## Reconstructing Cash Flow Figures Using T-Accounts
When a cash flow statement is prepared from two Balance Sheets (without a full P&L), some figures — actual purchases, sale proceeds, tax paid, dividends paid — must be reconstructed using ledger T-accounts.
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### Which Accounts Need T-Accounts?
| Account | Purpose |
|---|---|
| PPE (Buildings, Furniture, Cars, etc.) | Find purchases and book value at date of sale |
| Investments | Find purchases; cost of investments sold |
| Income Tax Payable | Find actual tax paid |
| Dividend Declared / Proposed Dividend Payable | Find dividend actually paid |
| Share Capital / Debentures / Loans | Find proceeds of issue or repayment |
---
### PPE T-Account
```
Asset Account (e.g., Furniture)
Dr: Opening balance (b/d) | Cr: Depreciation
Dr: Purchases (CIB — plug) | Cr: Book value at sale (plug if sold)
| Cr: Closing balance (c/d)
```
Once book value at sale is known:
`Sale proceeds = Book value at sale + Profit on sale (or − Loss on sale)`
---
### Investments T-Account
Investments are tracked at cost, not at market value:
```
Investments A/c
Dr: Opening balance (at cost) | Cr: Cost of investments sold (plug)
Dr: Purchases (CIB — plug) | Cr: Closing balance (at cost)
```
Profit on sale goes to P&L, not to this account.
`Sale proceeds = Cost of investments sold + Profit on sale`
---
### Dividend Paid — T-Account
```
Dividend Declared / Proposed Dividend Payable
Dr: Dividend paid (CIB) | Cr: Opening balance (prior year's proposed div)
Dr: Closing balance | Cr: P&L Appropriation (this year's proposed div)
```
`Dividend paid = Opening proposed dividend + Declared this year − Closing proposed dividend`
---
### Key Principle
Every T-account has four possible entries: Opening, Closing, P&L effect, and Cash (CIB). Given three, always solve for the fourth (cash). This is the mechanical core of most Cash Flow Statement problems.