- Holy Circus Ltd has been developing specialized computer software for its own use. At the end of the reporting period, the company spent $250 000 on the project. The final date for full implementation of the software is scheduled to be in 6 months’ time. However, the management accountant believes that the project will not be ready on time and that the company will have to acquire a commercial package instead, which will not be as efficient as the specialized software but will be better than having no operational software at all. Others in the software department agree with her. In the financial statements, how should Holy Circus Ltd account for the development costs of $250 000? Why? (5 Marks)
2.’A statement of cash flows is of limited use as a business needs to know if it will have
sufficient cash to support its planned future activities.’ Discuss the merit of this statement focusing on both the purpose and limitations of a statement of cash flows. (5 Marks)
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