Short answers : Solutions of Questions on Page Number : 285
Q1 :What is a Cash Flow Statement?
Answer : A Cash Flow Statement is a statement showing inflows and outflows of cash and cash equivalents from operating, investing and financing activities of a company during a particular period. It explains the reasons of receipts and payments in cash and change in cash balances during an accounting year in a company.
Q2 :How are the various activities classified (as per AS-3 revised) while preparing cash flow statement?
Answer : As per the Revised Accounting Standard 3 (AS-3), preparation of Cash Flow Statement for each period is mandatory. AS-3 also specifies the classification of all inflows and outflows basically under the following heads:
1. Cash Flow from Operating Activities
2. Cash Flow from Investing Activities
3. Cash Flow from Financing Activities
Q3 :State the uses of cash flow statement?
Answer : The uses of cash flow statement are as follows:
1. It is useful for short term financial planning about inflows and outflow of cash.
2. It helps in analysing the reason for the change in cash and cash equivalent balances of a company
3. It assists in determining and assessing liquidity and solvency positions of a company.
4. It enables to analyse and study the trends of receipts and payments of cash from various activities of a company and thereby helps in drafting various policy measures and short term planning.
5. It enables the segregation of cash flows from operating, investing and financing activities of the business separately.
6. It assists in making decision about distribution of profit with reference to the availability of cash.
Q4 :What are the objectives of preparing cash flow statement?
Answer : The important objectives for preparing Cash Flow Statement are as follows:
1. The most important objective that is fulfilled by preparing Cash Flow Statement is to ascertain the gross inflows and outflows of cash and cash equivalents from various activities.
2. Secondly, Cash Flow Statement helps in analysing various reasons responsible for change in the cash balances during an accounting year.
3. This statement helps in analysing and understanding the liquidity and solvency of a company , thereby, depicting the true liquidity position to the creditors and the investors.
4. Cash Flow Statement also helps in ascertaining the requirement and availability of cash in near future.
Q5 :What are the objectives of preparing cash flow statement?
Answer : The important objectives for preparing Cash Flow Statement are as follows:
1. The most important objective that is fulfilled by preparing Cash Flow Statement is to ascertain the gross inflows and outflows of cash and cash equivalents from various activities.
2. Secondly, Cash Flow Statement helps in analysing various reasons responsible for change in the cash balances during an accounting year.
3. This statement helps in analysing and understanding the liquidity and solvency of a company , thereby, depicting the true liquidity position to the creditors and the investors.
4. Cash Flow Statement also helps in ascertaining the requirement and availability of cash in near future.
Q6: Explain the terms: Cash Equivalents, Cash flows.
Answer : Cash equivalents are short term, highly liquid investments that are easily convertible into cash and which are subject to an insignificant risk of change in value. In other words, cash equivalents are held for the purpose of meeting short term cash commitments rather than for investment or any other purpose. An investment held for short-term maturity, say three months can be regarded as cash equivalent. Some examples of cash equivalents are treasury bills, commercial papers, etc. On the other hand, cash flows are inflows and outflows of cash and cash equivalents. A cash inflow results in increase in the total cash balance and a cash outflow results in decrease in the total cash balance.
Q7 : Prepare a format of cash flow from operating activities under direct method and indirect method.
Answer :
The format of cash flow from operating activities is as follows:
Direct Method
|
|
Cash Flow from Operating Activities: |
|
Cash receipts from customers |
*** |
Cash paid to suppliers and employers |
(***) |
Cash generated from operations |
*** |
Income tax paid |
(***) |
Cash flow before extraordinary items |
*** |
+/– Extraordinary items |
*** |
Net Cash from operating activities |
*** |
Indirect Method
|
||||
Cash Flow from Operating Activities: |
||||
Net Profit before tax and extraordinary items |
*** |
|||
Add: |
Non-Cash Expenses and Non-Operating Expenses |
|||
Depreciation |
** |
|||
Goodwill |
** |
|||
Interest paid |
** |
|||
Loss on sale of fixed assets |
** |
|||
Foreign exchange |
** |
** |
||
Less: |
Non Operating Incomes. |
|||
Dividend received |
** |
|||
Profit on sale of fixed assets |
** |
|||
Interest received |
** |
** |
||
Operating profit before working capital changes |
*** |
|||
Add: Decrease in Current Assets |
*** |
|||
Increase in Current Liabilities |
*** |
*** |
||
Less: Increase in Current Assets |
*** |
|||
Decrease in Current Liabilities |
*** |
*** |
||
Cash generated from Operating Activities |
*** |
|||
Income tax paid |
*** |
|||
Cash Flow before Extraordinary Items |
*** |
|||
Add/Less: Extra ordinary Items |
*** |
|||
Net Cash Flow from Operating Activities |
*** |
|||
Note: Preparation of Cash Flow Statement using Direct Method has been excluded from the prescribed syllabus. The format is given since the question has not specified the method explicitly. Students can refer to the direct method for the knowledge purpose.
Q8 : Now that you know the meaning of operating activities, state clearly what would constitute the operating activities for the following types of enterprises:
(i) Hotel
(ii) Film production house
(iii) Financial enterprise
(iv) Media enterprise
(v) Steel manufacturing unit
(vi) Software business unit.
Answer :
(i) Hotels
1. Receipts from sale of goods to customer.
2. Payment of wages and salaries, electricity, food items and other items used in accommodation.
(ii) Film Production House:
1. Receipts from selling film rights of a film to the distributors.
2. Payment to the staff, actors, actresses, directors, etc.
(ii) Financial Enterprises:
1. Receipts from repayment of loans, interest incomes from investments, etc.
2. Repayment of loans, recovery expenditure for recover of loans etc, salaries of employees.
(iv) Media Enterprises:
1. Receipts from advertisements.
2. Payments to staff, reporters, photographers, etc.
(v) Steel Manufacturing Unit:
1. Receipts from sale of steel sheets, steel castings, steel rods, etc.
2. Payment for iron, coal, salaries to staff, etc.
(vi) Software Business Unit:
1. Receipts from sale of software and renewal of licenses.
2. Payment of salaries to their employees, etc.
Q9: “The nature/type of enterprise can change altogether the category into which a particular activity may be classified.” Do you agree? Illustrate your answer?
Answer: Yes, the nature or type of an enterprise can change the category into which a particular activity may be classified. This can be better understood with the help of an example of two firms. One engaged in financial services and the other engaged in manufacturing services. For the firm that is engaged in financial services, interests received or paid are classified under operating activities whereas for the firm that is engaged in manufacturing business, interests paid are classified under financing activities and interest received as investing activities. Therefore, the classification of activities depends on the nature and type of enterprise.
Q10 :Describe the procedure to prepare Cash Flow Statement.
Answer : The procedure to prepare Cash Flow Statement is described in the following steps in their chronological order.
Step 1: Ascertain the cash flows from operating activities
Step 2: Ascertain the cash flows from investing activities
Step 3: Ascertain the cash flows from financing activities
Step 4: Ascertain net increase or decrease by summing up the amounts of Steps 1, 2, and 3.
Step 5: Write the opening balance of cash and cash equivalents and deduct it from the amount ascertained in Step 4. The resulting figure arrived is the Closing Balance of Cash and Cash Equivalents.
There are two methods viz. Direct Method and Indirect Method for the preparation of Cash Flow Statement.
Direct Method
Cash Flow Statement
|
||||
Particulars |
Amount Rs |
Amount Rs |
||
A. |
Cash Flow from Operating Activities |
|||
Cash Sales |
** |
|||
Cash receipt from Debtors |
** |
|||
Less: Cash Purchases |
** |
|||
Cash paid to creditors and other expenses |
** |
|||
Cash Generated from Operating Activities |
** |
|||
Less: Income Tax Paid |
** |
|||
Cash flow before Extraordinary Items |
** |
|||
Add/Less: Extraordinary Items |
** |
|||
Net Cash Flow from (used in) Operating Activities |
** |
** |
||
B. |
Cash Flow from Investing Activities |
** |
||
Sale of Fixed Assets |
** |
|||
Sale of long-term Investments |
** |
|||
Interest Received |
** |
|||
Dividend Received |
** |
|||
Rent Received |
** |
|||
Less: Purchase of Fixed Assets |
** |
|||
Less: Purchase of long-term Investment |
** |
|||
Net Cash Flow from Investing Activities |
** |
** |
||
C. |
Cash Flow from Financing Activities |
|||
Proceeds from Issue of Shares |
** |
|||
Proceeds from Issue of Debentures and Other Long-term Borrowings |
** |
|||
Less: Repayment of Debentures and Other Long-term Borrowings |
** |
|||
Less: Redemption of Preference Shares |
** |
|||
Less: Interest Paid |
** |
|||
Less: Dividend Paid |
** |
|||
Net Cash flow from Financing Activities |
** |
** |
||
Net Increase (or Decrease in Cash and Cash Equivalents (A+B+C) |
** |
|||
Cash and Cash Equivalents at the beginning (Cash in Hand, Cash at Bank, Marketable Securities, Short-term Deposits) |
** |
|||
Cash and Cash Equivalent at the end |
** |
|||
|
Indirect Method
|
|||||||
Cash Flow Statement
|
|||||||
Particulars |
Amount Rs |
Amount Rs |
|||||
A. |
Cash Flow from Operating Activities: |
||||||
Net Profit before tax and extraordinary items |
*** |
||||||
Add: Non-Cash Expenses and non operating expenses. |
|||||||
Depreciation |
** |
||||||
Goodwill |
** |
||||||
Interest paid |
** |
||||||
Loss on sale of fixed assets |
** |
** |
|||||
Less: |
Non-Operating Incomes. |
||||||
Dividend received |
** |
||||||
Profit on sale of fixed assets |
** |
||||||
Interest received |
** |
** |
|||||
Operating Profit before Working Capital Changes |
*** |
||||||
Add: Decrease in Current Assets |
*** |
||||||
Increase in Current Liabilities |
** |
*** |
|||||
Less: Increase in Current Assets |
*** |
||||||
Decrease in Current Liabilities |
*** |
*** |
|||||
Cash generated from Operating Activities |
*** |
||||||
Less: Income tax paid |
*** |
||||||
Cash flow before Extra ordinary items |
*** |
||||||
Add/Less: Extra ordinary items |
*** |
||||||
Net Cash Flow from Operating Activities |
*** |
||||||
B. |
Cash Flow from Investing Activities |
** |
|||||
Sale of Fixed Assets |
** |
||||||
Sale of Long-term Investments |
** |
||||||
Interest Received |
** |
||||||
Dividend Received |
** |
||||||
Rent Received |
** |
||||||
Less: Purchase of Fixed Assets |
** |
||||||
Less: Purchase of long term Investment |
** |
||||||
Net Cash Flow from Investing Activities |
** |
** |
|||||
|
|||||||
C. |
Cash Flow from Financing Activities |
||||||
Proceeds from Issue of shares |
** |
||||||
Proceeds from Issue of Debentures and other Long-term Borrowings |
** |
||||||
Less: Repayment of Debentures and other Long-term Borrowings |
** |
||||||
Less: Redemption of preference Share |
** |
||||||
Less: Interest paid |
** |
||||||
Less: Dividend paid |
** |
||||||
Net Cash Flow from Financing Activities |
** |
** |
|||||
Net Increase (or Decrease in Cash and Cash Equivalents (A+B+C) |
** |
||||||
Cash and Cash Equivalents at the beginning (Cash in Hand, Cash at Bank, Marketable Securities, Short-term Deposits) |
** |
||||||
Cash and Cash Equivalents at the end |
** |
||||||
|
|||||||
Note: Preparation of Cash Flow Statement using Direct Method has been excluded from the prescribed syllabus. The format is given since the question has not specified the method explicitly. Students can refer to the direct method for the knowledge purpose.
Q11: Describe”Indirect” method of ascertaining Cash Flow from Operating Activities.
Answer:
Indirect Method: This method starts with the Net Profit before tax and extraordinary items. For this purpose, the Net Profit as revealed by the Profit and Loss Account cannot be taken into consideration as there exists some items which do not leads to outflow of cash. The following are those items that need to be added back to the Net Profit of the Profit and Loss Account.
a. Non-cash items like, depreciation goodwill written off, etc are added to the Net Profit.
b. Non-operating expenses like loss on sale of fixed assets, transfers to reserves, loss on sale of fixed assets are added back to the Net Profit.
c. Provisions like, provisions for doubtful debts and discount for debtors, proposed dividends etc. should be added back to the Net Profit.
d. Decrease in current assets and increase in current liabilities should be added to the operating profit
The following are those items that need to deduct from the Net Profit of the Profit and Loss Account.
a. Non-operating incomes like profit on sale of fixed assets, etc. are deducted from the Net Profit.
b. Non-trading Incomes like dividend received, interest received, tax refund, etc. are to be deducted from the Net Profit.
c. Increase in current assets and decrease in current liabilities should be deducted from the operating profit.
Indirect Method
|
|||||
Cash Flow Statement
|
|||||
Particulars |
Amount Rs |
Amount Rs |
|||
Cash Flow from Operating Activities: |
|||||
Net Profit before tax and extraordinary items |
*** |
||||
Add: Non-Cash Expenses and Non-Operating Expenses. |
|||||
Depreciation |
** |
||||
Goodwill |
** |
||||
Interest paid |
** |
||||
Loss on sale of fixed assets |
** |
** |
|||
Less: |
Non-Operating Incomes. |
||||
Dividend received |
** |
||||
Profit on sale of fixed assets |
** |
||||
Interest received |
** |
** |
|||
Operating Profit before Working Capital Changes |
*** |
||||
Add: Decrease in Current Assets |
*** |
||||
Increase in Current Liabilities |
** |
*** |
|||
Less: Increase in Current Assets |
*** |
||||
Decrease in Current Liabilities |
*** |
*** |
|||
Cash generated from Operating Activities |
*** |
||||
Less: Income tax paid |
*** |
||||
Cash flow before Extra ordinary items |
*** |
||||
Add/Less: Extra ordinary items |
*** |
||||
Net Cash Flow from Operating Activities |
*** |
Q12:Explain the major Cash Inflow and outflows from investing activities.
Answer:
Investing activities are those activities that are related to sales and purchases of long-term fixed assets like, land and building, plant and machinery, furniture, etc. These fixed assets are not held for resale. The activities like sale and purchase of investments that are not included in the cash equivalents are also included in Investing activities. Any income arising from such investments (assets) are regarded a part of investing activities.
As per the AS3, the major cash inflows and outflows from investing activities are as follows:
a. Cash payments to acquire fixed assets (including intangibles like, goodwill). These payments include capitalised cost of research and development and self constructed fixed assets.
b. Cash receipts from disposal of fixed assets (including intangible assets).
c. Cash payments to acquire shares, warrants, or debt instruments of other enterprises and interest in joint venture (other than payments of those instruments consider as cash equivalents and are held for the trading purposes).
d. Cash receipts from disposal of shares, warrants or debt instruments of other enterprises and interest from joint ventures (other than receipts from those held for trading purposes).
e. Cash advances and loans made to third parties (other than advances, and loans made by financial enterprises). These will be treated as cash flows from the operating activities.
f. Cash receipts from repayment of advances and loans made to third parties (other than advances and loans of financial enterprises). These will be treated as
cash flows from operating activities.
g. Cash receipts from insurance company for any property involved in accident.
h. Any income arising from fixed assets or investments like interest, dividend, rent etc. In case of financial enterprises interest and dividend is treated as operating activities.
Direct Method Cash Flow Statement |
||||
Particulars |
Amount Rs |
Amount Rs |
||
Net Cash Flow from (used in) Operating Activities |
** |
** |
||
B. |
Cash Flow from Investing Activities |
** |
||
Sale of Fixed Assets |
** |
|||
Sale of long-term Investments |
** |
|||
Interest Received |
** |
|||
Dividend Received |
** |
|||
Rent Received |
** |
|||
Less: Purchase of Fixed Assets |
** |
|||
Less: Purchase of long-term Investments |
** |
|||
Net Cash Flow from Investing Activities |
** |
** |
Indirect Method Cash Flow Statement |
||||
Particulars |
Amount Rs |
Amount Rs |
||
Net Cash Flow from Operating Activities |
*** |
|||
Cash Flow from Investing Activities |
** |
|||
Sale of Fixed Assets |
** |
|||
Sale of Long-term Investments |
** |
|||
Interest Received |
** |
|||
Dividend Received |
** |
|||
Rent Received |
** |
|||
Less: Purchase of Fixed Assets |
** |
|||
Less: Purchase of long term Investment |
** |
|||
Net Cash Flow from Investing Activities |
** |
** |
||
Note: Preparation of Cash Flow Statement using Direct Method has been excluded from the prescribed syllabus. The format is given since the question has not specified the method explicitly. Students can refer to the direct method for the knowledge purpose.
Q13: Explain the major Cash Inflows and outflows from financing activities.
Answer: Financing activities are those activities that are related to capital or long term funds of an enterprise. These activities results in the change in the capital and borrowed funds.
As per the AS3, the major cash inflows from financing activities are as follows:
a. Cash proceeds from issue of shares and other similar instruments.
b. Cash proceeds from issue of debentures, loans, notes, bonds, and other short and long-term borrowings.
As per the AS3, the major cash outflows from financing activities are as follows:
a. Cash repayments of the amount borrowed in form of debentures, loans, notes bonds, and other short and long-term borrowings.
b. Buy-back of shares and debentures.
c. Interest paid on debentures, loans, and advances.
d. Dividend paid to the preference shareholders and equity shareholders.
An important point that must be noted is that the purchase and sale of securities, interest paid or received and dividend received is treated as cash flow from operating activities for an investment company. But dividend paid is treated as cash flow from financing activities.
Direct Method Cash Flow Statement |
|||||
Particulars |
Amount Rs |
Amount Rs |
|||
Net Cash Flow from Investing Activities |
** |
** |
|||
Cash Flow from Financing Activities |
|||||
Proceeds from Issue of Shares |
** |
||||
Proceeds from Issue of Debentures and Other Long-term Borrowings |
** |
||||
Less: Repayment of Debentures and Other Long-term Borrowings |
** |
||||
Less: Redemption of Preference Shares |
** |
||||
Less: Interest Paid |
** |
||||
Less: Dividend Paid |
** |
||||
Net Cash flow from Financing Activities |
** |
** |
|||
Net Increase (or Decrease in Cash and Cash Equivalents (A+B+C) |
** |
||||
Cash and Cash Equivalents at the beginning (Cash in Hand, Cash at Bank, Marketable Securities, Short-term Deposits) |
** |
||||
Cash and Cash Equivalent at the end |
** |
||||
Indirect Method
|
|||
Cash Flow Statement
|
|||
Particulars |
Amount Rs |
Amount Rs |
|
Net Cash Flow from Investing Activities |
** |
** |
|
Cash Flow from Financing Activities |
|||
Proceeds from Issue of shares |
** |
||
Proceeds from Issue of Debentures and other Long-term Borrowings |
** |
||
Less: Repayment of Debentures and other Long-term Borrowings |
** |
||
Less: Redemption of preference Share |
** |
||
Less: Interest paid |
** |
||
Less: Dividend paid |
** |
||
Net Cash Flow from Financing Activities |
** |
** |
|
Net Increase (or Decrease in Cash and Cash Equivalents (A+B+C) |
** |
||
Cash and Cash Equivalents at the beginning (Cash in Hand, Cash at Bank, Marketable Securities, Short-term Deposits) |
** |
||
Cash and Cash Equivalents at the end |
** |
Note: Preparation of Cash Flow Statement using Direct Method has been excluded from the prescribed syllabus. The format is given since the question has not specified the method explicitly. Students can refer to the direct method for the knowledge purpose.
Q14: Anand Ltd. arrived at a net income of Rs 5,00,000 for the year ended March 31, 2007. Depreciation for the year was Rs 2,00,000. There was a gain of Rs 50,000 on assets sold which was credited to profit and loss account. Bills Receivables increased during the year Rs 40,000 and Bills Payables also increased by Rs 60,000. Compute the cash flow operating activities by the indirect approach.
Answer:
Cash Flow from Operating Activities as on March 31, 2007 |
|||
Particulars |
Amount Rs |
Amount Rs |
|
Net Profit during the year |
5,00,000 |
||
Items to be adjusted: |
|||
Add: Depreciation |
2,00,000 |
||
Less: Gain on sale of assets |
(50,000) |
1,50,000 |
|
Operating Profit before Working Capital changes |
6,50,000 |
||
Add: Increase in Bills Payable |
60,000 |
||
Less: Increase in Bills Receivable |
(40,000) |
20,000 |
|
Net Cash from Operations |
6,70,000 |
||
Q15: From the information given below you are required to prepare the cash paid for the inventory:
Rs |
|
Inventory in the beginning |
40,000 |
Purchases |
1,60,000 |
Inventory in the end |
38,000 |
Trade payables in the beginning |
14,000 |
Trade payables in the end |
14,500 |
Answer:
Trade Payables Account |
|||||||
Dr. |
Cr. |
||||||
Date |
Particulars |
J.F. |
Amount Rs |
Date |
Particulars |
J.F. |
Amount Rs |
Cash (Balancing fig.) |
1,59,500 |
Balance b/d |
14,000 |
||||
Balance c/d |
14,500 |
Purchases |
1,60,000 |
||||
1,74,000 |
1,74,000 |
||||||
Cash paid for Inventory amounts to Rs 1,59,500
Q16: For each of the following transactions, calculate the resulting cash flow and state the nature of cash flow viz., operating, investing and financing
Acquired machinery for Rs 2,50,000 paying 20% drawn and executing a bond for the balance payable
(b) Paid Rs 2,50,000 to acquire shares in Informa Tech. and received a dividend of Rs 50,000 after acquisition.
(c) Sold machinery of original cost Rs 2,00,000 with an accumulated depreciation of Rs 1,60,000 for Rs 60,000.
Answer:
(a)
Part payment Rs 50,000 for acquiring machinery Rs 2,50,000 is related with Investing Activities
(b)
Rs |
|
Amount paid for acquiring shares |
(2,50,000) |
Dividend received |
50,000 |
Net Cash used in Investing Activities |
(2,00,000) |
Amount paid to acquire assets and dividend received is a part of Investing Activities.
(c) Inflow of cash of Rs 60,000 on sale of machinery is a part Investing Activities.
Q17:The following is the Profit and Loss Account of Yamuna Limited:
Statement of Profit and Loss of Yamuna Ltd. for the Year ended March 31, 2013 |
|||
Particulars |
Note No. |
Amount (Rs) |
|
i) |
Revenue from Operations |
10,00,000 |
|
ii) |
Expenses |
||
Cost of Material Consumed |
1 |
50,000 |
|
Purchase of Stock-in-trade |
5,00,000 |
||
Other Expenses |
2 |
3,00,000 |
|
Total Expenses |
8,50,000 |
||
iii) |
Profit before Tax (I – ii) |
1,50,000 |
Additional information:
(i) Trade receivables decrease by Rs 30,000 during the year.
(ii) Prepaid expenses increase by Rs 5,000 during the year.
(iii) Trade creditors decrease by Rs 15,000 during the year.
(iv) Outstanding expenses payable increased by Rs 3,000 during the year.
(v) Operating expenses included depreciation of Rs 25,000.
Compute net cash provided by operations for the year ended March 31, 2013 by the indirect method.
Answer:
Cash Flow from Operating Activities of Yamuna Limited as on March 31, 2013 |
||||
Particulars |
Amount Rs |
Amount Rs |
||
Net Profit earned during the year |
1,50,000 |
|||
Items to be added: |
||||
Depreciation |
25,000 |
|||
Operating Profit before Working Capital changes |
1,75,000 |
|||
Add: |
Increase in Current Liabilities |
|||
Outstanding Expenses |
3,000 |
|||
Add: |
Decrease in Current Assets |
|||
Trade Receivables |
30,000 |
|||
Stock |
50,000 |
83,000 |
||
Less: |
Decrease in Current Liabilities |
|||
Trade Creditors |
(15,000) |
|||
Less: |
Increase in Current Assets |
|||
Prepaid Expenses |
(5,000) |
(20,000) |
||
Net Cash from Operations |
2,38,000 |
|||
As per the solution, the Net Cash from Operating Activities is Rs 2,38,000, however, as per the answer given in the book is Rs 2,18,000.
Q18: Compute cash from operations from the following figures:
(i) Profit for the year 2013-14 is a sum of Rs. 10,000 after providing for depreciation of Rs. 2,000.
(ii) The current assets of the business for the year ended March 31, 2013 and 2014 are as follows:
March 31, 2013 (Rs.) |
March 31, 2014 (Rs.) |
|
Trade Receivables | 14,000 | 15,000 |
Provision for Doubtful Debts | 1,000 | 1,200 |
Trade Payables | 13,000 | 15,000 |
Inventories | 5,000 | 8,000 |
Short-term Investments | 10,000 | 12,000 |
Expenses payable | 1,000 | 1,500 |
Prepaid Expenses | 2,000 | 1,000 |
Accrued Income | 3,000 | 4,000 |
Income received in advance | 2,000 | 1,000 |
Answer:
Cash Flow Statement for the Year Ending March 31, 2014 |
||
Particulars |
Details (Rs) |
Amount (Rs) |
Cash from Operating Activities |
||
Net Profit |
10,000 |
|
Items to be added: |
||
Depreciation |
2,000 |
2,000 |
Operating Profit before Working Capital Adjustments |
12,000 |
|
Less: Increase in Current Assets |
||
Trade Receivables |
(1,000) |
|
Accrued Income |
(1,000) |
|
Short-term Investments |
(2,000) |
|
Inventories |
(3,000) |
|
Add: Increase in Current Liabilities |
||
Provision for Doubtful Debts |
200 |
|
Trade Payables |
2,000 |
|
Expense Payable |
500 |
|
Add: Decrease in Current Assets |
||
Prepaid Expenses |
(1,000) |
|
Less: Decrease in Current Liabilities |
||
Income received in advance |
1,000 |
|
Net Cash From Operating Activities |
7,700 |
|
Q19: From the following particulars of Bharat Gas Limited, calculate Cash Flows from Investing Activities. Also show the workings clearly preparing the ledger accounts:
Balance Sheet of Bharat Gas Ltd. as on …………. | |||
Particulars | Note No. | Figures as the end of 2011 (Rs) |
Figures as at the end of reporting 2010 (Rs) |
II) Assets | |||
1. Non-current Assets
|
|||
a) Fixed assets
|
|||
i) Tangible assets
|
1 | 12,40,000 | 10,20,000 |
ii) Intangible assets
|
2 | 4,60,000 | 3,80,000 |
b) Non-current investments
|
3 | 3,60,000 | 2,60,000 |
Notes | 1 | Tangible assets = Machinery |
2 | Intangible assets = Patents |
Notes
Figures of current year | Figures of previous year | |
1. Tangible Assets | ||
Machinery
|
12,40,000 | 10,20,000 |
2. Intangible Assets | ||
Goodwill
|
3,00,000 | 1,00,000 |
Patents
|
1,60,000 | 2,80,000 |
4,60,000 | 3,80,000 | |
3. Non-current Investments | ||
10% long term investments
|
1,60,000 | 60,000 |
Investment in land
|
1,00,000 | 1,00,000 |
Shares of Amartex Ltd.
|
1,00,000 | 1,00,000 |
3,60,000 | 2,60,000 | |
Additional Information:
(a) Patents were written-off to the extent of Rs. 40,000 and some Patents were sold at a profit of Rs. 20,000.
(b) A Machine costing Rs. 1,40,000 (Depreciation provided thereon Rs. 60,000) was sold for Rs. 50,000. Depreciation charged during the year was Rs. 1,40,000.
(c) On March 31, 2007, 10% Investments were purchased for Rs. 1,80,000 and some Investments were sold at a profit of Rs. 20,000. Interest on Investment was received on March 31, 2011.
(d) Amartax Ltd. paid Dividend @ 10% on its shares.
(e) A plot of Land had been purchased for investment purposes and let out for commercial use and rent received Rs. 30,000.
Answer:
Cash Flow from Investing Activities |
||||
Particulars |
Amount Rs |
Amount Rs |
||
Cash Inflow |
||||
Proceeds from Sale of Patents |
1,00,000 |
|||
Proceeds from Sale of Machinery |
50,000 |
|||
Proceeds from Sale of 10% Long-term Investment |
1,00,000 |
|||
Interest received on 10% Long-term Investment |
6,000 |
|||
Dividend Received from Amartax Ltd. |
10,000 |
|||
Rent Received |
30,000 |
2,96,000 |
||
Cash Outflow |
||||
Purchase of Goodwill |
(2,00,000) |
|||
Purchase of Machinery |
(4,40,000) |
|||
Purchase of 10% Long-term Investment |
(1,80,000) |
(8,20,000) |
||
Net Cash used in Investing Activities |
(5,24,000) |
|||
Patents Account |
|||||||
Dr. |
Cr. |
||||||
Date |
Particulars |
J.F. |
Amount Rs |
Date |
Particulars |
J.F. |
Amount Rs |
Balance b/d |
2,80,000 |
Profit and Loss (written off) |
40,000 |
||||
Profit and Loss (Profit on sale) |
20,000 |
Bank (sale- Balancing figure) |
1,00,000 |
||||
Balance c/d |
1,60,000 |
||||||
3,00,000 |
3,00,000 |
||||||
Machinery Account |
|||||||
Dr. |
Cr. |
||||||
Date |
Particulars |
J.F. |
Amount Rs |
Date |
Particulars |
J.F. |
Amount Rs |
Balance b/d |
10,20,000 |
Depreciation |
1,40,000 |
||||
Bank (Purchases- Balancing figure) |
4,40,000 |
Bank |
50,000 |
||||
Profit and Loss |
30,000 |
||||||
Balance c/d |
12,40,000 |
||||||
14,60,000 |
14,60,000 |
||||||
10% Long-term Investment Account |
|||||||
Dr. |
Cr. |
||||||
Date |
Particulars |
J.F. |
Amount Rs |
Date |
Particulars |
J.F. |
Amount Rs |
Balance b/d |
60,000 |
Bank (Balancing figure) |
1,00,000 |
||||
Bank |
1,80,000 |
||||||
Profit and Loss (Profit on sale) |
20,000 |
Balance c/d |
1,60,000 |
||||
2,60,000 |
2,60,000 |
||||||
Q20: From the following Balance Sheet of Mohan Ltd. Prepare cash flow Statement:
Particulars | Note No. | 2011 (Rs) |
2010 (Rs) |
I) Equity and Liabilities | |||
1. Shareholders’ Funds
|
|||
a) Equity share capital
|
3,00,000 | 2,00,000 | |
b) Reserves and surplus
|
2,00,000 | 1,60,000 | |
2. Non-current liabilities
|
|||
a) Long-term borrowings
|
1 | 80,000 | 1,00,000 |
3. Current liabilities
|
|||
Trade payables
|
1,20,000 | 1,40,000 | |
Short-term provisions
|
2 | 70,000 | 60,000 |
Total | 7,70,000 | 6,60,000 | |
II) Assets | |||
1. Non-current assets
|
|||
a) Fixed assets
|
3 | 5,00,000 | 3,20,000 |
2. Current assets
|
|||
a) Inventories
|
1,50,000 | 1,30,000 | |
b) Trade receivables
|
4,90,000 | 1,20,000 | |
c) Cash and cash equivalents
|
5,30,000 | 90,000 | |
Total | 7,70,000 | 6,60,000 | |
Notes
2011 | 2010 | |
1. Long-term borrowings | ||
Bank Loan
|
80,000 | 1,00,000 |
2. Short-term provision | ||
Proposed dividend
|
70,000 | 60,000 |
3. Fixed assets | 6,00,000 | 4,00,000 |
Less: Accumulated Depreciation
|
1,00,000 | 80,000 |
(Net) Fixed Assets
|
5,00,000 | 3,20,000 |
4. Trade receivables | ||
Debtors
|
60,000 | 1,00,000 |
Bills receivables
|
30,000 | 20,000 |
90,000 | 1,20,000 | |
5. Cash and cash equivalents | ||
Bank
|
30,000 | 90,000 |
Additional Information:
Machine Costing Rs. 80,000 on which accumulated depreciation was Rs. 50,000 was sold for Rs. 20,000.
Answer:
Cash Flow Statement of Mohan Ltd. |
|||||
Particulars |
Amount Rs |
Amount Rs |
|||
A. |
Cash Flow from Operating Activities |
||||
Profit as per the Balance Sheet (2,00,000 – 1,60,000) |
40,000 |
||||
Proposed Dividend |
70,000 |
||||
Net Profit before Taxation and Extraordinary items |
1,10,000 |
||||
Adjustments: |
|||||
Depreciation |
70,000 |
||||
Loss on Sale of Machine |
10,000 |
80,000 |
|||
Operating Profit before Working Capital changes |
1,90,000 |
||||
Add: |
Decrease in Current Assets |
||||
Debtors |
40,000 |
40,000 |
|||
2,30,000 |
|||||
Less: |
Increase in Current Assets |
||||
Inventories |
(20,000) |
||||
Bills Receivable |
(10,000) |
||||
Less: |
Decrease in Current Liabilities |
||||
Trade Payables |
(20,000) |
(50,000) |
|||
Net Cash from Operations |
1,80,000 |
||||
B. |
Cash Flow from Investing Activities |
||||
Proceeds from Sale of Fixed Assets |
20,000 |
||||
Purchases of Fixed Assets |
(2,80,000) |
||||
Net Cash outflow from Investing activity |
(2,60,000) |
||||
C. |
Cash Flow from Financing Activities |
||||
Issue of Shares |
1,00,000 |
||||
Bank Loan Paid |
(20,000) |
||||
Dividend Paid |
(60,000) |
||||
Net Cash from Financing Activities |
20,000 |
||||
D. |
Net Decrease in Cash and Cash Equivalents (A+B+C) |
(60,000) |
|||
Add: |
Cash and Cash Equivalents in the beginning |
90,000 |
|||
E. |
Cash and Cash equivalents at the end |
30,000 |
|||
Fixed Assets Account |
|||||||
Dr. |
Cr. |
||||||
Date |
Particulars |
J.F. |
Amount Rs |
Date |
Particulars |
J.F. |
Amount Rs |
Balance b/d |
4,00,000 |
Bank |
20,000 |
||||
Bank (Purchases- Balancing fig.) |
2,80,000 |
Profit and Loss |
10,000 |
||||
Accumulated Depreciation |
50,000 |
||||||
Balance c/d |
6,00,000 |
||||||
6,80,000 |
6,80,000 |
||||||
Accumulated Depreciation Account |
|||||||
Dr. |
Cr. |
||||||
Date |
Particulars |
J.F. |
Amount Rs |
Date |
Particulars |
J.F. |
Amount Rs |
Fixed Assets |
50,000 |
Balance b/d |
80,000 |
||||
Balance c/d |
1,00,000 |
Profit and Loss (Balance fig.) |
70,000 |
||||
1,50,000 |
1,50,000 |
||||||
Q21: From the following Balance Sheets of Tiger Super Steel Ltd., prepare Cash Flow Statement:
Particulars | Note No. | 2011 (Rs) |
2010 (Rs) |
I) Equity and Liabilities | |||
1. Shareholders’ Funds
|
|||
a) Share capital
|
1 | 1,30,000 | 2,00,000 |
b) Reserves and surplus
|
2 | 22,800 | 15,200 |
2. Current Liabilities
|
|||
a) Trade payables
|
3 | 21,200 | 14,000 |
b) Other current liabilities
|
4 | 2,400 | 3,200 |
c) Short-term provisions
|
5 | 38,400 | 22,400 |
Total | 2,14,800 | 1,74,800 | |
II) Assets | |||
1. Non-Current Assets
|
|||
a) Fixed assets
|
|||
i) Tangible assets
|
6 | 96,400 | 76,000 |
ii) Intangible assets
|
18,800 | 24,000 | |
b) Non-current investments
|
14,000 | 4,000 | |
2. Current assets
|
|||
a) Inventories
|
31,200 | 34,000 | |
b) Trade receivables
|
43,200 | 30,000 | |
c) Cash and cash equivalents
|
11,200 | 6,800 | |
Total | 2,14,800 | 1,74,800 | |
Notes
2011 | 2010 | |
1. Share Capital | ||
Equity share capital
|
1,20,000 | 80,000 |
10% Preference share capital
|
20,000 | 40,000 |
1,40,000 | 1,20,000 | |
2. Reserves and Surplus | ||
General reserve
|
12,00 | 8,000 |
Balance in statement of profit and loss
|
10,800 | 7,200 |
22,800 | 15,200 | |
3. Trade payables | ||
Bills payable
|
21,200 | 14,000 |
4. Other current liabilities | ||
Outstanding expenses
|
2,400 | 3,200 |
5. Short-term provisions | ||
Provision for taxation
|
12,800 | 11,200 |
Proposed dividend
|
15,600 | 11,200 |
38,400 | 22,400 | |
Answer:
Cash Flow Statement of Tiger Super Steels Ltd |
|||||
Particulars |
Amount Rs |
Amount Rs |
|||
A. |
Cash Flow from Operating Activities |
||||
Profit as per the Balance Sheet (10,800 –7,200) |
3,600 |
||||
General Reserve |
4,000 |
||||
Proposed Dividend |
15,600 |
||||
Provision for Taxation |
12,800 |
||||
Net Profit before Taxation and Extraordinary |
36,000 |
||||
Items to be added: |
|||||
Depreciation on Land and Building |
20,000 |
||||
Depreciation on Plant |
10,000 |
||||
Goodwill written off |
5,200 |
35,200 |
|||
Operating Profit before Working Capital changes |
71,200 |
||||
Add: |
Increase in Current Liabilities |
||||
Bills Payable |
7,200 |
||||
Add: |
Decrease in Current Assets |
||||
Inventories |
2,800 |
10,000 |
|||
81,200 |
|||||
Less: |
Increase in Current Assets |
||||
Trade Receivables |
(13,200) |
||||
Less: |
Decrease in Current Liabilities |
||||
Outstanding Expenses |
(800) |
(14,000) |
|||
Cash Generated from Operating Activities |
67,200 |
||||
Less: |
Income Tax paid |
(11,200) |
|||
Net Cash from Operating Activities |
56,000 |
||||
B. |
Cash Flow from Investing Activities |
||||
Purchases of Plant |
(50,400) |
||||
Purchases of Investment |
(10,000) |
||||
Net Cash used in Investing Activities |
(60,400) |
||||
C. |
Cash Flow from Financing Activities |
||||
Issue of Equity Shares |
40,000 |
||||
Dividend paid |
(11,200) |
||||
Redemption of 10% Preference Shares |
(20,000) |
||||
Net Cash from Financing Activities |
8,800 |
||||
D. |
Net Increase in Cash and Cash Equivalent |
4,400 |
|||
Add: |
Cash and Cash Equivalent in the beginning |
6,800 |
|||
E. |
Cash and Cash Equivalents at the end |
11,200 |
|||
Working Notes
1.
Plant Account |
|||||||
Dr. |
Cr. |
||||||
Date |
Particulars |
J.F. |
Amount Rs |
Date |
Particulars |
J.F. |
Amount Rs |
To Balance b/d |
36,000 |
By Depreciation |
10,000 |
||||
To Bank A/c (Purchases- Balancing figure) |
50,400 |
By Balance c/d |
76,400 |
||||
86,400 |
86,400 |
||||||
2.
Net Profit before Tax |
3,600 |
|
Profit and Loss Account |
12,800 |
|
Less: |
Provision for Tax |
16,400 |
Note: As per the solution, the Net Cash from Operating Activities, net Cash from Investing Activities and Net Cash from Financing Activities are Rs 56,000, Rs (60400) and Rs 8,800 respectively. However, as per the answer given in the book, the Net Cash from Operating Activities, net Cash from Investing Activities and Net Cash from Financing Activities are Rs 34,800, Rs (50,400) and Rs 20,000 respectively.
Q22: From the following information, prepare cash flow statement:
Particulars | Note No. | 31st March 2014 (Rs) |
31st March 2013 (Rs) |
I) Equity and Liabilities | |||
1. Shareholders’ Funds
|
|||
a) Share capital
|
7,00,000 | 5,00,000 | |
b) Reserves and surplus
|
4,70,000 | 2,50,000 | |
2. Non-current Liabilities
|
|||
(8% Debentures)
|
4,00,000 | 6,00,000 | |
3. Current Liabilities
|
|||
a) Trade payables
|
9,00,000 | 6,00,000 | |
Total | 24,70,000 | 19,50,000 | |
II) Assets | |||
1. Non-current assets
|
|||
a) Fixed assets
|
|||
i) Tangible
|
7,00,000 | 5,00,000 | |
ii) Intangible-Goodwill
|
1,70,000 | 2,50,000 | |
2. Current assets
|
|||
a) Inventories
|
6,00,000 | 5,00,000 | |
b) Trade Receivables
|
6,00,000 | 4,00,000 | |
c) Cash and cash equivalents
|
4,00,000 | 3,00,000 | |
Total | 24,70,000 | 19,50,000 | |
Additional Information:
Depreciation Charge on Plant amount to Rs. 80,000.
Answer:
Cash Flow Statement for the year ending March 31, 2014 |
|||
Particulars |
Details (Rs) |
Amount (Rs) |
|
A. |
Cash from Operating Activities |
||
Net Profit |
2,20,000 |
||
Items to be Added: |
|||
Interest on Debentures |
48,000 |
||
Depreciation on Fixed Assets |
80,000 |
||
Goodwill Written-off |
80,000 |
2,08,000 |
|
Operating Profit before Working Capital Adjustments |
4,28,000 |
||
Add: Increase in Current Liabilities |
|||
Creditors |
3,00,000 |
||
Less: Increase in Current Assets |
|||
Inventories |
(1,00,000) |
||
Trade Receivables |
(2,00,000) |
– |
|
Cash Generated from Operations |
4,28,000 |
||
Less: Tax Paid |
– |
||
Net Cash From Operating Activities |
4,28,000 |
||
B. |
Cash From Investing Activities |
||
Purchase of Fixed Assets (WN) |
(2,80,000) |
||
Net Cash From Investing Activities |
(2,80,000) |
||
C. |
Cash From Financing Activities |
||
Issue of Share Capital |
2,00,000 |
||
Redemption of Debentures |
(2,00,000) |
||
Interest Paid on Debentures |
(48,000) |
(48,000) |
|
Net Cash From Financing Activities (C) |
(48,000) |
||
Net Increase in Cash (A + B + C) |
1,00,000 |
||
Add: Opening Cash and Cash Equivalents |
3,00,000 |
||
Closing Cash and Cash Equivalents |
4,00,000 |
||
Working Note:
Fixed Assets Account |
|||||||
Dr. |
Cr. |
||||||
Particulars |
J.F. |
Amount (Rs) |
Particulars |
J.F. |
Amount (Rs) |
||
Balance b/d |
5,00,000 |
Depreciation |
80,000 |
||||
Purchases (Balancing Figure) |
2,80,000 |
Balance c/d |
7,00,000 |
||||
7,80,000 |
7,80,000 |
||||||
Q23: From the following Balance Sheet of Yogeta Ltd., prepare cash flow statement:
Particulars | Note No. | 31st March 2014 (Rs) |
31st March 2013 (Rs) |
I) Equity and Liabilities | |||
1. Shareholders’ Funds
|
|||
a) Share capital
|
1 | 4,00,000 | 2,00,000 |
b) Reserves and surplus-Surplus
|
2,00,000 | 1,00,000 | |
2. Non-current Liabilities
|
|||
a) Long-term borrowings
|
2 | 1,50,000 | 2,20,000 |
3. Current Liabilities
|
|||
a) Short-term borrowings
|
1,00,000 | – | |
(Bank overdraft)
|
|||
b) Trade payables
|
70,000 | 50,000 | |
c) Short-term provision
|
50,000 | 30,000 | |
(Provision for taxation)
|
|||
Total | 9,70,000 | 6,00,000 | |
II) Assets | |||
1. Non-current assets
|
|||
a) Fixed assets
|
|||
i) Tangible
|
7,00,000 | 4,00,000 | |
2. Current assets
|
|||
a) Inventories
|
1,70,000 | 1,00,000 | |
b) Trade Receivables
|
1,00,000 | 50,000 | |
c) Cash and cash equivalents
|
– | 50,000 | |
Total | 9,70,000 | 6,00,000 | |
Notes to Accounts
Particulars | 31st March 2014 (Rs) |
31st March 2013 (Rs) |
1. Share capital | ||
a) Equity share capital
|
3,00,000 | 2,00,000 |
b) Preference share capital
|
1,00,000 | – |
4,00,000 | 2,00,000 | |
2. Long term borrowings | ||
Long-term loan
|
– | 2,00,000 |
Long-term Rahul
|
1,50,000 | 20,000 |
1,50,000 | 2,20,000 | |
Additional Information:
Net Profit for the year after charging Rs. 50,000 as Depreciation was Rs. 1,50,000. Dividend paid on Share was Rs. 50,000, Tax Provision created during the year amounted to Rs. 60,000.
Answer:
Cash Flow Statement of Yogeta Ltd.
|
|||||
Particulars |
Amount Rs |
Amount Rs |
|||
A. |
Cash Flow from Operating Activities |
||||
Profit as per Balance Sheet (2,00,000 –1,00,000) |
1,00,000 |
||||
Proposed Dividend |
50,000 |
||||
Provision for Taxation |
60,000 |
||||
Net Profit before Taxation and Extraordinary items |
2,10,000 |
||||
Items to be added: |
|||||
Depreciation |
50,000 |
50,000 |
|||
Operating Profit before Working Capital changes |
2,60,000 |
||||
Add: Increase in Current liabilities |
|||||
Trade Payable |
20,000 |
20,000 |
|||
2,80,000 |
|||||
Less: Increase in Current Assets |
|||||
Inventories |
(70,000) |
||||
Trade Receivable |
(50,000) |
(1,20,000) |
|||
Cash Generated from Operating Activities |
1,60,000 |
||||
Less: Income Tax paid |
(40,000) |
||||
Net Cash from Operations |
1,20,000 |
||||
B. |
Cash Flow from Investing Activities |
||||
Purchases of Fixed Assets |
(3,50,000) |
||||
Net Cash used in Investing Activities |
(3,50,000) |
||||
C. |
Cash Flow from Financing Activities |
||||
Issue of Equity Shares |
1,00,000 |
||||
Issue of Preference Shares |
1,00,000 |
||||
Loan from Rahul |
1,30,000 |
||||
Less: Repayment of Loan |
(2,00,000) |
||||
Dividend Paid |
(50,000) |
||||
Net Cash from Financing Activities |
80,000 |
||||
D. |
Net decrease in Cash and Cash Equivalent (A+B+C) |
(1,50,000) |
|||
Add: Cash and Cash Equivalents in the beginning |
50,000 |
||||
E. |
Cash and Cash Equivalents at the end (Bank Overdraft) |
(1,00,000) |
|||
Working Notes:
1.
Provision for Taxation Account |
|||||||
Dr. |
Cr. |
||||||
Date |
Particulars |
J.F. |
Amount Rs |
Date |
Particulars |
J.F. |
Amount Rs |
Bank (Balancing figure) |
40,000 |
Balance b/d |
30,000 |
||||
Balance c/d |
50,000 |
Profit and Loss |
60,000 |
||||
90,000 |
90,000 |
||||||
2.
Fixed Assets Account |
|||||||
Dr. |
Cr. |
||||||
Date |
Particulars |
J.F. |
Amount Rs |
Date |
Particulars |
J.F. |
Amount Rs |
Balance b/d |
4,00,000 |
Depreciation |
50,000 |
||||
Bank |
3,50,000 |
Balance c/d |
7,00,000 |
||||
7,50,000 |
7,50,000 |
||||||
Q24: Following is the Financial Statement of Garima Ltd., prepare cash flow statement.
Particulars | Note No. | 31st March 2015 (Rs) |
31st March 2014 (Rs) |
I) Equity and Liabilities | |||
1. Shareholders’ Funds
|
|||
a) Share capital
|
1 | 4,40,000 | 2,80,000 |
b) Reserve and surplus-Surplus
|
2 | 40,000 | 28,000 |
2. Current Liabilities
|
|||
a) Trade payables
|
1,56,000 | 56,000 | |
c) Short-term provisions
|
12,000 | 4,000 | |
(Provision for taxation)
|
|||
Total | 6,48,000 | 3,68,000 | |
II) Assets | |||
1. Non-current assets
|
|||
a) Fixed assets
|
|||
i) Tangible
|
3,64,000 | 2,00,000 | |
2. Current assets
|
|||
a) Inventories
|
1,60,000 | 60,000 | |
b) Trade receivables
|
80,000 | 20,000 | |
c) Cash and cash equivalents
|
28,000 | 80,000 | |
d) Other current assets
|
16,000 | 8,000 | |
Total | 6,48,000 | 3,68,000 | |
Notes to Accounts
Particulars | 31st March 2015 (Rs) |
31st March 2014 (Rs) |
1. Share capital | ||
a) Equity share capital
|
3,00,000 | 2,00,000 |
b) Preference share capital
|
1,40,000 | 80,000 |
4,40,000 | 2,80,000 | |
2. Reserve and surplus | ||
Surplus in statement of profit and loss at the beginning of the year
|
28,000 | |
Add: Profit of the year
|
16,000 | |
Less: Dividend
|
4,000 | |
Profit at the end of the year | 40,000 | |
Additional Information:
- Interest paid on Debenture Rs 600
- Dividend paid during the year Rs 4,000
- Depreciation charged during the year Rs 32,000
Answer:
Cash Flow Statement (Indirect Method) |
|||||
Particulars |
Amount Rs |
Amount Rs |
|||
A. |
Cash Flow from Operating Activities |
||||
Profit as per Balance Sheet (40,000 – 28,000) |
12,000 |
||||
Proposed Dividend |
4,000 |
||||
Provision for Taxation |
12,000 |
||||
Net Profit before Taxation and Extraordinary items |
28,000 |
||||
Items to be added: |
|||||
Interest paid on Debentures | 600 | ||||
Depreciation |
32,000 |
32,600 |
|||
Operating Profit before Working Capital changes |
60,600 |
||||
Add: Increase in Current liabilities |
|||||
Trade Payables |
1,00,000 |
||||
Less: Increase in Current Assets |
|||||
Other Current Assets |
(8,000) |
||||
Inventories |
(1,00,000) |
||||
Trade Receivables |
(60,000) |
(68,000) |
|||
Cash generated from Operating Activities |
(7,400) |
||||
Less: Income Tax paid |
(4,000) |
||||
Net Cash used in Operating Activities |
(11,400) |
||||
B. |
Cash Flow from Investing Activities |
||||
Purchase of Fixed Assets |
(1,96,000) |
||||
Net Cash used in Investing Activities |
(1,96,000) |
||||
C. |
Cash Flow from Investing Activities |
||||
Issue of Equity Shares |
1,00,000 |
||||
Issue of Preference Shares |
60,000 |
||||
Less: Interest Paid on Debentures | (600) | ||||
Less: Dividend Paid |
(4,000) |
||||
Net Cash from Financing Activities |
1,55,400 |
||||
D. |
Net decrease in cash and cash equivalent (A+B+C) |
(52,000) |
|||
Add: Cash and Cash Equivalents in the beginning |
80,000 |
||||
E. |
Cash and Cash Equivalents at the end |
28,000 |
|||
Working Notes:
Plant and Machinery Account |
|||||||
Dr. |
Cr. |
||||||
Date |
Particulars |
J.F. |
Amount Rs |
Date |
Particulars |
J.F. |
Amount Rs |
Balance b/d |
2,00,000 |
Depreciation |
32,000 |
||||
Bank (Purchases- Balancing fig.) |
1,96,000 |
Balance c/d |
3,64,000 |
||||
3,96,000 |
3,96,000 |
||||||
Note: As per our solution Cash flow from Operating, Investing and Financing Activities is (Rs 11,400), (Rs 1,96,000) and Rs 1,55,400 respectively. But as per the book it is Rs (12,000), (Rs 1,96,000) and Rs 1,56,000.
Q25: From the following Balance Sheet of Computer India Ltd., prepare cash flow statement.
(Rs in ‘000)
Particulars | Note No. | 31st March 2015 (Rs) |
31st March 2014 (Rs) |
I) Equity and Liabilities | |||
1. Shareholders’ Funds
|
|||
a) Share capital
|
50,000 | 40,000 | |
b) Reserves and surplus-Surplus
|
1 | 3,700 | 3,000 |
2. Non-Current Liabilities
|
|||
10% Debentures
|
6,500 | 6,000 | |
3. Current Liabilities
|
|||
a) Short-term borrowings
|
2 | 6,800 | 12,500 |
b) Trade payables
|
11,000 | 12,000 | |
c) Short-term provisions
|
3 | 10,000 | 8,000 |
Total | 88,000 | 81,500 | |
II) Assets | |||
1. Non-current assets
|
|||
a) Fixed assets
|
4 | 25,000 | 30,000 |
2. Current assets
|
|||
a) Inventories
|
35,000 | 30,000 | |
b) Trade receivables
|
24,000 | 20,000 | |
c) Cash and cash equivalents-cash
|
3,500 | 1,200 | |
d) Other current assets-prepaid exp.
|
500 | 300 | |
Total | 88,000 | 81,500 | |
Notes to Accounts
Particulars | 31st March 2015 (Rs) |
31st March 2014 (Rs) |
|
1. | Reserve and surplus | ||
(i) Balance in statement of profit and loss | 1,200 | 1,000 | |
(ii) General reserve | 2,500 | 2,000 | |
3,700 | 3,000 | ||
2. | Short-term borrowings | ||
Bank Overdraft
|
6,800 | 12,500 | |
3. | Short-term provisions | ||
(i) Provision for taxation
|
4,200 | 3,000 | |
(ii) Proposed dividend
|
5,800 | 5,000 | |
10,000 | 8,000 | ||
4. | Fixed Assets: | ||
Fixed Assets | 40,000 | 41,000 | |
Less: Accumulated Depreciation | (15,000) | (11,000) | |
25,000 | 30,000 | ||
Additional Information:
Interest paid on Debenture Rs. 600
Answer:
Cash Flow Statement of Computer India Ltd. |
|||||
(00,000) |
|||||
Particulars |
Amount Rs |
Amount Rs |
|||
A. |
Cash Flow from Operating Activities |
||||
Profit as per Balance Sheet (1,200 – 1,000) |
200 |
||||
Proposed Dividend |
5,800 |
||||
General Reserve |
500 |
||||
Provision for Taxation |
4,200 |
||||
Net Profit before Tax and Extraordinary items |
10,700 |
||||
Items to be added |
|||||
Provision for Depreciation |
4,000 |
||||
Interest paid on Debentures |
600 |
4,600 |
|||
Operating Profit before Working Capital changes |
15,300 |
||||
Adjustments |
|||||
Less: |
Increase in Current Assets |
||||
Trade Receivables |
(4,000) |
||||
Inventories |
(5,000) |
||||
Prepaid Expenses |
(200) |
(9,200) |
|||
6,100 |
|||||
Less: |
Decrease in Current Liabilities |
||||
Trade Creditors |
(1,000) |
(1,000) |
|||
Cash generated from Operating Activities |
5,100 |
||||
Less: |
Income Tax Paid |
(3,000) |
|||
Net Cash from Operation |
2,100 |
||||
B. |
Cash Flow from Investing Activities |
||||
Sale of Fixed Assets |
1,000 |
||||
Net Cash from Investing Activities |
1,000 |
||||
C. |
Cash Flow from Financing Activities |
||||
Issue of Equity Shares |
10,000 |
||||
Issue of 10% Debentures |
500 |
||||
Less: |
Dividend paid |
(5,000) |
|||
Less: |
Interest paid |
(600) |
|||
Net Cash from Financing Activities |
4,900 |
||||
D. |
Net Increase in Cash and Cash Equivalent (A+B+C) |
8,000 |
|||
Add: |
Cash and Cash Equivalent in the beginning |
||||
Cash |
1,200 |
||||
Bank overdraft |
(12,500) |
(11,300) |
|||
E. |
Cash and Cash Equivalents at the end |
||||
Cash |
3,500 |
||||
Bank overdraft |
(6,800) |
(3,300) |