Analysis Of Financial Statements Ts Grewal 2018 for Class 12 Commerce Accountancy Chapter 5

Answer:

	Cash Flow Statement
Particulars		Amount (₹)	Amount (₹)
Cash Flow from Financing Activities
Loan Repaid		(1,00,000)
New Loan Raised		1,50,000	50,000
Cash Flows from Financing Activity			50,000

Working Notes:

Long Term Loan Account
Dr.		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Bank A/c (Repayment of Loan)	1,00,000	Balance b/d	2,00,000
Balance c/d	2,50,000	Bank A/c (Loan Raised)	1,50,000
	3,50,000		3,50,000

Answer:

Cash Flow from Financing Activities
	Particulars	Amount (Rs)	Amount (Rs)
	Proceeds from Issue of Equity Shares	1,10,000
	Redemption of 12% Debentures	(50,000)
	Interest Paid	(18,000)
	*Net Cash Flows from Financing Activities*		42,000

Answer:

Cash Flow from Financing Activities for the year ended March 31, 2018
	Particulars	Amount (Rs)	Amount (Rs)
	Issue of Shares	1,25,000
	Transfer to Securities Premium Reserve	1,25,000
	Issue of Debentures	1,00,000
	Premium on redemption of Preference Shares (5% of 1,50,000)	(7,500)
	Interim Dividend Paid(15% of 4,00,000)	(60,000)
	Redemption of Preference Share Capital	(1,50,000)
	Interest on Debentures (12% of 3,00,000)	(36,000)
	Interest on Preference Share Capital	(55,000)
	*Net Cash Flow from Financing Activities*		41,500

Answer:

Cash Flow Statement for the year ended March 31, 2018
	Particulars	Amount (Rs)	Amount (Rs)
	Cash Flow from Investing Activities
	Purchase of Machinery	(20,000)
	Sale of Machine	4,000
	*Net Cash from (used in) Investing Activities*		(16,000)

	Cash Flow from Financing Activities
	Proceeds from Issue of Equity Shares	5,000
	Repayment of Bank Loan	(10,000)
	*Net Cash from (used in) Financing Activities*		(5,000)

Working Notes:

Machinery Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	40,000	Accumulated Depreciation A/c	4,000
Bank A/c (Purchase- Bal. Fig.)	20,000	Bank A/c (Sale)	4,000
		Profit and Loss A/c (Loss on Sale)	2,000
		Balance c/d	50,000
	60,000		60,000

Accumulated Depreciation Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
To Machinery A/c (Bal. Fig.)	4,000	Balance b/d	10,000
Balance c/d	12,000	By Profit and Loss A/c (Dep. charged during the year)	6,000
	16,000		16,000

Answer:

Cash Flow from Financing Activities
	Particulars	Amount (Rs)	Amount (Rs)
	Proceeds from Issue of 12% Debentures	1,00,000
	Interest Paid	(19,000)
	Dividend Paid	(50,000)
	*Net Cash Flows from Financing Activities*		31,000

Note: Amount of Equity Share Capital has been increased due to the issue of Bonus Shares which does not involve any flow of cash. Therefore, it is not considered in the Financing Activities.

Answer:

Cash Flow Statement
	Particulars		Amount (₹)	Amount (₹)
	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss			7,25,000
	Items to be Added:
	Dividend on Equity Shares		90,000
	Dividend on Preference Shares		37,500
	Interest on Debentures		41,000
	Interest on Bank Loan		9,000
	Provision for Tax		1,12,500
	Transfer to General Reserve		75,000	3,65,000
	Operating Profit before Working Capital Adjustments			10,90,000
	Less: Increase in Current Assets
		Trade Receivables& Inventories	(1,50,000)
	Add:Increase in Current Liabilities
	Trade Payables		2,50,000	1,00,000
	Cash Generated from Operations			11,90,000
	Less: Taxes Paid			62,500
	Cash Flow from Operating Activities			11,27,500

Cash Flow Statement
	Particulars	Amount (₹)	Amount (₹)
	Cash Flow from Financing Activities
	Dividend on Equity Shares	(90,000)
	Dividend on Preference Shares	(37,500)
	Interest on Debentures	(41,000)
	Interest on Bank Loan	(9,000)
	Increase in Securities Premium Reserve	25,000
	Proceeds from Issue of Equity Shares	2,50,000
	Proceeds from Issue of Debentures	2,75,000
	Redemption of Preference Shares	(2,50,000)
	Repayment of Bank Loan	(25,000)
	Cash Flows from Financing Activity		97,500

Working Notes:

Provision for Tax Account
Dr.		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Bank A/c (Bal. fig.)	62,500	Balance b/d	50,000
Balance c/d	1,00,000	Profit & Loss A/c	1,12,500
	1,62,500		1,62,500

Calculation of Interest on Debentures

\begin{array}{l} 3, 75, 000 \times \frac{8}{100} = 30, 000 \\ 2, 75, 000 \times \frac{8}{100} \times \frac{6}{12} = 11, 000 \\ Total Interest = 41,000 (30,000+11,000) \end{array}

Calculation of Interest on Bank Loan

$\begin{array}{l} 1, 25, 000 \times \frac{8}{100} \times \frac{6}{12} = 5, 000 \\ 1, 00, 000 \times \frac{8}{100} \times \frac{6}{12} = 4, 000 \\ Total Interest = 9,000 (5,000+4,000) \end{array}$

Answer:

Cash Flow Statement
	Particulars		Amount (Rs)	Amount (Rs)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss (Net Profit)		2,000
	Profit Before Taxation		2,000
	Items to be Added:		–
	Operating Profit before Working Capital Adjustments		2,000
	Add: Decrease in Current Assets
	Stock		8,000
	Add: Increase in Current Liabilities
	Bills Payable		12,000
	Cash Generated from Operations		22,000
	Less: Tax Paid		–
	*Net Cash Flow from Operating Activities*			22,000

B	Cash Flow from Investing Activities
		Sale of Fixed Assets	30,000
	*Net Cash Flows from Investing Activities*			30,000

C	Cash Flow from Financing Activities
	Repayment of Long-Term Loan		(50,000)
	*Net Cash Used in Financing Activities*			(50,000)

D	Net Increase or Decrease in Cash and Cash Equivalents			2,000
		Add: Cash and Cash Equivalent in the beginning of the period		15,000
	Cash and Cash Equivalents at the end of the period			17,000

Answer:

Cash Flow Statement for the year ended March 31, 2018
	Particulars	Amount (Rs)	Amount (Rs)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss (1,83,000 – 82,000)	1,01,000
	Profit Before Taxation	1,01,000
	Items to be Added:
	Interest on Debentures	7,500
	Operating Profit before Working Capital Adjustments	1,08,500
	Less: Increase in Current Assets
	Inventories	(56,000)
	Add: Increase in Current Liabilities
	Trade Payables	40,000
	Less: Decrease in Current Liabilities
	Other Current Liabilities	(8,000)
	Add: Decrease in Current Assets
	Trade Receivables	38,000
	Cash Generated from Operations	1,22,500
	Less: Tax Paid	–
	*Net Cash Flows from Operating Activities*		1,22,500

B	Cash Flow from Investing Activities
	Purchase of Fixed Assets	(1,57,000)
	Purchase of Investments	(13,000)
	*Net Cash Used in Investing Activities*		(1,70,000)

C	Cash Flow from Financing Activities
	Proceeds from Issue of Equity Share Capital	50,000
	Proceeds from Issue of 15% Debentures	30,000
	Interest on Debentures (50,000 × 15%)	(7,500)
	*Net Cash Flow from Financing Activities*		72,500

D	Net Increase or Decrease in Cash and Cash Equivalents		25,000
	Add: Cash and Cash Equivalent in the beginning of the period		70,000
	Cash and Cash Equivalents at the end of the period		95,000

Note: It has been assumed that Debentures were issued at the end of the accounting period. Therefore, interest on Debentures is computed on the opening balance of the Debenture.

Answer:

Cash Flow Statement for the year ended March 31, 2018
	Particulars		Amount (₹)	Amount (₹)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss			9,000
	Items to be Added:
	General Reserve		10,000
	Goodwill		10,000
	Provision for Taxation		32,000
	Proposed Dividend		45,000	97,000
	Operating Profit before Working Capital Adjustments			1,06,000
	Less: Increase in Current Assets
		Trade Receivables	(33,000)
	Less: Decrease in Current Liabilities
	Other Current Liabilities		(2,000)
	Add:Decrease in Current Assets
	Inventories		18,000
	Add:Increase in CurrentLiabilities
	Trade Payables		18,000	1,000
	Cash Generated from Operations			1,07,000
	Less: Tax Paid			(28,000)
	*Net Cash Flows from Operating Activities*			79,000

B	Cash Flow from Investing Activities
	Purchase of Non-Current Investments			(25,000)
	Purchase of Plant & Machinery			(1,01,000)
	Sale of Land & Building			53,000
	*Net Cash Used in Investing Activities*			(73,000)

C	Cash Flow from Financing Activities
	Dividend Paid			(39,000)
	Proceeds from Issue of Share Capital			50,000
	*Net Cash Flow from Financing Activities*			11,000
D	Net Increase or Decrease in Cash and Cash Equivalents			11,000
	Add: Cash and Cash Equivalent in the beginning of the period			17,000
	Cash and Cash Equivalents at the end of the period			28,000

Question 44:

Prepare a Cash Flow Statement on the basis of the information given in the Balance Sheet of Libra Ltd. as at 31st March, 2013 and 31st March 2012:

Particulars ulars	Note No.	31st March, 2013 (₹)	31st March, 2012 (₹)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital		8,00,000	6,00,000
(b) Reserves and Surplus	1	4,00,000	3,00,000
2. Non-Current Liabilities
Long-term Borrowings		1,00,000	1,50,000
3. Current Liabilities
(a) Trade Payables		40,000	48,000
Total Total Expenses		13,40,000	10,98,000
II. ASSETS
1, Non-Current Assets
(a) Fixed Assets:
Tangible Assets		8,50,000	5,60,000
(b) Non-Current Investments		2,32,000	1,60,000
2. Current Assets
(a) Current Investments		50,000	1,34,000
(b) Inventories		76,000	82,000
(c) Trade Receivables		38,000	92,000
(d) Cash and Cash Equivalents		94,000	70,000
Total		13,40,000	10,98,000

Notes to Accounts

Particulars	31st March, 2013 (₹)	31st March, 2012 (₹)
I. Reserves and Surplus
Surplus, i.e., Balance in Statement of Profit and Loss	4,00,000	3,00,000

Answer:

	Cash Flow Statement for the year ended March 31, 2013
	Particulars	Details (Rs)	Amount (Rs)
A	Cash from Operating Activities
	Net Profit		1,00,000
	Operating Profit Before Working Capital Changes		1,00,000
	Add: Decrease in Current Assets
	Inventories	6,000
	Trade Receivables	54,000
	Less: Decrease in Current Liabilities
	Trade Payables	(8,000)	52,000

	Cash Generated from Operations		1,52,000
	Less: Tax Paid		-
	Net Cash Flow from Operating Activities		1,52,000

B	Cash From Investing Activities
	Purchase of Tangible Assets	(2,90,000)
	Purchase on Non Current Investment	(72,000)

	Net Cash Used in Investing Activities		(3,62,000)

C	Cash From Financing Activities
	Issue of Share Capital	2,00,000
	Long Term Borrowings	(50,000)

	Net Cash Flow from Financing Activities		1,50,000

D	Net Decrease in Cash and Cash Equivalents		(60,000)
	Add: Cash and Cash Equivalents in the beginning of the period (70,000 + 1,34,000)		2,04,000
	Cash and Cash Equivalents at the end of the period (94,000 + 50,000)		1,44,000

Question 45:

Following are the Balance Sheets of Solar Power Ltd. as at 31st March, 2014 and 2013:

Solar Power Ltd.

BALANCE SHEET

Particulars ulars	Note No.	31st March, 2014 (₹)	31st March, 2013 (₹)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital		24,00,000	22,00,000
(b) Reserves and Surplus	1	6,00,000	4,00,000
2. Non-Current Liabilities
Long-term Borrowings		4,80,000	3,40,000
3. Current Liabilities
(a) Trade Payables		3,58,000	4,08,000
(b) Short-term Provisions		1,00,000	1,54,000
Total Total Expenses		39,38,000	35,02,000
II. ASSETS
1. Non-Current Assets
Fixed Assets:
(i) Tangible Assets	2	21,40,000	17,00,000
(ii) Intangible Assets	3	80,000	2,24,000
2. Current Assets
(a) Current Investments		4,80,000	3,00,000
(b) Inventories		2,58,000	2,42,000
(c) Trade Receivables		3,40,000	2,86,000
(d) Cash and Cash Equivalents		6,40,000	7,50,000
Total		39,38,000	35,02,000

Notes to Accounts


Particulars ulars	31st March, 2014 (₹)	31st March, 2013 (₹)
1. Revenue and Surplus Surplus, i.e., Balance in Statement of Profit and Loss	6,00,000	4,00,000
2. Tangible Assets
Machinery	25,40,000	20,00,000
Less: Accumulated Deprciation	(4,00,000)	(3,00,000)
Total Expenses	21,40,000	17,00,000
3. Intangible Assets
Goodwill	80,000	2,24,000

Additional Iformation:
Druing the year, a piece of machinery costing ₹48,000 on which accumulated deprciation was ₹ 32,000. was sold for ₹ 12,000.
Prepare Cash Flow Statement.

Answer:

	Cash Flow Statement for the year ended March 31, 2014
	Particulars		Amount (Rs)	Amount (Rs)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss		2,00,000
	Profit Before Taxation			2,00,000
	Items to be Added:
	Amortisation of Goodwill		1,44,000
	Depreciation		1,32,000
	Loss on Sale of Fixed Assets		4,000	2,80,000
	Operating Profit before Working Capital Adjustments			4,80,000
	Less: Increase in Current Assets
		Inventories	16,000
		Trade Receivables	54,000
	Less: Decrease in Current Liabilities
	Trade Payables		50,000
	Short-Term Provisions		54,000	1,74,000
	*Net Cash Generated from Operating Activities*			3,06,000

B	Cash Flow from Investing Activities
		Sale of Machinery	12,000
		Purchase of Machinery	(5,88,000)
	*Net Cash Used in Investing Activities*			(5,76,000)

C	Cash Flow from Financing Activities
	Proceeds from Issue of Share Capital		2,00,000
	Proceeds from Long Term Borrowings		1,40,000
	*Net Cash Flow from Financing Activities*			3,40,000

D	Net Increase or Decrease in Cash and Cash Equivalents			70,000
		Add: Cash and Cash Equivalent in the beginning of the period		10,50,000
	Cash and Cash Equivalents at the end of the period			11,20,000

Working Notes:

Machinery Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	20,00,000	Bank A/c (Sale)	12,000
Bank A/c (Purchase- Bal. Fig.)	5,88,000	Depreciation on Part of Machinery	32,000
		Profit and Loss A/c (Loss on Sale)	4,000
		Balance c/d	25,40,000
	25,88,000		25,88,000

Accumulated Depreciation Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Machinery A/c	32,000	Balance b/d	3,00,000
Balance c/d	4,00,000	Profit and Loss A/c (Dep. charged during the year- Bal. Fig.)	1,32,000
	4,32,000		4,32,000

Answer:

Cash Flow Statement for the year ended March 31, 2018
	Particulars	Amount (Rs)	Amount (Rs)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss (1,50,000 – 2,00,000)	(50,000)
	Transfer to General Reserve	3,40,000
	Dividend Paid	50,000
	Profit Before Taxation	3,40,000
	Items to be Added:
	Interest Paid	54,000
	Loss on Sale of Machinery	14,000
	Operating Profit before Working Capital Adjustments	4,08,000
	Less: Increase in Current Assets
	Inventories	(1,00,000)
	Trade Receivables	(1,00,000)
	Add: Increase in Current Liabilities
	Trade Payables	3,50,000
	Cash Generated from Operations	5,58,000
	Less: Tax Paid	–
	*Net Cash Flow from Operating Activities*		5,58,000

B	Cash Flow from Investing Activities
	Sale of Machinery	6,000
	Purchase of Fixed Assets	(5,20,000)
	*Net Cash Used in Investing Activities*		(5,14,000)

C	Cash Flow from Financing Activities
	Proceeds from Issue of Equity Share Capital	5,00,000
	Proceeds from 7% Preference Share Capital	60,000
	Dividend Paid	(50,000)
	Redemption of 9% Debentures	(2,00,000)
	Interest Paid (6,00,000 × 9%)	(54,000)
	*Net Cash Flow from Financing Activities*		2,56,000

D	Net Increase in Cash and Cash Equivalents		3,00,000
	Add: Cash and Cash Equivalent in the beginning of the period		2,00,000
	Cash and Cash Equivalents at the end of the period		5,00,000

Working Notes:

Fixed Assets Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	15,00,000	Bank A/c (Sale)	6,000
Bank A/c (Purchase- Bal. Fig.)	5,20,000	Profit and Loss A/c (Loss on Sale)	14,000
		Balance c/d	20,00,000
	20,20,000		20,20,000

Question 47:

Following was the Balance Sheet of M.M. Ltd. as at 31st March, 2015:

Particulars	Note No.	(₹)	(₹)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital		5,00,000	4,00,000
(b) Reserves and Surplus	1	2,00,000	(50,000)
2. Non-Current Liabilities
Long-term Borrowings	2	4,50,000	5,00,000
3. Current Liabilities
(a) Short-term Borrowings	3	1,50,000	50,000
(b) Short-term Provisions	4	70,000	90,000
Total Total Expenses		13,70,000	9,90,000
II. ASSETS
1. Non-Current Assets
(a) Fixed Assets:
(i) Tangible Assets	5	10,03,000	7,20,000
(ii) Intangible Assets	6	20,000	30,000
(b) Non-Current Investments		1,00,000	75,000
2. Current Assets
(a) Current Investments		50,000	60,000
(b) Inventories	7	1,07,000	45,000
(c) Cash and Cash Equivalents		90,000	60,000
Total		13,70,000	9,90,000

Notes to Accounts

Particular		31^st March 2015 (₹)	31^st March 2014 (₹)
1.	Reserves and Surplus
	Surplus, i.e., Balance in Statement of Profit and Loss	2,00,000	(50,000)
		2,00,000	(50,000)
2.	Long-term Borrowings
	12% Debentures	4,50,000	5,00,000
		4,50,000	5,00,000
3.	Short-term Borrowings
	Bank Overdraft	1,50,000	50,000
		1,50,000	50,000
4.	Short-term Provisions
	Provision for Tax	70,000	90,000
		70,000	90,000
5.	Tangible Assets
	Machinery	12,03,000	8,21,000
	Less: Accumulated Depreciation	(2,00,000)	(1,01,000)
		10,03,000	7,20,000
6.	Intangible Assets
	Goodwill	20,000	30,000
		20,000	30,000
7.	Inventories
	Stock-in-Trade	1,07,000	45,000
		1,07,000	45,000

Additional Information:
1. 12% Debentures were redeemed on 31st March, 2015.
2. Tax ₹ 70,000 was paid during the year.
Prepare Cash Flow Statement.

Answer:

		Cash Flow Statement for the year ended 31^st March, 2015
	Particulars			Amount (₹)	Amount (₹)
I	Cash Flow from Operating Activities
	A. Net Profit before Tax and Extraordinary items*				2,50,000
	Adjustments for Non-cash and Non-operating items
	B. Add: Items to be Added
	Depreciation			99,000
	Intangible Assets Written off			10,000
	Interest on Debentures (12% of 5,00,000)			60,000
	Provision for Tax			50,000	2,19,000
	C. Less: Items to be Deducted

	D.Operating Profit before Working Capital Adjustments (A + B – C)				4,69,000
	E. Add: Decrease in Current Assets and Increase in Current Liabilities
	F. Less: Increase in Current Assets and Decrease in Current Liabilities
	Inventories			62,000	(62,000)
	Cash Generated from Operations (D + E – F)				4,07,000
	Less: Income Tax Paid (Net of Refund)			70,000	(70,000)
	*Net Cash Flows from (or used in) Operating Activities*				3,37,000

II	Cash Flow from Investing Activities
	Purchase of Fixed Assets (12,03,000 – 8,21,000)			(3,82,000)
	Purchase of Non-Current Investments			(25,000)
	*Net Cash Flows from (or used in) Investing Activities*				(4,07,000)

III	Cash Flow from Financing Activities
	Proceeds from Issue of Share Capital			1,00,000
	Redemption of Debentures			(50,000)
	Interest Paid on Debentures			(60,000)
	Increase in Bank Overdraft			1,00,000
	*Net Cash Flow from Financing Activities*				90,000

IV	Net Increase or Decrease in Cash and Cash Equivalents (I + II + III)				20,000
			Add: Cash and Cash Equivalent in the beginning of the period		1,20,000
			(Includes Current Investments of Rs 60,000)
	Cash and Cash Equivalents at the end of the period				1,40,000
	(Includes Current Investments of Rs 50,000)

Provision for Tax Account
Dr.		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Bank A/c	70,000	Balance b/d	90,000
Balance c/d	70,000	Statement of Profit and Loss	50,000
	1,40,000		1,40,000

Answer:

Cash Flow Statement for the year ended March 31, 2017
	Particulars	Amount (Rs)	Amount (Rs)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss (4,80,000 – 3,75,000)	1,05,000
	Interim Dividend	75,000
	Profit Before Taxation	1,80,000
	Items to be Added:
	Interest Paid on Debentures	27,000
	Depreciation	60,000
	Operating Profit before Working Capital Adjustments	2,67,000
	Less: Increase in Current Assets
	Trade Receivables	(75,000)
	Add: Increase in Current Liabilities
	Trade Payables	30,000
	Add: Decrease in Current Assets
	Inventories	60,000
	Cash Generated from operations	2,82,000
	Less: Tax Paid	–
	*Net Cash Flow from Operating Activities*		2,82,000

B	Cash Flow from Investing Activities
	Sale of Land	60,000
	Purchase of Machinery	(1,50,000)
	*Net Cash Used in Investing Activities*		(90,000)

C	Cash Flow from Financing Activities
	Proceeds from Issue of Share Capital	1,20,000
	Redemption of 10% Debentures	(1,80,000)
	Interim Dividend Paid	(75,000)
	Interest Paid on Debentures	(27,000)
	*Net Cash Used in Financing Activities*		(1,62,000)

D	Net Increase in Cash and Cash Equivalents		30,000
	Add: Cash and Cash Equivalent in the beginning of the period		1,50,000
	Cash and Cash Equivalents at the end of the period		1,80,000

Question 49:

Following are the Balance Sheets of Krishtec Ltd. for the years ended 31st March 2012 and 2011:

Particulars ulars	Note No.	31st March, 2012 (₹)	31st March, 2011 (₹)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital		12,00,000	8,00,000
(b) Reserves and Surplus (Surplus, i.e., Balance in Statement of Profit and Loss)		3,50,000	4,00,000
2. Non-Current Liabilities
Long-term Borrowings		4,40,000	3,50,000
3. Current Liabilities
(a) Trade Payables		60,000	50,000
Total Total Expenses		20,50,000	16,00,000
II. ASSETS
1, Non-Current Assets
Fixed Assets:
Tangible Assets		12,00,000	9,00,000
2. Current Assets
(a) Inventories		2,00,000	1,00,000
(b) Trade Receivables		3,10,000	2,30,000
(c) Cash and Cash Equivalents		3,40,000	3,70,000
Total		20,50,000	16,00,000

Prepare a Cash Flow Statement after taking into account the following adjustments:
(a) The company paid Interest ₹36,000 on its long-term borrowings.
(b) Depreciation charged on tangible fixed assets was ₹1,20,000

Answer:

Cash Flow Statement for the year ended March 31, 2012
	Particulars		Amount (₹)	Amount (₹)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss			(50,000)
	Items to be Added:
	Depreciation		1,20,000
	Interest		36,000	1,56,000
	Operating Profit before Working Capital Adjustments			1,06,000
	Less: Increase in Current Assets
	Inventories		(1,00,000)
	Trade Receivables		(80,000)
	Add:Increase in CurrentLiabilities
	Trade Payables		10,000	(1,70,000)
	Cash Generated from Operations			(64,000)
	Less: Tax Paid			NIL
	*Net Cash Flows from Operating Activities*			(64,000)

B	Cash Flow from Investing Activities
		Purchase of Tangible Fixed Assets		(4,20,000)
	*Net Cash Used in Investing Activities*			(4,20,000)

C	Cash Flow from Financing Activities
	Interest Paid			(36,000)
	Proceeds from Issue of Share Capital			4,00,000
	Proceeds from Long Term Borrowings			90,000
	*Net Cash Flow from Financing Activities*			4,54,000
D	Net Increase or Decrease in Cash and Cash Equivalents			(30,000)
	Add: Cash and Cash Equivalent in the beginning of the period			3,70,000
	Cash and Cash Equivalents at the end of the period			3,40,000

Tangible Fixed Assets Account
Dr.		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Balance b/d	9,00,000	Depreciation A/c	1,20,000
Bank A/c (Bal. Fig.)	4,20,000	Balance c/d	12,00,000
	13,20,000		13,20,000

Answer:

		Cash Flow Statement for the year ended March 31, 2018
	Particulars			Amount (Rs)	Amount (Rs)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss				10,000
	Transfer to Reserve				5,000
	Provision for Tax				20,000
	Interim Dividend				12,000
	Profit Before Taxation				47,000
	Items to be Added:
	Depreciation				5,000
	Operating Profit before Working Capital Adjustments				52,000
	Less: Increase in Current Assets
	Inventories			(33,000)
	Less: Decrease in Current Liabilities
	Creditors			(5,000)
	Add: Decrease in Current Assets
	Trade Receivables			8,000
	Add: Increase in Current Liabilities
	Bills Payable			10,000	(20,000)
	Cash Generated from Operations				32,000
	Less: Tax Paid				(10,000)
	*Net Cash Flows from Operating Activities*				22,000

B	Cash Flow from Investing Activities
			Sale of Investments	5,000
			Purchase of Fixed Assets	(15,000)
	*Net Cash Used in Investing Activities*				(10,000)

C	Cash Flow from Financing Activities
	Proceeds from Issue of Share Capital			25,000
	Proceeds of Bank Loan			20,000
	Bank Overdraft Raised			5,000
	Dividend Paid			(12,000)
	*Net Cash Flow from Financing Activities*				38,000
D	Net Increase in Cash and Cash Equivalents				50,000
	Add: Cash and Cash Equivalent at the beginning of the period				50,000
	Cash and Cash Equivalents at the end of the period				1,00,000

Working Notes:

WN1:

Fixed Assets Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	20,000	Depreciation	5,000
Bank A/c (Purchase- Bal. Fig.)	15,000	Balance c/d	30,000
	35,000		35,000

WN2:

Provision for Taxation Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Bank A/c (Tax Paid) (Bal. Fig.)	10,000	Balance b/d	15,000
Balance c/d	25,000	Profit and Loss A/c	20,000
	35,000		35,000

Question 51:

Prepare Cash Flow Statement from the following Balance Sheet:

Particulars ulars	Note No.	31st March, 2013 (₹)	31st March, 2012 (₹)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital		6,00,000	5,00,000
(b) Reserves and Surplus	1	4,00,000	2,00,000
2. Current Liabilities
(a) Trade Payables		2,80,000	1,80,000
Total Total Expenses		12,80,000	8,80,000
II. ASSETS
1, Non-Current Assets
(a) Fixed Assets:
Plant and Machinery		5,00,000	3,00,000
2. Current Assets
(a) Inventories		1,00,000	1,50,000
(b) Trade Receivables		6,00,000	4,00,000
(c) Cash and Cash Equivalents		80,000	30,000
Total		12,80,000	8,80,000

Notes to Accounts

Particulars	31st March, 2013 (₹)	31st March, 2012 (₹)
I. Reserves and Surplus
Surplus, i.e., Balance in Statement of Profit and Loss	4,00,000	2,00,000

Additional Information:
(i) An old machinery having book value of ₹50,000 was sold for ₹60,000.
(ii) Depreciation provided on Machinery during the year was ₹30,000.

Answer:

	Cash Flow Statement for the year ended March 31, 2013
	Particulars	Details (Rs)	Amount (Rs)
A	Cash from Operating Activities
	Net Profit		2,00,000
	Add: Non Operating Expenses
	Depreciation on Plant and Machinery	30,000
	Less: Non Operating Incomes
	Profit on Sale of Machinery	(10,000)	20,000
	Operating Profit Before Working Capital Changes		2,20,000
	Add: Increase in Current Liabilities
	Trade Payables	1,00,000
	Add: Decrease in Current Assets
	Inventories	50,000
	Less: Increase in Current Assets
	Trade Receivables	(2,00,000)	(50,000)
	Cash Generated from Operations		1,70,000
	Less: Tax Paid		-
	Net Cash Flow from Operating Activities		1,70,000

B	Cash From Investing Activities
	Sale of Plant and Machinery	60,000
	Purchase of Plant and Machinery	(2,80,000)
	Net Cash Used in Investing Activities		(2,20,000)

C	Cash From Financing Activities
	Issue of Share Capital	1,00,000
	Net Cash Flow from Financing Activities		1,00,000

D	Net Increase in Cash and Cash Equivalents		50,000
	Add: Cash and Cash Equivalents in beginning of the period		30,000
	Cash and Cash Equivalents at the end of the period		80,000

Working Notes:

Plant and Machinery Account
Dr.							Cr.
Date	Particulars	J.F.	Amount (Rs)	Date	Particulars	J.F.	Amount (Rs)
	Balance b/d		3,00,000		Depreciation		30,000
	P & L ( Profit)		10,000		Bank ( Sale)		60,000
	Purchases (bf)		2,80,000		Balance c/d		5,00,000

			5,90,000				5,90,000

Question 52:

Following is the summarised Balance Sheet of Philips India Ltd. as at 31st March 2018:

Particulars ulars	Note No.	31st March, 2018 (₹)	31st March, 2017 (₹)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital		13,50,000	13,50,000
(b) Reserves and Surplus	1	11,34,000	10,68,000
2. Non-Current Liabilities
Long-term Borrowings: 10% Mortgage Loan		8,10,000	...
3. Current Liabilities
(a) Trade Payables (Creditors)		4,20,000	5,04,000
(b) Short-term Provisions:
Provision for Tax		30,000	2,25,000
Total Total Expenses		37,26,000	31,47,000
II. ASSETS
1, Non-Current Assets
(a) Fixed Assets (Tangible)		9,60,000	12,00,000
(b) Non-Current Investments		1,80,000	1,50,000
2. Current Assets
(a) Current Investments		21,000	17,000
(b) Inventories		63,30,000	7,82,000
(c) Trade Receivables		13,65,000	6,30,000
(c) Cash and Cash Equivalents		5,70,00	4,30,000
Total		37,26,000	31,47,000

Notes to Accounts

Particulars	31st March, 2018 (₹)	31st March, 2017 (₹)
I. Reserves and Surplus
General Reserve	9,30,000	9,00,000
Surplus, i.e., Balance in Statement of Profit and Loss	2,04,000	1,68,000
	11,34,000	10,68,000

Additional Information:
1. Investments costing ₹ 24,000 were sold during the year for ₹ 25,5000.
2. Provistion for Tax made during the year was ₹ 27,000.
3. During the year, a part of the Fixed Assets costing ₹ 30,000 was sold for ₹ 36,000. The rofits were included in the Statement of Profit and Loss.
4. The Interim Dividend paid during the year amounted to ₹ 1,20,000.
You are required to prepare Cash Flow Statement.

Answer:

Cash Flow Statement for the year ended March 31, 2018
	Particulars	Amount (Rs)	Amount (Rs)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss (2,04,000 – 1,68,000)	36,000
	Transfer to General Reserve	30,000
	Interim Dividend	1,20,000
	Provision for Taxation	27,000
	Profit Before Taxation	2,13,000
	Items to be Added:
	Depreciation	2,10,000
	Profit on Sale of Investments	(1,500)
	Profit on Sale of Fixed Assets	(6,000)
	Operating Profit before Working Capital Adjustments	4,15,500
	Less: Increase in Current Assets
	Trade Receivables	(7,35,000)
	Less: Decrease in Current Liabilities
	Trade Payables	(1,02,000)
	Add: Decrease in Current Assets
	Inventories	90,000
	Cash Generated from Operations	(3,31,500)
	Less: Tax Paid	(2,22,000)
	*Net Cash from (used in) Operating Activities*		(5,53,500)

B	Cash Flow from Investing Activities
	Sale of Investments	25,500
	Sale of Fixed Assets	36,000
	Purchase of Investments	(54,000)
	*Net Cash Flow from Investing Activities*		7,500

C	Cash Flow from Financing Activities
	Proceeds from Issue of 10% Mortgage Loan	8,10,000
	Interim Dividend Paid	(1,20,000)
	*Net Cash Flow from Financing Activities*		6,90,000

D	Net Increase in Cash and Cash Equivalents		1,44,000
	Add: Cash and Cash Equivalent in the beginning of the period		4,47,000
	Cash and Cash Equivalents at the end of the period		5,91,000

Working Notes:

WN1

Fixed Assets Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	12,00,000	Bank A/c (Sale)	36,000
Profit and Loss A/c (Profit on Sale)	6,000	Depreciation (Bal. Fig.)	2,10,000
		Balance c/d	9,60,000
	12,06,000		12,06,000

WN2

Investments Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	1,50,000	Bank A/c (Sale)	25,500
Profit and Loss A/c (Profit on Sale)	1,500	Balance c/d	1,80,000
Bank A/c (Purchases- Bal. Fig.)	54,000
	2,05,500		2,05,500

WN 3

Provision for Taxation Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Bank A/c (Tax Paid- Bal. Fig.)	2,22,000	Balance b/d	2,25,000
Balance c/d	30,000	Profit and Loss A/c	27,000
	2,52,000		2,52,000

Answer:

Cash Flow Statement for the year ended March 31, 2018
	Particulars	Amount (Rs)	Amount (Rs)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss (30,600 – 30,500)	100
	Proposed Dividend	23,000
	Transfer to General Reserve	10,000
	Provision for Taxation	33,000
	Profit Before Taxation	66,100
	Items to be Added:
	Depreciation on Machinery	14,000
	Depreciation on Building	10,000
	Operating Profit before Working Capital Adjustments	90,100
	Add: Decrease in Current Assets
	Inventories	26,000
	Trade Receivables	15,800
	Less: Decrease in Current Liabilities
	Trade Payables	(14,800)
	Cash Generated from operations	1,17,100
	Less: Tax Paid	(28,000)
	*Net Cash Flows from Operating Activities*		89,100

B	Cash Flow from Investing Activities
	Purchase of Machinery	(33,000)
	Purchase of Goodwill	(5,000)
	*Net Cash from (used in) Investing Activities*		(38,000)

C	Cash Flow from Financing Activities
	Proceeds from Issue of Equity Shares	50,000
	Repayment of Bank Loan	(70,000)
	Dividend Paid	(23,000)
	*Net Cash Used in Financing Activities*		(43,000)

D	Net Increase in Cash and Cash Equivalents		8,100
	Add: Cash and Cash Equivalent in the beginning of the period		500
	Cash and Cash Equivalents at the end of the period		8,600

Working Notes:

WN1

Machinery Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	1,50,000	Depreciation	14,000
Bank A/c (Purchases- Bal. Fig.)	33,000	Balance c/d	1,69,000
	1,83,000		1,83,000

WN2

Provision for Taxation Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Bank A/c (Tax Paid)	28,000	Balance b/d	30,000
Balance c/d	35,000	Profit and Loss A/c (Bal. Fig.)	33,000
	63,000		63,000

Question 54:

From the following Balance Sheet of Akash Ltd. as at 31st March 2014:


Particulars	Note No.	31st March, 2014 (₹)	31 March, 2013 (₹)
I. EQUITY AND LIABILITES 1. Shareholders' Funds
(a) Share Capital		15,00,000	14,00,000
(b) Reserves and Surplus	1	2,50,000	1,10,000
2. Non-Current Liabilities
Long-term Borrowings		2,00,000	1,25,000
3. Current Liabilities
(a) Short-term Borrowings	2	12,000	10,000
(b) Trade Payables		15,000	83,000
(c) Short-term Provisions	3	18,000	11,000
Total		19,95,000	17,39,000
II. ASSETS
1. Non-Current Assets
Fixed Assets:
(i) Tangible Assets	4	18,60,000	16,10,000
(ii) Intangible Assets	5	50,000	30,000
2. Current Assets
(a) Current Investments		8,000	5,000
(b) Inventories		37,000	59,000
(c) Trade Receivables		26,000	23,000
(d) Cash and Cash Equivalents		14,000	12,000
Total		19,95,000	17,39,000

Notes to Accounts :
Particulars	31st March, 2014 (₹)	31st March, 2013 (₹)
1. Reserves and Surplus
Surplus, i.e., Balance in Statement of Profit and Loss	2,50,000	1,10,000
2. Short-term Borrowings :
Bank Overdraft	12,000	10,000
3. Short-term Provisions
Provision for Tax	18,000	11,000
4. Tangible Assets :
Machinery	20,00,000	17,00,000
Less: Accumulated Depreciation	(1,40,000)	(90,000)
	18,60,000	16,10,000
5. Intangible Assets
Patents	50,000	30,000

Additional Information :

(i) Tax paid during the year amounted to ₹ 16,000.
(ii) machine with a net book value of ₹ 10,000 (Accumulated Depreciation ₹ 40,000) was sold for ₹ 2,000.

Prepare Cash Flow Statement.

Answer:

		Cash Flow Statement for the year ended March 31, 2014
	Particulars			Amount (Rs)	Amount (Rs)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss			1,40,000
	Provision for Tax			23,000
	Profit Before Taxation				1,63,000
	Items to be Added:
	Depreciation			90,000
	Loss on Sale of Fixed Assets			8,000	98,000
	Operating Profit before Working Capital Adjustments				2,61,000
	Less: Increase in Current Assets
			Trade Receivables	(3,000)
	Less: Decrease in Current Liabilities
	Trade Payables			(68,000)
	Add: Decrease in Current Assets
	Inventory			22,000	(49,000)
	Cash Generated from Operations				2,12,000
	Less: Tax Paid				(16,000)
	*Net Cash Flows from Operating Activities*				1,96,000

B	Cash Flow from Investing Activities
			Sale of Fixed Assets	2,000
			Purchase of Patents	(20,000)
			Purchase of Fixed Assets	(3,50,000)
	*Net Cash Used in Investing Activities*				(3,68,000)

C	Cash Flow from Financing Activities
	Proceeds from Issue of Share Capital			1,00,000
	Proceeds from Long term Borrowings			75,000
	Raise of Bank Overdraft			2,000
	*Net Cash Flow from Financing Activities*				1,77,000

D	Net Increase in Cash and Cash Equivalents				5,000
	Add: Cash and Cash Equivalent in the beginning of the period (12,000+5,000)				17,000
	Cash and Cash Equivalents at the end of the period (14,000+8,000)				22,000

Working Notes:

WN1:

Fixed Assets Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	17,00,000	Bank A/c (Sale)	2,000
Bank A/c (Purchase- Bal. Fig.)	3,50,000	Accumulated Depreciation	40,000
		Profit and Loss A/c (Loss on Sale)	8,000
		Balance c/d	20,00,000
	20,50,000		20,50,000

WN2:

Accumulated Depreciation Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Fixed Assets A/c	40,000	Balance b/d	90,000
Balance c/d	1,40,000	Profit and Loss A/c (Dep. charged during the year- Bal. Fig.)	90,000
	1,80,000		1,80,000

WN3:

Provision for Taxation Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Bank A/c (Tax Paid)	16,000	Balance b/d	11,000
Balance c/d	18,000	Profit and Loss A/c (Bal. Fig.)	23,000
	34,000		34,000

Question 55:

From the following Balance Sheet of SRS Ltd. and the additional information as on 31st March, 2016, prepare a Cash Flow Statement:

SRS Ltd.

BALANCE SHEET as on 31st March, 2016

Particulars ulars	Note No.	31st March, 2016 (₹)	31st March, 2015 (₹)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital		4,50,000	3,50,000
(b) Reserves and Surplus	1	1,25,000	50,000
2. Non-Current Liabilities
Long-term Borrowings	2	2,25,000	1,75,000
3. Current Liabilities
(a) Short-term Borrowingst	3	75,000	37,500
(b) Shrot-term Provisions	4	1,00,000	62,500
Total Total Expenses		9,75,000	6,75,000
II. ASSETS
1, Non-Current Assets
(a) Fixed Assets:
(i) Tangible	5	7,32,500	4,52,500
(ii) Intangible	6	50,000	75,000
(b) Non-current Investments		75,000	50,000
2. Current Assets
(a) Current Investments		20,000	35,000
(b) Inventories	7	61,000	36,000
(c) Cash and Cash Equivalents		36,500	26,500
Total		9,75,000	6,75,000

Notes to Accounts

Particular		31^st March 2016 (₹)	31^st March 2015 (₹)
1.	Reserves and Surplus
	Surplus, i.e., Balance in Statement of Profit and Loss	1,25,000	50,000
2.	Long-term Borrowings
	12% Debentures	2,25,000	1,75,000
3.	Short-term Borrowings
	Bank Overdraft	75,000	37,500
4.	Short-term Provisions
	Provision for Tax	1,00,000	62,500
5.	Tangible Assets
	Machinery	8,37,500	5,22,500
	Accumulated Depreciation	(1,05,000)	(70,000)
		7,32,500	4,52,500
6.	Intangible Assets
	Goodwill	50,000	75,000
7.	Inventories
	Stock-in-Trade	61,000	36,000

Additional Information:
(i) ₹50,000, 12% Debentures were issued on 31st March, 2016.
(ii) During the year, a piece of machinery costing ₹40,000, on which accumulated depreciation was ₹20,000, was sold at a loss of ₹5,000.

Answer:

Cash Flow Statement for the year ended March 31, 2016
	Particulars	Amount (₹)	Amount (₹)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss	75,000
	Provision for Tax	1,00,000	1,75,000
	Profit Before Taxation		1,75,000
	Items to be Added:
	Goodwill written off	25,000
	Debentures Interest	21,000
	Depreciation	55,000
	Loss on Sale of Machinery	5,000	1,06,000
	Operating Profit before Working Capital Adjustments		2,81,000
	Less: Increase in Current Assets
	Inventories	(25,000)	(25,000)
	Cash Generated from Operations		2,56,000
	Less: Tax Paid		(62,500)
	*Net Cash Flows from Operating Activities*		1,93,500

B	Cash Flow from Investing Activities
	Sale of machinery	15,000
	Purchase of machinery	(3,55,000)
	Purchase of non-current investment	(25,000)	(3,65,000)
	*Net Cash Used in Investing Activities*		(3,65,000)

C	Cash Flow from Financing Activities
	Proceeds from Issue of Share Capital	1,00,000
	Increase in Bank Overdraft	37,500
	Interest on Debentures paid	(21,000)
	Proceeds from Issue of Debentures	50,000
	*Net Cash Flow from Financing Activities*		1,66,500
D	Net ↑/↓ in Cash and Cash Equivalents (A+B+C)		(5,000)
	Add: Cash and Cash Equivalent in the beginning of the period (26,500+35,000)		61,500
	Cash and Cash Equivalents at the end of the period (36,500+20,000)		56,500

Working Notes:

Machinery Account
Dr.		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Balance b/d	5,22,500	Bank A/c (Sale)	15,000
Bank A/c (Purchase- Bal. Fig.)	3,55,000	Accumulated Depreciation A/c	20,000
		Profit and Loss A/c (Loss on Sale)	5,000
		Balance c/d	8,37,500
	8,77,500		8,77,500

Accumulated Depreciation Account
Dr.		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Machinery A/c	20,000	Balance b/d	70,000
Balance c/d	1,05,000	Profit and Loss A/c (Dep. charged during the year- Bal. Fig.)	55,000
	1,25,000		1,25,000

Answer:

		Cash Flow Statement for the year ended March 31, 2018
	Particulars			Amount (Rs)	Amount (Rs)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss			1,40,000
	General Reserve			60,000
	Profit Before Taxation				2,00,000
	Items to be Added:
	Depreciation			1,60,000
	Debentures Interest			20,000
	Loss on Sale of Fixed Assets			10,000
	Items to be Deducted:
	Profit on sale of Investment			(16,000)	1,74,000
	Operating Profit before Working Capital Adjustments				3,74,000
	Less: Decrease in Current Liabilities
	Trade Payables			(30,000)
	Add: Decrease in Current Assets
	Trade Receivables			2,20,000	1,90,000
	Cash Generated from Operations				5,64,000
	Less: Tax Paid				-
	*Net Cash Flows from Operating Activities*				5,64,000

B	Cash Flow from Investing Activities
			Sale of Fixed Assets	20,000
			Sale of Non-Current Investment	96,000
			Purchase of Non-Current Investment	(1,50,000)
			Purchase of Fixed Assets	(8,80,000)
	*Net Cash Used in Investing Activities*				(9,14,000)

C	Cash Flow from Financing Activities
	Proceeds from Issue of Share Capital			4,00,000
	Proceeds from Issue of issue of Debentures			1,20,000
	Security Premium Reserve			20,000
	Repayment of Bank Loan			(30,000)
	Interest Paid			(20,000)
	*Net Cash Flow from Financing Activities*				4,90,000

D	Net Increase Decrease in Cash and Cash Equivalents				1,40,000
			Add: Cash and Cash Equivalent in the beginning of the period (1,10,000+1,30,000+80,000)		3,20,000
	Cash and Cash Equivalents at the end of the period (1,40,000+1,60,000+1,60,000)				4,60,000

Working Notes:

WN1:

Fixed Assets Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	14,00,000	Bank A/c (Sale)	20,000
Bank A/c (Purchase- Bal. Fig.)	8,80,000	Accumulated Depreciation	1,10,000
		Profit and Loss A/c (Loss on Sale)	10,000
		Balance c/d	21,40,000
	22,80,000		22,80,000

WN2:

Accumulated Depreciation Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Fixed Assets A/c	1,10,000	Balance b/d	1,90,000
Balance c/d	2,40,000	Profit and Loss A/c (Dep. charged during the year- Bal. Fig.)	1,60,000
	3,50,000		3,50,000

WN3:

Non-Current Investment Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	2,00,000	Bank A/c (Sale) (80,000+16,000)	96,000
Profit and Loss A/c (Profit on Sale)	16,000	Balance c/d	2,70,000
Bank A/c (Purchase- Bal. Fig.)	1,50,000

	3,66,000		3,66,000

Answer:

		Cash Flow Statement for the year ended March 31, 2018
	Particulars			Amount (Rs)	Amount (Rs)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss			2,00,000
	Preference Dividend $(3, 00, 000 \times \frac{10}{100})$ W.N.-1			30,000
	Profit Before Taxation				2,30,000
	Items to be Added:
	Depreciation on Fixed Assets			60,000
	Loss on Fixed Assets			40,000
	Interest on Debentures			30,000
	Dividend on Equity Shares			45,000
	Provision for Doubtful Debts			10,000
	Items to be Deducted:
	Interest on Investment			(10,000)	1,75,000
	Operating Profit before Working Capital Adjustments				4,05,000
	Less: Increase in Current Assets
			Trade Receivables	(1,00,000)
			Inventories	(1,00,000)	(2,00,000)
	Add: Increase in Current Liabilities
	Trade Payables			80,000	80,000
	Cash Generated from Operations				2,85,000
	Less: Tax Paid				-
	*Net Cash Flows from Operating Activities*				2,85,000

B	Cash Flow from Investing Activities
			Sale of Fixed Assets	50,000
			Purchase of Fixed Assets	(2,50,000)
			Purchase of Investment	(1,00,000)
			Interest on Investment	10,000
	*Net Cash Used in Investing Activities*				(2,90,000)

C	Cash Flow from Financing Activities
	Proceeds from Issue of Share Capital			2,00,000
	Proceeds from Issue of Debentures			1,00,000
	Interest on Debentures Paid			(30,000)
	Redemption of Preference Share Capital			(1,00,000)
	Security Premium Reserve			10,000
	Dividend Paid on Preference Share Capital			(30,000)
	Dividend Paid on Equity Share Capital			(45,000)
	*Net Cash Flow from Financing Activities*				1,05,000

D	Net Increase in Cash and Cash Equivalents				1,00,000
			Add: Cash and Cash Equivalent in the beginning of the period (50,000+20,000)		70,000
	Cash and Cash Equivalents at the end of the period (90,000+80,000)				1,70,000

Working Notes:

(1) Dividend on 10% Preference Shares has been calculated on the value as on 31st March, 2018 as Rs. 1,00,000 Preference Shares were redeemed on 31st March, 2018.

(2)

Fixed Assets Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	6,00,000	Bank A/c (Sale)	50,000
Bank A/c (Purchase- Bal. Fig.)	2,50,000	Depreciation	60,000
		Profit and Loss A/c (Loss on Sale)	40,000
		Balance c/d	7,00,000
	8,50,000		8,50,000

Answer:

		Cash Flow Statement for the year ended March 31, 2018
	Particulars			Amount (Rs)	Amount (Rs)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss			82,500
	Preference Dividend			12,000

	Profit Before Taxation				94,500
	Items to be Added:
	Depreciation on Fixed Assets			35,000
	Loss on sale of Fixed Assets			7,500
	Interest on Debentures			5,000
	Provision for Doubtful Debts			2,500
					50,000
	Items to be Deducted:
	Interest on Investment				(1,500)

	Operating Profit before Working Capital Adjustments				1,43,000
	Less: Increase in Current Assets
			Trade Receivables	(50,000)
	Add: Decrease in Current Assets
	Inventory			5,000
	Add: Increase in Current Liabilities
	Trade Payables			37,500	(7,500)
	Cash Generated from Operations				1,35,500
	Less: Tax Paid				-
	*Net Cash Flows from Operating Activities*				1,35,500

B	Cash Flow from Investing Activities
			Sale of Fixed Assets	12,500
			Purchase of Fixed Assets	(1,10,000)
			Purchase of Investment	(25,000)
			Interest on Investment	1,500
	*Net Cash Used in Investing Activities*				(1,21,000)

C	Cash Flow from Financing Activities
	Proceeds from Issue of Share Capital			25,000
	Proceeds from Issue of Debentures			50,000
	Interest on Debentures Paid			(5,000)
	Redemption of Preference Share Capital			(50,000)
	Premium on Redemption of Preference Share Capital			(2,500)
	Dividend Paid on Preference Share Capital			(12,000)
	Dividend Paid on Equity			(5,000)
	*Net Cash Flow from Financing Activities*				500

D	Net Increase in Cash and Cash Equivalents				15,000
			Add: Cash and Cash Equivalent in the beginning of the period (6,000+15,000+4,000)		25,000
	Cash and Cash Equivalents at the end of the period (12,500+22,500+5,000)				40,000

Working Notes:

(1) Interim dividend on equity shrares was paid out of General Reserve and not out of Surplus. Hence, the same has not been considered while calculating Net Profit before Tax and Extra-ordinary items.

(2)

Fixed Assets Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	2,55,000	Bank A/c (Sale)	12,500
Bank A/c (Purchase- Bal. Fig.)	1,10,000	Depreciation	35,000
		Profit and Loss A/c (Loss on Sale)	7,500
		Balance c/d	3,10,000
	3,65,000		3,65,000

Answer:

		Cash Flow Statement for the year ended March 31, 2018
	Particulars			Amount (Rs)	Amount (Rs)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss [1,50,000 − (−1,40,000)]			2,90,000
	Provision for Tax			45,000
	General Reserve			30,000
	Profit Before Taxation				3,65,000
	Items to be Added:
	Depreciation on Fixed Assets			60,000
	Loss on Fixed Assets			20,000
	Interest on Debentures (6,000 + 10,400)			16,400
	Interest on Bank Loan (2,000 + 1,600)			3,600
	Premium on Redemption of Preference Shares			5,000
	Goodwill written off			25,000	1,30,000
	Operating Profit before Working Capital Adjustments				4,95,000
	Less: Increase in Current Assets
			Inventories	(95,000)
	Add: Increase in Current Liabilities
	Trade Payables			10,000	(85,000)
	Cash Generated from Operations				4,10,000
	Less: Tax Paid				(35,000)
	*Net Cash Flows from Operating Activities*				3,75,000

B	Cash Flow from Investing Activities
			Sale of Fixed Assets	20,000
			Purchase of Fixed Assets	(3,40,000)
			Purchase of Investment	(45,000)
	*Net Cash Used in Investing Activities*				(3,65,000)

C	Cash Flow from Financing Activities
	Proceeds from Issue of Share Capital			1,00,000
	Proceeds from Issue of Debentures			1,10,000
	Interest on Debentures Paid			(16,400)
	Redemption of Preference Share Capital			(1,00,000)
	Premium on Redemption of Preference Share Capital			(5,000)
	Security Premium Reserve			10,000
	Repayment of Bank Loan			(10,000)
	Interest on Bank Loan Paid			(3,600)
	*Net Cash Flow from Financing Activities*				85,000
D	Net Increase in Cash and Cash Equivalents				95,000
			Add: Cash and Cash Equivalent in the beginning of the period (25,000+15,000)		40,000
	Cash and Cash Equivalents at the end of the period (1,30,000+5,000)				1,35,000

Working Notes:

WN1:

Fixed Assets Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	6,20,000	Bank A/c (Sale) (40,000 $\times$ 50%)	20,000
Bank A/c (Purchase- Bal. Fig.)	3,40,000	Depreciation	60,000
		Profit and Loss A/c (Loss on Sale)	20,000
		Balance c/d	8,60,000
	9,60,000		9,60,000

WN2:

Provision for Taxation Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Bank A/c (Tax Paid) (Bal. Fig.)	35,000	Balance b/d	40,000
Balance c/d	50,000	Profit and Loss A/c	45,000
	85,000		85,000

Answer:

Cash Flow Statement for the year ended March 31, 2018
	Particulars	Amount (Rs)	Amount (Rs)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss	1,80,000
	Provision for Taxation	40,000
	Profit Before Taxation	2,20,000
	Items to be Added:
	Finance Cost	15,000
	Depreciation and Amortisation Expenses	80,000
	Operating Profit before Working Capital Adjustments	3,15,000
	Less: Increase in Current Assets
	Inventories	(65,000)
	Trade Receivables	(38,000)
	Add: Increase in Current Liabilities
	Trade Payables	47,000
	Cash Generated from Operations	2,59,000
	Less: Tax Paid	(26,000)
	*Net Cash Flow from Operating Activities*		2,33,000

B	Cash Flow from Investing Activities
	Purchase of Fixed Assets	(3,00,000)
	*Net Cash Used in Investing Activities*		(3,00,000)

C	Cash Flow from Financing Activities
	Proceeds from Issue of Share Capital	1,00,000
	Bank Overdraft	13,000
	Redemption of Long-Term Loan	(30,000)
	Interest (Finance Cost)	(15,000)
	*Net Cash Flow from Financing Activities*		68,000

D	Net Increase or Decrease in Cash and Cash Equivalents		1,000
	Add: Cash and Cash Equivalent in the beginning of the period (17,000 + 28,000 + 20,000)		65,000
	Cash and Cash Equivalents at the end of the period (32,000 + 34,000)		66,000

Working Notes:

WN1

Provision for Taxation Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Bank A/c (Tax Paid- Bal. Fig.)	26,000	Balance b/d	30,000
Balance c/d	44,000	Profit and Loss A/c	40,000
	70,000		70,000

WN2

Fixed Assets Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	4,00,000	Depreciation A/c	80,000
Bank A/c (Purchases- Bal. Fig.)	3,00,000	Balance c/d	6,20,000
	7,00,000		7,00,000

Note: Short-term Investments are considered as a part of Cash and Cash Equivalents

Question 1:

Identify the transactions as belonging to (i) Operating Activities, (ii) Investing Activities, (iii) Financing Activities and (iv) Cash and Cash Equivalents:

(a) Cash Sale of Goods	(b) Cash Received against Revenue from Services rendered
(c) Cash Purchase of Goods	(d) Cash Paid against Services Taken
(e) Patents Purchased	(f) Marketable Securities
(g) Bank Overdraft	(h) Proceeds from Issue of Debentures
(i) Purchase of Shares	(j) Repayment of Long-term Loan
(k) Commission Received	(l) Redemption of Debentures
(m) Interest on Debentures	(n) Interest on Investments
(o) Income Tax Paid	(p) Income Tax Paid on Gain of Sale of Asset
(q) Cash Received from Debtors	(r) Cash Paid to Creditors.

Answer:

OPERATING ACTIVITY	INVESTING ACTIVITY	FINANCING ACTIVITY	CASH AND CASH EQUIVALENTS
a. Cash Sale of Goods	e. Patents Purchased	g. Bank Overdraft	f. Marketable Securities
b. Cash Received against Revenue from Services rendered	i. Purchase of Shares	h. Proceeds from Issue of Debentures
c. Cash Purchase of Goods	n. Interest on Investments	j. Repayment of Long-term Loan
d. Cash paid against Services Taken	p. Income Tax paid on Gain on Sale of Asset	l. Redemption of Debentures
k. Commission Received		m. Interest on Debentures
o. Income Tax paid
q. Cash Received from Debtors
r. Cash Paid to Creditors

Question 2:

Classify the following transactions as Operating Activities for a financial company and a non-financial company:

(a) Purchase of Shares on a Stock Exchange.	(b) Dividend received on Shares.
(c) Dividend paid on Shares.	(d) Loans given.
(e) Loans taken.	(f) Interest paid on borrowings.

Answer:

OPERATING ACTIVITY
Financial Company	Non-Financial Company
a. Purchase of Shares on a Stock Exchange	-
b. Dividend received on shares
d. Loans given
e. Loans taken
f. Interest paid on borrowings

A financial company deals with securities like shares, bonds, debentures, etc on a regular basis. These securities form part of their stock and hence purchase and sale of these securities will be categorised under Operating Activity. But, Dividend paid by them will be the part of Financing Activities.
However, for a non-financial company issue of shares, debentures, etc form part of financing activities as such issue will increase the capital employed in the business.

Question 3:

State which of the following would result in inflow/outflow or no flow of Cash and Cash Equivalents:
(a) Sale of Fixed Assets, Book Value ₹ 1,00,000 at a profit of ₹10,000.
(b) Sale of goods against cash.
(c) Purchase of machinery for cash.
(d) Purchase of Land and Building for ₹10,00,000. Consideration paid by issue of debentures.
(e) Issued fully paid Bonus Shares.
(f) Cash withdrawn from bank.
(g) Payment of Interim Dividend.
(h) Proposed Dividend.

Answer:

Inflow	Outflow	No Flow
a. Sale of Fixed Assets	c. Purchase of Machinery for cash	d. Purchase of Land and Building. Consideration paid by issue of Debentures.
b. Sale of goods against cash	g. Payment of Interim Dividend	e. Issued fully paid bonus shares
		f. Cash withdrawn from Bank
		h. Proposed Dividend

Question 4:

For each of the following transactions, calculate the resulting Cash Flow and state the nature of Cash Flow, i.e., whether it is Operating, Investing or Financing:
(a) Acquired machinery for ₹2,50,000 paying 20% by cheque and executing a bond for the balance payable.
(b) Paid ₹2,50,000 to acquire shares in Informa Tech Ltd. and received a dividend of ₹50,000 after acquisition.
(c) Sold machinery of original cost of ₹2,00,000 with an accumulated depreciation of ₹1,60,000 for ₹60,000.

Answer:

(a) Investing Activity: 50,000
(b) Investing Activity: 2,00,000
(c) Investing Activity: 60,000

Answer:

	Particulars	Amount (Rs)
	Profit as per Statement of Profit and Loss (10,00,000 – 5,00,000)	5,00,000
	Add: Proposed Dividend (Current Year)	4,00,000
	Profit Before Taxation and Extraordinary Items	9,00,000

Answer:

	Particulars	Amount (Rs)
	Profit as per Statement of Profit and Loss (7,20,000 – 4,00,000)	3,20,000
	Add: Proposed Dividend (Current Year)	1,60,000
	Add: Proposed Preference Dividend (Current Year) 10% of 6,00,000	60,000
	Add: Interim Dividend	40,000
	Profit Before Taxation and Extraordinary Items	5,80,000

Answer:

	Particulars	Amount (Rs)
	Profit as per Statement of Profit and Loss (2,00,000 – 1,45,000)	55,000
	Add: Proposed Dividend (Current Year)	50,000
	Add: Provision for Taxation (Current Year)	50,000
	Add: Interim Dividend Paid	10,000
	Profit Before Taxation and Extraordinary Items	1,65,000

Answer:

Cash Flow Statement for the year ended…
	Particulars	Amount (Rs)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss (3,36,000 − 1,00,000)	2,36,000
	Add: Transfer to Reserve	1,00,000
	Proposed Dividend	72,000
	Interim Dividend	90,000
	Provision for Tax	1,50,000
	Extraordinary Items (Loss due to Earthquake)	2,00,000
	Less: Extraordinary Items (Insurance Proceeds from Earthquake disaster settlement )	(1,00,000)
	Refund of Tax	(3,000)
	Net Profit before Tax and Extraordinary Items	7,45,000

Answer:

		Cash Flow Statement for the year ended March 31, ….
	Particulars		Amount (Rs)	Amount (Rs)
A	Cash Flow from Operating Activities
	Net Profit Before Taxation and Extraordinary Items			4,47,000
	Items to be Added:
	Depreciation on Machinery		84,000
	Loss on Sale of Furniture		18,000
	Interest on Borrowings		16,800
	Goodwill Amortized		18,600
	Premium on Redemption of Preference Share		6,000	1,43,400
	Items to be Deducted:
	Profit on Sale of Investment		(12,000)
	Interest and Dividend Received on Investment		(27,600)	(39,600)
	Operating Profit before Working Capital Adjustments			5,50,800

Answer:

Computation of Operating Profit before Working Capital Changes for the year ended March 31, 2018
	Particulars		Amount (Rs)	Amount (Rs)
	Profit as per Statement of Profit and Loss (1,70,000 – 1,00,000)			70,000
	Transfer to General Reserve (5,00,000 – 4,00,000)			1,00,000
	Provision for Taxation (Current Year)			1,00,000
	Profit before Tax			2,70,000
	Items to be Added:
		Depreciation for the year		75,000
	*Operating Profit before Working Capital Changes*			3,45,000

Answer:

Particulars		Amount (Rs)	Amount (Rs)
Profit as per Statement of Profit and Loss (Net Income)			20,000
Items to be Added:
	Depreciation	10,000
	Goodwill written off	8,000	18,000
Operating Profit before Working Capital Changes			38,000
Add: Decrease in Current Assets
	Trade Receivables	6,000
	Prepaid Insurance	1,000
Less: Increase in Current Assets
	Inventories	(20,000)
Less: Decrease in Current Liabilities
	Outstanding Rent	(9,000)
	Trade Payables	(6,000)	(28,000)
Cash Generated from operations			10,000
Less: Tax Paid			Nil
*Net Cash Flows from Operating Activities*			10,000

Question 12:

Compute Cash Flow from Operating Activities from the following information:


Particulars	₹
Net Profit after Provision for Tax and Payment of Dividend	2,15,000
Provision for Tax	45,000
Final Dividend paid during the year	50,000
Depreciation	25,000
Loss on Sale of Machinery	10,000
Patents Amortised	30,000
Gain on Sale of Land	70,000
Income Tax Refund	30,000

Answer:

Cash Flow from Operating Activities
	Particulars	Amount (Rs)	Amount (Rs)
	Net Profit after Provision for Tax and Proposed Dividend		2,15,000
	Add: Provision for Tax		45,000
	Add: Proposed Dividend		50,000
	Profit Before Taxation		3,10,000
	Items to be Added:
	Depreciation	25,000
	Loss on Sale of Machinery	10,000
	Patents Amortised	30,000	65,000
			3,75,000
	Items to be Deducted:
	Income Tax Refund	(30,000)
	Gain on Sale of Land	(70,000)	(1,00,000)
	Operating Profit before Working Capital Changes		2,75,000
	Less: Net Tax Paid (45,000 – 30,000)		(15,000)
	*Net Cash Flows from Operating Activities*		2,60,000

Question 13:

Calculate Cash Flow from Operating Activities from the following:

(i) Profit form the year is ₹ 7,00,000 after considering the following items:


Particulars	(₹)
Depreciation on Fixed Assets	40,000
Goodwill Amortised	20,000
Gain on Sale of Land	90,000
Appropriation of Profit towards General Reserve	60,000

(ii) Following is the position of Current Assets and Current Liabiliites


Particulars	Closing Balance (₹)	Opening Balance (₹)
Trade Payables	50,000	75,000
Trade Receivables	75,000	60,000
Prepaid Expenses	10,000	18,000

Answer:

Cash Flow from Operating Activities
	Particulars	Amount (Rs)	Amount (Rs.)
	Profit as per Statement of Profit and Loss		7,00,000
	Add: Transfer to General Reserve		60,000
	Profit Before Tax and Extraordinary items		7,60,000
	Items to be Added:
	Depreciation on Fixed Asset	40,000
	Goodwill Amortised	20,000	60,000
			8,20,000
	Items to be Deducted:
	Gain on Sale of land	(90,000)	(90,000)
	Operating Profit before Working Capital Adjustments		7,30,000
	Add:Decrease in Prepaid Expenses	8,000	8,000
			7,38,000
	Less: Decrease in Trade Payables	(25,000)
	Less: Increase in Trade Receivables	(15,000)	(40,000)

	*Net Cash Flows from Operating Activities*		6,98,000

Answer:

Cash Flow from Operating Activities
	Particulars		Amount (Rs)	Amount (Rs)
	Profit as per Statement of Profit and Loss			6,40,000
	Add: Provision for Tax			20,000
	Less:Extraordinary Item
	Insurance Claim			(50,000)
	Profit Before Tax and Extraordinary items			6,10,000
	Items to be Added:
	Depreciation on Plant and Machinery			55,000
				6,65,000
	Items to be Deducted:
	Gain on Sale of Investments			(20,000)
	Operating Profit before Working Capital Adjustments			6,45,000
	Add: Increase in Current Liabilities
		Trade Payables	30,000
	Add:Decrease in Current Assets
		Inventories	10,000	40,000
	Less: Increase in Current Assets			6,85,000
		Trade Receivables	(40,000)
		Prepaid Expenses	(14,000)	(54,000)
	Cash Generated from Operations (before tax and Extraordinary items)			6,31,000
	Less: Tax Paid			(15,000)
	Cash Flow from Operating Activities after Tax			6,16,000
	Add:Extraordinary items
	Insurance Claim			50,000
	*Net Cash Flows from Operating Activities*			6,66,000

Question 15:

Calculate Cash Flow from Operating Activities from the following information.

Particular	31^st March 2017 (Rs)
Net Profit (Difference between Closing and Opening Balance of Surplus, i.e., Balance in Statement of Profit and Loss)	8,00,000
Final Dividend paid in the year	1,10,000
Compensation for Natural Disaster credited to Statement of Profit and Loss	75,000
Depreciation	1,50,000
Loss on Sale of Investment	30,000
Gain (Profit) on Sale of Land	90,000
Provision for Tax	1,10,000
Dividend Received	20,000
Decrease in Current Assets (Other than Cash and Cash Equivalents)	40,000
Increase in Current Liablilities	70,000
Decrease in Current Liabilities	10,000
Increase in Current Assets (Other than Cash and Cash Equivalents)	60,000
Income Tax Refund	10,000
Income Tax Paid	1,20,000

Answer:

Cash Flow from Operating Activities
	Particulars	Amount (Rs)	Amount (Rs)
	Profit as per Statement of Profit and Loss		8,00,000
	Add: Provision for Tax		1,10,000
	Add: Proposed Dividend Less: Income Tax Refund Less: Compensation for Natural Disaster		1,10,000 (10,000) (75,000)

	Profit Before Tax and Extraordinary items		9,35,000
	Items to be Added:
	Depreciation on Plant and Machinery	1,50,000
	Loss on sale of Investment	30,000	1,80,000
			11,15,000
	Items to be Deducted:
	Profit on Sale of Land	(90,000)
	Dividend Received	(20,000)	(1,10,000)
	Operating Profit before Working Capital Adjustments		10,05,000
	Add: Increase in Current Liabilities	70,000
	Add:Decrease in Current Assets	40,000	1,10,000
			11,15,000
	Less: Decrease in Current Liabilities	(10,000)
	Less: Increase in Current Assets	(60,000)	(70,000)
	Cash Generated from Operations		10,45,000
	Less: Tax Paid		(1,20,000)
	Cash Flow from operations after Tax		9,25,000
	Add: Compensation for Natural Disaster Add: Income Tax Refund		75,000 10,000
	*Net Cash Flows from Operating Activities*		10,10,000

Answer:

Cash Flow from Operating Activities
	Particulars	Amount (Rs)	Amount (Rs)
	Profit as per Statement of Profit and Loss		1,80,000
	Add: Tax Expense		64,000
	Profit Before Taxation		2,44,000
	Items to be Added:
	Loss on Sale of Assets	36,000
	Depreciation and Amortisation Expenses	1,85,000	2,21,000
			4,65,000
	Items to be Deducted:
	Dividend Received	(5,000)
	Profit on Sale of Plant	(40,000)	(45,000)
	Operating Profit before Working Capital Adjustments		4,20,000
	Less: Decrease in Current Liabilities
	Office Expenses Outstanding		(5,000)
	Add: Increase in Current Liabilities
	Trade Payables	28,000
	Selling Expenses Outstanding	3,000	31,000
	Less: Increase in Current Assets
	Trade Receivables	(37,000)
	Inventories	(16,000)	(53,000)
	Cash Generated from Operations		3,93,000
	Less: Tax Paid		(64,000)
	*Net Cash Flows from Operating Activities*		3,29,000

Answer:

Cash Flow from Operating Activities
	Particulars		Amount (Rs)	Amount (Rs)
	Profit as per Statement of Profit or Loss		5,000
	Add: Transfer to Reserve		35,000	40,000
	Profit before Tax and Extraordinary Items			40,000
	Items to be Added:
	Depreciation(WN1)		22,000
	Goodwill written off		10,000	32,000
	Items to be Deducted:
	Profit on Sale of Asset			(8,000)
	Operating Profit before Working Capital Adjustments			64,000
	Less: Increase in Current Assets
		Bills Receivables		(41,000)
	Add:Decrease in Current Assets
		Debtors		35,000
	Less: Decrease in Current Liabilities
		Outstanding Expenses		(18,000)
	Cash Generated from Operations			40,000
	Less: Tax Paid			Nil
	*Net Cash Flows from Operating Activities*			40,000

Working Note1:

Provision for Depreciation Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Asset A/c (40,000 – 28,000)*	12,000	Balance b/d	20,000
Balance c/d	30,000	Profit and Loss A/c (Depreciation charged during the year)	22,000
	42,000		42,000

Particulars	Amount (Rs)
Cost of Asset Sold	40,000
Less: Provision for Depreciation*	(12,000)
Book Value	28,000
Less: Sale of Asset	(36,000)
Profit on Sale	8,000

Answer:

Cash Flow Statement
	Particulars		Amount (₹)	Amount (₹)
	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss			1,00,000
	Items to be Added:
	Depreciation		20,000
	Goodwill amortised		7,000
	Transfer to General Reserve		30,000
	Items to be Deducted:
	Gain on sale of machinery		(3,000)	54,000
	Operating Profit before Working Capital Adjustments			1,54,000
	Less: Increase in Current Assets
		Prepaid Expenses	(200)
		Trade Receivables	(3,000)
	Less: Decrease in Current Liabilities
	Outstanding Expenses		(2,000)
	Add:Increase in Current Liabilities
	Trade Payables		6,000	800
	Cash Generated from Operations			1,54,800

Answer:

Cash Flow from Operating Activities
	Particulars	Amount (Rs)	Amount (Rs)
	Profit as per Statement of Profit and Loss (80,000 – 40,000)		40,000
	Items to be Added		Nil
	Operating Profit before Working Capital Adjustments		40,000
	Less: Decrease in Current Liabilities
	Bills Payables		(1,000)
	Add: Increase in Current Liabilities
	Creditors	2,000
	Outstanding Expenses	1,000	3,000
	Less: Increase in Current Assets
	Debtors	(2,000)
	Bills Receivables	(3,000)	(5,000)
	Add: Decrease in Current Assets
	Inventories	3,000
	Prepaid Expenses	500	3,500
	Cash Generated from Operations		40,500
	Less: Tax Paid		Nil
	*Net Cash Flows from Operating Activities*		40,500

Answer:

Cash Flow from Operating Activities
	Particulars	Amount (Rs)	Amount (Rs)
	Profit as per Statement of Profit and Loss (65,000 – 60,000)		5,000
	Transfer to General Reserve		35,000
	Dividend Equalisation Fund		22,000
	Profit Before Taxation		62,000
	Items to be Added:
	Goodwill Written-off		10,000
	Operating Profit before Working Capital Adjustments		72,000
	Less: Decrease in Current Liabilities
	Salary Outstanding		(18,000)
	Less: Increase in Current Assets
	Wages Prepaid	(2,000)
	Bills Receivables	(41,000)	(43,000)
	Add: Decrease in Current Assets
	Debtors		47,000
	Cash Generated from Operations		58,000
	Less: Tax Paid		Nil
	*Net Cash Flows from Operating Activities*		58,000

Note: Dividend Equalisation Fund is the amount of profits that are reserved for distributing the dividends in the future. Hence, it is an appropriation of profits and thus, it is added back to the profits.

Answer:

Cash Flow Statement
	Particulars	Amount (₹)	Amount (₹)
	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss		10,000
	Items to be Added:
	Depreciation	2,000	2,000
	Operating Profit before Working Capital Adjustments		12,000
	Less: Increase in Current Assets
	Accrued Income	(1,000)
	Inventories	(3,000)
	Other Current Assets	(2,000)
	Trade Receivables	(1,000)
	Less: Decrease in Current Liabilities
	Income Received in Advance	(1,000)
	Add: Increase in Current Liabilities
	Expenses Payable	500
	Provision for Doubtful Debts	200
	Trade Payables	2,000
	Add: Decrease in Current Assets
	Prepaid Expenses	1,000	(4,300)
	Cash Generated from Operations		7,700

Answer:

Case (a)

Cash Flow from Operating Activities for the year ended 31^st March, 2018
	Particulars	Amount (Rs)	Amount (Rs)
	Profit as per Statement of Profit and Loss (6,00,000 – 2,00,000)		4,00,000
	Items to be Added:
	Provision for Depreciation (2,50,000 – 2,00,000)		50,000
	*Net Cash Flows from Operating Activities*		4,50,000

Case (b)

Cash Flow from Operating Activities for the year ended 31^st March, 2018
	Particulars	Amount (Rs)	Amount (Rs)
	Profit as per Statement of Profit and Loss (6,00,000 – 2,00,000)		4,00,000
	Items to be Added:
	Goodwill written off		10,000
	*Net Cash Flows from Operating Activities*		4,10,000

Case (c)

Cash Flow from Operating Activities for the year ended 31^st March, 2018
	Particulars	Amount (Rs)	Amount (Rs)
	Profit as per Statement of Profit and Loss (6,00,000 – 2,00,000)		4,00,000
	Items to be Added:
	Provision for Taxation (1,50,000 – 1,00,000)		50,000
	*Net Cash Flows from Operating Activities*		4,50,000

Case (d)

Cash Flow from Operating Activities for the year ended 31^st March, 2018
	Particulars	Amount (Rs)	Amount (Rs)
	Profit as per Statement of Profit and Loss (6,00,000 – 2,00,000)		4,00,000
	Items to be Added:
	Transfer to General Reserve		20,000
	*Net Cash Flows from Operating Activities*		4,20,000

Case (e)

Cash Flow from Operating Activities for the year ended 31^st March, 2018
	Particulars	Amount (Rs)	Amount (Rs)
	Profit as per Statement of Profit and Loss (6,00,000 – 2,00,000)		4,00,000
	Items to be Added:
	Loss on Sale of Machinery		5,000
	Provision for Depreciation		90,000
	*Net Cash Flows from Operating Activities*		4,95,000

Working Notes

Plant and Machinery Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	4,00,000	Bank a/c (Sale)	5,000
Bank A/c (Purchase- Bal. Fig.)	50,000	Accumulated Depreciation A/c	40,000
		Profit and Loss A/c (Loss on Sale)	5,000
		Balance c/d	4,00,000
	4,50,000		4,50,000

Accumulated Depreciation Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Plant and Machinery A/c	40,000	Balance b/d	1,00,000
Balance c/d	1,50,000	Profit and Loss A/c (Depreciation charged during the year)	90,000
	1,90,000		1,90,000

Answer:

		Cash Flow Statement for the year ended March 31, 2018
	Particulars		Amount (Rs)	Amount (Rs)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss			43,750
	Add: Provision for Tax			18,750
	Profit Before Taxation			62,500
	Items to be Added:
	Depreciation and Amortization Expenses		15,000
	Loss on Sale of Furniture		1,500
	Items to be Deducted:
	Profit on Sale of Machinery		(2,500)
	Rent		(15,000)
	Interest on Investment		(2,000)	(3,000)
	Operating Profit before Working Capital Adjustments			59,500
	Less: Increase in Current Assets
	Trade Receivables		(5,000)
	Prepaid Expenses		(1,500)
	Less: Decrease in Current Liabilities
	Trade Payables		(2,500)
	Add: Increase in Current Liabilities
	Outstanding Expenses		3,000
	Add: Decrease in Current Assets
	Inventory		15,000	9,000
	Cash Generated from Operations			68,500
	Less: Tax Paid			(18,750)
	*Net Cash Flows from Operating Activities*			49,750

Question 24:

Mars Ltd. has Plant and Machinery whose written down value on 1st April, 2017 was ₹9,60,000 and on 31st March, 2018 was ₹10,50,000. Depreciation for the year was ₹35,000. In the beginning of the year, a part of plant was sold for ₹45,000 which had a written down value of ₹30,000.
Calculate Cash Flow from Investing Activities

Answer:

Cash Flow from Investing Activities for the year ended March 31, 2017
	Particulars		Amount (Rs)	Amount (Rs)
		Purchase of Plant and Machinery	(1,55,000)
		Sale of Plant and Machinery	45,000
	*Net Cash Used in Investing Activities*			(1,10,000)

Working Notes:

Plant and Machinery Account
Dr.				Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	9,60,000	Depreciation	35,000
Profit and Loss A/c (Profit on Sale)	15,000	Bank A/c (Sale)	45,000
Bank A/c (Purchase)	1,55,000	Balance c/d	10,50,000
	11,30,000		11,30,000

Question 25:

From the following details. calculate Cash Flow from Investing Activities


Particulars	Closing (₹)	Opening (₹)
Machinery (At Cost)	10,00,000	9,50,000
Accumulated Depreciation	1,50,000	1,10,000
Patents	2,00,000	3,00,000

Additional Information:

During the year, machine costing ₹ 90,000 with accumulated depreciation of ₹ 60,000 was sold for ₹ 50,000.
Patents written off were ₹ 50,000 while a part of patents were sold at a profit of ₹ 40,000.

Answer:

Cash Flow from Investing Activities
	Particulars		Amount (Rs)	Amount (Rs)
		Purchase of Machinery *(WN1)*	(1,40,000)
		Sale of Machinery	50,000
		Sale of Patents *(WN3)*	90,000	Nil
	*Net Cash Used in Investing Activities*			Nil

Working Notes:

WN1:

Machinery Account
Dr.				Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	9,50,000	Provision for Depreciation A/c	60,000
Profit and Loss A/c (Profit on Sale)	20,000	Bank A/c (Sale)	50,000
Bank A/c (Purchase)	1,40,000	Balance c/d	10,00,000
	11,10,000		11,10,000

WN2:

Patents Account
Dr.				Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	3,00,000	Patents Written off	50,000
Profit and Loss A/c (Profit on Sale)	40,000	Bank A/c (Sale) (Balancing Figure)	90,000
		Balance c/d	2,00,000
	3,40,000		3,40,000

WN3:

Provision for Depreciation Account
Dr.				Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Asset A/c	60,000	Balance b/d	1,10,000
Balance c/d	1,50,000	Profit and Loss A/c (Depreciation charged during the year)	1,00,000
	2,10,000		2,10,000

Answer:

Cash Flow Statement
	Particulars	Amount (₹)	Amount (₹)
	Cash Flow from Investing Activities
	Purchase of Machinery	(35,000)
	Sale of Machinery	13,000	(22,000)
	Cash Used in Investing Activity		(22,000)

Working Notes:

Machinery Account
Dr.				Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Balance b/d	50,000	Bank A/c	13,000
Profit and Loss A/c	3,000	Accumulated Depreciation A/c	15,000
Bank A/c (Bal. Fig.)	35,000	Balance c/d	60,000
	88,000		88,000

Accumulated Depreciation Account
Dr.		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Machinery A/c	15,000	Balance b/d	25,000
Balance c/d	15,000	Profit and Loss A/c (Bal. Fig.)	5,000
	30,000		30,000

Answer:

Cash Flow from Investing Activities for the year ended March 31, 2018
	Particulars		Amount (Rs)	Amount (Rs)
		Purchase of Land and Building *(WN1)*	(6,50,000)
		Interest received on Investments	75,000
		Sale of Debentures *(WN2)*	2,75,000
		Purchase of Debentures (WN2)	(7,50,000)	(10,50,000)
	*Net Cash Used in Investing Activities*			(10,50,000)

Working Notes:

WN1:

Land and Building Account
Dr.				Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	9,00,000	Depreciation A/c	50,000
Bank A/c (Purchase)	6,50,000	Balance c/d	15,00,000
	15,50,000		15,50,000

WN2:

Investment in Debentures Account
Dr.				Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	5,00,000	Bank A/c (Sale)	2,75,000
Profit and Loss A/c (Profit on sale)	25,000	Balance c/d	10,00,000
Bank A/c (Purchase)	7,50,000
	12,75,000		12,75,000

Question 28:

From the following information, calculate Cash Flow from Investing Activities:

	₹		₹
Purchase of Machine	2,50,000	Purchase of Investments	1,60,000
Purchase of Goodwill	1,00,000	Sale of Patents	40,000
Sale of Machine	35,000	Interest and Dividend Received	10,000
Sale of Investment	50,000

A building was purchased as investment out of surplus which was let out for commercial purposes.
Rent Received ₹20,000.

Answer:

Cash Flow from Investing Activities
	Particulars	Amount (Rs)	Amount (Rs)
	Purchase of Machine	(2,50,000)
	Purchase of Goodwill	(1,00,000)
	Purchase of Investments	(1,50,000)
	Sale of Machine	35,000
	Sale of Investment	50,000
	Sale of Patents	40,000
	Interest and Dividend Received	10,000
	Rent Received	20,000
	*Net Cash Used in Investing Activities*		(3,45,000)

Answer:

		Cash Flow Statement for the year ended March 31, 2018
	Particulars			Amount (Rs)	Amount (Rs)

B	Cash Flow from Investing Activities
			Sale of Machinery	1,50,000
			Purchase of Machinery	(1,50,000)
			Purchase of Non-Current Investments	(2,00,000)
	*Net Cash Used in Investing Activities*				(2,00,000)

Working Notes:

Plant & Machinery Account
Dr.				Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	5,00,000	Bank A/c (Sale)	1,50,000
Bank A/c (Purchase- Bal. Fig.)	1,50,000	Balance c/d	5,00,000

	6,50,000		6,50,000

Answer:

Cash Flow from Investing Activities
	Particulars	Amount (Rs)	Amount (Rs)
	Purchase of Plant and Machinery (*WN1*)	(2,60,000)
	Purchase of Investments	(60,000)
	Sale of Plant and Machinery (*WN1*)	40,000
	Sale of Land (*WN2*)	1,60,000
	*Net Cash Used in Investing Activities*		(1,20,000)

Working Notes:

WN1

Plant and Machinery Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	8,50,000	Depreciation A/c	50,000
Bank A/c (Purchases- Bal. Fig.)	2,60,000	Bank A/c (Sale)	40,000
		Profit and Loss A/c (Loss on Sale)	20,000
		Balance c/d	10,00,000
	11,10,000		11,10,000

WN2

Land Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	2,00,000	Bank A/c (Sale- Bal. Fig.)	1,60,000
Profit and Loss A/c (Profit on Sale)	60,000	Balance c/d	1,00,000
	2,60,000		2,60,000

Answer:

Cash Flow from Investing Activities
	Particulars	Amount (Rs)	Amount (Rs)
	Purchase of Patents	(25,000)
	Purchase of Furniture	(2,25,000)
	Interest received on Investment	14,000
	Sale of Investment	20,000
	Sale of Land	10,000
	*Net Cash Used in Investing Activities*		(2,06,000)

Note: It has been assumed that Investments have been sold at their Book Value at the end of the accounting period.

Working Notes:

Computation of Interest on Investments

Answer:

Cash Flow from Investing Activities
	Particulars	Amount (Rs)	Amount (Rs)
	Purchase of Plant and Machinery	(2,70,000)
	Purchase of Investment	(1,00,000)
	Purchase of Goodwill	(50,000)
	Rent Received	20,000
	Dividend Received (1,50,000 × 12%)	18,000
	Sale of Plant and Machinery	35,000
	Sale of Investment	80,000
	Interest on Investments	6,000
	Sale of Patents	20,000
	*Net Cash Used in Investing Activities*		(2,41,000)

Working Notes:

WN1 Computation of Interest on Investments

Interest on 12% Long-term Investments =

WN2

Patents Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	1,00,000	Profit and Loss A/c (Written-off)	20,000
Profit and Loss A/c (Profit on Sale)	10,000	Bank A/c (Sale- Bal. Fig.)	20,000
		Balance c/d	70,000
	1,10,000		1,10,000

WN3

12% Long-Term Investments Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	50,000	Bank A/c (Sale- Bal. Fig.)	80,000
Bank A/c (Purchase)	1,00,000	Balance c/d	80,000
Profit and Loss A/c (Profit on Sale)	10,000
	1,60,000		1,60,000

WN3

Plant and Machinery Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	6,00,000	Depreciation A/c	70,000
Bank A/c (Purchase- Bal. Fig.)	2,70,000	Bank A/c (Sale)	35,000
		Profit and Loss A/c (Loss on Sale)	15,000
		Balance c/d	7,50,000
	8,70,000		8,70,000

Answer:

Cash Flow from Investing Activities
	Particulars	Amount (Rs)	Amount (Rs)
	Purchase of Machinery	(1,00,000)
	Sale of Machinery	26,000
	*Net Cash Used in Investing Activities*		(74,000)

Working Notes:

Machinery Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
To Balance b/d	5,00,000	Accumulated Depreciation A/c	20,000
To Bank A/c (Purchase- Bal. Fig.)	1,00,000	Bank A/c (Sale)	26,000
		Profit and Loss A/c (Loss on Sale)	4,000
		Balance c/d	5,50,000
	6,00,000		6,00,000

Accumulated Depreciation Account
Dr.		Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
To Machinery A/c	20,000	Balance b/d	1,00,000
Balance c/d	1,70,000	Profit and Loss A/c (Dep. charged during the year- Bal. Fig.)	90,000
	1,90,000		1,90,000

Question 34:

From the following particulars, calculate Cash Flow from Investing Activities


Particulars	Purchased (₹)	Sold (₹)
Machinery	6,20,000	2,00,000
Investments	2,40,000	80,000
Goodwill	1,00,000	...
Patents	...	1,50,000

Additional Information:

1. Interest received on debentures held as investment ₹ 8,000.

2. Interest paid on debentures issued ₹ 20,000.

3. Dividend received on shares held as investment ₹ 20,000.

4. Dividend paid on Equity Share Capital ₹ 30,000.

5. A plot of land was purchased out of the surplus funds for investment purposes and was let out for commercial use. Rent received ₹ 50,000 during the year.

Answer:

Cash Flow from Investing Activities
	Particulars	Amount (Rs)	Amount (Rs)
	Purchase of Machinery	(6,20,000)
	Purchase of Investments	(2,40,000)
	Purchase of Goodwill	(1,00,000)
	Sale of Machinery	2,00,000
	Rent Received	50,000
	Dividend Received	20,000
	Sale of Investments	80,000
	Interest on Debentures	8,000
	Sale of Patents	1,50,000
	*Net Cash Used in Investing Activities*		(4,52,000)

Note: Dividend paid and interest paid is a part of Financing Activities.

Analysis Of Financial Statements Ts Grewal 2018 for Class 12 Commerce Accountancy Chapter 5 - Cash Flow Statement

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