NCERT Solutions for Class 12 Accountancy Chapter 6 Cash Flow Statement

Exercises

Short Answer Type Questions

1. What is a cash flow statement?

Ans. A cash flow statement shows inflow and outflow of cash and cash equivalents from various activities of a company during a specific period. The primary objective of cash flow statement is to provide useful information about cash flows (inflows and outflows) of an enterprise during a particular period under various heads, i.e., operating activities, investing activities and financing activities.

2. How the various activities are classified (as per AS-3 revised) while preparing cash flow statement?

Ans. As per Accounting Standard-3 various activities of cash flow statement are classified into three categories as follows

(i) Cash Flow from Operating Activities: These are the principal revenue producing activities of the enterprise and other activities. The cash flow statement begins with the operating activities section. Operating activities generally reflect cash generated and/or paid as a result of the firm’s core business functions. Under US GAAP, this category incorporates the cash received from customers, paid to
suppliers, paid for operating costs, paid for income taxes, received from interest or dividends, and paid for periodic interest costs.

(ii) Investing Activities: These are the acquisition and disposal of long-term assets, other investments not included in cash equivalents. Cash flows from investing activities are those involving non-current capital assets used in the firm’s operations, such as Property, Plant, Equipment (PP&E) and intangible
assets. Purchase of any kind of non-current asset results in outflow and its disposal results in outflow.

(iii) Financing Activities: These are the activities that result in changes in the size and composition of the owner’s capital and borrowings of the enterprise. Cash flows from financing activities are those that take place between a firm and its investors. These include both the equity investments of stockholders (owners) and the loans from bondholders and other creditors. When the company issues new shares, it records a cash inflow from financing, and when it repurchases shares, pays dividends or pays off debt, it records a cash outflow.

3. State the objectives of cash flow statement

Ans. The various objectives of cash flow statement are as follows:

(i) Cash flow statement along with other financial statements provides information that enables users to evaluate changes in net assets of an enterprise, its financial structure (including its liquidity and solvency) and its ability to affect the amounts and timings of cash flows in order to adapt to changing circumstances and opportunities.

(ii) Cash flow information is useful in assessing the ability of the enterprise to generate cash and cash equivalents.

(iii) It also enhances the comparability of the reporting of operating performance by different enterprises.

(iv) Historical cash flow information is often used as an indicator of the amount, timing and certainty of future cash flows. It is also helpful in checking the accuracy of past assessments of future cash flows and in examining the relationship between profitability and net cash flow and impact of changing prices.

4. What are the objectives of preparing cash flow statement?

Ans. The various objectives of preparing cash flow statement are as follows:

(i) The first and most important objective of cash flow statement is that helps to ascertain the gross
inflows and out flows of cash and cash equivalents from operating, investing and financial activities.

(ii) A cash flow statement helps in determining the various causes for change in the cash balances during an accounting period.

(iii) A cash flow statement is also prepared to determine the liquidity position of an organisation.

(iv) Moreover a cash flow statement is prepared to know about the requirement of cash in future.

5. Explain the terms : (i) Cash equivalents, (ii) Cash flows.

Ans. A cash flow statement shows inflows and outflows of cash and cash equivalents from various activities of an enterprise during a particular period. As per AS-3, ‘Cash equivalents’ means short term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

An investment normally qualifies as cash equivalent only when it has a short maturity, of say, three months or less from the date of acquisition.

Investments in shares are excluded from cash equivalents unless they are in substantial cash equivalents, e.g., preference shares of a company acquired shortly before their specific redemption date provided there is only insignificant risk of failure of the company to repay the amount at maturity. Similarly, short term marketable securities which can be readily converted into cash are treated as cash equivalents.

6. Prepare a format of cash flow from operating activities under direct method and indirect method.

Ans. Format of cash flow from operating activities under indirect method is as follows:

Indirect Method
Cash Flow from Operating Activities
Net Profit before Tax and Extraordinary Items —
(+) Non-Cash Expenses and Non-Operating Expenses —
Depreciation —
Goodwill —
Interest Paid —
Loss on Sale of Fixed Assets —
(–) Non-operating Incomes
Dividend Received —
Profit on Sale of Fixed Assets —
Interest Received — —
Operating Profit before Working Capital Changes —
(+) Decrease in Current Assets —
(+) Decrease in Current Assets — —
(–) Increase in Current Assets —
(–) Decrease in Current Liabilities — —
Cash Generated from Operating Activities —
(–) Income Tax Paid —
Cash Flow before Extraordinary Items —
(+)/(–) Extraordinary Items —
Net Cash Flow from Operating Activities —

7. 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

Ans. Operating Activities: As we know that these are the principal revenue producing activities of the enterprise and other activities. Operating activities generally reflect cash generated and/or paid as a result of the firm’s core business functions. Hence, the following will be the operating activities in the above mentioned enterprises respectively.

(i) In Case of a Hotel : Receipts from sale of goods and services to the customer will be operating activity related to revenue generation. And payment of wages and salaries, electricity, food items and other items used in accommodation and stay of customer will be an operating activity related to expenditure.

(ii) Film Production House: In case of film production house revenue generating operating activity would be its receipts from selling film rights of a film to the distributors and its operating activity related to expenditure would be payment made to the staff member, unit, actors, actresses, directors, location rent and air fare etc.

(iii) Financial Enterprise: In case of a financial enterprise like bank, the receipts from repayment of loans, interest incomes from investments, etc will be considered as revenue generating operating activity and repayment of loans, recovery expenditure for recover of loans, etc. Salaries of employees will be considered as operating activity related to the expenditure.

(iv) Media Enterprise: A media enterprise is involved in service industry and its revenue generating operating activity would be receipts from advertisements and expenditure related operating activity would be payments to staff, reporters, photographers, etc.

(v) Steel Manufacturing Unit: The main source for revenue for a steel manufacturing unit would be its receipts from sale of steel sheets, steel castings, steel rods, etc. And the expenditure related operating activity would be payment for raw material (iron, coal), salaries to staff, etc.

(vi) Software Business Unit: A software business unit is basically a service providing unit which get its revenue through receipts from sale of software and renewal of licenses as an operating activity and various payment made by it in the form of salaries to its employees, etc. It is the part of operating activity as expenditure.

8. “The nature/type of enterprise can change altogether the category into which a particular activity may be classified.” Do you agree? Illustrate your answer.

Ans. Yes, the nature or type of an enterprise can change altogether 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 real estate and the other engaged in general business.

For the firm that is engaged in real estate business purchase and sales of building will be part of the operating activity on the other hand firm that is engaged in general business purchase and sales of building will be part of the investing activity. Hence, it can be said that the classification of activities depends on the nature and type of enterprise.

Long Answer Type Questions

1. Describe the procedure to prepare cash flow statement.

Ans. The procedure for preparing cash flow statement is as follows

Step 1 First of all cash flows from operating activities is ascertained.

Step 2 After that cash flows from investing activities is ascertained.

Step 3 The third step is to ascertain the cash flows from financing activities.

Step 4 Sum up the total of all the three steps and ascertain net increase or decrease.

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. The main difference in direct and indirect method is to calculate the cash flow from operating activities. Computation of rest of the two activities will remain same. Here are the Proforma of cash flow statement from both the methods.

Indirect Method
Cash Flow Statement
Particulars Amount (₹) Amount (₹)
A. Cash Flow from Operating Activities
Net Profit before Tax and Extraordinary Items —
(+) Non-Cash Expenses and Non-operating Expenses
Depreciation —
Goodwill —
Interest paid —
Loss on Sale of Fixed Assets — —
(–) Non-operating Incomes Dividned Received — —
Profit on Sale of Fixed Assets —
Interest Received — —
Operating Profit before Working Capital Changes and Extraordinary —
Items
(+) Decrease in Current Assets —
Increase in Current Liabilities — —
(–) Increase in Current Assets —
Decrease in Current Liabilities —
Cash Generated from Operating Activities —
(–) Income Tax Paid —
+/– 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 —
(–) Purchase of Fixed Assets —
(–) 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 —
(–) Repayment of Debentures and Other Long Term Borrowings —
Redemption of preference share
(–) Interest Paid —
(–) 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 —

2. Describe ''Indirect'' method of ascertaining cash flow from operating activities.

Ans. Computation of Cash Flow From Operating Activities:

Indirect Method: Following is the indirect method formula which is used to calculate cash flow from operating activities.

Indirect Method
Net Profit/Loss before Tax and Extraordinary Items
Add: Deductions already made in Profit and Loss on account of × × ×
Non-Cash items such as Depreciation, Goodwill to be written-off
Add: Deductions already made in Profit and Loss on Account of Non-operating Items such as interest × × ×
Addtion (income) mode in profit and loss on account of non-operating items such as Dividend
Received Profit on Sale of Fixed Assets.
Add/Less: Effects of Extraordinary Items × × ×
Operating Profit before Working Capital Changes and after Extraordinary Items
Add: Increase in Current Liabilities × × ×
Add: Decrease in Current Assets × × ×
Less: Increase in Current Assets × × ×
Less: Decrease in Current Liabilties × × ×
Cash Flows from Operating Activities before Tax and Extraordinary Items
Less: Income Tax Paid × × ×
Net Cash from Operating Activities × × ×

3. Explain the major cash inflows and outflows from investing activities.

Ans. Cash Flows from Investing Activities: The next step in building cash flow statement is to look at money a company spent on new capital investments. If a company capitalizes an investment, then that outflow of money does not show up on the income statement. That’s because accounting rules allow the company to depreciate (expense) the cost of the investment over time.

From a practical standpoint, if a company purchase an asset such as new plant equipment or machinery, then they most likely paid for that asset in cash. When money leaves a company, we have an outflow of cash that we need to show in our statement.

Example let’s say ‘X’ Company purchased a new computer system for ₹15,00,000 along with an assembly line machine for ₹20,00,000. These were the only two capital investments made by ‘X’ Company for the year. In this example, the company was also required to buy a new Machinery worth `5,00,000 into a special decommissioning fund.

In this example, we are going to show these items separately:

Cash Flows from Investing Activities (₹)
Purchase of New Computer (15,00,000)
Purchase of Assembly Line Machine (20,00,000)
Purchase of New Machinery (5,00,000)
Net Cash used in Investing Activities (40,00,000)

In the above example, we saw that the company made investment in fixed assets and used ₹40,00,000.

4. Explain the major Cash inflows and outflows from financing activities.

Ans. Cash Flows from Financing Activities : The final category of adjustments we need to address on a statement of cash flows is money raised by financing activities. As was the case with cash from operations, we can have both positive and negative adjustments to cash flow depending on the financing activities the company is engaged during the year.

Typical adjustments appearing here include changes in long and short term debt (issuing and redemption), issuing of preferred stock, issuing of common stock, retirement of stock, and stock dividends paid in cash.

Example ‘X’ Company decided to raise ₹2,50,000 by issuing common stock. They also issued around ₹5,00,000 in preference share, and redeemed around ₹3,00,000 in long term debt.

Net Cash Flows from Financing Activities Amount (₹)
Issuance of Common Stock 2,50,000
Issue of Preference Shares 5,00,000
Redemption of Long Term Debt (3,00,000)
Net Cash Provided by Financing Activites 4,50,000

In this example, ‘X’ Company used less money in their financing activities than they generated during the year.

Numerical Type Questions

1. Anand Ltd arrived at a net income of ₹5,00,000 for the year ended March 31, 2017. Depreciation for the year was ₹2,00,000. There was a gain of ₹50,000 on assets sold which was credited to profit and loss account. Trade receivable increased during the year by ₹40,000 and trade payable also increased by ₹60,000. Compute the cash flow from operating activities by the indirect approach.

Ans.

Cash flow from Operating Activities

 

as on March 31, 2017
Particulars Amount (₹) Amount (₹)
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
Add: Increase in Bills Payable 60,000
Less: Increase in Bills Receivable (40,000) 20,000
Net Cash from Operating activities. 6,70,000

2. From the information given below, you are required to calculate the cash paid for the inventory.

Particulars Amount (₹)
Inventory in the Beginning 40,000
Credit Purchase 1,60,000
Inventory in the End 38,000
Trade Payables in the Beginning 14,000
Trade Payables in the End 14,500

Ans. Dr. Creditor's Account Cr.

Date Particulars JF Amount (₹) Date Particulars JF Amount (₹)
To Cash (Balancing Figure) 1,59,500 By Balance b/d 14,000
To Balance c/d 14,500 By Purchase 1,60,000
1,74,000 1,74,000

Cash paid for inventory amounts to ₹1,59,500

Note: Purchase is considered to be credit purchase. Inventory in beginning and end has no effect.

3. For each of the following transactions, calculate the resulting cash flow and state the nature of cash flow viz, operating, investing and financing.

(i) Acquired machinery for ₹2,50,000 paying 20% by cheque and executing a bond for the balance payable.

(ii) Paid ₹2,50,000 to acquire shares in Informa Tech and received a dividend of ₹50,000 after acquisition.

(iii) Sold machinery of original cost ₹2,00,000 with an accumulated depreciation of ₹1,60,000 for ₹60,000.

Ans. (i) Related to investing activity 50,000 as part payment

$$\text{Working Note :} \\2,50,000×\frac{20}{100}=50,000\space\text{(Outflow)}$$

(ii) Related to investing activity. Acquiring shares in Informa Tech is an investment and dividend received on it is also part of same (₹2,50,000-50,000 = ₹2,00,000 outflow).

(iii) Related to investing activity. It is treated as sale of investment. ₹60,000 inflow and ₹20,000 as profit on sale of investment as operating activity.

4. 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, 2017
Particulars Amount (₹) Amount (₹)
(i) Revenue from Operations 10,00,000
(ii) Expenses
Cost of Materials Consumed 1 50,000
Purchases 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 Informations:

(i) Trade Receivables decrease by ₹30,000 during the year.

(ii) Prepaid expenses increase by ₹5,000 during the year.

(iii) Trade Payable decrease by ₹15,000 during the year.

(iv) Outstanding expenses increased by ₹3,000 during the year.

(v) Operating expenses included depreciation of ₹25,000.

Compute net cash provided by operations for the year ended March 31, 2017 by the indirect method.

Ans.

Cash Flow from Operating Activities of Yamuna Limited

 

as on March 31, 2017
Particulars Amount (₹) Amount (₹)
Net Profit 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
Trade Payables 15,000
Add: Decrease in Current Assets 15,000
Trade Receivables 30,000 48000
Less: Increase in Current Assets
Prepaid Expenes (5,000) (5,000)
Net Cash from Operations 2,18,000

5. Compute cash from operations from the following figures:

(i) Profit for the year 2016-17 is a sum of ₹10,000 after providing for depreciation of ₹2,000.

(ii) The current assets and current liabilities of the business for the year ended March 31, 2017 and 2016 are as follows:

Particulars March 31, 2016 (₹) March 31, 2017 (₹)
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
Other Current Assets 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

Ans.

Cash Flow Statement

 

for the year Ending March 31, 2017
Particulars Amount (₹) Amount (₹)
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)
Other Current Assets (2,000)
Inventories (3,000) (7,000)
Add: Increase in Current Liabilities
Provision for Doubtful Debts 200
Trade Payables 2,000
Expense Payable 500 2,700
Add: Decrease in Current Assets
Prepaid Expenses 1,000 1,000
Less: Decrease in Current Liabilities
Income Received in Advance (1,000) (1,000)
Net Cash From Operations Activities 7,700

6. From the foltowing 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 31 March, 2016 and 31 March, 2017
Particulars Note No. March 31, 2017 (₹) March 31, 2017 (₹)
II. Assets
1. Non-current Assets
(a) Proceeds from of Machinery
(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

Note: 1. Tangible assets = Machinery

2. Intangible assets = Patents

Notes to Accounts March 31, 2017 (₹) March 31, 2017 (₹)
1. Tangible Assets Machinery 12,40,000 10,20,000
2. Intangible Assets
Goowill 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 Amartax Ltd. 1,00,000 1,00,000
3,60,000 2,60,000

Additional Informations

(i) Patents were written-off to the extent of ₹40,000 and some patents were sold at a profit of ₹20,000.

(ii) A machine costing ₹1,40,000 (depreciation provided thereon ₹60,000) was sold for ₹50,000. Depreciation charged during the year was ₹1,40,000.

(iii) On March 31, 2017, 10% investments were purchased for ₹1,80,000 and some investments were sold at a profit of ₹20,000. Interest on investment was received on March 31, 2017.

(iv) Amartax Ltd. paid dividend @ 10% on its shares.

(v) A plot of land had been purchased for investment purposes and let out for commercial use and rent received ₹30,000.

 

Ans.

Cash Flow from Investing Activities
Particulars Amount (₹) Amount (₹)
Cash Inflow
Proceeds from Sale of Patents 1,00,000
Proceeds from 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
Purchases 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)

Dr.

Patents Account

Cr.

Date Particulars JF Amount
(₹)
Date Particulars JF Amount
(₹)
To Balance b/d 2,80,000 By Profit and Loss (Written off) 40,000
To Profit and Loss 20,000 By Bank (Sale-Balancing figure) 100,000
(Profit on Sale) By Balance c/d 1,60,000
3,00,000 3,00,000

Working Note: Machine costing ₹1,40,000 less depreciation ₹60,000, present value ₹80,000 sold for ₹50,000 i.e., loss on sale ₹30,000.

Dr.

Machinery Account

Cr.

Date Particulars JF Amount
(₹)
Date Particulars JF Amount
(₹)
To Balance b/d 10,20,000 By Depreciation 1,40,000
To Bank (Purchase Balancing Figure) 4,40,000 By Bank 50,000
(Profit on Sale) By Profit and Loss (Loss on Sale) 30,000
By Balance c/d 12,40,000
14,60,000 14,60,000

Dr.

10% Long Term Investment Account

Cr.

Date Particulars JF Amount
(₹)
Date Particulars JF Amount
(₹)
To Balance b/d 60,000 By Bank
To Bank 1,80,000 (Balancing Figure) 1,00,000
To Profit and Loss 20,000 By Balance c/d 1,60,000
(Profit on Sale)
2,60,000 2,60,000

7. From the following Balance Sheet of Mohan Ltd. prepare cash flow statement.

Balance Sheet of Mohan Limited
as on........

Particulars Note No. March 31, 2017 (₹) March 31, 2016 (₹)
I. Equity and Liabilities
1. Shareholders' Funds
(a) Equity Share Capital 3,00,000 2,00,000
(b) Reserves and Surplus 2,70,000 2,20,000
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
Total 7,70,000 6,60,000
II. Assets
1. Non-current Assets
Fixed assets 2 5,00,000 3,20,000
2. Current assets
(a) Inventories 1,50,000 1,30,000
(b) Trade receivables 3 90,000 1,20,000
(c) Cash and cash equivalents 4 30,000 90,000
Total 7,70,000 6,60,000
Notes to Accounts March 31,
2017 (₹)
March 31,
2017 (₹)
1. Long-term borrowings 9% Bank Loan 80,000 1,00,000
2. 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
3. Trade receivables
Debtors 60,000 1,00,000
Bills receivables 30,000 20,000
90,000 1,20,000
4. Cash and Cash equivalents
Bank 30,000 90,000
Additional Information Machine costing ₹80,000 on which accumulated depreciation was ₹50,000 was sold for ₹20,000. 9% bank loan ₹20,000 was repaid on March 31, 2017. Proposed dividend for the year 2015-16 was ₹60,000.

Ans.

Cash Flow Statement of Mohan Ltd.

Particulars Amount (₹) Amount (₹)
A. Cash Flow from Operating Activities
Profit as per the Balance Sheet (2,70,000 – 2,20,000) 50,000
Proposed Divided 60,000
Net Profit before Taxation and Extraordinary items Adjustments: 1,10,000
Depreciation 70,000
Loss on Sale of Machine 10,000
Interest on Loan 9,000 89,000
Operating Profit before Working Capital Charges 1,99,000
Add: Decrease in Current Assets Debtors 40,000 40,000
2,39,000
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 1,89,000
B. Cash Flow from Investing Activities
Proceeds from Sale of Fixed Assets (20,000)
Purchase 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
Interest paid 9,000
Net Cash from Financing Activities 11,000
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

Dr.

Fixed Assets Account

Cr.

Date Particulars JF Amount
(₹)
Date Particulars JF Amount
(₹)
To Balance b/d 4,00,000 By Bank 20,000
To Bank (Purchase) By Profit and Loss 10,000
Balancing Figure 2,80,000 (Loss on Sale)
By Accumulated Depreciation 50,000
By Balance c/d 6,00,000
6,80,000 6,80,000

Dr.

Accumulated Depreciation Account

Cr.

Date Particulars JF Amount
(₹)
Date Particulars JF Amount
(₹)
To Fixed Assets 50,000 By Balance b/d 80,000
To Balance c/d 1,00,000 By Profit and Loss
(Balancing Figure) 70,000
1,50,000 1,50,000

8. From the foltowing Batance Sheet of Tiger Super Steel Ltd, prepare Cash flow statement.

Balance Sheet of Tiger Super Steel Ltd.
as at 31st March, 2014 and 31st March 2017

Particulars Note No. March 31,
2017 (₹)
March 31,
2016 (₹)
I. Equity and Liabilities
1. Shareholders' Funds
(a) Share Capital 1 1,40,000 1,20,000
(b) Reserves and Surplus 2 38,400 26,400
2. Current Liabilities
(a) Trade payables 2 21,200 14,000
(b) Other current liabilities 3 2,400 3,200
(c) Short-term provisions 4 12,800 11,200
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
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 to Accounts 2017 (₹) 2016 (₹)
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 12,000 8,000
Balance in statement of profit and loss 26,400 18,400
38,400 26,400
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
6. Tangible assets
Land and building 20,000 40,000
Plant 76,400 36,000
96,400 76,000

Additional Information

''Proposed dividend for 2016-17 is ₹15,600 and for 2015-16 is ₹11,200. Depreciation Charged on Land and Building ₹20,000, and Plant ₹10,000 during the year. Proposed dividend for 2016-17 ₹15,600 and 2015-16 ₹11,200

Ans.

Cash Flow Statement of Tiger Super Steels Ltd.

Particulars Amount (₹) Amount (₹)
A. Cash Flow from Operating Activities
Profit as per the Balance Sheet (26,400 – 18,400) 3,600
General Reserve 4,000
Proposed Dividend 11,200
Provision for Taxation 12,800 36,000
Net Profit before Taxation and Extraordinary Items to be Added
Depreciation on Land and Building 20,000
Depreciation on Plant 10,000
Goodwill Written-off 5,200 35,200
71,200
Operating Profit before Working Capital Changes
Add: Increase in Current Liabilities (Trade Payables) 7,200
Add: Decrease in Current Assets (Inventors) 2,800 10,000
81,200
Less: Increase in Current Assets Trade Receivable 13,200
Less: Decrease in Current Liabilities Outstanding expense 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
Purchase of Plant 50,400
Purchase 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 11,800
Redemption of 10% Preference Shares 20,000
Net Cash from Financing Activities 8,800
D. Net Increase in Cash and Cash Equivalents 4,400
Add: Cash and Cash Equivalents in the Beginning 6,800
E. Cash and Cash Equivalents at the End 11,200

Dr.

Plant Account

Cr.

Date Particulars JF Amount
(₹)
Date Particulars JF Amount
(₹)
To Balance b/d 36,000 By Depreciation 10,000
To Bank (Purchase) 50,400 By Balance c/d 76,400
Balancing Figure
86,400 86,400

9. From the following information, prepare cash flow statement:

Balance Sheet

Particulars Note No. March 31,
2017 (₹)
March 31,
2017 (₹)
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
Trade papables 9,00,000 6,00,000
Total 24,70,000 19,50,000
II. Assets
1. Non-current Assets
(a) Fixed assets
(i) Tangible assets 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 charged on plant amount to ₹80,000.

Ans.

Cash Flow Statement

Particulars Amount (₹) Amount (₹)
A. Cash Flow from Operating Activities
Profit before tax (4,70,000 – 2,50,000) 2,20,000
Adjustment for Non-cash and Non-operating items
Depreciation 80,000
Written-off Goodwill 80,000
Interest on Debentures 48,000 2,08,000
Operating Profit before Working Capital Charges 4,28,000
Add: Increase in Trade Payables 3,00,000
Less: Increase in Inventories (1,00,000)
Less: Increase in Trade Receivables (2,00,000)
Cash from Operating Activities 4,28,000
B. Cash Flow from Investing Activities
Purchase of Plant (7,00,000 + 80,000 – 5,00,000) (2,80,000)
Net Cash used in Investing Activities (2,80,000)
C. Cash Flow from Financing Activities
Issue of Share 2,00,000
Redemption of Debentures (2,00,000)
Interest on Debentures (48,000)
Cash used in Financing Activities (48,000)
Net effect 1,00,000
(+) Opening Cash and Cash Equivalents 3,00,000

10. From the following Balance Sheet of Yogeta Ltd. prepare cash flow statement:

Balance Sheet

Particulars Note No. March 31,
2017 (₹)
March 31,
2016 (₹)
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
Long-term borrowings 2 1,50,000 2,20,000
3. Current Liabilities
(a) Short-term borrowings (Bank overdraft) 1,00,000 —
(b) Trade payables 70,000 50,000
(a) Short-term provision (Provision for taxation) 50,000 30,000
Total 9,70,000 6,00,000
II. Assets
1. Non-current Assets
(a) Fixed assets
Tangible assets 7,00,000 4,00,000
(b) Non-current investments
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 March 31,
2017 (₹)
March 31,
2016 (₹)
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 2,00,000
8% Long-term loan 2,00,000
9% Loan from Rahul 1,50,000 20,000
1,50,000 2,20,000

Additional Information

Net profit for the year after charging ₹50,000 as depreciation was ₹1,50,000, dividend paid on share was ₹50,000. Tax provision created during the year amounted to ₹60,000. 8% loan was repaid on March 31st 2017 and an additional 9% loan of ₹1,30,000 was obtained from Rahul on April 01, 2016.

Ans.

Cash Flow Statement of Yogeta Ltd.

Particulars Amount (₹) Amount (₹)
A. Cash Flow from Operating Activities
Net Profit after (2,00,000 – 1,00,000) 1,00,000
Add: Provisions for Tax 50,000
Net Profit before Taxation 1,50,000
Adjustments for non-cash and Non-operating items
Add: Depreciation 50,000
Add: Dividend paid 60,000
Add: Interest paid 29,500 1,39,500
Operating profit before working capital changes 2,89,500
Less: Increase in Inventories (70,000)
Less: Increase in Trade Receivables (50,000)
Add: Increase in Trade Payables (20,000)
Cash Generated from Operations 1,89,500
Less: Income Tax Paid (40,000)
Cash from Operating Activities 1,49,500
B. Cash Flow from Investing Activities
Purchase of Fixed Assets (3,50,000)
Net Cash used in Inesting 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
Add: Bank overdraft 1,00,000
Less: Repayment of Loan (2,00,000)
Less: Dividend Paid (50,000)
Less: Interest on Loan (29,500)
Net Cash from Financing Activities 1,50,500
D. Net Effect (50,000)
Add: Cash and Cash Equivalents in the Beginning 50,000
Cash and Cash Equivalents at the End NIL

Working Notes:

Dr.

Provision for Taxation Account

Cr.

Date Particulars JF Amount
(₹)
Date Particulars JF Amount
(₹)
To Bank 40,000 By Balance c/d 30,000
To Balance b/d 50,000 By Profit and Loss 60,000
90,000 90,000

Calculation of Interest:

  1. 8% Loan of ₹2,00,000 = ₹2,00,000 × 8% = ₹16,000
  2. 9% Loan of ₹1,50,000 = ₹1,50,000 × 9% = ₹13,500

Total Interest = ₹16,000 + ₹13,000 = ₹29,500

Dr.

Fixed Assets Account

Cr.

Date Particulars JF Amount
(₹)
Date Particulars JF Amount
(₹)
To Balance b/d 4,00,000 By Depreciation 50,000
To Bank 3,50,000 By Balance c/d 7,00,000
7,50,000 7,50,000

11. Following is the Balance Sheet of Garima Ltd. Prepare cash flow statement.

Particulars Note No. March 31,
2017 (₹)
March 31,
2016 (₹)
I. Equity and Liabilities
1. Shareholders' Funds
(a) Share Capital 1 4,40,000 2,80,000
(b) Reserves and Surplus (Surplus) 2 40,000 28,000
2. Current Liabilities
(a) Trade payables 1,56,000 56,000
(b) Short-term provisions (Provision for taxation) 12,000 4,000
Total 6,48,000 3,68,000
II. Assets
1. Non-current Assets
(a) Fixed assets
Tangible assets 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 (prepaid expenses) 16,000 8,000
Total 6,48,000 3,68,000
Notes to Accounts March 31,
2017 (₹)
March 31,
2016 (₹)
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: Interim Dividend 4,000
Profit at the end of the year 40,000

Additional Information:

  1. Depreciation charged during the year ₹32,000

Ans.

Cash Flow Statement of Garima Ltd.

Particulars Amount (₹) Amount (₹)
A. Cash Flow from Operating Activities 12,000
Net Profit before Taxation and Extraordinary Items (40,000 – 28,000) 12,000
Adjustments for:
Add: Depreciation 32,000
Add: Proposed Dividend (Interim Dividend) 4,000
Add: Provision for Taxation 12,000
Operating profit before working capital changes: 60,000
Add: Increase in Current liabilities
Trade Payables 1,00,000
Less: Increase in Current Assets
Inventories (1,00,000)
Other Current Assets (Prepaid Expenses) (8,000)
Trade receivables (60,000) (68,000)
Cash generated from Operating Activities (8,000)
Less: Income Tax paid (4,000)
Net Cash used in Operations Activities (12,000)
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 Financing Activities:
Issue of Equity Shares 1,00,000
Issue of Preference Shares 60,000
Less: Dividend Paid (4,000)
Net Cash from Financing Activities 1,56,000
D. Net decrease in Cash and Cash Equivalent (A + B + C) 52,000
Add: Cash and Cash Equivalents in the Beginning 80,000
28,000

Working Notes:

Dr.

Plant and Machinery Account

Cr.

Date Particulars JF Amount (₹) Date Particulars JF Amount (₹)
To Balance b/d 20,00,000 By Depreciation 32,000
To Bank (Purchase-) 1,96,000 By Balance c/d 3,64,000
Balancing Figur)
3,96,000 3,96,000

12. From the following Balance Sheet of Computer India Ltd. prepare cash flow statement.

Particulars Note No. March 31,
2017 (₹)
March 31,
2016 (₹)
I. Equity and Liabilities
1. Shareholders' Funds
(a) Share Capital 52,000 40,000
(b) Reserves and Surplus-Surplus 1 9,500 8,000
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 4,200 3,000
Total 90,000 81,500
II. Assets
1. Non-current Assets
(a) Fixed assets 4 27,000 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 90,000 81,500

Notes to Accounts

Particulars March 31,
2017 (₹)
March 31,
2016 (₹)
1. Reserve and surplus
(a) Balance in statement of profit and loss 7,000 6,000
(b) General reserve 2,500 2,000
9,500 8,000
2. Short-term borrowings Bank overdraft 6,800 12,500
3. Short-term Provisions
(a) Provision for Taxation 4,200 3,000
4. Fixed Assets:
Fixed Assets 42,000 41,000
Less: Accumulated Depreciation (15,000) (11,000)
27,000 30,000

Additional Information:

Proposed dividend for the year 2015-16 is ₹2,50,00,000

Ans.

Cash Flow Statement of Computer India Ltd.

Particulars Amount (₹) Amount (₹)
A. Cash Flow from Operating Activities
Net Profit After Tax and appropriations 1,000
Add: General Reserve 500
Add: Proposed Dividend 2,500
Add: Provision for Tax 4,200
Profit before Tax and Appropriations 8,200
Adjustments for Non-Cash and Non-Operating Items
Depreciation 4,000
Interest (6,000 × 10%) 600
Operating profit before Working Capital Changes 12,800
Less: Trade Payables (Decrease) (1,000)
Less: Inventories (Increase) (5,000)
Less: Trade Receivables (Increase) (4,000)
Less: Prepaid Expenses (Increase) (200)
Cash Generated from operations 2,600
Less: Tax Paid (3,000)
Cash used in Operating Activities (4,00)
B. Cash Flow from Investing Activities
Purchase of Fixed Assets (1,000)
Net Cash used in Investing Activities (1,000)
C. Cash Flow from Financing Activities:
Issue of Shares Capital 12,000
Issue of Debentures 500
Payment of Bank o/d (5,700)
Interest Paid (600)
Dividend Paid (2,500)
Net Cash from Financing Activities 3,700
Net Effect (A + B + C) 2,300
Add: Opening Cash and Cash Equivalents 1,200
Closing Cash and Cash Equivalents 3,500