cash from operating

cash from investing

and cash from financing activit

i) if assets increased(acquired\ purchased)= cash out flow= -
ii) if assets decreased(sold)= inflow= +
if liabilities are increased= +
if liabilities are decreased= -
income = +
expenses= -
 reserve funds= liabilities

.............company

cash flow statement under direct method

for the year ending .....

Pariculars Amt Amt

Cash flows from operating activities:
-Cash received from sales and debtors
Net sales (cash and credit sales less discount)........................................................ +++
Debtors \account receivables\ bills receivables increase............................................ -- -- --
Debtors \ account receivables\ bills receivables decrease......................................... +++
Provision for bad debt increase..................................................................................... +++
Provision for bad debt decrease.................................................................................... - -- ---
Discount allowed............................................................................................................. - -- -- -
a) Net cash received from sales and debtors..................................................................... Xxxx
cash paid to suppliers\ creditors|vendors
Cost of goods sold (COGS)............................................................................................... -- -- -
Stocks INVENTORIS increase................................................................................ -----
Stocks decrease.................................................................................................................... +++
Creditors\bills payable\account payable increases............................................................. +++
Creditors\bills payable\account payable decreases............................................................. - -- --
b) net cash paid to suppliers. \ creditors|vendors............................................................... Xxxx

- cash paid to employees and other operating cash expenses

Salaries paid-- ------
Rent paid--- ----
Selling expenses--- ----
Office expenses ---- -- -- -
Advertising ---- ----
General expenses---- ----

Other operating cash expenses ---

Prepaid expenses increase ----
Prepaid expenses decrease +++ +++
Outstanding expenses increase +++
Outstanding expenses decrease - - --
-----
c) net cash paid to employees and other operating cash expenses
interest expenses
------
interest paid --------
++++
interest payable increase +++
----
interest payable decrease ----
XXXX
d) net interest paid ------...................................................................................................
tax expenses ---------
----
TAX PAID..............................................................................................................................
+++
Provision for tax \ tax payable increase............................................................................
Provision for tax \ tax payable decrease ----
e) net tax expenses Xxxx
f) interest and dividend income............................................................................................ Xxxx

Net cash flow from operating activities before extra ordinary items (a+b+c+d+e+f) Xxxxxx
Bank overdraft increase ++++............................................................................................ ++++
Bank overdraft decrease ------................................................................................................ ------
Marketable securities increase -----,...................................................................................... ----
Marketable securities decrease ++++................................................................................ +++ Xxx
Short term loan increase ++++........................................................................................... ++++
Short term loan decrease -----......................................................................................... -----

1. Net cash flow from operating activities

Cash flow from investing activities:
Fixed assets( land , building, furniture, computer etc) increase(purchase) -----
Fixed assets( land , building, furniture, computer etc) decrease (sold) +++
Investment increase ----
Investment decrease +++
2. Net cash flow from investing activities Xxx
Cash flow from financing activities
Share capital increases or issue of share.................................................................................. ++
Share premium (additional paid in) increase........................................................................ ++
Debenture\ bond increase or issue of debenture\ bond ++
Debenture \ bond decrease Or Redemption of debenture ---
Bank loan increase\ taken ++
Bank loan decrease \ repid --
Dividend paid ---
Xxx
3.Net cash flow from financing activities
4. Net cash changes (1+2+3) Xxx
Add: opening cash and bank( last year) Xxx
5.Closing cash and bank(this year) Xxx

note: dividend received and interest received +++++

= operating activities or investing activities

QN 1.The following are the balance sheets of a company as on 31st Chaitra:

 Liabilities 1st year 2nd year Assets 1st year 2nd year

Share capital 2,40,000 3,30,000 Plant and machinery 2,10,000 3,00,000

Share premium 33,000 Land and building 1,41,000 3,81,000

Reserve and suppliers 1,95,000 2,01,600 Long term investment 66,000 42,000

Long term liabilities 1,50,000 3,00,000 Inventories 42,000 57,000

Accumulated dep. 90,000 1,65,000 Sundry debtors 75,000 87,000

Sundry creditors 45,000 60,000 Cash and bank 2,01,000 2,52,600

Bills payable 15,000 30,000

7,35,000 11,19,600 7,35,000 11,19,600

Income for the second year is as follows:

Particulars Rs. Rs.

Sales 3,60,000

Less: Cost of goods sold 2,02,200

Gross profit 1,57,800

Less: Depreciation on plant 30,000

Depreciation on building 48,000

Operating expenses 60,000 1,38,000

Net income from operation 19,800

Add: Gain on sale of investment 7,200

27,000
 Less: Loss on sale of machinery (Proceed Rs.9,000) 3,000

Net income 24,000

Less: Dividend paid 17,400

Retained earning 6,600

Additional information:

i. Investment costing Rs.24,000 was sold for Rs.31,200

ii. The plant purchase for Rs.1,05,000
Required: Cash flow statement using direct method

Solution: Cash flow statement

Under Direct method

Particulars Rs.

Cash from operating activities:

Cash collection from Sales and debtors:

Sales revenue 3,60,000

Increase in sundry debtors (12,000)

A Net. Cash collection from Sales and debtors: 3,48,000

. Cash paid to suppliers:

Cost of goods sold (2,02,200)

Increase in sundry creditors 15,000

Increase in bills payable 15,000

Increase in inventories (15,000)

B) Net. Cash paid to suppliers: (1,87,200)

 Cash paid to employees and other expenses:

Operating expenses (60,000)

C) Net Cash paid to employees and other expenses: (60,000)

1. Net Cash from operating activities (A+B+C) 1,00,800

Cash from investing activities:

Purchase of plant and machinery (1,05,000)

Purchase of land and building(381,000-141,000) (2,40,000)

Sale of investment 31,200

Sale of machinery 9,000

2. Net Cash from investing activities (3,04,800)

Cash from financing activities:

Issue of shares 90,000

Share premium received 33,000

Long-term liabilities raised 1,50,000

Dividend paid (17,400)

3. Net Cash from financing activities 2,55,600

4.Changes in cash (1+2+3) 51,600

Add: Opening cash balance(last yr) 2,01,000

5,Closing cash balance (this yr) 2,52,600

Dr.Accumulated Depreciation Account Cr.

Particulars Amount Particulars Amount

 To plant and machinery A/c (acc dep 3,000 By balance b/d (last yr) 90,000
of sold part) balancing

To balance c/d (this yr) 1,65,000 By profit and loss A/c (30,000+48,000) 78,000

Dep for the yr

1,68,000 1,68,000

Dr.Plant and Machinery Account gross concept Cr.

Particulars Amount Particulars Amount

To balance b/d(last year) 2,10,000 By accumulated depreciation A/c sold 3,000

part
To gain on sale .............

To bank (purchase) A/c 1,05,000 By bank A/c (sales) 9,000

By profit and loss A/c (loss) 3,000

By balance c/d (this) 3,00,000

3,15,000 3,15,000

QN 2.The Balance Sheets of a Company as on Ashadh 31, are as follows:

Liabilities Year I Year II Assets Year I Year II

 Share Capital 1,60,000 2,40,000 Fixed Assets 2,22,000 4,10,000

Share Premium 20,000 30,000 Debtors 80,000 1,20,000

Retained Earning 80,000 10,0000 Inventory 1,20,000 90,000

10% Debentures 80,000 Insurance prepaid 8,000 4,000

Creditors 1,00,000 70,000 Cash in hand 40,000 50,000

Overdraft 60,000 40,000

Provision for tax 40,000 1,00,000

Outstanding Exp. 10,000 14,000

Total 4,70,000 6,74,000 4,70,000 6,74,000

Additional Information (Transaction on for the year 2):

a. Sales Rs.16,00,000 b. Cost of goods sold Rs.11,20,000 c. Operating expenses Rs.2,76,000

d. Tax paid Rs.40,000 e. Sales of Fixed Assets Rs.72,000 f. Purchases of Fixed Assets Rs.3,12,000

g. Dividend distribution Rs.32,000

Solution:

Cash flow statement by using direct method

Particulars Rs.

Cash from operating activities:

Collection from debtors(a):

Sales 16,00,000

Increase in debtors (40,000)

15,60,000

Payment to suppliers (b):

Cost of goods sold (11,20,000)

Decrease in inventories 30,000

Decrease in creditors (30,000)

(11,20,000)

Cash paid for Operating expenses (c): (2,76,000)

Decrease in prepaid expenses 4,000

Increase in outstanding expenses 4,000

(2,68,000)

Cash paid for tax (d) (40,000)

Cash from operating activities before extra ordinary item [a+b+c+d] 1,22,000

Decrease in overdraft (20,000)

Net cash from operating activities [A1] 1,02,000

Cash from investing activities :

Purchased of fixed assets (3,12,000)

Sale of fixed assets 72,000

Net cash from investing activities (A2) (2,40,000)

Cash from financing activities:

 Issue of share (including premium) 90,000

Issued of debenture 80,000

Dividend distributed (32,000)

Net cash from financing activities (A3) 1,38,000

Changes in cash balance ( A1+A2+A3) 10,000

Add: opening cash balance 40,000

Closing cash balance 50,000

QN.3The income statement and balance of A ONE Company are given below:

Balance sheet

Liabilities and equity 2009 2010 Assets 2009 2010

Share capital 700,000 1,100,000 Land and building 750,000 800,000

Marketable securities 40,000 40,000 Plant and machinery 200,000 400,000

Debenture 300,000 200,000 Furniture 50,000 65,000

Bills payable 50,000 80,000 Inventories 50,000 100,000

Accounts payable 60,000 75,000 Debtors 125,000 90,000

Provision for tax 50,000 21,000 Bills receivable 15,000 20,000

Retained earning 20,000 59,000 Cash 30,000 100,000

Total 1,220,000 1,575,000 Total 1,220,000 1,575,000
 Income statement for this year

Particulars Amount Amount

b Sales 600,000

Less: Cost of goods sold

Opening stock 50,000

purchases 400,000

Closing stock (100,000) 350,000

Gross profit 250000

Less: Operating expenses

Depreciation on furniture 4,000

Selling and distribution expenses 70,000

Interest 20,000 94,000

Net income before other income 156,000

1,000
Less: Loss on sales of furniture
155,000
(Cost Rs.10,000 and total depreciation Rs.4,000)

Book value = cost - total dep= 10,000 - 4000= 6000

21,000 21,000

Net income before tax

Provision for tax

Net income after tax 134,000

Additional information:
i. Tax paid during the year Rs.50,000
ii. Dividend distributed for the year Rs.95,000
iii. Plant costing Rs.200,000 was purchased in this year
iv. Purchases of furniture Rs.25,000
Dr furniture account Cr

Particulars Rs Particulars Rs
To opening balance 50,000(last) By closing bal 65,000(this)
To purchase furniture 25,000 By dep 4000
(Cr -Dr)
By loss on sale 1000
By bank (sale of furniture 5000
750,00 75000
Required: Statement of cash flows showing
a. Cash from operating activities b. Cash from investing activities

c. Cash from financing activities d. Changes in cash and cash equivalent

Solution:

Particulars Amount Amount

C1: Cash from operating activities

A. Cash sales and collection from debtors

Sales 600,000

Decrease in Debtors 35,000

Increase in account receivable (5,000) 30,000

630,000

B. Cash purchase and payment to creditors

Cost of goods sold (350,000)

Increase in inventories (50,000)

Increase in bills payable 30,000

Increase in account payable 15,000 (5,000)

(355,000)

C. Cash payment to employees and other operating activities

Selling and distribution expenses (70,000) (70,000)

(70,000)

D. Cash paid for interest and tax

 Interest (20,000)

Tax paid (50,000) (70,000)

(70,000)

Cash from operating activities (A + B + C + D) 135,000

C2: Cash flow from investing activities

Purchases land and building (50,000)

Sales of furniture 5,000

(25,000)
Purchases of furniture
(270,000)
(200,000)
Purchases Plant and machinery
(270,000)

C3: Cash flow from financing activities

Issue of share capital 400,000

Redemption of debenture (100,000)

Dividend paid (95,000) 205,000

205,000

Net changes in cash and cash equivalent (C1 + C2 + C3) 70,000

Add: Opening cash balance 30,000

Closing cash balance 100,000

Example 22
You are given balance sheet of Apna Company.

Balance sheet

Liabilities and equity 2010 2011 Assets 2010 2011

Share capital 650,000 800,000 Land and building 700,000 700,000

Share premium 20,000 35,000 Plant and machinery (Net) 200,000 255,000
8% Debenture 200,000 100,000 Investment 50,000 75,000
Bills payable 100,000 80,000 Inventories 65,000 45,000
O/S expenses 50,000 65,000 Debtors 40,000 90,000
Bank overdraft 20,000 30,000 Bills receivable 30,000 20,000
Provision for tax 30,000 50,000 Cash 10,000 15,000
Profit and loss a/c 25,000 40,000

Total 1,095,000 1,200,000 Total 1,095,000 1,200,000

Additional information:

a. Sales and cost of goods sold for the year 2011 were Rs.440,000 and Rs.200,000.

b. Operating expenses was Rs.80,000, excluding interest Rs.30,000 for debentures.

c. Debentures were redeemed at a premium of Rs.15,000
d. The plant costing Rs.100,000 was purchased in year 2011 and the net proceed from the sale of plant was Rs.45,000

e. Dividend paid during the year was Rs.50,000

Required: Statement of cash flows showing

a. Cash from operating activities b. Cash from investing activities

c. Cash from financing activities d. Changes in cash and cash equivalent

Solution:

Particulars Amount Amount

C1: Cash from operating activities

A. Cash sales and collection from debtors

Sales 440,000

Increase in debtors (50,000)

Decrease in Bills receivable 10,000 (40,000)

400,000

B. Cash purchase and payment to creditors

Cost of goods sold (200,000)

Decrease in inventories 20,000

Decrease in bills payable (20,000) 0

(200,000)

C. Cash payment to employees and other operating activities

 Operating expenses (80,000)

Increase in outstanding expenses 15,000 (65,000)

(65,000)

D. Cash paid for interest and tax

Interest (30,000)

Tax paid (30,000) (60,000)

(60,000)

E. Cash from other activities

Increase in bank overdraft 10,000 10,000

10,000

Cash from operating activities (A + B + C + D+E) 85,000

C2: Cash flow from investing activities

Purchases Plant and machinery (100,000)

Sales of plant and machinery 45,000

Purchases of investment (25,000) (80,000)

(80,000)

C3: Cash flow from financing activities

Issue of share capital 150,000

Increase in share premium 15,000

 Redemption of debenture (100,000)
0
Premium on redemption (15,000)

Dividend paid (50,000)

0

Net changes in cash and cash equivalent (C1 + C2 + C3) 5,000

Add: Opening cash balance 10,000

Closing cash balance 15,000

Example 23

Balance sheet

Liabilities and equity Year I Year II Assets Year I Year II

Accounts payable 30,000 90,000 Cash 55,000 100,000

10% debenture 70,000 20,000 Accounts receivables 60,000 95,000

Share premium 10,000 20,000 Inventories 45,000 65,000

Share capital 200,000 300,000 Fixed assets 250,000 350,000

Bills payable 50,000 100,000 Trade mark 15,000 15,000

Retained earning 65,000 95,000

 Total 425,000 625,000 Total 425,000 625,000

Additional information:

i. Sales of year II Rs.570,000

ii. Operating expenses Rs.120,000

iii. Cost of goods sold Rs.330,000

iv. Fixed assets costing Rs.15,000 sold for Rs.20,000

v. Fixed assets purchased for Rs.165,000

vi. Debenture is redeemed with Rs.5,000 premium.

vii. Dividend distributed Rs.20,000 and tax paid Rs.20,000

Required: Statement of cash flows showing

a. Cash from operating activities b. Cash from investing activities

c. Cash from financing activities d. Changes in cash and cash equivalent

Solution:

Particulars Amount Amount

C1: Cash from operating activities

A. Cash sales and collection from debtors

Sales 570,000

Increase in account receivable (35,000) (35,000)

535,000
B. Cash purchase and payment to creditors

Cost of goods sold (330,000)

Increase in inventories (20,000)

Increase in bills payable 50,000

Increase in account payable 60,000 90,000

(240,000)

C. Cash payment to employees and other operating activities

Operating expenses (120,000) (120,000)

(120,000)

D. Cash paid for interest and tax

Tax paid (20,000) (20,000)

(20,000)

Cash from operating activities (A + B + C + D ) 155,000

C2: Cash flow from investing activities

Purchases of fixed assets (165,000)

Sales of fixed assets 20,000 (145,000)

(145,000)

C3: Cash flow from financing activities

Issue of share capital 100,000

 Increase in share premium 10,000

Redemption of debenture (50,000)

Premium on redemption (5,000)

Dividend paid (20,000) 35,000

35,000

Net changes in cash and cash equivalent (C1 + C2 + C3) 45,000

Add: Opening cash balance 55,000

Closing cash balance 100,000

No. 17]

The Balance Sheets of a Company as on Ashadh 31, are as follows:

Liabilities 2062 (Rs.) 2063 (Rs.) Assets 2062 (Rs.) 2063 (Rs.)

Share Capital 7,50,000 9,00,000 Plant & Machinery 8,00,000 11,40,000

Share premium 75,000 90,000 Investment 1,00,000 60,000

Retained Earnings 1,50,000 2,25,000 Inventories 75,000 1,50,000

8% Debentures 1,50,000 75,000 Debtors 2,21,000 1,48,000

Creditors 2,10,000 2,73,000 Prepaid Expenses 4,000 2,000

Outstanding Exp. 15,000 12,000 Cash & Bank 1,50,000 75,000

Total 13,50,000 15,75,000 Total 13,50,000 15,75,000

Additional information:
(i) Sales for the year 2063 Rs.9,00,000

(ii) Cost of goods sold Rs.5,20,000

(iii) Administrative expenses Rs.1,25,000

(iv) Selling & Distribution expenses Rs.25,000

(v) Investment costing of Rs.40,000 was sold at a profit of Rs.15,000

(vi) Purchased plant & machinery of Rs.4,65,000.

(vii) Dividend distributed Rs.45,000

Solution:

Cash flow statement

Particulars Rs.

Cash from operating activities:

a. Collection from debtors

Sales 9,00,000

Decrease in debtors 73,000

9,73,000

b. Payment to suppliers

Cost of goods sold (5,20,000)

Increase in inventories (75,000)

increase in creditors 63,000

(5,32,000)

c. Payment for operating expenses :

 Administrative expenses (1,25,000)

Selling and distribution expenses (25,000)

Decrease in outstanding expenses (3,000)

Decrease in prepaid expenses 2,000

(1,51,000)

Net cash from operating activities(A1) (973000-532000-151000) 2,90,000

Cash from investing activities:

Purchase of plant and machinery (4,65,000)

Sale of investment 55,000

Net cash from investing activities (A2) (4,10,000)

Cash from financing activities:

Issue of share (including premium) 1,65,000

Redemption of debenture (75,000)

Dividend distributed (45,000)

Net cash from financing activities(A3) 45,000

Changes in cash balance ( A1+A2+A3) (75,000)

Add: Opening cash balance 1,50,000

Closing cash balance 75,000

The Balance Sheets of a Company as on Ashadh 31, are as follows:

Liabilities Year I Year II Assets Year I Year II

Share Capital 1,60,000 2,40,000 Fixed Assets 2,22,000 4,10,000

 Share Premium 20,000 30,000 Debtors 80,000 1,20,000

Retained Earning 80,000 10,0000 Inventory 1,20,000 90,000

10% Debentures 80,000 Insurance prepaid 8,000 4,000

Creditors 1,00,000 70,000 Cash in hand 40,000 50,000

Overdraft 60,000 40,000

Provision for tax 40,000 1,00,000

Outstanding Exp. 10,000 14,000

Total 4,70,000 6,74,000 4,70,000 6,74,000

Additional Information (Transaction on for the year 2):

a. Sales Rs.16,00,000 b. Cost of goods sold Rs.11,20,000 c. Operating expenses Rs.2,76,000

d. Tax paid Rs.40,000 e. Sales of Fixed Assets Rs.72,000 f. Purchases of Fixed Assets Rs.3,12,000

g. Dividend distribution Rs.32,000

Solution:

Cash flow statement by using direct method

Particulars Rs.

Cash from operating activities:

Collection from debtors(a):

Sales 16,00,000

Increase in debtors (40,000)

 15,60,000

Payment to suppliers (b):

Cost of goods sold (11,20,000)

Decrease in inventories 30,000

Decrease in creditors (30,000)

(11,20,000)

Cash paid for Operating expenses (c): (2,76,000)

Decrease in prepaid expenses 4,000

Increase in outstanding expenses 4,000

(2,68,000)

Cash paid for tax (d) (40,000)

Cash from operating activities before extra ordinary item [a+b+c+d] 1,22,000

Decrease in overdraft (20,000)

Net cash from operating activities [A1] 1,12,000

Cash from investing activities :

Purchased of fixed assets (3,12,000)

Sale of fixed assets 72,000

Net cash from investing activities (A2) (2,40,000)

Cash from financing activities:

Issue of share (including premium) 90,000

 Issued of debenture 80,000

Dividend distributed (32,000)

Net cash from financing activities (A3) 1,38,000

Changes in cash balance ( A1+A2+A3) 10,000

Add: opening cash balance 40,000

Closing cash balance 50,000

Problem 18

The opening balance sheet and the related changes on it have been presented below:

Liabilities 1st January Increase (Decrease) Assets 1st January Increase (Decrease)

Share capital 300,000 100,000 Plant and machinery 300,000 175,000

Debentures 310,000 (175,000) Furniture 45,000 15,000

Creditors 85,000 (35,000) Stock 85,000 35,000

O/s interest 15,000 (10,000) Bills receivable 65,000 (45,000)

Bills payable 65,000 (25,000) Debtors 85,000 (50,000)

Provision for tax 20,000 40,000 Investment 200,000 (100,000)

Retained earning 20,000 225,000 Cash 35,000 95,000

Total 815,000 120,000 Total 815,000 120,000

Income statement for this year

Particulars Amount Amount

Sales 660,000

Less: Cost of goods sold

 Opening stock 100,000

Purchases 300,000

Closing stock (150,000) 250,000

Gross profit 410,000

Less: Operating expenses

Depreciation 25,000

Premium on redemption of debenture 15,000

Office expense 65,000

Interest 5,000 110,000

Net income before other income 200,000

Add: Gain on sales of investment 20,000

Net income before tax 220,000

Less: Provision for tax 40,000

Dividend paid 50,000 90,000

Retained earning 130,000

Required: Statement of cash flows showing

a. Cash from operating activities b. Cash from investing activities

c. Cash from financing activities d. Changes in cash and cash equivalent

[Ans.: CFOA Rs.310,000, CFIA (Rs.95,000), CFFA (Rs.140,000) and Net cash Rs.130,000)]

Problem 19

The income statement and balance sheet of Red and Blue Supplies Company are given below:
 Balance sheet

Liabilities 2067 2068 Assets 2067 2068

Share capital 700,000 900,000 Land and building 800,000 950,000

Share premium 20,000 40,000 Plant and machinery 300,000 200,000

Debentures 430,000 270,000 Furniture 55,000 40,000

Bills payable 100,000 50,000 Inventories 70,000 12,5000

Accounts payable 70,000 100,000 Debtors 115,000 100,000

Provision for tax 30,000 50,000 Bills receivable 20,000 20,000

Retained earning 20,000 115,000 Cash 10,000 90,000

Total 1,370,000 1,525,000 Total 1,370,000 1,525,000

Income statement

Particulars Amount Amount

Sales 775,000

Less: Cost of goods sold

Opening stock 95,000

Purchases 550,000

Closing stock (135,000) 510,000

Gross profit 265,000

Less: Operating expenses

Depreciation on plant and machinery 20,000

Salaries 57,000
 Interest 8,000 85,000

Net income before other income 180,000

Add: Gain on sales of plant and machinery 5,000

(Cost Rs.100,000 and total depreciation Rs.20,000) 185,000

Net income before tax

Less: Provision for tax 50,000

Dividend paid 40,000 90,000

Retained earnings 95,000

Required: Statement of cash flows showing

a. Cash from operating activities b. Cash from investing activities

c. Cash from financing activities d. Changes in cash and cash equivalent

[Ans.: CFOA Rs.110,000, CFIA Rs.(50,000), CFFA Rs.20,000 and Net cash Rs.80,000]

Problem 20

You are given the following income statement and balance sheet of Sony Company.

Balance sheet

Liabilities Year I Year II Assets Year I Year II

Accounts payable 53,000 85000 Cash 55,000 35,000

8% Debenture 100,000 20000 Accounts receivables 95,000 125,000

Share premium 10,000 25000 Inventories 95,000 65,000

Common stock 150,000 300000 Plant and machinery 95,000 220,000

Loan 60,000 100000 Accumulated depreciation (30,000) (70,000)

 Retained earning 42,000 90000 Investment 45,000 105,000

Total 415,000 620000 Total 415,000 620,000

Income statement

Particulars Amount Amount

Sales 697,000

Less: Cost of goods sold:

Opening stock 95,000

Purchases 413,000

Closing stock (60,000) 448,000

Gross profit 249,000

Less: Operating expenses:

Manufacturing expenses 72,000

Depreciation on plant and machinery 22,000

Office expenses 27,000

Interest expense 18,000 139,000

Net income before other incomes 110,000

Add: Gain on sales of plant and machinery (B.V. Rs.45,000) 5,000

Net income 115,000

Less: Dividend paid 25,000

Retained earning 90,000

Required: Statement of cash flows showing

 a. Cash from operating activities b. Cash from investing activities

c. Cash from financing activities d. Changes in cash and cash equivalent

[Ans.: CFOA Rs.164,000, CFIA (Rs.10,000), CFFA (Rs.80,000) and Net cash Rs.74,000]

Problem 21

The income statement and balance sheet of Subhakamana Company are given below:

Balance sheet

Liabilities and equity 2009 2010 Assets 2009 2010

Share capital 820,000 1135000 Land and building 800,000 800,000

Premium on redemption 50,000 55000 Plant and machinery 300,000 550,000

Debentures 320,000 270000 Furniture 50,000 75,000

Bills payable 50,000 80000 Inventories 77,000 100,000

Accounts payable 80,000 75000 Debtors 126,000 90,000

Provision for tax 15,000 21000 Bills receivable 14,000 20,000

Retained earning 72,000 99000 Cash 40,000 100,000

Total 1,407,000 1735000 Total 1,407,000 1,735,000

Income statement of the year 2010

Particulars Amount Amount

Sales 646,000

Less: Cost of goods sold

Opening stock 66,000

purchases 450,000
 Closing stock (150,000) 366,000

Gross profit 280,000

Less: Operating expenses

Depreciation on furniture 20,000

Expenses 145,000

Interest 15,000 180,000

Net income before other income 100,000

Less: Loss on sales of furniture 1,000

(Cost Rs.30,000 and total depreciation Rs.4,000)

Net income before tax 99,000

Less: Provision for tax 21,000 21,000

Net income after tax 78,000

Additional information:

i. Tax paid during the year Rs.15,000

ii. Dividend distributed for the year Rs.51,000

iii. Plant costing Rs.250,000 was purchased in this year

iv. Purchases of furniture Rs.71,000

Required: Statement of cash flows showing

a. Cash from operating activities b. Cash from investing activities

c. Cash from financing activities d. Changes in cash and cash equivalent

[Ans.: CFOA Rs.137,000, CFIA (Rs.296,000), CFFA Rs.219,000 and Net cash Rs.60,000]
Problem 22

The balance sheets and income statements of ABC Company have been given below:

Balance sheet

Liabilities Year I Year II Assets Year I Year II

Equity share capital 80,000 1,00,000 Land and building at cost 40,000 50,000

Share premium 8,000 10,000 Plant and machinery at cost 50,000 70,000

Bank loan - 20,000 Accumulated depreciation (10,000) (16,000)

Accounts payable 15,000 10,000 Inventories 30,000 40,000

Outstanding wages 5,000 6,000 Accounts receivable 20,000 15,000

Provision for taxation 8,000 10,000 Provision for doubtful debts (4,000) (3,000)

Profit and loss A/c 14,000 24,000 Cash at bank 4,000 24,000

1,30,000 1,80,000 1,30,000 1,80,000

Income statement

Particulars Rs. Rs.

Sales 1,00,000

Less: Cost of goods sold:

Purchases 50,000

Add: Beginning inventory 30,000

Less: Ending inventory (40,000)

Add: Wages 12,000 52,000

 Gross margin 48,000

Less: Total operating expenses

Operating expense 2,000

Depreciation on machinery 10,000

Provision for taxation 8,000

Loss on sale of machine

(cost Rs.10,000, accumulated depreciation Rs.4,000) 4,000 24,000

Net income 24,000

Additional information:

i) Purchase of machinery Rs. 30,000

ii) Dividend paid Rs. 14,000
Required: Cash flow statement showing a) Cash from operating activity, b) Cash from investing activity and c) Cash from financing activity

[Ans.: CFOA Rs 30,000, CFIA (Rs.38,000) and CFFA Rs.28,000]

Problem 23

The income statement and other related information of Bata Company have been provided below:

Income statement for the year 2068

Particulars Rs.

Sales revenue 5,00,000

Less: Cost of goods sold 3,00,000

Gross margin 2,00,000

Less: Operating expenses: 60,000

Office rent, rates and salaries 50,000

 Depreciation written off on machinery 5,000

Premium on redemption of debenture 10,000

Interest on debenture 20,000

Provision for taxation 1,45,000 1,45,000

Total operating expenses 55,000

Net Income before other incomes 10,000

Profit on sale of plant (book value Rs. 40,000) 65,000

Net income 30,000

Less: Provision for dividend 35,000

Retained earning

Other balance sheet items are as under :

Particulars Baishakh 1, 2068 Chaitra 30, 2068

Inventories 50,000 60,000

Accounts receivable 80,000 50,000

Accounts payable 40,000 70,000

Outstanding salaries 10,000 5,000

Debentures 1,50,000 1,00,000

Provision for taxation 30,000 20,000

Provision for dividend 20,000 30,000

Plant and machinery (net) 3,50,000 6,00,000

 Investment at cost 50,000 1,00,000

Share capital 5,00,000 7,00,000

Cash at bank 1,20,000 50,000

Additional information:

(i)Tax paid during the year Rs.30,000.

(ii) Dividend distributed for the year Rs.20,000.

(iii) Plant costing Rs.3,40,000 was purchased in the year.

(iv) Sale of plant Rs.50,000.

Required: Statement of sources and application of cash showing net cash available from operating, investing and financing activities

[Ans.: CFOA Rs 1,45,000, CFIA (Rs.3,40,000) and CFFA Rs.1,25,000]

Problem 24

The balance sheet and income statement of a company have been given below:

Liabilities Year I Year II Assets Year I Year II

Share capital 4,00,000 5,00,000 Land and building 1,00,000 1,00,000

Share premium 20,000 25,000 Plant & machinery (net) 2,50,000 3,00,000

10% debentures 1,00,000 50,000 Investment at cost 1,00,000 1,50,000

Bank overdraft _ 20,000 Inventories 1,00,000 50,000

Accounts payable 80,000 50,000 Prepaid expenses 4,000 6,000

Outstanding expenses 10,000 5,000 Accounts receivable 96,000 74,000

Provision for taxation 30,000 40,000 Cash at bank 30,000 50,000

Profit & loss account 40,000 40,000

 6,80,000 7,30,000 6,80,000 7,30,000

Additional information:

(i) Sales and cost of goods for the year II were Rs.4,00,000 and Rs.2,90,000 respectively.

(ii) Operating expenses was Rs.40,000, excluding interest on debentures Rs.10,000.

(iii) Debentures were redeemed with premium of Rs.10,000.

(iv) A plant of Rs.1,00,000 was purchased in year II and the net proceeds from the sale of plant was Rs.40,000.

(v) Dividend paid during the year II was Rs.40,000.

Required: Cash flow statement

[Ans.: CFOA Rs.1,25,000, CFIA (Rs.1,10,000) and CFFA Rs. 5,000]