Explanations

1. (a) No effect
2. (c) Debentures issued as collateral security will result in no flow.
3. (d) Cash Flow from Financing Activities

Particulars Amt (₹)

Repayment of 10% Bank Loan (1,00,000)

Issue of Share Capital 3,00,000

Proposed Dividend Paid (20,000)

Cash Flow from Financing Activity 1,80,000

4. (c) Financing activity 5. (a) Investing activity

6. (b) Operating activity
7. (c) ₹ 30,000 received from debtors
8. (d) Subtracted under operating activities as extraordinary item and inflow under investing
activities also.
9. (c) Added ₹ 1,30,000 under operating activities as loss on issue of debentures written-off
and inflow of ₹ 18,00,000 under financing activities.
10. (b) Sale of office equipment
= 3,00,000 + 30,000 +12,000 - 40,000 - 2,00,000
11. Cash flow statement is a statement showing the changes in financial position of a
business concern during different intervals of time in terms of cash and cash equivalents.
12. (i) Outflow of cash In the given statement, outstanding employees benefits decreases
by ₹ 3,000. it means ₹ 3,000 paid to employees.
(ii) No flow of cash In the given statement, the value of current investment increases by ₹
6,000, it means there is increase in the value as per market value. No purchase has been
made in respect of current investments.

(
13. (c) Interest paid 2 , 00,000 ×
12
×
6
100 12
+¿)
( )
12 6 = ₹ 21,600
1 , 60,000 × ×
100 12

(+) Debentures redeemed = ₹ 40,000

Outflow ₹ 61,600

14. (a) Purchase of marketable securities for ₹ 25,000 cash

15. Cash comprises cash in hand and demand deposits with banks and Cash equivalents
are short-term highly liquid investments that can be easily convertible into known amount of
cash and which are subject to an insignificant risk of change in value, e.g. Short-term
marketable securities, which can be readily converted into cash, are treated as cash
equivalents.
16. Activity which is financing for every enterprise is (any one)
(i) Payment of dividend
(ii) Interest on long-term borrowings
(iii) Issue of shares for cash
(iv) Issue of debentures for cash
17. The primary objective of preparing cash flow statement is to provide useful information
about the cash flows of an enterprise during a particular period under various heads i.e.
operating, investing and financing activities.
18. operating
19. (c) cash used in investing activities ₹ 3,60,000.
20.
Cash Flow from Investing Activities

Particulars Amt (₹)

Purchases of Machinery (9,00,000)

(+) Dividend Received on Shares 70,000

(+) Sale of Old Machinery (79,000 - 10,000) 69,000

Cash used in Investing Activities (7,61,000)

21. A-(iii), B-(ii), C-(i)

22. Payment and receipt of interest and dividend is classified as financing activity while
preparing cash flow statement of a non-financial company.
23. ‘Cash flow’ implies inflow and outflow of cash and cash equivalents. Receipt of cash from
an item other than cash and cash equivalents is termed as ‘cash inflow’ while cash payment
in respect of such item is termed as ‘cash outflow’.
24. When dividend is received by a finance company, then it can be considered as an
operating activity. It is so, because investing is a primary business of finance company.
25. No, ‘assets acquired by issue of shares’ are not disclosed in the cash flow statement due
to non-cash nature of the transaction.
26. Cash Flow from Investing Activities

Particulars Amt (₹)

Loan Given (1,00,000)

Purchase of Machinery (5,00,000)

Cash used in Investing Activity (6,00,000)

Cash Flow from Financing Activities

Particulars Amt (₹)

Loan Taken 6,00,000

Cash Flow from Financing Activity 6,00,000

27. Investing activities

28. ‘Inflow of cash’ means funds received by a company due to operating, investing or
financing activities.
29. When the maturity period of investment is not more than three months.
30. Rent received is inflow of cash from investing activities.
31. Interest received by a finance company is an operating activity. Interest paid by a finance
company is also an operating activity.
32. The maturity period for a short-term investment from the date of acquisition to be
qualified as cash equivalents should not be more than three months.
33. Net decrease in working capital implies increase in cash flow from operating activities
due to inflow of cash.
34. Net increase in working capital implies decrease in current assets and increase in
current liabilities is more than the increase in current assets and decrease in current
liabilities. So, it will increase the cash flow from operating activities.
35. Cheques and drafts are a part of cash equivalents and therefore not considered under
operating, investing or financing activities.
36. The objectives of preparing cash flow statement are
(i) To ascertain the sources and applications (receipts and payments) of cash and cash
equivalents under operating, investing and financing activities of the enterprise.
(ii) To ascertain net change in cash and cash equivalents being the difference between
sources (receipts) and applications (payments) under the three activities between the dates
of two balance sheets.
37. Yes, this statement is correct. This statement refers to finance companies. Cash flows
from such activities for these companies is classified under operating activity.
38. Separate disclosure of cash flows from investing activities is important because it shows
the extent to which the investment have been made for resources intended to generate
future income and cash flows.
39. Depreciation is added back to net profit while preparing cash flow statement as it is a
non-cash expense and does not involve any outflow of cash but results in decrease in
profits.
Concept Enhancer
There are two basis of accounting, cash basis and accrual basis. While cash basis records
only the cash transactions, accrual basis records cash as well as credit transactions.
40. Dividend of₹ 45,000 received by the mutual fund company will be depicted as a
operating activity while preparing cash flow statement.
41. No, the accountant was not correct in doing so. In case of a financing company,
‘dividend received on investments’ should be classified under the head ‘operating activity’.
42. Yes, the accountant is correct, because depreciation is a non-cash expense and it must
be added to net profit to calculate cash flow from operating activities.
43. The treatment of the accountant is incorrect. The treatment of dividend paid while
preparing the cash flow statement would be to show it under the head financing activity as
‘minus items’.
44. It is classified as operating activity.
45. It will be included in operating activity.
46. It will be classified under operating activity.
47. Net profit earned during the current year, i.e. ₹ 15,00,000 will be the cash flow from
operating activities.
48. Separate disclosure of cash flows arising from financing activities is important because it
is useful in predicting claims on future cash flows by providers of funds (both capital and
borrowings) to the enterprise..
49. Separate disclosure of cash flows from investing activities is important because they
represent to which investment have been made for resources, intended to generate future
income and cash flows.
50. Cash outflow arises when the net effect of transactions is a decrease in the amount of
cash and cash equivalents.
51. A cash flow statement provides information about the historical changes in cash and
cash equivalents of an enterprise by classifying cash flows into operating, investing and
financing activities between the dates of two balance sheets.
52. There is no flow of cash by the issue of 9% debentures to the vendors for the purchase
of machinery of ₹ 50,000 because this transaction will not change the balance of cash and
cash equivalents.
53. ‘Cash from operating activities’ are the principal revenue producing activities of the
enterprise and other activities, that are not investing or financing activities.
54. Dividend received by a finance company is an operating activity.
55. No flow of cash because no cash is involved in this transaction.
56. Operating activity
57. Cash flow arises when the net effect of a transaction either increases or decreases the
amount of cash or cash equivalent.
58. Discount received on making payment to suppliers will result in no flow of cash because
discount received is a non-cash transaction and does not result in actual payment of cash.
59. Proceeds from sale of patents is an investing activity.
60. Dividend paid 61. Operating activity
62. Investing activity
63.
Cash Flow Statement
for the year ended 31st March, 2023

Particulars Amt (₹)

1. Cash from Operating Activities

Profits before Tax and Extraordinary Activities 1,07,000

(+) Non-cash and Non-operating Expenses

Depreciation on Plant and Machinery 1,20,000

Interest on Debentures 10,000

Cash from Operating Activities before Working Capital 2,37,000

Changes

Increase in Trade Payables 18,000

Decrease in Trade Receivable 1,74,000

Increase in Inventory (2,07,000)

Cash from Operations 2,22,000

(-) Tax Paid (15,000)

Cash from Operating Activities 2,07,000

II. Cash from Investing Activities

Sale of Investments 40,000

Purchase of Investments (70,000)

Purchase of Plant and Machinery (4,05,000)

Cash from Investing Activities (4,35,000)

III. Cash from Financing Activities

Issue of Shares 2,00,000

Issue of Debentures 50,000

Interest on Debentures (10,000)

Cash from Financing Activities 2,40,000

IV. Net Cash Flow During the Year (I + II + III) 12,000

(+) Opening Cash and Cash Equivalents 33,000

Closing Cash and Cash Equivalents 45,000

Working Notes
1. Dr
Plant and Machinery Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Balance b/d 4,90,000By Depreciation A/c 1,20,000

To Bank A/c (Purchase) 4,05,000By Balance c/d 7,75,000

 8,95,000 8,95,000

2. Dr
Investment Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Balance b/d 50,000By Bank A/c (Sale) 40,000

To Gain on Sale (Capital reserve) 10,000By Balance c/d 90,000

To Bank A/c (Purchase) 70,000

1,30,000 1,30,000

3. Dr
Provision for Tax Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Bank A/c (Paid)‘ 15,000By Balance b/d 28,000

To Balance c/d 30,000By Statement of Profit and Loss 17,000

45,000 45,000

4. Net Profit after Tax and Extraordinary Items = 20,000

(+) Transfer to General Reserve = 70,000

(+) Provision for Tax = 17,000

= ₹ 1,07,000

64.
Cash Flow Statement
for the year ended 31st March 2022

Particulars Amt (₹)

I. Cash Flow from Operating Activities

Net Profit before Tax and Extraordinary Items (2,11,000)

Adjustment for Non-cash and Non-operating Items

(+) Depreciation (WN 3) 75,000

(+) Interest on Debentures (WNo 4) 24,000 99,000

Operating Loss before Working Capital Changes (1,12,000)

(+) Decrease in Inventories 33,000

(-) Decrease in Trade Payables (42,000)

Cash used in Operations (1,21,000)

(-) Tax Paid during the year (80,000)

Net Cash used in Operating Activities (2,01,000)

Working Notes
1. Calculation of net profit before tax and extraordinary item.

Net Profit as per profit and loss account (75,000 - 3,60,000) (2,85,000)

(+) Provision of tax made during the year (WN 2) 74,000

₹ (2,11,000)

2. Dr
Provision for Tax Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Bank A/c 80,000By Balance b/d 2,10,000

To Balance c/d 2,04,000By Profit and Loss A/c (B/F) 74,000

(Provision made)

2,84,000 2,84,000

3. Dr
Accumulated Depreciation Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Balance c/d 1,44,000By Balance b/d 69,000

By Profit and Loss A/c (B/F) 75,000

(Depreciation charged during the

year)
 1,44,000 1,44,000

(
4. Interest on debentures @ 10% = 1 , 80,000 ×
10
100 )(
+ 60,000 ×
10
100 )
=₹ 24,000

65.
Cash Flow Statement (Investing and Financing Activity)
for the year ended 31st March, 2022

Particulars Amt (₹)

I. Cash Flow from investing Activities

Proceeds from Sale of Plant and Machinery 45,000

Purchase of Plant and Machinery (WN 1) (20,25,000) 19,80,000

Net Cash used in Investing Activities (19,80,000)

II. Cash Flow from Financing Activities

Proceeds form Issue of Shares 10,00,000

Proceeds from Issue of Debentures 9,00,000

Interest paid on Debentures (1,25,000)

Net Cash Flow from Financing Activities 17,75,000

Working Note
Dr
Plant and Machinery Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Balance b/d 25,00,000By Bank A/c 45,000

To Bank A/c (B/F) (Purchase of Plant 20,25,000By Accumulated Depreciation A/c 50,000
and Machinery)

By Profit and Loss A/c (Loss on 30,000

Sale of Machinery)

By Balance c/d 44,00,000

45,25,000 45,25,000

66. (a) Net Profit before Tax and Extraordinary Items

= Net Profit for the Year + Interim Dividend + Loss of Assets due to Fire + Provision for Tax
+ Proposed Dividend - Insurance Claim received for Loss due to Fire - Tax Refund
= 7,50,000 + 90,000 + 20,000 + 80,000 + 1,60,000 - 10,000 - 20,000 = ₹ 10,70,000 '
(b) Operating Profit before Working Capital Changes
= Net Profit before Tax and Extraordinary Items + Adjustments for Non-cash and Non-
operating Expenses (Depreciation) and Goodwill Amortised - Adjustments for Non-cash and
Non-operating Incomes
= 10,70,000+ 40,000+ 70,000*-30,000= ₹ 11,50,000
*Goodwill Amortised = Opening Goodwill + Goodwill Purchased — Closing Goodwill .
(c) Cash Flow from Investing Activities = Interest on Non-current Investments + Insurance
Claim for Loss of Assets due to Fire - Purchase of Investments - Purchase of Machinery -
Goodwill Purchased
= 30,000 + 10,000 - 1,00,000 - 1,60,000 - 20,000 = ₹ (2,40,000) Outflow
(d) Cash Flow from Financing Activities = Bank Overdraft - interim Dividend Paid - Final
Dividend Paid
= 50,000 - 90,000 - 1,60,000 = ₹ (2,00,000) Outflow
(e) Closing Cash and Cash Equivalents = Cash in Hand + Investment in Marketable
Securities
= 2,00,000 + 1,50,000 = ₹ 3,50,000
67.
Cash Flow from Operating Activities
for the year ended 31st March, 2022

Particulars Amt (₹)

Cash Flow from Operating Activities

Net Profit before Tax and Extraordinary Items (WN 1) 5,50,000

Adjustments for

(+) Interest on Debentures 40,000

Operating Profit before Working Capital Change 5,90,000

Particulars Amt (₹)

(+) Decrease in Current Assets and Increase in Current Liabilities: 2,00,000

Outstanding Rent

(-) Increase in Current Assets and Decrease in Current Liabilities: (1,00,000)

Trade Payables

Inventories (6,60,000) (5,60,000)

Cash Generated from Operations 30,000

(-) Income Tax Paid (1,00,000)

Net Cash used in Operating Activities (70,000)

Working Note
Net Profit before Tax and Extraordinary Items

Net Profit for the year (10,00,000 - 6,00,000) = 4,00,000

(+) Provision for tax = 1,50,000

₹ 5,50,000

68.
Cash Flow Statement
for the year ended 31st March, 2021

Particulars Amt (₹)

A. Cash Flow from Operating Activities

Net Profit before Tax and Extraordinary Items (WN1) 2,95,000

Adjustments for Non-cash and Non-operating Items

(+) Depreciation of the Year 60,000

Amortisation of Patents 8,000

Interest on Debentures (2,00,000 × 10%) 20,000 88,000

Operating Profit Before Working Capital Changes 3,83,000

(+) Increase in Current Liabilities and Decrease in Current Assets

Increase in Creditors 20,000

Increase in Bills Payable 80,000

(-) Decrease in Current Liabilities and Increase in Current Assets

Increase in Inventories (20,000)

Increase in Trade Receivables (20,000) 60,000

Cash Generated from Operations 4,43,000

(-) Payment of Tax (2,80,000)

Cash Flow from Operating Activities 1,63,000

B Cash Flow from Investing Activities

Purchase of Machinery (140,000)

Investment in Long-term Loans and Advances (30,000)

Cash used in Investing Activities (1,40,000)

C. Cash Flow from Financing Activities

Issue of Equity Shares 2,30,000

Payment of Interest (20,000)

Redemption of Debentures (2,00,000) 10,000

D. Net Increase in Cash and Cash Equivalents (A + B + C) 33,000

(+) Opening Cash and Cash Equivalents 2,65,000

Closing Cash and Cash Equivalents 2,98,000

Working Notes

Amt (₹)

1. Net Profit as per Statement of Profit and Loss 20,000

(+) Tax Provided During the Year 2,75,000

2,95,000

2. Dr
Provision for Tax Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Bank A/c 2,80,000By Balance b/d 3,25,000

To Balance c/d 3,20,000By Statement of Profit and Loss 2,75,000

(Balancing figure)

6,00,000 6,00,000

69.
Cash Flow Statement
for the year ended 31st March, 2020

Particulars Amt (₹)

A. Cash Flow from Operating Activities

Net Profit before Tax and Extraordinary Items (70,000 - 50,000) 20,000

Adjustments for

(+) Loss on Sale of Machinery 15,000

Depreciation Charged on Machinery 20,000

Goodwill Written-off 8,000

Interest on Debentures 12,000 55,000

Operating Profit before Changes in Working Capital 75,000

(+) Decrease in Current Assets and Increase in Current Liabilities

Creditors 20,000

Bills Payable 80,000 1,00,000

(-) Increase in Current Assets and Decrease in Cupent Liabilities

Outstanding Expenses (5,000)

Inventories (20,000)

Trade Receivables (20,000) (45,000)

Net Cash from Operating Activities 1,30,000

8 Cash Flow from Investing Activities

Sale of Machinery 15,000

Purchase of Machinery (1,00,000)

Loans Advanced (30,000)

Net Cash used in Investing Activities (1,15,000)

C Cash Flow from Financing Activities

Issue of Shares 50,000

Debentures Redeemed (20,000)

Interest on Debentures (1,00,000 × 12%) (12,000)

Net Cash from Financing Activities 18,000

Net Increase in Cash and Cash Equivalents (A+B+C) 33,000

(+) Opening Cash and Cash Equivalents 65,000

Closing Cash and Cash equivalents 98,000

Working Notes
1. Dr
Machinery Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Balance b/d 2,00,000By Bank A/c (30,000-15,000) 15,000

To Bank A/c (balancing figure) 1,00,000By Profit and Loss A/c 15,000

By Provision for Depreciation A/c 10,000

By Balance c/d 2,60,000

3,00,000 3,00,000

2. Dr
Provision for Depreciation Account
Cr

Particulars Amt Particulars Amt (₹)

(₹)

To Machinery A/c 10,000By Balance b/d 50,000

To Balance c/d 60,000By Depreciation A/c (balancing figure) 20,000

70,000 70,000

70.
G Ltd. Cash Flow Statement
for the year ending 31st March, 2019

Particulars Amt (₹)

A. Cash flows from Operating Activities

Net Profit before Tax 1,10,000

(+) Depreciation on Machinery 25,000

(+) Interest on Debentures 16,000 41,000

Operating Profit before the Working Capital Change 1,51,000

|+) Decrease in Trade Receivables 1,10,000

(-) Decrease in Trade Payable (30,000)

Net Cash generated from Operating Activities 2,31,000

B. Cash Flow from Investing Activities

Purchase of Machinery (3,70,000)

Purchase of Non-current Investment (35,000)

 Net Cash used in Investing Activities (4,05,000)

C. Cash Flows from Financing Activities

Proceeds from Issue of Shares 2,00,000

Proceeds from Issue of 10% Debentures 60,000

Payment of Interest on 10% Debentures (16,000)

Cash Flow from Financing Activities 2,44,000

Net Increase in Cash and Cash Equivalents (A + B + C) 70,000

(+) Opening Balance of Cash and Cash Equivalents 2,10,000

Closing Balance of Cash and Cash Equivalents 2,80,000

71.
In the Book of Dreams Coverage Ltd
Cash Flow from Operating Activities
for the year ended 31 March, 2018

Particulars Amt (₹)

Net Profit after Tax and Extraordinary Items 1,50,000

(+) Provision for Tax (Current year) 50,000

Net Profit before Tax and Extraordinary Items 2,00,000

(+) Adjustment for Non-funds and Non-operating

Expenses

Loss on Sale of Machinery 18,000

Goodwill Written-off 5,000

Goodwill on Machinery 40,000 63,000

2,63,000

(-) Non-operati∩g/Trading Income — —

Net Profit before Working Capital Changes 2,63,000

(+) Decrease in Current Assets and Increase in Current

Liabilities

Trade Payables 17,000

2,80,000
(-) Increase in Current Assets and Decrease in Current
Liabilities

Inventory (75,000)

Trade Receivables (67,000) (1,42,000)

1,38,000

(-) Income Tax Paid (Previous Year) (30,000)

Net Cash Inflow from Operating Activities 1,08,000

Working Notes
1. Dr
Accumulated Depreciation Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Machinery A/c 20,000By Balance b/d 80,000

To Balance c/d 1,00,000By Statement of Profit and Loss A/c 40,000

(Deprecation of the current year)

1,20,000 1,20,000

2. Dr
Machinery Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Balance b/d 2,00,000By Bank A/c (Sold) 42,000

To Bank A/c (Pu-chased) 1,60,000By Profit and Loss A/c (Loss on Sale) 18,000

By Provision for Deprecation A/c (On 20,000

Sold Machine)

By Balance c/d 2,80,000

3,60,000 3,60,000

72.
Cash Flow Statement
for the year ended 31st March, 2018
Particulars Amt (₹)

A. Cash Flow From Operating Activities

Net Profit before Tax and Extraordinary Items (WN 1) (24,000)

(+) Depreciation on Machinery 4,20,000

Interest on Debentures 64,000

(-) Profit on Sale of Machinery (1,60,000) 3,24,000

Net Operating Profit before Working Capital Changes 3,00,000

(+) Increase in Current Liabilities and Decrease in Current Assets 50,000

Trade Payables

(-(Increase in Current Assets and Decrease in Current Liabilities: (4,00,000) (3,50,000)

Inventories

Cash Generated from Operations (50,000)

(-) Tax Paid (56,000)

Net Cash Used in Operating Activities (1,06,000)

B. Cash Flow from Investing Activities

Sale of Machinery 6,40,000

Purchase of Machinery 116,00,000)

Purchase of Intangible Assets (1,00,000)

Net Cash Used in Investing Activities (10,60,000)

C. Cash Flow from Financing Activities

Issue of Equity Shares 9,00,000

Issue of Debentures 3,00,000

Interest on Debentures Paid (64,000)

Net cash From Financing Activities 11,36,000

D. Net Decrease in Cash and Cash Equivalent (A + B + C) (30,000)

(+) Opening Cash and Cash Equivalent 78,000

Opening Current Investments 78,000 1,56,000

Cash and Cash Equivalent as on 31st March, 2018 1,26,000

Working Notes
1. Amt (₹)

Surplus as per Statement of Profit and Loss (4,00,000-5,00,000) = (1,00,000)

(+) Provision for Tax = 76,000

Net Profit before Tax and Extraordinary Items = (24,000)

2. Dr
Machinery Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Balance b/d 25,00,000By Bank A/c (Sale) 6,40,O00

To Statement of Profit and Loss 1,60,000By Accumulated Depreciation 3,20,000

To Bank A/c (Purchase) (Balancing 16,00,000By Balance c/d 33,00,000

figure)

42,60,000 42,60,000

3. Dr
Accumulated Depreciation Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Machinery A/c 3,20,000By Balance b/d 5,00,000

To Balance c/d 6,00,000By Statement of Profit and Loss 4,20,000

(Balancing figure)

9,20,000 9,20,000

73.
Cash Flow Statement
for the year ended 31st March, 2016 and 2017

Particulars Amt (₹)

A. Cash Flow from Operating Activities

Net Profit before Tax and Extraordinary Items (W N 3) 2,45,000

(+) Depreciation Charged During the Year 10,000

Interest on 9% Debentures (2,00,000 × 9%) 18,000 28,000

Operating Profit Before Working Capital Changes 2,73,000

(+) Increase in Current Liabilities and Decrease in Current Assets

(-) Increase in Current Assets and Decrease in Current Liabilities

Trade Payables (10,000)

Inventories (80,000)

Trade Receivables (50,000) (140,000)

Cash generated from Operations 1,33,000

(-) Tax Paid (80,000)

Net Cash Flow from Operating Activities 53,000

B. Cash Flow from Investing Activities

Purchase of Plant and Machinery (W N 1) (1,50,000)

Purchase of Goodwill (80,000)

Sale of Machinery 30,000

Purchase of Non-current Investments (5,00,000)

Net Cash used in Investment Activities (7,00,000)

C. Cash Flow from Financing Activities

Redemption of Debentures (1,00,000)

Interest Paid on Debentures (18,000)

Proceeds from Issue of Shares 5,00,000

Net Cash flow from Financing Activities 3,82,000

Net Decrease in Cash and Cash Equivalent (A + B + C) (2,65,000)

(+) Cash and Cash Equivalent in the Beginning

Cash in Hand 3,50,000

Cash at Bank 2,90,000 6,40,000

Cash and Cash Equivalent in the End 3,75,000

Cash in Hand 70,000

Cash in Bank 3,05,000 3,75,000

Working Notes
1. Dr
Plant and Machinery Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Balance b/d 11,40,000By Bank 30,000

To Bank (Purchase) (Balancing 1,50,000By Accumulated Depreciation A/c 50,000

figure)

By Balance c/d 12,10,000

12,90,000 12,90,000

2. Dr
Accumulated Depreciation Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Plant and Machinery A/c 50,000By Balance b/d 2,40,000

To Balance c/d 2,00,000By Statement of Profit and Loss 10,000

A/c (Balancing figure)

2,50,000 2,50,000

3. Net profit as per statement of profit and loss (7,50,000 - 6,00,000) = ₹ 1,50,000

(+) Provision for tax = ₹ 95,000

Net profit before tax and extraordinary items = ₹ 2,45,000

74.
Vishva Ltd Cash Flow Statement
for the year ended 31st March, 2018

Particulars Amt (₹)

I. Cash Flow from Operating Activities

Net Profit before Tax and Extraordinary Items (WN 1) 26,640

Adjustment for Non-cash and Non-operating Expenses

(+) Interest on Debentures 4,800

Depreciation on Land and Building 1,200

Depreciation on Plant and Machinery 14,400 20,400

Operating Profit before Working Capital Changes 47,040

(+) Increase in Current Liability and Decrease in Current Assets

Debtors 4,800 4,800

(-) Decrease in Current Liability and Increase in Current Assets

Trade Payables (7,200)

Inventories (16,200)

Bills Receivables (10,800) (34,200)

Cash Flow from Operating Activities before Payment of Tax 17,640

(-) Tax Paid (14,400)

Cash Flow from Operating Activities 3,240

II Cash Flow from Investing Activities

Purchase of Plant and Machinery (22,800 + 14,400 - 34,800) (2,400)

Cash used in Investing Activity (2,400)

III Cash Flow from Financing Activities

Issue of Equity Shares 18,000

10 % Debentures Raised 12,000

Interest on Debenture Paid (4,800)

Proceeds from Bank Overdraft 5,000

Cash Flow from Financing Activities 30,200

IV Increase in Cash and Cash Equivalents (I + II - III) 31,040

Opening Cash and Cash Equivalents 8,360

Closing Cash and Cash Equivalents (IV + V) 39,400

Working Notes
1. Calculation of Net Profit before Tax and Extraordinary Items

Particulars Amt (₹)

Surplus i.e. Balance in Statement of Profit and Loss 9,840

(+) Transfer to Genera) Reserve 3,600

(+) Provision for Tax 13,200

Net Profit before tax and Extraordinary Item 26,640

2. Dr
Provision for Income Tax Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Bank A/c (Tax Paid) 14,400By Balance b/d 18,000

To Balance C/d 16,800By Profit and Loss A/c 13,200

31,200 31,200

Common Mistake
Students usually put bank overdraft in operating activity. But bank overdraft will be recorded
under the head ‘Financing Activity’.
75.
Cash Flow Statement
for the year ended 31st March, 2017

Particulars Amt (₹)

A. Cash flow from Operating Activities

Net Profit before Tax and Extraordinary items 3,00,000

Adjustments for

(+) Depreciation 62,500

(+) Interest on Debentures (1,50,000 × 10%) 15,000 77,500

Operating Profit before Working Capital Changes 3,77,500

(+) Decrease in Current Assets and Increase in Current Liabilities —

(-) Increase in Current Assets and Decrease in Current Liabilities

Trade Receivables (50,000)

Short-term Loan and Advances (1,00,000) (1,50,000)

Cash Generated from Operations 2,27,500

(-) Income Tax Paid (75,000)

Net Cash flow from Operating Activities 1,52,500

B. Cash Flow from Investing Activities

Purchase of Machinery (2,12,500)

Cash Used in Investing Activities (2,12,500)

C. Cash Flow from Financing Activities

Proceeds from Issue of Debentures 1,00,000

Increase in Bank Overdraft 50,000

Dividend Paid (50,000)

Interest on Debentures (15,000)

Cash Flow from Financing Activities 85,000

D. Net Increase in Cash and Cash Equivalents (A+ B+ C) 25,000

(+) Opening Cash and Cash Equivalents 25,000

Closing Cash and Cash Equivalents 50,000

Working Note
Calculation of Net Profit before Tax and Extraordinary Items

Particulars Amt (₹)

Surplus, i.e. Balance in Statement of Profit and Loss (Closing) 1,00,000

(-) Surplus, i.e. Balance in Statement of Profit and Loss (Opening) (25,000) 1,25,000

(+) Proposed Dividend 50,000

Provision for Tax 1,25,000 1,75,000

Net Profit before Tax and Extraordinary Items 3,00,000

76.
Cash Flow Statement
for the year ended 31st March, 2015

Particulars Amt (₹)

A Cash Flow from Operating Activities

Net Profit before Tax and Extraordinary Items (WN) 3,00,000

Adjustments for

(+) Depreciation 39,000

(+) Intangible Assets Written-off 10,000

(+) Interest on Debentures (5,00,000 × 12%) 60,000 1,69,000

Operating Profit before Working Capital Changes 4,69,000

(-) Increase in Current Assets and Decrease in Current Liabilities

Inventories (62,000) (62,000)

Cash Generated from Operations 4,07,000

(-) Tax Paid (70,000)

Net Cash Flow from Operating Activities 3,37,000

Particulars Amt (₹)

B. Cash Flow Flow from Investing Activities

Purchase of Fixed Assets (3,82,000)

Purchase of Non-current Investments (25,000)

Net Cash Used in Investing Activities (4,07,000)

C. Cash Flow 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

D Net Increase in Cash and Cash Equivalents (A + B + C) 20,000

(+) Opening Cash and Cash Equivalents, i.e. Cash + Current 1,20,000
Investments (60,000 + 60,000)

E. Closing Cash and Cash Equivalents, i.e. Cash + Current 1,40,000

Investments (90,000 + 50,000)

Working Notes
1. Calculation of Net Profit before Tax and Extraordinary Items

Net Profit for the Year [2,00,000 - (-50,000)] ₹ 2,50,000

(+) Provision for Tax ₹ 50,000

₹ 3,00,000

2. Dr
 Provision for Tax Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Bank A/c 70,000By Balance b/d 90,000

To Balance c/d 70,000By Statement of Profit and Loss A/c 50,000

1,40,000 1,40,000

Common Mistake
Students usually get confused when current investments are given and record them under
investing activity. But current investments are to be taken as marketable securities unless
otherwise specified and should be included in cash and cash equivalents.
77.
Cash Flow from Operating Activities
for the year ended 31st March, 2015

Particulars Amt (₹)

Cash Flow from Operating Activities

Net Profit before Tax and Extraordinary Items 41,000

Adjustments for

(+) Depreciation 18,000

(+) Loss on Sale of Machinery 20,000 38,000

Operating Profit before Working Capital Changes 79,000

(+) Decrease in Current Assets and Increase in Current Liabilities

Outstanding Expenses 4,600

(-) Increase in Current Assets and Decrease in Current Liabilities

Inventories (8,000)

Trade Receivables (13,000) (16,400)

Cash Generated from Operations 62,600

(-) Tax Paid (23,000)

Net Cash flow from Operating Activities 39,600

Working Notes
1. Calculation of Net Profit before Tax and Extraordinary Items
 Amt (₹)

Net Profit before Tax (71,000 - 89,000) (18,000)

(+) Dividend paid 36,000

Tax Paid 23,000 59,000

41,000

2. Calculation of Loss on Sale of Machinery Amt (₹)

Cost of machine = 50,000

(-) Depreciation = (20,000)

Book value of machine = 30,000

(-) Sales value = (10,000)

Loss on sale = 20,000

78.
Cash Flow Statement
for the year ending 31st March, 2014

Particulars Amt (₹)

A. Cash Flow from Operating Activities

Net Profit before Taxation and Extraordinary Items (Surplus of 2,00,000

statement of profit and loss)

Adjustments for

(+) Depreciation (WN 2) 1,32,000

(+) Loss on Sale of Machinery 4,000

(+) Goodwill Written-off 1,44,000 2,80,000

Operating Profit before Working Capital Changes 4,80,000

(-) Increase in Current Assets and Decrease in Current Liabilities

Trade Payables (50,000)

Short-term Provisions (54,000)

Inventories (16,000)

Trade Receivables (54,000) (1,74,000)

Net Cash Flow from Operating Activities 3,06,000

B. Cash Flow from Investing Activities

Purchase of Machinery (WN 1) (5,88,000)

Sale of Machinery 12,000

•Net Cash Flow used in Investing Activities (5,76,000)

C. Cash Flow from Financing Activities

Issue of Shares 2,00,000

Loan Raised 1,40,000

Net Cash Flow from Financing Activities 3,40,000

D Net increase in Cash and Cash Equivalents (A + B + C) 70,000

(+) Opening Cash and Cash Equivalents (Cash 7,50,000 + Current 10,50,000
Investments 3,00,000)

E. Closing Cash and Cash Equivalents (Cash 6,40,000 + Current 11,20,000

Investments 4,80,000)

Working Notes
1. Dr
Machinery Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Balance b/d 20,00,000By Accumulated Depreciation 32,000

A/c

To Cash A/c (Purchase) 5,88,000By Cash A/c (Sale) 12,000

Particulars Amt (₹) Particulars Amt (₹)

By Depreciation A/c (Statement 4,000

of Profit and Loss)

(Loss on sale)

By Balance c/d 25,40,000

25,88,000 25,88,000

2. Dr
 Accumulated Depreciation Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Machinery A/c 32,000By Balance b/d 3,00,000

To Balance c/d 4,00,000By Depreciation A/c (Statement of 1,32,000

Profit and Loss) (Balancing figure)

4,32,000 4,32,000

79.
Cash Flow Statement
for the year ended 31st March, 2013

Particulars Amt (₹)

I. Cash Flow from Operating Activities

Net Profit before Tax and Extraordinary Items (90,000 - 75,000) 15,000

(+) Decrease in Current Asset and Increase in Current Liabilities

Trade Receivables 13,500

Inventories 1,500

(-) Decrease in Current Liabilities and Increase in Current Assets

Trade Payables (66,000) (51,000)

Net Cash Used in Operating Activities (36,000)

II Cash Flow from Investing Activities

Purchase of Tangible Assets (47,500)

Purchase of Non-current Investment (3,000)

Net Cash Used in Investing Activities (50,500)

III. Cash Flow from Financing Activities

Issue of Share Capital 50,000

Net Cash Flow from Financing Activities 50,000

IV. Net Decrease in Cash and Cash Equivalents (I + II + III) (36,500)

(+) Cash and Cash Equivalents in the Beginning (Cash 84,000 + 1,17,500
Current Investment 33,500)

V. Cash and Cash Equivalents at the End (Cash 68,500 + Current 81,000
Investment 12,500)

80.
Cash Flow Statement
for the year ended 31st March, 2012

Particulars Amt (₹)

I. Cash Flow from Operating Activities

Net Profit before Tax and Extraordinary Items (2,00,000 - 1,10,000) 90,000

Adjustments for

(+) Loss on Sale of Machinery 15,000

(+) Depreciation 2,00,000 2,15,000

Operating Profit before Working Capital Changes 3,05,000

(+) Decrease in Current Assets and Increase in Current Liabilities

Trade Receivables 8,000

Trade Payables 5,000

(-) Increase in Current Assets and Decrease in Current Liabilities

Inventories (10,000) 3,000

Net Cash Flow from Operating Activities 3,08,000

Particulars Amt (₹)

II. Cash Flow from Investing Activities

Proceeds from Sale of Machinery 65,000

Payment for Purchases of Tangible Assets (WN) (5,80,000)

Net Cash Used in Investing Activities (5,15,000)

III Cash Flow from Financing Activities

Proceeds from Issue of Share Capital 1,00,000

Proceeds from Long-term Borrowings 1,00,000

Net Cash Flow from Financing Activities 2,00,000

IV. Net Decrease in Cash and Cash Equivalents (I + II + III) (7,000)

(+) Cash and Cash Equivalents in the Beginning of the Year 35,000
V. Cash and Cash Equivalents al the End of the Year 28,000

Working Note
Dr
Tangible Assets Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Balance b/d 8,00,000By Bank A/c (Sale) 65,000

To Bank A/c (Purchases) (Balancing 5,80,000By Depreciation A/c 2,00,000

figure)

By Statement of Profit and Loss 15,000

(Loss on sale)

By Balance c/d 11,00,000

13,80,000 13,80,000

81.
Cash Flow Statement
for the year ended 31st March, 2012

Particulars Amt (₹)

I. Cash Flow from Operating Activities

Net Profit before Tax and Extraordinary Items (3,50,000-4,00,000) (50,000)

Adjustments for

(+) Depreciation 1,20,000

(+) Interest Paid 36,000 1,56,000

Net Profit before Working Capital Changes 1,06,000

(+) Decrease in Current Assets and Increase in Current Liabilities

Trade Payables 10,000

(-) Increase in Current Assets and Decrease in Current Liabilities

Inventories (1,00,000)

Trade Receivable (80,000) (1,70,000)

Net Cash Used in Operating Activities (64,000)

II. Cash Flow from Investing Activities

Purchase of Tangible Assets (WN) (4,20,000)

Net Cash Used in Investing Activities (4,20,000)

III. Cash Flow from Financing Activities

Interest Paid on Long-term Borrowings (36,000)

Proceeds from Issue of Share Capital 4,00,000

Proceeds from Long-term Borrowings 90,000

Net Cash Flow from Financing Activity 4,54,000

IV. Net Decrease in Cash and Cash Equivalents (I + II + III) (30,000)

(+) Cash and Cash Equivalents in the Beginning of the Year 3,70,000

V Cash and Cash Equivalents at the End of the Year 3,40,000

Working Note
Dr
Fixed Assets Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Balance b/d 9,00,000By Depreciation A/c 1,20,000

To Bank A/c (Purchase) (Balancing 4,20,000By Balance c/d 12,00,000

figure)

13,20,000 13,20,000

82.
Cash Flow Statement
for the year ended 31st March, 2011

Particulars Amt (₹)

I. Cash Flow from Operating Activities

Net Profit before Tax and Extraordinary Items (WN 1) 2,50,000

Adjustments for
(+) Depreciation on Equipments 18,000

(+) Patents Written-off 5,000

(+) Loss on Sale of Equipments 12,000 35,000

Operating Profit before Working Capital Changes 2,85,000

(-) Increase in Current Assets and Decrease in Current Liabilities

Debtors (67,000)

Stock (75,000)

Creditors (3,DOO) (1,45,000)

Cash Generated from Operations 1,40,000

(-) Income Tax Paid (30,000)

Net Cash Flow from Operating Activities 1,10,000

II. Cash Flow from Investing Activities

Proceeds from Sale of Equipments (WN 2) 70,000

Purchase of Equipments (1,00,000)

Purchase of Investment (1,00,000)

Net Cash Used in Investing Activities (1,30,000)

III. Cash Flow from Financing Activities

Proceeds from Issue of Shares 2,00,000

Repayment of Bank Loan (50,000)

Dividend Paid (50,000)

Net Cash Flow from Financing Activities 1,00,000

IV. Net Increase in Cash and Cash Equivalents (I + II + III) 80,000

(+) Cash and Cash Equivalents at the Beginning of Period 1,50,000

V. Cash and Cash Equivalents at the End of Period 2,30,000

Working Notes
1. Calculation of Net Profit before Tax and Extraordinary Items

Net Profit for the Year (3,50,000 - 2,00,000) ₹ 1,50,000

(+) Proposed Dividend ₹ 50,000

Provision for Tax ₹ 50,000

₹ 2,50,000

2. Dr
Equipments Account
Cr

Particulars Amt (₹) Particulars Amt (₹)

To Balance b/d 5,00,000By Depreciation A/c 18,000

To Bank A/c (Purchase) 1,00,000By Statement of Profit and Loss (Loss 12,000
on sale of building)

By Bank A/c (Balancing figure) 70,000

By Balance c/d 5,00,000

6,00,000 6,00,000

Case Based Question

1. (i) (d) Amt (₹)

Net profit after tax 31,25,000

(+) Transfer to reserves 8,75,000

(+) Provision for tax 4,37,500

Net profit before Tax 44,37,500

(ii) (c) Amt (₹)

Net profit before tax 44,37,500

(+) Goodwill written-off 7,80,000

(-) Gain on sale of fixed tangible asset (12,50,000)

Operating profit before working capital changes 39,67,500

(iii) (a) Cash Flow from Operating Activities before Tax

Particulars Amt (₹)

Operating Profit before Working Capital Changes 39,67,500

(+) Decrease in Current Assets and Increase in Current Liabilities

Trade payable 1,00,000

(-) Increase in Current Assets and Decrease in Current Liabilities

Prepaid Expenses (2,50,000)

Inventory (2,30,000)

Trade Receivables (30,000) (5,10,000)

35,57,500

(iv) (b) Amt (₹)

Cash flow from operating activities before tax 35,57,500

(-) Tax (4,37,500)

Cash flow from operating activities after tax 31,20,000