NCERT Solution For Class 12 Accountancy Chapter 6 Cash Flow Statement

Last Updated: August 25, 2024Categories: NCERT Solutions

Cash Flow Statement: NCERT Solutions Chapter 6

SimplyAcad has brought the best NCERT Solutions for Class 12 Accountancy Part 2 Chapter 6 Cash Flow Statement for students to practise the tricky questions. Our subject experts have prepared the solutions with detailed explanations and steps for better understanding of the concepts and related functions. Students can easily access the NCERT Solutions of Cash Flow Statement below.

NCERT Solutions for Class 12 Accountancy Part 2 Chapter 6 Cash Flow Statement

Question 1 : What is a Cash Flow Statement?

Answer: A cash flow statement is a statement that shows the inflow and the outflow of the cash and the cash equivalents from the operating, financing, and investing activities of the company. It records the receipts and the payments of the cash and the cash equivalents that any business incurs during the particular accounting year. The statement of the cash flow helps to establish the ability and the position of the business to generate cash for its varying needs.

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

Answer: As per AS-3 the following are the various activities classified while preparing a cash flow statement: Operating activity – Operating Activity includes all the activities that create and generate revenue for any business. For example, a company dealing with the garments will have its operating activity in the form of procurement of the raw materials, expenses made for manufacturing the garments, etc.

Investing activity – This includes all the transactions that are related to the long-term investments made by the company. Examples of this can include the sale and purchase of the fixed asset such as plants and Machinery. Financing activities – The financing activity includes all the transactions that are related to the acquiring of capital or long-term funds for any business. Examples of this can be the cash proceeds by the business from the issue of the equity shares and debentures etc.

Question 3: State the Objective of the cash flow statement.

Answer: The uses of the cash flow statement are as follows:

  • Cash flow statement is useful in providing information about the changes in the financial structure and the net assets and the amount which is generated with the inflows of the cash.
  • Cash flows are useful in providing information about the cash-generating capacity of the business by indicating the position of the business in terms of the cash and the cash equivalents.
  • Cash flows help the business to make comparisons about the operating performance of the business as the accounting treatments and practices might be different in the different enterprises and the cash flow statement will thus help the businesses to determine the cash generating capacity of them.
  • The cash flow records the transactions at their historical cost which can help the users to determine important information about the transactions as and when they require.

Question 4: What are the objectives of preparing a cash flow statement?

Answer: The objectives of the preparation of the cash flow statement are as follows:

  • The cash flow statement is helpful for the management to make the proper usage of the cash.
  • The cash flow statement helps the management of the organisation by allowing them to take corrective actions in cases when there is a misappropriation of the cash by the management.
  • It helps organisations to establish the need for cash for a specific period to ascertain the smooth functioning of the business.
  • It is useful in tracking the inflow and the outflow of the cash in the business for a particular accounting period.
  • It allows the management of the organisation to determine the decisions about the short-term financial requirements of the management.

Question 5: State the meaning of the terms:

(i) Cash Equivalents

(ii) Cash flows.

Answer:

(i) The short-term liquid investments that are made by any business which are not subjected to any change in their values are referred to as cash equivalents. The cash equivalents are held by the business to meet their short-term needs and commitments for investment purposes.

(ii) Cash flows are referred to as the movement of the cash inside and outside the business from the non-cash items. Thus when the cash is generated from the transaction of any non-cash item, then it is referred to as the cash inflow; on the other hand when the cash goes out of the business to meet the requirements for the transactions of any non-cash item, then it is referred to as the cash outflows.

Question 6: Prepare a format of cash flow from operating activities.

Answer: The following is the format of the cash flows from operating activities.

Net profit before tax
(add) deductions made in P&L made for non-cash items like depreciation, goodwill to be written off
(add) deductions made in P&L made for non-operating items like interest
(less) additions made in P&L for non-operating items like dividends received and profit on sale of fixed assets
Operating profit before changes in working capital
(add) increase in current liabilities
(add) decrease in current assets
(less) increase in current assets
(less) decrease in current liabilities
Cash flows from operating activities before tax and

extraordinary items

(less) income tax
(add/less) effects of extraordinary items
Net cash from operating activities

Question 7: State clearly what would constitute the operating activities for each of the following in the following enterprises:

(i) Hotel

(ii) Film production house

(iii) Financial enterprise

(iv) Media enterprise

(v) Steel manufacturing unit

(vi) Software development business unit.

Answer: The following are the operating activities of the following enterprises:

(i) Hotel – The receipt that comes from the sales made to the customers will be the cash inflows and the expenses such as salaries, rent, groceries, etc. will be regarded as the cash outflows.

(ii) Film production house – The sale of the film rights to the distributors will be regarded as the inflows, while the salaries paid to the actors, rent paid for the location, etc. will be regarded as the outflows.

(iii) Financial enterprise – The receipts that are received on the repayments of the loan and the interest on the loans will be the inflows and on the other hand, the outflows will be the salaries, loan recovery expenses, etc.

(iv) Media enterprise – Receipts which are generated from the advertisements will be regarded as the inflows and expenses which are made in the form of the payment of the salaries will be regarded as the outflows.

(v) Steel manufacturing unit – The sale of steel sheets, steel rods, etc. will be regarded as the inflows while the outflows that occur due to the purchase of the raw materials, wages, etc. will be the outflows.

(vi) Software business unit – The receipt is generated from the sale of software and the renewal of licences will be regarded as the inflows and the payment of salaries etc. will be regarded as the outflows.

Question 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.

Answer: The nature and the type of the business can rightly change the category into which the particular activity may be classified. For instance, a firm that is engaged in the purchase of the land and the buildings will have its operating activities which are in the form of sale and the purchase of the land. On the other hand, the sale and purchase of the land will be not regarded as operational activity in cases

of the other businesses.

Question 9: Describe the procedure to prepare a Cash Flow Statement. Answer:

  • Answer: The procedure to make the cash flow is as follows:
  • Firstly, determine the flows of the cash from the operating activities of the business.
  • Next, the business shall determine the flows of the cash from its investing activities.
  • Then it must determine the flows of the cash from its financing activities.
  • The next step involves the total of the sum of all the three activities.
  • The final step involved the deduction of the opening balance of the cash and the cash equivalents from the resulting sum of all three activities which will result in the figure which is the closing balance of the cash and the equivalents of the cash.

Question 10: Describe the “Indirect” method of ascertaining Cash Flow from Operating Activities.

Answer: The indirect method of ascertaining the cash flow from the operating activities involves all the non-operating and the non-cash items. Under this method, cash flow is ascertained from the flow of the cash of the operating activities beginning with the net profit or the net loss. The income statement in this method is on the accrual basis which hence includes both non-operating items such as interest paid, loss, or the profit made on the sale of any fixed assets; and the non-cash items such as write-off of the goodwill, and depreciation. Following is the sample of the net cash flows from the operating activities:

Net profit before tax
(add) deductions made in P&L made for non-cash items like depreciation, goodwill to be written off
(add) deductions made in P&L made for non-operating items like interest
(less) additions made in P&L for non-operating items like dividends received and profit on sale of fixed assets
Operating profit before changes in working capital
(add) increase in current liabilities
(add) decrease in current assets
(less) increase in current assets
(less) decrease in current liabilities
Cash flows from operating activities before tax and extraordinary items
(less) income tax
(add/less) effects of extraordinary items
Net cash from operating activities

Question 11: Explain the major Cash Inflow and outflows from investing activities.

Answer: Cash flows are referred to as the movement of the non-cash items of the business in and outside the business. Thus the cash inflow is referred to as the situation in which the cash comes from a non-cash item and on the other hand when the cash is used by the business to get the noncash item it is referred to as cash outflow. The transactions of the business which are related to the long-term investments in the business are called the investing activities.

The example of the cash flow from the investing activities is as follows:

Sale of machinery – Cash inflows

Purchase of machinery – Cash outflows

Question 12: Explain the major Cash flows and outflows from financing activities.

Answer: Cash flows are referred to as the movement of the non-cash items of the business in and outside the business. Thus the cash inflow is referred to as the situation in which the cash comes from a non-cash item and on the other hand when the cash is used by the business to get the noncash item it is referred to as cash outflow. For instance, the sale of the computer of the business generates cash for the business and hence is cash inflow and on the other hand the cash spent on the purchase of the new computer is the cash outflow. The financing activity refers to all those transactions that are related to the acquiring of long-term capital or funds for the business. Thus, the cash flow from the financing activities can be in the following forms:

Proceed from long-term borrowings – Cash inflows

Repayment of long-term borrowings – Cash outflows

Question 13: Anand Ltd. arrived at a net income of Rs 5,00,000 for the year ended March 31, 2017. Depreciation for the year was Rs 2,00,000. There was a gain of Rs 50,000 on assets sold which was credited to the profit and loss account. Bills Receivables increased during the year by Rs 40,000 and Bills Payables also increased by Rs 60,000. Compute the cash flow operating activities by the indirect approach.

Answer:

Cash Flow from Operating Activities as of March 31, 2017
Particulars Amount Amount
Rs Rs
Net Profit during the year 500000
Items to be adjusted:
Add: Depreciation 200000
Less: Gain on sale of assets -50000 150000
Operating Profit before Working Capital changes 650000
Add: Increase in Bills Payable 60000
Less: Increase in Bills Receivables -40000 20000
Net Cash from Operations 670000

Question 14: From the information given below you are required to prepare the cash paid for the inventory:

  Rs
Inventory in the beginning 40,000
Purchases 1,60,000
Inventory in the end 38,000
Trade payables in the beginning 14,000
Trade payables in the end 14,500

Answer:

Trade Payable A/c
Date Particular Amount Date Particular Amount
Cash (B.F.) 159500 Balance b/d 14000
Balance c/d 14500 Purchases 160000
174000 174000

Cash paid for Inventory amounts to Rs.159500.

Question 15: For each of the following transactions, calculate the resulting cash flow and state the nature of cash for low vis., operating, investing, and f, financing.

(a) Acquired machinery for Rs 2,50,000 paying 20% drawn and executing a bond for the balance payable.

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

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

Answer: (a) Amount paid for Machinery = 250000 x 20/100 = 50000

Part-payment Rs. 500 of 00 for acquiring machinery Rs.250000 is related to Voting Activities.

(b) Amount paid for acquiring shares (250000)

Dividend received 50000

Net Cash used in Investing Activities (200000)

AmountThe amount to acquire assets and divided dividends is a part of Investing Activities.

(c) InflowThe inflows of Rs.60000 on the sale of other machinery are part of Investing Activities.

Question 16: 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 Note No. Amount (Rs)
i) Revenue from Operations   10,00,000
ii) Expenses    
  Cost of Material Consumed 1 50,000
  Purchase of Stock-in-trade   5,00,000
  Other Expenses 2 3,00,000
  Total Expenses   8,50,000
iii) Profit before Tax (I – ii)   1,50,000

Additional information:

(i) Trade receivables decreased by 30,000 during the year.

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

(iii) Trade creditors decreased by Rs 15,000 during the year.

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

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

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

Answer:

Cash Flow from Operating Activities as of March 31, 2017
Particulars Amount Amount
Rs Rs
Net Profit earned during the year 150000
Items to be added:
Depreciation 25000 25000
Operating Profit before Working Capital changes 175000
Add: Increase in Current Liabilities
O/s Expenses 3000
Add: Decrease in Current Assets
Stock 50000 83000
Less: Decrease in Current Liabilities
Trade Creditors -15000
Less: Increase in Current Assets
Prepaid Expenses -5000 -20000
Net Cash from Operations 238000

Question 17: Compute cash from operations from the following figures:

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

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

Particulars March

31, 2016 (Rs.)

March

31, 2017 (Rs.)

Trade Receivables 14,000 15,000
Provision for Doubtful Debts 1,000 1,200
Trade Payables 13,000 15,000
Inventories 5,000 8,000
Short-term Investments 10,000 12,000
Expenses payable 1,000 1,500
Prepaid Expenses 2,000 1,000
Accrued Income 3,000 4,000
Income received in advance 2,000 1,000

Answer:

Cash Flow Statement for the year ending March 31, 2017
Particulars Amount Amount
Rs Rs
Cash Flow from Operating Activities
Net Profit 10000
Items to be added:
Depreciation 2000 2000
Operating Profit before Working Capital changes 12000
Less: Increase in Current Assets
Trade Receivables -1000
Accrued Income -1000
Other Current Assets -2000
Inventories -3000
Add: Increase in Current Liabilities
Provision for Doubtful Debts 200
Trade Payables 2000
Expense Payable 500
Add: Decrease in Current Assets
Prepaid Expenses -1000
Less: Decrease in Current Liabilities
Income received in advance 1000 -4300
Net Cash from Operating Activities 7700

Question 18: From the following particulars of Bharat Gas Limited, calculate Cash Flows from Investing Activities. Also, show the workings of preparing the ledger accounts:

Balance Sheet of Bharat Gas Ltd. as on 31 Mar. 2016 and 31 Mar. 2017

Particulars Note No. Figures as of the end of 2017

(Rs)

Figures as on and off reporting 2016

(Rs)

II) Assets      
1. Non-current Assets      
a) Fixed assets      
i) Tangible assets 1 12,40,000 10,20,000
ii) Intangible assets 2 4,60,000 3,80,000
b) Non-current

investments

3 3,60,000 2,60,000
Notes: 1 Tangible assets = Machinery
  2 Intangible assets = Patents

Notes

  Figures of

current year

Figures of

previous year

1. Tangible Assets Machinery    
12,40,000 10,20,000
   
2. Intangible Assets Goodwill Patents 3,00,000 1,00,000
1,60,000 2,80,000
  4,60,000 3,80,000
     
3. Non-current Investments    
10% long term investments 1,60,000 60,000
Investment in land 1,00,000 1,00,000
Shares of Amartex Ltd. 1,00,000 1,00,000
  3,60,000 2,60,000
     

Additional Information:

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

(b) A Machine costing Rs. 1,40,000 (Depreciation provided thereon Rs. 60,000) was sold for Rs. 50,000. Depreciation charged during the year was Rs. 1,40,000.

(c) On March 31, 2016, 10% of ments were purchased for Rs. 1,80,000, and some Investments were sold at a profit of Rs. 20,000. Interest on Investment was received on March 31, 2017.

(d) Amartex Ltd. paid dividends on its shares.

(e) A plot of Land had been purchased for investment purposes and let out for commercial use and rent received Rs. 30,000.

Answer:

Cash Flow from Investing Activities
Particulars Amount Amount
Rs Rs
Cash Inflow
Proceeds from the Sale of other f Patents 100000
Proceeds from the Sale of other Machinery 50000
Proceeds from Sale of 10% Long-term Investment 100000
Interest received on 10% Long-term Investment 6000
Dividend received from Amartex Ltd. 10000
Rent received 30000 296000
Cash Outflow
Purchase of Goodwill -200000
Purchase of Machinery -440000
Purchase of 10% Long-term Investment -180000 -820000
Net Cash Used in Investing Activities -524000
Patents A/c
Date Particular Amount Date Particular Amount
Balance b/d 280000 P/L (written off) 40000
P/L (Profit on Sale) 20000 Bank (Sale) (B.F.) 100000
Balance c/d 160000
300000 300000
Machinery A/c
Date Particular Amount Date Particular Amount
Balance b/d 1020000 Depreciation 140000
Patents A/c
Date Particular Amount Date Particular Amount
Balance b/d 280000 P/L (written off) 40000
P/L (Profit on Sale) 20000 Bank (Sale) (B.F.) 100000
Balance c/d 160000
300000 300000
Machinery A/c
Date Particular Amount Date Particular Amount
Balance b/d 1020000 Depreciation 140000
Patents A/c
Date Particular Amount Date Particular Amount
Balance b/d 280000 P/L (written off) 40000
P/L (Profit on Sale) 20000 Bank (Sale) (B.F.) 100000
Balance c/d 160000
300000 300000
Machinery A/c
Date Particular Amount Date Particular Amount
Balance b/d 1020000 Depreciation 140000

Question 19: From the following Balance Sheet of Mohan Ltd. Prepare the cash flow Statement:

Balance Sheet of Mohan Ltd.

as at 31 Mar. 2016 and 31 Mar. 2017

 

Particulars

Note No. March 31, 2017

(Rs)

March 31, 2016

(Rs)

I) Equity and Liabilities 1    
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 80,000 1,00,000
3. Current liabilities    
Trade payables   1,20,000 1,40,000
Short-term provisions 2
Total   7,70,000 6,60,000
II) Assets      
1. Non-current assets      
a) Fixed assets 3 5,00,000 3,20,000
2. Current assets      
a) Inventories   1,50,000 1,30,000
b) Trade receivables 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 account

  2017 2016
1. Long-term borrowings    
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 Rs. 80,000 on which accumulated depreciation was Rs. 50,000 was sold for Rs. 20,000.

Answer:

Cash Flow Statement of Mohan Ltd.
Particulars Amount Amount
Rs Rs
A. Cash flow from Operating Activities
Profit as per the Balance Sheet 40000
Proposed Dividend 70000
Net Profit before Extraordinary Items 110000
Adjustments:
Depreciation 70000
Loss on Sale of Machine 10000 80000
Operating Profit before Working Capital changes 190000
Less: Increase in Current Assets
Inventories -20000
Bill Receivables -10000
Add: Decrease in Current Assets
Debtors 40000
Less: Decrease in Current Liabilities
Trade Payable -20000 -10000
Net Cash from Operations 180000
B. Cash Flow from Investing Activities
Proceeds from Sale of Fixed Assets 20000
Purchase of Fixed Assets -280000
Net Cash Outflow from Investing Activity -260000
C. Cash Flow from Financing Activities
Issue of Shares 100000
Bank Loan paid -20000
Dividend paid -60000
Net Cash from Financing Activities 20000
D. Net Decrease in Cash and Cash Equivalents (A+B+C) -60000
Add: Cash and Cash Equivalents in the beginning 90000
E. Cash and Cash Equivalents at the end 30000
Fixed Assets A/c
Date Particular Amount Date Particular Amount
Balance b/d 400000 Bank 20000
Bank (Purchase)

(B.F.)

280000 P/L 10000
Accumulated Dep. 50000
Balance c/d 600000
680000 680000
Accumulated Depreciation A/c
Date Particular Amount Date Particular Amount
Fixed Assets 50000 Balance b/d 80000
Balance c/d 100000 P/L (B.F.) 70000
150000 150000

Question 20: From the following Balance Sheets of Tiger Super Steel Ltd., prepare Cash Flow Statement:

Balance Sheet of Tiger Super Steel Ltd. as on 31 Mar. 2016 and 31 Mar. 2017

Particulars Note No. March

31, 2017 (Rs)

March

31, 2016 (Rs)

I) Equity and Liabilities      
1. Shareholders’ Funds      
a) Share capital 1 1,40,000 2,00,000
b) Reserves and surplus 2 38,400 26,400
2. Current Liabilities      
a) Trade payables 3 21,200 14,000
b) Other current liabilities 4 2,400 3,200
c) Short-term provisions 5 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   14,000 4,000
2. Current assets      
a) Inventories 31,200 34,000
b) Trade receivables 43,200 30,000
c) Cash and cash equivalents 11,200 6,800
Total 2,14,800 1,74,800
     

Notes 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

12800 11200
Provision for taxation
Proposed dividend
6. Tangible assets    
Land and building 20,000 40,000
Plant 76,400 36,000
  96,400 76,000
     

Answer:

Cash Flow Statement of Tiger Super Steels Ltd.
Particulars Amount Amount
Rs Rs
A. Cash flow from Operating Activities
Profit as per the Balance Sheet 3600
General Reserve 4000
Proposed Dividend 15600
Provision for Taxation 12800
Net Profit before Taxation and Extraordinary 36000
Items to be added:
Depreciation on Land and Building 20000
Depreciation on Plant 10000
Goodwill written off 5200 35200
Operating Profit before Working Capital changes 71200
Less: Increase in Current Assets
Trade Receivables -13200
Less: Decrease in Current Liabilities
O/s Expenses -800
Add: Decrease in Current Assets
Inventories 2800
Add: Increase in Current Liabilities
Bills Payables 7200 -4000
Cash generated from Operating Activities 67200
Less: Income Tax paid -11200
Net Cash from Operating Activities 56000
B. Cash Flow from Investing Activities
Purchase of Plant -40400
Purchase of Investment -20000
Net Cash Used in Investing Activities -60400
C. Cash Flow from Financing Activities
Issue of Equity Shares 40000
Dividend paid -11200
Redemption of 10% Preference Shares -20000
Net Cash from Financing Activities 8800
D. Net Increase in Cash and Cash Equivalents (A+B+C) 4400
Add: Cash and Cash Equivalents at the beginning 6800
E. Cash and Cash Equivalents at the end 11200

Working Note: 1.

Plant A/c
Date Particular Amount Date Particular Amount
Balance b/d 36000 Depreciation 10000
Bank (Purchase) (B.F.) 50400 Balance c/d 76400
86400 86400

2.

Net Profit Before Tax 3600
Profit and Loss Account 12800
Provision for Tax 16400

Question 21: From the following information, prepare cash flow statement:

 

Particulars

Note No. 31st March

2015 (Rs)

31st March

2014 (Rs)

I) Equity and Liabilities      
1. Shareholders’ Funds    
a) Share capital 7,00,000 5,00,000
b) Reserves and surplus 4,70,000 2,50,000
2. Non-current Liabilities    
(8% Debentures) 4,00,000 6,00,000
3. Current Liabilities    
a) Trade payables 9,00,000 6,00,000
Total 24,70,000 19,50,000
II) Assets    
1. Non-current assets      
a) Fixed assets    
i) Tangible 7,00,000 5,00,000
ii) Intangible-Goodwill 1,70,000 2,50,000
2. Current assets    
a) Inventories 6,00,000 5,00,000
b) Trade Receivables 6,00,000 4,00,000
c) Cash and cash

equivalents

4,00,000 3,00,000
Total 24,70,000 19,50,000
     

Additional Information:

Depreciation Charge on Plant amounts to Rs. 80,000.

Answer:

Cash Flow Statement for the year ending March 31, 2015
Particulars Amount Amount
Rs Rs
A. Cash flow from Operating Activities
Net Profit 220000
Items to be added:
Interest on Debentures 48000
Depreciation on Fixed Assets 80000
Goodwill written off 80000 208000
Operating Profit before Working Capital changes 428000
Add: Increase in Current Liabilities
Creditors 300000
Less: Increase in Current Assets
Inventories -100000
Trade Receivables -200000
Cash generated from Operating Activities 428000
Less: Income Tax paid
Net Cash from Operating Activities 428000
B. Cash Flow from Investing Activities
Purchase of Fixed Assets -280000
Net Cash Used in Investing Activities -280000
C. Cash Flow from Financing Activities
Issue of Share Capital 200000
Redemption of Debentures -200000
Interest paid on Debentures -48000
Net Cash from Financing Activities -48000
D. Net Increase in Cash and Cash Equivalents (A+B+C) 100000
Add: Cash and Cash Equivalents in the beginning 300000
E. Cash and Cash Equivalents at the end 400000

Working Note:

Fixed Assets A/c
Date Particular Amount Date Particular Amount
Balance b/d 500000 Depreciation 80000
Purchase (b/f) 280000 Balance c/d 700000
780000 780000

Question 22: From the following Balance Sheet of Yogeta Ltd., prepare cash flow statement:

 

Particulars

Note No. 31st March

2017 (Rs)

31st March

2016 (Rs)

I) Equity and Liabilities      
1. Shareholders’ Funds      
a) Share capital 1 4,00,000 2,00,000
b) Reserves and surplus-

Surplus

  2,00,000 1,00,000
2. Non-current Liabilities      
a) Long-term borrowings 2 1,50,000 2,20,000
3. Current Liabilities      
a) Short-term borrowings   1,00,000
(Bank overdraft)      
b) Trade payables   70,000 50,000
c) Short-term provision   50,000 30,000
(Provision for taxation)      
Total   9,70,000 6,00,000
II) Assets      
1. Non-current assets      
a) Fixed assets      
i) Tangible   7,00,000 4,00,000
2. Current assets      
a) Inventories   1,70,000 1,00,000
b) Trade Receivables   1,00,000 50,000
c) Cash and cash

equivalents

  50,000
Total   9,70,000 6,00,000
   

Notes to Accounts

Particulars 31st March 2017 (Rs) 31st March 2016 (Rs)
1. Share capital    
a) Equity share capital 3,00,000 2,00,000
b) Preference share capital 1,00,000
  4,00,000 2,00,000
2. Long term borrowings    
Long-term loan 2,00,000
Long-term Rahul 1,50,000 20,000
  1,50,000 2,20,000
     

Additional Information: Net Profit for the year after charging Rs. 50,000 as Depreciation was Rs. 1,50,000. Dividend paid on Share was Rs. 50,000, Tax Provision created during the year amounted to Rs. 60,000.

Answer:

Cash Flow Statement of Yogeta Ltd.
Particulars Amount Amount
Rs Rs
A. Cash flow from Operating Activities
Profit as per the Balance Sheet 100000
Proposed Dividend 50000
Provision for Taxation 60000
Net Profit before Taxation and Extraordinary 210000
Items to be added:
Depreciation 50000 50000
Operating Profit before Working Capital changes 260000
Add: Increase in Current Liabilities
Trade Payable 20000
Less: Increase in Current Assets
Inventories -70000
Trade Receivables -50000 -100000
Cash generated from Operating Activities 160000
Less: Income Tax paid -40000
Net Cash from Operating Activities 120000
B. Cash Flow from Investing Activities
Purchase of Fixed Assets -350000
Net Cash used in Investing Activities -350000
C. Cash Flow from Financing Activities
Issue of Equity Shares 100000
Issue of Preference Shares 100000
Loan from Rahul 130000
Less: Repayment of Loan -200000
Dividend paid -50000
Net Cash from Financing Activities 80000
D. Net Decrease in Cash and Cash Equivalents (A+B+C) -150000
Add: Cash and Cash Equivalents in the beginning 50000
E. Cash and Cash Equivalents at the end -100000

Working Note: 1

Provision for Taxation A/c
Date Particular Amount Date Particular Amount
Bank (B.F.) 40000 Balance b/d 30000
Balance c/d 50000 P/L 60000
90000 90000

2.

Fixed Assets A/c
Date Particular Amount Date Particular Amount
Balance b/d 400000 Depreciation 50000
Bank 350000 Balance c/d 700000
750000 750000

Question 23: Following is the Financial Statement of Garima Ltd., prepare cash flow statement.

Particulars Note No. 31st March 2017 (Rs) 31st March 2016 (Rs)
I) Equity and Liabilities      
1. Shareholders’ Funds      
a) Share capital 1 4,40,000 2,80,000
b) Reserve and surplus-

Surplus

2 40,000 28,000
2. Current Liabilities      
a) Trade payables   1,56,000 56,000
c) Short-term provisions   12,000 4,000
(Provision for taxation)      
Total   6,48,000 3,68,000
II) Assets      
1. Non-current assets      
a) Fixed assets      
i) Tangible   3,64,000 2,00,000
2. Current assets      
a) Inventories   1,60,000 60,000
b) Trade receivables   80,000 20,000
c) Cash and cash

equivalents

  28,000 80,000
d) Other current assets   16,000 8,000
Total   6,48,000 3,68,000
       

Notes to Accounts

Particulars 31st March 2017 (Rs) 31st March 2016 (Rs)
1. Share capital    
a) Equity share capital 3,00,000 2,00,000
b) Preference share capital 1,40,000 80,000
  4,40,000 2,80,000
2. Reserve and surplus    
Surplus in statement of profit

and loss at the beginning of the year

28,000
Add: Profit of the year 16,000
Less: Dividend 4,000
Profit at the end of the year 40,000  
     

Additional Information:

1. Interest paid on Debenture Rs 600

2. Dividend paid during the year Rs 4,000

3. Depreciation charged during the year Rs 32,000

Answer:

Cash Flow Statement (Indirect Method)
Particulars Amount Amount
Rs Rs
A. Cash flow from Operating Activities
Profit as per the Balance Sheet 12000
Proposed Dividend 4000
Provision for Taxation 12000
Net Profit before Taxation and Extraordinary 28000
Items to be added:
Interest paid on Debentures 600
Depreciation 32000 32600
Operating Profit before Working Capital changes 60600
Add: Increase in Current Liabilities
Trade Payables 100000
Less: Increase in Current Assets
Other Current Assets -8000
Inventories -100000
Trade Receivables -60000 -68000
Cash generated from Operating Activities -7400
Less: Income Tax paid -4000
Net Cash from Operating Activities -11400
B. Cash Flow from Investing Activities

Notes to Accounts

  Particulars 31st March 2017 (Rs) 31st March 2016 (Rs)
1. Reserve and surplus    
(i) Balance in the statement of

profit and loss

7000 6,000
(ii) General reserve 2,500 2,000
    9,500 8,000
2. Short-term borrowings    
  Bank Overdraft 6,800 12,500
3. Short-term provisions    
  (i) Provision for taxation 4,200 3,000
  (ii) Proposed dividend
4. Fixed Assets:    
  Fixed Assets 42,000 41,000
  Less: Accumulated

Depreciation

(15,000) (11,000)
    25,000 30,000
       

Additional Information:

Interest paid on Debenture Rs. 600

Answer:

Cash Flow Statement of Computer India Ltd.
Particulars Amount Amount
Rs Rs
A. Cash flow from Operating Activities
Profit as per the Balance Sheet 200
Proposed Dividend 5800
General Reserve 500
Provision for Taxation 4200
Net Profit before Taxation and Extraordinary 10700
Items to be added:
Provision for Depreciation 4000
Interest paid on Debentures 600 4600
Operating Profit before Working Capital changes 15300
Less: Increase in Current Assets
Trade Receivables -4000
Inventories -5000
Prepaid Expenses -200
Less: Decrease in Current Liabilities
Trade Creditors -1000 -10200
Cash generated from Operating Activities 5100
Less: Income Tax paid -3000
Net Cash from Operating Activities 2100
B. Cash Flow from Investing Activities
Sale of Fixed Assets 1000
Net Cash Used in Investing Activities 1000
C. Cash Flow from Financing Activities
Issue of Equity Shares 10000
Issue of 10% Debentures 500
Less: Dividend paid -5000
Less: Interest paid -600
Net Cash from Financing Activities 4900
D. Net Increase in Cash and Cash Equivalents (A+B+C)
Add: Cash and Cash Equivalents at the beginning
Cash
Bank Overdraft
E. Cash and Cash Equivalents at the end
Cash
Bank Overdraft

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