After studying this chapter, you will be able to understand
Meaning of Cash Flow and Cash Flow Statement
Uses of Cash Flow Statement
Limitations of Cash Flow Statement
Classification of Business Transactions into Operating Activities, Investing Activities, and Financing Activities According to Accounting Standard (AS)–3 (Revised)
Preparation of Cash Flow Statement as per AS–3 by Both Direct Method and Indirect Method.
Accounting Treatment of Special Items (Non-cash Expenses and Non-operating Income)
Various Stages Involved in the Preparation of Cash Flow Statement (Six Stages With Illustrations) in Accordance With AS–3 (Revised).
The end product of the accounting process is “Financial Statement.” Financial Statements are nothing but the summarised statements of accounting data produced at the end of the accounting process by a business entity. It communicates accounting information to its users. The Balance Sheet and Profit and Loss Account (Income Statement) are the traditional financial statements of any business entity. A Balance Sheet shows the financial position of a business enterprise on the last day of an accounting period. It is only a Statement of Assets and Liabilities stating the financial position of an enterprise at a given date. A Profit and Loss Account (Income Statement) shows the financial performance (i.e., profit or loss) of a business entity during the specified period (i.e., accounting period). But revenues recorded in Profit and Loss Account will not reflect cash inflows. Likewise, some of the expenses shown in Profit and Loss Account will be non-cash expenses (like depreciation amortisation) and some will not be paid in full like goods purchased, on credit, outstanding expenses. As such, the periods of profit or loss will not bear any direct relationship with cash flows relating to that specified accounting period. No exact information will be obtained from these two traditional financial statements with regard to investing or financing activities of business entities. Hence, the need arises to assess the inflows and outflows of cash during the accounting period. Keeping in view of this aspect, the Institute of Chartered Accountants of India (ICAI) introduced one more essential component of financial statements – known as Cash Flow Statement. As per AS–3 (revised), the preparation of cash flow statement as the third financial statement has become statutory for any companies registered under the Companies Act 1956. The other forms of business organisations also prepare this third financial statement, viz. Cash Flow Statement. This Cash Flow Statement has to be prepared to provide information about the cash flows associated with operating, investing and financing activities of business entities during accounting period. Cash Flow Statement to put it in a nutshell reflects “sources and uses of cash.” This statement reveals “where cash comes from and where it goes.” This chapter describes in detail on this financial statement.
1. Short-term Planning: It gives information for a specific period. It is useful in short-term planning of an enterprise.
2. Easy Analysis of Liquidity and Solvency: Periodical cash flow statements assist in ascertaining liquidity and solvency of a concern.
3. Cash Management: This provides information about cash – surplus or deficit, thereby resulting in an efficient cash management.
4. Prediction: This predicts about the soundness of financial status of a concern.
5. Cash Budget: Cash Flow Statement is useful in preparing cash budgets of an enterprise.
6. Cash Position: This not only ascertains the cash position but also explains the reasons for such cash position (lower or higher).
7. Management Decisions: This is useful in determining the urgeness of management decisions and thereby acting as a deterrent against incorrect decisions.
8. A Tool of Planning: All future investments may be effectively planned with the help of Cash Flow Statements.
9. Dividend Policy: This statement also helps an enterprise in planning a good dividend policy.
As per the syllabus, cash flow statements are to be prepared as per revised standard issued by ICAI. This revised standard is better known among professional accountants as AS–3 (revised).
This AS–3 requires a Cash Flow Statement to be prepared and presented in a manner that it shows cash flow from business transactions during a period classified as follows:
These classifications of business transactions as per AS–3 may be represented as follows for easy comprehension.
Note:
This is not a distinction or difference between cash inflow and cash outflow. This only facilitates easy comprehension and better remembrance of cash inflow and cash outflow for each of the activities classified.
Illustration: 1
From the following activities, classify them as (1) Operating Activities, (2) Investing Activities and (3) Financing Activities
Requirements
Solution
Financing Activities |
: |
Issue of debenture, buy back of shares, repayment of long-term loan (manufacturer concern) |
Operating Activities |
: |
Sale of investment, income tax paid, office expenses |
Investing Activities |
: |
Sale of machinery, sale of investment (financial concerns) and sale of patent |
Cash equivalents |
: |
Bank balance, investment in marketable securities (short term) |
AS–3 requires that the Cash Flow Statement should show separately the activities, viz.
Before preparation of cash flow statements, one should be familiar with the pro forma or format of Cash Flow Statement under two different methods – (i) Direct Method and (ii) Indirect Method.
These are the revised formats as issued by ICAI (revised) as per AS–3 (revised).
Particulars | Rs | Rs |
---|---|---|
Cash from Operating Activities |
|
|
A. Operating Cash Receipts |
|
|
(i) Cash Sales |
|
|
(ii) Cash Received from Customers |
– |
|
(iii) Trading Commission Received |
– |
|
(iv) Royalties Received |
– |
|
(v) Others |
– |
xxxx(A) |
B. Operating Cash Payments |
|
|
(i) Cash Purchases |
– |
|
(ii) Cash Paid to Suppliers |
– |
|
(iii) Cash Paid to Business Expenses (office expenses, manufacturing expense, selling expense) |
– |
|
(iv) Others |
– |
xxxx(B) |
C. Cash Generated from Operation (A−B) |
|
xxx |
D. Income Tax Paid |
|
xxx |
E. Cash Flow before Extraordinary Items |
|
xxxx |
F. Extraordinary items (Receipts/payments) |
|
xxxx |
G. Net Cash from Operating Activities |
± |
(–) |
2. Cash flow from Investing Activities (As in Indirect Method) |
|
xxxxx |
3. Cash Flow from Financing Activities (As in Indirect Method) |
|
xxxx |
4. Net Increase/Decrease in Cash and Cash Equivalents (as in Indirect Method) (1 + 2 + 3) |
|
xxxx |
5. Add Cash and Cash Equivalents |
|
xxxxx |
In the beginning of the year (same as in Indirect Method) |
|
|
6. Cash and Cash equivalent in the end of the year |
|
xxxxx |
Particulars | Rs | Rs |
---|---|---|
1. Cash Flow from Operating Activities |
|
xxx |
A. Net profit before taxation and extraordinary items |
|
|
B. Add: Items to be added |
|
|
• Depreciation |
– |
|
• Preliminary expenses written off |
– |
|
• Discount on issue of shares and debentures written off |
– |
|
• Goodwill written off |
– |
|
• Patents and Trade marks written off |
– |
|
• Interest on Borrowings and Debentures (Only for non-finance companies to be shown – under Financial Activities) |
– |
|
• Loss on Sale of Fixed Assets |
– |
xxx |
C. Less: Items to be Deducted |
|
|
• Interest Income (only for non-finance companies to be shown under Investment Activities) |
– |
|
• Dividend Income (for non-finance companies to be shown under investment activities) |
– |
|
• Rental Income |
– |
|
• Profit on Sale of Fixed Assets (to be shown under Investment Activities – Sale Price) Operating Profit before Working Capital Charges Operating Profi t before working capital charges |
– |
xxx |
D. Operating Profit before Working Capital Changes (A + B – C) |
– |
|
E. Add: Decrease in Current Assets and Increase in Current Liabilities Detail: |
||
• Decrease in Stock/inventories |
– |
|
• Decrease in Debtors/B/R |
– |
|
• Decrease in Accrued Incomes |
– |
|
• Decrease in Prepaid Expenses |
– |
|
• Increase in Creditors/B/P |
– |
|
• Increase in Outstanding Expenses |
– |
|
• Increase in Advanced Income |
– |
|
• Increase in Provision for Doubtful Debt |
– |
x-x |
F. Less: Increase in Current Assets and Decrease in Current Liabilities |
||
• Increase in Stock/inventories |
||
• Increase in Debtors/B/R |
– |
|
• Increase in Accrued Incomes |
– |
|
• Increase in Prepaid Expenses |
– |
|
• Decrease in Creditors/B/P |
– |
|
• Decrease in Outstanding Expenses |
– |
|
• Decrease in Advanced Income |
– |
|
• Decrease in Provision for Doubtful Debt |
– |
|
|
– |
– |
G. Cash Generated from Operations (D + E – F) |
xxx |
|
H. Less: Income Tax Paid |
– |
|
I. Cash flow before extraordinary items, extraordinary items (±) |
* * * |
|
J. Net Cash from (or used in) Operating Activities |
xxx |
|
2. Cash Flow from Investing Activities |
||
• Proceeds from Sale of Fixed Assets |
– |
|
• Proceeds from Sale of Investments |
– |
|
• Proceeds from Sale of Intangible Assets |
– |
|
• Interest and Dividend Received (for non-finance companies only) |
– |
|
• Rent Income |
– |
|
• Purchase of Fixed Assets |
– |
|
• Purchase of Investments |
– |
|
• Purchase of Intangible Assets, e.g. Goodwill |
– |
|
• Extraordinary Items (± or) |
– |
|
Net Cash from (used in Investing Activities) |
___ |
|
3. Cash Flow from Financing Activities |
xxx |
|
• Proceeds from Issue of Shares and Debentures |
– |
|
• Proceeds from other Long-Term Borrowings |
– |
|
• Final Dividend paid |
– |
|
• Interim Dividend paid |
– |
|
• Interest on Loans and Debentures |
– |
|
• Repayment of Loans |
– |
|
• Redemption of Debentures/pret |
– |
|
• Extraordinary Items ( + or −) |
– |
|
Net Cash from (or used in) Financing Activities |
– |
|
|
– |
|
4. Net Increase/Decrease in Cash and Cash Equivalents (1 + 2 + 3) |
xxx |
|
5. Cash and Cash Equivalents in the beginning of the year |
||
• Cash in Hand |
– |
|
• Cash at Bank (less: O/D) |
– |
____ |
• Short-Term Deposits |
– |
xxx |
• Marketable Securities |
– |
– |
6. Cash and Cash Equivalents at the end of the year |
||
• Cash in Hand |
||
• Cash at Bank (less: O/D) |
||
• Short-Term Deposits |
||
• Marketable Securities |
Illustration: 2
You are required to calculate cash inflow from debtors from the following data.
Particulars | Rs |
---|---|
Opening Balance |
5,00,000 |
Cash Sales |
2,00,000 |
Opening Debtors |
50,000 |
Closing Debtors |
80,000 |
Sales Returns |
20,000 |
Solution: Cash inflow from debtors has to be computed. This can be prepared by two methods.
Method 1: Cash Inflow from Debtors: First the format has to be drawn. Then transfer the items as follows:
Cash Inflow from Debtors
Particulars | Rs | |
---|---|---|
Opening Balance |
Rs |
50,000 |
ADD Credit Sales: Total Sales |
5,00,000 |
|
Less: Cash Sales |
2,00,000 |
3,00,000 |
Closing Balance of Debtors |
3,50,000 |
|
Cash inflow from Debtors |
||
Less: |
||
Sales Returns |
20,000 |
|
Closing Balance of Debtors |
80,000 |
1,00,000 |
Cash Inflow from Debtors |
2,50,000 |
Step A: |
Opening Debtors has to be taken as base (given in the question) |
Step B: |
With this Credit Sales (Total Sale − Cash Sale) is ADDED |
Step C: |
Then, Sales Returns and Closing Balance of Debtors to be deducted |
Step D: |
The result shows Cash Infl ow from Debtors |
Method 2
Total Debtors Account
Total Debtors Account (ledger) is computed, as above.
Note
Illustration: 3
From the following calculate cash inflow from debtors
Particulars | Rs |
---|---|
Opening Debtors |
20,000 |
Closing Debtors |
40,000 |
Opening Bills Receivables |
15,000 |
Closing Bills Receivables |
25,000 |
Total Sales |
3,00,000 |
Cash Sales |
25% of credit sales |
Discount Allowed |
10,000 |
Bad Debts |
15,000 |
Discount Allowed |
20,000 |
Sales Returns |
35,000 |
Solution: First value of credit sales is to be calculated irrespective of the method to be adopted.
Let Credit Sales be taken as |
= |
X |
Cash Sales |
= |
25% of X |
|
= |
X/5 |
Method 1: Cash Inflow from Debtors
Particulars | Rs | |
---|---|---|
Opening Debtors | 20,000 |
|
Opening Bills Receivable | 15,000 |
|
*1Add: Credit Sales (worked out above) | Rs |
2,50,000 |
Less: Discount Allowed | (10,000) |
2,85,000 |
Bad Debts | (15,000) |
|
Sales Returns | (35,000) |
|
Closing Debtors | (40,000) |
|
Closing Bills Receivables | (25,000) |
|
1,25,000 |
||
1,60,000*2 |
Total Debtors Account
Bills Receivables
Method 2: Cash Inflow from Trading Commission
Illustration:4
Calculate the amount of trading commission received during the year 2006 from the following data.
|
Jan 2006 |
Dec 31, 2006 |
Accrued Trading Commission |
10,000 |
45,000 |
Advance Trading Commission |
15,000 |
60,000 |
Trading Commission earned during the year 2006 is Rs 1,70,000 |
Solution: Trading Commission received can also be computed in two different ways (1) Statement Form and (2) Account Form.
1. Statement Form
Particulars | Rs | Rs |
---|---|---|
Trading Commission earning during 2006 |
1,70,000 |
|
Add: 1. Accrued Trading Commission as on Jan 1, 2006 |
10,000 |
|
2. Advance Trading Commission as on Dec 31, 2006 |
60,000 |
70,000 |
|
2,40,000 |
|
Less: 1. Accrued Trading Commission as on Dec 31, 2006 |
15,000 |
|
2. Advance Trading Commission as on Jan 1, 2006 |
45,000 |
60,000 |
Total Commission earned during 2006 |
1,80,000 |
2. Account Form Trading Commission Account
Purchases include both cash and credit purchases.
|
+ ■ Credit Purchases + |
|
|
+ ■ Opening Creditors + |
Items to be added |
|
+ ■ Opening Bills Payable |
|
|
− ■ Closing Creditors |
|
|
− ■ Closing Bills Payable |
|
|
− ■ Discount Received |
Items to be deducted |
|
− ■ Purchase Returns |
|
This can also be calculated by preparing Total Creditors Account. [The balancing figure and bills payable can be inserted in the A/c by preparing Bills Payable A/c (balancing fig).]
Illustration: 5
Calculate cash outflow to creditors from the following:
Total Purchases |
: |
Rs 1,80,000 |
Cash Purchases |
: |
50% of credit purchases |
Opening Creditors |
: |
Rs 5,000 |
Closing Creditors |
: |
Rs 20,000 |
Purchase Returns |
: |
Rs 25,000 |
Discount (Received) |
: |
Rs 10,000 |
Solution
First, we have to calculate credit purchase. Credit purchase is not given in the problem. So, let us assume,
Credit purchases = Rs x.
Cash purchase is given as 50% of credit purchase
So, Cash purchase = x/2
Total purchases = Cash purchase + Credit purchase
Method 1: Calculation of Cash Outflow to Creditors
Particulars | Rs | |
---|---|---|
Opening Balance of Creditors |
5,000 |
|
Add: Credit Purchases |
1,20,000 |
|
Less: |
Rs |
|
(i) Closing Balance of Creditors |
(20,000) |
|
(ii) Discount Received |
(10,000) |
|
(iii) Purchase Returns |
(25,000) |
55,000 |
Cash Outfl ow to Creditors |
70,000 |
Method 2:
Total Creditors Account
(Note: Balancing figure = Rs 1,25,000 – 55,000) = Rs 70,000
Illustration: 6
Complete cash outflow to creditors from the following:
|
|
Rs |
|
Cost of Goods Sold |
3,00,000 |
|
Operating Stock |
5,000 |
|
Closing Stock |
15,000 |
|
25,000 |
|
|
Return Outwards |
10,000 |
|
Discount Received |
15,000 |
|
Opening Bills Payable A/c |
40,000 |
|
Closing Bills Payable A/c |
50,000 |
|
Closing Balance of Creditors |
40,000 |
|
Cash Purchases |
60,000 |
Solution: Credit purchases will have to be calculated first. For this, from the figures, total purchases are calculated.
Total Purchases = Cost of Sales (Cost of Goods Sold) + Closing Stock − Opening Stock
Students should note that cost of sales and cost of goods sold are one and the same
= Rs 3,00,000 + 15,000 – 5,000 = Rs 3,10,000
Then, Credit Purchases = Total Purchases – Cash Purchases
|
= |
Rs 3,10,000 ‒ Rs 60,000 |
|
= |
Rs 2,50,000 |
Method 1: Cash Outflow to Creditors Account
Particulars | Rs | |
---|---|---|
Opening Balance of Creditors A/c |
25,000 |
|
Opening Balance of Bills Payable A/c |
40,000 |
|
Add: Credit Purchases |
2,50,000 |
|
Less: |
Rs |
3,15,000 |
1. Discount Received |
15,000 |
|
2. Returns Outwards |
10,000 |
|
3. Closing Balance of Creditors |
40,000 |
|
4. Closing Balance of Bills Payable |
50,000 |
1,15,000 |
Cash Outfl ow to Creditors |
2,00,000 |
Method 2
Total Creditors Account
Bills Payable A/c
To find out cash outflow, the amount of expenses (given in P & L A/c) has to be adjusted.
Step 1: | For this * (i) amount outstanding in the beginning and (ii) prepaid at the end to be added with expenses (given in P & L A/c). |
Step 2: | (i) Amount outstanding in the end and (ii) prepaid at the beginning have to be deducted from P & L A/c. |
Step 3: | Net figure arrived will be cash paid for expenses. |
Note 1: | All non-cash expenses have to be ignored because no cash payment is involved (i.e., cash flow does not take place). |
Treatment of non-cash expenses: Such expenses are as follows:
Note 2: All appropriations: To be ignored: Outflow of cash does not occur
Appropriations:
Note 3: All items relating to investing activities and financing activities are ignored because they are taken into calculation of cash flow from investing or financing activities. For example, profit/loss on sale of fixed assets.
Illustration: 7
Compute Cash Outflow on Business Expenses from the following (taken from P & L A/c)
|
|
Rs |
|
Expenses occurred during the year 2006 |
25,000 |
|
Opening Outstanding Expenses |
3,000 |
|
Closing Outstanding Expenses |
5,000 |
|
Opening Prepaid Expenses |
4,000 |
|
Closing Prepaid Expenses |
2,500 |
Solution
Method I: Cash Outflow on Business Expenses
Particulars | Rs | Rs |
---|---|---|
Expenses incurred during the year |
25,000 |
|
Add: Opening Outstanding Expenses Closing Prepaid Expenses |
3000 |
|
Less: Closing Outstanding Expenses Opening Prepaid Expenses |
2500 |
5,500 |
|
30,500 |
|
Less: Closing Outstanding Expenses |
5000 |
|
Opening Prepaid Expenses |
4000 |
9,000 |
Cash Outflow on Expenses |
21,500 |
Method II
Expenses Account
Calculation of Cash from Operating Activities (Direct Method)
Illustration: 8
Direct Method illustrated:
Calculate cash flow from the following data by Direct Method.
|
|
Rs |
|
Cash Sales |
6,00,000 |
|
Cash Purchases |
3,00,000 |
|
Royalties Received |
25,000 |
|
Commission Paid |
15,000 |
|
Rent Paid |
12,000 |
|
Tax Paid |
33,000 |
|
Tax Refund Received |
13,000 |
|
Cash Received from Debtors |
15,000 |
|
Cash Paid to Creditors |
5,000 |
|
Wages and Salaries Paid |
30,000 |
|
Manufacturing Expenses Paid |
10,000 |
|
Office Expenses Paid |
8,000 |
|
Insurance Claim for Tsunami Loss |
35,000 |
Solution
Cash flow from Operating Activities
Particulars | Rs | |
---|---|---|
A. Operating Cash Receipts |
|
|
Cash Sales |
|
6,00,000 |
Cash Received from Debtors |
|
15,000 |
Royalties Received |
|
25,000 |
|
|
6,40,000 |
B. Operating Cash Payments |
Rs |
|
Cash Paid to Creditors |
5,000 |
|
Cash Purchases |
3,00,000 |
|
Commission Paid |
15,000 |
|
Rent Paid |
12,000 |
|
Wages and Salaries |
30,000 |
|
Manufacturing Expenses |
10,000 |
|
Office Expenses |
8,000 |
3,80,000 |
C. Cash From Operations Before Tax |
Rs |
2,60,000 |
D. Income Tax Paid |
33,000 |
|
Less: Refund Received |
13,000 |
20,000 |
E. Cash Flow from Operations before Extraordinary Items |
|
2,40,000 |
F. Extraordinary Items: Insurance Claim for Tsunami |
|
35,000 |
G. Net Cash Flow From Operating Activities |
|
2,05,000 |
Cash Flow from Operating Activities (Indirect Method)
So far, we have discussed the calculation of cash flow (Operating Activities) by Direct Method, stage by stage. Now we have to discuss this by the following Indirect Method.
One has to make adjustments on net profit arrived as in P & L Account.
To put in a nutshell, the net operating profit before working capital charges has to be adjusted as:
Items to be added
Items that lead to increase in cash have to be added.
They are as follows:
Items to be deducted
Items that lead to decrease in cash have to be deducted.
They are as follows:
Illustration: 9
Calculate Cash Flow from Operating Activities from the Following P & L A/c by Indirect Method
Solution: First, net profit before tax has to be calculated
|
Adjustment |
Net profit as per P & L A/c |
Rs 15,000 |
|
Items to be added: |
1. Proposed Dividend |
Rs 10,000 |
|
|
2. Provision for Tax |
Rs 5,000 |
|
|
|
30,000 |
|
Items to be deducted: |
1. Refund of Tax |
Rs 3,000 |
|
|
2. Net Profit before Tax |
Rs 27,000 |
|
|
|
30,000 |
Now we have to compute cash flow.
Cash Flow from Operating Activities
Particulars | Rs | |
---|---|---|
Net Profit Before Tax |
|
27,000 |
Adjustments |
Rs |
|
Add: Depreciation |
3,000 |
|
Goodwill Written off |
5,000 |
|
Loss on Sale of Machinery |
2,000 |
10,000 |
|
|
37,000 |
Less: Profit on Sale of Building |
|
12,000 |
Operating Profit before Working Capital Charges |
|
25,000 |
I.T. Refund Received |
|
3,000 |
Net Cash flow from Operating Activities |
|
28,000 |
Illustration: 10
The following is the position of Current Assets and Current Liabilities of a Company
Particulars | 1.1.2009 Rs | 31.12.2009 Rs |
---|---|---|
|
Rs |
|
Provision for Bad Debts |
5,000 |
– |
Short-Term Loan |
20,000 |
30,000 |
Creditors |
25,000 |
20,000 |
Bills Receivable |
30,000 |
50,000 |
The company incurred a loss of Rs 70,000 during the year 2009. Calculate cash flows from operating activities by Indirect Method.
Solution
Calculation of cash flow from Operating Activities: Indirect Method
Particulars | Rs | |
---|---|---|
Loss During 2009 |
|
–70,000 |
Adjustments |
|
|
(a) Increase in Current Assets |
Rs |
|
Bills Receivable |
(20,000) |
|
(b) Decrease in Current Liabilities Creditors |
(5,000) |
|
Provision for Bad Debts |
(5,000) |
|
|
|
–30,000 |
Cash used in Operating Activities |
|
(–1,00,000) |
Negative Cash from Operations Illustrated:
For sale and purchase of (non-current) fixed assets (as per revised standard)
There are two methods for this:
Treatment of (non-current) fixed assets – on original basis and – on W.D.V. basis.
Illustration: 11
Compute Cash Flow from Operating Activities by Indirect Method
Particulars | Opening Balance Rs |
Closing Balance Rs |
---|---|---|
P & L Account |
45,000 |
55,000 |
General Reserve |
25,000 |
30,000 |
Provision for Depreciation on Plant |
40,000 |
45,000 |
Outstanding Expenses |
5,000 |
2,000 |
Goodwill |
25,000 |
15,000 |
Sundry Debtors |
60,000 |
50,000 |
An item of plant costing Rs 50,000 having book value of Rs 40,000 was sold for Rs 45,000 during the year.
Solution
Step 1: First, net profit before tax is to be calculated
Net profit for the year |
|
Difference between opening and closing balances in the problem (i.e. Rs 55,000 − Rs 45,000) |
Rs 10,000 |
Adjustment |
|
Add General Reserve (Difference Rs 30,000 − 25,000) |
Rs 5,000 |
Net Profit before Tax |
Rs 15,000 |
Step 2: Next,
Treatment of Plant A/c
= Rs 45,000 – 40,000 = Rs 5,000
Plant Account
Step 3
Treatment of Provision for Depreciation
Provision for Depreciation on Plant Account
Step 4
Finally, now computation of cash flow from operating activities has to be worked out as follows:
Calculation of Cash Flows from Operating Activities
Particulars | Rs |
---|---|
Net Profit Before Tax |
15,000 |
Adjustments |
|
Add: Non-cash expenses |
Particulars | Rs | |
---|---|---|
|
Rs |
|
Depreciation |
15,000 |
|
Goodwill written off |
10,000 |
25,000 |
|
|
40,000 |
Less: Non-cash incomes |
|
|
Profit on Sale of Plant |
|
(5,000) |
Operating Profit before Working Capital Charges |
|
35,000 |
Add: Decrease in Current Assets: Sundry Debtors Debtors |
|
10,000 |
|
|
45,000 |
Less: Decrease in Current Liabilities: Outstanding Expenses |
|
(3,000) |
Cash Flows from Operating Activities |
|
42,000 |
Illustration: 12
Calculate cash flows from Operating Activities from the following information
Particulars | 2008 (Rs) | 2009 (Rs) |
---|---|---|
Debtors |
42,000 |
46,000 |
Prepaid Expenses |
2,000 |
2,700 |
Accrued Income |
1,500 |
1,200 |
Income Revised in Advance |
800 |
1,000 |
Creditors |
26,000 |
29,000 |
Bills Payable |
13,000 |
11,000 |
Outstanding Expenses |
8,000 |
6,000 |
Profit made during 2009 amounted to Rs 1,00,000 after taking into account the following adjustments
Answer: Cash flow for Operating Activities
Particulars | Rs | |
---|---|---|
Profit for the Year |
|
1,00,000 |
Items to be added back to profit |
Rs |
|
Add: Depreciation |
2,900 |
|
Goodwill Amortised |
3,000 |
|
Loss on Sale of Machine |
900 |
6,800 |
|
|
1,06,800 |
Less. Profit on Sale of Investment |
(2,000) |
(2,000) |
Cash Generated from Operation before |
|
1,04,800 |
Working Capital Charges (operation profit) |
|
|
Add: Decrease in Current Assets and Increase |
|
|
in Current Liabilities |
300 |
|
Accrued Income |
200 |
|
Income Received in Advance |
|
Particulars | Rs | Rs |
---|---|---|
Creditors |
2,000 |
2,500 |
|
|
1,07,300 |
Less: Increase in Current Assets and Decrease in Current Liabilities: |
||
Debtors |
(4,000) |
|
Prepaid Expenses |
(200) |
|
Bills Payable |
(2,000) |
|
Outstanding Expenses |
(2,000) |
(8,700) |
Net Cash Flow from Operating Activities |
98,600 |
Illustration: 13
The net profit of a company before tax is Rs 12,50,000 as on Mar 31, 2009 after considering the following:
|
Rs |
Depreciation on Fixed Assets |
25,000 |
Goodwill Written off |
15,000 |
Loss on Sale of Machine |
12,000 |
The current assets and current liabilities on the beginning and at the end of the year were as follows:
Particulars | Mar 31, 2008 (Rs) | Mar 31, 2009 (Rs) |
---|---|---|
Bills Receivables |
25,000 |
15,000 |
Bills Payable |
10,000 |
12,500 |
Debtors |
30,000 |
38,800 |
Stock in Hand |
18,000 |
14,000 |
Outstanding Expenses |
8,000 |
7,000 |
Calculate cash flow from Operating Activities.
Answer: Students should once again remember the steps in preparing cash flow from Operating Activities:
Step 1: |
Net profit before tax is taken as the base. |
Step 2: |
Items to be added back to the net profit have to be written one by one and add with net profit. |
Step 3: |
This added value is “operating profit before working capital charges.” |
Step 4: |
With this the following items to be added: |
|
Decrease in the value of Current Assets |
|
Increase in the value of Current Liabilities |
Step 5: |
Then, the following items have to be deducted: |
|
Increase in the value of Current Assets |
|
Decrease in the value of Current Liabilities |
Step 6: |
Net result is “net cash flow from operating activities” |
Calculation of Cash Flow from Operating Activities
Particulars | Rs | |
---|---|---|
A. Net Profi t before Tax |
|
12,50,000 |
B. Add: (Items to be added back to Net Profit) |
Rs |
|
Depreciation on Fixed Assets |
25,000 |
|
Goodwill Written off |
15,000 |
|
Loss on Sale of Machine |
12,000 |
52,000 |
(A + B) C. Operating Profi t before Working Capital Charges (A + B) |
|
13,02,000 |
D. Add: (Decrease in Current Assets and Increase in Current Liabilities |
|
|
Decrease in Bills Receivables |
9,500 |
|
Decrease in Stock |
4,000 |
|
Increase in Bills Payable |
2,500 |
16,000 |
E. (Deduct) Less: (Increase in Current Assets and Decrease in Current Liabilities |
|
13,18,000 |
Increase in Debtors |
8,000 |
|
Decrease in Outstanding Expenses |
1,000 |
(9,000) |
(C + D − E) F. Net Cash Flow from Operating Activities (C + D − E) |
|
13,08,200 |
Payments (Cash Outflow)
Receipts (Cash Inflow)
5.6.1.1 Fixed Assets: There are two categories: (i) Fixed assets are shown at Written Down Value (W.D.V.). No additional information will be shown.
Illustration:14
A public limited company has plant and machinery whose written down value on Apr 1, 2009 was Rs 7,50,000 and on Mar 31, 2010 was Rs 9,00,000. Depreciation for the year was Rs 30,000. At the beginning of the year a part of the plant was sold for Rs 20,000 which had written down value of Rs 17,500. Calculate the net cash flow from investing activities.
Solution
Note: Fixed assets are shown at written down value
Stage 1: Purchasing amount has to be calculated. So Plant and Machinery A/c has to be opened
Plant and Machinery Account
* Cash payment to acquire plant and machinery is ascertained as Rs 1,97,500
Stage 2: Cash flow from Investing Activities
Particulars | Rs | Rs |
---|---|---|
Cash Payments to Acquire Plant and Machinery |
(1,97,500) |
|
Cash Receipts from Sale of Plant and Machinery (given in question) |
20,000 |
(1,77,500) |
Cash Flow from Investing Activities |
__________ (1,77,500) |
Second Category
5.6.1.2 Fixed Assets are shown: At cost and accumulated depreciation (separately maintained) or provision for depreciation
This can be explained with the help of the following illustration.
From the following information, calculate the cash flow from Investing Activities.
Particulars | Mar 31, 2008 (Rs) | Mar 31, 2009 (Rs) |
---|---|---|
Machinery (at cost) |
5,00,000 |
5,50,000 |
Accumulated Depreciation |
1,00,000 |
1,20,000 |
Patents |
3,00,000 |
1,90,000 |
Additional Information
Solution
to ascertain all the missing figures.
Step 1
|
Profit on sale of machinery is to be calculated. |
|
Profit on Sale of Machinery = Sale Price − Book Value |
|
= Rs 25,000 − (Cost − Accumulated Depreciation) |
|
= Rs 25,000 − (Rs 50,000 − Rs 30,000) |
|
= Rs 25,000 − (Rs 20,000) |
|
= Rs 5,000 |
This amount has to be debited to Machinery A/c as P & L A/c.
Step 2
Machinery Account
Step 3
Accumulated Depreciation Account
Step 4
Patents Account
Step 5
Cash Flow from Investing Activities
Particulars | Rs |
---|---|
Inflow from Sale of Machinery |
25,000 |
*1 Outflow on Purchase of Machinery |
(1,00,000) |
*3 Inflow from Sale of Patents |
80,000 |
Net Cash Flow from Investing Activities |
5,000 |
Illustration: 16
From the following particulars, calculate the cash flows from investing activities.
Purchases Rs | Sales Rs | |
---|---|---|
Investments |
3,00,000 |
2,00,000 |
Goodwill |
1,50,000 |
– |
Machinery |
6,50,000 |
2,10,000 |
Patents |
– |
1,00,000 |
Dividend received on shares held as investment Rs 30,000. Interest received on debentures held as investment Rs 40,000. A building purchased for investment purposes (out of surplus funds) was let out and rent proceeds received thereby Rs 1,20,000.
This is a different problem.
Cash Flow from Investing Activities
Particulars | Rs |
---|---|
Investments Purchased |
(3,00,000) |
Proceeds from Sale of Investments |
2,00,000 |
Goodwill Purchased |
(1,50,000) |
Machinery Purchased |
(6,50,000) |
Proceeds from Sale of Machinery |
2,10,000 |
Proceeds from Sale of Patents |
1,00,000 |
Interest Received on Debentures |
40,000 |
Dividend Received on Shares |
30,000 |
Rent Received |
1,20,000 |
Net Cash Flow from Investing Activities |
(4,00,000) |
Illustration:17
A company has investments at the beginning of the year Rs 40,000 and at the end of the year Rs 30,000. During the year the company had sold 50% of its investments held in the beginning of the year at a profit of Rs 10,000. Compute cash flow from Investing Activities.
Solution
Step 1: First, cost of sales is to be calculated at 50% of the investment held in the beginning.
With this, profit has to be added to arrive at cash inflow from sale of investment.
So Sale of Investment = Rs 20,000 + Rs 10,000 = Rs 30,000
Step 2: Next, investment account is to be prepared to compute outflow on purchase of investment (i.e., the balancing figure in this account)
Investment Account
Step 3
Calculation of Cash Flow from Investing Activities
Particulars | Rs | |
---|---|---|
Inflow from Sale of Investment |
Rs |
|
Cost of Investment Sold |
20,000 |
|
Add: Profit on Sale |
10,000 |
30,000 |
Less: Outflow on Purchase of Investment |
(10,000) |
|
Net Cash Flow from Investing Activities |
20,000 |
Illustration: 18
Calculate Cash Flow from Investing Activities
Particulars | Rs | |
---|---|---|
|
Rs |
|
Machinery (at Cost) |
6,00,000 |
6,25,000 |
Accumulated Depreciation |
1,10,000 |
1,25,000 |
During the year, one of the machines costing Rs 60,000 with accumulated depreciation for this machine Rs 35,000 was sold for Rs 30,000.
Solution
Step 1: |
Computation of profit on sale of fixed assets and book value of assets. |
Step 2: |
Book value is to be found out |
Step 3: |
Profit on sale of machinery |
Step 4: |
Then machinery account is to be prepared |
Machinery Account
Step 5: Accumulated Depreciation Account is to be prepared
Accumulated Depreciation Account
Step 6: Cash flow from investing activities is prepared
Cash Flow from Investing Activities
Particulars | Rs |
---|---|
Inflow from Sale of Machinery |
30,000 |
Outflow from Purchase of Machinery |
(85,000) |
(Balancing Figure in Machinery A/c) |
|
Net Cash Flow from Investing Activities |
(55,000) |
Activities that result in change in the size and composition of owners’ capital and borrowing of the enterprises are termed as financing activities.
Items included in financing activities are as follows:
Note
Illustration: 19
Calculate the cash flow from financing activities of a concern from the following information
Particulars | Mar 31, 2008 (Rs) | Mar 31, 2009 (Rs) |
---|---|---|
Equity Share Capital |
5,00,000 |
6,75,000 |
9% Debentures |
2,00,000 |
1,50,000 |
Securities Premium |
50,000 |
70,000 |
Additional Information: Interest paid on debentures = Rs 18,000
Solution
Note
Treatment of change in share capital and changes in debentures and redemption.
Calculation of Net Cash Flow from Financing Activities
Particulars | Rs | Rs |
---|---|---|
Cash Receipts from Issue of Shares |
1,75,000 |
|
Add: Proceeds from Premium |
20,000 |
1,95,000 |
Redemption of Debentures |
(50,000) |
|
Interest Paid on Debentures |
(18,000) |
(68,000) |
Net Cash Flow from Financing Activities |
1,27,000 |
Illustration: 20
A public limited company extends the following information. Calculate the net cash flow from Financing Activities.
Particulars | Rs | Rs |
---|---|---|
Equity Shares Capital |
20,00,000 |
30,00,000 |
12% Debentures |
1,00,000 |
– |
9% Debentures |
– |
3,00,000 |
Additional Information
Solution
Note
Treatment of new issue of debentures – Interest and Dividend Bonus share
So, care should be taken before ascertaining the cash flow from financing activities, whether that items form part of financing activities and whether it should be included or not.
Calculation of Net Cash Flow from Financing Activities
Particulars | Rs |
---|---|
Cash Proceeds from the Issue of 9% Debentures |
3,00,000 |
Payments on Redemption of 12% Debentures |
(1,00,000) |
Interest Paid on Debentures |
(12,000) |
Payment of Dividend |
(75,000) |
Net Cash Flow from Financing Activities |
1,13,000 |
This depends on
For non-financial concerns
↓
Investing activity
↓
–For financial enterprises;
↓
–Operating activity
–For non-financial enterprises:
↓
Interest paid → financing activity
Interest received → investing activity
These can be represented by the tabular column as follows:
To be added back to current year's profit to ascertain cash flow from Operating Activities.
To be treated as Financing Activity.
Illustration: 21
From the following information, calculate the cash flow from Investing Activities and Financing Activities.
Particulars | Apr 1, 2008 (Rs) | Mar 31, 2009 (Rs) |
---|---|---|
Furniture (at cost) |
25,000 |
35,000 |
Accumulated Depreciation on Furniture |
5,000 |
8,000 |
Capital |
2,00,000 |
2,75,000 |
Loan |
50,000 |
30,000 |
During the year 2008–2009, furniture costing Rs 7,000 was sold at a profit of Rs 2,500. Depreciation on furniture charged during the year amounted to Rs 6,000.
Solution
Step 1: First, cash flow from Financing Activities is to be computed as follows:
Cash Flow from Financing Activities
Particulars | Rs |
---|---|
Cash Inflow by Issue of Fresh Capital {i.e. Increase in Capital = Rs 2,75,000 – 2,00,000} |
75,000 |
Cash Outflow on Repayment of Loan {i.e. Loan Decreased: Rs 50,000 – 30,000} |
(20,000) |
Net Cash from Financing Activities |
|
|
55,000 |
Next, Furniture Account and Accumulated Depreciation Accounts have to be computed.
Sale Price |
= |
Cost – Accumulated Depreciation + Profit on Sale |
|
= |
Rs 7,000 − 3,000*2 + 2,500 = Rs 6,500* |
Step 2
Accumulated Depreciation Account
Step 3
Furniture Account
Step 4: Finally, cash flow from Investing Activities has to be ascertained.
Cash Flow from Investing Activities
Particulars | Rs |
---|---|
Cash Inflow by Sale of Furniture *1 |
6,500 |
Cash Outflow on Purchase of Furniture *3 |
(17,000) |
Net Cash Flow from Investing Activities |
(10,500) |
Note: Here, negative net cash flow indicates net cash used in Investing Activities.
Illustration: 22
An Extract from the Balance Sheets of ABC Ltd
You are required to prepare the cash flow statement for the year ended Mar 31, 2008.
Solution: Computation of Cash Flow Statement of ABC Ltd. for the year ended Mar 31, 2008.
Rs | Rs | |
---|---|---|
A. Cash Flow from Operating Activities |
||
Closing Balance as per P & L A/c |
10,00,000 |
|
Less: Opening Balance as per P & L A/c |
7,00,000 |
|
Net Profit |
3,00,000 |
|
Add: Proposed Dividend during the Year |
5,00,000 |
|
Net Cash from Operating Activities |
8,00,000 |
|
B. Cash Flow from Financing Activities |
||
Final Dividend paid, |
4,00,000 |
|
i.e. Proposed Dividend (previous year) Payable |
(70,000) |
3,30,000 |
Net Cash used in Financing Activities |
3,30,000 |
Proposed Dividend Account
Dividend Payable Account
Illustration: 23
Extract from the Balance Sheets of XY Ltd is as follows
Additional Information
The final dividend on preference shares and an interim dividend of Rs 60,000 on equity shares were paid on Mar 31, 2009. How these items will be recorded in the Cash Flow Statement?
Solution
Rs | Rs | |
---|---|---|
Cash Flow from Operating Activities |
||
Closing Balance as per P &L A/c |
5,50,00 |
|
Less: Opening Balance as per P & L A/c |
3,00,000 |
|
Net Profit |
2,50,000 |
|
Add: Proposed Dividend during the year 2008–2009 |
2,50,000 |
|
Dividend Paid on Preference Shares |
60,000 |
|
Interim Dividend Paid |
60,000 |
3,70,000 |
Net Cash from Operating Activities |
6,20,000 |
|
Cash Flow from Financing Activities |
||
Final Dividend paid on Equity Shares (Rs 1,75,000 – 55,000) |
(1,20,000) |
|
Final Dividend paid on Preference Shares |
(60,000) |
|
Interim Dividend paid on Equity Shares |
(60,000) |
|
Net Cash used in Financing Activities |
(2,40,000) |
Illustration: 24
Extract of the Balance Sheet of Renu Ltd is as follows
Solution
Step 1
Discount on Issue of Shares Account
Step 2
Discount on Issue of Debentures Account
Step 3
10% Debentures Account
Step 4
An Extract of Cash Flow Statement for the year ended Mar 31, 2009
Rs | |
---|---|
1. Cash Flow Operating Activities |
|
Closing Balance as per P & L A/c |
2,50,000 |
Less: Discount Balance as per P & L A/c |
(2,00,000) |
Add: Discount on Issue of Shares (from – *1) |
1,00,000 |
Interest on Debentures (Rs 15,00,000 × 10/100) |
1,50,000 |
Net Cash from Operating Activities |
3,00,000 |
2. Cash Flow from Financing Activities |
|
Proceeds from Issue of Debentures (from – *3) |
4,25,000 |
Interest paid on Debentures (Rs 1,50,000 – 25,0000) |
(1,25,000) |
(as calculated) (unpaid) |
|
Net Cash from Financing Activities |
3,00,000 |
Illustration: 25
An Extract of Balance Sheet of Verma Ltd. is as follows
Additional Information
Discount on the issue of debentures written off during the year 2008–2009 was Rs 25,000.
You are required to depict the related items in the Cash Flow Statement.
Solution
Step 1
Discount on Issue of Shares Account
Step 2
Discount on Issue of Debentures Account
Step 3
10% of Debentures Account
Step 4
An extract of cash flow statement for the year ended on Mar 31, 2009
Rs | |
---|---|
1. Closing Balance as per P & L A/c |
2,25,000 |
Less: Opening Balance as per P & L A/c |
(1,50,000) |
Add: Discount on Issue of Shares *1 |
70,000 |
Discount on Issue of Debentures *2 |
75,000 |
Interest on Debentures |
1,50,000 |
Net Cash from Operating Activities |
3.70,000 |
2. Cash Flow from Operating Activities |
|
Proceeds from Issue of Debentures |
4,25,000 |
Interest paid on Debentures |
(1,30,000) |
Net Cash from Financing Activities |
2,95,000 |
Illustration: 26
From the following information, prepare a Cash Flow Statement for the year ending on Mar 31, 2008.
Depreciation provided during the year 2007–2008 = Rs 10,000
[B. Com (Madras) – Modified]
Solution
Stage I: (A) Cash flow from Operating Activities has to be calculated first.
Step 1: For this profi t as per Balance Sheet has to be taken as base fi gure (Rs 60,000 − 50,000)
Step 3: Here, depreciation and goodwill
Important Step: SUM of (i), (ii) and (iii) = Operating profi t before working capital charges
Step 4: With this
↓ |
↓ |
(given) |
(given) |
↓ |
↓ |
(2007) |
(2008) |
Step 5: Result – Net Cash from Operating Activities
Stage II: (B) Cash flow from Investing Activities has to be calculated:
Here in this question, cash outflows occurs on (i) purchase of machine and (ii) building
Step 1: *Accrual cash flow – amount spent on purchase of machineries – is ascertained by separately preparing Machinery Account and the balancing figure from that account has to be transferred here.
Step 2: Purchase of Building
Rs 90,000 − 40,000
↓ |
↓ |
(2007) |
(2008) |
[These two items are recorded one by one]
Note: The values are written without brackets which means outflow of cash:
Stage III: (C) Cash flow from Financing Activities has to be computed
Step 1: Here, in the problem, cash fl ow or share capital (Rs 1,60,000 − 80,000) is recorded.
↓ |
↓ |
(2008) |
(2007) |
Stage IV: Net increase in cash and cash equivalents is to be computed as
Add |
= |
A (Stage 1) |
Less |
= |
B (Stage 2) |
Add |
= |
C (Stage 3) |
[(i.e.) A − B + C] shows as
↓
Net increase in cash and cash equivalents
Stage V: |
With this |
|
Add: Cash and cash equivalents at the beginning |
Stage VI: |
Finally, we arrive at |
|
Cash and cash equivalents at the end. |
|
These are represented into the format as shown below |
Cash Flow Statement
Calculation of cash flow statement as per AS–3.
A. Cash Flow Statement from Operating Activities
Rs | Rs | |
---|---|---|
Net Profit before Taxation |
||
Profit as per Balance Sheets |
10,000 |
|
(Rs.60,000 – 50,000) (Ref: Stage 1. Step 1) |
||
Add: General Reserve |
6,000 |
16,000 |
(Rs 10,000 – 4,000) (Ref: Stage 1. Step 2) |
||
Add: Adjustments |
||
Depreciation (from information) (from step iii) |
10,000 |
|
Goodwill (Rs 30,000 – 20,000) (step iii) |
10,000 |
20,000 |
Operating Profit before Working Capital Charges |
36,000 |
|
Add: Increased in Current Liabilities |
||
Bills Payable (Rs 25,000 – 15,000) (step 4a) |
10,000 |
|
Less: Increase in Current Assets |
46,000 |
|
Debtors (step 4b) |
5,000 |
|
Decrease in Current Liabilities (Creditors) (step 4b) |
2,000 |
(7,000) |
Net Cash from Investing Activities |
39,000 |
B. Cash Flow from Investing Activities
Rs | ||
---|---|---|
Purchase of Machine (transferred from Machinery A/c) (Step 1) |
(59,000) |
|
Purchase of Building (Rs 90,000 – 40,000) (Step 2) |
(50,000) |
|
Net Cash used in Investing Activities |
(1,09,000) |
C. Cash Flow from Financing Activities
Rs | |
---|---|
Issue of Share Capital (Stage 3 – Step 1) |
80,000 |
A − B + C Net Increase in Cash and Cash Equivalents (Stage IV) |
10,000 |
Cash and Cash Equivalents at the Beginning (Stage V) (given 2007) |
20,000 |
Cash and Cash Equivalents at the End (Stage VI) |
30,000 |
*Machinery A/c
Step 1: Net profit before tax is taken as base. Instead of showing separately the closing balances and opening balances of P & L A/c straight away, net profit (closing balance – opening balance) amount can be recorded and with this transfer the General Reserve is added
Step 2: Add:
Step 3: Figure arrived at this stage is termed as operating profit before working capital charges
Step 4: With this, the following items have to be added
Add:
Step 5: Less: following items have to be deducted
Step 6: Figure arrived at this stage is termed as Net Cash Flow from Operating Activities. Now we have to go to next stage.
Purchase of plant, machinery, land and buildings, etc. has to be recorded here.
Important Note: |
If depreciation amount is given in additional information, separate accounts (Plants A/c – Building A/c) have to be prepared to ascertain the value of their purchase which are cash flows from Investing Activities. |
(In this stage, such items as described above are to be recorded and the sum of all items to be shown within brackets, which means that due to investing activities cash outflow actually takes place).
Figure arrived is termed as Net Cash from Financing Activities.
Step 1: Issue of share capital to be recorded, etc.
Step 2: Less: If any redemption, such amount has to be recorded and deducted from Step 1.
Step 3: Figure arrived at this stage is termed as “Net Cash from Financing Activities”.
Note: |
This is a simplified form. One or two items only are shown. Students should practice with this first and then proceed to all the other items mentioned in the standardised format as prescribed by AS–3. |
Illustration: 27
The following is the financial position as on Mar 31
During the year Rs 60,000 was paid as dividend, you are required to prepare Cash Flow Statement as per AS–3 (revised)
Solution: |
First, net profit has to be calculated because all adjustments have to be carried on units net profit as base. |
|
Rs |
Profit as on Mar 31, 2009 |
1,60,000 |
Profit as on Mar 31, 2008 |
1,40,000 |
(Difference) Profit for the year |
20,000 |
Add: Dividend paid during the year |
60,000 |
and Net profit before Tax and Extraordinary Items |
80,000*1 |
Cash Flow Statement for the Year Mar 31, 2009
Particulars | Rs | Rs |
---|---|---|
A. Cash Flow from Operating Activities |
||
*1Net Profit before Tax and Extraordinary Items |
*1 80,000 |
|
(as calculated above) |
||
Add: Depreciation |
10,000 |
|
Operating Profit before Working Capital Charges |
90,000 |
|
Add: Decrease in Stock |
14,000 |
|
Increase in Current Liabilities |
20,000 |
|
Increase in Debtors |
(5,000) |
|
Net Cash from Operating Activities |
1,19,000 |
|
B. Cash Flow from Investing Activities |
||
Purchase of Building |
(20,000) |
|
Purchase of Land |
(20,000) |
|
Purchase of Machinery |
(30,000) |
|
Net Cash used in Investing Activities |
(70,000) |
|
C. Cash Flow from Financing Activities |
||
Proceeds of Loan from Ram Ltd. |
40,000 |
|
Repayment of Bank loan |
(30,000) |
|
Payment of Dividend |
(60,000) |
(50,000) |
Net Decrease in Cash and Cash Equivalents |
(1,000) |
|
Cash and Cash Equivalents at the Beginning |
12,000 |
|
Cash and Cash Equivalents at the End |
11,000 |
Notes:
Hint 1: Instead of profit/loss, capital alone may be given in the problem. In such cases, profit is arrived at as follows:
Treatment of Capital and Drawings
|
|
Rs |
|
Capital at the end of the period.:… |
xx |
|
Less: Capital at the beginning of the period |
xx |
|
Profit for the year |
xx |
Hint 2: In case, if capital at the beginning and at the end of the period is given, students have to prepare Capital Account, and the balancing figure is taken as “Drawings.”
Format Capital A/c
|
Calculation of Drawings : |
|
|
Opening Capital : |
……… |
|
Add: Net Profit : |
……… |
|
Less: Closing Profit : |
……… |
|
Drawings |
__________ |
This amount has to be included in cash flow from financing activities under “Drawings.”
Hint 3: Loss on sale of fixed assets is calculated as follows:
Loss on Sale of Fixed Assets: Cost – Selling Price
And if in case of any depreciation: Cost – Accumulated Depreciation – Selling Price
Hint 4: Provision for Taxation
Case 1: Item, “Provision for Taxation” appears on the liabilities side of previous year’s Balance Sheet.
Case 2: This item “Provision for Taxation” appears on the liabilities side of the currents year’s balance sheet.
Under cash flow from Operating Activities
Format Provision for Tax Account
Hint 5: Dividend paid during the year
Dividend Paid: Opening Balance of P & L + Net Profit – Closing Balance of P &L A/c.
Hint 6: If appropriate adjustments have to be made for both provision for tax and interim dividend to arrive at net profit before tax, then the following adjustments are to be made as
|
|
Rs |
|
Profit at the end of the period (Closing) |
– |
|
Less: Profit at the beginning (Opening) |
− |
|
Profit of the Year |
− |
|
Appropriations |
|
|
Add: 1. Interim Dividend paid |
– |
|
2. Provision for Tax |
− |
|
Profit Before Tax |
xx |
Illustration: 28
From the following information, prepare a Cash Flow Statement as on Mar 31, 2009.
Depreciation provided during the year on machine was Rs.10,000.
Solution
Cash Flow Statement
Illustration: 29
Comprehensive illustrations from 28 to 37
From the following Balance Sheet of Raja Ltd, prepare a Cash Flow Statement.
Depreciation charged on plant was Rs 10,000 and on building was Rs 60,000.
Solution: As depreciation is given in additional information, Plant A/c and Building A/c have to be prepared separately to ascertain the value of their purchase which are cash flow from Investing Activities.
Plant A/c
Building A/c
Cash Flow Statement for the year ended Dec 31, 2009
Net Profit before Taxation | Rs | Rs |
---|---|---|
Closing Balance of P & L A/c |
24,000 |
|
Add: Transfer of General Reserve |
15,000 |
|
|
39,000 |
|
Less: Opening Balance of P & L A/c |
15,000 |
24,000 |
Note: Instead of showing separately closing and opening balance adjustments, straight away net profit can be found as (Closing Balance – Opening Balance) as Rs 9,000 and with this transfer to General Reserve is added.
Rs | Rs | |
---|---|---|
A. Net Profit before Tax and Extraordinary Items |
|
|
Adjustments for |
10,000 |
|
Depreciation on Plant |
60,000 |
|
Depreciation on Building |
16,000 |
|
Goodwill written off |
|
86,000 |
Operation Profit before Working Capital Charges |
|
1,10,000 |
Adjustments for: |
|
|
Add: Increase in Creditors |
12,000 |
|
Less: Increase in Debtors |
(35,000) |
|
Increase in Stock |
(5,000) |
(28,500) |
Net Cash from Operating Activities |
|
81,500 |
B. Cash Flow from Investing Activities |
|
|
Purchase of Plant |
70,000 |
|
Purchase of Building |
40,000 |
|
Net Cash in Investing Activities |
|
(1,10,000) |
C. Cash Flow from Financing Activities |
|
|
Issue of Share Capital |
50,000 |
|
Redemption of 12% Preference Share Capital |
(25,000) |
|
Net Cash from Financing Activities |
|
25,000 |
|
(3,500) |
|
Cash and Cash Equivalents at the Beginning of the Year |
|
(12,5,00) |
Cash and Cash Equivalents at the End of the Year |
|
9,000 |
Illustration: 30
From the following Balance Sheet of Vivek Ltd., prepare Cash Flow Statement.
Depreciation charged on plant was Rs 30,000 and on building was Rs 50,000.
Solution
Cash Flow Statement for the Year Ended Dec 31, 2009
Illustration: 31
What is meant by Investing Activities? From the following particulars prepare cash flow from Investing Activities.
Purchased Rs | Sold Rs | |
---|---|---|
1. Machinery |
4,00,000 |
2,00,000 |
2. Investments |
2,00,000 |
3,00,000 |
3. Goodwill |
1,00,000 |
|
4. Patents |
– |
1,50,000 |
5. Interest received or debentures held as investments |
10,000 |
|
6. Dividend received on shares held as investments |
5,000 |
|
7. A plot of land was purchased out of surplus funds for investment purposes and was let out for commercial use and rent received |
20,000 |
Answer: The acquisition and disposal of long-term assets (not included in cash equivalents) is called Investing Activities.
Cash Flow from Investing Activities
Particulars | Rs |
---|---|
Purchase of Machinery |
(4,00,000) |
Proceeds from Sale of Machinery |
2,00,000 |
Purchase of Investments |
(2,00,000) |
Proceeds from Sale of Investments |
3,00,000 |
Purchase of Goodwill |
(1,00,000) |
Proceeds from Sale of Patents |
1,50,000 |
Interest Received |
10,000 |
Dividend Received |
5,000 |
Rent Received |
20,000 |
Net Cash used in Investing Activities |
(15,000) |
Note: Figures within brackets mean items, i.e. to be deducted. This comes to be Rs 4,00,000, Rs 2,00,000, Rs 1,00,000 = Rs 7,00,000.
This has to be deducted from (Rs 2,00,000 + Rs 3,00,000 + Rs 1,50,000 + Rs 10,000 + Rs 5,000 + Rs 20,000 = Rs 6,85,000. Again (Rs – 7,00,000 + Rs 6,85,000) = Net Result (– Rs 15,000). So cash is used. Cash flows out on Investing Activities.
Illustration: 32
Calculate cash flows from Operating Activities from the following information.
Calculate cash flows from Operating Activities from the following information.
Particulars | 2008 Rs | 2009 Rs |
---|---|---|
Stock |
60,000 |
50,000 |
Debtors |
25,000 |
23,000 |
Creditors |
32,000 |
28,000 |
Expenses Outstanding |
3,500 |
4,500 |
Bills Payable |
35,000 |
22,000 |
Accrued Income |
8,000 |
9,000 |
P & L A/c |
80,000 |
90,000 |
Calculation of Net Cash Flows from Operating Activities
Particulars | Rs | Rs |
---|---|---|
Profit for the Year (Closing – Opening) |
|
10,000 |
Decrease in Stock |
10,000 |
|
Decrease in Debtors |
2,000 |
|
Decrease in Creditors |
(4,000) |
|
Increase in Expenses Outstanding |
1,000 |
|
Increase in Accrued Income |
(1,000) |
|
Decrease in Bills Payable |
(13,000) |
(5,000) |
Net Cash Flow from Operating Activities |
|
5,000 |
Illustration: 33
From the following information prepare a Cash Flow Statement.
Rs | |
---|---|
Opening Cash Balance |
10,000 |
Closing Cash balance |
12,000 |
Decrease in Debtors |
5,000 |
Increase in Creditors |
7,000 |
Sale of Fixed Assets |
20,000 |
Redemption of Debtors |
50,000 |
Net Profit for the Year |
20,000 |
Cash Flow Statement for the Year Ended
Particulars | Rs | Rs |
---|---|---|
A. Cash Flow from Operating Activities |
||
Net Profit for the Year |
20,000 |
|
Add: Decrease in Debtors |
5,000 |
|
Increase in Creditors |
7,000 |
|
Net Cash from Operating Activities |
|
_______ |
B. Cash Flow from Investing Activities |
||
Sale of Fixed Assets |
20,000 |
|
Net Cash from Investing Activities |
|
_______ |
C. Cash Flow from Financing Activities |
||
Redemption of Debtors |
(50,000) |
|
Net Cash from Financing Activities |
|
(50,000) |
D. Net Increase in Cash and Cash Equivalents |
|
2,000 |
(A + B + C) (32,000 + 20,000 – 50,000) |
|
|
E. Cash and Cash Equivalents at the Beginning |
|
10,000 |
F. Cash and Cash Equivalents at the End of the Period |
|
12,000 |
Illustration: 34
Prepare a Cash Flow Statement on the basis of the information given in the Balance Sheet of P.S. Ltd.
Solution
Cash Flow Statement for the year ended 2009
Particulars | Rs | Rs |
---|---|---|
A. Cash Flow from Operating Activities |
|
|
Closing Balance of General Reserve |
70,000 |
|
Less: Operating Balance of General Reserve |
(50,000) |
|
Net Profit (before Tax and Extraordinary Items) |
|
20,000 |
(Note: Net profit is not disclosed in the balance sheet. Only General Reserve appears here) |
|
|
Add: Items to be added i |
|
|
Amortisation of Goodwill |
8,000 |
|
Investment on Long-term Loan (Debtors = 1,00,000 × 12/100 × 1) |
12,000 |
12,000 |
Operating Profi t before Working Capital Changes |
|
40,000 |
Add: Decrease in Current Assets and Increase in Current Liabilities: |
|
|
Increase in Creditors |
20,000 |
|
Increase in Bills Payable |
80,000 |
1,00,000 |
Less: Increase in Current Assets and Decrease in Current Liabilities: |
|
|
Decrease in Outstanding Expenses |
(5,000) |
|
Increase in Debtors |
(20,000) |
|
Increase in Stock |
(20,000) |
(45,000) |
Net Cash from Operating Activities |
|
95,000 |
B. Cash Flow from Investing Activities |
|
|
Purchase of Land and Building |
(80,000) |
|
Purchase of Machinery |
(30,000) |
(1,10,000) |
Net Cash used in Investing Activities |
|
(1,10,000) |
C. Cash Flow from Financing Activities |
|
|
Proceeds from Equity Shares | 50,000 |
|
Payment of Long Term (Debenture Redeemed) |
(20,000) |
|
Payment of Interest on Debtors |
(12,000) |
18,000 |
Net Cash from Financing Activities |
|
18,000 |
D. Net Increase in Cash and Cash Equivalents (A + B + C) |
|
3,000 |
(95,000 − 1,10,000 + 18,000) |
|
|
E. Cash and Cash Equivalents at the Beginning Cash in Hand |
|
15,000 |
F. Cash and Cash Equivalents at the End of the Period |
|
18,000 |
Illustration: 35
Prepare a cash flow statement of Bulbul Ltd. on the basis of the information given in the Balance Sheets.
Solution
Cash Flow Statement for the year ended Dec 31, 2009
Particulars | Rs | Rs |
---|---|---|
A. Net Profit before Tax and Extraordinary Items |
||
Closing Balance of General Reserve |
1,80,000 |
|
Less: Opening Balance of General Reserve |
(1,00,000) |
|
Net Profit before Tax |
|
80,000 |
Add: Items to be added |
|
|
Amortisation of Goodwill |
20,000 |
|
Invest on Debenture |
24,000 |
44,000 |
Operating Profit before Working Capital Changes |
|
1,24,000 |
Add: Decrease in Current Assets and Increase in Current Liabilities: |
|
|
Decrease in Stock |
1,20,000 |
|
Increase in Creditors |
20,000 |
|
Increase in Outstanding Expenses |
10,000 |
1,50,000 |
Less: Increase in Current Assets and Decrease in Current Liabilities |
|
2,74,000 |
Increase in Debtors |
(10,000) |
|
Decrease in Bills Payable |
(5,000) |
(15,000) |
Cash generated from Operation: |
|
2,59,000 |
Less Income Tax paid |
|
– |
Cash from Operating Activities |
|
2,59,000 |
B. Cash Flow from Investing Activities |
||
Purchase of Land |
(3,00,000) |
|
Purchase of Machinery |
(10,000) |
(3,10,000) |
Net Cash used in Investing Activities |
|
(3,10,000) |
C. Cash flows from Financing Activities |
||
Proceeds from Issue of Equity Shares |
1,00,000 |
|
Payment for Debentures (Redemption) |
(50,000) |
|
Payment of Interest on Debentures |
(24,000) |
26,000 |
Net Cash from Financing Activities |
|
26,000 |
D. Net Increase/Decrease in Cash and Cash Equivalents |
|
25,000 |
(A − B + C) (Rs 2,59,000 − 3,10,000 + 26,000) |
|
|
E. Cash and Cash Equivalents at the Beginning (Cash) |
|
10,000 |
F. Cash and Cash Equivalents at the End |
|
35,000 |
Illustration: 36
The following balances appeared in Plant A/c and Accumulated Depreciation A/c in the books of Bhart Ltd.
As on Mar 31, 2008 Rs | As on Mar 31, 2009 Rs | |
---|---|---|
Plant |
7,50,000 |
9,70,000 |
Accumulated Depreciation |
1,80,000 |
2,40,000 |
Additional Information: Plant costing Rs 1,45,000 accumulated depreciation thereon Rs 70,000 was sold for Rs 35,000. You are required to
Answer: Note:
I. Plant Account
II. Accumulated Depreciation Account
Cash: Cash constitutes cash on banks.
Cash Equivalents: Short term, highly liquid investments that are readily convertible into known amount of cash.
Cash Flow: Inflow and outflow of cash equivalents.
Cash flow statement: A statement that shows the flow of cash and cash equivalent during a period.
Accounting Standard: Issued by ICAI.
Operating Activities: Principle revenue producing activities of business enterprises that are not investing and financing activities.
Investing Activities: Activities that result in change in size and composition of the owners' capital.
Financing Activities: Activities that result in change in size and composition of the owners' capital.
Debenture: A debt security with a general claim against all assets.
Debtor: A person who owes money to another or a business enterprise that owes money to another.
Depreciation: The systematic allocation of cost of fixed assets.
Direct method: The method that calculates net cash provided by operating activities.
Indirect method: The method that adjusts accrual net income to reveal only cash receipts and outflows.
General Reserve: An estimate of unforeseen liability undistributed profit.
Toster G., Financial Statement Analysis, Prentice Hall, Englewood Cliffs, 1986.
Horngreen Sundem Elioot, Introduction to Financial Accounting, Pearson Education, New Delhi, 2005.
Helfert, E.H., Techniques of Financial Analysis, Inrwin, Homewood, 1997.
———, Compendium of Statements and Standards of Accounting, The Institute of Chartered Accountants of India, New Delhi.
I Choose the best answer
Answers
II State whether the following statements are True or False
Answers
1. True |
2. True |
3. False |
4. False |
5. False |
6. True |
7. True |
8. False |
9. True |
10. False |
11. False |
12. False |
13. False |
14. True |
15. True |
16. False |
17. True |
18. False |
19. False |
20. True |
21. True |
22. True |
23. False |
24. True |
25. True |
26. True |
27. False |
28. False |
29. False |
30. False |
III Fill in the blanks with appropriate words
Answers
1. Calculate cash flow from Operating Activities from the following information.
Particulars | 2007 Rs | 2008 Rs |
---|---|---|
Stock |
60,000 |
50,000 |
Debtors |
25,000 |
23,000 |
Creditors |
32,000 |
28,000 |
Expenses Outstanding |
3,500 |
4,500 |
Bills Payable |
35,000 |
22,000 |
Accrued Income |
8,000 |
9,000 |
P and L A/c |
80,000 |
90,000 |
Answer: Net cash flow from Operating Activities Rs 5,000
2. X Ltd made a profit of Rs 1,00,000 after charging depreciation of Rs 20,000 on assets and a transfer for General Reserve of Rs 30,000. The Goodwill retain off was Rs 7,000 and the gain on sale of machineries was Rs 3,000. The other information available: (charges in the value of current assets and current liabilities). At the end of the year, debtors show an increase of Rs 6,000; creditors an increase of Rs 10,000; prepaid expenses an increase of Rs 200; bills receivable a decrease of Rs 3,000; bills payable a decrease of Rs 4,000 and outstanding expenses a decrease of Rs 2,000. Ascertain cash flow from operating activities.
Answer: Net Cash Flow from Operating Activities: Rs 1,54,800
3. X Ltd made a profit of Rs 1,20,000 after charging of depreciation of Rs 20,000 on assets and a transfer to General Reserve of Rs 30,000. The goodwill written off Rs 7,000 and the gain on sale of the machineries was Rs 3,000. Changes in the value of current assets and current liabilities at the end of the year: Debtors showed an increase of Rs 6,000; creditors an increase of Rs 10,000; prepaid expenses an increase of Rs 200; bills receivable a decrease of Rs 3,000; bills payable a decrease of Rs 4,000 and outstanding expenses a decrease of Rs 2,000.
Ascertain cash flow from operating activities.
Answer: Net Cash from Operating Activities: Rs 1,74,800.
4. On Mar 31, 2008, Y Ltd. made a profit of Rs 1,25,000 after considering the following.
Rs | |
---|---|
Depreciation on Billings |
25,000 |
Depreciation on Plant and Machinery |
45,000 |
Amortisation or Goodwill |
20,000 |
Gain on Sale of Machinery |
10,000 |
Current Assets and Current Liabilities |
Apr 1, 2007 Rs | Mar 31, 2008 Rs | |
---|---|---|
Accounts Receivable |
35,000 |
45,000 |
Stock in Hand |
75,000 |
69,000 |
Cash in Hand |
18,000 |
30,000 |
Accounts Payable |
30,000 |
32,000 |
Expenses Payable |
10,000 |
5,000 |
Bank Overdraft |
60,000 |
35,000 |
Ascertain cash flow from Operating Activities.
Answer: Net Cash Flow from Operating Activities: Rs 1,98,000
5. Calculate net cash flows from Operating Activities from the following details.
Rs | |
---|---|
Profits earned during the year 2008 |
50,000 |
Transfer to General Reserve |
10,000 |
Depreciation provided |
20,000 |
Profit on Sale of Furniture |
5,000 |
Loss on Sale of Machineries |
10,000 |
Preliminary Expenses retain off |
10,000 |
Particulars | 2007 Rs | 2009 Rs |
---|---|---|
Debtors |
10,000 |
15,000 |
Bills Receivable |
7,000 |
5,000 |
Stock |
15,000 |
18,000 |
Prepaid Expenses |
2,000 |
3,000 |
Bills Payable |
15,000 |
25,000 |
Creditors |
20,000 |
18,000 |
Outstanding Expenses |
3,000 |
4,000 |
Answer: Net cash from Operating Activities: Rs 87,000
6. Y Ltd. made a net profit of Rs 15,000 for the year ending on Mar 31, 2009 after taking the following into consideration.
Rs | |
---|---|
Depreciation on Plant and Machinery |
15,000 |
Depreciation on Buildings |
45,000 |
Amortisation of Goodwill |
20,000 |
Loss on Sale of Machinery |
5,000 |
Current Assets and Current Liabilities at the beginning and at the end of the year.
Particulars | Apr 1, 2008 Rs | Mar 31, 2009 Rs |
---|---|---|
Accounts Receivables |
35,000 |
40,000 |
Stock in Hand |
55,000 |
42,000 |
Cash in Hand |
12,000 |
2,000 |
Expense Due |
6,000 |
8,000 |
Accounts Payable |
60,000 |
53,000 |
Calculate cash flow from Operating Activities.
Answer: Cash flow from Operating Activities: Rs 97,000
7. The following balances appeared in Machinery Account and Accumulated Deprecation Account in the books of XYZ Ltd.
Mar 31, 2008 Rs | Mar 31, 2009 Rs | |
---|---|---|
Machinery A/c |
17,78,985 |
26,55,450 |
Accumulated Depreciation A/c |
3,40,795 |
4,75,690 |
Additional Information
Machinery costing Rs 2,60,000 on which accumulated depreciation Rs 1,00,000 was sold for Rs 75,000. You are required to
Answer |
1. Amount spent on purchase of machinery |
Rs 11,41,465 |
|
2. Depreciation charged for the year |
Rs 2,34,895 |
|
3. Loss on sale of machinery |
Rs 90,000 |
8. Calculate cash flow from Operating Activities from the following information.
Rs | |
---|---|
Profit for the Year |
50,000 |
Transfer to General Reserve |
10,000 |
Depreciation provided |
20,000 |
Profit on Sale of Furniture |
5,000 |
Loss on Sale of Furniture |
10,000 |
Preliminary Expenses Written off |
10,000 |
Particulars | Mar 31, 2008 Rs | Mar 31, 2008 Rs |
---|---|---|
Debtors |
10,000 |
15,000 |
Bills Receivable |
7,000 |
5,000 |
Stock |
15,000 |
18,000 |
Prepaid Expenses |
2,000 |
3,000 |
Creditors |
20,000 |
18,000 |
Bills Payable |
15,000 |
25,000 |
Outstanding Expenses |
3,000 |
4,000 |
Answer: Net Cash Flow from Operating Activities: Rs 97,000
9. From the following summarised balance sheets of a company, compute cash flow from operating activities.
Answer: |
(i) Net profit before tax and extraordinary items Rs 30,000 |
|
(ii) Net cash flow from operating activities Rs 3,600 |
10. From the flowing summarised Balance Sheets of a company calculate cash flow from Operating Activities.
Answer: Cash flow from Operating Activities: Rs 13,600
11. From the flowing statement compute cash generated from Operating Activities.
Statement of profit for the Year Ending Mar 31, 2009
Answer: Cash generated from Operating Activities Rs 55,000
12. From the following summarised Balance Sheets, calculate cash flow from Operating Activities.
Answer: Cash flow from Operating Activities Rs 10,000
13. A company had the following balances: investment at the beginning of the period Rs 46,000 and investment at the end of the period Rs 30,000. During the year the company sold 60% of its investments held in the beginning of the period at a profit of Rs 10,000. Calculate the cash flow from Investing Activities.
Answer: Cash flow from investing activities Rs 26,000
Hint: Investment A/c (balancing figure) Rs 11,600
14. From the following information calculate cash flow from Investing Activities.
Investment at the beginning of the period |
Rs 25,000 |
Investment at the end of the period |
Rs 24,000 |
During the year the company sold 40% of its investments held in the beginning of the period at a profit of Rs 9,000.
Answer: Cash Flow from Investing Activities: Rs 20,000
Hint: Purchase value {Rs 9,000}
15. From the following particulars calculate cash flow from Investing Activities.
Purchase Rs | Sold Rs | |
---|---|---|
Investment |
2,30,000 |
1,40,000 |
Goodwill |
1,75,000 |
– |
Machinery |
5,30,000 |
2,10,000 |
Patents |
– |
75,000 |
Interest received on debentures held as an investment Rs 18,000. Dividend received on shares held as investments Rs 25,000. A part of building was purchased out of surplus funds for investment purposes, which earned Rs 75,000 by way of rent.
Answer: Net cash used in Investing Activities: Rs 3,92,000
16. From the following information calculate cash flow from Investing Activities.
Mar 31, 2008 Rs | Mar 31, 2009 Rs | |
---|---|---|
Machinery |
5,00,000 |
5,50,000 |
Accumulated Depreciation |
1,00,000 |
1,20,000 |
Patent Rights |
3,00,000 |
1,80,000 |
Additional Information
Answer: Net cash flow from Investing Activities Rs 40,000
Hint: Balancing Figures: Machinery A/c Rs 1,00,000, Accumulated Depreciation A/c Rs 50,000 and Patents Account Rs 1,15,000
17. 1f. Ajay & Co. has plant and machinery, whose written down value on Apr 1, 2008 was Rs 7,50,000 and on Mar 31, 2009 was Rs 9,00,000. Depreciation for the year was Rs 30,000. At the beginning of the year a part of plant was sold for Rs 20,000 which had a written down value of Rs 16,000.
Answer: Net cash flow from Investing Activities Rs 1,76,000
Hint: Plant and Machinery A/c (Balancing Figure) Rs 1,96,000
18. Calculate cash flow from Financial Activities from the following information.
Mar 31, 2008 Rs | Mar 31, 2009 Rs | |
---|---|---|
Equity Share capital |
6,00,000 |
8,00,000 |
9% Debentures |
2,00,000 |
1,00,000 |
Securities Premium |
50,000 |
75,000 |
Information: Interest paid on debentures Rs 18,000
Answer: Net cash from Financing Activities: Rs 1,07,000
19. A public limited company provides the following figures. Calculate the net cash flow from Financing Activities.
Mar 31, 2008 Rs | Mar 31, 2009 Rs | |
---|---|---|
Equity Share Capital |
8,00,000 |
12,00,000 |
10% Debentures |
1,50,000 |
– |
6% Debentures |
– |
3,00,000 |
Additional Information
Answer: Net cash flow from Financing Activities: Rs 95,000
20. Calculate cash flow from (i) Investing Activities and (ii) Financing Activities from the following information.
Mar 31, 2008 Rs | Mar 31, 2009 Rs | |
---|---|---|
Furniture (at cost) |
30,000 |
40,000 |
Accumulated Depreciations Furniture |
7,000 |
10,000 |
Capital |
1,50,000 |
2,25,000 |
Loan from Bank |
40,000 |
25,000 |
During the year 2008–2009, furniture costing Rs 5,000 was sold at a profit of Rs 3,000. Depreciation charged during the year was Rs 6,000.
Answer: |
1. Net cash from Financing Activities: Rs 60,000 |
|
2. Net cash fl ow from Investing Activities: Rs 10,000 |
Hint: |
Sale Price Rs 5,000 |
|
Furniture purchased: Rs 15,000 |
|
Accumulated Depreciation: Rs 3,000 |
21. From the following Summary Cash Account of XYZ Ltd., you are required to prepare Cash Flow Statement for the year ended Mar 31, 2009 in accordance with AS–3.
Summary Cash Account for the year ended Mar 31, 2009
Answer: |
1. Net cash from Operating Activities: Rs 2,50,000 |
|
2. Net cash used in Investing Activities: Rs 1,00,000 |
|
3. Net cash used in Financing Activities: Rs 50,000 |
22. The Balance Sheet of J. K. Ltd. as on Mar 31, 2008 and Mar 31, 2009 are as follows:
Additional Information
An old machine was sold for Rs 20,000 which had a written down Rs 10,000; dividend paid during the year Rs 16,000 and depreciation charged to Profit and Loss Account for the year amounted to Rs 10,000. Prepare the Cash Flow Statement.
|
|
Rs |
Answer: |
1. Cash flow from Operating Activities |
36,000 |
|
2. Cash used in Investing Activities |
32,000 |
|
3. Cash flow from Financing Activities |
4,000 |
|
Cash – Cash constitutes cash on banks. |
|
3.144.40.212