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Ans: a
Ans: d
a) issue of shares
b) Decrease in current assets
c) Increase in the value of land
d) Payment of tax
Ans: a
a)
b)
c)
d)
Ans: d
Cash flow statement closes by the disclosing the closing balance of cash.
True
Illustration 1
10
Problem Statement
Harish Ltd. gives you the following information for the
year ended 31st March, 2006: Prepare CFS as
per Indirect Method
1. Sales for the year totaled Rs. 96,00,000. The
company sells goods for cash only
2. Cost of goods sold was 60% of sales.
3. Closing inventory was higher than opening
inventory by Rs. 43,000. Trade creditors on 31st
March, 2001 exceeded those on 31st March, 2000
by Rs. 23,000.
11
Contd:
4.
5.
6.
7.
8.
Solution-1
Cash Flow Statement For the Year Ended 31 March 2006
(A) Cash Flows from Operating Activities
Net profit before tax
Rs.
Rs.
13,80,000
Adjustment for:
Depreciation
3,15,000
(43,000)
23,000
9,000
16,84,000
7,00,000
9,84,000
(
13
Contd:
Cash flows from Investing Activities
Purchase of fixed assets
(10,27,500)
(10,27,500)
(4,07,000)
2,43,000
1,99,500
2,13,800
4,13,300
14
Illustration 2
15
Problem Statement
From the following condensed comparative Balance Sheets of Jatin Ltd. And
additional information, prepare a Cash Flow for the year 2006.
Liabilities
2005
Rs.
2006 Assets
Rs.
Share Capital
Security Premium
Retained earnings
2005
2006
Rs.
Rs.
62,000 66,000
7% Mortgage loan
20,000 plant and machinery(37,000)(26,200)
Creditors
6,900 6,000 Building
95,000 1,16,000
Outstanding salaries 2,000 1,400 Accumulated
Provision for taxation 1,000
16
Contd:
1.
2.
3.
4.
Additional information :
Plant costing Rs. 16,000 (accumulated
depreciation Rs. 14,800) was sold during the year
for Rs. 1,200.
Building was acquired during the year at a cost of
Rs. 21,000. In addition to cash payment of Rs.
1,000, a 7% mortgage loan was raised for the
balance.
Dividend of Rs. 8,000 was paid during the year.
A sum of Rs. 13,900 was transferred to provision
for taxation account in 2006.(ICAI)
17
Solution-2
Cash Flow Statement
For The Year Ending 31 December 2006
Rs.
Rs.
(A) Cash Flows from Operating Activities
Net profit before tax
28,900
Adjusted for :
Depreciation on :
Building
2,000
Plant
4,000
6,000
Operating profit before working capital changes
34,900
Decrease in stock
600
Decrease in debtors
1,000
Decrease in creditors
(900)
Decrease in outstanding salaries
(600)
Increase in prepaid expenses
(80)
Cash generated from opertations
34,920
Income tax paid
(13,500)
Net cash generated from operations
21,420
18
Contd:
(B) Cash Flows from Investing Activities
Purchase of Building
Purchase of Plant and Machinery
Purchase of Land
Sale of plant
Net cash used in Investing Activities
(C) Cash Flows from Financing Activities
Issue of Shares Capital
Security Premium
Dividends paid
Net cash from financing activities
Net increase in cash (A + B + C)
Cash in the beginning
Cash at the end
(1,000)
(20,000)
(2,000)
1,200
(21,800)
10,000
2,000
(8,000)
4,000
3,620
6,180
9,800
19
Working Notes
Retained Earnings Account
Dividend paid
Balance c/d
Rs.
Rs.
8,000 Balance b/d
23,820
30,820 Profit during the year (Balancing Figure)15,000
38,820
38,820
Plant and Machinery Account
Rs.
Rs.
Balance b/d
62,000 Sale of plant
1,200
Bank-Purchase (Balancing Figure)20,000Depreciation on plant sold14,800
Balance c/d
66,000
82,000
82,000
Accumulated Depreciation on Plant & Machinery Account
Plant (Depreciation)
Balance c/d
Rs.
Rs.
14,800 Balance b/d
37,000
26,200 Profit and Loss Account(Depreciation) 4,000
41,000
41,000
20
Contd:
Building Account
Rs.
Balance b/d
95,000
Cash (Purchase)
1,000
Mortgage Loan (Purchase)
20,000
1,16,000
Balance c/d
Rs.
1,16,000
1,16,000
Rs.
45,000
Rs.
Balance b/d
43,000
Profit and Loss Account(Depreciation) 2,000
45,000
45,000
Provision for Taxation Account
Rs.
Income tax paid (Balancing Figure)13,500 Balance b/d
Balance c/d
1,400 Profit and Loss Account
14,900
Rs.
1,000
13,900
21
Illustration 3
22
Problem Statement
The balance sheets of a Sandeep limited company
as at 31 March 2008 and 31 March 2009
Note No 1:
07-08
08-09
Reserves
48,000
50,000
23
Contd:
24
Contd:
The following additional information is available from
the books:
1. During the year ended 31-3-2009 an interim
dividend of Rs. 26,000 and final dividend of Rs.
54,000 were paid.
2. The assets of another company were purchased
for Rs.60,000 payable in fully paid shares of the
company. These assets consisted of stock Rs.
22,000 and machinery Rs. 29,000. In addition
sundry purchases of plant were made totalling Rs.
6,000.
3. Income-tax paid during 2009 was Rs. 25,000.
25
Soluion-3
CashFlowStatementforVictorsComputersLtd.
FortheyearEnding31March2009
CashFlowfromOperatingActivities
Differenceinprofitbetween31March2008and31March2009
Rs.
Rs.
1,530
Adjustmentsfor:
Depreciation
35,500
Provisionfortax
34,000
Reserves
2,000
Dividends(26,000+54,000)
80,000
Operatingprofitbeforetaxandworkingcapitalchanges
1,53,030
DecreaseinSundryDebtors
12,550
DecreaseinStock(1,09,040+22,00097,370)
33,670
IncreaseinSundryCreditors
2,125
DecreaseinBillsPayable
(22,255)
Cashgeneratedfromoperations
1,79,120
Incometaxpaid
(25,000)
Netcashfromoperatingactivities
1,54,120
26
Contd:
CashfromInvestingActivities
PurchaseofPlant
(6,000)
PurchaseofGoodwill
(10,000)
Decreaseinadvances[Para15(e)AS3(Revised)]
1,580
NetCashusedininvestingactivities
RepaymentofBankOverdraft
(60,000)
DividendsPaid
(80,000)
(14,420)
CashFlowsfromFinancingActivities
Netcashusedinfinancingactivities
(1,40,000)
Netdecreaseincashandcashequivalents(A+B+C)
(300)
Cashandcashequivalentsatthebeginning
3,000
Cashandcashequivalentsattheend
2,700
27
Illustration 4
28
Problem Statement
The following figures have been extracted from the Books of Nikhil Limited
for the year ended on 31.3.2004. You are required to prepare a cash flow
statement
Net profit before taking into account income tax and income from law
suits but after taking into account the following items was Rs. 20 lakhs:
Contd:
Dividends paid for the year 2002-2003 Rs. 5 lakhs
and interim dividend paid Rs. 3 lakhs for the year
2003-2004.
(v) Land was purchased on 2.4.2003 for Rs.
2,40,000 for which the company issued 20,000
equity shares of Rs. 10 each at a premium of 20%
to the land owner as consideration
(vi) Current assets and current liabilities in the
beginning and at the end of the years were as
detailed below:
30
Contd:
Stock
Sundry Debtors
Cash in hand
Bills receivable
Bills payable
Sundry Creditors
Outstanding expenses
As on
31.3.2003
Rs.
12,00,000
2,08,000
1,96,300
50,000
45,000
1,66,000
75,000
As on 31.3.2004
Rs.
13,18,000
2,13,100
35,300
40,000
40,000
1,71,300
81,800
31
Solution
Cash Flow Statement
for the year ended 31st March, 2004
Rs.
Rs.
Cash flow from Operating Activities
Net profit before income tax and extraordinary items:
20,00,000
Adjustments for:
Depreciation on fixed assets
5,00,000
Discount on issue of debentures
30,000
Interest on debentures paid
3,50,000
Interest on investments received
(60,000)
Profit on sale of investments
(20,000) 8,00,000
Operating profit before working capital changes
28,00,000
32
Contd:
Adjustments for:
Increase in stock
Increase in sundry debtors
Decrease in bills receivable
Decrease in bills payable
Increase in sundry creditors
Increase in outstanding expenses
(1,18,000)
(5,100)
10,000
(5,000)
5,300
6,800
(1,06,000)
(10,50,000)
16,44,000
90,000
17,34,000
33
Contd:
Cash flow from Investing Activities
Sale proceeds of investments
Interest received on investments
Net cash flow from investing activities
Cash flow from Financing Activities
Proceeds by issue of equity shares at 20% premium
Redemption of preference shares at 5% premium
Preference dividend paid
Interest on debentures paid
Dividend paid (5,00,000 + 3,00,000)
Net cash used in financing activities
Net decrease in cash and cash equivalents during
the year
Add: Cash and cash equivalents as on 31.3.2003
Cash and cash equivalents as on 31.3.2004
3,20,000
60,000
3,80,000
6,00,000
(15,75,000)
(1,50,000)
(3,50,000)
(8,00,000)
(22,75,00
0)
(1,61,000)
1,96,300
35,300
34
Illustration 5
35
Problem Statement
1. Presented below is the comparative balance sheets for Ashna Ltd. at 31 March :
2006
2005
Rs.
Rs.
Cash
40,000
57,000
Accounts Receivable
77,000
64,000
Inventory
Prepaid expenses
1,32,000 1,40,000
12,140
16,540
Land
1,25,000 1,50,000
Equipment
2,00,000 1,75,000
Accumulated Depreciation-Equipment
(60,000)
Building
2,50,000 2,50,000
Accumulated Depreciation-Building
(75,000)
(42,000)
(50,000)
7,01,140 7,60,540
Accounts Payable
33,000
45,000
Bonds Payable
2,35,000 2,65,000
2,80,000 2,50,000
Retained Earnings
1,53,140 2,00,540
36
Contd:
Additional information :
1.
2.
3.
4.
5.
6.
37
Solution
AshnaLtd.
Contd:
(B) Cash
25,000
15,000
(65,000)
(25,000)
39
Contd:
(C) Cash
Dividends Paid
(74,290)
(74,290)
(17,000)
57,000
40
Working Notes
Equity Share Capital Account
Rs.
Rs.
Balance c/d2,80,000 Balance b/d
2,50,000
Bonds Payable Account 30,000
2,80,000
2,80,000
2,35,000
30,000
2,65,000
41
Illustration 6
42
36,000
(ii)
Dividend paid
10,202
(iii)
Income-tax paid
(iv)
(v)
(vi)
(vii)
5,100
222
48
24,000
10
33,318
120
43
Contd:
(viii)
3,000
(ix)
12,000
(x)
13,042
(xi)
67,290
22,092
(xiii)
41,688
(xiv)
(xv)
(xvi)
YouarerequiredtoprepareacashflowstatementasperAS3(Revised).
18
55,866
6,000
6,000
8,000
44
Solution
Cash Flow Statement
For the Year Ending 31 March 2006
(A) Cash Flows from Operating Activities
Net profit before tax
Adjustments for:
Depreciation
Loss on sale of asset
Amortization of Government Grant
Profit on sale of investment
Interest received
Interest paid
Operating profit before working capital changes
Increase in working capital
Cash from operations
Tax Paid
Net cash used in operating activities
Rs.(in Lakhs)
24,000
48
(10)
(120)
(3,000)
12,000
68,918
(67,290)
1,628
(5,100)
(3,472)
45
Contd:
(B) Cash Flows from Investing Activities
Purchase of fixed assets
Interest income
Sale of investment (33,318 + 120)
Sale of asset (222 48)
Expenditure on Capital Project
Net cash used in investing activity
(C) Cash Flows form Financing Activity
Dividend Paid
Grant Received
Interest Paid
Long term Borrowing
Net Cash provided from financing activity
Net increase in cash and cash equivalents (A + B + C)
Cash and cash equivalents at the beginning
Cash and cash equivalents at the end
(22,092)
3,000
33,438
174
(41,688)
(27,168)
(10,202)
18
(13,042)
55,866
32,640
2,000
6,000
8,000
46
Illustration 7
47
(Rs.000)
50
300
2,800
100
3,250
Payment to suppliers
Purchase of fixed assets
Overhead expenses
Wages and salaries
Tax paid
Dividend paid
Bank loan
Closing balance
(Rs.000)
2,000
200
200
100
250
50
300
150
3,250
48
Solution 7
CashFlowStatementfortheyearended31.3.2009
CashflowfromOperatingActivities
Rs.in000
Cashreceivedfromcustomers
Less:Cashpaidtosuppliers
Cashpaidforoverheadexpenses
Cashpaidforwagesandsalaries
Less:Incometaxpaid
NetcashgeneratedfromOperatingActivities
2,800
2,000
200
100 2,300
500
250
250
49
Contd:
CashflowfromInvestingActivities
Saleoffixedassets
100
Less:Purchaseoffixedassets
(200)
NetcashusedinInvestingActivities
(100)
CashflowfromFinancingActivities
Receivedfromissueofsharecapital
300
Less:Paymentofbankloan
(300)
Paymentofdividend
50
350
NetcashusedinFinancingActivities
(50)
Netincreaseincashandequivalents
100
Add:Cashandequivalentsatthebeginningoftheyear
50
Cashandequivalentsattheendoftheyear
150
50
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