The Cash Flow Statement

1
LEARNING OBJECTIVES

After you have studied this chapter,

you should be able to understand the
following
 Need for a cash flow statement
 Difference between profit and
cash
 Different types of cash flows
 Meaning of cash from
operating activities, cash from
financing activities, cash from
investing activities
 Relationship between cash
from operating activities and
operating profit
 Impact of changes in working
capital on profit
 Format for presenting cash
flow statement

2
The Chairman’s Letter to Shareholders pending industry issue of Adjusted Gross
Dear Shareholder, Revenue (AGR) also added to the financial
woes of telecom operators. Efforts from the
Covid-19 and the associated lockdowns Government of India to soften the financial
across countries have triggered a once-in-a- burden by recommending payment through
century crisis for the society and the instalments has also been upheld by the
economy in 2020. January now seems like a Honourable Supreme Court.
month of a bygone era — such has been the
enormity of change. This is a defining
period in human and business history: one Outlook
that will test the resilience of individuals, The merger of Vodafone India and Idea
societies, corporations, and nations. Given Cellular, two large organizations with
the fog of uncertainty all around, it is hard to complementary strengths has opened
be prescient in these times. But there is little multiple opportunities and allowed your
doubt on one reality: companies with quality Company to get Your Company’s primary
leadership, sound business fundamentals, focus in FY20 has been rapid acceleration of
and a track record of winning in turbulent integration, which is now in final stages of
times, will emerge as champions in the new completion. Your Company has fully
global order. realized the guided annualised merger
related opex synergies of ` 84 Bn in the last
Your Company’s Performance quarter of the financial year ending March
The merger of Vodafone India into your 31, 2020. synergies across the board. Since
Company effective from August 31, 2018 merger, your Company has achieved several
led to the creation of Vodafone Idea milestones ahead of the expected timelines.
Limited, a partnership between two strong Your Company continues to focus on
promoters, Aditya Birla Group and execution of its stated strategy. Your
Vodafone Group. Post-merger, your Company has made significant 4G
Company is one of the leading investments and continues to expand its
telecommunications operators in India coverage and capacity further.
offering voice, data, enterprise services and
other Value-Added Services (“VAS”), Your company is also embarking on a new
including short messaging services, digital brand identity to mark the culmination of the
services, IoT etc. As of March 31, 2020, the integration exercise bringing to customers
subscriber base of your Company stands at the best of both brands. All the ongoing
293.7 Mn (on VLR) with subscriber market strategic initiatives will ensure that your
share at 29.7%.. company will continue to provide the best of
customer experience to retail and enterprise
Through the course of FY20, the operating customers and help in creating an agile and
environment continued to remain future fit organization.
challenging due to unsustainable pricing and
hyper competition. The verdict on the long Yours Sincerely

For details visit the site https://www.vodafoneidea.com

Dffor

3
INTRODUCTION

The basic objective of a cash flow statement (CFS) is to provide relevant information as regards
cash receipts and cash payments of an enterprise during the accounting period. CFS shows the
movement of cash of an enterprise. It records all cash flows occurred during a particular period.

The Ind AS-7 is the relevant standard for preparing the cash flow statement. According to the Ind
AS-7 , information about the cash flows of an enterprise is useful in providing users of financial
statements with a basis to assess the ability of the enterprise to generate cash and cash equivalents
and the needs of the enterprise to utilise those cash flows. The economic decisions that are taken
by users require an evaluation of the ability of an enterprise to generate cash and cash equivalents
and the timing and certainty of their generation.

PROFIT ALONE NOT SUFFICIENT:

In the previous chapter we saw that the profit is determined using the accrual concept and
matching concept. So, the profit earned during the period may not be same as the cash generated
from the operations during the period. Following Table shows cash from operations and the
operating profit of some of the well-known Indian companies.

CFO and PBT for the year ending 31 March 2020 (Rs. In million)
CFO PBT CFO PBT
Vodafone Idea Ltd. 69,210 -622,867 Coal India Ltd. -26,405 112,993
Bharti Airtel Ltd. 40,264 -510,209 Future Retail Ltd. -18,370 338
Vedanta Ltd. 71,980 -104,630 Titan Company Ltd. -2,886 21,050
Dish T V India Ltd. 2,788 -18,383 Steel Authority Of India Ltd. -6,506 31,707
Spicejet Ltd. 18,418 -9,348 National Aluminium Co. Ltd. -3,486 2,262

One need to understand the why and how the cash and profit are not same.

Before we get into the details of the Ind AS-7 let us calculate cash in hand just deducting
payments from receipts.

Cash in hand = All receipts – All payments.

Profit = All incomes – All expenses

Example 1
Following are the transactions of ABC ltd for the year ending March 2020:
 Started business with cash = 500,000
 Purchased goods for cash = 80,000
 Purchased plant for cash = 150,000
 Sold all goods for cash = 340,000
 Paid rent for the period = 25000
 Paid for advertisement = 15000
Find profit and cash in hand with the following assumptions
 Case 1: Depreciation =20% SLM

4
  Case II: Depreciation: 50% using WDV method

Income Statement and Cash Flow Statement

Income Statement Cash Flow Statement
Case I Case II Receipts Case I Case II
Incomes Capital 500,000 500,000
Sales 340,000 340,000 Sales 340,000 340,000
Expenses 840,000 840,000
COGS 80,000 80,000 Payments
Rent 25,000 25,000 Stock of goods 80,000 80,000
Depreciation 30,000 75,000 Plant 150,000 150,000
Advertisement 15,000 15,000 Rent 25,000 25,000
150,000 195,000 Advertisement 15,000 15,000
270,000 270,000
Profit before tax 190,000 145,000 CIH 570,000 570,000

Table Above examples shows that the profit decreased by more that 24 % when we changed the
assumptions but there was no change in the cash flows and cash in hand.. The change in profit is
solely due to the change in the accounting treament of depreciation.

Now let change the assumptions and examine the impact on profit and cash.
 Case III: Rent due but not paid; Depreciation =20% using SLM
 Case IIV: Rent paid; Depreciation = 20% using SLM

Income Statement and Cash Flow Statement

Income Statement Cash Flow Statement
Case III Case IV Receipts Case III Case IV
Incomes Capital 500,000 500,000
Sales 340,000 340,000 Sales 340,000 340,000

Expenses 840,000 840,000

COGS 80,000 80,000 Payments

Rent 25,000 25,000 Stock of goods 80,000 80,000

Depreciation 30,000 30,000 Plant 150,000 150,000
Advertisement 15,000 15,000 Rent 0 25,000
150,000 150,000 Advertisement 15,000 15,000
245,000 270,000
Profit before tax 190,000 190,000 CIH 595,000 570,000

In this case profit did not change but cash changed. Profit did not change because expenses are
recorded using the accrual principle. Under accrual principle profit is determined by deducting
expenses, whether paid or not, from income.

5
CASH FLOW STATEMENT
Cash flow statement is prepared as the per Ind-7. According to the Ind-7, a company should
prepare a cash flow statement and should present it for each period for which financial statements
are presented. It captures all the cash transactions undertaken during a particular period.

CFS records both revenue and capital items: Income statement shows only the revenue incomes
and revenue expenses, balance sheet shows the capital receipts and expenditures, whereas, the
cash flow statement shows all types of cash flows. The distinction between capital and revenue is
not relevant while preparing CFS. For example: Salary paid (revenue expense), Purchased Plant
(capital expense), Advertisement for launching a new product (deferred revenue expense) all are
shown in the cash flow statement for the period.

It records all cash flows even if it previous years, or future years. For example: Advance premium
paid (relating to the next year), Arrear salary paid (relating to the previous year) both are recorded
in the cash flow statement.

Following table shows some typical cash inflows (receipts) and cash outflows (payments).

Different Cash Flows

Receipts Payments
Issue of shares at par/premium/discount Buy back of shares at at par/premium/discount
Issues of Bonds at par/premium/discount Redemption of Bonds
Borrowing from banks and other sources Repayment of loans
Sale of goods for cash Interest paid
Collection from customers Dividend paid
Advance from customers Purchase of goods
Sale of investments(Shares/Bonds/Mutual funds) Payment to suppliers
Interest received Advance to suppliers
Dividend received Purchase of investments
Sale of property plant and equipment Purchase of property, plant, and equipment

Cash and Cash Equivalents:

The term cash and cash flows are not uniquely defined. Cash includes cash and cash equivalents.
According to InAS-7, Cash equivalents are held for the purpose of meeting short-term cash
commitments rather than for investment or other purposes. For an investment to qualify as a cash
equivalent, it must be readily convertible to a known amount of cash and be subject to an
insignificant risk of changes in value. Therefore, an investment normally qualifies as a cash
equivalent only when it has a short maturity of, say, three months or less from the date of
acquisition.

6
Format of Cash flow statement

Ind AS 7 Statement of Cash Flows – Ind AS 7 prescribes principles and guidance on

preparation and presentation of cash flows of an entity from operating, investing and
financing activities for a reporting period. The objective of Ind AS 7 is to provide
information about the historical changes in cash and cash equivalents of an entity during
the reporting period from its operating, investing and financing activities.

The statement of cash flows is required to report cash flows classified by operating,
investing and financing activities along with the components of cash and cash equivalents
at the beginning and end of the reporting period, except in limited circumstances where
cash flows are offset and reported on net basis.

The statement of cash flows shall report cash flows during the period classified by
operating, investing and financing activities.

Cash flow statement for the year ending 31 March XX Cash flow statement for the year ending 31 March XX
Opening (A) Opening
Receipts Sale of goods for cash
Issue of shares/Bonds Collection from customers
Borrowing from banks and other sources less
Sale of goods for cash Purchase of goods
Collection from customers Payment to suppliers
Sale of investments(Shares/Bonds/Mutual funds) Payment towards operating expenses
Interest/Dividend received (B) Cash from operating activties
Sale of property plant and equipment As per Ind AS 7
Issue of shares/Bonds
Less payments Borrowing from banks and other sources
Buy back of shares less
Redemption of Bonds/Loans Buy back of shares
Interest/ Dividend paid Interest/ Dividend paid
Purchase of goods ( C )Cash from financing activties
Payment to suppliers Sale of investments(Shares/Bonds/Mutual funds)
Payment towards operating expenses Interest/Dividend received
Purchase of investments Sale of property plant and equipment
Purchase of property, plant, and equipment Purchase of investments
Purchase of property, plant, and equipment
(D) Cash from investment activties
Cash in hand Cash in hand

7
COMPONENTS OF CASH FLOW STATEMENT
The cash flow statement should report cash flows during the period classified by
operating, investing and financing activities. Cash flow statement explains the reasons for
changes in cash and cash equivalents detailing out cash flow on various heads. Three are
important components of the CFS are:

 Cash flow from financing activities.

 Cash flow from investing activities;
 Cash flow from operating activities;

Cash flow from financing activities (CFF)

Financing activities are those activities that result in changes in the size and composition of the
equity capital and borrowing of the enterprise.
Cash inflows from financing activities include the following:

 Proceeds from issuing equity instruments;

 Proceeds from issuing bonds, mortgages, notes and from other short or long term
borrowing.

Cash outflows from financing activities include the following

 Repayment of amount borrowed;

 Capital element of finance lease payments;
 Buyback of shares;
 Payment of expenses or commissions on any issue of shares, debentures, loans, notes,
bonds and other financing.

Cash from financing activities may be negative or positive. Negative CFF means the company
has paid off loans or redeemed capital or bought back capital or distributed dividend. Positive
cash flows may be due to raising of funds in the form of capital or loans.

Example 1.I
ABC started business with capital of Rs. 100,000. It took 10% loan of Rs. 200,000; from SBI
bank . Purchase stock of goods = 50000; Purchased furniture = 25000; purchased shares of XY
Ltd = 80000. Sold 50% entire 50 % of stock for 100,000. Paid salaries = 10000; Interest for the
year was fully paid. The company also paid 25,000 towards other expenses. Received dividend
from XY ltd = 5000

8
 Cash Flow Statement
For the year ending 31 March
Receipts
Capital 100,000
Loan 200,000 Cash from financing activities (CFA)
Sales 200,000 For the year ending 31 March
Dividend 5,000 Receipts
505,000 Capital 100,000
Payments Loan 200,000
Stock of goods 50,000 300,000
CFA
Furniture 25,000 Payments
Shares of XY 80,000 Interest 20,000
Salaries 10,000 Divided 15,000
Interest 20,000 35,000
Other Expenses 25,000 CFA 265,000
Dividend 15,000
225,000
CIH 280,000

Now let us see the cash from financing activities of Vodafone ltd.

Vodafone Idea_ Cash Flows (Rs. in million)

Source: Annual Report of Vodafone Idea

9
During the year under review, the Company allotted 19,999,830,911 Equity Shares of
face value of Rs.10/- each to the eligible existing equity shareholders under Rights Issue
at an issue price of Rs. 12.50 (including a premium of ` 2.50) per equity share, thereby
raising funds aggregating to Rs 249,998 Million. All other cash outflows were due to the
repayment of loans and payment of interest.

Cash flow from investing activities (CFI)

Investing activities relate to the acquisition and disposal of long term assets and other investments
not included in cash equivalents. Cash inflows from investing activities include the following:

 Sale of shares of other companies

 Sale of bonds and ,debentures of other companies
 Dividend received
 Interest received.
 Receipts from sale of property, plant equipment and other productive assets;
 Receipts from derivative transactions

Cash outflows from investing activities include the following:

 Purchase of shares of other companies

 Purchase of bonds and ,debentures of other companies
 Purchase of property, plant equipment and other productive assets;
 Payments for derivative transactions

Cash from investing activities may be negative or positive. Negative CFI means the company has
paid for acquiring assets. Positive cash flows may be due to the sale of assets or due to the
receipt of dividend and interest on the investments made.

Example 1.II
ABC started business with capital of Rs. 100,000. It took 10% loan of Rs. 200,000; from SBI
bank . Purchase stock of goods = 50000; Purchased furniture = 25000; purchased shares of XY
Ltd = 80000. Sold 50% entire 50 % of stock for 100,000. Paid salaries = 10000; Interest for the
year was fully paid. The company also paid 25,000 towards other expenses. Received dividend
from XY ltd = 5000

10
 Cash Flow Statement
For the year ending 31 March
Receipts
Capital 100,000
Loan 200,000 Cash from investment activities (CIA)
Sales 200,000 For the year ending 31 March
Dividend 5,000 Receipts
505,000 Dividend 5,000
Payments
Stock of goods 50,000 5,000
CIA
Furniture 25,000 Payments
Shares of XY 80,000 Furniture 25,000
Salaries 10,000 Shares of XY 80,000
Interest 20,000 105,000
Other Expenses 25,000 CIA -100,000
Dividend 15,000
225,000
CIH 280,000

 Issues of shares is a financing activities, whereas purchase of shares of another company

purchased is an investing activity.
 Dividend paid is a financing activity, whereas dividend received is an investing activity.
 Negative CIA conveys a message that the company is creating assets which has the
potential to generate future cash flows.

Now let us see the cash from financing activities of Vodafone ltd.

11
Vodafone Idea_ Cash Flows (Rs. in million)

Source: Annual Report of Vodafone Idea

Cash flow from operating activities (CFO)

Operating activities are principal revenue producing activities of the enterprise and other
activities that are not investing or financing activities.

Some example of cash flow from operating activities:

 Cash receipts from the sale of goods and the rendering of services;
 Cash receipts from royalties, fees, commissions and other revenue;
 Cash receipts and payments from contracts held for dealing or trading
purposes;
 Cash payments to suppliers for goods and services;
 Cash payment to and on behalf of employees;
 Cash payments for income tax and refunds of income tax unless
specifically identified with financing or investment activities.

According to the IndAS-7, a company can prepare cash flows from operating activities
using either:
 the direct method, whereby major classes of gross cash receipts and gross cash
payments are disclosed; or

12
  the indirect method, whereby net profit or loss is adjusted for the effects of
transactions of a non-cash nature, any deferrals or accruals of past or future
operating cash receipts or payments, and items of income or expense
associated with investing or financing cash flows.

Direct approach

Under the direct method, information about major classes of gross cash receipts and gross
cash payments

Cash from Operations : = (Cash Sales + Collections from Customers + Other operating
receipts) less ( Payment for purchase of revenue goods and Payment towards revenue
expenses)

Example 1.III
ABC started business with capital of Rs. 100,000. It took 10% loan of Rs. 200,000; from SBI
bank . Purchase stock of goods = 50000; Purchased furniture = 25000; purchased shares of XY
Ltd = 80000. Sold 50% entire 50 % of stock for 100,000. Paid salaries = 10000; Interest for the
year was fully paid. The company also paid 25,000 towards other expenses. Received dividend
from XY ltd = 5000

Cash Flow Statement

For the year ending 31 March
Receipts
Capital 100,000
Loan 200,000 Cash from operating activities (COA)
Sales 200,000 For the year ending 31 March
Dividend 5,000 Receipts
505,000 Sales 200,000
Payments
Stock of goods 50,000 200,000
COA
Furniture 25,000 Payments
Shares of XY 80,000 Stock of goods 50,000
Salaries 10,000 Salaries 10,000
Interest 20,000 Other Expenses 25,000
Other Expenses 25,000 85,000
Dividend 15,000 COA 115,000
225,000
CIH 280,000

13
Let us put all cash flow together.

Cash Flow Statement Cash Flow Statement For the year ending 31 March
For the year ending 31 March Cash from Financing Activities
Receipts Capital 100,000
Capital 100,000 Loan 200,000
Loan 200,000 Interest -20,000
Sales 200,000 Divided -15,000
Dividend 5,000 CFA (A) 265,000
505,000 Cash from investment activities
Payments CFS as per Dividend 5,000
Stock of goods 50,000 Ind-AS Furniture -25,000
Furniture 25,000 Shares of XY -80,000
Shares of XY 80,000 CIA (B) -100,000
Salaries 10,000 Cash from Operating activities
Interest 20,000 Sales 200,000
Other Expenses 25,000 Stock of goods -50,000
Dividend 15,000 Salaries -10,000
225,000 Other Expenses -25,000
COA ( C ) 115,000
CIH 280,000 Cash in hand (A +B+C) 280,000

Indirect Approach –

Under the indirect method, the net cash flow from operating activities is determined by adjusting
profit or loss for the effects of:
 Non cash items
 Non operating items
 Changes in the operating working capital

Table 8.11
Cash from Operations and Profit of NALCO
(in crores)
2006 2005
Profit before Taxes 2753 2359
Cash from Operations 1965 1723

Why is Cash from operations different from profit? We had seen in the previous chapter that
every receipt is not an income and every payment is not an expense. So profit, which is the excess

14
of income over the expense, may not be equal to the cash in hand. Some of the reasons may be as
follows:
 Depreciation
 Financing charges (interest)
 Provisions
 Change in Creditors/Debtors
 Capital losses or profit (profit/loss on sale of assets )

Under indirect cash approach cash flow form operating activities can be derived as follows:

 Net profit or loss

 Add : Non-cash charge such as depreciation, provisions, deferred taxes,
unrealized foreign exchange losses;
 Add: Charges which are classified as part of investment or financing activities;
 Less : Non-cash income such as depreciation and other write backs;
 Less : Income which are classified as part of investment or financing activities.
 Add/Less : Changes in inventories, operating receivables and payables.

Exhibit 8.3 shows CFO of Vodafone (Rs. In mn)

15
Source: Annual Report _Vodafone Idea

In the indirect method effort is being made to reconcile profit with cash from operating activities.
We had discussed in the chapter 7 that Profit is determined on the basis of the accrual concept and
matching concept. Profit in the income statement also shows income and expense relating to other
non-operating activities. Figure 8.1 shows the relationship between CFO and profit for the period.

CFO = Profit + Non cash + Changes in

or items or working
- - capital

Non-cash items: While preparing the income statement some non-cash items are also recorded.
Some of the common non-cash items are: depreciation, amortisation, writing off research
expenses, provisions for doubtful debts.

Changes in working capital: Income statement is prepared on the basis of the accrual concept. So
expenses due but not paid and incomes due but not received are also recorded in the income
statement. Such items are reflected through current assets and current liabilities. Difference
between current assets and current liabilities is called working capital.

Example 8.8
Following are the assets and corresponding sources of ABC ltd.: Capital= 20,000; 12% loan =
50,000; Debtors = 30,000; and Furniture = 40,000 as on 1st April 2006. During the first quarter of
2006 the company had the following transactions:
 Purchased stock on credit = Rs. 30,000
 Sold 50% of the stock for cash = Rs. 30,000
 Paid rent = Rs. 3,000
 Collection from the debtors = Rs.20,000
 Interest due but not paid

Table 8.12 shows the profit for the first quarter and the corresponding cash from operating
activities using the direct method.
Table 8.12
Income Statement for the quarter CFO for the quarter
Income Receipts
Sales 30,000 Cash sales 30,000
Total Income 30,000 Collections 20,000
COGS 15,000 Total Receipts 50,000
Rent 3,000 Payments for stock 0
Depreciation 2000 Rent paid 3,000
Interest 1,500
Total Expenses 21,500 Total Payments 3,000
Profit 8,500 CFO 47,000

16
 Now let us find CFO using the indirect method and reconcile profit with CFO. However, to
determine the CFO through indirect method we the opening and closing balance sheet. Table
8.13 show the opening and closing balance sheet.

Table 8.13
Balance sheet of ABC ltd.
Opening Closing
Capital 20,000 20,000
Loan 50,000 50,000
Profit 8,500
Creditors 30000
Outstanding Interest 1,500
70,000 110,000
Debtors 30,000 10,000
Furniture 40,000 38,000
Cash 47,000
Stock 15,000
70,000 110,000

We had discussed in the previous paragraph that the to determine CFO from profit, we have
to find the determine the non-cash item, non-operating, and working capital changes.
 Non cash items = Depreciation =Rs. 2,000
 Non operating items= Interest = 1,500
 Working capital change
o Increase in creditors = 30,000
o Decrease in debtors = 20,000
o Increase in stock = 15,000

Non Changes in
CFO = Profit + Non cash + Operating working
47,000 8,500 items items + capital
2000 1500 35,000

Table 8.14 shows the CFO using the indirect method

17
 Table 8.14 
Cash Flow from Operating Activities
Profit 8,500
Add Non Cash item
Depreciation 2000
Add Non-Operating Item
Interest 1,500
Change in the working capital
Add
Increase in creditors 30,000
Decrease in debtors 20,000
Less
Increase in stock 15,000
CFO 47,000

 Depreciation is a non-cash item. While calculating profit, it has been deducted so it

has to added back to be profit to determine the cash from operating activities.
 Interest is a non-operating item. While calculating profit, interest has been deducted
so it has to be added back to profit to determine the cash from operating activities.
 Decrease in debtors. Debtors decreased from 30,000 to 10,000 due to collections.
However, collection is not an income of the current year. It has not been shown while
calculating the profit. So it has to be added to the profit to determine the cash flow.
 Increase in creditors. COGS is shown as an expense. However, money had not been
paid. Increase in creditors show that the company has purchased goods on credit. So
it has to be added to the profit to determine the CFO.

 Increase in Current Assets reduces CFO

 Decrease in Current Asset increases CFO
 Decrease in Current Liabilities reduces CFO
 Increase in Current Liability increases CFO


Example 8.9
Following are the relevant financial transactions of ABC ltd for the year ending March 2006.:

 Started business with Capital 50000

 Took 12% loan 50000
 Purchased stock on credit 50000
 Sold 50% of stock for cash 50000
 Purchased furniture for cash 20000
 Purchased shares for cash 20000
 Depreciation on furniture 2000
 Expenses for the year 10000
 Expenses paid 6000
 Dividend received 10000
 Dividend distributed 5000

18
 Table 8.15 shows different cash flows

Table 8.15
Cash from Investing Activities Cash from Operating
Cash from Financing (CFF) (CFI) Activities(CFO)
Capital 50,000 Sales 50,000
12% Loan 50,000 Dividend 10,000
Total Receipts 100,000 Total Receipts 10,000 Total Receipts 50,000
Less
Dividend distributed 5,000 Payment for furniture 20,000 Expenses 6,000
Payment for shares 20,000
Total Payments 5,000 Total Payments 40,000 Total Payments 6,000

-
CFF 95,000 CFI 30,000 CFO 44,000

Foreign currency cash flows

Cash flows arising from transactions in a foreign currency shall be recorded in an entity’s
functional currency by applying to the foreign currency amount the exchange rate
between the functional currency and the foreign currency at the date of the cash flow.

Unrealised gains and losses arising from changes in foreign currency exchange rates are
not cash flows. However, the effect of exchange rate changes on cash and cash
equivalents held or due in a foreign currency is reported in the statement of cash flows in
order to reconcile cash and cash equivalents at the beginning and the end of the period.
This amount is presented separately from cash flows from operating, investing and
financing activities and includes the differences, if any, had those cash flows been
reported at end of period exchange rates.

Interest and dividends

Cash flows from interest and dividends received and paid shall each be disclosed
separately. Cash flows arising from interest paid and interest and dividends received in
the case of a financial institution should be classified as cash flows arising from operating
activities. In the case of other entities, cash flows arising from interest paid should be
classified as cash flows from financing activities while interest and dividends received
should be classified as cash flows from investing activities. Dividends paid should be
classified as cash flows from financing activities.
Interest paid and interest and dividends received are usually classified as operating cash
flows for a financial institution. However, there is no consensus on the classification of
these cash flows for other entities.

Taxes on income

19
Cash flows arising from taxes on income shall be separately disclosed and shall be
classified as cash flows from operating activities unless they can be specifically identified
with financing and investing activities.
taxes paid are usually classified as cash flows from operating activities. However, when it
is practicable to identify the tax cash flow with an individual transaction that gives rise to
cash flows that are classified as investing or financing activities the tax cash flow is
classified as an investing or financing activity as appropriate

Non-cash transactions
Investing and financing transactions that do not require the use of cash or cash
equivalents shall be excluded from a statement of cash flows.
Examples of non-cash transactions are: (a) the acquisition of assets either by assuming
directly related liabilities or by means of a finance lease; (b) the acquisition of an entity
by means of an equity issue; and (c) the conversion of debt to equity.
PATTERN OF CASH FLOWS
Table 8.16 summarises the patterns of cash flows. Most of the financially strong companies will
have positive CFO. Cash generated from operations can be used for reducing loan reduction or
capital reduction.

Table 8.16
Situation Situation Situation Situation Situation Situation
1 2 3 4 5 6

Cash from Operation (CFO) Negative Positive Positive Negative Positive Negative

Cash from Financing (CFF) Positive Negative Negative Positive Positive Negative

Cash from Investing (CFI) Positive Positive Negative Positive Positive Negative
Which is the best combination and why?

INTERRELATIONSHIP BETWEEN INCOME STATEMENT, CASH FLOW

STATEMENT, AND BALANCE SHEET

Cash flow statement, Income statement, and balance sheet are interrelated. Change in the balance
sheet on two dates can be explained with the income statement and cash flow statement. Let us
take the following transactions and see the impact on the financial statements:
 Capital: Increase or decrease: Will affect the cash flow statement
 Expenses: Paid: affects cash flow statement and income statement
 Expenses due but not paid: affect income statement and balance sheet. No effect on the
cash flow statement
 Income received: affects cash flow statement and income statement
 Income due but not received: affects income statement and balance sheet
 Purchase of asset for cash: affects cash flow statement and balance sheet
 Purchase of assets on credit: affects balance sheet
 Interest paid: affects income statement and cash flow statement

20
  Interest due but not paid: affects income statement and balance sheet

One can prepare the cash flow statement if the opening and closing balance sheet and the income
statement for the period are given.

Example 8.10
Balance sheet of ABC ltd is as follows:

Balance Sheet
31st March 31st March
06 07
Capital 50,000 100,000
12% Loan 50,000 30,000
Profits 50,000 70,000
Creditors 50,000 50,000
200,000 250,000
Cash 50,000 40,000
Debtors 50,000 20,000
Plant 50,000 45,000
Shares 50,000 145,000
200,000 250,000

Several items of the balance sheet changed during the year. Income statement and cash flow
statement can explain the change in the balance sheet.
 Capital increased by 50,000: Cash flow item
 Loan decreased by 20,000: Cash flow item
 No change in creditors. No purchases or payment can be assumed.
 Debtors decreased by 30,000: Cash flow item
 Plant decreased by 5000: Expense or loss: Income statement item
 Shares increased by 95,000: Cash flow item
 Profit increased by 20,000: Income statement item. However, there is depreciation of Rs.
5000. so it can be assumed that the company earned an income (commission received,
dividend received) of Rs. 25,000.

Table 8.10
Income Statement Cash Flow Statement
Dividend 25,000 Opening Balance 50,000
Dividend 25,000
Total Income 25,000 Capital 50,000
Collection 30,000
Depreciation 5,000 Total Receipts 155,000
Payment
Total Expense 5,000 Loan 20,000
Shares 95,000
Total Payments 115,000
Profit 20,000 Closing Balance 40,000

21
Example 8.10

ABC ltd. lost several documents and reports due to fire. The accounts officer could put lay his
hands on the opening and closing balance sheet as shown by table 8.10
Table 8.10
Balance Sheet of ABC ltd.
Opening Closing
Capital 50,000 70,000
Reserves 20,000 30,000
Loan 20,000 10,000
90,000 110,000
Fixed Assets 40,000 38,000
Stock 30,000 20,000
Cash 20,000 22,000
Debtors 30,000
90,000 110,000

He also collected the following data from his team members:

 Sales 30,000
 Rent paid : 5000
 Interest paid: 1000
 Tax paid : 1000
The accounts office was asked to prepare the cash flow statement and income statement for the
period.

a. Capital
o Opening Capital + Money Raised = Closing Capital
o 50,000 + 20000 = 70,000
b. Loan
o Opening Loan - Money Repaid = Closing Loan
o 20,000 – 10,000 = 10,000
c. Reserves
o Opening Reserves + Current Profit = Closing Reserve
o 20,000 + 10,000 = 30,000
d. Fixed Assets
o Opening Assets - Depreciation = Closing Asset
o 40,000 -2,000 = 38,000
e. Stock
o Opening stock – COGS = Closing stock
o 30,000 – 10,000 = 20,000
f. Cash
o Opening + Receipts – Payments = Closing cash
o 20,000 + 20,000 – 18,000 = 22,000
g. Debtors
o Opening + Credit Sales – Receipts = Closing Cash

22
 o 0 + 30,000 – 0 = 30,000

Table 8.11 shows the relevant financial statements

Table 8.11
Opening Balance Sheet Cash Flow Statement for the year
Capital 50000 Receipts
Reserves 20000 Capital 20000
Loan 20000 Total Receipt 20000
Total 90000 Loan 10000
Fixed Assets 40000 Rent 5000
Stock 30000 Interest 1000
Cash 20000 Tax 2000
Total Payments 18000
Total 90000 CIH 2000

Closing Balance Sheet Income Statement for the year

Capital 70000 Sales 30000
Reserves 30000 COGS 10000
Loan 10000 Rent 5000
Total 110000 Depreciation 2000
Fixed Assets 38000 Interest 1000
Stock 20000 PBT 12000
Cash 22000 Tax 2000
Debtors 30000
Total 110000 PAT 10000

23
KEY TERMS

Cash flow statement: Cash flow statement is prepared as the per AS-3. CFS shows all cash
inflows and outflows for a particular period. CFS records both revenue and capital items: Income
statement shows only the revenue incomes and revenue expenses, balance sheet shows the capital
receipts and expenditures, whereas, the cash flow statement shows all types of cash flows.

Cash equivalents: Cash equivalents are held for the purpose of meeting short-term cash
commitments rather than for investment or other purposes. For an investment to qualify as a cash
equivalent, it must be readily convertible to a known amount of cash and be subject to an
insignificant risk of changes in value.

Financing activities: Financing activities are those activities that result in changes in the size and
composition of the equity capital and borrowing of the enterprise.

Investment activities: Investing activities relate to the acquisition and disposal of long term assets
and other investments not included in cash equivalents.

Operating activities: Operating activities are principal revenue producing activities of the
enterprise and other activities that are not investing or financing activities.

Operating profit: Excess of operating income over the operating expenses is operating
profit.

Cash from financing activities(CFF): CFF is result of the financing activities. Cash from
financing activities may be negative or positive. Negative CFF means the company has paid off
loans or redeemed capital or bought back capital or distributed dividend. Positive cash flows may
be due to raising of funds in the form of capital or loans.

Cash from investing activities (CFI): CFI is the result of the investing activity of a company.
Cash from investing activities may be negative or positive. Negative CFI means the company has
paid for acquiring assets. Positive cash flows may be due to the sale of assets or due to the
receipt of dividend and interest on the investments made.

Cash from Operating activities (CFO): CFO is the result of the operating activity of a company.
CFO depends profit generating ability of a company. CFO can be determined by direct method or
by using indirect method.

Direct method of determining CFO: Under direct approach operating cash flow information is
obtained from the cash book- cash receipts and payments can be classified and aggregated under
the usual heads of accounts.

Indirect method of determining CFO: Under indirect method effort is being made to reconcile
profit with cash from operating activities. Profit is adjusted for non-cash items, non-operating
items and changes in the working capital

24
Theoretical Questions
1. What is cash equivalents?
2. Distinguish between cash and profit.
3. Classify the cash flows.
4. What is cash from operating activities (CFO)?
5. What is the treatment of dividend and interest received and paid?
6. Distinguish between cash from operating activities and operating profit.
7. Examine the relationship between profit and cash from operating activities.
8. Why is cash generated during the year generally not equal to profit for the year?
9. Briefly explain the provisions of the Accounting Standard (AS)-3
10. Examine the impact of the changes in the working capital on the cash from operating
activities.
11. When will the cash from investing activities (CFI) be negative?
12. Explain with example the impact of depreciation on the cash from operating activities.
13. Examine the implications of having positive CFF, negative CFI, and negative CFO.
14. Can a company have positive profit and huge negative CFO?
15. Examine the implications of having negative CFF, negative CFI, and positive CFO.
16. A company having profit will always have positive cash from operating activities (CFO).
Comment.
17. Changes in working capital will no effect on CFO. Comment.
18. Buy back of shares will increase the cash from financing activities (CFI).
19. Dividend paid and dividend received will affect the cash from financing activities (CFF).
Comment.
20. Examine the impact of the following transaction of CFO:
a. Paid salaries
b. Purchased goods on credit
c. Interest received
d. Interest paid
e. Profit on the sale of fixed assets
f. Issued capital at a premium
g. Collections from old debtors.
h. Buy back of shares

Numericals

1. Following are the transactions of XYZ ltd for the year ending March 2006:
 Started business with capital = 200,000
 Issues shares to the public = 10000 shares of Rs. 10 at a premium of 50%
 Took 10% loan = 100,000
 Purchased plant on credit = 50,000
 Purchased stock of goods for cash = 50,000
 Purchased shares of MN ltd. = 50,000
 Sold 50% of shares of MN ltd for Rs. 40,000
 Interest due but not paid = 10,0000
 Sold 50% of stock of goods for cash = 50,000
 Expenses for the period = 20,000
 Expenses paid = 15,000

Required: Cash flow statement.

25
2. Following are the transactions of XYZ ltd for the year ending March 2006:
 Issues shares to the public = 20000 shares of Rs. 10 at a premium of 50%
 Took 10% loan = 200,000
 Purchased plant for cash = 50,000
 Purchased stock of goods on credit = 50,000
 Purchased shares of XY ltd. = 150,000
 Sold 50% of shares of MN ltd at a profit of 50% on cost
 Interest paid = 10,0000
 Sold 50% of stock of goods for cash = 50,000
 Expenses for the period = 20,000
 Expenses paid = 15,000
 Depreciation = 10%

Required: Cash from investing activities, cash from financing activites, and cash from operating
activities.

3. Following transactions are entered into by A & Co. during January 2006. Prepare the necessary
financial statements. Show the CFO, CFF, CFI.
(i) Started business with furniture valued at Rs. 12,000
(ii) Owners introduced Rs. 100,000 in cash
(iii) Issued 10000 shares of Rs.10 at a premium of Rs.50.
(iv) Purchased goods for sale for Rs. 50,000 from B & Co. on credit
(v) Purchased goods for cash: Rs.50,000
(vi) Sold goods costing Rs. 20,000, at Rs. 30,000 on cash basis
(vii) Sold goods costing Rs. 40,000, to C & Co. for Rs. 75,000 on credit
(viii) Paid Rs. 1,000 towards freight and paid Rs. 5,000 towards salary.
(ix) Lost goods for sale for Rs. 10,000 due to fire.
(x) Interest accrued but not due on 10% IDBI Loan: Rs. 1,000
(xi) Paid Rs. 12,000 towards annual insurance premium .
(xii) Realized Rs. 47,000 from C & Co. in full and final settlement.
(xiii) Charged depreciation on furniture Rs. 100
(xiv) Paid the money due to B&Co and received discount of Rs. 5,000
(xv) Conveyance charges paid to the staff Rs. 500

4. Following are the transactions of XYZ ltd. for the year ending March 2006:
 Started business with Capital 50000
 Took 12% loan 50000
 Purchased stock on credit 50000
 Sold 50% of stock for cash 50000
 Purchased furniture for cash 20000
 Purchased shares for cash 20000
 Depreciation on furniture 2000
 Expenses for the year 10000
 Expenses paid 6000
 Dividend received 10000
 Dividend distributed 5000

Required: Cash from investing activities, cash from financing activites, and cash from operating
activities.

26
5. Following are the transactions of XYZ ltd. for the year ending March 2006:
 Started business with Capital 150,000
 Took 12% loan 150,000
 Purchased stock on credit 150,000
 Sold 50% of stock for cash 150,000
 Purchased furniture for cash 20,000
 Purchased shares for cash 20,000
 Depreciation on furniture 2000
 Expenses for the year 10,000
 Expenses paid 20000
 Dividend received 10000
 Dividend distributed 5000
Required:
a) Cash from investing activities (CFI), cash from financing activites (CFF), and cash from
operating activities (CFO).
b) Reconcile profit with cash from operating activities (CFO)

6. Following is the balance sheet of XYZ limited as on 31 st March 2006:

Balance Sheet
Capital 100,000
12%
loan 150,000
250,000
Stock 70,000
Debtors 80,000
Furniture 40,000
Plant 50,000
Cash 10,000
250,000
Transactions during the first quarter of 2006 are given below:
 Purchased stock on credit 30,000
 Sold 50% of the stock for cash 80,000
 Paid rent 3,000
 Collection from the debtors 20,000
 Salaries for a month 2,000
 Salaries paid 24,000
 Insurance premium for the year paid 6,000

Required:
 All Financial statements
 CFO using indirect method

7. Share capital on 1.1. 99 = 200,000,

Share capital on 1.1.2000 = 500,000
Bonus shares issued during the year = 50000
Debentures converted into share = 100,000
Buy back of share = Rs. 200,000
Find Cash from financing activities

27
8. ABC ltd. issued 10,000 shares of Rs. 10 at 25. Took 12% loan of Rs. 200,000. Money raised
was used as follows:
 20% to buy stock of goods;
 30% to buy plant
 40% to shares of XYZ ltd.
 Balance was retained as cash
During the first quarter, sold the entire stock on credit for Rs. 80,000 and sold the shares of
XYZ ltd. at a profit of 50% for cash. Depreciation for the year =10,000;
Required: Cash flow statement

9. Net profit after depreciation and tax is Rs. 35000. Depreciation is 15000. A total sale was Rs.
Rs. 1,00,000 of which 60% was on credit. Cost of the goods was 25% of the sales. Entire
purchase was on credit. Find Cash from Operation.

10. Following are some of the financial statements of ABC ltd.

Table
Balance Sheet as on30th June 02
Sources Assets
Share capital 500,000 550,000 Fixed assets 600,000 540,000
Reserves and surplus 250,000 127,500 Bonds 50,000 0
12% Long term borrowings 150,000 100,000 Stock 200,000 150,000
Outstanding Salary 20,000 Debtors 200,000 145,000
Accrued Interest 4,500 Advance Rent 0 12,000
Creditors 200,000 200,000 CIH 50,000 155,000
TOTAL 1,100,000 1,002,000 1,100,000 1,002,000

Cash Flow Statement for Apr- June 02

Receipts Amount Payments Amount
Opening Cash 50,000 12% Long term borrowings 50,000
Cash Sales 250,000 Creditors 100,000
Collections from customers 150,000 Salaries 60,000
Dividend Received 2,000 Rent 36,000
Fixed Assets Fixed Assets 100,000
Interest on Bonds 5,000 Electricity Charges 6,000
Investments 60,000 Dividend Paid 10,000
CIH 155,000
517,000 517,000

28
11. ABC is a sports equipment sales company. During 1999, the company replaced Rs. 18000 of
its fully depreciated equipment with new equipment costing Rs. 23000. Although a mid year
dividend of Rs. 5000 was paid, the company found it necessary to borrow Rs.5000 from its
bank. Further borrowing may be needed since cash account is dangerously low at the year-
end. The president of the company, Ms. Saha was not happy with the financial position. To
get a clear picture of the business, she collected the following Income Statement and a rough
statement of cash flows.

Income Statement (1999-2000)

Items Amount
Sales 1,95,000
Cost of Goods Sold 1,40,000
Operating Expenses and taxes 49,700
Net Profit 5,300

Cash Flow (1999-2000) : Rough Statement

Items Amount

29
 Cash Received :
a) Net Income: 5,300
b) Depreciation: 5,000
Cash from Operation: 10,300
c) Loan from Bank 5,000
d) Debentures Raised 16,000
TOTAL CASH GENERATED 31,300
Cash Paid
a) New Equipment 23,000
b) Dividends 5,000
TOTAL PAYMENT 28,000
INCREASE IN CASH 3,300

Ms. Saha seeks your help. Specifically, she wants to know why the cash flow statement shows net
cash generated during the year as Rs. 3,300, when the cash balance decreased from Rs. 15,000 to
Rs.500 during the year. Also, why is depreciation shown as cash received? She asked you to see
the company’s balance sheet if required.

Balance Sheet
Items Amount Amount
Cash 500 15,000
Debtors 17,800 13,200
Stock 28,500 17,500
Prepaid Expenses 700 300
Equipment 40,000 35,000
Less Depreciation -11,000 -24,000
TOTAL ASSETS 76,500 57,000
Creditors 8,700 10,000
Outstanding Expenses 600 1,100
Bank Loan 5,000 -
Debentures 16,000 -
Share Capital 40,000 40,000
Retained Earnings 6,200 5,900
TOTAL LIABILITIES 76,500 57,000

30
Required:
(a) Correct Cash Flow Statement showing why the company is having such a difficult time
keeping sufficient cash on hand.
(b) Answer the president’s questions.

12. Transactions of XYZ ltd for the year ending March 06:
 Started business with capital 100,000
 Took 12% loan on 1st July 200,000
 Purchased plant on credit 50,000
 Purchased stock for cash 50,000
 Purchased furniture for cash 10,000
 Purchased stock on credit from X 100,000
 Sold 50% stock for cash 200,000
 Rent per month 2,000
 Purchased 12% Bonds of Z ltd 25,000
 Rent paid 24,000
 Interest on bonds received 3000
 Dividend Paid 20000
 Interest on loan paid 24000

Required: Cash flow statement using the AS-3

13. On 1st April 2006 A, B, and C floated a company “Buy N Sell” with own funds of
Rs. 50,000 each and immediately issued 10,000 shares of Rs.100 issued at premium
of 10% to their friends. The company purchased 100 shares of Microsys (@ Rs.2500)
on 20th April and deposited the balance money in a Short Term (9 months) Deposit
Scheme of Zltd. The rate of interest on the deposit is 18% per annum. Sold the shares
on 15th June 01 @ Rs. 3650. Declared and distributed dividend of 10%
Transactions for the first quarter of 2006 were as follows:
 Purchased 10% bonds of XY ltd. for Rs. 1 lakhs and 10000 shares of SAIL @
Rs.4
 Purchased the right to buy a building by paying Rs. 100000 and sold the right
within a week a hefty premium of 85%.
 Gave short-term advance to another company: Rs. 50000. Collected Rs. 60000
after 15 days.
 Bought two old maruti cars @ Rs. 2.5 lakhs from Delhi and sold one of them at
profit of 25%.

31
 Gave Rs. 20,000 to the MD of a company. MD became insolvent. Only 10% of
the money given could be collected.
 Commission paid to the agents: Rs.25000. Rent and other expense per month
Rs.10000
 Purchased a piece of land at Rs.5 lakhs and sold the same to a housing company
at a profit of 20% on the sales. Tax paid: 2% on the sales proceed.
 Purchased 100 shares of Satyam at Rs. 250.
 Sold all shares of SAIL @ Rs.6.50.
 Purchased a car for office use: Rs.5 lakhs
 A visited Singapore to explore new business avenues: Expenses incurred
Rs.50000.
 Sponsored the local cricket match: Rs.25000
 Purchased the right to sell tickets for the match for Rs. 100000. Expenses
incurred for selling the tickets Rs.30000. Sale proceeds from the tickets Rs.
220000.
 Paid Rs. 20 000 to an accountant to prepare the necessary financial statements.

Required: Cash flow statement and Income statement

1. You are given : The Balance Sheets of a company as on 31 st Mar 01/ 31st Mar 02 and the
Income Statement of the company for the year 2001-2002. Depreciation : Plant and
Machinery 20%, Furniture 5%, Computer 20%

Balance Sheet as on 31st March, 2001

Liabilities In Rs. Assets In Rs.
Capital A 50,000 Plant & Machinery 50,000
Capital B 50,000 Furniture 5,000
Share Capital 1,50,000 Computer for office use 30,000
Loan from ICICI at 10% 60,000 Debtor C ltd. 19,000
Creditor X ltd. 20,000 Investment SAIL at 25% 50,000
Interest Accrued 6,000 Rent paid in advance 12,000
Outstanding Expenses 4,000 Stock 1,50,000
Profit 20,000 Cash in hand 44,000

32
Total 3,60,000 Total 3,60,000

Income Statement for 2001-2002

Expenses In Rs. Incomes In Rs.
Cost of Goods sold 100,000 Sales 1,25,000
Depreciation : Interest (SAIL) 12,500
Plant & Machinery 10,000 Loss 1,750
Furniture 250
Computer 6,000
Bad debts 5,000
Rent 12,000
Interest (ICICI) 6,000
Total 1,39,250 Total 1,39,250

Balance Sheet as on 31st March, 2002

Liabilties In Rs. Assets In Rs.

Capital A 50,000 Plant & Machinery (-Depr.) 40,000
Capital B 50,000 Furniture 4,750
Share Capital 2,00,000 Computer for office use 24,000
Share Premium 60,000 Investment SAIL at 25% 50,000
Loan from ICICI at 10% 60,000 Stock 50,000
Creditor X ltd. 20,000 Cash in hand 2,93,500
Outstanding Expenses 4,000
Profit 20,000
- Loss 1,750

Total 4,62,250 Total 4,62,250

Required: Cash Flow Statement for the year 2001-2002

From the following Balance Sheets And Income Statement of XYZ Ltd., prepare a Cash
Flow Statement:

Balance Sheet as on 31st March 2001

Sources Rs. Applications Rs.
Share capital 239000 Fixed Assets 180000
Reserves and Surplus 32800 Investments 45900
Loan from IDBI 51300 Inventories 24000
Short term loans 8300 Debtors 62000
Creditors 6000 Cash and Bank 25500

33
 337400 337400

Balance Sheet as on 31st March 2002

Sources Rs. Applications Rs.
Share Capital 251000 Fixed Assets 210000
Reserves and Surplus 48450 Investments 64400
Loan from IDBI 56000 Inventories 24000
Short term loans 7750 Debtors 57500
Creditors 6500 Cash and Bank 16800
Salaries due but not paid 3000

372700 372700

Income Statement
Expenses Rs. Incomes Rs.
Opening Stock 24000 Sales:
Purchases: Cash 148700
Cash 48000 Credit 32000
Credit 30400
Depreciation 24000 Income From Investments 5800
Interest 7500
Salary 35000
Rent 15500
Advertising Expenses 8500
Telephone Charges 1950
Profit 15650

186500 186500

1. Following are the balance sheet and income statement of Altd.

Balance Sheet
Sources Assets
2001 2002 2001 2002
Share Capital 100000 200000 Plant and Machinery 100000 120000
Debentures 70000 30000 Investments 30000 80000
Creditors 28000 82000 Debtors 10000 40000
Tax Payable 0 6000 Cash 40000 10000
Profit and Loss A/c 16000 20000 Prepaid Expenses 4000 8000
Stock 30000 80000
214000 338000 214000 338000

34
During the year debentures were converted into share

Income Statement
Sales 200000
Less COGS Other Expenses
Opening Stock 30000 General Expenses 22000
Purchase 196000 Depreciation 16000
Closing Stock 80000 Taxes 8000
146000 Total Expenses 46000
Profit after Tax 8000
Dividend 4000

Required: Cash flow statement as per Accounting Standard-3

35
Real Life Questions
1. Satyam Computer Services Ltd. of Hyderabad was incorporated in 1987 as a private limited
company. The company was set up with the objective of providing software development and
consultancy services to large corporations. In 1991, it was converted into a public limited
company. To become an end-to-end IT solutions player in the areas of consulting, systems
integration, products, application development and maintenance services, Satyam Computers
merged its three subsidiary companies. The merger was with effect from April 1, 1999. As on
that date the assets and liabilities are as follows (Rs. Crore):

a) Gross Fixed Asset = Rs. 338.17, Accumulated Depreciation = 93.30,

b) Investments = Rs. 39.02 , Debtors = 132.24
c) Share Capital = 166.92, Reserves and Surplus = 140.90
d) Borrowings = 248.27, Creditors = 28.79

Following is the abstract of Income Statement and Cash Flow Statements of Satyam
Computer Services Ltd.

Income Statement
1st April 99 to 31st 2000 Cash Flow Statement
1st April 99 to 31st 2000
Items Amt. (Rs. crores)
Sales 677.07
Other Incomes 1.94
Salaries 269.82
Repairs Expenses 9.59 Items Amt. (Rs.crores)
Advertising 33.53 Opening 168.75
Cash
Other Expenses 117.58 Collection 524.49
from
Customers
Excise Duty 0.61 Raised Capital 58.24
Interest 40.88 Raised Loans 46.60
Depreciation 71.02 Purchase of F. 94.82
Assets
Tax 6.00 Purchase of 53.18
Investments
Profit After Tax 129.98 Interest paid 39.78
Tax paid 5.9
Dividends 12.78 Dividend paid 12.24
Dividend Tax 1.41 Closing Cash 592.16
Retained Profit 115.79

Required: Balance sheet of Satyam Computer Services Ltd. as on 31st March 2000.

36
2. Following are the cash transactions and other relevant information of Nalco for year ended
31st March 2005: Source: http://www.nalcoindia.com
a. Opening cash in hand: 98.34 crores
b. Cash purchase of fixed assets = 126.72
c. Cash sale of investments = 200
d. Cash redemption of debentures= 214
e. Repayment of loans = 440
f. Interest income for the period: 12
g. Interest received = 21
h. Interest for the period = 60
i. Interest paid = 69
j. Increase in inventories = 61
k. Increase in debtors = 69
l. Decrease in creditors = 88
m. Dividend paid = 437
n. Tax paid = 636
o. Profit before tax (PBT) = 1870
p. Depreciation = 459
q. Non- cash expenses = 13
r. Loss on sale of assets = 1.0

Required : Cash Flow Statement

3. Cash Flows of some Indian companies:

India Cements ACC Madras Cements

Cash from Operation 85.74 84.22 66.77
Cash from Financing 419.17 -83.04 -64.54
Cash from Investing -584.13 -15.61 -44.09

Give your comments.

37
38