PART – 2

CHAPTER 06
CASH FLOW STATEMENT

Question 1
What is a Cash Flow Statement?

Answer: Cash flow statement is the statement which shows

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

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

Answer: As per AS-3 the following are the various

activities classified while preparing cash flow statement:
Operating activity – Operating Activity includes all the
activities which creates and generate the revenue for any
business. For example, for a company dealing with the
garments will have its operating activity in the form of
procurement of the raw materials, expenses made for
manufacturing the garments, etc.
 Investing activity – It includes of all the transactions which
are related to the long-term investments made by the
company. The examples of this can include the sale and he
purchase of the fixed asset such as Plant and Machinery.
Financing activities – The financing activity includes of all
the transactions which are related to the acquiring of the
capital or the long-term funds for any business. The
examples of this can be the cash proceeds by the business
from the issue of the equity shares and debentures etc.

Question 3
State the uses of cash flow statement?

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

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

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

Answer: The objectives of the preparation of the cash flow

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

Question 5
State the meaning of the terms: Cash Equivalents, Cash
flows.
Answer:
(i) The short term liquid investments which are made by any
business which are not subjected to any change their values
are referred as the cash equivalents. The cash equivalents are
held by the business in order to meet their short term needs
and commitments for the investments purpose.
(ii) Cash flows are referred to as the movement of the cash
inside and outside the business from the non-cash items.
Thus when the cash is generated from transaction of any
non-cash item, than it is referred to as the cash inflow; on
the other hand when the cash goes out of the business o meet
the requirements for the transactions of any non-cash item ,
than it is referred to as the cash outflows.

Question 6
Prepare a format of cash flow from operating activities
under indirect method.

Answer: Following is the format of the cash flows from

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

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

(i) Hotel
(ii) Film production house
(iii) Financial enterprise
(iv) Media enterprise
(v) Steel manufacturing unit
(vi) Software development business unit.

Answer: The following are the operating activities of the

following enterprises:
(i) Hotel – The receipt which comes from the sales
made to the customers will be the cash inflows and the
expenses such as the salaries, rent, groceries etc. will be
regarded as the cash outflows.
(ii) Film production house – The sale of the film rights
to the distributors will be regarded as the inflows, while
the salaries paid to the actors, rent paid for the location
etc. will be regarded as the outflows.
 (iii) Financial enterprise – The receipts which are
received on the repayments of the loan and the interest
on the loans will be the inflows and on the other hand
the outflows will be the salaries, loan recovery expenses
etc.
(iv) Media enterprise – Receipts which are generated
from the advertisements will be regarded as the inflows
and expenses which are made in the form of the
payment of the salaries will be regarded as the outflows.
(v) Steel manufacturing unit – The sale of steel sheets,
steel rods etc. will be regarded as the inflows while the
outflows which occur due to the purchase of the raw
materials, wages etc. will be the outflows.
(vi) Software business unit – The receipt which is
generated from the sale of software and the renewal of
licenses will be regarded as the inflows and the payment
of salaries etc. will be regarded as the outflows.

Question 8
“The nature/type of enterprise can change altogether the
category into which a particular activity may be
classified.” Do you agree? Illustrate your answer.

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

Question 9
Describe the procedure to prepare Cash Flow Statement.

Answer: The procedure to make the cash flow is as follows:

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

Question 10
Describe "Indirect" method of ascertaining Cash Flow
from Operating Activities.

Answer: The indirect method of ascertaining the cash flow

from the operating activities involve all the non-operating
and the non-cash items. Under this method, cash flow is
ascertained from the flow of the cash of the operating
activities begin with the net profit or the net loss. The
income statement in this method is on the accrual basis
which hence includes both non-operating items such as
interest paid, loss or the profit made on the sale of any fixed
assets ; and the non-cash items such as write off of the
goodwill, depreciation. Following is the sample of the nest
cash flows from the operating activities:
Net profit before tax
(add) deductions made in P&L made for non-cash items
like depreciation, goodwill to be written off
(add) deductions made in P&L made for non-operating
item like interest
(less) additions made in P&L for non-operating items
like dividend received and profit on sale of fixed assets
Operating profit before changes in working capital
(add) increase in current liabilities
(add) decrease in current assets
(less) increase in current assets
(less) decrease in current liabilities
Cash flows from operating activities before tax and
extraordinary items
(less) income tax
(add/less) effects of extraordinary items
Net cash from operating activities

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

Answer: Cash flows is referred to as the movement of the

non-cash items of the business in and outside the business.
Thus the cash inflow is referred to as the situation in which
the cash comes from the non-cash item and on the other
hand when the cash is used by the business to get the non-
cash item than it is referred as cash outflow. The
transactions of the business which are related to the long
term investments in the business are called as the investing
activities.
The example of the cash flow from the investing activities is
as follows:
Sale of machinery – Cash inflows
Purchase of machinery – Cash outflows

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

Answer: Cash flows is referred to as the movement of the

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

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

Answer:
Cash Flow from Operating Activities as on March 31,
2017
Amount Amount
Particulars Rs Rs
Net Profit during the year 500000
Items to be adjusted:
Add: Depreciation 200000
Less: Gain on sale of assets -50000 150000
Operating Profit before Working
Capital changes 650000
Add: Increase in Bills Payable 60000
Less: Increase in Bills Receivables -40000 20000
Net Cash from Operations 670000
Question 14
From the information given below you are required to
prepare the cash paid for the inventory:

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

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

Cash paid for Inventory amounts to Rs.159500.

Question 15
For each of the following transactions, calculate the
resulting cash flow and state the nature of cash flow viz.,
operating, investing and financing.
(a) Acquired machinery for Rs 2,50,000 paying 20%
drawn and executing a bond for the balance payable.
(b) Paid Rs 2,50,000 to acquire shares in Informa Tech.
and received a dividend of Rs 50,000 after acquisition.
(c) Sold machinery of original cost Rs 2,00,000 with an
accumulated depreciation of Rs 1,60,000 for Rs 60,000.
Answer:
(a) Amount paid for Machinery = 250000 x 20/100 = 50000
Part payment Rs.50000 for acquiring machinery Rs.250000
is related with Investing Activities.

(b) Amount paid for acquiring shares (250000)

Dividend received 50000
Net Cash used in Investing Activities (200000)

Amount paid to acquire assets and dividend received is a

part of Investing Activities.

(c) Inflow of cash of Rs.60000 on sale of machinery is a part

of Investing Activities.

Question 16
The following is the Profit and Loss Account of Yamuna
Limited:

Statement of Profit and Loss of Yamuna Ltd.

for the Year ended March 31, 2017
Note Amount
Particulars
No. (Rs)
i) Revenue from Operations 10,00,000
ii) Expenses
Cost of Material Consumed 1 50,000
Purchase of Stock-in-trade 5,00,000
Other Expenses 2 3,00,000
Total Expenses 8,50,000
iii) Profit before Tax (I – ii) 1,50,000

Additional information:
(i) Trade receivables decrease by Rs 30,000 during the
year.
(ii) Prepaid expenses increase by Rs 5,000 during the
year.
(iii) Trade creditors decrease by Rs 15,000 during the
year.
(iv) Outstanding expenses payable increased by Rs 3,000
during the year.
(v) Operating expenses included depreciation of Rs
25,000.
Compute net cash provided by operations for the year
ended March 31, 2017 by the indirect method.

Answer:
Cash Flow from Operating Activities as on March 31,
2017
Amount Amount
Particulars Rs Rs
Net Profit earned during the year 150000
Items to be added:
Depreciation 25000 25000
Operating Profit before Working
Capital changes 175000
Add: Increase in Current Liabilities
O/s Expenses 3000
Add: Decrease in Current Assets
Trade Receivables 30000
 Stock 50000 83000
Less: Decrease in Current Liabilities
Trade Creditors -15000
Less: Increase in Current Assets
Prepaid Expenses -5000 -20000
Net Cash from Operations 238000

Question 17
Compute cash from operations from the following
figures:
(i) Profit for the year 2016-17 is a sum of Rs. 10,000 after
providing for depreciation of Rs. 2,000.
(ii) The current assets of the business for the year ended
March 31, 2016 and 2017 are as follows:
Particulars March March
31, 2016 31, 2017
(Rs.) (Rs.)
Trade Receivables 14,000 15,000
Provision for Doubtful Debts 1,000 1,200
Trade Payables 13,000 15,000
Inventories 5,000 8,000
Short-term Investments 10,000 12,000
Expenses payable 1,000 1,500
Prepaid Expenses 2,000 1,000
Accrued Income 3,000 4,000
Income received in advance 2,000 1,000
Answer:
Cash Flow Statement for the year ending March 31,
2017
Amount Amount
Particulars Rs Rs
Cash flow from Operating Activities
Net Profit 10000
Items to be added:
Depreciation 2000 2000
Operating Profit before Working
Capital changes 12000
Less: Increase in Current Assets
Trade Receivables -1000
Accrued Income -1000
Other Current Assets -2000
Inventories -3000
Add: Increase in Current Liabilities
Provision for Doubtful Debts 200
Trade Payables 2000
Expense Payable 500
Add: Decrease in Current Assets
Prepaid Expenses -1000
Less: Decrease in Current Liabilities
Income received in advance 1000 -4300
Net Cash from Operating Activities 7700

Question 18
From the following particulars of Bharat Gas Limited,
calculate Cash Flows from Investing Activities.
Also, show the workings clearly preparing the ledger
accounts:
Balance Sheet of Bharat Gas Ltd. as on 31 Mar. 2016
and 31 Mar. 2017
Figures Figures as
as the on end of
Note
Particulars end of reporting
No.
2017 2016
(Rs) (Rs)
II) Assets
1. Non-current Assets
a) Fixed assets
i) Tangible assets 1 12,40,000 10,20,000
ii) Intangible assets 2 4,60,000 3,80,000
b) Non-current 3 3,60,000 2,60,000
investments

Notes: 1 Tangible assets = Machinery

2 Intangible assets = Patents
Notes
Figures of Figures of
current previous
year year

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

Additional Information:
(a) Patents were written-off to the extent of Rs. 40,000
and some Patents were sold at a profit of Rs. 20,000.
(b) A Machine costing Rs. 1,40,000 (Depreciation
provided thereon Rs. 60,000) was sold for Rs. 50,000.
Depreciation charged during the year was Rs. 1,40,000.
(c) On March 31, 2016, 10% Investments were purchased
for Rs. 1,80,000 and some Investments were sold at a
profit of Rs. 20,000. Interest on Investment was
received on March 31, 2017.
(d) Amartax Ltd. paid Dividend @ 10% on its shares.
(e) A plot of Land had been purchased for investment
purposes and let out for commercial use and rent
received Rs. 30,000.

Answer:
Cash Flow from Investing Activities
Amount Amount
Particulars Rs Rs
Cash Inflow
Proceeds from Sale of Patents 100000
Proceeds from Sale of Machinery 50000
Proceeds from Sale of 10% Long-
term Investment 100000
Interest received on 10% Long-term
Investment 6000
Dividend received from Amartex
Ltd. 10000
Rent received 30000 296000
Cash Outflow
Purchase of Goodwill -200000
Purchase of Machinery -440000
Purchase of 10% Long-term
Investment -180000 -820000
Net Cash used in Investing
Activities -524000

Patents A/c
Date Particular Amount Date Particular Amount
P/L (written
Balance b/d 280000 off) 40000
P/L (Profit on Bank (Sale)
Sale) 20000 (B.F.) 100000
Balance c/d 160000
300000 300000
Machinery A/c
Date Particular Amount Date Particular Amount
Balance b/d 1020000 Depreciation 140000
 Bank
(Purchases)
(B.F.) 440000 Bank 50000
P/L 30000
Balance c/d 1240000
1460000 1460000
10% Long-term Investment A/c
Date Particular Amount Date Particular Amount
Balance b/d 60000 Bank (B.F.) 100000
Bank 180000 Balance c/d 160000
P/L (Profit on
Sale) 20000
260000 260000

Question 19
From the following Balance Sheet of Mohan Ltd.
Prepare cash flow Statement:
Balance Sheet of Mohan Ltd.
as at 31 Mar. 2016 and 31 Mar. 2017
March March
Note
Particulars 31, 2017 31, 2016
No.
(Rs) (Rs)
I) Equity and Liabilities
1. Shareholders’ Funds
a) Equity share capital 3,00,000 2,00,000
b) Reserves and surplus 2,00,000 1,60,000
2. Non-current liabilities
a) Long-term borrowings 1 80,000 1,00,000
3. Current liabilities
Trade payables 1,20,000 1,40,000
Short-term provisions 2 70,000 60,000
Total 7,70,000 6,60,000
II) Assets
1. Non-current assets
a) Fixed assets 3 5,00,000 3,20,000
2. Current assets
a) Inventories 1,50,000 1,30,000
b) Trade receivables 4,90,000 1,20,000
c) Cash and cash equivalents 5,30,000 90,000
Total 7,70,000 6,60,000

Notes
2017 2016
1. Long-term borrowings
Bank Loan 80,000 1,00,000
2. Short-term provision
Proposed dividend 70,000 60,000
3. Fixed assets 6,00,000 4,00,000
Less: Accumulated Depreciation 1,00,000 80,000
(Net) Fixed Assets 5,00,000 3,20,000
4. Trade receivables
Debtors 60,000 1,00,000
Bills receivables 30,000 20,000
90,000 1,20,000
5. Cash and cash equivalents
Bank 30,000 90,000
Additional Information:
Machine Costing Rs. 80,000 on which accumulated
depreciation was Rs. 50,000 was sold for Rs. 20,000.

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

Fixed Assets A/c

Date Particular Amount Date Particular Amount
Balance b/d 400000 Bank 20000
Bank
(Purchase)
(B.F.) 280000 P/L 10000
Accumulated
Dep. 50000
Balance c/d 600000
680000 680000
 Accumulated Depreciation A/c
Date Particular Amount Date Particular Amount
Fixed Assets 50000 Balance b/d 80000
Balance c/d 100000 P/L (B.F.) 70000
150000 150000

Question 20
From the following Balance Sheets of Tiger Super Steel
Ltd., prepare Cash Flow Statement:
Balance Sheet of Tiger Super Steel Ltd. as on 31
Mar. 2016 and 31 Mar. 2017
March March
Note
Particulars 31, 2017 31, 2016
No.
(Rs) (Rs)
I) Equity and Liabilities
1. Shareholders’ Funds
a) Share capital 1 1,30,000 2,00,000
b) Reserves and surplus 2 22,800 15,200
2. Current Liabilities
a) Trade payables 3 21,200 14,000
b) Other current liabilities 4 2,400 3,200
c) Short-term provisions 5 38,400 22,400
Total 2,14,800 1,74,800
II) Assets
1. Non-Current Assets
a) Fixed assets
i) Tangible assets 6 96,400 76,000
ii) Intangible assets 18,800 24,000
b) Non-current investments 14,000 4,000
2. Current assets
a) Inventories 31,200 34,000
b) Trade receivables 43,200 30,000
c) Cash and cash equivalents 11,200 6,800
Total 2,14,800 1,74,800

Notes to accounts:

2017 2016
1. Share Capital
Equity share capital 1,20,000 80,000
10% Preference share capital 20,000 40,000
1,40,000 1,20,000
2. Reserves and surplus
General reserve 12,000 8,000
Balance in statement of profit and 10,800 7,200
loss
22,800 15,200
3. Trade payables
Bills payable 21,200 14,000

4. Other current liabilities

Outstanding expenses 2,400 3,200

5. Short-term provisions
Provision for taxation 12,800 11,200
Proposed dividend 15,600 11,200
28,400 22,400
6. Tangible assets
Land and building 20,000 40,000
Plant 76,400 36,000
96,400 76,000

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

Working Note: 1.
Plant A/c
Date Particular Amount Date Particular Amount
Balance b/d 36000 Depreciation 10000
Bank
(Purchase)
(B.F.) 50400 Balance c/d 76400
86400 86400
2.
Net Profit before Tax 3600
Profit and Loss Account 12800
Provision for Tax 16400

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

31st March 31st March

Note
Particulars 2015 2014
No.
(Rs) (Rs)
I) Equity and Liabilities
1. Shareholders’ Funds
a) Share capital 7,00,000 5,00,000
b) Reserves and surplus 4,70,000 2,50,000
2. Non-current Liabilities
(8% Debentures) 4,00,000 6,00,000
3. Current Liabilities
a) Trade payables 9,00,000 6,00,000
Total 24,70,000 19,50,000
II) Assets
1. Non-current assets
a) Fixed assets
i) Tangible 7,00,000 5,00,000
ii) Intangible-Goodwill 1,70,000 2,50,000
2. Current assets
a) Inventories 6,00,000 5,00,000
b) Trade Receivables 6,00,000 4,00,000
c) Cash and cash 4,00,000 3,00,000
equivalents
Total 24,70,000 19,50,000

Additional Information:
Depreciation Charge on Plant amount to Rs. 80,000.

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

Working Note:
Fixed Assets A/c
Date Particular Amount Date Particular Amount
Balance b/d 500000 Depreciation 80000
Purchase (b/f) 280000 Balance c/d 700000
780000 780000
Question 22
From the following Balance Sheet of Yogeta Ltd.,
prepare cash flow statement:

31st March 31st March

Note
Particulars 2017 2016
No.
(Rs) (Rs)
I) Equity and Liabilities
1. Shareholders’ Funds
a) Share capital 1 4,00,000 2,00,000
b) Reserves and surplus- 2,00,000 1,00,000
Surplus
2. Non-current Liabilities
a) Long-term borrowings 2 1,50,000 2,20,000
3. Current Liabilities
a) Short-term borrowings 1,00,000 -
(Bank overdraft)
b) Trade payables 70,000 50,000
c) Short-term provision 50,000 30,000
(Provision for taxation)
Total 9,70,000 6,00,000
II) Assets
1. Non-current assets
a) Fixed assets
i) Tangible 7,00,000 4,00,000
2. Current assets
a) Inventories 1,70,000 1,00,000
b) Trade Receivables 1,00,000 50,000
c) Cash and cash - 50,000
equivalents
Total 9,70,000 6,00,000

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

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

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

Working Note: 1
Provision for Taxation A/c
Date Particular Amount Date Particular Amount
Bank Balance
(B.F.) 40000 b/d 30000
Balance
c/d 50000 P/L 60000
90000 90000

2.
Fixed Assets A/c
Date Particular Amount Date Particular Amount
Balance
b/d 400000 Depreciation 50000
Bank 350000 Balance c/d 700000
750000 750000
Question 23
Following is the Financial Statement of Garima Ltd.,
prepare cash flow statement.

Note 31st March 31st March

Particulars
No. 2017 (Rs) 2016 (Rs)
I) Equity and Liabilities
1. Shareholders’ Funds
a) Share capital 1 4,40,000 2,80,000
b) Reserve and surplus- 2 40,000 28,000
Surplus
2. Current Liabilities
a) Trade payables 1,56,000 56,000
c) Short-term provisions 12,000 4,000
(Provision for taxation)
Total 6,48,000 3,68,000
II) Assets
1. Non-current assets
a) Fixed assets
i) Tangible 3,64,000 2,00,000
2. Current assets
a) Inventories 1,60,000 60,000
b) Trade receivables 80,000 20,000
c) Cash and cash 28,000 80,000
equivalents
d) Other current assets 16,000 8,000
Total 6,48,000 3,68,000
Notes to Accounts
31st March 31st March
Particulars
2017 (Rs) 2016 (Rs)
1. Share capital
a) Equity share capital 3,00,000 2,00,000
b) Preference share capital 1,40,000 80,000
4,40,000 2,80,000
2. Reserve and surplus
Surplus in statement of profit 28,000
and loss at the beginning of
the year
Add: Profit of the year 16,000
Less: Dividend 4,000
Profit at the end of the year 40,000

Additional Information:
1. Interest paid on Debenture Rs 600
2. Dividend paid during the year Rs 4,000
3. Depreciation charged during the year Rs 32,000

Answer:
Cash Flow Statement (Indirect Method)
Amount Amount
Particulars Rs Rs
A. Cash flow from Operating
Activities
Profit as per the Balance Sheet 12000
Proposed Dividend 4000
Provision for Taxation 12000
Net Profit before Taxation and
Extraordinary 28000
Items to be added:
Interest paid on Debentures 600
Depreciation 32000 32600
Operating Profit before Working
Capital changes 60600
Add: Increase in Current Liabilities
Trade Payables 100000
Less: Increase in Current Assets
Other Current Assets -8000
Inventories -100000
Trade Receivables -60000 -68000
Cash generated from Operating
Activities -7400
Less: Income Tax paid -4000
Net Cash from Operating
Activities -11400
B. Cash Flow from Investing
Activities
Purchase of Fixed Assets -196000
Net Cash used in Investing
Activities -196000
C. Cash Flow from Financing
Activities
Issue of Equity Shares 100000
Issue of Preference Shares 60000
Less: Interest paid on Debentures -600
Less: Dividend paid -4000
 Net Cash from Financing
Activities 155400
D. Net Decrease in Cash and Cash
Equivalents (A+B+C) -52000
Add: Cash and Cash Equivalents in
the beginning 80000
E. Cash and Cash Equivalents at
the end 28000

Working Note:
Plant & Machinery A/c
Dat Amoun Dat Amoun
e Particular t e Particular t
Depreciatio
Balance b/d 200000 n 32000
Bank
(Purchase)
(B.F.) 196000 Balance c/d 364000
396000 396000

Question 24
From the following Balance Sheet of Computer India
Ltd., prepare cash flow statement.
(Rs in '000)
Note 31st March 31st March
Particulars
No. 2017 (Rs) 2016 (Rs)
I) Equity and Liabilities
1. Shareholders’ Funds
a) Share capital 50,000 40,000
b) Reserves and surplus- 1 3,700 3,000
Surplus
2. Non-Current Liabilities
10% Debentures 6,500 6,000
3. Current Liabilities
a) Short-term borrowings 2 6,800 12,500
b) Trade payables 11,000 12,000
c) Short-term provisions 3 10,000 8,000
Total 88,000 81,500
II) Assets
1. Non-current assets
a) Fixed assets 4 25,000 30,000
2. Current assets
a) Inventories 35,000 30,000
b) Trade receivables 24,000 20,000
c) Cash and cash 3,500 1,200
equivalents-cash
d) Other current assets- 500 300
prepaid exp.
Total 88,000 81,500

Notes to Accounts
31st March 31st March
Particulars
2017 (Rs) 2016 (Rs)
1. Reserve and surplus
(i) Balance in statement of 1,200 1,000
profit and loss
(ii) General reserve 2,500 2,000
 3,700 3,000
2. Short-term borrowings
Bank Overdraft 6,800 12,500

3. Short-term provisions
(i) Provision for taxation 4,200 3,000
(ii) Proposed dividend 5,800 5,000
10,000 8,000
4. Fixed Assets:
Fixed Assets 40,000 41,000
Less: Accumulated (15,000) (11,000)
Depreciation
25,000 30,000

Additional Information:
Interest paid on Debenture Rs. 600

Answer:
Cash Flow Statement of Computer India Ltd.
Amount Amount
Particulars Rs Rs
A. Cash flow from Operating
Activities
Profit as per the Balance Sheet 200
Proposed Dividend 5800
General Reserve 500
Provision for Taxation 4200
Net Profit before Taxation and
Extraordinary 10700
Items to be added:
Provision for Depreciation 4000
Interest paid on Debentures 600 4600
Operating Profit before Working
Capital changes 15300
Less: Increase in Current Assets
Trade Receivables -4000
Inventories -5000
Prepaid Expenses -200
Less: Decrease in Current Liabilities
Trade Creditors -1000 -10200
Cash generated from Operating
Activities 5100
Less: Income Tax paid -3000
Net Cash from Operating
Activities 2100
B. Cash Flow from Investing
Activities
Sale of Fixed Assets 1000
Net Cash used in Investing
Activities 1000
C. Cash Flow from Financing
Activities
Issue of Equity Shares 10000
Issue of 10% Debentures 500
Less: Dividend paid -5000
Less: Interest paid -600
Net Cash from Financing
Activities 4900
D. Net Increase in Cash and Cash
Equivalents (A+B+C) 8000
Add: Cash and Cash Equivalents in
the beginning
Cash 1200
Bank Overdraft -12500 -11300
E. Cash and Cash Equivalents at
the end
Cash 3500
Bank Overdraft -6800 -3300