Module-3 Financial Statement Reporting– II

Cash Flow Statement

Proforma of Cash Flow Statement as per AS-3

Cash flow Statement of ——————for the period ended ———————

Particulars Rs. Rs.
Cash Flow From Operating Activities:-
Net profit before tax and extraordinary items xxx
Adjustment for :-
Depreciation xxx
interest income xxx
Dividend income xxx
Interest expenses xxx
Foreign exchange loss xxx xxx
Operating profit before working capital changes xxx
Adjustment for changes in current assets and current liabilities:-
(+) a) increase in current liabilities xxx
b) decrease in current assets xxx
(-) a) decrease in current liabilities xxx
b) increase in current assets xxx xxx
Income tax paid xxx
Cash flow before extraordinary items xxx
Extraordinary items xxx
Net Cash From Operating Activities xxx
Net cash flow from investing activities:-
Purchase of fixed assets xxx
Proceeds from sale of fixed assets xxx
Interest and dividend received xxx xxx
Net cash from investing activities xxx
Net cash flow from financing activities:-
Proceeds from issue of shares/ Debentures xxx
Proceeds from long term borrowings xxx
Re-payment of long term borrowings xxx
Interest paid xxx
Dividend paid xxx xxx
Net cash from investing activities xxx
Net increase or decrease in cash and cash equivalents:-
cash and cash equivalents at the beginning of the period xxx
cash and cash equivalents at the end of the period xxx

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 Cash Flow Statement Numerical
Problem No.1 From the following Balance Sheets of XYL Limited, Prepare Cash
Flow Statement and also evaluate the financial performance of XYL Ltd:
Particulars Note No. 31.03.2018 31.03.2017
I ) Equity and Liabilities : Amount Amount
Shareholder’s Funds :    
1
a)      Share Capital 5,00,000 4,50,000
b)      Reserve & Surplus 1,18,000 70,000
  Current Liabilities      
a)      Trade Payables   99,000 75,000
b)      Short Term Provisions 2 1,00,000 82,000
Total   8,17,000 6,77,000
II. Assets :      
Non-Current Assets :      
(a) Fixed Assets      
(i)    Tangible Assets 3 3,70,000 2,80,000
(ii)    Intangible Assets 4 90,000 1,15,000
(2)    Current Assets :    
(a)    Inventory 1,09,000 77,000
 
(b)   Trade Receivables 2,30,000 1,80,000
(c)    Cash & Cash Equivalents 18,000 25,000
Total   8,17,000 6,77,000

Notes:
Not 31.03.2018 31.03.2017
e Particulars
Amount Amount
No.
Reserve & Surplus:    
1 General Reserve 70,000 40,000
Profit & Loss Balance 48,000 30,000
  Total 1,18,000 70,000
Short Term Provisions:    
2 Provision for Taxation 50,000 40,000
Proposed Dividend 50,000 42,000

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   Total 1,00,000 82,000
Tangible Assets :    
3 Land & Building 1,70,000 2,00,000
Plant 2,00,000 80,000
  Total 3,70,000 2,80,000
Intangible Assets :    
4
Goodwill 90,000 1,15,000
  Total 90,000 1,15,000

Additional Information:-
a) Depreciation of Rs. 10,000 & Rs. 20,000 has been charged on plant, land
& Building respectively.
b) An interim dividend of Rs 20,000 has been paid.
c) Income Tax of Rs 35,000 has been paid.
d) Rent Received during the year Rs 10,000

Solution:
Cash flow Statement

A Cash Flow From Operating activities:-    

1,63,00
  Profit before tax(Working Note1)   0
Adjustment for non cash and non
  operating items:-    
10,00
(+) depreciation in plant 0  
20,00
  depreciation on land and building 0  
25,00
  goodwill written off 0 55,000
2,18,00
      0
(-) Rent received   10,000
Operating Profit before working capital 2,08,00
  changes   0
(+) Increases in current liabilities    
  Trade Payables   24,000
2,32,00
      0
(-) Increase in current assets    
32,00
  Inventory 0  

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 50,00
  trade receivables 0 82,000
1,50,00
  Cash generated from operating activities   0
(-) Income tax paid   35,000
1,15,00
  Cash flows from Operating activities    0
B Cash Flow From Investing activities:-    
  sale of land and building   10,000
-
1,30,00
  purchase of plant   0
  rent received   10,000
 -
1,10,00
  Cash flows from Investment activities   0
C Cash Flow From Financing activities:-    
  issue of share capital   50,000
  payment of proposed dividend   -42,000
  interim dividend paid   -20,000
  Cash flows from Financing Activities    -12,000
Net cash decrease in cash and cash
  equivalent   -7000
(Add cash and cash equivalents in the
) beginning of the period   25,000
cash and cash equivalents in the end of
  the period   18,000

  Working Notes:-  
  profit before tax  
Profit an loss balance on 31 st March
  2018 48,000
Profit an loss balance on 31 st March
Less 2017 30,000
    18,000
Add Proposed Dividend 50,000
  interim dividend paid 20,000
  transfer to general reserve 30,000
  Provision for taxation 45,000
1,63,00
    0

Land and Building account

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 Particular Amount Particular Amount
BY statement of P& L (Current year
To balance b/d 2,00,000 Depreciation) 20,000
By Bank A/c ( Balancing Figure being
    sales) 10,000
    By Balance c/d (Given) 1,70,000
2,00,00
  2,00,000   0

Plant account

Particular Amount Particular Amount

To balance b/d
To Bank account (Balancing
Figure being sales)
BY statement of P& L
80,000 (Current year Depreciation) 10,000
1,30,000 By Balance c/d (Given) 2,00,000
2,10,00
2,10,000   0

Provision for Taxation

Particular Amount Particular Amount

To bank a/c (Payment
made) Given
To balance C/d Given
 
35,000 By Balance b/d Given 40,000
BY P& L (Balancing
figure,being provision made
50,000 in 2018) 45,000
85,000   85,000

Note :- Rent received is deducted from profit because it is related to investment

in property. It will be shown as inflow of cash under investing activity.

Comment:

Cash flows from operating activities are Rs.1,15,000, whereas cash flows from
financing activities are (Rs.12,000) and at the same time the cash flows from
investment activities are (Rs.1,10,000). This condition proves that the firm is
utilizing cash flows in appropriate manner. Negative cash flows from
investment activities and from financing activities, while positive cash flows
from operating activities is the indications of better cash flow management and
better performance of business. This position indicates that firm has sufficient

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cash from operating activities which they are utilizing for repayment of debt as
well as investment in long term assets.

Problem No.2 From the following Balance Sheets of M/s KTI ltd., Prepare
cash flow statement.and also evaluate the financial performance:
Balance Sheet As at 31.03.2018 and 31.03.2017
Note
  Particulars 31.03.2018 31.03.2017
No.
  I.  Equity and Liabilities : Amount Amount
  (1)  Shareholder’s Funds :    
1
  a) Share Capital 1,00,000 80,000
  b)Reserve & Surplus 6,400 6,000
  (2)Non-Current Liabilities      
  Long- term Borrowing 2 14,000 12,000
  (3)Current Liabilities      
  a) Short Term Borrowing 3 13,600 25,000
  b Trade Payables   20,000 24,000
  c) Short Term Provisions 4 20,000 16,000
  d) Other Current Liabilities 5 2,000 -
  Total   1,76,000 1,63,000
  I. Assets :      
  (1) Non-Current Assets :      
  Fixed Assets 6 50,000 60,000
  (2) Current Assets :    
  a) Inventories 70,000 60,000
  b) Trade Receivables   48,000 40,000
  c ) Cash & Cash Equivalents 7,000 2,400
  d) Prepaid Expenses 1,000 600
  Total   1,76,000 1,63,000
Notes:
Note Particulars 31.03.2018 31.03.2017

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 No. Amount Amount
Reserve & Surplus:
1 General Reserve 4,000 4,000
Profit & Loss Balance 2,400 2,000
Total 6,400 6,000
Long Term Borrowing :
2
15% Debenture 14,000 12,000
Total 14,000 12,000
Short Term Borrowing :
3
Cash Credit 13,600 25,000
Total 13,600 25,000
Short Term Provisions:
3 Provision for Taxation 8,400 6,000
Proposed Dividend 11,600 10,000
Total 20,000 16,000
Other Current Liabilities :
Dividend Payable 2,000 -
Fixed Assets :
80,000 82,000
4 Less :- Accumulated
30,000 22,000
Depreciation
Total 50,000 60,000
Additional Information:-
a) Provision for tax made Rs 9,400
b) Fixed Asset sold for Rs 10,000, their cost Rs 20,000 and accumulated
depreciation till date of sale is Rs 6,000
c) An interim dividend paid during the year Rs 9,000

Solution:
Cash Flow Statement

A Cash Flow From Operating activities:-    

  Profit before tax(Working Note1)   30,400
  Adjustment for on cash and non-operating items:-    
(+ 14,00
) depreciation 0  
  loss on sale of fixed assets 4,000  
  interest on debenture 1,800 19,800
   Operating Profit before working capital changes   50,200
(-) Increase in current assets    
10,00
  inventory 0  
  trade receivables 8,000  
  Prepaid expenses 400  
  Decrease in current liability (Trade payable) 4,000 (22,400

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 )
  Cash generated from operating activities   27,800
  Income tax paid less (7000)
  Net Cash from Operating activities   20,800
B Cash Flow From Investing activities:-    
  sale of Fixed Assets 10,000
(18,000
  Purchase of fixed assets )
   Net cash used in investing activities    (8,000)
C Cash Flow From Financing activities:-    
  issue of share capital   20,000
  issue of debenture   2,000
  proposed dividend   (8,000)
  interim dividend   (9,000)
  interest on debenture   (1,800)
(11,400
  Decrease in cash credit   )
  net cash used in investing activities    (8200)
  net increase in cash and cash equivalent   4600
cash and cash equivalents in the beginning of the
+ period   2,400
  cash and cash equivalents in the end of the period   7,000

Working Notes:-

  profit before tax  

  Profit an loss balance on 31st March 2018 2,400
Les
s Profit an loss balance on 31st March 2017 2,000
    400
Add Proposed Dividend 11,600
  interim dividend paid 9,000
     
  Provision for taxation 9,400
    30,400

Fixed Assets Account

Particular Amount Particular Amount

BY Accumulated
To balance b/d 82,000 Depreciation) 6,000
To bank a/c ( Balancing
Figure) 18,000 By Bank A( being sales) 10,000

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    By P & L account 4,000
    By Balance c/d (Given) 80,000
  1,00,000   1,00,000

Accumulated depreciation account

Amoun
Particular t Particular Amount
To fixed Assets 6,000 By Balance B/d 22,000
To balance By P & L a/c ( Current years
c/d 30,000 DEP) 14,000
  36,000   36,000

sion for Taxation

Particular Amount Particular Amount

To bank a/c (Payment
made) 7,000 By Balance b/d Given 6,000
BY statement of P& L
(Balancing figure, being
To balance C/d Given 8,400 provision made in 2018) 9,400
  15,400   15,400

Note :- Decrease in cash credit is treated as financing activity.

Comment:

Cash flows from operating activities are Rs.20,800, whereas cash flows from
financing activities are (Rs.8,200) and at the same time the cash flows from
investment activities are (Rs.8,000). This condition proves that the firm is
utilizing cash flows in appropriate manner. Negative cash flows from
investment activities and from financing activities, while positive cash flows
from operating activities is the indications of better cash flow management and
better performance of business. This position indicates that firm has sufficient
cash from operating activities which they are utilizing for repayment of debt as
well as investment in long term assets.

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Problem No.3 You are required to prepare a Cash- Flow statement ( as per AS-
3) for the year 2017-18 from the following Balance Sheets and also evaluate the
financial performance:
Balance Sheets of Janakhi India Ltd.
31st March, 2018
Note
Particulars 31.03.2018 31.03.2017
No.
I.  Equity and Liabilities : Amount Amount
(1)  Shareholder’s Funds :    
a)    Share Capital (Equity Share Capital) 3,00,000 2,00,000
b)   Reserve & Surplus (Statement of P&L
1,20,000 70,000
a/c)
(2) Non-Current Liabilities    
a)    Long- term Borrowing ( 8% Debenture) 1,50,000 1,20,000
(3) Current Liabilities    
a)    Short Term Borrowing (Bank Overdraft) 19,000 5,000
b)   Trade Payables (Creditors) 31,000 20,000
c)    Short Term Provisions 1,32,000 1,21,600
Total 7,52,000 5,36,600
I.             Assets :    
(1) Non-Current Assets :    
a)    Fixed Assets
Tangible 2 2,04,200 1,83,000 
b)   Non-Current Investment 1,30,000 1,20,000
(2) Current Assets :    
a)    Inventories 1,41,500 1,25,000
b)   Trade Receivables 64,600 64,500
c)    Cash & Bank Balances ( Cash at Bank ) 2,11,700 44,100
Total 7,52,000 5,36,600

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 Note No. Particulars 31.03.2018 31.03.2017
Amount Amount
Short Term Provisions:
Proposed Dividend 80,000 60,000
1
Provision for Taxation 50,000 60,000
Provision for Doubtful Debts 2,000 1,600
Total 1,32,000 1,21,600
Fixed Assets (Tangible)
3 Plant & Machinery 2,43,000 2,23,000
Less:- Accumulated Depreciation (38,800) (40,000)
Total 2,04,200 1,83,000
Additional Information:-During the year 2017-18:
1) A part of Machinery was sold for Rs 21,000 a profit of Rs 4,000.
2) The company charged Rs 3,000 as depreciation on its Plant &
Machinery.
3) New Debenture were issued on 31st March,2018 at a discount of 10%
4) Interest of Rs 9,600 was paid on Debenture.

Solution:

A Cash Flow From Operating activities:-    

1,80,00
  Profit before tax(Working Note1)   0
  Adjustment for on cash and non-operating items:-    
(+) depreciation on plant and Machinery 3,000  
  Provision for RDD 400  
  Discount on issue of debenture 3,000  
  Interest paid on debenture 9,600  
(-) profit on sale of machinery (4,000) 12,000
1,92,00
  Operating Profit before working capital changes   0
(-) Increase in current assets    
(16,500
  Inventory )  
  trade receivables (100)  
  Decrease in current liability (Trade payable) 11,000 (5,600)
1,86,40
  Cash generated from operating activities   0
  Income tax paid less (60,000)
1,26,40
  Net Cash from Operating activities   0
B Cash Flow From Investing activities:-    
  Purchase of plant (41,200)
  sale of Machinery 21,000

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   Purchase of non current investment   (10,000)
 (30,200
  net cash used in investing activities )
C Cash Flow From Financing activities:-    
1,00,00
  issue of share capital   0
  short term borrowing   14,000
  issue of debenture( long term borrowing)   27,000
  Dividend paid   (60,000)
  Interest on debenture   (9,600)
  net cash used in Financing activities   71,400
1,67,60
  net increase in cash and cash equivalent   0
(Add cash and cash equivalents in the beginning of the
) period   44,100
2,11,70
  cash and cash equivalents in the end of the period   0

Working Notes:- Computation of Profit before tax

Profit an loss balance on 31 st March

  2018 1,20,000
Profit an loss balance on 31 st March
Less 2017 70,000
    50,000
Add Provision for tax 80,000
  Proposed dividend 50,000
1,80,00
    0
Plant and Machinery A/c

Particular Amount Particular Amount

BY Accumulated
To balance b/d 2,23,000 Depreciation) 4,200
To profit on sale 4,000 By Bank A( being sales) 21,000
To bank a/c ( Balancing
Figure) 41,200    
    By Balance c/d (Given) 2,43,000
  2,68,200   2,68,200

Accumulated depreciation Account

Particular Amount Particular Amount
To Plant and machinery account 4,200 By Balance B/d 40,000
(Balancing Figure, being the

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depreciation on machinery sold)
To balance c/d
 
By Depreciation
account (Current year
38,800 depreciation ) 3,000
43,000   43,000

Note :-Balancing figure of accumulate depreciation account 4200 is the

depreciation on machinery sold. it will be transferred to the credit of plant and
machinery account.

Comment:

Cash flows from operating activities are Rs.1,26,400, whereas cash flows from
financing activities are Rs.714000 and at the same time the cash flows from
investment activities are (Rs. 30,200). This condition proves that the firm is
utilizing cash flows in appropriate manner. Negative cash flows from
investment activities and positive cash flows from financing and operating
activities are the indications of better cash flow management and better
performance of business. Further Investment funds still available with firm.

Problem No.4 From the following Balance Sheets of M/s Zee Ltd , Prepare its
Cash Flow Statement for the year 2017-18 (As per AS- 3) and also evaluate the
financial performance
Particulars Note No. 2017-18 2016-17
I. Equity and Liabilities : Amount Amount
(1) Shareholder’s Funds :
a) Share Capital 33,00,000 32,00,000
b) Reserve & Surplus 1 5,00,000 4,00,000
(2) Non-Current Liabilities
Long- term Borrowing 2 16,00,000 15,00,000
(3) Current Liabilities
a) Trade Payables ( Creditors) 3,00,000 5,00,000
b) Short Term Provisions 3 50,000 40,000
Total 57,50,000 56,40,000
II. Assets :
(1) Non-Current Assets :
a) Fixed Assets
i) Tangible 4 39,50,000 34,60,000
ii) Intangible 5 50,000 40,000
b) Non-Current Investment 6,00,000 6,00,000
(2) Current Assets :
a) Current Investment 6 10,000 30,000
b) Inventories 50,000 40,000

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 c) Trade Receivables 6,00,000 8,00,000
d) Cash & Bank Balances 4,90,000 6,70,000
Total 57,50,000 56,40,000

2017-18 2016-17
Note No. Particulars
Amount Amount
Reserve & Surplus:
1 General Reserve 3,50,000 2,80,000
Profit & Loss Balance 1,50,000 1,20,000
Total 5,00,000 4,00,000
Long Term Borrowing :
2
10% Debenture 16,00,000 15,00,000
Total 16,00,000 15,00,000
Short Term Provisions:
3 Proposed Dividend 30,000 27,000
Provision for Taxation 20,000 13,000
Total 50,000 40,000
Tangible Asset :- Plant &
4 39,50,000 34,60,000
Machinery
Total
Intangible Assets :-
5 50,000 40,000
Goodwill
Current Investments :
6
Marketable Securities 10,000 30,000
Additional Information:-
(1) The debenture were issued on 1.04.2017.
(2) Machinery costing Rs 70,000/- (accumulated depreciation thereon Rs
10,000) was sold for Rs 45,000.
(3) Machinery Costing Rs 8,00,000 was purchased during the year.
(4) Interim Dividend of Rs 11,000 was paid during the year.
Solution:
Cash Flow Statement

Particular Amount

I. Cash flows from Operating Activities :  

Net profit before taxation & extraordinary items 1,61,000

Adjustment for non-cash and non-operating items  

Loss on sale of Machinery 15,000
Depreciation on Plant & Machinery 2,50,000
Interest Paid on Debenture 1,60,000
Operating Profit before Working capital Changes 5,86,000

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 (+) Decrease in inventories 2,00,000
(-) Increase in Trade receivables (10,000)
(-) Decrease in Trade Payable (2,00,000)
Cash generated from Operating activities 5,76,000
(–) Tax paid (27,000)
A. Cash Inflows from Operating Activities 5,49,000
II. Cash flows from Investing Activities:  
Proceeds from sale of Machinery 45,000
Purchase of Machinery (8,00,000)
Purchase of Goodlwill (10,000)
B. Cash used in Investing Activities (7,65,000)
III. Cash flows from Financing Activities:  
Proceed from Issue of Share Capital 1,00,000
Proceeds from Issue of Debenture 1,00,000
Payment of Interim Dividend (11,000)
Payment of Proposed Dividend Last year (13,000)
Payment of Interest on Debenture (1,60,000)
C. Cash Inflows from Financing Activities 16,000
Net decrease in Cash & Cash Equivalents (A+B+C) (2,00,000)
(+) Cash and Cash Equivalents in the beginning 7,00,000
Cash and Cash Equivalents in the end 5,00,000

Working Notes:

(1) Net Profit before Tax:

Profit & Loss Balance on 31st March, 2018 1,50,000
Less: Profit & Loss bal on 31st March, 2017 1,20,000
30,000
Add: Interim Dividend Paid 11,000
Proposed Dividend for current year 20,000
Provision for Taxation for current year 30,000
Transfer to General Reserve 70,000
1,61,000

Tangible Asset Account

Particulars Amount Particulars Amount
Balance b/d 34,60,000 By Bank ( Sale of Land) 45,000
Purchase of fixed Assets 8,00,000 By Loss on sale 15,000
By Depreciation (bal. fig) 2,50,000

Balance c/d 39,50,000

42,60,000 42,60,000

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Cash & Cash equivalents 31.03.2018 30.03.2017
Cash & Bank 4,90,000 6,70,000
Marketable Securities 10,000 30,000
5,00,000
7,00,000

Comment - Cash flows from operating activities are Rs.5,48,000, whereas cash
flows from financing activities are Rs.16,000 and at the same time the cash
flows from investment activities are (Rs.7,65,000). This condition proves that
the firm is utilizing cash flows in appropriate manner. Negative cash flows from
investment activities and positive cash flows from financing and operating
activities are the indications of better cash flow management and better
performance of business. Further Investment funds still available with firm.

Problem No. 5. From the following information, prepare Cash Flow Statement
for Elegant Ltd and also evaluate the financial performance.
Balance Sheet of Pioneer Ltd., as on March 31, 2018
Not
31st March 31st March
Particulars e
2018 2017
  No.
  I. Equity and Liabilities      
1 Shareholders’ Funds      
  a) Share capital 1 7,00,000 5,00,000
  b) Reserve and surplus 2 3,50,000 2,00,000
2 Non-current Liabilities      
  Long-term borrowings: Bank Loan   50,000 1,00,000
3 Current Liabilities      
  a) Trade payables   45,000 50,000
b) Other current liabilities:
    7,000 5,000
outstanding rent
  c) Short-term provisions 3 1,20,000 80,000
  Total   12,72,000 9,35,000
II. Assets      
1 Non-current assets      
  a) Fixed assets      

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   (i) Tangible assets 4 5,00,000 5,00,000
  (ii) Intangible assets 5 95,000 1,00,000
  b) Non-current investments   1,00,000 -
2 Current assets      
  a) Inventories   1,30,000 50,000
  b) Trade receivables   1,20,000 80,000
  c) Cash and cash equivalents 6 3,27,000 2,05,000
  Total   12,72,000 9,35,000

31st March 31st March

  Particulars
2018 (Rs) 2017 (Rs)
  1 Equity Share Capital 7,00,000 5,00,000
  2 Reserve and Surplus    
Surplus: i.e., Balance in Statement of Profit &
  3,50,000 2,00,000
Loss A/C
  3. Short-term Provision:    
  Proposed Dividend 70,000 50,000
  Provision for Taxation 50,000 30,000
    1,20,000 80,000
  Fixed Assets    
  Tangible    
  Equipment 2,30,000 2,00,000
  Furniture 2,70,000 3,00,000
    5,00,000 5,00,000
  Intangible Assets    
  Patents 95,000 1,00,000
       
  Cash and cash equivalents    
  (i) Cash 27,000 5,000
  ii) Bank balance 3,00,000 2,00,000
    3,27,000 2,05,000
Additional Information :
1) During the year, equipment costing Rs 80,000 was purchased.
2) Loss on Sale of equipment amounted to Rs 5,000.

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3) Depreciation of Rs 15,000 and Rs 30,000 charged on equipment’s and
furniture.

Solution:
Cash Flow Statement

Particular Amount
I. Cash flows from Operating Activities :
Net profit before taxation & extraordinary items 2,70,000
Provision for :
Depreciation on equipment 15,000
Depreciation on furniture 30,000
Patents written-off 5,000
Loss on sale of equipment 5,000
Operating Profit before Working capital Changes 3,25,000
– Decrease in Trade payables -5,000
(+) Increase in Outstanding rent 2,000
– Increase in Trade receivables -40,000
– Increase in inventories -80,000
Cash generated from Operating activities 2,02,000
(–) Tax paid 30,000
A. Cash Inflows from Operating Activities 1,72,000
II. Cash flows from Investing Activities:
Proceeds from sale of equipment 30,000
Purchase of new equipment -80,000
Purchase of Investments -100000
B. Cash used in Investing Activities -150,000
III. Cash flows from Financing Activities:
Issues of equity share capital 2,00,000
Repayment of bank loan -50,000
Payment of dividend -50,000
C. Cash flows from Financing Activities 1,00,000
Net increase in Cash & Cash Equivalents (A+B+C) 1,22,000
(+) Cash and Cash Equivalents in the beginning 2,05,000
Cash and Cash Equivalents in the end 3,27,000

Working Notes:

Equity Share Capital Account

Particulars Amount Particulars Amount
Balance b/d 2,00,000 Depreciation (Bal. fig) 15,000
Cash 80,000 Bank 30,000

Statement of Profit & Loss 5,000

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 Account (loss on salw)
Balance c/d 2,30,000
2,80,000 2,80,000

(2) Patents of Rs 5,000 (i.e., Rs 1,00,000 – Rs 95,000) were written-off during

the year, and depreciation on furniture Rs 30,000. (Rs 3,00,000 – Rs 2,70,000)
(3) It is assumed that dividend of Rs 50,000 and tax of Rs 30,000 provided in
2013-2014 has been paid during the year 2014-15. Hence, proposed dividend
and provision for tax during the year amounts to Rs 70,000 and Rs 50,000
respectively.
(Rs)
(4) Profit and Loss at the end 3,50,000
(–) Profit and Loss in the beginning 2,00,000
(5) Net Profit during the year 1,50,000
+ Provision for tax during the year 50,000
+ Proposed dividend 70,000
Net Profit before taxation & extraordinary Items 2,70,000

Comment:

Cash flows from operating activities are Rs.1,72,000, whereas cash flows from
financing activities are Rs.1,00,000 and at the same time the cash flows from
investment activities are (Rs.1,50,000). This condition proves that the firm is
utilizing cash flows in appropriate manner. Negative cash flows from
investment activities and positive cash flows from financing and operating
activities are the indications of better cash flow management and better
performance of business.

Problem No. 6 From the following Balance Sheets of Rayan Ltd., prepare cash
flow statement and also evaluate the financial performance
Not 31st 31st
Particulars e March March
No. 2018 2017
I. Equity and Liabilities      
1 Shareholders’ Funds      
a) Share capital   15,00,000 10,00,000

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 b) Reserve and surplus (Balance in
  7,50,000 6,00,000
Statement of Profit and Loss)
2 Non-current Liabilities      
Long-term borrowings 1 1,00,000 2,00,000
3 Current Liabilities      
a) Trade payables   1,00,000 1,10,000
b) Short-term provisions   95,000 80,000
(Provision for taxation)      
25,45,00
Total   19,90,000
0
II. Assets      
Non-current assets      
1 a) Fixed assets      
(i) Tangible assets 2 10,10,000 12,00,000
(ii) Intangible assets (Goodwill)   1,80,000 2,00,000
b) Non-current investment   6,00,000 -
Current assets      
2 a) Inventories   1,80,000 1,00,000
b) Trade Receivables   2,00,000 1,50,000
c) Cash and cash equivalents 3 3,75,000 3,40,000
25,45,00
Total   19,90,000
0
Notes to Accounts
31st March 31st March
Particulars
2018 2017
1 Long-term Borrowings:    
  i) Debentures   2,00,000
  ii) Bank loan 1,00,000  
    1,00,000 2,00,000
2 Tangible Assets    
  i) Land and building 6,50,000 8,00,000
  ii) Plant and machinery 3,60,000 4,00,000
    10,10,000 12,00,000
3 Cash and cash equivalents    
  i) Cash in hand 70,000 50,000

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   ii) Bank balance 3,05,000 2,90,000
    3,75,000 3,40,000
Additional information:
1. Dividend proposed and paid during the year Rs 1,50,000.
2. Income tax paid during the year includes Rs 15,000 on account of
dividend tax.
3. Land and building book value Rs 1,50,000 was sold at a profit of 10%.
4. The rate of depreciation on plant and machinery is 10%.
Solution:
)

Particular Amount
I. Cash flows from Operating Activities :  
Net profit before taxation & extraordinary items 3,95,000
Provision for :  
Depreciation 40,000
Goodwill written off 20,000
Profit on sale of Land -15,000
Operating Profit before Working capital Changes 4,40,000
– Decrease in Trade payables -10,000
– Increase in Trade receivables -50,000
– Increase in inventories -80,000
Cash generated from Operating activities 3,00,000
(–) Tax paid 65,000
A. Cash Inflows from Operating Activities 2,35,000
II. Cash flows from Investing Activities:  
Proceeds from sale of Land & Building 1,65,000
Purchase of Investments (6,00,000)
B. Cash used in Investing Activities (4,35,000)
III. Cash flows from Financing Activities:  
Issues of equity share capital 5,00,000
Redemption of Debenture -200,000
Proceed from raising bank loan 1,00,000
Payment of dividend -150,000
Dividend Tax Paid -15,000
C. Cash Inflows from Financing Activities 2,35,000
Net increase in Cash & Cash Equivalents (A+B+C) 35,000
(+) Cash and Cash Equivalents in the beginning 3,40,000
Cash and Cash Equivalents in the end

(1) Total tax paid during the year Rs 80,0000

(–) Dividend tax paid (given) Rs (15,000)
Income tax paid for operating activities Rs 65,000

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(2) Net profit earned during the year after tax and dividend
= Rs 7,50,000 – 6,00,000 = Rs 1,50,000
(3) Net profit before tax = Net profit earned during the year after tax and
dividend + Provision for tax made + Proposed Dividend
= Rs 1,50,000 + Rs 95,000 (See provision for taxation account)+ Rs 1,50,000 =
Rs 3,95,000

Equity Share Capital Account

Particulars JF Amount Particulars JF Amount
10,00,00
Balance c/d 15,00,000 Balance b/d 0
Cash (New Capital
Raised) 5,00,000
15,00,00
15,00,000 0

Debenture Account
Particulars JF Amount Particulars JF Amount
Cash
(redemption) 20,000 Balance b/d 20,000
20,000 20,000

Bank Account
Particulars JF Amount Particulars JF Amount
Balance c/d 1,00,000 1,00,000
1,00,000 1,00,000

Provision for Tax Account

Particulars JF Amount Particulars JF Amount
Cash ( Tax paid
including Rs.15,000 for
Dividend) 80,000 Balance b/d 80,000
Statement of Profit &
Loss Account (Prof.
Balance c/d 95,000 made during the year) 95,000

1,75,000 1,75,000

Land & Building Account

Particulars JF Amount Particulars JF Amount
Balance b/d 8,00,000 Cash 1,65,000
Statement of Profit & 15,000 Balance c/d 6,50,000
Loss Account (Profit

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on Sale)

8,15,000 8,15,000
Proposed Dividend Account
Particulars JF Amount Particulars JF Amount
Cash 1,50,000 Surplus 1,50,000
1,50,000 1,50,000

Plant & Machinery Account

Particulars JF Amount Particulars JF Amount
Balance b/d 4,00,000 Depreciation 40,000
Balance c/d 3,60,000

4,00,000 4,00,000

Comment:

Cash flows from operating activities are Rs.2,35,000, whereas cash flows from
financing activities are Rs.2,35,000 and at the same time the cash flows from
investment activities are (Rs.4,35,000). This condition proves that the firm is
utilizing cash flows in appropriate manner. Negative cash flows from
investment activities and positive cash flows from financing and operating
activities are the indications of better cash flow management and better
performance of business.

Problem No. 7 From The Following Information Of Oswal Mills Ltd., Prepare
Cash Flow Statement and also evaluate the financial performance
Balance Sheet of Oswal Mills as on 31st March, 2017 and 2018
31st 31st
Note
  Particulars March March
No.
2018 (Rs) 2017 (Rs)
  I. Equity and Liabilities      
1 Shareholders’ Funds      
  a) Share capital 1 1,300 1,400
  b) Reserve and surplus (Surplus)   4,700 4,000
2 Current Liabilities      
  a) Short-term loan   200 600
  b) Trade payables   500 400
  Total   6,700 6,400

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  II. Assets      
1 Non-current assets      
  a) Fixed assets 2 2,400 2,400
  b) Non-current investments   300 200
2 Current assets      
  a) Inventories   1,200 1,300
  b) Trade receivables   800 900
  c) Cash and cash equivalents   1,200 800
  d) Short-term loans and advances   800 800
  Total   6,700 6,400

Notes to Accounts:
(Rs in Lakhs)
Particulars 31st March 2018 31st March 2017
1 Share capital    
Equity share capital 1,000 1,000
10% preference share capital 300 400
  1,300 1,400
2 Fixed assets    
Tangible assets 3,600 3,400
Less: Accumlated depreciation -1,200 -1,000
  2,400 2,400

Statement of Profit and Loss for the year ended 31st March, 2018
Not
31st March 31st March
Particulars e
2018 2017
No.
I. Revenue from operation   2,800 -
II. Other income (dividend income)   1,000 -
III. Total Revenue   3,800 -
IV. Expenses     -
Cost of material consumed   400 -
Employees benefit expenses   200 -
Finance cost (interest paid)   200 -

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 Depreciation   200 -
Loss due to earthquake   1,100 -
    2,100
V. Profit before tax   1,700 -
VI. Tax paid   1,000 -
Profit after tax   700 -
Additional information:
1. No dividend paid by the company during the current financial year.
2. Out of fixed assets, land worth Rs 1,000 Lakhs having no accumulated
depreciation was sold at no profit or no loss
Solution:
Cash Flow Statement

Particular Amount

I. Cash flows from Operating Activities :  

Net profit before taxation & extraordinary items 2,800
Adjustment for  
Depreciation 200
Interest Paid 200
Operating Profit before Working capital Changes 3,200
(+) Increase in Trade payables 100
(+) Decrease in Trade receivables 100
(+) Decrease in inventories 100
Cash generated from Operating activities 3,500
(–) Tax paid -1,000
Cash before Extra-ordinary Item 2,500
(-) Loss due to Earthquake 1,100
A. Cash Inflows from Operating Activities 1,400
II. Cash flows from Investing Activities:  
Proceeds from sale of Land 1,000
Purchase of fixed Asset (2) -1,200
Purchase of Investment -100
B. Cash used in Investing Activities - 300
III. Cash flows from Financing Activities:  
Payment of short term loan -400
Interest Paid -200
Redemption of Preference Share Capital -100
C. Cash Inflows from Financing Activities -700
Net increase in Cash & Cash Equivalents (A+B+C) 400
(+) Cash and Cash Equivalents in the beginning 800

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 Cash and Cash Equivalents in the end 1,200

Working Notes:

(1) Net Profit before Tax and Extraordinary Items = Rs 700 + Rs 1,100 + Rs
1,000 = Rs 2,800

2) Fixed Asset Account

Particulars JF Amount Particulars JF Amount
Balance b/d 3,400 Cash ( Sale of Land) 1,000
Purchase of fixed
Assets 1,200 Balance c/d 3,600

4,600 4,600

Accumulated Depreciation Account

Particulars JF Amount Particulars JF Amount
Balance c/d 1,200 Balance b/d 1,000
Statement of Profit
& Loss Account 200
1,200 1,200

Comment:

Cash flows from operating activities are Rs.1,400, whereas cash flows from
financing activities are (Rs.700) and at the same time the cash flows from
investment activities are (Rs.300). This condition proves that the firm is
utilizing cash flows in appropriate manner. Negative cash flows from
investment activities and from financing activities, while positive cash flows
from operating activities is the indications of better cash flow management and
better performance of business. This position indicates that firm has sufficient
cash from operating activities which they are utilizing for repayment of debt as
well as investment in long term assets.

Problem No.8 From the following Balance Sheets of XYL Limited, Prepare Cash
Flow Statement and also evaluate the financial performance:
Note
Particulars 31.03.2018 31.03.2017
No.
Equity and Liabilities : Amount Amount
1
a)Shareholder’s Funds :    
2
a)      Share Capital 2,50,000 2,25,000

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 b)      Reserve & Surplus 2,60,000 1,15,000
(1)    Current Liabilities      
a)      Trade Payables   49,500 37,500
b)      Short Term Provisions 3 50,000 40,000
Total   6,09,500 4,17,500
I. Assets :      
(1)    Non-Current Assets :      
(a)    Fixed Assets      

(i)    Tangible Assets 4 2,80,000

2,40,000
(ii)   Intangible Assets 5 20,000   36,000
(2)    Current Assets :    
(a)    Inventory 15,000 10,000
 
(b)   Trade Receivables 2,84,500 1,19,000
(c)    Cash & Cash Equivalents 10,000 12,500
Total   6,09,500 4,17,500

31.03.2018 31.03.2017
Particulars
Amount Amount
Share Capital    
Equity Share Capital 2,00,000 1,50,000
Preference Share Capital 50,000 75,000
  2,50,000 2,25,000
Reserve & Surplus:    
General Reserve 1,25,000 70,000
Profit & Loss Balance 1,35,000 45,000
Total 2,60,000 1,15,000
Short Term Provisions:    
Provision for Taxation 50,000 40,000
Total    
Tangible Assets :    
Land & Building 1,80,000 2,00,000
Plant 1,00,000 40,000
Total 2,80,000 2,40,000
Intangible Assets :    
Goodwill 20,000 36,000

Additional Information:-

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 a) Depreciation of Rs 10,000 & Rs. 60,000 has been charged on plant, land
& Building respectively.
b) Income Tax of Rs 43,000 has been paid.

Solution:

Particular Amount

I. Cash flows from Operating Activities :  

Net profit before taxation (Note 1) 1,98,000

Adjustment for non-cash and non-operating items  

+ Depreciation on plant 10,000
+ Depreciation on Building 60,000
+ Goodwill written off 16,000
Operating Profit before Working capital Changes 2,84,000
(+) Increase in Trade payables 12,000
(-) Increase in Trade receivables (1.65,500)
(-) Increase in inventories (5,000)
Cash generated from Operating activities 1,25,500
(–) Tax paid (43,000)
A. Cash Inflows from Operating Activities 82,500
II. Cash flows from Investing Activities:  
Purchase of Building (40,000)
Purchase of Plant (70,000)
B. Cash used in Investing Activities (1,10,000)
III. Cash flows from Financing Activities:  
Issue of equity share capital 50,000
Redemption of Preference Share Capital (25,000)
C. Cash Inflows from Financing Activities 25,000
Net decrease in Cash & Cash Equivalents (A+B+C) (2,500)
(+) Cash and Cash Equivalents in the beginning 12,500
Cash and Cash Equivalents in the end 10,000

Note 1:
Calculation of profit before tax
Profit & Loss balance on 31st March, 2018 1,35,000
Less: Profit & Loss balance on 31st March, 2017 45,000
90,000
Add: Transfer to General Reserve (1,25,000 – 70,000) 55,000
Provision for tax made during the year 53,000

1,08,000
Net Profit before Tax 1,98,000

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 Building Account
J J
Particulars F Amount Particulars F Amount
To Balance b/d 2,00,000 By Depreciation 60,000
To Bank Account
(Purchase) 40,000 By Balance c/d 1,80,000

2,40,000 2,40,000

Plant Account
J J
Particulars F Amount Particulars F Amount
To Balance b/d 40,000 By Depreciation 10,000
To Bank Account
(Purchase) 70,000 By Balance c/d 1,00,000

1,10,000 1,10,000

Provision for Tax Account

Particulars JF Amount Particulars JF Amount
To Bank Account 43,000 By Balance b/d 40,000
By Statement of
Profit & Loss
To Balance c/d 50,000 Account (Bal. fig) 53,000
93,000 93,000

Cash flows from operating activities are Rs.82,500, whereas cash flows from
financing activities are Rs.25,000 and at the same time the cash flows from
investment activities are (Rs.1,10,000). This condition proves that the firm is
utilizing cash flows in appropriate manner. Negative cash flows from
investment activities, while positive cash flows from operating activities and
from financing activities is the indications of better cash flow management and
better performance of business.

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