Cash flow statement

Problem No.1 1 year 2 year

Proposed dividend 20,000 30,000

Dividend Paid during the second year Rs.25,000

Required: accounting treatment for proposed dividend Ans: 35,000

Problem No.2 1 year 2 year

Provision for dividend 50,000 30,000

Dividend Paid during the second year Rs.35,000

Required: accounting treatment for dividend Ans: 15,000

Problem No.3 1 year 2 year

Proposed dividend 10,000 30,000

Provision during the second year Rs.25,000

Required: accounting treatment for proposed dividend Ans: 25,000

Problem No.4 1year 2 year

Provision for tax 10,000 20,000

Tax paid during second year Rs.30,000

Required: accounting treatment for tax Ans: 40,000

Problem No. 5 1year 2 year

Provision for tax 30,000 20,000

Tax paid during second year Rs.40,000

Required: accounting treatment for ta x Ans: 30,000

Problem No.6 1year 2 year

Provision for tax 50,000 90,000

Provision for tax during second year Rs.30,000

Required: accounting treatment for tax Ans: not possible

Problem No.7 1year 2 year

Provision for tax 50,000 30,000

Provision for tax during second year Rs.30,000

Required: accounting treatment for tax Ans:50,000

Problem No8: 1 year 2 year

Fixed assets 3,00,000 3,50,000

Accumulated depreciation 70,000 80,000

A part of fixed assets costing 70,000 was sold for Rs.60, 000; the accumulated depreciation
on sold machine was Rs.15,000

Required: accounting treatment Ans: gain on sale 5,000 purchase 1,20,000

Problem No.9 1 year 2 year

Fixed assets 2,00,000 3,50,000

Accumulated depreciation 70,000 50,000

A part of fixed assets costing 70,000 was sold for Rs.60,000.

Required: accounting treatment for above transaction Ans: gain on sale 10,000 purchase 1,20,000

Problem no.10 1 year 2 year

Fixed assets (gross) 2,00,000 2,50,000

Accumulated depreciation 30,000 50,000

Apart of fixed assets having book value Rs.70,000 was sold for Rs.60,000. Depreciation for
the year was Rs.25,000

Required: accounting treatment for above transaction Ans: loss on sale 10,000 purchase 1,25,000

Problem No.11 1 year 2year

Fixed assets (net ) 2,00,000 2,50,000

Accumulated depreciation 30,000 50,000

A part of fixed assets having book value Rs.70,000 was sold for Rs.60,000.
Accumulated depreciation on sold machine was Rs.5,000
Required: accounting treatment for above transaction Ans: loss on sale 10,000 purchase 1,45,000

Problem No.12

Details / year I II
Sundry debtors 50,000 1,00,000
Bills receivable 20,000 15,000
Provision for bad debt 15,000 10,000
Provision for discount 3,000 1,000
Bad debts written off -- 2,000
The net sales during the period was Rs.10,00,000

Required: cash collection from customers and cash sales Ans:-. 9, 46,000

Problem No.13 Following information is given to you

Details / yea r 2062 2063

Sales return -- 10,000
Sales -- 6,00,000
Account receivable 50,000 25,000
Sundry debtors 70,000 80,000
Provision for bad debt 18,000 20,000
Bad debts recovered -- 15,000
Bad debts written off -- 6,000
Required: cash collection from customers and cash sales Ans:-. 5,98,000

Problem No.14 Following information is given to you

Details / year 2063 2064

Purchase -- 2,05,000
Sundry creditors 20,000 30,000
Bills payable 25,000 20,000
Discount received -- 5,000
Inventory 25,000 30,000
Required: Amount paid to the supplier Ans: 1,95,000

Problem No.15 Following information is given to you

Particular 2063 2064

Wages Exp during the year 3,00,000
Outstanding wages 15,000 25,000

Required: wages paid during the year Ans: 2,90,000

Problem No.16 Following information is given to you

Particular 2064 2063

Operating exp 2,00,000
Administrative exp 1,00,000
 Selling and distribution exp 50,000
Out standing operating exp 20,000 10,000
Prepaid selling and distribution exp 10,000 5,000
Required: Payment for operating other exp Ans. 3,45,000

Problem No.17 Following information is given to you

Details /year 2063 2064

Interest exp 70,000
Outstanding interest 1,25,000 10,000
Required: Interest paid during the year Ans. 1,85,000

Problem No.18 Following information is given to you

Particular 2063 2064

Interest exp 50,000
Outstanding interest 5,000 10,000
Required: Interest paid during the year Ans. 45,000

Problem No.19 Following information is given to you

Details /year 2063 2064

Share capital 2,00,000 5,00,000
Preference share capital 1,00,000 50,000
6%Debenture 3,00,000 2,50,000
Bonds payable 5,00,000 4,00,000
Long term loan 10,00,000 10,00,000
Provision for dividend 50,000 30,000
Required: Cash flow from financing activities Ans. 80,000

Problem No.20 Following information is given to you

Details /year 2063 2064

Share capital 2,00,000 5,00,000
Preference share capital 1,00,000 50,000
6%Debenture 3,00,000 2,50,000
Bonds payable 5,00,000 4,00,000
Long term loan 10,00,000 10,00,000
Provision for dividend 50,000 30,000
preference share and debenture were redeemed at 5% premium . Last year dividend paid this
year

Required: Cash flow from financing activities Ans. 45,000

Problem No.21 Consider the following information

Cash collected from sales and debtors Rs,2,00,000

 Cash paid to supplier Rs.50,000
Cash paid to employee Rs.20,000
Interest paid Rs.10,000
Tax paid Rs.5,000
Required: Cash flow from operating activities Ans 15,000

Problem No.22 Consider the following information

Cash collected from sales and debtors Rs,5,00,000

Cash paid to supplier Rs.1,50,000
Cash paid to employee Rs1,.20,000
Other operating exp Rs.60,000
Depreciation for the year Rs,50,000
Goodwill written off Rs,15,000
Loss on sale of fixed assts Rs.5,000
Preliminary exp written off Rs.10,000
Interest paid Rs.10,000
Tax paid Rs25,000
Required: Cash flow from operating activities by using Direct and indirect method

Ans: 1,35,000

Problem No.23 Consider the following information

Cash collected from sales and debtors Rs,5,00,000

Cash paid to supplier Rs.1,50,000
Cash paid to employee Rs1,.20,000
Other operating exp Rs.60,000
Depreciation for the year Rs,50,000
Goodwill written off Rs.15,000
Loss on sale of fixed assts Rs.5,000
Preliminary exp written off Rs.10,000
Interest paid Rs.10,000
Tax paid Rs. 25,000
Detail /year 2064 2063
Debtors 20,000 40,000
Bills receivable 15,000 5,000
Account receivable 25,000 40,000
Notes receivable 50,000 30,000
Creditors 50,000 30,000
Bills payable 45,000 60,000
Notes payable 30,000 30,000
Required: Cash flow from operating activities by using Direct and indirect method
Ans:1,45,000
Problem No.24 Consider the following information

Particular 2061 2062

Sundry creditors 20,000 30,000
Bills payable 25,000 15,000
Outstanding exp 10,000 10,000
Advance income 5,000 2,000
Sundry debtors 60,000 80,000
Bills receivable 50,000 45,000
Stock 25,000 75,000
Prepaid exp 10,000 2,000
Net profit 80,000 depreciation for the year 80,000

Required: Cash flow from operating activities Ans. 20,000

Problem No.25 Consider the following information

Particular 2061 2062

Sundry creditors 20,000 30,000
Bills payable 25,000 15,000
Outstanding exp 10,000 10,000
Advance income 5,000 2,000
Sundry debtors 60,000 80,000
Bills receivable 50,000 45,000
Stock 25,000 75,000
Prepaid exp 10,000 2,000
Profit and loss account for the current year

Particulars Amount Particulars Amount

To salaries 14,000 By gross profit 78,000
To rent 26,000 By gain sale of furniture 2,000
To depreciation 10,000
To loss on sale of plant 5,000
To net profit 25,000
Total 80,000 Total 80,000
Required: Cash flow from operating activities Ans. Op 22,000

Problem No.26 The following information is given to you

Items Increase /( decrease)

Increase in gross value of plant machinery 2,00,000
Increase in investment 1,50,000
Increase in investment ( debenture) 2,00,000
Increase in acc. Depreciation 50,000
Increase in goodwill 50,000
Increase in advertisement exp 50,0000
Depreciation for the year Rs.60,000

Required: cash flow from investing activities Ans. IA (6,60,000)

 Problem No.27 Consider the following information

Liabilities Increase Assets Increase

Share capital 5,00,000 Plant and machinery 4,00,000
Share premium 50,000 Acc. Depreciation (40,000)
General reserve 50,000 Investment in debenture 3,00,000
Reserve fund 40,000 Investment in share 2,00,000
Capital reserve 60,000 Debtors 50,000
Provision for dividend 1,00,000 A /R 50,000
6% debenture 2,00,000 B/R 40,000
Bonds payable 1,00,000 Preliminary exp 50,000
Provision for A/R 5,000 Debenture discount (5,000)
Discount on bonds payable (10,000)
Profit and loss a/c (10,000)
Cash in hand 80,000
Total 11,05,000 Total 11,05,000
Required: prepare cash flow statement Ans: OP 1,80,000 IA ( 9,50,000) FA 8,50,000

roblem NO.23 From the following information’s prepares cash flow statement.

Capital 1 year 2nd year Assets 1 year 2nd year

Share capital 7,00,000 7,00,000 Cash at bank 17,35,000 19,30,000
6%Preference share 3,50,000 3,50,000 Calls in arrears 60,000 60,000
8%Debenture 2,00,000 2,00,000 Share forfeiture 20,000 20,000
Long term bank loan 3,00,000 3,00,000 Discount on issue of share 20,000 10,000
Bonds 2,00,000 2,00,000 Discount on issue of debt. 15,000 10,000
Capital reserve 10,000 10,000 Under writing commission 10,000 --
Profit & loss a/c 10,000 1,10,000
Provision for tax 20.000 50.000
Provision for dividend 30,000 60,000
Reserve 15,000 25,000
Sinking fund 25,000 25,000
Total 18,60,000 20,30,000 Total 18,60,000 20,30,000
Income statement for the year

Details Amount Amount

Sales 5,00,000
Less: material uses 2,00,000
Direct labour cost 50,000
Direct exp. 50,000 3,00,000
Gross profit 2,00,000
Less: other exp.
Operating exp. 30,000

EBT 1,70,000
Provision for tax 30,000
Provision for dividend 30,000
Transfer to reserve 10,000
 Transfer to sinking fund -- 70,000
Profit and (loss )a/c 1,00,000
Ans: OP 1,95,000 changes 1,95,000

Problem NO.24 From the following information’s prepares cash flow statement.

Capital 1 year 2nd year Assets 1 year 2nd year

Share capital 7,00,000 7,00,000 Cash at bank 17,35,000 19,30,000
6%Preference share 3,50,000 3,50,000 Calls in arrears 60,000 60,000
8%Debenture 2,00,000 2,00,000 Share forfeiture 20,000 20,000
Long term bank loan 3,00,000 3,00,000 Discount on issue of share 20,000 10,000
Bonds 2,00,000 2,00,000 Discount on issue of debt. 15,000 10,000
Capital reserve 10,000 10,000 Under writing commission 10,000 --
Profit & loss a/c 10,000 1,00,000
Provision for tax 20.000 50.000
Provision for dividend 30,000 60,000
Reserve 15,000 25,000
Sinking fund 25,000 25,000
Total 18,60,000 20,20,000 Total 18,60,000 20,20,000
Income statement for the year
Details Amount Amount
Sales 5,00,000
Less: material uses 2,00,000
Direct labour cost 50,000
Direct exp. 50,000 3,00,000
Gross profit 2,00,000
Less: other exp.
Operating exp. 30,000
EBT 1,70,000
Provision for tax 30,000
Provision for dividend 30,000
Transfer to reserve 10,000
Transfer to sinking fund -- 70,000
Profit and (loss )a/c 1,00,000
Ans:- Op 1,95,000 changes 1,95,000
Problem No.73 Consider the following balance sheet

Capital and liabilities 2063 2064 Assets 2063 2064

Share capital 200,000 240,000 Land and building 1,05,000 1,50,000
8%Debentures 50,000 -- Plant and equipment 2,90,000 3,20,000
share premium -- 10,000 Furniture 9,000 10,000
general reserve 30,000 50,000 Inventories 1,30,000 1,05,000
profit and loss a/c 48,000 68,000 Sundry debtors 75,000 85,000
sundry creditors 1,30,000 1,50,000 Cash 15,000 26,000
Prov. for dividend 20,000 24,000
Acc. depreciation
On plant 140,000 1,50,000
On furniture 6,000 4,000
Total 6,24,000 6,96,000 Total 624,000 6,96,000
Additional information:
during the year furniture which cost Rs.5,000,written down value Rs.1,000 was sold for Rs.2,000
plant and machinery which cost Rs.20,000and in respect of which Rs.13,000had been provided as
depreciation was sold during the year for Rs.3,000
the dividend of last year was paid in the current year
Interest received Rs.2,000 and dividend received Rs.7,000 have been included in net profit
Required: Cash flow statement showing cash flows from
a) Operating activities b) Investing activities
c) Financing activities
d) Net changes in cash and bank balance
Ans. 1) 1,18,000 2) (87,000) 3) ( 20,000) 4) 11,000

Q.2 The information is extracted from the trading company Income statement of 2 nd year

Amount Amount
Sales revenue 60,00,000
Less: cost of good s sold
Beginning inventory 1,00,000
Purchase 20,00,000
Ending inventory (2,00,000)
Wages paid 4,00,000 23,00,000
Gross margin 37,00,000
Less : operating exp
Operating exp excluding depreciation 10,00,000
Depreciation on plant 2,00,000
Administrative exp. 5,00,000
Selling and distribution exp. 4,00,000
Goodwill written off 30,000
Patent right written off 20,000
Premium on redemption of debenture 50,000
Loss on sale of plant (sale Rs.1,20,000) 25,000
Provision for tax 2,00,000
Provision for dividend 2,50,000 26,75,000
Net operating profit 10,25,000

Balance sheet as on 31st Dec.

Liabilities 1st year 2nd year Assets 1st year 2nd year
Share capital 10,00,000 12,00,000 Plant and equipment 10,00,000 14,00,000
Retained earning 1,75,000 12,00,000 Prepaid exp 50,000 40,000
Sundry creditors 2,25,000 1,00,000 Marketable securities 3,00,000 5,00,000
Bank loan 6,00,000 1,00,000 Inventories 1,00,000 2,00,000
Bills payable 2,00,000 2,00,000 Sundry debtors 4,00,000 6,00,000
Provision for tax 1,00,000 2,00,000 Goodwill 1,00,000 70,000
Patent right 50,000 30,000
Cash 3,00,000 3,60,000
Total 23,00,000 30,00,000 Total 23,00,000 30,00,000
Required cash flow statement
1. The cash flow statement of the company for the year 2070 and 2071 are given below.
Details 2070 2071
Sales revenue 11,00,000 16,00,000
 Purchas of raw materials 5,00,000 12,00,000
Wages 1,00,000 2,50,000
Operating expenses 1,50,000 1,50,000
Depreciation 60,000 60,000
Administrative expenses 30,000 30,000
Selling expenses 20,000 40,000
Tax expenses 40,000 60,000
Other overhead 25,000 40,000
Increase/(decrease) in inventory (40,000) 2,50,000
Increase/ (decrease) in debtors 50,000 1,50,000
Increase/ (decrease) in creditors 60,000 (1,00,000)
Increase/(decrease) in other liabilities 30,000 40,000
Cash flow from operation ---------? --------?
Cash flow from financing activities
Issue of share capital ------- 2,00,000
Redemption of debenture (2,00,000) (3,00,000)
Dividend paid (50,000) (50,000)
Debenture issued --- 6,00,000
Net cash flow from financing activities (2,50,000) 4,50,000
Cash flow from investing activities
Purchase of plant (2,00,000) (2,00,000)
Purchase of investment ----- ----
Sale of investment 2,50,000 1,00,000
Sale of fixed assets ----- ----
Net cash flow from investing activities 50,000 (1,00,000)
Required:
I. Explain the difference between net income and cash flow from operation.
II. Comment on cash flow from operating, investing and financing activities of 2070 and
2071.
III. What do you conclude the cash flow statement of the firm of two subsequent years?
IV. Why preparation of cash flow statement is essential along with balance sheet
preparation?

*The given financial information is extracted from the Belta and Delta trading for the year ended
2071.
Details Belta Trading Delta Trading
Sales revenue 20,00,000 20,00,000
Cost of goods sold 60% 50%
Administrative expenses 1,65,000 65,000
Selling expenses 3,00,000 2,40,000
Premium on redemption of debenture 50,000 --
Loss on sale F.A. (cost 60,000 accumulated dep. 40,000) 15,000 --
Loss on sale of investment -- 10,000
Premium on redemption of preference share -- 15,000
Other overhead 80,000 35,000
Tax expenses 40% 40%
Increase/(decrease) in inventory (50,000) 2,60,000
Increase/ (decrease) in debtors 50,000 1,50,000
Increase/ (decrease) in creditors 60,000 (1,50,000)
Increase/(decrease) in other liabilities 30,000 40,000
Increase/(decrease) in provision for tax 80,000 30,000
Increase/(decrease) in accumulated depreciation 20,000 40,000
Increase/(decrease) in short-term borrowings 1,00,000 (80,000)
Increase/(decrease) in debenture (3,00,000) 2,00,000
Increase/(decrease) in share capital 2,50,000 4,00,000
Increase /(decrease) in preference share capital (2,00,000) (1,50,000)
Increase /(decrease) fixed assets 3,00,000 3,50,000
Increase /(decrease) in investment 80,000 (1,00,000)
Beginning cash balance 1,00,000 2,50,000
Required:
I. Compute and compare Net income and Cash flow from operation of Belta and Delta
trading of the year 2071. (12)
II. What would be the amount of ending cash balance of Belta and Delta trading at the
end of the year 2071. (8)
III. Analyze the Cash flow statement you prepared and comment on the financial
performance of the Belta and Delta trading company. Use appropriate ratio for
supporting calculations. (8)
IV. Why preparation of cash flow statement is essential along with balance sheet
preparation?
V.
VI.
VII.
VIII.
IX.
X.
XI.
XII.

(2)
1. The cash flow statement of the company for the year 2070 and 2071 are given below.
Details 2070 2071
 Sales revenue 11,00,000 16,00,000
Purchas of raw materials 5,00,000 12,00,000
Wages 1,00,000 2,50,000
Operating expenses 1,50,000 1,50,000
Depreciation 60,000 60,000
Administrative expenses 30,000 30,000
Selling expenses 20,000 40,000
Tax expenses 40,000 60,000
Other overhead 25,000 40,000
Increase/(decrease) in inventory (40,000) 2,50,000
Increase/ (decrease) in debtors 50,000 1,50,000
Increase/ (decrease) in creditors 60,000 (1,00,000)
Increase/(decrease) in other liabilities 30,000 40,000
Cash flow from operation ---------? --------?
Cash flow from financing activities
Issue of share capital ------- 2,00,000
Redemption of debenture (2,00,000) (3,00,000)
Dividend paid (50,000) (50,000)
Debenture issued --- 6,00,000
Net cash flow from financing activities (2,50,000) 4,50,000
Cash flow from investing activities
Purchase of plant (2,00,000) (2,00,000)
Purchase of investment ----- ----
Sale of investment 2,50,000 1,00,000
Sale of fixed assets ----- ----
Net cash flow from investing activities 50,000 (1,00,000)
Required:
XIII. Explain the difference between net income and cash flow from operation.
XIV. Comment on cash flow from operating, investing and financing activities of 2070 and
2071.
XV. What do you conclude the cash flow statement of the firm of two subsequent years?
XVI. Why preparation of cash flow statement is essential along with balance sheet
preparation?