2019 Question paper – Section C – Solution

IN THE BOOKS OF RAMACHANDRA & SONS

Cash flow statement for the year ended 31.03.2017

Particulars Rs. Rs.

a) Cash flows from operating activities
Net profit after tax 55000
Add: Nil
Net profit before tax 55000
Add: Non-cash and non-operating expenses and losses:
Depreciation on machinery 19000
Loss on sale of machinery 10000
Cash flows before working capital changes 84000
Add: Decrease in stock 10000
Increase in creditors 4000
Less: Increase in debtors (20000)
Cash generated from operations /
Net cash flows from operating activities 78000

b) Cash flows from investing activities

Add: Sale of machinery 6000
Less: Purchase of land (15000)
Purchase of building (29000)
Purchase of machinery (10000)
Net cash flows from investing activities (48000)

c) Cash flows from financing activities

Add: Bank loan raised 10000
Less: Repayment of Mrs. Chitra’s loan (25000)
Drawings made by the proprietor (27000)

Net cash flows from financing activities (42000)

Net decrease in cash and cash equivalents (12000)

(a + b + c)
Add: Opening balance of cash and cash equivalents 20000

Closing balance of cash and cash 8000

equivalents
 MACHINERY A/C
To balance b/d 90000 By Cash / bank a/c 6000
To Provision for depreciation 35000 By Provision for depreciation a/c 4000
a/c (On machinery sold)
To Cash / Bank a/c 10000 By P & L a/c 10000
(Balancing figure – Purchase) (Loss on sale)
By Provision for depreciation a/c 50000
By balance c/d 65000
135000 135000

PROVISION FOR DEPRECIATION ON MACHINERY A/C

To Machinery a/c 4000 By Machinery a/c 35000
By P & L a/c 19000
To Machinery a/c 50000 (Balancing figure - Current year’s
depreciation charged)
54000 54000

CAPITAL A/C
To Drawings a/c 27000 By balance b/d 135000
(Balancing figure) By P & L a/c (Net profit after tax 55000
To balance c/d 163000 for the current year)
190000 190000

Working note 1: Calculation of profit or loss on sale of machinery

Cost of machinery sold 20000

Less: Accumulated depreciation up to the date of sale (4000)
Book value 16000
Less: Sale value (6000)
Loss on sale 10000