For a period Ind AS 7 IAS 7

Case 1 INR in million CFO (D)

Total Income 1000 1000
Total Expense 800 -680
EAT 200 320

If all incomes are operating incomes and received during the year
If all expneses are operating expenses and paid during the year, how much is the CFO f

Case 2 INR in million CFO

Total Income 1000 980
Total Expense 800 770
EAT 200 210

If all incomes are operating incomes except 20 million which is income on investments
If all expneses are operating expenses except interest expense of 30 million and paid d

Case 3
In question 1, expenses include depreciation of 100 million and bad debt of 20 million.
How much is CFO?
Apply direct method and indirect method.
 Reduced NC Expenses Direct method Indirect method
CFO EAT
Inflow 1000 Add: Dep + Bad det
Outflow 680
r, how much is the CFO for the year? 320

CFI 20

CFI CFF Net /\ CFF -30

20 310
-30
20 -30 200

income on investments and received during the year

of 30 million and paid during the year, how much is the CFO for the year?

d bad debt of 20 million. CFO

1000
680
320
 CFO(INDIRECT)

direct method PROFIT AS REPORTED 200

200 ADD DEPRN: 100
dd: Dep + Bad det 120 BAD DEBTS: 20
320 320
 BALANCE SHEET of X LTD as at 31st March
SOURCES 2017 2018 APPLICATION 2017 2018
Share capital 500 600 PPE net of depreciation 400 500
Securities premium 25
Retained Earnings 100 150 Non-current investments 100 50
Long Term Loans 200 150

Trade payables 20 35 Receivables 100 130

Interest payable 10 25 Inventory 80 120
Tax payable 20 40 Cash 170 225
TOTAL OF SOURCES 850 1025 TOTAL OF APPLICATION 850 1025
Some gross amounts from Balance sheet INCOME STATEMENT 2017-18
Operating CA other than cash 180 250 Sales 800
Operating CL 40 75 Less: COGS 500
Operating WC 140 175 Depreciation 100
Other expenses 50
FCFF starting with EBIT EBIT 150
EBIT 150 Less Interest 20
Add: Depreciation 100 EBT 130
Less: Tax on EBIT -45 Less: tax 39
Less: Increase in WC other than cash -35 EAT 91
Less: Capex -200
-30
FCFF starting with EAT CFO
EAT 91 EAT as Given 91
Add: Interest(1-t) 14 Add Tax 39
Add: Depreciation 100 Add Int 20
Less: Increase in WC -35 Add Depreciation 100
Less: Capex -200 250
-30 Less: Increase in inventory 40
FCFF starting with CFO Add: Increase in Trade Payabl 15 25
CFO 176 Less: Increase in Receivables 30
Less: Tax shield on interest -6 195
Tax Paid 19 55
Less: Capex -200 CFO 176
-30
CFI
Purchase of PPE -200
Non-Current Investments 50
CFI -150

CFF
Issue of Shares 125
Dividend Paid -41
Loan repaid -50
Interest Payable -5
CFF 29
CFO+CFI+CFF 55
 CASH FLOW STATEMENT Alternative way to calculate CFO NEW CFS CALC
Calculate CFO If you take EAT 91 EAT:
EBIT as per P & L statement 150 Add: Tax charge 39 ADD TAX:
Add: Interest 20 ADD:INTEREST
Add: Noncash expenses 150 ADD:DEPRECIATION
Depreciation 100 Add: Depreciation 100
CFO before change in WC 250 CFO before change in WC 250 CF BEFORE WC
Less: Increase in Recv 30 Less: Increase in Recv 30 LESS TR
Increase in Inventory 40 Increase in inventory 40 ADD TP
Add: Increase in trade payables 15 Add: Increase in trade payables 15 LESS INVENTORY
195 195
Less: Tax paid 19 Less: Tax paid 19 LESS TAX:
CFO 176 176 CFO
Calculate CFI
Purchase of PPE -200 EAT 91 CFI
Sale of noncurrent investments 50 TAX 39 PURCHSE OF PPE
CFI -150 INT 20 SALE OF I
Calculate CFF DEPRN 100 CFI
Issue of share capital 125 CF BEFORE WC CHANGES 250
Dividend paid -41 LESS:RECEIVABLES -30 CFF
Repayment of loan -50 INVENTORY -40 SHARE ISSUE
Payment of interest -5 ADD:TP 15 INT PAID
CFF 29 195 DIVIDEND
CFO+CFI+CFF 55 LESS TAX: 39 LOANS
change in cash balance in the BS 55 CFO 176 CFF

CFI CFO+CFI+CFF
PURCHASE -200 CASH BALANCE
NCI 50
CFI -150 FCFF from CFO

CFF
ISSUE OF SHARE 125
INT -5
LONG TERM LOANS -50
DIVIDEND -41
CFF 29

CFO+CFI+CFF 55
/\ IN Cash in BS 55

COGS=OS of FGs+Purchase of FGs-CS of FGs

500=80+X-120 Purchase=540
P= Sales-COGS=800-(80+540-120)=800-80-540+120
NEW CFS CALC
91
39
ADD:INTEREST 20
ADD:DEPRECIATION 100

CF BEFORE WC 250
-30
15
LESS INVENTORY -40
195
-19
176

PURCHSE OF PPE -200

50
-150

SHARE ISSUE 125

-5
-41
-50
29

CFO+CFI+CFF 55
CASH BALANCE 55

FCFF from CFO

176
TAX SHIELD: -6
170
Less:CAPEX -200
-30

EAT 91
LESS:CAPEX -200
ADD:DEPRN 100
LESS:WC -35
ADD:INT(1-T) 14
-30
 BALANCE SHEET of ALPHA LTD as at 31st March
2012 2013 2012 2013
Share capital 500 550 PPE net of depreciation 500 350
Securities premium 25
RE 200 230 Non-current investments 70 380
LTL 190 250
Trade receivable 90 85
Trade payable 50 40 Inventory 100 90
Interest payable 20 10 Prepaid expenses 40 50
Tax payable 30 25 Cash 190 175
990 1130 990 1130

CFO INCOME STATEMENT 2012-13

Sales 750
EAT as per Income statement 105 Less: COGS 450
Add: Tax expense 45 Depreciation 100
Add: Interest expense 30 Other expenses 50
180
Less: Profit from sale of assets 30 Add: Profit from sale of PPE 30
Add: Noncash expenses EBIT 180
Depreciation 100 Less Interest 30
CFO before change in WC 250 EBT 150
Add: Decrease in Recv 5 Less: tax 45
Decrease in inventory 10 EAT 105
Less: Increase in prepaid expenses 10
Less: Decrease in trade payables 10
245
Less: Tax paid 50
Cash from operating decisions 195
CFI
Sale of fixed assets 80
Purchase of noncurrent investmen -310
CFI -230
CFF
Issue of share capital 75
Dividend paid -75
Loan taken 60
Payment of interest -40
CFF 20
CFO+CFI+CFF -15
change in cash balance in the BS -15
Cash collected from customer
Beginning trade receivables 90
Sales during the year 750
Less: Ending trade receivables -85
Cash collected from customer 755

Impact of inventory change on cash flow

COGS = Opening inventory + Purchase - Closing inventory
or Opening inventory + Cost of goods manufactured - Closing inventory
Let the Purchase figure be X
COGS = 100 + X - 90
So, X = 450 + 90 - 100 = 440

Cash paid towards other expense

Opening prepaid expense 40
Expense paid during the period X
Less: Closing prepaid expense 50
Expense charged to income stateme 50
By solving the ebaove equation we get X = 50 + 50 - 40 = 60 (cash paid)

Cash paid to Supplier

Beginning trade payable 50
Purchase 440
Less: Ending trade payable 40
450
Impact of purchase on profit calculation is -440
But cash paid is 450
That requires an additional decution of 10 COGS = OS + Purchase - CS
450 = 100 + X - 90
Find purchases to ascertain TP So, X =
450+50=500 YEAR I
YEAR II= 450+40
DIFFERENCE 10 PAID
COGS=100+X-90
450=10+X
X=440 (Purchase)

Sales 750
P=Sales-COGS
750-450
300

EAT: 105
ADD TAX: 45
150
ADD INT: 30
180
LESS:PROFIT FROM PPE -30
150
ADD:DEPRN 100
BEFORE WC CHANGES 250
ADD:TR 5
INV 10
LESS:TP -10
LESS: PREPAID EXP -10
245
LESS: TAX 50
CFO 195

CFI
Sale of PPE 80
Purchase of NCI -310
CFI -230

CFF
ISSUE OF SHARE 75
LTL 60
Dividend -75
Interest -40
CFF 20
CFO+CFI+CFF -15
/\ IN Cash -15
 Income Statement for the year 2017-18
INCOME
Revenue from sales 5200
Other recurring revenue 100
Interest accrued and due 25
Total 5325
LESS: EXPENSES
COGS 3700
Selling & Distribution Expenses 100
Administrative Expenses 150
Depreciation 300
Interest 90
Tax charges 250
Total 4590
EAT 735

CASH FLOW STATEMENT

Cash from operating activities:
EBIT 1075
Add: Non-cash expenses 300
Less: Interest income 25
1350
Add: Decrease in other current assets 10
1,360
Add: Increase in current liabilities 260
1,620
Less Tax paid 200
1,420

Cash from investing activities

Purchase of assets -210
Purchase of investments -75
-285
Cash from financing activities
Share issue 50
Dividend paid -385
Interest paid -100
-435
SUMMARY OF CASH FLOW STATEMENT

Cash from operations 1,420

Cash from investing activities -285
Cash from financing activities -435
Change in cash 700

Opening balance of cash & cash equivalen 2,800

Add: Change in cash 700
Closing balance of cash & cash equivalent 3,500
 BALANCE SHEET AS AT 31ST MARCH
SOURCES 2018 2017
Equity Share Capital 750 700
Other Equity 9,350 9,000
Operating current liabilities 2,560 2,300
Tax payable 200 150
Interest payable 40 50
TOTAL 12,900 12,200
APPLICATION
Noncurrent assets
PPE (Gross Block) 10,500 9,900
Accumulated Depreciation -6,090 -5,800
PPE (Net Block) 4,410 4,100
Capital Work-in-progress 1,800 2,200
Investments 900 800
Current Assets
Cash & cash equivalents 3,500 2,800
Operating and nonoperating current assets 2,290 2,300
TOTAL 12,900 12,200
There is no asset sale during the year.
WORKING NOTE-1
PPE opening balance 9,900
Less: Asset discarded (Reconcile Accumulated Depreciation 10
9890
WIP capitalised (WIP completede and tr to PPE) 400
Purchase of assets (Balancing figure) 210 plug number
PPE closing balance 10,500
WORKING NOTE-2
Opening balance of reserves & surplus 9,000
Add:EAT 735
9,735
Less Dividend paid (Balancing figure) 385
Closing Balance of reserves & surplus 9,350
WORKING NOTE-3
Investments opening balance 800
Add: Interest accrued and due 25
825
Purchase of investments (Balancing figure) 75 plug number
Investments closing balance 900
10 30
-10 -15
0 15 WDV
 BALANCE SHEET of ALPHA LTD as at 31st March ( Figures in lakhs)
2017 2018
Share capital 500 550 PPE net of depreciation
Securities premium 25
Non-current investments (at
Retained Earnings 200 250 cost)

LTL 220 210 Current Assets:

Dividend payable 20 Trade receivable
Trade payable 50 40 Inventory
Interest payable 20 10 Prepaid expenses
Tax payable 30 25 Cash
1020 1130

INCOME STATEMENT 2017-18 CFS

Sales 750 Cash from operations
Interest received 10 EAT as given
Total Income 760 Add: Tax
Less: COGS 450 Add: Interest
Depreciation 100 Add: Loss on investment
Other expenses 50 Less: Profit from sale of PPE
Add: Profit from sale of PPE 30 Add: Dep
Less: Loss on sale of investments 10 Less: Interest income
EBIT 180
Less: Interest 30 Add: Decrease in trade receivabl
EBT 150 Less: Increase in inventory
Less: Tax 45 Less: Increase in prepaid expense
EAT 105 Less: Decrease in trade payable
Less: Tax paid
CFO
CFI
Machine purchased
Machine sold
Interest received
 investment sale
Investment purchased

CFF
Interest paid
Dividend paid
Share issue
Loan repaid

CFO + CFI + CFF

Additional Information:
1. A machine was purchased during the year for 75 lakhs. The payment for this machine was settled
Shares of Rs.25 lakhs were issued for the above machine purchase.
2. Investments of Rs.60 lakhs were sold.
Opening cash balance
Change in cash during the year
Clsoing balance of cash
s in lakhs)
2017 2018
400 350

200 240 140

Working notes:
90 85 100
100 150 Opening inventory 100
40 50 Add: Purchase P
190 255 65 Less: Closing inventory 150
1020 1130 COGS 450
So, purchase = 500
(2017-18) OP trade payable + Purchase - Cl trade payable = Cash pa
510
105 Opening receivable 90
45 Add: Sales 750
30 Less: Closing receivables 85
10 Cash collected from cust 755
-30
100 Sales - COGS = GP
-10 Sales - (OP inventory + Purchase - Cl inventory) = Profit
250 Sales - OP inventory - Purchase + Cl inventory = Profit
5 750 -100 - 500 + 150 = GP
-50
-10 Purchase triggers cash payment
-10 Per se
-50 As such
135

-50
55
10
 50
-100
-35

-40
-35
50
-10
-35

65

machine was settled during the year.

190
65
255
e payable = Cash paid to the suppliers

nventory) = Profit
nventory = Profit
 INR in lakhs
Income Statement for the year 2018-19 BALANCE SHEET AS AT 31ST MARCH
INCOME SOURCES
Revenue from sales 5200 Equity Share Capital
Other recurring revenue 100 Reserves & Surplus
Profit on sale of investments 50 10% Bonds
Interest accrued & due 15 Operating current liabilities
Interest accrued but not due 10
Total 5375 Tax payable
LESS: EXPENSES Interest payable
COGS 3700 TOTAL
Selling & Distribution Expense 100 APPLICATION
Administrative Expenses 150 Noncurrent assets
Depreciation 300 PPE (Gross Block)
Interest 90 Accumulated Depreciation
Tax charges 250 PPE (Net Block)
Total 4590 Capital Work-in-progress
EAT 785 Investments
Current Assets
Cash & cash equivalents
Interest accrued but not due

Other operating &

nonoperating current assets
TOTAL

An asset has been discarded.

Shares have been issued with premium of Rs.100 lakhs
Investment of Rs.100 lakhs was sold.
 INR in lakhs
EET AS AT 31ST MARCH CFO
2018 2019 EBITDA 1425
750 1400 Less: Nonoperating income 75
9,350 9,000 1350
1,000 800 Add: Increase in operating current liabilitie 100
3,000 3,100 Add: decrease in operating current assets 310
1,760
200 220
100 80 Less: Tax paid 230
14,400 14,600 CFO 1,530

10,500 10,600 CFI

-6,000 -5,800 Sale of investments 150
4,500 4,800 Purchase of investments -285
1,800 1,600 PPE purchase -400
5400 5600 -535

700 900 CFF

10 Issue of shares 750

2,000 1,690 Div paid -1235

14,400 14,600 Loan repaid -200
Interest paid -110
-795
CFO + CFI + CFF 200
Change in cash balance 200

Purchase of investments
Investment - Opening balance 5400
Add: interest accrued and due 15
Less: Sale of investments -100
5315
Purchase of investmnets 285
Closing balance of investments 5600
Dividend payment
R&S- Opening balance 9,350
Add: Securities premium 100
Add: EAT 785
10,235
Less: Closing balance 9,000
Dividend declared and paid 1,235

Depreciation - OB 6000
Add: Dep during the year 300
6300
Dep- closing balance 5800
Difference 500
So, asset discarded 500

Profit or loss on asset discarded nil

PPE- opening balance 10,500

Less: asset discarded 500
10000
Add: Transfer from CWIP 200
10200
PPE- purchase 400
PPE- closing balance 10,600
OB of int payable + int exp - closing balance of Int

Plug number
Plug number