CASH FLOW STATEMENTS

A Cash Flow Statement is one which is prepared from income statement and
balance sheet, showing sources of cash and uses of cash. It reveals the inflow and
outflow of cash during a particular period, and explains reasons for changes in
cash position between two balance sheet.
1.

ANSWER:
CASH FROM OPERATIONS
Particulars Rs. Rs.
Net profit 15,000
Add: non operating and
non cash expenses
Depreciation 3,000
Goodwill 3,000
Loss on sale of share 3,000
Provision of tax 4,000 13,000

28,000
Less: non cash and non
operating incomes
Profit on sale of machinery 5,000
CASH TRADING 23,000
PROFIT
ADD : dec in CA NIL
Inc in CL
LESS: Inc in CA NIL
Dec in CL
CASH FROM 23,000
OPERATIONS
2.

ANSWER:
CASH FROM OPERATIONS
Particulars Rs. Rs.
Net profit 10,000
Add: non operating and
non cash expenses
Depreciation 2,000
12,000
Less : non operation and NIL
non cash incomes
CASH TRADING 12,000
PROFIT
Add: Decrease in
CA/Increase in CL
Decrease in bills 1,000
receivable
Increase in bills payable 1,000
Increase in sundry 1,000
creditors
Increase in outstanding 500
expenses
Decrease in prepaid 1,000
expense
Increase in provision of 2,00 4,700
doubtful debts
16,700
 Less: Increase in
CA/Decrease in CL
Increase in debtors 2,000
Increase in inventories 3,000
Increase in short term 2,000
investments
Increase in accrued income 1,000
Decrease in income 1,000 9,000
received in advance
CASH FROM 7,700
OPERATIONS

3.

ANSWER:
CASH FLOW STATEMENT
Particulars Rs. Rs.
Opening cash balance 6,000
Add : cash inflows
Increase in trade creditors 1,200
Issue of shares 1,000
Cash from trading 600 2,800
operation
8,800
Less: cash outflows
Increase in debtors 3,500
Purchase of land and 1,200
building
Purchase of patent right 100 4,800

Closing cash balance 4,000

4.

Answer:
CASH FROM OPERATIONS
Particulars Rs. Rs.
Net profit 30,000
Add: non operating and
non cash expenses
Goodwill written off 10,000
Transfer of general reserve 10,000 20,000

50,000
Less: non operating non NIL
cash incomes
CASH TRADING 50,000
PROFIT
ADD: Decrease in
CA/Increase in CL
Increase in outstanding 5,000
expenses
Increase in creditors 10,000 15,000

65,000
Less : Increase in
CA/Decrease in CL
Increase in inventories 30,000
Increase in debtors 30,000
Increase in bills receivable 10,000 70,000

CASH LOST IN 5,000

OPERATION
 CASH FLOW STATEMENT
Particulars Rs. Rs.
Opening cash balance 10,000
ADD: Cash inflows
Issue of shares 50,000
Issue of bonds 10,000 60,000

70,000
LESS: Cash outflows
Cash lost in operation 5,000
Purchase of fixed asset 50,000 55,000

Closing balance 15,000

5.

Additional information:
a) Depreciation of Rs.10,000 and Rs.20,000 have been charged on Plant and Land and
Building a/c respectively in 2007.
b) Dividend of Rs.20,000 has been paid in 2007.
c) Income tax Rs.35,000 was paid in 2007.
ANSWER:
CASH FROM OPERATIONS
Particulars Rs. Rs.
Net profit 18,000
Add: non operating and
non cash expenses
Depreciation on plant 10,000
Depreciation on land and 20,000
building
Goodwill written off 25,000
Transfer of general reserve 30,000
Proposed dividend 28,000
Provision for tax 45,000 1,58,000

1,76,000
Less: non cash non nil
operating incomes
CASH FOR TRADING 1,76,000
PROFIT
ADD: Decrease in
CA/Increase in CL
Increase in creditors 28,000
2,04,000
LESS: Increase in
CA/Decrease in CL
Increase in debtors 40,000
Increase in stock 32,000
Increase in bills receivable 10,000
Decrease in bills payable 4,000 86,000

Cash from operations 1,18,000

CASH FLOW STATEMENT

Particulars Rs. Rs.
Opening cash balance 25,000
ADD: Cash inflows
Issue of share capital 1,00,000
Cash from operations 1,18,000
Sale of land 10,000 2,28,000

2,53,000
LESS: Cash outflows
Purchase of plant 1,30,000
Redemption of preference 50,000
share
Dividend 20,000
Income tax 35,000 2,35,000

Closing cash and bank 18,000

 balance

WORKING NOTES:
PLANT AND MACHINERY A/C
Dr Cr
Particulars Rs. Particulars Rs.
To bal b/d 80,000 By depreciation 10,000
To cash 1,30,000 By bal c/d 2,00,000
(purchases)
2,10,000 2,10,000

LAND A/C
Dr Cr
Particulars Rs. Particulars Rs.
To bal b/d 2,00,000 By depreciation 20,000
By cash (sale) 10,000
By bal c/d 1,70,000
2,00,000 2,00,000

PROPOSED DIVIDEND A/C

Dr Cr
Particulars Rs. Particulars Rs.
To dividend paid 20,000 By bal b/d 42,000
To bal c/d 50,000 By adjusted P&L 28,000
a/c (provision)
70,000 70,000

PRVISION FOR TAX A/C

Dr Cr
Particulars Rs. Particulars Rs.
To tax paid 35,000 By bal b/d 40,000
To bal c/d 50,000 By adjusted P&L 45,000
a/c(provision)
85,000 85,000