FINANCIAL ANALYSIS13 UNITS 1 & 2 : FUND FLOW STATEMENT AND CASH FLOW STATEMENT (A) Write short notes on: Question 1 Cash Flow Statement. Answer Cash flow statement is a statement of inflows and outflows of cash and cash equivalents. It starts with the opening balance of cash and cash equivalents at the start of the accounting period. It then gives in a summary form, the inflows and outflows relating to the following three classifications of activities : (i) Operating activities : They are the principal revenue producing activities of the enterprise. (5 marks) (Intermediate–Nov. 1997) (ii) Investing activities : They deal with the acquisition and disposal of long-term assets and long term investments. (iii) Financing activities : They reflect changes in the size and composition of capital in the case of a company this would preference capital and borrowings of the enterprise. The cash flows arising from extraordinary items are disclosed separately under each of the above three classifications. Likewise where the amount of significant cash and cash equivalent balances held by an enterprise are not available for use by the enterprise, the same should be disclosed separately together with a commentary by the management. Question 2 In the case of manufacturing company : (i) List the items of ‘inflows’ of cash receipts from operating activities; (4 marks) [Intermediate May 1998] (ii) List the items of “outlflows” of investing activities. 13.2 Accounting Answer (i) Inflows of cash receipts from operating activities : (a) Cash receipts from the sales of goods; (b) Royalties, fees, commission and other revenue; (c) Refunds of income-tax. (ii) Outflows of investing activities : (a) Cash payments for acquisition of fixed assets; (b) Cash payments for acquisition of shares, warrants or debts instruments of other enterprises and interests in joint ventures (other than payments for instruments considered to cash equivalents and those for dealing or trading purposes); (c) Cash advances and loans to third parties. Question 3 Classification of activities (with two examples) as suggested in AS 3, to be used for preparing a cash flow statements. (5 marks) (Intermediate–May 2001) Answer AS 3 (Revised) on Cash Flow Statements requires that the cash flow statement should report cash flows by operating, investing and financing activities. (i) Operating activities are the principal revenue-producing activities of the enterprise and other activities that are not investing or financing activities. Cash receipts from sale of goods and cash payments to suppliers of goods are two examples of operating activities. (ii) Investing activities are acquisition and disposal of long-term assets and other investments not included in cash equivalents. Payment made to acquire machinery and cash received for sale of furniture are examples of investing activities. (iii) Financial activities are those activities that result in changes in the size and composition of the owner’s capital (including preference share capital in the case of a company) and borrowings of the enterprise. Cash proceeds from issue of shares and cash paid to redeem debentures are two examples of financing activities. Question 4 Explain the difference between direct and indirect methods of reporting cash flows from operating activities with reference to Accounting Standard 3, (AS 3) revised. (8 marks) (Final Nov. 2001) Answer As per para 18 of AS 3 (Revised) on Cash Flow Statements, an enterprise should report cash flows from operating activities using either : Financial Analysis 13.3 (a) the direct method, whereby major classes of gross cash receipts and gross cash payments are disclosed; or (b) the indirect method, whereby net profit or loss in adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing or financing cash flows. The direct method provides information which may be useful in estimating future cash flows and which is not available under the indirect method and is, therefore, considered more appropriate than the indirect method. Under the direct method, information about major classes of gross cash receipts and gross cash payments may be obtained either : (a) from the accounting records of the enterprise; or (b) by adjusting sales, cost of sales (interest and similar income and interest expense and similar charges for a financial enterprise) and other items in the statment of profit and loss for : (i) changes during the period in inventories and operating receivables and payables; (ii) other non-cash items; and (iii) other items for which the cash effects are investing or financing cash flows. Under the indirect method, the net cash flow from operating activies is determined by adjusting net profit or loss for the effects of : (a) changes during the period in inventories and operating receivables and payables; (b non-cash items such as depreciation, provisions, deferred taxes and unrealised foreign exchange gains and losses; and (c) all other items for which the cash effects are investing or financing cash flows. Alternatively, the net cash flow from operating activities may be presented under the indirect method by showing the operating revenues and expenses, excluding non-cash items disclosed in the statement of profit and loss and the changes during the period in inventories and operating receivables and payables. Question 5 What all are the differences between Cash Flow statement and Fund Flow statement? (4 Marks) (PE-II – May 2006) Answer Differences between cash flow statement and fund flow statement (i) Cash flow statement deals with the change in cash position between two points of time. Fund flow statement deals with the changes in working capital position. (ii) Cash flow statement contains opening as well as closing balances of cash and cash equivalents. The fund flow statement does not contain any such opening and closing balance. a cash flow statement cannot be prepared from fund flow statement. (B) Practical Questions: Question 1 Given below are the condensed Balance Sheets of Lambakadi Ltd.13. in lakhs) Sales 600 Less : Cost of sales 400 200 Establishment charges 30 Selling and distribution expenses 60 Interest expenses 5 Loss on sale of equipment (Book value Rs. (iv) Fund flow statement can be prepared from the cash flow statement under indirect method. in lakhs) As at 31st March 1998 1997 Share Capital In equity shares of Rs. 40 lakhs) 15 110 90 Interest income 4 Dividend income 2 Foreign exchange gain 10 Damages received for loss of reputation 14 30 120 . However. 1998 (Figures Rs. (v) A statement of changes in working capital is usually prepared alongwith fund flow statement.4 Accounting (iii) Cash flow statement records only inflow and outflow of cash. for two years and the statement of Profit and Loss for one year : (Figures Rs. 100 each 10 40 Capital redemption reserve 10 — General reserve 15 10 Profit and loss account balance 30 20 8% debentures with convertible option 20 40 Other term loans 15 30 250 Fixed assets less depreciation Long term investments Working capital 130 40 80 250 250 100 50 100 250 Statement of Profit and Loss for the year ended 31st March. 100 each 150 110 10% redeemable preference shares of Rs. No such statement is prepared along with the cash flow statement. Fund flow statement records sources and application of funds. 1998 in accordance with para 18(a) of Accounting Standard (AS) 3 revised.97 exercised the option for conversion into equity shares during the financial year and the same was put through. 1998 (Rs.1 5 3 8 1.5 Depreciation Taxes Dividends Net profit carried to Balance Sheet 50 70 30 40 15 25 Your are informed by the accountant that ledgers relating to debtors. You are required to prepare a direct method cash flow statement for the financial year. (20 marks) (Final May 1998) Answer Lambakadi Ltd.4 0. in lakhs) Cash flows from operating activities Cash receipts from customers Cash paid to suppliers and employees Cash generated from operations Taxes paid Cash flows before extraordinary item Damages received for loss of reputation Net cash from operating activities 621 (496) 125 (27) 98 14 112 . creditors and stock for both the years were seized by the income-tax authorities and it would take atleast two months to obtain copies of the same.5 1. in lakhs) 1998 1997 Dividend receivable 2 4 Interest receivable 3 2 Cash on hand and with bank 7 10 Investments maturing within two months 3 2 15 18 Interest payable Taxes payable Current ratio Acid test ratio 4 6 10 1. he is able to furnish the following data : (Figures Rs.3. However. Direct Method Cash Flow Statement for the year ended 31st March.8 It is also gathered that debentureholders owning 50% of the debentures outstanding as on 31.Financial Analysis 13. creditors and stock (a) Current Ratio 31.1998 7 3 10 (10) Nil 31.4:1 31.20 lakhs. Conversion of debentures into equity shares. Cash and Cash Equivalents Cash on hand and with bank Short-term investments Effect of exchange rate changes Cash and cash equivalents Rs.98 1. a non-cash transaction.3.1997 10 2 12 – 12 NIL 20 (30) (15) (6) (15) (46) (12) 12 (120) 25 10 3 4 (78) 2.3.97 1. Calculation of debtors. amounted to .13.6 Accounting Cash flows from investing activities Purchase of fixed assets Proceeds from sale of equipment Proceeds from sale of long term investments Interest received Dividend received Net cash used in investing activities Cash flows from financing activities Proceeds from issuance of share capital Redemption of preference share capital Repayments of term loans Interest paid Dividend paid Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period (See Note 1 to the Cash Flow Statement) Cash and cash equivalents at end of the period (See Note 1 to the Cash Flow Statement) Notes to the Cash Flow Statement (Rs. in lakhs) 1.3.5:1 (Rs. Working Notes : 1.3. in lakhs) 31. 5 0. in lakhs) 150 182 18 350 242 8 250 600 182 782 161 621 400 30 60 490 306 796 300 496 64 161 15 240 150 10 160 242 64 150 150 .in lakhs) (b) Current Ratio Less : Acid Test Ratio Stock : Current Liabilities Stock (Rs.in lakhs) (c) Break-up of Current Assets Stock Debtors (Balancing figures) Other Current Assets (d) Break-up of Current Liabilities Creditors (Balancing figures) Others 2.4 240 – 80 = 160 1.4:1 160 × 0.5:1 80 80 1.Financial Analysis 13.4 350 0.4 = 64 350 – 100 = 250 1. Cash paid to suppliers and employees Cost of sales Establishment charges Selling and distribution expenses Add: Creditors at the beginning of the year Stock at the end of the year Less : Creditors at the end of year Stock at the beginning of the year 0.1 0.6:1 250 × 0.4 0.8 0.in lakhs) Current Assets (Rs.6 0.in lakhs) Current Liabilities (Rs.5 240 0. Cash receipts from customers Sales Add: Debtors at the beginning of the year Less : Debtors at the end of the year 3.5 1.4:1 100 10 1.6 = 150 (Rs.7 Working Capital to Current Liabilities Ratio Working Capital (Rs.4 0. 13.8 Accounting 4.V.3.3.1997 Purchase of fixed assets 6.D. at 31.1998 Add back : Depreciation for the year Disposals Less : W. Taxes paid Tax expense for the year Add : Tax liability at the beginning of the year Less : Tax liability at the end of year 30 3 33 6 27 5. Issue of shares Equity share capital at the end of the year Less : Equity share capital at the beginning of the year Less : Conversion of debentures into equity shares during the year (non-cash transaction) Cash flow from issue of equity shares 9. Dividend received Dividend income for the year Add : Amount receivable at the beginning of the year Less : Amount receivable at the end of the year 130 50 40 220 100 120 4 2 6 3 3 2 4 6 2 4 8.D. Fixed assets acquisitions W. Interest received Interest income for the year Add : Amount receivable at the beginning of the year Less : Amount receivable at the end of the year 7.V. at 31. Interest paid Interest expense for the year Add : Interest payable at the beginning of the year 150 110 40 20 20 5 5 . Question 2 The following are the changes in the account balances taken from the Balance Sheets of PQ Ltd.9 Less : Interest payable at the end of the year Notes : 1.000 [64.000 43. was sold for Rs. 13. (b) During the year plant costing Rs. 10 each issued and fully paid Capital reserve 8% debentures Debenture discount Freehold property at cost/revaluation Plant and machinery at cost Depreciation on plant and machinery Debtors Stock and work-in-progress Creditors Net profit for the year Dividend paid in respect of earlier year Provision for doubtful debts Trade investments at cost Bank You are informed that. 10 4 6 2.500 [11.000] 1. It has been assumed that foreign exchange gain represents the effect of changes in exchange rates on cash and cash equivalents held in a foreign currency.500 was lying.Financial Analysis 13. 15 lakhs have been paid off.000 [14.000. Rs. 7. as at the beginning and end of the year. It has been assumed that dividends for the year.500] 30.400] 50.300] 0 .000 [3. 0 ]49.000 60.300] 47.800] [76.200] [50.000 against which depreciation provision of Rs. 18. (a) Capital reserve as at the end of the year represented realised profits on sale of one freehold property together with surplus arising on the revaluation of balance of freehold properties.000 shares of Rs.000 38. : Changes in Rupees in debt or [credit] Equity share capital 30. 30. 1998) Answer PQ Ltd.900 Increase in debtors (less provision) (46..700) Increase in stock and work-in-progress (38.800) 17. 50.000 Operating profit before working capital changes 1. 64.000) Proceeds from sale of plant 7.000 debentures were issued for cash at a discount of Rs.13.500 (1. why bank borrowing has increased by Rs.900 Profit on sale of plant (2. Ignore taxation.300 was made up through borrowing from bank. You are required to prepare a statement which will explain.000) Dividend paid in financing activities (30. Cash Flow Statement for the year ended.000 Proceeds from sale of freehold property 6. Working Notes : (1) Plant and Machinery Amount of increase (at cost) Add : Disposal (at cost) Acquisition during the year Rs.10 Accounting (c) During the middle of the year Rs.300 during the year end. (d) The net profit for the year was after crediting the profit on sale of plant and charging debenture interest..000 Debenture interest paid (2.03.500) Interest expense 2.000) Net cash used in investing activities Cash flows from financing activities Proceeds from issuance od debentures at discount 49.500 Adjustments for : Depreciation 27.000 64.000.000) Net cash from financing activities Excess of outflows over inflows Thus the shortfall of Rs. (15 marks)(Final Nov.000 78.11.000 .800 Net cash operating activities Cash flows from investing activities Purchase of plant and machinery (78.500) Increase in creditors 11.200 Increase in trade investments (47.000 18.300 Rs 60. 64. 1. Cash flows from operating activities Net profit 76. 500 60.500 Plant and Machinery Account Rs. 50. .000 13. the entire amount of change has been considered under the closing balances for the purpose of calculation of missing figures.000.400 27.000 6.Financial Analysis 13.500 2.000 – 13. Notes : (1) Investment income and dividend pertaining to the current year have not been considered in the absence of any related information.000 80.200 43.200 43.900 6.200 By Bank A/c (Balancing figure) By Balance c/d By Balance b/d By Profit and Loss A/c (Balancing figure) 2. By Bank (Sale proceeds) By Provision for Depreciation By Balance c/d 7.000 49.900 (c) To Balance b/d To Capital reserve Freehold Property Account — 49.500 14. 7.900 27.500) Profit on sale (2) Freehold property Capital Reserve Less : Increase in freehold property (closing balance minus opening balance) Proceeds from sale of freehold property Memorandum Accounts (a) To Balance b/d To Profit and Loss A/c (Profit on sale) To Bank (Balancing figure) 78.11 Disposal of plant : proceeds from sale Net book value (18.000 80.500 (b) Provision for Depreciation (Plant and Machinery) Account 13.500 To Plant and Machinery A/c To Balance c/d 27.000 4.200 49. (2) Debenture interest has been calculated for 6 months @ 8% on Rs.500 49.200 Rs.200 In the absence of information about the opening balances. 1999 (Rs.558 532 20 552 27.278 210 5.348 18.284 (12) 3.272 18.457 32.13.12 Accounting Question 3 Examine the following schedule prepared by K Ltd.’000) .000 (626) 33.’000) Sales Add : Decrease in bills receivable.066 11 3.330 50 1.786 5. Schedule of funds provided by operations for the year ended 31st July. K Ltd.134 (Rs. Less : Increase in accounts receivable Inflow from operating revenues Cost of goods sold Less : Decrease in inventories Add : Decrease in trades payable Wages and Salaries Less : Increase in wages payable Administrative Expenses Add : Increase in prepaid expenses Property taxes Interest expenses Add : Amortisation of premium on bonds payable Outflow from operating expenses From operations Rent Income Add : Increase in unearned rent Income tax Less : Increase in deferred tax Funds from operations Required : (i) What is the definition of funds shown in the schedule? (ii) What amount was reported as gross margin in the income statement? (iii) How much cash was collected from the customers? (iv) How much cash was paid for the purchases made? 207 3 1.588 (212) 81 5.077 428 5.760 1.280 4. Rs.Financial Analysis 13.760 18.13 (v) As a result of change in inventories. (’000) Sales Cost of goods sold (iii) Cash collected from the customers (iv) Cash paid for purchases made (v) Change in inventories would reduce the working capital by (vi) Rental income earned during the year (vii) Tax expenses reported in the income statement (Viii) Reconciliation Statement Profit after tax (See W. did the working capital increase or decrease and by what amount? (vi) How much rent was actually earned during the year? (vii) What was the amount of tax expenses reported on the income statement? Can you reconcile the profit after tax-with the funds provided by the operations? (16 marks)(Final May 2000) Answer (i) ‘Funds’ shown in the schedule refer to the cash and cash equivalents [as defined in AS 3 (Revised) on Cash Flow Statements].278 (ii) Gross margin in the income statement : .588 14.457 212 207 1330 Rs.e.172 33.134 18.719 1.000 (626) 212 (81) 12 (11) 3 50 4. cash and cash equivalents) 32.) Decrease in bills receivable Increase in accounts receivable Decrease in inventories Decrease in trades payable Increase in wages payable Increase in prepaid expenses Increase in unearned rent Increase in deferred tax Funds from operations as shown in the schedule (i.(’000) 3.N. 760 18.066 428 532 20 9.14 Accounting Working Note : Calculation of Profit after Tax Sales Less : Cost of goods sold Gross margin Add : Rental income Less : Wages and salaries Administrative expenses Property taxes Interest expenses Amortisation of premium on bonds payable Profit before tax Less : Income tax Profit after tax Question 4 Ms.506 10.13.765 2.248 40 185 20. in Lakhs) Net Profit Dividend (including dividend tax) paid Provision for Income tax Income tax paid during the year Loss on sale of assets (net) Book value of the assets sold Depreciation charged to Profit & Loss Account Amortisation of Capital grant Profit on sale of Investments Carrying amount of Investment sold Interest income on investments Increase expenses Interest paid during the year 25.000 4.330 3.284 3.000 10.520 5.379 .000 8.330 5. Joyti of Star Oils Limited has collected the following information for the preparation of cash flow statement for the year 2000 : (Rs.535 5.172 207 14.000 6 100 27. (’000) 32.049 1.719 Rs.588 14. in lakhs) Cash flows from operating activities Net profit before taxation (25.560 Investment in joint venture 3.003 Closing cash and Bank balance 6.000 57.850 Expenditure on construction work in progress 34. Cash Flow Statements issued by the Institute of Chartered Accounants of India.980 Proceeds from short-term borrowings 20. (16 marks)(Final May 2001) Answer Star Oils Limited Cash Flow Statement for the year ended 31st December.895) 145 (27.15 Increase in Working Capital (excluding Cash & Bank Balance) 56.248) (2.Financial Analysis 13.000 + 5.988 Required : Prepare the Cash Flow Statement for the year 2000 in accordance with AS 3.353 (4.765 + 100) 30.740 Proceeds from calls in arrear 2 Receipt of grant for capital projects 12 Proceeds from long-term borrowings 25.865) .000) Adjustments for : Depreciation Loss on sale of assets (Net) Amortisation of capital grant Profit on sale of investments Interest income on investments Interest expenses Operating profit before working capital changes Changes in working capital (Excluding cash and bank balance) Cash generated from operations Income taxes paid Net cash used in operating activities Cash flows from investing activities Sale of assets Sale of investments (27.000 20.575 Opening cash and Bank balance 5.075) 1.506) 10. (make necessary assumptions).000 40 (6) (100) (2. 2000 (Rs.075 Purchase of fixed assets 14.428 (56. 4. The company does not have any cash equivalents. 2.985 5.000 200 200 100 250 . ’000 Balance on 1.520) (8.3.514 1.2001 Rs.2000 Issue of Equity Shares Receipts from Customers Sale of Fixed Assets 50 300 2.13. 2001 in accordance with AS 3 (Revised) using the direct method. Question 5 2.506 has been received during the year.16 Accounting Interest income on investments Purchase of fixed assets Investment in joint venture Expenditure on construction work-in progress Net cash used in investing activities Cash flows from financing activities Proceeds from calls in arrear Receipts of grant for capital projects Proceeds from long-term borrowings Proceed from short-term borrowings Interest paid Dividend (including dividend tax) paid Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period Working note : Book value of the assets sold Less : Loss on sale of assets Proceeds on sale Assumption : Interest income on investments Rs.560) (3.850) (34. Summary Cash Account for the year ended 31.800 100 Payment to Suppliers Purchase of Fixed Assets Overhead expense Wages and Salaries Taxation Rs.980 20.535) 27.634) 2 12 25. ’000 2.506 (14.988 185 40 145 From the following Summary Cash Account of X Ltd.575 (10. prepare Cash Flow Statement for the year ended 31st March.003 6.740) (22. 000) (100) (200) 500 (250) 50 300 150 3.3. 2001) Rs. 2001 (Using the direct method) Rs. Cash Flow Statement for the year ended 31st March.250 Answer X Ltd. ’000 Cash flows from operating activities Cash receipts from customers Cash payments to suppliers Cash paid to employees Cash payments for overheads Cash generated from operations Income tax paid Net cash from operating activities Cash flows from investing activities Payments for purchase of fixed assets Proceeds from sale of fixed assets Net cash used in investing activities Cash flows from financing activities Proceeds from issuance of equity shares Bank loan repaid Dividend paid Net cash used in financing activities Net increase in cash Cash at beginning of the period Cash at end of the period 300 (300) (50) (200) 100 2.Financial Analysis 13.2001 3.17 Dividend Repayment of Bank Loan Balance on 31.250 (8 marks)(Final Nov.800 (2.’000 250 (100) (50) 100 50 150 . 20.00.03.000 4.000 5. 50.000) was sold for Rs.000 2.000 1. (ii) During the year one old machine costing 50.00.00.) 8. Prepare Cash flow Statement.000 2.2001 (Rs.000 1.000 .00.18 Accounting Question 6 From the following details relating to the Accounts of Grow More Ltd.000 6.000 31.03.000 2.000 – 70. (iii) Rs.000 1.00.000 1.000 – 7.00.00.50.000 20.000 60. (16 marks) (PE-II–Nov.000 4. 35.00. 2002) Answer Grow More Ltd Cash Flow Statement for the year ended 31st March.00.00.00.000.00.000 2.000 8. prepare Cash Flow Statement: Liabilities Share Capital Reserve Profit and Loss Account Debentures Provision for taxation Proposed dividend Sundry Creditors Assets Plant and Machinery Land and Building Investments Sundry Debtors Stock Cash on hand/Bank 7.00.00.000 2.00.000 (i) Depreciation @ 25% was charged on the opening value of Plant and Machinery.2002 (Rs.000 2.) 10.00.000 (WDV 20.000 1. 2002 Cash Flow from Operating Activities Net Profit Proposed Dividend 40.000 5.000 was paid towards Income tax during the year.000 31.000 2.00.00.00.00.00.000 25.13.00. (iv) Building under construction was not subject to any depreciation.00.00.00.000 20.000 7.000 25. 000 (1.00.000 By 1.Financial Analysis 13.00.000 (3.25.000 1.000 (15.50.00.000) 35. Balance b/d Profit and Loss A/c (Balancing figure) 1.000 NIL 2.60.00.000 50.00.00.000 (1.000 (6.000 By 1.000) 3.000 2.45.000 80.10.00.000) 3.000 2.000) 3.000 Rs.80.000 80.000) (1.000) 2.000) 4.000) (2.20.00. To To Cash (Paid) Balance c/d 50.000) 2.000 (50.00.000 70.19 Provision for taxation Transfer to General Reserve Depreciation Profit on sale of Plant and Machinery Operating Profit before Working Capital changes Increase in Stock Decrease in debtors Decrease in creditors Cash generated from operations Income tax paid Net Cash from operating activities Cash Flow from Inventing Activities Purchase of fixed assets Expenses on building Increase in investments Sale of old machine Net Cash used ininvesting activities Cash Flow from financing activities: Proceeds from issue of shares Proceeds from issue of debentures Dividend paid Net cash used in financing activities Net increase in cash or cash equivalents Cash and Cash equivalents at the beginning of the year Cash and Cash equivalents at the end of the year Working Notes: Provision for taxation account Rs.50.00.00.10.000 .000 (2. 25.00. 2003 Rs.000 8.00.50.000 70.000 31st March.00. 2003 Rs. To To Balance b/d Cash (Balancing figure) 5. 2002 Rs. Assets Land and Building Plant and Machinery 1.45.20 Accounting Plant and Machinery account Rs.000 2.000 50. 2003: Balance Sheet 31st March.000 30.45.000 By 3.00.000 31st March.000 15.50.00.000 20.00.50.000 1.000 5.000 60.000 60. 5.000 12.000 – 80. prepare Cash Flow Statement of Ryan Ltd. 2.000 95.000 20.13.00.00.000 90.000 30.45.65. 2002 Rs.000 7.000 7.000 – 1.00.000 20.000 2.00.000 1.000 Question 7 From the following Balance Sheet and information.000 – – 2. 1.00.000 .00.000 95.000 By _______ By 8.000 Depreciation Cash (sale of machine) Balance c/d Rs.000 31st March. for the year ended 31st March. Liabilities Equity Share Capital 10% Redeemable Preference Capital Capital Redemption Reserve Capital Reserve General Reserve Profit and Loss Account 9% Debentures Sundry Creditors Bills Payable Liabilities for Expenses Provision for Taxation Proposed Dividend 6. 000 Rs.000 3.000 90.20.000. 90. 1. 2002 a plant was sold for Rs.45.V.000 80. 50.000 and W.000 65.21 Investments Inventory Bills Receivable Sundry Debtors Cash and Bank Preliminary Expenses Voluntary Separation Payments Additional Information: (i) 50.53.000 15. (iii) Part of the investments (Cost – Rs. 2003 Cash flow from operating activities Net Profit before taxation Adjustment for Depreciation Preliminary expenses Profit on sale of plant Profit on sale of investments Interest on debentures Operating profit before working capital changes Increase in inventory 1.000 (40. 70. 5.D. (ii) On 1st April.000 (Cost – Rs.000 1.35. (vi) Voluntary separation cost of Rs. (v) Directors have proposed 15% dividend for the current year. 2.000 1.75. 70. (vii) Income-tax liability for the current year was estimated at Rs. (20 marks) (PE-II–May 2003) Answer Cash Flow Statement of Ryan Limited For the year ended 31st March. (viii) Depreciation @ 15% has been written off from Plant account but no depreciation has been charged on Land and Building.000 (5.000.000 (Original Cost – Rs.5 lakhs acquired.000) Rs. 4.000 70.Financial Analysis 13.000) (20.000 65. (iv) Pre-acquisition dividend received Rs. .50.000) was sold for Rs. 1.000 12. 50.000 was adjusted against cost of investment.000 15. 50.000) 18. Capital Reserve consisted of profit on sale and profit on revaluation.50.000 was adjusted against General Reserve.00.000 65.000 25.000 95. 1.000 A piece of land has been sold out for Rs.000 1.35.30.25. – Rs. 1 lakh was issued at par as part consideration for plant of Rs.000 10.000 90.000) and the balance land was revalued.000) and Debentures worth Rs. 000 1.13.000) 1.13.50.23.000) (25.000) 5.10.00.000 (10.000) 1. Net profit before taxation Retained profit Less: Balance as on 31.00.000 3.00.000 .000) (25.000 (45.000) 5.3.000 (50. 70.000 70.000) 10.000 1.000 90.000) (60.000) (18.00.23.2002 Rs.000 (3.000) 2.000) (78.000 (60.000 (2.000) 15.50.000 (1.000 (1.22 Accounting Decrease in bills receivable Increase in debtors Increase in creditors Decrease in bills payable Increase in accrued liabilities Cash generated from operations Income taxes paid Voluntary separation payments Net cash from operating activities Cash flow from investing activities Proceeds from sale of land Proceeds from sale of plant Proceeds from sale of investments Purchase of plant Purchase of investments Pre-acquisition dividend received Net cash used in investing activities Cash flow from financing activities Proceeds from issue of equity shares Proceeds from issue of debentures Redemption of preference shares Dividends paid Interest paid on debentures Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and Cash equivalents at the end of the year Working Notes: 1.000 65.000) 90. 000 Profit on sale of land Profit on revaluation of land .000 _______ 3. 80.00.000 3.000 Cash (Sale) Balance c/d Rs.000 By By _______ 1.50.000 1. 30.000 By Depreciation 1.000 90.000 2. To To To To Balance b/d Profit and loss account Debentures Bank Plant and Machinery Account Rs. 1.000 70.000 By Balance c/d 3. 90.000 1.90.000 By Cash (Sale) 20.000 1.000 By Cash (Sale) 40.000 1.00.45.25.90.000 50.000 By 30.00.000 Land and Building Account 2.00. Rs.000 1.000 Investments Account Rs.00.35.50.000 Capital Reserve Account Rs.000 (Pre-acquisition) _______ By Balance c/d 1.000 9.Financial Analysis 13.65. 2.00.000 By 70. To To To Balance b/d Profit and loss account Bank (Balancing figure) Rs.000 7.000 5.000 4.23 Provision for taxation Proposed dividend 20.35.000 5.000 9.000 1.00.50.000 3. 5.00. 70. To To To Balance b/d Capital reserve (Profit on sale) Capital reserve (Revaluation profit) Rs.000 By Dividend 25.25. To Balance c/d Rs. ) 12.20.000 1.000 By 90.000 Note: Cash Flow statement has been prepared using ‘indirect method’. 2001 and 2002 are as follows: Liabilities 31st 31st Assets March March 2001 2002 (Rs.50.35. Voluntary Separation Payments Account Rs.000 9. for the years ended 31st March.000 2.10.25.20.000 1.00.000 9. To Balance b/d 65.000 By 1.000 Balance b/d Profit and loss account Rs.000 Fixed Assets Less: Depreciation 4.000 By Balance c/d 1.000 1.000 4.000 By 1.00.000 By 95.000 11.80.00. 60.000 _______ 2.00.80.000 Equity share capital 10% Preference share capital Capital Reserve .40.000 By 1.000 7.75.) 38.50.50.000 Balance b/d Rs.95.95. 50.000 Rs.00.000 1.60.000 90.000 22.50. Question 8 The Balance Sheet of New Light Ltd.000 31st March 2002 (Rs.000 26.50.) 32.75. 60. 1. 60.) (Rs.000 16.00.000 8.000 2.24 Accounting 6.00.000 By General reserve To Bank (Balancing figure) 1.000 3.00.13. To To Bank (Balancing figure) Balance c/d Proposed Dividend Account Rs. To To Bank (Balancing figure) Balance c/d Provision for Taxation Account Rs.000 Balance b/d Profit and loss account Rs. To To To Voluntary separation cost Capital redemption reserve Balance c/d General Reserve Account Rs. 2.000 1. 50.000 1.000 Investment 31st March 2001 (Rs.000 – 40.00. (iv) Company sold some investment at a profit of Rs.80.00.000 4.000 11.000 ________ 38.40.000 3. 2003) Answer New Light Ltd.000 + Rs.000 ________ 43. whereas previously the practice was to value stock at cost less 10%.00.000.000 Cash 3. the cost of which was Rs.40.16.000 13.3.000 10.000 16.000 2.000. 2.24.000 1.000 on which depreciation amounting to Rs.000.25 General Reserve Profit and Loss A/c 9% Debentures Current liabilities Proposed dividend Provision for Tax Unpaid dividend 6.40.20.20.000 Other current assets 2.40.000 – (Rs.Financial Analysis 13.000 Additional information: (i) The company sold one fixed asset for Rs.40. 36.000)] Transfer to general reserve Proposed dividend Provision for tax Net profit before taxation and extraordinary item Adjustments for: Rs. (vi) Company decided to value stock at cost.000 40.000 Preliminary expenses 5. Cash Flow Statement for the year ended 31st March.00. 1.000 .20. (iii) Depreciation on fixed assets provided Rs. 3.000 1. (16 marks) (PE-II–Nov.80. 2.80. 40.000 43.10. 2002 Cash Flow from operating activities Profit after appropriation Increase in profit and loss A/c after inventory adjustment [Rs.000 10.000 – 38. A.60.000.000.000 has been provided.80.3.00.2002 was correctly valued at Rs. 80.44.3. (ii) The company also decided to write off another fixed asset costing Rs.44.000 1. Rs. The stock on 31. (v) Debentures and preference share capital redeemed at 5% premium. 40.000 and the depreciation provided on it was Rs.000 8.80. 56.000 3. Prepare Cash Flow Statement as per revised Accounting Standard 3 by indirect method.2001 was Rs.60.20.00. 3.2.00. The stock according to books on 31.10.000 80.000 1.20. which was credited to capital reserve.000 4.00.000 3.000 6.000. 52.000 10 Rs.000 + Rs.36.000 (3.20.80.000) (1.000 6.16.76.10.20.10.11. 24.000 + Rs. 1.000 1.000) 5.000 (6.000 –Rs.000 10.000) (1. 2.000 (1. 6.26.000)] Cash generated from operations Income taxes paid Net Cash from operating activities B.13.26.20.00.000 + Rs.26 Accounting Preliminary expenses written off Depreciation Loss on sale of fixed assets Decrease in value of fixed assets Premium on redemption of preference share capital Premium on redemption of debentures Operating profit before working capital changes Increase in current liabilities (Rs.6. 24. Cash Flow from investing activities Purchase of fixed assets Proceeds from sale of fixed assets Proceeds from sale of investments Net Cash from investing activities Cash Flow from financing activities Proceeds from issuance of share capital Redemption of preference share capital (Rs.000.4.20.24.000 (8.000 90 Therefore.000) Dividend paid Net Cash from financing activities Net increase/decrease in cash and cash equivalent during the year Cash and cash equivalent at the beginning of the year Cash and cash equivalent at the end of the year 40.88.000 40.13.000 Working Notes: 1.000 16.5.000 20.1.000 Nil 10.000) 9.00.000 6.000) Redemption of debentures (Rs. Revaluation of stock will increase opening stock by Rs.04.60.000 3.92. opening balance of other current assets would be as follows: .000 10.60.000) 4.000) C.000) 1. 44.000 (1.56.000) Increase in other current assets [Rs.000 – (Rs. 80. Due to this assumption cash flow from operating activities would be affected.40. 24.000 Bank A/c (sale of assets) Accumulated depreciation A/c Profit and loss A/c(loss on sale of assets) Accumulated depreciation A/c Profit and loss A/c (assets written off) Balance c/d Rs.64. 1.00.56.000 Accumulated Depreciation Account Rs.000 By Bank A/c (balancing figure being investment sold) Balance c/d Rs.000 + Rs. 2. The opening balance of profit and loss account after revaluation of stock will be Rs.000 – Rs.20.000.000 3.000 By By By By By By 4.000 (Rs.000 2.60. To To To Fixed assets A/c Fixed assets A/c Balance c/d 40.000).20. 9. To To Balance b/d Bank A/c (balancing figure being assets purchased) 40.000 20.00.000 By Profit and loss A/c 11.000 16.1. 16.Financial Analysis 13.56. 24.000 5.000 (depreciation for the period) 12.000 = Rs.56.80. The cash flow from operating activities will increase by Rs. 2.000.000 40.000 + Rs. 1.20. 6.000 38.000 80. 16.000.000 Rs.20.000 12.000 Fixed Assets Account Rs.000 56.000 4.34. unpaid dividend can be assumed as current liability and hence.00. 1.000 By Balance b/d 40. 4.40.00.00. 28. 1.04. 3.000 By 4. To To Balance b/d Capital reserve A/c (Profit on sale of investment) Investment Account Rs. dividend paid can be shown at Rs.10.000 3.40. 11.20. the opening balance of profit and loss account be increased by Rs.16.000 to Rs. 32.000 2.000 Rs.000 to Rs. . Unpaid dividend is taken as non-current item and dividend paid is shown at Rs.08. 24.000 = Rs.000 8.000 Due to under valuation of stock.000 and cash flow from financing activities will get reduced by Rs.27 Rs. 11. 80.60.000 40. Note: Alternatively. 000 1.00.20.000) Operating profit before working capital changes Rs.40.000 18.000 Less: Depreciation 9. 40.3.40. declared dividend of Rs.90.80.20.000 Capital Retained Earnings Debentures Current Liabilities Creditors Bank Loan Liability for expenses Dividend payable securities Inventories Prepaid Expenses 91.000 26. 2.10.000 Plant & Machinery 36.000 Balance Sheet as on 31st March Assets 2004 Rs.2004: Liabilities 31st March 2003 Rs.000 1.00.20. .000 3. 27. 2004.000 ― 8.000 Cash Marketable 31st March 2003 Rs.20.80.80.60.90.50.000 1.000 Additional Information: (i) (ii) (ii) 91.80.80.03.00.50.10.000 15.000 6. 22.20.40.000 3.00.000 1.000.000 were determined to be worthless and were written off against the provisions for doubtful debts account during the year.000 24.000 is Rs. 50.000 11.000 15.60. 50.000 90. after charging depreciation Rs. 1.000 19.000 23.000 32.50. (16 marks) (PE-II–May 2004) Answer Cash flow Statement of ABC Ltd.20.000 Net profit for the year ended 31st March.000 22.000 20.80. 22.000 – Rs.000 28. for the year ended 31. ABC Ltd.90. 12.000 Less: Provision 2.00.28 Accounting Question 9 ABC Ltd.40.30.70.000 1.000 Current Assets 8.000 Rs.000 26.6.10.00.80.13.7.00.000 1. Debtors of Rs.30.000 21.20.90.30.000 31st March 2004 Rs.000 7.000 Debtors 3.70.30. You are required to prepare Cash Flow Statement by using indirect methods as per AS 3 for the year ended 31.2004 Cash flows from Operating activities Net Profit Add: Adjustment for Depreciation (Rs.000 for the year 2003-2004.90.50.000 1. gives you the following informations.12.12.000 1. 70.10. 12.27.000 2.70.70.000 – Rs. 18. In the above solution.23.000 – Rs.50.70.2.000) Issue of debentures Payment of Dividend (Rs. 1.20.000 6. 2.000) Increase in provision for doubtful debts (Rs.20.000 60.000 30.1.000 60.50.000 27.20.15.20.Financial Analysis 13.29 Add: Decrease in Inventories (Rs.3.2003 (Rs.2004.3.00.000 were written off against provision for doubtful debts account during the year. the adjustment of writing off bad debts may be ignored and the solution can be given on the basis of figures of debtors and provision for doubtful debts as appearing in the balance sheet on 31.000 – Rs.80.000 (10.80.20.80.20.90.000) Expenses outstanding (Rs. 3.20.50.20.000 – Rs.00.000 8.2004.00.2004 (Rs. 1.00.20.90.000 Decrease in current liabilities: Creditors (Rs. Bad debts have been added back in the balances of provision for doubtful debts and debtors as on 31.50.000) Net cash used in financing activities Net increase in cash during the year Add: Cash and cash equivalents as on 1. .000 + Rs.000 27.000 9.000 – Rs.000) Net cash from operating activities Cash flows from Investing activities Purchase of Plant & Equipment (Rs.000 + Rs.20.000 13.000) Less: Increase in Current Assets: Debtors (Rs.30.3.000 – Rs.50.30. 8.40.000 – Rs.000 19. 3.000) 90.000 – Rs. 15.40.00.000) Cash and cash equivalents as on 31.000 33.30.000) Net cash used in investing activities Cash flows from Financing Activities Bank loan raised (Rs.60.000) 1.11. 8. Alternatively.000) Note: Bad debts amounting Rs. 40. 1.000) Prepaid expenses (Rs.4.000 (13. 4.000) NIL 6.000 – Rs.19.60. 30. 3.000 1.500 13. 97.3. 1.60.2003 and 31. (v) Provision for Taxation and Dividend are to be taken as Non-current liabilities.900 9.00.500 52.250 11.00.2003 Rs.00.92.000 42.500 15.000 29.2004 prepare a statement of sources and applications of fund and a schedule of changes in working capital for the year ending 31.500 5.100 16.500. as on 31.000 31.000 8.3.36.92.000 84. 65.90.500 2.90.2003 Rs.3.000 9.000 9.62.17. 16.000 42.20.16.17.500 5.77. (iv) Investments which were sold for Rs. 2.2003 Add: Profit for 2003-2004 Less: Dividend Rs.000 11.500 3.3.000 42.92.500 (ii) Profit and loss account for 2003-2004 is as follows: Balance as on 31.500 was sold for Rs.000 32.18.66.000 7.90.500.3.2004 Rs.750 46.600 31.37. 97.500 11.750 The following additional information is given: (i) Accumulated depreciation 31.2003 Accumulated depreciation 31.3.500 21.2004 Depreciation for 2003-2004 Building Rs. (20 marks) (PE-II–Nov. 2004) .000 5. 4.000 4.54.75.00.70.70.250 Balance Sheets Assets Goodwill Building Machinery Non-trade investments Debtors Stock Cash Prepaid expenses Debenture discount 31.000 4.87.000 60.07.500 1. 13.38.07.000 2.000 had cost Rs.77.71.500 8. 42.100 4. 4.60.850 46.000 16.99.600 60.250 31.3.3.3.2004 Rs.17.25.30 Accounting Question 10 From the following balance sheets of Sneha Ltd.500 (iii) During 2003-2004 machinery costing Rs.93.13.000 10.70.500 2.54.2004: Liabilities Equity share capital Profit and loss account 10% Debentures Creditors Bills payable Provision for tax Dividend payable 31.500 Machinery Rs. 15. 84.500 52.00.75.000 Rs.750 Decrease Rs.31 Answer (a) Sneha Ltd. Fund Flow Statement for the year ended 31st March.70.92.000 10.500 1.250 12.000 42.14. 4) Tax paid Dividend (Rs.75. 7.17.500 32.07.92.60.2004 Rs. 2.000 Rs.000 4.60.000 3. 2004.000) Sale of machinery Sale of investments Funds from operation (W.000) Machinery purchased (W.16.000 7. 11.000 2.54.250 22. 1) Applications of funds Debentures redeemed (Rs.25.90.86.00.00.250 8.000 42.000 1. 2004 Balance as on Changes in working capital 1.250 31.000 2.99. . Last year’s provision for taxation amounting Rs.2003 Rs.N.000 Increase Rs. Current Assets: Debtors Stock Cash Prepaid expenses A Current Liabilities: Creditors 9.000 16.Financial Analysis 13.000 97. 2004 Sources of funds Share capital (Rs.70.500 Rs.) 3.000 23.500 22.000 Schedule of Changes in Working Capital for the year ended 31st March.00.3.500 9.25.25.4.61. 13.500 2. The provision for taxation has been treated as a non-current liability as per the requirement of the question.000 5. 42.500 2.90. 16.00.000 7. 16. 13.N.250) Increase in working capital Amount (Rs.000 has been assumed to be paid in the current year ended 31st March.60. 3) 1.17.26.000 22.000 16.90.000 – Rs.500 Bank -Sale Profit and loss account – written off (balancing figure) Balance c/d .69.000 19. 8.750 Statement showing funds generated from operations (Rs.500) 32. 1.750 1. 97.36.500) _______ By 5. 1.02.750 1.88.500 13. 31.70. 97.250 5.250 9.500 – Rs.32 Accounting Bills payable B Working capital (A – B) Increase in working capital Working Notes: 1.61. 4) (2) (3) (4) Investments written off (W. 1.17. 42.850 84.82.500 ________ 10.500 on machinery (W.400 Increase in profit and loss account during the year (Rs. 11.000 1.500 2. 4.87.42.000 By 19.000 – Rs.17.750 8.75. 11. 65. 5.500 2.88.77.250 3.850 – Rs.000 11. To To Balance b/d Profit on sale (Rs.000 – Rs.500 By Rs.) 3.88.37.500 9.500 (5) (6) (7) Less: Non-cash incomes (1) Profit on sale of investments (Rs.500 16.93. 42.27.100) Add: Non-cash expenditures (1) Loss on sale of machinery (W.000) Dividend 32.70.70.07.000 11.27.600 16. 29.500 Goodwill written off (Rs.N.000 10.500 2.000 Non Trade Investment Account Rs.13.500) Funds from operations 2.500 Cr.70.500) Debenture discount written off (Rs.26. 2) Provision for tax Depreciation on building (Rs.500 16.N. Rs. Dr.250 10.N.44.90. 30.D.33 3.2003. Dr. 3 lakhs (Sale of Investments for Rs.2004 at a premium of 5%.500 17.500 Question 11 The following figures have been extracted from the Books of X Limited for the year ended on 31. (i) Net profit before taking into account income tax and income from law suits but after taking into account the following items was Rs.500 ________ 39. (c) Interest on Debentures paid Rs.4.11.18. 5 lakhs.36. 20 lakhs: (a) Depreciation on Fixed Assets Rs. 15. Dividend on preference shares were paid at the time of redemption.3. 60. (b) Discount on issue of Debentures written off Rs. 97.000. Add: Provision for depreciation 21.38. Further the company issued 50.500 Rs. To To 4.000 Cr.V. You are required to prepare a cash flow statement.500 32. (ii) Income tax paid during the year Rs.66.500 By By 15.2004.50.500 15. 10.500 By By 15.29.000 by the company in a suit filed.92.62.000 equity shares of Rs. To Balance b/d Add: Provision for depreciation To Bank -purchase (balancing figure) Machinery -sale (balancing figure) Balance c/d Provision for Depreciation on Machinery Account Rs. 100 each were redeemed on 31.97.500 1. 90.000 39. 3. (f) Compensation received Rs. (e) Interest received on investments Rs.62. Dr. 3.500 37. Rs.000.000 Balance b/d Depreciation Cr. .86.500 32.92. 10% preference shares of Rs.000).500 17.Financial Analysis 13. 10 each at a premium of 20% on 2.3.50. 1. Rs.29.66. Bank (sale) Depreciation Loss on sale Balance c/d W.500 Machinery Account 16.000.97.05.20.000.000 By By 7. (iii) 15.000. (d) Book value of investments Rs.500 1. 18.00.000) 8.000 Rs.000 for which the company issued 20. 2004 Rs.34 Accounting (iv) Dividends paid for the year 2002-2003 Rs. 2.000 equity shares of Rs.00.300 50.000 1.000 28.000 2. 5 lakhs and interim dividend paid Rs.000 2.000 As on 31. Cash flow from Operating Activities Net profit before income tax and extraordinary items: Adjustments for: Depreciation on fixed assets Discount on issue of debentures Interest on debentures paid Interest on investments received Profit on sale of investments Operating profit before working capital changes Adjustments for: Increase in stock Increase in sundry debtors Decrease in bills receivable Decrease in bills payable Increase in sundry creditors (1.300 5.66.300 40.3.50.18.000 (60.300 81.00. .3. 13.00.000 40.000 20.00.000 30.000 45.13. 3 lakhs for the year 2003-2004.4. 12.2003 Rs.96. (v) Land was purchased on 2. (vi) Current assets and current liabilities in the beginning and at the end of the years were as detailed below: As on 31. 10 each at a premium of 20% to the land owner as consideration.2003 for Rs.000 1.000) (5.40.000 1.13.08.800 (20 marks) (PE-II – May 2005) Stock Sundry Debtors Cash in hand Bills receivable Bills payable Sundry Creditors Outstanding expenses Answer X Ltd.100 35.71.000 75.2004 Rs. Cash Flow Statement for the year ended 31st March.000) (20.000 3.000) 5.000 (5.100) 10. 50.000 17.000) Add: Cash and cash equivalents as on 31.3.000 3. (ii) Cost of goods sold was 75% of sales.80.3.000) 16. gives you the following information for the year ended 31st March.20. . 2006: (i) Sales for the year Rs.34.00.000 3.000) (22.50.000 6.000) (1.61.000.06.44.000) (1.35 Increase in outstanding expenses Cash generated from operations Income tax paid Cash flow from extraordinary items: Compensation received in a suit filed Net cash flow from operating activities Cash flow from Investing Activities Sale proceeds of investments Interest received on investments Net cash flow from investing activities Cash flow from Financing Activities Proceeds by issue of equity shares at 20% premium Redemption of preference shares at 5% premium Preference dividend paid Interest on debentures paid Dividend paid (5.96.Financial Analysis 13.2005 by Rs.2004 35.2006 exceed the outstanding on 31.000) Net cash used in financing activities Net decrease in cash and cash equivalents during the year 6. The Company sold goods for cash only. Question 12 Raj Ltd.00. (iii) Closing inventory was higher than opening inventory by Rs.000 (10.00.94.300 Cash and cash equivalents as on 31.75.300 Note: Purchase of land in exchange of equity shares (issued at 20% premium) has not been considered in the cash flow statement as it does not involve any cash transaction. (iv) Trade creditors on 31.48.000) (8.000.00.2003 1.3.000 90.00.000.000) (3.3.000 + 3.000) 26.000 60.00.50.000 (15.75.1.50.800 (1. 60.4.3. (viii) One new machinery was acquired in December. Direct Method Cash flow from operating activities: Cash receipt from customers (sales) Cash paid to suppliers and expenses (Rs.35.60.000) Cash flow from operation Less: Tax paid Net cash from operating activities Cash flow from investing activities: Purchase of fixed assets Net cash used in investing activities Cash flow from financing activities: Dividend Paid Net cash from financing activities Add: Opening balance of Cash in Hand and at Bank Cash in Hand and at Bank on 31.3.13. (x) Cash in hand and at Bank on 31.00.20.70. 2005 for Rs.20.000 8.000 (6.000.90.2005 Rs.000 39.50.3.2006 Rs.10.00.40.000) (6.2006 Rs.1.00.35.2006 as per the prescribed Accounting standard.3.000.000) (1. Prepare Cash Flow Statement for the year ended 31.3.1.6. (ix) Dividend paid during the year Rs.000 + Rs.000 Rs. (12 Marks) (PE-II – May 2006) Answer Cash flow statement of Raj Limited for the year ended 31.50.50.000) 20.000.50.2006 . (vi) Amounts paid to Trade creditors during the year Rs.36 Accounting (v) Tax paid during the year amounts to Rs.50.000 50.000 7.000) (1.000.00.3. (xi) Cash in hand and at Bank on 1.000.000. (vii) Administrative and Selling expenses paid Rs.000.20.000 70. 48.000 1. 80.000 5.10. (iii) Machinery of another company was purchased for a consideration of Rs.2006 (Rs.Financial Analysis 13.000 27.00.3.000 1.2005 (Rs.00.000 Additional Information: (i) Dividend of Rs.000 27.000 1.3.000 5.000 4. As on 31.000 1.00.00. (iv) Income-tax provided during the year Rs.000 25.000 1.000 4.50.000 payable in equity shares.000 1.00.25.000 Year 2005 (Rs. 2005 and 2006: Liabilities Equity share capital Capital Reserve General Reserve Profit and Loss A/c Long-term loan from the Bank Sundry Creditors Provision for Taxation Proposed Dividends As on 31.00.000 4.50.00.000 4.65.000 2.55.00.25.000 --2. (ii) Machinery during the year purchased for Rs.000 was paid during the year ended March 31.00.25.000 3.) 4.000 1.00.000 50.) 10.50.000 60.00. 2006.000 4.) 5.000 3.000 7.000 2.20.000 3.000 25.25.00.00.000.1. as on March 31.37 Question 13 The following are the summarized Balance Sheets of ‘X’ Ltd..00.000.000 10.000 Assets Land and Building Machinery Investment Stock Sundry Debtors Cash in Hand Cash at Bank .1.80.20.000 50.1.50.) 12.50.50.00.000 9.80.000 Year 2006 (Rs. 000.N.Nov.38 Accounting (v) Company sold some investment at a profit of Rs. 2006) Answer Cash Flow Statement for the year ending on March 31.00.000 5.00.000) 2. From the above particulars.000) (1. 2006 as per AS 3 (Indirect method).25.10.75.1) Adjustment for depreciation on Machinery (W.2) Adjustment for depreciation on Land & Building Operating profit before change in Working Capital Decrease in Stock Increase in Sundry Debtors Decrease in Sundry Creditors Income-tax paid Net cash from operating activities II. (vii) Depreciation written off on Land and Building Rs.50.90.000) (45.N.13. .000 20.35. Cash flows from Financing Activities Issue of equity shares (2.00. which was credited to Capital reserve.20.000 (1.000) 75.00.000 5.000 Rs.000 3. 2006 Rs. I. (16 Marks) (PE-II . Cash flows from Operating Activities Net profit made during the year (W.000 (65.000) 1.60.000) 60.000 (20.00.000-1.000.50. prepare a cash flow statement for the year ended March.000) (50.000) (1.000) Repayment of Long term loan Dividend paid Net increase in cash and cash equivalent Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period 1. (vi) There was no sale of machinery during the year.000 20. Cash flows from Investing Activities Purchase on Machinery Sale of Investments III.000 (1.000 55. 39 Working Notes: (i) Add: Add: Add: (ii) To To To (iii) To To (iv) To To (v) To To Balance b/d Capital Reserve A/c (Profit on sale of investment) Bank Balance c/d Cash (Bal.000 Rs.000 10.) Balance c/d 30.000 9.000 2.60. Fig.000 1. Fig.000 60.25.25.000 By By Depreciation (Bal.000 1.05. By By Balance b/d P & L A/c 50.000 1.000 55.000 .10. By By Balance b/d P & L A/c (Bal.2006 Increase in P & L (Cr.00.000 2.25. 7.50.000 9.10.000 9.000 1.000 2.000 1.000 1.000 Rs.) 1.3. 55. 1.000 Proposed Dividend Account Rs. 45.000 Rs.000 Investment Account Rs.00.000 1.000 1. 1.25.) Balance c/d Balance b/d Bank Equity share capital Net Profit made during the year ended 31.05.75.000 Provision for Taxation Account Rs. Fig.20.Financial Analysis 13.25.00.000 60.) Balance Transfer to general reserve Provision for taxation made during the year Provided for proposed dividend during the year Machinery Account Rs.25.000 50.000 Rs.000 55.00.000 Balance c/d 50. By Bank A/c (Balancing figure for investment sold) By 1.75.
Report "Cash Flow Statements Exercises and Answers"