NCERT Solution For Class 12 Accountancy Chapter 6 - Cash Flow Statement

NCERT Solutions are said to be an extremely helpful book while preparing for the CBSE Class 12 Accountancy examinations. This study material owns a deep knowledge and the Solutions collected by the subject matter experts are no distinct.

NCERT Solution For Class 12 Accountancy Chapter 6 – Cash Flow Statement provides us with an all-inclusive data to all the concepts. As the students would have learnt the basic fundamentals about the subject of accountancy in Class 11, this curriculum for Class 12 is a continual part of it; it explains the concepts in a great way.

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Access NCERT Solutions for Class 12 Accountancy Chapter 6 – Cash Flow Statement

Short Questions for NCERT Accountancy Solutions Part 2 Class 12 Chapter 6

1. What is a Cash Flow Statement?

A financial statement that represents the inflow and outflow of cash and cash equivalents of a company is called a cash flow statement. It shows how well a company can manage its cash position and generates enough cash to pay the obligations in the form of debt and also run the operational expenses.

2. How are the various activities classified (as per AS-3 revised) while preparing cash flow statement?

Three types of activities are defined:

1. Operating Activities

2. Financing Activities

3. Investing Activities

3. State the uses of cash flow statement?

Following are uses of cash flow statement:

1. Useful for evaluating cash position of a firm

2. Helpful in finding deficiencies and variations in firms performance which helps in effective decision making

3. It helps in assessment of liquidity of a company

4. It analyses cash receipts and payments from the various activities of a company and helps in short term planning

5. It helps in segregating cash flows obtained from the various activities of the business

6. It helps in providing decision about distribution of profit.

7. It is useful for short term financial analysis

4. What are the objectives of preparing cash flow statement?

Following are the objectives:

1. To determine inflow and outflow of cash and the cash equivalents obtained from the different kind of activities.

2. To seek out various reasons responsible for change in cash balances during the accounting period

3. It helps in depicting the position of the company in terms of liquidity and solvency

4. It also helps in determining the requirement and the corresponding availability of cash for business in future.

5. State the meaning of the terms: Cash Equivalents, Cash flows.

Cash equivalents are investments that are highly liquid in nature and do not change value easily. Cash equivalents are essential for managing short term cash requirements or any such investments. For example treasury bills.

Cash Flows: It is the inflow and outflow of cash and cash equivalents. Cash inflows boosts cash balance and cash outflow has a negative impact on cash balance

6. Prepare a format of cash flow from operating activities under indirect method.

The format is as follows:

NCERT ACT CLASS 12 Chp 6-1

7. State clearly what would constitute the operating activities for each of the following enterprises:

(i) Hotel

(ii) Film production house

(iii) Financial enterprise

(iv) Media enterprise

(v) Steel manufacturing unit

(vi) Software development business unit.

(i) Hotels

1. Receipts obtained from sale of goods to customers.

2. Customer stay, payments of wages and salaries, food items and electricity are operating activities

(ii) Film Production House:

1. Receipts obtained from selling of film rights to distributors

2. Payment provided to actor, actresses, directors and other employees.

(iii) Financial Enterprises:

1. Receipts obtained from loan repayments, interest received from investments

2. Salary for employees, expenditure incurred for recovering loans, loan repayment etc

(iv) Media Enterprises:

1. Receipts that are obtained from various advertisements

2. Payments made to photographers, employees and reporters

(v) Steel Manufacturing Unit:

1. Receipts obtained from sale of steel rods, castings and sheets.

2. Payments made for purchasing iron, coal and salaries to staff.

(vi) Software Development Business Unit:

1. Receipts obtained for software sales and license renewal

2. Payments towards salaries of employees

8. “The nature/type of enterprise can change altogether the category into which a particular activity may be classified.” Do you agree? Illustrate your answer.

Yes, it can happen. For example, there are two firms one is engaged in real estate and the other in general business. For the firm engaged in real estate sale of building will be regarded as part of operating activity while for the firm dealing with general business, purchase or sale of a building is regarded as an investing activity. Therefore, it can be said that nature and type of enterprise determines the type of activities.

Long Questions for NCERT Accountancy Solutions Part 2 Class 12 Chapter 6

1. Describe the procedure to prepare Cash Flow Statement.

Following steps are followed:

1. Determine cash flows obtained from operating activities

2. Determine cash flows obtained from financing activities

3. Determine cash flow obtained from investing activities

4. Determine net increase or decrease which is obtained by adding amounts from all the cash flow activities.

5. Add the opening balance of cash and the cash equivalents and deduct the same from the amount determined in the previous step.

There are two methods which are used for preparation of cash flow statement

1. Direct Method

2. Indirect Method.

NCERT ACT CLASS 12 Chp 6-2

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2. Describe “Indirect” method of ascertaining Cash Flow from Operating Activities.

In indirect method cash flow statement begins with net income or loss, and thereafter the additions or deductions from that amount for non-cash expense and revenue items, which results in cash flow from operating activities. Following are some items:

1. Items that are non-cash in nature like goodwill, depreciation are added towards net profit

2. Expenses that are non-operating in nature like transfer to reserve and loss on sale of fixed assets which are added back to show Net Profit earned.

3. Provision such as discount for debtors, doubtful debts, proposed dividends etc. should be added to Net Profit

4. Any decrease in current assets and an increase in current liabilities is added to operating profit.

Following items get deducted from net profit of P & L account

1. Incomes that are non-operating in nature like sale of fixed assets

2. Non-trading incomes like dividend received, tax refund, interest received

3. Increase in current assets and decrease in current liabilities

NCERT ACT CLASS 12 Chp 6-4

3. Explain the major Cash Inflow and outflows from investing activities.

Investing activities consist of sales and purchase of fixed assets that are long term in nature, like building, land, furniture and plant and machinery etc. It also includes sale and purchase of items that are not cash equivalents. If any income is received from these assets it is regarded as a part of investing activities. The major cash inflows and outflows that are involved in investing activities are:

1. Cash receipts that are obtained when fixed assets are sold off and it includes intangible assets.

2. Acquiring fixed assets which also includes intangibles like goodwill using cash payments, the payments is for the research and development and assets that are self-constructed.

3. Acquiring shares, debt instruments or warrants using cash payments

4. Disposal of shares and warrants that yield cash receipts.

5. Loans and cash advances that are made to third parties (does not includes loans and advances made by financial enterprises.

6. Cash receipts obtained from any insurance company for a property that is involved in accident

7. Cash receipts that are obtained for repayment of loans and cash advances made to third parties.

8. Any type of income that is obtained from fixed assets like interest, dividend and rent (not in case of financial enterprises)

NCERT ACT CLASS 12 Chp 6-5

NCERT ACT CLASS 12 Chp 6-6

4. Explain the major Cash Inflows and outflows from financing activities.

In a firm, the financing activities are associated with capital or long term funds of the firm, the financing activities bring about change in capital and borrowed funds.

The following cash inflows and outflows as per AS3 can be mentioned here as:

1. Cash received from the issuing of shares and similar instruments causes cash inflow

2. Cash received from issuing of debentures, obtaining loans, bonds and similar instruments brings cash inflow.

3. Repayments of debentures, loans and bonds in form of cash is considered cash outflow

4. Buying back shares and debentures which were issued is also cash outflow

5. Interest payment for debentures, advances and loans.

6. Dividend payment to equity and preference shareholders.

NCERT ACT CLASS 12 Chp 6-7

NCERT ACT CLASS 12 Chp 6-8

Numerical Questions for NCERT Accountancy Solutions Part 2 Class 12 Chapter 6

1. Anand Ltd., arrived at a net income of ₹ 5, 00,000 for the year ended March 31, 2017. Depreciation for the year was ₹ 2, 00,000. There was a profit of ₹ 50,000 on assets sold which was transferred to Statement of profit and Loss account. Trade Receivables increased during the year ₹ 40,000 and Trade Payables also increased by ₹ 60,000. Compute the cash flow operating activities by the indirect approach.

The solution for this question is as follows:

Cash Flow from Operating Activities as on March 31, 2017
Particulars Amount

(₹)

Amount

(₹)

Net Profit during the year 5,00,000
Items to be adjusted:
Add: Depreciation 2,00,000
Less: Gain on sale of assets (50,000) 1,50,000
Operating Profit before Working Capital changes 6,50,000
Add: Increase in Trade Payables 60,000
Less: Increase in Trade Receivables (40,000) 20,000
Net Cash from Operations 6,70,000

2. From the information given below you are required to calculate the cash paid for the inventory:

Particulars (₹)
Inventory in the beginning 40,000
Credit Purchases 1,60,000
Inventory in the end 38,000
Trade payables in the beginning 14,000
Trade payables in the end 14,500

The solution for this question is as follows:

Trade Payables Account
Dr. Cr.
Date Particulars J.F. Amount

Date Particulars J.F. Amount

Cash (Balancing fig.) 1,59,500 Balance b/d 14,000
 Balance c/d 14,500 Purchases 1,60,000
1,74,000 1,74,000

Therefore the cash paid for Inventory amounts to ₹ 1, 59,500

3. For each of the following transactions, calculate the resulting cash flow and state the nature of cash flow, viz., operating, investing and financing.

(a) Acquired machinery for ₹ 2, 50,000 paying 20% by cheque and executing a bond for the balance payable.

(b) Paid ₹ 2, 50,000 to acquire shares in Informa Tech. and received a dividend of ₹ 50,000 after acquisition.

(c) Sold machinery of original cost ₹ 2, 00,000 with an accumulated depreciation of ₹ 1, 60,000 for ₹

60,000.

The solution for this question is as follows:

(a)
NCERT ACT CLASS 12 Chp 6-9

Part payment ₹ 50,000 for acquiring machinery ₹ 2, 50,000 is related with Investing Activities

(b)

Amount paid for acquiring shares (2,50,000)
Dividend received 50,000
Net Cash used in Investing Activities (2,00,000)

Amount paid to acquire assets and dividend received is a part of Investing Activities.

(c) Inflow of cash of ₹ 60,000 on sale of machinery is a part Investing Activities.

4. The following is the Profit and Loss Account of Yamuna Limited:

Statement of Profit and Loss of Yamuna Ltd.,

for the Year ended March 31, 2017

Particulars Note No. Amount

(₹)

i) Revenue from Operations 10,00,000
ii) Expenses
Cost of Materials Consumed 1 50,000
Purchase of Stock-in-trade 5,00,000
Other Expenses 2 3,00,000
Total Expenses 8,50,000
iii) Profit before Tax (i – ii) 1,50,000

Additional information:

(i) Trade receivables decrease by ₹ 30,000 during the year.

(ii) Prepaid expenses increase by ₹ 5,000 during the year.

(iii) Trade payables increase by ₹ 15,000 during the year.

(iv) Outstanding expenses payable increased by ₹ 3,000 during the year.

(v) Other expenses included depreciation of ₹ 25,000. 

Compute net cash from operations for the year ended March 31, 2017 by the indirect method.

The solution for this question is as follows:

Cash Flow from Operating Activities of Yamuna Limited as on March 31, 2017
Particulars Amount

Amount

Net Profit earned during the year 1,50,000
Items to be added:
Depreciation 25,000
Operating Profit before Working Capital changes 1,75,000
Add: Increase in Current Liabilities
Outstanding Expenses 3,000
Add: Decrease in Current Assets
Trade Receivables 30,000
Stock 50,000 83,000
Less: Decrease in Current Liabilities
Trade Creditors (15,000)
Less: Increase in Current Assets
Prepaid Expenses (5,000) (20,000)
Net Cash from Operations 2,38,000

5. Compute cash from operations from the following figures:

(i) Profit for the year 2016-17 is a sum of ₹. 10,000 after providing for depreciation of ₹. 2,000.

(ii) The current assets and current liabilities of the business for the year ended March 31, 2016 and 2015 are as follows:

Particular March
31, 2016
(₹)
March
31, 2017
(₹)
Trade Receivables 14,000 15,000
Provision for Doubtful Debts 1,000 1,200
Trade Payables 13,000 15,000
Inventories 5,000 8,000
Other Current Assets 10,000 12,000
Expenses payable 1,000 1,500
Prepaid Expenses 2,000 1,000
Accrued Income 3,000 4,000
Income received in advance 2,000 1,000

The solution for this question is as follows:

Cash Flow Statement

for the Year Ending March 31, 2017

Particulars Details

(₹)

Amount

(₹)

Cash from Operating Activities
 Net Profit 10,000
Items to be added:
  Depreciation 2,000 2,000
Operating Profit before Working Capital Adjustments 12,000
Less: Increase in Current Assets
Trade Receivables (1,000)
Accrued Income (1,000)
Accrued Income (2,000)
Other Current Assets (3,000)
Inventories
Add: Increase in Current Liabilities
Provision for Doubtful Debts 200
Trade Payables 2,000
Expense Payable 500
Add: Decrease in Current Assets
Prepaid Expenses (1,000)
Less: Decrease in Current Liabilities
Income received in advance 1,000
Net Cash From Operating Activities 7,700

6. From the following particulars of Bharat Gas Limited, calculate Cash Flows from Investing Activities. Also, show the workings clearly preparing the ledger accounts:

Balance Sheet of Bharat Gas Ltd. as on 31 Mar. 2016 and 31 Mar. 2017  
Particulars Note No. Figures as the end of 2017
(₹)
Figures as at the
end of reporting 2016
(₹)
II) Assets
1. Non-current Assets
a) Fixed assets
i) Tangible assets 1 12,40,000 10,20,000
ii) Intangible assets 2 4,60,000 3,80,000
b) Non-current investments 3 3,60,000 2,60,000
Notes 1 Tangible assets = Machinery
2 Intangible assets = Patents

Notes

Figures of current year Figures of previous year
1. Tangible Assets
Machinery 12,40,000 10,20,000
2. Intangible Assets
Goodwill 3,00,000 1,00,000
Patents 1,60,000 2,80,000
4,60,000 3,80,000
3. Non-current Investments
10% long term investments 1,60,000 60,000
Investment in land 1,00,000 1,00,000
Shares of Amartex Ltd. 1,00,000 1,00,000
3,60,000 2,60,000

Additional Information:

(a) Patents were written-off to the extent of ₹. 40,000 and some Patents were sold at a profit of ₹. 20,000.

(b) A Machine costing ₹. 1, 40,000 (Depreciation provided thereon ₹. 60,000) was sold for ₹. 50,000. Depreciation charged during the year was ₹. 1, 40,000.

(c) On March 31, 2016, 10% Investments were purchased for ₹. 1, 80,000 and some Investments were sold at a profit of ₹. 20,000. Interest on Investment was received on March 31, 2017.

(d) Amartax Ltd. paid Dividend @ 10% on its shares.

(e) A plot of Land had been purchased for investment purposes and let out for commercial use and rent received ₹. 30,000.

The solution for this question is as follows:

Cash Flow from Investing Activities
Particulars Amount

Amount

Cash Inflow
Proceeds from Sale of Patents 1,00,000
Proceeds from Sale of Machinery 50,000
Proceeds from Sale of 10% Long-term Investment 1,00,000
Interest received on 10% Long-term Investment 6,000
Dividend Received from Amartax Ltd. 10,000
Rent Received 30,000 2,96,000
Cash Outflow
Purchase of Goodwill (2,00,000)
Purchase of Machinery (4,40,000)
Purchase of 10% Long-term Investment (1,80,000) (8,20,000)
Net Cash used in Investing Activities (5,24,000)
Patents Account
Dr. Cr.
Date Particulars J.F. Amount

Date Particulars J.F. Amount

Balance b/d 2,80,000 Profit and Loss (written off) 40,000
Profit and Loss  (Profit on sale) 20,000 Bank (sale- Balancing figure) 1,00,000
Balance c/d 1,60,000
3,00,000 3,00,000
Machinery Account
Dr. Cr.
Date Particulars J.F. Amount

Date Particulars J.F. Amount

Balance b/d 10,20,000 Depreciation 1,40,000
Bank (Purchases- Balancing figure) 4,40,000 Bank 50,000
Profit and Loss 30,000
Balance c/d 12,40,000
14,60,000 14,60,000
10% Long-term Investment Account
Dr. Cr.
Date Particulars J.F. Amount

Date Particulars J.F. Amount

Balance b/d 60,000 Bank  (Balancing figure) 1,00,000
Bank 1,80,000
Profit and Loss (Profit on sale) 20,000 Balance c/d 1,60,000
2,60,000 2,60,000

7. From the following Balance Sheet of Mohan Ltd., prepare cash flow Statement:

Balance Sheet of Mohan Ltd.,
as at 31st March 2016 and 31 March 2017
Particulars Note No. March 31, 2017
(₹)
March 31, 2016
(₹)
I) Equity and Liabilities
1. Shareholders’ Funds
a) Equity share capital 3,00,000 2,00,000
b) Reserves and surplus 2,00,000 1,60,000
2. Non-current liabilities
a) Long-term borrowings 1  80,000 1,00,000
3. Current liabilities
Trade payables 1,20,000 1,40,000
Short-term provisions 2 70,000 60,000
Total 7,70,000 6,60,000
II) Assets
1. Non-current assets
Fixed assets 3 5,00,000 3,20,000
2. Current assets
a) Inventories 1,50,000 1,30,000
b) Trade receivables 4 90,000 1,20,000
c) Cash and cash equivalents 5 30,000 90,000
Total  7,70,000 6,60,000

Notes to accounts:

2017 2016
1. Long-term borrowings
Bank Loan 80,000 1,00,000
2. Short-term provision
Proposed dividend 70,000 60,000
3. Fixed assets 6,00,000 4,00,000
Less: Accumulated Depreciation 1,00,000 80,000
(Net) Fixed Assets 5,00,000 3,20,000
4. Trade receivables
Debtors 60,000 1,00,000
Bills receivables 30,000 20,000
90,000 1,20,000
5. Cash and cash equivalents
Bank 30,000 90,000

Additional Information:

Machine Costing ₹. 80,000 on which accumulated depreciation was ₹. 50,000 was sold for ₹. 20,000.

The solution for this question is as follows:

Cash Flow Statement of Mohan Ltd.
Particulars Amount

Amount

A. Cash Flow from Operating Activities
Profit as per the Balance Sheet  (2,00,000 – 1,60,000) 40,000
Proposed Dividend 70,000
Net Profit before Taxation and Extraordinary items 1,10,000
Adjustments:
Depreciation 70,000
Loss on Sale of Machine 10,000 80,000
Operating Profit before Working Capital changes 1,90,000
Add: Decrease in Current Assets
Debtors 40,000 40,000
2,30,000
Less: Increase in Current Assets
Inventories (20,000)
Bills Receivable (10,000)
Less: Decrease in Current Liabilities
Trade Payables (20,000) (50,000)
Net Cash from Operations 1,80,000
B. Cash Flow from Investing Activities
Proceeds from Sale of Fixed Assets 20,000
Purchases of Fixed Assets (2,80,000)
Net Cash outflow from Investing activity (2,60,000)
C. Cash Flow from Financing Activities
Issue of Shares 1,00,000
Bank Loan Paid (20,000)
Dividend Paid (60,000)
Net Cash from Financing Activities 20,000
D. Net Decrease in Cash and Cash Equivalents (A+B+C) (60,000)
Add: Cash and Cash Equivalents in the beginning 90,000
E. Cash and Cash equivalents at the end 30,000
Fixed Assets Account
Dr. Cr.
Date Particulars J.F. Amount

Date Particulars J.F. Amount

Balance b/d 4,00,000 Bank 20,000
Bank (Purchases- Balancing fig.) 2,80,000 Profit and Loss 10,000
Accumulated Depreciation 50,000
Balance c/d 6,00,000
6,80,000 6,80,000
Accumulated Depreciation Account
Dr. Cr.
Date Particulars J.F. Amount

Date Particulars J.F. Amount

Fixed Assets 50,000 Balance b/d 80,000
Balance c/d 1,00,000 Profit and Loss (Balance fig.) 70,000
1,50,000 1,50,000

8. From the following Balance Sheets of Tiger Super Steel Ltd., prepare Cash Flow Statement:

Balance Sheet of Tiger Super Steel Ltd.
as at 31st March 2014 and 31st March 2017
Particulars Note No. March 31, 2017
(₹)
March 31, 2016
(₹)
I) Equity and Liabilities
1. Shareholders’ Funds
a) Share capital 1 1,40,000 1,20,000
b) Reserves and surplus 2 22,800 15,200
2. Current Liabilities
a) Trade payables 3 21,200 14,000
b) Other current liabilities 4 2,400 3,200
c) Short-term provisions 5 28,400 22,400
Total 2,14,800 1,74,800
II) Assets
1. Non-Current Assets
a) Fixed assets
i) Tangible assets 6 96,400 76,000
ii) Intangible assets 18,800 24,000
b) Non-current investments 14,000 4,000
2. Current Assets
a) Inventories 31,200 34,000
b) Trade receivables 43,200 30,000
c) Cash and Cash Equivalents 11,200 6,800
Total  2,14,800 1,74,800

Notes to accounts:

2017 2016
1. Share Capital
Equity share capital 1,20,000 80,000
10% Preference share capital 20,000 40,000
1,40,000 1,20,000
2. Reserves and surplus
General reserve 12,000 8,000
Balance in statement of profit and loss 10,800 7,200
22,800 15,200
3. Trade payables
Bills payable 21,200 14,000
4. Other current liabilities
Outstanding expenses 2,400 3,200
5. Short-term provisions
Provision for taxation 12,800 11,200
Proposed dividend 15,600 11,200
28,400 22,400
6. Tangible assets
Land and building 20,000 40,000
Plant 76,400 36,000
96,400 76,000

Additional Information:
Depreciation Charge on Land & Building ₹ 20,000, and Plant ₹ 10,000 during the year.

The solution for this question is as follows:

Cash Flow Statement of Tiger Super Steels Ltd
Particulars Amount

Amount

A. Cash Flow from Operating Activities
Profit as per the Balance Sheet (10,800 –7,200) 3,600
General Reserve 4,000
Proposed Dividend 15,600
Provision for Taxation 12,800
Net Profit before Taxation and Extraordinary 36,000
Items to be added:
Depreciation on Land and Building 20,000
Depreciation on Plant 10,000
Goodwill written off 5,200 35,200
Operating Profit before Working Capital changes 71,200
Add: Increase in Current Liabilities
Bills Payable 7,200
Add: Decrease in Current Assets
Inventories 2,800 10,000
81,200
Less: Increase in Current Assets
Trade Receivables (13,200)
Less: Decrease in Current Liabilities
Outstanding Expenses (800) (14,000)
Cash Generated from Operating Activities 67,200
Less: Income Tax paid (11,200)
Net Cash from Operating Activities 56,000
B. Cash Flow from Investing Activities
Purchases of Plant (40,400)
Purchases of Investment (20,000)
Net Cash used in Investing Activities (60,400)
C. Cash Flow from Financing Activities
Issue of Equity Shares 40,000
Dividend paid (11,200)
Redemption of 10% Preference Shares (20,000)
Net Cash from Financing Activities 8,800
D. Net Increase in Cash and Cash Equivalent 4,400
Add: Cash and Cash Equivalent in the beginning 6,800
E. Cash and Cash Equivalents at the end 11,200

Working Notes:

1.

Plant Account
Dr. Cr.
Date Particulars J.F. Amount

Date Particulars J.F. Amount

To Balance b/d 36,000 By Depreciation 10,000
To Bank A/c (Purchases- Balancing figure) 50,400 By Balance c/d 76,400
86,400 86,400

2.

Net Profit before Tax 3,600
Profit and Loss Account 12,800
Less: Provision for Tax 16,400

9. From the following information, prepare cash flow statement:

Particulars Note No. 31st March
2015
(₹)
31st March
2014
(₹)
I) Equity and Liabilities
1. Shareholders’ Funds
a) Share capital 7,00,000 5,00,000
b) Reserves and surplus 4,70,000 2,50,000
2. Non-current Liabilities
(8% Debentures) 4,00,000 6,00,000
3. Current Liabilities
a) Trade payables 9,00,000 6,00,000
Total 24,70,000 19,50,000
II) Assets
1. Non-current assets
a) Fixed assets
i) Tangible 7,00,000 5,00,000
ii) Intangible-Goodwill 1,70,000 2,50,000
2. Current assets
a) Inventories 6,00,000 5,00,000
b) Trade Receivables 6,00,000 4,00,000
c) Cash and cash equivalents 4,00,000 3,00,000
Total  24,70,000 19,50,000

Additional Information:

Depreciation Charge on Plant amount to ₹. 80,000.

Cash Flow Statement

for the year ending March 31, 2015

Particulars Details

(₹)

Amount

(₹)

A. Cash from Operating Activities
Net Profit 2,20,000
Items to be Added:
Interest on Debentures 48,000
Depreciation on Fixed Assets 80,000
Goodwill Written-off 80,000 2,08,000
Operating Profit before Working Capital Adjustments 4,28,000
Add: Increase in Current Liabilities
Creditors 3,00,000
Less: Increase in Current Assets
Inventories (1,00,000)
Trade Receivables (2,00,000)
Cash Generated from Operations 4,28,000
Less: Tax Paid
Net Cash From Operating  Activities  4,28,000
B. Cash From Investing Activities
Purchase of Fixed Assets (WN) (2,80,000)
Net Cash From Investing Activities (2,80,000)
C. Cash From Financing Activities
Issue of Share Capital 2,00,000
Redemption of Debentures (2,00,000)
Interest Paid on Debentures (48,000) (48,000)
Net Cash From Financing Activities (C) (48,000)
Net Increase in Cash (A + B + C) 1,00,000
Add: Opening Cash and Cash Equivalents 3,00,000
Closing Cash and Cash Equivalents 4,00,000

Working Note:

Fixed Assets Account
Dr. Cr.
Particulars J.F. Amount

(₹)

Particulars J.F. Amount

(₹)

Balance b/d 5,00,000 Depreciation 80,000
Purchases (Balancing Figure) 2,80,000 Balance c/d 7,00,000
7,80,000 7,80,000

10. From the following Balance Sheet of Yogeta Ltd., prepare cash flow statement:

Particulars Note No. 31st March
2017
(₹)
31st March
2016
(₹)
I) Equity and Liabilities
1. Shareholders’ Funds
a) Share capital 1 4,00,000 2,00,000
b) Reserves and surplus-Surplus 2,00,000 1,00,000
2. Non-current Liabilities
a) Long-term borrowings 2 1,50,000 2,20,000
3. Current Liabilities
a) Short-term borrowings 1,00,000
(Bank overdraft)
b) Trade payables 70,000 50,000
c) Short-term provision 50,000 30,000
(Provision for taxation)
Total 9,70,000 6,00,000
II) Assets
1. Non-current assets
a) Fixed assets
i) Tangible 7,00,000 4,00,000
2. Current assets
a) Inventories 1,70,000 1,00,000
b) Trade Receivables 1,00,000 50,000
c) Cash and cash equivalents 50,000
Total  9,70,000 6,00,000

Notes to Accounts

Particulars 31st March
2017
(₹)
31st March
2016
(₹)
1. Share capital
a) Equity share capital 3,00,000 2,00,000
b) Preference share capital 1,00,000
4,00,000 2,00,000
2. Long term borrowings
Long-term loan 2,00,000
Long-term Rahul 1,50,000 20,000
1,50,000 2,20,000

Additional Information:
Net Profit for the year after charging ₹. 50,000 as Depreciation was ₹. 1, 50,000. Dividend paid on Share was ₹. 50,000, Tax Provision created during the year amounted to ₹. 60,000.

The solution for this question is as follows:

Cash Flow Statement of Yogeta Ltd.
Particulars Amount

Amount

A. Cash Flow from Operating Activities
Profit as per Balance Sheet (2,00,000 –1,00,000) 1,00,000
Proposed Dividend 50,000
Provision for Taxation 60,000
Net Profit before Taxation and Extraordinary items 2,10,000
Items to be added:
Depreciation 50,000 50,000
Operating Profit before Working Capital changes 2,60,000
Add: Increase in Current liabilities
Trade Payable 20,000 20,000
2,80,000
Less: Increase in Current Assets
Inventories (70,000)
Trade Receivable (50,000) (1,20,000)
Cash Generated from Operating Activities 1,60,000
Less: Income Tax paid (40,000)
Net Cash from Operations 1,20,000
B. Cash Flow from Investing Activities
Purchases of Fixed Assets (3,50,000)
Net Cash used in Investing Activities (3,50,000)
C. Cash Flow from Financing Activities
Issue of Equity Shares 1,00,000
Issue of Preference Shares 1,00,000
Loan from Rahul 1,30,000
Less: Repayment of Loan (2,00,000)
Dividend Paid (50,000)
Net Cash from Financing Activities 80,000
D. Net decrease in Cash and Cash Equivalent (A+B+C) (1,50,000)
Add: Cash and Cash Equivalents in the beginning 50,000
E. Cash and Cash Equivalents at the end (Bank Overdraft) (1,00,000)

Working Notes:

1.

Provision for Taxation Account
Dr. Cr.
Date Particulars J.F. Amount

Date Particulars J.F. Amount

Bank (Balancing figure) 40,000 Balance b/d 30,000
Balance c/d 50,000 Profit and Loss 60,000
90,000 90,000

2.

Fixed Assets Account
Dr. Cr.
Date Particulars J.F. Amount

Date Particulars J.F. Amount

Balance b/d 4,00,000 Depreciation 50,000
Bank 3,50,000 Balance c/d 7,00,000
7,50,000 7,50,000

 

 

11. Following is the Financial Statement of Garima Ltd., prepare cash flow statement.

Particulars Note No. 31st March
2017
(₹)
31st March
2016
(₹)
I) Equity and Liabilities
1. Shareholders’ Funds
a) Share capital 1 4,40,000 2,80,000
b) Reserve and surplus-Surplus 2 40,000 28,000
2. Current Liabilities
a) Trade payables 1,56,000 56,000
c) Short-term provisions 12,000 4,000
(Provision for taxation)
Total 6,48,000 3,68,000
II) Assets
1. Non-current assets
a) Fixed assets
i) Tangible 3,64,000 2,00,000
2. Current assets
a) Inventories 1,60,000 60,000
b) Trade receivables 80,000 20,000
c) Cash and cash equivalents 28,000 80,000
d) Other current assets 16,000 8,000
Total  6,48,000 3,68,000

Notes to Accounts

Particulars 31st March
2017
(₹)
31st March
2016
(₹)
1. Share capital
a) Equity share capital 3,00,000 2,00,000
b) Preference share capital 1,40,000 80,000
4,40,000 2,80,000
2. Reserve and surplus
Surplus in statement of profit and loss at the beginning of the year 28,000
Add: Profit of the year 16,000
Less: Dividend 4,000
Profit at the end of the year 40,000

Additional Information:

  1. Interest paid on Debenture ₹ 600
  2. Dividend paid during the year ₹ 4,000
  3. Depreciation charged during the year ₹ 32,000

The solution for this question is as follows:

Cash Flow Statement (Indirect Method)
Particulars Amount

Amount

A. Cash Flow from Operating Activities
Profit as per Balance Sheet  (40,000 – 28,000) 12,000
Proposed Dividend 4,000
Provision for Taxation 12,000
Net Profit before Taxation and Extraordinary items 28,000
Items to be added:
Interest paid on Debentures 600
Depreciation 32,000 32,600
Operating Profit before Working Capital changes 60,600
Add: Increase in Current liabilities
Trade Payables 1,00,000
Less: Increase in Current Assets
Other Current Assets (8,000)
Inventories (1,00,000)
Trade Receivables (60,000) (68,000)
Cash generated from Operating Activities (7,400)
Less: Income Tax paid (4,000)
Net Cash used in Operating Activities (11,400)
B. Cash Flow from Investing Activities
Purchase of Fixed Assets (1,96,000)
Net Cash used in Investing Activities (1,96,000)
C. Cash Flow from Investing Activities
Issue of Equity Shares 1,00,000
Issue of Preference Shares 60,000
    Less: Interest Paid on Debentures (600)
Less: Dividend Paid (4,000)
Net Cash from Financing Activities 1,55,400
D. Net decrease in cash and cash equivalent (A+B+C) (52,000)
Add: Cash and Cash Equivalents in the beginning 80,000
E. Cash and Cash Equivalents at the end 28,000

Working Notes:

Plant and Machinery Account
Dr. Cr.
Date Particulars J.F. Amount

Date Particulars J.F. Amount

Balance b/d 2,00,000 Depreciation 32,000
Bank (Purchases- Balancing fig.) 1,96,000 Balance c/d 3,64,000
3,96,000 3,96,000

12. From the following Balance Sheet of Computer India Ltd., prepare cash flow statement.

(₹ in ‘000)
Particulars Note No. 31st March
2017
(₹)
31st
March
2016
(₹)
I) Equity and Liabilities
1. Shareholders’ Funds
a) Share capital 50,000 40,000
b) Reserves and surplus-Surplus 1 3,700 3,000
2. Non-Current Liabilities
10% Debentures 6,500 6,000
3. Current Liabilities
a) Short-term borrowings 2 6,800 12,500
b) Trade payables 11,000 12,000
c) Short-term provisions 3 10,000 8,000
Total 88,000 81,500
II) Assets
1. Non-current assets
a) Fixed assets 4 25,000 30,000
2. Current assets
a) Inventories 35,000 30,000
b) Trade receivables 24,000 20,000
c) Cash and cash equivalents-cash 3,500 1,200
d) Other current assets-prepaid exp. 500 300
Total  88,000 81,500

Notes to Accounts

Particulars 31st March

2017

(₹)

31st
March
2016

(₹)

1. Reserve and surplus
(i) Balance in statement of profit and loss 1,200 1,000
(ii) General reserve 2,500 2,000
3,700 3,000
2. Short-term borrowings
Bank Overdraft 6,800 12,500
3. Short-term provisions
(i) Provision for taxation 4,200 3,000
(ii) Proposed dividend 5,800 5,000
10,000 8,000
4. Fixed Assets:
  Fixed Assets 40,000 41,000
  Less: Accumulated Depreciation (15,000) (11,000)
25,000 30,000

Additional Information:

Interest paid on Debenture ₹. 600

The solution for this question is as follows:

Cash Flow Statement of Computer India Ltd. 
(‘00,000)
Particulars Amount

Amount

A. Cash Flow from Operating Activities
Profit as per Balance Sheet (1,200 – 1,000) 200
Proposed Dividend 5,800
General Reserve 500
Provision for Taxation 4,200
Net Profit before Tax and Extraordinary items 10,700
Items to be added
Provision for Depreciation 4,000
Interest paid on Debentures 600 4,600
Operating Profit before Working Capital changes 15,300
Adjustments
Less: Increase in Current Assets
Trade Receivables (4,000)
Inventories (5,000)
Prepaid Expenses (200) (9,200)
6,100
Less: Decrease in Current Liabilities
Trade Creditors (1,000) (1,000)
Cash generated from Operating Activities 5,100
Less: Income Tax Paid (3,000)
Net Cash from Operation 2,100
B. Cash Flow from Investing Activities
Sale of Fixed Assets 1,000
Net Cash from Investing Activities 1,000
C. Cash Flow from Financing Activities
Issue of Equity Shares 10,000
Issue of 10% Debentures 500
Less: Dividend paid (5,000)
Less: Interest paid (600)
Net Cash from Financing Activities 4,900
D. Net Increase in Cash and Cash Equivalent (A+B+C) 8,000
Add: Cash and Cash Equivalent in the beginning
Cash 1,200
Bank overdraft (12,500) (11,300)
E. Cash and Cash Equivalents at the end
Cash 3,500
Bank overdraft (6,800) (3,300)

Concepts covered in this chapter –

  • Nature of the cash flow statement
  • Benefits of cash flow statement
  • Cash and cash equivalents
  • Cash flows
  • Preparation of cash flow statement

Conclusion

NCERT Solutions for Class 12 Accountancy Chapter 6 provides a wide degree of illustrative examples; which assists the students to comprehend and learn quickly. The above mentioned are the illustrations for Class 12 CBSE syllabus. For more solutions and study materials of NCERT solutions for Class 12 Accountancy, visit BYJU’S or download the app for more information.

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