Question

Prepare Cash Flow Statement from the following Information:

Balance Sheet
Liabilities	2004 Rs	2005 Rs	Assets	2004 Rs	2005 Rs
Equity Share Capital	5,00,000	7,00,000	Cash/Bank	3,00,000	4,00,000
8% Debentures	6,00,000	4,00,000	Sundry Debtors	4,00,000	6,00,000
Profit and Loss Account	3,00,000	5,00,000	Stock	5,00,000	6,00,000
Creditors	6,00,000	9,00,000	Goodwill	2,50,000	1,70,000
			Discount on Debenture	50,000	30,000
			Plant	5,00,000	7,00,000
	20,00,000	25,00,000		20,00,000	25,00,000

Additional Information:

Depreciation Charge on Plant amount to Rs 80,000.

Answer 1

Cash Flow Statement
	Particulars			Amount Rs	Amount Rs
A.	Cash Flow from Operating Activities
	Net Profit as per the Balance Sheet (5,00,000 –­­­ 3,00,000)				2,00,000
	Items to be added:
	Depreciation on Plant			80,000
	Goodwill written off			80,000
	Discount on Debentures written off			20,000	1,80,000
	Operating Profit before Working Capital adjustments				3,80,000
	Add: Increase in Current Liabilities
	Creditors			3,00,000	3,00,000
					6,80,000
	Less: Increase in Current Assets
	Sundry Debtors			(2,00,000)
	Stock			(1,00,000)	(3,00,000)
	Net Cash from Operations				3,80,000
B.	Cash Flow from Investing Activities
	Purchase of Plant				(2,80,000)
	Net Cash used in Investing Activities				(2,80,000)
C.	Cash Flow from Financing Activities
	Issue of Equity Share Capital				2,00,000
	Redemption of 8% Debentures				(2,00,000)
					Nil
D.	Net Increase in Cash and Cash Equivalent (A+B+C)				1,00,000
	Add: Cash and Cash Equivalent in the beginning				3,00,000
E.	Cash and Cash Equivalents at the end				4,00,000

Working Notes:

Plant Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
	Balance b/d		5,00,000		Depreciation		80,000
	Bank (Purchases- Balancing figure)		2,80,000		Balance c/d		7,00,000
			7,80,000				7,80,000