Question

From the following Balance Sheet and information of Sun Ltd., prepare Cash Flow Statement:

Particulars ulars	Note No.	31st March, 2019 (₹)	31st March, 2018 (₹)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital	1	7,00,000	6,00,000
(b) Reserves and Surplus	2	4,10,000	2,00,000
2. Non-Current Liabilities
Long-term Borrowings: 10% Debentures		3,00,000	2,00,000
3. Current Liabilities
(a) Trade Payables		1,40,000	60,000
Total Total Expenses		15,50,000	10,60,000
II. ASSETS
1. Non-Current Assets
(a) Fixed Assets−Tangible		7,00,000	6,00,000
(b) 10% Investments		2,00,000	1,00,000
2. Current Assets
(a) Current Investments		90,000	50,000
(b) Inventories		2,00,000	1,00,000
(c) Trade Receivables	3	2,80,000	1,90,000
(d) Cash and Cash Equivalents		80,000	20,000
Total		15,50,000	10,60,000

Notes to Accounts :
Particulars	31st March, 2019 (₹)	31st March, 2018 (₹)
1. Share Capital
Equity Share Capital	5,00,000	3,00,000
10% Preference Share Capital	2,00,000	3,00,000
	7,00,000	6,00,000
2. Reserves and Surplus
Securities Premium Reserve	10,000	...
Surplus i.e., Balance in Statement of Profit and Loss	4,00,000	2,00,000
	4,10,000	2,00,000
3. Trade Receivables
Sundry Debtors	3,00,000	2,00,000
Less: Provision for Doubtful Debts	20,000	10,000
	2,80,000	1,90,000

You are informed that during the year:

(i)	Proposed Dividend:	31st March, 2019	31st March, 2018
	Equity Share Capital	Nil	Nil
	Preference Share Capital	10%	10%

(ii) A machine with a book value of ₹ 90,000 was sold for ₹ 50,000;
(iii) Depreciation charged during the year ₹ 60,000;
(iv) Debentures were issued on 1st April, 2018;
(v) Investments were purchased on 31st March, 2019;
(vi) Preference shares were redeemed on 31st December,2018;
(vii) An interim dividend @ 15% was paid on equity shares on 31st December, 2018;
(viii) Fresh equity shares were issued at a premium of 5% on 31st March, 2019.

Answer 1

		Cash Flow Statement for the year ended March 31, 2019
	Particulars			Amount (₹)	Amount (₹)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss			2,00,000
	Preference Dividend $(3,00,000\times \frac{10}{100})$W.N.-1			30,000
	Profit Before Taxation				2,30,000
	Items to be Added:
	Depreciation on Fixed Assets			60,000
	Loss on Fixed Assets			40,000
	Interest on Debentures			30,000
	Dividend on Equity Shares			45,000
	Provision for Doubtful Debts			10,000
	Items to be Deducted:
	Interest on Investment			(10,000)	1,75,000
	Operating Profit before Working Capital Adjustments				4,05,000
	Less: Increase in Current Assets
			Trade Receivables	(1,00,000)
			Inventories	(1,00,000)	(2,00,000)
	Add: Increase in Current Liabilities
	Trade Payables			80,000	80,000
	Cash Generated from Operations				2,85,000
	Less: Tax Paid				-
	Net Cash Flows from Operating Activities				2,85,000
B	Cash Flow from Investing Activities
			Sale of Fixed Assets	50,000
			Purchase of Fixed Assets	(2,50,000)
			Purchase of Investment	(1,00,000)
			Interest on Investment	10,000
	Net Cash Used in Investing Activities				(2,90,000)
C	Cash Flow from Financing Activities
	Proceeds from Issue of Share Capital			2,00,000
	Proceeds from Issue of Debentures			1,00,000
	Interest on Debentures Paid			(30,000)
	Redemption of Preference Share Capital			(1,00,000)
	Security Premium Reserve			10,000
	Dividend Paid on Preference Share Capital			(30,000)
	Dividend Paid on Equity Share Capital			(45,000)
	Net Cash Flow from Financing Activities				1,05,000
D	Net Increase in Cash and Cash Equivalents				1,00,000
			Add: Cash and Cash Equivalent in the beginning of the period (50,000+20,000)		70,000
	Cash and Cash Equivalents at the end of the period (90,000+80,000)				1,70,000

Working Notes:

(1) Dividend on 10% Preference Shares has been calculated on the value as on 31st March, 2018 as Rs. 1,00,000 Preference Shares were redeemed on 31st December, 2018.

(2)

Fixed Assets Account
Dr.		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Balance b/d	6,00,000	Bank A/c (Sale)	50,000
Bank A/c (Purchase- Bal. Fig.)	2,50,000	Depreciation	60,000
		Profit and Loss A/c (Loss on Sale)	40,000
		Balance c/d	7,00,000
	8,50,000		8,50,000