Question

From the following Balance Sheet and information of Volvo 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	2,25,000	2,50,000
(b) Reserves and Surplus	2	1,27,500	50,000
2. Non-Current Liabilities
Long-term Borrowings: 10% Debentures		1,00,000	50,000
3. Current Liabilities
(a) Trade Payables		72,500	35,000
(b) Other Current Liabilities−Premium on Redemption of Preference Shares		2,500	5,000
Total Total Expenses		5,27,500	3,90,000
II. ASSETS
1, Non-Current Assets
(a) Fixed Assets−Tangible		3,10,000	2,55,000
(b) Non-Current Investments (10% Investments)		40,000	15,000
2. Current Assets
(a) Current Investments		5,000	4,000
(b) Inventories		45,000	50,000
(c) Trade Receivables	3	92,500	45,000
(d) Cash and Cash Equivalents	4	35,000	21,000
Total		5,27,500	3,90,000

Notes to Accounts

Particulars	31st March, 2019 (₹)	31st March, 2018 (₹)
1. Share Capital
Equity Share Capital	1,75,000	1,50,000
12% Preference Share Capital	50,000	1,00,000
	2,25,000	2,50,000
2. Reserves and Surplus
General Reserve	10,000	15,000
Surplus, i.e., Balance in Statement of Profit and Loss	1,17,500	35,000
	1,27,500	50,000
3. Trade Receivables
Sundry Debtors	1,00,000	50,000
Less: Provision for Doubtful Debts	7,500	5,000
	92,500	45,000
4. Cash and Cash Equivalents
Cash in Hand	12,500	6,000
Cash in Bank	22,500	15,000
	35,000	21,000

Additional Information :
(i) You are informed during the year:

Proposed Dividend	31st March, 2019 (₹)	31st March, 2018 (₹)
Equity Share Capital	NIL	NIL
Preference Share Capital	12%	12%

(ii) A machine with a book value of ₹20,000 was sold for ₹12,500;
(iii) Depreciation charged during the year was ₹35,000;
(iv) Preference shares were redeemed on 31st March, 2018 at a premium of 5%;
(v) An Interim dividend of ₹5,000 was paid on equity shares on 31st March, 2019 out of General Reserve;
(vi) Fresh equity shares were Issued on 31st March, 2019; and
(vii) Additional Investments were purchased 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			82,500
	Preference Dividend			12,000
	Profit Before Taxation				94,500
	Items to be Added:
	Depreciation on Fixed Assets			35,000
	Loss on sale of Fixed Assets			7,500
	Interest on Debentures			5,000
	Provision for Doubtful Debts			2,500
					50,000
	Items to be Deducted:
	Interest on Investment				(1,500)
	Operating Profit before Working Capital Adjustments				1,43,000
	Less: Increase in Current Assets
			Trade Receivables	(50,000)
	Add: Decrease in Current Assets
	Inventory			5,000
	Add: Increase in Current Liabilities
	Trade Payables			37,500	(7,500)
	Cash Generated from Operations				1,35,500
	Less: Tax Paid				-
	Net Cash Flows from Operating Activities				1,35,500
B	Cash Flow from Investing Activities
			Sale of Fixed Assets	12,500
			Purchase of Fixed Assets	(1,10,000)
			Purchase of Investment	(25,000)
			Interest on Investment	1,500
	Net Cash Used in Investing Activities				(1,21,000)
C	Cash Flow from Financing Activities
	Proceeds from Issue of Share Capital			25,000
	Proceeds from Issue of Debentures			50,000
	Interest on Debentures Paid			(5,000)
	Redemption of Preference Share Capital			(50,000)
	Premium on Redemption of Preference Share Capital			(2,500)
	Dividend Paid on Preference Share Capital			(12,000)
	Dividend Paid on Equity			(5,000)
	Net Cash Flow from Financing Activities				500
D	Net Increase in Cash and Cash Equivalents				15,000
			Add: Cash and Cash Equivalent in the beginning of the period (6,000+15,000+4,000)		25,000
	Cash and Cash Equivalents at the end of the period (12,500+22,500+5,000)				40,000

Working Notes:

(1) Interim dividend on equity shrares was paid out of General Reserve and not out of Surplus. Hence, the same has not been considered while calculating Net Profit before Tax and Extra-ordinary items.

(2)

Fixed Assets Account
Dr.		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Balance b/d	2,55,000	Bank A/c (Sale)	12,500
Bank A/c (Purchase- Bal. Fig.)	1,10,000	Depreciation	35,000
		Profit and Loss A/c (Loss on Sale)	7,500
		Balance c/d	3,10,000
	3,65,000		3,65,000