Question

From the following Balance Sheet as at 31st March, 2019 and Statement of Profit and Loss for the year ended 31st March, 2019 of RSB Ltd. and additional information, prepare Cash Flow Statement:

Particulars	Note No.	31st March, 2019 (₹)	31st March, 2018 (₹)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital		7,50,000	5,00,000
(b) Reserves and Surplus	1	9,50,000	3,00,000
2. Non-Current Liabilities
Long-term Borrowings (5% Debentures)		7,00,000	4,00,000
3. Current Liabilities
(a) Trade Payables		1,10,000	90,000
(b) Other Current Liabilities	2	39,000	25,000
(c) Short-term Provisions (Provision for Tax)		2,60,000	2,25,000
Total		28,09,000	15,40,000
II. ASSETS
1. Non-Current Assets
(a) Fixed Assets – Tangible	3	6,85,000	7,45,000
(b) Non-current Investments		7,50,000	2,50,000
2. Current Assets
(a) Current Investments		6,74,000	95,000
(b) Inventories		1,00,000	2,00,000
(c) Trade Receivables		4,00,000	1,50,000
(d) Cash and Cash Equivalents		2,00,000	1,00,000
Total		28,09,000	15,40,000

STATEMENT OF PROFIT AND LOSS
for the year ended 31st March, 2019

Particulars	Note No.	31st March, 2019 (₹)	31st March, 2018 (₹)
I. Revenue from Operations	4	40,00,000	35,00,000
II. Other Income	5	35,000	30,000
III. Total Revenue (I + II)		40,35,000	35,30,000
IV. Expenses:
Purchases of Stock-in-Trade		27,00,000	24,70,000
Change in Inventories of Stock-in-Trade	6	1,00,000	50,000
Finance Cost		27,500	20,000
Depreciation		40,000	45,000
Other Expenses		22,500	20,000
Total Expenses		28,90,000	26,05,000
V. Profit before Tax (III – IV)		11,45,000	9,25,000
VI. Less: Tax		3,45,000	2,25,000
VII. Profit after Tax (V – VI)		8,00,000	7,00,000

Notes to Accounts

Particular		31st March 2019 (₹)	31st March 2018 (₹)
1.	Reserves and Surplus
	Debenture Redemption Reserve	1,00,000	1,00,000
	Surplus, i.e., Balance in Statement of Profit and Loss	8,50,000	2,00,000
		9,50,000	3,00,000
2.	Other Current Liabilities
	Interest on Debentures	35,000	20,000
	Outstanding Expenses	4,000	5,000
		39,000	25,000
3.	Fixed Assets–Tangible
	Cost	8,90,000	9,90,000
	Less: Accumulated Depreciation	2,05,000	2,45,000
		6,85,000	7,45,000
4.	Revenue from Operations
	Sales	42,00,000	35,75,000
	Less: Sales Return	2,00,000	75,000
		40,00,000	35,00,000
5.	Other Income
	Interest on Deposits	15,000	12,500
	Dividend on Investments	10,000	17,500
	Gain (Profit) on Sale of Fixed Assets	10,000	…
		35,000	30,000
6.	Change in Inventories of Stock-in-Trade
	Opening Stock	2,00,000	2,50,000
	Less: Closing Stock	1,00,000	2,00,000
		1,00,000	50,000

Additional Information:

1. Additional debentures were issued on 1^st October, 2018 of ₹5,00,000. On the same date, part of outstanding debentures were redeemed and interest was paid, whereas interest on outstanding debentures was paid on 10^th April, 2019.
2. Board of Directors proposed dividend in both the years @ 10%.
3. Interim Dividend of ₹ 1,00,000 was paid during the year.
4. A fixed asset with original cost of 1,00,000, on which depreciation till date was provided of ₹ 80,000 was sold at a profit of ₹ 10,000.

Answer 1

Cash flow Statement
for the year ended 31st March, 2019
Particulars	Amount (₹)	Amount (₹)
A. Cash Flow from Operating Activities
Net Profit (as per Statement of Profit and Loss)	8,00,000
Add:Provision for Tax Made (WN3)	3,45,000
Net Profit before tax and extraordinary items	11,45,000
Add:Depreciation charged during the year (WN1)	40,000
Finance cost	27,500
Less:Interest on Deposits	15,000
Dividend received on Investments	10,000
Gain on sale of fixed asset	10,000
Net Profit before working capital changes	11,77,500
Add:Increase in Trade Payables	20,000
Decrease in Inventories	1,00,000
Less: Decrease in Outstanding expenses	1,000
Increase in Trade receivables	2,50,000
Net Profit before Tax		10,46,500
Less: Tax Paid		3,10,000
Cash flow from Operating Activities		7,36,500
B. Cash flow from Investing Activities
Sale of Fixed Asset	30,000
Purchase of Investments	(5,00,000)
Dividend received on Investments	10,000
Interest Received on deposits	15,000
Cash used in Investing Activities		(4,45,000)
C. Cash flow from Financing Activities
Proceeds from Issue of shares	2,50,000
Proceeds from Issue of debentures	5,00,000
Cash outflow on redemption of debentures (WN2)	(2,00,000)
Finance Cost paid (20,000 + 27,500 – 35,000)	(12,500)
Interim Dividend paid	(1,00,000)
Proposed Dividend Paid	(50,000)
Cash flow from Financing Activities		3,87,500
Net Increase in Cash and Cash Equivalents (A + B + C)		6,79,000
Add: Opening Balance of Cash	1,00,000
Opening Balance of Current Investments	95,000	1,95,000
Closing Balance of Cash and Cash Equivalents		8,74,000
Current Investments Closing Balance	6,74,000
Closing Balance of Cash	2,00,000
		8,74,000

Working Notes: 1.

Dr.	Accumulated Depreciation A/c						Cr.
Date		Particulars	Amount (₹)	Date	Particulars	Amount (₹)
2019				2018
March 31		To Fixed Asset A/c (Depreciation on Mach. Sold)	80,000	April 01	By Balance b/d	2,45,000
March 31		To balance c/d	2,05,000		By Statement of Profit & Loss A/c	40,000
			2,85,000			2,85,000

Dr.	Fixed Assets A/c						Cr.
Date		Particulars	Amount (₹)	Date	Particulars	Amount (₹)
2018				2019
April 01		To balance b/d	9,90,000	March 31	By Accumulated Depreciation A/c	80,000
2019				March 31	By Bank A/c- Sale of Machine (Bal. Fig.)	30,000
March 31		To Statement of Profit & Loss A/c- Profit	10,000	March 31	By balance c/d	8,90,000
			10,00,000			10,00,000

2.

Dr.	5% Debentures A/c						Cr.
Date		Particulars	Amount (₹)	Date	Particulars	Amount (₹)
2018				2018
October 01		To Bank A/c (Redemption) (Bal Fig.)	2,00,000	April 01	By balance b/d	4,00,000
2019				2018
March 31		To balance c/d	7,00,000	October 01	By Bank A/c (Issue)	5,00,000
			9,00,000			9,00,000

3.

Dr.	Provision for Tax A/c						Cr.
Date		Particulars	Amount (₹)	Date	Particulars	Amount (₹)
2019				2018
March 31		To Bank A/c- Tax Paid	3,10,000	April 01	By balance b/d	2,25,000
March 31		To balance c/d	2,60,000	2019
				March 31	By Statement of Profit & Loss A/c	3,45,000
			5,70,000			5,70,000