Question

From the following Balance Sheet of Mohan Ltd., prepare cash flow statement.
Balance Sheet of Mohan Ltd.
as on………….
$\begin{array}{cccccc}\text{Capital and Liabilities}& 2010& 2011& \text{Assets}& 2010& 2011\\ & \text{(Rs.)}& \text{(Rs.)}& & \text{(Rs.)}& \text{(Rs.)}\\ \text{Equity Share Capital}& 2,00,000& 3,00,000& \text{Fixed Assets}& 4,00,000& 6,00,000\\ \text{Profit and Loss}& 1,60,000& 2,00,000& \text{Stock}& 1,30,000& 1,50,000\\ \text{Bank Loan}& 1,00,000& 80,000& \text{Debtors}& 1,00,000& 60,000\\ \text{Accumulated Depreciation}& 80,000& 1,00,000& \text{Bills Receivable}& 20,000& 30,000\\ \text{Creditors}& 1,40,000& 1,20,000& \text{Bank}& 90,000& 30,000\\ \text{Proposed Dividend}& \underset{–}{60,000}& \underset{–}{70,000}& & & \\ & \underset{–}{7,40,000}& \underset{–}{8,70,000}& & \underset{–}{\overline{7,40,000}}& \underset{–}{\overline{8,70,000}}\end{array}$

Additional Information:
Machine costing Rs. 80,000 on which accumulated depreciation was Rs. 50,000 was sold for Rs. 20,000.

Answer 1

Cash Flow Statement of Mohan Ltd.
$\begin{array}{cccc}& \text{Particulars}& \text{Amt. (Rs.)}& \text{Amt. (Rs.)}\\ A.& \text{Cash Flow from Operating Activities:}& & \\ & \text{Profit as per the Balance Sheet (2,00,000 - 1,60,000)}& 40,000& \\ & \text{Proposed Dividend}& \underset{–}{70,000}& \\ & \text{Net Profit before Taxation and Extraordinary Items}& & 1,10,000\\ & \text{Adjustments for non-cash items:}& & \\ & \text{Depreciation}& 70,000& \\ & \text{Loss on Sale of Machine}& \underset{–}{10,000}& \underset{–}{80,000}\\ & \text{Operating Profit before Working Capital changes}& & 1,90,000\\ & \text{Changes in Working Capital:}& & \\ & \text{(+) Decrease in Debtors}& 40,000& \\ & \text{(-) Increase in Stock}& (20,000)& \\ & \text{(-) Increase in Bills Receivable}& (10,000)& \\ & \text{(-) Decrease in Creditors}& \underset{–}{(20,000)}& \underset{–}{(10,000)}\\ & \text{Net Cash from Operating Activities}& & \underset{–}{1,80,000}\\ B.& \text{Cash Flow from Investing Activities}& & \\ & \text{Proceeds from Sale of Fixed Assets}& & 20,000\\ & \text{Purchase of Fixed Assets}& & \underset{–}{(2,80,000)}\\ & \text{Net Cash Outflow from Investing Activity}& & \underset{–}{(2,60,000)}\\ C.& \text{Cash Flow From Financing Activities}& & \\ & \text{Issue of Shares}& & 1,00,000\\ & \text{Bank Loan paid}& & (20,000)\\ & \text{Dividend paid}& & \underset{–}{(60,000)}\\ & \text{Net Cash from Financing Activities}& & \underset{–}{20,000}\\ D.& \text{Net Decrease in Cash and Cash Equivalentes (A+B+C)}& & (60,000)\\ & \text{(+) Cash and Cash Equivalents in the Beginning}& & \underset{–}{90,000}\\ E.& \text{Cash and Cash Equivalents at the End}& & \underset{–}{30,000}\end{array}$

Dr. Fixed Assets Account Cr.
$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{J.F.}& \text{Amt. (Rs.)}& \text{Date}& \text{Particulars}& \text{J.F.}& \text{Amt. (Rs.)}\\ & \text{Balance b/d}& & 4,00,000& & \text{Bank}& & 20,000\\ & \text{Bank (Purchase)}& & & & \text{Profit and Loss}& & 10,000\\ & \text{(Balancing Figure)}& & 2,80,000& & \text{(Loss on Sale)}& & \\ & & & & & \text{Accumulated}& & 50,000\\ & & & & & \text{Depreciation A/c}& & \\ & & & & & \text{Balance c/d}& & \underset{–}{6,00,000}\\ & & & \overline{\underset{–}{6,80,000}}& & & & \underset{–}{6,80,000}\end{array}$

Dr. Accumulated Depreciation Account Cr.
$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{J.F.}& \text{Amt. (Rs.)}& \text{Date}& \text{Particulars}& \text{J.F.}& \text{Amt. (Rs.)}\\ & \text{Fixed Assets}& & 50,000& & \text{Balance b/d}& & 80,000\\ & \text{Balance c/d}& & 1,00,000& & \text{Profit and Loss A/c}& & \\ & & & & & \text{(Balancing Figure)}& & 70,000\\ & & & \overline{\underset{–}{1,50,000}}& & & & \overline{\underset{–}{1,50,000}}\end{array}$