Question

From the following Balance Sheets of XY Ltd. as at 31-03-2018 and 31-03-2017 prepare a Cash Flow statement:
$$\begin{array}{cccc}\text{Particulars}& \text{Note}& 31-03-2018& 31-03-2017\\ & \text{No.}& & \\ \text{I. Equity And Liabilities:}& & \text{Rs.}& \text{Rs.}\\ \text{(1) Share holder's Funds:}& & & \\ \text{(a) Share Capital}& 1& 8,50,000& 4,60,000\\ \text{(b) Reserve and Surplus}& 2& 1,70,000& 2,40,000\\ \text{(2) Non - Current liabilities:}& & & \\ \text{Long term Borrowings}& 3& \underset{–}{1,80,000}& \underset{–}{2,00,000}\\ \text{Total}& & \underset{–}{12,00,000}& \underset{–}{9,00,000}\\ \text{II. Assets:}& & & \\ \text{(1) Non Current Assets:}& & & \\ \text{Fixed Assets}& & 7,00,000& 5,00,000\\ \text{(2) Current Assets:}& & & \\ \text{(a) Inventory}& & 2,50,000& 2,10,000\\ \text{(b) Trade Receivables}& & 1,90,000& 1,40,000\\ \text{(c) Cash and Cash Equivalents}& & \underset{–}{60,000}& \underset{–}{50,000}\\ \text{Total}& & \underset{–}{12,00,000}& \underset{–}{9,00,000}\end{array}$$
Notes :
(1)
$$\begin{array}{ccc}\text{Share Capital:}& 31-03-2018& 31-03-2017\\ \text{Equity Share Capital}& 7,50,000& 4,00,000\\ 8\%\text{Preference share Capital}& \underset{–}{1,00,000}& \underset{–}{60,000}\\ & \underset{–}{8,50,000}& \underset{–}{4,60,000}\\ \left(2\right)\text{Reserve and Surplus:}& & \\ \text{General reserve}& 50,000& 70,000\\ \text{Profit and Loss Balance}& \underset{–}{1,20,000}& \underset{–}{1,70,000}\\ & \underset{–}{1,70,000}& \underset{–}{2,40,000}\\ \left(3\right)\text{Long term Borrowings:}& & \\ 10\%\text{Debentures}& \underset{–}{1,80,000}& \underset{–}{2,00,000}\end{array}$$
Additional Information
(i) During the year machine costing Rs. 80,000 was sold for Rs. 50,000.
(ii) Interim Dividend paid on equity share capital Rs. 80,000

Answer 1

Cash Flow Statement
For the year ended 31st March, 2018
$$\begin{array}{cccc}\text{Particulars}& & \text{Amount (Rs.)}& \text{Amount (Rs.)}\\ \text{A. Cash Flow From Operating Activities}& & & \\ \text{Net Profit before Tax (Note 1)}& & 14,800& \\ \text{Adjustments for non - cash items:}& & & \\ \text{Loss on sale of Machinery}& & \underset{–}{30,000}& \\ & & \text{44,800}& \\ \text{Adjustments for non - operating items:}& & & \\ (+)\text{Interest on Debentures}& & \underset{–}{20,000}& \\ \text{Operating profit before working capital changes}& & 64,800& \\ \text{(-) Increase in Inventory}& (40,000)& & \\ \text{(-) Increase in Trade Receivable}& \underset{–}{(50,000)}& \underset{–}{(90,000)}& \\ \text{Net Cash used in Operating activities}& & \underset{–}{25,200}& (25,200)\\ \text{B. Cash flows from Investing Activities:}& & & \\ \text{Sale of Fixed Assets}& & 50,000& \\ \text{Purchase of Fixed Assets}& & \underset{–}{(2,80,000)}& \\ \text{Net Cash used in investing activities}& & \underset{–}{(2,30,000)}& (2,30,000)\\ \text{C. Cash Flows from Financing Activities:}& & & \\ \text{Issue of Equity Share Capital}& & 3,50,000& \\ \text{Issue of Preference Share Capital}& & 40,000& \\ \text{Redemption of Long-term Borrowings (Debentures)}& & (20,000)& \\ \text{Preference Dividend for Previous Year}& & (4,800)& \\ \text{Interim Dividend on Equity Shares}& & (80,000)& \\ \text{Interest Paid on Long term Borrowings (Debentures)}& & \underset{–}{(20,000)}& \\ \text{Net Cash from Financing activities}& & \underset{–}{2,65,200}& \underset{–}{2,65,200}\\ \text{Net Increase in Cash and Cash Equivalents}& & & 10,000\\ \text{(+) Cash and Cash equivalents in the beginning of the period}& & & \underset{–}{50,000}\\ \text{Cash and Cash equivalents at the end of the period}& & & \underset{–}{60,000}\end{array}$$
Notes :
(i)
$$\begin{array}{cc}\text{Calculation of Net Profit before Tax:}& \text{Rs.}\\ \text{Profit and Loss Balance on 31st March, 2018}& 1,20,000\\ \text{(-) Profit and Loss Balance on 31st March, 2017}& \underset{–}{1,70,000}\\ & (50,000)\\ (-)\text{Transfer from General Reserve}& (20,000)\\ (+)\text{Preference dividend for previous year}8\%on60,000& 4,800\\ (+)\text{Interim Dividend on equity capital}& \underset{–}{80,000}\\ \text{Net Profit before tax}& \underset{–}{14,800}\end{array}$$
Note: Decrese in General Reserve is deducted because it is utilisation of past reserve.
* Dividend on Preference shares is paid before payment of dividend on equity shares. The company has paid interim dividend on equity shares. Hence, it must have paid previous year's dividend on preference shares.

(2)

Dr. Fixed Assets Account Cr.
$$\begin{array}{cccc}\text{Particulars}& \text{Amount (Rs.)}& \text{Particulars}& \text{Amount (Rs.)}\\ \text{Balance b/d}& 5,00,000& \text{Bank A/c (Sale)}& 50,000\\ \text{Bank A/c}& & \text{Loss on sale}& 30,000\\ \text{(Balancing figure, being purchase)}& \underset{–}{2,80,000}& \text{Balance c/d}& \underset{–}{7,00,000}\\ & \underset{–}{7,80,000}& & \underset{–}{7,80,000}\end{array}$$
(3) It is assumed that debentures have been redeemed at the end of the year i.e., on 31st March, 2018
- No marks will be deducted if interest on debentures has been calculated on the closing balance.