Question

From the following extracts taken from the Balance sheets of M/s Khanduja Ltd., on 31st March as dthe additional information provided, you are required to Calculate:
(i) Cash Flows from Operting Activities.
(ii) Cash Flows from Financing Activities.
$$\begin{array}{ccc}\text{Equity and Liabilities}& 31-03-2015& 31-03-2016\\ \text{Equity Share Capital}& 20,00,000& 30,00,000\\ 10\%\text{Preference Share Capital}& 2,00,000& 1,00,000\\ \text{Securities premium Reserve A/c}& -& 95,000\\ \text{Profit and Loss Balance}& 4,00,000& 8,00,000\\ 10\%\text{Debentures}& 10,00,000& 10,00,000\end{array}$$

Additional Information:
1. Fresh equity shares were issued on 31st March 2016 at a premium of 10%
2. Interim Dividend was paid on equity shares @8%
3. Preference shares were redeemed on 31st March, 2016 at premium of 5%. Premium on redemption was charged against premium received on issue of fresh equity shares.

Answer 1

(i)
Cash Flows From Operating Activities
$$\begin{array}{ccc}\text{Particulars}& \text{Amount (Rs.)}& \\ \text{Net profit before tax (Note 1)}& 5,80,000& \\ \text{Adjustements for non - operating items:}& & \\ \text{(+) Interest on Debentures}& \underset{–}{1,00,000}& \\ \text{Net Cash flows from Operating Activities}& \underset{–}{6,80,000}& \end{array}$$
Note
(1) Calculation of Net Profit before Tax:
$$\begin{array}{cc}\text{Profit and Loss Balance on 31st March, 2015}& 8,00,000\\ (-)\text{Profit and Loss Balance on 31st March, 2015}& \underset{–}{4,00,000}\\ & 4,00,000\\ (+)\text{Dividend on Preference shares}(10\%onRs.2,00,000)& 20,000\\ \text{Dividend on Equity Shares}(8\%on20,00,000)& \underset{–}{1,60,000}\\ & \underset{–}{5,80,000}\end{array}$$
(ii) $$\begin{array}{ccc}\text{Particulars}& \text{Amount (Rs.)}& \\ \text{Cash Proceeds from Issue of Equity Shares}& & \\ (10,00,000+\text{Securities Premium Reserve Rs. 1,00,000})& 11,00,000& \\ \text{Cash paid for redemption of Preference shares}& & \\ (Rs.1,00,000+\text{Premium Rs. 5,000})& (1,05,000)& \\ \text{Dividend Paid on Preference shares}& (20,000)& \\ \text{Dividend paid on Equity Shares}& (1,60,000)& \\ \text{Interest on Debentues}& \underset{–}{(1,00,000)}& \\ \text{Net Cash flows from Financing Activities}& \underset{–}{7,15,000}& \end{array}$$

Dividend on Pref. Shares is paid before payment of dividend on Equity Shares. The Company has paid interim dividend on equity shares. Hence, it must have paid dividend on preference shares.