Question

From the following information, calculate Net Cash Flow from Operating Activities and Financing Activities:

Particular	31st March 2019 (₹)	31st March 2018 (₹)
Equity Share Capital	13,75,000	11,25,000
5% Preference Share Capital	5,00,000	7,50,000
General Reserve	3,75,000	3,00,000
Surplus i.e., Balance in Statement of Profit and Loss	3,75,000	(3,50,000)
Securities Premium Reserve	25,000	...
Provision for Tax	1,00,000	50,000
Non-current Liabilities (8% Debentures)	6,50,000	3,75,000
Short-term Borrowings (8% Bank Loan)	1,00,000	1,25,000
Trade Payables	5,00,000	2,50,000
Trade Receivables and Inventories	13,00,000	11,50,000

Additional Information:
(i) During the year additional debentures were issued at par on 1st October and Bank Loan was repaid on the same date.
(ii) Dividend on Equity Shares @ 8% was paid on Opening Balance.
(iii) Income tax ₹ 1,12,500 has been provided during the year.
(iv) Preference shares were redeemed at par at the end of the year.

Answer 1

Cash Flow Statement
	Particulars		Amount (₹)	Amount (₹)
	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss			7,25,000
	Items to be Added:
	Dividend on Equity Shares		90,000
	Dividend on Preference Shares		37,500
	Interest on Debentures		41,000
	Interest on Bank Loan		9,000
	Provision for Tax		1,12,500
	Transfer to General Reserve		75,000	3,65,000
	Operating Profit before Working Capital Adjustments			10,90,000
	Less: Increase in Current Assets
		Trade Receivables& Inventories	(1,50,000)
	Add:Increase in Current Liabilities
	Trade Payables		2,50,000	1,00,000
	Cash Generated from Operations			11,90,000
	Less: Taxes Paid			62,500
	Cash Flow from Operating Activities			11,27,500

Cash Flow Statement
	Particulars	Amount (₹)	Amount (₹)
	Cash Flow from Financing Activities
	Dividend on Equity Shares	(90,000)
	Dividend on Preference Shares	(37,500)
	Interest on Debentures	(41,000)
	Interest on Bank Loan	(9,000)
	Increase in Securities Premium Reserve	25,000
	Proceeds from Issue of Equity Shares	2,50,000
	Proceeds from Issue of Debentures	2,75,000
	Redemption of Preference Shares	(2,50,000)
	Repayment of Bank Loan	(25,000)
	Cash Flows from Financing Activity		97,500

Working Notes:

Provision for Tax Account
Dr.		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Bank A/c (Bal. fig.)	62,500	Balance b/d	50,000
Balance c/d	1,00,000	Profit & Loss A/c	1,12,500
	1,62,500		1,62,500

Calculation of Interest on Debentures

$\begin{array}{l}3,75,000\times \frac{8}{100}=30,000\\ 2,75,000\times \frac{8}{100}\times \frac{6}{12}=11,000\\ \mathrm{Total}\mathrm{Interest}=\mathrm{41,000}\left(30,000+11,000\right)\end{array}$

Calculation of Interest on Bank Loan

$\begin{array}{l}1,25,000\times \frac{8}{100}\times \frac{6}{12}=5,000\\ 1,00,000\times \frac{8}{100}\times \frac{6}{12}=4,000\\ \mathrm{Total}\mathrm{Interest}=9,000\left(5,000+4,000\right)\end{array}$