Question

Prepare cash flow statement from the following information:

Balance Sheet
$\begin{array}{cccccc}\text{Capital and Liabilities}& \text{2010 (Rs.)}& \text{2011 (Rs.)}& \text{Assets}& \text{2010 (Rs.)}& \text{2011 (Rs.)}\\ \text{Equity Share Capital}& \text{5,00,000}& \text{7,00,000}& \text{Cash/Bank}& \text{3,00,000}& \text{4,00,000}\\ \text{8\% Debentures}& 6,00,000& 4,00,000& \text{Sundry Debtors}& \text{4,00,000}& \text{6,00,000}\\ \text{Profit and Loss Account}& \text{3,00,000}& \text{5,00,000}& \text{Stock}& \text{5,00,000}& \text{6,00,000}\\ \text{Creditors}& \text{6,00,000}& \text{9,00,000}& \text{Goodwill}& \text{2,50,000}& \text{1,70,000}\\ & & & \text{Discount on Debenture}& 50,000& 30,000\\ & & & \text{Plant}& \text{5,00,000}& \text{7,00,000}\\ & \overline{\underset{–}{20,00,000}}& \overline{\underset{–}{25,00,000}}& & \overline{\underset{–}{20,00,000}}& \overline{\underset{–}{25,00,000}}\end{array}$

Additional information:
Depreciation charged on plant amounts to Rs. 80,000.

Answer 1

Cash Flow Statement

$\begin{array}{cccc}& \text{Particulars}& \text{Amt. (Rs.)}& \text{Amt. (Rs.)}\\ \text{A.}& \text{Cash Flow from Operating Activities:}& & \\ & \text{Net Profit as per the Balance Sheet (5,00,000 - 3,00,000)}& & 2,00,000\\ & \text{Adjustment for non-cash items:}& & \\ & \text{Depreciation on Plant}& \text{80,000}& \\ & \text{Goodwill Written-off}& \text{80,000}& \\ & \text{Discount on Debentures Written-off}& \underset{–}{\text{20,000}}& \underset{–}{\text{1,80,000}}\\ & \text{Operating Profit before Working Capital Adjustments}& & \text{3,80,000}\\ & \text{Changes in Working Capital:}& & \\ & \text{(+) Increase in Creditors}& \text{3,00,000}& \\ & \text{(-) Increase in Sundry Debtors}& (2,00,000)& \\ & \text{(-) Increase in Stock}& \underset{–}{(1,00,000)}& \text{-}\\ & \text{Net Cash from Operations}& & \underset{–}{\overline{3,80,000}}\\ \text{B.}& \text{Cash Flow from Investing Activities:}& & \\ & \text{Purchase of Plant}& & \underset{–}{(2,80,000)}\\ & \text{Net Cash used in Investing Activities}& & \underset{–}{(2,80,000)}\\ \text{C.}& \text{Cash Flow from Financing Activities}& & \\ & \text{Issue of Equity Share Capital}& & \text{2,00,000}\\ & \text{Redemption of 8 \% Debentures}& & \underset{–}{\left(\text{2,00,000}\right)}\\ & & & \underset{–}{Nil}\\ \text{D.}& \text{Net Increase in Cash Equivalents (A + B + C)}& & 1,00,000\\ & \text{(+) Cash and Cash equivalents in the Beginning}& & \underset{–}{3,00,000}\\ \text{E.}& \text{Cash and Cash Equivalents at the End}& & \underset{–}{4,00,000}\end{array}$

Dr. Plant Account Cr.
$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{J.F.}& \text{Amt. (Rs.)}& \text{Date}& \text{Particulars}& \text{J.F.}& \text{Amt. (Rs.)}\\ & \text{Balance b/d}& & 5,00,000& & \text{Depeciation}& & 80,000\\ & \text{Bank (Purchase)}& & 2,80,000& & \text{Balance c/d}& & 7,00,000\\ & \text{(Balancing Figure)}& & & & & & \\ & & & \underset{–}{\overline{7,80,000}}& & & & \underset{–}{\overline{7,80,000}}\end{array}$