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Question

Prepare cash flow statement from the following information:

                                                      Balance Sheet
Capital and Liabilities2010 (Rs.)2011 (Rs.)Assets2010 (Rs.)2011 (Rs.)Equity Share Capital5,00,0007,00,000Cash/Bank3,00,0004,00,0008% Debentures6,00,0004,00,000Sundry Debtors4,00,0006,00,000Profit and Loss Account3,00,0005,00,000Stock5,00,0006,00,000Creditors6,00,0009,00,000Goodwill2,50,0001,70,000Discount on Debenture50,00030,000Plant5,00,0007,00,000¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯20,00,000–––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯25,00,000–––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯20,00,000–––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯25,00,000–––––––––

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


Solution

                                                            Cash Flow Statement

ParticularsAmt. (Rs.)Amt. (Rs.)A.Cash Flow from Operating Activities:Net Profit as per the Balance Sheet (5,00,000 - 3,00,000)2,00,000Adjustment for non-cash items:  Depreciation on Plant80,000  Goodwill Written-off80,000  Discount on Debentures Written-off20,000–––––1,80,000–––––––Operating Profit before Working Capital Adjustments3,80,000Changes in Working Capital:  (+) Increase in Creditors3,00,000  (-) Increase in Sundry Debtors(2,00,000)  (-) Increase in Stock(1,00,000)––––––––––-       Net Cash from Operations¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯3,80,000––––––––B.Cash Flow from Investing Activities:Purchase of Plant(2,80,000)––––––––––Net Cash used in Investing Activities(2,80,000)––––––––––C.Cash Flow from Financing ActivitiesIssue of Equity Share Capital2,00,000Redemption of 8 % Debentures(2,00,000)–––––––––   Nil      ––––––––D.Net Increase in Cash Equivalents (A + B + C)1,00,000(+) Cash and Cash equivalents in the Beginning3,00,000––––––––E.Cash and Cash Equivalents at the End4,00,000––––––––

Dr.                         Plant Account                                                  Cr.
 DateParticularsJ.F.Amt. (Rs.)DateParticularsJ.F.Amt. (Rs.)Balance b/d5,00,000Depeciation80,000Bank (Purchase)2,80,000Balance c/d7,00,000(Balancing Figure)¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯7,80,000––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯7,80,000––––––––

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