Capankaj goel CFS -Answers PROBLEM 12.1 The financial position of ABC Ltd. on 1 January 2009 and 31 December 2009 was as follows: Assets 1-1-2009 31-12-2009 Rs. Rs. Cash 8,000 7,200 Debtors 70,000 76,800 Stock 50,000 44,000 Land 40,000 60,000 Building 1,00,000 1,10,000 Machinery: 2,14,000 2,44,000 Provision for Depreciation (54,000) (72,000) 4,28,000 4,70,000 Liabilities Rs. Rs. Current Liabilities 72,000 82,000 Loan from associate company – 40,000 Loan from Bank 60,000 50,000 Capital and Reserves 2,96,000 2,98,000 4,28,000 4,70,000 During the year Rs. 52,000 were paid as dividends. Prepare a cash flow statement. SOLUTION 12.1 Cash Flow Statement For the Year Ending 31 December 2009 A. Cash Flows from Operating Activities Rs. Rs. Net Profit before taxation and extraordinary item: 54,000 [2,98,000 – 2,96,000 + 52,000 (Dividends)] Adjustment for: Depreciation 18,000 Operating Profit before working capital changes 72,000 Increase in Sundry Debtors (6,800) Decrease in Stock 6,000 Increase in Current liabilities 10,000 Net Cash from operating activities 81,200 (B) Cash Flows from Investing Activities Purchase of Building (10,000) Purchase of Land (20,000) Purchase of Machinery (30,000) Net cash used in financing activities (60,000) (C) Cash Flows from Financing Activities Loan from Associate Company 40,000 Repayment of Bank Loan (10,000) Payment of Dividends (52,000) Net cash used in financing activities (22,000) Net decrease in cash and cash equivalents (A+B+C) (800) Cash and cash equivalents at the beginning of the period 8,000 Cash and cash equivalents at the end of the period 7,200 PROBLEM 12.2
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Capankaj goel CFS -Answers
PROBLEM 12.1
The financial position of ABC Ltd. on 1 January 2009 and 31 December 2009 was as follows:
Assets 1-1-2009 31-12-2009
Rs. Rs.
Cash 8,000 7,200
Debtors 70,000 76,800
Stock 50,000 44,000
Land 40,000 60,000
Building 1,00,000 1,10,000
Machinery: 2,14,000 2,44,000
Provision for Depreciation (54,000) (72,000)
4,28,000 4,70,000
Liabilities Rs. Rs.
Current Liabilities 72,000 82,000
Loan from associate company – 40,000
Loan from Bank 60,000 50,000
Capital and Reserves 2,96,000 2,98,000
4,28,000 4,70,000
During the year Rs. 52,000 were paid as dividends. Prepare a cash flow statement.
SOLUTION 12.1
Cash Flow Statement
For the Year Ending 31 December 2009
A. Cash Flows from Operating Activities Rs. Rs.
Net Profit before taxation and extraordinary item: 54,000
[2,98,000 – 2,96,000 + 52,000 (Dividends)]
Adjustment for:
Depreciation 18,000
Operating Profit before working capital changes 72,000
Increase in Sundry Debtors (6,800)
Decrease in Stock 6,000
Increase in Current liabilities 10,000
Net Cash from operating activities 81,200
(B) Cash Flows from Investing Activities
Purchase of Building (10,000)
Purchase of Land (20,000)
Purchase of Machinery (30,000)
Net cash used in financing activities (60,000)
(C) Cash Flows from Financing Activities
Loan from Associate Company 40,000
Repayment of Bank Loan (10,000)
Payment of Dividends (52,000)
Net cash used in financing activities (22,000)
Net decrease in cash and cash equivalents (A+B+C) (800) Cash and cash equivalents at the beginning of the period 8,000
Cash and cash equivalents at the end of the period 7,200
PROBLEM 12.2
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Capankaj goel CFS -Answers
From the following balance sheets of X Ltd., make out the statement of cash flows:
Liabilities 2008 2009
Rs. Rs.
Equity Share Capital 3,00,000 4,00,000
8% Preference Share Capital 1,50,000 1,00,000
General Reserve 40,000 70,000
Profit and Loss Account 30,000 48,000
Proposed Dividend 42,000 50,000
Creditors 55,000 83,000
Bills Payable 20,000 16,000
Provision for Taxation 40,000 50,000
6,77,000 8,17,000
Assets Rs. Rs.
Goodwill 1,15,000 90,000
Land & Buildings 2,00,000 1,70,000
Plant 80,000 2,00,000
Debtors 1,60,000 2,00,000
Stock 77,000 1,09,000
Bills Receivable 20,000 30,000
Cash in hand 15,000 10,000
Cash at Bank 10,000 8,000
6,77,000 8,17,000
Additional information:
(a) Depreciation of Rs. 10,000 and Rs. 20,000 have been charged on plant and land & buildings respectively in 2009.
(b) An interim dividend of Rs. 20,000 has been paid in 2009.
(c) Rs. 35,000 income-tax was paid during the year 2009.
SOLUTION 12.2
Cash Flow Statement
For the Year Ending 31 December 2009
(A) Cash Flows from Operating Activities Rs. Rs.
Net increase in profit between 2008-09 (48,000 – 30,000) 18,000
Adjustments for:
Goodwill 25,000
Depreciation 30,000
Provision for Taxation 45,000
Proposed Dividend 50,000
General Reserve 30,000
Interim Dividend 20,000
Operating profit before taxation and working capital changes 2,18,000
Increase in Creditors 28,000
Increase in Debtors (40,000)
Increase in Stock (32,000)
Increase in Bills Receivable (10,000)
Increase in Bills Payable (4,000)
Cash generated from operations 1,60,000
Income tax paid (35,000)
Net cash from operating activities 1,25,000
(B) Cash Flows from Investing Activities
Purchase of Plant (1,30,000)
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Capankaj goel CFS -Answers
Proceeds from sale of Land and Building 10,000
Net cash used in investing activities (1,20,000)
(C) Cash Flows from Financing Activities
Proceeds from issuance of Equity Share Capital 1,00,000
Redemption of Preference Shares (50,000)
Payment of Dividends: Final 42,000
Interim 20,000 (62,000)
Net cash used in financing activities (12,000)
Net decrease in cash and cash equivalents (A+B +C) (7,000)
Cash and cash equivalents in the beginning 25,000
Cash and cash equivalents at the end (10,000 + 8,000) 18,000
WORKING NOTES
Equity Share Capital Account
Rs. Rs.
Balance c/d 4,00,000 Balance b/d 3,00,000
Bank (Balancing Figure) 1,00,000
4,00,000 4,00,000
8% Preference Share Capital Account
Rs. Rs.
Bank 50,000 Balance b/d 1,50,000
Balance c/d 1,00,000
1,50,000 1,50,000
General Reserve Account
Rs. Rs.
Balance c/d 70,000 Balance b/d 40,000
Profit and Loss Account 30,000
70,000 70,000
Proposed Dividend
Rs. Rs.
Bank 42,000 Balance b/d 42,000
Balance c/d 50,000 Profit and Loss Account 50,000
92,000 92,000
Provision for Taxation
Rs. Rs.
Bank 35,000 Balance b/d 40,000
Balance c/d 50,000 Profit and Loss Account 45,000
85,000 85,000
Goodwill Account
Rs. Rs.
Balance b/d 1,15,000 Profit and Loss Account 25,000
Balance c/d 90,000
1,15,000 1,15,000
Land and Building Account
Rs. Rs.
Balance b/d 2,00,000 Depreciation 20,000
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Bank 10,000
Balance c/d 1,70,000
2,00,000 2,00,000
Plant Account
Rs. Rs.
Balance b/d 80,000 Depreciation 10,000
Bank 1,30,000 Balance c/d 2,00,000
2,10,000 2,10,000
Interim Dividends
Rs. Rs.
Bank 20,000 Profit and Loss Account 20,000
20,000 20,000
Note: In the absence of any information, it is assumed that there is no profit or loss on sale of land and building for Rs.
10,000.
PROBLEM 12.3
From the particulars given ahead prepare cash flow statement as per AS-3 (Revised) using indirect method:
Balance Sheets As At 31 March, .....
Liabilities 2009 2008
Rs. Rs.
Equity Share Capital 80,000 55,000
10% Preference Share Capital 20,000 25,000
General Reserve 7,600 4,000
Profit & Loss Account 2,400 2,000
15% Debentures 14,000 12,000
Creditors 22,000 24,000
Proposed Dividend 8,000 10,000
Provision for Taxation 8,400 6,000
1,62,400 1,38,000
Assets: 2009 2008
Fixed Assets 80,000 82,000
Less:Accumulated Depreciation 30,000 22,000
50,000 60,000
Stock 70,000 60,000
Debtors 34,400 15,000
Cash 7,000 2,400
Prepaid Expenses 1,000 600
1,62,400 1,38,000
Additional Information:
(a) Provision for tax made Rs. 9,400.
(b) Fixed assets costing Rs. 20,000 (accumulated depreciation till date of sale on them Rs. 6,000) were sold for Rs. 10,000.
(c) Interim dividend paid during the year Rs. 9,000. Proposed dividend of last year was declared and paid during the year.
Ignore corporate dividend tax.
(d) New debentures were issued on 31 March, 2009.
[B. Com. (Hons.) Delhi 2009 (Second Option)]
SOLUTION 12.3
Cash Flow Statement
For the Year Ending 31 December 2009
(A) Cash Flows from Operating Activities Rs. Rs.
Profit before tax (21,000 + 9,400) 30,400
Adjustments for:
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Capankaj goel CFS -Answers
Depreciation 14,000
Loss on sale of Machinery 4,000
Debenture Interest (15% of Rs. 12,000) 1,800
Operating income before working capital changes 50,200
Increase in stock (10,000)
Increase in debtors (19,400)
Increase in prepaid expenses (400)
Decrease in creditors (2,000)
Cash generated from operations 18,400
Income tax paid (7,000)
Net cash from operating activities 11,400
(B) Cash Flows from Investing Activities
Purchase of fixed assets (18,000)
Proceeds from sale of fixed assets 10,000
Net cash used in investing activities (8,000)
(C) Cash Flows from Financing Activities
Issue of Share Capital 25,000
Issue of Debentures 2,000
Redemption of Preference Shares (5,000)
Debenture Interest (1,800)
Interim Dividend Paid (9,000)
Final Dividend Paid on Equity and
Preference Shares (10,000)
Net cash from financing activities 1,200
Net increase in cash and cash equivalents (A + B + C) 4,600
Cash and cash equivalents in the beginning of the year 2,400
Cash and cash equivalents at the end of the year 7,000
WORKING NOTES
Profits and Loss Appropriation Account
Rs. Rs.
Interim Dividend 9,000 Balance b/d 2,000
Proposed Dividends 8,000 Profits for the year 21,000
General Reserve 3,600
Balance c/d 2,400
23,000 23,000
Provision For Taxation Account
Rs. Rs.
Bank Account 7,000 Balance b/d 6,000
Balance c/d 8,400 Profit and Loss Account 9,400
15,400 15,400
Fixed Assets Account
Rs. Rs.
Balance b/d 82,000 Bank Account 10,000
Bank Account 18,000 Accumulate Depreciation 6,000
Profit and Loss Account 4,000
(Loss on sale)
Balance c/d 80,000
1,00,000 1,00,000
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Capankaj goel CFS -Answers
Accumulated Depreciation Account
Rs. Rs.
Fixed Assets 6,000 Balance b/d 22,000
Balance c/d 30,000 Depreciation Account 14,000
36,000 36,000
PROBLEM 12.4
The following are the balance sheets of Modern Ltd.:
Reserve for conting- Investments 5,50,000 3,70,000
encies 3,00,000 3,00,000 Prepaid
Profit and Loss Expenses 5,000 10,000
Account 80,000 1,15,000 Stock in trade 4,10,000 5,30,000
Equity Share Capital 11,50,000 11,50,000 Machinery 2.60,000 3,50,000
Land & Building 7,50,000 7,50,000
27,60,000 26,75000 27,60,000 26,75,000
The following information in also available:
(i) 10% Dividends in cash
(ii) New machinery for Rs. 1,50,000 was purchased but old machinery costing Rs. 60,000 was sold Rs. 20,000.
Accumulated depreciation there on was Rs. 30,000.
(iii) Rs. 1,00,000, 8% Debentures were redeemed through open market purchase @ Rs 96 for a debenture of Rs. 100.
(iv) Rs. 1,80,000 investments were sold at book value.
You are required to prepare a cash flow statement for the year ended 31 March 2005 in accordance with Accounting Standard – 3 (Revised) [C.S. (Inter) June 2006]
SOLUTION 12.4
Cash Flow Statement
For the Year Ending 31 March 2005
(A) Cash Flows from Operating Activities Rs. Rs.
Net profit earned during the year (1,15,000 – 80,000) 35,000
Adjustments for:
Depreciation 50,000
Dividends 1,15,000
Loss on sale of machinery 10,000
Profit on redemption of Debenture (4,000)
Operating profit before working capital changes 2,06,000
Decrease in debtors 1,20,000
Decrease in sundry creditors (35,000)
Increase in Stock (1,20,000)
Decrease in outstanding expenses (5,000)
Increase in prepaid expenses (5,000)
Net cash from operating activities 1,61,000
(B) Cash Flows from Investing Activities
Purchase of new plant and machinery (1,50,000)
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Capankaj goel CFS -Answers
Sale of old plant and machinery 20,000
Sale of temporary investments 1,80,000
Net cash from investing activities 50,000
(C) Cash Flows from Financing Activities
Redemption of Debentures (96,000)
Dividends paid in cash (1,15,000)
Net cash used in financing activities (2,11,000)
Net increase/decrease in cash and cash
equivalents (A + B + C) Nil
Cash and cash equivalents at the beginning
of the year 4,50,000
Cash and cash equivalents at the end of the year 4,50,000
WORKING NOTES
Dividends Account
Rs. Rs.
Dividend Bank Account 1,15,000 Profit and Loss Appropriation
Account 1,15,000
1,15,000 1,15,000
Machinery Account
Rs. Rs.
Balance b/d 2,60,000 Bank Account 20,000
Bank Account 1,50,000 Depreciation Fund Account 30,000
Profit and Loss Account 10,000
Balance c/d 3,50,000
4,10,000 4,10,000
Depreciation Fund Account
Rs. Rs.
Machinery Account 30,000 Balance b/d 2,00,000
Balance c/d 2,20,000 Profit and Loss Account 50,000
2,50,000 2,50,000
8% Debentures Account
Rs. Rs.
Bank Account 96,000 Balance b/d 4,50,000
Profit and Loss Account 4,000
(Profit on Redemption)
Balance c/d 3,50,000
4,50,000 4,50,000
Investments Account
Rs. Rs.
Balance b/d 5,50,000 Bank Account 1,80,000
Balance c/d 3,70,000
5,50,000 5,50,000
PROBLEM 12.5
From the following summarised balance sheets of PQR Ltd. as on 31 March 2009 and 2010 and the income statement for the year
ended 31 March 2010, you are required to prepare a cash flow statement by indirect method:
Net increase in cash and cash equivalents (A + B + C) 630
Cash and cash equivalents at the beginning 160
Cash and cash equivalents at the end 790
WORKING NOTES
Provision for Tax Account
Rs. (’000) Rs.(’000)
Bank Account 8,60 Balance b/d 1,000
(Balancing Figure) Profit and Loss Account 2,60
Balance c/d 400
1,260 1,260
Fixed Assets Account
Rs. (’000) Rs.(’000)
Balance b/d 1,910 Bank 20
Bank Account (Purchase) 350 Accumulated Depreciation 60
Balance c/d 2,180
2,260 2,260
Interest Receivable
Rs. (’000) Rs.(’000)
Profit and Loss Account 300 Bank 200
Balance c/d 100
300 300
Interest Account
Rs. (’000) Rs. (’000)
Bank Account 270 Balance b/d 100
Balance c/d 230 Profit and Loss Account 400
500 500
Debentures Account
Rs. (’000) Rs. (000)
Bank Account 180 Balance b/d 1,040
Balance c/d 1,110 Bank 250
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1,290 1,290
PROBLEM 12.6
A V Ltd. gives you the following information for the year ended 31 March, 2006:
(a) Sales for the year totalled Rs. 96,00,000. The company sells goods for each only.
(b) Cost of goods sold was 60% of sales. Closing inventory was higher than the opening inventory by Rs. 43,000. Trade
creditors on 31 March, 2006 exceeded those on 31 March, 2005 by Rs. 23,000.
(c) Net profit before tax was Rs. 13,80,000. Tax paid amounted to Rs. 7,00,000. Depreciation on fixed assets for the year was
Rs. 3,15,000 whereas other expenses totalled Rs. 21,45,000. Outstanding expenses on 31 March, 2005 and 31 March, 2006 totalled Rs. 82,000 and Rs. 91,000 respectively.
(d) New machinery and furniture costing Rs. 10,27,500 in all were purchased.
(e) A right issue was made of 2,000 equity shares of Rs. 250 each at a premium of Rs.75 per share. The entire money was received along with applications.
(f) Dividends and corporate dividend tax totalling Rs. 4,07,000 were paid.
(g) Cash in hand and at bank as 31 March, 2005 totalled Rs. 2,13,800. You are requested to prepare cash flows statement
using indirect method as per AS-3 (Revised).
[B.Com (Hons.) Delhi 2007 (First Option)
SOLUTION 12.6
A.V. LTD.
Cash Flow Statement For the Year Ended 31 March 2006
(A) Cash Flows from Operating Activities Rs. Rs.
Net profit before tax 13,80,000
Adjustment for:
Depreciation 3,15,000
Operating profit before Working Capital changes 16,95,000
Increase in inventory (43,000)
Increase in trade creditors 23,000
Increase in outstanding expenses 9,000
Cash generated from operations 16,84,000
Tax paid 7,00,000
Net cash from operating activities 9,84,000
(B) Cash flows from Investing Activities
Purchase of fixed assets (10,27,500)
Net cash used in investing activities (10,27,500)
(C) Cash Flows from Financing Activities
Issue of Equity Share Capital (Including premium) 6,50,000
Dividends and Corporate Dividend Tax (4,07,000)
Net cash generated from financing activities 2,43,000
Net increase in cash and cash equivalents (A + B + C) 1,99,500
Cash and cash equivalents on 31-3-2005 2,13,800
Cash and cash equivalents on 31-3-2006 4,13,300
PROBLEM 12.7
Following facts have been extracted from the books of Daisy-Mishu Ltd. for the year ended on 31-3-2004. You are required to prepare a cash flow statement:
(i) Net profit before taking into account income tax and income from law suits but after taking account the following items –
Rs. 20 Lakhs.
(a) Depreciation on Fixed Assets Rs. 5 Lakhs
(b) Discount on issue of Debentures written off Rs. 30,000.
(c) Interest on Debentures paid – Rs. 3,50,000.
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Capankaj goel CFS -Answers
(d) Book value of investments – Rs. 3 Lakh (sale of investments for Rs. 3,20,000).
(e) Interest received on investments – Rs. 60,000
(f) Compensation received Rs. 90,000 by the company in a suit filed.
(ii) Income tax paid during the year – Rs. 10,50,000.
(iii) 15,000, 10% Preference Shares of Rs. 100 each were redeemed on 31-3-2004 at a premium of 5%. Further the company
issued 50,000 equity shares of Rs. 10 each at a premium of 20% on 2-4-2003. Dividends on preference shares were paid at the time of redemption.
(iv) Dividends paid for the year 2002-03 Rs. 5 Lakhs and Interim dividends paid Rs. 3 Lakhs, for the year 2003-04.
(v) Land was purchased on 2-4-2003 for Rs. 2,40,000 for which the company issued 20,000 equity shares of Rs. 10 each at a premium of 20% to the land owner as purchase consideration.
(vi) Current assets and current liabilities in the beginning and at the end were as detailed below:
As on 31-3-2003 As on 31-3-2004
Rs. Rs.
Stock 12,00,000 13,18,000
Sundry Debtors 2,08,000 2,13,100
Cash in hand 1,96,300 35,300
Bills Receivable 50,000 40,000
Bills Payable 45,000 40,000
Sundry Creditors 1,66,000 1,71,300
Outstanding Expenses 75,000 81,800
[PCC May 2005]
SOLUTION 12.7
Cash Flow Statement
For the Year Ending 31 March 2004
(A) Cash Flows from Operating Activities Rs. Rs.
Net profit before income tax and extraordinary items 20,00,000
Adjustments for:
Depreciation on Fixed Assets 5,00,000
Interest on Debentures paid 3,50,000
Discount on issue of Debentures 30,000
Interest on investments received (60,000)
Profit on sale of investments (20,000)
Operating profit before working capital changes 28,00,000
Increase in Sundry Debtors (5,100)
Decrease in Bills Receivable 10,000
Increase in Stock (1,18,000)
Increase in Outstanding Expenses 6,800
Decrease in Bills Payable (5,000)
Increase in Sundry Creditors 5,300
Cash generated from operations 26,94,000
Income tax paid (10,50,000)
16,44,000
Cash flow from extra-ordinary item:
Compensation received in suit filed 90,000
Net cash from operating activities 17,34,000
(B) Cash Flows from Investing Activities
Interest received on investment 60,000
Sale proceeds from investment 3,20,000
Net cash from investing activities 3,80,000
(C) Cash Flows from Financing Activities
Dividends paid:
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Interim for 2003 – 04 3,00,000
Final Dividend for 2002-03 5,00,000 (8,00,000)
Preference Dividend Paid (1,50,000)
Interest on Debentures paid (3,50,000)
Redemption of Preference Shares of 5% premium (15,75,000)
Proceeds by Equity Share Capital at a
Premium of 20% 6,00,000
Net cash used in financing activities (22,75,000)
Net decrease in cash during the year (A+B+C) (1,61,000)
Cash and cash equivalents as on 31-3-2003 1,96,300
Cash and cash equivalents at 31-3-2004 35,300
Note: Since purchase of land for Rs. 2,40,000 in exchange for equity shares (20,000 equity shares of Rs. 10 each at a
premium of 20%) does not involve any cash transaction, it has not been taken in the above cash flow statements.
PROBLEM 12.8
The summarised balance sheets of Victor Companies Ltd. as on 31-3-2008 and 31-3-2009 are as follows:
Assets 31-3-2008 31-3-2009
Rs. Rs.
Fixed Assets at cost 8,00,000 9,50,000
Less:Depreciation 2,30,000 2,90,000
Net 5,70,000 6,60,000
Investments 1,00,000 80,000
Other Current Assets 2,50,000 3,10,000
Cash 30,000 20,000
Preliminary expenses 20,000 10,000
9,70,000 10,80,000
Liabilities Rs. Rs.
Share Capital 3,00,000 4,00,000
Capital Reserve – 10,000
General Reserve 1,70,000 2,00,000
Profit & Loss Account 60,000 75,000
Debentures 2,00,000 1,40,000
Sundry Creditors 1,20,000 1,30,000
Tax provision 90,000 85,000
Proposed dividend 30,000 36,000
Unpaid dividend – 4,000
9,70,000 10,80,000
During 2008-2009 the company:
(a) sold one machine for Rs. 25,000, the cost of the machine was Rs. 64,000 and depreciation provided for it amounted to Rs.
35,000;
(b) provided Rs. 95,000 as depreciation;
(c) redeemed 30% of debentures at Rs. 103;
(d) sold investments at profit and credited to capital reserve; and
(e) decided to value the stock at cost, whereas earlier the practice was to value stock at cost less 10%. The stock according to books on 31-3-08 was Rs. 54,000 and stock on 31-3-09 was Rs. 75,000 which was correctly valued at cost.
Prepare a cash flow statement according to AS- 3 (Revised)
SOLUTION 12.8
Cash Flow Statement for Victors Computers Ltd.
For the year Ended 31 March 2009
Cash Flows from Operating Activities Rs. Rs.
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Difference in net profits between 31.3.08 and 31.3.09 15,000
Adjustments for:
Valuation of Stock (6,000)
Depreciation 95,000
Preliminary expenses 10,000
General Reserve 30,000
Premium on Redemption of Debentures 1,800
Provision for Tax 85,000
Proposed Dividends 36,000
Loss on Sale of Fixed Assets 4,500
Operating profit before tax and working capital changes 2,70,800
Increase in Current Assets (2,50,000 + 6,000 – 3,10,000) (54,000)
Increase in creditors 10,000
2,26,800
Income taxes paid (90,000)
Net cash from operating activities 1,36,800
Cash Flows from Investing Activities
Purchase of fixed assets (2,14,000)
Proceeds from sale of investments 30,000
Proceeds from sale of fixed assets 25,000
Net cash used in investing activities (1,59,000)
Cash Flows from Financing Activities
Proceeds from issuance of Share Capital 1,00,000
Redemption of Debentures (61,800)
Payment of Dividends (26,000)
Net cash flows from financing activities 12,200
Net decrease in cash and cash equivalents (A + B + C) (10,000)
Cash and cash equivalents as on 31-3-2008 30,000
Cash and cash equivalents as on 31-3-2009 20,000
Fixed Assets Account
Rs. Rs.
Balance b/d 8,00,000 Cash 25,000
Cash 2,14,000 Provision for Depreciation 35,000
Profit and Loss Account 4,000
Balance c/d 9,50,000
10,14,000 10,14,000
Provision for Depreciation Account
Rs. Rs.
Fixed Assets Account 35,000 Balance b/d 2,30,000
Balance c/d 2,90,000 Profit and Loss Account 95,000
3,25,000 3,25,000
Investments Account
Rs. Rs.
Balance b/d 1,10,000 Cash 30,000
Capital Reserve 10,000 Balance c/d 80,000
1,10,000 1,10,000
Preliminary Expenses Account
Rs. Rs.
Balance b/d 20,000 Profit and Loss Account 10,000
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Balance c/d 10,000
20,000 20,000
Share Capital Account
Rs. Rs.
Balance c/d 4,00,000 Balance b/d 3,00,000
Cash 1,00,000
4,00,000 4,00,000
Capital Reserve Account
Rs. Rs.
Balance c/d 10,000 Balance b/d –
Investments Account 10,000
10,000 10,000
General Reserve Account
Rs. Rs.
Balance c/d 2,00,000 Balance b/d 1,70,000
Profit and Loss Account 30,000
2,00,000 2,00,000
Debentures Account
Rs. Rs.
Cash 61,800 Balance b/d 2,00,000
Balance c/d 1,40,000 Profit and Loss Account 1,800
(Premium on Redemption)
2,01,800 2,01,800
Tax Provision Account
Rs. Rs.
Cash 90,000 Balance b/d 90,000
Balance c/d 85,000 Profit and Loss Account 85,000
1,75,000 1,75,000
Proposed Dividend Account
Rs. Rs.
Unpaid Dividend 4,000 Balance b/d 30,000
Cash 26,000 Profit and Loss Account 36,000
Balance c/d 36,000
66,000 66,000
Unpaid Dividend Account
Rs. Rs.
Balance c/d 4,000 Balance b/d –
Proposed Dividend 4,000
4,000 4,000
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PROBLEM 12.9
The following are the summaries of the balance sheets of a limited company as at 31 March 2008 and 31 March 2009:
Liabilities 2008 2009 Assets 2008 2009
Rs. Rs. Rs. Rs.
Sundry Creditors 39,010 41,135 Cash at Bank 3,000 2,700
from the Bank 5,00,000 4,00,000 Cash at Bank 3,00,000 4,10,000
Sundry Creditors 5,00,000 4,00,000
Provision for taxation 50,000 60,000
Proposed Dividends 1,00,000 1,25,000
27,50,000 25,50,000 27,50,000 25,50,000
Additional Information:
(i) Dividend of Rs. 1,00,000 was paid during the year ended 31 March 2006.
(ii) Machinery during the year purchased for Rs. 1,25,000.
(iii) Machinery of another company was purchased for a consideration of Rs. 10,00,000 payable in equity shares.
(iv) Income tax provided during the year Rs. 55,000.
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(v) Company sold some investment at a profit of Rs. 10,000 which was credited to Capital Reserve.
(vi) There was no sale of machinery during the year.
(vii) Depreciation written off on Land and Building Rs. 20,000.
From the above particulars prepare a Cash Flow Statement for the year ended 31 March, 2006 as per AS-3 (Revised) using Indirect Method. [PCC Nov. 2006]
SOLUTION 12.10
X Ltd.
Cash Flow Statement
For the year Ending 31 March 2006
(A) Cash Flows from Operating Activities Rs. Rs.
Net profit for the year before taxation and
Extraordinary items 2,60,000
Adjustmetns for:
Depreciation on Machinery 55,000
Depreciation on Building 20,000
Operating profit before working changes: 3,35,000
Decrease in Stock 20,000
Increase in Debtors (20,000)
Decrease in Creditors (1,00,000)
Cash generated from operations 2,35,000
Income Tax Paid (45,000)
Net cash from operating activities 1,90,000
(B) Cash Flows from Investing Activities
Purchase of machinery (1,25,000)
Sale of Investment (50,000 + 10,000) 60,000
Net cash used in investing activities (65,000)
(C) Cash Flows from Financing Activities
Payment of Dividend (1,00,000)
Payment of Loan (1,00,000)
Proceeds from issue of Share Capital 1,50,000
Net Cash used in financing activities (50,000)
Net increase in cash and cash equivalents ( A + B + C) 75,000
Cash and cash equivalents at the beginning 5,00,000
Cash and cash equivalents at the end 5,75,000
ANALYSIS OF NON-CURRENT ITEMS
Provision For Taxation Account
Rs. Rs.
Bank Account (Balancing Figure) 45,000 Balance b/d 50,000
Balance c/d 60,000 Profit and Loss Account 55,000
1,05,000 1,05,000
Proposed Dividend Account
Rs. Rs.
Bank Account 1,00,000 Balance b/d 1,00,000
Balance c/d 1,25,000 Profit and Loss Account 1,25,000
2,25,000 2,25,000
Profit and Loss Account
Rs. Rs.
Proposed Dividend 1,25,000 Balance b/d 1,50,000
Provision for Taxation Account 55,000Net Profit during the year 2,60,000
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General Reserve Account 50,000 (Balancing Figure)
Balance c/d 1,80,000
4,10,000 4,10,000
Machinery Account
Rs. Rs.
Balance b/d 7,50,000 Depreciation Account 55,000
Bank Account 1,25,000 Balance c/d 9,20,000
Equity Share Capital Account 1,00,000
9,75,000 9,75,000
Equity Share Capital Account
Rs. Rs.
Balance c/d 12,50,000 Balance b/d 10,00,000
Machinery Account 1,00,000
Bank Account 1,50,000
12,50,000 12,50,000
Investments Account
Rs. Rs.
Balance b/d 1,00,000 Bank Account (Balancing Figure) 60,000
Capital Reserve Balance c/d 50,000
Account (Profit on
Sale of investments) 10,000
1,10,000 1,10,000
PROBLEM 12.11
Raj Ltd. gives you the following information for the year ended 31 March 2006:
(i) Sales for the year Rs. 48,00,000. The company sold goods for cash only.
(ii) Cost of the goods sold was 75% of sales.
(iii) Closing inventory was higher than opening inventory by Rs. 50,000.
(iv) Trade creditors on 31-3-06 exceed the outstanding on 31-3-05 by Rs. 1,00,000.
(v) Tax paid during the year amounts to Rs. 1,50,000.
(vi) Amounts paid to trade creditors during the year Rs. 35,50,000.
(vii) Administrative and selling expenses paid Rs. .3,60,000.
(viii) One new machinery was acquired in December 2005 for Rs. 6,00,000.
(ix) Dividend paid during the year Rs. 1,20,000.
(x) Cash in hand and at Bank on 31-3-2006 – Rs. 70,000.
(xi) Cash in hand and at Bank on 1-4-2006 – R. 50,000.
Prepare cash flow statement for the year ended 31-3-2006 as per the prescribed Accounting Standard.
[PCC May 2006]
SOLUTION 12.11
RAJ LTD.
Cash Flow Statement
For the Year Ending 31 March 2006
(A) Cash Flows from Operating Activities Rs. Rs.
Net profit before tax (See Working Note) 8,40,000
Increase in Sundry Creditors 1,00,000
Increase in inventory (50,000)
Cash generated from operations 8,90,000
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Income tax paid (1,50,000)
Net Flows from Investing Activities 7,40,000
(B) Cash Flows from Investing Activities
Purchase of Machinery (6,00,000)
Net cash used in investing activities (6,00,000)
(C) Cash Flows from Financing Activities
Dividends Paid (1,20,000)
Net cash used in financing activities (1,20,000)
Net increase in cash and cash equivalents (A + B + C) 20,000
Cash and Cash equivalents at the beginning 50,000
Cash and cash equivalents at the end 70,000
WORKING NOTE
Sales 48,00,000
Less: Cost of Goods Sold (75% of Rs. 36,00,000) 36,00,000
12,00,000
Less: Administration Expenses 3,60,000
Income before tax 8,40,000
PROBLEM 12.12
J Ltd. presents you the following information for the year ended 31 March 2007:
(Rs. in lacs)
(i) Net before tax provision 36,000
(ii) Dividend paid 10,202
(iii) Income tax paid 5,100
(iv) Book value of assets sold 222
Loss on sale of asset 48
(v) Depreciation debited in Profit and Loss Account 24,000
(vi) Capital grant received – amortised in profit and
Loss Account 10
(vii) Book value of investment sold 33,318 Profit on sale of investment
120
(viii) Interest income from investment credited to Profit
and Loss Account 3,000
(ix) Interest expenditure debited in Profit and Loss Account 12,000
Equity share capital, Rs. 20 per share 4,00,000 3,50,000
Security premium 55,000 45,000
Profit and loss appropriation account 1,54,100 1,19,100
7,53,100 5,63,600
Additional information:
(i) Dividends of Rs. 40,000 were declared during the year.
(ii) Machinery with an original cost of Rs. 80,000 and accumulated depreciation of Rs. 74,000 was sold during the year for Rs. 6,000 cash. New machinery was also purchased for Rs. 1,00,000 cash.
(iii) Land and buildings were acquired during the year at a cost of Rs. 1,15,000. In addition to the down payment of Rs. 15,000, a ten year 10% mortgage note for Rs. 1,00,000 was issued to the vendor.
Income Statement for the year ended December 31, 2009
Rs.
Sales 8,10,000
Cost of goods sold 4,60,000
Gross profit on sales 3,50,000
Operating expenses:
Depreciation expenses – Machinery 20,000
Depreciation expenses – Building 10,000
Other operating expenses 1,75,000 2,05,500
Income before income tax 1,44,500
Income tax 69,500
75,000
Prepare a cash flow statement
SOLUTION 12.14
Scindia Ltd.
Cash Flow Statement [As per AS-3 (Revised)]
For the Year Ending 31 December 2009
(A) Cash Flows from Operating Activities Rs. Rs.
Net income before tax and extraordinary items 1,44,500
Adjustment for:
Depreciation (20,000 + 10,000) 30,000
Operating Profit before working capital changes 1,74,500
Decrease in Debtors 4,000
Decrease in Inventories 3,000
Increase in Prepaid Expenses (400)
Decrease in Creditors (4,500)
Decrease in Wages Payable (3,000)
Cash from operations 1,73,600
Income Tax Paid (67,500)
Net cash from operating activities 1,06,1000
(B) Cash Flows from Investing Activities
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Sale of Machinery 6,000
Purchase of Machinery (1,00,000)
Land and Building (Down Payment) (15,000)
Net cash used in investing activities (1,09,000)
(C) Cash Flows from Financing Activities
Issue of Share Capital (including premium) 60,000
Dividends Paid (40,000)
Net cash from financing activities 20,000
Net increase in cash and equivalents (A + B + C) 17,100
Cash and cash equivalents at the beginning of the period 28,900
Cash and cash equivalents at the end of the period 46,000
Non-cash transaction such as purchase of land and building by issue of 10% Mortgage Note has been excluded from the
cash flow statement as per requirements of AS-3 (Revised) which provides:
“Investing and financing transactions that do not require the use of cash or cash equivalents should be excluded from a
cash flow statement. Such transactions should be disclosed elsewhere in the financial statements in way that provides all
the relevant information about these investing and financing activities. [Prara 40]”
PROBLEM 12.15
The following data were provided by the accounting records of X Ltd. at the year ended 31 March, 2008:
Profit and Loss Account 12,000 Balance c/d 1,15,000
(Profit on sale)
Bank Account 78,000
2,17,000 2,17,000
Share Capital Account
Rs. Rs.
Balance c/d 4,65,000 Balance b/d 3,15,000
Bank 1,50,000
4,65,000 4,65,000
PROBLEM 12.17
From the following information given below relating to Pooja Ltd., you are required to prepare a Cash Flow Statement:-
31 March 31 March
Assets 2008 2009
Rs. Rs.
Freehold Land and Building at cost 1,00,000 –
Less: Depreciation (20,000) –
Leasehold Land and Building – 50,000
Less: Depreciation – (1,000)
Plant and Equipment at cost 3,00,000 12,00,000
Less: Depreciation (2,50,000) (3,20,000)
Investment at cost 60,000 –
Stock in hand 3,00,000 2,00,000
Debtors 1,00,000 1,00,000
Bank 10,000 –
Discount on Issue of Debentures – 2,500
6,00,000 12,31,500
Liabilities and Capital Rs. Rs.
Preference shares of Rs. 10 – 50,000
Ordinary shares of Rs. 10 2,00,000 3,20,000
Capital Redemption Reserve Account 40,000 –
Securities Premium Account 20,000 40,000
Surplus on Sale of:
Freehold Land and Building – 1,20,000
Investment – 20,000
Government Grants 30,000 50,000
Retained Profits 2,10,000 2,50,000
Debentures – 1,00,000
Loan from UTI Bank for 5 years – 50,000
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Creditors for goods 40,000 70,000
Bank Overdraft – 94,000
Taxation 60,000 60,000
Acceptance Credit – 7,500
6,00,000 12,31,500
You are given the following additional information:
(i) No plant and equipment was sold or scrapped during the year.
(ii) On 1 January 2009 the freehold land and building were sold and leased back from the purchaser.
(iii) A bonus issue of ordinary shares on the basis of one new share for every five held has been made. The Capital Redemption Reserve was used for this purpose.
(iv) The preference shares were issued for cash at par.
(v) An issue of Rs. 10 ordinary shares was made at a price of Rs. 12.50 per share.
(vi) Debentures were issued at a discount of 10%
(vii) No dividends were paid or proposed for the year.
(viii) Explain briefly why the cash at bank has become nil although the retained earnings have registered an increase over the last year.
SOLUTION 12.17
Analysis of Non-Current Items
Freehold Land and Building Account
Rs. Rs.
Balance b/d 1,00,000 Provision for Depreciation 20,000
Surplus on Sale Account 1,20,000 Cash 2,00,000
2,20,000 2,20,000
Provision for Depreciation on Freehold Land and Building Account
Rs. Rs.
Freehold Land and – Balance c/d 20,000
Building Account 20,000
Leasehold Land and Building Account
Rs. Rs.
Balance b/d – Balance c/d 50,000
Cash 50,000
50,000 50,000
Provision for Depreciation on Leasehold Land and Building Account
Rs. Rs.
Balance c/d 1,000 Balance b/d –
Profit and Loss Account 1,000
1,000 1,000
Government Grants
Rs. Rs.
Balance c/d 50,000 Balance b/d 30,000
Cash 20,000
50,000 50,000
Debentures Account
Rs. Rs.
Balance c/d 1,00,000 Cash 90,000
Discount on Issue of
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Debentures Account 10,000
1,00,000 1,00,000
Loan From U.T.I. Bank Account
Rs. Rs.
Balance c/d 50,000 Cash 50,000
Taxation Account
Rs. Rs.
Cash 60,000 Balance b/d 60,000
Balance c/d 60,000 Profit and Loss Account 60,000
1,20,000 1,20,000
Surplus on Sale Account
Rs. Rs.
Balance c/d 1,40,000 Balance b/d —
Freehold Land and Building 1,20,000
Investment Account 20,000
1,40,000 1,40,000
Plant and Equipment Account
Rs. Rs.
Balance b/d 3,00,000 Balance c/d 12,00,000
Cash 9,00,000
12,00,000 12,00,000
Provision for Depreciation on Plant and Equipment
Rs. Rs.
Balance c/d 3,20,000 Balance b/d 2,50,000
Profit and Loss Account 70,000
3,20,000 3,20,000
Investment Account
Rs. Rs.
Balance b/d 60,000 Cash 80,000
Surplus on Sale Account 20,000
80,000 80,000
Discount on Issue of Debentures Account
Rs. Rs.
Debentures Account 10,000 Profit and Loss Account 7,500
Balance c/d 2,500
10,000 10,000
Preference Share Capital Account
Rs. Rs.
Balance c/d 50,000 Cash 50,000
Ordinary Share Capital Account
Rs. Rs.
Balance c/d 3,20,000 Balance b/d 2,00,000
Bonus Issue 40,000
Cash 80,000
3,20,000 3,20,000
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Capital Redemption Reserve Account
Rs. Rs.
Bonus Issue Account 40,000 Balance b/d 40,000
Bonus Issue Account
Rs. Rs.
Ordinary Share Capital Account 40,000 Capital Redemption Reserve Account 40,000
Securities Premium Account
Rs. Rs.
Balance c/d 40,000 Balance b/d 20,000
Cash 20,000
40,000 40,000
Retained Profit Account
Rs. Rs.
Provision for tax 60,000 Balance b/d 2,10,000
Balance c/d 2,50,000 Net Profit during the year 1,00,000
3,10,000 3,10,000
SOLUTION 12.18
Pooja Ltd.
Cash Flow Statement
For The Year Ending On 31 March 2009
Rs. Rs.
(A) Cash Flows from Operating Activities
Net surplus before taxation and extraordinary items 1,00,000
Adjustments for:
Depreciation on Leasehold Land and Building 1,000
Depreciation on Plant and Equipment 70,000
Discount on issue of Debentures 7,500
Operating profit before working capital changes 1,78,500
Decrease in Stock 1,00,000
Increase in Creditors 30,000
Increase in acceptance credit 7,500
Cash from Operating Activities 3,16,000
Income Tax Paid 60,000
Net cash generated from operating activities 2,56,000
(B) Cash Flows from Investing Activities
Sale of Freehold Land and Building 2,00,000
Purchase of Leasehold Land and Building (50,000)
Purchase of Plant and Equipment (9,00,000)
Sale of investment 80,000
Net cash used in investing activities (6,70,000)
(C) Cash Flows from Financing Activities
Issue of Equity Share Capital
Including Securities Premium (80,000 + 20,000) 1,00,000
Issue of Preference Share Capital 50,000
Bank Overdraft 94,000
Government Grants 20,000
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Issue of Debentures 90,000
Loan from U.T.I. Bank 50,000
Net cash generated from financing activities 4,04,000