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प्रश्न
While preparing its Cash Flow Statement, will a company consider an increase in its Bank Overdraft as an Operating Activity or as a Financing Activity?
उत्तर
An increase in bank Overdraft of a corporation is considered a financing activity since it is a form of extremely short-term loan provided by a bank to a customer who has a good reputation in the eyes of the bank.
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संबंधित प्रश्न
From the following extracts of a company’s Balance Sheets and the additional information, you are required to calculate Cash from Financing Activities for the year ending 31st March, 2021.
| Particulars | 31.3.2021 (₹) | 31.3.2020 (₹) |
| Equity Share Capital | 9,00,000 | 7,00,000 |
| 10% Preference Share Capital | 3,00,000 | 5,00,000 |
| Securities Premium Reserve | 30,000 | 5,000 |
| 12% Debentures | 4,00,000 | 3,00,000 |
| Cash Credit | 12,000 | 10,000 |
Additional information:
- During the year 2020-21:
- Dividend proposed on Equity Shares in 2019-20 of ₹ 65,000 was declared and paid.
- Debentures were issued on 1st July, 2020, at a discount of 10%.
- Interest on cash credit of ₹ 500 was paid.
- Underwriting commission of ₹ 25,000 was paid to the underwriters.
- The Equity shares were issued at a premium.
- The 10% Preference Shares were redeemed on 31st March, 2021.
The following balances have been extracted from the books of Meadow Ltd. as at 31st March, 2023.
| Particulars | (₹) | Particulars | (₹) |
| Capital Reserve | 1,20,000 | Bank Overdraft | 40,000 |
| Plant and Machinery (at cost) | 6,00,000 | Bills Receivables | 20,000 |
| Land and Building | 6,80,000 | Patents | 80,000 |
| Statement of Profit & Loss (Dr.) | 1,70,000 | Sundry Debtors | 90,000 |
| Short-term Loans and Advances | 50,000 | Provision for Doubtful Debts | 10,000 |
| Cash & Bank Balances | 1,60,000 | Inventories | 30,000 |
| Trade Payables | 90,000 | Share Capital | 12,20,000 |
| Accumulated depreciation on Plant and Machinery | 1,00,000 | 5% Debentures (1/5 of the Debentures to be redeemed on 31st March, 2024) | 3,00,000 |
Additional Information:
- The company had issued 1,25,000 Equity shares of ₹ 10 each which were all applied for and allotted to the public. These shares were fully called up by the company.
- There were calls-in arrears @ ₹ 2 per share on 15,000 shares out of which 5,000 shares were forfeited by the company.
You are required to:
- Show the Share Capital in the Notes to Accounts.
- Give the amount for each of the following:
- Short-term borrowings
- Current Assets
- Property, Plant and Equipment and Intangible Assets
- Property, Plant and Equipment
While preparing its Cash Flow Statement, which of the following will be classified by a company as its Cash Outflow from Investing Activities?
P: Investment in Government Securities.
Q: Investment in bank deposits (having maturity of six months).
R: Proceeds from redemption of liquid mutual fund units.
S: Proceeds from bank deposits with original maturity of less than three months.
