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Question
For each of the following transactions, calculate the resulting Cash Flow and state the nature of Cash Flow, i.e., whether it is Operating, Investing or Financing:
(a) Acquired machinery for ₹2,50,000 paying 20% by cheque and executing a bond for the balance payable.
(b) Paid ₹2,50,000 to acquire shares in Informa Tech Ltd. and received a dividend of ₹50,000 after acquisition.
(c) Sold machinery of original cost of ₹2,00,000 with an accumulated depreciation of ₹1,60,000 for ₹60,000.
Solution
(a) Investing Activity: 50,000
(b) Investing Activity: 2,00,000
(c) Investing Activity: 60,000
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Explain the major Cash Inflow and outflows from investing activities.
For each of the following transactions, calculate the resulting cash flow and state the nature of cash flow, viz., operating, investing and financing.
(a) Acquired machinery for Rs 2,50,000 paying 20% by cheque and executing a bond for the balance payable.
(b) Paid Rs 2,50,000 to acquire shares in Informa Tech. and received a dividend of Rs 50,000 after acquisition.
(c) Sold machinery of original cost Rs 2,00,000 with an accumulated depreciation of Rs 1,60,000 for Rs 60,000.
Identify the transactions as belonging to (i) Operating Activities, (ii) Investing Activities, (iii) Financing Activities and (iv) Cash and Cash Equivalents:
| (a) Cash Sale of Goods | (b) Cash Received against Revenue from Services rendered |
| (c) Cash Purchase of Goods | (d) Cash Paid against Services Taken |
| (e) Patents Purchased | (f) Marketable Securities |
| (g) Bank Overdraft | (h) Proceeds from Issue of Debentures |
| (i) Purchase of Shares | (j) Repayment of Long-term Loan |
| (k) Commission Received | (l) Redemption of Debentures |
| (m) Interest on Debentures | (n) Interest on Investments |
| (o) Income Tax Paid | (p) Income Tax Paid on Gain of Sale of Asset |
| (q) Cash Received from Debtors | (r) Cash Paid to Creditors |
Answer the following question:
From the following information, calculate the amount of cash flow from investing activities.
Acquired machinery for 10,00,000, paying 10% immediately in cash and accepting a draft for the balance in favour of the vendor, payable after three months.
Insurance Claim received by Albert Co. Ltd. of ₹ 5,00,000 for Loss of Machinery due to theft will be recorded in Cash Flow Statement in which of the following manner?
A company issued 20,000; 9% Debentures of ₹ 100 each at 10% Discount. These debentures were to be redeemed at 15% Premium at the end of 5 years. The balance in Securities Premium Account as of the date of Issue was ₹ 3,70,000. How this transaction will be reflected in Cash Flow Statement?
Interest of ₹3,000 received in cash on loans and advances will result in :
In case of a financial enterprise whose main business is lending and borrowing, ‘interest paid' and ‘interest received’ are classified as ______.
Which of the following transaction will result in no flow of cash?
Which of the following activities are operating activities for the purpose of preparing 'Cash flow statement'?
- Dividend and Interest received on securities.
- Payment of employee benefit expenses.
- Cash receipts from royalties and fees.
- Issue of shares against purchase of machinery.
What will be the effect of issue of Bonus shares on Cash Flow Statement?
Prepare a Cash Flow Statement from the following Balance Sheets of Arya Ltd.:
| Particulars | Note | 31.3.2023 (₹) | 31.3.2022 (₹) | |
| I. | Equity and Liabilities: | |||
| (1) | Shareholders’ Funds: | |||
| a) | Share Capital | 1 | 10,00,000 | 8,00,000 |
| b) | Reserves and Surplus | 2 | 6,40,000 | 5,40,000 |
| (2) | Non-Current Liabilities: | |||
| Long-term Borrowings | 1,50,000 | 1,00,000 | ||
| (3) | Current Liabilities: | |||
| a) | Trade Payables | 3 | 30,000 | 12,000 |
| b) | Short-term Provisions | 30,000 | 28,000 | |
| Total | 18,50,000 | 14,80,000 | ||
| II. | Assets: | |||
| (1) | Non-Current Assets: | |||
| a) | Property, Plant and equipment and intangible assets: Property, Plant and Equipment |
4 | 7,75,000 | 4,90,000 |
| b) | Non-current Investments | 90,000 | 50,000 | |
| (2) | Current Assets | |||
| a) | Inventory | 6,20,000 | 4,13,000 | |
| b) | Trade receivables | 3,20,000 | 4,94,000 | |
| c) | Cash & Cash Equivalents | 45,000 | 33,000 | |
| Total | 18,50,000 | 14,80,000 |
Notes to Accounts:
| Particulars | 31.3.2023 | 31.3.2022 | |
| 1. | Reserves & Surplus: | ||
| General Reserve | 5,00,000 | 4,30,000 | |
| Capital Reserve | 60,000 | 50,000 | |
| Surplus ie balance in statement of profit and loss | 80,000 | 60,000 | |
| 6,40,000 | 5,40,000 | ||
| 2. | Long-term Borrowings: | ||
| 10% Debentures | 1,50,000 | 1,00,000 | |
| 3. | Short-term Provisions: | ||
| Provision for tax | 30,000 | 28,000 | |
| 4. | Tangible Assets: | ||
| Plant and Machinery | 7,75,000 | 4,90,000 |
Additional Information:
- Tax provided during the year is ₹ 17,000.
- Depreciation charged on plant and Machinery during the year amounted to ₹ 1,20,000.
- Non-current Investments costing ₹ 30,000 were sold for ₹ 40,000 during the year. Gain on sale of Investments was credited to Capital Reserve.
- Additional Debentures were issued on 31.03.2023.
