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Question
Interest of ₹3,000 received in cash on loans and advances will result in :
Options
cash inflow from operating activities.
cash inflow from investing activities.
cash inflow from financing activities.
no change in cash or cash equivalents.
Solution
Interest of ₹3,000 received in cash on loans and advances will result in cash inflow from investing activities.
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How are the various activities classified (as per AS-3 revised) while preparing cash flow statement?
Long Answer Question
Explain the major Cash Inflow and outflows from investing activities.
Classify the following transactions as Operating Activities for a financial company and a non-financial company:
(a) Purchase of Shares on a Stock Exchange.
(b) Dividend received on Shares.
(c) Dividend paid on Shares.
(d) Loans given.
(e) Loans taken.
(f) Interest paid on borrowings.
What is meant by 'Operating Activities'?
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?
Read the following hypothetical text and answer the given questions on the basis of the same:
Aashna, an alumnus of CBSE School, initiated her start up Smartpay, in 2015. Smartpay is a service platform that processes payments via UPI and POS, and provides credit or loans to their clients. During the year 2021-22, Smartpay issued bonus shares in the ratio of 5:1 by capitalising reserves. The profits of Smartpay in the year 2021-22 after all appropriations was ₹ 7,50,000. This profit was arrived after taking into consideration the following items -
| Particulars | Amount (₹) |
| Interim Dividend paid during the year | 90,000 |
| Depreciation on Machinery | 40,000 |
| Loss of Machinery due to fire | 20,000 |
| Insurance claim received for Loss of Machinery due to Fire |
10,000 |
| Interest on Non-Current Investments received | 30,000 |
| Tax Refund | 20,000 |
Additional Information:
| Particulars | 31.3.22 (₹) | 31.3.21 (₹) |
| Equity Share Capital | 12,00,000 | 10,00,000 |
| Securities Premium Account | 3,00,000 | 5,00,000 |
| General Reserve | 1,50,000 | 1,50,000 |
| Investment in Marketable Securities | 1,50,000 | 1,00,000 |
| Cash in hand | 2,00,000 | 3,00,000 |
| Machinery | 3,00,000 | 2,00,000 |
| 10% Non-Current Investments | 4,00,000 | 3,00,000 |
| Bank Overdraft | 2,50,000 | 2,00,000 |
| Goodwill | 30,000 | 80,000 |
| Provision for Tax | 80,000 | 60,000 |
- Goodwill purchased during the year was ₹ 20,000.
- Proposed Dividend for the year ended March 31, 2021 was ₹ 1,60,000 and for the year ended March 31, 2022 was ₹ 2,00,000.
You are required to:
- Calculate Net Profit before tax and extraordinary items.
- Calculate Operating profit before working capital changes.
- Calculate Cash flow from Investing activities.
- Calculate Cash flow from Financing activities.
- Calculate closing cash and cash equivalents.
Calculate 'Cash Flows from Investing Activities' and 'Cash Flows from Financing Activities' for the year ended 31st March 2021 from the following Balance Sheet of Kamna Ltd. as 31st March 2021 showing your workings clearly:
| Kamna Ltd. Balance Sheet as at 31st March, 2021 |
|||
| Particulars | Note No. | 31st March, 2021 (₹) |
31st March, 2020 (₹) |
| I. Equity and Liabilities | |||
| 1. Shareholders' Funds | |||
| (a) Share Capital | 12,00,000 | 11,00,000 | |
| (b) Reserves and surplus | 1 | 3,00,000 | 2,00,000 |
| 2. Non-Current Liabilities | |||
| Long-term borrowings | 2,40,000 | 1,70,000 | |
| 3. Current Liabilities | |||
| Trade payables | 2,20,000 | 2,81,000 | |
| Total | 19,60,000 | 17,51,000 | |
| II. Assets | |||
| 1. Non Current Assets | |||
| (a) Fixed Assets | |||
| (i) Tangible Assets | 2 | 10,70,000 | 8,50,000 |
| (ii) Intangible Assets | 3 | 40,000 | 1,12,000 |
| 2. Current Assets | |||
| (a) Current Investments | 2,40,000 | 1,50,000 | |
| (b) Inventories | 1,20,000 | 1,21,000 | |
| (c) Trade Receivables | 1,70,000 | 1,43,000 | |
| (d) Cash and Cash Equivalents | 3,20,000 | 3,75,000 | |
| Total | 19,60,000 | 17,51,000 | |
Notes to Accounts:
| Note No. |
Particulars | 31st March, 2021 (₹) |
31st March, 2020 (₹) |
| 1. | Reserve and Surplus: | 3,00,000 | 2,00,000 |
| Surplus i.e. Balance in | |||
| Statement of Profit & Loss | |||
| 2. | Tangible Assets: | ||
| Machinery | 12,70,000 | 10,00,000 | |
| Accumulated Depreciation | (2,00,000) | (1,50,000) | |
| 10,70,000 | 8,50,000 | ||
| 3. | Intangible Assets: | ||
| Goodwill | 4,000 | 1,12,000 |
Additional Information:
A piece of machinery costing ₹ 24,000 on which accumulated depreciation was ₹ 16,000, was sold for ₹ 6,000.
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?
Match the transactions given in column - II with their correct category given in Column - I for the purpose of preparation of 'Cash Flow Statement'.
| Column - I | Column - II | ||
| (a) | Investing Activity | (i) | Interest paid |
| (b) | Financing Activity | (ii) | Purchase of Goodwill |
| (c) | Operating Activity | (iii) | Cash receipts from sale of goods |
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?
