Advertisements
Advertisements
Question
Short Answer Question
Prepare a format of cash flow from operating activities under indirect method.
Solution
The format of cash flow from operating activities under Indirect method is as follows:
|
Indirect Method |
||||
|
Cash Flow from Operating Activities: |
|
|
||
|
Net Profit before tax and extraordinary items |
|
*** |
||
|
|
Add: |
Non-Cash Expenses and Non-Operating Expenses |
|
|
|
|
|
Depreciation |
** |
|
|
|
|
Goodwill |
** |
|
|
|
|
Interest paid |
** |
|
|
|
|
Loss on sale of fixed assets |
** |
|
|
|
|
Foreign exchange |
** |
** |
|
|
Less: |
Non Operating Incomes. |
|
|
|
|
|
Dividend received |
** |
|
|
|
|
Profit on sale of fixed assets |
** |
|
|
|
|
Interest received |
** |
** |
|
Operating profit before working capital changes |
|
*** |
||
|
|
Add: Decrease in Current Assets |
*** |
|
|
|
|
|
Increase in Current Liabilities |
*** |
*** |
|
|
Less: Increase in Current Assets |
*** |
|
|
|
|
|
Decrease in Current Liabilities |
*** |
*** |
|
Cash generated from Operating Activities |
|
*** |
||
|
Income tax paid |
|
*** |
||
|
Cash Flow before Extraordinary Items |
|
*** |
||
|
|
Add/Less: Extra ordinary Items |
|
*** |
|
|
Net Cash Flow from Operating Activities |
|
*** |
||
Note: Preparation of Cash Flow Statement using Direct Method has been excluded from the prescribed syllabus. The format is given since the question has not specified the method explicitly. Students can refer to the direct method for the knowledge purpose.
APPEARS IN
RELATED QUESTIONS
Why is separate disclosure of cash flows from investing activities important? State.
While preparing the Cash Flow Statement the accountant of Gulfam Ltd., a financing company showed Dividend received on Investments as Investing Activity. Was he correct in doing so? Give reason.
Which of the following transactions will result in 'Flow of Cash’?
(a) An issue of equity shares of Rs 1, 00,000.
(b) Purchase of machinery of Rs 1,75,000.
(c) Redemption of 9% debentures Rs 3,50,000.
(d) Cash deposited into bank Rs 15,000.
Following is the Balance Sheets of Wind Power Ltd as at 31.3.2014:
| Wind Power Ltd Balance Sheet as at 31.3.2014 |
|||
| Particulars | Note No |
2013-14 Rs |
2012-13 Rs |
|
I. Equity and Liabilities 1. Shareholder’s Funds a. Share Capital b. Reserve and Surplus 2. Non - Current Liabilities a. Long-term borrowings 3. Current Liabilities a. Trade Payables b. Short-Term Provisions |
1
|
48,00,000 12,00,000
9,60,000
7,16,000 2,00,000 |
44,00,000 8,00,000
6,80,000
8,16,000 3,08,000 |
| Total | 78,76,000 | 70,04,000 | |
|
II. Assets a) Fixed Assets (i) Tangible assets (ii) Intangible b) Non – Current Investments 2. Current Assets a) Current Investments b) Inventories c) Trade Receivables d)Cash and Cash Equivalents |
2 3
|
42,80,000 1,60,000
9,60,000 5,16,000 6,80,000 12,80,000 |
34,00,000 4,80,000
4,48,000 4,84,000 5,72,000 16,20,000 |
| Total | 78,76,000 | 70,04,000 | |
Notes to Accounts
| Note No |
Particulars | As On 31-3-2014 |
As On 31-3-2013 |
| 1 |
Reserve and Surplus |
12,00,000 |
8,00,000 |
|
2
|
Tangible Assets Machinery Less: Accumulated Depreciation |
50,80,000 (8,00,000) |
40,00,000 (6,00,000) |
|
3
|
Intangible Assets Goodwill |
1,60,000 |
4,80,000 |
Additional information
During the year a piece of machinery, costing Rs 96,000 on which accumulated depreciation was Rs 64,000 was sold for Rs 24,000.
Prepare Cash Flow Statement
Why is specific disclosure of cash flow financing activities important while preparing Cash Flow Statement?
Following is the Balance Sheet of Wisben Ltd. As on 31st March 2012
| Balance Sheet of Tiger Super Steel Ltd. | |||
| Particulars | Note No. |
2012 Rs |
2011 Rs |
|
I. Equity and Liabilities 1. Shareholders' Funds a. Share Capital b. Reserves and Surplus (Profit & Loss Balance) 2. Non-Current Liabilities a. Long Term-Borrowing 3. Current Liabilities a. Trade Payables |
7,00,000 2,00,000
3,00,000
30,000 |
6,00,000 1,10,000
2,00,000
25,000 |
|
| Total | 12,30,000 | 9,35,000 | |
|
II. Assets 1. Non- Current assets a. Fixed assets i. Tangible assets b. Non –Current Investment 2. Current assets a. Inventory b. Trade Receivable c. Cash and Cash Equivalents |
11,00,000
70,000 32,000 28,000 |
8,00,000
60,000 40,000 35,000 |
|
| Total | 12,30,000 | 9,35,000 | |
Adjustments:
During the year a piece of machinery of the book value of Rs 80,000 was sold for Rs 65,000. Depreciation provided on tangible assets during the year amounted to Rs 2,00,000.
Prepare a Cash Flow Statement.
State with reason whether the following transactions will increase, decrease or not change the 'Return on Investment':
(i) Purchase of machinery worth Rs 2,00,000 by issue of equity shares.
(ii) Charging depreciation of Rs 5,000 on machinery.
(iii) Redemption of debentures in cash Rs 70,000.
(iv) Converting Rs 50,000, 9% debentures into equity shares.
From the following Balance Sheets of Sonam Ltd as on 31-3-2012 and 31-3-2011.
Prepare a Cash Flow Statements:
|
Liabilities |
31-3-2011 Rs |
31-3-2011 Rs |
Assets |
31-3-2011 Rs |
31-3-2011 Rs |
|
Equity Shares Capital Profit and Loss Account Bank Loan Proposed Dividend Provision for tax Creditors |
1,00,000
25,000
50,000 20,000
10,000 15,000
|
1,50,000
50,000
25,000 15,000
17,500 11,250 |
Patents Building Investment Debtors Stock Cash
|
12,500 1,50,000 - 50,000 2,500 5,000 |
11,250 1,50,000 18,750 3,750 21,250 |
|
|
|
||||
|
2,20,000 |
2,68,750 |
|
2,20,000 |
2,68,750 |
|
|
|
|
|
|
Additional Information:
During the year a Building having book value Rs 50,000 was sold at a loss of Rs 2,000 and deprecation charged on Building was Rs 4,000
From the following Balance Sheet of Vijay Ltd. as on 31-3-2009 and 31-3-2010 prepare a Cash Flow Statement.
|
Liabilities |
31-3-2009 Rs |
31-3-2010 Rs |
Assets |
31-3-2009 Rs |
31-3-2010 Rs |
|
Share Capital |
45,000 |
65,000 |
Fixed Assets |
46,700 |
83,000 |
|
General Reserve |
15,000 |
27,500 |
Stock |
11,000 |
13,000 |
|
Profit and Loss Account |
10,000 |
15,000 |
Debtors |
18,000 |
19,500 |
|
Trade Creditors |
8,700 |
11,000 |
Cash |
2,000 |
2,500 |
|
|
|
|
Preliminary Expenses |
1,000 |
500 |
|
|
78,700 |
1,18,500 |
|
78,700 |
1,18,500 |
|
|
|
|
|
|
|
Additional Information:
(i) Depreciation on Fixed assets for the year 2009-2010 was Rs 14,700
(ii) An interim dividend Rs 7,000 has been paid to the shareholders during the year.
List any two investing activities which result into outflow of cash.
From the following Balance Sheets of B.C.R. Ltd as on 31-3-2010 and 31-3-2011.
Prepare a Cash Flow Statements:
|
Balance Sheets of B.C.R. Ltd. as on 31.3.2010 and 31.3.2011 |
|||||
|
Liabilities |
31-3-2010 Rs |
31-3-2011 Rs |
Assets |
31-3-2010 Rs |
31-3-2011 Rs |
|
Equity Shares Capital Profit and Loss Account Bank Loan Proposed Dividend Provision for tax Creditors |
5,00,000
2,00,000
1,00,000 50,000 30,000 55,000 |
7,00,000
3,50,000
50,000 70,000 50,000 52,000 |
Patents Equipment Investment Debtors Stock Bank |
1,00,000 5,00,000 – 80,000 55,000 2,00,000 |
95,000 5,00,000 1,00,000 1,30,000 3,00,000 |
|
|
|
||||
|
9,35,000 |
12,72,000 |
|
9,35,000 |
12,72,000 |
|
|
|
|
|
|||
Additional Information:
During the year Equipment costing Rs 1,00,000 was purchases. Loss on sale of Equipment amounted to Rs 12,000. Rs 18,000 deprecation charged on Equipment.
From the following Balance Sheets, Prepare a Cash Flow Statements as per AS- 3 (revised)
|
Liabilities |
2008 Amount Rs |
2009 Amount Rs |
Assets |
2008 Amount Rs |
2009 Amount Rs |
|
Share Capital |
12,000 |
15,000 |
Furniture |
5,000 |
8,000 |
|
P & L Account |
5,000 |
6,000 |
Stock |
6,000 |
4,000 |
|
Creditors |
15,000 |
11,000 |
Debtors |
10,000 |
8,000 |
|
|
|
|
Cash |
11,000 |
12,000 |
|
|
32,000 |
32,000 |
|
32,000 |
32,000 |
|
|
|
|
|
|
|
A dividend of Rs 3,000 was paid during the year 2008-09
From the following information, prepare cash flow statement:
| Particulars | Note No. | 31st March 2015 (Rs) |
31st March 2014 (Rs) |
| I) Equity and Liabilities | |||
|
1. Shareholders’ Funds |
|||
|
a) Share capital |
7,00,000 | 5,00,000 | |
|
b) Reserves and surplus |
4,70,000 | 2,50,000 | |
|
2. Non-current Liabilities |
|||
|
(8% Debentures) |
4,00,000 | 6,00,000 | |
|
3. Current Liabilities |
|||
|
a) Trade payables |
9,00,000 | 6,00,000 | |
| Total | 24,70,000 | 19,50,000 | |
| II) Assets | |||
|
1. Non-current assets |
|||
|
a) Fixed assets |
|||
|
i) Tangible |
7,00,000 | 5,00,000 | |
|
ii) Intangible-Goodwill |
1,70,000 | 2,50,000 | |
|
2. Current assets |
|||
|
a) Inventories |
6,00,000 | 5,00,000 | |
|
b) Trade Receivables |
6,00,000 | 4,00,000 | |
|
c) Cash and cash equivalents |
4,00,000 | 3,00,000 | |
| Total | 24,70,000 | 19,50,000 |
Additional Information:
Depreciation Charge on Plant amount to Rs. 80,000.
From the following Balance Sheet of Yogeta Ltd., prepare cash flow statement:
| Particulars | Note No. | 31st March 2017 (Rs) |
31st March 2016 (Rs) |
| I) Equity and Liabilities | |||
|
1. Shareholders’ Funds |
|||
|
a) Share capital |
1 | 4,00,000 | 2,00,000 |
|
b) Reserves and surplus-Surplus |
2,00,000 | 1,00,000 | |
|
2. Non-current Liabilities |
|||
|
a) Long-term borrowings |
2 | 1,50,000 | 2,20,000 |
|
3. Current Liabilities |
|||
|
a) Short-term borrowings |
1,00,000 | - | |
|
(Bank overdraft) |
|||
|
b) Trade payables |
70,000 | 50,000 | |
|
c) Short-term provision |
50,000 | 30,000 | |
|
(Provision for taxation) |
|||
| Total | 9,70,000 | 6,00,000 | |
| II) Assets | |||
|
1. Non-current assets |
|||
|
a) Fixed assets |
|||
|
i) Tangible |
7,00,000 | 4,00,000 | |
|
2. Current assets |
|||
|
a) Inventories |
1,70,000 | 1,00,000 | |
|
b) Trade Receivables |
1,00,000 | 50,000 | |
|
c) Cash and cash equivalents |
- | 50,000 | |
| Total | 9,70,000 | 6,00,000 |
Notes to Accounts -
| Particulars | 31st March 2017 (Rs) |
31st March 2016 (Rs) |
| 1. Share capital | ||
|
a) Equity share capital |
3,00,000 | 2,00,000 |
|
b) Preference share capital |
1,00,000 | - |
| 4,00,000 | 2,00,000 | |
| 2. Long term borrowings | ||
|
Long-term loan |
- | 2,00,000 |
|
Long-term Rahul |
1,50,000 | 20,000 |
| 1,50,000 | 2,20,000 |
Additional Information:
Net Profit for the year after charging Rs. 50,000 as Depreciation was Rs. 1,50,000. Dividend paid on Share was Rs. 50,000, Tax Provision created during the year amounted to Rs. 60,000. 8% loan was repaid on March 31, 2017 and an additional 9% loan of Rs. 1,30,000 was obtained from Rahul on April 01, 2016.
Answer the following question:
State giving reason, whether the issue of shares for consideration other than cash will result into inflow, outflow or no flow of cash.
Classify the following activity into operating activities, investing activities, financing activities or cash activities.
"Cash Sales"
Classify the following activity into operating activities, investing activities, financing activities or cash activities
"Proceeds from sales of old machinery"
Classify the following activity into operating activities, investing activities, financing activities or cash activities
"Proceeds from issuance of equity share capital."
From the following information, find out Cash Outflow from Financing Activities.
| Year I | Year II | |
| Proposed Dividend | ₹ 1,20,000 | ₹ 1,50,000 |
| 12% debentures | ₹ 4,00,000 | ₹ 5,00,000 |
Additional Information:
Additional Debentures were issued at the end of the year.
Interim Dividend paid ₹ 50,000
Preference Share Capital Issued ₹ 2,00,000
