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Question
The accountant of Manav Ltd. while preparing Cash Flow Statement added depreciation provided on fixed assets to net profit for calculating cash flow from operating activities. Was he correct in doing so? Give reason.
Solution
Yes, the accountant of Manav Ltd. was correct. While preparing a Cash Flow Statement, only those items are considered that result in any cash flow. Since depreciation is a non-cash expense; therefore it has to be added back to the net profit.
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From the following Balance Sheets of B.C.R. Ltd as on 31-3-2010 and 31-3-2011.
Prepare a Cash Flow Statements:
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Balance Sheets of B.C.R. Ltd. as on 31.3.2010 and 31.3.2011 |
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Liabilities |
31-3-2010 Rs |
31-3-2011 Rs |
Assets |
31-3-2010 Rs |
31-3-2011 Rs |
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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 |
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9,35,000 |
12,72,000 |
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9,35,000 |
12,72,000 |
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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.
Long Answer Question
Describe"Indirect" method of ascertaining Cash Flow from Operating Activities.
From the following Balance Sheets of Tiger Super Steel Ltd., prepare Cash Flow Statement:
Balance Sheet of Tiger Super Steel Ltd.
as at 31st March 2014 and 31st March 2017
| Particulars | Note No. | March 31, 2017 (Rs) |
March 31, 2016 (Rs) |
| I) Equity and Liabilities | |||
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1. Shareholders’ Funds |
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a) Share capital |
1 | 1,40,000 | 1,20,000 |
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b) Reserves and surplus |
2 | 22,800 | 15,200 |
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2. Current Liabilities |
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a) Trade payables |
3 | 21,200 | 14,000 |
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b) Other current liabilities |
4 | 2,400 | 3,200 |
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c) Short-term provisions |
5 | 28,400 | 22,400 |
| Total | 2,14,800 | 1,74,800 | |
| II) Assets | |||
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1. Non-Current Assets |
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a) Fixed assets |
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i) Tangible assets |
6 | 96,400 | 76,000 |
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ii) Intangible assets |
18,800 | 24,000 | |
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b) Non-current investments |
14,000 | 4,000 | |
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2. Current Assets |
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a) Inventories |
31,200 | 34,000 | |
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b) Trade receivables |
43,200 | 30,000 | |
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c) Cash and Cash Equivalents |
11,200 | 6,800 | |
| Total | 2,14,800 | 1,74,800 |
Notes to accounts:
|
2017 |
2016 |
|
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1. Share Capital |
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Equity share capital |
1,20,000 |
80,000 |
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10% Preference share capital |
20,000 |
40,000 |
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1,40,000 |
1,20,000 |
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2. Reserves and surplus |
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General reserve |
12,000 |
8,000 |
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Balance in statement of profit and loss |
10,800 |
7,200 |
|
22,800 |
15,200 |
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3. Trade payables |
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Bills payable |
21,200 |
14,000 |
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4. Other current liabilities |
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Outstanding expenses |
2,400 |
3,200 |
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5. Short-term provisions |
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Provision for taxation |
12,800 |
11,200 |
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Proposed dividend |
15,600 |
11,200 |
|
28,400 |
22,400 |
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6. Tangible assets |
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Land and building |
20,000 |
40,000 |
|
Plant |
76,400 |
36,000 |
|
96,400 |
76,000 |
Additional Information:
Depreciation Charge on Land & Building Rs 20,000, and Plant Rs 10,000 during the year.
______ means short-term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
Name the activities that is related to purchase and sale of long-term assets or fixed assets such as machinery, furniture, land and building, etc.?
Classify the following activity into operating activities, investing activities, financing activities or cash activities
"Proceeds from sales of old machinery"
Assertion (A): Buy-back of equity shares comes under financing activities.
Reason (R): Financing activities are the activities that result in a change in the size composition of the owner's capital and borrowing of the enterprise from other sources.
State whether the following transaction will result in inflow, outflow or no flow of cash while preparing cash flow statement:
Issued bonus shares ₹ 5,00,000.
