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Question
Short Answer Question
What are the objectives of preparing cash flow statement?
Solution
The important objectives for preparing Cash Flow Statement are as follows:
1. The most important objective that is fulfilled by preparing Cash Flow Statement is to ascertain the gross inflows and outflows of cash and cash equivalents from various activities.
2. Secondly, Cash Flow Statement helps in analysing various reasons responsible for change in the cash balances during an accounting year.
3. This statement helps in analysing and understanding the liquidity and solvency of a company , thereby, depicting the true liquidity position to the creditors and the investors.
4. Cash Flow Statement also helps in ascertaining the requirement and availability of cash in near future.
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RELATED QUESTIONS
'An enterprise may hold securities and loans for dealing or trading purposes in which case they are similar to inventory acquired specifically for resale.' Is the statement true? Cash flows from such activities will be classified under which type of activity while preparing 'Cash flow statement'.
Will 'Net decrease in working capital' other than cash and cash equivalents, increase, decrease or not change Cash Flow from Operating Activities? Give reason in support of your answer.
Which of the following transactions will result in the flow of cash?
(1) Deposited Rs 40,000 into the bank.
(2) Withdrew cash from bank Rs 54,000.
(3) Sold marketable securities of Rs 25,000 at par.
(4) The sold machinery of the book value of Rs 50,000 at a gain of Rs 10,000
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
While preparing 'Cash Flow Statement', the accountant of 'Jain Limited', a financing company, showed dividend received on investments as investing activity. Was he correct in doing so? Give reason.
Under which type of activity will you classify' Dividend received by a financial company' while preparing Cash Flow Statement?
Short term investments are not considered while preparing cash flow statement. Why?
What is meant by 'Cash Flow' while preparing Cash Flow Statement?
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
Short Answer Question
State clearly what would constitute the operating activities for each of the follow in the following of enterprises:
(i) Hotel
(ii) Film production house
(iii) Financial enterprise
(iv) Media enterprise
(v) Steel manufacturing unit
(vi) Software development business unit.
The following is the Profit and Loss Account of Yamuna Limited:
|
Statement of Profit and Loss of Yamuna Ltd., for the Year ended March 31, 2017 |
|||
| Particulars | Note No. | Amount (₹) | |
| i) | Revenue from Operations | 10,00,000 | |
| ii) | Expenses | ||
|
|
Cost of Materials Consumed | 1 | 50,000 |
| Purchase of Stock-in-trade | 5,00,000 | ||
| Other Expenses | 2 | 3,00,000 | |
| Total Expenses | 8,50,000 | ||
| iii) | Profit before Tax (i – ii) | 1,50,000 | |
Additional information:
- Trade receivables decrease by Rs 30,000 during the year.
- Prepaid expenses increase by Rs 5,000 during the year.
- Trade payables increase by Rs 15,000 during the year.
- Outstanding expenses payable increased by Rs 3,000 during the year.
- Other expenses included a depreciation of Rs 25,000.
Compute net cash from operations for the year ended March 31, 2017 by the indirect method.
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.
"______ implies movement of cash in and out of non-cash items. Receipt of cash from a non-cash item is termed as cash inflow while cash payment in respect of such items as cash outflow"
Classify the following activity into operating activities, investing activities, financing activities or cash activities.
"Cash receipt from debtors"
Classify the following activity into operating activities, investing activities, financing activities or cash activities
"Purchase of machinery"
An example of Cash Flows from Operating Activity is ______
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
