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Question
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.
Solution
Dividend received on investments is cash flow from operating activities. Therefore, it is to be
categorised under 'Cash Flow from Operating Activities'. Thus, the accountant was incorrect in his
approach of showing it under 'Investing Activity'.
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RELATED QUESTIONS
Why is separate disclosure of cash flows from investing activities important? State.
Amongst the following, 'Payment of bonus to the employees' by an insurance company is which type of activity?
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
State the objective preparing ‘Cash Flow Statement’.
Short term investments are not considered while preparing cash flow statement. Why?
State any two advantages of preparing cash flow statement.
What is meant by a non-cash transaction? Give one example of a non-cash transaction.
Compute cash from operations from the following figures:
(i) Profit for the year 2016-17 is a sum of Rs. 10,000 after providing for depreciation of Rs. 2,000.
(ii) The current assets and current liabilities of the business for the year ended March 31, 2016 and 2015 are as follows:
| Particular | March 31, 2016 (Rs) |
March 31, 2017 (Rs) |
| Trade Receivables | 14,000 | 15,000 |
| Provision for Doubtful Debts | 1,000 | 1,200 |
| Trade Payables | 13,000 | 15,000 |
| Inventories | 5,000 | 8,000 |
| Other Current Assets | 10,000 | 12,000 |
| Expenses payable | 1,000 | 1,500 |
| Prepaid Expenses | 2,000 | 1,000 |
| Accrued Income | 3,000 | 4,000 |
| Income received in advance | 2,000 | 1,000 |
Following is the Financial Statement of Garima 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 | 4,40,000 | 2,80,000 |
|
b) Reserve and surplus-Surplus |
2 | 40,000 | 28,000 |
|
2. Current Liabilities |
|||
|
a) Trade payables |
1,56,000 | 56,000 | |
|
c) Short-term provisions |
12,000 | 4,000 | |
|
(Provision for taxation) |
|||
| Total | 6,48,000 | 3,68,000 | |
| II) Assets | |||
|
1. Non-current assets |
|||
|
a) Fixed assets |
|||
|
i) Tangible |
3,64,000 | 2,00,000 | |
|
2. Current assets |
|||
|
a) Inventories |
1,60,000 | 60,000 | |
|
b) Trade receivables |
80,000 | 20,000 | |
|
c) Cash and cash equivalents |
28,000 | 80,000 | |
|
d) Other current assets |
16,000 | 8,000 | |
| Total | 6,48,000 | 3,68,000 | |
|
|
|
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 |
1,40,000 | 80,000 |
| 4,40,000 | 2,80,000 | |
| 2. Reserve and surplus | ||
|
Surplus in statement of profit and loss at the beginning of the year |
28,000 | |
|
Add: Profit of the year |
16,000 | |
|
Less: Dividend |
4,000 | |
| Profit at the end of the year | 40,000 |
Additional Information:
- Depreciation charged during the year Rs 32,000.
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.
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.
"Cash Sales"
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"
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
"Cash credit"
Which of the following is not a cash outflow?
Cash flow example from an Investing 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
From the following Balance Sheets of Rainbow Ltd., you are required to prepare a Cash Flow Statement (as per As 3) for the year 2021 - 22.
| Balance Sheets of Rainbow Ltd. As at 31st March, 2022 and 31st March, 2021 |
|||
| Particulars | Note no. | 31.3.2022 (₹) |
31.3.2021 (₹) |
| I. Equity and liabilities | |||
| 1. Shareholder's Funds | |||
| (a) Share Capital (Equity) | 4,00,000 | 4,00,000 | |
| (b) Reserve and Surplus | 1 | 1,60,000 | 1,20,000 |
| 2. Non-Current Liabilities | |||
| Long-term Borrowings (5% Debentures) | 3,50,000 | 2,60,000 | |
| 3. Current Liabilities | |||
| Short term Provision (Provision for Tax) | 30,000 | 25,000 | |
| Total | 9,40,000 | 8,05,000 | |
| II. Assets | |||
| 1. Non-Current Assets | |||
| Property, Plant & Equipment & Intangible Assets | |||
| (i) Property, Plant & Equipment (Plant & Machinery) | 6,00,000 | 7,80,000 | |
| 2. Current Assets | |||
| Cash & Bank Balances (Cash at Bank) | 3,40,000 | 25,000 | |
| Total | 9,40,000 | 8,05,000 | |
Notes to Accounts:
| Particulars | 31.3.2022 (₹) | 31.3.2021 (₹) |
| I. Reserves and Surplus | ||
| General Reserve | 30,000 | 20,000 |
| Balance in Statement of Profit and Loss | 1,30,000 | 1,00,000 |
Additional Information:
During the year 2021-22, the company:
- Sold a machine for ₹ 90,000 at a loss ₹10,000.
- Issued the 5% Debentures on 31st March; 2022, at a discount of 10%. The discount was written off from General Reserve.
