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Question
While preparing Cash Flow statement of Sharda Ltd. 'Depreciation provided on fixed assets' was added to net profit to calculate cash flow from operating activities. Was the accountant correct in doing so? Give reason.
Solution
Depreciation of fixed assets is the non-cash expense. It must have been deducted from Net Profit while preparing Profit and Loss Account. Therefore; in Cash Flow Statement it must be added back to Net Profit before taxation and extraordinary items under Cash Flow from Operating Activities. Thus, the accountant of Sharda Ltd. is correct.
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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.
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 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.
Short Answer Question
What is a Cash Flow Statement?
"______ 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"
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Which one is Cash Outflows from Financing activities?
Cash Flow Statement is based upon ______.
Which item comes under Financial Activities in the Cash Flow statement?
Dividend received by other than financial enterprise is shown in cash flow statement under ______.
Expenses paid in advance at the end of the year are ______ in ______ activities while preparing the Cash Flow Statement.
Interest collected by an automobile company selling a car on an instalment basis will be classified as:
