Rete Specific Project Based on Cash Flow Statement Preparation of Cash Flow Statement from the Balance Sheet of a Company From the following balance sheet of Vardhman Led as at 31st March, 2014 and 2015 and additional information, prepare cach flow statement and interpret the results thereof, Vardhman Ltd Balance Sheet ast 3st Mareh, 2014 and 2015 Particulars | note no HMA, suet [LEQUITY AND LIABILITIES . 2. Shareholders Funds (@) tae Copal s.eno00 | 4.03000 (0) Reserves and Surplus (Balance in statement of profit and logs) 48,000, 49,000 2.Non-curert ables Langton Borowings + | sao00, 45,00 3. current Liailtos ‘rade Payeise Total 2.14000): Lasers “Non cent Assets Tied Ase abe) 2 | 10000) 1.71000 2. current Assets (@) Trace Fcetabes som} 99400 @)iverteies 25000 22.000 {© Cath and Cash Eloi 4000/3600 “ota 21000 | 2.3s.000 Notes to Accounts 1. Long-term Boowings Lean tom 2 Us Ioan tom Bark 5: Fined Aseots (Tange) | and 2ncoo| 30000 Building 50,000) 55,000 Pant and Machinery 107000 1.22000 | (Depreciation (27,000) (96,000), A8éivonal information During ne yeu, € 25,000 were paid as ner dividend.Detailed Study of the Project Introduction The project is to prepare cash flow statement of Vardhman Led for the year ended 31se March, 2015 in accordance with the Accounting Standard-3 (Revised) issued by the Institute of Chartered “Accountants of India. Also, the company's results are to be interpreted. The necessary data i. the balance sheet of Vardhman Led as at 31st March, 2014 and 31st March, 2015 alongwith che relevant information and notes to accounts for the year ended 31st March, 2015 is provided. Execution of Project Work (0) Cash flow staremene of Wardhman Led as per AS-3 (Revised) for the year ended 31st March, 2015 is prepared following the indirect method. (i Cash flow statement prepared is analysed and observations are made. (iii) Graphical presentation of results of differenc business activities to show cash generated (or used) under operating, investing and financing activities is given below Cash Flow Statement for the year ended 31st March, 2015 ‘A. Cash flow from Operating Activites Net Profit before Tax and Extraordinary tema (WN) 27,000 [Adjustment for Non-cash and Non-operating Expenses, (+) Depreciation 2,000 Operating Profit before Working Capital Changes. 38.000 (4) Decrease in Curent Assets and Increase in Curent Lisbities leventores 3,000 Trade Payables 5,000 (Pllncrease in Curent Assets and Decrease in Cument Lilies ‘rade Recewablos (2.400) | _ 4.600 Net Cash ram Operating Activities "40,600 8. Cash Flow from Investing Activities Purchase of Buikings 6,000) Purchase of Land (19,000) Purchase of Plant and Machinery (15,000) Net Cash used i investing Activites "| (20.000) (©. Cash Flow from Financing Actttios Proceeds of Loan from 2 Lit 20,000 Repayrent of Bank Loan (5,000) Payment of interim Dividend (28.000) Nat Cash used in Financing Actes | tt. 900) "Nat Decrease in Cash and Cash Equivalents (400) ‘Caah and Cash Equivalents in he Beginning ofthe Year 4000 (Cath and Cash Equivalents at he End of the Year 800Working Mote Calcul of Net Profit before Tax and Extraordinary Items - __Pariclars - CGing Galanos as psx Statement of Prot anc Loss on ist March, 2012 (4) Opering Balance as per Statement of Profit nd Loss aon Tat Agi 2011 Proftor ne Year (=) trim Divide Pid Net Profit before Tix and Exrorinary ers Interpretation of Results Cash flow statement analysis of Vardhman Led shows the inflow and outflow of cash separately from the chree different activities namely, operating activities, investing activities and financing activities. Cash generated from operating activities amounted to € 40,600 which has been invested in purchasing building 5,000, land ® 10,000, machinery & 15,000 as is shown under cash used. in investing activities. The remaining cash of % 10,600 from operating meeting the deficit of eash from Financing activities amounting to € 11,000. Thus, results cath outflow of 8 400 from all che chree activities together. Increase in trade receivablesis not good. Increase in turnover may have lead to increase in trade receivables. However, t should be analysed with bad debts and debe collection period to reach any logical conclusion. Company has generated cash from its operating activities which is a goad siga. The inflow from operating activities will help the company to finance its growth plans. Besides it also meets the expectation of sharcholders regarding return on cheie investment. Result to Different Acti (20.000) | c11.000) to00 senot8) = 1090 || — =n m0 - 0.00 cstem — Caehfom Cah Cjereing —vesing —‘ranang See Ate ‘Amowt | oso (eaoo0} (11.000)Viva Questions 1. What do you mean by cash flow statement? 2. What is meant by operating activities? 3. What is meant by financing activities? 4. What is meant by investing activities? 5s. What is meant by cash equivalents? 6 While calculating cash flow from operating activities, what is the treatment of, depreciation? 7. The cash generated from operating activities of the company amounts to % 40,600. Do you consider it healthy for the company? 8. Why depreci statement? yn written back is not considered while preparing the cash flow 9. Give an example of investing activity. 10, Give an example of financing activity. 1. It is a statement prepared to show inflow and outflow of cash and cash equivalents 2 Operating activities are the principal revenue producing activities of the enterprise and other activities that are not investing or financing activities. 3. Finaneing activities are activities that result in changes in the size and eotnposition of the owner's capital and borrowings of the enterprise. 4. Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents, 3. Cash equivalents are short-term, highly liquid investments that are readily convertible into known amount of cash and which are subject to an insignificant risk of changes in value. 6 While calculating cash flow from operating activities, depreciation is added back to the net profit, as it is a non-cash expenditure 7. Yes, itishealthy for the company as the cash generated from operating activities is utilised in investing and financing activities that means business is generating adequate cash to finance the purchase of assets as well as payment of loan and interest. B Asitis not a cach transaction, 9. Purchase of building. 10. Repayment of bank loan.