Describes the

Inflows (sources) and

outflows(Uses) of cash

and cash equivalents

During a specified period.

(As per AS-3)
 Objectives of cash flow statement

Cash Management: Tool for short-term financial

planning. By preparing the statement,

a firm can know how much cash can be

generated by its operations and

how much cash is needed.

Cash Planning: It helps in planning repayment of loans,

dividend policy,

replacement of fixed assets and

capital budgeting decisions.

Answers to Difficult Questions: Explains the
causes for financial difficulties.

Even if the firm is profitable, firm experiences

difficulty for cash

Discloses Reasons for success or failure:

Important technique for evaluating success or failure of

cash planning.

If the results are not as per expectation,

reasons can be analyzed and corrective steps can be

taken.
 Cash Flow Statements

Cash And
Operating Financing Investing
Cash
Activities Activities Activities
Equivalent
Revenue producing activities and

generally result from

the transactions and other events

that determine the net profit or loss of the organisation

 Operating
Activities

Cash Inflow Cash Outflow

1. Cash Sales 1. Cash purchases

2. Cash Received From Debtors 2. Payment to creditors
3. Cash Received From 3. Cash operating expenses
Commission And Fees 4. Payment of wages
4. Royalty 5. Income tax
Activities that result in changes in size and
composition of

owners’ capital and

long-term debts of the firm.

 Financing
activities

Cash Inflow Cash Outflow

1. Issue of shares in cash 1. Payment of loans

2. Issue of debentures in 2. Redemption of preferences
cash shares
3. Long term borrowing 3. Buy back of equity shares
4. Payment of dividend
5. Payment of interest
Investing activities relate to purchase and sale of
long-term assets or fixed assets

such as machinery, furniture, land and building

and other investments

 Investing
Activities

Cash Inflow Cash Outflow

1. Sales of fixed assets 1. Purchase of fixed assets

2. Sales of investment 2. Purchase of investment
3. Interest received
4. Dividend received
Short term, highly liquid investments that can be
converted into known Amounts of cash

within a reasonable period, without subjecting to

any significant risk. Includes
•Cash
•Cash in hand
•Bank balance
•Short term investment
•Marketable securities
Identify the following items as:-
Operating activities ,Investing activities, Financing activities,
Cash & Cash equivalents

1. Cash sales Operating activities

2. Cash received from trade receivables Operating activities

3. Purchase of building Investing activities

4. Sale of building Investing activities

5. Issue of share capital and debentures Financing activities

6. Buy back of equity shares Financing activities

7. Dividend paid Financing activities

8. Cash purchases Operating activities

9. Redemption of debentures Financing activities

Identify the following items as:-
Operating activities ,Investing activities, Financing activities,
Cash & Cash equivalents

1. Purchase of goodwill Investing activities

2. Sales of patents Investing activities

3. Short term deposit in a bank Cash equivalents

4. Commission received Operating activities

5. Rent paid Operating activities

6. Income tax paid Operating activities

7. Bank balance Cash equivalents

8. Office Expenses Operating activities

9. Investment in short term securities Cash equivalents

These firms like Mutual Funds, Banks , Investment companies
has a main business of borrowing and advancing loans, buying
and selling of shares, debentures, fixed deposits

Other than financial enterprises like firms deals in

Manufacturing Of Garments, Steel , Real Estate etc.

No Item For financing For non financing

company company

1 Interest Received Operating Activities Investing activities

2 Dividend Received Operating Activities Investing activities
3 Interest Paid Operating Activities Financing Activities
4 Dividend Paid Financing Activities Financing Activities
Identify the following items as:-
Operating activities ,Investing activities, Financing activities,
Cash & Cash equivalents

1. Income tax refund Operating activities

2. Interest received on investment by :-

(a) Financial company(b) Non financial (a) Operating activities
company (b) Investing activities

3. Sale of investment by :- (a) Financial

company (b) Non financial company (a) Operating activities

(b) Investing activities

4. Interest paid on debentures:- (a) (a) Operating activities

Financial company (b) Non financial
company (b) Financing activities

5. Rent received by a company whose (a) Operating activities

main business is :- (a) Real estate
company (b) Manufacturing company (b) Investing activities
 When does the cash
flow arises

Outflow Of
Inflow Of
Cash
cash

Transactions result in either

increase/decrease in cash
equivalent
 State which of the following transactions will result in
inflow/outflow or change in cash or cash equivalent

1. Purchase of inventory for cash

2. Purchase of goods on credit
3. Sale of goods costing Rs 10,000 for Rs 12000 for cash
4. Sales of goods on credit
5. Purchase of a fixed asset by issue of shares

1. Outflow of cash
2. No effect
3. Inflow of cash
4. No effect
5. No effect
 State which of the following transactions will result in
inflow/outflow or change in cash or cash equivalent

1. Sale of fixed assets ( book value Rs 15000) at a loss of Rs

5000
2. Cash received from debtors Rs 90,000 and allowed him discount
of Rs 1000
3. Shares issue for cash
4. Issue of fully paid bonus shares
5. Depreciation on furniture

1. Inflow of cash
2. Inflow of cash
3. Inflow of cash
4. No effect
5. No effect
 State which of the following transactions will result in
inflow/outflow or change in cash or cash equivalent

1. Purchase of patents
2. Issue of debenture for the purchase of machinery
3. Declaration of final dividend
4. Cash withdrawn from bank
5. Purchase of marketable securities of cash

1. Outflow cash
2. No effect
3. No effect
4. No effect
5. No effect
 Format Of Cash flow statement
Particulars Amount

Cash Flows from Operating Activities

Cash Generated from operations activities

Cash Flows from Investing Activities

Net Cash from (or used) in Investing Activities

Cash Flows from Financing Activities

Net Cash from (or used) in Financing Activities

Net Increase (or Decrease) in Cash & Cash Equivalents (X+Y+Z)

Add: Cash and Cash Equivalents in the beginning

Cash and cash Equivalents at the end of the year

Cash flow from operating activities
 Format Of from operating activities
Particulars Amount

A, Cash Flows from Operating Activities

Net Profit before Tax (see note No. 1)
Adjustments for non cash and non operating items:

Add:
•Depreciation
•Preliminary Expenses/Discount on issue of Share and Deb written off
•Goodwill, Patents and Trademarks amortized
•Interest on long-term borrowings
•Loss on Sale of Fixed Assets

Less:
•Interest Income
• Dividend Income
• Rental Income
• Profit on sale of Fixed Assets

Operating Profit before Working Capital Changes

Add: Decrease in current Assets ,Increase in Current Liabilities
Less: Increase in current Assets. Decrease in Current Liabilities
Cash Generated from operations
Less: Income Tax Paid (Previous year)

Net Cash Flows from/Used in operating activities

Determine the net profit before tax
extraordinary items

Adjustment for non cash or non operating

income/expenses

Changes in current assets and current

liability
 Format Of Cash from operating activities
Particulars Amount

A, Cash Flows from Operating Activities

Net Profit before Tax (see note No. 1)
Adjustments for non cash and non operating items:

Add:
•Depreciation
•Preliminary Expenses/Discount on issue of Share and Deb written off
•Goodwill, Patents and Trademarks amortized
•Interest on long-term borrowings
•Loss on Sale of Fixed Assets

Less:
•Interest Income
• Dividend Income
• Rental Income
• Profit on sale of Fixed Assets

Operating Profit before Working Capital Changes

Add: Decrease in current Assets ,Increase in Current Liabilities
Less: Increase in current Assets. Decrease in Current Liabilities
Cash Generated from operations
Less: Income Tax Paid (Previous year)
Net Cash Flows from/Used in operating activities
 Calculation of Net Profit before Tax and Extraordinary Item.
Particulars Amount

Net Profit of the current year (after appropriations)

Add: -
•Transfer to reserves
• Proposed dividend for Current Year –
• Provision for tax made during the current year

Less: - Refund of tax

Net profit before tax

Reasons for additions and deduction of items

 Transfer to reserves
 Proposed dividend for Current Year –
 Provision for tax made during the current year
 Calculation of Net Profit before Tax and Extraordinary Item.
Particulars Amount

Net Profit of the current year (after appropriations)

Add: -
•Transfer to reserves
• Interim dividend paid during the year
•Proposed dividend for Current Year –
• Provision for tax made during the current year

Less: - Refund of tax

Net profit before tax

Reasons for additions and deduction of items

•Interim dividend paid during the year

 Calculation of Net Profit before Tax and Extraordinary Item.
Particulars Amount

Net Profit of the current year (after appropriations)

Add: -
•Transfer to reserves
• Interim dividend paid during the year
•Proposed dividend for Current Year –
• Provision for tax made during the current year

Less: - Refund of tax

Net profit before tax

Reasons for additions and deduction of items

Refund of tax
Particulars 31.03.2011 31.03.2010
Balance in Statement of Profit and Loss 75,000 60,000
Provision for tax 12,000 21,000
Proposed dividend 13,000 19,000
General reserves 12000 10,000
Refund of tax 12,000

Working Note: Calculation of net profit before Tax

Particulars Amount

A, Cash Flows from Operating Activities

Net Profit after appropriations: 15,000
Add: Provision for Tax (current year) 12,000
Add: Proposed Dividend (current year) 13,000

Add: Transferred to general reserves 2,000

Less: :- Refund of tax 12,000

Net Profit before tax 30,000

 Format Of Cash from operating activities
Particulars Amount

A, Cash Flows from Operating Activities

Net Profit before Tax (see note No. 1)
Adjustments for non cash and non operating items:

Add:
•Depreciation
•Preliminary Expenses/Discount on issue of Share and Deb written off
•Goodwill, Patents and Trademarks amortized
•Interest on long-term borrowings
•Loss on Sale of Fixed Assets

Less:
•Interest Income
• Dividend Income
• Rental Income
• Profit on sale of Fixed Assets

Operating Profit before Working Capital Changes

Add: Decrease in current Assets ,Increase in Current Liabilities
Less: Increase in current Assets. Decrease in Current Liabilities
Cash Generated from operations
Less: Income Tax Paid (Previous year)
Net Cash Flows from/Used in operating activities
 Reasons for additions and deduction of items

 Depreciation
 Preliminary Expenses/Discount on issue of
Share and Deb written off
 Goodwill, Patents and Trademarks
amortized
Loss on Sale of Fixed Assets

 Interest Income
 Dividend Income
 Rental Income
 Profit on sale of Fixed Assets
 Format Of Cash from operating activities
Particulars Amount

A, Cash Flows from Operating Activities

Net Profit before Tax (see note No. 1)
Adjustments for non cash and non operating items:

Add:
•Depreciation
•Preliminary Expenses/Discount on issue of Share and Deb written off
•Goodwill, Patents and Trademarks amortized
•Interest on long-term borrowings
•Loss on Sale of Fixed Assets

Less:
•Interest Income
• Dividend Income
• Rental Income
• Profit on sale of Fixed Assets

Operating Profit before Working Capital Changes

Add: Decrease in current Assets ,Increase in Current Liabilities

Less: Increase in current Assets. Decrease in Current Liabilities
Cash Generated from operations
Less: Income Tax Paid (Previous year)
Net Cash Flows from/Used in operating activities
 Reasons For Additions
Decrease in current assets
Particulars 2013 2014
Debtors 20,000 15,000

Amount received from debtors (assumed) = Rs 20,000

Amount due from debtors at the end = Rs 15,000
Net amount received from debtors Rs 5000 ( Inflow)

Increase in current liability

Particulars 2013 2014
creditors 10,000 20,000
Amount paid to creditors ( assumed) = Rs 10,000
Amount due to creditors at the end = Rs 20,000
Amount paid less to creditors Rs 10,000 ( Inflow)
 Reasons For deductions
Increase in current assets
Particulars 2013 2014
Inventory 25,000 40,000

Amount received from sale of inventory (assumed) = Rs 25,000

Inventory unsold at the end of year = Rs 40,000
Net amount paid for inventory Rs 15000 ( outflow)

Increase in current liability

Particulars 2013 2014
Outstanding expenses 10,000 8,000
Amount paid for outstanding exp ( assumed) = Rs 10,000
Amount due for outstanding the end = Rs 8,000
Amount paid more for outstanding exp Rs 2,000 ( outflow)
 Particulars 31.03.2012 31.03.2011
Trade Receivables 1,64,000 1,40,000
Inventory 1,15,000 84,000
Trade Payables 73,000 60,000
Office Expenses Outstanding 4,000 6,000
Operating profit before working capital changes = 2,10,000

Particulars Amount

Operating Profit before Working Capital Changes 2,10,000

Add: Decrease in current Assets ,Increase in Current Liability
Trade Payables 13,000 13,000
2,23,000
Less: Increase in current Assets. Decrease in Current Liability
Trade Receivables (24,000)
Inventory (31,000)
Office Exp Outstanding (2,000) (57,000)

Net Cash flow from operating activities 1,66,000

 Particulars 31.03.2011 31.03.2012
Trade receivables 65,000 63,000
Trade payables 50,000 59,000
Expenses outstanding 2,000 1600
Prepaid expenses 900 1200
Inventory 70,000 58,000
Operating profit before working capital changes = 1,87,000
Particulars Amount

Operating Profit before Working Capital Changes 1,87,000

Add: Decrease in current Assets ,Increase in Current Liability
Trade Receivables 2,000
Trade Payables 9,000
Inventory 12,000 23,000
Less: Increase in current Assets. Decrease in Current Liability 2,10,000
Office Exp Outstanding (400)
Prepaid expenses (300) (7,00)

Net Cash flow from operating activities 2,09,300

Particulars 31.03.2011 31.03.2010
Operating loss before working capital chg 5,000
•Trade Receivables 25,000 31,000
•Outstanding Rent 12,000 21,000
Bank balance 40,000 38,000
•Prepaid Expenses 4,000 2,000
•Trade Payables 13,000 19,000

Particulars Amount

A, Cash Flows from Operating Activities

Operating loss before working capital changes (5,000)

Add: Decrease in current Assets ,Increase in Current Liabilities

Trade Receivables 6,000 6,000
1,000
Less: Increase in current Assets. Decrease in Current Liabilities
Prepaid Expenses (2,000)
Trade Payables (6,000)
Outstanding Rent (9,000) (17,000)

Net Cash used in operating activities (16,000)

 Particulars 31.03.2011 31.03.2012
Debtors 80,000 60,000
Bills receivables 7,000 10,000
Creditors 50,000 55,000
Bills payable 8000 6,000
Outstanding expenses 1,000 1,500
Prepaid expenses 1,800 1,600
Accrued income 8,00 900
Income received in advance 700 -

Operating profit before working capital changes = 1,00,000

Particulars Amount
Operating Profit before Working Capital Changes 1,00,000
Add: Decrease in current Assets ,Increase in Current Liability
Debtors 20,000
Prepaid Expenses 2,00
Creditors 5,000
Exp Outstanding 5,00 25,700
Less: Increase in current Assets. Decrease in Current Liability
1,25,000
Bills payables (3000)
Accrued income (100)
Bills payables (2,000)
Income received in advance (7,00) (58,00)

Net Cash flow from operating activities 1,19,900

 Adjustment regarding provision for
taxation

As per the guidelines ( Circular no 43 dated 2nd July by

C.B.S.E ) Accounting treatment of Deferred tax liability is
Non-evaluative)
 When only current year data is given
Particulars 2013 2014
Profit and loss A/c 30000 45000
Provision for taxation 20000

Particulars Amount
Cash Flows from Operating Activities
Net Profit before Tax (see note No. 1) 35,000
Less: Tax paid (20,000)

Working Note: Calculation of net profit before Tax

Note no 1 Amount
Net Profit after appropriations( 45,000 – 30,000) 15,000
Add: Provision for Tax 20,000
35,000
 When data for two years are given
Particulars 2014
Profit and loss A/c 30,000 45,000
Provision for taxation 14000 20000

Particulars Amount

Cash Flows from Operating Activities

Net Profit before Tax (see note No. 1) 35,000
Less: Tax paid (14,000)

Working Note: Calculation of net profit before Tax

Note no 1 Amount

Net Profit after appropriations ( 45,000-30,000) 15,000

Add: Provision for Tax 20,000
35,000
Adjustment Regarding
Dividend
Particulars 2013 2014
Profit and loss A/c 5,000 20,000
Proposed dividend 14,000 20,000

Particulars Amount

Cash Flows from financing Activities

Less: Dividend Paid (14,000)

Working Note: Calculation of net profit before Tax

Note no 1 Amount

Net Profit after appropriations: 15,000

Add: Proposed dividend 20,000
35,000
Particulars 2013 2014
Goodwill 25,000 20,000

If goodwill is decreasing:- It will be added back to non-

cash items in cash from operating activities (Goodwill
written off)

Particulars 2013 2014

Goodwill 25,000 32,000

If goodwill is increasing:- It will be deduced from cash

from investing activities (Purchase of goodwill)
The profit of Philips Ltd. after appropriations was 2,50,000.
This profit was arrived at after taking into consideration the
following items
No. Particulars Amount
1 Depreciation on Fixed Tangible Assets (Machinery) 20,000
2 Loss on sale of Fixed Tangible Assets (Furniture) 2,000
3 Goodwill written off 9,000
4 Provision for Taxation 35,000
5 Transfer to General Reserve 17,500
6 Gain on sale of Fixed Tangible Assets (Machinery) 8,000

Particulars 31.03.2011 31.03.2012

Trade Receivables (all good) 50,000 62,000
Trade payables 45,000 55,000
Inventory 12,000 8,000
Income received in Advance 8,000 -------
Outstanding Expenses 6,000 3,000
Prepaid Expenses -- 5,000

C.B.S.E guidelines
Working Note: Calculation of net profit before Tax

Particulars Amount

A, Cash Flows from Operating Activities

Net Profit after appropriations: 2,50,000
Add: Provision for Tax 35,000
Add: Transfer to General Reserve 17,500
Net Profit before tax 3,02,500
 Cash from operating activities
Particulars Amount

A, Cash Flows from Operating Activities

Net Profit before Tax (see note No. 1)
Adjustments for non cash and non operating items: 3,02,500

Depreciation on Fixed Tangible Assets 20,000

Loss on sale of Fixed Tangible Assets 2,000
Goodwill written off 9,000 3,33,500

Less: Gain on sale of Machinery 8,000

Operating Profit before Working Capital Changes 3,25,500
Add: Decrease in current Assets ,Increase in Current Liabilities
Inventory 4,000
Trade Payables 10,000 14,000
3,39,500
Less: Increase in current Assets. Decrease in Current Liabilities
Trade Receivables (12,000)
Prepaid Expenses (5,000)
Outstanding Expenses (3,000)
Income received in Advance (8,000) 3,11,500

Less: Tax paid (35,000)

Net Cash Flows from operating activities 2,76,500
 Particulars Note no Amount
1 Revenue from operation 12,00,000
11 Other Income 1 18,000
111 Total Revenue 12,18,000

1V. Expenses
Employee benefit expenses 10,000
Depreciation and amortization expenses 20,000
Other expenses 2 31,000
Total expenses 61000

V Profit before tax (111 – 1V.) 55,000

Less:- provision for tax 21,000
Profit for the period 34,000

(1)Other income (2) Other expenses

Profit on sale of machinery 5,000 Goodwill written off 8,000
Dividend received 3,000 Rent 18,000
Rent received 4,000 Loss on sale of building 5,000
Income tax refund 6,000
Particulars Amount
Profit of the period 80,000
Provision for taxation 36,000
Depreciation and amortization exp 45,000
Profit on sale of land 15,000
Interest received 3,000
Goodwill written off 10,000
Loss on sale of plant 30,000
Particulars 31.03.2012 31.03.2013
Trade Receivables (All Good) 1,40,000 1,64,000
Trade payables 84,000 1,15,000
Inventory 60,000 73,000
Office expenses outstanding 6,000 4,000

Working Note: Calculation of net profit before Tax

Particulars Amount

A, Cash Flows from Operating Activities

Net Profit after appropriations: 80,000

Add: Provision for Tax 36,000

Net Profit before tax 1,16,000
Particulars Amount

A, Cash Flows from Operating Activities

Net Profit before Tax (see note No. 1)
1,16,000
Adjustments for non cash and non operating items:
Depreciation And amortization exp 72,000
Loss on sale of Plant 30,000
Goodwill Written off 10,000 1,12,000
2,28,000

Less: Gain on sale of Land (15,000)

Less: interest received (3,000) (18,000)

Operating Profit before Working Capital Changes 2,10,000

Add: Decrease in current Assets ,Increase in Current Liabilities

Trade payables 13,000 13,000
2,23,000
Less: Increase in current Assets. Decrease in Current Liabilities
Outstanding expenses (2,000)
Inventory (31,000)
Trade receivables (24,000) (57,000)

Cash generated from operating activities 1,66,000

(36,000)
Less: Tax paid
Net Cash Flows from operating activities 1,30,000
Particulars Amount
Profit after tax 1,30,000
Tax paid 15,000
Depreciation 32,000
Share issue expenses 10,000

Particulars 31.03.2012 31.03.2013

Trade Receivables (All Good) 65,000 63,000
Trade payables 50,000 59,000
Office expenses outstanding 2,000 1,600
Prepaid expenses 900 12,00
Inventory 70,000 58,000

Working Note: Calculation of net profit before Tax

Particulars Amount

A, Cash Flows from Operating Activities

Net Profit after appropriations: 1,30,000
Add: Provision for Tax 15,000
Net Profit before tax 1,45,000
Particulars Amount

A, Cash Flows from Operating Activities

Net Profit before Tax (see note No. 1)
1,45,000
Adjustments for non cash and non operating items:
Depreciation 32,000
Share issue expenses written off 10,000 42,000
Operating Profit before Working Capital Changes 1,87,000

Add: Decrease in current Assets ,Increase in Current Liabilities

Trade payables 9,000
Inventory 12,000
Trade receivables 2,000 23,000

2,10,000
Less: Increase in current Assets. Decrease in Current Liabilities
Prepaid Expenses (300)
Outstanding expenses (400)
(700)

Cash generated from operating activities 2,09,300

(15,000)
Less: Tax paid
Net Cash Flows from operating activities 1,94,300
The Net income of M Ltd. for the year ended March 31, 2007 was
Rs. 4,89,000.Depreciation charged for the year was Rs. 87,000.
Income for the year was arrived at after adjusting for gain on sale of
land Rs.1,05,000,loss on sale of equipment Rs.48,000 and writing off
cost of equity issue Rs. 25,000.

Particulars March 31,2006 March 31,2007

Inventory 1,67,000 1,85,000
Receivables 1,45,000 1,42,000
Prepaid expenses 8,000 12000
Cash in hand and at bank 32,000 17,000
Payables 1,07,000 95,000
Expenses outstanding 9,000 13,000
Bank overdraft 80,000 60,000
 Format Of Cash flow statement
Particulars Amount

A, Cash Flows from Operating Activities

Net Profit before Tax (see note No. 1)
Adjustments for non cash and non operating items: 4,89,000

Depreciation on Fixed Tangible Assets 87,000

Loss on sale of Equipment 48,000
Writing off preliminary expense 25,000 1,60,000

Less: Gain on sale of Land 105,000

Operating Profit before Working Capital Changes 5,44,000
Add: Decrease in current Assets ,Increase in Current Liabilities
Payables 12,000
Inventory 18,000
Prepaid expenses 4,000 34,000
5,78,000
Less: Increase in current Assets. Decrease in Current Liabilities
Trade creditors (3,000)
Expenses outstanding (4,000)
7,000

Net Cash Flows from operating activities 5,71,000

 Particulars Note no Amount
1 Revenue from operation 98000
11 Other Income 1 18,000
111 Total Revenue 1,16,000

1V. Expenses
Employee benefit expenses 10,000
Depreciation and amortization expenses 20,000
Other expenses 2 31,000
Total expenses 61000

V Profit before tax (111 – 1V.) 55,000

Less:- provision for tax 21,000
Profit for the period 34,000
Less :- Proposed Dividend 10,000
Balance of profit 24,000

(1)Other income (2) Other expenses

Profit on sale of machinery 5,000 Goodwill written off 8,000
Dividend received 3,000 Rent 18,000
Commission accrued 4,000 Loss on sale of building 5,000
Income tax refund 6,000
Particulars Amount
A, Cash Flows from Operating Activities
Net Profit before Tax (see note No. 1)
Adjustments for non cash and non operating items: 49,000

Depreciation 20,000
Loss on sale of Building 5,000
Goodwill Written off 8,000 33,000
82,000
Less: Gain on sale of machinery (5,000)
Interest received (3,000)

Rent received (4,000) (12,000)

Cash generated from operating activities 70,000
Less: Tax paid (15,000)
Cash flow from operating activities 55,000

Working Note: Calculation of net profit before Tax

Particulars Amount

A, Cash Flows from Operating Activities

Net Profit after appropriations: 24,000

Add: Provision for Tax (21000) - Refund of tax (6,000) 15,000

Add: Proposed dividend 10,000

Net Profit before tax 49,000

 Adjustment regarding provision for
taxation

As per the guidelines ( Circular no 43 dated 2nd July by

C.B.S.E ) Accounting treatment of Deferred tax liability is
Non-evaluative)
When two years data are given with adjustment
Particulars 2013 2014
Profit and loss A/c 30,000 45,000
Provision for taxation 14,000 20,000
Adjustment:- Tax paid during the year Rs 12000

Particulars A, Cash Flows from Operating Activities Amount

Net Profit before Tax (see note No. 1) 33,000

Less: Tax paid (12,000)

Note no 1 Amount

Net Profit after appropriations: 15,000

Add: Provision for Tax (current year) 18,000
Provision For Taxation A/c 33,000

Particulars Amount Particulars Amount

To Cash A/c 12,000 By Balance b/d 14,000

To balance c/d 20,000 By Statement Of Profit 18,000

And Loss A/c (current
years provision
32,000 32,000
balancing figure)
When two years data are given with adjustment
Particulars 2013 2014
Profit and loss A/c 30,000 45,000
Provision for taxation 14,000 20,000

Adjustment:- Provision for tax made during the year Rs 18000

Particulars A, Cash Flows from Operating Activities Amount

Net Profit before Tax (see note No. 1) 15,000

Less: Tax paid (12,000)

Note no 1 Amount

Net Profit after appropriations: 15,000

Add: Provision for Tax (current year) 18,000
Provision For Taxation A/c 33,000

Particulars Amount Particulars Amount

To Cash A/c 12,000 By Balance b/d 14,000
(balancing figure)
20,000 By Statement Of Profit 18,000
To balance c/d And Loss A/c (current
years provision)
32,000 32,000
Items Amount
Provision for tax made during the year 44,000
Transfer to general reserves 5,000
Depreciation on tangible assets 50,000
Loss on sale of machinery 16,000
Provision for doubtful debts 10,000
Gain on sale of land 7,000

Particulars 2013 2014

Provision For Tax 10,000 25,000
Proposed Dividend 78,000 52,000
Prepaid Expenses 3,000 2,000
Inventory 51,000 40,000
Creditors 20,000 15000
Working Note: Calculation of net profit before Tax

Particulars Amount

A, Cash Flows from Operating Activities

Net Profit after appropriations: 4,75,000
Add: Provision for Tax 44,000
Add: Transfer to General Reserve
5,000
Add: Proposed Dividend
52,000
Net Profit before tax 5,76,000

Provision For Taxation A/c

Particulars Amount Particulars Amount

To Cash A/c( bal 29,000 By Balance b/d 10,000
fig
To balance c/d 25,000 By Statement Of Profit 44,000
And Loss A/c
54,000 54,000
 Format Of Cash flow statement
Particulars Amount

A, Cash Flows from Operating Activities

Net Profit before Tax (see note No. 1)
Adjustments for non cash and non operating items: 6,12,000

Depreciation on Fixed Tangible Assets 50,000

Loss on sale of Machinery 16,000
Provision for doubtful debts 10,000 ,76,000

Less: Gain on sale of Land 7,000

Operating Profit before Working Capital Changes 6,81000
Add: Decrease in current Assets ,Increase in Current Liabilities
Prepaid Expenses 1,000
Inventory 11,000 12,000
6,93,000
Less: Increase in current Assets. Decrease in Current Liabilities
Trade creditors (5,000)

6,88,000
Less: Tax paid
(29,000)
Net Cash Flows from operating activities 6,59,000
Particulars 31.03.2011 31.03.2010
Balance in Statement of Profit and Loss 75,000 60,000
Trade Receivables 25,000 31,000
Provision for tax 12,000 21,000
Goodwill 40,000 38,000
Prepaid Expenses 4,000 2,000
Proposed dividend 13,000 19,000

Tax paid during the year is Rs 18000

Working Note: Calculation of net profit before Tax

Particulars Amount

A, Cash Flows from Operating Activities

Net Profit after appropriations: 15,000
Add: Provision for Tax 9,000
Add: Transfer to General Reserve
5,000
Add: Proposed Dividend
19,000
Net Profit before tax 48,000

Provision For Taxation A/c

Particulars Amount Particulars Amount

To Cash A/c 18,000 By Balance b/d 21,000

To balance c/d 12,000 By Statement Of Profit 9,000

And Loss A/c ( bal fig
30,000 30,000
 Format Of Cash flow statement
Particulars Amount

A, Cash Flows from Operating Activities

Net Profit before Tax (see note No. 1)
Adjustments for non cash and non operating items: 48,000

Provision for Depreciation 6,000 ,6,000

Operating Profit before Working Capital Changes 54,000

Add: Decrease in current Assets ,Increase in Current Liabilities

Trade Receivables 6,000 6,000
60,000
Less: Increase in current Assets. Decrease in Current Liabilities
Prepaid expenses (2,000) (2,000)
58,000
Less: Tax paid (18,000)

Net Cash Flows from operating activities 40,000

Note:- Goodwill is increasing it will come in investing activities

 Cash flow from
investing activities
Particulars Amount

B. Cash Flows from Investing Activities

•Proceeds from Sale of Tangible Fixed Assets

•Proceeds from Sale of intangible Fixed Assets
•Proceeds from Sale of Non-Current Investments
•Interest and Dividend received, Rent received
•Purchase of Tangible Fixed Assets
•Purchase of intangible Fixed Assets like goodwill
•Purchase of Non-Current Investments
Net Cash from (or used) in Investing Activities
Prepare cash flow from investing activities
Particulars Purchases sales
Plant 6,20,000 2,00,000
Investment 2,40,000 80,000
Goodwill 1,00,000 -
Patents --- 1,50,000

1. Interest received on debentures held as investment Rs 8,000

2. Interest paid on debentures issued Rs 15,000
3. Dividend received on shares held as investment Rs 20,000
4. Dividend paid on equity share capital Rs 25,000
5. A plot of land was purchased out of surplus for investment purposes
was let out for commercial use . rent received was Rs 30,000
Particulars Amount

Cash Flows from Investing Activities

Purchase of investment (2,40,000)

Sales of investment 80,000
Goodwill purchase (1,00,000)
Purchase of plant (6,20,000)
Proceeds from sale of Plant 2,00,000

Sale of patents 1,50,000

Interest received 8,000

Dividend received 20,000

Rent received 30,000

4,72,000
Net from Investing Activities
 Finding out the missing amount
regarding fixed assets and
depreciation when adjustments are
given
 When the fixed assets are shown at the written down value

Outflow Inflow
(Less) (Add)
Machinery A/c ( At Written down value)

Particulars Amount Particulars Amount

To Balance b/d XXXX By Bank A/c XXXX
To Statement of P/L XXXX XXXX
By Dep. A/c
( Profit On Sale)
To Bank A/c XXXX By Statement of P/L XXXX
( Loss On Sale)
By Balance b/d XXXX
XXXX XXXX
 Prepare cash flow from investing activities
Particulars 2013 2014
Machinery 4,00,000 4,20,000
Additional information
1. During the year machinery costing Rs 40,000 with its accumulated
depreciation of Rs 24,000 was sold for Rs 20,000
2. Depreciation on machinery was Rs 30000

Outflow
Inflow
(less)
Machinery A/c(written down value (Add)

Particulars Amount Particulars Amount

To Balance b/d 4,00,000 By Bank A/c 20,000
To Statement of P/L 4,000 By Dep A/c 30,000
( profit on sale)
66,000 By Balance b/d 4,20,000
To Bank A/c (Bal Fig)
4,70,000 4,70,000

Note:- Accumulated depreciation will not be consider because it

has already been deducted in the previous years
 When the fixed assets are shown at original cost and
accumulated depreciation account is separately given
Outflow Inflow
(Less) (Add)
Machinery A/c ( At Cost)

Particulars Amount Particulars Amount

To Balance b/d XXXX By Bank A/c XXXX
To Statement of P/L XXXX By Acc Dep A/c XXXX
( Profit On Sale)
To Bank A/c XXXX By Statement of P/L XXXX
( Loss On Sale)
By Balance b/d XXXX
XXXX XXXX
Provision For Depreciation A/c
Particulars Amount Particulars Amount
To Machinery A/c 24,000 By Balance b/d XXXX
By Statement Of P/L A/c XXXX
(Current Year Dep.)
To Balance c/d XXXX
XXXX XXXX
 Prepare cash flow from investing activities
Particulars 2002 2003
Equipment ( at cost) 65,00,000 78,70,000
Accumulated depreciation( 10,80,000 16,32,000

Additional information
1. During the year equipment costing Rs 12,30,000 with its accumulated
depreciation of Rs 7,18,000 was sold for Rs 4,68,000

Outflow Office Equipment A/C Inflow

Particulars Amount Particulars Amount
To Balance b/d 65,00,000 By Bank A/c (sale) 4,68,000
By Acc Dep A/c
7,18,000
By Statement of profit & loss
To Bank A/c (Purchase Bal Fig) 26,00,000 ( Loss on sale) 44,000
By Balance b/d 78,70,000

91,00,000 91,00,000

Provision For Depreciation A/c

Particulars Amount Particulars Amount

To Machinery A/c 7,18,000 By Balance b/d 10,80,000
To Balance c/d 16,32,000 By Statement Of P/L A/c (Bal fig) 12,70,000
23,50,000 23,50,000
 Prepare cash flow from investing activities
Particulars 2013 2014
Machinery ( at cost) 4,00,000 4,20,000
Accumulated depreciation( 1,00,000 1,10,000
Patents 2,80,000 1,60,000

Additional information
1. During the year machinery costing Rs 40,000 with its accumulated depreciation of Rs
24,000 was sold for Rs 20,000
2. Patents were written off to the extent of Rs 40,000 and some patents were sold at a
profit of Rs 20,000

Outflow Machinery A/c Inflow

Particulars Amount Particulars Amount
To Balance b/d 4,00,000 By Bank A/c 20,000
To Statement of profit & loss
4,000 By Acc Dep A/c 24,000
( profit on sale)
By Balance b/d 4,20,000
To Bank A/c (Bal Fig) 60,000

4,64,000 4,64,000
Provision For Depreciation A/c

Particulars Amount Particulars Amount

To Machinery A/c 24,000 By Balance b/d 1,00,000
To Balance c/d 1,10,000 By Statement Of P/L A/c (Bal fig) 34,000
1,34,000 1,34,000
 Prepare cash flow from investing activities
Particulars 2013 2014
Machinery ( at cost) 4,00,000 4,20,000
Accumulated depreciation( 1,00,000 1,10,000
Patents 2,80,000 1,60,000
Additional information
1. During the year machinery costing Rs 40,000 with its accumulated depreciation
of Rs 24,000 was sold for Rs 20,000
2. Patents were written off to the extent of Rs 40,000 and some patents were
sold at a profit of Rs 20,000
Particulars Amount

B. Cash Flows from Investing Activities

•Sale of machinery 20,000
•Purchase of machinery (60,000)
•Sale of patents 1,00,000

Net Cash from Investing Activities 60,000

Patents Inflow
Particulars Amount Particulars Amount
2,80,000 By Bank A/c
1,00,000
To Balance b/d
By Depreciation 40,000
To Statement of profit & 20,000 By Balance b/d
loss ( profit on sale) 1,60,000
3,00,000 3,00,000
Prepare cash flow from investing activities
Particulars 2013 2014
Investment 34,000 28,000

1. During the year the company sold 40% of its investment held in
the beginning of the period at a profit of Rs 8400. Calculate the
cash flow from investment activities.

Particulars Amount

B. Cash Flows from Investing Activities

•Sale of investment 22,000

•Purchase of investment (7,600)

Net Cash from Investing Activities 14,400

Outflow Inflow
Investment A/c
Particulars Amount Particulars Amount

To Balance b/d 34,000

By Bank A/c 22,000
To Statement of P/L
( profit on sale) 8,400

To bank (bal fig) 7,600 By Balance b/d 28,000

50,000 50,000
 Prepare cash flow from investing activities
Particulars 2013 2014
Investment A/c 2,50,000 5,00,000
Fixed assets A/c 8,75,000 11,90,000
1. Half of the investment held in the beginning of the year were sold at 10% profit
2. Depreciation on fixed assets was Rs 1,00,000 for the year
3. Interest received on investment Rs 35,000
4. Dividend received on investment Rs 15,000
5. Rent received Rs 10,0000
Outflow Investment A/c Inflow
Particulars Amount Particulars Amount
To Balance b/d 2,50,000 By Bank A/c 1,37,500
To Statement of P/L 12,500
By Balance b/d 5,00,000
( profit on sale)
To bank (bal fig) 3,75,000

6,37,500 6,37,500

Outflow
Fixed Assets A/c
Particulars Amount Particulars Amount
To Balance b/d 8,75,000 By Depreciation A/c 100,000
To Bank A/c (Bal Fig) 4,15,000 By Balance b/d 11,90,000

12,90,000 12,90,000
Prepare cash flow from investing activities
Particulars 2013 2014
Investment A/c 2,50,000 5,00,000
Fixed assets A/c 8,75,000 11,90,000
1. Half of the investment held in the beginning of the year were sold at
10% profit
2. Depreciation on fixed assets was Rs 1,00,000 for the year
3. Interest received on investment Rs 35,000
4. Dividend received on investment Rs 15,000
5. Rent received Rs 10,0000

Particulars Amount

B. Cash Flows from Investing Activities

1,37,500
•Sale of investment
(3,75,000)
•Purchase of investment
•Purchase of fixed assets 4,15,,000

•Interest received 35,000

•Dividend received 15,000
•Rent received 100,00
Net Cash used Investing Activities 5,92,500
 Cash flow from
financing activities
Particulars Amount

C. Cash Flows from Financing Activities

•Proceeds from issue of Shares and Debentures

•Proceeds from Long-term Borrowings

•Final Dividend Paid ,Interim Dividend Paid

•Interest on Long-term borrowings paid

•Repayment of Loan ,- Redemption of Debentures

Net Cash from (or used) in financing Activities

Prepare Cash Flow From Financing Activities

Particulars 31st March 2007 31st March 2006

Equity share capital 8,00,000 6,00,000
12% preference shares capital - 2,00,000
14% debentures 1,00,000 --
1. Equity shares were issued at a premium of 15%
2. Underwriting commission on equity shares Rs 10,000
3. 12% preference shares were redeemed at a premium of 5%
4. 14% debentures were issued at a discount of 1%
5. Interim dividend paid on equity shares Rs 90,000
6. Dividend paid on old preferences shares Rs 24000
7. Interest paid on debentures Rs 14,000

Particulars Amount

Cash Flows from Financing Activities

Proceeds from issue of equity share capital ( Rs 2,00,000 + Premium 2,20,000
Rs 30,000 – underwriting commission Rs 10000)

Redemption of preference shares ( RS 2,00,000 + RS 10000 (Premium) (2,10,000)

 Proceeds from issue of debentures(1,00,000 – 1,000) 99,000

Interim dividend paid on equity shares (90,000)

(24,000)
Dividend paid on preference shares ( 12% on 2,00,000)
(14,000)
 Interest paid on debentures ( 14% on 1,00,000)
Net Cash used in Financing Activities (19,000)
Prepare cash flow from financing activities
Particulars 31st March 2006 31st March 2007
Equity share capital 6,00,000 10,00,000
18% preference shares capital 4,00,000 3,00,000
Securities premium 1,00,000 2,60,000
14% debentures 2,00,000 2,50,000
Discount on debentures 5,000 6,000
Underwriting commission on issue of shares 20,000
1. Dividend on preference shares and an interim dividend @ 15% were paid on
equity shares on march 31st 2007
2. Preferences shares were redeem on march 31st 2007 at a premium on 5% such
premium has been provided out of profit
3. New shares and debentures were issued on march 31st 2007

Particulars Amount

Cash Flows from Financing Activities

Proceeds from issue of equity share capital ( Rs 4,00,000 + Premium 5,40,000
Rs 1,60,000 – underwriting commission Rs 20000)

Redemption of preference shares ( RS 1,00,000 + RS 5000 (Premium) (1,05,000)

 Proceeds from issue of debentures(50,000 – 1,000) 49,000

Interim dividend paid on equity shares ( 15% on 6,00,000) (90,000)

(72,000)
Dividend paid on preference shares ( 18% on 4,00,000)
(28,000)
 Interest paid on debentures ( 14% on 2,00,000)
Net Cash from Investing Activities 294,000)
Prepare cash flow from financing activities
Particulars 31st March 2004 31st March 2005
Equity share capital 20,00,000 30,00,000
18% preference shares capital 2,00,000 1,00,000
Securities premium - 1,00,000
Profit and loss balance 4,00,000 8,00,000
10% debentures 10,00,000 10,00,000

1. Preference shares were redeemed on 31st march, 2005 at a premium of 5%.

2. Dividend on equity shares was paid 8%.

3. Fresh issue of equity shares was done on 1st April 2004

Particulars Amount

Cash Flows from Financing Activities

Proceeds from issue of equity share capital ( Rs 10,00,000 + Premium 11,00,000
Rs 1,00,000

Redemption of preference shares ( RS 1,00,000 + RS 5000 (Premium) (1,05,000)

 Dividend paid on equity shares (2,40,000)

Dividend paid on preference shares ( 10% on 2,00,000) (20,000)

 Interest paid on debentures ( 10% on 10,00,000)

(1,00,000)

Net Cash Used in Investing Activities 6,35,000)

 Format Of Cash flow statement
Particulars Amount

Cash Flows from Operating Activities

Cash Generated from operations activities

Cash Flows from Investing Activities

Net Cash from (or used) in Investing Activities

Cash Flows from Financing Activities

Net Cash from (or used) in Financing Activities

Net Increase (or Decrease) in Cash & Cash Equivalents (X+Y+Z)

Add: Cash and Cash Equivalents in the beginning

Cash and cash Equivalents at the end of the year

Prepare cash flow statement.
Particulars Amount
Cash from operating activities 103800
Net cash used in investing activities (1,86,000)
Cash from financing activities 72200
Particulars 31st March 2012 31st March 2011
Cash and cash equivalent
Cash 40,000 20,000
Bank 20,000 50,000

Cash flow statement

Particulars Amount
Net cash from Operations Activities 1,03,800
Net cash used in Investing Activities (1,86,000)

Net cash from Financing Activities 72,200

Net Decrease in Cash & Cash Equivalents (X+Y+Z) (10,000)

Add: Cash and cash equivalents in the beginning 70,000

Cash and cash equivalents at the end of the year 60,000

Prepare cash flow statement.
Particulars Amount
Cash from operating activities (16,000)
Net cash used in investing activities (1,05,000)
Cash from financing activities 1,30,000
Particulars 31st March 2012 31st March 2011
Cash and cash equivalent
Cash 7,000 15,000
Bank 32,000 20,000
Short term investment 15,000 10,000

Cash flow statement

Particulars Amount
Net cash used in Operations Activities (16,000)
Net cash used in Investing Activities (1,05,000)

Net cash from Financing Activities 1,30,000

Net increase in Cash & Cash Equivalents (X+Y+Z) 9,000

Add: Cash and cash equivalents in the beginning 45,000

Cash and cash equivalents at the end of the year 54,000

Prepare cash flow statement.
Particulars Amount
Net Cash from operating activities 65,000
Net Cash from investing activities 50,000
Net Cash used in financing activities (95,000)
Particulars 31st March 2012 31st March 2011
Cash and cash equivalent
Cash 13,000 5,000
Bank overdraft (25,000) (37,000)

Cash flow statement

Particulars Amount
Net cash from Operations Activities 65,000
Net cash from Investing Activities 50,000

Net cash used in Financing Activities (95,000)

Net Increase in Cash & Cash Equivalents (X+Y+Z) 20,000

Add: Cash and cash equivalents in the beginning (32,000)

Cash and cash equivalents at the end of the year (12,000)

.Prepare cash flow statement.
Particulars Note No. 31.03.2012 31.03.2011
I. Equity And Liabilities
1. Shareholders’ funds
(a) Share capital 5,00,000 4,00,000
(b) Reserve and surplus 1 3,05,000 2,10,000
2. Non Current Liabilities
Long Term borrowing 2 3,10,000 3,00,000
3. Current Liabilities
Trade payables 95,000 80,000
Total 12,10,000 9,90,000
II. ASSETS
(1) Non-Current Assets
Fixed Assets ( tangible) 7,00,000 5,00,000
Long term investment 56,000 70,000

(2) Current Assets

a) Inventories 2,80,000 2,10,000
b) Trade Receivable 1,14,000 140,000
c) Cash & Cash Equivalents 60,000 70,000
Total 12,10,000 9,90,000
Note no 31.03.2012 31.03.2011

1 Reserves and surplus

General Reserves 1,15,000 1,00,000

Profit And Loss 1,90,000 1,10,000

2 Long term borrowing

12% Debentures 1,50,000 2,00,000

14% Mortgage Loan 1,60,000 1,00,000

Interest paid during the year Rs 37,800

Particulars Amount

Cash Flows from Operating Activities

Net Profit before Tax (see note No. 1) 95,000
Adjustments for non cash and non operating items:

Interest paid 37,800

37,800
Operating Profit before Working Capital Changes 1,32,800
Add: Decrease in CA ,Increase in CL
Trade Receivables 26,000
Trade Payables 15,000 41,000
1,73,800
Less: Increase in CA. Decrease in CL
Inventory (70,000) (70,000)
Net Cash Flows from operating activities X 1,03,800

Working Note: Calculation of net profit before Tax

Particulars Amount

Net Profit after appropriations: : ( 1,90,000 – 1,10,000) 80,000

Add: Transfer to General Reserve 15,000
Net Profit before tax 95,000
Particulars Amount

Cash Flows from Investing Activities

Purchase of fixed assets (2,00,000)
Sale of long term investment 14,000

Net cash used in Investing Activities Y (186,000)

Cash Flows from Financing Activities

Issue of shares 1,00,000
Proceeds from mortgage loan 60,000
Redemption of debentures (50,000)
Interest paid (37800)

Net Cash from financing activities Z 72,200

Net Decrease in Cash & Cash Equivalents (X+Y+Z) (10,000)

Add: Cash and cash equivalents in the beginning 70,000

Cash and cash equivalents at the end of the year 60,000

.Prepare cash flow statement.
Particulars Note No. 31.03.2012 31.03.2011
I. Equity And Liabilities
1. Shareholders’ funds
(a) Share capital 3,00,000 2,00,000
(b) Reserve and surplus (P/L Acc. 54,000 40,000
2. Non Current Liabilities
Long term borrowing 1 95,000 50,000
3. Current Liabilities
Trade payables 90,000 75,000
Other current liability 2 35,000 25,000
Total 5,74,000 3,90,000
II. Assets
(1) Non-Current Assets
Fixed Assets
Tangible Assets 3 1,70,000 90,000
Intangible assets 4 67,000 1,05,000
Long term investment 65,000 40,000

(2) Current Assets

a) Current investment 5 15,000 10,000
b) Inventories 90,000 50,000
c) Trade Receivable 1,20,000 50,000
d) Cash & Cash Equivalent 39,000 35,000
e) Other current assets 6 8,000 10,000
Total 5,74,000 3,90,000
Note 31.03.2012 31.03.2011
1 Long term borrowing
Public deposits 95,000 50,000
2 Other Current Liabilities
Outstanding expenses 35,000 25,000
3 Tangible assets
Land and building 1,70,000 90,000
4 Intangible assets
Goodwill 60,000 90,000
Patents 7,000 15,000
5 Current investment
marketable securities 15,000 10,000
6 Other current assets
Prepaid Expense 8,000 10,000

Interest paid on public deposits Rs 9000

On 1st April 2011 10,000 shares of 10 each were issued at 6% discount
Particulars Amount
Cash Flows from Operating Activities
Net Profit before Tax (see note No. 1) 14,000
Adjustments for non cash and non operating items:
Discount written off 6,000
Patents written off 8,000
Interest Paid 9,000
Goodwill written off 30,000 53,000
Operating Profit before Working Capital Changes 67,000
Add: Decrease in CA ,Increase in CL
Prepaid Expenses 2,000
Trade payables 15,000
Outstanding Expenses 10,000 27,000
94,000
Less: Increase in CA. Decrease in CL
Inventory (40,000)
Trade receivables (70,000) (1,10,000)
Net Cash used in operating activities X (16,000)

Working Note: Calculation of net profit before Tax

Particulars Amount

Net Profit after appropriations: : ( 54,000 – 40,000) 14,000

Net Profit before tax 14,000

Particulars Amount

Cash Flows from Investing Activities

Purchase of land and building (80,000)
Purchase of long term investment (25,000)

Net cash used in Investing Activities Y (105,000)

Cash Flows from Financing Activities

Issue of shares (1,00,000 – 6,000 ) 9,4,000
Proceeds from public deposits 45,000
Interest paid (9,000)

Net Cash from financing activities Z 1,30,000

Net Increase in Cash & Cash Equivalents (X+Y+Z) 9,000

Add: Cash and cash equivalents in the beginning 45,000

Cash and cash equivalents at the end of the year 54,000

34.Prepare cash flow statement.

Particulars Note No. 31.03.2012 31.03.2011

I. Equity And Liabilities

1. Shareholders’ funds
(a) Share capital 80,000 80,000
(b) Reserve and surplus 80,000 30,000
2. Non Current Liabilities
Long term borrowing -- 75,000
3. Current Liabilities 1
short term provision 2 25,000 37,000
Trade payables 90,000 46,000
Short term provisions 3 45,000 32,000
Total 3,20,000 3,00,000
II. ASSETS
1 Non-Current Assets
Fixed Assets 4 90,000 1,50,000
2 Current Assets
a) Current investment 30,000 20,000
b) Inventories 90,000 60,000
c) Trade Receivable 97,000 65,000
d) Cash & Cash Equivalents 13,000 5,000
Total 3,20,000 3,20,000
Note 31.03.2012 31.03.2011
1 Long term borrowing

15 % loan - 75,000

2 Short term borrowing

Bank overdraft 25,000 37,000

3 Short term provisions

Provision for taxations 15,000 12,000

Proposed divided 30,000 20,000

4 Fixed assets

Plant and machinery 1,50,000 2,00,000

Less provision for deprecation (60,000) (50,000)

1. Loan was repaid on 1st April, 2011

Particulars Amount
Cash Flows from Operating Activities
Net Profit before Tax (see note No. 1) 95,000
Adjustments for non cash and non operating items:
Depreciation on plant 10,000 10,000
Operating Profit before Working Capital Changes 1,05,000
Add: Decrease in CA ,Increase in CL
Trade payables 44,000 44,000
Less: Increase in CA. Decrease in CL 1,49,000
Inventory (30,000)
Trade receivables (32,000)
Current investment (72,000)
(10,000)
Cash generated in operating activities 77,000
Less:- payment of tax ( previous year ) (12,000)
Net Cash used in operating activities X 65,000
Working Note: Calculation of net profit before Tax
Particulars Amount
Net Profit after appropriations: (80,000 – 30,000) 50,000
Add: Provision for Tax ( current year) 15,000
Add: Proposed dividend ( current year) 30,000
Net Profit before tax 95,000
Particulars Amount

Cash Flows from Investing Activities

Sale of plant and machinery 50,000

Net cash from Investing Activities Y 50,000

Cash Flows from Financing Activities

Repayment of Loan (75,000)
Payment of dividend (20,000)

Net Cash used in financing activities Z (95,000)

Net Increase in Cash & Cash Equivalents (X+Y+Z) 20,000

Add: Cash and cash equivalents in the beginning (32,000)

Cash and cash equivalents at the end of the year (12,000)

35.Prepare cash flow statement.
Particulars Note No. 31.03.2012 31.03.2011
I. Equity And Liabilities
1. Shareholders’ funds
(a) Share capital 1 2,50,000 2,25,000
(b) Reserve and surplus (P/L 2 59,000 35,000
Acc.
3. Current Liabilities
Trade payables 49,500 37,500
Total 3,58,500 2,97,500
II. ASSETS
1 Non-Current Assets
Fixed Assets ( tangible) 3 1,60,000 1,20,000
Intangible assets 4 20,000 36,000
2 Current Assets
a) Inventories 15,000 10,000
b) Trade Receivable 1,54,500 1,19,000
c) Cash & Cash Equivalents 9,000 12,500

Total 3,58,500 2,97,500

Note no 31.03.2012 31.03.2011

1 Share capital

Equity share capital 2,00,000 1,50,000

Preference share capital 50,000 75,000

2 Reserves and surplus

General reserves 35,000 20,000

Profit and loss account 24,000 15,000

3 Tangible Assets

Building 60,000 80,000

Plant 1,00,000 40,000

4 Intangible assets

Goodwill 20,000 36,000

1. Depreciation charges on plant Rs 10,000

2. Depreciation charges on building Rs 60,000

Particulars Amount

Cash Flows from Operating Activities

Net Profit before Tax (see note No. 1) 24,000
Adjustments for non cash and non operating items:
Depreciation on plant 10,000
Depreciation on Building 60,000
Goodwill written off 16,000 86,000
Operating Profit before Working Capital Changes 1,10,000

Add: Decrease in CA ,Increase in CL

Trade payables 12,000 12,000
Less: Increase in CA. Decrease in CL 1,22,000
Inventory (5,000)
Trade receivables (35,500) (40500)
Net Cash from operating activities 81,500

Working Note: Calculation of net profit before Tax

Particulars Amount
Net Profit after appropriations: 9,000
Add: Transfer to General Reserve 15,000
Net Profit before tax 24,000
 Building A/c ( At Cost)
Particulars Amount Particulars Amount
To Balance b/d 80,000 By depreciation A/c 60,000
To Bank A/c (Bal Fig ) 40,000
Purchase By Balance b/d 60,000

1,20,000 1,20,000

Plant A/c ( At Cost)

Particulars Amount Particulars Amount
To Balance b/d 40,000 By depreciation A/c 10,000
To Bank A/c (Bal Fig) 70,000
purchase By Balance b/d 1,00,000

1,10,000 1,10,000
Particulars Amount

Cash Flows from Investing Activities

Purchase of Building (40,000)
Purchase of Plant (70,000)

Net cash from Investing Activities Y (1,10,000)

Cash Flows from Financing Activities

 Issue of equity share capital 50,000
 Redemption of preference share capital (25,000)

Net Cash used financing activities Z 25,000

Net decrease in Cash & Cash Equivalents (X+Y+Z) (3,500)

Add: Cash and cash equivalents in the beginning 12,500

Cash and cash equivalents at the end of the year 9,000

Prepare cash flow statement.
Particulars Note No. 31.03.2012 31.03.2011
I. Equity And Liabilities
1. Shareholders’ funds
(a) Share capital 7,00,000 6,00,000
(b) Reserve and surplus (P/L Acc. 2,00,000 1,10,000
2. Non Current Liabilities
Loan from borrowing 3,00,000 2,00,000
3. Current Liabilities
Trade payables 30,000 25,000
Total 12,30,000 9,35,000
II. ASSETS
(1) Non-Current Assets
Fixed Assets ( tangible) 11,00,000 8,00,000
Tangible Assets

(2) Current Assets 70,000 60,000

a) Inventories 32,000 40,000
b) Trade Receivable 28,000 35,000
c) Cash & Cash Equivalents
Total 12,30,000 9,35,000
1. At the beginning of the year a piece of machinery of the book
value of Rs 80,000 was for Rs 65,000
2. Depreciation charges on tangible assets amounted to Rs 2,00,000.
Particulars Amount

Cash Flows from Operating Activities

Net Profit before Tax (see note No. 1) 90,000
Adjustments for non cash and non operating items:
Depreciation on fixed assets(machinery) 2,00,000
Depreciation on Building 15,000 2,15,000

Operating Profit before Working Capital Changes 3,05,000

Add: Decrease in CA ,Increase in CL

Trade payables 8,000
Trade receivables 5,000 13,000
Less: Increase in CA. Decrease in CL 3,18,000

Inventory (10,000) (10,000)

Net Cash flow from operating activities X 3,08,000

Working Note: Calculation of net profit before Tax

Particulars Amount

Net Profit after appropriations: ( 2,00,000 – 1,10,000) 90,000

 Fixed assets Tangible A/c
Particulars Amount Particulars Amount
To Balance b/d 8,00,000 By depreciation A/c 2,00,000
To Bank A/c (Bal Fig) 5,80,000 By Bank (sale) 65,000

By statement of profit 15,000

and loss a/c

By Balance c/d 11,00,000

13,80,000 13,80,000
 Cash from operating activities
Particulars Amount

A, Cash Flows from Operating Activities

Net Profit before Tax (see note No. 1)
Adjustments for non cash and non operating items: 48,000
Provision for Depreciation 6,000 ,6,000

Operating Profit before Working Capital Changes 54,000

Add: Decrease in current Assets ,Increase in Current Liabilities

Trade Receivables 6,000 6,000
60,000
Less: Increase in current Assets. Decrease in Current Liabilities
Prepaid expenses (2,000) (2,000)
58,000
Less: Tax paid (18,000)

Net Cash Flows from operating activities 40,000