Practice Questions:-

1. ABC Ltd. arrived at a net income of Rs. 3,00,000 for the year ended March 31, 2024. Depreciation for the year was Rs.
50,000. There was a gain of Rs. 1,50,000 on assets sold which was added in other incomes. Trade Receivables increased by
Rs. 40,000, and Trade Payables increased by Rs. 60,000 during the year. Use the information given above to compute the
cash flow from operating activities.

Profits : 3,00,000
Less: Gain on Sale of Assets : -1,50,000
Operating Profits Before Taxes 1,50,000

Less: Increase in Trade Receivables : -40,000

Add: Increase in Trade Payables : 60,000
Add: Depreciation : 50,000
Net Cash from Operations 2,20,000

2. Compute cash from operations from the following figures:

i. Net Profit for 2023-24: Rs. 1,00,000
ii. Depreciation of Rs.20,000.
iii. Trade receivables decreased by Rs. 30,000 during the year.
iv. Prepaid expenses increased by Rs. 50,000 during the year.
v. Trade payables decreased by Rs. 15,000 during the year.
vi. Outstanding expenses payable increased by Rs. 30,000 during the year.
Compute net cash provided by operations for the year ended March 31, 2024.

Solution 2.

Profits : 1,00,000
Less: Gain on Sale of Assets : 0
Add: Loss on Sale of Assets : 0
Add: Interest Expense : 0
Operating Profits Before Taxes 1,00,000

Add: Decrease in Trade Receivables : 30,000

Less: Increase in Prepaid Expenses : -50,000
Less: Decrease in Trade Payables : -15,000
Add: Increase in Outstanding Expenses : 30,000

Add: Depreciation : 20,000

Net Cash from Operations 1,15,000

3. Compute cash from operations from the following figures:

Net income Rs. 10,00,000
Profit of Rs. 8,00,000 on selling a land.
Depreciation of Rs. 2,00,000.
Increase in Accounts Payable: Rs. 1,00,000.
Decrease in Accounts Receivable: Rs. 1,20,000.

Solution 3.
Profits : 10,00,000
Less: Gain on Sale of Land : -8,00,000
Add: Loss on Sale of Assets : 0
Add: Interest Expense : 0
Operating Profits Before Taxes 2,00,000

Add: Decrease in Trade Receivables : 1,20,000

Add: Increase in Trade Payables : 1,00,000

Add: Depreciation : 2,00,000

Net Cash from Operations 6,20,000
4. Compute cash from operations from the following figures:

(i) Net Profit for the year 2023-24: Rs. 1,00,000

(ii) Depreciation: Rs. 30,000
(iii) Dividend Income (As shown in P&L Account): Rs. 15,000
(iv) Finance costs: Rs 30,000
(v) The current assets and current liabilities of the business are as follows:

March March
Particular 31, 2023 31, 2024
(Rs) (Rs)
Trade Receivables 150,000 170,000
Provision for Doubtful Debts 10,000 12,000
Trade Payables 1,50,000 1,90,000
Inventories 50,000 80,000
Salaries payable 10,000 15,000
Prepaid Expenses 20,000 10,000
Accrued dividend on investments 30,000 40,000
Outstanding interest 20,000 10,000
Solution 4:

Profits : 1,00,000
Less: Dividend Income : -15,000
Add: Loss on Sale of Assets : 0
Add: Interest Expense : 30,000
Operating Profits Before Taxes 1,15,000

Less: Increase in Trade Receivables (Net of Prov) : -18,000

Less: Increase in Inventories : -30,000
Add: Increase in Trade Payables : 40,000
Add: Increase in Outstanding Salaries : 5,000
Add: Increase in Prepaid Expenses : 10,000

Add: Depreciation : 30,000

Net Cash from Operations 1,52,000
(No adjustment needed for Accrued Dividend and Outstanding Interest as these are Investing Activities)

5. Calculate Cash flow from Investing Activities for a manufacturing firm from the following information:
Interest income Rs. 50,000
Dividend paid Rs. 3,00,000
Dividend received Rs. 4,00,000
Interest paid Rs. 1,20,000
Rental receipts from a flat Rs. 5,00,000
Gain on sale of machinery Rs. 25,000 (Book Value: Rs 1,00,000)
Solution 5:

Net cash flow from Investing Activity

Add: Dividend Received : 4,00,000

Add: Interest Received : 50,000
Add: Rent Received : : 5,00,000
Add: Sale Proceed of Machinery : 1,25,000
Less: Payments for Buying of Assets : 0

Cash From Investing Activities 10,75,000

6. Calculate Cash Flow from Investing Activities from the following information:

Particular March 31, 2024 (Rs) March 31, 2023 (Rs)

Patents 80,000 1,50,000
Machinery 2,10,000 2,00,000

Additional Information:
1. At the start of the year, a machine costing Rs. 50,000 with accumulated depreciation of 20,000 was sold for Rs. 40,000.
2. Depreciation & amortization charged in the year amounted to Rs. 20,000 and Rs. 5,000, respectively on machinery and
patents.
3. Patents written off were Rs. 30,000, and some patents were sold at a profit of Rs. 10,000. The business did not add
(purchased/ registered) any patents.
Solution 6:

Transaction ASSETS EQUITY

Cash Patents Machinery Incomes Expenses
Opening Balance 1,50,000 (Step 1) 2,00,000 (Step 2)
Sale of Machine (Step 6) +40,000 -30,000 +10,000
Patents Written Off (Step 7) -30,000 -30,000
Depreciation & Amort (Step 8) -5,000 -20,000
Sale of Patents (Step 9) +45,000 -35,000 +10,000
(Balancing Figure)
Machinery Purchased (Step 10) -60,000 +60,000 (Step 10)
Balancing Figure
80,000 (Step 3) 2,10,000 (Step 4)

Net cash flow from Investing Activity

Add: Sale of Patent : 45,000

Add: Sale of Machine : 40,000
Less: Purchase of Machine : -60000

Cash From Investing Activities 25,000

 7. The following are the financial statements of ABC Ltd. for the year ending 31.03.2024 (all figures in Rs. Lacs):
Income Statement of ABC Ltd. for the year ending 31.03.2024:
Details Amount
Revenue from Sale and Services 250.00
Gain on sale of investments 20.00
Interest on loan given to subsidiaries 5.00
Total Incomes (A) 275.00

Expenses (B)
Cost of material consumed 110.00
Employee Compensation Expenses 35.00
Depreciation and Amortization 25.00
Finance Costs 10.00
Other Expenses 40.00 220.00
Profits Before Taxes (A – B) 55.00
Less: Tax Expenses for the year 25.00
Profits after Taxes 30.00
Balance Sheet of ABC Ltd. for the years ending 31.03.2024 and 31.03.2023:
As on As on
BE ATTENTIVE HERE 31.03.2024 31.03.2023
Equity and Liabilities
Equity
Share Capital 500.00 300.00
Other Equity (Retained Earnings) 260.00 140.00
Total Equity 760.00 440.00
Non-Current Liabilities
Term Loan from Banks 80.00 90.00
Total Non-Current Liability 80.00 90.00
Current Liabilities
Short Term Credit from Bank 40.00 50.00
Trade Payables 20.00 30.00
Outstanding Expenses 10.00 0
Provision for Taxes 40.00 30.00
Total Current Liability 110.00 110.00
Total Equity and Liabilities 950.00 640.00

Assets
Non-Current Assets
Property, Plant and Equipment 600.00 380.00
Loans to Subsidiaries 50.00 40.00
Investments 60.00 70.00
Total Non-Current Assets 710.00 490.00
Current Assets
Inventory 50.00 80.00
Trade Receivables 110.00 55.00
Cash and Cash Equivalents 60.00 10.00
Prepaid Expenses 17.00 0
Accrued Interest on Loan to Subsidiaries 3.00 5.00
Total Current Assets 240.00 150.00
Total Assets 950.00 640.00

The following additional information is available for the financial year ending 31.03.2024:
1. During the year, 20 lakh equity shares of Rs.10 each were issued at a premium of Rs.5 per share
2. Tax paid during the year amounted to Rs.15 lacs
3. Other expenses include a loss on the sale of the machine of Rs.10.00 lacs. The machine was sold for Rs.40.00 lacs.
4. The book value of investments sold was Rs.30.00 lakhs
5. Dividend paid during the year: Rs.10 lacs
Prepare the cash flow statement for ABC Ltd.
CAREFULLY LOOK AT ORDER OF YEARS IN THE BALANCE SHEET. 1st Column is closing balance and 2nd column in
opening balance

CFO
PBT 55
Add: Interest 10
Less: Gain on Sale of Investment -20
Add: Loss on Sale of Machine 10
Operating Profits Before Taxes 55

Decrease in Inventory 30
Increase in Trade Receivables -55
Increase in Prepaid Expenses -15
Decrease in Trade Payables -10
Increase in Outstanding Expenses 10
Add: Depreciation 25
Less: Taxes Paid -15
CFO 25

Sale of Machine 40
Sale of Investment 50
Purchase of Investments -20
Purchase of Machine -305
CFI -235

Issue of Share Capital 200

Security Premium 100
Short Term Credit from Bank -10
Term Loan Repaid -10
Interest Paid -10
Dividend Paid -10
CFF 260

CFO+CFI+CFF 50
Add: Opening Balance of Cash 10
Closing Balance of Cash 60