CASH FLOW STATEMENT

Cash Flow Statement: Cash Flows, Types of Activities that Generate and
Use Cash, Methods of Presenting Operating Activities, Preparation of the
Statement of Cash Flows, Information Needed to Prepare the Statement of
Cash Flows, Preparing the Cash Flows from Operating Activities, Preparing
the Cash Flows from Investing Activities, Preparing the Cash Flows from
Financing Activities, Interpreting the Statement of Cash Flows.
 Cash Flow Statement:
• Cash flow statement is a statement showing inflow (receipt) and outflows (payment) of
cash during a particular period.
• In other words, CFS is a summary of sources and application of cash during a particular
span of time.
• Cash Flow is a statement which report flow of cash and cash equivalent (CCE). This
report is to prepared as part of final accounts.
• CFS analyzed the reason of changes in the balances of cash between the two balance
sheet dates. The term `Cash’ stands here for cash and cash equivalent
• A Cash Flow Statement is a statement which is prepared by acquiring Cash from
different sources and the application of the same for different payments throughout the
year.
• It is an essential tool of short-term financial analysis.

Note: Cash Equivalent includes Bank Balance (not bank overdraft) and short term investments
realizable in 3 months. These investments are called marketable investments
 Differences between Cash Book and Cash Flow
Statement:

• Cash book is a ledger which consist of records of all cash transactions by a company in a

systematic manner. Whereas, cash flow statement is a record of performance of an entity

over a specified period of transaction.

• In cash flow statement, non-cash items are also recorded such as Goodwill or Prelimi-

nary expenses, depreciation etc and in cash book only cash transaction is recorded.

• Cash flow statement is prepared on annual basis whereas cash book is maintained on

day to day basis.

• Cash Flow Statement is usually prepare after Income Statement and the Balance Sheet.

But Cash Book reveals only the continuous day-to-day monetary transactions.

3
 Objectives OR Use of Cash Flow Statement
• Predict or Planning for the future cash flows: A cash flow statement (CFS)
provides information to investor or to the firm to make prediction or planning about
the cash position, surplus or deficit, excess of receipt over payment etc.
• Predict ability to pay dividends and meet obligation (debts): If the firm/
company does not have the adequate cash it can not pay employees, settle debts or pay
dividend. Employees, creditors and stockholders should be particularly interested in
this statement, because it alone shows the flow of cash in the business.
• Helpful in ascertaining Cash Flow from Various Activities separately: A CFS
aims to highlights cash flow from operating, investing and financing activities
separately. It indicate how much cash has been generated or use in this activities.
• Evaluate the trend of Cash Receipt and Payment: CFS reveal the speed at
which the cash is being generated from customer (debtors), stock and other current
assets and speed at which current liabilities are being paid. It enable the management
to evaluate true position of cash in future.
 FORMAT OF CASH FLOW
Cash flow Statement
--------------------------------------------------------------------
Cash Flow from Operating Activities …………
Cash Flow from Investing Activities ………….
Cash Flow from Financing Activities ………….

Total ------------
Add Opening Balance of Cash/Cash Equ. -----------
-----------
Closing Balance of Cash/Cash Equ ---------
 Cash Flow Activities
A cash flow statement aims to determine the effects of cash of different type of

cash inflows and outflows. In this process, all cash flows are classified into three

categories : Cash flow from Operating Activities, Cash flow from Investing

Activities and Cash flow from Financing Activities

• Operating Activities: These activities the cash effects of transaction that create revenue and

expenses. Thus enter into the determination of net income

• Investing Activities: It includes, (i) Acquisition and disposing of investment and property,

plant and equipment, and (ii) Lending money and collecting the loans.

• Financing Activities: It includes , (i) obtaining cash from the issue of debts, and the re paying

the amount borrowed, and (ii) Obtained cash from stockholder, re purchase of shares and

paying dividend.
 Cash flow from Operating Activities

• The Operating Activities Section includes cash inflows and cash outflows that
result from the operations of the business and some incidental business
transactions.
• Operating cash inflows include
• Cash collected from customers (Debtors)
• Paid Operating Expenses
• Paid to Supplier or Creditors
• Good Purchases or Sales.
• Income Tax Paid
• Payment of Expenses
• Operating Income/Profit
• Cash payments to and on behalf of employees
• Cash receipts and cash payments of an insurance enterprise for premiums and claims, annuities
and other policy benefits
• Cash payments to suppliers for goods and services;
7
 Cash flow from Investing Activities
Cash from Investing activities: It means flow of cash and cash equivalent arising from
flow of cash from fixed assets and investments. It includes income arising from
disposal of fixed assets and investments.
Investing Activities cash inflows include :

• Purchase of Machine
• Sale of Machine
• Purchase of Bond or Treasury Stock
• Sale of Treasure Stock or debenture
• Purchase of Shares
• Purchase of Debentures
• Dividend Received
• Interest Received
• Income from investments
• Purchase of investments
• Purchase or Sale of Fixed Assets

8
 Cash flow from Financing Activities
• It means flow of cash and cash equivalent arising from capital and loan. It also
includes service cost of Capital and Loan.
• Loan mean Loan borrowed short term or long term, secured or unsecured.
• Bank overdraft is considered as Loan as per Accounting Standard.
Issue of Share Capital : xxx

Issue of Debentures / Bonds : xxx

Buy of cash capital : xxx

Loan raised : xxx

Loan repayment : xxx

Paid Dividend : xxx

Paid Interest : xxx

Repayment of Loan : xxx

Redemption of Debentures / Bonds : xxx

Note: Cash Equivalent includes Bank Balance (not bank overdraft) and short term investments
realizable in 3 months. These investments are called marketable investments 9
 Exercise -1
Identify which section of the statement of cash flows each of the
following events would appear in (operating, investing and
financing or in a separate schedule):

Sno. Items
1 Purchase of Plant and Machine
2 Sold Treasury stock
3 Net Income
4 Sold long-term investments
5 Purchased a building
6 Issued bonds
7 Paid dividends
8 Dividend Received
9 Cash received from debtors
10 Purchased treasury stock
11 The issuance of common shares for cash
 Solution Exercise -1

Items Identifications

1 Purchase of Plant and Machine Investment Activities

2 Sold Treasury stock Investment Activities

3) Net Income Operating Activities

4) Sold long-term investments Investment Activities

5) Purchased a building Investment Activities

6) Issued bonds Financing Activities

7) Paid dividends Financing Activities

8) Dividend Received Investment Activities

9) Cash received from debtors Operating Activities

10) Purchased treasury stock Investing Activities

Financing Activities
11) issuance of common shares for cash
 Exercise -2
Identify which section of the statement of cash flows each of the following events
would appear in (operating, investing and financing) or in a separate schedule

Item
1. Collection form Debtors
2. Cash Sales
3. Cash purchase
4. Investment Income
5. Loan borrowed
6. Repayment of Loan
7. Income Tax
8. Interest Paid
9. Buy of cash capital
10. Purchased treasury stock
11. Issue of Share

12
Solution Exercise -2 :

Item Activities

1. Collection form Debtors Operating Activities

2. Cash Sales Operating Activities

3. Cash purchase Operating Activities

4. Investment Income Investing Activity

5. Loan borrowed Financing Activity

6. Repayment of Loan Financing Activity

7. Income Tax Operating Activity

8. Interest Paid Financing Activity

9. Buy of cash capital Financing Activity

10. Purchased treasury stock Investing Activity

11. Issue of Share Financing Activity

13
 Preparation of Cash Flow Statement

Cash flow can be prepared from THREE sources of information:

(a) By Combining Cash and Cash Equivalent Accounts
(b) By Analyzing Balance sheet and Profit and Loss a/c
(c) By Analyzing Balance sheet only

(a) By Combining Cash and Cash Equivalent Accounts

From Cash a/c following accounts to be combine for preparing cash flow statement:
1. Cash a/c
2. Bank a/c
3. Short term investments a/c
Flow within above three accounts should be cancelled
 Preparation of Cash Flow Statement

Cash flow can be prepared by the following Methods

(a) Direct Method
• Cash Flow from Cash a/c
(b) Indirect Method
• Cash Flow from Two Balance Sheet and Profit and
Loss (Direct and Indirect Method)
• Cash Flow from Two Balance Sheets (Indirect
Method)
 Exercise-3
Following Cash a/c Cash Flow form ‘COMBINING CASH and Cash equivalent accounts
are given of Sharma & Sharma company.
Cash A/c
To Balance b/d 1,00,000 By Cash Purchase 700000
To collection from debtors 1200000 By Operating Exp paid 300000
To Cash Sales 1500000 By Bank 700000
To Bank 10,00,000
To interest income from S.T Inv. 20000 By Loan repaid 100000
To Int. form LT investment 15000 By Short term Inv. Purchased 200000
By Balance c/d 1835000
----------- -----------
38,35,000 3835000
Short term Investment a/c
To Balance b/d 1,00,000 By Bank 150000
To Cash 2,00,000 By Balance c/d 150000
--------- ----------

Bank a/c
To Balance b/d 3,00,000 By Dividend paid 50,000
To Share Capital 1,00,000 By Interest paid 1,00,000
To Loan 5,00,000 By Cash 10,00,000
To S.T. Investment 1,50,000 By Balance c/d 6,00,000
To Cash 7,00,000
--------- ----------
17,50,000 17,50,000
Solution: Cash Flow form CASH and Cash Equivalent ACCOUNT’
Cash Flow Statement
(a) Operating Activities:
• Collection from Debtors 12,00,000
• Cash Sales 15,00,000
• Cash Purchase (7,00,000)
• Cash paid Operating Exp. (3,00,000)
17,00,000

(b) Investment Activities

• To interest income from S.T Inv 20000
• To interest income from L.T Inv 15,000
35,000
(c) Financing Activities
• Issue of Share 1,00,000
• Loan 5,00,000
• Repayment of Loan (1,00,000)
• Dividend Paid (50,000)
• Interest Paid (1,00,000)
3,50,000
---------------------------------
TOTAL 20,85,000
Add Opening Balance (all three a/c) 5,00,000
----------------------------
Closing Balance 25,85,000
 Operating Activities
Indirect Method
• Net Income or Net Profit
• Add :
▪ Depreciation exp (noncash exp)
▪ Losses from sale of assets
▪ Goodwill
▪ # Provision for Taxation
▪ Provision for Doubtful Debts
▪ General Reserve
▪ Preliminary Exp (Share Issue Exp.)
• Less:
▪ Gains or profit from Sale of Assets
▪ Interest Received
Current Assets
▪ - increases in current assets
▪ + decreases in current assets
Current Liabilities
▪ + increases in current liabilities
▪ - decreases in current liabilities
▪ # Decrease in Tax Liability
Net cash from operating activities :
 RULES OF CURRENT ASSETS AND LIABILTIES

When the NET Income or NET PROFIT is given and find Operating income, the
following rules will be applicable for Current Assets and Current Liability

Current Assets:
Add : Decrease
Less : Increase
Current Liability:
Add : Increase
Less : Decrease
Note: Add depreciation or noncash exp (General Reserve, Goodwill etc) and Losses of
Sale of Assets
19
 Exercise -4
Question: Calculate ‘Cash Flow from Operating Activities (Operations)’
from the following information:
Profit & Loss Account for the year ended 31St December 2012
Dr Amount (SAR) Amount (SAR)

Cost of goods sold 1553000 Sales ( Revenue) 2200000

Salary 60000 Interest Received 10000
Rent 48000
Selling Expenses 85000
Depreciation 120000
Loss on sale of Fixed assets 55000
Payment of Tax 54000
Net Profit 235000
Additional Information from Balance Sheet:
01/1/ 2012 31/12 2012
Debtors / Receivable 2,60,000 3,12,000

Creditors/ Payable 116000 100000

Stock 1,50,000 2,33,000
Outstanding Salary 3000 4000
20
Solution: Ex-4 Cash Flow From Operating Activities
(Indirect method)
NET PROFIT 2,35,000
ADD:
Depreciation Expenses 120000
Loss on Sales of Fixed Assets 55000 175000

Less: Gain / Interest Received 10000 (10000)

Less: Increase in CA;

(i) Debtors : 52000
(ii) Stock : 83000 (135000)
Add: Increase in CL;
1000 1000
(i) Salary Outstanding

Less: Decrease in CL;

16000 (16000)
(i) Payable/ Creditor

Net Cash From Operating Activities 250000

21
 Exercise -5
Calculate ‘Cash From Operating Activities’ from the following balances

31/12/ 2012 ($) 31/12 2013 ($)

Debtors/Receivable 50000 40000
Bill Receivable 10000 12500
Payable 25000 20000
Outstanding Expenses 800 1000
Bill Payable 40000 25000
Accrued Income 6000 7000

Operating Profit before working Capital changes was SR 130000

22
Solution Exercise -5 :

Cash Flow From Operating Activities

(Indirect method)
Cash from operating Activities
Net Profit : 130000
Current Assets:
Debtors (50000-40000): 10,000
Receivable (10000-12500) : (2500)
Accrued Income (6000-7000) : (1000)
Current Liabilities:
Bills Payable : (40000-25000) : (15000)
Payable : (25000-20000) : (5000)
Outstanding : (800-1000) : 200
----------------------
116700
 Exercise -6
Calculate Cash From Operating Activities from the following figure

31/12/ 2012 ($) 31/12 2013 ($)

Operating Profit before working Capital -- 150000
changes
Receivable 300000 336000
Stock 200000 180000
Prepaid Expenses 20000 25000
Accrued Income 8000 6000
Payable 100000 140000
Outstanding Expenses 32000 26000
Income Received in Advance 3000 2000

24
Solution Exercise -6 :
Cash Flow From Operating Activities
(Indirect method)
Net Profit as per the Income Statement 1,50,000
Less: Increase in CA;
(i) Debtors: 36000
(ii) Prepaid Expenses: 5000 (-) 41000

Add: Decrease in CA; 109000

Changes in (i) Stock 20000
Current Assets & (ii) Accrued Income 2000 22000
Current
Liabilities 131000

Add: Increase in CL;

(i) Creditors 40000 40000
171000
Less: Decrease in CL;
(i) Outstanding Exp 6000
(ii) Income Received
in Advance 1000 (-) 7000

Net Cash From Operating 164000

Activities 25
 Exercise -7
From the following Information Calculate cash from Operating
Activities
Ser. no Description SAR
1 Profit& Loss Account on 1St January 2007 ( Cr) 25000
2 Profit& Loss Account on 31St December 2007 ( Cr) 80000
3 Depreciation on Fixed Assets 12500
4 Amortization of Goodwill 8000
5 Loss on Sales of Machinery 20000
6 Provision for Taxation* 15000
7 Transfer to General Reserve 30000
8 Decrease in Debtors 22800
9 Decrease in Bill Payable 4700
10 Outstanding Expenses on 1St Jan 2007 5000
11 Outstanding Expenses on 31 St Dec 2007 6500
12 Decrease Prepaid Expenses 2000
Decrease in Taxation: 15000

26
Solution - 7
Cash Flow From Operating Activities
Net Profit as per the B/S (80000-25000) = 55000
Add:
Non Cash Charges (Expenses):
Depreciation 12500
Goodwill written off 8000
Transfer for Gen Reserve 30000
Loss on Sales of Machine 20000
Provision for Tax 15000 85500
140500

Change in the Current Assets & Current Liability

Add:
Decrease in Current assets;
Receivable 22800
Prepaid Expenses 2000

Add:
Increase in Current Liability;
Increase in Outstanding Exp. 1500 26300
166800
Less: Decrease in Current Liabilities;
Decrease in Bill Payable 4700
Decrease on tax Liability 15000 (-) 19700
27
Net Cash From Operating Activities 147100
 Exercise -8
The following is the position of Current Assets and Current Liabilities of Tawunniya
Insurance Company
Assets/ Liabilities 2012 2013
Provision for Doubtful Debts
1000 0
Short Term Loan
10000 19000
Creditors 15000 10000
Bill Payable 20000 40000

The company incurred a loss of SR 45000 during the year. Calculate Cash From
Operating Activities.

28
 Solution Exercise -8
Cash From Operating Activities
Net Loss as per the B/S (-) 45000
Add:
Non Cash Charges (Expenses / Provision):
Provision for Doubtful Debts 1000 (+) 1000
(-) 44000

Change in the Current Assets & Current Liability

Add: Decrease in Current assets; Nil

Add: Increase in Current Liability;
Short Term Loan 9000
Bill Payable 20000 29000
(-) 17000
Less: Increase in Current Assets; Nil
Less: Decrease in Current Liabilities;
Creditors 5000 (-) 5000

Net Cash Loss (used)From Operating Activities (-) 20000

 Exercise -9
Calculate Cash From Operating Activities from the following figures
Information 2012 2013
Profit & Loss accounts 60000 65000
Debtors 87000 50000
Bill Receivable 62000 103000
General Reserve 202000 237000
Salary Outstanding 30000 12000
Wages Pre Paid 5000 7000
Goodwill 80000 70000
 Solution Exercise -9 : Cash From Operating Activities (Operations).

Solution:
Net income or Profit : 5000
Add:
General Reserve 35000
Goodwill 10000
45000
Current Assets:
Debtor 37000
Bill Receivable (41000)
Wages Prepaid (2000)
Current Liability
Salary Outstanding (18000)
----------------------
Income or Cash from Operating Profit 26000
Exercise -10
Calculate ‘ Cash From Operating Activities from the following :-
Information 2010 2011
Profit & Loss accounts 20000 30000
Bill Receivable 14000 18000
Provision for Depreciation 30000 32000
Outstanding Rent Payable 1600 4000
Prepaid Insurance 1400 1200
Goodwill 20000 16000
,Inventory 14000 18000

Answer: 10600

43-46
 EXERCISE – 11

From the following information given by Nadec Co., you are required to
Prepare Cash From Operations:
Particulars Year 2016 Year 2017
Bills Payable 10000 16000
Trade Creditors 24000 32000
Outstanding Expenses 4000 2000
Bill Receivable 40000 36000
Trade Debtors 80000 120000
Prepaid Expenses 4000 6000
Accrued Incomes 10000 16000
Incomes Received in Advance 4000 2000
Additional Information
Nadec Co., earned profit of SAR 4,00,000 after charging or crediting the following items to its profit
and loss account during the year 2017:
(1) Profit on Sale of Investments SAR 8,000
(2) Loss on Sale of Building SAR 18,000
(3) Depreciation on Fixed Assets SAR 14,000
(4) Goodwill Written off SAR 4,000

Hint:
400000+6000+8000-2000+4000-40000-2000-6000-2000+14000+4000+18000-8000 = 3,94,000
33
 Exercise -12 :

Prepare Cash Flow Statement from the following Balance Sheet

Pepsi Company Ltd

Liability 2012 2013 Assets 2012 2013

Share Capital 400000 500000 Machinery 500000 700000
Long Term
General Reserve 125000 135000 Investment 70000 56000
Profit& Loss A/c 110000 190000 Stock 210000 280000
Debenture 12% 200000 150000 Receivable 140000 114000
14% Mortgage Loan 100000 160000 Cash & Bank 70000 60000
Payables 80000 95000 Share Issue Expenses 25000 20000
Total 1015000 1230000 Total 1015000 1230000
Solution: 12

Cash From Operating Activities

(Indirect method)
Cash from Operating Activities (Operation):

Net Profit : (190000-110000) : 80000

Add :
General Reserve 10000
Share Issue exp 5000

Current Assets :
Stock (210000 – 280000) : (70000)
Receivable (140000-114000) : 26000
Current Lib :
Payable (80000-95000) 15000

Cash from Operating activities : 66,000

 Cash flow Statement
--------------------------------------------------------------------------------
Cash Flow from Operating Activities 66,000
Cash Flow from Investing Activities
Machine (200000)
LT Invt. 14,0000
Cash Flow from Financing Activities
Share Capital 100000
Debenture (50000)
Loan 60000
-------------
Total (10000)
Add Opening Balance of Cash/Cash Equ. 70,000
-----------
Closing Balance of Cash/Cash Equ 60,000
 Cash Flow Statement
(from TWO balance sheets and one profit and loss a/c)

• Cash flow can be prepare by analysis of accounts appear in two balance sheet and
profit and loss a/c, for this purpose accounts are required to be prepared to find
out flow of cash.
• Following accounts are to be prepared if required a/c (More Focus)
– Fixed Assets – (a) by Gross Method (b) by Net Method
– Investment a/c
– Provision for taxation a/c
– Proposed dividend a/c with unpaid dividend
– Current assets : Debtor or B/R and Stock a/c
– Loan / Liabilities a/c or Debenture a/c
– Reserve and Surplus a/c
– Current liabilities a/c : Creditor or B/P
– Share Capital a/c
 Balance Sheet
------------------------------------------------------------------------------------------------------------------------------
2013(Opening) 2014 (Closing)
-------------------------------------------------------------------------------------------------------------------------------
Fixed Asset 200000 380000
Investment 150000 200000
Exercise Stock 100000 120000
Debtor 50000 70000
-13 : Cash 20000 30000
--------------------- ----------------
520,000 8,00,000
-------------- --------------
Share Capital 3,00,000 4,00,000
Profit & Loss 1,00,000 1,50,000
Loan 70,000 1,00,000
Creditors 50000 1,50,000
----------------- ----------------
5,20,000 8,00,000
Profit & Loss a/c
Sales : 5,00,000

Less Cost of Good Sold : 3,00,000

Gross Profit : 2,00,000

Depreciation : 20,000

Expenses : 1,30,000

Profit : 50,000
Prepare Cash Flow Statement.
Solution Exercise -13 :
Cash Flow Statement
------------------------------------------------------------------------------------------------------------------------------------------------
Cash Flow from Operating Activities:
- Payment to Creditor (2,20,000)
- Collection from debtor 4,80,000
- Expenses paid (1,30,000)
1,30,000
Cash Flow from Investment Activities:
- Purchase of Fixed Assets : (2,00,000)
- Purchase of Investment : (50,000)
(2,50,000)
Cash Flow from Financing Activities:
- Issue of Share Capital : 1,00,000
- Loan Raised : 30,000
1,30,000
-------------------------------
TOTAL : 10,000
Add: Opening Balance of Cash 20,000
Total 30,000 (Closing Cash)
Working Note:
1 Fixed Asset a/c
---------------------------------------------------------------------------------------------------------------
To Balance b/d : 2,00,000 By Dep 20,000
by closing a/c 3,80,000
To Bank (purchased FA): 2,00,000 (given)
---------------------------------------------------------------------------------------------------------------
2. Investment a/c
---------------------------------------------------------------------------------------------------------------
To Balance b/d : 1,50,000
by closing a/c 2,00,000
To Bank (purchased Inv): 50,000 (given)
---------------------------------------------------------------------------------------------------------------
Stock and Creditor a/c
3. Stock a/c
---------------------------------------------------------------------------------------------------------------
To Balance b/d : 1,,00,000 By Cost of Gd Sold 3,00,,000
by closing a/c 1,20,000
To Purchase(b/f): 3,20,000 (given)
---------------------------------------------------------------------------------------------------------------
Noted: Cost of Good Sold: Opening Stock + Purchase – Closing Stock
4. Creditor a/c
---------------------------------------------------------------------------------------------------------------
To bank : 2,20,000 By Balance b/d 50,000
by Purchase 3,20,000
To Balance c/d : 1,50,000
---------------------------------------------------------------------------------------------------------------
Working Note:

5. Debtors a/c
--------------------------------------------------------------------------------------------------------------------------------------
To Balance b/d : 50,000 By Cash/Bank collection 4,80,000
by Balance C/d 70,000
To Sales 5,00,000 (given)
---------------------------------------------------------------------------------------------------------------
6. Share Capital a/c
---------------------------------------------------------------------------------------------------------------
By Balance b/d 3,00,000
To Balance c/d : 4,00,000 By Bank 1,00,000
(issue of share cap.)
---------------------------------------------------------------------------------------------------------------
7. Profit and Loss a/c
---------------------------------------------------------------------------------------------------------------
By Balance b/d 1,00,000
To Balance c/d : 1,50,000 By Net Profit 50,000
---------------------------------------------------------------------------------------------------------------
No difference found
8. Loan a/c
---------------------------------------------------------------------------------------------------------------
By Balance b/d 70,000
To Balance c/d : 1,00,000 By Bank 30,000
(borrowed more)
---------------------------------------------------------------------------------------------------------------
 Exercise -15 (Practicing)
From the following Balance sheets of Samsung Ltd., you are required to prepare a CASH FLOW
STATEMENT:
Liabilities Year 2015 Year2016 Assets Year2015 Year 2016
(SAR) (SAR) (SAR) (SAR)

Share Capital 20,000 30,000 Fixed Assets 20,000 30,000

Profit & Loss a/c 10,000 16,000 Goodwill 10,000 8,000

General Reserve 6,000 8,000 Stock 10,000 16,000

Debenture 10,000 12,000 Trade Debtors 10,000 16,000

Trade Creditors 6,000 8,000 Bills Receivable 2,000 4,000

Outstanding Expenses 2,000 3,000 Bank Balance 2,000 3,000

TOTAL 54000 77000 TOTAL 54000 77000

Cash from operating activities:

Cash Flow Statement
Net Profit : 6000
Add:
Operating Activities: (1000)
General Reserve : 2000
Investment Activities :
Goodwill : 2000 : 4000
- Fixed Assets: (10000)
Current Asset :
Stock : (6000)
Financial Activities
Debtor: (6000)
- Share Capital 10000
B/R (2000)
- Debenture 2000
Current Lib:
- ----------
Creditor : 2000
1000
Outstanding exp: 1000
Add Opening 2000
-----------
-------
(1000)
3000
 Exercise -16 (Practicing)

[Cash Flow Statement]

From the following ‘Cash and Cash Equivalent Accounts’ are given of Al safi company. You are required to prepare ‘CASH
FLOW STATEMENT’
Cash A/c
Particular Amount Particular Amount
To Balance b/d 8000 By Cash Purchase 50000
To Collection from debtors 6000 By Operating Exp Paid 4000
To Cash Sales 80000 By Rent 3000
To Bank 20000 By Wages 8000
To Interest income from Short term investment 6000 By Loan Repaid 3000

To Interest income from Long term investment 3000 By Short term investment 15000
By Bank 30000
By Balance c/d 10000
123000 123000
Bank A/c
Particular Amount Particular Amount
To Balance b/d 25000 By Dividend Paid 10000
To Share Capital 50000 By Interest Paid 12000
To Loan 80000 By Cash 20000
To Short term investment 7000 By Repayment of Loan 40000
To Cash 30000 By Balance c/d 110000
192000 192000
Short Term Investments a/c
Particular Amount Particular Amount
To Balance b/d 6000 By Bank 7000
To Cash 15000 By Balance c/d 14000
21000 21000 43
 Cash Flow Statement
Operating Activities
Collection from debtors 6000
Sales 80000
Cash purchase 50000
Operating exp 4000
Rent 3000
Wages 8000
Investing Activities
Int on ST Investment 6000
Int on LT investment 3000
Financing Activities
Loan Repaid 3000
Share Capital 50000
Loan 80000
Dividend 10000
Interest Paid 12000
Repayment of Loan 40000
225000 130000
Total 95000
Add Opening Balance 39000
Closing Balance of Cash & Equt 134000
Closing Balance (All A/c) 134000

44
Sno. Current Assets Current Liabilities
1 Debtors Creitors
2 Bills Receivables Bills Payable
3 Accounts Receivables Accounts Payables
4 Stock or Inventory Bank Overdraft
5 Cash Outstanding Expenses
6 Bank Income Received in Advance
7 Pre-paid Expenses Provision for Taxation Liability*
8 Accrued Income Short Term Loan
9
10
11

45