Cash Flow Statement

Particulars Amount Amount

Cash from Operating activities
1. Cash collection from sales and debtors
Sales + xx
Increase/ Decrease in Debtors/ account receivable -/+ xx
Increase/ Decrease in provision for D/D +/- xx
Bad debt written off - xx
Bad debt recovered + xx
Discount allowed on sales - xx + xx

2. Paid to Suppliers/ Creditors/ Account payable/ Bills payable

Cost of goods sold - xx
Increase/ Decrease in creditors/ AP/BP +/- xx
Increase/ Decrease in inventory (closing stock) -/+ xx - xx

3. Paid to employees & for other operating expenses:

Salaries & wages/ All expenses (except depreciation) - xx
Increase/ Decrease in outstanding expenses +/- xx
Increase/ Decrease in prepaid expenses -/+ xx - xx

4. Paid for interest and tax

Interest paid/ Tax paid - xx
Increase/ Decrease in interest & tax outstanding +/- xx -xx

5. Extra Ordinary items:

Interest received/ Dividend received + xx
Increase/ Decrease in Bank overdraft/ short term loan +/- xx
Increase/ Decrease in Marketable securities/ short term investment -/+ xx +/- xx

A. Net cash from operating activities (1 + 2 + 3 + 4 + 5) …….

B. Net cash from investing activities:

Purchase of fixed assets and investment (increase) - xx
Sale of fixed assets and investment (decrease) + xx
xx
C. Net cash from financing activities:
Issue of Shares/ Debentures/ Loan (increase) + xx
Redemption of debentures/ preference share/ loan (decrease) - xx
Increase in share premium + xx
Dividend paid - xx
xx
Net increase/ decrease in cash and bank +/- xx
Add: Opening cash and bank xx
Closing cash and bank xx
 Liabilities 2065 (Rs.) 2066 (Rs.) Assets 2065 (Rs.) 2066 (Rs.)
Share capital 500,000 600,000 Fixed assets 600,000 800,000
Share premium 50,000 60,000 Bills receivable 50,000 40,000
15% debentures 100,000 50,000 Debtors 100,000 60,000
Creditors 150,000 190,000 Closing stock 50,000 100,000
Retained earning 100,000 150,000 Cash 100,000 50,000
Total 900,000 1,050,000 Total 900,000 1,050,000
1. The Balance Sheet of Company as on Chaitra 31 is given below:
Additional information
a. Sales for the year 2066: Rs. 1,000,000
b. Cost of goods sold: Rs. 750,000
c. Purchase of fixed assets of Rs. 300,000 and sale of fixed assets of Rs. 40,000 (Book value of Rs.
40,000)
d. Operating expenses Rs. 120,000
e. Dividend paid Rs. 20,000
Required: Cash flow statement using direct method
Solution,
Cash flow Statement

Particulars Amount Amount

Cash from operating activities:
1. Cash from Sales and debtors/ receivable
Sales 1,000,000
Decrease in debtors 40,000
Decrease in receivable 10,000 1,050,000

2. Cash paid to Suppliers

Cost of goods sold (750,000)
Increase in creditors 40,000
Increase in closing stock (50,000) (760,000)

3. Cash paid to employees & operating expenses

Operating expenses (120,000) (120,000)

A. Net Cash from operating activities 170,000

B. Net Cash from investing activities
Purchase of fixed assets (300,000)
Sale of fixed assets 40,000 (260,000)
C. Net Cash from financing activities
Issue of share 100,000
Increase in share premium 10,000
15% Debenture redeemed (Decrease) (50,000)
Dividend paid (20,000) 40,000

Net decrease in cash (50,000)

Add: Beginning Cash 100,000
Ending Cash 50,000
 Liabilities Year 1 Year 2 Assets Year 1 Year 2
Share capital 450,000 720,000 Fixed assets 350,000 600,000
10% Debentures 100,000 40,000 Account receivable 40,000 40,000
Account payable 40,000 50,00 Inventory 100,000 150,000
Retained earnings 10,000 80,000 Cash balance 100,000 90,000
Good will 10,000 10,000
Total 600,000 890,000 Total 600,000 890,000
2. The Balance Sheets of a Company for last two years on 31 Chaitra, are as follows:
Additional information:
a. Sales for the year Rs. 625,000
b. Cost of goods sold Rs. 300,000
c. Operating expenses Rs. 150,000 (including depreciation on fixed assets Rs. 80,000 and interest
on debenture Rs. 10,000)
d. Gain on sale of fixed assets (Book value Rs. 50,000) Rs. 5,000
e. Purchases of fixed assets Rs. 380,000
f. Dividend paid Rs. 110,000
Required: Cash flow statement using direct method
Cash Flow Statement

Particulars Amount Amount

Cash from operating activities:
1. Cash collection from Sales & Debtors:
Sales 625,000 625,000
2. Cash payment to Suppliers:
Cost of goods sold (300,000)
Increase in AP 10,000
Increase in inventory (50,000) (340,000)
3. Cash paid to employees / operating expenses:
Operating expenses (150,000 – 80,000 – 10,000) (60,000) (60,000)
4. Cash paid for interest & tax:
Interest paid (10,000) (10,000)
A. Net Cash from operating activities 215,000
B. Net Cash from investing activities:
Purchase of fixed assets (380,000)
Sale of fixed assets (50,000 + 5,000) 55,000 (325,000)
C. Net Cash from financing activities:
Issue of shares 270,000
10% Debenture Redeemed (60,000)
Dividend paid (110,000) 100,000
Net: decrease in cash (10,000)
Add: Beginning Cash 100,000
Ending Cash 90,000
 Liabilities Year 1 Year 2 Assets Year 1 Year 2
Share capital 800,000 1,000,000 Fixed assets 600,000 800,000
10% Debenture 100,000 50,000 Inventory 100,000 150,000
Retained earnings 100,000 200,000 Debtors 430,000 320,000
Creditors 200,000 250,000 Bank & cash balance 120,000 300,000
Expenses payable 50,000 70,000
Total 1,250,000 1,570,000 Total 1,250,000 1,570,000
3. The balance of Year 1 and Year 2 of a company is given below:
Additional information:
 Sales revenue: Rs. 1,200,000
 Cost of goods sold: Rs. 800,000
 Purchase of fixed assets: Rs. 350,000
 Interest on debenture: Rs. 10,000
 Administrative expenses: Rs. 120,000
 Tax paid during the year: Rs. 60,000
 Dividend distributed: Rs. 70,000
 Sale of fixed assets: Rs. 110,000
Required: Cash flow statement using direct method
Cash Flow Statement

Particulars Amount Amount

Cash from operating activities
1. Cash collection from Sales & Debtors:
Sales 1,200,000
Decrease in debtors 110,000 1,310,000
2. Cash payment to Suppliers / creditors:
Cost of goods sold (800,000)
Increase in creditors 50,000
Increase in inventory (50,000) (800,000)
3. Cash payment to employees & for other operating expenses:
Administrative expenses (120,000)
Increase in expenses payable 20,000 (100,000)
4. Payment for interest & tax:
Interest on debenture (10,000)
Tax paid (60,000) (70,000)
A. Net cash from operating activities 340,000
B. Net cash from investing activities:
Purchase of fixed assets (350,000)
Sale of fixed assets 110,000 (240,000)
C. Net cash from financing activities:
Issue of share 200,000
10% Debenture redeemed (50,000)
Dividend paid (70,000) 80,000
Net increase in cash 180,000
Add: Opening Cash & Bank 120,000
Closing Cash & Bank 300,000
 Liabilities Year 1 Year 2 Assets Year 1 Year 2
Share capital 500,000 600,000 Fixed assets 500,000 700,000
Bank Loan 100,000 50,000 Stock 40,000 80,000
Creditors 150,000 200,000 Debtors 210,000 170,000
Retained earning 100,000 150,000 Cash 100,000 50,000
Total 850,000 1,000,000 Total 850,000 1,000,000
4. The Balance sheets of a company are as follows:
Additional information:
a. Sales and cost of goods sold for the year were Rs. 700,000 and Rs. 440,000 respectively.
b. Operating expenses were Rs. 100,000.
c. Purchase of fixed assets Rs. 320,000 and a part of fixed assets was sold for 70,000.
d. Dividend paid for the year Rs. 60,000.
Required: Cash flow statement using direct method
(Ans: Cash and operating activities Rs. 210,000, Cash from investing activities (Rs. 250,000), Cash
from financing activities (Rs. 10,000)]

Liabilities Year 1 Year 2 Assets Year 1 Year 2

Share capital 750,000 900,000 Fixed assets 750,000 1,050,000
8% Debentures 150,000 75,000 Inventory 60,000 120,000
Retained earnings 150,000 225,000 Sundry debtors 315,000 255,000
Sundry creditors 150,000 200,000 Bank and Cash balance 150,000 75,000
Outstanding expenses 75,000 100,000
Total 1,275,000 1,500,000 Total 1,275,000 1,500,000
5. The balance sheets of a Limited Company as on Chaitra 31 are given below:
Additional information for year 2:
a. Sales income Rs. 10,50,000
b. Cost of goods sold Rs. 660,000
c. Administrative expenses Rs. 150,000
d. Purchased fixed assets Rs. 480,000
e. Fixed assets sold Rs. 105,000
f. Dividend distributed for the year Rs. 90,000
Required: Cash flow statement by using direct method.
(Ans: Cash from operating activities Rs. 315,000, Cash investing activities (Rs. 375,000), Cash
from financing activities (Rs. 15,000)]

Liabilities Year 1 Year 2 Assets Year 1 Year 2

Share capital 400,000 500,000 Fixed assets 525,000 680,000
 10% Debenture 100,000 50,000 Inventories 50,000 75,000
Long term loan 50,000 150,000 Debtors 75,000 100,000
Creditors 50,000 50,000 Prepaid insurance 5,000 10,000
Wages payable _ 10,000 Cash at bank 45,000 15,000
Provision for tax 25,000 30,000
Retained earning 75,000 90,000
Total 700,000 880,000 Total 700,000 880,000
6. The balance sheet of company as on Chaitra 31st are as under:
Additional information:
 Sales of year 2 Rs. 600,000
 Cost of goods sold Rs. 225,000
 Operating expenses excluding Rs. 10,000 interest debentures: Rs. 250,000
 Tax paid Rs. 25,000
 Fixed assets purchased Rs. 215,000
 Fixed assets sold Rs. 15,000
 Dividend paid Rs. 25,000
Required: Cash flow statement

Cash Flow Statement

Particulars Amount Amount

 Cash from operating activities:
1. Collection from Sales & Debtors:
Sales 600,000
Increase in debtors (25,000} 575,000
2. Payment to Suppliers / Creditors:
Cost of goods sold (225,000)
Increase in inventory (25,000) (250,000)
3. Payment to employees / other operating expenses:
Operating expenses (250,000)
Increase in wages payable 10,000
Increase in prepaid insurance (5,000) (245,000)
4. Interest paid:
Interest on debentures (10,000)
5. Tax paid:
Tax paid (25,000)
A. Net Cash from operating activities 45,000
B. Net Cash from investing activities:
Fixed assets purchased (215,000)
Fixed assets sold 15,000 (200,000)
C. Net Cash from financing activities:
Issue of shares 100,000
10% Debentures redeemed (50,000)
Long term loan increased 100,000
Dividend paid (25,000) 125,000
Net decrease in Cash & Cash equivalent (30,000)
Add: Beginning Cash & Cash equivalent 45,000
Ending Cash & Cash equivalent 15,000

Particulars Previous year (Rs.) Current year (Rs.)

Fixed assets 300,000 195,000
 Debtors 120,000 150,000
Inventory 135,000 160,000
Share capital 150,000 300,000
Creditors 120,000 150,000
Wages outstanding 40,000 50,000
Cash 75,000 ?
7. The closing balance of different assets and liabilities are given below:
Additional information:
 Cost of goods sold Rs. 725,000
 Operating expenses Rs. 300,000
 Sales during the year Rs. 1,200,000
 Furniture costing Rs. 90,000 has been sold during the year for Rs. 100,000
 Equipment purchased during the year for Rs. 104,000
 Tax paid Rs. 15,000.
Required: Cash flow statement using direct method
[Ans: Cash from operating activities Rs. 145,000, Cash from investing activities (Rs. 4,000),
Cash from financing activities Rs. 150,000; Closing cash balance Rs. 366,000]

Particulars Opening (Rs.) Closing (Rs.)

Inventory 48,000 96,000
Debtors 252,000 204,000
Cash 120,000 60,000
Creditors 120,000 160,000
Outstanding expenses 60,000 80,000
8. The opening and closing balances of assets and liabilities are as under:
Additional information:
 Sales Rs. 840,000
 Cost of sales Rs. 528,000
 Administrative expense Rs. 120,000
 Purchase of fixed assets Rs.3 84,000 sales of fixed assets Rs.84,000
 Shares issued Rs. 120,000
 Repayment of debentures Rs. 60,000
 Dividend paid Rs. 72,000
Required: Cash flow statement
[Ans: Cash from operating activities Rs. 252,000, Cash from investing activities (Rs. 300,000), Cash
from financing activities (Rs. 12,000)]

Liabilities and equity 2012 2013 Assets 2012 2013

Share capital 150,000 245,000 Fixed assets (net) 150,000 200,000
 Preference share 50,000 40,000 Investment 50,000 70,000
9% debentures 100,000 50,000 Inventory 100,000 130,000
Sundry creditors 40,000 45,000 Sundry debtors 110,000 105,0000
Profit and loss account 150,000 220,000 Cash at bank 80,000 95,000
Total 490,000 600,000 Total 490,000 600,000
9. Following are the summarized comparative balance sheet of Kathmandu Kastha Limited as at 31 st
December:
Additional information:
a. Sales for 2013 was Rs. 500,000.
b. Cost of goods sold Rs. 250,000.
c. Operating expenses Rs. 100,000 and depreciation for the year Rs. 30,000 (excluding
depreciation).
d. Fixed assets having book value Rs. 30,000 sold for Rs. 40,000
e. Fixed assets purchases during the year was Rs. 110,000.
f. Dividend paid Rs. 55,000.
g. Debentures were redeemed with Rs. 5,000 premium. (9% debenture redeemed=55000}
Required: Cash flow statement using direct method.
[Ans: Cash from operating activities Rs. 130,000, Cash from investing activities (Rs. 90,000),
Cash from financing activities (Rs. 25,000)]
10. The Income Statement and other relevant information have been provided below:

Particulars Amount Amount

Sales revenue 500,000
Less: cost of goods sold 300,000
Gross: margin 200,000
Less: Expenses:
Office rent, rates and salaries 60,000
Depreciation charged on plant and machinery 50,000
Debenture premium 5,000
Interest on debenture 10,000
Provision of taxation 20,000 145,000
Net income before other income 55,000
Add: Profit on sale of plant (book value of Rs. 40,000) 10,000
Net Income 65,000
Less: provision for dividend 30,000
Retained earning 35,000
Income Statement
For the year ended 31st December 2013

1st January 2013 31st December 2013

Inventories 50,000 60,000
Accounts receivable 80,000 50,000
Accounts payable 40,000 70,000
Outstanding salaries 10,000 5,000
Debentures 150,000 100,000
Provision for taxation 30,000 20,000
Provision for dividend 20,000 30,000
Plant and machinery (net) 350,000 600,000
Investment at cost 50,000 100,000
Share capital 500,000 700,000
Cash at bank 120,000 50,000
The other items extracted from the balance sheet are given below:
Additional information:
 Purchase of plant and machinery of Rs. 340,000
 Dividend paid of Rs. 20,000
 Tax paid Rs. 30,000
Required: Cash flow statement under direct method

Solution,

Particulars Amount Amount

1. Cash flows from operating activities:
A. Cash sales and collection from debtors:
Sales 500,000
Decrease in account receivables 30,000 530,000
B. Cash purchase and payment to suppliers:
Cost of goods sold (300,000)
Increase in inventories (10,000)
Increase in accounts payable 30,000 (280,000)
C. Payment to employees and other operating expenses:
Office rent, rates and salaries (60,000)
Decrease in outstanding salaries (5,000) (65,000)
D. Payment for interest and taxes:
Interest on debenture (10,000)
Tax paid (30,000) (40,000)
Cash flows from operating activities: 145,000
2. Cash flows from investing activities:
Sale of plant (Rs. 40,000 + Rs. 10,000) 50,000
Purchase of plant (340,000)
Investment made (50,000)
Decrease in cash from investing activities (340,000)
3. Cash flows from financing activities:
Issue of shares 200,000
Dividend paid (20,000)
Redemption of debentures[50000+5000] (55,000)

Increase in cash from financing activities 125,000

Decrease in cash and cash equivalent items (1 + 2 + 3) (70,000)
Add: Opening balance of cash at bank 120,000
Closing balance of cash at bank 50,000
Cash Flow Statement
For the year ended 31st December 2013
11. The detailed Income statement of a company is as follows:
Particulars Amount Amount
Cash and credit sales 500,000
Less: Purchase 150,000
Direct wages 150,000
Total cost of goods sold 300,000
Gross margin 200,000
Less: Operating expenses 60,000
Depreciation 40,000 100,000
Net income before tax 100,000
Less: Tax paid 30,000
Dividend paid 20,000 50,000
Retained earnings 50,000
Additional information:
 Current liabilities increased by Rs. 50,000
 Current assets other than cash increased by Rs. 60,000
 Plant and machinery purchased by Rs. 200,000
 Company issued 1,000 additional shares of Rs. 100 each
 Beginning and ending balances of cash were Rs. 50,000 and Rs. 30,000 respectively.
Required: Cash flow statement showing
a) Cash from operating activities
b) Cash from investing activities
c) Cash from financing activities
d) Changes in cash balance
 Solution,

Particulars Amount Amount

1. Cash flows from operating activities:
A. Cash sales and collection from debtors:
Sales 500,000
B. Cash purchases and payment to suppliers:
Purchases (150,000)
C. Payment to employees and for other operating expenses:
Direct wages (150,000)
Operating expenses (60,000)
Increase in current liabilities 50,000
Increase in current assets (60,000) (220,000)
D. Payment for tax:
Tax paid (30,000)
Cash flows from operating activities (A + B + C + D) 100,000
2. Cash flows from investing activities:
Purchase of plant (200,000)
3. Cash flows from financing activities:
Issue of shares (1,000 shares of Rs. 100 each) 100,000
Dividend paid (20,000) 80,000
Decrease in cash and cash equivalent items (1 + 2 + 3) (20,000)
Add: Opening balance of cash 50,000
Closing balance of cash 30,000
Cash Flow Statement
For the year ended …