Jai Shri Krishna

Q.1. While computing cash from operating activities, indicate whether the following items will be added or subtracted
from the net profit- if not to be considered, write NC-:
Items:
(a) Increase in the value of creditors
(b) Increase in the value of patents
(c) Decrease in prepaid expenses
(d) Decrease in income received in advance
(e) Decrease in value of inventory
(f) Increase in share capital
(g) Increase in the value of trade receivables
(h) Increase in the amount of outstanding expenses
(i) Conversion of debentures into shares
(j) Decrease in the value of trade payables
(k) Increase in the value of trade receivables
(L) Decrease in the amount of accrued income
Solution -:
a) + b) NC c) + d) - e) + f) NC g) - h) + i) NC j) - k) - L) +
Q.2 From the following Balance Sheets of Xerox Ltd., prepare cash flow statement.
Particulars Note 31 March, 31 March,
No. 2017 (Rs.) 2016 (Rs.)
I. Equity and Liabilities
1. Shareholders’ Funds
a) Share capital 15,00,000 10,00,000
b) Reserve and surplus (Balance in Statement 7,50,000 6,00,000
of Profit and Loss)
2. Non-current Liabilities
Long-term borrowings 1 1,00,000 2,00,000
3. Current Liabilities
a) Trade payables 1,00,000 1,10,000

DEEPAK BHATIA CLASSES 1.

 b) Short-term provisions (Provision for taxation) 95,000 80,000
Total 25,45,000 19,90,000
II. Assets
1. Non-current assets
a) Fixed assets
(i) Tangible assets 2 10,10,000 12,00,000
(ii) Intangible assets (Goodwill) 1,80,000 2,00,000
b) Non-current investment 6,00,000 -
2. Current assets
a) Inventories 1,80,000 1,00,000
b) Trade Receivables 2,00,000 1,50,000
c) Cash and cash equivalents 3 3,75,000 3,40,000
Total 25,45,000 19,90,000
Notes to Accounts:
Particulars 31 March, 31 March,
2017 (Rs.) 2016 (Rs.)
1. Long-term borrowings:
i) 9% Debentures - 2,00,000
ii) 5% Bank loan 1,00,000 -
1,00,000 2,00,000
2. Tangible Assets
i) Land and building 6,50,000 8,00,000
ii) Plant and machinery 3,60,000 4,00,000
10,00,000 12,00,000
3. Cash and cash equivalents
i) Cash in hand
70,000 50,000
ii) Bank balance
3,05,000 2,90,000
3,75,000 3,40,000

Additional information:
1. Proposed dividend 2016-17 is Rs. 2,25,000 and for 2015-16 is Rs. 1,50,000.
2. Income tax paid during the year includes Rs. 15,000 on account of dividend tax.
3. Land and building book value Rs. 1,50,000 was sold at a profit of 10%.
4. The rate of depreciation on plant and machinery is 10%.
5. 9% debentures redeemed on April 2017, 5% bank loan was opted on March 31, 2017.

DEEPAK BHATIA CLASSES 2.

 Solution:
Cash Flow Statement
Particulars Rs.
I. Cash flow from Operating Activities
Net Profit before Taxation and Extraordinary Items 3,95,000
Adjustment for-
+ Depreciation 40,000
+ Goodwill written-off 20,000
– Profit on Sale of Land (15,000)
= Operating Profit before working capital changes 4,40,000
– Decrease in Trade Payables (10,000)
– Increase in Trade Receivables (50,000)
– Increase in Inventories (80,000)
= Cash generated from Operations 3,00,000
– Income Tax Paid (1) (65,000)
A. Cash Inflows from Operations 2,35,000
II. Cash flows from Investing Activities
Proceeds from Sale of Land and Building
1,65,000
Purchase of Investment
(6,00,000)
B. Cash used in Investing Activities
4,35,000
III. Cash flows from Financing Activities
5,00,000
Proceeds from issue of Equity Share Capital
(2,00,000)
Redemption of Debentures
1,00,000
Proceeds from raising Bank Loan.
(1,50,000)
Dividend Paid
(15,000)
Dividend Distribution Tax Paid
2,35,000
C. Cash flows from Financing Activities
35,000
Net Increase in cash and cash equivalents (A+B+C)
3,40,000
+ Cash and Cash Equivalents in the beginning
Cash and Cash Equivalent at the end 3,75,000

Working Notes:
(1) Total tax paid during the year Rs. 80,0000
(–) Dividend Distribution tax paid (given) Rs. (15,000)
Income tax paid for operating activities Rs. 65,000

DEEPAK BHATIA CLASSES 3.

 (2) Net profit earned during the year after tax and dividend
= Rs. 7,50,000 – 6,00,000 = Rs. 1,50,000
(3) Net profit before tax
= Net profit earned during the year after tax and dividend + Provision for tax made + Declared Dividend
= Rs. 1,50,000 + Rs. 95,000 (See provision for taxation) + Rs. 1,50,000
= Rs. 3,95,000

Dr. Provision for Taxation Account Cr.

Particulars J.F. Amount (Rs.) Particulars J.F. Amount (Rs.)
To Cash (Tax paid:which 80,000 By Balance b/d 80,000
includes Rs. 15,000 as By Statement of Profit
dividend and Loss (Provision made
To Balance c/d 95,000 during the year) 95,000
1,75,000
1,75,000
Dr. Land and Building Account Cr.
Particulars J.F. Amount (Rs.) Particulars J.F. Amount (Rs.)
To Balance b/d Statement of 8,00,000 By Cash 1,65,000
To Profit and Loss (Profit on 15,000 By Balance c/d 6,50,000
sale) 8,15,000 8,15,000
Dr. Plant and Machinery Account Cr.
Particulars J.F. Amount (Rs.) Particulars J.F. Amount (Rs.)
To Balance b/d By Depreciation 40,000
4,00,000 By Balance c/d 3,60,000
4,00,000 4,00,000

Q.3 From the following information of Oswal Mills Ltd., prepare cash flow statement:
Balance Sheet of Oswal Mills as on 31st March, 2016 and 2017
Particulars Note 31 March, 31 March,
No. 2017 (Rs.) 2016 (Rs.)
I. Equity and Liabilities
1. Shareholders’ Funds
a) Share capital 1 1,300 1,400
b) Reserve and surplus (Surplus) 4,700 4,000
2. Current Liabilities

DEEPAK BHATIA CLASSES 4.

 a) Short-term borrowings 200 600
b) Trade payables 500 400
Total 6,700 6,400
II. Assets
1. Non-current assets
a) Fixed assets 2 2,400 2,400
b) Non-current investment 300 200
2. Current assets
a) Inventories 1,200 1,300
b) Trade Receivables 800 900
c) Cash and cash equivalents 1,200 800
d) Short-term loans and advances 800 800
Total 6,700 6,400
Notes to Accounts:
Particulars 31 March. 2017 (Rs.) 31 March. 2017 (Rs.)
1. Share capital
Equity share capital 1,000 1,000
10% preference share capital 300 400
1,300 1,400
2. Fixed assets
Tangible assets 3,600 3,400
Less: Accumulated depreciation (1,200) (1,000)
2,400 2,400
Statement of Profit and Loss for the year ended 31st March, 2017 (Rs. in Lakhs)
Particulars Note No. 31st March, 2017 (Rs.) -
I. Revenue from operation 2,800 -
II. Other income (dividend income) 1,000 -
III. Total Revenue 3,800 -
IV. Expenses Cost of material consumed 400 -
Employees benefit expenses 200 -
Finance cost (interest paid) 200 -
Depreciation 200 -
Loss due to earthquake 1,100 -
2,100 -
V. Profit before tax -

DEEPAK BHATIA CLASSES 5.

 VI. Tax paid 1,700 -
Profit after tax 1,000
700
Additional information:
1. No dividend paid by the company during the current financial year.
2. Out of fixed assets, land worth Rs. 1,000 Lakhs was sold at this amount.
Solution:
Cash Flow Statement
Particulars (Rs.)
Cash Flows from Operating Activities
Net Profit before Tax and Extraordinary Items (1) 2,800
Adjustment for Non-cash and Non-operating Items
+ Interest paid 200
+ Depreciation 200
Operating profit before working capital changes 3,200
Adjustment for:
+ Decrease in Inventories 100
+ Decrease in Trade Receivables 100
+ Increase in Trade Payables 100
Cash generated from operations 3,500
(–) Income Tax paid (1,000)
Cash Flow before Extraordinary items 2,500
(–) Loss due to earthquake (1,100)
A. Net cash from Operating Activities
1,400
Cash flows from Investing Activities
Sale of Land
1,000
Purchase of fixed assets (2)
(1,200)
Purchase of Investments
(100)
B. Net cash from Investing Activities
(300)
Cash flows from Financing Activities
Payment of short-term loans
(400)
Interest Paid
(200)
Redemption of 10% preference share capital
(100)
C. Net Cash used in Financing Activities
(700)
Net increase in Cash and Cash Equivalents during the year (A+B+C)

DEEPAK BHATIA CLASSES 6.

 + Cash and Cash Equivalents in the beginning of the year 400
= Cash and Cash Equivalents in the end 800
1,200
Working Notes:
(1) Net Profit before Tax and Extraordinary Items = Rs. 700 + Rs. 1,100 + Rs. 1,000 = Rs. 2,800
(2)
Dr. Fixed Assets Account Cr.
Particulars J.F. Amount (Rs.) Particulars J.F. Amount (Rs.)
To Balance b/d 3,400 By Cash (Sale of land) 1,000
To Cash (Purchase of fixed 1,200 By Balance c/d 3,600
assets) 4,600 4,600
Dr. Accumulated Depreciation Account Cr.
Particulars J.F. Amount (Rs.) Particulars J.F. Amount (Rs.)
To Balance b/d 1,200 By Balance c/d 1,000
By Statement of Profit and 200
1,200 Loss 1,200

DEEPAK BHATIA CLASSES 7.