Unit-5-CASHFLOW FORMAT

Amount ( Amount
Cash flow statement Rs) ( Rs)
Cash flow from operating Activities
Profit Made during the year XXX
Add: Non-operating items
Depreciation on building XXX
Depreciation on Machinery XXX
Depreciation on Machinery sold XXX
Increase in Provision for doubtful debts XXX
Dividends Paid XXX
Transfer to reserves XXX
Goodwill written off XXX
Preliminary expenses written off XXX
Other tangible assets written off XXX
Loss on sale of disposable fixed assets XXX
Less:
Profit on sale of Investment XXX
Profit on sale of Machinery XXX
Operating Profit before working Capital Changes XXX
Add:
Increase in current liabilites XXX
Decrease in current assets XXX
Less:
Increase in current assets XXX
Decrease in current liabilites XXX
Cash Generated from operating activites XXX
Less: Income tax paid XXX
Net Cash flows from opearting activites(A) XXX

Cash flow from Investing Activites

Add:
Sale of machines XXX
Sale of investments XXX
Less:
Purchase of Buildings XXX
Purchase of Machinery XXX
Net Cashflows from Investing activities(B) XXX

Cashflow from financing activites

Add:
 Issue of share XXX
Issue of Debentures XXX
Less:
Redemption of debentures XXX
Interim Dividend Paid XXX
Dividend Paid XXX
Net Cash flows from Financing activites ( C) XXX

Net Increase/ Decrease in cash & cash

equivalents(A+B+C) XXX
ADD:cash & cash equivalents at the beginning of the year XXX
cash & cashquivalents at the end of the year XXX

CASH FLOW STATEMENT PROBLEMS AND SOLUTIONS

Balance Sheet
Liabilities 2012 2013 Assets 2012 2013
₹ ₹ ₹ ₹
Equity Share 200,000 250,000 Good will 30,000 20,000
₹ ₹ ₹ ₹
Preference Share 50,000 40,000 buildings 100,000 80,000
₹ ₹ ₹ ₹
Geneearl Reserve 35,000 55,000 Plant 40,000 70,000
₹ ₹ ₹ ₹
P&L 15,000 17,000 Debtors 120,000 160,000
₹ ₹ ₹ ₹
Creditors 23,000 5,000 Stock 18,000 20,000
₹ ₹
Cash 15,000 17,000
₹ ₹ ₹ ₹
323,000 367,000 323,000 367,000
Adjustment:
Depreciation charged on plant
was
30,000 and on building Rs50,000
Solution:

Amount Amount
Cash flow statement ( Rs) ( Rs)
Cash flow from opearting activites
Profit Made during the year 2000
Add:Non-operating items
Depreciation on building 50000
Depreciation on Machinery/ plant 30000
Depreciation on Machinery sold
Increase in Provision for doubtful debts
Dividends Paid
Transfer to reserves 20,000
Goodwill written off 10000
Preliminary expenses written off
Other tangible assets written off
Loss on sale of disposable fixed assets
Less:
Profit on sale of Investment
Profit on sale of Machinery
Operating Profit before working Capital Changes 112000 112000
Add:
Increase in current liabilites
Decrease in current assets

Less:
Increase in current assets
Stock 2000
Debtors 40000
Decrease in current liabilites 18000
Cash Generated from operating activites 60000 -60000
Less: Income taxpaid
Net Cash flows from opearting activites(A) 52000

Cash flow from Investing Activites

Add:
Sale of machines
Sale of investments
Less:
Purchase of Buildings 30000
Purchase of Machinery/plant 60000
Net Cashflows from Investing activities(B) 90000 -90000
-38000
Cashflow from financing activites
Add:
Issue of share 50000
Issue of Debentures
Less:
Redemption of Preference shares -10000
Redemption of debentures
Interim Dividend Paid
Dividend Paid
Net Cash flows from Financing activites ( C) 40000 40000

Net Increase/ Decrease in cash & cash

equivalents(A+B+C) 2000
ADD: cash & cash equivalents at the beginning of the year 15000
cash & achievements at the end of the year 17000

Working notes:
Plant a/c
Dr Cr
By
To Balance B/d 40,000 Depreciation 30,000
By balance C/d 70,000
To Bank
(Purchases) 60,000
100,000 100,000

Buildings a/c
Dr Cr

To Balance b/d 100,000 By Depreciation 50,000

To Bank (Purchases) ( B/F) By balance c/d 80,000

30000

130000 130,000
SUM:

Balance Sheet
Liabilities 2012 2013 Assets 2012 2013
Equity Share capital 3,00,000 4,00,000 Fixed Assets 4,00,000 5,50,000
P&L account 85,000 110,000 Stock 2,00,000 2,25,000
Bank Loan ( long -Term) 1,00,000 75,000 Debtors 2,10,000 1,90,000
Accumulated Deprecaition 80,000 1,35,000 Bills Receivables 80,000 1,10,000
Creditors 3,10,000 2,95,000 Bank 30,000 NIL
Proposed dividend 45,000 60,000
9,20,000 10,75,000 9,20,000 10,75,000
Adjustment:
A piece of Machinery costing Rs60,000 on which accumulated depreciation was Rs15,000 was sold for
Rs30,000

Amount Amount
Cash flow statement ( Rs) ( Rs)
Cash flow from opearting activites
Profit Made during the year (110,000- 85,000) 25000
Add:Non-operating items
Depreciation on building Nil
Depreciation on Machinery/ plant ( 1,35,000-80,000=55,000) 55,000
Depreciation on Machinery sold 15,000
Increase in Provision for doubtful debts NIL
Dividends Paid ( announced during 2013) 60000
Transfer to reserves NIL
Goodwill written off NIL
Preliminary expenses written off NIL
Other tangible assets written off NIL
Loss on sale of disposable fixed assets (60,000-15,000=45,000-30,000) 15000 170000
Less:
Profit on sale of Investment Nil
Profit on sale of Machinery Nil
Operating Profit before working Capital Changes
Add:
Increase in current liabilites NIL
Decrease in current assets
Debtors (2,10,000-1,90,000) 20000

Less:
Increase in current assets
Stock(2,25,000- 2,00,000) -25000
BR(1,10,000-80,000) -30000
Decrease in current liabilites- sundry creditors (3,10,000-2,95,000) -15000
Cash Generated from operating activites 120000
Less: Income taxpaid NIL
Net Cash flows from opearting activites(A) 120000 1,20,000

Cash flow from Investing Activites

Add:
Sale of machines 30000
Sale of investments NIL
Less:
Purchase of Buildings NIL
Purchase of Machinery/plant(225000-15000) -210000
Net Cash flows from Investing activities(B) -180000 (1,80,000)

Cashflow from financing activites

Add:
Issue of Equity Shares ( 4,00,000-3,00,000) 100000
Issue of Debentures NIL
Less:
Redemption of Preference shares NIL
Repayment of bank loan ( 1,00,000-75,000) -25000
Interim Dividend Paid NIL
Dividend Paid (announced in 2012) -45000
Net Cash flows from Financing activites ( C) 30000 30,000

Net Increase/ Decrease in cash & cash

equivalents(A+B+C)(1,20,000+30,000- 180,000) -30000
ADD: Cash & Cash equivalents at the beginning of the year (Bank) 30000
cash & cashquivalents at the end of the year( closing Balance of Bank ) 0
Note : When Cash balance is not given , we should consider Bank as equivalent to cash )
Working notes:

Calculation of Loss on Sale of Machinery

Cost of Machinery 60,000
Less: Accumulated Depr 15,000
Book value of Machinery 45,000
Less Sale of Machinery 30,000
Loss on Sale of Machinery 15,000

Machinery a/c
To Balance b/d 4,00,000 By Bank (sale) 30,000
By Dep 15,000
By Profit& loss (loss) 15,000
To Bank (purchases)( B/F) 2,10,000 By Balance c/d 5,50,000

6,10,000 6,10,000

List of Problems for Practice in Cash flow statement

From the information is available from the books of Standard company ltd

Particulars 2013-14 2014-15

Profits made during the year 2,50,000 ------------
Income received in advance 500 600
Prepaid Expenses 1600 1400
Debtors 80,000 95,000
Bills Receivables 25,000 20,000
Creditors 45,000 40,000
Bills payable 13,000 15,000
Outstanding expenses 2500 2000
Accrued Income 1500 1200

Calculate cash flow from operations.

Sum: From the following, find out cash from operations:

Particulars Rs Particulars Rs
To Salaries 2500 By Gross Profit 12,500
To Rent 500 By Profit on sale of land 2,500
To depreciation 1,000 By Income tax refund 1,500
To Loss on sale of Plant 500
To Goodwill written off 2,000
To Proposed Dividend 2,500
To Provision for Taxation 2,500
To Net Profit 5,000
16,500 16,500

From the following comparative Balance sheet, Prepare cash flow statement

Balance sheet

Liabilities 2011 2012 Assets 2011 2012

Equity Share capital 50,000 60,000 Cash 3,000 5,000
Sundry Creditors 10,000 22,000 Bank 8,000 14,000
Bills Payable 8,000 5,000 Sundry Debtors 9,000 12,000
General Reserve 6,000 10,000 Land 10,000 16,000
Profit& loss 40,000 55,000 Buildings 50,000 70,000
Appropriation a/c
Machinery 34,000 35,000
114,000 1,52,000 114,000 1,52,000