CASH FLOW STATEMENT

A statement of changes in the financial position of a company can be found out in two ways:
(a) Working Capital Basis, i.e. Funds Flow Statement, and
(b) Cash Basis, i.e., Cash Flow Statement
A Cash Flow Statement is statement of changes in cash position between the beginning and end of the
financial period. It is a statement which summarizes the sources of cash from which cash payments shade
during a particular period of time, say a month or a year.
1. Cash position and working capital position. A cash flow statement is mainly dealt with changes in
cash position, while a funds flow statement is concerned with changed working capital.
2. Usefulness in short-term financial analysis. For short-term financial analysis the cash flow statement
is considered to be more useful to management as compared to funds flow statement.
3. Method of preparation. Techniques of preparing the cash flow statement and funds flow statement
are different. In funds flow statement, an increase in a current liability brings a decrease in the current
asset resulting in decrease in net working capital and vice-verse. In a cash flow statement an increase
in a current liability or decrease in a asset (other than cash) might result in an increase in cash and
vice-versa.
4. The funds flow statement generally gives a picture of changes in the working capital in future;
whereas; the funds flow statement does not give and such statement.
5. Opening and closing balances. In the cash flow statement opening and closing balance ( cash and
equivalents) is given. But a funds flow statement does not contain in opening and closing balances.
6. Legal requirement. There is no legal requirement to prepare funds flow statement but cash flow
statement is to be prepared by every listed company as per the requirement of SEBI.

Source of Cash

Internal Sources
i. Depreciation: Depreciation does not result in an outflow of cash. Therefore net profit will have to
be increased by finding out the amount of depreciation of development rebate charged, in order
to find out the real cash generated from operations.
ii. Amortization of intangible assets: Goodwill, preliminary expenses, etc. when written off against
profits, reduce the net profit without affecting the cash balance. The amount written off should,
therefore, be added back to profit to find out the generation of each from operations.
iii. Loss on sale of fixed assets: it does not result in an outflow of cash, therefore should be added
back to profits.
iv. Gain from sale of fixed assets: Since sale of fixed assets is taken as a separate source of cash, it
should be deducted from the net profits.

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 v. Creation of reserves: If profit for the year has been arrived at after charging transfers to reserves.
Such transfers should be added back to profits. The cash operations show a net loss, such net loss
after making adjustments for non-cash items can be shown as an application of cash.

External Sources
i. Issue of New shares: In case shares have been issued for cash, the net cash received (i.e., after
deducting expenses on the issue of shares or discount on the issue of shares) will be taken as a
source of cash.
ii. Raising Long-term Loans: Long-term loans, such as issue of debentures, loan from Industrial
Finance Corporations, State Financial Corporation and IDBI are sources of cash. They should be
shown separately.
iii. Purchases of Plant and Machinery of deferred payments: In case plant and Machinery have been
purchased on a deferred payment system, it should be shown as separate source of cash.
iv. Short-term Borrowing-cash credit from banks: Short-term borrowings, etc., from bans increase
available cash but they have to be shown separately under the above head.
v. Sale of Fixed Assets, Investments, etc.: It results in the generation of cash and therefore, is a
source of cash.

Cash Fund – Understanding

As per Accounting Standard – 3 (AS-3) issued by the Institute of Chartered Accountants of India, the
term cash includes:

1. Cash in hand;
2. Demand deposits with bank; and
3. Cash equivalent. These are short-term highly liquid investments that are readily convertible
into known amounts of cash, and which are subject to an insignificant risk of changes in value.

Meaning of Cash Inflow and Outflow

Cash flow includes inflow and outflow of cash. An inflow, i.e., source of cash increases the total cash
available at the disposal of the firm, while and outflow, i.e. use of cash decrease it. The difference between
cash inflows, and cash outflow in known as net cash flow which can be either net cash flow or net cash
outflow.
It should be noted that cash flow statement deals with the flow of cash fund, but it does not consider
investment inter se cash bank balance and cash equivalents. This is line with funds flow statement which
excludes movement between items that constitute working capital, i.e., current assets and current
liabilities.
1. OPERATING ACTIVITIES: Operating activities are the principal revenue activities of the enterprises.
CASH INFLOWS
(i) Cash sales and cash received from debtors.
(ii) Cash received from royalty, fees, commission, etc.
(iii) In case of finance companies, cash received from sale of securities, interest and dividend
receipts.
CASH OUTFLOWS
(i) Cash purchases and payment to creditors.
(ii) Payment of wages, salaries, rent, insurance, etc.
(iii) Payment of taxes.
(iv) In case of finance companies, cash payment of interest and purchase of securities.
2. INVESTING ACTIVITIES: These are the acquisitions and disposal of long-term assets (such as plant,
machinery, furniture, land and building etc.) and other investments are not in cash equivalents.
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 CASH INFLOWS
(i) Sale of fixed assets
(ii) Sale of investments such as share, and debenture
(iii) Receipts of interest and dividends
(iv) Receipts from repayment of loans made to third parties.
CASH OUTFLOWS
(i) Purchase of fixed assets
(ii) Purchases of shares, debentures, etc. as investments
3. FINANCING ACTIVITIES: These are the activities that result in changes in the size and composition of
the owner’s capital and borrowings of the enterprise.
CASH INFLOWS
(i) Cash receipts from the issue of shares, debentures, etc.
(ii) Cash receipts from loans raised
CASH OUTFLOWS
(i) Cash payments for the redemption of preference shares and debentures.
(ii) Buy-back of equity shares.
(iii) Payment of interest and dividends.

Preparation of cash flow statement

Preparation of cash flow statement is similar to that of funds flow statement. In fact, the difference arises
from the definition of funds. In funds flow statement, fund mean net working capital while in cash flow
statement it mean ‘cash’. AS-3 has not prescribed any specific formed cash flow statement. but SEBI has
approved the cash flow statement to be prepared in the following form:

Direct Method: Under this method, cash receipts from operating revenues and cash payments for
operating expenses are calculated and shown in the cash flow statement.

(i) Cash sales of goods and services

(ii) Cash received from debtors
(iii) Cash payment for purchase of inventories
(iv) Cash payment to creditors
(v) Cash payment for wages, salaries and other operating expenses
(vi) Cash payment of income tax, etc.

Indirect Method: Under the indirect method, the net cash from operating activities is determined by
making necessary adjustments in the net profit (or loss) as disclosed by Profit and Loss Account.
Adjustments in net profit or loss occur because of the following:
(a) Non-cash items like depreciation;
(b) Changes during the period in inventories and operating receivable and payables;
(c) All other items for which cash effects are investing and financing cash flows.
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 CASH FLOW STATEMENT
Questions:-
Q1. From the following information, prepare a Cash Flow Statement:
BALANCE SHEETS AS AT…
Particular Note 31.03.2015 31.03.2014
Rs. Rs.
I. EQUITY AND LIABILITIES
(1) Shareholders’ Funds
(a) Share capital 12,50,000 10,00,000
(b) Reserves and Surplus 1 4,90,000 4,00,000
(2) Non-Current Liabilities (long Term Loan) 4,00,000 5,00,000
(3) Current Liabilities
Trade Payables 4,00,000 5,00,000
Short-term Provision (provision for tax) 60,000 50,000
Total 26,00,000 24,50,000
II. ASSETS
(1) Non-Current Assets
Tangible Fixed Assets 2 13,00,000 11,50,000
Non-Current Investments 50,000 1,00,000
(2) Current Assets
Inventories 2,80,000 3,00,000
Trade Receivables 4,20,000 4,00,000
Cash & Cash Equivalents 5,50,000 5,00,000
Total 26,00,000 24,50,000

NOTE 1: RESERVES AND SURPLUS

Particulars 31.03.2015 31.03.2014
Rs. Rs.
Profit and Loss A/c 4,80,000 4,00,000
Capital Reserve 10,000 –
4,90,000 4,00,000

NOTE 2: TANGIBLE FIXED ASSETS

Particulars 31.03.2015 31.03.2014
Rs. Rs.
Land & Building 3,80,000 4,00,000
Machinery 9,20,000 7,50,000
13,00,000 11,50,000

Additional Information:
(1) Depreciation written off on land and building Rs. 20,000.
(2) The company sold some investment at a profit of Rs. 10,000, which was credited to Capital
Reserve.
(3) Income-tax provided during the year Rs. 55,000.
(4) During the year the company purchased a machinery for Rs. 2,25,000. They paid Rs. 1,25,000
in cash and issued 10,000 equity shares of Rs. 10 each at par.
You are required to prepare a Cash Flow Statement for the year ended 31st March 2015 as per
AS-3 by using indirect method.

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Q2. From the following information, prepare a Cash Flow Statement:

BALANCE SHEETS AS AT …
Particular Note 31.03.2015 31.03.2014
Rs. ‘000 Rs. ‘000
I. EQUITY AND LIABILITIES
(1) Shareholders’ Funds
(a) Share capital 1150 1000
(b) Reserves and Surplus 1 490 400
(2) Non-Current Liabilities (Long Term Loan) 400 500
(3) Current Liabilities
Trade Payables 400 500
Short-term Provisions 2 185 150
Total 2625 2550
II. ASSETS
(1) Non-Current Assets
Tangible Fixed Assets 3 1300 1250
Non-Current Investments 50 100
(2) Current Assets
Inventories 280 300
Trade Receivables 420 400
Cash & Cash equivalents 575 500
Total 2625 2550

NOTE 1: RESERVES AND SURPLUS

Particulars 31.03.2015 31.03.2014
Rs. ‘000 Rs.’000
General Reserve 300 250
Profit and Loss A/c 180 150
Capital Reserve 10 –
490 400

NOTE 2: SHORT-TERM PROVISIONS

Particulars 31.03.2015 31.03.2014
Rs. ‘000 Rs. ‘000
Proposed Dividend 125 100
Provision for Tax 60 50
185 150

NOTE 3: TANGIBLE FIXED ASSETS

Particulars 31.03.2015 31.03.2014
Rs. ‘000 Rs. ‘000
Land & Building 480 500
Machinery 820 750
1300 1250
Additional Information:
(i) Dividend of Rs. 1,00,000 was paid during the year.
(ii) Machinery purchased during the year for Rs. 1,25,000.

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 (iii) Company sold some investment at a profit of Rs. 10,000 which was credited to capital
reserve.
(iv) Depreciation written off on Land & Building Rs. 20,000.
(v) Income tax provided during the year Rs. 55,000.

Q3. From the following information, prepare a Cash Flow Statement:

BALANCE SHEETS AS AT …
Particular Note 31.03.2015 31.03.2014
Rs. Rs.
I. EQUITY AND LIABILITIES
(1) Shareholders’ Funds
(c) Share capital 1 18,80,000 16,00,000
(d) Reserves and Surplus 2 11,00,000 8,40,000
(2) Non-Current Liabilities (9% Debentures) 2,80,000 4,00,000
(3) Current Liabilities
Trade Payables 5,20,000 4,80,000
Other Current Liabilities (Unpaid Dividend) 16,000 –
Short-term Provisions 3 4,84,000 4,80,000
Total 42,80,000 38,00,000
I. ASSETS
(1) Non-Current Assets
Tangible Fixed Assets 38,00,000 32,00,000
Accumulated Depreciation (11,60,000) (9,20,000)
Non-Current Investments 3,20,000 4,00,000
(2) Current Assets
Cash & Cash equivalents 10,000 10,000
Other Current Assets 13,10,000 11,10,000
Total 42,80,000 38,00,000

NOTE 1: SHARE CAPITAL

Particulars 31.03.2015 31.03.2014
Rs. Rs.
Equity Share Capital 16,00,000 12,00,000
10% Preference Share Capital 2,80,000 4,00,000
18,80,000 16,00,000

NOTE 2: RESERVES AND SURPLUS

Particulars 31.03.2015 31.03.2014
Rs. Rs.
General Reserve 8,00,000 6,80,000
Profit and Loss A/c 2,60,000 1,60,000
Capital Reserve 40,000
11,00,000 8,40,000

NOTE 3: SHORT-TERM PROVISIONS

Particulars 31.03.2015 31.03.2014
Rs. Rs.
Proposed Dividend 1,44,000 1,20,000
Provision for Tax 3,40,000 3,60,000
4,84,000 4,80,000

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 Additional Information:
(i) The company sold one fixed asset for Rs. 1,00,000, the cost of which was Rs. 2,00,000 and the
depreciation provided on it was Rs. 80,000. The company also decided to write off another
fixed asset costing Rs. 56,000 on which depreciation amounting to Rs. 40,000 has been
provided. Depreciation on fixed assets provided Rs. 3,60,000.
(ii) Sold some investment at a profit of Rs. 40,000, which was credited to capital reserve.
(iii) Debentures and preference share capital redeemed at 5% premium.
(iv) Company decide to value inventories at cost, whereas previously the practice was to value
inventories at cost less 10%. The inventories according to books on 31.3.2014 was Rs.
2,16,000. The inventories on 31.3.2015 was correctly valued at Rs. 3,00,000.
Q4. From the following information, prepare a Cash Flow Statement:
BALANCE SHEET AS AT …
Particular Note 31.03.2015 31.03.2014
Rs. Rs.
I. EQUITY AND LIABILITIES
(1) Shareholders’ Funds
(a) Share capital 1 6,00,000 7,00,000
(b) Reserves and Surplus 2 3,60,000 2,75,000
(2) Non-Current Liabilities (9% Debentures) 2,00,000 –
(3) Current Liabilities
Trade Payables 1,15,000 1,10,000
Other Current Liabilities 30,000 20,000
Short-term Provisions 3 1,85,000 1,20,000
Total 14,90,000 12,25,000
II. ASSETS
(1) Non-Current Assets
Tangible Fixed Assets 4 9,15,000 7,00,000
Non-Current Investments 50,000 80,000
Other Non-Current Assets 5 1,25,000 65,000
(2) Current Assets
Inventories 95,000 90,000
Trade Receivables 2,40,000 2,00,000
Cash & Cash equivalents 65,000 90,000
Total 14,90,000 12,25,000

NOTE 1: SHARE CAPITAL

Particulars 31.03.2015 31.03.2014
Rs. Rs.
Equity Share Capital 6,00,000 5,00,000
10% Preference Share Capital – 2,00,000
6,00,000 7,00,000

NOTE 2: RESERVE AND SURPLUS

Particulars 31.03.2015 31.03.2014
Rs. Rs.
General Reserve 1,00,000 2,50,000
Profit and Loss A/c 60,000 25,000
Capital Reserve 1,00,000 –
Capital Redemption Reserve 1,00,000 –
3,60,000 2,75,000

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 NOTE 3: SHORT-TERM PROVISIONS
Particulars 31.03.2015 31.03.2014
Rs. Rs.
Proposed Dividend 90,000 60,000
Provision for Tax 95,000 60,000
1,85,000 1,20,000

NOTE 4: TANGIBLE FIXED ASSETS

Particulars 31.03.2015 31.03.2014
(Rs.) (Rs.)
Land & Building 1,50,000 2,00,000
Machinery 7,65,000 5,00,000
9,15,000 7,00,000

NOTE 5: OTHER NON-CURRENT ASSETS

Particulars 31.03.2015 31.03.2014
(Rs.) (Rs.)
Voluntary Separation Payments 1,25,000 65,000

Additional Information:
(i) A piece of land has been sold out for Rs. 1,50,000 (Cost: Rs. 1,20,000) and the balance land
was revalued. Capital Reserve consisted of profit on sale and profit on revaluation.
(ii) During the year on 1st April, 2014 a plant was sold for Rs. 90,000 (Original Cost: Rs. 70,000 and
W.D.V.: Rs. 50,000) and Debentures worth Rs. 1 lakhs was issued at par as part consideration
for plant of Rs. 4.5 lakhs acquired. Depreciation @ 15% has been written off from Plant
account but no depreciation has been charged on Land and Building.
(iii) Part of the investments (Cost Rs. 50,000) was sold for Rs. 70,000.
(iv) Income tax liability for the current year was estimated at Rs. 1,35,000.
(v) Pre-acquisition dividend received Rs. 5,000 was adjusted against cost of investment.
(vi) Voluntary separation cost of Rs. 50,000 was adjusted against General Reserve.
Q5. Raj Ltd. gives you the following information for the year ended 31st March, 2015:
(i) Sales for the year Rs. 48,00,000. The company sold goods for cash only.
(ii) Cost of goods sold was 75% of sales.
(iii) Closing inventory was higher than opening inventory by Rs. 50,000.
(iv) Closing Trade Payables exceed the Opening Trade Payables by Rs. 1,00,000
(v) Tax paid during the year amounts to Rs. 1,50,000.
(vi) Amounts paid to Trade Payables during the year Rs. 35,50,000.
(vii) Administrative and Selling expenses paid Rs. 3,60,000.
(viii) One new machinery was acquired during the year for Rs. 6,00,000.
(ix) Dividend paid during the year Rs. 1,20,000.
(x) Cash in hand and of Bank at the end Rs. 70,000.
(xi) Cash in hand and at Bank at the beginning Rs. 50,000.
Required: Prepare Cash Flow Statement as per the prescribed Accounting standard.
Q6. J. Ltd. presents you the following information for the year ended 31st March, 2015:
(Rs. in lacs)
(i) Net profit before tax provision 36,000
(ii) Dividend paid 10,202
(iii) Income-tax paid 5,100
(iv) Book value of assets sold 222
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 Loss on sale of asset 48
(v) Depreciation debited in P&L Account 24,000
(vi) Capital grant received –amortized in P&L A/c 10
(vii) Book value of investment sold 33,318
Profit on sale of investment 120
(viii) Interest income from investment credited in P&L A/c 3,000
(ix) Interest expenditure debited in P&L A/c 12,000
(x) Interest actually paid (Financing activity) 13,042
(xi) Increase in working capital [Excluding cash and bank balance] 67,290
(xii) Purchase of fixed assets 22,092
(xiii) Expenditure on construction work 41,688
(xiv) Gran received for capital projects 18
(xv) Long term borrowings from banks 55,866
(xvi) Provision for income-tax debited in P&L A/c 6,000
Cash and bank balance at the beginning 6,000
Cash and bank balance at the end 8,000
You are required to prepare a Cash Flow Statement as per AS 3 (Revised)
Q7. From the information contained in Income Statement and Balance Sheet of ‘A’ Ltd., Prepare Cash Flow
Statement:
INCOME STATEMENT FOR THE YEAR ENDED MARCH 31, 2015
Particulars Rs.
Net sales (A) 2,52,00,000
Less:
Cash Cost of Sales 1,98,00,000
Depreciation 6,00,000
Salaries and wages 24,00,000
Operating Expenses 8,00,000
Provision for Taxation 8,80,000
(B) 2,44,80,000
Net Operating Profit (A - B) 7,20,000
Non-recurring Income – Profits on sale of equipment 1,20,000
8,40,000
Retained earnings and profits brought forward 15,18,000
23,58,000
Dividends declared and paid during the year 7,20,000
Profit and Loss A/c balance as on March 31, 2015 16,38,000
BALANCE SHEETS AS AT …
Particular Note 31.03.2015 31.03.2014
Rs. Rs.
I. EQUITY AND LIABILITIES
(1) Shareholders’ Funds
(a) Share capital 44,40,000 36,00,000
(b) Reserves and Surplus (P&L A/c) 16,38,000 15,18,000
(2) Non-Current Liabilities – –
(3) Current Liabilities
Trade Payables 23,40,000 24,00,000
Other Current Liabilities 1 6,12,000 3,60,000
Total 90,30,000 78,78,000
II. ASSETS
(1) Non-Current Assets
Tangible Fixed Assets 67,20,000 40,80,000

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 Accumulated Depreciation (13,20,000) (12,00,000)
(2) Current Assets
Inventories 9,60,000 26,40,000
Trade Receivables 18,60,000 16,80,000
Cash & Cash Equivalents 7,20,000 6,00,000
Short Term Loans & Advances 90,000 78,000
Total 26,00,000 24,50,000
NOTE 1: OTHER CURRENT LIABILITIES
Particulars 31.03.2015 31.03.2014
(Rs.) (Rs.)
Income Tax Payables 1,32,000 1,20,000
Outstanding Expenses 4,80,000 2,40,000
6,12,000 3,60,000
The original cost of equipment sold during the year was Rs. 7,20,000.
Q8. From the following information, prepare a Cash Flow Statement:
BALANCE SHEETS AS AT …
Particular Note 31.03.2015 31.03.2014
Rs. Rs.
I. EQUITY AND LIABILITIES
(1) Shareholders’ Funds
(a) Share capital 12,00,000 12,00,000
(b) Reserves and Surplus (P&L A/c) 10,00,000 8,50,000
(2) Non-Current Liabilities [Long Term Loans] 10,60,000 10,00,000
(3) Current Liabilities
Trade Payables 4,00,000 3,50,000
Total 36,60,000 34,00,000
II. ASSETS
(1) Non-Current Assets
Tangible Fixed Assets 20,00,000 17,00,000
Non-Current Investments 2,00,000 2,00,000
(2) Current Assets
Inventories 7,00,000 6,80,000
Trade Receivables 6,90,000 7,60,000
Cash & Cash Equivalents 70,000 60,000
Total 36,60,000 34,00,000
INCOME STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2015
Particulars Rs. Rs.
Sales 40,80,000
Less: cost of sales (27,20,000)
Gross Profit 13,60,000
Less: Operating Expenses:
Administrative Expenses (4,60,000)
Depreciation (2,20,000) (6,80,000)
Operating Profit 6,80,000
Add: Non-Operating incomes (dividend received) 50,000
7,30,000
Less: interest paid (1,40,000)
Profit before tax 5,90,000
Less: income-tax (2,60,000)
Profit after tax 3,30,000
STATEMENT OF RETAINED EARNINGS

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 Particulars Rs.
Opening balance 8,50,000
Add: Profit 3,30,000
11,80,000
Less: Dividend paid (1,80,000)
Closing balance 10,00,000
Q9. From the following information, prepare a Cash Flow Statement:
BALANCE SHEETS AS AT …
Particular Note 31.03.2015 31.03.2014
Rs. Crores Rs. Crores
I. EQUITY AND LIABILITIES
(1) Shareholders’ Funds
(a) Share capital 140 140
(b) Reserves and Surplus 110 92
(2) Non-Current Liabilities [Debentures] 135 40
(3) Current Liabilities
Trade Payables 230 310
Other Current Liabilities 70 60
Short-term Provisions (Provision for tax) 15 8
Total 700 650
II. ASSETS
(1) Non-Current Assets
Tangible Fixed Assets 430 309
Accumulated depreciation (218) (194)
Non-Current Investments 60 75
(2) Current Assets
Inventories 205 160
Trade Receivables 180 270
Cash & Cash Equivalents 26 10
Other Current Assets (Prepaid Expenses) 17 20
Total 700 650
INCOME STATEMENT OF XYZ LTD. FOR THE YEAR ENDED MARCH 31, 2015
Rs. in Crores
Sales Rs. 1,000
Less: cost of goods sold 530
Gross Margin 470
Less: Operating expenses 352
Net Operating Income 118
Non-Operating Items:
Loss on sale of equipment (4)
Income before taxes 114
Less: Income-taxes 48
Net Income 66
Additional information:
(i) Dividends of Rs. 48 crores were paid in during the year.
(ii) The loss on sale of equipment of Rs. 4 crore reflects a transaction in which equipment with an
original cost of Rs. 12 crore and accumulated depreciation of Rs. 5 crore were sold for Rs 3
crore in cash.
Q10. From the following information, prepare a Cash Flow Statement:
BALANCE SHEET AS AT …
Particular Note 31.03.2015 31.03.2014
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 Rs. ‘000 Rs. ‘000
I. EQUITY AND LIABILITIES
(1) Shareholders’ Funds
(a) Share capital 1500 1250
(b) Reserves and Surplus 3410 1380
(2) Non-Current Liabilities [Long Term Deb] 1110 1040
(3) Current Liabilities
Trade Payables 150 1890
Other Current Liabilities 1 630 110
Total 6800 6660
II. ASSETS
(1) Non-Current Assets
Tangible Fixed Assets 2180 1910
Accumulated depreciation (1450) (1060)
Non-Current Investments 2500 2500
(2) Current Assets
Inventories 900 1950
Trade Receivables 1700 1200
Cash & Cash Equivalents 870 160
Other Current Assets (Interest Receivable) 100 –
Total 6800 6660
NOTE 1: OTHER CURRENT LIABILITIES
Particulars 31.03.2015 31.03.2014
(Rs.) ‘000 (Rs.) ‘000
Interest Payable 230 100
Income Tax Payable 400 1000
630 1100
STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31.3.2015
Rs.
Sales 30,650
Cost of sales (26,000)
Gross Profit 4,650
Depreciations (450)
Administrative and selling expenses (910)
Interest expenses (400)
Interest income 300
Dividend income 200
Net profit before taxation and extraordinary items 3,390
Extraordinary items:
Insurance proceeds from earthquake disaster settlement 140
Net profit after extraordinary items 3,530
Income tax (300)
3,230
Additional information:
(i) An amount of Rs. 250 was raised from the issue of share capital and a further Rs. 250 was
raised from long-term borrowings:
(ii) Interest expense was Rs. 400 of which Rs. 170 was paid during the period Rs. 100 relating to
interest expense of the prior period was also paid during the period.
(iii) Dividends paid were Rs 1,200.
(iv) Tax deducted at source on dividends received (including in the tax expense of Rs. 300 for the
year) amounted to Rs. 40.

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 (v) During the period the enterprise acquired fixed assets for Rs. 350. The payment was made in
cash.
(vi) Plant with original cost of Rs. 80 and accumulated depreciation of Rs. 60 was sold for Rs. 20.
(vii) Sundry Trade Receivables and Sundry Trade Payables include amounts relating to credit sales
and credit purchase only.
Q11. On the basis of the following information prepare a Cash Flow Statement for the year ended 31 st
March, 2015:
(i) Total sales for the year were Rs. 199 crore out of which cash sales amounted to Rs. 131 crore.
(ii) Cash collections from credit customers during the year totaled Rs. 67 crore.
(iii) Cash paid to suppliers of goods and services and to the employees of the enterprise amounted
to Rs. 159 crore.
(iv) Fully paid preference share of the face value of Rs. 16 crore were redeemed and equity shares
of the face value of Rs. 16 crore were allotted as fully paid up at a premium of 25%.
(v) Rs. 13 crore were paid by way of income tax.
(vi) Machine of the book value of Rs. 21 crore was sold at a loss of Rs. 30 lakhs and a new machine
was installed at a total cost of Rs. 40 crore.
(vii) Debenture interest amounting Rs. 1 crore was paid.
(viii) Dividends totaling Rs. 10 crore was paid on equity and preference shares. Corporate dividend
tax @ 17% was also paid.
(ix) On 31st March, 2014 balance with bank and cash on hand totaled Rs. 9 crore.
Q12. Surya Ltd. has provided you the following particulars. Prepare Cash Flow from Operating Activities
by Indirect Method in accordance with AS 3:
PROFIT & LOSS ACCOUNT OF SURYA LTD.
For the year ended 31st March, 2015
Particulars Rs. Particulars Rs.
To depreciation 86,700 By Operating Profit before depreciation 11,01,600
To Patents written off 35,000 By Profit on sale on investments 10,000
To Provision for tax 1,25,000 By refund of Tax 3,000
To Proposed dividend 72,000 By insurance claim-Major Fire Settlement 1,00,000
To Transfer to Reserve 87,000
To Net Profit 8,08,900
12,14,600 12,14,600
Additional information:
31.3.2014 31.3.2015
Rs. Rs.
Stock 1,20,000 1,60,000
Trade Debtors 7,500 75,000
Trade Creditors 23,735 87,525
Provision for Tax 1,18,775 1,25,000
Prepaid Expenses 15,325 12,475
Marketable Securities 11,775 29,325
Cash Balance 25,325 35,340
Q13. Prepare Cash Flow for Gamma Ltd., for the year ending 31.3.2014 from the following information:
(1) Sales for the amounted to Rs. 135 crores out of which 60% was sales.
(2) Purchases for the year amounted to Rs. 55 crores out of which credit purchase was 80%.
(3) Administrative and selling expenses amounted to Rs. 18 crores and salary paid amounted to
Rs. 22 crores.
(4) The company redeemed debentures of Rs. 20 crores at a premium of 10%. Debenture holders
were issued equity shares of Rs. 15 crores towards redemption and the balance was paid in
cash. Debenture interest paid during the year was Rs. 1.5 crores.
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 (5) Dividend paid during the year amounted to Rs. 10 crores. Dividend distribution tax @ 17%
was also paid.
(6) Investment costing Rs. 12 crores were sold at a profit of Rs. 2.4 crores.
(7) Rs. 8 crores was paid towards income tax during the year.
(8) A new plant costing Rs. 21 crore was purchased in part exchange of an old plant. The book
value of the old plant was Rs. 12 crores but the vendor took over the old plant at a value of
Rs. 10 crore only. The balance was paid in cash to the vendor.
(9) The following balances are also provided
Rs. in crores Rs. in crores
1.4.2013 31.3.2014
Debtors 45 50
Creditors 21 23
Bank 6
Q14. The following summary cash account has been extracted from the company’s accounting records:
Summary Cash Account
Rs. ‘000
Balance at 1-1-X8 35
Receipt from customers 2,783
Issue of shares 300
Sale of fixed assets 128
3,246
Payments to suppliers 2,047
Payments for fixed assets 230
Payments for overheads 115
Wages and salaries 69
Taxation 243
Dividends 80
Repayments of bank loan 250 (3,034)
Balance at 31-12-X8 212
st
Prepare Cash Flow Statement of this company Hills Ltd., for the year ended 31 December 19X8 in
accordance with AS 3 (Revised)
The company does not have any cash equivalents.
Q15. Following is the cash flow abstract of Alpha Ltd. for the years ended 31st March, 2006:
Cash Flow Abstract
Inflows Rs. Outflows Rs.
Opening Balance: Payment to creditors 90,000
Cash 10,000 Salaries and wages 25,000
Bank 70,000 Payments of overheads 15,000
Share Capital Fixed assets acquired 4,00,000
Shares issues 5,00,000 Debentures redeemed 50,000
Collection from debtors 3,50,000 Banks loans repaid 2,50,000
Sales of fixed assets 70,000 Taxations 55,000
Cash 5,000
Bank 10,000
dividend 1,00,000
Closing Balance:
10,00,000 10,00,000
Prepare Cash Flow Statement for the year ended 31st March 2008 in accordance with Accounting
Standard 3

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Q16. From the following information, prepare Cash Flow Statement:
Cash A/c
To balance b/d 3,00,000 By cash to creditor 4,00,000
To cash sale 4,00,000 By payment for operating expense 1,00,000
To debtor collection 3,00,000 By investment (LT) 50,000
To bank 5,00,000 By Bank 3,00,000
To investment (ST) 1,00,000 By c/d 8,00,000
To Loan 50,000
16,50,000 16,50,000

Bank A/c
To balance b/d 2,00,000 By interest paid 10,000
To cash 3,00,000 By dividend paid 30,000
To investments (LT) 1,00,000 By cash 5,00,000
To sale (M/c) 5,00,000 By investments (ST) 2,00,000
By balance c/d 3,60,000

11,00,000 11,00,000

Investment (ST)
To balance b/d 7,00,000 By cash 1,00,000
To bank 1,00,000 By balance c/d 7,00,000
8,00,000 8,00,000
Investment (LT)
To balance b/d 1,90,000 By bank 1,00,000
To cash 50,000 By balance c/d 1,40,000

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