2nd Puc Accountancy Chapter 11 Cash Flow Statement Part – 2 Notes | ದ್ವಿತೀಯ ಪಿ.ಯು.ಸಿ ಲೆಕ್ಕಶಾಸ್ತ್ರ ಅಧ್ಯಾಯ – 11 ನೋಟ್ಸ್

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2nd Puc Accountancy Chapter 11 Notes

2nd Puc Accountancy Chapter 11 Cash Flow Statement Part - 2 Notes | ದ್ವಿತೀಯ ಪಿ.ಯು.ಸಿ ಲೆಕ್ಕಶಾಸ್ತ್ರ ಅಧ್ಯಾಯ - 11 ನೋಟ್ಸ್
2nd Puc Accountancy Chapter 11 Cash Flow Statement Part – 2 Notes

2nd Puc Accountancy Chapter 11 Notes

Short Questions with Answers

Q1. How are the various activities classified (as per AS-3 revised) while preparing the cash flow statements?

A: Three types of activities are defined:

1. Operating Activities


2. Financing Activities

3. Investing Activities

Q2. What is a Cash Flow Statement?

A: A financial statement that represents the inflow and outflow of cash and cash equivalents of a company is called a cash flow statement. It shows how well a company can manage its cash position and generates enough cash to pay the obligations in the form of debt and also run the operational expenses.

Q3. What are the objectives of preparing a cash flow statement?

A: The following are the objectives:

  • To determine the inflow and outflow of cash and the cash equivalents obtained from the different kinds of activities.
  • To seek out various reasons responsible for the change in cash balances during the accounting period
  • It helps in depicting the position of the company in terms of liquidity and solvency
  • It also helps in determining the requirement and the corresponding availability of cash for business in the future.

Q4. State the uses of cash flow statements.

A: The following are uses of cash flow statements:

  • Useful for evaluating the cash position of a firm
  • Helpful in finding deficiencies and variations in a firm’s performance which helps in effective decision making
  • It helps in the assessment of the liquidity of a company
  • It analyses cash receipts and payments from the various activities of a company and helps in short-term planning
  • It helps in segregating cash flows obtained from the various activities of the business
  • It helps in providing decisions about the distribution of profit.
  • It is useful for short-term financial analysis

Q5. Prepare a format of cash flow from operating activities under the indirect method.

The format is as follows:

Q6. State the meaning of the terms: Cash Equivalents, Cash flows.

Cash equivalents are investments that are highly liquid in nature and do not change value easily. Cash equivalents are essential for managing short-term cash requirements or any such investments. For example treasury bills.

Cash Flows: It is the inflow and outflow of cash and cash equivalents. Cash inflows boost cash balance and cash outflow has a negative impact on cash balance

Q7. “The nature/type of enterprise can change altogether the category into which a particular activity may be classified.” Do you agree? Illustrate your answer.

Yes, it can happen. For example, there are two firms one is engaged in real estate and the other in general business. For the firm engaged in the real estate sale of a building will be regarded as part of the operating activity while for the firm dealing with general business, the purchase or sale of a building is regarded as an investing activity. Therefore, it can be said that nature and type of enterprise determine the type of activities.

Q8. State clearly what would constitute the operating activities for each of the following enterprises:

(i) Hotel

(ii) Film production house

(iii) Financial enterprise

(iv) Media enterprise

(v) Steel manufacturing unit

(vi) Software development business unit.

(i) Hotels

1. Receipts obtained from the sale of goods to customers.

2. Customer stay, payments of wages and salaries, food items and electricity are operating activities

(ii) Film Production House:

1. Receipts obtained from the selling of film rights to distributors

2. Payment provided to actors, actresses, directors, and other employees.

(iii) Financial Enterprises:

1. Receipts obtained from loan repayments, interest received from investments

2. Salary for employees, expenditure incurred for recovering loans, loan repayment, etc

(iv) Media Enterprises:

1. Receipts that are obtained from various advertisements

2. Payments made to photographers, employees, and reporters

(v) Steel Manufacturing Unit:

1. Receipts obtained from the sale of steel rods, castings, and sheets.

2. Payments made for purchasing iron, coal, and salaries to staff.

(vi) Software Development Business Unit:

1. Receipts obtained for software sales and license renewal

2. Payments towards salaries of employees

Long Question And Practical Questions With Answers

Q1. Describe the “Indirect” method of ascertaining Cash Flow from Operating Activities.

In the indirect method, the cash flow statement begins with net income or loss, and thereafter the additions or deductions from that amount for non-cash expense and revenue items, which results in cash flow from operating activities. Following are some items:

1. For Items that are non-cash in nature like goodwill, depreciation is added towards net profit

2. Expenses that are non-operating in nature like transfer to reserve and loss on sale of fixed assets which are added back to show Net Profit earned.

3. Provisions such as discounts for debtors, doubtful debts, proposed dividends, etc. should be added to Net Profit

4. Any decrease in current assets and an increase in current liabilities is added to operating profit.

The following items get deducted from a net profit of the P & L account

1. Incomes that are non-operating in nature like the sale of fixed assets

2. Non-trading incomes like dividends received, tax refunds, and interest received

3. Increase in current assets and decrease in current liabilities

Karnataka 2nd PUC Accountancy Chapter 11 Cash Flow Statement Notes

Q2. Describe the procedure to prepare a Cash Flow Statement.

The following steps are followed:

1. Determine cash flows obtained from operating activities

2. Determine cash flows obtained from financing activities

3. Determine cash flow obtained from investing activities

4. Determine net increase or decrease which is obtained by adding amounts from all the cash flow activities.

5. Add the opening balance of cash and the cash equivalents and deduct the same from the amount determined in the previous step.

There are two methods that are used for the preparation of cash flow statement

1. Direct Method

2. Indirect Method.

Q3. Explain the major Cash Inflows and outflows from financing activities.

In a firm, the financing activities are associated with capital or long-term funds of the firm, the financing activities bring about change in capital and borrowed funds.

The following cash inflows and outflows as per AS3 can be mentioned here:

1. Cash received from the issuing of shares and similar instruments causes cash inflow

2. Cash received from issuing debentures, obtaining loans, bonds and similar instruments brings cash inflow.

3. Repayments of debentures, loans, and bonds in form of cash are considered cash outflow

4. Buying back shares and debentures which were issued is also a cash outflow

5. Interest payment for debentures, advances, and loans.

6. Dividend payment to equity and preference shareholders.

Q4. Explain the major Cash Inflow and outflows from investing activities.

Investing activities consist of sales and purchase of fixed assets that are long-term in nature, like buildings, land, furniture and plant and machinery, etc. It also includes the sale and purchase of items that are not cash equivalents. If any income is received from these assets it is regarded as a part of investing activities. The major cash inflows and outflows that are involved in investing activities are:

1. Cash receipts that are obtained when fixed assets are sold off and it includes intangible assets.

2. Acquiring fixed assets which also includes intangibles like goodwill using cash payments, the payments is for research and development and assets that are self-constructed.

3. Acquiring shares, debt instruments, or warrants using cash payments

4. Disposal of shares and warrants that yield cash receipts.

5. Loans and cash advances that are made to third parties (does not includes loans and advances made by financial enterprises.

6. Cash receipts obtained from any insurance company for a property that is involved in an accident

7. Cash receipts that are obtained for repayment of loans and cash advances made to third parties.

8. Any type of income that is obtained from fixed assets like interest, dividend, and rent (not in the case of financial enterprises)

Q5. Anand Ltd. arrived at a net income of ₹ 5, 00,000 for the year ended March 31, 2017. Depreciation for the year was ₹ 2, 00,000. There was a profit of ₹ 50,000 on assets sold which was transferred to the Statement of Profit and Loss account. Trade Receivables increased during the year ₹ 40,000 and Trade Payables also increased by ₹ 60,000. Compute the cash flow operating activities by the indirect approach.

The solution to this question is as follows:

Cash Flow from Operating Activities as on March 31, 2017

ParticularsAmount(₹)Amount(₹)
Net Profit during the year5,00,000
Items to be adjusted:
Add: Depreciation2,00,000
Less: Gain on sale of assets(50,000)1,50,000
Operating Profit before Working Capital changes6,50,000
Add: Increase in Trade Payables60,000
Less: Increase in Trade Receivables(40,000)20,000
Net Cash from Operations6,70,000

Q6. From the information given below you are required to calculate the cash paid for the inventory:

Particulars(₹)
Inventory in the beginning40,000
Credit Purchases1,60,000
Inventory in the end38,000
Trade payables in the beginning14,000
Trade payables at the end14,500

The solution for this question is as follows:

Trade Payables Account

Dr. Cr.

DateParticularsJ.F.AmountDateParticularsJ.F.Amount
Cash (Balancing fig.)1,59,500Balance b/d14,000
 Balance c/d14,500Purchases1,60,000
1,74,0001,74,000

Therefore the cash paid for Inventory amounts to ₹ 1, 59,500

Q7. For each of the following transactions, calculate the resulting cash flow and state the nature of cash flow, viz., operating, investing and financing.

(a) Acquired machinery for ₹ 2, 50,000 paying 20% by cheque and executing a bond for the balance payable.

(b) Paid ₹ 2, 50,000 to acquire shares in Informa Tech. and received a dividend of ₹ 50,000 after the acquisition.

(c) Sold machinery of original cost ₹ 2, 00,000 with accumulated depreciation of ₹ 1, 60,000 for ₹

60,000.

The solution for this question is as follows:

(a)
NCERT ACT CLASS 12 Chp 6-9

Part-payment ₹ 50,000 for acquiring machinery ₹ 2, 50,000 is related with Investing Activities

(b)

Amount paid for acquiring shares(2,50,000)
Dividend received50,000
Net Cash used in Investing Activities(2,00,000)

Amount paid to acquire assets and dividends received is a part of Investing Activities.

(c) Inflow of cash of ₹ 60,000 on the sale of machinery is a part of Investing Activities.

Q8. The following is the Profit and Loss Account of Yamuna Limited:

Statement of Profit and Loss of Yamuna Ltd., for the Year, ended March 31, 2017

ParticularsNote No.Amount(₹)
i)Revenue from Operations10,00,000
ii)Expenses
Cost of Materials Consumed150,000
Purchase of Stock-in-trade5,00,000
Other Expenses23,00,000
Total Expenses8,50,000
iii)Profit before Tax (i – ii)1,50,000

Additional information:

(i) Trade receivables decrease by ₹ 30,000 during the year.

(ii) Prepaid expenses increase by ₹ 5,000 during the year.

(iii) Trade payables increase by ₹ 15,000 during the year.

(iv) Outstanding expenses payable increased by ₹ 3,000 during the year.

(v) Other expenses included depreciation of ₹ 25,000. 

Compute net cash from operations for the year ended March 31, 2017, by the indirect method.

The solution to this question is as follows:

Cash Flow from Operating Activities of Yamuna Limited as on March 31, 2017

ParticularsAmountAmount
Net Profit earned during the year1,50,000
Items to be added:
Depreciation25,000
Operating Profit before Working Capital changes1,75,000
Add: Increase in Current Liabilities
Outstanding Expenses3,000
Add: Decrease in Current Assets
Trade Receivables30,000
Stock50,00083,000
Less: Decrease in Current Liabilities
Trade Creditors(15,000)
Less: Increase in Current Assets
Prepaid Expenses(5,000)(20,000)
Net Cash from Operations2,38,000

Q9. Compute cash from operations from the following figures:

(i) Profit for the year 2016-17 is a sum of ₹. 10,000 after providing for depreciation of ₹. 2,000.

(ii) The current assets and current liabilities of the business for the year ended March 31, 2016, and 2015 are as follows:

ParticularMarch
31, 2016
(₹)
March
31, 2017
(₹)
Trade Receivables14,00015,000
Provision for Doubtful Debts1,0001,200
Trade Payables13,00015,000
Inventories5,0008,000
Other Current Assets10,00012,000
Expenses payable1,0001,500
Prepaid Expenses2,0001,000
Accrued Income3,0004,000
Income received in advance2,0001,000

The solution to this question is as follows:

Cash Flow Statement for the Year Ending March 31, 2017

ParticularsDetails(₹)Amount(₹)
Cash from Operating Activities
 Net Profit10,000
Items to be added:
  Depreciation2,0002,000
Operating Profit before Working Capital Adjustments12,000
Less: Increase in Current Assets
Trade Receivables(1,000)
Accrued Income(1,000)
Accrued Income(2,000)
Other Current Assets(3,000)
Inventories
Add: Increase in Current Liabilities
Provision for Doubtful Debts200
Trade Payables2,000
Expense Payable500
Add: Decrease in Current Assets
Prepaid Expenses(1,000)
Less: Decrease in Current Liabilities
Income received in advance1,000
Net Cash From Operating Activities7,700

Q10. From the following particulars of Bharat Gas Limited, calculate Cash Flows from Investing Activities. Also, show the workings clearly preparing the ledger accounts:

Balance Sheet of Bharat Gas Ltd. as on 31 Mar. 2016 and 31 Mar. 2017  

ParticularsNote No.Figures as the end of 2017
(₹)
Figures as at the
end of reporting 2016
(₹)
II) Assets
1. Non-current Assets
a) Fixed assets
i) Tangible assets112,40,00010,20,000
ii) Intangible assets24,60,0003,80,000
b) Non-current investments33,60,0002,60,000
Notes1Tangible assets = Machinery
2Intangible assets = Patents

Notes

Figures of the current yearFigures of the previous year
1. Tangible Assets
Machinery12,40,00010,20,000
2. Intangible Assets
Goodwill3,00,0001,00,000
Patents1,60,0002,80,000
4,60,0003,80,000
3. Non-current Investments
10% long-term investments1,60,00060,000
Investment in land1,00,0001,00,000
Shares of Amartex Ltd.1,00,0001,00,000
3,60,0002,60,000

Additional Information:

(a) Patents were written off to the extent of ₹. 40,000 and some Patents were sold at a profit of ₹. 20,000.

(b) A Machine costing ₹. 1, 40,000 (Depreciation provided thereon ₹. 60,000) was sold for ₹. 50,000. Depreciation charged during the year was ₹. 1, 40,000.

(c) On March 31, 2016, 10% of Investments were purchased for ₹. 1, 80,000, and some Investments were sold at a profit of ₹. 20,000. Interest on Investment was received on March 31, 2017.

(d) Amartax Ltd. paid Dividends @ 10% on its shares.

(e) A plot of Land had been purchased for investment purposes and let out for commercial use and rent received ₹. 30,000.

The solution to this question is as follows:

Cash Flow from Investing Activities

ParticularsAmountAmount
Cash Inflow
Proceeds from Sale of Patents1,00,000
Proceeds from Sale of Machinery50,000
Proceeds from Sale of 10% Long-term Investment1,00,000
Interest received on 10% Long-term Investment6,000
Dividend Received from Amartax Ltd.10,000
Rent Received30,0002,96,000
Cash Outflow
Purchase of Goodwill(2,00,000)
Purchase of Machinery(4,40,000)
Purchase of 10% Long-term Investment(1,80,000)(8,20,000)
Net Cash used in Investing Activities(5,24,000)

Patents Account

Dr. Cr.

DateParticularsJ.F.AmountDateParticularsJ.F.Amount
Balance b/d2,80,000Profit and Loss (written off)40,000
Profit and Loss  (Profit on sale)20,000Bank (sale- Balancing figure)1,00,000
Balance c/d1,60,000
3,00,0003,00,000

Machinery Account

Dr. Cr.

DateParticularsJ.F.AmountDateParticularsJ.F.Amount
Balance b/d10,20,000Depreciation1,40,000
Bank (Purchases- Balancing figure)4,40,000Bank50,000
Profit and Loss30,000
Balance c/d12,40,000
14,60,00014,60,000

10% Long-term Investment Account

Dr. Cr.

DateParticularsJ.F.AmountDateParticularsJ.F.Amount
Balance b/d60,000Bank  (Balancing figure)1,00,000
Bank1,80,000
Profit and Loss (Profit on sale)20,000Balance c/d1,60,000
2,60,0002,60,000

Q11. From the following Balance Sheet of Mohan Ltd., prepare the cash flow Statement:

Balance Sheet of Mohan Ltd., as at 31st March 2016 and 31 March 2017

ParticularsNote No.March 31, 2017
(₹)
March 31, 2016
(₹)
I) Equity and Liabilities
1. Shareholders’ Funds
a) Equity share capital3,00,0002,00,000
b) Reserves and surplus2,00,0001,60,000
2. Non-current liabilities
a) Long-term borrowings1 80,0001,00,000
3. Current liabilities
Trade payables1,20,0001,40,000
Short-term provisions270,00060,000
Total7,70,0006,60,000
II) Assets
1. Non-current assets
Fixed assets35,00,0003,20,000
2. Current assets
a) Inventories1,50,0001,30,000
b) Trade receivables490,0001,20,000
c) Cash and cash equivalents530,00090,000
Total 7,70,0006,60,000

Notes to accounts:

20172016
1. Long-term borrowings
Bank Loan80,0001,00,000
2. Short-term provision
Proposed dividend70,00060,000
3. Fixed assets6,00,0004,00,000
Less: Accumulated Depreciation1,00,00080,000
(Net) Fixed Assets5,00,0003,20,000
4. Trade receivables
Debtors60,0001,00,000
Bills receivables30,00020,000
90,0001,20,000
5. Cash and cash equivalents
Bank30,00090,000

Additional Information:

Machine Costing ₹. 80,000 on which accumulated depreciation was ₹. 50,000 was sold for ₹. 20,000.

The solution to this question is as follows:

Cash Flow Statement of Mohan Ltd.

ParticularsAmountAmount
A.Cash Flow from Operating Activities
Profit as per the Balance Sheet  (2,00,000 – 1,60,000)40,000
Proposed Dividend70,000
Net Profit before Taxation and Extraordinary items1,10,000
Adjustments:
Depreciation70,000
Loss on Sale of Machine10,00080,000
Operating Profit before Working Capital changes1,90,000
Add: Decrease in Current Assets
Debtors40,00040,000
2,30,000
Less: Increase in Current Assets
Inventories(20,000)
Bills Receivable(10,000)
Less: Decrease in Current Liabilities
Trade Payables(20,000)(50,000)
Net Cash from Operations1,80,000
B.Cash Flow from Investing Activities
Proceeds from the Sale of Fixed Assets20,000
Purchases of Fixed Assets(2,80,000)
Net Cash outflow from Investing Activity(2,60,000)
C.Cash Flow from Financing Activities
Issue of Shares1,00,000
Bank Loan Paid(20,000)
Dividend Paid(60,000)
Net Cash from Financing Activities20,000
D.Net Decrease in Cash and Cash Equivalents (A+B+C)(60,000)
Add: Cash and Cash Equivalents in the beginning90,000
E.Cash and Cash equivalents at the end30,000

Fixed Assets Account

Dr. Cr.

DateParticularsJ.F.AmountDateParticularsJ.F.Amount
Balance b/d4,00,000Bank20,000
Bank (Purchases- Balancing fig.)2,80,000Profit and Loss10,000
Accumulated Depreciation50,000
Balance c/d6,00,000
6,80,0006,80,000

Accumulated Depreciation Account

Dr. Cr.

DateParticularsJ.F.AmountDateParticularsJ.F.Amount
Fixed Assets50,000Balance b/d80,000
Balance c/d1,00,000Profit and Loss (Balance fig.)70,000
1,50,0001,50,000

Q12. From the following Balance Sheets of Tiger Super Steel Ltd., prepare the Cash Flow Statement:

Balance Sheet of Tiger Super Steel Ltd. as of 31st March 2014 and 31st March 2017

ParticularsNote No.March 31, 2017
(₹)
March 31, 2016
(₹)
I) Equity and Liabilities
1. Shareholders’ Funds
a) Share capital11,40,0001,20,000
b) Reserves and surplus222,80015,200
2. Current Liabilities
a) Trade payables321,20014,000
b) Other current liabilities42,4003,200
c) Short-term provisions528,40022,400
Total2,14,8001,74,800
II) Assets
1. Non-Current Assets
a) Fixed assets
i) Tangible assets696,40076,000
ii) Intangible assets18,80024,000
b) Non-current investments14,0004,000
2. Current Assets
a) Inventories31,20034,000
b) Trade receivables43,20030,000
c) Cash and Cash Equivalents11,2006,800
Total 2,14,8001,74,800

Notes to accounts:

20172016
1. Share Capital
Equity share capital1,20,00080,000
10% Preference share capital20,00040,000
1,40,0001,20,000
2. Reserves and surplus
General reserve12,0008,000
Balance in the statement of profit and loss10,8007,200
22,80015,200
3. Trade payables
Bills payable21,20014,000
4. Other current liabilities
Outstanding expenses2,4003,200
5. Short-term provisions
Provision for taxation12,80011,200
Proposed dividend15,60011,200
28,40022,400
6. Tangible assets
Land and building20,00040,000
Plant76,40036,000
96,40076,000

Additional Information:
Depreciation Charge on Land & Building ₹ 20,000, and Plant ₹ 10,000 during the year.

The solution to this question is as follows:

Cash Flow Statement of Tiger Super Steels Ltd

ParticularsAmountAmount
A.Cash Flow from Operating Activities
Profit as per the Balance Sheet (10,800 –7,200)3,600
General Reserve4,000
Proposed Dividend15,600
Provision for Taxation12,800
Net Profit before Taxation and Extraordinary36,000
Items to be added:
Depreciation on Land and Building20,000
Depreciation on Plant10,000
Goodwill has written off5,20035,200
Operating Profit before Working Capital changes71,200
Add: Increase in Current Liabilities
Bills Payable7,200
Add: Decrease in Current Assets
Inventories2,80010,000
81,200
Less: Increase in Current Assets
Trade Receivables(13,200)
Less: Decrease in Current Liabilities
Outstanding Expenses(800)(14,000)
Cash Generated from Operating Activities67,200
Less: Income Tax paid(11,200)
Net Cash from Operating Activities56,000
B.Cash Flow from Investing Activities
Purchases of Plant(40,400)
Purchases of Investment(20,000)
Net Cash used in Investing Activities(60,400)
C.Cash Flow from Financing Activities
Issue of Equity Shares40,000
Dividend paid(11,200)
Redemption of 10% Preference Shares(20,000)
Net Cash from Financing Activities8,800
D.Net Increase in Cash and Cash Equivalent4,400
Add: Cash and Cash Equivalent in the beginning6,800
E.Cash and Cash Equivalents at the end11,200

Working Notes:

  1. Plant Account

Dr. Cr.

DateParticularsJ.F.AmountDateParticularsJ.F.Amount
To Balance b/d36,000By Depreciation10,000
To Bank A/c (Purchases- Balancing figure)50,400By Balance c/d76,400
86,40086,400

2.

Net Profit before Tax3,600
Profit and Loss Account12,800
Less: Provision for Tax16,400

Q13. From the following information, prepare a cash flow statement:

ParticularsNote No.31st March
2015
(₹)
31st March
2014
(₹)
I) Equity and Liabilities
1. Shareholders’ Funds
a) Share capital7,00,0005,00,000
b) Reserves and surplus4,70,0002,50,000
2. Non-current Liabilities
(8% Debentures)4,00,0006,00,000
3. Current Liabilities
a) Trade payables9,00,0006,00,000
Total24,70,00019,50,000
II) Assets
1. Non-current assets
a) Fixed assets
i) Tangible7,00,0005,00,000
ii) Intangible-Goodwill1,70,0002,50,000
2. Current assets
a) Inventories6,00,0005,00,000
b) Trade Receivables6,00,0004,00,000
c) Cash and cash equivalents4,00,0003,00,000
Total 24,70,00019,50,000

Additional Information:

Depreciation Charge on the Plant amount to ₹. 80,000.

Cash Flow Statement for the year ending March 31, 2015

ParticularsDetails(₹)Amount(₹)
A.Cash from Operating Activities
Net Profit2,20,000
Items to be Added:
Interest on Debentures48,000
Depreciation on Fixed Assets80,000
Goodwill Written-off80,0002,08,000
Operating Profit before Working Capital Adjustments4,28,000
Add: Increase in Current Liabilities
Creditors3,00,000
Less: Increase in Current Assets
Inventories(1,00,000)
Trade Receivables(2,00,000)
Cash Generated from Operations4,28,000
Less: Tax Paid
Net Cash From Operating  Activities 4,28,000
B.Cash From Investing Activities
Purchase of Fixed Assets (WN)(2,80,000)
Net Cash From Investing Activities(2,80,000)
C.Cash From Financing Activities
Issue of Share Capital2,00,000
Redemption of Debentures(2,00,000)
Interest Paid on Debentures(48,000)(48,000)
Net Cash From Financing Activities (C)(48,000)
Net Increase in Cash (A + B + C)1,00,000
Add: Opening Cash and Cash Equivalents3,00,000
Closing Cash and Cash Equivalents4,00,000

Working Note:

Fixed Assets Account

Dr. Cr.

ParticularsJ.F.Amount(₹)ParticularsJ.F.Amount(₹)
Balance b/d5,00,000Depreciation80,000
Purchases (Balancing Figure)2,80,000Balance c/d7,00,000
7,80,0007,80,000

Q14. From the following Balance Sheet of Yogeta Ltd., prepare the cash flow statement:

ParticularsNote No.31st March
2017
(₹)
31st March
2016
(₹)
I) Equity and Liabilities
1. Shareholders’ Funds
a) Share capital14,00,0002,00,000
b) Reserves and surplus-Surplus2,00,0001,00,000
2. Non-current Liabilities
a) Long-term borrowings21,50,0002,20,000
3. Current Liabilities
a) Short-term borrowings1,00,000
(Bank overdraft)
b) Trade payables70,00050,000
c) Short-term provision50,00030,000
(Provision for taxation)
Total9,70,0006,00,000
II) Assets
1. Non-current assets
a) Fixed assets
i) Tangible7,00,0004,00,000
2. Current assets
a) Inventories1,70,0001,00,000
b) Trade Receivables1,00,00050,000
c) Cash and cash equivalents50,000
Total 9,70,0006,00,000

Notes to Accounts

Particulars31st March
2017
(₹)
31st March
2016
(₹)
1. Share capital
a) Equity share capital3,00,0002,00,000
b) Preference share capital1,00,000
4,00,0002,00,000
2. Long-term borrowings
Long-term loan2,00,000
Long-term Rahul1,50,00020,000
1,50,0002,20,000

Additional Information:
Net Profit for the year after charging ₹. 50,000 as Depreciation was ₹. 1, 50,000. The dividend paid on Shares was ₹. 50,000, Tax Provision created during the year amounted to ₹. 60,000.

The solution to this question is as follows:

Cash Flow Statement of Yogeta Ltd.

ParticularsAmountAmount
A.Cash Flow from Operating Activities
Profit as per Balance Sheet (2,00,000 –1,00,000)1,00,000
Proposed Dividend50,000
Provision for Taxation60,000
Net Profit before Taxation and Extraordinary items2,10,000
Items to be added:
Depreciation50,00050,000
Operating Profit before Working Capital changes2,60,000
Add: Increase in Current liabilities
Trade Payable20,00020,000
2,80,000
Less: Increase in Current Assets
Inventories(70,000)
Trade Receivable(50,000)(1,20,000)
Cash Generated from Operating Activities1,60,000
Less: Income Tax paid(40,000)
Net Cash from Operations1,20,000
B.Cash Flow from Investing Activities
Purchases of Fixed Assets(3,50,000)
Net Cash used in Investing Activities(3,50,000)
C.Cash Flow from Financing Activities
Issue of Equity Shares1,00,000
Issue of Preference Shares1,00,000
Loan from Rahul1,30,000
Less: Repayment of Loan(2,00,000)
Dividend Paid(50,000)
Net Cash from Financing Activities80,000
D.Net decrease in Cash and Cash Equivalent (A+B+C)(1,50,000)
Add: Cash and Cash Equivalents in the beginning50,000
E.Cash and Cash Equivalents at the end (Bank Overdraft)(1,00,000)

Working Notes:

  1. Provision for Taxation Account

Dr. Cr.

DateParticularsJ.F.AmountDateParticularsJ.F.Amount
Bank (Balancing figure)40,000Balance b/d30,000
Balance c/d50,000Profit and Loss60,000
90,00090,000

2. Fixed Assets Account

Dr. Cr.

DateParticularsJ.F.AmountDateParticularsJ.F.Amount
Balance b/d4,00,000Depreciation50,000
Bank3,50,000Balance c/d7,00,000
7,50,0007,50,000

Q15. Following is the Financial Statement of Garima Ltd., prepare cash flow statement.

ParticularsNote No.31st March
2017
(₹)
31st March
2016
(₹)
I) Equity and Liabilities
1. Shareholders’ Funds
a) Share capital14,40,0002,80,000
b) Reserve and surplus-Surplus240,00028,000
2. Current Liabilities
a) Trade payables1,56,00056,000
c) Short-term provisions12,0004,000
(Provision for taxation)
Total6,48,0003,68,000
II) Assets
1. Non-current assets
a) Fixed assets
i) Tangible3,64,0002,00,000
2. Current assets
a) Inventories1,60,00060,000
b) Trade receivables80,00020,000
c) Cash and cash equivalents28,00080,000
d) Other current assets16,0008,000
Total 6,48,0003,68,000

Notes to Accounts

Particulars31st March
2017
(₹)
31st March
2016
(₹)
1. Share capital
a) Equity share capital3,00,0002,00,000
b) Preference share capital1,40,00080,000
4,40,0002,80,000
2. Reserve and surplus
The surplus in the statement of profit and loss at the beginning of the year28,000
Add: Profit of the year16,000
Less: Dividend4,000
Profit at the end of the year40,000

Additional Information:

Interest paid on Debenture ₹ 600

Dividend paid during the year ₹ 4,000

Depreciation charged during the year ₹ 32,000

The solution to this question is as follows:

Cash Flow Statement (Indirect Method)

ParticularsAmountAmount
A.Cash Flow from Operating Activities
Profit as per Balance Sheet  (40,000 – 28,000)12,000
Proposed Dividend4,000
Provision for Taxation12,000
Net Profit before Taxation and Extraordinary items28,000
Items to be added:
Interest paid on Debentures600
Depreciation32,00032,600
Operating Profit before Working Capital changes60,600
Add: Increase in Current liabilities
Trade Payables1,00,000
Less: Increase in Current Assets
Other Current Assets(8,000)
Inventories(1,00,000)
Trade Receivables(60,000)(68,000)
Cash generated from Operating Activities(7,400)
Less: Income Tax paid(4,000)
Net Cash used in Operating Activities(11,400)
B.Cash Flow from Investing Activities
Purchase of Fixed Assets(1,96,000)
Net Cash used in Investing Activities(1,96,000)
C.Cash Flow from Investing Activities
Issue of Equity Shares1,00,000
Issue of Preference Shares60,000
    Less: Interest Paid on Debentures(600)
Less: Dividend Paid(4,000)
Net Cash from Financing Activities1,55,400
D.Net decrease in cash and cash equivalent (A+B+C)(52,000)
Add: Cash and Cash Equivalents in the beginning80,000
E.Cash and Cash Equivalents at the end28,000

Working Notes:

Plant and Machinery Account

Dr. Cr.

DateParticularsJ.F.AmountDateParticularsJ.F.Amount
Balance b/d2,00,000Depreciation32,000
Bank (Purchases- Balancing fig.)1,96,000Balance c/d3,64,000
3,96,0003,96,000

Q16. From the following Balance Sheet of Computer India Ltd., prepare a cash flow statement.

ParticularsNote No.31st March
2017
(₹)
31st
March
2016
(₹)
I) Equity and Liabilities
1. Shareholders’ Funds
a) Share capital50,00040,000
b) Reserves and surplus-Surplus13,7003,000
2. Non-Current Liabilities
10% Debentures6,5006,000
3. Current Liabilities
a) Short-term borrowings26,80012,500
b) Trade payables11,00012,000
c) Short-term provisions310,0008,000
Total88,00081,500
II) Assets
1. Non-current assets
a) Fixed assets425,00030,000
2. Current assets
a) Inventories35,00030,000
b) Trade receivables24,00020,000
c) Cash and cash equivalents-cash3,5001,200
d) Other current assets-prepaid exp.500300
Total 88,00081,500

Notes to Accounts

Particulars31st March2017(₹)31st
March
2016(₹)
1.Reserve and surplus
(i) Balance in the statement of profit and loss1,2001,000
(ii) General reserve2,5002,000
3,7003,000
2.Short-term borrowings
Bank Overdraft6,80012,500
3.Short-term provisions
(i) Provision for taxation4,2003,000
(ii) Proposed dividend5,8005,000
10,0008,000
4.Fixed Assets:
  Fixed Assets40,00041,000
  Less: Accumulated Depreciation(15,000)(11,000)
25,00030,000

Additional Information:

Interest paid on Debenture ₹. 600

The solution to this question is as follows:

Cash Flow Statement of Computer India Ltd. 

ParticularsAmountAmount
A.Cash Flow from Operating Activities
Profit as per Balance Sheet (1,200 – 1,000)200
Proposed Dividend5,800
General Reserve500
Provision for Taxation4,200
Net Profit before Tax and Extraordinary items10,700
Items to be added
Provision for Depreciation4,000
Interest paid on Debentures6004,600
Operating Profit before Working Capital changes15,300
Adjustments
Less: Increase in Current Assets
Trade Receivables(4,000)
Inventories(5,000)
Prepaid Expenses(200)(9,200)
6,100
Less: Decrease in Current Liabilities
Trade Creditors(1,000)(1,000)
Cash generated from Operating Activities5,100
Less: Income Tax Paid(3,000)
Net Cash from Operation2,100
B.Cash Flow from Investing Activities
Sale of Fixed Assets1,000
Net Cash from Investing Activities1,000
C.Cash Flow from Financing Activities
Issue of Equity Shares10,000
Issue of 10% Debentures500
Less: Dividend paid(5,000)
Less: Interest paid(600)
Net Cash from Financing Activities4,900
D.Net Increase in Cash and Cash Equivalent (A+B+C)8,000
Add: Cash and Cash Equivalent at the beginning
Cash1,200
Bank Overdraft(12,500)(11,300)
E.Cash and Cash Equivalents at the end
Cash3,500
Bank Overdraft(6,800)(3,300)

FAQ:

1. What is a Cash Flow Statement?

A financial statement that represents the inflow and outflow of cash and cash equivalents of a company is called a cash flow statement. It shows how well a company can manage its cash position and generates enough cash to pay the obligations in the form of debt and also run the operational expenses.

2. How are the various activities classified (as per AS-3 revised) while preparing cash flow statements?

1. Operating Activities
2. Financing Activities
3. Investing Activities

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