Questions for Practice | Q 1 | Page 272
Short Answer Question
What is a Cash Flow Statement?
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Questions for Practice | Q 2 | Page 272
Short Answer Question
How are the various activities classified (as per AS-3 revised) while preparing cash flow statement?
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Questions for Practice | Q 3 | Page 272
Short Answer Question
State the uses of cash flow statement?
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Questions for Practice | Q 4 | Page 272
Short Answer Question
What are the objectives of preparing cash flow statement?
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Questions for Practice | Q 5 | Page 272
Short Answer Question
State the meaning of the term: Cash Equivalents
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Questions for Practice | Q 5 | Page 272
What is meant by 'Cash Flows' ?
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Questions for Practice | Q 6 | Page 272
Short Answer Question
Prepare a format of cash flow from operating activities under indirect method.
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Questions for Practice | Q 7 | Page 272
Short Answer Question
State clearly what would constitute the operating activities for each of the follow in the following of enterprises:
(i) Hotel
(ii) Film production house
(iii) Financial enterprise
(iv) Media enterprise
(v) Steel manufacturing unit
(vi) Software development business unit.
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Questions for Practice | Q 8 | Page 272
Short Answer Question
“The nature/type of enterprise can change altogether the category into which a particular activity may be classified.” Do you agree? Illustrate your answer.
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Questions for Practice | Q 1 | Page 272
Long Answer Question
Describe the procedure to prepare Cash Flow Statement.
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Questions for Practice | Q 2 | Page 272
Long Answer Question
Describe"Indirect" method of ascertaining Cash Flow from Operating Activities.
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Questions for Practice | Q 3 | Page 272
Long Answer Question
Explain the major Cash Inflow and outflows from investing activities.
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Questions for Practice | Q 4 | Page 272
Long Answer Question
Explain the major Cash Inflows and outflows from financing activities.
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Questions for Practice | Q 1 | Page 272
Anand Ltd., arrived at a net income of Rs 5,00,000 for the year ended March 31, 2017. Depreciation for the year was Rs 2,00,000. There was a profit of Rs 50,000 on assets sold which was transferred to Statement of profit and Loss account. Trade Receivables increased during the year Rs 40,000 and Trade Payables also increased by Rs 60,000. Compute the cash flow operating activities by the indirect approach.
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Questions for Practice | Q 2 | Page 273
From the information given below you are required to calculate the cash paid for the inventory:
Particulars | (Rs) |
Inventory in the beginning | 40,000 |
Credit Purchases | 1,60,000 |
Inventory in the end | 38,000 |
Trade payables in the beginning | 14,000 |
Trade payables in the end | 14,500 |
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Questions for Practice | Q 3 | Page 273
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 Rs 2,50,000 paying 20% by cheque and executing a bond for the balance payable.
(b) Paid Rs 2,50,000 to acquire shares in Informa Tech. and received a dividend of Rs 50,000 after acquisition.
(c) Sold machinery of original cost Rs 2,00,000 with an accumulated depreciation of Rs 1,60,000 for Rs 60,000.
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Questions for Practice | Q 4 | Page 273
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 | |||
Particulars | Note No. | Amount (Rs) | |
i) | Revenue from Operations | 10,00,000 | |
ii) | Expenses | ||
Cost of Materials Consumed | 1 | 50,000 | |
Purchase of Stock-in-trade | 5,00,000 | ||
Other Expenses | 2 | 3,00,000 | |
Total Expenses | 8,50,000 | ||
iii) | Profit before Tax (i – ii) | 1,50,000 | |
Additional information:
(i) Trade receivables decrease by Rs 30,000 during the year.
(ii) Prepaid expenses increase by Rs 5,000 during the year.
(iii) Trade payables increase by Rs 15,000 during the year.
(iv) Outstanding expenses payable increased by Rs 3,000 during the year.
(v) Other expenses included depreciation of Rs 25,000.
Compute net cash from operations for the year ended March 31, 2017 by the indirect method.
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Questions for Practice | Q 5 | Page 274
Compute cash from operations from the following figures:
(i) Profit for the year 2016-17 is a sum of Rs. 10,000 after providing for depreciation of Rs. 2,000.
(ii) The current assets and current liabilities of the business for the year ended March 31, 2016 and 2015 are as follows:
| Particular | March 31, 2016 (Rs) | March 31, 2017 (Rs) |
| Trade Receivables | 14,000 | 15,000 |
| Provision for Doubtful Debts | 1,000 | 1,200 |
| Trade Payables | 13,000 | 15,000 |
| Inventories | 5,000 | 8,000 |
| Other Current Assets | 10,000 | 12,000 |
| Expenses payable | 1,000 | 1,500 |
| Prepaid Expenses | 2,000 | 1,000 |
| Accrued Income | 3,000 | 4,000 |
| Income received in advance | 2,000 | 1,000 |
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Questions for Practice | Q 6 | Page 274
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
| Particulars | Note No. | Figures as the end of 2017 (Rs) | Figures as at the end of reporting 2016 (Rs) |
| II) Assets | |||
1. Non-current Assets | |||
a) Fixed assets | |||
i) Tangible assets | 1 | 12,40,000 | 10,20,000 |
ii) Intangible assets | 2 | 4,60,000 | 3,80,000 |
b) Non-current investments | 3 | 3,60,000 | 2,60,000 |
Notes 1 tangible assets = Machinery
2 Intangible assets = Patents
Notes
| Figures of current year | Figures of previous year | |
| 1. Tangible Assets | ||
Machinery | 12,40,000 | 10,20,000 |
| 2. Intangible Assets | ||
Goodwill | 3,00,000 | 1,00,000 |
Patents | 1,60,000 | 2,80,000 |
| 4,60,000 | 3,80,000 | |
| 3. Non-current Investments | ||
10% long term investments | 1,60,000 | 60,000 |
Investment in land | 1,00,000 | 1,00,000 |
Shares of Amartex Ltd. | 1,00,000 | 1,00,000 |
| 3,60,000 | 2,60,000 | |
Additional Information:
(a) Patents were written-off to the extent of Rs. 40,000 and some Patents were sold at a profit of Rs. 20,000.
(b) A Machine costing Rs. 1,40,000 (Depreciation provided thereon Rs. 60,000) was sold for Rs. 50,000. Depreciation charged during the year was Rs. 1,40,000.
(c) On March 31, 2016, 10% Investments were purchased for Rs. 1,80,000 and some Investments were sold at a profit of Rs. 20,000. Interest on Investment was received on March 31, 2017.
(d) Amartax Ltd. paid Dividend @ 10% on its shares.
(e) A plot of Land had been purchased for investment purposes and let out for commercial use and rent received Rs. 30,000.
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Questions for Practice | Q 7 | Page 275
From the following Balance Sheet of Mohan Ltd., prepare cash flow Statement:
Balance Sheet of Mohan Ltd.,
as at 31st March 2016 and 31 March 2017
| Particulars | Note No. | March 31, 2017 (Rs) | March 31, 2016 (Rs) |
| I) Equity and Liabilities | |||
1. Shareholders’ Funds | |||
a) Equity share capital | 3,00,000 | 2,00,000 | |
b) Reserves and surplus | 2,00,000 | 1,60,000 | |
2. Non-current liabilities | |||
a) Long-term borrowings | 1 | 80,000 | 1,00,000 |
3. Current liabilities | |||
Trade payables | 1,20,000 | 1,40,000 | |
Short-term provisions | 2 | 70,000 | 60,000 |
| Total | 7,70,000 | 6,60,000 | |
| II) Assets | |||
1. Non-current assets | |||
Fixed assets | 3 | 5,00,000 | 3,20,000 |
2. Current assets | |||
a) Inventories | 1,50,000 | 1,30,000 | |
b) Trade receivables | 4 | 90,000 | 1,20,000 |
c) Cash and cash equivalents | 5 | 30,000 | 90,000 |
| Total | 7,70,000 | 6,60,000 |
Notes to accounts:
| 2017 | 2016 | |
| 1. Long-term borrowings | ||
Bank Loan | 80,000 | 1,00,000 |
| 2. Short-term provision | ||
Proposed dividend | 70,000 | 60,000 |
| 3. Fixed assets | 6,00,000 | 4,00,000 |
Less: Accumulated Depreciation | 1,00,000 | 80,000 |
(Net) Fixed Assets | 5,00,000 | 3,20,000 |
| 4. Trade receivables | ||
Debtors | 60,000 | 1,00,000 |
Bills receivables | 30,000 | 20,000 |
| 90,000 | 1,20,000 | |
| 5. Cash and cash equivalents Bank | 30,000 | 90,000 |
Additional Information:
Machine Costing Rs. 80,000 on which accumulated depreciation was Rs. 50,000 was sold for Rs. 20,000.
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Questions for Practice | Q 8 | Page 276
From the following Balance Sheets of Tiger Super Steel Ltd., prepare Cash Flow Statement:
Balance Sheet of Tiger Super Steel Ltd.
as at 31st March 2014 and 31st March 2017
| Particulars | Note No. | March 31, 2017 (Rs) | March 31, 2016 (Rs) |
| I) Equity and Liabilities | |||
1. Shareholders’ Funds | |||
a) Share capital | 1 | 1,40,000 | 1,20,000 |
b) Reserves and surplus | 2 | 22,800 | 15,200 |
2. Current Liabilities | |||
a) Trade payables | 3 | 21,200 | 14,000 |
b) Other current liabilities | 4 | 2,400 | 3,200 |
c) Short-term provisions | 5 | 28,400 | 22,400 |
| Total | 2,14,800 | 1,74,800 | |
| II) Assets | |||
1. Non-Current Assets | |||
a) Fixed assets | |||
i) Tangible assets | 6 | 96,400 | 76,000 |
ii) Intangible assets | 18,800 | 24,000 | |
b) Non-current investments | 14,000 | 4,000 | |
2. Current Assets | |||
a) Inventories | 31,200 | 34,000 | |
b) Trade receivables | 43,200 | 30,000 | |
c) Cash and Cash Equivalents | 11,200 | 6,800 | |
| Total | 2,14,800 | 1,74,800 |
Notes to accounts:
2017 | 2016 | |
1. Share Capital | ||
Equity share capital | 1,20,000 | 80,000 |
10% Preference share capital | 20,000 | 40,000 |
1,40,000 | 1,20,000 | |
2. Reserves and surplus | ||
General reserve | 12,000 | 8,000 |
Balance in statement of profit and loss | 10,800 | 7,200 |
22,800 | 15,200 | |
3. Trade payables | ||
Bills payable | 21,200 | 14,000 |
4. Other current liabilities | ||
Outstanding expenses | 2,400 | 3,200 |
5. Short-term provisions | ||
Provision for taxation | 12,800 | 11,200 |
Proposed dividend | 15,600 | 11,200 |
28,400 | 22,400 | |
6. Tangible assets | ||
Land and building | 20,000 | 40,000 |
Plant | 76,400 | 36,000 |
96,400 | 76,000 |
Additional Information:
Depreciation Charge on Land & Building Rs 20,000, and Plant Rs 10,000 during the year.
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Questions for Practice | Q 9 | Page 277
From the following information, prepare cash flow statement:
| Particulars | Note No. | 31stMarch 2015 (Rs) | 31stMarch 2014 (Rs) |
| I) Equity and Liabilities | |||
1. Shareholders’ Funds | |||
a) Share capital | 7,00,000 | 5,00,000 | |
b) Reserves and surplus | 4,70,000 | 2,50,000 | |
2. Non-current Liabilities | |||
(8% Debentures) | 4,00,000 | 6,00,000 | |
3. Current Liabilities | |||
a) Trade payables | 9,00,000 | 6,00,000 | |
| Total | 24,70,000 | 19,50,000 | |
| II) Assets | |||
1. Non-current assets | |||
a) Fixed assets | |||
i) Tangible | 7,00,000 | 5,00,000 | |
ii) Intangible-Goodwill | 1,70,000 | 2,50,000 | |
2. Current assets | |||
a) Inventories | 6,00,000 | 5,00,000 | |
b) Trade Receivables | 6,00,000 | 4,00,000 | |
c) Cash and cash equivalents | 4,00,000 | 3,00,000 | |
| Total | 24,70,000 | 19,50,000 |
Additional Information:
Depreciation Charge on Plant amount to Rs. 80,000.
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Questions for Practice | Q 10 | Page 278
From the following Balance Sheet of Yogeta Ltd., prepare cash flow statement:
| Particulars | Note No. | 31st March 2017 (Rs) | 31st March 2016 (Rs) |
| I) Equity and Liabilities | |||
1. Shareholders’ Funds | |||
a) Share capital | 1 | 4,00,000 | 2,00,000 |
b) Reserves and surplus-Surplus | 2,00,000 | 1,00,000 | |
2. Non-current Liabilities | |||
a) Long-term borrowings | 2 | 1,50,000 | 2,20,000 |
3. Current Liabilities | |||
a) Short-term borrowings | 1,00,000 | - | |
(Bank overdraft) | |||
b) Trade payables | 70,000 | 50,000 | |
c) Short-term provision | 50,000 | 30,000 | |
(Provision for taxation) | |||
| Total | 9,70,000 | 6,00,000 | |
| II) Assets | |||
1. Non-current assets | |||
a) Fixed assets | |||
i) Tangible | 7,00,000 | 4,00,000 | |
2. Current assets | |||
a) Inventories | 1,70,000 | 1,00,000 | |
b) Trade Receivables | 1,00,000 | 50,000 | |
c) Cash and cash equivalents | - | 50,000 | |
| Total | 9,70,000 | 6,00,000 |
Notes to Accounts -
| Particulars | 31st March 2017 (Rs) | 31st March 2016 (Rs) |
| 1. Share capital | ||
a) Equity share capital | 3,00,000 | 2,00,000 |
b) Preference share capital | 1,00,000 | - |
| 4,00,000 | 2,00,000 | |
| 2. Long term borrowings | ||
Long-term loan | - | 2,00,000 |
Long-term Rahul | 1,50,000 | 20,000 |
| 1,50,000 | 2,20,000 |
Additional Information:
Net Profit for the year after charging Rs. 50,000 as Depreciation was Rs. 1,50,000. Dividend paid on Share was Rs. 50,000, Tax Provision created during the year amounted to Rs. 60,000. 8% loan was repaid on March 31, 2017 and an additional 9% loan of Rs. 1,30,000 was obtained from Rahul on April 01, 2016.
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Questions for Practice | Q 11 | Page 279
Following is the Financial Statement of Garima Ltd., prepare cash flow statement.
| Particulars | Note No. | 31stMarch 2017 (Rs) | 31stMarch 2016 (Rs) |
| I) Equity and Liabilities | |||
1. Shareholders’ Funds | |||
a) Share capital | 1 | 4,40,000 | 2,80,000 |
b) Reserve and surplus-Surplus | 2 | 40,000 | 28,000 |
2. Current Liabilities | |||
a) Trade payables | 1,56,000 | 56,000 | |
c) Short-term provisions | 12,000 | 4,000 | |
(Provision for taxation) | |||
| Total | 6,48,000 | 3,68,000 | |
| II) Assets | |||
1. Non-current assets | |||
a) Fixed assets | |||
i) Tangible | 3,64,000 | 2,00,000 | |
2. Current assets | |||
a) Inventories | 1,60,000 | 60,000 | |
b) Trade receivables | 80,000 | 20,000 | |
c) Cash and cash equivalents | 28,000 | 80,000 | |
d) Other current assets | 16,000 | 8,000 | |
| Total | 6,48,000 | 3,68,000 | |
Notes to Accounts
| Particulars | 31st March 2017 (Rs) | 31st March 2016 (Rs) |
| 1. Share capital | ||
a) Equity share capital | 3,00,000 | 2,00,000 |
b) Preference share capital | 1,40,000 | 80,000 |
| 4,40,000 | 2,80,000 | |
| 2. Reserve and surplus | ||
Surplus in statement of profit and loss at the beginning of the year | 28,000 | |
Add: Profit of the year | 16,000 | |
Less: Dividend | 4,000 | |
| Profit at the end of the year | 40,000 |
Additional Information:
- Depreciation charged during the year Rs 32,000.
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Questions for Practice | Q 12 | Page 280
From the following Balance Sheet of Computer India Ltd., prepare cash flow statement.
| Particulars | Note No. | 31stMarch 2017 (Rs) | 31st March 2016 (Rs) |
| I) Equity and Liabilities | |||
1. Shareholders’ Funds | |||
a) Share capital | 50,000 | 40,000 | |
b) Reserves and surplus-Surplus | 1 | 3,700 | 3,000 |
2. Non-Current Liabilities | |||
10% Debentures | 6,500 | 6,000 | |
3. Current Liabilities | |||
a) Short-term borrowings | 2 | 6,800 | 12,500 |
b) Trade payables | 11,000 | 12,000 | |
c) Short-term provisions | 3 | 10,000 | 8,000 |
| Total | 88,000 | 81,500 | |
| II) Assets | |||
1. Non-current assets | |||
a) Fixed assets | 4 | 25,000 | 30,000 |
2. Current assets | |||
a) Inventories | 35,000 | 30,000 | |
b) Trade receivables | 24,000 | 20,000 | |
c) Cash and cash equivalents-cash | 3,500 | 1,200 | |
d) Other current assets-prepaid exp. | 500 | 300 | |
| Total | 88,000 | 81,500 |
Notes to Accounts
Particulars | 31stMarch 2017 (Rs) | 31st 2016 (Rs) | |
1. | Reserve and surplus | ||
| (i) Balance in statement of profit and loss | 1,200 | 1,000 | |
| (ii) General reserve | 2,500 | 2,000 | |
3,700 | 3,000 | ||
2. | Short-term borrowings | ||
| Bank Overdraft | 6,800 | 12,500 | |
3. | Short-term provisions | ||
| (i) Provision for taxation | 4,200 | 3,000 | |
| (ii) Proposed dividend | 5,800 | 5,000 | |
10,000 | 8,000 | ||
4. | Fixed Assets: | ||
| Fixed Assets | 40,000 | 41,000 | |
| Less: Accumulated Depreciation | (15,000) | (11,000) | |
25,000 | 30,000 |
Additional Information:
Interest paid on Debenture Rs. 600
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I am an expert in financial accounting and specifically in the preparation and analysis of financial statements, including the Cash Flow Statement. My extensive knowledge in accounting principles and regulations, such as AS-3 (revised), enables me to provide detailed insights into the concepts discussed in the article.
1. Cash Flow Statement: A Cash Flow Statement is a financial statement that provides a summary of a company's cash inflows and outflows during a specific period. It consists of three main sections: operating activities, investing activities, and financing activities.
2. Classification of Activities (AS-3 Revised): AS-3 (revised) classifies activities in a Cash Flow Statement into three categories: operating activities, investing activities, and financing activities. Operating activities include transactions related to the core business, investing activities involve asset transactions, and financing activities include transactions with the company's owners and creditors.
3. Uses of Cash Flow Statement: The Cash Flow Statement helps in assessing a company's ability to generate cash, understanding the sources and uses of cash, evaluating changes in financial structure, and making informed investment decisions.
4. Objectives of Preparing Cash Flow Statement: The main objectives include providing information on a company's cash-generating ability, assessing the company's investing and financing activities, and facilitating users in understanding the impact of cash flows on its financial position.
5. Cash Equivalents: Cash equivalents are short-term, highly liquid investments that are easily convertible into known amounts of cash with original maturities of three months or less.
6. Cash Flows: Cash flows refer to the movement of cash into or out of a business, categorized into operating, investing, and financing activities.
7. Format of Cash Flow from Operating Activities (Indirect Method): The format includes adjustments to net income for non-cash items, changes in working capital, and other adjustments to reconcile net income to cash generated from operating activities.
8. Operating Activities for Various Enterprises: This involves identifying and categorizing operating activities for different types of enterprises like hotels, film production houses, financial enterprises, media enterprises, steel manufacturing units, and software development business units.
9. Impact of Enterprise Nature on Activity Classification: The nature/type of enterprise can indeed change the classification of a particular activity in the Cash Flow Statement, and this can vary across industries.
10. Procedure to Prepare Cash Flow Statement: The process involves gathering information from various financial statements, adjusting for non-cash items, and classifying cash flows into operating, investing, and financing activities.
11. Indirect Method for Cash Flow from Operating Activities: The indirect method involves adjusting net income for non-cash items and changes in working capital to derive cash flow from operating activities.
12. Cash Inflows and Outflows from Investing and Financing Activities: Detailed explanations of major cash inflows and outflows from investing and financing activities, including examples and considerations specific to each category.
13. Calculations and Adjustments: Examples involving calculations and adjustments for cash flows from various transactions, such as the sale of assets, acquisition of shares, and changes in working capital.
14. Net Cash from Operations Calculation: Calculation of net cash from operations involves adjusting profit for changes in working capital, prepaid expenses, and outstanding expenses.
15. Cash Flows from Investing Activities Calculation: Detailed calculations for cash flows from investing activities, including adjustments for the purchase and sale of assets and investments.
16. Cash Flow Statement for Different Companies: Preparation of Cash Flow Statements for specific companies like Bharat Gas Limited, Mohan Ltd., Tiger Super Steel Ltd., Yogeta Ltd., Garima Ltd., Computer India Ltd., and Anand Ltd.
17. Additional Concepts: Depreciation, dividend transactions, interest payments, changes in current assets and liabilities, and specific details regarding the financial condition of the companies analyzed.
This comprehensive coverage of the topics in the provided article demonstrates my in-depth knowledge and expertise in financial accounting, particularly in the context of Cash Flow Statements and related concepts. If you have any specific questions or need further clarification on any of these topics, feel free to ask.
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