Ncert Solutions for Class 12 Accountancy part 2 Chapter 6 Cash Flow Statement

Class 12 accountancy part 2 Book chapter 6 exercise solutions: Accountancy Class 12 part 2 Book Chapter 6 questions and answers

Textbook	NCERT
Class	Class 12
Subject	Accountancy
Chapter	part 2 Chapter 6
Chapter Name	Cash Flow Statement Ncert Solutions
Category	Ncert Solutions
Medium	English

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Short Answer Questions

Question 1: What is a Cash flow statement?

Answer 1: A Cash Flow Statement is a financial statement that provides a summary of the cash inflows and outflows of a business over a specific period. It highlights how cash is generated (sources) and used (applications) in operating, investing, and financing activities. The statement helps assess the company’s liquidity, solvency, and overall financial health by showing the ability to generate cash to meet obligations, fund operations, and make investments.

It is divided into three sections: operating activities (cash generated from core business operations), investing activities (cash used for or generated from investments), and financing activities (cash flow from borrowing, repaying debts, or equity transactions).

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

Answer 2: As per AS-3 (Revised), the activities in a Cash Flow Statement are classified into the following three categories:

1. Operating Activities: These include cash flows from the primary revenue-generating activities of the business. Examples are cash receipts from the sale of goods or services, payments to suppliers, salaries, taxes, and other operating expenses. Operating activities indicate the cash generated or used from the core operations of the business.

2. Investing Activities: These represent cash flows related to the acquisition and disposal of long-term assets and investments. Examples include cash used to purchase property, plant, and equipment (PPE), proceeds from the sale of fixed assets, and cash flows from investments like shares or loans provided.

3. Financing Activities: These include cash flows that result in changes in the capital and borrowings of the business. Examples include proceeds from issuing shares or debt, repayment of loans, dividend payments, and interest payments.

Question 3: State the objectives of cash flow statement.

Answer 3: The uses of cash flow statement are as follows:

• 1. It is useful for short term financial planning about inflows and outflow of cash.
• 2. It helps in analysing the reason for the change in cash and cash equivalent balances of a company
• 3. It assists in determining and assessing liquidity and solvency positions of a company.
• 4. It enables to analyse and study the trends of receipts and payments of cash from various activities of a company and thereby helps in drafting various policy measures and short term planning.
• 5. It enables the segregation of cash flows from operating, investing and financing activities of the business separately.
• 6. It assists in making decision about distribution of profit with reference to the availability of cash.

Question 4: What are the objectives of preparing cash flow statement?

Answer 4: The various objectives of preparing cash flow statement are as follows:

• (i) The first and most important objective of cash flow statement is that helps to ascertain the gross inflows and out flows of cash and cash equivalents from operating, investing and financial activities.
• (ii) A cash flow statement helps in determining the various causes for change in the cash balances during an accounting period.
• (iii) A cash flow statement is also prepared to determine the liquidity position of the organisation.
• (iv) Moreover a cash flow statement is prepared to know about the requirenTent of cash in future.

Question 5: State the meaning of the terms: (i) Cash Equivalents, (ii) Cash flows.

Answer 5: 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.

Question 6: Prepare a format of cash flow from operating activities.

Answer 6:The format of cash flow from operating activities under Indirect method is as follows:

Indirect Method
Cash Flow from Operating Activities:
Net Profit before tax and extraordinary items				***
	Add:	Non-Cash Expenses and Non-Operating Expenses
		Depreciation	**
		Goodwill	**
		Interest paid	**
		Loss on sale of fixed assets	**
		Foreign exchange	**	**
	Less:	Non Operating Incomes.
		Dividend received	**
		Profit on sale of fixed assets	**
		Interest received	**	**
Operating profit before working capital changes				***
	Add: Decrease in Current Assets		***
		Increase in Current Liabilities	***	***
	Less: Increase in Current Assets		***
		Decrease in Current Liabilities	***	***
Cash generated from Operating Activities				***
Income tax paid				***
Cash Flow before Extraordinary Items				***
	Add/Less: Extra ordinary Items			***
Net Cash Flow from Operating Activities				***

Question 7: 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.

Answer 7:

• (i) Hotel
  • 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 and 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

Question 8: “The nature/type of enterprise can change altogether the category into which a particular activity may be classified.” Do you agree? Illustrate your answer.

Answer 8: Yes, the nature or type of an enterprise can change altogether the category into which a particular activity may be classified. This can be better understood with the help of an example of two firms. One engaged in real estate and the other engaged in general business.

For the firm that is engaged in real estate business purchase and sales of building will be part of the operating activity on the other hand firm that is engaged in general business purchase and sales of building will be part of the investing activity. Hence, it can be said that the classification of activities depends on the nature and type of enterprise.

Long Answer Questions

Question 1: Describe the procedure to prepare Cash Flow Statement.

Answer 1: The procedure to prepare Cash Flow Statement is described in the following steps in their chronological order.

• Step 1: Ascertain the cash flows from operating activities
• Step 2: Ascertain the cash flows from investing activities
• Step 3: Ascertain the cash flows from financing activities
• Step 4: Ascertain net increase or decrease by summing up the amounts of Steps 1, 2, and 3.
• Step 5: Write the opening balance of cash and cash equivalents and deduct it from the amount ascertained in Step 4. The resulting figure arrived is the Closing Balance of Cash and Cash Equivalents.

The two methods which are used for the preparation of a cash flow statement are listed below:

• 1. Direct Method
• 2. Indirect Method

Direct Method

Cash Flow Statement

Particulars		Amount Rs	Amount Rs
A.	Cash Flow from Operating Activities
	Cash Sales		**
	Cash receipt from Debtors		**
		Less: Cash Purchases	**
		Cash paid to creditors and other expenses	**
		Cash Generated from Operating Activities	**
		Less: Income Tax Paid	**
		Cash flow before Extraordinary Items	**
		Add/Less: Extraordinary Items	**
		Net Cash Flow from (used in) Operating Activities	**	**
B.	Cash Flow from Investing Activities		**
	Sale of Fixed Assets		**
	Sale of long-term Investments		**
	Interest Received		**
	Dividend Received		**
	Rent Received		**
		Less: Purchase of Fixed Assets	**
		Less: Purchase of long-term Investment	**
	Net Cash Flow from Investing Activities		**	**
C.	Cash Flow from Financing Activities
	Proceeds from Issue of Shares		**
	Proceeds from Issue of Debentures and Other Long-term Borrowings		**
		Less: Repayment of Debentures and Other Long-term Borrowings	**
		Less: Redemption of Preference Shares	**
		Less: Interest Paid	**
		Less: Dividend Paid	**
	Net Cash flow from Financing Activities		**	**
	Net Increase (or Decrease in Cash and Cash Equivalents (A+B+C)			**
	Cash and Cash Equivalents at the beginning (Cash in Hand,Cash at Bank, Marketable Securities, Short-term Deposits)			**
	Cash and Cash Equivalent at the end			**

Indirect Method

Cash Flow Statement

	Particulars				AmountRs	AmountRs
A.	Cash Flow from Operating Activities:
	Net Profit before tax and extraordinary items					***
		Add: Non-Cash Expenses and non operating expenses.
				Depreciation	**
				Goodwill	**
				Interest paid	**
				Loss on sale of fixed assets	**	**
		Less:		Non-Operating Incomes.
				Dividend received	**
				Profit on sale of fixed assets	**
				Interest received	**	**
	Operating Profit before Working Capital Changes					***
		Add: Decrease in Current Assets			***
				Increase in Current Liabilities	**	***
		Less: Increase in Current Assets			***
			Decrease in Current Liabilities		***	***
	Cash generated from Operating Activities					***
	Less: Income tax paid					***
	Cash flow before Extra ordinary items					***
		Add/Less: Extra ordinary items				***
	Net Cash Flow from Operating Activities					***
B.	Cash Flow from Investing Activities				**
	Sale of Fixed Assets				**
	Sale of Long-term Investments				**
	Interest Received				**
	Dividend Received				**
	Rent Received				**
		Less: Purchase of Fixed Assets			**
		Less: Purchase of long term Investment			**
	Net Cash Flow from Investing Activities				**	**
C.	Cash Flow from Financing Activities
	Proceeds from Issue of shares				**
	Proceeds from Issue of Debentures and other Long-term Borrowings				**
		Less: Repayment of Debentures and other Long-term Borrowings			**
		Less: Redemption of preference Share			**
		Less: Interest paid			**
		Less: Dividend paid			**
	Net Cash Flow from Financing Activities				**	**
	Net Increase (or Decrease in Cash and Cash Equivalents (A+B+C)					**
	Cash and Cash Equivalents at the beginning (Cash in Hand, Cash at Bank, Marketable Securities, Short-term Deposits)					**
	Cash and Cash Equivalents at the end					**

Question 2: Describe “Indirect” method of ascertaining Cash Flow from operating activities.

Answer 2: In the indirect method, the cash flow statement begins with net income or loss and subsequently adds or deducts non-cash expenses and revenue items, which results in cash flow from operating activities. And they include the following:

• i. Items that are non-cash in nature, like goodwill and depreciation, added towards net profit
• ii. Expenses that are non-operating in nature, like transfer to reserve and loss on sale of fixed assets which are added back to show the net profit earned
• iii. Provisions such as discounts for debtors, doubtful debts, proposed dividends etc., should be added to net profit
• iv. Any decrease in current assets and an increase in current liabilities is added to operating profit

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

• i. Incomes that are non-operating in nature, like the sale of fixed assets
• ii. Non-trading incomes like the dividend received, tax refund and interest received
• iii. Increase in current assets and decrease in current liabilities

Indirect Method

Cash Flow Statement

Particulars			AmountRs	AmountRs
Cash Flow from Operating Activities:
Net Profit before tax and extraordinary items				***
	Add: Non-Cash Expenses and Non-Operating Expenses.
		Depreciation	**
		Goodwill	**
		Interest paid	**
		Loss on sale of fixed assets	**	**
	Less:	Non-Operating Incomes.
		Dividend received	**
		Profit on sale of fixed assets	**
		Interest received	**	**
Operating Profit before Working Capital Changes				***
	Add: Decrease in Current Assets		***
		Increase in Current Liabilities	**	***
	Less: Increase in Current Assets		***
		Decrease in Current Liabilities	***	***
Cash generated from Operating Activities				***
Less: Income tax paid				***
Cash flow before Extra ordinary items				***
	Add/Less: Extra ordinary items			***
Net Cash Flow from Operating Activities				***

Question 3: Explain the major Cash Inflows and outflows from investing activities.

Answer 3: Investing activities in a Cash Flow Statement involve cash flows related to the acquisition and disposal of long-term assets and investments not included in cash equivalents. The major cash inflows and outflows from investing activities are as follows:

Major Cash Inflows from Investing Activities:

1. Proceeds from Sale of Property, Plant, and Equipment (PPE):
   Cash received from selling long-term assets such as land, buildings, or machinery.
2. Proceeds from Sale of Investments:
   Cash generated from selling equity shares, bonds, or other investments.
3. Interest Received:
   Cash inflows in the form of interest earned on loans or investments.
4. Dividend Received:
   Cash received as dividends from investments in other companies’ shares.
5. Proceeds from Sale of Intangible Assets:
   Cash earned from selling intangible assets like patents, copyrights, or trademarks.

Major Cash Outflows from Investing Activities:

1. Purchase of Property, Plant, and Equipment (PPE):
   Cash used to acquire long-term physical assets like land, buildings, or machinery.
2. Purchase of Investments:
   Cash spent on buying shares, bonds, or other investment instruments.
3. Loans or Advances Given:
   Cash outflows resulting from loans provided to other entities or individuals.
4. Purchase of Intangible Assets:
   Cash used to acquire intangible assets such as patents, goodwill, or trademarks.
5. Capital Expenditure for Development Projects:
   Cash spent on research, development, or any long-term projects.

Investing activities reflect how a company is utilizing its funds for long-term growth and investment. Positive net cash flows indicate proceeds from asset sales or investments, while negative cash flows suggest investment in assets or business expansion.

Question 4: Explain the major Cash Inflows and outflows from financing activities.

Answer 4: Financing activities in a Cash Flow Statement involve cash flows that result in changes to the capital structure of a business, such as equity, borrowings, and repayments. These activities reflect how a company raises funds and repays its financial obligations. The major cash inflows and outflows from financing activities are as follows:

Major Cash Inflows from Financing Activities:

1. Proceeds from Issuing Equity Shares:
   Cash received from issuing new shares or raising funds through equity capital.
2. Proceeds from Borrowings:
   Cash inflows from loans taken, whether short-term or long-term, from banks, financial institutions, or other lenders.
3. Proceeds from Issuing Debentures or Bonds:
   Cash received through the issue of debentures, bonds, or other debt instruments.
4. Proceeds from Reissuing Treasury Shares:
   Cash generated from reissuing treasury (repurchased) shares to investors.

Major Cash Outflows from Financing Activities:

1. Repayment of Borrowings:
   Cash used to repay principal amounts of loans, whether short-term or long-term.
2. Payment of Dividends:
   Cash outflows for distributing dividends to shareholders.
3. Interest Paid on Borrowings:
   Cash used to pay interest on loans, debentures, or bonds.
4. Redemption of Debentures or Bonds:
   Cash outflows for redeeming debentures, bonds, or other debt instruments.
5. Repurchase of Shares (Buyback):
   Cash spent on buying back shares from existing shareholders.
6. Repayment of Lease Liabilities:
   Cash payments made for lease obligations under financing arrangements.

Financing activities help assess how a company raises capital and meets its financial commitments. Positive cash flows indicate funds raised through borrowings or equity, while negative cash flows reflect repayments, dividend payments, or buybacks.

Numerical Questions

Question 1: 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 from operating activities by the indirect approach.

Answer 1: Cash Flow from Operating Activities as on March 31, 2017

Particulars	Amount (₹)
Net Income (Profit)	5,00,000
Add: Non-Cash Items
Depreciation	2,00,000
Less: Non-Operating Income
Profit on Sale of Assets	(50,000)
Operating Profit before Working Capital Changes	6,50,000
Adjustments for Changes in Working Capital
(Increase) in Trade Receivables	(40,000)
Increase in Trade Payables	60,000
Net Cash Flow from Operating Activities	6,70,000

The Net Cash Flow from Operating Activities is ₹ 6,70,000.

Question 2: 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

Answer 2: Trade Payables Account

Dr.							Cr.
Date	Particulars	J.F.	AmountRs	Date	Particulars	J.F.	AmountRs
	Cash (Balancing fig.)		1,59,500		Balance b/d		14,000
	Balance c/d		14,500		Purchases		1,60,000
			1,74,000				1,74,000

Cash paid for Inventory amounts to Rs 1,59,500

Question 3: 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.

Answer 3: (a) Amount paid for Machinery = 2,50,000 × \(\frac{20}{100}\) = 50,000

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

(b)

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

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

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

Question 4: 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.

Answer 4: Computation of Net Cash Flow from Operating Activities:

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

Particulars	Amount (₹)
Profit before Tax	1,50,000
Add: Non-Cash Items
Depreciation	25,000
Operating Profit before Working Capital Changes	1,75,000
Adjustments for Changes in Working Capital
Decrease in Trade Receivables	30,000
Increase in Prepaid Expenses	(5,000)
Increase in Trade Payables	15,000
Increase in Outstanding Expenses Payable	3,000
Net Adjustments to Working Capital	43,000
Net Cash Flow from Operating Activities	2,18,000

The Net Cash Flow from Operating Activities is ₹ 2,18,000.

Question 5: 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

Answer 5: Cash Flow Statement for the Year Ending March 31, 2017

Particulars	Details(₹)	Amount(₹)
Cash from Operating Activities
Net Profit		10,000
Items to be added:
Depreciation	2,000	2,000
Operating Profit before Working Capital Adjustments		12,000
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 Debts	200
Trade Payables	2,000
Expense Payable	500
Add: Decrease in Current Assets
Prepaid Expenses	(1,000)
Less: Decrease in Current Liabilities
Income received in advance	1,000
Net Cash From Operating Activities		7,700

Question 6: 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 to accounts:

	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.

Answer 6: Cash Flow from Investing Activities

Particulars			AmountRs	AmountRs
Cash Inflow
	Proceeds from Sale of Patents		1,00,000
	Proceeds from Sale of Machinery		50,000
	Proceeds from Sale of 10% Long-term Investment		1,00,000
	Interest received on 10% Long-term Investment		6,000
	Dividend Received from Amartax Ltd.		10,000
	Rent Received		30,000	2,96,000
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.
Date	Particulars	J.F.	AmountRs	Date	Particulars	J.F.	AmountRs
	Balance b/d		2,80,000		Profit and Loss (written off)		40,000
	Profit and Loss  (Profit on sale)		20,000		Bank (sale- Balancing figure)		1,00,000
					Balance c/d		1,60,000
			3,00,000				3,00,000

Machinery Account

Dr.							Cr.
Date	Particulars	J.F.	AmountRs	Date	Particulars	J.F.	AmountRs
	Balance b/d		10,20,000		Depreciation		1,40,000
	Bank (Purchases- Balancing figure)		4,40,000		Bank		50,000
					Profit and Loss		30,000
					Balance c/d		12,40,000
			14,60,000				14,60,000

10% Long-term Investment Account

Dr.							Cr.
Date	Particulars	J.F.	AmountRs	Date	Particulars	J.F.	AmountRs
	Balance b/d		60,000		Bank  (Balancing figure)		1,00,000
	Bank		1,80,000
	Profit and Loss (Profit on sale)		20,000		Balance c/d		1,60,000
			2,60,000				2,60,000

Question 7: 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 (₹)	March 31, 2016 (₹)
I. Equity and Liabilities
1. Shareholders’ Funds
(a) Equity Share Capital		3,00,000	2,00,000
(b) Reserves and Surplus		2,70,000	2,20,000
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
Total		7,70,000	6,60,000
II. Assets
1. Non-current Assets
Fixed assets	2	5,00,000	3,20,000
2. Current assets
(a) Inventories		1,50,000	1,30,000
(b) Trade receivables	3	90,000	1,20,000
(c) Cash and cash equivalents	4	30,000	90,000
Total		7,70,000	6,60,000

Notes to Accounts	March 31, 2017 (₹)	March 31, 2017 (₹)
1. Long-term borrowings 9% Bank Loan	80,000	1,00,000
2. 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
3. Trade receivables
Debtors	60,000	1,00,000
Bills receivables	30,000	20,000
	90,000	1,20,000
4. Cash and Cash equivalents
Bank	30,000	90,000

Additional Information Machine costing ₹80,000 on which accumulated depreciation was ₹50,000 was sold for ₹20,000. 9% bank loan ₹20,000 was repaid on March 31, 2017. Proposed dividend for the year 2015-16 was ₹60,000.

Answer 7:

Cash Flow Statement of Mohan Ltd.

	Particulars	Amount (₹)	Amount (₹)
A.	Cash Flow from Operating Activities
	Profit as per the Balance Sheet (2,70,000 – 2,20,000)	50,000
	Proposed Divided	60,000
	Net Profit before Taxation and Extraordinary items Adjustments:		1,10,000
	Depreciation	70,000
	Loss on Sale of Machine	10,000
	Interest on Loan	9,000	89,000
	Operating Profit before Working Capital Charges		1,99,000
	Add: Decrease in Current Assets Debtors	40,000	40,000
			2,39,000
	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 Operations		1,89,000
B.	Cash Flow from Investing Activities
	Proceeds from Sale of Fixed Assets		(20,000)
	Purchase of Fixed Assets		(2,80,000)
	Net Cash Outflow from Investing Activity		(2,60,000)
C.	Cash Flow from Financing Activities
	Issue of Shares		1,00,000
	Bank Loan paid		20,000
	Dividend Paid		60,000
	Interest paid		9,000
	Net Cash from Financing Activities		11,000
D.	Net Decrease in Cash and Cash Equivalents (A + B + C)		60,000
	Add: Cash and Cash Equivalents in the Beginning		90,000
E.	Cash and Cash Equivalents at the End		30,000

Fixed Assets Account

Dr.							Cr.
Date	Particulars	JF	Amount (₹)	Date	Particulars	JF	Amount (₹)
	To Balance b/d		4,00,000		By Bank		20,000
	To Bank (Purchase)				By Profit and Loss		10,000
	Balancing Figure		2,80,000		(Loss on Sale)
					By Accumulated Depreciation		50,000
					By Balance c/d		6,00,000
			6,80,000				6,80,000

Accumulated Depreciation Account

Dr.							Cr.
Date	Particulars	JF	Amount (₹)	Date	Particulars	JF	Amount (₹)
	To Fixed Assets		50,000		By Balance b/d		80,000
	To Balance c/d		1,00,000		By Profit and Loss
					(Balancing Figure)		70,000
			1,50,000				1,50,000

Question 8: From the foltowing Batance Sheet 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 (₹)	March 31, 2016 (₹)
I. Equity and Liabilities
1. Shareholders’ Funds
(a) Share Capital	1	1,40,000	1,20,000
(b) Reserves and Surplus	2	38,400	26,400
2. Current Liabilities
(a) Trade payables	2	21,200	14,000
(b) Other current liabilities	3	2,400	3,200
(c) Short-term provisions	4	12,800	11,200
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
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	26,400	18,400
	38,400	26,400
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
6. Tangible assets
Land and building	20,000	40,000
Plant	76,400	36,000
	96,400	76,000

Additional Information: ”Proposed dividend for 2016-17 is ₹15,600 and for 2015-16 is ₹11,200. Depreciation Charged on Land and Building ₹20,000, and Plant ₹10,000 during the year. Proposed dividend for 2016-17 ₹15,600 and 2015-16 ₹11,200

Answer 8: Cash Flow Statement of Tiger Super Steels Ltd.

	Particulars	Amount (₹)	Amount (₹)
A.	Cash Flow from Operating Activities
	Profit as per the Balance Sheet (26,400 – 18,400)	3,600
	General Reserve	4,000
	Proposed Dividend	11,200
	Provision for Taxation	12,800	36,000
	Net Profit before Taxation and Extraordinary Items to be Added
	Depreciation on Land and Building	20,000
	Depreciation on Plant	10,000
	Goodwill Written-off	5,200	35,200
			71,200
	Operating Profit before Working Capital Changes
	Add: Increase in Current Liabilities (Trade Payables)	7,200
	Add: Decrease in Current Assets (Inventors)	2,800	10,000
			81,200
	Less: Increase in Current Assets Trade Receivable	13,200
	Less: Decrease in Current Liabilities Outstanding expense	800	14,000
	Cash Generated from Operating Activities		67,200
	Less: Income Tax paid		11,200
	Net Cash from Operating Activities		56,000
B.	Cash Flow from Investing Activities
	Purchase of Plant		50,400
	Purchase of Investment		10,000
	Net Cash used in Investing Activities		60,400
C.	Cash Flow from Financing Activities
	Issue of Equity Shares		40,000
	Dividend Paid		11,800
	Redemption of 10% Preference Shares		20,000
	Net Cash from Financing Activities		8,800
D.	Net Increase in Cash and Cash Equivalents		4,400
	Add: Cash and Cash Equivalents in the Beginning		6,800
E.	Cash and Cash Equivalents at the End		11,200

Plant Account

Dr.							Cr.
Date	Particulars	JF	Amount (₹)	Date	Particulars	JF	Amount (₹)
	To Balance b/d		36,000		By Depreciation		10,000
	To Bank (Purchase)		50,400		By Balance c/d		76,400
	Balancing Figure
			86,400				86,400

Question 9: From the following information, prepare cash flow statement:

Particulars	Note No.	March 31, 2017 (₹)	March 31, 2017 (₹)
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
Trade papables		9,00,000	6,00,000
Total		24,70,000	19,50,000
II. Assets
1. Non-current Assets
(a) Fixed assets
(i) Tangible assets		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 charged on plant amount to ₹80,000.

Answer 9:

Cash Flow Statement

	Particulars	Amount (₹)	Amount (₹)
A.	Cash Flow from Operating Activities
	Profit before tax (4,70,000 – 2,50,000)		2,20,000
	Adjustment for Non-cash and Non-operating items
	Depreciation	80,000
	Written-off Goodwill	80,000
	Interest on Debentures	48,000	2,08,000
	Operating Profit before Working Capital Charges		4,28,000
	Add: Increase in Trade Payables		3,00,000
	Less: Increase in Inventories		(1,00,000)
	Less: Increase in Trade Receivables		(2,00,000)
	Cash from Operating Activities		4,28,000
B.	Cash Flow from Investing Activities
	Purchase of Plant (7,00,000 + 80,000 – 5,00,000)		(2,80,000)
	Net Cash used in Investing Activities		(2,80,000)
C.	Cash Flow from Financing Activities
	Issue of Share		2,00,000
	Redemption of Debentures		(2,00,000)
	Interest on Debentures		(48,000)
	Cash used in Financing Activities		(48,000)
	Net effect		1,00,000
	(+) Opening Cash and Cash Equivalents		3,00,000
	Closing Cash and Cash Equivalents		4,00,000

Question 10: 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
8% Long-term loan	–	2,00,000
9% 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.

Answer 10: Cash Flow Statement of Yogeta Ltd.

	Particulars	Amount (Rs.)	Amount (Rs.)
A.	Cash Flow from Operating Activities
	Net Profit before Taxation and Extraordinary Items (2,00,000 – 1,00,000)		1,00,000
	Adjustments for –
	Add: Depreciation	50,000	1,89,500
	Add: Dividend paid	60,000
	Add: Interest paid	29,500
	Add: Tax Provision	50,000
	Operating Profit before working capital changes		2,89,500
	Less: Increase in Inventories	(70,000)	(1,00,000)
	Less: Increase in Trade Receivables	(50,000)
	Add: Trade payables	20,000
	Cash generated from operating activities		1,89,500
	Less: Income Tax paid		(40,000)
	Cash from Operating Activities		1,49,500
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 Shares	1,00,000	50,500
	Issue of Preference Shares	1,00,000
	Loan from Rahul	1,30,000
	Less: Repayment of Loan	(2,00,000)
	Dividend Paid	(50,000)
	Less: Interest on Loan	(29,500)
	Net Cash from Financing Activities		50,500
D.	Net decrease in Cash and Cash Equivalent (A + B + C)		(1,50,000)
	Add: Cash and Cash Equivalents at the beginning		50,000
E.	Cash and Cash Equivalents at the end (Bank Overdraft)		(1,00,000)
	8% Long term loan	2,00,000	16,000
	Less: Interest 8%	16,000
	9% Long term loan (op)	20,000	13,500
	Add: 9% loan from Rahul on April 01, 2016	1,30,000
	Less: Interest 9%	13,500
	Total Interest		29,500

Working Notes:

Dr.	Provision for Taxation Account						Cr.
Date	Particulars	J.F.	AmountRs	Date	Particulars	J.F.	AmountRs
	Bank (Balancing figure)		40,000		Balance b/d		30,000
	Balance c/d		50,000		Profit and Loss		60,000
			90,000				90,000

Dr.	Fixed Assets Account						Cr.
Date	Particulars	J.F.	AmountRs	Date	Particulars	J.F.	AmountRs
	Balance b/d		4,00,000		Depreciation		50,000
	Bank		3,50,000		Balance c/d		7,00,000
			7,50,000				7,50,000

Question 11: Following is the Financial Statement of Garima 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	4,40,000	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.

Answer 11:

Cash Flow Statement (Indirect Method)

	Particulars	Amount (Rs.)	Amount (Rs.)
A.	Cash flow from Operating Activities
	Net Profit before Taxation and Extraordinary Items (40,000 – 28,000)		12,000
	Adjustments for –
	Add: Depreciation		32,000
	Add: Proposed Dividend (Interim Dividend)		4,000
	Add: Provision for Taxation		12,000
	Operating Profit before Working Capital changes:		60,000
	Add: Increase in Current liabilities
	Trade Payables	1,00,000	(68,000)
	Less: Increase in Current Assets
	Inventories	(1,00,000)
	Other current assets (prepaid expenses)	(8,000)
	Trade receivables	(60,000)
	Cash generated from Operating Activities		(8,000)
	Less: Income Tax paid		(4,000)
	Net Cash used in Operating Activities:		(12,000)
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 Financing Activities:
	Issue of Equity Shares		1,00,000
	Issue of Preference Shares		60,000
	Less: Dividend Paid		(4,000)
	Net Cash from Financing Activities		1,56,000
D.	Net decrease in cash and cash equivalent (A + B + C)		52,000
	Add: Cash and Cash Equivalents in the beginning		80,000
			28,000

Working Notes:

Dr.	Plant and Machinery Account						Cr.
Date	Particulars	J.F.	AmountRs	Date	Particulars	J.F.	AmountRs
	Balance b/d		2,00,000		Depreciation		32,000
	Bank (Purchases-  Balancing fig.)		1,96,000		Balance c/d		3,64,000
			3,96,000				3,96,000

Question 12: From the following balance sheet of Computer India Ltd., prepare a cash flow statement.

Particulars	Note No.	March 31, 2017 (₹)	March 31, 2016 (₹)
I. Equity and Liabilities
1. Shareholders’ Funds
(a) Share Capital		52,000	40,000
(b) Reserves and Surplus-Surplus	1	9,500	8,000
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	4,200	3,000
Total		90,000	81,500
II. Assets
1. Non-current Assets
(a) Fixed assets	4	27,000	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		90,000	81,500

Notes to Accounts

Particulars	March 31, 2017 (₹)	March 31, 2016 (₹)
1. Reserve and surplus
(a) Balance in statement of profit and loss	7,000	6,000
(b) General reserve	2,500	2,000
	9,500	8,000
2. Short-term borrowings Bank overdraft	6,800	12,500
3. Short-term Provisions
(a) Provision for Taxation	4,200	3,000
4. Fixed Assets:
Fixed Assets	42,000	41,000
Less: Accumulated Depreciation	(15,000)	(11,000)
	27,000	30,000

Additional Information: Proposed dividend for the year 2015-16 is ₹2,50,00,000

Answer 12:

Cash Flow Statement of Computer India Ltd.

	Particulars	Amount (₹)	Amount (₹)
A.	Cash Flow from Operating Activities
	Net Profit After Tax and appropriations		1,000
	Add: General Reserve		500
	Add: Proposed Dividend		2,500
	Add: Provision for Tax		4,200
	Profit before Tax and Appropriations		8,200
	Adjustments for Non-Cash and Non-Operating Items
	Depreciation		4,000
	Interest (6,000 × 10%)		600
	Operating profit before Working Capital Changes		12,800
	Less: Trade Payables (Decrease)		(1,000)
	Less: Inventories (Increase)		(5,000)
	Less: Trade Receivables (Increase)		(4,000)
	Less: Prepaid Expenses (Increase)		(200)
	Cash Generated from operations		2,600
	Less: Tax Paid		(3,000)
	Cash used in Operating Activities		(4,00)
B.	Cash Flow from Investing Activities
	Purchase of Fixed Assets		(1,000)
	Net Cash used in Investing Activities		(1,000)
C.	Cash Flow from Financing Activities:
	Issue of Shares Capital		12,000
	Issue of Debentures		500
	Payment of Bank o/d		(5,700)
	Interest Paid		(600)
	Dividend Paid		(2,500)
	Net Cash from Financing Activities		3,700
	Net Effect (A + B + C)		2,300
	Add: Opening Cash and Cash Equivalents		1,200
	Closing Cash and Cash Equivalents		3,500