Capankajcagoel CFS -Answers

PROBLEM 12.1
The financial position of ABC Ltd. on 1 January 2009 and 31 December 2009 was as follows:
Assets 1-1-2009 31-12-2009
Rs. Rs.
Cash 8,000 7,200
Debtors 70,000 76,800
Stock 50,000 44,000
Land 40,000 60,000
Building 1,00,000 1,10,000
Machinery: 2,14,000 2,44,000
Provision for Depreciation (54,000) (72,000)
4,28,000 4,70,000
Liabilities Rs. Rs.
Current Liabilities 72,000 82,000
Loan from associate company 40,000
Loan from Bank 60,000 50,000
Capital and Reserves 2,96,000 2,98,000
4,28,000 4,70,000
During the year Rs. 52,000 were paid as dividends. Prepare a cash flow statement.

SOLUTION 12.1
Cash Flow Statement
For the Year Ending 31 December 2009
A. Cash Flows from Operating Activities Rs. Rs.
Net Profit before taxation and extraordinary item: 54,000
[2,98,000 2,96,000 + 52,000 (Dividends)]
Adjustment for:
Depreciation 18,000
Operating Profit before working capital changes 72,000
Increase in Sundry Debtors (6,800)
Decrease in Stock 6,000
Increase in Current liabilities 10,000
Net Cash from operating activities 81,200
(B) Cash Flows from Investing Activities
Purchase of Building (10,000)
Purchase of Land (20,000)
Purchase of Machinery (30,000)
Net cash used in financing activities (60,000)
(C) Cash Flows from Financing Activities
Loan from Associate Company 40,000
Repayment of Bank Loan (10,000)
Payment of Dividends (52,000)
Net cash used in financing activities (22,000)
Net decrease in cash and cash equivalents (A+B+C) (800)
Cash and cash equivalents at the beginning of the period 8,000
Cash and cash equivalents at the end of the period 7,200

PROBLEM 12.2
Capankajcagoel CFS -Answers

From the following balance sheets of X Ltd., make out the statement of cash flows:
Liabilities 2008 2009
Rs. Rs.
Equity Share Capital 3,00,000 4,00,000
8% Preference Share Capital 1,50,000 1,00,000
General Reserve 40,000 70,000
Profit and Loss Account 30,000 48,000
Proposed Dividend 42,000 50,000
Creditors 55,000 83,000
Bills Payable 20,000 16,000
Provision for Taxation 40,000 50,000
6,77,000 8,17,000
Assets Rs. Rs.
Goodwill 1,15,000 90,000
Land & Buildings 2,00,000 1,70,000
Plant 80,000 2,00,000
Debtors 1,60,000 2,00,000
Stock 77,000 1,09,000
Bills Receivable 20,000 30,000
Cash in hand 15,000 10,000
Cash at Bank 10,000 8,000
6,77,000 8,17,000
Additional information:
(a) Depreciation of Rs. 10,000 and Rs. 20,000 have been charged on plant and land & buildings respectively in 2009.
(b) An interim dividend of Rs. 20,000 has been paid in 2009.
(c) Rs. 35,000 income-tax was paid during the year 2009.

SOLUTION 12.2
Cash Flow Statement
For the Year Ending 31 December 2009
(A) Cash Flows from Operating Activities Rs. Rs.
Net increase in profit between 2008-09 (48,000 30,000) 18,000
Adjustments for:
Goodwill 25,000
Depreciation 30,000
Provision for Taxation 45,000
Proposed Dividend 50,000
General Reserve 30,000
Interim Dividend 20,000
Operating profit before taxation and working capital changes 2,18,000
Increase in Creditors 28,000
Increase in Debtors (40,000)
Increase in Stock (32,000)
Increase in Bills Receivable (10,000)
Increase in Bills Payable (4,000)
Cash generated from operations 1,60,000
Income tax paid (35,000)
Net cash from operating activities 1,25,000
(B) Cash Flows from Investing Activities
Purchase of Plant (1,30,000)
Capankajcagoel CFS -Answers

Proceeds from sale of Land and Building 10,000

Net cash used in investing activities (1,20,000)
(C) Cash Flows from Financing Activities
Proceeds from issuance of Equity Share Capital 1,00,000
Redemption of Preference Shares (50,000)
Payment of Dividends: Final 42,000
Interim 20,000 (62,000)
Net cash used in financing activities (12,000)
Net decrease in cash and cash equivalents (A+B +C) (7,000)
Cash and cash equivalents in the beginning 25,000
Cash and cash equivalents at the end (10,000 + 8,000) 18,000

WORKING NOTES
Equity Share Capital Account
Rs. Rs.
Balance c/d 4,00,000 Balance b/d 3,00,000
Bank (Balancing Figure) 1,00,000
4,00,000 4,00,000
8% Preference Share Capital Account
Rs. Rs.
Bank 50,000 Balance b/d 1,50,000
Balance c/d 1,00,000
1,50,000 1,50,000
General Reserve Account
Rs. Rs.
Balance c/d 70,000 Balance b/d 40,000
Profit and Loss Account 30,000
70,000 70,000
Proposed Dividend
Rs. Rs.
Bank 42,000 Balance b/d 42,000
Balance c/d 50,000 Profit and Loss Account 50,000
92,000 92,000
Provision for Taxation
Rs. Rs.
Bank 35,000 Balance b/d 40,000
Balance c/d 50,000 Profit and Loss Account 45,000
85,000 85,000
Goodwill Account
Rs. Rs.
Balance b/d 1,15,000 Profit and Loss Account 25,000
Balance c/d 90,000
1,15,000 1,15,000
Land and Building Account
Rs. Rs.
Balance b/d 2,00,000 Depreciation 20,000
Capankajcagoel CFS -Answers

Bank 10,000
Balance c/d 1,70,000
2,00,000 2,00,000
Plant Account
Rs. Rs.
Balance b/d 80,000 Depreciation 10,000
Bank 1,30,000 Balance c/d 2,00,000
2,10,000 2,10,000
Interim Dividends
Rs. Rs.
Bank 20,000 Profit and Loss Account 20,000
20,000 20,000
Note: In the absence of any information, it is assumed that there is no profit or loss on sale of land and building for Rs.
10,000.
PROBLEM 12.3
From the particulars given ahead prepare cash flow statement as per AS-3 (Revised) using indirect method:
Balance Sheets As At 31 March, .....
Liabilities 2009 2008
Rs. Rs.
Equity Share Capital 80,000 55,000
10% Preference Share Capital 20,000 25,000
General Reserve 7,600 4,000
Profit & Loss Account 2,400 2,000
15% Debentures 14,000 12,000
Creditors 22,000 24,000
Proposed Dividend 8,000 10,000
Provision for Taxation 8,400 6,000
1,62,400 1,38,000
Assets: 2009 2008
Fixed Assets 80,000 82,000
Less:Accumulated Depreciation 30,000 22,000
50,000 60,000
Stock 70,000 60,000
Debtors 34,400 15,000
Cash 7,000 2,400
Prepaid Expenses 1,000 600
1,62,400 1,38,000
Additional Information:
(a) Provision for tax made Rs. 9,400.
(b) Fixed assets costing Rs. 20,000 (accumulated depreciation till date of sale on them Rs. 6,000) were sold for Rs. 10,000.
(c) Interim dividend paid during the year Rs. 9,000. Proposed dividend of last year was declared and paid during the year.
Ignore corporate dividend tax.
(d) New debentures were issued on 31 March, 2009.
[B. Com. (Hons.) Delhi 2009 (Second Option)]

SOLUTION 12.3
Cash Flow Statement
For the Year Ending 31 December 2009
(A) Cash Flows from Operating Activities Rs. Rs.
Profit before tax (21,000 + 9,400) 30,400
Adjustments for:
Capankajcagoel CFS -Answers

Depreciation 14,000
Loss on sale of Machinery 4,000
Debenture Interest (15% of Rs. 12,000) 1,800
Operating income before working capital changes 50,200
Increase in stock (10,000)
Increase in debtors (19,400)
Increase in prepaid expenses (400)
Decrease in creditors (2,000)
Cash generated from operations 18,400
Income tax paid (7,000)
Net cash from operating activities 11,400
(B) Cash Flows from Investing Activities
Purchase of fixed assets (18,000)
Proceeds from sale of fixed assets 10,000
Net cash used in investing activities (8,000)
(C) Cash Flows from Financing Activities
Issue of Share Capital 25,000
Issue of Debentures 2,000
Redemption of Preference Shares (5,000)
Debenture Interest (1,800)
Interim Dividend Paid (9,000)
Final Dividend Paid on Equity and
Preference Shares (10,000)
Net cash from financing activities 1,200
Net increase in cash and cash equivalents (A + B + C) 4,600
Cash and cash equivalents in the beginning of the year 2,400
Cash and cash equivalents at the end of the year 7,000

WORKING NOTES
Profits and Loss Appropriation Account
Rs. Rs.
Interim Dividend 9,000 Balance b/d 2,000
Proposed Dividends 8,000 Profits for the year 21,000
General Reserve 3,600
Balance c/d 2,400
23,000 23,000
Provision For Taxation Account
Rs. Rs.
Bank Account 7,000 Balance b/d 6,000
Balance c/d 8,400 Profit and Loss Account 9,400
15,400 15,400
Fixed Assets Account
Rs. Rs.
Balance b/d 82,000 Bank Account 10,000
Bank Account 18,000 Accumulate Depreciation 6,000
Profit and Loss Account 4,000
(Loss on sale)
Balance c/d 80,000
1,00,000 1,00,000
Capankajcagoel CFS -Answers

Accumulated Depreciation Account

Rs. Rs.
Fixed Assets 6,000 Balance b/d 22,000
Balance c/d 30,000 Depreciation Account 14,000
36,000 36,000

PROBLEM 12.4
The following are the balance sheets of Modern Ltd.:
Liabilities As on As on Assets As on As on
31-3-04 31-3-05 31-3-04 31-3-05
Rs. Rs. Rs. Rs.
Sundry Creditors 5,15,000 4,80,000 Cash and Bank
Outstanding Expenses 65,000 60,000 balances 4,50,000 4,50,000
8% Debentures 4,50,000 3,50,000 Sundry Debtors 3,35,000 2,15,000
Depreciation Fund 2,00,000 2,20,000 Temporary
Reserve for conting- Investments 5,50,000 3,70,000
encies 3,00,000 3,00,000 Prepaid
Profit and Loss Expenses 5,000 10,000
Account 80,000 1,15,000 Stock in trade 4,10,000 5,30,000
Equity Share Capital 11,50,000 11,50,000 Machinery 2.60,000 3,50,000
Land & Building 7,50,000 7,50,000
27,60,000 26,75000 27,60,000 26,75,000
The following information in also available:
(i) 10% Dividends in cash
(ii) New machinery for Rs. 1,50,000 was purchased but old machinery costing Rs. 60,000 was sold Rs. 20,000.
Accumulated depreciation there on was Rs. 30,000.
(iii) Rs. 1,00,000, 8% Debentures were redeemed through open market purchase @ Rs 96 for a debenture of Rs. 100.
(iv) Rs. 1,80,000 investments were sold at book value.
You are required to prepare a cash flow statement for the year ended 31 March 2005 in accordance with Accounting Standard 3
(Revised) [C.S. (Inter) June 2006]

SOLUTION 12.4
Cash Flow Statement
For the Year Ending 31 March 2005
(A) Cash Flows from Operating Activities Rs. Rs.
Net profit earned during the year (1,15,000 80,000) 35,000
Adjustments for:
Depreciation 50,000
Dividends 1,15,000
Loss on sale of machinery 10,000
Profit on redemption of Debenture (4,000)
Operating profit before working capital changes 2,06,000
Decrease in debtors 1,20,000
Decrease in sundry creditors (35,000)
Increase in Stock (1,20,000)
Decrease in outstanding expenses (5,000)
Increase in prepaid expenses (5,000)
Net cash from operating activities 1,61,000
(B) Cash Flows from Investing Activities
Purchase of new plant and machinery (1,50,000)
Capankajcagoel CFS -Answers

Sale of old plant and machinery 20,000

Sale of temporary investments 1,80,000
Net cash from investing activities 50,000
(C) Cash Flows from Financing Activities
Redemption of Debentures (96,000)
Dividends paid in cash (1,15,000)
Net cash used in financing activities (2,11,000)
Net increase/decrease in cash and cash
equivalents (A + B + C) Nil
Cash and cash equivalents at the beginning
of the year 4,50,000
Cash and cash equivalents at the end of the year 4,50,000

WORKING NOTES
Dividends Account
Rs. Rs.
Dividend Bank Account 1,15,000 Profit and Loss Appropriation
Account 1,15,000
1,15,000 1,15,000
Machinery Account
Rs. Rs.
Balance b/d 2,60,000 Bank Account 20,000
Bank Account 1,50,000 Depreciation Fund Account 30,000
Profit and Loss Account 10,000
Balance c/d 3,50,000
4,10,000 4,10,000
Depreciation Fund Account
Rs. Rs.
Machinery Account 30,000 Balance b/d 2,00,000
Balance c/d 2,20,000 Profit and Loss Account 50,000
2,50,000 2,50,000
8% Debentures Account
Rs. Rs.
Bank Account 96,000 Balance b/d 4,50,000
Profit and Loss Account 4,000
(Profit on Redemption)
Balance c/d 3,50,000
4,50,000 4,50,000
Investments Account
Rs. Rs.
Balance b/d 5,50,000 Bank Account 1,80,000
Balance c/d 3,70,000
5,50,000 5,50,000

PROBLEM 12.5
From the following summarised balance sheets of PQR Ltd. as on 31 March 2009 and 2010 and the income statement for the year
ended 31 March 2010, you are required to prepare a cash flow statement by indirect method:
Liabilities 31-3-2009 31-3-2010 Assets 31-3-2009 31-3-2010
Capankajcagoel CFS -Answers

Rs.(000) Rs.(000) Rs.(000) Rs.(000)

Equity Share Capital 1,250 1,500 Fixed Assets 1,910 2,180
Reserves 1,380 3,330 Less: Depreciation (1,060) (1,450)
Debentures 1,040 1,110 850 730
Creditors 1,890 150 Long term
Interest Payable 100 230 investment 2,500 2,500
Provision for tax 1,000 400 Inventories 1,950 900
Trade Debtors 1,200 1,700
Cash and Bank 160 790
Interest Receivable 100
6,660 6,720 6,660 6,720
Additional Information:
(i) Plant costing Rs. 80,000 and accumulated depreciation of Rs. 60,000 was sold for Rs. 20,000.
(ii) Debentures of Rs. 1,80,000 were redeemed during the year.
(iii) Out of the interest expenses of Rs. 4,00,000, Rs. 2,70,000 were paid during the year.
(iv) Dividend (including corporate dividend tax) Rs. 13,20,000 was paid during the year.
(v) Income statement for 200910 was as follows:
(Rs. 000)
Sales 30,650
Less: Cost of goods sold 26,000
Gross Profit 4,650
Less: Depreciation 450
Interest 400
Advertisement 950 1,800
2,850
Add: Interest income 300
Dividend 200 500
3,350
Add: Insurance claim for earthquake loss 180
3,530
Less: Income tax provision 260
Net Profit 3,270
[C.S. (Inter) December 2000 Modified]
SOLUTION 12.5
Cash Flow Statement
For the Year Ending 31 March 2010
(A) Cash Flow from Operating Activities Rs. (000) Rs. (000)
Net profit before taxation and extraordinary item 3,350
Adjustments for
Depreciation 450
Interest 400
Interest Income (300)
Dividend Income (200)
Operating profit before working capital changes 3,700
Decrease in inventories 1,050
Increase in debtors (500)
Decrease in Creditors (1,740)
Insurance Claim received from earthquake loss 180
Capankajcagoel CFS -Answers

Cash generated from operations 2,690

Income tax paid (860)
Net cash from operating activities 1,830
(B) Cash Flows from Investing Activities
Purchase of plant (350)
Sale of Plant 20
Interest received (300 100) 200
Dividend received 200
Net cash from investing activities 70
(C) Cash Flows from Financial Activities
Issue of equity shares 250
Issue of Debentures (1,110 + 180 1,040) 250
Redemption of Debentures (180)
Dividends paid (including Corporate Dividend Tax) (1,320)
Interest paid (270)

Net Cash used in financing activities (1,270)

Net increase in cash and cash equivalents (A + B + C) 630
Cash and cash equivalents at the beginning 160
Cash and cash equivalents at the end 790

WORKING NOTES
Provision for Tax Account
Rs. (000) Rs.(000)
Bank Account 8,60 Balance b/d 1,000
(Balancing Figure) Profit and Loss Account 2,60
Balance c/d 400
1,260 1,260
Fixed Assets Account
Rs. (000) Rs.(000)
Balance b/d 1,910 Bank 20
Bank Account (Purchase) 350 Accumulated Depreciation 60
Balance c/d 2,180
2,260 2,260
Interest Receivable
Rs. (000) Rs.(000)
Profit and Loss Account 300 Bank 200
Balance c/d 100
300 300
Interest Account
Rs. (000) Rs. (000)
Bank Account 270 Balance b/d 100
Balance c/d 230 Profit and Loss Account 400
500 500
Debentures Account
Rs. (000) Rs. (000)
Bank Account 180 Balance b/d 1,040
Balance c/d 1,110 Bank 250
Capankajcagoel CFS -Answers

1,290 1,290

PROBLEM 12.6
A V Ltd. gives you the following information for the year ended 31 March, 2006:
(a) Sales for the year totalled Rs. 96,00,000. The company sells goods for each only.
(b) Cost of goods sold was 60% of sales. Closing inventory was higher than the opening inventory by Rs. 43,000. Trade
creditors on 31 March, 2006 exceeded those on 31 March, 2005 by Rs. 23,000.
(c) Net profit before tax was Rs. 13,80,000. Tax paid amounted to Rs. 7,00,000. Depreciation on fixed assets for the year was
Rs. 3,15,000 whereas other expenses totalled Rs. 21,45,000. Outstanding expenses on 31 March, 2005 and 31 March,
2006 totalled Rs. 82,000 and Rs. 91,000 respectively.
(d) New machinery and furniture costing Rs. 10,27,500 in all were purchased.
(e) A right issue was made of 2,000 equity shares of Rs. 250 each at a premium of Rs.75 per share. The entire money was
received along with applications.
(f) Dividends and corporate dividend tax totalling Rs. 4,07,000 were paid.
(g) Cash in hand and at bank as 31 March, 2005 totalled Rs. 2,13,800. You are requested to prepare cash flows statement
using indirect method as per AS-3 (Revised).
[B.Com (Hons.) Delhi 2007 (First Option)

SOLUTION 12.6
A.V. LTD.
Cash Flow Statement For the Year Ended 31 March 2006
(A) Cash Flows from Operating Activities Rs. Rs.
Net profit before tax 13,80,000
Adjustment for:
Depreciation 3,15,000
Operating profit before Working Capital changes 16,95,000
Increase in inventory (43,000)
Increase in trade creditors 23,000
Increase in outstanding expenses 9,000
Cash generated from operations 16,84,000
Tax paid 7,00,000
Net cash from operating activities 9,84,000
(B) Cash flows from Investing Activities
Purchase of fixed assets (10,27,500)
Net cash used in investing activities (10,27,500)
(C) Cash Flows from Financing Activities
Issue of Equity Share Capital (Including premium) 6,50,000
Dividends and Corporate Dividend Tax (4,07,000)
Net cash generated from financing activities 2,43,000
Net increase in cash and cash equivalents (A + B + C) 1,99,500
Cash and cash equivalents on 31-3-2005 2,13,800
Cash and cash equivalents on 31-3-2006 4,13,300

PROBLEM 12.7
Following facts have been extracted from the books of Daisy-Mishu Ltd. for the year ended on 31-3-2004. You are required to
prepare a cash flow statement:
(i) Net profit before taking into account income tax and income from law suits but after taking account the following items
Rs. 20 Lakhs.
(a) Depreciation on Fixed Assets Rs. 5 Lakhs
(b) Discount on issue of Debentures written off Rs. 30,000.
(c) Interest on Debentures paid Rs. 3,50,000.
Capankajcagoel CFS -Answers

(d) Book value of investments Rs. 3 Lakh (sale of investments for Rs. 3,20,000).
(e) Interest received on investments Rs. 60,000
(f) Compensation received Rs. 90,000 by the company in a suit filed.
(ii) Income tax paid during the year Rs. 10,50,000.
(iii) 15,000, 10% Preference Shares of Rs. 100 each were redeemed on 31-3-2004 at a premium of 5%. Further the company
issued 50,000 equity shares of Rs. 10 each at a premium of 20% on 2-4-2003. Dividends on preference shares were paid
at the time of redemption.
(iv) Dividends paid for the year 2002-03 Rs. 5 Lakhs and Interim dividends paid Rs. 3 Lakhs, for the year 2003-04.
(v) Land was purchased on 2-4-2003 for Rs. 2,40,000 for which the company issued 20,000 equity shares of Rs. 10 each at a
premium of 20% to the land owner as purchase consideration.
(vi) Current assets and current liabilities in the beginning and at the end were as detailed below:
As on 31-3-2003 As on 31-3-2004
Rs. Rs.
Stock 12,00,000 13,18,000
Sundry Debtors 2,08,000 2,13,100
Cash in hand 1,96,300 35,300
Bills Receivable 50,000 40,000
Bills Payable 45,000 40,000
Sundry Creditors 1,66,000 1,71,300
Outstanding Expenses 75,000 81,800
[PCC May 2005]

SOLUTION 12.7
Cash Flow Statement
For the Year Ending 31 March 2004
(A) Cash Flows from Operating Activities Rs. Rs.
Net profit before income tax and extraordinary items 20,00,000
Adjustments for:
Depreciation on Fixed Assets 5,00,000
Interest on Debentures paid 3,50,000
Discount on issue of Debentures 30,000
Interest on investments received (60,000)
Profit on sale of investments (20,000)
Operating profit before working capital changes 28,00,000
Increase in Sundry Debtors (5,100)
Decrease in Bills Receivable 10,000
Increase in Stock (1,18,000)
Increase in Outstanding Expenses 6,800
Decrease in Bills Payable (5,000)
Increase in Sundry Creditors 5,300
Cash generated from operations 26,94,000
Income tax paid (10,50,000)
16,44,000
Cash flow from extra-ordinary item:
Compensation received in suit filed 90,000
Net cash from operating activities 17,34,000
(B) Cash Flows from Investing Activities
Interest received on investment 60,000
Sale proceeds from investment 3,20,000
Net cash from investing activities 3,80,000
(C) Cash Flows from Financing Activities
Dividends paid:
Capankajcagoel CFS -Answers

Interim for 2003 04 3,00,000

Final Dividend for 2002-03 5,00,000 (8,00,000)
Preference Dividend Paid (1,50,000)
Interest on Debentures paid (3,50,000)
Redemption of Preference Shares of 5% premium (15,75,000)
Proceeds by Equity Share Capital at a
Premium of 20% 6,00,000
Net cash used in financing activities (22,75,000)
Net decrease in cash during the year (A+B+C) (1,61,000)
Cash and cash equivalents as on 31-3-2003 1,96,300
Cash and cash equivalents at 31-3-2004 35,300
Note: Since purchase of land for Rs. 2,40,000 in exchange for equity shares (20,000 equity shares of Rs. 10 each at a
premium of 20%) does not involve any cash transaction, it has not been taken in the above cash flow statements.

PROBLEM 12.8
The summarised balance sheets of Victor Companies Ltd. as on 31-3-2008 and 31-3-2009 are as follows:
Assets 31-3-2008 31-3-2009
Rs. Rs.
Fixed Assets at cost 8,00,000 9,50,000
Less:Depreciation 2,30,000 2,90,000
Net 5,70,000 6,60,000
Investments 1,00,000 80,000
Other Current Assets 2,50,000 3,10,000
Cash 30,000 20,000
Preliminary expenses 20,000 10,000
9,70,000 10,80,000
Liabilities Rs. Rs.
Share Capital 3,00,000 4,00,000
Capital Reserve 10,000
General Reserve 1,70,000 2,00,000
Profit & Loss Account 60,000 75,000
Debentures 2,00,000 1,40,000
Sundry Creditors 1,20,000 1,30,000
Tax provision 90,000 85,000
Proposed dividend 30,000 36,000
Unpaid dividend 4,000
9,70,000 10,80,000
During 2008-2009 the company:
(a) sold one machine for Rs. 25,000, the cost of the machine was Rs. 64,000 and depreciation provided for it amounted to Rs.
35,000;
(b) provided Rs. 95,000 as depreciation;
(c) redeemed 30% of debentures at Rs. 103;
(d) sold investments at profit and credited to capital reserve; and
(e) decided to value the stock at cost, whereas earlier the practice was to value stock at cost less 10%. The stock according to
books on 31-3-08 was Rs. 54,000 and stock on 31-3-09 was Rs. 75,000 which was correctly valued at cost.
Prepare a cash flow statement according to AS- 3 (Revised)

SOLUTION 12.8
Cash Flow Statement for Victors Computers Ltd.
For the year Ended 31 March 2009
Cash Flows from Operating Activities Rs. Rs.
Capankajcagoel CFS -Answers

Difference in net profits between 31.3.08 and 31.3.09 15,000

Adjustments for:
Valuation of Stock (6,000)
Depreciation 95,000
Preliminary expenses 10,000
General Reserve 30,000
Premium on Redemption of Debentures 1,800
Provision for Tax 85,000
Proposed Dividends 36,000
Loss on Sale of Fixed Assets 4,500
Operating profit before tax and working capital changes 2,70,800
Increase in Current Assets (2,50,000 + 6,000 3,10,000) (54,000)
Increase in creditors 10,000
2,26,800
Income taxes paid (90,000)
Net cash from operating activities 1,36,800
Cash Flows from Investing Activities
Purchase of fixed assets (2,14,000)
Proceeds from sale of investments 30,000
Proceeds from sale of fixed assets 25,000
Net cash used in investing activities (1,59,000)
Cash Flows from Financing Activities
Proceeds from issuance of Share Capital 1,00,000
Redemption of Debentures (61,800)
Payment of Dividends (26,000)
Net cash flows from financing activities 12,200
Net decrease in cash and cash equivalents (A + B + C) (10,000)
Cash and cash equivalents as on 31-3-2008 30,000
Cash and cash equivalents as on 31-3-2009 20,000
Fixed Assets Account
Rs. Rs.
Balance b/d 8,00,000 Cash 25,000
Cash 2,14,000 Provision for Depreciation 35,000
Profit and Loss Account 4,000
Balance c/d 9,50,000
10,14,000 10,14,000
Provision for Depreciation Account
Rs. Rs.
Fixed Assets Account 35,000 Balance b/d 2,30,000
Balance c/d 2,90,000 Profit and Loss Account 95,000
3,25,000 3,25,000
Investments Account
Rs. Rs.
Balance b/d 1,10,000 Cash 30,000
Capital Reserve 10,000 Balance c/d 80,000
1,10,000 1,10,000
Preliminary Expenses Account
Rs. Rs.
Balance b/d 20,000 Profit and Loss Account 10,000
Capankajcagoel CFS -Answers

Balance c/d 10,000

20,000 20,000
Share Capital Account
Rs. Rs.
Balance c/d 4,00,000 Balance b/d 3,00,000
Cash 1,00,000
4,00,000 4,00,000
Capital Reserve Account
Rs. Rs.
Balance c/d 10,000 Balance b/d
Investments Account 10,000
10,000 10,000
General Reserve Account
Rs. Rs.
Balance c/d 2,00,000 Balance b/d 1,70,000
Profit and Loss Account 30,000
2,00,000 2,00,000
Debentures Account
Rs. Rs.
Cash 61,800 Balance b/d 2,00,000
Balance c/d 1,40,000 Profit and Loss Account 1,800
(Premium on Redemption)
2,01,800 2,01,800
Tax Provision Account
Rs. Rs.
Cash 90,000 Balance b/d 90,000
Balance c/d 85,000 Profit and Loss Account 85,000
1,75,000 1,75,000
Proposed Dividend Account
Rs. Rs.
Unpaid Dividend 4,000 Balance b/d 30,000
Cash 26,000 Profit and Loss Account 36,000
Balance c/d 36,000
66,000 66,000
Unpaid Dividend Account
Rs. Rs.
Balance c/d 4,000 Balance b/d
Proposed Dividend 4,000
4,000 4,000
Capankajcagoel CFS -Answers

PROBLEM 12.9
The following are the summaries of the balance sheets of a limited company as at 31 March 2008 and 31 March 2009:
Liabilities 2008 2009 Assets 2008 2009
Rs. Rs. Rs. Rs.
Sundry Creditors 39,010 41,135 Cash at Bank 3,000 2,700
Bills Payable 33,780 11,525 Sundry Debtors 85,175 72,625
Bank Overdraft 60,000 Sundry Advances 2,315 735
Provision for Tax 40,000 49,000 Stock 1,09,040 97,370
Reserves 48,000 50,000 Land & Buildings 1,48,000 1,44,250
Profit & Loss Account 39,690 41,220 Plant & Machinery 1,12,950 1,16,200
Share Capital 2,00,000 2,60,000 Goodwill 19,000
4,60,480 4,52,880 4,60,480 4,52,880
The following additional information is available from the books:
(i) During the year ended 31-3-2009 an interim dividend of Rs. 26,000 and final dividend of Rs. 54,000 were paid.
(ii) The assets of another company were purchased for Rs.60,000 payable in fully paid shares of the company. These assets
consisted of stock Rs. 22,000 and machinery Rs. 29,000. In addition sundry purchases of plant were made totalling Rs.
6,000.
(iii) Income-tax paid during 2009 was Rs. 25,000.
Prepare a cash-flow-statement

SOLUTION 12.9
Cash Flow Statement for Victors Computers Ltd.
For the year Ending 31 March 2009
Cash Flow from Operating Activities Rs. Rs.
Difference in profit between 31 March 2008 and 31 March 2009 1,530
Adjustments for:
Depreciation 35,500
Provision for tax 34,000
Reserves 2,000
Dividends (26,000 + 54,000) 80,000
Operating profit before tax and working capital changes 1,53,030
Decrease in Sundry Debtors 12,550
Decrease in Stock (1,09,040 + 22,000 97,370) 33,670
Increase in Sundry Creditors 2,125
Decrease in Bills Payable (22,255)
Cash generated from operations 1,79,120
Income tax paid (25,000)
Net cash from operating activities 1,54,120
Cash from Investing Activities
Purchase of Plant (6,000)
Purchase of Goodwill (10,000)
Decrease in advances [Para 15 (e) AS-3 (Revised)] 1,580
Net Cash used in investing activities (14,420)
Cash Flows from Financing Activities
Repayment of Bank Overdraft (60,000)
Dividends Paid (80,000)
Net cash used in financing activities (1,40,000)
Net decrease in cash and cash equivalents (A + B + C) (300)
Cash and cash equivalents at the beginning 3,000
Cash and cash equivalents at the end 2,700
Capankajcagoel CFS -Answers

Land and Building Account

Rs. Rs.
Balance b/d 1,48,000 Depreciation 3,750
Balance c/d 1,44,250
1,48,000 1,48,000
Plant and Machinery Account
Rs. Rs.
Balance b/d 1,12,950 Depreciation 31,750
Share Capital 29,000 Balance c/d 1,16,200
Bank 6,000
1,47,950 1,47,950
Goodwill Account
Rs. Rs.
Balance b/d Balance c/d 19,000
Share Capital 9,000
Bank 10,000
19,000 19,000
Provision for Tax
Rs. Rs.
Bank 25,000 Balance b/d 40,000
Balance c/d 49,000 Profit and Loss Account 34,000
74,000 74,000
Reserve Account
Rs. Rs.
Balance c/d 50,000 Balance b/d 48,000
Profit and Loss Account 2,000
50,000 50,000

PROBLEM 12.10
The following are the summarised Balance Sheets of X Ltd. as on 31 March 2005 and 2006.
Liabilities 31 March 31 March Assets 31 March 31 March
2005 2006 2005 2006
Rs. Rs. Rs. Rs.
Equity Share Capital 10,00,000 12,50,000 Land and Building 5,00,000 4,80,000
Capital Reserve 10,000 Machinery 7,50,000 9,20,000
General Reserve 2,50,000 3,00,000 Investment 1,00,000 50,000
Profit and Loss Stock 3,00,000 2,80,000
Account 1,50,000 1,80,000 Sundry Debtors 4,00,000 4,20,000
Long term loan Cash in hand 2,00,000 1,65,000
from the Bank 5,00,000 4,00,000 Cash at Bank 3,00,000 4,10,000
Sundry Creditors 5,00,000 4,00,000
Provision for taxation 50,000 60,000
Proposed Dividends 1,00,000 1,25,000
27,50,000 25,50,000 27,50,000 25,50,000
Additional Information:
(i) Dividend of Rs. 1,00,000 was paid during the year ended 31 March 2006.
(ii) Machinery during the year purchased for Rs. 1,25,000.
(iii) Machinery of another company was purchased for a consideration of Rs. 10,00,000 payable in equity shares.
(iv) Income tax provided during the year Rs. 55,000.
Capankajcagoel CFS -Answers

(v) Company sold some investment at a profit of Rs. 10,000 which was credited to Capital Reserve.
(vi) There was no sale of machinery during the year.
(vii) Depreciation written off on Land and Building Rs. 20,000.
From the above particulars prepare a Cash Flow Statement for the year ended 31 March, 2006 as per AS-3 (Revised) using
Indirect Method. [PCC Nov. 2006]

SOLUTION 12.10
X Ltd.
Cash Flow Statement
For the year Ending 31 March 2006
(A) Cash Flows from Operating Activities Rs. Rs.
Net profit for the year before taxation and
Extraordinary items 2,60,000
Adjustmetns for:
Depreciation on Machinery 55,000
Depreciation on Building 20,000
Operating profit before working changes: 3,35,000
Decrease in Stock 20,000
Increase in Debtors (20,000)
Decrease in Creditors (1,00,000)
Cash generated from operations 2,35,000
Income Tax Paid (45,000)
Net cash from operating activities 1,90,000
(B) Cash Flows from Investing Activities
Purchase of machinery (1,25,000)
Sale of Investment (50,000 + 10,000) 60,000
Net cash used in investing activities (65,000)
(C) Cash Flows from Financing Activities
Payment of Dividend (1,00,000)
Payment of Loan (1,00,000)
Proceeds from issue of Share Capital 1,50,000
Net Cash used in financing activities (50,000)
Net increase in cash and cash equivalents ( A + B + C) 75,000
Cash and cash equivalents at the beginning 5,00,000
Cash and cash equivalents at the end 5,75,000
ANALYSIS OF NON-CURRENT ITEMS
Provision For Taxation Account
Rs. Rs.
Bank Account (Balancing Figure) 45,000 Balance b/d 50,000
Balance c/d 60,000 Profit and Loss Account 55,000
1,05,000 1,05,000
Proposed Dividend Account
Rs. Rs.
Bank Account 1,00,000 Balance b/d 1,00,000
Balance c/d 1,25,000 Profit and Loss Account 1,25,000
2,25,000 2,25,000
Profit and Loss Account
Rs. Rs.
Proposed Dividend 1,25,000 Balance b/d 1,50,000
Provision for Taxation Account 55,000Net Profit during the year 2,60,000
Capankajcagoel CFS -Answers

General Reserve Account 50,000 (Balancing Figure)

Balance c/d 1,80,000
4,10,000 4,10,000
Machinery Account
Rs. Rs.
Balance b/d 7,50,000 Depreciation Account 55,000
Bank Account 1,25,000 Balance c/d 9,20,000
Equity Share Capital Account 1,00,000
9,75,000 9,75,000
Equity Share Capital Account
Rs. Rs.
Balance c/d 12,50,000 Balance b/d 10,00,000
Machinery Account 1,00,000
Bank Account 1,50,000
12,50,000 12,50,000
Investments Account
Rs. Rs.
Balance b/d 1,00,000 Bank Account (Balancing Figure) 60,000
Capital Reserve Balance c/d 50,000
Account (Profit on
Sale of investments) 10,000
1,10,000 1,10,000

PROBLEM 12.11
Raj Ltd. gives you the following information for the year ended 31 March 2006:
(i) Sales for the year Rs. 48,00,000. The company sold goods for cash only.
(ii) Cost of the goods sold was 75% of sales.
(iii) Closing inventory was higher than opening inventory by Rs. 50,000.
(iv) Trade creditors on 31-3-06 exceed the outstanding on 31-3-05 by Rs. 1,00,000.
(v) Tax paid during the year amounts to Rs. 1,50,000.
(vi) Amounts paid to trade creditors during the year Rs. 35,50,000.
(vii) Administrative and selling expenses paid Rs. .3,60,000.
(viii) One new machinery was acquired in December 2005 for Rs. 6,00,000.
(ix) Dividend paid during the year Rs. 1,20,000.
(x) Cash in hand and at Bank on 31-3-2006 Rs. 70,000.
(xi) Cash in hand and at Bank on 1-4-2006 R. 50,000.
Prepare cash flow statement for the year ended 31-3-2006 as per the prescribed Accounting Standard.
[PCC May 2006]

SOLUTION 12.11
RAJ LTD.
Cash Flow Statement
For the Year Ending 31 March 2006
(A) Cash Flows from Operating Activities Rs. Rs.
Net profit before tax (See Working Note) 8,40,000
Increase in Sundry Creditors 1,00,000
Increase in inventory (50,000)
Cash generated from operations 8,90,000
Capankajcagoel CFS -Answers

Income tax paid (1,50,000)

Net Flows from Investing Activities 7,40,000
(B) Cash Flows from Investing Activities
Purchase of Machinery (6,00,000)
Net cash used in investing activities (6,00,000)
(C) Cash Flows from Financing Activities
Dividends Paid (1,20,000)
Net cash used in financing activities (1,20,000)
Net increase in cash and cash equivalents (A + B + C) 20,000
Cash and Cash equivalents at the beginning 50,000
Cash and cash equivalents at the end 70,000

WORKING NOTE
Sales 48,00,000
Less: Cost of Goods Sold (75% of Rs. 36,00,000) 36,00,000
12,00,000
Less: Administration Expenses 3,60,000
Income before tax 8,40,000

PROBLEM 12.12
J Ltd. presents you the following information for the year ended 31 March 2007:
(Rs. in lacs)
(i) Net before tax provision 36,000
(ii) Dividend paid 10,202
(iii) Income tax paid 5,100
(iv) Book value of assets sold 222
Loss on sale of asset 48
(v) Depreciation debited in Profit and Loss Account 24,000
(vi) Capital grant received amortised in profit and
Loss Account 10
(vii) Book value of investment sold 33,318 Profit on sale of investment
120
(viii) Interest income from investment credited to Profit
and Loss Account 3,000
(ix) Interest expenditure debited in Profit and Loss Account 12,000
(x) Interest actually paid (Financing Activity) 13,042
(xi) Increase in working capital (Excluding cash and
Bank balances) 67,290
(xii) Purchase of fixed assets 22,092
(xiii) Expenditure on construction work 41,688
(xiv) Grant received for capital projects 18
(xv) Long term borrowings from bank 55,866
(xvi) Provision for income tax debited in
Profit and Loss Account 6,000
(xvii) Cash and Bank balance on 1-4-06 6,000
(xvii) Cash and Bank balance on 31-3-07 8,000
Prepare a cash flow statement as per A - 3 (Revised)
[PCC November 2007]

SOLUTION 12.12
Capankajcagoel CFS -Answers

J Ltd.
Cash Flow Statement
For the Year Ending 31 March 2006
(A) Cash Flows from Operating Activities Rs. (in Lakhs) Rs.(in Lakhs)
Net profit before tax 36,000
Adjustments for:
Depreciation 24,000
Loss on sale of asset 48
Amortization of Government Grant (10)
Profit on sale of investment (120)
Interest received (3,000)
Interest paid 12,000
Operating profit before working capital changes 68,918
Increase in working capital (67,290)
Cash from operations 1,628
Tax Paid (5,100)
Net cash used in operating activities (3,472)
(B) Cash Flows from Investing Activities
Purchase of fixed assets (22,092)
Interest income 3,000
Sale of investment (33,318 + 120) 33,438
Sale of asset (222 48) 174
Expenditure on Capital Project (41,688)
Net cash used in investing activity (27,168)
(C) Cash Flows form Financing Activity
Dividend Paid (10,202)
Grant Received 18
Interest Paid (13,042)
Long term Borrowing 55,866
Net Cash provided from financing activity 32,640
Net increase in cash and cash equivalents (A + B + C) 2,000
Cash and cash equivalents at the beginning 6,000
Cash and cash equivalents at the end 8,000

PROBLEM 12.13
The following are the summaries of the balance sheets of a limited company as at 31 December 2008 and 31 December 2009:
Liabilities 2008 2009 Assets 2008 2009
Rs. Rs. Rs. Rs.
Sundry Creditors 39,500 41,135 Cash at Bank 2,500 2,700
Bills Payable 33,780 11,525 Debtors 85,175 72,625
Bank Overdraft 59,510 Advances 2,315 735
Provision for Tax 40,000 50,000 Stock 1,11,040 97,370
Reserves 50,000 50,000 Land & Buildings 1,48,500 1,44,250
Profit & Loss Account 39,690 41,220 Plant & Machinery 1,12,950 1,16,200
Share Capital 2,00,000 2,60,000 Goodwill 20,000
4,62,480 4,53,880 4,62,480 4,53,880
The following additional information is available from the books:
(i) During the year ended 31-12-2009, an additional dividend of Rs. 26,000 was paid.
Capankajcagoel CFS -Answers

(ii) The assets of another company were purchased for Rs. 60,000 payable in fully paid shares of the company. These assets
consisted of stock Rs. 21,640, machinery Rs. 18,360 and goodwill Rs. 20,000. In addition sundry purchases of plant
were made totalling Rs. 5,650.
(iii) Income tax paid during 2009 was Rs. 25,000.
(iv) The net profit for the year before tax was Rs. 62,530.
Prepare a cash-flow statement.

SOLUTION 12.13
Cash Flow Statement [As per AS-3 (Revised)]
For the Year Ending 31 December 2009
(A) Cash Flows from Operating Activities Rs. Rs.
Net Profit before taxation and extra-ordinary item 62,530
Adjustment for:
Depreciation (4,250 + 20,760) 25,010
Operating Profit before working capital changes 87,540
Decrease in Debtors 12,550
Decrease in Advances 1,580
Decrease in Stock (1,11,040 + 21,640 97,370) 35,310
Increase in Sundry Creditors 1,635
Decrease in Bills Payable (22,255)
Cash from operations 1,16,360
Income Tax Paid (25,000)
Net cash from operating activities 91,360
(B) Cash Flows from Investing Activities
Purchase of Plant 5,650
Net cash used in investing activities (5,650)
(C) Cash Flows from Financing Activities
Repayment of Bank Overdraft (59,510)
Payments of Dividends (26,000)
Net cash used in financing activities (85,510)
Net increase in cash and cash equivalents (A + B + C) 200
Cash and cash equivalents at beginning of the period 2,500
Cash and cash equivalents at the end of the period 2,700
Note:Non-cash transactions such as purchase of asset by issue of share capital are not required to be disclosed in cash
flow statement [AS-3 (Revised), Para 40]

PROBLEM 12.14
Condensed versions of the comparative balance sheets and income statement of Scindia Ltd. are presented below:
Comparative Balance Sheets
December 31, 2009 and 2008
Assets 2009 2008
Rs. Rs.
Cash 46,000 28,900
Debtors 41,000 45,000
Inventories 48,000 51,000
Prepaid expenses 4,100 3,700
Machinery 3,30,000 3,10,000
Accumulated depreciation machinery (1,31,000) (1,85,000)
Buildings 5,80,000 4,75,000
Accumulated depreciation Buildings (2,25,000) (2,15,000)
Capankajcagoel CFS -Answers

Land 60,000 50,000

7,53,100 5,63,600
Liabilities and Capital
Creditors 32,500 37,000
Wages payable 4,500 7,500
Income tax payable 7,000 5,000
Mortgage note payable 2012 1,00,000
Equity share capital, Rs. 20 per share 4,00,000 3,50,000
Security premium 55,000 45,000
Profit and loss appropriation account 1,54,100 1,19,100
7,53,100 5,63,600
Additional information:
(i) Dividends of Rs. 40,000 were declared during the year.
(ii) Machinery with an original cost of Rs. 80,000 and accumulated depreciation of Rs. 74,000 was sold during the
year for Rs. 6,000 cash. New machinery was also purchased for Rs. 1,00,000 cash.
(iii) Land and buildings were acquired during the year at a cost of Rs. 1,15,000. In addition to the down payment of Rs.
15,000, a ten year 10% mortgage note for Rs. 1,00,000 was issued to the vendor.
Income Statement for the year ended December 31, 2009
Rs.
Sales 8,10,000
Cost of goods sold 4,60,000
Gross profit on sales 3,50,000
Operating expenses:
Depreciation expenses Machinery 20,000
Depreciation expenses Building 10,000
Other operating expenses 1,75,000 2,05,500
Income before income tax 1,44,500
Income tax 69,500
75,000
Prepare a cash flow statement

SOLUTION 12.14
Scindia Ltd.
Cash Flow Statement [As per AS-3 (Revised)]
For the Year Ending 31 December 2009
(A) Cash Flows from Operating Activities Rs. Rs.
Net income before tax and extraordinary items 1,44,500
Adjustment for:
Depreciation (20,000 + 10,000) 30,000
Operating Profit before working capital changes 1,74,500
Decrease in Debtors 4,000
Decrease in Inventories 3,000
Increase in Prepaid Expenses (400)
Decrease in Creditors (4,500)
Decrease in Wages Payable (3,000)
Cash from operations 1,73,600
Income Tax Paid (67,500)
Net cash from operating activities 1,06,1000
(B) Cash Flows from Investing Activities
Capankajcagoel CFS -Answers

Sale of Machinery 6,000

Purchase of Machinery (1,00,000)
Land and Building (Down Payment) (15,000)
Net cash used in investing activities (1,09,000)
(C) Cash Flows from Financing Activities
Issue of Share Capital (including premium) 60,000
Dividends Paid (40,000)
Net cash from financing activities 20,000
Net increase in cash and equivalents (A + B + C) 17,100
Cash and cash equivalents at the beginning of the period 28,900
Cash and cash equivalents at the end of the period 46,000
Non-cash transaction such as purchase of land and building by issue of 10% Mortgage Note has been excluded from the
cash flow statement as per requirements of AS-3 (Revised) which provides:
Investing and financing transactions that do not require the use of cash or cash equivalents should be excluded from a
cash flow statement. Such transactions should be disclosed elsewhere in the financial statements in way that provides all
the relevant information about these investing and financing activities. [Prara 40]

PROBLEM 12.15
The following data were provided by the accounting records of X Ltd. at the year ended 31 March, 2008:
Rs.
Sales 20,00,000
Cost of goods sold (12,00,000)
Gross profit 8,00,000
Operating Expenses (including depreciation) (4,00,000)
Interest expense paid (60,000)
Interest income received 20,000
Gain on sale of investments 30,000
Loss on sale of plant (10,000)
Net profit before tax 3,80,000
Provision for income tax (1,40,000)
Net profit after tax 2,40,000
Balance Sheets
Assets As at 31-3-2008 As at 31-3-2007
Rs. Rs.
Plant 14,00,000 10,00,000
Less: Accumulated Depreciation (2,00,000) (1,60,000)
12,00,000 8,40,000
Investments (long-term) 2,00,000 3,20,000
Inventory 3,00,000 2,20,000
Accounts receivable 90,000 1,10,000
Cash at bank 1,00,000 90,000
18,90,000 15,80,000
Liabilities Rs. Rs.
Equity share capital 8,00,000 4,00,000
Securities Premium 40,000
General Reserve 3,00,000 2,60,000
Profit & Loss Account 70,000 16,000
Debentures 5,00,000 7,00,000
Accounts Payable 1,20,000 1,04,000
Provision for tax 60,000 1,00,000
Capankajcagoel CFS -Answers

18,90,000 15,80,000
Additional information:
(i) Sold investments for Rs. 1,50,000.
(ii) Issued equity shares of Rs. 10 each at 10% Premium
(iii) Sold plant that cost Rs. 24,000 with accumulated depreciation of Rs. 4,000 for Rs. 10,000.
(iv) Paid dividend.
You are required to prepare Cash Flow Statement as per AS: 3 (Revised).

SOLUTION 12.15
X Ltd.
Cash Flow Statement For The Year Ending 31 March, 2008
(A) Cash Flows from Operating Activities Rs. Rs.
Profit before tax and Extraordinary Items 3,80,000
Adjustments for:
Depreciation 44,000
Interest Paid 60,000
Loss on Sale of Plant 10,000
Profit on Sale of Investments (30,000)
Interest Received on Investments (20,000)
Operating Profit before Working Capital Changes 4,44,000
Decrease in Account Receivable (Debtors) 20,000
Increase in Accounts Payable (Creditors) 16,000
Increase in Inventory (80,000)
Cash from Operations 4,00,000
Income Tax Paid (1,80,000)
Net Cash From Operating Activities 2,20,000
(B) Cash Flows from Investing Activities
Interest Income 20,000
Sale of Investments 1,50,000
Sale of Plant 10,000
Purchase of Plant (4,24,000)
Net cash used in investing Activities (2,44,000)
(C) Cash Flows from Financing Activities
Interest Paid (60,000)
Dividends Paid (1,46,000)
Redemption of Debentures (2,00,000)
Issue of Shares 4,00,000
Securities Premium 40,000
Net cash from financing activities 34,000
Net Increase in Cash and Cash Equivalents ( A + B + C) 10,000
Cash and cash equivalents at the beginning of the year 90,000
Cash and cash equivalents at the end of the year 1,00,000
Plant Account
Rs. Rs.
Balance b/d 10,00,000 Balance b/d 10,000
Bank Account 4,24,000 Accumulated Depreciation 4,000
(Balancing Figure) Profit and Loss Account 10,000
(Loss on sale)
Capankajcagoel CFS -Answers

Balance c/d 14,00,000

14,24,000 14,24,000
Accumulated Depreciation on Plant Account
Rs. Rs.
Plant Account 4,000 Balance b/d 1,60,000
Balance c/d 2,00,000 Depreciation Account 44,000
2,04,000 2,04,000
Investments Accounts
Rs. Rs.
Balance b/d 3,20,000 Bank Account 1,50,000
Profit and Loss Account 30,000 Balance c/d 2,00,000
(Profit on sale)
3,50,000 3,50,000
Provision For Tax Account
Rs. Rs.
Bank Account (B.F.) 1,80,000 Balance b/d 1,00,000
Balance c/d 60,000 Profit & Loss Account 1,40,000
2,40,000 2,40,000
Profit and Loss Account
Rs. Rs.
Dividends Paid (B.F.) 1,46,000 Balance b/d 16,000
General Reserve 40,000 Profit for the year 2,40,000
Balance c/d 70,000
2,56,000 2,56,000
General Reserve Account
Rs. Rs.
Balance c/d 3,00,000 Balance b/d 2,60,000
Profit and Loss Account 40,000
3,00,000 3,00,000
Equity Share Capital Account
Rs. Rs.
Balance c/d 8,00,000 Balance b/d 4,00,000
Bank Account 4,00,000
8,00,000 8,00,000
Securities Premium Account
Rs. Rs.
Balance c/d 40,000 Balance b/d
Bank (Balancing Figure) 40,000
40,000 40,000

PROBLEM 12.16
The data given ahead were provided by accounting records of Shuchi Diamonds Ltd.:
Income Statement
(for the year ended 31-3-2009)
Rs.
Sales 6,98,0000
Capankajcagoel CFS -Answers

Cost of goods sold (5,20,000)

Gross margin 1,78,000
Operating expenses (1,47,000)
(including depreciation expenses of Rs. 37,000) 31,000
Other income (expenses)
Interest expense paid (23,000)
Interest income received 6,000
Gain on sale of investments 12,000
Loss on sale of plant (3,000)
Profit before tax 23,000
Provision for tax (7,000)
Profit after tax 16,000

Comparative Balance Sheets

(As At 31 March...)
Liabilities 2009 2008 Assets 2009 2008
Rs. Rs. Rs. Rs.
Share Capital 4,65,000 3,15,000 Plant Assets 7,15,000 5,05,000
Reserves and Surplus 1,40,000 1,32,000 Less: Accumulated
Current Liabilities: Depreciation (1,03,000) (68,000)
Accounts Payable 50,000 43,000 6,12,000 4,37,000
Accrued Liabilities 12,000 9,000 Investment 1,15,000 1,27,000
Income Tax Payable 3,000 5,000 (Long-term)
Secured Loan: Current Assets:
Bonds 2,95,000 2,45,000 Inventory 1,44,000 1,10,000
Accounts Receivable 47,000 55,000
Cash 46,000 15,000
Prepaid Expenses 1,000 5,000
9,65,000 7,49,000 9,65,000 7,49,000
Analysis of selected transactions and accounts during 2008-09:
(i) Sold investments costing Rs. 90,000 for Rs. 1,02,000. Some investments were purchased for cash.
(ii) Sold plant assets that cost Rs. 10,000 with accumulated depreciation of Rs. 2,000 for Rs. 5,000.
(iii) Issued Rs. 1,00,000 of bonds at face value in exchange for plant assets on 31 March, 2009. Some plant assets were
purchased for cash also.
(iv) Repaid Rs. 50,000 of bonds at face value at maturity.
(v) Issued 15,000 shares of Rs. 10 each for cash at par.
(vi) Paid cash dividends Rs. 8,000. Ignore corporate dividend tax.
Prepare cash flow statement for the year ended 31 March, 2009 as per AS-3 (Revised) using indirect method.
[B.Com. (Hons) Delhi 2009 First option]

SOLUTION 12.16
Shuchi Diamonds Limited
Cash Flow Statement For The Year Ending 31 March, 2009
Rs. Rs.
(A) Cash Flows from Operating Activities
Net profit before tax 23,000
Adjustments for
Depreciation 37,000
Gain on sale of investments (12,000)
Loss on sale of plant assets 3,000
Capankajcagoel CFS -Answers

Interest expense 23,000

Interest income (6,000)
Operating profit before working
capital changes 68,000
Increase in inventory 34,000
Decrease in accounts receivable 8,000
Decrease in prepaid expenses 4,000
Increase in accounts payable 7,000
Increase in accrued liabilities 3,000
Cash generated from operations 56,000
Income tax paid 9,000
Net cash from operating activities 47,000
(B) Cash Flows from Investing Activities
Purchase of Plant Assets (1,20,000)
Sale of Plant Assets 5,000
Purchase of Investments (78,000)
Sale of Investments 1,02,000
Interest Received 6,000
Net cash used in investment activities (85,000)
(C) Cash Flows from Financing Activities
Proceeds from Issue of Share Capital 1,50,000
Repayment of Bonds (50,000)
Interest Paid (23,000)
Dividend Paid (8,000)
Net cash from financing activities 69,000
Net increase in cash and cash equivalents (A + B + C) 31,000
Cash in hand and cash equivalents in the
beginning of the year 15,000
Cash and cash equivalents at the end of the year 46,000

WORKING NOTES
Income Tax Payable Account
Rs. Rs.
Bank Account 9,000 Balance c/d 5,000
Balance c/d 3,000 Profit and Loss Account 7,000
12,000 12,000
Plant Assets Account
Rs. Rs.
Balance b/d 5,05,000 Bank Account 5,000
Bonds 1,00,000 Accumulated Depreciation 2,000
Bank 1,20,000 Profit and Loss Account 3,000
(Loss on sale)
Balance c/d 7,15,000
7,25,000 7,25,000
Accumulated Depreciation Account
Rs. Rs.
Plant Assets Account 2,000 Balance b/d 68,000
Balance c/d 1,03,000 Depreciation Account 37,000
Capankajcagoel CFS -Answers

1,05,000 1,05,000
Bonds Account
Rs. Rs.
Bank 50,000 Balance b/d 2,45,000
Balance c/d 2,95,000 Plant Assets Account 1,00,000
3,45,000 3,45,000
Investments Account
Rs. Rs.
Balance b/d 1,27,000 Bank Account 1,02,000
Profit and Loss Account 12,000 Balance c/d 1,15,000
(Profit on sale)
Bank Account 78,000
2,17,000 2,17,000
Share Capital Account
Rs. Rs.
Balance c/d 4,65,000 Balance b/d 3,15,000
Bank 1,50,000
4,65,000 4,65,000

PROBLEM 12.17
From the following information given below relating to Pooja Ltd., you are required to prepare a Cash Flow Statement:-
31 March 31 March
Assets 2008 2009
Rs. Rs.
Freehold Land and Building at cost 1,00,000
Less: Depreciation (20,000)
Leasehold Land and Building 50,000
Less: Depreciation (1,000)
Plant and Equipment at cost 3,00,000 12,00,000
Less: Depreciation (2,50,000) (3,20,000)
Investment at cost 60,000
Stock in hand 3,00,000 2,00,000
Debtors 1,00,000 1,00,000
Bank 10,000
Discount on Issue of Debentures 2,500
6,00,000 12,31,500
Liabilities and Capital Rs. Rs.
Preference shares of Rs. 10 50,000
Ordinary shares of Rs. 10 2,00,000 3,20,000
Capital Redemption Reserve Account 40,000
Securities Premium Account 20,000 40,000
Surplus on Sale of:
Freehold Land and Building 1,20,000
Investment 20,000
Government Grants 30,000 50,000
Retained Profits 2,10,000 2,50,000
Debentures 1,00,000
Loan from UTI Bank for 5 years 50,000
Capankajcagoel CFS -Answers

Creditors for goods 40,000 70,000

Bank Overdraft 94,000
Taxation 60,000 60,000
Acceptance Credit 7,500
6,00,000 12,31,500
You are given the following additional information:
(i) No plant and equipment was sold or scrapped during the year.
(ii) On 1 January 2009 the freehold land and building were sold and leased back from the purchaser.
(iii) A bonus issue of ordinary shares on the basis of one new share for every five held has been made. The Capital
Redemption Reserve was used for this purpose.
(iv) The preference shares were issued for cash at par.
(v) An issue of Rs. 10 ordinary shares was made at a price of Rs. 12.50 per share.
(vi) Debentures were issued at a discount of 10%
(vii) No dividends were paid or proposed for the year.
(viii) Explain briefly why the cash at bank has become nil although the retained earnings have registered an increase over the
last year.

SOLUTION 12.17
Analysis of Non-Current Items
Freehold Land and Building Account
Rs. Rs.
Balance b/d 1,00,000 Provision for Depreciation 20,000
Surplus on Sale Account 1,20,000 Cash 2,00,000
2,20,000 2,20,000
Provision for Depreciation on Freehold Land and Building Account
Rs. Rs.
Freehold Land and Balance c/d 20,000
Building Account 20,000
Leasehold Land and Building Account
Rs. Rs.
Balance b/d Balance c/d 50,000
Cash 50,000
50,000 50,000
Provision for Depreciation on Leasehold Land and Building Account
Rs. Rs.
Balance c/d 1,000 Balance b/d
Profit and Loss Account 1,000
1,000 1,000
Government Grants
Rs. Rs.
Balance c/d 50,000 Balance b/d 30,000
Cash 20,000
50,000 50,000
Debentures Account
Rs. Rs.
Balance c/d 1,00,000 Cash 90,000
Discount on Issue of
Capankajcagoel CFS -Answers

Debentures Account 10,000

1,00,000 1,00,000
Loan From U.T.I. Bank Account
Rs. Rs.
Balance c/d 50,000 Cash 50,000
Taxation Account
Rs. Rs.
Cash 60,000 Balance b/d 60,000
Balance c/d 60,000 Profit and Loss Account 60,000
1,20,000 1,20,000
Surplus on Sale Account
Rs. Rs.
Balance c/d 1,40,000 Balance b/d
Freehold Land and Building 1,20,000
Investment Account 20,000
1,40,000 1,40,000
Plant and Equipment Account
Rs. Rs.
Balance b/d 3,00,000 Balance c/d 12,00,000
Cash 9,00,000
12,00,000 12,00,000
Provision for Depreciation on Plant and Equipment
Rs. Rs.
Balance c/d 3,20,000 Balance b/d 2,50,000
Profit and Loss Account 70,000
3,20,000 3,20,000
Investment Account
Rs. Rs.
Balance b/d 60,000 Cash 80,000
Surplus on Sale Account 20,000
80,000 80,000
Discount on Issue of Debentures Account
Rs. Rs.
Debentures Account 10,000 Profit and Loss Account 7,500
Balance c/d 2,500
10,000 10,000
Preference Share Capital Account
Rs. Rs.
Balance c/d 50,000 Cash 50,000
Ordinary Share Capital Account
Rs. Rs.
Balance c/d 3,20,000 Balance b/d 2,00,000
Bonus Issue 40,000
Cash 80,000
3,20,000 3,20,000
Capankajcagoel CFS -Answers

Capital Redemption Reserve Account

Rs. Rs.
Bonus Issue Account 40,000 Balance b/d 40,000
Bonus Issue Account
Rs. Rs.
Ordinary Share Capital Account 40,000 Capital Redemption Reserve Account 40,000
Securities Premium Account
Rs. Rs.
Balance c/d 40,000 Balance b/d 20,000
Cash 20,000
40,000 40,000
Retained Profit Account
Rs. Rs.
Provision for tax 60,000 Balance b/d 2,10,000
Balance c/d 2,50,000 Net Profit during the year 1,00,000
3,10,000 3,10,000

SOLUTION 12.18
Pooja Ltd.
Cash Flow Statement
For The Year Ending On 31 March 2009
Rs. Rs.
(A) Cash Flows from Operating Activities
Net surplus before taxation and extraordinary items 1,00,000
Adjustments for:
Depreciation on Leasehold Land and Building 1,000
Depreciation on Plant and Equipment 70,000
Discount on issue of Debentures 7,500
Operating profit before working capital changes 1,78,500
Decrease in Stock 1,00,000
Increase in Creditors 30,000
Increase in acceptance credit 7,500
Cash from Operating Activities 3,16,000
Income Tax Paid 60,000
Net cash generated from operating activities 2,56,000
(B) Cash Flows from Investing Activities
Sale of Freehold Land and Building 2,00,000
Purchase of Leasehold Land and Building (50,000)
Purchase of Plant and Equipment (9,00,000)
Sale of investment 80,000
Net cash used in investing activities (6,70,000)
(C) Cash Flows from Financing Activities
Issue of Equity Share Capital
Including Securities Premium (80,000 + 20,000) 1,00,000
Issue of Preference Share Capital 50,000
Bank Overdraft 94,000
Government Grants 20,000
Capankajcagoel CFS -Answers

Issue of Debentures 90,000

Loan from U.T.I. Bank 50,000
Net cash generated from financing activities 4,04,000
Net decrease in cash (A + B + C) (10,000)
Cash and cash equivalents at the beginning 10,000
Cash and cash equivalents at the end Nil