CASH FLOW STATEMENT
MEANING OF CASH FLOW STATEMENT:-
Cash Flow Statement is a statement that shows the flow of cash & cash equivalents during the period
under report.
OBJECTIVES OF CASH FLOW STATEMENT:-
1. To ascertain the sources of cash and cash equivalents under operating, investing & financing activities
by the enterprise.
2. To ascertain the applications of cash and cash equivalents under operating, investing & financing
activities by the enterprise.
3. To ascertain net change in cash and cash equivalents being the difference between receipts & payments
under operating, investing and financing activities between the dates of two balance sheets
FORMAT OF CASH FLOW STATEMENT
(INDIRECT METHOD) FOR THE YEAR ENDED……………………..
{As per Accounting Standard-3 (Revised)}
I. CASH FLOW FROM OPERATING ACTIVITIES
(A) Net profit before tax and extraordinary items (as per working note)
(B) Add : Items to be added
*Depreciation
*Goodwill, Patents and Trademarks amortized
*Interest on Bank Overdraft/Cash Credit
*Interest on Borrowings and Debentures
*Loss on Sale of Fixed Assets
*Increase in Provision for doubtful debts
(C) Less : Items to be deducted
*Interest Income
*Dividend Income
*Rental Income
*Gain on Sale of Fixed Assets
*Decrease in Provision for doubtful debts
(D) Operating profit before Working Capital changes (A+B-C)
(E) Add : Decrease in Current Assets & Increase in Current Liabilities
(F) Less : Increase in Current Assets & Decrease in Current Liabilities
(G) Cash generated from Operations (D+E-F)
(H) Less : Income tax paid (Net of tax refund)
Cash flow before Extraordinary items
*Extraordinary items (+/-)
Cash Flow From (or Used in) Operating Activities
II. CASH FLOW FROM INVESTING ACTIVITIES
● Proceeds from sale of fixed assets
● Proceeds from sale of investments (other than Current Investments to be
included in cash & cash equivalents and Marketable Securities)
● Proceeds from sale of intangible assets
● Interest and Dividend received (for non-financial companies Only)
● Rent received
● Payment for Purchase of Fixed Assets
● Payment for Purchase of Investments (Other than Marketable Securities)
● Payment for purchase of intangible assets like goodwill
● Extraordinary items (e.g. Insurance Claim on machinery against fire)
(+/-)
Cash Flow From (or used in) Investing Activities
III. CASH FLOW FROM FINANCING ACTIVITIES
● Proceeds from Issue of Shares and Debentures
● Proceeds from Other Long-term Borrowings
● Increase/decrease in Bank Overdraft/Cash Credit
● Payment of Final Dividend
● Payment of Interim Dividend
● Payment of Interest on Debentures and Loans (Short-term and long-term)
● Repayment of Loans
● Redemption of Debentures/Preference Shares
● Payment of Share Issue Expenses
● Payment for Buy-back of Shares as Extraordinary Activities
● Cash Flow From (or Used in) Financing ActivitiTIES
IV. Net Increase/Decrease in cash & Cash Equivalents .-.-.-
(I+II+III) .
V. Add: Cash & Cash Equivalents in the beginning of the …..
year
VI. Cash & Cash Equivalents at the end of the year …..
WORKING NOTES:
Net Profit Before tax and extraordinary items:
Net Profit as per Statement of Profit & Loss or difference between closing balance & opening balance of
surplus i.e., balance in statement of profit & loss
Add: + Transfer to Reserves.
+ Proposed Dividend for current year.
+ Interim Dividend paid during the year.
+ Provision for Tax for the current year.
+ Extraordinary Items, if any, Debited to the Statement of Profit & Loss.
Less: - Extraordinary Items, if any, Credited to the Statement of Profit & Loss.
- Refund of Tax Credited to the Statement of Profit & Loss.
Net Profit Before Tax and Extraordinary Items.
NOTES:
1. Amounts in brackets mean amounts that are to be deducted.
2. Increase/ Decrease in unpaid interest on debentures/ loans affect Cash Flow from Financing Activities.
3. Increase/ Decrease in Unclaimed dividend affect Cash Flow from Financing Activities.
4. Increase/ Decrease in Accrued interest on investments affects Cash Flow from Investing Activities
Following is the Balance Sheet of Mevanca Limited as at 31st March, 2017:
Mevanca Limited BALANCE SHEET
as at 31st March, 2017:
Particulars Not 31st 31st
March, March,
e 2017 2016
No. (₹) (₹)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital 3,00,000 1,00,000
(b) Reserves and Surplus 1 25,000 1,20,000
2. Non-Current Liabilities
Long-term Borrowings 2 80,000 60,000
3. Current Liabilities
(a) Trade Payables 6,000 20,000
(b) Short-term Provisions 3 68,000 70,000
Total 4,79,000 3,70,000
II. ASSETS
1. Non-Current Assets
Fixed Assets 4 3,36,000 1,92,000
2. Current Assets
(a) Inventories 67,000 60,000
(b) Trade Receivables 51,000 65,000
(c) Cash and Cash Equivalents 25,000 49,000
(d) Other Current Assets 4,000
Total 4,79,000 3,70,000
Notes to Accounts
31st 31st
March, March,
2017 2016
Particulars (₹) (₹)
1. Reserves and Surplus
Surplus, i.e., Balance in Statement of Profit and Loss 25,000 1,20,000
25,000 1,20,000
2. Long-term Borrowings
10% Long-term Loan 80,000 60,000
80,000 60,000
3. Short-term Provisions
Provision for Tax 68,000 70,000
68,000 70,000
4. Fixed Assets
Machinery 3,84,000 2,15,000
Accumulated Depreciation (48,000) (23,000)
3,36,000 1,92,000
Additional Information:
(i) Additional loan was taken on 1st July, 2016.
(ii) Tax of ₹ 53,000 was paid during the year.
Prepare Cash Flow Statement.
ANS :-
Cash flow Statement
for the year ended 31st March, 2017
Particulars ( `) ( `)
A. Cash Flow from Operating Activities
(95,00
Net Loss as per Statement of Profit and Loss 0)
51,00
Add: Provision for Tax made (WN1) 0
(44,00
Net loss before Tax and Extraordinary Items 0)
25,00
Add: Depreciation charged during the year 0
Interest paid on loan (WN2) 7,500
(11,50
Net Loss before Working Capital Changes 0)
14,00
Add: Decrease in Trade Receivables 0
Decrease in other Current Assets 4,000
(14,00
Less: Decrease in Trade Payables 0)
(7,000
Increase In Inventories )
(14,50
Net Loss before Tax 0)
(53,00
Add: Tax to be paid during the year 0)
(67,50
Cash used in Operating Activities 0)
B. Cash Flow from Investing Activities
(1,69,
Purchase of Machinery 000)
(1,69,
Cash used in Investing Activities 000)
C. Cash Flow from Financing Activities
2,00,0
Proceeds from Issue of Shares 00
20,00
Proceeds from additional loan taken 0
(7,500
Interest paid on long-term loan )
2,12,5
Cash flow from Financing Activities 00
(24,00
Net decrease in Cash and Cash Equivalents 0)
49,00
Add: Opening Balance of Cash and Cash Equivalent 0
25,00
Cash and Cash Equivalents at the end of the year 0
Working Notes:
1.
Dr. Provision for Tax A/c Cr.
Amount Amount
Date Particulars ( `) Date Particulars ( `)
2017 2016
March April
31 To Cash A/c- Tax Paid 53,000 01 By balance b/d 70,000
March
31 To balance c/d 68,000 2017
March By Statement of Profit &
31 Loss A/c 51,000
1,21,000 1,21,000
2. Interest on Loan
Interest on Loan taken on 1st July, 2016= `. 20,000×10/100×9/12= `. 1,500
Interest on Loan as on 31st March, 2016= `. 60,000×10100= `. 6,000
Total Interest Paid on Loan= `. (6,000+1,500)= `. 7,500
Q2. Following is the Balance sheet of X Ltd. as at 31st March, 2018;
BALANCE SHEET OF X LTD. as at 31st March, 2018
Note 31st March, 31st March,
Particulars No. 2020 (`) 2017 (`)
I. EQUITY AND
LIABILITIES
1. Shareholders’ Funds
(a) Share Capital 19,00,000 17,00,000
(b) Reserves and Surplus 1 6,00,000 3,00,000
2. Non-Current Liabilities
Long-term Borrowings 2 5,00,000 4,00,000
3. Current Liabilities
(a) Short-term Borrowings 3 1,70,000 1,75,000
(b) Short-term Provisions 4 2,00,000 1,65,000
Total 33,70,000 27,40,000
ASSETS
1. Non-Current Assets
(a) Fixed Assets:
(i) Tangible Assets 24,00,000 19,00,000
(ii) Intangible Assets 2,00,000 3,00,000
(b) Non-current Investments 3,00,000 2,00,000
2. Current Assets
(a) Current Investments 5 1,40,000 1,70,000
(b) Inventories 6 2,60,000 1,30,000
(c) Cash and Cash Equivalents 70,000 40,000
Total 33,70,000 27,40,000
Notes to Accounts
31st
March, 31st March,
Particulars 2018 (`) 2017 (`)
1. Reserves and! Surplus
Surplus, i.e., Balance in Statement of Profit and Loss 6,00,000 3,00,000
6,00,000 3,00,000
2, Long-term Borrowings
12% Debentures 5,00,000 4,00,000
5,00,000
4,00,000
[Link]-term Borrowings
Bank Overdraft 1,70,000 1,75,000
1,70,000 1,75,000
Å, Short-term Provisions
Provision for Tax 2,00,000 1,65,000
2,00,000 1,65,000
5. Tangible Assets Machinery 26,00,000 20,00,000
Less: Accumulated Depreciation (2,00,000) (1,00,000)
24,00,000 19,000,000
6. Intangible Assets
Goodwill 2,00,000 3,00,000
2,00,000 3,00,000
Additional Information:
(i) `1,00,000, 12% Debentures were issued on 1st April, 2017.
(ii) During the year, a piece of machinery costing ` 80,000 on which accumulated depreciation was ` 40,000
was sold at a gain of `10,000.
Prepare a Cash Flow Statement. (CBSE 2019C)
ANS :-
Cash Flow Statement
Particulars Detail `
I. Cash flow from operating activities
Net profit as per Statement of profit and loss 3,00,000
(6,00,000-3,00,000)
Add:
Provision for Tax 2,00,000
Net profit before tax and extraordinary items 5,00,000
Add: ,
Depreciation on Machinery 1,40,000
Goodwill amortised 1,00,000
Interest on debentures 60,000 3,00,000
Less: 8,00,000
Gain on Sale of machinery (10,000)
Operating Profit Before Working Capital
Changes 7,90,000
Less:
Inventories (1,30,000)
Cash Generated from operation 6,60,000
Less: Tax paid (1,65,000)
Cash flow from operating activities 4,95,000
II. Cash flow from Investing activities
Proceeds From sale of Machinery 50,000
Payments for the purchase of Machinery (6,80,000)
Payments for the purchase of Current Investment (1,00,000)
Cash Used in Investing activities (7,30,000)
III. Cash flow from Financing activities
Proceeds from Issue of Shares 2,00,000
Proceeds from Issue of Debenture 1,00,000
Decrease in Bank Overdraft (5,000)
Payment of Interest on Debenture (60,000)
Cash used in Financing activities 2,35,000
Net Decrease in Cash and cash equivalents Nil
Add: Opening Cash and Cash Equivalents 2,10,000
Closing Cash and Cash Equivalents 2,10,000
Working notes:
Dr. Fixed Assets A/c Cr.
Particulars ` Particulars `
To Balance B/d 20,00,000 By Provision for Dep. a/c 40,000
To P&L a/c (Gain on sale) 40,000 By Bank a/c (sale) 50,000
To Bank a/c (Purchase) 6,80,000 By Balance C/d 26,00,000
26,90,000 26,90,000
Space
Dr. Provision for Depreciation A/c Cr.
Particulars ` Particulars `
By Balance B/d 1,00,000
To Machinery a/c 40,000 By P&L a/c 1,40,000
To Balance C/d 2,00,000 (Dep. provided during the year)
2,40,000 2,40,000
[Link] the following Balance Sheet of Gopal Ltd. and the additional information as at 31st March. 2019.
Prepare a Cash Flow Statement when Cash Flows from Financing Activities is ` 2,32,000;
31st 31st
Note March, March,
Particulars No. 2019 (`) 2018 (`)
I. EQUITY AND
LIABILITIES
1. Shareholders' Funds
(a) Share Capital 10,00,000 8,00,000
(b) Reserves and Surplus 1 4,00,000 (1,00,000)
2. Non-Current Liabilities
Long-term Borrowings 2 9,00,000 9,00,000
3. Current Liabilities
(a Short-term Borrowings 3 2,40,000 1,00,000
(b) Short-term Provisions 4 2,00,000 1,75,000
Total 27,40,000 18,75,000
Il. ASSETS
1. Non-Current Assets
(a) Property, Plant and
Equipment (Fixed Assets):
(i) Tangible Assets 5 20,00,000 14,42,000
(ii) Intangible Assets 6 46,000 58,000
(b) Non-current Investments 1,00,000 45,000
2. Current Assets
(a) Current Investments 2,00,000 1,20,000
(b) Inventories 7 2,14,000 90,000
(c) Cash and Cash Equivalents 1,80,000 1,20,000
Total 27,40,000 18,75,000
Notes to Accounts
31st March, 31st March,
Particulars 2019 (`) 2018 (`)
1. Reserves and Surplus
Surplus, i.e., Balance in Statement of Profit and
Loss 4,00,000 (1,00,000)
2. Long-term Borrowings
12% Debentures 9,00,000 9,00,000
3. Short-term Borrowings
Bank Overdraft 240,000 1,00,000
4. Short-term Provisions
Provision for Tax 2,00,000 1,75,000
5. Tangible Assets
Machinery 24,00,000 16,42,000
Less: Accumulated Depreciation (4,00,000) (2,00,000)
20,00,000 14,42,000
6. Intangible Assets
Goodwill 46,000 58,000
7. Inventories
Stock-in-Trade 2,14,000 90,000
Additional Information: Tax ` 1,50,000 was paid during the year. (CBSE 2020).
Sheet of Gopal Ltd
Cash Flow Statement as at 31st March. 2019
Particulars Detail `
I. Cash Flow From Operating Activity
Surplus, i.e., Balance in Statement of Profit and
Loss 5,00,000
Add: Provision for Tax 1,75,000
Add: Depreciation on machinery 2,00,000
Goodwill Amortised 12,000
Interest on Debenture 1,08,000 3,20,000
Operating Profit Before Working Capital Changes 9,95,000
Increase in Liabilities and Decrease in
Add: Assets
Inventories 1,24,000
Cash Generated From Operation 8,71,000
Less: Tax Paid 1,50,000
Cash Flow From Operating Activity 7,21,000
II. Cash Flow From Investing Activity
Payment for purchase of Machinery (7,58,000)
Payment for purchase of Investing (55,000)
Cash Flow From Investing Activity (8,13,000)
III. Cash Flow From Financing Activity
Issue of shares 2,00,000
Increase in Bank Over draft 1,40,000 3,40,000
Payment of Interest on Debenture (1,08,000)
Cash Flow From Financing Activity 2,32,000
Net increase in Cash and Cash
IV. Equivalents 1,40,000
(7,21,000+(8,13,000)+2,32,000)
Add: Opening Cash and Cash Equivalents 2,40,000
Closing Cash and Cash Equivalents 3,80,000
Working Notes:
Dr. Provision for Tax A/c Cr.
Particulars ` Particulars `
By Balance B/d 1,75,000
To Bank A/c 1,50,000 By P&L a/c 1,75,000
To Balance C/d 2,00,000 (Tax provided during the year)
3,50,000 3,50,000