Cash Flow Statement PDF

Unit3
MODULE5
CashFlowStatement

PracticalProblems
(WithSolutions)

Stepsforsolvingexample:
1. According to the question prepared Adj. P & L Account and other
necessaryAccount.
2. Applyalladjustmentsontherespecteditemswhichareconnectedto
theaccounts.
3. MarkontheparticulartransactionswhicharegoingtorecordinCFS
also.
4. FindoutbalanceforAdj.P&LAccountandallotheraccounts.
5. Now,prepareCFSwithAdj.Profit beforetaxand afterdepreciation
andnoncashitems.
6. Identifiedoperatingitemslikechangesinworkingcapitalrecordfirst
and then deduct tax liability form it, you will get answer that Cash
Flowfromoperatingactivity.
7. Now,identifiedchangesinfixedassetsandinvestmentsandfindout
changesinCashFlowfrominvestingactivities.
8. Finally, check about changes in financing activities and find out
changes in Cash Flow from it like Equity capital, Pref. Cap.,
Debenture,BankLoan,DividendandInterestpaidetc.
9. Atlast,maketotalofchangesinallactivitiesandaddedopeningBank
andCashbalanceonit.Answerwillbeshowingitthatisclosingbank
andcashbalance.
Illustration1
ThefollowingareBalanceSheetandIncomeStatementofOmltd.
Liabilities 1.1.06 31.12.06 Assets 1.1.06 31.12.06
Sharecapital 1,80,000 2,22,000 FixedAssets:

Profit&lossA/c 75,900 81,900 Land 24,000 48,000
Creditors 1,20,000 1,17,000 Building 1,80,000 2,88,000
OutstandingExpenses 12,000 24,000 CurrentAssets:
Provisionfortax 6,000 6,600 Cash 30,000 36,000
Prov.forDep.onbuilding 60,000 66,000 Debtors 84,000 93,000
Stock 1,32,000 48,000
Advances 3,900 4,500
4,53,900 5,17,500 4,53,900 5,17,500
Information:Companysoldbuildingduringtheyear,costpriceofwhichwasRs.
36,000.
ProfitAndLossA/C
Foryearended31.3.06
Particular RS Particular RS
ToCostofsales 9,90,000 ByNetsales 12,60,000
ToWages&salaries 1,20,000
ToGrossprofitc/d 1,50,000
12,60,000 12,60,000
ToOperatingExp. 40,000 ByGrossprofit 1,50,000
ToDepreciation 30,000 ByProfitonsaleofBuilding 6,000
ToProvisionfortax 44,000
ToNetprofit 42,000
1,56,000 1,56,000
ToproposedDividend 36,000 ByBalanceb/d 75,900
TobalanceCarriedto 81,900 ByNetProfit(transf.) 42,000
balancesheet
1,17,900 1,17,900
Youarerequiredtoprepareacashflowstatement
Solution:
ProvisionfortaxA/c
Particulars Rs Particulars Rs
ToBank(taxpaid) 43,400 ByBalanceb/d 6,000
ToBalancec/d 6,600 ByP&LA/c.(provision) 44,000
50,000 50,000

BuildingA/c
ToBalanceb/d 1,80,000 ByDep.Provisiona/c 24,000
ToP&LA/c.(profitonsale) 6,000 ByBank(sale) 18,000
ToBank(purchase) 1,44,000 ByBalancec/d 2,88,000
3,30,000 3,30,000

DepreciationprovisiononbuildingA/c
ToBuildinga/c(dep.) 24,000 ByBalanceb/d 60,000
ToBalancec/d 66,000 ByP&LA/c.(current 30,000
yearsdep.)

90,000 90,000
AdjustedProfitandLossAccount
ToProvisionfortax 44,000 ByBalanceb/d 75,900
ToProv.fordep.onbuilding 30,000 ByProfitonsaleof
ToDividendpaid 36,000 building 6,000
ToBalancec/d 81,900 ByAdj.Profit 1,10,000
1,91,900 1,91,900

CashflowstatementofOmLtdfortheyearendingon
31.3.06(AsperA.S.3)
Particulars Amount Amount
Rs. Rs.
(1)CashFlowfromOperatingActivities:
Profitbeforetax(afternoncashitems) 1,10,000
Add/Less:ChangesinWorkingCapital
- Inc.indebtors (9,000)
- Dec.instocks 84,000
- Inc.inadvances (600)
- Dec.increditors (3,000)
- Inc.inOutstandingexpenses 12,000
Cashflowsfromoperatingactivities 1,93,400
Less:TaxPaid 43,400
NETCASHFLOWFROMOPERATINGACTIVITES(A) 1,50,000
(2)CashFlowfromInvestingActivities:
- PurchaseofLand(referquestionassetsside) (24,000)
- PurchaseofBuilding(referbuildingA/c.) (1,44,000)
- Saleofbuilding(referbuildingA/c.) 18,000
NETCASHFLOWFROMINVESTINGACTIVITES(B) (1,50,000)
(3)CashFlowfromFinancingActivities:
- IssuedEquityShares 42,000
- Dividendpaid (36,000)
NETCASHFLOWFROMFINANCINGACTIVITIES(C) 6,000
NETCASHFLOWFROMALLACTIVITES(A+B+C) 6,000
Add:OpeningCashandBankBalance 30,000
ClosingCashandBankBalance 36,000

Illustration:2
FollowingarethebalancesheetsofaVijay&son:
Liabilities 1105 311205 Assets 1105 311205
Creditors 36,000 41,000 Cash 4,000 3,600
LoanfromPartner 20,000 Debtor 35,000 38,400
LoanfromBank 30,000 25,000 Stock 25,000 22,000
Capital 1,48,000 1,49,000 Land 20,000 30,000
Building 50,000 55,000
Machinery 80,000 86,000
2,14,000 2,35,000 2,14,000 2,35,000
DuringtheyearRs.26,000paidasdividend.Theprovisionmadefordepreciationagainst
machineryason1.1.05wasRs.27,000andon31.12.05Rs36,000.
Prepareacashflowstatement.
Solution:
MachineryAccount
ToBalanceb/d 80,000 ByProv.fordepreciation 36,000
ToProv.fordepreciation 27,000 ByBalancec/d 86,000
ToBank(purchase)? 15,000
1,22,000 1,22,000

Cashflowstatementfortheyearended31.12.2005

Particular Rs. Rs.
1.Cashflowsfromoperatingactivities:
Netprofitbeforetax 27,000
Adjustmentfordep. 9,000

Inc.incurrentliabilities 36,000
Inc.indebtor 5,000
Decreaseinstock (3,400)
3,000
Netcashfromoperatingactivities 40,600

2.Cashflowsfrominvestingactivities
Purchaseofland (10,000)
Purchaseofbuilding. (5,000)
Purchaseofmachinery (15,000)
Netcashfrominvestingactivities (30,000)
3.Cashflowsfromfinancingactivities:
Loan 20,000
Repaymentofbankloan (5,000)
PaymentofDividends (26,000)
(11,000)
Netcashfromfinancingactivities
NetCashFlowfromallactivities(A+B+C) (400)
Add:openingcashbalance 4,000
Closingcashbalance 3,600

W.N.
Netprofitbeforetax.
Capital(1.1.05) 1,48,000
Capital(31.12.05) 1,49,000
Diff. 1,000
Add.Dividends 26,000
27,000

Illustration:3
ThesummarizedbalancesheetofBhadreshLtd.ason31.12.05and31.12.2006areas
follows:
Sharecapital 4,50,000 4,50,000 Fixedasset 4,00,000 3,20,000

GeneralReserve 3,00,000 3,10,000 Investment 50,000 60,000
P&la/c 56,000 68,000 Stock 2,40,000 2,10,000
Creditors 1,68,000 1,34,000 Debtor 2,10,000 4,55,000
Taxprovision 75,000 10,000 Bank 1,49,000 1,97,000
Mortgageloan 2,70,000
10,49,000 12,42,000 10,49,000 12,42,000

AdditionalDetails:
1. InvestmentcostingRs.8,000weresoldforRs.8,500
2. TaxprovisionmadeduringtheyearwasRs.9,000
3. DuringtheyearpartoffixedassetscostingRs10,000wassoldforRs12,000and
theprofitwasincludedinP&LA/c.Youarerequiredtopreparecashflow
statementfor2006.

Solution:
Particular Rs. Rs.
Netprofitbeforetax(Rs.28,500incaseProfitonsale 31,000
onInvestment&FixedAssetnotconsidered)
Adjustmentfor:
Dep. 70,000
Profitonsaleofinvestment (500)
ProfitonsaleofFixedassets (2,000)
Dec.instock 30,000
Dec.increditor (34,000)
Inc.indebtor (2,45,000)
Incometaxpaid (74,000)

Netcashfromoperatingactivities (2,24,500)
2.Cashflowsfrominvestingactivities:
Investmentpurchased (18,000)
Saleofinvestment 8,500
SaleofFixedassets 12,000
Netcashfrominvestingactivities 2,500
3.Cashflowsfromfinancingactivities:
Mortgageloantaken 2,70,000
NetCashFlowfromallactivities(A+B+C) 48,000
Add:openingcashbalance 1,49,000
Closingcashbalance 1,97,000

FixedAssetsA/c
ToBalanceb/d 4,00,000 ByBanka/c 12,000
ToProfitandLossa/c 2,000 ByDep. 70,000
ByBalancec/d 3,20,000
4,02,000 4,02,000
ProvisionfortaxA/c
ToBalancec/d 10,000 ByP&LA/c(provision) 9,000

84,000 84,000
InvestmentA/c
ToBalanceb/d 50,000 ByBank(sale) 8,500
ToP&LA/c 500 ByBalancec/d 60,000
ToBank(purchase) 18,000
68,500 68,500

AdjustedP&LA/c
ToProvisionfortax 9,000 ByBalanceb/d 56,000
ToProvisionforG.R. 10,000 ByProfitonsaleofInv. 500
ToBalancec/d 68,000 ByProfitonsaleofF.A. 2,000
ByAdjustedProfit 28,500
87,000 87,000

Illustration:4
PreparecashflowstatementofSatyamltd.Fromthefollowing:
Liabilities 1.1.06 31.12.06 Assets 1.1.06 31.12.06
Sharecapital 1,00,000 4,00,000 Goodwill 20,000

8%debenture 2,00,000 Machinery 1,25,000 4,75,000
Retainedearning 60,000 90,000 Stock 20,000 80,000
Creditors 40,000 1,00,000 Debtor 30,000 1,00,000
Billspayable 20,000 40,000 Bank 50,000 1,50,000
Taxprovision 30,000 40,000 Cash 25,000 45,000
2,50000 8,70,000 2,50,000 8,70,000

AdditionalDetails:
1. During 2006 the business of a sole trader was purchased by issuing share for Rs.
2,00,000.Theassetsacquiredfromhimwere:
Goodwill Rs. 20,000, machinery Rs. 1,00,000 , stock Rs. 50,000 and Debtors Rs.
30,000
2. Provisionfortaxchargedin2006wasRs.35,000
3. The debenture was issued at a premium of 5% which is included in the retained
earnings.
4. DepreciationchargedonmachinerywasRs.30,000.

Solution:
Particular Rs Rs

Adjustmentfor:
Dep.Onmachinery 30,000
Inc..increditor 60,000
Inc..inbillspayable 20,000
Inc.instock (10,000)
Inc..indebtor (40,000)

Machinerypurchased (2,80,000)
Netcashfrominvestingactivities (2,80,000)

3.Cashflowsfromfinancingactivities
Issueofshares 1,00,000
Issueofdebenture 2,10,000
Cashflowsfromfinancingactivities 3,10,000
Netinc.incashequivalents 1,20,000
Closingcashbalance 1,95,000

ProvisionfortaxA/c
ToBalancec/d 40000 ByP&LA/c(provision) 35,000

65,000 84,000
MachineryA/c
ToBalanceb/d 1,25,000 ByDepreciation 30,000
ToBank(purchase) 2,80,000 ByBalancec/d 4,75,000
ToVendor 1,00,000
5,05,000 5,05,000

ShareCapitalA/c
ByBalanceb/d 1,00,000
ByVendor 2,00,000
ToBalancec/d 4,00,000 ByBank 1,00,000
4,00,000 4,00,000

Illustration:5
ThesummarizedbalancesheetofJayLtdason31.12.06and31.12.2007areasfollows:
Sharecapital 1,00,000 1,00,000 Building 46,800 45,000

GeneralReserve 38,400 42,000 PlantandMachinery 38,280 42,030
Creditors 9,750 6,380 Goodwill 13,000 13,000
Taxprovision 19,000 21,000 Investment 10,000 11,250
Prov.fordoubtfuldebt 1,000 1,200 Stock 30,000 28,000
Debtor 22,070 22,300
Cash 8,000 9,000
1,68,150 1,70,580 1,68,150 1,70,580
Aftertakingthefollowinginformationintoaccount,prepareacashflowstatementfor
theyearending31.12.2007
1. Theprofitfor20062007wasRs.8,600againstthishadbeenchargedDep.Rs.3,050
andincreaseinprovisionfordoubtfuldebtRs.200
2. IncometaxRs.18,000waspaidduringtheyearchargedagainsttheprovisionandin
additionRs.20,000waschargedagainstprofitandcarriedtotheprovision.
3. AninterimdividendOfRs.5,000waspaidinJanuary2007
4. AdditionalplanwaspurchasedinSeptember2006forRs.5,000
5. Investments(costRs.5,000)weresold2007forRs.4800andon1stmarch2007
anotherinvestmentwasmadeforRs.6,250.
Solution:
Particular Rs. Rs.
Adjustmentfor:
Depreciation 3,050
Inc.inprovisionford/d 200
Dec.instock 2,000
Dec.increditor (3,370)
Inc.indebtor (230)

Investmentpurchased (6,250)
Saleofinvestment 4,800
Plantpurchased (5,000)

Netcashfrominvestingactivities (6,450)

3.Cashflowsfromfinancingactivities
Paymentofinterimdividend (5,000)
Netinc.incashequivalents 1,000

Closingcashbalance 9,000

AdjustedprofitandlossA/c
ToProvisionfortax 20,000 Byprofit 28,800
ToGeneralreserve 3,600
ToLossonsaleofInvest. 200
Tointerimdividend 5,000
28,800 28,800
ProvisionfortaxA/c
ToBalancec/d 21,000 ByP&LA/c. 20,000
(provision)
39,000 39,000

Illustration6
TheBalanceSheetsofafirmason31stDecember2008and2009aregivenbelow:
ShareCapital 1,00,000 1,60,000 FixedAssetsCost 1,52,000 2,00,000
RetainedEarnings Inventory 93,400 89,200
70,250 85,300
Accumulated Debtors 30,800 21,100
Depreciation 60,000 40,000
12%Debenture 50,000 Prepaidexpenses 3,950 3,000
Creditors 28,000 48,000 Bank 28,100 20,000
3,08,250 3,33,300 3,08,250 3,33,300
AdditionalInformation:
1. NetprofitisRs.27,050.
2. DepreciationchargedRs.10,000.
3. CashdividenddeclaredduringtheperiodRs.12,000.
4. AnadditiontothebuildingwasmadeduringtheyearatacostofRs.78,000andfully
depreciatedequipmentcostingRs.30,000wasdiscardedasnosalvagebeing
realized.
PrepareaCashFlowStatement.

Solution:
AdjustedProfit&LossAccount
Particular Amount Particular Amount
ToProv.fordepreciation 10,000 ByBalanceb/d 70,250
ToDividend 12,000
ToBalancec/d 85,300 ByAdj.Profit 37,050
1,07,300 1,07,300
FixedAssetsAccount
ToBalanceb/d 1,52,000 ByAccumulatedDep. 30,000
ToBank 78,000 ByBalancec/d 2,00,000

2,30,000 2,30,000

AccumulatedDepreciationAccount
ToFixedAssets 30,000 ByBalanceb/d 60,000
ToBalancec/f 40,000 ByProfit&LossA/c. 10,000

70,000 70,000

Cashflowstatementfortheyearendingon31.12.09(AsperA.S.3)
Rs. Rs.
37,050
Profitbeforetax(afternoncash&extraordinaryitems)
Add/Less:ChangesinWorkingCapital
- Dec.inInventory 4,200
- DecreaseinDebtors 9,700
- IncreaseinCreditors 20,000
- Decreaseinprepaidexpenses 950 34,850
Cashflowsfromoperatingactivities 71,900
Less:TaxPaid Nil
NETCASHFLOWFROMOPERATINGACTIVITES(A) 71,900
(2)CashFlowfromInvestingActivities:
- PurchaseofBuilding (78,000)
NETCASHFLOWFROMINVESTINGACTIVITES(B) (78,000)
(3)CashFlowfromFinancingActivities:
- IssuedEquityShares 60,000
- Dividendpaid (12,000)
- Redemptionofdebenture (50,000)
NETCASHFLOWFROMFINANCINGACTIVITIES(C) (2,000)
NETCASHFLOWFROMALLACTIVITES(A+B+C) (8,100)
Add:OpeningCashandBankBalance 28,100
ClosingCashandBankBalance 20,000

Illustration7
Fromthefollowinginformation,preparecashflowstatement:
BalanceSheet
ShareCapital 2,00,000 2,00,000 Cash 8,000 10,000
Profit&Loss 50,000 90,000 Bank 22,000 20,000
BankLoan 10,000 Debtors 10,000 20,000
Outstanding 5,000 1,000 Stock 25,000 15,000
Expenses
Creditors 15,000 20,000 Noncurrent 2,35,000 2,75,000
asset
Provisionfortax 20,000 25,000
UnclaimedDividend 4,000
3,00,000 3,40,000 3,00,000 3,40,000
Net profit for the year 2012 after providing Rs.20,000 as depreciation was Rs. 60,000.
During2012,companydeclaredequitydividend@10%andpaidRs.15,000asIncome
tax.
Solution:
CashflowstatementfortheyearendedonDecember2012
Rs. Rs.
IncreaseinProfit&Lossaccount 40,000
Add:Proposeddividend(10%of2,00,000) 20,000
NetProfit 60,000
Add:Depreciation 20,000
ProvisionofIncometax 20,000
Fundsfromoperations 1,00,000
Add:Increaseincreditors 5,000
Decreaseinstock 10,000
Less:Increaseindebtors (10,000)
Decreaseinoutstandingexpenses (4,000)
Cashgeneratedfromoperations 1,01,000
Less:Taxpaid (15,000)
NETCASHPROVIDEDBYOPERATINGACTIVITIES(A) 126000 86,000
40000
26000
(2)CashFlowFromInvestingActivities:
PurchaseofNoncurrentAsset(2,95,0002,35,000) (60,000)
NETCASHPROVIDEDBYINVESTINGACTIVITIES(B) (60,000)
(3)CashFlowFromFinancingActivities:
Repaymentofloan (10,000)
Repaymentofdividend(20,0004,000) (16,000)
NETCASHPROVIDEDBYFINANCINGACTIVITIES(C) (26,000)
NETCASHFLOWFROMALLACTIVITES(A+B+C) Nil
Add:Openingbalanceofcash&bank 30,000
Closingbalanceofcash&bank 30,000
Illustration8
From the following BalanceSheet prepare cash flow statement for the year
2012.
ShareCapital 1,25,000 1,53,000 Cash 10,000 7,000
Creditors 40,000 44,000 Debtors 30,000 50,000
LoanfromX 25,000 Stock 40,000 25,000
Loanfrombank 40,000 50,000 Machinery 80,000 55,000
Land 35,000 50,000
Building 35,000 60,000
2,30,000 2,47,000 2,30,000 2,47,000
DuringtheyearamachinecostingRs.10,000withaccumulateddepreciationRs.3,000
wassoldforRs.5,000.
Solution:
CashflowstatementfortheyearendedonDecember2012
Rs. Rs.
Capitalattheendoftheyear 1,53,000
Less:Capitalatthebeginningoftheyear (1,25,000)
Profitfortheyear 28,000
Add:Lossonsaleofmachinery 2,000
Depreciation 18,000
Profitbeforechangesinworkingcapital 48,000
Add:Increaseincreditors 4,000
Decreaseinstock 15,000
Less:Increaseindebtors (20,000)
NETCASHPROVIDEDBYOPERATINGACTIVITIES(A) 47,000
SaleofMachinery 5,000
Purchaseofland (15,000)
PurchaseofBuilding (25,000)
Loanfrombank 10,000
RepaymentofloanfromX (25,000)
Add:Openingbalanceofcash&bank 10,000
Closingbalanceofcash&bank 7,000

WorkingNote:
MachineryAccount
ToBalanceb/d 80,000 ByBanka/c 5,000
ByLossonsale 2,000
ByDepreciation 18,000
ByBalancec/f 55,000
80,000 80,000

Illustration9
The following are the summarized financial statements of Ambuja Co. Ltd. for
2012and2013:
StatementofFinancialPosition
Particulars 2013 2012
Assets:
Cash 9,000 15,000
Debtors 25,000 31,000
Stock 60,000 45,000
Fixedassetatcost 1,20,000 1,05,000
2,14,000 1,96,000
Liabilities:
ShareCapital 32,500 31,500
6%Debenturesdueon31122015 50,000 70,000
RetainedEarnings 38,500 27,500
Creditors 20,000 12,500
IncometaxPayable 36,000 27,500
AccumulatedDepreciation 37,000 27,000
2,14,000 1,96,000

IncomeStatement
(ForTheYearEnding31stDecember)
Sales 4,25,000 4,50,000
OperatingExpenses(includingdepreciationRs. 3,40,000 3,80,800
10,000)
InterestonDebentures 3,000 4,200
NetProfitBeforeTax 82,000 65,000
IncomeStatement 36,000 27,500
46,000 37,500

StatementofRetainedEarnings
RetainedEarningsBeginning 27,500 25,000
NetProfitfortheyear 46,000 37,500
73,500 62,500
Dividends 35,000 35,000
RetainedEarningsEnd 38,500 27,500

Solution:
CashFlowStatement
NetProfit 82,000
(Changesinworkingcapital)
DecreaseinDebtors 6,000
IncreaseinCreditors 7,500
Depreciation 10,000
23,500
IncreaseinStock (15,000) 8,500
CASHPROVIDEDBYOPERATINGACTIVITIES 90,500
Less:TaxPaid (27,500)
NETCASHPROVIDEDBYOPERATINGACTIVITIES(A) 63,000
Purchaseoffixedassets (15,000)
Issueofshares 1,000
RedemptionofDebentures (20,000)
DividendPaid (35,000)
Add:Openingbalanceofcash 15,000
Closingbalanceofbank 9,000

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Unit3

Sharecapital 1,80,000 2,22,000 FixedAssets:

Sharecapital 4,50,000 4,50,000 Fixedasset 4,00,000 3,20,000

10,49,000 12,42,000 10,49,000 12,42,000

Sharecapital 1,00,000 4,00,000 Goodwill 20,000

Sharecapital 1,00,000 1,00,000 Building 46,800 45,000

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