Question:

Following are the summarized balance sheets of Growell Ltd., as on 31st March, 1998 and 1999.
1998 1999 1998 1999
Share Capital 200,000 250,000 Land & Building 200,000 190,000
General reserve 50,000 60,000 Machinery 150,000 169,000
P L A/c 30,500 30,600 Stock 100,000 74,000
Bank Loan 70,000 - Debtors 80,000 64,200
Creditors 150,000 135,200 Cash 500 800
Provision for Taxation 30,000 35,000 Bank - 7,800
Goodwill - 5,000
530,500 510,800 530,500 510,800

Additional Information:
During the year ended 31st March, 2004
(i) Dividend of Rs. 23,000 was paid.
(ii) Assets of another company were purchased for a consideration of Rs. 50,000 payable in shares.
The following assets were purchased:
Stock: Rs. 20,000; Machinery Rs. 25,000
(iii) Machinery was further purchased for Rs. 8,000
(iv) Depreciation written off on machinery Rs. 12,000; and
(v) Income-tax provided during the year Rs. 33,000;
(vi) loss on sale of machinery Rs. 200 was written off to general reserve.
You are required to prepare the Statement of Cash flow.

Solution:

Share Capital Account

By Balance b/d 200,000
By Machinery 25,000
By Stock 20,000
To Balance c/d 250,000 By Goodwill 5,000
250,000 250,000

General Reserve Account

To Machinery 200 By Balance b/d 50,000
To Balance c/d 60,000 By P L A/c 10,200
60,200 60,200

Provision for Taxation

To Bank A/c 28,000 By Balance b/d 30,000
To Balance c/d 35,000 By P L A/c 33,000
63,000 63,000

Machinery
To Balance b/d 150,000 By Depreciation 12,000
To Share Capital 25,000 By General Res. 200
To Bank 8,000 By Bank 1,800
By Balance c/d 169,000
183,000 183,000

Adjusted Profit & Loss Account

To Proposed Dividend 23,000 By Balance b/d 30,500
To General res. 10,200 By Operationg Profit
To Depreciation 22,000 before working capital
To provision for Tax 33,000 changes 88,300
 To Balance c/d 30,600
118,800 118,800

Note: Depreciation on Land & Building

Opening Balance 200,000
Less: Closing balance 190,000
10,000

Growell Ltd.
Cash Flow Statement ( As per AS 3: Indirect Method)
for the year ended 31st March, 1999.
Particulars Rs. Rs.

Cash flow from Operating Activities:

Operating profit before working capital changes. 88,300
Add: Decrease in Stock [100000-(74000-20000)] 46,000
Add: Decrease in Debtors 15,800
Less: Decrease in Creditors - 14,800
Cash generated from operations 135,300
Less: Income taxes PAID 28,000
Net cash from operating activities 107,300

Cash flows from investing activities:

Purchase of Machinery - 8,000
Proceeds from Sale of Machinery 1,800 - 6,200
Net cash from investing activities

Cash flows from financing activities

Dividends paid - 23,000
Repayment of Bank Loan - 70,000
Net cash used in financing activities - 93,000

Net increase in cash and cash equivalents 8,100

Add: Cash and cash equivalents at beginning of period 500
Cash and cash equivalents at end of period (800 + 7800) 8,600