Question

Following is the Balance Sheet of Nidhi Ltd. as at 31st March, 2026, prepare Cash Flow Statement:

Particulars	Note No.	31st March, 2026 (₹)	31st March, 2025 (₹)
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
(a) Share Capital		30,00,000	20,00,000
(b) Reserves and Surplus	1	(4,25,000)	(5,37,500)
2. Non-Current Liabilities
Long-term Borrowings	2	7,50,000	6,25,000
3. Current Liabilities
Trade Payables		4,75,000	6,75,000
Total		38,00,000	27,62,500
II. ASSETS
1. Non-Current Assets
(a) Property, Plant and Equipment and Intangible Assets:
—Property, Plant and Equipment (Machinery)		17,25,000	12,50,000
(b) Non-Current Investments		3,00,000	5,00,000
2. Current Assets
(a) Trade Receivables		16,00,000	8,62,500
(b) Cash and Cash Equivalents		1,75,000	1,50,000
Total		38,00,000	27,62,500

Notes to Accounts

Particulars	31st March, 2026 (₹)	31st March, 2025 (₹)
1. Reserves and Surplus
Surplus, i.e., Balance in Statement of Profit & Loss	(4,25,000)	(5,37,500)
2. Long-term Borrowings
12% Debentures	7,50,000	6,25,000

Additional Information:

1. Debentures were issued on 1st January, 2026.
2. Machinery costing ₹ 5,00,000 on which depreciation charged was ₹ 1,75,000 was sold for ₹ 3,75,000.
3. Depreciation charged during the year was ₹ 2,00,000.
4. Non-current Investments were sold at a profit of 20%.

Prepare Cash Flow Statement.

Answer 1

Cash Flow Statement of Nidhi Ltd. For the year ended 31st March, 2026
Particulars	Details (₹)	Amount (₹)
A. Cash Flow from Operating Activities
Net Profit before Tax and Extraordinary Items (Note 1)	(62,500)
Adjustment for Non-Cash & Non-Operating Items:
+ Depreciation on Machinery	2,00,000
+ Interest on 12% Debentures (Note 4)	22,500
- Profit on sale of Non-Current Investments (Note 3)	(50,000)
Operating Profit before Working Capital Changes	1,10,000
Adjustment for Working Capital Changes:
- Increase in Current Assets (Trade Receivables)	(7,37,500)
- Decrease in Current Liabilities (Trade Payables)	(2,00,000)
Cash Used in Operating Activities (A)		(8,27,500)
B. Cash Flow from Investing Activities
Proceeds from Sale of Machinery	3,75,000
Proceeds from Sale of Non-Current Investments (Note 3)	2,50,000
Payment for Purchase of Machinery (Note 2)	(6,50,000)
Cash Used in Investing Activities (B)		(25,000)
C. Cash Flow from Financing Activities
Proceeds from Issue of Share Capital	10,00,000
Proceeds from Issue of 12% Debentures	1,25,000
Payment of Interest on Debentures	(22,500)
Cash Flow from Financing Activities (C)		11,02,500
Net Increase in Cash & Cash Equivalents (A + B + C)		25,000
+ Cash & Cash Equivalents at the beginning of the year		1,50,000
Cash & Cash Equivalents at the end of the year		1,75,000

Working Notes:

1. Calculation of Net Profit before Tax:

Closing Balance of Surplus (Profit & Loss Account) = ₹ (4,25,000)

Less: Opening Balance of Surplus = ₹ (5,37,500)

Net Profit = \[(4,25,000) - (5,37,500) =\] ₹ 1,12,500

2. Machinery Account

Receipts	Amount (₹)	Payments	Amount (₹)
To Balance b/d	12,50,000	By Cash A/c (Sale)	3,75,000
To Bank A/c (Purchase - Bal. Fig.)	6,50,000	By Depreciation A/c	2,00,000
		By Balance c/d	17,25,000
Total	19,00,000	Total	19,00,000

3. Non-Current Investments Account

Opening Balance = ₹ 5,00,000

Closing Balance = ₹ 3,00,000

Book Value of Investments sold = $5,00,000 - 3,00,000 =$ ₹ 2,00,000

Profit on Sale = 20% of ₹ 2,00,000 = ₹ 40,000

Sale Proceeds = $2,00,000 + 40,000 =$ ₹ 2,40,000

4. Interest on 12% Debentures:

Debentures were issued on 1st January, 2026.

Interest on Opening Balance (₹ 6,25,000) for full year (12%) = ₹ 75,000

Interest on New Debentures (₹ 1,25,000) for 3 months (Jan to Mar) = $1,25,000 \times 12\% \times \frac{3}{12} =$ ₹ 3,75,000

Total Interest = ₹ 78,750