Question

From the following Balance Sheet of Samta Ltd., as at 31st March, 2019, prepare Cash Flow Statement:

Particulars	Note No.	31st March, 2019 (₹)	31st March, 2018 (₹)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds:
(a) Share Capital	1	7,50,000	7,50,000
(b) Reserves and Surplus	2	3,10,000	(20,000)
2. Non-Current Liabilities:
Long-term Borrowings (8% Debentures)		2,60,000	1,50,000
3. Current Liabilities:
(a) Short-term Borrowings (8% Bank Loan)		40,000	50,000
(b) Trade Payables		1,20,000	1,10,000
(c) Short-term Provisions	3	50,000	40,000
Total		15,30,000	10,80,000
II. ASSETS
1. Non-Current Assets:
(a) Fixed Assets:
(i) Tangible Assets (Net)		8,60,000	6,20,000
(ii) Intangible Assets (Goodwill)		15,000	40,000
(b) Non-Current Investments		1,25,000	80,000
2. Current Assets:
(a) Current Investments		5,000	15,000
(b) Inventories		1,95,000	1,00,000
(c) Trade Receivables		2,00,000	2,00,000
(d) Cash and Cash Equivalents		1,30,000	25,000
Total		15,30,000	10,80,000

es to Accounts:

Particulars	31st March, 2019 (₹)	31st March, 2018 (₹)
1. Share Capital:
Equity Share Capital	5,50,000	4,50,000
12% Preference Share Capital	2,00,000	3,00,000
	7,50,000	7,50,000
2. Reserves and Surplus:
Securities Premium Reserve	10,000	-
General Reserve	1,50,000	1,20,000
Surplus, i.e., Balance in Statement of Profit and Loss	1,50,000	(1,40,000)
	3,10,000	(20,000)
4. Short-term Provisions:
Provision for Tax	50,000	40,000

Additional Information:  
(i) During the year a piece of machinery costing ₹ 60,000 on which depreciation charged was ₹ 20,000 was sold at 50% of its book value. Depreciation provided on tangible Assets ₹ 60,000;
(ii) Income tax ₹ 45,000 was provided;
(iii) Additional Debentures were issued at par on 1st October, 2018 and Bank Loan was repaid on the same date;
(iv) At the end of the year Preference Shares were redeemed at a premium of 5%.

Answer 1

Cash Flow Statement for the year ended March 31, 2019

	Particulars	Amount (₹)	Amount (₹)
A)	Cash Flow from Operating Activities:
	Profit as per Statement of Profit and Loss [1,50,000 − (−1,40,000)]	2,90,000
	(+) Provision for Tax	45,000
	(+) General Reserve	30,000	3,65,000
	Profit Before Taxation		3,65,000
	(+) Non-operating Expenses
	1) Depreciation on Fixed Assets	60,000
	2) Interest on Debentures  `= (1,50,000 × 8/100 × 6/12) + (2,60,000 × 8/100 × 6/12)` = 6,000 + 10,400	16,400
	3) Premium on Redemption of Preference Shares	5,000
	4) Interest on Bank Loan `= (50,000 × 8/100 × 6/12) + (40,000 × 8/100 × 6/12)` = 2,000 + 1,600	3,600
	5) Goodwill written off	25,000
	6) Loss on Fixed Assets	20,000	1,30,000
	Operating Profit before Working Capital Adjustments		4,95,000
	(+) Increase in Current Liabilities
	Trade Payables		10,000
	(-) Increase in Current Assets
	1) Inventories		(95,000)
	Cash Generated from Operations		4,10,000
	Less: Tax Paid		(35,000)
	Net Cash Flows from Operating Activities		3,75,000
B)	Cash Flow from Investing Activities:
	1) Sale of Fixed Assets	20,000
	2) Purchase of Fixed Assets	(45,000)
	3) Purchase of Investment	(3,40,000)
	Net Cash Used in Investing Activities		(3,65,000)
C)	Cash Flow from Financing Activities
	1) Proceeds from Issue of Share Capital	1,00,000
	2) Proceeds from Issue of Debentures	1,10,000
	3) Security Premium Reserve	10,000
	4) Premium on Redemption of Preference Share Capital	(5,000)
	5) Interest on Bank Loan Paid	(3,600)
	6) Interest on Debentures Paid	(16,400)
	7) Redemption of Preference Share Capital	(1,00,000)
	8) Repayment of Bank Loan	(10,000)	85,000
	Net Cash Flow from Financing Activities		85,000
D)	Net Increase in Cash and Cash Equivalents:		95,000
	Add: Cash and Cash Equivalent in the beginning of the period (25,000 + 15,000)		40,000
	Cash and Cash Equivalents at the end of the period (1,30,000 + 5,000)		1,35,000

Working Notes:

WN1:

Dr.	Fixed Assets A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	6,20,000	By Depreciation A/c	60,000
To Bank A/c - Purchase (Balancing Figure)	3,40,000	By Bank A/c (Sale) (40,000 × 50%)	20,000
		By Profit and Loss A/c (Loss on Sale)	20,000
		By Balance c/d	8,60,000
	9,60,000		9,60,000

WN2:

Dr.	Provision for Taxation A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Bank A/c (Tax Paid)	35,000	By Balance b/d	40,000
To Balance c/d	50,000	By Profit & Loss A/c	45,000
	85,000		85,000