Question

From the following Balance Sheets of Diamond Limited as on 31^st March, 2013, and 31^st March, 2014, prepare a Cash Flow Statement (as per Accounting Standard 3).

Balance Sheets as on 31st March 2014.
Particulars	Note No.	31st March, 2014 (₹)	31st March, 2013 (₹)
I. EQUITY AND LIABILITIES:
1. Shareholders’ Funds
(a) Share Capital (Equity)		4,00,000	3,40,000
(b) Reserves and Surplus	1	1,60,000	1,20,000
2. Non-Current Liabilities
Long-Term Borrowings (5% Debentures)		3,50,000	2,60,000
3. Current Liabilities
(a) Trade Payables	2	55,000	30,000
(b) Other Current Liabilities	3	2,000	5,000
TOTAL		9,67,000	7,55,000
II. ASSETS:
1. Non-Current Assets
(a) Property, Plant and Equipment and Intangible Assets
(i) Property, Plant and Equipment	4	6,00,000	4,80,000
2. Current Assets
(a) Inventories		73,000	50,000
(b) Trade Receivables (Debtors)		1,55,000	1,30,000
(c) Cash and Bank Balances		1,39,000	95,000
TOTAL		9,67,000	7,55,000

Notes to Accounts:

Particulars	31st March, 2014 (₹)	31st March, 2013 (₹)
1. Reserves and Surplus
General Reserve	50,000	42,000
Statement of Profit and Loss	1,10,000	78,000
2. Trade Payables
Creditors	45,000	18,000
Bills Payable	10,000	12,000
3. Other Current Liabilities
Outstanding Expenses	2,000	5,000
4. Property, Plant and Equipment
Building	4,40,000	2,90,000
Plant and Machinery	1,60,000	1,90,000

Additional Information:

1. Depreciation charged on building ₹ 20,000.
2. A machine with a book value of ₹ 10,000 was sold for ₹ 8,000.
3. Debentures were issued on 1^st April, 2013, at a discount of 10%. The discount was written off from General Reserve.

Answer 1

CASH FLOW STATEMENT OF DIAMOND LIMITED for the year ended 31st March, 2014.
Particulars	Amount (₹)	Amount (₹)
A. Cash Flows from Operating Activities:
Profit before Tax		49,000
Adjustments for non-cash and non-operating items:
Add:
Depreciation on Building	20,000
Depreciation on Plant & Machinery	20,000
Loss on Sale of Machinery	2,000
Interest on Debentures (5% on ₹ 3,50,000)	17,500	59,500
Operating profit before working capital changes		1,08,500
Add: Increase in Current Liabilities:
Creditors		27,000
		1,35,500
Less: Decrease in Current Liabilities:
Bills Payable	2,000
Outstanding Expenses	3,000
Add: Increase in Current Assets:
Debtors	25,000
Inventories	23,000	53,000
Net Cash from operating activities		82,500
B. Cash Flows from Investing Activities:
Purchase of Building	(1,70,000)
Sale of Plant	8,000
Net Cash used in investing activities		(1,62,000)
C. Cash Flows from Financing Activities:
Issue of Equity share capital	60,000
Issue of Debentures (₹ 90,000 less Discount ₹ 9,000)	81,000
Interest paid on Debentures	(17,500)
Net Cash from financing activities		1,23,500
Net Increase in cash and cash equivalents (A + B + C)		44,000
Add: Cash and cash equivalents at the beginning of the period.	95,000
Cash and cash equivalents at the end of the period		1,39,000

Working Note (1):

Particulars	Amount (₹)
Calculation of Profit before Tax:
Profit & Loss Balance on 31st March, 2014	l,10,000
Less: Profit & Loss Balance on 31st March, 2013	78,000
	32,000
Add: Transfer to General Reserve (as per Note 2)	17,000
	49,000

Working Note (2):

Dr.	GENERAL RESERVE ACCOUNT		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Discount written off (10% of ₹ 90,000)	9,000	By Balance b/d	42,000
To Balance c/d	50,000	By Statement of Profit & Loss (Balancing figure)	17,000
	59,000		59,000

Working Note (3):

Dr.	BUILDING ACCOUNT		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	2,90,000	By Depreciation A/c (Current year’s depreciation)	20,000
To Bank A/c (Balancing figure, being purchased)	1,70,000	By Balance c/d (Given)	4,40,000
	4,60,000		4,60,000

Working Note (4):

Dr.	PLANT & MACHINERY ACCOUNT		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	1,90,000	By Bank	8,000
		By Loss on Sale of Plant & Machinery A/c	2,000
		By Depreciation A/c (Balancing figure being Current Year’s Depreciation)	20,000
		By Balance c/d	1,60,000
	1,90,000		1,90,000