Question

Following are the Balance Sheets of Pawan Ltd.:

Particulars	Note No.	31.3.2022 (₹)	31.3.2021 (₹)
I. EQUITY AND LIABILITIES:
(1) Shareholders’ Funds:
(a) Share Capital		3,00,000	2,50,000
(b) Reserves and Surplus	1	2,07,000	1,75,000
(2) Current Liabilities:
(a) Short-term Borrowings	2	20,000	15,000
(b) Trade Payables		31,000	54,000
(c) Short-term Provision	3	84,000	81,000
Total		6,42,000	5,75,000
II. ASSETS:
(1) Non-Current Assets:
(a) Property, Plant and Equipment and Intangible Assets
(i) Property, Plant and Equipment	4	2,70,000	2,70,000
(ii) Intangible Assets (Goodwill)		50,000	30,000
(b) Non-Current Investments		45,000	50,000
(2) Current Assets:
(a) Trade Receivables		2,67,000	2,19,000
(b) Cash & Bank Balances		10,000	6,000
Total		6,42,000	5,75,000

Notes:

Particulars	31.3.2022 (₹)	31.3.2021 (₹)
(1) Reserve & Surplus	1,97,000	1,75,000
Securities Premium Reserve	10,000	-
	2,07,000	1,75,000
(2) Short-term Borrowings:
Bank Overdraft	20,000	15,000
(3) Short-term Provision:
Provision for Tax	62,000	65,000
Provision for Doubtful Debts	22,000	16,000
	84,000	81,000
(4) Property, Plant and Equipment:
Land	1,50,000	70,000
Machinery	1,20,000	2,00,000
	2,70,000	2,70,000

1. Machinery of the book value of ₹ 60,000 was sold for ₹ 18,000 during the year.
2. Interim Dividend paid during the year: ₹ 25,000.
3. During the year Company sold 40% of its original non-current investments at a loss of 20%.

You are required to prepare a Cash-Flow Statement.

Hints:

1. Current year’s Depreciation ₹ 20,000.
2. Purchase of Non-Current Investments ₹ 15,000.
3. Increase in Intangible Assets will be treated as purchase of Intangible Assets.

Answer 1

Cash Flow Statement of Pawan Ltd. For the year ended 31st March, 2022.
Particulars	Amount (₹)	Amount (₹)
A. Cash Flow from Operating Activities:
Net profit after tax (change in Reserve & Surplus) (W.N.1)	22,000
Add: Interim dividend paid	25,000
Profit after tax adjusted (W.N.1)		47,000
Add:
Depreciation on Machinery	20,000
Loss on sale of Machinery	42,000
Loss on sale of Investments	4,000
Increase in Provision for Doubtful Debts	6,000	72,000
Operating profit before working capital changes		1,19,000
Less:
Increase in Trade Receivables	(48,000)
Decrease in Trade Payables	(23,000)	(71,000)
Cash from operations		48,000
Less: Income tax paid (W.N.2)		(3,000)
Net cash from operating activities (A)		45,000
B. Cash Flow from Investing Activities:
Add:
Sale of Machinery	18,000
Sale of Investments (W.N.3)	16,000	34,000
Less:
Purchase of Land	(80,000)
Purchase of Investments (W.N.3)	(15,000)
Purchase of Goodwill (W.N.4)	(20,000)	1,15,000
Net cash used in investing activities (B)		(81,000)
C. Cash Flow from Financing Activities:
Add:
Proceeds from the issue of Share Capital	50,000
Securities Premium received	10,000
Increase in Bank Overdraft	5,000
Less: Interim dividend paid	(25,000)
Net cash from financing activities (C)		40,000
Net increase / (decrease) in cash & cash equivalents (A + B + C)		4,000
Add: Opening cash & cash equivalents.		6,000
Closing cash & cash equivalents		10,000

Working Note 1: Calculation of Net Profit before Tax.

Particulars	Amount (₹)	Amount (₹)
Closing Reserve & Surplus (2022)	1,97,000
Less: Opening Reserve & Surplus (2021)	(1,75,000)
Increase in Reserve & Surplus		22,000
Add: Interim Dividend paid		25,000
Adjusted Profit after Tax		47,000

Working Note 2: Calculation of Income Tax Paid.

Particulars	Amount (₹)
Opening Provision for Tax	65,000
Less: Closing Provision for Tax	(62,000)
Income Tax Paid	3,000

Working Note 3: Calculation of Investments.

i. Opening ₹ 50,000; 

Sold Cost = 40% × 50,000 = ₹ 20,000; 

Loss = 20,000 × 20% = ₹ 4,000 

Sale proceeds = ₹ 20,000 − ₹ 4,000 = ₹ 16,000

ii. Closing ₹ 45,000;

Purchases = Closing + Cost sold − Opening 

= 45,000 + 20,000 − 50,000 

= ₹ 15,000

Working Note 4: Calculation of Intangible Assets (Goodwill).

Particulars	Amount (₹)
Closing Balance	50,000
Less: Opening Balance	(30,000)
Goodwill Purchased	20,000