Question

Following are the Balance Sheets of Vindhya Papers Ltd. as at 31^st March, 2023 and 2022

		Nt. No.	31.3.2023 (₹ in Lakhs)	31.3.2022 (₹ in Lakhs)
I.	Equity & Liabilities
	Shareholder’s Funds:
	Share Capital		22	20
	Reserves & Surplus	(1)	19.7	15.4
	Current Liabilities:
	Short-Term Borrowings	(2)	6	2
	Trade Payables		9	6.8
	Short-term Provision	(3)	2	1.4
			58.7	45.6
II.	Assets
	Non-Current Assets:
	Property, Plant and Equipment (Machinery)	(4)	34	30.2
	Current Assets:
	Current Investments (Marketable Securities)		1.3	2.2
	Inventory		13	6
	Trade Receivables		10	4
	Cash		0.4	3.2
			58.7	45.6

Notes:

		31.3.2023 (₹ in Lakhs)	31.3.2022 (₹ in Lakhs)
(1)	Reserve & Surplus:
	General Reserve	8	3
	P & LBalance	11.7	8.4
		19.7	15.4
(2)	Short term Borrowings:
	Bank Overdraft	6.0	2.0
(3)	Short-term Provision:
	Provision for Tax	2.0	1.4
(4)	Machinery:	51	43
	Less: Provision for Depreciation	17	12.8
		34	30.2

Additional Information:

1. Tax paid during the year ₹1,00,000. 
2. Depreciation charged during the year ₹6,30,000
3. Machinery costing ₹5,00,000 (accumulated depreciation ₹2,10,000) were sold at a profit of ₹30,000. 
4. Interim Dividend paid during the year ₹2,50,000. 

    Company is unable to understand why the cash balance has decreased and bank overdraft has increased. The profits of the company were going up, and the profit of current year was the highest as compared to the corresponding figures of the last three years.

    You have been asked to prepare a statement to show the causes of decrease in Cash Balance and increase in Overdraft. You are also required to suggest the remedial measures for the same.

Answer 1

VINDHYA PAPERS LTD.
CASH FLOW STATEMENT
For the year ended 31st March, 2023
Particulars		Amount (₹)
A.	Cash Flow from Operating Activities:
	Net Profit before Tax	6,60,000
	Add: Depreciation	6,30,000
	Add: Loss on Sale of Machinery	1,80,000
	Less: Profit on Sale of Machinery	(30,000)
	Operating Profit before Working Capital Changes	14,40,000
	Adjustments for Working Capital Changes:
	Less: Trade Receivables	(6,00,000)
	Less: Inventory	(7,00,000)
	Add: Trade Payables	2,20,000
	Net Working Capital Changes	(10,80,000)
	Cash Generated from Operations	3,60,000
	Less: Income Tax Paid	(1,00,000)
	Net Cash from Operating Activities (A)	2,60,000
B.	Cash Flow from Investing Activities:
	Purchase of Fixed Assets / Machinery	(12,70,000)
	Proceeds from Sale of Machinery	2,90,000
	Net Cash Used in Investing Activities (B)	(9,80,000)
C.	Cash Flow from Financing Activities:
	Proceeds from Issue of Share Capital	2,00,000
	Dividend Paid	(2,50,000)
	Increase in Bank Overdraft	4,00,000
	Net Cash from Financing Activities (C)	3,50,000
Net Decrease in Cash and Cash Equivalents (A + B + C)		(3,70,000)
Add: Opening Balance of Cash and Cash Equivalents		3,20,000
Closing Balance of Cash and Cash Equivalents (Bank Overdraft)		(50,000)