Question

Following is the Balance Sheet of Best Barcode Ltd.:

BALANCE SHEET OF BEST BARCODE LTD. as at 31st March, 2026
Particulars	Note No.	31st March, 2026 (₹)	31st March, 2025 (₹)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital	1	6,00,000	5,50,000
(b) Reserves and Surplus	2	1,28,000	70,000
2. Current Liabilities
(a) Trade Payables		1,22,000	88,000
(b) Short-term Provisions	3	50,000	40,000
Total		9,00,000	7,48,000
II. ASSETS
1. Non-Current Assets
Property, Plant and Equipment and Intangible Assets:
(i) Property, Plant and Equipment		3,70,000	2,80,000
(ii) Intangible Assets (Goodwill)		90,000	1,15,000
2. Current Assets
(a) Current Investments		10,000	15,000
(b) Inventories		1,82,000	1,00,000
(c) Trade Receivables		1,57,000	1,57,000
(d) Cash and Cash Equivalents		91,000	81,000
Total		9,00,000	7,48,000

Notes to Accounts

Particulars	31st March, 2026 (₹)	31st March, 2025 (₹)
1. Share Capital
Equity Share Capital	5,00,000	4,00,000
10% Preference Share Capital	1,00,000	1,50,000
	6,00,000	5,50,000
2. Reserves and Surplus
Securities Premium	10,000	...
General Reserve	70,000	40,000
Surplus, i.e., Balance in Statement of Profit & Loss	48,000	30,000
	1,28,000	70,000
3. Short-term Provisions
Provision for Tax	50,000	40,000

Additional Information:

1. Proposed dividend for the years ended 31st March, 2026 and 2025 were ₹ 60,000 and ₹ 50,000 respectively.
2. A machine costing ₹ 50,000 (depreciation provided thereon ₹ 30,000) was sold for ₹ 10,000.
3. Depreciation charged during the year was ₹ 20,000.
4. Interim dividend paid ₹ 20,000.
5. Income Tax paid ₹ 35,000.

Prepare a Cash Flow Statement for the year ended 31st March, 2026, complying with AS-3 (Revised).

Hints:

1. Proposed dividend includes the dividend on both equity and preference shares.
2. Current Investment is a part of Cash Equivalents.

Answer 1

Cash Flow Statement of Best Barcode Ltd. for the year ended 31st March, 2026
Particulars	Amount (₹)	Amount (₹)
A. Cash Flow from Operating Activities
Net Profit before Tax and Extraordinary Items		1,63,000
Add: Non-Cash and Non-Operating Expenses
1. Depreciation charged during the year	20,000
2. Loss on Sale of Machinery	10,000	30,000
		1,93,000
Less: Non-Operating Incomes
Amortisation of Goodwill (It is an addition, but here Goodwill decreased: ₹ 1,15,000 to ₹ 90,000. This is written-off/Amortised)
3. Goodwill Amortised \[(1,15,000 - 90,000)\]		25,000
Operating Profit before Working Capital Changes		2,18,000
Adjustments for Changes in Working Capital:
Add: Increase in Current Liabilities & Decrease in Current Assets
1. Increase in Trade Payables $(1,22,000 - 88,000)$	34,000
Less: Increase in Current Assets & Decrease in Current Liabilities
2. Increase in Inventories $(1,82,000 - 1,00,000)$	(82,000)	(48,000)
Cash Generated from Operations		1,70,000
Less: Income Tax Paid (Given)		(35,000)
Net Cash Flow from Operating Activities		1,35,000
B. Cash Flow from Investing Activities
1. Proceeds from Sale of Machinery	10,000
2. Payment for Purchase of Property, Plant & Equipment (Note 4)	(1,30,000)
Net Cash Used in Investing Activities		(1,20,000)
C. Cash Flow from Financing Activities
1. Proceeds from Issue of Equity Shares $(5,00,000 - 4,00,000)$	1,00,000
2. Proceeds from Securities Premium	10,000
3. Redemption of 10% Preference Shares $(1,00,000 - 1,50,000)$	(50,000)
4. Interim Dividend paid during the year	(20,000)
5. Previous Year's Proposed Dividend paid during the year	(50,000)
Net Cash Used in Financing Activities		(10,000)
Net Increase in Cash and Cash Equivalents (A + B + C)		5,000
Add: Opening Balance of Cash & Cash Equivalents (Working Note 5)		96,000
Closing Balance of Cash & Cash Equivalents (Working Note 5)		1,01,000

Working Notes & Ledger Accounts:

1. Calculation of Net Profit before Tax and Extraordinary Items:

Closing Balance of Surplus (Profit & Loss) = ₹ 48,000

Less: Opening Balance of Surplus (Profit & Loss) = (₹ 30,000)

Net Profit earned during the current year = ₹ 18,000

Add: Transfer to General Reserve $(70,000 - 40,000)$ = ₹ 30,000

Add: Proposed Dividend of the previous year (ended 31st March, 2025) = ₹ 50,000

Add: Interim Dividend paid during the year = ₹ 20,000

Add: Provision for Tax made during the year (See Ledger Account below) = ₹ 45,000

Net Profit before Tax and Extraordinary Items = ₹ 1,63,000

2. Calculation of Loss on Sale of Machinery:

Cost of machine sold = ₹ 50,000

Less: Accumulated Depreciation on it = (₹ 30,000)

Book Value of machine sold = ₹ 20,000

Less: Sale Proceeds received = (₹ 10,000)

Loss on Sale = ₹ 10,000

3. Provision for Tax Account

Debit (Particulars)	Amount (₹)	Credit (Particulars)	Amount (₹)
To Bank A/c (Tax Paid)	35,000	By Balance b/d (Opening)	40,000
To Balance c/d (Closing)	50,000	By Statement of P&L (Provision Made - Bal. Fig.)	45,000
Total	85,000	Total	85,000

4. Property, Plant and Equipment (Net Book Value Basis) Account

Debit (Particulars)	Amount (₹)	Credit (Particulars)	Amount (₹)
To Balance b/d (Opening)	2,80,000	By Bank A/c (Sale Proceeds)	10,000
To Bank A/c (Purchase - Balancing Figure)	1,30,000	By Statement of P&L (Loss on Sale)	10,000
		By Depreciation charged during the year	20,000
		By Balance c/d (Closing)	3,70,000
Total	4,10,000	Total	4,10,000

5. Setup of Cash and Cash Equivalents (AS-3 Framework):

Opening Balance: Cash & Cash Equivalents (₹ 81,000) + Current Investments (₹ 15,000) = ₹ 96,000

Closing Balance: Cash & Cash Equivalents (₹ 91,000) + Current Investments (₹ 10,000) = ₹ 1,01,000