Question

From the following Balance Sheet of Ajanta Limited as at March 31, 2017, prepare a Cash Flow Statement:

Particulars	Note No.	31-3-2017 (₹)	31-3-2016 (₹)
I. EQUITY AND LIABILITIES:
(1) Shareholders’ Funds
(a) Equity Share Capital		10,00,000	10,00,000
(b) Reserves and Surplus	1	2,40,000	1,20,000
(2) Non-Current Liabilities
Long-Term Borrowings (9% Debentures)		3,20,000	2,40,000
(3) Current Liabilities
(a) Trade Payables	2	1,80,000	2,40,000
(b) Other Current Liabilities	3	1,80,000	1,60,000
Total		19,20,000	17,60,000
II. ASSETS:
(1) Non-Current Assets
(a) Property, Plant and Equipment and Intangible Assets
(i) Property, Plant and Equipment	4	13,40,000	12,00,000
(b) Non-Current Investments	5	2,40,000	1,60,000
(2) Current Assets
(a) Inventories		1,20,000	1,60,000
(b) Trade Receivables		1,60,000	1,60,000
(c) Cash and Bank Balances		60,000	80,000
Total		19,20,000	17,60,000

Notes to Accounts:

Note No.	Particulars	31-3-2017 (₹)	31-3-2016 (₹)
1.	Reserves and Surplus:
	General Reserve	1,20,000	1,20,000
	Balance in Statement of Profit & Loss	1,20,000	-
		2,40,000	1,20,000
2.	Trade Payables:
	Creditors	1,40,000	1,20,000
	Bills Payable	40,000	1,20,000
		1,80,000	2,40,000
3.	Other Current Liabilities:
	Outstanding Rent	1,80,000	1,60,000
4.	Property, Plant and Equipment:
	Plant & Machinery	14,90,000	13,00,000
	Accumulated Depreciation	(1,50,000)	(1,00,000)
		13,40,000	12,00,000
5.	Non-Current Investments:
	Shares in XYZ Limited	2,40,000	1,60,000

Additional Information:

1. During the year 2016-17, a machinery costing ₹ 50,000 and accumulated depreciation thereon ₹ 15,000 was sold for ₹ 32,000. 
2. 9% Debentures ₹ 80,000 were issued on April 1, 2016.

Answer 1

Cash Flow Statement of Ajanta Limited for the year ended 31st March, 2017.
Particulars	Amount (₹)	Amount (₹)
A. Cash Flow from Operating Activities
Net Profit before Tax and Extraordinary Items		1,20,000
Adjustments for non-cash and non-operating items:
Add: Depreciation	55,000
Less: Profit on Sale of Machinery (50,000 – 5,000 – 32,000)	(13,000)	42,000
Operating Profit before Working Capital Changes		1,62,000
Add:
Decrease in Inventories	40,000
Increase in Outstanding Rent	20,000	60,000
Less:
Increase in Creditors	(20,000)
Decrease in Bills Payable	(80,000)	(1,00,000)
Net Cash from Operating Activities		2,16,800
B. Cash Flow from Investing Activities
Purchase of Property, Plant & Equipment (W.N. 1)	(2,95,000)
Sale of Machinery	32,000
Purchase of Non-Current Investments	(80,000)
Net Cash used in Investing Activities		(2,88,000)
Cash Flow from Financing Activities
Proceeds from Issue of Debentures (3,20,000 – 2,40,000)	80,000
Less: Dividend Paid (Balancing figure)	(28,800)
Net Cash from Financing Activities		51,200
Net Decrease in Cash and Cash Equivalents (A + B + C)		(20,000)
Add: Opening Cash and Bank Balances		80,000
Closing Cash and Bank Balances		60,000

Working Note 1: Calculation of Purchase of Property, Plant & Equipment.

Particulars	Amount (₹)
Opening Balance of PPE	13,00,000
Add: Purchases (Balancing Figure)	2,95,000
Less: Sale of Machinery (Cost)	(50,000)
Closing Balance of PPE	14,90,000

Working Notes:

i. Depreciation for the year:

= Closing Accumulated Depreciation – Opening + on sold asset 

= ₹ 1,50,000 – ₹ 1,00,000 + ₹ 5,000

= ₹ 55,000

ii. Profit on sale of machinery = ₹ 32,000 – (₹ 50,000 – ₹ 5,000) 

= ₹ 13,000