Question

From the following Balance Sheets of Halogen Ltd., you are required to prepare a Cash Flow Statement (as per AS 3) for the year 2022-23.

Balance Sheets of Halogen Ltd. As at 31st March, 2023 and 31st March, 2022
Particulars	Note No.	31-3-2023 (₹)	31-3-2022 (₹)
I EQUITY AND LIABILITIES
1. Shareholder's Funds		4,50,000	4,00,000
(a) Share Capital (Equity shares @ ₹ 10 each)
(b) Reserves and Surplus (Statement of P/L)		1,06,000	(20,000)
2. Non-Current Liabilities		6,00,000	4,00,000
Long-term Borrowings (15% Debentures)
3. Current Liabilities		50,000	70,000
Short-term Provisions (Provision for Tax)
Total		12,06,000	8,50,000
II ASSETS
1. Non-current Assets		4,80,000	7,00,000
Property, Plant & Equipment & Intangible Assets
(i) Property, Plant & Equipment	1.
2. Current Assets		2,56,000	10,000
a) Current Investments
b) Cash & Bank Balances (Cash at Bank)		4,70,000	1,40,000
Total		12,06,000	8,50,000

Notes to Accounts:

Particulars	31-3-2023 (₹)	31-3-2022 (₹)
I. Property, Plant & Equipment	7,42,000	9,00,000
Plant & Machinery
Less: Accumulated Depreciation	(2,62,000)	(2,00,000)

Additional Information:

During the year 2022-23, the company:

1. Issued additional debentures on 1^st October, 2022.
2. Sold Plant & Machinery, the book value of which was ₹ 1,20,000 (accumulated depreciation ₹ 38,000), for ₹ 50,000.

Answer 1

Cash Flow Statement
Particulars	Amount (₹)	Amount (₹)
A. Cash Flow from Operating Activities	1,76,000	3,51,000
Net profit before tax and extraordinary items (WN 2)
Adjustments for non-cash and non-operating items	1,00,000
Add: Depreciation on Plant and Machinery
Loss on sale of Plant and machinery	70,000
Interest paid on Debentures (WN 3)	75,000
Operating profit before working capital changes	4,21,000
Less: Tax paid	(70,000)
Cash Flow from Operating Activities	3,51,000
B. Cash flow from Investing Activities	50,000	50,000
Proceeds from sale of Plant & Machinery
Cash Flow from Investing Activities	50,000
C. Cash Flow from Financing Activities	50,000	1,75,000
Proceeds from issue of Equity shares
Proceeds from issue of Debentures	2,00,000
Payment for interest on Debentures	(75,000)
Cash flow from financing Activities	1,75,000
Net increase or decrease in Cash & Cash equivalents (A + B + C)		5,76,000
Add: Opening balance of Cash & Cash equivalents (10,000 + 1,40,000)		1,50,000
Closing balance of Cash & Cash equivalents (2,56,000 + 4,70,000)		7,26,000

Working Notes 1:

Dr.	Plant and Machinery Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	9,00,000	By Bank A/c	50,000
		By Accumulated Depreciation A/c	38,000
		By Statement of Profit & Loss (1,20,000 − 50,000)	70,000
		By Balance c/d	7,42,000
	9,00,000		9,00,000

 

Dr.	Accumulated Depreciation Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Plant & Machinery A/c	38,000	By Balance b/d	2,00,000
To Balance c/d	2,62,000	By Statement of Profit & Loss (Depreciation)	1,00,000
	3,00,000		3,00,000

Working Notes 2: 

Calculation of Net Profit before Tax:	₹
Closing Balance in the statement of profit and loss on 31-3-23	1,06,000
Less: Opening Balance in Statement of Profit & Loss on 31-3-22	(20,000)
	1,26,000
Net Profit before tax for the year 31-3-2023	50,000
Add: Provision for Tax (Current Year)	1,76,000

Working Notes 3: 

Interest on Debentures = `(4,00,000xx15/100xx6/12) + (6,00,000 xx15/100xx6/12)`

= 30,000 + 45,000

= ₹ 75,000