Question

From the following Balance Sheets of Tarun Fashions Ltd., prepare a Cash-Flow Statement:

Particulars	Note No.	31.3.2024 (₹)	31.3.2023 (₹)
I. EQUITY AND LIABILITIES:
(1) Shareholders’ Funds:
(a) Share Capital		1,50,000	1,20,000
(b) Reserve and Surplus		1,78,000	75,000
(2) Non-Current Liabilities:
Long-term Borrowings	1	-	50,000
(3) Current Liabilities:
(a) Trade Payables		31,500	67,000
(b) Short-term Provisions (Provision for Tax)		42,000	30,000
TOTAL		4,01,500	3,42,000
II. ASSETS:
(1) Non-Current Assets:
(a) Property, Plant and Equipment and Intangible Assets
(i) Property, Plant and Equipment	2	2,08,000	1,40,000
(ii) Intangible Assets	3	35,000	20,000
(2) Current Assets:
(a) Inventory		1,05,000	1,20,000
(b) Trade Receivables		33,500	37,000
(c) Cash & Bank Balances		20,000	25,000
TOTAL		4,01,500	3,42,000

Notes:

	31.3.2024 (₹)	31.3.2023 (₹)
(1) Long-term Borrowing:
15% Debentures	-	50,000
(2) Property, Plant and Equipment:
Building	80,000	1,00,000
Plant & Machinery	1,28,000	40,000
	2,08,000	1,40,000
(3) Intangible Assets:
Goodwill	35,000	20,000

Additional Information:

1. 
   

   	31.3.2024 (₹)	31.3.2023 (₹)
   Contingent Liability:
   Proposed Dividend	15,000	12,000

2. Depreciation of ₹ 10,000 was provided on Plant & Machinery. 
3. Gain on sale of a part of Building ₹ 25,000.
4. Debentures were redeemed on 1^st April, 2023.
5. Provision for Tax made during the year ₹ 50,000.

Hint:

1. Increase in Goodwill will be treated as a purchase of Goodwill.
2. Tax paid during the year: ₹ 38,000.

Answer 1

Cash Flow Statement for the year ended 31st March, 2024
Particulars	Amount (₹)	Amount (₹)
A. Cash Flow from Operating Activities
Net Profit before Tax		1,65,000
Add: Depreciation on Plant & Machinery	10,000
Less: Gain on Sale of Building	(25,000)	(15,000)
Operating Profit before Working Capital Changes		1,50,000
Add: Decrease in current assets
Trade Receivables	3,500
Inventories	15,000	18,500
		1,68,500
Less: Decrease in current liabilities
Trade Payables	(35,500)	(35,500)
		1,33,000
Less: Income Tax Paid		(38,000)
Net Cash from Operating Activities (A)		95,000
B. Cash Flow from Investing Activities
Purchase of Goodwill	(15,000)
Sale of Building	45,000
Purchase of Plant and Machinery	(98,000)
Net Cash used in Investing Activities (B)		(68,000)
C. Cash Flow from Financing Activities
Issue of Share Capital	30,000
Redemption of Debentures	(50,000)
Payment of Dividend	(12000)
Net Cash from Financing Activities (C)		(32,000)
Net Increase/Decrease in Cash and Cash Equivalents (A + B + C)		(5,000)
Add: Opening Balance of Cash and Cash Equivalents		25,000
Closing Balance of Cash and Cash Equivalents		20,000

Working Note 1:

Dr.	Building Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance B/d	1,00,000	By Bank A/c	45,000
To Bank A/c (Purchase)	25,000	By Balance C/d	80,000
	1,25,000		1,25,000

Working Note 2:

Dr.	Plant and Machinery Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance B/d	40,000	By Bank A/c	10,000
To Bank A/c (Purchase)	98,000	By Balance C/d	1,28,000
	1,38,000		1,38,000

Working Note 3:

Particulars	Amount (₹)
Calculation of Net profit before tax
Surplus (i.e., statement of balance P&L) (178000 − 75000)	1,03,000
Add:
Proposed dividend of Previous year	12,000
Provision for Tax made during the year	50,000
	1,65,000