Question

From the following information, calculate Cash Flow from Operating Activities and Investing Activities:

Particulars	31st March, 2025 (₹)	31st March, 2026 (₹)
Surplus, i.e., Balance in Statement of Profit & Loss	2,50,000	10,00,000
Provision for Tax	75,000	75,000
Trade Payables	1,00,000	3,75,000
Current Assets (Trade Receivables and Inventories)	11,50,000	13,00,000
Property, Plant and Equipment and Intangible Assets:
Property, Plant and Equipment	21,25,000	23,30,000
Accumulated Depreciation	10,62,500	11,00,000

Additional Information:

1. A machine having book value of ₹ 1,00,000 (Depreciation provided thereon ₹ 1,62,500) was sold at a loss of ₹ 20,000.
2. Tax paid during the year ₹ 75,000.

Answer 1

Cash Flow Statement (Extract)
Particulars	Amount (₹)	Amount (₹)
I. Cash Flow from Operating Activities
Net Profit before Tax and Extraordinary Items		8,25,000
Add: Non-Cash and Non-Operating Expenses
1. Depreciation provided during the year	2,00,000
2. Loss on Sale of Machine	20,000	2,20,000
Operating Profit before Working Capital Changes		10,45,000
Adjustments for Changes in Working Capital:
1. Add: Increase in Trade Payables \[(3,75,000 - 1,00,000)\]	2,75,000
2. Less: Increase in Current Assets $(13,00,000 - 11,50,000)$	(1,50,000)	1,25,000
Cash Generated from Operations		11,70,000
Less: Income Tax Paid		(75,000)
Net Cash Flow from Operating Activities		10,95,000
II. Cash Flow from Investing Activities
1. Proceeds from Sale of Machine	80,000
2. Payment for Purchase of Property, Plant & Equipment	(4,67,500)
Net Cash Used in Investing Activities		(3,87,500)

Working Notes & Ledger Accounts:

1. Calculation of Net Profit before Tax:

Net Profit as per Surplus $(10,00,000 - 2,50,000)$ = ₹ 7,50,000

Add: Provision for Tax made during the year (from Tax Account) = ₹ 75,000

Net Profit before Tax = ₹ 8,25,000

2. Calculation of Sale Proceeds & Cost of Sold Machine:

Book Value of machine sold = ₹ 1,00,000

Less: Loss on Sale = (₹ 20,000)

Sale Proceeds (Cash Inflow) = ₹ 80,000

Original Cost of machine sold = Book Value + Depreciation = $1,00,000 + 1,62,500 = {2,62,500}$

3. Property, Plant and Equipment (Cost) Account

Debit (Particulars)	Amount (₹)	Credit (Particulars)	Amount (₹)
To Balance b/d (Opening)	21,25,000	By Accumulated Depreciation A/c (On sold item)	1,62,500
To Bank A/c (Purchase - Balancing Figure)	4,67,500	By Bank A/c (Sale Proceeds)	80,000
		By Statement of P&L (Loss on Sale)	20,000
		By Balance c/d (Closing)	23,30,000
Total	25,92,500	Total	25,92,500

4. Accumulated Depreciation Account

Debit (Particulars)	Amount (₹)	Credit (Particulars)	Amount (₹)
To Property, Plant & Equipment A/c	1,62,500	By Balance b/d (Opening)	10,62,500
To Balance c/d (Closing)	11,00,000	By Statement of P&L (Depreciation - Bal. Fig.)	2,00,000
Total	12,62,500	Total	12,62,500