Question

Prepare a Cash-Flow Statement from the Balance Sheets given below:

Particulars	Note No.	31.3.2022 (₹)	31.3.2021 (₹)
I. EQUITY AND LIABILITIES:
(1) Shareholders’ Funds:
(a) Share Capital		5,00,000	5,00,000
(b) Reserves and Surplus	1	2,25,000	90,000
(2) Non-Current Liabilities:
Long-term Borrowings	2	25,000	-
(3) Current Liabilities:
(a) Trade Payables		1,00,000	80,000
(b) Short-term Provision	3	15,000	20,000
Total		8,65,000	6,90,000
II. ASSETS:
(1) Non-Current Assets:
(a) Property, Plant and Equipment and Intangible Assets
(i) Property, Plant and Equipment (Machinery)		3,10,000	3,00,000
(2) Current Assets:
(a) Current Investments (Marketable)		16,000	20,000
(b) Inventory		3,20,000	1,50,000
(c) Trade Receivables		2,00,000	2,10,000
(d) Cash & Bank		19,000	10,000
Total		8,65,000	6,90,000

Notes:

Particulars	31.3.2022 (₹)	31.3.2021 (₹)
(1) Reserve & Surplus:
General Reserve	1,50,000	1,20,000
Profit & Loss Balance	75,000	(30,000)
	2,25,000	90,000
(2) Long-term Borrowings:
Mortgage Loan	25,000	-
(3) Short-term Provision:
Income Tax Provision	15,000	20,000

Additional Information:

1. Depreciation written off on Machinery @ 10% on last year’s balance.
2. Interim Dividend paid during the year @ 10% on Share Capital.
3. Mortgage Loan was taken on 1^st July, 2021 @ 10% p.a. Interest has been paid up to date.

Answer 1

Cash Flow Statement for the year ended 31st March 2022.
Particulars	Amount (₹)	Amount (₹)
A. Cash Flow from Operating Activities:
Net profit after appropriation (30,000 + 75,000)		1,05,000
Add:
Depreciation on Machinery (10% of ₹3,00,000)	30,000
Dividend Paid (Interim) (10% of ₹5,00,000)	50,000
Transfer to General Reserve (1,50,000 − 1,20,000)	30,000
Interest on mortgage loan (W.N.)	1,875	1,11,875
Operating profit before Working Capital changes		2,16,875
Working capital adjustments:
Less:
Inventory (3,20,000 − 1,50,000)	(1,70,000)
Income‑tax provision (15,000 − 20,000)	(5,000)
Add:
Trade Receivables (2,00,000 − 2,10,000)	10,000
Trade Payables (1,00,000 − 80,000)	20,000	(1,45,000)
Net cash from Operating Activities (A)		71,875
B. Cash Flow from Investing Activities:
Purchase of Machinery (Closing ₹ 3,10,000 − Opening ₹ 3,00,000 + Depreciation ₹ 30,000)		(40,000)
Net Cash used in Investing Activities (B)		(40,000)
C. Cash Flow from Financing Activities:
Proceeds from a mortgage loan		25,000
Less:
Interim dividend paid	(50,000)
Interest on the mortgage loan is paid	(1,875)	(51,875)
Net Cash from Financing Activities (C)		(26,875)
Net increase in Cash & Cash Equivalents (A + B + C)		(5,000)
Add: Opening Cash & Bank		10,000
Closing Balance of Cash and Cash Equivalents		5,000

Working Note: Calculation of Interest on Mortgage Loan.

Loan taken on 1^st July, 2021 @ 10% p.a., amount ₹ 25,000.

Interest for 9 months = ₹ 25,000 × 10% × `9/12`

∴ Interest on the Mortgage loan = ₹ 1,875.