Question

Prepare a Cash-Flow Statement from the following information relating to Garden Honey Ltd. and give your comments about the same:

BALANCE SHEETS
			Nt. No.	31.3.2023 (₹)	31.3.2022 (₹)
I.	Equity & Liabilities
	(1)	Shareholder’s Funds:
		Share Capital		4,05,000	3,50,000
		Reserve & Surplus	(1)	67,000	20,000
	(2)	Non-Current Liabilities:
		Long Term Borrowings	(2)	-	30,000
	(3)	Current Liabilities:
		Short-term Borrowings	(3)	40,000	70,000
		Trade Payables		83,000	1,76,000
		Other Current Liabilities	(4)	10,000	-
		Short-term Provision	(5)	30,000	22,000
				6,35,000	6,68,000
II.	Assets
	(1)	Non-Current Assets:
		(a) Property, Plant and Equipment and Intangible Assets
		(i) Property, Plant and Equipment	(6)	3,65,000	3,50,000
		(ii) Intangible Assets	(7)	42,000	60,000
		(b) Non-Current Investments		30,000	62,000
	(2)	Current Assets:
		Inventory		80,000	1,20,000
		Trade Receivables		1,00,000	66,000
		Cash		18,000	10,000
				6,35,000	6,68,000

Notes:

		2023 (₹)	2022 (₹)
1.	Reserve & Surplus:
	P & L Balance	67,000	20,000
2.	Long Term Borrowings:
	12% Debentures	-	30,000
3.	Short term Borrowings:
	Bank Overdarft	40,000	70,000
4.	Other Current Liabilities:
	Outstanding Expenses	10,000	-
5.	Short term Provision:
	Provision for Tax	30,000	22,000
6.	Property, Plant and Equipment:
	Land & Building	50,000	2,00,000
	Plant & Machinery	3,15,000	1,50,000
		3,65,000	3,50,000
7.	Intangible Assets:
	Goodwill	42,000	60,000

Additional Information:

1. Interest paid on debentures during the year amounted to ₹1,500.
2. Depreciation charged on plant & machinery ₹20,000.
3. Provision made for Taxes ₹35,000. 
4. Interim Dividend paid ₹28,000. 
5. Plant & Machinery costing ₹50,000 was sold during the year for ₹10,000 only.

Answer 1

GARDEN HONEY LTD.
CASH FLOW STATEMENT
For the year ended 31st March, 2023
Particulars		Amount (₹)
A.	Cash Flow from Operating Activities:
	Net Profit after Tax	47,000
	Add: Tax Paid (W.N.2)	27,000
	Net Profit before Tax	74,000
	Add: Depreciation on Plant & Machinery	20,000
	Add: Loss on Sale of Plant (₹50,000 – ₹10,000)	40,000
	Add: Interest on Debentures	1,500
	Operating Profit before Working Capital Changes	1,35,000
	Adjustments for Working Capital Changes:
	Add: Decrease in Inventory	40,000
	Increase in Trade Receivables	(34,000)
	Decrease in Trade Payables	(93,000)
	Add: Increase in Other Current Liabilities	10,000
	Add: Increase in Short-term Provision	8,000
	Net Change in Working Capital	(69,000)
	Cash Generated from Operations	66,500
	Less: Income Tax Paid (W.N.2)	(27,000)
	Net Cash from Operating Activities (A)	85,500
B.	Cash Flow from Investing Activities:
	Sale of Plant	10,000
	Sale of Land & Building	1,50,000
	Sale of Non-Current Investments	32,000
	Purchase of Plant & Machinery (W.N.1)	(85,000)
	Purchase of Land & Building	(1,50,000)
	Net Cash used in Investing Activities (B)	(43,000)
C.	Cash Flow from Financing Activities:
	Proceeds from Issue of Share Capital	55,000
	Redemption of Debentures	(30,000)
	Interest Paid on Debentures	(1,500)
	Interim Dividend Paid	(28,000)
	Decrease in Short-term Borrowings	(30,000)
	Net Cash used in Financing Activities (C)	(34,500)
Net Increase in Cash & Cash Equivalents (A + B + C)		8,000
Opening Cash & Cash Equivalents		-
Closing Cash & Cash Equivalents		8,000

WORKING NOTE 1:

Dr.	PLANT & MACHINERY ACCOUNT		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	2,00,000	By Bank (Sale)	10,000
To Bank (Purchases)	85,000	By P&L A/c (Loss)	40,000
		By Depreciation	20,000
		By Balance c/d	2,15,000
Total	2,85,000	Total	2,85,000

WORKING NOTE 2: 

Dr.	PROVISION FOR TAX ACCOUNT		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Bank A/c (Tax Paid)	27,000	By Balance b/d (Opening)	22,000
To Balance c/d (Closing)	30,000	By P&L A/c (Current Year Provision)	35,000
Total	57,000	Total	57,000