Question

Prepare a Cash-Flow statement from the following:

Particulars	Note No.	31.3.2022 (₹)	31.3.2021 (₹)
I. EQUITY AND LIABILITIES:
(1) Shareholders’ Funds:
(a) Share Capital		3,00,000	2,00,000
(b) Reserve and Surplus	1	65,000	50,000
(2) Current Liabilities:
(a) Trade Payables	2	1,05,000	52,000
(b) Other Current Liabilities	3	-	16,000
(c) Short-Term Provision	4	20,000	2,000
TOTAL		4,90,000	3,20,000
II. ASSETS:
(1) Non-Current Assets:
(a) Property, Plant and Equipment and Intangible Assets
(i) Property, Plant and Equipment (Machinery)		2,25,000	1,10,000
(b) Non-Current Investments		55,000	60,000
(3) Current Assets:
(a) Inventory		26,000	50,000
(b) Trade Receivables		1,80,000	92,000
(c) Cash and Bank Balances		4,000	8,000
TOTAL		4,90,000	3,20,000

Notes:

	31.3.2022 (₹)	31.3.2021 (₹)
(1) Reserve & Surplus:
General Reserve	20,000	-
Profit & Loss Balance	45,000	(50,000)
	65,000	(50,000)
(2) Trade Payables:
Sundry Creditors	95,000	52,000
Bills Payable	10,000	-
	1,05,000	52,000
(3) Other Current Liabilities:
Outstanding Salaries	-	16,000
(4) Short-term Provision:
Provision for Doubtful Debts	20,000	2,000

Additional Information:

1. During the year, company sold 60% of its original non-current investments at a profit of 25%.
2. Depreciation provided on Machinery during the year was ₹ 35,000.

Answer 1

Cash Flow Statement for the year ended 31st March, 2022.
Particulars	Amount (₹)	Amount (₹)
A. Cash Flow from Operating Activities
Net Profit before Tax (Closing P&L – Opening P&L) (45,000 – 50,000)	(5,000)
Less: Profit on Sale of Non-Current Investments	(9,000)
Adjusted Net Profit before Tax		(14,000)
Add:
Depreciation on Machinery	35,000
Increase in Provision for Doubtful Debts (20,000 – 2,000)	18,000	53,000
Operating Profit before Working Capital Changes		39,000
Adjustments for Working Capital:
Less:
Increase in Trade Receivables (1,80,000 – 92,000)	(88,000)
Decrease in Outstanding Salaries	(16,000)	(1,04,000)
Add:
Decrease in Inventory (50,000 – 26,000)	24,000
Increase in Trade Payables (1,05,000 – 52,000)	53,000	77,000
Net Change in Working Capital		(27,000)
Cash Generated from Operations		12,000
Net Cash from Operating Activities (A)		12,000
B. Cash Flow from Investing Activities:
Purchase of Machinery		(1,50,000)
Purchase of Non-Current Investments		(31,000)
Sale of Non-Current Investments		45,000
Net Cash used in Investing (B)		(1,36,000)
C. Cash Flow from Financing Activities:
Issue of Share Capital (3,00,000 – 2,00,000)		1,00,000
Securities Premium (₹20,000 newly added)		20,000
Net Cash from Financing Activities (C)		1,20,000
Net Increase in Cash & Cash Equivalents (A + B + C)		27,000
Add: Opening Cash & Cash Equivalents		8,000
Closing Cash & Cash Equivalents		35,000

Working Note for Investing Activities:

Given:

(1) Machinery account:

i. Opening = ₹ 1,10,000

ii. Closing = ₹ 2,25,000

iii. Depreciation during the year = ₹ 35,000

Closing Balance of Machinery = Opening + Purchases – Depreciation

Let purchases be X:

2,25,000 = 1,10,000 + X − 35,000

∴ X = 1,10,000 − 35,000

∴ X = 75,000 − 2,25,000

∴ X = −1,50,000

(2) Non-Current Investments:

i. Opening = ₹ 60,000

ii. Closing = ₹ 55,000

iii. 60% of ₹ 60,000 = ₹ 36,000 sold at 25% profit = ₹ 9,000

iv. Sale value = ₹ 45,000

So, the total before the sale must have been,

55,000 (closing) + 36,000 (sold) = 91,000

So new investments made during the year = ₹ 91,000 – ₹ 60,000

= ₹ 31,000 (Cash Outflow)