'An Enterprise May Hold Securities and Loans for Dealing Or Trading Purposes in Which Case They Are Similar to Inventory Acquired Specifically for Resale.' is the Statement True? Cash Flows from Such Activities Will Be Classified Under Which Type of Activity While Preparing 'Cash Flow Statement'. - Accountancy

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'An enterprise may hold securities and loans for dealing or trading purposes in which case they are similar to inventory acquired specifically for resale.' Is the statement true? Cash flows from such activities will be classified under which type of activity while preparing 'Cash flow statement'.

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Solution

Cash flows from such activities will be classified under Operating Activity.

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2015-2016 (March) Foreign Set 1

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L Ltd. had purchased machinery on deferred payment basis. During the year ended 31-3-2015 the company paid an installment of Rs.4,00,000 which included interest of Rs.4,000. Under which activity or activities payment of installment will be classified while preparing Cash flow  Statement.


Following was the Balance Sheet of M.M Ltd at on 31.3.2015.

                                                        M.M. Ltd Balance Sheet as at 31-3-2015

Particulars Note No. 31-3-2015 (Rs.) 31-3-2014 (Rs.)

I. Equity and Liabilities

        1. Shareholder’s Funds

              a. Share Capital

              b. Reserve and Surplus

         2. Non - Current Liabilities

              a) Long – term borrowings

         3. Current Liabilities

              a) Short – term borrowings

              b) Short – term provisions

 

 

 

1

 

2

 

3

4

 

 

5,00,000

2,00,000

 

4,50,000

 

1,50,000

70,000

 

 

4,00,000

(50,000)

 

5,00,000

 

50,000

90,000

Total   13,70,000 9,90,000

II. Assets

     1. Non – Current Assets

               a) Fixed Assets

                     Tangible assets

                     Intangible assets

               b) Non – Current Investments

      2. Current Assets

                a) Current Investments

                b) Inventories

                c) Cash and Cash Equivalents

 

 

 

5

6

 

 

 

7

 

 

 

 

10,03,000

20,000

1,00,000

 

50,000

1,07,000

90,000

 

 

 

7,20,000

30,000

75,000

 

60,000

45,000

60,000

Total   13,70,000 9,90,000

 

Note No Particulars 31-3-2015(Rs.) 31-3-2014(Rs.)

1.

 

Reserve and Surplus

(Surplus i.e. Balance in Statement of Profit and Loss)

 

2,00,000

 

(50,000)

    2,00,000 (50,000)

2.

 

Long term borrowings :

12 % Debentures

 

4,50,000

 

5,00,000

    4,50,000 5,00,000

3.

 

Short – term borrowings :

Bank Overdraft

 

1,50,000

 

50,000

    1,50,000 50,000

4.

 

Short – term provisions

Provisions for tax

 

70,000

 

90,000

    70,000 90,000

5.

 

 

Tangible Assets

Machinery

Accumulated Depreciation

 

12,03,000

(2,00,000)

 

8,21,000

(1,01,000)

    10,03,000 7,20,000

6.

 

Intangible Assets

Goodwill

 

20,000

 

30,000

    20,000 30,000

7.

 

Inventories

Stock in trade

 

1,07,000

 

45,000

    1,07,000 45,000

Additional Information

(i) 12% Debentures were redeemed on 31-3-2015

(ii) Tax Rs. 70,000 was paid during the year

Prepare Cash flow Statement.


State the primary objective of preparing a Cash Flow Statement.


From the following Balance Sheet of JY Ltd. as at 31st March 2017, prepare a Cash Flow Statement :

Balance Sheet of JY Ltd.
as at 31.3.2017
Particular Note No.

31-3-2017

Rs

31-3-2016

Rs

I. Equity and Liabilities

  1. Shareholders' Funds:

     (a) Share capital

     (b) Reserves and surplus

  2. Non-current Liabilities:

    Long term-borrowing

  3. Current Liabilities:

    (a) Short-term borrowings

    (b) Short-term provisions

 

 

 

1

 

2

 

3

4

 

 

5,00,000

1,00,000

 

2,50,000

 

1,50,000

2,00,000

 

 

5,00,000

(25,000)

 

1,50,000

 

1,00,000

1,25,000

Total   12,00,000 8,50,000

II. Assets

   1. Non- Current Assets:

     (a) Fixed Assets:

         (i) Tangible

   2. Current Assets:

    (a) Trade Receivable

    (b) Cash and Cash Equivalents

    (c) Short-term Loans and Advances

 

 

 

5

 

 

 

 

 

 

 

6,00,000

 

2,75,000

1,25,000

2,00,000

 

 

 

4,50,000

 

2,25,000

75,000

1,00,000

Total   12,00,000 8,50,000

 

Notes to Accounts

Note No Particulars

31-3-2017

Rs

31-3-2016

Rs

1

 

 

2

 

 

3

 

 

 

4

 

 

 

5

 

 

Reserve and Surplus

(Surplus i.e. Balance in Statement of Profit and Loss)

 

 

1,00,000

 

(25,000)

1,00,000 (25,000)

Long-term borrowings :

10 % Debentures

 

 

2,50,000

 

1,50,000

2,50,000 1,50,000

Short-term borrowings :

Bank Overdraft

 

 

1,50,000

 

1,00,000

1,50,000 1,00,000

Short-term provisions:

(i) Proposed Dividend

(ii) Provision for Tax

 

 

75,000

1,25,000

 

50,000

75,000

2,00,000 1,25,000

Tangible Assets:

Machinery

Accumulated Depreciation

 

 

7,37,500

(1,37,500)

 

5,25,000

(75,000)

6,00,000 4,50,000

Additional Information:

Rs 1,00,000, 10% Debentures were issued on 31-3-2017.


Will 'acquisition of machinery by an issue of equity shares' be considered while preparing 'Cash Flow Statement'? Give reason in support of your answer.


Which of the following transactions will result in 'Flow of Cash’?
(a) Deposited Rs 10,000 into the bank.
(b) Withdrew cash from bank Rs 14,500.
(c) Sale of the machinery of the book value of Rs 74,000 at a loss of Rs 9,000.
(d) Converted Rs  2,00,000 9% debentures into equity shares.


While preparing the Cash Flow Statement of Alka Ltd. 'dividend paid' was shown as an operating
activity by the accountant of the company. Was he correct in doing so? Give reason.


Amongst the following, 'Payment of bonus to the employees' by an insurance company is which type of activity?


While preparing Cash Flow Statement, the accountant of a financing company showed 'Dividend Received Rs 50,000 on investments' as an investing activity. Was he correct in doing so? Give reason.


Which of the following transactions will result in the flow of cash :
(1) Deposited Rs 43,000 into the bank.
(2) Withdrew cash from bank Rs 23,000.
(3) Sale of the machinery of the book value of Rs 38,000 at a loss of Rs 3,000.
(4) Converted Rs 2,00,000, 9% debentures into equity shares.


Why is specific disclosure of cash flow financing activities important while preparing Cash Flow Statement?


Why is ‘Cash Flow statement’ prepared? State.


State any two benefits of preparing 'Cash Flow Statement'. 


From the following Balance Sheets of Sonam Ltd as on 31-3-2012 and 31-3-2011.

Prepare a Cash Flow Statements:  

Liabilities

31-3-2011

Rs

31-3-2011

Rs

Assets

31-3-2011

Rs

31-3-2011

Rs

Equity Shares Capital

Profit and Loss Account

Bank Loan

Proposed Dividend

Provision for tax

Creditors

1,00,000

 

25,000

 

50,000

20,000

 

10,000

15,000

 

1,50,000

 

50,000

 

25,000

15,000

 

17,500

11,250

Patents

Building

Investment

Debtors

Stock

Cash

 

 

 

 

12,500

1,50,000

-

50,000

2,500

5,000

11,250

1,50,000

18,750
63,750

3,750

21,250

 

 

2,20,000

2,68,750

 

2,20,000

2,68,750

 

 

 

 

 

Additional Information:

During the year a Building having book value Rs 50,000 was sold at a loss of Rs 2,000 and deprecation charged on Building was Rs 4,000


Give the meaning of ‘Cash Flow’.


From the following Balance Sheets of B.C.R. Ltd as on 31-3-2010 and 31-3-2011.

Prepare a Cash Flow Statements:  

Balance Sheets of B.C.R. Ltd.

as on 31.3.2010 and 31.3.2011

Liabilities

31-3-2010

Rs

31-3-2011

Rs

Assets

31-3-2010

Rs

31-3-2011

Rs

Equity Shares Capital

Profit and Loss Account

Bank Loan

Proposed Dividend

Provision for tax

Creditors

5,00,000

 

2,00,000

 

1,00,000

50,000

30,000

55,000

7,00,000

 

3,50,000

 

50,000

70,000

50,000

52,000

Patents

Equipment

Investment

Debtors

Stock

Bank

1,00,000

5,00,000

80,000

55,000

2,00,000

95,000

5,00,000

1,00,000
1,47,000

1,30,000

3,00,000

 

 

9,35,000

12,72,000

 

9,35,000

12,72,000

 

 

 

Additional Information:

During the year Equipment costing Rs 1,00,000 was purchases. Loss on sale of Equipment amounted to Rs 12,000. Rs 18,000 deprecation charged on Equipment.


                    You are required to prepare a Cash-Flow Statement (as per AS-3)
                          for the year 2016-17 from the following Balance Sheet.
                                    Balance Sheet of Honesty Ltd.
                          As at 31st March, 2016 and 31st March, 2017

  I     Particulars     Note No.          31.03.2017

31.03.2017

1.

EQUITY AND LIABILITIES
Shareholders Funds
(a) Share Capital (Equity Share Capital)
(b) Reserves and Surplus (Statement of P/L)

1.

           

                    14,00,000 

 5,00,000

 

 

 

 

 

10,00,000

4,00,000

 

 

 

2. Non-Current Liabilities
Long Term Borrowing (10% Debentures)
  5,00,000 1,40,000
3. Current Liabilities
(a) Short Term Borrowings (Bank Overdraft)  
(b) Trade Payables (Creditors)
(c) Short Term Provisions
 

20,000

1,00,000

60,000

30,000

60,000

30,000

  TOTAL   25,80,000 16,60,000
II 1.  ASSETS
Non-Current Assets
Fixed Assets 
(i) Tangible 
(ii) Intangible (Goodwill)
      2.

 

 

16,00,000

1,40,000

 

 

9,00,000

2,00,000

  2. Current Assets
(a) Inventories
(b) Trade Receivables 
(c) Cash and Bank Balances
(Cash at Bank)
 

2,50,000

5,00,000

90,000

2,00,000

3,00,000

60,000

  TOTAL   25,80,000 16,60,000

Notes to Accounts:

Particulars 31.03.2017 31.03.2016
1. Short term provisions
provision for taxation
60,000 30,000
2. Fixed Assets (Tangible)
Plant and Machinery 
Less Accumulated Depreciation

 

17,60,000

(1,60,000)

 

10,00,000

(1,00,000)

  16,00,000 9,00,000

During the year 2016-17:
(i) A part of the machine, costing Rs. 50,000, accumulated depreciation thereon being Rs. 20,000, was sold for
Rs.18,000.
(ii) Tax paid Rs. 20,000.
(iii) Interest of Rs. 50,000 paid on Debentures.


Short Answer Question

What are the objectives of preparing cash flow statement?


Short Answer Question

Prepare a format of cash flow from operating activities under indirect method.


The following is the Profit and Loss Account of Yamuna Limited:

Statement of Profit and Loss of Yamuna Ltd.,

for the Year ended March 31, 2017

Particulars

Note No.

Amount

(Rs)

i)

Revenue from Operations

 

10,00,000

ii)

Expenses

 

 

 

Cost of Materials Consumed

1

50,000

 

Purchase of Stock-in-trade

 

5,00,000

 

Other Expenses

2

3,00,000

 

Total Expenses

 

8,50,000

iii)

Profit before Tax (i – ii)

 

1,50,000

 

Additional information:

(i) Trade receivables decrease by Rs 30,000 during the year.

(ii) Prepaid expenses increase by Rs 5,000 during the year.

(iii) Trade payables increase by Rs 15,000 during the year.

(iv) Outstanding expenses payable increased by Rs 3,000 during the year.

(v) Other expenses included depreciation of Rs 25,000. 

Compute net cash from operations for the year ended March 31, 2017 by the indirect method.


Name the activities that constitute the primary or main activities of an enterprise?


Which one is Cash Inflows from operating activities?


Which one is Cash Outflows from Financing activities?


Which one is Cash Inflows from Financing activities?


Classify the following activity into operating activities, investing activities, financing activities or cash activities.

"Cash receipt from debtors"


Classify the following activity into operating activities, investing activities, financing activities or cash activities

"Proceeds from sales of old machinery"


Assertion (A): Buy-back of equity shares comes under financing activities.

Reason (R): Financing activities are the activities that result in a change in the size composition of the owner's capital and borrowing of the enterprise from other sources.


Statement of cash flows includes:


Cash flow example from an Investing activity is:


Cash from Operating Activities will decrease due to:


State whether the following transaction will result in inflow, outflow or no flow of cash while preparing cash flow statement:

Interest received in cash from loans and advances ₹ 80,000.


From the following information of Hoopla Ltd., you are required to prepare a Cash Flow Statement (as per AS 3) for the year 2021 - 22.

  Particulars (₹)
(i) Profit for the year 2021-22, before considering dividend
and tax but after taking into account the following items:
15,80,000
  (a) Depreciation on Property, Plant & Equipment 5,50,000
  (b) Interest Payable on Bank Loan 3,80,000
  (c) Profit on sale of investments, the book value of
which was ₹ 2,20 000.
1,00,000
(ii) During the year 2021-22:  
  (a) The company  
  • Paid Tax (which was provided in 2020 - 21) 4,40,000
  • Issued 66,000 equity shares of ₹ 10 each 6,60,000
  • Repaid Bank Loan 15,00,000
  • Paid interest on Bank Loan 3,00,000
  • Paid Dividend 5,00,000
  (b) Trade payables decreased by 10,000
  (c) Cash at bank increased from ₹ 60,000 on 1st April,
2021 to ₹ 7,00,000 on 31st March, 2022.
 

From the following Balance Sheets of Rainbow Ltd., you are required to prepare a Cash Flow Statement (as per As 3) for the year 2021 - 22.

Balance Sheets of Rainbow Ltd.
As at 31st March, 2022 and 31st March, 2021
Particulars Note no. 31.3.2022
(₹)
31.3.2021
(₹)
I. Equity and liabilities      
1. Shareholder's Funds      
(a) Share Capital (Equity)   4,00,000 4,00,000
(b) Reserve and Surplus 1 1,60,000 1,20,000
2. Non-Current Liabilities      
Long-term Borrowings (5% Debentures)   3,50,000 2,60,000
3. Current Liabilities      
Short term Provision (Provision for Tax)   30,000 25,000
Total   9,40,000 8,05,000
II. Assets      
1. Non-Current Assets      
Property, Plant & Equipment & Intangible Assets      
(i) Property, Plant & Equipment (Plant & Machinery)   6,00,000 7,80,000
2. Current Assets      
Cash & Bank Balances (Cash at Bank)   3,40,000 25,000
Total   9,40,000 8,05,000

Notes to Accounts:

Particulars 31.3.2022 (₹) 31.3.2021 (₹)
I. Reserves and Surplus    
General Reserve 30,000 20,000
Balance in Statement of Profit and Loss 1,30,000 1,00,000

Additional Information:

During the year 2021-22, the company:

  1. Sold a machine for ₹ 90,000 at a loss ₹10,000.
  2. Issued the 5% Debentures on 31st March; 2022, at a discount of 10%. The discount was written off from General Reserve.

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