Question

Cash flow from operating activities of Starline Ltd. for the year ended 31.03.2019 was ₹ 18,000. The Balance Sheet along with notes to accounts of Starline Ltd. as at 31-03-19 is given below :

Starline limited​ 
Balance Sheet as at 31st March, 2019 

Particulars	Note No.	31-03-19(₹)	31-03-18(₹)
I. Equity and Liabilities: ​
1. Shareholders Funds
(a) Share Capital		18,00,000	10,00,000
b) Reserves and Surplus	1	50,000	40,000
2. Non-Current Liabilities
Long term Borrowings	2	1,00,000	4,00,000
3. Current Liabilities
Short term Provisions	3	2,50,000	3,60,000
Total		22,00,000	18,00,000
II. Assets
1. Non-Current Assets
Fixed Assets
(i) Tangible Assets	5	9,80,000	6,35,000
(ii) Intangible Assets	6	2,68,000	1,70,000
2. Current Assets
(a) Current Investments		1,40,000	70,000
(b) Trade Receivables		4,40,000	1,50,000
c) Cash and Cash Equivalents		1,55,000	63,000
Total		22,00,000	18,00,000

Notes to Accounts 

	Particulars	31-03-19 (₹)	31-03-18 (₹)
1.	Reserves and Surplus	50,000	40,000
	Surplus (Balance in Statement of Profit and Loss)	50,000	40,000
2	Long-term Borrowings
	8% Debentures	1,00,000	4,00,000
		1,00,000	4,00,000
3	Short term provisions
	Provision for tax	2,50,000	3,60,000
		2,50,000	3,60,000
4	Tangible Assets
	Plant and Machinery	15,20,000	10,90,000
	Less: Accumulated Depreciation	(1,20,000)	(90,000)
		14,00,000	10,00,000
5	Intangible Assets
	Goodwill	1,80,000	70,000
		1,80,000	70,000

You are given the following additional information :

(a) A machinery of the book value of ₹ 40,000 (depreciation provided thereon ₹ 12,000) was sold at a loss of ₹ 6,000.

(b) 8% debentures were redeemed on 1^st July 2018.

Prepare Cash Flow Statement.

Answer 1

Cash Flow Statement 
for the years ended 31^st March 2018 and 31^st March, 2019 

Particulars	Details	Amount (₹)
A. Cash Used in Operating Activities		(18,000)*
B. Cash Flow from Investing Activities
Purchase of Plant & Machinery	(4,70,000)
Sale of Plant & Machinery	22,000
Purchase of Goodwill	(1,10,000)
Cash used in Investing Activities		(5,58,000)
C. Cash flow from Financing Activities
Proceeds from issue of shares	8,00,000
Redemption of debentures	(3,00,000)
Interest Paid on debentures (8,000 + 6,000)	(14,000)
Cash Flow from Financing Activities		4,86,000
Net Increase in Cash and Cash Equivalents (A – B + C)		(90,000)
Add: Opening Balance of Cash and cash equivalents	2,30,000
Opening Balance of Current Investments	1,90,000
Cash and Cash equivalents at the end of the period		3,30,000
Closing Balance of Cash and cash equivalents	3,00,000
Closing Balance of Current Investments	30,000	3,30,000

*There is a printing mistake in the question paper. ₹18,000 given as Cash flow from operating activities is actually 'Cash Outflow'

Working Notes:

Dr.	Plant & Machinery A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To balance b/d	10,90,000	By Accumulated depreciation A/c	12,000
To Bank A/c (Purchase)	4,70,000	By Statement of Profit & Loss	6,000
(Balancing Fig.)		By Bank A/c (Sale)	22,000
		By balance c/d	15,20,000
	15,60,000		15,60,000

 

Dr.	Accumulated Depreciation A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Plant & Machinery A/c (Dep. on asset sold)	12,000	By balance b/d	90,000
		By statement of Profit & Loss	42,000
To balance c/d	1,20,000	(Dep. Charged during the year)
	1,32,000		1,32,000