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Solution - Concept of Cash Flow Statement

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Question

Why is separate disclosure of cash flows from investing activities important? State.

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Following is the Balance Sheet of SN Ltd as at 31-3-2015:

                                                     S.N Ltd Balance Sheet as at 31-3-2015

ParticularsNote No.31-03-2015 (Rs.)31-03-2014 (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

 

 

2,50,000

1,00,000

 

2,25,000

 

75,000

35,000 

 

 

2,00,000

(25,000)

 

2,50,000

 

25,000

45,000 

Total 6,85,000  4,95,000

 II. Assets

       1. Non – Current Assets

                a) Fixed Assets

                      Tangible assets

                      Intangible

                 b) Non – Current Investments

         2. Current Assets

                 a) Current Investments

                  b) Inventories

                  c) Cash and Cash Equivalents

 

 

 

5

6

 

 

 

7

 

 

 

 

5,01,500

10,000

50,000

 

25,000

53,500

45,000 

 

 

 

3,60,000

15,000

37,500

 

30,000

22,500

30,000 

 Total  6,85,0004,95,000 

 

Note No.Particulars31-3-2015 (Rs.)31-3-2014 (Rs.)

1.

 

Reserve and Surplus

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

 

1,00,000

 

(25,000)

  1,00,000(25,000)

2.

 

Long term borrowings :

12 % Debentures

 

2,25,000

 

2,50,000

  2,25,0002,50,000

3.

 

Short – term borrowings :

Bank Overdraft

 

75,000

 

25,000

  75,00025,000

4.

 

Short – term provisions

Provisions for tax

 

35,000

 

45,000

  35,00045,000

5.

 

 

Tangible Assets

Machinery

Accumulated Depreciation

 

6,01,500

(1,00,000)

 

4,10,500

(50,500)

  5,01,5003,60,000

6.

 

Intangible Assets

Goodwill

 

10,000

 

15,000

  10,00015,000

7.

 

Inventories

Stock in trade

 

53,500

 

22,500

  53,50022,500

Additional Information

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

(ii) Tax Rs.35,000 was paid during the year

Prepare Cash flow Statement

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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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Give the meaning of 'Cash Flow statement'.

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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.

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State the objective of preparing ‘Cash Flow statement’.

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