Question

Following is the summarised Balance Sheet of Philips India Ltd. as at 31st March 2026:

Particulars	Note No.	31st March, 2026 (₹)	31st March, 2025 (₹)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital		13,50,000	13,50,000
(b) Reserves and Surplus	1	11,34,000	10,68,000
2. Non-Current Liabilities
Long-term Borrowings: 10% Mortgage Loan		8,10,000	...
3. Current Liabilities
(a) Trade Payables (Creditors)		4,20,000	5,04,000
(b) Short-term Provisions:
Provision for Tax		30,000	2,25,000
Total		37,26,000	31,47,000
II. ASSETS
1, Non-Current Assets
(a) Property, Plantand Equipment and Intangible Assets:
Property, Plant and Equipment		9,60,000	12,00,000
(b) Non-Current Investments		1,80,000	1,50,000
2. Current Assets
(a) Current Investments		21,000	17,000
(b) Inventories		19,95,000	13,50,000
(c) Cash and Cash Equivalents:
Bank		5,70,000	4,30,000
Total		37,26,000	31,47,000

Notes to Accounts

Particulars	31st March, 2026 (₹)	31st March, 2025 (₹)
I. Reserves and Surplus
General Reserve	9,30,000	9,00,000
Surplus, i.e., Balance in Statement of Profit and Loss	2,04,000	1,68,000
	11,34,000	10,68,000

Additional Information:
1. Investments costing ₹ 24,000 were sold during the year for ₹ 25,500.
2. Provistion for Tax made during the year was ₹ 27,000.
3. During the year, a part of the Fixed Assets costing ₹ 30,000 was sold for ₹ 36,000. The rofits were included in the Statement of Profit and Loss.
4. The Interim Dividend paid during the year amounted to ₹ 1,20,000.
You are required to prepare Cash Flow Statement.

Hints:

1.

Dr.	PROVISION FOR TAX ACCOUNT		Cr.
Particulars	₹	Particulars	₹
To Bank A/c (Balancing Figure)	2,22,000	By Balance b/d	2,25,000
To Balance c/d	30,000	By Statement of Profit & Loss (Provision for Tax)	27,000
	2,52,000		2,52,000

1. Purchase of Investment ₹ 54,000.
2. It is assumed that 10% Mortgage Loan has been taken at the end of current accounting year.
3. Current Investments are considered to be Marketable Securities since no information is given.

Answer 1

Cash Flow Statement of Philips India Ltd. for the year ended 31st March, 2026
Particulars	Amount (₹)	Amount (₹)
A. Cash Flow from Operating Activities
Net Profit before Tax and Extraordinary Items (Working Note 1)		2,13,000
Add: Non-Cash and Non-Operating Expenses:
1. Depreciation on Property, Plant and Equipment (Working Note 4)		2,10,000
		4,23,000
Less: Non-Operating Incomes:
2. Profit on Sale of Non-Current Investments \[(25,500 - 24,000)\]	(1,500)
3. Profit on Sale of Fixed Assets $(36,000 - 30,000)$	(6,000)	(7,500)
Operating Profit before Working Capital Changes		4,15,500
Adjustments for Changes in Working Capital:
1. Less: Increase in Inventories $(19,95,000 - 13,50,000)$	(6,45,000)
2. Less: Decrease in Trade Payables $(4,02,000 - 5,04,000)$	(1,02,000)	(7,47,000)
Cash Used in Operations		(3,31,500)
Less: Income Tax Paid (Working Note 2)		(2,22,000)
Net Cash Used in Operating Activities		(5,53,500)
B. Cash Flow from Investing Activities
1. Proceeds from Sale of Non-Current Investments	25,500
2. Proceeds from Sale of Fixed Assets	36,000
3. Payment for Purchase of Non-Current Investments (Working Note 3)	(54,000)
Net Cash Flow from Investing Activities		7,500
C. Cash Flow from Financing Activities
1. Proceeds from raising 10% Mortgage Loan	8,10,000
2. Interim Dividend paid during the year	(1,20,000)
Net Cash Flow from Financing Activities		6,90,000
Net Increase in Cash and Cash Equivalents (A + B + C)		1,44,000
Add: Opening Balance of Cash & Cash Equivalents		4,47,000
Closing Balance of Cash & Cash Equivalents		5,91,000

Working Notes & Ledger Accounts:

1. Calculation of Net Profit before Tax and Extraordinary Items:

Closing Balance of Surplus (Profit & Loss) = ₹ 2,04,000

Less: Opening Balance of Surplus (Profit & Loss) = (₹ 1,68,000)

Net Profit generated during the year = ₹ 36,000

Add: Transfer to General Reserve $(9,30,000 - 9,00,000)$ = ₹ 30,000

Add: Interim Dividend paid during the year = ₹ 1,20,000

Add: Provision for Tax made during the year = ₹ 27,000

Net Profit before Tax and Extraordinary Items = ₹ 2,13,000

2. Provision for Tax Account

Debit (Particulars)	Amount (₹)	Credit (Particulars)	Amount (₹)
To Bank A/c (Tax Paid - Balancing Figure)	2,22,000	By Balance b/d (Opening)	2,25,000
To Balance c/d (Closing)	30,000	By Statement of P&L (Provision Made)	27,000
Total	2,52,000	Total	2,52,000

3. Non-Current Investments Account

Debit (Particulars)	Amount (₹)	Credit (Particulars)	Amount (₹)
To Balance b/d (Opening)	1,50,000	By Bank A/c (Sale Proceeds)	25,500
To Statement of P&L (Profit on Sale)	1,500	By Balance c/d (Closing)	1,80,000
To Bank A/c (Purchase - Balancing Figure)	54,000
Total	2,05,500	Total	2,05,500

4. Property, Plant and Equipment Account

Debit (Particulars)	Amount (₹)	Credit (Particulars)	Amount (₹)
To Balance b/d (Opening)	12,00,000	By Bank A/c (Sale Proceeds)	36,000
To Statement of P&L (Profit on Sale)	6,000	By Depreciation A/c (Balancing Figure)	2,10,000
		By Balance c/d (Closing)	9,60,000
Total	12,06,000	Total	12,06,000