Question

From the figures given in the Balance Sheet and additional information, calculate ‘Cash Flows from Investing Activities’ and ‘Cash Flows from Financing Activities’.

Balance Sheet of Bharat Gas Ltd. as at 31st March, 2024.
Particulars	Note No.	31.3.2024 (₹)	31.3.2023 (₹)
I. EQUITY AND LIABILITIES:
(1) Shareholders’ Funds
(a) Equity Share Capital		20,00,000	20,00,000
(b) Reserves and Surplus	1	3,80,000	4,00,000
(2) Non-Current Liabilities
Long-term Borrowings (8% Debentures)		4,00,000	5,00,000
(3) Current Liabilities
(a) Trade Payables		4,20,000	1,60,000
(b) Bank Overdraft		1,50,000	2,00,000
(c) Short-term Provisions	2	50,000	60,000
TOTAL		34,00,000	33,20,000
Ii. ASSETS:
(1) Non-Current Assets
Property, Plant and Equipment and Intangible Assets
(i) Property, Plant and Equipment	3	20,40,000	20,00,000
(ii) Intangible Assets	4	2,00,000	1,50,000
(2) Current Assets
(a) Inventories		7,00,000	8,00,000
(b) Trade Receivables		3,10,000	1,60,000
(c) Cash and Cash Equivalents		1,50,000	2,10,000
TOTAL		34,00,000	33,20,000

Notes to Accounts:

Note No.	Particulars	31.3.2024 (₹)	31.3.2023 (₹)
1.	Reserves and Surplus:
	Surplus, i.e., Balance in Statement of Profit and Loss	3,80,000	4,00,000
2.	Short-term Provisions:
	Provision for Tax	50,000	60,000
3.	Property, Plant and Equipment:
	Machinery	25,50,000	26,00,000
	Less: Accumulated Depreciation	(5,10,000)	(6,00,000)
		20,40,000	20,00,000
4.	Intangible Assets:
	Goodwill	2,00,000	1,50,000

Additional Information:

1. A piece of machinery costing ₹ 7,00,000 was sold for ₹ 5,00,000. Depreciation charged during the year amounted to ₹ 1,80,000.
2. 8% Debentures were redeemed at a premium of 5% on 1^st January, 2024.
3. Interim Dividend on equity share capital was paid @ 7%.

Answer 1

Cash Flow Statement for the year ending 31st March, 2023
Particulars	Amount (₹)	Amount (₹)
A. Cash Flow from Investing Activities
Proceeds from the sale of Machinery		5,00,000
Less:
Purchase of Goodwill	(50,000)
Purchase of Machinery	(6,50,000)	(7,00,000)
Net Cash used in Investing Activities		(2,00,000)
B. Cash Flows from Financing Activities
Repayment of Debentures	(91,000)
Interest on Debentures	(40,000)
Final Dividend Paid	(2,00,000)
Net Cash used in Financing Activities		(3,33,000)
Net Increase in Cash and Cash Equivalents (A + B)		(5,33,000)

Working Notes: Investing Activities;

(1) Calculation of Goodwill:

Increased from ₹ 1,50,000 (2023) to ₹ 2,00,000 (2024),

Thus, Purchase of Goodwill = ₹ 2,00,000 − ₹ 1,50,000 = ₹ 50,000

(2) Calculation of Purchase of Machinery:

(From Note 3)

• Opening Machinery: ₹ 26,00,000
• Closing Machinery: ₹ 25,50,000
• Depreciation during the year: ₹ 1,80,000 (non-cash)
• Sold machinery (cost): ₹ 7,00,000

Dr.	Machinery Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	26,00,000	By Accumulated Depreciation A/c	2,70,000
To Bank (Purchase - Bal. fig.)	6,50,000	By Bank (Sale)	5,00,000
To Profit & Loss (profit)	70,000	By Balance c/d	25,50,000
Total	33,20,000	Total	33,20,000

Working Notes: Financing Activities;

(1) Interest on Debentures:

• 8% of ₹ 5,00,000 (opening balance) = ₹ 40,000 (Assumed paid during the year)

(2) Final Dividend Paid on Equity Shares:

• Equity Share Capital = ₹ 20,00,000
• Dividend rate = 10%
• Dividend Paid = 10% of ₹ 20,00,000
  = ₹ 2,00,000