Question

From the following Balance Sheet and information of Sun Ltd., prepare Cash Flow Statement:

Particulars	Note No.	31st March, 2019 (₹)	31st March, 2018 (₹)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital	1	7,00,000	6,00,000
(b) Reserves and Surplus	2	4,10,000	2,00,000
2. Non-Current Liabilities
Long-term Borrowings:  10% Debentures		3,00,000	2,00,000
3. Current Liabilities
(a) Trade Payables		1,40,000	60,000
Total		15,50,000	10,60,000
II. ASSETS
1. Non-Current Assets
(a) Fixed Assets−Tangible		7,00,000	6,00,000
(b) 10% Investments		2,00,000	1,00,000
2. Current Assets
(a) Current Investments		90,000	50,000
(b) Inventories		2,00,000	1,00,000
(c) Trade Receivables	3	2,80,000	1,90,000
(d) Cash and Cash Equivalents		80,000	20,000
Total		15,50,000	10,60,000

Notes to Accounts :

Particulars	31st March, 2019 (₹)	31st March, 2018 (₹)
1. Share Capital
Equity Share Capital	5,00,000	3,00,000
10% Preference Share Capital	2,00,000	3,00,000
	7,00,000	6,00,000
2. Reserves and Surplus
Securities Premium Reserve	10,000	-
Surplus i.e., Balance in Statement of Profit and Loss	4,00,000	2,00,000
	4,10,000	2,00,000
3. Trade Receivables
Sundry Debtors	3,00,000	2,00,000
Less: Provision for Doubtful Debts	20,000	10,000
	2,80,000	1,90,000

You are informed that during the year:

(i)	Proposed Dividend:	31st March, 2019	31st March, 2018
	Equity Share Capital	Nil	Nil
	Preference Share Capital	10%	10%

(ii) A machine with a book value of ₹ 90,000 was sold for ₹ 50,000;

(iii) Depreciation charged during the year ₹ 60,000;

(iv) Debentures were issued on 1st April 2018;

(v) Investments were purchased on 31st March 2019;

(vi) Preference shares were redeemed on 31st December 2018;

(vii) An interim dividend @ 15% was paid on equity shares on 31st December 2018.

(viii) Fresh equity shares were issued at a premium of 5% on 31st March 2019.

Answer 1

Cash Flow Statement for the year ended March 31, 2019
Particulars	Amount (₹)	Amount (₹)
A. Cash Flow from Operating Activities
Profit as per Statement of Profit and Loss	2,00,000
Preference Dividend `(3,00,000 xx 10/100 )` W.N.-1	30,000
Profit Before Taxation		2,30,000
Items to be Added:
Depreciation on Fixed Assets	60,000
Loss on Fixed Assets	40,000
Interest on Debentures	30,000
Dividend on Equity Shares	45,000
Provision for Doubtful Debts	10,000
Items to be Deducted:
Interest on Investment	(10,000)	1,75,000
Operating Profit before Working Capital Adjustments		4,05,000
Less: Increase in Current Assets
Trade Receivables	(1,00,000)
Inventories	(1,00,000)	(2,00,000)
Add: Increase in Current Liabilities
Trade Payables	80,000	80,000
Net Cash Flows from Operating Activities		2,85,000
B. Cash Flow from Investing Activities
Sale of Fixed Assets	50,000
Purchase of Fixed Assets	(2,50,000)
Purchase of Investment	(1,00,000)
Interest on Investment	10,000
Net Cash Used in Investing Activities		(2,90,000)
C. Cash Flow from Financing Activities
Proceeds from Issue of Share Capital	2,00,000
Proceeds from Issue of Debentures	1,00,000
Interest on Debentures Paid	(30,000)
Redemption of Preference Share Capital	(1,00,000)
Security Premium Reserve	10,000
Dividend Paid on Preference Share Capital	(30,000)
Dividend Paid on Equity Share Capital	(45,000)
Net Cash Flow from Financing Activities		1,05,000
D. Net Increase in Cash and Cash Equivalents		1,00,000
Add: Cash and Cash Equivalent in the beginning of the period (50,000 + 20,000)		70,000
Cash and Cash Equivalents at the end of the period (90,000 + 80,000)		1,70,000

Working Notes:

(1) Dividend on 10% Preference Shares has been calculated on the value as on 31st March, 2018 as Rs. 1,00,000 Preference Shares were redeemed on 31st December, 2018.
 (2)

Dr.	Fixed Assets Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Balance b/d	6,00,000	Bank A/c (Sale)	50,000
Bank A/c (Purchase- Bal. Fig.)	2,50,000	Depreciation	60,000
		Profit and Loss A/c (Loss on Sale)	40,000
		Balance c/d	7,00,000
	8,50,000		8,50,000