Question

From the following Balance Sheets of Enclotek Ltd. as at 31^st March and the additional information provided, calculate:

1. Cash from ‘Operating Activities’
2. Cash from ‘Financing Activities’:

Particulars	Note No.	31.3.2023 (₹)	31.3.2022 (₹)
I. EQUITY AND LIABILITIES:
(1) Shareholders’ Funds:
(a) Share Capital	1	7,00,000	7,50,000
(b) Reserve and Surplus	2	3,35,000	-
(2) Non-Current Liabilities
Long-term Borrowings	3	3,00,000	2,00,000
(3) Current Liabilities		70,000	1,10,000
TOTAL		14,05,000	10,60,000
II. ASSETS:
(1) Non-Current Assets:
(a) Property, Plant and Equipment and Intangible Assets
(i) Property, Plant and Equipment (Machinery)		8,60,000	6,20,000
(ii) Intangible Assets	4	-	20,000
(b) Non-Current Investments		1,25,000	80,000
(2) Current Assets		4,20,000	3,40,000
TOTAL		14,05,000	10,60,000

Working Notes:

Particulars	31.3.2023 (₹)	31.3.2022 (₹)
(1) Share Capital:
Equity Share Capital	5,00,000	4,50,000
5% Preference Share Capital	2,00,000	3,00,000
	7,00,000	7,50,000
(2) Reserve & Surplus:
Capital Redemption Reserve	1,00,000	-
General Reserve	1,35,000	1,00,000
Profit & Loss Balance	1,00,000	(1,00,000)
	3,35,000	-
(3) Long-term Borrowings:
8% Debentures	3,00,000	2,00,000
(4) Intangible Assets:
Goodwill	-	20,000

Additional Information:

1. Depreciation provided on Machinery ₹ 60,000.
2. Preference shares were redeemed at a premium of 5% on 31^st March, 2023.
3. Additional debentures were issued on 1^st October, 2022.
4. Proposed dividend on equity share capital for previous year ended 31^st March 2022 was paid @ 8%.

Hint: Dividend paid on Preference Shares ₹ 15,000.

Notes:

(1) Negative balance of Profit & Loss amounting to ₹ 1,00,000 appearing in the Balance Sheet on 31.3.2022 represents an amount of loss. In the current year (2022-23), after covering this loss of ₹ 1,00,000, the Profit and Loss shows a profit of ₹ 1,00,000. It means net profit during the current year must have been ₹ 1,00,000 + ₹ 1,00,000 = ₹ 2,00,000.

(2) Interest on Debentures:

8% on ₹ 2,00,000 for 6 months	8,000
8% on ₹ 3,00,000 for 6 months	12,000
	20,000

(3) Since dividend on Equity Shares has been paid, dividend on Preference Shares also must have been paid prior to dividend on equity shares.

(4) Proposed Dividend paid on Equity Share Capital ₹ 36,000.

Answer 1

Cash Flow Statement For the year ending 31st March, 2023
Particulars	Amount (₹)	Amount (₹)
A. Cash Flows from Operating Activities:
Net Profit before Tax		2,55,000
Adjustments for non-cash and non-operating items:
Add:
Depreciation	60,000
Loss on Sale of Machinery	56,000
Interest on Debentures	1,000
Less: Profit on Sale of Investments	(10,000)	1,07,000
Operating Profit before Working Capital Changes		3,62,000
Current Assets (Increase)	(80,000)
Current Liabilities (Increase)	10,000	70,000
Cash Generated from Operations		4,32,000
Less: Income Tax Paid		(61,000)
Net Cash from Operating Activities		3,71,000
B. Cash Flow from Financing Activities:
Proceeds from the Issue of Equity Shares		50,000
Proceeds from the Issue of 8% Debentures		1,00,000
		1,50,000
Less:
Redemption of Preference Shares (₹ 1,00,000 @ 5% Premium)	(1,05,000)
Dividend Paid on Equity Shares	(36,000)
Dividend Paid on Preference Shares	(15,000)
Interest Paid on Debentures	(20,000)	(1,76,000)
Net Cash Used in Financing Activities		(26,000)
Net Increase in Cash and Cash Equivalents (A + B)		3,45,000

Working Note 1: Calculation of Net Profit before Tax.

Particulars	Amount (₹)
Profit & Loss A/c (Closing)	1,00,000
Add: Proposed Dividend (2023)	6,000
Add: Transfer to General Reserve	50,000
Add: Interim Dividend	36,000
Add: Provision for Tax	63,000
Net Profit before Tax	2,55,000

Working Note 2: Calculation of Preference Share Capital.

Opening: ₹ 3,00,000

Closing: ₹ 2,00,000

Redeemed = ₹ 1,00,000

Premium @5% = ₹ 5,000

Total Cash Outflow = ₹ 1,05,000