Question

From the following Balance Sheets of Godrej Ltd., you are required to prepare Cash-Flow Statement.

Particulars	Note No.	31.3.2022 (₹)	31.3.2021 (₹)
I. EQUITY AND LIABILITIES:
(1) Shareholders’ Funds:
(a) Share Capital		3,30,000	3,00,000
(b) Reserves and Surplus		25,000	(30,000)
(2) Non-Current Liabilities:
Long-term Borrowings		25,000	40,000
(3) Current Liabilities:
(a) Short-term Borrowings	1	5,000	-
(b) Trade Payables		97,000	1,24,000
(c) Short-term Provision	2	30,000	24,000
Total		5,12,000	5,18,000
II. ASSETS:
(1) Non-Current Assets:
(a) Property, Plant and Equipment and Intangible Assets
(i) Property, Plant and Equipment (Machinery)		2,60,000	2,00,000
(ii) Intangible Assets		7,500	60,000
(b) Non-Current Investments	3	64,000	50,000
(2) Current Assets:
(a) Inventory		62,500	70,000
(b) Trade Receivables		98,000	1,30,000
(c) Cash & Bank Balances		20,000	8,000
Total		5,12,000	5,18,000

Notes:

Particulars	31.3.2022 (₹)	31.3.2021 (₹)
(1) Short-term Borrowings:
Bank Overdraft	5,000	-
(2) Short-term Provision:
Taxation Provision	30,000	24,000
(3) Intangible Assets:
Goodwill	-	50,000
Patents	7,500	10,000
	7,500	60,000

Additional Information:

1. Machinery whose original cost was ₹ 50,000 (accumulated depreciation thereon being ₹ 32,000) was sold for ₹ 10,000.
2. Depreciation on Machinery charged during the year was ₹ 25,000.
3. Non-current investments costing ₹ 20,000 were sold for ₹ 32,000 during the year.
4. Interest paid on long-term borrowings amounted to ₹ 3,000.

Notes:

1. Patents are assumed to be written off.
2. Bank Overdraft is treated as financing activity.

Answer 1

Cash Flow Statement of Godrej Ltd. for the year ended 31st March, 2022.
Particulars	Amount (₹)	Amount (₹)
A. Cash Flow from Operating Activities:
Net Profit before Tax (reconstructed) (W.N.1)		25,000
Add:
Depreciation on Machinery	25,000
Goodwill written off	50,000
Patents written off	52,500
Loss on sale of Machinery (W.N.4)	8,000
Less: Profit on sale of Investments	(12,000)	1,23,500
Operating profit before working capital changes		1,48,500
Add:
Decrease in Inventories	7,500
Decrease in Trade Receivables	32,000
Less: Decrease in Trade Payables	(27,000)
Net change in working capital		12,500
Cash from operations		1,61,000
Less: Income tax paid		(71,000)
Net Cash from Operating Activities (A)		90,000
B. Cash Flow from Investing Activities:
Add:
Sale of Machinery	10,000
Sale of Investments	32,000	42,000
Less:
Purchase of Machinery (W.N.2)	(1,03,000)
Purchase of Investments (W.N.3)	(34,000)	(1,37,000)
Net Cash used in Investing Activities (B)		(95,000)
C. Cash Flow from Financing Activities:
Add:
Proceeds from the Issue of Share Capital	30,000
Increase in Short-term Borrowings	5,000	35,000
Less:
Redemption/Repayment of Long-term Borrowings	(15,000)
Interest paid	(3,000)	(18,000)
Net Cash from Financing Activities (C)		17,000
Net Increase/(Decrease) in Cash & Cash Equivalents (A + B + C)		12,000
Add: Opening Cash & Cash Equivalents		8,000
Closing Cash & Cash Equivalents		20,000

Working Note 1: Calculation of Net Profit before Tax.

Particulars	Amount (₹)	Amount (₹)
Closing balance of Reserve & Surplus	25,000
Less: Opening balance of Reserve & Surplus	(30,000)
Change in Reserve & Surplus (i.e., decrease)		(5,000)
Add: Provision for Tax (current year)	30,000
Net Profit before Tax		25,000

Working Note 2: Calculation of Purchases of Machinery (WDV method).

Particulars	Amount (₹)	Amount (₹)
Closing balance of Machinery (WDV)		2,60,000
Add:
Depreciation during the year	25,000
WDV of Machinery sold (₹ 50,000 – ₹ 32,000)	18,000	43,000
Sub-total		3,03,000
Less: Opening balance of Machinery (WDV)		(2,00,000)
Purchases of Machinery		1,03,000

Working Note 3: Calculation of Purchases of Investments.

Particulars	Amount (₹)
Closing balance of Investments	64,000
Add: Cost of Investments sold	20,000
Sub-total	84,000
Less: Opening balance of Investments	(50,000)
Purchases of Investments	34,000

Working Note 4: Calculation of Sale of Machinery.

Particulars	Amount (₹)
Cost of Machinery sold	50,000
Less: Accumulated Depreciation	(32,000)
WDV of Machinery sold	18,000
Less: Sale price	(10,000)
Loss on Sale of Machinery	8,000

Working Note 5: Calculation of Profit on Sale of Investments.

Particulars	Amount (₹)
Sale price of Investments	32,000
Less: Cost of Investments sold	(20,000)
Profit on Sale of Investments	12,000

Working Note 6: Calculation of Provision for Tax A/c (to find tax paid).

Dr.	Provision for Tax A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Bank (Tax paid)	71,000	By Balance b/d	24,000
To Balance c/d	30,000	By P&L A/c (Current year provision)	77,000
Total	1,01,000	Total	1,01,000