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Question
From the following details relating to Radha Ltd., prepare Cash Flow Statement:
| BALANCE SHEET OF RADHA 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 | 1 | 20,00,000 | 16,00,000 |
| (b) Reserves and Surplus | 2 | 6,00,000 | 4,20,000 |
| 2. Non-Current Liabilities | |||
| Long-term Borrowings: 10% Debentures | 4,00,000 | ... | |
| 3. Current Liabilities | |||
| (a) Trade Payables | 14,00,000 | 16,40,000 | |
| (b) Short-term Provisions | 3 | 2,00,000 | 1,40,000 |
| Total | 46,00,000 | 38,00,000 | |
| II. ASSETS | |||
| 1. Non-Current Assets | |||
| (a) Property, Plant and Equipment and Intangible Assets: | |||
| —Property, Plant and Equipment | 4 | 26,00,000 | 18,00,000 |
| (b) Non-Current Investments | 2,00,000 | ... | |
| 2. Current Assets | |||
| (a) Inventories | 18,00,000 | 18,00,000 | |
| (b) Cash and Cash Equivalents | ... | 2,00,000 | |
| Total | 46,00,000 | 38,00,000 | |
Notes to Accounts:
| Particulars | 31st March, 2026 (₹) | 31st March, 2025 (₹) |
|---|---|---|
| 1. Share Capital | ||
| Equity Shares of ₹ 100 each fully paid | 20,00,000 | 16,00,000 |
| 2. Reserves and Surplus | ||
| General Reserve | 4,00,000 | 3,00,000 |
| Surplus, i.e., Balance in Statement of Profit & Loss | 2,00,000 | 1,20,000 |
| 6,00,000 | 4,20,000 | |
| 3. Short-term Provisions | ||
| Provision for Tax | 2,00,000 | 1,40,000 |
| 4. Property, Plant and Equipment | ||
| Plant and Machinery | 14,00,000 | 10,00,000 |
| Land and Building | 12,00,000 | 8,00,000 |
| 26,00,000 | 18,00,000 |
Additional Information:
- Depreciation @ 25% was charged on the opening value of Plant and Machinery.
- During the year one old machine costing ₹ 1,00,000 (Written Down Value ₹ 40,000) was sold for ₹ 70,000.
- ₹ 1,00,000 was paid as income tax during the year.
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Solution
| Cash Flow Statement of Radha Ltd. for the year ended 31st March, 2026 | ||
|---|---|---|
| Particulars | Amount (₹) | Amount (₹) |
| A. Cash Flow from Operating Activities | ||
| Net Profit before Tax and Extraordinary Items (See Working Note 1) | 5,40,000 | |
| Add: Non-Cash and Non-Operating Expenses: | ||
| 1. Depreciation on Plant and Machinery (Given) | 2,50,000 | |
| 2. Interest on 10% Debentures (See Working Note 4) | 20,000 | 2,70,000 |
| 8,10,000 | ||
| Less: Non-Operating Incomes: | ||
| 3. Gain (Profit) on Sale of Machinery (See Working Note 2) | (30,000) | |
| Operating Profit before Working Capital Changes | 7,80,000 | |
| Adjustments for Changes in Working Capital: | ||
| Less: Decrease in Trade Payables \[(14,00,000 - 16,40,000)\] | (2,40,000) | |
| Cash Generated from Operations | 5,40,000 | |
| Less: Income Tax Paid (Given) | (1,00,000) | |
| Net Cash Flow from Operating Activities | 4,40,000 | |
| B. Cash Flow from Investing Activities | ||
| 1. Proceeds from Sale of Machinery | 70,000 | |
| 2. Payment for Purchase of Plant and Machinery (See Ledger Account) | (6,90,000) | |
| 3. Payment for Purchase of Land and Building $(12,00,000 - 8,00,000)$ | (4,00,000) | |
| 4. Payment for Purchase of Non-Current Investments $(2,00,000 - 0)$ | (2,00,000) | |
| Net Cash Used in Investing Activities | (12,20,000) | |
| C. Cash Flow from Financing Activities | ||
| 1. Proceeds from Issue of Share Capital $(20,00,000 - 16,00,000)$ | 4,00,000 | |
| 2. Proceeds from Issue of 10% Debentures | 4,00,000 | |
| 3. Proposed Dividend of previous year (2025) paid | (2,00,000) | |
| 4. Interest paid on 10% Debentures | (20,000) | |
| Net Cash Flow from Financing Activities | 5,80,000 | |
| Net Decrease in Cash and Cash Equivalents (A + B + C) | (2,00,000) | |
| Add: Opening Balance of Cash & Cash Equivalents | 2,00,000 | |
| Closing Balance of Cash & Cash Equivalents | ... (Nil) | |
Working Notes & Ledger Accounts:
1. Calculation of Net Profit before Tax and Extraordinary Items:
Closing Balance of Surplus (Profit & Loss) = ₹ 2,00,000
Less: Opening Balance of Surplus (Profit & Loss) = (₹ 1,20,000)
Net Profit generated during the year = ₹ 80,000
Add: Transfer to General Reserve $(4,00,000 - 3,00,000)$ = ₹ 1,00,000
Add: Proposed Dividend of the previous year (ended 31st March, 2025) = ₹ 2,00,000
Add: Provision for Tax made during the year (See Ledger Account below) = ₹ 1,60,000
Net Profit before Tax and Extraordinary Items = ₹ 5,40,000
2. Calculation of Profit on Sale of Machinery:
Written Down Value (WDV) of machinery sold = ₹ 40,000
Sale Proceeds received = ₹ 70,000
Gain (Profit) on Sale = $70,000 - 40,000 ={₹ 30,000}$
3. Provision for Tax Account
| Debit (Particulars) | Amount (₹) | Credit (Particulars) | Amount (₹) |
|---|---|---|---|
| To Bank A/c (Tax Paid) | 1,00,000 | By Balance b/d (Opening) | 1,40,000 |
| To Balance c/d (Closing) | 2,00,000 | By Statement of P&L (Provision Made - Bal. Fig.) | 1,60,000 |
| Total | 3,00,000 | Total | 3,00,000 |
4. Plant and Machinery Account
| Debit (Particulars) | Amount (₹) | Credit (Particulars) | Amount (₹) |
|---|---|---|---|
| To Balance b/d (Opening) | 10,00,000 | By Bank A/c (Sale Proceeds) | 70,000 |
| To Statement of P&L (Gain on Sale) | 30,000 | By Depreciation A/c $(25\% \text{ of } 10,00,000)$ | 2,50,000 |
| To Bank A/c (Purchase - Balancing Figure) | 6,90,000 | By Balance c/d (Closing) | 14,00,000 |
| Total | 17,20,000 | Total | 17,20,000 |
5. Calculation of Interest on 10% Debentures:
Since the new debentures of ₹ 4,00,000 were issued on 1st October, 2025, interest is paid on them for exactly 6 months (October to March):
$$\text{Interest Paid} = 10\% \text{ of } ₹ 4,00,000 \times \frac{6}{12} = {₹ 20,000}$$
