Question

From the following extracts of a company’s Balance Sheets and the additional information, you are required to calculate Cash from Financing Activities for the year ending 31^st March, 2021.

Particulars	31.3.2021 (₹)	31.3.2020 (₹)
Equity Share Capital	9,00,000	7,00,000
10% Preference Share Capital	3,00,000	5,00,000
Securities Premium Reserve	30,000	5,000
12% Debentures	4,00,000	3,00,000
Cash Credit	12,000	10,000

Additional information:

1. During the year 2020-21:
   1. Dividend proposed on Equity Shares in 2019-20 of ₹ 65,000 was declared and paid.
   2. Debentures were issued on 1st July, 2020, at a discount of 10%.
   3. Interest on cash credit of ₹ 500 was paid.
   4. Underwriting commission of ₹ 25,000 was paid to the underwriters.
   5. The Equity shares were issued at a premium.
2. The 10% Preference Shares were redeemed on 31st March, 2021.

Answer 1

Cash Flow horn Financing Activities	₹
Proceeds from the issue of equity shares	2,00,000
Redemption of preference shares	(2,00,000)
Issue of Debentures	90,000
Cash credit taken	2,000
Interest paid on cash credit	(500)
Payment of underwriting commission	(25,000)
Dividend paid on equity shares	(65,000)
Dividend paid on preference shares	(50,000)
Interest paid on Debentures (Refer to working notes)	(45,000)
Securities premium received (Refer to working notes)	60,000
Net Cash Flow from Financing Activities	(33,500)

Working Notes:

(1) Calculation of Interest on Debentures:

`[3,00,000 xx 12/100] + [1,00,000 xx 12/100 xx 9/12 (1 " July"  20 - 31 " Mar."  21)]`

= ₹  36,000 + ₹  9,000

= ₹ 45,000

(2) Dividend on Preference Shares = 10% × ₹ 5,00,000 = ₹ 50,000

(3) Securities Premium Received = ₹ 30,000 + ₹ 10,000 + ₹ 25,000 - ₹ 5,000

= ₹ 60,000

(4) Note that Discount on issue of debentures of ₹ 10,000 and underwriting commission of ₹ 25,000 have been written off from Securities Premium Reserve as per the provision of the Companies Act.