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Question
From the following information, calculate (a) Cash Flow from Investing Activities; and (b) Cash Flow from Financing Activities:
| Particulars | 31st March, 2025 (₹) | 31st March, 2026 (₹) |
|---|---|---|
| Plant and Machinery | 8,50,000 | 10,00,000 |
| Non-Current Investments | 40,000 | 1,00,000 |
| Land (at Cost) | 2,00,000 | 1,00,000 |
| Equity Share Capital | 20,00,000 | 30,00,000 |
| 10% Preference Share Capital | 2,00,000 | 1,00,000 |
| Securities Premium | ... | 1,00,000 |
| 10% Debentures | 10,00,000 | 10,00,000 |
Additional Information:
- Depreciation charged on Plant and Machinery was ₹ 50,000.
- Plant and Machinery of book value ₹ 60,000 was sold for ₹ 40,000.
- Land was sold at a gain of ₹ 60,000.
- Preference Shares were redeemed on 31st March, 2026 at a premium of 5%.
- Dividend on Equity Shares and Preference Shares for the year ended 31st March, 2025 was Nil and for the year ended 31st March, 2026, Proposed Dividend on Equity Shares was 10%.
- Fresh issue of Equity Shares was on 1st April, 2025.
Hint: Dividend on 10% Preference Shares will not be paid because Proposed Dividend on both Equity and Preference Shares in the year ended 31st March, 2025 was nil.
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Solution
| Cash Flow Statement | ||
|---|---|---|
| Particulars | Amount (₹) | Amount (₹) |
| (a) Cash Flow from Investing Activities | ||
| 1. Proceeds from Sale of Plant and Machinery | 40,000 | |
| 2. Proceeds from Sale of Land | 1,60,000 | |
| 3. Payment for Purchase of Plant and Machinery | (2,60,000) | |
| 4. Payment for Purchase of Non-Current Investments \[(1,00,000 - 40,000)\] | (60,000) | |
| Net Cash Used in Investing Activities | (1,20,000) | |
| (b) Cash Flow from Financing Activities | ||
| 1. Proceeds from Issue of Equity Shares (including Premium) | 11,00,000 | |
| 2. Redemption of 10% Preference Shares $(2,00,000 - 1,00,000)$ | (1,00,000) | |
| 3. Premium paid on Redemption of Preference Shares $(5\% \text{ of } ₹ 1,00,000)$ | (5,000) | |
| 4. Interest paid on 10% Debentures $(10\% \text{ of } ₹ 10,00,000)$ | (1,00,000) | |
| Net Cash Flow from Financing Activities | 8,95,000 | |
Working Notes & Ledger Accounts:
1. Plant and Machinery Account
| Debit (Particulars) | Amount (₹) | Credit (Particulars) | Amount (₹) |
|---|---|---|---|
| To Balance b/d (Opening) | 8,50,000 | By Depreciation A/c (Given) | 50,000 |
| To Bank A/c (Purchase - Balancing Figure) | 2,60,000 | By Bank A/c (Sale Proceeds) | 40,000 |
| By Statement of P&L (Loss on Sale) | 20,000 | ||
| By Balance c/d (Closing) | 10,00,000 | ||
| Total | 11,10,000 | Total | 11,10,000 |
Loss on Sale = Book Value (₹ 60,000) - Sale Value (₹ 40,000) = ₹ 20,000.
2. Calculation of Sale Proceeds of Land:
Cost of Land sold = Opening Balance $-$ Closing Balance
$$2,00,000 - 1,00,000 = \text{₹ } 1,00,000$$
Sale Proceeds = Cost + Gain = $1,00,000 + 60,000 = {₹ 1,60,000}$
3. Proceeds from Issue of Equity Shares:
Increase in Equity Share Capital = $30,00,000 - 20,00,000 = \text{₹ } 10,00,000$
Increase in Securities Premium = $1,00,000 - 0 = \text{₹ } 1,00,000$
Total Proceeds = Share Capital + Premium = ${₹ 11,00,000}$
