Question

From the following information, calculate Net Cash Flow from Operating Activities and Financing Activities:

Particulars	31st March 2019 (Rs.)	31st March 2019 (Rs.)
Equity Share Capital	13,75,000	11,25,000
5% Preference Share Capital	5,00,000	7,50,000
General Reserve	3,75,000	3,00,000
Surplus i.e., Balance in Statement of Profit and Loss	3,75,000	(3,50,000)
Securities Premium Reserve	25,000	...
Provision for Tax	1,00,000	50,000
Non-current Liabilities (8% Debentures)	6,50,000	3,75,000
Short-term Borrowings (8% Bank Loan)	1,00,000	1,25,000
Trade Payables	5,00,000	2,50,000
Trade Receivables and Inventories	13,00,000	11,50,000

Additional Information:

1. During the year additional debentures were issued at par on 1st October and Bank Loan was repaid on the same date.
2. Dividend on Equity Shares @ 8% was paid on Opening Balance.
3. Income tax ₹ 1,12,500 has been provided during the year.
4. Preference shares were redeemed at par at the end of the year.

Answer 1

Calculation of Net Cash Flow from Operating Activities for the year ended 31st March
Particulars	Amount (₹)	Amount (₹)
(A) Cash Fiow from Operating Activities:
Net Profit before Tax and Extra Ordinary items	10,40,000
Add: Non-operating or Non-cash Expenses:
Debenture Interest Provided (Rs. 3,75,000 × 8% + 2,75,000 × 8% × `6/12`  = Rs. 30,000 + Rs. 11,000)	41,000
Bank Interest Provided (Rs. 1,00,000 × 8% + Rs. 25,000 × 8% × `6/12`)	9,000
Net Profit Before Working Capital Changes	10,90,000
Add: Increase in Current Liabilities
Trade Payables	2,50,000
	13,40,000
Less. Increase in Current Assets
Trade Recenables and Inventories	1,50,000
Cash Generated from Operating Activities	11,90,000
Less: Income Tax Paid	62,500
Net Cash Flow from Operating Activities		11,27,500

 

Calculation of Net Cash Flow from Financing Activities for the year ended 31st March
Particulars	Amount (₹)	Amount (₹)
(B) Cash Flow from Financing Activities:
Equity Share Capital issued 5%	2,50,000
Preference Share Capital Redeemed	(2,50,000)
Preference Dividend paid (Rs. 7,50,000 × 5%)	(37,500)
Equity Dividend paid (Rs. 11,25,000 ×  5%)	(90,000)
Securities Premium collected on issue of Equity Shares/ Debentures	25,000
8% Debentures Issued	2,75,000
8% Bank Loan Repaid	(25,000)
Debenture Interest Provided (Rs. 3,75,000 × 8% + 2,75,000 × 8% × `6/12`  = Rs. 30,000 + Rs. 11,000)	(41,000)
Bank Interest Provided (Rs. 1,00,000 × 8% + Rs. 25,000 × 8% × `6/12`)	(9,000)
Net Cash Flow from Financing Activities		97,5000

Working Note:-

(i) Calculation of tax paid during the year:

Provision for Taxation A/c
Particulars	Amount (Rs.)	Particulars	Amount (Rs.)
To cash A/c (Tax paid) (b/f)	62,500	By Balance b/d	50,000
To Balance c/d	1,00,000	By Statement of Profit and Loss A/c (Tax provision made during the year or tax provided)	1,12,500
	1,62,500		1,62,500

(ii) Calculation of Net Profit before Tax and Extra Ordinary Items:

Particulars	Amount (₹)	Amount (₹)
Net Profit after Tax and Extra Ordinary items:
Closing Balance of Surplus, ie. Balance in Statement of Profit and Loss	3,75,000
Add - Opening Balance of Proft and loss	3,50,000
Net Profit before Tax and Extra Ordinary Items:	7,25,000
General Reserve (Rs. 3,75,000 - Rs. 3,00,000)	75,000
Provision for Taxation	1,12,000
Preference Dividend paid (Rs. 7,50,000 × 5%)	37,500
Equity Dividend paid (Rs. 11,25,000 × 8%)	90,000
Net Profit before Tax and Extra Ordinary items		10,40,000