Question

Prepare a Cash-Flow Statement from the following Balance Sheets of Surya Vanaspati Ltd.:

Particulars	Note No.	31.3.2022 (₹)	31.3.2021 (₹)
I. EQUITY AND LIABILITIES:
(1) Shareholders’ Funds:
(a) Share Capital		2,50,000	2,00,000
(b) Reserves and Surplus		72,000	50,000
(2) Current Liabilities:
(a) Trade Payables		1,13,000	1,30,000
(b) Short-term Provisions	1	24,000	20,000
Total		4,59,000	4,00,000
II. ASSETS:
(1) Non-Current Assets:
(a) Property, Plant and Equipment and Intangible Assets
(i) Property, Plant and Equipment	2	2,52,000	1,50,000
(2) Current Assets:
(a) Inventory		41,000	93,000
(b) Trade Receivables	3	1,40,000	1,40,000
(c) Other Current Assets	4	6,000	5,000
(d) Cash & Bank Balances		20,000	12,000
Total		4,59,000	4,00,000

Notes:

Particulars	31-3-2022 (₹)	31-3-2021 (₹)
(1) Short-term Provision:
Provision for Taxation	24,000	20,000
(2) Property, Plant and Equipment:
Plant & Machinery	3,00,000	1,90,000
Accumulated Depreciation	(48,000)	(40,000)
	2,52,000	1,50,000
(3) Trade Receivables:
Sundry Debtors	1,25,000	1,00,000
Bills Receivable	15,000	40,000
	1,40,000	1,40,000
(4) Other Current Assets:
Prepaid Rent	-	2,000
Prepaid Insurance	6,000	3,000
	6,000	5,000

Additional Information: 

1. During the year, machinery whose original cost was ₹ 50,000 was sold for ₹ 32,000.
2. Company charged ₹ 20,000 as depreciation on Plant and Machinery.

Hints:

1. Balancing figure of Accumulated Depreciation A/c ₹ 12,000, being the depreciation on machinery sold, will be transferred to the Cr. side of Plant and Machinery A/c.
2. Loss on sale of Machinery ₹ 6,000; Purchase of Plant & Machinery ₹ 1,60,000.

Answer 1

Cash Flow Statement for the year ended 31st March, 2022.
Particulars	Amount (₹)	Amount (₹)
A. Cash Flow from Operating Activities:
Net Profit before Tax and Extraordinary Items (W.N. 1)		22,000
Adjustments for Non-Cash and Non-Operating Items:
Add:
Depreciation	20,000
Loss on sale of machinery	20,000	40,000
Operating Profit before Working Capital Changes		62,000
Adjustments for Changes in Working Capital:
Add:
Decrease in Inventory	52,000
Increase in Short-term Provisions	4,000	56,000
Less:
Increase in Other Current Assets	(1,000)
Decrease in Trade Payables	(17,000)	(18,000)
Cash Generated from Operations		1,00,000
Less: Corporate Tax estimated (@30%)		(14,000)
Net Cash from Operating Activities (A)		86,000
B. Cash Flow from Investing Activities:
Sale of Machinery	32,000
Less: Purchase of Machinery (W.N. 2)	(1,60,000)	(1,28,000)
Net Cash Used in Investing Activities (B)		(1,28,000)
C. Cash Flow from Financing Activities:
Issue of Equity Share Capital on 31.3.2022	2,50,000
Less: Issue of Equity Share Capital on 31.3.2021	(2,00,000)	50,000
Net Cash from Financing Activities (C)		50,000
Net Increase in Cash and Cash Equivalents (A + B − C)		8,000
Add: Cash and Cash Equivalents at the beginning of the year		12,000
Cash and Cash Equivalents at the end of the year		20,000

Working Note 1: Calculation of Net Profit Before Tax.

Particulars	Amount (₹)
Closing Balance of Reserves & Surplus	72,000
Less: Opening Balance of Reserves & Surplus	(50,000)
Net Profit for the Year	22,000

Working Note 2: Calculation of Fixed Assets Movement.

Particulars	Amount (₹)
Opening Balance of PPE	1,50,000
Less: Book Value of Machinery Sold (Derived)	(32,000)
Adjusted Opening Balance	1,18,000
Closing Balance of PPE	2,52,000
Purchase of Machinery (2,52,000 – 1,18,000)	1,34,000
Add: Accumulated Depreciation Reversed (Sold Machinery)	26,000
Total Cash Outflow on Purchase of Machinery	1,60,000

Working Note 3: Calculation of Depreciation.

Particulars	Amount (₹)
Opening Accumulated Depreciation	30,000
Closing Accumulated Depreciation	50,000
Add: Depreciation on Assets Sold (Balancing)	(20,000)
Depreciation for the Year	20,000