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 COCEDUCATION.COM cash flow statement CA/CMA SANTOSH KUMAR

AS-3 (REVISED): CASH FLOW STATEMENT

Cash Flow Statement deals with the provision of information about the historical changes in cash and cash
equivalents of an enterprise by means of a cash flow statement which classifies cash flows during the
period from operating, investing and financing activities.
• Cash comprises cash on hand and demand deposits with banks
• Cash equivalents are short term, highly liquid investments that are readily convertible into known
amounts of cash and which are subject to an insignificant risk of changes in value.
• Cash flows are inflows and outflows of cash and cash equivalents.
• Operating activities are the principal revenue-producing activities of the enterprise and other
activities that are not investing or financing activities.
• Investing activities are the acquisition and disposal of long-term assets and other investments not
included in cash equivalents.
• Financing activities are activities that result in changes in the size and composition of the owners’
capital (including preference share capital in the case of a company) and borrowings of the
enterprise.

Methods of preparing Cash Flow Statement:

1. Direct Method: In this method major classes of gross cash receipts and gross cash payments are
disclosed.
2. Indirect Method: Under this method, the following adjustment to reported net profit or loss to be
made:
• Effects of transactions of non-cash nature.
• Deferrals in accruals of past or future operating receipt or payments.
• Changes in current assets and liabilities
• Income & expenses associated with investing and financing cash flows.
Question 1.From the following details relating to the Accounts of Grow More Ltd. prepare Cash Flow Statement:

31.3.2021 31.3.2020

Share Capital 10,00,000 8,00,000

General Reserve 2,00,000 1,50,000

Profit and Loss Account 1,00,000 60,000

Debentures 2,00,000

Provision for taxation 1,00,000 70,000

Dividend Payable 2,00,000 1,00,000

Sundry Creditors 7,00,000 8,20,000

25,00,000 20,00,000

Plant and Machinery 7,00,000 5,00,000

Land/Building 6,00,000 4,00,000

Investments 1,00,000

Sundry Debtors 5,00,000 7,00,000

Stock 4,00,000 2,00,000

Cash on hand/bank 2,00,000 2,00,000

25,00,000 20,00,000
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COCEDUCATION.COM cash flow statement CA/CMA SANTOSH KUMAR

Question 2. From the following details relating to accounts of Grow Ltd. prepare Cash Flow Statement:

31.3.2002 31.3.2001

Share Capital 10,00,000 8,00,000

General Reserve 2,00,000 1,50,000

Profit and Loss Account 1,00,000 60,000

Debentures 2,00,000

Provision for taxation 1,00,000 70,000

Dividend Payable 2,00,000 1,00,000

Sundry Creditors 7,00,000 8,20,000

25,00,000 20,00,000

Plant and Machinery 7,00,000 5,00,000

Land/Building 6,00,000 4,00,000

Investments 1,00,000 NIL

Sundry Debtors 50,0,000 7,00,000

Stock 4,00,000 2,00,000

Cash on hand/bank 2,00,000 2,00,000

25,00,000 20,00,000

(i) Depreciation @ 25% was charged on the opening value of Plant and Machinery.
(ii) During the year one old machine costing 50,000 (WDV 20,000) was sold for Rs. 35,000.
(iii) Rs. 50,000 was paid towards income tax during the year.
(iv) Building under construction was not subject to any depreciation.
Prepare cash flow statement. (CA Inter June 2001- 16 Marks)

Question 3. From the following particulars prepare a Cash Flow Statement:

Last year This Year

Assets Rs. Rs
Cash 4,000 3,600
Debtors 35,000 38,400
Stock 25,000 22,000
Land 20,000 30,000
Buildings 50,000 55,000
Machinery 80,000 86,000
2,14,000 2,35,000
Liabilities
Creditors 36,000 41,000
Mrs. Neena's Loan - 20,000
Bank Loan 30,000 25,000
Capital 1,48,000 1,49,000
2,14,000 2,35,000

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Additional information:
1) During the year, Mr. Suresh (the proprietor) had withdrawn Rs. 26,000 for personal use.
2) The provision for depreciation against machinery last year was Rs. 27,000 and this year Rs. 30,000.
3) During the year a part of machine costing Rs 30,000(book value Rs 22,000) was sold for Rs 7,000.

Question:4 Prepare Cash flow statement from the following comparative balance sheets

As on 31 March As on 31 March
Liabilities 2020 2021 Assets 2020 2021
Rs. Rs. Rs. Rs.
Share Capital 4,50,000 5,00,000 Fixed Assets 5,00,000 5,30,000
Loans unsecured 2,00,000 2,00,000
General reserve 25,000 75,000 Current assets 5,42,000 6,01 ,000
Creditors
3,67,000 3,56,000
10,42,000 11,31,000 10,42,000 11,31,000

Additional information: (i) During the year 2020-21, the company earned a profit of Rs. 2,00,000 after
charging depreciation of Rs. 75,000. The profit was appropriated as follows: Provision for taxation Rs.
1,00,000, Dividend paid Rs. 50,000 and balance to reserve Rs. 50,000.

(ii) Machinery worth Rs. 75,000 was sold at Rs. 60,000 and a new machinery for Rs. 1,80,000 was purchased.

QUESTION 5. Following are the summarized Balance Sheets of Shotgun Ltd. as on 31 March 2017 and 2018
Liabilities 2017 2018 Assets 2017 2018
Rs. Rs. Rs. Rs.
Share Capital 2,00,000 2,50,000 Land and Building 2,00,000 1,85,000
General Reserve 50,000 55,000 Machinery 1,50,000 1,70,000
Profit and loss A/c 30,500 30,600 Stock 1,00,000 77,000
Debentures 70,000 - Debtors 80,000 64,000
Sundry Creditors 1,50,000 1,40,000 Bank 500 8,000
Provision for Taxation 30,000 35,000 Goodwill - 6,600
5,30,500 5,10,600 5,30,500 5,10,600

1. Dividend of Rs. 25,000 was paid.

2. Assets of another company were purchased for a consideration of Rs. 50,000 payable in shares:
Stock Rs. 20,000, Machinery Rs. 25,000.
3. Depreciation written off machinery was Rs. 10,000.
4. Income tax provided during the year was Rs. 33,000.
5. Loss on sale of machine Rs. 1,000 was written off to General Reserve.
6. Machinery for Rs. 15,000 was purchased for cash.
Prepare Cash Flow Statement. (CA IPCC Group 1 - 16 marks)

Question 6. The summarized balance sheets of P. Ltd., as on 31 December 2017 and 2018 are as follows:
Assets 31-12-2017 31-12-2018
Fixed Assets: At cost 16,00,000 19,00,000
Less: Depreciation 4,60,000 5,80,000

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11,40,000 13,20,000
Trade Investments 2,00,000 1,60,000
Current Assets 5,60,000 6,60,000
Discount on debentures 40,000 20,000
19,40,000 21,60,000
Liabilities
Share Capital 6,00,000 8,00,000
Capital Reserves - 20,000
General Reserve 3,40,000 4,00,000
Profit and Loss Account 1,20,000 1,50,000
Debentures 4,00,000 2,80,000
Liabilities for goods and services 2,40,000 2,60,000
Provision for Income Tax 1,80,000 1,70,000
Dividend paid 60,000 72,000
Unpaid Dividend - 8,000
19,40,000 21,60,000

During 2018, the company:

(i) Sold one machine for Rs. 50,000; the cost of machine was Rs. 1,00,000 and the depreciation
provided for it amounted to Rs. 40,000;
(ii) Provided Rs. 1,80,000 as depreciation;
(iii) Redeemed 30% of debentures @ 105;
(iv) Sold some trade investments at profit of Rs. 20,000, credited to capital reserve;
(v) Decided to value the stock at cost, whereas previously the practice was to value stock at cost less 10%. The
stock according to books on 31.12.2017 was 1,08,000; the stock on 31.12.18 Rs.1,50,000 was correctly valued at cost;
(vi) Decided to write of fixed assets costing Rs. 28,000 on which depreciation amounting to 20,000 has been
provided. You are required to prepare the cash flow statement during 2018. (CA IPCC Group 1 - 16 marks)

Question 7. The balance sheets of AB Ltd. as on 31 December 2017 and 2018 are as under:
Liabilities 31.12.17 31.12.18 Assets 31.12.17 31.12.18
Equity share capital 1,50,000 2,50,000 Goodwill 60,000 47,000
8% Redeemable Land and Building 1,00,000 75,000
Preference Shares 1,50,000 1,00,000 Plant and Machinery 90,000 1,91,000
Reserves and Surplus: Trade Investments 10,000 35,000
General Reserve 20,000 30,000 Current Assets,
Capital Reserve - 25,000 Loans and Advances
Profit & Loss Account 18,000 27,000 Stock 85,000 78,000
Sundry Debtors 60,000 90,000
Bills Receivable 15,000 18,000
Sundry Creditors 26,000 53,000 Cash at Bank 10,000 22,000
Bills Payable 18,000 12,000 Cash in hand 7,000 6,000
Provision for taxation 28,000 32,000
Dividend payable 27,000 33,000
4,37,000 5,62,000 4,37,000 5,62,000
The following further particulars are given:

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(i) In 2018, Rs. 18,000 depreciation has been written off plant and machinery and no depreciation has been
charged on land and building.
(ii) A piece of land has been sold out and the balance has been revalued, profit on such Sale and revaluation
being transferred to Capital Reserve. There is no other entry in Capital Reserve Account.
(iii) A plant was sold for Rs. 12,000 (W.D.V. - Rs. 15,000)
(iv) Dividend received amounted to Rs. 2,100 which included pre-acquisition dividend of Rs. 600.
(v) An interim dividend of Rs. 10,000 has been paid in 2018. You are required to prepare Cash Flow Statement
(CA INTER Group 1 - 16 marks)
Question 8. Following are the balance sheets of X Co. Ltd. as on 31st March, 2017and 2018:

Liabilities 2017 2018 Assets 2017 2018

Pref. Share Capital ---- 2,00,000 Goodwill 20,000 30,000
Eq. Share Capital 4,20,000 5,20,000 Buildings 6,00,000 5,80,000
General Reserve 1,00,000 1,10,000 Machinery 3,00,000 3,38,000
Profit & Loss Account 61,000 71,200 Stock 2,00,000 1,48,000
14% Debentures 2,00,000 - Debtors 1,40,400 1,08,000
Creditors 4,40,000 2,68,000 Cash/ Bank 20,600 37,200
Unclaimed Dividend 2,000
Provision for tax 60,000 70,000
12,81,000 12,41,200 12,81,000 12,41,200

Information:
(i) Dividend paid in cash Rs. 50,000 during the year.
(ii) Assets acquired for Rs. 1,00,000 payable in equity shares: stock Rs. 50,000, Machine Rs. 40,000.
(iii) Machine purchased for cash Rs. 12,000.
(iv) ) machinery of the book value of Rs. 6,000 was sold for Rs. 6,500.
(v) Provision for tax during the year Rs. 66,000.
(vi) Debenture holders accept preference shares in settlement of their claims.
(vii) Depreciation on buildings Rs. 20,000. Prepare Cash flow statement.
(CA Inter- May 2007 - 16 marks)

Question 9. From the following summarized balance sheets of a company, as at 31 March 2017 and 31 March
2018 respectively prepare cash flow statement. All working should form part of your answer:
Liabilities 2017 2018 Assets 2017 2018
75,000 1,20,000 Fixed Assets at cost 2,40,070 2,53,730
Equity Share Capital
10% Redeemable Less : Depreciation 90,020 98,480
Preference Share Capital 1,00,000 80,000 1,50,050 1,55,250
Reserve for replacement Investments 61,000 76,000
of Machinery
Long term Loans 15,000 10,000 Stock 98,000 1,04,000
- 40,000 Trade Debtors 88,000 85,000
Bank Overdraft
Trade Creditors 22,000 - Bank 11,750 32,000
Dividend payable 84,450 75,550
on Equity Shares
12,000 24,000
Profit & Loss Account
1,00,350 1,02,700
4,08,800 4,52,250 4,08,800 4,52,250
Additional information:
(i) During the year, additional equity capital was issued to the extent of Rs. 25,000 by way of bonus shares
fully paid.
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COCEDUCATION.COM cash flow statement CA/CMA SANTOSH KUMAR

(ii) Final dividend on preference shares and an interim dividend of Rs. 4,000 on equity shares were paid on 31
March 2018.
(iii) Dividends payable on equity shares for the year ended 31 March 2017 were paid in October 2017.
(iv) Movement in reserve for replacement of machinery account represents transfer to Profit and Loss A/C.
(v) During the year, one item of plant was up valued by Rs.3,000 and credit for this taken to profit and loss a/c.
(vi) Rs. 1,700 being expenditure on fixed assets for the year ended 31 March 2017 wrongly debited to sundry
debtors then, was corrected in the next year.
(vii) Fixed assets costing Rs. 6,000 (accumulated depreciation Rs. 4,800) were sold for Rs. 250, loss arising there
from was written off.
(viii) Preference shares redeemed in the year (June 2017) were out of a fresh issue of equity shares. Premium
paid on redemption was 10%. (CA Inter- May 1997 16 marks)

Hint: Reduce opening debtors by 1,700 and increase the opening balance of fixed assets with the help of
following journal entry:
(Opening) Fixed Assets Account Dr. 1,700
To (Opening:) Debtors 1,700

Question 10. Condensed versions of the comparative balance sheets and income statement of Scindia
Ltd. are presented below:
Comparative Balance Sheets as on December 31, 1999 and 1998

Assets 1999 1998

Rs. Rs.
Cash 46,000 28,900
Debtors 41,000 45,000
Inventories 48,000 51,000
Prepaid expenses 4,100 3,700
Machinery 3,30,000 3,10,000
Accumulated depreciation-Machinery (1,31,000) (1,85,000)
Buildings 5,80,000 4,75,000
Accumulated depreciation-Buildings (2,25,000) (2,15,000)
Land 60,000 50,000
7,53,100 5,63,600
Liabilities and Capital
Creditors 32,500 37,000
Wages payable 4,500 7,500
Income tax payable 7,000 5,000
Mortgage note payable 2022 1,00,000 -
Equity share capital, Rs. 20 per share 4,00,000 3,50,000
Security premium 55,000 45,000
Profit and loss(surplus) account 1,54,100 1,19,100
7,53,100 5,63,600
Additional information:
(i) Dividends of Rs. 40,000 were declared during the year.
(ii) Machinery with an original cost of Rs. 80,000 and accumulated depreciation of Rs. 74,000 was sold during
the year for Rs. 6,000 cash. New machinery was also purchased for Rs. 1,00,000 cash.
(iii) Land and buildings were acquired during the year at a cost of Rs. 1,15,000. In addition to the down
payment of Rs. 15,000, a ten year 10% mortgage note for Rs. 1,00,000 was issued to the vendor.
Income Statement for the year ended December 31, 2017

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Sales 8,10,000
Cost of goods sold 4,60,000
Gross profit on sales 3,50,000
Operating expenses:
Depreciation expenses-machinery 20,000
Depreciation expenses-buildings 10,000
Other operating expenses 1,75,500 2,05,500
Income before income tax 1,44,500
Income tax provision 69,500
Net profit after tax 75,000
( CA final – 10 marks)

Question 11. You are given below the profit and loss account of Srivastava Ltd., for the year ended
December 31, 2021. The company is engaged in the manufacture of plastic cans.
Rs.
Sales 8,00,000
Operating expenses (excluding depreciation) (5,00,000)
Depreciation (1,00.000)
Net profit before tax 2,00,000
Extraordinary income-Gain on speculation 50,000
2,50,000
Provision for taxes @ 40% 1,00,000
Net profit after taxes 1,50,000

Additional information:
(1) Included in operating expenses is loss on sale of machinery Rs. 20,000.
(2) Actual taxes paid in respect of 2020 Rs. 90,000.
(3) The balances relating to current items taken from the balance sheets of 2020 and 2021 are given below:
31-12-2021 31-12-2020
Trade debtors 80,000 60,000
Inventory 65,000 70,000
Trade creditors 90,000 85,000
Required: Cash flow from operation
by direct and indirect methods.
(CMA Inter – 8 marks)

Question 12.Presented below are the balance sheets of Reckless Limited, as at 31.12.16 and 2017.
2021 2020

Assets
Cash and bank balances 4,00,000 6,00,000
Trade debtors 8,00,000 6,50,000
Inventory 14,00,000 15,50,000
Prepaid expenses 65,000 80,000
Land 15,00,000 18,00,000
Equipment 20,00,000 16,00,000
Accumulated depreciation-Equipment (3,00,000) (2,00,000)
Building 25,00,000 25,00,000
Accumulated depreciation-Buildings (6,00,000) (5,00,000)
77,65,000 80,80,000
Capital and Liabilities
Provision for taxation 1,25,000 1,00,000
Trade creditors 6,50,000 8,00,000
Debentures 20,50,000 22,00,000
Equity share capital 43,00,000 40,00,000
Retained earnings 6,40,000 9,80,000
77,65,000 80,80,000

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Additional information:
(1) Land was sold for cash at a profit of Rs. 50,000.
(2) Net profit for the year Rs. 1,60,000.
(3) Equipment costing Rs. 6,00,000 was purchased and paid by cash. In addition equipment costing
Rs. 2,00,000 with a book value of Rs. 40,000 was sold for Rs. 30,000 and cash was received.
(4) Debentures were redeemed at face value by issuing shares at par.
(5) Amount transferred to provision for taxation during the year Rs. 1,60,000.
You are required to prepare a statement of cash flow for Reckless Ltd. for the year ended December 31,2021.
( CA Inter – 10 marks)
Question 13. You are given below the balance sheet of Guruji Limited for the year ended December
31,2020.
Rs.
Assets
Plant and Machinery (net of depreciation) 6,00,000
Land 2,00,000
Investments 3,00,000
Trade debtors 2,60,000
Stock 2,00,000
Bank balance 2,40,000
18,00,000
Liabilities
Equity share capital 8,00,000
Retained earnings 2,40,000
Debentures 3,00,000
Long-term borrowings 2,60,000
Trade creditors 2,00,000
18,00,000
During 2021 the following transactions took place:

1. Further land was purchased for cash Rs. 1,50,000.

2. An amount of Rs. 60,000 was repaid towards long-term borrowings.
3. Dividends paid to shareholders Rs. 1,20,000.
4. Plant of Rs. 2,00,000 was purchased by issuing debentures at par Rs. 2,00,000.
5. Part of the investments was sold at Rs. 1,20,000 resulting in a profit of Rs. 20,000.
6. Net profit for the period was Rs. 3,50,000 after writing off depreciation amount of Rs. 90,000 on plant
and machinery.
7. Investment costing Rs 50,000 purchased during the year.
8. The following were the balances as at December 31,2021:

Trade debtors 3,30,000

Trade creditors 2,30,000
Stock 1,50,000
Bank balance 4,10,000

You are required to prepare the balance sheet as at December 31, 2021 and a statement of cash flow for the
year ended December 31, 2021. ( CA Inter – 12 marks modified)
Question 14. ABC Limited gives you its Balance Sheet as on 31st March, 2020 and its projected Profit and Loss
Account for the year ended 31st March, 2021.

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Balance Sheet as on 31st March, 2020

Liabilities Amount Assets Amount
Equity share capital 6,00,000 Machinery(at cost) 7,00,000
Security premium 20,000 Less: dep. 1,40,000 5,60,000
General reserve 1,30,000 Motor car at cost 80,000
Profit and loss account 65,000 Less: dep. 30,000 50,000
8% debentures 3,00,000 Stock 5,60,000
Sundry creditors 2,85,000 Book debts 2,20,000
Provision for tax 1,40,000 Bank 1,40,000
Dividend payable 90,000 Advance income tax 1,00,000

16,30,000 16,30,000
Projected Profit and Loss Account (For the year ended 31st March, 2021)

R s. Rs.
To Opening Stock 5,60,000 By Sales :
To Purchases 14,40,000 Cash 3,70,000
To Wages 80,000 Credit 18,00,000
To Manf. Exps. 40,000 By Stock 4,20,000
To Office & Administration By Profit on Sale of Machine 10,000
Expenses 50,000
To Selling & Distribution
Expenses 30,000
To Interest 24,000
To Depreciation :
Machinery 56,000
Car 14,000 70,000

To Provision for Taxation 1,36,000

To Dividend payable on
Equity 1,00,000
To Balance 70,000
26,00,000 26,00,000

The company proposes to issue one equity share for two equity shares with a nominal value of Rs. 3,00,000 at
a premium of 10%. Machinery will be acquired for Rs. 1,00,000. The cost of machinery to be sold in the year
ended 31st March, 2021 is Rs. 80,000 with a depreciation provision of Rs. 45,000.
It is expected that:
st
(i) Tax liability up to 31st March, 2020 will be settled for Rs. 1,20,000 within 31 March, 2021.
(ii) Advance Income Tax amounting to Rs. 1,30,000 is proposed to be paid in 2020-21.
(iii) Book debts will be 10% more than warranted by the credit period of two months.
(iv) Creditors for goods will continue to extend one and half months' credit and manufacturing expenses
outstanding at the end of March, 2021 will be Rs. 5,000.
You are required to :
(i) Draft the Company's projected Balance Sheet as on 31st March, 2021.
(ii) Draft the statement showing the cash flows during the year ended 31st March, 2021. ( CA Final-12 marks)
Modified

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Question 15. From the following Balance Sheet and Information prepare Cash Flow Statement of Ryan
Ltd. for the year ended 31st March, 2003:
Balance Sheet
31st March, 2003 31st March, 2002
Liabilities

Equity Share Capital 6,00,000 5,00,000

10 % Redeemable Preference Capital - 2,00,000
Capital Redemption Reserve 1,00,000 -
Capital Reserve 1,00,000 -
General Reserve 1,00,000 2,50,000
Profit and Loss Account 70,000 50,000
9% Debentures 2,00,000 -
Sundry Creditors 95,000 80,000
Bills Payable 20,000 30,000
Liabilities for Expenses 30,000 20,000
Provision for taxation 95,000 60,000
Dividend payable 90,000 60,000
15,00,000 12,50,000
Assets
Land and Building 1,50,000 2,00,000
Plant and Machinery 7,65,000 5,00,000
Investments 50,000 80,000
Inventory 95,000 90,000
Bills Receivable 65,000 70,000

Sundry Debtors 1,75,000

1,30,000
Cash and Bank 75,000 115,000
Voluntary Separation Payments 1,25,000 65,000

15,00,000 12.50,000

Additional Information:
(i) A piece of land has been sold out for Rs. 1,50,000 (Cost - Rs. 1,20,000) and the balance land was revalued.
Capital Reserve consisted of profit on sale and profit on revaluation.
(ii) On 1st April. 2002 a plant was sold for Rs. 90,000 (Original Cost - Rs. 70,000 and WDV - R.s. 50,000) and
Debentures worth Rs. 1 lakh was Issued at par as part consideration for plant of Rs. 4.5 lakhs acquired.
(iii) Part of investments (Cost - Rs. 50,000) was sold for Rs. 70,000.
(iv) Pre-acquisition dividend received Rs. 5,000 was adjusted against cost of investment.
(v) Directors have proposed 15% dividend for the current year,
(vi) Voluntary separation cost of Rs, 50,000 was adjusted against General Reserve.
(vii) Income-tax liability for the current year was estimated at Rs. 1.35,000.
(viii) Depreciation@ 15% has been written off from Plant account but no depreciation has been charged on
Land and Building. ( CA Inter – 16 marks)

Question 16. The Balance Sheet of New Light Ltd., for the year ended 31st March, 2001 and 2002 are as
follows:

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st
Liabilities 31st March 31st March Assets 31 March 31st March
2001 (Rs.) 2002 (Rs.) 2001 (Rs.) 2002 (Rs.)
Equity share capital 12,00,000 16,00,000 Fixed Assets 32,00,000 38,00,000

4,00,000 2,80,000 Less: Depreciation 9,20,000 11,60,000

10%Pref. share capital
22,80,000 26,40,000
Capital Reserve - 40,000 Investment 4,00,000 3,20,000
General Reserve 6,80,000 8,00,000 Cash 90,000 50,000
Profit and Loss A/c 2,40,000 3,00,000 Other current assets 11,10,000 13,10,000
9% Debentures 4,00,000 2,80,000
Current liabilities 4,80,000 5,20,000
Dividend Payable 1,20,000 1,44,000
Provision for Tax 3,60,000 3,40,000
Unpaid dividend - 16,000
38,80,000 43,20,000 38,80,000 43,20,000
Additional information;
(i) The company sold one fixed asset for Rs. 1,00,000. the cost of which was Rs. 2,00,000 and the depreciation
provided on it was Rs. 80,000.
(ii) The company also decided to write off another fixed asset costing Rs. 56,000 on which depreciation
amounting to Rs. 40,000 has been provided.
(iii) Depreciation on fixed assets provided Rs. 3,60,000.
(iv) Company sold some investment at a profit of Rs. 40,000 which was credited to capital reserve.
(v) Debentures and preference share capital redeemed at 5% premium.
(vi) Company decided to value stock at cost whereas previously the practice was to value stock at cost less
10%. The stock according to books on 31.3.2001 was Rs. 2,16,000. The stock on 31.3.2002 was correctly valued
at Rs. 3,00,000.
Prepare Cash Flow Statement as per revised Accounting Standard by indirect method.
Answer: Cash Flow Statement for the year ended 31st March, 2002
A. Cash flow from operating activities

Profit during the year 60,000

Adjustment for inventory (24,000)

Transfer to general reserve 1,20,000

Proposed dividend 1,44,000

Provision for tax 3,40,000

Net profit before taxation 6,40,000

Adjustment made for:

Depreciation 3,60,000

Loss on sale of fixed assets 20,000

Decrease in value of fixed assets 16,000

Premium on redemption of preference share capital 6,000

Premium on redemption of debentures 6,000

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Operating profit before change in working capital 11,28,000

Increase in current liabilities ( Rs. 5,20,000-4,80,000) 40,000

Increase in current assets (Rs. 13,10,000-(11,10,000+24,000) (1,76,000)

Cash generated from operations 9,92,000

Income tax paid (3,60,000)

Net cash from operating activities 6,32,000

B. Cash flow from investing activities

Purchase of fixed assets (8,56,000)

proceeds from sale of fixed assets 1,00,000

proceeds from sale of investments 1,20,000

net cash from investing activities -6,36,000

C. Cash flow from financial activities

Proceeds from issuance of share capital 4,00,000

Redemption of preference share capital (1,20,000+6,000) (1,26,000)

Redemption of debentures (Rs. 1,20,000+6,000) (1,26,000)

Dividend paid (1,04,000)

Net cash from financial activities 44,000

Net increase/decrease in cash and cash equivalent during the year Nil

Cash and cash equivalent at the end of the year is same as cash and cash
equivalent at the beginning of the year i.e. Rs. 10,000

Working notes:

1. Revaluation of stock increases the opening stock by Rs. 24,000

[ ]

Hence, opening balance of other current assets will e as follows:

Rs. 11, 10,000 + Rs. 24,000 = Rs. 11,34,000

Due to under valuation of stock, the opening of profit and loss account be increased by Rs. 24,000.

Opening balance of profit and loss account after revaluation of stock will be 2,40,000+24,000= 2,64,000.

2. Fixed Assets Account

Particulars Rs. Particulars Rs.
To balance b/d 32,00,000 By bank A/c (sale of assets) 1,00,000
To bank A/c (balancing figure will be By accumulated depreciation A/c 80,000
assets purchased) 8,56,0000 By profit and loss A/c (loss on sale of
assets) 20,000
By accumulated depreciation A/c 40,000
By profit and loss A/c ( assets written
off) 16,000

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By balance c/d 38,00,000

40,56,000 40,56,000
3. Inventory Account
Particulars Rs. Particulars Rs.
To balance b/d 4,00,000 By bank A/c (balancing figure being
To capital reserve A/c (profit on sale of investment sold) 1,20,000
investment ) 40,000 By balance c/d 3,20,000

4,40,000 4,40,000
4. Accumulated depreciation Account
Particulars Rs. Particulars Rs.
To fixed assets account 80,000 By balance b/d 9,20,000
To fixed assets account 40,000 By profit and loss A/c (depreciation for
To balance c/d 11,60,000 the period) 3,60,000
12,80,000 12,80,000
5. Unpaid dividend is taken as non-current item and dividend paid is shown at (Rs. 1,20,000-16,000) = Rs.
1,04,000

Question 17. Ms. Jyothi of star oils limited has collected the following information for the preparation of
cash flow statement for the year 2020.

( Rs. In lakhs)
Net profit 25,000
Dividend (including dividend tax ) paid 8,535
Provision for income tax 5,000
Income tax paid during the year 4,248
Loss on sale of assets (net) 40
Book value of the assets sold 185
Depreciation charged to profit & loss account 20,000
Amortization of capital grant 6
Profit on sale of investments 100
Carrying amount of investment sold 27,765
Interest income on investment s 2,506
Interest expenses 10,000
Interest paid during the year 10,520
Increase in working capital (excluding cash & bank balance) 56,075
Purchase of fixed assets 14,560
Investment in joint venture 3,850
Expenditure on construction work in progress 34,740
Proceeds from calls in arrear 2
Receipt of grant for capital projects 12
Proceeds from long –term barrowings 25,980
Proceeds from short –term barrowings 20,575
Opening cash and bank balance 5,003
Closing cash and bank balance 6,988
Prepare the cash flow statement for the year 2020 in accordance with AS-3 cash flow statement issued by the
institute of chartered accountants of India. (Make necessary assumptions). (CA Inter- May 2016 12 marks)

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Question 18. Following are the balance sheet of X Ltd. As on 31 December,2000 and 2001, and income statement
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for the period ending 31 December,2001, an equipment whose cost price was Rs. 15,000 was sold for Rs. 6,000
and it had an accumulated depreciation of Rs. 8,000.

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Balance sheet
2000 2001 2000 2001
Capital 2,50,000 4,60,000 Building and equipment 4,20,000 4,80,000
Retained earnings 2,31,000 2,11,000 Less: Depreciation. 1,05,000 1,20,000
Debentures 2,20,000 60,000 3,15,000 3,60,000
Provision for income tax 86,000 12,000 Land 60,000 60,000
Patents 55,000 65,000
Outstanding expenses 3,000 5,000 Cash 74,000 37,000
Accounts payable(creditor) 58,000 94,000 Inventories 3,12,000 2,77,000
Bills payable 28,000 8,000 Accounts receivables(debtors) 54,000 47,000
Pre-paid expenses 6,000 4,000

8,76,000 8,50,000 8,76,000 8,50,000

Income statement (for the year ended 31.12.2001)

Net sales 19, 70,000

Less: cost of goods sold 14, 80,000

Gross profits 4, 90,000

Less: operating expenses (includes Depreciation on

Buildings and equipment of Rs. 23,000 and patent

Amortization of Rs. 6,000 5, 00,000

Net loss from operation (10,000)

Less; other revenue 7,000

Net loss: (3,000)

Add: Retained earnings 2, 31,000

2, 28,000

Less: Dividend paid 16,000

Loss on sale of asset 1,000 17,000

Retained earnings (31.12.2001) 2, 11,000

Prepare a Cash flow statement. ( CMA Final – 12 marks)

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Question 19. Balance sheet of Pi Ltd. For the year ended 31 March 2001 and 2002 were summarized thus:

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Liabilities 31.3.2001 31.3.2002 Assets 31.3.2001 31.3.2002

Equity capital 5,00,000 9,00,000 Goodwill 10,000 14,000
Preference capital 2,00,000 1,00,000 Land and building 4,50,000 6,90,000
Capital reserve ……….. 24,000 Plant and machinery 1,70,000 1,60,000
General reserve 50,000 70,000 Car ……… 40,000
Profit and loss 20,000 30,000 Investment 40,000 20,000
Hire vendor ………. 28,000 Stock 60,000 1,00,000
10% debenture ………. 2,00,000 Debtors 75,000 1,45,000
Creditors 95,000 85,000 Cash 45,000 2,61,000
Provision for tax 30,000 45,000 Advances tax 35,000 50,000
Unclaimed dividend ……… 7,000 Bank 10,000 9,000
8,95,000 14,89,000 8,95,000 14,89,000
Adjustments:
i. A car of 50,000 was purchased on Hire Purchase and Rs. 25,000 was paid to Hire Vendor during
the year.
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ii. The debentures were issued @ 10% premium which was taken to Capital Reserve on 1 April,
2001.
iii. Accumulated Depreciation on Land and Building was 1,50,000 and 2,10,000 respectively.
iv. Accumulated Depreciation on Plant and Machinery was 1,30,000 and 1,40,000 respectively.
v. Investments were sold @ 40% premium, the profit of which was taken to Capital Reserve.
vi. Bonus Shares of 1 for every 5 held was issued in the beginning the year.
vii. Land and Building worth 1,50,000
Plant and Machinery worth 50,000
Debtors worth 70,000
Stock worth 20,000
Creditors worth 30,000
Were purchased by issue of shares of Rs. 2,50,000 shares @ 10% premium.
viii. Dividend paid during the year = Rs. 43,000.
ix. The preference shares were redeemed @ 25% premium.
x. Plant & Machinery costing Rs. 50,000 (WDV 22,000) was disposed off.
xi. Bad Debts written off RS. 5,000.
xii. Dividend received was Rs. 17,000 of which Rs. 7,000 was post acquisition. Prepare Cash Flow
Statement.( CA Inter – 12 marks modified)
Question 20.The balance sheet of A Ltd. For the years ended 31st March, 2001 and 2002 were summarized thus:

Liabilities 2001 2002 Assets 2001 2002

Share capital 5,00,000 7,50,000 Goodwill 10,000 9,000
Pref. capital 2,00,000 1,00,000 Land and building 4,00,000 4,80,000
Security premium ……….. 10,000 Plant 3,00,000 2,70,000
General reserve 70,000 1,00,000 Investments 1,00,000 70,000
Profit and Loss 45,000 50,000 Stocks 90,000 1,20,000
10% Debenture 2,00,000 ……… Debtors 1,00,000 86,000
Outstanding wages 5,000 10,000 Advance tax 50,000 40,000
Creditors 90,000 1,15,000 Prepaid Expenses 20,000 45,000
Provision for tax 60,000 80,000 Bank 85,000 1,10,000
Provision for Dep (P&M) 30,000 50,000 Cash 45,000 35,000
12,00,000 12,65,000 12,00,000 12,65,000

(1) Re. 1 lakh equity shares were issued at 10% premium.

(2) In the beginning of the year,one share was issued as bonus for every 10 shares held out of generalreserves.
(3) Preference shares of Rs. 1,00,000 was converted into equity shares.
(4) Tax for year ended 2001 was settled at Rs. 90,000 by Assessing officer.
(5) Depreciation rate on land and Building was 20% P.a.
(6) Plant and machinery costing Rs. 30,000 WDV Rs. 10,000 was disposed off during the year.
(7) Investments purchased during the year amounted to 40,000 and company also sold some of them at loss of 10%.
(8) An item in the stock of Rs. 20,000 was wrongly valued at Rs. 27,000 which was rectified during the year.
(9) Debentures have been redeemed in the middle of the year.
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(10)The net profit earned during the year is Rs. 1,20,000. Prepare cash flow statement for the year ended on 31st
March, 2002.

Question 21. ABC Ltd. gives you the following information. You are required to prepare Cash Flow Statement by
using indirect methods as per AS-3 for the year ended 31.03.2004:
Balance Sheet as on
Liabilities 31 March,03 31 March,04 Assets 31 March,03 31 March,04
Share Capital 50,00,000 50,00,000 Plant &
Retained Machinery 27,30,000 40,70,000
Earnings 26,50,000 36,90,000 Less: Depre-
Debentures — 9,00,000 Citation (6,10,000) (7,90,000)
21,20,000 32,80,000
Debtors 23,90,000 28,30,000
Less: Provision (1,50,000) (1,90,000)
22,40,000 26,40,000
Creditors 8,80,000 8,20,000 Cash 15,20,000 18,20,000
Bank Loan 1,50,000 3,00,000 Marketable.
Liability for Securities 11,80,000 15,00,000
Expenses 3,30,000 2,70,000 Inventories 20,10,000 19,20,000
Dividend - Prepaid Expenses 90,000 1,20,000
Payable
1,50,000 3,00,000
91,60,000 1,12,80,000 91,60,000 1,12,80,000
Additional Information:
(i) Net profit for the year ended 31st March, 2004, after charging depreciation Rs. 1,80,000 is Rs. 22,40,000.
(ii) Debtors of Rs. 2,30,000 were determined to be worthless and were written off against the provisions for
doubtful debts account during the year.
(iii)ABC Ltd. declared dividend of Rs. 12,00,000 for the year 2003-2004. (CA Final MAY 2004 – 16 Marks)

Question 22.The following figures have been extracted from the Books of X Limited for the year ided on 31.3.2004. You
are required to prepare a cash flow statement.

(i) Net profit before taking into account Income Tax and Income from law suits but after taking into Account the
following items was Rs. 20 lakhs:

(a) Depreciation on Fixed Assets Rs. 5 lakhs.

(b) Discount on issue of Debentures written off Rs. 30,000.
(c) Interest on Debentures paid Rs. 3,50,000.
(d) Books value of investments Rs. 3 lakhs (Sale of Investments for Rs. 3,20,000).
(e) Interest received on investments Rs. 60,000.
(f) Compensation received Rs. 90,000 by the company in a suit filed.
(ii) Income tax paid during the year Rs. 10,50,000.

(iii) 15,000,10% preference shares of Rs. 100 each were redeemed on 31.3.2004 at a premium of 5%. Further the company
issued 50,000 equity shares of Rs. 10 each at a premium of 20% on 2.4.2003. Dividend on preference shares were
paid at the time of redemption.

(iv) Dividends paid for the year 2002-2003 Rs. 5 lakhs and Interim dividend paid Rs. 3 lakhs for the year 2003-04.

(v) Land was purchased qp 2.4.2003 for Rs. 2,40,000 for which the company issued 20,000 equity shares of Rs. 10
each at a premium of 20% to the land owner as consideration.

(vi) Current assets and Current liabilities in the beginning and at the end of the years were as detailed below:

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As on As on
31.3.2003 31 .3.2004
Stock 12,00,000 13,18,000

Sundry Debtors 2,08,000 2,13,100

Cash in hand 1,96,300 35,300

Bills receivable 50,000 40,000

Bills payable 45,000 40,000

Sundry Creditors 1,66,000 1,71,300

Outstanding expenses 75,000 81,800 (CA Inter 2005 May (12 marks))
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Question 23. Raj Ltd. gives you the following information for the year ended 31 March, 2006:
(i) Sales for the year Rs. 48,00,000. The Company sold goods for cash only.
(ii) Cost of goods sold was 75% of sales.
(iii) Closing inventory was higher than Opening inventory by Rs. 50,000.
(iv) Trade creditors on 31.3.2006 exceed the outstanding on 31.3.2005 by Rs. 1,00,000.
(v) Tax paid during the year amounts to Rs. 1,50,000.
(vi) Amounts paid to Trade Creditors during the year Rs. 35,50,000.
(vii) Administrative and Selling Expenses paid Rs. 3,60,000.
(viii) One new machinery was acquired in December, 2005 for Rs. 6,00,000.
(ix) Dividend paid during the year Rs. 1,20,000.
(x) Cash in hand and at Bank on 31.3. 2006 Rs. 70,000.
(xi) Cash in hand and at Bank on 1.4.2005 Rs. 50,000.
Prepare Cash Flow Statement for the year ended 31.3.2006 as per AS-3. ( B.COM – 8 marks)

Question 24. The following are the summarized Balance Sheets of 'X' Ltd. as on March 31, 2005 and 2006 :

31.3.2005 31.3.2006
Equity share capital 10,00,000 12,50,000
Capital Reserve — 10,000
General Reserve 2,50,000 3,00,000
Profit and Loss A/c 1,50,000 1,80,000
Long-term loan from the Bank 5,00,000 4,00,000
Sundry Creditors 5,00,000 4,00,000
Provision for Taxation 50,000 60,000
Dividend payable 1,00,000 1,25,000
25,50,000 27,25,000
Assets 2005 2006
Land and Building 5,00,000 4,80,000
Machinery 7,50,000 9,20,000
Investment 1,00,000 50,000
Stock 3,00,000 2,80,000
Sundry Debtors 4,00,000 4,20,000
Cash in Hand 2,00,000 1,65,000
Cash at Bank 3,00,000 4,10,000

25,50,000 27,25,000

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Additional Information :
(i) Dividend of Rs. 1,00,000 was paid during the year ended March 31, 2006.
(ii) Machinery during the year purchased for Rs. 1,25,000.
(iii) Machinery of another company was purchased for a consideration of Rs. 1,00,000 payable in equity shares.
(iv) Income-tax provided during the year Rs. 55,000.
(v) Company sold some investment at a profit of Rs. 10,000. which was credited to Capital reserve.
(vi) There was no sale of machinery during the year.
(vii) Depreciation written off on Land and Building Rs. 20,000.
From the above particulars, prepare a cash flow statement for the year ended March, 2006 as per
AS-3 (Indirect method). CA- 2006- Nov (16 marks)

Question 25. Garden Ltd. acquired fixed assets viz. plant and machinery for Rs. 20 lakhs. During the same year it sold its
furniture and fixtures for Rs.5 lakhs. Can the company disclose, net cash outflow towards purchase of fixed assets in the
cash flow statement as per AS-3? CA-2007 -May (2 marks)

Answer: As per AS - 3 (Revised) 'Cash Flow statements', an organisation should report separately major classes of
gross cash receipts and gross cash payments arising from operating, investing and financing activities except to the
extent that cash flows described in A.S. are reported on a net basis. Acquisition and disposal of fixed assets is not
prescribed in the content of the said standard. So, the Garden Ltd. cannot disclose net cash flow in respect of
acquisition of plant and machinery and disposal of furniture and fixtures.
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Question 26. J Ltd. presents you the following information for the year ended 31 March, 2007:

(Rs. in Lacs)
(1) Net Profit before tax provision 36,000

(ii) Dividend paid 10,202

(iii) Income-tax paid 5,100
(iv) Book value of Assets sold 222
Loss on sale of Asset 48
(v) Depreciation debited in P & L account 24,000
(vi) Capital grant received-amortised in P & L A/c 10
(vii) Book value of investment sold 33,318
Profit on sale of investment 120
(viii) Interest income from investment credited in P & L A/c 3,000
(IX) Interest expenditure debited in P & L A/c 12,000
(x) Interest actually paid (Financing activity) 13,042
(xi) Increase in working Capital [Excluding cash and Bank Balance]. 67,290

(xii) Purchase of fixed assets 22,092

(xiii) Expenditure on construction work 41,688
(xiv) Grant received for Capital projects 18
(xv) Long-term borrowings from Banks 55,866
(xvi) Provision for Income-tax debited in P & L A/c 6,000
Cash and Bank Balance on 1.4.2006 6,000
Cash and Bank Balance on 31.3.2007 8,000
You are required to prepare a Cash flow statement as per AS-3 (Revised). CMA FINAL -2007 - Nov(10 marks)

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Question: 27 : From the flowing summarized cash account of S Ltd. Prepare cash flow statement for the year
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ended 31 March, 2021 in accordance with AS - 3 (Revised) using direct method. The company does not have
any cash requirement: Summarized Cash Account

Rs. 000 Rs. 000

Opening Balance 50 Payment to suppliers 2,000

Issue of share capital 300 Purchase of fixed assets 200

Received from customers 2,800 Overhead expenses 200

Sale of fixed assets 100 Wages and salaries 100

Tax paid 250

Dividend paid 50

Bank loan 300

Closing balance 150

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Question 28: The flowing particulars relate to Bee Ltd. for the year ended 31 March 2010;

(i) Furniture of book value of Rs. 15,500 was disposed of for Rs. 12,000.
(ii) Machinery costing Rs. 3,10,000 was purchased and Rs. 20,000 were spent on its erection.
(iii) Fully paid 8% preference shares of the face value of Rs. 10,00,000 were redeemed at a premium of
3%. In this connection 60,000 equity shares of Rs. 10 each were issued at a premium of Rs. 2 per
share. The entire money being received with application.
(iv) Dividend was paid as follows:
On 8% preference shares Rs. 40,000
On equity shares for the year 2009-10 1, 10,000
(v) Total sales were Rs. 32,00,000 out of which cash sales were 11,50,000.
(vi) Total purchases were Rs. 8,00,000 including cash purchase of Rs. 60,000
(vii) Total expenses were Rs. 12,40,000
(viii) Taxes paid including dividend tax of Rs. 22,500 were Rs. 3,30,000
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(ix) Cash and cash equivalents as on 31 March, 2010 were Rs. 1,25,000
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You are requested to prepare cash flow statement as per AS-3 for the year ended 31 March, 2010 after taking
into consideration the following also:
st st
On 31 March, 2009 on 31 March, 2010
Sundry debtors 1,50,000 1,47,000
Sundry creditors 78,000 83,000
Unpaid expenses 63,000 55,000 ( CA Inter – 16 marks)

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Answer: Cash flow Statement for the year ended 31 march, 2010

Particulars Rs. Rs.

1. Cash flows from operating activities

Cash receipts from customers (W. N 1)
Less: Cash paid to suppliers and payment for expenses (W. N. 3) 32,03,000
Cash generated from operations (20,43,000)
Income tax paid (3,30,000-22,500)
Net cash from operating activities 11,60,000

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3,07,500

8,52,500

2. Cash flow from investing activities

Sale of furniture
Purchase of machinery 12,000
Net cash used in investing activities 3,30,000

(3,18,000)

3. Cash flow from financial activities

proceeds from issue of equity shares
redemption of 8% preference shares 7,20,000
dividend paid (Rs. 40,000+1,10,000) (10,30,000)
dividend distribution tax paid
net cash used in financial activities (1,50,000)

net increase in cash and cash equivalents (22,500)

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add: cash and cash equivalents as on 31 March 2009 (bal. Figure) (4,82,500)

52,000

73,000
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Cash and cash equivalents as on 31 March, 2010 1,25,000

Working Note;
1. Cash Receipt from customers:
Credit sale = total sales Rs. 32, 00,000 – cash sales Rs. 11,50,000
= 20, 50,000 Total debtors Account

To balance b/d 1,50,000 By cash/Bank (Bal. Fig) 20,53,000

To credit sales 20,50,000 By balance c/d 1,47,000

22,00,000 22,00,000

Total sale receipts = Rs. 20,53,000+11,50,000+32,03,000

2. Credit purchases = total purchases Rs. 8,00,000 – cash purchases Rs. 60,000 = Rs. 7,40,000
Total Creditors Account

To cash/bank (bal. fig) 7,35,000 By balance b/d 78,000

To balance c/d 83,000 By credit purchases 7,40,000

8,18,000 8,18,000

Total payments to suppliers = Rs. 7,35,000+60,000= Rs. 7,95,000

3. Cash paid to suppliers and payment for expenses

Particulars Rs.

Outstanding expenses as on 31.3.2009 63,000

Add: expenses charged to profit and loss account 12,40,000

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13,03,000
Less: outstanding expenses as on 31.3.2010 55,000
Payment on account of expenses 12,48,000

Total of payment to suppliers and payment for expenses = Rs. 7, 95,000+ 12, 48,000= 20, 43,000

Question 29;The following are the summarized Balance Sheets of Lotus Ltd. as on 31st March, 2010 and 2011
31.3.10 31.3.11
Liabilities:
Equity share capital (Rs. 10 each) 10,00,000 12,50,000
Capital Reserve …………. 10,000
Profit and loss A/c 4,00,000 4,80,000
Long term loan from the bank 5,00,000 4,00,000
Sundry creditors 5,00,000 4,00,000
Provision for taxation 50,000 60,000
24,50,000 26,00,000

Assets:
Land and building 4,00,000 3,80,000
Machinery 7,50,000 9,20,000
Investment 1,00,000 50,000
Stock 3,00,000 2,80,000
Sundry debtors 4,00,000 4,20,000
Cash in hand 2,00,000 1,40,000
Cash at bank 3,00,000 4,10,000
24,50,000 26,00,000
Additional information:
1. Depreciation written off on land and building Rs. 20,000
2. The company sold some investment at a profit of Rs. 10,000 which was credited of capital Reserve.
3. Income tax provided during the year Rs. 55,000
4. During the year, the company purchased machinery for Rs. 2, 25,000. They paid Rs. 1, 25,000 in cash
and issue 10,000 equity shares of Rs. 10 each at par.
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You are requested to prepare a cash flow statement for the year ended 31 March 2011 as per AS -3, by using
indirect method.

Answer:
Cash flow from operating activities
Net profit before tax for the year (W. N 1) 1,35,000
Add: depreciation on machinery (w. N. 2) 55,000
Depreciation on land and building 20,000
Operating profit before change in working capital 2,10,000
Add: decrease in stock 20,000
Less: increase in sundry debtors (20,000)
Less: Decrease in sundry creditors (1,00,000)
Cash generated from operations 1,10,000
Less: income tax paid (W. N 3) (45,000)
Net cash generated from operating activities 65,000
Cash flow from investment activities
Purchased of machinery (2,25,000-1,00,000) (1,25,000)
Sale of investment (W. N 4) 60,000
Net cash used in investing activities (65,000)
Cash flow from financial activities
Issue of equity share (2,50,000-1,00,000) 1,50,000
Repayment of long term loan (1,00,000)

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Net cash generated from financial activities 50,000

Net increase cash and cash equivalents 50,000
Cash and cash equivalents at the beginning of the year
(2,00,000+3,00,000) 5,00,000
Cash and cash equivalents at the end of the year (1,40,000+4,10,000)
5,50,000
Working notes;

1. Calculation of net profit before tax.

Rs.
Increase in profit and loss (cr.) balance 80,000
Add; provision for taxation made during the year 55,000
1,35,000

2. Calculation of depreciation changed on machinery

Rs. Rs.
To balance b/d 7,50,000 By depreciation (bal. fig) 55,000
To bank 1,25,000 By balance c/d 9,20,000
To equity share capital 1,00,000
9,75,000 9,75,000
Calculation of tax paid
Rs. Rs.
To cash (bal. fg) 45,000 By balance b/d 50,000
To balance c/d 60,000 By profit and loss A/c 55,000
1,05,000 1,05,000

Calculation of sales value of investment sold investment A/c

Rs. Rs.
To balance b/d 1,00,000 By bank A/c (bal. Fig) 60,000
To capital reserve (profit on sale of By balance c/d 50,000
investments) 10,000
1,10,000 1,10,000
st
Question: 30 Balance sheet of M/S. Hero Ltd. as on 31 March, 2010 and 2011 are as follows;

Liabilities 31.3.10 31.3.11 Assets 31.3.10 31.3.11

Equity share capital 1,000 1,150 Land and buildings 500 480
Capital reserve ……. 10 Machinery 750 820
General reserve 250 300 Investments 100 50
Profit and loss A/c 150 180 Stock 300 280
Long term loan from bank 500 400 Sundry debtors 400 420
Sundry creditors 500 400 Cash in hand 200 165
Provision for taxation 50 60 Cash at bank 300 410
Dividends Payable 100 125
2,550 2,625 2,550 2,625
Additional information;
st
(i) Dividend of Rs. 1, 00,000 was paid during the year ended 31 March, 2011.
(ii) Machinery purchased during the year for Rs. 1, 25,000.
(iii) Company sold some investment at a profit of Rs. 10,000 which was created to capital reserve.
(iv) Depreciation written off on land and building Rs. 20,000.
(v) Income tax provided during the year Rs. 55,000.
st
Prepare cash flow statement for the year ended 31 March, 2011 as per AS-3 using the indirect method.

Question 31. Oriental Bank of Commerce, received a gross ₹4,500 crores demand deposits from
customers and customers withdrawn ₹4,000 crores of demand deposits during the financial year 2017-18.
How would you classify such cash flows? (ICMAI final Study material)
Solution: It will be treated as an Operating activity, on net basis ₹500 crores, inflow.
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COCEDUCATION.COM cash flow statement CA/CMA SANTOSH KUMAR

Question 32. Balance Sheet as at 31.12.2021

(Rs. ’000)

Assets 2021 2020

Cash on hand and balances with banks 200 25
Short-term investments(for less than 3 months) 670 135
Sundry debtors 1,700 1,200
Interest receivable 100 –
Inventories 900 1,950
Long-term investments 2,500 2,500
Fixed assets at cost 2,180 1,910
Accumulated depreciation (1,450) (1,060)
Fixed assets (net) 730 850
Total assets 6,800 6,660
Liabilities
Sundry creditors 150 1,890
Interest payable 230 100
Income taxes payable 400 1,000
Long-term debt 1,110 1,040
Total liabilities 1,890 4,030
Shareholders’ Funds
Share capital 1,500 1,250
Reserves 3,410 1,380
Total shareholders’ funds 4,910 2,630
Total liabilities and shareholders’ funds 6,800 6,660
Statement of Profit and Loss for the period ended 31.12.2021

(Rs. ’000)
Sales 30,650
Cost of sales (26,000)
Gross profit 4,650
Depreciation (450)
Administrative and selling expenses (910)
Interest expense (400)

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 COCEDUCATION.COM cash flow statement CA/CMA SANTOSH KUMAR

Interest income 300

Dividend income 200
Foreign exchange loss (40)
Net profit before taxation and extraordinary item 3,350
Extraordinary item – Insurance proceeds from
earthquake disaster settlement 180
Net profit after extraordinary item 3,530
Income-tax (300)
Net profit 3,230
ADJUSTMENTS:
a) An amount of 250 was raised from the issue of share capital and a further 250
was raised from long term borrowings.
b) Dividends paid were 1,200.
c) Tax deducted at source on dividends received (included in the tax expense of
300 for the year) amounted to 40.
d) Plant with original cost of 80 and accumulated depreciation of 60 was sold for
20. Prepare cash flow statement by both methods as per AS 3 (revised).

Question 33. (CASH FLOW STATEMENT FOR FINANCIAL ENTERPRISES) prepare cash flow
statement of financial enterprise, COC Financial services Ltd by direct method.

Profit and loss Account

Particulars Amount Particulars Amount
Interest on deposits 23,463 Interest and commission 28,447
Employees expense 997
Income tax paid 100 Recovery of loan previously 237
Dividend paid to shareholders 400 written off
Balance transferred to balance sheet 4274
Dividend received on permanent 250
investments

Interest received on permanent 300

investments

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 COCEDUCATION.COM cash flow statement CA/CMA SANTOSH KUMAR

BALANCE SHEET of COC Financial services Ltd

Capital and liabilities 2020 2021 Assets 2020 2021

Equity share capital 18,350 20,150 Short term funds 4,000 4,650

Deposits from customers 3,500 4,100 Deposits held for

regulatory 2,000 1,766
Certificate of deposits 1,000 800
Funds advance to
10% Debentures 1200 1000 customers 1,000 1,288

Other long term borrowings 1,500 500 Credit card

receivables 3,000 3,360
Profit and loss A/c ---- 4,274
Other short term
securities 900 1,020

Permanent
investment 8,000 7,400

Fixed assets 2,000 2,500

Cash and cash 4,650 8.840

equivalent
25,550 30,824 25,550 30,824

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