1

CASH FLOW STATEMENT

Solution 1
1) Operating Activities: b, c, f & i.
2) Investing Activities: a, g .
3) Financing Activities: d, e, h.

Solution 2
(a) Operating Activities: Items 1 and 5.
(b) Investing Activities: Items 3,7 and 9
(c) Financing Activities: Items 4,6,8 and 10
(d) Cash Equivalent: 2

Solution 3
(a) Operating Activities: Items (c) and (j)
(b) Investing Activities: Items (a),(d), (e) and (g)
(c) Financing Activities: Items (b),(f) and (h)
(d) Item (i): Not a Cash Equivalent:

Solution 4
X Ltd.
Cash Flow Statement for the year ended 31st March, 2022
(Using direct method)
₹’000 ₹’000
Cash flows from operating activities
Cash receipts from customers 2,800
Cash payments to suppliers (2,000)
Cash paid to employees (100)
Cash payments for overheads (200)
Cash generated from operations 500
Income tax paid (250)
Net cash generated from operating activities 250
Cash flows from investing activities
Payments for purchase of fixed assets (200)
Proceeds from sale of fixed assets 100
Net cash used in investing activities (100)
Cash flows from financing activities
Proceeds from issuance of equity shares 300
Bank loan repaid (300)
Dividend paid (50)
Net cash used in financing activities (50)
Net increase in cash 100
Cash at beginning of the period 50
Cash at end of the period 150

Solution 5
Cash Flow Statement for the year ended 31st March, 2022
₹ ₹
Cash flows from operating activities
Cash received on account of trade receivables 3,50,000
Cash paid on account of trade payables (90,000)
Cash paid to employees (salaries and wages) (25,000)
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 2
Other cash payments (overheads) (15,000)

Cash generated from operations 2,20,000

Income tax paid (55,000)
Net cash generated from operating activities 1,65,000
Cash flows from investing activities
Payments for purchase of fixed assets (4,00,000)
Proceeds from sale of fixed assets 70,000
Net cash used in investing activities (3,30,000)
Cash flows from financing activities
Proceeds from issuance of equity shares 5,00,000
Bank loan repaid (2,50,000)
Debentures redeemed (50,000)
Dividend paid (1,00,000)
Net cash used in financing activities 1,00,000
Net decrease in cash & cash equivalents (65,000)
Cash and cash equivalents at the beginning of the year 80,000
Cash and cash equivalents at the end of the year 15,000

Solution 6
Gama Limited
Cash Flow Statement for the Year Ended 31st March 2021
Particulars Amount Amount
(₹’000) (₹’000)
Cash flow from Operating Activities:
Cash receipts from customers 74,682
Cash payments to suppliers (54,918)
Cash payments for wages & salaries (1,863)
Cash payments of overheads (3,105)
Cash Generated from Operations 14,796
Payment of Taxation (6,561)
Net Cash from Operating Activities 8,235
Cash Flow from Investing Activities:
Proceeds from sale of investments 459
Proceeds from sale of Property, Plant and Equipment 3,456
Purchase of Investments (351)
Purchase of Property, Plant and Equipment (6,210)
Net Cash Used in Investing Activities (2,646)
Cash Flow from Financing Activities:
Proceeds from issue of shares 8,100
Payment of Dividend (2,160)
Repayment of Bank Overdraft (6,750)
Interest paid on Bank Overdraft (1,350)
Net Cash Used in Financing Activities (2,160)
Net Increase in Cash & Cash Equivalent 3,429
Cash and Cash Equivalent in the Beginning of the year 945
Cash and Cash Equivalent in the end of the year 4374

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 3
Solution 7
Tom & Jerry Ltd.
Cash Flow Statement for the year ended 31st March, 2022
₹’000 ₹’000
Cash flows from operating activities
Cash receipts from customers 16,596
Cash payments to suppliers (12,204)
Cash paid to employees (414)
Cash payments for Selling & Admin. Expenses (690)
Cash generated from operations 3,288
Income tax paid (1,458)
Net cash generated from operating activities 1,830
Cash flows from investing activities
Payments for purchase of fixed assets (1,380)
Proceeds from sale of fixed assets 768
Sale of Investments 102
Purchase of investments (78)
Net cash used in investing activities (588)
Cash flows from financing activities
Proceeds from issuance of equity shares 1,800
Bank loan repaid (1,500)
Interest paid on bank loan (300)
Dividend paid (480)
Net cash used in financing activities (480)
Net increase in cash and cash equivalents 762
Cash and cash equivalents at beginning of period 210
Cash and cash equivalents at end of period 972

Solution 8
Cash Flow Statement for the year ending on March 31, 2022
₹ ₹
I Cash flows from Operating Activities
Net profit made during the year (W.N.1) 2,60,000
Adjustment for depreciation on Machinery (W.N.2) 55,000
Adjustment for depreciation on Land & Building 20,000
Operating profit before change in Working Capital 3,35,000
Decrease in inventory 20,000
Increase in trade receivables (20,000)
Decrease in trade payables (1,00,000)
Income-tax paid (45,000)
Net cash from operating activities 1,90,000
II. Cash flows from Investing Activities
Purchase on Machinery (1,25,000)
Sale of Investments 60,000 (65,000)
III. Cash flows from Financing Activities
Issue of equity shares (2,50,000-1,00,000) 1,50,000
Repayment of Long Term Loan from Bank (5,00,000-4,00,000) (1,00,000)
Dividend paid (1,00,000) (50,000)
Net increase in cash and cash equivalent 75,000
Cash and cash equivalents at the beginning of the period 5,00,000
Cash and cash equivalents at the end of the period 5,75,000

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 4
Working Notes:
(i) Net Profit made during the year ended 31.3.2022
₹
Increase in P & L (Cr.) Balance 30,000
Add: Transfer to general reserve 50,000
Add: Provision for taxation made during the year 55,000
Add: Dividend payable during the year 1,25,000
2,60,000

(ii) Machinery Account

₹ ₹
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

(iii) Provision for Taxation Account

₹ ₹
To Cash (Bal. Fig.) 45,000 By Balance b/d 50,000
To Balance c/d 60,000 By P & L A/cd 55,000
1,05,000 1,05,000

(iv) Dividend Payable Account

₹ ₹
To Bank 1,00,000 By Balance b/d 1,00,000
To Balance c/d 1,25,000 By P & L A/c (Bal. Fig.) 1,25,000
2,25,000 2,25,000

(v) Investment Account

₹ ₹
To Balance b/d 1,00,000 By Bank A/c 60,000
To Capital Reserve A/c (Profit 10,000 (Bal. fig. for investment sold)
on sale of investment) By Balance c/d 50,000
1,10,000 1,10,000

Solution 9
Fox Ltd.
Cash Flow Statement for the year ended 31st March, 2021
Particular ₹ ₹
Cash flows from operating activities
Net Profit (35,000 less 25,000) 10,000
Add: Dividend 10,000
Provision for tax 8,000
Net profit before taxation and extraordinary items 28,000
Adjustments for:
Depreciation 40,000
Operating profit before working capital changes 68,000
Increase in trade receivables (75,000)
Increase in inventories (70,000)
Increase in other current assets (33,000)
Increase in trade payables 90,000 (88,000)
Cash used in operating activities (20,000)
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 5
Less: Tax paid* (5,000)
Net cash used in operating activities (25,000)
Cash flows from investing activities
Purchase of PPE (2,10,000)
Net cash used in investing activities (2,10,000)
Cash flows from financing activities
Issue of equity shares for cash 2,10,000
Issue of preference shares 50,000
Dividends paid (10,000)
Net cash generated from financing activities 2,50,000
Net increase in cash and cash equivalents 15,000
Cash and cash equivalents at beginning of period 90,000
Cash and cash equivalents at end of period 1,05,000
*Provision for tax of last year considered to be paid in the current year.

Working Note:
₹
Property, plant and equipment acquisitions
W.D.V. at 31.3.2021 3,50,000
Add back:
Depreciation for the year 40,000
3,90,000
Less: W.D.V. at 31.12.2020 1,80,000
Acquisitions during 2020-2021 2,10,000

Solution 10
Cash Flow Statement of Mr. Zen as per AS 3
for the year ended 31.3.2022

i. Cash flow from operating activities

Net Profit (given) 3,60,000
Adjustments for
Depreciation on Plant & Machinery 1,44,000
Loss on Sale of Machinery 16,000 1,60,000
Operating Profit before working capital changes 5,20,000
Decrease in inventories 80,000
Increase in trade receivables (1,60,000)
Increase in trade payables 32,000 (48,000)
Net cash generated from operating activities 4,72,000
ii. Cash flow from investing activities
Sale of Machinery 40,000
Purchase of Land (2,80,000)
Net cash used in investing activities (2,40,000)
iii. Cash flow from financing activities
Repayment of Mrs. Zen’s Loan (2,00,000)
Drawings (1,36,000)
Loan from Bank 80,000
Net cash used in financing activities (2,56,000)
Net decrease in cash (24,000)
Opening balance as on 1.4.2021 80,000
Cash balance as on 31.3.2022 56,000

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 6
Working Notes:
Plant & Machinery A/c
₹ ₹
To Balance b/d 8,40,000 By Cash Sales 40,000
(6,40,000 + 2,00,000) By Provision for Depreciation A/c 24,000
By Profit & Loss A/c – Loss on 16,000
Sale (80,000 – 64,000)
By Balance c/d 7,60,000
(4,40,000+3,20,000)
8,40,000 8,40,000

Provision for depreciation on Plant and Machinery A/c

₹ ₹
To Plant and Machinery A/c 24,000 By Balance b/d 2,00,000
To Balance c/d 3,20,000 By Profit & Loss A/c (Bal. fig.) 1,44,000
3,44,000 3,44,000

To find out Mr. Zen’s drawings:

₹
Opening Capital 10,00,000
Add: Net Profit 3,60,000
13,60,000
Less: Closing Capital (12,24,000)
Drawings 1,36,000

Solution 11
Cash Flow Statement for the year ended 31st March, 2022
Amount Amount
I Cash Flows from Operating Activities
Closing Balance as per Profit & Loss A/c 1,60,000
Less: Opening Balance as per Profit & Loss A/c (1,00,000)
60,000
Add: Transfer to General Reserve 20,000
Net Profit before taxation and extra-ordinary items 80,000
Add: Depreciation on Plant and Machinery 50,000
Less: Profit on sale of machinery (Refer W.N.) (3,000)
Operating Profit 1,27,000
Add: Decrease in Inventory 25,000
Add: Increase in trade payables 47,000 72,000
Less: Increase in trade receivables (10,000)
Less: Decrease in Outstanding expenses (2,000) (12,000)
Net Cash from Operating Activities 1,87,000
II Cash Flows from Investing Activities
Purchase of Land & Building (40,000)
Proceeds from Sale of Machinery (Refer W.N.) 8,000
Purchases of Plant & Machinery (Refer W.N.) (3,55,000)
Net Cash Used in Investing Activities (3,87,000)
III Cash Flows from Financing Activities
Proceeds from Issuance of Share Capital 2,00,000
Net Cash from Financing Activities 2,00,000
Net Increase/Decrease in Cash & Cash Equivalents 0
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 7
Add: Cash in hand at the beginning of the year 20,000
Cash in hand at the end of the year 20,000
Working Note:
Plant and Machinery Account
₹ ₹
To Balance b/d 5,00,000 By Bank 8,000*
To Profit & Loss A/c (Profit on sale) 3,000 By Depreciation 50,000
To Purchases (Bal. fig.) 3,55,000 By Balance c/d 8,00,000
8,58,000 8,58,000
*160% of (12,000-7,000) = 8,000

Solution 12
Cash Flow Statement of A (P) Ltd. for the year ended 31st March 2022
₹ ₹
I Cash flows from Operating Activities
Profit before tax 5,90,000
Adjustments for
Depreciation 2,20,000
Interest paid 1,40,000
Dividend received (50,000)
Operating profit before working capital changes 9,00,000
Add:
Decrease in trade receivables 70,000
Increase in trade payables 50,000
10,20,000
Less: Increase in inventory (20,000)
Cash generated from operations 10,00,000
Less: Tax paid (2,60,000)
Cash flow from operating activities 7,40,000
II Cash flows from investing activities
Purchase of fixed assets[20,00,000+2,20,000-17,00,000] (5,20,000)
Dividend on investments 50,000
Cash used in investing activities (4,70,000)
III Cash flows from financing activities
Long term loan taken 60,000
Interest paid (1,40,000)
Dividend paid (1,80,000)
Cash used in financing activities (2,60,000)
Net increase in cash during the year 10,000
Add: Opening cash balance 60,000
Closing cash balance 70,000

Solution 13
Harry Ltd.
Cash Flow Statement for the year ended 31st March, 2022
A. Cash flow from Operating Activities
Net profit for the year before taxation 8,000
Adjustment for
Depreciation (1,000+2,000+5,000) 8,000
Profit on sale of Investment (8,000)
Profit on sale of car (1,400)
Operating profit before working capital changes 6,600
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 8
Adjustment for working capital changes
Increase in trade receivables (2,000)
Increase in Inventory (6,000)
Increase in trade payables 3,000
Cash generated from operations 1,600
Income tax paid (2,000)
Net Cash generated from operating activities (a) (400)
B. Cash flow from Investing Activities
Sale of Car 3,400
Purchase of Car (16,000)
Sale of Investment 10,000
Purchase of Investment (6,000)
Purchase of Furniture & fixtures (14,000)
Net Cash used in investing activities (b) (22,600)
C. Cash flow from Financing Activities
Issue of shares for cash 20,000
Dividend paid (2,000)
Net cash inflow from financing activities (c) 18,000
Net increase in cash & cash equivalents during the year (a+b+c) (5,000)
Cash and cash equivalents at the beginning of the year 17,000
Cash and cash equivalents at the end of the year 12,000
Working Notes:
Provision for Taxation A/c
₹ ₹
To Cash (Bal. Fig.) 2,000 By Balance b/d 2,000
To Balance c/d 3,000 By P & L A/c 3,000
5,000 5,000
Calculation of Fixed assets acquisitions
Furniture & Fixtures Car
W.D.V. at 31.3.2022 34,000 25,000
Add back: Depreciation for the year 2,000 5,000
Disposals - 2,000
36,000 32,000
Less: W.D.V. at 31.3.2021 (22,000) (16,000)
Acquisitions during 2021-2022 14,000 16,000
Solution 14
Cash Flow Statement for the year ending on March 31, 2022
₹ ₹
I Cash flows from Operating Activities
Net profit before tax for the year (W.N.1) 67,500
Add: Depreciation on Machinery (W.N.2) 27,500
Add: Depreciation on Land & Building 10,000
Operating profit before change in Working Capital 1,05,000
Decrease in inventory 10,000
Increase in trade receivables (10,000)
Decrease in trade payables (50,000)
Income-tax paid (22,500)
Net cash from operating activities 32,500
II. Cash flows from Investing Activities
Purchase on Machinery (62,500)
Sale of Investments 30,000 (32,500)
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 9
III. Cash flows from Financing Activities
Issue of equity shares (1,25,000-50,000) 75,000
Repayment of Long Term Loan from Bank (50,000) (25,000)
Net increase in cash and cash equivalent 25,000
Cash and cash equivalents at the beginning of the period 2,50,000
Cash and cash equivalents at the end of the period 2,75,000

Working Notes:
(i) Net Profit made during the year ended 31.3.2022
₹
Increase in P & L (Cr.) Balance 40,000
Add: Provision for taxation made during the year 27,500
67,500

(ii) Machinery Account

₹ ₹
To Balance b/d 3,75,000 By Depreciation (Bal. Fig.) 27,500
To Bank 62,500 By Balance c/d 4,60,000
To Equity share capital 50,000
4,87,500 4,87,500

(iii) Provision for Taxation Account

₹ ₹
To Cash (Bal. Fig.) 22,500 By Balance b/d 25,000
To Balance c/d 30,000 By P & L A/c 27,500
52,500 52,500
(iv) Investment Account
₹ ₹
To Balance b/d 50,000 By Bank A/c 30,000
To Capital Reserve A/c (Profit 5,000 (Bal. fig. for investment sold)
on sale of investment) By Balance c/d 25,000
55,000 55,000

Solution 15
Cash Flow Statement as per AS 3
Cash flows from operating activities: ₹ in lacs
Net profit before tax provision 72,000
Add: Non cash expenditures:
Depreciation 48,000
Loss on sale of assets 96
Interest expenditure (non-operating activity) 24,000 72,096
1,44,096
Less: Non cash income
Amortisation of capital grant received (20)
Profit on sale of investments (non-operating income) (240)
Interest income from investments (non-operating income) (6,000) 6,260
Operating profit 1,37,836
Less: Increase in working capital (1,34,580)
Cash from operations 3,256

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 10
Less: Income tax paid (10,200)
Net cash generated from operating activities (6,944)
Cash flows from investing activities:
Sale of assets (444 – 96) 348
Sale of investments (66,636+240) 66,876
Interest income from investments 6,000
Grants for capital projects 36
Purchase of fixed assets (44,184)
Expenditure on construction work (83,376)
Net cash used in investing activities (54,300)
Cash flows from financing activities:
Long term borrowings 1,11,732
Interest paid (26,084)
Dividend paid (20,404)
Net cash from financing activities 65,244
Net increase in cash 4,000
Add: Cash and bank balance as on 1.4.2021 12,000
Cash and bank balance as on 31.3.2022 16,000

Solution 16
Manan Ltd.
Cash Flow Statement for the year ended 31st March, 2022
Amount Amount
Cash flow from Operating Activities
Net profit before income tax and extraordinary items: 30,00,000
Adjustments for:
Depreciation on Property, plant and equipment 7,50,000
Discount on issue of debentures 45,000
Interest on debentures paid 5,25,000
Interest on investments received (90,000)
Profit on sale of investments (30,000)
12,00,000
Operating profit before working capital changes 42,00,000
Adjustments for:
Increase in inventory (1,77,000)
Decrease in trade receivable 7,350
Increase in trade payables 450
Increase in outstanding expenses 10,200 (1,59,000)
Cash generated from operations 40,41,000
Income tax paid (15,75,000)
Cash flow from ordinary items 24,66,000
Cash flow from extraordinary items:
Compensation received in a suit filed 1,35,000
Net cash flow from operating activities 26,01,000
Cash flow from Investing Activities;
Sale proceeds of investments 4,80,000
Interest received on investments 90,000
Purchase of land (3,00,000 less 2,64,000) (36,000)
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 11
Net cash flow from investing activities 5,34,000
Cash flow from Financing Activities
Proceeds of issue of equity shares at 20% premium 6,00,000
Redemption of preference shares at 5% premium (23,62,500)
Preference dividend paid (2,25,000)
Interest on debentures paid (5,25,000)
Dividend paid (7,50,000 + 2,50,000) (10,00,000)
Net cash used in financing activities (35,12,500)
Net decrease in cash and cash equivalents during the year (3,77,500)
Add: Cash and cash equivalents as on 31.3.2021 3,94,450
Cash and cash equivalents as on 31.3.2022 16,950

Solution 17
S Ltd.
Cash Flow Statement for the year ended 31st March, 2022
Amount Amount
Cash flow from Operating Activities
Net profit before income tax and extraordinary items: 30,00,000
Adjustments for:
Depreciation on Property, plant and equipment 7,00,000
Discount on issue of debentures 45,000
Interest on debentures paid 4,35,000
Interest on investments received (70,000)
Profit on sale of investments (25,000)
Stock adjustment {14,76,000 less16,40,000(14,76,000/90X100)} 1,64,000 12,49,000
Operating profit before working capital changes 42,49,000
Adjustments for:
Increase in inventory (2,90,000)
{16,40,000(14,76,000/90X100) less 13,50,000}
Decrease in trade receivable 13,800
Increase in trade payables 2,600
Increase in outstanding expenses 4,400 (2,69,200)
Cash generated from operations 39,79,800
Income tax paid (12,80,000)
Net cash flow from operating activities 26,99,800
Cash flow from Investing Activities;
Sale proceeds of investments 3,75,000
Interest received on investments 70,000
Purchase of Fixed Assets (7,00,000 less 6,00,000) (1,00,000)
Net cash flow from investing activities 3,45,000
Cash flow from Financing Activities
Proceeds of issue of equity shares 7,20,000
Redemption of preference shares (21,00,000)
Dividend paid (11,00,000)
Interest on debentures paid (4,35,000)
Net cash used in financing activities (29,15,000)
Net increase in cash and cash equivalents during the year 1,29,800
Add: Cash and cash equivalents as on 31.3.2021 2,40,700
Cash and cash equivalents as on 31.3.2022 3,70,500
*Net profit given in the question is after considering only the items listed as information point (1) of the
question; hence amount of loss on plant not added back

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 12
Solution 18
Cash flow statement for the year ended 31st March, 2022
₹ (in crore) ₹ (in crore)
Cash flow from operating activities
Cash sales 131
Cash collected from credit customers 67
Less: Cash paid to suppliers for goods & services and to employees (159)
Cash from operations 39
Less: Income tax paid (13)
Net cash generated from operating activities 26.00
Cash flow from investing activities
Payment for purchase of Machine (40.00)
Proceeds from sale of Machine 20.70
Net cash used in investing activities (19.30)
Cash flow from financing activities
Redemption of Preference shares (16.00)
Proceeds from issue of Equity shares 20.00
Debenture interest paid (1.00)
Dividend Paid (11.70)
Net cash used in financing activities (8.70)
Net decrease in cash and cash equivalent (2.00)
Add: Cash and cash equivalents as on 1.04.2021 9.00
Cash and cash equivalents as on 31.3.2022 7.00

Solution 19
Cash flow statement (using Direct Method) for the year ended 31st March, 2022
₹ (in crore) ₹ (in crore)
Cash flow from operating activities
Cash sales 262
Cash collected from credit customers 134
Less:Cash paid to suppliers for goods & services & to employees (W.N.) (251)
Cash from operations 145
Less: Income tax paid (26)
Net cash generated from operating activities 119
Cash flow from investing activities
Payment for purchase of Machine (25-15) (10)
Proceeds from sale of Investments 16
Net cash generated from investing activities 6
Cash flow from financing activities
Redemption of Preference shares (32)
Proceeds from issue of Equity shares 24
Debenture interest paid (2)
Dividend Paid (15)
Net cash used in financing activities (25)
Net increase in cash and cash equivalent 100
Add: Cash and cash equivalents as on 1.04.2021 2
Cash and cash equivalents as on 31.3.2022 102

Working Note: Calculation of cash paid to suppliers of goods and services and to employees
(₹ in crores)
Opening Balance in creditors Account 84
Add: Purchases (220x .8) 176
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 13
260
Less: Closing balance in Creditors Account (92)
Cash paid to suppliers of goods 168
Add: Cash purchases (220x .2) 44
Total cash paid for purchases to suppliers (a) 212
Add: Cash paid to suppliers of other consumables and services (b) 19
Add: Payment to employees (c) 20
Total cash paid to suppliers of goods & services and to employees [(a)+ (b) + (c)] 251

Solution 20
M/s MNT Ltd.
Cash Flow Statement for the year ended 31st March, 2022
Particulars
Cash flows from Operating Activities
Cash sales (3,82,500/.30) 12,75,000
Less: Cash payments for trade payables (4,60,000)
Wages Paid (4,92,500)
Office and selling expenses (75,000) (10,27,500)
Cash generated from operations before taxes 2,47,500
Income tax paid (65,000)
Net cash generated from operating activities (A) 1,82,500
Cash flows from investing activities
Sale of investments 7,20,000
Payments for purchase of Plant & machinery (2,50,000)
Net cash used in investing activities (B) 4,70,000
Cash flows from financing activities
Bank loan repayment(including interest) (2,15,000)
Dividend paid (30,000)
Net cash used in financing activities (C) (2,45,000)
Net increase in cash (A+B+C) 4,07,500
Cash and cash equivalents at beginning of the period 2,00,000
Cash and cash equivalents at end of the period 6,07,500
Note: In the above answer, Cash Flow Statements has been prepared by Direct Method

Solution 21
M/s PQR Ltd.
Cash Flow Statement for the year ended 31st March, 2022
(Using Direct Method)
Particulars
Cash flows from Operating Activities
Cash sales (3,75,000/25%) 15,00,000
Less: Cash payments for trade payables (6,10,000)
Wages Paid (5,55,000)
Office and selling expenses (35,000+15,000) (50,000) (12,15,000)
Cash generated from operations before taxes 2,85,000
Income tax paid (55,000)
Net cash generated from operating activities (A) 2,30,000
Cash flows from investing activities
Sale of investments (8,20,000+20,000) 8,40,000
Payments for purchase of Plant & machinery (3,50,000)
Net cash generated from investing activities (B) 4,90,000

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 14
Cash flows from financing activities
Bank loan repayment(including interest) (2,05,000)
Dividend paid (40,000)
Net cash used in financing activities (C) (2,45,000)
Net increase in cash (A+B+C) 4,75,000
Cash and cash equivalents at beginning of the period 2,25,000
Cash and cash equivalents at end of the period 7,00,000

Cash Flow from Operating Activities

(Using Indirect Method)
Particulars
Net Profit for the year before tax and extraordinary items 2,80,000
Add: Non-Cash and Non-Operating Expenses:
Depreciation 60,000
Interest Paid 5,000
Less: Non-Cash and Non-Operating Incomes:
Profit on Sale of Investments (20,000)
Net Profit after Adjustment for Non-Cash Items 3,25,000
Less: Decrease in trade payables 15,000
Increase in inventory 25,000 (40,000)
Cash generated from operations before taxes 2,85,000

Working Note:
Calculation of net profit earned during the year
Particulars
Gross profit 3,75,000
Less: Office expenses, selling expenses 50,000
Depreciation 60,000
Interest paid 5,000 (1,15,000)
2,60,000
Add: Profit on sale of investments 20,000
Net profit before tax 2,80,000

Solution 22
Loans and Advances given to the following and
interest earned on them:
a) to suppliers Operating Cash flow
b) to employees Operating Cash flow
c) to its subsidiaries companies Investing Cash flow
Investment made in subsidiary Smart Ltd. and
Investing Cash flow
dividend received
Dividend paid for the year Financing Cash Outflow
TDS on interest income earned on investments made Investing Cash Outflow
TDS on interest earned on advance given to
Operating Cash Outflow
suppliers
Insurance claim received against loss of fixed asset Extraordinary item to be shown under separate
by fire heading as ‘Cash inflow from Investing activities’.

Solution 23
Interest paid by financial enterprise Cash flows from operating activities
Dividend paid Cash flows from financing activities
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 15
TDS on interest received from subsidiary co. Cash flows from investing activities
Deposit with Bank for a term of two years Cash flows from investing activities
Insurance claim received towards loss of Extraordinary item to be shown as a separate heading
machinery by fire under ‘Cash flow from investing activities’
Purchase of business falls under Investing Activities as per AS 3 “Cash Flow Statement”. The aggregate
cash flows arising from acquisitions and from disposals of other business units should be presented
separately and classified as investing activities. Thus netting of aggregate cash flows from disposal and
acquisition of business units is not possible

Solution 24
As per AS 3 on ‘Cash flow Statement’, cash & cash equivalents consists of cash in hand, balance with
banks & short-term, highly liquid investments. If investment, of ₹ 10 lacs, made in debentures is for
short-term period then it is an item of ‘cash equivalents’. However, if investment of ₹ 10 lacs made in
debentures is for long-term period then as per AS 3, it should be shown as cash flow from investing
activities.

Solution 25
Cash Flow Statement from Investing Activities of
Subham Creative Limited for the year ended 31-03-2022
Cash generated from investing activities
Interest on loan received 70,000
Pre-acquisition dividend received on investment made 52,600
Unsecured loans given to subsidiaries (5,00,000)
Interest received on investments (gross value) 82,000
TDS deducted on interest (8,200)
Sale of Plant & Machinery (90,000 – 9,600) 80,400
Cash used in investing activities (before extra-ordinary item) (2,23,200)
Extraordinary claim received for loss of machinery 55,000
Net cash used in investing activities (after extra-ordinary item) (1,68,200)
Note:
a. Debenture interest paid and Term Loan repaid are financing activities and therefore not considered for
preparing cash flow from investing activities.
b. Machinery acquired by issue of shares does not amount to cash outflow, hence also not considered in
the above cash flow statement.
c. The investments made in debentures are for short-term, it will be treated as ‘cash equivalent’ and will
not be considered as outflow in cash flow statement.

Solution 26
Cash Flow Statement for the year ending on March 31, 2022
₹ ₹
I Cash flows from Operating Activities
Net profit made during the year (before tax) (W.N.1) 98,000
Add: Depreciation on Machinery 18,000
Add: Loss on sale of Plant 3,000
Add: Goodwill written off 13,000
Less: Dividend Income (1,500)
Operating profit before change in Working Capital 1,30,500
Decrease in inventory 7,000
Increase in trade receivables (33,000)
Increase in trade payables 21,000
Income-tax paid (28,000)
Net cash from operating activities 97,500
II. Cash flows from Investing Activities
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 16
Purchase of Plant (1,34,000)
Sale of Land 50,000
Sale of Plant 12,000
Purchase of Investments (25,600)
Dividend Received 2,100 (95,500)
III. Cash flows from Financing Activities
Proceeds from Issuance of equity shares 1,00,000
Redemption of Preference Shares (50,000)
Interim Dividend paid (10,000)
Final Dividend paid (27,000) 13,000
Net increase in cash and cash equivalent 15,000
Cash and cash equivalents at the beginning of the period 17,000
Cash and cash equivalents at the end of the period 32,000
Working Notes:
(i) Net Profit made during the year ended 31.3.2022
₹
Increase in P & L (Cr.) Balance (27,000-18,000) 9,000
Add: Transfer to general reserve 10,000
Add: Dividend declared during the year 37,000
Add: Interim Dividend paid during the year 10,000
Add: Provision for taxation made during the year 32,000
98,000

(ii) Land & Building Account

₹ ₹
To Balance b/d 1,00,000 By Bank (Sale) 50,000
To Capital Reserve 25,000 By Balance c/d 75,000
(Profit on Revaluation)
1,25,000 1,25,000

(iii) Plant & Machinery Account

₹ ₹
To Balance b/d 90,000 By Depreciation 18,000
To Bank A/c (Purchase) 1,34,000 By Bank (sale) 12,000
By P&L A/c (Loss on sale) 3,000
By Balance c/d 1,91,000
2,24,000 2,24,000

(iv) Investments Account

₹ ₹
To Balance b/d 10,000 By Bank A/c (Dividend received) 600
To Bank A/c (Purchase) 25,600 By Balance c/d 35,000
35,600 35,600

Solution 27
Cash flow statement consists of:(a) Cash in hand and deposits repayable on demand with any bank or
other financial institutions and (b) Cash equivalents, which are short term, highly liquid investments that
are readily convertible into known amounts of cash & are subject to insignificant risk or change in value.
Cash flows are inflows (i.e. receipts) and outflows (i.e. payments) of cash and cash equivalents. Any
transaction, which does not result in cash flow, should not be reported in the cash flow statement.
Movements within cash or cash equivalents are not cash flows because they do not change cash as
defined by AS 3 “Cash Flow Statements” which is sum of cash, bank and cash equivalents.

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 17
In the given case, due to increase in rate of foreign exchange by 75 paise, there is increase
(change) in bank balance. This increase of ₹ 18,750 (25,000 x 0.75) is not a cash flow because neither
there is any cash inflow nor there is any cash outflow. Therefore, this change in bank balance amounting
₹ 18,750 need not be disclosed in Cash Flow Statement of Ruby exports.
The net increase/decrease in Cash/Cash equivalents in the Cash Flow Statements are stated
exclusive of exchange gains and losses. The resultant difference between Cash and Cash Equivalents as
per the Cash flow statement and that recognized in the balance sheet is reconciled in the note on cash
flow statements.

Solution 28
The related items given in the question will appear in the Cash Flow Statement of ABC Limited for the
year ended 31st March, 2021 as follows:
₹ ₹
Cash flows from operating activities
Closing Balance as per Profit and Loss Account 28,00,000
Less: Opening Balance as per Profit and Loss Account (20,00,000)
8,00,000
Less: Dividend received (50,000) 7,50,000
Cash flows from investing activities
Dividend received 50,000
Cash flows from financing activities
Proceeds from issuance of share capital
Equity shares issued for cash 10,00,000
Proceeds from securities premium (₹ 5,50,000 – 5,00,000) 50,000 10,50,000
Less: Redemption of Preference shares (₹ 7,00,000 – ₹ 6,00,000) (1,00,000) 9,50,000
Note:
a) Machinery acquired by issue of shares does not amount to cash outflow, hence also not considered in
the cash flow statement.
b) ABC Ltd. has been considered as a non-financial company in the given answer.

Solution 29
Alpha Ltd.
Cash Flow Statement (from Operating Activities)
for the year ended 31st March, 2022
₹ ₹
Cash flow from Operating Activities
Net profit before income tax and extraordinary items: 40,00,000
Adjustments for:
Depreciation on Property, plant and equipment 10,00,000
Discount on issue of debentures 60,000
Interest on debentures paid 7,00,000
Interest on investments received (1,20,000)
Profit on sale of investments (40,000) 16,00,000
Operating profit before working capital changes 56,00,000
Adjustments for:
Increase in inventory (2,36,000)
Increase in Sundry Debtors (10,200)
Decrease in Bills receivables 20,000
Increase in Sundry Creditors 10,600
Increase in Bills payables (10,000)
Increase in outstanding expenses 13,600 (2,12,000)
Cash generated from operations 53,88,000
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 18
Income tax paid (21,00,000)
Cash flow from ordinary items 32,88,000
Cash flow from extraordinary items:
Compensation received in a suit filed 1,80,000
Net cash flow from operating activities 34,68,000

Solution 30
No. Particulars Activities
(i) Dividend paid for the year Financing
(ii) TDS on interest income earned on investments made Investing
(iii) Loans and advances given to suppliers and interest earned from them Operating
(iv) Deposit with bank for a term of two years Investing
(v) Highly liquid Marketable Securities (without risk of change in value) Cash Equivalent
(vi) Investments made and dividends earned on them Investing
(vii) Insurance claims received against loss of stock or loss of profits Operating
(viii) Loans and advances given to subsidiaries and interest earned from Investing
them
(ix) Issue of Bonus Shares No Cash Inflow
/Cash outflow
(x) Term Loan repaid Financing

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