CA INTER ADV.

ACCOUNTS CASH FLOW STATEMENTS

Master Problem on Cash Flow Statement (Prepare by CA. Jai Chawla)

Covering Maximum Adjustments in Single Questions

Mr. Shubham provides us his Balance sheet as on 31/03/20X2 along with additional information:

(₹ in Cr.)
EQUITY AND LIABILITIES Opening Balances Closing Balances
Equity Share Capital 50,00,000 69,00,000
8% pref. Sh. Capital 15,00,000 10,00,000
P&L Account 23,00,000 30,00,000
General Reserve 7,00,000 9,00,000
CRR - 3,00,000
9% Bank Loan 70,00,000 76,00,000
Loan From Nidhi (Interest free) 9,00,000 -
Creditors 32,00,000 37,00,000
Bills Payable 5,00,000 6,00,000
Tax provision 17,00,000 21,50,000
O/s expenses 2,50,000 1,20,000
Dividend payable 5,50,000 70,000
2,36,00,000 2,69,70,000

ASSETS
Residential property - 1,00,00,000
P&M (Gross Value) 12,00,000 15,00,000
(-) Provision For Dep (3,50,000) (4,75,000)
Investments 50,00,000 10,00,000
Loan to Mr. Jai 5,00,000 3,00,000
Goodwill 30,00,000 15,00,000
Trade Receivable 60,00,000 35,00,000
Inventory 40,00,000 50,00,000
Advance Tax 16,00,000 24,00,000
Prepaid Expenses 7,00,000 8,00,000

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CA INTER ADV. ACCOUNTS CASH FLOW STATEMENTS
Advertisement Exp (Deferred) 13,00,000 10,00,000
Cash & Cash Equivalent 6,50,000 4,45,000
2,36,00,000 2,69,70,000
Additional Information:-

1) Grant received for Business purpose Rs.7,50,000 & Charged to P&L.

2) Dividend received ₹ 6,00,000 out of which 1,50,000 is Pre-Acquisition.
3) Preferece Shares were redeemed at 10% premium & Premium is w/f in P&L.
4) Tax paid during the year 30,00,000.
5) Interim Dividend paid 4,00,000.
6) P&M of Org. Cost of 4,00,000 with Accumulated Depreciation of 2,50,000 was 37,500 sold at
25% Profit.
7) New P&M purchased, 60% payment in Cash & remaining in the form of Issue of ESC.
8) Depreciation on P&M is 3,75,000.
9) Opening Inventory is measured at Cost less 50%. Closing Inventory is measured at cost + 25%
10) Advertisement Expenditure of 5,00,000 W/off directly from GR.
11) Bad-debts during the year charged to Profit and Loss A/c 3,00,000.
12) Exchange Loss due to Remeasurement of creditors as per AS 11 - 1,00,000 transfer to P&L.
13) Other Incomes includes Income from Instagram & YouTube 2,50,000 (considered as
Extraordinary)
14) Investments were sold at 5% Profit.
15) Other incomes includes total Interest Earned 2,00,000 on which TDS is deducted. TDS 20,000 is
a part of Closing Prepaid Expense in Balance Sheet.
16) Loss due to theft = 15,000 cash (Extraordinary)
17) Tax Refund = 50,000

Prepare Statement of Cash Flows as per Indirect Method.

Solution:

Statement of Cash Flows

1) Cash Flows from Operating Activities:

Particulars Amount
Difference of P&L 7,00,000
(+) Transfer to GR 10,00,000
(+) Interim Dividend declared and Paid 4,00,000

CA. JAI CHAWLA 2

CA INTER ADV. ACCOUNTS CASH FLOW STATEMENTS
(+) Final Dividend Declared in CY 7,00,000
(+) Premium on Redemption w/o in Profit and Loss A/c 5,000
Net Profit After Tax (NPAT) 28,50,000
(-) Stock adjustment
Opening Stock adjustment (40,00,000)
Closing Stock adjustement (10,00,000)
(+) Tax provision 26,50,000
Net Profit Before Tax 5,00,000
(+/-) Adjustment for:-
(+) Depreciation 3,75,000
(-) Gain on sale of P&M (37,500)
(-) Advertisement Expenses Paid (2,00,000)
(-) Gain on sale of Investment (1,92,500)
(-) Post Acquisition Dividend Received (4,50,000)
(+) Loss due to theft (extra-ordinary) 15,000
(+) Bad debts (Non-Cash) 3,00,000
(+) Ex. Loss on Creditors 1,00,000
(-) Insta & YT Income (Extra-ordinary) (2,50,000)
(-) Interest on Investment Earned (2,00,000)
(-) Tax Refund (50,000)
(+) Interest on Bank Loan 6,84,000
(+) Amortisation of Goodwill 15,00,000
(+/-) Working Capital Adjustment
(+) Creditors 4,00,000
(+) Bills Payable 1,00,000
(-) O/s Exp. (1,30,000)
(+) Trade Receivable 2,00,000
(+) Inventory 40,00,000
(-) Prepaid exp. (80,000)
Net Cash before Tax & Extra ordinary items 85,84,000
(-) Tax paid (30,00,000)
(-) Loss due to theft (15,000)
(+) Insta & YT 2,50,000
(+) Tax Refund 50,000
Net Cash generated from Operating Activity (a) 5,869,000

CA. JAI CHAWLA 3

CA INTER ADV. ACCOUNTS CASH FLOW STATEMENTS
2) Cash Flow from Investing Activity:

Sale of P&M 1,87,500

(-) Payment for purchase for P&M (4,20,000)
(+) Sale of Investments 4,042,500
(+) Dividend received
Pre-acquisition 1,50,000
Post-acquisition 4,50,000
(+) Interest Collected 1,80,000
(-) Investment in Residential Property (1,00,00,000)
(+) Loan repaid by Mr. Jai 2,00,000
Net Cash used in Investing Activity (b) (52,10,000)

3) Cash Flow from Financing Activity:

(-) Interim Dividend Paid (4,00,000)

(-) Final Dividend of PY Paid in CY (5,50,000)
(-) Redemption of PSC (5,50,000)
(+) Issue of ESC 16,20,000
(+) Bank Loan raised 6,00,000
(-) Interest on Bank Loan (6,84,000)
(-) Loan Repaid to Nidhi 9,00,000
Net Cash used in Financing Activity (c) 86,4,000
Net cash outflow during the Year (a+b+c) 2,05,000
(+) Opening balance of Cash & CE 6,50,000
Closing balance of Cash & CE 4,45,000

Working Note - 1 Tax a/c

To Balance bld 16,00,000 By Balance b/d 17,00,000

To Bank (tax paid) 30,00,000 By P&L 26,50,000
(balancing fig.)
To Balance c/f 21,50,000 By Balance c/f 24,00,000

Working Note – 2 Plant & Machine (Gross)

To Balance b/d 12,00,000 By Provision for Depreciation 2,50,000

CA. JAI CHAWLA 4

CA INTER ADV. ACCOUNTS CASH FLOW STATEMENTS
To P&L (Gain) 37,500 By Bank 1,87,500
To Bank (bal. fig.) 4,20,000
To ESC (bal. fig.) 2,80,000 By Balance c/d 15,00,000

Provision for Depreciation

To P&M 2,50,000 By Balance b/d 3,50,000

To Balance c/d 4,75,000 By Depreciation 3,75,000

Working Note - 3

ESC Opening 50 lacs

ESC Closing 69 lacs
Issued during the year 19 lacs
(-) issued for P&M (Non Cash) 2.8 lacs
Issued against Cash (bal. fig.) 16.20 lacs

Working Note - 4
Advertisement Expense (Asset)

To Balance b/d 13,00,000 BY GR 5,00,000

To Bank (bal. fig.) 2,00,000 By Balance c/d 10,00,000

WN-5 General Reserve

To Advertisement Exp. 5,00,000 By Balance b/d 7,00,000

To CRR 3,00,000 By P&L (b/f) 10,00,000
To Balance c/d 9,00,000

Working Note – 6 Investment A/c

To Balance b/d 50,00,000 By Bank 1,50,000

To Gain (P&L) 192500 By Bank (bal. fig.) 40,42,500

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CA INTER ADV. ACCOUNTS CASH FLOW STATEMENTS
By Balance c/d 10,00,000

Working Note – 7

Trade Receivables
Closing Balance as per B/s 35,00,000
Add: Bad-debts 3,00,000
Closing Trade Receivables before Bad-debts for the purpose of cash flow (since
Bad-debt is a non-cash item) 38,00,000
Opening Trade Receivables 60,00,000
Working Capital change due to Trade Receivables 22,00,000
Creditors
Closing Balance as per B/s 37,00,000
less: Exchange Loss 1,00,000
Closing Creditors before Exchange Loss for the purpose of cash flow (since Ex.
loss is a non-cash item) 36,00,000
Opening Creditors Balance 32,00,000
Working Capital change due to Trade Receivables 4,00,000
Prepaid Expenses
Closing Balance as per B/s 8,00,000
less: TDS included in Closing balance 20,000
Net Closing balance of Prepaid Exp. 7,80,000
Opening Balance 7,00,000
Working Capital change due to Trade Receivables 80,000

CA. JAI CHAWLA 6