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Assignment
Cash Flow Statement
Q. Questions and Answers
No.
1 The following information was provided by M/s PQR Ltd. for the year ended 31 st March,
20X1;
1) Gross Profit Ratio was 25% for the year, it amounts to ₹ 3,75,000.
2) Company sold goods for cash only.
3) Opening inventory was lesser than closing inventory by ₹ 25,000.
4) Wages paid during the year ₹ 5,55,000.
5) Office expenses paid during the year ₹ 35,000.
6) Selling expenses paid during the year ₹ 15,000.
7) Dividend paid during the year ₹ 40,000
8) Bank Loan repaid during the year ₹ 2,05,000 (included interest ₹ 5,000)
9) Trade Payables on 31st March, 20X0 were ₹ 50,000 and on 31st March, 20X1 were ₹ 35,000.
10) Amount paid to Trade payables during the year ₹ 6,10,000.
11) Income Tax paid during the year amounts to ₹ 55,000.
(Provision for taxation as on 31st March, 20X1 ₹ 30,000)
12) Investments of ₹ 8,20,000 sold during the year at a profit of ₹ 20,000.
13) Depreciation on furniture amounts to ₹ 40,000.
14) Depreciation on other tangible assets amounts to ₹ 20,000.
15) Plant and Machinery purchased on 15th November, 20X0 for ₹ 3,50,000.
16) On 31st March, 20X1 ₹ 2,00,000, 7% Debentures issued at face value in an exchange for a
plant.
17) Cash and Cash equivalents on 31st March, 20X0 ₹ 2,25,000.
A) Prepare cash flow statement for the year ended 31st March, 20X1. Using direct method.
B) Calculate cash flow from operating activities, using indirect method.
(May 2019/ICAI SM/May 2013/November 2014/November 2015(M)/November
2016(M)/November 2007/May 2006/November 2021 RTP)
Sol. 1)
PQR Ltd.
Cash Flow Statement for the year ended 31st March, 20X1
(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 2,30,000
(A)
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)
 cash flow from investing activities (B) 4,90,000
Cash flows from financing activities;
 Bank loan repayment (including interest) (2,05,000)

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 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 2,25,000
period
 Cash and cash equivalents at end of the period 7,00,000

2) Cash Flow from Operating Activities by Indirect method;

Particulars (₹)
 Net Profit for the year before tax and 2,80,000
extraordinary items
 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)
 Operating profit before working capital changes 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 Notes: -
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
2. From the following Balance Sheets and information, prepare Cash Flow Statement of Ryan Ltd.
by Indirect method for the year ended 31st March, 20X1;
Particulars Notes 31st March 20X1 (₹) 31st March 20X0 (₹)
Equity and Liabilities;
1) Shareholders’ funds;
a) Share capital 1 6,00,000 7,00,000
b) Reserves and Surplus 2 4,20,000 3,00,000
2) Non-current liabilities;
Long -term borrowings 3 2,00,000 ----
3) Current liabilities;
a) Trade Payables 1,15,000 1,10,000
b) Other current liabilities 4 30,000 20,000
c) Short term provision 95,000 1,20,000
(provision for tax)
Total 14,60,000 12,50,000
Assets;
1) Non-current assets;
a) Property, plant and 5 9,15,000 7,00,000
Equipment

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b) Non-Current 50,000 80,000

Investments
2) Current assets;
a) Inventories 95,000 90,000
b) Trade receivables 2,50,000 2,25,000
c) Cash and Cash 50,000 90,000
equivalents
d) Other Current assets 1,00,000 65,000
Total 14,60,000 12,50,000

Notes to accounts;
Particulars Notes 31st March, 20X1 31st March, 20X0
1) Share capital;
Equity share capital 6,00,000 5,00,000
10% Redeemable ---- 2,00,000
Preference share capital
Total 6,00,000 7,00,000
2) Reserves and Surplus;
Capital redemption 1,00,000 ----
reserve
Capital reserve 70,000 ----
General reserve 1,50,000 2,50,000
Profit and Loss account 1,00,000 50,000
Total 4,20,000 3,00,000
3) Long term borrowings;
9% Debentures 2,00,000 ----
4) Other current liabilities;
----
Liabilities for expenses 30,000 20,000
Total 30,000 20,000
5) Property, plant and equipment;
Plant and machinery 7,65,000 5,00,000
Land and building 1,50,000 2,00,000
Net carrying value 9,15,000 7,00,000

Additional Information: -
1) A piece of land has been sold out for ₹ 1,50,000 (Cost − ₹ 1,20,000) and the balance land
was revalued. Capital Reserve consisted of profit on revaluation of land.
2) On 1st April, 20X0 a plant was sold for ₹ 90,000 (Original Cost − ₹ 70,000 and W.D.V − ₹
50,000) and Debentures worth ₹ 1 lakh were issued at par as part consideration for plant
of ₹ 4.5 lakhs acquired.
3) Part of the investments (Cost − ₹ 50,000) was sold for ₹ 70,000.
4) Pre-acquisition dividend received ₹ 5,000 was adjusted against cost of investment.
5) Interim dividend was declared and paid @ 15% during the current year.
6) Income-tax liability for the current year was estimated at ₹ 1,35,000.
7) Depreciation @ 15% has been charged on Plant and Machinery but no depreciation has
been charged on Building.
(ICAI SM/ May 2003/November 2003(M)/ May 2011/November 2017)

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Sol. Cash Flow Statement of Ryan Limited

For the year ended 31st March, 20X1
Particulars (₹) (₹)
 Cash Flow from operating activities
 Net Profit before taxation (W.N.1) 2,75,000
 Adjustment for
 Depreciation (W.N.3) 1,35, 00
 Profit on sale of land (30,000)
 Profit on sale of plant (W.N.3) (40,000)
 Profit on sale of investments (W.N.4) (20,000)
 Interest on debentures (2,00,000 × 9%) 18,000
 Operating profit before working capital changes 3,38,000
 Increase in inventory (5,000)
 Increase in trade receivables (25,000)
 Increase in Other current assets (W.N.9) (35,000)
 Increase in Trade payables 5,000
 Increase in liabilities for expenses 10,000
 Cash generated from operations 2,88,000
 Income taxes paid (W.N.8) (1,60,000)
 Net cash generated from operating activities 1,28,000
Cash flow from investing activities
 Proceeds from sale of land (W.N.2) 1,50,000
 Proceeds from sale of plant (W.N.3) 90,000
 Proceeds from sale of investments (W.N.4) 70,000
 Purchase of plant (W.N.3) (3,50,000)
 Purchase of investments (W.N.4) (25,000)
 Pre-acquisition dividend received (W.N.4) 5,000
 Net cash used in investing activities (60,000)
Cash flow from financing activities
 Proceeds from issue of equity shares (6,00,000 – 5,00,000) 1,00,000
 Proceeds from issue of debentures (2,00,000 – 1,00,000) 1,00,000
 Redemption of preference shares (2,00,000)
 Dividends paid (90,000)
 Interest paid on debentures (18,000)
 Net cash used in financing activities (1,08,000)
 Net decrease in cash and cash equivalents (40,000)
 Cash and Cash equivalents at the beginning of the year 90,000
 Cash and Cash equivalents at the end of the year 50,000

Working Notes: -
1)
Particulars (₹)
Net profit before taxation;
 Retained profit 1,00,000
 Less: Balance as on 31.03.20X0 (50,000)
50,000
 Provision for taxation 1,35,000
 Interim Dividend 90,000
2,75,000

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2)
Dr. Land and Building Account Cr.
Particulars (₹) Particulars (₹)
To Balance b/d 2,00,000 By Cash (Sale) 1,50,000
To Profit and Loss A/c 30,000 By Balance c/d 1,50,000
(Profit on sale)
To Capital reserve 70,000
(Revaluation profit)
3,00,000 3,00,000

3)
Dr. Plant and Machinery Account Cr.
Particulars (₹) Particulars (₹)
To Balance b/d 5,00,000 By Cash (Sale) 90,000
To Profit and loss 40,000 By Depreciation 1,35,000
account
To Debentures 1,00,000 By Balance c/d 7,65,000
To Bank 3,50,000
9,90,000 9,90,000

4)
Dr. Investment Account Cr.
Particulars (₹) Particulars (₹)
To Balance b/d 80,000 By Cash (Sale) 70,000
To Profit and Loss account 20,000 By Dividend (Pre-acquisition) 5,000
To Bank (Balancing 25,000 By Balance c/d 50,000
figure)
1,25,000 1,25,000

5)
Dr. Capital Reserve Account Cr.
Particulars (₹) Particulars (₹)
To Balance c/d 70,000 By Profit on revaluation of 70,000
land
70,000 70,000

6)
Dr. General Reserve Account Cr.
Particulars (₹) Particulars (₹)
To Capital redemption 1,00,000 By Balance b/d 2,50,000
reserve
To Balance c/d 1,50,000
2,50,000 2,50,000

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7)
Dr. Provision for Taxation Account Cr.
Particulars (₹) Particulars (₹)
To Bank (Balancing 1,60,000 By Balance /d 1,20,000
figure)
To Balance c/d 95,000 By Profit and loss account 1,35,000
2,55,000 2,55,000
8)
Dr. Other Current Assets Account Cr.

Particulars (₹) Particulars (₹)

To Balance b/d 65,000 By Balance c/d 1,00,000
To Bank (Balancing 35,000
figure)
1,00,000 1,00,000

3. The following figures have been extracted from the books of X Limited for the year ended on
31.03.20X3. You are required to prepare a cash flow statement as per AS-3 using indirect
method.
1) Net profit before taking into account income tax and income from law suits but after taking
into account the following items was ₹ 20 lakhs;
a) Depreciation on Property, Plant & Equipment ₹ 5 lakhs.
b) Discount on issue of Debentures written off ₹ 30,000.
c) Interest on Debentures paid ₹ 3,50,000.
d) Book value of investments ₹ 3 lakhs (Sale of Investments for ₹ 3,20,000).
e) Interest received on Investments ₹ 60,000.
f) Compensation received ₹ 90,000 by the company in a suit filed.
2) Income tax paid during the year ₹ 10,50,000.
3) 15,000, 10% preference shares of ₹ 100 each were redeemed on 31.03.20X3 at a premium
of 5%. Further the company issued 50,000 equity shares of ₹ 10 each at a premium of 20%
on 2.4.20X2. Dividend on preference shares were paid at the time of redemption. Premium
on redemption of Pref. shares w/o against Securities Premium
4) Dividend paid for the year 20X1-20X2 ₹ 5 lakhs and interim dividend paid ₹ 3 lakhs for the
year 20X2-20X3.
5) Land was purchased on 2.4.20X2 for ₹ 2,40,000 for which the company issued 20,000
equity shares of ₹ 10 each at a premium of 20% to the land owner as consideration.

6) Current assets and current liabilities in the beginning and at the end of the years were as
detailed below;
Particulars As on 31.03.20X2 (₹) As on 31.03.20X3 (₹)
 Inventory 12,00,000 13,18,000
 Trade receivables 2,58,000 2,53100
 Cash in hand 1,96,300 35,300
 Trade payables 2,11,000 2,11,3 0
 Outstanding expenses 75,000 81,800

(May 2020 RTP/ICAI SM/November 2020/May 2005/January 2021)

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Sol. X Ltd.
Cash Flow Statement
For the year ended 31st March, 20X3
Particulars (₹) (₹)
Cash Flow from Operating Activities;
 Net profit before incom tax and 20,00,000
extraordinary items;
 Adjustments for;
 Depreciation on PPE 5,00,000
 Discount on issue of debentures 30,000
 Interest on debentures paid 3,50,000
 Interest on investments received (60,000)
 Profit on sale of investments (20,000) 8,00,000
 Operating profit before working 28,00,000
capital changes
 Adjustment for;
 Increase in inventory (1,18,000)
 Decrease in trade receivables 4,900
 Increase in trade payables 300
 Increase in outstanding expenses 6,800 (1,06,000)
 Cash generated from operations 26,94,000
 Income tax paid (10,50,000)
16,44,000
 Cash flow before extraordinary items;
 Compensation received in a suit filed 90,000
 Net cash flow from operating activities 17,34,000
Cash flow from Investing Activities;
 Sale proceeds of investments 3,20,000
 Interest received on investments 60,000
 Net cash flow from investing activities 3,80,000
Cash Flow from Financing Activities;
 Proceeds by issue of equity shares at 6,00,000
20% premium
 Redemption of preference shares at (15,75,000)
5% premium
 Preference dividend paid (1,50,000)
 Interest on debentures paid (3,50,000)
 Dividend paid (5,00,000 + 3,00,000) (8,00,000)
 Net cash used in financing activities (22,75,000)
 Net decrease in cash and cash (1,61,000)
equivalents during the year
 Add: Cash and cash equivalents as on 1,96,300
31.03.20X2
 Cash and cash equivalents as on 35,300
31.03.20X3

Notes: -
*Purchase of land in exchange of equity shares (issued at 20% premium) has not been
considered in the cash flow statement as it does not involve any cash transaction.
4. Prepare Cash Flow Statement of Light Ltd. for the year ended 31st March, 20X2, in accordance
with AS-3 (Revised) from the following Summary Cash Account;

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Summary Cash Account

Particulars (₹ in ‘000) (₹ in ‘000)
 Balance as on 01.04.20X1 315
 Receipts from Customers 24,894
 Sale of Investments (Cost ₹ 1,35,000) 153
 Issue of Share 2,700
 Sale of Fixed Assets 1,1 2
29,214
 Payment to Suppliers 18,306
 Purchase of Investments 117
 Purchase of Fixed Assets 2,070
 Wages & Salaries 621
 Selling & Administration Expenses 1,035
 Payment of Income Tax 2,187
 Payment of Dividends 720
 Repayment of Bank Loan 2,250
 Interest paid on Bank Loan 450 (27,756)
 Balance as on 31.03.20X2 1,458
(RTP November 2020/ICAI SM/July 2021)
Sol. Cash Flow Statement of Light Ltd. for the year ended 31st March, 20X2
Particulars (₹ ‘000) (₹ ‘000)
Cash flows from operating activities;
 Cash receipts from customers 24,894
 Cash payments to suppliers (18,306)
 Cash paid to employees (621)
 Other cash payments (for Selling & (1,035)
Administration expenses)
 Cash generated from operations 4,932
 Income taxes paid (2,187)
 Net cash from operating activities 2,745
 Cash flows from investing activities
 Payments for purchase of fixed asset (2,070)
 Proceeds from sale of fixed assets 1,152
 Purchase of investments (117)
 Sale of investments 153
 Net cash used in investing activities (882)
 Cash flows from financing activities
 Proceeds from issuance of share capital 2,700
 Bank loan repaid (2,250)
 Interest paid on bank loan (450)
 Dividend paid (720)
 Net cash used in financing activities (720)
 Net increase in cash and cash equivalents 1,143
 Cash and cash equivalents at beginning of 315
period
 Cash and cash equivalents at end of period 1,458
5. Following are extracts of the Balance Sheets of Ajay Ltd.;
Particulars Notes 31.03.20X1 (₹) 31.3.20X2
(₹)
Equity and Liabilities;
Shareholder’s funds;

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a) Share capital 1 5,00,000 5,00,000

b) Reserve & surplus 2 50,000 90,000
Non-current Liabilities;
a) Long-term borrowings 3 5,00,000 7,50,000
Current liabilities;
a) Other current liabilities 4 ---- 5,000
Assets;
Non- current assets;
a) Intangible assets 5 2,05,000 1,80,000

Notes to accounts;
Particulars 31.03.20X1 31.03.20X2 (₹)
(₹)
1) Share Capital;
 50,000 Equity Shares of ₹ 10 each 5,00,000 5,00,000
2) Reserve & s rplus;
 Profit & Loss A/c 50,000 90,000
3) Long-term borrowings;
 10% Debentures 5,00,000 7,50,000
4) Other current liabilities;
 Unpaid interest ---- 5,000
5) Intangible assets;
 Goodwill 2,05,000 1,80,000

You are required to show the related items in Cash Flow from operating activity and financing
activity.
(ICAI SM/May 2015 RTP)
Sol. An Extract of Cash Flow Statement for the year ending 31.03.20X2;

Particulars (₹)
Cash flows from operating activities;
 Closing balance as per Profit & Loss A/c 90,000
 Less: Opening balance as per Profit & Loss A/c (50,000)
 Add: Goodwill amortisation 25,000
 Add: Interest on Debentures (Refer Note 1) 75,000
 Net Cash from Operating Activities 1,40,000

Note 1;
*Interest has been computed on the closing balance of debentures as on 31.03.20X1 assuming
that all the additions/ deletions were made, if any, at the beginning of the year.

Cash flows from financing activities;

Particulars (₹)
 Proceeds from debentures (Refer Working Note) 2,50,000
 Interest paid on Debentures [less unpaid] (70,000)
 Net Cash from Financing Activities 1,80,000

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Working Notes: -
10% Debentures Account
Particulars (₹) Particulars (₹)
To Balance c/d 7,50,0 0 By Balance b/d 5,00,000
By Bank A/c (Bal. fig.) 2,50,000
7,50,000 7,50,000

6. Prepare cash flow from investing activities as per AS-3 of M/s Shubham Creative Limited
for year ended 31.03.20X1.
Particulars (₹) Amount
 Machinery acquired by issue of shares of face value 2,00,000
 Claim received for loss of machinery in earthquake 55,000
 Unsecured loans given to associates 5,00,000
 Interest on loan received from associate company 70,000
 Pre-acquisition dividend received on investment made 52,600
 Debenture interest paid 1,45,200
 Term loan repaid 4,50,000
 Interest received on investment (TDS of ₹ 8,200 was deducted on 73,800
the above interest)
 Book value of plant & machinery sold (loss incurred ₹ 9,600) 90,000

(March 2021 MTP/November 2019)

Sol. Cash Flow Statement from Investing Activities of Shubham Creative Limited for year
ended 31-03-20X1.

Cash generated from investing activities (₹) (₹)

 Interest on loan received 70,000
 Pre-acquisition dividend received on investment 52,600
made
 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- (2,23,200)

ordinary item)

Extraordinary claim received for loss of machinery

Net cash used in investing activities (after extra- 55,000
ordinary item) (1,68,200)

Note: -
1) Debenture interest paid and Term Loan repaid are financing activities and therefore not
considered for preparing cash flow from investing activities.
2) Machinery acquired by issue of shares does not amount to cash outflow, hence also not
considered in the above cash flow statement.
7. Classify the following activities as;
a) Operating activities
b) Investing activities
c) Financing activities
d) Cash equivalents with reference to AS 3 (Revised).

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a) Brokerage paid on purchase of investments

b) Underwriting commission paid
c) Trading commission received
d) Proceeds from sale of investments.
e) Purchase of goodwill.
f) Redemption of preference shares
g) Rent received from property held as investment
h) Interest paid on long-term borrowings
i) Marketable securities (having risk of change in value)
j) Refund of income tax received
(ICAI SM/may 2018)
Sol. Classification of activities with reference to AS-3;
a) Brokerage paid on purchased of  Investing Activities
investments
b) Underwriting Commission paid  Financing Activities
c) Trading Commission received  Operating Activities
d) Proceeds from sale of investment  Investing Activities
e) Purchase of goodwill  Investing Activities
f) Redemption of Preference shares  Financing Activities
g) Rent received from property held as  Investing Activities
investment
h) Interest paid on long term  Financing Activities
borrowings
i) Marketable securities  Not a Cash equivalent
j) Refund of Income tax received  Operating Activities
8. Intelligent Ltd., a non-financial company has the following entries in its Bank Account. It has
sought your advice on the treatment of the same for preparing Cash Flow Statement.
1) Loans and Advances given to the following and interest earned on them;
a) To Suppliers
b) To employees
c) To its subsidiaries companies
2) Investment made in subsidiary Smart Ltd. and dividend received.
3) Dividend paid for the year
4) TDS on interest income earned on investments made
5) TDS on interest earned on advance given to suppliers
6) Insurance claim received against loss of fixed asset by fire.

Discuss in the context of AS 3 Cash Flow Statement. (ICAI SM/May 2014)

Sol. 1) Loans and advances given and interest earned;

a) To Suppliers Operating Cash flow

b) To Employees Operating Cash flow
c) To its subsidiary companies Investing Cash flow

2) Investment made in subsidiary company and dividend received;

 Investing Cash flow

3) Dividend paid for the year;

 Financing Cash Outflow

4) TDS on interest income earned on investments made;

 Investing Cash Outflow

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5) TDS on interest earned on advance given to suppliers;

 Operating Cash Outflow

6) Insurance claim received of amount loss of fixed asset by fire;

 Extraordinary item to be shown under a separate heading as ‘Cash inflow from
investing activities’.
9. From the following information, calculate cash flow from operating activities;
Summary of Cash Account
For the year ended March 31, 20X1
Particulars (₹) Particulars (₹)
To Balance b/d 1,00,000 By Cash Purchase 1,20,000
To Cash sales 1,40,000 By Trade payables 1,57,000
To Trade receivables 1,75,000 By Office & Selling 75,000
Expenses
To Trade Commission 50,000 By Income Tax 30,000
To Sale of Investment 30,000 By Investment 25,000
To Loan from Bank 1,00,000 By Repayment of Loan 75,000
To Interest & Dividend 1,000 By Interest on loan 10,000
By Balance c/d 1,04,000
5,96,000 5,96,000

(ICAI SM/Nov. 2015 RTP)

Sol. Cash Flow Statement of….
For the year ended March 31, 20X1 (Direct Method)
Particulars (₹) (₹)
 Operating Activities;
 Cash received from sale of goods 1,40,000
 Cash received from Trade receivables 1,75,000
 Trade Commission received 50,000 3,65,000
 Less: Payment for Cash Purchases 1,20,000
 Payment to Trade payables 1,57,000
 Office and Selling Expenses 75,000
 Payment for Income Tax 30,000 (3,82,000)
 Net Cash Flow used in Operating Activities (17,000)
10. Ryan Ltd provides you the following information at the year-end, March 31, 20X1;
Particulars (₹) (₹)
 Sales 6,98,000
 Cost of Goods Sold (5,20,000)
1,78,000
 Operating Expense
 (Including Depreciation Expense of ₹ 37,000) (1,47,000)
31,000
Other Income/(Expenses);
 Interest Expense paid (23,000)
 Interest Income received 6,000
 Gain on Sale of Investments 12,000
 Loss on Sale of Plant (3,000)
(8,000)

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Profit before Tax 23,000

Income tax (7,000)
Profit after Tax 16,000

Information available;
Particulars 31st March 20X1 31st March 20X0
(₹) (₹)
 Plant 7,15,000 5,05 000
 Less: Accumulated Depreciation (1,03,000) (68,000)
6,12,000 4,37,000
 Investments (Long term) 1,15,000 1,27,000
 Inventory 1,44,000 1,10,000
 Trade receivables 47,000 55,000
 Cash 46,000 15,000
 Prepaid expenses 1,000 5,000
 Share Capital 4,65,000 3,15,000
 Reserves and surplus 1,40,000 1,32,000
 Bonds 2,95,000 2,45,000
 Trade payables 50,000 43,000
 Outstanding liabilities 12,000 9,000
 Income taxes payable 3,000 5,000

Analysis of selected accounts and transactions during 20X0-X1;

1) Purchased investments for ₹ 78,000.
2) Sold investments for ₹ 1,02,000. These investments cost ₹ 90,000.
3) Purchased plant assets for ₹ 1,20,000.
4) Sold plant assets that cost ₹ 10,000 with accumulated depreciation of ₹ 2,000 for ₹ 5,000.
5) Issued ₹ 1,00,000 of bonds at face value in an exchange for plant assets on 31st March,
20X1.
6) Repaid ₹ 50,000 of bonds at face value at maturity.
7) Issued 15,000 shares of ₹ 10 each.
8) Paid cash dividends ₹ 8,000.

Prepare Cash Flow Statement as per AS-3 (Revised), using indirect method.
(ICA SM/May 2003(M)
Sol. Ryan Ltd.
Cash Flow Statement
For the year ending 31st March, 20X1
Particulars (₹) (₹)
Cash flows from operating activities;
 Net profit before taxation 23,000
 Adjustments for;
 Depreciation 37,000
 Gain on sale of investments (12,000)
 Loss on sale of plant assets 3,000
 Interest expense 23,000
 Interest income (6,000)
 Operating profit before working capital 68,000
changes
 Decrease in trade receivables 8,000
 Increase in inventory (34,000)

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 Decrease in prepaid expenses 4,000

 Increase in trade payables 7,000
 Increase in outstanding liabilities 3,000
 Cash generated from operations 56,000
 Income taxes paid* (9,000)
 Net cash generated from operating activities 47,000
Cash flows from investing activities;
 Purchase of plant (1,20,000)
 Sale of plant 5,000
 Purchase of investments (78,000)
 Sale of investments 1,02,000
 Interest received 6,000
 Net cash used in investing activities (85,000)
Cash flows from financing activities;
 Proceeds from issuance of share capital 1,50,000
 Repayment of bonds (50,000)
 Interest paid (23,000)
 Dividends paid (8,000)
 Net cash from financing activities 69,000
 Net increase in cash and cash equivalents 31,000
 Cash and cash equivalents at the 15,000
beginning of the period
 Cash and cash equivalents at the end of the 46,000
period

Working Notes: -
1)
Particulars (₹)
Income taxes paid;
 Income tax expense for the year 7,000
 Add: Income tax liability at the beginning of the year 5,000
12,000
 Less: Income tax liability at the end of the year (3,000)
9,000
2)
Dr. Investments A/c Cr.
Particulars Amount Particulars Amount
Balance B/d 1,27,000 Bank A/c (Sale) 1,02,000
Bank A/c(Purchase) 78,000
Profit and loss A/c 12,000 Balance C/d 1,15,000
2,17,000 2,17,000

Dr. Plant A/c Cr.

Particulars Amount Particulars Amount
Balance B/d 5,05,000 Plant disposal A/c 10,000
Bonds 1,00,000
Bank A/c 1,20,000 Balance C/d 7,15,000
7,25,000 7,25,000

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Dr. Accumulated depreciation A/c Cr.

Particulars Amount Particulars Amount
Plant disposal a/c 2,000 Balance B/d 68,000
Balance c/d 1,03,000 Depreciation (b/f) 37,000
1,05,000 1,05,000

Dr. Plant disposal A/c Cr.

Particulars Amount Particulars Amount
Plant A/c 10,000 Accumulated depreciation 2,000
A/c
Bank A/c 5,000
Loss on sale of plant 3,000
10,000 10,000
11. The following are the extracts of Balance Sheet and Statement of Profit and Loss of
Supriya Ltd.;
Extract of Balance Sheet
Particulars Notes 20X1 20X0
(₹’000) (₹ ‘000)
Equity and Liabilities;
1) Shareholder’s funds;
a) Share Capital 1 500 200
2) Non-Current liabilities;
a) Long-term loan from bank ---- 250
3) Current liabilities;
a) Trade Payables 1,000 3,047
Assets;
1) Non-current assets;
a) Property, Plant and Equipment 230 128
2) Current Assets;
a) Trade receivables 2,000 4,783
b) Cash & Cash equivalents (Cash 212 35
balance)

Extract of Statement of Profit and Loss

Particulars Notes 20X1 20X0
(₹ ‘000) (₹’ 000)
1) Expenses;
Employee benefits expenses 69 25
Other expenses 2 115 110
2) Tax expense;
Current tax (paid during year) 243 140

Notes to accounts;
Particulars 20X1 20X0
(₹ ‘000) (₹ ‘000)
1) Share Capital;
Equity Shares of ₹ 10 each, fully paid up 500 200
2) Other expenses;
Overheads 115 110

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Prepare Cash Flow Statement of Supriya Ltd. for the year ended 31st March, 20X1 in accordance
with AS-3 (Revised) using direct method. All transactions were done in cash only.
There were no outstanding/prepaid expense as on 31st March, 20X0 and on 31st March, 20X1.
Ignore depreciation. Dividend amounting ₹ 80,000 was paid during the year ended 31st ,20X1.
(May 2021 RTP/November 2006)
Sol. Supriya Ltd.
Cash Flow Statement for the year ended 31st March, 20X1
(Using direct method)
Particulars (₹ ‘000) (₹ ‘000)
Cash Flow from Operating Activities;
 Cash receipts from customers 2,783
 Cash payments to suppliers (2,047)
 Cash paid to employees (69)
 Other cash payments (for overheads) (115)
 Cash generated from operations 552
 Income taxes paid (243)
Net cash from operating activities 309
Cash flows from investing activities;
 Payments for purchase of Property, Plant and (102)
Equipment
Net Cash used in investing activities (102)
Cash flows from financing activities;
 Proceeds from issuance of share capital 300
 Bank loan repaid (250)
 Dividend paid (80)
 Net cash used in financing activities (30)
Net increase in cash and cash equivalents 177
Cash and cash equivalents at beginning of 35
period
Cash and cash equivalents at end of period 212
12. From the following information, prepare a Cash Flow Statement for the year ended 31st
March, 20X2.
Balance Sheets
Particulars Note 31.03.20X2(₹) 31.03.20X1(₹)
I. EQUITY AND LIABILITIES;
1) Shareholder’s Funds;
a) Share Capital 1 3,50,000 3,00,000
b) Reserves and Surplus 2 82,000 38,000
2) Non-Current Liabilities;
3) Current Liabilities;
a) Trade Payables 65,000 44,000
b) Other Current Liabilities
Short term Provisions 3 69,000 55,000
Total 5,66,000 4,37,000
II. ASSETS;
1) Non-Current Assets;
a) Tangible Assets 4 2,66,000 1,90,000
b) Intangible Assets 47,000 60,000
(Goodwill)
Non-Current Investments; 35,000 10,000
2) Current Assets;

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a) Inventories 78,000 85,000

b) Trade Receivables 1,08,000 75,000
c) Cash & Cash Equivalents 32,000 17,000
Total 5,66,000 4,37,000

Note: -1 Share Capital

Particulars 31.03.20X2 31.03.20X1 (₹)
(₹)
 Equity Share Capital 2,50,000 1,50,000
 8% Preference Share Capital 1,00,000 1,50,000
Total 3,50,000 3,00,000

Note: -2 Reserves and Surplus

Particulars 31.03.20X2(₹) 31.03.20X1 (₹)
 General Reserve 30,000 20,000
 Profit and Loss A/c 27,000 18,000
 Capital Reserve 25,000 ----
Total 82,000 38,000

Note: -3 (Provision for tax)

Particulars 31.03.20X2 31.03.20X1(₹)
(₹)
Provision for tax 69,000 55,000

Note: -4 Tangible Assets

Particulars 31.03.20X2 (₹) 31.03.20X1 (₹)
 Land & Building 75,000 1,00,000
 Machinery 1,91,000 90,000
Total 2,66,000 1,90,000

Additional Information;
1) ₹ 18,000 depreciation for the year has been written off on plant and machinery and no
depreciation has been charged on Land and Building.
2) A Piece of land has been sold out for ₹ 50,000 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.
3) A plant was sold for ₹ 12,000 WDV being ₹ 15,000 on the date of sale (after charging
depreciation).
4) Dividend received amounted to ₹ 2,100 which included pre-acquisition dividend of ₹ 600.
5) An interim dividend of ₹ 10,000 including Dividend Distribution Tax has been paid.
6) Non-current investments given in the balance sheet represents investment in shares of other
companies.
7) Amount of provision for tax existing on 31.03.20X1 was paid during the year 20X1-20X2.
(November 2019 RTP)
Sol. Cash Flow Statement for the year ending 31st March, 20X2
Particulars (₹) (₹)
1) Cash Flow from Operating Activities;
a) Closing balance as per Profit and Loss 27,000
Account

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 Less: Opening balance as per Profit and Loss (18,000)

Account

 Add: Interim dividend paid during the year 10,000

 Add: Transfer to reserve 10,000
 Add: Provision for Tax 69,000
b) Net profit before taxation, and extra-ordinary 98,000
item
c) Add: Items to be added
 Depreciation 18,000
 Loss on sale of Plant 3,000
 Goodwill written off 13,000 34,000
d) Less: Dividend Income (1,500)
e) Operating profit before working capital 1,30,500
changes [B + C – D]
f) Add: Decrease in Current Assets and Increase
in Current Liabilities
 Decrease in Inventories 7,000
 Increase in Trade Payables 21,000 28,000
g) Less: Increase in Trade Receivables (33,000)
h) Cash generated from operations (E + F – G) 1,25,500
I) Less: Income taxes paid (55,000)
j) Net Cash from (used in) operating activities 70,500
II. Cash Flows from investing activities;
 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
 Net cash used in investing activities (95,500)
III. Cash Flows from Financing activities;
 Proceeds from issue of equity share capital 1,00,000
 Redemption of preference shares (50,000)
 Interim Dividend paid (10,000)

 Net cash from financing activities 40,000

IV. Net increase in cash and cash equivalents 15,000
(I + II + III)
V. Cash and cash equivalents at beginning of 17,000
period
VI. Cash and cash equivalents at end of 32,000
period (IV + V)

1)
Land and Building Account
Particulars (₹) Particulars (₹)
To Balance b/d 1,00,000 By Bank A/c (Sale) 50,000
To Capital Reserve A/c 25,000 By Balance c/d 75,000
(Profit on
sale/revaluation)
1,25,000 1,25,000

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2)
Plant and Machinery Account
Particulars (₹) Particulars (₹)
To Balance b/d 90,000 By Depreciation A/c 18,000
To Bank A/c (Purchase) 1,34,000 By Bank A/c (sale) 12,000

By Profit and Loss A/c 3,000

(Loss on sale)
By Balance c/d 1,91,000
2,24,000 2,24,000

3)
Investment Account
Particulars (₹) Particulars (₹)
To Balance b/d 10,000 By Bank A/c (Dividend 600
received)
To bank A/c 25,600 By Balance c/d 35,000
(Purchase)
35,600 35,600

13. The balance sheets of Sun Ltd. as at 31st March 20X1 and 20X0 were as;
Particulars Notes 20X1 (₹) 20X0 (₹)
Equity and Liabilities;
1) Shareholder’s funds;
a) Share capital 1 60,000 50,000
b) Reserve & Surplus 2 5,000 4,000
2) Current Liabilities;
a) Trade Payables 4,000 2,500
b) Other current liabilities ----
Short term provision (provision for 3 1,500 2,000
tax)
Total 70,500 58,500
Assets;
1) Non-current assets;
a) Property, Plant & Equipment 4 39,500 29,000
2) Current assets;
a) Current investments 2,000 1,000
b) Inventories 17,000 14,000
c) Trade receivables 8,000 6,000
d) Cash & cash equivalents 5 4,000 8,500
70,500 58,500

Notes to accounts;
Particulars 20X1 (₹) 20X0 (₹)
1) Share Capital;
Equity Shares of ₹ 10 each 60,000 50,000
2) Reserve & surplus;
Profit and Loss Account 5,000 4,000
3) Other current liabilities;

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Provision for tax) 1,500---- 2,000

4) Property, plant and equipment (at WDV);
Building 10,000 10,000
Fixtures 17,000 11,000
Vehicles 12,500 8,000
Total 39,500 29,000
5) Cash and cash equivalents;
Cash and Bank 4,000 8,500

The profit and loss statement for the year ended 31st March, 20X1 disclosed;
Particulars (₹)
 Profit before tax 4,500
 Tax expense; Current tax (1,500)
 Profit for the year 3,000
 Declared dividend (2,000)
 Retained Profit 1,000

Further information is available;

Particulars Fixtures (₹) Vehicles (₹)
 Depreciation for the year 1,000 2,500
 Disposals;
 Proceeds on disposal of vehicles ---- 1,700
 Written down value ---- (1,000)
 Profit on disposal 700
Prepare a Cash Flow Statement for the year ended 31st March, 20X1. (ICAI SM)
Sol. Sun Ltd.
Cash Flow Statement
For the year ended 31st March, 20X1
Particulars (₹) (₹)
Cash flows from operating activities;
 Net Profit before taxation 4,500
 Adjustments for;
 Depreciation 3,500
 Profit on sale of vehicles (1,700 – 1,000) (700)
 Operating profit before working capital 7,300
changes
 Increase in Trade receivables (2,000)
 Increase in inventories (3,000)
 Increase in Trade payables 1,500
 Cash generated from operations 3,800
 Income taxes paid (W.N.1) (2,000)
 Net cash generated from operating activities 1,800
Cash flows from investing activities;
 Sale of vehicles 1,700
 Purchase of current investments (1,000)
 Purchase of vehicles (W.N.3) (8,000)
 Purchase of fixtures (W.N.3) (7,000)
 Net cash used in investing activities (14,300)
Cash flows from financing activities;
 Issues of shares for cash 10,000

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 Dividends paid (W.N.2) (2,000)

 Net cash generated from financing activities 8,000
Net decrease in cash and cash equivalents (4,500)
Cash and cash equivalents at beginning of 8,500
period (See Note)
Cash and cash equivalents at end of period 4,000
(See Note)
Note to the Cash Flow Statement
Cash and Cash Equivalents
31.3.20X1 31.3.20X0
 Bank and Cash 4,000 8,500
 Cash and cash equivalents 4,000 8,500
Working Notes: -
Particulars (₹)
1) Income taxes paid;
Income tax expense for the year 1,500
Add: Income tax liability at the beginning of the year 2,000
3,500
Less: Income tax liability at the end of the year (1,500)
2,000
2) Dividend paid;
Declared dividend for the year 2,000
2,000
3) Property, Plant and equipment acquisitions;
Particulars Fixtures (₹) Vehicles (₹)
 W.D.V at 31.03.20X1 17,000 12,500
 Add: back;
 Depreciation for the year 1,000 2,500
 Disposals ---- 1,000
18,000 16,000
 Less: W.D.V at 31.12.20X0 (11,000) (8,000)
 Acquisitions during 20X0-20X1 7,000 8,000

Note: -
*Current investments may not be readily convertible to a known amount of cash and may not be
subject to an insignificant risk of changes in value as per the requirements of AS-3 and hence
those have been considered as investing activities.
14. Ms. Jyoti of Star Oils Limited has collected the following information for the preparation of cash flow
statement for the year ended 31st March, 20X1;
Particulars (₹ in Lakhs)
 Net Profit 25,000
 Dividend 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 the Statement of Profit and Loss 20,000
 Profit on sale of investments 100
 Carrying amount of Investment sold 27,765
 Interest income received on investments 2,506
 Interest expenses of the year 10,000

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 Interest paid during the year 10,520

 Increase in Working Capital (excluding Cash & Bank Balance) 56,081
 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 borrowings 25,980
 Proceeds from short-term borrowings 20,575
 Opening cash and bank balance 5,003
 Closing cash and bank balance 6,988

Prepare the Cash Flow Statement for the year ended 31 March 20X1 in accordance with AS 3, (Make
necessary assumptions.) (ICAI SM)
Sol. Star Oils Limited
Cash Flow Statement
For the year ended 31st March, 20X1
Particulars (₹) in Lakhs
Cash flows from operating activities;
 Net profit before taxation (25,000 + 5,000) 30,000
Adjustments for;
 Depreciation 20,000
 Loss on sale of assets (Net) 40
 Profit on sale of investments (100)
 Interest income on investments (2,506)
 Interest expenses 10,000
 Operating profit before working capital changes 57,434
Changes in working capital (Excluding cash and bank (56,081)
balance)
Cash generated from operations 1,353
 Income taxes paid (4,248)
Net cash used in operating activities (2,895)
Cash flows from investing activities;
 Sale of assets (W.N.1) 145
 Sale of investments (27,765 + 100) 27,865
 Receipt of grant for capital projects 12
 Interest income on investments 2,506
 Purchase of fixed assets (14,560)
 Investment in joint venture (3,850)
 Expenditure on construction work-in-progress (34,740)
Net cash used in investing activities (22,622)
Cash flows from financing activities;
 Proceeds from calls in arrear 2
 Proceeds from long-term borrowings 25,980
 Proceed from short-term borrowings 20,575
 Interest paid (10,520)
 Dividend paid (8,535) 27,502
Net increase in cash and cash equivalents 1,985
Cash and cash equivalents at the beginning of the 5,003
period
Cash and cash equivalents at the end of the period 6,988

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Working Notes: -
1)
 Book value of the assets sold 185
 Less: Loss on sale of assets (40)
 Proceeds on sale 145
15. How will you disclose following items while preparing Cash Flow Statement of Gagan Ltd. as per
AS-3 for the year ended 31st March, 20X2?
1) 10% Debentures issued; As on 01-04-20X1 ₹ 1,10,000
As on 31-03-20X2 ₹
77,000(Redeemed at year end)
2) Debentures were redeemed at 5% premium at the end of the year. Premium was charged
to the Profit & Loss Account A/c for the year.

3) Unpaid Interest on Debentures; As on 01-04-20X1 ₹ 275

As on 31-03-20X2 ₹ 1,175
4) Debtors of ₹ 36,000 were written off against the Provision for Doubtful Debts A/c during
the year.
5) 10% Bonds (Investments); As on 01-04-20X1 ₹ 3,50,000
As on 31-03-20X2 ₹ 3,50,000
6) Outstanding Interest on Investments; As on 31-03-20X2 ₹ 10,500
(ICAI SM)
Sol. Cash Flow Statement of M/s Gagan Ltd. for the year ended March 31, 20X2;
a) Cash Flow from Operating Activities;
Net Profit as per Profit & Loss A/c Xxxxx
Add: Premium on Redemption of Debentures 1,650
Add: Interest on 10% Debentures 11,000
Less: Interest on 10% Investments (35,000)
b) Cash Flow from Investing Activities;
Interest on Investments [35,000 – 10,500] 24,500
c) Cash Flow from Financing Activities;
Interest on Debentures paid [11,000 – (1,175 – 275)] – outflow (10,100)
Redemption of Debentures [(1,10,000 – 77,000) at 5% premium] – outflow (34,650)
Note: -
Debtors written off against provision for doubtful debts does not require any further
adjustments in Cash Flow Statement.
16. Following is the cash flow abstract of Alpha Ltd. for the year ended 31st March, 20X1;
Cash Flow (Abstract)
Inflows (₹) Outflows (₹)
Opening cash and bank 80,000 Payment for Account Payables 90,000
balance
Share capital – shares issued 5,00,000 Salaries and wages 25,000
Collection from Trade 3,50,000 Payment of overheads 15,000
Receivables
Sale of Machinery 70,000 Machinery acquired 4,00,000
Debentures redeemed 50,000
Bank loan repaid 2,50,000
Tax paid 1,55,000
Closing cash and bank balance 15,000
10,00,000 10,00,000
Prepare Cash Flow Statement for the year ended 31st March, 20X1 in accordance with AS-3.
(April 2021 MTP)

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Sol. Cash Flow Statement for the year ended 31.03.20X1

Particulars (₹) (₹)
Cash Flow 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)
 Other cash payments (overheads) (15,000)
 Cash generated from operations 2,20,000
 Income tax paid (1,55,000)
 Net cash generated from operating activities 65,000
Cash Flow from investing activities;
 Payment for purchase of machinery (4,00,000)
 Proceeds from sale of machinery 70,000
 Net cash used in investment activities (3,30,000)
Cash flow from financing activities;
 Proceeds from issue of share capital 5,00,000
 Bank loan repaid (2,50,000)
 Debentures redeemed (50,000)
 Net cash used in financing activities 2,00,000
 Net decrease in cash and 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
17. The following particulars relate to Bee Ltd. For the year ended 31st March, 20X2;
1) Furniture of book value of ₹ 15,500 was disposed off for ₹ 12,000.
2) Machinery costing ₹ 3,10,000 was purchased and ₹ 20,000 were spent on its erection.
3) Fully paid 8% preference share of the face value of ₹ 10,00,000 were redeemed at a
premium of 3%. In this connection 60,000 equity shares of 10 each were issued at a
premium of 2 per share. The entire money being received with application.
4) Dividend was paid as follows;
‒ On 8% preference share 40,000
‒ On equity share for the year 20X1-X2, 1,10,000.
5) Total sales were 32,00,00 out of which cash sales were 11,50,000.
6) Total purchase were 8,00,000 including cash purchase of 60,000.
7) Total expenses were 12,40,000.
8) Taxes paid were 3,30,000.
9) Cash and cash equivalent as on 31st March 20X2 were 1,25,000.

You are requested to prepare Cash Flow Statement as per AS-3 for the year ended 31st March,
2010 after taking into consideration the following also;
Particulars On 31st March, 20X1 On 31st March, 20X2
 Sundry debtors 1,50,000 1,47,000
 Sundry creditors 78,000 83,000
 Unpaid expenses 63,000 55,000
(May, 2010)
Sol. Cash Flow Statement
For the Year ended 31st March, 20X2
Particulars Amount
(₹)
I) Cash Flow from Operating Activities;
 Cash receipts from customers (W.N.1) 32,03,000

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 Less: Cash paid to suppliers and payment for expense (W.N.3)

(20,43,000)
 Cash generated from operations 11,60,000
 Income tax paid (3,30,000 ) 3,30,000
 Net cash from operating activities 8,30,000
II) Cash Flows from Investing Activities;
 Sale of furniture 12,000
 Purchase of machinery (3,30,000)
 Net cash used in investing activities (3,18,000)
III) Cash Flow from financing Activities;
 Proceeds from issue of equity shares 7,20,000
 Redemption of 8% preference shares (10,30,000)
 Dividend paid (1,50,000)

Net cash used in financing activities (4,60,000)

Net increase in cash and cash equivalents 52,000
Add: Cash and Cash equivalents as on 31st March, 20X0(Balancing figure) 73,000

Cash and Cash equivalents as on 31st March, 20X1 1,25,000

Working Notes: -
1) Cash receipt from customers;
 Credit sales = Total sales 32,00,000 – Cash sales 11,50,000 = 20,50,000.

Total Debtors Account

Particulars Dr. (₹) Particulars Cr. (₹)
To Balance b/d 1,50,000 By Cash/Bank 20,53,000
(Balancing figure)
To Credit Sales 20,50,000 By Balance c/d 1,47,000
22,00,000 22,00,000

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

2) Cash payment to Suppliers;

*Credit purchase = Total purchase 8,00,000 – Cash purchases 60,000 = 7,40,000.

Total Creditors Account

Particulars Dr. (₹) Particulars Cr. (₹)
To Cash/Bank (Balancing 7,35,000 By Balance b/d 78,000
figure)
To Balance c/d 83,000 By Credit purchases 7,40,000
8,18,000 8,18,000

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

3) Cash paid to suppliers and payment for expenses;

Particulars Amount
(₹)
 Outstanding expenses as on 31.03.2009 63,000
 Add: Expenses charged to profit and loss account 12,40,000
13,03,000

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 Less: Outstanding expenses as on 31.03.2010 55,000

 Payment on account of expenses 12,48,000

*Total of payment to suppliers and payment for expenses = 7,95,000 + 12,48,000 = 20,43,000.
18. From the following information, prepare a Cash Flow Statement as per AS-3 for Banjara
Ltd., Using direct method.
Balance Sheet as on March 31, 20X2
Particulars 20X2 20X1
Assets;
 Cash on hand and balances with bank 200 25
 Marketable securities (having one month 670 135
maturity)
 Sundry debtors 1,700 1,200
 Interest receivables 100 ----
 Inventories 900 1,950
 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 tax payable 400 1,000
 Long term debt 1,110 1,040
 Total liabilities 1,890 4,030
 Shareholders’ fund;
 Share capital 1,500 1,250
 Reserves 3,410 1,380
4,910 2,630
Total liabilities and shareholders fund 6,800 6,660

Statement of Profit or Loss for the year ended 31.3.10.

Particulars (₹)
 Sales 30,650
 Cost of sales (26,000)
 Gross profit 4,650
 Depreciation (450)
 Administrative and selling expenses (910)
 Interest expenses (400)
 Interest income 300
 Dividend income 200
 Net profit before taxation and extraordinary items 3,390
Extraordinary items
 Insurance proceeds from earthquake disaster settlement 140
 Net profit after extraordinary items 3.530
 Income tax (300)
3,230

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Additional Information: -
1) An amount of 250 was raised from the issue of share capital and a further 250 was raised
from long-term borrowings.
2) Interest expenses was 400 of which 170 was paid during the period 100 relating to interest
expense of the prior period was also paid during the period.
3) Dividends paid were 1,200.
4) Tax deducted at source on dividends received (including in the tax expense of 300 for the
year) amounted to 40.
5) During the period the enterprise acquired fixed assets for 350. The payment was made in
cash.
6) Plant with original cost of ₹ 80 and accumulated depreciation of 60 was sold for 20.
Sundry debtors and Sundry creditors include amounts relating to credit sales and credit
purchase only. November, 2010
Sol. Cash Flow Statement (direct method)
Particulars Amount (₹)
Cash flows from operating Activities
 Cash receipts from customers (W.N.2) 30,150
 Cash paid to suppliers, employees and for expenses (W.N.3) (27,600)
 Cash generated from operations 2,550
 Income tax paid (W.N.4) (860)
1,690
 Cash flow before extraordinary item; proceeds from 140
earthquake diseaster settlement
 Net cash from operating activities 1,830
Cash flows from Investing Activities
 Purchase of fixed assets (350)
 Proceeds from sale of equipment 20
 Interest received (300 – 100) 200
 Dividends received (200 – 40) 160
 Net cash from investing activities 30
Cash flows from Financing Activities
 Proceeds from issuance of share capital 250
 Proceeds from long term borrowings 250
 Repayment of long-term borrowings (W.N.5) (180)
 Interest paid (W.N.6) (270)
 Dividends paid (1,200)
 Net cash used in financial activities (1,150)
 Net increase in cash and cash equivalents 710
 Cash and Cash equivalents at beginning of the period 160
(W.N.1)
 Cash and cash equivalents at end of the period (W.N.1) 870

Working Notes: -
Cash and Cash equivalents;
Cash and cash equivalents consist of cash in hand and balances with banks and investments in
money market instruments for short period.
Particulars 20X2 20X1
 Cash in hand and balance with bank 200 25
 Short-term investments 670 135
 Cash and cash equivalents 870 160

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Cash receipts from customers;

Particulars (₹) ‘000’
 Total Sales 30,650
 Add: Sundry debtors at the beginning of the year 1,200
31,850
 Less: Sundry debtors at the end of the year (1,700)
 Cash sales 30,150
Cash paid to suppliers, employees and for expenses;
Particulars (₹) ‘000’
 Cost of sales 26,000
 Administrative and selling expenses 910
26,910
 Add: Sundry creditors at the beginning of the year 1,890
 Inventories at the end of year 900 2,790
29,700
 Less: Sundry creditors at the end of year (150)
 Inventories at the beginning of the year (1,950) (2,100)
27,600

Income tax paid (Including TDS from dividends received);

Particulars (₹)
‘000’
 Income tax expenses for the year 300
(Including tax deducted at source from dividends received)
 Add: Income tax liability at the beginning of the year 1,000
1,300
 Less: Income tax liability at the end of the year (400)
900

*Out of 900 thousands tax deducted at source on dividends received (amounting to 40

thousands) is included in cash flows from investing activities and the balance of 860 thousands
is included in cash flows from operating activities.

Repayment of long-term borrowings during the year;

Particulars (₹)
 Long term debts at the beginning of the year 1,040
 Add: Long term borrowings made during the year 250
1,290
 Less: Long term borrowings at the end of the year (1,110)
180

Interest paid during the year;

Particulars (₹)
 Interest expense for the year 400
 Add: Interest payable at the beginning of the year 100
500
 Less: Interest payable at the end of the year (230)
270

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19. Given below are the relevant extracts of the Balance Sheet and the Statement of Profit and Loss
of ABC Ltd. along with additional information;
Extract of Balance Sheet
Particulars Notes 31.3.20X1 (₹) in 31.03.20X0 (₹) in Lakhs
Lakhs
Equity and Liabilities;
1) Current liabilities;
a) Trade Payables 250 230
b) Short term Provisions 1 200 180
c) Other current liabilities 2 70 50
Assets;
1) Current assets;
a) Inventories 200 180
b) Trade Receivables 400 250
c) Other current assets 3 195 180

Statements of Profit and Loss of ABC Ltd.

For the year ended 31st March, 20X1
Particulars Notes (₹) in Lakhs
1) Revenue from operations 4,150
2) Other income 4 100
3) Total Revenue (I + II) 4,250
Expenses;
Purchases of Stock-in-Trade 2,400
Change in inventories of finished goods (20)
Employee benefits expense 800
Depreciation expense 100
Finance cost 5 60
Other expense 200
4) Total expenses 3,540
5) Profit before tax (III – IV) 710
6) Tax expenses;
Current tax 200
7) Profit for the year from 510
Continuing operations
Appropriations;
 Balance of Profit and Loss account brought forward 50
 Transfer to general reserve 200
 Dividend paid 330

Note to accounts;
Particulars 20X1 (₹) in 20X0 (₹) in lakhs
lakhs
1) Short term Provisions;
Provision for Tax 200 180
2) Other current liabilities;
Outstanding wages 50 40
Outstanding expenses 20 10
Total 70 50
3) Other current assets;
Advance tax 195 180

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4) Other income;
Interest and dividend 100
5) Finance cost;
Interest 60

Compute cash flow from operating activities using both direct and indirect method. (ICAI SM)
Sol. Cash Flows from Operating Activities
Particulars (₹) in lakhs (₹) in lakhs
Using Direct Method;
Cash Receipts;
 Cash sales and collection from Trade
receivables
 Sales + Opening Trade receivables – Closing 4,150 + 250 − 400 4,000
Trade receivables (A)
 Cash payments;
 Cash purchases & payment to Trade payables
 Purchases + Opening Trade payables – Closing 2,400 + 230 − 250 2,380
Trade payables
 Wages and salaries paid 800 + 40 – 50 790
 Cash expenses 200 + 10 − 20 190
 Taxes paid – Advance tax 195
(B) 3,555
 Cash flow from operating activities (A – B) 445
Using Indirect Method;
 Profit before tax 710
 Add: Non-cash items: Depreciation 100
 Add: Interest: Financing cash inflow 60
 Less: Interest and Dividend: Investment (100)
 Cash outflow (195)
 Less: Tax paid
 Working capital adjustments
 Trade receivables 250 – 400 (150)
 Inventories 180 – 200 (20)
 Trade payables 250 – 230 =20
 Outstanding wage 50 – 40 =10
 Outstanding expense 20 – 10 =10 (130)
Cash flow from operating activities 445
20. From the following information of Mr. zen, prepare a Cash flow statement as per AS-3 for
the year ended 31.03.20X1;
Ledger balances of Mr. Zen as of 20X0 and 20X1
Particulars As on 1.4.20X0 (₹) As on 1.4.20X1 (₹)
 Zen’s Capital A/c 10,00,000 12,24,000
 Trade payables 3,20,000 3,52,000
 Mrs. Zen’s loan 2,00,000 ----
 Loan from Bank at 10%P. a 3,20,000 4,00,000
 Land 6,00,000 8,80,000
 Plant and Machinery 6,40,000 4,40,000
 Inventories 2,80,000 2,00,000
 Trade receivables 2,40,000 4,00,000
 Cash 80,000 56,000
Additional information;

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A machine costing ₹ 80,000 (accumulated depreciation there on ₹ 24,000) was sold for ₹ 40,000.
The provision for depreciation on 1.4.20X0 was ₹ 2,00,000 and 31.3.20X1 was ₹ 3,20,000. The
net profit for the year ended on 31.03.20X1 was ₹ 3,60,000. (ICAI SM)
Sol. Cash Flow Statement of Mr. Zen as per AS-3
For the year ended 31.03.20X1
Particulars (₹)
Cash flow from operating activities;
 Net Profit (given) 3,60,000
Adjustments for;
 Depreciation on Plant & Machinery (W.N.2) 1,44,000
 Loss on Sale of Machinery (W.N.1) 16,000
 Interest on bank loan 40,000 2,00,000
 Operating Profit before working capital changes 5,60,000
 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; 5,12,000
Cash flow from investing activities;
 Sale of Machinery (W.N.1) 40,000
 Purchase of Land (8,80,000 – 6,00,000) (2,80,000)
Net Cash used in investing activities; (2,40,000)
Cash flow from financing activities;
 Repayment of Mrs. Zen’s Loan (2,00,000)
 Drawings (W.N.3) (1,36,000)
 Loan from Bank 80,000
 Interest on bank loan (40,000)
Net cash used in financing activities; (2,96,000)
 Net decrease in cash (24,000)
 Opening balance as on 1.4.20X0 80,000
 Cash balance as on 31.03.20X1 56,000
Working Notes: -
1) Plant & Machinery A/c;
Particulars (₹) Particulars (₹)
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 16,000
Loss on Sale (80,000 – 64,000)
By Balance c/d
(4,40,000 + 3,20,000) 7,60,000
8,40,000 8,40,000

2) Provision for depreciation on Plant and Machinery A/c;

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

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3) To Find out Mr. Zen’s drawings;

Particulars (₹)
 Opening Capital 10,00,000
 Add: Net Profit 3,60,000
13,60,000
 Less: Closing Capital (12,24,000)
 Drawings 1,36,000
Note: Assume that additional loan taken from the bank in the starting of the year.
21. The Balance Sheet of New Light Ltd. as at 31st March, 20X1 and 20X0 (for theyears ended)
are as follows:
₹ ₹
Notes 31st March 31st March
20X0 20X1
Equity and Liabilities
1 Shareholders’ funds
A Share capital 1 16,00,000 18,80,000
B Reserves and Surplus 2 8,40,000 11,00,000
2 Non-current liabilities
Long term borrowings 3 4,00,000 2,80,000
3 Current liabilities
A Other current liabilities Short 4 6,00,000 5,20,000
B term provision (provision for
tax) 3,60,000 3,40,000
Total 38,00,000 41,20,000
Assets
1 Non-current assets
A Property, plant and Equipment 22,80,000 26,40,000
Non-Current Investments 5
B Current assets 4,00,000 3,20,000
2 Cash and Cash equivalents Other
A Current assets 10,000 10,000
B Total 11,10,000 11,50,000
38,00,000 41,20,000
Notes to accounts
No. Particulars 31st March, 31st March,
20X0 20X1
1) Share capital
Equity share capital 12,00,000 16,00,000
10% Preference share capital 4,00,000 2,80,000
Total 16,00,000 18,80,000
2) Reserves and Surplus
General reserve 6,00,000 7,60,000
Profit and Loss account 2,40,000 3,40,000
Total 8,40,000 11,00,000
3) Long term borrowings

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9% Debentures 4,00,000 2,80,000

Total 4,00,000 2,80,000
4) Other current liabilities
Dividend payable 1,20,000 -
Current Liabilities 4,80,000 5,20,000
Total 6,00,000 5,20,000
5) Property, plant and equipment
Property, plant and equipment 32,00,000 38,00,000
Less: Depreciation (9,20,000) (11,60,000)
Net carrying value 22,80,000 26,40,000
Additional information:
i) The company sold one property, plant and equipment for ₹ 1,00,000, thecost of which
was ₹ 2,00,000 and the depreciation provided on it was ₹80,000.
ii) The company also decided to write off another item of property, plantand equipment
costing ₹ 56,000 on which depreciation amounting to ₹ 40,000 has been provided.
iii) Depreciation on property, plant and equipment provided ₹ 3,60,000.
iv) Company sold some investment at a profit of ₹ 40,000.
v) Debentures and preference share capital redeemed at 5% premium. Debentures were
redeemed at the year end.
vi) Company decided to value inventory at cost, whereas previously the practice was to value
inventory at cost less 10%. The inventory according to books on 31.3.20X0 was ₹
2,16,000. The inventory on 31.3.20X1 was correctly valued at ₹ 3,00,000.
Prepare Cash Flow Statement as per revised Accounting Standard 3 by indirect method.
(ICAI SM)
Sol. New Light Ltd.
Cash Flow Statement for the year ended 31st March, 20X1
A) Cash Flow from operating activities ₹ ₹
Profit after appropriation
Increase in profit and loss A/c after inventory
adjustment [₹3,40,000 – (₹2,40,000 + 76,000
₹24,000)]
Transfer to general reserve 1,60,000
Provision for tax 3,40,000
Net profit before taxation and extraordinary 5,76,000
item
Adjustments for:
Depreciation 3,60,000
Loss on sale of property, plant and equipment 20,000
Decrease in value of property, plant and 16,000
equipment
Profit on sale of investment (40,000)
Premium on redemption of preference share 6,000
capital
Interest on debentures 36,000
Premium on redemption of debentures 6,000

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Operating profit before working capital 9,80,000

changes
Increase in current liabilities
(₹5,20,000 –₹4,80,000) 40,000
Increase in other current assets
[₹11,50,000 – (₹ 11,10,000 + ₹24,000)] (16,000)
Cash generated from operations 10,04,000
Income taxes paid (3,60,000)
Net Cash generated from operating activities 6,44,000
B) Cash Flow from investing activities
Purchase of property, plant and equipment (W.N.3) (8,56,000)
Proceeds from sale of property, plant and 1,00,000
equipment (W.N.3)
Proceeds from sale of investments (W.N.2) 1,20,000
Net Cash used in investing activities (6,36,000)
C) Cash Flow from financing activities
Proceeds from issuance of share capital 4,00,000
Redemption of preference share capital (1,26,000)
(₹1,20,000 + ₹6,000)
Redemption of debentures (1,26,000)
(₹ 1,20,000 +₹ 6,000)
Dividend paid (1,20,000)
Interest on debentures (36,000)
Net Cash generated from financing activities (8,000)
Net increase/decrease in cash and cash Nil
equivalent during the year
Cash and cash equivalent at the beginning of 10,000
the year
Cash and cash equivalent at the end of the 10,000
year

Working Notes:
1) Revaluation of inventory will increase opening inventory by ₹ 24,000. 2,16,000/90 x 10 =
₹ 24,000
Therefore, opening balance of other current assets would be as follows:
₹ 11,10,000 + ₹ 24,000 = ₹ 11,34,000
Due to under valuation of inventory, the opening balance of profit and loss account be
increased by ₹ 24,000.
The opening balance of profit and loss account after revaluation of inventory will be ₹
2,40,000 + ₹ 24,000 = ₹ 2,64,000

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2) Investment Account
₹ ₹
To Balance b/d 4,00,000 By Bank A/c 1,20,000
To Profit and Loss A/c (balancing figure
(Profit on sale of being investment
investment) 40,000 sold)
By Balance c/d 3,20,000
4,40,000 4,40,000

3) Property, Plant and Equipment Account

Particulars ₹ Particulars ₹ ₹
To Balance b/d 32,00,000 By Bank A/c (Sale of 1,00,000
assets)
To Bank A/c (balancing 8,56,000 By Accumulated 80,000
figure being assets depreciation A/c
purchased)
By Profit and loss A/c 20,000 2,00,000
(loss on sale of assets)
By Accumulated 40,000
depreciation A/c
By Profit and loss A/c 16,000 56,000
(assets written off)
By Balance c/d 38,00,000
40,56,000 40,56,000

4) Accumulated Depreciation Account

₹ ₹
To Property, 80,000 By Balance b/d 9,20,000
plant and
equipment
A/c
To Property, 40,000 By Profit and loss A/c 3,60,000
plant and (depreciation for
the year)
equipment
A/c
To Balance c/d 11,60,000
12,80,000 12,80,000
22. ABC Ltd. gives you the Balance sheets as at 31st March 20X0 and 31st March 20X1. You are
required to prepare Cash Flow Statement by using indirect method as per AS 3 for the year
ended 31st March 20X1:
Particulars Notes ₹ ₹
31st March 31st March
20X0 20X1
Equity and Liabilities
1 Shareholders’ funds Share

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A capital Reserves and 50,00,000 50,00,000

B Surplus 26,50,000 36,90,000
2 Non-current liabilities
Long term borrowings 1 - 9,00,000
3 Current liabilities
A Short-term borrowings (Bank loan) 1,50,000 3,00,000
B Trade payables 8,80,000 8,20,000
C Other current liabilities 2 4,80,000 2,70,000

Total
91,60,000 1,09,80,000
Assets
1
Non-current assets
A 21,20,000 32,80,000
3
Property, plant and Equipment
2 Current assets Current
A Investments Inventory 11,80,000 15,00,000
B Trade receivables 20,10,000 19,20,000
C Cash and Cash equivalents 4 22,40,000 26,40,000
D Other Current assets (Prepaid 15,20,000 15,20,000
E expenses) 90,000 1,20,000
Total
91,60,000 1,09,80,000

Notes to accounts
No. Particulars ₹20X0 20X1
1) Long term borrowings
9% Debentures (issued at the end of year) - 9,00,000
Total - 9,00,000

2) Other current liabilities

Dividend payable 1,50,000 -
Liabilities for expenses 3,30,000 2,70,000
Total 4,80,000 2,70,000
3) Property, plant and equipment
Plant and machinery 27,30,000 40,70,000
Less: Depreciation (6,10,000) (7,90,000)
Net carrying value 21,20,000 32,80,000
4) Trade receivables
Gross amount 23,90,000 28,30,000
Less: Provision for doubtful debts (1,50,000) (1,90,000)
Total 22,40,000 26,40,000

Additional Information:
i) Net profit for the year ended 31st March, 20X1, after charging depreciation ₹ 1,80,000 is ₹
10,40,000.
ii) Trade receivables of ₹ 2,30,000 were determined to be worthless and were written off
against the provisions for doubtful debts account during the year.
(ICAI SM)

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Sol. Cash Flow Statement of ABC Ltd. for the year ended 31.3.20X1
Cash flows from Operating Activities ₹ ₹
Net Profit 10,40,000
Add: Adjustment For Depreciation (₹7,90,000 – 1,80,000
₹6,10,000)
Add: Adjustment for Provision for Doubtful Debts 2,70,000
(₹ 4,20,000 – ₹1,50,000)
Operating Profit Before Working Capital Changes 14,90,000
Add: Decrease in Inventories 90,000
(₹ 20,10,000 – ₹ 19,20,000)
15,80,000
Less: Increase in Current Assets
Trade Receivables
(₹ 30,60,000 – ₹23,90,000) 6,70,000
Prepaid Expenses (₹ 1,20,000 – ₹90,000) 30,000
Decrease in Current Liabilities:
Trade Payables (₹ 8,80,000 – ₹ 8,20,000) 60,000
Expenses Outstanding
(₹ 3,30,000 – ₹ 2,70,000) 60,000 (8,20,000)
7,60,000
Net Cash generated from Operating Activities
Cash Flows from Investing Activities (3,20,000)
Investment in Current Investments
Purchase of Plant & Machinery
(₹ 40,70,000 – ₹ 27,30,000) (13,40,000)
(16,60,000)
Net Cash Used in Investing Activities
Cash Flows from Financing Activities
Bank Loan Raised (₹ 3,00,000 – ₹ 1,50,000) 1,50,000
Issue of Debentures 9,00,000
Payment of Dividend (1,50,000)
9,00,000
Net Cash Used in Financing Activities
-
Net Increase in Cash During the Year
15,20,000
Add: Cash and Cash Equivalents as on 1.4.20X0
15,20,000
Cash and Cash Equivalents as on 31.3.20X1

Note:
1) Bad debts amounting ₹ 2,30,000 were written off against provision for doubtful debts
account during the year. In the above solution, Bad debts have been added back in the
balances of provision for doubtful debts and trade receivables as on 31.3.20X1.
Alternatively, the adjustment of writing off bad debts may be ignored and the solution can
be given on the basis of figures of trade receivables and provision for doubtful debts as
appearing in the balance sheet on 31.3.20X1.
2) Current investments (i.e. Marketable securities) may not be readily convertible to a known
amount of cash and be subject to an insignificant risk of changes in value as per the
requirements of AS 3 and hence those have been considered as investing activities.

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23. The summarized Balance Sheet of Flora Limited for the year ended 31st March, 20X0 and 31st
March, 20X1 are as below:
Assets 31/03/20X1 (₹) 31/03/20X0 (₹)
Goodwill 15,000 28,000
Land 5,75,000 6,00,000
Furniture and Fixture 48,000 44,000
Vehicles 22,000 28,000
Office Equipment 21,000 –
Long–term Investments 60,000 1,10,000
Stock–in–hand 96,000 88,000
Bills Receivables 46,000 52,000
Cash and Bank Balance 1,29,850 34,500
Total 10,31,000 9,99,000

Liabilities 31/03/20X1 (₹) 31/03/20X0 (₹)

Equity Share Capital 6,80,000 5,00,000
General Reserves 90,000 60,000
Profit and Loss Account 93,000 52,000
Capital Reserve 75,000 –
8% Debentures of ₹100 each – 3,00,000
Loan from Mr. Andrew – 15,000
Bills Payables 11,000 13,000
Trade Payables 49,000 45,000
Creditors for Equipment 10,500 –
Outstanding Expenses 4,500 3,000
Provision for Taxation 18,000 11,000
Total 10,31,000 9,99,000

Additional Information:
i) On 1st April, 20X0, one of the vehicles was sold for ₹3,000. No new purchases were made
during the year.
ii) A part of the total land was sold for ₹1,25,000 (Cost ₹1,00,000) and the balance land was
revalued. Capital reserve consists of profit on revaluation of balance land. No new
purchases were made during the year.
iii) Depreciation provided during the year.
 Furniture and Fixtures ₹5,000
 Vehicles ₹2,200
iv) Interim divided of ₹5,000 was paid during the year.
v) Provision for taxation for the year 20X0–20X1 was ₹16,000.
vi) 8% Debentures were redeemed at par after half year interest payment on 30th September,
20X0.
vii) Part of the long-term investments were sold at a profit of ₹8,000.
viii) Interest income received during the year on long-term investment was ₹6,500.

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You are required to prepare Cash Flow Statement from Operating Activities for the year ended
31st March, 20X1 using indirect method. (All workings should form part of the answer).
(May 2023)
Sol. Cash Flow from operating Activities
Profit before tax 92,000
Add: Depreciation 7,200
Add: Interest on 8% Debentures 12,000
Add: loss on sale of vehicle 800
Add: Goodwill W/o 13,000

Less: Profit on Sale of land 25,000

Less: Profit on Sale of long term Investments 8,000
Less Interest Income received 6,500

Operating Profit before working capital changes 85,500

Add: Increase in Outstanding Expenses 1,500
Add: Increase in Trade Payable 4,000
Less: Decrease in Bills Payable (2,000)
Less: Increase in Stock (8,000)
Less: Increase in Bills Receivable (3,650)
Decrease in Trade Receivable 6,000
Operating profit before tax 83,350
Income Tax paid (w.n.4) 9,000
Net cash from operating Activities 74,350

Working Note
1)
Dr. Vehicle A/C Cr.
To balance b/d 28,000 By Bank A/C 3,000
By Depreciation A/C 2,200
By P/L A/C 800
(Loss on Sale)

By balance C/d 22000

28,000 28,000

2)
Dr. Land A/C Cr.
To balance b/d 6,00,000 By Bank A/C 1,25,000
To P/L A/C 25,000
(Profit on Sale)
To Capital Reserve 75,000 By balance c/d 5,75,000
(Revaluation profit)
7,00,000 7,00,000

3)
Dr. Furniture/ Fixtures A/C Cr.
To balance b/d 44,000 By Depreciation 5,000
To bank A/C 9,000
(Purchase)

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By balance c/d 48,000

53,000 53,000
4)
Dr. Provision for Taxation A/C Cr.
To Bank A/c 9,000 By Balance b/d 11,000
By P/L A/C 16,000
(C.Y. Prov. For tax)
To balance c/d 18,000
27,000 27,000

5) Calculation of Profit before tax

Increase in Profit /Loss A/C 41,000
Increase in General Reserve A/C 30,000
Add: C.Y. Provision for tax 16,000
Add: Interim Dividend paid 5,000
Profit before tax 92,000
24. The following information is provided by Alpha Limited, for the year ended 31st March, 20X1:
i) Net profit before taking into account income tax and income from law suits but after
taking into account the following items was ₹40 lakhs.
ii) Depreciation on Fixed Assets ₹10 lakhs.
iii) Discount on issue of Debentures written of ₹60,000.
iv) Interest on Debentures paid ₹7,00,000.
v) Book value of investments ₹6 lakhs (Sale of Investments for ₹6,40,000).
vi) Interest received on investments ₹1,20,000.
vii) Compensation received ₹1,80,000 by the company in a suit filed.
viii) Income tax paid ₹21,00,000
ix) Current assets and current liabilities in the beginning and at the end of the year were
as detailed below:
As on 31.3.20X0 As on 31.3.20X1
₹ ₹
Stock 24,00,000 26,36,000
Sundry Debtors 4,16,000 4,26,200
Cash in hand 3,92,600 70,600
Bills Receivable 1,00,000 80,000
Bills Payable 90,000 80,000
Sundry Creditors 3,32,000 3,42,600
Outstanding Expenses 1,50,000 1,63,600
You are required to prepare Cash Flow Statement from Operating Activities in accordance with
AS-3 (revised) using the indirect method for the year ended 31st March,20X1.
(May 2022)
Sol. 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

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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
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

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