BBA (WOW) MANAGEMENT ACCOUNTING

MODULE – III
CASH FLOW STATEMENT

Cash flow statement is a statement prepared to track the inflow and outflow of cash and cash equivalents between
two balance sheet dates.

Need for Cash Flow Statement

Cash Flow Statement is of vital importance to the financial management & short term financial planning.
Its various uses are as follows:

1) Cash Flow Statement is prepared on cash basis hence it is useful in evaluating the cash position of an
enterprise.

2) A projected cash flow statement can be prepared so that it can enable the firmto plan & co –
ordinate its financial operations efficiently.

3) A comparison of historical & projected cash flow statements will reveal variations in the
performance so that the firm can take immediate effective action.

4) It indicates whether a firm's short term paying capacity is improving or deteriorating over a period of time by
preparing cash flow statements for a number of years.

5) It helps in planning the repayment of loans, replacement of fixed assets etc. It is also significant for making
capital budgeting decisions.

6) It clearly indicates the causes for poor cash position in spite of substantial profits in a firm by throwing light on
various applications of cash made by the firm.

7) Cash Flow Statement provides information of all activities classified underoperating, investing &
financing activities.

A fund in an enterprise implies working capital. There are two types of working capital

a) Gross working capital

b) Net working capital

Gross working capital means the sum of all current assets in an enterprise. Net working capital means current assets over current
liabilities.

Here, funds essentially mean net working capital. It is important for the preparation of cash flow statement to
understand the flow of funds.

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Flow of Funds

Flow of funds implies changes in funds due to various transactions leading to increase and decrease in working
capital. A decrease in working capital implies source or inflow of funds while an increase in working capital
implies applications or outflow of funds.

Note: Funds move from non – current to current transactions i.e when a transaction affects one current account
and one non – current account.

a) A current asset and a fixed asset

b) A current asset and a fixed liability
c) A current liability and a fixed asset
d) A current liability and a fixed liability

Current Assets are those which can be converted into cash in the course of business within a period of one year and
current liabilities are those which have to be paid off in the course of business within a period of one year.
List of Current Assets and Current Liabilities

Current Assets Current Liabilities

Cash in hand Bills payable
Cash at bank Creditors / Accounts payable
Bills receivable Outstanding expenses
Debtors / Accounts Receivable Cash Credit
Short Term Loans advanced Bank overdraft
Temporary / Marketable Investments Short Term Loans Taken
Stock / Inventory Pre received incomes
 Raw materials
 Work – in – progress
 Stores & spares
 Finished goods
Prepaid expenses Unclaimed dividend
Outstanding incomes
Loose tools

List of Non – Current Assets and Non – Current Liabilities

Non - Current Assets Non - Current Liabilities

Goodwill Equity Share Capital
Trademarks Preference Share Capital
Copyrights Share Premium
Land Capital Reserve
 Freehold
 Leasehold
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Building Profit & Loss a/c (Cr bal)
Plant & Machinery Debentures
Furniture & Fittings Mortgage Loans
Long Term Investments Provision for depreciation
Profit & Loss a/c (Dr bal) Provision for taxation
Discount on issue of shares & debentures Proposed dividend
Preliminary expenses
Underwriting commission

How to Judge whether a transaction results in a flow of fund or not?

When a transaction takes place, a journal entry should be made and the accounts involved should be classified
into current and non – current. It should help analyse if the transaction leads to a flow of funds or not.
Category 1: When a transaction involves only current accounts, there is no flow of funds.

Category 2: When a transaction involves only non - current accounts, there is no flow of funds.

Category 3: When a transaction involves a current account and non – current account, the net working capital
increases or decreases and hence there is a flow of funds.

ILLUSTRATION

Category 1: Transaction involving only current accounts

Situation A: Transaction involving Current Asset and Current Liability

 Cash paid to creditors.

Creditors A/c Dr (Current Account) To

Cash A/c (Current Account)

Inference: The above transaction does not result in the flow of fund because both the accounts involved
(i.e. creditors and cash) belong to the category of current accounts. The cash account being an item of
current decreases and creditors, being a current liability also decreases. The net effect of this transaction
therefore will be no change in working capital.

Situation B: Transaction involving two Current Assets

 Sale of Short Term Investments

Cash A/c Dr (current account) To

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Investments A/c (current account)

Inference: The above transaction does not result in the flow of fund because both the accounts involved
(i.e. investments and cash) belong to the category of current accounts. The cash account being an item of
current asset increases and investments, being a current asset decreases. The net effect of this transaction
therefore will be no change in working capital.
Situation C: Transaction involving two Current Liabilities

 Issued bills payable to creditors Creditors A/cDr

(current liability)

To Bills Payable A/c (current liability)

Inference: The above transaction does not result in the flow of fund because both the accounts involved
(i.e. creditors and bills payable) belong to the category of current accounts. The creditors’ account being
an item of current liability decreases and bills payable, being a current liability increases. The net effect
of this transaction therefore will be no change in working capital.

Category 2: Transaction involving only non - current accounts

Situation A: Transaction involving Non - Current Asset and Non - Current Liability

 Shares issued to vendors for purchase of land & building Landand

Building A/c Dr (non – current asset)

To Share Capital A/c (non – current liability)

Inference: As both accounts involved belong to non – current category, the amount of current asset and current
liabilities is not affected at all thereby keeping the amount of working capital unaffected. This transaction does not
result in the flow of fund.

Situation B: Transaction involving two Non - Current Assets

 Purchase of Building in exchange of old plant BuildingA/c

Dr (non – current asset)

To Plant A/c (non – current asset)

Inference: As both accounts involved belong to non – current category, the amount of current asset and current
liabilities is not affected at all thereby keeping the amount of working capital unaffected. This transaction does not
result in the flow of fund.

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Situation C: Transaction involving two Non - Current Liabilities

 Debentures converted into share capital Debentures A/cDr

(non – current liability)

To Share Capital A/c (non – current liability)

Inference: As both accounts involved belong to non – current category, the amount of current asset and current
liabilities is not affected at all thereby keeping the amount of working capital unaffected. This transaction does not
result in the flow of fund.

Category 3: Transaction involving current accounts and non – current accounts Situation A: Transaction

involving Current Asset and Non - Current Liability

 Debentures issued for cash Cash A/c

Dr (current asset)
To Debenture A/c (non – current liability)

Inference: The above transaction includes accounts of both current category and non – category account.
Cash account increases which belongs to current category and Debenture also increase which belongs to
non – current category. Since cash increases current asset also increases.
Therefore, there is a flow of fund.

Situation B: Transaction involving Current Asset and Non - Current Asset

 Purchase of Plant and Machinery

Plant & Machinery A/c Dr (non – current asset) To

Cash A/c (current asset)

Inference: The above transaction includes accounts of both current category and non – category account.
Cash account decreases which belong to current category and Plant & machinery also increases which
belongs to non – current category. Since cash decreases current asset also decreases. Therefore, there is a
flow of fund.

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Situation C: Transaction involving Current Liability and Non - Current Liability

 Payment to creditors in shares

Creditors A/c Dr (current liability) To

Share capital A/c (non – current liability)

Inference: The above transaction includes accounts of both current category and non – category account.
Creditors’ account decreases which belongs to current category and Share capital also increases which belongs
to non – current category. Since creditors decreases current liability also decreases. Therefore, there is a flow
of fund.

Situation D: Transaction involving Current Liability and Non - Current Asset

 Payment made in the form of long term investments to creditors. CreditorsA/c

Dr (current liability)

To Investments A/c (non – current asset)

Inference: The above transaction includes accounts of both current category and non – category account.
Creditors’ account decreases which belongs to current category and Long term investments which belongs
to non – current category.
Since creditors decreases current liability also decreases. Therefore, there is a flow of fund.

Special Transactions

There are certain accounts of a revenue nature which do not belong to any of the current or non current category.
These revenue items are transferred to Profit & Loss Account.

 Salaries paid

a) Wages Account Dr

To Cash A/c

b) Profit & Loss A/c Dr

To Wages A/c

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The consolidated entry will be:

Profit & Loss A/c Dr (non – current liability) To

Cash A/c (current asset)

Inference: Since, the transaction has one current account and another non – current account; there is a flow of
fund.

The above situation is applicable for any operating expenses paid like salaries, rent, establishment expenses, etc.

Cash Flow Statement

"A statement of changes in the financial position of a firm on cash basis is called a cash flow statement."
The cash flow statement describes the inflow (sources) & outflow (uses) of cash. It summarises the causes of
changes in cash position of a business enterprise between two balance sheet dates.

Differences between Fund Flow Statement & Cash Flow Statement

Fund Flow Statement Cash Flow Statement

1) It is based on a wider concept of funds 1) It is based on a narrower concept of funds
i.e. working capital i.e. cash

2) It is based on accrual basis ofaccounting 2) It is based on cash basis of

accounting

3) Changes in current assets & current 3) No schedule of changes in working

liabilities appear separately in a capital. The changes in current assets
schedule of changes in working capital & current liabilities are summarized in thecash
flow statement.

4) It is useful in planning intermediate & longterm 4) It is useful for short term analysis & cashplanning
financing. of the business.

5) It reveals the sources & applications offunds 5) It classifies all cash inflows &outflows
of an organization. in terms of operating, investing &
financing activities.

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Cash Flow Statement as per AS – 3

The AS – 3 is mandatory for the following enterprises

a) Enterprises whose equity or debt securities are listed or gong to be listed on a recognizedstock
exchange in India.
b) All other commercial, industrial and business reporting enterpriseswhose turnover forthe
accounting period exceeds Rs 50 crores.
c) All commercial, industrial and business reporting enterprises having borrowings, including public
deposits, in excess of Rs 10 crores at any time during the accounting period.

Cash Fund

As per AS – 3 the following items are part of cash fund:

1. Cash in hand
2. Demand deposits with banks
3. Cash Equivalents – marketable securities

Meaning of Cash Flow

Cash flow means inflow and outflow of cash. An inflow i.e. source of cash increases the total cash available at the
disposal of the firm while an outflow i.e. use of cash decreases it. The difference between cash inflows and cash
outflows is known as net cash flow which can either net cash inflow or net cash outflow.
As per AS – 3, cash flow statement is classified into

1) Cash flows from operating activities

2) Cash flows from investing activities

3) Cash flows from financing activities

Cash flows from Operating Activities

Operating activities are the basic revenue producing activities of the enterprise. The amount of cash flows arising
from operating activities is an indicator of a firm's operating capability to generate sufficient funds to meet its
operating needs, pay dividends, repay loans, etc. without depending on external sources of finance.

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Examples of cash flow from operating activities

1) Cash receipts from sale of goods & rendering of services

2) Cash receipts from royalties, fees, commissions, etc

3) Cash payment to suppliers of goods & services

4) Cash payment to & behalf of employees

5) Cash payments or refunds of income tax relating to operating activities

Cash flows from Investing Activities

Investing activities are the acquisition & disposal of long term assets & investments. A separate disclosure of cash
flows arising from investing activities is important because cash flows represent the extent to which expenditure
have been made for resources to generate future incomes.

Examples of cash flow from investing activities

1) Cash payments to acquire fixed assets (including intangibles).

2) Cash receipts from disposal of fixed assets (including intangibles)

3) Cash receipts from disposal of shares, warrants, debt instruments, etc

4) Cash advances & loans made to third parties.

5) Cash receipts from the repayment of advances & loans made to third parties.

Cash flows from Financing Activities

Financing activities are activities that result in changes in the size & composition of the owners' capital (including
preference share capital in the case of a company) & borrowings of the enterprise.

Examples of cash flows from financing activities

1) Cash proceeds from issuing shares or other similar instruments

2) Cash proceeds from issuing debentures, loans, bonds & other short or long term
borrowings

3) Cash repayments of amounts borrowed such as redemption ofdebentures, bonds,

preference shares.

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PROFORMA OF CFS ACCORDING TO ACCOUNTING STANDARD 3 (AS – 3) CASH FLOWSTATEMENT

OF........ FOR THE YEAR ENDED........

NOTE: CASH AND BANK BALANCES SHOULD BE TAKEN ONLY FOR RECONCILIATION
PURPOSES

Particulars Amt (Rs) Total (Rs)

1) Cash Flows from Operating Activities:
Net profit before tax xxxx
Add : Non- Operating / Non- Cash Expenses and Losses
Depreciation xxx
Preliminary expenses written off xxx
Discount on issue of shares & debentures written off xxx
Goodwill written off xxx
Patents & trade marks written off xxx
Loss on sale of fixed assets xxx
xxxx
Less: Non – Operating / Non – Cash Incomes and Gains
Interest & Dividend received on investments (xxx)
Rental income (xxx)
Profit on sale of assets (xxx)
Operating profit before working capital changes xxxx

Add: Net decrease in current assets xxx

Net increase in current liabilities xxx
xxxx
Less: Net increase in current assets (xxx)
Net decrease in current liabilities (xxx)
Cash flows from operating activities before tax xxxx
Less: Income tax paid (xxx)
Cash flows from operating activities before extra ordinary items xxxx

Adjustment for Extra ordinary items xxx

Net Cash Flows from Operating Activities xxxx

2) Cash flows from Investing Activities

Proceeds from sale of fixed assets xxx
Proceeds from sale of investments xxx
Proceeds from sale of intangible assets xxx
Interest and dividend received xxx

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Rental income xxx

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xxxx
Purchase of fixed assets (xxx)
Purchase of intangible assets like goodwill (xxx)
Purchase of investments (xxx)
Net cash flows from Investing Activities xxxx

3) Cash flows from Financing Activities

Proceeds from issue of shares & debentures xxx
Proceeds from other long term borrowings xxx
xxx
Final dividend paid (xxx)
Interim dividend paid (xxx)
Interest on debentures and loans paid (xxx)
Repayment of loans (xxx)
Redemption of debentures (xxx)
Redemption of preference shares (xxx)
Net cash flows from Financing Activities xxxx

Net cash inflows / outflows during the year xxxx

Add: Opening Balance of Cash & Cash equivalents
(i) Cash in hand xxx
(ii) Cash at Bank xxx
(iii) Marketable Securities xxx xxxx
Closing Balance of Cash & Cash equivalents xxxx

Treatment of Provision for Taxation

Provision for taxation appearing on the liability side of the previous year’s balance sheet will be treated as payment
of tax during the year and deducted while calculating net cash flows from operating activities.
On the other hand; provision for taxation appearing on the liabilityside of current year’s balance sheet will
be added as non – operating & non – cash expenses & losses while calculating cash from operations.

NOTE:

If provision for taxation appears in the balance sheet and if an adjustment relating provision for tax is given in the
problem then provision for taxation account is to be opened to find the balancing figure.

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Provision for Taxation A/c

To Cash A/c (tax paid) Xxx By Bal B/d (PY) xxx

To balance c/d (CY) Xxx By Profit & Loss A/c (CY’s provision) xxx
Xxx xxx

The payment of tax during the year is deducted while calculating net cash flows from operating activities.
On the other hand; the current year’s provision to be added as non
– operating & non – cash expenses & losses while calculating cash from operations.

Treatment of Proposed Dividend

Proposed dividend appearing on the liability side of the previous year’s balance sheet must have been paid during
the year and hence will be shown as a payment under the heading cash flows from financing activities. On the other
hand; proposed dividend appearing on the liability side of current year’s balance sheet will be added as non –
operating & non – cash expenses & losses while calculating cash from operations.

NOTE:
If proposed dividend appears in the balance sheet and if there is an adjustment given in the problem; the proposed
dividend account is to be opened to find the balancing figure.

Proposed Dividend A/c

To Cash A/c (dividend paid) xxx By Bal B/d (PY) xxx

To balance c/d (CY) xxx By Profit & Loss A/c (CY’s provision) xxx
xxx xxx
The payment of dividend is treated as an outflow of funds under the heading cash flows from financing activities. On
the other hand; proposed dividend appearing on the liability side of current year’s balance sheet will be added as non
– operating & non – cash expenses & losses while calculating cash from operations.

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EXTRAORDINARY ITEMS

These are those items which cannot be classified as operating, investing or financing activities. For example;
legal claim, cost of winning a law suit or lottery, receipt of claim from an insurance company, etc.

Limitations of Cash Flow Statement

Despite of a number of uses, cash flow statement also suffers from the following limitations:

1) As cash flow statement is based on cash basis of accounting, it ignores thebasic accounting concept
of accrual basis.

2) Cash Flow statement is not suitable for judging the profitability of a firm as non – cash chargesare
ignored while calculating cash flows from operating activities.

3) Funds flow statement presents a more complete picture than Cash flow statement.

4) It is difficult to define the term "cash". There are no controversies over a number of items likecheques,
stamps, postal orders etc whether they are to be included in cash.

PROBLEMS
1) Calculate cash from operations from the following profit and loss a/c Profit andloss a/c
for the year ended 31/3/2019
Particulars Rs Particulars Rs
To salaries 30,000 By gross profit 1,40,000
To rent 25,000 By profit on sale of plant 15,000
To depreciation 7,000 By income tax refund 10,000
To loss on sale of land 10,000
To preliminary
expenses written off 5,000
To proposed dividend 20,000
To provision for taxation 15,000
To net profit 53,000
1,65,000 1.65,000

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2) From the figures given below, calculate cash from operations

Particulars 31st Dec, 2018 31st Dec,2019

Trade debtors 1,50,000 1,30,000
Bills receivable 50,000 40,000
Stock – in – trade 1,20,000 1,45,000
Prepaid expenses 30,000 25,000
Accrued income 20,000 27,500
Sundry creditors 80,000 1,10,000
Outstanding expenses 4,000 5,000
Bills payable 30,000 25,000
Income received in advance 3,000 4,000
Profit made during the year ---------- 7,50,000

3) X Ltd. Made a profit of Rs 4,00,000 after considering the following items:

a) Depreciation on fixed assets Rs 15,000
b) Writing off of preliminary expenses Rs 6,000
c) Loss on sale of furniture Rs 900
d) Provision for taxation Rs 75,000
e) Transfer to general reserve Rs 5,000
f) Profit on sale of building Rs 10,000
The following additional is also supplied to you:
Particulars 31st Mar, 2017 31st Mar, 2018
Sundry debtors 15,000 20,000
Sundry creditors 12,000 17,000
Bills receivable 14,000 17,500
Bills payable 9,500 6,000
Outstanding expenses 3,000 2,000
Prepaid expenses 100 200
You are required to ascertain the amount of cash from operations.

4) From the following balance sheets, prepare a cash flow statement under AS – 3

Liabilities 2018(Rs) 2019(Rs) Assets 2018(Rs) 2019(Rs)

Capital 10,000 10,000 Cash 5,600 5,400

Profit & Loss A/c 5,200 15,400 Debtors 3,400 6,600

Long term Loan 6,000 8,000 Stock 5,400 9,200

Short term Loan 2,400 2,400 Long term investments 7,000 12,000
Creditors 3,600 3,600 Plant 10,600 9,600

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Income tax payable 3,800 3,400 Prepaid insurance 400 800
Outstanding wages 1,400 800
32,400 43,600 32,400 43,600

5) Following is the summarized balance sheet of Bangalore Industries Ltd as on December 31,2017 and
2018

Liabilities 2017 (Rs) 2018(Rs) Assets 2017(Rs) 2018(Rs)

Sundry creditors 40,400 48,200 Cash &Bank 44,000 47,800

Bills payable 10,800 12,200 Debtors 10,800 17,000
Outstanding rent 2,600 1,000 Stock – in - trade 44,000 67,200
Mortgage Loan 22,000 21,000 Temporary 30,800 8,000
investment
Share capital 2,80,000 3,20,000 Plant & Machinery 2,54,600 3,35,800
Reserves 1,12,600 1,26,600 Land 50,000 50,000

Proposed dividend 28,000 32,000 Long term investment 62,200 35,200

4,96,400 5,61,000 4,96,400 5,61,000

6) Prepare a Cash Flow Statement on the basis of the information given inthe BalanceSheets
of P S Ltd

Liabilities 2019 (Rs) 2020(Rs) Assets 2019(Rs) 2020(Rs)

Share Capital 2,00,000 2,50,000 Goodwill 10,000 2,000

Debentures 1,00,000 80,000 Land & 2,00,000 2,80,000

Building
General reserve 50,000 70,000 Machinery 1,00,000 1,30,000

Creditors 40,000 60,000 Debtors 40,000 60,000

Bills payable 20,000 1,00,000 Stock 70,000 90,000

Outstanding expenses 25,000 20,000 Cash 15,000 18,000
4,35,000 5,80,000 4,35,000 5,80,000

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7) The balance sheets of VXL Limited as at December 31 of two years are given below:
Particulars 2019 (Rs) 2018 (Rs)
ASSETS
Cash balances 60,000 50,000

Trade debtors 1,00,000 75,000

Inventory 1,20,000 1,40,000
Land 80,000 1,00,000
Plant & Machinery 2,50,000 2,00,000
Total 6,10,000 5,65,000
LIABILITIES & CAPITAL

Trade creditors 40,000 30,000

Debentures 90,000 1,50,000

Provision for depreciation on plant 80,000 60,000

Equity Share Capital 2,40,000 2,00,000

Retained earnings 1,60,000 1,25,000

Total 6,10,000 5,65,000

Cash dividends of Rs 25,000 have been paid during the year. Prepare cashflow
statement.

8) Following is the balance sheet of AB Co Ltd as at 1st January, 2019 and 31st December,2019
Particulars 1/01/2019 (Rs) 31/12/2019 (Rs)
LIABILITIES
Equity share capital 3,00,000 3,50,000
Share premium ------------ 30,000
General reserve 45,000 65,000
Profit & Loss A/c 30,000 80,800
6% Debentures ----------- 70,000
Sundry creditors 85,000 90,700
Provision for taxation 22,500 40,500
Proposed dividend 30,000 35,000
Total 5,12,500 7,62,000
ASSETS
Land & Building 2,30,000 3,90,000

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Plant & Machinery 85,400 1,40,000
Furniture 5,500 6,500
Stock 82,400 95,700
Sundry debtors 75,000 85,500
Bank balance 34,200 44,300
Total 5,12,500 7,62,000
Additional Information:
Depreciation written off during the year:
Land and Building Rs 60,000
Plant & Machinery Rs 50,000
Furniture Rs1,200
Prepare a cash flow statement as per AS -3.

9) The Balance sheets of X Ltd as on 31st March, 2018 and 31st March 2019 were as follows:
Particulars 31/03/2018 (Rs) 31/03/2019 (Rs)
ASSETS
Land & Buildings 80,000 1,20,000
Plant & Machinery 5,00,000 8,00,000
Stock 1,00,000 75,000
Sundry debtors 1,40,000 1,50,000
Prepaid expenses 14,000 12,000
Cash at Bank 16,000 18,000
Total 8,50,000 11,75,000

LIABILITIES & CAPITAL

Share Capital 5,00,000 7,00,000
Profit & Loss A/c 1,00,000 1,60,000
General reserve 50,000 70,000
Sundry creditors 1,63,000 2,00,000
Bills payable 30,000 40,000
Outstanding expenses 7,000 5,000
Total 8,50,000 11,75,000

Additional Information:
a) Rs 50,000 depreciation has been charged to plant and machinery during the year 2018 –
2019
b) A piece of machinery was sold for Rs 8,000 during the 2018 – 2019. It had cost of Rs 12,000,
depreciation of Rs 7,000 has been provided on it. Prepare cash flow statementfrom the above
details.

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10) The following Balance Sheets are given:

Liabilities 2018 (Rs) 2019(Rs) Assets 2018(Rs) 2019(Rs)

Equity Share Capital 3,00,000 4,00,000 Goodwill 1,15,000 90,000

Redeemable Preference 1,50,000 1,00,000 Land & 2,00,000 1,70,000
Capital Building
General reserve 40,000 70,000 Plant 80,000 2,00,000
Profit & Loss A/c 30,000 48,000 Debtors 1,60,000 2,00,000
Proposed dividend 42,000 50,000 Stock 77,000 1,09,000
Creditors 55,000 83,000 Bills 20,000 30,000
Receivable
Bills Payable 20,000 16,000 Cash in hand 15,000 10,000
Provision for taxation 40,000 50,000 Cash at bank 10,000 8,000
6,77,000 8,17,000 6,77,000 8,17,000
It is also given that:
a) Depreciation of Rs 20,000 on land & building and Rs 10,000 on plant hasbeen charged in2019.
b) Interim dividend of Rs 20,000 has been paid in 2019
c) Income tax Rs 35,000 has been paid during 2019 Preparecash
flow statement for the year 2019.

11) The following are the comparative balance sheets of XYZ as on 31st December 2019 and 2020
LIABILITIES 2019 2020 ASSETS 2019 2020
Share capital 3,50,000 3,70,000 Land 1,00,000 1,50,000

(shares of Rs.10 Stock 2,46,000 2,13,500

each)
50,400 52,800 Goodwill 50,000 25,000
Profit and loss a/c
60,000 30,000 Cash & Bank 42,000 35,000
9% Debentures
51,600 59,200 Temporary
Creditors investments
3,000 4,000
Debtors
71,000 84,500

5,12,000 5,12,000 5,12,000 5,12,000

Other particulars provided to you are : (a) Dividends declared and paid during the year Rs.17,500 (b) Land was
revalued during the year at Rs.1,50,000 and the profit on revaluation transferred to profit and loss a/c. (c)
Debenture interest paid during the year Rs 5,400.

Prepare Cash Flow Statement for the year ended 31/12/2019.

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12) From the following balance sheet of P K Ltd for the year ending 31/12/2016 and 31/12/2017,prepare
cash flow statement.

Liabilities 2016(Rs) 2017(Rs) Assets 2016(Rs) 2017(Rs)

Equity Share Capital 2,15,000 2,75,000 Goodwill ----------- 20,000
Reserves 40,000 40,000 Plant & Machinery 1,12,950 1,16,200
Profit & Loss A/c 39,690 41,220 Land & Building 1,48,500 1,44,250
Provision for tax 40,000 50,000 Current Assets 1,98,530 1,70,730
Bank loan 59,510 --------- Cash 7,500 7,700
Current liabilities 73,280 52,660
4,67,480 4,58,880 4,67,480 4,58,880

The following information is also provided:

a) A dividend of Rs 26,000 was paid during the year 2017
b) Profit before tax for the year was Rs 62,530
c) During the year 2017, the company paid tax of Rs 25,000
d) During the year, the company purchased another company and paid Rs 60,000 in sharecapital. It
acquired stock Rs 21,640 and plant 18,360
e) It purchases machinery costing Rs 5,650 during the year.

13) Prepare a cash flow statement from the following balance sheets of Mr. Kamal
Liabilities 2019 2020 Assets 2019 2020
Current
Liabilities 3,50,000 4,00,000 Cash 50,000 40,000
Loan from
Mrs Subha -------------- 2,50,000 Debtors 4,00,000 4,50,000
Bank loan 4,00,000 3,00,000 Stock 3,00,000 2,50,000
Capital 15,00,000 15,40,000 Land 3,00,000 4,00,000
Building 5,00,000 5,50,000
Machinery 7,00,000 8,00,000
22,50,000 24,90,000 22,50,000 24,90,000
During the year, Mr. Kamal brought an additional capital of Rs 1,00,000 and his drawings during the year
were Rs 3,10,000.
Provision for depreciation on machinery – opening balance - Rs 3,00,000; closing balance – Rs4,00,000.
No depreciation need to be provided for other assets.

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BBA (WOW) MANAGEMENT ACCOUNTING

14) Balance Sheet of Mr. A on 01.01.2020 & 31.12.2020 were as follows.

LIABILITIES 1/1/2020 31/12/2020 ASSETS 1/1/2020 31/12/2020

Capital 1,50,000 1,90,000 Cash 20,000 26,000

Mrs B's Loan 30,000 -------- Debtors. 54,000 76,000

Loan from SBI 60,000 80,000 Stock 48,000 42,000

Sundry Creditors 50,000 56,000 Furniture 2,000 2,000

Machinery 90,000 65,000

Land 36,000 45,000

Buildings 40,000 70,000

2,90,000 3,26,000 2,90,000 3,26,000

During the year.

1. A Machine costing is 12,000/- (accumulated depreciation of Rs 4000/-) was sold for Rs.5,500/-
2. The provision for depreciation against machinery as on 1.1.2020 was Rs.24,000/- and on
31.12.2020 was Rs.37,000/-
3. Net profit for the year 2020 amounted to Rs.60, 000/-You
are required to prepare cash flow statement

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