Statement of Cash Flows

Statement of Cash Flows is a statement which describes the

inflows(sources) and outflows (uses) of cash and cash
equivalents in an enterprise during a specific period of time.
• It is based on a narrow concept of funds i.e., cash
• It is based on cash basis of account
• It is prepared by classifying all cash inflows and outflows in
terms of operating, investing and financing activities.
• It is more useful for short-term analysis and cash planning of
the business.
There are two methods of reporting cash flows from operating
activities:
 The Direct Method
 The Indirect Method
AGBS-Hyderbad
 Statement of Cash Flows
A. Cash Flow From Operating Activities
Net Profit/Loss before tax and extraordinary items Xxx
Adjusted for: Non cash and Non operating items i. e. , Dep., loss Xxx
on sale of fixed assets, goodwill written off etc.
Operating profit before working capital changes xxx
Adjustment for Current Asset and Current Liabilities
Add: increase in C. Liabilities &Decrease in C. Assets Xxx
Less: Decrease in C. Liabilities & Increase in C. Assets (xxx)
Cash generated from operations before Tax & extraordinary items Xxxx
Less: tax and extraordinary items (xxx) Xxx
B. Cash Flow From Investing Activity
Purchase of Fixed assets (xxx)
Sale of Fixed Assets Xxx
Purchase of Investment (xxx)
Sale of investment xxx
Interest received Xx
Dividend received xx Xxx
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Cont….. Next slide
C. Cash Flow From Financing Activity
Proceeds from issue of share capital Xxx
Proceeds from long-term borrowings Xxx
Payment of long term loans (xxx)
Dividend paid (xxx)
Redemption of preference share capital (xxx) Xxxx
Net increase/Decrease in Cash and Cash Equivalents Xxxx
Cash and Cash equivalents at the beginning Xxx
Cash and Cash Equivalents at the end Xxx

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1. Following are the balance sheets of A Ltd as on 31st December 2010 and
2011. you are require to prepare Statement of Cash Flows .

(Rs. In lakhs)
2010 2011
Cash 27 72
Sundry debtors 220 226
Stock 100 174
Prepaid expenses 21 42
Plant and Machinery 635 750
Total assets 1003 1264
Liabilities &Capital
Sundry creditors 42 154
Other current liabilities 78 62
Debentures 225 318
Capital 550 600
Profit and Loss a/c 108 130
Total liabilities 1003 1264

AGBS-Hyderbad
2. The following are the summarised balance sheets of A. Ltd. , 31 st Dec. , 2009 & 10
Liabilities 2009 Rs. 2010 Rs. Assets 2009 Rs. 2010 Rs.
Share capital 6,00,000 8,00,000 Plant & 4,00,000 6,45,000
machinery (at
cost)
Debentures 2,00,000 3,00,000 Land & buildings 3,00,000 4,00,000
(at cost )
Profit and loss 1,25,000 2,50,000 Stock 3,00,000 3,50,000
a/c
Creditors 1,15,000 90,000 Bank 20,000 40,000
Provision for 6,000 3,000 Preliminary 7,000 6,000
bad debts expenses
Provision for Debtors 69,000 61,000
depreciation
- On land & 20,000 24,000
Buildings
- On plant & 30,000 35,000
machinery
10,96,000 15,02,000 10,96,000 15,02,000

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Additional information:
i. During the year a part of machinery costing
Rs. 70,000 (accumulated depreciation there
on Rs. 2,000) was sold for Rs. 6,000
ii. Dividends of Rs. 50,000 were paid during the
year.
You are required to prepare Statement of Cash
Flows.

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3. The following are the summarised Balance sheets of a company as on 31 st Dec, 2008
and 2009.
Liabilities 2008 2009 2008 2009
Share capital 1,00,000 1,25,000 Land 1,00,000 95,000
General reserve 25,000 30,000 Machinery 75,000 85,500
Profit and loss a/c 15,250 15,300 Sundry debtors 50,000 37,000
Bank loan(long term) 35,000 - Cash 250 300
Sundry creditors 75,000 67,600 Bank 4,000
Provision for taxation 15,000 17,500 Good will(at 1,500
cost)
Furniture 40,000 32,100
2,65,250 2,55,400 2,65,250 2,55,400
Additional information
During the year ended 31st December 2009:
1). Dividend of Rs. 11,500 was paid. 2). depreciation charged on land Rs. 5,000.
3). Machinery was further purchased for Rs. 19,000. 4). Depreciation written off on
machinery Rs. 6,000. 5). Income tax paid during the year Rs. 16,500. 6). Loss on sale of
machinery Rs. 100 was written off to general reserve.
You are required to prepare a Statement of Cash Flows.

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4. The following Balance Sheets related to M/s XL Ltd. (Rs. 000)
Assets: Previous year Current year
Cash 800 888
Sundry Debtors 200 370
Raw material and stores 160 224
Finished goods 140 120
Plant and Machinery 300 340
Land 80 80
Buildings 400 320
Patents 20 18
Discount on issue of debentures 40 36
2140 2396
Liabilities & Capital
Current liabilities 600 640
Provision for depreciation 100 56
Debenture 440 440
Reserves and surplus 300 390
Share capital 700 870
2140 2396

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The following additional information is available : Rs.
Net profit after tax 2,00,000
Dividend 40,000
Depreciation charged to profit 16,000
Ordinary shares issued 1,00,000
Bonus shares issued 70,000
Building sold 28,000
Original Cost Rs. 80,000
Net book value Rs. 20,000

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5. Prepare a Statement of Cash Flows of Atlantic Business Corporation from the following
information
Liabilities Rs. Rs. Assets Rs. Rs.
Current liabilities 30,000 32,000 Cash and bank 40,000 44,400
Bonds payable 22,000 22,000 Debtors 10,000 20,700
Discount on Bonds (2,000) (1,800) Inventories 15,000 15,000
Capital stock 35,000 43,500 Land 4,000 4,000
Retained earnings 15,000 19,500 Business premises 20,000 16,000
Plant 15,000 17,000
Accumulated Dep. (5,000) (2,800)
Patents 1,000 900
1,00,000 1,15,200 1,00,000 1,15,200
Additional Information: 1). income for the period Rs. 10,000
2). a building that cost Rs. 4,000 and which had a book value of Rs. 1,000 was sold Rs. 1, 400.
3). The depreciation charged for the year was Rs. 800.
4). There was Rs. 5,000 issue of capital stock.
5). Cash dividends of Rs. 2,000 and stock dividend of Rs. 3,500 were paid were declared.

AGBS-Hyderbad
6. The Balance Sheet of M/s A and B on 1.1.2017 and 31.12.2017 were as follows:
Liabilities 1.1.2017 31.12.2017 Assets 1.1.2017 31.12.2017
Creditors 1,20,000 1,32,000 Cash 30,000 21,000
Mrs A’s Loan 75,000 - Debtors 90,000 1,50,000
Loan from bank 1,20,000 1,50,000 Stock 1,05,000 75,000
Capital 3,75,000 4,59,000 Machinery 2,40,000 1,65,000
Land 1,20,000 1,50,000
Buildings 1,05,000 1,80,000
6,90,000 7,41,000 6,90,000 7,41,000
During the year a machine costing Rs. 30,000 (accumulated depreciation Rs. 9,000) was sold
for Rs. 15,000. the provision for depreciation against machinery on 1.1.2017 was Rs. 75,000
and on 31.12.2017 Rs. 1,20,000. Net profit for the year 2017 amounted to Rs. 1,35,000.
Prepare Statement of Cash Flows.

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