12th | Cash Flow Statement | Question No. 37 To 40 | Ts Grewal Solution 2022-2023

Question 37:

Jalco Ltd. provided the following information, calculate Net Cash Flow from Financing Activities:

Particular

31^st March,

2022 (`)

31^st March,

2021 (`)

Equity Share Capital

12,00,000

10,00,000

12% Debentures

2,00,000

1,00,000

Additional Information:
1.Interest paid on debentures ` 19,000.
2. Dividend paid in the year ` 50,000.
3. During the year, Jalco Ltd. issued bonus shares in the ratio of 5 : 1 by captialising reserve.

Answer:

Cash Flow from Financing Activities
	Particulars	(`)	(`)
	Proceeds from Issue of 12% Debentures	1,00,000
	Interest Paid	(19,000)
	Dividend Paid	(50,000)
	Net Cash Flows from Financing Activities		31,000

Note: Amount of Equity Share Capital has been increased due to the issue of Bonus Shares which does not involve any flow of cash. Therefore, it is not considered in the Financing Activities.

Question 38:

From the following information, calculate Net Cash Flow from Operating Activities and Financing Activities:

Particular	31^st March 2021 (`)	31^st March 2020 (`)
Equity Share Capital	13,75,000	11,25,000
5% Preference Share Capital	5,00,000	7,50,000
General Reserve	3,75,000	3,00,000
Surplus i.e., Balance in Statement of Profit and Loss	3,75,000	(3,50,000)
Securities Premium Reserve	25,000	...
Provision for Tax	1,00,000	50,000
Non-current Liabilities (8% Debentures)	6,50,000	3,75,000
Short-term Borrowings (8% Bank Loan)	1,00,000	1,25,000
Trade Payables	5,00,000	2,50,000
Trade Receivables and Inventories	13,00,000	11,50,000

Additional Information:
(i) During the year additional debentures were issued at par on 1st October and Bank Loan was repaid on the same date.
(ii) Dividend on Equity Shares @ 8% was paid on Opening Balance.
(iii) Income tax `1,12,500 has been provided during the year.
(iv) Preference shares were redeemed at par at the end of the year.

Answer:

Cash Flow Statement
	Particulars	Detail	(`)
	Cash Flow from Operating Activities Surplus i.e., Balance in Statement of Profit and Loss
	Closing Surplus		3,75,000
	Less: Opening Surplus		(3,50,000)
	Profit as per statement of P&L		7,25,000
Add:	Reserve	75,000
	Dividend Paid on Equity Shares	90,000
	Dividend Paid on Preference Shares	25,000
	Provision for Tax	1,12,500	3,02,500
			10,27,500
Add;	Interest on Debentures	41,000
	Interest on Bank Loan	9,000	50,000
	Operating Profit before Working Capital Adjustments		10,77,500
Add:	Increase in liabilities Trade Payable		2,50,000
			13,27,500
Less:	Increase in assets Trade Receivables and Inventories		1,50,000
	Cash Generated from Operation		11,77,500
Less:	Tax paid in current year		62,500
	Cash Flow from Operating Activities		11,15,000

Cash Flow from Financing Activities
	Proceeds from Issue of shares	2,50,000
	Increase in Securities Premium Reserve	25,000
		2,15,000	5,50,000
Less:	Payment for redemption of preference shares	(2,50,000)
	Payment for Repayment of Loan	(25,000)
	Dividend Paid on Equity Shares	(90,000)
	Dividend Paid on Preference Shares	(25,000)
	Interest on Debentures	(41,000)
	Interest on Bank Loan	(9,000)	(4,40,000)
	Cash Flow from Financing Activities		1,10,000

Working Notes:

Provision for Tax Account
Dr.		Cr.
Particulars	Amount (`)	Particulars	Amount (`)
Bank A/c (Bal. fig.)	62,500	Balance b/d	50,000
Balance c/d	1,00,000	Profit & Loss A/c	1,12,500
	1,62,500		1,62,500

Calculation of Interest on Debentures

3,75,000×8/100=30,000

2,75,000×8/100×6/12=11,000

Total Interest=30,000+11,000=41,000

Calculation of Interest on Bank Loan

1,25,000×8/100×6/12=5,000

1,00,000×8/100×6/12=4,000

Total Interest= 5,000+4,000=9,000

Question 39:

From the following information, prepare Cash Flow Statement:

Particulars	(`)
Opening Cash and Bank Balances	1,50,000
Closing Cash and Bank Balances	1,70,000
Decrease in Stock	80,000
Increase in Bills Payable	1,20,000
Sale of Fixed Assets	3,00,000
Repayment of Long-term Loan	5,00,000
Net Profit for the Year	20,000

Answer:

Cash Flow Statement
	Particulars		(`)	(`)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss (Net Profit)		20,000
	Profit Before Taxation		20,000
	Items to be Added:		–
	Operating Profit before Working Capital Adjustments		20,000
	Add: Decrease in Current Assets
	Stock		80,000
	Add: Increase in Current Liabilities
	Bills Payable		1,20,000
	Cash Generated from Operations		2,20,000
	Less: Tax Paid		–
	Net Cash Flow from Operating Activities			2,20,000

B	Cash Flow from Investing Activities
		Sale of Fixed Assets	3,00,000
	Net Cash Flows from Investing Activities			3,00,000

C	Cash Flow from Financing Activities
	Repayment of Long-Term Loan		(5,00,000)
	Net Cash Used in Financing Activities			(5,00,000)

D	Net Increase or Decrease in Cash and Cash Equivalents			20,000
		Add: Cash and Cash Equivalent in the beginning of the period		1,50,000
	Cash and Cash Equivalents at the end of the period			1,70,000

Question 40:

From the following Balance Sheet of Young India Ltd., prepare Cash Flow Statement:

BALANCE SHEET OF YOUNG INDIA LTD. as at 31st March, 2022
Particular	Note No.	31st March, 2022 (`)	31st March, 2021 (`)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital		2,50,000	2,00,000
(b) Reserves and Surplus: Surplus, i.e., Balance in Statement of Profit and Loss		1,83,000	82,000
2. Non-Current Liabilities
Long-term Borrowings:
15% Debentures		80,000	50,000
3. Current Liabilities
(a) Trade Payables		1,50,000	1,10,000
(b) Other Current Liabilities		12,000	20,000
Total		6,75,000	4,62,000
II. ASSETS
1. Non-Current Assets
(a) Fixed Assets (Tangible)		2,74,000	1,17,000
(b) Non-Current Investments		68,000	55,000
2. Current Assets
(a) Inventories		2,06,000	1,50,000
(b) Trade Receivables		32,000	70,000
(c) Cash and Cash Equivalents		95,000	70,000
Total		6,75,000	4,62,000

Answer:

Cash Flow Statement for the year ended March 31, 2022
	Particulars	(`)	(`)
A	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss (1,83,000 – 82,000)	1,01,000
	Profit Before Taxation	1,01,000
	Items to be Added:
	Interest on Debentures	7,500
	Operating Profit before Working Capital Adjustments	1,08,500
	Less: Increase in Current Assets
	Inventories	(56,000)
	Add: Increase in Current Liabilities
	Trade Payables	40,000
	Less: Decrease in Current Liabilities
	Other Current Liabilities	(8,000)
	Add: Decrease in Current Assets
	Trade Receivables	38,000
	Cash Generated from Operations	1,22,500
	Less: Tax Paid	–
	Net Cash Flows from Operating Activities		1,22,500

B	Cash Flow from Investing Activities
	Purchase of Fixed Assets	(1,57,000)
	Purchase of Investments	(13,000)
	Net Cash Used in Investing Activities		(1,70,000)

C	Cash Flow from Financing Activities
	Proceeds from Issue of Equity Share Capital	50,000
	Proceeds from Issue of 15% Debentures	30,000
	Interest on Debentures (50,000 × 15%)	(7,500)
	Net Cash Flow from Financing Activities		72,500

D	Net Increase or Decrease in Cash and Cash Equivalents		25,000
	Add: Cash and Cash Equivalent in the beginning of the period		70,000
	Cash and Cash Equivalents at the end of the period		95,000

Note: It has been assumed that Debentures were issued at the end of the accounting period. Therefore, interest on Debentures is computed on the opening balance of the Debenture.