5.

Illustration 5.1 Management Accountng

Calculate cash from operating activities from the following:
31st March
2013
2014
Profit and Loss Account 60,000
Debtors 85,000 65,000
Bills Receivable (B/R) 40,000 48,000
General Reserve 1,72,000 81,000
Wages outstanding 26,000 2,07,000
Salaries prepaid 8,000
8,000
Goodwill
70,000
10,000
60,000
Solution
Calculation of Cash from Operating Activities
Profit during the year (65,000 - 60,000)
Add : Transfer to general reserve 5,000 alcule
(2,07,000 -
Goodwill witten off (70,000 - 60,000) 1,72,000) 35,000
Cas
10,000
45,000 g te
Add: Decrease in debtors (C.A.) (85,000- 50,000
48,000) 37,000
OW
Less: Increase in B/R (C.A.) (81,000 - 40,000) 87,000alcul
Increase in salaries prepaid (C.A) (10,000- 8,000) 41,000
he
Decrease in wages outstanding (C.L.) (26,000- 8,000) 2,000
18,000 ebentt
61,000
Cash from operating activities ating
26,000 d of
C.A. = Current Assets; C.L. = Current
Liabilities.
Illustration 5.2 lustra
From the following balances calculate cash from Pre
operations : RS. Lto
31st December
2013 2014
abiliti
Bills Receivable
50,000 47,000 hare
Debtors
10,000 12,500 23% De
Bills Payable
20,000 25,000 iAnera
Creditors
8,000 6,000 Lredti o
Outstanding Expenses
Prepaid Expenses
1,000
800
1,200
700
tstar
Accrued Income 750
600
Income received in advance 800 250
Profit made during the year 70,000
5.9 70,000 8,30078,300 5,20073,100 of and statement.andcashthis of
disposal 2014 2,80,000
2,000 1,30,000
60,00018,0005,80,000
90,000
inflows shares Sheets
of under
outflows
andcashflow statement
preference Balance
2,5002,000150 550 acquisition and 2,00,000
1,00,000
70,000 4,35,000
of cash
3,0005,000200 100 2013 10,000 40,000 15,000
effect the
the inflows
flow
of
redemption in
Activities in given
fromnet activities of cash
:liabilities The effect information
liabilities: resultinvestments.
the Building
Operating Activities Activities
investing in
debentures,
net shown
current activities The andMachinery
Goodwill
2,50,000|
current Assets
2014 Debtors
etc.and the Land Cash
Stock20,000
and Financing
from (C.L.)
Investing from
in
increases (C.L.) in investing determined of
andloans 80,000 1,00,000 5,80,000
60,000
decrease advance basis 70,000
Cash Liability. flows
assets shares
(C.A.) of Activities.
of (C.A.) expenses (C.A.) activities cash from
fromcurrent
repayment the
Currentfrom
year
Caleulation and (C.L.) in 1,00,000
receivable expensesand of is on 2,00,000 25,0004,35,000
20,000
theassets payable
(C.L.)
(C.A.)
received
income outflowsas issue activities
Financing Statement 2013 40,000
50,000
outstandingassets Flows non-operating
shown Flows
during
current prepaid current creditors operating to
and
income =
debtors accrued C.L. financing
and loans
billsbills
Asset, Cashcash Cashrelate from
determined Flow
Statement madein in in in in and
in in in in in from activities
of
esDecreases
Decrease
Increase Decrease
Increase Increase Decrease
IncreaseIncrease
Decrease assets, of raising Flows Cash
Profit Cash Currentof inflows
Calculation Calculation these Outstanding
Exp.
onlution :Add loss: =
C.A.
ebentures,Cash
Cashtermisoutflows These toTelating
of

5.3
lustration
aPrepare
Ltd. Liabilities

12%
Debentures
Share
Capital
General
Reserve
Bills
Payable
Creditors
long head P.S.
es Solution : 5.10
. Net
(iii) () ()
Add: Cash
CashIncrease Cash Cash Cash Less
Cash Goodwill
Add:Profit Cash
inflow shares
debentures
and balance CashRedemption of outfiow
of
machinery
Issuefrom Purchase of frominflow
Purchase Increase
Decrease : creditors
Increaseinduring from
Increase Increase
balance in
ses from Investing from Operating
at Cash Financing from the
the financing of in in in in written
investing land operating
outstanding stock debtors bills year
of end the in Cash
ash Activities Activities
and Activities
of
beginning (C.A.) payable off tr.
(C.A.) (10,000- to Flow
the activities activities activities
building (C.L.)
A general
low year exp. (C.L.) Statement
of (C.L.)
nt the 2,000)reserve
year for
(70,000-
the
year
50,000)
ending

2014

20,000(-) 30,00080,000
(-) () (-) (-)
5,00020,000
(-) 20,000
1,28,000 Management
Accounting
50,000 80,000
20,0008,00020,000

(-)1,10,000
18,00015,000 3,00030,000 83,000

o De
lo Re
lo b Probl
 flo
cash basis.
Cash flow statement ignores accrual basis of accounting as it is prepared on
PROBLEMS AND SOLUTIONS

Aroblem 5.1
Srom the following calculate cash from operations
Profit and Loss Account for the year ended 31st March, 2014
(? 000) ( 000)

Salaries 5,000 By Gross profit 25,000

b Rent 1,000 By Profit on sale of land 5.000
Depreciation 2,000 By Income-tax refund 3,000
Loss on sale of plant 1,000
D Goodwill written off 4,000
DProposed dividend 5,000
Ib Provision for tax 5,000
o Net proft 10,000
33,000 33,000

Solution :
Calculation of Cash from Operations

10,000
Net profit
Add : Non cash items :
2,000
Depreciation 4,000
Goodwill witten off 5,000
Proposed dividend 5,000
Provision for tax 1,000 17,000
Loss on sale of plant
27,000
Less: Non operating incomes : 5,000
Profit on sale of land 3,000 8,000
Income tax refund
19,000
Cash from Operations
blem5.4

balance sheets of VXL Limited as at December 31 of two years are given below : 2013
the 2014
Assets (?) (?)
60,000 50,000
Cash balances 1,00,000 75.000
Tade debtors 1,20,000 1,40,000
Inventory 80.000 1,00,000
Land 2,50,000 2,00,000
Plant and Machinery 5,65.000
6,10,000
Total
Liabilities and Capital 40,000 30.000
Trade creditors 90,000 1,50,000
Debentures 80,000 60,000
Provision for depreciation on plant 2,40,000 2,00,000
Equity share capital 1,60,000 1,25,000
Retained earnings
6,10,000 5,65.000
Total
paid during the vear.
Cash dividends of 25,000 have been
flow statement on indirect basis
You are required to prepare a cash
5.14
Management Accountino Aalad

Solution
Cash Flow Statement

Prep
(i) Cash flow from operating activities
Net profit during the year (25,000 + 35,000)*
Add: Depreciation (80,000- 60,000) 60,000 alutio

Net decrease in inventory (1,40,000 - 1,20,000) 20,000 Norkin

Net increase in creditors (40,000- 30,000) 20,000
10,000
Less: Net increase in debtors (1,00,000 - 75,000) 1,10,000
Net inflow from operating activities 25,000 p Balan
(i) Cash flow from investing activities 85,000 oProfi
Purchase from plant and machinery (-) 50,000 o Cash
Sale of land
20,000
Net Cash outflow from investing activities
(iiü) Cash flow from financing activities (-)30,000
Issue of share capital (2,40,000- 2,00,000) 40,000
Redemption of debentures (1,50,000- 80,000) (-) 60,000
Dividend paid (- 25,000 ()
Net cash outflow from financing activities
Net Increase in Cash (85,000- 30,000 - () 45,000 Add
Add: Cash balance in the 45,000)
10,000
beginning
Cash balance at the end 50,000

*Working Note : Profit during the year = Dividend paid + 60,000

Increase in retained earnings.
Problem 5.5
The Balance Sheets of X Ltd as on 31st
March, 2013 and 31st March, 2014 were as Le
follows :
31st March 31st March
2013 2014
Assets :
Land and Buildings
Plant and Machinery 80,000 1,20,000
Stock 5,00,000 8,00,000 L
Sundry Debtors 1,00,000 75,000
C
Prepaid Expenses 1,40,000 1,50,000
Cash at Bank 14,000 12,000
16,000 18,000
Liabilities and Capital : 8,50,000 11,75,000
Share Capital 7,00,000
Profit & Loss Account 5,00,000
General Reserve 1,00,000
1,60,000
70,000
Sundry Creditors 50,000 2,00,000
Bills Payable 1,63,000 40,000
Outstanding Expenses 30,000
7,000
5,000

11,75,000
8,50,000
 FlowStatement 5.15

Aditional Information:
50,000 depreciation has been charged to plant and Machinery during the year, 2014.
)A piece of machinery was sold for 8,000 during 2014.It had cost ?12,000, depreciation of
F7,000 has been provided on it.
Prepare Cash Flow Statement from the above details.

ution
orking Notes :
Plant & MachineryAccount

Balance b/d 5,00,000 By Cash - Sale 8,000

t Profit on sale 3,000| By Depreciation 50,000
Cash (Purchase) (B.E.) 3,55,000 By Balance c/d 8,00,000
8,58,000 8,58,000

Cash Flow Statement

for the year ending 31st March 2014
() Cash from Operating Activities
60,000
Profit during the year (1,60,000- 1,00,000 50,000
Add: Depreciation on machinery 20,000
General reserve (70,000 - 50,000) 25,000
Decrease in stock (C.A.) 2,000
Decrease in prepaid expenses (C.A) 37,000
Increase in creditors (C.L.) 10,000
Increase in bills payable (C.L.) 2,04,000
(-) 3,000
machinery
Less : Gain on sale of (C.A.) (-) 10,000
Increase in debtors (-) 2,000
(C.L.)
Decrease in outstanding exp. 1,89,000
operating activities
Cash inflow from
Investing Activities 8,000
(ii) Cash frommachinery (-) 3,55,000
Add: Sale of machinery (-) 40,000
Less: Purchase of land and building (-) 3,87,000
Less: Purchase of investing activities
from
Cash outflow Financing Activities 2,00,000
(iii) Cash from
Issue of shares activities 2,00,000
from financing 2,000
Cash inflow in cash 16,000
increase beginning
Net
balance in the 18,000
Add : Cash at the
balance
end
Cash
 5.16
Management Accounting Cash

W
Problem 5.6
Sons.
balance sheets of IVRL &
Given below are the
1Jan 2014 31 Dec.
2014 |Assets 1Jan. 2014 31 Dec. 201%
Liabilities
ToB
40,000 44,000 Cash 10,000
Creditors
25,000 Debtors 30,000 1,
Mrs. A's Loan
40,000 50,000 | Stock 35,000 50,000
Loans from Bank
Capital
1,25,000 1,53,000| Machinery 80,000 25,55,00,
00,
Land 40,000
Building 35,000 50,05,
60,00
2,30,000 2,47,000 2,30,000
247,00 To
During the year amachine costing 10,000 (accumulated depreciation 3,000) sold for ?5.00 To E
The provisions for depreciation against Machinery as on 1 January, 2014 was 25,000 and n
31 December 2014 40,000. Net profit for the year amount to 45,000.
You are required to prepare Cash Flow Statement.
Pro
Solution
Cash Flow Statement
for the year ending 31-12-2014
(i) Cash flow from operating activities
Profit made during the year
Add : Depreciation on machinery 45,000
Loss on sales of machinery* 18,000
Decrease in stock 2,000
Increase in creditors 10,000
4,000 34,000
Less : Increase in debtors 79,000
Cash inflows from operating (-) 20,000
Cash flow from investing activitis 59,000
Sale of machinery* activities
Purchase of land (50,000 - 40,000) 5,000
Purchase of building (60,000 - 35,000) (-) 10,000
Net Cash outflow from
investing activities
Cash flow from financing
() 25,000
(-)30,000
Loan from Bank activities:
Mrs. A's loan repaid 10,000
Drawings (-) 25,000
Net cash outflow from financial
Net decrease in cash and cash activities
(-) 17,000 -)32,000
Cash and cash equivalents on Janequivalents
1, 2012
(-)3,000
10,000
Cash and cash equivalents on Dec 31,
2012 7.000
MtFlowStatement 5.17

Working otes:
Machinery Account (At Cost)
Particulars Particulars

Balanceb/d 1,05,000 By Bank 5,000

By Loss on sale of Machinary 2,000
By Provision for depreciation 3,000
By Balance c/d 95,000

1,05,000 1,05,000

Provision for Depcreciation

Particulars
Particulars
25,000
3,000 By Balance b/d
Nachinery 18,000
Balance c/d
40,000 By P. &L. A/c (balancing figure)
43.000
43,000

Problem 5.7 2014.

balance sheet of AB Co Ltd. as at 1st January, 2014 and 31st December,
Following is the 1-1-2014 31-12-2014

Liabilities: 3,00,000 3,50,000

Equity share capital 30,000
Share premium 45,000 65,000
General reserve 30,000 80,800
Profit and .loss 70,000
6% Debentures 85,000 90,700
22,500 40,500
Sundry creditors 35,000
Provision for taxation 30,000
Proposed dividend 5,12,500 7,62,000

2,30,000 3,90,000
Assets : 1,40,000
Land and building 85,400
5,500 6,500
Plant and machinery 95,700
Furniture 82,400
75,000 85,500
Stock 44,300
34,200
Sundry debtors 7,62,000
Bank balance 5,12,500

Additional Information 60,000

Vepreciation written off during the year. 50,000
Land and building 1,200
Plant and machinery
Furniture flow statement.
You are required to prepare a cash
5.18

Solution:
Management Accountna
Note : The following accounts have been prepared to determine the relevant
Land and Building Account information.
To Balance b/d 2,30,000 By Depreciation
To Bank (purchase) 2,20,000 By Balance c/d
4,50,000 3,90,009
Plant and Machinery Account
4,50,059,
To Balance b/d 85,400 By Depreciation
To Bank (purchase) 1,04,600 By Balance c/d 50,000
1,90,000 140,00
1.90,00
Furniture Account
To Balance b/d 5,500|| By Depreciation
To Bank (purchase) 2,200| By Balance c/d 1.200
7,700
6,500
7,700
Provision for Taxation Account

To Bank (tax paid) 22,500 By Balance b/d

To Balance c/d 22,500
40,500| By P &L A/c 40,500
63,000 63,000
Cash Flow Statement for the vear ended
31-12-2014
(1) Cash Flow from Operating Activities
Profit during the year (80,800 - 30,000) 50,800
Add : Derreciation on :
Land and building
Plant and machinery 60,000
Furniture 50,000
General reserve (65,000 - 45,000) 1,200
Taxation provision 20,000
Proposed dividend 40,500
Increase in creditors (90,700- 85,000) 35,000
5,700
Less : Increase in stock (95,700- 82,400) 2,63,200
Increase in debtors (85, 500- 75,000) (-) 13,30
() 10,500
Less : Income taX paid 2,39,400|
Cash inflow from operating activities ( 22,500 2,16,900
 t FlowStatement 5.19

Cash Flow from Investing Activities

Less: Purchase of land and building (-) 2,20,000
Purchase of plant and machinery (-) 1,04,600
Purchase of furniture (-) 2,200
Cash outflowfrom investingactivities (-) 3,26,800
m) Cash Flow from Financing Activities
Add : Issue of equity shares 50,000
Share premium 30,000
Issue of debentures 70,000
1,50,000
Less : Payment of dividend (-) 30,000
Cash inflow from financing activities 1,20,000
Net increase in cash 10,100
34.200
Add : Cash balance in the beginning
Cash balance at the end 44,300

Problem 5.8
The following Balance Sheets are given : 2013 2014
2013 2014 Assets
iabilities
1,15,000 90,000
3,00,000 4,00,000 Goodwill 2,00,000 1,70,000
Equity Share Capital 1,50,000 1,00,000 Land and Building 80,000 2,00,000
tedeemable Pref. Capital 40,000 70,000 Plant
1,60,000 2,00,000
beneral Reserve 30,000 48,000 Debtors
77,000 1,09,000
rofit and Loss Account 50,000 Stock
42,000 Bills Receivable 20,000 30.000
roposed Dividend 55,000 83,000
Cash in Hand 15,000 10,000
zeditors 20,000 16,000 10,000
Cash at Bank 8,000
50,000
Blls Payable 40,000 6,77,000 8,17,000
rovision for Taxation 6,77,000 8,17,000

charged in 2014
also given that : and building and 10,000 on plant has been
It is on land
Depreciation of ? 20,000 has been paid in 2014
(a) dividend of? 20,000
during 2014
(b) Interim has been paid (B. Com.)
Income tax? 35,000 the year 2014.
(c) Statement for
Cash Flow
Prepare
 Cash

5.20 Management Accountind

Solution :
Cash Flow Statement for the year 2014

() Cash from Operating Activities 30,000) 18,000

Profit during the year (48,000- 10,000
Add: Depreciation on plant 20,000
Depreciation on building
Goodwill witten off 25,000
Proposed dividend 50,000
Internim dividend 20,000
General reserve 30,000
45,000 Sol
Provision for taxation
Increase in creditors (C.L.) 28,000
2,46,000
Less: Decrease in bils payable (C.L.) (-) 4,000
Increase in debtors (C.A.) (-) 40,000
Increase in stock (C.A.) (-) 32,000
Increase in bills receivable (C.A.) (-) 10,000
1,60,000
Income tax paid 35,000
Cash inflow from operating activities 1,25,000
(i) Cash from Investing Activities
Purchase of plant () 1,30,000
Sale of building 10,000
Cash outflow from investing activities (-) 1,20,000
(iii) Cash from Financing Activities
Issue of share capital 1,00,000
Redemption of pref. shares (-) 50,000
Dividend paid (-) 42,000
Interim dividend paid (- 20,000
Cash outflow from financing activities -) 12,000
Net decrease in cash (-) 7,000
Cash balance in the beginning (15,000 + 10,000) 25,000
Cash balance at the end (10,000 + 8000) 18,000

Problem 5.9
From the following Balance Sheet of PK Ltd. for the year ending 31-12-2013 and 31-12-2014, prepal
cash flow statement.

Liabilities 2013 2014 2014

Assets 2013

20,000
Equity share capital 2,15,000 2,75,000 Goodwill
1,16,200
Reserves 40,000 40,000 Plant &Mach. 1,12,950
Profit &Loss A/c 1,44,250
39,690 41,220 | Land and Building 1,48,500 1,70,730
Provision for tax 40,000 50,000 Current assets 1,98,530 7,700
Bank loan 59,510 Cash 7,500
Current liabilities 73,280 52,660
4,58,880
4,67,4804,58,880 4,67,480
 Flow Statement 5.21

he following information is also provided:

Adividend of 26,000 was paid during the year 2014.
. Profit before tax for the year was 62,530.
3. During the year 2014, the company paid tax of 25,000.
4. During the year, thecompany purchased another company and paid 60,000 in share capital.
It acquired stock 21,640 and plant 18,360.
5. It purchases machinery costing 5,650 during the year.
solution
Cash Flow Statement for the year ending 31-12-2014
) Cash Flow for 0perating Activities
Profit during the year 62,530
Add : Deprecation on:
Land and building (1,48,500 - 1,44,250) 4,250
Plant and machinery 20,760
Decrease in current assets 27,800
21,640
Stock acquired on purchase of business
1,36,980
(-) 25,000
Less : Tax paid (-) 20,620
Decrease in current liabilities
91,360
Cash inflow from operating activities
(ü) Cash flow from investing activities. () 5,650
Purchase of plant and machinery
activities
(ii)Cash flows from financing (-) 26,000
Payment of dividend (-) 59,510
Re-payment of bank loan 200
cash 7,500
Net Increase in beginning
Add cash balance in the year
7,700
end of the
Cash balance at the
non-cash transaction and
Working Notes. ? 60,000 for purchasing another company is a
for
share capital statement.
1. Issue of not entered in cash flow
thus has Plant and Machinery Account
2
1,12,950 By Depreciation (B.F.) 20,760
5,650 By Balance c/d 1,16,200
To Balance b/d 18,360
To
To Cash
purchase (non-cash) 1,36,960
1,36,960
5.22
Management Accounting
Problem 5.10
sheets of Glow Ltd. as on 31st March 2013 and 31st March. 2014
Given below are the balance 2013
2014
2,00,000
Equity Share capital 3,00,000
1,00,000 1,00,000
Long-term Loan 1,50,000
Creditors 2,00,000
2,00,000 3,00,000
Bills payable 1,80,000
Retained earnings 2,00,000
8,30,000 11,00,000
Cash 60,000 30,000
Stock 1,20,000 1,90,000
Debtors 80,000 1,20,000
Goodwill 2,00,000 1,50,000
Plant and Machinery 1,00,000 2,00,000
Land and Buildings 2,00,000 4,00,000
Furniture 70,000 10,000
8,30,000 11,00,000
Additional information:

(a) Operating expenses include depreciation ? 80,000 and amortization of goodwill ? 50,000.
(b) A machine has been sold for 15,000. The written down value of the machine was 40,000 and
20,000 depreciation is changed on the same in 2014.
(c) Plant and machinery was purchased for cash 1,40,000 and Land and
Buildings for ? 2,00,0v
(d) Furniture was sold for cash 60,000.
(e) Equity shares were issued for cash 1,00,000.
() 80,000dividend was paid in cash.
(a) Net profit for the year ending 31-3-2014 was
1,00,000.
Prepare a Statement of Cash Flow for the year ending
31-3-2014.
 flowStatement 5.23

otion:

Cash Flow Statement for the year ending 31-3-2014

a Cash flow from operating activities:

Net profit for the year 1,00,000
Add: Depreciation (plant + building) 80,000
Loss on sale of plant 5,000
Goodwill written off 50,000
Increase in creditors 50,000
Increase in bills payable 1,00,000
2,85,000
Less: Increase stock (-) 70,000
Increase in debtors -) 40,000 1,75,000
Net cash inflow from operating activities 2,75,000
() Cash flow from investing activities:
Purchase of plant and machinery (-) 1,40,000
Purchase of land and building (-)2,60,000
Sale of machinery 15,000
Sale of funiture 60,000
Net cash outflow from investing activities (-) 3,25,000
(im) Cash flow from financing activities:
Issue of equity capital 1,00,000
Dividend payment (-)80,000
Net cash inflow from financing activities 20,000
Net decrease in cash (-) 30,000
Cash balance in the beginning 60,000
Cash balance at the end 30,000

Working Notes:
Plant and Machinery Account

15,000
ToBalance b/d 1,00,000 By Cash (sale)
1,40,000 By Loss on sale 5,000
To Purchase
By Depreciation 20,000
By Balance c/d 2,00,000
2,40,000 2,40,000

Land and Building Account

2,00,000 By Depreciation 60,000

4,00,000
To Balance b/d 2,60,000 By Balance c/d
4,60,000
To Purchase 4,60,000
5.24

Problem 5.11
Management Accounting
From the following condensed comparative Balance Sheets of Bangalore Mills
Ltd. and
intormation, prepare a Cash Flow Statement for the year 2014. additionl
Liabilities 2013 2014 Assets
2013 2014
Share Capital 70,000 80,000 Plant &Machinery
Share Premium 62,000
9,000 11,000 Accumulation Dep. on 66,000
plant and much. (37,000) (26,200,
Retained earnings 23,820 30,820 Building 95,000
7% Mortgage loan
Creditors
20,000 Accumulation dep. on building (43,000) 1,16,000
Outstandingsalaries
6,900 6,000 Land
10,000 (45,000)
Provision for taxation
2,000 1,400 Stock 10,220 12,9,620
000
1,000 1,400 Debtors 8,600
Prepaid expenses 720
7,680000
Cash
6,180 9,800
1,12,720 1,50,620
1,12,720 1,50,620
Additional information
1. Plant costing 16,000 (accumulated depreciation
1,200. 14,800) was sold during the year for ?
2. Building was acquired during the year at a
cost of
?1,000, a 7% mortgage loan was raised for the balance.21,000. In addition to cash payment of
3. Dividend of 8,000 was paid
during the year.
4. A sum of 13,900 was
transferred to provision for taxation account in 2014.
Solution
Cash Flow Statement for the year
2014
(1) Cash flow from
operating activities :
Net profit during the year (before
provision for tax) divided payment and 28,900

Add: Depreciation -Building

Plant 2,000
Decrease in stock (C.A.) 4,000
Decrease in debtors (C.A.) 600
1,000
Less: Decrease in creditors 7,600
Decrease in outstanding salaries () 900
Increase in prepaid expenses (-) 600
Income tax paid () 80 ()7.480
Net cash inflow from operating () 13,500 21,420
activities
FowStatement 5.25

Cash flow from investing activities :

Purchase of Building (-)1,000
Purchase of plant and machinery (-) 20,000
Purchase of land
Sale of plant (-)2,000
1,200
Net cash outflow from investing activities
(-)21,800
(m) Cash flow from financing activities:
Issue of shares
10,000
Share premium
2,000
Dividend paid
Net cash inflow from financing activities (-) 8,000
Net Increase in cash 4,000
Cash in the beginning 3,620
Cash at the end of 2012 6,180
9,800
Norking Notes:
Retained Earnings Account

Dividend paid
o Balance c/d
8,000| By Balance b/d
23,820
30,820| By Profit during the year (B.F.)
15,000
38,820
38,820
Plant and Machinery Account
Rs
to Balance b/d 62,000| By Sale of plant
20,000| By Dep. on plant sold 1,200
OBank-Purchase (B.F.) 14,800
By Balanced c/d
66,000
82,000
82,000
Accumulated Depreciation on Plant &Mach. Account

14,800|By Balance b/d

loPlant (Dep.) 26,200| By P &LA/c (Dep.) 37,000
lo Balance c/d 4,000
41,000
41,000
Building Account

95,000| By Balance c/d 1,16,000

1,000
lo Balance b/d
20,000
lo Bank (purchase)
(Purchase) 1,16,000
0 Mortgage Loan 1,16,000
 To 5.26
Profit
Capital
Equity
Share Term
Long
Debt
Payable
Income
Tax Creditors Liabilities
Dividends
Payable Problem
5.12 Income
Totax To
Balance
Account Balancec/d
Balance
IncomeNet and
Interest
Less:
Add:Expenses
Operating
Expernses
Less: Less:
Loss c
Income
Less:
Tax Income sheets d
LawbeforeTaxOperating Gross Revenue
Income Margin CostSalesNet (B.E.)
paid
Appropriation
suit of
Goods for
compensation Income
2013
Balance
Sold
and
Accumulated
Statement
3,07,000
3,40,000 1,68,000 26,00075,000 2014
3,000 2,00066,000 2014 sheets Provision
and
For as Depreciation
Inventory
1,56,000expenses
Prepaid
26,000| Cash onincome 14,900 13,500|By 45,000 45,000
the 42,000|5,000| 78,000 Assets
2013 1,400| for
31
Year December
statement Taxation
Depreciation
Provision
for
Machinery Debtors
Land Provision ByBy
By
Ended P&LA/cBalance P
Balance on
&
Account L Building
31 for 2013 for A/c
and b/d b/d
December doubtful 2014 (provision (Dep.)
Equipment and Account
of
2014 ABX
debts during
2014
1,00,000
5,00,000
6,00,000 Ltd.
18,00017,000
35,000 30,0004,00034,00066,000 Management
Accounting
5,000
(1,13,000)
(1,02,000) are the
3,40,000 1,56,00069,000 1,03,000(3,000)95,00011,000
3,07,000 1,72,000 presented
6,000 2014 year)

66,000 5,00092,000(2,000) 79,00013,000 belor 14,900 13,900 1,00, 4309

20
2013
 alution Statement
Fiopt
w
(ü) (0 the
(n) repare () )
equipment
land of of
Net Purchase Cash Add: : Cash
Less: DepreciationAdd Profit There Landpayi6,0ncash00.
Cash Cash NetDividend Interest
Net paid paidIncrease Cash Purchase fol owing
EquigpmentDideclvidendsared
decrease cash cash Increase Decrease
paiTadx creditors Increase
in
inventory
Increase expenses
Interest
in Provision
Operating during flow
balance
balance flow flow Net Law Cash were was
inoutflow from additional
inflow from cash suit Flow acquired
no
long from in the worth
at in in compensation
outflow in for accruals
from term investing prepaid debtorsprofit operating
yea Statement
the the cash financing from doubtful Cash information
beginning
end during
for 16,000
financing debt investing from before (before
expenses Flow interest.and3,000.
activities debtor activities: for 2014, R
activities operating working tax)Statement amounts
prepaid
the for was
activities activities
year
acquired available: is
6,000.
: :
activities capital
2014.
for
changes by
the the
year issuance
ending
of
2014 long
term
(-) 11,000
19,000(-) 1,00012,000 () (-)
(-) 16,000 note
(-)4,000 3,000(-)6,000(-) 11,000
(-)4,00023,000 1,000 4,000

10,000 ?

2,000(-) 9,000() -) ()
8,000(-) 13,000(59,000 arnd
46,00016,000 30,000 5.27
11,00013,000 15,000 5,000
by
5.28
Management Accounting
Problem 5.13
XLR Ltd. has provided the following balance sheets for two years as on 31-3-2013 and 31-3-201/
Liabilities 2013 2014| Assets 2013 2014

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

General reserve 60,000 Machinery
5,000
50,000 1,50,000 1,69,000
P&L A/c 30,500 30,600| Land and Building 2,00,000 1.90,000
Bank Loan (Long term) 70,000 Stock 1,00,000 74,000
Provision for taxation 30,000 35,000 Sundary debtors 80,000 64,200
Sundry creditors 1,50,000 1,35,200 Cash 500 600
Bank
5,30,500 5,10,800
8,000
5,30,500 5,10,800
The following additional information is supplied :
During the year ended 31-3-2014, assets of another company were acquired for a consideration of
50,000 which was not payable in cash but in shares. These assets included:
Machinery 25,000
Stock 20,000
You are required to prepare a Cash Flow Statement.
Solution
Missing information is derived by preparing the following accounts. Net profits during
? 100 + Tr. to general reserve the year profit
10,000 + provision for taxation ? 35,000 = 45,100.
Share Capital Account

To Balance c/d
2,50,000| By Balance b/d 2,00,000
By Machinery 25,000
By Stock 20,000
By Goodwill (Bal. Fig.) 5,000
2,50,000 2.50,000

Machinery Account
To Balance c/d
To Share Capital A/c 1,50,000| By Depreciation (Bal. Fig.) 6,000
25,000| By Balance c/d 1,69,000
1,75,000 L75,000

Provision for Taxation Account

To Bank 30,000 By Balance b/d 30,000

To Balance c/d 35,000| By P&L A/c 35,000
65,000 65,000
astFlow Statement
5.29

Cash Flow Statement for the year ending

31-3-2014
() Cash flow from Operating Activities
Net profit during the year (100 +10,000 +35,000) 45,100
Add : Depreciation on land and building 10,000
Depreciation on machinery 6,000
Decrease in stock (CA) 26,000
Decrease in debtors (CA) 15,800
1,02,900
Less: Decrease in creditors (CL) (-) 14,800
Income tax paid (- 30,000
Net cash inflow from operating activities 58,100

() Cash flow from Investing Activities NIL

(iü) Cash flow from Financing Activities

Add : Issue of share capital (equal to stock acquired) 20,000
Less : Repayment of Bank loan (-) 70,000
(-) 50,000
Net cash outflow from financing activities 8,100
Net increase in cash and cash equivalents 500
Cash and cash equivalents in the beginning of the year
8.600
Cash and cash equivalents at the end of the year (600 + 8,000)
EXAMINATION QUESTIONS

Short Answer Questions

1. Giving reasons, classify the following into cash flows from:
Operating Activities; (ii) Investing Activities; and (iii) Financing Activities.
()
1. Cash sales of goods-in-trade:
2. Cash paid to suppliers of raw materials;
employees;
3. Cash payments of salaries and wages to
say, machinery;
4. Cash payment to acquire a fixed asset, premium;
5. Cash proceeds from issuing shares at a
6. Payment of dividends;
7. Interest received on investments;
8. Interest paid on debentures;
9. Payment of income tax; and
10. Cash repayment of a long-term loan.
3. Operating Activities, 4. Investing Activities,
2.Operating Activities, 8. FinancingActivities,
Ans. 1. Operating Activities, 6. Financing Activities, 7. Investing Activities,
5. Financing Activities, 10. Financing Activities.
Activities,
9. Operating ement ?