FINANCIAL STATEMENTS OF COMPANIES 11.

91 a

Illustration 6
Ryan Ltd provides you the following information at the year-end, March 31, 20X1:

` `

- Sales 6,98,000

~ Cost of Goods Sold (5,20,000)

Gross Profit 1,78,000

~Operating Expenses
-
(including Depreciation Expense of ` 37,000)-
(1,47,000)

Operating pit 31,000

Other Income / (Expenses):

Interest Expense paid (23,000)

&
- ~
-

Interest Income received -6,000

operating
~
= Now

- Gain on Sale of Investments -

12,000
- Loss on Sale of Plant - (3,000)

(8,000)
NPBT
~ F 23,000

-Income tax =>

* (7,000)

NPAT
16,000
X

Information available:

31st March 31st March

20X1
E
20X0
T

` `

~ Plant : LOST ↑
=
=> 7,15,000 5,05,000

-Less: Accumulated Depreciation * (1,03,000) (68,000)

E
- I

WD 6,12,000 4,37,000

© The Institute of Chartered Accountants of India

 Cash from statement f -
t .

y
.
e .
31 3 21
. .

Particulars Amount Amount

1) Cash flow from

operating activities

Net
Profit before tax (16000 +1000) 23000
↑

add :
extraordinary expenses X

incomes
extraordinary
X
less :

Net Profit before tax and

extraordinaly items 23000
↑

add :
Non-operating
LOSOP
expenses
3008

Interest expense 23000

less :
Non-operating Incomes
↑

GOSOI (2000)
26000)
1

Interest Income

add :
Operating Non-cash expenses
Depreciation 37000 !

operating profit before working Capital changes 68000

(34000)
%

Add
increase in
less :
in
inventory Receivables 8000
: decrease Trade
add : decrease in prepaid expenses 4000
increase in Trade
add :
increase in
Payablesliab 7000
add :
outstanding 3000
.

Cash flow from operations 56000

less : Income Tax paid 19000)
flow from activities 47008 47008
cash
operating ↑

activities
It) Cash from from
Interest
investing
received 6000
Investment purchased (78000)↑

Investments sold 102000

(120000S
1

Plant purchased
(85000)
-

Plant sold 5000

#I) Cash How from financing activities

Interest paid (23000S
Bonds repaid (50000S
share Capital issued 150000
Dividend paid 28000)
Cash flow from financing activities 69000 /
69000
 cash
generated
opening
during the
year
31000-

and equivaleto
cash 15000

using equivalents
cash cash 46000
↑

Working Notes : -

Income Tax all Plant all

OB 5000
By ,
bank 5000
OB 505000
By , DeL 3000

To bank 9000 To, bank 120000

- By .
Acc Depr
.
2000

Ibal)
,

By ,
Pa 7000 To bonds,
100000
& ↑

CB 715000

CB 3000
- - -
-
- - - -

Investments
Accu
·
Depu als

To Plant
,
2000 OB 68000 OB 127000
By .
bank 102000
↑ &

To Bank
,
78000
↑

To PeL
,
12000
↑

By ,
deph 31000

Ibal) ↑

CB 103000 CB 115000
1

- - - -
- - -
-

Share capital
a Bonds
315000
1

To bank ,
50000 OB 245000
-
-

By ,
bank 150000
- -
By , plant 100000
-

CB 465000
-
CB 295000
&
-

-
- - - -
- -
-
 a 11.92 ADVANCED ACCOUNTING

- Investments (Long term) * 1,15,000

-
1,27,000
-
- -

~ Inventory CA 1,44,000 1,10,000

=
- =

~ Trade receivables CA 47,000 55,000

= =

~Cash 46,000 15,000

= =

- Prepaid expenses CA
1,000
- =
5,000

- Share Capital # 4,65,000 3,15,000

= -
- &

~ Reserves and surplus >

-
Trans to Res > - -X 1,40,000
=
1,32,000
-
-

- Bonds * 2,95,000
=
2,45,000
-
-

-
Trade payables 22 50,000
=
43,000
T

- Outstanding liabilities CL 12,000 9,000

= -

- Income taxes payable 3,000 5,000

F
F

Analysis of selected accounts and transactions during 20X0-X1

- = - T [ Bank Dr . 102000
1. Purchased investments for ` 78,000.
-

- F To Invst 90000
=

12000
,

~
2. Sold investments for ` 1,02,000. These investments cost ` 90,000. To POL
-
- = = ,

3.
~ Purchased plant assets for ` 1,20,000.
- -
-
= -

-
4. Sold plant assets that cost `10,000 with accumulated depreciation of ` 2,000
- F
= -
>
- -

for ` 5,000.
-

5. Issued ` 1,00,000 of bonds at face value in an exchange for plant assets on

W -
- -
-
= - = = -

31st March, 20X1.

w 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. -

-
- Z - =

Prepare Cash Flow Statement as per AS-3 (Revised), using indirect method.
-
-

Bank Dr . 5000 C= 10000 AD = 2000

Dr 3000 -
P2L .

WDY 8000
A D
.
- Du .
2000
=

To Plant
,
10000
50
© The Institute of Chartered Accountants of India
 FINANCIAL STATEMENTS OF COMPANIES 11.95 a

Illustration 7
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
i
150O

(a)
- Trade Payables > C 4,000 2,500
- = =

(b)
- Other current liabilities -
3 - 1,000
-

(c)
~ Short term provision (provision for tax)
-
# 1,500
=
1,000
=
-
-

Total 70,500 58,500

Assets

1 Non-current assets

(a)
~ Property, Plant & Equipment 4
-
39,500 29,000
-

2 Current assets
> X
↑ wa -

(a) Current investments

- CA - Invest act 2,000 1,000
= -

(b)
- Inventories Wel 17,000 14,000
-
-
CA -
w = =

(c)
~ Trade receivables 8,000 6,000
= =

(d)
- Cash & cash equivalents -
5 4,000 8,500

70,500 58,500

© The Institute of Chartered Accountants of India

 Cash flow statement f. t y- 2
. .
31 3
.
21
.

Particulars Amount Amount

1) Cash flow from

operating Activities

4508
Net
Profit before tax
add :
extraordinary expenses X

less :
extraordinary incomes X

Net Profit before tax and

extraordinary items 4500
add :
Non-operating expenses X

less :
Non-operatingsale
incomes
Profit on of Vehicle (700)

add :
operating non-cash expenses
Depreciation : fixtures 1000
Vehicles 2500 3500
-

before
Operating profit Working Capital changes 7300
add : Increase in Trade
Payables 1500

less : increase in
inventory (3000)
less : increase is Trade Receivables (2000)

cash flow from operations 3808

less : Income Tax paid (1000)
Cash flow from
operating activities 2800 2800

flow from
I Cash Investing Activities
1000)
Investments purchased
Proceeds from sale of vehicle 1700
fixture purchased (7000)
Vehicle purchased (8000)
Cash used in
investing activities (14300) (14300)
#) cash flow from financing activities
Proceeds from issue of share Capital 10000
1

Dividend paid (3000)

Cash flow from
financing activities 7000 7000
 (4500)
generated &
duringthvalents
Cash
year
opening cash cash 8500

2 4000
closing
cash cash
equivalents

working Notes : -

Dividend
Payable Tax als
1000 open.
open pay pay 1008

To cash/baul To cash/bank PeL

,

Ibali)
3000
↑
By ,
P2L all 2000 ,
1000
By ,
1500

(bal ).

uosing pay O
uosing pay 1500

-
- -
-
-
-
-
-

fixtures all Vehicles

opening bal 1,000

1 By depreciation
,
1000
Open. bal 8000
By , depreciation 2500

To P2L
,
100
By . Cash/bank 1700
To cash/bank
,
7000
/

(bal. U :
bal
:

17000 To cash/bank 8000 closbal .

12508
(bal)
↑ S

-
- -
-

-
-
- -

calculation of Net Profit Before Tax

1) Retained in Pe( = 1000

2) Transfer to Reserve
3) Proposed Dividend = 2000
-

Profit after tax 3000

4) Tax expense =
-
1500

Profit before tax 4500

-
-

⑬ t B - Debt + cred = OcF

Y --
- stock Debt BR Pre-exp-
> 0
operat
,

NoC- wa ,

Op
.
. >
-
-

->
current Inv - >
- X-luvstA
-
- -
-
 a 11.96 ADVANCED ACCOUNTING

Notes to accounts

20X1
-
-
20X0
-
-

` `
1 Share Capital

- Equity Shares of `10 each 60,000 50,000

2 Reserve & surplus

i need in

~ Profit and Loss Account 5,000 821 4,000

- - -
-
P
-

3 Other current liabilities

- Dividend Payable D - 1,000

=
- -

4 Property, plant and equipment (at WDV)

W
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
T =

The profit and loss statement for the year ended 31st March, 20X1 disclosed:
= = = - - - --

Particulars `

-
Profit before tax 4,500
I

W Tax expense: Current tax W (1,500)

-

Profit for the year PAT 3,000

App - Declared dividend -(2,000)

Retained Profit ~ 1,000
App ~

© The Institute of Chartered Accountants of India

 FINANCIAL STATEMENTS OF COMPANIES 11.97 a

Further information is available:

Fixtures Vehicles

` `

-Depreciation for the year 1,000 2,500

Disposals:
-
-

Proceeds on disposal of vehicles — 1,700

F
Sp
-

-Written down value WDY — (1,000)

Profit on disposal
- 700

Prepare a Cash Flow Statement for the year ended 31st March, 20X1. Baule Du . 1700

Solution To Vehicle
,
1000
708
Sun Ltd. To P2L,

Cash Flow Statement

for the year ended 31st March, 20X1

` `
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 changes 7,300

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) (1,000)

Net cash generated from operating activities 2,800

© The Institute of Chartered Accountants of India

 a 11.100 ADVANCED ACCOUNTING

Illustration 8
Ms. Jyoti of Star Oils Limited has collected the following information for the
preparation of cash flow statement for the year ended 31 st March, 20X1:

(` in lakhs)

-
Net Profit After tax 25,000

~Dividend paid 8,535

- Provision for Income tax (Tax expense) =

5,000
-Income tax paid during the year 4,248
-

Loss on sale of assets (net) 40

3
s
= =
Sp= 145 =

-
Book value of the assets sold 185=

w Depreciation charged to the Statement of Profit and Loss 20,000

F

~Profit on sale of Investments 100

~ Carrying amount of Investment sold
GSp = 27 865
.
=

27,765
&

Interest income received on investments 2,506

~ = -
- =

~Interest expenses of the year 10,000

-

~ Interest paid during the year 10,520

-
-

* Increase in Working Capital (excluding Cash & Bank Balance) 56,081

- Purchase of Fixed assets 14,560
E

~
Investment in joint venture 3,850
&

- Expenditure on construction work in progress

= = I
34,740
-
-

- Proceeds from calls in arrear 2

=

~ Receipt of grant for capital projects 12

-
=

- Proceeds from long-term borrowings

=
25,980
⑤

~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)

© The Institute of Chartered Accountants of India

 casn from statement 31 3 21
ft y e
. . . . . .

Particulars Amount Amount

1) Cash flow from

operating activities

Net profit before tax (25000 + 5000)

&
30000
1

add :
extraordinary expenses X

incomes
less :
extraordinary X

before tax and items

Net
Profit extraordinary 30000
↑

add :
non-operating expenses
loss on sale of assets 40
Interest expenses 10000
&

incomes
less :
non-operating
Profit sale of
on investment (100)
Interest Income (2506)
add :
operating non-cash expenses
Depreciation 20000
~

operating profit before

working Capital changes 57434
Increase in
working Capital (58081)

Cash flow from operations

1353
less : Income tax paid (4248)
&

(2895) (2895)
cash flow from
operating activities
Activities
#) Cash frw from
Investing
Proceeds from sale of assets 145

Proceeds from sale of investments 27865

↑

Interest received 2506

Purchase of fixed Asset (1450)I

Investment in Joint Venture (3850)

Construction work in
progress (34740)
↑

Cash used in
investing activities (22634) (22634)

# Cash from from

financing activities
Dividend paid ( 853st
-

Interest paid (10520)

Proceeds from calls in arrears
↑

Receipt of grant for capital project 12

Proceeds from long term borrowings 25980 ↑
 Proceeds from short term
borrowings 20575
I

Cash flow from

financing activity 2754 27574
F

Cash
generated during the
year
1985

opening cash
casn & cash
equivalents 5003

closing
I cash
equivalents 6988

Increase in
working Capital 56061 cash outflow
= +

WC = CA -
CL

o
M
C Co
Op
100000 150000 25000 45000
infi
·

-
50000 Inc- 20000 Inc

[ -
:

Cash outflow Casin

inflow
> increase in working E

Capital = 30000
&

Cash outflow

NOTE :- Receipt of
grant for capital project is considered as financingactivity
because
its activities
business has received
funding from a source for conducting
invested in capital it will be
is
. When such
grant project
considered as cash flow from
Investing Activity .

of
assumed
Alternatively receipt grant for capital project can be

directly to be an
investing activity
.
 FINANCIAL STATEMENTS OF COMPANIES 11.109 a

Cash flows from financing activities

Redemption of debentures (22-15) (7)
Interest paid (1.5)
Dividend paid (11.7)
Net cash used in financing activities (20.2)
Net increase in cash 12.2
Cash at beginning of the period 6.0
Cash at end of the period 18.2

Significant non-cash items:

(a) Debenture-holders received equity shares of ₹ 15 crores on redemption of

the debentures.
(b) Plant having book value of ₹ 12 crores was given in exchange of an asset
costing ₹ 21 crores. The said plant was transferred at a value of ₹ 10 crores
only, and ₹ 11 crores was paid for the balance dues towards the plant.
Illustration 12
From the following information of Mr. Zen, prepare a Cash flow statement as per
AS-3 for the year ended 31.3.20X1:
Ledger balances of Mr. Zen as of 20X0 and 20X1

As on 1.4.20X0 As on 1.4.20X1
` `
-Zen’s Capital A/c * 10,00,000 12,24,000
Trade payables
~ Ch 3,20,000 3,52,000
= T

-Mrs.a
Zen’s loanW
=
2,00,000 -
-
--
=

-Loan from Bank 3,20,000

-
-
4,00,000
=

WLand A D 6,00,000 8,80,000

cost - . .

-
- -
-

-Plant and Machinery (net block) *

200 000 + 6,40,000 GH 0000 4,40,000 + 320000
=
- -
= -
= - -

T60000
, -

2
Inventories CA 2,80,000 2,00,000 -

= -
-

-Trade receivables CA
2,40,000 4,00,000
-
= -

-Cash 80,000
-
-
56,000
z

© The Institute of Chartered Accountants of India

 Cash flow statement
ft y . .
e .
31 3 21
. .

Particulars Amount Amount

from from Activities
7) cash
operating
Net
Profit before tax &
extraordinary items 360000
-

add :
Non-operating expenses
loss on
sale of machine 16000
A

incomes
less :
Non-operating
add :
Operating Non-cash expenses
144000
Depreciation & -

operating profit before

working Capital changes 520000
S -

Increase in Trade 32000

add :
payables
add : decrease in
inventory 80000
&

less : Increase in Trade Receivables (160000)

cash flow from Operations 472000

-
less: Income Tax paid
Cash
flow from operating activities 472000
-
472000
-
↑

# Cash flow from

Land purchased
investing activities
(280000)
40000
1

Proceeds from sale of machine -

Cash used in
investing activities (40000) (40000)

#) cash
frou from financing activities
loar repaid to Mrs
. Zen (200000)
Proceeds from bank was 80000

Drawings by inMr Zen . (136000S

-

Cash used
financing activities (250000) (258000) ,

cash
generated during the year (24000)
&

opening cash 2 cash

Equivalents 8000D

crosing I cash
cash equivalents 56000
-
working Notes : -

plant & Machine as Accu ·

Depo al
OB 840000
- By bank 40000 To
,
PCM 24000 OB 200000
-

16000
7

By P2L
,

24000
By, A D
.
By (bal
depl 144000
.

,
-

)
S

CB 760000 CB 320000
& ↑
- -

- -
- -
-
&

Capi·al al
-
-

OB 1000000
-

To bank
,
136000
(balo)
-

By ,
P2L 360000
& Y

CB 1224000
-

- -
- -
 Baul DV . 40000 C =
80000 AD = 24000

PCL Du . 16000 -
WDV = 5:000
-

A D
. .
Dr
. 24000
11.110 ADVANCED ACCOUNTING
40
J
a
To PCM
,
80 000
,

Additional information:
- # -
A machine costing ` 80,000 (accumulated depreciation there on `24,000) was sold
- 2 -
17 Il
for ` 40,000. The provision for depreciation on 1.4.20X0 was ` 2,00,000 and
-

Il - -
= -
-
I
31.3.20X1 was ` 3,20,000. The net profit for the year ended on 31.3.20X1 was
~
= =

` 3,60,000.
=

Solution
Cash Flow Statement of Mr. Zen as per AS 3
for the year ended 31.3.20X1

(i) 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 1,60,000

Operating Profit before working capital 5,20,000

changes

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 4,72,000

(ii) 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)

© The Institute of Chartered Accountants of India