I-10 PREVIOUS EXAMS TREND ANALYSIS
TAXMANN ®
YearQuestion No. Compulsory Chapter NameMarksCategory 7(a)Basic concepts of auditing6Theory 7(b)Basic concepts of auditing6Theory 8(a)Provision relating to audit under Companies Act, 2013 6Theory 8(b)Provision relating to audit under Companies Act, 2013 6Theory 9(a)Provision relating to audit under Companies Act, 2013 4Theory 9(b)Provision relating to audit under Companies Act, 2013 8Theory 10(a)Provision relating to audit under Companies Act, 2013 4Theory 10(b)Provision relating to audit under Companies Act, 2013 4Theory 10(c)Auditing of different types of undertakings 4Theory 10(d)Provision relating to audit under Companies Act, 2013 4Theory June 2023 [Syllabus 2022] 1(a)YesAccounting for Shares and Debentures 1Theory Preparation of Statement of P&L and Balance sheet 1Theory Accounts of Banking, Electricity and Insurance Companies 3Theory Cash flow Statement1Practical 1(b)YesAccounting for Shares and Debentures 1Theory Cash flow Statement1Theory Accounting Standards2Theory 1(c)YesAccounting for Shares and Debentures 1Theory Preparation of Statement of P&L and Balance sheet 1Theory Accounts of Banking, Electricity and Insurance Companies 1Theory Accounting Standards1Theory 2(a)Accounting for Shares and Debentures 4Practical
TAXMANN ® YearQuestion No. Compulsory Chapter NameMarksCategory 2(b)Accounting for Shares and Debentures 8Practical 3(a)Cash flow Statement8Practical 3(b)Accounts of Banking, Electricity and Insurance Companies 4Practical 4Preparation of Statement of P&L and Balance sheet 12Practical 5(a)Accounting Standards4Practical 5(b)Accounts of Banking, Electricity and Insurance Companies 8Practical 6(a)YesBasic concepts of auditing1Theory Provision relating to audit under Companies Act, 2013 4 Auditing of different types of undertakings 1 6(b)YesBasic concepts of auditing2Theory Provision relating to audit under Companies Act, 2013 2 6(c)YesBasic concepts of auditing1Theory Provision relating to audit under Companies Act, 2013 2 Auditing of different types of undertakings 1 7(a)Basic concepts of auditing6Theory 7(b)Basic concepts of auditing6Theory 8(a)Provision relating to audit under Companies Act, 2013 6Theory 8(b)Provision relating to audit under Companies Act, 2013 6Theory 9(a)Provision relating to audit under Companies Act, 2013 8Theory 9(b)Provision relating to audit under Companies Act, 2013 4Theory 10(a)Auditing of different types of undertakings 4Theory 10(b)Provision relating to audit under Companies Act, 2013 8Theory PREVIOUS EXAMS TREND ANALYSIS I-11
TAXMANN ® I-13 Module No. Name of Module Study Material Module SECTION A: CORPORATE ACCOUNTING 1 Accounting for Shares and DebenturesModule 1 2 Preparation of Statement of P&L and Balance sheetModule 2 3 Cash flow StatementModule 3 4 Accounts of Banking, Electricity and Insurance Companies Module 4 5 Accounting StandardsModule 5 SECTION B: AUDITING 6 Basic Concepts of Auditing Module 6 7 Provisions relating to Audit under Companies Act, 2013 Module 7 8 Auditing of different types of Undertakings Module 8
TAXMANN ® Module-wise Marks Distribution I-5 Previous Exams Trend Analysis I-7 Module-wise Comparison with Study Material I-13 SECTION A CORPORATE ACCOUNTING Module 1 ACCOUNTING OF SHARES AND DEBENTURES 1.3 Module 2 PREPARATION OF STATEMENT OF PROFIT AND LOSS AND BALANCE SHEET (AS PER SCHEDULE III OF COMPANIES ACT, 2013) 2.1 Module 3 CASH FLOW STATEMENT 3.1 Module 4 ACCOUNTS OF BANKING, ELECTRICITY AND INSURANCE COMPANIES 4.1 Module 5 ACCOUNTING STANDARDS 5.1 SECTION B AUDITING Chapter-wise Marks Distribution 6.2 Module 6 BASIC CONCEPTS OF AUDITING 6.3 PAGE I-15
TAXMANN ® Module 7 PROVISIONS RELATING TO AUDIT UNDER COMPANIES ACT 7.1 Module 8 AUDITING OF DIFFERENT TYPES OF UNDERTAKING 8.1 I-16 CONTENTS PAGE
A QUICK REVIEW
The statement of cash flows shall report cash flows during the period classified under the following three categories —
(
a)Cash flow from operating activities;
(
b)Cash flow from investing activities; and
(
c)Cash flow from financing activities.
Note: Sum of these three types of cash flows reflects the net change in cash and cash equivalent of the entity.
Cash and Cash Equivalents:
(
a)Cash shall consist of cash in hand and demand deposits; and
(
b)Cash equivalent consist of short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Types of Cashflows:
(a)Cash flow from operating activities
Cash flows from operating activities are primarily derived from the principal revenue producing activities of the entity. Therefore, they generally result from the transactions and other events that enter into the determination of profit or loss.
Examples of cash flows from operating activities are:
(i)cash receipts from the sale of goods and the rendering of services;
(ii)cash receipts from royalties, fees, commissions and other revenue;
(iii)cash payments to suppliers for goods and services;
(iv)cash payments to and on behalf of employees;
(v)cash receipts and cash payments of an insurance entity for premiums and claims, annuities and other policy benefits;
(vi)cash payments or refunds of income taxes unless they can be specifically identified with financing and investing activities; and
(vii)cash receipts and payments from contracts held for dealing or trading purposes.
TAXMANN ® 3.1
MODULE 3
Note: Cash received on account of sale of an item of plant is a cash flow from investing activities. Again, cash flows arising from the purchase and sale of dealing or trading securities are classified as operating activities. Similarly, cash advances and loans made by financial institutions are usually classified as operating activities since they relate to the main revenue-producing activity of that entity.
(b) Cash flow from investing activities
The activities of acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents are investing activities. However, only expenditures that result in a recognized asset in the balance sheet are eligible for classification as investing activities. Examples of cash flows arising from investing activities are:
(i) cash payments to acquire property, plant and equipment, intangibles and other long-term assets. These payments include those relating to capitalised development costs and self-constructed property, plant and equipment;
(
ii) cash receipts from sales of property, plant and equipment, intangibles and other long-term assets;
(iii) cash payments to acquire equity or debt instruments of other entities and interests in joint ventures (other than payments for those instruments considered to be cash equivalents or those held for dealing or trading purposes);
(iv) cash receipts from sales of equity or debt instruments of other entities and interests in joint ventures (other than receipts for those instruments considered to be cash equivalents and those held for dealing or trading purposes);
(v) cash advances and loans made to other parties (other than advances and loans made by a financial enterprise);
(vi) cash receipts from the repayment of advances and loans made to other parties (other than advances and loans of a financial enterprise);
(vii) cash payments for futures contracts, forward contracts, option contracts and swap contracts except when the contracts are held for dealing or trading purposes, or the payments are classified as financing activities; and
(viii) cash receipts from futures contracts, forward contracts, option contracts and swap contracts except when the contracts are held for dealing or trading purposes, or the receipts are classified as financing activities.
(c) Cash from financing activities
These are activities that result into change in size and composition of owner’s capital and borrowing of the organisation. Accordingly, it includes receipts from issue of shares, bonds and other instruments, borrowing and repayment of loans.
TAXMANN ® 3.2 SECTION A : CORPORATE ACCOUNTING
Examples of cash flows arising from financing activities are:
(i) cash proceeds from issuing shares or other similar instruments;
(
ii) cash proceeds from issuing debentures, loans, notes, bonds, mortgages and other short-term or long-term borrowings;
(iii) cash repayments of amounts borrowed.
PAST EXAMINATION QUESTIONS
OBJECTIVE QUESTIONS
Q. 1. Interest and Dividends received in the case of a manufacturing concern should be classified as cash flow from:
(A) Operating activities (B) Financing activities (C) Investing activities (D) None of the above. [June 2013, 1 Mark]
Ans. (C) Investing activities
Q. 2. Which of the following items is not a part of cash flow from operating activities?
(A) Collection from customers
(B) Payment of outstanding wages
(C) Payment to suppliers of machinery
(D) Advances to foreign suppliers for raw materials [June 2017, 1 Mark]
Ans. (C) Payment to suppliers of machinery
Q. 3. Interest received by a finance company is a part of cash flow from investing activities. (True/ False) [June 2017, 1 Mark]
Ans. False
Q. 4. While preparing Cash Flow Statement of XY Ltd., a finance company, interest received on loans should be shown as:
(A) Cash Flow from Operating Activities
(B) Cash Flow from Investing Activities
(C) Cash Flow from Financing Activities
(D) Cash and Cash Equivalent [Dec. 2017, 1 Mark]
Ans. (A) Cash Flow from Operating Activities
Q. 5. Interest and dividend received form a part of financing cash flow. [Dec. 2017, 1 Mark]
Ans. False
TAXMANN ® MOD. 3 : CASH FLOW STATEMENT 3.3
Q. 6. Which of the following is not a component of Cash Flow Statement?
(A) Cash payments to suppliers for goods and services
(B) Charging of Depreciation
(C) Cash advances and loans made to third parties
(D) Cash repayments of amounts borrowed [June 2018, 1 Mark]
Ans. (B) Charging of Depreciation
Q. 7. In case of Cash Flow Statement prepared under indirect Method, decrease in current liabilities is:
(A) Added to cash flow from operating activities
(B) Deducted to cash flow from operating activities
(C) Added to cash flow from investing activities
(D) None of the above [June 2019, 1 Mark]
Ans. (B) deducted to cash flow from operating activities
Q. 8. Machinery purchased by issuing shares is shown under Cash Flow from Investments Activities in Cash Flow Statement. (True/False) [June 2019, 1 Mark]
Ans. False
Q. 9. How should the revaluation of Fixed Assets be treated in a Cash Flow Statement?
(A) Under cash flow from financing activities
(B) Do not appear in cash flow statement
(C) Under cash flow from operating activities
(D) Under cash flow from investing activities [Dec. 2021, 1 Mark]
Ans. (B) Do not appear in cash flow statement
Q. 10. Cash Flow arising from which of the following Operating, Investing or Financing Activities may be reported on a net basis? Name one item. [Dec. 2021, 1 Mark]
Ans. Cash receipts and payments on behalf of customers when the cash flow reflect the activities of the customer rather than those of the entity OR cash receipts and payments for items in which turnover is quick, the amounts are large, and the maturities are short.
Q. 11. Increase in Bank Overdraft is:
(A) Increase in Cash and Cash equivalents
(B) Decrease in Cash and Cash equivalents
(C) Inflow from Financial activities
(D) Outflow from Financial activities [Dec. 2022, 1 Mark]
Ans. (B) decrease in Cash and Cash equivalents
TAXMANN ® 3.4 SECTION A : CORPORATE ACCOUNTING
Q. 12. Interest Income in case of a financial company is treated as a part of Revenue from Operations. (True/ False) [Dec. 2022, 1 Mark]
Ans. True
Q. 13 Net profit for the year ended 31.12.2022 ` 15,000, interest received in advance on 1st January, 2022 ` 2,000 and 31st December, 2022 ` 3,000. Cash from operations will be _____.
(A) 16,000
(B) 22,000
(C) 13,000
(D) 15,000 [July 2023, 1 Mark]
16,000
Q. 14. Payment of income tax is classified under cash flow from financing activity. (True/ False) [July 2023, 1 Mark]
Ans. False
DESCRIPTIVE QUESTIONS
Q. 1. What is the meaning of the expression ‘cash equivalent’? [Dec. 2013, 2 Marks]
Ans. Cash equivalent means bank balance and other risk-free short-term investments and advances which are readily encashable. Cash equivalents means short-term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
Q. 2. State the classification of cash flow activities as per AS-3. [Dec. 2014, 2 Marks]
Ans.
Cash Flow Statement explains cash movements under three different heads, namely: Cash flow from operating activities; Cash flow from investing activities; Cash flow from financing activities.
Q. 3. Write a short note on objectives of preparing Cash Flow Statement. [June 2017, 4 Marks]
TAXMANN ® MOD. 3 : CASH FLOW STATEMENT 3.5
(A)
Working Note: Net Profit 15,000 Increase in current liability 1,000 Cashflow from Operations 16,000
Ans.
Ans. Objectives of preparing Cash Flow Statement:
(i) To provide information about firm’s liquidity, flexibility and ability to generate future cash flow.
(ii) To provide information about firm’s ability to meet future obligations.
(iii) To enhance comparability among firms.
(iv) To assess reliability of net profit and quality of earnings.
(v) To enable the users to assess how assets and liabilities have increased or decreased.
(vi) To project future cash flow streams.
(vii) To provide information on different types of cash flow.
Q. 4. Reasons for preparation of Cash Flows. [June 2019, 4 Marks] Ans.
Cash Flow statement is considered to be a summarized statement showing sources of Cash Inflows and application of cash outflows of an enterprise during a particular period of time.
It is prepared on the basis of the published data as disclosed by the Financial Statement of two different financial periods. It is an essential tool for managerial decision-making.
Cash Flow Statement reports the management net Cash Flow (i.e. cash inflow less cash outflow or vice versa) from each activity of the enterprise as well as of the overall business of the enterprise.
The management of the enterprise gets a picture of movement of cash resources from the Cash Flow Statement and can assess the stronger and weaker area of movement of cash for different activities of the business for drawing up the future planning.
PRACTICAL PROBLEMS
Q. 1. The following relevant items from the Balance Sheet of LM Limited are provided:
TAXMANN ® 3.6 SECTION A : CORPORATE ACCOUNTING
Particulars31-03-2012 (`)31-03-2013 (`) Goodwill90,00075,000 Profit & loss4,15,0006,25,000 General Reserve3,25,0003,75,000 Inventories4,15,0005,10,000 Debtors3,45,0003,22,000 Prepaid Expenses18,00015,000 Creditors2,35,0002,70,000 Provision for tax1,05,0001,55,000 Provision for doubtful debts17,25015,000
Depreciation amounting to ` 1,42,000 and Profit on sale of Machinery amounting to ` 21,000 appeared in the Profit and Loss A/c for the year ending 31-3-2013. During the year 2012-13 ` 1,00,000 was paid as Income Tax. You are required to calculate Net Cash Flow from operating activity for the year ending 31st March, 2013. [Dec. 2013, 4 Marks] Ans.
Statement showing cash flow from operating activities for the year ended 31st March 2013:
Q. 2. Shyama Limited has given the following information for the preparation of cash flow statement for the year 2013-14:
TAXMANN ® MOD. 3 : CASH FLOW STATEMENT 3.7
Particulars ` `
Increase in balance of
&
Profit on sale of machinery(21,000) Provision for tax1,50,000 Depreciation1,42,000 Goodwill written off15,000 Transfer to general reserve50,0003,36,000 Operating profit before working capital changes5,46,000 Changes in working Capital: Decrease in prepaid expenses3,000 Decrease in provision for doubtful debts(2,250) Increase in Inventories(95,000) Increase in creditors35,000 Decrease in Debtors23,000(36,250) Tax paid(1,00,000) Net Cash flow from Operating activities4,09,750 Working Notes:
Opening balance 1,05,000 Tax paid (1,00,000) Closing (1,55,000) Tax Provision 1,50,000
(A) Cashflow from Operating Activities:
Profit
loss (6,25,000 – 4,15,000)2,10,000
(1) Provision for tax:
Particulars ` in ’000 Net profit after tax 50,000 Dividend (including dividend tax) paid 17,070 Provision for income tax 10,000
TAXMANN ® 3.8 SECTION A : CORPORATE ACCOUNTING Income tax paid during the year 8,496 Loss on sale of assets (net) 80 Book value of the assets sold 370 Depreciation charged during the year 40,000 Amortisation of capital grant 12 Profit on sale of investments 200 Cost of investment sold 55,530 Interest received on investments 5,012 Interest expenses 20,000 Interest paid during the year 21,040 Increase in Current Assets (excluding Cash & Bank balance) 77,500 Decrease in Current Liabilities 34,650 Purchase of Fixed Assets 29,120 Purchase of investment 7,700 Expenditure on construction work in progress 69,480 Receipt of grant for capital projects 28 Proceeds from issue of share capital 51,960 Proceeds from issue of Debentures 41,150 Opening Cash and Bank balance 10,006 Closing Cash and Bank balance 13,976 You are required to prepare the Cash Flow Statement for the year 2013-14 in accordance with AS-3. [June 2014, 10 Marks] Ans. Cash Flow Statement for the year ended 31st March 2014 Particulars ` in ’000 ` in ’000 (A) Cashflow from Operating Activities: Net profit before Taxation60,000 Depreciation40,000 Loss on sale of assets80 Amortization of capital grant(12) Profit on sale of investments(200) Interest received in investments(5012) Interest expenses20,00054,856 Operating profit before working capital changes1,14,856 Changes in working Capital: Decrease in current liabilities(34,650) Increase in current assets(77,500)(1,12,150) Tax paid(8,496)
TAXMANN ® MOD. 3 : CASH FLOW STATEMENT 3.9 Particulars ` in ’000 ` in ’000 Net Cashflow from Operating activities(5,790) (B) Cashflow from Investing Activities: Sale of Assets290 Sale of Investments55,730 Interest received on investments5,012 Purchase of Fixed Assets(29,120) Purchase of Investments(7,700) Expenditure on Capital Work-in-progress(69,480) Net Cashflow from Investing activities(45,268) (C) Cash flow from Financing Activities: Receipt of Grant for capital projects28 Proceeds from issue of share capital51,960 Proceeds from issue of debenture41,150 Interest paid(21,040) Dividend (including Dividend distribution tax) paid(17,070) Net Cash flow from Financing activities55,028 Net increase in cash and cash equivalents3,970 Cash and cash equivalents at the beginning10,006 Cash and cash equivalents at the end13,976 Q.
(` in Lakhs) Particulars31-03-201331-03-2014 Profit & loss4147 General Reserve4649.50 Creditors2523.50 Bills payable34 Income tax payable1017 Proposed dividend1518 Stock3027 Debtors2226 Bills receivable42.50 Prepaid expenses12.40
3. Relevant balance sheet accounts of Arti Limited, as on 31st March, 2013 and 2014 are as follows:
Other Information:
(1) During the year 2013-14, one old machine costing ` 6,45,000 (W.D.V. ` 3,92,000) was sold for ` 3,68,000 and some investments are sold at a profit of ` 15,000.
(2) During the year 2013-14, depreciation charged ` 4,50,000, goodwill written off ` 25,000 and Income tax paid ` 8,75,000.
You are required to calculate the net cash flow from operating activities. [Dec. 2014, 8 Marks]
Ans.
Statement showing cashflow from operating activities for the year ended 31st March 2014
TAXMANN ® 3.10 SECTION A : CORPORATE ACCOUNTING
Particulars ` in Lakhs ` in Lakhs
Cashflow from Operating Activities: Increase in balance of Profit & loss (47 – 41)6.00 Loss on sale of machinery0.24 Tax Provision15.75 Proposed Dividend18 Profit on sale of investment(0.15) Depreciation4.50 Goodwill written off0.25 Transfer to general reserve3.5042.09 Operating profit before working capital changes48.09 Changes in working Capital: Increase in prepaid expenses(1.40) Increase in bills payable1 Decrease in Stock3 Decrease in Bills Receivable1.50 Decrease in creditors(1.50) Increase in Debtors(4)(1.40) Tax paid (8.75) Net Cashflow from Operating activities37.94 Working Notes: (1) Provision for tax: Opening balance 10 Tax paid (8.75) Closing (17) Tax Provision 15.75
(A)
Q. 4. Following details are provided by Patasha Ltd.:
(1) Depreciation @ 15% was charged on the opening value of Plant and Machinery.
(2) At the year end, one old machine costing ` 1,50,000 (WDV ` 70,000) was sold for ` 1,10,000. Purchase was also made at the year end.
(3) ` 1,20,000 was paid towards Income tax during the year.
(4) ` 15,000 received as interest on investment during the year.
(5) Building under construction was not subject to any depreciation. You are required to prepare Cash Flow Statement as per AS-3.
[June 2015, 10 Marks]
Ans. Cash Flow Statement for the year ended 31st March 2015
Particulars ` `
(A) Cashflow from Operating Activities: Increase in balance of Profit & loss (3,00,000 – 1,50,000)1,50,000
Proposed Dividend4,00,000
Provision for tax1,70,000
Transfer to general reserve50,000
TAXMANN ® MOD. 3 : CASH FLOW STATEMENT 3.11
Particulars31-03-2015 (`)31-03-2014 (`) Liabilities: Share Capital25,00,00022,00,000 General Reserve4,00,0003,50,000 Profit & Loss Account3,00,0001,50,000 Debentures5,00,0003,00,000 Provision for tax2,00,0001,50,000 Proposed dividend4,00,0003,50,000 Trade payables9,00,00011,50,000 Total 52,00,00046,50,000 Assets: Plant & Machinery15,00,00011,00,000 Land & Building10,00,0008,00,000 Investments (Non-Trading)3,00,0001,50,000 Trade receivables9,00,00010,50,000 Inventories10,00,00012,00,000 Cash/ Bank5,00,0003,50,000 Total 52,00,00046,50,000
TAXMANN ® 3.12 SECTION A : CORPORATE ACCOUNTING Particulars ` ` Depreciation (11,00,000 × 15%)1,65,000 Profit on sale of machinery (1,10,000 – 70,000)(40,000) Interest on investments(15,000)7,30,000 Operating profit before working capital changes8,80,000 Changes in working Capital: Decrease in Inventories2,00,000 Decrease in trade payables(2,50,000) Decrease in trade receivables1,50,0001,00,000 Tax paid(1,20,000) Net Cashflow from Operating activities8,60,000 (B) Cashflow from Investing Activities: Purchase of Fixed Assets(6,35,000) Expenses on Building(2,00,000) Interest on Investments15,000 Increase in Investments(1,50,000) Sale of old machine1,10,000 Net Cashflow from Investing activities(8,60,000) (C) Cashflow from Financing Activities: Proceeds from issue of share capital3,00,000 Proceeds from issue of debenture2,00,000 Dividend paid(3,50,000) Net Cashflow from Financing activities1,50,000 Net increase in cash and cash equivalents1,50,000 Cash and cash equivalents at the beginning3,50,000 Cash and cash equivalents at the end5,00,000 Q. 5. From the following information, prepare Cash Flow Statement: Particulars31-03-2016 (`)31-03-2015 (`) Liabilities: Share Capital12,50,00010,00,000 Capital Reserve10,000Profit & Loss Account4,80,0004,00,000
(1) Depreciation written off on land and building ` 20,000.
(2) The company sold some investment at a profit of ` 10,000, which was credited to Capital Reserve.
(3) Income-tax provided during the year ` 55,000.
(4) During the year the company purchased a machinery for ` 2,25,000. They paid ` 1,25,000 in cash and issued 10,000 equity shares of ` 10 each at par.
You are required to prepare a Cash Flow Statement for the year ended 31st March 2016 as per AS 3 by using indirect method. [Dec. 2015, 8 Marks] [June 2017, 6 Marks]
Cash Flow Statement For the year ended 31st March 2016
TAXMANN ® MOD. 3 : CASH FLOW STATEMENT 3.13 Particulars31-03-2016 (`)31-03-2015 (`) Long-term loan4,00,0005,00,000 Provision for tax60,00050,000 Trade payables4,00,0005,00,000 Total 26,00,00024,50,000 Assets: Plant & Machinery9,20,0007,50,000 Land & Building3,80,0004,00,000 Investments (Non-Current)50,0001,00,000 Trade receivables4,20,0004,00,000 Inventories2,80,0003,00,000 Cash/Bank5,50,0005,00,000 Total 26,00,00024,50,000
Additional information:
Ans.
Particulars
(A) Cashflow from Operating Activities: Increase in balance of Profit & loss (4,80,000
4,00,000)80,000 Provision for tax55,000 Depreciation on machinery55,000 Depreciation on land & building20,0001,30,000 Operating profit before working capital changes2,10,000 Changes in working Capital: Decrease in Inventories20,000 Decrease in trade payables(1,00,000) Increase in trade receivables(20,000)(1,00,000) Tax
` `
–
paid(45,000)
31st March, 2015 and 2016:
TAXMANN ® 3.14 SECTION A : CORPORATE ACCOUNTING Particulars ` ` Net Cashflow from Operating activities65,000 (B) Cashflow from Investing Activities: Purchase of machinery (2,25,000 – 1,00,000)(1,25,000) Sale of Investments60,000 Net Cashflow from Investing activities(65,000) (C) Cashflow from Financing Activities: Proceeds from issue of share capital (2,50,000 – 1,00,000)1,50,000 Repayment of Long-term loan(1,00,000) Net Cashflow from Financing activities50,000 Net increase in cash and cash equivalents50,000 Cash and cash equivalents at the beginning5,00,000 Cash and cash equivalents at the end5,50,000 Working Notes: (1) Provision for tax: Opening balance 50,000 Provision 55,000 Closing (60,000) Tax Paid 45,000 (2) Investment: Opening balance 1,00,000 Profit (Capital Res.) 10,000 Closing Balance (50,000) Sale 60,000 (3) Machinery: Opening Balance 7,50,000 Purchase 1,25,000 Equity Shares 1,00,000 Closing Balance (9,20,000) Depreciation 55,000
Q. 6. Following Balances are provided by the Meenakshi Ltd. for the year ended
(i) Investment were sold during the year for ` 7,00,000.
(ii) During the year an old machine costing ` 16,00,000 was sold for ` 7,20,000. Its written down value was ` 9,00,000.
(iii) Depreciation charged on plant and machinery @ 20% on the opening balance.
(iv) There was no purchase or sell of land and building during the year.
(v) Provision for tax made during the year was ` 32,20,000.
(vi) During the year premium on redemption of debentures ` 4,00,000 was written-off.
You are required to prepare a statement showing the net cash flow from the operating activities. [June 2016, 9 Marks] Ans.
Statement showing cashflow from operating activities for the year ended 31st March 2016
Particulars
TAXMANN ® MOD. 3 : CASH FLOW STATEMENT 3.15 Particulars31-03-2015 (`)31-03-2016 (`) Equity Share Capital1,20,00,0001,40,00,000 General Reserve74,00,00089,00,000 Profit & Loss Account42,00,00060,00,000 11% Debentures1,00,00,00060,00,000 Provision for tax25,50,00038,40,000 Proposed dividend18,00,00025,20,000 Trade payables37,00,00043,00,000 Goodwill20,00,00016,00,000 Plant & Machinery1,20,00,0001,32,00,000 Land & Building1,40,00,0001,30,00,000 Investments (Non-Trading)48,00,00044,00,000 Trade receivables57,60,00083,00,000 Inventories80,00,00077,00,000 Cash/ Bank17,60,00018,60,000 Prepaid Expenses3,00,0002,20,000
Information:
Additional
` `
Cashflow from
Increase in balance of Profit & loss
42,00,000) 18,00,000 Transfer to general reserve15,00,000 Provision for tax32,20,000
(A)
Operating Activities:
(60,00,000 –
TAXMANN ® 3.16 SECTION A : CORPORATE ACCOUNTING Particulars ` ` Proposed dividend25,20,000 Depreciation on land & building10,00,000 Depreciation on plant & machinery24,00,000 Profit on sale of investment (7,00,000 – 4,00,000)(3,00,000) Loss on sale of plant & machinery1,80,000 Goodwill written off4,00,000 Premium of redemption of debentures written off4,00,0001,13,20,000 Operating profit before working capital changes 1,31,20,000 Changes in working Capital: Decrease in prepaid expenses80,000 Decrease in Inventories3,00,000 Increase in trade payables6,00,000 Increase in trade receivables(25,40,000)(15,60,000) Tax paid(19,30,000) Net Cashflow from Operating activities96,30,000 Working Notes: (1) Provision for tax: Opening balance 25,50,000 Provision 32,20,000 Closing (38,40,000) Tax Paid 19,30,000 (2) Investment: Opening balance 48,00,000 Sale (7,00,000) Closing Balance (44,00,000) Profit 3,00,000 Q.
Amount (`) Fixed Assets 5,70,000 Less: Depreciation 1,99,500 Net Fixed Assets 3,70,500 Stocks and Debtors 2,37,500 Bank Balance 33,250 Creditors 57,000
7. EVVM INDIA LTD. has the following balances as on 1st April, 2015:
Bills Payable
38,000
Capital (Shares of ` 100 each) 2,85,000
The company made the following estimates for financial year 2015-16:
(
(
i) The company will pay a free of tax dividend of 10% the rate of tax being 25%.
ii) The company will acquire fixed assets costing ` 95,000 after selling one machine for ` 19,000 costing ` 47,500 and on which depreciation provided amounted to ` 33,250.
(iii) Stocks and Debtors, Creditors and Bills payables at the end of financial year are expected to be ` 2,80,250, ` 74,100 and ` 49,400 respectively.
(iv) The profit would be ` 52,250 after depreciation of ` 57,000. Prepare the projected cash flow statement and ascertain the bank balance of EVVM INDIA LTD. at the end of financial year 2015-16.
[Dec. 2016, 9 Marks]
Ans.
Cash Flow Statement for the year ended 31st March 2016
TAXMANN ® MOD. 3 : CASH FLOW STATEMENT 3.17
Particulars ` `
Cashflow from Operating Activities: Profit for the year52,250 Depreciation57,000 Profit on Sale of machine(4,750)52,250 Operating profit before working capital changes1,04,500 Changes in working Capital: Increase in stock and debtors(42,750) Increase in Creditors17,100 Increase in Bills payable11,400(14,250) Tax paidNet Cashflow from Operating activities90,250
Cashflow from Investing Activities: Purchase of Fixed Assets(95,000) Machinery sold19,000 Net Cashflow from Investing activities(76,000)
Cashflow from Financing Activities: Dividend paid (Including Dividend
(38,000) Net Cashflow from Financing activities(38,000)
(A)
(B)
(C)
distribution tax)
Net increase in cash and cash equivalents(23,750)
Cash and cash equivalents at the beginning33,250
Cash and cash equivalents at the end9,500
Working Note:
Dividend = 2,85,000*10% = ` 28,500
Since, dividend is paid tax free and tax is 25%, Tax will be = 28,500 × 25/75 = ` 9,500 Total Dividend including Dividend distribution tax = 9,500 + 28,500 = ` 38,000
Q. 8. From the following information provided, prepare a Cash Flow Statement as per AS-3. Balance Sheet of PQR Ltd:
Additional information:
(i) During the year the company got income from investment ` 80,000.
(ii) Company paid ` 1,50,000 as equity dividend and ` 76,000 as preference dividend.
(iii) The company redeemed the preference shares at a premium of 5% after making a successful call of ` 50 per share to make the shares fully paid.
TAXMANN ® 3.18 SECTION A : CORPORATE ACCOUNTING Particulars ` `
Particulars31-03-2016
Liabilities: Equity Share Capital20,00,00015,00,000 Redeemable Preference share capital-5,00,000 Profit & Loss Account3,00,0004,50,000 General Reserve2,00,0004,00,000 Capital Redemption Reserve5,00,000Securities Premium-20,000 Current Liabilities6,50,0008,00,000 Total 36,50,00036,70,000 Assets: Fixed Assets16,50,00015,00,000 Investments (Non-Current)7,00,0008,00,000 Trade receivables4,50,0005,00,000 Inventories7,60,0007,00,000 Cash/Bank6,00074,000 Prepaid expenses84,00096,000 Total 36,50,00024,50,000
(`)31-03-2015 (`)
