NCERT Solutions for Class 12 Accountancy Company Accounts and Analysis of Financial Statements Chapter 6

Cash Flow Statement Class 12

Chapter 6 Cash Flow Statement Exercise Solutions

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Short answers : Solutions of Questions on Page Number : 315

Q1 :  

What is a Cash Flow Statement?


Answer :

A Cash Flow Statement is a statement showing inflows and outflows of cash and cash equivalents from operating, investing and financing activities of a company during a particular period. It explains the reasons of receipts and payments in cash and change in cash balances during an accounting year in a company.

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Q2 :  

How are the various activities classified (as per AS-3 revised) while preparing cash flow statement?


Answer :

As per the Revised Accounting Standard 3 (AS-3), preparation of Cash Flow Statement for each period is mandatory. AS-3 also specifies the classification of all inflows and outflows basically under the following heads:

1. Cash Flow from Operating Activities

2. Cash Flow from Investing Activities

3. Cash Flow from Financing Activities

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Q3 :  

State the uses of cash flow statement?


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Q4 :  

What are the objectives of preparing cash flow statement?


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Q5 :  

Explain the terms: Cash Equivalents, Cash flows.


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Q6 :  

Prepare a format of cash flow from operating activities under direct method and indirect method.


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Q7 :  

Now that you know the meaning of operating activities, state clearly what would constitute the operating activities for the following types of enterprises:

(i) Hotel

(ii) Film production house

(iii) Financial enterprise

(iv) Media enterprise

(v) Steel manufacturing unit

(vi) Software business unit.


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Q8 :  

Now that you know the meaning of operating activities, state clearly what would constitute the operating activities for the following types of enterprises:

(i) Hotel

(ii) Film production house

(iii) Financial enterprise

(iv) Media enterprise

(v) Steel manufacturing unit

(vi) Software business unit.


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Numerical questionslong answers : Solutions of Questions on Page Number : 316

Q1 :  

Anand Ltd. arrived at a net income of Rs 5,00,000 for the year ended March 31, 2007. Depreciation for the year was Rs 2,00,000. There was a gain of Rs 50,000 on assets sold which was credited to profit and loss account. Bills Receivables increased during the year Rs 40,000 and Bills Payables also increased by Rs 60,000. Compute the cash flow operating activities by the indirect approach.


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Q2 :  

Describe the procedure to prepare Cash Flow Statement.


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Q3 :  

From the information given below you are required to prepare the cash paid for the inventory:

 

 

Rs

Inventory in the beginning

40,000

Purchases

1,60,000

Inventory in the end

38,000

Inventory creditors in the beginning

14,000

Inventory creditors in the end

14,500

 


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Q4 :  

Describe 'Direct' and 'Indirect' methods of ascertaining Cash Flow from Operating Activities.


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Q5 :  

For each of the following transactions, calculate the resulting cash flow and state the nature of cash flow viz., operating, investing and financing.

(a) Acquired machinery for Rs 2,50,000 paying 20% drawn and executing a bond for the balance payable.

(b) Paid Rs 2,50,000 to acquire shares in Informa Tech. and received a dividend of Rs 50,000 after acquisition.

(c) Sold machinery of original cost Rs 2,00,000 with an accumulated depreciation of Rs 1,60,000 for Rs 60,000.


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Q6 :  

Explain the major Cash Inflow and outflows from investing activities.


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Q7 :  

The following is the Profit and Loss Account of Yamuna Limited:

 

Yamuna Limited

Profit and Loss Account for the Year ended March 31, 2007

 

Rs

Rs

Sales

 

10,00,000

Cost of Goods Sold:

 

 

Opening Stock

2,50,000

 

Purchases

5,00,000

 

 

7,50,000

 

Less: Closing Stock

2,00,000

5,50,000

Gross Profit

 

4,50,000

Operating Expenses

 

3,00,000

Net Profit

 

1,50,000

 

 

 

 

Additional information:

(i) Trade debtors decrease by Rs 30,000 during the year.

(ii) Prepaid expenses increase by Rs 5,000 during the year.

(iii) Trade creditors decrease by Rs 15,000 during the year.

(iv) Outstanding expenses increased by Rs 3,000 during the year.

(v) Operating expenses included depreciation of Rs 25,000. Compute net cash provided by operations for the year ended March 31, 2007 by the indirect method.

 


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Q8 :  

Explain the major Cash Inflows and outflows from financing activities.


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Numerical questions : Solutions of Questions on Page Number : 317

Q1 :  

Compute cash from operations from the following figures:

(i) Profit for the year 2005-06 is a sum of Rs 10,000 after providing for depreciation of Rs 2,000.

(ii) The current assets of the business for the year ended March 31, 2006 and 2007 are as follows:

 

 

March

March

 

31, 2006

31, 2007

 

Rs

Rs

Debtors

10,000

12,000

Provision for Doubtful Debts

1,000

1,200

Bills Receivables

4,000

3,000

Bills Payables

5,000

6,000

Creditors

8,000

9,000

Inventories

5,000

8,000

Short-term Investments

10,000

12,000

Outstanding Expenses

1,000

1,500

Prepaid Expenses

2,000

1,000

Accrued Income

3,000

4,000

Income received in advance

2,000

1,000

 


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Q2 :  

From the following Particulars of Bharat Gas Limited, calculate Cash Flows from Investing Activities. Also show the workings clearly preparing the ledger accounts:

 

Balance Sheet of Bharat Gas Limited as on .....................

 

Liabilities

2006

Amount

Rs

2007

Amount

Rs

 

2006

Amount

Rs

2007

Amount

Rs

 

 

 

Goodwill

1,00,000

3,00,000

 

 

 

Patents

2,80,000

1,60,000

 

 

 

Machinery

10,20,000

12,40,000

 

 

 

10% Long-term Investment

60,000

1,60,000

 

 

 

Investment in Land

1,00,000

1,00,000

 

 

 

Shares of Amartax Ltd.

1,00,000

1,00,000

 

 

 

 

 

 

 

Additional Information:

(a) Patents were written off to the extent of Rs 40,000 and some Patents were sold at a profit of Rs 20,000.

(b) A Machine costing Rs 1,40,000 (Depreciation provided thereon Rs 60,000) was sold for Rs 50,000. Depreciation charged during the year was Rs 1,40,000.

(c) On March 31, 2007, 10% Investments were purchased for Rs 1,80,000 and some Investments were sold at a profit of Rs 20,000. Interest on Investment was received on March 31, 2007.

(d) Amartax Ltd. paid Dividend @ 10% on its shares.

(e) A plot of Land had been purchased for investment purposes and let out for commercial use and rent received Rs 30,000.

 


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Q3 :  

From the following Balance Sheet of Mohan Ltd. Prepare cash flow Statement:

Balance Sheet of Rajeshwar Limited as on ............................

Liabilities

2005

Rs

2006

Rs

Assets

2005

Rs

2006

Rs

Equity Share Capital

2,00,000

3,00,000

Fixed Assets

4,00,000

6,00,000

Profit and Loss

1,60,000

2,00,000

Stock

1,30,000

1,50,000

Bank Loan

1,00,000

80,000

Debtor's

1,00,000

60,000

Accumulated Dep.

80,000

1,00,000

Bills Receivable

20,000

30,000

Creditor

1,40,000

1,20,000

Bank

90,000

30,000

Proposed Dividend

60,000

70,000

 

 

 

 

7,40,000

8,70,000

 

7,40,000

8,70,000

 

 

 

 

 

 

Additional Information:

Machine Costing Rs 80,000 on which accumulated depreciation was Rs, 50,000 was sold for Rs 20,000.


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Q4 :  

From the following Balance Sheets of Tiger Super Steel Ltd., prepare Cash Flow Statement:

Balance Sheet

Liabilities

2005

Rs

2006

Rs

Assets

2005

Rs

2006

Rs

Equity Share Capital

80,000

1,20,000

Goodwill

24,000

18,800

10%Preference Sh. Capital

40,000

20,000

Land and Building

40,000

20,000

General Reserve

8,000

12,000

Plant

36,000

76,400

Profit and Loss Account

7,200

10,800

Investment

4,000

14,000

Proposed Dividend

11,200

15,600

Debtor's

30,000

43,200

Bills Payable

14,000

21,200

Stock

34,000

31,200

Outstanding Expenses

3,200

2,400

Cash

6,800

11,200

Provision for Taxation

11,200

12,800

 

 

 

 

1,74,800

2,14,800

 

1,74,800

2,14,800

 

 

 

 

 

 

 

Additional Information:

Depreciation Charge on Land & Building Rs 20,000, and Plant Rs 10,000 during the year.

 


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Q5 :  

Prepare Cash Flow Statement from the following Information:

 

Balance Sheet

Liabilities

2004

Rs

2005

Rs

Assets

2004

Rs

2005

Rs

Equity Share Capital

5,00,000

7,00,000

Cash/Bank

3,00,000

4,00,000

8% Debentures

6,00,000

4,00,000

Sundry Debtors

4,00,000

6,00,000

Profit and Loss Account

3,00,000

5,00,000

Stock

5,00,000

6,00,000

Creditors

6,00,000

9,00,000

Goodwill

2,50,000

1,70,000

 

 

 

Discount on Debenture

50,000

30,000

 

 

 

Plant

5,00,000

7,00,000

 

20,00,000

25,00,000

 

20,00,000

25,00,000

 

 

 

 

 

 

 

Additional Information:

Depreciation Charge on Plant amount to Rs 80,000.

 


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Q6 :  

From the following Information Prepare Cash flow Statements for Yogeta Ltd.

 

Balance Sheet

 

Liabilities

2005

Rs

2006

Rs

Assets

2005

Rs

2006

Rs

Equity Share Capital

2,00,000

3,00,000

Bank

45,000

-

Preference Share Capital

-

1,00,000

Cash

5,000

-

Profit and Loss Account

1,00,000

2,00,000

Stock

1,00,000

1,70,000

Loan

2,00,000

-

Bills Receivable

50,000

1,00,000

Provision for Taxation

30,000

50,000

Fixed Assets

4,00,000

7,00,000

Bills Payable

50,000

70,000

 

 

 

Bank overdraft

-

1,00,000

 

 

 

Loan from Rahul

20,000

1,50,000

 

 

 

 

6,00,000

9,70,000

 

6,00,000

9,70,000

 

 

 

 

 

 

 

Additional Information:

Net Profit for the year After Charging Rs 50,000 as Depreciation was Rs 1,50,000. Dividend paid on Share was Rs 50,000, Tax Provision created during the year year amounted to Rs 60,000.

 


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Q7 :  

Following is the Financial Statement of Garima Ltd. Prepare Cash flow Statements.

 

Balance Sheet as on 31st Dec. 2006

 

Liabilities

2005

Rs

2006

Rs

Assets

2005

Rs

2006

Rs

Equity Share Capital

2,00,000

3,00,000

Plant and Machinery

2,00,000

3,64,000

Preference Share Capital

80,000

1,40,000

Stock

60,000

1,60,000

Creditors

56,000

1,56,000

Debtors

20,000

80,000

Provision for Taxation

4,000

12,000

Bank

80,000

28,000

Profit & Loss Account

28,000

40,000

Prepaid Expenses

8,000

16,000

 

3,68,000

6,48,000

 

3,68,000

6,48,000

 

 

 

 

 

 

 

Profit and Loss Account for the Year ended Dec. 31, 2006

 

Receipts

Amount

Rs

Payments

Amount

Rs

Opening Stock

60,000

Sales

5,00,000

Purchase

4,92,000

Closing Stock

1,60,000

Gross Profit c/d

1,08,000

 

 

 

6,60,000

 

6,60,000

Salary

44,000

Gross Profit b/d

1,08,000

Depreciation

32,000

 

 

Provision for Tax

16,000

 

 

Net Profit c/d

16,000

 

 

 

1,08,000

 

1,08,000

Dividend

4,000

Balance b/d

28,000

Balance c/d

40,000

Net Profit b/d

16,000

 

44,000

 

44,000

 

 

 

 

 


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Q8 :  

Following as the Balance Sheets of Computer India Ltd.:

 

 

 

 

(In Lakhs)

Liabilities

2004

Rs

2005

Rs

Assets

2004

Rs

2005

Rs

Equity Share Capital

40,000

50,000

Fixed Assets

41,000

40,000

Profit and Loss Account

1,000

1,200

Less : Provision for Depreciation

11,000

15,000

General Reserve

2,000

2,500

 

30,000

25,000

10% Debentures

6,000

6,500

Debtors

20,000

24,000

Sundry Creditor

12,000

11,000

Stock

30,000

35,000

Provision for Taxation

3,000

4,200

Prepaid Expenses

300

500

Proposed Dividend

5,000

5,800

Cash

1,200

3,500

Bank overdraft

12,500

6,800

 

 

 

 

81,500

88,000

 

81,500

88,000

 

 

 

 

 

 

 

Additional Information:

Interest paid on Debenture Rs 600

 


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