CBSE Class 12 Accountancy Cash Flow Statement Set B

LEARNING OBJECTIVES

i) To understand the meaning of cash flow statement

ii) To understand the meaning of cash, cash funds and cash equivalents.

iii) To calculate operating profit and cash flow from operating activities

iv) To understand operating and non-operating expenses and incomes.

v) To calculate cash flow from operating, investing and financing activities.

vi) To prepare cash flow statement with additional information

 CASH FLOW STATEMENT

Qus:1 Why is the cash flow statement not a suitable judge of profitability ?

Qus:2 Under which accounting standard , cash flow statement is prepared ?

Qus:3 Why do we add back depreciation to net profit while calculating cash flow from operating activities.

Qus:4 How will you classify loans given by Birla Finance Ltd.? While preparing cash flow statement.

Qus:5 How will you classify deposits by customers in HDFC Bank while preparing cash flow statement.

Qus:6 Where will you show purchase of computer in cash flow statement ?

Qus:7 Give two examples of ‗ Significant non cash transactions ‗.

Qus:8 How will you classify loans given by Tata Manufacturing Company.

Qus:9 A company receives a dividend of Rs. 2 Lakhs on its investment in other company‘s share will it be Cash inflow from operating or investing activities in case of a.

(i) Finance Company.

(ii) Non-Finance Company.

Qus:10 How are various activities classified as per AS-3 (Revised) ?

Qus:11 Cash flow from operating Activities + Cash flow from Investing Activities + Cash flow from Financing Activities =……………………………………

Qus:12 What are the two methods which can be employed to calculate net cash flow from operating activities ?

Qus:13 Escorts Ltd. Engaged in the business of manufacturing tractors invested Rs.40,00,000 in the shares of a Car manufacturing Company. state with reason whether the dividend received on this investment will be cash flow from operating activities or Investing activities.

Qus:14 Modern Toys Ltd. Purchased a machinery of Rs.20,00,000 for manufacturing toys. State giving reason Whether the cash flow due to the purchase of machinery will be cash flow from operating activities, Investing activities or Financing activities ?

Qus:15 From the following profit or loss account find out the flow of cash from operating activities of Mohan Ltd.

Question. The basis of cash flow statement is____________________
Answer: Cash basis of accounting.

Question. Debentures issued for consideration other then cash are not shown in the cash flow statement because_______________________________-is not received against the issue.
Answer: Cash or cash equivalent.

Question. Marketable securities are included in ________--
Answer: Cash and cash equivalents.

Question. Curret investment are shown in____________________________
Answer: Cash and cash equivalents.

Question. Buyback of own share is shown as outflow in financing activity as __________________________
Answer: cash used in financing activities.

Question. Discount / loss on issue of debentures writtenoff is shown by way of deduction from ______________________ of the debentures.
Answer: Securities Premium Reserve or Statement of Profit and Loss.

Question. Dividend received by other then financial enterprises is shown in cash flow statement under
(a) operating activity
(b) Investing activity
(c) Financing activity
(d) general activity
Answer: (b)

Question. Dividend received by financial enterprises is shown in cash flow statement under
(a) operating activity
(b) Investing activity
(c) Financing activity
(d) general activity
Answer: (a)

Question. Payment of income tax is shown as
(a) operating activity
(b) Investing activity
(c) Financing activity
(d) general activity
Answer: (a)

Question. Dividend paid by a non financing company is shown as
(a) operating activity
(b) Invensting activity
(c) Financing activity
(d) general activity
Answer: (c)

Question. Which of the following is shown under financing activity
(a) Cash received received against sale of goods
(b) Cash received received against purchase of goods
(c) commission received
(d) interest paid
Answer: (d)

Question. Which of the following is not added as non cash expense
(a) Goodwill amortised
(b) depreciation
(c) Interest on debentures paid
(d) all of these
Answer: (c)

Question. Identity the following transaction belonging to (i) operating activity (ii) financing activity (iii) investing activity (iv) cash and cash equivalent
1. cash sales
2. Rent paid
3. Incometax paid
4. balance at bank
5. issue of debentures
6. cash paid against trade payables
7. income tax refund recieved
8. sale of patents
9. purchase of goodwill
10. purchase of securities
11. cash purchase
12. cash in hand
13. office expense
14. sale of machine by a dealer of machine
15. dividend paid
16. purchase of machine
17. issue of share capital
18. purchase of marketable securities
19. short term deposit in bank
20. cash received from debtors
Answer:
1. Operating Activity
2. Operating Activity
3. Operating Activity
4. Cash and Cash Equivalent
5. Financing Activity
6. Operating Activity
7. Operating Activity
8. Investing Activity
9. Investing Activity
10. Investing Activity (Non-Current)
11. Operating Activity
12. Cash and Cash Equivalent
13. Operating Activity
14. Operating Activity
15. Financing Activity
16. Investing Activity
17. Financing Activity
18. Cash and Cash Equivalent
19. Cash and Cash Equivalent
20. Operating Activity

Question. Calculate cash flow from operating activity from the following details:
Particulars | 31.3.2020 | 30.3.2019
Surplus i.e balance in statement of p/l | 300000 | 200000
Bills receivables | 180000 | 140000
Accumulated depreciation | 320000 | 300000
Outstanding rent | 40000 | 16000
Prepaid insurance | 12000 | 14000
goodwill | 160000 | 200000
stock | 180000 | 140000
Answer:
Net Profit for the year = \( 3,00,000 - 2,00,000 = Rs 1,00,000 \)
Adjustments for Non-Cash Items:
+ Accumulated Depreciation = \( 3,20,000 - 3,00,000 = 20,000 \)
+ Goodwill Amortised = \( 2,00,000 - 1,60,000 = 40,000 \)
Operating Profit before Working Capital Changes = \( Rs 1,60,000 \)
Adjustments for Working Capital:
- Increase in Bills Receivables = \( (40,000) \)
+ Increase in Outstanding Rent = \( 24,000 \)
+ Decrease in Prepaid Insurance = \( 2,000 \)
- Increase in Stock = \( (40,000) \)
Cash Flow from Operating Activities = \( Rs 1,06,000 \)

Question. Calculate cash flow from operating activity:
particulars | Amount
Net profit after tax and dividend | 110000
Provision for tax | 50000
Proposed dividend (last year) approved by shareholders in AGM | 50000
depreciation | 20000
Loss on sale of plant | 10000
Goodwill amortised | 40000
Gain on sale of land | 40000
Income tax paid | 50000
Income tax refund | 40000
Answer:
Net Profit before tax and extraordinary items = \( 1,10,000 + 50,000 (\text{Prov for tax}) + 50,000 (\text{Div}) - 40,000 (\text{Tax refund}) = Rs 1,70,000 \)
Adjustments for Non-Cash/Non-Operating Items:
+ Depreciation = \( 20,000 \)
+ Loss on sale of plant = \( 10,000 \)
+ Goodwill amortised = \( 40,000 \)
- Gain on sale of land = \( (40,000) \)
Operating Profit before WC changes = \( Rs 2,00,000 \)
Less: Income tax paid (net) = \( (50,000 - 40,000) = (10,000) \)
Cash Flow from Operating Activities = \( Rs 1,90,000 \)

Question. State the category of the following items for a financial as well as non-financial company
(1) Dividend received
(2) Dividend paid
(3) Interest paid
(4) Interest received
Answer:
(1) Dividend received: Non-financial - Investing Activity; Financial - Operating Activity.
(2) Dividend paid: For both - Financing Activity.
(3) Interest paid: Non-financial - Financing Activity; Financial - Operating Activity.
(4) Interest received: Non-financial - Investing Activity; Financial - Operating Activity.

Question. What are the objectives of preparing cash flow statement?
Answer: 1. To ascertain the sources (receipts) of cash and cash equivalents under operating, investing, and financing activities. 2. To ascertain the uses (payments) of cash and cash equivalents under these activities. 3. To ascertain the net change in cash and cash equivalents between the opening and closing balance sheet dates.

Question. Calculate the net amount of cash flow if a fixed asset costing \( Rs. 32,000 \) (having a book value of \( Rs. 24,000 \)) is sold at a loss of \( Rs. 8,000 \).
Answer:
Sale Price = Book Value - Loss = \( 24,000 - 8,000 = Rs 16,000 \).
The net cash flow (inflow) is \( Rs 16,000 \) in investing activity.

Question. X Ltd. made a profit of \( Rs. 1, 00,000/- \) after charging depreciation of \( Rs. 20,000/- \) on assets and a transfer to General Reserve of \( Rs. 30,000/- \). The Goodwill written off was \( Rs. 7, 000/- \) and the gain on sale of machinery was \( Rs. 3, 00,000/- \). The other information available to you (changes in the value of current assets and current liabilities) is as follows:
At the end of the year Debtors showed an increase of \( Rs. 6, 00,000/- \), creditors an increase of \( Rs. 10, 00,000/- \), prepaid expenses an increase of \( Rs. 20,00,00 \), Bills Receivable a decrease of \( Rs. 3, 00,000/- \), Bills Payable a decrease of \( Rs. 4, 00,000/- \) and outstanding expenses a decrease of \( Rs. 2, 00,000/- \). Ascertain the cash flow from the operating activities.
Answer:
Net Profit before tax and extraordinary items = \( 1,00,000 + 30,000 (\text{Gen Res}) = Rs 1,30,000 \)
Adjustments for Non-Cash Items:
+ Depreciation = \( 20,000 \)
+ Goodwill written off = \( 7,000 \)
- Gain on sale of machinery = \( (3,000) \)
Operating profit before WC changes = \( Rs 1,54,000 \)
Adjustments for WC:
- Increase in Debtors = \( (6,000) \)
+ Increase in Creditors = \( 10,000 \)
- Increase in Prepaid Expenses = \( (200) \)
+ Decrease in Bills Receivable = \( 3,000 \)
- Decrease in Bills Payable = \( (4,000) \)
- Decrease in Outstanding Expenses = \( (2,000) \)
Cash Flow from Operating Activities = \( Rs 1,54,800 \)

Question. From the following information calculate cash flow from financing activity:
Particulars | 31.3.2020 | 31.3.2019
Equity share capital | 900000 | 700000
12% preference share capital | 300000 | 500000
Security premium | 140000 | 100000
12% debentures | 400000 | 300000
Additional information:
1. dividend paid on preference share
2. \( 12\% \) preference shares were redeemed at a premium of \( 5\% \) on 31.3.2020
3. interim dividend paid on equity shares at the end of the current year was paid at \( 15\% \)
Answer:
Inflow from Issue of Equity Shares = \( (9,00,000 - 7,00,000) + (1,40,000 - 1,00,000) = Rs 2,40,000 \)
Inflow from Issue of Debentures = \( 4,00,000 - 3,00,000 = Rs 1,00,000 \)
Outflow for Redemption of Pref Shares = \( 2,00,000 + (5\% \text{ of } 2,00,000) = (Rs 2,10,000) \)
Outflow for Pref Dividend = \( 12\% \text{ of } 5,00,000 = (Rs 60,000) \)
Outflow for Interim Dividend = \( 15\% \text{ of } 7,00,000 = (Rs 1,05,000) \)
Net Cash Flow from Financing Activities = \( Rs (35,000) \text{ (Outflow)} \)

Question. From the following information calculate cash flow from financing activity:
Particulars | 31.3.2020 | 31.3.2019
Equity share capital | 2000000 | 1500000
12% preference share capital | --- | 500000
14% debentures | 250000 | ----
Additional information:
1. equity shares were issued at a premium of \( 20\% \)
2. \( 12\% \) preference shares were redeemed at par
3. \( 14\% \) debentures were issued at a discount of \( 10\% \)
4. interim dividend paid on equity shares 150000
5. interest paid on 14% debentures 35000
6. underwriting commission on equity share 20000
7. dividend paid on preference share 60000
Answer:
Inflow from Equity Shares = \( 5,00,000 + (20\% \text{ of } 5,00,000) = Rs 6,00,000 \)
Outflow for Underwriting Commission = \( (Rs 20,000) \)
Inflow from Debentures = \( 2,50,000 - (10\% \text{ of } 2,50,000) = Rs 2,25,000 \)
Outflow for Redemption of Pref Shares = \( (Rs 5,00,000) \)
Outflow for Interest on Debentures = \( (Rs 35,000) \)
Outflow for Equity Dividend = \( (Rs 1,50,000) \)
Outflow for Pref Dividend = \( (Rs 60,000) \)
Net Cash Flow from Financing Activities = \( Rs 60,000 \text{ (Inflow)} \)

Question. From the following Balance sheet prepare Cash Flow Statement:
Balance Sheet as at \( 31^{st} \) March 2014 and 2013:
Liabilities:
1. Shareholders’ Funds: (a) Share Capital (2014: 2,50,000; 2013: 2,00,000); (b) Reserve and Surplus (2014: 90,600; 2013: 80,500)
2. Current Liabilities: (a) Bank Loan (2014: ----; 2013: 70,000); (b) Trade Payables (2014: 1,35,000; 2013: 1,50,000); (c) Short Term Provision: Provision for Tax (2014: 35,000; 2013: 30,000)
Assets:
1. Non Current Assets: (a) Fixed Assets: (i) Tangible (2014: 3,59,000; 2013: 3,50,000); (ii) Intangible Goodwill (2014: 5,000; 2013: ----)
2. Current Assets: (a) Inventories (2014: 74,000; 2013: 1,00,000); (b) Trade Receivables (2014: 64,000; 2013: 80,000); (c) Cash and Cash Equivalents (2014: 8,600; 2013: 500)
Notes to Accounts:
1. Reserve and Surplus: General Reserve (2014: 60,000; 2013: 50,000); Surplus i.e. Balance in P&L (2014: 30,600; 2013: 30,500)
2. Tangible Fixed Assets: Land and Building (2014: 1,90,600; 2013: 2,00,000); Plant and Machinery (2014: 1,69,000; 2013: 1,50,000)
Additional Information:
1. Dividend of \( Rs. 23,000 \) was paid.
2. The Income Tax paid during the year \( Rs. 28,000 \).
3. Machinery was purchased during the year \( Rs. 33,000 \).
4. Depreciation written off on Machinery \( Rs. 14,000 \), Building \( Rs. 10,000 \).
Answer:
Operating Profit before WC changes: \( Rs 80,100 \).
Net cash from Operating Activities: \( Rs 1,01,100 \).
Net cash used in Investing Activities: \( Rs (30,000) \) [Purchase of Mach (33,000) + Sale of Bldg 9,400 - Goodwill pur (5,000)].
Net cash used in Financing Activities: \( Rs (63,000) \) [Issue of Cap 50,000 - Bank Loan paid (90,000) - Dividend (23,000)].
Net increase in Cash: \( Rs 8,100 \). Add opening cash: \( Rs 500 \). Closing cash: \( Rs 8,600 \).

Question. From the following Balance sheet prepare Cash Flow Statement:
Liabilities:
1. Shareholders’ Funds: (a) Share Capital (2014: 6,00,000; 2013: 5,00,000); (b) Reserve and Surplus (2014: 75,000; 2013: 50,000)
2. Non Current Liabilities: 8% Debentures (2014: 1,10,000; 2013: 2,00,000)
3. Current Liabilities: (a) Bank Overdraft (2014: 1,00,000; 2013: 80,000); (b) Trade Payables (2014: 75,000; 2013: 80,000); (c) Short Term Provision (2014: 40,000; 2013: 30,000)
Assets:
1. Non Current Assets: (a) Fixed Assets: (i) Tangible Assets: Land and Building (2014: 5,50,000; 2013: 5,50,000); (ii) Intangible Assets: Goodwill (2014: 75,000; 2013: 1,00,000); (b) Investment (2014: 2,00,000; 2013: 1,50,000)
3. Current Assets: (iii) Inventories (2014: 80,000; 2013: 60,000); (iv) Trade Receivables (2014: 90,000; 2013: 68,000); (v) Cash & Cash Equivalents (2014: 5,000; 2013: 12,000)
Notes to Accounts:
1. Reserve and Surplus: Securities Premium Reserve (2014: 50,000; 2013: 50,000); Surplus i.e. Balance in P&L (2014: 25,000; 2013: ----)
2. Short term Provisions: Proposed Dividend (2014: 15,000; 2013: 10,000); Provision for Tax (2014: 25,000; 2013: 20,000)
Additional Information:
1. Net profit for the year 2013-14 before Tax and Dividend amounted to \( Rs. 63,000 \).
2. Provision for Tax during the year 2013-14 was \( Rs. 23,000 \).
3. Depreciation provided on Fixed Assets for the year 2013-14 \( Rs. 80,000 \).
4. Debentures amounted to \( Rs. 90,000 \) were redeemed on \( 1^{st} \) July 2013.
Answer:
Net Cash Flow from Operating Activities: \( Rs 1,40,000 \).
Net Cash Flow used in Investing Activities: \( Rs (1,30,000) \).
Net Cash Flow used in Financing Activities: \( Rs (17,000) \).
Net decrease in Cash: \( Rs (7,000) \). Add opening cash: \( Rs 12,000 \). Closing cash: \( Rs 5,000 \).

Question. Global ltd, has machinery written down value of which on 1.4.2019 was \( 860,000 \) and on 31.3.2020 was \( 950,000 \). Depreciation for the year was \( 40,000 \). In the beginning of the year an item of machinery was sold for \( 25,000 \) which had a writtendown value of \( 20,000 \). calculate cash flow from investing activity
Answer:
Machinery Account:
To Balance b/d \( 8,60,000 \)
To Purchase (balancing figure) \( 1,50,000 \)
By Bank (Sale) \( 25,000 \)
By Depreciation \( 40,000 \)
By Balance c/d \( 9,50,000 \)
[Profit on sale \( 5,000 \) debited]
Cash Flow from Investing Activity = Sale \( 25,000 \) - Purchase \( 1,50,000 = (Rs 1,25,000) \text{ Outflow} \).

Question. Swan ltd. Had the following balances
Investment in the beginning of the period \( 34,000 \)
Investment at the end of the period \( 28,000 \)
During the year the company sold its \( 40\% \) investment held in the beginning of the period at a profit of \( 8,400 \) determine cash flow from investing activity
Answer:
Cost of investment sold = \( 40\% \text{ of } 34,000 = Rs 13,600 \).
Sale Price = Cost + Profit = \( 13,600 + 8,400 = Rs 22,000 \).
Investment Account:
To Balance b/d \( 34,000 \)
To Profit on sale \( 8,400 \)
To Purchase (balancing figure) \( 7,600 \)
By Bank (Sale) \( 22,000 \)
By Balance c/d \( 28,000 \)
Cash Flow from Investing Activity = Sale \( 22,000 \) - Purchase \( 7,600 = Rs 14,400 \text{ Inflow} \).

Please refer to attached file for CBSE Class 12 Accountancy Cash Flow Statement Set B