question_answer

From the following, calculate the net cash flow from operating activities.

	Particulars	Note No.	31st March, 2017 Amt (Rs.)	31st March, 2016 Amt (Rs.)
I.	EQUITY AND LIABILITIES
	1. Shareholders? Funds
	(a) Share Capital	1	1,87,500	1,87,500
	(b) Reserves and Surplus	2	77,500	(5,000)
	2. Non-current Liabilities (8% Debentures)		65,000	37,500
	3. Current Liabilities
	(a) Short-term Borrowings		10,000	12,500
	(b) Trade Payables		30,000	27,500
	(c) Short-term Provisions		12,500	10,000
	Total		3,82,500	270,000
II.	ASSETS
	1. Non-current Assets
	(a) Tangible Fixed Assets (Net)		2,15,000	1,55,000
	(b) Intangible Assets		2,15,000	1,55,000
	(c) Non-current Investments		31,250	20,000
	2. Current Assets
	(a) Current Investments		1,250	3,750
	(b) Inventories		48,750	25,000
	(c) Trade Receivables		50,000	50,000
	(d) Cash and Cash Equivalents		32,500	6,250
	Total		3,82,500	2,70,000

Notes to Accounts

	Particulars	2017 (Rs.)	2016 (Rs.)
1.	Share Capital
	Equity Share Capital	1,37,500	1,12,500
	5% Preference Share Capital	50,000	75,000
2.	Reserves and Surplus
	General Reserve	37,500	30,000
	Statement of Profit and Loss	37,500	(35,000)
	Securities Premium Reserve	2,500	-
3.	Short-term Borrowings
	8% Bank Loan	10,000	12,500
4.	Short-term Provisions
	Provision for Tax	12,500	10,000
5.	Intangible Assets
	Goodwill	3.750	10.000

Additional Information During the year, a piece of machinery costing Rs. 15,000 on which depreciation charged was Rs. 5,000 was sold for Rs. 5,000. Depreciation provided on fixed assets Rs. 15,000. Dividend on Equity shares @ 8% was paid on opening balance. Income tax Rs. 11,250 was provided. Additional debentures were issued at par on 1st October, 2015 and bank loan was repaid on the same date. At the end of the Year, preference shares were redeemed at a premium of 5%

Answer:

            Calculation of Net Cash Flow from Operating Activities

	Particulars		Amt (Rs.)
1.	Cash Flow from Operating Activities
	Net Profit before Tax		1,04,000
	(+) Adjustment for Non-cash and Non-operating Items
	Depreciation on Fixed Assets	15,000
	Loss on Sales of Machinery	5,000
	Interest on Debentures                \[[(37,500\times 8/100)+(Rs.\,27,500\times 8/100\times 6/12)]\]	4,100
	Interest on Bank Loan     \[[Rs.\,12,500\times 8/100\times 6/12)+(Rs.\,10,000\times 8/100\times 6/12)]\]	900
	Goodwill Amortised	6,250
	Premium on redemption of Preference Shares	1,250	32,500
	Operating Profit before Working Capital Changes		1,36,500
	(-) Increase in Current Assets and Decrease Current Liabilities Inventories		(23,750)
	(+) Decrease in Current Assets and Increase in Current Liabilities Trade Payables		2,500
	(+) Net Cash Flow from Operating Activities before Tax		1,15,250
	(-) Tax Paid		(8,750)
	Net Cash Inflow from Operating Activities after Tax		1,06,500

            Working Notes

	Particulars	Amt (Rs.)
1.	Calculation of Net Profit before Tax
	Closing balance of Profit and Loss A/c	37,500
	(+) Opening Balance of Profit and Loss A/c (Debit)	35,000
	(+) Transfer to Reserve	7,500
	(+) Dividend on Equity Shares	9,000
	(+) Dividend on Preference Shares	3,750
	(+) Provision for Tax	11,250
	Net Profit before Tax	1,04,000

            2. Dr                                                         Tangible Fixed Assets Account                                                Cr

Particulars	Amt (Rs.)	Particulars	Amt (Rs.)
To Balance b/d	1,55,000	By Depreciation A/c	15,000
To Bank A/c (Purchases)	85,000	By Bank A/c (Sale)	5,000
		By Profit and Loss (Loss)	5,000
		By Balance c/d	2,15,000
	2,40,000		2,40,000

            3. Dr                                                         Provision for Tax Account                                                       Cr

Particulars	Amt (Rs.)	Particulars	Amt (Rs.)
To Bank A/c (Balancing figure)	8,750	By Balance c/d	10,000
To Balance c/d	12,500	By Profit and Loss A/c	11,250
	21,250		21,250