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Illustrations · Illustration 7
Q.

From the following information, prepare a Cash Flow Statement of Pioneer Ltd.

Balance Sheet of Pioneer Ltd. as on March 31, 2017

ParticularsNote No.31st March 2017 (₹)31st March 2016 (₹)
I. Equity and Liabilities
1. Shareholders' Funds
a) Share capital17,00,0005,00,000
b) Reserve and surplus24,20,0002,50,000
2. Non-current Liabilities
Long-term borrowings: 10% Bank Loan50,0001,00,000
3. Current Liabilities
a) Trade Payables45,00050,000
b) Other current liabilities: outstanding rent7,0005,000
c) Short-term provisions350,00030,000
Total12,72,0009,35,000
II. Assets
1. Non-current assets
a) Fixed assets — (i) Tangible assets45,00,0005,00,000
(ii) Intangible assets595,0001,00,000
b) Non-current investments1,00,000—
2. Current assets
a) Inventories1,30,00050,000
b) Trade receivables1,20,00080,000
c) Cash and cash equivalents63,27,0002,05,000
Total12,72,0009,35,000

Notes to Accounts:

Note 1 — Share Capital

Particulars31st March 2017 (₹)31st March 2016 (₹)
Equity Share Capital7,00,0005,00,000

Note 2 — Reserve and Surplus

Particulars31st March 2017 (₹)31st March 2016 (₹)
Surplus (Balance in Statement of Profit and Loss)4,20,0002,50,000

Note 3 — Short-term Provisions

Particulars31st March 2017 (₹)31st March 2016 (₹)
Provision for Taxation50,00030,000

Note 4 — Tangible Assets

Particulars31st March 2017 (₹)31st March 2016 (₹)
Equipments2,30,0002,00,000
Furniture2,70,0003,00,000

Note 5 — Intangible Assets

Particulars31st March 2017 (₹)31st March 2016 (₹)
Patents95,0001,00,000

Note 6 — Cash and Cash Equivalents

Particulars31st March 2017 (₹)31st March 2016 (₹)
Cash27,0005,000
Bank Balance3,00,0002,00,000

Additional Information: During the year, equipment costing ₹80,000 was purchased; loss on sale of equipment amounted to ₹5,000; depreciation of ₹15,000 and ₹3,000 was charged on equipments and furniture respectively; a loan of ₹50,000 was repaid on 31.03.2017; and the proposed dividend for the year 2015-16 was ₹50,000.

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✓ Free question

Operating activities generate ₹1,82,000, investing uses ₹1,50,000, and financing provides ₹90,000 — a net increase of ₹1,22,000, reconciling opening cash ₹2,05,000 to closing ₹3,27,000.

Cash Flow Statement of Pioneer Ltd.

ParticularsAmount (₹)
I. Cash flows from Operating Activities
Net Profit before taxation & extraordinary items2,70,000
Add: Depreciation on equipment15,000
Add: Depreciation on furniture30,000
Add: Patents written-off5,000
Add: Loss on sale of equipments5,000
Add: Interest on bank loan10,000
Operating Profit before Working Capital changes3,35,000
Less: Decrease in trade payables(5,000)
Add: Increase in outstanding rent2,000
Less: Increase in trade receivables(40,000)
Less: Increase in inventories(80,000)
Cash generated from operating activities2,12,000
Less: Tax paid(30,000)
A. Net Cash Inflows from Operating Activities1,82,000
II. Cash flows from Investing Activities
Proceeds from sale of equipments30,000
Purchase of new equipment(80,000)
Purchase of investments(1,00,000)
B. Net Cash used in Investing Activities(1,50,000)
III. Cash flows from Financing Activities
Issue of equity share capital2,00,000
Repayment of bank loan(50,000)
Payment of dividend(50,000)
Payment of interest on bank loan(10,000)
C. Net Cash Inflows from Financing Activities90,000
Net increase in Cash & Cash Equivalents (A + B + C)1,22,000
Add: Cash and Cash Equivalents in the beginning2,05,000
Cash and Cash Equivalents in the end3,27,000

Working Note 1 — Equipment Account

ParticularsAmount (₹)ParticularsAmount (₹)
To Balance b/d2,00,000By Depreciation15,000
To Cash (purchase)80,000By Bank (sale)30,000
By Statement of Profit & Loss (loss on sale)5,000
By Balance c/d2,30,000
Total2,80,000Total2,80,000

Working Note 2 — Calculation of Net Profit before Taxation

ParticularsAmount (₹)
Surplus (Statement of Profit & Loss) at the end4,20,000
Less: Surplus at the beginning(2,50,000)
Net Profit during the year1,70,000
Add: Provision for tax during the year50,000
Add: Proposed dividend (2015-16)50,000
Net Profit before taxation & extraordinary items2,70,000

Patents of ₹5,000 (₹1,00,000 − ₹95,000) were written off; depreciation on furniture was ₹30,000 (₹3,00,000 − ₹2,70,000). The proposed dividend of ₹50,000 and tax of ₹30,000 provided in 2015-16 are assumed paid during 2016-17.

✓Final answer

Net cash from Operating ₹1,82,000; used in Investing (₹1,50,000); from Financing ₹90,000; net increase ₹1,22,000, taking Cash and Cash Equivalents from ₹2,05,000 to ₹3,27,000.

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