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Numerical Questions · Q10
Q.

From the following Balance Sheet of Yogeta Ltd., prepare a Cash Flow Statement.

Balance Sheet of Yogeta Ltd.

ParticularsNote No.31 March 2017 (₹)31 March 2016 (₹)
I. Equity and Liabilities
1. Shareholders' Funds — a) Share capital14,00,0002,00,000
b) Reserve and surplus (Surplus)2,00,0001,00,000
2. Non-current Liabilities — Long-term borrowings21,50,0002,20,000
3. Current Liabilities — a) Short-term borrowings (Bank overdraft)1,00,000—
b) Trade payables70,00050,000
c) Short-term provision (Provision for taxation)50,00030,000
Total9,70,0006,00,000
II. Assets
1. Non-current assets — Fixed assets: Tangible7,00,0004,00,000
2. Current assets — Inventories1,70,0001,00,000
Trade Receivables1,00,00050,000
Cash and cash equivalents—50,000
Total9,70,0006,00,000

Notes to Accounts

Particulars31 March 2017 (₹)31 March 2016 (₹)
1. Share capital: Equity share capital3,00,0002,00,000
Preference share capital1,00,000—
2. Long-term borrowings: 8% Long-term loan—2,00,000
9% Loan from Rahul1,50,00020,000

Additional Information: Net Profit for the year, after charging ₹50,000 as depreciation, was ₹1,50,000. Dividend paid on shares was ₹50,000. Tax provision created during the year amounted to ₹60,000. The 8% loan was repaid on March 31, 2017 and an additional 9% loan of ₹1,30,000 was obtained from Rahul on April 01, 2016.

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Net cash from Operating Activities ₹1,20,000; used in Investing Activities ₹(3,50,000); from Financing Activities ₹1,80,000; net decrease in cash ₹(50,000), reconciling opening cash ₹50,000 to closing cash ₹Nil (bank overdraft ₹1,00,000 shown as a financing inflow).


Concept: Cash Flow Statement under AS-3 (Revised)

A Cash Flow Statement classifies cash movements into three activities:

Operating Activities capture cash generated from the entity's principal revenue-producing activities. We start with net profit (after tax and depreciation) and adjust for non-cash charges (depreciation added back), changes in working capital (increase in current assets reduces cash; increase in current liabilities adds cash), and actual tax paid (provision created minus actual payment).

Investing Activities record cash flows from acquisition and disposal of long-term assets and investments. Purchase of fixed assets is a cash outflow; proceeds from sale are inflow.

Financing Activities include cash from or to owners and lenders: issue of shares, borrowing/repayment of loans, and dividends paid.

The key treatment rules:

  • Depreciation is added back to profit (it reduced profit but involved no cash outflow).
  • Tax paid = Opening provision + Tax charged during the year − Closing provision.
  • Purchase of fixed assets = Closing tangible assets − Opening tangible assets + Depreciation (since depreciation reduced the book value).
  • Proceeds from issue of shares = Increase in share capital.
  • Proceeds from borrowings and Repayment of borrowings are shown separately (not netted).
  • Dividends paid is a financing outflow.
  • Change in cash and cash equivalents = Closing cash − Opening cash; a bank overdraft is negative cash.

Solution: Cash Flow Statement of Yogeta Ltd. for the year ended 31st March 2017

Cash Flow Statement

ParticularsAmount (₹)Amount (₹)
A. Cash Flow from Operating Activities
Net Profit before Tax and Extraordinary Items (W.N. 1)2,10,000
Adjustments for:
Depreciation on Tangible Assets50,000
Operating Profit before Working Capital Changes2,60,000
Adjustments for Working Capital Changes:
(Increase) in Inventories(70,000)
(Increase) in Trade Receivables(50,000)
Increase in Trade Payables20,000
(1,00,000)
Cash Generated from Operations1,60,000
Less: Income Tax Paid (W.N. 2)(40,000)
Net Cash from Operating Activities1,20,000
B. Cash Flow from Investing Activities
Purchase of Tangible Fixed Assets (W.N. 3)(3,50,000)
Net Cash used in Investing Activities(3,50,000)
C. Cash Flow from Financing Activities
Proceeds from Issue of Equity Share Capital (W.N. 4)1,00,000
Proceeds from Issue of Preference Share Capital (W.N. 5)1,00,000
Proceeds from 9% Loan from Rahul (W.N. 6)1,30,000
Repayment of 8% Long-term Loan (W.N. 7)(2,00,000)
Dividends Paid(50,000)
Increase in Bank Overdraft (W.N. 8)1,00,000
Net Cash from Financing Activities1,80,000
Net Decrease in Cash and Cash Equivalents (A + B + C)(50,000)
Add: Cash and Cash Equivalents at the beginning (1.4.2016)50,000
Cash and Cash Equivalents at the end (31.3.2017)Nil

Working Notes

W.N. 1: Net Profit before Tax

Given: Net Profit after tax = ₹1,50,000.

Tax provision created during the year = ₹60,000.

Net Profit before Tax = ₹1,50,000 + ₹60,000 = ₹2,10,000.


W.N. 2: Income Tax Paid

ParticularsAmount (₹)
Opening Provision for Taxation (1.4.2016)30,000
Add: Tax Provision created during the year60,000
90,000
Less: Closing Provision for Taxation (31.3.2017)(50,000)
Tax Paid during the year40,000

W.N. 3: Purchase of Tangible Fixed Assets

ParticularsAmount (₹)
Closing Tangible Assets (31.3.2017)7,00,000
Add: Depreciation charged during the year50,000
7,50,000
Less: Opening Tangible Assets (1.4.2016)(4,00,000)
Purchase of Tangible Assets3,50,000

W.N. 4: Proceeds from Issue of Equity Share Capital

Equity Share Capital increased from ₹2,00,000 to ₹3,00,000.

Proceeds = ₹3,00,000 − ₹2,00,000 = ₹1,00,000.


W.N. 5: Proceeds from Issue of Preference Share Capital

Preference Share Capital increased from ₹Nil to ₹1,00,000.

Proceeds = ₹1,00,000.


W.N. 6: Proceeds from 9% Loan from Rahul

9% Loan from Rahul increased from ₹20,000 to ₹1,50,000.

Additional loan obtained = ₹1,50,000 − ₹20,000 = ₹1,30,000.

(The additional information confirms this: ₹1,30,000 obtained on 1.4.2016.)


W.N. 7: Repayment of 8% Long-term Loan

8% Long-term Loan decreased from ₹2,00,000 to ₹Nil.

Repayment = ₹2,00,000.

(The additional information confirms this was repaid on 31.3.2017.)


W.N. 8: Bank Overdraft

Bank Overdraft (a short-term borrowing, treated as a financing activity when it represents a loan rather than part of cash management) increased from ₹Nil to ₹1,00,000.

Increase = ₹1,00,000. …

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