From the following Balance Sheet of Mohan Ltd., prepare a Cash Flow Statement.
Balance Sheet of Mohan Ltd.
| Particulars | Note No. | 31 March 2017 (₹) | 31 March 2016 (₹) |
|---|---|---|---|
| I. Equity and Liabilities | |||
| 1. Shareholders' Funds | |||
| a) Equity share capital | 3,00,000 | 2,00,000 | |
| b) Reserves and Surplus | 2,70,000 | 2,20,000 | |
| 2. Non-current liabilities — Long-term borrowings | 1 | 80,000 | 1,00,000 |
| 3. Current liabilities — Trade payables | 1,20,000 | 1,40,000 | |
| Total | 7,70,000 | 6,60,000 | |
| II. Assets | |||
| 1. Non-current assets — Fixed assets | 2 | 5,00,000 | 3,20,000 |
| 2. Current assets — a) Inventories | 1,50,000 | 1,30,000 | |
| b) Trade receivables | 3 | 90,000 | 1,20,000 |
| c) Cash and cash equivalents | 4 | 30,000 | 90,000 |
| Total | 7,70,000 | 6,60,000 |
Notes to Accounts
| Particulars | 31 March 2017 (₹) | 31 March 2016 (₹) |
|---|---|---|
| 1. Long-term borrowings: 9% Bank Loan | 80,000 | 1,00,000 |
| 2. Fixed assets (gross) | 6,00,000 | 4,00,000 |
| Less: Accumulated Depreciation | (1,00,000) | (80,000) |
| Net Fixed Assets | 5,00,000 | 3,20,000 |
| 3. Trade receivables: Debtors | 60,000 | 1,00,000 |
| Bills receivables | 30,000 | 20,000 |
| 4. Cash and cash equivalents: Bank | 30,000 | 90,000 |
Additional Information: A machine costing ₹80,000, on which accumulated depreciation was ₹50,000, was sold for ₹20,000. A 9% bank loan of ₹20,000 was repaid on March 31, 2017. Proposed dividend for the year 2015-16 was ₹60,000.
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Start your 14-day free trial to unlock the full solution →Net Cash from Operating Activities = ₹1,89,000; Net Cash used in Investing Activities = ₹(2,60,000); Net Cash from Financing Activities = ₹11,000; Net decrease in Cash & Cash Equivalents = ₹(60,000), reconciling the fall from ₹90,000 to ₹30,000.
Working notes
W1 - Depreciation charged during the year
Accumulated depreciation: opening ₹80,000, closing ₹1,00,000; the machine sold carried ₹50,000 of accumulated depreciation (now removed).
Depreciation for the year = 1,00,000 + 50,000 - 80,000 = ₹70,000.
W2 - Loss on sale of machine
Book value = Cost 80,000 - Accumulated depreciation 50,000 = ₹30,000; sold for ₹20,000.
Loss on sale = 30,000 - 20,000 = ₹10,000.
W3 - Interest on 9% bank loan
The loan was repaid on 31 March 2017, so it ran at ₹1,00,000 for the whole year. Interest = 9% x 1,00,000 = ₹9,000 (a finance cost - added back to operating profit and shown as an outflow under financing).
W4 - Net Profit before Tax
The previous year's proposed dividend (₹60,000 for 2015-16) is declared and paid in 2016-17, so it reduces this year's reserves.
Closing Reserves = Opening Reserves + Profit - Dividend declared
2,70,000 = 2,20,000 + Profit - 60,000, so Profit before Tax = ₹1,10,000 (no tax is given).
W5 - Fixed assets purchased
Gross block: opening ₹4,00,000, closing ₹6,00,000; machine of cost ₹80,000 sold.
Purchases = 6,00,000 + 80,000 - 4,00,000 = ₹2,80,000.
Cash Flow Statement of Mohan Ltd. for the year ended 31 March 2017
| Particulars | Rs. | Rs. |
|---|---|---|
| A. Cash Flow from Operating Activities | ||
| Net Profit before Tax (W4) | 1,10,000 | |
| Add: Interest on bank loan (W3) | 9,000 | |
| Add: Depreciation (W1) | 70,000 | |
| Add: Loss on sale of machine (W2) | 10,000 | 89,000 |
| Operating Profit before Working Capital Changes | 1,99,000 | |
| Add: Decrease in Trade Receivables | 30,000 | |
| Less: Increase in Inventories | (20,000) | |
| Less: Decrease in Trade Payables | (20,000) | (10,000) |
| Cash Generated from Operations | 1,89,000 | |
| Less: Income Tax paid | Nil | |
| Net Cash from Operating Activities | 1,89,000 |
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