From the following information of Oswal Mills Ltd., prepare a Cash Flow Statement (figures in ₹ Lakhs).

**Balance Sheet of Oswal Mills as on 31st March, 2016 and 2017**

| Particulars | Note No. | 31st March 2017 (₹) | 31st March 2016 (₹) |
|---|---|---:|---:|
| **I. Equity and

Question

From the following information of Oswal Mills Ltd., prepare a Cash Flow Statement (figures in ₹ Lakhs).

**Balance Sheet of Oswal Mills as on 31st March, 2016 and 2017**

| Particulars | Note No. | 31st March 2017 (₹) | 31st March 2016 (₹) |
|---|---|---:|---:|
| **I. Equity and Liabilities** | | | |
| 1. Shareholders' Funds — a) Share capital | 1 | 1,300 | 1,400 |
| b) Reserve and surplus (Surplus) | | 4,700 | 4,000 |
| 2. Current Liabilities — a) Short-term borrowings | | 200 | 600 |
| b) Trade payables | | 500 | 400 |
| **Total** | | **6,700** | **6,400** |
| **II. Assets** | | | |
| 1. Non-current assets — a) Fixed assets | 2 | 2,400 | 2,400 |
| b) Non-current investments | | 300 | 200 |
| 2. Current assets — a) Inventories | | 1,200 | 1,300 |
| b) Trade receivables | | 800 | 900 |
| c) Cash and cash equivalents | | 1,200 | 800 |
| d) Short-term loans and advances | | 800 | 800 |
| **Total** | | **6,700** | **6,400** |

**Notes to Accounts:**

**Note 1 — Share Capital**

| Particulars | 31st March 2017 (₹) | 31st March 2016 (₹) |
|---|---:|---:|
| Equity share capital | 1,000 | 1,000 |
| 10% preference share capital | 300 | 400 |
| **Total** | **1,300** | **1,400** |

**Note 2 — Fixed Assets**

| Particulars | 31st March 2017 (₹) | 31st March 2016 (₹) |
|---|---:|---:|
| Tangible assets | 3,600 | 3,400 |
| Less: Accumulated depreciation | 1,200 | 1,000 |
| **Net** | **2,400** | **2,400** |

**Statement of Profit and Loss for the year ended 31st March, 2017**

| Particulars | Amount (₹) |
|---|---:|
| Revenue from operation | 2,800 |
| Other income (dividend income) | 1,000 |
| **Total Revenue** | **3,800** |
| Cost of material consumed | 400 |
| Employees benefit expenses | 200 |
| Finance cost (interest paid) | 200 |
| Depreciation | 200 |
| Loss due to earthquake | 1,100 |
| **Total Expenses** | **2,100** |
| **Profit before tax** | **1,700** |
| Tax paid | 1,000 |
| **Profit after tax** | **700** |

**Additional Information:** (1) No dividend was paid by the company during the current financial year. (2) Out of fixed assets, land worth ₹1,000 Lakhs was sold at this amount.

Accepted Answer

> [!TLDR]
> After adding back interest and depreciation and treating the earthquake loss as an extraordinary item, operating activities give ₹1,400; investing uses ₹300 and financing uses ₹700 — a net increase of ₹400 Lakhs (₹800 → ₹1,200).

### Cash Flow Statement of Oswal Mills Ltd. (₹ Lakhs)

| Particulars | Amount (₹) |
|---|---:|
| **Cash Flows from Operating Activities** | |
| Net Profit before Tax and Extraordinary Items | 2,800 |
| Add: Interest paid | 200 |
| Add: Depreciation | 200 |
| Operating profit before working capital changes | 3,200 |
| Add: Decrease in Inventories | 100 |
| Add: Decrease in Trade Receivables | 100 |
| Add: Increase in Trade Payables | 100 |
| Cash generated from operations | 3,500 |
| Less: Income Tax paid | (1,000) |
| Cash Flow before Extraordinary items | 2,500 |
| Less: Loss due to earthquake | (1,100) |
| **A. Net cash from Operating Activities** | **1,400** |
| **Cash flows from Investing Activities** | |
| Sale of Land | 1,000 |
| Purchase of fixed assets | (1,200) |
| Purchase of Investments | (100) |
| **B. Net cash used in Investing Activities** | **(300)** |
| **Cash flows from Financing Activities** | |
| Payment of short-term loans | (400) |
| Interest Paid | (200) |
| Redemption of 10% preference share capital | (100) |
| **C. Net Cash used in Financing Activities** | **(700)** |
| **Net increase in Cash and Cash Equivalents (A + B + C)** | **400** |
| Add: Cash and Cash Equivalents in the beginning | 800 |
| **Cash and Cash Equivalents at the end** | **1,200** |

### Working Notes (₹ Lakhs)

Net Profit before Tax and Extraordinary Items = Profit after tax ₹700 + Loss due to earthquake ₹1,100 + Tax ₹1,000 = ₹2,800.

**Fixed Assets Account**

| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---|---:|---|---:|
| To Balance b/d | 3,400 | By Cash (sale of land) | 1,000 |
| To Cash (purchase of fixed assets) | 1,200 | By Balance c/d | 3,600 |
| **Total** | **4,600** | **Total** | **4,600** | …

Activity	What it includes	Example
Operating Activities	Main revenue-producing activities	Cash from selling goods, cash paid to suppliers, salaries
Investing Activities	Purchase/sale of long-term assets	Buying machinery, selling land, loans given
Financing Activities	Changes in equity and borrowings	Issue of shares, repayment of bank loan, dividend paid

Particulars	Amount (₹)
A. Cash Flow from Operating Activities
Net Profit before Tax (from P&L)	1,00,000
Adjustments for non-cash items:
Add: Depreciation	20,000
Add: Loss on sale of asset	5,000
Less: Profit on sale of asset	(3,000)
Changes in Working Capital:
Increase in Debtors	(10,000)
Decrease in Stock	8,000
Increase in Creditors	6,000
Net Cash from Operating Activities	1,26,000
B. Cash Flow from Investing Activities
Purchase of Machinery	(50,000)
Sale of Land	30,000
Net Cash used in Investing Activities	(20,000)
C. Cash Flow from Financing Activities
Issue of Share Capital	40,000
Repayment of Loan	(15,000)
Dividend Paid	(10,000)

Activity	Net Cash (₹ Lakhs)
A. Operating Activities	1,400
B. Investing Activities	(300)
C. Financing Activities	(700)

Concept understanding — Cash Flow Calculation

Cash Flow: From Pocket Money to the Cash Flow Statement

Why Cash Flow Matters

The Three Activities of Cash Flow

Accounting Treatment — No Debit/Credit Here

The Proforma of a Cash Flow Statement (as per NCERT)

Cash Flow Statement of Oswal Mills Ltd. (₹ Lakhs)

Working Notes (₹ Lakhs)

Particulars	Note No.	31st March 2017 (₹)	31st March 2016 (₹)
I. Equity and Liabilities
1. Shareholders' Funds — a) Share capital	1	1,300	1,400
b) Reserve and surplus (Surplus)		4,700	4,000
2. Current Liabilities — a) Short-term borrowings		200	600
b) Trade payables		500	400
Total		6,700	6,400
II. Assets
1. Non-current assets — a) Fixed assets	2	2,400	2,400
b) Non-current investments		300	200
2. Current assets — a) Inventories		1,200	1,300
b) Trade receivables		800	900
c) Cash and cash equivalents		1,200	800
d) Short-term loans and advances		800	800
Total		6,700	6,400

Particulars	31st March 2017 (₹)	31st March 2016 (₹)
Equity share capital	1,000	1,000
10% preference share capital	300	400
Total	1,300	1,400

Particulars	31st March 2017 (₹)	31st March 2016 (₹)
Tangible assets	3,600	3,400
Less: Accumulated depreciation	1,200	1,000
Net	2,400	2,400

Particulars	Amount (₹)
Revenue from operation	2,800
Other income (dividend income)	1,000
Total Revenue	3,800
Cost of material consumed	400
Employees benefit expenses	200
Finance cost (interest paid)	200
Depreciation	200
Loss due to earthquake	1,100
Total Expenses	2,100
Profit before tax	1,700
Tax paid	1,000
Profit after tax	700

Particulars	Amount (₹)
Cash Flows from Operating Activities
Net Profit before Tax and Extraordinary Items	2,800
Add: Interest paid	200
Add: Depreciation	200
Operating profit before working capital changes	3,200
Add: Decrease in Inventories	100
Add: Decrease in Trade Receivables	100
Add: Increase in Trade Payables	100
Cash generated from operations	3,500
Less: Income Tax paid	(1,000)
Cash Flow before Extraordinary items	2,500
Less: Loss due to earthquake	(1,100)
A. Net cash from Operating Activities	1,400
Cash flows from Investing Activities
Sale of Land	1,000
Purchase of fixed assets	(1,200)
Purchase of Investments	(100)
B. Net cash used in Investing Activities	(300)
Cash flows from Financing Activities
Payment of short-term loans	(400)
Interest Paid	(200)
Redemption of 10% preference share capital	(100)
C. Net Cash used in Financing Activities	(700)
Net increase in Cash and Cash Equivalents (A + B + C)	400
Add: Cash and Cash Equivalents in the beginning	800
Cash and Cash Equivalents at the end	1,200

Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	3,400	By Cash (sale of land)	1,000
To Cash (purchase of fixed assets)	1,200	By Balance c/d	3,600
Total	4,600	Total	4,600

Cash Flow Statement of Oswal Mills Ltd. (₹ Lakhs)

Working Notes (₹ Lakhs)

🎓Unlock everything free for 14 days

Unlock everything free for 14 days