From the following information, calculate Cash Flow from Operating Activities for the year ended 31st March, 2014:
BALANCE SHEETS OF G.K. LTD. as on 31st March, 2013 and 31st March, 2014
| Liabilities | 31st March, 2013 (₹) | 31st March, 2014 (₹) | Assets | 31st March, 2013 (₹) | 31st March, 2014 (₹) |
|---|---|---|---|---|---|
| Share Capital | 1,20,000 | 1,40,000 | Goodwill | 20,000 | 16,000 |
| General Reserve | 8,000 | 12,000 | Buildings | 76,000 | 96,400 |
| Profit and Loss A/c | 7,200 | 6,200 | Investments | 4,000 | 14,000 |
| Proposed Dividend | 11,200 | 20,200 | Debtors | 30,000 | 43,200 |
| Creditors | 28,400 | 36,400 | Stock | 34,000 | 31,200 |
| Cash | 10,800 | 14,000 | |||
| 1,74,800 | 2,14,800 | 1,74,800 | 2,14,800 |
Or
What is Cash Flow Statement? Distinguish between Cash Book and Cash Flow Statement.
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Start your 14-day free trial to unlock the full solution →Net profit = change in P&L (-1,000) + transfer to General Reserve (4,000) + current proposed dividend (20,200) = 23,200. Add goodwill written off 4,000 -> operating profit before working-capital changes 27,200. Adjust working capital: -13,200 (debtors up), +2,800 (stock down), +8,000 (creditors up) -> 24,800.
Step 1 — Net Profit before tax (old method, proposed dividend as appropriation):
| Particulars | ₹ |
|---|---|
| Closing balance of P&L A/c | 6,200 |
| Less: Opening balance of P&L A/c | 7,200 |
| = Decrease in P&L balance | (1,000) |
| Add: Transfer to General Reserve (12,000 - 8,000) | 4,000 |
| Add: Proposed Dividend (current year) | 20,200 |
| Net Profit before tax | 23,200 |
Step 2 — Cash Flow from Operating Activities:
| Particulars | ₹ |
|---|---|
| Net Profit before tax | 23,200 |
| Add: Goodwill written off (20,000 - 16,000) | 4,000 |
| Operating Profit before Working Capital changes | 27,200 |
| Add: Decrease in Stock (34,000 - 31,200) | 2,800 |
| Add: Increase in Creditors (36,400 - 28,400) | 8,000 |
| Less: Increase in Debtors (43,200 - 30,000) | (13,200) |
| Cash Flow from Operating Activities | 24,800 |
(Buildings and Investments are investing items; proposed dividend of the previous year and share capital are financing items, so they are excluded here. No tax or depreciation information is given.)
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