From the following Balance Sheet of Computer India Ltd., prepare a Cash Flow Statement (all figures ₹ in '000). **Balance Sheet of Computer India Ltd.** (₹ in '000) | Particulars | Note No. | 31 March 2017 (₹) | 31 March 2016 (₹) | |---|---|---:|---:| | **I. Equity and Liabilities** | | | | | 1. Shareholders' Funds — a) Share capital | | 52,000 | 40,000 | | b) Reserve and surplus (Surplus) | 1 | 9,500 | 8,000 | | 2. Non-current Liabilities — 10% Debentures | | 6,500 | 6,000 | | 3. Current liabilities — a) Short-term borrowings | 2 | 6,800 | 12,500 | | b) Trade payables | | 11,000 | 12,000 | | c) Short-term provisions | 3 | 4,200 | 3,000 | | **Total** | | **90,000** | **81,500** | | **II. Assets** | | | | | 1. Non-current assets — Fixed assets | 4 | 27,000 | 30,000 | | 2. Current assets — Inventories | | 35,000 | 30,000 | | Trade receivables | | 24,000 | 20,000 | | Cash and cash equivalents (cash) | | 3,500 | 1,200 | | Other current assets (prepaid expenses) | | 500 | 300 | | **Total** | | **90,000** | **81,500** | **Notes to Accounts** (₹ in '000) | Particulars | 31 March 2017 (₹) | 31 March 2016 (₹) | |---|---:|---:| | 1. Reserve and surplus: Balance in Statement of Profit and Loss | 7,000 | 6,000 | | General reserve | 2,500 | 2,000 | | 2. Short-term borrowings: Bank overdraft | 6,800 | 12,500 | | 3. Short-term provisions: Provision for taxation | 4,200 | 3,000 | | 4. Fixed Assets (gross) | 42,000 | 41,000 | | Less: Accumulated Depreciation | (15,000) | (11,000) | | Net Fixed Assets | 27,000 | 30,000 | **Additional Information:** Proposed dividend for the year 2015-16 is ₹2,50,00,000.

From the following Balance Sheet of Computer India Ltd., prepare a Cash Flow Statement (all figures ₹ in '000)

Numerical Questions · Q12

From the following Balance Sheet of Computer India Ltd., prepare a Cash Flow Statement (all figures ₹ in '000).

Balance Sheet of Computer India Ltd. (₹ in '000)

Particulars	Note No.	31 March 2017 (₹)	31 March 2016 (₹)
I. Equity and Liabilities
1. Shareholders' Funds — a) Share capital		52,000	40,000
b) Reserve and surplus (Surplus)	1	9,500	8,000
2. Non-current Liabilities — 10% Debentures		6,500	6,000
3. Current liabilities — a) Short-term borrowings	2	6,800	12,500
b) Trade payables		11,000	12,000
c) Short-term provisions	3	4,200	3,000
Total		90,000	81,500
II. Assets
1. Non-current assets — Fixed assets	4	27,000	30,000
2. Current assets — Inventories		35,000	30,000
Trade receivables		24,000	20,000
Cash and cash equivalents (cash)		3,500	1,200
Other current assets (prepaid expenses)		500	300
Total		90,000	81,500

Notes to Accounts (₹ in '000)

Particulars	31 March 2017 (₹)	31 March 2016 (₹)
1. Reserve and surplus: Balance in Statement of Profit and Loss	7,000	6,000
General reserve	2,500	2,000
2. Short-term borrowings: Bank overdraft	6,800	12,500
3. Short-term provisions: Provision for taxation	4,200	3,000
4. Fixed Assets (gross)	42,000	41,000
Less: Accumulated Depreciation	(15,000)	(11,000)
Net Fixed Assets	27,000	30,000

Additional Information: Proposed dividend for the year 2015-16 is ₹2,50,00,000.

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Concept understanding — Cash Flow Classification

Cash Flow Classification: From Pocket Money to a Business

Think about your own monthly allowance. You get some money from your parents (inflow), you spend on snacks, movies, and stationery (outflow), and maybe you save a bit or borrow from a friend. Now, if someone asked you, "Where did your money come from and where did it go?", you'd naturally group those transactions: money from parents, money spent on fun, money saved. That's exactly what Cash Flow Classification does for a business — it sorts every cash transaction into one of three buckets so you can see the story behind the cash.

The Three Buckets: Operating, Investing, Financing

The NCERT Class-12 Accountancy textbook (Part II, Chapter 6) defines Cash Flow Statement as a statement that shows inflows and outflows of cash and cash equivalents from operating, investing, and financing activities. Let's break each one down.

1. Operating Activities (The Core Business)

These are the cash flows from the main revenue-producing activities of the business. For a manufacturing company, that means cash from selling goods and cash paid to suppliers, employees, and for rent. Think of it as the cash generated by the business's day-to-day operations.

Examples:

Cash received from customers
Cash paid to suppliers
Cash paid for salaries, rent, taxes
Cash received from interest or dividends (for a non-financial company, these are often classified as operating or investing — NCERT allows both, but operating is common)

2. Investing Activities (Buying and Selling Long-Term Assets)

These are cash flows from the purchase and sale of long-term assets and investments that are not cash equivalents. This bucket answers: "Is the business investing in its future growth or selling off its assets?"

Examples:

Purchase of machinery, building, land (cash outflow)
Sale of old machinery (cash inflow)
Purchase of shares or debentures of other companies (cash outflow)
Sale of such investments (cash inflow)
Loans given to others (cash outflow) and repayment received (cash inflow)

3. Financing Activities (How the Business is Funded)

These are cash flows from transactions with the owners and lenders. This bucket shows how the business raises money and repays those who funded it.

Examples:

Issue of shares or debentures (cash inflow)
Repayment of long-term loans (cash outflow)
Payment of dividends (cash outflow)
Buyback of shares (cash outflow)
Proceeds from long-term borrowings (cash inflow)

Why Does This Classification Matter?

A single number like "net cash flow" tells you very little. But when you see that a company has negative cash flow from operations but positive cash flow from financing, you immediately know: the company is burning cash from its core business and is surviving by borrowing or issuing shares. That's a red flag.

Conversely, a company with strong positive operating cash flow but negative investing cash flow is likely a healthy business investing in growth. The classification gives you the diagnosis of the business's financial health — not just the final number.

Accounting Treatment: No Debit/Credit Here

This is a crucial point for Class-12 students: The Cash Flow Statement is not a ledger account. It does not involve debiting or crediting any account. It is a statement prepared from the Balance Sheet and Statement of Profit & Loss (Income Statement). You do not pass journal entries for it.

Instead, you reclassify the changes in balance sheet items and income statement items into the three categories. The format is prescribed by the NCERT and is based on AS-3 (Revised).

The NCERT Format (Proforma) of Cash Flow Statement

Below is the standard format as per NCERT Class-12 Accountancy (Part II, Chapter 6). Note that the textbook uses ₹ for amounts.

Particulars	Amount (₹)
A. Cash Flow from Operating Activities
Net Profit before Tax and Extraordinary Items	XXX
Adjustments for:
Depreciation	+ XXX
Loss on Sale of Asset	+ XXX
Gain on Sale of Asset	– XXX
Operating Profit before Working Capital Changes	XXX
Changes in Working Capital:
Increase in Current Assets	– XXX
Decrease in Current Assets	+ XXX
Increase in Current Liabilities	+ XXX
Decrease in Current Liabilities	– XXX
Cash Generated from Operations	XXX
Less: Income Tax Paid	(XXX)
Net Cash Flow from Operating Activities	XXX
B. Cash Flow from Investing Activities
Purchase of Fixed Assets	(XXX)
Sale of Fixed Assets	XXX
Purchase of Investments	(XXX)
Sale of Investments	XXX
Interest Received	XXX
Dividends Received	XXX
Net Cash Flow from Investing Activities	XXX
C. Cash Flow from Financing Activities

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We prepare the Cash Flow Statement of Computer India Ltd. for the year ended 31 March 2017 by the indirect method. All figures are Rs in '000. The bank overdraft (a short-term borrowing) is treated as a financing activity, so cash and cash equivalents (cash only) move from ₹1,200 to ₹3,500, a net increase of ₹2,300, which the statement reconciles to exactly.

Step 1 - Net Profit before Tax

Particulars	₹('000)
Increase in balance of Statement of Profit & Loss (7,000 - 6,000)	1,000
Add: Transfer to General Reserve (2,500 - 2,000)	500
Add: Dividend paid during the year (2015-16 proposed)	2,500
Add: Provision for taxation (current year)	4,200
Net Profit before Tax	8,200

Step 2 - Cash Flow from Operating Activities

Particulars	₹('000)
Net Profit before Tax	8,200
Add: Depreciation (accumulated 15,000 - 11,000)	4,000
Operating Profit before Working Capital Changes	12,200
Less: Increase in Inventories (35,000 - 30,000)	(5,000)
Less: Increase in Trade Receivables (24,000 - 20,000)	(4,000)
Less: Increase in Prepaid Expenses (500 - 300)	(200)
Less: Decrease in Trade Payables (12,000 - 11,000)	(1,000)
Cash Generated from Operations	2,000
Less: Income Tax paid (opening provision)	(3,000)
Net Cash used in Operating Activities	(1,000)

Step 3 - Cash Flow from Investing Activities

Particulars	₹('000)
Purchase of Fixed Assets (gross: 42,000 - 41,000)	(1,000)
Net Cash used in Investing Activities	(1,000)

Step 4 - Cash Flow from Financing Activities

Particulars	₹('000)
Proceeds from issue of Share Capital (52,000 - 40,000)	12,000
Proceeds from issue of 10% Debentures (6,500 - 6,000)	500
Repayment of Bank Overdraft (12,500 - 6,800)	(5,700)
Dividend paid (2015-16 proposed)	(2,500)

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Cash Flow Statement of Computer India Ltd. for the year ended 31 March 2017 (all figures Rs in '000): Operating ₹(1,000); Investing ₹(1,000); Financing ₹4,300; net increase in cash ₹2,300, taking cash from ₹1,200 to ₹3,500.

Prepared under AS-3 (Revised) - Indirect Method. All figures are Rs in '000. Bank overdraft (short-term borrowing) is treated as a financing activity; the previous year's proposed dividend (₹2,500) is the dividend paid during the year.

Working Note - Net Profit before Tax

Particulars	₹('000)
Increase in Balance of Statement of P&L (7,000 - 6,000)	1,000
Add: Transfer to General Reserve (2,500 - 2,000)	500
Add: Dividend paid during the year (2015-16 proposed)	2,500
Add: Provision for taxation (current year)	4,200
Net Profit before Tax	8,200

Fixed Assets (Note 4): accumulated depreciation rose 11,000 to 15,000, so depreciation for the year = 4,000; gross block rose 41,000 to 42,000, so purchases = 1,000 (no asset sold).

A. Cash Flow from Operating Activities

Particulars	₹('000)
Net Profit before Tax	8,200
Add: Depreciation	4,000
Operating Profit before Working Capital Changes	12,200
Less: Increase in Inventories (35,000 - 30,000)	(5,000)
Less: Increase in Trade Receivables (24,000 - 20,000)	(4,000)
Less: Increase in Prepaid Expenses (500 - 300)	(200)
Less: Decrease in Trade Payables (12,000 - 11,000)	(1,000)
Cash Generated from Operations	2,000
Less: Income Tax paid (opening provision)	(3,000)
Net Cash used in Operating Activities (A)	(1,000)

B. Cash Flow from Investing Activities

Particulars	₹('000)
Purchase of Fixed Assets (gross: 42,000 - 41,000)	(1,000)
Net Cash used in Investing Activities (B)	(1,000)

C. Cash Flow from Financing Activities

Particulars	₹('000)
Proceeds from issue of Share Capital (52,000 - 40,000)	12,000
Proceeds from issue of 10% Debentures (6,500 - 6,000)	500
Repayment of Bank Overdraft / Short-term Borrowings (12,500 - 6,800)	(5,700)
Dividend paid (2015-16 proposed)	(2,500)
Net Cash from Financing Activities (C)	4,300

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Working Note - Net Profit before Tax

A. Cash Flow from Operating Activities

B. Cash Flow from Investing Activities

C. Cash Flow from Financing Activities

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