Class 12-commerce NCERT Solutions Accountancy Chapter 6 - Cash Flow Statements

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Cash Flow Statements Exercise 274

Solution SA 1

A statement showing inflow and outflow of cash and cash equivalents from operating, investing and financing activities of a company during a specific period is called a cash flow statement. It explains changes in cash balance and the reasons of receipts and payments in cash during an accounting year of a company.

Solution SA 2

Preparation of a cash flow statement for each period is mandatory according to the Revised Accounting Standard 3 (AS-3). AS-3 also specifies the classification of all inflows and outflows mainly under the following heads:

Cash Flow from Operating Activities
Cash Flow from Investing Activities
Cash Flow from Financing Activities

Solution SA 3

Uses of the cash flow statement:

It is useful for short-term financial planning about inflow and outflow of cash.
It analyses the reason for the change in cash and cash equivalent balances of a company.
It determines and assesses liquidity and solvency positions of a company.
It examines and reviews the trends of receipts and payments of cash from various activities of a company and thereby helps in drafting various policy measures and short-term planning.
It helps in the segregation of cash flows from operating, investing and financing activities of the business.
It assists in decision making regarding profit distribution with reference to the availability of cash.

Solution SA 4

Important objectives for preparing the cash flow statement:

It ascertains the gross inflows and outflows of cash and cash equivalents from various activities.
It evaluates various reasons responsible for the change in the cash balances during an accounting year.
It analyses and understands the liquidity and solvency of a company, thereby representing the true liquidity position to creditors and investors.
It helps to find the availability and requirement of cash in the near future.

Solution SA 5

Cash equivalents are short-term liquid investments which are easily convertible into cash. They are subject to an insignificant risk of change in value. They are held for the purpose of meeting short-term cash commitments. An investment held for short-term maturity, say four months, can be considered as cash equivalent. Examples of cash equivalents are treasury bills and commercial papers. On the other hand, cash flows are inflows and outflows of cash and cash equivalents. Total cash balance increases when there is cash inflow and decreases when there is cash outflow.

Solution SA 6

Format of cash flow from operating activities:

Indirect Method
Cash Flow from Operating Activities
Net Profit before Tax and Extraordinary Items		***
------Add: Non-Cash Expenses and Non-Operating Expenses
-------------Depreciation	**
-------------Goodwill	**
-------------Interest Paid	**
-------------Loss on Sale of Fixed Assets	**
-------------Foreign Exchange	**	**
------ Less: Non-Operating Incomes
------------- Dividend Received	(**)
------------- Profit on Sale of Fixed Assets	(**)
------------- Interest Received	(**)	(**)
Operating Profit before Working Capital Changes		***
------ Add: Decrease in Current Assets	***
------------- Increase in Current Liabilities	***	***
------ Less: Increase in Current Assets	(***)
------------- Decrease in Current Liabilities	(***)	(***)
Cash Generated from Operating Activities		***
Income Tax Paid		(***)
Cash Flow before Extraordinary Items		***
------ Add/Less: Extraordinary Items		***
Net Cash Flow from Operating Activities		***

Solution SA 7

Hotels

Proceeds from the sale of goods to consumers
Payment of wages and salaries, electricity, food items and other items used in accommodation

Film Production House

1. Proceeds from selling film rights to distributors

2. Payment to staff, actors, actresses, directors etc.

Financial Enterprises

Proceeds from repayment of loans, interest incomes from investments etc.
Repayments of loans, recovery expenditure for recovery of loans, salaries of employees

Media Enterprises

Proceeds from advertisements
Payments to staff, reporters, photographers etc.

Steel Manufacturing Unit

Proceeds from sale of steel sheets, steel castings, steel rods etc.
Payment for materials such as iron, coal; salaries to staff etc.

Software Development Business Unit

Proceeds from the sale of software and renewal of licenses
Payment of salaries to employees etc.

Solution SA 8

Yes, the nature/type of an enterprise can change the category into which a particular activity may be classified. This can be understood better with the help of an example.

One firm is engaged in financial services and another is engaged in manufacturing services. For the firm which is engaged in financial services, interests received or paid are categorised under operating activities, whereas for the firm which is engaged in manufacturing business, interests paid are categorised under financing activities and interest received as investing activities. Therefore, the classification of activities depends on the nature and type of enterprise.

Solution NUM 1

Cash Flow from Operating Activities as on March 31, 2014
	Particulars	Rs.	Rs.
	Net Profit during the year		5,00,000
	Items to be adjusted:
	------Add: Depreciation	2,00,000
	------Less: Profit on sale of assets	50,000	1,50,000
	Operating Profit before Working Capital changes		6,50,000
	------Add: Increase in Trade Payable	60,000
	------Less: Increase in Trade Receivable	40,000	20,000
	Net Cash from Operations		6,70,000

Cash Flow Statements Exercise 275

Solution NUM 2

Trade Payables Account
Dr.							Cr.
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
	To Cash A/c (Balancing fig.)		1,59,500		By Balance b/d		14,000
	To Balance c/d		14,500		By Purchases A/c		1,60,000

			1,74,000				1,74,000

Cash paid for purchase of inventory amount to Rs.1,59,500.

Solution NUM 3

Part payment Rs.50,000 for acquiring machinery Rs.2,50,000 is related with Investing Activities.

	Rs.
Amount paid for acquiring shares	2,50,000
Dividend received	50,000
Net Cash used in Investing Activities	2,00,000

Amount paid to acquire assets and dividend received is a part of Investing Activities.

c. Inflow of cash of Rs.60,000 on sale of machinery is a part Investing Activities.

Solution NUM 4

Cash Flow from Operating Activities of Yamuna Limited
as on March 31,2017
Particulars	Rs.	Rs.
Net Profit earned during the year		1,50,000
Items to be added:
-------Depreciation		25,000
Operating profit before working capital changes		1,75,000
-----Add: Increase in Current Liabilities
------------Outstanding Expenses	3,000
-----Add: Decrease in Current Assets
------------Trade Receivables	30,000
------------Stock	50,000	83,000
-----Less: Decrease in Current liabilities
------------Trade Payables	(15,000)
-----Less: Increase in Current Assets
------------Prepaid Expenses	(5,000)	(20,000)
Net Cash from Operations		2,38,000

Note: As per the solutions ,the Net Cash from Operating Activities is Rs.2,38,000,however,as per the answer given in the book is Rs.2,18,000

Cash Flow Statements Exercise 276

Solution NUM 5

Cash Flow Statement
For the year ending March 31,2017
Particulars	Rs.	Rs.
Cash From Operating activities
Net Profit		10,000
Items to be added:
-----------Depreciation	2,000	2,000
Operating profit before working capital Adjustment		12,000
-----Less: Increase in Current Assets
------------Trade Receivables	(1,000)
------------Accrued Income	(1,000)
------------Other Current Assets	(2,000)
------------Inventories	(3,000)
-----Add: Increase in Current liabilities
------------Provision for Doubtful Debts	200
------------Trade Payables	2,000
------------Expenses payable	500
-----Add: Decrease in Current Assets
------------Prepaid Expenses	1,000
-----Less: Decrease in Current liabilities
------------Income received in advance	(1,000)	(4,300)
Net Cash from Operations Activities		7,700

Solution NUM 6

Cash Flow from Investing Activities
Particulars	Rs.	Rs.
Cash Inflow
Proceeds from Sale of Patents	1,00,000
Proceeds from Sale of Machinery	50,000
Proceeds from Sale of 10% Long-Term Investment	1,00,000
Interest received on 10% Long-term investment	6,000
Dividend Received from Amartax Ltd.	10,000
Rent Received	30,000	2,96,000
Cash Outflow
Purchases of Goodwill	(2,00,000)
Purchase of Machinery	(4,40,000)
Purchase of 10% Long - term Investment	(1,80,000)	(8,20,000)
Net Cash used in Investing Activities		(5,24,000)

Patents Account
Dr.							Cr.
Date	Particulars	J.F.	Rs.	Date	Particulars	J.F.	Rs.
	To Balance c/d		2,80,000		By Profit and Loss A/c (written off)		40,000
	To Profit and Loss A/c (Profit on Sale)		20,000		By Bank A/c (Sale-Balancing figure)		1,00,000
					By Balance c/d		1,60,000

			3,00,000				3,00,000

Machinery Account
Dr.							Cr.
Date	Particulars	J.F.	Rs.	Date	Particulars	J.F.	Rs.
	To Balance b/d		10,20,000		By Depreciation A/c		1,40,000
	To Bank A/c (Purchase-Balancing figure)		4,40,000		By Bank A/c		50,000
					By Profit and Loss A/c		30,000
					By Balance c/d		12,40,000

			14,60,000				14,60,000

10% Long -Term Investment Account
Dr.							Cr.
Date	Particulars	J.F.	Rs.	Date	Particulars	J.F.	Rs.
	To Balance b/d		60,000		By Bank A/c (Balancing figure)		1,00,000
	To Bank A/c		1,80,000		By Balance c/d		1,60,000
	To Profit and Loss A/c (Profit on Sale)		20,000


			2,60,000				2,60,000

Cash Flow Statements Exercise 277

Solution NUM 7

Cash Flow Statement of Mohan Ltd.
	Particulars	Rs.	Rs.
A.	Cash Flow from Operating Activities:
	Profit as per the balance Sheet (2,00,000 -1,60,000)	40,000
	Proposed Dividend	70,000	1,10,000
	Net Profit Before Taxation and Extraordinary items
	------Adjustment:
	--------Depreciation	70,000
	--------Loss on sale of Machine	10,000	80,000
	Operating profit before working capital changes		1,90,000
	------Add: Decrease in Current Assets
	---------Debtors	40,000	40,000
			2,30,000
	------Less: Increase in Current Assets
	---------Inventories	(20,000)
	---------Bills Receivable	(10,000)
	------Less: Decrease in Current Liabilities	(20,000)	50,000
	---------Trade Payable		1,80,000
	Net Cash From Operations

B.	Cash Flow from Investing Activities
	Proceeds From Sale of Fixed Assets		20,000
	Purchases of Fixed Assets		(2,80,000)
	Net Cash outflow From Investing Activities		(2,60,000)

C.	Cash Flow from Financing Activities
	---------Issue of Share		1,00,000
	---------Bank Loan Paid		(20,000)
	---------Dividend Paid		(60,000)
	Net Cash Flow from Financing Activities		20,000
D.	Net Decrease in Cash and Cash Equivalent (A+B+C)
	---------Add: Cash and Cash Equivalent in the beginning		90,000
E.	Cash and Cash Equivalents at the end		30,000

Fixed Assets Account
Dr.							Cr.
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
	To Balance b/d		4,00,000		By Bank A/c		20,000
	To Bank A/c (Purchases Balancing figure)		2,80,000		By Profit and Loss A/c		10,000
					By Accumulated Depreciation A/c		50,000
					By Balance c/d		6,00,000

			6,80,000				6,80,000

Accumulated Depreciation Account
Dr.							Cr.
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
	To Fixed Assets A/c		50,000		By Balance b/d		80,000
	To Balance c/d		1,00,000		By Profit and Loss A/c (Balance Fig)		70,000

			1,50,000				1,50,000

Cash Flow Statements Exercise 278

Solution NUM 8

Cash Flow Statement of Tiger Super Steel Ltd.
	Particulars	Rs.	Rs.
A.	Cash Flow from Operating Activities:
	Profit as per the balance Sheet (10,800-7,200)	3,600
	General Reserve	4,000
	Proposed Dividend	15,600
	Provision for Taxation	12,800
	Net Profit Before Taxation and Extraordinary items		36,000
	------Items to be Added:
	------Depreciation on land and Building	20,000
	------Depreciation on Plant	10,000
	------Goodwill written off	5,200	35,200
	Operating profit before working capital changes		71,200
	------Add: Increase in Current Liabilities
	--------Bills Payable	7,200
	------Add: Decrease in Current Assets
	--------Inventories	2,800	10,000
			81,200
	------Less: Increase in Current Assets
	--------Trade Receivables	(13,200)
	------Less: Decrease in Current Liabilities
	--------Outstanding Expenses	(800)	(14,000)
	Cash Generated from Operating Activities		67,200
	--------Less: Income Tax Paid		(11,200)
	Net Cash From Operations Activities		56,000

B.	Cash Flow from Investing Activities
	--------Purchases of Plant		(50,400)
	--------Purchases of investment		(10,000)
	Net Cash Used in Investing Activities		(60,400)

C.	Cash Flow from Financing Activities
	--------Issue of Equity Share		40,000
	--------dividend Paid		(11,200)
	--------Redemption of 10% Preferences Share		(20,000)
	Net Cash Flow from Financing Activities		8,800
D.	Net Decrease in Cash and Cash Equivalent
	--------Add: Cash and Cash Equivalent in the beginning		6,800
E.	Cash and Cash Equivalents at the end		11,200

Working Note:

Plant Account
Dr.							Cr
Date	Particulars	J.F	Rs.	Date	Particulars	J.F		Rs.
	To Balance c/d		36,000		By Depreciation A/c			10,000
	To Bank A/c (Purchases Balancing figure)		50,400
					By Balance c/d			76,400

			86,400					86,400

Net Profit before Tax	3,600
Profit and Loss Account	12,800
Provision for Tax	16,400

Note: The Net Cash from Operating Activities and net Cash from Investing Activities and net cash from Financing Activities are Rs.56,000, Rs.(60,400) and Rs.8,800 respectively. However, as per the answer given in the book, the Net Cash from Operating Activities, net Cash from Investing Activities and Net Cash from financing activities are Rs.34,800, Rs.(50,400) and Rs.20,000 respectively.

Cash Flow Statements Exercise 280

Solution NUM 9

Cash Flow Statement
For the year ending March 31, 2015
	Particular	Rs.	Rs.
A.	Cash From Operating Activities Net Profit:
	--------Items to be Added:		2,20,000
	--------Interest on Debenture	48,000
	--------Depreciation on Fixed assets	80,000
	--------Goodwill written off	80,000
	Operating profit before working capital changes Adjustment:		4,28,000
	------Add: Increase in Current Liabilities
	--------Creditors	3,00,000
	------Less: Increase in Current Assets
	--------Inventories	(1,00,000)
	--------Trade Receivables	(2,00,000)
	Cash Generated from Operations		4,28,000
	--------Less: Tax Paid
	Net Cash From Operations Activities		4,28,000

B.	Cash from Investing Activities
	--------Purchases of Fixed Assets (WN)	(2,80,000)
	Net Cash From Investing Activities		(2,80,000)

C.	Cash Flow from Financing Activities
	--------Issue of Equity Share	2,00,000
	--------Redemption of Debenture	(2,00,000)
	--------Interest paid on Debenture	(48,000)	(48,000)
	Net Cash Flow from Financing Activities ( C)		(48,000)
D.	Net Increase in Cash (A+B+C)		1,00,000
	--------Add: Opening Cash and Cash Equivalent		3,00,000
	Closing Cash and Cash Equivalent		4,00,000

Working Note:

Fixed Assets Account
Dr.							Cr
Date	Particulars	J.F	Rs.	Date	Particulars	J.F		Rs.
	To Balance c/d		5,00,000		By Depreciation A/c			80,000
	To Purchases A/c (Balancing figure)		2,80,000
					By Balance c/d			7,00,000

			7,80,000					7,80,000

Solution NUM 10

Cash Flow Statement of Yogeta Ltd.
	Particulars	Rs.	Rs.
A.	Cash Flow from Operating Activities:
	Profit as per the balance Sheet (2,000,000-1,00,000)	1,00,000
	Proposed Dividend	50,000
	Provision for Taxation	60,000
	Net Profit Before Taxation and Extraordinary items		2,10,000
	--------Items to be Added:
	------------Depreciation	50,000	50,000
	Operating profit before working capital changes		2,60,000
	------Add: Increase in Current Liabilities
	--------Trade Payable	20,000	20,000
			2,80,000
	------Less: Increase in Current Assets
	--------Inventories	(70,000)
	--------Trade Receivables	(50,000)	(1,20,000)
	Cash Generated from Operating Activities		1,60,000
	--------Less: Income Tax Paid		(40,000)
	Net Cash From Operations		1,20,000
B.	Cash Flow from Investing Activities
	--------Purchases of Fixed Assets		(3,50,000)
	Net Cash Used in Investing Activities		(3,50,000)
C.	Cash Flow from Financing Activities
	--------Issue of Equity Share		1,00,000
	--------Issue of Preference Share		1,00,000
	--------Loan of Rahul		1,30,000
	--------Less: Repayment of Loan		(2,00,000)
	--------Dividend paid		(50,000)
	Net Cash from Financing Activities		80,000
D.	Net Decrease in Cash and Cash Equivalent (A+B+C)		(1,50,000)
	--------Add: Cash and Cash Equivalent in the beginning		50,000
E.	Cash and Cash Equivalents at the end (Bank Overdraft)		(1,00,000)

Working Note:

Provision for Taxation Account
Dr.							Cr
Date	Particulars	J.F	Rs.	Date	Particulars	J.F		Rs.
	To Bank A/c (Balancing figure)		40,000		By Balance b/d			30,000

	To Balance c/d		50,000		By Profit and Loss A/c			60,000

			90,000					90,000

Fixed Assets Account
Dr.							Cr
Date	Particulars	J.F	Rs.	Date	Particulars	J.F		Rs.
	To Balance b/d		4,00,000		By Depreciation A/c			50,000

	To Bank A/c		3,50,000		By Balance c/d			7,00,000

			7,50,000					7,50,000

Cash Flow Statements Exercise 281

Solution NUM 11

Cash Flow Statement (Indirect Method)
	Particulars	Rs.	Rs.
A.	Cash Flow from Operating Activities:
	Profit as per the balance Sheet (40,000-28,000)	12,000
	Proposed Dividend	4,000
	Provision for Taxation	12,000
	Net Profit Before Taxation and Extraordinary items		28,000
	------Items to be Added:
	-------------Interest paid on Debentures	600
	-------------Depreciation	32,000	32,600
	Operating profit before working capital changes		60,600
	------Add: Increase in Current Liabilities
	-------------Trade Payables	1,00,000
	------Less: Increase in Current Assets
	-------------Other Current Assets	(8,000)
	-------------Inventories	(1,00,000)
	-------------Trade Receivables	(60,000)	(68,000)
	Cash Generated from Operating Activities		(7,400)
	------Less: Income Tax Paid		(4,000)
	Net Cash Used Operating Activities		(11,400)
B.	Cash Flow from Investing Activities
	------Purchases of Fixed Assets		(1,96,000)
	Net Cash Used in Investing Activities		(1,96,000)
C.	Cash Flow from Financing Activities
	------Issue of Equity Share		1,00,000
	------Issue of Preference Share		60,000
	------Interest paid on Debentures		(6000)
	------Dividend paid		(4,000)
	Net Cash from Financing Activities		1,55,400
D.	Net Decrease in Cash and Cash Equivalent (A+B+C)		(52,000)
	------Add: Cash and Cash Equivalent in the beginning		80,000
E.	Cash and Cash Equivalents at the end (Bank Overdraft)		28,000

Working Note:

Plant and machinery Account
Dr.							Cr
Date	Particulars	J.F	Rs.	Date	Particulars	J.F		Rs.
	To Balance b/d		2,00,000		By Depreciation A/c			32,000
	To Bank (Balancing figure)		1,96,000
					By Balance c/d			3,64,000

			3,96,000					3,96,0000

Note: As per our solution Cash flow from Operating. Investing and Financing Activities is (Rs.11,400), (Rs.1,96,000) and Rs.1,55,400 respectively. But as per the book it is (Rs.12,000), (Rs.1,96,000) and Rs.1,56,000.

Cash Flow Statements Exercise 282

Solution NUM 12

Cash Flow Statement Computer India Ltd.
	Particulars	Rs.	Rs.
A.	Cash Flow from Operating Activities:
	Profit as per the balance Sheet(1,200-1,000)	200
	Proposed Dividend	5,800
	General Reserve	500
	Provision for Taxation	4,200
	Net Profit Before Taxation and Extraordinary items		10,700
	----Items to be Added:
	-----------Provision for Depreciation	4,000
	-----------Interest paid on Debenture	600	4,600
	Operating profit before working capital changes Adjustment		15,300
	----Less: Increase in Current Assets
	-----------Trade Receivables	(4,000)
	-----------Inventories	(5,000)
	-----------Prepaid Expenses	(200)	(9,200)
			6,100
	----Less: Decreases in Current Liabilities
	-----------Trade Creditors	(1,000)	(1,000)
	Cash Generated from Operating Activities		5,100
	----Less: Income Tax Paid		(3,000)
	Net Cash From Operation		2,100
B.	Cash Flow from Investing Activities
	------Sales of Fixed Assets		1,000
	Net Cash Used in Investing Activities		1,000
C.	Cash Flow from Financing Activities
	------Issue of Equity Share		10,000
	------Issue of 10% Debentures		500
	------Less: Dividend paid		(5,000)
	------Less: Interest paid		(600)
	Net Cash from Financing Activities		4,900
D.	Net Decrease in Cash and Cash Equivalent (A+B+C)		8,000
	---Add: Cash and Cash Equivalent in the beginning
	------ ---Cash	1,200
	------ ---Bank Overdraft	(12,500)	(11,300)
E.	Cash and Cash Equivalents at the end
	------ ---Cash	3,500
	------ ---Bank Overdraft	(6,800)	(3,300)

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Class 12-commerce NCERT Solutions Accountancy Chapter 6 - Cash Flow Statements

Cash Flow Statements Exercise 274

Solution SA 1

Solution SA 2

Solution SA 3

Solution SA 4

Solution SA 5

Solution SA 6

Solution SA 7

Solution SA 8

Solution NUM 1

Cash Flow Statements Exercise 275

Solution NUM 2

Solution NUM 3

Solution NUM 4

Cash Flow Statements Exercise 276

Solution NUM 5

Solution NUM 6

Cash Flow Statements Exercise 277

Solution NUM 7

Cash Flow Statements Exercise 278

Solution NUM 8

Cash Flow Statements Exercise 280

Solution NUM 9

Solution NUM 10

Cash Flow Statements Exercise 281

Solution NUM 11

Cash Flow Statements Exercise 282

Solution NUM 12

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