Cash Flow

Statement
Proforma and Problems

Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

Introduction
Cash Flow format
Cash Flow Problems

Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

Cash Generated
from Operations
Retained Earning
Dividend
Net Profit After Tax
Add: Provision for Tax
Net Profit Before Tax
Add: Non-cash Expenses
Depreciation
Amortisation (Goodwill w/o)
Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

XX
XX
XX
XX
XX
XX
XX
3

Adjust: Non-operating items

Loss on sale of Asset/Investment
Interest expenses
Interest/ Dividend Income
Profit on sale of Asset/
Investment
Funds from Operations
Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

XX
XX
XX
(XX)
(XX)
XX
4

Adjust: Working Capital Items

Decrease in Current Asset
Increase in Current Liabilities
Increase in Current Asset
Decrease in Current Liabilities
Cash generated from operation
Income Tax Paid
Cash flow from operating activities
Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

XX
XX
XX
(XX)
(XX)
XX
(XX)
XX
5

Cash Flow from Investing Activities

Purchase of Assets / Investment

(XX)

Sale of Assets / Investment

XX

Interest / Dividend received

XX

Investment in joint venture

(XX)

Cash flows from investing activities XX

Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

Cash Flow from Financing Activities

Issue of shares/ debentures for cash
Redemption of Preference shares/
debentures
Interest / Dividend paid
Proceeds from borrowings
Repayment of loan
Cash flows from financing activities
Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

XX
(XX)
(XX)
XX
(XX)
XX
7

Cash Flow
Statement
1. Cash Flow from Operating Activities
2. Cash Flow from Investing Activities
3. Cash Flow from Financing Activities
Net Increase / decrease in cash
(1+2+3)
Cash & Cash Equivalents at the beginning

XX
XX
XX
XX

Cash & Cash Equivalents at the end

XX

Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

XX

Cash & Cash

Equivalents

at
Beginning

Cash
Bank
Short Term Investment
Total
Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

XX
XX
XX
XX

at
End
XX
XX
XX
XX
9

Exercise 1.
Prepare cash flow statement from
the following details of the
Narendra Ltd.
Profit and Loss A/c for the year
ending 31 March 2010 is as follows
Sales
Interest

Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

200000
15000
10

Total Income
Purchase
Wages

215000
70000
28000

Interest

14000

Depreciation
Office Exp
Goodwill written off

9000
30000
11000

Tax

37000

Dividend
Net profit
Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

3000
13000
11

Balance Sheet of the Narendra Ltd

2009

2010

160000
50000

190000
50000

9000

22000

80000
20000

51000
40000

2000

3000

321000

356000

Liabilities
Share Capital
General Reserve
Profit and Loss A/c
Debentures
Creditors
Proposed Dividend
Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

12

2009
Assets
Land
Fixed Assets
Investment
Sundry Debtors
Bank
Goodwill

2010

75000
75000
140000 131000
59000 111000
12000
17000
5000
3000
30000
19000
321000 356000

Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

13

Cash Flow statement

Retained earnings
Dividend
Profit as per Profit & loss A/c
Depreciation
Goodwill written off
Interest Expenses
Income Tax
Interest Income
Funds from operations
Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

13000
3000
16000
9000
11000
14000
37000
(15000)
72000
14

Add: Increase in creditors

Less: Increase in Debtors

20000
(5000)

Cash generated from operation

87000

Income Tax Paid

Net Cash flow from operating
activities
Cash Flow from Investing Activities
Purchase of Investment
Interest Income
Net cash flows from investing
activities
Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

(37000)
50000

(52000)
15000
(37000)
15

Cash Flow from Financing Activities

Issue of shares
Dividend
Redemption of Debentures
Interest paid
Net cash flows from Financing
activities
Net decrease in cash
Cash and Cash Equivalents at
the beginning
Cash and Cash Equivalents at
the end
Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

30000
(2000)
(29000)
(14000)
(15000
)
(2000)
5000
3000
16

Cash & Cash

Equivalents
Bank
Total

at
Beginning
5000
5000

Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

at End
3000
3000

17

Exercise 2.
Prepare cash flow statement from the
following details of the Keshav Ltd.
Profit and Loss A/c for the year ending
31 March 2010 is as follows
Sales
Profit on sale of investment (Sale
Value: Rs. 4000)
Closing Stock
Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

90000
2000
6000
18

Total Income
Purchase
Manufacturing Expenses
Wages
Depreciation
General Exp
Discount on issue of debenture
Tax
General Reserve
Net profit
Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

98000
40000
17000
1400
5000
8000
3000
6000
5000
12600
19

Balance Sheet of the Keshav Ltd

Liabilities
Share Capital
General Reserve
Profit and Loss A/c
Debentures
Creditors
Provision for Tax
Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

2009

2010

50000
10000

50000
15000

8000

20600

10000
16000

27000
10000

7000

12000

101000

134600
20

2009
Assets
Fixed Assets
Machinery
Investment
Sundry Debtors
Bank
Goodwill

2010

40000
40000
21000
55600
5000
3000
15000
14300
5000
6700
15000
15000
101000 134600

Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

21

Cash Flow statement

Retained Earning
Transfer General Reserve
Net Profit as per Profit and Loss
A/c
Depreciation
Discount on issue of Debentures
Income Tax
Profit on sale of investment
Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

12600
5000
17600
5000
3000
6000
(2000)
22

Funds From operation

Decrease in Sundry Debtors
Increase in Bills Payable

29600
700
5000

Increase in Sundry Creditors

(6000)

Cash generated from operation

29300

Income Tax Paid

(6000)

Net Cash flow from operating

activities
Cash Flow from Investing Activities

23300

Sale of Investment
Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

4000
23

Purchases of Machinery
Net cash flows from investing
activities
Cash Flow from Financing Activities
Issue of Debentures
Net increase in cash

(39600)
(35600
)

Cash & Cash Equivalents at the

beginning
Cash & Cash Equivalents at the
end

5000

Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

14000
1700

6700

24

Cash & Cash

Equivalents
Bank
Total

at
Beginning
5000
5000

at End
6700
6700

Machinery A/c
Balance B/d

21000 Depreciation

Cash/Bank A/c 39600 Balance C/d

(purchases)
60600
Management Accounting - Dr. Varadraj Bapat, IIT Mumbai

5000
55600
60600
25