Post on 31-Dec-2015
Cash flow statement
Computation of Cash flows from operations
Indirect method
Illustration –Profit & loss Account for the year ended 31st March, 2009
Particulars Rs. Particulars Rs.
Administration expenses 15,000 Gross Profits 45,000
Depreciation 12,000 Profit on sale of machinery 4,000
Loss on sale of plant 1,000
Goodwill w/off 4,000
Provision of taxation 5,000
Net profits 12,000
49,000 49,000
Additional information 31.03.08 31.03.09
Stock 22,000 27,000
Debtors 20,000 19,000
Prepaid insurance 1,000 1,200
Creditors 7,000 8,000
Salaries o/s 2,000 2,500
Net profits as per profit and loss account 1
Adjustment for non-cash expenses/incomes: 2
Add: Non-cash expenses +
Deduct: Non-cash incomes -
Adjustment for non-operating incomes and losses: 3
Add: non-operating losses +
Deduct: non-operating incomes -
Adjustment for working capital changes: 4
Add: ↓ in current assets +
↑ in current liability +
Deduct: ↑ in current assets -
↓ in current liability -
Cash flows operating activities before payment of taxes
1 (+/-) 2, 3, 4
Tax payments -
Cash flows operating activities after tax payments
Based on accounting equation
Assets = Liabilities + CapitalCA + NCA = CL + NCL + CCash + AR + Inv + Mar. sec. + NCA = CL + NCL + CCash= CL + NCL + C – AR – Inv – Mar. sec. – NCA • CL + NCL + C have positive relation with cash • – AR – Inv – Ppd exp – NCA have negative
relation with cash
Illustration –Profit & loss Account for the year ended 31st March, 2009
Particulars Rs. Particulars Rs.
Administration expenses 15,000 Gross Profits 45,000
Depreciation 12,000 Profit on sale of machinery 4,000
Loss on sale of plant 1,000
Goodwill w/off 4,000
Provision of taxation 5,000
Net profits 12,000
49,000 49,000
Additional information 31.03.08 31.03.09
Stock 22,000 27,000
Debtors 20,000 19,000
Prepaid insurance 1,000 1,200
Creditors 7,000 8,000
Salaries o/s 2,000 2,500
Net profits 12,000
Adjustment for non-fund and non-recurring expenses/incomes:
Add: Depreciation 12,000
Goodwill written off 4,000
Provision for taxation 5,000 21,000
Adjustment for gains/losses on non-current assets:
Add: Loss on sale of plant 1,000
Less: Profit on sale of land (4,000) (3,000)
Adjustment for working capital changes:
Add: ↓ in debtors 1,000
↑ in creditors 1,000
↑ in salary o/s 5,00
Less: ↑ in stock (5,000)
↑ in prepaid insurance (2,00) (2,700)
Cash from operating activities 27,300
Cash from investing activities
Add: Sale of non-current assets -
Sale of long term investment -
Dividend received -
Interest received on long term investment -
Deduct: Purchase of non-current assets -
Purchase of long term investment -
Cash from investing activities -
Illustration - Kanishk• The following transactions occur at Kanishk
Enterprises:
Particulars Amount (Rs.)
Purchased a machinery for 1,50,000
Sold shares worth 2,00,000
Received interest on debentures 10,000
Received dividend on shares held 20,000
Sold old machinery 50,000
Solution
Cash Flow from Investing Activities:Sale of Shares 2,00,000Interest received 10,000Sale proceeds of old machinery 50,000Dividend received 20,000 2,80,000Less: Outflow on account of machine purchase 1,50,000 Cash flow from Investing Activities 1,30,000
Kanishk EnterprisesCash Flow Statement
Cash from financing activities
Add: Issue of share capital -Issue of debentures -
Raising long term loans -Less: Redemption of debentures -Repayment of long term loans -
Dividends paid -Interest paid -
Cash from financing activities -
Cash from Financing ActivitiesSupposing during the year Kanishk
Enterprises has taken a loan of Rs 1,50,000 and paid an interest of Rs 15,000 thereon, how much is the cash flow from financing activities
Cash flow from financing activities = Rs 1,35,000 (i.e., 1,50,000 - 15,000)
Preparing a Cash Flow StatementCASH FLOW STATEMENT
Cash from operating activities 1
Add: cash from investing activities 2
Add: cash from financing activities 3
Cash generated during the year 1+2+3
Add: Cash at the beginning of the year 4 (From BS)
Cash at the end of the year 1+2+3+4