Important Questions - Cash Flow Statement Commerce Notes | EduRev

Crash Course of Accountancy - Class 12

Commerce : Important Questions - Cash Flow Statement Commerce Notes | EduRev

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Ques 1 
Classify the following into (i) Operating Activities, (ii) Investing Activities, (iii) Financing Activities and (iv) Cash and Cash 
Equivalents while preparing a Cash Flow Statement: 
1. Cash Sales 2. Purchase of Building 
3. Dividend paid 4. Cash paid to Trade Payables 
5. Redemption of Debentures 6. Purchase of Investments 
7. Short – term Deposits in Bank 8. Cash received from Trade Receivables 
9. Issue of Share Capital or Debentures 10. Bank Balance 
11. Income Tax Paid 12. Selling and Distribution Expenses 
13. Sale of Building 14. Interest paid on Debentures 
15. Sale of Non – Current Investments 16. Repayment of Long – term Loan 
Solution: 
Operating Activities 1,4, 8,11,12 
Investing Activities 2,6,13,15 
Financing Activities 3,5, 9,14,16 
Cash and Cash Equivalents 7,10 
 
Ques 2 
Identify the following transactions belonging to: (i) Operating Activities, (ii) Investing Activities, (iii) Financing Activities and 
(iv) Cash and Cash Equivalents. 
1. Buy – back of Equity Shares 2. Cash Purchase 
3. Office Expenses 4. Purchase of Machinery 
5. Commission received 6. Investment in Short – term Marketable Securities 
7. Rent Paid 8. Income Tax Refund received 
9. Sale of Building 10. Cash in hand 
11. Sale of Patents 12. Purchase of Goodwill 
Solution: 
Operating Activities : 2, 3, 5,7,8 
Investing Activities : 4,9,11,12 
Financing Activities : 1 
Cash and Cash Equivalents : 6,10 
 
Ques 3 
Classify the following transactions as Operating, Investing and Financing Activities for (i) Financial Enterprise, and (ii) N on – 
Financial Enterprise. 
1. Interest paid on Debentures 2. Interest received on Investments 
3. Sale of Investments 4. Dividend received on Shares 
5. Dividend Paid 6. Purchase of Securities 
7. Receipt of Loans and Advances made 8. Commission paid on purchase of securities 
9. Sale of Securities 10. Loans and Advances made 
Solution: 
No. Transactions Financial Enterprise Non – Financial Enterprise 
1. Interest paid on Debentures Operating Financing 
2. Interest received on Investments Operating Investing 
3. Sale of Investments Operating Investing 
4. Dividend received on Shares Operating Investing 
5. Dividend paid Financing Financing 
6. Purchase of Securities Operating Investing 
7. Receipt of Loans and Advances made Operating Investing 
8. Commission paid on purchase of securities Operating Investing 
9. Sale of Securities Operating Investing 
10. Loans and Advances made Operating Investing 
 
Ques 4 
Illustration 4. Identify the following transactions belonging to: (i) Operating Activities, (ii) Investing Activities and (ii i) 
Financing Activities. 
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Ques 1 
Classify the following into (i) Operating Activities, (ii) Investing Activities, (iii) Financing Activities and (iv) Cash and Cash 
Equivalents while preparing a Cash Flow Statement: 
1. Cash Sales 2. Purchase of Building 
3. Dividend paid 4. Cash paid to Trade Payables 
5. Redemption of Debentures 6. Purchase of Investments 
7. Short – term Deposits in Bank 8. Cash received from Trade Receivables 
9. Issue of Share Capital or Debentures 10. Bank Balance 
11. Income Tax Paid 12. Selling and Distribution Expenses 
13. Sale of Building 14. Interest paid on Debentures 
15. Sale of Non – Current Investments 16. Repayment of Long – term Loan 
Solution: 
Operating Activities 1,4, 8,11,12 
Investing Activities 2,6,13,15 
Financing Activities 3,5, 9,14,16 
Cash and Cash Equivalents 7,10 
 
Ques 2 
Identify the following transactions belonging to: (i) Operating Activities, (ii) Investing Activities, (iii) Financing Activities and 
(iv) Cash and Cash Equivalents. 
1. Buy – back of Equity Shares 2. Cash Purchase 
3. Office Expenses 4. Purchase of Machinery 
5. Commission received 6. Investment in Short – term Marketable Securities 
7. Rent Paid 8. Income Tax Refund received 
9. Sale of Building 10. Cash in hand 
11. Sale of Patents 12. Purchase of Goodwill 
Solution: 
Operating Activities : 2, 3, 5,7,8 
Investing Activities : 4,9,11,12 
Financing Activities : 1 
Cash and Cash Equivalents : 6,10 
 
Ques 3 
Classify the following transactions as Operating, Investing and Financing Activities for (i) Financial Enterprise, and (ii) N on – 
Financial Enterprise. 
1. Interest paid on Debentures 2. Interest received on Investments 
3. Sale of Investments 4. Dividend received on Shares 
5. Dividend Paid 6. Purchase of Securities 
7. Receipt of Loans and Advances made 8. Commission paid on purchase of securities 
9. Sale of Securities 10. Loans and Advances made 
Solution: 
No. Transactions Financial Enterprise Non – Financial Enterprise 
1. Interest paid on Debentures Operating Financing 
2. Interest received on Investments Operating Investing 
3. Sale of Investments Operating Investing 
4. Dividend received on Shares Operating Investing 
5. Dividend paid Financing Financing 
6. Purchase of Securities Operating Investing 
7. Receipt of Loans and Advances made Operating Investing 
8. Commission paid on purchase of securities Operating Investing 
9. Sale of Securities Operating Investing 
10. Loans and Advances made Operating Investing 
 
Ques 4 
Illustration 4. Identify the following transactions belonging to: (i) Operating Activities, (ii) Investing Activities and (ii i) 
Financing Activities. 
 
    
 
1. Dividend paid by a finance company. 
2. Issuing 9% Debentures. 
3. Furniture Purchased for Cash. 
4. Cash received from Debtors. 
5. Payment of cash to acquire Debentures by an Investment company. 
6. Dividend received by a finance company. 
7. Proceeds from sale of investment. 
8. Redemption of Preference Shares. 
9. Purchase of Fixed Assets. 
10. Payment of Dividend. 
11. Interest Received. 
Solution: 
Operating Activities : 4,5,6 
Investing Activities : 3,7,9,11 
Financing Activities : 1,2,8,10 
 
Ques 5 
State which of the following would result in inflow /outflow of Cash and Cash Equivalents: 
1. Conversion of debentures into equity shares by a financing company. {CBSE, Delhi 2008 (I)} 
2. Declaration of final dividend. {CBSE, Delhi 2010(I)} 
3. Sale of Marketable Securities at par. {CBSE, Delhi 2010 (II)} 
4. Interest paid on Debentures. {CBSE, Delhi 2010 (III)} 
5. Deposit of cash into Bank. {CBSE, Delhi 2011(I)} 
6. Purchased machinery for cash Rs. 80,000. {CBSE, Delhi 2005} 
7. Paid to creditors Rs. 40,000. {CBSE, Delhi 2005} 
8. Converted Rs. 10,000 equity shares into 9% debentures. {CBSE, Delhi 2005} 
9. Received cash of Rs. 30,000 from Trade Receivables.  
10 Issued equity shares Rs. 10,00,000 for cash. {CBSE, Delhi 2005} 
11 Building Purchased by issue of shares.  
12 Furniture costing Rs. 25,000 sold for Rs. 30,000.  
13 Providing Depreciation on Fixed Assets.  
14 Issue of Bonus Shares.  
Solution: 
No. Effect on Cash Flaw Reason 
1. No Flow Both items are related to non – current items. 
2. No Flow Declaration of Dividend does not mean that it has been paid also. 
3. No Flow Movement between items of cash or cash equivalents. 
4. Outflow It involves payment of cash to debentureholders. 
5. No Row Movement between items of cash or cash equivalents. 
6. Outflow Cash and Cash Equivalents decreased by Rs. 80,000. 
7. Outflow Cash and Cash Equivalents decreased by Rs. 40,000. 
8. No Flow Both items are related to non – current items. 
9. Inflow Cash and Cash Equivalents increased by Rs. 30,000. 
10. Inflow Cash and Cash Equivalents increased by Rs. 10,00,000. 
11. No Flow Both items are related to non – current items. 
12. Inflow Cash and Cash Equivalents increased by Rs. 30,000. 
13. No Flow No involvement of Cash and Cash Equivalents. 
14. No Flow No involvement of Cash and Cash Equivalents. 
 
Ques 6 
The profit of Pokemon Ltd. after appropriations was Rs. 2,56,000. This profit was arrived at after taking into consideration 
the following items: 
S. No. Particulars . Amt. (Rs.) 
1. Depreciation on Fixed Tangible Assets (Machinery) 20,000 
2. Loss on sale of Fixed Tangible Assets (Furniture) 2,000 
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Ques 1 
Classify the following into (i) Operating Activities, (ii) Investing Activities, (iii) Financing Activities and (iv) Cash and Cash 
Equivalents while preparing a Cash Flow Statement: 
1. Cash Sales 2. Purchase of Building 
3. Dividend paid 4. Cash paid to Trade Payables 
5. Redemption of Debentures 6. Purchase of Investments 
7. Short – term Deposits in Bank 8. Cash received from Trade Receivables 
9. Issue of Share Capital or Debentures 10. Bank Balance 
11. Income Tax Paid 12. Selling and Distribution Expenses 
13. Sale of Building 14. Interest paid on Debentures 
15. Sale of Non – Current Investments 16. Repayment of Long – term Loan 
Solution: 
Operating Activities 1,4, 8,11,12 
Investing Activities 2,6,13,15 
Financing Activities 3,5, 9,14,16 
Cash and Cash Equivalents 7,10 
 
Ques 2 
Identify the following transactions belonging to: (i) Operating Activities, (ii) Investing Activities, (iii) Financing Activities and 
(iv) Cash and Cash Equivalents. 
1. Buy – back of Equity Shares 2. Cash Purchase 
3. Office Expenses 4. Purchase of Machinery 
5. Commission received 6. Investment in Short – term Marketable Securities 
7. Rent Paid 8. Income Tax Refund received 
9. Sale of Building 10. Cash in hand 
11. Sale of Patents 12. Purchase of Goodwill 
Solution: 
Operating Activities : 2, 3, 5,7,8 
Investing Activities : 4,9,11,12 
Financing Activities : 1 
Cash and Cash Equivalents : 6,10 
 
Ques 3 
Classify the following transactions as Operating, Investing and Financing Activities for (i) Financial Enterprise, and (ii) N on – 
Financial Enterprise. 
1. Interest paid on Debentures 2. Interest received on Investments 
3. Sale of Investments 4. Dividend received on Shares 
5. Dividend Paid 6. Purchase of Securities 
7. Receipt of Loans and Advances made 8. Commission paid on purchase of securities 
9. Sale of Securities 10. Loans and Advances made 
Solution: 
No. Transactions Financial Enterprise Non – Financial Enterprise 
1. Interest paid on Debentures Operating Financing 
2. Interest received on Investments Operating Investing 
3. Sale of Investments Operating Investing 
4. Dividend received on Shares Operating Investing 
5. Dividend paid Financing Financing 
6. Purchase of Securities Operating Investing 
7. Receipt of Loans and Advances made Operating Investing 
8. Commission paid on purchase of securities Operating Investing 
9. Sale of Securities Operating Investing 
10. Loans and Advances made Operating Investing 
 
Ques 4 
Illustration 4. Identify the following transactions belonging to: (i) Operating Activities, (ii) Investing Activities and (ii i) 
Financing Activities. 
 
    
 
1. Dividend paid by a finance company. 
2. Issuing 9% Debentures. 
3. Furniture Purchased for Cash. 
4. Cash received from Debtors. 
5. Payment of cash to acquire Debentures by an Investment company. 
6. Dividend received by a finance company. 
7. Proceeds from sale of investment. 
8. Redemption of Preference Shares. 
9. Purchase of Fixed Assets. 
10. Payment of Dividend. 
11. Interest Received. 
Solution: 
Operating Activities : 4,5,6 
Investing Activities : 3,7,9,11 
Financing Activities : 1,2,8,10 
 
Ques 5 
State which of the following would result in inflow /outflow of Cash and Cash Equivalents: 
1. Conversion of debentures into equity shares by a financing company. {CBSE, Delhi 2008 (I)} 
2. Declaration of final dividend. {CBSE, Delhi 2010(I)} 
3. Sale of Marketable Securities at par. {CBSE, Delhi 2010 (II)} 
4. Interest paid on Debentures. {CBSE, Delhi 2010 (III)} 
5. Deposit of cash into Bank. {CBSE, Delhi 2011(I)} 
6. Purchased machinery for cash Rs. 80,000. {CBSE, Delhi 2005} 
7. Paid to creditors Rs. 40,000. {CBSE, Delhi 2005} 
8. Converted Rs. 10,000 equity shares into 9% debentures. {CBSE, Delhi 2005} 
9. Received cash of Rs. 30,000 from Trade Receivables.  
10 Issued equity shares Rs. 10,00,000 for cash. {CBSE, Delhi 2005} 
11 Building Purchased by issue of shares.  
12 Furniture costing Rs. 25,000 sold for Rs. 30,000.  
13 Providing Depreciation on Fixed Assets.  
14 Issue of Bonus Shares.  
Solution: 
No. Effect on Cash Flaw Reason 
1. No Flow Both items are related to non – current items. 
2. No Flow Declaration of Dividend does not mean that it has been paid also. 
3. No Flow Movement between items of cash or cash equivalents. 
4. Outflow It involves payment of cash to debentureholders. 
5. No Row Movement between items of cash or cash equivalents. 
6. Outflow Cash and Cash Equivalents decreased by Rs. 80,000. 
7. Outflow Cash and Cash Equivalents decreased by Rs. 40,000. 
8. No Flow Both items are related to non – current items. 
9. Inflow Cash and Cash Equivalents increased by Rs. 30,000. 
10. Inflow Cash and Cash Equivalents increased by Rs. 10,00,000. 
11. No Flow Both items are related to non – current items. 
12. Inflow Cash and Cash Equivalents increased by Rs. 30,000. 
13. No Flow No involvement of Cash and Cash Equivalents. 
14. No Flow No involvement of Cash and Cash Equivalents. 
 
Ques 6 
The profit of Pokemon Ltd. after appropriations was Rs. 2,56,000. This profit was arrived at after taking into consideration 
the following items: 
S. No. Particulars . Amt. (Rs.) 
1. Depreciation on Fixed Tangible Assets (Machinery) 20,000 
2. Loss on sale of Fixed Tangible Assets (Furniture) 2,000 
 
    
 
3. Goodwill written off 9,000 
4. Provision for Taxation 35,000 
5. Transfer to General Reserve 22,500 
6. Income Tax Paid 42,000 
7. Gain on sale of Fixed Tangible Assets (Machinery) 8,000 
8. Income Tax Refund 6,000 
9. Insurance Claim Received 5,000 
 
Particulars 31.03.2011 (Rs.) 31.03.2012(Rs.) 
Trade Receivables (All Good) 50,000 62,000 
Trade payables 45,000 55,000 
Inventory 12,000 8,000 
Income received in Advance 8,000 — 
Outstanding Expenses 6,000 3,000 
Prepaid Expenses — 5,000 
You are required to calculate Cash from Operating Activities: 
Solution: 
CASH FLOW FROM OPERATING ACTIVITIES 
Particulars Amt. (Rs.) Amt.(Rs.) 
Net Profit before Tax and Extraordinary Items 
(WN:1)
 3,02,500  
Add: Depreciation on Machinery 20,000  
Loss on sale of Furniture 2,000  
Goodwill written off 9,000  
Less: Gain on sale of Machinery (8,000)  
Operating Profit before Working Capital Changes 3,25,500  
Add: Decrease in Current Assets and Increase in Current Liabilities:   
Decrease in Inventories 4,000  
Increase in Trade Payables 10,000  
Less: Increase in Current Assets and Decrease in Current Liabilities:   
Increase in Trade Receivables (12,000)  
Increase in Prepaid Expenses (5,000)  
Decrease in Outstanding Expenses (3,000)  
Decrease in Income received in advance (8,000)  
Cash Generated from Operating Activities 3,11,500  
Less: Income Tax Paid (Net of Income Tax Refund) (36,000)  
Cash Flow before Extraordinary Items 2,75,500  
Add: Insurance Claim Received 5,000  
Cash Flow from Operating Activities  2,80,500 
Working Notes: 
1. Calculation of Net Profit before Tax and Extraordinary Items: 
Net Profit after appropriations 2,56,000 
Add: Transfer to General Reserve 22,500 
Add: Provision for Tax (After adjusting Income Tax Refund) 29,000 
Less: Insurance Claim Received (Extraordinary Item) (5,000) 
Net Profit before Tax and Extraordinary Items 3,02,500 
 
Ques 7 
From the following Statement of Profit and Loss of Mars Ltd for the year ended 31
st
 March, 2015, calculate Cash Flow from 
Operating Activities: 
 
Particulars Note No. Amt. (Rs.) 
I. Revenue from Operation  11,96,000 
II. Other Income 1 39,000 
III. Total Revenue (I + II)  12,35,000 
IV. Expenses:   
Cost of Materials Consumed  8,00,000 
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Ques 1 
Classify the following into (i) Operating Activities, (ii) Investing Activities, (iii) Financing Activities and (iv) Cash and Cash 
Equivalents while preparing a Cash Flow Statement: 
1. Cash Sales 2. Purchase of Building 
3. Dividend paid 4. Cash paid to Trade Payables 
5. Redemption of Debentures 6. Purchase of Investments 
7. Short – term Deposits in Bank 8. Cash received from Trade Receivables 
9. Issue of Share Capital or Debentures 10. Bank Balance 
11. Income Tax Paid 12. Selling and Distribution Expenses 
13. Sale of Building 14. Interest paid on Debentures 
15. Sale of Non – Current Investments 16. Repayment of Long – term Loan 
Solution: 
Operating Activities 1,4, 8,11,12 
Investing Activities 2,6,13,15 
Financing Activities 3,5, 9,14,16 
Cash and Cash Equivalents 7,10 
 
Ques 2 
Identify the following transactions belonging to: (i) Operating Activities, (ii) Investing Activities, (iii) Financing Activities and 
(iv) Cash and Cash Equivalents. 
1. Buy – back of Equity Shares 2. Cash Purchase 
3. Office Expenses 4. Purchase of Machinery 
5. Commission received 6. Investment in Short – term Marketable Securities 
7. Rent Paid 8. Income Tax Refund received 
9. Sale of Building 10. Cash in hand 
11. Sale of Patents 12. Purchase of Goodwill 
Solution: 
Operating Activities : 2, 3, 5,7,8 
Investing Activities : 4,9,11,12 
Financing Activities : 1 
Cash and Cash Equivalents : 6,10 
 
Ques 3 
Classify the following transactions as Operating, Investing and Financing Activities for (i) Financial Enterprise, and (ii) N on – 
Financial Enterprise. 
1. Interest paid on Debentures 2. Interest received on Investments 
3. Sale of Investments 4. Dividend received on Shares 
5. Dividend Paid 6. Purchase of Securities 
7. Receipt of Loans and Advances made 8. Commission paid on purchase of securities 
9. Sale of Securities 10. Loans and Advances made 
Solution: 
No. Transactions Financial Enterprise Non – Financial Enterprise 
1. Interest paid on Debentures Operating Financing 
2. Interest received on Investments Operating Investing 
3. Sale of Investments Operating Investing 
4. Dividend received on Shares Operating Investing 
5. Dividend paid Financing Financing 
6. Purchase of Securities Operating Investing 
7. Receipt of Loans and Advances made Operating Investing 
8. Commission paid on purchase of securities Operating Investing 
9. Sale of Securities Operating Investing 
10. Loans and Advances made Operating Investing 
 
Ques 4 
Illustration 4. Identify the following transactions belonging to: (i) Operating Activities, (ii) Investing Activities and (ii i) 
Financing Activities. 
 
    
 
1. Dividend paid by a finance company. 
2. Issuing 9% Debentures. 
3. Furniture Purchased for Cash. 
4. Cash received from Debtors. 
5. Payment of cash to acquire Debentures by an Investment company. 
6. Dividend received by a finance company. 
7. Proceeds from sale of investment. 
8. Redemption of Preference Shares. 
9. Purchase of Fixed Assets. 
10. Payment of Dividend. 
11. Interest Received. 
Solution: 
Operating Activities : 4,5,6 
Investing Activities : 3,7,9,11 
Financing Activities : 1,2,8,10 
 
Ques 5 
State which of the following would result in inflow /outflow of Cash and Cash Equivalents: 
1. Conversion of debentures into equity shares by a financing company. {CBSE, Delhi 2008 (I)} 
2. Declaration of final dividend. {CBSE, Delhi 2010(I)} 
3. Sale of Marketable Securities at par. {CBSE, Delhi 2010 (II)} 
4. Interest paid on Debentures. {CBSE, Delhi 2010 (III)} 
5. Deposit of cash into Bank. {CBSE, Delhi 2011(I)} 
6. Purchased machinery for cash Rs. 80,000. {CBSE, Delhi 2005} 
7. Paid to creditors Rs. 40,000. {CBSE, Delhi 2005} 
8. Converted Rs. 10,000 equity shares into 9% debentures. {CBSE, Delhi 2005} 
9. Received cash of Rs. 30,000 from Trade Receivables.  
10 Issued equity shares Rs. 10,00,000 for cash. {CBSE, Delhi 2005} 
11 Building Purchased by issue of shares.  
12 Furniture costing Rs. 25,000 sold for Rs. 30,000.  
13 Providing Depreciation on Fixed Assets.  
14 Issue of Bonus Shares.  
Solution: 
No. Effect on Cash Flaw Reason 
1. No Flow Both items are related to non – current items. 
2. No Flow Declaration of Dividend does not mean that it has been paid also. 
3. No Flow Movement between items of cash or cash equivalents. 
4. Outflow It involves payment of cash to debentureholders. 
5. No Row Movement between items of cash or cash equivalents. 
6. Outflow Cash and Cash Equivalents decreased by Rs. 80,000. 
7. Outflow Cash and Cash Equivalents decreased by Rs. 40,000. 
8. No Flow Both items are related to non – current items. 
9. Inflow Cash and Cash Equivalents increased by Rs. 30,000. 
10. Inflow Cash and Cash Equivalents increased by Rs. 10,00,000. 
11. No Flow Both items are related to non – current items. 
12. Inflow Cash and Cash Equivalents increased by Rs. 30,000. 
13. No Flow No involvement of Cash and Cash Equivalents. 
14. No Flow No involvement of Cash and Cash Equivalents. 
 
Ques 6 
The profit of Pokemon Ltd. after appropriations was Rs. 2,56,000. This profit was arrived at after taking into consideration 
the following items: 
S. No. Particulars . Amt. (Rs.) 
1. Depreciation on Fixed Tangible Assets (Machinery) 20,000 
2. Loss on sale of Fixed Tangible Assets (Furniture) 2,000 
 
    
 
3. Goodwill written off 9,000 
4. Provision for Taxation 35,000 
5. Transfer to General Reserve 22,500 
6. Income Tax Paid 42,000 
7. Gain on sale of Fixed Tangible Assets (Machinery) 8,000 
8. Income Tax Refund 6,000 
9. Insurance Claim Received 5,000 
 
Particulars 31.03.2011 (Rs.) 31.03.2012(Rs.) 
Trade Receivables (All Good) 50,000 62,000 
Trade payables 45,000 55,000 
Inventory 12,000 8,000 
Income received in Advance 8,000 — 
Outstanding Expenses 6,000 3,000 
Prepaid Expenses — 5,000 
You are required to calculate Cash from Operating Activities: 
Solution: 
CASH FLOW FROM OPERATING ACTIVITIES 
Particulars Amt. (Rs.) Amt.(Rs.) 
Net Profit before Tax and Extraordinary Items 
(WN:1)
 3,02,500  
Add: Depreciation on Machinery 20,000  
Loss on sale of Furniture 2,000  
Goodwill written off 9,000  
Less: Gain on sale of Machinery (8,000)  
Operating Profit before Working Capital Changes 3,25,500  
Add: Decrease in Current Assets and Increase in Current Liabilities:   
Decrease in Inventories 4,000  
Increase in Trade Payables 10,000  
Less: Increase in Current Assets and Decrease in Current Liabilities:   
Increase in Trade Receivables (12,000)  
Increase in Prepaid Expenses (5,000)  
Decrease in Outstanding Expenses (3,000)  
Decrease in Income received in advance (8,000)  
Cash Generated from Operating Activities 3,11,500  
Less: Income Tax Paid (Net of Income Tax Refund) (36,000)  
Cash Flow before Extraordinary Items 2,75,500  
Add: Insurance Claim Received 5,000  
Cash Flow from Operating Activities  2,80,500 
Working Notes: 
1. Calculation of Net Profit before Tax and Extraordinary Items: 
Net Profit after appropriations 2,56,000 
Add: Transfer to General Reserve 22,500 
Add: Provision for Tax (After adjusting Income Tax Refund) 29,000 
Less: Insurance Claim Received (Extraordinary Item) (5,000) 
Net Profit before Tax and Extraordinary Items 3,02,500 
 
Ques 7 
From the following Statement of Profit and Loss of Mars Ltd for the year ended 31
st
 March, 2015, calculate Cash Flow from 
Operating Activities: 
 
Particulars Note No. Amt. (Rs.) 
I. Revenue from Operation  11,96,000 
II. Other Income 1 39,000 
III. Total Revenue (I + II)  12,35,000 
IV. Expenses:   
Cost of Materials Consumed  8,00,000 
 
    
 
Changes in Inventories of Finished Goods and Work – in – Progress  30,000 
Employees Benefit Expenses  2,10,000 
Depreciation and Amortisation  30,000 
Other Expenses 2 40,000 
Total Expenses  11,10,000 
V. Profit before Tax (III – IV)  1,25,000 
Notes to Accounts: 
Particulars Amt.(Rs.) 
1. Other Income  
Rent 30,000 
Profit on sale of Machinery 5,000 
Interest on Debentures held as Investments 4,000 
 39,000 
2. Other Expenses  
Manufacturing Expenses 25,000 
Selling and Distribution Expenses 12,000 
Loss on sale of Furniture 3,000 
 40,000 
Additional Information: 
Particulars 31.03.2014(Rs.) 31.03.2015(Rs.) 
Trade Receivables 40,000 50,000 
Trade Payables 70,000 65,000 
Inventories 50,000 35,000 
Outstanding Expenses 10,000 16,000 
Prepaid Expenses 7,000 10,000 
Solution: 
CASH FLOW FROM OPERATING ACTIVITIES 
Particulars Amt (Rs.) Amt. (Rs.) 
Profit before Tax 1,25,000  
Add: Depreciation and Amortisation 30,000  
Add: Loss on sale of Furniture 3,000  
Less: Rent (Non – Operating Income) (30,000)  
Less: Profit on sale of Machinery (5,000)  
Less: Interest on Debentures held as Investments (Non – Operating Income) (4,000)  
Operating Profit before Working Capital Changes 1,19,000  
Add: Decrease in Current Assets and Increase in Current Liabilities:   
Decrease in Inventories 15,000  
Increase in Outstanding Expenses 6,000  
Less: Increase in Current Assets and Decrease in Current Liabilities:   
Increase in Trade Receivables (10,000)  
Increase in Prepaid Expenses (3,000)  
Decrease in Trade Payables (5,000)  
Cash Flow from Operating Activities  1,22,000 
 
Ques 8 
From the following Balance Sheets of Enclotek Ltd., as at 31
st
 March, 2006 and 31
st
 March, 2005, calculate Cash Flow from 
Operating Activities:  
Particulars Note No. 31.3.2006 
(Rs.) 
31.3.2005 
(Rs.) 
I. EQUITY AND LIABILITIES    
1. Shareholders' Funds    
(a) Share Capital 1 6,50,000 7,50,000 
(b) Reserves and Surplus 2 3,50,000 20,000 
2. Non – Current Liabilities    
Long – term Borrowings 3 3,00,000 2,00,000 
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Ques 1 
Classify the following into (i) Operating Activities, (ii) Investing Activities, (iii) Financing Activities and (iv) Cash and Cash 
Equivalents while preparing a Cash Flow Statement: 
1. Cash Sales 2. Purchase of Building 
3. Dividend paid 4. Cash paid to Trade Payables 
5. Redemption of Debentures 6. Purchase of Investments 
7. Short – term Deposits in Bank 8. Cash received from Trade Receivables 
9. Issue of Share Capital or Debentures 10. Bank Balance 
11. Income Tax Paid 12. Selling and Distribution Expenses 
13. Sale of Building 14. Interest paid on Debentures 
15. Sale of Non – Current Investments 16. Repayment of Long – term Loan 
Solution: 
Operating Activities 1,4, 8,11,12 
Investing Activities 2,6,13,15 
Financing Activities 3,5, 9,14,16 
Cash and Cash Equivalents 7,10 
 
Ques 2 
Identify the following transactions belonging to: (i) Operating Activities, (ii) Investing Activities, (iii) Financing Activities and 
(iv) Cash and Cash Equivalents. 
1. Buy – back of Equity Shares 2. Cash Purchase 
3. Office Expenses 4. Purchase of Machinery 
5. Commission received 6. Investment in Short – term Marketable Securities 
7. Rent Paid 8. Income Tax Refund received 
9. Sale of Building 10. Cash in hand 
11. Sale of Patents 12. Purchase of Goodwill 
Solution: 
Operating Activities : 2, 3, 5,7,8 
Investing Activities : 4,9,11,12 
Financing Activities : 1 
Cash and Cash Equivalents : 6,10 
 
Ques 3 
Classify the following transactions as Operating, Investing and Financing Activities for (i) Financial Enterprise, and (ii) N on – 
Financial Enterprise. 
1. Interest paid on Debentures 2. Interest received on Investments 
3. Sale of Investments 4. Dividend received on Shares 
5. Dividend Paid 6. Purchase of Securities 
7. Receipt of Loans and Advances made 8. Commission paid on purchase of securities 
9. Sale of Securities 10. Loans and Advances made 
Solution: 
No. Transactions Financial Enterprise Non – Financial Enterprise 
1. Interest paid on Debentures Operating Financing 
2. Interest received on Investments Operating Investing 
3. Sale of Investments Operating Investing 
4. Dividend received on Shares Operating Investing 
5. Dividend paid Financing Financing 
6. Purchase of Securities Operating Investing 
7. Receipt of Loans and Advances made Operating Investing 
8. Commission paid on purchase of securities Operating Investing 
9. Sale of Securities Operating Investing 
10. Loans and Advances made Operating Investing 
 
Ques 4 
Illustration 4. Identify the following transactions belonging to: (i) Operating Activities, (ii) Investing Activities and (ii i) 
Financing Activities. 
 
    
 
1. Dividend paid by a finance company. 
2. Issuing 9% Debentures. 
3. Furniture Purchased for Cash. 
4. Cash received from Debtors. 
5. Payment of cash to acquire Debentures by an Investment company. 
6. Dividend received by a finance company. 
7. Proceeds from sale of investment. 
8. Redemption of Preference Shares. 
9. Purchase of Fixed Assets. 
10. Payment of Dividend. 
11. Interest Received. 
Solution: 
Operating Activities : 4,5,6 
Investing Activities : 3,7,9,11 
Financing Activities : 1,2,8,10 
 
Ques 5 
State which of the following would result in inflow /outflow of Cash and Cash Equivalents: 
1. Conversion of debentures into equity shares by a financing company. {CBSE, Delhi 2008 (I)} 
2. Declaration of final dividend. {CBSE, Delhi 2010(I)} 
3. Sale of Marketable Securities at par. {CBSE, Delhi 2010 (II)} 
4. Interest paid on Debentures. {CBSE, Delhi 2010 (III)} 
5. Deposit of cash into Bank. {CBSE, Delhi 2011(I)} 
6. Purchased machinery for cash Rs. 80,000. {CBSE, Delhi 2005} 
7. Paid to creditors Rs. 40,000. {CBSE, Delhi 2005} 
8. Converted Rs. 10,000 equity shares into 9% debentures. {CBSE, Delhi 2005} 
9. Received cash of Rs. 30,000 from Trade Receivables.  
10 Issued equity shares Rs. 10,00,000 for cash. {CBSE, Delhi 2005} 
11 Building Purchased by issue of shares.  
12 Furniture costing Rs. 25,000 sold for Rs. 30,000.  
13 Providing Depreciation on Fixed Assets.  
14 Issue of Bonus Shares.  
Solution: 
No. Effect on Cash Flaw Reason 
1. No Flow Both items are related to non – current items. 
2. No Flow Declaration of Dividend does not mean that it has been paid also. 
3. No Flow Movement between items of cash or cash equivalents. 
4. Outflow It involves payment of cash to debentureholders. 
5. No Row Movement between items of cash or cash equivalents. 
6. Outflow Cash and Cash Equivalents decreased by Rs. 80,000. 
7. Outflow Cash and Cash Equivalents decreased by Rs. 40,000. 
8. No Flow Both items are related to non – current items. 
9. Inflow Cash and Cash Equivalents increased by Rs. 30,000. 
10. Inflow Cash and Cash Equivalents increased by Rs. 10,00,000. 
11. No Flow Both items are related to non – current items. 
12. Inflow Cash and Cash Equivalents increased by Rs. 30,000. 
13. No Flow No involvement of Cash and Cash Equivalents. 
14. No Flow No involvement of Cash and Cash Equivalents. 
 
Ques 6 
The profit of Pokemon Ltd. after appropriations was Rs. 2,56,000. This profit was arrived at after taking into consideration 
the following items: 
S. No. Particulars . Amt. (Rs.) 
1. Depreciation on Fixed Tangible Assets (Machinery) 20,000 
2. Loss on sale of Fixed Tangible Assets (Furniture) 2,000 
 
    
 
3. Goodwill written off 9,000 
4. Provision for Taxation 35,000 
5. Transfer to General Reserve 22,500 
6. Income Tax Paid 42,000 
7. Gain on sale of Fixed Tangible Assets (Machinery) 8,000 
8. Income Tax Refund 6,000 
9. Insurance Claim Received 5,000 
 
Particulars 31.03.2011 (Rs.) 31.03.2012(Rs.) 
Trade Receivables (All Good) 50,000 62,000 
Trade payables 45,000 55,000 
Inventory 12,000 8,000 
Income received in Advance 8,000 — 
Outstanding Expenses 6,000 3,000 
Prepaid Expenses — 5,000 
You are required to calculate Cash from Operating Activities: 
Solution: 
CASH FLOW FROM OPERATING ACTIVITIES 
Particulars Amt. (Rs.) Amt.(Rs.) 
Net Profit before Tax and Extraordinary Items 
(WN:1)
 3,02,500  
Add: Depreciation on Machinery 20,000  
Loss on sale of Furniture 2,000  
Goodwill written off 9,000  
Less: Gain on sale of Machinery (8,000)  
Operating Profit before Working Capital Changes 3,25,500  
Add: Decrease in Current Assets and Increase in Current Liabilities:   
Decrease in Inventories 4,000  
Increase in Trade Payables 10,000  
Less: Increase in Current Assets and Decrease in Current Liabilities:   
Increase in Trade Receivables (12,000)  
Increase in Prepaid Expenses (5,000)  
Decrease in Outstanding Expenses (3,000)  
Decrease in Income received in advance (8,000)  
Cash Generated from Operating Activities 3,11,500  
Less: Income Tax Paid (Net of Income Tax Refund) (36,000)  
Cash Flow before Extraordinary Items 2,75,500  
Add: Insurance Claim Received 5,000  
Cash Flow from Operating Activities  2,80,500 
Working Notes: 
1. Calculation of Net Profit before Tax and Extraordinary Items: 
Net Profit after appropriations 2,56,000 
Add: Transfer to General Reserve 22,500 
Add: Provision for Tax (After adjusting Income Tax Refund) 29,000 
Less: Insurance Claim Received (Extraordinary Item) (5,000) 
Net Profit before Tax and Extraordinary Items 3,02,500 
 
Ques 7 
From the following Statement of Profit and Loss of Mars Ltd for the year ended 31
st
 March, 2015, calculate Cash Flow from 
Operating Activities: 
 
Particulars Note No. Amt. (Rs.) 
I. Revenue from Operation  11,96,000 
II. Other Income 1 39,000 
III. Total Revenue (I + II)  12,35,000 
IV. Expenses:   
Cost of Materials Consumed  8,00,000 
 
    
 
Changes in Inventories of Finished Goods and Work – in – Progress  30,000 
Employees Benefit Expenses  2,10,000 
Depreciation and Amortisation  30,000 
Other Expenses 2 40,000 
Total Expenses  11,10,000 
V. Profit before Tax (III – IV)  1,25,000 
Notes to Accounts: 
Particulars Amt.(Rs.) 
1. Other Income  
Rent 30,000 
Profit on sale of Machinery 5,000 
Interest on Debentures held as Investments 4,000 
 39,000 
2. Other Expenses  
Manufacturing Expenses 25,000 
Selling and Distribution Expenses 12,000 
Loss on sale of Furniture 3,000 
 40,000 
Additional Information: 
Particulars 31.03.2014(Rs.) 31.03.2015(Rs.) 
Trade Receivables 40,000 50,000 
Trade Payables 70,000 65,000 
Inventories 50,000 35,000 
Outstanding Expenses 10,000 16,000 
Prepaid Expenses 7,000 10,000 
Solution: 
CASH FLOW FROM OPERATING ACTIVITIES 
Particulars Amt (Rs.) Amt. (Rs.) 
Profit before Tax 1,25,000  
Add: Depreciation and Amortisation 30,000  
Add: Loss on sale of Furniture 3,000  
Less: Rent (Non – Operating Income) (30,000)  
Less: Profit on sale of Machinery (5,000)  
Less: Interest on Debentures held as Investments (Non – Operating Income) (4,000)  
Operating Profit before Working Capital Changes 1,19,000  
Add: Decrease in Current Assets and Increase in Current Liabilities:   
Decrease in Inventories 15,000  
Increase in Outstanding Expenses 6,000  
Less: Increase in Current Assets and Decrease in Current Liabilities:   
Increase in Trade Receivables (10,000)  
Increase in Prepaid Expenses (3,000)  
Decrease in Trade Payables (5,000)  
Cash Flow from Operating Activities  1,22,000 
 
Ques 8 
From the following Balance Sheets of Enclotek Ltd., as at 31
st
 March, 2006 and 31
st
 March, 2005, calculate Cash Flow from 
Operating Activities:  
Particulars Note No. 31.3.2006 
(Rs.) 
31.3.2005 
(Rs.) 
I. EQUITY AND LIABILITIES    
1. Shareholders' Funds    
(a) Share Capital 1 6,50,000 7,50,000 
(b) Reserves and Surplus 2 3,50,000 20,000 
2. Non – Current Liabilities    
Long – term Borrowings 3 3,00,000 2,00,000 
 
    
 
3. Current Liabilities    
Trade Payables  1,20,000 85,000 
Total  14,20,000 10,55,000 
II. ASSETS    
1. Non – Current Assets    
(a) Fixed Assets    
(i) Tangible Assets  8,60,000 6,20,000 
(ii) Intangible Assets (Goodwill)  10,000 15,000 
(b) Non – Current Investments  1,25,000 80,000 
2. Current Assets    
Inventories  3,25,000 3,00,000 
Trade Receivables  1,00,000 40,000 
Total  14,20,000 10,55,000 
Notes to Accounts: 
Particulars 31.3.2006 (Rs.) 31.3.2005 (Rs.) 
1. Share Capital   
Equity Share Capital 4,50,000 4,50,000 
5% Preference Share Capital 2,00,000 3,00,000 
 6,50,000 7,50,000 
2. Reserves and Surplus   
General Reserve 1,50,000 1,20,000 
Surplus i.e. Balance in the Statement of Profit and Loss 2,00,000 (1,00,000) 
 3,50,000 20,000 
3. Long – Term Borrowings   
8% Debentures 3,00,000 2,00,000 
Additional Information: 
(i) Depreciation provided on Fixed Assets Rs. 60,000. 
(ii) Preference Share were redeemed at a premium of 5% on 31
st
 March, 2006. 
(iii) Additional debentures were issued on 1
st
 October, 2005. 
(iv) The company declared and paid dividend on Equity Shares @ 8%. 
Note: Balance Sheets given in the question have been modified as per Schedule III. 
Solution: 
CASH FLOW FROM OPERATING ACTIVITIES______________________ 
Particulars Amt. (Rs.) Amt. (Rs.) 
Net Profit before Tax 
(wN:1)
 3,81,000  
Add: Depreciation on Fixed Assets 60,000  
Add: Premium on redemption of Preference Shares (5% x Rs. 1,00,000) 
(wn;2)
 5,000  
Add: Interest on Debentures {(8% x Rs.2,00,000x 6/12) + 
(8%xRs.3,00,000x6/12) 
20,000  
Add: Goodwill Written off (Rs. 15,000 – Rs. 10,000) 5,000  
Operating Profit before Working Capital Changes 4,71,000  
Add: Decrease in Current Assets and Increase in Current Liabilities:   
Increase in Trade Payables 35,000  
 
Less: Increase in Current Assets and Decrease in Current Liabilities:   
Increase in Inventories (Stock) (25,000)  
Increase in Trade Receivables (Debtors) (60,000)  
Cash Flow from Operating Activities  4,21,000 
Working Notes: 
1. Calculation of Net Profit before Tax and Extraordinary Items: 
Profit for the Year (2,00,000 – ( – 1,700,000)) 3,00,000 
Add: Dividend on Preference Shares (5% of Rs.3,00,000) 
(wn:3)
 15,000 
Add: Dividend on Equity Shares (8% of Rs. 4,50,000) 36,000 
Add: Transfer to General Reserve (Rs. 1,50,000 – Rs. 1,20,000) 30,000 
Net Profit before Tax and Extraordinary Items 3,81,000 
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