Cash Flow Query

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VUELVE

CA- Student

351 Points Joined February 2010

Following is the balance sheet of Metlife Ltd as on 31^st March, 2004 and 2005

*Liabilities*	*2004*	*2005*	*Assets*	*2004*	*2005*
Share Capital	2,00,000	2,50,000	Land & Buildings	2,00,000	1,90,000
Gen Reserve	50,000	60,000	Stock	1,00,000	74,000
P&L A/c	30,500	30,600	Machinery	1,50,000	1,69,000
Bank Loan(Long Term)	70,000	-	Sundry Debtors	80,000	64,200
Sundry Creditors	1,50,000	1,35,200	Cash	500	800
Provision for Tax	30,000	35,000	Bank	-	7,800
			Goodwill	-	5,000
Total	5,30,500	5,10,800	Total	5,30,500	5,10,800

Prepare the cash flow statement from the following information: During the year ended 31^st Mar, 05

1. Dividend of Rs.23,000 was paid

2. Assets of another company were purchased for a consideration of Rs.50,000 payable in shares. The following assets were purchased – Stock Rs.20,000, Machinery Rs.25,000

3. Machinery was further purchased for Rs.8,000

4. Depreciation Written off on machinery Rs.12,000 and

5. Income Tax provided during year Rs.33,000, loss on sale of machinery Rs.200 was written off to general reserve.

Need Solution for this...!!

Thank You..!!

Replies (7)

Deepika Agarwal

CA practice

93 Points Joined February 2009

mr. justin i will solve ur query but at evening..........

SUDHIR & PRADEEP JI

CA FINAL+LLB + DISA

2299 Points Joined March 2010

a + b +c activities = 300 reply thanks ok

First of all, the 2005 B/s does not tally, there is a difference of Rs.200, hence, I have taken the Profit and Loss figure to be 30,800 instead of Rs.30,600. You can adjust it any where and suitably amend the answer.

Significant non-cash item is a must disclosure - REfer Below.

You need lots of practice in CFS - both Consolidated and Cash Flow

Good Luck

Shiva

Main Answer:

A. Operating

Source

Increase in P/l A/c

300

B/s

Tra to G/R

10200

B/s and WN1

Div Paid

23000

Adj 1

Depreciation

22000

Adj 4+Rs.10000 for Land and Building

Provision for Income Tax

33000

Adj 4

88500

Working capital Adjs

Decrease/(Increase) in Stock

46000

Note: Decrease in Stock 26000 plus Stock for which cash not paid Rs.20000)

Decrease/(Increase) in Debtors

15800

B/s

(Decrease)/Increase in Creditors

(15000)

B/s

135300

Payment of Income Tax

(28000)

WN2

Cash From Operating

107300

B. Investing

Sale of Machinery

1800

WN3

Purchase of Machinery

(8000)

Adj 3 - Only Cash purchase

Cash From Investing

(6200)

C. Financing Activities

Repayment of Term Loan

(70000)

Dividend Paid

(23000)

Contra Above and Adj 1

Cash From Financing

(93000)

Increase/(Decrease in Cash and CE)

A+B+C

8100

Add: Opening Balance

500

Closing Balance of Cash

8600

Notes:

1. Significant Non cash Activities

During the year, the company has issued Rs.50000 of Rs.10 Equity for consideration other than cash for

P&M	25000
Stock	20000
G/w	5000
	50000

Working Notes

	WN 1 General Resere A/c

	To Loss on sale	200	By Bal b/d	50,000
	(given as adj against G/r)		By P/l (bal. fig)	10,200
	To Bal c/d	60,000	(Current year appropriation)
		60200		60200


	WN2 Provision for Income Tax A/c

	To Bank (Bal fig)	28,000	By Bal b/d	30,000
			By P/l as per WN4	33,000
	To Bal c/d	35,000
		63,000		63,000



	WN3 Machinery Tax A/c

	To Bal b/d	150,000	By Depreciation	12,000	Adj 4
Adj 2	To Share Capital	25,000	By Loss on Sale	200	Adj 5
Adj 3	To Bank	8,000	(G/R
			By Bank (bal fig)	1,800
			Sale Proceeds
			By Bal c/d	169000
		183,000		183,000

Guest

yeah there is a lack of Rs200 on liabilities side for the year 2005. Anyway good presentation by Mr. shiva

VUELVE

CA- Student

351 Points Joined February 2010

Friends I'm sorry, i have wrongly typed one item in the Liabilities Side, It is Sundry Creditors and for the year 2005 amount for Sundry creditors is Rs.1,35,200/-

I'm extremely apologizing for the mistake and you people might have spent more time on it. I'm Very Very Sorry for the same...!!

I Thank You for your precious time invested for me ...!!

PS: Answer as per my material : Cash from operations (Before WC Changes) = Rs.88,300, Cash Inflow from operating activities (after tax) = Rs.1,07,300, Cash used / outflow in investing activities = (Rs.6,200), Cash used / Outflow in Financing Activities = (Rs.93,000).

Guest

Metlife Ltd.

Cash Flow Statement for the year ended 31^st march 2005

As Per AS-3

Net profit as per P&l (30600-30500)	100
ADD- Dividend paid -Trfr to G/R(60000+200-50000) - prov. For Tax (current year) - Depreciation(12000+10000)	23000 10200 33000 22000
Operating profit working capital changes	88300
ADD- Decrease in S.debtors(80000-64200) ADD- Decrease in Stock(100000-74000+20000) LESS – Decrease in S.creditors(150000-135200)	15800 46000 (14800)
Cash generated from operations	135300
LESS- Income Tax Paid( 30000+33000-35000)	(28000)
Cash from operating Activity{A}	107300

*Cash flow from Investing Activity--*
Purchase of machinery	(8000)
Sale of Machinery	1800
Cash used in investing Activity{B}	(6200)

Cash flow from financing activity---
Bank loan repaid	(70000)
Dividend Paid	(23000)
Cash used in financing activity{C}	(93000)


*Net Increase in cash & cash equivalents{A+B+C}*	*8100*
*Cash & cash equivalents in starting{D}* Cash 500	500
Cash & cash eqivalents at end{ A+B+C+D} Cash 800 Bank 7800	8600

Kindly see working notes for general reserve, provision for tax and machinery A/c as given by Mr. Shiva

In my solution i have also taken depreciation for land and building(200000-190000) Bcz its not only land, it consist of building also and i have assumed reduction of 10000 as a depreciation on building. The other depreciation of 12000 is on machinery as given in question by Mr. Justin