Cash flow statement

Basic principles of cash flow statement

1. Operating Activity : It records the cash flow of all operating expenses and all cash flows
through current asset ( expect cash and bank balance ) and current liabilities
2. Investment Activity: It records the cash flows through only purchase and sales of fixed asset
and investment
3. Financing Activity: It records cash flows through only issue of equity shares, debentures and
preference capital and redemption of debentures and preference share capital and payment
dividend

General rules to be followed while preparing the cash flow statement

1. Any change is the balances sheet between two years given will be reflects in the cash flows
2. Changes will be affect either cash or profit
3. Changes affecting profit will reflect in profit and loss appropriation account
4. Changes affecting cash will reflect in cash flow statement
Format of profit & loss Appropriation

Particulars Amount Particulars Amount

To depreciation on fixed assets XX By Balance B/d XX
To increases in reserve XX By profit on sale fixed assets XX
To increases in provision XX BY increases in Goodwill XX
To goodwill written off XX By Increases on investment XX
To interim dividend paid XX BY discount on redemption of XX
debentures or preference share
To premium on redemption of XX BY cash from operation B/f XXX
debentures or preference share
To proposed dividend of current XX
year
To balance c/d XX
Total XX Total XX

Format of cash flow statement

Particulars Amount Amount

Operating Activity
Cash from operations XX
Add: decreases in current Assets and increases in current XX
liabilities XX
Less : increases in current asset and decreases in current XX
liabilities XXX
Payment of income Tax
Cash from operating Activity XX
Investment Activity : XX
 Sales of fixed asset or investment XXX
Purchases of fixed assets or investment
Cash from investment activity XX
Financing Activity : XX
Issue of equity shares XX
Issue of debentures (XX)
Issues of preference share (XX)
Redemption of debentures (XX)
Redemption of preference share (XX)
Payment of interim dividend XXX
Proposed dividend of pervious year XXX
Cash from financing Activity XXX
Cash from all the above activities XXX
Add: opening balance of cash and bank
Closing balance of cash or bank

Problem: 1
Following is the trading and profit and loss For the year ended 31-3-2017 and calculate
the cash from operation

Particulars Amount Particulars Amount

To purchases 1,27,000 By sales 1,91,000
To wages 31,900
To gross profit c/d 31,500
1,91,000 1,91,000
To salaries 6,600
To rent 3,190
To depreciation 9,570
To loss on sale of investment 3,200
To good will written off 3,940
To net profit 30,000
56,500 56,500

Problem: 2 Calculate cash from operating activities and from figures given below
Cash from operation is Rs.10, 000

Particulars Amount 2016 Amount 2017

Sundry creditors 1,10,000 1,12,000
inventories 1,15,000 1,20,000
Sundry debtors 1,27,000 1,30,000
Bills receivables 52,000 51,000
Short term investments 44,000 43,000
Bills payable 28,000 24,000
Prepaid expenses 12,000 11,000

Problem: 3 compute cash from operations from the following information given. Profit for the
year is Rs.10,000
 Particulars 2017 2018
Sundry debtors 10,000 12,000
Provision for bad debts 1,000 1,200
Bills receivable 4,000 3,000
Bills payable 5,000 6,000
Sundry creditors 8,000 9,000
Stock 5,000 8,000
Short term investments 10,000 12,000
Outstanding expenses 1,000 1500
Prepaid expenses 2,000 1,000

Problem: 4 from the following particulars, calculate the cash from operations during the year
2012 and profit for the year is Rs.13, 00,000

Particulars 2011 2012

Debtors 5,00,000 4,70,000
Bills receivables 1,00,000 1,25,000
Creditors 2,00,000 2,50,000
Bills payable 80,000 60,000
Outstanding expenses 10,000 12,000
Prepaid expenses 8,000 7,000
Accrued income 6,000 7,500
Income received in advance 3,000 2,500

Problem : 5 calculate cash from operations from the following

Particulars 2016 2017

Profits 1,40,000 2,00,000
Outstanding Expenses 2,000 6,000
Prepaid expenses 4,000 8,000
Depreciation 16,000
Dividend paid 20,000
General Expenses 15,500

Problem: 6 from the following, calculate cash from operating activities

a. Total sales : Rs. 6,00,000
b. Total purchases : Rs. 4,50,000
c. Debtors at the beginning of the year : Rs.80,000
d. Creditors for supplies at the beginning of the year : Rs.50,000
e. Creditors for supplies at the end of the year :Rs.1,20,000
f. Debtors at the end of the year : Rs. 2,00,000
g. Operating Expenses : Rs.80,000