WORKSHEET ON CASH FLOW STATEMENT

[Board Exam Questions]

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SYNOPSIS
CASH FLOW STATEMENT
A cash flow statement provides information about the historical changes in cash and
cash equivalents of an enterprise by classifying cash flows into operating, investing and
financing activities.
Benefits of Cash Flow Statement
 It enables to assess the financial structure of an organization.
 It helps in in assessing the ability of the enterprise to generate cash and cash
equivalents.
 It also helps in fine tuning its cash inflow and cash outflow, keeping in response to
changing condition.
 It helps in comparing inflows and out flows of cash.
Cash Flows

Cash from
Operating
Activities

Cash
Cash from Flows Cash from
Financing
Investing
Activities Activities
Cash from Operating Activities
These are the principal revenue generating activities (or the main activities) of the
enterprise and other activities that are not investing or financing activities.
Cash Inflows from operating activities
 Cash receipts from sale of goods and the rendering of services.
 Cash receipts from royalties, fees, commissions and other revenues.
Cash Outflows from operating activities
 Cash payments to suppliers for goods and services.
 Cash payments to and on behalf of the employees.
 Cash payments to an insurance enterprise for premiums and claims, annuities, and
other policy benefits.
 Cash payments or refunds of income taxes unless they can be specifically identified
with financing and investing activities.
Cash from Investing Activities
Investing activities relate to purchase and sale of long-term assets or fixed assets
such as machinery, furniture, land and building, etc.
Cash Outflows from investing activities
 Cash payments to acquire fixed assets including intangibles and capitalised research
and development.
 Cash payments to acquire shares, warrants or debt instruments of other enterprises
other than the instruments other than those held for trading purposes.
 Cash advances and loans made to third party (other than advances and loans made
by a financial enterprise wherein it is operating activities).
Cash Inflows from Investing Activities
 Cash receipt from disposal of fixed assets including intangibles.
  Cash receipt from the repayment of advances or loans made to third parties ( except
in case of financial enterprise).
 Cash receipt from disposal of shares, warrants or debt instruments of other
enterprises except those held for trading purposes.
 Interest received in cash from loans and advances.
 Dividend received from investments in other enterprises.
Cash from Financing Activities
Financing activities are activities that result in changes in the size and composition
of the owners’ capital and borrowings of the enterprise.
Cash Inflows from financing activities
 Cash proceeds from issuing shares (equity or/and preference).
 Cash proceeds from issuing debentures, loans, bonds and other long term
borrowings.
Cash Outflows from financing activities
 Cash repayments of amounts borrowed.
 Interest paid on debentures and long-term loans and advances.
 Dividends paid on equity and preference capital.
Extraordinary Items
Extraordinary items are non-recurring in nature and hence cash flows associated
with extraordinary items should be classified and disclosed separately as arising from
operating, investing or financing activities. e.g. loss due to theft or earthquake or flood.
Interest and Dividend
Payment of interest and dividends are classified as financing activities whereas
receipt of interest and dividends are classified as investing activities.
Taxes on Income and Gains
 Tax on operating profit should be classified as operating cash flows.
 Dividend tax, i.e. Tax paid on dividend should be classified as financing Activity
along with dividend paid.
 Capital gains tax paid on sale of fixed assets should be classified under Investing
activities.
 Particulars Amount(Rs)
(A) Cash Flows From Operating Activities
Net Profit/Loss before Tax and Extraordinary Items
+ Deductions already made in Profit and Loss on account of
Non-cash items such as Depreciation, Goodwill to be Written-off.
+ Deductions already made in Profit and Loss on Account of Non-operating
items such as Interest.
– Additions (incomes) made in Profit and Loss on Account of Non-operating
Items such as Dividend Received, Profit on sale of Fixed Assets.
Operating Profit before Working Capital changes
+ Increase in Current Liabilities
+ Decrease in Current Assets
– Increase in Current Assets
– Decrease in Current Liabilities
Cash Flows from Operating Activities before Tax and Extraordinary Items.
– Income Tax Paid
+/– Effects of Extraordinary Items
Net Cash from Operating Activities
(B) Cash Flows From Investing Activities
Cash receipt from disposal of fixed assets including intangibles.
(-)Cash payments to acquire fixed assets including intangibles and capitalised
research and development.
Cash receipt from the repayment of advances or loans made to third parties (
except in case of financial enterprise).
(-)Cash payments to acquire shares, warrants or debt instruments of other
enterprises other than the instruments other than those held for trading
purposes.
Cash receipt from disposal of shares, warrants or debt instruments of other
enterprises except those held for trading purposes.
(-)Cash advances and loans made to third party
Interest received in cash from loans and advances.
Dividend received from investments in other enterprises.
Net cash from Investing Activities
(C)Cash Flows from Financing Activities
Cash proceeds from issuing shares (equity or/and preference).
Cash proceeds from issuing debentures, loans, bonds and other long term
borrowings.
(-) Cash repayments of amounts borrowed.
(-) Interest paid on debentures and long-term loans and advances.
(-) Dividends paid on equity and preference capital.
Net cash used in Financing Activities
Net increase in Cash and Cash Equivalents (A+B+C)
(+) Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Non-cash Transactions
Investing and financing transactions that do not require the use of cash or cash
equivalents should be excluded from a cash flow statement.
Calculation of Net Profit/Loss before Tax and Extraordinary Items
Particulars Amount

Balance in Statement of Profit & loss Current year XXXX

Less : Balance in Statement of Profit & loss XXXX
Previous year XXXX
Add : Transferred to General Reserve XXX
Interim Dividend Paid during the year XXX
Proposed Dividend Paid during the
year(Previous Year) XXX
Provision for Taxation Current Year XXX
Less :
Tax Refunded During The year XXX
Net Profit/Loss before Tax and Extraordinary XXXX
Items
 2016 FOREIGN
Sl. Question Mark
No.
1 Give the meaning of cash flow statement 1
2 “ An enterprise may hold securities and loans for dealing or trading 1
purpose in which case they are similar to inventory acquired
specifically for resale. Is the statement correct? Cash flow from
such activities will be classified under which type of activity while
preparing Cash flow statement?
3 6
 2017 Foreign
4. What is meant by ‘Cash Flow from Investing Activities’? 1
5 J.K. Ltd. purchased machinery on deferred payment basis. During 1
the year ended 31.3.2016 the company paid an instalment of Rs.
 4,00,000 which included interest of Rs. 40,000. While preparing
cash flow statement, under which type of activities will this
payment be classified ?
Also, mention the amount involved in each activity.
6. Following is the Balance Sheet of J.M. Ltd as at 31.3.2016 : 6
J.M. Ltd. Balance Sheet as at 31.3.2016
 Additional Information :
(i) Rs. 25,000, 12% debentures were issued on 31.3.2016.
(ii) During the year a piece of machinery costing Rs. 20,000, on
which accumulated depreciation was Rs. 10,000, was sold at a loss
of Rs. 2,500.
Prepare Cash Flow Statement
2018 Delhi
7 State the primary objective of preparing a Cash Flow Statement 1
8 ‘Interest received and paid’ is considered as which type of activity 1
by a finance company while preparing a Cash Flow Statement ?
9 From the following Balance Sheet of JY Ltd. as at 31st March 2017, 6
prepare a Cash Flow Statement :
Balance Sheet of JY Ltd. as at 31.3.2017
 Additional Information :
Rs. 1,00,000, 10% debentures were issued on 31.3.2017.
2019 Delhi
10 How you will treat commission received , while preparing cash 1
flow statement
11 How you will treat Dividend , while preparing cash flow statement 1
12 6
 2020 Delhi
13 Give an example of an activity which is always financing with 1
regards to the Cash Flow Statement.
14 On 1.10.2018, Micro Ltd. issued 20,000, 8% debentures of Rs. 100 1
each and paid interest of Rs. 80,000 on these debentures on 31st
March, 2019.
 Calculate the cash flow from financing activities for the period
ending 31st March, 2019.
15 6