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Cash Flow Statement 4.19

5. Property, Plant and Equipment
Land and Building 3,50,000 6,50,000
Machinery 7,25,000 2,75,000
10,75,000 9,25,000
6. Intangible Assets
Brands 25,000 37,500
7. Other Current Assets
Prepaid Expenses 37,500 50,000

Additional Information:

1. During the year ` 27,500 depreciation was charged on machinery.
2. Gain on sale of Land and Building ` 50,000.
3. Interest paid ` 62,500.

Solution: ABC Ltd.
CASH FLOW STATEMENT for the year ended 31st March, 2024
Particulars ` `
(A) Cash Flow from Operating Activities
Net Profit (` 1,87,500 – ` 1,00,000) 87,500
Add: Transfer to General Reserve 37,500
Provision for Tax (Current Year) 1,25,000
Net Profit before Tax 2,50,000
Adjustment for Non-cash and Non-operating Items:
Add: Depreciation 27,500
Brands written off 12,500
Interest Paid 62,500
Less: Gain on Sale of Land and Building (50,000)
Operating Profit before Working Capital Changes 3,02,500
Add: Increase in Current Liabilities and Decrease in Current Assets:
Trade Payables 75,000
Prepaid Expenses 12,500
Less: Increase in Current Assets:
Inventories (1,12,500)
Trade Receivables (1,00,000)
Net Cash Inflow from Operating Activities before Tax 1,77,500
Less: Income Tax Paid 1,00,000
Cash Flow from Operating Activities 77,500
(B) Cash Flow from Investing Activities
Sale of Land and Building (WN 1) 3,50,000
Purchase of Machinery (WN 2) (4,77,500)
Cash Used in Investing Activities (1,27,500)
(C) Cash Flow from Financing Activities
Proceed from Bank Overdraft 30,000
Issue of Debentures 1,25,000
Payment of Cash Credit (5,000)
Interest Paid (62,500)
Cash Flow from Financing Activities 87,500
(D) Net Increase in Cash and Cash Equivalents (A + B + C) 37,500
(E) Add: Cash and Cash Equivalents at the beginning 1,00,000
(F) Cash and Cash Equivalents at the end (D + E) 1,37,500