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4.26 Analysis of Financial Statements—CBSE XII
Solution: CASH FLOW STATEMENT
for the year ended 31st March, 2024
Particulars `
(A) Cash Flow from Operating Activities
Net Loss as per Surplus, i.e., Balance in Statement of Profit & Loss (` 1,20,000 – ` 1,70,000) (50,000)
Add: Dividend paid 80,000
Less: Transfer from Reserve (20,000)
Net Profit before Tax and Extraordinary Items 10,000
Add: Debentures Interest (` 2,00,000 × 10/100) 20,000
Loss on Sale of Machinery 30,000
Operating Profit before Working Capital Changes 60,000
Adjustment for Working Capital Changes:
Less: Increase in Current Assets:
Inventories 40,000
Trade Receivables 50,000 90,000
Cash Used in Operating Activities (30,000)
(B) Cash Flow from Investing Activities
Sale of Machinery 50,000
Purchases of Machinery (WN 2) (2,80,000)
Cash Used in Investing Activities (2,30,000)
(C) Cash Flow from Financing Activities
Issue of Equity Share Capital 3,50,000
Issue of Preference Share Capital 40,000
Redemption of Debentures (20,000)
Dividend Paid (80,000)
Interest on Debentures Paid (20,000)
Cash Flow from Financing Activities 2,70,000
(D) Net Increase in Cash and Cash Equivalents (A + B + C) 10,000
Add: Cash and Cash Equivalents in the beginning of the year 50,000
(E) Cash and Cash Equivalents at the end of the year 60,000

Working Notes:
1. It is assumed that debentures had been redeemed at the end of the year.

2. Dr. MACHINERY ACCOUNT Cr.
Particulars ` Particulars `
To Balance b/d 5,00,000 By Bank A/c (Sale) 50,000
To Bank A/c (Purchases) 2,80,000 By Loss on Sale of Machinery A/c 30,000
(Balancing Figure) (Statement of Profit & Loss)
By Balance c/d 7,00,000
7,80,000 7,80,000

3. Share Issue Expenses have been adjusted from Securities Premium as per Section 52(2) of the Companies Act, 2013.
4. It is assumed that Dividend paid includes dividend on equity as well as Preference Shares.