Page 88 - afs12

4.6 Analysis of Financial Statements—CBSE XII
Solution:
Net Profit before Tax and Extraordinary Items: `
Surplus, i.e., Balance in Statement of Profit & Loss (Closing) 2,10,000
Less: Surplus, i.e., Balance in Statement of Profit & Loss (Opening) 1,40,000
70,000
Add: Transfer to General Reserve (` 1,20,000 – ` 80,000) 40,000
Dividend (Previous Year) Paid during the year 90,000
Provision for Tax (Current Year) 70,000
Net Profit before Tax and Extraordinary Items 2,70,000
Illustration 3. Calculate Cash Flow from Operating Activities from the following information:
`
Net Profit (After Provision for Tax ` 3,06,000) 14,06,000
Proposed Dividend 2,42,000
Above Net Profit is determined after following Credit and Debits:
Credits:
(i) Compensation for Earthquake Disaster 1,50,000
(ii) (Gain) Profit on Sale of Machinery 35,000
(iii) Dividend Received on Investments 30,000
Debits:
(i) Depreciation 2,80,000
(ii) Loss on Sale of Investments 60,000
Decrease or Increase in Current Assets and Current Liabilities is as follows:
Decrease in Current Assets (Other than Cash and Cash Equivalents) 20,000
Increase in Current Liabilities (Other than Bank Overdraft and Cash Credit) 3,02,000
Increase in Current Assets (Other than Cash and Cash Equivalents) 6,00,000
Decrease in Current Liabilities (Other than Bank Overdraft and Cash Credit) 1,28,000
Other Information:
Income Tax Paid 2,36,000
Refund of Income Tax Received 6,000
Solution: CASH FLOW FROM OPERATING ACTIVITIES
Particulars `

Net Profit After Tax 14,06,000
Add: Provision for Tax 3,06,000
17,12,000
Less: Refund of Income Tax 6,000
Extraordinary Items: Compensation for Earthquake Disaster 1,50,000 1,56,000
Net Profit before Tax and Extraordinary Items 15,56,000
Add: Non-Cash/Non-Operating Items:
Depreciation 2,80,000
Loss on Sale of Investments 60,000
Less: Non-Cash/Non-Operating Items:
Gain (Profit) on Sale of Machinery (35,000)
Dividend Received on Investments (30,000)
Operating Profit before Working Capital Changes 18,31,000
Add: Decrease in Current Assets 20,000
Increase in Current Liabilities 3,02,000
21,53,000
Less: Increase in Current Assets (6,00,000)
Decrease in Current Liabilities (1,28,000) (7,28,000)
Cash Flow from Operating Activities before Tax and Extraordinary Items 14,25,000
Less: Income Tax Paid (Net of Refund) (2,30,000)
Cash Flow from Operating Activities after Tax 11,95,000
Add: Extraordinary Item: Compensation for Earthquake Disaster 1,50,000
Cash Flow from Operating Activities 13,45,000

Note: Proposed Dividend is not taken as the Net Profit given is after Provision for Tax.