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Cash Flow Statement 4.7
Illustration 4. From the following information, calculate Cash Flow from Operating Activities
and Investing Activities:

Particulars 31st March, 31st March,
2023 (`) 2024 (`)
Surplus, i.e., Balance in Statement of Profit & Loss 50,000 2,00,000
Provision for Tax 15,000 15,000
Trade Payables 20,000 75,000
Current Assets (Inventories and Trade Receivables) 2,30,000 2,60,000
Property, Plant and Equipment 4,25,000 4,66,000
Accumulated Depreciation 2,12,500 2,20,000
Additional Information:
1. Tax paid during the year ` 15,000.
2. A machine costing ` 40,000 (Book value ` 10,000) was sold at a gain (profit) of ` 4,000.
Solution:
CASH FLOW FROM OPERATING ACTIVITIES AND INVESTING ACTIVITIES
Particulars `
(A) Cash Flow from Operating Activities
Net Profit before Tax and Extraordinary Items (WN 1) 1,65,000
Add: Depreciation (WN 3) 37,500
Less: Gain (Profit) on Sale of Machinery (4,000)
Operating Profit before Working Capital changes 1,98,500
Less: Increase in Current Assets (30,000)
Add: Increase in Trade Payable 55,000 25,000
2,23,500
Less: Tax Paid 15,000
Cash Flow from Operating Activities 2,08,500
(B) Cash Flow from Investing Activities
Sale of Machinery 14,000
Purchase of Property, Plant and Equipment (WN 2) (81,000)
Cash Used in Investing Activities (67,000)

Working Notes:
1. Calculation of Net Profit before Tax and Extraordinary Items: `
Closing Surplus, i.e., Balance in Statement of Profit & Loss 2,00,000
Less: Opening Surplus, i.e., Balance in Statement of Profit & Loss 50,000
1,50,000
Add: Provision for Tax made during the Current Year 15,000
Net Profit before Tax and Extraordinary Items 1,65,000

2. Dr. PROPERTY, PLANT AND EQUIPMENT ACCOUNT Cr.
Particulars ` Particulars `
To Balance b/d 4,25,000 By Bank A/c (Sale) 14,000
To Gain (Profit) on Sale of Asset A/c 4,000 By Accumulated Depreciation A/c 30,000
(Statement of Profit & Loss) (Depreciation on Sold Machine)
To Bank A/c (Purchase) (Bal. Fig.) 81,000 By Balance c/d 4,66,000
5,10,000 5,10,000