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Cash Flow Statement 4.17

Adjustment for Change in Current Assets and Current Liabilities:
Decrease in Trade Payable (2,000)
Increase in Inventories (12,000)
Increase in Trade Receivables (19,400)
Increase in Prepaid Expenses (400)
Cash Generated from Operating Activities before Tax 9,400
Less: Tax Paid (WN 2) 7,000
Cash Flow from Operating Activities 2,400
(B) Cash Flow from Investing Activities
Purchase of Machinery (WN 3) (18,000)
Sale of Machinery (WN 3) 10,000
Cash Used in Investing Activities (8,000)
(C) Cash Flow from Financing Activities
Proceeds from Issue of Equity Share Capital 25,000
Redemption of 12% Preference Shares (5,000)
Proceeds from Issue of 15% Debentures 2,000
Interest on Debentures (1,800)
Final Dividend Paid during the year (10,000)
Cash Flow from Financing Activities 10,200
(D) Net Increase in Cash and Cash Equivalents (A + B + C) 4,600
Add: Opening Balance of Cash and Cash Equivalents 2,400
(E) Closing Balance of Cash and Cash Equivalents 7,000

Working Notes:
1. Calculation of Net Profit before Tax and Extraordinary Items: `
Difference between Closing and Opening balance of Surplus, i.e.,
Balance in Statement of Profit & Loss 400
Add: Transfer to General Reserve 3,600
Proposed Dividend (Previous Year) paid during the year 10,000
Provision for Tax 9,400 23,000
Net Profit before Tax and Extraordinary Items 23,400

2. Dr. PROVISION FOR TAX ACCOUNT Cr.
Particulars ` Particulars `
To Bank A/c (Tax Paid) 7,000 By Balance b/d 6,000
(Bal. Fig.) By Statement of Profit & Loss (Provision Made) 9,400
To Balance c/d 8,400
15,400 15,400

3. Dr. MACHINERY ACCOUNT Cr.
Particulars ` Particulars `
To Balance b/d 82,000 By Bank A/c (Sale) 10,000
To Bank A/c (Bal. Fig.) 18,000 By Accumulated Depreciation A/c 6,000
By Loss on Sale of Asset A/c 4,000
(Statement of Profit & Loss)
By Balance c/d 80,000
1,00,000 1,00,000