MGT101 - Financial Accounting - I - Lecture Handout 42

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CASH FLOW STATEMENT (Continued)

Question # 1

You are given the Balance Sheet of ABC Limited as at June 30, 2001 and June 30, 2002 and its Profit and Loss Account for the year ended June 30 2002.

Required

You are required to prepare Cash Flow Statement for the given period.

ABC Ltd
Balance Sheet As At June 30 2002

2002 Rs. 2001 Rs. Rs. ‘000 Rs. ‘000 Building at Cost 181,000 140,000 Accumulated Depreciation 36,000 30,000 Written Down Value 145,000 110,000 Plant and Machinery cost 83,000 90,000 Accumulated Depreciation 36,000 35,000 Written Down Value 47,000 55,000 Total Fixed Assets at WDV 192,000 165,000 Long Term Investment 17,000 10,000 Current Assets
Debtors 30,000 21,000 Stock 25,000 40,000 Short Term Deposits 18,000 15,000 Cash and Bank 30,000 24,000 103,000 100,000

Current Liabilities
Creditors

15,000 12,000 Proposed Dividend 18,000 16,000 Tax Payable 9,000 8,000 42,000 36,000 Working Capital 61,000 64,000 Net Assets Employed 270,000 239,000

Financed By
Share Capital

180,000 160,000 Share Premium Account 17,000 12,000 General Reserve 23,000 20,000 Accumulated Profit and Loss 34,000 27,000 Share Holders’ Equity 254,000 219,000 Term Finance Certificates 16,000 20,000 Total 270,000 239,000

ABC Ltd
Profit and Loss Account For the Year Ended June 30 2002
Rs. ‘000

Sales
Cost of Sales
Gross Profit
Other Income

Less: Administrative Expenses
Director’s Remuneration
Depreciation on Building
Loss on Sale of Machinery
Other Administrative Expenses

Less: Selling Expenses
Less: Mark up on TFC

Profit for the Year Before Tax
Provision for tax
Profit after tax
Acc. Profit Brought Forward

Appropriation
Transfer to Reserve
Proposed Dividend

Accumulated Profit Carried Forward

300,000
(231,000)
69,000
4,000
73,000

4,000
6,000
2,000
12,000
24,000
10,000
2,000
36,000
37,000
9,000
28,000
27,000
55,000

3,000
18,000
21,000
34,000

Additional Information

Other income include dividend on Long Term Investment
Cost of goods sold includes depreciation for the year on machinery Rs. 5,000.
Accumulated Depreciation on the machine disposed off amounts to Rs. 4,000.

Solution

ABC Ltd
Cash Flow Statement For the Year Ended June 30 2002

Note Rs. ‘000 Net Profit Before Tax 37,000 Adjustment of Non Cash Items
Depreciation 11,000 Loss on Sale of Machinery 2,000 Markup on TFC 2,000 52,000 Less: Other Income (4,000) Operating Profit Before Working
Capital Changes 48,000 Working Capital Changes
Reduction in Stock 15,000 Increase in Creditors 3,000 Increase in Debtors (9,000) 9,000 Cash Flow from Operations 57,000 Markup on TFC Paid (2,000) Tax Paid 1 (8,000) Net Cash Flow From Operating Activities 47,000 Cash Flow From Investing Activities
Dividend Received 4,000 Payment to Acquire Investments 2 (7,000) Purchase of Fixed Assets (Building) 3 (41,000) Receipt from Sale of Assets 4 1,000 Net Cash Flow From Investing Activities (43,000) Cash Flow From Financing Activities
Issue of Ordinary Shares 20,000 Share Premium Account 5,000 Dividend Paid 5 (16,000) Repayment of TFC 6 (4,000) Net Cash Flow From Financing Activities 5,000 Net Increase / (Decrease) in Cash and
Cash Equivalents During The Year 9,000 O/B of Cash and Cash Equivalents 39,000 C/B of Cash and Cash Equivalents 48,000

Note # 1 Tax Paid

Provision for Tax Account Code --------
Particulars	Amount Dr. (Rs.)	Particulars	Amount Cr. (Rs.)
Cash Balance c/f	8,000 9,000	Bal. B/F For the year	8,000 9,000
Total	17,000	Total	17,000

Note # 2 Payments to Acquire Investments

Investment Account Code --------
Particulars	Amount Dr. (Rs.)	Particulars	Amount Cr. (Rs.)
Bal. B/F Cash	10,000 7,000	Bal. C/F	17,000
Total	17,000	Total	17,000

Note # 3 Purchases of Fixed Assets

Building Cost Account Code --------
Particulars	Amount Dr. (Rs.)	Particulars	Amount Cr. (Rs.)
Bal. B/F Cash	140,000 41,000	Bal. C/F	181,000
Total	181,000	Total	181,000

Note # 4 Sale Proceed of Machinery

Machinery at Cost Account Code --------
Particulars	Amount Dr. (Rs.)	Particulars	Amount Cr. (Rs.)
Bal. B/F	90,000	Disposal A/c Bal. C/F	7,000 83,000
Total	90,000	Total	90,000

Disposal of asset Account Code --------
Particulars	Amount Dr. (Rs.)	Particulars	Amount Cr. (Rs.)
Cost	7,000	Accumulated Dep. Loss on Sale Sale Proceed	4,000 2,000 1,000
Total	7,000	Total	7,000

Note # 5 Dividend Payable

Dividend Payable Account Code -------
Particulars	Amount Dr. (Rs.)	Particulars	Amount Cr. (Rs.)
Cash C/B	16,000 18,000	O/B For the Year	16,000 18,000
Total	34,000	Total	34,000

Note # 6 Repayment of TFC

TFC Account Account Code --------
Particulars	Amount Dr. (Rs.)	Particulars	Amount Cr. (Rs.)
Cash C/B	4,000 16,000	O/B	20,000
Total	20,000	Total	20,000