How to prepare Cash flow statement with examples?

Example 1: Prepare cash flow statement by direct method with the help of following information:

· Cash sales Rs. 6, 60, 000.

· Debtors at the beginning of the year of 2005 are Rs. 1, 20, 000 and at the end of the year is Rs. 90, 000.

· Cost of goods sold is Rs. 1, 15, 000 and Salary & wages is Rs. 98, 000.

· Machinery purchase of Rs. 4, 20, 300 and sold the old machine at Rs. 1, 32,000.

· Payment of loan amount is Rs. 1, 00, 000.

· Purchase an investment of Rs.3, 00,000.

· Cash in hand at the beginning of the year is Rs. 52, 000 and at the end of the year is Rs. 1,50, 000.

· Issue of share capital of Rs. 2, 00,000 and dividend paid at the end of 31^st March 2006 is Rs. 80, 000.

· Administrative expenses Rs. 10, 000.

Solutions:

CASH FLOW STATEMENT

for the year ended 31^st March 2006

Particulars	Amount in Rs.	Amount in Rs.
Cash flow from operating activities:
Cash receipts from customers¹	6, 90,000
Cash paid to supplier and employees²	(2, 23,000)
Net cash from operating activities		4, 67,000
Cash flow from investing activities:
Purchase of machinery	(2, 20,300)
Purchase of investment	(3, 00,000)
Sale of machinery	1, 32,000
Net cash used in investing activities		(3, 88,300)
Cash flow from financing activities:
Payment of loan	(1, 00,000)
Dividend paid	( 80, 000)
Issue of share	2, 00,000
Net cash from financing activities		20, 000
Net increase in cash and cash equivalent		98, 700
Cash and cash equivalent at the beginning of the year		52, 000
Cash and cash equivalent at the end of the year		1, 50,700

Working notes:


Cash receipts from customers¹ :
Cash sales	6, 60,000
Add: debtors at the beginning of the year	1, 20,000
Less: debtors at the end of the year	(90, 000)
	6, 90,000
Cash paid to supplier and employees²:
Cost of goods sold	1, 15,000
Salary & wages	98, 000
Administrative expenses	10, 000
	2, 23,000

Example 2: Prepare cash flow statement for the year ended 31^st March 2010 from the following:

BALANCE SHEET

· Dividend received in 2010 is Rs. 9, 000.

· Profit on sale of asset is Rs.2, 000 and transfer to reserve is Rs. 10, 000.

· Depreciation charged on machinery is Rs. 28, 000 and interest paid Rs. 12, 000.

Solutions:

CASH FLOW STATEMENT

(indirect method)

For the year ended 31^st March 2010

Particulars	Amount	Amount
Net profit before tax (85, 000 - 60,000)	25, 000
+proposed dividend	61, 800
+Provision for tax	30, 000
+Transfer to reserve	10, 000	1, 26,800
Adjustments for:
Depreciation	28, 000
Interest paid	12, 000
Dividend received	(9,000)
Profit on sale of asset	(2, 000)	29, 000
Operating profit before working capital changes		1, 55,800
Add: Increase current liabilities: creditors	15, 000
Outstanding expenses	4, 000
Add: decrease in current assets: stock	1, 200
Less: Increase in current assets: debtors	(3, 000)	17, 200
Cash generated from operating activities		1, 73,000
Payment of tax		(18, 000)
Net cash flow from operating activities		1, 55,000
Cash flows from investing activities:
Purchase of land & buildings	(30, 000)
*Purchase of machinery	(6, 000)
Purchase of goodwill	(8, 000)
Transfer to Reserve	(10, 000)
Profit on sale of asset	2, 000
Dividend received	9, 000
Purchase of investment	(10, 000)
Net cash used in investing activities		(45, 000)
Cash flows from financing activities:
Issue share capital	20, 000
Redemption of debenture	(20, 000)
Payment of loan	(9, 000)
Dividend paid	(51, 000)
Interest paid	(12, 000)
Net cash flow from financing activities		(72, 000)
Net increase in cash and cash equivalent		30,000
*Cash and cash equivalent at the beginning of the year		66,000
*Cash and cash equivalent at the end of the year		96,000

*Cash in hand +cash at bank + short investment – overdraft

Machinery A/c

Finance Numericals