Question
From the balance Sheet of Mohan Ltd. Prepare a Cash Flow Statement
Liabilities 2006 2007 Assets 2006 2007 Equity share capital
200,000.00
300,000.00 Fixed Assets
400,000.00
600,000.00 Profit & Loss
160,000.00
200,000.00 Stock
130,000.00
150,000.00 Bank Loan
100,000.00
80,000.00 Debtors
100,000.00
50,000.00 Acc. Depreciation
80,000.00
100,000.00 Bills Receivable
20,000.00
30,000.00 Creditor
140,000.00
120,000.00 Bank
90,000.00
30,000.00 Proposed Dividend
60,000.00
70,000.00
740,000.00
870,000.00
740,000.00
870,000.00
Explanation / Answer
Note: Here in 2007 assets total given as $870,000 but its actual total is $860,000.
Assumptions: 1. I treated bank balance of 2007 as$40,000 (Due to difference in totals), 2. Current year income is calculated as: Total profit & Loss account balance of 2007 - Profit & Loss account balance of 2006 year. 3. To calculating cash flow from operating activities: Increased current assets has to deduct, Decreased current assets has to add, Increased current liabilities has to add, Decreased current liabilities has to deduct. 4. All amounts are treated as $.
Cash Flow Statement of Mohan Ltd. (Indirect Method): Particulars Amount Amount Cash Flow From Operating Activities: Profit and loss of 2007 (200,000 - 160,000) $40,000
Add: Depreciation (100,000 - 80,000) $20,000
Add: Collections from debtors (100,000 - 50,000) $50,000
Add: Increase in proposed dividend (70,000 - 60,000) $10,000
Less: Stock purchases (150,000 - 130,000) ($20,000)
Less: Increase in bills receivable (30,000 - 20,000) ($10,000)
Less: Decrease in creditors (140,000 - 120,000) ($20,000)
Net Cash Flow From Operating Activities: $70,000 Cash Flow From Investing Activities: Less: Purchase of fixed assets (600,000 - 400,000) ($200,000)
Net Cash Flow From Investing Activities: ($130,000) Cash Flow From Financing Activities: Add: Issue of equity shares (300,000 - 200,000) $100,000
Less: Repayment of bank loan (100,000 - 80,000) ($20,000) $80,000
Net Cash Flow From Financing Activities: ($50,000) Add: Opening Bank Balance $90,000
Ending Bank Balance: $40,000 Thank you.....
Particulars Amount Amount Cash Flow From Operating Activities: Profit and loss of 2007 (200,000 - 160,000) $40,000
Add: Depreciation (100,000 - 80,000) $20,000
Add: Collections from debtors (100,000 - 50,000) $50,000
Add: Increase in proposed dividend (70,000 - 60,000) $10,000
Less: Stock purchases (150,000 - 130,000) ($20,000)
Less: Increase in bills receivable (30,000 - 20,000) ($10,000)
Less: Decrease in creditors (140,000 - 120,000) ($20,000)
Net Cash Flow From Operating Activities: $70,000 Cash Flow From Investing Activities: Less: Purchase of fixed assets (600,000 - 400,000) ($200,000)
Net Cash Flow From Investing Activities: ($130,000) Cash Flow From Financing Activities: Add: Issue of equity shares (300,000 - 200,000) $100,000
Less: Repayment of bank loan (100,000 - 80,000) ($20,000) $80,000
Net Cash Flow From Financing Activities: ($50,000) Add: Opening Bank Balance $90,000
Ending Bank Balance: $40,000