The following information was provided by PQR Ltd. for the year ended 31st March, 2024 : (1) Gross Profit Ratio was 25% for the year, which amounts…

CA Intermediate · Advanced Accounting · MTP · September 2024
The following information was provided by PQR Ltd. for the year ended 31st March, 2024 : (1) Gross Profit Ratio was 25% for the year, which amounts to 3,75,000. (2) Company sold goods for cash only. (3) Opening inventory was lesser than closing inventory by - 25,000. (4) Wages paid during the year 5,55,000. (5) Office expenses paid during the year 35,000. (6) Selling expenses paid during the year 15,000. (7) Dividend paid during the year 40,000. (8) Bank Loan repaid during the year 2,05,000 (included interest 5,000) (9) Trade Payables on 31st March, 2023 were - 50,000 and on 31st March, 2024 were - 35,000. (10) Amount paid to Trade payables during the year 6,10,000 (11) Income Tax paid during the year amounts to 55,000 (Provision for taxation as on 31st March, 202430,000)· (12) Investments of 8,20,000 sold during the year at a profit of 20,000. (13) Depreciation on furniture amounts to 40,000. (14) Depreciation on other PPE amounts to 20,000. (15) Plant and Machinery purchased on 15th November, 2023 for 3,50,000. (16) On 31st March, 20242,00,000, 7% Debentures were issued at face value in an exchange for a plant. (17) Cash and Cash equivalents on 31st March, 20232,25,000. (i) Prepare cash flow statement for the year ended 31st March, 2024, using direct method. (ii) Calculate cash flow from operating activities, using indirect method.

Suggested Answer and Working Notes:

PQR Ltd. Cash Flow Statement for the year ended 31st March, 2024 (Using direct method) Particulars ₹ Cash flows from Operating Activities Cash sales (₹ 3,75,000/25%) 15,00,000 Less: Cash payments for trade payables (6,10,000) Wages Paid (5,55,000) Office and selling expenses (₹ (35,000 + 15,000)) (50,000) (12,15,000) Cash generated from operations before taxes 2,85,000 Income tax paid (55,000) Net cash generated from operating activities (A) 2,30,000 Cash flows from Investing activities Sale of investments (8,20,000 + 20,000) 8,40,000 Payments for purchase of Plant & machinery (3,50,000) Net cash used in investing activities (B) 4,90,000 Cash flows from financing activities Bank loan repayment (including interest) (2,05,000) Dividend paid (40,000) Net cash used in financing activities (C) (2,45,000) Net increase in cash (A+B+C) 4,75,000 Cash and cash equivalents at beginning of the period 2,25,000 Cash and cash equivalents at end of the period 7,00,000 (ii) 'Cash Flow from Operating Activities' by indirect method ₹ Net Profit for the year before tax and extraordinary items 2,80,000 Add: Non-Cash and Non-Operating Expenses: Depreciation 60,000 Interest Paid 5,000 Less: Non-Cash and Non-Operating Incomes: Profit on Sale of Investments (20,000) Net Profit after Adjustment for Non-Cash Items 3,25,000 Less: Decrease in trade payables 15,000 Increase in inventory 25,000 (40,000) Cash generated from operations before taxes 2,85,000 Working Note: Calculation of net profit earned during the year Particulars ₹ Gross profit 3,75,000 Less: Office expenses, selling expenses 50,000 Depreciation 60,000 Interest paid 5,000 (1,15,000) 2,60,000 Add: Profit on sale of investments 20,000 Net profit before tax 2,80,000

Topics: AS 3

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