A Ltd., whose functional currency is Indian Rupee, had a balance of cash and cash equivalents of 2,00,000, but no trade receivables or trade…

An exchange gain on retranslation of the trade payable of 5,00,000 is recorded in profit or loss [€ 1,00,000 x (105 – 100) = 5,00,000]. A further exchange gain of 3,00,000 regarding the trade receivable is recorded in the statement of profit or loss [$ 1,50,000 x (87 – 85) = 3,00,000]. The loan was retranslated at 31st March, 20X3 @100 = 1,00,00,000, with a further exchange gain of 5,00,000 recorded in the statement of profit or loss. A Ltd. therefore records a cumulative exchange gain of 13,00,000 (5,00,000 + 3,00,000 + 5,00,000) in arriving at its profit for the year. In addition, A Ltd. records a gross profit of 22,50,000 (₹ 1,05,00,000 - 1,27,50,000) on the sale of the goods. Statement of Cash Flows Cash flows from operating activities (Indirect method) Particulars Amount (₹) Profit before taxation (22,50,000 + 13,00,000) 35,50,000 Adjustment for unrealised exchange gains/losses: Foreign exchange gain on long term loan (5,00,000) Decrease in trade payables (5,00,000) Operating cash flow before working capital changes 25,50,000 Changes in working capital (Due to increase in trade payables) 1,05,00,000 Net cash inflow from operating activities 1,30,50,000 Cash inflow from financing activity 1,05,00,000 Net increase in cash and cash equivalents 2,35,50,000 Cash and cash equivalents at the beginning of the period 2,00,000 Cash and cash equivalents at the end of the period (W.N.) 2,37,50,000 Note: Taxation is ignored. Working Note: Closing Cash and Cash Equivalents Particulars Amount (₹) Opening balance of cash and cash equivalents 2,00,000 Add: Received from settlement of Trade Receivables 1,30,50,000 Add: Received from conversion of loan 1,05,00,000 2,37,50,000