1 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Cash Flow Statement Proforma and Problems

2 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Introduction Cash Flow format Cash Flow Problems

3 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Cash Generated from Operations Retained Earning XX DividendXX Net Profit After Tax XX Add: Provision for Tax XX Net Profit Before Tax XX Add: Non-cash Expenses DepreciationXX Amortisation (Goodwill w/o) XX

4 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Adjust: Non-operating items XX Loss on sale of Asset/Investment XX Interest expenses XX Interest/ Dividend Income (XX) Profit on sale of Asset/ Investment (XX) Funds from Operations XX

5 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Adjust: Working Capital Items XX Decrease in Current Asset XX Increase in Current Liabilities XX Increase in Current Asset (XX) Decrease in Current Liabilities (XX) Cash generated from operation XX Income Tax Paid (XX) Cash flow from operating activities XX

6 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Cash Flow from Investing Activities Purchase of Assets / Investment (XX) Sale of Assets / Investment XX Interest / Dividend received XX Investment in joint venture (XX) Cash flows from investing activities XX

7 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Cash Flow from Financing Activities Issue of shares/ debentures for cash XX Redemption of Preference shares/ debentures (XX) Interest / Dividend paid (XX) Proceeds from borrowings XX Repayment of loan (XX) Cash flows from financing activities XX

8 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Cash Flow Statement 1. Cash Flow from Operating Activities XX 2. Cash Flow from Investing Activities XX 3. Cash Flow from Financing Activities XX Net Increase / decrease in cash (1+2+3) XX Cash & Cash Equivalents at the beginning XX Cash & Cash Equivalents at the end XX

9 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Cash & Cash Equivalents at Beginning atEnd CashXXXX BankXXXX Short Term Investment XXXX TotalXXXX

10 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Exercise 1. Prepare cash flow statement from the following details of the Narendra Ltd. Prepare cash flow statement from the following details of the Narendra Ltd. Profit and Loss A/c for the year ending 31 March 2010 is as follows Sales Interest15000

11 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Total Income Purchase70000 Wages28000 Interest14000 Depreciation9000 Office Exp Goodwill written off Tax37000 Dividend3000 Net profit 13000

12 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Liabilities Share Capital General Reserve Profit and Loss A/c Debentures Creditors Proposed Dividend Balance Sheet of the Narendra Ltd

13 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Assets Land Fixed Assets Investment Sundry Debtors Bank Goodwill

14 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Cash Flow statement Retained earnings Dividend3000 Profit as per Profit & loss A/c Depreciation9000 Goodwill written off Interest Expenses Income Tax Interest Income (15000) Funds from operations 72000

15 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Add: Increase in creditors Less: Increase in Debtors (5000) Cash generated from operation Income Tax Paid (37000) Net Cash flow from operating activities Cash Flow from Investing Activities Purchase of Investment (52000) Interest Income Net cash flows from investing activities (37000)

16 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Cash Flow from Financing Activities Issue of shares Dividend(2000) Redemption of Debentures (29000) Interest paid (14000) Net cash flows from Financing activities (15000 ) Net decrease in cash (2000) Cash and Cash Equivalents at the beginning 5000 Cash and Cash Equivalents at the end 3000

17 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Cash & Cash Equivalents at Beginning at End Bank Total

18 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Exercise 2. Prepare cash flow statement from the following details of the Keshav Ltd. Prepare cash flow statement from the following details of the Keshav Ltd. Profit and Loss A/c for the year ending 31 March 2010 is as follows Sales90000 Profit on sale of investment (Sale Value: Rs. 4000) 2000 Closing Stock 6000

19 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Total Income98000 Purchase40000 Manufacturing Expenses Wages1400 Depreciation5000 General Exp 8000 Discount on issue of debenture 3000 Tax6000 General Reserve 5000 Net profit 12600

20 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Liabilities Share Capital General Reserve Profit and Loss A/c Debentures Creditors Provision for Tax Keshav Balance Sheet of the Keshav Ltd

21 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Assets Fixed Assets Machinery Investment Sundry Debtors Bank Goodwill

22 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Cash Flow statement Retained Earning Transfer General Reserve 5000 Net Profit as per Profit and Loss A/c Depreciation5000 Discount on issue of Debentures 3000 Income Tax 6000 Profit on sale of investment (2000)

23 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Funds From operation Decrease in Sundry Debtors 700 Increase in Bills Payable 5000 Increase in Sundry Creditors (6000) Cash generated from operation Income Tax Paid (6000) Net Cash flow from operating activities Cash Flow from Investing Activities Sale of Investment 4000

24 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Purchases of Machinery (39600) Net cash flows from investing activities (35600 ) Cash Flow from Financing Activities Issue of Debentures Net increase in cash 1700 Cash & Cash Equivalents at the beginning 5000 Cash & Cash Equivalents at the end 6700

25 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Cash & Cash Equivalents at Beginning at End Bank Total Balance B/d 21000Depreciation5000 Cash/Bank A/c (purchases) Balance C/d Machinery A/c