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

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Presentation on theme: "1 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Cash Flow Statement Proforma and Problems."— Presentation transcript:

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

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

3 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 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 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 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 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 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 9 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Cash & Cash Equivalents at Beginning atEnd CashXXXX BankXXXX Short Term Investment XXXX TotalXXXX

10 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 Sales200000 Interest15000

11 11 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Total Income 215000 Purchase70000 Wages28000 Interest14000 Depreciation9000 Office Exp 30000 Goodwill written off 11000 Tax37000 Dividend3000 Net profit 13000

12 12 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai 20092010 Liabilities Share Capital 160000190000 General Reserve 5000050000 Profit and Loss A/c 900022000 Debentures8000051000 Creditors2000040000 Proposed Dividend 20003000 321000356000 Balance Sheet of the Narendra Ltd

13 13 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai 20092010 Assets Land7500075000 Fixed Assets 140000131000 Investment59000111000 Sundry Debtors 1200017000 Bank50003000 Goodwill3000019000 321000356000

14 14 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Cash Flow statement Retained earnings 13000 Dividend3000 Profit as per Profit & loss A/c 16000 Depreciation9000 Goodwill written off 11000 Interest Expenses 14000 Income Tax 37000 Interest Income (15000) Funds from operations 72000

15 15 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Add: Increase in creditors 20000 Less: Increase in Debtors (5000) Cash generated from operation 87000 Income Tax Paid (37000) Net Cash flow from operating activities 50000 Cash Flow from Investing Activities Purchase of Investment (52000) Interest Income 15000 Net cash flows from investing activities (37000)

16 16 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Cash Flow from Financing Activities Issue of shares 30000 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 17 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Cash & Cash Equivalents at Beginning at End Bank50003000 Total50003000

18 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 19 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Total Income98000 Purchase40000 Manufacturing Expenses 17000 Wages1400 Depreciation5000 General Exp 8000 Discount on issue of debenture 3000 Tax6000 General Reserve 5000 Net profit 12600

20 20 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai 20092010 Liabilities Share Capital 5000050000 General Reserve 1000015000 Profit and Loss A/c 800020600 Debentures1000027000 Creditors1600010000 Provision for Tax 700012000 101000134600 Keshav Balance Sheet of the Keshav Ltd

21 21 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai 20092010 Assets Fixed Assets 4000040000 Machinery2100055600 Investment50003000 Sundry Debtors 1500014300 Bank50006700 Goodwill1500015000 101000134600

22 22 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Cash Flow statement Retained Earning 12600 Transfer General Reserve 5000 Net Profit as per Profit and Loss A/c 17600 Depreciation5000 Discount on issue of Debentures 3000 Income Tax 6000 Profit on sale of investment (2000)

23 23 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Funds From operation 29600 Decrease in Sundry Debtors 700 Increase in Bills Payable 5000 Increase in Sundry Creditors (6000) Cash generated from operation 29300 Income Tax Paid (6000) Net Cash flow from operating activities 23300 Cash Flow from Investing Activities Sale of Investment 4000

24 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 14000 Net increase in cash 1700 Cash & Cash Equivalents at the beginning 5000 Cash & Cash Equivalents at the end 6700

25 25 Management Accounting - Dr. Varadraj Bapat, IIT Mumbai Cash & Cash Equivalents at Beginning at End Bank50006700 Total50006700 Balance B/d 21000Depreciation5000 Cash/Bank A/c (purchases) 39600 Balance C/d 55600 60600 Machinery A/c

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