Fma11
Upcoming SlideShare
Loading in...5
×
 

Fma11

on

  • 1,210 views

 

Statistics

Views

Total Views
1,210
Views on SlideShare
1,210
Embed Views
0

Actions

Likes
1
Downloads
61
Comments
0

0 Embeds 0

No embeds

Accessibility

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Fma11 Fma11 Presentation Transcript

    • By Narain narain@fms.eduCASH FLOW STATEMENT narain@fms.edu
    • Cash Flow Statement• Profit ≠ Cash • As P & L a/c is prepared on Accrual basis• The term cash mean & include – 1. Cash in Hand 2. Demand deposit with banks p 3. Cash Equivalents narain@fms.edu
    • Cash Flow Statement• AS-3 & IAS-7• CFS reflects the movement of cash from three types of Activities of the firm – 1. Operating Activities 2. 2 Investing Activities 3. Financing Activities narain@fms.edu
    • ExerciseIdentify the following transactions with the three activities: 1 Borrowed from a bank and purchased land 4,00,000 2 Sold investment securities 7,00,000 3 Paid dividends 3,00,000 4 Issued 500 equity shares 3,50,000 3 50 000 5 Purchased machinery and equipment 1,75,000 6 Bank loan paid 6,50,000 7 Received accounts receivable outstanding 1,00,000 8 Accounts payable increased narain@fms.edu 1,90,000
    • Preparation of CFS• Direct Method • Comparatively more useful • Disclose gross receipts & gross payments• I di t Method Indirect M th d • Profit & Loss a/c is reconciled for the effects of transaction of non – cash nature nat re narain@fms.edu
    • Format: Direct Method Statement of Cash Flows (Direct Method ) …..Company Name For the year ended….Cash flows from operating activitiesCash received from customersInterest receivedCash paid for merchandiseCash paid for Income taxesNet cash flow from operating activities XXX (A)Cash flows from investing activitiesPurchase of marketable securitiesProceeds from sale of marketable securitiesCash paid for purchase of plant assetsLoan made to borrowersCollection on loansCash received from sale of plant assets XXX (B)Net cash from investing activitiesCash flows from financing activitiesProceeds from borrowingsCash paid to settle short-term debts XXX (C)Cash paid to retire long term debtCash received from issuing stockCash paid for dividendsNet cash provided by financing activities A+B+CNet increase (decrease) in cash XXXCash and cash equivalent at the beginning of the yearCash and cash equivalents at the end of the year narain@fms.edu XXX
    • Format: Indirect MethodNet profit before tax and extraordinary items(+) Depreciation(+) Amortization of intangible assets(+) Preliminary expenses written off(-) Gain on sale of fixed assets / investments(+) Loss on sale of fixed assets / investmentsOperating profit before working capital changes(+) Decrease in current assets( -) Increase in current assets(+) Increase in current liability(-) Decrease in current liability(-) Income tax paid(±) Extraordinary items ANET CASH FLOW PROVIDED BY (or USED IN ) OPERATING ACTIVITIESCash flows from investing activities(+) Sale of assets / investments(-) Purchase of assets / investmentsNET CASH FLOW PROVIDED BY (or USED IN ) INVESTING ACTIVITIES BCash flows from financing activities(+) Proceeds f P d from long t l term b borrowings i(+) Proceeds from issue of share capital(-) Dividends paid(-) Interest paidNET CASH FLOW FROM FINANCING ACTIVITIES CNet increase / decrease in cash and cash equivalents A+B+C(+) Cash and cash equivalents in the beginning XXXCash and cash equivalents at the end narain@fms.edu XXXXX
    • CFS: Indirect Performa• Classify the extraordinary items based on the Activities• Tax flow also to be classified based on the Activities• D not i l d the non – cash transactions Do include h h i • Generally put as note to the statement narain@fms.edu
    • Non-Cash items• Purchase of long – term assets by issuing equity share capital. q y p• Retirement of bonds by issuing equity share p capital.• Issue of debt to purchase fixed assets.• Exchange of non cash assets for other non cash assets.• Conversion of preferred share to equity share narain@fms.edu
    • Steps to Prepare CFS• Information needed for its preparation – 1. Comparative Balance Sheet 2. Income Statement 3. Additional information• Steps to prepare CFS • Analyse the Non – Current Accounts • Analyse the profit & loss figure • Chart the cash flow statement narain@fms.edu
    • Q1. Use the following information about X Ltd. to prepare the cash flow statement for the company: Comparative balance sheet of X Ltd. As on 31st March of... Liabilities 2009 2008 Assets 2009 2008 Equity Share Capital 60,000 50,000 Land 10,000 10,000 Profit & Loss A/c 5,000 4,000 Furniture 17,000 11,000 Creditors 4,000 2,500 Vehicles 12,500 8,000 Provision for Taxation 1,500 1,000 Short-term Investments 2,000 1,000 Proposed Dividend 2,000 1,000 Stock 17,000 14,000 Debtors 8,000 6,000 Bank & Cash 6,000 8,500 72,500 58,500 72,500 58,500 The company also has the Profit and Loss Account as: Profit and Loss Account For the year ending 31st March 2009 Profit before tax 4,500 Less: Tax (1,500) Profit after tax 3,000 Less: Proposed dividend (2,000) Profit retained 1,000 The following additional information is also provided: Furniture Vehicles Depreciation for the year 1,000 2,500 Disposals Proceeds from disposal 1,700 Written Down Value (1,000) Profit on disposal 700Q2. The following is the Balance sheet of MN Ltd. Comparative balance sheet of MN Ltd. As on 31st March of... (‘000) Liabilities 2008 2009 Assets 2008 2009 Equity capital 60,00 60,00 Land & Buildings 14,20 17,50 General Reserve 30,90 34,10 Plant & Machinery 31,00 37,50 Profit & Loss Account 1,50 1,80 Furniture & Fixtures 8,40 9,80 9% Debentures – 15,00 Investment 50 60 Sundry Creditors 1,30 3,70 Stock 3,40 4,20 Proposed Dividends 1,80 Debtors 30,00 36,00 Cash and Bank 8,00 9,00 95,50 1,14,60 95,50 1,14,60Additional information for the year ended 31 March 2009: 1. Dividend of Rs. 1,80,000 for the year ended 31 March 2008 was paid during 2009. 2. Investment costing Rs. 10,000 was sold for Rs. 12,000. 3. Depreciation on assets for the year ended 31 March 2009 was charged to Profit & Loss account as follow:
    • Land and Buildings Rs. 42,000 Plant and Machinery Rs. 4,74,000 Furniture and Fixtures Rs. 184,000 4. Sales of fixed assets: Machinery Sale value Rs. 1,00,000 (WDV Rs. 2,20,000) Furniture Sale value Rs. 30,000 (WDV Rs. 20,000) Prepare the cash flow statement of MN Ltd. for the year ended 31 March 2009.Q3. Use the following information about KM Ltd.’s Balance sheet as on 31st December 2007 and 31st December 2008 to prepare a statement of cash flows for the year ended 31st December 2008. Comparative balance sheet of KM Ltd. As on 31st December of .. (‘000) Liabilities 2007 2008 Assets 2007 2008 Share capital 8,00 10,00 Plant & Machinery 5,00 7,00 Reserve 1,50 2,00 Land & Building 4,00 6,00 Profit & loss account 60 1,00 Investments – 1,00 Debentures – 2,00 Sundry debtors 7,00 5,00 Provision for taxation 70 1,00 Stock 2,00 4,00 Proposed dividend 1,00 2,00 Cash on hand/bank 2,00 2,00 Sundry creditors 8,20 7,00 20,00 25,00 20,00 25,00The additional information relating to 2008 activities is as follows: 1. Depreciation @ 25% was charged on the opening value of Plant & Machinery. 2. During the year one old machine costing Rs. 50,000 (WDV 20,000) was sold for Rs. 35,000. 3. Rs. 50,000 was paid towards Income tax during the year. 4. Building under construction was not subject to any depreciation.Solution indications: Cash inflow from operating activities Rs. 3,10,000 Cash outflow from investing activities Rs. 6,10,000 Cash inflow from financing activities Rs. 3,00,000Q4. The following is the Balance sheet of PQ Ltd. Comparative balance sheet As on 31st March of … Liabilities 2008 2009 Assets 2008 2009 Share Capital 315,000 465,000 Plant 505,000 715,000 Reserves & Surplus 132,000 140,000 Less: Accumulated Dep. 68,000 103,000 Bonds 245,000 295,000 437,000 612,000 Current Liabilities Long Term Investments 127,000 115,000 Account Payable 43,000 50,000 Current Assets Accrued Liabilities 9,000 12,000 Inventory 110,000 144,000 Income Tax Payable 5,000 3,000 Account Receivable 55,000 47,000 Cash 15,000 46,000 Prepaid Expenses 5,000 1,000 749,000 965,000 749,000 965,000
    • The profit and loss account of the company is as follows: Profit & Loss Account for the year ending on 31st March 2009 Cost of goods sold 520,000 Sales 698,000 Gross Profit 178,000 698,000 698,000 Depreciation 37,000 Gross Profit 178,000 Administration expenses 110,000 Interest received 6,000 Interest paid 23,000 Gain on sale of Investment 12,000 Loss on sale of Plant 3,000 Income tax 7,000 Net Profit 16,000 196,000 196,000With the help of further information given below, prepare the cash flow statement of thiscompany: 1. Investment purchased for Rs. 78,000. 2. Investments costing Rs. 90,000 sold for Rs. 102,000. 3. Plant purchased for Rs. 120,000. 4. Plant costing Rs. 10,000, with accumulated depreciation of Rs. 2,000, was sold for Rs. 5,000. 5. Bonds with face value of Rs. 100,000 was issued in exchange of Plant bought on 31st Mar. 09 6. Repaid Rs. 50,000 of bonds at face value at maturity. 7. Issued 15,000 shares of Rs. 10 each. 8. Paid cash dividends Rs. 8,000.
    • Solution to Q4 Cash Flow Statement of PQ Ltd. for the year ending 31-03-2009 cash flow from operations Net profit before taxation 23,000 Adjustments for: Depreciation 37,000 Profit on sale of Investments 12,000 Loss on sale of Plant 3,000 Interest paid 23,000 Interest received 6,000 operating profit before WC changes 68,000 Decrease in account receivables 8,000 Increase in Inventories 34,000 Decrease in prepaid expenses 4,000 Increase in account payable 7,000 Increase in accrued liabilities 3,000 cash generated from operations 56,000 Income tax paid 9,000 Net cash inflow from operations 47,000 Cash flow from investing activities Sale of Plant 5,000 Purchase of Plant 120,000 Purchase of Investments 78,000 Sale of Investments 102,000 Interest received 6,000 Net cash outflow from investing activities 85,000 Cash flow from financing activities Issue of share capital 150,000 Repayment of bond 50,000 Interest paid 23,000 Dividend paid 8,000 Net cash inflow from financing activities 69,000 Net increase in cash & cash eq. 31,000 Cash & cash eq. at the beginning 15,000 Cash & cash eq. at the end 46,000