Doubts

Mevo Ltd., a financial enterprise had advanced a loan of Rs. 3,00.000, invested Rs. 6,00.000 in shares of the other companies and purchased machinery for Rs. 9,00,000. It received dividend of Rs. 70,000 on investment in shares. The company sold an old machine of the book value of Rs. 79,000 at a loss of Rs. 10,000. Compute Cash flows from Investing Activities. (C.B.S.E. 2019.M.P.)

SOLUTION Cash Flows from Investing Activities ParticularsDetailsAmount (Rs.)Sale of Machinery69,000 Purchase of Machinery(9,00,000) Net Cash used in Investing Activities(8,31,000)(8,31,000)

Continue ReadingMevo Ltd., a financial enterprise had advanced a loan of Rs. 3,00.000, invested Rs. 6,00.000 in shares of the other companies and purchased machinery for Rs. 9,00,000. It received dividend of Rs. 70,000 on investment in shares. The company sold an old machine of the book value of Rs. 79,000 at a loss of Rs. 10,000. Compute Cash flows from Investing Activities. (C.B.S.E. 2019.M.P.)

P P Limited is Share Broker Company. G G Limited is engaged in manufacturing of packaged food. P P Limited purchased 5,000 equity shares of Rs. 100 each of Savita Limited. G G Limited also purchased 10,000 equity shares of Rs. 100 each of Savita Limited. For the purpose of preparing their respective Cash Flow Statements, under which category of activities the purchase of shares will be classified by P P Limited and G G Limited? (C.B.S.E. Sample Paper, 2018)

SOLUTION For P P Limited: Operating Activity.For G G Limited: Investing Activity.

Continue ReadingP P Limited is Share Broker Company. G G Limited is engaged in manufacturing of packaged food. P P Limited purchased 5,000 equity shares of Rs. 100 each of Savita Limited. G G Limited also purchased 10,000 equity shares of Rs. 100 each of Savita Limited. For the purpose of preparing their respective Cash Flow Statements, under which category of activities the purchase of shares will be classified by P P Limited and G G Limited? (C.B.S.E. Sample Paper, 2018)

State whether the following will increase, decrease or have no effect cash flow from operating activities while preparing ‘Cash Flow Statement’: (i) Decrease in outstanding employees benefits expenses by Rs. 3,000; (ii) Increase in prepaid insurance by Rs. 2,000. (C.B.S.E. 2017)

SOLUTION (i) It will result in decrease in Cash Flow from Operating Activities.(ii) It will also result in decrease in Cash Flow from Operating Activities.

Continue ReadingState whether the following will increase, decrease or have no effect cash flow from operating activities while preparing ‘Cash Flow Statement’: (i) Decrease in outstanding employees benefits expenses by Rs. 3,000; (ii) Increase in prepaid insurance by Rs. 2,000. (C.B.S.E. 2017)

The Patents of X Ltd. increased from Rs. 3,00,000 in 2013-14 to Rs. 3,50,000 in 2014-15. What will be its treatment while preparing Cash Flow Statement for the year ended 31st March 2015?

SOLUTION It will be taken as purchase of Patents of Rs. 50,000 and will be shown under Cash Flow from Investing Activities as an outflow of cash.

Continue ReadingThe Patents of X Ltd. increased from Rs. 3,00,000 in 2013-14 to Rs. 3,50,000 in 2014-15. What will be its treatment while preparing Cash Flow Statement for the year ended 31st March 2015?

 ‘An enterprise may hold securities and loans for dealing or trading purposes in which case they are similar to inventory acquired specifically for resale’. Is the statement correct? Cash flows from such activities will be classified under which type of activity while preparing Cash Flow Statement? (C.B.S.E. 2016)

SOLUTION Yes, the statement is correct in case of financial enterprises. Cash Flow from such activity will be classified as Operating Activity.

Continue Reading ‘An enterprise may hold securities and loans for dealing or trading purposes in which case they are similar to inventory acquired specifically for resale’. Is the statement correct? Cash flows from such activities will be classified under which type of activity while preparing Cash Flow Statement? (C.B.S.E. 2016)