Doubts

‘G Ltd.’ is carrying on a paper manufacturing business. In the current year, it purchased machinery for Rs. 30,00,000; it paid salaries of Rs. 60,000 to its employees; it required funds for expansion and therefore, issued shares of Rs. 20,00,000. It earned a profit of Rs. 9,00,000 for the current year. Find out Cash Flow from Operating Activities.

SOLUTION Cash Flow from Operating Activities = Net Profit of the Company Rs. 9,00,000.Note: Salaries of 60,000 are deducted while computing net profit.

Continue Reading‘G Ltd.’ is carrying on a paper manufacturing business. In the current year, it purchased machinery for Rs. 30,00,000; it paid salaries of Rs. 60,000 to its employees; it required funds for expansion and therefore, issued shares of Rs. 20,00,000. It earned a profit of Rs. 9,00,000 for the current year. Find out Cash Flow from Operating Activities.

‘Shri Ltd.’ was carrying on a business of packaging in Delhi and earned good profits in the past years. The company wanted to expand its business and required additional funds. To meet its requirements the company issued equity shares of Rs. 30,00,000. It purchased a computerised machine of Rs. 20,00.000. It also purchased raw material amounting to Rs. 2,00,000. During the current year, the Net Profit of the company was Rs. 15,00,000. Find out ‘Cash Flow from Operating Activities’ from the above transactions.

SOLUTION Cash Flow from Operating Activities = Net, Profit of the Company Rs. 15.00,000.Note: Purchase of Raw Material Rs. 2,00,000 must have been considered while computing net profit.

Continue Reading‘Shri Ltd.’ was carrying on a business of packaging in Delhi and earned good profits in the past years. The company wanted to expand its business and required additional funds. To meet its requirements the company issued equity shares of Rs. 30,00,000. It purchased a computerised machine of Rs. 20,00.000. It also purchased raw material amounting to Rs. 2,00,000. During the current year, the Net Profit of the company was Rs. 15,00,000. Find out ‘Cash Flow from Operating Activities’ from the above transactions.

Hider Ltd., a mutual fund company invested Rs. 5,00,000 in shares of Prayag Ltd. It received dividend of Rs. 45,000 during the year. How will it be depicted in the Cash Flow Statement?

SOLUTION It will be depicted in Cash Flow Statement as Operating Activity.

Continue ReadingHider Ltd., a mutual fund company invested Rs. 5,00,000 in shares of Prayag Ltd. It received dividend of Rs. 45,000 during the year. How will it be depicted in the Cash Flow Statement?

While preparing Cash Flow Statement, the accountant of ‘Rachna Ltd.’, a financing company, included ‘Interest received on loan’ in financing activities. Was he correct in doing so? Give reason.

SOLUTION No, the accountant was not correct.Reason: Since Rachna Ltd. is a financing company, interest received will be an operating activity for it.

Continue ReadingWhile preparing Cash Flow Statement, the accountant of ‘Rachna Ltd.’, a financing company, included ‘Interest received on loan’ in financing activities. Was he correct in doing so? Give reason.

While preparing Cash Flow’ Statement of Sharda Ltd. ‘Depreciation provided on fixed assets’ was added to net profit to calculate cash flow from operating activities. Was the accountant correct in doing so? Give reason.

SOLUTION Yes, accountant is correct.Reason: Depreciation is non-cash item.

Continue ReadingWhile preparing Cash Flow’ Statement of Sharda Ltd. ‘Depreciation provided on fixed assets’ was added to net profit to calculate cash flow from operating activities. Was the accountant correct in doing so? Give reason.

State with reason whether the issue of 9% debentures to a vendor for the purchase of machinery of Rs. 50,000 will result in inflow, outflow or no flow’ of cash while preparing Cash Flow Statement.

SOLUTION No flow of cash.Reason: Issue of 9% Debentures against the purchase of machinery would result in no flow of cash because it does not involve cash.

Continue ReadingState with reason whether the issue of 9% debentures to a vendor for the purchase of machinery of Rs. 50,000 will result in inflow, outflow or no flow’ of cash while preparing Cash Flow Statement.

Finserve Ltd is carrying on a Mutual fund business. It invested Rs. 30,00,000 in share’s and Rs. 15,00,000 in debentures of various companies during the year. It received Rs. 3,00,000 as dividend and interest. Find out cash flows from investing activities. (C.B.S.E. Sample Paper, 2015)

SOLUTION Cash flow from investing activities will be nil since Finserve Ltd. is a finance company.

Continue ReadingFinserve Ltd is carrying on a Mutual fund business. It invested Rs. 30,00,000 in share’s and Rs. 15,00,000 in debentures of various companies during the year. It received Rs. 3,00,000 as dividend and interest. Find out cash flows from investing activities. (C.B.S.E. Sample Paper, 2015)