Question

Following is the Balance Sheet of Bharat Gas Ltd. as at 31.3.2023: Balance Sheet of Bharat Gas Ltd. as at 31.3.2023 \begin{center} \begin{tabular}{|l|c|r|r|} Particulars & Note No. & 31.3.2023 & 31.3.2022
\multicolumn{4}{|l|}{I. Equity and Liabilities:}
1. Shareholders’ funds & & &
(a) Share capital & & 14,00,000 & 10,00,000
(b) Reserves and Surplus & 1 & 5,00,000 & 4,00,000
2. Non-current liabilities & & &
Long-term borrowings & & 5,00,000 & 1,40,000
3. Current liabilities & & &
(a) Trade payables & & 1,00,000 & 60,000
(b) Short-term provisions & 2 & 80,000 & 60,000
Total liabilities & & 25,80,000 & 16,60,000
\multicolumn{4}{|l|}{II. Assets:}
1. Non-current assets & & &
(a) Fixed assets & & &
(i) Tangible assets & 3 & 16,00,000 & 9,00,000
(ii) Intangible assets & 4 & 1,40,000 & 2,00,000
2. Current assets & & &
(a) Inventories & & 2,50,000 & 2,00,000
(b) Trade receivables & & 1,90,000 & 80,000
(c) Cash and cash equivalents & & 3,00,000 & 2,80,000
Total assets & & 25,80,000 & 16,60,000
\end{tabular} \end{center} Notes to Accounts: \begin{center} \begin{tabular}{|c|l|r|r|} Note No. & Particulars & 31.3.2023 & 31.3.2022
1 & Reserves and Surplus: & &
& Balance in Statement of Profit and Loss & 5,00,000 & 4,00,000
2 & Short-term provisions: & &
& Provision for Taxation & 80,000 & 60,000
3 & Tangible Assets: & &
& Machinery & 18,50,000 & 10,00,000
& Less: Accumulated Depreciation & 16,00,000 & 9,00,000
4 & Intangible Assets: & &
& Goodwill & 1,40,000 & 2,00,000
\end{tabular} \end{center} Adjustments: During the year, a machine costing \rupee 3,00,000 on which accumulated depreciation was \rupee 45,000 was sold for \rupee 1,35,000. Calculate 'Cash Flows from Operating Activities'

Hint:

Operating activities include adjustments for non-cash items, working capital changes, and tax provisions to arrive at the net cash flow.

Answer 1

Cash Flows from Operating Activities Net Profit before Tax: Increase in Profit and Loss Account (\rupee 5,00,000 - \rupee 4,00,000) = \rupee 1,00,000 Add: Non-Cash Items: Depreciation on Machinery (\rupee 16,00,000 - \rupee 9,00,000) = \rupee 7,00,000 Loss on Sale of Machinery: \[ \text{Loss} = \text{Book Value of Machinery} - \text{Sale Value} \] Book Value = \rupee 3,00,000 - \rupee 45,000 = \rupee 2,55,000
Loss = \rupee 2,55,000 - \rupee 1,35,000 = \rupee 1,20,000 \[ \text{Total Non-Cash Items} = \rupee 7,00,000 + \rupee 1,20,000 = \rupee 8,20,000 \] Less: Adjustments: Increase in Working Capital: \[ \text{Increase in Inventories} = \rupee 2,50,000 - \rupee 2,00,000 = \rupee 50,000 \] \[ \text{Increase in Trade Receivables} = \rupee 1,90,000 - \rupee 80,000 = \rupee 1,10,000 \] \[ \text{Increase in Working Capital} = \rupee 50,000 + \rupee 1,10,000 = \rupee 1,60,000 \] Add: Tax Provision: \rupee 80,000 \[ \text{Cash Flows from Operating Activities} = \rupee 1,00,000 + \rupee 8,20,000 - \rupee 1,60,000 + \rupee 80,000 = \rupee 6,40,000 \]