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 \[ \begin{array}{|l|c|r|r|} \hline \textbf{Particulars} & \textbf{Note No.} & \textbf{31.3.2023 (\text{₹})} & \textbf{31.3.2022 (\text{₹})} \\ \hline \multicolumn{4}{|l|}{\textbf{I. Equity and Liabilities:}} \\ 1. \text{Shareholders’ funds} & & & \\ \text{(a) Share capital} & & 14,00,000 & 10,00,000 \\ \text{(b) Reserves and Surplus} & 1 & 5,00,000 & 4,00,000 \\ 2. \text{Non-current liabilities} & & & \\ \text{Long-term borrowings} & & 5,00,000 & 1,40,000 \\ 3. \text{Current liabilities} & & & \\ \text{(a) Trade payables} & & 1,00,000 & 60,000 \\ \text{(b) Short-term provisions} & 2 & 80,000 & 60,000 \\ \textbf{Total liabilities} & & \textbf{25,80,000} & \textbf{16,60,000} \\ \hline \multicolumn{4}{|l|}{\textbf{II. Assets:}} \\ 1. \text{Non-current assets} & & & \\ \text{(a) Fixed assets} & & & \\ \text{(i) Tangible assets} & 3 & 16,00,000 & 9,00,000 \\ \text{(ii) Intangible assets} & 4 & 1,40,000 & 2,00,000 \\ 2. \text{Current assets} & & & \\ \text{(a) Inventories} & & 2,50,000 & 2,00,000 \\ \text{(b) Trade receivables} & & 1,90,000 & 80,000 \\ \text{(c) Cash and cash equivalents} & & 3,00,000 & 2,80,000 \\ \textbf{Total assets} & & \textbf{25,80,000} & \textbf{16,60,000} \\ \hline \end{array} \]

Notes to Accounts: \[ \begin{array}{|c|l|r|r|} \hline \textbf{Note No.} & \textbf{Particulars} & \textbf{31.3.2023 (\text{₹})} & \textbf{31.3.2022 (\text{₹})} \\ \hline 1 & \text{Reserves and Surplus:} & & \\ & \text{Balance in Statement of Profit and Loss} & 5,00,000 & 4,00,000 \\ 2 & \text{Short-term provisions:} & & \\ & \text{Provision for Taxation} & 80,000 & 60,000 \\ 3 & \text{Tangible Assets:} & & \\ & \text{Machinery} & 18,50,000 & 10,00,000 \\ & \text{Less: Accumulated Depreciation} & 16,00,000 & 9,00,000 \\ 4 & \text{Intangible Assets:} & & \\ & \text{Goodwill} & 1,40,000 & 2,00,000 \\ \hline \end{array} \]

Adjustments:

During the year, a machine costing ₹3,00,000 on which accumulated depreciation was ₹45,000 was sold for ₹1,35,000.

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 \[ \text{Cash Flows from Operating Activities} = \rupee 1,00,000 + \rupee 8,20,000 - \rupee 1,60,000 + \rupee 80,000 = \rupee 6,40,000 \]