Question

Following is the Balance Sheet of Bharat Gas Ltd. as at 31.3.2023: % Table for Balance Sheet \[ \begin{array}{|c|c|c|c|} Particulars & Note No. & 31.03.2023 (\( \text{\rupee} \)) & 31.03.2022 (\( \text{\rupee} \))
\multicolumn{4}{|c|}{I. Equity and Liabilities}
\text{Shareholders' Funds} & & &
\quad (a) \, \text{Share Capital} & & 14,00,000 & 10,00,000
\quad (b) \, \text{Reserves and Surplus} & 1 & 5,00,000 & 4,00,000
\text{Non-Current Liabilities} & & &
\quad \text{Long Term Borrowings} & & 5,00,000 & 4,00,000
\text{Current Liabilities} & & &
\quad (a) \, \text{Trade Payables} & & 1,00,000 & 60,000
\quad (b) \, \text{Short Term Provisions} & 2 & 80,000 & 60,000
Total & & 25,80,000 & 16,60,000
\multicolumn{4}{|c|}{II. Assets}
\text{Non-Current Assets} & & &
\quad (a) \, \text{Tangible Assets} & 3 & 16,00,000 & 9,00,000
\quad (b) \, \text{Intangible Assets} & 4 & 1,40,000 & 2,00,000
\text{Current Assets} & & &
\quad (a) \, \text{Inventories} & & 2,50,000 & 2,00,000
\quad (b) \, \text{Trade Receivables} & & 5,00,000 & 3,00,000
\quad (c) \, \text{Cash and Cash Equivalents} & & 90,000 & 60,000
Total & & 25,80,000 & 16,60,000
\end{array} \] % Notes to Accounts Notes to Accounts: \[ \begin{array}{|c|l|c|c|} Note No. & Particulars & 31.03.2023 (\( \text{\rupee} \)) & 31.03.2022 (\( \text{\rupee} \))
1 & \text{Reserves and Surplus:} & &
& \quad \text{Balance in Statement of Profit and Loss} & 5,00,000 & 4,00,000
2 & \text{Short Term Provisions:} & &
& \quad \text{Provision for Taxation} & 80,000 & 60,000
3 & \text{Tangible Assets:} & &
& \quad \text{Machinery (Gross)} & 18,50,000 & 10,00,000
& \quad \text{Less: Accumulated Depreciation} & 16,00,000 & 9,00,000
4 & \text{Intangible Assets:} & &
& \quad \text{Goodwill} & 1,40,000 & 2,00,000
\end{array} \] % Adjustments Adjustments: During the year, a machine costing \( \text{\rupee} 3,00,000 \), on which accumulated depreciation was \( \text{\rupee} 45,000 \), was sold for \( \text{\rupee} 1,35,000 \). Calculate ‘Cash Flows from Operating Activities’.

Hint:

\textbf{Cash Flow Tip:} Depreciation is a non-cash item added back to profits. Loss or profit on asset sale is adjusted in the cash flow calculation.

Answer 1

Cash Flows from Operating Activities Net Profit Before Taxation: \[ \text{Increase in Reserves (Profit and Loss Account)} = \text{\rupee} 5,00,000 - \text{\rupee} 4,00,000 = \text{\rupee} 1,00,000 \] Add: Provision for Taxation (Current Year) = \( \text{\rupee} 80,000 \) \[ \text{Net Profit Before Taxation} = \text{\rupee} 1,80,000 \] Adjustments: Add: Depreciation on Machinery = \( \text{\rupee} 16,00,000 - \text{\rupee} 9,00,000 = \text{\rupee} 7,00,000 \) Less: Profit on Sale of Machinery = Sale Proceeds - Book Value \[ \text{Profit} = \text{\rupee} 1,35,000 - (\text{\rupee} 3,00,000 - \text{\rupee} 45,000) = \text{\rupee} 1,35,000 - \text{\rupee} 2,55,000 = -\text{\rupee} 1,20,000 \] Add: Loss on Sale of Machinery = \( \text{\rupee} 1,20,000 \) Cash Generated from Operating Activities: \[ \begin{aligned} \text{Net Profit Before Taxation} & = \text{\rupee} 1,80,000
\text{Add: Depreciation} & = \text{\rupee} 7,00,000
\text{Add: Loss on Sale of Machinery} & = \text{\rupee} 1,20,000
\text{Total Cash Generated from Operating Activities} & = \text{\rupee} 10,00,000 \end{aligned} \] % Journal Entries Journal Entries: \[ \begin{array}{|c|l|c|} Date & Particulars & Amount (\( \text{\rupee} \))
\text{31.03.2023} & \text{Cash A/c Dr.} & 1,35,000
& \quad \text{Accumulated Depreciation A/c Dr.} & 45,000
& \quad \text{To Machinery A/c} & 3,00,000
& \quad \text{To Profit and Loss A/c} & 1,20,000
\end{array} \]