Question

On 31st March, 2024 following is the Balance Sheet of Bhavik Limited :
Bhavik Ltd.
\includegraphics[scale=0.7]{2.png}
\includegraphics[scale=0.7]{3.png}
Additional Information :
(i) During the year a piece of machinery costing Rs 8,00,000 accumulated depreciation thereon Rs 50,000 was sold for Rs 6,50,000
(ii) Debentures were redeemed on 31-03-2024.
Calculate:
(a) Cash flows from Investing Activities
(b) Cash flows from Financing Activities

Hint:

Cash Flow Statement Steps: 1. Compare B/S items to identify changes. 2. Prepare Ledger Accounts (Fixed Asset, Acc. Dep., Investment, Provision for Tax) if additional info is given, to find hidden items (purchases, sales, depreciation, tax paid). 3. Classify cash flows: * \textbf{Operating:} Core business activities, changes in current assets/liabilities (Indirect: Start PBT, adjust non-cash/non-operating items, WC changes, tax paid). * \textbf{Investing:} Purchase/Sale of non-current assets (PPE, Intangibles, Investments). * \textbf{Financing:} Transactions related to non-current liabilities and shareholders' funds (Issue/Redemption of Shares/Debentures, Loans raised/repaid, Dividends paid, Interest paid).

Answer 1

Working Notes:
WN1: Plant and Machinery Account
\begin{longtable}{|l|r|l|r|} \hline Dr. & Rs & Cr. & Rs
\hline \endfirsthead \hline Dr. & Rs & Cr. & Rs
\hline \endhead \hline \endfoot \hline \endlastfoot To Balance b/d & 16,00,000 & By Bank A/c (Sale) & 6,50,000
To Bank A/c (Purchase - Bal Fig) & 13,50,000 & By Acc. Depreciation A/c (on sold M/c) & 50,000
& & By Loss on Sale (Statement of P\) & 1,00,000
& & (Cost 8L - Dep 0.5L - Sale 6.5L) &
& & By Balance c/d & 21,50,000
\hline Total & 29,50,000 & Total & 29,50,000
\hline \end{longtable} *Purchase of Plant \& Machinery = Rs 13,50,000 (Outflow - Investing)*
*Sale Proceeds from Plant \& Machinery = Rs 6,50,000 (Inflow - Investing)*
WN2: Accumulated Depreciation Account
\begin{longtable}{|l|r|l|r|} \hline Dr. & Rs & Cr. & Rs
\hline \endfirsthead \hline Dr. & Rs & Cr. & Rs
\hline \endhead \hline \endfoot \hline \endlastfoot To Plant \& Machinery A/c (on sold M/c) & 50,000 & By Balance b/d & 1,00,000
To Balance c/d & 2,50,000 & By Statement of P\ (Depreciation for Year - Bal Fig) & 2,00,000
\hline Total & 3,00,000 & Total & 3,00,000
\hline \end{longtable} *Depreciation for the year = Rs 2,00,000 (Non-cash, added back in Operating)*
WN3: Non-current Investments Account
Opening Balance = Rs 4,00,000. Closing Balance = Rs 3,00,000.
Decrease implies Sale of Investments = Rs 4,00,000 - Rs 3,00,000 = Rs 1,00,000 (Assuming sold at book value).
*Sale of Non-current Investments = Rs 1,00,000 (Inflow - Investing)*
WN4: Share Capital
Increase = Rs 12,00,000 - Rs 10,00,000 = Rs 2,00,000.
*Issue of Share Capital = Rs 2,00,000 (Inflow - Financing)*
WN5: 10\% Debentures (Long-term Borrowings)
Decrease = Rs 10,00,000 - Rs 6,00,000 = Rs 4,00,000.
*Redemption of Debentures = Rs 4,00,000 (Outflow - Financing)*
Interest on Debentures: Paid on opening balance (Rs 10L) as redemption is on last day. Interest = 10\% of 10L = Rs 1,00,000 (Outflow - Financing).
WN6: Provision for Tax
Assume tax paid during the year = Opening Provision = Rs 4,00,000 (Outflow - Operating).
Assume tax made during the year = Closing Provision = Rs 3,00,000 (Added to PBT in Operating).
Alternatively, calculate Net Profit after Tax = 4L - 3L = 1L. PBT = PAT + Tax Made = 1L + 3L = 4L. Check if this reconciles.
PBT = 4L. Add: Dep (2L), Loss on Sale (1L), Interest (1L) = 8L Operating Profit before WC Changes.
(a) Cash Flow from Investing Activities
\begin{tabular}{l|r|r} \hline Particulars & Details (Rs) & Amount (Rs)
\hline Purchase of Plant and Machinery (WN1) & & (13,50,000)
Sale Proceeds from Plant and Machinery (WN1) & & 6,50,000
Sale of Non-current Investments (WN3) & & 1,00,000
\hline Net Cash used in Investing Activities & & (6,00,000)
\hline \end{tabular}
(b) Cash Flow from Financing Activities
\begin{tabular}{l|r|r} \hline Particulars & Details (Rs) & Amount (Rs)
\hline Proceeds from Issue of Share Capital (WN4) & & 2,00,000
Redemption of 10\% Debentures (WN5) & & (4,00,000)
Interest paid on 10\% Debentures (WN5) & & (1,00,000)
\hline Net Cash used in Financing Activities & & (3,00,000)
\hline \end{tabular}