ANSWERS

1. (d)

2. (c)

3. (c)

4. (c)

5. (a)

6. (b)

7. (c)

8. (d)

9. (a)

10. (c)

11. (c)

12. (a)

13. (b)

14. (b)

15. (b)
Working Note:

Dr. MACHINERY ACCOUNT Cr.

Particulars ` Particulars `
To Balance b/d 15,00,000 By Depreciation A/c 2,00,000
To Statement of Profit & Loss (Gain) 60,000 By Bank A/c (Sale) (Balancing Figure) 5,10,000
To Bank A/c (Purchase) 1,50,000 By Balance c/d 10,00,000
17,10,000 17,10,000

16. (d)
Working Note:
Calculation of Net Profit before Tax and Extraordinary Items:
`
Surplus, i.e., Balance in Statement of Profit & Loss (31st March, 2023) 11,00,000
Less: Surplus, i.e., Balance in Statement of Profit & Loss (31st March 2022) 5,00,000
6,00,000
Add: Proposed Dividend for the year ended 31st March, 2022 declared in the year 2023
7,00,000
13,00,000

Note: Dividend Payable (₹ 50,000) has no affect on Net Profit before Tax and Extraordinary Items.

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17. (d)
Working Note:
Calculation of Net Profit before Tax and Extraordinary Items: `
Surplus, i.e., Balance in Statement of Profit & Loss (31st March, 2023) 6,00,000
Less: Surplus, i.e., Balance in Statement of Profit & Loss (31st March, 2022) 4,00,000
2,00,000
Add: Loss on Issue of Debentures
50,000
2,50,000

Note: Loss on Issue of Debentures (₹ 50,000) is added to Net Profit before Tax and Extraordinary Items as
it does not involve flow of cash and also proceeds from Issue of Debentures is shown at amount
received.

18. (b)
19. (a) Investing Activities include the acquisition and disposal of long-term assets and other investments
not included in cash equivalents.
Financing Activities are activities that result in changes in size and composition of owner’s capital
(including Preference Share Capital in the case of a company) and borrowings of the enterprise.

(b) Transactions which represent movement between items of Cash or Cash Equivalents are not cash
flows since these components are part of the cash management of an enterprise rather than part
of operating, investing and financing activities.

(c) Interest received on investments by a company is an Investing Activity.

20. Calculation of Net Cash Flow from Operating and Investing Activities:

Particulars `
I. Cash Flow from Operating Activities
Net Profit before Tax and Extraordinary Items (WN 1) 3,30,000
Adjustment for Non-cash and Non-Operating Items:
Add: Depreciation 1,30,000
Loss on Sale of Machinery 40,000
Operating Profit before Working Capital Changes 5,00,000
Add: Change in Current Assets and Increase in Current Liabilities:
Increase in Current Assets (60,000)
Increase in Trade Payables 1,10,000 50,000
Net Cash Flow from Operating Activities before Tax 5,50,000
Less: Tax Paid 30,000
Net Cash Flow from Operating Activities 5,20,000
II. Cash Flow from Investing Activities
Proceeds from Sale of Machinery 35,000
Purchase of Property, Plant and Equipment: Fixed Assets (WN 2) (3,65,000)
Net Cash used in Investing Activities (3,30,000)

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Working Notes:
1. Calculation of Net Profit before Tax and Extraordinary Items: `
Surplus, i.e., Balance in Statement of Profit & Loss (Closing) 4,00,000
Less: Surplus, i.e., Balance in Statement of Profit & Loss (Opening) (1,00,000)
3,00,000
Add: Provision for Tax 30,000
Net Profit before Tax and Extraordinary Items 3,30,000

2. Dr. PROPERTY, PLANT AND EQUIPMENT ACCOUNT: FIXED ASSETS ACCOUNT Cr.
Particulars ` Particulars `
To Balance b/d 7,50,000 By Bank A/c (Sale) 35,000
To Bank A/c— Purchase (Balancing Figure) 3,65,000 By Accumulated Depreciation A/c (Transfer) 70,000
By Statement of Profit & Loss A/c (Loss on Sale) 40,000
By Balance c/d 9,70,000
11,15,000 11,15,000

3. Dr. ACCUMULATED DEPRECIATION ACCOUNT Cr.

Particulars ` Particulars `
To Fixed Assets A/c (Balancing Figure) 70,000 By Balance b/d 1,80,000
To Balance c/d 2,40,000 By Statement of Profit & Loss A/c (Depreciation) 1,30,000
3,10,000 3,10,000

21. Aakashvani Ltd.

CASH FLOW STATEMENT for the year ended 31st March, 2023
Particulars Detail (`) `
I. Cash Flow from Operating Activities
Net Profit before Tax and Extraordinary Items (WN 1) 2,50,000
Adjustment for Non-cash and Non-Operating Items:
Goodwill Amortised 2,40,000
Depreciation Charged 50,000
Interest on Debentures 52,000
Operating Profit before Working Capital Changes 5,92,000
Add: Decrease in Current Assets and Increase in Current Liabilities:
Trade Receivables 10,000
6,02,000
Less: Increase in Current Assets and Decrease in Current Liabilities:
Inventories (1,10,000)
Trade Payables (20,000) (1,30,000)
Cash Generated from Operations 4,72,000
Less: Tax Paid Nil
Cash Flow from Operating Activities 4,72,000 4,72,000

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 II. Cash Flow from Investing Activities
Purchase of Land and Building (5,00,000)
Purchase of Goodwill (WN 2) (40,000)
Proceeds from Sale of Non-current Investments 2,00,000
Loans and Advances Given (50,000)
Cash Used in Investing Activities (3,90,000)

III. Cash Flow from Financing Activities

Proceeds from Issue of Shares 5,00,000
Securities Premium 50,000
Redemption of 8% Debentures (` 3,00,000 + ` 30,000) (3,30,000)
Interest on Debentures (52,000)
Dividend Paid (WN 3) (1,40,000)
Cash Flow from Financing Activities 28,000
IV. Net Increase in Cash and Cash Equivalents (I + II + III) 1,10,000
Add: Cash and Cash Equivalents (Opening) (` 1,00,000 + ` 1,50,000) (WN 4) 2,50,000
V. Closing Cash and Cash Equivalents (` 1,10,000 + ` 2,50,000) 3,60,000

Working Notes:
1. Net Profit before Tax and Extraordinary Items: `
Net Profit as per Statement of Profit & Loss (` 1,50,000 – ` 1,10,000) 40,000
Add: Transfer to General Reserve 60,000
Proposed Dividend (Previous years) 1,50,000
Net Profit before Tax and Extraordinary Items 2,50,000

2. Dr. GOODWILL ACCOUNT Cr.

Particulars ` Particulars `
To Balance b/d 6,00,000 By Statement of Profit & Loss 2,40,000
To Bank A/c (Balancing Figure) 40,000 By Balance c/d 4,00,000
6,40,000 6,40,000

3. Dr. DIVIDEND PAYABLE ACCOUNT Cr.

Particulars ` Particulars `
To Bank A/c (Balancing Figure) 1,40,000 By Balance b/d 30,000
To Balance c/d 40,000 By Surplus, i.e., Balance in Statement of Profit &
Loss A/c (Proposed Dividend of previous year) 1,50,000
1,80,000 1,80,000

4. Current Investment is a part of Cash and Cash Equivalents.