Question 16 Marks
Read the following hypothetical text and answer the given questions on the basis of the same.
In 2011, two young Indian entrepreneurs, Vaishali Bhatia and Vivek Bhatia decided to start an online auto portal. At that time, there were no major players in the market and they saw an opportunity to fill the gap. They used a user-friendly website and mobile app which made it easy for users to research and buy cars. It was converted into a company 'Car Easy Ltd.' in 2018.
From the following Balance Sheet of the company as on 31st March, 2022, calculate 'Cash Flows From Operating Activities'.
Notes to Accounts:
Additional Information:
i. 10% Debentures were issued on 31st March, 2021.
ii. Tax of ₹ 80,000 was paid during the year.
In 2011, two young Indian entrepreneurs, Vaishali Bhatia and Vivek Bhatia decided to start an online auto portal. At that time, there were no major players in the market and they saw an opportunity to fill the gap. They used a user-friendly website and mobile app which made it easy for users to research and buy cars. It was converted into a company 'Car Easy Ltd.' in 2018.
From the following Balance Sheet of the company as on 31st March, 2022, calculate 'Cash Flows From Operating Activities'.
| Balance Sheet of 'Car Easy Ltd' as at 31st March, 2022 | |||
| Particulars | Note No. | 31.3.2022 (₹) | 31.3.2021 (₹) |
| I Equity and Liabilities: | |||
| 1. Shareholders' Funds | |||
| (a) Share Capital | 9,00,000 | 3,00,000 | |
| (b) Reserves and Surplus | 1 | 75,000 | 3,60,000 |
| 2. Non-Current Liabilities | |||
| Long-term Borrowings | 2 | 2,40,000 | 1,80,000 |
| 3. Current Liabilities. | |||
| (a) Trade Payables | 18,000 | 60,000 | |
| (b) Short-term Provisions | 3 | 2,04,000 | 2,10,000 |
| Total | 14,37,000 | 11,10,000 | |
| II Assets: | |||
| 1. Non-Current Assets | |||
| Fixed Assets | 4 | 10,08,000 | 5,76,000 |
| 2. Current Assets | |||
| (a) Inventories | 3,54,000 | 3,87,000 | |
| (b) Cash and Cash Equivalents | 75,000 | 1,47,000 | |
| Total | 14,37,000 | 11,10,000 | |
| Note No. | Particulars | 31.3.2022 (₹) | 31.3.2021 (₹) |
| 1 | Reserve and Surplus | ||
| Surplus i.e. Balance in Statement of Profit and Loss | 75,000 | 3,60,000 | |
| 75,000 | 3,60,000 | ||
| 2 | Long-term Borrowings | ||
| 10% Debentures | 2,40,000 | 1,80,000 | |
| 2,40,000 | 1,80,000 | ||
| 3 | Short-term Provisions | ||
| Provision for Tax | 2,04,000 | 2,10,000 | |
| 2,04,000 | 2,10,000 | ||
| 4 | Fixed Assets | ||
| Machinery | 11,52,000 | 6,45,000 | |
| Accumulated Depreciation | (1,44,000) | (69,000) | |
| Total | 10,08,000 | 5,76,000 |
i. 10% Debentures were issued on 31st March, 2021.
ii. Tax of ₹ 80,000 was paid during the year.
Answer
Working Notes:
View full question & answer→| Calculation of 'Cash Flows from operating activities' | ||
| for the year ended 31st March, 2022 | ||
| Particulars | Details (₹) | Amount (₹) |
| Net Loss before tax and extraordinary items | (2,11,000) | |
| Add : Non-cash and Non-operating expenses : | ||
| Depreciation on machinery | 75,000 | |
| Interest on Debentures | 24,000 | 99,000 |
| Net Loss before changes in working capital | (1,12,000) | |
| Add : Decrease in Current Assets and Increase in Current Liabilities : | ||
| Decrease in Inventories | 33,000 | |
| Less : Increase in Current Assets and Decrease in CurrentLiabilities : | ||
| Trade Payables | (42,000) | (9,000) |
| Cash generated from operations | (1,21,000) | |
| Less : Tax paid | (80,000) | |
| Net cash outflow/used in operating activities | (2,01,000) | |
| Provision for Tax A/c | |||
| Dr. | Cr. | ||
| Particulars | (₹) | Particulars | (₹) |
| To Bank A/c | 80,000 | By Balance b/d | 2,10,000 |
| To Balance c/d | 2,04,000 | By Statement of Profit & Loss | 74,000 |
| 2,84,000 | 2,84,000 | ||
| Calculation of net profit before tax: | |
| (₹) | |
| Net Loss | (2,85,000) |
| Add provision for Tax | 74,000 |
| Net loss before tax | (2,11,000) |