12th | Volume 3 | Chapter:5 | Question No. 1 to 4 | Cash Flow Statement

Question 1:

Identify the transactions as belonging to (i) Operating Activities, (ii) Investing Activities, (iii) Financing Activities and (iv) Cash and Cash Equivalents:

(a) Cash Sale of Goods	(b) Cash Received against Revenue from Services rendered
(c) Cash Purchase of Goods	(d) Cash Paid against Services Taken
(e) Patents Purchased	(f) Marketable Securities
(g) Bank Overdraft	(h) Proceeds from Issue of Debentures
(i) Purchase of Shares	(j) Repayment of Long-term Loan
(k) Commission Received	(l) Redemption of Debentures
(m) Interest on Debentures	(n) Interest on Investments
(o) Income Tax Paid	(p) Income Tax Paid on Gain of Sale of Asset
(q) Cash Received from Debtors	(r) Cash Paid to Creditors.

Answer:

OPERATING ACTIVITY	INVESTING ACTIVITY	FINANCING ACTIVITY	CASH AND CASH EQUIVALENTS
a. Cash Sale of Goods	e. Patents Purchased	g. Bank Overdraft	f. Marketable Securities
b. Cash Received against Revenue from Services rendered	i. Purchase of Shares	h. Proceeds from Issue of Debentures
c. Cash Purchase of Goods	n. Interest on Investments	j. Repayment of Long-term Loan
d. Cash paid against Services Taken	p. Income Tax paid on Gain on Sale of Asset	l. Redemption of Debentures
k. Commission Received		m. Interest on Debentures
o. Income Tax paid
q. Cash Received from Debtors
r. Cash Paid to Creditors

Question 2:

Classify the following transactions as Operating Activities for a financial company and a non-financial company:

(a) Purchase of Shares on a Stock Exchange.	(b) Dividend received on Shares.
(c) Dividend paid on Shares.	(d) Loans given.
(e) Loans taken.	(f) Interest paid on borrowings.

Answer:

OPERATING ACTIVITY
Financial Company	Non-Financial Company
a. Purchase of Shares on a Stock Exchange
b. Dividend received on shares
d. Loans given
e. Loans taken
f. Interest paid on borrowings

A financial company deals with securities like shares, bonds, debentures, etc on a regular basis. These securities form part of their stock and hence purchase and sale of these securities will be categorised under Operating Activity. But, Dividend paid by them will be the part of Financing Activities.
However, for a non-financial company issue of shares, debentures, etc form part of financing activities as such issue will increase the capital employed in the business.

Question 3:

State which of the following would result in inflow/outflow or no flow of Cash and Cash Equivalents:
(a) Sale of Fixed Assets, Book Value ` 1,00,000 at a profit of `10,000.
(b) Sale of goods against cash.
(c) Purchase of machinery for cash.
(d) Purchase of Land and Building for `10,00,000. Consideration paid by issue of debentures.
(e) Issued fully paid Bonus Shares.
(f) Cash withdrawn from bank.
(g) Payment of Interim Dividend.

Answer:

Inflow	Outflow	No Flow
a. Sale of Fixed Assets	c. Purchase of Machinery for cash	d. Purchase of Land and Building. Consideration paid by issue of Debentures.
b. Sale of goods against cash	g. Payment of Interim Dividend	e. Issued fully paid bonus shares
		f. Cash withdrawn from Bank

Question 4:

For each of the following transactions, calculate the resulting Cash Flow and state the nature of Cash Flow, i.e., whether it is Operating, Investing or Financing:
(a) Acquired machinery for `2,50,000 paying 20% by cheque and executing a bond for the balance payable.
(b) Paid `2,50,000 to acquire shares in Informa Tech Ltd. and received a dividend of `50,000 after acquisition.
(c) Sold machinery of original cost of `2,00,000 with an accumulated depreciation of `1,60,000 for `60,000.