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Cash flow from Operating Activities

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Operating Activities’ portion of cash flow statement >>
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Financial Statement Analysis-FIN621
VU
Lesson-15
FINANCIAL STATEMENTS
(Continued)
Cash flow from Operating Activities
Study computation of net sales, cost of goods sold and interest expense etc. On Income
Statement.
Cash received from customers; Cash received from sales on cash = Net Sales; Cash
received from sales on credit/on account =
Net sales ­ increase in Accounts Receivable or Net
sales + decrease in Accounts Receivable. Increase/decrease in Accounts Receivable is observed from
beginning and ending/closing balances, appearing on Balance Sheet.
(A1 No:1): Cash received from customers = 900,000 ­ 30,000
= Rs.870,000
A1 No:2
Cash dividend received = Dividends Revenue =Rs.3,000: Divided Revenue is based on cash, so
whatever Dividend Revenue is being received, that in cash Inflows.
Cash interest received=Interest Revenue + Decrease in Interest Receivable, or Interest Revenue
­ Increase in Interest Receivable = 6000 + 1000 = 7000
Interest & Dividend received = 3,000 + 7,000 = 10,000
Cash Inflow from operating activities would be: Cash from customers + interest & dividends
receivable = 870,000 + 10,000 = Rs. 880,000
CASH FLOW STATEMENT CONTD.........
QUESTION # 1
You are given the Balance Sheet of ABC Limited as at June 30, 2001 and June 30, 2002 and its Profit
and Loss Account for the year ended June 30 2002.
Required
You are required to prepare Cash Flow Statement for the given period.
ABC Ltd
Balance Sheet As At June 30 2002
2002 Rs.
2001 Rs.
Rs. `000
Rs.
`000
Building at Cost
181,000
140,000
Accumulated Depreciation
36,000
30,000
Written Down Value
145,000
110,000
Plant and Machinery cost
83,000
90,000
Accumulated Depreciation
36,000
35,000
Written Down Value
47,000
55,000
56
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Financial Statement Analysis-FIN621
VU
Total Fixed Assets at WDV
192,000
165,000
Long Term Investment
17,000
10,000
Current Assets
Debtors
30,000
21,000
Stock
25,000
40,000
Short Term Deposits
18,000
15,000
Cash and Bank
30,000
24,000
103,000
100,000
Current Liabilities
Creditors
15,000
12,000
Proposed Dividend
18,000
16,000
Tax Payable
9,000
8,000
42,000
36,000
Working Capital
61,000
64,000
Net Assets Employed
270,000
239,000
Financed By
Share Capital
180,000
160,000
Share Premium Account
17,000
12,000
General Reserve
23,000
20,000
Accumulated Profit and Loss
34,000
27,000
Share Holders' Equity
254,000
219,000
Term Finance Certificates
16,000
20,000
Total
270,000
239,000
57
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Financial Statement Analysis-FIN621
VU
ABC Ltd
Profit and Loss Account For the Year Ended June 30 2002
Rs. `000
300,000
Sales
(231,000)
Cost of Sales
Gross Profit
69,000
Other Income
4,000
73,000
Less: Administrative Expenses
Director's Remuneration
4,000
Depreciation on Building
6,000
Loss on Sale of Machinery
2,000
Other Administrative Expenses
12,000
24,000
Less: Selling Expenses
10,000
Less: Mark up on TFC
2,000
36,000
Profit for the Year Before Tax
37,000
Provision for tax
9,000
Profit after tax
28,000
Acc. Profit Brought Forward
27,000
55,000
Appropriation
Transfer to Reserve
3,000
Proposed Dividend
18,000
21,000
Accumulated Profit Carried Forward
34,000
Additional Information
1. Other income include dividend on Long Term Investment
2. Cost of goods sold includes depreciation for the year on machinery Rs. 5,000.
3. Accumulated Depreciation on the machine disposed off amounts to Rs. 4,000.
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Financial Statement Analysis-FIN621
VU
SOLUTION
ABC Ltd
Cash Flow Statement For the Year Ended June 30 2002
Note
Rs. `000
Net Profit Before Tax
37,000
Adjustment of Non Cash Items
Depreciation
11,000
Loss on Sale of Machinery
2,000
Markup on TFC
2,000
52,000
Less: Other Income
(4,000)
Operating Profit Before Working
Capital Changes
48,000
Working Capital Changes
Reduction in Stock
15,000
Increase in Creditors
3,000
Increase in Debtors
(9,000)
9,000
Cash Flow from Operations
57,000
Markup on TFC Paid
(2,000)
Tax Paid
1
(8,000)
Net Cash Flow From Operating Activities
47,000
Cash Flow From Investing Activities
Dividend Received
4,000
Payment to Acquire Investments 2
(7,000)
Purchase of Fixed Assets (Building)
3
(41,000)
Receipt from Sale of Assets
4
1,000
Net Cash Flow From Investing Activities
(43,000)
Cash Flow From Financing Activities
Issue of Ordinary Shares
20,000
Share Premium Account
5,000
Dividend Paid
5
(16,000)
Repayment of TFC
6
(4,000)
Net Cash Flow From Financing Activities
5,000
Net Increase / (Decrease) in Cash and
Cash Equivalents During The Year
9,000
O/B of Cash and Cash Equivalents
39,000
C/B of Cash and Cash Equivalents
48,000
59
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Financial Statement Analysis-FIN621
VU
Note # 1
Tax Paid
Provision for Tax
Account Code --------
Particulars
Amount
Particulars
Amount
Dr. (Rs.)
Cr. (Rs.)
Cash
8,000
Bal. B/F
8,000
Balance c/f
9,000
For the year
9,000
Total
17,000
Total
17,000
Note # 2
Payments to Acquire Investments
Investment
Account Code --------
Particulars
Amount
Particulars
Amount
Dr. (Rs.)
Cr. (Rs.)
10,000
Bal. B/F
7,000
Cash
17,000
Bal. C/F
Total
17,000
Total
17,000
Note # 3
Purchase of Fixed Assets
Building Cost
Account Code --------
Particulars
Amount
Particulars
Amount
Dr. (Rs.)
Cr. (Rs.)
140,000
Bal. B/F
41,000
Cash
181,000
Bal. C/F
Total
181,000
Total
181,000
Note # 4
Sale Proceed of Machinery
Machinery at Cost
Account Code --------
Particulars
Amount
Particulars
Amount
Dr. (Rs.)
Cr. (Rs.)
7,000
90,000
Disposal A/c
Bal. B/F
83,000
Bal. C/F
Total
90,000
Total
90,000
60
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Financial Statement Analysis-FIN621
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Disposal of asset
Account Code --------
Particulars
Amount
Particulars
Amount
Dr. (Rs.)
Cr. (Rs.)
4,000
7,000
Accumulated Dep.
Cost
2,000
Loss on Sale
1,000
Sale Proceed
Total
7,000
Total
7,000
Note # 5
Dividend Payable
Dividend Payable
Account Code --------
Particulars
Amount
Particulars
Amount
Dr. (Rs.)
Cr. (Rs.)
16,000
O/B
16,000
Cash
18,000
For the Year
18,000
C/B
Total
34,000
Total
34,000
Note # 6
Repayment of TFC
TFC Account
Account Code --------
Particulars
Amount
Particulars
Amount
Dr. (Rs.)
Cr. (Rs.)
20,000
O/B
4,000
Cash
16,000
C/B
Total
20,000
Total
20,000
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Table of Contents:
  1. ACCOUNTING & ACCOUNTING PRINCIPLES
  2. Dual Aspect of Transactions
  3. Rules of Debit and Credit
  4. Steps in Accounting Cycle
  5. Preparing Balance Sheet from Trial Balance
  6. Business transactions
  7. Adjusting Entry to record Expenses on Fixed Assets
  8. Preparing Financial Statements
  9. Closing entries in Accounting Cycle
  10. Income Statement
  11. Balance Sheet
  12. Cash Flow Statement
  13. Preparing Cash Flows
  14. Additional Information (AI)
  15. Cash flow from Operating Activities
  16. Operating Activities’ portion of cash flow statement
  17. Cash flow from financing Activities
  18. Notes to Financial Statements
  19. Charging Costs of Inventory to Income Statement
  20. First-in-First - out (FIFO), Last-in-First-Out (LIFO)
  21. Depreciation Accounting Policies
  22. Accelerated-Depreciation method
  23. Auditor’s Report, Opinion, Certificate
  24. Management Discussion & Analyses (MD&A)
  25. TYPES OF BUSINESS ORGANIZATIONS
  26. Incorporation of business
  27. Authorized Share Capital, Issued Share Capital
  28. Book Values of equity, share
  29. SUMMARY
  30. SUMMARY
  31. Analysis of income statement and balance sheet:
  32. COMMON –SIZE AND INDEX ANALYSIS
  33. ANALYSIS BY RATIOS
  34. ACTIVITY RATIOS
  35. Liquidity of Receivables
  36. LEVERAGE, DEBT RATIOS
  37. PROFITABILITY RATIOS
  38. Analysis by Preferred Stockholders
  39. Efficiency of operating cycle, process
  40. STOCKHOLDERS’ EQUITY SECTION OF THE BALANCE SHEET 1
  41. STOCKHOLDERS’ EQUITY SECTION OF THE BALANCE SHEET 2
  42. BALANCE SHEET AND INCOME STATEMENT RATIOS
  43. Financial Consultation Case Study
  44. ANALYSIS OF BALANCE SHEET & INCOME STATEMENT
  45. SUMMARY OF FINDGINS