Aashna is a Mechanical Engineer from a premier institute based in Kolkata. After working for a decade in the engineering industry, Aashna completes a management development programme from a top-grade Business School. Sub

CS Executive · Corporate Accounting and Financial Management · PYQS · June 2025
Aashna is a Mechanical Engineer from a premier institute based in Kolkata. After working for a decade in the engineering industry, Aashna completes a management development programme from a top-grade Business School. Subsequently, Aashna along with her three colleagues sets up a venture capital fund - GKJ & Co. The aim is to invest in companies that manufacture import substitutes. There is an impetus from the Government to manufacture in India to meet domestic demand and for the world and hence it is felt that any investment made in the manufacturing industry is likely to grow at an above average rate.. GKJ & Co. has raised an initial amount of ₹ 80 crore from investors and is scouting for initial deployment opportunities. One such opportunity is investments in Royden & Co. Royden & Co. is a manufacturer of equipment and tools which are used in dental clinics. This equipment is essentially an import substitute and has potential to be exported as well. The Balance Sheet of Royden & Co. as on the recent financial year end is given below: I. Equity and Liabilities Beginning of financial year (₹ Lakhs) Ending of financial year (₹ Lakhs) Share Capital 1,400 1,600 Share Premium 180 220 Retained Earnings 476 616 7% Mortgage Loans - 400 Creditors 138 120 Outstanding Salaries 40 28 Provision for taxation 20 28 Total 2,254 3,012 II. Assets Plant & Machinery 1,240 1,320 Accumulated depreciation on plant and machinery (740) (524) Building 1,900 2,320 Accumulated depreciation on building (860) (900) Land 200 240 Stock 204 192 Debtors 172 152 Prepaid Expenses 14 16 Cash & Bank 124 196 Total 2,254 3,012 The following additional details are hereunder : (i) Plant costing ₹ 320 lakhs (accumulated depreciation ₹ 296 lakhs) was sold during the year for ₹ 24 lakhs (ii) Building was acquired during the year at cost of ₹ 420 lakhs. In addition to cash payment of ₹ 20 lakhs mortgage of ₹ 400 lakhs was raised for balance. (iii) Dividend of ₹ 160 lakhs was paid during the year. (iv) A sum of ₹ 278 lakhs was transferred to Provision for tax account. Prepare cash flow statement (indirect method) of Royden & Co. for the current financial year with the available details.

Answer & Explanation:

Cash Flow Statement (indirect method) of Royden & Co. Amount (₹ lakh) A. Cash Flow from Operations Net Profit for the year before dividend and provision for tax (W.N:1) 578 Depreciation on Plant (W.N:2) 80 Depreciation on Building (W.N:2) 40 120 698 Changes in working capital Decrease in stock 12 Decrease in Debtors 20 Increase in prepaid expenses (2) 30 Decrease in creditors (18) Decrease in outstanding salaries (12) (30) Cash flow from operations before tax payment 698 Less: Income Tax paid (W.N:1) (270) Cash flow from operations after income tax paid - I 428 B. Cash Flow from Investing Purchase of Building (W.N:2) (420) Purchase of Plant & Machinery (W.N:2) (400) Purchase of Land (40) Sale of Plant 24 Net Cash Flow from Investing - II (836) C. Cash Flow from Financing Mortgage Loan 400 Issue of Shares 200 Share premium 40 Dividend paid (160) Cash Flow from Financing - III 480 Change in Cash & cash equivalents (I+III-II) 72 Opening Balance of cash & cash equivalents 124 Closing Balance of cash & cash equivalents 196 Working Note- 1: Calculation of Net Profit after tax but before dividend and provision for tax. Provision for Taxation A/c Particulars Amount (₹ lakh) Particulars Amount (₹ lakh) To Bank (income tax paid) (Balancing figure) 270 By balance b/d 20 To balance c/d 28 By P&L A/c 278 298 298 Retained Earnings A/c Particulars Amount (₹ lakh) Particulars Amount (₹ lakh) To Dividend paid 160 By balance b/d 476 To balance c/f 616 By Profit (Balancing figure) 300 776 776 Net profit for the year = Provision for Tax Account (P&L account balance) + Profit for the year as per retained earnings = ₹ 278 lakh + ₹ 300 lakh = ₹ 578 Lakh Working Note- 2: Depreciation Plant and Machinery A/c Particulars Amount (₹ lakh) Particulars Amount (₹ lakh) To balance b/f 1,240 By Bank A/c (sale of plant) 24 To Bank - purchase (Balancing figure) 400 By depreciation on plant sold 296 By balance c/d 1,320 1,640 1,640 Accumulated Depreciation on Plant and Machinery A/c Particulars Amount (₹ lakh) Particulars Amount (₹ lakh) To depreciation on plant sold 296 By balance b/d 740 To balance c/d 524 By P&L A/c (depreciation for current year) 80 820 820 Building A/c Particulars Amount (₹ lakh) Particulars Amount (₹ lakh) To balance b/d 1,900 To Bank 420 By balance c/d 2,320 2,320 2,320 Accumulated Depreciation on Building A/c Particulars Amount (₹ lakh) Particulars Amount (₹ lakh) By balance c/d 860 To balance c/f 900 By P&L A/c (depreciation) 40 900 900

Topics: Corporate Accounting

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic