The document provides financial information from the balance sheets of ABC Ltd as of June 30, 2001 and June 30, 2002 and the profit and loss account for the year ended June 30, 2002. It then uses this information to prepare a cash flow statement for the same period. Specifically, it takes the net profit before tax of Rs. 37,000 and makes adjustments for non-cash items like depreciation and loss on sale of machinery. It also accounts for changes in working capital like the reduction in stock. This results in a net cash flow from operating activities of Rs. 47,000. It also details cash flows from investing and financing activities to arrive at the final net increase in cash and cash equivalents of Rs. 9

1. Financial Accounting
1
Lecture – 42
Question
• 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.

2. Financial Accounting
2
Lecture – 42
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
Total Fixed Assets at WDV 192,000 165,000

3. Financial Accounting
3
Lecture – 42
ABC Ltd
Balance Sheet As At June 30 2002
2002 Rs. 2001 Rs.
Rs. ‘000 Rs. ‘000
Total Fixed Assets at WDV
Long Term Investments
192,000
17,000
165,000
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

4. Financial Accounting
4
Lecture – 42
ABC Ltd
Balance Sheet As At June 30 2002
2002 Rs. 2001 Rs.
Rs. ‘000 Rs. ‘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

5. Financial Accounting
5
Lecture – 42
ABC Ltd
Profit and Loss Account For the Year Ended June 30 2002
Rs. ‘000
Sales 300,000
Cost of Sales (231,000)
Gross Profit 69,000
Other Income 4,000
73,000
Less: Administrative Expenses
Director’s Remuneration 4,000
Depreciation on Building
Loss on Sale of Machinery
Other Administrative Expenses
6,000
2,000
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

6. Financial Accounting
6
Lecture – 42
ABC Ltd
Profit and Loss Account For the Year Ended June 30 2002
Rs. ‘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

7. Financial Accounting
7
Lecture – 42
Additional Information
1. Other income include dividend on Long Term Investment
2. Cost of goods sold include depreciation for the year on
machinery Rs. 5,000.
3. Accumulated Depreciation on the machine disposed off
amounts to Rs. 4,000.

8. Financial Accounting
8
Lecture – 42ABC 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

9. Financial Accounting
9
Lecture – 42
ABC Ltd
Cash Flow Statement For the Year Ended June 30 2002
Note Rs. ‘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)

10. Financial Accounting
10
Lecture – 42
ABC Ltd
Cash Flow Statement For the Year Ended June 30 2002
Note Rs. ‘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

11. Financial Accounting
11
Lecture – 42
Notes
• Note 1: Tax Paid
Provision For Tax Payable
Debit side.
Cash
8,000
Bal. C/F 9,000
Credit side.
Bal. B/F 8,000
For the year 9,000
Balancing
Figure

12. Financial Accounting
12
Lecture – 42
• Note 2: Payment to Acquire Investments
Investment
Debit side.
Bal. B/F 10,000
Cash
7,000
Credit side.
Bal. C/F 17,000
Balancing
Figure

13. Financial Accounting
13
Lecture – 42
• Note 3: Purchase of Fixed Assets
Building Cost
Debit side.
Bal. B/F 140,000
Cash
41,000
Credit side.
Bal. C/F 181,000
Balancing
Figure

14. Financial Accounting
14
Lecture – 42
• Note 4: Sale Proceeds of Machinery
Disposal of Asset Account
Debit side.
Cost 7,000
Credit side.
Accum. Dep. 4,000
Loss on Sale 2,000
Sale Proceed 1,000
Machinery at Cost
Debit side.
Bal. B/F 90,000
Credit side.
Disposal A/c 7,000
Bal. C/F 83,000
Balancing
Figure
Balancing
Figure

15. Financial Accounting
15
Lecture – 42
• Note 5: Dividend Paid
Dividend Payable
Debit side.
Cash
16,000
C/B 18,000
Credit side.
O/B 16,000
For the Year
18,000
Balancing
Figure

16. Financial Accounting
16
Lecture – 42
• (6) Repayment of TFC
TFC Account
Debit side.
Cash
4,000
C/B 16,000
Credit side.
O/B 20,000
Balancing
Figure