Page 130 - DCOM302_MANAGEMENT_ACCOUNTING

Unit 6: Cash Flow Statement

6.5 Keywords Notes

Cash: It includes cash in hand and demand deposits with bank.

Cash Equivalents: refer short-term risk free highly liquid investment.

Cash Flow Statement: The statement which indicates the flow (movement) of cash during a
period.

Flow of Cash: It means the change in cash. It also includes the inflow and outflow of cash.
6.6 Review Questions

1. The comparative balance sheets of RKV Ltd., for the last two years were as follows:

Liabilities 2006 2007 Assets 2006 2007
` ` ` `
Loan from wife 20,000 Cash 11,000 15,000
Bills payable 12,000 8,000 Debtors 40,000 35,000
Creditors 25,000 52,000 Stock 25,000 30,000
Loan from Bank 43,000 60,000 Machinery 20,000 14,000
Capital 66,000 34,000 Land & Buildings 50,000 80,000
1,46,000 1,74,000 1,46,000 1,74,000
Additional Information:
(i) Net loss for the year 2007 amounted to ` 13,000.
(ii) During the year a machine costing ` 5,000 (accumulated depreciation ` 2,000) was
sold for ` 2,500. The provision for depreciation against machinery as on 31-12-2006
was ` 6,000 and on 31-12-2007 ` 7,000.
From the above information, prepare a cash fl ow statement.

2. Draw the proforma of the Adjusted profit and loss account.
3. The financial position of RKV Ltd. on 1st January, 2006 and December 31, 2006 was as

follows:
Liabilities 1-1-2006 31-12-06 Assets 1-1-06 31-12-06
` ` ` `
Current liabilities 36,000 41,000 Cash 4,000 3,600
Mrs. Tall’s loan - 20,000 Debtors 35,000 38,400
Loan from bank 30,000 25,000 Stock 25,000 22,000
Capital 1,48,000 1,49,000 Land 20,000 30,000
Building 50,000 55,000
Machinery 80,000 86,000
2,14,000 2,35,000 2,14,000 2,35,000
During the year the RKV withdrew ` 26,000 for domestic expenses. The provision for
depreciation against machinery as on 1.1.2006 was ` 27,000 and 31.12.2006 ` 36,000.

Prepare the cash flow statement for the year ended 31st December, 2006.

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