Question

A businessman starts his business with Rs. 5,00,000. He borrows Rs10, 00,000 @12% P.A. From
the bank. He bought a machine for Rs. 4,00,000 and paid rent Rs. 12,000. He bought goods of Rs. 80,000
for cash. He sold goods for Rs. 2,00,000 for cash. He also paid interest on loan for two months. Find out
cash flows on account of various activities.
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Answer 1

Answer:

Explanation:

A Cash Flow From Operating Activities    

 Cash Sales          200,000  

 Cash Receipt From Debtors    

   Less : Cash Purchases        (180,000)  

   Cash Paid to Creditors and other expenses    

   Cash Paid to Creditors and other expenses          (12,000)  

   Cash Generated from operating activities                  8,000

   Less : income tax paid    

   Cash Flow before extraordinary item                  8,000

   Add/ Less : Extra ordinary item    

 Net Cash Flow From Operating Activities                  8,000

B. Cash Flow from investing activities    

       

 Sale of Machinery    

 Less : Purchase of Noncurrent Investment 0  

   Less : Purchase of Machinery (400,000) (400,000)

 Net Cash from Investing Activities   (400,000)  

C. Cash Flow from Finacing activities    

 Proceeds from Capital Infusion 500,000  

 Proceeds from Borrowings 1,000,000  

    Less : Redemption of Debentures 0  

    Less : Interest Paid (20,000)  

    Less : Dividend Paid 0 1,480,000

 Net Cash Flow From Financing activities   1,480,000