Chapter # 10

Statement of Cash flows

IAS-07
 General Format (Indirect method)
Rs. Rs.
Cash flow from Operating Activities
Profit/(loss) before tax Cash flow from Investing Activities
Adjustments for: Purchase of non-current assets
Depreciation / Amortization
(Gain)/loss on sale of fixed assets Sale proceeds from disposal of fixed assets
(Gain)/loss on sale of long term investments Purchase of long term investment
Interest income/investment income
Interest expense Sale proceeds of long term investments
Operating cash flow before working capital changes Interest received
Adjustment for working capital changes
(Increase)/decrease in current assets Net Cash from investing activities B -
(Increase)/decrease in inventories
(Increase)/decrease in trade receivable (net)/bill
receivable Cash flow from Financing Activities
(Increase)/decrease in prepayments Proceed from issue of share capital
(Increase)/decrease in stationery/loose tools/office (including difference in share premium a/c)
supplies etc.
Increase/(Decrease) in current liabilities Long term loan raised/repaid
Increase/(decrease) in creditors/bills payable
Increase/(decrease) in accrued expenses Net cash from financing activities C -
Working capital changes
Net increase in cash and cash equivalents (A+B+C)

Cash generated from operations Add: cash and cash equivalents at beginning of period
Less: (W-1)
Interest paid
Income tax paid Cash and cash equivalents at end of period -
Dividend paid (W-1)
Net Cash from operating activities A
(W-1) Cash and cash equivalents
2008 2007

Bank
Cash in hand
Petty Cash
Short term investment
- Short term running finance/short term loan
- Bank overdraft
- -
Question # 02 Page # 658: (Spring-09, Q # 03 – 12 M) Amount in Rs.
Particulars December 31
The comparative balance sheets of Mr. Moosani show
2008 2007
the following information:
Cash 5,200 41,400
Accounts receivable 31,700 21,500
Inventory 25,000 19,400
Additional data related to 2008 is as follows: Investments - 16,900
(i) Equipment that had costed Rs. 23,000 and Furniture 80,000 64,000
was 40% depreciated at the time of disposal Equipment 86,000 43,000
was sold for Rs. 6,500. Total 227,900 206,200
(ii) Payments against long-term loans amounted to Allowance for doubtful accounts 6,500 9,700
Rs. 22,000 of which Rs. 12,000 was paid by Accumulated depreciation on equipment 24,000 18,000
Accumulated depreciation on furniture 8,000 15,000
Mr. Moosani out of his personal account.
Trade creditors 10,800 6,500
(iii) On January 1, 2008, the furniture was Accrued expenses 4,300 10,800
completely destroyed by a fire. Proceeds Bills payable 6,500 8,600
received from the insurance company Long-term loans 31,800 53,800
amounted to Rs. 60,000. Capital 136,000 83,800
(iv) Investments were sold at Rs. 7,500 above Total 227,900 206,200
their cost. Required:
(v) Mr. Moosani withdraws Rs. 15,000 each Prepare a cash flow statement for the year ended 31
month for his personal use. December 2008.
Question # 04 Page # 659: {Spring-11, Q # 04 – 14 Marks}
Mr. Junaid Janjua has provided you the following statements of financial position and statement of comprehensive income.
Balance Sheet 2010 2009 Income Statement
Rs.
As on December 31, 2010 Rs. Rs. For the year ended December 31, 2010
Cash 145,000 32,000 Sales revenue 9,280,000
Accounts receivable 280,000 104,000 Cost of goods sold (6,199,000)
Long-term investments 220,000 170,000 Gross margin 3,081,000
Inventory 424,000 200,000 Operating expenses
Prepaid insurance 24,000 36,000 Selling expenses 634,000
Office supplies 14,000 7,000 Administrative expenses 1,348,000
Land 1,810,000 2,500,000 Depreciation expenses 230,000
Building 2,800,000 2,300,000 (2,212,000)
Accumulated depreciation (890,000) (720,000) Income from operations 869,000
Equipment 1,200,000 1,150,000 Other revenues/expenses
Accumulated depreciation (380,000) (350,000) Gain on sale of land 64,000
Total assets 5,647,000 5,429,000 Gain on sale of long term investment 32,000
Accounts payable 158,000 263,000 Loss on sale of equipment (15,000)
Wages payable 40,000 24,000 81,000
Short-term loans 580,000 580,000 Net income 950,000
Long-term loans 985,000 1,160,000
Capital 3,884,000 3,402,000
Total liabilities and equity 5,647,000 5,429,000
Notes:
(a) Part of the long term loan amounting to Rs. 100,000 was paid by Mr. Junaid from his personal account.
(b) Long term investments costing Rs. 100,000 were sold during the year.
(c) Depreciation charged during the year on equipment amounted to Rs. 60,000. Equipment having a book value of Rs. 75,000 was sold
during the year.
(d) Drawings amounted to Rs. 568,000.
Required: Prepare a cash flow statement for the year ended December 31, 2010.
Question # 15 Page # 667: {Autumn-19, Q # 05 – 19 Marks}
Following are the extracts from the financial statements of Sunday Traders Limited (STL) for the year ended 30 June 2019:
Statement of financial position as on 30 June 2019 Statement of profit or loss for the year
2019 2018 2019 2018 ended 30 June 2019
Assets Equity & liabilities
Rs. in million Rs. in million Rs. in “m”
PPE 8,555 7,240 Share capital (Rs.100 each) 4,650 3,450 Sales 29,700
Investment property 1,800 1,120 Share premium 1,600 1,240 Cost of sales (15,750)
Stock in trade 4,800 4,500 Retained earnings 1,652 (655) Gross profit 13,950
Prepayments 184 268 Long term loans 6,024 6,523 Distribution cost (6,185)
Trade receivables 3,800 3,600 Trade payables 3,422 5,390 Administrative cost (2,302)
Cash 194 480 Contract liability 250 40 Other income 404
Accrued liabilities 310 180 Profit before interest and tax 5,867
Interest payable 135 110 Interest expense (1,210)
Current maturity of long- Profit before tax 4,657
850 700
term loans Tax expense (1,150)
Provision for taxation 440 230 Profit after tax 3,507
19,333 17,208 19,333 17,208
Additional information:
(i) 72% of sales were made on credit.
(ii) Depreciation expense for the year amounted to Rs.750 million which was charged to distribution and administrative cost in the ratio
of 3:1.
(iii) Distribution cost includes:
• Rs.40 million in respect of loss on disposal of equipment. The written down value at the time of disposal was Rs.152 million.
• impairment loss on vehicles amounting to Rs.24 million.
(iv) Loan instalments (including interest) of Rs.1,984 million were paid during the year.
(v) Other income comprises of:
• increase in fair value of investment property amounting to Rs.220 million. Required:
• rent received from investment property amounting to Rs.184 million. Prepare STL’s statement of cash flows for the
(vi) During the year, STL issued right shares at premium. year ended 30 June 2019 using direct method.
Question # 11 Page # 663: {Autumn-15, Q # 06 – 18 Marks}
Following are the extracts from income statement of Quality Enterprises (QE) for the year ended 31 December 2015 and its statement of
financial position as at that date, together with some additional information:
Income statement for Statement-of financial position as at 31 December 2013
Rs. in ‘000
the year ended 31.12.15 2015 2014 Assets 2015 2014
Profit from operations 6,402 ---Rs. in ‘000--- ---Rs. in ‘000---
Other income 1,357 Equity and liabilities Non-Current assets
Interest expense (100) Property, plant and
Owner's capital 14,219 10,703 19,628 11,845
Profit before tax 7,659 equipment
Income tax expense (1,376) Unappropriated profit 10,652 6,697 Investments 7,645 6,498
Profit for the year 6,283 27,273 18,343
Additional information: Revaluation surplus 2,676 1,911
(i) During the year, movements in 10% bank loan 6,000 -
property, plant and equipment Current liabilities Current assets
include: Trade and other payables 3,337 4,953 Inventories 4,642 3,073
o Depreciation amounting to Income tax payable Trade and other
1,300 994 2,273 3,865
Rs.5,280,000. receivables
o Machinery having a carrying Bank overdraft - 27 Cash and bank 3,996 4
amount of Rs.2,481,000 was 4,637 5,974 10,911 6,942
sold for Rs.3,440,000. 38,184 25,285 38,184 25,285
o Factory building was revalued from a carrying amount of Rs.5,963,000 to Rs. 8,000,000. Required:
o An office building which had previously been revalued, was sold at its carrying amount of Rs.2,599,000. Prepare a statement
(ii) The owner of QE withdrew Rs.300,000 per month. The amounts were debited to unappropriated profit. of cash flows for
(iii) Trade debts written off during the year amounted to Rs. 200,000. The provision for bad debts as at 31 Quality Enterprises for
December 2015 was Rs. 400,000 (2014: Rs. 550,000) the year ended 31
(iv) The interest on bank loan is payable on 30 June every year. The bank loan was received on 1 November December 2015, using
2015. Interest for two months has been accrued and included in trade and other payables. the indirect method.
(v) Other income includes investment income of Rs. 398,000. As at 31 December 2015 trade and other
receivables included investment income receivable amounting to Rs.96,000 (2014: Rs.80,000).
Question # 12 Page # 664: {Spring-17, Q # 06 – 12 Marks}
The statement of financial position of Liaquat Industries as at 31 December 2016 is as follows:
2016 2015 2016 2015
Equity and liabilities Assets
Rs. Rs. Rs. Rs.
Owner’s capital 13,938,060 13,665,280 Freehold land 4,778,400 6,600,000
Long-term loan 1,000,000 1,000,000 Building - WDV 5,057,600 4,171,200
Short term loan 1,331,200 1,531,200 Vehicle - WDV 600,000 800,000
Accounts payable 417,120 694,320 Equipment -WDV 1,643,100 2,112,000
Accrued interest 105,600 63,360 Capital work in progress 1,478,400 1,821,600
Long-term deposits 580,800 448,800
Inventory 685,608 320,628
Accounts receivable 1,273,272 595,452
Cash 694,800 84,480
16,791,980 16,954,160 16,791,980 16,954,160
Additional information: The following information has been extracted from
(i) Details of gain on sale of fixed assets are as follows: income statement
Rs. Rs.
Gain on sale of freehold land 168,960 Depreciation expenses 932,500
Loss on disposal of equipment due to fire (70,000) Finance cost 141,872
98,960 Gain on sale of fixed assets (net) 98,960
The loss on disposal of equipment represents the WDV of the equipment. Net profit before tax 1,525,948
The amount of insurance claim received, amounting to Rs. 30,000 was
erroneously credited to accumulated depreciation.
(ii) Repairs to building amounting to Rs. 50,000 were erroneously debited to Required:
building account on 31 December 2016. Prepare statement of cash flows for the year ended 31
(iii) Transfers from capital work in progress to building amounted to Rs. December 2016, in accordance with IAS – 7 using
1,200,000. indirect method.
(iv) The owner withdrew Rs. 150,000 per month.
Question # 13 Page # 665: {Spring-18, Q # 03 – 15 Marks}
Following information pertains to Nadir Limited:
Extract from statement of profit or loss Extract from statement of financial position as on 31 December 2017
for the year ended 31 December 2017 2017 2016 2017 2016
Equity and liabilities Assets
Rs. in ‘000’ ---- Rs. in ‘000 ---- ---- Rs. in ‘000 ----
Profit before taxation 8,955 Share capital 12,400 10,000 Non-Current assets
Taxation (2,945) Share premium 1,400 - PPE – net 21,400 15,800
Profit after taxation 6,010 Retained earnings 13,450 12,440 Current assets:
Surplus on revaluation 4,000 - Stock-in-trade 5,600 5,750
Non-current liabilities: Trade receivables – net 6,840 4,446
Other information: 4,100 5,000 Other receivables 2,385 800
Long-term loans
(i) Shares issued during the Current liabilities: Cash & bank 2,355 3,204
year were as follows: Trade payables 1,900 1,400
• 10% bonus shares in Accruals & other payables 680 660
March 2017 Tax liability 650 500
• Right shares in July 2017 38,580 30,000 38,580 30,000
(ii) During the year, a plant costing Rs. 9,500,000 and having a book value of Rs. 5,200,000 was disposed of for
Rs. 4,800,000 of which Rs. 1,800,000 are still outstanding.
(iii) Depreciation for the year amounted to Rs. 7,350,000.
(iv) Financial charges for the year amounted to Rs. 1,100,000. Accrued financial charges as on 31 December
2017 amounted to Rs. 112,000 (2016: Rs. 48,000).
(v) Provision for doubtful trade receivables is maintained at 5%.
Required:
Prepare statement of cash flows for the year ended 31 December 2017, in accordance with IAS 7 ‘Statement of
Cash Flows’ using indirect method.
Question # 19 Page # 670: {Spring-22, Q # 02 – 08 Marks}
Following information pertains to Dahl Limited (DL):

Summarised statement of financial position as at 31 December 2021

2021 2020 2021 2020
Rs. in million Rs. in million
Share capital 11.0 10.0 Property, plant and equipment 18.7 10.6
Retained earnings 32.9 33.8 Working capital other than cash 24.5 17.8
Revaluation surplus 4.0 - Cash 4.7 15.4
47.9 43.8 47.9 43.8

Additional information:
(i) Final dividend was paid in respect of year 2020 amounting to Rs. 3.4 million.
(ii) Additions to property, plant and equipment during the year amounted to Rs. 14 million.
(iii) Tax expense for the year amounted to Rs. 2.4 million. Tax payable as at 31 December 2021 amounted to
Rs. 1 million (2020: Rs. 0.2 million)
Required:
Prepare DL’s statement of cash flows for the year ended 31 December 2021.
Question # 20 Page # 670: {Autumn-22, Q # 07 – 15 Marks}
Following is the statement of financial position of Quicken Limited (QL) as at 30 June 2022:
2022 2021 2022 2021
Rs. in million Rs. in million
Share capital 480 400 Land and building 748 526
Revaluation surplus 135 - Vehicles 118 96
Retained earnings 337 325 Inventories 365 444
Long-term loan 335 460 Trade and other receivables 212 185
Trade and other payables 160 142 Cash and bank balances 73 111
Advance from customers 69 35
1,516 1,362 1,516 1,362
Additional information:
(i) During the year, land and building were revalued for the first time, resulting in a surplus of Rs. 150 million and
incremental depreciation of Rs. 15 million.
(ii) Depreciation on building charged to profit or loss amounted to Rs. 72 million.
(iii) During the year, vehicles having book value of Rs. 8 million were sold for Rs. 11 million received in cash. Further,
sale proceeds of Rs. 6 million of another vehicle (book value Rs. 7 million) disposed of in May 2021 were received in
August 2021.
(iv) Vehicles costing Rs. 51 million were purchased during the year of which Rs. 12 million is still unpaid.
(v) Inventories as at 30 June 2022 included work in process inventories of Rs. 96 million (2021: Rs. 80 million) which are
not available for sale.
(vi) Interest on loan for the year amounted to Rs. 48 million of which Rs. 14 20% interim bonus shares and
million was capitalised in the cost of a building constructed during the year. 2022
15% final cash dividend
(vii) Following dividends were announced for the year ended 30 June 2022 and 2021: 5% interim bonus shares and
2021
Required: Prepare QL’s statement of cash flows for the year ended 30 June 2022. 10% final cash dividend
Question # 21 Page # 671: {Autumn-23, Q # 07 – 18 Marks}
The following is the statement of financial position of Dolphin Limited (DL) as at 30 June 2023:
2023 2022 2023 2022
Equity & liabilities Assets
Rs. in million Rs. in million
Share capital 16,000 13,000 Property, plant and equipment 13,835 14,300
Share premium 1,120 - Capital work-in-progress 3,485 2,500
Retained earnings 10,150 10,800 Investment properties 1,820 1,950
Long-term loan 3,275 3,540 Inventories 7,450 5,000
Trade and other payables 1,485 935 Trade receivables - net 3,588 4,085
Accrued interest 140 195 Advance tax 36 -
Dividend payable 260 140 Cash and bank balances 2,216 1,010
Tax payable - 235
32,430 28,845 32,430 28,845
Additional information:
(i) The interest payment for the year amounted to Rs. 700 million, of which Rs. 300 million has been capitalised in
capital work-in-progress.
(ii) The transfer from capital work-in-progress to property, plant and equipment amounted to Rs. 550 million.
(iii) An old machine costing Rs. 520 million with a book value of Rs. 350 million was traded-in for a new machine costing
Rs. 600 million on payment of Rs. 200 million.
(iv) DL acquired an investment property costing Rs. 300 million, of which Rs. 125 million is still unpaid. DL applies fair
value model for subsequent measurement of its investment properties.
(v) The provision for doubtful trade receivables at 30 June 2023 was estimated at 8% (2022: 5%).
(vi) During the year, DL issued 10% bonus shares. Subsequently, a right issue was also made.
(vii) The tax charge for the year amounted to Rs. 750 million at 30% of profit before tax.
(viii) DL classifies dividends and interest payments in a way that keeps ‘cash flows from operating activities’ higher.
Required: Prepare DL's statement of cash flows for the year ended 30 June 2023.
Question # 08 Page # 661: {Autumn-13, Q # 07 – 07 Marks}
A summary of revenues and expenses of AB Enterprise for the year ended 30 June 2013 is given below:
Rs.
Sales 2,345,000
Cost of goods manufactured and sold (1,624,000)
Gross profit 721,000
Selling, general and administrative expenses (509,000)
Net income before income tax 212,000
Income tax (90,000)
Net income 122,000
Net changes in working capital items for the year ended 30 June 2013 were as follows:
Net changes
Dr. Cr.
Cash 32,000
Trade receivables (net) 74,000
Inventories 105,000
Prepaid expenses (selling and general) 6,000
Accrued expenses 15,000
Income tax payable 28,000
Trade payables 90,000
• Depreciation for the year amounted to Rs. 68,000.
Required:
Prepare a cash flow statement for the year ended 30 June 2013.
Question # 14 Page # 666: {Spring-19, Q # 07 – 14 Marks}
Junior Accountant of Drum Limited has prepared the following statement of cash flows for the year ended 31
December 2018: Additional Information: Statement of cash flows
Junior Accountant informed you that he has taken the Rs. in ‘000’
difference of opening and closing balances of each balance Cash flows from operating activities
sheet item and classified each difference as either operating, Increase in retained earnings 1,360
investing or financing cash flows. He further informed that the Increase in dividend payable 200
statement is tied up with the cash balances appearing in the Increase in net trade receivables (100)
balance sheet. He has ignored the following information: Increase in interest accrued 50
(i) Depreciation on building and equipment amounted to Rs. 1,510
480,000 and Rs. 810,000 respectively. Cash flows from investing activities
(ii) During the year, an equipment costing Rs. 560,000 and Increase in land and building (2,600)
having a book value of Rs 310,000 was sold for Rs 440,000 Increase in equipment (1,550)
(iii) Provision for doubtful debts was increased by Rs. 140,000 Decrease in inventory 400
(iv) Dividend amounting to Rs. 700,000 was paid during the Decrease in tax payable (60)
(3,810)
year.
Cash flows from financing activities
(v) Interest and tax expenses for the year amounted to Rs.
Increase in share capital and premium 2,350
378,000 and Rs. 650,000 respectively.
Decrease in long term loan (1,000)
(vi) Trade and other payables as at 31 December 2018 Increase in trade and other payables 600
included Rs. 950,000 for purchase of land and building. 1,950
Required: Decrease in cash balance during the
Prepare statement of cash flows for the year ended 31 year (350)
December 2018, in accordance with IAS - 7 ‘Statement of Cash Opening cash balance 450
Flows’ using indirect method. Closing cash balance 100
Question # 09 Page # 662: {Spring-13, Q # 07 – 13 Marks} Debit Credit
Particulars
Rs. in million
Galaxy Brothers commenced their business on 1 January 2013 Sales 136.00
with cash of Rs. 50 million, a building valued at Rs. 25 million Cost of sales
83.50
(including depreciation expense of Rs. 9 million)
and a motor vehicle costing Rs. 1.4 million. Following is the
Operating and selling expenses
summarised Trial Balance as of 31 December 2013: 37.30
(including depreciation expense of Rs. 6.25 million)
Miscellaneous income (net of loss of Rs. 0.35 on
0.50
settlement of total loss claim)
Finance charges 2.50
Taxation expense 6.00
Cash and bank balances 5.00
Bank overdraft 23.00
Accounts receivable 18.00
Provision for doubtful debts 0.90
Closing inventory 10.00
Settlement of the insurance claim pertained to an accident Accounts payable 14.00
of a new car costing Rs. 1.8 million and having a depreciation Interest payable 1.20
Provision for taxation (net of payments) 1.00
charge of Rs. 0.25 million for the period in use.
Partners' capital (net of cash withdrawals) 73.95
Required: 12% Long term loan payable 25.00
Property, plant and equipment 128.25
Prepare a statement of cash flow for the year ended 31
Accumulated depreciation 15.00
December 2013. 290.55 290.55