Question

On $31^{\text {st }}$ March, 2024, following is the Balance Sheet of Bhavik Limited :

Bhavik Ltd.

Balance Sheet as at $31^{\text {st }}$ March 2024

I. Equity and Liabilities :

Particulars	Note No.	$31-3-2024$ (₹)	$31-3-2023$ (₹)
1. Shareholders funds
(a) Share Capital		12,00,000	10,00,000
(b) Reserves and Surplus	1	4,00,000	3,00,000
2. Non-current liabilities
Long-term borrowings	2	6,00,000	10,00,000
3. Current Liabilities		5,00,000	1,00,000
(a) Trade Payables	3	3,00,000	4,00,000
(b) Short-term provisions
Total		30,00,000	28,00,000

II. Assets :

1. Non-current Assets
(a) Property, Plant and Equipment and Intangible Assets
Property plant and equipment	4	19,00,000	15,00,000
(b) Non-current Investments		3,00,000	4,00,000
2. Current Assets
(a) Inventories		4,50,000	3,50,000
(b) Trade Receivables		2,50,000	4,50,000
(c) Cash and Cash Equivalents		1,00,000	1,00,000
Total		30,00,000	28,00,000

Notes to Accounts :

Note	Particulars	$31-3-2024$ (₹)	$31-3-2023$ (₹)
No.
1.	Reserves and Surplus i.e. Balance in Statement of Profit and Loss	4,00,000	3,00,000
2.	Long-term borrowings
	10% Debentures	6,00,000	10,00,000
3.	Short-term provisions
	Provision for tax	3,00,000	4,00,000
4.	Property plant and equipment
	Plant and Machinery	21,50,000	16,00,000
	Less : Accumulated Depreciation	2,50,000	1,00,000
	19,00,000	15,00,000

Additional Information :

• During the year, a piece of machinery costing ₹ 8,00,000 with accumulated depreciation of ₹ 50,000 was sold for ₹ 6,50,000.
• Debentures were redeemed on $31^{\text {st }}$ March, 2024.

Calculate :

1. Cash flows from Investing Activities
2. Cash flows from Financing Activities

Hint:

For Cash Flow Statement (Investing \& Financing): - Investing: Focus on purchase/sale of Non-Current Assets (PPE, Intangibles, Investments). Sale proceeds are inflow, purchases are outflow. Interest/Dividends Received are also Investing inflows.
- Financing: Focus on changes in Non-Current Liabilities (Loans, Debentures) and Shareholders' Funds (Share Capital). Issue of shares/debentures is inflow, redemption/buyback/repayment is outflow. Payment of Interest and Dividends are Financing outflows.
- Use comparative Balance Sheets and Additional Info. Prepare ledger accounts (e.g., Fixed Asset A/c, Acc Dep A/c) if needed to find missing figures like purchases or depreciation.

Answer 1

This section details the cash flows derived from investing and financing activities.

a) Cash Flows from Investing Activities

Sale of Machinery:

• Selling Price: Rs 6,50,000
• Original Cost: Rs 8,00,000
• Accumulated Depreciation: Rs 50,000
• Resulting Cash Inflow: Rs 6,50,000

Purchase of Plant and Machinery:

• Opening Gross Balance: Rs 16,00,000
• Closing Gross Balance: Rs 21,50,000
• Machinery Sold during the period: Rs 8,00,000
• Calculation for Purchases: Closing Balance + Machinery Sold - Opening Balance = Rs 21,50,000 + Rs 8,00,000 - Rs 16,00,000 = Rs 13,50,000
• Resulting Cash Outflow: Rs 13,50,000

Non-Current Investments:

• Decrease in Investments: Rs 1,00,000 (Calculated as Opening Balance of Rs 4,00,000 minus Closing Balance of Rs 3,00,000)
• Resulting Cash Inflow: Rs 1,00,000

Net Cash Flow from Investing Activities:

• Cash from Sale of Machinery: +Rs 6,50,000
• Cash for Purchase of Machinery: -Rs 13,50,000
• Cash from Sale of Investments: +Rs 1,00,000
• Net Cash Used in Investing Activities: Rs 6,50,000 - Rs 13,50,000 + Rs 1,00,000 = (Rs 6,00,000)

b) Cash Flows from Financing Activities

Share Capital:

• Increase in Share Capital: Rs 1,00,000 (Calculated as Closing Balance of Rs 4,00,000 minus Opening Balance of Rs 3,00,000)
• Resulting Cash Inflow from Issuance: Rs 1,00,000

Debentures:

• All debentures were redeemed during the period (as per Additional Information).
• Opening Balance: Rs 10,00,000
• Resulting Cash Outflow for Redemption: Rs 10,00,000

Net Cash Flow from Financing Activities:

• Cash from Share Issuance: +Rs 1,00,000
• Cash for Debenture Redemption: -Rs 10,00,000
• Net Cash Used in Financing Activities: Rs 1,00,000 - Rs 10,00,000 = (Rs 9,00,000)

Final Answers:

• (a) Net Cash Used in Investing Activities: (Rs 6,00,000)
• (b) Net Cash Used in Financing Activities: (Rs 9,00,000)