Q50977a The following additional information is also relevant for the preparation of the statement of cash flows (figures are inRs.’000). An amount of 250 was raised from the issue of share capital and a further 250 was raised from long term borrowings. Interest expense was 400 of which 170 was paid during the period. 100 relating to interest expense of the prior period was also paid during the period. Dividends paid were 1,200. Tax deducted at source on dividends received (included in the tax expense of 300 for the year) amounted to 40. During the period, the enterprise acquired fixed assets for 350. The payment was made in cash. Plant with original cost of 80 and accumulated depreciation of 60 was sold for 20. Foreign exchange loss of 40 represents the reduction in the carrying amount of a short-term investment in foreign-currency designated bonds arising out of a change in exchange rate between the date of acquisition of the investment and the balance sheet date. Sundry debtors and sundry creditors include amounts relating to credit sales and credit purchases only.

Balance Sheet as at 31.12.1996		(Rs. ’000)
Assets	1996	1995
Cash on hand and balances with banks	200	25
Short-term investments	670	135
Sundry debtors	1,700	1,200
Interest receivable	100	–
Inventories	900	1,950
Long-term investments	2,500	2,500
Fixed assets at cost	2,180	1,910
Accumulated depreciation	(1,450)	(1,060)
Fixed assets (net)	730	850
Total assets	6,800	6,660

Liabilities
Sundry creditors	150	1,890
Interest payable	230	100
Income taxes payable	400	1,000
Long-term debt	1,110	1,040
Total liabilities	1,890	4,030
Shareholders’ Funds Share capital	1,500	1,250
Reserves	3,410	1,380
Total shareholders’ funds	4,910	2,630
Total liabilities and shareholders’ funds	6,800	6,660

Statement of Profit and Loss for the period ended 31.12.1996	(Rs. ’000)
Sales	30,650
Cost of sales	(26,000)
Gross profit	4,650
Depreciation	(450)
Dividend income	200
Foreign exchange loss	(40)
Net profit before taxation and extraordinary item	3,350
Extraordinary item – Insurance proceeds from Earthquake disaster settlement	180
Net profit after extraordinary item	3,530
Income-tax	(300)
Net profit	3,230

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Direct Method Cash Flow Statement
1996	(Rs. ’000)
Cash flows from operating activities Cash receipts from customers	30,150
Cash paid to suppliers and employees	(27,600)
Cash generated from operations	2,550
Income taxes paid	(860)
Cash flow before extraordinary item	1,690
Proceeds from earthquake disaster settlement	180
Net cash from operating activities	1,870
Cash flows from investing activities Purchase of fixed assets	(350)
Proceeds from sale of equipment	20
Interest received	200
Dividends received	160
Net cash from investing activities	30
Cash flows from financing activities Proceeds from issuance of share capital	250
Proceeds from long-term borrowings	250
Repayment of long-term borrowings	(180)
Interest paid	(270)
Dividends paid	(1,200)
Net cash used in financing activities	(1,150)
Net increase in cash and cash equivalents	750
Cash and cash equivalents at beginning of period (see Note 1)	160
Cash and cash equivalents at end of period (see Note 1)	910

Indirect Method Cash Flow Statement
1996	(Rs. ’000)
Cash flows from operating activities
Net profit before taxation, and extraordinary item	3,350
Adjustments for:
Depreciation	450
Foreign exchange loss	40
Interest income	(300)
Dividend income	(200)
Interest expense	400
Operating profit before working capital changes	3,740
Increase in sundry debtors	(500)
Decrease in inventories	1,050
Decrease in sundry creditors	1,740
Cash generated from operations	2,550
Income taxes paid	(860)
Cash flow before extraordinary item	1,690

Proceeds from earthquake disaster settlement	180
Net cash from operating activities	1,870
Cash flows from investing activities
Purchase of fixed assets	(350)
Proceeds from sale of equipment	20
Interest received	200
Dividends received	160
Net cash from investing activities	30
Cash flows from financing activities
Proceeds from issuance of share capital	250
Proceeds from long-term borrowings	250
Repayment of long-term borrowings	(180)
Interest paid	(270)
Dividends paid	(1,200)
Net cash used in financing activities	(1,150)
Net increase in cash and cash equivalents	750
Cash and cash equivalents at beginning of period	160
Cash and cash equivalents at end of period	910

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