From the above information, prepare a Cash Flow Statement as per Accounting Standard – 3. All calculations are to be considered as part of the answer.

Steps to Solve

1. Calculate Cash Flow from Operating Activities

Start by determining the net profit/loss for the year.

1. Determine the changes in working capital by comparing the balance sheet items from 31-03-2013 to 31-03-2014:

   • Increase in Debtors: $2,000,000 - 1,800,000 = 200,000$ (outflow)
   • Increase in Stock: $3,000,000 - 1,600,000 = 1,400,000$ (outflow)
   • Increase in Bills Receivable: $1,200,000 - 1,400,000 = -200,000$ (inflow)
   • Increase in Creditors: $1,400,000 - 1,200,000 = 200,000$ (inflow)
   • Increase in Bills Payable: $50,000 - 40,000 = 10,000$ (inflow)

2. Calculate Cash Flow from Investing Activities

Calculate cash flows from investments:

• Note the sale of Land and Building for $125,000$ with a profit transfer to capital reserve.
• Investments sold for a profit: $40,000$ realized 20% profit. The cost price = $40,000 / 1.2 = $33,333. Therefore, cash inflow = $40,000$.

3. Calculate Cash Flow from Financing Activities

Identify cash flows related to financing:

• Convert 500 debentures at ₹100 each to shares: ₹50,000 inflow.
• Proposed Dividend paid: ₹1,000,000$ outflow.

4. Prepare the Cash Flow Statement

Compile the results from the operating, investing, and financing activities into the Cash Flow Statement format:

• Cash Flow from Operating Activities: net income adjusted for working capital changes.
• Cash Flow from Investing Activities: sum of cash inflows/outflows from investments.
• Cash Flow from Financing Activities: sum of cash inflows/outflows from financing activities.

5. Final Statement Review

Ensure all calculations align, and present the final Cash Flow Statement clearly highlighting sources and uses of cash.