Cash Flow Statement Page 20

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MODULE - 6A
Cash Flow Statement
Analysis of Financial Statements
Note
– The gain on sale of building (i.e. Rs 6000) would be deducted from the
reported Income (or profit)
– Purchase of building for Rs.144,000 is identified from the balancing
Notes
figure in the Building account as an outflow of cash.
– Rs.110,000 a charge to Profit and Loss Account is non-cash expenses
and would be added back to the reported net income (profit)
Illustration 7
The following information is given to you about the provision for taxation
for 2006 and 2007 of M/s Gill Private (Pvt) Limited (Ltd.).
Liabilities
2006
2007
Rs
Rs
Provision for taxation
15000
20000
Net Income for the year 2006 is Rs.50,000
How would you deal with this item assuming it as non-current liability?
Solution
Provision for the year 2006 is an outflow of cash.
Provision for the 2007 shall be dealt with as follows
Rs.
Net Income for the 2007
50,000
Add provision for Taxation for 2007
20000
Cash provided from operating activities
70,000
Illustration 8
The following relevant Information is obtained from the book of Venugopalan
Limited (Ltd.).
Liabilities
2006
2007
Rs
Rs
Provision for Taxation
50000
70000
The amount of tax paid during 2007 amounted to Rs.40000. How would
you deal with this item presuming to be non current? You are also given
net profit after taxation was Rs.80000.
81
ACCOUNTANCY

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