## Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on April 22, 2023

## Fact Checked

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These problems will help students clarify key concepts about cash flow statements and to ready themselves for their exams and interviews.

From the summarized cash book of Zenith Ltd. shown below, calculate net cash flow from operating activities .

From the following profit and loss account of Samarth Ltd., calculate net cash flows from operating activities.

From the following information extracted from the book of Max Ltd. for the year 2019-20, calculate net cash flow from investing activities .

Additional information is given as follows:

• Depreciation charged on furniture during the year was \$10,000
• Depreciation on machinery charged during the year was \$25,000
• Machinery, the book value of which was \$80,000, sold for \$75,000
• Land was sold at a profit of \$90,000

Note: \$190,000 indicates cash outflows are more than inflows.

## Working Notes

You received the following information from Hema Enterprises Pvt. Ltd. Calculate the net cash flow from investing activities.

Information relating to assets sold during the year 2020 is given as follows:

• Furniture costing \$100,000 (accumulated depreciation \$20,000) was sold for \$70,000
• Machinery costing \$100,000 (accumulated depreciation \$30,000) was sold for \$80,000

Note: Cash outflows are more than cash inflows (\$410,000).

From the following information acquired from Tarapoore Ltd., calculate net cash flows from financing activities for the year 2019-20.

Note: Interest on debentures paid during the year was \$30,000 and on bank loan \$40,000.

Base Ltd. provides the following information to you. Calculate net cash flows from financing activities for the year 2019-20.

Further information is given as follows:

• The company issued 5,000 bonus shares during 2019-20 to shareholders at face value
• Interest on debentures paid, in total, during the year was \$60,000
• Interest on bank loan paid during the year was \$25,000
• Dividends paid during the year amounted to \$120,000

You can also check:

• Cash Flow Statement MCQs
• Cash Flow Statement Short Questions Q&A
• Cash Flow Statement: Fill In the Blanks

## Cash Flow Statement: Practical Problems and Solutions FAQs

What is a cash flow statement.

The Cash Flow statement is an integral part of the Financial Statements. It shows the amount and timing of money in and outflows, i.E., Cash received and paid to suppliers, employees, investors, etc. It also shows changes in the balance sheet (other than equity). The Cash Flow statement reports how much cash was generated or used by the firm, not how much profit was made.

## What are the three types of Cash Flows?

There are three Cash Flow types that companies should track and analyze to determine the liquidity and solvency of the business: Cash Flow from operating activities, Cash Flow from investing activities, and Cash Flow from financing activities.

## What is the purpose of the Cash Flow statement?

The Cash Flow statement tells you how your company got its cash balance at the beginning of the period compared to the end.

## What are the two ways to prepare Cash Flow statements?

There are two ways to prepare a Cash Flow statement: the direct method and the indirect method.

## What is the most important part of the Cash Flow statement?

The most important part of a Cash Flow statement is net incom, because it shows how much money a company earned during a given period.

## True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website , view his author profile on Amazon , or check out his speaker profile on the CFA Institute website .

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## Practice Problems: Statement of Cash Flows

Demonstration problem.

The following comparative balance sheets are for Dells Corporation as of 2010 June 30, and 2009 June 30. Also provided is the statement of income and retained earnings for the year ended 2010 June 30, with additional data.

Equipment with a cost of USD 20,000, on which USD 10,000 of depreciation had been recorded, was sold for USD 3,000 cash. Additional equipment was purchased for USD 220,000.

Stock was issued for USD 250,000 cash.

The USD 50,000 bank note was paid. Using the data given for Dells Corporation:

a. Prepare a statement of cash flows - indirect method.

b. Prepare a working paper to convert net income from an accrual basis to a cash basis. Then prepare a partial statement of cash flows - direct method, showing only the cash flows from operating activities section.

Home » Exercises » Statement of cash flows

## Statement of cash flows

[exercises].

• Chapter Name: Statement of cash flows
• Section: Exercises
• Number of Exercises: 13
• Solutions: Available for all 13 exercises

We have provided the solutions of all the exercises in the statement of cash flows chapter. However, It is always in your best interest that you try enough to solve each exercise yourself before seeing the solution.

If you face difficulty in solving these exercises or understanding the solutions, please go to the explanations section of our website and read full explanation of the statement of cash flows chapter.

Exercise-1 (Operating, investing and financing activities and their effect)

Exercise-2 (Net cash provided/used by investing activities)

Exercise-3 (Net cash provided/used by financing activities)

Exercise-4 (Cash paid to suppliers – formula approach)

Exercise-5 (Cash paid to suppliers – t accounts approach)

Exercise-6 (Cash received from customers – formula approach)

Exercise-7 (Cash received from customers – t accounts approach)

Exercise 8 (Net cash provided/used by operating activities – indirect method )

Exercise-9 (Effect of transactions on statement of cash flows – indirect method)

Exercise-10 (Computation of net cash flows from operating activities – indirect method)

Exercise-11 (Computation of cash paid for property, plant and equipment)

Exercise-12 (Computation of cash paid for dividends)

Exercise-13 (Preparation of statement of cash flows – Indirect method)

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## Cash Flow Statement: Problems and Solutions | Accounting

Here is a compilation of top three accounting problems on cash flow statement with its relevant solutions.

From the following summary of Cash Account of X Ltd., prepare Cash Flow Statement for the year ended 31st March 2007 in accordance with AS-3 using the direct method. The company does not have any cash equivalents.

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