Solution for Q 01 to 10 of Chapter 5 of Book 3 - Analysis of Financial Statements of T S Grewal Class 12 Accountancy 2026-27 are given below. The Chapter name is Cash Flow Statements class 12. These Solutions are based on topics Meaning of operating, investing and financing activities, Calculation of net profit before tax and extra ordinary items and calculation of operating profit before working capital changes
Working notes are given with each solution. These help in understanding the steps and are also important for board exams as marks are given for steps.
These solutions are also useful for CA Foundation, CS Foundation and CMA Foundation students. The solutions will be helpful for students as well as teachers teaching class 12 accounts.
Question 1
| Question | Type of Activity | ||||
| a | Operating Activity | ||||
| b | Operating Activity | ||||
| c | Operating Activity | ||||
| d | Operating Activity | ||||
| e | Investing Activity | ||||
| - Patent is an asset | |||||
| f | Cash and Cash Equivalents | ||||
| g | Financing Activity | ||||
| - Overdraft is a borrowing | |||||
| h | Financing Activity | ||||
| i | Investing Activity | ||||
| - We are purchasing shares of some other company | |||||
| - These are not our company shares. | |||||
| - Our company shares are issued and not purchased | |||||
| j | Financing Activity | ||||
| k | Operating Activity | ||||
| l | Financing Activity | ||||
| - Redemption means repayment | |||||
| m | Financing Activity | ||||
| n | Investing Activity | ||||
| o | Operating Activity | ||||
| p | Investing Activity | ||||
| - Income tax is related to income from investing activity | |||||
| q | Operating Activity | ||||
| r | Operating Activity | ||||
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Question 10
| Add/less | Description | Amount | ||||
| NP before tax and extra ordinary items | 447000 | |||||
| Add | Non Cash and non operating Expenses | |||||
| Depreciation on Machinery | 84000 | |||||
| Goodwill Amortised | 18600 | |||||
| Interest on Borrowings | 16800 | |||||
| Loss on sale of furniture | 18000 | |||||
| Less | Non Cash and non operating Income | |||||
| Gain on sale of investments | 12000 | |||||
| Interest and Dividend received on investments | 27600 | |||||
| Op Profit Before working capital changes | 544800 | |||||
| Note : Premium on redemption of Preference Shares is a liability |
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Question 2
| Question | Financial | Non Financial |
| a | Operating | Investing |
| b | Operating | Investing |
| c | Financing | Financing |
| d | Operating | Investing |
| e | Operating | Financing |
| f | Operating | Financing |
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Question 3
| Note : Journal entries not asked in question. Given here only for understading |
| Question | Flow Type | Dr | Cr | |||
| a | Cash Inflow | |||||
| Bank A/c Dr.. | 110000 | |||||
| To Fixed Assets A/c | 100000 | |||||
| To Profit and Loss A/c | 10000 | |||||
| b | Cash Inflow | |||||
| Cash A/c Dr.. | ||||||
| To Sales | ||||||
| c | Cash Outflow | |||||
| Machinery A/c Dr.. | ||||||
| To Cash A/c | ||||||
| d | No Cash Flow | |||||
| Land and Building A/c Dr.. | ||||||
| To Debentures A/c | ||||||
| e | No Cash Flow | |||||
| Securities Premium Reserves A/c Dr.. | ||||||
| To Equity Share Capital A/c | ||||||
| f | No Cash Flow | |||||
| Cash A/c Dr.. | ||||||
| To Bank A/c | ||||||
| g | Cash Outflow | |||||
| Dividend Payable A/c Dr.. | ||||||
| To Bank A/c | ||||||
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Question 4
| Note : Journal entries not asked in question. Given here only for understading |
| Question | Type of Activity | Dr | Cr | |||
| a | Cash Outflow from Investing activity | 50000 | ||||
| Journal | ||||||
| Machinery A/c Dr.. | 250000 | |||||
| To Bank A/c | 50000 | |||||
| To Creditors for Machinery A/c | 200000 | |||||
| b | Cash Outflow from Investing activity | 250000 | Investment | |||
| Cash Inflow from investing activity | 50000 | Dividend | ||||
| Journal | ||||||
| a) Share of Informa Tech Ltd A/c Dr.. | 250000 | |||||
| To Bank A/c | 250000 | |||||
| (Being shares of Informa Tech Ltd puchased) | ||||||
| b) Bank A/c Dr.. | 50000 | |||||
| To Dividend Income A/c | 50000 | |||||
| (Being Dividend received from Informa Tech Ltd) | ||||||
| c | Cash Inflow from investing activity | 60000 | ||||
| Journal | ||||||
| a) Accumulated Depreciation A/c Dr.. | 160000 | |||||
| To Machinery A/c | 160000 | |||||
| b) Bank A/c Dr.. | 60000 | |||||
| To Machinery A/c | 40000 | |||||
| To Profit and Loss A/c | 20000 | |||||
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Question 5
| Add/Less | Description | Amount | Remark | ||||
| Balance in Surplus as on 31-Mar-2026 | 2000000 | ||||||
| Less | Balance in Surplus as on 31-Mar-2025 | 1000000 | |||||
| Addition to Surplus in 2024-2025 | 1000000 | ||||||
| Add | Proposed Dividend for year ended 31-Mar-2024 | 800000 | (Pre year) | ||||
| Net Profit before tax and extra ordinary items | 1800000 | ||||||
| Note : |
| a) Proposed dividend for the year ended 31-Mar-2024 is assumed to be paid this year |
| It is added back here as it is deducted for arriving at the balance in Surplus as on 31-Mar-2024 |
| b) Dividend Payable in balance sheet is a liability and does not impact Net Profits |
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Question 6
| Add/Less | Description | Amount | ||||
| Balance in Surplus as on 31-Mar-2025 | 720000 | |||||
| Less | Balance in Surplus as on 31-Mar-2024 | 400000 | ||||
| Addition to Surplus in 2024-2025 | 320000 | |||||
| Add | Proposed Equity Dividend | 160000 | ||||
| (for year ended 31-Mar-2024) | ||||||
| Add | Interim equity Dividend | 40000 | ||||
| Add | Preference share dividend | 60000 | ||||
| Net Profit before tax and extra ordinary items | 580000 | |||||
| Note : |
| a) Proposed dividend for the year ended 31-Mar-2024 is assumed to be paid this year |
| It is added back here as it is deducted for arriving at the balance in Surplus as on 31-Mar-2024 |
| b) Unpaid Dividend in balance sheet is a liability and does not impact Net Profits |
| c) Since equity dividend is paid so the preference share dividend must have been paid |
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Question 7
| Add/Less | Description | Amount | |||
| Balance in Surplus as on 31-Mar-2025 | 1500000 | ||||
| Less | Balance in Surplus as on 31-Mar-2024 | 1000000 | |||
| Addition to Surplus in 2024-2025 | 500000 | ||||
| Add | Dividend on Preference Shares | 100000 | |||
| Add | Interim Dividend (Current Year) | 200000 | |||
| NP before tax and extra ordinary items | 800000 | ||||
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Question 8
| Add/Less | Description | Amount | Remarks | |||||
| Closing Balance of Surplus | 336000 | |||||||
| Less | Opening Balance of Surplus | 100000 | ||||||
| Addition to Surplus | 236000 | |||||||
| Add | Interim Dividend | 90000 | ||||||
| Add | Transfer to Reserves | 100000 | (Appropriation of profits) | |||||
| Add | Provision for Tax | 150000 | (non cash item) | |||||
| Add | Loss due to earthquake | 200000 | (Extra Ordinary Loss) | |||||
| 776000 | ||||||||
| Less | Refund of Tax | 3000 | ||||||
| Less | Insurance claim (loss due to earthquake) | 100000 | (Extra Ordinary Income) | |||||
| Net Profit before tax and extra ordinary items | 673000 | |||||||
| Note : |
| Refund of tax is deducted as it is credited to Profit and Loss A/c and hence |
| is included in balance in Surplus |
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Question 9
| Add/Less | Description | Amount | Remarks | |||||
| Closing Balance of Surplus | 645000 | |||||||
| Less | Opening Balance of Surplus | -90000 | ||||||
| Addition to Surplus in 2025-2026 | 735000 | |||||||
| Add | Proposed Dividend for last year | 90000 | (Assumed to be paid this year) | |||||
| Add | Interim Dividend | 180000 | ||||||
| Add | Transfer to Reserves | 90000 | (Appropriation of profits) | |||||
| Add | Transfer to WCR | 15000 | (Appropriation of profits) | |||||
| Add | Provision for Tax | 300000 | (non cash item) | |||||
| Add | Loss due to fire | 400000 | (Extra Ordinary Loss) | |||||
| 1810000 | ||||||||
| Less | Refund of Tax | 6000 | ||||||
| Less | Insurance for loss due to earthquake | 200000 | (Extra Ordinary Income) | |||||
| NP before tax and extra ordinary items | 1604000 | |||||||
| Note : |
| Refund of tax is deducted as it is credited to Profit and Loss A/c and hence |
| is included in balance in Surplus |
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Q 1-10 | Q 11-20 | Q 21-30 | Q 31-40 | Q 41-52