T.S. Grewal Class 12 Vol 3 Chapter 5 Q.24 - Cash Flow Statement

Question 24

From the following details, calculate Cash Flow from Investing Activities:

Particulars	Closing (₹)	Opening (₹)
Machinery (At Cost)	10,00,000	9,50,000
Accumulated Depreciation	1,50,000	1,10,000
Patents	2,00,000	3,00,000

Additional Information:
1. During the year, a machine costing ₹90,000 with accumulated depreciation of ₹60,000 was sold for ₹50,000.
2. Patents written off were ₹50,000, while a part of the patents was sold at a profit of ₹40,000.

Solution

Cash Flow from Investing Activities

Particulars	Amount (₹)	Amount (₹)
Purchase of Machinery (WN1)	(1,40,000)
Sale of Machinery	50,000
Sale of Patents (WN3)	90,000	Nil
Net Cash Used in Investing Activities		Nil

Working Note 1: Machinery Account (at cost)

Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	9,50,000	By Provision for Depreciation A/c	60,000
To Statement of Profit and Loss (Profit on Sale, 50,000 − 30,000)	20,000	By Bank A/c (Sale)	50,000
To Bank A/c (Purchase, balancing figure)	1,40,000	By Balance c/d	10,00,000
Total	11,10,000	Total	11,10,000

Working Note 2: Provision for Depreciation Account

Particulars	Amount (₹)	Particulars	Amount (₹)
To Machinery A/c (on asset sold)	60,000	By Balance b/d	1,10,000
To Balance c/d	1,50,000	By Statement of Profit and Loss (Depreciation charged during the year, balancing figure)	1,00,000
Total	2,10,000	Total	2,10,000

Working Note 3: Patents Account

Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	3,00,000	By Patents Written Off	50,000
To Statement of Profit and Loss (Profit on Sale)	40,000	By Bank A/c (Sale, balancing figure)	90,000
		By Balance c/d	2,00,000
Total	3,40,000	Total	3,40,000

Note: Patents Written Off is a non-cash amortisation entry used only to reconstruct the ledger and derive the Sale of Patents figure — it does not itself appear as a line in the Cash Flow Statement.