Income tax paid: The amount of the income tax paid usually differs from the estimated income tax expense, appearing on the profit and loss account. Also a part of the income tax expenses for a year is paid in the following year. The difference between income tax payment and income tax expense result in a change income tax payable. The following equation shows this relationship: Tax paid during the year = Opening balance of tax unpaid + Provision made during the year - Closing balance of tax unpaid. Let us take an example to understand these treatments. Illustration 5.1: The Board of Director of Amit Itd. was not able to decide that why the Co. are not having adequate cash balance. The amount of profit of the company for the year 2003 was Rs. 90,000. This was highest amount as compared to previous years. You have been asked to prepare a Cash Flow Statement with the help of following information using direct method. t25 Balance Sheet Liabilities ssue and paid up capital Profit and Loss A/C Mortgage Loan Tax unpaid Trade creditors Dec. 2002 Dec. 2003 Assets 1,575.00 1,575.00 Long term assts 157.00 225.00 Closing stock 900.00 Prepayments 22.50 67.50 Trade debtors 315.00 877.50 Cash 2,070.00 3,645.00 (Rs. in thousands Dec.2002 Dec.2003 1,125.00 2.047.50 337.50 900.00 45.00 90.00 112.50 450.00 450.00 157.50 2,070.00 3,645.00 Statement of Profit (For the year ended Dec. 2003) ) Particulars Rs. ,000 Rs. ,000 2.250.00 Sales Opening stock Add. Purchases 337.50 2205.00 2,542,50 900.00 1642.50 607.50 Less Closing stock Gross profit Less: Administrative expenses Depreciation Taxes (Provision) Net Profit Payment of dividends Add. Profit and loss a/c (Jan.2003) Balance on Dec. 2003 247.50 180.00 90.00 517.50 90.00 22.50 67.50 157.50 225.00 You are also informed that a new building was purchased on 15 June 2003 for Rs. 11,02,500