necessary remedial measures can be taken. Moreover it provides a better measure for inter-period and inter-firm comparison (vi) Evaluate management decisions: The statement of cash flows reports the companies investing and financing activities and thus gives the investors and creditors about cash flow information for evaluating managers decisions. | 48 Mustration 12. From the information as contained in the income statement and the balance sheet of Ashok Lid., you are required to prepare a cash flow statement using (1) Direct Method and (1) Indirect Method. A. Income Statement and Reconciliation of Earnings for the year ended 31.3.2014 25,20,000 Not Sales Less: Cost of sales Depreciation Salaries and wages Operating expenses Provision for taxation 19,80,000 60,000 2.40,000 80,000 88.000 24,48,000 72.000 Net operating profit Non-recurring income: Profit on sale of equipment Retained earnings (balance in Profit & Loss Account brought forward) Dividend declared and paid during the year Profit & Loss Account balance as on 31.3.2014 B. Comparative Balance Sheets 12.000 84.000 1.51.800 2.35,800 72.000 1.63.800 As at 31.3.2013 3.60.000 1.51,800 2.40.000 24.000 12.000 1.20.000 9.07.800 As al 31.3.2014 4,44,000 1.63.800 2,34,000 48.000 13.200 1.32.000 10.35.000 Capital Surplus in profit and loss Alc Sundry creditors Outstanding expenses Income tax payable Accumulated depreciation on building and equipments Fixed assets Land Building and equipments Current assets Cash Deblors Stock Advances 48.000 3.60.000 96,000 5,76,000 60,000 1,68,000 2,64.000 7.800 9.07.800 72,000 1.86.000 96,000 9.000 10.35.000 Cost of equipment sold was 372,000