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CA Intermediate · Advanced Accounting · AS 3 Cash Flow Statement

Bharat Exports Ltd began the year with cash and cash equivalents of ₹1,00,000. Net cash from operating activities was ₹3,00,000, net cash used in investing activities was ₹2,00,000 and net cash used in financing activities was ₹50,000. These figures exclude the effect of exchange rate changes. The company holds a US dollar bank balance, which produced an unrealised exchange gain of ₹12,000 during the year. Closing cash and cash equivalents shown in the cash flow statement will be:

Closing cash and cash equivalents are ₹1,62,000. The three activities add a net ₹50,000 to the opening ₹1,00,000, giving ₹1,50,000. AS 3 reports the unrealised exchange gain on foreign currency cash as a separate reconciling item, so the ₹12,000 gain is added.

  1. A₹1,38,000
  2. B₹1,50,000
  3. C₹1,62,000Correct
  4. D₹1,74,000

Explanation

Net change from the three activities = 3,00,000 - 2,00,000 - 50,000 = 50,000, giving 1,50,000. AS 3 requires the effect of exchange rate changes on cash held in foreign currency to be shown separately as a reconciling item; the gain increases the balance by 12,000, giving 1,62,000. Ignoring it gives 1,50,000, and deducting it gives 1,38,000.

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