Cash Flow from Financing Activities Example | Class 12

Cash flow from financing activities is a category in a company’s cash flow statement that accounts for external activities that allow a firm to raise capital. These activities result in change in capital and borrowings of the enterprise. Cash flow from financing activities example are as given below:

  1. Cash receipt from issue of shares.
  2. Payment of preliminary expenses
  3. Repayment of loans.
  4. Payment of interst on borrowings.
  5. Proceeds from issue of debentures
  6. Payment of Dividend




Cash Flow from Financing Activities Example 1:

Following particulars are provided by Amit Ltd.  Net cash flow from financing activities will be:

Additional information:
a) Preference dividend on preference shares and an interim dividend on equity shares @ 12 % were paid on 30th September 2014 .
b) Preference shares were redeemed on 31st March 2015 at a premium of 15 %. Such premium has been provided out of profits. New shares and debentures issued on 1st October 2014

Explanation : –

Issue of share capital = Closing balance of share capital (-) Opening balance of share capital
Equity share capital = 36,00,000 (-) 24,00,000
= 12,00,000
Premium on issue of shares = Closing balance of security premium (-) opening balance of security premium
= 5,00,000 (-) 4,00,000
= 100000
Issue of debentures = Closing balance of debentures (-) Opening balance of debentures
= 9,60,000 (-) 8,00,000
= 160000
Redemption of preference shares = Opening balance of preference shares (-) Closing balance of preference shares
= 16,00,000 (-) 4,00,000
= 12,00,000

Premium on redemption of preference shares = 12,00,000 X 15/100 = 1,80,000

Interest paid on debentures = 8,00,000 X 16% = 1,28,000

Add: Interest on new debentures issued = 1,60,000 X 16% X 6/12 = 12,800

Total interest on debentures = 1,28,000 + 12,800
= 1,40,800

Dividend paid on equity shares = 24,00,000 X 12/100 = 2,88,000

Dividend paid on preference shares = 16,00,000 X 15/100

= 2,40,000




Cash Flow from Financing Activities Example 2:

Akash Ltd provides the following information. Cash flow from financing activities will be:

Additional information:
1 Interest paid on debentures Rs 7,000 .
2 Dividend paid Rs 12,000 .

Explanation : –

Issue of equity share capital Closing balance of debentures (-) opening balance of debentures
2,25,000 (-) 1,50,000
75,000
Cash proceeds from 15 % Debentures = Closing balance of debentures (-) opening balance of debentures
= 60,000 (-) 0
= 60,000
Redemption of 12 % Debentures = opening balance of debentures (-) Closing balance of debentures
= 50,000 (-) 0
= 50,000

Cash Flow from Financing Activities Example 3:

Following particulars are provided by Akash Ltd . The total money received from issue of equity shares will be:

Additional information:
a Preference dividend on preference shares and an interim dividend on equity shares @ 3 % were paid on 30th September 2014.
b Preference shares were redeemed on 31st March 2015 at a premium of 18 %.Such premium has been provided out of profits. New shares and debentures issued on 1st October 2014.

Explanation : –

Issue of share capital = Closing balance of share capital (-) Opening balance of share capital
Equity share capital = 6750000 (-) 4500000
= 2250000
Premium on issue of shares = Closing balance of security premium (-) opening balance of security premium
= 937500 (-) 750000
= 187500
Interim dividend paid = 4500000 x 3 %
= 135000
Total amount received from issue of equity shares = Total amount of shares issued + Security premium received on issue (-) Interim dividend paid
= 2250000 + 187500 (-) 135000
= 2302500




Cash Flow from Financing Activities Example 4:

Following particulars are provided by Akash Ltd . The total amount paid to preference shares holders will be:

Additional information:
a Preference dividend on preference shares and an interim dividend on equity shares @ 15 % were paid on 30th September 2014 .
b Preference shares were redeemed on 31st March 2015 at a premium of 12 %.Such premium has been provided out of profits. New shares and debentures issued on 1st October 2014

Explanation : –

Redemption of preference shares = Opening balance of preference shares (-) Closing balance of preference shares
= 400000 (-) 100000
= 300000

Premium on redemption of preference shares = 300000 X 12/100 = 36000

Preference dividend = 400000 X 7%
= 28000
Total amount paid = 300000 + 36000 + 28000
= 364000




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