## T-Account Working Notes: Deriving Cash Flows
### When to Use
Use T-accounts when the problem provides opening/closing balances and total accrual-basis figures (total sales, total purchases) but does not directly state the cash received or cash paid.
---
### Trade Receivables (Debtors) – Finding Cash Received
```
Trade Receivables A/c
Dr Cr
──────────────────────────────────────────
Opening balance XX | Cash received ?? ← Balancing figure
Credit Sales XX | Closing balance XX
──────────────────────────────────────────
XX | XX
```
Formula: Cash received from debtors = Opening bal + Credit sales − Closing bal
> Note: Cash sales bypass debtors entirely — they are already a direct cash inflow.
---
### Trade Payables (Creditors) – Finding Cash Paid
```
Trade Payables A/c
Dr Cr
─────────────────────────────────────────────
Cash paid ?? ← B/f | Opening balance XX
Closing balance XX | Credit Purchases XX
─────────────────────────────────────────────
XX | XX
```
Formula: Cash paid to creditors = Opening bal + Credit purchases − Closing bal
---
### PPE Account – Finding Cash Paid for PPE
```
PPE A/c
Dr Cr
───────────────────────────────────────────
Opening balance XX | Sale proceeds XX
Cash purchases ?? | Depreciation XX
| Closing balance XX
───────────────────────────────────────────
```
Formula: Cash paid for PPE = Closing bal + Depreciation + Sale book value − Opening bal
---
### Loan Account – Finding Repayment
```
Bank Loan A/c
Dr Cr
───────────────────────────────────────────
Cash repaid ?? ← B/f | Opening balance XX
Closing balance XX | New loan raised XX
───────────────────────────────────────────
```
Formula: Cash repaid = Opening bal + New borrowings − Closing bal
---
### General Rule for Any T-Account
> Balancing figure on the Dr side = Cash paid (outflow)
> Balancing figure on the Cr side = Cash received (inflow)
All other non-cash entries (depreciation, discount, bad debts) must also be entered on the correct side before balancing.
### Example 1
Illustration 11 Working Notes (₹ crores)
Given: Total Sales = ₹135 cr (all credit); Opening Debtors = ₹45 cr; Closing Debtors = ₹50 cr
Trade Receivables T-Account:
```
Dr Cr
────────────────────────────────────────────────────
Opening Balance 45 | Cash received 49 ← (B/f)
Credit Sales 54 | Closing Balance 50
────────────────────────────────────────────────────
99 | 99
```
Cash received from debtors = 45 + 54 − 50 = ₹49 crores
---
Given: Total Purchases = ₹55 cr (credit); Opening Creditors = ₹21 cr; Closing Creditors = ₹23 cr
Trade Payables T-Account:
```
Dr Cr
────────────────────────────────────────────────────
Cash paid 42 ← (B/f) | Opening Balance 21
Closing Balance 23 | Credit Purchases 44
────────────────────────────────────────────────────
65 | 65
```
Cash paid to creditors = 21 + 44 − 23 = ₹42 crores
### Example 2
Illustration 11 – Debenture Redemption Working (₹ crores)
Given: Debentures redeemed at premium; premium = ₹22 cr; new share issue proceeds = ₹150 cr
Logic:
- Debenture redemption = face value redeemed + premium paid = total cash outflow in CFF
- Premium on redemption is NOT added to the debenture T-account (it is an additional cash outflow)
- New share issue at cash = ₹150 cr → CFF inflow
New Plant Purchase Working:
When old plant is exchanged (part-exchange) for new plant:
```
Cash paid for new plant = Purchase price of new plant
− Exchange value of old plant
```
The exchange value of old plant = its book value at date of exchange (if no gain/loss given).
### Example 3
Share Capital T-Account (ESC)
```
Equity Share Capital A/c
Dr Cr
─────────────────────────────────────────────
Balance c/d 500 | Opening balance 200
| Cash – Fresh issue 300 ← (B/f)
─────────────────────────────────────────────
500 | 500
```
Cash received from share issue = 500 − 200 = ₹300
Loan T-Account:
```
Loan A/c
Dr Cr
───────────────────────────────────────
Cash repaid 250 ← (B/f) | Opening 250
Balance c/d 0 |
───────────────────────────────────────
250 | 250
```
Cash repaid = ₹250 (loan fully repaid)