## Working Notes – T-Account (Ledger) Technique
When a question provides opening/closing balances and P&L figures but not the direct cash figure, reconstruct the relevant T-account. The balancing figure = the cash flow.
### Core Principle
Every account obeys double entry:
Opening Balance + Debits = Credits + Closing Balance
If all figures except one are known, the unknown = the cash flow for the statement.
---
### Template 1 – PPE / Plant Account (Gross Block)
```
Plant Account
Dr Cr
Opening Balance (Gross) X Depreciation X
Cash Purchases [?] Cost of asset disposed X
Closing Balance (Gross) X
```
→ Cash Purchases = Closing + Depreciation + Cost disposed − Opening
To find Sale Proceeds of disposed asset:
Sale Proceeds = Net Book Value ± Profit / Loss
Net Book Value = Cost − Accumulated Depreciation on that asset
---
### Template 2 – Investment Account
```
Investment Account
Dr Cr
Opening Balance X Sale Proceeds [?]
Cash Purchases [?] Closing Balance X
P&L: Profit on Sale X (P&L: Loss) X
```
→ Sale Proceeds = Opening + Purchases + Profit − Closing
---
### Template 3 – Provision for Tax Account
```
Provision for Tax Account
Dr Cr
Tax Paid (Cash) [?] Opening Balance X
Closing Balance X P&L: Tax charge X
```
→ Tax Paid = Opening Provision + P&L Charge − Closing Provision
---
### Template 4 – Share Capital / Debentures
```
Share Capital Account
Dr Cr
Closing Balance X Opening Balance X
Fresh Issue (Cash) [?]
```
→ Cash from Issue = Closing − Opening (when no redemptions during the year)
---
### Template 5 – Land and Building (with Renovation)
```
Land & Building Account
Dr Cr
Opening Balance X Closing Balance X
Renovation (CWiP) X
```
Amount transferred from Capital Work-in-Progress to the building account = investing cash outflow already paid in the year of construction.
---
### Non-Cash Transactions – Exclude Entirely
If assets are acquired in exchange for shares or debentures (no cash changes hands), these are non-cash transactions and must be excluded from the Cash Flow Statement. They are disclosed separately in a note to the accounts.
Example: Bonds of ₹1,00,000 issued in part-exchange for Plant — neither the plant entry nor the bond entry appears anywhere in the cash flow statement.
---
### Suggested Sequence When Solving a Problem
1. Open T-accounts for all non-current assets (PPE Gross Block, Investments)
2. Open T-accounts for long-term liabilities (Share Capital, Debentures, Provision for Tax)
3. Enter all known figures (opening/closing balances, P&L items, depreciation)
4. Find the plug (balancing figure) = cash flow to insert in the statement
5. Verify: Opening CCE + Net Change (A+B+C) = Closing CCE