You create the graphics from the panel and then change its size. The graphics object therefore clips to the previous size.
Change the size before you create the graphics object:
int row = Convert.ToInt32(textBox1.Text);
int column = Convert.ToInt32(textBox2.Text);
flowLayoutPanel1.Width = (row * 50) + 30;
flowLayoutPanel1.Height = (column * 50) + 1;
System.Drawing.Graphics graphics = flowLayoutPanel1.CreateGraphics();
graphics.Clear(Form1.ActiveForm.BackColor);
for (int j = 0; j < column; j++)
{
for (int i = 0; i < row; i++)
{
System.Drawing.Rectangle rectangle = new System.Drawing.Rectangle(50 * i, 50 * j, 50, 50);
graphics.DrawEllipse(System.Drawing.Pens.Black, rectangle);
graphics.DrawRectangle(System.Drawing.Pens.Red, rectangle);
}
}