Question 1) The following is the Comparative Balance Sheets of Pratima & Co. Ltd.

As on 30th June 1987 and 30 th June 1988 Balance sheet Liabilities 30-6-1987 Rs 30-6-1988 Rs Assets 30-6-1987 Rs 30-6-1988 Rs

Share capital Reserve fund P&L A/c Trade creditors Bank overdraft Provision for taxation Provision for doubtful debts

1,80,000 28,000 39,000 16,000 12,400 32,000 3,800

2,00,000 36,000 24,000 10,800 2,600 34,000 4,200

Goodwill Buildings Machinery Investments Inventories Debtors Cash

24,000 80,000 74,000 20,000 60,000 40,000 13,200

20,000 72,000 72,000 22,000 50,800 44,400 30,400

3,11,200

3,11,600

3,11,200

3,11,600

Additional information: i. ii. iii. iv. Prepare a) A statement of changes in working capital. b) A funds flow statement Depreciation charged on machinery Rs. 10,000 and on buildings Rs.8,000. Investments sold during the year Rs.3, 000. Rs.15,000 interim dividend paid during January 1988. Taxes paid during the year rs. 30,000.

Solution:a) Pratima Co. Ltd.

Statement of changes in working capital for the year ending 30th June 1988 30-6-1987 Particulars Rs 30-6-1988 Rs Increase Rs Current assets: Inventories Debtors Cash Total (A) Current Liabilities: Trade creditors Bank overdraft Provision for doubtful debts Total (B) Working capital (A-B) Increase in working capital 16,000 12,400 3,800 32,200 81,000 27,000 1,08,000 1,08,000 36,600 10,800 2,600 4,200 17,600 1,08,000 27,000 36,600 5,200 9,800 400 60,000 40,000 13, 200 1,13,200 50,800 44,400 30,400 1,25,600 4,400 17,200 9,200 Decrease Rs Changes in working capital

Note: Provision for tax and interim dividend are treated as non-current items.

b)

Pratima Co. Ltd. Funds flow statement for the year ending 30th June 1988 Particulars Sources of funds: Funds from operations ( W.N.1) Sale of investments Issue of shares (2,00,000-1,80,000) Total sources (A) Applications of funds: Machinery purchased (W.N.2) Investments purchased (W.N.3) Interim dividend paid Tax paid Total applications (B) Increase in working capital (A B ) 8,000 5,000 15,000 30,000 58,000 27,000 62,000 3,000 20,000 85,000 Rs. Rs.

Note: Provision for Tax and Division are treated as non-current items . Investments are taken as non-trading investments.

Working notes: W.N.1: Particulars To Transfer to Reserve Fund (36,000-28,000) To Depreciation on Machinery To Depreciation on Buildings To interim dividend To Goodwill written off ( 24,000-20,000) To Provision for tax (W.N.4) To Balance c/d 4,000 32,000 24,000 1,01,000 1,01,000 8,000 10,000 8,000 15,000 Adjusted Profit & Loss Account Rs Particulars By Balance b/d By Funds from Operations (Bal.fig.) Rs 39,000 62,000

W.N.2: Particulars To Balance b/d To Bank (Purchase Bal. fig )

Machinery Account Rs 74,000 8,000 82,000 Particulars By Depreciation By Balance c/d Rs 10,000 72,000 82,000

W.N.3:

Investments Account

Particulars To Balance b/d To Bank (purchase Bal. fig. )

Rs 20,000 5,000 25,000

Particulars By Bank (sale) By Balance c/d

Rs 3,000 22,000 25,000

W.N.4 Particulars To bank ( Tax paid ) To Balance c/d

Provision for Tax Account Rs. 30,000 34,000 Particulars By Balance b/d By P & L A/c (Provision made Bal.fig.) 64,000 32,000 64,000 Rs. 32,000

Question 2) From the following Balance Sheets prepare a Funds Flow Statement Balance Sheet Liabilities 1989 Rs. Share Capital General Reserve Profit on sale of investment P & L A/c 7% Debentures Creditors Bills Payable Proposed dividend Provision for tax 1,00,000 3,00,000 1,60,000 10,000 30,000 70,000 14,70,000 10,000 2,00,000 2,00,000 2,50,000 12,000 35,000 75,000 17,32,000 14,70,000 17,32,000 6,00,000 2,00,000 1990 Rs. 7,00,000 2,50,000 Fixed Assets Investments Stock Debtors Bills Receivable Prepaid expenses Discount on debentures 15,000 10,000 Assets 1989 Rs. 8,00,000 1,80,000 2,00,000 2,25,000 40,000 10,000 1990 Rs. 9,50,000 1,80,000 2,70,000 2,45,000 65,000 12,000

Other Information: a) During 1990 Fixed assets (Book value Rs.10,000 and depreciation written off Rs. 30,000) were sold for Rs.8,000. b) During 1990 investment costing Rs.80,000 were sold and new investments were bought for Rs.80,000. c) Debentures were redeemed at a premium of 10%. d) During 1990 income tax paid was Rs.55,000. e) Provision for depreciation 31-12-89 Rs.2,00,000; 31-12-90 Rs.2,50,000.

Solution : Funds Flow Statement for the year 1990 Particulars Sources of Funds Issue of shares (7,00,000-6,00,000) Sale of fixed assets Sale of investments(80,000+10,000) Funds from operations (W.N.1) Total sources(A) Applications of Funds: Debentures redeemed Premium on debentures redeemed Tax paid Dividend paid Fixed assets purchased (W.N.2) Investments purchased Total Applications (B) Increase in working capital (A-B) 1,00,000 10,000 55,000 30,000 2,40,000 80,000 5,15,000 25,000 1,00,000 8,000 90,000 3,42,000 5,40,000 Rs. Rs.

Note: 1) Tax, dividend and investments are treated as non-current items 2) Opening balance of proposed dividend is assumed to have been paid during 1990

Working notes: W.N.1: Particulars To Transfer to general reserve (2,50,000-2,00,000) To Premium on redemption of debentures (1,00,000 X 10 %) To proposed dividend To Provision for Tax (W.N.3) To Depreciation on Fixed Assets {2,50,000-(2,00,000-30,000)} To Loss on sale of fixed assets (10,000-8,000) To Discount on debentures written off( 15,000 10,000) To Balance c/d 5,000 2,00,000 4,42,000 4,42,000 2,000 80,000 10,000 35,000 60,000 50,000 Adjusted Profit Loss Account Rs. Particulars By Balance b/d By Funds from operations (Bal.fig.) Rs. 1,00,000 3,42,000

Note: 1) Profit on sale of investments is not shown in the adjusted P&L A/c because it was not credited to P&L A/c. 2) Premium on redemption of debentures is assumed to have been provided from P&L A/c balance. 3) Though provision for depreciation is given in adjustments , it does not appear in Balance Sheet. So, the fixed assets account is shown at book value.

W.N.2: Fixed Assets Account Particulars To Balance b/d To Bank ( purchase ) (Bal.fig.) Rs. 8,00,000 2,40,000 Particulars By Depreciation {2,50,000 (2,00,000-30,000)} By Bank (sale) By P&L A/c (Loss on sale ) By Balance c/d Rs. 80,000 8,000 2,000 9,50,000

10,40,000

10,40,000

Note: After adjusting depreciation on the fixed assets sold the depreciation provision is 2,00,000-30,000= Rs.1,70,000. Thus , depreciation for the current year is Rs 2,50,000-1,70,000=Rs 80,000. W.N.3 : Particulars To Bank (Tax paid ) To balance c/d Rs 55,000 75,000 By Balance b/d By P & L A/c ( provision made , Bal.fig.) Provision for Tax A/c Particulars Rs 70,000 60,000

1,30,000

1,30,000

W.N.4 : Particulars To balance b/d To Profit on sale of investments To Bank ( purchase )

Investments Account Rs. 1,80,000 10,000 80,000 Particulars By Bank ( sale ) By Balance c/d Rs. 90,000 1,80,000

2,70,000

2,70,000

Question no 3) Balance sheet of Ganesh Mills Ltd. Liabilities 1992 Rs. Equity share capital 10% redeemable pref. share capital Capital redemption reserve Reserve fund Share premium Profit & loss A/c 12% Debentures Creditors 2,00,000 30,000 1,20,000 2,00,000 80,000 11,30,000 2,00,000 1,00,000 1,20,000 30,000 1,80,000 3,00,000 1,40,000 12,70,000 11,30,000 12,70,000 3,00,000 1993 Rs. 4,00,000 Buildings Machinery Furniture Investments Stock Debtors Cash at bank Assets 1992 Rs. 2,50,000 3,00,000 20,000 1,00,000 3,00,000 1,40,000 20,000 1993 Rs. 3,00,000 3,20,000 18,000 1,50,000 2,50,000 2,00,000 32,000

The following transactions took place during the year 1993: a. Preference shares were redeemed at 10% premium. b. Rs. 20,000 was transferred to reserve fund from P & L A/c. c. Investments ( book value Rs. 40,000) were sold for Rs. 70,000. d. Depreciation provided on Building, Machinery, and Furniture Rs. 20,000 , Rs.30,000 and Rs. 2,000 respectively. e. Dividends paid Rs. 50,000 and income tax paid Rs. 45,000. Prepare a funds flow statement showing changes in working capital

Solution) Ganesh mills Ltd. Funds Flow Statement for the year 1993 Particulars Sources of Funds: Funds from operations(W.N.1) Issue of equity shares(4,00,000-3,00,000) Issue of debentures(3,00,000-2,00,000) Sale of Investments Total sources (A) Applications of Funds: Preference shares redeemed Premium on redemption (2,00,000X10/100) Purchase of building(W.N.2) Purchase of machinery(W.N.3) Purchase of investments(W.N.4) Dividends paid Income tax paid Total Applications (B) Decrease in working capital (A-B) 2,00,000 20,000 70,000 50,000 90,000 50,000 45,000 5,25,000 -38,000 2,17,000 1,00,000 1,00,000 70,000 4,87,000 Rs. Rs.

Note: Dividend, Income tax and Investments are treated as non-current items

Working notes: W.N.1: Particulars To Transfer to reserve fund To Premium on redemption of preference share (2,00,000 X 10%) To Depreciation on: Buildings Machinery Furniture To Dividends To Provision for income tax To Balance c/d 20,000 30,000 2,000 50,000 45,000 1,80,000 3,67,000 Note: 1) Since Tax and dividend are given in the adjustments alone as paid, provision must have been made for them out of profits and immediately payment is made . So, they do not appear in the Balance Sheet. 2) Premium on redemption of preference shares must have been provided out of P&L A/c since Rs.1,00,000 was transferred to capital redemption reserve from reserve fund. W.N.2: Particulars To Balance b/d To Bank (Purchase) (Bal. fig.) Buildings Account Rs. 2,50,000 70,000 3,20,000 Particulars By Depreciation By Balance c/d Rs. 20,000 300,000 3,20,000 3,67,000 20,000 Adjusted Profit and Loss Account Rs. 20,000 Particulars By Balance b/d By Profit on sale of investments (70,000 40,000 ) By Funds from operations (Bal. fig.) 30,000 2,17,000 Rs. 1,20,000

W.N.3: Particulars To Balance b/d To Bank (Purchase) (Bal. fig. )

Machinery Account Rs. 3,00,000 50,000 3,50,000 Particulars By Depreciation By Balance c/d Rs. 30,000 3,20,000 3,50,000

W.N.4: Particulars To Balance b/d To P & L A/c (profit on sale ) (70,000-40,000) To Bank (purchase) (Bal.fig.)

Investments Account Rs. 1,00,000 Particulars By Bank (sale) By Balance c/d 30,000 90,000 Rs. 70,000 1,50,0000

2,20,000

2,20,000

Question 4) Prepare a Funds Flow Statement from the following data: Balance Sheet Liabilities 31.12.96 Rs. Equity Capital Long term Debt Retained Earnings Accumulated Depreciation Accounts Payable 5,000 1,400 2,800 2,100 2,000 13,300 31.12.97 Rs. 5,300 1,300 3,700 2,500 2,100 14,900 Cash Accounts Receivable Inventories Other Assets Fixed Assets Assets 31.12.96 Rs. 2,000 2,400 3,100 800 5,000 13,300 31.12.97 Rs. 2,500 2,700 3,200 700 5,800 14,900

Additional Information: a) Fixed assets costing Rs.1,200 were purchased for cash. b) Fixed assets (original cost Rs.400, accumulated depreciation Rs.150) were sold at book value. c) Depreciation for the year 1997 amounted to Rs.550 and duly debited to P&L A/c. d) Reported income for 1997 was Rs.1,200.

Solution: Funds Flow Statement for the year ending 31-12-97 Particulars Sources of funds: Issue of equity shares (5,300-5,000) Sale of fixed assets (W.N.2) Funds from operations(W.N.1) Total Sources (A) Applications of funds: Long-term debt repaid(1,400-1,300) Fixed assets purchased Dividend paid (W.N.4) Total applications( B ) Increase in working capital (A-B) 100 1,200 300 1,600 700 300 250 1,750 2,300 Rs. Rs.

Note: Other assets is taken as other current assets since fixed assets are separately given. Working Notes W.N.1: Particulars To Depreciation on Fixed Assets To Dividend ( W.N.4) To Balance c/d Adjusted Profit and Loss Account Rs. 550 300 3,700 4,550 4,550 Particulars By Balance B/d By Funds from operations (Bal. fig.) Rs. 2,800 1,750

Note: Since P&L A/c balance is not separately given ,opening and closing balances of retained earnings are shown in the Adjusted P & L A/c.

W.N.2: Particulars To Balance b/d To Bank (purchase) Rs. 5,000 1,200

Fixed Assets Account Particulars By Accumulated depreciation A/c (Depreciation on asset sold) By Bank ( sale) By Balance c/d 6,200 Rs. 150 250 5,800 6,200

W.N.3: Particulars

Accumulated Depreciation A/c Rs. 150 By Balance b/d By P & L A/c (current year depreciation) 2,500 2,650 2,650 Particulars Rs. 2,100 550

To Fixed Assets A/c (Depreciation on asset sold) To Balance c/d

W.N.4:

Reconciliation of Profits Rs. Opening Balance of retained earnings 2,800 1,200 4,000

Add:

Reported Income for 1997 (given )

Less:

Transfer to any reserve 4,000

Less:

Closing Balance of Retained earnings Dividend (Balancing figure )

3,700 300

Note: Reconciliation of profits can be made, when reported income is separately given, to find a missing figure like Dividend.

By Kamarthi karthik , 11397051 Dms-som 2011-13 batch Sec-b