1.

From the following balances extracted from the books of City Union Bank Ltd as on
31.3.2018

Particulars Rs. Particulars Rs.

Interest on Fixed Deposits 30000 Other Management Expenses 700
Interest on Savings Bank Deposits 12000 Profit and Loss A/c (1.4.2017) 30000
Interest on Overdrafts 15000 Interest on Current Accounts 8400
Interest on Tem loans 40000 Interest on Cash Credit 4200
Interest on Investments 10000 Director's fees 600
Discount on Bills 29500 Auditor's fees 400
Profit on Sale of Investments 15000 Locker Rent 1800
Loss on Sale of Buildings 3000 Transfer fees 500
Commission and Brokerage 21000 Rent and Taxes 1200
Salaries 800 Postage and Telegrams 200
Depreciation on Bank properties 500 Printing and Stationery 600
Additional Information’s:
(a). Rebate on bills discounted - Rs.1500
(b). Provision for bad debts - Rs.1200
(c). Provision for Income Tax - Rs.1100
(d). Revenue Reserve @ 5%
(e). Proposed Dividend - Rs.6000
Required:
(i). Prepare a Profit and Loss Statement of the Bank and interpret its financial position
(ii). Explain the treatment of Rebate on Bills discounted

Answer:

Profit and Loss Account

Particulars Sch. No Rs.
I. Income    
Interest Earned 13 105600
Other Income 14 35300
Total   140900
II. Expenses    
Interest Expended 15 42000
Operating Expenses 16 5000
Provisions & Contingencies   2700
Total   49700
     
III. Profit and Loss    
Net Profit for the year   91200
P&L B/f   30000
Total   121200
 IV. Appropriations    
Statutory Reserve   30300
Revenue Reserve   6060
Proposed Dividend   6000
Transfer to Balance Sheet   78840
Total   121200

Schedule 13 Interest Earned Schedule 15 Interest Expended

Interest on Overdrafts 15000 Interest on Fixed Deposits 30000
Interest on Tem loans 40000 Interest on Savings Bank Deposits 12000
Interest on Investments 10000   42000
Discount on Bills 29500
Less: Rebate on Bills
discounted -1500 Schedule 16 Operating Expenses
Interest on Current Accounts 8400 Salaries 800
Interest on Cash Credit 4200 Depreciation on Bank properties 500
  105600 Other Management Expenses 700
Director's fees 600
Schedule 14 Other Income Auditor's fees 400
Commission 21000 Rent and Taxes 1200
Profit on Sale of Investment 15000 Postage and Telegrams 200
Loss on Sale of Buildings -3000 Printing and Stationery 600
Transfer fees 500   5000
Locker rent 1800
  35300

2. The summarised balance Sheets of KSBS Products Company Ltd for the years ended 31.3.2016
and 31.3.2017 are given below:

Capital and Liabilities 31.3.2016 31.3.2017 Assets 31.3.2016 31.3.2017

Share Capital 500000 500000 Land and Buildings 180000 200000
Plant and
General Reserve 200000 220000 Machinery 210000 276000
Profit and Loss
account 40000 32000 Other fixed assets 30000 45000

Mortgage Loan --- 100000 Investments 50000 50000

Creditors 158000 172000 Stock 200000 190000

Provision for Taxation 45000 30000 Debtors 170000 195000

      Cash at Bank 103000 98000

  943000 1054000   943000 1054000

Additional Information:
(i) Dividend proposed and paid during the year was Rs.30,000
(ii) Provision for taxation made during the year was Rs.12,000
(iii) Machinery worth Rs.15,000 was sold for Rs.12,000 and the loss was excluded in the Profit and
Loss account
(iv) Investment costing Rs.10,000 were sold during the year for Rs.12,000

Required:
Prepare a Cash Flow Statement and interpret the Cash flow position in the company.

Answer:

Cash Flow Statement

Operating Activity  
Net Loss -8000
Add: Provision for Tax 12000
Loss on sale 3000
Transfer to General Reserve 20000
Profit on sale of invest -2000
Proposed dividend 30000
Decrease in stock 10000
Increase in Drs -25000
Increase in Crs 14000
Tax Paid -27000
  27000
Investing Activity  
Purchase of PM -81000
Purchase of Investment -10000
Purchase of L&B -15000
Purchase of other Assets -20000
Sale of Machinery 12000
Sale of Investment 12000
  -102000
Financing Activity  
Borrow of Mortgage loan 100000
Proposed Dividend -30000
  70000
   
Net Cash increase/Decrease in CF -5000
Add: Opening Cash 103000
Closing Cash 98000

Ledgers:
Provision for Taxation
To Bank (Tax) 27000 By Bal 45000
To Bal 30000 By Provision 12000
  57000   57000
 Plant and Machinery
To Bal 210000 P&L (Loss) 3000
To Bank (Purchase) 81000 Sale 12000
    By Bal 276000
  291000   291000

Investment
To Bal 50000 By Bank(Sale) 12000
To P&L(Profit) 2000 By Bal 50000
To Bank (Purchase) 10000    
  62000   62000