FUNDS FLOW STATEMENT iia iacbscacnioeace oman oo EE {noduction and meaning, Preparation of funds flow statement, Statement of changes In werking capital, tems requiring special attention, Distinction between funds floyy Stotement and profit and toss account and balance sheet, Advantages of funds flow Statement, Problems and solutions, Examination questions. Introduction Balance Sheet and Profit and Loss Account are the two most important financial statements suis 4 pacinGPaed at the end of the financial year. Balance Sheet (or Position Statement) shows finan, < the same amount. Thus working capital eniey put decreases plant (f A i ‘ash (current ass : 7 (e) Increase. It Kestiaeohir ett me means CUITENt asset, . 5. asset results in increase in working creditors int king capital. as » Stock of materials as well wr ies - amount, This does ases but cash wo! not affect decreases. Thus current liabilities increase by the same (current asset) Workin, (a) Decrease. Furniture (fixed asset) inctey es not affect capital is decreased, oth non-cursent items: It do * Wothin, (h) No change. Plant and debentures are bol : 4.2 capital. nage in working capital. ‘ 1) Decreases, It decreases cash resulting in decrease 1” ont liabilities. Thus this transac ( es. Tt decre: are non-curtt ting (7) No change, Hoth debentures and long-term loan a" does not affect working capital ee Preparation of Funds Flow Statement now the [duirement to mr In order to prepare a funds flow statement, it is necessary to Teatians ropare Funds Figy various ‘sources’ and application’ of funds. The various sources ard 4PP [Statement rious ‘sources’ and ‘applications’ of fund ae of funds are given below in a profroma of Funds Flow statement ae i ul Statement of Sources and Applications (Funds Flow Statement) Sources of Funds : (a) Issue of Share Capital (b) Issue of Debentures (©) Loans from Institutions (@) Sale of non-current assets and investments (e) Funds from operations (Profit) : ——— Total Sources ee Applications of Funds (a) Redemption of Preference Shares (b) Redemption of Debentures (c) Repayment of loans (@) Purchase of non-current assets (e) Loss from operations (Loss) Bi (A) Payment of dividend, taxes, etc. Soa Total Applications 3 Net Increase or Decrease in Working Capital (Total Sources - Total Applications) 2 2 EXHIBIT 4.2, Format of Funds Flow Statement : I t Scanned with CamScanneri ——— ——————— *’ Y Management Accounting | a iteratively, the funds flow statement may be prepared in T-form account as follows : Funds Flow Statement for the period i Gourees of Funds % | Applications of Funds x 7, issue of shares || 1. Redemption of pref. shares I 4 eve of debentures || 2. Redemption of debentures 4 Loans from Institutions 3. Repayment of Loans 4 Sale of non-current assets | 4. Purchase of non-current assets junds from Operations | 5. Payment of dividend, taxes ] * pecrease in working capital (B.F.) 6. Loss from operations Increase in working capital (B.F.) | | Various sources and applications of funds have been shown in the Exhibit] When a transaction results in increase of funds, it is called source of funds 42. Sources of Funds Raising Long term Loans Non- trading Receipts Profit from Operations Purchase Redemp- |° Repayment Payment Loss of Fixed of tion of of Divi- from : q Assets Long Term Pref. dends, operations te Loans Shares Taxes etc. if and deb. i Applications of Funds EXHIBIT 4.3 Sources and Applications of Funds Various sources and applications of funds are calculated from the Comparative | When a transaction Balance Sheets and additional information given. For example, if share capital | results in decrease has increased from one year to next year, it shows source of fund from issue of | Of funds, itis called shares, If the question is silent about the nature of issue of be Lapplication of fund. assumed that shares were issued for cash and the Fe applies to both equity and preference share during the period. It means preference shares \ tis thus recorded as an appli the balance sheets, oo ee Scanned with CamScannera 432 Management Accounting STATEMENT OF CHANGES IN WORKING CAPITAL ¢ statement of sources and applicati ion of funds shows the di! = oe aa Ths and total applications as Tithe nets ot Grove in working capita) Th variation in working capital can be verified by sg sunatene fee in working capital. This statement, unlike ater tes, A ieee is prepared with the help of only current _| Information given in I cae should ° such a statement of changes in working Lbalance sheets. ont Sr ue ali pabapeiread that such a statement is prepared only from the in se ouesde the betas chee re is no effect on this statement of any additional Statement of Change in Working Capital changes in working ‘capital Is prepared only from the Previous Year | Current Year Effect on working capital : : Trews (9) ] Decene i) ant Assets = eaeh and bank Debtors stock Prepaid expenses Bill receivable etc. E Total current Liabilities = Creditors Bills payable Outstanding exp- Total Increase or decrease in working capital EXHIBIT 4.4. Format of Statement ‘of Changes in Working Capital hile preparing the statement it should be noted that : (a) Increases in current assets result in increase (+) in working capital. (6) Decreases in current assets result in decrease (-) in working capital. (6) Increases in current liabilities result in decrease (-) in working capital. (@ Decreases in current liabilities result in increase (*) in working capital. Mlustration 4.5 Taking the data given in Illustratio prepared as follows : : a 4.4, the Statement of Changes in Working Capital will be Scanned with CamScannerFund Flow Statements Fund Flow stsements ty Statement of Changes in Working Capital 2013 2014 Increase (+) | Decrease -y z z z z Current Assets : Cash 35,000 75,000 40,000 Account Receivable 98,000 90,000 8,000 Stocks 87,000 1,20,000 33,000 Total (a) 2,20,000 2,85,000 Current Liabilities : ‘Accounts Payable 70,000 1,00,000 30,000 Total (b) 70,000 1,00,000 Working Capital (a) ~ (b) 41,50,000 1,85,000 Increase in Working Capital 35,000 - = 35,000 1,85,000 1,85,000 73,000 73,000 Mlustration 4.6 curren Scanned with CamScannerFund Flow Statements Current Assets = Cash e Account Receivable oo c Stocks a 0 Total (a) 30,000 : 7 Current Liabilities + he Accounts Payable Total (b) a tt Working Capital (a) ~ (b) own A Increase in Working Capital z i 4? ABC Ltd. for two years: , The following are the summa we Share Capital Profit & Loss Account Reserves S. Creditors Bills Payable Bank Overdraft Provision for taxation Goodwill Land and Building 1,12,450 Plant and Machinery 1,48,000 Stocks 1,11,040 9730 | S. Debtors 85,175 | Bills Receivable 2,315 | Gash 2,500 | : 4,61,480 | Additional Information : 1. During the year ending 31st Dec. 2014, an interim dividend of % 2,600 was paid. 2, Income tax paid during the year amounted to % 25,000. | 3. The net profit for the year before tax was % 62,530. | You are required to prepare Statement of Changes on Working Capital, treating provision for | tazation as a current lability. Scanned with CamScanner‘Management Accounting ya ion on ABC Co. Ltd. Statement of Changes in Working Capital Tifect on Working Capital : nuszeor | anszeors [Traesete) | Beret C) peti z z z Assets ¢ _ oar cash 2,500 2.700 200 a 2, Debtors 85,175 72,625 a acces 5. Bills Receivable 2,315 735 = 1.580 4, Stocks 1.11,040 97,370 - 13.67 Total (A) 2,01,030 1,73,430 Liabilities : con reitors 39,500 41,135 = 1,635 2. Bills Payable 11,525 22,255 = 3, Bank Overdraft 59,510 = 4, Provision for taxation a 10,000 Total (B) Working Capital (A - B) Increase in working capital = i 42,530 \ 70,770 81,965 81,965 : Wote : As stated earlier, additional information given outside the Balance Sheet has no effect on the statement of Changes in Working Capital. This statement is prepared only on the basis of information given in the Balance Sheet. i 1 ' Item Requiring Special Attention Given below are certain items which require special attention while preparing a Statement of Sources and Application of Funds. |. Fund From Operations Funds from ‘operations is the first and the foremost source of funds for any firm. Profit is a very important sources of fund in a business. In fact, profit from operations is the only item of source which is generated by the internal sources ie, by the operations of business activities. However, it is important to note that net profit as shown by the Profit and Loss Account does not always Comectly represent the amount of fund from business operations. The reason is simple. There are Certain items which appear in the Profit and Loss Account but do not involve any payment in cash e.9., é:precation, writing off goodwill and preliminary expenses etc. These types of items do not have any” ‘fect on the working capital and are termed as ‘non-fund’ net profi wn by the Profit ard Loss Account has to be adjusted for these ‘non-fund’ items so as to arriv nd fre °perations, The following are the main adjustments oh 7 Add : Generally the following items are added back to net profit 1. Depreciation on fixed assets. 2. Written off fictitious and intangible items li ‘sue of shares ete, Scanned with CamScannern Wording Caplttal ont of Schedule of Changes | Statom: st Bohe Kffoot Working Captiay nor Inoroane ; | __Parttewtar Previoun Yoar | currant Current Assets: Cash in hand Cash at bank Lule k repaid Expenses Acenied Incomes Total Current Assets Current Laabilitws Bills Payable ‘Sundry Creiitors Outstanding Expenses Bank Overdrait Short-term advances Dividends Payable Proposed dividenda* Provision for taxation* Total Current Liabilities Working Capital (CA-CL) Net Increase or Decrease int Working Capital + May or may not be a current liability. illustration 1. Prepare a Statement of changes in Working Capital from the following Balance Sheets of Manjit and Company Limited, Balance Sheets as at December 31 Liabilities 2006 2007 Assets 2006 3007 Rs. Rs. Rs. 7 Equity Capital 500,000 5,00,000 Fixed Assets 6,00,000 7,00,000 Debentures 3'70,000 4.50.00 Long-term Tax Payable 77000 43,000 Investments 2,00,000 —_1,00,000 ‘Accounts Payable 96,000 1,92,000 Work-in-Progress "80,000 ‘90,000 Interest Payable 37000 45,000 Stock-in-trade 1,50,000 2,25,000 Dividend Payable 30,000 «35,000 Accounts Receivable 70,000 1,40,000 Cash 30,000. 10,000 00 12,08,000 00 Solution : Statement of Changes in Working Capital Effect on Working Capital Particulars Tnerease | Decrease . Ra. Rs. Current Assets : . Cash 30,000 10,000 20,000 70,000 1,40,000 70,000 Accounts Receivable Debtors Closing St Current Liabil Trade Cre Bills Payal Loans (Pay Working Cap Net incren Working ¢ Note. Scanned with CamScanneras Pits Payable 96,000 1,92'000. ted Payable 50,000 38.000 i 2,60,000 | 3,15,0000 pang Capital (CA-CL) 70,000 1,50,000 se ih Workang Capital of See 80,000 Reiner 150,000, lustration 2. From the follow? statement showing changes in Working Capital. . 2,08,000 80,000 2,04,000 ‘31st Dee. 2007 ‘st Dec. 2006 Rs. Rs “sets Cash Debtors sing Stock Tengittrm Investments a Preliminary Expenses betrrade Creditors 50,000 ¥ Bills Payable 20,000 Loans (Payable during 2008) 7 Share Capital 1.25,000 Profit & Loss Account 0,000 255,000 Solution Statement Showing Changes in Working Capital Effect on Working Capital Particulars 2006 2007 nerease crease Rs, Rs. Rs. Rs. Current Assets Cash 25,000 70,000 45,000 Debtors, 98,000 90,000 8,000 Closing Stock 87,000 1,20,000 33,000 2,10,000) 2,80,000 La Current Liabilities : a Trade Creditors 50,000 45,000 5,000 Bills Payable 20,000 35,000 15,000 A Loans (Payable during 2008) 20,000 20,000 20,000 1,900,000 Worlang Capital (CA-CLy 1,40,000 1,80,000 Net increase in kang Capital 40,000 40,000 \ % 1,80,000 1,80,000 83,000 83.000 } “No ans (payable during 2008) is a current habilty- i a Scanned with CamScannerCalculation of Funds from Operations Funds from operations may be computed by preparing a statement by starting with the net prof: already calculated and then add and deduct items to arrive at funds from operations. Alternatively, funds from operations may be calculating by preparing Adjusted Profit and Loss Account in T-form as shown below : Scanned with CamScannerpefund Stems: ® "Semecion 2 eto 2 ted at © best um on redemption of debentures/ ve shares Pcount on issue of shares and debentures = Pepa amiten off co Gemints written Off © pater ary expenses written off = Peon of Profit: one reral reserve = erent sinking fund = proposed dividend (Equity and Preference) nem dividend = Hation provision = pebenture sinking fund yet Profit c/4 EXHIBIT 4.5 Proforma of Adjusted P&L Account lustration 4, arte i During the year 2014, Soni Ltd. earned a profit of & 1,85,720 after adjusting the following : Provision for bad debts sala Depreciation written off Profit on sale of fixed assets Discount on debentures written off Loss on sale of investments Preliminary expenses written off Proposed dividend ‘Transfer to debenture redemption Fund Dividend received Calculate funds from operations. By Wet Profit b/d By Non-operating incomes = Interest received — Dividend received = Refund of taxes — Profit on sate of non-current assets Management Accounting ‘By Funds from operations (Bal, Figure.) z 1,500 8,500 15,300 14,000 20,000 2,000 8,000 50,000 20,000 4,500 Scanned with CamScannera Fund Flow Statem Solution ‘ cateulation of funds from operation’ 18578 Profit as per Profit & Loss Account Bi Add: to cash charges 15,300 reciation 20,000 Discount on debentures 2,000 Loss on investment 8,000 Preliminary expenses i 50,000 Proposed dividend 20, 00 4 Deb. redemption fund ae | q Rese 3,01,035 Less: Non-operating incomes : Profit on sale of fixed assets ad Dividend received a | =f Funds from operations ae Note : Provision for bad debts decreases net working capital and thus is not adjusted Alternative Method Adjusted Profit and Loss Account z t To Depreciation 435,300] By Profit on sale of fixed assets 16005 To Discount on debentures 20,000] By Dividend received : a Ihe Laas an lavecenant 2,000] By Funds from operations (Bal. Fig) | 282.0 To Prel. expenses written off 8,000 To Proposed dividend 50,000 To Deb. Redemption Fund 20,000 To Net profit 1,85,720 3,01,020 30100 i Scanned with CamScannerev Mustration 4.8 oF ' , Jo Net From the following Profit and Loss Account, calculate funds from operations: E Profit and Loss Account — 7 z 7 sotut To Depreciation 1,000 | By Gross profit 9,000 To Discount 100 | By Profit on sale of plant ey | ee To Loss on sale of machine 400 To Goodwill written off 2,350 To Preliminary exp. written off 500 To Sundry Expenses 2,500 To Net Profit 5,650 12,500 12,500 Scanned with CamScanner. Management Accounting gowto™ ta Calculation of Fund {rom Operation: “85 ,). |---| oT at profit as per Profit and Loss Account 5,650 Be tems or expenses not resulting inthe application of funds: ' 44 Depreciation 1,000 {discount : 0 {0 Loss on sale of machine 400 1 {2 Goo written of 2350 Lag | fh ina een tnt 7 01 tal x "0 eduet — lems which ae nota source of funds: Profit on the sale of plant 8s ends rm Operon [ee Sea stato ee lenlate funds from operations from the following : ' Profit and Loss Account Tock 5,000] By Sales 1,50,000, ee 25,000 By Closing Stock 10,000 To Purchases “ To Wages 4,200 sys ‘ad : Outstanding 800 | 5,000 } ‘o Mig. Expenses .o0 ‘i 1a Gross Profit 1,21,000 — \ 7,60,000 [160.000 to Silay 6.500 By Gross Profit 1,21,000 ess: Prepaid roo | 5,800 To Rent 2,200 ‘ ‘To Depreciation 3,500 a To Goodwill written off 5,000 § To Preliminary Expenses written off 2,500 To Net Profit 1,02,000, ee } 1.21,000 [1.21,000 i Solution i Calculation of Fund from Operations z z ‘Net Profit as per Profit and Loss Account 1,02,000 ‘Adé: Non-Fund! items and expenses not resulting in the application of funds (a) Depreciation 3,500 (b) Preliminary expenses written off 2500 (c) Goodwill written off 5,000 11,000 Funds from operations 1,13,000, Scanned with CamScannerFund Flow Statements Alte dei imative Method. Funds from operations can also be calculated by starting from the gq 9 all such expenses which result in the application of funds. This is shown below = Calculation of Funds from Operations z Sales Closing Stock Less: Opening Stock +,000 Net Purchases . ws000 Wages 4 Salaries Be Rent Fd Mfg. Expenses 6.000 Funds from Operations Tag 2.71 “ wis . Treatment of Provision for Taxation | Provision for taxation may be treated in either of the following two ways while preparing a fy, wo flow statement. ne ” stark gustent ability When provision for taxation treated as a current Uability it appear, Pee x statement of Changes in Working Capital. In such a case it will not be taken into account ey | capital ae calculating funds from operations and nothing appears on application side of the Funds Flow Statemen (a) ; on account of taxation. n 2. As a non-current liability. When provision for taxation is treated as a non-current Lily provision created during the year is added back in profit to calculate funds from operations and ta | solutio paid during the year is shown as an application of fund in the Funds Flow Statement. In this case, i, (a) does not appear in the Statement of Changes in Working Capital. Provision for Taxation ond ik. 3. Treatment of Proposed Dividend Proposed Ding | \ ay be troated re wh ‘ This item may be treated in either of the two ways stated below : Current labitues er sent) u yh 1. As a current liability. In such a situation , it appears in the statement non-current 0) E a of changes in working capital and no adjustrzent is made in the calculation of Llabllities. @ Ov funds from operations. It is also not recorded in the Funds Flow Statement as an application, G 2. As a non-current liability. When proposed dividend is treated as non-current item is added | applic 4 back in profit to calculate the funds from operations and dividend actually paid (°" payable) is shown 0) ‘as an application of funds in the Funds Flow Statement. It does not appear in the Statement of Changes ®) in Working Capital. iG Important Note : Treatment of proposed dividend as a non-current item Is mostly used in actual practice. 4. Treatment of Interim Dividend vet i let Interim dividend paid is shown as an application of fund in the Funds Flow Statement. It is also s added back in the net profit for calculating the funds from operations, if it has already been debited to In are pr Profit and Loss Account. Scanned with CamScannerPROBLEMS AND SOLUTIONS Problem 4.1 The following is the Balance Sheet of AZ Co. Ltd.. tor two years. Balance Sheets Liabilities = 2013 20% ‘Share capital 12,00,000 16,00,005 Debentures 4,00,000 6,00,000 Profit and Loss Account 2,50,000 500,009 Creditors 2,30,000 180,000 Provision for = (a) Bad and doubtful debts 12,000 6,000 (b) Depreciation on land and building 40,000 48,000 (©) Depreciation on plant and machinery 60,000 70,000 21,92,000 Assets : Plant and machinery (at cost) 8,00,000 12,90,000 Land and building (at cost) 6,00,000 8,00,000 Stock 6,00,000 7,00,000 Bank 40,000 80,000 Preliminary expenses 14,000 12,000 Debtors . 1,38,000 41,22,000 21,92,000 30,04,000 Additional information : 4. During the year a part of the machinery costing % 1,40,000 (accumulated depreciation thereo" ¥ 4,000) was sold for & 12,000. 2. Dividend of % 1,00,000 was paid during the year. (a) Change in working capital in 2014, and prepare scertain * . (b) Funds flow statement for 2014 Scanned with CamScannerManagement Accounting 2 25 | 426 the | setation vt tep-l tee step ‘Statement of Changes in Working Capital as - ne | Particulars 2013, 2014 | Increase | Decrease * z z z t stock 6,00,000 | 7,00,000 | 1,00,000 - Bank 40,000 | ‘0,000 | 40,000 — Debtors 1,38,000 | 1,22000 - 16,000 of | Creditors 2,30,000 | 1,80,000 | 50,000 - Poorision for bad debts 12,000 6,000 6,000 Increase in Working Capital (Bal. Fig.) = | 1.80,000 Total 1,96,000 | 1,96,000 Scanned with CamScanneron pe “WORKING NOTES 3g step - 2 Plant and Machinery Account ‘ z t & ‘Balance b/d 8,00,000 | By Bank (Sale) 12,000 7 to Bank (B.F) (purchase) 6,30,000 | By Dep. on machine sold 4,000 e By Loss on sale 1,24,000 i By Balance c/d 12,90,000 o 1¥4,30,000 14,30,000 E | i Stop-3 _Povision for Depreciation on Pant and Machinery Account To Pant and Machin ‘ au ery 4,000 | By Balance b/d Bppealance c/a 70,000 | By P&L A/e 74,000 Scanned with CamScannerFind Row statements Se 4 L Adjusted Profit and Loss Account g To Dividend paid 41,00,000} By Balance b/d To Dep. in plant and machinery 14,000 To Dep. on building 8,000) By Funds from operations (Bal. Fig.) To Prel. expenses 2000| To Loss on sale of machine 1,26,000 To Balance c/d 5,00,000 7,48,060 Scanned with CamScannerO16 000 000 000 000 A Funds Flow Statement Step -S- for the year ending 2014 Sources of Funds : Issue of share capital (16,00,000 — 12,00,000) Issue of debentures (6,00,000 - 400,000) Funds from operations" Sale of machine Total (A) Applications of Funds : Purchase of plant* Purchase of building (8,00,000 ~ 6,00,000) Dividend paid Total (B) Increase in working capital (A - B) = 4,00,000, 2,00,000 4,98,000 12,000 [11,210,000 ib 6,30,000 200,000 100,000, 9,30,000 1,80,000 eos, Scanned with CamScannerFund Flow Statements Adjusted Profit and Loss Account : t 7 ' Jo Bivdend pia 1,00,000] By Balance b/d Be Dep in plant and machinery 14,000 2st 0 Dep. on building 8,000| By Funds from operations (Bal, Fi To Prel. expenses 2000 eet a To Loss on sale of machine 1.24,000 i To Balance ¢/d 500,000) 7,48,000] 2 Stay Problem 4. The Summarised Balance Sheets of K Ltd. as follows : on 31st March, 2013 and 3ist March 201, ate Liabilities 2013) 2014] Assets 2013 Share Capital 12,00,000| 15,00,000 | Buildings 8,00,000 : 14% Debentures 6,00,000| 4,00,000 | Machinery S,o0.000 | 720 PRL A/c 1,00,000| 1,50,000 | Short-term investments 3,00,000 | 72220 General Reserve 3,00,000| 3,50,000 | Inventories “00,000 | {50008 Creditors 4,90,000) 5,60,000 | Debtors 6,70,000 sat Proposed dividends 1,20,000] 1,80,000 | Cash at Bank 2,20,000 a Provision for taxation 1,00,000| _1,30,000| Prepaid expenses 20,000 nae 29,10,000| 32,70,000 29,10,000 m Additional Information ; (i) Debentures were redeemed at a premium of 10%. | (ii) Taxes paid during the year amounted to ® 1,40,000. (ii) A machine which appeared at a WDV of 7 80,000 was sold for & 1,30,000; and new machines worth % 3,60,000 were acquired during the year. Prepare a statement of sources and applications of funds, showing changes in the working capital Solution Statement of Changes in Working Capital Particulars 2013 2014 Increase | Decrease z z z z Creditors 4,90,000 5,60,000 te 70,000 Short term investments 3,00,000 | 4,50,000] —1,50,000 - Inventories 4,00,000 4,70,000 70,000 - Debtors 6,70,000 5,30,000 teaas 140,000 Bank - 2,20,000| 330,000) —_1,10,000 Prepaid expenses 20,000 10,000 iaant qe Net incrcase in working capital (B.F.) =|} 110,00 3,30,000 3,30,000 Note : Proposed dividend and provision for taxation have been treated as non-current items. scanne amocannerparte: & C14 wera] ao! ‘hasr Tun FaLextmantr |B00p00| 4 Socoo| 1Se000. | — Srulosied 4.00000 |. «to.000 2.000 | ~___ || pebtoss. . 640000 | $30000|_ — 40000 _ Bank - A0000).330000} 110000} — _|pepail_ op a0000| gom¢ = lo, | stofar_c- ACAD 1,10000}.1 449000 - =] |Lew. woseat_lob lites |. ea catditos’s _[ ¥900toe| S60000 | “hl c-. CB) | 490900/S fop00 | Co anne (A-2)| 20004 12,390) (0 woesking Cog 1,10,000} _—_ C11 a0000 = 19 2008 at colby 12,30000| 18,3000 T lH _—_—_L-_____— jaigeo | = ote ~ dis Prepased Too. Provisicml_ (or te N step -3 Mainewy ble v Vin bolons bo! stoooa ley 5 audi [14.80,000 pet dla ___| 50,000 * na S060 | C 130,000 - 0= €0000 000 “Sa Sale value la Tro on Sale] = * | +,2.0000__ rel = 60,000 ky sa I —_1B.t05" ‘Scanned with CamScanneret pal Ab net aS pe | aie cotieg Gal > os 100000 ~~. - . !$0000 oh ae Add. on- opi fapenter* ®) tpnora) Rede bd proposed! Divider! ~ - 180000. 2. Fas. jssovi S500 — a) Depseuiaihton m aati — useate)_$00000 - 16000 2) pinta 00 Rare L__£Spveenium_on Refers —UG0o090 = 400000 aque ji 2 oP-eal clos (wont) 60,000 50,000. ll : brome eaten aa som) tet 200000 TE on Opal font_Cuss nei 4) | te Ts : foul Tilton = stern] 3 2. Salo Tofol Courts 139.000 |_S,20,000 4.80000 | Apdiration, na funds > = hw 4 Debenfuded Redoemect at. ma | [200000 + 20,000 1 [sonda0- yooed _ Le oe Xleh_s = 40,0005 10. canned wit ~amocannerRind Mow Statements ————~_ia Hie Problem 4.3 Pecan Tap ANE sumatsed Nalnce sheets of XL as on 338 December, 2013 and 201%: S Equity Shares G, 5. te of Fauity Shares Capital 2,00.000 | 2,50,000 | Bank 35,000 1. Sase of J Debentaes 1.09,000 | “80,000 | stock 40,000 2 tne of 0° 20% Pret. Shate capitat 50,000 | 80,000 | Bills Receivable 20,000 3. I ake Public Deposits 20,000 | 30,000 | ebtors 70,000 4 Coptic den ae | 50,000} 80,000 | Machinery 75,000 5 Ses of eo 20,000) 25,000 | Furniture 30.000 | 20g & gunds fror Bia a eel sae | aon Provision for Depreciation Buildings 140.000 | “'g9.09) . on Machinery 10,000} 15,000 | Goodwilt 30.000 | amp applications Proposed Dividend 20,000} 25,000 1 Redemot Creditors 40,000} 50,000 2, Land a Bills Payable 30,000| 18,000 3. ea aniture 3,90,000] 7.13,000 52000 [ram Rais Additional Information : 6. Payment (©) Depreciation charged during 2014 was 4,000 on Fumiture, € 42,000 on Machiney ag © ent § 20,000 on Buildings. (2) Redemption of debentures was made at 10% premium, ea (c) Fart of machinery was sold for & 15,000 at a loss of t 4,000. cr {@) During 2014 interim dividend was paid ¥ 10,000 and income tax was paid & 5,000. —— Prepare : ‘Working 1. Statement of changes in working capital. 2. Funds flow statement, — Working notes are also required to be shown. Scanned with CamScanner| Fo Bank Ate (Gulf) 11,000, “bepreciciion Mle 7 Cao mine __|_____ By Lowen Sali yf |" keoo pees) prose 4 Mouhinesy Ale _—____ oT HL a eet % Bank Ale ([siuf 15000 _ 7 ee at Cd +" 60000 | 6000. s $6, 000_ TP woot Assets | prolecn 3 fnisee | stat 4 Stakerent fthonges in pottinwlary - at -lalzas ila Y Bonk 35,000 | 16000] - «| ioe: wo,000 | 45000] 25900 | | eon eed | $0,000 | 30,000 | — |) bellows 0,000 | 100000] 34,000! — I total Ad ! 1eso00_| 9.41000) . | woront Uunbilition © \ cvwtor's i 40,000) 50,000} - | 10,000 le }-30,000. | 18,000) 12,000 | — Total 06) “10,000! 62,000 | voorseing caysital CA-B)! 95000 | 143000) | xoueose fo ‘toa hy sat 18000 F000, Bo Coal Fp) po 11300 0! 10 F000 JoF000 Provision or Deprevtion ee An i var Pastliwlon's — ot (8 eh bel ari _ |e COP-Cal} | | J a | ral © cus Ate | 9a000 | [_Step-3: So 7 __tacutin Acasa Sot Th Golonee” bol | F500! By prion for toro __po [Ste 2 Furbo A — —..|| To Calan. bH_._| 10,000. te Bank ate Coal) a 000.—+ ___|| Cpururase of Fernuluty tn a a ——_pailinlott_— ay Ne puof os pt Pal ale [ cpas| | [or Bal = clowig bal + Coy as | $0,000 - 60,¥00 3 lo Add 5 Nen— i99_Eapenses ernie tf; roiliae > epreutllinn_on_ Maubuiudy |S) Cxpreutuiion_on_Burtli : |4) Low on Sale Mowhine 5.) tore worilten at __| )_premv’vm _ov_rred: an e8 ~ conta | Provision kor Toaaboen MP Roxas alin evden _—_ Scanned with CamScanneree ' } som af fas a - 21000 | a. ssued Guily Stave_[9,S0,000- 2,00,000)_|-S0,000 | 2. rst 4 —poreference shares [80,000 - $0,009}, 30,000 “| y. bean taken _ C80,000- s0000) 30,000 _pultdi_oepesit._taken [30,000 - 20,000). | 10,000 [t. sole of mauhinoty Cus. netdel | ts 000. ob es opofifions Cu. mut) —__| 102000. Sola oon [Bst000— Apicaitionds ‘of Funds + Rederryhion gf Debenitige Cao. ooo 42.000]. “3900 | £ to0000 —g0,000 20,000 Redeomed — —_- al £ opal Cioving Gal : ~TD0,00E oT. poemim 750007] “Lod pudhated [2%00 Son 40,000 Maskubegy tpushared (uy.wote= 3) ___ tL000 = rile pusdared 8 Si. n | Too PSOne 6 parpment af _Fical civifond Cop.alane) —_ab,oo Tneim__ewrfencd__ Total 4 fecialion we +— Scanned with CamscannerProblem 4. From the following Balance Sheets of A Ltd. make out : (a) Statement of Changes in the Working Capital; and (b) Funds Flow Statement. Scanned with CamScanner+ le 2, | 2. Mel «| N3ls 3s Babi 313-2033 Hyaity Share Capital ,00,000 | §,00,000] iand and Suldings Frofit § Loss A/c 1,00,000{ 2 Plant and Machine general Reserve 50,000 Provision for Taxation 50.000 sundry Creditors 1,10,000 sills Payable 80,000] 90,000] Cash in Hand Outstanding Rent 30,000 | __ 25.000 10,00,000 ] 13,25.000 Additional Information : (2) Depreciation on plant and machinery in 2024 € 50,000. (®) A piece of machinery costing ¥ 12,000 was sold for € 8,000 duzin: 7,000 had been provided on it). (0) An interim dividend of € 6,000 was paid during the yeax (@) Income tax paid during 2014 & 45,000. 9 2014 ( Scanned with CamScanner| petro (saooa_| _léoneo | @ ta.mo)— 1 $0,000 I ha i -| 10000) So,o00| Fy | Aisa. i _= __|_40,000, “F6,0001 : 7 [vac000. {200001 $0 000 | 80,000. [Steps = j } ae proutsion [fer “Tata Timm Alo | > te Be Alpes 4 Sn a4 4 Sooa_oy rorya | S0,000_, “| Chom po | cra Ao. [eal by) 3S000" To Baolomee cl 4o.onn | Ffotal provision for | ate [esooo | c+y)’ sooo [step 3. py. float ond Moshinty tHe Ee Te tlaows vol | 5.00000 | ty oppouifien — | —| 0,000 — Ito Pet Ab-ém | Save) | Cerofit_ om Sate) By Bonk fle (Sale| goon | (000 - Hans ‘000 d_mouhinay | SURIIIAiALLD _ — _ [By Bolin ch! |Rooono “gies ——eprofi - — | 355000 | 4 BSkoon | Ss. 88000 \ Scanned with CamScanneérWB WAY | | EF EET : ip TT a [a Sate of plont and Morh'eoy 8000 I 3. Furd Faoen_opaalions ! 168009 | - Tafol_sonrees on ——aAcppbicalti gp Fuso ____ +. Se gy puta of hond_&_surling [Seal eal A, 0,000 2 punta pant_aud Mobic Coooniig noted | 255 000 13: Toa. paid, Cue. - in J 45000 > al id [piven in Adfustrnenf || 6 000 —— 2 Apications | 46000 j in wanticg copstod [yu 6000-37600) Fp.00 — | ‘Scanned with GamScannerProblem 4.5 The following Balance Sheets of Pieco Ltd. for the years 2012-13 and 2013-14 are given. You are required to prepare a Funds Flow Statement : Scanned with CamScanner436 Management Accounting Liabilities 2013 2014 ‘Assets 2013 2014 +000 000 e000 000 Shares Capital 150 25 | Land 150 150 Share Premium - 25 | Plant 156 150 General Reserves 6 90 | Furniture 105 13.5 Profit & Loss A/c 15 25.5 | Investment 90 320 Debentures 6% 105 75 | Debtors 45 105 rovision for Depreciation Stock 90 975 on Plant 75 8% | Cash 45 675 Provision for Depreciation on Furniture 25 9 Tax provision 30 45 Sundry Creditors 129 M25 586.5 | 703.5 586.5 7035 Additional information: () Plant purchased for % 6,000 (depreciation value € 3,000) was sold for cash £1,200 on 31st December 2013. (i) On 30th September 2013 Furnitures was purchased for % 3,000. (iii) Depreciation on Plant 8% and Depreciation on Furniture 124% on average cost. (iv) Dividend 224% on original share capital. Frinde Flaw Ctatamant Scanned with CamScanneri 7 i \\ ji : 7 \ lwot + 6000 = anno _'360 = Deyo = 1209 = 1440 = Seal Los ® Bets wD oe Tl T ¢000 x87 = “Hon * Th _plant_ak a 3360 1 flan B #5000 Aweruloled Dep wai re | Blo. : Sold £91 ants (Toalone eld | S4or0 le *490% V5] SY Sepmeitalinn Ceol fe") Ps “Ces Cy) BFE 360 Scanned with CamScannerae a= ae eg He “ig 7 i << AbL_too Dinas 7— conn y £000. a) Rescued Lop Stl =—cla EAL J = Ce a LD (2,029, [5000 i 2 ot gy plant TS sil rag Se ngs SO = E455, —— Noxonan: pag. 2 Buel fre spbalital : Slip-8: Fund Flow sfaTecnonh x —Pohiawha's fal [souxces tf funds 2 | Shove pila sano - 159000) - | 45000 a 4500 Teale of plat {ap _____— ___ Funds fps _eepaafiin______——— f Tofol cA) 173950 — gli a just Ogun = 35000 TY 5 ‘| 30,005 __ Tp stron rr igo — % = 9,600" 30.000 —pusuhatk gf Fuscslioo 13500 16560 3000 ci. Bal 7D canned with CamScanner