ACCOUNTING PROCESS

CASELETS

Accounting for Management

 Case I – Trial Balance
 From the following balances extracted from the
books of a trader, prepare Trial Balance as on 31st
March, 2011.

Contd…

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Case I – Trial Balance
Contd…

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Solution to Case I – Trial Balance

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 Case II – Ledger Posting
 Journalize the following transactions and post them
in the ledger.
2006
January 1 Commenced business with cash 50000
January 3 Paid into bank
25000
January 5 Purchased furniture for cash 5000
January 8 Purchased goods and paid by cheque 15000
January 8 Paid for carriage 500
January 14 Purchased Goods from K. Murthy 35000
Contd…

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 Case II – Ledger Posting
Contd…

January 18 Cash Sales 32000

January 20 Sold Goods to Ashok on credit 28000
January 25 Paid cash to K. Murthy in full settlement 34200
January 28 Cash received from Ashok 20000
January 31 Paid Rent for the month 2000
January 31 Withdrew from bank for private use 2500

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Soln. to Case II – Ledger Posting

Journal Entry

Journal Entry
Contd…

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Soln. to Case II – Ledger Posting

Journal Entry
Contd…..

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Soln. to Case II – Ledger Posting

Ledger
Posting

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Soln. to Case II – Ledger Posting

Ledger
Posting
Contd….
.

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Soln. to Case II – Ledger Posting

Ledger
Posting
Contd….
.

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Soln. to Case II – Ledger Posting

Ledger
Posting
Contd….
.

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Soln. to Case II – Ledger Posting

Ledger
Posting
Contd….
.

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Soln. to Case II – Ledger Posting

Ledger
Posting
Contd….
.

Accounting for Management

 Ledger
Posting
Scheme

Accounting for Management

 Ledger
Posting
Scheme

Accounting for Management

 Case III – Cash Flow Statement
 From the following P&L A/c and Balance Sheet,
prepare cash flow statement of Sunil Computer Mart
for the month of January.
P&L Statement
Revenue   Rs.
Cash Sales 20000  
for Jan
Credit Sales 5000  
Total Revenue   25000
Less: Expenses    
Raw Material & Supplies 11750  
Maintenance Expense 500  
Rent 5000  
Provision for Power & Telephone 1400  
Total Expenses   18650
Gross Profit   6350
Depreciation 500  
Interest 300   Contd…
Net Profit   5550

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 Case III – Cash Flow Statement

Owners Equity + Liabilities Rs. Assets Rs.

Shareholder's Equity 100000 Fixed Assets  
Reserves & Surplus 5550 Gross Block 25000 Balance
    Less Accumulated Depreciation -500 Sheet as on
    Net Block 24500
31st Jan
Liabilities   Current Assets  
Accounts Payable 14000 Cash 79000
Interest Payable 300 Inventory 28500
Provisions 1400 Accounts Receivables 3500
Loan Payable 20000 Supplies 750
Total Liabilities 35700 Security Deposit 5000
       
Total Equity + Liabilities 141250 Total Assets 141250

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 Statement of Cash Flows
Cash Flows from Operating activities are primarily
the cash effects of day-to-day revenue and expense
transactions that are included in the income statement.

Cash Flows from Investing Activities are the cash

effects of purchasing and selling long term assets such
as plant and equipment.

Cash Flows from Financing Activities are the cash

effects of owners having invested in the company,
lenders having loaned money to the company, any
repayments made to the creditors, or any cash
withdrawals from the company by the owners.
Accounting for Management
 Case III – Cash Flow Statement for Jan
Rs. Rs.
A. Cash Flows from Operating Activities    
Net Profit as per Income Statement 5550
Add Back: Depreciation 500
Add Back: Interest 300
Operating Profit before working capital changes 6350
Adjusted for:
Accounts Receivables -3500
Inventory & Supplies -29250
Accounts Payable 14000
Provision for Power & Telephone 1400
Cash generated from Operations -11000
Net Cash from Operating Activities -11000

Contd…

Accounting for Management

 Statement of Cash Flows
Cash Flows from Operating activities
Cash flow from operating activities starts with net profit
from operations, which is clearly taken from the income
statement. Depreciation and interest expenses are
added back to generate cash from operations figure.

Now as working capital increases and decreases are a

part of the operating activities the net changes in them
are going to be reflected here. As accounts receivables
and inventory use cash and account payables generate
cash, they are treated as such.

Accounting for Management

 Case III – Cash Flow Statement for Jan

Rs. Rs.
B. Cash Flow from Investing Activities    
Purchase of equipment -25000
Prepaid Rent (Security) -5000
Net Cash used in Investing Activities -30000

C. Cash Flow from Financing Activities

Cash Invested by owner 100000
Proceeds from Loans Payable 20000
Net Cash from Financing Activities 120000
Net Increase in Cash & Cash Equivalents (A+B+C) 79000
Opening Balance of Cash & Cash Equivalents 0
Closing Balance of Cash & Cash Equivalents 79000

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 Statement of Cash Flows
Cash Flows from Investing activities
The firm has made only two investments, it bought
equipment and it deposited security for the shop, both of
which are reflected in cash flows from investing
activities.

Cash Flows from Financing activities

Cash flow from financing activities show any new
generations of funds by the firm to finance its
operations. Here the owner’s equity that has come in is
shown as also the loan that is repayable after three
months.
Accounting for Management
THANK YOU

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