From the following information prepare
i) A Schedule of Changes in Working Capital
ii) A Funds Flow Statement
Balance Sheet of M/s ______ as on |
Liabilities |
31stMarch |
Assets |
31stMarch |
2006 |
2007 |
2006 |
2007 |
Capital Profit/Loss Appropriation Bank Loan Bills Payable Sundry Creditors Reserve for Taxation
|
18,50,000 14,78,000 12,00,000 4,00,000 14,00,000 2,00,000
|
21,00,000 17,64,000 9,00,0000 6,80,000 12,20,000 1,80,000
|
Goodwill (at Cost) Land and Buildings Plant and Machinery Furniture and Fittings Stock/Inventories Sundry DebtorsBills Receivable Bank Cash
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6,00,000 18,50,000 4,74,000 1,94,000 8,26,000 12,00,000 8,00,000 5,00,000 84,000
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6,00,000 22,00,000 5,24,000 1,94,000 7,24,000 12,80,000 7,21,000 4,83,000 1,18,000
|
|
65,28,000 |
68,44,000 |
|
65,28,000 |
68,44,000 |
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Solution » Schedule of Changes in Working Capital
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Schedule/Statement of Changes in Working Capital for the period from __ to __ |
Particulars/Account |
Previous Period |
Current Period |
Working Capital Change |
Increase |
Decrease |
A. CURRENT ASSETS
1) Stock/Inventories
2) Sundry Debtors
3) Bills Receivable
4) Bank
5) Cash
|
8,26,000 12,00,000 8,00,000 5,00,000 84,000
|
7,24,000 12,80,000 7,21,000 4,83,000 1,18,000
|
80,000
34,000
|
1,02,000
79,000 17,000
|
|
34,10,000 |
33,26,000 |
1,14,000 |
1,98,000 |
B. CURRENT LIABILITIES/PROVISIONS
1) Bills Payable
2) Sundry Creditors
3) Provision for Taxation
|
4,00,000 14,00,000 2,00,000
|
6,80,000 12,20,000 1,80,000
|
1,80,000 20,000
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2,80,000
|
|
20,00,000 |
20,80,000 |
3,14,000 |
4,78,000 |
Working Capital (A − B) |
14,10,000 |
12,46,000 |
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Change in Working Capital |
(12,46,000 − 14,10,000) (Or) (3,14,000 − 4,78,000) |
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1,64,000 |
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normal-loss,abnormal-loss,valuation,process,cost,accounting
To be able to work out all the problems on preparation of Funds Flow Statement in a similar manner, it would be convenient to adopt the procedure of preparation of altered fund (ledger) accounts.
• Altered Fund Accounts » Hide/Show
Make up all those ledger accounts within the Fund Area where there is a change in values. These are accounts which have been influenced on account of transactions during the period for which the flow is being analysed.
In this problem, we need to prepare
- Capital a/c
- Profit and Loss Appropriation a/c ⇐ [Please make it a habit to make this the last account you prepare]
- Bank Loan a/c
- Land and Buildings a/c
- Plant and Machinery a/c
Each Ledger account should be prepared so as to reveal all the information relating to that account and for that period
Date |
Particulars |
J/F |
Amount (in Rs) |
Date |
Particulars |
J/F |
Amount (in Rs) |
31-03-07
|
To Balance c/d
|
–
|
21,00,000
|
01-04-06 –
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By Balance b/d By Bank a/c (?)
|
– –
|
18,50,000 2,50,000
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Total |
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21,00,000 |
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Total |
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21,00,000 |
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01-04-07 |
By Balance b/d |
– |
21,00,000 |
- The higher closing balance indicates additional capital raised during the period.
- Capital has been raised in exchange for cash
Date |
Particulars |
J/F |
Amount (in Rs) |
Date |
Particulars |
J/F |
Amount (in Rs) |
– 31-03-07
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To Bank a/c (?) To Balance c/d
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– –
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3,00,000 9,00,000
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01-04-06
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By Balance b/d
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–
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12,00,000
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Total |
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12,00,000 |
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Total |
|
12,00,000 |
|
|
|
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01-04-07 |
By Balance b/d |
– |
9,00,000 |
- The lower closing balance indicates repayment of loan during the period.
- Loan has been repaid by paying out cash
Dr | Land and Buildings a/c | Cr |
Date |
Particulars |
J/F |
Amount (in Rs) |
Date |
Particulars |
J/F |
Amount (in Rs) |
01-04-06 –
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To Balance b/d To Bank a/c (?)
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– –
|
18,50,000 3,50,000
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31-03-07
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By Balance c/d
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–
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22,00,000
|
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Total |
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22,00,000 |
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Total |
|
22,00,000 |
01-04-07 |
To Balance b/d |
– |
9,00,000 |
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- The higher closing balance indicates additional purchase/acquisition during the period.
- Additional Assets have been purchased for cash
Dr | Plant and Machinery a/c | Cr |
Date |
Particulars |
J/F |
Amount (in Rs) |
Date |
Particulars |
J/F |
Amount (in Rs) |
01-04-06 –
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To Balance b/d To Bank a/c (?)
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– –
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4,74,000 50,000
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31-03-07
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By Balance c/d
|
–
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5,24,000
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Total |
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5,24,000 |
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Total |
|
5,24,000 |
01-04-07 |
To Balance b/d |
– |
5,24,000 |
|
|
|
|
- The higher closing balance indicates additional purchase/acquisition during the period.
- Additional Assets have been purchased for cash
• Making up the Funds Flow Statement from these
Every posting read as "By Cash/Bank a/c" indicates a source of fund and as "To Cash/Bank a/c" indicates an application of Fund. Filling the details with the Ledger account head as the identifier in the Funds Flow Statement is all that you need to do.
Dr | Profit and Loss Appropriation a/c | Cr |
Date |
Particulars |
J/F |
Amount (in Rs) |
Date |
Particulars |
J/F |
Amount (in Rs) |
31-03-07
|
To Balance c/d
|
–
|
17,64,000
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01-04-06 31-03-07
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By Balance b/d By P/L (FFO) a/c
|
– –
|
14,78,000 2,86,000
|
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Total |
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17,64,000 |
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Total |
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17,64,000 |
|
|
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01-04-07 |
By Balance b/d |
– |
17,64,000 |
• Funds From Operations
One additional detail/item that is to be gathered is the Funds From Operation. This information is derived from the Profit and Loss Appropriation account. Where the posting in the appropriation account reads "By Funds From Operations" it indicates a source of fund and where it reads "To Funds From Operations" it indicates an application of fund
Filling the detail relating to FFO in the Funds Flow Statement and deriving the difference between the total sources and total applications would complete its preparation.
• Changes in Fund Accounts
Just for solving this problem and similar other ones, you may not need to prepare the above notes and you can just manage with a simple comparison of figures as below.
This can be done orally showing the calculation in the Funds Flow Statement itself.
Item |
Amount Previous Period |
Amount Current Period |
Change |
Nature |
Result |
Capital Profit/Loss Appropriation Bank Loan Land and Building Plant and Machinery
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18,50,000 14,78,000 12,00,000 18,50,000 3,70,000
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21,00,000 17,64,000 9,00,000 22,00,000 4,74,000
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2,50,000 2,86,000 3,00,000 3,50,000 50,000
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Liability - Increase Liability - Increase Liability - Increase Liability - Increase Asset - Increase
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Inflow Inflow Inflow Inflow Outflow
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• Statement Form
Funds Flow Statement for the period from __ to __ |
Particulars |
Amount |
Amount |
SOURCES (INFLOW) of FUNDS :
1) Capital
2) Profit/Loss Appropriation
|
2,50,000 2,86,000
|
5,36,000
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Less: APPLICATIONS (OUTFLOW) of FUNDS
1) Land and Buildings
2) Plant and Machinery
3) Bank Loan
|
3,50,000 50,000 3,00,000
|
7,00,000
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Change in Working Capital |
− 1,64,000 |
There is a decrease in Net Working Capital to the extent of Rs. 1,64,000
• T Form
Statement of Sources and Applications of Funds for the period from __ to __ |
Sources (Inflow) of Funds |
Amount |
Applications (Outflow) of Funds |
Amount |
1) Capital
2) Profit/Loss Appropriation
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2,50,000 2,86,000
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1) Land and Buildings
2) Plant and Machinery
3) Bank Loan
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3,50,000 50,000 3,00,000
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5,36,000 |
|
7,00,000 |
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Change in Working Capital |
1,64,000 |
(Sources/Inflow of Funds) < (Applications/Outflow of Funds)
⇒ There is a decrease in Net Working Capital to the extent of Rs. 1,64,000
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