From the information given above, you are required to prepare: a) Statement showing changes in working capital b) Funds flow statement.

The balance sheets of  ABC Ltd. as on 31-3-2008 and 31-3-2007 are as given below:

		31-3-08		31-3-07
Sources of Funds
Share Capital		5,000		4,000
Reserves and Surplus
General Reserve	1,000		800
P&L A/c	400		200
Share Premium	1,000		-
Capital Reserve	1,000		500
		3,400		1,500
Secured Loans		4,000		3,000
Unsecured Loans		3,000		1,000
Total		15,400		9,500

Applications of Funds
Fixed Assets –Gross Block	12,000		10,000
Less: Accumulated Depn.	3,000		2,000
Net Block		9,000		8,000
Capital Work-in-progress		3,000		-
Investments		2,000		5,00
Current Assets, Loans and Advances
A. Current Assets
Inventories – Raw materials	700		600
Work-in-progress	250		300
Finished goods	150		200
Sundry Debtors	1,200		1,300
Prepayments	200		150
Cash and Bank Balances	500		400
	3,000		2,950
B. Loans and Advances
Advance tax	1,400		9,00
Loans to employees (long-term)	1,000		5,00
	5,400		4,350
Less: Current Liabilities of Provisions
A Current Liabilities
Sundry Creditors	8,00		9,50
Outstanding Expenses	4,00		3,00
B. Provisions
Provisions for Retirement Benefits of employees	3,50		3,00
Tax Provision	1,450		1,000
Proposed Dividend	1,000		8,00
	4,000		3,350
Net Current Assets		1,400		1,000
Total		15,400		9,500

               

Additional Information:

1.       Actual tax liability for 2006-07was Rs. 950 lacs;

2.       A piece of machinery costing Rs. 500 lacs, accumulated depreciation Rs. 200 lacs was sold for Rs. 250 lacs. The loss was charged to profit and loss account;

3.       A portion of secured loan as on 31-3-07 amounting to Rs. 400 lacs was converted into equity at a premium Rs. 200 lacs. There was also fresh issue of equity at 100% premium.

4.       Out of secured loans as on 31-3-08 Rs 500 lacs were short-term loans.

5.       Out of unsecured loans, short­-term loans were to the extent of Rs. 400 lacs and Rs. 500 lacs respectively as on 31-3-07 and 31-3-08.

6.       Out of investments Rs. 200 lacs were current investments as on 31-3-07 and Rs. 500 lacs were current investments as on 31-3-08.

7.       There was a revaluation of fixed assets during 2007-08 and the revaluation profit Rs. 500 lacs was charged to capital reserve.

                From the information given above, you are required to prepare:

a)             Statement showing changes in working capital

b)             Funds flow statement.

Answer 2

STATEMENT SHOWING CHANGE IN WORKING CAPITAL

Particulars	2008	2007	Increase	Decrease
Current Assets A
inventory	700	600	100
Work in progress	250	300		50
Finish goods	150	200		50
sundry debtors	1200	1300		100
prepayment	200	150	50
cash and Bank balance	500	400
	3000	2950	150	300
Current Liabilities B
Sundry Creditors	800	950	150
Outstanding Expenses	400	300		100
Provision  for Retirement benefits of employee	350	300	50
tax Provision	1450	1000		450
proposed Dividend	1000	800		200
	4000	3350	200	750
Total A+B =C	7000	6300	350	1050
D Change in Working Capital			700

Fund Flow Statement As on 31-03-2008

Source of Fund	Amount	Application of Fund	Amount
Share Capital	1000	Fixed Assets	1000
General Reserve	200	Capital W.I.P	3000
Profit And Loss	200	Investment	1500
Share premium	1000	Payment of Tax	950
Capital Reserve	500	Sales of Machinery (loss)	50
Secured Lone	1000	Payment of secured Lone	500
unsecured lone	2000	payment of unsecured lone	500
Share of fund	200	payment of lone	300
Revaluation of Fixed Assets	500	premium of share	200
payment of investment	700
decrease in working capital	700
Application of fund
	8000		8000