The balance sheets of ABC Ltd. as on 31-3-2008 and 31-3-2007 are as given below:
ABC Ltd. Balance Sheets
Sources of Funds
|
Share Capital 5,000 4,000
Reserves and SurplusGeneral Reserve 1,000 800P&L A/c 400 200
Share Premium 1,000 - Capital Reserve 1,000 5003,400 1,500Secured Loans 4,000 3,000Unsecured Loans 3,000 1,000Total 15,400 9,500
Applications of Funds Fixed Assets –Gross BlockLess: AccumulatedDepn.
|
3,000 2,000Net Block 9,000 8,000Capital Work-in- progress3,000 -
Investments 2,000 5,00Current Assets, Loans and AdvancesA. Current AssetsInventories – Raw materials700 600
Work-in-progress 250 300Finished goods 150 200Sundry Debtors 1,200 1,300Prepayments 200 150Cash and Bank Balances 500 4003,000 2,950B. Loans and AdvancesAdvance tax 1,400 9,00Loans to employees(long-term)
Less: Current Liabilities1,000 5,00
5,400 4,350
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 3,350Net 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.
Solution.
Statement showing changes in working capital
| Particulars | 2007 | 2008 | Increase | Decrease |
| | Rs | Rs | Rs | Rs |
| Current Assets | | | | |
| Inventories | | | | |
| Raw Materials | 600 | 700 | 100 | - |
| Work in Progress | 300 | 250 | - | 50 |
| Finished goods | 200 | 150 | - | 50 |
Sundry Debtors 1300 1200 - 100
Current Investments 200 500 300 - Prepayments 150 200 50 - Cash & Bank 400 500 100 - Current Liabilities
Sundry Creditors 950 800 150
Outstanding Exp. 300 400 - 100
Secured Loan - 500 - 500
Unsecured Loan 400 500 - 100
700 900
Net Decrease in working Capital 200 -
900 900
a) Fund Flow Statement for the year 2007-2008
Sources of Fund
Fund From Operations 4100
Issue of Equity share Capital 1000
Share Premium 1000
Secured Loan 900
Unsecured Loan 1900
Decrease in working Capital 200
Total Sources 9350
APPLICATION OF FUNDS
Conversion of secured loan 400
Purchase of Investments 1200
Purchase of Fixed Assets 2000
Advance Taxes 1450
Proposed Dividend 800
Capital W.I.P. 3000
Loans of Advances to employees 500
Total Application 9350
Share Capital A/c
| To Bal c/d | 5000 | By Bal b/d | 4000 |
| | | By Secured loan | 400 |
| | | By Bank | 600 |
| | 5000 | | 5000 |
|
Secured Loan (long term)
| To Bal c/d | 400 | By Bal b/d | 3000 |
| | 3500 | By Bank | 900 |
| | 3900 | | 3900 |
|
Unsecured Loan (long term)
To Bal c/d 2500 By Bal b/d 600
By Bank 19002500 2500
Secured Loan (current Liab)
To Bal c/d 500 By Bank 500
500 500Unsecured Loan (current Liab)
To Bal c/d 500 By Bal b/d 400By Bank 100500 500Investment A/c (Long term)
To Bal b/d 300 By Bal c/d 1500To Bank 12001500 1500Investment A/c (Current)
To Bal b/d 200 By Bal c/d 500To Bank 300500 500 
Fixed Asset A/c
To Bal b/d 10000 By Dep 200To Capital Reserve 500 By Bank 250To Bank 2000 By P/L A/c 50By Bal c/d 1200012500 12500
|
Adjusted Profit & Loss A/c
To Loss on sale of machinery 50 By Bal b/d 200To Provision for Dep. 1200 By Fund from operation 4100
To General Reserves 200To Proposed dividend 1000To Provision for Retirement 50
|
To Bal c/d 4004300 4300Proposed Dividend
To Bank 800 By Bal b/d 800To Bal c/d 1000 By P/L A/c 10001800 1800Provision for Retirement
To Bal c/d 350 By Bal b/d 300By P/L A/c 50350 350
|
To Bal c/d 1000 By Bal b/d 800By P/L A/c 2001000 1000Capital Reserve A/c
To Bal c/d 1000 By Bal b/d 500By Fixed Assets 5001000 1000Provision for Taxation
To Advance Tax 950 By Bal b/d 1000To Bal c/d 1450 By P/L A/c 14002400 2400Advance Tax
To Val b/d 900 By Provision for tax 950To Bank 1450 By Bal c/d 14002350
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