Funds Flow Analysis: Problems and Solutions

The following are summarized balance sheets of a company. You are required to prepare a statement of funds flow.

Balance Sheet
31.3. 2011 31.3.2012

Assets (a) Goodwill (b) !uilding (c) %lant (d) )toc* (e) +ebtors (f) !an* (g) -ash Total Assets Liabilities (a) %aid .p )hare -apital (b) General /eser0es (c) %rofit and 1oss 2ccount (d) !an* 1oan (1ong Term) (e) -reditors (f) %ro0ision for Ta4ation Total Liabilities Additional Information i +uring the year a di0idend of /s. 11"$00 was paid. ii i0 +epreciation was written off plant /s. &000. iii +epreciation was written off buildings /s. $000

0 100"000 &$"000 $0"000 (0"000 0 ,$0 265250

000 #$"000 '("000 &"000 ,"100 ("000 00 255400

100"000 ,$"000 1$",$0 $"000 &$"000 1$"000 265250

1,$"000 0"000 1$" 00 3&"300 0 1&"$00 255400

+uring the year a sum of /s. 13"$00 was pro0ided for ta4ation.

olution to %roblem =1

Note 1 Statement of Changes in Wor ing Capital 1. .11 -urrent 2ssets )toc* +ebtors !an* -ash -urrent 1iabilities -reditors 6et 7ncrease in 8or*ing -apital Note 2 Funds Provided by Operations %rofit at the end of the year ( 1. .,01,) %rofit at the start of the year ( 1. .,011) Thus" profit for the year 2dd9 +i0idend +epreciation9 %roperty +epreciation9 :achinery %ro0ision for Ta4ation Transfer to /eser0es ;unds %ro0ided by <perations Note 3 Plant !alance as on 1. .,011 1ess9 +epreciation for the year Thus" the closing balance should ha0e been !ut" the closing balance is9 Thus" plant purchased during the year is9 1$ 00 1$,$0 $0 11$00 &000 $000 13$00 $000 $0000 (0000 0 ,$0 &$000 1. .1, &000 ,100 (000 00 0 -hange 51 000 5&#00 (000 $0 &$000 $'1$0

($000 ($0$0

&$000 &000 3'000 '(000 13000

Note 4 Buildings !alance as on 1. .,011 1ess9 +epreciation for the year !alance as on 1. .,01, Note 5 Income !a" Paid !alance as on 1. .,011 2dd9 %ro0ision for the Year !alance should ha0e been !ut" balance as on 1. .,01, if gi0en as> Thus" ta4 paid during the year

100000 $000 #$000

1$000 13$00 1$00 1&$00 1(000

Statement of Changes in Financial Position Sour"e ;unds from <perations (6ote ,) 7ssue of shares !an* 1oan se o! Funds 7ncrease in 8or*ing -apital (6ote 1) %urchase of %lant (6ote () 7ncome Ta4 %aid (6ote $) %urchase of Goodwill +i0idend ($0$0 ,$000 ,300 $'1$0 13000 1(000 000 11$00

10,3$0

10,3$0

The following are summarized balance sheets of a company. You are required to prepare a statement of funds flow.

Balance Sheet
31.3. 2011 31.3.2012

Assets (a) Goodwill (b) !uilding (c) %lant (d) 7n0estment (d) )toc* (e) !ills /ecei0ables (f) +ebtors (f) !an* Total Assets Liabilities (a) %aid .p )hare -apital (b) General /eser0es (c) %rofit and 1oss 2ccount (d) !ills %ayable (e) -reditors (f) %ro0ision for Ta4ation (g) %ro0ision for doubtful debts Total Liabilities Additional Information i +uring the year a di0idend of /s. 13000 was paid. ii +epreciation was written off plant /s. '000. iii +epreciation was written off buildings /s. '000 i0

,(000 '0000 &(000 ,0000 30000 (000 3000 1 ,00 311200

,(000 &,000 &,000 ,,000 (3'00 3(00 '000 0(00 311600

,00000 ,'000 ,000 ,(00 13000 ,000 '00 311200

,00000 3000 ,3000 1300 10'00 3000 1,00 311600

2 pro0ision of /s. '000 was made for ta4ation during the year.

olution to %roblem =,

Note 1 Statement of Changes in Wor ing Capital 1. .11 -urrent 2ssets )toc* !ills /ecei0able +ebtors !an* -urrent 1iabilities !ills %ayable -reditors %ro0ision for +oubtful +ebts 6et 7ncrease in 8or*ing -apital Note 2 Funds Provided by Operations %rofit at the end of the year ( 1. .,01,) %rofit at the start of the year ( 1. .,011) Thus" profit for the year 2dd9 +i0idend +epreciation9 %lant +epreciation9 !uildings %ro0ision for Ta4ation Transfer to /eser0es ;unds %ro0ided by <perations Note 3 Plant !alance as on 1. .,011 1ess9 +epreciation for the year Thus" the closing balance should ha0e been !ut" the closing balance is9 Thus" plant purchased during the year is9 ,3000 ,000 53000 13000 '000 '000 '000 '000 30000 (000 3000 1 ,00 ,(00 13000 '00 1. .1, (3'00 3(00 '000 0(00 1300 10'00 1,00 -hange 51 ,00 ,(00 ,000 1&,00 '00 $,00 5(00 1(000

&'000 &,000

&(000 '000 33000 &,000 3000

Note 4 Buildings !alance as on 1. .,011 1ess9 +epreciation for the year !alance as on 1. .,01, Note 5 Income !a" Paid !alance as on 1. .,011 2dd9 %ro0ision for the Year !alance should ha0e been !ut" balance as on 1. .,01, if gi0en as> Thus" ta4 paid during the year

'0000 '000 &,000

,000 '000 &0000 3000 (000

Statement of Changes in Financial Position Sour"e ;unds from <perations (6ote ,) se o! Funds 7ncrease in 8or*ing -apital (6ote 1) %urchase of %lant (6ote () 7ncome Ta4 %aid (6ote $) %urchase of 7n0estments +i0idend 1(000 3000 (000 ,000 13000 &,000

&,000

The following are summarized balance sheets of a company. You are required to prepare a statement of funds flow.

Balance Sheet
31.3. 2011 31.3.2012

Assets (a) ;i4ed 2ssets (b) 7n0estments (c) )toc* (d) +ebtors (e) !an* Total Assets Liabilities (a) )hare -apital (b) General /eser0es (c) %rofit and 1oss 2ccount (d) +ebentures (e) -reditors (f) %ro0ision for Ta4ation Total Liabilities Additional Information a

(00000 $0000 ,(0000 ,10000 1(#000 104#000

,0000 30000 ,10000 ($$000 1#&000 1242000

($0000 00000 $3000 3'000 13'000 &000 104#000

($0000 10000 3'000 ,&0000 1 (000 10000 1242000

+uring the year in0estments costing /s. '000 were sold for /s. '$00? the profit was included in the profit and loss account. b +epreciation was written off fi4ed assets /s. &0000. ;i4ed assets costing /s. 10000 were sold for /s. 1,000? the profit was included in the profit and loss account. +uring the year a sum of /s. #000 was pro0ided for ta4ation. e +i0idend paid during the year amounted to /s. (0000.

c d

olution to %roblem =

Note 1 Statement of Changes in Wor ing Capital 1. .11 -urrent 2ssets )toc* +ebtors !an* -urrent 1iabilities -reditors 6et 7ncrease in 8or*ing -apital Note 2 Funds Provided by Operations %rofit at the end of the year ( 1. .,01,) %rofit at the start of the year ( 1. .,011) Thus" profit for the year 2dd9 +i0idend +epreciation %ro0ision for Ta4ation Transfer to /eser0es 1ess9 %rofit on sale of in0estments %rofit on sale of fi4ed assets 3'000 $3000 1,000 (0000 &0000 #000 10000 $00 ,000 ,(0000 ,10000 1(#000 13'000 1. .1, ,10000 ($$000 1#&000 1 (000 -hange 5 0000 ,($000 ('000 (000 ,#&000

1,#000 ,$00 1 '$00

;unds %ro0ided by <perations Note 3 Fi"ed Assets !alance as on 1. .,011 1ess9 +epreciation for the year )ale -losing balance as on 1. .1,

(00000 &0000 10000 '0000 ,0000

Note 4 Investments !alance as on 1. .,011 1ess9 )ale during the year !alance should ha0e been !ut" balance as on 1. .,01, is9 Thus" purchase of new in0estments Note 5 Income !a" Paid !alance as on 1. .,011 2dd9 %ro0ision for the Year !alance should ha0e been !ut" balance as on 1. .,01, if gi0en as> Thus" ta4 paid during the year

$0000 '000 (,000 30000 1'000

&000 #000 13000 10000 3000

Statement of Changes in Financial Position Sour"e ;unds from <perations (6ote ,) )ale of ;i4ed 2ssets )ale of 7n0estments 7ssue of +ebentures se o! Funds 7ncrease in 8or*ing -apital (6ote 1) %urchase of 7n0estments 7ncome Ta4 %aid (6ote $) +i0idend 1 '$00 1,000 '$00 ,0,000 ,#&000 1'000 3000 (0000

31000

31000

The following is the balance sheet of a company. You are required to prepare a statement of changes in financial position.

Balance Sheet
31.12. 2011 31.12.2012

Assets Fi$ed Assets (a) %roperty (b) :achinery (c) Goodwill %urrent Assets (a) +ebtors (b) -ash @ !an* !alances (c) )toc* (c) %re5%ayments Total Assets Liabilities S(are(olders) Funds (a) %aid .p -apital (b) /eser0es (c) %rofit and 1oss 2ccount -urrent 1iabilities (a) -reditors (b) !ills %ayable (c) !an* <0erdraft (d) %ro0ision for Ta4ation Total Liabilities

1('"$00 11,"#$0 0 '3"130 1"$00 110"000 " &0 462&4'0

1((",$0 1,3",00 10"000 3#"( 0 11"000 #,"000 1"000 453&''0

,,0"000 0"000 #"3#0 #"000 "&#0 30"000 (0"000 462&4'0

,&0"000 (0"000 (1",,0 (1"330 11"000 0 $0"000 453&''0

Additional Information i +uring the year ended +ecember 1" ,01, a di0idend of /s. ,3"000 was paid. ii The following assets of another company were purchased for /s. $0"000 in e4change for shares9 (a) in0entories9 ,1"3(0? (b) machinery9 1'" 30? (c) goodwill9 10"000. +epreciation written off during the year were as follows9 (a) property9 (",$0? (b) :achinery9 10"&30. /s. ,'"&&0 was pro0ided for income ta4 during the year.

iii 2 new plant was purchased for /s. $"3$0. i0 0

olution to %roblem =(

Note 1 Statement of Changes in Wor ing Capital 1.1,.11 -urrent 2ssets +ebtors -ash @ !an* !alances )toc* %re5%ayments -urrent 1iabilities -reditors !ills %ayable !an* <0erdraft 6et 7ncrease in 8or*ing -apital Note 2 Funds Provided by Operations %rofit at the end of the year ( 1.1,.,01,) %rofit at the start of the year ( 1.1,.,011) Thus" profit for the year 2dd9 +i0idend +epreciation9 %roperty +epreciation9 :achinery %ro0ision for Ta4ation Transfer to /eser0es ;unds %ro0ided by <perations Note 3 Property !alance as on 1.1,.,011 1ess9 +epreciation for the year !alance as on 1.1,.,01, (1,,0 #3#0 1$ 0 ,3000 (,$0 10&30 ,'&&0 10000 '3"130 1"$00 110"000 " &0 #"000 "&#0 30"000 1.1,.1, 3#"( 0 11"000 &0" 30 1"000 (1"330 11"000 0 -hange 513"& 0 #"$00 5 #"3(0 5," &0 5,"330 ,,"&#0 30"000 0"'#0

&#&'0 '1 10

1('"$00 (,$0 1((",$0

Note 4 #achinery !alance as on 1.1,.,011 1ess9 +epreciation for the year 2cquired against issue of shares (Gi0en) %urchased +uring the Year (Gi0en) !alance as on 1.1,.,01, Note 5 Income !a" Paid !alance as on 1.1,.,011 2dd9 %ro0ision for the Year !alance should ha0e been !ut" balance as on 1.1,.,01, if gi0en as> Thus" ta4 paid during the year

11,"#$0 10&30 10,"1#0 1'" 30 $"3$0 1,3",00

(0000 ,'&&0 3'&&0 $0000 1'&&0

Statement of Changes in Financial Position Sour"e ;unds from <perations (6ote ,) se o! Funds 7ncrease in 8or*ing -apital (6ote 1) %urchase of :achinery (6ote () 7ncome Ta4 %aid +i0idend 0'#0 $3$0 1'&&0 ,3000 '1 10

'1 10