Acounting Problem Solution

7/30/2019 Acounting Problem Solution

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Section - C

Q8. Preparation of Fund Flow Statement for M/s. XYZ Ltd:

M/s. XYZ Ltd.

Fund Flow Statement for the Year Ending 31.03.2011

Rs. Rs.

1000 3000

38000 210008000

7000

39000 39000

Working Notes:

(1) Plant Account:

Dr. Cr.

Date Rs. Date Rs.

31.03.2010 37000 - 4000

- 3000 31.03.2011 36000

40000 40000

(2) Building Account:

Dr. Cr.Date Rs. Date Rs.

31.03.2010 40000 - 4000

- 0 31.03.2011 36000

40000 40000

(3) Provision of Tax Account:

Dr. Cr.

Date Rs. Date Rs.

- 19000 31.03.2010 16000

31.03.2011 18000 - 21000

37000 37000

(4) Funds from Operations: Profit & Loss Adjustment Account

Dr. Cr.

Rs. Rs.

4000 16000

38000

4000 (Balancing figure)

4000

21000

8000

13000

54000 54000

(5) Statement of Changes in Working Capital for the year ending 31.03.2011

Yr. 2010 Yr. 2011

Rs. Rs. Increase Decrease

30000 23400 - 6600

2000 3200 1200 -

18000 19000 1000 -

6600 15200 8600 -

56600 60800

8000 5400 2600 -

1200 800 400 -

400 600 - 200

9600 6800 -

47000 54000

7000 - - 700054000 54000 13800 13800

Purchase of Plant (Note 1)

Funds from operations (Note 4) Provision of Tax (Note 3)Payment of Interim Dividend

Increase in working capital (Note

5)

Provisions for doubtful debts

Working Capital (A-B)

Increase in working capital

Sources

Sundry Creditors

Bills Payable

To provision of Tax A/c

To interim dividend

To balance c/d

To Bank A/c (purchases)

Particulars

Income from investments

Applications

Debtors

Current Liabilities (B)

Cash

Effect on Working

CapitalParticulars

Current Assets (A)Stock

Bills Recievables

To Depreciation:

Plant

Building

To Bank A/c (payment of tax) By balance b/d

To balance c/d By Profit & Loss Adjustment A/c

By funds from operations

Particulars Particulars

To General Reserve By balance b/d

By balance c/d



To balance b/d By Depreciation A/c

Particulars

To balance b/d

To Bank A/c ( purchases)

By Depreciation A/c

By balance c/d


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Working Notes:

Considering "turnover" as net sales in the year,

and the year just ended as xxx0 and the next year as xxx1 (non-leap year);

Net Sales of M/s. Reinz. Co. in year xxx0 = 16.00Rs. Millions

Projected growth in sales = 8.40Rs. %Hence, projected net sales of year xxx1 = (16 + 16*8.4/100)

= 17.34Rs. Milions

Cost of sales of yr. xxx0 = 10.88Rs. Millions

Other expenses of yr. xxx0 = 1.44Rs. Millions

Gross profit ratio = (Gross Profit/Net sales) 30 %

Projected gross profit of next year = 17.34 * 30/100

= 5.20Rs. Millions

Projected Cost of goods sold 17.34 - 5.20= 12.14Rs. Millions

Operating profit margin = 20 %

Hence, Opearting ratio

= (Cost of goods sold + operating expenses)/ Net sales 80 %

Hence, (Cost of goods sold+operating expenses) = 17.34*80/100

13.88Rs. Millions

Operating expences = 13.88 - 12.14

= 1.73Rs. Millions

Inventory turnover period = 110 days

Average stock/inventory = Cost of goods sold * 11

= 3.66Rs. Millions

Opening Stock = 2.4 Millions

Average Stock = (Opening Stock + Closing Stock)/2

Hence, closing stock = 2*average stock -opening stock

= 4.92Rs. Millions

Trade receivable period/

debt collection period = 65 days

Assuming all sales to be credit sales,

Hence, average debtors/trade receivables = credit sales * 65/365= 3.09Rs. Millions

Hence, closing debtors = 2*average debtors -opening debtors

= 3.98Rs. Millions

Trade payable period/


Assuming all purchases to be credit purchases,

Hence, average creditors/trade payables = credit purchase * 65/3


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As there is no change in non-current asset,

Non current assets in yr. xxx1 = 22.00Rs. Million

Ending Stock = 4.92Rs. Million

Trade receivables = 3.98Rs. Million

Total assets = 30.90Rs. Million

Interest rate on long term loan = 8 %

Long term loan interest = 10*8/100

= 0.80Rs. Million

Overdraft at end of yr. xxx0 = 2.20Rs. Million

Interest on overdraft in yr. xxx1 = 0.14Rs. Million

Total interest to be paid = 0.94Rs. Millions

Net profit = Gross profit - operating expenses - interest 2.53Rs. Millions

Taxation = 30 %

Provision for tax for yr. xxx1 = 0.76Rs. Millions

Net profit after tax = 1.77Rs. Millions

Appropriation of the net profit is done through dividend and reserves.

Total liabilities except trade payables

= Equity finance + reserve+net profit+provision of tax + loan + overdraft

= 5 + 7.5 + 1.77 + 0.76 +

= 27.23Rs. Million

As per fundamentals of balance sheet,

Total assets = Total liability

Hence, trade payable/creditors = 30.90 - 27.23

= 3.67Rs. Million

Average creditors = (Opening creditors + Closing Creditors)/2 = (1.9 + 3.67)/2

= 2.78Rs. Million

Trade payable period/


Assuming all purchases to be credit purchases,

Hence, average creditors/trade payables = purchase * 75/365

Purchase = avg. creditors*365/75

= 13.54Rs. Million

Cost of goods sold = opening stock + purchase + direct expenses - closing stock

or, 12.14 = 2.4 + 13.54 + direct expenses - 4.92or, direct expenses = 12.14 + 4.92 - 2.4 - 13.54 = 1.11Rs. Million


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5.12Rs. 0.32Rs.

2.74Rs.

0/365

5


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Acounting Problem Solution