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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 Sources Rs. Applications Income from investments 1000 Purchase of Plant (Note 1) Funds from operations (Note 4) 38000 Provision of Tax (Note 3) Payment of Interim Dividend Increase in working capital (Note 5) 39000

Rs. 3000 21000 8000 7000 39000

Working Notes: (1) Plant Account: Dr. Date Particulars 31.03.2010 To balance b/d To Bank A/c ( purchases) (2) Building Account: Dr. Date Particulars 31.03.2010 To balance b/d To Bank A/c (purchases) (3) Provision of Tax Account: Dr. Date Particulars To Bank A/c (payment of tax) 31.03.2011 To balance c/d

Rs. 37000 3000 40000

Date

Particulars By Depreciation A/c 31.03.2011 By balance c/d

Cr. Rs. 4000 36000 40000 Cr. Rs. 4000 36000 40000 Cr. Rs. 16000 21000 37000

Rs. 40000 0 40000

Date

Particulars By Depreciation A/c 31.03.2011 By balance c/d

Rs. 19000

Date Particulars 31.03.2010 By balance b/d

18000 By Profit & Loss Adjustment A/c 37000 (4) Funds from Operations: Profit & Loss Adjustment Account Dr. Cr. Particulars Rs. Particulars Rs. To General Reserve 4000 By balance b/d 16000 To Depreciation: By funds from operations 38000 Plant 4000 (Balancing figure) Building 4000 To provision of Tax A/c 21000 To interim dividend 8000 To balance c/d 13000 54000 54000 (5) Statement of Changes in Working Capital for the year ending 31.03.2011 Effect on Working Capital Increase Decrease 1200 1000 8600 6600 -

Particulars Current Assets (A) Stock Bills Recievables Debtors Cash

Yr. 2010 Rs. 30000 2000 18000 6600 56600

Yr. 2011 Rs. 23400 3200 19000 15200 60800

Current Liabilities (B) Sundry Creditors Bills Payable Provisions for doubtful debts

8000 1200 400 9600 47000 7000 54000

5400 800 600 6800 54000 54000

2600 400 -

200 -

Working Capital (A-B) Increase in working capital

13800

7000 13800

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 Projected growth in sales Hence, projected net sales of year xxx1 = = = = = = Rs. 16.00 Millions Rs. 8.40 % (16 + 16*8.4/100) Rs. 17.34 Milions Rs. 10.88 Millions Rs. 1.44 Millions 30 % 17.34 * 30/100 Rs. 5.20 Millions 17.34 - 5.20 Rs. 12.14 Millions

Cost of sales of yr. xxx0 Other expenses of yr. xxx0 Gross profit ratio = (Gross Profit/Net sales) Projected gross profit of next year

= =

Projected Cost of goods sold =

Operating profit margin = Hence, Opearting ratio = (Cost of goods sold + operating expenses)/ Net sales Hence, (Cost of goods sold+operating expenses) = Operating expences = = = = = = = = =

20 % 80 % 17.34*80/100 Rs. 13.88 Millions 13.88 - 12.14 Rs. 1.73 Millions 110 days Cost of goods sold * 110/365 Rs. 3.66 Millions 2.4 Millions (Opening Stock + Closing Stock)/2 2*average stock -opening stock Rs. 4.92 Millions

Inventory turnover period Average stock/inventory Opening Stock Average Stock Hence, closing stock

Trade receivable period/ debt collection period Assuming all sales to be credit sales, Hence, average debtors/trade receivables Hence, closing debtors

= = = = =

65 days credit sales * 65/365 Rs. 3.09 Millions 2*average debtors -opening debtors Rs. 3.98 Millions 75 days credit purchase * 65/365

Trade payable period/ debt collection period = Assuming all purchases to be credit purchases, Hence, average creditors/trade payables =

As there is no change in non-current asset, Non current assets in yr. xxx1 Ending Stock Trade receivables Total assets

= = = =

Rs. 22.00 Million Rs. 4.92 Million Rs. 3.98 Million Rs. 30.90 Million

Interest rate on long term loan Long term loan interest

= = = = = =

8% 10*8/100 Rs. 0.80 Million Rs. Rs. Rs. Rs. 2.20 Million 0.14 Million 0.94 Millions 2.53 Millions

Overdraft at end of yr. xxx0 Interest on overdraft in yr. xxx1 Total interest to be paid Net profit = Gross profit - operating expenses - interest

Taxation = 30 % Provision for tax for yr. xxx1 = Rs. 0.76 Millions Net profit after tax = Rs. 1.77 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 +10+ 2.2 = Rs. 27.23 Million As per fundamentals of balance sheet, Total assets = Total liability Hence, trade payable/creditors = 30.90 - 27.23 = Rs. 3.67 Million Average creditors = (Opening creditors + Closing Creditors)/2 = (1.9 + 3.67)/2 = Rs. 2.78 Million Trade payable period/ debt collection period = 75 days Assuming all purchases to be credit purchases, Hence, average creditors/trade payables = purchase * 75/365 Purchase = avg. creditors*365/75 = Rs. 13.54 Million Cost of goods sold = opening stock + purchase + direct expenses - closing stock or, 12.14 = 2.4 + 13.54 + direct expenses - 4.92 or, direct expenses = 12.14 + 4.92 - 2.4 - 13.54 = Rs. 1.11 Million

Rs. 5.12 Rs. Rs. 2.74

0.32

t of goods sold * 110/365

dit purchase * 65/365

7.5 + 1.77 + 0.76 +10+ 2.2

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