Net Working Capital = Current Assets – Current Liabilities

Statement of Changes In Working Capital:

* Increase in current assets , increase in net working capital

* Decrease in current assets , decrease in net working capital
* Increase in current liabilities , decrease in net working capital
* Decrease in current liabilities, increase in net working capital
Ques. From the following information, prepare Schedule of Changes in Working Capital
 Example:- The Balance Sheet of ABC Ltd. at the end of 2006 and 2007 are as
follows: 31 March 2006 31 March 2007
Liabilities:
Accounts Payable 15,000 20,000
Notes Payable 25,000 10,000
Other Current Liabilities 10,000 15,000
6 % Bonds ------ 20,000
Retained Earning 80,000 1,10,000
Mortgage ------ 10,000
Shares 50,000 50,000
TOTAL 1,80,000 2,35,000
Assets:
Cash 10,000 5,000
Marketable Security 10,000 -------
Inventory 70,000 1,05,000
Receivables 30,000 40,000
Fixed Assets 1,00,000 1,40,000
Accumulated Depreciation (-)40,000 (-)55,000
TOTAL 1,80,000 2,35,000

You are required to prepare a Statement of Changes in Working Capital and Fund Flow Statement
.
Statement of Changes in Working Capital
Particular 2006 2007 Effect on Working Capital

Increase Decrease
Current Assets: Rs. Rs. Rs. Rs.

Cash 10,000 5,000 ----- 5,000

Marketable Security 10,000 ----- ----- 10,000

Inventory 70,000 1,05,000 35,000 -----

Receivable 30,000 40,000 10,000 -----

1,20,000 1,50,000

Current Liabilities:

Accounts Payable 15,000 20,000 ----- 5,000

Notes Payable 25,000 10,000 15,000 -----

Other Current Liabilities 10,000 15,000 ----- 5,000

50,000 45,000

Net Increase in Working Capital(Balance) ----- 35,000

TOTAL 60,000 60,000

 Balance Sheet of M/s _

as on 31stMarch as on 31stMarch
Liabilities Assets
2006 2007 2006 2007

Goodwill (at Cost)

Land and Buildings 6,00,000 6,00,000
Capital
Plant and 18,50,000 22,00,000
Profit/Loss 18,50,000 21,00,000 Machinery 4,74,000 5,24,000
Appropriation 14,78,000 17,64,000 Furniture and 1,94,000 1,94,000
Bank Loan 12,00,000 9,00,0000 Fittings 8,26,000 7,24,000
Bills Payable 4,00,000 6,80,000 Stock/Inventories 12,00,000 12,80,000
Sundry Creditors 14,00,000 12,20,000 Sundry Debtors 8,00,000 7,21,000
Reserve for 2,00,000 1,80,000 Bills Receivable 5,00,000 4,83,000
Taxation
Bank 84,000 1,18,000
Cash

TOTAL 65,28,000 68,44,000 TOTAL 65,28,000 68,44,000

 Schedule/Statement of Changes in Working Capital for the period from 31/03/06 to 31/03/07
Balance as on 31st March Working Capital Change
Particulars/Account
2006 2007 Increase Decrease
a) CURRENT ASSETS

1) Stock/Inventories 826,000 724,000 102,000

2) Sundry Debtors 1,200,000 1,280,000 80,000
3) Bills Receivable 800,000 721,000 79,000
4) Bank 500,000 483,000 17,000
5) Cash 84,000 118,000 34,000

TOTAL 3,410,000 3,326,000 114,000 198,000

b) CURRENT LIABILITIES

1) Bills Payable 400,000 680,000 280,000

2) Sundry Creditors 1,400,000 1,220,000 180,000
3) Provision for Taxation 200,000 180,000 20,000

TOTAL 2,000,000 2,080,000 200,000 280,000

Working Capital [(a) - (b)] 1,410,000 1,246,000

TOTAL 314,000 478,000

Net Change in Working Capital 164,000