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ACCOUNTING FOR MANAGERS
Dr. BHAVIK PANCHASARA

Marwadi Education Foundations Group of Institutions

1. Find out the changes in working capital from the following data: [Ans. + in WC 62,000] Capital & Liabilities: Share Capital Trade Creditors P & L A/c Assets: Machinery Stock in trade Debtors Cash 70,000 1,21,000 1,81,000 48,000 1,00,000 1,36,000 1,70,000 70,000 December 2006 3,00,000 1,06,000 14,000 December 2007 3,75,000 70,000 31,000

2. Calculate funds from operations from the following P & L A/c: To Salaries To Rent To Commission To Discount allowed To Provision for Depreciation To Transfer to GR To Provision for Tax To Loss on sale of Investment To Discount on issue of debentures To Preliminary Expenses To Selling Expenses To Net Profit 10,000 3,000 2,000 1,000 14,000 20,000 10,000 5,000 2,000 3,000 20,000 1,20,000 2,10,000 3. Following are the information for Shyam Ltd. for the last two years: [Rs. in 000] Liabilities Equity shares Preference Shares P & L A/c 10% Debentures TOTAL 2011 200 300 50 -550 2012 300 300 100 500 1200 TOTAL 550 1200 Assets Fixed Assets Investments Working capital 2011 300 150 100 2012 700 150 350 2,10,000 By GP By Profit on sale of machine By Refund of tax By Dividend received 5,000 3,000 2,000 2,00,000

Depreciation during the year was Rs. 100000. Prepare funds flow statement, statement of changes in working capital and a statement showing funds from operations.

2 AFM 810001 by Prof. BHAVIK PANCHASARA

Marwadi Education Foundations Group of Institutions

[ ANS: Net increase is WC Rs. 250000, Funds from operations Rs. 150000] 4. Following is the balance sheet of Shri Yamuna LTd. and other additional information: Liabilities Equity shares Preference Shares General Reserve P & L A/c Current Liabilities TOTAL 2011 600 200 10 30 110 950 2012 800 -30 50 130 1010 Assets Plant & Machinery Land Investments Current Assets Misc. Expenses TOTAL 2011 100 500 100 200 50 950 2012 180 250 --540 40 1010

The company sold entire machinery @ 10% profit on its book value as on 1 st October, 2011. It had purchased new machinery on the same day. The company charges depreciation @ 20% p.a. During the year company has also sold half land at profit of Rs. 200000. Find out net increase or decrease in working capital and funds from operations. [ANS: Net increase in working capital 320000, Funds from operations Rs. 129000]. 5. From the following balances of Reliance Ltd. prepare Funds Flow Statement, Statement of changes in working capital and funds from operations. Liabilities Equity shares Preference Shares General Reserve P & L A/c 10% Debentures Current Liabilities TOTAL Additional Information: 1. The company has sold entire machinery with a loss of 20% on its book value as on 1.10.2011, and purchased the new machinery on the same day. The company charges the depreciation @ 20% p.a. 2. The company has redeemed the preference shares with 10% premium. 3. The company issued 3000 equity shares each of Rs. 100 with 5% premium. 4. The premium on redemption of preference share was utilized entirely from the share premium and the balance from the general reserve account. You are required to prepare funds flow account, statement of changes in working capital and statement showing funds from operations. [ANS: Funds from operations Rs. 209000, Net increase in WC Rs. 110000] 2011 200 300 50 50 -300 900 2012 500 -60 100 200 200 1060 TOTAL 900 1060 Assets Plant & Machinery Investments Current Assets 2011 300 100 500 2012 450 100 510

3 AFM 810001 by Prof. BHAVIK PANCHASARA

Marwadi Education Foundations Group of Institutions

6. Following is the balance sheet of Empire Ltd. [Rs. in 000] Liabilities Equity shares Preference Shares Share Premium P & L A/c 10% Debentures Accounts Payable Provision for Tax TOTAL Additional Information: 1. During the year the company has purchased Machinery worth Rs. sixty lakhs. 2. During the year company has paid the tax Rs. fifteen lakhs. 3. Interim dividend paid during the year was Rs. two lakhs. 4. The equity shares were issued at premium equal to its face value. You are required to prepare funds flow statement, Statement of changes in working capital and statement of funds from operations. [ANS: Funds from operations Rs. fifty two lakhs and net increase in WC Rs. fourty seven lakhs] 7. Jay Exports Ltd provides you following information [Rs. in 000] Liabilities 2011 2012 1000 30 140 50 50 5 20 25 Land Building Plant & Machinery Investments Debtors Stock Prepaid Expenses Cash Preliminary Expenses Assets 2011 50 100 150 20 50 200 5 10 10 2012 200 450 85 60 105 265 10 5 5 40 1320 2011 1000 800 500 500 2800 5000 1000 11600 2012 5000 2000 4500 1800 1000 4000 500 18800 TOTAL 11600 18800 Assets Fixed Assets Investments Account Receivables Stock Prepaid Expenses 2011 2000 800 3500 4800 500 2012 5300 1000 6500 5800 200

Equity shares @ Rs. 100 500 GR P & L A/c Bank Loan Creditors Bills Proposed Dividend BOD 20 50 100 35 10 10 10

Discount on Issue of Shares -TOTAL Additional Information: 735 1320 TOTAL 735

4 AFM 810001 by Prof. BHAVIK PANCHASARA

Marwadi Education Foundations Group of Institutions

1. The company has a policy to provide depreciation on building and plant and machinery @ 10% and 15% p.a. respectively. 2. During the year the company had purchased building of Rs. 400000 on first day of 2011 and sold the plant on the same day of book value of Rs. 55000 at loss of Rs. 15000. 3. Interim dividend paid during the year was Rs. 5000 and proposed final dividend of Rs. 15000. 4. During the year equity shares were issued at 10% discount. You are required to prepare funds flow statement, statement of working capital changes and funds from operations. [ANS: Funds from operations Rs. 210000, net increase in WC Rs. 50000] 8. Following is the balance sheet of Nirmal Ltd. [Amount in 000] Liabilities Equity shares [Rs. 100] Share Premium General Reserve P & L A/c 2011 1100 -200 320 2012 1200 50 250 300 200 280 65 70 150 85 2650 TOTAL 2560 2650 Assets Land & Building Plant & Machinery Furniture Investments Stock Debtors Cash Discount on issue of share 2011 1000 550 180 379 97 245 49 5 2012 900 740 240 350 79 281 40 --

14% Debentures[Rs. 100] 350 Bank loan Creditors Bills Payable Proposed Dividend Provision for Tax TOTAL 300 75 55 100 60 2560

Prepare fund flow statement with necessary accounts after considering the following additional information: 1. Fixed assets are depreciated @ 10% p.a. on opening balance. 2. The debentures were redeemed at 5% premium. 3. Tax paid during the year Rs. 75000. 4. The furniture of Rs. 138000 were purchased and part of the old furniture was sold @ 60% loss. 5. A machine [BV Rs. 60000] destroyed by fire and realized Rs. 6000 as scrap. 6. Shares are issued at a premium as a part payment of the new machinery purchased during the year. The balance payment of the machinery was made in cash. [ANS: Funds from operations Rs. 590500, net increase in WC Rs. 4000] 9. Following are the balance sheet of Shri Rajhans Ltd. You are required to prepare funds flow statement and other necessary accounts with appropriate working notes and ledger accounts after considering the additional information.

5 AFM 810001 by Prof. BHAVIK PANCHASARA

Marwadi Education Foundations Group of Institutions

Liabilities Equity shares [Rs. 100] General Reserve P & L A/c Depreciation Fund 2011 150000 30000 8000 20000 2012 Assets 2011 100000 40000 18000 41000 70000 20400 11300 2300 15000 318000 2012 160000 70000 25000 21000 95000 -13100 3200 10000 407300

150000 Land & Building 35000 Plant & Machinery 11500 Investments 32000 Stock 50000 Debtors 60000 Bank 48000 Cash 15000 Outstanding Commission 5800 Preliminary Expenses 407300 TOTAL

12% Debentures[Rs. 100] 50000 14% Debentures[Rs. 100] Creditors Bank Overdraft Outstanding Expenses TOTAL -51500 -8500 318000

1. No depreciation is charged on building. 2. A machine costing Rs. 20000 depreciated upto 30% was sold at 20% loss. 3. 14% Debentures were issued at 5% discount. 4. During the year, 1000 shares of FFF Ltd purchased. The pre acquisition dividend on these shares were 2500. 5. Compensation of Rs. 18600 paid to a workman, is written off through reserve for contingencies. [ANS: Funds from operations Rs. 71000, Decrease in working capital Rs. 11500] 10. Following are the balances of Anurag Ltd. on 31st March, 2012. Your are required to find out funds from operations, total funds flow and working capital changes. [Rs. in 000] Particulars Accounts payable Equity Shares Goodwill Land Other current assets Preference Shares P & L A/c Provision for Tax Additional information: 1. The net profit during the year amounted to Rs. 140000. 2011 40 100 -100 10 -100 40 2012 45 400 50 250 25 200 190 50 Particulars Accounts Receivables General Reserve Investments Loans Plant & Machinery Preliminary Expenses Proposed Dividend Stock 2011 100 10 50 150 100 50 20 50 2012 120 30 10 -300 40 30 150

6 AFM 810001 by Prof. BHAVIK PANCHASARA

Marwadi Education Foundations Group of Institutions

2. In the beginning of the year Anurag Ltd. has acquired a company and the purchase consideration was settled against acquisition by issue of equity shares at par of Rs. 300000 and 10% Preference shares of Rs. 200000. The assets acquired were, Plant & Machinery RS. 250000, Land Rs. 150000 and Stock Rs. 50000. [ANS: Funds from operations Rs. 250000 and net increase in working capital Rs. 80000] 11. Mr. Rajiv has following financial data: [Amount in Rs.] Sales Liabilities Cash inflows 8000 3000 10000 Assets Trading Expenses Closing capital Employed 15000 3000 12000 General Expenses Cash outflows Opening capital Employed 4000 12000 11000

Prepare P & L Account, Balance sheet and Funds Flow Statement. [ANS: Net Profit Rs. 1000, Total of Balance Sheet Rs. 15000 and Funds from operations Rs. 1000] 12. Following is the balance sheet of Jayesh Ltd. [Rs. in 000] Liabilities Equity shares Preference shares P & L A/c 10% Debentures TOTAL Additional Information: 1. Depreciation provided during the year Rs. 400000. Prepare funds flow statement, statement of changes in working capital and find out funds from operations. 13. Following is the information of a company. [Rs. in 000] Liabilities Equity shares Preference shares General Reserve P & L A/c Current Liabilities Additional Information: 1. The company has sold entire machinery @ 10% profit on its book value as on 1 st October 2011 and purchased new one. Depreciation rate is 20% p.a. 2. During the year, the company has sold half of its land at profit of Rs. 1000000. 2011 450 200 50 150 200 2012 600 300 50 250 360 Assets Plant & Machinery Land Investments Current Assets Misc. Expenses 2011 200 300 200 300 50 2012 360 500 -560 40 2011 400 650 150 --1200 2012 600 600 200 1000 1200 TOTAL 1200 1200 Assets Fixed Assets Investments Working Capital 2011 600 300 300 2012 1500 300 600

7 AFM 810001 by Prof. BHAVIK PANCHASARA

Marwadi Education Foundations Group of Institutions

Prepare funds flow statement, statement of changes in working capital and find out funds from operations. 14. Following is the balance sheet of Dell Company. [Rs. in 000] Liabilities Equity shares Preference shares General Reserve P & L A/c Current Liabilities Other information: 1. The company sold all investments at a loss of 20% on its book value. 2. On 1st October, 2011, the company purchased a new machinery of Rs. 500000 and charges depreciation @ 20% p.a. 3. During the year the company has redeemed the preference share @ 10% premium. 4. The company has issued 3000 equity shares each of Rs. 100 with the premium of Rs. 5 per share. 5. The redemption premium on preference shares was utilized entirely from issue of equity shares and balance from the general reserve account. Prepare funds flow statement, statement of changes in working capital and find out funds from operations. 15. Following are the details of Arti Ltd. [Rs. in 000] Liabilities Equity shares [Rs. 100] 2011 1500 2012 3500 -500 1800 2000 3100 Assets Plant & Machinery Current Assets Investments 2011 3600 9500 800 2012 4000 7900 1000 2011 500 300 100 150 250 2012 800 -200 450 400 Assets Plant & Machinery Current Assets Investments 2011 500 600 100 2012 850 700 220 80

Discount on issue of share 100

Preference shares[Rs. 100]1000 Securities Premium P & L A/c 10% Debentures Current Liabilities Additional Information: 2000 800 2200 6400

1. During the year company had sold machinery of book value Rs. 1000000 for Rs. 600000 and charged the depreciation of Rs. 500000. 2. Provision for tax made Rs. 1500000 3. Interim dividend paid during the year Rs. 300000. 4. Preference shares were redeemed at premium of 20% for redumption premium, securities premium account was utilized.

8 AFM 810001 by Prof. BHAVIK PANCHASARA

Marwadi Education Foundations Group of Institutions

5. the equity shares were issued at par. Prepare funds flow statement, statement of changes in working capital and find out funds from operations. 16. From the following details, prepare funds flow statement, statement of changes in working capital and find out funds from operations. Liabilities Equity shares [Rs. 100] Securities Premium General Reserve P & L A/c 10% Debentures Bank loan Creditors Bills Payable Provision for Tax Proposed Dividend Additional Information: 1. All fixed assets are depreciated by 10% on opening balance. 2. Debentures were receemed at 10% premium. The premium was utilized from the general reserve account. 3. Rs. 75000 paid as tax. 4. Furniture of Rs. 150000 was purchased during the year ans some of the old furniture was sold at 60% loss. 5. A machine having book value Rs. 60000 was destroyed by fire and was sold as scrap for Rs. 6000 only. 6. Shares are issued at premium as a part payment of the new machinery purchased during the year. The balance payment of machinery was made by cash. 2011 1000 -200 320 500 150 50 50 200 100 2012 1500 50 250 500 -200 80 50 150 150 Assets Plant & Machinery Land & Building Furniture Investments Stock Debtors Cash Preliminary Expenses Discount on Shares 2011 500 1100 200 800 80 240 50 25 5 2012 750 1300 250 1000 80 250 50 20 --

9 AFM 810001 by Prof. BHAVIK PANCHASARA