Financial Accounting

1

Lecture – 42

Question

• You are given the Balance Sheet of ABC Limited as at June 30 2001 and June 30, 2002 and its Profit and Loss Account for the year ended June 30 2002.

Required

• You are required to prepare Cash Flow Statement for the given period.

Financial Accounting

2

Lecture – 42

ABC Ltd

Balance Sheet As At June 30 2002

2002 Rs. 2001 Rs.

Rs. ‘000 Rs. ‘000

Building at Cost 181,000 140,000

Accumulated Depreciation 36,000 30,000

Written Down Value 145,000 110,000

Plant and Machinery cost 83,000 90,000

Accumulated Depreciation 36,000 35,000

Written Down Value 47,000 55,000

Total Fixed Assets at WDV 192,000 165,000

Financial Accounting

3

Lecture – 42

ABC Ltd

Balance Sheet As At June 30 2002

2002 Rs. 2001 Rs.

Rs. ‘000 Rs. ‘000

Total Fixed Assets at WDVLong Term Investments

192,00017,000

165,00010,000

Current Assets

Debtors 30,000 21,000

Stock 25,000 40,000

Short Term Deposits 18,000 15,000

Cash and Bank 30,000 24,000

103,000 100,000

Current Liabilities

Creditors 15,000 12,000

Proposed Dividend 18,000 16,000

Tax Payable 9,000 8,000

42,000 36,000

Working Capital 61,000 64,000

Net Assets Employed 270,000 239,000

Financial Accounting

4

Lecture – 42

ABC Ltd

Balance Sheet As At June 30 2002

2002 Rs. 2001 Rs.

Rs. ‘000 Rs. ‘000

Financed By

Share Capital 180,000 160,000

Share Premium Account 17,000 12,000

General Reserve 23,000 20,000

Accumulated Profit and Loss 34,000 27,000

Share Holders’ Equity 254,000 219,000

Term Finance Certificates 16,000 20,000

Total 270,000 239,000

Financial Accounting

5

Lecture – 42

ABC Ltd

Profit and Loss Account For the Year Ended June 30 2002

Rs. ‘000

Sales 300,000

Cost of Sales (231,000)

Gross Profit 69,000

Other Income 4,000

73,000

Less: Administrative Expenses

Director’s Remuneration 4,000

Depreciation on Building Loss on Sale of Machinery Other Administrative Expenses

6,0002,000

12,000

24,000

Less: Selling Expenses 10,000

Less: Mark up on TFC 2,000

36,000

Profit for the Year Before Tax 37,000

Financial Accounting

6

Lecture – 42

ABC Ltd

Profit and Loss Account For the Year Ended June 30 2002

Rs. ‘000

Profit for the Year Before Tax 37,000

Provision for tax 9,000

Profit after tax 28,000

Acc. Profit Brought Forward 27,000

55,000

Appropriation

Transfer to Reserve 3,000

Proposed Dividend 18,000

21,000

Accumulated Profit Carried Forward 34,000

Financial Accounting

7

Lecture – 42

Additional Information

1. Other income include dividend on Long Term Investment2. Cost of goods sold include depreciation for the year on

machinery Rs. 5,000.3. Accumulated Depreciation on the machine disposed off

amounts to Rs. 4,000.

Financial Accounting

8

Lecture – 42ABC Ltd

Cash Flow Statement For the Year Ended June 30 2002

Note Rs. ‘000

Net Profit Before Tax 37,000

Adjustment of Non Cash Items

Depreciation 11,000

Loss on Sale of Machinery 2,000

Markup on TFC 2,000

52,000

Less: Other Income (4,000)

Operating Profit Before Working Capital Changes 48,000

Working Capital Changes

Reduction in Stock 15,000

Increase in Creditors 3,000

Increase in Debtors (9,000)

9,000

Cash Flow from Operations 57,000

Financial Accounting

9

Lecture – 42

ABC Ltd

Cash Flow Statement For the Year Ended June 30 2002

Note Rs. ‘000

Cash Flow from Operations 57,000

Markup on TFC Paid (2,000)

Tax Paid 1 (8,000)

Net Cash Flow From Operating Activities 47,000

Cash Flow From Investing Activities

Dividend Received 4,000

Payment to Acquire Investments 2 (7,000)

Purchase of Fixed Assets (Building) 3 (41,000)

Receipt from Sale of Assets 4 1,000

Net Cash Flow From Investing Activities (43,000)

Financial Accounting

10

Lecture – 42

ABC Ltd

Cash Flow Statement For the Year Ended June 30 2002

Note Rs. ‘000

Cash Flow From Financing Activities

Issue of Ordinary Shares 20,000

Share Premium Account 5,000

Dividend Paid 5 (16,000)

Repayment of TFC 6 (4,000)

Net Cash Flow From Financing Activities 5,000

Net Increase / (Decrease) in Cash and

Cash Equivalents During The Year 9,000

O/B of Cash and Cash Equivalents 39,000

C/B of Cash and Cash Equivalents 48,000

Financial Accounting

11

Lecture – 42

Notes

• Note 1: Tax Paid

Provision For Tax Payable

Debit side.

Cash 8,000

Bal. C/F 9,000

Credit side.

Bal. B/F 8,000

For the year 9,000

Balancing Figure

Financial Accounting

12

Lecture – 42

• Note 2: Payment to Acquire Investments

Investment

Debit side.

Bal. B/F 10,000

Cash 7,000

Credit side.

Bal. C/F 17,000Balancing Figure

Financial Accounting

13

Lecture – 42

• Note 3: Purchase of Fixed Assets

Building Cost

Debit side.

Bal. B/F 140,000

Cash 41,000

Credit side.

Bal. C/F 181,000Balancing Figure

Financial Accounting

14

Lecture – 42

• Note 4: Sale Proceeds of Machinery

Disposal of Asset Account

Debit side.

Cost 7,000

Credit side.

Accum. Dep. 4,000

Loss on Sale 2,000

Sale Proceed 1,000

Machinery at Cost

Debit side.

Bal. B/F 90,000

Credit side.

Disposal A/c 7,000

Bal. C/F 83,000

Balancing Figure

Balancing Figure

Financial Accounting

15

Lecture – 42

• Note 5: Dividend Paid

Dividend Payable

Debit side.

Cash 16,000

C/B 18,000

Credit side.

O/B 16,000

For the Year 18,000

Balancing Figure

Financial Accounting

16

Lecture – 42

• (6) Repayment of TFC

TFC Account

Debit side.

Cash 4,000

C/B 16,000

Credit side.

O/B 20,000

Balancing Figure