Question

Calculate Funds from Operations from the following information:

(i) Net profit for the year Rs. 65,00,000

(ii) Profit on sale of building Rs. 3,55,000

(iii) Goodwill appears in the books at Rs. 18,00,000 of which 10% has been written *** during the year.

(iv) Machinery worth Rs. 80,000 has been sold *** Rs. 65,000 during the year.

(v) Transfer to General Reserves Rs. 12,50,000.

(vi) Depreciation at 20% has been provided on furniture of Rs. 65,00,000.

Answer 1

Calculation of Funds From Operations

| Particulars | | Amount (Rs.) |
| Net Profit for the year (given) | | 65,00,000 |
| Add: Non – fund items debited to P&L Account | | |
| Goodwill written * | 1,80,000 | |
| Loss on sale of machinery | 15,000 | |
| Transfer to General Reserve | 12,50,000 | |
| Depreciation (20% of 65,00,000) | 13,00,000 | 27,45,000 |
| Less: Non – fund items credited to P&L Account** | | |
| Profit on sale of building | 3,55,000 | 3,55,000 |
| Funds from operations | | 88,90,000 |

ADJUSTED PROFIT AND LOSS ACCOUNT

| Particulars | Amount (Rs.) | Particulars | Amount (Rs.) |
| To Goodwill written * | 1,80,000 | By Profit on sale of building | 3,55,000 |
| To loss on sale of machinery | 15,000 | By Funds From Operations | 88,90,000 |
| To Transfer to General Reserve | 12,50,000 | | |
| To Depreciation (20% of 65,00,000) | 13,00,000 | | |
| To Net Profit | 65,00,000 | | |
| | 92,45,000 | | 92,45,000** |