Question

Prepare Statement of Changes in Working Capital and Funds Flow Statement from the following Balance Sheets of Dakshin Ltd. for 2014 and 2015.

Balance Sheets of Dakshin Ltd.

| Liabilities | 2014 Rs. | 2015 Rs. | Assets | 2014 Rs | 2015 Rs. |
| Share Capital(Paid-up) | | | Land & Buildings | 12,00,000 | 10,00,000 |
| 11% Cumulative Preference Shares | -- | 6,00,000 | Plant & Machinery | 6,00,000 | 10,00,000 |
| Equity Shares | 22,00,000 | 24,00,000 | Sundry Debtors | 8,00,000 | 9,60,000 |
| General Reserve | 80,000 | 80,000 | Stock | 12,00,000 | 14,00,000 |
| Profit and Loss Account | 40,000 | 48,000 | Bank | 48,000 | 1,40,000 |
| 9% Debentures | 2,40,000 | 2,80,000 | Cash | 12,000 | 20,000 |
| Provision for Taxation | 120,000 | 1,68,000 | | | |
| Proposed Dividend | 2,00,000 | 2,32,000 | | | |
| Current Liabilities | 9,80,000 | 7,12,000 | | | |
| | 38,60,000 | 45,20,000 | | 38,60,000 | 45,20,000 |

Answer 1

STATEMENT OF CHANGES IN WORKING CAPITAL

Net Increase in Working Capital: Rs. 7,28,000

FUNDS FLOW STATEMENT

| Sources | Amount (Rs.) | Applications | Amount (Rs. ) |
| Issue of Preference Shares | 6,00,000 | Purchase of Plant and Machinery | 4,00,000 |
| Issue of Equity Shares | 2,00,000 | Provision for Taxation (assumed to be paid) | 1,20,000 |
| Issue of Debentures | 40,000 | Proposed Dividend (assumed to be paid) | 2,00,000 |
| Sale of Land & Buildings | 2,00,000 | Net Increase in Working Capital | 7,28,000 |
| Funds From Operations | 4,08,000 | | |
| | 14,48,000 | | 14,48,000 |

Working Notes:

1. Increase in 11% Cumulative Preference Shares and equity shares indicates issue of new shares.

2. Proposed Dividend and Provision for Taxation have been treated as non-current.

3. New debentures have been issued during the year.

4. Decrease in balance of Land and Buildings shows sale.

5. Similarly, plant and machinery has been purchased.

6. Calculation of Funds From Operations

Adjusted Profit and Loss Account

| Particulars | Rs. | Particulars | Rs. |
| To Provision for Taxation | 1,68,000 | By Balance b/d | 40,000 |
| To Proposed dividend | 2,32,000 | By Funds from operations (Balance figures) | 4,08,000 |
| To Balance c/d | 48,000 | | |
| | 4,48,000 | | 4,48,000 |