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Acounting Problem Solution
Acounting Problem Solution
Fund Flow Statement for the Year Ending 31.03.2011 Sources Rs. Applications Income from investments 1000 Purchase of Plant (Note 1) Funds from operations (Note 4) 38000 Provision of Tax (Note 3) Payment of Interim Dividend Increase in working capital (Note 5) 39000
Working Notes: (1) Plant Account: Dr. Date Particulars 31.03.2010 To balance b/d To Bank A/c ( purchases) (2) Building Account: Dr. Date Particulars 31.03.2010 To balance b/d To Bank A/c (purchases) (3) Provision of Tax Account: Dr. Date Particulars To Bank A/c (payment of tax) 31.03.2011 To balance c/d
Date
Cr. Rs. 4000 36000 40000 Cr. Rs. 4000 36000 40000 Cr. Rs. 16000 21000 37000
Date
Rs. 19000
18000 By Profit & Loss Adjustment A/c 37000 (4) Funds from Operations: Profit & Loss Adjustment Account Dr. Cr. Particulars Rs. Particulars Rs. To General Reserve 4000 By balance b/d 16000 To Depreciation: By funds from operations 38000 Plant 4000 (Balancing figure) Building 4000 To provision of Tax A/c 21000 To interim dividend 8000 To balance c/d 13000 54000 54000 (5) Statement of Changes in Working Capital for the year ending 31.03.2011 Effect on Working Capital Increase Decrease 1200 1000 8600 6600 -
Current Liabilities (B) Sundry Creditors Bills Payable Provisions for doubtful debts
2600 400 -
200 -
13800
7000 13800
Working Notes: Considering "turnover" as net sales in the year, and the year just ended as xxx0 and the next year as xxx1 (non-leap year); Net Sales of M/s. Reinz. Co. in year xxx0 Projected growth in sales Hence, projected net sales of year xxx1 = = = = = = Rs. 16.00 Millions Rs. 8.40 % (16 + 16*8.4/100) Rs. 17.34 Milions Rs. 10.88 Millions Rs. 1.44 Millions 30 % 17.34 * 30/100 Rs. 5.20 Millions 17.34 - 5.20 Rs. 12.14 Millions
Cost of sales of yr. xxx0 Other expenses of yr. xxx0 Gross profit ratio = (Gross Profit/Net sales) Projected gross profit of next year
= =
Operating profit margin = Hence, Opearting ratio = (Cost of goods sold + operating expenses)/ Net sales Hence, (Cost of goods sold+operating expenses) = Operating expences = = = = = = = = =
20 % 80 % 17.34*80/100 Rs. 13.88 Millions 13.88 - 12.14 Rs. 1.73 Millions 110 days Cost of goods sold * 110/365 Rs. 3.66 Millions 2.4 Millions (Opening Stock + Closing Stock)/2 2*average stock -opening stock Rs. 4.92 Millions
Inventory turnover period Average stock/inventory Opening Stock Average Stock Hence, closing stock
Trade receivable period/ debt collection period Assuming all sales to be credit sales, Hence, average debtors/trade receivables Hence, closing debtors
= = = = =
65 days credit sales * 65/365 Rs. 3.09 Millions 2*average debtors -opening debtors Rs. 3.98 Millions 75 days credit purchase * 65/365
Trade payable period/ debt collection period = Assuming all purchases to be credit purchases, Hence, average creditors/trade payables =
As there is no change in non-current asset, Non current assets in yr. xxx1 Ending Stock Trade receivables Total assets
= = = =
Rs. 22.00 Million Rs. 4.92 Million Rs. 3.98 Million Rs. 30.90 Million
= = = = = =
8% 10*8/100 Rs. 0.80 Million Rs. Rs. Rs. Rs. 2.20 Million 0.14 Million 0.94 Millions 2.53 Millions
Overdraft at end of yr. xxx0 Interest on overdraft in yr. xxx1 Total interest to be paid Net profit = Gross profit - operating expenses - interest
Taxation = 30 % Provision for tax for yr. xxx1 = Rs. 0.76 Millions Net profit after tax = Rs. 1.77 Millions Appropriation of the net profit is done through dividend and reserves. Total liabilities except trade payables = Equity finance + reserve+net profit+provision of tax + loan + overdraft = 5 + 7.5 + 1.77 + 0.76 +10+ 2.2 = Rs. 27.23 Million As per fundamentals of balance sheet, Total assets = Total liability Hence, trade payable/creditors = 30.90 - 27.23 = Rs. 3.67 Million Average creditors = (Opening creditors + Closing Creditors)/2 = (1.9 + 3.67)/2 = Rs. 2.78 Million Trade payable period/ debt collection period = 75 days Assuming all purchases to be credit purchases, Hence, average creditors/trade payables = purchase * 75/365 Purchase = avg. creditors*365/75 = Rs. 13.54 Million Cost of goods sold = opening stock + purchase + direct expenses - closing stock or, 12.14 = 2.4 + 13.54 + direct expenses - 4.92 or, direct expenses = 12.14 + 4.92 - 2.4 - 13.54 = Rs. 1.11 Million
0.32