FINANCIAL STATEMENT ANALYSIS

Funds Flow Analysis

Problems

Short Problems

1. The balance in the provision for taxation on 1-4-1991 was Rs. 30,000 and on 31-3-
1992 Rs. 40,000. Taxes paid during 1991-92 were Rs. 25,000. How will you deal with
the same in the funds flow statement ? What is the Provision made during the year
1991-92 ?

2. Following are the extracts from the balance sheets of Goutham Ltd., as on 31 st
December 2016 and 31st December 2017. You are required to calculate funds from
operations.
As on 31st December
2016 2017
Profit and Loss Account 30,000 40,000
General Reserve 20,000 25,000
Goodwill 10,000 5,000
Preliminary Expenses 6,000 4,000
Provision for Depreciation on Machinery 10,000 12,000

3. Calculate Funds from Operations from the following Profit and Loss Account.
Rs. Rs.
To Expenses paid and outstanding 3,00,000 By Gross Profit 4,50,000
To Depreciation 70,000 By Gain on sale
To Loss on sale of machine 4,000 land 60,000
To Discount on Debentures 200
To Goodwill 20,000
To Net Profit 1,15,800
5,10,000 5,10,000

4. From the following information relating to Plant of XYZ Ltd. Calculate the funds
obtained from the sale of plant.
31-3-1993 31-3-1994
Plant (gross) 1,00,000 1,25,000
Accumulated Depreciation 20,000 30,000
Additional Information
(a) Loss on sale of Plant --- 1,000
(b) Depreciation charged during the
Year on Plant --- 14,000
(c) Purchase of Plant during the year --- 35,000

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5. From the two Balance Sheets as on 31 st December 1987 and 1988 you are required
to prepare a schedule of changes in working capital for 1988.
December 31st
1987 1988
Assets
Cash 30,000 47,000
Debtors 1,20,000 1,15,000
Stock in Trade 80,000 90,000
Land 50,000 66,000
2,80,000 3,18,000
Capital and Liabilities
Share Capital 2,00,000 2,50,000
Trade Creditors 70,000 45,000
Retained Earnings 10,000 23,000
2,80,000 3,18,000

6. Find the changes in working capital from the particulars of Amararaja Batteries Ltd.,
given below.

Capital and 31-12-96 31-12-97 Assets 31-12-96 31-12-97

Liabilities Rs. Rs. Rs. Rs.
Share Capital 3,00,000 3,75,000 Machinery 70,000 1,00,000
Trade Creditors 1,06,000 70,000 Stock 1,21,000 1,36,000
P & L A/c 14,000 31,000 Debtors 1,81,000 1,70,000
Cash 48,000 70,000
4,20,000 4,76,000 4,20,000 4,76,000

7. Find out the changes in working capital of JVK Industries Ltd., from the particulars
given below.

Capital and 31-12-96 31-12-97 Assets 31-12-96 31-12-97

Liabilities Rs. Rs. Rs. Rs.
Creditors 45,000 50,000 Goodwill 5,000 10,000
Bills Payable 35,000 20,000 Cash 70,000 25,000
Loans Debtors 90,000 98,000
(due 1997) 20,000 --- Stock 1,20,000 87,000
Capital 1,50,000 1,25,000 Investments 10,000 15,000
P & L A/c 75,000 60,000 Land 27,000 15,000
Preliminary
Expenses 3,000 5,000
3,25,000 2,55,000 3,25,000 2,55,000

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8. Prepare a Statement of Changes in Working Capital of Saroja Ltd., from the information
given below :
Particulars December 31st
2015 2016
Equities and Liabilities
Shareholders Funds
Share Capital 2,50,000 2,50,000
Reserves and Surplus 10,000 25,000
Current Liabilities
Trade Payable 45,000 70,000
Total 3,05,000 3,45,000
Assets
Non-Current Assets
Fixed Assets 50,000 68,000
Current Assets
Inventories 80,000 90,000
Trade Receivables 1,12,000 1,22,000
Cash and Cash Equivalents 63,000 65,000
Total 3,05,000 3,45,000

Main Problems

1. You are given the following comparative Balance Sheet of Mohan Ltd.
Particulars March 31st
2016 2017
Equity and Liabilities
Shareholders Funds
Share Capital 25,000 25,000
Reserves and Surplus 2,300 1,000
Current Liabilities
Trade Payables 4,500 7,000
Total 31,800 33,000
Assets
Non-Current Assets
Fixed Assets 6,600 5,000
Current Assets
Inventories 9,000 8,000
Trade Receivables 11,500 12,000
Cash and Cash Equivalents 4,700 3,000
Total 31,800 33,000
You are required to prepare :
(i) Statement showing changes of working capital.
(ii) Statement of Sources and Uses of funds.

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2. The following are the Balance Sheets of Mihika Ltd., from which you are asked to
prepare funds flow statement.
Particulars March 31st
2016 2017
Equity and Liabilities
Shareholders Funds
Share Capital 1,25,000 1,50,000
Reserves and Surplus 60,000 75,000
Non-Current Liabilities --- ---
Current Liabilities
Trade Payable 70,000 1,00,000
Total 2,55,000 3,25,000
Assets
Non-Current Assets
Fixed Assets 20,000 30,000
Non-Current Investments 15,000 10,000
Current Assets
Inventories 87,000 1,20,000
Trade Receivables 98,000 90,000
Cash and Cash Equivalent 35,000 75,000
Total 2,55,000 3,25,000

3. The following are the summarized balance sheets of Sandhya Ltd., as on 31-3-2016
and 31-3-2017.
Particulars Note March 31st
No. 2016 2017
Equity and Liabilities
Shareholders Funds
Share Capital 1 40,000 50,000
Reserves and Surplus 2 3,000 3,200
Non-Current Liabilities
10 % Debentures 6,000 7,000
Current Liabilities
Short Term Borrowings 12,500 6,800
Trade Payables 12,000 11,000
Short Term Provisions 3 8,000 10,000
Total 81,500 88,000
Assets
Non-Current Assets
Fixed Assets 4 30,000 25,000
Current Assets
Inventories 30,000 35,000
Trade Receivables 20,000 24,000
Cash and Cash Equivalent 1,500 4,000
Total 81,500 88,000

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 Notes to Accounts
31-3-2016 31-3-2017
1. Share Capital
Equity Share Capital 40,000 40,000
7 % Redeemable Preference
Share Capital --- 10,000
40,000 50,000

2. Reserves and Surplus

General Reserve 2,000 2,000
Surplus as per Statement of
Profit & Loss 1,000 1,200
3,000 3,200

3. Short Term Provisions

Provision for Tax 3,000 4,200
Proposed Dividend 5,000 5,800
8,000 10,000

4. Fixed Assets
Original Cost 41,000 40,000
Accumulated Depreciation 11,000 15,000
30,000 25,000
You are required to prepare
(i) A Statement of Changes in Working Capital.
(ii) Statement of Sources and Application of Funds.

4. From the following Balance Sheet of Siddanth Ltd., prepare funds flow statement.

Particulars Note March 31st

No. 2016 2017
Equity and Liabilities
Shareholders Funds
Share Capital 2,40,000 3,60,000
Reserves and Surplus 1,00,500 1,25,000
Non-Current Liabilities
8 % Debentures --- 78,000
Current Liabilities
Trade Payable 1,00,500 1,09,600
Short Term Provisions 29,400 32,700
Total 4,70,400 7,05,300
Assets
Non-Current Assets
Fixed Assets 2,80,200 4,98,000
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 Current Assets
Inventories 66,300 78,000
Trade Receivables 1,09,500 1,17,300
Cash and Cash Equivalent 14,400 12,000
Total 4,70,400 7,05,300

1. Reserves and Surplus 31-3-2016 31-3-2017

Share Premium 24,000 36,000
General Reserve 18,000 27,000
Surplus as per Statement of
Profit & Loss 58,500 62,000
1,00,500 2,07,300
2. Fixed Assets
Building 1,66,200 3,39,600
Machinery 1,06,800 1,53,900
Furniture 7,200 4,500
2,80,200 4,98,000
Provide depreciation on Machinery Rs. 38,400 on furniture Rs. 1,200.

5, The following are the balance sheet of Sahil Ltd., as on 31 st March 2016 and 31st
March 2017.
Particulars Note March 31st
No. 2016 2017
Equity and Liabilities
Shareholders Funds
Share Capital 1,60,000 2,20,000
Reserves and Surplus 1 2,36,000 4,88,000
Non-Current Liabilities --- ---
Current Liabilities
Trade Payable 2,30,000 1,80,000
Other Current Liabilities 6,000 3,000
Total 6,32,000 8,91,000
Assets
Non-Current Assets
Fixed Assets 2 1,30,000 2,07,000
Current Assets
Inventories 3,00,000 3,50,000
Trade Receivables 1,62,000 2,54,000
Cash and Cash Equivalent 40,000 80,000
Total 6,32,000 8,91,000
Notes to Accounts

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 1. Reserves and Surplus 31-3-2016 31-3-2017
Surplus as per Statement of
Profit & Loss 2,50,000 5,00,000
Less : Preliminary Expenses 14,000 12,000
2,36,000 4,88,000

2. Fixed Assets
Buildings at cost 1,40,000 2,18,000
Depreciation on Buildings 10,000 11,000
1,30,000 2,07,000
Additional Information :
1. During the year a building which was purchased earlier for Rs. 14,000
(depreciation written off Rs. 1,000) was sold for Rs. 1,200.
2. A dividend of Rs. 40,000 has been paid during the year.

From the above information, you are required to prepare (a) A statement of changes in
working capital (b) funds flow statement.

6. The following information is extracted from the financial statements of Abhinav Ltd., as
at 31st March 2016 and 31st March 2017.

2016 (Rs) 2017 (Rs)

Share Capital 4,00,000 6,00,000
Reserves and Surplus 2,50,000 3,50,000
Depreciation Fund 80,000 1,20,000
Bank Loan 1,60,000 80,000
Sundry Creditors 1,20,000 1,35,000
Proposed Dividend 40,000 60,000
Provision for Taxation 40,000 55,000
Land and Building (at cost) 3,00,000 4,00,000
Plant and Machinery (at cost) 4,60,000 6,30,000
Inventories 1,80,000 2,00,000
Sundry Debtors 1,00,000 1,55,000
Cash and Bank Balance 50,000 15,000

A machinery which was purchased earlier for Rs. 60,000 was sold for Rs. 4,000. The
book value of the machine was Rs. 6,000. The company also purchased new
equipment during the year.

The company has issued new shares to the extent of Rs. 2,00,000 for cash. You are
required to prepare :
(i) Statement of Changes in Working Capital and
(ii) Statement of Sources and Application of Funds.

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7. The following are the summarized Balance Sheets of Tanmayi Ltd., on 31 st March 2016
and 31st March 2017.
Particulars Note 31-3-2016 31-3-2017
No
Equity and Liabilities
Shareholders Funds
Share Capital 6,00,000 8,00,000
Reserves and Surplus 1 1,18,000 2,44,000
Non-Current Liabilities
Debentures 2,00,000 3,00,000
Current Liabilities
Trade Payables 1,15,000 90,000
Short Term Provisions --- ---
Provision for Doubtful Debts 6,000 3,000
Total 10,39,000 14,37,000
Assets
Non-Current Assets
Fixed Assets 2 6,50,000 9,86,000
Current Assets
Inventories 3,00,000 3,50,000
Trade Receivables 69,000 61,000
Cash and Cash Equivalent 20,000 40,000
Total 10,39,000 14,37,000
Notes to Accounts
1. Reserves and Surplus 31-3-2016 31-3-2017
Surplus as per Statement of Profit & Loss 1,25,000 2,50,000
Less : Preliminary Expenses 7,000 6,000
1,18,000 2,44,000

2. Fixed Assets
Land and Building at cost 3,00,000 4,00,000
Depreciation on Buildings 20,000 24,000
2,80,000 3,76,000
Plant and Machinery at cost 4,00,000 6,45,000
Depreciation on Plant and Machinery 30,000 35,000
3,70,000 6,10,000

Additional Information :
(i) During the year, a part of Machinery costing Rs. 70,000 (accumulated
depreciation thereon 2,000) was sold for Rs. 6,000.
(ii) Dividends of Rs. 50,000 were paid during the year. You are required to ascertain
changes in working capital for 2017 and prepare funds flow statement.

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8. From the following summarized financial statements of Shraddha Ltd., as at 31 st March
2016 and 31st March 2017, prepare :
(i) A Statement showing sources and application of funds during the same period,
and
(ii) A Statement of changes in working capital for the year ended 30 th March 2017.

Balance Sheet of Shraddha Ltd.

Particulars Note 31-3-2016 31-3-2017
No.
Equity and Liabilities
Shareholders Funds
Share Capital 2,00,000 2,40,000
Reserves and Surplus 1 83,000 1,20,000
Non-Current Liabilities
16 % Debentures 1,00,000 90,000
Current Liabilities
Trade Payable 1,80,000 2,20,000
Short Term Provisions --- ---
Proposed Dividend 20,000 30,000
Total 5,83,000 7,00,000
Assets
Non-Current Assets
Fixed Assets 3,60,000 4,10,000
Non-current investments 40,000 50,000
Current Assets
Inventories 1,00,000 1,40,000
Trade Receivables 80,000 98,000
Cash and Cash Equivalent 3,000 2,000
Total 5,83,000 7,00,000
Notes to Accounts

Reserves and Surplus 31-3-2016 31-3-2017

General Reserve 1,00,000 1,20,000
Surplus as per Statement of Profit & Loss 20,000 30,000
Less : Preliminary Expenses 37,000 30,000
83,000 1,20,000

During the year ended 31-3-2017, depreciation charged on fixed assets amounted to
Rs. 50,000. The final dividend for the ended 31-3-2016 amounting to Rs. 20,000 was
paid on 10-4-2016.

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9. From the following particulars, prepare fund flow statement and a schedule of changes
in working capital.
January 1 December 31
Cash 2,000 1,800
Debtors 17,500 19,200
Stock 12,500 11,000
Land 10,000 15,000
Buildings 25,000 27,500
Machinery 40,000 43,000
1,07,000 1,17,500
Creditors 18,000 20,500
Bank Loan (long term) 15,000 22,500
Capital 74,000 74,500
1,07,000 1,17,500
During the year, drawings by the proprietor for personal use amounted to Rs. 13,000.
Provision for depreciation on machinery stood at Rs. 13,500 on January 1 and at Rs.
18,000 on December 31.

10. The Balance Sheets of M/s Black and White as on 31-12-1991 and 31-12-1992 were
as follows :
Balance Sheets
Liabilities 31-12-91 31-12-92 Assets 31-12-91 31-12-92
Creditors 40,000 44,000 Cash 10,000 7,000
Mr. White’s Loan 25,000 --- Debtors 30,000 50,000
Loan from Bank 40,000 50,000 Stock 35,000 25,000
Capital 1,25,000 1,53,000 Machinery 80,000 55,000
Land 40,000 50,000
Building 35,000 60,000
2,30,000 2,47,000 2,30,000 2,47,000

During the year machine costing Rs. 10,000 (accumulated depreciation Rs. 3,000)
was sold for Rs. 5,000. The provisions for depreciation against machinery as on 31-12-
1991 was Rs. 25,000 and on 31-12-1992 Rs. 40,000. Net profit for the year 1992
amounted to Rs. 45,000.
You are required to prepare :
(a) A schedule of changes in working capital.
(b) A funds flow statement.

11. Prepare a fund flow statement for Ananth Ltd., from the following information for the year
ended 31-3-2017.
31-3-2016 31-3-2017
Cash and Bank Balance 2,50,000 1,25,000
Share Capital 50,00,000 40,00,000
Reserves and Surplus 15,00,000 5,00,000
Secured Loans 35,00,000 40,00,000
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 Current Liabilities 50,00,000 60,00,000
Fixed Assets 31,00,000 30,00,000
Investments 1,50,000 -----
Stocks, Stores and Work in Progress 75,00,000 78,75,000
Sundry Debtors 40,00,000 35,00,000

(i) The net profit after adjustments in respect of provision for dividends, taxation was
Rs. 1,00,000 for the year.
(ii) There was addition to fixed assets during the year amounting to Rs. 4,00,000
and depreciation for the year was Rs. 3,00,000.

12. From the following Balance Sheets of Ananya Ltd., as at 31-3-2016 and 31-3-2017
you are required to prepare a statement of sources and application of funds for the year
ended 31-3-2017.

Balance Sheet of Ananya Ltd.

Particulars Note 31st March
No. 2016 2017
Equity and Liabilities
Shareholders Funds
Share Capital 1,00,000 1,25,000
Reserves and Surplus 1 40,250 45,300
Non-Current Liabilities
Bank Loan 35,000 -----
Current Liabilities
Trade Payable 75,000 67,600
Short Term Provisions ----- -----
Provision for Tax 15,000 17,500
Total 2,65,250 2,55,400
Assets
Non-Current Assets
Fixed Assets
Tangible 2 1,75,000 1,79,500
Intangible ----- 2,500
Current Assets
Inventories 50,000 37,000
Trade Receivables 40,000 32,100
Cash and Cash Equivalent 250 4,300
Total 2,65,250 2,55,400

Notes to Accounts
1. Reserves and Surplus 31-3-2016 31-3-2017
General Reserve 25,000 30,000
Surplus as per Statement of Profit & Loss 15,250 15,300
40,250 45,300
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2. Tangible Fixed Assets

Land 1,00,000 95,000
Plant 75,000 84,500
1,75,000 1,79,500

The following information is also provided :

Dividend paid during 2017 Rs. 11,500. Depreciation written off -- Plant Rs. 7,000 and
Income Tax Provision made during the year Rs. 16,500. Proposed Dividend and
Provision for Tax to be treated as appropriation of profit.

13. From the following balance sheets of HM Co., Ltd., prepare :

(i) Statement of Changes in Working Capital and
(ii) Fund Flow Statement.

Balance Sheet as on 31st December (year ending) (Rs. 000)

Liabilities 1990 1991 Assets 1990 1991

Equity Share Goodwill 1.10 1.00
Capital 2.50 3.50 Land and
8 % Redeemable Buildings 2.00 1.80
Preference Shares 1.50 1.00 Plant 0.60 1.20
General Reserve 0.30 0.60 Debtors 1.00 1.40
P & L A/c 0.30 0.50 Stock 0.55 0.85
Proposed Dividend 0.25 0.30 Bills Receivable 0.15 0.35
Creditors 0.55 0.70 Cash in Hand 0.20 0.15
Bills Payable 0.10 0.08 Cash at Bank 0.10 0.25
Provision for
Taxation 0.20 0.32
5.70 7.00 5.70 7.00

Additional Information :
(i) Depreciation of Rs. 10,000 on plant and Rs. 10,000 on land and building has
been charged in 1991.
(ii) An interim dividend of Rs. 15,000 has been paid during the year 1991.
(iii) Income Tax of Rs. 25,000 has been paid during the year 1991.

14. From the following Balance Sheets of Pioneers Ltd., as on 31-12-1993 and 31-12-
1994 prepare :

(i) A Funds Flow Statement

(ii) A Statement of Changes in Working Capital

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Liabilities 1993 1994 Assets 1993 1994
Share Capital 2,00,000 2,00,000 Goodwill 24,000 24,000
General Reserve 28,000 36,000 Building 80,000 72,000
P & L A/c 32,000 26,000 Plant 74,000 72,000
Sundry Creditors 16,000 10,800 Investments 20,000 22,000
Bills Payable 2,400 1,600 Bills Receivable 4,000 6,400
Provisions for Stock 60,000 46,800
Taxation 32,000 36,000 Debtors 36,000 38,000
Provision for Cash at Bank 13,200 30,400
Doubtful Debts 800 1,200
3,11,200 3,11,600 3,11,200 3,11,600

Additional Information :
(i) Depreciation charged on plant was Rs. 8,000 and on Building Rs. 8,000.
(ii) Provision for Taxation of Rs. 38,000 was made during the year 1994.
(iii) Interim dividend of Rs. 16,000 was paid during the year 1994.