December 2016 source rs application rs funds from

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December 2016 source Rs, Application Rs. Funds from operations (Rs.134000 Rs.104000) 30000 Purchase of machinery (Rs.230000 Rs.200000) 30000 Issue of 10% preference shares 10000 Purchase of buildings 26000
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107 (Rs.110000 Rs.100000) (Rs.176000 Rs.150000) Issue of equity shares (Rs.250000 Rs.220000) 30000 Redemption of debentures (Rs.70000 R.64000) 6000 Share premium (Rs.26000 Rs.20000) 6000 Increase in working capital 14000 76000 76000 STATEMENT OF CHANGES IN WORKING CAPITAL 2015 2016 Changes in working capital Increase Decrease Rs. Rs. Rs. Rs. Current assets Cash 42000 32000 10000 Debtors 38000 38000 Bills receivables 42000 62000 20000 Stock 84000 98000 14000 Total (A) 206000 230000 Current liabilities Creditors 38000 46000 8000 Bills payable 5000 4000 1000 Provision for tax 10000 12000 2000 Dividend payable 7000 8000 1000 Total (B) 60000 70000 Working capital (A) : (B) 146000 160000 Net increase in working capital 14000 14000 Total 160000 160000 35000 35000 7.4 REVISION POINT 1. Fund From Operation is to be determined on the basis of Profit and Loss Account. The operating profit revealed by Profit and Loss Account represents the excess of sales revenue over cost of goods sold.
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108 2. A Statement of Changes in Working Capital is prepared before preparation of fund flow statement. it is essential to prepare first the schedule of changes in working capital and fund from operations. Statement of changes in working capital is prepared on the basis of items in current assets and current liabilities of between two consecutive balance sheet years.. This statement helps to measure the movement or changes of working capital during a particular period. 3. Fund Flow Statement is a statement summarizing the substantial financial changes in items of financial position which have occurred between the two different balance sheet dates. This statement is prepared on the basis of "Working Capital" concept of funds. 7.5 INTEXT QUESTIONS 1. W hat is meant by the term “fund”? 2. What is fund flow statement? 3. State the transactions that do not affect the flow of funds. 4. What is fund from operations? 7.6 SUMMARY Mainly two comparative balance sheets at the beginning and end of a period are used for preparing a funds flow statement. In addition, a summarized income statement and retained earning statement or at least material information from these statements is required in order to obtain information relating to funds from operation and ownership transactions. These are the basic minima and not maxima. Additional information, if available, will sharpen the firms financial profile as reveled by the statement The funds flow analysis involves the preparation of two statements viz 1. statement or schedule of changes in working capital and 2. sources and uses of funds statement 7.7 TERMINAL QUESTIONS 1. Which of the following will result into application of fund ? a. payment to creditors b. issue of share capital c. sales of plant d. purchase of land ans : d 2. profit made by a business concern will result of in equal increase of a. cash balance b. net working capital c. gross works capital d. networth of the business ans. d 3. state which of the following is non current liabilities
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109 a. sundry creditors b. debentures c. outstanding expenditure d. bank over draft ans. B 7.8 SUPPLEMENTARY MATERIAL
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