Illustration 1. From the following balance sheets of the company for the ending 31st December 2019 and 31st December 2020, prepare a schedule of changes in working capital and a statement showing sources and application of funds.
Liabilities & Capital |
2019 |
2020 |
Assets |
2019 |
2020 |
Share Capital |
3,00,000 |
4,00,000 |
Plant&Machinery |
50,000 |
60,000 |
Sundry Creditors |
1,00,000 |
70,000 |
Furniture & Fixtures |
10,000 |
15,000 |
P/L A/c |
15,000 |
30,000 |
Stock in Trade |
85,000 |
1,05,000 |
Debtors |
1,60,000 |
1,50,000 |
|||
Cash |
1,10,000 |
1,70,000 |
|||
4,15,000 |
5,00,000 |
4,15,000 |
5,00,000 |
Solution:
| Schedule of Changes in Working Capital | ||||
| 1-1-2020 | 31-12-2020 | Increase in Working capital | Decrease in Working capital | |
| Current Assets | ||||
| Cash | 1,10,000 | 1,70,000 | 60,000 | —- |
| Debtors | 1,60,000 | 1,50,000 | —- | 10,000 |
| Stock-in-Trade | 85,000 | 1,05,000 | 20,000 | —- |
| Current Liabilities | ||||
| Sundry Creditors | 1,00,000 | 70,000 | 30,000 | |
| 1,00,000 | 70,000 | |||
| Working Capital | 2,55,000 | 3,55,000 | ||
| Net Increase in Working Capital | 1,00,000 | 1,00,000 | ||
| 3,55,000 | 3,55,000 | 1,10,000 | 1,10,000 | |
| Statement of Source and Application of Funds | |||
| for the year ended 31-12-2020 | |||
| Sources | Rs, | Applications | Rs |
| Issue of share capital | 1,00,000 | Purchase of Plant&Machinery (60,000 – 50,000) | 10,000 |
| Funds from operations | 15,000 | Purchase of Furniture&Fixtures (15,000 – 10,000) | 5,000 |
| Net increase in Working Capital | 1,00,000 | ||
| 1,15,000 | 1,15,000 | ||
Illustration 2. From the following balance sheets of the company for the ending 31st December 2019 and 31st December 2020, prepare a schedule of changes in working capital and a statement showing sources and application of funds.
Liabilities & Capital |
2019 |
2020 |
Assets |
2019 |
2020 |
Capital |
63,000 |
1,00,000 |
Cash |
15,000 |
20,000 |
Long-Term Borrowings |
50,000 |
60,000 |
Debtors |
30,000 |
28,000 |
Trade Creditors |
42,000 |
39,000 |
Stock-in-Trade |
55,000 |
72,000 |
Bank Overdraft |
35,000 |
25,000 |
Land&Buildings |
80,000 |
1,00,000 |
Outstanding Expenses |
5,000 |
6,000 |
Furniture |
15,000 |
10,000 |
1,95,000 |
2,30,000 |
1,95,000 |
2,30,000 |
Solution:
| Schedule of Changes in Working Capital | ||||
| 1-1-2020 | 31-12-2020 | Increase in Working Capital | Decrease in Working Capital | |
| Current Assets | ||||
| Cash | 15,000 | 20,000 | 5,000 | —- |
| Debtors | 30,000 | 28,000 | —- | 2,000 |
| Stock-in-Trade | 55,000 | 72,000 | 17,000 | —- |
| Current Liabilities | ||||
| Trade Creditors | 42,000 | 39,000 | 3,000 | |
| Bank Overdraft | 35,000 | 25,000 | 10,000 | |
| Outstanding Expenses | 5,000 | 6,000 | 1,000 | |
| 82,000 | 70,000 | |||
| Working Capital (C.A – C.L) | 18,000 | 50,000 | 32,000 | |
| Net increase in Working Capital | 32,000 | |||
| 50,000 | 50,000 | 35,000 | 35,000 | |
| Funds Flow Statement | |||
| for the year ended 31-12-2020 | |||
| Sources | Rs, | Applications | Rs |
| Raising of Long-term Borrowings (60,000 – 50,000) |
10,000 | Purchase of Land&Building (1,00,000 – 80,000) | 20,000 |
| Sales of Furniture (15,000 -10,000) | 5,000 | Net increase in Working Capital | 32,000 |
| Funds from Operations | 37,000 | ||
| 52,000 | 52,000 | ||