Funds Flow Analysis

1. Calculate Funds Flow Statement. From the following Balance Sheets.

Liabilities 31-3- 31-3- Assets 31-3- 31-3-
2003(RS) 2004(Rs) 2003(RS) 2004(Rs)
Capital 21,000 25,000 Cash 4,000 4,700
P&L A/c 1,000 2,300 Debtors 12,000 11,500
Creditors 7,000 6,500 Land 5,000 6,600
Stock 8,000 11,000
Total 29,000 33,800 Total 29,000 33,800

Solution : WC = CA-CL

Statement Showing Changes in Working Capital

Particulars 2003 2004

Current Assets
Cash 4000 4700
Debtors 12000 11500
Stock 8000 11000
Sub total 24000 27200
Less Current Liabilities
Creditor 7000 6500

Net Working Capital 17000 20700

Increase in NWC 3700

Adj Profit and Loss A/c 1-4-2003-to 31-03-2004

Dr
Cr

Particulars Rs Particulars Rs
Bal b/d 1000
By funds from operations 1300

Bal c/d
2300 2300
3

Funds Flow Statement

Sources of Funds Rs Application / use of Funds Rs

Issue of shares 4000 Purchase of land 1600
By funds from 1300 Increase in working cap 3700
operations

5300 5300
[Link] following details are available for ABC Ltd 31-03 -2005, 31-03-2006
Liabilities 2005 2006 Assets 2005 2006
Share Capital 70,000 74,000 Cash 9,000 7,800
10%Debentures 12,000 6,000 Investment Current 14,900 17,700
Reserve for Doubtful Debts 700 800 Stock 49,200 42,700
Trade Creditors 10,360 11,840 Land 20,000 30,000
P&lA/c 10,040 10,560 Goodwill 10,000 5,000
103,100 103,200 103,100 103,200
Additional Information:
1. Dividend paid Rs 3,500
Prepare Funds flow statement
Solution

Statement Showing Changes in Working Capital

Particulars 2005 2006

Current assets
cash 9,000 7,800
Investment Current 14,900 17,700
Stock 49,200 42,700
(-) current liabilities
Reserve for Doubtful Debts 700 800
Trade Creditors 10,360 11,840

Net Working Capital 62,040 55,560

Increase in NWC 6,480

Decrease in NWC Rs 6480

Adj Profit and Loss A/c 1-4-2005 to 31-3-2006

Particulars Rs Particulars Rs
goodwill 5000 By bal b/d 10040
Div paid 3500 Funds from ops 9020

To bal c/d 10560

19060 19060

Net Profit = Rs 520

+ 5000 +3500 = 9020

Funds from operations

Funds Flow Statement

Sources Rs Application Rs
Issue of shares 4000 Purchase of land 10000
Decrease in WC 6480 Redemption of debenture 6000
Funds from operations 9020 Dividend paid 3500

19500 19500
3..Following are the Balance Sheets as on 31 December
liabilities 2009 2010 Assets 2009 2010
Share Capital 140000 148000 Cash 18000 16000
Debentures 24000 12000 Debtors 29800 35400
Sundry creditors 20720 23680 Stock 98400 85000
Provision for Bad Debts 1400 1600 Building 40000 55000
Profit and Loss A/c 20080 21120 Preliminary Expenses 20000 15000
Total 206200 206400 Total 206200 206400
Following additional Information is given:
1. Dividend Paid Rs7000.
2. Depreciation on building Rs2000 for 2010.

Prepare 1. Statement Showing Working Capital

2. Funds Flow Statement
Statement Showing Changes in Working Capital

Particulars 2009 2010

Current assets
Cash 18000 16000
Debtors 29800 35400
Stock 98400 85000
total 146200 136400
Current liabilities
Sundry creditors 20720 23680
Provision for Bad Debts 1400 1600
Total 22120 25280
Net working cap 124080 111120
Increase/decrease in wc 12960

Adj Profit and Loss A/c( 1-1-2010 to 31-12-2010)

Dr Cr

Particulars Rs Particulars Rs
Dividend paid 7000 Bal b/d 20080
Depreciation paid 2000 Funds from ops 15040
Pre. Exp. 5000

Bal c/d 21120

35120 35120
 Funds Flow Statement

Sources Rs Application Rs
Issue of shares 8000 Redemption of debenture 12000
Decrease in WC 12960 Purchase of building 17000
Funds from ops 15040 Dividend paid 7000

36000 36000
Building A/C(1-1-2010 to 31-12-2010)

Dr
Cr

Particulars Rs Particulars Rs
Bal b/d 40000 depreciation 2000
To bank 17000

Bal c/d 55000

57000 57000
CASH FLOWS

INFLOWS

OUTFLOWS

CASHFLOW FROM OPERATING ACTIVITIES

CASH FLOW FROM INVESTING ACTIVITIES

CASH FLOW FROM FINANCING ACTIVITIES

CASHFLOW
1. From the Following Cash A/c Summary Prepare a Cash Flow Statement as per the
Provisions of IND AS.
Cash A/c
Dr Cr
Particulars Amount Particulars Amount
By Payment to
To Balance b/d 50,000 Suppliers 75,000
By Purchase of
To Issue of Shares 300,000 Machinery 100,000
To Bank Loan 600,000 By Purchase of Land 200,000
To Sale of Furniture 200,000 By Salaries and wages 250,000
By Taxation 20,000
By Dividend 10,000
By Interest 6,000
By Balance C/d 489,000
1,150,000 1,150,000
Solution

CASH FLOW STATEMENT dated for the year ended ____

Particulars Amount Rs
Cash flow from operating acivity
By Payment to Suppliers (75,000)
By Salaries and wages (250,000)
By Taxation (20,000)

(345,000)
Cash flow from investing activity
By Purchase of Machinery (100,000)
By Purchase of Land (200,000)
To Sale of Furniture 200,000
(100000)
Cash flow from financing activity
To Issue of Shares 300,000
To Bank Loan 600,000
By Dividend (10,000)
By Interest (6,000)
8,84,000
Net increase in cash n cash equivalent 439000
Opening bal of cash n cash equivalent 50,000
closing bal of cash n cash equivalent 489,000
 2. The following details are available for ABC Ltd

Liabilities 2005 2006 Assets 2005 2006

Cash and Cash
Share Capital 70,000 74,000 Equivalents 9,000 7,800
Investment in Shares,
Debentures 12,000 6,000 FD 14,900 17,700
Outstanding Expenses 700 800 Stock 49,200 42,700
Trade Creditors 10,360 11,840 Land 20,000 30,000
Retained Earnings 10,040 10,560 Goodwill 10,000 5,000
103,100 103,200 103,100 103,200

Additional Information:
1. Dividend paid Rs 3,500 ADJ / FA
Prepare cash flow statement
CASH FLOW STATEMENT for the year ended 31-03-2006

Particulars Amount ( Rs)

Cash flow from operating acivity
Net profit before int n tax 520

Goodwill written off 5000

Dividend paid 3500
Cash flow from OA before other transactions 9020
Outstanding Expenses 100
Trade Creditors 1480
stock 6500
Net cash flow from OA 17100
Cash flow from investing activity
Investment in Shares, FD (2800)
Purchase of land (10000)
Net cash flow from IA (12800)
Cash flow from financing activity
Issue of shares 4000
Redemption of debenture (6000)
Dividend paid (3500)
(5500)
Net decrease in cash and cash equivalent (1200)
Opening bal of cash and cash equivalent 9000
Closing bal of cash and cash equivalent 7800
 3. Following are Balance Sheets of 31st March 2017 and 31st March 2018
31st March 31st March
Assets 2017 2018
Land and Building 80,000 1,20,000
Plant and Machinery 5,00,000 8,00,000
Stock 1,00,000 75,000
Sundry Debtors 1,40,000 1,50,000
Prepaid Expenses 14,000 12,000
Cash at Bank 16,000 18,000
Total 8,50,000 11,75,000
31st March 31st March
Liabilities 2017 2018
Share Capital 5,00,000 7,00,000
Profit and Loss Account 1,00,000 1,60,000
General Reserve 50,000 70,000
Sundry Creditors 1,63,000 2,00,000
Bills Payable 30,000 40,000
Outstanding Expenses 7,000 5,000
Total 8,50,000 11,75,000

Additional Information
1. Rs 50,000 depreciation has been charged to plant and machinery during the year 2017-
2018.
2. A piece of machinery was sold for Rs 8000 during the year 2017-2018. It had a cost of
Rs12000 and a depreciation of Rs7000 has been provided on it so far.
Prepare Cash Flow Statement. (Use Indirect Method)
CASH FLOW STATEMENT

Particulars Amt
Cash flow from operating acivity
Net profit 60000
General reserve 20000
Profit on sale of machinery (3000)
depreciation 50000
CF from OA before other OA 127000
stock 25000
Sundry debtors (10000)
Prepaid exp 2000
Sundry creditors 37000
Bills payable 10000
o/s exp (2000)
Net cash flow from OA 189000
Cash flow from investing activity
Purchase of land n building (40000)
Purchase of pland and machinery (355000)
Sale of machinery 8000
Net cash flow from IA (387000)

Cash flow from financing activity

Issue of shares 200000
Net cash flow from FA 200000

Net decrease in cash and cash equivalent 2000

Opening bal of cash and cash equivalent 16000
Closing bal of cash and cash equivalent 18000

Plant and Machinery A/C

Particulars Amt Particulars Amt

Bal b/d 500000 depreciation 50000
Profit on sale of machinery 3000 Bank (machine sold) 8000
Bank a/c (machine purchased) 355000

Bal c/d 800000

858000 858000
Working Capital Management

1. Leo Ltd ‘s level of activity is 3,00,000 units per annum. The cost structure is as follows:

Cost per unit (Rs)

Raw Material cost 20

Labour 5

Overheads 15

Total cost 40

Profit 10

Selling Price 50

Raw materials are held in stock for 2 weeks.

Work in progress ( 50%) complete is equal to ½ months production.
Finished goods remain in the warehouse for a month.
Suppliers extend months credit.
Debtors are allowed two months credit.
Minimum cash balance of Rs 20,000 is maintained , Precautionary Margin 10%
What is the net working Capital ?
Solution

A) Current Assets
Inventory of Raw Material (300000*20*2/52) 230769
Inventory of Work in Progress (300000*40*0.5*0.5/12) 250000
Inventory of Finished Goods (300000*40*1/12) 1000000
Debtors (300000*40*2/12) 2000000
Cash 20000
Subtotal 3500769

B) Current liabilities
Creditors (300000*20*1/12) 500000
Subtotal 500000

NWC (A-B) 3000769

+ Precautionary margin (10%) 300076.9
Req. of NWC 3300845.9
Q2 . Budgeted Sales are Rs 2,60,000 per annum. The cost sheet is as follows:

Rs / unit
Raw Material 3
Labor 4
Overheads 2
Profit 1
Selling Price 10

1. Raw Material in stock 3 weeks and finished goods in stock for 2 weeks
2. WIP will be for three weeks ( 50% Complete)
3. Suppliers will give 5 weeks credit and customers are given eight weeks credit
4. Maintain cash balance at Rs 50,000

Calculate Working Capital Requirement.

Solution
A) Current Assets
Inventory of Raw Material (260000*3*3/52) 45000
Inventory of Finished goods (260000*9*2/52) 90000
Inventory of Work in Progress (260000*0.5*9*3/52) 67500
Debtors (260000*9*8/52) 135000
Cash 50000
Subtotal 387500

B) Current Liabilities
Creditors (260000*3*5/52) 75000
Subtotal 75000

NWC (A-B) 312500

[Link] Output is 2,4000 units per annum. The cost sheet is as follows:

Rs / unit
Raw Material 3
Labor 4
Overheads 2
Total Cost 9
Profit 1
Selling Price 10

Raw Material in stock 3 Months and finished goods in stock for 2 Months
Suppliers will give 1 Month credit and customers are given 2 months credit
Cash Balance is Rs 15,00,000.

Calculate Working Capital Requirement.

Current Assets
Inventory of Raw Material (24000*3*3/12) 18000
Inventory of Finished Goods (24000*9*2/12) 36000
Debtors (24000*9*2/12) 36000
Cash 1500000
Subtotal 1590000

Current liabilities
Creditors (24000*3*1/12) 6000
Subtotal 6000

NWC (A-B) 1584000