Answered

Discover a world of knowledge at Westonci.ca, where experts and enthusiasts come together to answer your questions. Get the answers you need quickly and accurately from a dedicated community of experts on our Q&A platform. Discover in-depth answers to your questions from a wide network of professionals on our user-friendly Q&A platform.

The Balance Sheets of Kumari Co. Ltd. as on 31st Dec 2020 and 31st Dec 2021 were as follows:

| Liabilities | 2020 | 2021 | Assets | 2020 | 2021 |
|---------------------|----------|----------|-------------------|----------|----------|
| Equity Share capital| ₹1,80,000| ₹2,60,000| Fixed assets | ₹1,86,800| ₹3,32,000|
| General Reserve | ₹20,000 | ₹30,000 | Stock | ₹44,000 | ₹52,000 |
| Profit & Loss A/c | ₹40,000 | ₹60,000 | Sundry debtors | ₹72,000 | ₹78,000 |
| 12% debenture | | ₹40,000 | Bank | ₹8,000 | ₹10,000 |
| Creditors | ₹74,800 | ₹84,000 | Preliminary Expenses| ₹4,000 | ₹2,000 |
| | ₹3,14,800| ₹4,74,000| | ₹3,14,800| ₹4,74,000|

Additional Information:
1. Dividend of ₹40,000 was paid on equity share capital.
2. Depreciation written off on fixed assets was ₹46,800.

Prepare a schedule of changes in working capital and a fund flow statement.

Sagot :

GinnyAnswer
Alright, let's analyze and prepare the requested financial statements step-by-step.

### Step 1: Calculate the Working Capital for 2020 and 2021

Working Capital is calculated as the difference between current assets and current liabilities.

#### Current Assets:
- 2020: Stock + Sundry Debtors + Bank
[tex]\[ 2020\ \text{current assets} = ₹ 44,000 + ₹ 72,000 + ₹ 8,000 = ₹ 1,24,000 \][/tex]

- 2021: Stock + Sundry Debtors + Bank
[tex]\[ 2021\ \text{current assets} = ₹ 52,000 + ₹ 78,000 + ₹ 10,000 = ₹ 1,40,000 \][/tex]

#### Current Liabilities:
- 2020: Creditors
[tex]\[ 2020\ \text{current liabilities} = ₹ 74,800 \][/tex]

- 2021: Creditors
[tex]\[ 2021\ \text{current liabilities} = ₹ 84,000 \][/tex]

#### Working Capital:
- 2020:
[tex]\[ 2020\ \text{working capital} = ₹ 1,24,000 - ₹ 74,800 = ₹ 49,200 \][/tex]

- 2021:
[tex]\[ 2021\ \text{working capital} = ₹ 1,40,000 - ₹ 84,000 = ₹ 56,000 \][/tex]

#### Change in Working Capital:
[tex]\[ 2021\ \text{working capital} - 2020\ \text{working capital} = ₹ 56,000 - ₹ 49,200 = ₹ 6,800 \][/tex]

### Step 2: Sources and Applications of Funds in the Fund Flow Statement

#### Sources of Funds:
1. Funds from Operations:
- 2021 Profit & Loss A/c - 2020 Profit & Loss A/c + Depreciation Written Off:
[tex]\[ ₹ 60,000 - ₹ 40,000 + ₹ 46,800 = ₹ 66,800 \][/tex]

2. Funds from Issue of Shares:
- 2021 Equity Share Capital - 2020 Equity Share Capital:
[tex]\[ ₹ 2,60,000 - ₹ 1,80,000 = ₹ 80,000 \][/tex]

3. Funds from Reserves:
- 2021 General Reserve - 2020 General Reserve:
[tex]\[ ₹ 30,000 - ₹ 20,000 = ₹ 10,000 \][/tex]

4. Increase in Creditors:
- 2021 Creditors - 2020 Creditors:
[tex]\[ ₹ 84,000 - ₹ 74,800 = ₹ 9,200 \][/tex]

#### Total Sources of Funds:
[tex]\[ ₹ 66,800 + ₹ 80,000 + ₹ 10,000 + ₹ 9,200 = ₹ 1,66,000 \][/tex]

#### Applications of Funds:
1. Purchase of Fixed Assets:
- 2021 Fixed Assets - 2020 Fixed Assets:
[tex]\[ ₹ 3,32,000 - ₹ 1,86,800 = ₹ 1,45,200 \][/tex]

2. Decrease in Preliminary Expenses:
- 2021 Preliminary Expenses - 2020 Preliminary Expenses:
[tex]\[ ₹ 2,000 - ₹ 4,000 = -₹ 2,000 \][/tex]

3. Dividend Paid:
[tex]\[ ₹ 40,000 \][/tex]

#### Total Applications of Funds:
[tex]\[ ₹ 1,45,200 - ₹ 2,000 + ₹ 40,000 = ₹ 1,83,200 \][/tex]

#### Net Fund Flow:
[tex]\[ \text{Total Sources} - \text{Total Applications} = ₹ 1,66,000 - ₹ 1,83,200 = -₹ 17,200 \][/tex]

### Summary:
- Working Capital 2020: ₹ 49,200
- Working Capital 2021: ₹ 56,000
- Change in Working Capital: ₹ 6,800
- Funds from Operations: ₹ 66,800
- Funds from Issue of Shares: ₹ 80,000
- Funds from Reserves: ₹ 10,000
- Increase in Creditors: ₹ 9,200
- Purchase of Fixed Assets: ₹ 1,45,200
- Preliminary Expenses: -₹ 2,000
- Dividend Paid: ₹ 40,000
- Total Sources: ₹ 1,66,000
- Total Applications: ₹ 1,83,200
- Net Fund Flow: -₹ 17,200
We hope our answers were helpful. Return anytime for more information and answers to any other questions you may have. We hope you found what you were looking for. Feel free to revisit us for more answers and updated information. Stay curious and keep coming back to Westonci.ca for answers to all your burning questions.