funds flow analysis 1

8/8/2019 Funds Flow Analysis 1

1/24

FUNDS FLOW ANALYSISFUNDS FLOW ANALYSIS


2/24

B ALANCE SHEET 1B ALANCE SHEET 1

NORMAL FUNDS UTILISATIONNORMAL FUNDS UTILISATIONLIABILITIES (Sources)LIABILITIES (Sources)

Long term sourcesLong term sources::

Share capitalShare capital

Long term debtLong term debt

Short term sources:Short term sources:

Current liabilities

Current liabilities

ProvisionsProvisions

ASSETS (Application)ASSETS (Application)

Long term usesLong term uses::

Fixed assetsFixed assets

Short term usesShort term uses::

InvestmentsInvestments

Current assetsCurrent assets

P&L a/c (loss)P&L a/c (loss)


3/24

BALANCE SHEET 2BALANCE SHEET 2OVER TRADING & UNDER CAPITALISATIONOVER TRADING & UNDER CAPITALISATION

LIABILITIES (Sources)LIABILITIES (Sources)

Long term sourcesLong term sources::




Current liabilitiesCurrent liabilities


ASSETS (Application)ASSETS (Application)

Long term usesLong term uses::


(over trading)(over trading)

Short term usesShort term uses::

InvestmentsInvestments




4/24

BALANCE SHEET 3BALANCE SHEET 3OVER CAPITALISATION & UNDER TRADINGOVER CAPITALISATION & UNDER TRADING

LIABILITIES (Sources)LIABILITIES (Sources)Long term sourcesLong term sources::




Current liabilitiesCurrent liabilities


ASSETS (Application)ASSETS (Application)Long term usesLong term uses::


....

(over capitalisation)(over capitalisation)

Short term usesShort term uses:: InvestmentsInvestments




5/24

ILLUSTRATIONILLUSTRATION

(Rs in lakhs)(Rs in lakhs)

LIABILITIESLIABILITIES 3131--0303--20082008 3131--0303--20092009

Share CapitalShare Capital RsRs RsRs

PreferencePreference 40

40

40

40

EquityEquity 8080 8080

Reserves & SurplusReserves & Surplus 8282 106106

Long term loansLong term loans 113113 9696

Short term loansShort term loans 4747 3636

Current liabilitiesCurrent liabilities 3939 4646

TOTALTOTAL 401401 404404


6/24

ILLUSTRATION Contd..ILLUSTRATION Contd..


ASSETSASSETS 3131--0303--20082008 3131--0303--20092009

Fixed assetsFixed assets RsRs RsRs

Gross (Original cost)Gross (Original cost) 375375 412412(Less) depreciation(Less) depreciation 167167 203203

Net fixed assetsNet fixed assets 208208 209209

Current assets:Current assets:

InventoryInventory 9090 9393

DebtorsDebtors 4444 6363

Cash on handCash on hand 5959 3939

TOTALTOTAL 401401 404404


7/24

SolutionSolution

Step I Ascertain the changes in working capitalStep I Ascertain the changes in working capitalposition in two years as follows:position in two years as follows:

3131--0303--20082008 3131--0303--20092009

Current assetsCurrent assets RsRs RsRs

InventoryInventory 9090 9393

DebtorsDebtors 4444 6363

Cash on handCash on hand 5959 3939

Total (A)Total (A) 193193 195195Current liabilitiesCurrent liabilities

Short term loansShort term loans 4747 3636


Total (B)Total (B) 8686 8282


8/24

Solution contd..Solution contd..

Statement of changes in working capitalStatement of changes in working capital

DETAILSDETAILS 3131--0303--20082008 3131--0303--20092009

Current assetsCurrent assets 193193 195195

Less:Less:


Net Current assetsNet Current assets 107107 113113

Increase in NetIncrease in NetCurrent assetsCurrent assets

(113(113 107)107)66


9/24


Step II Ascertain the increase or decrease inStep II Ascertain the increase or decrease in

other liabilities and assets separately:other liabilities and assets separately:

Step III Ascertain theStep III Ascertain the SourcesSources andandApplicationApplication

of funds as follows:of funds as follows:

SourceSource = Increase in liability OR Decrease in= Increase in liability OR Decrease in

assetassetApplicationApplication = Increase in asset OR Decrease in liability= Increase in asset OR Decrease in liability


10/24


STATEMENT OF SOURCES ANDSTATEMENT OF SOURCES AND

APPLICATION OF FUNDSAPPLICATION OF FUNDS

Source:Source: RsRs

Increase inIncrease in

reserves &reserves &surplussurplus

2424

Increase inIncrease in

DepreciationDepreciation 3636

TOTALTOTAL 6060

Application:Application: RsRs

Increase inIncrease inFixed assetsFixed assets 3737

Increase inIncrease inNet currentNet currentassetsassets

66

Decrease inDecrease interm loansterm loans

1717

TOTALTOTAL 6060


11/24

Balance sheets as on 31 MarchBalance sheets as on 31 March


LIABILITIESLIABILITIES 20082008 20092009

Share CapitalShare Capital 2.002.00 3.003.00

Reserves & SurplusReserves & Surplus 0.400.40 0.850.85Secured loansSecured loans 1.001.00 0.860.86

Current liabilities:Current liabilities:

CreditorsCreditors 0.600.60 1.041.04Provision for Income taxProvision for Income tax 0.200.20 0.050.05

Outstanding expensesOutstanding expenses 0.100.10 0.100.10

TotalTotal 4.304.30 5.905.90


12/24



AssetsAssets 20082008 20092009

BuildingsBuildings

Less depreciation:Less depreciation:

1.751.75

0.250.25 1.501.50

2.652.65

0.35 2.300.35 2.30

Plant & MachineryPlant & MachineryLess depreciation:Less depreciation:

2.602.600.850.85 1.751.75

3.203.200.95 2.250.95 2.25


StocksStocks 0.650.65 0.690.69

DebtorsDebtors 0.150.15 0.180.18

Cash & bank balanceCash & bank balance 0.250.25 1.051.05 0.480.48 1.351.35

TotalTotal 4.304.30 5.905.90


13/24

Additional information Additional information

Plant & machinery with original cost ofPlant & machinery with original cost of

Rs. 15,000 (written down value Rs.7,000)Rs. 15,000 (written down value Rs.7,000)

was sold for Rs. 5,000was sold for Rs. 5,000

Prepare:Prepare:

(i)(i) Statement showing changes in working capitalStatement showing changes in working capital

positionposition(ii)(ii) Statement of sources & application of fundsStatement of sources & application of funds


14/24

SolutionSolution

STATEMENT OF CHANGES INSTATEMENT OF CHANGES IN

WORKING CAPITALWORKING CAPITAL


Less: Current LiabilitiesLess: Current Liabilities

CreditorsCreditors

NET CURRENT ASSETSNET CURRENT ASSETS

Decrease in net currentDecrease in net current

assetsassets

2008 20092008 2009

1.05 1.351.05 1.35

0.60 1.040.60 1.04

0.45 0.310.45 0.31

((--) 0.14) 0.14


15/24

SolutionSolution

Calculation of cash profitsCalculation of cash profits

RsRs

Increase in profitIncrease in profit 0.450.45

Add:Add:

Loss on sale of plant & machineryLoss on sale of plant & machinery 0.020.02 Depreciation on plant & machinery sold 0.08Depreciation on plant & machinery sold 0.08

Depreciation on plant & machinery (2009) 0.10Depreciation on plant & machinery (2009) 0.10

Depreciation on BuildingDepreciation on Building 0.100.10 Provision for outstanding expenses 0.10Provision for outstanding expenses 0.10

TOTAL (CASH PROFIT)TOTAL (CASH PROFIT) 0.850.85


16/24

SolutionSolution

Calculation of Machinery purchased during 2008Calculation of Machinery purchased during 2008--0909

DetailsDetails DebitDebit Credit CreditOpening balance 2009Opening balance 2009 2.602.60

Depreciation up to 2008Depreciation up to 2008 0.850.85

Depreciation for 2008Depreciation for 2008--0909 0.100.10

Depreciation on P&M soldDepreciation on P&M sold 0.080.08

Cash (Sale)Cash (Sale) 0.050.05

Loss on saleLoss on sale 0.020.02

Purchases during 2008Purchases during 2008--0909(*Balance figure)(*Balance figure)

*0.75*0.75

Balance c/dBalance c/d (CLOSINGBALANCE(CLOSINGBALANCE2009)2009)

2.252.25

TotalTotal 3.353.35 3.353.35


17/24

SolutionSolution

STATEMENT OF SOURCES AND APPLICATIONSTATEMENT OF SOURCES AND APPLICATION

OF FUNDSOF FUNDS

SOURCES:SOURCES: RsRs

Increase in share capitalIncrease in share capital 1.001.00

Profit for the yearProfit for the year 0.850.85Decrease in net current assets 0.14Decrease in net current assets 0.14

Sale of plant and machinery 0.05Sale of plant and machinery 0.05

TOTALTOTAL 2.042.04


18/24

SolutionSolution

STATEMENT OF SOURCES AND APPLICATIONSTATEMENT OF SOURCES AND APPLICATION

OF FUNDSOF FUNDS

APPLICATION OF FUNDSAPPLICATION OF FUNDS RsRs

Purchase of buildings 0.90Purchase of buildings 0.90

Purchase of plant & machinery 0.

75Purchase of plant & machinery 0.

75

Repayment of term loan 0.14Repayment of term loan 0.14

Payment of outstanding expenses 0.10Payment of outstanding expenses 0.10

Payment of income tax 0.15Payment of income tax 0.15

TOTALTOTAL 2.042.04


19/24



Share CapitalShare Capital 1,00,0001,00,000 1,55,0001,55,000

Reserves & Surplus:Reserves & Surplus:General reserveGeneral reserve

Profit & Loss a/cProfit & Loss a/c

50,00050,000

10,00010,000

60,00060,000

17,00017,000Long term loansLong term loans 70,00070,000 50,00050,000


CreditorsCreditors 86,00086,000 95,00095,000Provision for Income taxProvision for Income tax 20,00020,000 30,00030,000

TotalTotal 3,36,0003,36,000 4,07,0004,07,000


20/24


ASSETSASSETS 20082008 20092009

BuildingsBuildings 1,00,0001,00,000 1,00,0001,00,000

Plant & MachineryPlant & Machinery


1,04,0001,04,000

50,00050,000 54,00054,000

1,00,0001,00,000

56,00056,000 44,00044,000

FurnitureFurniture


7,0007,000

5,0005,000 2,0002,000

9,0009,000

6,0006,000 3,0003,000InvestmentInvestment 60,00060,000 80,00080,000


Cash & bank balanceCash & bank balance 30,00030,000 45,00045,000

SticksSticks 60,00060,000 65,00065,000

DebtorsDebtors 30,00030,000 1,20,0001,20,000 70,00070,000 1,80,0001,80,000

TotalTotal 3,36,0003,36,000 4,07,0004,07,000


21/24

Additional informationAdditional information

During the year an item of machinery with anDuring the year an item of machinery with an

original cost of Rs.4,000 (written down valueoriginal cost of Rs.4,000 (written down value

Rs.2,000) was sold for Rs.800Rs.2,000) was sold for Rs.800

Prepare:Prepare:

(i)(i) Statement showing changes in working capitalStatement showing changes in working capital

positionposition(ii)(ii) Statement of sources & application of fundsStatement of sources & application of funds


22/24



Share CapitalShare Capital 6,00,0006,00,000 7,00,0007,00,000

Reserves & Surplus:Reserves & Surplus:

General reserveGeneral reserve

Profit & Loss a/cProfit & Loss a/c

2,00,0002,00,000

1,00,0001,00,000

2,50,0002,50,000

2,10,0002,10,000

Long term loansLong term loans 3,00,0003,00,000 2,00,0002,00,000


Outstanding expensesOutstanding expenses 10,00010,000 12,00012,000

CreditorsCreditors 1,60,0001,60,000 2,50,0002,50,000

Proposed dividendProposed dividend 30,00030,000 35,00035,000

Provision for Income taxProvision for Income tax 70,00070,000 75,00075,000

TotalTotal 14,70,00014,70,000 17,32,00017,32,000


23/24


ASSETSASSETS 20082008 20092009

Fixed assetsFixed assetsLess depreciation:Less depreciation:

10,00,00010,00,0002,00,0002,00,000 8,00,0008,00,000

12,00,00012,00,0002,50,0002,50,000 9,50,0009,50,000

InvestmentInvestment 1,80,0001,80,000 1,80,0001,80,000


Cash & bank balanceCash & bank balance 40,00040,000 65,00065,000

SticksSticks 2,00,0002,00,000 2,70,0002,70,000

DebtorsDebtors 2,25,0002,25,000 2,45,0002,45,000

Prepaid expensesPrepaid expenses 10,00010,000 12,00012,000

Miscellaneous expenditureMiscellaneous expenditure 15,00015,000 10,00010,000

TotalTotal 14,70,00014,70,000 17,32,00017,32,000


24/24

Additional informationAdditional information

1. During the year fixed assets with written1. During the year fixed assets with written

down value Rs.10,000 (Depreciation writtendown value Rs.10,000 (Depreciation written

Off Rs 30,000 was sold for Rs.8,000Off Rs 30,000 was sold for Rs.8,000

2. Proposed dividend of year 2008 was paid in 20092. Proposed dividend of year 2008 was paid in 20093. Income tax paid in 2009 was Rs 55,0003. Income tax paid in 2009 was Rs 55,000

Prepare:Prepare:

(i)(i) Statement showing changes in working capitalStatement showing changes in working capitalpositionposition

(ii)(ii) Statement of sources & application of fundsStatement of sources & application of funds

funds flow analysis 1

Documents