Financial Accounting

1

Lecture – 38

Statement of Changes In Equity

• Statement of changes in equity shows the movement in: Share Capital (issued share capital) Share Premium Nature of Reserves created Un-appropriated Profit / Loss Dividend Distributed

Note: Show all points simultaneously.

Financial Accounting

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Lecture – 38

Statement of Changes In Equity

• Capital Reserve and Fixed Asset Replacement Reserve are used for specific purpose. These are not distributed among share holders.

• General Reserve and undistributed profit` can be distributed among share holders.

Financial Accounting

3

Lecture – 38

Share Premium

• Share Premium – Amount received in excess of the face value of the share. Example: if a Rs. 10 share is sold for Rs, 12 then Rs. 2 is share premium.

• Share Premium can not be distributed among the share holders.

• It can be utilized for: To issue Bonus Shares To write off Preliminary Expenses To meet the difference of face value and cash received in

case of shares issued at discount To meet the expenses of issue of shares For payment of premium on redemption of debentures

Financial Accounting

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Lecture – 38

Revaluation Reserve

• Revaluation Reserve – is created when an asset is re-valued from cost to market value.

• Revaluation Reserve can not be distributed among the share holders.

• It can be utilized for: Setting off any loss on revaluation At the time of disposal of asset, the reserve relating to

that asset is transferred to profit & loss account.

Financial Accounting

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Lecture – 38

Cash Flow Statement

• Cash Flow Statement – shows the movement of cash resources during the year.

• It is an integral part of Financial statements.

Note: Show all points simultaneously.

Financial Accounting

6

Lecture – 38

Notes to the Accounts

• Notes to the Accounts – are the explanatory notes of all the items shown in the profit and loss account and the balance sheet.

• It is the requirement of the Companies Ordinance and the International Accounting Standards.

Financial Accounting

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Lecture – 38

Contents of Notes to the Accounts

• Following are explained in Notes to the accounts: Nature of business of the company Accounting Policies of the company Details and explanation of items given in the Profit and

Loss Account and Balance Sheet.

Financial Accounting

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Lecture – 38

Debentures

• Debenture is an instrument for obtaining loan from general public.

• Mark up is paid on Debentures which is generally equal to the market rate.

Financial Accounting

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Lecture – 38

Debentures

• Debentures are acknowledgement of debt, owed by the company to the public at large for a defined period of time, and has a mark up (profit) rate attached to it.

Financial Accounting

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Lecture – 38

Term Finance Certificate

• Term Finance Certificate are issued for a defined period.

• These are also issued to obtain loan from public at large.

Financial Accounting

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Lecture – 38

• Both Debentures and Term Finance Certificates are usually issued by Public Companies.

Financial Accounting

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Lecture – 38

Question

• Beta (Private) Limited is a manufacturing company.

• Following list of balances has been extracted from its books as on June 30, 2002.

Financial Accounting

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Lecture – 38

Particulars Amount Rs.

Authorized Capital (face value Rs. 10 each) 500,000

Paid up / issued Capital 300,000

Debentures 240,000

Land 120,000

Building 315,000

Motor Vehicles 187,500

Furniture 34,500

Accumulated Profit and Loss Account 29,489

Stock in Trade 48,630

Financial Accounting

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Lecture – 38

Particulars Amount Rs.

Debtors 42,525

General Reserve 28,000

Creditors 27,360

Proposed Dividend 15,000

Bank Balance ?

Accumulated Depreciation

Motor Vehicles 46,050

Building 66,000

Fixtures 11,250

Financial Accounting

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Lecture – 38

Note:

• All items of profit and loss have been accounted for in calculating the balance of accumulated profit and loss account, except for Depreciation which is to be charged at 10% on WDV on all depreciable assets.

Required

• Prepare the balance sheet of Beta (Private) Limited As on June 30, 2002

Financial Accounting

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Lecture – 38

Beta (Private) Limited

Trial Balance As At June 30, 2002

Debit Rs. Credit Rs.

Paid up Capital 300,000

Debentures 240,000

Accumulated Profit and Loss Account 49,489

General Reserve 8,000

Creditors 27,360

Accumulated Depreciation

Motor Vehicles 46,050

Building 66,000

Furniture and Fixtures 11,250

Solution

Financial Accounting

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Lecture – 38

Debit Rs. Credit Rs.

Proposed Dividend 15,000

Land 120,000

Building 315,000

Motor Vehicles 187,500

Furniture and Fixture 34,500

Stock in Trade 48,630

Debtors 42,525

Bank Balance

TOTALDouble Under line

748,155 763,149

14,994

763,149 763,149

Note: See Animation

Financial Accounting

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Lecture – 38Beta (Private) Limited

Balance Sheet As At June 30, 2002

Particulars Note Amount Rs.

Fixed Assets at WDV 1Current Assets

DebtorsStock in TradeBank Balance

Total Current AssetsCurrent Liabilities

CreditorsProposed Dividend

Total Current Liabilities

Working Capital

Net Assets Employed

Financed By:Authorized Capital50,000 Shares of Rs. 10 each

Paid Up Capital30,000 shares of Rs. 10 eachGeneral ReserveAccumulated Profit and Loss Account 2

Debentures

Total

Double Under line

Financial Accounting

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Lecture – 38

Beta (Private) Limited

Balance Sheet As At June 30, 2002

Particulars Note Amount Rs.

Fixed Assets at WDV 1Current Assets

DebtorsStock in TradeBank Balance

Total Current AssetsCurrent Liabilities

CreditorsProposed Dividend

Total Current Liabilities

Working Capital

Net Assets Employed

Double Under line

Financial Accounting

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Lecture – 38

Note 1 – Fixed Assets at WDV

Particulars Cost Rate Acc. Dep. WDV

As At1-7-01

Addition/Deletion

As At30-6-02

As At1-7-01

For TheYear

As At30-6-02

As At30-6-02

Land

Building

Furniture & Fixtures

Vehicles

TOTAL