Question

Prepare Statement of Changes in Working Capital and Funds Flow Statement from the following Balance Sheets of Dakshin Ltd. for 2014 and 2015. 

Balance Sheets of Dakshin Ltd.

Liabilities	2014 Rs.	2015 Rs.	Assets	2014 Rs	2015 Rs.
Share Capital(Paid-up)			Land & Buildings	12,00,000	10,00,000
11% Cumulative Preference Shares	--	6,00,000	Plant & Machinery	6,00,000	10,00,000
Equity Shares	22,00,000	24,00,000	Sundry Debtors	8,00,000	9,60,000
General Reserve	80,000	80,000	Stock	12,00,000	14,00,000
Profit and Loss Account	40,000	48,000	Bank	48,000	1,40,000
9% Debentures	2,40,000	2,80,000	Cash	12,000	20,000
Provision for Taxation	120,000	1,68,000
Proposed Dividend	2,00,000	2,32,000
Current Liabilities	9,80,000	7,12,000
	38,60,000	45,20,000		38,60,000	45,20,000

Answer 1

STATEMENT OF CHANGES IN WORKING CAPITAL

Net Increase in Working Capital: Rs. 7,28,000

FUNDS FLOW STATEMENT

Sources	Amount (Rs.)	Applications	Amount (Rs. )
Issue of Preference Shares	6,00,000	Purchase of Plant and Machinery	4,00,000
Issue of Equity Shares	2,00,000	Provision for Taxation (assumed to be paid)	1,20,000
Issue of Debentures	40,000	Proposed Dividend (assumed to be paid)	2,00,000
Sale of Land & Buildings	2,00,000	Net Increase in Working Capital	7,28,000
Funds From Operations	4,08,000
	14,48,000		14,48,000

Working Notes: 

1. Increase in 11% Cumulative Preference Shares and equity shares indicates issue of new shares.

 2. Proposed Dividend and Provision for Taxation have been treated as non-current. 

3. New debentures have been issued during the year.

4. Decrease in balance of Land and Buildings shows sale. 

5. Similarly, plant and machinery has been purchased. 

6. Calculation of Funds From Operations

Adjusted Profit and Loss Account

Particulars	Rs.	Particulars	Rs.
To Provision for Taxation	1,68,000	By Balance b/d	40,000
To Proposed dividend	2,32,000	By Funds from operations (Balance figures)	4,08,000
To Balance c/d	48,000
	4,48,000		4,48,000