Fund flow statement practical problems and solutions

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Question 1

Prepare fund  flow statement from the following:

1. Increase in working capital: $4,000
2. Net profit $10,750 before written off goodwill
3. Depreciation on fixed assets: $1,750
4. Dividend paid: $3,500
5. Goodwill written off $5,000 out of profits
6. $5,000 share capital was issued for cash
7. Machinery purchased for $10,000

Solution

Fund from operations:

Net Profit before writing off goodwill$10,750
Add: Depreciation1,750
12,500

Fund Flow Statement

Sources of Funds$Application of Funds$
Income from operations12,500Payment of Dividend3,500
Issue of share capital5,000Purchase of machinery10,000
Increase in working capital4,000
17,50017,500

Problem 2

Prepare the fund flow statement from the below-given balance sheet of John Trading Co. for the year 2018-19.

Balance sheet of John Trading Co. 
For the year 2018-19

2018201920182019
$$$$
Share Capital5,00,0006,50,000Goodwill20,00015,000
Share premium50,000Investments1,50,0002,00,000
P & L A/C25,000Fixed Assets5,50,0005,50,000
Debentures2,00,000Debtors60,00040,000
Bank overdraft80,0001,00,000Stock1,20,00080,000
Creditors60,00075,000Cash12,0005,000
Proposed dividend10,00015,000Prepaid
Provision of tax20,00025,000Expenses8,000
9,20,0008,90,0009,20,0008,90,000
Also Check:  What is fund flow statement?

Adjustments: Net profit before tax and dividend $63,000, provision of tax during the year $23,000. Actual tax paid $18,000, Provision of dividend $15,000.

Depreciation charged: $80,000
Bonus shares $50,000 out of share premium

Solution

Income from operations

$
Net Proft63,000
Less: Income tax dividend provision23,000 + 15,00038,000
Add: Depreciation (Fixed Assets)80,00025,000
Goodwill written off 5,0005,00085,000
Proposed tax 23,000 + Proposed dws 15,00038,000
1,48,000

Change in Working Capital

Current Assets (Dr.)$
Increase
$
Decrease
Drs.20,000
Stock40,000
Cash7,000
Prepaid expenses8,000
Current Liabilities
Bank overdraft20,000
Crs.15,000
Decrease in working capital1,10,000

Proposed dividend

$$
To bank10,000By b/d10,000
To c/d15,000By P&L15,000
25,00025,000

Proposed income tax

$$
To balance c/d25,000By balance b/d20,000
To bank18,000By P&L23,000
43,000

Fixed Assets

$$
To b/d5,50,000By Depreciation80,000
To Bank80,000By Balance c/d5,50,000
6,30,0006,30,000

Fund flow statement

Sources of funds$Application of funds$
Share capital (50,000 Bonus share out of premium)1,00,000Deb. redemption2,00,000
Income from operations1,48,000Tax Paid18,000
Decrease in Working Capital1,10,000Dividend Paid10,000
Investment purchased50,000
Fixed Assets purchased80,000
3,58,0003,58,000
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