Page 100 - DCOM302_MANAGEMENT_ACCOUNTING

Unit 5: Fund Flow Statement

The next non-current liability account is General Reserve account. Notes

The opening balance is less than the closing balance of the general reserve account, which
means that some portion of the current year profi t is transferred to General Reserve. The
actual entry is as follows:

Net profit A/c Dr `20,000

To General Reserve A/c `20,000

For finding out the fund from operations, the amount that was transferred from the net

profit to general reserve should be added back in order to identify the original volume.

Adjusted Profit & Loss A/c `20,000
To General Reserve A/c `20,000

Dr General Reserve A/c Cr
Particulars ` Particulars `
By Balance B/d 6,00,000
To Balance C/d 6,20,000 By (Adjusted profit &Loss A/c)Profi t 20,000

transferred to general reserve
6,20,000 6,20,000
The next non-current liability is the Mortgage A/c.
The raising of mortgage loan leads to incoming of cash resources as well as further building
up of the liabilities.
Debit what comes in - Cash resources are coming in.

Credit all liabilities - Mortgage loan is a liability/responsibility of the firm to repay it to the
lender.
Cash A/c Dr `5,40,000
To Mortgage loan A/c `5,40,000
Dr Mortgage A/c Cr
Particulars ` Particulars `
To Balance C/d By Balance B/d ----------
5,40,000 By Cash(New Mortgage Loan) 5,40,000
Balancing fi g.
5,40,000 5,40,000
The next important non-current liability is provision for taxation.

Dr Provision for Taxation Cr
Particulars ` Particulars `
To Cash (Tax paid previous 1,50,000 By Balance B/d 1,50,000
year taxation)

To Balance C/d 20,000 By (Adjusted Profit & Loss A/c) 20,000
Provision made during the current year
1,70,000 1,70,000

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