Page 103 - DCOM302_MANAGEMENT_ACCOUNTING

Management Accounting

Notes 5.6 Keywords

Current Assets: Assets which are in the form of cash, equivalent to cash or easily convertible into
cash.
Current Liabilities: Short-term financial resources of the fi rm.

Decrease in Working Capital: Decrease in Net working capital i.e. Excess of current liabilities
over the current assets - Resources side of the fund fl ow.
Flow: Flow means changes occurred in between two different time periods.
Fund from Operations: Income generated from only operations.
Fund Lost in Operations: Loss incurred in the operations.

Fund: Fund means working capital
Increase in Working Capital: Increase in Net working capital i.e. Excess of current assets over the
current liabilities- Applications side of the fund fl ow.

Non-current Assets: Long-term assets.
Non-current Liabilities: Long-term fi nancial resources.
Statement of changes in Working Capital: Enlisting the changes taken place in between the
current assets and current liabilities of two different time horizons.

5.7 Review Questions

1. From the following two balance sheet as at December 31, 2004 and 2005. Prepare the
statement of sources and uses of funds.

2004 (`) 2005 (`) 2004 (`) 2005 (`)
Liabilities
Share capital 80,000 90,000
Trade creditors 20,000 46,000

Profit & Loss a/c 4,60,000 5,00,000
Assets
Cash 60,000 94,000
Debtors 2,40,000 2,30,000
Stock in trade 1,60,000 1,80,000
Land 1,00,000 1,32,000
5,60,000 6,36,000 5,60,000 6,36,000
2. From the following balance sheets of XYZ Co. Ltd. Prepare Funds Flow Statement.

(` ‘000)
Liabilities 2006 2007 Assets 2006 2007
Equity share capital 600 800 Goodwill 230 180
Preference capital 300 200 Land and buildings 400 340
General reserve 80 140 Plant and machinery 160 400

Profit & Loss account 60 96 Debtors 320 400
Proposed dividend 84 10 Stock 154 218
Creditors 110 166 Bills receivable 40 60
Contd…

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