Page 125 - DCOM302_MANAGEMENT_ACCOUNTING

Management Accounting

Notes Dr. Machinery Account Cr.

Particulars ` Particulars `
To Balance B/d (Opening) 5,00,000 By cash sale 26,000

By Profit and loss a/c Loss 4,000
Balancing Fig.
By Depreciation Provision 20,000
By Balance c/d(Closing ) 4,50,000
2,80,000+1,70,000
5,00,000 5,00,000
During the purchase of land and building, what happens?
Debit what comes in - land and building are coming in.
Credit what goes out - cash resources are going out.
` `

Land & Building A/c Dr 80,000
To Cash A/c 80,000

Dr. Land and Building Cr.
Particulars ` Particulars `
To Balance B/d (Opening) 2,20,000
To Cash (Purchase) 80,000 By Balance c/d (Closing) 3,00,000
3,00,000 3,00,000

The next step is to prepare adjusted profit and loss account.

Dr. Adjusted Profit and Loss Account Cr.
Particulars ` Particulars `
To Machinery A/c (Loss on sale) 4,000 By Balance B/d -----------
To Depreciation provided during the year 90,000 By Cash from operations 2,14,000
To Balance c/d 1,20,000
2,14,000 2,14,000
The next most important step is to compare the current assets.
Increase in creditors ` 20,000 - cash infl ow
Loan from SBI ` 50,000 - cash infl ow

Decrease in stock ` 10,000 - cash infl ow
Loan repaid ` 1,20,000 - cash outfl ow
Decrease in bills payable ` 20,000 - cash outfl ow
Increase in Debtors ` 20,000 - cash outfl ow

Cash Flow Statement

Infl ow ` Outfl ow `
Opening cash balance 40,000 Loan repaid 1,20,000
Creditors 20,000 Bills payable 20,000
Contd…

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