Page 127 - DCOM302_MANAGEMENT_ACCOUNTING

Management Accounting

Notes The opening balance of share capital is less than the closing balance of the share capital
account. It means that the firm has undergone for further issue of share capital. The further

issue of share capital brings forth cash inflows to the fi rm.

` `
Cash A/c Dr 8,000
To share capital A/c 8,000
Dr. Share Capital Account Cr.
Particulars ` Particulars `
By Balance B/d (Opening) 1,40,000
To Balance c/d (Closing) 1,48,000 By Cash Balancing fi gure 8,000
1,48,000 1,48,000
The next non-current liability account is the Bonds account.

During the repayment of bonds or redemption of bonds, the cash resources are going out
of the fi rm.
` `

Bond A/c Dr 12,000
To Cash (redemption) 12,000
Dr. Bond Account Cr.
Particulars ` Particulars `
To cash (redemption) 12,000 By Balance B/d (Opening) 24,000
To Balance c/d (Closing) 12,000
24,000 24,000
The next step is to prepare the Adjusted Profit & Loss account

Dr. Adjusted Profit & Loss Account Cr.
To Provision for doubtful debts 200 By Balance B/d 20,080
To Goodwill written off 10,000 By Cash from operations 18,240
To Dividends paid 7000
To Balance c/d 21,120
38,320 38,320
The next most important step is to compare the current assets during the two years.
Increase in Accounts payable `2,960 - Cash infl ow
Decrease in Inventories `13,000 - Cash infl ow
Increase in accounts receivable `5,600 - Cash outfl ow

The next step is to draft the Cash fl ow statement.

Cash Flow Statement
Infl ow ` Outfl ow `
Opening cash balance 18,000 Increase in bills receivable 5,600
Issue of shares 8,000 Purchases of land 20,000
Increase in Bills payable 2,960 Dividends paid 7,000
Contd…

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