Page 96 - DCOM302_MANAGEMENT_ACCOUNTING

Unit 5: Fund Flow Statement

During the purchase, what happens in the fi rm? Notes

The cash resources are going out of the firm and plant is coming into the business
enterprise.
Debit what comes in - Plant
Credit what goes out - Cash

Plant A/c `3,000
To Cash A/c `3,000
The next non-current asset account is Investment account.
The opening balance is less than that of the closing balance; which means that the fi rm has
made a purchase of investments worth of `1,000. The following is the journal entry:
Investments A/c Dr `1,000
To cash A/c `1,000

Dr Investments account Cr
Particulars ` Particulars `
To Balance B/d 10,000

To Cash(purchase) Balancing fig 1,000 By Balance c/d 11,000
11,000 11,000
The next one is the non-current liability account. The fi rst non-current liability account is
General reserve. The opening balance is less than the closing balance of the general reserve
account, which means that some portion of the current year profit is transferred to General

reserve. The actual entry is as follows:

Net profit A/c Dr `4,000
To General reserve A/c `4,000

For finding out the fund from operations, the amount which 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 `4,000
To General Reserve A/c `4,000
Dr General Reserve Account Cr
Particulars ` Particulars `
By Balance B/d 14,000
To Balance B/d 18,000 By (Adjusted profit and loss A/c) Profi t 4,000

transferred during the current year
18,000 18,000
The next non-current liability account is Provision for taxation account.
Dr Provision for Taxation Account Cr
Particulars ` Particulars `
To Cash (Tax paid previous 17,000 By Balance B/d 16,000
year taxation) Balancing fi g.

To Balance B/d 18,000 By (Adjusted profit & Loss A/c) provision 19,000
for taxation made during the year
35,000 35,000

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