Page 214 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Unit 12: Fund Flow Analysis

12.2 Preparation of Statement of Changes in Working Capital Notes

The ultimate purpose of preparing the schedule of changes in the working capital illustrates the
changes in the volume of net working capital which envisages either sources or application of
fund. The schedule of changes is focused as follows:

Increase in Current Assets Increase in Working Capital
Decrease in Current Assets Decrease in Working Capital
Increase in Current Liabilities Decrease in Working Capital
Decrease in Current Liabilities Increase in Working Capital

Particulars Previous Current Increase in Decrease
Year Year Working in Working
Capital (+) Capital (-)
(A) Current Assets:
Cash in Hand
Cash at Bank
Marketable Securities
Bills Receivable
Sundry Debtors
Closing Stock
Prepaid Expenses
(B) Current Liabilities:
Creditors
Bills Payable
Outstanding expenses
Pre received Income
Provision for doubtful and bad debts
Net Working Capital(A-B)
Increase/Decrease Working Capital

Example: From the following details prepare a statement showing changes in working
capital during 2005.
Balance Sheet of Pioneer Ltd
as on 31st December

Liabilities 2004 (`) 2005 (`) Assets 2004 (`) 2005 (`)
Share capital 5,00,000 6,00,000 Fixed assets 10,00,000 11,20,000
Reserves 1,50,000 1,80,000 Less: Depreciation 3,70,000 4,60,000

Profit and Loss A/c 40,000 65,000 6,30,000 6,60,000
Debentures 3,00,000 2,50,000 Stock 2,40,000 3,70,000
Creditors for goods 1,70,000 1,60,000 Book Debts 2,50,000 2,30,000
Provision for tax 60,000 80,000 Cash in hand 80,000 60,000
Preliminary expenses 20,000 15,000
12,20,000 13,35,000 12,20,000 13,35,000

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