Page 155 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes Solution:
Schedule of Changes in Working Capital
2008 2009 Increase in Working Decrease in Working
Capital Capital
Current Asset:
Stock 2,40,000 3,70,000 1,30,000 —
Book debts 2,50,000 2,30,000 — 20,000
Cash in hand 80,000 60,000 — 20,000
5,70,000 6,60,000 1,30,000 40,000
Current liabilities:
Creditors for goods 1,70,000 1,60,000 10,000 —
Working capital 4,00,000 5,00,000 1,40,000 40,000
Increase in working 1,00,000 — — 1,00,000
capital
5,00,000 5,00,000 1,40,000 1,40,000

Example: From the following relating to Panasonic Ltd., prepare Funds Flow Statement.
Balance Sheet of Panasonic Ltd.
as on 31st December

Liabilities 2008 ( ) 2009 ( ) Assets 2008 ( ) 2009 ( )
Share capital 6,00,000 8,00,000 Fixed assets 3,80,000 4,20,000
Reserves 2,00,000 1,00,000 Accounts 2,10,000 3,00,000
receivable
Retained earnings 60,000 1,20,000 Stock 3,00,000 3,90,000
Accounts payable 90,000 2,70,000 Cash 60,000 1,80,000
9,50,000 12,90,000 9,50,000 12,90,000

Additional Information:
1. The company issued bonus shares for 1,00,000 and for cash 1,00,000.
2. Depreciation written off during the year 30,000.
Solution:

The first step is prepare the statement of Changes in Working Capital
Schedule of Changes in Working Capital
2008 2009 Increase in Working Decrease in Working
Capital Capital
Current Asset:
Cash 60,000 1,80,000 1,20,000 —
Stock in trade 3,00,000 3,90,000 90,000 —
Accounts receivable 2,10,000 3,00,000 90,000 —

5,70,000 8,70,000
Current Liabilities:
Accounts payable 90,000 2,70,000 1,80,000
Working capital 4,80,000 6,00,000 3,00,000 1,80,000
Contd...
Increase in working 1,20,000 1,20,000
capital
6,00,000 6,00,000 3,00,000 3,00,000
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