Page 177 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes Additional information:
(i) Dividends amounting to 7,000 were paid during the year 1996.
(ii) Land was purchased for 20,000.
(iii) 10,000 were written off on goodwill during the year.

(iv) Bonds of 12,000 were paid during the course of the year.
(v) You are required to prepare a cash flow statement.
The first step is to prepare non-current accounts.
The first step is to prepare non-current assets and liabilities account.

As far as non-current asset account is concerned, Land account has to be prepared.
The opening balance is lesser than the closing balance of the Land account of the firm.
It is only due to purchase of land only inflated the value of the land at the end of the time
horizon.
Debit what comes in - Land has come in.
Credit what goes out- cash resources have gone out of the firm at the moment of purchase.

Land A/c Dr 20,000
To cash A/c 20,000
Dr. Land Cr.

To Balance B/d (Opening) 40,000
To Cash (Purchase) 20,000 By Balance c/d (Closing) 60,000
60,000 60,000

The non-current liability account is to be prepared.
The first non-current liability account that is affected is the share capital account.
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 firm.

Cash A/c Dr 8,000
To share capital A/c 8,000
Dr. Share capital account Cr.

By Balance B/d (Opening) 1,40,000
To Balance c/d (Closing) 1,48,000 By Cash Balancing figure 8,000
1,48,000

The next non-current liability account is the Bonds account.

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