FUNDS FLOW ANALYSIS
BALANCE SHEET 1
NORMAL FUNDS UTILISATION
LIABILITIES (Sources) ASSETS (Application)
Long term sources: Long term uses:
Share capital Fixed assets
Long term debt
Short term uses:
Short term sources: Investments
Current assets
Current liabilities
Provisions
P&L a/c (loss)
BALANCE SHEET 2
OVER TRADING & UNDER CAPITALISATION
LIABILITIES (Sources) ASSETS (Application)
Long term sources: Long term uses:
Share capital Fixed assets
Long term debt
(over trading)
…………………………………
Short term sources: Short term uses:
Current liabilities Investments
Provisions Current assets
P&L a/c (loss)
BALANCE SHEET 3
OVER CAPITALISATION & UNDER TRADING
LIABILITIES (Sources) ASSETS (Application)
Long term sources: Long term uses:
Share capital Fixed assets
Long term debt
………………………………..
Short term sources: (over capitalisation)
Current liabilities
Provisions
Short term uses:
Investments
Current assets
P&L a/c (loss)
ILLUSTRATION
(Rs in lakhs)
LIABILITIES 31-03-2008 31-03-2009
Share Capital Rs Rs
Preference 40 40
Equity 80 80
Reserves & Surplus 82 106
Long term loans 113 96
Short term loans 47 36
Current liabilities 39 46
TOTAL 401 404
ILLUSTRATION Contd..
(Rs in lakhs)
ASSETS 31-03-2008 31-03-2009
Fixed assets Rs Rs
Gross (Original cost) 375 412
(Less) depreciation 167 203
Net fixed assets 208 209
Current assets:
Inventory 90 93
Debtors 44 63
Cash on hand 59 39
TOTAL 401 404
Solution
Step I Ascertain the changes in working capital
position in two years as follows:
31-03-2008 31-03-2009
Current assets Rs Rs
Inventory 90 93
Debtors 44 63
Cash on hand 59 39
Total (A) 193 195
Current liabilities
Short term loans 47 36
Current liabilities 39 46
Total (B) 86 82
Solution contd..
Statement of changes in working capital
DETAILS 31-03-2008 31-03-2009
Current assets 193 195
Less:
Current liabilities 86 82
Net Current assets 107 113
Increase in Net
Current assets
6
(113 – 107)
Solution contd..
Step II Ascertain the increase or decrease in
other liabilities and assets separately:
Step III Ascertain the Sources and Application
of funds as follows:
Source = Increase in liability OR Decrease in
asset
Application = Increase in asset OR Decrease in liability
Solution contd..
STATEMENT OF SOURCES AND
APPLICATION OF FUNDS
Source: Rs Application: Rs
Increase in
Increase in Fixed assets 37
reserves & 24
surplus Increase in
Net current 6
Increase in assets
Depreciation 36 Decrease in 17
term loans
TOTAL 60 TOTAL 60
Balance sheets as on 31 March
(Rs in lakhs)
LIABILITIES 2008 2009
Share Capital 2.00 3.00
Reserves & Surplus 0.40 0.85
Secured loans 1.00 0.86
Current liabilities:
Creditors 0.60 1.04
Provision for Income tax 0.20 0.05
Outstanding expenses 0.10 0.10
Total 4.30 5.90
Balance sheets as on 31 March
(Rs in lakhs)
Assets 2008 2009
Buildings 1.75 2.65
Less depreciation: 0.25 1.50 0.35 2.30
Plant & Machinery 2.60 3.20
Less depreciation: 0.85 1.75 0.95 2.25
Current assets:
Stocks 0.65 0.69
Debtors 0.15 0.18
Cash & bank balance 0.25 1.05 0.48 1.35
Total 4.30 5.90
Additional information
Plant & machinery with original cost of
Rs. 15,000 (written down value Rs.7,000)
was sold for Rs. 5,000
Prepare:
(i) Statement showing changes in working capital
position
(ii) Statement of sources & application of funds
Solution
STATEMENT OF CHANGES IN
WORKING CAPITAL
2008 2009
Current assets 1.05 1.35
Less: Current Liabilities
Creditors 0.60 1.04
NET CURRENT ASSETS 0.45 0.31
Decrease in net current (-) 0.14
assets
Solution
Calculation of cash profits
Rs
Increase in profit 0.45
Add:
Loss on sale of plant & machinery 0.02
Depreciation on plant & machinery sold 0.08
Depreciation on plant & machinery (2009) 0.10
Depreciation on Building 0.10
Provision for outstanding expenses 0.10
TOTAL (CASH PROFIT) 0.85
Solution
Calculation of Machinery purchased during 2008-09
Details Debit Credit
Opening balance 2009 2.60
Depreciation up to 2008 0.85
Depreciation for 2008-09 0.10
Depreciation on P&M sold 0.08
Cash (Sale) 0.05
Loss on sale 0.02
Purchases during 2008-09 *0.75
(*Balance figure)
Balance c/d (CLOSING BALANCE 2.25
2009)
Total 3.35 3.35
Solution
STATEMENT OF SOURCES AND APPLICATION
OF FUNDS
SOURCES: Rs
Increase in share capital 1.00
Profit for the year 0.85
Decrease in net current assets 0.14
Sale of plant and machinery 0.05
TOTAL 2.04
Solution
STATEMENT OF SOURCES AND APPLICATION
OF FUNDS
APPLICATION OF FUNDS Rs
Purchase of buildings 0.90
Purchase of plant & machinery 0.75
Repayment of term loan 0.14
Payment of outstanding expenses 0.10
Payment of income tax 0.15
TOTAL 2.04
Balance sheets as on 31 March
LIABILITIES 2008 2009
Share Capital 1,00,000 1,55,000
Reserves & Surplus:
General reserve 50,000 60,000
Profit & Loss a/c
10,000 17,000
Long term loans 70,000 50,000
Current liabilities:
Creditors 86,000 95,000
Provision for Income tax 20,000 30,000
Total 3,36,000 4,07,000
Balance sheets as on 31 March
ASSETS 2008 2009
Buildings 1,00,000 1,00,000
Plant & Machinery 1,04,000 1,00,000
Less depreciation: 50,000 54,000 56,000 44,000
Furniture 7,000 9,000
Less depreciation: 5,000 2,000 6,000 3,000
Investment 60,000 80,000
Current assets:
Cash & bank balance 30,000 45,000
Sticks 60,000 65,000
Debtors 30,000 1,20,000 70,000 1,80,000
Total 3,36,000 4,07,000
Additional information
During the year an item of machinery with an
original cost of Rs.4,000 (written down value
Rs.2,000) was sold for Rs.800
Prepare:
(i) Statement showing changes in working capital
position
(ii) Statement of sources & application of funds
Balance sheets as on 31 March
LIABILITIES 2008 2009
Share Capital 6,00,000 7,00,000
Reserves & Surplus:
General reserve
2,00,000 2,50,000
Profit & Loss a/c
1,00,000 2,10,000
Long term loans 3,00,000 2,00,000
Current liabilities:
Outstanding expenses 10,000 12,000
Creditors 1,60,000 2,50,000
Proposed dividend 30,000 35,000
Provision for Income tax 70,000 75,000
Total 14,70,000 17,32,000
Balance sheets as on 31 March
ASSETS 2008 2009
Fixed assets 10,00,000 12,00,000
Less depreciation: 2,00,000 8,00,000 2,50,000 9,50,000
Investment 1,80,000 1,80,000
Current assets:
Cash & bank balance 40,000 65,000
Sticks 2,00,000 2,70,000
Debtors 2,25,000 2,45,000
Prepaid expenses 10,000 12,000
Miscellaneous expenditure 15,000 10,000
Total 14,70,000 17,32,000
Additional information
1. During the year fixed assets with written
down value Rs.10,000 (Depreciation written
Off Rs 30,000 was sold for Rs.8,000
2. Proposed dividend of year 2008 was paid in 2009
3. Income tax paid in 2009 was Rs 55,000
Prepare:
(i) Statement showing changes in working capital
position
(ii) Statement of sources & application of funds
