Problem No 2:

The Balance Sheets of National Co. as on 31st December, 2021 and 31 December
2022 are as follows:
Liabilities & 2021 2022 Assets 2021 2022
Capital
Share Capital 5,00,000 7,00,000 Land &Buildings 80,000 1,20,000
Profit &loss 1,00,000 1,60,000 Plant & 5,00,000 8,00,000
Machinery
General Reserve 50,000 70,000 Stock 1,00,000 75,000
Sundry Creditors 1,53,000 1,90,000 Debtors 1,50,000 1,60,000
Bills Payable 40,000 50,000 Cash 20,000 20,000
Outstanding 7,000 5,000
Expenses
8,50,000 11,75,000 8,50,000 11,75,000
AdditionalInformation
(1) 50,000 depreciation has been charged on Plant and Machinery during 2022.
(2) A piece of Machinery was sold for ? 8,000 during the year 2022. It had cost
?12,000; depreciation of 7,000 had been provided on it.
Prepare a Schedule of changes in Working Capital and a Statement showing the
Sources and Application of Funds for 2022.
Solution: Schedule for Changes in working Capital
Items 2021 2022 Changes in Working
Capital
Increase Decrease

Current Assets
Stock 1,00,000 75,000 25,000
Debtors 1,50,000 1,60,000 10,000
Cash 20,000 20,000
2,70,000 2,55,000

1.37
Advanced Financial Management Corporate Restructuring and
Items 2021 2022 Changes in Working
Corporata
Capital
Increase
Decrease
Current Liabilities
Sundry Creditors 1,53,000 1,90,000
Bills Payable 40,000 50,000
37,000
10,000
Expenses 0/S 7,000 5,000 2,000
2,00,000 2,45,000
Working Capital 70,000 10,000
Net Decrease in Working
Capital 60,000 60,000
70,000 70,000 72,000 72,000
Statement of Source and Application of Funds
For the year ended 31t December 2022
Sources Applications
Funds from Operations (1) 1,27,000 Purchase of Land and 40,000
Buildings
Issue of Shares 2,00,000 Purchase of Plant and 3,55,000
Machinery (2)
Sale proceeds of Machinery 8,000
Decrease in WorkingCapital 60,000
3,95,000 3,95,000
Workings
Dr. (1) Adjusted Profit and Loss Account Cr.

To Plant & Machinery A/c 50,000 By Balance b/d 1,00,000

(Depreciation of 2019) (Opening Balance)
To General Reserve 20,000 By Plant & Machinery 3,000
(Transferred during 2019) (Profit on Sale)
1,27,000
To Balance c/d 1,60,000 By Funds from Operation
(Balancingfigure)
2,30,000
2,30,000

1.38
... Cr. 1,70,000
90,000 2,00,000
2,00,000
1,09,000
30,000 8,000
10,000 6,77,000
8,17,000
and
Corporate 8,00050,000 8,00,000 8,58,000 2022
Land
and 1,15,000
2,00,000 80,000
1,60,000 15,000 and
20,000
77,000 10,000
Restructuring Machinery) 2021
Plant
following: on
A/c charged
of Buildings
Corporate Loss c/d Receivable
(Sale (Depreciation)
Account handBank
Balance the SSeS
2022.
& Goodwill
4,00,000 Debtors in at been
BankProfit Prepare &
Machinery Land 70,000 Stock
Plant 50,000 CashCash
Bills
83,000 2022.during
5,00,000By
By By have
Ltd. Capital 1,00,000 48,000 50,000 8,17,000
16,000 in
20,000paidpaid
3,000 3,55,000 8,58,000 2022 1.39
X
and of Working beenbeen
Sheets 2022.
Plant and
1,50,000
3,00,000 30,000
40,000 55,000
42,000 40,000
20,000 6,77,000 has has
Plant in in
10.000 of35.000
(2)
Management
Financial
Advanced Balance
Changes2021 respectively
20.000
of Statement
Additional
Infornmation:
(Purchase following of
A/c Share
Capital
Equity Proposed
Dividend of
Depreciation
figure)
(Balancing of Income-tax
dividend
To Losssale)
b/d
Balance on
(Profit Machinery) ProblemStatement
3:
No. Flow General
Reserve Buildings
A/c & the Fund
Liabilities
Share
Capital Profit
Redeemable &
Loss Bills Provision
for
Payable
& Preference
Profit Bank From Creditors Taxation A
() (ii) 1. 2. 3.
To To
Dr.