1. Shares were certified at a premium of Rs. 1.50' per share.

2. Throughout the year Taxation liability regarding of 2002 was Rs, 20,000 and paid.

3. Throughout the year, Rs. 11,000 was provided for depreciation on Machinery and Plant.

4.  An item of the plant the written down value Rs. 20,000 was sold on Rs. 25,000.

5. Throughout the year, a dividend @ 7.5 percent was paid.

6. Part of the investment costing Rs. 30,000 was sold at Rs. 35,000 and the profit was considered in Profit and Loss account.

Depends on the above information, we initially set ourselves to ascertain the cash inflow and outflow regarding Investment, Machineries and Plant and Tax, that cannot be determined through a mere inspection of their balances in two balance sheets. The duty is accomplished through preparing the respective accounts and examining the effects of the additional information on each of such.  It is followed through preparation of an "Adjusted the Profit and Loss a/c" to determine the actual net profit earned throughout the period, in the light of the additional information now obtainable. In the last stage, the "Cash flow statement" is prepared as in Table 3.

Investment Account

To Opening balance	75,000	By Sale		35,000
To P & L a/c (profit on sale)	5,000	By Closing balance		1,30,000
To Bank (Purchases)	85,000
	1,65, 000			1,65, 000

Plant & Machinery Account

To Opening balance                          1,10,000                  By Sale                                     25,000

 To P & L a/c (profit on sale)             5,000                      By P & L a/c- depreciation   11,000

To Bank                                                91,000                     By Closing balance             1,70,000

         2,06,000                                                                     2,06,000

Provision for taxation

To Bank	20,000	By Opening Balance	20,000
By Closing balance	35,000	By P & L a/c	35,000

        55,000                                                                             55,000

Adjusted Profit and Loss Account

To General Reserve                       15,000 By Opening balance	40,000
To Dividend                                  30,000 By Dividend Equalisn. Reserve	10,000
To Provision for tax                      35,000 By Plant and Machineries profit on sale	5,000
To Depreciation                             11,000 By Investment-profit on sale.	5,000
By profit for the year
(balancing figure)	1,01,000
To Goodwill                                  10,000
To Preliminary expenses                 5,000
To Closing balance                        55,000
1,61,000	1,61,000
Table 3
Statement of Cash flow
for the period 1.4 2002 to 31.3.2003
	Rs.
Opening Cash balance as on 1.4.2002 Add/(deduct): Cash flow from Operating Activities Net profit (Ref: P&L Adjustment a/c)                                                       1,01,000 Add:	20,000

Posted Date: 4/9/2013 1:58:03 AM | Location : United States

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