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Financial Accounting

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Financial Accounting (Mgt-101)
VU
Lesson-43
FINANCIAL STATEMENTS OF LISTED/QUOTED COMPANIES
According to Companies Ordinance 1984, the arrangement of financial statements is as follows:
 Balance Sheet
 Profit and Loss Account
 Cash Flow Statement
 Statement of changes in Equity
 Notes to the Accounts
For the sake of presentation same order should be followed while solving the questions. But we cannot
complete the balance sheet without first preparing the Profit and Loss Account. To solve the problem in
exam situation we usually prepare the forms of Balance Sheet and Profit and Loss Account first. This way
we can also plan the Serial Numbers of Notes to the Accounts beforehand. Otherwise a sheet of question
paper can be left blank for preparation of Balance Sheet.
Comparative figures are also included in the financial statements for every figure, except where first set of
financial statements is being prepared. In examination situation comparative figures should be shown
provided these are provided in the question.
QUESTION
Following is the trial balance of Alfa Ltd. For the year ended June 30, 2002. You are also given the balance
sheet of June 30, 2001.
REQUIRED
You are required to prepare a set of financial statements of the Alfa Ltd.
Alfa Ltd.
Trial Balance for the Year June 30, 2002
Debit
Credit
Rs.
Rs.
Fixed Assets at Cost
Freehold Land
500,000
Building
600,000
Furniture and Fixture
400,000
Vehicles
930,000
Accumulated Depreciation
Building
150,000
Furniture and Fixture
150,000
Vehicles
300,000
Sundry Debtors
80,000
Advances, Deposits and Prepayments
26,000
Investments (Long Term)
105,000
Cash in hand
2,000
Cash at bank
75,500
Purchases
500,000
Sales Return
10,000
Stock July 01, 2001
85,000
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Financial Accounting (Mgt-101)
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Salaries (Admin. Staff)
65,000
Rent, Rates and Taxes
12,500
Carriage inward
8,000
Legal Charges
7,500
Salaries (Sales Staff)
45,000
Selling Expenses
23,000
Financial Charges
45,000
Sundry Creditors
50,500
Short Term Running Finance
175,000
Advances from Customers
28,500
General Reserve
250,000
Tax Payable
35,500
Accumulated Profit Brought Forward
90,000
Sales
857,200
Markup on Investments
15,000
Purchase Return
12,800
Loan from Bank (Long Term)
655,000
Issued Share Capital
750,000
TOTAL
3,519,500
3,519,500
Additional information:
 The authorized capital of the company is Rs. 1,000,000 divided into 100,000 shares of Rs. 10 each.
 Additions made in Fixed Assets include Building Rs. 75,000 and Furniture and Fixture Rs. 50,000.
These have already been recorded in the books of accounts.
 Depreciation is to be charged on Building 5%, Furniture and Fixture @ 10% and Vehicles 20% on
written down value. Full year,s depreciation is charged in the year of purchase whilst no depreciation
is charged in the year of disposal.
 Provision for doubtful debts to be created Rs. 5,000.
 Stock on June 30, 2002 Rs. 65,000
 Provide Rs. 9,800 for income tax.
275
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Financial Accounting (Mgt-101)
VU
Alfa Ltd.
Balance Sheet as at June 30, 2001.
Note
2001
Operating Fixed Assets
1,705,000
Investments
55,000
1,760,000
Current Assets
Sundry Debtors
65,900
Stock in Trade
85,000
Advances, Deposits and Prepayments
21,500
Cash in hand
1,500
Cash at bank
58,600
232,500
Current Liabilities
Sundry Creditors
65,200
Short Term Running Finance
125,500
Tax Payable
42,000
Advances from Customers
19,800
252,500
Working Capital
(20,000)
Net Capital Employed
1,740,000
Financed by
Share Capital and Reserves
Authorized Capital
100,000 shares of Rs. 10 each.
1,000,000
Share Capital
75,000 (2001: 60,000) shares of Rs. 10 each
600,000
General reserve
250,000
Un-appropriated Profit
90,000
Total Share holders Equity
940,000
800,000
Long Term Loans
Total
1,740,000
SOLUTION
276
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Financial Accounting (Mgt-101)
VU
Alfa Ltd.
Balance Sheet as at June 30, 2002.
Note
2002
2001
Operating Fixed Assets
1
1,656,500
1,705,000
Investments
105,000
55,000
1,761,500
1,760,000
Current Assets
Sundry Debtors
65,900
80,000
Stock in Trade
65,000
85,000
Advances, Deposits and Prepayments
26,000
21,500
Cash in hand
2,000
1,500
Cash at bank
75,500
58,600
248,500
232,500
Current Liabilities
Sundry Creditors
50,500
65,200
Short Term Running Finance
175,000
125,500
Tax Payable
2
45,300
42,000
Advances from Customers
28,500
19,800
299,300
252,500
Working Capital
(50,800)
(20,000)
Net Capital Employed
1,710,700
1,740,000
Financed by
Share Capital and Reserves
Authorized Capital
100,000 shares of Rs. 10 each.
1,000,000
1,000,000
Share Capital
75,000 (2001: 60,000) shares of Rs. 10 each
750,000
600,000
General reserve
250,000
250,000
Un-appropriated Profit
55,700
90,000
Total Share holders Equity
1,055,700
940,000
655,000
800,000
Long Term Loans
TOTAL
1,710,700
1,740,000
PROFIT AND LOSS ACCOUNT
Alfa Ltd.
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Financial Accounting (Mgt-101)
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Profit and Loss Account for the year ended June 30, 2002.
Note
2002
2001
Rs.
Rs.
Net Sales
3
847,200
x
Less: Cost of Goods Sold
4
515,200
x
Gross Profit
332,000
x
Add: Other Income
15,000
x
347,000
x
Less:
Administrative Expenses
5
258,500
x
Selling Expenses
6
68,000
x
326,500
x
Operating Profit
20,500
x
Less: Financial Charges
45,000
x
Net Profit / (Loss) Before Tax
(24,500)
x
Less: Provision for Tax
9,800
x
Net Profit / (Loss) After Tax
(34,300)
x
Accumulated Profit / (Loss) Brought Forward
90,000
x
Accumulated Profit / (Loss) Carried Forward
55,700
x
278
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Financial Accounting (Mgt-101)
VU
Alfa Ltd.
Cash Flow Statement for the year ended June 30, 2002
Note
2002
2001
Cash Flow From Operating Activities
Profit / (Loss) Before Tax
(24,500)
Adjustment for: Depreciation
173,500
Operating Profit Before Working Capital
changes
149,000
(Increase) / Decrease in C. Assets
Sundry Debtors
(14,100)
Stock in Trade
20,000
Advances, Deposits and Prepayments
(4,500)
1,400
Increase / (Decrease) in C. Liabilities
Sundry Creditors
(14,700)
Short Term Running Finance
49,500
Advances from Customers
8,700
43,500
Cash Generated From Operations
193,900
Income Tax Paid
(6,500)
Net Cash Flow from Operations
187,400
Cash Flow From Investing Activities
Building
(75,000)
Furniture and Fixture
(50,000)
Investments (Long Term)
(50,000)
Net Cash Flow From Investing Activities
(175,000)
Cash Flow from financing Activities
Share Capital Issued
150,000
Long Term Loan Repaid
(145,000)
5,000
Net Increase in Cash & Cash Equivalents
17,400
O/B of Cash and Cash Eq.
60,100
C/B of Cash and Cash Eq.
77,500
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Financial Accounting (Mgt-101)
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280
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Financial Accounting (Mgt-101)
VU
Alfa Ltd.
Statement of Changes in Equity for the Year Ended June 30, 2002
Share
General
Un-app.
Total
Capital
Reserve
Profit
Balance as on June 30, 2000
x
x
x
x
Profit after tax for the year
x
x
Dividend
(x)
(x)
Balance as on June 30, 2001
600,000
250,000
90,000
940,000
150,000
Shares Issued
150,000
Profit after tax for the year
(34,300)
34,300
750,000
250,000
55,700
1,055,700
NOTES TO THE ACCOUNTS
Note # 1
Fixed Assets at WDV
Cost
R
Accumulated Depreciation
WDV
Particulars
As On
As On
A
As On
On
For
As On
As On
Jul 01
Add.
Disp.
Jun 01
T
Jul 01
Disp.
The
Jun 01
Jun 01
2001
2002
E
2001
Year
2002
2002
Freehold
Land
500,000
-
-
500,000
-
-
-
-
-
500,000
Building
525,000
75,000
-
600,000
5
150,000
-
22,500
172,500
427,500
Furniture
and Fixture
350,000
50,000
-
400,000
10
150,000
-
25,000
175,000
225,000
Vehicles
930,000
-
-
930,000
20
300,000
-
126,000
426,000
504,000
600,000
-
173,500
773,500
1,656,500
2,305,000
125,000
-
2,430,000
Total 2002
2,305,000
600,000
1,705,000
Total 2001
x
x
x
x
x
x
Note # 2
Tax Payable
Tax Payable as Per Trial Balance
35,500
Current Year's Provision
9,800
45,300
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Financial Accounting (Mgt-101)
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Note # 3
Net Sales
Gross Sales
857,200
Less: Returns
10,000
847,200
Note # 4
Cost of Goods Sold
Opening Stock
85,000
Add: Cost of Material Purchased
Gross Purchases
500,000
Less: Returns
12,800
Add: Carriage Inward
8,000
495,200
Less: Closing Stock
65,000
Cost of goods sold
515,200
Note # 5
Administrative Expenses
Salaries (Admin. Staff)
65,000
Rent, Rates and Taxes
12,500
Legal Charges
7,500
Depreciation
173,500
TOTAL
258,500
Note # 6
Selling Expenses
Salaries (Sales Staff)
45,000
Selling Expenses
23,000
TOTAL
68,000
282
Table of Contents:
  1. Introduction to Financial Accounting
  2. Basic Concepts of Business: capital, profit, budget
  3. Cash Accounting and Accrual Accounting
  4. Business entity, Single and double entry book-keeping, Debit and Credit
  5. Rules of Debit and Credit for Assets, Liabilities, Income and Expenses
  6. flow of transactions, books of accounts, General Ledger balance
  7. Cash book and bank book, Accounting Period, Trial Balance and its limitations
  8. Profit & Loss account from trial balance, Receipt & Payment, Income & Expenditure and Profit & Loss account
  9. Assets and Liabilities, Balance Sheet from trial balance
  10. Sample Transactions of a Company
  11. Sample Accounts of a Company
  12. THE ACCOUNTING EQUATION
  13. types of vouchers, Carrying forward the balance of an account
  14. ILLUSTRATIONS: Ccarrying Forward of Balances
  15. Opening Stock, Closing Stock
  16. COST OF GOODS SOLD STATEMENT
  17. DEPRECIATION
  18. GROUPINGS OF FIXED ASSETS
  19. CAPITAL WORK IN PROGRESS 1
  20. CAPITAL WORK IN PROGRESS 2
  21. REVALUATION OF FIXED ASSETS
  22. Banking transactions, Bank reconciliation statements
  23. RECAP
  24. Accounting Examples with Solutions
  25. RECORDING OF PROVISION FOR BAD DEBTS
  26. SUBSIDIARY BOOKS
  27. A PERSON IS BOTH DEBTOR AND CREDITOR
  28. RECTIFICATION OF ERROR
  29. STANDARD FORMAT OF PROFIT & LOSS ACCOUNT
  30. STANDARD FORMAT OF BALANCE SHEET
  31. DIFFERENT BUSINESS ENTITIES: Commercial, Non-commercial organizations
  32. SOLE PROPRIETORSHIP
  33. Financial Statements Of Manufacturing Concern
  34. Financial Statements of Partnership firms
  35. INTEREST ON CAPITAL AND DRAWINGS
  36. DISADVANTAGES OF A PARTNERSHIP FIRM
  37. SHARE CAPITAL
  38. STATEMENT OF CHANGES IN EQUITY
  39. Financial Statements of Limited Companies
  40. Financial Statements of Limited Companies
  41. CASH FLOW STATEMENT 1
  42. CASH FLOW STATEMENT 2
  43. FINANCIAL STATEMENTS OF LISTED, QUOTED COMPANIES
  44. FINANCIAL STATEMENTS OF LISTED COMPANIES
  45. FINANCIAL STATEMENTS OF LISTED COMPANIES