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MGT101 - Financial Accounting - I - Lecture Handout 43

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FINANCIAL STATEMENTS OF LISTED/QUOTED COMPANIES

According to Companies Ordinance 1984, the contents of financial statements are 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. That is 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
Rs.

Credit
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  
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.
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
       
Long Term Loans   800,000
       
Total     1,740,000

Solution

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   80,000 65,900
  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
         
Long Term Loans   655,000 800,000
         
         
  Total   1,710,700 1,740,000

Profit & Loss Account

Alfa Ltd.
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

 

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  

 

Alfa Ltd.
Statement of Changes in Equity
For the Year Ended June 30, 2002
Particulars        
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
Shares Issued 150,000     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. Disposal. Jun 01 T Jul 01 Disposal. 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
                     
Total 2002 2,305,000 125,000   2,430,000   600,000   173,500 773,500 1,656,500
                     
Total 2001 x x x 2,305,000   x x x 600,000 1,705,000

Note # 2 Tax Payable

Tax Payable as Per Trial Balance

35,500
Current Year's Provision
9,800
45,300

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

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