Bholenath starts a business by issuing 18,000 shares with a face value of 10, with 1 on application; and of


Bholenath starts a business by issuing 18,000 shares with a face value of ₹10, with ₹1 on application; and of ₹4 on allotment, in 20X5. Out of this, DJ Baba, owner of 200 shares, did not pay the ₹4 on allotment money, which was done before the end of the year 20X5. Dr. Funny, owner of 180 shares, paid the remaining uncalled amount, not including the share premium, in 20X5. The share premium of ₹2.50 was to be paid on the first and final call, to be made in 20X6.

The other items in the balance sheet of 20X5 are as following: Gross fixed assets amounting to ₹2,00,000; Investments purchased worth ₹27,000; Inventory ₹78,000; Debtors ₹75,000; Cash balance ₹40,000; Loan to the Director ₹2,000, Preliminary expenses not written down ₹15,000; Depreciation of ₹25,000; Term loan ₹50,000. Creditors ₹36,000; Provision for tax ₹18,000; and Provision for Dividends ₹15,000. The company made a profit before tax and dividend of ₹1,00,000. There is no other account in the balance sheet, apart from a cash credit facility from the Bank of Baroda to the extent of ₹5,00,000.

In 20X6, the company made full sales on credit for ₹4,00,000. The cost of goods (which was only goods) was ₹2,40,000. the operating expense was ₹1,11,000, out of which depreciation was ₹25,000. The company wrote off ₹5,000 of the preliminary expenses. The company also made a provision for tax of ₹21000 and of Dividend ₹1,80,000. The previous year’s provisions were fully paid off. The company also sold an asset of ₹30,000 (written down or book value) for a profit of ₹2,00,000. Regarding items in balance sheet the following information will be useful.

  • The company got the share premium of ₹2.50 from all except owners of 150 shares, who did not pay allotment money or other calls.
  • The company lined up an extra ₹1,75,000 on term loan. Nothing was repaid.
  • Sundry creditors were ₹45,000 as at end.
  • Fixed assets of ₹2,55,000 were purchased during 2002.
  • No investments were added.
  • No change in inventory.
  • Debtors were 25% of sales at end.
  • Cash balance was maintained at the same level (as there was a compulsion to do so).
  • The loan to the director increased to ₹1,00,000. Nothing was repaid.


(a) Prepare the funds flow statement.

(b) Mention the relevant accounting standards used in taking care of the different items.

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Related Book For  answer-question

Financial Accounting For Management

ISBN: 9789385965661

4th Edition

Authors: Neelakantan Ramachandran, Ram Kumar Kakani

Question Details
Chapter # 9- Accounting Standards
Section: Numerical Problems
Problem: 4
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Question Posted: August 25, 2023 08:28:31