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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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