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FINANCIAL STATEMENTS OF LIMITED COMPANIES (Continued)
Question
Following trial balance has been extracted from the books of Alpha Ltd. as on June 30, 2002.
You are required to prepare the profit and loss account for the year and the Balance Sheet as at June 30, 2002.
| Alpha Limited | ||
| Trial Balance As at June 30, 2002 |
||
| Title of Account | Dr. Rs. | Cr. Rs. |
| Paid up capital | 175,000 | |
| 10 % Debentures | 75,000 | |
| Building at Cost | 237,500 | |
| Equipment at Cost | 20,000 | |
| Vehicles at Cost | 43,000 | |
| Accumulated Dep. – Building | 11,250 | |
| Equipment | 6,000 | |
| Vehicles | 12,900 | |
| Stock Opening Balance | 12,900 | |
| Sales | 245,500 | |
| Purchases | 134,775 | |
| Carriage Inward | 4,050 | |
| Salaries and Wages | 23,100 | |
| Directors Remuneration | 15,750 | |
| Vehicle Running Expenses | 20,300 | |
| Insurance | 7,325 | |
| Miscellaneous Expenses | 1,400 | |
| Markup on Debentures | 3,750 | |
| Debtors | 46,525 | |
| Creditors | 28,425 | |
| Bank | 20,975 | |
| General Reserve | 12,500 | |
| Share Premium Account | 35,000 | |
| Interim Dividend Paid | 8,750 | |
| Accumulated Profit and Loss account | 42,350 | |
| TOTAL | 643,925 | 643,925 |
Additional Information:
- Closing stock Rs. 68,050.
- Depreciation Building 5,000, Vehicles Rs 7,500, Equipment 3,000.
- Six months Debenture markup is to be accrued.
- 10% final dividend is to be paid in addition to interim dividend.
- Transfer Rs. 5,000 to general reserve.
- Authorized share capital is Rs. 250,000 divided in to 25,000 shares of Rs. 10 each.
- Provision for Income Tax to be made Rs. 12,500.
Solution:
Balance Sheet
| Alpha Ltd. | ||
| Balance Sheet As At June 30, 2002 |
||
| Particulars | Note | Amount Rs. |
| Fixed Assets at WDV | 1 | 254,850 |
| Current Assets Debtors Stock in Trade Bank Balance |
46,525 68,050 20,975 |
|
| 135,550 | ||
| Current Liabilities Creditors Proposed Dividend Debenture Markup Payable Provision for Tax |
28,425 17,500 3,750 12,500 |
|
| 62,175 | ||
| Working Capital | 73,375 | |
| Net Assets Employed | 328,225 | |
| Financed By: Authorized Capital 25,000 Shares of Rs. 10 each |
250,000 | |
| Paid Up Capital 17,500 shares of Rs. 10 each Share Premium General Reserve (12,500 + 5,000 transferred from P & L) Accumulated Profit and Loss Account |
175,000 35,000 17,500 25,725 |
|
| Share Holders’ Equity Debentures |
253,225 75,000 |
|
| Total | 328,225 | |
Profit & Loss Account
| Alpha Ltd | ||
| Profit and Loss Account For the Year Ended June 30 2002 |
||
| Particulars | Note | Rs. |
| Sales | 245,500 | |
| Less: Cost of Goods Sold | 127,500 | |
| Gross Profit | 118,000 | |
| Less: Administrative Expenses | ||
| Directors Remuneration | 15,750 | |
| Salaries and Wages | 23,100 | |
| Vehicle Running Expenses | 20,300 | |
| Insurance | 7,325 | |
| Depreciation | 15,500 | |
| Miscellaneous Expenses | 1,400 | |
| 83,375 | ||
| Operating Profit | 34,625 | |
| Less: Debenture Markup | 7,500 | |
| Net Profit Before Tax | 27,125 | |
| Less: Provision for Tax | 12,500 | |
| Net Profit after tax | 14,625 | |
| Add: Accumulated Profit Brought Forward | 42,350 | |
| 56,975 | ||
| Less: Appropriation | ||
| General Reserve | 5,000 | |
| Interim dividend | 8,750 | |
| Proposed Final Dividend (10% of 175,000) | 17,500 | |
| 31,250 | ||
| Accumulated Profit Carried Forward | 25,725 | |
Note # 1 Fixed Asset at WDV
| Particulars | Cost | R A T E |
Acc. Dep. | WDV | ||||
| As At 1-7-01 |
Addition/ Deletion |
As At 30-6-02 |
As At 1-7-01 |
For The Year |
As At 30-6-02 |
As At 30-6-02 |
||
| Building | 237,500 | 0 | 237,500 | 11,250 | 5,000 | 16,250 | 221,250 | |
| Equipment | 20,000 | 0 | 20,000 | 6,000 | 3,000 | 9,000 | 11,000 | |
| Vehicles | 43,000 | 0 | 43,000 | 12,900 | 7,500 | 20,400 | 22,600 | |
| TOTAL | 300,500 | 0 | 300,500 | 30,150 | 15,500 | 45,650 | 254,850 | |
Note # 2 Cost of Goods Sold
Opening Stock
Note # 3 Mark up on Debentures
Mark up given in trial
Statement of Changes in Equity
Statement of changes in equity shows movement in share holders’ equity during the reported period.
Share holders equity includes:
- Share Capital
- Share Premium Reserve
- General Reserve
- Accumulated Profit & Loss Account
Types of Reserves
Reserves are of two types:
- Distributable Reserve
- Non Distributable Reserve
Distributable Reserve
Distributable reserves are those reserves which are distributable among the share holders of the company, for Example, General Reserve, Accumulated Profit & loss etc.
Non Distributable Reserve
Non Distributable reserves are those reserves which are created for a specific purpose. These can not be distributed among share holders. These can be utilized for that particular purpose, for which, these are created. For example, Share Premium Reserve, Revaluation Reserve.
Procedure for Preparing Statement of Change in Equity
All the opening balances of share holders’ equity are listed down first. Movement during the year in share holders’ equity is recorded. After adding/reducing the share holders’ equity, closing balances are calculated. All information regarding share holders’ equity is collected from balance sheet of the company. According to International Accounting Standards, fixed assets revaluation reserve is included in the statement of changes in equity. But The Companies Ordinance does not allow revaluation reserve to become a part of statement of changes in equity. As Companies Ordinance prevails over International Accounting Standards, so we do not show Revaluation reserve in the statement of changes in equity.
Statement of Change in Equity
| Alpha Ltd | |||||
| Statement of Changes in Equity For Year Ended June 30, 2002 |
|||||
| Share Capita l |
Share Premiu m Account |
General Reserv e |
Profit & Loss A/c |
Total | |
| Balance On Jun 30, 2001 |
175,000 | 35,000 | 12,500 | 42,350 | 264,850 |
| Net Profit for the Period |
14,625 | 14,625 | |||
| Transfer to General Reserve |
5,000 | (5,000) | 0 | ||
| Dividend | (26,250) | (26,250) | |||
| Balance On June 30, 2002 |
175,000 | 35,000 | 17,500 | 25,725 | 253,225 |
Notes to the Accounts
Notes to the accounts are explanatory notes on financial statements of the company. These include all the information, from formation of company to the calculation of figures, arrived at, during the preparation of financial statements.
Notes of Alpha Ltd. are as follows:
Company and Its operations
o Company was formed in the year --------
o The company trades in electronic consumer items.
Significant Accounting Policies:
Historical Cost Convention
o These accounts have been prepared under the historical cost convention.
Revenue Recognition
o Sales are recorded on dispatch of goods to customers.
Fixed Assets
o Fixed Assets are recorded at cost less accumulated depreciation.
Stock Valuation
o Method of stock valuation is --------
Taxation
o Provision for Taxation is calculated on the basis of -------
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