mgt101 - financial accounting- lecture 38
DESCRIPTION
Virtual University Course MGT101 - Financial Accounting Lecture No 38 Instructor's Name: Mr. Mujahid Eshai Course Email: [email protected]TRANSCRIPT
Financial Accounting
1
Lecture – 38
Statement of Changes In Equity
• Statement of changes in equity shows the movement in: Share Capital (issued share capital) Share Premium Nature of Reserves created Un-appropriated Profit / Loss Dividend Distributed
Note: Show all points simultaneously.
Financial Accounting
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Lecture – 38
Statement of Changes In Equity
• Capital Reserve and Fixed Asset Replacement Reserve are used for specific purpose. These are not distributed among share holders.
• General Reserve and undistributed profit` can be distributed among share holders.
Financial Accounting
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Lecture – 38
Share Premium
• Share Premium – Amount received in excess of the face value of the share. Example: if a Rs. 10 share is sold for Rs, 12 then Rs. 2 is share premium.
• Share Premium can not be distributed among the share holders.
• It can be utilized for: To issue Bonus Shares To write off Preliminary Expenses To meet the difference of face value and cash received in
case of shares issued at discount To meet the expenses of issue of shares For payment of premium on redemption of debentures
Financial Accounting
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Lecture – 38
Revaluation Reserve
• Revaluation Reserve – is created when an asset is re-valued from cost to market value.
• Revaluation Reserve can not be distributed among the share holders.
• It can be utilized for: Setting off any loss on revaluation At the time of disposal of asset, the reserve relating to
that asset is transferred to profit & loss account.
Financial Accounting
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Lecture – 38
Cash Flow Statement
• Cash Flow Statement – shows the movement of cash resources during the year.
• It is an integral part of Financial statements.
Note: Show all points simultaneously.
Financial Accounting
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Lecture – 38
Notes to the Accounts
• Notes to the Accounts – are the explanatory notes of all the items shown in the profit and loss account and the balance sheet.
• It is the requirement of the Companies Ordinance and the International Accounting Standards.
Financial Accounting
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Lecture – 38
Contents of Notes to the Accounts
• Following are explained in Notes to the accounts: Nature of business of the company Accounting Policies of the company Details and explanation of items given in the Profit and
Loss Account and Balance Sheet.
Financial Accounting
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Lecture – 38
Debentures
• Debenture is an instrument for obtaining loan from general public.
• Mark up is paid on Debentures which is generally equal to the market rate.
Financial Accounting
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Lecture – 38
Debentures
• Debentures are acknowledgement of debt, owed by the company to the public at large for a defined period of time, and has a mark up (profit) rate attached to it.
Financial Accounting
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Lecture – 38
Term Finance Certificate
• Term Finance Certificate are issued for a defined period.
• These are also issued to obtain loan from public at large.
Financial Accounting
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Lecture – 38
• Both Debentures and Term Finance Certificates are usually issued by Public Companies.
Financial Accounting
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Lecture – 38
Question
• Beta (Private) Limited is a manufacturing company.
• Following list of balances has been extracted from its books as on June 30, 2002.
Financial Accounting
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Lecture – 38
Particulars Amount Rs.
Authorized Capital (face value Rs. 10 each) 500,000
Paid up / issued Capital 300,000
Debentures 240,000
Land 120,000
Building 315,000
Motor Vehicles 187,500
Furniture 34,500
Accumulated Profit and Loss Account 29,489
Stock in Trade 48,630
Financial Accounting
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Lecture – 38
Particulars Amount Rs.
Debtors 42,525
General Reserve 28,000
Creditors 27,360
Proposed Dividend 15,000
Bank Balance ?
Accumulated Depreciation
Motor Vehicles 46,050
Building 66,000
Fixtures 11,250
Financial Accounting
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Lecture – 38
Note:
• All items of profit and loss have been accounted for in calculating the balance of accumulated profit and loss account, except for Depreciation which is to be charged at 10% on WDV on all depreciable assets.
Required
• Prepare the balance sheet of Beta (Private) Limited As on June 30, 2002
Financial Accounting
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Lecture – 38
Beta (Private) Limited
Trial Balance As At June 30, 2002
Debit Rs. Credit Rs.
Paid up Capital 300,000
Debentures 240,000
Accumulated Profit and Loss Account 49,489
General Reserve 8,000
Creditors 27,360
Accumulated Depreciation
Motor Vehicles 46,050
Building 66,000
Furniture and Fixtures 11,250
Solution
Financial Accounting
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Lecture – 38
Debit Rs. Credit Rs.
Proposed Dividend 15,000
Land 120,000
Building 315,000
Motor Vehicles 187,500
Furniture and Fixture 34,500
Stock in Trade 48,630
Debtors 42,525
Bank Balance
TOTALDouble Under line
748,155 763,149
14,994
763,149 763,149
Note: See Animation
Financial Accounting
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Lecture – 38Beta (Private) Limited
Balance Sheet As At June 30, 2002
Particulars Note Amount Rs.
Fixed Assets at WDV 1Current Assets
DebtorsStock in TradeBank Balance
Total Current AssetsCurrent Liabilities
CreditorsProposed Dividend
Total Current Liabilities
Working Capital
Net Assets Employed
Financed By:Authorized Capital50,000 Shares of Rs. 10 each
Paid Up Capital30,000 shares of Rs. 10 eachGeneral ReserveAccumulated Profit and Loss Account 2
Debentures
Total
Double Under line
Financial Accounting
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Lecture – 38
Beta (Private) Limited
Balance Sheet As At June 30, 2002
Particulars Note Amount Rs.
Fixed Assets at WDV 1Current Assets
DebtorsStock in TradeBank Balance
Total Current AssetsCurrent Liabilities
CreditorsProposed Dividend
Total Current Liabilities
Working Capital
Net Assets Employed
Double Under line
Financial Accounting
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Lecture – 38
Note 1 – Fixed Assets at WDV
Particulars Cost Rate Acc. Dep. WDV
As At1-7-01
Addition/Deletion
As At30-6-02
As At1-7-01
For TheYear
As At30-6-02
As At30-6-02
Land
Building
Furniture & Fixtures
Vehicles
TOTAL