From the following Balance Sheets of Sriramco, prepare

(a) Statement of Changes in Working Capital, and (b) Funds Flow Statement: Balance Sheet of Sriramco as on 31st December…

Assets
Goodwill
Land and Buildings
Plant
Investments
Book Debts
Stock
Cash in hand and at Bank
Preliminary Expenses

Liabilities
Share Capital
Equity Share Capital
10% Red. Pref. Share Capital
Capital Reserve
General Reserve
P. and L. Account
Proposed Dividend
Sundry Creditors
Provision for Taxation
2000. 2001
Rs.
90,000
2,80,000
1,00,000
30,000
1,80,000
80,000
40,000
20,000 Rs.
80,000
2,00,000
2,00,000
40,000
2,10,000
1,20,000
45,000
10,000
8,20,000 9,05,000


4,00,000
2,00,000
-
60,000
30,000
60,000
30,000
40,000

5,00,000
1,00,000
30,000
80,000
45,000
60,000
45,000
45,000
8,20,000 9,05,000

The following additional information is also available
(a) A machine has been sold for Rs. 40,000 whose written down value was Rs. 36,000.
Depreciation of Rs. 15,000 has been charged on plant in 2001;
(b) A piece of land had been sold out in 2001 and the profit on the sale has been credited to
capital reserve;
(c) An interim dividend of Rs. 30,000 has been paid in 2001;
(d) Income tax paid during 2001 amounts to Rs. 45,000;
(e) Preference Shares were redeemed at 5% premium.

To prepare the Statement of Changes in Working Capital and the Funds Flow Statement for Sriramco, we need to analyze the changes in the company's balance sheet items and cash flows. Here are the steps to prepare both statements:

Step 1: Calculate the changes in current assets and current liabilities:

Current Assets (2001) - Current Assets (2000) = Change in Current Assets
Current Liabilities (2001) - Current Liabilities (2000) = Change in Current Liabilities

Step 2: Prepare the Statement of Changes in Working Capital:

Working Capital (2000) = Current Assets (2000) - Current Liabilities (2000)
Working Capital (2001) = Current Assets (2001) - Current Liabilities (2001)

Statement of Changes in Working Capital:
Opening Working Capital (2000) =
Current Assets (2000) - Current Liabilities (2000)

Changes in Current Assets and Liabilities:
Increase/Decrease in Current Assets = Change in Current Assets
Increase/Decrease in Current Liabilities = Change in Current Liabilities

Closing Working Capital (2001) =
Opening Working Capital (2000) + (Increase/Decrease in Current Assets - Increase/Decrease in Current Liabilities)

Step 3: Prepare the Funds Flow Statement:

Funds Provided From Operations:
Net Income (Loss) =
Profit and Loss Account (2001) - Profit and Loss Account (2000)
Add Non-Cash Expenses (Depreciation) = Depreciation Expense (2001)
Add/Less Working Capital Changes = Closing Working Capital (2001) - Opening Working Capital (2000)

Funds Provided by Financing Activities:
Increase in Share Capital = Change in Share Capital
Increase in Reserves = Capital Reserve (2001) - Capital Reserve (2000)
Add Dividends Paid = Interim Dividend Paid (2001)

Funds Used in Investing Activities:
Sale of Machine = Proceeds from Sale of Machine
Sale of Land = Proceeds from Sale of Land

Net Increase/Decrease in Cash = Total Cash Inflows - Total Cash Outflows
Closing Cash = Opening Cash + Net Increase/Decrease in Cash

Now, with the given information, we will calculate the above steps and prepare both the Statement of Changes in Working Capital and the Funds Flow Statement.

To prepare the Statement of Changes in Working Capital and Funds Flow Statement for Sriramco, we need to determine the changes in the various assets and liabilities between the two balance sheets. Let's go step by step:

1. Goodwill: There is no information provided about any changes in the Goodwill asset. Therefore, there is no change in working capital or funds flow related to Goodwill.

2. Land and Buildings: Similarly, no information is provided about any changes in Land and Buildings.

3. Plant: We are given that depreciation of Rs. 15,000 has been charged on Plant in 2001. This means that Plant has decreased by Rs. 15,000. We will consider this decrease in Plant asset in the Statement of Changes in Working Capital and Funds Flow Statement.

4. Investments: No information is given about any changes in Investments.

5. Book Debts: The change in Book Debts is calculated by subtracting the 2000 balance from the 2001 balance. In this case, it is (Rs. 2,10,000 - Rs. 1,80,000) = Rs. 30,000. We will consider this change in Book Debts in the Statement of Changes in Working Capital and Funds Flow Statement.

6. Stock: The change in Stock is calculated by subtracting the 2000 balance from the 2001 balance. In this case, it is (Rs. 1,20,000 - Rs. 80,000) = Rs. 40,000. We will consider this change in Stock in the Statement of Changes in Working Capital and Funds Flow Statement.

7. Cash in hand and at Bank: No information is given about any changes in Cash in hand and at Bank.

8. Preliminary Expenses: No information is given about any changes in Preliminary Expenses.

9. Share Capital: The changes in Share Capital are given in the balance sheets. We need to consider these changes in both the Statement of Changes in Working Capital and Funds Flow Statement.

10. Capital Reserve and General Reserve: No information is given about any changes in Capital Reserve or General Reserve.

11. Profit and Loss Account (P&L Account): No information is given about any changes in the P&L Account.

12. Proposed Dividend: We are given that an interim dividend of Rs. 30,000 has been paid in 2001. This means that the Proposed Dividend liability has decreased by Rs. 30,000. We will consider this decrease in Proposed Dividend liability in the Statement of Changes in Working Capital and Funds Flow Statement.

13. Sundry Creditors: The change in Sundry Creditors is calculated by subtracting the 2000 balance from the 2001 balance. In this case, it is (Rs. 45,000 - Rs. 40,000) = Rs. 5,000. We will consider this change in Sundry Creditors in the Statement of Changes in Working Capital and Funds Flow Statement.

14. Provision for Taxation: We are given that income tax paid during 2001 amounts to Rs. 45,000. This means that the Provision for Taxation liability has decreased by Rs. 45,000. We will consider this decrease in Provision for Taxation liability in the Statement of Changes in Working Capital and Funds Flow Statement.

15. 10% Red. Pref. Share Capital: No information is given about any changes in 10% Red. Pref. Share Capital.

Now that we have determined the changes in the various assets and liabilities, we can prepare the Statement of Changes in Working Capital and Funds Flow Statement for Sriramco based on this information.