Financial Accounting
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.
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Financial Accounting
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.
2
Financial Accounting
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
3
Financial Accounting
Lecture – 38
Revaluation Reserve
• Revaluation
•
•
Reserve – is created when an asset is revalued 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.
4
Financial Accounting
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.
5
Financial Accounting
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.
6
Financial Accounting
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.
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Financial Accounting
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.
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Financial Accounting
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.
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Financial Accounting
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.
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Financial Accounting
Lecture – 38
• Both Debentures and Term Finance Certificates are usually
issued by Public Companies.
11
Financial Accounting
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.
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Financial Accounting
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
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Financial Accounting
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
14
Financial Accounting
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
15
Financial Accounting
Lecture – 38
Solution
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
General Reserve
49,489
8,000
Creditors
27,360
Accumulated Depreciation
Motor Vehicles
46,050
Building
66,000
Furniture and Fixtures
11,250
16
Financial Accounting
Lecture – 38
Note: See Animation
Debit 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
748,155
763,149
14,994
Bank Balance
TOTAL
Credit Rs.
Double
Under
line
763,149
17
763,149
Financial Accounting
Lecture – 38
Beta (Private) Limited
Balance Sheet As At June 30, 2002
Particulars
Note
Fixed Assets at WDV
Current Assets
Amount Rs.
1
Debtors
Stock in Trade
Bank Balance
Total Current Assets
Current Liabilities
Double
Under
line
Creditors
Proposed Dividend
Total Current Liabilities
Working Capital
Net Assets Employed
Financed By:
Authorized Capital
50,000 Shares of Rs. 10 each
Paid Up Capital
30,000 shares of Rs. 10 each
General Reserve
Accumulated Profit and Loss Account
2
Debentures
Total
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Financial Accounting
Lecture – 38
Beta (Private) Limited
Balance Sheet As At June 30, 2002
Particulars
Fixed Assets at WDV
Current Assets
Note
Amount Rs.
1
Debtors
Stock in Trade
Bank Balance
Double
Under
line
Total Current Assets
Current Liabilities
Creditors
Proposed Dividend
Total Current Liabilities
Working Capital
Net Assets Employed
19
Financial Accounting
Lecture – 38
Note 1 – Fixed Assets at WDV
Particulars
Cost
As At
1-7-01
Addition/
Deletion
Rate
As At
30-6-02
Land
Building
Furniture &
Fixtures
Vehicles
TOTAL
20
Acc. Dep.
As At
1-7-01
For The
Year
WDV
As At
30-6-02
As At
30-6-02