Meaning, Uses, Example of Current assets and Current Liabilities

2. Fixed expenses decrease per unit with the
increases in production and increases per
unit with the decrease in production.
a) True
b) False

3. ANS : TRUE

4. Marginal costing is also known as
a) Direct costing
b) Variable costing
c) Both a and b
d) None of the above

5. ANS C

6. . While computation of profit in marginal
costing
a) Total marginal cost is deducted from
total sales revenues
b) Total marginal cost is added to total
sales revenues
c) Fixed cost is added to contribution
d) None of the above

7. ANS: A

8. R&D budget and Capital expenditure budget are
examples of
a. Short-term budget
b. Current budget
c. Long-term budget
d. None of the above

9. ANS C

10. Which statement is prepared in the process of
funds flow analysis?
a) Schedule of changes in working capital
b) Funds Flow Statement
c) Both a and b
d) None of the above

11. ANS:; A

12. Which of the following are sources of
funds?
A) Issue of bonus shares
B) Issue of shares against the purchase of
fixed assets
C) Conversion of debentures into shares
D) Conversion of loans into shares
a) A and C
b) A and D
c) A, B, C and D
d) None of the above

13. ANS D

14. The Break-even Point of a company is that level of
sales income which will equal the sum of its fixed
cost.
a) True
b) False

15. ANS: TRUE

16. Using equation method, Break-even point is
calculated as
a) Sales = Variable expenses + Fixed expenses + Profit
b) Sales = Variable expenses + Fixed expenses - Profit
c) Sales = Variable expenses - Fixed expenses + Profit
d) None of the above

17. ANS : A

18. Given selling price is Rs 20 per unit, variable
cost is Rs 16 per unit contribution is
a) Rs 1.25 per unit
b) Rs 4 per unit
c) Rs 0.8 per unit
d) None of the above

19. ANS: B

20. NEW LESSON

21. UNIT: 3 ???

22. SYLLABUS
Unit 3: FUND FLOW ANALYSIS 12 HRS
Meaning and Concept of Fund – Meaning and Definition of Fund Flow
Statement – Uses and Limitations of Fund Flow Statement – Procedure of Fund
Flow Statement – Statement of changes in Working Capital – Statement of
Funds from Operation – Statement of Sources and Application of Funds –
Problems.

23. EXPECTED QUESTION FROM EXAM;

24. INTRODUCTION
MEANING OF FUND:
IN BROAD SENSE : IT MEANS ALL FINANCIAL RESOURCES.
IN NARROW SENSE: IT MEANS CASH / MONEY
IN POPULAR SENSE: THE TERM FUND MEANS WORKING CAPITAL
FUND= CURRENT ASSEST –CURRENT LIABILITIES.

25. MEANING OF FUND FLOW STATEMENT
IT SHOWS THE CHANGE IN
ASSETS AND LIABILTIES AND
SHAREHOLDERS EQUITYS
BETWEEN THE DATES OF
BALANCE SHEET.

26. DEFINATION
ACCORDING TO SMITH AND BROWN: “FFS IS
PREPARED TO INDICATE IN SUMMARY FROM
CHANGES OCCURING IN ITEMS OF
FINANCIAL POSITIONS BETWEEN 2
DIFFERENT BALANCE SHEETS.

27. CURRENT ASSETS:
CURRENT ASSESTS REALISE WITHIN ONE YEAR IN NORMAL COURSE OF BUSINESS.THE CA INCLUDES
THE FOLLOWINGS:
1. CASH AND BANK BALANCE
2. ACCOUNTS RECEIVEABLE THAT IS DEBTS AND BILLS RECEIVEABLE
3. STOCK FROM RAW MATERIAL, WORK IN PROGRESS AND FINISHED GOODS
4. 4. TEMPROPRY INVESTMENT OR SHORT TERM INVESTMENT
5. PRE PAYMENT EG: PREPAID RENT ETC.,
6. ACCUED INCOME

28. CURRENT LIABILITIES
It means are likely to mature within one year.
1. ACCOUNTS PAYABLE THAT IS CREDITORS AND BILLS PAYABLE
2. OUTSTANDING EXPENSES EX: WAGES, RENT COMMISION ETC..,
3. BANK OVER DRAFT
4. INCOME RECEIVED IN ADVANCE
5. DIVIDEND PAYABLE
6. PROVISION FOR DOUBTFULL DOUBTS
7. PROVISION FOR TAXATION MAY BE CURRENTS OR NON CURRENT
8. PROPOSEDDIVIDENTS-MAY BE CURRENT OR NON CURRENT.

29. NON CURRENT ASSESTS:
all assets other than CA are known as Non
currents Assests.
1. GOOD WILL
2. LAND AND BUILDING
3. PLANT AND MACHINERY
4. FURNITURE
5. LONG TERM INVESTMENT
6. PROFIT AND LOSS ACCOUNT (dr) BALANCE
7. PRELIMANARY EXPENSES
8. PATENTS RIGHT AND TRADE MARK
9. DISCOUNT ON ISSUE OF SHARES AND DEBENTURES

30. NON CURRENT LIABILTIES
ALL LIABILITIES OTHER THAN CURRENT LIABILITIES ARE KNOWN AS NON CURRENT
LIABILITIES.
1. SHARE CAPITAL –EQUITY AND PREFERENCE
2. DEBENTURES AND LONG TERM LOANS
3. P&L (CR BALANCE)
4. PROVISIONS AND RESERVES EG,CAPITAL RESERVE,GENERAL RESERVE,SINKING
FUND
5. PROPOSED DIVIDENT
6. SHARE PREMIEUM ACCOUNT
7. SHARE FORFEITURE ACCOUNTS

31. OBJECTIVES OF FUNDFLOW STATEMENT
1.TO KNOW THE CHANGES IN WORKING CAPITAL DURING THE
PERIOD
2.TO UNDERSTAND THE WORKING CAPITAL POSITION OF THE
FIRM
3.TO REVEAL THE MOST IMPORTANT CHANGES THOSE HAVE
TAKEN PLACE DURING A PARTICULAR PERIOD
4.TO ASSESS THE FINANCIAL CONDITION OF THE FIRM.

32. IMPORTANCE OR USES OR BENEFITS OF FFS
1. USEFULL TO
SHAREHOLDERS
3. USEFULL TO SHORT
TERM
CREDITORS,BANK &
FINANCIAL
INSTITUTION
2.USEFULL TO LONG
CREDITORS &
DEBENTURES
HOLDERS
4.USEFUL TO
MANAGEMENT

33. 1.usefull to shareholders
• It provides information regarding the availability of
funds in the business.
• It enables to know the ability of company to pay
dividend.

34. 2.Usefull to long creditors and debentures
holders.
•1. it helps to understand whether the money
borrowed is ualized or not.
•2. It enable to judge the capacity of the capacity
of the company to repay loan and debenture.

35. 3.Usefull to short term creditors ,banks and
financial institution:
•It helps to know whether the money borrowed it
utilized or not
•It helps to know whether the company can pay
int., to re pay the principal in time.

36. 4. Use full to management
• Evaluating proper utilization of funds
• Formulating sound dividend policy
• Estimating future working capital requirement
• Identifying any un necessary investment in Fixed
assets.
• Understanding the reason for financial difficulties.

37. Limitations:
• It shows what happened in the past.
• It is only a re arrangement of data given in fianancial statements.
Hence it is not original.
• It doesn’t take into account those transaction don’t affect the working
capital
• It is not as useful as cash flow statement.

38. Distinction Between Fund flow Statement &
Profit and Loss account
Basis P & L FFS
1.Legal Requirement Preparation of P & L a/c of a
company is compulsory. Under Law,
has to be published as a part of final
account
Preparation of FFS is not compulsory
under law.
2. Purpose It is Prepared to calculate net profit
or loss.
It is prepared to calculate net
increase or decrease in W.C of busing
during a period.
3.Item Recorded P & l A/C records items of revenue &
expenses
In FFS record source & application of
funds i.e., Networking Capital.
4 Types of activities P & l a/c provides information about
operating activities of a a business
FFS Provides information about its
financial & Investing Activities
5.Types of accounts P & L deals with nominal Accounts FFS deals with Non-Current Accounts

39. Difference Between FFS & Balance Sheet
Basis Balance Sheet FFS
A. Legal Requirement Preparation of B/S of a company is
Compulsory as per schedule VI of
the companies act
Preparation of FFS is not
compulsory
B. Purpose Purpose of Preparing the B/S to
show the financial position of a
business as a particular date.
It shows the net increase or
decrease in working capital during
a period
C. Basis of Preparation B/S is prepared on the basis of trail
balance & additional information
FFS is prepared on the basis of two
consecutive B/S & additional Info.
D. Types of information B/s shows the assets, Liabilities &
capital at a point of time.
FFS reveals flow of funds during a
period of time i.e movement of
resources.
D. Types of account B/S contains Balance of personnel
& real A/C
FFS deals with those accounts
which affect working capital i.e..,
non-current account.

40. Steps to be followed in FFS:
Step -1 Statement of changes in working capital
Step -2.Analysis the Changes n Non Current assets (Preparation of Non
current Assets)
Step -3 Preparation of Fund from operation
Step -4 Fund flow Statement