Schedule Changes in Working Capital: Problems and Solutions
Arjun EP
Statement of Schedule Changes in Working Capital
Schedule change in working capital is prepared from current assets and current liabilities to find out increasing or decreasing in working capital.
Assets and liabilities are given in comparative balance sheet.
This statement helps to identify the change in working capital.
This change may be increase or decrease.
Formula of working capital
Working capital = Current assets – Current liabilities
While preparing this statement, following points are taken into account:
Increase in current assets → Increase in working capital
Decrease in current assets → Decrease in working capital
Increase in current liabilities → Decrease in working capital
Decrease in current liabilities → Increase in working capital
Procedures for schedule change in working capital
|
Step 1: |
First find out current assets and current liabilities from comparative balance sheet, |
|
Step 2: |
Write down current assets and current liabilities in the format of schedule change in working capital and do the sum |
|
Step 3: |
Compare current assets of current year with last year; |
|
|
If increase, write in increase column; if decrease, write in decrease column, |
|
Step 4: |
Compare current liabilities of current year with last year; |
|
|
If increase, write in decrease column; if decrease, write in increase column, |
|
Step 5: |
Do the sum of all increase and decrease column, |
|
Step 6: |
Find out net change in working capital from the difference of current assets and current liabilities, |
|
Step 7: |
Now, compare whether increase or decrease in working capital. |
Schedule Changes in Working Capital
|
Particulars |
Previous |
Current |
Effect in working capital |
|
|
|
Year |
Year |
Increase |
Decrease |
|
Current assets: |
|
|
|
|
|
Cash, bank balance |
xxxx |
xxxx |
Increase |
Decrease |
|
Debtors, B/R, A/R |
xxxx |
xxxx |
Increase |
Decrease |
|
Stock/inventory |
xxxx |
xxxx |
Increase |
Decrease |
|
Marketable security |
xxxx |
xxxx |
Increase |
Decrease |
|
Short term loan (given) |
xxxx |
xxxx |
Increase |
Decrease |
|
Prepaid expenses |
xxxx |
xxxx |
Increase |
Decrease |
|
Accrued income |
xxxx |
xxxx |
Increase |
Decrease |
|
Total current assets (A) |
xxxx |
xxxx |
|
|
|
Current liabilities: |
|
|
|
|
|
Creditors, B/P, A/P |
xxxx |
xxxx |
Decrease |
Increase |
|
Bank overdraft |
xxxx |
xxxx |
Decrease |
Increase |
|
Cash credit |
xxxx |
xxxx |
Decrease |
Increase |
|
Short term loan |
xxxx |
xxxx |
Decrease |
Increase |
|
Outstanding expenses |
xxxx |
xxxx |
Decrease |
Increase |
|
Advance income |
xxxx |
xxxx |
Decrease |
Increase |
|
Provision for bad debts (liability) |
xxxx |
xxxx |
Decrease |
Increase |
|
Proposed dividend* |
xxxx |
xxxx |
Decrease |
Increase |
|
Provision for tax* |
xxxx |
xxxx |
Decrease |
Increase |
|
Total current liabilities (B) |
xxxx |
xxxx |
|
|
|
Net working capital (A – B) |
xxxx |
xxxx |
xxxx |
xxxx |
|
Increase or decrease in working capital |
|
|
|
|
|
Total |
xxxx |
xxxx |
xxxx |
xxxx |
Note:
*If proposed dividend and provision for tax is given in adjustment, we should not write in current liabilities. We should prepare ledger viz working note.
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1A
Following extracted data id given by ABC Company (P) Ltd (in $/₹/Rs)
|
Particulars |
Year 2019 |
Year 2020 |
|
|
Debtors |
20,000 |
30,000 |
|
|
Creditors |
40,000 |
50,000 |
|
|
Bills receivable |
20,000 |
80,000 |
|
|
Bills payable |
20,000 |
10,000 |
|
|
Stock |
75,000 |
55,000 |
|
|
Prepaid expenses |
8,000 |
8,000 |
|
|
Marketable securities |
18,000 |
12,000 |
|
|
Short term investment |
22,000 |
32,000 |
|
|
Bank balance |
35,000 |
44,000 |
|
|
Cash balance |
21,000 |
20,000 |
|
|
Outstanding expenses |
12,000 |
5,000 |
|
|
Advance income |
3,000 |
− |
|
|
Bank overdraft |
5,000 |
15,000 |
|
Required: Schedule of changes in working capital
[Answer: Increase in WC = Rs 62,000]
SOLUTION:
Schedule of Changes in Working Capital
|
Particulars |
Year |
Year |
Effect in working capital |
|
|
|
|
2019 |
2020 |
Increase |
Decrease |
|
|
Current assets: |
|
|
|
|
|
|
Debtors |
20,000 |
30,000 |
10,000 |
|
|
|
Bills receivable |
20,000 |
80,000 |
60,000 |
|
|
|
Stock |
75,000 |
55,000 |
|
20,000 |
|
|
Prepaid expenses |
8,000 |
8,000 |
|
− |
|
|
Marketable securities |
18,000 |
12,000 |
|
6,000 |
|
|
Short term investment |
22,000 |
32,000 |
10,000 |
− |
|
|
Bank balance |
35,000 |
44,000 |
9,000 |
− |
|
|
Cash balance |
21,000 |
20,000 |
− |
1,000 |
|
|
(A) |
219,000 |
281,000 |
|
− |
|
|
Current liabilities: |
|
|
|
|
|
|
Creditors |
40,000 |
50,000 |
− |
10,000 |
|
|
Bills payable |
20,000 |
10,000 |
− |
− |
|
|
Outstanding expenses |
12,000 |
5,000 |
10,000 |
− |
|
|
Advance income |
3,000 |
− |
7,000 |
− |
|
|
Bank overdraft |
5,000 |
15,000 |
3,000 |
10,000 |
|
|
(B) |
80,000 |
80,000 |
− |
− |
|
|
Net working capital (A – B) Increase in working capital |
139,000 62,000 |
201,000 – |
109,000 – |
47,000 62,000 |
|
|
|
|
|
|
|
|
|
Total |
201,000 |
201,000 |
109,000 |
109,000 |
|
Keep in Mind (KIM)
|
Net working capital (value of A – B) of year 2019 is Rs 139,000 |
|
Net working capital (value of A – B) of year 2020 is Rs 201,000 |
|
Compare with last year, increase in working capital = Rs 201,000 – Rs 139,000 = Rs 62,000. |
#####
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Click on link for YouTube videos |
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Accounting for Share |
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Share in Nepali |
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Debentures |
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Final Accounts: Class 12 |
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Final Accounts in Nepali |
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Work Sheet |
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Ratio Analysis (Accounting Ratio) |
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Fund Flow Statement |
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Cash Flow Statement |
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Theory Accounting Xii |
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Theory: Cost Accounting |
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Cost Accounting |
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LIFO−FIFO |
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Cost Sheet, Unit Costing |
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Cost Reconciliation Statement |
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#####
PROBLEM: 1B
The following is the balance sheet of AXN Company Ltd for the two fiscal years:
|
Capital and Liabilities |
2019 |
2020 |
Assets |
2019 |
2020 |
|
Equity share capital |
5,00,000 |
7,50,000 |
Cask in hand |
10,000 |
12,000 |
|
Debentures |
2,50,000 |
2,00,000 |
Cash at bank |
15,000 |
10,000 |
|
Bank loan |
3,00,000 |
3,00,000 |
Sundry debtors |
1,50,000 |
1,30,000 |
|
Sundry creditors |
1,00,000 |
1,20,000 |
Bills receivable |
75,000 |
1,00,000 |
|
Bills payable |
55,000 |
40,000 |
Closing stock |
90,000 |
1,05,000 |
|
Outstanding expense |
50,000 |
30,000 |
Prepaid expenses |
55,000 |
45,000 |
|
Advance incomes |
5,000 |
10,000 |
Outstanding income |
10,000 |
50,000 |
|
Bank overdraft |
70,000 |
85,000 |
Plant and machinery |
4,00,000 |
4,50,000 |
|
Short term loan |
55,000 |
45,000 |
Land and Building |
4,50,000 |
5,85,000 |
|
Dividend payable |
25,000 |
30,000 |
Vehicles |
1,50,000 |
1,25,000 |
|
Tax payable |
10,000 |
12,000 |
Discount on shares |
15,000 |
10,000 |
|
|
14,20,000 |
16,22,000 |
|
14,20,000 |
16,22,000 |
Required: Schedule change in working capital
[Answer: Decrease in WC = Rs 10,000]
SOLUTION:
Schedule Change in Working Capital
|
Particulars |
2018 |
2019 |
Effect on WC |
|
|
|
|
|
Increase |
Decrease |
|
Current assets: |
|
|
|
|
|
Cask in hand |
10,000 |
12,000 |
2,000 |
− |
|
Cash at bank |
15,000 |
10,000 |
− |
5,000 |
|
Sundry debtors |
1,60,000 |
1,30,000 |
− |
30,000 |
|
Bills receivable |
75,000 |
1,00,000 |
25,000 |
− |
|
Closing stock |
90,000 |
1,05,000 |
15,000 |
− |
|
Prepaid expenses |
55,000 |
45,000 |
− |
10,000 |
|
Outstanding income |
10,000 |
5,000 |
− |
5,000 |
|
Total current assets (A) |
4,15,000 |
4,07,000 |
|
|
|
Current liabilities: |
|
|
|
|
|
Sundry creditors |
1,00,000 |
1,20,000 |
− |
20,000 |
|
Bills payable |
55,000 |
40,000 |
15,000 |
− |
|
Outstanding expense |
50,000 |
30,000 |
20,000 |
− |
|
Advance incomes |
5,000 |
10,000 |
− |
5,000 |
|
Bank overdraft |
70,000 |
85,000 |
− |
15,000 |
|
Short term loan |
55,000 |
45,000 |
10,000 |
− |
|
Dividend payable |
25,000 |
30,000 |
− |
5,000 |
|
Tax payable |
10,000 |
12,000 |
− |
2,000 |
|
Total current liabilities (B) |
3,70,000 |
3,72,000 |
|
|
|
Working capital (A-B) |
45,000 |
35,000 |
87,000 |
97,000 |
|
Decrease in working capital |
− |
10,000 |
10,000 |
|
|
Total |
45,000 |
45,000 |
97,000 |
97,000 |
###########
|
Click on link for YouTube videos: |
|
|
Accounting Equation |
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|
Basic Journal Entries in Nepali |
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Basic Journal Entries |
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Journal Entry and Ledger |
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Ledger |
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Subsidiary Book |
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Cash Book |
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Trial Balance & Adjusted Trial Balance |
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Bank Reconciliation Statement (BRS) |
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Depreciation |
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Final Accounts: Class 11 |
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Adjustment in Final Accounts |
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Capital and Revenue |
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Single Entry System |
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Non-Trading Concern |
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Government Accounting |
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Goswara Voucher (Journal Voucher) |
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###########
#####
|
PROBLEMS AND ANSWERS |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1
The following comparative balance sheet of ABC Company Ltd is given below ($/₹/Rs):
|
Capital and liabilities |
2019 |
2020 |
Assets |
2019 |
2020 |
|
Equity share capital |
2,50,000 |
5,00,000 |
Cash at bank |
60,000 |
62,000 |
|
Sundry creditors |
50,000 |
70,000 |
Sundry debtors |
15,000 |
10,000 |
|
Bills payable |
55,000 |
40,000 |
Closing stock |
75,000 |
1,00,000 |
|
Outstanding expense |
50,000 |
30,000 |
Prepaid expenses |
90,000 |
1,05,000 |
|
Bank overdraft |
70,000 |
85,000 |
Fixed assets |
2,45,000 |
2,93,000 |
|
Short term loan |
10,000 |
45,000 |
|
|
|
|
|
4,85,000 |
6,70,000 |
|
4,85,000 |
6,70,000 |
Required: Schedule change in working capital
[Answer: Increase in working capital = Rs 2,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2
The following is the balance sheet of ABC Company Ltd for the two years ($/₹/Rs):
|
Capital and liabilities |
2019 |
2020 |
Assets |
2019 |
2020 |
|
Equity share capital |
9,00,000 |
11,00,000 |
Cask in hand |
10,000 |
12,000 |
|
Sundry creditors |
50,000 |
70,000 |
Cash at bank |
15,000 |
10,000 |
|
Bills payable |
55,000 |
40,000 |
Sundry debtors |
1,50,000 |
1,30,000 |
|
Outstanding expense |
50,000 |
30,000 |
Bills receivable |
75,000 |
1,00,000 |
|
Advance incomes |
5,000 |
10,000 |
Closing stock |
90,000 |
1,05,000 |
|
Bank overdraft |
70,000 |
85,000 |
Prepaid expenses |
55,000 |
45,000 |
|
Short term loan |
55,000 |
45,000 |
Accrued income |
10,000 |
50,000 |
|
Dividend payable |
25,000 |
30,000 |
Fixed assets |
8,00,000 |
9,60,000 |
|
Tax payable |
10,000 |
12,000 |
Discount on shares |
55,000 |
50,000 |
|
|
12,20,000 |
14,22,000 |
|
12,20,000 |
14,22,000 |
Required: Schedule change in working capital
[Answer: Increase in working capital = Rs 45,000]
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