SVKM’s Narsee Monjee Institute of Management Studies (NMIMS) 

School of Distance Learning 
 
 
 
SUBJECT : ACCOUNTING AND FINANCE
FOR MANAGERS Marks: 20

All questions are compulsory:

Good Luck Limited has submitted the following condensed Balance Sheets as on 31st December,
2006 and 31st December, 2007 and the Statement of Income and Reconciliation of Retained
Earnings for the year ended 31st December, 2007:

Balance Sheets

Liabilities 2006 2007 Assets 2006 2007

Rs. Rs. Rs. Rs.

Share Capital 3,00,000 4,00,000 Fixed Assets 7,00,000 8,00,000

General Reserve 80,000 1,00,000 Less:

Accumulated
depreciation 2,25,000 2,60,000

Retained Earnings 60,000 90,000 4,75,000 5,40,000

6% Debentures 2,00,000 1,25,000 Stock 1,25,000 2,00,000

Loans on 40,000 Sundry Debtors 1,80,000 1,50,000

Mortgage

Sundry Creditors 1,85,000 1,05,000 Cash in hand / 95,000 89,000

bank

Wages outstanding 3,000 5,000 Prepaid Expenses 3,000 6,000

Provision for Preliminary

Income-tax Expenses
75,000 1,40,000 25,000 20,000
 SVKM’s Narsee Monjee Institute of Management Studies (NMIMS) 
School of Distance Learning 
 
 
 
9,03,000 10,05,000 9,03,000 10,05,000

Statement of Income and Reconciliation of Retained Earnings

Rs

Sales 15,00,000

Less: Cost of goods sold:

Stock on 1st Jan, 2007 1,25,000

Add: Purchases 10,00,000

11,25,000

Less: Stock on 31st Dec. 2007 2,00,000

9,25,000

5,75,000

Less: Wages 40,000

Gross Income 5,35,000

Less: Sundry Expenses 2,05,000

Preliminary Expenses written off 5,000

Depreciation 35,000

2,45,000

2,90,000

Less: Provision for Income Tax 1,40,000

General Reserve 20,000 1,50,000

Dividend Paid 1,00,000 1,20,000

 SVKM’s Narsee Monjee Institute of Management Studies (NMIMS) 
School of Distance Learning 
 
 
 
Net Income for the year (Retained) 30,000

Add Retained Earnings on 31-12-2006 60,000

90,000

Additional Information:

1. The cash inflow and outflow during the course of operations of the firm are as follow:

Collection from customers Rs 15,30,000

Cash paid to suppliers Rs 10,80,000

Cash paid to employees and other expense Rs 2,46,000

Income tax paid during the year Rs 75,000

2. During 2007, the company purchased a building for Rs 1,00,000.

You are required to prepare Cash Flow Statement and comment on cash flow condition of
the company.

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