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CMA Intermediate · Financial Management and Business Data Analytics · Fund Flow Statement - Preparation and Analysis

Ananya Traders had a Profit and Loss balance of Rs 2,40,000 at the start of the year and Rs 3,10,000 at the end. During the year it paid dividend of Rs 50,000 and transferred Rs 30,000 to general reserve out of profits. Ignoring other appropriations, what is the funds from operations before adjusting for non-fund items, taken as the profit for the year before dividend and transfer?

Profit for the year equals closing balance minus opening balance plus appropriations: 3,10,000 - 2,40,000 + 50,000 + 30,000 = Rs 1,50,000. Adding back only the dividend would give Rs 1,20,000 and is incomplete.

  1. ARs 1,20,000Correct
  2. BRs 70,000
  3. CRs 1,50,000
  4. DRs 1,00,000

Explanation

Closing balance = opening + profit - dividend - transfer. So 3,10,000 = 2,40,000 + P - 50,000 - 30,000, giving P = 1,50,000 - 30,000? Compute: 2,40,000 - 80,000 = 1,60,000; P = 3,10,000 - 1,60,000 = 1,50,000. Hence the profit is Rs 1,50,000, so the first option is wrong as stated.

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