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4.22 Analysis of Financial Statements—CBSE XII

Working Notes:
1. Calculation of Net Profit before Tax and Extraordinary Items: `
Closing Balance of Surplus, i.e., Balance in Statement of Profit & Loss 1,00,000
Add: Opening Balance of Surplus, i.e., Balance in Statement of Profit & Loss (Debit) 50,000
1,50,000
Less: Transferred from General Reserve (2,25,000)
(75,000)
Add: Provision for Tax 45,000
Dividend on Preference Shares (12% of ` 2,00,000, WN 5) 24,000
Dividend (Interim) on Equity Shares (8% of ` 6,00,000) 48,000
Net Profit before Tax and Extraordinary Items 42,000

2. Dr. PROVISION FOR TAX ACCOUNT Cr.
Particulars ` Particulars `
To Bank A/c (Tax Paid) (Balancing Figure) 20,000 By Balance b/d 25,000
To Balance c/d 50,000 By Statement of Profit & Loss (Provision) 45,000
70,000 70,000

3. Dr. MACHINERY ACCOUNT Cr.
Particulars ` Particulars `

To Balance b/d 3,00,000 By Bank A/c (Sale) (` 30,000 + ` 6,000) 36,000
To Gain (Profit) on Sale of Machinery A/c 6,000 By Depreciation A/c 70,000
(Statement of Profit & Loss) By Balance c/d 5,00,000
To Bank A/c (Purchase) (Bal. Fig.) 3,00,000
6,06,000 6,06,000

4. Dr. NON-CURRENT INVESTMENTS ACCOUNT Cr.
Particulars ` Particulars `
To Balance b/d 1,40,000 By Bank A/c (Sale) 72,000
To Gain (Profit) on Sale of Investment A/c 12,000 (` 60,000 + 20% of ` 60,000)
(Statement of Profit & Loss) By Balance c/d 2,00,000
To Bank A/c (Purchase) (Bal. Fig.) 1,20,000
2,72,000 2,72,000

5. Preference Shareholders get a preferential right as to payment of dividend. In the given question, company declared and
paid dividend on Equity Shares. So, it is implied that dividend was first paid to the preference shareholders and then to
equity shareholders.