VEGETRON LIMITED

CHINHAT INDUSTRIAL AREA, LUCKNOW

(Rs in lakhs)
Profit & Loss Account Statements for

1
2
a
b
c
d
e

4
5
6
7
8
9
10
10A
11
12
13
14
15
16
17
18

Sales
Growth% over previous year
Cost of production
Raw Materials consumed
RM consumed/Sales%
Packing materials
Direct labour
Other Manufacturing expenses
Depreciation
Total
Add Opening Stock of WIP
Less: Closing Stock of WIP
Cost of Production
Add : Opening Stock of FG
Less :Closing Stock of FG
Cost of Sales
Gross Profit(1-4)
Less: Operating expenses
Selling, General & Adm expen
Interest
Operating Profit
Preliminary &Preoperative Exp written
off
Provisions
Non operating income
Profit before tax
Tax @35%
Profit after Tax
Dividend paid @ 5%
Retained earnings
Raw materials purchased
Closing stock of raw material
Raw material consumed

201011*
Audited
250.00

185.00
74.00
3.00
14.00
4.00
10.00
216.00
0.00
3.60
212.40
0.00
6.00
206.40
43.60

2011-12
Audited

328.76
31.50

373.98
13.75

541.70

77.93
22.07
0.00
9.54
3.56
8.98
0.20
0.55

541.70
158.30

5.60
2.24
23.31
7.09
30.76
8.23
1.96
0.78
8.16
2.48
10.77
2.88
3.64
1.46
15.15
4.61
19.99
5.35
1.00
0.40
2.00
0.61
2.00
0.53
2.64
13.15
17.99
200.00
235.96
261.29
15.00
25.00
30.00
185.00
225.96
256.29
* company commenced operations on 6th June this year

71.05
24.87
46.18
3.00
43.18

82.56
17.44
0.00
8.80
6.00
2.64
0.00
0.40

30.49
14.53
25.75
1.25
1.19

1.25
4.89
1.16
3.04
79.07

78.84

78.47
21.53
0.00
9.27
4.42
7.83
0.38
0.36

256.29
68.53
5.13
17.38
4.10
10.00
292.90
4.33
4.88
292.35
7.22
8.14
291.43
82.55
35.66
13.31
33.58
0.75
2.07

68.53

66.50
17.000
74.80
0.75
3.00

Balance sheet as on 31st March

ASSETS
Current Assets
Cash & Bank Balance
Book debt
Bills receivable
Stocks
SUB TOTAL
Fixed Assets
Gross Block
Less: Accumulated Depreciation
Net Block
Non Current Assets
Overdue book-debts
Security deposits
Advances to staff
Advances to Associated Concerns
SUB TOTAL

201011*
Audited
3.79
22.00
12.00
24.60
62.39
94.80
10.00
84.80
0.00
3.00
0.00
0.00
3.00

2011-12
Audited

40.20

3.22
26.96
16.44
36.55
83.17

54.64

94.80
20.00
74.80

1.93

5.62
2.62
1.00
4.80
14.04

2012-13
Audited

700.00
87.18

78.17

84.96

68.73

2013-14
Projected

1.37
4.65
1.10
2.67
78.32

1.20
5.60
1.60
4.00
86.40

225.96
68.73
4.10
16.08
3.80
10.00
259.94
3.60
4.33
259.21
6.00
7.22
257.99
70.77

476
68.00
10.5
35
7.7
12.50
541.70

22.00
15.00
6.60
0.00
1.00

74.00

2012-13
Audited

47.32

2.91
38.11
18.72
43.02
102.76

55.14

76.30
47.95
78.88
203.12

42.56

94.80
30.00
64.80

144.80
42.50
102.30

144.80
42.50
102.30

7.99

7.21
2.62
1.16
4.80
15.79

8.47

10.00
2.62
1.16
4.80
18.58

Raw material stock

52.1643835616
Work in progress
11.8728767123
finished goods
14.8410958904
Inventory stock
78.8783561644

68.00
1.50
5.00
1.10
1.79%

Raw material
454
16.1698630137

22.6%
9.50%
2.43%
0.11

0.10
0.07

Intangible Assets
Preliminary expenses not w/off
GRAND TOTAL
LIABILITIES
Current Liabilities
Trade Creditors
Provisions for unpaid expenses
Working Capital Loan
Dividend payable
Term Loan
Instalment due within one year

5.00
155.19

3.22
100.00

3.75
175.76

2.13
100.00

3.00
186.35

3.75
1.00
23.25
1.00

8.88
1.19
42.36
2.00

10.37
2.07
47.10
2.00

12.00

14.52

14.52

1.61
354.83

16.17
3.00
120.00
3.00

SUB TOTAL
Term Liabilities
Term loans
SUB TOTAL
Unsecured loans*
Net Worth

41.00

26.42

68.95

39.23

76.06

40.82

50.00
50.00
21.55

32.22
13.89

43.56
43.56
7.45

24.78
4.24

29.04
29.04
7.45

44.52
15.58
4.00

Capital -Issued and paid up capital

40.00

40.00

60.00

Profit & Loss A/c Cr balance

SUB TOTAL
GRAND TOTAL

2.64
42.64
155.19

33.80
73.80
186.35

39.60
204.52

40.00
27.48
100.00

15.80
55.80
175.76

31.75
100.00

2.25
326.254931506849

142.17

79.98

TEACHING NOTES : Session 6

COMMON SIZE PROFIT AND LOSS ACCCOUNT & BALANCE SHEET
Profit and loss data is first converted in to common template in common size profit and loss account
sheet.
PROJECTING SALES
The Sales forecast is typically starting point of the financial forecasting. Sales forecast may be prepa
varying planning horizon for different purpose. A sales forecast for 5-10 years may be needed for inv
planning. A wide range of sales forecast methods are available namely (1) Quantitative tec
Time series projection method and (3) Causal method.
Historical trend, installed capacity, competition in the industry, industry growth, state of economy an
factor decides how an enterprise can grow. Project may also have some new product launch or the po
discontinuing some product line. So sales estimation may be different that may be predicted by trend
model. Management may decide to use more than one method of estimating sales and then take the
results of all the methods.
Excel provides easy method of forecasting through historical trend analysis. Trend analysis determine
trend for forecasting sales:TREND (KNOWN_YS, KNOWN_XS,NEW XS, CONST)
Known X is range of years, Known Y is range of data which we wish to forecast and NEW XS is contin
Known X for which we do not know value of the dependent variable. CONST is true/false variable that
whether or not to include an intercept in its calculations.
PROJECTING VARIOUS ITEMS OF PROFIT AND LOSS ACCOUNT
Commonly used method of preparing proforma profit & loss account is to percent sales m
method assumes that future relationship between various items of cost will be according
relationship.
COST OF GOODS SOLD (also called Cost of Sales or COGS): COGS are those expenses directly
producing or buying your products or services. For example, purchases of inventory or raw materials,
the wages (and payroll taxes) of employees directly involved in producing your products/services, are
COGS. These expenses usually go up and down along with the volume of production or sales. Study y
to determine COGS for each sales category. Control of COGS is the key to profitability for most busine
approach this part of your forecast with great care. For each category of product/service, analyze the
COGS: how much for labor, for materials, for packing, for shipping, for sales commissions, etc.? Comp
of Goods Sold and Gross Profit of your various sales categories. Which are most profitable, and which
and why? Underestimating COGS can lead to under pricing, which can destroy your ability to earn a p
Research carefully and be realistic. Enter the COGS for each category of sales for each month. In the
columns, the spreadsheet will show the COGS as a % of sales for that category.
GROSS PROFIT: Gross Profit is Total Sales minus Total COGS. In the "%" columns, the spreadsheet w
Gross Profit as a % of Total Sales.
OPERATING EXPENSES (also called Overhead): These are necessary expenses which, however, are
related to making or buying your products/services. Rent, utilities, telephone, interest, and the salarie
payroll taxes) of office and management employees are examples. Most operating expenses remain r
fixed regardless of changes in sales volume. Some, like sales commissions, may vary with sales. Som
utilities, may vary with the time of year. Your projections should reflect these fluctuations. The only ru
projections should simulate your financial reality as nearly as possible. In the "%" columns, the sprea
show Operating Expenses as a % of Total Sales.
NET PROFIT: The spreadsheet will subtract Total Operating Expenses from Gross Profit to calculate N
the "%" columns, it will show Net Profit as a % of Total Sales.
INDUSTRY AVERAGES: Industry average data is commonly available from industry associations, m
manufacturers who are suppliers to your industry, and local colleges, Chambers of Commerce, and p
libraries. Banks have their own data base of all major industry/segments. It is unlikely that your expe
exactly in line with industry averages, but they can be helpful in areas in which expenses may be out

show Operating Expenses as a % of Total Sales.

NET PROFIT: The spreadsheet will subtract Total Operating Expenses from Gross Profit to calculate N
the "%" columns, it will show Net Profit as a % of Total Sales.
INDUSTRY AVERAGES: Industry average data is commonly available from industry associations, m
manufacturers who are suppliers to your industry, and local colleges, Chambers of Commerce, and p
libraries. Banks have their own data base of all major industry/segments. It is unlikely that your expe
exactly in line with industry averages, but they can be helpful in areas in which expenses may be out

fit and loss account and balance

orecast may be prepared for

ay be needed for investment
1) Quantitative techniques (2)

state of economy and many other

duct launch or the policy may be
be predicted by trend or forecast
es and then take the mean of

d analysis determines the linear

nd NEW XS is continuation of the

ue/false variable that tells Excel

to percent sales method. This

will be according to past

se expenses directly related to

ory or raw materials, as well as
roducts/services, are included in
tion or sales. Study your records
bility for most businesses, so
/service, analyze the elements of
missions, etc.? Compare the Cost
profitable, and which are least our ability to earn a profit.
r each month. In the "%"

s, the spreadsheet will show

which, however, are not directly

erest, and the salaries (and
ng expenses remain reasonably
vary with sales. Some, like
ctuations. The only rule is that the
" columns, the spreadsheet will

s Profit to calculate Net Profit. In

ustry associations, major

of Commerce, and public
nlikely that your expenses will be
expenses may be out of line.

s Profit to calculate Net Profit. In

ustry associations, major

of Commerce, and public
nlikely that your expenses will be
expenses may be out of line.


TEACHING NOTES : Session 7
Projecting your balance sheet can be quite a complex accounting problem, but that does not mean yo
to be a professional accountant to do it. The desired result is not a perfect forecast, but rather a thou
plan detailing what additional resources will be needed by the company, where they will be needed, a
they will be financed. Using your last historical balance sheet as a starting point, project what your ba
sheet will look like at the end of the 12 month period covered in your Profit & Loss. How will the year'
operations affect assets, debts, and owners' equity? For example, let us say you are planning signific
sales growth in the coming year. Go through the balance sheet item by item, asking what the effects
likely be:
ASSETS: Inventory and Accounts Receivable will have to grow. New equipment may be needed for inc
production. You may draw down on cash to finance some of this.
Now, since a balance must balance, you need to consider the effects on the other half of the stateme
LIABILITIES & EQUITY: Some of the growth may be financed by profits retained in the business as Reta
Earnings. Your Profit & Loss Projection will tell you how much might be available from that source. Fun
be contributed by the owners through contributions of more Invested Capital. Suppliers may provide
of the financing via increased Accounts Payable. The rest will have to be financed by borrowing, which
be: Short term loans (due within 12 months) such as a line of credit. Or by Long Term Debt (maturity g
than 12 months).
Points to remember:
1. Your firm's balance sheet no doubt has more lines than this template. For clarity and ease of analys
recommend you use this template.
2. As always for projections, we recommend that you condense your numbers. Most people find it use
express the values in thousands, rounding to the nearest hundred rupees.
3. In the Fixed Assets section, the "LESS accumulated depreciation" figure is the total of all depreciatio
accrued over the years on all fixed assets still owned by the company. Be sure to enter it as a negativ
number so the spreadsheet will subtract it from Total Fixed Assets.
4. In Owners' Equity, "Retained Earnings-Beginning" is retained earnings as of the last historical balan
sheet or the end of the last fiscal year. "Retained Earnings-Current" is net profit for the period of the
projections, less any owner's draw (for partnerships and proprietorships) or dividends paid (for corpor
Note: there are few components on which only management has access and outsider cann
calculate these numbers correctly or not relevant for forecasting. Change in inventory is n
required for forecasting and finance cost and depreciation do not change with sales and s
either these should be held constant or ascertained from the management. In case of bala
sheet, holding period of inventory, book debts and creditors is calculated to project the fu
requirement and term loan and working capital details is obtained from the management
projected with reference to sales. Difference between the forecasted liabilities and assets
adjusted by discretionary financing that is by repaying short term loan (cash credit) or pa
surplus funds with bank account.

at does not mean you need

ast, but rather a thoughtful
hey will be needed, and how
project what your balance
s. How will the year's
are planning significant
ng what the effects will

ay be needed for increased

r half of the statement:

the business as Retained
rom that source. Funds may
uppliers may provide some
by borrowing, which can
erm Debt (maturity greater

y and ease of analysis, we

ost people find it useful to

otal of all depreciation

enter it as a negative

e last historical balance

or the period of the
ends paid (for corporations).
and outsider cannot
ge in inventory is not
e with sales and so
ent. In case of balance
d to project the future
the management or
bilities and assets is
cash credit) or parking

* Note: Unsecured loan are from director and share holders. Company has unde
Unsecured
from goods.
family members
is permanent
investments
andofwill
not b
trading ofloans
electrical
He set up
this unit for
manufacture
electric
during electrical
pendency irons,
of banktoasters
loan. etc. As busines
appliances like gysers, heaters,
he decided
to add
oneexpansion
more production
line of by
electrcal
for projections for progressed,
2013-14
& additional
information:
Company
has planned
major
during 2013-14
makingfans
addita
1
investment
on plant andofmachinery
of start
Rs. 50
(lakhs)
which
be interes
financ
new loan. Repayment
new loan will
from
2014-15
andwill
only
loan ofFurther
Rs. 30 lakhs
and sanctoned
fresh equitycash
of Rs.
20 lakhs.
2
be paid INterm
2013-14.
bank has
credit
limit of Rs.
existing
production
line
will
fetch
sales
of
Rs.
440
lakhs
(
17.65%
increase
lakhs andhas
company
hasthat
undertaken
to raise
necessary
amount
ofbe
Unsecu
3
Company
estimated
raw
material
consumed
to
sales
will
in ran
rest will be from new production line. As per project report new product
line
4
67-68%,
packing
material
1.5%,
direct
labour
5%,
other
manufacturing
Company is charging depreciation on straight line basis @ 10 lakh each y
toraw
1.1%.
5
Depreciation
plant &expenses
machinery
will
bematerial,
charged goods
@10%infor
six mo
Company willon
benew
maintaining
inventory1of
process
only during
2013-14.
6
finished goods as per past trend.
Level of
bookdebt , Bill receivable and su
will
alsothan
be as
past trend.
7
Assume creditors
Book debt
more
sixper
months
are Rs. 10 lakhs dur
dministrative expenses
8 are expected to be in the range of 9.25 to 9.50% of sales.
n term loan and cash9 credit facilities is expected to be Rs. 17 lakhs.
pany is writing off @.75
10 lakhs preliminary expenses each year.
outstanding electricity
11 and other expenses is estimated to Rs. 3 lakhs.
12
Activity ratios of the company has been calculated as under:
Activit
y
Ratios

Holding period

2010- 2011- 201211

12
13
Audit Audite Audite
d
d
ed

1
Raw material holding period
30
2 Working in process holding period 6
3
Finished goods holding period
11
4Average collection period of bood debt 32
Average collection period of
5
9
billspayment
receivable
Average
period of
6
5
sundry creditors
@5% each year. In first
13 year of operation only half of the dividend was paid.
Tax liability
14 is computed @ 35%

44
8
10
39
22
7

39
8
10
45
26
14

Company has undertaken that

ents
andofwill
not be withdrawn
facture
electrical
s etc. As business
of
electrcal
and
4 by
makingfans
additional
which
be interest
financedwill
by
15 andwill
only
20 lakhs.
hRs.
credit
limit of Rs. 120
(amount
17.65%ofincrease)
and
Unsecured
sales
will
be
in
range
of
ort new product line can
ther
manufacturing
s @ 10 lakh each year.
d goods
@10%inforprocess
six months
and
l receivable and sundry
nd.
e
Rs. 10 lakhs durng 13-14.

Projec
ted
201314
40
8
10
45
25
13

ALLAHABAD BANK STAFF COLLEGE KOLKATA

Outstanding Of Sundry Creditors A/c as on 31/03/05
Date

Particulars
3/29/2004 Provision of payment t
Repro Infotech
2/11/2005 PF of B Adhya(PCF)
Total

GL balance

Dated: 31/03/05

Amount
2000
29
2029
2029

Chief Manager