Guidelines for Project work in Accounting and Practical work in Computerized Accounting Project No.1 Project STATEMENT M/s Sunil Computers Rahul and Manoj are two brothers. Rahul was interested in computers and often found time to work on computer, Due to his keen interest in computers and its applications made him to take up computer software subject for his degree course. On the other hand Mangj's core interest was in sitting at his father's shop nearby at market place selling electrical appliances after college hours. Their father Mr. Sunil was happy that Manoj showed interest in his business, but was so worried about the brothers drifting apart after college due to varied interests. Mr. Sunil decided that this is the time for him to intervene and make decisions for them. He felt that the interest of his two sons be put together and they could start a flourishing business of their own - Sunil Computers The boom in the Information Technology (IT) Industry made him find ways to satisfy his sons! dreams. Finally he decided to start a computer business for both his sons. He asked Manoj, a commerce graduate to draw up a proposal for the same. Manoj came out with the following: The area they lived in and run shop consisted of middle income group families and many of them did not possess computers at home. Their shop could be used to provide the following services : 2 Computer classes for various age groups. 2 Computer using facilities on payment per hourly basis and printing of documents from computers. we Internet access facilities at the prevailing market rates by entering into contract with the Videsh Sanchar Nigam Limited (VSNL). 2 Computer game comer for children. The shop they had in the market place was a single story building. On 1* April, 2014, Rahul and Mangj borrowed & 1,75,000/- each from their father and introduced it as their capital in the firm. They brought in capital as follows : € 10,000/- each in cash & 1,65,000/- each by cheque. They constructed first floor of the building owned by their father spending % 1,00,000. They put up their proposal to the bank and managed to get the bank loan of & 3,00,000.Guidelines for Project work in Accounting, and Practical work in Computerized Accounting The bank advanced the loan of & 3,00,000 as per the favourable credit worthiness of their father. Repayment structure of the loan was as follows : % 1,0,000 (& 1,00,000 + % 30,000 interest) 2 End of the 1* year ox End of the 24 year Xx End ofthe3= year = %1,10,000 (& 1,00,000 + & 10,000 interest) % 1,20,000 (€ 1,00,000 + € 20,000 interest) Total amount to be repaid including interest in three annual installments will be 3,60,000 They purchased 10 computers amounting to € 400,000. The details of the expenditures to start their business is as follows : Xx ForElectricity Connection Security deposit of € 1,000 2 Forlnternet Connection—Security deposit of € 1,00,000 2 For printing and distribution of pamphlets in the surrounding colonies for advertisement purpose amounting to 4,500 2 Computer Café furnished amounting to % 45,000. The students on an average paid a monthly fee of % 500 for three months computer evening classes. There were a number of internet subscribers and receipts on account of internet facility was & 10,000 a month in the first quarters on an average. They also decided to buy and sell computer stationery like floppy disc, CDs, mouse, keyboard, ete. At the end of the yeas, their results showed the following: 2 Total Revenue Amount in& — Fees from Computer Students 2,70,000 — Sale from Computer Stationery 3,10,000 — Income from|ntemet Subscribers, 3,50,000 2 Purchases of Computer Stationery 2,55,000 2 Internet Expenses, 1,70,000 2 Electricity Expenses payable 1,24,000 2 Telephone Expenses 35,000 2 General Expenses 112,000Guidelines for Project work in Accounting and Practical work in Computerized Accounting, 2 Business Promotion Expenses, 15,000 tx Repair é& Maintenance Expenses — Computers 14,000 — Building 8,000 There was a helper at their father's shop, who agreed to clean up the Computer Café and fetch water to visitors. For this additional service, he was paid a salary of € 500 per month. They both withdrew 5,000 each from bank every month for their personal expenses. They paid the bank loan regularly. All the payments were made by cheques. Father was pleased for this sons efficiency and wanted to expand their business. Closing stock at the end of the year was valued % 20,000 Provide depreciation on Building at the rate of 5%, on Computers at the rate 25% and on furniture at the rate 10%. You are required to prepare the following: 4) Journalise the above transactions. Post them into ledger accounts and prepare the trial balance. i) Prepare Trading and Profit & Loss account for the year ended 31* March, 2015 and Balance Sheet as at 31#*March, 2015. They approached the bank for further loan. Compute the ratios that the banker will require before granting the loan. Processing the Source Material Journal entries and ledger accounts will be prepared from the information given in the project statement. After preparing the Trial Balance, Trading and Profit and Loss Account and Balance Sheet will be prepared. Lastly necessary ratios will be calculated to take a decision.Guidelines for Project work in Accounting and Practical work in Computerized Accounting, per 2014 LApsil LApsil LApsil LApsil LApsil LApsil LApsil Journal Register 1 April, 2014 to 31 March 2015 perenne Cash A/e Bank A/e ToRahul's Capital A/e ToMangj's Capital A/c (Being Capital invested in the business) De. De. Building A/c ToBank A/c (Being Building constructed and capitalized) Ds. Bank A/e ToBank Loan A/c (Being Loan received from bank) Ds. Computers A/e ToBank A/c (Being Computers purchased) De. Security Deposit Electricity Board A/e Security Deposit VSNL A/c ToBank A/c (Being Security deposits paid with Electricity Board and VSNL) De. De. Furniture & Fixtures A/e ToBank A/c (Being furniture and fixtures purchased) Ds. Advertisement A/c ToBank A/c (Being Payment made for Advertisement) De. pay i) 20,000 330,000 1,00,000 3,00,000 4,00,000 1,000 1,00,000 45,000 4,500 [over ® 1,75,000 1,75,000 1,00,000 3,00,000 4,00,000 101,000 45,000 4,500 10Guidelines for Project work in Accounting and Practical work in Computerized Accounting 2015 [Bank A/e De. 93;30,000 31-Mar | To Sales (Computer Stationery) A/c 3,10,000 Tolncome (Intemet subscribers) A/e 3,50,000 ToFee (Computer Students) A/e 2,70,000 Being sales proceeds from floppy disks, CDs fee from computer students and receipts of internet subsenbers received) 31-Mar | ComputerStationery A/c Ds. 2,55,000 ToBank A/c 2,55,000 Geing computer stationery purchased) 31.-Mar | Telephone Expenses A/e Dr. 35,000 General Expenses A/c Dr. 12,000 Business Promotion Expenses A/c Dr. 15,000 Repair f& Maintenance-Computer A/c De. 14,000 Repair f& Maintenance-Building A/c Dr. 8,000 Salary A/c Dr. 6,000 ToBank A/c Being expenses paid) 90,000 31-Mar | Rahul's Drawings A/c Ds. 60,000 Mang's Drawings A/c Dr. 60,000 ToBank A/c 1,20,000 (Being amount withdrawn for personal use of % 5,000 each per month) 31-Mar | Interest on Bank Loan A/c Dr. 30,000 ToBank Loan A/e 30,000 (Being Interest on Bank Loan for the year 2014-15 provided) 31-Mar |BankLoan A/c Ds. 1,30,000 ToBank A/c 1,30,000 Being installment for the 2014-15 paid) WGuidelines for Project work in Accounting, and Practical work in Computerized Accounting, 3l-Mar | Depreciation A/e Dr. 1,07,500 ToBuildings A/e 5,000 ToComputers A/e 100,000 To Furniture and Fixtures A/c 2,500 (Being Depreciation on building @ 5%, Computer @ 25% and Furniture & Fixture @ 10% provided) 31-Mar | InternetExpenses A/c Dr. 1,70,000 ToBank A/c 1,70,000 (Being internet expenses paid to VSNL) 31-Mar | Electricity Expenses A/e Dr. 1,24,000 To Electricity Expenses Payable A/e 1,24,000 (Being Electricity expenses payable) 31-Mar | Trading A/c Dr. 2,55,000 ToComputerStationery A/c 2,55,000 (Closing entry for computer stationery) 3-Mar | Sales (ComputerStationery) A/c Dr. 3,10,000 Closing Stock A/e Ds. 20,000 ToTrading A/e 3,30,000 (Closing entry for sales and closing stock) 3-Mar | Trading A/c Dr. 75,000 ToProfit and Loss A/c 75,000 (Gross Profit for the yeas) 31-Mar | Profitand Loss A/e Dr. 5,26,000 To Advertisement 4,500 ToBusiness Promotion Expenses A/c 15,000 ToDepreciation A/e 107,500 To Electricity Expenses A/c 1,24,000 ToGeneral Expenses A/c 12,000 Tolnterest on Bank Loan A/e 30,000 Tolnternet Expenses A/c 1,70,000 To Repairs and Maintenance-Computer A/c 14,000 12Accou' Guidelines for Project work in To Repairs and Maintenance - Building A7e ToSalary A/c To Telephone Expenses A/e (Closing entry for indirect expenses) ToProfit and Loss A/c (Closing entry for incomes other than Sales) Fees (ComputerStudents) A/e Ds. Income (Intemet Subscribes) A/e Dr. 2,70,000 3,50,000 Profit & Loss A/c Dr. ToRahul's Capital A/e ToMangj's Capital A/c (Net profit of the year transferred to the capital m/s of Rahul & Manoj) 169,000 1g and Practical work in Computerized Accoun 8,000 6,000 35,000 6,20,000 84,500 84,500 ng 2014 Apr 2015 Mar31 paren Somes Te) 2014 ToRahut’s Capital A/e 165,000 | Apeot | ByBuildings A/e ToMano/'s Capital A/e 165,000 ByComputers A/c BySecurity ToBank Loan A/e 3,00,000 Deposits ToSales (Computer 3,10,000 ae oe Stationery) A/c Perea Advertisement A/c Particulars | Folio| Amount | Date peer ®@ 2014 | ToBank A/e 4500 | 2015 | ByProfit&Loss A/c 4,500 Apsil Mar, 31 4,500 4,500 Dr Bank A/c cr. 1,00,000 4,00,000 1,000 13Guidelines for Project work in Accounting, and Practical work in Computerized Accounting, Tolncome (ntemet 550,000 BySecanity 700,000 subscribers) A/e Deposit VSNL ToFee (Computer 2,70,000 Ale Students) A/c ByFurniture & Faso Fixture A/e By, Advertisement 4,500 Ale ByComputer 2,55,000 Stationery A/e ByTelephone 35,000 Charges A/e ByGeneral 12,000 Expenses A/c Business Promotion Exp. 15,000 Ale Bre 14,000 Computer A/e ByR &M Building A/e 8,000 BySalary A/c 6,000 ByRahul’s Drawings A/e 60,000 ByMang's Drawings A/e 60,00 ByBankLoan Ale 130,000 Bylatemet Expenses A/e 1,70,000 ByBalance ¢/d 144,500 e000 | 15;607000 2015 ToBalance b/d 144,500 ApsOL 14Guidelines for Project work in Accounting and Practical work in Computerized Accounting Dr Building A/c cr. Cee ce ce etre es Ore cred ® 2014 2015 | ByDepreciation A/e 5,000 Apsil01 |ToBank A/c 1,00,000 | Mar. 31 | ByBalance ¢/d 95,000 2015 11,00,000 7,00,000 April01 | To Balance 95,000 b/d Dr Business Promotion Expenses A/e cr. pared ere as 2015 2015 Mar.31 | ToBank A/c 15,000 | Mar.31 | ByProfit & Loss A/c 15,000 15,000 15,000 Dr. Bank Loan A/e ce Date | Particulars Folio Amount Date Nd 2015 2014 Mar31 | ToBank A/c 130,000 | Ap.01 | ByBank A/e onan 2015 | TeBalance 2015 By Interest on Bank 30,000 Maris | ¢/4 2,00,000 | Man 31 | Loan A/e 3,30,000 3,30,000 2015 Aps.01 | ByBalance b/d 2,00,000 15Guidelines for Project work in Accounting and Practical work in Computerized Accounting, Dr. Cash A/c ce perenne Folio |Amount | Date | Particulars | Folio | Amount i) ®@ 2014 Aps.01 | ToRahul's Capital A/c 10,000 To Mangj's Capital A/e 10,000 | 2015 Mar.31 | By Balance 20,000 2015 20,000 gel 20,000 Aps01 | ToBalance b/d 20,000 20,000 Dr. Computer A/c ce pen ems eae ert ins [ren ® 2014 2015 Apsl0l | ToBank A/c 400,000 | Mar.31 | ByDepreciation Ale 1,00,000 Mar.31 | ByBalance ¢/d 3,00,000 400,000 54100000) 2015 ToBalance 3,00,000 Apsl0l | b/d Dr. Depreciation A/c ce Particulars Folio | Amount | Date | Particulars | Folio i) 2015 2015 Maz. | To Building A/c 5,000 | Mar.31 | Profit & Loss 107,500 31 ToComputers A/c 1,00,000 Ale ToFumiture & Fixtures A/e 2,500 11,07,500 107,500 16Guidelines for Project work in Accounting and Practical work in Computerized Accounting Dr lectricity Expenses A/e G. [ert Oca ete ame al etre eed 2015 | To Electricity 1,24,000 [2015 | ByProfit & 124,000 Mar.31 | Payable A/c Mar.31 | Loss A/c 1,24,000 124,000 Dr lectricity Expenses Payable A/e cr. 2015 Mar. 31 ToProfit & Loss A/e 2015 2015 By Electricity Mar.31 | To Balance Mar.31 | Expenses A/c 1,24,000 c/a 1,24,000 | 2015 124,000 124000 | Apr.o1 | ByBalance b/d 1,24,000 Dr. Fumiture & Fixtures A/c Ce pee bes pe i) 2014 2015 By Depreciation Apr0l | ToBank A/e 45000 |Mar31 | A/c 2,500 Mar.31 | ByBalance c/d 42,500 2015 “45,000 45,000 Apr.01 | ToBalance 6/4 42,500 Dr. Fee (Computer Students) A/c Ce Particulars 2,70,000 | 2015 ByBank A/e Mar. 31 2,70,000 2,70,000 2,70,000 WGuidelines for Project work in Accounting and Practical work in Computerized Accounting Dr General Expenses A/c cr. SST ety F PROS ®@ ) 2015 12,000 | 2015 | ByProfit & Loss 12,000 Mar.31 | ToBank A/c Mar.31 | A/c 12,000 12,000 Dr Interest on Bank Loan A/c cr. yNOeITnS 2015 | ToBankLoan 30,000 | 2015 | By Profit & Loss 30,000 Mar.31 | A/e Mar.31 | A/c PROS ®@ 2015 1,70,000 | 2015 | ByProfit & Loss 1,70,000 Mar.31 | ToBank A/c Mar.31 | A/c 1,70,000 1,70,000 Dr. Income (Intemet Subscribers) A/c cr. Folio Amount | Date id) 2015 | To Profit & 350,000 | 2015, 3,50,000 Mar.31 | Loss A/e Mar.31_ | ByBank A/c 3,50,000 3,50,000 18Guidelines for Project work in Accounting and Practical work in Computerized Accounting Dr. Manoj's Capital A/e ce Particulars Folio Amount Date Folio Amount i} iis} 2015 | ToMangy's 2014 Mar.31 | Drawings A/c 60,000 | April01 | ByCash A/c 10,000 ByBank A/c 165,000 2015 2015 Mar.31 | ToBalance ¢/d 199,500 |Mar.31 | ByP &L A/c 84,500 TST BOO 259,500 2015 Apnto1 | ByBalance b/d 1,99,500 Dr. Manoj's Drawings A/c ce Particulars Folio Amount | Date Particulars ® 2015) 2015 Mar.31 | ToBank A/e 60,000 | Mar.31 | ByMangj's Capital 60,000 Ale 60,000 60,000 Dr. Computer Stationery A/c ce Particulars | Folio | Amount | Date Particulars _ | Folio id) 2015 | TeBank 2,55,000 | 2015 | ByProfit & Loss 2,55,000 Mar.31 | A/c Mar.31 | A/c 2,55,000 2,55,000 Dr. Repair & Maintenance Computer A/« ce Particulars 2015 | ToBank 14,000 | 2015, By Profit & Loss 14,000 Mar.31 | A/e Mareh31 | A/c 14,000 14,000 19Guidelines for Project work in Accounting and Practical work in Computerized Accounting Dr. Rahul's Capital A/c ce Career aren em ea eer i) ®@ 2015 2014 ByCash A/e 10,000 March,31 | To Rahul's Apr.0l | ByBank A/e 165,000 Drawings A/e 60,000 | 2015 March,31 | To Balance c/d 1,99,500 | Mareh31 | ByP &L A/e 84,500 2,59,500 50 2015 ByBalance 799,500 Apso1 | b/d Dr. Rahul's Drawings A/c ce POE eet ons al ete ® BOS 2015 March, 31 | To Bank A/c 60,000 | Mareh,31 | ByRahul's 60,000 Capital A/e 60,000 60,000 Dr. Repair & Maintenance Building A/c ce PORE Se em oat ®@ 2015 2015 March,31 | To Bank A/c 8000 | March, 31 | By Profit & Loss A/c 8,000 8,000 8,000 Dr. Security Dep osit-Hectricity Board A/c ce Sere em CR ec I ec car eI ed ®@ 2014 1000 | 2015 | ByBalance e/d 1,000 Apsil01 |ToBank A/c Mar.31 2015 1,000 1,000 Apalor | TeBelance b/d 71000Guidelines for Project work in Accounting and Practical work in Computerized Accounting Dr Security Deposit-VSNL A/e G. SSC er ae Ca eet ee) i) 2014 2015 ApnOl | ToBank A/c 1,00,000 | Mar.31 | ByBalance 1,00,000 2015 7,00,000 cfd 00000" Apr01 | To Balance b/d 1,00,000 Dr. Sales (Computer Stationery) A/c oe prs Ce cones 2015 2015 March, 31 | To Profit & 3,10,000 | March, 31 | ByBank 3,10,000 Loss A/e Ale 3,10,000 310,000 Dr Salary A/e ices Sree tas ren oy ed ® 2015 2015 March,31 | To Bank A/c 6,000 | Mareh,31 | ByProfit & Loss 6,000 Ale 6,000 6,000 Dr Telephone Expenses A/c G. Particulars | Folio | Amount | Date Particulars Folio 2015 2015 Mar,31 | ToBank A/e 35000 | March, 31 | Profit & Loss 35,000 Alc 35,000 35,000Guidelines for Project work in Accounting and Practical work in Computerized Accounting, TRIAL BALANCE OF RAHUL AND MANOJ 01 April, 2014 to 31 March, 2015 ea ee eam tT bs C 1. | Advertisement A/e 4,500 = 2. | Bank A/e 1,44,500 - 3. | Building 95,000 - 4, | Business Promotion Expenses A/c 15,000 - 5. | BankLoan A/c — | 2,00,000 6. | Cash A/e 20,000 - 7. | Computer A/e 3,00,000 - 8. | Depreciation A/e 1,07,500 - 9, | Electricity Expenses A/e 1,24,000 - 10. | Electricity Expenses Payable A/e — | 1.24000 Tl. | Furniture & Fixtures A/c 42,500 - 12, | Fees (ComputerStudents) A/c —| 2,70,000 13. | General Expenses A/c 12,000 - 14, | Interest on Bank Loan A/e 30,000 - 15, | InternetExpenses A/c 1,70,000 - 16. | Income (Internet Subseribers) A/e — | 350,000 17. | Mangj's Capital A/e — | 115,000 18. | ComputerStationery A/e 255,000 - 19. | Repair & Maintenance Computer A/c 14,000 - 20. | Rahul's Capital A/e — | 115,000 21. | Repair & Maintenance Building A/c 8,000 - 22, | Security Deposit Electricity Board A/c 1,000 - 23, | Security Deposit VSNL A/c 100,000 - 24, | Sales (ComputerStationery) A/e — | 3,10,000 25. | Salary A/c 6,000 - 26. | Telephone Expenses A/e 35,000 - POO Mere ere eT) Closing Stock of Computer Stationery was € 20,000Guidelines for Project work in 1g and Practical work in Computerized Acco ng TRADING AND PROFIT & LOSS ACCOUNT OF RAHUL AND MANOJ For the year ended 31 March, 2015 Sere ned ToComputerStationery A/c 255,000 | BySales (ComputerStationery) A/c ToGross Profite/d 75,000 | By Closing Stock 3,30,000 To Advertisement A/c 4,500 | ByGross Profitb/d To Business Promotion Expenses A/c | 15,000 | ByFees (Computer Students) A/c ToDepreciation A/e 107,500 | ByIncome (IntemetSubseribers) A/e To Electricity Expenses A/e 1,24,000 ToGeneral Expenses A/c 12,000 Tolnterest on Bank Loan A/c 30,000 TolnternetExpenses A/c 1,70,000 To Repair & Maintenance 14,000 Computer A/e To Repair & Maintenance Building 8,000 Ale ToSalary A/c 6,000 To Telephone Expenses A/e 35,000 ToNetProfit t/f to Capital A/c Rahul's Capital A/e 84,500 Mangj's Capital A/e 84,500 169,000 6,95,000 6,95,000Guidelines for Project work in Accounting and Practical work in Computerized Accounting, RAHUL AND MANOJ BALANCE SHEET as at 31 March, 2015 yNOeITnS ® CAPITAL ACCOUNT Rahul's Capital Capital Introduced 1,75,000 Add :NetProfit 84,500 259,500 Less :Drawings 60,000 Mangj's Capital Capital Introduced 1,75,000 Add :NetProfit 84,500 259,500 Less : Drawings 60,000 LONG TERM LIABILITIES Bank Loan CURRENT LIABILITIES Electricity Expenses Payable 1,99,500 1,99,500 2,00,000 124,000 7,23,000 FIXED ASSETS Computers 4,00,000 Less :Depreciation 1,00,000 Building 11,00,000 Less:Depreciation 5,000 Furniture & Fixtures 45,000 Less:Depreciation 2,500 DEPOSITS Security Deposit Electricity Board Security Deposit- VSNL. CURRENT ASSETS Stock Cash in hand Cash atBank 3,00,000 95,000 42,500 1,000 1,00,000 20,000 20,000 144,500 7,23,000 Bank will analyse the following ratios before granting the loan. (a) CusrentRatios (Current Assets /Cusrent Liabilities) (&) QuickRatio (Curent assets-stock/Current Liabilities) (c) Debt equity Ratio (Total debt/ owner's fund) 1.33:1 1ayit 0.50Guidelines for Project work in Accounting and Practical work in Computerized Accounting Conclusion 1. On the basis of glance at the ratios it can be concluded that the business is a success. 2. The bank should grant loan as the ratios are favourable. Working Notes ®@ NetProfit 169,000 Total Revenue 9,30,000 Fixed Assets 437,500 Current Assets 164,500 Current Liabilities 1,24,000 Working Capital (CA-CL) 40,500 Stock 20,000 Quick Assets 144,500 Total Debt 2,00,000 Owner's Fund 3,99,000Guidelines for Project work in Accounting, and Practical work in Computerized Accounting, COMPREHENSIVE PROJECT-2 1, Name of the Project : A sstudy of the business of 'Favourite Toys" 2. Objective of the Project (i) To know whether Favourite Toys! is a success ora failure (i) To know whether the banks will agree to give Loan to the business. Period of Study : Year ending 31*March 2015. Analytical tools used —«:—= Accounting Ratios Source Material : TheProjectStatement of Favourite Toys’Guidelines for Project work in Accounting and Practical work in Computerized Accounting Project No.2 Project STATEMENT M/s ‘Favourite Toys' Ram did his Economics (Hons.) from Delhi University and MBA from Indian School of Business (Hyderabad). He got job with a good salary. After 5 years of work experience, he started his business of assembling toy cars and named his business Favourite Toys’. On 1+ April, 2014 he introduced a capital of ¥ 2 lakhs in cash and % 33 lakhs by cheque. He also took a loan of € 10 lakhs from the State Bank of India, borrowed @ 5 lakhs from his friend, Amitby cheque. He took premises on rent at € 10,000/- per month in Okhla Industrial Area, New Delhi for setting up of his new factory. On 1 April, 2014 he purchased machinery of @ 10 lakhs and furniture for his office worth T 1,00,000 through a cheque. On the same date he withdrew %8,00,000 from bank account for meeting day to day business expenses. He hired an executive to help him in setting up the business at a salary % 10,000 per month. He also took an insurance cover at a premium of € 50,000 per annum on 1 April. Within one month, he was ready to assemble toy cars. On 1 May, he made purchases for & 70 lakhs out of which & 60 lakhs were still payable and hired 5 workers on monthly wages of € 8,000. On the same date he purchased a telephone and installed it, which cost him € 2,000. The payment of the telephone was made through a cheque. He also paid % 20,000 by cheque to print catalogues for his products. Payment of all routine expenses was made at the end of the year. By the end of the year, all wages were paid every month in cash. Machinery and Furniture were depreciated © 10% per annum. Total sales amounted to % 90 lakhs. He paid annual electricity charges of € 1,00,000 and telephone expenses & 15,000 by cash. He withdrew % 1 lakhs from bank for personal use. On 31 March 2015 he purchased investments worth % 10 lakhs through bank. He repaid & 5,00,000 with & 25,000 as an interest to Amit on account of the loan taken earlier. There was a fire in the factory that destroyed goods worth & 2,00,000 out of which the insurance company admitted a claim of & 1,00,000. He paid % 50,000 as carriage by cash. Interest on bank Loan was € 50,000 due but not paid. At the end of year closing stock was valued at 10 lakhs. You are required to prepare the following: (a) Journalize the above transactions, post them into ledger accounts and prepare trial balance for the year ended 31*March, 2015, (b) Trading and Profit and Loss Account for the year ending 31 March, 2015 and Balance sheet as at 31tMarch, 2015. If the business approaches a bank for a loan, will the bank oblige? 27Guidelines for Project work in Accounting and Practical work in Computerized Accounting Journal Register 1 April, 2014 to 31 March, 2015 Peerenns are 2014 TApsil [Cash A/c Dr. Bank A/c Dr. To Capital A/e (Being Capital invested in the Business) TApsil [Cash A/c Dr. ToBank A/c (Being cash withdrawn from bank for business expenses.) TApsil [Bank A/c Dr. ToLoan-SBI A/c (Being Loan taken from State Bank of India) TApsil [Bank A/c Dr. ToLoan A/e (Being loan received) LApsil [Machinery A/c Dr. Furniture A/e Dr. ToBank (Being Machinery and Furniture purchased) LApsil [Insurance Premium A/e Dr. ToBank A/c (Being Insurance Premium paid) May [Purchases A/e Dr. ToBank A/c To Creditors A/e (Being purchases made in cash and on credit) Debit z 2,00,000 33,00,000 8,00,000 10,00,000 5,00,000 10,00,000 1,00,000 50,000 70,00,000 forer 35,00,000 8,00,000 110,00,000 5,00,000 11,00,000 50,000 110,00,000 60,00,000Guidelines for Project work in Accounting and Practical work in Computerized Accounting, May | Telephone A/c Dr. 2,000 ToBank A/c 2,000 (Being Telephone purchased and installed) ‘May | Printing Expenses A/c Dr. 20,000 ToBank A/c 20,000 (Being printing for catalogue expenses paid) 31-May |Bank A/c Dr. 90,00,000 ToSales A/e 90,00,000 (Being sales proceeds from selling of toy cars.) 31-Mar. | Loan A/c Dr. 5,00,000 Interest on Loan A/e Dr. 25,000 ToBank A/c 5,25,000 (Being Loan and Interest paid) 31-Mar. | Insurance Claim Receivable A/c Dr. 1,00,000 Loss byFire A/e Dr. 1,00,000 ToPurchase A/c 2,00,000 (Being insurance claim receivable on account of fire occurred in the factory and loss provided in the books) 31-Mar. | Carriage Inward A/c Dr. 50,000 ToCash A/e 50,000 (Being carriage paid in cash) 31-Mar. | Rent factory A/e Dr. 1,20,000 ToCash A/e 1,20,000 (Being Rent paid in cash) 31-Mar. | Salary A/c Dr. 1,20,000 ToCash A/e 1,20,000 (Being Salary paid to executive in cash)Guidelines for Project work in Accounting, and Practical work in Compu ized Accounting, 31-Mar 31-Mar. Wages A/e Dr. ToCash A/e (Being Wages paid in cash for 11 months) 31-Mar. Depreciation A/c Dr. ToMachinery A/e ToFurniture A/c (Being Depreciation provided on Machinery and furniture © 10% per annum) 31-Mar. Electricity Expenses A/e Dr. ToCash A/e (Being Electricity expenses paid in cash.) 31-Mar. Telephone Expenses A/e Dr. ToCash A/e (Being Telephone charges paid in cash.) 31-Mar. Drawings A/c Dr. ToBank A/c (Being cash withdrawn from business for personal use) 31-Mar. Investment A/e Dr. ToBank A/c (Being Investment purchased during the year) 31-Mar. Interest on Loan-SBI A/e Dr. ToLoan-SBI A/c (Being Interest on SBI loan for the year ended provided) Trading A/e Dr. ToPurchases A/e To Wages A/c To Carriage Inward A/c ToFactory Rent A/c (Closing entry for purchases, wages, carriage inward and factory rent) 4,40,000 110,000 1,00,000 15,000 1,00,000 10,00,000 50,000 74,10,000 4,40,000 100,000 10,000 1,00,000 15,000 1,00,000 110,00,000 50,000 68,00,000 4,40,000 50,000 1,20,000Guidelines for Project work in Accounting and Practical work in Computerized Accoun 31-Mar 31-Mar 31-Mar 31-Mar Sales A/c Dr. Closing Stock A/e Dr. ToTrading A/e (Closing entry forSales and Closing Stock) Trading A/e Dr. ToProfitand Loss A/c (Gross profit eamed during the year) Profit and Loss A/c Dr. ToDepreciation A/e ToBlectricity Expenses A/c ToSalary A/c Tolnsurance Premium A/e Tolnterest Loan-SBI A/c Tolnterest on Loan A/c ToLoss by Fire A/e ToPrinting Expenses A/e To Telephone Expenses A/e (Closing entry for indirect expenses) Profit and Loss A/e Dr. ToRam’'s capital A/c (Net profit transferred to Ram's capital A/c) '90,00,000 10,00,000 27,210,000 5,90,000 20,00,000 1,00,00,000 27,10,000 1,10,000 1,00,000 1,20,000 50,000 50,000 25,000 1,00,000 20,000 15,000 20,00,000 cent Pees ES ER es TL)Guidelines for Project work in Accounting and Practical work in Computerized Accounting Dr. Bank A/c ce peer ons Cet ms z 2014 2014 Apr.01 | To capital A/c 33,00,000 | April, o1 |ByCash A/c 8,00,000 Apr. |ToLoansBI 110,00,000 | April,o1 | By Machinery A/c 110,00,000 Apror |A/e 5,00,000 | April,o1 |By Furniture A/e 1,00,000 2015 | Loan A/c April, 01 | By Insurance Prem. A/c 50,000 Dae St ro sales A/e 90,00,000 | May,01 | By Purchases A/c 110,00,000 May, 01 | By Telephone A/c 2,000 May,01 | By Printing Exp. A/c 20,000 2015 Mar31 | By Drawings A/e 100,000 Mar,31_ | By Investment A/e 110,00,000 Mar31 |ByLoan A/c 5,00,000 Mar,31_ | By Interest on Loan A/c 25,000 Mar,31 |ByBalance c/a 92,03,000 2015 | s.00 000) ‘Apror |ToBalance b/d 92,03,000 Dr. Cash A/c ce 2014 April, O1 Aptil, O1 2015 Apri, oF To Capital A/e ToBank A/c To Balance b/d 2,00,000 800,000 2015 May, 31 May, 31 May, 31 May, 31 May, 31 May, 31 May, 31 By Carriage Inward A/c By Rent factory A/c By Salary A/c By Wages A/c By Electricity Expenses A/c By Telephone Expenses A/c By Balance c/d 50,000 1,20,000 1,20,000 4,40,000 1,00,000, 15,000 1,558,000 [10,00,000 |Guidelines for Project work in Accounting and Practical work in Computerized Accounting Dr. Capital A/c ce Peres Sommaire nn el z z 2015 | ToDrawings A/c 100000 | 2014 | ByCash A/e 2,00,000 Mar, 31 | To Balance c/d Aps Ol | ByBank A/c 33,00,000 54,00,000 ByP &LA/e 20,00,000 735300,000 | 2015 35,00,000, Apsil,01 | ByBalance b/é 54,00,000 Dr. Creditors A/c ce Date Particulars Folio | Amount | Date Particulars | Folio | Amount i z 2015 | To Balance c/d 60,00,000 | 2015 Mar,31 May,01 | ByPuschase A/e 60,00,000 ©, "50,00,000 a 50,00,000 Apslo1 | ByBalance b/d 60,00,000 Dr. Carriage Inward A/c ce Date Particulars | Folio| Amount | Date | Particulars | Folio | Amount ig z 2015) 2015 Mar,31_ | ToCash A/e 50,000 | May,01 | By Trading 50,000 Ale 50,000 0,000 Dr. Drawings A/c ce Date Particulars Folio Amount | Date Particulars | Folio | Amount cd c 2015) 2015 Mar,31_ | ToBank A/c 1,00,000 | May,01 | ByCapital A/c 1,00,000 11,00,000 7,00,000Guidelines for Project work in Accounting and Practical work in Computerized Accounting Dr. Depreciation A/c ce ano ene etrnt) z 2015 | To Machinery A/c 1,00,000 | 2015 By Profit & 1,10,000 Mat, 31 | To Furniture A/e 10,000 | Mas 31 |Loss A/e 110,000 1,10,000 Dr. Hectricity Expenses A/c (oa 2015 Mar, 31 Particulars ToCash A/e 11,00,000 | 2015 1,00,000 By Profit & Loss Mar,31 | A/e 1,00,000 1,00,000 2014 Apel, OL 2015 Apel, OL ToBank A/c ToBalance b/d 11,00,000 | 2015 Mar, 31 ~yp060 | Mae 32 90,000 PON aC tao z 2015 | ToCash A/e 1,20,000 | 2015 | ByProfit & 1,20,000 Mas, 31 Mar,31 | Loss A/c 1,20,000 1,20,000 Dr Fumiture A/e cr. peer By Depreciation Ale ByBalance ¢/d 10,000 90,000 11,00,0002015 Mar, 31 ere ed ToBank A/c Guidelines for Project work in Accounting and Practical work in Computerized Accounting Loan A/c Folio Amount Date peered z 500,000 | 2014] ByBank A/e tty G. yen z 5,00,000 5,00,000 Peet Serene z 2015 ToBank A/c 110,00,000 | 2015 ByBalance e/d 110,00,000 Mas, 31 Mar, 31 10,00,000 10,00,000 2015 ToBalance 110,00,000 Apsil, OL | b/d Dr Interest on Loan-SBI A/c cr. Ste 2015 To Loan-SBI 50,000} 2015 | ByProfit & Loss 50,000 Mas,31 | A/e Mar,31 | A/e 50,000 50,000 Dr Interest on Loan A/e cr. Sra tad beet eS TC et z z 2015 ToBank A/c 25,000 | 2015 By Profit & Loss 25,000 Mas, 31 March, 31 | A/e 25,000 25,000Guidelines for Project work in Accounting and Practical work in Computerized Accounting Dr. Insurance Claim Receivable A/c Gr. Paes Seg te nn a es z 2015 | ToPurchase 1000002015 | ByBalance ¢/d 1,00,000 Mar,31_ | A/e Mas, 31 700,000 700,000 2015 | ToBalance tn Apalol |b/a Dr. Insurance Premium A/e Ge. Pe ee em eae crn an al es Te Cte] z x 2015 | ToBank A/c 50,000 | 2014 | By Profit & Lose 50,000 Mas, 31 Mas,31 | A/e 50,000 50,000 Dr. Loss By Fire A/e Ge. PPE ee em ea re an a ee Te | z z 2015 | ToPurchases 1,00,000} 2015 | ByProfit & Loss 1,00,000 Mar,31_ | A/e Mar,31 | A/c 100,000 300,000 Dr. Loan-SBI A/c Ge. ee ea cree ams z 2015 | ToBalance 10,50,000} 2014 | ByBank A/e 110,00,000 Mar,31_ | e/a Apsl,01 2015 | Bylnterest on 50,000 10,50,000 | Mar,31 | Loan A/e 10,50,000 2015 10,50,000 Apsto1 |TeBalance b/dGuidelines for Project work in Accounting and Practical work in Computerized Accounting Dr. Printing Expenses A/c c rem eae etre z 2014 | ToBank A/e 10,00,000 | 2015 | By Depreciation 1,00,000 April, OL Maz,31 | A/c | Mar, 31 | ByBalance e/d 900,000 2015 $210,00,000) 110,00,000 April 01 | To Balance b/d 9,00,000 as Dr. Purchases A/e c. Pe eres ens eae en a 5 2015 | ToBank 2015 May, 01 | A/e 10,00,000 | Mar,31 | ByInsurance Claim Receivable A/c 1,00,000 By Loss byFire A/e 1,00,000 ByTrading A/e 68,00,000 70,00,000 70,00,000 Dr. Rent Factory A/c ce Date | Particulars | Folio Amount | Date are ern z i 2015 | ToCash A/e 1,20,000 | 2015 1,20,000 Mas, 31 Mas, 31 | ByProfit &Loss A/c 120,000 1,20,000 Dr. Sales A/c c. ae eer in ne z 2015 2015 Maz,31 | To Trading A/c 90,00,000 | Mas,31 | ByCash A/e 50,00,000 90,00,000 0,00,000 37Guidelines for Project work in Accounting and Practical work in Computerized Accounting Dr Telephone Expense A/c cr. PS rea eer cs z 2015 ToCash A/e 15,000 | 2015 | By Profit & Loss 15,000 Mar, 31 Mar,31 | A/e 15,000 15,000 Dr Telephone cr. 2014 ToBank A/c 2,000 | 2015 ByBalance c/d 2,000 ey 2000 | Mas, 31 2000 | April, OL |ToBalance 2,000 b/d Dr. ‘Wages A/c Ce 2015 ToCash A/e 4,40,000 | 2015 By Trading 440,000 Mas, 31 Mar,31_ | A/e 4,40,000 4,40,000TRIAL BALANCE OF RAM 01 April, 2014 to 31 March, 2015 8. No. Pen) 1. | Bank A/e 2. |CashA/e 3. | Capital A/c 4, | Creditors A/e 5. | Carriage Inward A/e 6. | Depreciation A/e 7. | Electricity Expenses A/c 8. | Salary A/e 9. | Furniture's A/e 10. | Investment A/e 11, | Interest on Loan-SBI A/c 12. | Interest on Loan A/e 13. | Insurance Claim Receivable A/e 14. | Insurance Premium A/e 15. | Loss ByFire A/e 16. | Loan-SBI A/c 17. | Printing Expenses A/c 18. | Machinery A/c 19. | Purchases A/e 20. | RentFactory A/e 2. | Sales A/c 22, | Telephone Expense A/c 23, | Telephone A/e 24, | Wages A/c Guidelines for Project work in 50,000 1,10,000 11,00,000 1,20,000 90,000 110,00,000 50,000 25,000 11,00,000 50,000 1,00,000 20,000 9,00,000 68,00,000 1,20,000 15,000 2,000 4,40,000 1g and Practical work in Computerized Accoun 34,00,000 60,00,000 10,50,000 90,00,000 ng any rey mee Closing Stock of % 10,00,000Guidelines for Project work in Accounting and Practical work in Computerized Accounting, TRADING AND PROFIT & LOSS ACCOUNT OF RAM For the year ended 31 March, 2015 Sere ed ToPurchases A/e To Wages A/e To Carriage Inward A/c ToFactory Rent A/c ToGross Profite/d ToDepreciation A/e To Electricity Expenses A/c ToSalary A/e ToInsurance Premium A/e ToInterest on Loan-SBI A/e TolInterest on Loan A/c To Loss by Fire A/e To Printing Expenses A/e To Telephone Expense A/c ToNetProfit t/f to Capital A/c 6800000 | BySales A/c 440,000 | ByClosing Stock A/e 50,000 1,20,000 25,90,000 1,00,00,000' 110000 | ByGross Profitb/d 100,000 1,20,000 50,000 50,000 25,000 100,000 20,000 15,000 20,00,000 EL 25,90,000Guidelines for Project work in 1g and Practical work in Computerized Accounting, RAM'S BALANCE SHEET As at 31 March, 2015 CAPITAL ACCOUNT FIXED ASSETS Capital introduced 35,00,000 Machinery 110,00,000 Add:NetProfit 20,0000 Less :Depreciation 1,00,000| 9,00,000 55,00,000 Less :Drawings 1,00,000] 54,00,000] Furniture 11,00,000 LONG TERM LIABILITIES Less:Depreciation 10,000 | 90,000 Loan-SBI 10,5000 Telephone 2,000 CURRENT LIABILITIES NON-CURRENT ASSETS Creditors 60,00,000 Investment 10,00,000 Insurance Claim Receivable 1,00,000 CURRENT ASSETS Cash in hand 1,55,000 Cash atBank 92,03,000 Stock 110,00,000 1,24,50,000 1,24,50,000 Calculation of Relevant Ratios Profitability Ratio 1. Gross ProfitRatios (Gross Profit/Sales) x 100 30.11% 2. NetProfitRatios (NetProfit/Total Revenue) x 100 22.22% Tumover Ratio 3. Working Capital Turnover Ratio 2times (Gales/W orking Capital)Guidelines for Project work in Accounting, and Practical work in Computerized Accounting 4, Fixed Assets TurnoverRatio 9 times (Gales/Net Fixed Assets) Liquidity Ratio 173 5. Current Ratios (Current Assets /Current Liabilities) 6. QuickRatio (Current Assets-S tock) /Current Liabilities 156:1 Working Notes @ Gross Profit 27,10,000 NetProfit 20,00,000 Total Revenue 90,00,000 Fixed Assets 9,92,000 Current Assets 1,03,58,000 Current Liabilities 60,00,000 Working Capital (CA-CL) 43,58,000 Quick Assets 93,58,000 Stock 110,00,000 Total Debt 10,50,000 Owner's Fund 54,00,000 Conclusion The business of Favourite Toys! is a success, It is indicated by good profitability ratios specially when it is the first year of the firm. Turnover ratios also indicate the effective and efficient utilization of the fixed assets and working capital. Liquidity ratios are also more than one. Any bank will agree to give them loan on the basis of above ratios. Project Statement for Practice Read the project statements carefully and prepare comprehensive projects on likes of the sample projects.Guidelines for Project work in Accounting and Practical work in Computerized Accounting, PRojEcT-3 Project STATEMENT "Muskan Saloon" Muskan commenced business of selling beauty products on 1 April, 2014 with a capital of € 25 lakhs. She entered into an agreement with Cosmetics India to sell the beauty products, purchased from them on one month credit basis. During the year Muskan acquired following assets for which the payments were made through bank. Land 7,50,000 Building 112,50,000 Office Equipment 11,20,000 Furniture é& Fixtures 11,30,000 The beauty products were to be sold for cash only and the cash proceeds were to be deposited in the bank on the same day. All expenses except petty expenses were to be paid by bank only. The petty cashier was given € 5,000 on 1 April, 2014 under Imprest System’. The petty cashier would be reimbursed the actual expenses of the month on the first day of the next month before depositing the sale proceeds of the day. The following information is extracted from the books of Muskan for the year ended on March 31, 2015. nount Purchases 12,40,000 Sales 15,90,000 Payments through Bank accounts: Salaries 65000 Advance Tax paid 5,400 Electricity expenses, 7,600Guidelines for Project work in Accounting, and Practical work in Comput ized Accounting, Telephone expenses 5,900 Advertising expenses 6,000 Opening ceremony expenses 3,000 Petty expenses, 16,900 Printing & Stationery 2,000 The following expenses were not yet paid but need to be provided for computing current year's Salaries of € 6,700, electricity expenses of 800 and telephone expenses of € 300. The cash with the petty cashier on 31*March, 2015 were @ 1,500. The purchases for the month of March, 2015 amounted to € 1,00,000. The company paid for purchases as per terms agreed upon, Closing stock as at 31* March, 2015 was % 500. Charge depreciation on building © 2%. Provision for Tax liability required to be made of 6,000. A, Prepare Trial Balance, Income Statement for the year ended 31st March, 2015 and Balance Sheet as at 31March, 2015. B. 1. Cosmetics India wants to know the short term financial position of Muskan Saloon before extending the agreement on credit policy for the next year. 2. Muskan is interested in knowing : a) The profitability and cost efficiency of the firm in terms of "operating expenses to sales" and b) The efficiency with which the capital, fixed assets, working capital and the total assets of the company have been utilized.Guidelines for Project work in Accounting and Practical work in Computerized Accounting Project No. 4 Project STATEMENT M/s Steel Products Raghu was a 24 years old resident of Rampur village in Bihar. He did B.Com (Hons.) from Bihar University, Patna. He belongs to a middle class family and always wanted to be a successful businessman but unable to decide the business which would best suit him. One day, while talking with his friend, he got convinced about starting the business and on 1* Apsil, 2014 he started a Steel Pipes and Angles business at a backward area of Bihar. He introduced capital of € 70,000 in cash and % 20,000 through cheque. he took a loan of & 8,00,000 from ICICI Bank at a rate of interest of 10% per annum by pledge of his property. He purchased iron rods from Ram & Co. worth % 20,000 on credit, machinery & 40,000, furniture % 10,000 and small piece of land for 1,00,000 on the same date. He hired 10 workers on 1* April and agreed to pay them wages of & 12,500 each p.a. On 12 April, he returned goods worth & 2000 to Ram and Co, being defective goods. He withdrew goods worth 4,000 for domestic use on the same date. On 30% May, he sold steel pipes to Gupta & Co. worth & 35,000 on credit. On 30 June, he sold steel angle worth 50,000 to Kumar & Co. as per the payment terms, 50% in cash, 30% through. cheque and drew a bill for balance. On 4% July, Gupta & Co. who drew some defects in the pipes, returned the same worth ® 10,000. Raghu paid office and administrative expenses of & 2,000 and selling and distribution expenses, of € 5,000 on 64 July and advertisement expenses of € 10,000 on 34 August. On 4 September, he purchased iron rods worth % 25,000 from Khanna and Co. who drew a bill for 6 months on Raghu, which he duly accepted. On 98 October, goods worth & 10,000 were lost due to theft, however an insurance company admitted a claim of & 5,000. On 174 October, Raghu paid & 6,000 to Ram & Co. On 164 December, he received & 10,000 from Gupta and Co. Wages paid in advance were 10,000 on 15 January. On 22*4January, Raghu contributed T 8000 to the Prime Minister's Relief Fund. A part of the machinery broke down on 128 February, % 2,000 was incurred for its repairing. On 2s4March, Raghu sold steel rods worth & 60,000 to Sharma and Co, and received % 20,000 in cash and balance was payable after 3 months. He sold steel rods worth % 65,000 to Rakesh and Co. for cash on 4 March, On 15! March Sharma became insolvent and 50 paise in a rupee were received from his estate. On 208 March, Raghu purchased iron rods worth % 3,33,000 from Shyam and Co. 45Guidelines for Project work in Accounting, and Practical work in Computerized Accounting The following transactions took place on 31+ March 2015 2 Wages paid 1,15,000 2 Electricity bills paid % 7,000 ox Heating and lighting expenses € 5,500 % Telephone charges & 3,000 oe Carriage and freight & 1,000 2 Miscellaneous expenses € 500 On 31+ March 2015, closing stock was valued at % 4,40,000; depreciation on furniture and machinery is to be provided © 10% p.a,; interest on capital to be provided © 5% p.a. and interest on drawings to be charged @ 2% p.a. You are required to: a) Pass journal entries, post them into the ledger accounts and prepare a Trial Balance. b) Prepare, Trading and Profit & Loss A/c for the year ended 31+ March, 2015 and Balance Sheet as at 31 March, 2015 and analyze the profitability and the financial position of the business. Decide whether the business is a success or a failure. SPECIFIC PROJECTS Segment Reporting, Segments are (i) The products of a company like Alto, Desire and Gypsy of Maruti. (ii) The area of operation of a company like Consumer Care Business, Food Business and Personal Care Business of Dabur and Passenger transport, Goods transport of a Transport Company. (iii) The Geographical areas served by a service company like Northern Railway, Eastern Railway and Western Railway, etc. of Indian Railways. It is mandatory for companies to report the progress of each segment as per AS-17 issued by the Council of The Institute of Chartered Accountants of India since April 1, 2001. It ensures full disclosure about the revenue from each segment, the profit from each segment and the amount of capital allocated to each segment. These reports are on quarterly, half yearly and annual basis. Thus, every segment gets full attention of the management and the shareholders also come to know the financial position of each segment. It is, required for true and fair disclosure as well.Guidelines for Project work in Accounting and Practical work in Computerized Accounting Two specific projects on Performance of Segments are presented here : i) On segments of Prakash Industries Ltd. and is) On segments of DaburIndia Ltd. Segment reporting is only one area of business reports. The students should explore more such areas from the company reports for relevant specific projects. For the sake of practice and exercise the students should visit the company's websites and check the quarterly reports for segment performance. This will be the source material for the projects. 47Guidelines for Project work in Accounting, and Practical work in Computerized Accounting PROJECT ON SEGMENT ANALYSIS-1 L_ Name of Project Analysis of Performance of each segment of Prakash Industries Limited with reference to 1. Revenue, 2. Profitand 3. Capital employed 2 Objectives: 2 To study whether the contribution of various segments of Prakash Industries Limited with respect to (i) Revenue, and (it) Profit, is justified ? 2 To know as to which operation segment is performing best in terms of Net Profit and Return on Investment 3. Period Under Study: Financial Year ending 31" March, 2007 4 Tools of Analysis 1, Common Size Statement and 2. Ratios 5. Source Material Newspaper cutting of Audited Financial Results of Prakash Industries Limited from the Economie Times dated 24 August, 2007 or the Website of the company. 6. Processing of Data: 1 Common Size Statement of Segment Wise Revenue 2 Compare the Revenue from Operations of each segment of Prakash Industries with ‘TOTAL REVENUE for the year ended 31 March 2007. Revenue of the segment _ Total Revenue 100 te Use the formula Revenue of the segment Total Revenue Degree 360Guidelines for Project work in Accounting and Practical work in Computerized Accounting Commonsize Statement Showing Inter-Segment Comparison of Revenue For the year ended 31 March, 2007 eee Pate Othe Revenue (@) 12755] 94901 6497.00] 3079 | 117232 Percentage of T otal Revenue (%) 1088 | 80.95 554] 263/ 100 Degrees for Pie Diagram 39.17 | 291.439° 19.95°| 9.45°| 360° Source: The Economic Times 24 August, 2007 Pie Chart Representing Segment Revenue 94s 19.95" 39.17" 291.43" mPower wSteel_mPVC Pipes mOthers IL Common Size Statement of Segment Wise Profit Ye Compare the PROFIT of each segment of Prakash Industries Limited with TOTAL PROFIT for the year ended 31 March, 2007. 2 Use the formula to calculate percentage and degrees for making pie diagram. Profit of the segment 100 Total Profit * Percentage = Profit of the segment Total Profit Degrees = x360 Commonsize Statement Showing Inter Segment Comparison of Profit For the year ended 31 March, 2007 cee Pena mn aces ome te Profit (%) (in lakhs) 6506] 7985 gor] 272) 15664 49Guidelines for Project work in Accounting, and Practical work in Computerized Accounting Percentage of Total Profit (%) 41.53] 50.98 575] 1.74. 100 Degrees for Pie Diagram 149.52 | 183.52° zoe] 625°] 360° Source: The Economic Times 24 August, 2007 Pie Chart Representing Segmentwise Profit 625 2071" 149.52" ed 183.52" mPower mSteel MPVC Pipes mOthers II Common size statement of segment wise capital employed te Compare the CAPITAL EMPLOYED of each segment of Prakash Industries Limited with TOTAL CAPITAL EMPLOYED for the year ended 31 March, 2007. 2 Use the formula to calculate percentage and degrees for making pie diagram. Capital Employed of the Segment Total Capital Employed Percentage = x 100 Capital Employed of the Segment Degrees = B Total Capital Employed x 360 ‘Commonsize Statement Showing Inter Segment Comparison of Capital Employed For the year ended 31 March, 2007 eee Pate Capital Employed @ (in lakhs) 13870 | 66660 1630] 6921] 89081 % of Total Capital Employed (%) 1557| 7483 Esa) | e777 | em 100) Degrees for Pie Diagram 56.05° | 269.39° 65% | 2797] 360° Source: The Economic Times 24 August, 2007Guidelines for Project work in Accounting and Practical work in Computerized Accounting IV. Calculation of Return on Investment % Calculate the Return on Investment of each segment of Prakash Industries Limited for the year ended 31 March, 2007 we Use the following formula to calculate Return on Investment Profit Before Interest, Tax and Dividend = Capital Employed 100 Retum on Investment= Statement Showing Inter Segment Comparison of ROI For the year ended 31 March, 2007 eg Cm COe C Piy rents Total PBIT & (in lakhs) 6506 7985 901 272 15664 Capital Employed (% in lakhs) 13870 66660 1630 6921 89081 46.91 11.98 55.28 3.93 1758 ROI (%) E100 Capital Employed Graphical Representation of ROI 6 55.28% ROI (4) Power Steal PVC Pipes Others Total ‘SegmentsGuidelines for Project work in Accounting, and Practical work in Computerized Accounting Combined Comparative Statement Ey SPerearrel Cen r Revenue (%) of Total 1088| 80.95 554 263 | 100 PBIT (%) of Total 4153| 50.98 5.75 174 | 100 Capital Employed (%) of Total 1557| 74.83 1.83 777 | 100 ROI (%) same 4691] 1198] 55.28 393 | 1738 Conclusions: x PVC Pipes Segment has the highest ROI 55.28% with capital share of only 183%. te With the Revenue share of 10.88% of the Total Revenue, P ower Segment is able to generate a PBIT of 41.53% of the T otal Profit. ve PowerSegmentalso has a good ROI of 46.91%. wx Therefore, PVC Pipes Segment and Power Segment are the best performing segments. Future Projections: x With 55.28% share of ROI, PVC Pipes segment seems to have a bright future. More funds should be diverted towards this segment from Steel segment which is losing its shine. 2 Poweralso has a future growth potential because of shortage of power in the country. It will be a good idea to divert some funds towards this segment from Steel Segment.Guidelines for Project work in Accounting and Practical work in Computerized Accounting, Project on Analysis of Cash Flow Statement Analyse of Cash Flows Statements of Apollo Private Limited Summary of Cash Flows of Appollo Private Limited for the years 2015 and 2014 are as follows: Opening balance of Cash and Cash Equivalents 6,60,000 | 760,000 Cash Flow from Operating Activities 28,40,000 | 7,10,000 Cash Flow from Investing Activities (13,70,000) | (23,10,000) Cash Flow from Financing Activities (12,00,000) | 15,00,000 Closing balance of Cash and Cash Equivalents 930,000 | 6,60,000 1 Cash Flow from Operating Activities: @ (b) Cash Flow from Operating Activities has a positive inflow of € 28 40,000 in the year ended March 31*, 2015 and % 7,10,000 in the year ended March 31+ 2014, which shows that the company has good operating activities ie. principal revenue producing activities. Appollo Private Limited is carrying its business activities and has managed to increase its cash inflow from operating activities more than 4 times during the year by controlling on current receivables, as compared to sales raised from previous year to current year. It has generated cash flow from % 7,10,000 in the year 2014 which later increased to & 28,10,000 in the year 2015. IL. Cash Flow from Investing Activities: (a) (b) Cash flow from investing activities means that Appollo Private Limited has invested in fixed assets. Investment in terms of purchasing fixed assets and investing in non- current trade investments, which facilitated the business to earn more profit in future. Itis also a healthy sign for any business. However, investment in fixed assets should not be made out of short term funds or it should be financed through long term funds, otherwise the company may face shortage of working capital. In the year 2015, Appollo Private Limited invested of 13,70,000 out of the total inflow % 30,40,000 ( 28,40,000 from operating activities + T 2,00,000 from financing activities).Guidelines for Project work in Accounting, and Practical work in Comput (a) ized Accounting, The company used significantly large amount from operating activities. & 2,00,000 is from short term borrowing. This should not be used in long term investments. The company has not used these funds as ithas enough funds from operating activities. In the year 2014, Appollo Private Limited invested of € 23,10,000 out of the total inflow % 22,10,000 (& 7,10,000 from operating activities + € 15,00,000 from financing activities), as the company used considerable amount to finance the long term investments from financing activities and less amount from operating activities, which shows the efficient cash management to some extent. IIL Cash Flow From Financing Activities: (a) (b) In the year 2015, Appollo Private Limited used % 28,40,000 from operating activities in repaying its long term liabilities of € 12,00,000 which will ultimately help the company improve its solvancy ratios particularly debt-equity, interest coverage and total assets to debts ratios. In the year 2014, Appollo Private Limited used proceeds of cash of & 10,00,000 from issue of shares and & 5,00,000 from borrowings to finance the long term investment of the company, which shows healthy sign of cash management. On the basis of the above analysis, we may conclude that business of Appollo Private Limited is doing well and prospects of the company are bright. But the company is carrying unusually high cash and cash equivalents, indicating the inefficient cash management. The management must consider this situation and take decision for better cash management so that better standards are achieved.Guidelines for Project work in Accounting and Practical work in Computerized Accounting Project on Revenue, Net Profit Ratio and Earning per share of Aditya Birla Nuvo Limited Name of the Project: A comparative study of the changes in Revenue, Net Profit and Earnings per share. Period of Study (i) Second Quarter of 2014-15 and Second Quarter of 2013-14 (i) Half year 2014-15 and Half year 2013-14 (Half years include the 24 Quarters of respective years) Objective (i) To know whether the company has performed better than before. . Tools of Analysis (i) Comparative Statements and (i) NetProfitRatio Source Material A cutting published in the Economic Times of 13 November 2014 giving Performance Highlights of Aditya Birla Nuvo Ltd. This information is also available on the website of the company. Process of Analysis, Preparation of Comparative Statements A) A comparative statement on Quarterly basis involving the Second Quarter of current year ie, 201415 and the corresponding Second Quarter of the previous year ie, 2013-14. This will include the comparison of the data regarding (i) Revenue (ii) Net Profit and (iii) Eamings per share, The relative changes in the statement will be used to derive conclusions. The relative changes will also be shown on the Bar Graph.Guidelines for Project work in Accounting and Practical work in Computerized Accounting, A) Quarterly basis Comparative Statement for Second Quarter ending 30 September, 2013, and 2014, (Crores) Perea aera cee Cand Ree) 30 Sept. 2014 Sram nts z z z 2 1, [Revenue 6492 6597 105 162 2. | NetProfit 290 452 162 55.86 3. | Earnings Per share 97 139 0 433 (@ annualized) Derivations () Revenue has increased only by 1.62%, (i) The Net profit has increased tremendously by 55.86%. This means that the company has introduced drastic expense control system to increase profit. It is quite evident from the above analysis. Because of increase in profit by 55.86% the earning per share has also increased by 43.3%. (same reasons as above) Bar Graph 60 50 40 30 ‘Change in % 20 10 Revenue Net Profit Earning Per ShareGuidelines for Project work in Accounting and Practical work in Computerized Accounting With expenses (derived) Perret aero eae UL CaS Roe RC uees Seca oes z z ss % 1, | Revenue 6492 6597 105 162 2. | Less Expenses 6,202 eas 67) (92) (balancing figure) 3. | NetProfit 290 452 162 55.86 4, | Earnings Per share 7 139 0 433 (€ annualized) Derivation The profit of the second quarter has increased by 55.86% because there is a very minor decrease of 92% in expenses during this quarter. First Quarter Derived from the given data by deducting 24 Quarter figure from the half yearly figure. Perego ae eae UOC oS Rey 30 Sept. 2016 change __change < i z % 1. [Revenue 5,745 6,207 462 8.04% 2, | Less expenses 5Al4 6403 629 16% (balancing figure) NetProfit 331 264, (967 | (20.24)% Derivations There is an increase of 11.6% in expenses leading to decrease in Net Profit by more than 20% in first quarter, This supports our contention that the first quarter performance was very poor and that is why the half - yearly performance is lower than the performance of the company in the second quarter. 57Guidelines for Project work in Accounting and Practical work in Computerized Accounting, (B) Half Yearly basis Comparative Statement for Half Years ending September 30,2013 and 2014 Ale Coat eae ee Cote nemie Cnr nea on ted Ree) RCT aes eS td z z z % Revenue 12,237 12,804 567 463 2, | NetProfit 62 76 95 153 3. | Eamings Per share 103 0 7 68 (@ annualized) Tt has been noted that as compared to Quarterly changes, the half yearly changes are disappointing. Derivations: () With 24.63% increase in Revenue, the NetProfit has increased only by 15.3%. (i) Earning per share (EPS) has only increased marginally by 15.3%. (ii) It seems that this comparatively dismal performance during the half year ending September 30, 2014 could be because of bad performance in the First Quarter of the current year, because First Quarter is the part of Half Year. The management should take care of this fact. This has also been vindicated by the analysis of the First Quarter given above. (iv) The increase in Earnings per share (EPS) is also low at 6.8% as compared to 43.3% increase on quarterly basis. EPS moves with net profit. If change in net profit is low EPS change will also be low. Comparison of Net Profit Ratios ats Particular cevTUE GTO ERT uarter Ending e] 4 Qi 1g 30 Sept. 2013 290 «100 AAT % e492 2 juarter Ending 30 Sept. 2014 6.85% 2 Paeaats 42 100 3597Guidelines for Project work in Accounting and Pracccal work in Computerized Accounsing 3. Half Year Ending 30 Sept. 2013 5.07% eee 221100 7237 4 Half Year Ending 30 Sept. 2014 5.59% 6 30 Sep! BO arn 1804 This comparison of NP. ratios also shows that the NP ratio of 24 Quarter of the current year is better than the NP ratio of n4 Quarter of the previous year. It is also better than the NP Ratios of both, the half years, current year and the half year of the previous year. Conclusion: The analysis of changes in Revenue, Net Profit and Earning Per Share proves beyond doubt that the performance of 2*4 Quarter of the current year 2014-2015 is the best on all accounts. On half yearly basis also the current half year performance is better than the half year of the previous year.