Financial Accounting & Analysis

Answer 1

A journal can be defined as a detailed account that videotapes all the transactions of a
business in a financial year. These transactions can be utilized to make other financial devices
by transferring them to them, such as a general journal. A journal also videotapes all the
information related to advertising, consisting of days, amounts, and accounts affected,
utilized in a double-entry accounting method.
For accounting objectives, journal accounts can also be described as an electronic document
or a physical record kept as a spreadsheet, publication, or information within the accounting
software application. When a financial transaction is made, a bookkeeper documents that
business transaction as a journal entry. The journal entry will also detail if the earnings or
expense influences one or more business accounts.
Journaling all the transactions is a crucial part of particular document maintenance and assists
with concise reviews and records transfer late in the accounting procedure. Journal accounts
and the primary journal are typically evaluated as part of an audit process or trade.
Journal account

We have prepared the journal account above and tape-recorded all the financial transactions
throughout the year that are pointed out in the question.
In the first transaction, Vinita transferred five lakhs from her interest-bearing account to her
business account. So, her savings account will be debited with 5 lakh rupees, and her business
account will be credited with 5 lakh rupees.
In the 2nd transaction, she purchased supplies and goods in cash. So, her cash will be debited,
and the acquisition account will be credited. The amount involved in both variations is 1 lakh
rupees.

In the 3rd transaction, she purchased goods up for sale for 3 lakh rupees. Her acquisition
accounts will be credited with 3 lakh rupees, and her money account will be debited with 3
lakh rupees. So, the transaction will be the same as above.
In the 4th transaction, she made a credit sale of her goods for 5 lakh rupees. So, her
borrower's account will be credited with five lakhs, and the sales account will be debited with
five lakhs.

In the last transaction, she paid salaries to her staff members of 20000 rupees, which her bank
account debited with 20000, and the wages account will be credited with the same amount.
Double-entry bookkeeping, generally utilized to record financial transactions in journal
accounts, impacts how journals are videotaped and maintained. Every financial transaction
contains an exchange between two accounts. This indicates that each access in a journal
account is recorded at two accounts: debit and credit. For example, if an entrepreneur's
acquisition of 1 lakh is well worth inventory with cash, the accountant documents two
transactions in a journal access. In this transaction, the cash account will be debited with 1
lakh, and the inventory account will be credited with 1 lakh.

Apart from double-entry accounting, there is one more type, single-entry accounting, which
is not typically used in business and accounting. It is the most basic type of accounting and is
set up like a cheque publication; in this sort of accounting, only one account is used for every
single journal entrance. It is straightforward and has a total elementary amount of money
discharges and inflows.

For instance- A firm proprietor acquisitions 1 lakh well worth of supply making use of cash,
and the single-entry accounting system records a 1 lakh reduction in cash, with the final
balance below it. It is feasible to differentiate costs and revenue into two columns so a
company can track total expenditures and revenue and not simply the accumulated final
balance.

A journal is additionally used in investment and trading. For a private capitalist or an angel
investor, a journal is a detailed and extensive record of selling the investor's trading account,
which is used for the auditing process and tax assessment.

In conclusion, a journal is a detailed document of all the financial transactions made by a

business throughout the fiscal year.

Whenever a firm tapes a transaction in its journal accounts, it is mainly videotaped using the
double-entry accounting method; however, some people utilize the single-entry bookkeeping
method.

The double-entry bookkeeping method frequently transforms to increase accounts after a

transaction, an increase in one and a decline in the other.
On the other hand, single-entry accounting is seldom used and only brings adjustments in a
solitary account.

A journal likewise assists businesses in operating taped transactions to make other financial
tools.

Answer 2

A dividend is a share of kept earnings and revenues that a business pays its proprietors and
shareholders. When a company generates profits and revenues, those earnings can be
reinvested in the industry or paid out to its owners and shareholders through dividends. The
yearly Dividend per share, separated by the supply rate, can be defined as the dividend return.
Dividend profits are the best for investors as they obtain a dividend yearly, and their invested
amount is increased through compounding.

As dividends are earnings for the shareholders, they are not expenditures for the business.
Dividends are just a distribution of revenues made among the shareholders who are owners of
the business.

Various types of dividends are-

a) Cash- This is the payment of dividends in the form of cash by the firm to its owners and
shareholders. The payment occurs digitally, generally a wire transfer, and can be paid literally
by cheque or cash. This is one of the most standard methods of paying dividends to
businesses.
b) Stock- Supply dividends can be specified as the dividends the company pays its
shareholders by providing more shares. These are paid of ad valorem, based upon the number
of shares an individual currently possesses. These are additionally known as outstanding
shares or bonus shares.
c) Assets- A firm is not restricted to paying dividends to its owners in the form of shares or
cash. It is complementary to pay for other properties, such as physical assets, investment
safeties, and even property, although this is sometimes done.
d) Special- A special dividend can be specified as paid beyond a firm's conventional plan.
That is, yearly and quarterly. It is generally the result of having added cash.
e) Common- This sort of Dividend refers to the class of shareholders, that is, typical
shareholders, not what's being gotten as payment.
f) Preferred- This is similar to standard and refers to the course of shareholders receiving the
payment.
g) Other- Much less usual, other financial assets can be paid out as choices, dividends,
warrants, shares in a new spin-out firm, and so on.

Accounting treatment of Dividend

After the firm pays the Dividend to its shareholders, it is tape-recorded by debiting the
maintained income account. The business's undistributed profits for an accounting year or
period of different years. This entry will reflect the total number of dividends to be paid.
Debiting the account will function as a reduction in the amount of that account.

The dividends payable account records the amount the company owes to its shareholders. It is
called a liability. It prevails practice to videotape it under current liabilities in the primary
journal hierarchy. Credit scores are the amount in the Dividend payable account on the
declaration date.
The date of the document is when the GAAP accounting professionals are on holiday. It is
when a company recognizes the shareholders are to be paid. Because supplies of some
businesses can transform hands swiftly, the date of the document makes a point in time to
compute which individuals will get the dividends.

The date of payment is the last entry to videotape the provision of a cash dividend in the
firm's books of accounts. It includes documenting the dividend entry on the date the company
pays the cash dividend.

This transaction implies money heading out of business, which will attribute or decrease the
business's cash account and debit the dividends payable fee. It is essential to utilize the actual
payment date for the overall value of all dividends paid by the company.

As any person would expect, dividends need not impact a business's daily activities. That
means proclaiming, paying, and videotaping it in the books of accounts would maintain the
company's balance sheet. There is no requirement to fret, as the balance sheet will still be
balanced. After the record date, the responsibilities will rise, and the company's preserved
revenues will lower. After the payment is made, the cash account and the responsibility will
be reduced. The result across both entries will be a general reduction in cash and kept profits
for the Dividend amount.

It is critical to decide when to start paying dividends, how much to pay, and the regularity of
payments. This can be critical points in the positive outlook of the business owners or
supervisors and the maturity of the business.
Nevertheless, taping the amount of Dividend paid by the firm, whether the company uses a
cash basis or complies with GAAP, is very important because the financial records are
precise with appropriate dividend coverage.

Answer 3a

An asset can be defined as a resource with some economic value that a corporation,
individual, or country has or regulates with the expectation that it will supply an advantage in
the future. Assets are tape-recorded on the firm's annual report. They are identified as
financial, current, and intangible. They are developed or acquired to increase a firm's value or
profit. An asset can additionally be defined as valuable goods that can generate capital,
enhance sales, or lower expenditures, regardless of whether it is a patent or manufacturing
tool.

Total assets can be the amount of all the assets owned by a particular company.
Total assets= Accounts receivable + Supplies + equipment + unearned revenue + cash +
prepaid insurance + common stock
= 240 + 500 + 1000 + 475 + 1170+ 100 + 1500= 4985
Total liabilities excluding stockholders' equity= Retained earnings + salaries payable +
accounts payable = 668 + 167 + 200 = 1035
Stockholders' equity= Total assets – Total liabilities = 4985-1035=3950
A business includes assets, liabilities, and investors' equity. Assets are the sources that bring
some value, and liabilities are a kind of debt that a business will pay soon. It is constantly
helpful for a firm to increase its assets and reduce its liabilities. Because a debt-free company
I the most effective company to invest in, an investor seeks his financial investments.

For example, Mr. Randhawa is looking to spend one crore rupees on an FMCG company. He
is trying to find a business that will offer him compounded wide range in minimal time.
There are two FMCG businesses out there. One is Britannia, and the various other is ITC.
Britannia is a debt-free business with assets worth 40,000 crores, and on the other hand, ITC
is a business that has a total debt of 40,000 crores, and its assets are valued at 30,000 crores.
So, after examining the firm's basics, Mr. Randhawa has concluded that it is wiser to
purchase Britannia than ITC.

Mr. Randhawa chose Britannia over ITC because it is a debt-free company with numerous
assets, so his financial investment would be much safer and supply him with extraordinary
returns.

It is all the game of valuations and is leading in the sector. So, the company should constantly
decrease its liabilities and enhance its assets. It will enhance its financial value and draw in
more financiers than it needs.

Answer 3b

A balance sheet can be defined as a financial statement that depicts the company's financial
setting. It records the liabilities and assets of a firm at the end of the fiscal year after the
preparation of trading and earnings and loss account.

Not-for-profit organizations make their balance sheet to determine the financial position of
the company's establishment. Preparing an annual report is complex, and one needs to be
experienced to achieve desired outcomes.

In an annual report, the assets are videotaped on the left-hand side, and the liabilities are
taped on the right-hand side.

There are certain advantages of a balance sheet-

a) Calculation of various ratios- A balance sheet can assist speculators, supervisors,
controllers, and money lenders in taking the proportion of a company by establishing
financial percentages making use of information and numbers from the balance sheet,
generally connected to different reports. For instance, the pay proclamation, for example,
balance sheet information, are used to look at liquidity, which is the capacity of the company
to cover its current tabs.
b) Business preview or snapshot- A company's annual report assists us in predicting the
company's financial setting. It depicts what a company declares and what the business owes.
The difference between assets and obligations is called the business's total assets.
c) Assurance of risk-return- The annual report splits itself into various components, amongst
which lengthy and brief sources mirror the appetite of business to create cost-free profits and
maintain the tasks.
There are certain disadvantages of the balance sheet-
a) Misquoted long-term assets- long-lasting resources to last over one year and incorporate
things like the plant, residential or commercial property, and equipment. The balance sheet
documents the estimate of long-haul assets at the expense spent for them, called publication
esteem and verifiable. Among the constraints of this financial device is that it needs to
remember the present estimate of these assets.
b) Missing assets- An annual report videotapes only some business assets. For example, a
company made a deal of 8000 crore rupees with one more company; however, it will not be
taped in an annual report. So, the significant disadvantage of a balance sheet is that it misses
some assets.
c) Needs comparison- To fully use points that are yet to be established, one should figure out
the business's balance sheet, which of competitors, and their balance sheet over the various
bookkeeping period. It is a basic errand to make the relationship bear the goods of the annual
report.