ACCOUNTANCY - vishvasbook.com Project Workbook_1.pdf · Dr. VINOD KUMAR M.Com., B.Ed, Doctorate in...

Name of the Student........................................................................................

Name of the School.........................................................................................

Class ........................................... Roll No. ......................................................

Chandigarh–Bengaluru–Delhi–Guwahati–Hyderabad–IndoreJammu–Jodhpur–Kolkata–Lucknow–Mumbai–Patna–Ranchi

PROJECT WORKBOOK

ACCOUNTANCYAs per the Latest Syllabus & guidelines Issued by CBSE for Project Work in Accounting

AUTHOR

Dr. VINOD KUMARM.Com., B.Ed, Doctorate in Commerce

XIICBSE

PrefaceI am feeling great pleasure in putting the Accountancy Project Workbook for class XII in the hands of Honorable Academic Community. The main purpose of writing this project workbook is to provide the practical knowledge of accounting to the students. I am confident that this project workbook will be certainly helpful to the students and the teaching fraternity. I am extremely grateful to the entire team of Vishvas Publications for providing wings to my ideas.I would also like to thank to the students, teachers, lecturers and Chartered Accountants across the country for appreciating my work in the field of accountancy.Why this project workbook is valuable for the students?

They will learn the meaning of project work and how to prepare a good project?

They will understand the value of project work in their real life. They will learn that how to identify, collect, and analyse the financial

data for the project work. They will understand the concept of Analysis and Interpretation. They will understand the concept of Cash Flow Statement. They will understand the concept of Ratio Analysis.

This project workbook is designed as per the latest syllabus issued by C.B.S.E. In this book �Four Solved Sample Projects� have been given to assist the students to develop a good project.Topics covered under this project work are :1. Analysis and Interpretation of Financial Statements.2. Ratio Analysis3. Cash Flow StatementStudents and teachers may directly contact to the Author to clear their doubts or for any suggestion for the improvement.

AuthorVinod Kumar (Accountancy Guru)www.accountancybook.com E-mail : [email protected]

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ContentsCBSE Guidelines 6�8

Part-B : Financial Statement Analysis

PROJECT�1 9�32

Part-A : Comprehensive ProblemPart-B : Project on Segement AnalysisPart-C : Cash Flow Statement

PROJECT�2 33�52

Part-A : Comprehensive ProblemPart-B : Project on Segement AnalysisPart-C : Cash Flow Statement

Computerized Accounting (Part-C)

Project�3 53�55Payroll Mate Software

Project�4 56�61Easy Accounts

Viva Questions (Part�B) 62�66Viva Questions (Part�C) 67�68

VALIDITY CERTIFICATE

This is to certify that this Accountancy Project Workbook belongs to

Name ......................................................................................................................

Roll No ............................ Class .................................... Section .............................

Session ................................... of ..............................................................................

The Projects recorded in this Project Workbook have been done by the candidate in

the school and the signatures affixed on recorded projects are genuine.

The student's initiative, cooperation and participation during the practical

classes is .Excellent/Good/Average

His/Her aesthetic presentation, visual appeal, expression and neatness is

Excellent/Good/Average.

His/Her content accuracy, creativity, originality and analysis of different

perception is .Excellent/Good/Average

Date : ..................... Teacher-Incharge

I wou ld l ike to convey my hear t f e l t thanks to

Mr/Mrs................................................ my Accountancy

teacher, who always gave valuable suggestions and guidance

for completion of my project. He/She helped me to

understand and remember important details of the project

that I would have otherwise lost. My project has been a

success only because of his guidance.

Acknowledgement

Name of Project................................................................

Name of Student..............................................................

Class Roll No Section................ ....................... .................

School Name....................................................................

5 Project–1

CBSE GUIDELINES FOR PROJECT WORK IN ACCOUNTING FOR CLASS�XII

The Board has introduced Project Work in Accounting for Class-XII in the Optional Part B : 'Financial Statement Analysis'. It is expected that the Project Work will help the students in developing the skills to comprehend, analyse and interpret accounting data of the business firms and make it meaningful for taking business decisions.

Objectives

l To enable a student to complete the accounting process in real life business situations and apply the tools of analysis as per the syllabus for a comprehensive project.

l To develop the competence of reading accounting data from quarterly or half yearly or annual reports of business firms and interpreting the information on the basis of given guidelines to present the desirable information in required format in the Project File for Specific Projects.

Guidelines for TeachersDuring the academic session the students will work on at least three types of projects out of which one will be of Comprehensive nature. The comprehensive project will involve the students from the initial stage of accounting to the preparation and analysis of financial statements. The data provided or the Project Statement will be as close to the real life situations as possible. The project statement should cover all important aspects like investments, financing, operating, adjustments to final accounts, etc. in a condensed form. The situations given in these problems will require a student to derive meaningful conclusion for taking decisions for the purposes of investment, expansion, financing, etc.

Two projects will be of specific nature using atleast one tool of analysis in each. The data for these will be drawn mainly from quarterly or half yearly or annual reports of corporate sector. Students will analyze the information given in the financial statements as follows:

(a) Performance of Segments keeping in mind their three parameters Revenue, Net Profit and Capital Employed of companies on quarterly or half yearly or annual basis. This is widely published and reported by the companies. It can be picked up either from the newspapers or from the websites of the companies.

(b) Comparison of Revenue, Net Profit and Earning Per Share (EPS) on quarterly or half yearly or annual basis with the help of comparative or common size statements. The Projects given in these guidelines are on sample areas of business activities like Segment Reporting, etc. The teachers and students are free to explore more such areas of business activities for specific projects.

There are four tools of analysis given in the syllabus for the analysis of Financial Statements, namely (i) Comparative Statement, (ii) Common Size Statements, (iii) Ratios and (iv) Cash Flow Statement. Any one or more of these tools are to be used to derive conclusions. No project is to be prepared on the tools, but these tools are to be used to achieve the object of the project. For instance, there will not be any project on the 'Ratios' as such, but ratios will be used in the development of the project to reach a conclusion.

Part�B : Financial Statement AnalysisProject WorkDuration: 1:30 Min Marks: 20Unit-1 Project File 4 Marks : As per requirement (given below)Unit-2 Written Test 12 Marks : One hourUnit-3 Viva Voce 4 Marks : As per requirement (given below)

Part�C : Computerzised AccountingPractical WorkUnit-1 File : 4 MarksUnit-2 Practical Examination : 12 Marks-1hr.Unit-3 Viva Voce : 4 Marks

XII 6Vishvas Accountancy Project Workbook

Scope

For the purpose of Project Work, the following ratios will be included :

Liquidity Ratios : Current Ratio, Liquidity Ratio.

Solvency Ratios : Debt to Equity; Total Assets to Debt, Proprietary Ratio.

Activity Ratios : Inventory Turnover, Debtors Turnover, Payables Turnover, Working Capital Turnover, Fixed Assets Turnover, Current Assets Turnover.

Profitability Ratio : Gross Profit Ratio, Operating Ratio, Net Profit Ratio, Return on Investment, Earning Per Share � Price Earnings Ratio.

A few projects have been given in detail at the end of the guidelines for practice. The student is expected to analyze the facts, and present the information in a meaningful manner for interpretation. Teachers are expected to discuss these problems thoroughly with the students and encourage them to come out with solutions. They are also expected to collect the quarterly or half yearly or annual Segment reports and Revenue and Net Profit reports of companies from newspapers or from the websites of the companies and formulate their own problems for Project Work.

UNIT-1: PROJECT FILE

Students will prepare a Project File to record their work related to the problems attempted by them in the following format :1. First page of the file should describe title of work, identity of student, school, and the teacher

concerned.2. Index to indicate columns for title of work, page no., date, teacher's remarks and signature.3. The format for Project Work will be :l Statement of the problem/Name of the Projectl Objectivesl Period of Studyl Source Materiall Tools of Analysis usedl Processing and Tabulation of datal Diagrammatic/graphic presentation- pie-diagrams, bar diagrams and graphs.l Derivations, Interpretation and Conclusion.l Assumptions (if any)Project File should be neatly handwritten and presentable with page numbers. Each step of the solution needs to be highlighted. Conclusions drawn should be placed in boxes at the end.

Evaluation

Guidelines for the ExaminerWhile evaluating the Project File, marks are to be awarded out of four, based on :l Contentl Coveragel Presentationl Interpretation and Conclusionl Originality and Quality of work

7 Project–1

UNIT-2: WRITTEN TEST

Objectives

l To give them exposure to analyse the financial statements of business firms and help them to derive meaningful information and conclusions therefrom.

l To know how effectively the students can derive conclusions and express them.

Guidelines for Teachers

Teachers will discuss with students the sample questions for this test and develop question papers for the purpose in their house examinations.

Guidelines for Examiners

Students will be given 2 application-oriented problems of 6 marks each covering the tools for analysis of financial statements. The question paper will be set in consultation with the school teacher. No question similar to the question given in the 3 hour question paper of the Board, should be asked here. Only such questions, relating to financial statements of companies should be asked which encourage thinking on practical lines. The external examiner will discuss with the internal examiner all the projects completed during the year and set the questions accordingly. On the day of the examination both should come prepared with atleast 10 questions each. Both the internal and external examiners must agree on the nature and scope of questions asked. It must be ensured that multiple sets of papers are prepared. Marks will be awarded on the steps taken, data identified and solution arrived at.

UNIT-3: VIVA�VOCE

Objectivesl To assess whether the student has understood the topic covered and is able to express.

l To assess whether the Project File presented by the student is genuine and prepared by him only.

Guidelines for Teachersl During the course of the academic year, the teacher must give thorough practice to the

students on �Viva Voce� examination on each aspect of the Project report and file.

l During all internal examinations 'Viva Voce' examination should form an integral part of the practical examination.

l Wherever possible, the teacher may invite a colleague/expert from another school for asking questions. This will rehearse the students for the final examination.

Guidelines for Examinersl The work done by the students in Project file will form the basis of asking questions. The

external examiner may ask 2-3 questions to test the authenticity of the work done in the files. Marks will be awarded out of 4 in consultation with the school teacher.

Viva Questionsl Should relate only to the Project.

(a) To check the authenticity of the work and

(b) To check that the student understands the idea behind the Project.


Part – A : Comprehensive ProblemPROJECT – 1

Vinod Kumar a highly motivated commerce student from Delhi, very much interested in the field of commerce. At school level he had decided to become an entrepreneur as he was very much interested in Business Studies, Accountancy and Entrepreneurship subjects. He pursued B. Com for under graduation and did his Masters (MBA) in Business Administration from Delhi University. After completing his masters, he decided to start his own business (Sole Proprietorship). For this purpose he carried out a market survey, the results of which convinced him to target the young generation.

After doing a lot of market research and survey, he decided to manufacture the following products:

(1) Smartphones (Product Line)

(2) Digital Cameras (Product Line)

(3) Tablets (Product Line)

(4) Home Theater System (Product Line)

He has also decided to open a school to provide free education to the children belonging to remote areas and economically backward section of the society. For this purpose he has decided to spend some amount of profit every year.

He told his parents about his business ideas (He had decided to start), parents were very supportive and gave him Rs.30,00,000 as an addition to his own savings of Rs.5,00,000.

l He started business with Rs.35,00,000

l He opened a Bank Account with ICICI bank in the name of business and deposited Rs.50,000.

l He found that his investment amount (Capital) is not enough to run the business. So he decided to obtain a loan from IDBI (Bank) of Rs.15,00,000 @ 10% p.a.

He purchased the following assets for business:

Land and Building Rs.12,00,000

Plant and Machinery Rs.7,00,000

Office Furniture Rs.60,000

Office Equipments Rs.40,000

Stock Rs.4,00,000

Payment is made through cash Rs.15,00,000 and Balance through cheque.

l Goods purchased for cash Rs.5,00,000

l Goods purchased on credit Rs.7,00,000

l He also purchased a laptop for office use for Rs.40,000 and four computers for staff for Rs.60,000

l Goods sold (Cash) Rs.11,00,000

l Goods sold (Credit) Rs.9,00,000

l Purchase return during the year Rs.50,000

l Sales return during the year Rs.30,000

l Cash received from debtors Rs.5,00,000

l Cash paid to creditors Rs.6,00,000

PART�B : FINANCIAL STATEMENT ANALYSIS

9 Project–1

l Bills Receivable Rs.60,000

l Bills Payable Rs.40,000l Goods taken for personal use Rs.10,000l Goods given as charity Rs.15,000l Goods distributed as free samples Rs.20,000l Rent paid for Office Building Rs.5,000l Stationery purchased for office Rs.8,000l Withdrawn from bank for office use Rs.1,50,000l Paid electricity bill Rs.4,000l Office expenses paid through cheque Rs.12,000l Salaries paid to staff Rs.1,00,000l Typewriter purchased for office use Rs.9,000l Paid Rs.3,000 for repair of machineryl Paid fire insurance premium for office building by cheque Rs.6,000.l Paid for advertisement (TV and 'The Hindustan Times') Rs.60,000l Printing and stationery expenses Rs.4,000l Additional capital introduced by Mr. Vinod Kumar as per the requirement of Business

Rs.2,00,000l A fire occurred in the godown and stock of the value of Rs.6,000 was destroyed. Nothing was

received from insurance company because these goods were not insured.l Postage and telephone expenses Rs.2,000l Carriage inward Rs.6,000l Carriage outward Rs.5,000l A new printer purchased for office Rs.7,000l Bank charges Rs.1,000l General expenses Rs.1,500l License and registration fee Rs.800l Transportation Expenses Rs.1,200l Audit fees paid Rs.4,000l Interest paid on bank loan (IDBI) by the bank (ICICI) as per the standing advice Rs.1,20,000As an accountant you are required to Journalise these transactions and post them into ledger accounts and prepare a Trial Balance.(1) Prepare Trading and Profit and Loss Account for the year ending 31st March 2016 and balance

sheet on the same date after considering the following adjustments: (a) Plant & machinery are to be depreciated @ 6% p.a. (b) Depreciation on office furniture and office equipments is to be charged @8% p.a. (c) Closing Stock at the end Rs.1,00,000. (d) Salaries outstanding Rs.40,000 (e) Interest on bank loan outstanding Rs.30,000 (f) Manager will get commission on net profit after charging such commission @ 5% p.a. (only

in the case of profit).(2) Comment on the financial position and profitability of the business and give valuable

suggestion to the management when gross profit of the similar firm is Rs.5,00,000 and net profit is Rs.40,000.


Cash A/c Dr. 35,00,000 To Capital A/c 35,00,000(Being business commenced)

Bank (ICICI) A/c Dr. 50,000 To Cash 50,000 (Being bank (ICICI) account opened)

Bank (ICICI) A/c Dr. 15,00,000 To 10% Bank Loan (IDBI) 15,00,000(Being loan obtained from bank)

Land and Building A/c Dr. 12,00,000Plant and Machinery A/c Dr. 7,00,000Office Furniture A/c Dr. 60,000Office Equipments A/c Dr. 40,000Stock A/c Dr. 4,00,000 To Cash A/c 15,00,000 To Bank (ICICI) A/c 9,00,000(Being assets purchased)

Purchase A/c Dr. 5,00,000 To Cash 5,00,000(Being goods purchased in cash)

Purchase A/c Dr. 7,00,000 To Creditors A/c 7,00,000(Being goods purchased on credit)

Office Equipments A/c Dr. 1,00,000 To Cash A/c 1,00,000(Being laptop purchased for office use)

Cash A/c Dr. 11,00,000 To Sales A/c 11,00,000 (Being goods sold in cash)

Debtors A/c Dr. 9,00,000 To Sales 9,00,000(Being goods sold on credit)

Creditors A/c Dr. 50,000 To Purchase Return A/c 50,000(Being goods returned)

Sales Return A/c Dr. 30,000 To Debtors A/c 30,000(Being goods returned)

Cash A/c Dr. 5,00,000 To Debtors A/c 5,00,000(Being cash Received from debtors)

Particulars Credit(`)Debit(`)L.FDate

Solution. Journal Entries

11 Project–1

Creditors A/c Dr 6,00,000 To Cash A/c 6,00,000 (Being cash paid to creditors)

Bills Receivable A/c Dr. 60,000 To Debtors A/c (Being bills receivable from debtors) 60,000

Creditors A/c Dr. 40,000 To Bills Payable 40,000(Being bills payable to creditors)

Drawings Dr. 10,000 To Purchase A/c 10,000(Being goods taken for personal use)

Charity A/c Dr. 15,000 To Purchase A/c 15,000(Being goods given as charity)

Free Samples A/c Dr. 20,000 To Purchase A/c 20,000(Being goods given as free sample)

Rent A/c Dr. 5,000 To Cash A/c 5,000(Being rent paid)

Stationery A/c Dr. 8,000 To Cash A/c 8,000(Being stationery purchased for office)

Cash A/c Dr. 1,50,000 To Bank (ICICI) A/c 1,50,000(Being cash withdrawn from bank)

Electricity Expenses A/c Dr. 4,000 To Cash A/c 4,000(Being electricity expenses paid)

Office Expenses A/c Dr. 12,000 To Bank (ICICI) A/c 12,000(Being office expenses paid)

Salaries A/c Dr. 1,00,000 To Cash A/c 1,00,000(Being salaries paid)

Office Equipments A/c Dr. 9,000 To Cash A/c 9,000(Being typewriter purchased for office use)

Repair A/c Dr. 3,000 To Cash A/c 3,000(Being repair expenses paid)


Fire Insurance Premium A/c Dr. 6,000 To Bank (ICICI) A/c 6,000(Being fire insurance premium paid)

Advertisement A/c Dr. 60,000 To Cash A/c 60,000(Being advertisement expenses paid)

Printing and Stationery A/c Dr. 4,000 To Cash A/c 4,000(Being printing and stationery expenses paid)

Cash A/c Dr. 2,00,000 To Capital A/c 2,00,000(Being additional capital introduced)

Loss by fire A/c Dr. 6,000 To Purchase A/c 6,000(Being goods lost by fire)

Postage and Telephone expenses A/c Dr. 2,000 To Cash A/c 2,000(Being postage & telephone expenses paid)

Carriage Inward A/c Dr. 6,000 To Cash A/c 6,000(Being carriage inward expenses paid)

Carriage Outward A/c Dr. 5,000 To Cash A/c 5,000(Being carriage outward expenses paid)

Office Equipment A/c Dr. 7,000 To Cash A/c 7,000 (Being printer purchased for office)

Bank Charges A/c Dr. 1,000 To Bank (ICICI) A/c 1,000(Being bank charges charged by bank)

General Expenses A/c Dr. 1,500 To Cash A/c 1,500(Being general expenses paid)

License and Registration fee A/c Dr. 800 To Cash A/c 800(Being license & registration fee paid)

Transportation Expenses A/c Dr. 1,200 To Cash A/c 1,200(Being transportation expenses paid)

Audit Fees A/c Dr. 4,000 To Cash A/c 4,000(Being audit fee paid)

13 Project–1

Interest on Bank Loan A/c Dr. 1,20,000 To Bank (ICICI) A/c 1,20,000(Being interest on bank loan paid)

Preparation of Ledger Accounts:Cash Account

To Capital A/c 35,00,000 By Bank A/c 50,000 To Sales A/c 11,00,000 By Assets A/c 15,00,000To Debtors A/c 5,00,000 By Purchase A/c 5,00,000To Bank A/c 1,50,000 By Office Equipments A/c 1,00,000To Capital A/c 2,00,000 By Creditors A/c 6,00,000 By Rent A/c 5,000 By Stationery A/c 8,000 By Electricity Expenses A/c 4,000 By Salaries A/c 1,00,000 By Office Equipment A/c 9,000 By Repair A/c 3,000 By Advertisement A/c 60,000 By Printing & Stationery A/c 4,000 By Postage & Telephone Exp. 2,000 By Carriage Inward A/c 6,000 By Carriage Outward A/c 5,000 By Office Equipments A/c 7,000 By General Expenses A/c 1,500 By License and Registration A/c 800 By Transportation A/c 1,200 By Audit Fee A/c 4,000 By Balance c/d 24,79,500 54,50,000 54,50,000To Balance b/d 24,79,500

Particulars Amount(` ) Amount(` )Particulars

Capital Account

To Balance c/d 37,00,000 By Cash A/c 35,00,000 By Cash A/c 2,00,000 37,00,000 37,00,000 By Balance b/d 37,00,000


Bank Account (ICICI)

To Cash A/c 50,000 By Assets A/c 9,00,000To 10% IDBI Bank Loan 15,00,000 By Cash A/c 1,50,000



By Bank A/c 15,00,000To Balance c/d 15,00,000 15,00,000 15,00,000 By Balance b/d 15,00,000


Land and Building Account

To Balance b/d 12,00,000 By Balance c/d 12,00,000 12,00,000 12,00,000 To Balance b/d 12,00,000


10% IDBI Bank Loan Account

By Office Expenses A/c 12,000 By Fire Insurance Premium 6,000 By Bank Charges 1,000 By Interest on bank loan 1,20,000 By Balance c/d 3,61,000 15,50,000 15,50,000To Balance b/d 3,61,000

Plant and Machinery Account

To Balance b/d 7,00,000 By Balance c/d 7,00,000 7,00,000 7,00,000To Balance b/d 7,00,000


Office Furniture Account

To Balance b/d 60,000 By Balance c/d 60,000 60,000 60,000To Balance b/d 60,000


Office Equipments Account

To Balance b/d 40,000To Cash A/c 1,00,000 By Balance c/d 1,56,000To Cash A/c 9,000To Cash A/c 7,000 1,56,000 1,56,000To Balance b/d 1,56,000


15 Project–1

Purchase Account

To Cash A/c 5,00,000 By Loss by fire 6,000To Creditors A/c 7,00,000 By Charity 15,000 By Purchase A/c 10,000 By Free Samples 20,000 By Balance c/d 11,49,000 12,00,000 12,00,000To Balance b/d 11,49,000


Stock (Inventory) Account


To Balance b/d 4,00,000 By Balance c/d 4,00,000 4,00,000 4,00,000To Balance b/d 4,00,000

Creditors Account

To Purchase Return A/c 50,000 By Purchase A/c 7,00,000To Cash A/c 6,00,000To Bills Payable A/c 40,000To Balance c/d 10,000 7,00,000 7,00,000 By Balance b/d 10,000


Sales Account

By Cash A/c 11,00,000To Balance c/d 20,00,000 By Debtors A/c 9,00,000 20,00,000 20,00,000 By Balance b/d 20,00,000


Debtors Account

To Sales A/c 9,00,000 By Sales Return A/c 30,000 By Cash A/c 5,00,000 By Bills Receivable 60,000 By Balance c/d 3,10,000 9,00,000 9,00,000To Balance b/d 3,10,000



Sales Return Account

To Debtors A/c 30,000 By Balance c/d 30,000 30,000 30,000To Balance b/d 30,000


Purchase Return Account

By Creditors A/c 50,000To Balance c/d 50,000 50,000 50,000 By Balance b/d 50,000


Bills Receivable Account

To Debtors A/c 60,000 By Balance c/d 60,000 60,000 60,000To Balance b/d 60,000


Bills Payable Account

By Creditors A/c 40,000To Balance c/d 40,000 40,000 40,000 By Balance b/d 40,000


Drawings Account

To Purchase A/c 10,000 By Balance c/d 10,000 10,000 10,000To Balance b/d 10,000


Charity Account



17 Project–1

Rent Account

To Cash A/c 5,000 By Balance c/d 5,000 5,000 5,000To Balance b/d 5,000


Free Samples Account



Stationery Account



Electricity Expenses Account



Office Expenses Account

To Bank A/c 12,000 By Balance c/d 12,000 12,000 12,000To Balance b/d 12,000


Salaries Account

To Cash A/c 1,00,000 By Balance c/d 1,00,000 1,00,000 1,00,000To Balance b/d 1,00,000



Fire Insurance Premium Account



Repair Account



Advertisement Account

To Cash A/c 60,000 By Balance c/d 60,000 60,000 60,000 To Balance b/d 60,000


Printing and Stationery Account



Loss by Fire Account



Postage & Telephone Expenses Account



19 Project–1

Carriage Outward Account



Carriage Inward Account



Bank Charges Account



General Expenses Account



License and Registration Fee Account

To Bank A/c 800 By Balance c/d 800 800 800To Balance b/d 800


Transportation Expenses Account




Interest on Bank Loan Account

To Bank A/c 1,20,000 By Balance c/d 1,20,000 1,20,000 1,20,000 To Balance b/d 1,20,000


Audit Fee Account


To Bank A/c 4000 By Balance c/d 4000 4000 4000 To Balance b/d 4000

Trial Balance

Particulars Debit Credit

Cash 24,79,500Capital ......... 37,00,000Bank 3,61,000 ........10% IDBI Bank Loan 15,00,000 Land and Building 12,00,000 ........ Plant and Machinery 7,00,000 ........Office Furniture 60,000 ........Office Equipments 1,56,000 ........Stock 4,00,000 ........Purchase 11,49,000 ........Creditors ....... 10,000Sales ....... 20,00,000Debtors 3,10,000 ........Purchase Return ...... 50,000Sales Return 30,000 ........Bills Receivable 60,000 ........Bills Payable ...... 40,000Drawings 10,000 ........Charity 15,000 ........Free Samples 20,000 ........Rent 5,000 ........Stationery 8,000 ........Electricity Expense 4,000 ........Office Expense 12,000 ........Salaries 1,00,000 ........

21 Project–1

Repair 3,000 ........Fire Insurance Premium 6,000 ........Advertisement 60,000 ........Printing and Stationery 4,000 ........Loss by Fire 6,000 ........Postage and Telephone Expenses 2,000 ........Carriage Inward 6,000 ........Carriage Outward 5,000 ........Bank Charges 1,000 ........General Expenses 1,500 ........License & Registration Fee 800 ........Transportation Expenses 1,200 ........Audit Fee 4,000 ........Interest on Bank Loan 1,20,000 ........ 73,00,000 73,00,000

Trading Account

To Opening Stock 4,00,000 By Sales 20,00,000To Purchases 11,49,000 Less : Return 30,000 19,70,000Less : Return 50,000 10,99,000 By Closing Stock 1,00,000To Carriage Inward 6,000To Gross Profit 5,65,000 20,70,000 20,70,000


Profit and Loss Account

To Charity 15,000 By Gross Profit b/d 5,65,000To Free Samples 20,000To Rent 5,000To Stationery 8,000To Electricity Expenses 4,000To Office Expenses 12,000To Salaries 1,00,000Add : outstanding 40,000 1,40,000To Repair 3,000To Fire Insurance Premium 6,000To Advertisement 60,000To Printing & Stationery 4,000To Loss by fire 6,000To Postage & Telephone 2,000To Carriage outward 5,000



To Bank Charges 1,000To General Expense 1,500To License & Registration 800To Transportation Expense 1,200To Audit Fee 4,000To Int. on Bank Loan 1,20,000Add : Outstanding 30,000 1,50,000To Dep. on Plant & machinery 42,000To Dep. on Office Furniture 4,800To Dep. on Office Equipments 12,480 To Net Profit 57,220 5,65,000 5,65,000To Manager's Commission 2,725 Net Profit b/d 57,22057,220 × 5/105 To Adjusted N/P 54,495 57,220 57,220

Balance Sheet

Capital 37,00,000 Land and Building 12,00,000Add : N/P 54,495 Plant & Machinery 7,00,000Less : Drawings 10,000 37,44,495 Less : Depreciation 42,000 6,58,00010% Bank Loan (IDBI) 15,00,000 Office Furniture 60,000Interest outstanding on loan 30,000 Less : Depreciation 4,800 55,200Creditors 10,000 Office Equipments 1,56,000Bills Payable 40,000 Less : Depreciation 12,480 1,43,520Salaries Outstanding 40,000 Debtors 3,10,000Manager's Commission 2,725 Bills Receivable 60,000 Stock 1,00,000 Bank 3,61,000 Cash 24,79,500 53,67,220 53,67,220

Liabilities Amount(` ) Amount(` )Assets

Analysis & Interpretation

1. Gross Profit Ratio = Gross Profit/ Net Sales × 100

= 5,65,000/19,70,000 × 100 = 28.68%

2. Net Profit Ratio = Net Profit/Net Sales × 100

= 54,495/19,70,000 × 100 = 2.77%

3. Working Capital Turnover Ratio = Net Sales/Cost of Revenue from Operations

= 19,70,000/14,05,000 = 1.40 Times

Cost of Revenue from Operation = Net Sales � Gross Profit

4. Inventory Turnover Ratio = Cost of Revenue from Operations/ Average Inventory

= 14,05,000/2,50,000 = 5.62 Time

23 Project–1

Presentation Through Bar Diagram

0

1,00,000

2,00,000

3,00,000

4,00,000

5,00,000

6,00,000

Gross Profit Net Profit

(before commission)

Net Profit (after commission)

Profit

5. Trade Receivables Turnover Ratio = Net Credit Sales/Average Trade Receivables

= 8,70,000/3,70,000 = 2.35 Times

6. Trade Payable Turnover Ratio = Net Credit Purchase/Average Trade Payables

= 6,50,000/50,000 = 13 Times

Comparison of Gross Profit with other Business

0

100000

200000

300000

400000

500000

600000

Gross Profitof MainBusiness

Gross Profitof SimilarBusiness

Comparison of Net Profit with other Business

0

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20000

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NetProfit of

MainBusiness

NetProfit ofSimilar

Business


i The amount invested by Mr. Vinod Kumar is very effective and able to make the Investment :profit in the first year of its working.

i Mr. Vinod Kumar has successfully arranged the finance for the business and used it Financing :in a very systematic way.

i Cash in hand Rs.24,79,500 is a big amount, Mr. Vinod Kumar can use this amount Expansion :for the expansion of the business.

i There is a big difference in the amount of Gross Profit and Net Suggestions and Comments :Profit. Mr. Vinod Kumar should practice cost cutting methods. Net profit of the business can be increased only by reducing or cutting the cost. He should also use effective advertising methods to increase the sales of the business and to make a solid foothold in the market. Gross Profit Ratio is very good but Net Profit Ratio is not satisfactory in comparison to the Gross Profit. Working Capital Turnover Ratio is 1.40 times, it indicates that working capital should be utilized effectively and efficiently. Trade Receivable Turnover Ratio indicates that business has successfully realized the amount due from debtors. Inventory management of the business is very good. Mr. Vinod Kumar is not only operating a good business but also doing social work by promoting education among the financially weak children who cannot afford expensive education, books and stationery etc. Overall his business is doing well in comparison to the similar business.

1. Name of Project: Segment Analysis of VK Industries

VK Industries is an Indian conglomerate holding company headquartered in Mumbai, Maharashtra, India. VK Industries owns businesses across India engaged in petrochemicals, refining, natural resources. VK Industries is the most profitable company in India, the second-largest publicly traded company in India by market capitalization and the second largest company in India as measured by revenue after the government-controlled Corporation. The company is ranked 111th on the Fortune Global 500 list of the world's biggest corporations, as of 2015. VK Industries contributes approximately 20% of India's total exports.

Analysis of performance of each segment of VK Industries Limited with reference to

(1) Revenue (2) Profit and (3) Capital employed

2. Objectives:

(a) To study whether the contribution of various segments of VK Industries Limited with respect to (i) Revenue and (ii) Profit is justified ?

(b) 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 31st March, 2015

4. Tools of analysis:

(1) Common Size Statement and (2) Ratios

5. Source material:

Newspaper cutting of Audited Financial Results of VK Industries Limited from the Economic Times dated 5 August, 2015 or the Website of the company.

Part – B : Project on segment analysis - Vk Industries

Conclusion

25 Project–1

Common Size Statement Showing Inter-Segment Comparison of RevenueFor the year ended 31 March, 2015

Segment Petrochemicals Refining Oil & gas Others Total

Revenue 19133 142352 9746 4619 175850

Percentage of 10.88 80.95 5.54 2.63 100Revenue

o o o o oDegrees for 39.17 291.43 19.95 9.45 360 Pie Diagram

Source : The Economic Times 5 August, 2015.

Use the formula = × 100 Revenue of the segment

Total Revenue

Degree = × 360 Revenue of the segment

Total Revenue

6. Processing of data :

I. Common Size Statement of Segment Wise Revenue

Compare the Revenue from Operations of each segment of VK Industries with total revenue for the year ended 31 March 2015

Pie chart Representing Segment Revenue

Petrochemicals

Refining

Oil & gas

Others

Total

II. Common Size Statement of Segment Wise Profit

l Compare the profit of each segment of VK Industries Limited with total profit for the year ended 31 March, 2015.

l Use the formula to calculate percentage and degrees for making pie diagram.

Percentage = × 100 Profit of the segment

Total Profit

Degree = × 360 Profit of the segment

Total Profit

Common Size Statement Showing�Inter Segment Comparison of Profit For the year ended 31 March, 2015


Profit (in Lakhs) 9759 11978 1352 408 23497

Percentage of 41.53 50.98 5.75 1.74 100 Profit

Degrees for 149.52° 183.52° 20.71° 6.25° 360° Pie Diagram



Pie chart Representing Segment Revenue

Petrochemicals

Refining

Oil & gas

Others

Total

III. Common Size Statement of Segment Wise Capital Employed

l Compare the capital employed of each segment of VK Industries Limited with total capital employed for the year ended 31 March, 2015.

l Formula to calculate percentage and degrees for making pie diagram.

Percentage = × 100 Capital Employed of the Segment

Total Capital Employed

Degree = × 360 Capital Employed of the Segment

Total Capital Employed

Common Size Statement Showing Inter Segment Comparison of Capital EmployedFor the year ended 31 March, 2015


Capital Employed 20805 99990 2445 10382 133622

(in Lakhs)

Percentage of total 15.57 74.83 1.83 7.77 100capital employed

Degrees for 56.05° 269.39° 6.59° 27.97° 360° Pie Diagram


IV. Calculation of Return on Investment

l Calculate the Return on Investment of each segment of VK Industries Limited for the year ended 31 March, 2015.

l Formula to calculate Return on Investment.

Return on Investment = × 100 Profit Before Interest, Tax and Dividend

Capital Employed

Statement Showing Inter Segment Comparison of ROI For the year ended 31 March, 2015


PBIT (in Lakhs) 9759 11978 1352 408 23497

Capital Employed 20805 99990 2445 10382 133622 (in Lakhs)

ROI % 46.91 11.98 55.28 3.93 17.58

Note: ROI % =PBIT/Capital Employed × 100

27 Project–1

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hem

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as

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Graphic Presentation of ROI

Combined Comparative Statement


Revenue (%) of total 10.88 80.95 5.54 2.63 100

PBIT (%) of total 41.53 50.98 5.75 1.74 100

Capital Employed 15.57 74.83 1.83 7.77 100

(%) of total

ROI (%) same 46.91 11.98 55.28 3.93 17.38

Conclusionsl VK Industries is doing well in the area of oil & gas and Petrochemicals.

l Company must focus on refining sector also because it may also contribute to the high profit to the firm.

l Oil and gas Segment has the highest ROI 55.28% with capital share of only 1.83%.

l With the Revenue share of 10.88% of the Total Revenue, Power Segment is able to generate a PBIT of 41.53% of the Total Profit.

l Power Segment also has a good ROI of 46.91%.

l Therefore, oil & gas Segment and Petrochemicals Segment are the best performing segments.

Future Projections

l Company has enough potential to handle the volatile situations. Company must create some reserves out of profits to meet the future contingencies.

l Company has 55.28% share of ROI, oil & gas segment seems to have a bright future. More funds should be diverted towards this segment from refining segment which is losing its shine.

l Petrochemical also has a future growth potential because of shortage of petrochemicals in the country. It will be a good idea to divert some funds towards this segment from refining Segment.

Vinod Limited is an Indian Conglomerate holding company headquartered in Delhi, Darya Ganj, India. The Company is present in many business sectors including textiles, retail and health care.

Part – C : Cash Flow Statement


Balance Sheet of Vinod Limited

I. EQUITY AND LIABILITIES

(1) Shareholders Funds

(a) Share capital 1 10,00,000 9,00,000

(b) Reserves and Surplus 2 2,36,000 1,40,000

(2) Current Liabilities

(a) Trade Payables 3 1,98,000 1,50,000

(b) Short term provision 4 2,00,000 1,64,000

Total 16,34,000 13,54,000

II. ASSETS

(1) Non-Current Assets

Fixed Assets

(i) Tangible Assets 5 7,40,000 5,60,000

(ii) Intangible Assets (goodwill) 1,80,000 2,30,000

(2) Current Assets

(a) Inventories 2,18,000 1,54,000

(b) Trade Receivables 6 4,60,000 3,60,000

(c) Cash and cash equivalents (cash) 36,000 50,000

Total 16,34,000 13,54,000

Particulars Note No. 2016 2015

Vinod Limited is the Third Largest publicly trading company in India by market capitalisation and is the second largest company in India by its Revenue from operations. The Company is ranked in Top in India by India Business Group. Company contributes 12% of India's total exports.

Following is the Balance Sheet of Vinod Limited (with additional information i.e. Notes to Accounts), prepare Cash Flow Statement and Interpret the result thereof:

Notes To Accounts

1. Share Capital

Equity share capital 8,00,000 6,00,000

Preference share capital 2,00,000 3,00,000

2. Reserves and Surplus

General Reserve 1,40,000 80,000

Statement of profit and loss 96,000 60,000

3. Trade Payables

Sundry Creditors 1,66,000 1,10,000

Bills Payable 32,000 40,000

4. Short Term Provisions

Proposed Dividend 1,00,000 84,000

Provision for Tax 1,00,000 80,000

Particulars 2016 2015

29 Project–1

Additional Information:

(i) Depreciation of Rs.20,000 and Rs.40,000 have been charged on plant and machinery and land and building during the year 2015-16.

(ii) An interim dividend of Rs.40,000 has been paid in the year 2015-16.

(iii) Rs.70,000 income tax has been during the year 2015-16.

Solution :

Introduction : The Project is to prepare Cash Flow Statement of Vinod Limited for the year ended 31st March 2016. Cash Flow Statement of the company will be prepared as per the Accounting Standard � 3 (Revised) issued by the Institute of Chartered Accountants of India. It also requires the interpretation of the results of the company.

Tools for the Analysis of Company's Result

(1) Cash Flow Statement

(a) Cash Flow From Operating Activities

(b) Cash Flow From Investing Activities

(c) Cash Flow From Financing Activities

(2) Analysis and Observation

(3) Preparation of Bar Diagram to show the Cash Generated (or used) under, Operating, Investing and Financing Activities.

5. Tangible Assets

Land and building 3,40,000 4,00,000

Plant and Machinery 4,00,000 1,60,000

6. Trade Receivables

Debtors 4,00,000 3,20,000

Bills Receivables 60,000 40,000

Cash Flow Statement

A. Cash flow from Operating ActivitiesProfit during the year Statement of P/L 36,000Add : General reserve 60,000 96,000Add : Interim Dividend 40,000Add : Proposed Dividend 1,00,000Add : Tax 90,000 3,26,000Add : Intangible Asset amortised 50,000Add : Depreciation 20,000 + 40,000 60,000Operating profit before working capital changes 4,36,000Add : Increase in creditors 56,000Less : Increase in sundry debtors (80,000)Less : Increase in Inventories (64,000)Less : Increase in Bills Receivable (20,000)

Particulars Detail Amount


Less : Decrease in Bills Payable (8,000) 3,20,000Less : Tax (70,000) Cash flow from operating activities 2,50,000B. Cash flow from Investing ActivitiesProceeds from sale 20,000Purchase of fixed assets (2,60,000)Cash flow from investing activities (2,40,000) C. Cash flow from Financing ActivitiesIssue of Share Capital 2,00,000Preference Shares Redeemed (1,00,000)Interim Dividend (40,000)Proposed Dividend (84,000)Cash flow from financing activities (24,000)D. Net increase in Cash and Equivalents (A+B+C) (14,000)Add: Cash & cash equivalents 50,000 Cash & cash equivalents at the end 36,000

Land and Building Account

To Balance b/d 4,00,000 By Bank (bal. fig. sale) 20,000 By Depreciation A/c 40,000 By Balance c/d 3,40,000 4,00,000 4,00,000


Plant and Machinery Account

To Balance b/d 1,60,000 By Depreciation A/c 20,000To Bank A/c 2,60,000 By Balance c/d 4,00,000(bal. fig. purchase) 4,20,000 4,20,000


Provision for Tax Account

To Bank A/c (Tax paid) 70,000 By Balance b/d 80,000To Balance c/d 1,00,000 By Statement of P/L 90,000 (bal. fig. provision made) 1,70,000 1,70,000


Analysis and Conclusion

Vinod Limited's Cash Flow Statement analysis shows the inflow and outflow of cash separately from the three different activities namely, Operating Activities, Investing Activities and Financing Activities.

31 Project–1

Result of Different Activities

Business Activities Amount

Cash From Operating Activities 2,50,000

Cash From Investing Activities (2,40,000)

Cash From Financing Activities (24,000)

-3,00,000

�2,00,000

�1,00,000

0

1,00,000

2,00,000

3,00,000

OperatingActivities

InvestingActivities

FinancingActivities

On the basis of the above analysis, we may conclude that business of Vinod Limited is doing well and prospects of the company are bright. But the company is carrying unusually low 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.

I. Cash Flow from Operating Activities

d Cash Flow from Operating Activities has a positive inflow of Rs. 2,50,000 in the year ended March 31st, 2016 which shows that the company has good operating activities i.e. principal revenue producing activities.

d Cash generated from operating activities amounted to Rs.2,50,000 which has been invested in purchasing of Fixed Assets.

II. Cash Flow from Investing Activities

d Cash flow from investing activities means that Vinod Limited has invested in fixed assets. Investment in terms of purchasing fixed assets which facilitated the business to earn more profit in future. It is also a healthy sign for any business.

d Proceeds from Sale of Fixed Assets Rs.20,000 is also utilised for purchasing of fixed assets and remaining amount is utilised for other payments.

III. Cash Flow From Financing Activities

d Rs.2,00,000 Share capital is raised and Preference Shares worth Rs.1,00,000 are redeemed by the company.

d Dividend paid to the Shareholders on Time.

d Financing Activities showing cash outflow because of redemption of preference shares and amount of dividend paid to the shareholders.

d Overall company is having Rs.36,000 Cash in hand which is a good sign.

d Company is able to meet its obligations and also meets the expectation of shareholders regarding return on their investment. That is why company is able to issue its Equity shares and raised Rs.2,00,000 share capital.


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