NMIMS - Financial Accounting & Analysis

 

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Financial Accounting & Analysis

 

1. With the given information prepare the statement of Profit and Loss of the company in vertical format.

 

TABLE BELOW

 

Depreciation and amortisation expenses	295600
Purchase of stock in trade	10450
Employees benefit costs	959139
Other expenses	565000
Revenue from sale of product	5000000
Other operating revenues	2500000
Cost of material consumed	1050000
Finance cost	525000

 

Also share your opinion on the statement – “Revenue from operations and earnings before interest, taxes, depreciation and amortization differs from each other”. How?  (10 Marks)

 

Sol:

 

1.  Preparation of statement of profit and loss     

 

Figure 1:

2. Cash flow statement is different as it classifies financial information into three major heads which allow the stakeholders in effective decision making. Discuss the broad heads as defined under AS 3 cash flow statement. What can be the potential benefits of preparing a cash flow statement? Elaborate (10 Marks)

Sol:

Discussion of AS 3 cash flow statement

The statement of cash flow can be regarded as a financial metric and a part of the financial statements that are released by an organization that primarily summarizes the number of cash equivalents and cash coming inwards and going outwards of an entity (Nga et al. 2020). The statement of cash flow primarily complements the other two financial metrics of financial statements namely the income statement and balance sheet (Knežević et al. 2018). Cash flow or CF provides the investors and the potential investors the opportunity to comprehend the operations of the organization along with determining the financial position of the entity. On the other hand, it also helps

3. These selected condensed data are taken from a recent balance sheet of Sambhav Realities (Rs in crores)

 

PARTICULARS	AMOUNT
Cash	29.3
Debtors	20.5
Inventory	28.7
Prepaid expenses	24
Outstanding payments	15.5
Trade payables	30.7
Unpaid taxes	25
Loan taken for construction of building for 11 months	50

 

a.     Discuss about current assets and current liabilities, classify the above into current assets and current liabilities (5 Marks)

 

Sol:

STATEMENT OF PROFIT AND LOSS

 

 

Figure 2: Statement of P&L

(Source: case study)

 

a. Classification of current liabilities and current assets along with Working capital

 

PARTICULARS	AMOUNT
Current Assets
Cash	29.3
Inventory	28.7
Debtors	20.5
Prepaid expenses	24
Total Current Assets	102.5
Current Liabilities
Outstanding payments	15.5
Trade payables	30.7
Unpaid taxes	25
A loan is taken for construction of a building   for 11 months	50
Total Current Liabilities	121.2
Working Capital	-18.7

 

Table 2: Classification of Current assets and liabilities

(Source: Excel)

Current assets or CA primarily represent the entire assets of an organization that are usually estimated to be sold, consumed conveniently through the business functions or the standard business operations within the time frame of a year (Aničić et al. 2017). It usually appears on the balance

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