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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 Material

l Tools of Analysis used

l Processing and Tabulation of data

l 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.


Mr. Vinod Kumar is an aspiring entrepreneur who has been severely impacted by the aftermath of the Jammu & Kashmir floods tragedy.

He has post graduated from the London School of Economics with masters in Business Administration (MBA) and International Relations.

Through this catastrophic event, Vinod has decided to purchase an existing business in the Kashmir Valley which has been adversely affected by the flood. He is extremely inclined towards providing employment to the people in the affected areas nearby.

The existing business, located in the valley that he intends to purchase had been running on profits. However, due to the floods the factory had to be shut down immediately as there was heavy damage.

The owners are in no position to recover the former condition of the factory and have therefore decided to sell it.

Mr. Kumar purchased the business of Singh Bros. on 1st April 2015. The business is mainly concerned with manufacturing electronic goods i.e.

(1) Batteries for Mobile Phones, Laptops and Digital Cameras

(2) Battery Chargers

(3) Pen Drives and (16 GB, 32 GB, 64 GB)

(4) USB Cables etc.

(5) CCTV Cameras

Following assets were taken over by Mr. Vinod Kumar on the above mentioned date:

Land and Building Rs.10,00,000

Plant and Machinery Rs.8,00,000

Furniture & Fittings Rs.2,50,000

Stock Rs.3,00,000

Office Equipment Rs.1,00,000

Mr. Vinod Kumar paid Rs.25,00,000 as purchase consideration. On the same day he bought Rs.20,00,000 as his capital and took loan Rs.5,00,000 from the bank @ 8% p.a. interest and Rs.2,00,000 from his wife @ 6% p.a. interest to meet the working capital.

His transactions during the accounting period was as follows:

E Total Purchases Rs.28,00,000 including credit purchases worth Rs.20,00,000.

E He invested Rs.2,00,000 in shares of Reliance Limited.

E Total Sales Rs.48,00,000 including credit sales worth Rs.18,00,000.

Direct Expenses:

Wages Rs,3,50,000

Manufacturing expenses Rs.50,000

Factory Lighting Rs.20,000

Carriage inwards Rs.10,000

Commission on purchases Rs.15,000

PROJECT – 2

Part – A : Comprehensive Problem

33 Project–2

Freight Rs.5,000

Indirect Expenses:

Salaries Rs.2,00,000

Office Rent Rs.10,000

Postage and Telephone expense Rs.5,000

Stationery Rs.3,000

Water & Electricity (office) Rs.12,000

Conveyance Rs.8,000

Advertising Rs.12,000

l He withdrew Rs.60,000 from the business to buy a personal Laptop.

l Goods worth Rs.30,000 given as charity to the financially weaker group of women associated with women welfare club.

l Cash received from debtors Rs.10,00,000.

l Cash paid to creditors Rs.12,00,000.

l Interest paid on Bank Loan Rs.28,000.

l Interest paid on Mrs. Vinod's loan Rs.10,000.

l B/R received from debtors Rs.80,000.

l Bill accepted in favour of creditors Rs.1,00,000.

l Dividend received on investment Rs.10,000.

You are required to :

(i) Give journal entries for these transactions and post them into ledger account and prepare a Trial Balance.

(ii) Prepare Trading Account, Profit & Loss Account and Balance Sheet considering the following adjustments:

(a) Interest is outstanding on Bank Loan Rs.12,000 and on Mrs. Vinod's Loan Rs.2,000.

(b) Plant and Machinery is to be depreciated by 5% and Furniture by 10%.

(c) Closing Stock Rs.3,50,000.

(d) Wages outstanding Rs.30,000 and office rent outstanding Rs.5,000.

(e) Manager is entitled to a commission of 5% on net profit before charging such commission.

(iii) Find Gross Profit and Net Profit Ratio and also comment on the profitability and liquidity of the business when Gross Profit of the similar firm is Rs.13,50,000 and Net Profit Rs.9,00,000.

1 Apr Bank A/c Dr. 20,00,0002012 To Capital A/c 20,00,000 (Being capital introduced by Vinod)

1 Apr Land and Building A/c Dr. 10,00,0002012 Plant and Machinery A/c Dr. 8,00,000 Furniture & Fittings A/c Dr. 2,50,000 Stock A/c Dr. 3,00,000 Office Equipments A/c Dr. 1,00,000

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

Solution. Journal Entries


Goodwill A/c (Bal. Fig.) Dr. 50,000 To Bank A/c 25,00,000 (Being assets purchased)

Bank A/c Dr. 5,00,000 To 8% Bank Loan A/c 5,00,000 (Being loan obtained from bank)

Bank A/c Dr. 2,00,000 To 6% Mrs. Vinod's Loan 2,00,000 (Being loan obtained)

Purchases A/c Dr. 8,00,000 To Bank A/c 8,00,000 (Being goods purchased)

Purchases A/c Dr. 20,00,000 To Creditors A/c 20,00,000 (Being goods purchased)

Investment A/c Dr. 2,00,000 To Bank A/c 2,00,000 (Being money invested in shares of Reliance Ltd.)

Bank A/c Dr. 30,00,000 To Sales A/c 30,00,000 (Being goods sold on cash basis)

Debtors A/c Dr. 18,00,000 To Sales A/c 18,00,000 (Being goods sold on credit)

Wages A/c Dr. 3,50,000 To Bank A/c 3,50,000 (Being wages paid)

Manufacturing Expense A/c Dr. 50,000 To Bank A/c 50,000 (Being manufacturing expenses paid)

Factory Lighting A/c Dr. 20,000 To Bank A/c 20,000 (Being factory expenses paid)

Carriage Inwards A/c Dr. 10,000 To Bank A/c 10,000 (Being expenses on purchase paid)

Commission on Purchase A/c Dr. 15,000 To Bank A/c 15,000 (Being commission paid)

Freight A/c Dr. 5,000 To Bank A/c 5,000 (Being freight expenses paid)

35 Project–2

Salaries A/c Dr. 2,00,000 To Bank A/c 2,00,000 (Being Salaries paid)

Office Rent A/c Dr. 10,000 To Bank A/c 10,000 (Being office rent paid)

Postage and Telephone A/c Dr. 5,000 To Bank A/c 5,000 (Being postage & telephone expense paid)

Stationery A/c Dr. 3,000 To Bank A/c 3,000 (Being stationery expenses paid)

Water & Electricity A/c Dr. 12,000 To Bank A/c 12,000 (Being water & electricity expenses paid)

Conveyance A/c Dr. 8,000 To Bank A/c 8,000 (Being conveyance expenses paid)

Advertising A/c Dr. 12,000 To Bank A/c 12,000 (Being advertising expenses paid)

Drawings A/c Dr. 60,000 To Bank A/c 60,000 (Being withdrawn for personal use)

Advertising A/c Dr. 30,000 To Purchase A/c 30,000 (Being goods give as charity)

Bank A/c Dr. 10,00,000 To Debtors A/c 10,00,000 (Being cash received from debtors)

Creditors A/c Dr. 12,00,000 To Bank A/c 12,00,000 (Being cash paid to creditors)

Interest on Bank Loan Dr. 28,000 To Bank A/c 28,000 (Being interest paid on bank loan)

Interest on Mrs. Vinod's Loan Dr. 10,000 To Bank A/c 10,000 (Being interest paid on Mrs. Vinod's Loan)

Bills Receivable A/c Dr. 80,000 To Debtors A/c 80,000 (Being B/R received from debtors)


Creditors A/c Dr. 1,00,000 To Bills Payable A/c 1,00,000 (Being bill accepted in favour of creditors)

Bank A/c Dr. 10,000 To Dividend Received A/c 10,000 (Being dividend received on investment)

Preparation of Ledger: Bank A/c

Particulars Amount (`)

To Capital A/c 20,00,000 By Land and Building A/c 10,00,000 To 8% Bank Loan A/c 5,00,000 By Plant and Machinery A/c 8,00,000 To 6% Mrs. Vinod's Loan 2,00,000 By Furniture & Fittings A/c 2,50,000 To Sales A/c 30,00,000 By Stock A/c 3,00,000 To Debtors A/c 10,00,000 By Office Equipment A/c 1,00,000 To Dividend Received A/c 10,000 By Goodwill A/c 50,000 By Purchase A/c 8,00,000 By Investment A/c 2,00,000 By Wages A/c 3,50,000 By Manufacturing Exp. A/c 50,000 By Factory Lighting A/c 20,000 By Carriage Inward A/c 10,000 By Commission on Purchase 15,000 By Freight A/c 5,000 By Salaries A/c 2,00,000 By Office Rent A/c 10,000 By Postage & Telephone A/c 5,000 By Stationery A/c 3,000 By Water & Electricity A/c 12,000 By Conveyance A/c 8,000 By Advertising A/c 12,000 By Drawings A/c 60,000 By Creditors A/c 12,00,000 By Int. on bank loan 28,000 By Int. on Mrs. Vinod's loan 10,000 By Balance c/d 12,12,000 67,10,000 67,10,000

Particulars Amount (`)Date Date

Capital A/c


By Bank A/c 20,00,000 To Balance c/d 20,00,000 20,00,000 20,00,000


37 Project–2

Land and Building A/c


To Bank 10,00,000 By Balance c/d 10,00,000 10,00,000 10,00,000


Plant and Machinery A/c




Furniture & Fittings A/c




Stock A/c




Office Equipment A/c




Goodwill A/c


To Bank 50,000 By Balance c/d 50,000 50,000 50,000


8% Bank Loan A/c


To Balance c/d 5,00,000 By Bank A/c 5,00,000 5,00,000 5,00,000


6% Mrs. Vinod's Loan A/c


To Balance c/d 2,00,000 By Bank A/c 2,00,000 2,00,000 2,00,000



Investment A/c


To Bank A/c 2,00,000 By Balance c/d 2,00,000 2,00,000 2,00,000


Debtors A/c


To Sales A/c 18,00,000 By Bank A/c 10,00,000 By Bills Receivable A/c 80,000 By Balance c/d 7,20,000 18,00,000 18,00,000


Purchase A/c


To Bank A/c 8,00,000 By Advertising 30,000 To Creditors A/c 20,00,000 By Balance c/d 27,70,000 28,00,000 28,00,000


Creditors A/c


To Bank A/c 12,00,000 By Purchase A/c 20,00,000 To Bills Payable A/c 1,00,000 To Balance c/d 7,00,000 20,00,000 20,00,000


Sales A/c


To Balance c/d 48,00,000 By Bank A/c 30,00,000 By Debtors A/c 18,00,000 48,00,000 48,00,000


Wages A/c




Manufacturing Expenses A/c


To Bank A/c 50,000 By Balance c/d 50,000 50,000 50,000


Factory Lighting A/c




39 Project–2




Commission on Purchase A/c




Freight A/c




Carriage Inwards A/c

Salaries A/c




Office Rent A/c




Postage and Telephone A/c




Stationery A/c

Particulars Amount (`) Particulars Amount (`)Date Date


Conveyance A/cParticulars Amount (`)



Water and Electricity A/c





Advertising A/c


To Bank A/c 12,000 By Balance c/d 42,000 To Purchase A/c 30,000 42,000 42,000


Drawings A/c




Interest on Bank Loan A/c




Interest on Mrs. Vinod's Loan A/c




Bills Receivable A/c


To Debtors A/c 80,000 By Balance c/d 80,000 80,000 80,000


Bills Payable A/c


To Balance c/d 1,00,000 By Creditors A/c 1,00,000 1,00,000 1,00,000


Dividend Received A/c

Particulars Amount (`) Particulars Amount (`)Date Date

To Balance c/d 10,000 By Bank A/c 10,000 10,000 10,000

Trial Balance

Particulars Debit Credit

Bank A/c 12,12,000 Capital A/c 20,00,000Land and Building A/c 10,00,000 Plant and Machinery A/c 8,00,000

41 Project–2

Furniture & Fittings A/c 2,50,000 Stock A/c 3,00,000Office Equipment A/c 1,00,000Goodwill A/c 50,0008% Bank Loan A/c 5,00,0006% Mrs. Vinod's Loan A/c 2,00,000 Purchase A/c 27,70,000 Creditors A/c 7,00,000Investment A/c 2,00,000Debtors A/c 7,20,000 Sales A/c 48,00,000Wages A/c 3,50,000 Manufacturing Expenses A/c 50,000 Factory Lighting A/c 20,000 Carriage Inward A/c 10,000Commission on purchase A/c 15,000Freight A/c 5,000Salaries A/c 2,00,000Office Rent A/c 10,000Postage and Telephone Exp. A/c 5,000Stationery A/c 3,000Water and Electricity A/c 12,000Conveyance A/c 8,000Advertising A/c 42,000Drawings A/c 60,000Interest on Bank Loan 28,000Interest on Mrs. Vinod's Loan 10,000Bills Receivable 80,000Bills Payable 1,00,000Dividend Received 10,000 83,10,000 83,10,000

Trading Account


To Opening Stock 3,00,000 By Sales 48,00,000To Purchases 27,70,000 By Closing Stock 3,50,000To Wages 3,50,000Add : Outstanding 30,000 3,80,000To Manufacturing Exp. 50,000To Factory Lighting 20,000To Carriage Inward 10,000To Commission on purchase 15,000To Freight 5,000To Gross Profit 16,00,000 51,50,000 51,50,000



Profit and Loss Account


To Salaries 2,00,000 By Gross Profit b/d 16,00,000To Office Rent 10,000 By Dividend Received 10,000Add: Outstanding 5,000 15,000To Postage & Telephone 5,000To Stationery 3,000To Water & Electricity 12,000To Conveyance 8,000To Advertising 42,000To Int. on Bank Loan 28,000 Add : Outstanding 12,000 40,000To Int. on Mrs. Vinod's Loan 12,000(10,000 + 2,000 due) To Dep. on plant & machinery 40,000To Dep. on Furniture 25,000 To Net Profit 12,08,000 16,10,000 16,10,000To Manager's Commission 60,400 By Net Profit b/d 12,08,00012,08,000 × 5/100To Net Profit 11,47,600 12,08,000 12,08,000


Balance Sheet

Liabilities Amount (`)

Capital 20,00,000 Goodwill 50,000Add : N/P 11,47,600 Land and Building 10,00,000Less : Drawings 60,000 30,87,600 Plant and Machinery 8,00,0008% Bank Loan 5,00,000 Less : Depreciation 40,000 7,60,000Add: Interest due 12,000 5,12,000 Furniture & fittings 2,50,000 6% Mrs. Vinod's Loan 2,00,000 Less : Depreciation 25,000 2,25,000Add: Interest due 2,000 2,02,000 Office Equipment 1,00,000Creditors 7,00,000 Investment 2,00,000 Bills Payable 1,00,000 Debtors 7,20,000Wages Outstanding 30,000 Bills Receivable 80,000Office Rent 5,000 Stock 3,50,000Manager Commission 60,400 Bank 12,12,000 46,97,000 46,97,000

Assets Amount (`)

Analysis & Interpretation

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

= 16,00,000/48,00,000 × 100 = 33.33%

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

= 11,47,600/48,00,000 × 100 = 23.90%

43 Project–2

Net Profit 23.90% Gross Profit 33.33%

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

= 48,00,000/32,00,000 = 1.5 Times

Cost of Revenue from operation = Net Sales � Gross Profit

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

= 32,00,000/3,25,000 = 9.84 Times

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

= 18,00,000/8,00,000 = 2.25 Times

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

= 20,00,000/8,00,000 = 2.5 Times

Comparison of Gross Profit with Similar Firm

Comparison of Expenses

Comparison of Gross Profit

Comparison of Net Profit with Similar Firm

Comparison of Gross Profit

4,80,000

4,60,000

4,40,000

4,20,000

4,00,000

3,80,000

3,60,000Direct

ExpensesIndirect

Expenses

Comparison of Expenses

16,00,000

15,50,000

15,00,000

14,50,000

14,00,000

13,50,000

13,00,000

12,50,000

12,00,000Main

BusinessSimilarFirm


Conclusion and Comments

(1) Mr. Vinod Kumar has made a useful investment by purchasing this business. He is able to manage a good profit in the first year. It shows that, if this business is continued in the same manner, it will provide good profits in the future too.

(2) Mr. Vinod Kumar is successful in arranging finance for the business. It shows that in future business will not face any financial hurdle because business has earned a good profit in the first year of its commencement. Customers and investors will take it very positively.

(3) Mr. Vinod Kumar can think about the expansion of the business because he is having a good bank balance i.e. Rs.12,12,000.

(4) Suggestions

Business is already doing well but it may earn more profits by cost control (by reducing Direct Expenses) and increasing its sales. Gross profit and net profit of the business is better than the similar firm (doing same business). Mr. Kumar must think about the new selling techniques, new customers, new market and latest advertising techniques. It is beginning only and after sometimes he has to face competition in the market, so it is better to prepare himself in advance for the future business. Loan taken from bank should be paid off as soon as possible because it will reduce a huge liability of the business. Instead of paying a big amount to manager as commission, Mr. Kumar should appoint new sales agents to increase the sale of the business. Overall business is doing very well and performance in each and every area is satisfactory.

Comparison of Net Profit

Comparison of Net Profit

Part – B : Project on Segment Analysis

1. Name of the Project : Vinod Motor Company

Vinod Motor Company is the third largest two-wheeler manufacturer in India and one among the top ten in the world, with annual revenue of more than Rs.1,00,000 Cr in 2015-16 and is the flagship company of the, USD 9.35 billion in 2014-15, Vinod Group of companies. The company has an annual sales of 3.5 million units a year. Vinod Motor Company is also the 2nd largest exporter in India with exports to over 53 countries

Vinod Motor Company Ltd (Vinod Motor), member of the Vinod Group of companies, is the largest company of the group in terms of size and turnover with more than 3.7 crore customers riding this company's bike. Mr.Vinod Kumar, the Chairman of Vinod Motor Company has led by example, winning many laurels including the prestigious �Padma Shri� award. �Order of Diplomatic Service

12,00,000

10,00,000

8,00,000

6,00,000

4,00,000

2,00,000

0 MainBusiness

SimilarFirm

45 Project–2

Merit" medal from Korean President, The JRD Tata Corporate, The Star of Asia award by Business Week, The Jamshedji TATA Lifetime Quality Achievement Award and Emerging Corporate Giant - Times & Harvard Business School Association are other high-profile awards bestowed on him, on behalf of the company. He was also awarded the coveted Ishikawa-Kano Award presented by Asian Network for Quality. Among the latest honours conferred on him was an honorary doctor of science degree by Purdue University, USA.

Analysis of performance of each segment of Vinod Motor Company with reference to:

(i) Revenue

(ii) Profit and

(iii) Capital employed

2. Objectives:

l To study whether the contribution of various segments of Vinod Motor Company with respect to (i) Revenue and (ii) Profit is justified ?

l 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:

(i) Common Size Statement and

(ii) Ratios

5. Source material:

Newspaper cutting of Audited Financial Results of Vinod Motor Company from the Economic Times dated 22 October, 2015 or the Website of the company.

6. Processing of data :

I. Common Size Statement of Segment Wise Revenue

l Compare the Revenue from Operations of each segment of Vinod Motor Company with Total Revenue for the year ended 31 March 2015.

Use the formula = × 100 Revenue of the segment

Total Revenue

Degree = × 360 Revenue of the segment

Total Revenue

Common Size Statement Showing Inter-Segment Comparison of Revenue

For the year ended 31 March, 2015

Segment Motorcycles Bike Tyres Brake lining Others Total

Revenue 58,000 22,000 13,000 7,000 1,00,000

Percentage of 58% 22% 13% 7% 100Revenue

o o o o oDegrees for 208.8 79.2 46.8 25.2 360Pie Diagram

Source: The Economic Times 22 October, 2015.


II. Common Size Statement of Segment Wise Profit

l Compare the profit of each segment of Vinod Motor Company 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

Pie chart Representing Segment Revenue

Motor cycle

Bike Tyres

Brake Lining

Others

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

Segment Motor cycles Bike Tyres Brake lining Others Total

Profit (in Lakhs) 23450 11978 1458 398 37284

Percentage of 62.89 32.12 3.91 1.07 100Profit

o o o o oDegrees for 226.40 115.63 14.07 3.85 360Pie Diagram


Pie chart Representing Segment Revenue

Motor cycle

Bike Tyres

Brake Lining

Others

III. Common Size Statement of Segment Wise Capital Employed

l Compare the Capital Employed of each segment of Vinod Motor Company 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

47 Project–2

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


Capital Employed 52200 19800 14400 3600 90,000(in Lakhs)

% of Total Capital 58% 22% 16% 4% 100Employed (%)

o o o o oDegrees for 208.8 79.2 57.6 14.4 360 Pie Diagram


0

10000

20000

30000

40000

50000

60000

Motor

Cycle

Bike

Tyres

Brake

Lining

Others

CapitalEmployed

IV. Calculation of Return on Investment

l Calculate the Return on Investment of each segment of Vinod Motor Company for the year ended 31 March, 2015.

l Formula to calculate Return on Investment:

Return of 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) 23450 11978 1458 398 37284

Capital Employed 52200 19800 14400 3600 90000 (in Lakhs)

ROI % 44.92% 60.49% 10.12 11.05 41.43%

Graphic Presentation of ROI706050403020100

MotorCycle

Bike Tyres

BrakeLining

Others

ROI


Combined Comparative Statement

Segment Motor cycles Bike Tyres Brake lining Others Total

Revenue (%) of total 58 22 13 7 100

PBIT (%) of total 62.89 32.12 3.91 1.07 100Capital Employed

(%) of total 58 22 16 4 100ROI (%) same 44.92% 60.49% 10.12% 11.05% 41.43%

Conclusions

l Vinod Motor Company is doing well in the area of Motor cycle and Bike Tyres.

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

l Bike Tyres Segment has the highest ROI 60.49% with less amount of capital invested in it.

l With the Revenue share of 58% of the Total Revenue, Motor cycle segment is able to generate a PBIT of 62.89% of the Total Profit.

l Tyres segment and Brake Lining also getting a good ROI of 60.49% and 10.12%.

l Therefore, Motor cycle and Tyres 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 41.43% share of ROI, Brake Lining seems to have a bright future. More funds should be diverted towards this segment from other segment which is losing its shine.

l Bike tyres also has a future growth potential because of heavy demand of motor cycles in the country. It will be a good idea to divert some funds towards this segment.

Part – C : Cash Flow Statement

VK Wind Energy Limited is a wind turbine supplier based in Delhi, India. Formerly ranked as the world's second largest supplier, the company claims to have over 15,000 MW of wind energy capacity installed globally, with operations across 21 countries and a workforce of over 5,000.

The company is listed on the National Stock Exchange of India and on the Bombay Stock Exchange.

VK Wind Energy Limited is a vertically integrated wind power company. VK Wind Energy Limited makes and installs wind turbines. The company manufactures blades, generators, panels, and towers in-house and large or offshore turbines through its subsidiary Senvion. The company is integrated downstream and delivers turnkey projects through its project management and installation consultancy, operations and maintenance services. VK Wind Energy Limited has offices, R&D and technology centers, manufacturing facilities and service support centers spread across the globe.

49 Project–2

I. Equity and Liabilities

1. Shareholder's Funds:

(a) Share Capital 20,00,000 15,00,000

(b) Reserve and Surplus 1 5,00,000 3,00,000

2. Non-Current Liabilities:

Long-Term Borrowings 3,00,000 2,00,000

3. Current Liabilities:

(a) Trade Payables 1,50,000 2,00,000

(b) Short-Term Provisions 2 70,000 60,000

Total 30,20,000 22,60,000

II. Assets:

1. Non-Current Assets:

(a) Fixed Assets:

(i) Tangible assets 3 19,00,000 15,00,000

(ii) Intangible assets 4 4,70,000 2,70,000

2. Current Assets:

(a) Inventories 2,50,000 1,60,000

(b) Trade Receivables 2,10,000 2,10,000

(c) Cash and Cash equivalents 1,90,000 1,20,000

Total 30,20,000 22,60,000

Particulars NoteNo. 31.3.2014(`) 31.3.2013(`)

1. Reserves and Surplus

Surplus (balance in Statement of Profit and Loss) 5,00,000 3,00,000

2. Short term provisions

Provision for tax 70,000 60,000

3. Tangible Assets

Machinery 27,00,000 21,00,000

Accumulated Depreciation (8,00,000) (6,00,000)

4. Intangible Assets

Goodwill 4,70,000 2,70,000

Particulars Ason31.3.14(`) Ason31.3.13(`)S.No.

NotestoAccounts

The Balance Sheet of VK Wind Energy Limited on 31-3-2014 is as follows :

Financing Activities

Prepare a Cash Flow Statement after taking into account the following adjustment :

During the year a piece of machinery costing ` 30,000 on which accumulated depreciation was ` 6,000 was sold for ` 20,000.

Solution.

Introduction : The Project is to prepare Cash Flow Statement of VK Wind Energy Limited for the year ended 31st March 2014. 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.


Cash flow from Operating Activities :

Net Profit before tax & extraordinary items 2,00,000

Add : Provision for Tax 70,000

Add : Non cash and non-operating charges

Depreciation on machinery 2,06,000

Loss on sale of machinery 4,000

Operating profit before working capital changes 4,80,000

Less : Increase in Current Assets

Increase in inventories (90,000)

Less : Decrease in Current Liabilities

Decrease in trade payables (50,000)

Operating profit after working capital changes 3,40,000

Less : Tax Paid (60,000)

Cash generated from Operating Activities 2,80,000

Cash flow from Investing Activities :

Purchase of machinery (6,30,000)

Sale of machinery 20,000

Purchase of Goodwill (2,00,000)

Cash used in investing activities (8,10,000)

Cash flow from Financing Activities

Issue of share capital 5,00,000

Money raised from long term borrowings 1,00,000

Cash from financing activities 6,00,000

70,000

Net increase in cash & cash equivalents

Add : Opening balance of cash & cash equivalents : 1,20,000

Closing Balance of cash & cash equivalents 1,90,000

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 Activities2. Analysis and Observation

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

Cash Flow Statement

Analysis and Conclusion

VK Wind Energy 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.

I. Cash Flow from Operating Activities:

Cash Flow from Operating Activities has a positive inflow of Rs. 2,80,000 in the year ended March 31st, 2014 which shows that the company has good operating activities i.e. principal revenue producing activities.

51 Project–2

Business Activities Amount

Cash From Operating Activities 2,80,000

Cash From Investing Activities (8,10,000)

Cash From Financing Activities 6,00,000

Cash generated from operating activities amounted to Rs.2,80,000 out of which some amount has been invested in purchasing of Fixed Assets.

II. Cash Flow From Investing Activities:

Cash flow from investing activities means that VK Wind Energy 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. Following assets are purchased by the company:

Fixed Tangible Assets (Machinery)l

Fixed Intangible Assets (Goodwill)l

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:

Rs.5,00,000 Share capital is raised and Rs.1,00,000 raised through other long term borrowings.

Dividend was not declared because more funds are required for the growth and development of the company.

Overall company is having Rs.1,90,000 Cash and Cash Equivalents which is a good sign.

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.5,00,000 share capital.

Result of Different Activities

-1,000,000

-800,000

-600,000

-400,000

-200,000

0

200,000

400,000

600,000

OperatingActivities

InvestingActivities

FinancingActivities

On the basis of the above analysis, we may conclude that business of VK Wind Energy Limited is doing well and prospects of the company are bright. The company is carrying a good amount of cash and cash equivalents, indicating the efficient cash management. The management must consider this situation and utilize its cash and cash equivalents so that better standards are achieved.


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