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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 |
- 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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