ACCOUNTS

PROJECT -II

TOPIC- ANALYSIS OF FINANCIAL STATEMENT

FUZAIL SAYEED
KHAN
CLASS – 12 D
ROLL NO - 26
 ACKNOWLEDMENT
• I would like to express my special thanks of gratitude to my
teacher Mr P.K SAHU as well as our principal Mrs Rajani Shekhar
who gave me the golden opportunity to do this wonderful project
on the topic –FUNDAMENTAL OF PARTNERSHIP which also helped
me in doing a lot of Research and I came to know about so many
new things I am really thankful to them. Secondly I would also like
to thank my parents and sister who helped me a lot in finalizing
this project within the limited time frame.
• THANKS TO EVERYONE WHO HELPED ME
 contents
Page no.
topic

INTRODUCTION 1-10
QUESTION 1 10-12
QUESTION 2 12-15
RATIOS 15-17
INTRODUCTION
• MEANING OF FINANCIAL STATEMENT
• It is a report that depict financial and finanacial information related to
business . A company management uses it to communicate with
external stakeholders. These include shareholders, tax authorities,
investors and etc.
• These statement are basically include the following reports:
Balance sheet
Profit and loss statement
Statement of cashflow
Income statement
• WHAT IS BALANCESHEET?
• The balance Sheet is a snapshot of what the company both owns and owes at a specific
period of time. Its used alongside other important financial documents such as
statement of cash flow pr income statements to perform financial analysis. The purpose
of a balance sheet is to show a comoany networth at a given time and to give interested
parties and insight.

• WHAT IS INCOME STATEMENT?

• The income statement often called a profit and loss statement shows a company's financial
health over a specified period of time . It provides a company with valuable information about
revenue , sales and a expenses. These statements are used to make important
financial decisions. Both revenue and expenses closely monitored sic they are important in
keeping costs under control.

ANALYSIS OF FINANCIAL STATEMENT

Financial statement analysis is a method of receiving and analysing a company'S accounting
reports in order gauge it'S past preset and projected future performance . This project of
receivingng the financial statement allows for better econimic decision making. Therefore the
main purpose of financial statement analysis is to utilise informationabout the past performance
about the company.
METHODS
1 External analysis – This analysis is made by the parties whonare
outsider for the business. These parties are investors bankers financial
institutions, creditors ,etc. These parties do not have access to the detail
internal records.
2 Enternal analysis – This analysis is made by the person who have access to
the detail records of business. Such analysis can therefore performed by
executive of the organisation. The main objectives of such analysis is to assist
the management in taking right decision.
3 Horizontal analysis – In such type of analysis statement for a number of
years are received and analysed. Figure for two or more years are continued
in such type of analysis and these figures are placed side by side to facilitate
comparison.
4 Vertical analysis – In such type of analysis financial statement for a single
year a particular date are received and analysed with the help of proper
devices like ratio.
 Vertical common size statement
• A vertical financial statement is a type of common statement that
expresses all values as percentage of the base value in the same
year because the analysis is performed from the top down.
These financial statement are called Vertical.

HORIZONTAL COMMON SIZE STATEMENT

• Horizontal financial statement are common sized statement that

express value of different year as percentage of the base value in a
given base year . Horizontal statements are used to compare balance
sheet data as well as income statement data and evaluate and how it
changed over the course of several years .
 CHARACTERISTICS OF BALANCE SHEET
• It portrays the relationship between equity and liability and assest
. Total of equity and liability side is always equal to the assets side.
• It shows the financial position of the business according to going
concern concept.

CHARACTERISTICS OF PROFIT AND LOSS STATEMENT

• It is prepared for a particular period of time and not on a particular
date.

• It matches the revenue and expense of an entreprise for a

particular period to determine the profit earned or loss suffered
during the period
 QUESTION -1
From the following particulars
• Prepare a comparative statement of p/l of Anand Automotive Ltd.
• Prepare a common size statement of p/l of Anand Automotive Ltd.
Particulars 2013 2014
Revenue from operation Rs.5,00,000 Rs 3,00,000
Cost of material consumed 60% of RFO 50% of RFO
Indirect expenses 80% of cost RFO 20% of cost RFO
Tax rate 40% of net 40% of net

Profit before tax Profit before tax

 Solution :
• 1. comparative statement of p/l for the years ended 31 march 2013
&2012.

particulars N 2012-13 2011-12 Absolute year %change

r Base year 2011- base year 2011-
12 12

1 revenue from operation 5,00,000

Click to add text 3,00,000 2,00,000 66.6%

2 less: expenses cost of

material consumed 3,00,000 1,50,000 1,50,000 100.00
Indirect expenses 90,000 30,000 60,000 200.00
3,90,000 1,80,000 2,10,000 116.6%
1,10,000 1,20,000 (10,000) (8.33)
3 profit before tax ( 1-2) (44,000) (48,000) (4000) (8.33)
4 less:tax 66,000 72,000 6000 (8.33)
5 Profit after tax (3-4)
 2. Common size statement of p/l for the year ending
31st march 2013 & 2012
Particulars nr Absolute Amts % of RFO
2012-13 2011-12 2012-13 2011-12
1 revenue from operation 5,00,000 3,00,000 100 100
2 less: expenses:
Cost of material consumed 3,00,000 1,50,000 60.00 50.00
Indirect expenses 90,000 30,000 18.00 10.00
Total expenses 3,90,000 1,80,000 78.00 60.00
3 profit before taxes (1-2) 1,10,000 1,20,000 22.00 40.00
4 less:tax (44,000) (48,000) (8.80) (16.00)
5 profit after tax (3-4) 66,000 72,000 13.20 24.00
Question 2:
From the following data prepare :
1. comparative b/s of Asif gems LTD
2. common size statement of Asif gems LTD
particulars 31.3.2013 31.3.2012
Share capital 3,00,000 2,40,000
Reserve and surplus 80,000 70,000
Trade payable 1,00,000 1,10,000
Trade receivable 1,90,000 1,80,000
Short term provision 40,000 15,000
Fixed assets 2,90,000 2,30,000
Long term provisions 80,000 65,000
Current investments 10,000 8,000
Inventory 1,01,000 72,000
Cash and bank balance 90,000 10,000
 Solution:
1 comparative b/s of Asif gems LTD as at 31st
march 2013-12

Particulars 2013 2014 Absolute % inc or dec

change
I. equity and liability
1. shareholder fund
A) share capital 3,00,000 2,40,000 60,000 25%
B) R & S 80,000 70,000 10,000 14.28%
2. non current liabilities
A) long time provision 80,000 65,000 15,000 23.07%
3. current liabilities
A) trade payable 1,00,000 1,10,000 (10,000) (9.09)
B) short term provision 40,000 15,000 25,000 166.66
TOTAL 6,00,000 5,00,000 1,00,000 20%
II assets
1. non current assets 2,90,000 2,30,000 60,000 26.08%
A) fixed assets
2. current assets 10,000 8,000 2000 25%
A) current investment 1,01,000 72,000 29,000 40.02%
B) inventory 1,90,000 1,80,000 10,000 5.55%
 2. common size b/s of Asif gems LTD as at 31st march
2013 & 12
Particulars Absolute AMT. % b/s Total
2013 2012 2013 2012
I equity and liability
1 share holder fund
A) share capital 3,00,000 2,40,000 50.00 48.00
B) R&S 80,000 70,000 13.33 14.00
2 non current liability
A) long term provision 80,000 65,000 13.33 13.00
3 current liability
A) trade payable 1,00,000 1,10,000 16.67 22.00
B) short term provision 40,000 15,000 6.67 3.00
TOTAL 6,00,000 5,00,000 100.00 100.00

II. Assets
1 non current assets
A) fixed assets 2,90,000 2,30,000 48.33 46.00
2 current asset
A) current investment 10,000 8,000 1.67 1.60
B)inventory 1,01,000 72,000 16.83 14.40
C)trade receivable 1,90,000 1,80,000 31.67 36.00
Ratios
1. propritory ratio = shareholders fund
Total assets
= 2,40,000 =0.48:1
5,00,000
2. working capital turnover ratio :
=RFO
WC
Working capital= CA – CL
CA=8000 + 1,80,000+ 72000+10,000
=2,70,000
CL= 1,10,000+ 15,000
= 1,25,000
Working capital = 1,45,000
3,00,0000 = 2.06 :1
1,45,000
 3. Liquidity ratio
current ratio =CA
CL
=2,70,000 = 2.16:1
1,25,000

4. LIQUID RATIO = CA – INVESTMENT

CL
= 1,98,000 = 1.58:1
1,25,000
5. Return of investment = profit before tax x 100
capital employed
capital employed = 3,10,000 + 65,000
= 3,75,000
=1,20,000 x 100 = 32%
3,75,000