MANAGERIAL ACCOUNTS

by Raksha M

Submission date: 25-Apr-2024 04:15PM (UTC+0530)

Submission ID: 2361366835
File name: ACCOUNTS_N.pdf (622.83K)
Word count: 1909
Character count: 11349
RUAS BAC504

Faculty of Management &Commerce

Ramaiah University of Applied Sciences

Department Management Studies

Programme M.B.A. in Marketing Management, Operations Management, Financial
Management, Human Resource Management, Hospitality Management, Pharma
Business Management and Master in Hospital Administration
Batch Full -Time 2023
Course Code BAC504
Course Title Managerial Accounting
Course Leader(s) Usha J.C.

Course Assessment

Reg.No. 23MCMS101149 Name of the Student Raksha M

Marking Scheme

Discuss the impact of cash flow statements that help investors 5

1
and analysts also evaluate a company's position
2 Justification and stance taken. 5
Part A 10

Create a company(In Tally) assuming any 8 transactions , post 10

1
them to respective voucher and generate financial statements
2 Viva -Voice 5

Part B 15
Total Assignment Marks 25
Component-2 Assignment Examiner Remarks
Part A

Part B

Marks (Max 25 )

Signature of Examiner

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RUAS BAC504

Part –A
a) Discuss the impact of cash flow statements that help investors and
analysts also evaluate a company's position
b) Justification and stance taken.

A cash flow statement tracks the inflow and outflow of cash, providing insights into a
company's financial health and operational efficiency.

The cash flow statement provides insight into the sources of a company's funds, the
manner in which it is being spent, and the state of its operations. Alternatively called
the statement of cash flows, the cash flow statement (CFS) assists creditors in
ascertaining the amount of cash on hand—also known as liquidity—that the business
needs to cover its debts and pay for operating expenses. Investors value the CFS equally
since it provides information about a company's sound financial standing. As a result,
individuals can utilize the statement to help them decide on their investments in a
better, more knowledgeable way.

Cash flow statements are typically divided into three main sections: operating activities,
investing activities, and financing activities

Operating Activities: This section reports cash flows from the company's primary
business operations. It includes cash received from customers for sales of goods or
services, as well as cash paid for operating expenses, such as salaries, rent, utilities, and
taxes. Operating cash flow is a key indicator of a company's ability to generate cash
from its core business activities.

Investing Activities: Here, cash flows related to investments in long-term assets are
recorded. This includes cash used for the purchase of property, plant, and equipment
(capital expenditures), investments in securities such as stocks or bonds, and proceeds
from the sale of these assets. Investing activities reflect the company's commitment to
maintaining and expanding its business operations.

Financing Activities: This section details cash flows related to the company's financing
activities, including issuing or repurchasing stock, borrowing or repaying debt, and
paying dividends to shareholders. It shows how the company raises capital and
manages its capital structure. Financing activities can have a significant impact on the
company's financial flexibility and leverage.

Impact of cash flow statements

Cash flow statements provide investors and analysts with valuable information that aids in their
decision-making process and assessment of a company's financial performance. Cash flow
statements serve as a vital tool for investors and analysts, offering detailed insights into a
company's financial operations, liquidity, growth prospects, and ability to manage debt .

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Here's how they impact investors and analysts

➢ Assessing Financial Health

Investors and analysts use cash flow statements to assess a company's financial health
by examining its ability to generate cash from its core operations. Positive cash flow
from operating activities indicates that the company is generating sufficient cash to
support its day-to-day operations and potentially invest in growth opportunities.

➢ Identifying Trends
By analyzing cash flow statements over multiple periods, investors and analysts can
identify trends in a company's cash flow generation. This helps in understanding
whether the company's cash flows are growing, declining, or remaining stable over
time, which can provide insights into its financial performance and management
effectiveness.

➢ Evaluating Liquidity
Cash flow statements help investors and analysts evaluate a company's liquidity
position by comparing its cash flows with its short-term liabilities. A strong positive cash
flow indicates that the company has enough liquid assets to meet its short-term
obligations, reducing the risk of financial distress.

➢ Forecasting Future Performance

Cash flow statements provide valuable insights for forecasting a company's future
financial performance. By analyzing historical cash flow trends and understanding the
factors driving them, investors and analysts can make more accurate predictions about
the company's future cash flows, earnings, and overall financial health.

➢ Comparing Companies
Investors and analysts use cash flow statements to compare the cash flow performance
of different companies within the same industry or sector. This allows them to assess
which companies are generating stronger cash flows relative to their peers, which can
inform investment decisions and highlight potential investment opportunities.

➢ Assessing Debt Servicing Ability

Cash flow statements help investors and analysts evaluate a company's ability to
service its debt obligations. By analyzing the company's cash flows relative to its debt
repayment schedule, stakeholders can assess whether the company has sufficient cash
flow to meet its interest payments and repay principal amounts when due.

In conclusion, cash flow statements are indispensable tools for investors and analysts in
evaluating a company's financial health and performance. They provide a comprehensive view
of a company's cash flow generation, liquidity position, growth prospects, and debt servicing
ability. By assessing these key aspects, stakeholders can make informed investment decisions,
identify trends, forecast future performance, compare companies within the same industry,
and gauge a company's ability to meet its financial obligations. Ultimately, cash flow
statements play a crucial role in guiding stakeholders towards making sound financial decisions
and assessing the overall health and sustainability of a company

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RUAS BAC504

Cash flow statements of Microsoft

CASH FLOW ANALYSIS

Cash Flow from Operating Activities

• Microsoft cash flow from operating activities for the quarter ending December 31, 2023
was $49.436B, a 43.83% increase year-over-year.
• Microsoft cash flow from operating activities for the twelve months ending December
31, 2023 was $226.413B, a 7.3% increase year-over-year.
• Microsoft annual cash flow from operating activities for 2023 was $87.582B, a 1.63%
decline from 2022.

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RUAS BAC504

• Microsoft annual cash flow from operating activities for 2022 was $89.035B, a 16.02%
increase from 2021.
• Microsoft annual cash flow from operating activities for 2021 was $76.74B.

JUSTIFICATION AND STANCE

Microsoft's cash flow from operating activities exhibits a mixed trend over the years,
showcasing both significant growth and slight decline. The substantial increase in cash
flow for the quarter ending December 31, 2023, by 43.83% year-over-year, and for the
twelve months ending December 31, 2023, by 7.3%, highlights the company's
continued ability to generate substantial cash from its core operations. These increases
indicate Microsoft's strong performance in key business segments such as software
licensing, cloud services, and productivity solutions. However, the annual cash flow for
2023 experienced a slight decline of 1.63% compared to 2022, which may be
attributed to various factors such as changes in business strategy, market conditions,
or investment in growth initiatives. Despite this decline, Microsoft's overall cash flow
from operating activities remains robust, reflecting its resilience and stability in the
technology industry.

Cash Flow from Investing Activities

• Microsoft cash flow from investing activities for the quarter ending December 31, 2023
was $-71.422B, a 594.63% increase year-over-year.
• Microsoft cash flow from investing activities for the twelve months ending December
31, 2023 was $-107.145B, a 66.61% increase year-over-year.
• Microsoft annual cash flow from investing activities for 2023 was $-22.68B, a 25.18%
decline from 2022.
• Microsoft annual cash flow from investing activities for 2022 was $-30.311B, a 9.91%
increase from 2021.
• Microsoft annual cash flow from investing activities for 2021 was $-27.577B.

JUSTIFICATION AND STANCE

Microsoft's cash flow from investing activities demonstrates a notable increase both
on a quarterly and yearly basis, indicating significant changes in the company's
investment strategies. The substantial increase in cash flow for the quarter ending
December 31, 2023, by 594.63% year-over-year, and for the twelve months ending
December 31, 2023, by 66.61%, suggests heightened investment in long-term growth
opportunities, such as acquisitions, research and development, and capital
expenditures. However, despite these increases, the annual cash flow for 2023
experienced a decline of 25.18% compared to 2022. This decline could be attributed to
a shift in investment priorities, reduced acquisition activities, or lower capital
expenditure requirements. Overall, Microsoft's increased investment activities signal a
proactive approach towards securing future growth, although the decline in annual
cash flow warrants further examination to understand the specific factors driving this
trend.

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RUAS BAC504

Cash Flow from Financing Activities

• Microsoft cash flow from financial activities for the quarter ending December 31, 2023
was $4.614B, a 120.75% decline year-over-year.
• Microsoft cash flow from financial activities for the twelve months ending December
31, 2023 was $-57.082B, a 58.52% decline year-over-year.
• Microsoft annual cash flow from financial activities for 2023 was $-43.935B, a 25.38%
decline from 2022.
• Microsoft annual cash flow from financial activities for 2022 was $-58.876B, a 21.43%
increase from 2021.
• Microsoft annual cash flow from financial activities for 2021 was $-48.486B.

JUSTIFICATION AND STANCE

Microsoft's cash flow from financing activities experienced significant fluctuations,

indicating changes in the company's financing strategies and capital structure
management. The sharp decline in cash flow for the quarter ending December 31,
2023, by 120.75% year-over-year, and for the twelve months ending December 31,
2023, by 58.52%, suggests a reduction in financing activities such as debt issuance or
share repurchases. This decline continued on an annual basis, with a 25.38% decrease
in cash flow from financial activities for 2023 compared to 2022. Despite the increase
in cash flow from financial activities in 2022, which saw a 21.43% rise from 2021, the
subsequent decline indicates a shift in priorities or market conditions influencing
Microsoft's financing decisions. Overall, while the reduction in financing cash flow may
signal efforts to manage debt levels or allocate capital more efficiently, further analysis
is necessary to understand the specific factors driving these trends and their
implications for Microsoft's financial position and strategic direction.

REFERENCE
https://www.cfainstitute.org/en/membership/professional-development/refresher-
readings/understanding-cash-flow-statements
https://www.macrotrends.net/stocks/charts/MSFT/microsoft/financial-statements

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RUAS BAC504

Part –B
Assume you are the owner of the company and prepare the financial statement:
a) Create a company (In Tally) assuming any 8 transactions, post them to respective voucher and
generate financial statements

1. Create the company "Raksha & Co.Ltd" for the financial year 2024 with necessary
details.
2. Create the necessary ledger accounts and post the following transactions in
respective vouchers.

Take a screen shot of Day book and Trial balance

1. Raksha started business with a Capital-Rs 7,00,000
2. Deposited in DTC bank-Rs 5,00,000
3. Rent paid by Cheque- Rs 15,000
4. Bought office furniture from Mr. Tom on credit- Rs 35,000
5. Discount received- Rs 10,000
6. Purchased goods from Dinesh & Co- Rs 3,80,000
7. Cash withdrawn from bank for office use- Rs 30,000
8. Sold goods to Sanil & Co-4,20,000
9. Purchase return of goods to Dinesh & Co - Rs 30,000
10. Paid to Dinesh & Co in full settlement by Cheque-Rs 3,50,000

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 Raksha & Co. Ltd
Day Book
For 1-Apr-2024

Date Particulars Vch Type Vch No. Debit Amount Credit Amount
Inwards Qty Outwards Qty
1-4-2024 Cash Contra 1 5,00,000.00
1-4-2024 DTR Bank A/C Contra 2 30,000.00
1-4-2024 Rent A/c Payment 1 15,000.00
1-4-2024 Dinesh & Co. A/c Payment 2 3,50,000.00
1-4-2024 Raksha's Capital A/c Receipt 1 7,00,000.00
1-4-2024 Discount Received A/c Receipt 2 10,000.00
1-4-2024 Office Furniture A/c Journal 1 35,000.00
1-4-2024 Dinesh & Co. A/c Debit Note 1 30,000.00
1-4-2024 Sanil & Co. A/c Sales 1 4,20,000.00
1-4-2024 Dinesh & Co. A/c Purchase 1 3,80,000.00
 Raksha & Co. Ltd
Profit & Loss A/c
For 1-Apr-2024

Particulars For 1-Apr-2024 Particulars For 1-Apr-2024

Purchase Accounts 3,50,000.00 Sales Accounts 4,20,000.00

Purchase A/c 3,80,000.00 Sales A/c 4,20,000.00
Purchase Return A/c (-)30,000.00

Gross Profit c/o 70,000.00

4,20,000.00 4,20,000.00

Indirect Expenses 15,000.00 Gross Profit b/f 70,000.00

Rent A/c 15,000.00
Indirect Incomes 10,000.00
Nett Profit 65,000.00 Discount Received A/c 10,000.00

Total 80,000.00 Total 80,000.00

 Raksha & Co. Ltd
Balance Sheet
For 1-Apr-2024

Liabilities as at 1-Apr-2024 Assets as at 1-Apr-2024

Capital Account 7,00,000.00 Fixed Assets 35,000.00

Raksha's Capital A/c 7,00,000.00 Office Furniture A/c 35,000.00

Loans (Liability) Current Assets 7,65,000.00

Closing Stock
Current Liabilities 35,000.00 Sundry Debtors 4,20,000.00
Sundry Creditors 35,000.00 Cash-in-Hand 2,40,000.00
Bank Accounts 1,05,000.00
Profit & Loss A/c 65,000.00
Opening Balance
Current Period 65,000.00

Total 8,00,000.00 Total 8,00,000.00

RUAS BAC504

Benefits you have derived by solving this assignment

In my opinion, working on this assignment has been really valuable as it improved the
knowledge of accounting through understanding and analysis of cash flow statements. Working
on Tally helped to apply theoretical knowledge to practical situations, enhancing problem
solving skills in accounting and financial reporting.

The assignment effectively accesses module learning outcomes by addressing the concept of
cash flow statements , the impact of cash flow statements and its analysis. It helped to
demonstrate practical skills by using Tally software to prepare financial statements.

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