Financial Accounting and Analysis – Dec 21

Answer 1:

INTRODUCTION
The rise or fall in a company's or organization's readily available cash is referred to as its cash
flow (CF). Over a period of time, "cash flow" refers to the amount of money that a firm earns
or expends in relation to its total assets. As a result, understanding what you're looking for is
crucial while doing cancer research: All of them will be covered in great depth in this
presentation. CF is crucial to a company's long-term viability for investors and business
owners. A comparison between CF's cash flow statement and the cash flow statement of a firm
might be misleading. Product/service delivery dates are linked with revenue due to the
application of accrual accounting principles, which level off expenditures and match income
streams. Revenue recognition limits and the matching principle may have a substantial
influence on a company's net income or net profits.

CONCEPT AND APPLICATION

Operational, investment, and financial activity all fall within these three categories

A cash flow statement must reflect an increase in net income for the OPERATIONS SECTION
in order to account for asset sales losses

Because the transaction was "non-cash," the corporation did not have to pay for the loss of the
sale. Fixed asset or investment sales fall into a different investment category.

A company's actions generate dividends, which are a kind of income. In order to be considered
an investment, dividends must be paid out in cash. Investors in non-operating enterprises get
dividends. Net profits before taxes and other unforeseen items are not included in investment
activity cash flows.

Interest is a business expense. There is a time and a place for interest payments within the
financing process. Interest is a different kind of currency that may be earned while making
investments. A lot of cash is invested in activities like stock and bond purchases prior to
taxation and other expenses such as fees.

An investment loss is a loss of money. regardless matter how long or short-term the bank
overdraft interest is (NPBT). It's up to you to pay for it, so be prepared. In the financial
department, a cash outflow has been recorded.

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Financial Accounting and Analysis – Dec 21

"Other income" on the profit and loss statement includes profits from investments. Profit before
taxes and unanticipated expenses reduce operational cash flow. The company's gross revenues
are determined by the sum of all investment operations' cash inflows.

A company's income statement shows the depreciation of fixed assets, such as buildings and
equipment, over time. Net profit before taxes and special items is calculated using operational
cash flow since it does not need a payment or an outflow of cash.

Accounting records demonstrate the company's intangible asset amortisation. Since Net Profit
Before Tax and Extraordinary Items does not show a payment or outflow of money, operational
cash flow is evaluated.

CASH FLOW FROM OPERATING ACTIVITIES-

PARTICULARS AMOUNT
NET PROFIT BEFORE TAX AND EXTRAORDINARY ITEMS 2,69,244
ADJUSTMENTS FOR NON-CASH AND NON-OPERATING ITEMS
ADD: ITEMS TO BE ADDED
DEPRECIATION 85000
AMORTISATION EXPENSES 110000
INTEREST ON BORROWINGS AND DEBENTURES 12000
LOSS ON SALE OF FIXED ASSET 95780
LESS: ITEMS TO BE DEDUCTED
INTEREST INCOME (35000)
DIVIDEND INCOME (26000)
GAIN ON SALE OF INVESTMENTS (45000)
CASH FLOW FROM OPERATING ACTIVITIES 4,66,024

CONCLUSION
You may use the operational operations cash flow formula to see how a firm is doing in
important areas (or not). Increased cash flow from operations enables companies to develop
and provide new products as well as to pay dividends and reduce their debts. You should
keep in mind that investors are usually on the lookout for companies that generate consistent
revenue.

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Financial Accounting and Analysis – Dec 21

Financial health and efficiency may be assessed by analysing an organization's operating cash
flow (OCF). Investors, creditors, and company owners may be able to make better judgments
based on this information.

Answer 2:

INTRODUCTION
It is possible to conduct a horizontal study of financial statement components throughout time
(also known as trend analysis). New patterns and trends may be discovered by using this.

Horizontal analyses use claims that span many time periods. Researchers often utilise the
earliest era of history to compare remarks made in different periods of time.

CONCEPT & APPLICATION

The financial data of a corporation may be examined via the use of trend analysis. It is possible
to express momentum in a variety of ways. Make a note of the changes in percentage and
amount that have occurred throughout time.

In order to calculate the change in %, what is the formula?

At the beginning of the year, this project will get underway. The majority of individuals begin
in the first year. To begin with, let's look at what the world was like in the year 100. These
numbers are used to calculate trend percentages, which are then compared to last year's
percentages. Trend % goes below 100 only if the base year's value is lower than the current
one; if it does, it does not. Multiplying the prior year's totals will give you the total for that
year.

(This year's value Minus last year's value) *100 = Percentage Trend.

Data comparability necessitates uniformity across all financial reporting processes and
standards.

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Financial Accounting and Analysis – Dec 21

The profitability, solvency, and liquidity of different companies' accounts may be compared.

Reference points for our analysis of DABURI INDIA were its balance sheets from the previous
two fiscal years (FY 2019-20 and FY 2020-2021).

Dabur India

------------------- in Rs. Cr. -------------------

%
Mar 21 Mar 20 CHANGE
CHANGE

12 12
months months

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 176.74 176.71 0.03 0.017

Total Share Capital 176.74 176.71 0.03 0.017

Reserves and Surplus 5,214.48 4,397.52 816.96 18.578

Total Reserves and Surplus 5,214.48 4,397.52 816.96 18.578

Total Shareholders’ Funds 5,391.22 4,574.23 816.99 17.861

NON-CURRENT LIABILITIES

Long Term Borrowings 19.62 24.68 (5.06) (20.502)

Deferred Tax Liabilities [Net] 0.00 0.00 0 0

Other Long Term Liabilities 1.37 4.66 (3.29) (70.601)

Long Term Provisions 55.55 54.69 0.86 1.572

Total Non-Current Liabilities 76.54 84.03 (7.49) (8.913)

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Financial Accounting and Analysis – Dec 21

CURRENT LIABILITIES

Short Term Borrowings 151.96 89.28 62.68 70.206

Trade Payables 1,480.70 1,032.45 448.25 43.416

Other Current Liabilities 269.31 197.32 71.99 36.484

Short Term Provisions 134.43 122.80 11.63 9.471

Total Current Liabilities 2,036.40 1,441.85 594.55 41.235

Total Capital And Liabilities 7,504.16 6,100.11 1404.05 23.017

ASSETS

NON-CURRENT ASSETS

Tangible Assets 1,131.00 1,060.75 70.25 6.623

Intangible Assets 26.42 25.15 1.27 5.050

Capital Work-In-Progress 107.26 105.83 1.43 1.351

Other Assets 47.39 48.38 (0.99) (2.046)

Fixed Assets 1,312.07 1,240.11 71.96 5.803

Non-Current Investments 3,122.76 1,084.16 2038.6 188.035

Deferred Tax Assets [Net] 17.45 21.62 (4.17) 19.288

Long Term Loans And Advances 16.37 16.78 (0.41) (2.443)

Other Non-Current Assets 205.52 472.25 (266.73) (56.481)

Total Non-Current Assets 4,674.17 2,834.92 1839.25 64.878

CURRENT ASSETS

Current Investments 451.14 1,382.67 (931.53) (67.372)

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Financial Accounting and Analysis – Dec 21

Inventories 1,114.16 809.14 305.02 37.697

Trade Receivables 281.24 379.63 (98.39) (25.917)

Cash And Cash Equivalents 834.74 525.60 309.14 58.817

Short Term Loans And Advances 1.75 1.22 0.53 43.443

Other Current Assets 146.96 166.93 (19.97) (11.963)

Total Current Assets 2,829.99 3,265.19 (435.2) (13.328)

Total Assets 7,504.16 6,100.11 1404.05 23.017

INFERENCES DRAWN: -

Equity share capital only rose by 0.017 percent in 2020-21 and 2019-20 fiscal years. From
fiscal year 2020-21 to fiscal year 2019, the reserve and surplus grew by 18.588%. Liabilities
other than current obligations decreased by 8.913% from FY 2019-20 because of less long-
term loan repayments and other long-term commitments. Short-term borrowing jumped from
89.28 crores in FY 2019-20 to 151.96 crores in FY 2020-21, while trade payables rose by
43.416 percent. Physical and intangible assets both played a key part in the 5.803% increase
in the company's fixed assets during the fiscal year 2020-21. It's been an astonishing 188.035
percent increase in non-current investments since FY 2020-21. The investments made in
2019-20 and 2020-21 are down 67.372 percent from this year's. Cash and cash equivalents in
2020-21 increased by 58.817 percent as compared to the 2019-20 fiscal year. Cash on hand
increased by 43.443 percent, while trade receivables dropped by 25.917 per cent, compared
to FY 2019-20.

CONCLUSION
In order for investors and financial experts to assess a company's performance and predict its
stock price in the future, they need financial data. The annual report includes the financial
records of the firm in addition to the audited statistics.

Net income is the profit that remains after all expenses have been deducted from revenue.

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Financial Accounting and Analysis – Dec 21

Answer 3.A.:

INTRODUCTION

It doesn't matter whether it's a currency exchange or an extension of a credit line or the
acquisition or sale of assets (such as bonds or certificates of deposit), an economic transaction
is defined by the financial institution as any payment, transfer, or delivery. Payments, transfers
of monies, and delivery of commodities may all be done in a variety of ways by a financial
institution (such as the use of a bank account).

CONCEPT & APPLICATION

Rules of Debit and Credit under the Modern Approach

Asset Accounts Debit the increase; Credit the decrease

Liabilities Accounts Credit the Increase; Debit the decrease

Capital Accounts Credit the Increase; Debit the decrease

Revenue Accounts Credit the Increase; Debit the decrease

Expense Accounts Debit the increase; Credit the decrease

User accounts may be categorised into one of the following. It is possible to have a personal,
commercial, or government account.

It's possible to categorise accounts as either real, personal, or nominal (or nominal).

This ledger account type is used to track non-individually identifiable assets and liabilities.
Carrying over money is possible since these accounts don't shut at the end of the year. A Real
Account resembles a bank or savings account in many ways.

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Financial Accounting and Analysis – Dec 21

The general ledger includes accounts for individuals, businesses, and organisations. The
general ledger accounting system is thus a valuable tool for any company. There are several
similarities between a Creditor Account and a Personal Account.

All monetary transactions are tracked in the General Ledger. Nominal accounts include both
Interest Accounts and Nominal Accounts.

Let's suppose that these trades will go through, given the current circumstances.

My start-up cost me Rs. 1,50,000 (about $1,500 USD)

The following two accounts will be impacted by the transaction: In other words, money and
resources A/C comes in two flavours: a window unit and a central unit (capital)

There are two types of accounts: capital A/C (money) and real A/C (assets) (cash). Accounts
are referred to as "A/Cs" in this context (capital).

The purchase of Rs 25,000 worth of products was made using cash

These kinds of transactions have an effect on the accts A/C and A/C. (expenses).

There are two types of financial records: nominal and real accounts. Nominal accounts record
expenditures, while real accounts record assets (such as cash).

As a result, C received a credit sale of 20,000 rupees.

The Cs and Cs A/C and Revenue A/C will be impacted (Sales)

There are two types of air conditioning systems: residential and commercial. C's AC is another
name for Asset AC, a smaller, more portable air conditioner.

The winner will take home a check for Rs 15,000 as a reward.

In terms of money, this transaction was beneficial to both A/C (Payroll) and A/C (Salary) (cash)

It's important to differentiate the real money (cash and savings) from the phoney money (wages
and perks).

To create a bank account and make a deposit of Rs. 100,000,000 in it.

Cash and deposit accounts are also affected (Bank)

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Financial Accounting and Analysis – Dec 21

There are two real-world examples of accounts: the Cash Account and the Asset Account
(Bank).

CONCLUSION

Revenue is generated when customers buy goods and services. When you buy the identical
products and services from a different firm, you wind up spending more money and having less
money in your wallet. Consumers trade goods and services for money.

Answer 3.B.:

INTRODUCTION

Before they are sorted by date, diary entries are recorded using debit and credit principles. For
each kind of account, there are certain regulations to adhere to.

When the value of an asset increases, a debit is recorded, and when the value decreases, a credit
is recorded.

Expenses are deducted as they rise and credited when they fall.

CONCEPT & APPLICATION

The following are three key accounting ideas:

The account of the donor is debited, whilst the account of the beneficiary is refunded.

A donor's bank account gets debited for the amount of the donation when they make a donation.
Maintaining a general ledger-like personal account may be used to keep track of the finances
of people or corporations.

If you get a payment, you should take it out of the account. Make sure your donation is sent to
the proper area before submitting it.

Using a Real Account will allow you to see exactly how much money is coming in and going
out.

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Financial Accounting and Analysis – Dec 21

The second golden rule applies to all accounts that meet the requirements of validity. Asset and
liability accounts are included in these financial statements.

A permanent account, on the other hand, is a pre-existing account which isn't going away
anytime soon. Since we live in the real world, we don't have a year's end. Not at all. The
accounts for this month are simply carried over to the accounting period for the next month.

When your company introduces a new product or service, take a payment from the account (for
example, an asset). In the event that money is withdrawn from your company's account, it
should be returned to you.

The default option for nominal accounts should be to debit costs and credit earnings.

The final of the golden accounting rules applies to nominal accounts. Nominal accounts, such
as checking and savings accounts, are permanently closed at the conclusion of each accounting
month. For transitory accounts, the phrase "nominal accounts" is used. It is possible to find
profit and loss statements in the short-term or nominal balance sheets.

Debit the nominal account whenever your business makes a purchase or suffers a loss. If your
company is required to reveal earnings or losses, the account should be debited.

Journal Entries of the given transactions area as follows: -

1. Started business with cash Rs 1,50,000

CASH A/C --------------------------------------- DEBIT 1,50,000

TO CAPITAL A/C 1,50,000
(BEING BUSINESS STARTED WITH CASH)
Base of the transaction - Debit the receiver and credit the giver & Debit what comes in and
credit what goes out

2. Purchased goods for cash Rs 25,000

PURCHASES A/C --------------------------------------- DEBIT 25,000

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Financial Accounting and Analysis – Dec 21

TO CASH A/C 25,000

(BEING GOODS PURCHASED FOR CASH)
Base of the transaction - Debit what comes in and credit what goes out & Debit expenses and
losses, credit income and gains

3. Sold goods to C on credit Rs 20,000

C --------------------------------------- DEBIT 20,000

TO SALES A/C 20,000
(BEING GOODS SOLD TO C ON CREDIT)
Base of the transaction - Debit the receiver and credit the giver & Debit expenses and losses,
credit income and gains

4. Paid salary for cash Rs 15,000

SALARY A/C --------------------------------------- DEBIT 15,000

TO CASH A/C 15,000
(BEING GOODS SOLD TO C ON CREDIT)
Base of the transaction - Debit what comes in and credit what goes out & Debit expenses and
losses, credit income and gains

5. Deposited cash into the bank account Rs 1,00,000

BANK A/C --------------------------------------- DEBIT 1,00,000

TO CASH A/C 1,00,000
(BEING GOODS SOLD TO C ON CREDIT)
Base of the transaction - Debit what comes in and credit what goes out

CONCLUSION
Diary entries may be sorted by date and subject. In the end, regardless of the method utilised,
the consequences are always the same. For every transaction, the "Double Entry System"
dictates that it be recorded in two separate accounts, one debited and the other credited.

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Financial Accounting and Analysis – Dec 21

The journal acts as the company's first book of accounts for accountants. If anything goes
wrong here, the remainder of the procedure might be in jeopardy.

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