Profit and loss account of friends flower and shop

For the quarter ended 31st December 2010

(Rs. In lakhs)
particulars Amount Amount
Rs.
Net revenue from sale of flowers 750
Revenue from sale of wastage flowers 75

Purchase cost of flowers 529 825

Carrying cost 132
661
Operating profit 164

Rent of shop 1.5

Insurance premium .70
Electricity charges .50
Stationary .63
Tax & legal expenses (including establishment expenses and all 65
taxes)
Traveling expenses .88
Commission to retailers 5.48
Salary /wages (excluding partners salary) 5.75
Other expenses 2.13
Depreciation .80 83.745
Interest on bank loan .375

Net profit 80.255

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Profit and loss appropriation account of friends flower and shop
For the quarter ended 31st December 2010
(Rs. In lakhs)

2
 Particulars Amount Amount
Rs. Rs.
Net profit from profit and loss account 80.255

Less: interest on capital paid to partners@6%

Hitesh .30
Subhakant .48
Nilkant .42
Abinash .30
Rajkumar .30
Salary to partners
Hitesh .60
Subhakant .60
Nilkant .60
Abinash .60
Rajkumar .60
4.8
Distributable profit:

Hitesh
Subhakant 15.091
Nilkant 15.091
Abinash 15.091
Rajkumar 15.091
15.091
75.455

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 Partners’ capital account
For the quarter ended 31st December 2010
(Rs. In lakhs)
Dr. Cr.
Particular Hites Subh Abi Nil Raj Particular Hites Subh Abi Nil Raj
s Rs. Rs. Rs. Rs. Rs. s Rs. Rs. Rs. Rs. Rs.
To 20.99 24.17 20.99 23.11 20.99 By cash 5 8 5 7 5
balance 1 1 1 1 1 By
c/d interest on .30 .48 .30 .42 .30
capital
By salary .60 .60 .60 .60 .60

By Net
profit 15.09 15.09 15.09 15.09 15.091
1 1 1 1

20.99 24.17 20.99 23.11 20.99 20.99 24.17 20.99 23.11 20.991
1 1 1 1 1 1 1 1 1
By 20.99 24.17 20.99 23.11 20.991
balance 1 1 1 1
b/d

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 Particulars Amount Amount
Rs. Rs.
Source of fund:
Partners capital:
Subhakant 24.171
Abinash 20.991
Hitesh 20.991
Rajkumar 20.991
Nilkant 23.111
110.255

15%bank loan from Indian bank 10.0000

120.255
Application of funds: (A)

Building * 87.4765
Furniture 8.00000
less: depreciation @20% .50000
7.50000

Balance
Tools 5.00000
.30000 Sheet of
Less: depreciation @6% 4.70000
(B) Friends
99.6765
flower and
Current assets: shop
Stock 2.0305
Sundry Debtors 10.450 For the
Bank 5.2030 quarter
Cash 10.295
ended 31st
Less: Current liabilities: 27.9785 December
Sundry creditors 7.40 2010

(C) 20.5785
(Rs. In
A=(B+C) 120.255 lakhs)

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* Building was purchased at 31st December, so depreciation is not charged.

Cash flow statement

For the quarter ended 31st December2010
(As per accounting standard -3)-Indirect method
(Rs. in lakhs)
Particulars Amount(Rs Amount(Rs Amount(Rs)
) )
Cash flow from operating activities:
Profit as per profit and loss account 80.255
Add: Non cash expenses:
Depreciation on furniture and tools(.50+.30) .80

Add: increase in sundry creditors 7.40

88.455
Less: increase in current assets:
(other than cash and cash equivalent)
Increase in Sundry debtors 10.450
Increase in stock 2.0305 12.4805

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 Net cash from operating activities 75.9745

cash flow from investing activities :

purchase of building 87.4765
purchase of furniture 8.000
purchase of tools 5.000
Net cash out flow from investing activities (100.4765)

cash inflow from financing activities:

loan taken from bank 10.000
cash received from partners 30.000

40.000
Net cash flow 15.498

Cash and cash equivalent at the beginning of the year NIL

Cash and cash equivalent at the end of the year 15.498

Analysis of ratios

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 Name of the ratios Ratio

Net profit ratio (net profit/sales) 9.73%

Return on individual investment

Hitesh 301.82%
Nilkant 215.59%
Subhakant 188.64%
Abinash 301.82%
Rajkumar 301.82%

Current ratio(current assets/ current liabilities) 3.78 times

Fixed assets to current assets ratio(fixed assets/current assets) 3.56 times

Proprietary ratio(partners capital at the end of quarter/total assets) 86.37%

Debtor’s turnover ratio(sales / sundry debtors) 78.95 times

Average collection period (debtors velocity)(365/debtors turnover ratio) 4.62 days

Creditor’s turnover ratio(purchase cost of flower/sundry creditors) 78.49times

Average payment period (creditors velocity)(365/creditors turnover ratio) 4.65days

Operating profit ratio (operating profit/sales) 19.88%

Operating ratio(operating expenses/sales)(100%-19.88) 80.12%

Liquid ratio(current assets(-)stock/current liabilities(-)bank overdraft) No need to find

out in our business
Working capital turnover ratio (cost of sales/net working capital) 25.71 times
Net assets turnover ratio (sales/capital employed) or capital turnover ratio 6.86 times

Fixed assets turnover ratio (sales/fixed assets) 8.28 times

Expenses ratio(expenses/sales)other than operating expenses 10.15%

Interest coverage ratio(cash flow from operating activities/interest) 202.59 times

Cash return on total assets(operating cash flow/total assets) 59.52%

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 Interpretation of ratio
Current ratio is favour for the business because it is above three times, so it is good for the
business.

Average collection period and average payment period is more or less same, so it is also
reasonable, quite acceptable.

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Operating profit ratio is 19.88% and net profit ratio is 9.73%which is not bad, because of volume
of the sale is bigger, if target sale is increasing then it will be increase. There is some cost which is
fixed in nature.

Liquid ratio is no need to calculate for our because when we compute liquid ratio then from
current assets we subtract stock and from current liabilities we subtract bank overdraft, but in our
business stock is flower which is too much liquid, because it will be sold within one or two days,
so we do not want to calculate liquid ratio. We already compute current ratio.

Return on individual investment is very good. Within one quarter rate of individual returns are-
Hitesh - 301.82%
Nilkant- 215.59%
Subhakant- 188.64%
Abinash- 301.82%
Rajkumar- 301.82%
It is a profitable sector to invest.

Net assets turnover ratio is above six times which is good for the business.

At the end of the quarter we purchase some fixed assets for growing our business, we purchase a
building which is shows more cash out flow for investing activities. But at the end of the year it
will be most favourable ratio of return on fixed assets.

NOTES:
In case of furniture out of Rs. 8, 00,000, Rs.2, 50,000 was purchased at the beginning of the business that is 1st
September, and Rs.5, 50,000 was purchased at the end of the quarter that is 31st December, 2010. So
Depreciation is not charged for the amount of Rs. 5, 50,000, which are purchased for new building. Depreciation
is charged Rs.50,000,@20% per annum on Rs.2, 50,000.

Depreciation on furniture= 2, 50,000*20/100=Rs.50, 000

AGREEMENT OF PARTNERSHIP:

Each and every partner will invest according to there capability. Interest on capital will be
providing @6% on opening capital balance.

Partners can withdraw money from business but not exceeding Rs.120000 per annum, in special
case it will be decided by other partners, if a single partner is not agree then the partner can not

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withdraw over exceeding amount. In case of over exceeding amount, the interest on drawings will
be charged @5% per annum.

All the partners are full time employee for only this business.

Salary of each partners are same, amounting to Rs.20000 per month.

Profit will be distributed among the partners equally.

Any partner can not take decision by his own; if it will be acceptable by the other partners then the
partner can take decision.

All the partners are responsible for the business.

New partners can join but it will be acceptable by all the partners.

Any body can retire from partners but it must be inform by before one year.

In case of death of any partners he or she must nominee any person at the beginning of the
registration. So this particular nominee can future partner of the business, any other person can not
claim for the partner of the business. If nominee is minor then he or she can partner after cross the
majority age.

If any partner wants to give loan to business then interest on loan must be bellow 6% per annum.

Future plans-

Future plan of “FRIENDS FLOWER AND SHOP” is to establish an organised and international
quality business. Produce flowers in nationally and sale it to international branded.

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