NMIMS Global Access

School for Continuing Education (NGA-SCE) Course: Financial Accounting

& Analysis

Internal Assignment Applicable for December 2021 Examination

1. The net profit before taxes as per the profit and loss account, of Gaman Ltd is Rs 269244.
With the given set of information, classify the given items as (operating / investing /
financing), share the correct classification with logical reasoning and calculate the cash flow
from operating activities
Loss on sale of asset 95780
dividend income 26000
interest income 35000
finance cost paid on debentures 12000
gain on sale of investment 45000
Depreciation on fixed assets 85000
Amortisation Expenses 110000
Answer:
Loss on Asset Sale - It falls under the heading of Investing activities. It's because the money
invested in the firm did not return, thus it's regarded a net profit. It is a long-term asset, and
the company does not keep track of the cash it receives from operations.
Dividend Income - Because dividends are a sort of cash receivable in the form of revenue,
commission, or profit from operations, they are recorded under operational activities in cash
flow. Dividends are payments made to shareholders in the form of cash receipts.
Income from Interest - Interest income, which is a sort of cash receipt from debtors on a lent
loan or money, is also reported under Operating operations. It provides a cash receipt from
the activities of the company.
Finance costs spent on Debentures - Finance costs paid on Debentures are considered as a
kind of spending on invested money and are classified as financing activities. It's subtracted
from Financing activities (cash outflow) and added to Net profit after taxes in cash in
operational operations. Furthermore, it has no effect on a company's capital structure.
Gain on Investment Sale - It is a profit from the sale of an asset; an invested asset is
classified as an investment, but a gain on the sale of a fixed asset is classified as an
operational activity and is deducted from net income.
Fixed Asset Depreciation - Operating operations include depreciation on fixed assets. It's a
non-cash expenditure with a depreciated value that doesn't include cash payments and must
be re-added to operational operations.
Expenses for amortisation - These are known as depreciation expenditures, which are non-
cash payments or expenses that must be brought back to the company's operational operations
after they have been written down in value since the beginning of the year.
Net Profit before Taxes 269244
Loss on sale of asset (+) 95780
Depreciation (+) 85000
Amortization Expenses (+) 110000
Finance cost paid on debentures 12000
Non-operating items
Dividend Income (-) (26000)
Interest Income (-) (35000)
Gain on Sale of Asset (-) (45000)
Cash flow from Operating activities 4,66,024

2. Discuss the steps of performing trend analysis on the financial statements of any
company.
Download the Balance sheet of any company of your interest from the open sources.
Perform the comparative analysis of that Balance sheet and discuss your findings.
Hint to attempt: to choose a company from open source- type the name of the company
in the web page.
Download the annual report as available, latest. Identify the relevant data, and then
perform comparative analysis of Balance Sheet of the company

COMPANY’s PROFILE:
Bhansali Engineering Polymers Limited (BEPL) has pioneered in manufacturing international
quality acrylonitrile butadiene styrene (ABS). The company is a value driven organization,
aiming excellence in providing quality products and services, since its incorporation in 1984.
 Comparative Analysis of Bhansali Engineering Polymers Limited (BEPL)
Standalone Balance Sheet of (BEPL)
------------------- in Rs. Cr. -------------------
Mar 21 Mar-20 Mar-19
12 12 12 Difference Percentage Difference Percentage
months Months months (2020-2019) Change (2021- Change
(2020) 2020) (2021)
Equity Share Capital 16.59 16.59 16.59 0 0% 0 0%
Total Share Capital 16.59 16.59 16.59 0 0% 0 0%
Reserves and Surplus 664.26 339.61 282.31 57.3 20% 324.65 96%
Total Reserves and 664.26 339.61 282.31 57.3 20% 324.65 96%
Surplus
Total Shareholders 680.85 356.2 298.9 57.3 19% 324.65 91%
Funds
Long Term 0 0 0 0 0% 0 0%
Borrowings
Deferred Tax 16.98 16.35 22.92 -6.57 -29% 0.63 4%
Liabilities [Net]
Other Long Term 0.51 0.44 0 0.44 0% 0.07 16%
Liabilities
Long Term 3.75 3.78 4.18 -0.4 -10% -0.03 -1%
Provisions
Total Non-Current 21.24 20.57 27.11 -6.54 -24% 0.67 3%
Liabilities

Short Term 0 0 0 0 0% 0 0%
Borrowings
Trade Payables 36.18 272.31 194.46 77.85 40% -236.13 -87%
Other Current 37.95 3.37 9.41 -6.04 -64% 34.58 1026%
Liabilities
Short Term 0.46 0.61 0.86 -0.25 -29% -0.15 -25%
Provisions
Total Current 74.6 276.29 204.73 71.56 35% -201.69 -73%
Liabilities
Total Capital And 776.69 653.06 530.74 122.32 23% 123.63 19%
Liabilities

Tangible Assets 140.75 149.53 143.44 6.09 4% -8.78 -6%

Intangible Assets 0.06 0.09 0.06 0.03 50% -0.03 -33%
Capital Work-In- 0 1.52 0 1.52 0% -1.52 -100%
Progress
Fixed Assets 140.82 151.13 143.5 7.63 5% -10.31 -7%
Non-Current 1.5 1.5 1.5 0 0% 0 0%
Investments
Deferred Tax Assets 0 0 2.01 -2.01 -100% 0 0%
[Net]
Long Term Loans 24.52 21.44 0 21.44 0% 3.08 14%
And Advances
Other Non-Current 4.69 4.84 2.29 2.55 111% -0.15 -3%
Assets
Total Non-Current 171.53 178.91 149.3 29.61 20% -7.38 -4%
Assets

Inventories 112.87 208.35 100.13 108.22 108% -95.48 -46%

Trade Receivables 290.74 153.74 223.8 -70.06 -31% 137 89%
Cash And Cash 153.1 63.27 23.98 39.29 164% 89.83 142%
Equivalents
Short Term Loans 39.38 31.9 21.46 10.44 49% 7.48 23%
And Advances
Other Current Assets 9.07 16.89 12.07 4.82 40% -7.82 -46%
Total Current 605.16 474.16 381.44 92.72 24% 131 28%
Assets
Total Assets 776.69 653.06 530.74 122.32 23% 123.63 19%

ANALYSIS:

Current Assets

As we see in year 2020 inventories have increased by 108% which affected the total current
assets a lot. The reason behind such increase can be that unsold goods are left for sales
which means Bhansali Engineering Polymers LTD (BEPL) have mismatched the
production and requirement. And in 2020-2021 it decreased by 46% which means the
inventories are being sold.

There has been decrease in trade receivables in 2020 by 31% which tells us that the goods
sold on credit hasn’t been received by the company. But in 2021 there is an increase of
89% which shows us that money has been received and there not any delay in payment.

Cash and Cash equivalents are increased by 164% in 2020 and by 142% in 2021 which is
good sign because BEPL has cash to run its daily expenses.

Short term loan and Advances have increased by 49% in 2020 and 23% in 2021, this tells
us that the company has already paid in advance which will eventually benefit BEPL only.
And if we talk about loans, BEPL has given short term loans to others which they will
repay that means again benefit of company.
The total Current Asset shows us 24% and 28% increase in year 2020 and 2021
respectively.

Non-Current Assets

We see BEPL has paid Deferred taxes only in year 2019, which means BEPL has paid
taxes in advance so it can get relief later in upcoming years. We also see that later it hasn’t
paid any deferred taxes which justifies our explanation.

Here also long-term loans and advances have increased in both years which means BEPL
has given money on credit to other and paid advance payment to others.

The total Non-Current assets show us increases by 20% in 2020 and decrease of 4% in
2021. Which is because BEPL has sold some of Fixed Assets hence the decrease of 7% in
Fixed Assets which affected Non-Current Assets in this way.

Current Liability

We see here that in 2020 Trade Payable has increased by 40% which tells us that the money
which BEPL has to pay to other businesses or borrowers has increased by 77cr. But the
good thing is in 2021 the Trade Payable has decreased by 87% which means BEPL has
paid 236cr to its borrowers and now is left with only 36cr amount of Trade Payable.

Started on a good note Other Current Liabilities decreased in 2020 which a good thing for
BEPL because it doesn’t have to pay more to anyone in span of 365 days but there is huge
increase in 2021 of 1026% which according to me is going to be used by BEPL for its
Cash and short-term expenses or to pay its short-term loans.

Short Term Provision has decreased by 29% and 25% in year 2020 and 2021 respectively
which tells us that the amount kept aside by BEPL for any doubtful debts has been used.

The total Current Liability is left with 74cr only with a decrease of 73% in 2021, which
indeed is a good thing for BEPL.

Non-Current Liabilities

Deferred tax Liability has increased in 2021 by only 4% which tells us that, the tax which
BEPL has yet to pay but the due the date has not been arrived yet has increased.
Long Term Liabilities have increased by 16% in 2021 which is only 55 lakhs means BEPL
is in a good position from the point of view of creditors.

Long Term Provision have consistently decreased in 2020 and 2021 by 10% and 1%
respectively. This means BEPL is using funds kept for undoubtful occasions.

The total Non-Current Liabilities is decreased in 2020 by 24% and then it increased in
2021 by 3% which lefts BEPL with 22cr only which according to me indicates that BEPL
has some plans beside expanding itself because we see its Tangible, Intangible and Fixed
Assets decreasing which it might has sold thus the huge increase in cash. Maybe BEPL is
looking forward to pay its loans and advances more rather than expanding itself.

Conclusion

Bhansali Engineering Polymers LTD. will meet its short-term goals as the Current
Liabilities are only 75 crores in 2021 whereas Current Assets are 605 crores in 2021. This
will help BEPL to clear its Current Liability. And talking about Non -Current Liability in
2021 it is only 21 crores whereas Non-Current Assets in 2021 is 171 crores which will
help BEPL is meet its long-term goals.

3. Mr. Akbar provides you with the following information-(all the transactions are separate
and independent of each other)
• Started business with cash Rs150000
• Purchased goods for cash Rs 25000
• Sold goods to C on credit Rs 20000
• Paid salary for cash Rs15000
• Deposited cash into the bank account Rs100000
a. Identify the accounts being affected in the monetary transaction and identify the type of
accounts identified - real, personal or nominal
Real Account
A Real Account is a general ledger account relating to Assets and Liabilities other than
people accounts. These are accounts that don’t close at year-end and are carried forward. An
example of a Real Account is a Bank Account.
Personal account
A Personal account is a general ledger account connected to all persons like individuals,
 firms and associations. An example of a Personal Account is a Creditor Account.
Nominal account
A Nominal account is a general ledger account pertaining to all income, expenses, losses and
gains. An example of a Nominal Account is an Interest Account.

Transactions Accounts Type of Accounts

involved
Started business with Cash Account Real Account - Cash is taken from the account and placed
cash Rs150000
in the business's capital account after being invested in the
business.
Capital Personal Account - Because the capital account gets the
Account money put for the start-up of the firm, it will be impacted by
monetary transactions.
Purchased goods for cash Purchases Nominal Account - The purchases account will not have a
Rs 25000
Account monetary effect, but the cash account will, because cash has
been deducted, and the purchases account will be influenced
by the increased stock of items.
Sold goods to C on credit C’s Account Personal Account – Because no cash was used, neither the
Rs 20000
c's account nor the sales account would be affected by the
monetary transaction.
Sales Account Nominal Account - No cash usage was done, hence both c’s
account and sales account will not be affected by monetary
transaction.
Paid salary for cash Salary Account Nominal Account - As cash is deposited as a monetary
Rs15000 transaction, the cash account is decreased and the bank
account is boosted.
Deposited cash into the Bank Account Real Account - When cash is placed as part of a monetary
bank account transaction, the cash account is decreased and the bank
Rs100000 account is boosted.
b. Discuss the rule of passing the journal entry applicable here and pass the journal entry
(Golden rule or transaction analysis, any of these rule/s can be taken as a base to justify
the answer)

S Particulars L. Amount Amount

No. F. (Dr.) (Cr.)
1. Cash A/c Dr. 15000
To Capital A/c 15000
(Being the amount invested by Mr. Akbar in his business)
2. Purchases A/c Dr. 25000
To Cash A/c 25000
(Being goods purchased for cash)
3. C’s A/c Dr. 2000
To Sales A/c 2000
(Being goods sold to C on Credit)
4. Salary A/c Dr. 15000
To Cash A/c 15000
(Being the amount paid for salary)
5. Bank A/c Dr. 100000
To Cash A/c 100000
(Being the amount deposited in bank)

Rules of debit and credit (Golden rule):

Personal account Debit the receiver and credit the giver.
Real Account Debit what comes in and credit what goes out.
Nominal Account Debit all expenses and losses and credit all incomes and gains.

➢ Increase in Assets are debits

➢ Decrease in Assets are credits

➢ Increase in Liabilities are credits Decrease in Liabilities are debits

➢ Increase in Capital are credits

➢ Decrease in Capitals are debits

➢ Expenses and losses are debits

➢ Incomes and Gains are credits