ACCOUNTS PROJECT 1

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 Acknowledgement

Index
Introduction......................................................................1
Significance of Financial Statement Analysis...................2
Comparative Statement...................................................3
Common-Size Statement..................................................3
Company Profile (ITC Ltd.)................................................4
Comparative Balance Sheet.............................................5
Common-Size Balance Sheet............................................6
Comparative Income Statement......................................7
Common-Size Income Statement.....................................9
Graphical Representation...............................................11
A. Comparative Balance Sheet.....................................11
B. Common-Size Balance Sheet...................................13
C. Comparative Income Statement..............................15
D. Common-Size Income Statement............................18
Conclusion.......................................................................21
Bibliography....................................................................22
 Introduction

Financial Statements are reports that summarize important financial accounting

information about your business. There are three main types of financial
statements: the balance sheet, income statement, and cash flow statement.

Together, they give you—and outside people like investors—a clear picture of your
company’s financial position.

We’ll look at what each of these three basic financial statements do, and examine how
they work together to give you a full picture of your company’s financial health. A
balance sheet is a snapshot of your business finances as it currently stands. It tells you
about the assets you own, and liabilities (i.e., debts) you owe, at a particular point in
time.

How often your bookkeeper prepares a balance sheet for you will depend on your
business. Some businesses get daily or monthly financial statements, some prepare
financial statements quarterly, and some only get a balance sheet once a year. Balance
sheets are broken up into three general categories: assets, liabilities, and equity.

The income statement

While the balance sheet is a snapshot of your business’s financials at a point in time,
the income statement  (sometimes referred to as a profit and loss statement) shows
you how profitable your business was over an accounting period, such as a month,
quarter, or year. It shows you how much you made (revenue) and how much you
spent (expenses).

The cash flow statement

The cash flow statement tells you how much cash entered and left your business over
a particular time period.

Cash flow statements (also known as the statement of cash flows) are typically only
prepared for companies that use the accrual accounting method. This is because under
the accrual method, a company’s income statement might include revenue that the
company has earned but not yet received, and expenses the company has incurred but
not yet paid.

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Significance of Financial Statement Analysis

1. Judging the earning capacity or profitability of a business concern.

2. Analyzing the short term and long term solvency of the business concern.
3. Helps in making comparative studies between various firms.
4. Assists in preparing budgets.
5. The financial statement analysis provides important information to them for
their purpose.
6. It is important to them because they can obtain useful information for their
investment decision making purpose.
7. They are used as a prediction the firm’s future incomes distribution to
shareholders members in terms of dividend.
8. It is helpful to the government agencies in analyzing the taxation owed to
the firm.
 Comparative Statement

A comparative statement is a document used to compare a particular

financial statement with prior period statements. Previous financials
are presented alongside the latest figures in side-by-side columns,
enabling investors to identify trends, track a company’s progress and
compare it with industry rivals. Analysts, investors, and business
managers use a company’s income statement,  and cash flow
statement for comparative purposes. They want to see how much is
spent chasing revenues from one period to the next and how items on
the balance sheet and the movements of cash vary over time.

Common-Size Statement
A common size income statement is an income statement in which
each line item is expressed as a percentage of the value of revenue or
sales. It is used for vertical analysis, in which each line item in a financial
statement is represented as a percentage of a base figure within the
statement. Common size financial statements help to analyze and
compare a company's performance over several periods with varying
sales figures. The common size percentages can be subsequently
compared to those of competitors to determine how the company is
performing relative to the industry.

Company Profile (ITC Ltd.)

ITC Limited is an Indian company headquartered in Kolkata, West
Bengal.[5] ITC has a diversified presence across industries such as
cigarettes, FMCG, hotels, packaging, paperboards and specialty papers
and agribusiness. The company has a total of 13 businesses in 5
segments. Also, there are 90 countries where ITC exports its products.
Its products are available in 6 million retail outlets. Established in 1910
as the Imperial Tobacco Company of India Limited, the company was
renamed as the India Tobacco Company Limited in 1970 and later to
I.T.C. Limited in 1974. The company now stands renamed to ITC
Limited, where "ITC" today is no longer an acronym or an initialized
form.
The company completed 100 years in 2010 and as of 2019–20, had an
annual turnover of US$10.74 billion and a market capitalization of
US$35 billion. It employs over 36,500 people at more than 60 locations
across India and is part of the Forbes 2000 list. Within a relatively short
span of time, ITC has built 25 mother brands, many of which are market
leaders in their segments. This vibrant portfolio of brands represents an
annual consumer spends of over H19,700 crore today. ITC’s world-class
Indian brands anchor competitive and inclusive value chains that
create, capture, and retain larger value within the country.
 Comparative Balance Sheet
COMPARATIVE BALANCE SHEET of ITC Ltd. as at 31st March, 2021 and 2020
31st 31st
Absolute
March, March, Percentage
Particulars Change
2021 2020 Change (%)
(₹ in crore)
(₹ in crore) (₹ in crore)
I. EQUITY AND LIABILITIES        
1. Shareholders' Funds        
(a) Share Capital 781.84 773.81 8.03 1.04
(b) Reserves and Surplus 18,882.77 15,981.31 2,901.46 18.16
2. Non-Current Liabilities        
(a) Long-term Borrowings 92.84 107.40 (14.56) (13.56)
(b) Long-term Provisions 107.12 93.82 13.30 14.18
3. Current Liabilities        
(a) Short-term Borrowings 1.77 1.94 (0.17) (8.76)
(b) Trade Payables 1,424.84 1,395.31 29.53 2.12
(c) Other Current Liabilities 3,371.27 3,067.77 303.50 9.89
(d) Short-term Provisions 4303.95 4,012.46 291.49 7.26
Total 28,966.40 25,433.82 3,532.58 13.89
II. ASSETS        
1. Non-Current Assets        
(a) Fixed Assets:        
(i) Tangible Assets 11,252.92 9,529.83 1,723.09 18.08
(ii) Intangible Assets 123.02 148.68 (25.66) (17.26)
(b) Non-Current Investments 1,953.28 1,563.30 389.98 24.95
(c) Long-term Loans and Advances 1,193.61 1,146.47 47.14 4.11
2. Current Assets        
(a) Current Investments 4,363.31 3,991.32 371.99 9.32
(b) Inventories 5,637.83 5,269.17 368.66 7.00
(c) Trade Receivables 986.02 885.10 100.92 11.40
(d) Cash and Cash Equivalents 2,818.93 2,243.24 575.69 25.66
(e) Short-term Loans and Advances 500.59 563.45 (62.86) (11.16)
(f) Other Current Assets 136.89 93.26 43.63 46.78
Total 28,966.40 25,433.82 3,532.58 13.89
         
 Common-Size Balance Sheet

COMMON-SIZE BALANCE SHEET of ITC Ltd. as at 31st March, 2021 and 2020
31st 31st Percentage of Percentage of
March, March, Balance Sheet Balance Sheet
Particulars 2021 2020 Total Total
(₹ in (₹ in 31st March, 31st March,
crore) crore) 2021(%) 2020(%)
I. EQUITY AND LIABILITIES        
1. Shareholders' Funds        
(a) Share Capital 781.84 773.81 2.70 3.04
(b) Reserves and Surplus 18,882.77 15,981.31 65.19 62.83
2. Non-Current Liabilities        
(a) Long-term Borrowings 92.84 107.40 0.32 0.42
(b) Long-term Provisions 107.12 93.82 0.37 0.37
3. Current Liabilities        
(a) Short-term Borrowings 1.77 1.94 0.01 0.01
(b) Trade Payables 1,424.84 1,395.31 4.92 5.49
(c) Other Current Liabilities 3,371.27 3,067.77 11.64 12.06
(d) Short-term Provisions 4303.95 4,012.46 14.86 15.78
Total 28,966.40 25,433.82 100.00 100.00
II. ASSETS        
1. Non-Current Assets        
(a) Fixed Assets:        
(i) Tangible Assets 11,252.92 9,529.83 38.85 37.47
(ii) Intangible Assets 123.02 148.68 0.42 0.58
(b) Non-Current Investments 1,953.28 1,563.30 6.74 6.15
(c) Long-term Loans and Advances 1,193.61 1,146.47 4.12 4.51
2. Current Assets        
(a) Current Investments 4,363.31 3,991.32 15.06 15.69
(b) Inventories 5,637.83 5,269.17 19.46 20.72
(c) Trade Receivables 986.02 885.10 3.40 3.48
(d) Cash and Cash Equivalents 2,818.93 2,243.24 9.73 8.82
(e) Short-term Loans and Advances 500.59 563.45 1.73 2.22
(f) Other Current Assets 136.89 93.26 0.47 0.37
Total 28,966.40 25,433.82 100.00 100.00
         
 Comparative Income Statement

COMPARATIVE INCOME STATEMENT of ITC LTD. for the years ended 31st March, 2021 and 2020
31st March, 31st March, Absolute
Note Percentage
Particulars 2021 2020 Change
No. Change (%)
(₹ in crore) (₹ in crore) (₹ in crore)

I. Revenue from
Operations   48,524.54 46,807.34 1,717.20 3.67

II. Other Income   3,250.99 3,013.66 237.33 7.88

III. Total Income   51,775.53 49,821.00 1,954.53 3.92

IV. Expenses:          

Cost of Materials
Consumed   13,605.07 13,121.76 483.31 3.68

Purchases of Stock-in-
Trade   6,896.40 4,289.71 2,606.69 60.77

Changes in Inventories of
Finished Goods, Work-in-
Progress and
Stock-in-Trade   (526.86) (176.34) (350.52) 198.78

Excise Duty   3,039.43 1,187.64 1,851.79 155.92

Employees Benefit
Expenses   2,820.95 2,658.21 162.74 6.12
Finance Costs   47.47 55.72 (8.25) (14.81)

Depreciation and
Amortization Expenses   1,561.83 1,563.27 (1.44) (0.09)

Other Expenses   7,167.09 7,822.11 (655.02) (8.37)

Total Expenses   34,611.38 30,522.08 4,089.30 13.40

V. Profit before
Exceptional Items and tax   17,164.15 19,298.92 (2,134.77) (11.06)

VI. Exceptional Items   - (132.11) 132.11 (100.00)

VII. Profit before tax   17,164.15 19,166.81 (2,002.66) (10.45)

VIII. Tax Expense:          

Current Tax   4,035.36 4,441.97 (406.61) (9.15)

Deferred Tax   97.15 (411.21) 508.36 (123.63)

IX. Profit for the year   13,031.64 15,136.05 (2,104.41) (13.90)

           
 Common-Size Income Statement

COMMON-SIZE INCOME STATEMENT of ITC Ltd. for the years ended 31st march, 2021 and 2020
% of Revenue % of Revenue
Not 31st March, 31st March,
of Operations of Operations
Particulars e 2021 2020
31st March, 31st March,
No. (₹ in crore) (₹ in crore)
2021(%) 2020(%)

I. Revenue from
Operations   48,524.54 46,807.34 100.00 100.00

II. Other Income   3,250.99 3,013.66 6.70 6.44

III. Total Income   51,775.53 49,821.00 106.70 106.44

IV. Expenses:          

Cost of Materials
Consumed   13,605.07 13,121.76 28.04 28.03

Purchases of Stock-in-
Trade   6,896.40 4,289.71 14.21 9.16

Changes in Inventories
of Finished Goods,
Work-in-Progress and
Stock-in-Trade   (526.86) (176.34) (1.09) (0.38)

Excise Duty   3,039.43 1,187.64 6.26 2.54

Employees Benefit
Expenses   2,820.95 2,658.21 5.81 5.68
Finance Costs   47.47 55.72 0.10 0.12

Depreciation and
Amortization Expenses   1,561.83 1,563.27 3.22 3.34

Other Expenses   7,167.09 7,822.11 14.77 16.71

Total Expenses   34,611.38 30,522.08 71.33 65.21

V. Profit before
Exceptional Items and
tax   17,164.15 19,298.92 35.37 41.23

VI. Exceptional Items   - (132.11) - (0.28)

VII. Profit before tax   17,164.15 19,166.81 35.37 40.95

VIII. Tax Expense:          

Current Tax   4,035.36 4,441.97 8.32 9.49

Deferred Tax   97.15 (411.21) 0.20 (0.88)

IX. Profit for the year   13,031.64 15,136.05 26.86 32.34

           
 Graphical Representation
A. Comparative Balance Sheet
1. Absolute Change in Equity and Liabilities (₹ in crore):

291.49 8.03
303.50
29.53
(0.17)
13.30
(14.56)

2,901.46

Share Capital Reserves and Surplus Long-term Borrowings Long-term Provisions

Short-term Borrowings Trade Payables Other Current Liabilities Short-term Provisions

2. Percentage Change in Equity and Liabilities (%):

1.04
7.26 18.16
9.89

2.12

(8.76)
(13.56)
14.18

Share Capital Reserves and Surplus Long-term Borrowings Long-term Provisions

Short-term Borrowings Trade Payables Other Current Liabilities Short-term Provisions
3. Absolute Change in Non-Current Assets and Current Assets
(₹ in crore):

(62.86) 43.63
575.69

100.92
1,723.09
368.66

371.99
389.98

47.14
(25.66)

Tangible Assets Intangible Assets Non-Current Investments

Long-term Loans and Advances Current Investments Inventories
Trade Receivables Cash and Cash Equivalents Short-term Loans and Advances
Other Current Assets

4. Percentage Change in Non-Current and Current Assets (%):

18.08
46.78 (17.26)

24.95
(11.16)

25.66
4.11
9.32
7.00
11.40

Tangible Assets Intangible Assets Non-Current Investments

Long-term Loans and Advances Current Investments Inventories
Trade Receivables Cash and Cash Equivalents Short-term Loans and Advances
Other Current Assets
B. Common-Size Balance Sheet

1. Equity and Liabilities (31st March, 2021):

2.70
14.86

11.64

4.92
0.01
0.37
0.32 65.19

Share Capital Reserves and Surplus Long-term Borrowings Long-term Provisions

Short-term Borrowings Trade Payables Other Current Liabilities Short-term Provisions

2. Equity and Liabilities (31st March, 2020):

3.04
15.78

12.06

5.49
0.01
0.37 62.83
0.42

Share Capital Reserves and Surplus Long-term Borrowings Long-term Provisions

Short-term Borrowings Trade Payables Other Current Liabilities Short-term Provisions
3. Non-Current Assets and Current Assets (31st March, 2021):
1.73 0.47
3.40 9.73

38.85

19.46

4.12
15.06 6.74
0.42

Tangible Assets Intangible Assets Non-Current Investments

Long-term Loans and Advances Current Investments Inventories
Trade Receivables Cash and Cash Equivalents Short-term Loans and Advances
Other Current Assets

4. Non-Current Assets and Current Assets (31st March, 2020):

3.48 8.82 2.22 0.37

37.47

20.72

15.69 4.51
6.15
0.58

Tangible Assets Intangible Assets Non-Current Investments

Long-term Loans and Advances Current Investments Inventories
Trade Receivables Cash and Cash Equivalents Short-term Loans and Advances
Other Current Assets
C. Comparative Income Statement

1. Revenue and Income from Different Sources(Absolute

Change):

237.33

1,717.20

Revenue from Operations Other Income

2. Revenue and Income from Different Sources (Percentage

Change):

3.67

7.88

Revenue from Operations Other Income

3. Expenses in Different Uses (Absolute Change):
(655.02) 483.31
(1.44)
(8.25)
162.74

1,851.79 2,606.69

(350.52)

Cost of Materials Consumed

Purchases of Stock-in-Trade
Changes in Inventories of Finished Goods, Work-in-Progresss and Stock-in-Trade
Excise Duty
Employees Benefit Expenses
Finance Costs
Deprecitation and Amortisation Expenses
Other Expenses

4. Expenses in Different Uses (Percentage Change):

(14.81) (0.09) (8.37) 3.68

60.77
6.12

155.92

198.78

Cost of Materials Consumed

Purchases of Stock-in-Trade
Changes in Inventories of Finished Goods, Work-in-Progresss and Stock-in-Trade
Excise Duty
Employees Benefit Expenses
Finance Costs
Deprecitation and Amortisation Expenses
Other Expenses
5. Profit at Different Stages (Absolute Change):

(2,002.66)
(2,104.41)

508.36 (406.61)

Profit before Tax Current Tax Deferred Tax Profit after Tax

6. Profit at Different Stages (Percentage Change):

(10.45)
(13.90) (9.15)

(123.63)

Profit before Tax Current Tax Deferred Tax Profit after Tax
D. Common-Size Income Statement

1. Revenue and Income from Different Sources (31st March,

2021):

6.70

100.00

Revenue from Operations Other Income

2. Revenue and Income from Different Sources (31st March,

2020):
3. Expenses in Different Uses (31st March, 2021):
14.77
6.44
28.04

3.22
0.10

5.81

6.26 14.21
100.00
(1.09)

Cost of Materials Consumed

Purchases of Stock-in-Trade
Revenue from Operations Other Income
Changes in Inventories of Finished Goods, Work-in-Progresss and Stock-in-Trade
Excise Duty
Employees Benefit Expenses
Finance Costs
Deprecitation and Amortisation Expenses
Other Expenses
4. Expenses in Different Uses (31st March, 2020):
5. Profit at Different Stages (31st March, 2021):

26.86

35.37

8.32
0.20

Profit before Tax Current Tax Deferred Tax Profit after Tax

16.71

28.03

3.34

0.12
5.68
9.16

2.54
(0.38)

Cost of Materials Consumed

Purchases of Stock-in-Trade
Changes in Inventories of Finished Goods, Work-in-Progresss and Stock-in-Trade
Excise Duty
Employees Benefit Expenses
Finance Costs
Deprecitation and Amortisation Expenses
Other Expenses

6. Profit at Different Stages (31st March, 2020):

32.34

40.95

9.49

(0.88
)

Profit before Tax Current Tax Deferred Tax Profit after Tax
 Conclusion
After observing the Comparative Balance Sheet, we notice that there is
an increase in the share capital and reserves and surplus by 1.04% and
18.16% respectively, which is a positive sign for the company. We also
observe that there is an increase in both total assets as well as
liabilities, which is an indication that the company is growing, and is
thus, also a positive sign. However, there is a huge increase in Cash and
Bank Balance which suggests that the company is not able to handle its
Cash and Bank balances in an effective manner, which could otherwise
be utilized in short-term investments to generate extra revenue for the
company.
The Common-size Balance Sheet shows that Reserves and Surplus
constitute a major part of the Total Equity and Liabilities, which
indicates that the profit of the firm is utilized for the growth of the
company. Therefore, the internal or market value of the share of the
company will be more than that of the face value.
The Comparative Income Statement shows that total income has
increased, but total expenses has also increased at a higher rate, which
causes the net profit of the company to decrease. Thus, showing that
the company has not performed as well for the year ended 31st March,
2021 as they did the previous year.
The Common-size Income Statement further reinforces the fact that
the company did not perform well by showing that there is a
percentage decrease in net profit despite the slight percentage increase
in total Income. This is because of the percentage increase in total
expenses. Thus, we can conclude by saying that ITC Ltd. can improve its
profit only by taking measures to reduce their expenses which has been
increasing at a greater rate than their total income.
 Bibliography
 https://www.investopedia.com/terms/f/financial-statement-
analysis.asp
 https://quickbooks.intuit.com/in/resources/accounting-taxes/
comparative-financial-statements/
 https://www.investopedia.com/terms/c/
commonsizefinancialstatement.asp
 https://www.wikiaccounting.com/advantages-of-financial-
statements/
 https://www.moneycontrol.com/financials/itc/balance-sheetVI/
ITC
 https://www.itcportal.com/about-itc/shareholder-value/report-
and-accounts.aspx