aay Indian tnsiicute: of Management ; i ete “ os F&A 89 R ne “Mansa Building" On y i 3 On ant 3 1967, Me. Dinesh Acharya sald to his son: "Look Manoj, now that you are here on onl like you to spend these holidays gaining some business experience rather than idling ee 7 pad In-coffee shops. For the first job you can study the Statement of Acccunts for Mansa boiling year 19%6 (Exhibit 1), Ihave been receiving this statement from your material uncle rie ony year for the last few ycars. I jus file the statement as it docs not'tell me anything about Sults of operating the building. Talk to your uncle and let me sce If you can tell me how much Profits we are making from this building.” ' Manoj Acharya, a student at a prominent college of business administration in Westem India was visiting his parents in New Delhi during Christmas vacation. Although he regretied missing the swinging music in the cdffec shops, Manoj Acharya decided to devote extra efforts tothe assignment giver by his father, Fortunately for him, he was able to meet Mr._Hafshavadan Pandit, his maternal. - Uunele, We same day after noon at which he gathered the information about the buidin. Mansa Biflding’ was a four- storeyed structure consisting of 20 flats and & shops. A list of the ‘caants Of thé building,’ the nature of their businesses, and the monthly reats paid by them is given in Exhibit.2.The building which had originally-been constructed in January 1947 was acquired by Ac, Dingsh Acharya on a cash down basis late in December 1956. The “acquisition cost was "Rs.4,80,000; Mis Pandit disclosed’ that ak the time et acusition ; He daind hod. av abprobeite valve of Rs.1,20,000 and the building an additionat life Of 30 years at the time of its acquisiidn, .~ Mr. Pandit then went on to explain the statement of account for the year ended December 31, 1966. ‘Amount’receivable from tenants: , » On'Decdnber 81,1966 rent fro’ tenanis amounting to Rs.7.450. was still outstanding. On the. ind, ofily:Rs.425_which was one month's rent for 2 flais (N65.6 and '12) had been outstanding ihejbegidiing of the year (je.December 1965 rent on she two Mats.) iad been the usual practice. + fo Fecolicct ihe sent for ¢ach month before the end of that month. In other .words, the rent for the modth of December was éollécied before end of that month. In other words, the rent forthe morth OF December. was collected “before December.-31. However, Mr. Pandit’ explained, because of his é! ivolvement ih making arrangements for his ‘involvement in making’ the" ‘arrangements “for ‘i daughter's -macriage, the rent collection proges$ ‘had slowed down and’ hence tre amount ‘uistandings,,"In_ hig Opinion; most of the tenani3"mnost of his tenants were very reliable and could sbe-expected to clear their arrears in, couple of months time. The oaly problem was most tenants ‘expected Mr. Pandit to collect the rent personally. Mr. Pandit explained further that Flat Nos.19 ard 20. were occupicd by him and his family. The rental value for these two flats was Rs.200 per month 1) Prepared by Suresh A Seahen , Ininn lnvtitae of Menegement, Ahmedabad ‘Cure Material of the Ilan Institue of Management, Akimedabad, it prepared as a basis for ats discuss Cook ane nt designe! wi yecscnt illuststione of either earect oF incorrect Ramin of adninibtative prot» Copyright © 1967, by the ladian Institute of Manageme. Alimedsbad. Revised iv 1982. Ren RUE MCNPePresented-the amount. of cash the butik account, On Januiry 1, 1966, fhown a balance of Rs, 128,942 ini he bank “account, All eecips of rentas W Of Cheques were deposited in Uhis bank account and all payments thro the ‘A comparison of the bank statement with hat all deposits made upio December 31,1966 and ember 31, 1966 had been included by the bank in its records. This expenditure was incurred in repairing certain Pertion oF the building. It included the painting for RS.5.000. The details of the expenditure are as under. 7 Normal repairs to the building Rs. Fainting Contractor's ‘Bill Mr. Pandit explained that it shad before Diwali:each year. ‘The in at been. fy While he could not say definitely whet OM. OE.Rs. 5,000 between iniemal and ~ €xtemal painting, Mr Pandit realed 'y, the exterior painting had been carried Out the contractor's bill had amounted to Rs.3,000._ ae by Collection Charges — Qe5, Insurance Premhum Mr. Pandit had made it @ practice tn take compretiensive insurance policy for the building. ‘The purpose of Laking a policy was to oblain protection against the hazards of fires, carthquakes ar! other Kinds of calamities. On January 1,- 1966 R5:2,00) had been paid’ as Insurance premium on such comprehensive policy. The life of the policy was 2 ycars. 6. Property Rates and Taxes ‘The Municipal Corporation collected property rates and taxes which were payable in advance hal? yearly, On October 31) 1966, Mr. Pandit had received a bill from the C ‘orporation stating that the properly rates and taxes far the period from October 1, 1966 to March 31, 1967, was Rs.12,000. Mr. Pandit had not yet paid this bill. Earlier, two bills for Rs.12,000 each had been received on October 31, ‘These bills had been cleared payment on February 15 feted from October 1, 1965 to September 30, 1966. 7 1965 and Apzil 30, 1966. 1966 and July 31, 1966 and had covered the Rent received in Advance Qne of the tenanis informed Mr. Pandit that he would pay the rent for the months of January and February in advance since he would be away from New Delhi during these two months. A sium of 5.500 was received from Mr. Harjit Singh, tsnant of Flat No.11 as the rent in adva:ce. 8. Dinesh Acharya - Capital Account Mr. Pandit explained that the item of Rs.154,267 helped to balance the Statement of Account. It aiso represented the amount duc to Mr. Dinesh Acharya from the operations of Mansa Building. “Mr. Pandit added that during the year Mr. Dinesh Acharys had withdrawn Rs.10,000, from the building's bank in order to meet Manoj’s educational expenses and other houscheld needs. ‘After studying the statement of Account (Exhibit 1) for sometime, Manoj Acharya realized why his father had been filling away these statements year afer ye: ‘of assets and liabilitics nor a profit and loss statement. M: ‘The Statement was ncither a statement Acharya felt that his father would: be in a better position to undersiand the affairs of the building if a Balance Shect and Profit and Loss Statement were:prepared for Mansa Bui i. With this in mind, Mangj-Acharya-prepared a Balance Sheot as it would have appeared at the beginning of the year i.c.. January 1, 1966 CExhibit 3), This Manoj Achaiya feli, would be good starting point to prepare financial statements in the imanner he nad been instructed at his college. Required Do you think any change are necessary in the Balance Sheet shown in Exhibit3. + Prepare a Profit and Loss Statement for the year 1966 and Balance Sheet as 6n December 31, 1966 in a form that you ink would be most vseful to Mr. Dinesh Acharya. You should be prepared to explain the differences:between your statements and the State. cf Account as Prepared by Mr. Pandit.Seg = i anacnnicelneianeiinr ai of ct nn i on ponent Eek J - SBS wenueain Manse bitdig : c ne _~Stitement of Account fr the Year Ended Dee, 31, 1966 1 Amounu Receivable from Tenants Fle No, Months | Amount 150_| 6, Property, Rates and tres seni || Nov.-Dee. "66 300 4 ns 2s | 250_| 7. Rent Received in Soo | Advice Fat No. 11 500 1500 . soo 8. Dinesh Acharya Capita 3000 } Account 154267 stop | " No. : : 100 i 4 200 if “20° 2 Bank Balance : yee ee 3.Mr. Says Narain 4. Operating Expenses ee Printing & Sutionery 2s i 3 Postage & Telegrams pe ee ggt Bunk Charges 28 | Repairn Renewals & Replacement si7 _| Collection charges. afer 2093 BB uf | 27 . S$. Iraurance Preiniuin SPs goo | 166767 166767Exhibit 2 - we SS Manda Hutttig : Flu No, | Name of Tenant Nature of Business 1 | Sonali Mukerjee | Advertting Azency 2 | Satys Narain Butineseman 3 | 1K, Silk & Company Traders 4 | Dr, Pitumber Singh |_Denti«t S| Roshan Lal Government Employee 6 | IL Juin . Stockbroker 175 7 | ML. Jain Sweetmect Merchant 175 8 | Col. Jauwir Lal Armed Forces 175 9. | De. P.C. Kapoor Consulting Surgeon 250 10 | ink oj, Dover aj [I and Company Lawyer's Office 250 11 | Harjit Singh Business Executive 250 | { 12. | B.D. Greaver Political Worker = 25) i 13 | Gurwewsud tai Es BE | 14.15.16 | Charles Timber Pvt Lad Business Offices 1500 ai 18 | Ranjit Sager Jain a Dy. Inspector of Police 250 “| Harshay san Pandit 150 20. | Harshvadan Pendit® 150 Shop | Dalip Kumar & Sone Newspaper Agent 100 No.l 2. | Surinder Kumar Gill Chemist & Druggist 100 rie a) kena bol Gn Provision Stores 200 5 | De. Sizij Prakash Chiropodist 100 6 | Govind Rejen | Ast Studio 100 7 Tamil Natu Coffee House # | Tamil Nuta Colfer Howse | REE _ 200 Toul Monthly Rent | __Rs.5375 * Flats occupied by Mr. Hacshvadan Pandit, maternal uncle of Manoj Acharya.Liabilities & Capital 120000 | Accrued Collection charger*(4’% on Ks.425) Ral7 $30 Accounts Payable for Hi Property rates and xcs Rs 1200) 1 proecDepn. (lor 9 years Less Amt applicable to ! stline basis) LoseXX 257000 T1966 6000+ OW) Account receivable 425 | Owners Capital 480000 “Cash Bank, Rs.124942 | Retined earnings 15350) | 49saso 501367 seoe | 501367 beowme an eapense for Uut year, fa On te basis of 30 years life from date of acquisit i This is an advance payments notice covering the period from October 1, 1965 w March 31, 1968. Only 3 mimths property rates and tanes relating wW 1965 have been shown as oulstanding/ b balancing item, ‘This tent should have been collected in 19S. If diis had tuppen the collection charge would have a