ACCOUNTANCY PROJECT WORKBOOK

As per the Latest Syllabus & guidelines Issued by CBSE for Project Work in Accounting

AUTHOR
Dr. VINOD KUMAR
M.Com., B.Ed, Doctorate in Commerce

Name of the Student........................................................................................

Name of the School.........................................................................................

Class ........................................... Roll No. ......................................................

XII
CBSE

Chandigarh–Bengaluru–Delhi–Guwahati–Hyderabad–Indore
Jammu–Jodhpur–Kolkata–Lucknow–Mumbai–Patna–Ranchi
 Preface
I am feeling great pleasure in putting the Accountancy Project Workbook for
class XII in the hands of Honorable Academic Community. The main
purpose of writing this project workbook is to provide the practical
knowledge of accounting to the students. I am confident that this project
workbook will be certainly helpful to the students and the teaching
fraternity.
Contents
I am extremely grateful to the entire team of Vishvas Publications for CBSE Guidelines 6 8
providing wings to my ideas. Part-B :
I would also like to thank to the students, teachers, lecturers and Chartered Financial Statement Analysis
Accountants across the country for appreciating my work in the field of PROJECT 1 9 32
accountancy.
Part-A : Comprehensive Problem
Why this project workbook is valuable for the students?
Part-B : Project on Segement Analysis
 They will learn the meaning of project work and how to prepare a
Part-C : Cash Flow Statement
good project?
 They will understand the value of project work in their real life. PROJECT 2 33 52
 They will learn that how to identify, collect, and analyse the financial Part-A : Comprehensive Problem
data for the project work. Part-B : Project on Segement Analysis
 They will understand the concept of Analysis and Interpretation. Part-C : Cash Flow Statement
 They will understand the concept of Cash Flow Statement.
Computerized Accounting (Part-C)
 They will understand the concept of Ratio Analysis.
This project workbook is designed as per the latest syllabus issued by Project 3 53 55
C.B.S.E. Payroll Mate Software
In this book Four Solved Sample Projects have been given to assist the
students to develop a good project. Project 4 56 61
Topics covered under this project work are : Easy Accounts
1. Analysis and Interpretation of Financial Statements. Viva Questions (Part B) 62 66
2. Ratio Analysis Viva Questions (Part C) 67 68
3. Cash Flow Statement
Students and teachers may directly contact to the Author to clear their
doubts or for any suggestion for the improvement.
Vinod Kumar (Accountancy Guru) Author
www.accountancybook.com E-mail : authorcbse@gmail.com

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 VALIDITY CERTIFICATE
This is to certify that this Accountancy Project Workbook belongs to

Name ......................................................................................................................

Roll No ............................ Class .................................... Section .............................

Session ................................... of ..............................................................................

The Projects recorded in this Project Workbook have been done by the candidate in
the school and the signatures affixed on recorded projects are genuine.

 The student's initiative, cooperation and participation during the practical

classes is Excellent/Good/Average.

 His/Her aesthetic presentation, visual appeal, expression and neatness is

Excellent/Good/Average.

 His/Her content accuracy, creativity, originality and analysis of different

perception is Excellent/Good/Average.

Date : ..................... Teacher-Incharge

 Acknowledgement
I would like to convey my heartfelt thanks to

Mr/Mrs................................................ my Accountancy

teacher, who always gave valuable suggestions and guidance

for completion of my project. He/She helped me to

understand and remember important details of the project

that I would have otherwise lost. My project has been a

success only because of his guidance.

Name of Project................................................................

Name of Student..............................................................

Class................Roll No....................... Section.................

School Name....................................................................

5 Project–1
 CBSE GUIDELINES FOR PROJECT WORK IN ACCOUNTING FOR CLASS XII
The Board has introduced Project Work in Accounting for Class-XII in the Optional Part B :
'Financial Statement Analysis'. It is expected that the Project Work will help the students in
developing the skills to comprehend, analyse and interpret accounting data of the business firms
and make it meaningful for taking business decisions.

Part B : Financial Statement Analysis Part C : Computerzised Accounting

Project Work Practical Work
Duration: 1:30 Min Marks: 20 Unit-1 File : 4 Marks
Unit-1 Project File 4 Marks : As per requirement (given below) Unit-2 Practical
Unit-2 Written Test 12 Marks : One hour Examination : 12 Marks-1hr.
Unit-3 Viva Voce 4 Marks : As per requirement (given below) Unit-3 Viva Voce : 4 Marks

Objectives
l To enable a student to complete the accounting process in real life business situations and
apply the tools of analysis as per the syllabus for a comprehensive project.
l To develop the competence of reading accounting data from quarterly or half yearly or annual
reports of business firms and interpreting the information on the basis of given guidelines to
present the desirable information in required format in the Project File for Specific Projects.
Guidelines for Teachers
During the academic session the students will work on at least three types of projects out of which
one will be of Comprehensive nature. The comprehensive project will involve the students from the
initial stage of accounting to the preparation and analysis of financial statements. The data
provided or the Project Statement will be as close to the real life situations as possible. The project
statement should cover all important aspects like investments, financing, operating, adjustments
to final accounts, etc. in a condensed form. The situations given in these problems will require a
student to derive meaningful conclusion for taking decisions for the purposes of investment,
expansion, financing, etc.
Two projects will be of specific nature using atleast one tool of analysis in each. The data for these
will be drawn mainly from quarterly or half yearly or annual reports of corporate sector. Students
will analyze the information given in the financial statements as follows:
(a) Performance of Segments keeping in mind their three parameters Revenue, Net Profit and
Capital Employed of companies on quarterly or half yearly or annual basis. This is widely
published and reported by the companies. It can be picked up either from the newspapers or
from the websites of the companies.
(b) Comparison of Revenue, Net Profit and Earning Per Share (EPS) on quarterly or half yearly or
annual basis with the help of comparative or common size statements. The Projects given in
these guidelines are on sample areas of business activities like Segment Reporting, etc. The
teachers and students are free to explore more such areas of business activities for specific
projects.
There are four tools of analysis given in the syllabus for the analysis of Financial Statements,
namely (i) Comparative Statement, (ii) Common Size Statements, (iii) Ratios and (iv) Cash Flow
Statement. Any one or more of these tools are to be used to derive conclusions. No project is to
be prepared on the tools, but these tools are to be used to achieve the object of the project. For
instance, there will not be any project on the 'Ratios' as such, but ratios will be used in the
development of the project to reach a conclusion.

Vishvas Accountancy Project Workbook XII 6

Scope
For the purpose of Project Work, the following ratios will be included :
Liquidity Ratios : Current Ratio, Liquidity Ratio.
Solvency Ratios : Debt to Equity; Total Assets to Debt, Proprietary Ratio.
Activity Ratios : Inventory Turnover, Debtors Turnover, Payables Turnover, Working Capital
Turnover, Fixed Assets Turnover, Current Assets Turnover.
Profitability Ratio : Gross Profit Ratio, Operating Ratio, Net Profit Ratio, Return on Investment,
Earning Per Share Price Earnings Ratio.
A few projects have been given in detail at the end of the guidelines for practice. The student is
expected to analyze the facts, and present the information in a meaningful manner for
interpretation. Teachers are expected to discuss these problems thoroughly with the students and
encourage them to come out with solutions. They are also expected to collect the quarterly or half
yearly or annual Segment reports and Revenue and Net Profit reports of companies from
newspapers or from the websites of the companies and formulate their own problems for Project
Work.

UNIT-1: PROJECT FILE

Students will prepare a Project File to record their work related to the problems attempted by them
in the following format :
1. First page of the file should describe title of work, identity of student, school, and the teacher
concerned.
2. Index to indicate columns for title of work, page no., date, teacher's remarks and signature.
3. The format for Project Work will be :
l Statement of the problem/Name of the Project
l Objectives
l Period of Study
l Source Material
l Tools of Analysis used
l Processing and Tabulation of data
l Diagrammatic/graphic presentation- pie-diagrams, bar diagrams and graphs.
l Derivations, Interpretation and Conclusion.
l Assumptions (if any)
Project File should be neatly handwritten and presentable with page numbers. Each step of the
solution needs to be highlighted. Conclusions drawn should be placed in boxes at the end.
Evaluation
Guidelines for the Examiner
While evaluating the Project File, marks are to be awarded out of four, based on :
l Content
l Coverage
l Presentation
l Interpretation and Conclusion
l Originality and Quality of work

7 Project–1
 UNIT-2: WRITTEN TEST
Objectives
l To give them exposure to analyse the financial statements of business firms and help them to
derive meaningful information and conclusions therefrom.
l To know how effectively the students can derive conclusions and express them.

Guidelines for Teachers

Teachers will discuss with students the sample questions for this test and develop question papers
for the purpose in their house examinations.

Guidelines for Examiners

Students will be given 2 application-oriented problems of 6 marks each covering the tools for
analysis of financial statements. The question paper will be set in consultation with the school
teacher. No question similar to the question given in the 3 hour question paper of the Board,
should be asked here. Only such questions, relating to financial statements of companies should
be asked which encourage thinking on practical lines. The external examiner will discuss with the
internal examiner all the projects completed during the year and set the questions accordingly. On
the day of the examination both should come prepared with atleast 10 questions each. Both the
internal and external examiners must agree on the nature and scope of questions asked. It must
be ensured that multiple sets of papers are prepared. Marks will be awarded on the steps taken,
data identified and solution arrived at.

UNIT-3: VIVA VOCE

Objectives
l To assess whether the student has understood the topic covered and is able to express.
l To assess whether the Project File presented by the student is genuine and prepared by him
only.
Guidelines for Teachers
l During the course of the academic year, the teacher must give thorough practice to the
students on Viva Voce examination on each aspect of the Project report and file.
l During all internal examinations 'Viva Voce' examination should form an integral part of the
practical examination.
l Wherever possible, the teacher may invite a colleague/expert from another school for asking
questions. This will rehearse the students for the final examination.
Guidelines for Examiners
l The work done by the students in Project file will form the basis of asking questions. The
external examiner may ask 2-3 questions to test the authenticity of the work done in the files.
Marks will be awarded out of 4 in consultation with the school teacher.
Viva Questions
l Should relate only to the Project.
(a) To check the authenticity of the work and
(b) To check that the student understands the idea behind the Project.

Vishvas Accountancy Project Workbook XII 8

 Part – A : Comprehensive Problem

PROJECT – 2
Mr. Vinod Kumar is an aspiring entrepreneur who has been severely impacted by the aftermath of
the Jammu & Kashmir floods tragedy.
He has post graduated from the London School of Economics with masters in Business
Administration (MBA) and International Relations.
Through this catastrophic event, Vinod has decided to purchase an existing business in the
Kashmir Valley which has been adversely affected by the flood. He is extremely inclined towards
providing employment to the people in the affected areas nearby.
The existing business, located in the valley that he intends to purchase had been running on
profits. However, due to the floods the factory had to be shut down immediately as there was heavy
damage.
The owners are in no position to recover the former condition of the factory and have therefore
decided to sell it.
Mr. Kumar purchased the business of Singh Bros. on 1st April 2015. The business is mainly
concerned with manufacturing electronic goods i.e.
(1) Batteries for Mobile Phones, Laptops and Digital Cameras
(2) Battery Chargers
(3) Pen Drives and (16 GB, 32 GB, 64 GB)
(4) USB Cables etc.
(5) CCTV Cameras
Following assets were taken over by Mr. Vinod Kumar on the above mentioned date:
Land and Building Rs.10,00,000
Plant and Machinery Rs.8,00,000
Furniture & Fittings Rs.2,50,000
Stock Rs.3,00,000
Office Equipment Rs.1,00,000
Mr. Vinod Kumar paid Rs.25,00,000 as purchase consideration. On the same day he bought
Rs.20,00,000 as his capital and took loan Rs.5,00,000 from the bank @ 8% p.a. interest and
Rs.2,00,000 from his wife @ 6% p.a. interest to meet the working capital.
His transactions during the accounting period was as follows:
E Total Purchases Rs.28,00,000 including credit purchases worth Rs.20,00,000.
E He invested Rs.2,00,000 in shares of Reliance Limited.
E Total Sales Rs.48,00,000 including credit sales worth Rs.18,00,000.
Direct Expenses:
Wages Rs,3,50,000
Manufacturing expenses Rs.50,000
Factory Lighting Rs.20,000
Carriage inwards Rs.10,000
Commission on purchases Rs.15,000

33 Project–2
 Freight Rs.5,000
Indirect Expenses:
Salaries Rs.2,00,000
Office Rent Rs.10,000
Postage and Telephone expense Rs.5,000
Stationery Rs.3,000
Water & Electricity (office) Rs.12,000
Conveyance Rs.8,000
Advertising Rs.12,000
l He withdrew Rs.60,000 from the business to buy a personal Laptop.
l Goods worth Rs.30,000 given as charity to the financially weaker group of women associated
with women welfare club.
l Cash received from debtors Rs.10,00,000.
l Cash paid to creditors Rs.12,00,000.
l Interest paid on Bank Loan Rs.28,000.
l Interest paid on Mrs. Vinod's loan Rs.10,000.
l B/R received from debtors Rs.80,000.
l Bill accepted in favour of creditors Rs.1,00,000.
l Dividend received on investment Rs.10,000.
You are required to :
(i) Give journal entries for these transactions and post them into ledger account and prepare a
Trial Balance.
(ii) Prepare Trading Account, Profit & Loss Account and Balance Sheet considering the following
adjustments:
(a) Interest is outstanding on Bank Loan Rs.12,000 and on Mrs. Vinod's Loan Rs.2,000.
(b) Plant and Machinery is to be depreciated by 5% and Furniture by 10%.
(c) Closing Stock Rs.3,50,000.
(d) Wages outstanding Rs.30,000 and office rent outstanding Rs.5,000.
(e) Manager is entitled to a commission of 5% on net profit before charging such commission.
(iii) Find Gross Profit and Net Profit Ratio and also comment on the profitability and liquidity of the
business when Gross Profit of the similar firm is Rs.13,50,000 and Net Profit Rs.9,00,000.
Solution. Journal Entries

Date Particulars L.F Debit (`) Credit (`)

1 Apr Bank A/c Dr. 20,00,000

2012 To Capital A/c 20,00,000
(Being capital introduced by Vinod)
1 Apr Land and Building A/c Dr. 10,00,000
2012 Plant and Machinery A/c Dr. 8,00,000
Furniture & Fittings A/c Dr. 2,50,000
Stock A/c Dr. 3,00,000
Office Equipments A/c Dr. 1,00,000

Vishvas Accountancy Project Workbook XII 34

 Goodwill A/c (Bal. Fig.) Dr. 50,000
To Bank A/c 25,00,000
(Being assets purchased)
Bank A/c Dr. 5,00,000
To 8% Bank Loan A/c 5,00,000
(Being loan obtained from bank)
Bank A/c Dr. 2,00,000
To 6% Mrs. Vinod's Loan 2,00,000
(Being loan obtained)
Purchases A/c Dr. 8,00,000
To Bank A/c 8,00,000
(Being goods purchased)
Purchases A/c Dr. 20,00,000
To Creditors A/c 20,00,000
(Being goods purchased)
Investment A/c Dr. 2,00,000
To Bank A/c 2,00,000
(Being money invested in shares of Reliance Ltd.)
Bank A/c Dr. 30,00,000
To Sales A/c 30,00,000
(Being goods sold on cash basis)
Debtors A/c Dr. 18,00,000
To Sales A/c 18,00,000
(Being goods sold on credit)
Wages A/c Dr. 3,50,000
To Bank A/c 3,50,000
(Being wages paid)
Manufacturing Expense A/c Dr. 50,000
To Bank A/c 50,000
(Being manufacturing expenses paid)
Factory Lighting A/c Dr. 20,000
To Bank A/c 20,000
(Being factory expenses paid)
Carriage Inwards A/c Dr. 10,000
To Bank A/c 10,000
(Being expenses on purchase paid)
Commission on Purchase A/c Dr. 15,000
To Bank A/c 15,000
(Being commission paid)
Freight A/c Dr. 5,000
To Bank A/c 5,000
(Being freight expenses paid)

35 Project–2
 Salaries A/c Dr. 2,00,000
To Bank A/c 2,00,000
(Being Salaries paid)
Office Rent A/c Dr. 10,000
To Bank A/c 10,000
(Being office rent paid)
Postage and Telephone A/c Dr. 5,000
To Bank A/c 5,000
(Being postage & telephone expense paid)
Stationery A/c Dr. 3,000
To Bank A/c 3,000
(Being stationery expenses paid)
Water & Electricity A/c Dr. 12,000
To Bank A/c 12,000
(Being water & electricity expenses paid)
Conveyance A/c Dr. 8,000
To Bank A/c 8,000
(Being conveyance expenses paid)
Advertising A/c Dr. 12,000
To Bank A/c 12,000
(Being advertising expenses paid)
Drawings A/c Dr. 60,000
To Bank A/c 60,000
(Being withdrawn for personal use)
Advertising A/c Dr. 30,000
To Purchase A/c 30,000
(Being goods give as charity)
Bank A/c Dr. 10,00,000
To Debtors A/c 10,00,000
(Being cash received from debtors)
Creditors A/c Dr. 12,00,000
To Bank A/c 12,00,000
(Being cash paid to creditors)
Interest on Bank Loan Dr. 28,000
To Bank A/c 28,000
(Being interest paid on bank loan)
Interest on Mrs. Vinod's Loan Dr. 10,000
To Bank A/c 10,000
(Being interest paid on Mrs. Vinod's Loan)
Bills Receivable A/c Dr. 80,000
To Debtors A/c 80,000
(Being B/R received from debtors)

Vishvas Accountancy Project Workbook XII 36

 Creditors A/c Dr. 1,00,000
To Bills Payable A/c 1,00,000
(Being bill accepted in favour of creditors)
Bank A/c Dr. 10,000
To Dividend Received A/c 10,000
(Being dividend received on investment)

Preparation of Ledger: Bank A/c

Date Particulars Amount (`) Date Particulars Amount (`)

To Capital A/c 20,00,000 By Land and Building A/c 10,00,000
To 8% Bank Loan A/c 5,00,000 By Plant and Machinery A/c 8,00,000
To 6% Mrs. Vinod's Loan 2,00,000 By Furniture & Fittings A/c 2,50,000
To Sales A/c 30,00,000 By Stock A/c 3,00,000
To Debtors A/c 10,00,000 By Office Equipment A/c 1,00,000
To Dividend Received A/c 10,000 By Goodwill A/c 50,000
By Purchase A/c 8,00,000
By Investment A/c 2,00,000
By Wages A/c 3,50,000
By Manufacturing Exp. A/c 50,000
By Factory Lighting A/c 20,000
By Carriage Inward A/c 10,000
By Commission on Purchase 15,000
By Freight A/c 5,000
By Salaries A/c 2,00,000
By Office Rent A/c 10,000
By Postage & Telephone A/c 5,000
By Stationery A/c 3,000
By Water & Electricity A/c 12,000
By Conveyance A/c 8,000
By Advertising A/c 12,000
By Drawings A/c 60,000
By Creditors A/c 12,00,000
By Int. on bank loan 28,000
By Int. on Mrs. Vinod's loan 10,000
By Balance c/d 12,12,000
67,10,000 67,10,000

Capital A/c

Date Particulars Amount (`) Date Particulars Amount (`)

By Bank A/c 20,00,000
To Balance c/d 20,00,000
20,00,000 20,00,000

37 Project–2
 Land and Building A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Bank 10,00,000 By Balance c/d 10,00,000
10,00,000 10,00,000

Plant and Machinery A/c

Date Particulars Amount (`) Date Particulars Amount (`)

To Bank 8,00,000 By Balance c/d 8,00,000
8,00,000 8,00,000

Furniture & Fittings A/c

Date Particulars Amount (`) Date Particulars Amount (`)

To Bank 2,50,000 By Balance c/d 2,50,000
2,50,000 2,50,000

Stock A/c

Date Particulars Amount (`) Date Particulars Amount (`)

To Bank 3,00,000 By Balance c/d 3,00,000
3,00,000 3,00,000

Office Equipment A/c

Date Particulars Amount (`) Date Particulars Amount (`)

To Bank 1,00,000 By Balance c/d 1,00,000
1,00,000 1,00,000

Goodwill A/c

Date Particulars Amount (`) Date Particulars Amount (`)

To Bank 50,000 By Balance c/d 50,000
50,000 50,000

8% Bank Loan A/c

Date Particulars Amount (`) Date Particulars Amount (`)
To Balance c/d 5,00,000 By Bank A/c 5,00,000
5,00,000 5,00,000

6% Mrs. Vinod's Loan A/c

Date Particulars Amount (`) Date Particulars Amount (`)

To Balance c/d 2,00,000 By Bank A/c 2,00,000
2,00,000 2,00,000

Vishvas Accountancy Project Workbook XII 38

 Purchase A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 8,00,000 By Advertising 30,000
To Creditors A/c 20,00,000 By Balance c/d 27,70,000
28,00,000 28,00,000
Creditors A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 12,00,000 By Purchase A/c 20,00,000
To Bills Payable A/c 1,00,000
To Balance c/d 7,00,000
20,00,000 20,00,000

Investment A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 2,00,000 By Balance c/d 2,00,000
2,00,000 2,00,000

Debtors A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Sales A/c 18,00,000 By Bank A/c 10,00,000
By Bills Receivable A/c 80,000
By Balance c/d 7,20,000
18,00,000 18,00,000
Sales A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Balance c/d 48,00,000 By Bank A/c 30,00,000
By Debtors A/c 18,00,000
48,00,000 48,00,000

Wages A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 3,50,000 By Balance c/d 3,50,000
3,50,000 3,50,000
Manufacturing Expenses A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 50,000 By Balance c/d 50,000
50,000 50,000

Factory Lighting A/c

Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 20,000 By Balance c/d 20,000
20,000 20,000

39 Project–2
 Carriage Inwards A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 10,000 By Balance c/d 10,000
10,000 10,000

Commission on Purchase A/c

Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 15,000 By Balance c/d 15,000
15,000 15,000
Freight A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 5,000 By Balance c/d 5,000
5,000 5,000
Salaries A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 2,00,000 By Balance c/d 2,00,000
2,00,000 2,00,000

Office Rent A/c

Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 10,000 By Balance c/d 10,000
10,000 10,000

Postage and Telephone A/c

Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 5,000 By Balance c/d 5,000
5,000 5,000

Stationery A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 3,000 By Balance c/d 3,000
3,000 3,000

Water and Electricity A/c

Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 12,000 By Balance c/d 12,000
12,000 12,000

Conveyance A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 8,000 By Balance c/d 8,000
8,000 8,000

Vishvas Accountancy Project Workbook XII 40

 Advertising A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 12,000 By Balance c/d 42,000
To Purchase A/c 30,000
42,000 42,000

Drawings A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 60,000 By Balance c/d 60,000
60,000 60,000

Interest on Bank Loan A/c

Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 28,000 By Balance c/d 28,000
28,000 28,000

Interest on Mrs. Vinod's Loan A/c

Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c 10,000 By Balance c/d 10,000
10,000 10,000

Bills Receivable A/c

Date Particulars Amount (`) Date Particulars Amount (`)
To Debtors A/c 80,000 By Balance c/d 80,000
80,000 80,000

Bills Payable A/c

Date Particulars Amount (`) Date Particulars Amount (`)
To Balance c/d 1,00,000 By Creditors A/c 1,00,000
1,00,000 1,00,000

Dividend Received A/c

Date Particulars Amount (`) Date Particulars Amount (`)
To Balance c/d 10,000 By Bank A/c 10,000
10,000 10,000

Trial Balance

Particulars Debit Credit

Bank A/c 12,12,000

Capital A/c 20,00,000
Land and Building A/c 10,00,000
Plant and Machinery A/c 8,00,000

41 Project–2
Furniture & Fittings A/c 2,50,000
Stock A/c 3,00,000
Office Equipment A/c 1,00,000
Goodwill A/c 50,000
8% Bank Loan A/c 5,00,000
6% Mrs. Vinod's Loan A/c 2,00,000
Purchase A/c 27,70,000
Creditors A/c 7,00,000
Investment A/c 2,00,000
Debtors A/c 7,20,000
Sales A/c 48,00,000
Wages A/c 3,50,000
Manufacturing Expenses A/c 50,000
Factory Lighting A/c 20,000
Carriage Inward A/c 10,000
Commission on purchase A/c 15,000
Freight A/c 5,000
Salaries A/c 2,00,000
Office Rent A/c 10,000
Postage and Telephone Exp. A/c 5,000
Stationery A/c 3,000
Water and Electricity A/c 12,000
Conveyance A/c 8,000
Advertising A/c 42,000
Drawings A/c 60,000
Interest on Bank Loan 28,000
Interest on Mrs. Vinod's Loan 10,000
Bills Receivable 80,000
Bills Payable 1,00,000
Dividend Received 10,000
83,10,000 83,10,000

Trading Account

Particulars Amount (`) Particulars Amount (`)

To Opening Stock 3,00,000 By Sales 48,00,000
To Purchases 27,70,000 By Closing Stock 3,50,000
To Wages 3,50,000
Add : Outstanding 30,000 3,80,000
To Manufacturing Exp. 50,000
To Factory Lighting 20,000
To Carriage Inward 10,000
To Commission on purchase 15,000
To Freight 5,000
To Gross Profit 16,00,000
51,50,000 51,50,000

Vishvas Accountancy Project Workbook XII 42

 Profit and Loss Account

Particulars Amount (`) Particulars Amount (`)

To Salaries 2,00,000 By Gross Profit b/d 16,00,000
To Office Rent 10,000 By Dividend Received 10,000
Add: Outstanding 5,000 15,000
To Postage & Telephone 5,000
To Stationery 3,000
To Water & Electricity 12,000
To Conveyance 8,000
To Advertising 42,000
To Int. on Bank Loan 28,000
Add : Outstanding 12,000 40,000
To Int. on Mrs. Vinod's Loan 12,000
(10,000 + 2,000 due)
To Dep. on plant & machinery 40,000
To Dep. on Furniture 25,000
To Net Profit 12,08,000
16,10,000 16,10,000
To Manager's Commission 60,400 By Net Profit b/d 12,08,000
12,08,000 × 5/100
To Net Profit 11,47,600
12,08,000 12,08,000

Balance Sheet

Liabilities Amount (`) Assets Amount (`)

Capital 20,00,000 Goodwill 50,000
Add : N/P 11,47,600 Land and Building 10,00,000
Less : Drawings 60,000 30,87,600 Plant and Machinery 8,00,000
8% Bank Loan 5,00,000 Less : Depreciation 40,000 7,60,000
Add: Interest due 12,000 5,12,000 Furniture & fittings 2,50,000
6% Mrs. Vinod's Loan 2,00,000 Less : Depreciation 25,000 2,25,000
Add: Interest due 2,000 2,02,000 Office Equipment 1,00,000
Creditors 7,00,000 Investment 2,00,000
Bills Payable 1,00,000 Debtors 7,20,000
Wages Outstanding 30,000 Bills Receivable 80,000
Office Rent 5,000 Stock 3,50,000
Manager Commission 60,400 Bank 12,12,000
46,97,000 46,97,000

Analysis & Interpretation

1. Gross Profit Ratio = Gross Profit/ Net Sales × 100
= 16,00,000/48,00,000 × 100 = 33.33%
2. Net Profit Ratio = Net Profit/Net Sales × 100
= 11,47,600/48,00,000 × 100 = 23.90%

43 Project–2
 Net Profit 23.90% Gross Profit 33.33%

3. Working Capital Turnover Ratio = Net Sales/Cost of Revenue from Operations

= 48,00,000/32,00,000 = 1.5 Times
Cost of Revenue from operation = Net Sales Gross Profit
4. Inventory Turnover Ratio = Cost of Revenue from operations/ Average Inventory
= 32,00,000/3,25,000 = 9.84 Times
5. Trade Receivables Turnover Ratio = Net Credit Sales/Trade Receivables
= 18,00,000/8,00,000 = 2.25 Times
6. Trade Payable Turnover Ratio = Net Credit Purchase/Trade Payables
= 20,00,000/8,00,000 = 2.5 Times

Comparison of Expenses

4,80,000

4,60,000

4,40,000

4,20,000

4,00,000

3,80,000

3,60,000
Direct Indirect
Expenses Expenses

Comparison of Expenses

Comparison of Gross Profit with Similar Firm

Comparison of Gross Profit

16,00,000
15,50,000
15,00,000
14,50,000
14,00,000
13,50,000
13,00,000
12,50,000
12,00,000
Main Similar
Business Firm
Comparison of Gross Profit

Comparison of Net Profit with Similar Firm

Vishvas Accountancy Project Workbook XII 44

 Comparison of Net Profit

12,00,000

10,00,000

8,00,000

6,00,000

4,00,000

2,00,000
Main Similar
0 Business Firm
Comparison of Net Profit

Conclusion and Comments

(1) Mr. Vinod Kumar has made a useful investment by purchasing this business. He is able to
manage a good profit in the first year. It shows that, if this business is continued in the same
manner, it will provide good profits in the future too.
(2) Mr. Vinod Kumar is successful in arranging finance for the business. It shows that in future
business will not face any financial hurdle because business has earned a good profit in the
first year of its commencement. Customers and investors will take it very positively.
(3) Mr. Vinod Kumar can think about the expansion of the business because he is having a good
bank balance i.e. Rs.12,12,000.
(4) Suggestions
Business is already doing well but it may earn more profits by cost control (by reducing Direct
Expenses) and increasing its sales. Gross profit and net profit of the business is better than
the similar firm (doing same business). Mr. Kumar must think about the new selling
techniques, new customers, new market and latest advertising techniques. It is beginning only
and after sometimes he has to face competition in the market, so it is better to prepare himself
in advance for the future business. Loan taken from bank should be paid off as soon as
possible because it will reduce a huge liability of the business. Instead of paying a big amount
to manager as commission, Mr. Kumar should appoint new sales agents to increase the sale of
the business. Overall business is doing very well and performance in each and every area is
satisfactory.

Part – B : Project on Segment Analysis

1. Name of the Project : Vinod Motor Company

Vinod Motor Company is the third largest two-wheeler manufacturer in India and one among the
top ten in the world, with annual revenue of more than Rs.1,00,000 Cr in 2015-16 and is the
flagship company of the, USD 9.35 billion in 2014-15, Vinod Group of companies. The company
has an annual sales of 3.5 million units a year. Vinod Motor Company is also the 2nd largest
exporter in India with exports to over 53 countries
Vinod Motor Company Ltd (Vinod Motor), member of the Vinod Group of companies, is the largest
company of the group in terms of size and turnover with more than 3.7 crore customers riding this
company's bike. Mr.Vinod Kumar, the Chairman of Vinod Motor Company has led by example,
winning many laurels including the prestigious Padma Shri award. Order of Diplomatic Service

45 Project–2
 Merit" medal from Korean President, The JRD Tata Corporate, The Star of Asia award by Business
Week, The Jamshedji TATA Lifetime Quality Achievement Award and Emerging Corporate Giant -
Times & Harvard Business School Association are other high-profile awards bestowed on him, on
behalf of the company. He was also awarded the coveted Ishikawa-Kano Award presented by Asian
Network for Quality. Among the latest honours conferred on him was an honorary doctor of science
degree by Purdue University, USA.
Analysis of performance of each segment of Vinod Motor Company with reference to:
(i) Revenue
(ii) Profit and
(iii) Capital employed
2. Objectives:
l To study whether the contribution of various segments of Vinod Motor Company with
respect to (i) Revenue and (ii) Profit is justified ?
l To know as to which operation segment is performing best in terms of Net Profit and
Return on Investment.
3. Period under study:
Financial Year ending 31st March, 2015
4. Tools of analysis:
(i) Common Size Statement and
(ii) Ratios
5. Source material:
Newspaper cutting of Audited Financial Results of Vinod Motor Company from the Economic
Times dated 22 October, 2015 or the Website of the company.
6. Processing of data :
I. Common Size Statement of Segment Wise Revenue
l Compare the Revenue from Operations of each segment of Vinod Motor Company with
Total Revenue for the year ended 31 March 2015.
Revenue of the segment
Use the formula = × 100
Total Revenue

Revenue of the segment

Degree = × 360
Total Revenue

Common Size Statement Showing Inter-Segment Comparison of Revenue

For the year ended 31 March, 2015
Segment Motorcycles Bike Tyres Brake lining Others Total
Revenue 58,000 22,000 13,000 7,000 1,00,000
Percentage of 58% 22% 13% 7% 100
Revenue
o o o o o
Degrees for 208.8 79.2 46.8 25.2 360
Pie Diagram

Source: The Economic Times 22 October, 2015.

Vishvas Accountancy Project Workbook XII 46

 Pie chart Representing Segment Revenue

Motor cycle
Bike Tyres
Brake Lining
Others

II. Common Size Statement of Segment Wise Profit

l Compare the profit of each segment of Vinod Motor Company with total profit for the year
ended 31 March, 2015.
l Use the formula to calculate percentage and degrees for making pie diagram.
Profit of the segment
Percentage = × 100
Total Profit

Profit of the segment

Degree = × 360
Total Profit
Common Size Statement Showing Inter-Segment Comparison of Revenue
For the year ended 31 March, 2015

Segment Motor cycles Bike Tyres Brake lining Others Total

Profit (in Lakhs) 23450 11978 1458 398 37284
Percentage of 62.89 32.12 3.91 1.07 100
Profit
o o o o o
Degrees for 226.40 115.63 14.07 3.85 360
Pie Diagram

Source: The Economic Times 22 October, 2015.

Pie chart Representing Segment Revenue

Motor cycle
Bike Tyres
Brake Lining
Others

III. Common Size Statement of Segment Wise Capital Employed

l Compare the Capital Employed of each segment of Vinod Motor Company with Total Capital
Employed for the year ended 31 March, 2015.
l Formula to calculate percentage and degrees for making pie diagram.
Capital Employed of the segment
Percentage = × 100
Total Capital Employed
Capital Employed of the segment
Degree = × 360
Total Capital Employed

47 Project–2
 Common Size Statement Showing Inter Segment Comparison of Capital Employed
For the year ended 31 March, 2015

Segment Motorcycles Bike Tyres Brake lining Others Total

Capital Employed 52200 19800 14400 3600 90,000
(in Lakhs)
% of Total Capital 58% 22% 16% 4% 100
Employed (%)
o o o o o
Degrees for 208.8 79.2 57.6 14.4 360
Pie Diagram

Source: The Economic Times 22 October, 2015.

60000
50000
40000
Capital
30000
Employed
20000
10000
0
Motor Bike Brake Others
Cycle Tyres Lining

IV. Calculation of Return on Investment

l Calculate the Return on Investment of each segment of Vinod Motor Company for the year
ended 31 March, 2015.
l Formula to calculate Return on Investment:

Profit before interest × Tax and Dividend

Return of Investment = × 100
Capital Employed

Statement Showing Inter Segment Comparison of ROI For the year ended 31 March, 2015

Segment Motorcycles Bike Tyres Brake lining Others Total

PBIT (in Lakhs) 23450 11978 1458 398 37284
Capital Employed 52200 19800 14400 3600 90000
(in Lakhs)
ROI % 44.92% 60.49% 10.12 11.05 41.43%
Graphic Presentation of ROI
70
60
50
40
ROI
30
20
10
0
Motor Bike Brake Others
Cycle Tyres Lining

Vishvas Accountancy Project Workbook XII 48

 Combined Comparative Statement

Segment Motor cycles Bike Tyres Brake lining Others Total

Revenue (%) of total 58 22 13 7 100
PBIT (%) of total 62.89 32.12 3.91 1.07 100
Capital Employed
(%) of total 58 22 16 4 100
ROI (%) same 44.92% 60.49% 10.12% 11.05% 41.43%

Conclusions
l Vinod Motor Company is doing well in the area of Motor cycle and Bike Tyres.
l Company must focus on Brake Lining also because it may also contribute to the high profit to
the firm.
l Bike Tyres Segment has the highest ROI 60.49% with less amount of capital invested in it.
l With the Revenue share of 58% of the Total Revenue, Motor cycle segment is able to generate a
PBIT of 62.89% of the Total Profit.
l Tyres segment and Brake Lining also getting a good ROI of 60.49% and 10.12%.
l Therefore, Motor cycle and Tyres Segment are the best performing segments.
Future Projections
l Company has enough potential to handle the volatile situations. Company must create some
reserves out of profits to meet the future contingencies.
l Company has 41.43% share of ROI, Brake Lining seems to have a bright future. More funds
should be diverted towards this segment from other segment which is losing its shine.
l Bike tyres also has a future growth potential because of heavy demand of motor cycles in the
country. It will be a good idea to divert some funds towards this segment.

Part – C : Cash Flow Statement

VK Wind Energy Limited is a wind turbine supplier based in Delhi, India. Formerly ranked as the
world's second largest supplier, the company claims to have over 15,000 MW of wind energy
capacity installed globally, with operations across 21 countries and a workforce of over 5,000.
The company is listed on the National Stock Exchange of India and on the Bombay Stock
Exchange.
VK Wind Energy Limited is a vertically integrated wind power company. VK Wind Energy Limited
makes and installs wind turbines. The company manufactures blades, generators, panels, and
towers in-house and large or offshore turbines through its subsidiary Senvion. The company is
integrated downstream and delivers turnkey projects through its project management and
installation consultancy, operations and maintenance services. VK Wind Energy Limited has
offices, R&D and technology centers, manufacturing facilities and service support centers spread
across the globe.

49 Project–2
The Balance Sheet of VK Wind Energy Limited on 31-3-2014 is as follows :

Particulars Note No. 31.3.2014 (`) 31.3.2013 (`)

I. Equity and Liabilities
1. Shareholder's Funds:
(a) Share Capital 20,00,000 15,00,000
(b) Reserve and Surplus 1 5,00,000 3,00,000
2. Non-Current Liabilities:
Long-Term Borrowings 3,00,000 2,00,000
3. Current Liabilities:
(a) Trade Payables 1,50,000 2,00,000
(b) Short-Term Provisions 2 70,000 60,000
Total 30,20,000 22,60,000
II. Assets:
1. Non-Current Assets:
(a) Fixed Assets:
(i) Tangible assets 3 19,00,000 15,00,000
(ii) Intangible assets 4 4,70,000 2,70,000
2. Current Assets:
(a) Inventories 2,50,000 1,60,000
(b) Trade Receivables 2,10,000 2,10,000
(c) Cash and Cash equivalents 1,90,000 1,20,000
Total 30,20,000 22,60,000

Notes to Accounts
S. No. Particulars As on 31.3.14 (`) As on 31.3.13 (`)

1. Reserves and Surplus

Surplus (balance in Statement of Profit and Loss) 5,00,000 3,00,000
2. Short term provisions
Provision for tax 70,000 60,000
3. Tangible Assets
Machinery 27,00,000 21,00,000
Accumulated Depreciation (8,00,000) (6,00,000)
4. Intangible Assets
Goodwill 4,70,000 2,70,000

Financing Activities
Prepare a Cash Flow Statement after taking into account the following adjustment :
During the year a piece of machinery costing ` 30,000 on which accumulated depreciation was
` 6,000 was sold for ` 20,000.
Solution.
Introduction : The Project is to prepare Cash Flow Statement of VK Wind Energy Limited for the
year ended 31st March 2014. Cash Flow Statement of the company will be prepared as per the
Accounting Standard 3 (Revised) issued by the Institute of Chartered Accountants of India. It
also requires the interpretation of the results of the company.

Vishvas Accountancy Project Workbook XII 50

Tools for the Analysis of Company's Result
1. Cash Flow Statement
(a) Cash Flow From Operating Activities
(b) Cash Flow From Investing Activities
(c) Cash Flow From Financing Activities
2. Analysis and Observation
3. Preparation of Bar Diagram to show the Cash Generated (or used) under, Operating, Investing
and Financing Activities.
Cash Flow Statement

Cash flow from Operating Activities :

Net Profit before tax & extraordinary items 2,00,000
Add : Provision for Tax 70,000
Add : Non cash and non-operating charges
Depreciation on machinery 2,06,000
Loss on sale of machinery 4,000
Operating profit before working capital changes4,80,000
Less : Increase in Current Assets
Increase in inventories (90,000)
Less : Decrease in Current Liabilities
Decrease in trade payables (50,000)
Operating profit after working capital changes 3,40,000
Less : Tax Paid (60,000)
Cash generated from Operating Activities 2,80,000
Cash flow from Investing Activities :
Purchase of machinery (6,30,000)
Sale of machinery 20,000
Purchase of Goodwill (2,00,000)
Cash used in investing activities (8,10,000)
Cash flow from Financing Activities
Issue of share capital 5,00,000
Money raised from long term borrowings 1,00,000
Cash from financing activities 6,00,000
70,000
Net increase in cash & cash equivalents
Add : Opening balance of cash & cash equivalents : 1,20,000
Closing Balance of cash & cash equivalents 1,90,000

Analysis and Conclusion

VK Wind Energy Limited's Cash Flow Statement analysis shows the inflow and outflow of cash
separately from the three different activities namely, Operating Activities, Investing Activities and
Financing Activities.
I. Cash Flow from Operating Activities:
 Cash Flow from Operating Activities has a positive inflow of Rs. 2,80,000 in the year ended
March 31st, 2014 which shows that the company has good operating activities i.e. principal
revenue producing activities.

51 Project–2
  Cash generated from operating activities amounted to Rs.2,80,000 out of which some amount
has been invested in purchasing of Fixed Assets.
II. Cash Flow From Investing Activities:
 Cash flow from investing activities means that VK Wind Energy Limited has invested in fixed
assets. Investment in terms of purchasing fixed assets which facilitated the business to earn
more profit in future. It is also a healthy sign for any business. Following assets are purchased
by the company:
l Fixed Tangible Assets (Machinery)
l Fixed Intangible Assets (Goodwill)
 Proceeds from Sale of Fixed Assets Rs.20,000 is also utilised for purchasing of fixed assets and
remaining amount is utilised for other payments.
III. Cash Flow From Financing Activities:
 Rs.5,00,000 Share capital is raised and Rs.1,00,000 raised through other long term
borrowings.
 Dividend was not declared because more funds are required for the growth and development of
the company.
 Overall company is having Rs.1,90,000 Cash and Cash Equivalents which is a good sign.
 Company is able to meet its obligations and also meets the expectation of shareholders
regarding return on their investment. That is why company is able to issue its Equity shares
and raised Rs.5,00,000 share capital.
Result of Different Activities

Business Activities Amount

Cash From Operating Activities 2,80,000
Cash From Investing Activities (8,10,000)
Cash From Financing Activities 6,00,000

600,000
400,000
200,000
0
-200,000
-400,000
-600,000
-800,000
-1,000,000
Operating Investing Financing
Activities Activities Activities

On the basis of the above analysis, we may conclude that business of VK Wind Energy Limited is doing
well and prospects of the company are bright. The company is carrying a good amount of cash and
cash equivalents, indicating the efficient cash management. The management must consider this
situation and utilize its cash and cash equivalents so that better standards are achieved.

Vishvas Accountancy Project Workbook XII 52