Questions and Answers of Financial Accounting For Managers

Complete the following balance sheet and profit and loss statement based on the information given as follows:Profit and Loss Statement Liabilities Current liabilities Long-term debts Equity capital
Financial information can be used to ascertain efficiency or otherwise in utilization of assets. Which ratios can be used to measure efficiency in assets utilization?
Assuming that Sharda Limited uses a perpetual inventory system and keeps detailed record of purchase and sales. The datewise break up of purchase and sales during the quarter is given below:Using
Based upon the revised Trial Balance, prepare the profit and loss account of Snow White & Co for the year ended 31st December 2017 and the Balance Sheet as on that date. Particulars Purchases
The excerpts from the profit and loss account of MG Retails Limited for the last two years are given as follows: You are required to:1. Calculate the yearonyear growth of sales and net profit.2.
Chit-Chat Limited funds its inventories by taking short-term loan from a bank @ 12% p.a. The estimated sale of the company for the coming year is ₹ 800 million with a gross margin of 25% on
Based upon the following information, comment on the capital structure of Swift Transport Limited using suitable ratios: Particulars Shareholders' funds Borrowed funds Earnings before Interest and
CSR Infotech Limited is engaged in software development and BPO services. The company is paying dividends since its inception. The relevant details from its financial statements are reproduced as
The financial information about two competing firms Black Limited and White Limited is given as follows: 1. Based upon the above information, compute the return on capital employed and return on
Business enterprises try to maximize their return on equity. What are the key drivers of ROE? Explain by using Dupont Analysis.
Sit-Sat Limited followed the calendar year as the accounting period till December 2015 and changed to financial year thereafter. During the switch over period, it prepared the accounts for fifteen
Based upon the trial balance of Star Limited as given in the problem 8 of Chapter 5, prepare the balance sheet of the company as on 31st March 2017. Make suitable assumptions as necessary.problem
After preparing the above trial balance, the following adjustments were identified. You are required to pass the necessary adjustment entries, prepare a revised Trial Balance and close the
In each of the following cases how will the transaction affect the balance sheet as on 31st March 2017:1. Premises taken on rent on 1st August 2016 by paying a deposit of ₹ 10 million. Quarterly
Based upon the trial balance given in Problem 3 of Chapter 5 (profit and loss statement) prepare the balance sheet of Shivam Industries Limited as on 31st March 2017.Problem 3Based upon the given
Please complete the income statement for the year 2016–17 based upon the information given: Particulars Sales Opening stock Purchases Closing stock Cost of goods sold Gross profit Operating
The profit and loss account of Innovative Products Limited for the years 2016 and 2017 is given below:The management was surprised to note that though the sales have increased by 9%, the profit
Sharda Limited uses periodic inventory system for accounting. The following data pertains to quarter ended 30th June 2017:The sales of the company during the quarter amounted to ₹ 2,700,000. The
Precision Limited deals in highly sophisticated engineering items. It imports these items in semi finished form. These items are processed further to meet the precise requirement of the customers.
Assume that Satluj Cements Limited charges depreciation on the written down value method basis and the rate of depreciation being 20% per annum. 1. Prepare the depreciation schedule for the above
Aar Dee Limited bought a machine for ₹ 600,000. The management estimates a useful life of 10 years for the machine after which it can be sold for ₹ 30,000. For accounting purposes, the company
Calculate the cash flow from operating activities on the basis of the following information using direct method and indirect method: Profit and Loss Statement for the Year Ended 31st December
A-One Industries follows financial year as its accounting period. On 1st December 2013, the company bought five computers for a total consideration of ₹ 500,000. The company estimates the useful
Pure Copper Limited bought pollution control equipments costing ₹ 30 million. As per the scheme of the government, to promote use of pollution control devices, 40% of the cost of the equipment is
The balance sheet of Axon Limited for the year 2017 and 2016 showed the following amounts under the heading borrowed funds:The company took fresh longterm loans during the year amounting to ₹ 250
The balance sheet of Axon Limited for the year 2017 and 2016 showed the following amounts under the heading property, plant and equipment: During the year, the company sold an item of PPE with
Established in 1976, Apollo Tyres Ltdis India’s leading tyre manufacturer, with operations in three continents, and headquartered in Gurgaon, outside India’s capital city of New Delhi. The equity
On the basis of the profit and loss statement for the year ended 31st March 2017, balance sheets as on 31st March 2017 and 2016 respectively, and the additional information, prepare the cash flow
The cash flow from operating activities (indirect method) in respect of AOne Batteries for the year 2017 is give as follows:On the basis of the information in the cash flow statement as above,
Based upon the following balance sheets, prepare the cash flow statement for the year 2016–17: Particulars Assets Non-current assets Property, plant and equipment (gross block) Less: Provision for
Based upon the following information calculate the economic value added (EVA) and market value added (MVA) for Hot & Spice Limited.The detail of capital employed by the company in the last two
The followings are the excerpts from the profit and loss account and the balance sheet of PL Limited for the year ended 31stMarch 2016 and 2017.1. Compute the net margin ratio, earnings per share and
The management of ABC Limited is happy to note that the profit for the year 2017 has improved compared to the previous year. You are required to critically review the profitability for the two years
‘The quality of analysis is dependent upon the quality of information depicted by the financial statements’. Do you agree?
Steel Authority of India Limited (SAIL) and Tata Steel Limited are the two largest steel producers in India. The former is a public sector giant set up in the year 1973 with over 85% of the capital
How do common size financial statement useful in analysis?
Bharti Airtel Limited is the largest provider of mobile telephone services in India. It also offers fixed lines, broad band and subscription television services. The total income of the income grew
Rising Stars Limited reported a profit after tax of ₹ 38 million for the year 2017. The company’s share capital consists of 2.5 million shares of face value ₹ 10 each. The company declared a
J K Cements Limited is a leading manufacturer of cement in India with installed grey cement capacity of 10.5 million tonne per annum. It is the second largest manufacturer of white cement with an
The management of Ram Sham Limited is concerned about the increasing level of sundry receivables. The company has the policy of giving 60 days credit to its customers. All the sales are on credit
You are given the following information in respect of Surya Limited and Chand Limited in similar business for the year ended 31st March 2017.1. Which company is managing its trade receivables
How does short-term solvency analysis differ from longterm solvency analysis?
The current assets and current liabilities of PTI Limited amounted to ₹ 230 million and ₹ 100 million, respectively. The current assets include inventories amounting to ₹ 80 million. Compute
Set up in 1954, Bharat Electronics Limited (BEL) is India’s foremost defense electronics company, a Navratna PSU under the Ministry of Defence. PQR is a multi-products, multi-technology,
Steel Scrap Trader sells its product at a gross margin of 25% on sales. Its annual sales are estimated to be ₹ 360 million. The inventory turnover ratio for the business is 4 times whereas the
High current ratio may also indicate lower efficiency in assets utilization. Do you agree?
Zing Limited has current assets of ₹ 4,650,000 and current liabilities of ₹ 1,850,000. The current assets include inventories amount to ₹ 1,100,000.1. Calculate the current ratio and liquid
The current ratio and liquid ratio of the company are 2.5:1 and 1.5:1. If the current assets amounted to ₹ 500 million, f ind the amount of inventories held by the company.
Differentiate between interest coverage ratio and debt service coverage ratio. Which one do you think is a better indicator of the debt servicing capacity of an enterprise?
Which key ratios would an investor in the equity market track?
The balance sheets and the profit and loss accounts of Maharaja Synthetics Limited for the last two years are given as follows: Statement Profit and Loss Account for the Year Ended 31st MarchOn the
On the basis of the following information compute the debt equity ratio and the interest coverage ratio. Particulars Share capital Other equity Debentures outstanding @ 10% Term loan @ 12% Profit
The balance sheet of Suvarana Textiles Limited as on 31st March 2018 and the profit and loss statement for the year ended on that date is given as follows.Based on the aforesaid information, you are
What is Z score?
The management of Holly Polly Printers Limited is concerned about the decline in the return on equity of the company over the last three years notwithstanding significant improvement in profits over
Saral and Sulabh Limited earned a profit after tax of ₹ 724 million for the year 2016–17. The capital of the company consists of 20 million preference shares of the face value ₹ 100 each
On the basis of the following, financial information relating to Zeta Limited comments upon the working capital management of the company. Use suitable ratios in support of your analysis.
The year 2017 had been a great year for Blue Sea Enterprises Limited. The net profit of the company has increased by almost 70% compared to the previous year. The management has declared an increased
The summarized profit and loss statement and the balance sheets for Beta Limited and Theta Limited are given as follows. Profit and Loss Statement for the Year ended 31st March 2017Balance Sheet as
The summarized profit and loss statement of Vroom Auto Limited, manufacturer of motor cycles is given as follows: You are required to:1. Prepare the common size profit and loss statement taking the
State Bank of India (SBI) is the oldest bank in India holding premier position in terms of balance sheet size, number of branches and market capitalization. It was adjudged as the best bank by the
Reliance Industries Limited (RIL) is a fortune 500 company, and is the largest private sector company in India. It is the flagship company of Reliance Group founded by Mr. Dhirubhai Ambani. The
Reliability is one of the key attributes of financial statements. Do you agree with the statement?
The Indian business and investor community received a shock on 7th January 2009 when Mr. Ramalinga Raju, CEO of Satyam Computer Limited (Satyam), by a letter to the board of directors admitted
Briefly describe the regulatory environment to ensure that the financial statements are reliable.
Define the term ‘financial shenanigans’. Is it necessarily illegal?
As per a report published in the Economic Times dated 23rd June 2011 titled ‘No standards, so real estate numbers remain a riddle’ in absence of any regulations in this regards, revenue
Revenue recognition is one of the most vulnerable accounting areas. Describe some of the methods of manipulating revenue recognition.
Explain the following financial shenanigan techniques:1. ‘Big bath’ accounting2. ‘Cookiejar’ accounting3. Channelstuffing4. Roundtripping
What steps would you suggest for the management to take to prevent financial shenanigans?
How will you detect presence of financial shenanigans in the financial statements?
Financial shenanigans are short-term measures’. Comment.
Based upon the given Trial Balance and the additional information, prepare the statement of profit and loss of Shivam Industries Limited for the year ended 31st March 2017:Trial Balance of Shivam
Bharti Airtel Limited was promoted by Mr. Sunil Mittal in the year 1995. With the opening of telecom sector in India, the company launched its mobile services under the brand name ‘Airtel’ in
‘Financial accounting information is primarily used by the external users whereas management accounting information is exclusively used by internal users’. Explain.
What are the key differences between financial accounting and management accounting?
Identify three primary financial statements and state their purposes.
The accounting and disclosure requirements are greatly influenced by the regulations. Briefly explain the accounting environment in India.
Mr. Smart Lal commenced his trading business in the name of Exotica Trading Company on 1st April 2017 with a capital of ₹ 1,000,000 and a loan from the State Bank of India amounting to ₹ 500,000.
Explain the following accounting principles with suitable examples: 1. Accounting period 2. Separate entity 3. Money measurement 4. Substance over form 5. Historical cost 6. Dual aspect
Curewell Pharmaceutical Limited is facing a law suit wherein it may be liable to pay a fine of ₹ 10 million. The lawyer of the company has advised that there is a high probability of the company
A business enterprise recorded cash sales of ₹ 15.5 million and credit sales of ₹ 7.8 million during the year 2016– 17. The cash purchases during the year were ₹ 13 million whereas credit
‘Gains are recorded if reasonably certain, whereas losses are recorded even if reasonably probable’. Explain the statement and identity the accounting principle.
Hindustan Unilever Limited (HUL), incorporated in 1933, is a part of the Unilever Group. The company is present in various segments including home and personal care, food and beverages, and water.
Shivam Limited borrowed a sum of ₹ 50 million from the State Bank of India on 1st August 2016 for a period of one year. The loan matured on 30th July 2017 and was duly repaid on due date with
Alto Limited bought a building for ₹ 30 million in the year 2014–15 which is being used for office purposes. Due to fall in the real estate prices in the area, the company ascertains that the
As per consistency principle, accounting policies once chosen cannot be changed. Do you agree?
Which of the following transactions are subject matter of accounting: 1. Purchase of 200 kg of goods by the firm on credit for ₹ 100,000. 2. Resignation of one of the key salesman of the
Thanks to your help Roney is able to present the recasted and duly tallied Trial Balance to the Chief Accountant. The Chief Accountant informed him some additional transactions that need to be
Eighth Wonder & Co is engaged in cosmetics business. The trial balance and additional information as on 31st March 2017 are given below. You are required to prepare the profit and loss account
From the following Trial Balance of SSS Limited, prepare the profit and loss account for the year ended 31st March 2017 and a Balance Sheet on that date: Trial Balance of SSS Limited as on 31st
Financial statements of companies are much more detailed and structured. Why?
Ramesh, a fresh graduate, has recently joined his first job in a bank. His supervisor has asked him to find certain information from financial statements of a company. Please help him by suggesting
Identify financial statements which include the following information: 1. Shares issued during the year 2. Other income earned during the year 3. Trade receivables at the end of the year 4.
Explain the key requirements as laid down by Ind AS 1 relating to the presentation of financial statements.
Write a short note on various financial statements which are required to be prepared by a company.
The statement of profit and loss is a flowbased statement whereas the balance sheet is a static statement. Explain.
Asian Paints was set up in the year 1942 and is India’s leading paint company with a group turnover of ₹ 170.85 billion. The group has an enviable reputation in the corporate world for
For better understanding of financial statements, it is important to go through the notes to accounts. Do you agree?
In each of the following cases ascertain the amount to be charged as expenses in the statement of profit and loss for the year 2016–17: 1. Premises taken on rent on 1st August 2016 by paying a

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