Badam Gussain, Vice-President (Accounts) of Sach International Corporation, Singapore was taken aback when he reviewed the financial performance of the company. He noticed that the sales for the current financial year was trailing behind the sales figures of the previous financial year. It was less as much as about 10% as compared to the sales figures of the previous financial year. The same was the position of the profit for the year. He immediately retrieved the facts of the previous financial year as well as Chairman’s speech published in the previous annual report that depicted the following facts:

Along with this, he recalled the facts from the previous year’s address of Chairman delivered at AGM. Accordingly, the sales and EAT for the current year should have shown an increase of 30% and 12%, respectively over the last year’s performance. He immediately called his subordinates and held a meeting to review the situation. His team members updated him by providing the figures of the provisional income statement for the year as on March 12, 2010 that revealed the following facts:

All the senior management team members headed by Badam Gusain were surprised at the figures presented by the middle-management executives. However, they could interpret the accounting jugglery but kept quiet and everyone clapped. At the end, the Chairman congratulated all the employees and announced a productivity bonus for the employees.

Discussion Questions

1. Analyse the case from the viewpoint of accounting fundamentals.

2. Comment on the accounting policy of the company.

3. Also evaluate how middle-level executives could show a better performance in contrast to the apprehension of the senior management team headed by Badam Gusain.

Transcribed Image Text:

Sales Less: Cost of Goods Sold (COGS) Gross Profit Less: Operating Expenses Income Statement For the year ending March 31, 2009 Particulars Administrative expenses Selling and Distribution expenses 25,000 45,000 Details Amount ( in Crore) 10,00,000 7,00,000 3,00,000 70,000