Financial Accounting and

Analysis
Table of Contents
Questions.........................................................................................................................................3
Question 1. Various techniques of financial analysis to get the actual financial position...........3
Question 2. Relevant journal entries in book of account with accounting assumptions.............5
Question 3. In the context of its financial statements and annual report the flowing answers are
as follows:....................................................................................................................................8
A. Discussion and differentiate on types of dividend Britannia Industries Ltd paid for the
financial year 2020-2021.............................................................................................................8
B. 3 profitability ratios which help to assess the profitability of the company...........................9
Questions
Question 1. Various techniques of financial analysis to get the actual financial position.
Financial analysis is evaluating financial data to assess a firm's performance and develop
plans for further improvement. The fundamental accounting also focuses on the funding sources
that a company has managed to generate its resources. There have been different financial
analysis techniques that are implemented by external parties or to get the actual status of the
company in a respective year. The main 5 of these are discussed underneath below:
1. Cash flow analysis:The circulation of cash, as well as bank balances, is the basis for
cash flow analysis. In simple words, the CFA would evaluate the flow of cash rather than
the flow of working capital. Mainly cash flows may be divided into two categories. There
are two types of cash flows: actual as well as notional. This is basically, shown in a type
of document which demonstrates total outflows and inflows of cash and other equivalents
of money from three main activities such as: operating, investing and financing. This
supports evaluating the actual reasons for total cash payments and receipts of money in
an accounting year.
2. Ratio analysis: Before investing in any Indian company, it is very much important for
interested parties to make a proper analysis of the main ratio that helps to define the
position in the marketplace and valuable decisions can be taken. This seems to be an
effort to introduce a meaningful link between particular (or groups of) elements on the
financial statements or statement of comprehensive income. It is beneficial not just
tointernal company stakeholders but also to help external different stakeholders to make a
valuable decision. Accessibility, profitability, efficiency, as well as capital gearing, are all
highlighted through ratio analysis. In addition, some of the main ratios include net profit,
return on assets, EPS, or leverage that support to ascertain better firm for investment
within the same industry.
3. Trend analysis: This technique is simply related to considering the ratios of various
items for several periods so that proper comparison can be done based on different
performances. To get suitable results, figures of one years are expected as the base year
and the amount from other years are presented in actual percentage format in the context
 of that base year.This approach entails determining the direction of stock markets. In
simple terms, the share prices will be established beforehand. Throughout this case, a
high expected price indicates that investment will be beneficial for the investors. As a
result, this is among the most distinctive financial research tools since it was used to
predict the impact of a variety of external events on a company.
4. Comparative statement analysis: There have been some important financial documents
that support recognising the comparative status of operational and financial for a
company within the different time frames. This has been further classified into two forms
to make a better understanding for the investors investing in Indian companies. The same
is discussed below:
 As the name implies, comparative analysis of the statement of financial position is to
focus solely on balance sheets from various periods. This sort of study helps in evaluating
the firm's true financial situation throughout time as well as how successfully it manages
its investments, obligations, and expenditures at any specific fiscal year.
 Comparative analysis of P&L account: Only trading P&L accounts are tried to compare
against earlier periods or within the declaration itself. This study supports in
comprehending the company concern's, operating performance over some time. It may be
examined vertically as well as horizontally.
5. Common size statement: For producing common-size statements, a vertical display of
financial data is used by the investors so that no information gets missed out while
investing. Furthermore, the rupee worth of the accounting information items is not kept in
mind by them. However, while creating a CSS, only the return percentage is taken into
account and actual investments are done in the right amount.The assets, liability, or
sales are all fixed to 100, as well as the balancing elements are contrasted in terms of
percentage to that same assets, obligation, or total sales. As a result, a typical size
statement depicts the relationship between each element and the total. The P&L account
(Common Size Income Statement) and the balance sheet (Common Size Balance Sheet)
each have their respective CSS.
In the end, it can be concluded that to effectively understand and invest in a business within a
country like India, an investor must be very well able to understand the financial terms such
as the capacity to comprehend and communicate financial information in the form of accounting
results. As a result, financial analysis is now considered a vital element of every sector.

Question 2. Relevant journal entries in book of account with accounting assumptions.

Accounting principles are basic rules which accounting department follows while entering
daily transactions into the different books of accounts. In the following report, a discussion of
how the business transaction should enter into book of accounts and journal entries has been
done.
Journal Entries
Bank A/c Dr. 1000,000
To Capital 300,000
To Bank of Baroda 700,000
(Being business started with the bank and bank loan)
In this transaction, two types of accounts are affected: Personal and Real. For affecting
these two accounts, three items are evolved: Bank a/c, Capital a/c and Bank of Baroda a/c. These
items have been classified into different types of accounts below:
Real Account Personal Account
 Bank  Bank of Baroda
 Capital
There are a set of rules in each round that are relevant and followed by everyone. These
principles are important because they are fundamental to the capabilities of the center. Likewise,
there are also great guidelines for accounting. This simply means that the expense account is
affected by day-to-day transactions. It also needs to keep up to date with the latest changes,
giving a true and fair view of the current financial position of an organization.
Real Account
A real account is a type of account that retains and rolls its final balance until the end of
the year. These amounts will then become, at that stage, initial variations in the subsequent
period. The areas not yet confirmed are the real records of resources, responsibility and value.
Additional actual records include contingent assets, contingent liabilities, and clearing accounts,
as these records maintain their balance during this financial year.
Real accounts are not listed in the income statement. All balances in the income, expense,
profit and loss accounts (known as nominal or temporary accounts) recorded in the payment
definition are given to maintain a profit towards the end of each fiscal year, resulting in initial
changes in these records at the beginning of the next financial year. Since a record profit is a real
record, this means that the balances in all floating records will be moved to a real record.
These record balances changes in each accounting period but never close permanently
until or unless the account is settled down by the business. Managers can verify the amount of
these advances by observing the opening and closing balance of each table. The final equity will
be covered by the asset report towards the end of the period and will continue until the next
period transforming into the underlying equity for the period will keep the following books. The
link between real and accessible records is that changing one may turn out to be a change in the
other. This means that if a record is increased or decreased, a permanent record will increase or
decrease.
In the above transaction, the Bank account will be included in current assets under the
Assets side. On the other hand, the balance of Capital account will be transferred to the Equity
side under liabilities and equity.
Personal Account
Ledger accounts are records that involve exchanges marked with different individuals or
associations with which business having a direct relationship is known as personal accounts.
Some examples are customers, vendors, salary accounts of employees, drawings and capital
accounts of owners, so on. A personal account is a complete accounting record. All records that
have been identified by humans, whether they are ordinary people as human beings or deceived
people as groups, fall into this category.
This is because of personal account, when a company receives something from one
company or another, the parent company becomes the beneficiary and the next company or
individual from which it is acquiring becomes the supplier.
Golden rule 1 says: put the payer in debt, give credit to the provider. By applying the
standard to our model, books should reflect the cost of individual records and business account
credit.
In the above transaction, Bank of Baroda is treated as a personal account because it is the
name of a bank. Thus, any name of institution, supplier and person's name will be treated as a
personal account.
 As discussed above, all the transactions are related to either personal account or real
account. Both types of accounts do not affect the income statement. Thus, these accounts will
only impact the Balance Sheet:
Amount
Assets
Current Assets
Bank ₹ 1,000,000
   
Total Assets ₹ 1,000,000

Liabilities and Shareholder's equity

Non-current Liabilities
Bank loan ₹ 700,000

Equity
Capital ₹ 300,000
   
Total Liabilities and equities ₹ 1,000,000
In the above transactions, it is assumed that capital will treat as equity. The owner brings
some contribution into the business either in the form of cash, bank account or fixed assets.
These contributions of owner are treated as capital. The bank loan has been taken from Bank of
Baroda, which has been mentioned in journal entries. But the name of the bank will not be
reflected under balance sheet. Balance sheet only reflects the total balance remaining at the end
of the year in the following subsidiary books and ledger accounts. Sometimes trial balance also
best reflects Balance Sheet and considered to copy the ending balances of different items into
balance sheet directly from trial balance.
The Key accounting assumptions describe how the business is coordinated and operates.
They will be based on how contracts are posted. Since none of these assumptions are misleading,
it may be important to modify the financial data generated by a business and referenced in its tax
reports. These key assumptions are:
 Going concern assumption: The business will continue to operate for years to come. In
the event that this view is incorrect (for example, where there appears to be a violation),
the eligible costs should be seen immediately.
  Reliability assumption: Only trades that are able to appear correctly should be logged.
While this perception may not be correct, an industry is more likely to accelerate revenue
recognition to solidify its mobile results.
 Time period assumption: A company's quoted cash returns should cover a similar and
expected time frame. Otherwise, the budget summaries will not be largely consistent
across the exposure periods.
 When auditing an organization's financial statements, the auditors detect violations of
these accounting assumptions and do not provide a good assessment of the
announcements until any problems are identified. In doing so, new tax reports must be
produced that reflect the revised orders.

Question 3. In the context of its financial statements and annual report the flowing answers are as
follows:

A. Discussion and differentiate on types of dividend Britannia Industries Ltd paid for the
financial year 2020-2021.
There are different types of dividend payable by Britannia industries limited over a period
of time. As per the analysis the respective company is playing off three types of dividend which
are interim, special and final in past few years.
Interim dividend:The term interim dividend refers to a dividend which is paid before
annual general meetings for a respective company. Declaration for the respective dividend is
accompanied by companies entering financial statements. For the given company managers of
the business as their decisions pay such dividend semi-annually.
Special dividend:Another dividend type which is special dividend is a payment made to
company shareholders that states that the company is independent when applicable from the
usual repeating divisional cycle. Usually in such type of dividend the investors anticipate this to
represent a continuous growth when a business rises its ordinary dividend.
Final dividend: Fast type of dividend which is given by the respective company is final
dividend. Respective type of dividend is declared as a result or after the annual general meeting
of the corporate firm. The respective amount is computed following recording all the financial
accounts for the end of the year and notification of profitability and financial health of the firm.
However, the respective dividend is different from personal dividend as an enterprise knows
audits and releases its financial results after discussing several aspects of operation working of
the form in annual general meeting of the company.
In context to the given form that is Britannia industries limited the respective management
department of the firm initiates effective working of the firm incontext by performing respective
market research over respective fields of working. As per data of the economics Times markets
2021 Britannia industries limited provided interim dividend as on 13th March 2021 followed
with special dividend as on 17th August 2020 semiannually and in end of the same year provided
interim dividend as on 5th of October 2020. In respective year on 20th April 2020, interim
dividend was being paid by the given company. The following changes in dividend paid by the
respective company fluctuated in given years, however in past years before 2019 for more than
6-8 years company is distributing final dividend type. From this it can be said that, the
distribution of the relevant dividend policy adopted by the firm were more strategic type as all
distribution decisions were being made after discussing it in AGM of the company. Further, this
also displays quality of being transparent to its stakeholders (The economic times market, 2020).

B. 3 profitability ratios which help to assess the profitability of the company.

Profitability ratios are referred to such ratios which are used to access particular firm’s
ability as well as performance during a particular period of time. Managers of Britannia
Industries ltd. uses such ratios for determining their profitability of the company in a given
period of time. The critical analysis and evaluation of such ratio aids towards effective decision
making and strategizing better pathways to follow desired goals and objectives of the given
company. There are 3 profitability ratio which are used by Britannia industries limited to Access
Company’s profitability in a particular financial year.
Profitability ratio of Britannia Industries ltd are:
Ratios 2020 2021
Gross profit 39.13% 41.95%
Operating profit 14.48% 17.60%
Net profit 16.12% 19.14%
Gross profit ratio
Such type of ratio is used to access company's financial performance by calculating the
amount left over from the sales of a given product after subtracting the cost of obtaining the sold
item. The respective ratio is calculated on the basis of sales activities being performed in the
given time period. Managers of the respective firm by calculation of this ratio can ascertain the
gross profit margin which the business is earning after selling their particular product or service
in the given marketplace. By ascertaining this type of ratio manages of give company is able to
make effective decisions in regards to respective sales activities being performed by company in
given marketplace. In the respective year, 2020-21 the gross profit ratio increase from 39% to
41% approx. and the main reason for such increase is reduction in expense which are not making
any productivity for the company.
Operating profit ratio
The respective ratio is ascertained through analyzing the performance of respective firm
in terms of its operational work after subtracting all the interest and taxes being charged in the
process. Through an analysis of the particular ratio higher authority of the given firm can make
operational changes in areas where it is lagging and can prevent producing lower productivity
than expected or desired in an organizational firm. Evaluating this element of profitability ratio
enables managers of the firm to take appropriate operational decisions which also aids towards
maintain effective work culture in the business firm. In year 2020 the operating profit is14%
which rises to 17% approx. which showsBritannia is making effective activities year by year and
all its operating expenses are able to make decent operating income.
Net profit ratio
The respective ratio dedicates its learning towards analyzing the profit left over for the
given firm after deduction of all the cost and related items for goods being sold in the given
marketplace. From the given ratio managers at Britannia industries limited can ascertain the net
profit margin business is making after subtractions being made towards its sales activity. By
analysis of this type of ratio better and effective management decisions could be passed. This
enables respective company to provide a better shape to its respective planning structure and
enables individuals to work in desired direction for achievement of respective goals and
objectives. The table above shows that net profit increases from 16% to 19% with the increase
sales number for the company, it is quite obvious that after deducting tax and interest from
overall revenues the profit figures shows positive working in that year.