FINANCIAL ACCOUNTING & ANALYSIS

Q.1

INTRODUCTION

Users can use a cash flows to evaluate an enterprise's net assets, its financial infrastructure
(including liquidity management), or its ability to adjust cash flow amounts & timing in order
to take advantage of changing circumstances or opportunities, when used in combination with
other income statement. As a result, working capital information is important in measuring a
company's potential to create cash and other cash equivalents, as well as allowing users to
construct models to compare and estimate cash flows from other companies. Furthermore, it
improves the comparability of operational performance reports from other businesses since it
removes the impact of accounting procedures for the identical transactions and occurrences.
The quantity, timing, and confidence of cash flow may be predicted using historical data. It
may also be used to check the accuracy of previous forecasts of cash flows or to examine the
link between profitability and cash flow, as well as the effect of pricing changes.

Fig.1 Operating Activities

Financial Accounting:

A company's financial activities are all included in "Accounting Accounting." Expenses,

information management, or the compilation of financial statements are all important aspects
of a well-run accounting department.
It is the job of financial accountants to ensure that these reports are correct and adhere to "
Accounting Principles Generally Accepted"  known as ERP.

Why Is Financial Accounting Important?

Businesses rely on financial accounting to maintain tabs on their financial operations. Thus,
they are in a position to make well-informed judgments on the distribution of their financial
resources. As a business owner, accounting information helps you convey your company's
financial status to investors and lenders

CONCEPT

 Operating Activities

One of the most important indicators of a company's capacity to continue functioning, pay
dividend, repay loans, or create new investments is the cash flow flow created by its
operations. In order to anticipate future operating cash flows, it is helpful to know the exact
components of cash flow from the past.

 Investing Activities

Since the free cash flow indicate expenditures made on resources that are expected to create
future revenue or cash flows, the income received resulting from investment activities is
critical. Capital expenditures, such as the purchase of assets, may result in a variety of cash
flows, such as:

(a) (Including intangibles). All of the following are included in these payments:

(b) Cash receipts from the sale of fixed assets (such as intangibles), and

(c) payments made to acquire other enterprises' shares, warrants and debt instruments (other
than those pay-outs for those computing device to just be payable on demand or that are held
for trading purposes).

 Financing Activities

Due to the usefulness of this information in anticipating future claims on the enterprise's cash
flows, it is vital to break apart cash flows resulting from financing operations.

a)When a company raises money by various means, such as issuing stock or other similar
instruments, issuing debentures, loan, notes, bonds,
b) Or any other short-term or long-term borrowing, or repaying borrowed funds in cash, these
cash flows are examples of financing operations.

Particular Amount Logical Reasoning

It's a loss when 95780 Non-inventory assets may be sold for over their market
you sell an asset. worth, and thus result in loss upon sale. It is the sum of
money a corporation loses when sells a semi property for
much more than the market worth.

Dividend income 26000 You may augment your Social Security or pension income
with dividend payments over time. It may even be enough to
keep you in the same financial position you were in before to
retiring. If you have a little forethought, you can survive off
profits.

Interest income 35000 The interest paid on bonds is a major source of revenue for
several corporations. In contrast, the vast majority of
companies who display an interest charge on their financial
statements are doing so because they've loaned money to
finance their growth or to support their operations.

Debenture 12000 The interest rate a corporation pays on to its obligations,

financing costs. including bonds, is known as cost of debts. Prior to taxes, the
debt is referred to as the industry's total debt. After taxes, the
debt is referred to.

 Profits derived 45000 If the securities are expected to be sold within a year, they
from the selling of will be classed as current total assets. Whether they are
a securities. expected to be retained for a longer time, they will be live
long assets.

Fixed-asset 85000 In order to account for such due to wear on corporate assets,
depreciation depreciation of capital assets should be computed. There
must be an estimate of the amount of degradation since this is
a non-cash expenditure. Depreciation is write off each year,
lowering the asset's value on the balance sheet.

Amortization 110000 Typically, depreciation or amortization not included in the

Expenses cost of sales or are expensed separately on the financial
statements. Gross income or profit is generated between a
company's total revenue and its cost of sales.

Establishing a working capital budget:

Particulars Amount

Net Income 2,69,244

(+) Depreciation on fixed assets 85,000

(+) Amortization Expenses 1,10,000

Net Cash provided by operating activities 4.64,244

CONCLUSI ON

Using a cash flows, you could see how much income is coming in and going out each month.
With the revenue and balance statements, cash flow is a crucial document for small
businesses to keep an eye on. Company's cash flow illustrates how so much money they earn
and spend. The state of a company's finances is a good indicator of how successfully it
manages and finances its responsibilities and activities. The current free cash flow of a
company are compared in financial statements or cash flow statements. It's clear that there's a
big difference between them. Financial and operational planning typically include the
presentation of money-float analysis to users. The statement indicates how much money was
earned & spent during the given time period, and also how many coins were changed.

Q2.

INTRODUCTION

 FINANCIAL STATEMENTS

Companies' risk and profitability may be assessed using a wide range of approaches based on
the financial data presented in the statements. Analyzing and correcting for measurement
mistakes is the ideal way to conduct a study of a company's financial statements. The
reformed and corrected financial statements are then used to execute different computations.
There is a problem, however, with first two phases in practice. This is the case when financial
ratios are determined based only on the reported figures, however certain changes may be
made to the numbers.

The income statement may be restructured by splitting the reporting items in recurring or
regular things and non-recurring or unusual items. In this segment, income is broken down
into core earnings and temporary earnings.

Fig.2 Three Financial Statements

CONCEPT
  BAJAJ AUTO Income Statement Analysis
 This year's operating income was down 7.3% year-over-year (YoY).
 During the fiscal year, the company's operational profit fell by 3.5% YoY. There was
a decrease in operating profits from 17.0 percent in FY20 to 17.7 percent in FY21.
 Depreciation charges rose by 5.3% YoY, while financing expenses rose up 110.8%
YoY.
 A decrease of 15.9% year-over-year was recorded in other revenue.
 The year-over-year decrease in net profit was 6.9 percent.

BAJAJ AUTO Profit and Loss Statement 2020-2021

Year Ending Number of MThs 12 March 20* 12 Mar-21* % Change

Net Sales Rest m 299,187 277,411 -7.3%

Other income Rest m 15,246 12,820 -15.9%

Total Revenues Rest m 314,432 290,231 -7.7%

Gross profit Rest m 50,956 49,191 -3.5%

Depreciation Rest m 2,464 2,594 5.3%

Interest Rest m 32 67 110.8%

Profit before tax Rest m 63,706 59,351 -6.8%

Tax Rest m 14,802 13,844 -6.5%

Profit after tax Rest m 48,904 45,507 -6.9%

Margin of gross profit

% 17.0 17.7

Tax rate in effect % 23.2 23.3

 Net profit margin % 15.6 15.7

Source: Accord Fintech, Equity master

 BAJAJ AUTO Balance Sheet Analysis

 In FY21, the firm's existing liabilities were Rupees 56 billion, up from Rest billion
used in FY20, a 32.7 percent rise.
 There has been a 3.3% decrease in lengthy debt from Rupees 1 billion in FY20 to
Rest billion dollars in FY21.

Balance Sheet of BAJAJ AUTO as of March 20, 2021

Year Ending Number of MThs 12 March 20* 12 Mar-21* % Change

Net worth Rest m 216,621 272,734 25.9

Current Liabilities Rest m 42,533 56,435 32.7

Long-term Debt Rest m 1,256 1,215 -3.3

Total Liabilities Rest m 265,100 336,017 26.8

Current assets Rest m 66,160 141,877 114.4

Fixed Assets Rest m 198,940 194,141 -2.4

Total Assets Rest m 265,100 336,017 26.8

Source: Accord Fintech and Equity Master are the sources for this information.

Analysis of the BAJAJ AUTO Statement Of Cash flows

 On a year-over-year basis, BAJAJ AUTO's cash from operating operations (CFO)

was Rupees 31 billion in FY21.
 At Rupees -29 billion on a year-over-year basis, FY21's cash from investment
operations was the lowest on record.
  By comparison, the company's FY21 CFF was Rupees -195 million, an increase of
100 percent year-over-year (YoY).

BAJAJ AUTO Finance OUTLOOK 2020-21

No. of
12 12
months
%
Particulars
Change
Year Mar- Mar-
Ending 20 21

Operating Expenses (Cash

Rest m 38,504 31,199 -19.0%
Flow)

Investing Activities' Cash -

Rest m 15,561 -
Flow 28,684

Financing Activities' Cash -

Rest m -195 -
Flow 62,465

Cash Flow (Net) Rest m -6,302 2,312 -

Source: Equity master, Accord Fintech

BAJAJ AUTO values at the moment.

 Since last year, the company's twelve months ending EPS has fallen from the previous year's
figure of Rupees 169.0 to Rupees 157.3.
 It has a P/E ratio of 21.9 time its 12 months ended earnings at the present cost of Rest 3,845.
 At present prices, the pricing to margin requirement (P/BV) ratio is 3.4 times, and the earning
per share is 3.3 times.
 P/CF (price per cash flow) ratio of the firm was 23.1 times cash flow profits for the year.

No. of MThs Year Ending 12 Mar-20* 12 Mar-21*

Rest 1,033.9 958.7

Revenue each share Unadd
Earnings per share TTM Rest 169.0 157.3
 Earnings per share diluted Rest 169.0 157.3
Price to Income Ratio x 21.7 23.1
P/E ratio TTM x 21.9 21.9
Price to Book Value P/BV ratio x 3.4 3.4
Market capitalization Rest m 1,112,616 1,112,616
Dividends paid per shares Unadd Rest 120.0 140.0

 Ratio Analysis for BAJAJ AUTO

 Solvency Ratios

Current Ratio: In FY21 the quick ratio increased from 1 6x to 2 5x Measures a company's
capacity to meet its immediate financial obligations as well as its long term financial
commitments.

Profitability Ratios

Return on Equity (ROE): The company's ROE dropped from 22 6 percent in FY20 to 16 7

percent in FY21 Roe assesses the capacity of the business to create profits from the money
invested by its owners

Return on Capital Employed (ROCE): There was a significant drop in the company's

ROCE from 29 3% in FY20 to 21 77% in FY21 Based on total capital used shareholder
capital and loan capital the ROCE assesses a company's potential to create profits

Key Ratio Analysis

No. of MThs Year Ending 12 Mar-20* 12 Mar-21*

Current ratio x 1.6 2.5

Debtors’ Days Days 2 4

Interest coverage x 2,017.0 892.2

Debt to equity ratio x 0.0 0.0

Return on assets % 18.5 13.6

 Return on equity % 22.6 16.7

Return on capital employed % 29.3 21.7

CONCLUSION

Users can assess a company's risk and profitability by looking at its financial statements.
Ideally, the study should include a reformulation of the data, an analysis of the data, and an
adjustment for any measurement mistakes that could exist. However, in reality, these stages
are often omitted. On a year-over-year basis, BAJAJ AUTO's cash from operating operations
(CFO) was Rest 31 billion in FY21. As compared to FY20, the company's cash flow was
Rupees 2 billion, an increase.

The current ratio of the company grew from throughput compared in FY20 to 2.5x in FY21, a
significant improvement. ROE (Return on Investment): The Company’s ROE dropped to
16.7 percent. BAJAJ's ROA dropped reduced to 21.7 percent, from 29.3 percent, as a result
of a decrease in the ROCE.

Q3. A

INTRODUCTION

Financial accounting is the method of creating financial statements which firms use to
communicate their financial position of investors, creditors, suppliers, or consumers.

In contrast to management accounting, which focuses on providing thorough reports and

predictions for the company's managers, this is among the most crucial contrasts.
 Fig.3 Financial Accounting

CONCEPT

Accounts are nothing more than a summary of the business's transactions in relation to
individuals, their representatives, or property. Suppliers and consumers, for example, are
considered different accounts when a firm engages into a transaction with them. These kinds
of stories link things together.

 Types of Accounts
1. Personal Account

A Personal Account is one linked to a person a company a set of organizations or other entity
these people might be real artificial or representational humans depending on the context.

Type of Personal Accounts

a. Natural Persons

Accounts like Veer's A/c Ayaan or Karen's A/c Karen refer to real individuals

b. Artificial Accounts

Companies and organizations like Kapoor Private Ltd A/c Booker's Club A/c etc. are
included in these accounts.

Representative Accounts

Representation accounts are those that serve as a representative of a certain individual

Interest A/c Outstanding Wages A/c Pre Expense A/c and so on.

2. Real Account

Real accounts are those that are linked to tangible assets such as real estate stock or other
property

a. Tangible Real Accounts

Tactical Real Accounts that can be seen and touched it is possible to view feel or even touch
these assets A/c systems for machinery vehicles buildings and more

b. Intangible Real Accounts

 Nonphysical belongings that may be valued in monetary terms are known as intangible assets
Because of this these assets are of some worth

3. Nominal Account: The utilization of little notes will allow us to change our income
expenditures and profits only a few instances are salary A/C wage A/C or rent A/C.

Particulars Type of Account

The company was started with a cash investment Changing a Personal Account, including a
of Rest. 150000. savings, does not affect a Real Account, such as
for a checking account account.

₹ 25000 in money was made available for the For purchases, the Concept Account is utilised;
purchase of the products. for monitoring cash flow, the Actual Account is
still used.

I sold C goods for Rest 20000 on credit. Nominal Account's selling accounts would be
impacted.

He was paid Rs15000 in money as a wage. Actual account, such like cash, or nominal
accounts, like earnings, are two forms of
accounting. There is a strong connection
between them all.

A sum of Rs100, 000 would be placed in the Because bank or cash bills were legitimate
banks. bills, it may affect current account.

CONCLUSION

First, we need to learn about the many sorts of loan that exist on earth in order to come up
with the Appropriate accounting guidelines. All standard financial statements, regardless of
form, employ the accounts class. As a result, each Accounts will be assigned to a few of the
previously identified essential groups.

Q. 3b

INTRODUCTION
To register a commercial transactions in the books record of a company, a ledger account is
utilized General ledger accounts for a journal, but a subordinate ledger may also record it,
which is subsequently rolled forward from the ledger accounts. Every business transaction
should be recorded in at last two places, according to the logic of a general journal known as
double entry accounting.

Fig.4 Rules for Journal Entries

CONCEPT

 Different Types of Journal Entries

 Compound Entries

It is necessary to use compound entries when a transaction has an impact on many financial
records at the same time. The occurrence of these is more likely when the recording are
similar in character or take place on the same day.

Ref DATE Account Titles and Explanation Debit Credit

.

101 September Equipment $1,000

3rd

Cash $500
 Accounts payable $500

(purchased computer software with a balance

on the account)

 Adjusting Entries

Entries are being used to make corrections to prior entries in a diary that have been
previously recorded. Their job is to make sure that the recordings correspond to the relevant
accounting periods.

There are four main types of adjusting entries:

1. Pay in advance for goods that haven't been utilized is a kind of prepaid cost. Think about
insurance. It safeguards a business against potential losses, such as due to fire, that have yet
to occur.

2. Cash collected first before product and service has been delivered is referred to as
unearned revenue

On October 31st, the entry would read like this:

DATE Account Titles and Explanation Ref. Debit Credit

October Cash 101 $3,000

31st

Unearned Revenue $3,000

(adjusting entry due to excess cash)

 Reversing Entries
The opposites of adjusting adjustments are reverse entries. Rather, when we say "the
reverse," we don't imply that the adjustments are eliminated. It doesn't matter how much time
has passed.

What the final journal entry as follows;

DATE Account Titles and Explanation Ref Debit Credit

.

December Service Revenue 101 $3,000

2nd

Accounts receivable $3,000

(to reverse November 2nd adjusting entry)

 Journal Entries:

1. Begun business with Rs150000 with cash

Dr. 150,000

50,000 to Capital A/c 1

2. Purchased products for Rest 25000 in cash:

A/c Purchases —— Dry 25,000

A/C 25,000 to be cashed

3. Sold items on credit to C for Rest 20000:

Dr. 20,000 C's A/C

A/c Sales 20,000

4. Paid pay in cash of Rs15000:

A/c Salary —— Dr. 15,000

15,000 to cash a/c

5. Deposited Rs100, 000 in cash into the bank account:

Bank Account —— Dr. 1,000,000

A/c 1, 00,000 to Cash.

CONCLUSION

In order to ensure the validity of the organization's transactions, it is crucial to be aware of

the bulk of the transactions. If a company keeps a track of all transactions and recommends
saving it for later review, that's a good sign. Accountants should use accounting general rules
in situations when a financial statement is unavailable. Any account may use this instruction,
but you should firstly identify which account type you have.