Financial Accounting - Application

					     BALANCE SHEET AS AT …….
                                            Sch Current Yr. Previous Yr.
SOURCES OF FUNDS
    Shareholders Funds
    a. Share Capital                        A    xx           xx
    b. Reserves & Surplus                   B    xx    xx     xx    xx
    Loan Funds
    a. Secured Loans                        C    xx           xx
    b. Unsecured Loans                      D    xx     xx    xx    xx
    Deferred Tax Liability                  E           xx          xx
                                                       xxx          xxx
APPLICATION OF FUNDS
      Fixed Assets                           F
      a. Gross Block                             xx           xx
      b. Less: Depreciation                      xx           xx
      c. Net Block                                     xx           xx
      Investments                           G          xx           xx
      Deferred Tax Assets                   E          xx           xx
      Current Assets, Loans & Advances      H
      a. Inventories                             xx           xx
      b. Sundry Debtors                          xx           xx
      c. Cash & Bank Balances                    xx           xx
      d. Loans & Advances                        xx    xx     xx    xx
Less: Current Liabilities & Provisions       I
      a. Liabilities                             xx           xx
      b. Provisions                              xx     xx    xx    xx
      Net Current Assets                               xxx          xxx
      Mis. Expenditure (to the extent not
      written off or adjusted)               J         xx           xx
      Notes to Accounts
      Total                                            xxx          xxx
  PROFIT & LOSS A/C for the year ended……… Current Yr. Previous Yr.
                                        Sch
INCOME                                   K
  a. Sales Less Returns                     xx         xx
  Less: Excise Duty                         xx         xx
  Net Sales                                      xx           xx
  b. Other Income                                xx           xx
  Total Income                                  xxx           xxx
EXPENDITURE
  Cost of Materials                     L    xx         xx
  Manufacturing Expenses                M    xx         xx
  Office & Administrative Expenses      N    xx         xx
  Selling & Distribution Expenses       O    xx         xx
  Financial Expenses                    P    xx         xx
  Miscellaneous expenses w/off               xx         xx
  Depreciation                               xx         xx
  Total Expenditure                               xxx         xxx
  PROFIT BEFORE TAX (PBT)                         xx          xx
  Provision for Taxation                          xx          xx
  PROFIT AFTER TAX (PAT)                          xx          xx
  Appropriations                                  xx          xx
  Proposed Dividend                               xx          xx
  General Reserve / Capital Reserve               xx          xx
  Balance Carried Over to B/S                      xx          xx
A. SHARE CAPITAL
      Authorised Capital
      Issued Capital
      Subscribed Capital
      Calls in Arrears

B. RESERVES & SURPLUS
      Capital Reserve
      Capital Redemption Reserve
      Profit & Loss A/c
      Debenture Redemption Reserve
      Sinking fund
      Insurance Fund
      Contingency Reserve
      Revaluation Reserve
      Profit Prior to Incorporation
      Premium on issue of debentures

C. SECURED LOANS
      Debentures
      Bonds & Loans
      Bank Overdraft
      Cash Credit
       Loans & Advances from Banks & Financial Institutions


D. UNSECURED LOANS
      Fixed Deposits
      Loans & advances from subsidiaries
      Short term loans & advances
      Other Loans & advances

F. FIXED ASSETS
      Goodwill
        Land & Building
        Railway Slidings
        Plant & Machinery, Furniture & Fittings
        Development of Property
        Patents, Trade Marks, Designs, Copyrights
        Live Stock, Vehicles
        Capital Work in Progress

G. INVESTMENTS
      Government & Trust Securities
      Shares, Debentures & Bonds
      Immovable Properties
      Investment in subsidiary companies
      Investment in capital of partnership firm

H. CURRENT ASSETS, LOANS & ADVANCES
   CURRENT ASSETS
      Accrued interest on investment
      Stores & spare parts
      Loose tools
      Stock of raw material/finished goods
      Sundry Debtors
      Cash in Hand
      Bank Balance

   LOANS & ADVANCES
      Loans & advances to subsidiaries
      Loans & advances to partnership firms
      Bills of Exchange
      Balance with Excise Authority
      Prepaid expenses
      Advance tax
      Advances to employees
      Advances to suppliers
      Security deposits with customers
I. CURRENT LIABILITIES & PROVISIONS
   CURRENT LIABILITIES
      Bills payable
      Sundry Creditors
      Outstanding expenses
      Advance Income
      Unclaimed dividends
      Interest accrued but not due
      Advances from customers
      Tax payable
      Tax Deducted at Source Payable

   PROVISIONS
      Provision for Income Tax
      Proposed Dividend
      Provision for gratuity & Pension
      Provision for contingencies
      Provision for corporate dividend tax

J. MIS. EXPD. (to the extent not w/off)
      Preliminary Expenses
      Brokerage on Issue of shares & debentures
      Underwritting commission on issue of shares
      Discount on issue of shares
      Development expenditure
      Deferred revenue expenditure

L. COST OF MATERIALS
      Purchase of Raw Material
      Carriage Inward
      Customs Duty
      Import of Raw Material
      Clearing & Forwarding Charges
      Dock Charges
M. MANUFACTURING EXPENSES
     Direct Labour
     Direct Expenses
     Factory Rent
     Factory Insurance
     Factory Electricity
     Power & Fuel
     Fuel & Oil
     Laboratory Expenses
     Depreciation on Plant & Machinery
     Depreciation on Factory Building
     Repairs & Maintenance of Factory
     Indirect Wages (Supervisor's Salary)
     Technical Director's Fees
     Royaltee
     Loose Tools Written off
     Factory Stationery
     Works Manager's Salary
     Store Keeper's Salary
     Factory Cleaning Expenses
     Other Factory Expenses

N. OFFICE & ADMINISTRATIVE EXPENSES
      Office Rent, Rates & Taxes
      Staff Salary
      Office Electricity
      Printing & Stationary
      Postage & Telegrams
      Office Conveyance
      Depreciation on Office Premises
      Depreciation on Office Equipments
      Repairs & Maintenance of Office
      Sundry Expenses
      Accountant's Salary
       Professional Charges
       Legal Charges
       Audit Fees

O. SELLING & DISTRIBUTION EXPENSES
      Advertising Expenses
      Showroom Expenses
      Travelling Expenses
      Commission on Sales
      Sales Manger's Salary
      Samples & Gifts
      Demonstration Expenses
      Packing Expenses
      Carriage Outward
      Rent of Warehouse
      Electricity Charges of Warehouse
      Depreciation on Delivery Van
      Expenses on Delivery Van
      Salaries of Packing Department
      Collection Charges

P. FINANCIAL EXPENSES
      Loss on sale of fixed assets
      Loss on sale of investments
       Compensation / damages paid as per the order by the Court
       Loss by fire,theft etc.
       Interest on loans, deposits, debentures etc.,
       Underwritting commission
       Share transfer expenses
       Fines & Penalties
       Expenses on issue of shares
   Name of Ratio                 Formula                                                   General Comments

   Solvency Ratios
1 Current Ratio                  Current Assets                                    2:1     Test of Short Term Solvency
                                 Current Liabilities

2 Liquid Ratio /                 Quick Assets *                                    1:1     Test of immediate solvency
  Quick Ratio /                  Quick Liabilities **
  Acid-test Ratio
                                 * CA-Stock-Prepaid Expenses
                                 ** CL-Bank Overdraft

3 Proprietory Ratio              Proprietor's Funds
                                 -------------------- x 100                  65% to 75% Test of long term solvency
                                 Total Assets *

                                 * CA + FA + Investments


   Capital Structure Ratios
4 Debt Equity Ratio              Debt                                        2:1           Capital Structure Analysis
                                 Equity                 OR                   2:3

                                 Debt                                        0.67:1
                                 Debt + Equity

5 Capital Gearing Ratio           Capital bearing fixed rate of return                      Ratio <1 Lowly geared
                                  Capital not bearing fixed rate of return                  Ratio = 1 Perfectly geared
   * In debt equity ratio pref.cap. is denominator and in cap gearing ratio it is numerator Ratio > 1 Highly geared


   Turnover / Efficiency Ratio
6 Stock / Inventory Turnover Cost of Sales                               5-6 times         Test of efficiency in
  Ratio                      Average Stock                                                 managemnt of stock
                             (in absence of average stock take closing stock)

7 Debtors Turnover Ratio        Credit Sales                                               Efficiency in management
                                (Debtors + Bills Receivables)                              of Accounts Receivables
   (Debtors always at gross without deducting RBD)

8 Debtors Velocity /             365 days / 52 weeks /12 months                            Average credit period granted
  Collection Period Ratio        Debtors Turnover                    OR                    to customer

                                 Debtors + Bills Receivable                                Higher turnover is better
                                 Credit Sales                        OR
                                                                                           Lower velocity is better
                                 Debtors + Bills Receivable                                up to certain level
                                 Average Daily Credit Sales

   Like debtors velocity, stock velocity can be calculated. It represents average period of holding the stock
9 Creditors Turnover Ratio      Credit Purchases                          Efficiency in managemnt of
                                (Creditors + Bills Payable)               accounts payable
                                * always average figures are taken

10 Creditors Velocity Ratio     365 days / 52 weeks /12 months            Average credit period
                                Creditors Turnover                        available from suppliers

   Velocity always in period & Turnover always in times

11 Fixed Assets Turnover Ratio Total Sales                                Efficiency in utilisation of
                               Fixed Assets                               Fixed Assets

12 Working capital Turnover     Total Sales                               Efficiency in use of
                                Working Capital                           Working capital


   Profitability Ratios
13 Gross Profit Ratio           Gross Profit                              Basic Profitability of
                                ------------- X 100                       the product
                                Net Sales

14 Operating Net Profit Ratio   Operating Net Profit                      Test of overall profitability
                                --------------------- X 100               vis-à-vis sales
                                Net Sales

15 Operating Ratio              Total Operating Cost *                    Test of overall profitability
                                --------------------- X 100               vis-à-vis sales
                                Net Sales

   * Cost of Sales + Other Operating Expenses

16 Material Consumption Ratio Materials Consumed                          Break-up of operating cost
                              --------------------- X 100
                              Net Sales

17 Conversion Cost Ratio        Direct Labour + Mfg. Overheads            Break-up of operating cost
                                --------------------------------- X 100
                                Net Sales

18 Admin Expense Ratio          Administrative Expenses                   Break-up of operating cost
                                --------------------- X 100
                                Net Sales

19 Selling & Dist Exp Ratio     Selling & Dist Exp                        Break-up of operating cost
                                --------------------- X 100
                                Net Sales

20 Financial Expenses Ratio     Financial Expenses                        Break-up of operating cost
                                --------------------- X 100
                                Net Sales
   Individual Expenses Ratio
   Salaries
   ---------- X 100
   Sales

   Advt.
   ------ X 100
   Sales


   Profitability vis-vis Funds Employed
21 Return on Investment           EBIT *                                                      Test of profitability vis-à-vis
   Ratio (ROI)                    ------------------ X 100                                    total funds
                                  Capital Employed

   * Interest does not represent operating efficiency. So interest is not taken in to account in the figure of profit
   EBIT = Operating Net Profit + Interest Expenditure

22 Return on                      Net Profit After Tax                                        Test of profitability vis-à-vis
   Proprietor's funds             ---------------------- X 100                                total funds
                                  Proprietor's Funds

23 Return on Equity               Net profit after tax & pref. dividend                       Test of profitability vis-à-vis
   Share Capital                  ----------------------------------- X 100                   equity share capital
                                  Equity share capital

   Equity Shareholders Fund = Equity Share Capital + Reserves & Surplus. If the ratio in on equity shareholders
   fund then in denominator it should be, Eq.Sh.Cap + Reserves & Surplus

24 Interest Coverage Ratio        EBIT                                         3 to 4 times Safety from the point of view
                                  Interest Expenditure                                      of lenders

25 Debt Service                   Earnings available for debt services *                Capacity to pay interest &
   Coverage Ratio                 Interest + Installments                               principal from existing
                                                                                        profits is tested
   * NP + Non cash operating expenses + amortisations & write off + Interest on debt fund

26 Stock to Working               Closing Stock                                        100% Ratio < Extent of stock
   Capital Ratio                  ---------------------- X 100                              blocking the working capital
                                  Working Capital

27 Absolute Cash Ratio            Cash Reservoir *                                            Liquidity position in absolute
                                  Current Liabilities                                         terms is tested

   * Cash + Bank + non trade marketable securities

28 Cash position to               Cash Reservoir                                              The extent of cash in the
   Total Assets Ratio             ---------------- X 100                                      total assets
                                  Total Assets
29 Interval Measure            Cash Reservoir                    No. of days for which
                               Avg. daily cash expenses *        cash will last

   * Avg. daily cash expense = (NP - Non cash expenses) / 365

30 EPS (Earning per share)     NPAT & Pref. Dividend             Profit earning on per
                               No. of issued equity shares       share basis

31 DPE (Dividend per share)    Total Dividend                    Earning per share from
                               No. of issued equity shares       shareholders point of view

32 Dividend pay out            Dividend per share                The % of distribution &
                               ------------------- X 100         retention of profits
                               EPS

33 Yield for shareholders      DPS                               The expectation of
                               -------------------- ---- X 100   shareholder is compared
                               Market price per share            with this ratio to find the
                                                                 adequacy of return

				
DOCUMENT INFO
Description: A very nice and elaborate, practically functional and workable excel sheet. Students will find it lot helpful as all they have to do is put values in the sheet to get the calculations done. Also serves as a template. Have ready to use formats for Balance Sheet, Profit and Loss Account, and Full range Ratio Analysis and different types of ratios with formulas for ease of use and calculation. Teachers can have this as an asset in order to check any work. Similarly the use of this document for both students and teachers is immense.