Financial Accounting and Analysis Assignment

Financial Accounting and Analysis Assignment

Question (1):

Solutions:

Given,
Cost of machine = Rs 15 lacs
Scrap value of machine = Rs 8 lacs
Machine’s estimated useful life = 4 years
Depreciation Rate = 20%.

The WDV of the asset for the four years is:

write down value (WDV):

The write down value (WDV), is the "net book value of an asset computed by deducting the accumulated depreciation from the value shown in the account books.

Depreciation:

Depreciation is defined as the reduction of recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible.


Rate of depreciation:

Depreciation Rate is used by the company for calculation of depreciation on the assets owned by them and depends on the rates issued by the Income-tax department.

Annual Depreciation = (Cost of Asset – Net Scrap Value)/Useful Life

Rate of depreciation = 1 - (8/15)^(1/4) = 0.145.

Accumulated depreciation:

Accumulated depreciation is the total amount an asset has been depreciated up until a single point. Each period, the depreciation expense recorded in that period is added to the beginning accumulated depreciation balance.

Accumulated depreciation for four years was: 15×0.2×4 = 12.

Profit on sale is 12 - 8 = 4.


Question (2):

Solutions:

Accounting steps in order to prepare the financial statements:

(1) Examine transactions by analysing the source document

Source documents are typically retained for use as evidence when auditors later review a company's financial statements, and need to verify that transactions have, in fact, occurred.

They usually contain the following information:

(a) A description of a business transaction

(b) The date of the transaction

(c) A specific amount of money

(d) An authorizing signature

(2) Records transactions in the journal

All accounting transactions are recorded through journal entries that show account names, amounts, and whether those accounts are recorded in debit or credit side of accounts.

(3) Post record entries to the ledger account

After journal entries are made, the next step in the accounting cycle is to post the journal entries into the ledger. Posting refers to the process of transferring entries in the journal into the accounts in the ledger. Posting to the ledger is the classifying phase of accounting.

(4) Complete the worksheet by preparing the account balance

Accounting worksheets are most often used in the accounting cycle process to draft an unadjusted trial balance, adjusting journal entries, adjusted trial balance, and financial statements.

8 Steps of Preparing Accounting Worksheet

Name of business organization and preparation date.
Drawing column and mentioning the head of the column.
Unadjusted Trial Balance.
Adjustment column.
Adjusted trial balance column.
Income statement column.
Retained earnings statement.
Balance sheet.

(5) Prepare the financial statement

The preparation of financial statements involves the process of aggregating accounting information into a standardized set of financials.

(6) Record and post the adjusting entry

Adjusting entries are made in your accounting journals at the end of an accounting period after a trial balance is prepared. The purpose of adjusting entries is to adjust revenues and expenses to the accounting period in which they occurred.

(7) Record and post the closing entry

The closing entries are the journal entry form of the Statement of Retained Earnings. The goal is to make the posted balance of the retained earnings account match what we reported on the statement of retained earnings and start the next period with a zero balance for all temporary accounts.

(8) Prepare the final balance sheet

Preparing the final accounts is the last stage of the accounting cycle. They help in determining the financial position of the business at the end of the financial as well as the accounting year. These include Trading account, Profit and loss account, and Balance sheet.

Question (3):

Solution:

Given,

Profit before taxes = Rs 50 lakhs

Dividend declared per share = Rs2

Price of the share prevalent on stock exchange = Rs 200

Applicable tax rate = 35%

Share capital of company 5 lakh shares of Rs 10 each

Calculate-
Earnings per share
Dividend Pay-out Ratio
Price earnings ratio

Calculation:

Earnings per share = Profit/Share capital,

EPS= 50 × (1−0.35) lakhs / 5 lakhs = 6.5.

Dividend Pay-out Ratio = Dividend per share/Earnings per share,

DPratio = 6.5/2 = 0.31

Price earnings ratio = Price per share/Earnings per share,


PEratio = 200/6.5 = 30.77

Question 3 (b):

Solution:

Given,

Plant acquired = 160000
Claim received for loss of plant in fire = 45500
Unsecured loans given to subsidiaries = 595000
Interest on loan received from subsidiary companies = 72500


Cash flow statement from investing activities of Alpha Creative Ltd for the year ended March31, 2019



Plant acquired (160,000)

Unsecured loans given to subsidiaries (595,000)

Interest on loan received from subsidiary companies 72,500



Net cash from investing activities (682,500)

NOTES

Alpha Creative Ltd had cash outflows for Acquisition of Plant and Loans to subsidaries, and cash inflow from Interest of loan.

Item "Claim received for loss of plant in fire" is not cash flow.


Reference: Ques Answer




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