Description

Financial Accounting & Analysis

April 2025 Examination

 

 

Q1. Prepare final accounts from the following balances –

Trial Balance as on 31.03.2024

 

Addition information:

• The closing inventory as on 31.03.2024 was valued at Rs. 3,68,500.

 

• Depreciation on plant @ 15% and on Building @ 10%.
• Outstanding printing and stationery expense Rs. 5000.
• Prepaid advertisement expense Rs. 15000.     (10 Marks)

 

Ans 1.

Introduction

The preparation of final accounts is a critical process in financial accounting, where the financial position and performance of a business are summarized. These statements include the Trading and Profit & Loss Account and the Balance Sheet. Final accounts help stakeholders assess profitability, operational efficiency, and financial stability. The trial balance serves as the foundation for this process. Adjustments, such as depreciation, outstanding expenses, and closing inventory, ensure the accounts reflect the true and fair view of the financial position. This task involves the application of accounting principles like the accrual concept and matching principle. In this problem, we will analyze the trial balance and incorporate the adjustments to prepare the Trading, Profit & Loss Account, and Balance Sheet as of March 31,

 

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Q2. Raj Limited  provides  the following  information  for the immediately  preceding  two years.  From the given information  prepare Comparative  Income Statement of the company

for the two- year period:  (10 Marks)

 

Particulars	2023	2024
	Rs. Million	Rs. Million
Sales	5,000	3,750
Cost of goods sold	3,000	2,450
Operating expenses	750	490
Financial expenses	500	340
Income tax	150	95
Net profit	600	375

 

Ans 2.

Introduction

A Comparative Income Statement is a key tool in financial analysis that enables the comparison of a company’s financial performance over two or more periods. It highlights changes in revenue, expenses, and profitability, providing insights into the company’s growth trends, efficiency, and areas of improvement. By showing both absolute and percentage changes, a comparative income statement makes it easier for stakeholders to understand how various income statement elements have evolved. In this exercise, we analyze Raj Limited’s income statement for 2023 and 2024 to assess its performance, identifying key trends and underlying causes for any changes in profitability. This analysis uses critical accounting

 

 

Q3(a). Dividend is the distribution of profits by a company to its shareholders. Companies generally pay two types of dividends: Interim dividend and Final dividend. You are required to explain the term Dividend and explain the two types of dividends.

 (5 Marks)

Ans 3a.

Introduction

A dividend is the portion of a company’s profits distributed to its shareholders as a reward for their investment in the company. It reflects a company’s financial health, profitability, and commitment to providing returns to shareholders. Dividends can be paid in cash, shares, or other forms and are usually declared by the company’s board of directors. There are primarily two types of dividends: interim dividend and final dividend. These distributions not only signal a company’s performance but also contribute to shareholder satisfaction and market

 

 

Q3(b). In order to take management decisions for a company, it is important to analyze the financial statements of the company in detail with the help of various financial analysis  techniques.  Explain  in  one  sentence  each  the  5  techniques  of  analyzing financial statements.      (5 Marks)

Ans 3b.

Introduction

Financial statement analysis is the process of evaluating a company’s financial data to assess its performance, financial health, and decision-making efficiency. It enables management, investors, and other stakeholders to make informed decisions. Various techniques, including ratio analysis, comparative analysis, common-size analysis, trend analysis, and cash flow