Philips Ltd Balance Sheet as on 31st December 2020, 2019 and 2018 were as follows: Liabilities 2020 2019 2018 Assets 2020 2019 2018 Rs Rs Rs Rs Rs Rs Share Capital 300,000 300,000 300,000 Fixed Assets 400,000 360,000 280,000 General Reserve 200,000 140,000 100,000 Stock 160,000 150,000 135,000 Secured Loan 160,000 180,000 140,000 Debtors 200,000 160,000 140,000 Sundry Creditors 160,000 90,000 45,000 Investments 100,000 80,000 60,000 Accruals 60,000 60,000 50,000 Cash & Bank 20,000 20,000 20,000 880,000 770,000 635,000 880,000 770,000 635,000 Summarised Income Statement for the year ended 31st December: 2020 2019 2018 Rs Rs Rs Sales 4,000,000 3,600,000 3,000,000 Cost of Sales 2,800,000 2,400,000 2,000,000 Operating Expenses 900,000 800,000 700,000 Interest Expense 16,000 18,000 14,000 Tax Expense 25% 33% 40% Prepare analytical Common Size financial statements and comment on Short Term Solvency, Long Term Solvency and Profitability of the company.?
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Philips Ltd Balance Sheet as on 31st December 2020, 2019 and 2018 were as follows:
|
Liabilities |
2020 |
2019 |
2018 |
Assets |
2020 |
2019 |
2018 |
|
|
Rs |
Rs |
Rs |
|
Rs |
Rs |
Rs |
|
Share Capital |
300,000 |
300,000 |
300,000 |
Fixed Assets |
400,000 |
360,000 |
280,000 |
|
General Reserve |
200,000 |
140,000 |
100,000 |
Stock |
160,000 |
150,000 |
135,000 |
|
Secured Loan |
160,000 |
180,000 |
140,000 |
Debtors |
200,000 |
160,000 |
140,000 |
|
Sundry Creditors |
160,000 |
90,000 |
45,000 |
Investments |
100,000 |
80,000 |
60,000 |
|
Accruals |
60,000 |
60,000 |
50,000 |
Cash & Bank |
20,000 |
20,000 |
20,000 |
|
|
880,000 |
770,000 |
635,000 |
|
880,000 |
770,000 |
635,000 |
Summarised Income Statement for the year ended 31st December:
|
|
2020 |
2019 |
2018 |
|
Rs |
Rs |
Rs |
|
|
Sales |
4,000,000 |
3,600,000 |
3,000,000 |
|
Cost of Sales |
2,800,000 |
2,400,000 |
2,000,000 |
|
Operating Expenses |
900,000 |
800,000 |
700,000 |
|
Interest Expense |
16,000 |
18,000 |
14,000 |
|
Tax Expense |
25% |
33% |
40% |
Prepare analytical Common Size financial statements and comment on Short Term Solvency, Long Term Solvency and Profitability of the company.?
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