FINANCIAL ACCOUNTING FOR

MANAGEMENT (FAM)

PROF. (DR.) RANJAN DASGUPTA

(101)(120)(125)

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 References:
1) Class discussions and handouts.

2) Accounting Text and Cases by

Robert Anthony, David Hawkins and
Kenneth Merchant (AHM), 13th Edition,
McGraw Hill Edu.

3) Financial Accounting: A Managerial

Perspective by Narayanaswamy, R., 6th
Edition, PHI Learning.
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 Evaluation:
1. Tests (2*10): 20 marks
2. Mid-term Exam.: 20 marks
3. Class Performance: 10 marks
4. Group Activity/Presentation: 10 marks
5. End-term Exam.: 40 marks
Total 100 marks

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Learning roadmap of the course:

INTRODUCTION to PREPARATION
FINANCIAL & ANALYSIS &
ACCOUNTING PRESENTATION INTERPRETATION
(Induction of Financial (Session 20-23)
– Session 1-4) Statements [FS]

1) Balance sheet [BS] (Session 5-7) Concepts-in-depth

2) Income statement [IS]
(Session 8-10) 1) Revenue recognition (Session 12)
1) Cash flow statement [CFS] 2) Inventory valuation (Session 13)
(Session 16-18) 3) Depreciation (Session 14-15)

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 Quiz 8 - (56)(64)
The amount of assets and liabilities in the
balance sheet of S Ltd. as on March 31st,
2015 was Rs.1,00,00,000 and Rs.40,00,000
respectively. What is the amount of equity in
the balance sheet?
1. Rs.60,00,000.
2. Rs.6,00,000.
3. Rs.1,40,00,000.
4. None of the above.

Ans.1
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 Quiz 9 - (55)(64)(90)
A company has an obligation due in 2017.
On the balance sheet of 2014-15, the
obligation should be classified as:
1. A current asset.
2. A current liability.
3. A long-term debt.
4. None of the above.

Ans.3

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 ELEMENTS OF FINANCIAL
STATEMENTS – IS:

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 (65)(68)(55)
(56)(64)(62)

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Income & Expenses: (58)(68)(90)
(a) Income is increase in economic benefits
during the accounting period in the form of
inflows or enhancements of assets or
decreases of liabilities that result in
increases in equity, other than those
relating to contributions from equity
participants.
(b) Expenses are decreases in economic
benefits during the accounting period in the
form of outflows or depletions of assets or
incurrences of liabilities that result in
decreases in equity, other than those
relating to distributions to equity
participants.
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 INCOME:(58)(68)(90)
The definition of income encompasses both
revenue and gains.
❖ Revenue arises in the course of the
ordinary activities of an enterprise and is
referred to by a variety of different names
including sales, fees, interest, dividends,
royalties and rent.
❖ Gains represent other items that meet the
definition of income and may, or may not,
arise in the course of the ordinary
activities of an enterprise, e.g., those
arising on the disposal of fixed assets.
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 EXPENSES:(58)(68)(90)
The definition of expenses encompasses
those expenses that arise in the course of the
ordinary activities of the enterprise, as well
as losses.
❑ Expenses that arise in the course of the
ordinary activities of the enterprise
include, e.g., cost of goods sold, wages,
and depreciation.
❑ Losses represent other items that meet the
definition of expenses and may, or may
not, arise in the course of the ordinary
activities of the enterprise, e.g., those
arising on the disposal
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of fixed assets. 11
GIM-FAM Prof. Ranjan Dasgupta
So, NET INCOME is:(58)(68)(90)
(55)(56)(64)
Revenues – Expenses - Taxes

Revenues – Cost of sales/COGS

= Gross Margin

Gross Margin – Operating/Period

Expenses = EBIT
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 Quiz 10:
Capital increases if ______ increases:
a) Expenses.
b) Drawings.
c) Interest on capital.
d) Revenue.

Ans.d

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 Quiz 11:(90)
Suppose you have a PPE value post
depreciation Rs.1,25,000, which you
have sold in Rs.1,10,000. Which of the
above statements is true:
1. You have incurred an expense of
Rs.15,000.
2. You have had a loss of Rs.15,000.
3. You have earned Rs.1,10,000.
4. None of the above.
Ans.2
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 ELEMENTS OF FINANCIAL
STATEMENTS – Statement of
Changes in Equity:

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 ELEMENTS OF FINANCIAL
STATEMENTS – CFS:

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 (55)(56)(64)

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 (90) )(55)
(56)(64)

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 Notes to the Financial
Statements -

Notes help financial statements

users understand how the
amounts were derived and what
other information may affect
their decisions.
 Capital Maintenance
Adjustments:
The revaluation or restatement of assets and
liabilities gives rise to increases or decreases
in equity. While these increases or decreases
meet the definition of income and expenses,
they are not included in the statement of
profit and loss under certain concepts of
capital maintenance. Instead, these items
are included in equity as capital
maintenance adjustments or revaluation
reserves. For example, financial and
physical capital maintenance.
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Interrelationships between
Financial Statements:

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 Financial Statements –
Income (55)(56)(64)
Statement/ Financial
Statement of Statements are
Profit and Loss typically prepared
Statement of
in this order.
Retained
Earnings/
Statement of
Changes in Equity
Balance
Sheet
Statement
Notes to
Accounts
of Cash
Flows
The Income Statement/ Statement of
Profit and Loss -
PIZZA HUT Pvt. Ltd.
Income Statement/Statement of Profit and Loss The unit of
For the Quarter Ended September 30, 2014 Reports
measurethe
Revenues
Revenue from Operations Rs. 11,000 assumption
amount of
Total Revenue Rs. 11,000 states that
revenues
Expenses results
less of
Cost of Materials Consumed 4,000 business
expenses
Wages Expense 2,000 activities
Rent Expense 1,500 for a period
should be
Electricity Expense 600
Insurance Expense 300
of time.
reported in an
Advertising Expense 100 appropriate
Income Tax Expense 500
monetary
Total Expenses 9,000
Net Income Rs. 2,000 unit.
 ASSIGNMENT 1 - Preparing an Income
Statement and Inferring Missing Values:

PVR Entertainment Group operates movie theaters and food

concession counters throughout India. Its income statement
for the quarter ended June 30, 2014, reported the following
amounts (in '000):
Admissions Revenues Rs.455700 Net Income ?
Concessions Expenses 25,500 Other Expenses 233,800
Concessions Revenues 188,900 Other Revenues 31,200
Film Rental Expenses 247,000 Rent Expense 90,000
Gen. & Admin. Expenses 65,700 Total Expenses ?

Required:
1. Solve for the missing amounts and prepare an Income
Statement for the quarter ended June 30, 2014.
2. What is PVR’s main source of revenue and biggest expense?
Solution: Preparing the Income Statement and
Inferring Missing Values -
PVR ENTERTAINMENT GROUP
Income Statement
For the Quarter Ended June 30, 2014
(in '000)
Revenues
Admissions Revenues Rs.4,55,700
Concessions Revenues 1,88,900
Other Revenues 31,200
Total Revenues Rs.6,75,800

Expenses
Concessions Expenses 25,500
Film Rental Expenses 2,47,000
General and Administrative Expenses 65,700
Rent Expense 90,000
Other Expenses 2,33,800
Total Expenses Rs.6,62,000
?

Net Income Rs.13,800

?
The Statement of Retained Earnings -
Smitha Ltd.:PIZZA
Statement
HUT of Changes
Pvt. Ltd. in Equity
For the year ended March 31 st, 2015
Statement of Retained Earnings
Equity
Forbalance as on April
the Quarter Ended1st,September
2014 Rs.50,00,000
30, 2014
Equity shares issued and paid up 30,00,000
Retained
during theEarnings
year July 1, 2014 Rs. Nil
Net
Add:Profit
Netfor the period
Income 10,00,000
2,000
Dividend
Subtract:forDividends
the year (2,00,000)
(1,000)
Retained Earnings Sept. 30, 2014 Rs. 1,000
Rs.88,00,000
Equity balance as on March 31st, 2015

Reports the way that net income and the

Reports how the opening equity balance changes with
distribution of dividends affected the
new issuance, net profit and dividend distribution
financial
andposition
show the of the company
closing during the
equity balance
period.
 ASSIGNMENT 2 -

On the basis of the data given below, prepare a

Statement of Retained Earnings for 2013 (its
first year of operations) and 2014. Show
computations. Net Income for 2013 Rs.36,000
Net Income for 2014 45,000
Dividends for 2013 15,000
Dividends for 2014 20,000
Total assets at the end 1,25,000
of 2013
Total assets at the end 2,42,000
of 2014
Solution - Statement of Retained
Earnings:

Statement of Retained Earnings

For the Year Ended December 31, 2013
Retained Earnings, January 1, 2013 Rs. Nil
Add: Net Income 36,000
Subtract: Dividends (15,000)
Retained Earnings December 31, 2013 Rs.21,000

Statement of Retained Earnings

For the Year Ended December 31, 2014
Retained Earnings, January 1, 2014 Rs.21,000
Add: Net Income 45,000
Subtract: Dividends (20,000)
Retained Earnings December 31, 2014 Rs.46,000
 The Balance Sheet -
Reports at a point in PIZZA HUT Pvt. Ltd.
Balance Sheet
time: as at September 30, 2014
Assets
1. What a business owns Cash
Accounts Receivable
Rs.14,000
1,000
(assets). Inventory 3,000
Equipment 40,000
2. What it owes to Total Assets Rs.58,000

creditors (liabilities). Liabilities

Accounts Payable Rs. 7,000
3. What is left over for Short-term Loans
Total Liabilities
20,000
Rs.27,000
the owners of the Stockholders'/Shareholders' Equity
company’s stock Contributed Capital Rs.30,000
Retained Earnings 1,000
(stockholders’/ Total Stockholders'/Shareholders' Equity Rs.31,000
shareholders’ equity). Total Liabilities and Stockholders' Equity Rs.58,000

BASIC ACCOUNTING EQUATION

Assets = Stockholders’/Shareholders’ Equity
+ Liabilities
 ASSIGNMENT 3 -

J.M.Weston is a designer shoe warehouse, selling some of the

most luxurious and fashionable shoes at prices that people
can actually afford. Its balance sheet, as at January 1, 2015,
contained the following items (in '000).
Accounts Receivable 11,888
Cash 45,570
Contributed Capital 291,248
Short-term Loans 99,044
Other Assets 494,294
Other Liabilities 79,148
Property, Plant and Equipment 233,631
Retained Earnings 179,538
Total Assets 785,383
Total Liabilities & Stockholders' Equity ?
Required:
1. Prepare the balance sheet as at January 1, 2015 solving
for the missing amount.
2. As of January 1, did most of the financing for assets come
from creditors or stockholders/shareholders?
 Solution: Preparation of the Balance Sheet -
J.M.Weston
Balance Sheet as at January 1, 2015
(in '000) Most of the financing
Assets as of January 1,
Cash Rs. 45,570
2015 came from
Accounts Receivable 11,888
Property, Plant, and Equipment 2,33,631 stockholders/
Other Assets 4,94,294 shareholders. The
Total Assets Rs.7,85,383
stockholders have
Liabilities
financed Rs.4,70,786
Accounts Payable Rs.1,36,405 of the total assets
Short-term Loans 99,044
and creditors have
Other Liabilities 79,148
Total Liabilities Rs.3,14,597
financed only
Stockholders’/Shareholders’ Equity Rs.3,14,597 of the
Contributed Capital 2,91,248
total assets of the
Retained Earnings 1,79,538
Total Stockholders’ Equity 4,70,786
company.
Total Liabilities and Stockholders’/ Rs.7,85,383
Shareholders’ Equity
 The Statement of Cash Flows -
PIZZA HUT Pvt. Ltd. Summarizes
Statement of Cash Flows
For the Quarter Ended September 30, 2014
how a
Cash Flows from Operating Activities business’s
operating,
Cash collected from customers Rs. 10,000
Cash paid to suppliers and employees (5,000)
Cash Provided by Operating Activities
Cash Flows from Investing Activities
Rs. 5,000 investing and
Cash paid to buy equipment (40,000) financing
Cash Used in Investing Activities
Cash Flows from Financing Activities
Rs.(40,000)
activities
Capital contributed by stockholders/shareholders 30,000 caused its cash
Cash dividends paid to stockholders (1,000)
Cash borrowed from the bank 20,000 balance to
Cash Provided by Financing Activities
Change in Cash
Rs. 49,000
Rs. 14,000
change over a
Beginning Cash Balance July 1, 2014 - particular
Ending Cash Balance Sept. 30, 2014 Rs. 14,000
period of time.
 Relationships Among the Financial Statements -
PIZZA HUT Pvt. Ltd. (55)(56)(64)
Income Statement/Statement of Profit and Loss
For the Quarter Ended September 30, 2014
Revenues
Revenue from Operations Rs.11,000
Total Revenue
Expenses
Rs.11,000 1 Net income
Cost of Materials Consumed
Wages Expense
4,000
2,000
flows from
Rent Expense
Electricity Expense
1,500
600 the Income
Statement to
Insurance Expense 300
Advertising Expense 100
Income Tax Expense 500
Total Expenses
Net Income
9,000
Rs.2,000
the
Statement of
Retained
PIZZA HUT Pvt. Ltd.
Statement of Retained Earnings

Earnings.
For the Quarter Ended September 30, 2014
Retained Earnings July 1, 2014 Rs. Nil
Add: Net Income 2,000
Subtract: Dividends (1,000)
Retained Earnings Sept. 30, 2014 Rs.1,000
 Relationships Among the Financial Statements -
(55)(56)(64)
PIZZA HUT Pvt. Ltd.
2 Ending Retained Balance Sheet
as at September 30, 2014
Earnings flows from Assets
Cash Rs.14,000

the Statement of Accounts Receivable

Inventory
1,000
3,000

Retained Earnings Equipment

Total Assets
40,000
Rs.58,000

to the Balance Liabilities

Accounts Payable Rs. 7,000
Sheet. Short-term Loans
Total Liabilities
20,000
Rs.27,000
Stockholders'/Shareholders' Equity
Contributed Capital 30,000
Retained Earnings 1,000
Total Stockholders'/Shareholders' Equity Rs.31,000
PIZZA HUT Pvt. Ltd.
Total Liabilities and Stockholders' Equity Rs.58,000
Statement of Retained Earnings
For the Quarter Ended September 30, 2014
Retained Earnings July 1, 2014 Rs. Nil
Add: Net Income 2,000
Subtract: Dividends (1,000)
Retained Earnings Sept. 30, 2014 Rs.1,000
 Relationships Among the Financial Statements -
(55)(56)(64)
PIZZA HUT Pvt. Ltd. PIZZA HUT Pvt. Ltd.
Statement of Cash Flows Balance Sheet
For the Quarter Ended September 30, 2014 as at September 30, 2014
Cash Flows from Operating Activities Assets
Cash collected from customers Rs.10,000 Cash Rs.14,000
Cash paid to suppliers and employees (5,000) Accounts Receivable 1,000
Cash Provided by Operating Activities 5,000 Inventory 3,000
Cash Flows from Investing Activities Equipment 40,000
Total Assets Rs.58,000
Cash paid to buy equipment (40,000)
Cash Used in Investing Activities (40,000) Liabilities
Cash Flows from Financing Activities Accounts Payable Rs. 7,000
Capital contributed by stockholders 30,000 Short-term Loans 20,000
Cash dividends paid to stockholders (1,000) Total Liabilities Rs.27,000
Cash borrowed from the bank 20,000 Stockholders'/Shareholders' Equity
Cash Provided by Financing Activities 49,000 Contributed Capital 30,000
Change in Cash Rs.14,000 Retained Earnings 1,000
Beginning Cash Balance July 1, 2014 - Total Stockholders'/Shareholders' Equity Rs.31,000
Ending Cash Balance Sept. 30, 2014 Rs.14,000 Total Liabilities and Stockholders' Equity Rs.58,000

3 Cash on the Balance Sheet and Cash at End

of Year on the Statement of Cash Flows agree.
Using Financial Statements -
Creditors Investors
(1)Is the company (1)What immediate
generating return (through
enough cash to dividends) on my
make payments contributions?… SRE
on its loans? … SCF
(2)What is the long-
(2)Does the term return
company have (through stock price
enough assets to increases resulting
cover its from the company’s
liabilities? … B/S profits)? .. I/S
ASSIGNMENT 4: Critical Thinking - Developing
a Balance Sheet:
On September 30, Ashok and Joy started arguing about who
is better off. Joy said he was better off because he owned a
Play Station that he bought last year for Rs.350. He figures
that, if needed, he could sell it to a friend for Rs.280. Ashok
argued that he was better off because he had Rs.1,000 cash
in his SBI Account and a vintage car that he bought two
years ago for Rs.800 but could now sell for Rs.1,400. Joy
countered that Ashok still owed Rs.250 on his car loan and
that Joy’s dad promised to buy him a Scorpio if he does
really well in his accounting class. Joy said he had Rs.6,000
cash in his bank account right now because he just received a
Rs.4,800 student loan. Ashok knows that Joy also owes a
tuition installment of Rs.800 for this term.
Required:
1. Prepare a financial report that compares what Ashok and
Joy each own and owe on September 30. Make a list of any
decisions you had to make when preparing your report.
Solution: Critical Thinking - Developing a Balance Sheet:

Balance Sheet
Ashok Joy
ASSETS
What is owned
Cash Rs.1,000 Rs.6,000
Play Station -0- 350
Car 800 -0-
TOTAL Rs.1,800 Rs.6,350
What is owed
LIABILITIES
Car loan Rs.250 Rs.-0-
Tuition Payable -0- 800
Student Loan -0- 4,800
TOTAL 250 5,600
“Net worth”
EQUITY 1,550 750
TOTAL Rs.1,800 Rs.6,350
 Session 3 & 4:

Transaction Analysis [TA] & Its

Impact on the BS:

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 Learning Roadmap
❑ How to recognise, measure and
analyse transactions?
❑ How the transactions impact the
fundamental accounting equation
[through BS]?

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 Few points to remember:
❑ Inventory/Stock vs. Asset (based on
the nature of business)
❑ Nature of the transaction (cash/
credit)
❑ Nature of the transaction (capital/
revenue/ deferred revenue)
❑ Use of office inventory/ stock/ cash/
fund etc. for office/ personal uses
❑ Cash basis vs Accrual basis

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 Analyzing Transactions -
The process of identifying the specific effects
of economic events on the accounting equation.

Basic Accounting Equation -

Resources Owned . . . Resources Owed . . .
by the company to Shareholders to Creditors

Shareholders’
Assets = + Liabilities
Equity
Depicts Separate Entity Assumption
Requires that a business’s financial reports include only
the activities of the business and not those of its
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shareholders.
GIM-FAM Prof. Ranjan Dasgupta 43
Expanded Accounting Equation -
Shareholders’
Assets = + Liabilities
Equity

Retained
Equity Stock +
Earnings

Revenues - Expenses - Dividends

Revenues - Expenses + Gains - Losses - Dividends

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 Dividends -

Distributions of a
company’s earnings to its
shareholders as a return
on their investment.

Shareholders’

Dividends are not an expense.

 Understanding Transaction
Analysis and its impact on the
BS - Practical:

Problem 1 -

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 During the month of June 2018, Bon
Voyage Travel recorded the following
transactions: (99)
1) Owners invested Rs.25,000 in cash
to start the business. They received
equity.
2) The month’s rent of Rs.500 is
prepaid in cash.
3) Equipment costing Rs.8,000 is
bought on credit.
4) Rs.500 is paid for office supplies/
inventory.
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5) Advertising costing Rs.750 is paid for
with cash. (99)(101)(120)(125)
6) Paid Rs.3,000 employee salaries in
cash.
7) Earned travel commission of
Rs.10,000 of which Rs.2,000 is
received in cash.
8) Paid Rs.5,000 of the Rs.8,000 owed to
the equipment supplier.
9) Used Rs.100 of the office supplies.
10) Charged Rs.1,000 of miscellaneous
expenses on the corporate credit card.
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You are required to:(101)(120)(125)(97)(98)
(a) Prepare an analysis of the month’s
transactions using the same tabular
format as known.
(b) Explain how the transactions during the
month changed the basic accounting
equation (A = C + L) for the company.
(c) Prepare an IS for the month (ignore
taxes).
(d) Explain the changes in Cash Statement/
Account.
(e) Explain why the change in the Cash
Statement/ Account and the month’s
income are not the same.
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 Solution:(101)(120)(125)

SEE EXCEL SHEET

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 Understanding Transaction
Analysis and its impact on the
BS - Practical:

Problem 3 -

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An analysis of the transactions made by Acme
Consulting for the month of June 2018 is
shown below: (in Rs.)
Tran Cash + Accts. + Suppl. + Equip. = Accts. + Share. Descr.
No. Recei. Inven. Payab. Equity of Tran
1 +20,000 +20,000 Investment

2 -5,000 +7,000 +2,000

3 -1,000 +1,000

4 -4,500 -4,500 Salaries

5 +5,000 +5,000 +10,000 Revenues

6 -1,500 -1,500

7 +1,000 -1,000

8 -750 -750 Rent

9 -500 -500 Electricity

10 +200 -200 Travel

11 -200 -200
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You are required to:
(a)Explain each transaction.
(b) List the changes in the company’s
BS during the month of June 2018.
(c) Prepare an IS for the month of June
(ignore taxes).
(d) Explain the changes in the Cash
Statement/Account.
(e) Explain why the change in the Cash
Statement/Account and the month’s
income are not the same.
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1) Owners invest
Solution (a):
Rs.20,000 of equity capital in Acme
Consulting.
2) Equipment costing Rs.7,000 is purchased for
Rs.5,000 cash and an account payable of Rs.2,000.
3) Supplies inventory costing Rs.1,000 is bought for
cash.
4) Salaries of Rs.4,500 are paid in cash.
5) Revenues of Rs.10,000 are earned, of which
Rs.5,000 has been recovered in cash. The
remaining Rs.5,000 is owed to the company by its
customers.
6) Accounts payable of Rs.1,500 are paid in cash.
7) Customers pay Rs.1,000 of the Rs.5,000 they owe
the company.
8) Rent Expense of Rs.750 is paid in cash.
9) Utilities of Rs.500 are paid in cash.
10)A Rs.200 travel expense has been incurred but not
yet paid.
11)Supplies
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costing Rs.200 are consumed.54
Prof. Ranjan Dasgupta
 Solution (b):
ACME CONSULTING
BALANCE SHEET AS AT JUNE 30 2018
Shareholders’ Equity Rs. Assets Rs.
and Liabilities
Shareholders’ 23,850 Equipment 7,000
Equity
Current assets: 12,750
Current liabilities: 700 Cash
Accounts
payable Accounts 4,000
receivable

Supplies 800
inventory
Total Shareholders’
Equity and Liabilities Rs.24,550
Total Assets Rs.24,550
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 Solution (c):
ACME CONSULTING
INCOME STATEMENT JUNE 30 2018
Revenues Rs.10,000

Expenses:
Salaries 4,500

Rent 750

Utilities 500

Travel 200

Supplies 200
6,150
Net Rs. 3,850
Income

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 Solution (d):
ACME CONSULTING
CASH STATEMENT JUNE 2018
Receipts Disbursements
Equipment
Owners’
purchase Rs.5,000
investment Rs.20,000
Supplies
purchase 1,000
Salaries paid
Cash 4,500
sales 5,000 Payments to
vendors 1,500
Rent paid
Collection of 750
accounts 1,000 Utilities paid
receivable 500
Total
disbursements Rs.13,250
Total
receipts Rs.26,000 Increase in
cash/Surplus Rs.12,750

Total
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Rs.26,000
 Solution (e):

The change in this cash account

includes the owners’ investment,
which is not an income statement
item. The income statement includes
revenues and expenses that have not
yet been received in cash or paid in
cash. The cash paid to purchase the
equipment is not reflected in the
income statement.

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 Understanding Transaction
Analysis and its impact on the
BS - Practical:

Problem 4 -

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After 8 months of operations, Channel
Video Company had the following
account balances as on August 31
2018 – Cash – Rs.5,000; Trade
receivables – Rs.10,000; Equipment –
Rs.11,700; DVDs – Rs.36,000; Trade
payables – Rs.7,000; Share capital –
Rs.25,000; Retained earnings –
Rs.30,700.

The following transactions took place

in September 2018:
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(a)Collected from customers billed in
August Rs.4,000.
(b) Paid amounts due on August 31.
(c) Took a bank loan – Rs.10,000.
(d) Paid assistant’s salary Rs.600.
(e) Bought DVDs for cash Rs.5,000.
(f) Bought equipment on credit
Rs.20,000.
(g) Received DVD hire charges
Rs.15,000.
(h) Paid store rent Rs.2,000.
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i) Paid suppliers Rs.3,000.
j) Billed customers for DVD hire
charges Rs.3,500.
k) Paid dividend Rs.2,500.

You are required to analyse the effect

of the transactions on the accounting
equation and prepare the BS
thereafter. (101)(125)

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 Solution:

SEE EXCEL SHEET

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 ASSIGNMENT 5:
On March 1 2018 Ms. Rina established
an audit practice as a sole
proprietorship and concluded the
following transactions in the first
month:
1. Rina brought into business her
personal laptop costing Rs.50,000.
2. Provided services for cash
Rs.23,000.
3. Bought office equipment on credit
Rs.25,000.
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4. Billed clients for service Rs.16,000.
5. Paid rent deposit for office Rs.10,000.
6. Collected payments from clients (4)
Rs.12,300.
7. Withdrew cash for personal use
Rs.9,000.
8. Paid electricity expense Rs.1,700.
9. Paid salary to office assistant
Rs.2,000.
You are required to analyse the effect of
the transactions on accounting equation
and prepare a BS.
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 ASSIGNMENT 6:
On September 1 2017, Meera Kumar
started Instaprogram Company to
provide computer programming
services. On September 30 2017, the
company had the following balances:
Cash – Rs.10,000; Trade receivables –
Rs.5,000; Computer supplies –
Rs.1,000; Office equipment – Rs.35,000;
Trade payables – Rs.13,300; Share
capital – Rs.24,500; Retained earnings
– Rs.13,200.
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The following transactions took place in
October 2017:
1) Bought computer supplies for cash
Rs.1,800.
2) Billed clients for professional
services Rs.59,900.
3) Purchased office equipment for cash
Rs.3,000.
4) Provided services for cash
Rs.20,000.
5) Paid suppliers Rs.11,000.
6) Paid office rent Rs.1,100.
6/21/2019 GIM-FAM Prof. Ranjan Dasgupta 67
7) Collected from clients billed in
September Rs.4,000.
8) Bought equipment on credit
Rs.20,000.
9) Collected from clients (2) Rs.56,400.
10) Paid programmers’ salaries
Rs.28,000.
11) Paid dividends Rs.6,750.
Analyse the effect of the transactions
on the accounting equation and
thereby prepare the BS.
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 Readings:
1. Accounting Text and Cases by
Robert N Anthony, David F Hawkins,
and Kenneth A Merchant, 13th Ed.
(Indian), Chapters 1 & 2 (pages 1-
49).
2. Financial Accounting A Managerial
Perspective by R Narayanaswamy,
5th Ed., Chapter 1 (pages 1-62).
3. Session handouts.
4. Framework (as provided).
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 Thank You

6/21/2019 GIM-FAM Prof. Ranjan Dasgupta 70