¥2

Addendum A.67

_ [l'mJ~ llluslratf~ •JJ

pany UK Gel Ltd. lS in the buslness ohf manu [Link] writing instruments . ft being concerned
'(he co~ ·. rofitability and liquid ity positi
_,t ~
abOut P§'comments thereon. on as engaged you to analyse its financial dat.1 and give
t,st'f'\·auoru , ,
0
. rnpan y has provi ded its Finan c· J s
• Balance Sheet s and Statem en t of
r.e.,
fhe co L for the financial years d d ;a tatem ents,
profit & o~l ble on its website [Link]. 1st March, 2021, .2022 and 2023. These Financial St.1tements
.are a)so ava1 a

p,oJect Solution
AJ)out the Project
ent of Profit & Loss and Balance Sheets
The company has pr~a~ ed Comp arativ e Statements, i.e., Statem item of
se or decrease) both in terms of rupees and percentages in each
10 analyse changes (i.e., increa
income and Position Statem ents.
smen t on the profit abilit y
The Project is to analy se the finan cial data and give asses
the following accounting ratios:
and liquidity of UK Gel Ltd. for the last three years on the basis of
(i) Gross Profit Ratio; (ii) Net Profit Ratio;
(ilil Inventory Turnover Ratio; (iv) Current Ratio;
M Liquid Ratio; and (vi) Debt Collection Period .

Information and Data for the Project

March, 2021, 31st March, 2022 and
The Statement of Profi t & Loss for the years ended 31st
Accounts have been provi ded. The (
31st March, 2023, the Balance Sheets as at those dates and Notes to I
computation of the ratios is given at
data so provided has been utilised for comp uting the ratios. The i
of the three years have been shown
the end of the conclusion as Working Notes. The computed ratios
the computed ratios, views have been
with the help of graph s for easy under stand ing. On the basis of
formed and expressed.
The data provid ed by the comp any is produ ced below:
2022 and 2023
STATEMENT OF PROFIT & LOSS for the years ended 31st March, 2021,
Note No. 31st March, 31st March, 31st March,
s. Particulars 2023(t)
No.
2021 m 2022m l
-

L Income
8,00,000 12,60,000 17,40,000 [
{a} Revenue from Operations {Net Sales} 10,000 40,000 85,000
{b) Other Income
8, 10,000 13,00,000 18,25,000
Toul
II. &pencfiture 6,00,000 8,00,000 9,50,000
(a) Purchases of Stock-i n-Trade l (30,000) {50,000) {75,000)
(b) Change In Inventories of Stock-in-Trade 1, 10,000 2,00,000 2,80,000
k) Employees Benefit Expenses ... ft. 70,000
(d) finance Costs 10,000 '
.I
8,000 9,000
(e) Depreciation and Amortisation Expenses 80,000 1,00,000 1,20,000
(f} Other Expenses
7,68,000 10,59,000 13,55,000 l
TotaJ Il
... Profit before Tax (I - fl)
42,000 2,41 ,000
1,00,000
4,70,000
1,80,000
l'i. LfH: Tax 21,000
~- Profit after Tu
.......... -Htt
21,000 1,41,,000 2,90,000

-
A.6 8 Double Entry BOOK 1\1:..-t" •· ....

BALAN CESHE!TS
as at 31st March, 2021, 2022 Qnd 2023
Particulars Note No. 31st Morch, 31 tt Mard,, 1315t Mardi,
2021 ~) 2012 (~} 2023 (1.)
- --- - -~ -
l. EQUITY ANO LIABIUTIES
1. Shareholdtn' Funds
ta) Share Capital 2,00,000 2.00,000 2,00,000
(b) Reserves and Surplus 33,000 89.500 1,501000
2. Non-C1.1rrent L11bllltJes
(a) Long-term Borcowings (Debentures) 2,00,000
(b) Other Long-term UabilltJes 60,000 40,000 20,000
(cl Long-term Provisions 10,000 15,000 15,000
3, Current Llablllties
{a) Short-term Borrowings 20,000 15,000 20;000
(bl Trade Payables 1,12,000 2,24,000 3,32,000
(c} Other Cun:(?J'lt llabllitles 20,000 20,000 20,000
(d) Short-term Provisions (Provision for Tax) 5,000 40,000 65,000
Total 4,60,000 6,43,500 1O,U.000 J

I. ASSETS
l . Non-Current [Link]
{a) Property, Plant and Equipment and Intangible Assets
:
U) Property, Plant and Equipment 78,000 97,000 1,40,000
01) lnt,ar,iglble Assets 30,000 38,000 42,000
Ou) Capital Work·•~•Progress 50,000 40,000
(,vt [Link] AS5ets 1:tnder Progress
20,000 11,000
(bl Non-<JJrrent Investments 60,000 66,500 30,000
(c:l Long-term Loans and Ad•,ances
30,000 32.000 35.000
2. Currfflt Ass.t s
(a) Current lrvestments
2,000 7,000 43,000
(bJ lnveotcries
70,000 1,20,000 1,95,000
(c} Trade [Link],ables
80,000 1,90,000 4,80,0 00 ,r
(d) Cash and Cash Equivalents
15.000 10,000 20,000
(e) Short·[Link] Loans and AdvarKes
10,000 20.000 24,000
(f) OtMr GJrrent Asse_ts
15,000 12,000 13,000
Total
4,60,000 6,43,,500 10,22000

Note to Accounts

Particulars 31 st Mardi\, 31st March, 31st Maoch,

1. Ching• in Inventories of Stock..fn~Trade

-- - 2021 ~ 20l2 (t) 2023('tl

[Link] Jnventones
40,000 70,000 1,2~000
Lt$S~Cosing [Link]
70,000 1,20,000 1,95-0.00
(.30,000) (S0,000~ (7~ ~
AddrtwnaJ lnf1Jrt111Jtt01-1:
1, The com pany 's Other Curn__')flt Llabiuties are Ouls
.tandmg Expenses.
2.. [Link] Ct. trre.n.t Assets are Accrued lru:.omes.
. Reiscrves ~nd Surplus of the company are Surplus,
3 1,e.., BalaMe in Stak-ment of Profit & loss.
►
An1Jytkal Tools Used
for analysing the [Link].l data of the company, [Link] tools used for analysls are:
1. [Link] Statements, IL., Comparative Statement of Profit & Loss and Comparative &lanO:!
Sheet; and
2. Accounting Ratios.

Planning and Execution

Comparative Statements to analyse changes (i.e., increase or decrease) both in terms of rupees and
percentages in each item.
Considering the requirements of the company, following ratios have been computed:
(i) Gross Profit Ratio; (ii) Net Profit Ratio;
(iii} Inventory Turnover Ratio; (iv) Current Ratio;
{v) Liquid Ratio; and (vi) Debt Collection Period .
Calculation of above accounting ratios is given in the project itself.
Computati on, Analysis, and Comments
t
0
UK Gel Ltd.
1. COMPARATIVE STATEMENT OF PROFIT & LOSS for the )'t'Ots ended 31st March, 2011, 1022. 1013
Particulars Not! 31st March, 31st March, 31 st March, Absolute Change Percentage Change
l
Absolute Change Perceoti-ge Change
No. 2021 2022 2023 (Increase/Decrease) (Increase/Decrease) (lncrea.s ~) (lncrtase/DeCn!ase) ~
f .._ 't 'f (%) f (%) -<
...... ,__ -.ii-~
- "'" -~ - -- - g
A B
-(B-A)
' -·>-
C =D 0/A >c: lOO= E (C - 8) =f F/8 x 100 = G 7ft'
- - - ·- ---· - - - · 7:
I. Revenue .from Operations 8,00,000 12,60,000 17;40,000 4,60,000 S7.5 4,80.000 38.09
II. Other Income 10,000 40,000 85,000 30,000 300 45,000 112.S
tll. Totlll Revenue (I + II)
- -- - -- - Il
8,10,000 13,00,000 18,25,000 4,90,000 60.49 5,25,000 ' 40.38
&l
VI
rv. Expens.s I I m
X
l, {a) Purchases of Stock-ln~Trade 6,00,000 8,00,000 9,50,000 2,00,000 3333 1,50,000 18.75
I
{b} Change In lnventoriesofStock-tn-Trade {30,000) (50,000) (75,000) (20,000) (66.67) (25,000) ([Link]
[
'
(c) Employees Benefit Expenses 1,10;000 2,00,000 2,80,000 90,000 81 .82 80,000 40.00
{d) finance Cost 70,000 I
70,000
- -· - - ...
(e) Depreciation & Amortisation Expenses 8,000 9,000 10,000 1,000 [Link] I 1,000 11.11
I

I (f) Other Expenses 80,000 1,00,000 1,20,000 20,000 25.00 20,000 20.00
Total Expenses 7,68,000 10,59,000 13,55,000 2,91,000 37.89 2,96,000 27.95
-
V. Profit before Tax (HI - IV) 42,000 2,41,000 4,70,000 1,99,000
-
473.81 2,29.000 95.02
VI. Tax 21,000 1,00,000 1,80,000 79)000 376.19 80,000 80.00
~ .
VJI. Profit after Tax (V - Vt) 21,000
-
1,41,000 2,90,000 1,20,000 S71 .43 1,49,000
"-: _,_ ~ - _,__ 105.67
- - . ,, - -
- -· - --- - _..,_ -
Notes:
1. Absolute Change in each Item of Comparative Statement of Profit & loss ls calculated by subtracting the previous year's balance from the current
year's
balance and indicate the change as increase(+) or decrease(- ).
2. Percentage change ls calculated as follows:
Absolute Increase or Decrease/Previous year's absolute figure x 100.
 UK Gel Ltd,
COMPARATIVE BALANCE SHEET as at 31st March, 2021, 2022 and 2023
Particulars Note , 31stMarch, , 31stMarch, 31stMarch, AbsoluteChange \PefcentageChange Abso\uteChange Pe\'c~~n(Je
No. 2021 2022 2023 (Increase/Decrease) (Increase/Decrease) l\ncrease/Oecrease) l\naease/Oecrease)
~ t ' ' (%) " \%)
A I 8 I C I O 8- A
= I E l 00 x 0/A
= I F = C- 8 \ G = , 00 x f ~

I. EQUITY AND LIABILITIES

1. Shareholders' Funds
{a) Share capital 2,00,000 I 2,00,000 I 2,00,000
{b) Reserves and Surplus (i.e.,
Balance In Statement of
Profit & Loss) 33,000 I [Link] I 1,so,000 56,500 17111 60,500 67I,O
2. Non-Cunent U1bllitles
(a) long-term Borrowings
- Debentures 2,00,000 2,00,000
-(b) Other long-term liabilities 60,000 40,000 20,000 (20,000) (33.33) (20,000) {SO)
I

(c) long-term Provisions 10,000 15,000 15,000 5,000 50.00

3. Current U1bllitles I
(a) Short-term Borrowings 20,000 15,000 20,000 (5,000) (25) S,000 33.33
(b) Trade Payables 1,12,000 2,24,000 3,32,000 1,12,000 1,08,000
100 I 48.21
(c) Other Current Liabilities
-Outstanding Expenses 20,000 I 20,000 I 20,000
(d) Short-term Provisions
-Provision for Tax 5,000 40,000 65,000 35,000 I 700 I 25,000 } 62.5
Totll 4,60,000 6,43,500 I 10,22.000
i
I I I .. --I 1,83,500 I 39B9 I 3.~ ~ ~ !2 "
5.
C
3
)t
•~
..
 . ~ ---.- -
-- - -- ---- .. ,..----....-.- - - - .-------~
-- - >
r"· ~~- ~---~ _____ - --- -~--..,-· !
'i ·",,_,
I
,►
I,
~
i (a) Pl'operty. Plant and Equipment t ,,£
. and •um,glble AsSttS: , , :
l ,. . {i) ~ . Plant and • , j
Equipment : 78,000 97,000 lA0,000 19,000 24.36 0..000 4433
. l
-,,:'
(ii) tnta~Assm 30,000 38,000 42,000 8,000 26.67 4,000 10.53

{fri} Capital Wor1c-tn-f>roglffl SO;()()() 40,000 ... (10,000) {20) (40,000) (lOO) i
i,
(tv} tntangtbl, Assets Und@r '
1
Progress 20,000 11,000 (9,000) (45) (l liOO()) UOO) ~
f
- ~
I m
~ (b} Non-cunent Investments 60,000 66,500 30,000 6,500 10.83 {36,500) .(54..89) ; ~
•I
(c) long-tffln loans and Advances 30,000 32,000 35,000 2.000 61,7 3,000 9.38
I
2. CUmnt Assets
(al Curffllt Investments 2,000 7,000 43,000 [Link] 250 36,000 514.29
' 50,000 7t.43 751)()0 Q.5 1
j (b) Inventories 70,000 1,20,000 1,95,000
r
I
(c) Trad, Receivables 80,000 l,90,000 4,80,000 1,10,000 1375 2.901000 152.63 ,
\
f (d) Cash and Cash Equlvalents 15,000 10,000 20,000 (5,000) {3333) 10,000 lOO I
I
I
{e) Short-term loans and Advances 10,000 20,000 2-4,000 10.000 100 -i,000 20.00
I
I

(e) Other Current Assets

tI -Accrued Income 15,000 12,000 13,000 (3,000) (20) l.000 8.33

Total 4,60,000 6,.43,SOO 10,22.~ l,83,500 39.89 58.12

-
.. . .
~
1 - - ·.
Notes:
1. Absolute Change in each item of Comparative Balance Sheet Is cakulated by subtracting the prmous yNr's balance from the current year and Indicate the CMJ9 as inaase
(+) or decrease(-).
2. Percentage change Is calculated as follows:
Absolute Increase or Decrease/ previous year absolute figure x 100.
3. If rurrent )'Nr's Vilue has decreased, show the Absolute change and Percentage change In brackm to reflect negative Item.

..
 Addendum A.7 3

COMPUTATION OF ACCOUNTING RATIOS

2, 31st March. 202 t 31 n March, 2022 31st March, 2023
Accounting Ratios

• p,oftt Ratw:
f 2, 30,0 00 f s,10,000 t 8,65,000 ~ l OO
~ Gross Profi t x 100 x 100 X l()()
~ t
~a.0 0,00 0 f 12,6 0,00 0 17, 40,0 00
"t-,enue
n {Net Sales) = 28.75% = 40.48% =49.71%

Workin9 Note)
(See

Nci FroDt Rario:

Net Profit after Tax '{ 21,00 0 f 1,41, 000 f2,9 0,00 0 x l OO
X 100 x 100
{ S,OQ,-000 X 100 ?12, 60,0 00 t 17,4 0,00 0
~ e from Oper ation s
(Net Sales) =2.63% = 11.19% =16..67%

r,'f/lto,Y Turnover Ratio:

Cost of Reve nue from f 8, 75,0 00 =5.5 6Tim es
~ 5,70 ,000 ~7.5 0,00 0
0perations (Cost of Goo ds Sold ) t = 10.36 1lme s = 7.89 Time s
55, 000 f 95,0 00 t 1,57, 500 .
-Average Inven torie s (Stoc k)

-U11TentRot10:
t7,7 5,00 0
t 1, 92, 000 f 3,59, 000 = 1.77 :1
Current Assets = 1.22 : 1 =1.2 0 : l
f 1,57, 000 ~2,9 9,00 0 f 4,37 ,000
current Liabilities

U1JD(/ Ratro:
tl,2 2, 000 f 2, 39,0 00 f 5,80 ,000
Current Assets - Inven torie s =0.8 0:1 =13 3 : 1
= 0.78 : 1 t 4,37 ,000
t 1.57, 000 t2,99,00 0
Current Liabilities C

Debt Collection Period:

f 80, 000 f 1,90,000 365 t 4,80 ,000
Trade Receivables x 365
X .x 365
X 365 f l 2,60, 000 \'17, 40, 000
Credit Sales tS,0 0, 000
= 3650 Or 37 Days = 55.04 Or 55 Days = 100.69 Or 101 Days

Worlcing Note:
- ation of Gross Profit·.
Ciilcu/
31st March, 31st March, 31st March.
lars 2021 ro 2022 m 2023 ro
-Particu
[Link] from Operations (Sales)
8,00,000 12,60,000 17,40,000
5,70,000 7,50,0 00 8,75,0 00
less: Cost of Revenue from Operations"
2.30,0 00 5,10,0 00 8,65,0 00
GrossProfit -·· r
'

+ Chan ge in Inve ntori es of Stoc k-in-Trad e.

"Cost of Revenue from Oper ation s = Purc hase s of Stock-in-T rade
March, 2021 =t 6,00, 000 - t 30,00 0 = ~ 5,70, 000
31st

31st Ma t 50,00 0 = t 7,50, 000

rch, 2022 = t 8,00, 000 -
31st Ma t 75,00 0 =t 8,75,000
rch. 2023 = t 9,50, 000 -
· ~e·o·
• irect Expenses are assu med to be nil.
°k74 Ooubfe Entr y Book K~n g-C SS E .XII
Analysts and Comments rations by
Com para tive Stat eme nt of Prof it & Loss sho ws that there is incr ease in Revenu e from Ope
1. 22 and 20.22-23
(Le., 515 %) and by f 4~,0 00 (i.e., 38.09%) duri ng the yeaJ'S 2021 -
t -l.60,000 pants
ely. Alth oug h ther e is sign ifica nt incr ease in the exp ense s duri ng thes e year s yet com
respectiv
profit befo re and after tax increases.
pan y show that ther e is no incr ease in Sha
re CapitaJ d urin g
2. Com para tive BaLmce Sheets of the com of Surp lus, i.£.,
ease s beca use of incr ease in the amo unt
2021 -23 but the Sha reho lder s' Fun ds incr d urin g
Lon g-te rm Borrowings increases by f 2,00,000
Balance in Statement of Prof it & Loss. While
the ye"a r 2022 -23~
/or may be
of inefficiency in collection from Deb tors and
3. Increase in Trad e Receivables may be because wou ld increase.
beca use ofextended cred it peri od. In effec
t. wor king capital requ irem ent of the com pany
is not prop erly
ease in Inve ntory is ano ther poo r sign for the com pany . It sho ws that inve ntor y
4. Incr
inve sted in it
utili sed and subs tant ial wor king capi tal is
nde d cred it
show s eith er the com pany is enjo ying exte
5. 1here is also incr ease in Trad e Pay able s that
ents to cred itors.
period for pay men t or it is dela ying the paym
ther e is a
show s sign ifica nt grow th each yea r. Also
6. Rev enue from [Link] of the com pany y has been
Net Profit Ratio. It mea ns that the com pan
sign ifica nt incr ease in Gro ss Prof it Ratio and also bett er
whi ch has resu lted in bett er Gro ss Prof it and
able to realise bett er pric e for its prod ucts
pany
Net Pro fit It is a good indi cato r for the com

and furt her

year 2021; it decr ease d to 7.89 in the year 2022
7. Inve ntor y Turn over Ratio is 10.36 in the mak e
d ~ 5.56 in the year 2023 . Tha t mea ns com pany star ted mai ntai ning mor e inve ntor y to
decrease mea ns
. This shou ld be anal ysed whe ther mai ntai ning mor e inve ntor y is requ ired or not It
the sale
that the com pany has inve sted mor e than
requ ired capital in inve ntor ies.
 ~n ~15
..--.1 Ratio is approximately the same in the lint two year,j,. However ii [Link] [Link] in dv dw:.d
.8 Cw.•"'.. in 2023 Howeve r · . n .i.L..c , r-·
' m ~ u11: three years, Current RatJQ if Iowa than BJt ~ nt>rtn of.
·
yu.r~r.t., ·
2 ; L The ~=~ ~ £ace [Link] in meeting its short,wm liabilities on time, lmprcweme;nt
lo
the [Link] • m year 2023 to 1.77 is a si21lfficant improvement. It iJ good for ihe company
t,ut needs to be unproved further.
r

Uqwd Ratio
9. It is observed that the Liquid .Ratio is also on the same pattern as the Current Ratio.
is approxjmately same in the first two years but improve d in the third year. In the
year '1JJ13, the
company should be able to meet its £inanciaJ commitment on time, ~

to 55
lO. Debt Collection Period has negative growth and has increase d from 37 days in the year 2021
y is selling
days in the year 2022 and further to 101 days in the year 2023. lt shows that the compan
its stock by offering higher credit period which may result in requirem ent of more working capital
.md. higher bad debts. Therefore, the compan y may fa<:e problem in realisation from debtors.