NMIMS Global Access

School for Continuing Education (NGA-SCE)

Course: Financial Accounting & Analysis
Internal Assignment Applicable for December 2020 Examination

Assignment Marks: 30

Instructions:

• All Questions carry equal marks.

• All Questions are compulsory
• All answers to be explained in not more than 1000 words for question 1 and 2 and for
question 3 in not more than 500 words for each subsection. Use relevant examples,
illustrations as far as possible.
• All answers to be written individually. Discussion and group work is not advisable.
• Students are free to refer to any books/reference material/website/internet for attempting
their assignments, but are not allowed to copy the matter as it is from the source of
reference.

• Students should write the assignment in their own words. Copying of assignments from
other students is not allowed

• Students should follow the following parameter for answering the assignment questions

For Theoretical Answer For Numerical Answer

Assessment Parameter Weightage Assessment Parameter Weightage
Introduction 20% Understanding and usage 20%
Concepts and Application 60% of the formula
related to the question Procedure / Steps 50%
Conclusion 20% Correct Answer & 30%
Interpretation

1. Karagiri is a Pune based startup that works with 800 families across India. The startup is
in the business of handloom saris. They converted the pandemic period in to an opportunity.
The business owners realized that accounting is essential to permit informed judgements
and decisions by the user of accounts. In the light of given
 NMIMS Global Access
School for Continuing Education (NGA-SCE)
Course: Financial Accounting & Analysis
Internal Assignment Applicable for December 2020 Examination

definition of accounting, discuss about users and uses of accounting information

(10 Marks)

2. Mr. Kohli is planning to invest in the share market. He wants to study the Balance Sheet
of Amul Industries. He wants your guidance in finding the various elements of the Balance
Sheet of Amul Industries. Kindly discuss the same (10 Marks)

3. Discuss for question (a) and (b)

- Define and identify the type of Income / Expenses
- Treatment of the Income / Expenses in the Profit and Loss account, Impact of the
Income / Expenses in the Balance Sheet

a. You purchased 10 shares of L& T Company last year. On 5th March 2019, the company
has declared a dividend Rs 50 per share. The income is earned but not yet collected in your
account during this financial year. (5 Marks)

b. On 5th March 2019, Mehta Brothers received 100% advance for goods, to be supplied in
the next month. The Cost of the goods was Rs50000. They usually sells the goods at 10%
mark up. (5 Marks)
 NMIMS Global Access
School for Continuing Education (NGA-SCE)
Course: Financial Accounting & Analysis
Internal Assignment Applicable for December 2020 Examination

Answer 1:
Users of accounting information are internal and external.

External users are creditors, investors, government, trading partners, regulatory agencies,
international standardization agencies, journalists and internal users are owners, directors, managers,
employees of the company.

A common use of accounting information is measuring the performance of various business

operations. While financial statements are the classic accounting information tool used to assess
business operations, business owners may conduct a more thorough analysis of this information when
reviewing business operations.

Karagiri is a Pune based startup that works with 800 families across India. The startup is in the
business of handloom saris. Currently demand of clothes are increasing day by day so it is good to
startup with a and ethnic wear business in India. Sarees business is one of the best business with
highprofit margin. It is possible when you purchase the sarees from direct manufacturing companies.
They provide you list of all leading sarees manufacturers and sarees weavers companies across the
India. You can also Buy , , List of Sarees wholesalers and much more. They have wonderful
collection of , , kanchipuram sarees, Silk sarees, Chanderi sarees, Patola sarees, wedding sarees, Plain
cotton sarees and moreWe are deeply committed to building on existing efforts and undertake newer
initiatives to accelerate progress on the SDG targets for long term transformation, he said.

Using Accounting Information

The American Accounting Association defines accounting as “the process of identifying, measuring
and communicating economic information to permit informed judgements and decisions by users of
the information.” In other words, it is the process of communicating financial information about a
business entity to stakeholders and managers. Economic information is generally displayed in the
form of financial statements that show the economic resources that a business currently has; the goal
of the business is to determine which information is useful to the outside world.

Accounting involves two main elements:

An information process that identifies, classifies and summarizes the financial events that take place
within an organization

A reporting system that communicates relevant financial information to interested persons, allowing
them to assess performance, make decisions, and/or control the economic resources in the
organization.

It is important to note that accounting is not the end of the decision making process; it provides the
most relevant and reliable information possible to allow for goals to be developed, implemented, and
revised.
Meaning of Accounting : In 1966, the American Accounting Association (AAA) defined accounting
as 'the process of identifying, measuring and communicating economic information to permit
informed judgments and decisions by users of information'.
 NMIMS Global Access
School for Continuing Education (NGA-SCE)
Course: Financial Accounting & Analysis
Internal Assignment Applicable for December 2020 Examination

Answer 2 :

A balance sheet is an important statement of any business of the company and it is an important
document that provides a piece of essential information regarding the assets, the liabilities, and the
equity of the business.

Assets are item s of value that the company must have in order to operate or function normally and in
this case, Mr. Kohli must ensure that before he commences the share market business, he must ensure
that he has sufficient assets to support the business.

Liabilities are the amount of money that is a company or any business owes their creditors. For
instance, such things are the employees, tax authorities, creditors, and suppliers of the business or the
company. Mr. Kohli should ensure that before he starts the share market business, he must know well
how better to handle the liabilities because if not well handled the business can be bankrupt because
of insolvency. Mr. Kohli must also know how often the business can be paying the liabilities back.

Finally, Mr. Kohli must ensure that he has full knowledge and understanding of the equity which
constitutes all the earnings retained by the shareholders in exchange for the ownership of the business
or the company.

Points to be kept under consideration :

i)Working Capital or short-term liquidity
Is the difference between a company's current assets, such as cash, accounts receivable and
inventories of raw materials and finished goods, and its current liabilities, such as accounts payable.

ii)Asset performance
Refers to a business' ability to take operational resources, manage them, and produce profitable
returns.

iii) Capitalization structure.

Capitalization structure is the amount of debt versus equity that a company has on its balance sheet.
 NMIMS Global Access
School for Continuing Education (NGA-SCE)
Course: Financial Accounting & Analysis
Internal Assignment Applicable for December 2020 Examination

Answer 3 :

Discussion for Questions (a) and (b)

a) Dividend Income Earned but not yet Collected in the Account during the Current Financial
Year,

The dividend income that I, the shareholder of L& T Company earned but not yet collected in my
account during the current financial year is an accrued dividend. According to Haupt and Nel
(2019), accrued dividends are the statement of financial position’s liabilities, which account for
common shares’ dividends that firms declare but do not pay the stockholders at that date. Firms
enter the dividend value that they allocate below the net income amount on their income statements.
An accrued dividend increases the current liabilities amount on the balance sheet when a firm
declares it and remains so until the Company pays it.

b) Receipt of 100% Advance for Goods by Mehta Brothers to be Supplied in the Next Month.

The 100% advance for goods that Mehta Brothers received on 5th March 2019, to be supplied in
the next month is a prepaid income. Jackson and Sneathen (2019) assert that prepaid income is
money that a firm receives from its clients before providing the products to those customers. Firms
credit prepaid incomes in their income statements. a prepaid income increases the current liabilities
amount on the balance sheet until the vendor delivers the products to the customers.

References :
➢ Haupt, E., & Nel, R. (2019). Dividend Cession–Investigating the South African Tax
Implications. Journal of Economic and Financial Sciences, 12(1).
➢ Jackson, R. E., & Sneathen Jr, L. D. (2019). Journal Entries as Tools for Financial Statement
Disclosure of Pension Reporting and other Comprehensive Income. American Journal of
Business Education (AJBE), 12(3).