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PROCEDURE
- Obtain Current Year and Last few years Profitability Statement
- Enquire About Current Loans and their Repayment Schedule and Ensure it matches with Current Profit and Loss/Balance Sheet
- Discuss With Management Or Sales Dept About Future Plan
- (Ask For Future Sales, Whether New Machines Installed, What will be their cost and installation charges ,Where Will Money Come From - Bank Loan On Own Money ,What will be Rate of interest on Bank Loan,In how much year it will be repaid)
Suppose Management Says that in future,Sales will Double
In this case
Treatment of Direct Income and Expenses
If Sale Double
Direct Income - Double
Purchase - Double
Direct Exp - Double
Opening Stock - Closing Stock Of Last Year
GP(Gross Profit) - Double
Closing Stock - Balance Figure
Treatment Of Indirect Expenses
| Type of Expense | How to Prepare |
| Depreciation |
Actual Calculation as per Working Note |
| Interest |
Actual Calculation as per Working Note |
| Selling Exp. | On Basis of Sales (Double in our case) |
| Expenses fixed as per Contract or Agreement | As Per Agreement |
| Other Expense | On Basis of 10%/15% Inflation |
| Tax Expense | As per Current Tax Rate (30%) |
Assignment
Prepare projected P&L and Balance Sheet on the basis of following assumptions
Prepare working note for loan interest , Fd Interest and Depriciation
ASSUMPTIONS
Year 1
Sales Double
Existing Loan Repaid In 5 Yrs(In 5 Equal Principal Instalments+Interest),installment paid in the beginning of the next year
Assume 15% Inflation
Year 2
Sale 40% Increase As Compared To Projected Year
Machine To Be Installed For Rs 2000
Installation Charges Of Rs 500
Machine Will Be Installed After 5 Months (By 30 Aug)
Loan To Be Taken From Pnb @ 10% Of 1500 (60% Of Cost Of Project) (Repayble In 3 Years)
Fd To Be Broken After 3 Months(By 30 June)
Capital Increase By 500
Balance From Cash & Bank
Assume 15% Inflation
Assume Depreciation Rate on Machine is 15%
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