The
Board has introduced Project Work in Accounting for Class-XII in the Optional
Part B :
'Financial
Statement Analysis'. It is expected that the Project Work will help the
students in
developing
the skills to comprehend, analyse and interpret accounting data of the business
firms
and make it meaningful for taking business decisions.
Project Work
Duration: 1 Hour 30 Minutes Marks: 20
Unit-1 Project file 4 Marks — As per
requirement (given below)
Unit-2 Written Test 12 Marks — One
hour
Unit-3 Viva Voce 4 Marks — As per
requirement (given below)
Objectives
To enable a student to
complete the accounting process in real life business situations and
apply
the tools of analysis as per the syllabus for a comprehensive project.
To develop the competence of
reading accounting data from quarterly or half yearly or
annual
reports of business firms and interpreting the information on the basis of
given
guidelines
to present the desirable information in required format in the Project File for
Specific
Projects.
Guidelines
During
the academic session the students will work on at least three types of projects
out of
which
one will be of Comprehensive nature. The comprehensive project will involve the
students
from the initial stage of accounting to the preparation and analysis of
financial
statements.
The data provided or the Project Statement will be as close to the real life
situations as
possible. The project statement should cover all important aspects like
investments, financing,
operating, adjustments to final accounts, etc. in a condensed form. The
situations given
in these problems will require a student to derive meaningful conclusion for
taking decisions
for the purposes of investment, expansion, financing, etc.
Two
projects will be of specific nature using at least one tool of analysis in each.
The data for these
will be drawn mainly from quarterly or half yearly or annual reports of
corporate sector.
Students
will analyze the information given in the financial statements as follows :
a)
Performance of Segments keeping in mind their three parameters Revenue, Net
Profit and Capital
Employed of companies on quarterly or half yearly or annual basis. This is
widely published
and reported by the companies. It can be picked up either from the newspapers or from
the websites of the companies.
b)
Comparison of Revenue, Net Profit and Earning Per Share (EPS) on quarterly or
half yearly or
annual basis with the help of comparative or common size statements.
The
Projects given in these guidelines are on sample areas of business activities
like Segment Reporting,
etc. The teachers and students are free to explore more such areas of business activities
for specific projects.
There
are four tools of analysis given in the syllabus for the analysis of Financial
Statements,
namely
(i) Comparative Statement, (ii) Common Size Statements, (iii) Ratios and (iv)
Cash Flow Statement.
Any one or more of these tools are to be used to derive conclusions. No project
is to be
prepared on the tools, but these tools are to be used to achieve the object of
the project. For instance,
there will not be any project on the 'Ratios' as such, but ratios will be used
in the development
of the project to reach a conclusion.
Scope
For the
purpose of Project Work, the following ratios will be included :
Liquidity Ratios :
Current Ratio, Liquidity Ratio.
Solvency Ratios : Debt
to Equity; Total Assets to Debt, Proprietary Ratio.
Activity Ratios :
Inventory Turnover, Debtors Turnover, Payable Turnover, Working
Capital
Turnover, Fixed Assets Turnover, Current Assets Turnover.
Profitability Ratio : Gross
Profit Ratio, Operating Ratio, Net Profit Ratio, Return on
Investment,
Earning Per Share – Price Earnings Ratio.
A few
projects have been given in detail at the end of the guidelines for practice.
The student is expected
to analyze the facts, and present the information in a meaningful manner for interpretation.
Teachers are expected to discuss these problems thoroughly with the students and
encourage them to come out with solutions. They are also expected to collect
the quarterly or half
yearly or annual Segment reports and Revenue and Net Profit reports of
companies from newspapers
or from the websites of the companies and formulate their own problems for
project work.
UNIT-1:
PROJECT FILE
Students
will prepare a Project File to record their work related to the problems
attempted by them in
the following format :
1.
First page of the file should describe title of work, identity of student,
school, and the
teacher
concerned.
2.
Index to indicate columns for title of work, page no., date, teacher's remarks
and
signature.
3. The
format for Project Work will be :
Statement of the problem/Name
of the Project
Objectives
Period of Study
Source Material
Tools of Analysis used
Processing and Tabulation of
data
Diagrammatic/graphic
presentation- pie-diagrammes, bar diagrammes and graphs.
Derivations, Interpretation
and Conclusion.
Assumptions (if any)
Project
File should be neatly handwritten and presentable with page numbers. Each step
of the
solution
needs to be highlighted. Conclusions drawn should be placed in boxes at the end.
UNIT-2: WRITTEN TEST
To give them exposure to
analyse the financial statements of business firms and help them
derive
meaningful information and conclusions therefrom.
To know how effectively the
students can derive conclusions and express them.
Guidelines for Teachers
Teachers
will discuss with students the sample questions for this test and develop
question
papers
for the purpose in their house examinations. Some sample questions are given in
this
booklet.
Guidelines for Examiners
Students
will be given 2 application-oriented problems of 6 marks each covering the
tools for
analysis
of financial statements. The question paper will be set in consultation with
the school
teacher.
No question similar to the question given in the 3 hour question paper of the
Board,
should
be asked here. Only such questions, relating to financial statements of
companies should
be
asked which encourage thinking on practical lines. A question bank is given in
this booklet
for
reference. The external examiner will discuss with the internal examiner all
the projects
completed
during the year and set the questions accordingly. On the day of the
examination
both
should come prepared with at least 10 questions each. Both the internal and
external
examiners
must agree on the nature and scope of questions asked. It must be ensured that
multiple
sets of papers are prepared. Marks will be awarded on the steps taken, data
identified &
solution arrived .
PROJECT NO. 1
PROJECT STATEMENT
M/s Sunil Computers
Rahul
and Manoj are two brothers. Rahul was interested in computers and often found
time to work on
computer. Due to his keen interest in computers and its applications made him
to take up
computer software subject for his degree course. On the other hand Manoj's core
interest was in
sitting at his father's shop nearby at market place selling electrical
appliances after college
hours.
Their
father Mr. Sunil was happy that Manoj showed interest in his business, but was
so
worried
about the brothers drifting apart after college due to varied interests. Mr.
Sunil decided that
this is the time for him to intervene and make decisions for them. He felt that
the interest of his two
sons be put together and they could start a flourishing business of their own –
Sunil Computers.
The
boom in the Information Technology (IT) Industry made him find ways to satisfy
his sons'dreams.
Finally
he decided to start a computer business for both his sons. He asked Manoj, commerce graduate
to draw up a proposal for the same.
Manoj came out with the following:
The
area they lived in and run shop consisted of middle income group families and
many of
them
did not possess computers at home.
Their
shop could be used to provide the following services :
Computer classes for various
age groups.
Computer using facilities on
payment per hourly basis and printing of documents from
computers.
Internet access facilities at
the prevailing market rates by entering into contract with the
Videsh
Sanchar Nigam Limited (VSNL).
Computer game corner for
children.
The
shop they had in the market place was a single story building.
On 1 April, 2014, Rahul and Manoj
borrowed ` 1,75,000/- each from their father and introduced it as their
capital in the firm.
They brought in capital as follows : ` 10,000/- each in cash ` 1,65,000/- each by cheque.
They
constructed first floor of the building owned by their father spending ` 1,00,000. They put up
their proposal to the bank and managed to get the bank loan of ` 3,00,000.
SPECIFIC PROJECTS
Segments
are (i) The products of a company like Alto, Dezire and Gypsy of Maruti. (ii)
The
area of
operation of a company like Consumer Care Business, Food Business and Personal
Care Business
of Dabur and Passenger transport, Goods transport of a Transport Company. (iii)
The Geographical
areas served by a service company like Northern Railway, Eastern Railway and Western
Railway, etc. of Indian Railways.
It is
mandatory for companies to report the progress of each segment as per AS-17
issued by
the
Council of The Institute of Chartered Accountants of India since April 1, 2001.
It ensures
full
disclosure about the revenue from each segment, the profit from each segment
and the
amount
of capital allocated to each segment. These reports are on quarterly, half
yearly and
annual
basis. Thus, every segment gets full attention of the management and the
shareholders
also
come to know the financial position of each segment. It is, required for true
and fair
disclosure
as well.
Two
specific projects on Performance of Segments are presented here :
i) On
segments of Prakash Industries Ltd. and
ii) On
segments of Dabur India Ltd.
Segment
reporting is only one area of business reports. The students should explore
more such areas
from the company reports for relevant specific projects. For the sake of
practice and exercise
the students should visit the company's websites and check the quarterly
reports for segment
performance. This will be the source material for the projects.
PROJECT ON SEGMENT
ANALYSIS-I
Analysis of Performance of each segment of Prakash Industries
Limited with reference to
1. Revenue,
2. Profit and
3. Capital employed
2. Objectives:
To study whether the
contribution of various segments of Prakash Industries Limited
with
respect to (i) Revenue, and (ii) Profit, is justified ?
To know as to which operation
segment is performing best in terms of Net Profit and
Return
on Investment.
3. Period Under Study:
Financial Year ending 31
4. Tools of Analysis:
st
1. Common Size Statement and
2. Ratios
5. Source Material:
March, 2007
Newspaper cutting of Audited Financial Results of Prakash
Industries Limited from the
Economic
Times dated 2 nd August, 2007 or the Website of the company.
6. Processing of Data :
I. Common Size Statement of Segment Wise Revenue
Compare the Revenue from
Operations of each segment of Prakash Industries with
TOTAL
REVENUE for the year ended 31 March 2007.
Use the formula =
Degree
= Revenue of the segment
X 100
/ Total Revenue
Common size Statement Showing Inter-Segment Comparison of Revenue
For the year ended 31 March, 2007
Segment Power Steel PVC Pipes Others Total
Revenue
(`) 12755 94901 6497.00 3079 117232
Percentage
of Total Revenue (%) 10.88 80.95 5.54 2.63 100
Degrees
for Pie Diagram 39.17° 291.43° 19.95° 9.45° 360°
Source: The Economic Times 2nd
August, 2007
II. Common Size Statement of Segment Wise Profit
Compare the PROFIT of each
segment of Prakash Industries Limited with TOTAL
PROFIT
for the year ended 31 March, 2007.
Use the formula to calculate
percentage and degrees for making pie diagram.
Percentage =
Degrees =
Pie Chart Representing
Segment Revenue
291.43°
19.95°
9.45°
Profit
of the segment
´
100
Total
Profit
Profit
of the segment
360
Total
Profit
´
39.17°
Power
Steel PVC Pipes
Others
Commonsize Statement Showing Inter Segment Comparison of Profit
For the year ended 31 March, 2007
Segment Power Steel PVC Pipes Others Total
Profit
(`) (in lakhs) 6506 7985 901 272 15664
