ComprehensivePROJECTinFinancialAccountingforManagementbyRamachandran&Kakani,McGraw

Hill,2011"

PROJECT

COMPREHENSIVE

A student need not have any previous experience or technical background for the
preparationofthisassignment.

THEPROBLEM*:

Youarelaunchingintoabusinessinthenameandstyleofyourchoice.Ithastobeasimple
manufacturing business. It means that your business would involve, buying materials,
transformingitusingplantandmachinery,andsellingit.Keepinmindtheconditionsgiven
inthisproject.Strictlyadheretotheconditions.

ASSUMPTIONSANDREQUIREMENTS:

Youcanmakeanyassumption,providedtheyarereasonableinanactualbusinesssituation,
subject to the conditions 1 to 24 (detailed below). Realistic nature of the project would
involvefactorssuchasvolumeofturnover,coststructure,typeandnatureoftransaction.
Pleasedrawuptheaccountsandreportsinproperformasiftheyweremadeoutforareal
lifebusiness.

This project would involve four submissions either in word file or in hand written. The
deadline for the project would be announced periodically. Each days delay would lead to
deduction of marks at the rate of 1 mark per day (for any one of the submissions). The
projectwouldcarryaweightageof30%ingrading.Thecompletedprojectistobesubmitted
beforethefinaldeadline.

CONDITIONS:

1.Dateofcommencementofthebusinessistobethefirstdayofthemonthofyourbirth.

Forexample,ifyourdateofbirthis10thJanuary1981thenyourdateofcommencementwill
be1stofJanuary.Alternatively,ifyourdateofbirthis30thAugust 1999then yourdateof
commencementwillbe1stofAugust.

*
I will keep a few sample copies of the past projects with Ms. Shalini Beck (Intercom 3260, Email id:
[email protected]) for display over the next four weeks. However, no photocopying/Similar activity, of the
documents is allowed.

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ComprehensivePROJECTinFinancialAccountingforManagementbyRamachandran&Kakani,McGraw
Hill,2011"

2.1CapitaltobecontributedwilldependonyourRollnumberintheclassandyourdayof
birth
YourRegister/rollnumbermultipliedbyyourdayofbirth(allinRs.lakh)

Assuming, Roll Number 001 has the date of birth as 01Jan.1993, so roll no 001 will have
contributed capital of INR 1 Lakh. On the other hand, if Roll Number 200 has the date of
birthas30Dec.1995,sorollno200willhavecontributedcapitalofINR6,000Lakhs.

2.2Longtermloansequaltomaximumof2timesthecapitalisavailableattherateof10%
perannum.Longtermloanhastobeatleastbeequaltocapital.

3.GrantfromtheGovernmentisavailabletotheextentof20%ofyourcontributionorvalue
of fixed assets which ever are lower (as part of Government of Indias make in India
campaign)

4. Fixed assets to start with will vary for the different students based on their month of
birth(asperinstituterecords)asfollows:

Series"0"rollnumbers:71%to75%oflongtermfundsavailable
Series"1"rollnumbers:76%to80%oflongtermfundsavailable
Series"2"rollnumbers:31%to35%oflongtermfundsavailable
Series"3"rollnumbers:36%to40%oflongtermfundsavailable
Series"4"rollnumbers:41%to45%oflongtermfundsavailable
Series"5"rollnumbers:46%to50%oflongtermfundsavailable
Series"6"rollnumbers:51%to55%oflongtermfundsavailable
Series"7"rollnumbers:56%to60%oflongtermfundsavailable
Series"8"rollnumbers:61%to65%oflongtermfundsavailable
Series"9"rollnumbers:66%to70%oflongtermfundsavailable

5. Depreciation on monthly basis is to be computed on straight line method by all even

6.Creditsaleswillbefourtimescashsales.

7.Creditpurchasewillbethreetimescashpurchase.

8. Credit terms are as follows for different Roll numbers (there has to be some credit
purchaseandsaleinallcases):

CreditSale

001to040rollnumbers:21days

041to080rollnumbers:45days

081to120rollnumbers:1week

121to160rollnumbers:2weeks

Allothersrollnumbers:30days
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ComprehensivePROJECTinFinancialAccountingforManagementbyRamachandran&Kakani,McGraw
Hill,2011"

CreditPurchase

Series0rollnumbers:21days
Series1rollnumbers:45days
Series2rollnumbers:1week
Series3rollnumbers:2weeks
Series4rollnumbers:30days
Series5rollnumbers:40days
Series6rollnumbers:10days
Series7rollnumbers:20days
Series8rollnumbers:50days
Series9rollnumbers:55days

9.Onehalfofthecreditsaleandpurchasecanbeagainstnotes(billsofexchange).

10.Cashbalanceattheendofanymonthistobemaximumof7daysandminimumsof3
dayscashexpenses.Deploymentofsurpluscashonshorttermintercorporatemarketat6%
perannumispossible.

11. All notes receivable are discounted with the bankers at 15% per annum. Bankers will
discountallnotesreceivableat15%perannum.Youcanalsoavailofoverdraftlimitfromthe
bankertotheextentof75%ofunencumberedcurrentassets.

12.20%ofthereceivablewillbedelayedbyonehalfofthenormalcreditperiod.(Ifcredit
periodis30daystheywillbepaidinonly45days).

13.Payingontime,warrantsacashdiscountof4%anddelayinpaymentswouldwarranta
penaltyof2%permonthforthedaysofdefaultincaseofreceivable.

14. 5% of the receivable due by more than 15 days over the credit period and 10% of the
receivable due for more than 21 days over the credit period will be bad. Provisions for
doubtfuldebtsareprovidedat10%.

15. Delay in meeting payable will carry penalty as in the case of receivable and similar
discountsareavailableforpayingontime.

16. Interest on long term loan is payable monthly and principal is repayable over 5 year
periodinmonthlyinstallments.

17. Delay in payment of principal or interest would involve penal interest of 15% of the
amountindefaultfortheperiodofdefault.

18.Salesvolumewillincreaseby10%overthepreviousmonth,salepricewillincreaseby5%
overthepreviousmonthandpurchasepricewillincreaseby5%every15days,allreckoned
onacalendarmonthbasis.

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ComprehensivePROJECTinFinancialAccountingforManagementbyRamachandran&Kakani,McGraw
Hill,2011"

19.Allothercostswillremainstableovertheperiod.

20.Assumenogestationperiod.Thatis,thebusinessstartsoperationsfromdayone.

21.Municipalratesaretobepaidattherateof1%ofownersequityatthebeginningofeach
calendarmonth.

22.Wagecostcouldbe10to30%ofsales.

23.Rentalcanbe5%ofsales.

24.Youneedtohaveatleast2transactionsperdayfor20daysinamonth.

REQUIRED:

1. You are required to prepare the accounts of the business as if owned by you as an
individualproprietorshipinanynameandstyleofyourchoice,withintheframeworkofthe
conditionsonethroughtwentyfourdetailedabove,forthreeaccountingperiods.

2.Prepareaprecisechronologicalstatementofalltransactions.

3.Preparejournalentriesforalltransactionsandpostthemtoappropriateledgersduring
thefirstaccountingperiod.

4.For2ndand3rdperiodyoumayskipjournalentriesanddirectlyprepareledgeraccount
sayas(cashreceipts,cashpayments,sales,andpurchasesbook)

5.Prepareapostclosingtrialbalance,incomestatementandbalancesheetfortheendof
themonth.Youmayhaveatleastthreefinancialstatementsforeachmonth.

6. Prepare a monthly statement showing compliance with the conditions specified.

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