Question

QUESTION 5:

A. Income statement and balance sheet
From the following financial information of XYZ Ltd, for the year ended
December 31, 2017. Prepare Income statement and Balance sheet.
Particulars Amount $
Cash 31,000
Accounts Receivable 9,000
Equipment 90,000
Accumulated Depreciation 10,000
Accounts Payable 8,000
Bank Loan(Long term liability) 1,12,000
Sales 65,600
Cost of Goods sold 34,000
Advertising expense 10,000
Fuel expense 4,000
Interest expense 10,000
Income tax expense 2,400
Inventory 200,000
Share Capital 130,000
Short Term Liability 70,000

B. ‘The finance department of an enterprise performs several functions in order to achieve the
objectives. The scope of finance is very wide.’

Answer 1

(A)

Income Statement of XYZ Ltd. for the year ended 31 December,2017

Particulars	Amount($)
Sales	65,600
Less: Cost of Goods Sold	34,000
Gross Profit	31,600
Less:
Advertising Expense	10,000
Fuel	4,000
Ineterest	10,000
Profit before tax	7,600
Income tax expense	2,400
PAT	5,200

Balance Sheet of XYZ Ltd. as on 31st Dec,2017

Assets	($)	($)
Non-Current Assets
Equipment	90,000
Accumulated Depreciation	10,000	80,000
Current Assets
Cash	31000	31,000
Inventories	200000	2,00,000
Receivables	9000	9,000
Total Assets		3,20,000
Liabilities
Share Capital		130000
Long-Term Liabilities
Bank Loan		1,12,000
Short-Term Liabilities
Accounts Payable	8,000
Short term Loan	70,000	78,000
Total Liabilities		3,20,000

(B) ‘The finance department of an enterprise performs several functions in order to achieve the
objectives. The scope of finance is very wide.’

Following are the some of the functions performed by the Finance Department of the Company -

(i) Accounting - The Finance dept of a company is responsible for recording each and every transactions in books of Accounts. It manages the preparation of financial statements, cash flow statements. It manages accounts payable, accounts receivables.

(ii) Record Keeper - The Finance dept of a company keeps the financial records of the company. The dept keeps record of financial transaction and events and are kept safely for many years. Each Accounting transaction recorded in books is supported by some documentary evidence and these evidences are kept in the form of vouchers, book keeping.

(iii) Working Capital Management - The finance dept is responsiible to analyze working capital requirement of a company and according it manages the working capital needs.

(iv) Payroll - The Finance dept is responsible to ensure proper payment to all the employees of the company and in timely fashion. It also ensures proper deductions have been done from salary whereever applicable (ex- contribution, tax deductions).

(v) Finance Control - The senior managers in Finance dept ensures proper compliances of statutory payments, proper financial controls are in place and financial processes follow the internal as well as legal guidelines.  

(vi) Strategic Planning - The team performs financial planning and plans short - term and long-term plans of a company based on the assessment of financial health of the company.

(vii) Capital Budgeting Decisions - The Finance dept deeply analyze various investment option available in the market and choose the best one that increases the profitability of the company.

(viii) Risk Management- There are various risk involved in a company related to finance like - interest rate risk, Exchange rate risks, market and currency risk etc. These risks are mitigated through implementation of proper strategy and controls by the Finance Department.

The Aforementioned points proves that Finance dept of a company has wider range of responsibilities and is incharge of money of an Organisation.