Trend Analysis - Statement of Assets & Liabilities

From the following statement of Assets and Liabilities of ABC Ltd. Compute the trend percentages using 31st Dec, 2013 as the base year.

1. MANAGEMENT ACCOUNTING Financial Analysis and Interpretation : Trend Analysis By: Smt.UMA MINAJIGI REUR HEAD, DEPT. OF COMMERCE & Management Smt. V G Degree College for Women, Kalaburagi

2. MANAGEMENT ACCOUNTING B.COM SIXTH SEMESTER & BBA FOURTH SEMESTER 6.3: PRINCIPLES OF MANAGEMENT ACCOUNTING

3. B.COM SIXTH SEMESTER 6.3: PRINCIPLES OF MANAGEMENT ACCOUNTING   Unit I: Management Accounting (08 Hours): Definition and objectives of Management Accounting - Relationship between Cost, Financial and Managerial Accounting.   Unit II : Financial Statements (15 Hours): Nature, uses and limitations. Analysis and interpretations – meaning, procedure, objectives, and importance. Comparative statement, Common Size Statements and Trend Analysis - practical problems.   Unit III: Ratio Analysis (15 Hours): Definition and meaning of Ratio Analysis, importance and limitations, Profitability Ratio – Gross profit Ratio, operating Ratio, Overall profitability ratio – Earning per share. Turnover Ratios- Inventory Turnover Ratio, Debtors Turnover Ratio, Debt collection period , Creditors Turnover Ratio, Debt payment period, Liquidity Ratio- current ratio, liquid ratio. Financial positions and Leverage Ratios- Debt Equity Ratio, Proprietary Ratio - Problems thereon.   Unit IV: Analysis through Leverages (12 Hours): Meaning- types of Leverages- operating – financial and combined leverages- problems thereon.   Unit V: Fund Flow Statement (15 Hours): Meaning , uses and limitations – preparation of fund-flow statement. Cash Flow Statement: Meaning and preparation of Cash flow statement- problems thereon.

4. Unit II : Financial Statements : Nature, uses and limitations. Analysis and interpretations – meaning, procedure, objectives, and importance. Comparative statement, Common Size Statements and Trend Analysis - practical problems.

5. Trend Analysis Or Trend Percentage or Trend Ratio Analysis Meaning of Trend Analysis: Comparison of past data over a period of time with a base year is Trend Analysis. It computes the changes in percentage for different variables over a long period and then makes a comparative study of them. Each item in the base year is taken as 100 and on that basis, trend analysis for the corresponding items in the other years are calculated.

6. Trend Analysis Or Trend Percentage or Trend Ratio Analysis The trend percentage helps the analyst to study the changes that have occurred during the period. Such analysis indicates the progress of business by showing ups and downs in its activities. The comparison may be made in three different ways: Percentage of changes Ratio of changes Graphic or diagrammatic presentation of the changes.

7. Trend Analysis Or Trend Percentage or Trend Ratio Analysis Procedure for calculating trends analysis Or Steps for calculating trend analysis Selecting of base year i.e , one year is taken as a base year, generally the first or the last is taken as base year. The figures of base year are taken as 100. Trend percentage is calculated is calculated in relation to base year.

8. Trend Analysis Computation of trend percentage The following points are to be taken into account while calculating the trend percentage. Some accounting principles and practices should be followed. The base year should be clearly selected i.e , either first year or last year. Generally, earliest year is taken is taken as the base year. Every item in the base statements is started at 100. Trend percentage should be calculated only for items having logical relationship with one another.

9. Trend Analysis Computation of trend percentage The following points are to be taken into account while calculating the trend percentage. Trend percentage of cash item in another statement is calculated with reference to the same item in the base statement by using the following formula: Percentage  

10. Illustration 1: From the following statement of Assets and Liabilities of ABC Ltd. Compute the trend percentages using 31 st Dec, 2013 as the base year. Particulars 2013 2014 2015   Amount Amount Amount Amount Amount Amount I. Equity & Liabilities             Shareholders fund Share Capital 1,00,000 1,25,000 1,50,000 Reserves & Surplus 50,000 1,50,000 75,000 2,00,000 75,000 2,25,000 2. Non-Current Liabilities Long Term Borrowings 1,00,000 50,000 25,000 3. Current Liabilities Trade Payables 1,50,000 2,00,000 1,00,000 Total 4,00,000 4,50,000 3,50,000 II. Assets 1. Non-Current Assets a. Fixed Assets Tangible Assets 2,00,000 2,50,000 2,00,000 2. Current Assets Inventories 1,25,000 1,25,000 75,000 Trade receivables 50,000 50,000 50,000 Cash & Cash Equivalents 25,000 2,00,000 25,000 2,00,000 25,000 1,50,000 Total 4,00,000 4,50,000 3,50,000

11. Notes to Accounts Particulars 2013 2014 2015   Amount Amount Amount Note 1: Share Capital 100000 125000 150000 Share Capital 100000 125000 150000 Note 2: Reserves & Surplus 50000 75000 75000 Reserves & Surplus 50000 75000 75000 Note 3: Long Term Borrowings Loans 100000 50000 25000 Long Term Borrowings 100000 50000 25000 Note 4: Trade Payable Sundry Creditors 150000 200000 100000 Trade Payable 150000 200000 100000 Note 6: Tangible Assets Buildings 100000 125000 150000 Plants 100000 125000 50000 Tangible Assets 200000 250000 200000 Note 8: Inventories Stock 125000 125000 75000 Inventories 125000 125000 75000 Note 9: Trade Receivables Sundry Debtors 50000 50000 50000 Trade Receivables 50000 50000 50000 Note 10: Cash & Cash Equivalents Cash 25000 25000 25000 Cash & Cash Equivalents 25000 25000 25000

12. Particulars 2013 2014 2015 Trend percentage 100 Base year 2013 2013 2014 2015 I. Equity & Liabilities Shareholders fund Share Capital 1,00,000 1,25,000 1,50,000 100 125 150 Reserves & Surplus 50,000 75,000 75,000 100 150 150 Total Shareholders Fund (A) 1,50,000 2,00,000 2,25,000 100 133.33 150 2. Non-Current Liabilities Long Term Borrowings 1,00,000 50,000 25,000 100 50 25 Total Long Term Loans (B) 1,00,000 50,000 25,000 100 50 25 3. Current Liabilities Trade Payables 1,50,000 2,00,000 1,00,000 100 133.33 66.67 Total Current Liabilities (C) 1,50,000 2,00,000 1,00,000 100 133.33 66.67 Total (A+B+C) 4,00,000 4,50,000 3,50,000 100 112.5 87.5 Solution: Trend Analysis Comparative Statement of Assets & Liabilities for the year ending 2013 to 2015.

13. Particulars 2013 2014 2015 Trend percentage 100 Base year 2013 2013 2014 2015 II. Assets 1. Non-Current Assets a. Fixed Assets Tangible Assets 2,00,000 2,50,000 2,00,000 100 125 100 Total Non-Current Assets (D) 2,00,000 2,50,000 2,00,000 100 125 100 2. Current Assets Inventories 1,25,000 1,25,000 75,000 100 100 60 Trade receivables 50,000 50,000 50,000 100 100 100 Cash & Cash Equivalents 25,000 25,000 25,000 100 100 100 Total Current Assets (E) 2,00,000 2,00,000 1,50,000 100 100 75 Total (D+E) 4,00,000 4,50,000 3,50,000 100 112.5 87.5 Solution: Trend Analysis Comparative Statement of Assets & Liabilities for the year ending 2013 to 2015.

14. Illustration: 1 Solution: For Sales:   Calculation of trend percentages:            

15. Share Capital:   Calculation of trend percentages:         Reserves & Surplus:

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