Question

The following are the Balance Sheets of Mohan Limited, at the end of 2011 and 2012.
$Rs000\begin{array}{cccccc}\text{Liabilities}& \text{2011}& \text{2012}& \text{Assets}& \text{2011}& \text{2011}\\ \text{Equity Share Capital}& 400& 600& \text{Land and Buildings}& 270& 170\\ \text{Reserves and Surplus}& 312& 354& \text{Plant and Machinery}& 310& 786\\ \text{Debentures}& 50& 100& \text{Furniture and}& 9& 18\\ & & & \text{Fixtures}& & \\ \text{Long Term Loans}& 150& 255& \text{Other Fixed Assets}& 20& 30\\ \text{Accounts Payable}& 255& 117& \text{Loans and Advances}& 46& 59\\ \text{Other Current}& 7& 10& \text{Cash and Bank}& 118& 10\\ \text{Liablilities}& & & & & \\ & & & \text{Account Receivable}& 209& 190\\ & & & \text{Inventory}& 160& 130\\ & & & \text{Prepaid Expenses}& 3& 3\\ & & & \text{Other Current Assets}& 29& 40\\ & \underset{–}{\underset{–}{1,174}}& \underset{–}{\underset{–}{1,436}}& & \underset{–}{1,174}& \underset{–}{1,436}\end{array}$
Prepare a Comparative Balance Sheet and study the financial position of the company.

Answer 1

$\begin{array}{ccccc}\text{Particulars}& \text{2011}& \text{2012}& \text{Absolute}& \text{Change in}\\ & \text{(Rs 000)}& \text{(Rs 000)}& \text{Change}& \text{Percentage}\\ \text{Assets}& & & & \\ \text{Current Assets}& & & & \\ \text{Cash and Bank}& 118& 10& (-)108& (-)91.53\\ \text{Account Receivable}& 209& 190& (-)19& (-)9.09\\ \text{Inventory}& 160& 130& (-)30& (-)18.75\\ \text{Prepaid Expenses}& 3& 3& & \\ \text{Loan and Advances}& 46& 59& +13& +28.26\\ \text{Other Current Assets}& 29& 40& +11& +37.93\\ \text{Total Current Assets(A)}& \overline{\underset{–}{565}}& \overline{\underset{–}{432}}& \overline{\underset{–}{(-)133}}& \overline{\underset{–}{(-)23.54}}\\ \text{Fixed Assets}& & & & \\ \text{Land and Building}& 270& 170& (-)100& (-)37.04\\ \text{Plant and Machinery}& 310& 786& +476& +153.55\\ \text{Furniture and Fixtures}& 9& 18& +9& +100.00\\ \text{Other fixed Assets}& 20& 30& +10& +50.00\\ \text{Total Fixed Assets (B)}& \overline{\underset{–}{609}}& \overline{\underset{–}{1,004}}& \overline{\underset{–}{+395}}& \overline{\underset{–}{+64.86}}\\ \text{Total Assets(A+B)}& \overline{\underset{–}{\underset{–}{1,174}}}& \overline{\underset{–}{\underset{–}{1,436}}}& \overline{\underset{–}{\underset{–}{+262}}}& \overline{\underset{–}{\underset{–}{+22.32}}}\\ \text{Liabilities}& & & & \\ \text{Current Liabilities}& & & & \\ \text{Account Payable}& 255& 117& (-)138& (-)54.12\\ \text{Other Current Liabilities}& 7& 10& +3& 42.86\\ \text{Total Current Liabilities (A)}& \overline{\underset{–}{262}}& \overline{\underset{–}{127}}& \overline{\underset{–}{(-)135}}& \overline{\underset{–}{(-)51.53}}\\ \text{Debentures}& 50& 100& +50& +100.00\\ \text{Long term Loan}& 150& 255& +105& +70.00\\ \text{Total Long Term External Liabilities (B)}& \overline{\underset{–}{200}}& \overline{\underset{–}{355}}& \overline{\underset{–}{+155}}& \overline{\underset{–}{+77.50}}\\ \text{Equity Share Capital}& 400& 600& +200& +50.00\\ \text{Reserve and Surplus}& 312& 354& +42& +13.46\\ \text{Shareholders Fund(C)}& \overline{\underset{–}{712}}& \overline{\underset{–}{954}}& \overline{\underset{–}{+242}}& \overline{\underset{–}{+33.99}}\\ \text{Total Liabilities and Shareholder}& & & & \\ \text{Fund(A+B+C)}& \underset{–}{\underset{–}{1,174}}& \underset{–}{\underset{–}{1,436}}& \underset{–}{\underset{–}{+262}}& \underset{–}{\underset{–}{+22.32}}\end{array}$

Working Note:
Absolute Change = Current year – Previous year
Change in Percentage = $\frac{\text{Absolute Change}}{\text{Previous year}}\times 100$

Comments:
(i) Decrease in current Liabilities is more than decrease in current assets which indicates that the current ratio has improved.
(ii) Decrease in cash and bank may result in delay in payments. (iii) Fixed Assets have increased along with share capital. It indicated that such assets has been purchased using Long term sources of finance.
(iv) Increase in reserve and surplus is a healthy indicator.