C. A. FINAL FINANCIAL REPORTING VALUE ADDED STATEMENT Q.1. X Ltd. had been preparing value added statement for the past five years. The personnel manager of company has suggested that a value added incentive scheme when introduced will motivate employee to better performance. To introduce the scheme, it is proposed that the best index performance, i.e. Employee Costs to Added Value for the last 5 years will be used as the target index for future calculations of the bonus to be earned. After the target index is determined, any actual improvement in the index will be rewarded, the employer and employees sharing any such bonus in the ratio 1:2. The bonus is given at the end of the year, after the profit for the year is determined. Value Added Statement for 5 years Year 2007 2008 2009 2010 2011 Sales 3,000 4,000 5,000 6,000 7,000 Less: Bought in good service 1,480 2,200 2,900 3,600 4,200 Added Value 1,520 1,800 2,100 2,400 2,800 Employees costs 684 792 840 984 1,120 Dividend 100 150 200 240 300 Taxes 320 380 410 500 560 Depreciation 226 278 360 440 560 Debenture Interest 40 40 40 40 60 Retained earnings 150 160 250 196 200 Added Value 1,520 1,800 2,100 2,400 2,800 Summarized P & L for 2012 ( in lakhs) ( ) ( ) Sales 8,000 Cost of material 3,100 Wages 700 Production Salaries 200 Production Expenses 700 Depreciation on Machinery 500 Administration Salaries 300 Administration Expenses 350 Administration Depreciation 200 Deb. Interest 40 Salaries (Sales Deptt.) 60 Sales Expenses 250 Depreciation (Sales Deptt. Assets) 60 6,460 Profit 1,540 Required: (a) Calculate the Bonus to be paid to the Employees, if any, for the year 2012 (b) How will you adjust this bonus in Value Added Statement for the year 2012? 1
Q.2. Q.3. FINANCIAL REPORTING / VALUE ADDED STATEMENT. On the basis of the following income statement pertaining to Brite Ltd., you are required to prepare: (a) Gross value added statement; and (b) Statement showing reconciliation of gross value added with Profit Before Taxation. Profit and Loss Account of Brite Ltd. for the year ended 31 st March, 2012 ( ) in thousands ( ) in thousands Income Sales less returns 15,27,956 Dividends and interest 130 Miscellaneous income 474 (A) 15,28,560 Expenditure Production and operational expenses: Decrease in inventory of finished goods 26,054 Consumption of raw materials 7,40,821 Power and lighting 1,20,030 Wages, salaries and bonus 3,81,760 Staff welfare expenses 26,240 Excise duty 14,540 Other manufacturing expenses 32,565 13,42,010 Administrative expenses: Director s remuneration 7,810 Other administrative expenses 32,640 40,450 Interest on: 9% Mortgage debentures 14,400 Long-term loan from financial institution 10,000 Bank overdraft 100 24,500 Depreciation on fixed assets 50,600 (B) 14,57,560 Profit before Taxation, (A) (B) 71,000 Provision for Income-Tax @ 35.875% 25,470 Profit after Taxation 45,530 Balance of account as per last Balance Sheet 6,300 51,830 Transferred to: General Reserve 40% of 45,530 18,212 Interim Dividend paid 2,000 Proposed Dividend @ 22% 20,000 Tax on distributed profits @ 12.81% 2,818 43,030 Surplus carried to Balance Sheet 8,800 [November, 2003] Value Added Ltd. furnishes the following Profit and Loss A/c: Profit and Loss A/c for the year ended 31 st March, 2012 2
Income Notes ( 000) Turnover 1 29,872 Other Income 1,042 Expenditure 30,914 Operating expenses 2 26,741 Interest on 8% Debenture 987 Interest on Cash Credit 3 151 Excise duty 1,952 29,831 Profit before depreciation 1,083 Less: Depreciation (342) Profit before tax 741 Provision for tax 4 (376) Profit after tax 365 Less: Transfer to Fixed Assets Replacement Reserve (65) Less: Dividend paid (125) Retained Profit 175 Notes: (1) Turnover is based on invoice value and net of sales tax. (2) Salaries, wages and other employee benefits amounting to 14,761 ( 000) are included in operating expenses. (3) Cash Credit represents a temporary source of finance. It has not been considered as a part of capital. (4) Transfer of 54 ( 000) to the credit of deferred tax account is included in provision for tax. Required: Prepare Value Added Statement for the year ended 31 st March, 2012 and reconcile total value added with profit before taxation. [Nov. 2007] 300 3
Q.4. The following is the Profit and Loss Account of Galaxy Ltd. for the year ended 31.03.2012. Prepare a Gross Value Added Statement of Galaxy Ltd. and show also the reconciliation between Gross Value Added and Profit before taxation. Profit and Loss Account for the year ended 31.03.2012 Income Notes Amount ( in lakhs) Income: Sales - 890 Other Income - 55 945 Expenditure: Production and operational expenses (a) 641 - Administration expenses (Factory) (b) 33 - Interest (c) 29 - Depreciation 17 (720) Profit before taxes - 225 Provision for taxes (d) - (30) Profit after tax - 195 Balance as per last Balance Sheet - 10 205 Transferred to General Reserve 45 - Dividend paid 95-140 - Surplus carried to Balance Sheet 65-205 - Notes: (a) Production and Operational expenses in lakhs Consumption of raw materials 293 Consumption of stores 59 Salaries, Wages, Gratuities etc. (Admn.) 82 Cess and Local taxes 98 Other manufacturing expenses 109 641 (b) Administration expenses include salaries, commission to Directors 9.00 lakhs Provision for doubtful debts 6.30 lakhs. (c) Interest Include: in lakhs Interest on loan from ICICI Bank for working capital 9 Interest on loan from ICICI Bank for fixed loan 10 Interest on loan from IFCI for fixed loan 8 Interest on Debentures 2 29 (d) The charges for taxation include a transfer of 3.00 lakhs to the credit of Deferred Tax Account. (e) Cess and Local taxes include Excise Duty, which is equal to 10% of cost of bought-in material and services. [November, 2004] 4
Q.5. From the following Profit and Loss account of New Mode Reporting Ltd., prepare a gross value added statement for the year ended 31 st March, 2012. Show also the reconciliation between GVA and Profit before taxation. Profit and Loss Account ( ) 000s ( ) 000s Income Sales 12,480 Other income 110 12,590 Expenditure Production and Operational expenditure 8,640 Administrative expenses 360 Interest and other charges 1,248 Depreciation 32 10,280 Profit before tax 2,310 Less: Provision for tax (110) Profit after tax 2,200 Add: Balance as per last Balance Sheet 120 2,320 Less: Transfer to Fixed assets replacement Reserve 800 Dividend paid 320 (1,120) Surplus carried to Balance Sheet 1,200 Additional Information: (i) Production and Operational expenses consists of Consumption of Raw materials 64,20,000 Consumption of Stores 80,000 Local Tax 16,000 Salaries to Administrative staff 12,40,000 Other Manufacturing expenses 8,84,000 (ii) Administrative expenses include salaries and commission to directors - 10,000 (iii) Interest and other charges include (iv) (a) Interest on bank overdraft (overdraft is of temporary nature) 2,18,000 (b) Fixed loan from SIDBI 1,02,000 (c) Working capital loan from IFCI 40,000 (d) Excise duties? Excise duties amount to one-tenth of total value added by manufacturing and trading activities. [May, 1999, Nov. 2008) 5
Q.6. From the following data, prepare a Value Added Statement of Bhadreshwar Ltd., for the yearended 31.03.2000. Balance Sheet of Satyam Ltd on 31.03.2006 PARTICULARS PARTICULARS Decrease in Stock 24,000 Sales 40,19,000 Purchases 20,20,000 Other Income 55,000 Wages & Salaries 10,00,000 Manufacturing & Other Expenses 2,30,000 Finance Charges 4,69,000 Depreciation 2,44,000 Profit Before Taxation 87,000 Total 40,74,000 Total 40,74,000 PARTICULARS Profit Before Taxation 87,000 Less: Tax Provisions (40,000) Income Tax Payments (for earlier years) (3,000) Add: Earlier Year Profit brought forward 38,000 Profit After Taxation 82,000 Appropriations of PAT Debenture Redemption Reserve 10,000 General Reserve 10,000 Proposed Dividend 35,000 Balance Carried to Balance Sheet 27,000 Total 82,000 Q.7. From the following details, calculate the Gross Value Added and Net Value Added of Amareshwar Ltd. Profit and Loss Account for the year ended 31 st March 2000 Particulars 000s Notes 000s Sales 8,540 Trading Profit A 766 Less: Depreciation 121 Interest 56 B (177) Add: Rent from let out properties 33 Profit Before Tax 622 Less: Provision for tax C (275) Profit After Tax 347 Less: Extra-Ordinary items D (7) 340 Less: Dividend Paid and Payable (136) Retained Profit 204 6
Notes : FINANCIAL REPORTING / VALUE ADDED STATEMENT. A. Trading Profit is arrived at after charging Salaries, Wages, etc. to employees ( 000s) B. Interest figure is ascertained as under : 1,475 Interest paid on Bank Loans and Overdrafts ( 000s) Directors Remuneration 145 Interest received (9) Audit Fees 90 Net Interest 56 Hire of Equipment 115 C Provision of Taxes includes a transfer of 57(000s) to the credit of Deferred Tax Account. D. Extra-ordinary items Surplus on Sale & Lease back of properties Loss of Cash by theft 65 ( 000s) 8 (15) 7