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PROJECT WORK IN ACCOUNTANCY (2023-24) COMPREHENSIVE …

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PROJECT WORK IN ACCOUNTANCY (2023-24) COMPREHENSIVE PROJECT TOPIC: Study of the Operational Efficiency of "Clean Detergent Soap" (With GST) Objectives of the Project: The main objectives of my project are that I will be able: To judge the performance of the firm. To judge the overall profitability position. To check the financial soundness. To judge the effectiveness with which the fixed assets have been used. To identify Investing and Financing activities and prepare Cash Flow Statement. TOOLS OF ANALYSIS (1) Ratios (ii) Cash Flow Statement SOURCE MATERIAL Project Statement: 'Clean Detergent Soap' On January 1, 2022 National Small Industries Corporation (NSIC) organised a Camp for those who wanted to start a small business. The NSIC displayed 1500 small business projects which could be started with an investment of 2,00,000. The NSIC also promised to buy the entire production of the first year. It promised to supply the required machinery at a very subsidised rate. It also had a scheme to give loans upto 50% of the working capital requirement. A large number of people visited the camp. There were project demonstrations by the NSIC advisers and experts. Ms. Neelam was very impressed by the demonstration of the small business project on Detergent Powder. The project was economically vlable. She was convinced that she will definitely succeed in carrying out the project. She entered into an agreement with the NSIC who agreed to supply the necessary plant for ₹ 60,000 (GST @ 18 %) on turnkey basis. She had sufficient open space at her residence in a village. She got the machine fixed, and the down payment of 20,800 was made. The balance was to be paid equally over a period of five years. She went through the literature provided by the NSIC to know the addresses of the suppliers of the raw materials. She placed necessary orders for the raw material and arranged for workers who will operate the machine and do other necessary production work. She set up a small workable office and decided to do all office work herself. All supplies were on a credit for two weeks. She formally inaugurated the production on April 1, 2022. She invited all the villagers on the very first day. Clean Detergent powder was very reasonably priced. The price was very much lower than other brands in the market. She visited ten other villages around her village. She told the people there, as to how her detergent powder is better and cheaper than others. Her product was really good and was accepted by all those who used it. Within two months she could sell whatever she produced every week. Her initial investment was 80,000 out of which she paid the first instalment (down payment) of plant on April 1, 2022. She opened a Bank Account with 49,200 on the same date. She had an old scooter worth 20,000 which she decided to use in her business. She also purchased furniture for 12,000 (GST @ 12%). Thus, her total investment was 1,00,000. The payments to suppliers were made on the 15th and the 30th of each month. The salaries and wages were paid only on the 7th of each month. The Sales were mostly for Cash. The Cash Sale was deposited in the Bank the next day. The sale to local customers was on credit for oneweek. All the customers were honest and paid the amount as and when due. The following expenses were incurred and revenue realised during the year ended March 31, 2023. (₹) 1. Raw material purchased on credit (GST @ 12%) 12,00,000 2. Cash paid to the (suppliers) creditors 11,24,000 3. Cash Sales (GST @ 18%) 16,00,000 4. Credit Sales (GST @ 18%) 15,25,000 5. Cash received from customers 2,31,000 6. Wages paid for eleven months 19,000 7. Office expenses 25,000 8. Power bills paid 10,000 9. Packing expenses (GST @ 12%) 2,52,000 10. Drawings Other balances as on March 31, 2023 were as follow: (i) Closing Stock (₹) (ii) Plant 25,000 60,000 (iii) Furniture 12,000 (iv) Debtors 75,000 (v) Scooter 20,000 Depreciation was charged @ 10% p.a. on both plant and furniture and @ 20% on Scooter. Wages are outstanding for one month. Required: 1. Ms. Neelam wants to judge her performance. ii. Calculate necessary ratios to find out her overall profitability and production efficiency. iii. Evaluate her liquidity position at the end of the year. iv. Identify her main financing and investing activities. V. Prepare Cash Flow Statement. vi. Can she get a loan from a bank?
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