Take a loan for 500,000. 4. Sell 50% inventory for 500,000 (50% cash and 50% credit) 5. Interest on loan of 10% paid. 6. Salary and other expenses 200,000. 7. All receivables collected 8. Building purchased for 300,000 (through cash), depreciation at 10% per annum.
Retained EarningsLoans
TOTAL
500000
500000
100000
500000
Balance Sheet as on --------date Liabilities Share Capital Retained Earnings Loans Creditors O/S Expenses Assets Fixed Assets Investments Inventory Receivables Cash Prepaid expenses
TOTAL
1184000
1184000
Investments
Inventory
Receivables
1600000
270000
100000
Income Statement for the period Income Expenses COGS Expenses Opex EBITDA Depn EBIT Int EBT Tax EAT 500000 100000 200000 300000
300000 200000 30000 170000 50000 120000 36000 Assume 30% 84000 assume all this is retained in the business
30000
Taxes always are paid on Profits ( Income - Expenses ) sales(topline) - COGS - opex = EBITDA EBITDA - DA = EBIT EBIT - Interest = EBT EBT + Other Income (Dividends, non-operating, incom EBT - Tax = NI(bottom line)
Cash 500000 -100000 500000 250000 -50000 -200000 250000 -300000 -36000
30000 36000
814000
380000
1600000
ys are paid on Profits ( Income - Expenses ) not on Income ne) - COGS - opex = EBITDA
er Income (Dividends, non-operating, income from side businesses, non-recurring, extraordinary, netc)= EBT
Applications Sources
rnd ( expense or asset depends upon the type of company and transaction: eg: one time invt of 10m is a deferred expense (co
Straight line method: Linearly the cost is divided over a period of given years Written Down Value : Principal cost of the amount keeps reducing as per the depreciation accounted for in the prev yrs. The salvage value : causes the total depn amount to reduce by an amount equal to the scrap/salvage value book value : cost of asset now in the books (ie. : after depreciation etc) market value : cost of an asset in the market at present salvage value : cost of an asset in the market at the end of the asset's life cost: cost of acquiring an asset ( from designing to - consulting- buying- setup cost- testing to commercial produc gross block : 10,00,000 ( at end of Y2) total accumulated depn : 3,60,000 Net block : 6,40,000 net worth : total assets - loans / the amount owned by the shareholders
m is a deferred expense (conservatism) accounted for under assets and divided over a period of time. 1 lakh per year (consistency) invt
ted for in the prev yrs. The principal the depn is accounted on reduces each succeeding year.