Continuous Assignment #1

Group 30
CASE 2
A) We recommend following business to the people mentioned:
1) Amar Initially sole proprietorship and then move to company to raise new
capital and expand as he wants to grow fast.
2) Akbar - sole proprietorship as he is self-reliant and will have control over the
firm.
3) Anthony - partnership model to start an event management firm as it does not
require much capital and the profits and loss can be shared as he is a team player.
4) Amarpreet - LLP as he wants to run his hospital which can be managed by group
of professionals. It would also limit his liability as it involves risk.
CASE 4
A) No, we do not agree with Koyas loss calculation. He should not have included
personal expenses for the calculation of profit/loss. It is given that only source of
income was the fare collected from the cab. Bases on this we calculate revenues and
expense(Only business expenses to be included and personal expenses excluded)
Expenses

Revenue
Description
Groceries Purchased

Amou
nt (in
INR)
48275

Clothes for daughters

2850

Books and fees

Uniform and drivers
badge
Food and drinks while
driving

850

18000

Sari for wife

Diesel and oil
Domestic expenses
EMI Paid
Paid Savings account
Total

1250
157500
11000
198000
7490
448000

2785

Description
Driver's uniform and
badge
Food and drinks
while driving
Diesel and oil
EMI
Down Payment
Total

Amou
nt (in
INR)
2785
18000
15750
0
19800
0
28500
0
66128
5

CASE 5
A) Reasons firm create their own subsidiaries are:1) Tax Relief: To offset profits in one part of business with losses in another especially
in tax heavens.

2) Financial protection: To protect the company from financial liabilities. Example: If

the subsidiary runs into financial trouble, the parent companys assets and its credit
rating are protected.
3) Legal Protection: firm can create subsidiary for part of business which is vulnerable
to legal trouble.
4) Expansion or Downsizing of business: If firm wants to raise new capital to expand
or want to sell portion of the business.

Rohit Ferro-Tech Ltd.

Ans1 Proofs of fundamental concepts of accounting:
1) Property Rights- Pg 49 note 2 section b
2) Business Entity- Pg 14, Directors report shows it is a company
3) Gong concern Pg16, 4th point of Directors responsibility statement and Pg 46
1.1(a)
4) Monetary Expression Pg 80 section1.4 Intangible assets converted to monetary
value on Pg 88 Note 12
5) Matching concept Pg 77 Note 23 and 25 in consolidated profit and loss
statement.
6) Realization concept Pg 46 sec 1.2(b) Pg 42 Balance sheet shows trade
receivables
7) Consistency Pg 80, Note1; Pg 46 sec 1.3 (b) of annual report 2013-14 compared
with Pg 36 sec 1.3 (b)of annual report 2012-13 show straight line depreciation is
being followed in both financial years
8) Diversity among Independent Entities- Not applicable here
9) Conservatism Pg 46 section 1.5- Inventories are valued at lower cost
10) Reliability of data Pg 37 Independent auditor report
11) Dependability of data - Pg 23, sec Internal control and system
12) Materiality Pg 44 cash flow from operating activities-last point (sundry
balances written off)
13) Timeliness Pg 14, first line shows accounts presented are for the year 2013-14

2) Following are the stakeholders in the company:

1) Government: will into tax liabilities, regulations and environment norms being followed
by the company. Pg 43 P&L statement
2) Public: Interested in environmental activities. Pg 17 Energy Conservation.
3) Investors: Interested in future plan of action Pg 19, pg 15 Expansion projects under
implementation
4) Board Of Directors: Mr Suresh kumar patni will be interested in Balance sheet (Pg 76),
profit and loss statement (Pg 77) and cash flow statement (Pg 78)
5) Employees: Mr S.Banerjee, cost accountant will be interested in pay hikes. Pg 61 Note 25

6) Equity Analyst and Fund Managers: Interested in credit rating (pg 15), share
performance and corporate debt restructuring (Pg 15)
7) Customers: Interested in knowing the ability to fulfil orders eg. steel industry
8) Suppliers and Other Creditors: Interested in profitability and improvements of the
company. Pg 10 and pg42