Financial Analysis

Point 1: Position in accounts.
\emph{Charge} → recorded in Profit & Loss A/c as expense; reduces profit. \emph{Appropriation} → recorded in P& L \emph{Appropriation} A/c; allocates profit. Point 2: Compulsion.
\emph{Charge} is obligatory (must be paid irrespective of profit). \emph{Appropriation} is discretionary (depends on available profit). Point 3: Examples.
Charge: Interest on debentures, depreciation. Appropriation: Dividend, transfer to general reserve, bonus issue.
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Step 1: Meaning.
Accumulated profits are undistributed earnings standing in the books on the date of reconstitution/dissolution (e.g., General Reserve, Credit balance of P& L, Workmen Compensation Reserve surplus, etc.).
Step 2: Treatment in partnership.
Before admission/retirement/death, these are transferred to partners’ capital accounts in the \emph{old} profit-sharing ratio.
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Step 1: Define. Trend analysis = horizontal analysis of financial statements.
Step 2: Method. Base year = 100, other years compared as percentage of base year.
Step 3: Utility. - Shows growth/decline. - Useful for forecasting.
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