Acconting Project Report

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PAKISTAN TOBBACO COMPANY


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PAKISTAN TOBACCOCOMPANY

COST ACCOUNTING

SUBMITTED BY

NAME

ENROLLMENT NO

1) MIAN MUHAMMAD SAJAWAL 01-111101-157

2) IBRAHIM GHAZNAVI 01-111101-113

3) MYRA RABBANI 01-111102-108

4) Arshad Bhukari

5) Husaifa

CLASS: BBA 5-C

DEPARTMENT: MANAGEMENT SCIENCES

SUBMITTED TO

SIR SHAHZAD BUTT

DATE: 21-MAY-2012


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ABSTRACT

This report contains an introduction to the Pakistan Tobacco Company (PTC); and an analysis of its Profit and

Loss statement and Balance Sheet, which helps to analysis the financial position of the Company.

Moreover, this report encompasses on the interpretation of its financial statement; Ratio Analysis.

In our report we have discussed each of the above elements and given some suggestions to the Company to

improve its financial position and we hope that it will be of considerable use by those who review it


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ACKNOWLEDGEMENT

First and foremost, we thank God Almighty for everything, and for enabling us to accomplish making this report.

We would like to thank Sir Shahzad Butt, who has guided us throughout the course; he is a true mentor and we

sincerely appreciate her patience, assistance and guidance and humor and secondly we would like to thank Mr.Faisal Saif, who is the Senior Manager at Pakistan Tobacco Company


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CONTENTS

INTRODUCTION 4

PTC EMPLOYMENT PRINCIPLE 4

VISION 5

MISSION 5

STRATEGIC OBJECTIVES

5

RATIO ANALYSIS

6

A) GROSS PROFIT RATIO TO SALES 6

B) GROSS PROFIT TO COST 7

C) GROSS PROFIT PER UNIT 8

D) INCOME TO SALES PERCENTAGE 9

E) INCOME PER UNIT 10


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F) INVENTORY TURNOVER IN TIMES 11

G) INVENTORY TURNOVER IN DAYS 12

PROFIT & LOSS ACCOUNT 13

BALANCE SHEET

14

INTRODUCTION

Pakistan Tobacco Company Limited was incorporated in 1947 immediately after independence, when it took over

the business of the Imperial Tobacco Company of British India which had been operational in the South Asia since

1905. Pakistan Tobacco Company is part of the British American Tobacco Group, one of the world's most

international business groups, with brands sold in 180 markets around the world. It is located in Jhelum, Pakistan.

From being just a single factory operation to a company which is involved in every aspect of cigarette production,

from tobacco cultivation to packaging we have evolved and grown with Pakistan. However, what is significant

about these sixty-two years is the effort that PTC has demonstrated in the development of the country. By being

instrumental in the campaign for modern agricultural and industrial practices, we have helped in the development

and progress of the agricultural & industrial sector in the country. PTC is the largest excise tax generator in the

private sector in the country. In 2004 alone, PTC paid the government close to Rs.16 billion in excise and sales

taxes. This amounts to over Rs. 50 million per working day. Over one million people are economically dependent

on the industry in Pakistan.


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PTC EMPLOYMENT PRINCIPLE

Our Guiding Principles describe the organisation we are and the organisation we want to be. They represent the

common values at the heart of our success. Our Employment Principles build on our commitment to good

employment practices and workplace related human rights.

VISION STATEMENT

The vision statement of Pakistan Tobacco Company is First Choice for Everyone


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MISSION

Their mission statement is to transform PTC to perform responsibly with the speed,

flexibility and enterprising spirit of an innovative, consumer focused Company

STRATEGIC OBJECTIVE

Our strategy reflects our vision of being the champions of growth, productivity,

responsibility and winning organization.

RATION ANALYSIS

GROSS PROFIT RATIO TO SALES

Gross Profit / Net Sales * 100

2010: 6,204,912 / 20,952,629 * 100

= 29.61 %

2011: 6,240,701 / 22,949,974 * 100

= 27.19 %


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8.60%

8.80%

9.00%

9.20%

9.40%

9.60%

9.80%

10.00%

10.20%

10.40%

2010

2011

INTERPRETATION:

The Gross Profit Ratio to sales has decreased from 29.61% in 2010 to 27.19% in 2011. Decline in the ratio shows

that PTC effectiveness of business is decreasing in terms of profit which it has made on COGS. PTC should

improve its Cost Management and Pricing Decisions.

GROSS PROFIT RATIO TO COST

Gross Profit / COGS * 100

2010: 6,204,912 / 14,747,717 * 100

= 42.1 %

2011: 6,240,701 / 16,709,273 * 100

= 37.3 %


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34.00%

35.00%

36.00%

37.00%

38.00%

39.00%40.00%

41.00%

42.00%

43.00%

2010

2011

INTERPRETATION:

PTC Gross Profit Ratio to Cost is decreasing from 42.1% in 2011 to 37.3% in 2011, which shows that PTC Cost of

Sales is not in line with Gross Profit. If PTC can not improve its sales due to market competitiveness so PTC

should improve its Cost Management.

GROSS PROFIT RATIO PER UNIT

Total Gross Profit / No. of Units Sold

2010: 6,204,912,000 / 36,831,000,000

= 0.168 Per unit

2011: 6,240,701,000 / 39,795,000,000


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= 0.1568 Per unit

0.15

0.155

0.16

0.165

0.17

per unit

2010

2011

INTERPRETATION:

The Gross Profit Ratio is decreasing from 0.168 per unit in 2010 to 0.1568 per unit in 2011 which shows that PTC

Cost of Sales is increasing more than Net Turn over.

PTC should be efficient in its Cost Management and Pricing decisions.

INCOME TO SALES PERCENTAGE

Net Income / Net Sales * 100

2010: 925,100 / 60,195,535 * 100

= 1.54 %

2011: 363,785 / 60,491,816 * 100


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= 0.54 %

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

2010

2011

INTERPRETATION:

PTC net Profit Margin has decline from 1.54% in 2010 to 0.54% in 2011 primarily due to increase in other

operating Expenses company might has incurred cost on different projects.

PTC must ensure that on the projects it has invested should deliver financial results

INCOME PER UNIT

Net Income / No. of Units Sold

2010: 925,100,000 / 36,831,000,000

= 0.025 per unit


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2011: 363,785,000 / 39,795,000,000

= 0.009 per unit

0

0.005

0.01

0.015

0.02

0.025

2010

2011

INTERPRETATION:

Inventory Turnover in Times is also decresing by 0.23 per unit in 2010 to 0.009 per unit in 2011. It could br of two

reasons:

1. PTC has reduced its size of inventory

2. Or it is managing its Inventory very efficiently.

INVENTORY TURNOVER IN TIMES

COGS / Avg. Inventory

2010: 4,915,788 + 5,318,558 / 2

Average Inventory For 2010 = 5,117,173

14,747,717 / 5,117,173

= 2.88 Times


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2011: 5,318,558 + 5,376,669 / 2

Average Inventory For 2011 = 5,347,613.5

16,709,273 / 5,347,613.5

= 3.12 Times

2.75

2.8

2.85

2.9

2.95

3

3.05

3.1

3.15

2010

2011

INTERPRETATION:

Inventory Turnover in Times is Increasing from 2.88 Times in 2010 to 3.12 Times in 2011 which shows that PTC

is efficiently managing its Inventory

INVENTORY TURNOVER IN DAYS

(Inventory * Days in Year) / COGS

2010: 4,915,788 + 5,318,558 / 2

Average Inventory For 2010 = 5,117,173

(5,117,173 * 360) /14,747,717


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= 125 Days

2011: 5,318,558 + 5,376,669 / 2

Average Inventory For 2011 = 5,347,613.5

(5,347,613.5 * 360) / 16,709,273

= 115 Days

110

112

114

116

118

120

122

124

126

Days

2010

2011

INTERPRETATION:

Inventory days have decreased from 125 in 2010 to 115 in 2011, which shows Increase in efficiency in

managing the inventories & converting them in sales. As the firm is improving its sales of inventory, the

firm has reduced time for its inventory conversion.

PROFIT & LOSS ACCOUNTFor the year ended December 31, 2011

2011 2010

Rs. 000 Rs. 000

--------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------


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Gross turnover 67,491,816 60,195,535

Excise duties (34,719,661) (30,476,421)

Sales tax (9,822,181) (8,766,485)

Net turnover 22,949,974 20,952,629Cost of sales (16,709,273) 20,952,629

Gross profit 6,240,701 6,204,912

Selling and distribution expenses (3,129,938) (3,279,390)

Administration expenses (1,321,713) (1,233,165)

Other operating expenses (1,182,363) (208,211)

Other operating incomes 53,967 46,610

(5,580,047) (4,674,156)

Operating profit 660,654 1,530,756

Finance income 39,160 36,933

Finance cost (140,539) (149,680)

Net finance cost (101,379) (112,747)

Profit before income tax 559,275 1,418,009

Income tax expenses (195,490) (492,909)

Profit for the year 363,785 925,100

BALANCE SHEETFor the year ended December 31, 2011

2011 2010Rs. 000 Rs. 000

--------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------

Non current assets

Property, plant and equipment 6,092,284 5,823,688


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Long term investment in subsidiary company 5,000 5,000

Long term loans 1,260 3,417

Long term deposits and prepayments 22,640 15,375

Currents assets

Stock in trade 6,462,330 6,002,823

Stores and spares 190,110 199,207

Trade debts 1,202 1,597

Loans and advances 64,310 48,267

Short term prepayments 94,052 118,329

Other receivables 196,249 93,546

Income tax paid in advances 79,419 15,206

Cash and bank balances 109,631 51,945

------------------------------------------------------------

7,197,303 6,530,920

Current liabilities

Trade and other payables 7,067,704 5,339,725

Accrued interest / mark-up 51,187 46,789

Short term running finances 1,783,623 2,252,218

------------------- --------------

8,902,514 7,638,732

------------------------------------------------------------

(1,705,211) (1,107,812)

Net current liabilities

Non current liabilities

Deferred income tax liability (1,082,038) (1,137,581)

Net assets 3,333,935 3,602,087


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