FINANCIAL ACCOUNTING

COMPANY: TATA CONSULTANCY SERVICES LTD.

Submitted By:
Group 7 Sec- C

Rishab Doogar 21A2HP414

Sanjana Nahata 21A2HP412
Maitreye Shrivastava 21A2HP438
Pranav Iyer 21A2HP402
Soumya Chaudhary 21A2HP435
Poojitha Gondesi 21A2HP425
 Balance Sheet for the last 5 years
(From March 2017 to March 2021)
Standalone Balance Sheet ------------------- in Rs. Cr. -------------------
  Mar 21 Mar 20 Mar 19 Mar 18 Mar 17
  12 mths 12 mths 12 mths 12 mths 12 mths
EQUITIES AND LIABILITIES          
SHAREHOLDER'S FUNDS          
Equity Share Capital 370.00 375.00 375.00 191.00 197.00
Total Share Capital 370.00 375.00 375.00 191.00 197.00
Reserves and Surplus 74,424.00 73,993.00 78,523.00 75,675.0 77,825.00
0
Total Reserves and Surplus 74,424.00 73,993.00 78,523.00 75,675.0 77,825.00
0
Total Shareholders Funds 74,794.00 74,368.00 78,898.00 75,866.0 78,022.00
0
NON-CURRENT LIABILITIES          
Long Term Borrowings 0.00 0.00 0.00 39.00 44.00
Deferred Tax Liabilities [Net] 365.00 347.00 339.00 424.00 314.00
Other Long Term Liabilities 5,697.00 6,234.00 1,367.00 643.00 638.00
Long Term Provisions 0.00 0.00 0.00 26.00 39.00
Total Non-Current Liabilities 6,062.00 6,581.00 1,706.00 1,132.00 1,035.00
CURRENT LIABILITIES          
Short Term Borrowings 0.00 0.00 0.00 181.00 200.00
Trade Payables 7,962.00 8,734.00 7,692.00 4,775.00 4,190.00
Other Current Liabilities 19,213.00 15,057.00 11,030.00 8,931.00 6,245.00
Short Term Provisions 1,350.00 235.00 174.00 171.00 66.00
Total Current Liabilities 28,525.00 24,026.00 18,896.00 14,058.0 10,701.00
0
Total Capital And Liabilities 1,09,381.0 1,04,975.00 99,500.00 91,056.0 89,758.00
0 0
ASSETS          
NON-CURRENT ASSETS          
Tangible Assets 15,697.00 15,883.00 9,522.00 9,430.00 9,214.00
Intangible Assets 362.00 239.00 139.00 10.00 17.00
Capital Work-In-Progress 861.00 781.00 834.00 1,238.00 1,477.00
Fixed Assets 16,920.00 16,903.00 10,495.00 10,678.0 10,708.00
0
Non-Current Investments 2,405.00 2,189.00 2,189.00 2,186.00 2,201.00
Deferred Tax Assets [Net] 3,160.00 2,219.00 2,097.00 3,051.00 2,447.00
Long Term Loans And Advances 2.00 2.00 2.00 1,503.00 6.00
Other Non-Current Assets 3,734.00 4,468.00 5,685.00 5,416.00 5,954.00
Total Non-Current Assets 26,221.00 25,781.00 20,468.00 22,834.0 21,316.00
 0
CURRENT ASSETS          
Current Investments 28,324.00 25,686.00 28,280.00 35,073.0 40,729.00
0
Inventories 7.00 5.00 10.00 25.00 21.00
Trade Receivables 25,222.00 28,660.00 24,029.00 18,882.0 16,582.00
0
Cash And Cash Equivalents 3,142.00 4,824.00 8,900.00 3,487.00 1,316.00
Short Term Loans And Advances 10,486.00 7,270.00 7,018.00 2,793.00 2,704.00
OtherCurrentAssets 15,979.00 12,749.00 10,795.00 7,962.00 7,090.00
Total Current Assets 83,160.00 79,194.00 79,032.00 68,222.0 68,442.00
0
Total Assets 1,09,381.0 1,04,975.00 99,500.00 91,056.0 89,758.00
0 0

Introduction
Tata Consultancy Services (TCS) is an Indian multinational IT services and consulting firm
based out of Mumbai, Maharashtra, India, with its largest campus in Chennai, Tamil Nadu,
India. TCS is the world's largest IT services firm by market capitalization ($200 billion) as of
February 2021. It is a Tata Group business with operations in 149 locations in 46 countries.

Trend Analysis of Balance Sheet

Tata Consultancy Services has shown immense growth in its position statement in the last "5"
years, in last 5 Years the organisation balance sheet grown by 11%, (from 89,758 crores to
1,09,381 crores). The company has various assets and liabilities recorded, which shows some
significant amount of increase and decrease in the past five years, a detailed analysis of the
same is mentioned below.
1. Shareholders funds and Liabilities

a. Share capital – The company’s share capital, has shown a significant amount of
growth in the past few years. Especially from 2018 to 2020 there is a development of
184 crore rupees, however in FY 2020-2021 there is a loss of 5 crore rupees, which
indicate that dividend has been paid to the shareholders. Whereas for 2018-2020 we
can say that brand issued allocation of 184 crores to acquire funds for itself.
b. Reserve fund - Dividend distribution, meeting future obligations, overcoming losses,
managing working capital requirements, meeting finances requirements for business
expansion, and so on are all examples of how reserves and excess are used. Over the
past five years a pattern of fall, rise, and fall again can be observed in the reserve
fund. A fall in the reserves indicate dividend payment to shareholders. Even though
there has been a fall of 3,401.00 crore rupees the organisation has a significant
amount of reserve and surplus, which will help it in the long run.
 c. Current liability- Current liability of the organisation has increased by about 29%
over the past five years, which shows the organisation is conserving its cash by credit
purchases; it also depicts the positive impact of money. Though current liability
increment reduced the working capital ratio, it gives organisation liquidity and
positive strength.
d. Long term liability- The long term borrowings fell in FY 2017 and 2018, and
eventually went down to 0 in 2019 and have been 0 ever since.
e. Deferred tax liability – Deferred tax liability is a tax liability which has been not
paid to authority on the due date. The balance sheet shows a significant amount of
deferred tax liability, and it is increasing over the year, except for FY 2019 when it
reduced. Still, the liability only increased over the years. The organisation is saving
its assets by increasing this item, but in the long run, it will become a burden for
them. Deferred tax liability has increased by 51 crore rupees over the year.
f. Provision for the long term- It is a sum set aside to cover a future liability with an
amount that is difficult to determine but may be estimated, and it is only used if the
liability arises after 12 months or after the operational cycle time. Here the provision
fell from 39 crore rupees to 0 over the past 5 years, which indicates that if a future
liability arises then the company won’t be in a good position to cover for it.
2. Assets
a. Fixed Assets- The fixed assets of the company shown an increasing trend over the
years, it has increased by 6,212 crore rupees over the years. Fixed assets play a
crucial role in a company’s profitability because of its longevity nature, increasing
rate of trend signifies that the company is investing on its fixed assets to enhance its
purchases power and profitability.
b. Non-Current Asset- Long-term investments in which the full value will not be
realised within the accounting year are referred to as noncurrent assets. Here we can
observe an increase of 4905 crore rupees in the non-current asset, this indicates that
the firm is purchasing more illiquid assets.
c. Current assets- All of a company's assets that are expected to be sold or used in the
next year as a result of normal business operations are referred to as current assets. In
the balance sheet we see a rise of 14,718 crore rupees. Since the amount of CA is
significantly higher than CL, the company should be able to meet its short-term
obligations.
Overall, the balance sheet is showing an increasing rate which defines organisations
flourishing position in the industry, which motivates the external as well as an internal
stakeholder.
 P&L Summary of Last 5 Years of TCS Ltd Mar'17-Mar'21

 Year Mar 21 Mar 20  Mar 19 Mar 18   Mar 17

   INCOME :          

 Operating Income + 1,35,963.00 1,31,306.00 1,23,170.00 97,356.00 92,693.00

   Net Operating Income 1,35,963.00 1,31,306.00 1,23,170.00 97,356.00 92,693.00

 Other Income + 5,400.00 8,082.00 7,627.00 5,803.00 4,568.00

   Total Income 1,41,363.00 1,39,388.00 1,30,797.00 1,03,159.00 97,261.00

   EXPENDITURE:          

   Cost of Traded Software Packages 14 18 40 86 94

 Operating Expenses + 1,216.00 1,578.00 1,963.00 1,920.00 1,664.00

 Employee Cost + 69,046.00 64,906.00 59,377.00 51,499.00 48,116.00

 Selling and Administration Exp. + 18,423.00 19,658.00 19,101.00 12,395.00 12,246.00

 Miscellaneous Expenses + 8,172.00 7,793.00 7,725.00 3,651.00 3,484.00

   Total Expenditure 96,871.00 93,953.00 88,206.00 69,551.00 65,604.00

   Operating Profit 44,492.00 45,435.00 42,591.00 33,608.00 31,657.00

 Interest + 537 743 170 30 16

   Gross Profit 43,955.00 44,692.00 42,421.00 33,578.00 31,641.00

 Depreciation+ 3,053.00 2,701.00 1,716.00 1,647.00 1,575.00

   Profit Before Tax 40,902.00 41,991.00 40,705.00 31,931.00 30,066.00

 Tax+ 10,300.00 9,012.00 9,943.00 6,878.00 6,643.00

 Deferred Tax+ -358 -281 697 -188 -230

   Reported Net Profit 30,960.00 33,260.00 30,065.00 25,241.00 23,653.00

 Extraordinary Items + -894.02 49.36 64.67 173.57 4.65

   Adjusted Net Profit 31,854.02 33,210.64 30,000.33 25,067.43 23,648.35

 Adjustment below Net Profit + -19,765.00 -653 -16,138.00 -4,913.00 -220

   P & L Balance brought forward 71,532.00 77,159.00 74,080.00 65,965.00 53,576.00

 Appropriations + 11,799.00 38,234.00 10,848.00 12,213.00 11,044.00

   P & L Balance carried down 70,928.00 71,532.00 77,159.00 74,080.00 65,965.00

   Dividend 0 0 0 9,571.43 3,842.00

   Equity Dividend % 3,800.00 7,300.00 3,000.00 5,000.00 4,700.00

   Dividend Per Share (Rs) 38 73 30 50 47

   Earnings Per Share-Unit 83.68 88.69 80.17 132.15 120.07

    Earnings Per Share (Adj)-Unit 83.68 88.69 80.17 66.08 60.04

   Book Value-Unit Curr 199.67 195.96 209.71 397.3 393.32

   Book Value (Adj)-Unit Curr 199.67 195.96 209.71 198.65 196.66

Trend analysis of the income statement

 The Operating Profit showed an increasing trend from the year 2017 to 2020, it has
increased by 6%, 26%, 6.67%, then in the year 2020-21, it declined by 2%
 The total income increased by 6%, 26%, 6%, and 1.5% over the years from 2017-
2021 thereby showing increasing trend.
 Profit After Tax/ Net Profit increased by 7%, 19%, 10% for 2017-2020, but then
decreased by 7% for 2020-2021, respectively. The decrease in profit in recent year
can be due to increase in expenditure.
 Company’s expenditure has increased majorly due to increase in employee cost over
the years.
 Depreciation charges increased over the years from 2017-21 by 4.5%, 4%, 57% and
29% respectively.

Summary of Cash Flow Statement of Last 5 Years of TCS Ltd

Mar'17-Mar'21

  Year Mar 21  Mar 20  Mar 19  Mar 18  Mar 17 

Cash Flow Summary          

Cash and Cash Equivalents at Beginning of the

year 3,852.00 3,327.00 1,278.00 790 4,383.00

Net Cash from Operating Activities 33,822.00 26,603.00 23,998.00 21,587.00 23,132.00

Net Cash Used in Investing Activities -4,539.00 12,967.00 5,876.00 5,728.00 -15,834.00

Net Cash Used in Financing Activities -32,023.00 -39,045.00 -27,825.00 -26,827.00 -10,891.00

Net Inc/(Dec) in Cash and Cash Equivalent -2,740.00 525 2,049.00 488 -3,593.00

Cash and Cash Equivalents at End of the year 1,112.00 3,852.00 3,327.00 1,278.00 790

1. Cashflow from Operating Activities:

 Operating cashflow focuses on the inflow and outflow of cash from the company’s
ongoing regular business activities
  TCS is showing positive cash flows from operating activities over the years and is
increasing every year except for 2017-18.
 The positive CFOA means the company is having funds for regular business and is
not relying on the outside fund for it.

2. Cashflow from Investing Activities:

 The inflow and outflow of cash from sale or purchase of fixed assets of the company
is recorded under this section.
 TCS showed a negative Cash Flow for the year 2017 and 2021and in the years 2018-
2020, it is increasing A negative flow from investing activities means that a company
is investing in fixed assets and is forward looking.
 These investments will generate income for the company in the future. It also received
dividend and interest on investments.

3. Cashflow from Financing activities:

 “The inflow or outflow from Financing activities tells us if the company is getting
cash from issuing of share, bonds and other securities, the outflow could be
repayment of debts, payment of dividend/interest and repurchase of shares.”
 The company has a negative cashflow as company has paid dividends to its
shareholder and income tax on the dividend. This negative balance doesn’t mean
company is in losses, it is due to payments of dividends.

4. Overall Net cash flow for the company has decreased in current FY 2021 whereas in other
years they showed increasing trend i.e. from 2018-20.
RATIO ANALYSIS
1. Liquidity ratios:
Liquidity Ratios are a measure of Liquidity. It reflects the ability of the company to pay its
obligations in short term.
Tata consultancy services' current and quick ratios dropped from 6.4 in 2017 to 2.92 in 2021.
This demonstrates how well money was used during these years while still having enough
cash to pay down the debt.
The cash ratio has risen and fallen over the last five years, with a ratio of 0.11 in 2021,
indicating that it does not have enough cash on hand to pay off its short-term debt. However,
because the company has a large number of short-term investments and trade receivables, it is
unlikely to have any problems paying off its debts.

2. Efficiency ratios:
An efficiency ratio assesses a company's capacity to generate revenue from its assets.
Analysts use them to assess a company's short-term or present performance.
The stronger the company's performance, the higher the asset turnover ratio. The ratio is on
the rise, with a forecast of 1.3 in 2021. This means that for every $1 in total assets, the
company earns $1.3 in revenue.
The inventory turnover ratio is also trending rising, indicating that the retained inventory is
being replenished more frequently.
The receivable turnover rises until 2019 before plummeting due to the pandemic. It began to
recover after the economy began to improve.
3. Solvency ratios:
A solvency ratio is a crucial metric used by prospective business lenders to assess an
organization's capacity to satisfy long-term debt obligations.
The interest coverage ratio determines how many times a company's available earnings can
cover its existing interest payments. In the current quarter, the company's ratio has declined
to 77.17.
The shareholder equity ratio shows how much of a company's assets were generated through
the issuance of stock shares rather than debt. When compared to debt financing, capital based
entirely on equity may have several disadvantages. As a result, a combination of the two is
thought to be best. Tcs ltd. shows a decrease in the SE ratio from 0.87 to 0.68, indicating that
it is still relying more on equity and less on debt financing.
4. Profitability ratios:
Return on assets (ROA) is a profitability measure that indicates how much profit a company
can make from its assets. Over the course of five years, the ratio has increased by 26% to
28%, demonstrating that the company is doing a good job of generating revenue from its
assets.
The return on equity (ROE) is a financial performance indicator that is computed by dividing
net income by shareholders' equity. A technology firm may have normal ROE levels of 18%
or more. Tcs ltd. shows a modest decline from the previous year, but an overall gain of 10%
from 2017 to 2021, with a current value of 41.39 percent.
5. Investment ratios:
The P/E ratio is a measure of a company's current share price in relation to its earnings per
share (EPS). The ratio is used to determine the worth of a company and whether it is
overpriced or undervalued. Historically, the average price-to-earnings ratio (p/e) has ranged
from 13 to 15. Tcs ltd. has increased from 17% in 2017 to 28% in 2021, indicating that
investors are prepared to pay a higher share price today in anticipation of future growth.
The dividend yield is a financial measure that shows how much a firm pays out in dividends
each year as a percentage of its stock price. A respectable dividend yield is estimated to be
between 2% and 6%. When a stock has a low dividend yield, it means that the market price of
the stock is much greater than the dividend payments a shareholder receives from owning the
shares. The firm's dividend yield is declining, signalling strong market price increase.

6. Price to book value:

The price-to-book (P/B) ratio represents the relationship between the total value of an
organisation’s outstanding shares and the book value of its equity. It has been favoured by
value investors for decades and is widely used by market analysts.
Traditionally, any value under 1.0 is considered a good P/B value, indicating a potentially
undervalued stock. However, value investors often consider stocks with a P/B value under 3
and above 1. Tcs ltd. shows an upward trend the ratio standing at 15.21 in the FY 2020-2021.
MANNER OF DISCLOSURE OF ACCOUNTING POLICY
Statement of compliance
The standalone financial statements have been prepared in accordance with the Indian
Accounting Standards as prescribed under section 133 of the Companies Act, 2013 read with
the Companies (Indian Accounting Standards) Rules as amended from time to time.
Basis of preparation
These standalone financial statements have been prepared on historical cost basis except for
certain financial instruments and defined benefit plans which are measured at fair value or
amortised cost at the end of each reporting Integrated Annual Report 2020-21 period.
All assets and liabilities have been classified as current and non-current as per the Company's
normal operating cycle. Based on the nature of services rendered to customers and time
elapsed between deployment of resources and the realisation in cash and cash equivalents of
the consideration for such services rendered, the Company has considered an operating cycle
of 12 months.
The statement of cash flows has been prepared under indirect method, whereby profit or loss
is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of
past or future operating cash receipts or payments and items of income or expense associated
with investing or financing cash flows. The cash flows from operating, investing, and
financing activities of the Company are segregated.
The Company considers all highly liquid investments that are readily convertible to known
amounts of cash and are subject to an insignificant risk of changes in value to be cash
equivalents.

Use of estimates and judgements

The preparation of the standalone financial statements in conformity with the recognition and
measurement principles of Indian AS requires management of the Company to make
estimates and judgements that affect the reported balances of assets and liabilities, disclosures
of contingent liabilities as at the date of the standalone financial statements and the reported
amounts of income and expense for the periods presented.

REVENUE RECOGNITION POLICY

The Group earns revenue primarily from providing IT services, consulting and business
solutions. The Group offers a consulting-led, cognitive powered, integrated portfolio of IT,
business and engineering services and solutions.
Revenue is recognised upon transfer of control of promised products or services to customers
in an amount that reflects the consideration which the Group expects to receive in exchange
for those products or services.
• Revenue from time and material and job contracts is recognised on output basis measured
by units delivered, efforts expended, number of transactions processed, etc.
• Revenue related to fixed price maintenance and support services contracts where the Group
is standing ready to provide services is recognised based on time elapsed mode and revenue
is straight lined over the period of performance.
• In respect of other fixed-price contracts, revenue is recognised using percentage-of-
completion method (‘POC method’) of accounting with contract costs incurred determining
the degree of completion of the performance obligation. The contract costs used in computing
the revenues include cost of fulfilling warranty obligations.
• Revenue from the sale of distinct internally developed software and manufactured systems
and third-party software is recognised upfront at the point in time when the system / software
is delivered to the customer. In cases where implementation and / or customisation services
rendered significantly modifies or customises the software, these services and software are
accounted for as a single performance obligation and revenue is recognised over time on a
POC method.
• Revenue from the sale of distinct third-party hardware is recognised at the point in time
when control is transferred to the customer.

DEPRECIATION METHOD
Property, plant and equipment are stated at cost comprising of purchase price and any initial
directly attributable cost of bringing the asset to its working condition for its intended use,
less accumulated depreciation (other than freehold land) and impairment loss, if any.
Depreciation is provided for property, plant and equipment on a straight-line basis so as to
expense the cost less residual value over their estimated useful lives based on a technical
evaluation. The estimated useful lives and residual values are reviewed at the end of each
reporting period, with the effect of any change in estimate accounted for on a prospective
basis. Depreciation is not recorded on capital work-in-progress until construction and
installation are complete and the asset is ready for its intended use.
Manner of Recording Long term and Short-term Investments
Both Long-Term Investment and Short-Term Investments are recorded in the Balance Sheet
as Assets. Long-term assets are non-current assets, and short-term assets are current assets.
Short-term investments are held by the company for a period of not more than 12 months.
Long-Term Investment: the company includes investment in equity instruments of its
Subsidiaries, Joint Ventures, and Associates at cost, and the Preference Shares and other
investments are recorded at fair value.
Short-Term Investment: short-term investments of Tcs are recorded in the Balance sheet as
current investment.

Classification and Treatment of Extraordinary Items.

Extraordinary items are events that do not occur often or rarely occur. They can be gains as
well as losses arises out of events that are of unusual nature. Tcs recorded the extraordinary
items in the Income Statement or Profit & Loss Statement and these items showed a decline
over the period of five years from 2017-21.

Accounting For Benefits Provided to The Employees

All the benefits provided to the employees are charged to the Income Statement of Tcs ltd as
“Employee Cost”
The Company provides benefits such as gratuity, pension, and provident fund (Company
managed fund) to its employees, which are treated as defined benefit plans.
All employee benefits payable wholly within twelve months of rendering the service are
classified as short-term employee benefits. Benefits such as salaries, wages etc. and the
expected cost of ex-gratia are recognised in the period in which the employee renders the
related service.
The Employee Benefits Expense apart from regular salary, wages and bonuses includes:
Employees Stock Option Expenses
Health care and insurance
Employee assistance programs
Pension and retirement plans.
REFERENCES

 Annual report retrieved from

https://www.moneycontrol.com/financials/tataconsultancyservices/capital-structure/
tcs
 https://www.goodreturns.in/company/tata-consultancy-services/accounting-
policy.html
 TCS logo retrieved from https://worldvectorlogo.com/logo/tata-consultancy-services
 Ratio formulas retrieved from
https://corporatefinanceinstitute.com/resources/knowledge/finance/financial-ratios/

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