Finance

B.B.A L.L. B (Hons.) / Semester 1

Finance

Research Paper

Financial Accounts of Lueur Clothing

Submitted To
Prof. Naveen Rastogi
Prof. NMIMS School of Law

Submitted By
Kinjal Bhardwaj
D027
SAP ID: 81022019101
Finance

Table of Contents
INTRODUCTION.................................................................................................................... 3
MARKET POTENTIAL & STRATEGY .......................................................................... 4
LUEUR CLOTHING........................................................................................................... 5
AIM OF THE PAPER ......................................................................................................... 6
RESEARCH OBJECTIVES ............................................................................................... 6
JOURNAL ENTRIES.............................................................................................................. 7
LEDGER ACCOUNTS ........................................................................................................... 9
TRIAL BALANCE ................................................................................................................ 11
INCOME STATEMENT ...................................................................................................... 12
BALANCE SHEET................................................................................................................ 12
COST SHEET ........................................................................................................................ 13
PRODUCTION BUDGET .................................................................................................... 14
MATERIAL PURCHASE BUDGET................................................................................... 15
CASH BUDGET..................................................................................................................... 16
CONCLUSION ...................................................................................................................... 17

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INTRODUCTION

The Garment Industry of India is an Rs -one trillion industry. Almost 33 % of its knitwear
production and about 20% of its woven-garment production, both by volume, enters export
markets. Overall about 25 % of the volume of its garment production goes into export markets,
leaving 75 % for domestic consumption. The Industry covers over one lakh units and employs
about 6 million workers, both directly and indirectly in almost equal proportion. The indirect
portion helps to sustain the direct production sector in the shape of items associated with
the garment industry production including sewing/embroidery thread, buttons, buckles,
zippers, metal plates, cardboard sheets, plastic butterflies and packaging material.

Organized sector of the garment industry is roughly 20% of the total industry, concentrating
chiefly on exports. These are usually limited Companies while the rest are proprietary or
partnership Companies. Geographically, men's garments are largely produced in western and
southern India while production of ladies garments predominates in North India. Eastern
section of India specializes in children garments where in fact, these took their birth. Fibre-
wise, 80% of the production is of cotton garments, 15% of synthetic/mixed garments and the
rest of silk and wool garments.

The industry manufactures over a 100 different types of garments for men, women and
children. These includes overcoats/raincoats, suits, ensembles, jackets, dresses, skirts, trousers,
shirts, blouses, inner-garments, T-shirts, jerseys/pullovers, babies garment as well as
accessories like shawls/scarves, handkerchiefs, gloves and parts of garments. Fabric constitutes
65 to 70% of the cost of production with labor making up a further 15% and the rest go for
overheads and manufacturer's profit.

Retail trade in India is spread over department stores, hyper markets/discount stores and
specialty stores. A number of shopping malls have sprung up all over the country, especially
in the metros. Due to this, land prices have spiraled. Attention now shifts to "B" class, "C" class
cities and the rural area.

Government policies of economic liberalization have raised incomes, encouraged women

entrepreneurs resulting in a steep rise in family incomes and making available increasing levels
of disposable income in their hands. This has helped to increase purchase of garments but has
limited this purchase due to rise in prices of food grains on account of unseasonable weather.

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The benefit of economic reforms has percolated down to rural areas coupled with the spread of
education. In fact, some of rural areas enjoy a life-style comparable to or even better than that
enjoyed by urban folk. For the last several years, 9 to 10% of the disposable income goes into
the purchase of garments and textiles in items like house-finishing, drapers, tapestries and the
like.

Export of garments and accessories from India are routed to all corners of the world. However,
the USA, EU and Canada together account for 70% of world exports. Markets in Asia, Africa,
East Europe, Australia, New Zealand and countries in the Pacific Ocean account for the rest.

Immediately after the cessation of ATC (Agreement on Textiles and Clothing) in December
2004, limiting exports of textiles and garments from India, there was a 25% spurt in exports of
garments in the following year. This has since slowed down to around 10%. A number of
supplying countries from Asia have come into existence, notably, Bangladesh, Vietnam,
Srilanka, Cambodia and Pakistan resulting in cut-throat competition in the supply of popular
varieties helping to bring down prices. India has had to adopt innovative practices by upgrading
the quality of product in order to sustain (leave alone increase) her market share in the world
community. In recent years, appreciation of the Indian Rupee vs.US $ and the downslide in US
economy has had a restraining effect on garment exports from India, but the industry is now
coming to terms with the development. As a labour-oriented industry, the activity in production
and marketing has now shifted to Asia with India and China being leading suppliers as well as
markets for garments.

Market Potential
The future for the Indian textiles industry looks promising, buoyed by strong domestic
consumption as well as export demand. With consumerism and disposable income on the rise,
the retail sector has experienced a rapid growth in the past decade with the entry of several
international players like Marks & Spencer, Guess and Next into the Indian market.
High economic growth has resulted in higher disposable income. This has led to rise in demand
for products creating a huge domestic market.

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Textile & garments industry in India is expected to reach $223 bn by 2021 from
$140.4 bn in 2018. The textiles and apparel industry in India has strengths across the entire
value chain from fiber, yarn, fabric to apparel. It is highly diversified with a wide range of
segments ranging from products of traditional handloom, handicrafts, wool and silk products
to the organized textile industry. The organized textile industry is characterized by the use of
capital-intensive technology for mass production of textile products and includes spinning,
weaving, processing, and apparel manufacturing.

The domestic textiles and apparel industry stood at $140 bn in 2018 (including handicrafts) of
which $100 bn was domestically consumed while the remaining portion worth $40 bn was
exported to the world market. Further, the domestic consumption of $100 bn was divided into
apparel at $74 bn, technical textiles at $19 bn and home furnishings at $7 bn. While exports
comprised of textile exports at $20.5 bn apparel exports at $16.1 bn and handlooms at $3.8 bn.

LUEUR CLOTHING
Born in 2002, the brand Lueur is a part of TMS CLOTHING CO. LIMITED. The dream of
two sisters – Ms. Kinjal Bhardwaj and Mr. Kaila Bhardwaj came to reality when Lueur started
its journey with an aim to provide fashion in a modern retail environment to the Indian woman.

We are a brand in the Indian retail space which offers ‘Indian contemporary’ wear and stays a
step ahead of the fashion curve. The pioneer in introducing the concept of ‘Mix n Match’ in
retail, Lueur designers take inspiration from the latest fashion trends & forecasts from the west
and transform them into silhouettes and styles acceptable to the modern Indian woman. Lueur’s
core mission is to provide complete wardrobe solution to the modern Indian woman.

Started in 2001, the aim was to fill the gap by providing contemporary Indian ethnic wear in
organized modern retail format. We aim to grow nationally as well as globally to cater a larger
clientele through both retail and e-commerce space. Lueur wants to become the most preferred
fashion brand for the modern Indian woman.

With the thought of changing the Indian fashion landscape forever, our products outshine the
Lueur women from the rest. Our focus is on quality material, design, fit and sizing. We are the
first fashion brand to study about Indian woman’s shape, fits and size classification and came
up with 7 instead of regular 3 sizes.

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We keep evolving with the changing tides of fashion, keeping the pace with Indian ever-
changing never-changing woman and rendering ourselves indispensable. Our core values of
Integrity, Result Orientation, Speed, Innovation and Camaraderie reflects across organization.
The work culture of W is all about inclusion, collaboration, high performance and opportunity.
We also ensure that all our actions are in service of our Vision, Mission and values.

AIM AND OBJECTIVES OF THE PAPER

AIM: The purpose of the paper at the hand stands to study and examine the journals, ledger,
profit, loss and balance sheet of Lueur Clothing.

“OBJECTIVES”: The objectives of the paper are to recognize Lueur Clothing as a business
and the factors that influence it, to prepare the Lueur Clothing’s accounting books and assess
the results in light of the financial review.

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JOURNAL ENTRIES

In the books of Lueur Clothing

DATE PARTICULARS L/F DEBIT (Rs.) CREDIT (Rs.)

2020
April 1 Cash A/c……………………….... Dr 250000
To capital A/c 250000
(being, infusion of capital)

April 8 Purchases A/c…………...……… Dr 10000

To Manas A/c 10000
(being, goods purchased from Manas)

April 12 Anu A/c………………………. Dr 12500

To Sales A/c 12500
(being, sold goods to Anu)

April 15 Manas A/c…………………………Dr 5000

To Cash A/c 5000
(being, cash paid on Manas account)

April 20 Cash A/c………………………… Dr 4000

To Anu A/c 4000
(being, cash received from Anu on
account)

April 30 Cash A/c………………………… Dr 2500

To Sales A/c 2500
(being, service provided to Ansh)

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DATE PARTICULARS L/F DEBIT (Rs.) CREDIT (Rs.)

April 30 Cash A/c………………………… Dr 1500

To Sales A/c 1500
(being, service provided to Manas)

April 30 Purchases A/c…………………… Dr 1000

To Cash A/c 1000
(being, goods purchased from Anu)

April 30 Salary A/c………………………. Dr 2500

To Cash A/c 2500
(being, salary paid to employees)

April 30 Drawings A/c…………………… Dr 1000

To Cash A/c 1000
(being, cash withdrawn for personal use)

TOTAL 290000 290000

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LEDGER ACCOUNTS

Dr. Capital Account Cr.

Date Particulars J.F Amount Date Particulars J.F Amount
2020 2020
April 30 To Balance c/d 250000 April 1 By Cash A/c 250000

250000 250000
May 1 By Balance b/d 250000

Dr Cash Account Cr
Date Particulars J.F Amount Date Particulars J.F Amount
2020 2020
April 1 To Capital A/c 250000 April 12 By Manas A/c 5000
April 20 To Anu A/c 4000 April 30 By Salary A/c 2500
April 30 To Sales A/c 15000 April 30 By Purchase A/c 10000
April 30 To Sales A/c 25000 April 30 By Drawings A/c 1000
April 30 By Balance c/d 275500

294000 294000
May 1 To Balance b/d 275500

Dr. Purchases Account Cr.

Date Particulars J.F Amount Date Particulars J.F Amount
2020 2020
April 8 To Manas A/c 10000 April 30 By Balance c/d 20000
April 30 To Cash A/c 10000

20000 20000
June 1 To Balance b/d 20000

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Dr. Sales Account Cr.

Date Particulars J.F Amount Date Particulars J.F Amount
2020 2020
April 30 To Balance c/d 52500 April 12 By Anu A/c 12500
April 30 By Cash A/c 15000
April 30 By Cash A/c 25000

52500 52500
June 1 By Balance b/d 52500

Dr. Manas Account Cr.

Date Particulars J.F Amount Date Particulars J.F Amount
2020 2020
April 15 To Cash A/c 5000 April 8 By Purchase A/c 10000
April 30 To Balance c/d 5000

10000 10000
June 1 By Balance b/d 5000

Dr. Anu Account Cr.

Date Particulars J.F Amount Date Particulars J.F Amount
2020 2020
April 12 To Sales A/c 12500 April 20 By Cash A/c 4000
April 30 By Balance c/d 8500

12500 12500
June 1 To Balance c/d 8500

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Dr. Salary Account Cr.

Date Particulars J.F Amount Date Particulars J.F Amount
2020 2020
April 30 To Cash A/c 2500 April 30 By Balance c/d 2500

2500 2500
June 1 To Balance b/d 2500

Dr. Drawings Account Cr.

Date Particulars J.F Amount Date Particulars J.F Amount
2020 2020
April 30 To Cash A/c 1000 April 30 By Balance c/d 1000

1000 1000
June 1 To Balance b/d 1000

TRIAL BALANCE

Particulars Debit Credit

Capital - 25,0000
Purchases 20000 -
Sales - 52,500
Drawings 1000 -
Salary 2500 -
Cash 27,5500 -
Manas - 5000
Anu 8500 -

TOTAL 6,15000 6,15000

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INCOME STATEMENT

Particulars Note No. Figures (Rs.)

Revenue from Operations 6,00,000
Other Income (300+2400+2500) 21,000
Total Revenue 6,21,000

Cost of Materials Consumed (1200+48000-1800) 23,7000

Purchase of stock-in-trade (1200+1000+800-1000-800-500) 3500
Employee benefit expense 7500
Finance cost 5000
Depreciation (120000*15%) SLM Method 90000
Total Expenses 33,9500
Profit before exceptional and extraordinary item 28,1500
Exceptional and extraordinary item 10000
Profit before tax 27,1500
Tax (15%) 19600

Profit after Tax 126,5100

BALANCE SHEET

Particulars Figures (Rs.) Figures (Rs.)

I) Non-Current Assets
a) Property 40,0000
b) Capital 35,0000
c) Goodwill 25000
d) Financial Assets 25000
e) Investment 15,0000 95,0000

II) Current Assets

a) Inventory 125000

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b) Trade Receivables 20,0000

c) Cash & Cash Equivalents 25000 35,0000
Total Assets 1,30,0000

III) Equity -
IV) Non-Current Liabilities
a) Long-Term Loan 50,0000
b) Other Borrowings 25,0000 75,0000
V) Current Liabilities
a) Trade Payables 45,0000
b) Provisions 10,0000 55,0000
Total Liabilities 1,30,0000

COST SHEET

Particulars Amount Amount

Opening stock of raw materials 6000
Purchase of raw materials 20,0000
Closing stock of raw materials (5000) 20,1000
Raw materials consumed (10000)
Direct Wages (2500)
Direct Expenses (5000)
Prime Cost 18,3500
Factory Overheads:
Factory Rent 25000
Factory Power 5000
Indirect Wages 2500
Factory Insurance 7500
Supervision Salary 5000 41250
22,4750
Opening stock of WIP 5000

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Closing stock of WIP (7500)

Works Cost 22,2250
Office Rent 25000
Bank Charges 2500
Asset Depreciation 17500 35000
Cost of Production 25,7250
Opening stock of Finished goods 10000
Closing stock of Finished goods (12500)
Cost of Goods Sold 25,4750
Selling Overheads:
Travelling Expense 5000
Advertisement 25000 30000
Cost of Sales 28,4750
Profit 25,1900
Sales 53,6650

PRODUCTION BUDGET

Total 1st 2nd 3rd 4th

Quarter Quarter Quarter Quarter
Desired Closing Inventory 152500 25000 37500 40000 50000
Cost of Goods 75000 10000 25000 15000 25000
227500 35000 6,2500 5,5000 75000
Total Opening Inventory 10,0000 25000 37500 27500 10000
Purchases 127500 10000 25000 27500 6,5000

The anticipated stock at the beginning of the year:

Finished Goods 2000

Cloth/material 1000 tons
Thread 75 tons

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The required stock level at the end of the year is:

Finished Goods 2500
Cloth/material 1000 tons
Thread 75 tons

MATERIAL PURCHASE BUDGET

Production units:
Budgeted Sales Units 12,500
Open stock of finished goods (2000)
Closing stock of finished goods 2500
Production Units 5,000
Material Usage:
Cloth: 1000 tons 1000 tons
Thread: 75 tons 75 tons
Material Purchases:
Cloth:
Quantity to be used 1000 tons
Opening stock of raw materials (500 tons)
Closing stock of raw materials 500 kilos
Required Purchases of Cloth 1000 tons
Nails:
Quantity to be used 75 tons
Opening stock of raw materials (75 tons)
Closing stock of raw materials 50 kilos
Required Purchases of Acrylic 75 tons

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CASH BUDGET

For 3 months ending 31st July 2020

Particulars April (Rs.) June (Rs.) July (Rs.)
Receipts:
Cash Sales 9,7500 12,2500 13,5000
Collection from Credit Sales 15000 25000 27500
Collection from sale of non-current assets - - -
Receipts from loans 5000 5000 5000
Total Receipts (A) 11,7500 15,2500 16,7500
Payments:
Cash Purchases 10000 10000 15000
Credit Purchases 25000 27500 35000
Expenses 7500 10000 15000
Cash Drawings 1000 - -
Purchase of non-current assets 5,0000 5,0000 5,0000
Repayment of loan 5000 5000 5000
Total Payments (B) 9,8500 10,2500 12,0000
Net Receipts (A-B) 19000 5,0000 47500
Bank Balance at start 5,0000 (25000) (52500)

Bank Balance at end 6,9000 25000 (5000)

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CONCLUSION

The financial results seen above are from the year 2020, and Lueur was established in early
2002. They defined the company's current state and position, including how it was cash-
strapped and experiencing a cash shortage when it first started. Small percentages of profit and
sales were also present. With high profit margins and lower average costs, they have developed
themselves as a dominant player in 2021.

Financial data, on the other hand, is important because it helps companies make better choices
and predict their potential opportunities. Lueur Clothing's potential to grow and flourish while
still holding customers informed was aided by the upkeep of these books of accounts.

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