ADVANCED ACCOUNTING - I

T.Y.B. Com

Academic Year 2022-23

(Booklet for Semester V as per the Autonomous Syllabus)

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COURSE Advanced Accountancy-I (2021)
TITLE
Course Learning Outcomes: On successful completion of the module students will be able to:

1. Point 1: To students will be able to read and interpret financial statements with the
help of tools such as ratio analysis.
2. Point 2: Will get well versed with the use of Excel for accounting
3. Point 3: Will be able to use and generate TDS report on Excel.

Gist of this The course is designed to enable students to use accounting knowledge for
course in practical application. To promote the use of excel for accounting among students.
maximum 3
to 4 lines
Detailed syllabus
Unit CONTENTS OF THE COURSE No. of
Lectures
Topic: General Insurance Claim Accounts Claim for Loss of Stock
1.1 Introduction
1.2 Procedure for calculation
1.3 Average clause
1.4 Treatment of abnormal items of goods
1. 1.5 Under and overvaluation of stock 12
Claim for Loss of Profit
1.6 Introduction
1.7 Indemnity under policy
1.8 Some important items
1.9 Procedure for ascertaining claims

2. Topic: Accounts for Incomplete records (Single Entry)

2.1 Introduction 16
2.2 Ascertainment of Profit or Loss of sole traders
2.3 Method and conversion of single entry into double entry

3. Topic: Ratio Analysis

3.1 Ratio Analysis
3.2 Objectives and nature of ratio analysis
3.3 Problems on Ratio Analysis 10
3.3.1 Return on Investment
3.3.2 Profitability Ratios
3.3.3 Gross Profit Ratio
3.3.4 Net Profit Ratio

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 3.3.5 Operating Ratio
3.4 Turnover Ratios 2.4.1Stock Turnover Ratio
3.4.2 Debtors Turnover Ratio
3.5 Liquidity Ratios
2.5.1 Current Ratio
2.5.2 Liquid Ratio
3.6 Solvency Ratios
3.6.1 Debt Equity Ratio
3.6.2 Proprietary Ratio
3.6.3 EPS Ratio
3.6.4 PE Ratio

4. Topic: Basic Financial management for individuals

Financial management with the help of Single entry, understanding Balance
Sheet & savings position without maintaining books of account, ratio 10
analysis for calculating certain ratios for individual financial management
and use of excel formulae for financial management

5. Topic: Accounting for TDS

Tax deduction entries in Tally, generation of TDS returns using tally 6
software
Total Number of Lectures 54

Suggested Reference Book:

1. By P. C. Tulsian (Tata Mc-Graw-Hill Publishing Co. Ltd., New Delhi)
2. Financial Accounting: By A. Mukherji & M. Hanif (Tata Mc-Graw-Hill Publishing Co. Ltd., New Delhi)
3. Financial Accounting: By S.N.Maheshwari & S.K.Maheshwari (Vikas Publishing House Pvt. Ltd.)
4. Advanced Accounts: By M.C.Shukla & S.P.Grewal (S.Chand & Co. Ltd., New Delhi)
5. Advanced Accountancy: By S.P.Jain & K.N.Narang (Kalyani Publishers, New Delhi)
6. Advanced Accountancy: By R.L.Gupta & M. Radhaswamy (Sultan Chand & Sons, New Delhi)
Suggested Journals
1. The Chartered Accountant: Monthly journal by Institute of Chartered Accountants of India
2. The Accounting World: ICFAI Hyderabad

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 UNIT 1
GENERAL INSURANCE CLAIM ACCOUNTS
I Claim for Loss of Stock

1. A fire occurred in the premises of M/s Gokhale & Co. on 15th Oct.
2021. From the following details ascertain the loss of stock and prepare
a claim for insurance: Rs.
Stock on 1-4-2020 68,000
Purchases from 1-4-2020 to 31-3-2021 2,44,000
Sales from 1-4-2020 to 31-3-2021 3,60,000
Stock on 31-3-2021 60,000
Purchases from 1-4-2021 to 14-10-2021 2,94,000
Sales from 1-4-2021 to 14-10-2021 3,00,000
The stock salvaged was worth Rs. 36,000.
The amount of policy was Rs. 1,26,000. There was an average clause in the
policy.

2. There was a fire in the business premises of Shyam traders on 15-

10-2021. from the following particulars, ascertain the loss of stock and
prepare a claim for insurance.
Stock on 1-4-2020 15,300
Purchases from 1-04-2020 to 31-03-2021 61,000
Sales from 1-4-2020 to 31-03-2021 90,000
Stock on 31-03-2021 13,500
Purchases from 1-4-2021 to 14-10-2021 73,500
Sales from 1-4-2021 to 14-10-2021 75,000
The stock saved was worth Rs. 9,000. The stocks were always valued at 90%
of the cost.
The amount of policy was Rs. 31,500. There was an average clause in the
policy.

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3. On 30th April 2021 stock of summit ltd destroyed and following
information is obtained. Every year the stock on hand is valued at 10%
less than the cost.

Particulars 2018-19 2019-20 2020-21 1-4-2021 to 30-

4-2021

Opening stock 270,900 324,000 360,000 369,000

Purchases 749,000 800,000 810,000 60,000

Sales 12,00,000 13,20,000 14,00,000 1,20,000

Wages 210,000 230,000 250,000 20,000

Closing Stock 324,000 360,000 369,000 -

They have taken fire insurance policy of Rs.3,50,000 and there is an average
clause in the policy. The salvaged goods amounted to Rs. 10,000.

4. A fire broke out in the premises of Bright & Co. Pune on 15th August,
2021. From the following particulars ascertain the loss of stock and
prepare a claim for insurance:
Particulars Rs.
Stock on 1-4-2020 34,000
Stock on 31-3-2021 30,000
Sales from 1-4-2020 to 31-3-2021 1,80,000
Purchases from 1-4-2020 to 31-3-2021 1,22,000
Sales from 1-4-2021 to 14-8-2021 1,50,000
Purchases from 1-4-2021 to 14-8-2021 1,47,000
The stock salvaged was worth Rs. 36,000. The amount of policy was Rs.
63,000. There was an average clause in the policy.

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5. A fire occurred in the Godown of Shri Mahesh on 30-06-2021
destroying the stock. The books and records were saved from which the
following particulars were obtained:
Rs.
Sales for the year 2020-21 4,00,000
Purchases during the year 2020-21 4,00,000
Purchases for the period 1-4-2021 to 30-6-2021 1,40,000
Sales for the period 1-4-2021 to 30-6-2021 3,36,000
Stock on 1st April, 2020 1,76,000
Stock on 31st March, 2021 2,20,000
It was the practice of Shri Mahesh to value stock at cost plus 10%. Stock
salvaged was Rs. 20,000. Amount of policy Rs. 145,000 and there was an
average clause in the policy.
Find out the amount of the claim to be lodged for loss of stock.

6. A fire occurred in the Godown of Ravi Kumar on 30th June, 21

destroying the stock. The books and records were saved from which the
following particulars were obtained
Rs.
Stock on 1st April, 2020 1,76,000
Stock on 31st March, 2021 2,20,000
Total Sales for the year 2020-21 4,00,000
Purchases during the year 2020-21 4,00,000
Purchases for the period 1-4-2021 to 30-6-2021 1,40,000
Cash sales for the period 1-1-2021 to 30-6-2021 36,000
Sundry Debtors on 31-03-2021 1,36,000
Amount received from debtors from 1-4-2021 to 30-6-2021 1,80,000
Sundry debtors on 30-6-2021 1,20,000
It was the practice of Ravi Kumar to value stock at cost plus 10%. Stock
salvaged was Rs. 35,000. Amount of policy Rs.1, 20,000 and there was an
average clause in the policy.
Find out the amount of the claim to be lodged, for loss of stock

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7. A fire occurred in the Godown of Shri Madhu on 30 September, 2021,
destroying the stock. The books and records were saved from which the
following particulars were obtained: Rs.
Cash Sales for the year 2020-21 80,000
Sundry Debtors on 1-4-2020 80,000
Sundry Debtors on 31-03-2021 1,36,000
Amount received from debtors during the year 2020-21 2,64,000
Purchases during the year 2020-21 4,00,000
Purchases for the period 1-4-2021 to 30-9-2021 1,40,000
Cash sales for the period 1-4-2021 to 30-9-2021 36,000
Amount received from debtors from 1-4-2021 to 30-9-2021 1,80,000
Sundry debtors on 30-9-2021 1,20,000
Stock on 1st April, 2020 1,76,000
Stock on 31st March, 2021 2,20,000
It was the practice of Shri Madhu to value stock at cost plus 10%. Stock
salvaged was Rs. 20,000.
Find out the amount of the claim to be lodged, for loss of stock

8. A fire occurred in the Godown of ABC Ltd. on 30th September, 2021

destroyingthe major portion of the stock. The following particulars were,
however available:
Rs.
Stock on 1-4-2020 1,25,600
Stock on 31-3-2021 1,42,400
Sales for the year 2020-21 4,02,000
Sales from 1-4-2021 to 30-9-2021 1,61,000
Purchases for the year 2020-21 3,20,000
Purchases from 1-4-2021 to 30-9-2021 50,400
Included in the stock on 31st March 2020 were some spoiled goods whichoriginally
cost Rs. 8,000 but were valued at Rs. 5,600.
Half of this stock was sold for Rs. 2,000 in the year 2020-21 and the remaining
stock was valued at Rs. 2,400 on 31st March 2021.
Half of this stock was sold for Rs. 1,000 in September, 2021. The unsold
portion was considered to be worth 80% of its original cost. Subject to this
exceptionthe rate of Gross Profit was uniform.
The sum insured was Rs. 60,000. There was an average clause in the policy.
The stocks salvage worth Rs. 4,800.

Calculate the amount of insurance claim.

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9. A fire occurred in the Godown of J.K. Co. Ltd. on 31st December,
2021 destroying the major portion of the stock. The following
particularswere however available:
Rs.
Stock on 1 April. 2020
st 31,400
Stock on 31 March. 2021
st 35,600
Sales for the year 2020-21 1, 00,500
Sales from 1 April 2021 to 31 December, 2021
st st 40,250
Purchases for the year 2020-21 80,000
Purchases from 1st April 2021 to 31st December, 2010 12,600
Included in the stock of 31st Mar. 2020 were some shop-soiled goods which
originally cost Rs. 2,000 but were valued at Rs. 1,400. Half of the stock was
sold for Rs. 500 in the year 2020-21, and the remaining stock was valued at
Rs. 600 on 31st Mar, 2021. Half of this was sold for Rs. 250 in December, 2021.
The remaining unsold portion was considered to be worth 80% of its original
cost.Subject to this, the rate of gross profit was uniform.
The sum insured was Rs. 15,000 and there was an average clause in the Policy.
The stock saved worth Rs. 1,200.
Find out the amount of claim to be lodged with the Insurance Company
for loss of stock.

10. A fire occurred in the Godown of Bad Luck Co. Ltd. on 1st November 2021
andsome of the stock was destroyed. The stock salvaged was Rs.30, 500.in
addition some stock was salvaged in damaged condition and its value was
agreed at Rs. 14,500.

Particulars Rs.

Purchase for the year ended 31.03.2021 7,00,000

Sales for the year ended 31.03.2021 11,00,000

Purchases from 01.04.2021 to 01.11.2021 240,000

Sales from 01.04.2021 to 01.11.2021 360,000

Stock on 01.04.2020 300,000

Stock as on 31.03.2021 340,000

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Additional information:

a) Purchases for the year ended 31.03.2021 include purchase of Plant for
Rs. 20,000
b) Stock as on 31.03.2021 was overvalued by Rs. 20,000
Calculate the amount of the claim.

11. On 31st July, 2021 a fire broke out in the Godown of Anish and
thestock as on that date was totally destroyed.

Particulars 2018-19 2019-20 2020-21 31-7-2021

Opening stock 40,500 31,500 27,360 29,304

Purchases 346,000 365,000 408,000 -

Sales 396,000 420,000 456,000 -

Freight 4,000 4,400 4,560 2,300

Salaries 7,500 9,000 11,000 6,000

Drawings(Goods) 8,000 12,000 10,000 4,000

The sales and purchases in 2020-21 had occurred uniformly from month to
month and Anish states that the same quantum of purchases and sales as in
2020-21 has been maintained in 2021-22 up to the date of fire. He also states
that hevalues stock 10% below cost.

12. A fire occurred in the premises of ABC Co. ltd on 01-09-2021 and most of
the stock was destroyed. The stock salvaged was Rs.28, 000. A fire insurance
policy for Rs.171, 000 was taken to cover loss of stock by fire. From the
following particulars ascertain the insurance claim.

Particulars Rs.
Purchases for the year 2020-21 9,38,000

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 Sales for the year 2020-21 11,60,000

Purchases from 1st April to the date of fire 182,000

Sales from 1st April to the date of fire 240,000

144,000
Stock on 1st April 2020
242,000
Stock as on 31st Mar ,2021
100,000
Wages paid during the year 2020-21
18,000
Wages paid from 1st April 2020 to the date of fire

During the year 2020-21, goods costing Rs. 20,000 were distributed as free
samples for advertisement purposes.

The firm followed the practice of valuing stock at cost less 10%. However, the
stock as on 31st March 2021 was valued at cost plus 10%. There was an
average clause in the policy.

13. The premises of Ghanshyam were destroyed by fire on 30-9-2021. From

the available records the following figures were extracted. Prepare a
statement of claim in respect of the loss of stock for the submission to the
Insurance Co. The firm closes its books on 31st March every year.
Particulars 2018-19 2019-20 2020-21 As on 30-9-21
Rs. Rs. Rs. Rs.
Opening stock 20,000 22,000 11,800 34,020
Purchases 1,78,000 1,50,000 1,77,000 36,000
Sales 2,22,000 2,02,500 1,93,500 28,000
Purchases Return 18,000 5,000 7,000 1,000
Return Inward 22,000 4,000 6,000 2,000
Freight Inward 5,000 3,000 5,000 1,000
Closing stock 22,000 11,800 34,020 –
On 31-3-2019, while valuing closing stock, a slow moving item costing Rs.
5,000 was valued at Rs. 4,000. This was sold for Rs. 4,500 on 30th September,
2019.
On 31st March, 2020 a Slow Moving item costing Rs. 6,000 was wrongly
valued at Rs. 7,000. This was sold for Rs. 5,500 on 30th November, 2020.

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On 31st March, 2021 another slow moving item costing Rs. 12,000 was valued
at Rs. 10,000, 50% of which was sold before 30th September, 2021 for Rs.
6,000.
The value of salvage was Rs. 8,000. The amount of Policy was Rs. 40,000 and
there was an average clause in the policy.

14. A fire occurred in the premises of Pearl Ltd. on1st August, 2021 and
mostof the stock was destroyed. Pearl Ltd. has a fire insurance policy of
Rs. 2, 00,000. The stock saved was Rs. 40,000. From the given information
ascertain the amount of claim.

Particulars Rs.

Purchases for the year 20-21 5,00,000

Sales for the year 20-21 12,00,000

Purchases from 1.4.21 to 01.07.21 1,50,000

Sales from 1.4.21 to 01.07.21 5,00,000

Stock on 1-4-20 2,70,000

Stock on 31-3-21 3,30,000

Wages paid during 20-21 1,00,000

Wages paid till the date of fire 10,000

1. During the year goods costing Rs.10,000 were distributed at free sample.

2. The firm followed the practice of valuing stock at cost less 10% however,
the stock on 31.3.21 was valued at cost plus 10%.

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 II. CLAIM FOR LOSS OF PROFIT
1. From the following particulars find out claim under the loss of
profit policy.
1. Date of fire: 30-06-2021
2. Policy Amount: Rs.2,40,000
3. Indemnity Period: 6 Months
4. Net profit for the accounting year ended 31st March,2021: Rs.1,62,600
5. Sales for the year ended 30-06-2021: Rs.12,00,000
6. Standing charges for the accounting year ended 31st March, 2021: Rs.
75,000.
7. Turnover for the year ending 31-03-2021-Rs.11,88,000
8. Turnover from 1-7-2021 to 31-12-2021-Rs.3,36,000
9. Turnover from 1-7-2020 to 31-12-2020-Rs.6,60,000
The turnover for the year 2020-2021 had shown a tendency of increase of
10% over the turnover of the previous year.

2. Mr. Khanna holds a Loss of Profit Policy. From the following

information calculate the amount of claim under a Loss of Profit Policy.
(1) The accounts are prepared annually on 31st December.
(2) The Net Profit Plus Insured standing charges for the year ended 31st
December 2021 Rs. 2,00,000.
(3) Fire occurred on 30th April 2022; the period of indemnity is 6 months.
(4) The sales for the year ended 30th April 2022 were Rs. 5,24,000 and for the
year ended 31st December, 2021 were Rs. 5,00,000.
(5) The sales during the period of dislocation were Rs. 80,000 and for the
corresponding period in the preceding year were Rs. 1,80,000.
(6) The expenses incurred to mitigate loss were Rs. 8,000.
(7) The savings in standing charges due to fire amounted to Rs. 2,000.
(8) The amount of Policy was Rs. 1,57,200.

3.From the following information, calculate the amount of claim under

loss of profit policy
 Date of fire 1-4-2021
 Period of indemnity: 4 Months
 Policy amount: 300,000.
 Sales from 1-1-2020 to 31-12-2020-Rs.18,00,000.
 Sales from 1-4-2020 to 31-3-2021- Rs.20,00,000.

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  Net profit for the year 2020-Rs. 200,000 and standing charges:
Rs.2,00,000(out of which Rs. 40,000 were uninsured)
 Sales during the dislocation period Rs.2,00,000 and during the
corresponding
Period in the last year: Rs.600, 000.

4. Mr. Vijay holds a Loss of Profit Policy. From the following information
calculate the amount of claim under a Loss of Profit Policy.
(1) The accounts are prepared annually on 31st December.
(2) The Net Profit Plus Insured standing charges for the year ended 31st
December 2021 Rs. 4,00,000.
(3) Fire occurred on 30th April 2022; the period of indemnity is 6 months.
(4) The sales for the year ended 30th April 2022 were Rs. 10,48,000 and for
the year ended 31st December, 2021 were Rs. 10,00,000.
(5) The sales during the period of dislocation were Rs. 1,60,000 and for the
corresponding period in the preceding year were Rs. 3,60,000.
(6) The expenses incurred to mitigate loss were Rs. 16,000.
(7) The savings in standing charges due to fire amounted to Rs. 4,000.
(8) The amount of Policy was Rs. 3,14,400.

5.From the following particulars finds out claim under the loss of profit
policy.
1. Date of fire: 1-4-2021
2. Dislocation up to 1-8-2021
3. Policy Amount: Rs. 30,000
4. Indemnity Period: 6 Months
5. Sales for 2020 accounting year Rs.1,20,000
6. Net Profit for 2020 accounting year Rs. 13,000
7. Standing charges for 2020 accounting year (all insured) Rs. 17,000
8. Sales from 1-4-2020 to 31-3-2021 Rs.1,60,000
9. Sales from 1-4-2021 to 1-8-2021 Rs. 15,000
10. Sales from 1-4-2020 to 1-8-2020 Rs. 50,000
There is a clear 10% upward trend in the business

6. From the following information find out the claim under ‘loss of profit
policy
Sales in 2018 Rs.15,00,000
Sales in 2019 Rs.18,00,000
Sales in 2020 Rs.21,60,000

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Sales in 2021 Rs.25,92,000
Net profit in 2021 Rs.1,50,000
Insured standing charges in 2021 Rs.1,09,200
Date of fire :1st January 2022
Period of dislocation:3 months
Sales from 1-1-2021 to 31-3-2021 Rs.6,48,000
Sales from 1-1-2022 to 31-3-2022 Rs.1,77,600
Indemnity period 9 months
Policy amount Rs.7,50,000

-------------******************----------------------

14
 Unit 2
Accounts From Incomplete Records (Single Entry
System)

(A) Statement of Affairs Method

1. A Trader has not kept proper books of account. The following balances
placed before you and you are required to prepare a statement showing
net profit:
01-04-2021(Rs.) 31-03-2022(Rs.)
Cash in hand 5,350 5,400
Bank Overdraft 45,000 40,000
Stock 59,350 62,200
Sundry Creditors 38,600 37,200
Sundry Debtors 30,200 29,800
Bills Receivables 42,400 40,800
Land & Building 53,000 53,000
Furniture 4,600 4,600
Bills Payable 62,000 58,000

Drawings during the year amounted to Rs.6, 000.Depreciation is to be

calculated on land and building at 2%and on furniture at 10%.Provide
for doubtful debts
at 2.5%.

2. Ms .Akashi does not maintain books of accounts on double entry

system .However she gives the following information, from which you
are required to calculate profit for the year 2021-22.
Assets & Liabilities 1-4-2021 31-3-2022
(Rs.) (Rs.)
Land & Building 10,00,000 15,00,000
Plant and Machinery 6,00,000 8,00,000
Furniture & Fixture 90,000 95,000
Sundry Debtors 3,05,500 4,59,800

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Sundry Creditors 3,12,900 3,04,800
Bills Receivable 76,500 83,900
Bills Payable 48,130 36,150
Cash balance 1,94,600 2,96,600
Outstanding Salary 84,000 76,000
Stock in Trade 4,32,500 6,44,100
Additional information:
 On 1st October, 2021 she introduced a further capital of Rs.450,
000 andwithdrew
Rs.40, 000 p.m. for personal use.
 Additions to Plant and Machinery and Furniture & Fixture were made
on 1st October, 2021.Depreciation at 10% is required on both.
 Provide 5% reserve for doubtful debts on debtors and 2% discount on
creditors.

3. Following information is available from the records maintain by Mr.

Jay.

Assets & Liabilities 1-4-2021 31-3-2022

(Rs.) (Rs.)
Stock 4,00,000 6,00,000
Sundry Debtors 3,00,000 4,00,000
Furniture (cost) 30,000 30,000
Bills Receivable 35,500 49,800
Cash balance 20,000 10,000
Outstanding expenses 50,000 80,000
Sundry Creditors 1,50,000 2,50,000
Bank 1,00,000 (Dr.) 50,000(Cr.)
1. 10%depreciation is to be charge on furniture.
2. He sold a private car for R. 1,80,000 and proceeds were utilised for
business.
3. Reserve for doubtful debts to be maintained at 5% on debtors.
4. He has paid life insurance premium Rs.12,000 from the business account
and withdrawn goods worth Rs. 25,000 for his personal use.
Prepare: 1.Statement of Affairs
2. Statement of profit or loss for the year ended 31st march, 2022.

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4. Miss. Sanjana keeps her books on single entry system & following
information is disclosed.
Particulars 31-3- 31-3-
2021(Rs.) 2022(Rs.)
Cash at bank 11,80,000 12,70,000
Stock in Trade 85,50,000 94,87,500
Trade Debtors 3,00,000 4,50,000
Furniture 4,00,000 4,75,000
Sundry Creditors 2,20,000 1,86,000
Bills payable 76,000 45,000
10% bank Loan 60,000 60,000
12% government bonds(1-7-2021) ----- 2,00,000
On 1st October, 2021, out of business fund, she had also purchased a
residential building costing Rs.12, 00,000. Charge 10% interest on capital and
5% on drawings. Reserve for doubtful debts to be maintained at 5% on
debtors and charge 12% depreciation on furniture on opening balance.
Prepaid insurance amounted to Rs.4000. Ascertain her profit or loss as on 31st
march 2022.

(B) Final Accounts Method

5. Madhav did not keep a complete set of Double entry records but was able to
provide you with the following information on 31st March, 2022:
Particulars 1-4-2021 31-3-2022
Rs. Rs.
Trade Debtors 4,884 5,580
Trade Creditors 2,580 2,772
Rent owing to Landlord - 750
Sundry Expenses unpaid 360 450
Prepaid Insurance 100 150
Stock in Trade 6,480 7,395
Machinery 13,500 15,150

Madhav deposited all cash received into the Bank and made all payments by
Cheque and the following figures are available in respect of transactions with
the bank.

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 Receipts Rs. Payments Rs
Balance at Bank 1-4-2021 786 Insurance 750
Loan from Raviraj 3,000 Payment to Creditors 51,048
Cash sales 49,968 Wages 8,001
Cash received from 24,486 Rent 2,250
debtors New Machinery 3,000
Sundry Expenses 4,878
Personal Drawings 6,240
Balance at Bank(31-3-2022) 2,073
78,240 78,240

Further details which came to notice that a debtor who owed Rs. 1,260 died
leaving no assets behind. Discount Rs. 945 had been allowed on the receipts
from debtors and discount Rs. 1,962 had been deducted from the payments
made to creditors.
You are required to prepare Trading and Profit & Loss Account for the
year ended 31st March, 2022 and Balance sheet as on 1-4-2021 and 31-
3-2022.

6. Rukmini keeps her books by single entry. On 1-4-2021 her capital was
Rs. 69,000. Analysis of her cash book for the year 2021-22 gives the
following particulars:

Debit side: Rs.

Received from sundry debtors 60,000
Paid into Capital A/c 5,000

Credit side:
Due to bank on 1-4-2021 7,400
Payment to sundry creditor 25,000
General expenses of business 10,000
Salaries paid 15,500
Drawings 3,000
Balance at Bank on 31-3-2022 4,000
Cash in hand 100

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Assets and liabilities were:

Particulars 1-4-2021 Rs. 31-3-2022 Rs.

Debtors 53,000 88,000
Creditors 15,000 19,500
Stock 17,000 19,000
Plant & machinery 20,000 20,000
Furniture 1,400 1,400

From the above information prepare Trading and Profit & Loss A/c for the
year ended 31-3-2021 and Balance Sheet as on that date. You are also
required to prepare Total Debtors A/c and Total Creditors A/c after providing
5% interest on opening capital balance, 10% depreciation on plant and
machinery, 5% depreciation on furniture and reserve of 5% on sundry
debtors.

7. Mr. Avinash maintains his books by Single Entry System.His Cash Book
for the year ended 31st March, 2022 was as follows:
Summary of Cash Book
Receipts Rs. Payments Rs
To Balance B/d 12,300 By Investments 2,000
To Cash Sales 8,700 By Avinash-s Drawings 6,500
To Debtors 35,700 By Purchases 7,300
To Bills Receivable 15,300 By Creditors 28,900
To interest 1,500 By Bills Payable 7,500
To Avinash's Capital 10,000 By Wages 17,300
To Balance C/d 3,730 By Carriage Inwards 1,350
By Postage 550
By Salaries 12,000
By Rent & Taxes 930
By Insurance 700
By Printing & Stationery 2,200

87,230 87,230

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 Particulars 1-4-2021 31-3-2022
Rs. Rs.
Investments 15,000 17,000
Stock 13,700 29,300
Debtors 21,000 25,000
Bills Receivable 14,000 18,000
Creditors 31,000 29,000
Bills Payable 7,000 9,000
Plant and Machinery 45,000 42,500
Furniture 3,500 3,100

Adjustments:
(1) A provision of Rs. 1,250 was necessary on Debtors for doubtful debts.
(2) Outstanding W ages were Rs.1,500 and Outstanding Salary Rs. 700.
(3) Insurance was paid for one year ending on 30th September, 2010
(4) An Advertising bill was payable amounting to Rs 400
Prepare Trading and Profit & Loss Account for the year ended 31-3-2022 and
Balance Sheet as on that date.

8. Mr.Amit could not keep complete records .He furnishes you the following
information:

A. Particulars of Assets and Liabilities:

Particulars 1-4-2021 31-3-2022

Rs. Rs.
Stock 37,400 46,800
Debtors 24,000 28,000
Bills Receivable 8,000 10,000
Creditors 18,000 3,000
Bills Payable 2,000 400
Fixed Assets 25,200 ?
Bank Balance 8,700 ?

B.Bank Transactions:

Collection from Debtors:Rs.74,800 Payment to Creditors Rs.52,200

Bills Receivable Collected Rs.24,000 Bills Payable discharged Rs.18,600
20
Cash Sale deposited Rs17,200 Purchases by cheque Rs1,000
Additional Capital (on 1-10-2021) Rs.5,000 Wages paid Rs.24,000
Commission received Rs.3,000 Salaries paid Rs.13,000
Carriage Outward Rs.8,490 Insurance premium paid Rs.1,600
Carriage Inward Rs.500 Drawings Rs.15,000

C) Additional information:

A provision @10% is required for doubtful debts and depreciation @ 5 % is to

be written off on fixed assets.
Provide interest on capital @5%p.a.
Rs.6,000 is outstanding for Wages and Rs.3,800 for Salaries,Prpaid Insurance
Rs.500,outstanding legal charges Rs.1,400.
Discount allowed Rs.1,000, Discount earned Rs.1,800,Returns Inward
Rs.1,500 Returns outward Rs.2,000 , Bad Debts Rs.1,000.
Prepare Trading and Profit and Loss account and the Balance Sheet.

9. The following facts have been ascertained from the record of Shekhar
who maintains his books of accounts under the single entry system:

Receipts for the year ended 31st march 2022:

From sundry debtors Rs.88,125

Cash sales Rs.20,625
Paid in by the proprietor Rs.12,500
Payments made during the year:
New plant purchased:3,125 Drawings Rs.7,500
Wages Rs.33,625 Salaries Rs.5,625
Interest paid Rs.375 Telephone Rs.625
Rent Rs.6,000 Light & Power Rs.2,375
Sundry expenses Rs.10,625 Sundry creditors Rs.38,125
All receipts and payments are made through bank.
Assets and liabilities:
Particulars 1-4-2021 Rs. 31-3-2022 Rs.
Sundry creditors 12,625 12,000
Sundry debtors 18,750 30,625
Bank 3,125 ?
Stock 31,250 15,625
Plant 37,500 36,575

21
10. Shri Pradhan ,who maintains his books of accounts on single entry
system,supplies you the following information:

Particulars 31-03-2021 31-03-2022

Rs. Rs.
Creditors 10,000 12,500
Bills Payable 2,000 4,500
Stock 15,000 14,000
Machinery 25,000 35,000
Furniture 4,000 4,000
Debtors 16,500 19,300
Bills Receivable 1,500 2,200
Salary outstanding 500 -
Summary of Cash Transaction during 2021-22
Receipts Rs. Payments Rs
To Balance B/d 500 By Payment to Creditors 37,000
To Cash Sales 6,000 (including Bills Payable)
To Receipts from By Wages 11,000
Debtors(including Bills 77,100 By Salaries 12,500
Receivable) By Office expenses 8,000
To Miscellaneous Receipts 300 By Drawings 7,000
To Loan from Amir 10,000 By Fixed Deposits 5,000
By Machinery(1-10-2014) 10,000
By balance c/d 3,400
93,900 93,900
Discount allowed were Rs.900 and discount received during the year Rs.500

You required to prepare Trading and Profit & Loss Account for the year
ending 31st March,2022 after taking into consideration the following
adjustments:

1. Office expenses included insurance at Rs.500 per annum paid upto 31st
march 2022
2. Wages Rs.2, 000 are due on 31-03-2022.
3. Of the sundry debtors Rs.800 are to be written off as bad debts.
4. Depreciation is to be provided on Furniture at 5%p.a. and on Machinery at
10% p.a.
5. During the year Shri Pradhan had taken goods of Rs.500 for his own use.NO
22
entry is made in the books.

11. The following information is supplied from which you are required to
prepare the profit and loss account for the year ended 31st march 2022 and
balance sheet as on that date:

I)Assets and liabilities 1-4- 31-3-

2021 2022
Rs. Rs.
Sundry Assets 36,000 40,000
Stock 28,000 38,000
Cash In Hand 16,400 9,600
Debtors ? 52,000
Cash at bank 4,400 16,000
Creditors 24,000 19,600
Miscellaneous expenses 2,000 1,200
outstanding

II) Details relating to the year’s transactions are:

23
Receipts in the year and discount received credited
to debtors accounts
4,90,0
Returns from 00

DebtorsBad debts 12,000

Sales-cash and 2,000

creditReturns to 6,00,0
00
creditors
6,000
Payment to creditor by
4,72,4
cheque Receipts from debtors 00
into bankCash purchases 4,86,0
00
Salaries and wages paid out of
20,000
bank Miscellaneous expenses paid
36,000
by cashDrawings by cash
10,000
Purchases of sundry assets by
18,800
chequeCash withdrawn from bank
4,000
Cash sales deposited in bank
42,000
Discount allowed by creditors
?

8,000

24
 --------------------*******************----------------------

Previous Exam Questions

Mr. BABUBHAI does not know how to keep books of account. From his various
records, the following particulars have been made available prepare the final
Accounts, after providing for doubtful debts 5 per cent of debtors outstanding
and depreciating the motor car @ 20 per cent. OCT 17
(i) Balance Sheet as on April 1, 2016
Liabilities Amount Rs. Assets Amount Rs.

Capital 92,500 Motor Car 71,700

Bills payable 32,800 Stock 51,500

Creditors 84,200 Debtors 49,500

Bills receivable 24,400

Cash in hand 12,400

2,09,500 2,09,500

(ii) Cash Transactions during the year

Receipts Amount Rs. Payments Amount Rs.

Balance b/d 12,400 Furniture 30,000

Receipt from 1,15,000 Wages 9,400

debtors

Bills receivable 14,200 Purchases 40,500

Sales 1,03,000 Drawings 24,000

Bills payable 30,700

General expenses 20,700

Payment to 80,800
creditors

25
 Balance c/d 8,500

2,44,600 2,44,600

(iii) Other Information

Particulars Amount Rs.

Bills receivable drawn (received) 6,300

Discount to customers 2,300

Discount from suppliers 700

Credit purchases 29,600

Closing stock 41,700

Closing balance of debtor 55,000

Closing balance of bills payable 10,200

Mr. Durga Prasad does not maintain proper books of account. His Cash
Book for the year ended 31st March, 2017 was as follows: OCT 18
Summary of Cash Book
Receipts Rs. Payments Rs
To Balance B/d 12,000 By Investments 8,000
To Cash Sales 17,400 By Drawings 6,500
To Debtors 91,400 By Purchases 14,600
To Bills Receivable 30,600 By Creditors 57,800
To Interest on 1,500 By Bills Payable 15,000
Investments 30,000 By Wages 34,600
To Capital introduced By Carriage Inwards 2,700
By Postage 1,200
By Salaries 18,000
By Rent & Taxes 2,000
By Insurance 2,000
By Printing & Stationery 2,800
By Balance c/d. 17,700
1,82,900 1,82,900

26
 Particulars 1-4-2016 31-3-2017
Rs. Rs.
Investments 25,000 33,000
Stock 27,400 58,600
Debtors 42,000 50,000
Bills Receivable 28,000 36,000
Creditors 62,000 58,000
Bills Payable 14,000 18,000
Plant and Machinery 1,00,000 85,000
Furniture 15,000 13,500

Adjustments:
(1) A provision of Rs.3,000 was necessary on Debtors for doubtful debts.
(2) Outstanding Wages were Rs.3,000.
(3) Insurance was paid for one year ending on 30th September, 2017
(4) An Advertising bill was payable amounting to Rs 4,000
Prepare Trading and Profit & Loss Account for the year ended 31-3-2017 and
Balance Sheet as on that date.

From the following information prepares Trading and Profit and Loss
account for the year ended 31.03.2014 and Balance Sheet as on that
date:
A) Balance sheet as on 1.4.2013
Liabilities Rs. Assets Rs.
Capital 1,20,600 Land and Building 80,000
Creditors 69,800 Machinery 50,000
Bills Payable 29,000 Patents 20,000
Loans 30,600 Fixtures 15,000
General Reserve 20,000 Stock 44,600
Outstanding Wages 2,680 Debtors 49,400
Bank Overdraft 4,000 Bills Receivable 14,600
Cash in hand 3,080
2,76,680 2,76,680
B) Cash Book for the year ended 31.03.2014
Receipts Rs. Payments Rs.
To Balance B/d 3,080 By Bank Overdraft 4,000
To Debtors 45,980 ByWages 15,280
To Bills Receivable 11,400 By Loans Paid 10,600

27
To Capital 15,000 By Creditors 41,000
To Sales 35,820 By Bills Payable 21,800
To Commission 5,000 By Salaries 23,400
To Rent 22,000 By Sundry Expenses 1,460
By Interest on Loans 2,000
By Drawings 8,940
By 6% Investments 8,000
(Purchased on 1.10.2013)
By Balance c/d
Cash 1,580
Bank 220
1,38,280 1,38,280

C) The remaining transactions: Rs.

Credit sales 76,000
Credit Purchases 70,000
Bills Receivable Received 21,400
Stock on 31.03.2014 59,000
Discount to customers 1,020
Discount from suppliers 1,020
Bills Payable Issued 19,400
Bills Receivable Dishonored 3,000
d) Adjustments Rs.
i. Provide 5% for doubtful debts on debtors.
ii. Depreciate Machinery by 5%, Land and Building by 10%.
iii. Outstanding wages are Rs.1, 820 and salary Rs.1, 080

28
 Unit 3
Ratio Analysis

1. Prepare a Balance Sheet with as much details as possible from the following
information:
(1) Stock Velocity 8
(2) Capital Turnover Ratio 2
(3) Fixed Assets Turnover Ratio 5
(4) Gross Profit Turnover Ratio 20%
(5) Debtors Velocity 73 days
(6) Creditors Velocity 3 months
(7) Gross Profit Rs. 4, 00,000
(8) Reserve and Surplus Rs. 80,000
(9) Closing Stock was Rs. 40,000 in excess of the opening stock.
(10) There are no long term liabilities.

2. The following information is given:

Current Ratio 2.5
Liquidity Ratio 1.5
Net Working Capital Rs. 3, 00,000
Average Debt Collection Period 2 Months
Stock Turnover Ratio 6 Times
Fixed Assets to Shareholders Net worth 0.8
Gross Profit Ratio 20%
Reserve to Share Capital 0.5: 1
Draw up a Balance Sheet from the above.

3. From the following information prepare the Balance Sheet with as many details
as possible:
Current Ratio 2.5
Liquidity Ratio 1.5
Fixed Assets to Proprietary Fund Ratio 0.75
Working Capital Rs. 6,00,000
Reserves and Surplus Rs.4,00,000
Bank Overdraft Rs.1,00,000
There is no long term loan or fictitious assets.

4. From the following information relating to Amit Limited, Mumbai, you are
required to prepare its summarized Balance Sheet with as much details as possible:
29
• Current Ratio 2.5
• Acid Test Ratio 1.5
• Gross Profit to Sales 0.2
• Net Working Capital to Net Worth 0.3
• Sales to Fixed Assets 2.0
• Sales to Net Worth 1.5
• Sales to Debtors 6.0
• Reserves to Capital 1.0
• Net Worth to Long Term Loan 20.0
• Stock Turnover Ratio 6.0
• Paid up Share Capital Rs. 40, 00,000

5. From the different ratios given below complete the Balance Sheet in the given format:
• Sales to total assets 3
• Sales to fixed assets 5
• Current Assets are 2/3rd of the fixed assets.
• Inventory Turnover Ratio 20
• Debtors’ Turnover Ratio 15
• Current Ratio 2
• Total assets to Net worth 2.5
• Debt Equity Ratio 1
• Sales during the year are Rs. 60, 00,000

6. Following information is given by a company from its books of accounts as on March

31, 2022:
Particulars Rs.
Inventory 1,00,000
Total Current Assets 1,60,000
Shareholders’ funds 4,00,000
13% Debentures 3,00,000
Current liabilities 1,00,000
Net Profit Before Tax 3,51,000
Cost of revenue from operations 5,00,000
Calculate:
i) Current Ratio
ii) Liquid Ratio
iii) Debt Equity Ratio
iv) Interest Coverage Ratio
v) Inventory Turnover Ratio
30
7. From the following information calculate (i) Earning per share
(ii) Dividend payout ratio (iii) Price earnings ratio
Particulars Rs.
70,000 equity shares of Rs 10 each 7,00,000
Net Profit after tax but before dividend 1,75,000
Market price of a share 13
Dividend declared @ 15%

8. Following are the ratios in respect of the Financial Year 2021-22:

(1) Debtors Turnover Ratio – 4 times
(2) Creditors Turnover Ratio – 8 times
(3) Capital Turnover Ratio – 2 times
(4) Stock Turnover Ratio – 8 times
(5) Fixed Assets Turnover Ratio – 8 times
(6) Gross Profit Ratio – 25%
(7) Gross Profit during the year – Rs. 4, 00,000
(8) Reserve and Surplus – Rs. 1,00,000
(9) Closing Stock is more by Rs. 80,000 than the opening stock.
(10) There are no long term liabilities towards the outsiders.
You are required to prepare Balance Sheet as at 31st March, 2022

9. You have been furnished with the financial information:

Balance sheet as on 31st March, 2022
Particulars Rs.
Liabilities:
Equity Share Capital (Rs.100 each) 10,00,000
Reserves and Surplus 3,68,000
Trade Payables 3,04,000
Other Current Liabilities 20,000
Total 16,92,000
Fixed Assets 7,20,000
Sundry Debtors 3,60,000
Less: Allowances 40,000 3,20,000
Stock 4,80,000
Prepaid Insurance 12,000
Cash 1,60,000
Total 16,92,000

31
 Statement of Profit for the year ended 31st march, 2022
Particulars Rs.
Sales 40,00,000
Less: Cost of goods sold 30,80,000
Gross Profit 9,20,000
Less: Operating expenses 6,80,000
Net Profit 2,40,000
Less: taxes @50% 1,20,000
Net profit after taxes 1,20,000

Sundry debtors and stock at the beginning of the year were Rs.3,00,000 and Rs,4,00,000
respectively.Determine:
a) Current Ratio b) Acid Test Ratio c) Stock Turnover Ratio
d) Gross Profit Ratio e) Net Profit Ratio f) Operating Ratio
g) Earnings per share h) Debtors turnover
i) Market value of the equity share if price earnings ratio (P/E) is 10times.

10. The following are summarized Profit and Loss account for the year ended 31st march,
2022 and the Balance Sheet as on date:
Particulars Rs. Particulars Rs.
To Opening Stock 10,000 By Sales 1,00,000
To Purchases 55,000 By Closing Stock 15,000
To Gross Profit C/D 50,000
1,15,000 1,15,000
To Administration 15,000 By Gross Profit B/D 50,000
Expenses
To Interest 3,000
To Selling Expenses 12,000
To Net Profit C/D 20,000
50,000 50,000
Liabilities Rs. Assets Rs.
Share Capital Land and Building 50,000
(10,000 shares of 1,00,000 Plant and Machinery 30,000
Rs.100 each) Stock 15,000
Profit and Loss 20,000 Debtors 15,000
Creditors 25,000 Bills Receivable 12,500
Bills Payable 15,000 Cash at Bank 17,500
Furniture 20,000
1,60,000 1,60,000
32
Additional information:
Average Debtors: Rs.12, 500, Credit Purchases: Rs.40, 000, Credit Sales: Rs.80, 000.
Calculate:
A. Stock Turnover Ratio B. Debtors Turnover Ratio
C. Creditors Turnover Ratio D. Working Capital Turnover Ratio
E. Sales to Capital Employed F. Return on Shareholders’ Funds
G. Gross Profit Ratio H.Net Profit Ratio
I. EPS (Earning Per Share) J. Operating Ratio

11. From the following annual accounts calculates:

 Profitability Ratios
 Financial position (Current, Quick ,Debt-Equity, Proprietary Ratio)
 Turnover Ratio
Particulars 31-03-2021 31-03-2022
(Rs.) (Rs.)
Sales 12,00,000 14,96,000
Less :Cost of Sales 9,44,000 11,92,000
Gross Profit 2,56,000 3,04,000
Less : Expenses:
Warehousing and transport 76,000 96,000
Administration 76,000 76,000
Selling 44,000 56,000
Debenture Interest - 8,000
Net Profit 60,000 68,000
Fixed Assets less Depreciation 1,20,000 1,60,000
Stock 2,40,000 3,76,000
Debtors 2,00,000 3,28,000
Cash 40,000 28,000
Total Assets 6,00,000 8,92,000
Share capital 3,00,000 3,00,000
Reserves 60,000 1,20,000
Profit and loss 40,000 48,000
Debentures - 1,20,000
Current liabilities 2,00,000 3,04,000
Total Liabilities 6,00,000 8,92,000

33
12. Following is the Balance Sheet of SCAC Ltd. as on 31st March 2022

Liabilities Rs. Assets Rs.

Equity Share Capital 20,000 Goodwill 12,000
Capital Reserve 4,000 Fixed Assets 28,000
8% Loan on Mortgage 16,000 Stock 6,000
Trade Creditors 8,000 Debtors 6,000
Bank Overdraft 2,000 Investments 2,000
Taxation – Current 2,000 Cash In hand 6,000
Profit and Loss A/c
Profit after Tax and interest on 8% 8,000
Loan 12,000
Less Transfer to reserve (4,000)
60,000 60,000

Sales amounted to Rs.120, 000

Calculate Ratios for:
 Testing Liquidity or Short Term Solvency
 Testing Long Term Solvency
 Testing Profitability
 Testing Capital Gearing

13. The following are the ratios relating to the activities of Symbi Ltd.
Debtors Velocity 3 Months
Stock Velocity 8 Months
Creditors Velocity 2 Months
Gross Profit Ratio 25%
Gross profit for the year amounts to Rs. 400,000.
Closing Stock for the year is Rs. 10,000 more than the Opening Stock.
Bills Receivable amount to Rs. 25,000 and Bills Payable to Rs. 10,000.
Find the following figures:
 Sales
 Sundry Debtors
 Closing Stock
 Sundry Creditors

34
14. Calculate P/E Ratio from the following:
Equity Share Capital (Rs. 20 each) 50,00,000
Reserves and Surplus 5,00,000
Secured Loans at 15% 25,00,000
Unsecured Loans at 12.5% 10,00,000
Fixed Assets 30,00,000
Investments 5,00,000
Operating Profit 25,00,000
Income Tax Rate 50%
Market Price/share Rs.50

15. Following is the Balance Sheet of SCAC Ltd. as on 31st March 2020
Liabilities Rs. Assets Rs.
Equity Share Capital 500,000 Fixed Assets 2550,000
(Rs.10 each) 30,00,000
Less Depn.
(450,000)
Reserve Fund 350,000 Stock 500,000
Profit and Loss A/c 550,000 Debtors 400,000
Long Term Loans 17,50,000 Cash In hand 100,000
Creditors 2,50,000
Other Current Liabilities 1,50,000
35,50,000 35,50,000
Additional Information:
Profit earned during the year was Rs.400, 000.
The company has declared 25% dividend.
Market Price of Share is Rs. 560.
Ignore Provisions regarding Taxation.
Calculate:
a) Debt Equity Ratio
b) EPS
c) P/E Ratio
d) Dividend Payout Ratio
e) Dividend Yield Ratio

35
16. You are required to complete the following Balance Sheet as on 31st March, 2022
of SYM Pvt. Ltd.
Liabilities Amt Assets Amt
Equity Share Capital 14,00,000 Fixed Assets ?
Reserves and Surplus ? Investments ?
Loans 19,00,000 Current Assets:
Creditors ? Stock ?
Bank Overdraft 1,33,000 Debtors ?
Cash ?
Total ? Total ?
Ratios of the company are:
Reserve and Surplus to Net Worth Ratio = 1:6
Sales to Net Worth Ratio = 4.5:1
Debtors Turnover Ratio = 6 times, however, 20% of the sales are Cash Sales.
Current Ratio 2.5:1
Acid Test Ratio 4:3.
Stock Turnover Ratio = 5 times (based on Closing Stock)
Fixed Assets Turnover Ratio is 7 times.

36