Accounting ratio are calculated from financial statements which are drawn on the basis of historical costs as recorded in the books of accounts. Thus. these ratios ignore the change in price level and they do not reflect the actual analysis.

(i) A Management Information System (MIS) is a system that provides information for decision making at all levels of management.
(ii) It includes manufacturing information system, marketing information system, human resource information system and accounting information system.

(i) In the case of over subscription, the shares are allotted to the public with certain number lesser than the number of shares they applied for, in certain basis.
(ii) It is called pro - rata allotment.

No, as the balance in receipt and payments account is closing cash and bank balance

It is so because salary or commission paid to a partner is not a charge on profit but an I appropriation of profit.

A person may join as a new partner in an existing partnership firm. This is called admission of a partner.

(i) Drawings is the amount withdrawn in each or in kind, for personal purposes.
(ii) A drawings account is opened in the name of each partner and the drawings are debited to this account.
(iii) At the end of every year, the drawings account is closely by a transfer to the respective partner's capital account or current account

Annuity refers to series of uniform cash flow at regular intervals. The table value gives the present value of annuity of rupee one received at the end of every year for a specified number of years.
Annuity factor=\(=\frac { i{ (1+i) }^{ n } }{ { (1+i) }^{ n }-1 } \)
Where, i = interest rate
n = estimated number of yea

Adjustment for goodwill
As the sacrifice made by the existing partners is not mentioned, it is assumed that they sacrifice in their old profit sharing ratio 3 : 2.

Computation of sacrificing ratio and new profit sharing ratio
Share sacrificed \(=\frac{1}{14}:\frac{1}{14}\)
Sacrificing ratio of Vimala and Kamala is 1 : 1
Old ratio is 4: 3 that is \(\frac { 4 }{ 7 } :\frac { 3 }{ 7 } \)
New share of old partner = Old share - Share sacrificed
Vimala \(=\frac { 4 }{ 7 } -\frac { 1 }{ 14 } =\frac { 8-1 }{ 14 } =\frac { 7 }{ 14 } \)
Kamala \(=\frac { 3 }{ 7 } -\frac { 1 }{ 14 } =\frac { 6-1 }{ 14 } =\frac { 5 }{ 14 } \)
Share of new partner:
Vinitha = Sum of shares sacrificed by old partners
\(=\frac { 1 }{ 14 } +\frac { 1 }{ 14 } =\frac { 2 }{ 14 } \)
New profit sharing ratio of Vimala, Kamala and Vinitha is \(\frac { 7 }{ 14 } :\frac { 5 }{ 14 } :\frac { 2 }{ 14 } \) or 7:5:2

Computation of sacrificing ratio and new profit sharing ratio
Old share = 3:2 that is, Prasanth \(\frac { 3 }{ 5 } \) and Nisha \(\frac { 2 }{ 5 } \)
Share sacrificed = Old share × Proportion of share sacrificed
Prasanth = \(\frac { 3 }{ 5 } \times \frac { 2 }{ 5 } =\frac { 6 }{ 25 } \)
Nisha = \(\frac { 2 }{ 5 } \times \frac { 2 }{ 5 } =\frac { 4 }{ 25 } \)
Sacrificing ratio of Prasanth and Nisha is \(\frac { 6 }{ 25 } \) and \(\frac { 4 }{ 25 } \), that is, 3:2
New share = Old share - Share sacrificed
Prasanth = \(\frac { 3 }{ 5 } -\frac { 6 }{ 25 } =\frac { 15-6 }{ 25 } =\frac { 9 }{ 25 } \)
Nisha = \(\frac { 2 }{ 5 } -\frac { 4 }{ 25 } =\frac { 10-4 }{ 25 } =\frac { 6 }{ 25 } \)
Share of new partner = Sum of shares sacrificed by Prasanth and Nisha
Ramya = \(\frac { 6 }{ 25 } +\frac { 4 }{ 25 } =\frac { 6+4 }{ 25 } =\frac { 10 }{ 25 } \)
New profit sharing ratio of Prasanth, Nisha and Ramya = \(\frac { 9 }{ 25 } :\frac { 6 }{ 25 } :\frac { 10 }{ 25 } \) that is, 9:6:10

Gaining Ratio is the proportion of the profit which is gained by the continuing partner.
Gaining ratio = Ratio of share gained by the Conitinuing partners.
Share gained = New share - Old share

Accounting Information System (AIS) collects financial data, processes them and provides information to the various users. To provide information AIS requires data from other information system that is manufacturing, marketing and human resources.

Goodwill = Average profit \(\times\) Number of years of purchase
Average profit \(=\frac{Total\ profit}{Number\ of\ years}\)
\(\frac{10,000+11,000+12,000+13,000+14,000}{5}\)
\(=\frac{60,000}{5}\) = Rs. 12,000
Average profit = Rs. 12,000
Goodwill Average profit \(\times\) Number of years of purchase
12,000 \(\times\) 2 = 24,000
Goodwill = Rs. 24,000

Calculation of interest on drawings of Kevin (using average period)
Total amount of drawings = Rs. 5,000 x 4 = Rs. 20,000
If drawings are made at the end of every quarter, average period = 4.5
Interest on drawings = Total amount of drawing x Rate of interest x \(\frac{Average \ period}{12}\)
= Rs. 20,000 x \(\frac{6}{100}\) x \(\frac{4.5}{12}\)
Interest on drawings of Kevin = Rs. 450

Life membership fee is accounted as a capital receipt and added to capital fund on the liabilities side of Balance sheet. It is not recurring in nature.

A Statement of affairs is a Statement showing the assets and liabilities on a particular date. The balance of assets show on the right side and the balance of liabilities on the left side. This Statement resembles a balance Sheet the difference between the total of assets and total of liabilities is taken as Capital.
Capitals = Assets - Liabilities

Debt equity ratio = \(\frac{Long\ term\ debt}{Shareholders'funds}\) = \(\frac{80,000}{1,60,000}\) = 0.5:1
Long term debt = Debentures = Rs.80,000
Shareholders’ funds = Equity share capital + Reserves and surplus
= 1,00,000 + 60,000 = Rs.1,60,000
(ii) Proprietary ratio
Proprietary ratio gives the proportion of shareholders’ funds to total assets. Proprietary ratio shows the extent to which the total assets have been financed by the shareholders’ funds. It is calculated as follows:
Proprietary ratio = \(\frac{Shareholders'funds}{Total\ assets}\)
Higher the proprietary ratio, greater is the satisfaction for lenders and creditors, as the firm is less dependent on external sources of finance.

(i) Current ratio = \(\frac{Current assets}{Current liabilities}\) = \(\frac{1,50,000}{50,000}\) = 3:1
Current assets = Inventories + Trade receivables + Cash and cash equivalents + Prepaid expenses
= 45,000 + 70,000 + 30,000 + 5,000 = Rs.1,50,000
Current liabilities = Short term borrowings + Trade payables + Expenses payable + Short term provisions
= 17,000 + 25,000 + 3,000 + 5,000 = Rs.50,000
(ii) Quick ratio = \(\frac{Quick assets}{Current liabilities}\) = \(\frac{1,00,000}{50,000}\) = 2:1
Quick assets = Total current assets – Inventories – Prepaid expenses
= 1,50,000 – 45,000 – 5,000 = Rs.1,00,000