Common-size balance sheet of Raheem Ltd as on 31st March, 2016 and 31 st March, 2017

Particulars	Absolute amount on 31st  March 2016	Percentage of total assets on  31st March 2016	Absolute amount on 31st March 2017	Percentage of total assets on 31st March 2017
	Rs.		Rs.
I. Equity and liabilities
l. Shareholders fund
a. Share capital	5,00,000	25	6,00,000	50
b. Reserve and surplus	4,00,000	20	3,60,000	30
2. Non-current liabilities
Long-term borrowings	8,00,000	40	2,40,000	20
3. Current liabilities
Trade payables	30,000	15	-	-
Total	20,00,000	100	12,00,000	100
II. Assets
l. Non-current assets
a. Fixed assets	10,00,000	50	6,00,000	50
b. Non-current investments	5,00,000	25	2,40,000	20
2. Current assets
Inventories	3,00,000	15	1,20,000	10
Cash and cash equipments	2,00,000	10	2,40,000	20
Total	20,00,000	100	12,00,000	100

Jupiter's share \(\cfrac { 2 }{ 10 } \)
Share gained = Retiring partner's share x Proportion of share gained
Sun = \(\cfrac { 2 }{ 10 } \times \cfrac { 3 }{ 5 } =\cfrac { 6 }{ 50 } \)
Moon = \(\cfrac { 2 }{ 10 } \times \cfrac { 2 }{ 5 } =\cfrac { 4 }{ 50 } \)
Gaining ration = \(\cfrac { 6 }{ 50 } :\cfrac { 4 }{ 50 } \) that is,3:2
New share of continuing partner = Old share + share gained
Sun = \(\cfrac { 5 }{ 10 } +\cfrac { 6 }{ 50 } =\cfrac { 25+6 }{ 50 } =\cfrac { 31 }{ 50 } \)
Moon = \(\cfrac { 3 }{ 10 } +\cfrac { 4 }{ 50 } =\cfrac { 15+4 }{ 50 } =\cfrac { 19 }{ 50 } \)
The new of Sun and Moon is \(\cfrac { 31 }{ 50 } :\cfrac { 19 }{ 50 } \)
 that is 31: 19

Journal entry

Date	Particulars		L.F	Debit Rs.	Credit Rs.
2019 January 1	Kavutha's capital A/c	Dr		80,000
	Radha's capital A/c	Dr		60,000
	To Profit and loss A/c				1,40,000
	(Accumulated loss transferred to old partner's capital account in the old profit sharing ratio)

Statement of affairs as on 31^st March 2019

Liabilities	Rs.	Assets	Rs.
Sundry creditors	25,000	Bank balance	8,000
Expenses outstanding	1,000	Stock	80,000
Closing capital (B/F)	1,16,500	Sundry debtors	50,000
		Furniture	2,500
		Cash in hand	2,000
	1,42,500		1,42,500

Statement of profit or loss

Particulars	Rs.
Closing capital	1,16,500
Add: Drawings (1000 x 12)	12,000
	1,28,500
Less: Additional capital	20,000
Adjusted closing capital	1,08,500
Less: Opening capital	1,20,000
Loss for the year	11,500

Goodwill = Average profit x Number of years purchase
Average profit =\(\frac{Total\ profit}{Number\ of\ years}\)
\(=\frac{20,000+25,000-3,000+18,000}{4}\)
\(=\frac{60,000}{4}\)
Rs. 15000
Goodwill =Average profit x Number of years of purchase
=15,000x5=75,000
Goodwill=Rs.75,000

Dr In the books of Trichy Rotary club Income and Expenditure Account for the year ended 31^st March, 201 Cr

Expenditure	Rs	Income	Rs
To Rent	2,800	By Dividend received	27,600
To Secretary's honorarium	15,000	By Sale of old newspaper	3,000
To Postage	1,700	By Member's subscription	31,000
To General Expenses	4,350	By Locker rent	8,000
To Printing and stationery	45,000	By Interest on investment
To Audit fees	5,000	By Profit on sale of
		furniture (5000-4000)
		By Deficit (excess of
		expenditure over income)
	73,850		73,850

Dr Revaluation A/c Dr

Particulars	Rs.	Rs.	Particulars	Rs.
To Stock A/c		5,000	By Land A/c	20,000
To Provision for doubtful debts A/c		3,000
To Profit on revaluation transferred to
Amal's capital A/c	7,000
Vimal's capital A/c	5,000	12,000
		20,000		20,000

Dr Capital A/c Dr

Particulars	Amal Rs.	Vimal Rs.	Nirmal Rs.	Particulars	Amal Rs.	Vimal Rs.	Nirmal Rs.
To Balance c/d	91,000	65,000	30,000	By Balance b/d	70,000	50,000	-
				By Bank A/c	-	-	30,000
				By Revaluation A/c	7,000	5,000	-
	91,000	65,000	30,000		91,000	65,000	30,000
				By Balance b/d	91,000	65,000	30,000

In the books of Saranya Ltd Journal entries Date Particulars    L.F  Debit Rs. Credit Rs.   Bank A/c (30,000 x 3)  Dr    90,000     To Equity share application A/c       90,000   (Application money received)           Equity share application A/c (20,000 x 3)  Dr   60,000     To Equity share capital A/c       60,000   (Transfer of share application money to share
capital)           Equity share application A/c (10000 x 3)  Dr   30,000     To Bank A/c       30,000   (Excess share application money refunded)           Equity share allotment A/c (20,000 x 4)  Dr   80,000     To Equity share capital A/c       80,000   (share allotment money due)           Bank A/c  Dr   80,000     To Equity share allotment A/c       80,000   (Allotment money received)           Equity share first and final call A/c  Dr   60,000     To Equity share capital A/c       60,000   (share first and final call money due)           Bank A/c  Dr   60,000     To Equity share first and final call A/c       60,000   (share first and final money received)        

Date	Particulars		L.F	Debit Rs.	Credit Rs.
2018 April 1	Premises A/c	Dr.		40,000
	To Revaluation A/c				40,000
	(Value of premises increased)
"	Revaluation A/c	Dr.		10,000
	To Stock A/c				3,000
	To Machinery A/c				6,500
	To Outstanding liability A/c				500
	(Decrease in value of assets and outstanding liability recorded)
"	Revaluation A/c	Dr.		30,000
	To Ramya's capital A/c				15,000
	To Sara's capital A/c				9,000
	To Thara's capital A/c				6,000
	(Profit on revaluation distributed)

Dr. Revaluation account Cr.

Particulars	Rs.	Rs.	Particulars	Rs.
To Stock A/c		3,000	By Premises A/c	40,000
To Machinery A/c		6,500
To Outstanding liability A/c		500
To Profit on revaluation transferred to
Ramya's capital A/c (5/10)	15,000
Sara's capital A/c (3/10)	9,000
Thara's capital A/c (2/10)	6,000	30,000
		40,000		40,000

In the books of Khan Ltd. Journal entries

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Bank A/c (65,000 × 4)	Dr.		2,60,000
	To Equity share application A/c				2,60,000
	(Application money received)
	Equity share application A/c (50,000 × 4)	Dr.		2,00,000
	To Equity share capital A/c				2,00,000
	(Transfer of share application money to share capital)
	Equity share application A/c (15,000 × 4)	Dr.		60,000
	To Equity share allotment A/c				60,000
	(Excess share application money utilised for allotment)
	Equity share allotment A/c	Dr.		2,00,000
	To Equity share capital A/c				2,00,000
	(Share allotment money due)
	Bank A/c (2,00,000 – 60,000)	Dr.		1,40,000
	To Equity share allotment A/c				1,40,000
	(Allotment money received)
	Equity share first and final call A/c (50,000 × 2)	Dr.		1,00,000
	To Equity share capital A/c				1,00,000
	(Share first and final call money due)
	Bank A/c	Dr.		1,00,000
	To Equity share first and final call A/c				1,00,000
	(Share first and final call money received)

Following steps are to be followed to enter the transactions in Tally ERP 9
1. To create company:
Company Info > Create Company
Type the Name as Peral and keep all other fields as they are and choose 'Yes' to accept.
2. To maintain accounts only:
Gateway of Tally > F11 Accounting Features > General > Maintain accounts only: Yes > Accept Yes
3. To create ledger accounts with opening balances:
Gateway of Tally > Masters > Accounts Info> Ledgers> Single Ledger> Create

Creation of	Name	Under	Opening balance	Accept
Bright’s Capital A/c	Bright’s Capital A/c	Capital Account	2,26,000	Yes
Ramesh A/c (Sundry creditors)	Ramesh A/c	Sundry Creditors	24,000	Yes
Machinery A/c	Machinery A/c	Fixed Assets	1,00,000	Yes
Furnitures A/c	Furnitures A/c	Fixed Assets	10,000	Yes
Opening stock	Opening stock	Stock-in -Hand	20,000	Yes
Shankar A/c (Sundry debtors)	Shankar A/c	Sundry Debtors	50,000	Yes
Cash in hand	Cash	Cash-in-Hand	15,000	Yes
Cast at bank	Bank	Bank Accounts	55,000	Yes

Note: 
Cash account need not be created as it is a default ledger. Only the opening balance has to be recorded by altering the cash account.
To record the opening balance of Cash
Gateway of Tally > Masters > Accounts Info > Ledgers > Single Ledger > Alter

After creating the ledgers and recording the opening balances of ledger accounts the balance sheet of Bright is shown as in the following figure:

4. To create ledger accounts for transactions

Creation of	Name	Under	Accept
Wages A/c	Wages A/c	Direct Expenses	Yes
Salaries A/c	Rent A/c	Indirect Expenses	Yes
Purchases A/c	Purchases A/c	Purchases Account	Yes
Senthamarai A/c	Senthamarai A/c	Sundry Creditors A/c	Yes
Sales A/c	Sales A/c	Sales Account	Yes
Pushparaj A/c	Pushparaj A/c	Sundry Debtors A/c	Yes
Depreciation A/c	Depreciation A/c	Indirect Expenses	Yes

5. To enter transactions through vouchers
Gateway of Tally > Transactions > Accounting Vouchers
Example: Wages of Rs. 2,000 paid by Cash
F5: Payment Voucher
Account: Cash
Particulars: Wages A/c
Amount: Rs. 2,000
Narration: Wages paid by cash
Accept: Yes
In the similar way, record the other transactions. Use Payment Voucher for Salaries paid and payment to Senthamarai.
Use Purchase Voucher for credit purchases from Senthamarai and cash purchases.
Use Sales Voucher for credit sales to Pushparaj and cash sales.
Use Receipt Voucher for cash received from Shankar.
Use Journal Voucher for depreciation.
To record closing stock:
Since maintain accounts only is set to 'Yes' and integrate accounts and inventory is set to "No" under accounting features. Stock has to be recorded manually. Hence the closing stock has to be recorded by altering the stock account and while entering the data of closing stock, the date of opening stock has to be entered. The following procedure is to be followed:
Gateway of Tally > Masters > Accounts Info > Ledgers > Single Ledger > Alter > Stock > Closing balance > Date (opening date) > Amount > Accept Yes

6. To view reports:
(i) To view Profit and Loss Account:
F10: A/c Reports > Profit & Loss A/c > Alt + F1 (detailed) (or)
Gateway of Tally > Report > Profit & Loss A/c > Alt + F1 (detailed)

(ii) To view Balance sheet:
F10: A/c Reports > Balance sheet > Alt + F1 (detailed) (or)
Gateway of Tally > Reports > Balance Sheet > Alt + F1 (detailed)

Average profit = \(\frac { Total\ profit }{ Number\ of\ year } \)
=\(\frac { 62,000+61,000+63,000 }{ 3 } \)
= \(\frac { 1,86,000 }{ 3 } \)
= Rs. 62,000
Normal profit = Capital employed \(\times\) Normal rate of return
= 4,00,000 \(\times\) 10%
= Rs. 40,000
Super profit = Average profit - Normal profit
= 62,000 – 40,000
= Rs. 22,000
Goodwill = \(\frac { Super\ profit }{ Normal\ rate\ of\ return } \) \(\times\)100
= \(\frac { 22,000 }{ 10 } \) \(\times\) 100
= Rs. 2,20,000

Average profit = \(\frac { Total\ profit }{ Number\ of\ year } \)
Average profit = \(\frac { 30,000+32,000+35,000+37,000+40,000 }{ 5 } \)
Average profit = \(\frac { 1,74,000 }{ 5 } \)

Particulars	Rs.
Average profit before fair remuneration to the partners	34,800
Less: Fair remuneration to the partners	2,800
Average profit	32,000

Normal profit = Capital employed \(\times\) Normal rate of return
= 1,20,000 × 20%
= Rs. 24,000
Super profit = Average profit - Normal profit
= 32,000 – 24,000
= Rs. 8,000
Goodwill = Super profit \(\times\) Number of years of purchase
= 8,000 \(\times\) 5
= Rs. 40,000

Dr. Profit and loss appropriation account for the year ended 31st March 2019 Cr.

Particulars	Rs.	Rs.	Particulars	Rs.
To Interest on capital A/c:			By Profit and loss A/c	20,000
Durai (25,000 \(\times\) 5%)		1,250	By Interest on drawings A/c
Velan (30,000 \(\times\) 5%)		1,500	Durai	300
To Salary to Durai A/c		5,000	Velan	450
To Commission to Velan A/c		2,000
To Partners’ capital A/c (profit transferred)
Durai (11,000 \(\times\) 2/5)		4,400
Velan (11,000 \(\times\) 3/5)		6,600	11,000
			20,750	20,750

 kumbakonam basketball association 
Dr    Income Expenditure A/c for the year ended 31^st March, 2018                  Cr

Expenditure	Rs	Income	Rs
To Rent of ground	12,000	By Rent of hall received	6,000
To Printing Charges	5,000	By Subscription received	9,000
To Bank charges	1,000	By Locker rent received	2,000
To Tournament expenses	16,000	By Deficit	26,000
To Audit fees	3,000	(Excess of expenditure over income)
To Sports materials  purchased	4,000
To Insurance for building	2,000
	43,000		43,000

In the books of Trichy Recreation Club

Dr. Income and Expenditure Account for the year ended 31st March, 2018 Cr

Expenditure	Rs.	Income	Rs.
To Rent	2,800	By Dividend received	27,600
To Secretary's honorarium	15,000	By Sale of old newspaper	3,000
To Postage	1,700	By Members’ subscription	31,000
To General expenses	4,350	By Locker rent	8,000
To Printing and stationery	45,000	By Interest on Investments	1,250
To Audit fees	5,000	By Profit on sale of furniture	600
		(5,000 - 4,400)
		By Deficit	2,400
		(Excess of expenditure over income)
	73,850		73,850

In the books of Pandian Statement of affairs as on 1^st January, 2018

Liabilities	Rs.	Assets	Rs.
Creditors	15,000	Cash in hand	10,000
Bank loan	25,000	Stock	28,000
Opening capital	80,000	Debtors	40,000
(balancing figure)		Bills receivable	12,000
		Furniture	30,000
	1,20,000		1,20,000

Dr. Trading and Profit and Loss Account for the year ended 31^st December, 2018 Cr.

Particulars		Rs.	Particulars		Rs.
To Opening stock		28,000	By Sales
To Purchases			Cash	11,200
Cash	4,250		Credit	88,800	1,00,000
Credit	35,750	40,000	By Closing stock		11,000
To Gross profit c/d		40,000
		1,11,000			1,11,000
To Salaries		8,900	By Gross Profit b/d		40,000
To Carriage on sales		700	By Commission received		600
To Office rent		2,400
To Interest on bank loan		2,500
To Depreciation on furniture		1,500
To Provision for doubtful debts		600
To Net profit transferred to capital a/c		24,000
		40,600			40,600

Balance Sheet as on 31^st December, 2018

Liabilities	Rs.	Rs.	Assets	Rs.	Rs.
Capital	80,000		Cash in hand		17,000
Add: Net profit	24,000		Stock		11,000
	1,04,000		Debtors	60,000
Add: Additional capital	14,000		Less: Provision for doubtful debts	600	59,400
	1,18,000		Bills receivable		35,100
Less: Drawings	8,000	1,10,000	Furniture	30,000
Bank loan		25,000	Less: Depreciation	1,500	28,500
Creditors		16,000
		1,51,000			1,51,000

According to Indian partnership Act, 1932 in the absence of partnership deed, profits are shared equally among the partners. So, the claim of Ramesh to share the profits in the ratio of capitals is not valid.

Revaluation account will be debited. Increase in bills payable is a loss for the firm. Being a nominal account, to record this loss, revaluation account will have to be debited.

A person who is retired from the firm is known as an outgoing partners or retiring partners.

Goodwill cannot be seen and touched. It is invisible. Hence it is treated as intangible asset. But it is not a fictitious asset because goodwill has a value and it can be purchased or sold with any other asset.

(i) These are the amount received by not-for-profit organizations as a gift. It may be a general donation or specific donation.
(ii) General donation: If the donation is received without any specific condition, then it is a general donation. It is a revenue receipt.
(iii) Specific donation: If the donation received with a specific condition particular purpose like donations for sports fund, prize fund, etc., It is known as a specific donation. It is a capital receipt.

Computation of sacrificing ratio and new profit sharing ratio
Siva's share = \(\frac{1}{5}\)
Proportion of share sacrificed = 1 : 1 (equally) i.e.\(\frac{1}{2}:\frac{1}{2}\)
Share scarified = New partner's share x Proportion of share sacrificed
Selvam \(=\frac { 1 }{ 5 } \times \frac { 1 }{ 2 } =\frac { 1 }{ 10 } \)
Senthil \(=\frac { 1 }{ 5 } \times \frac { 1 }{ 2 } =\frac { 1 }{ 10 } \)
Sacrificing ratio of Selvam and Senthil is \(\frac { 1 }{ 10 } :\frac { 1 }{ 10 } \) that is 1:1
New share of old partner = Old share - Share sacrificed
Selvam \(=\frac { 2 }{ 5 } -\frac { 1 }{ 10 } =\frac { 4-1 }{ 10 } =\frac { 3 }{ 10 } \)
Senthil \(=\frac { 3 }{ 5 } -\frac { 1 }{ 10 } =\frac { 6-1 }{ 10 } =\frac { 5 }{ 10 } \)
Share of new partner
Siva = \(\frac{1}{5}\)
In order to equate, monthly and divide Siva's share by 2
\(=\frac { 1 }{ 5 } \times \frac { 2 }{ 2 } =\frac { 2 }{ 10 } \)
New profit sharing ratio of Selvam, Senthil and Siva \(=\frac { 3 }{ 10 } :\frac { 5 }{ 10 } :\frac { 2 }{ 10 } \), that is 3:5:2

Fixed assets turnover ratio = \(\frac{Revenue\ from\ operation}{Average\ i\ xed\ assets}\) = \(\frac{60,00,000}{6,00,000}\) = 10 times

Net profit ratio = \(\cfrac { Net\ profit\ after\ tax }{ Revenue\ from\ operations } \times 100=\cfrac { 1,40,000 }{ 3,50,000 } \times 40\)
Net profit = Revenue from operations – Cost of revenue from operations – Administration
expenses – Selling expenses
= 3,50,000 – 1,50,000 – 50,000 – 10,000 = Rs.1,40,000
Tutorial note
It is assumed that there is no tax payable.

Journal entry

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Equity share capital A/c (20 × 6)	Dr.		120
	To Equity share allotment A/c (20 × 3)				60
	To Equity share first call A/c (20 × 1)				20
	To Forfeited shares A/c (20 × 2)				40
	(Shares forfeited)

(i) Ratios are only means: Ratios are not end in themselves but they are only means to achieve a particular purpose.
(ii) Accuracy of financial information : The accuracy of a ratio depends on the accuracy of information taken from financial statements.

Group is a collection of ledgers of the same nature. There are predefined groups of accounts which are widely used in accounts of many orgaisation groups are categorised as primary group and sub - groups.

Statement of profit or loss for the year ending
31^st March 2018

Particulars	Rs.
Closing capital as on 31st December 2018	1,80,000
Add : Drawings during the year	50,000
	2,30,000
Less: Additional capital introduced during the year	40,000
Adjusted closing capital	1,90,000
Less: Opening capital as on 1st January, 2018	2,20,000
Loss for the year	30,000

Following are the characteristics of a company:
(a) Voluntary association: A company is a voluntary association of persons. No law can compel persons to form a company
(b) Separate legal entity: Company is an artificial person. It has a separate legal entity which is separate and distinct from its members.
(c) Common seal: A company may have a common seal which can be affixed on the documents.
(d) Perpetual succession: A company continues for ever. Its continuity is not affected by the changes in its members. It can be wound up only by law.
(e) Limited liability: The liability of the shareholders of the company is limited to the extent of face value of the shares held by the shareholders.
(f) Transferability of shares: The shares of a company are freely transferable except incase of a private company.

Financial statement analysis may be done with any of the following objectives.
(i) To analyse the profitability and earning capacity.
(ii) To study the long term and short term solvency of the business.
(iii) To determine the efficiency in operations and use of assets.
(iv) To determine the trend in sales, production etc.
(v) To forecast for future and prepare budgets.
(vi) To make inter-firm and intra-firm comparisons.

Statement of affairs as on 31.12.2019

Liabilities	Rs.	Assets	Rs
Creditors	60,000	Cash in hand	70,000
Bills payables	10,000	Stock	80,000
Capital	3,30,000	Bills receivables	1,00,000
(Balancing figure)		Debtors	1,50,000
	4,00,000		4,00,000

Calculation of Profit

Particulars	Rs.
Capital at the end	3,30,000
Add: Drawings	60,000
	3,90,000
Less: Additional capital	20,000
	3,70,000
Less: Opening capital	1,80,000
Profit for the year	1,90,000

Values involved are
(i) Violating child labour act by employing 10 year old boy.
(ii) By providing good quality product she is promoting the welfare and health of society
(iii) By charging reasonable prices she is not indulged in profiteering.

(a) write off the entire amount of existing goodwill

Journal entry

Date	Particulars	L.F	Debit Rs.	Credit Rs.
2018 April 1	Sam's Capital (3/5) Dr		18,000
	Jose's capital  (2/5) Dr		12,000
	To Goodwill A/c			30,000
	(Existing goodwill written off)

(b) write off Rs. 20,000 of the existing goodwill.

Journal Entry

Date	Particulars	L.F	Debit Rs.	Credit Rs.
2018 April 1	Sam's Capital A/c (3/5)   Dr		12,000
	Joe's Capital A/c(2/5)     Dr		8,000
	To Goodwill A/c			20,000
	(Existing goodwill written off to the extent of Rs. 20,000)

Following are some of the major accounting vouchers used in an organisation:
(i) Receipt Voucher
(ii) Payment Voucher
(iii) Contra Voucher
(iv) Purchase Voucher
(v) Sales Voucher
(vi) Journal Voucher