Credit payment period is the average time taken by the business for payment of accounts payables. Lesser the credit payment period, greater is the efficiency of the management in managing accounts payable as it indicates quicker settlement of trade payable. It is calculated as follows.
Credit payment period (in days) = \(\frac { Number\quad of\quad months\quad in\quad a\quad year }{ Trade\quad payable\quad sturn\quad over\quad ratio } \quad \) x 100
Credit payment period (in months) = \(\frac { Number\quad of\quad months\quad in\quad a\quad year }{ Trade\quad payable\quad sturn\quad over\quad ratio } \quad \).

Functional classification of ratio is based on the purpose for which ratios are computed and it is the most commonly used classification. Under the functional classification, the ratios are classified as follows:
(i) Liquidity ratios
(ii) Long term solvency ratios
(iii) Turnover ratios
(iv) Profitability ratios

(i) Rights issue
Issue of equity shares to the existing shareholders of the company through a letter of offer is known as rights issue.
(ii) Bonus issue
Issue of equity shares to the existing shareholders of the company free of cost out of accumulated profit is known as bonus issue.

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.

The significance of financial statements to various stakeholders is as follows.
(i) To management:
Financial statements provide information to the management to take decision and to have control over business activities in various areas.
(ii) To shareholders:
Financial statements help the shareholders to know whether the business has potential for growth and to decide to continue their shareholding.
(iii) To creditors:
Creditors can get information about the ability of the business to repay the debts from financial statements.
(iv) To bankers:
Information given in the financial statements is significant to the bankers to assess whether there is adequate security to cover the amount of the loan or overdraft.
(v) To government:
Financial statements are Significant to government to assess the tax liability of business concerns and to frame and amend industrial policies.

The values highlighted are
(i) Social responsibility towards society.
(ii) Sensitivity towards cleaner environment

The value involved are Respect for women and women empowerment.

Journal entry

Date	Particulars	L.f	Debit Rs.	Credit Rs.
	Profit and loss appropriation A/c Dr		2,47,500
	To A's capital A/c			1,23,750
	To A's capital A/c (Being profit transferred to capital account)			1,23,750

Values shown by the firm are
i. Responsibility :
Firm has shown responsibility towards senior citizens by giving them their dues.
ii. Compassion:
Partners have shown compassion towards senior citizens by fulfilling their duties towards senior citizens .

Values being affected are
(i) Reliablility: Value of reliability is affected as accounts maintained on single entry system are less reliable as they are prepared from incomplete records.
(ii) Accuracy: Value of arithmetical accuracy is affected, as in single entry system, trial balance cannot be prepared which proves arithmetical accuracy of accounts.

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.

(i) Under this method, only one capital account is maintained for each partner.
(ii) The capital is changing from period to period.
(iii) This capital account shows always a credit balance
(iv) All adjustment relating to partners are recorded directly in the capital account.

Goodwill may be classified into acquired goodwill or self-generated goodwill.
(i) Acquired or purchased goodwill:
(1) Goodwill acquired by making payment in cash or kind is called acquired or purchased goodwill.
(2) The excess of purchase consideration over the value of net assets acquired is treated as acquired goodwill.
(ii) Self - generated goodwill:
It is the goodwill which is self generated by a firm based on features of the business such as favourable location, local customers, etc. Such self-generated goodwill cannot be recorded in the books of accounts.

Following are the circumstances that require valuation of goodwill of partnership firms in order to protects the rights of the partners
(i) When there is a change in the profit sharing ratio
(ii) When a new partner is admitted into a firm
(iii) When an existing partner retires from the firm or when a partner dies.
(iv) When a partnership firm is dissolved

a)

Journal entry

Particulars		L.F	Depit Rs	Credit Rs
Balu's capital A/c	Dr.		30,000
Chandru's capital A/c	Dr		18,000
Nirmal's capital A/c	Dr		12,000
To Goodwill A/c				60,000
(value of goodwill entirely shared to all partners)

b)

Journal entry

Particulars		L.F	Debit Rs	Credit Rs
Balus capital Alc	Dr		15,000
Chandru's capital A/c	Dr		9,000
Nirmal's capital A/c	Dr		6,000
To Goodwill A/c				30,000
(Half of the existing goodwill written off)

Trade payables turnover ratio = \(\frac{Net\ credit\ purchases}{Average\ trade\ payables}\) = \(\frac{1,00,000}{20,000}\) = 5 times
Average trade payables = \(\frac{Opening\ trade\ payables + Closing\ trade\ payables}{2}\)
= \(\frac{(20,000 + 4,000) + (10,000 + 6,000)}{2}\) = Rs.20,000
payment period (in days) = \(\frac{Number\ of\ days\ in\ a\ year}{Trade\ payables\ turnover\ ratio}\) = \(\frac{365}{5}\) = 73 days. 

(i) Give only interim reports:
Financial statements are prepared at the end of every accounting period. But the actual position of the business can be known only when the business is closed.
(ii) LImited access to external users:
The external users do not have detailed and frequent information of financial results as they have limited access
(iii) Influenced by personal judgement:
Preparation of financial statements may be influenced by personal judgements and therefore these are not free from bias.

The direction of a company have an authority of reissue of shares once forfeited by them due to non-payments of calls. They can rreissue the forfeitedshares at par, at premium or at discount. When forfeited shares are reissued at a premium, the amount of such premium will be credited to securities premium account.
If the reissue price is more than the amount. Unpaid on forfeited shares it results in profit and is transferred to capital reserve account.

In the books of Maruthu Ltd. Journal entries

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Equity share capital A/c (150 × 10)	Dr.		1,500
	To Equity share final call A/c (150 × 4)				600
	To Forfeited shares A/c (150 × 6)				900
	(50 shares forfeited)
	Bank A/c (100 × 9)	Dr.		900
	Forfeited shares A/c (100 × 1)			100
	To Equity share capital A/c (100 × 10)				1,000
	(100 forfeited shares reissued @ Rs.9 per share)
	Forfeited shares A/c	Dr.		500
	To Capital reserve A/c				500
	(Gain on reissue of forfeited shares transferred to capital reserve account)

Working note:
Forfeited amount for 150 shares = Rs.900
Forfeited amount for 100 shares = \(\frac{900}{150}\) x 100 = Rs.600
Gain or loss = Amount forfeited – loss on reissue
= 600 - 100
Net gain = Rs.500

To View Profit and Loss Account
F10: A/c Reports > Profit & Loss A/c > Alt F1 (detailed)
(or)
Gateway of Tally > Reports> Profit & Loss A/c > Alt F1 (detailed)

(i) Under this method, goodwill is the excess of capitalised value of average profit of the business over the actual capital employed in the business.
Goodwill = Total capitalised value of the business - Actual capital employed
(ii) The total capitalised value of the business is calculated by capitalising the average profits on the basis of the normal rate of return.
Capitalised value of the business 
\(=\frac{Average\ profit}{Normal\ rate of\ return}\times 100\)
(iii) Actual capital employed = Fixed assets (excluding goodwill ) + Current assets - Current liabilities

(i) Interest on capital will not be allowed as the partnership deed is silent as to the interest on capital.
(ii) Profit before interest on capital is Rs. 27,000.
Computation of interest on capital:
A: 4,00,000 \(\times\) \(\frac{3}{100}\) = Rs. 12,000
B: 2,00,000 \(\times\) \(\frac{3}{100}\) = Rs. 6,000
Since there is sufficient profit, interest on capital will be provided.
(iii) Profit before interest on capital is Rs. 27,000.
Computation of interest on capital:
A: 4,00,000 \(\times\) \(\frac{5}{100}\) = Rs. 20,000
B: 2,00,000 \(\times\) \(\frac{5}{100}\) = Rs. 10,000
Since the profit is insufficient, interest on capital will not be provided. Profit of Rs. 27,000 will be distributed to the partners in their capital ratio of 2:1.

Dr Income and Expenditure Account for the year ended 31^st March, 2019 Cr

Expenditure	Rs	Income	Rs	Rs
		By Subscription	50,000
		Add:
		Outstanding for the year
		2017-2018	30,000	80,000

Total subscription due for current year (2018 - 19) (\(200 \times 400\))	= 80,000
Less : Amount received for the current year (2018-19)	= 50, 000
Outstanding subscription for the current year (2018 - 19)	Rs. 3000

Balance sheet as on 31^st March, 2019

Liabilities	Rs	Assets	Rs	Rs
Subscription		Outstanding subscription
rceived in advance		2017 - 2018	2,000
for the year 2019-20	5,000	2018 - 2019	30,000	32,000

(a) Sale of sports materials :
(i) Consumable items such as sports materials, stationery, medicines, etc., consumed during the year will appear on the debit side of income and expenditure account.
(ii) Opening stock + the current year - Consumption Purchases during Closing stock
(iii) Closing stock will appear on the assets side of the balance sheet as at the end of the year.
(iv) If there is any sale of old sports materials, etc., that will be shown on the credit side of income and expenditure account or can be subtracted from the respective items consumed on the debit side of income and expenditure account.
(b) Life membership fees:
Amount received towards life membership fee from members is a capital receipt as it is nonrecurring in nature.
(c)Tournament fund : If there are any specific funds such as tournament fund, prize fund, etc., these funds should be shown on the liabilities side of the balance sheet separately.

Dr. Bills receivable account Cr.

Particulars	Rs.	Particulars	Rs
To Balance b/d	40,000	By Cash A/c	90,000
To Debtors A/c*	90,000	By Debtors A/c	10,000
(Bills received during the year – balancing figure)		(Bills receivable dishonoured)
		By Balance c/d	30,000
	1,30,000		1,30,000

Dr. Total debtors account Cr

Particulars	Rs	Particulars	Rs
To Balance b/d	1,50,000	By Cash A/c	3,90,000
To Bills receivable A/c (dishonoured)	10,000	By Sales returns A/c	40,000
To Sales A/c (credit)	4,90,000	By Bills receivable A/c*	90,000
		By Balance c/d	1,30,000
	6,50,000		6,50,000

Total Sales = Cash Sales + Credit Sales = Rs. 2,00,000 + Rs. 4,90,000 = Rs. 6,90,000.
(iii) Format of total creditors account

Dr. Total creditors account Cr.

Particulars	Rs	Particulars	Rs
To Cash A/c (paid)	xxx	By Balance b/d	xxx
To Bank A/c (cheques paid)	xxx	(opening balance)
To Bills payable A/c		By Purchases A/c	xxx
(bills accepted)	xxx	(credit purchases)
To Discount received A/c	xxx	By Bank A/c	xxx
To Purchase returns A/c	xxx	(cheques dishonoured)
To Balance c/d	xxx	By Bills payable A/c	xxx
(closing balance)		(dishonoured )
	xxx		xxx

In the books of David 
Calculation of opening capital 
Statement of affairs as on 1^st April, 2018 Liabilities Rs Assets Rs Sundry creditors 1,05,000 Cash 43,000 Loan 25,000 Stock of goods 1,20,000 Capital (balancing figure) 4,00,000 Sundry debtors 84,000  Business premises 2,50,000  Furniture 33,000 5,30,000 5,30,000 Calculation of closing capital 
Statement of affairs as on 31^st March, 2019 Liabilities Rs Assets Rs Sundry creditors 1,02,000 Cash 29,000 Loan 20,000 Stock of goods 1,30,000 Capital (balancing figure) 4,42,000 Sundry debtors 1,10,000  Business premises 2,50,000  Furniture 45,000  5,64,000 5,64,000 Statement of affairs as on 31st March, 2019
ParticularsRs Closing capital as on 31.3.2019 4,42,000 Add: Drawings during the year (2,500 x 12) 30,000 4,72,000 Less: Additional capital introduced during the year 45,000 Adjusted closing capital 4,27,000 Less: Opening capital as on 1.4.2018 4,00,000 Profit made during the year ending 31.3.2019 27,000

Journal Entry

Date	Particulars		L.F	Debit Rs.	Credit Rs.
	Building A/c	Dr		70,000
	Investment A/c	Dr		20,000
	Sundry creditors A/c	Dr		16,000	1,06,000
	To Revaluation A/c
	(Profit items enterd in credit side)
	Revaluation Alc	Dr		26,000
	To Machinery A/c				14,000
	To Furniture A/c				12,000
	(Loss items enterd in credit side)
	Revaluation A/c	Dr		70,000
	To Seenu's capital A/c				43,750
	To Siva's capital A/c				26,250
	(old partner's capital in old ratio)

Dr Revaluation A/c Cr

Particulars	Rs.	Rs.	Particulars	Rs.
To Machinery A/c		14,000	By Building A/c	70,000
To Furniture A/c		12,000	By Investment A/c	20,000
To Profit on revaluation transferred to			By Sundry creditor A/c	16,000
Seenu's capital A/c	43,750
Siva's capital A/c	26,250	70,000
		1,06,000		1,06,000

Journal entries

Date	Particulars		L.F	Debit Rs	Credit Rs
2017	Building A/c	Dr		30,000
April 1	To Revaluation A/c				30,000
	(Value of building inreased)
2017	Revaluation A/c	Dr		18,000
April1	To Stock A/c				5,000
	To Furniture A/c				12,000
	To Outstanding liability A/c				1,000
	(Decrease in value of assets and outstanding liability recorded
2017	Revaluation A/c	Dr		12,000
April1	To Roja's capital A/c				4,800
	To Neela's capital A/c				3,600
	To Kanaga's capital A/c				3,600
	(profit on recaluation distributed)

Dr                       Revaluation Account                              Cr

Particulars	Rs	Rs	Particulars	Rs
To Stock A/c		5,000	By Building A/c	30,000
To Furniture A/c		12,000
To Outstanding liability A/c		1,000
To Profit on revaluation transferred to
Roja's capital A/c	4,800
Neela's capital A/c	3,600
Kanaga's capital A/c	3,600
		12,000
		30,000		30,000

The applications of CAS are as follows:
(i) Maintaining accounting records:
In CAS, accounting records can be maintained easily and efficiently for long time period. It facilitates fast and accurate retrieval of data and information.
(ii) Inventory management:
CAS facilitates efficient management of inventory. Updated information about availability of inventory, level of inventory, etc., can be obtained instantly.
(iii) Report generation:
CAS helps to generate various routine and special purpose reports.
(iv) Data import/export:
Accounting data and information can be imported from or exported to other users within the organisation as well as outside the organisation.
(v) Taxation:
CAS helps to compute various taxes and to deduct these and deposit the same to the Government account.

Calculation of adjusted profit

Particulars	2016 Rs.	2017 Rs.	2018 Rs.
Profit	25,000	23,000	26,000
Less: Non -recurring income	2,500	-	-
	22,500	23,000	26,000
Add: Stock destroyed by fire (abnormal loss)	-	3,500	-
Profit after adjustments	1,30,000	1,20,000	2,30,000

Average profit \(=\frac{Total\ profit}{Number\ of\ years}\)
\(=\frac{22,000+26,000+26,000}{3}\)
\(=\frac{75,000}{3}\) = Rs. 25,000

	Rs.
Average profit before adjusting insurance premium payable in future	25,000
Less: Insurance premium payable in future	250
Average profit	24,750

Goodwill = Average profit \(\times\) Number of years of purchase
= 24,750 \(\times\) 2 = 49,500
Goodwill = Rs. 49,500

Journal entries

Date	Particulars		L.E.	Dr. Rs.	Cr. Rs
2018	Interest on capital A/c	Dr.		1,500
Dec. 31	To Arulappan’s capital A/c				1,000
	To Nallasamy’s capital A/c (Interest on capital @ 5% provided)				500
"	Profit and loss appropriation A/c	Dr.		1,500
	To Interest on capital A/c (Interest on capital account closed)				1,500
'	Arulappan’s capital A/c	Dr.		200
	Nallasamy’s capital A/c	Dr.		300
	To Interest on drawings A/c (Interest on drawings charged)				500
"	Interest on drawings A/c	Dr.		500
	To Profit and loss appropriation A/c (Interest on drawings account closed)				500
"	Profit and loss appropriation A/c Dr.			17,000
	To Arulappan’s capital A/c				13,600
	To Nallasamy’s capital A/c (Profit transferred)				3,400

Dr. Profit and loss appropriation account for the year ended 31st December 2018 Cr.

Particulars	Rs.	Rs.	Particulars	Rs.
To Interest on capital			By Profit and loss A/c	18,000
Arulappan		1,000	By Interest on drawings A/c
Nallasamy		500	Arulappan	200
To Partners’ capital A/c (profit)			Nallasamy	300
Arulappan (4/5)	13,600	17,000
Nallasamy (1/5)	3,400	18,500		18,500

Durai’s share of goodwill = 36,000 × 1/4 = Rs. 9,000
As the sacrifice made by the existing partners is not mentioned, it is assumed that they sacrifice in their old profit sharing ratio 1:1:1. Therefore, sacrificing ratio is 1:1:1.

Journal Entries

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Bank A/c	Dr..		9,000
	To Arun’s capital A/c				3,000
	To Babu’s capital A/c				3,000
	To Charles’s capital A/c (Cash brought for goodwill credited to old partners’ capital account in sacrificing ratio)				3,000
	Arun’s capital A/c	Dr.		1,500
	Babu’s capital A/c			1,500
	Charles’s capital A/c			1,500
	To Bank A/c (Cash withdrawn by the partners				4,500

Trade receivables turnover ratio = \(\frac{Credit\ revenue\ from\ operations}{Average\ trade\ receivables}\) = \(\frac{9,60,000}{1,60,000}\) = 6 times
Trade receivables = Debtors + Bills receivable = 1,00,000 + 60,000 = Rs.1,60,000

Common-size income statement of Kumar Ltd for the year ended 31^st March, 2018

Particulars	Absolute amount	Percentage of revenue from operations
Revenue from operations	5,00,000	100
Add: Other income	20,000	4
Total revenue	5,20,000	104
Less: Expenses	3,00,000	60
Profit before tax	2,20,000	44

Computation of percentage for other income
\(\cfrac { 20,000 }{ 5,00,000 } \times 100=4%\)%