As the sacrifice made by the existing partners is not mentioned, it is assumed that they sacrifice in their old profit sharing ratio of 4 : 1. Therefore sacrificing ratio is 4 : 1
Manos share of goodwill = 25,000 x \(\frac{2}{5}\)
= Rs. 10,000

Journal Entry

Date	Particulars	L.F	Debit Rs.	Credit Rs.
	Manos capital A/c        Dr		10,000
	To Anu's capital A/c  \((\frac{4}{5})\)			8,000
	To Arul's capital A/c  \((\frac{1}{5})\)			2,000
	(Mano's share of goodwill created to the old partner's capital account in the sacrificing ratio)

Journal entries

Date	Particulars		L.F	Debit Rs	Credit Rs
2018	(i) Kavin's capital A/c	Dr.		1,50,000
Dec.31	To Bank Ale				1,50,000
	(Amount due paid immediately)
2018	(ii) Kavins capital A/c	Dr		1,50,000
	To Kavins loan A/c				1,50,000
	(Amount due transferred to loan account)
2018	(iii) Kavins capital A/c	Dr		1,50,000
Dee.31	To Bank A/c				1,00,000
	To Kavins loan A/c				50,000
	(Rs 1,00,000 paid and the balance transferred to Ian account)

Journal entries

Date	Particulars		L.F	Debit Rs.	Credit Rs.
2018 Dec. 31	(i) Kumudha’s capital A/c	Dr.		2,00,000
	To Bank A/c				2,00,000
	(Amount due paid immediately)
"	(ii) Kumudha’s capital A/c	Dr.		2,00,000
	To Kumudha’s loan A/c				2,00,000
	(Amount due transferred to loan account)
"	(iii) Kumudha’s capital A/c			2,00,000
	To Bank A/c				70,000
	To Kumudha’s loan A/c				1,30,000
	(Rs. 70,000 paid and the balance transferred to loan account)

In the books of Gemini Ltd. Journal entries

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Equity share capital A/c (20 × 7)	Dr.		140
	To Equity share first call A/c (20 × 2)				40
	To Forfeited shares A/c (20 × 5)				100
	(Forfeiture of 120 shares, Rs.7 called up)
	Bank A/c (15 × 6)	Dr.		90
	Forfeited shares A/c			15
	To Equity share capital A/c (15 × 7)				105
	(Reissue of 15 forfeited shares @ Rs.6 per share)
	Forfeited shares A/c	Dr		60
	To Capital reserve A/c				60
	(Gain on reissue of forfeited shares transferred to capital reserve account)

Note:
Computation of transfer to capital reserve

Forfeited amount for reissued shares of 15	= \(\frac{100}{20}\times\)15	= 75
Less: Loss on reissue		15
Transfer to capital reserve		60

Remaining balance in shares forfeited account Rs. 25 will appear in the balance sheet. Accountancy.

Following are the limitations of ratio analysis:
(i) Accuracy of financial information : The accuracy of a ratio depends on the accuracy of information taken from financial statements.
(ii) Consistency in preparation of financial statements: Inter-firm comparisons with the help of ratio analysis will be meaningful only if the firms follow uniform accounting procedures consistently.
(iii) Non-availability of standards or norms: Ratios will be meaningful only if they are compared with accepted standards or norms. Only few financial ratios have universally recognised standards.
(iv) Change in price level : Ratio analysis may not reflect price level changes and current values as they are calculated based on historical data given in financial statements.

Average profit \(=\frac{Total\ profit}{Number\ of\ years}\)
\(=\frac{10,000+12,000+12,000+11,500}{4}\)
\(=\frac{46,000}{4}\) = Rs.11,500

Average profit before adjusting fair remuneration of the parter	= Rs. 11,500
Less: Fair remuneration of partners	= Rs.   1,500
Average profit	= Rs. 10,000

Goodwill Average profit \(\times\) Number of years of purchase
= 10,000 \(\times\) 3
= Rs. 30,000
Goodwill = Rs. 30,000

(i) No Interest on capital will not allowed as the partnership deed.
(ii) Profit before interest on capital is Rs. 5,000.
Computation of interest on capital:
Ahamed: 60,000 \(\times\) \(\frac{4}{100}\) = Rs. 2,400
Basheer : 40,000 \(\times\) \(\frac{4}{100}\) = Rs. 1,600
Since there is sufficient profit, interest on capital will be provided
(iii) Profit before interest on capital is Rs. 5,000
Computation of interest on capital :
Ahamed: 60,000 \(\times\) \(\frac{6}{100}\) = Rs. 3,600
Basheer: 40,000 \(\times\) \(\frac{6}{100}\) = Rs. 2,400
Since the profit is insufficient, interest on capital will not be provided. Profit of 5,000 will be distributed to the partners on their capital ratio of 3 : 2

Goodwill = Average profit × Number of years of purchase
Average profit = \(\frac { Total\ profit }{ Number\ ofyear } \)
Average profit = \(\frac { 15,000+17,000-6,000+14,000 }{ 4 } \)
= \(\frac { 40,000 }{ 4 } \) = Rs. 10,000
Goodwill = Average profit \(\times\) Number of years of purchase
= 10,000 × 5 = Rs. 50,000

Calculation of interest on drawings under product method.
Date of drawings Amount withdrawn
Rs. Period up to December 31
(months) Product
Rs. March 1 6,000 10 60,000 June 1 4,000 7 28,000 September 1 5,000 4 20,000 December 1 2,000 1 2,000       1,10,000 Interest on drawings = Sum of product \(\times\) Rate of interest \(\times\) \(\frac{1}{12}\)
= 1,10,000 \(\times\) \(\frac{12}{100}\) \(\times\) \(\frac{1}{12}\) = Rs.1,100

(A) Treatment in income and Expenditure account:
When subscription received for the current year, previous years and subsequent period are given separately, subscription received for the current year will be shown on the credit side of Income and Expenditure
Account after making the adjustments given below:
(i) Subscription outstanding for the current year is to be added.
(ii) Subscription received in advance in the previous year which is meant for the current year, is to be added.When 'total subscription received during the current year is given, that total subscriptions received during the current year will be shown on the credit side of Income and Expenditure Account after making the following-adjustments: (i) Subscription outstanding in the previous year which is received in the current year will be subtracted. Subscription outstanding for the current year is added.
(iii) Subscriptions received in advance in the previous year which is meant for the current year, is added and subscriptions received in advance in the current year which is meant for the subsequent year must be subtracted.
(B) Treatment in Balance Sheet
(i) Subscriptions outstanding for the current year and still outstanding for the previous year will be shown on the assets side of the balance sheet.
(ii) Subscriptions received in advance in the current year will be shown on the liabilities side of the balance sheet.

Dr                                  Total Creditors account                           Cr

Particulars	Rs.	Particulars	Rs
To Cash (Bills paid)	30,000	By Balance b/d	25,000
To Balance c/d	20,000	By Sundry creditors	25,000
		(Bills accepted - balancing figure)
	50,000		50,000

Dr                         Total Creditors account                           Cr

Particulars	Rs.	Particulars	Rs
To Cash paid	1,20,000	By Balance b/d	30,000
To Purchases returns	15,000	By Purchases	1,55,000
To Bills payable	25,000	(credit balancing figure)
(Bills accepted)
To Balance c/d	25,000
	1,85,000		1,85,000

Total purchases = Cash purchases + Credit purchases
=Rs.2,25,000 + Rs.1,55,000
=Rs.3,80,000

Statement of affairs of Subha as on 31.03.2019

Liabilities	Rs.	Assets	Rs.
Creditors	90,000	Stock in trade	1,60,000
Bills payable	2,40,000	Cash in hand	60,000
Bank overdraft	50,000	Debtors	1,80,000
Capital (Balancing figure)	4,20,000	Bills receiveble	70,000
		Computer	30,000
		Machinery	3,00,000
	8,00,000		8,00,000

Statement of profit or loss for the year ending
31^st March 2019

Particulars	Rs.
Closing capital as on 31.03.2019	4,20,000
Add: Drawings during the year	30,000
	4,50,000
Less: Additional capital introduced during the year	40,000
Adjusted closing capital	4,10,000
Less: Opening capital as on 01.04.2018	1,20,000
Profit made during the year ending 31.03.2019	2,90,000

Following are the steps to be followed under the statement of affairs method to find out the profit or loss.
(1) Ascertain the opening capital by preparing a statement of affairs at the beginning of the year by taking the opening balances of assets and liabilities.
(2) Ascertain the closing capital by preparing a statement of affairs at the end of the accounting period after making all adjustments such as depreciation, bad debts, outstanding and prepaid expenses, outstanding income, interest on capital, interest on drawings, etc.
(3) Add the amount of drawings (both in cash and/in kind) to the closing capital.
(4) Deduct the amount of additional capital introduced, to get adjusted closing capital.
(5) Ascertain profit or loss by subtracting opening capital from the adjusted closing capital.
a) If adjusted closing capital is more than the opening capital, it denotes profit
b) If adjusted closing capital is lesser than the opening capital, it denotes loss Following format is used to find out the profit or loss:

Particulars	Rs.
Capital at the end of the year	xxxx
Add: Drawings during the year	xxxx
	xxxx
Less: Additional capital introduced during the year	xxxx
Adjusted closing capital	xxxx
Less: Opening Capital	xxxx
Profit or loss for the year	xxxx

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

Statement of profit or loss for the year ended 31^st December, 2018

Particulars	Rs
Closing capital (as on 31.12.2018) (balancing figure)	35,000
Add: Drawings during the year (goods taken for personal us	5,000
	40,000
Less: Additional capital introduced during the year	2,500
Adjusted closing capital	37,500
Less: Opening capital (as on 1.1.2018)	27,500
Profit made during the year	10,000

Journal Entry

Date	Particulars	L.F	Debit Rs.	Credit Rs.
April 2017, 1	Premises A/c                    Dr		60,000
	To Revaluation A/c			60,000
	(Appreciation in value of premises recorded)
April 2017,1	Revaluation A/c               Dr		10,000
	To Stock A/c			5,000
	To Furniture A/c			2,000
	To Machinery A/c			2,500
	(Decrease in assets recorded and outstanding liability made)			500
April 2017,1	Revaluation A/c              Dr		50,000
	To Haris capital A/c			25,000
	To Madhavans capital A/c			15,000
	To Kesavan's Capital A/c			10,000
	(profit on revaluation transferred)

Dr Revaluation A/c Cr

Particulars	Rs.	Rs.	Particulars	Rs.
To Stock A/c		5,000	By Premises A/c	60,000
To Furniture A/c		2,000
To Machinery A/c		2,500
To Outstanding liability A/c		500
To Profit on revaluation transferred to
Hari's capital Ale (5/10)	25,000
Madhavan's capital Ale (3/10)	15,000
Kesavan's capital Ale (2/10)	10,000	50,000
		60,000		60,000

(i) Inventory turnover ratio = \(\frac{Cost\ of\ revenue\ from\ operations}{Average\ inventory}\) = \(\frac{6,00,000}{1,20,000}\) = 5 times
Average inventory = \(\frac{Opening\ inventory + Closing\ inventory}{2}\)
= \(\frac{1,40,000 + 1,00,000}{2}\)= \(\frac{2,40,000}{2}\)= Rs. 1,20,000
(ii) Trade receivables turnover ratio = \(\frac{Credit\ revenue\ from\ operations}{Average\ trade\ receivables}\)
= \(\frac{10,50,000}{70,000}\) = 15 times
Average trade receivables = \(\frac{Opening\ trade\ receivables + Closing\ trade\ receivables}{2}\)
= \(\frac{80,000 + 60,000}{2}\) =\(\frac{1,40,000}{2}\)= Rs.70,000
(iii) Creditors payables turnover ratio = \(\frac{Net\ credit purchases}{Average\ trade\ payables}\) = \(\frac{4,50,000}{45,000}\)= 10 times
Average trade payables = \(\frac{Opening\ trade\ payables + Closing\ trade\ payables}{2}\)
= \(\frac{40,000 + 50,000}{2}\) = \(\frac{90,000}{2}\) = Rs. 45,000
(iv) Fixed assets turnover ratio = \(\frac{Revenue\ from\ operations}{Average\ xed\ assets}\)= \(\frac{10,50,000}{5,25,000}\) = 2 times
Average fixed assets = \(\frac{Opening\ fixed\ assets + Closing\ fixed\ assets}{2}\)
= \(\frac{5,50,000 + 5,00,000}{2}\) = \(\frac{10,50,000}{2}\)= Rs. 5,25,000

Journal entries

Date	Particulars		L.F	Debit Rs	Credit Rs
2018 April 1	Land and building A/c	Dr		18,000
	To Revaluation A/c				18,000
	(Increase in the value of building accounted)
2018 April 1	Revaluation A/c	Dr.		23,000
	To Machinery A/c				15,000
	To Outstanding expenses A/c				8,000
	(Reduction in the value of machinery
	and outstanding expenses accounted)
2018 April 1	Vinoth's capital A/c	Dr		2,000
	Karthi's capital A/c	Dr.		2,000
	Pranar's capital A/c	Dr		1,000
	To Revaluation A/c				5,000
	(Loss on revaluation transferred to
	capital accounts)

Dr                                      Revaluation A/c                                             Cr

Particulars	Rs	Particulars	Rs	Rs
To Machinery A/c	15,000	By Land and building A/c		18,000
To Outstanding expenses A/c	8,000	By Loss on revaluation transferred to
		Vinoth's capital A/c (5,000 x 2/5)	2,000
		Karthi's capital A/c (5,000 x 2/5)	2,000
		Prana's capital A/c (5,000 x 1/5)	1,000
				5,000
	23,000			23,000

Common-size balance sheet of Sharmila Ltd and Sangeetha Ltd as on 31^st March, 2019

	Sharmila Ltd		Sangeetha Ltd
Particulars	Absolute amount	Percentage of total assets	Absolute amount	Percentage of total assets
	Rs.	Rs.	Rs.
I EQUITY AND LIABILITIES
Shareholders’ funds	5,00,000	50	11,00,000	55
Non-current liabilities	4,00,000	40	7,00,000	35
Current liabilities	1,00,000	10	2,00,000	10
Total	10,00,000	100	20,00,000	100
II ASSETS
Non-current assets	6,50,000	65	18,00,000	90
Current assets	3,50,000	35	2,00,000	10
Total	10,00,000	100	20,00,000	100

This type of a voucher basically analyses a business transaction from the accounting stand point and is used for recording purposes
These are commonly prepared by accountants on the basis of supporting vouchers and approved by a different individual. They are further subdivided into two, Cash and Non-cash vouchers.
Examples of cash type :
1. Credit Vouchers
2.  payment Vouchers
3. Contra Vouchers
4. Purchase Vouchers
5. Sales Vouchers
6. journal vouchers
Examples of the Non-cash type :
1. Debit note
2. Credit note
3. Invoice

Basis of destination	Fixed capital method	Fluctuating capitals method
Number of accounts	Two accounts are maintained for each partner, that is, capital account and current account.	Only one account, that is, capital account is maintained for each partner.
Change in capital	The amount of capital normally remains unchanged except when additional capital is introduced or capital is withdrawn permanently	The amount of capital changes from period to period.
Closing balance	Capital account always shows a credit balance	Capital account generally shows credit balance. It may also show a debit balance.
Adjustments	All adjustments relating to interest on capital, interest on drawings, salary or commission, share of profit or loss are done in current account	All adjustments relating to interest on capital, interest on drawings, salary or commission, share of profit or loss are done in the capital account

Since there is no partnership deed, provisions of the Indian Partnership Act, 1932 will apply.
(i) No interest on capital is payable to any partner. Therefore, A is not entitled to interest on capital.
(ii) No interest is chargeable on drawings made by the partner. Therefore, B need not pay interest on drawings.
(iii) Interest on loan is payable at 6% per annum. Therefore C is to get interest at 6% per annum on Rs. 10,000.
(iv) No remuneration is payable to any partner. Hence, D is not entitled to salary.
(v) Profits should be distributed equally.

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

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

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
\(\cfrac { 20,000 }{ 5,00,000 } \times 100=4%\)%

Journal entry

Date	Particulars		L.F.	Debit Rs.	Credir Rs.
2017	Profit and loss appropriation A/c	Dr.		20,000
April 1	General reserve A/c	Dr.		5,000
	Workmen compensation fund A/c	Dr.		15,000
	To Rathna Kumar’s capital A/c (40,000 \(\times\) 3/5)				24,000
	To Arockia Das’s capital A/c (40,000 \(\times\) 2/5)				16,000
	(Accumulated profit and reserve transferred to old partners’ capital account in the old profit sharing ratio)