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

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.

(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.

Following are the objectives of ratio analysis:
(i) To simplify accounting figures
(ii) To facilitate analysis of financial statements
(iii) To analyse the operational efficiency of a business
(iv) To help in budgeting and forecasting
(v) To facilitate intra firm and inter firm comparison of performance

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)

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

Expenditure	Rs.	Income	Rs.	Rs.
		By Subscription received during the year	16,000
		Less: Subscription received for 2017	3,000
			13,000
		Less: Subscription received for 2019	5,000
			8,000
		Add: Subscription due for 2018	4,000
			12,000
		Add: Received in advance in 2017 for 2018	2,000	14,000

(b) Treatment of consumable items such as sports materials, stationery items, medicines, etc.
(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) Consumption = Opening stock + Purchases during the current year - 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.

Proprietary ratio = \(\frac { Shareholder's\quad funds }{ Total\quad assets } \)
Shareholder's funds = Equity share capital + Preference share capital + Reserves and surplus
= Rs.1,00,000 + Rs.75,000 + Rs.25,000 = Rs.2,00,000
∴ Proprietary ratio = \(\frac { 2,00,000 }{ 4,00,000 } \) = 0.5:1

Dr                                             Revaluation Account                                                              Cr

Particulars		Rs.	Particulars	Rs.
To Stock A/c		4,000	By Land and Buildings A/c	40,000
To Provision for doubtful debts A/c		1,400
To Outstanding expenses A/c		2,600
To Profit on revaluation transferred to :
Valluvan's capital A/c	19,200
Kambans capital A/c	12,800	32,000
		40,000		40,000

Dr                                                Capital Account                                    Cr

Particulars	Ragu Rs.	Sam Rs.	Particulars	Ragu Rs.	Sam Rs.
To Balance c/d	1,09,200	92,800	By Balance b/d	90,000	80,000
	34,000	26,000	By Revaluation A/c	19,200	12,800
	1,09,000	92,000		1,09,000	92,000
			By Balance b/d	1,09,000	92,000

Balance sheet ofValluvan and Kamban as on 1st January, 2019

Liabilities	Rs.	Rs.	Assets	Rs.	Rs.
Outstanding expenses		2,600	Cash in hand		4,000
Sundry creditors		96,000	Sundry Debtors	56,000
Bills payable		34,000	Less: Provision for doubtful debts	1,400	54,600
Capital Accounts:			Stock	40,000
Vallauvan	1,09,200		Loss: Reduction	4,000	36,000
Kamban	92,800	2,02,000	Plant & Machinery		80,000
			Land and buildings	1,20,000
			Add: Appreciation	40,000	1,60,000
		3,34,600			3,34,600

Journal entries

Date	Particulars		L.F	Debit Rs.	Credit Rs.
	(a) Goodwill A/c	Dr		40,000
	To Surya's capital A/c (40,000 x 5/10)				20,000
	To Ramesh's capital A/c (40,000 x 3/10)				12,000
	To Rajesh's capital A/c (40,000 x 2/10)				8,000
	(Goodwill raised and transferred to old partners in the old ratio)
	(b) Goodwill A/c	Dr		10,000
	To Surya's capital A/c (10,000 x 5/10)				5,000
	To Ramesh's capital A/c (10,000 x 3/10)				3,000
	To Rajesh's capital A/c (10,000 x 2/10)				2,000
	(Increase in goodwill transferred)
	(c) Surya's capacital A/c (10,000 x 5/10)	Dr		5,000
	Ramesh's capital A/c (10,000 x 3/10)	Dr
	Rajeshs capital A/c (10,000 x 2/10)	Dr		3,000
	To Goodwill A/c			2,000
	(Decrease in goodwill transferred to the old partners in the old ratio)				10,000

Calculation of opening capital

Statement of affairs as on 1.4.2017

Liabilities	Rs.	Assets	Rs.
Sundry creditors	37,500	Furniture	2,500
Opening capital (B/F)	58,750	Cash	6,250
		Sundry Debtors	62,500
		Stock	25,000
	96,250		96,250

Dr.                      Total Debtors account                         Cr.

Liabilities	Rs.	Particulars	Rs.
To Balance b/d	62,500	By Cash received	1,35,000
To Credit Sales (B/F)	1,66,250	By Discount allowed	2,500
		By Sales returns	3,750
		By Balance c/d	87,500
	2,28,750		2,28,750

Dr. Total Creditors account Cr.

Liabilities	Rs.	Particulars	Rs.
To Cash paid	1,12,500	By Balance b/d	37,500
To Discount received	3,750	By Credit purchases (B/F)	1,23,750
To Purchase returns	1,250
To Balance c/d	43,750
	1,61,250		1,61,250

Trading and Profit and loss account for the year ended 31.3.2018

Particulars	Rs.	Rs.	Particulars	Rs.	Rs.
To Opening stock		25,000	By Sales	1,66,250
To Purchases	1,23,750		Less: Sales returns	3,750	1,62,500
Less: Purchase returns	1,250	1,22,500
			By Closing stock		12,500
To Gross profit c/d		27,500
		1,75,000			1,75,000
To Discount allowed		2,500	By Gross profits b/d		27,500
To Sundry expenses		8,750	By Discount received		3,750
To Depreciation		125
To Net profit		19,875
(Transferred to capital a/c)		31,250			31,250

Balance sheet as on 31.3.2018

Liabilities	Rs.	Rs.	Assets	Rs.	Rs.
Capital	58,750		Furniture	2,500
Add: Net profit	19,875		Less: Depreciation	125	2,375
	78,625		Cash		10,000
Less: Drawings	10,000	68,625	Sundry debtors		87,500
Sundry creditors		43,750	Closing stock		12,500
		1,12,375			1,12,375

Dr Income and Expenditure Account for the year ending on March 31, 2015Cr

Expenditure	Rs.	Income	Rs.	Rs.
		By Subscriptions
		received for 2014-15	30,000
		Add: Outstanding for
		2014-15	17,000
		Add;	47,000
		Received in advance
		For 2014-15
			4,000	51,000

Balance sheet as on March31,2015

Liabilities	Rs	Asets	Rs	Rs
Subscription received in		Subscription
advance for 2014-15	5,000	outstanding
		2013-14	1,500
		2014-15	17,000	18,500

Dr In the books of Cricket club Income and Expenditure Account for the year ending 31.3.2 Cr

Expenditure	Rs.	Rs.	Income	Rs.	Rs
To Salaries	2,000		By Subscriptions		10,400
			By Donation		2,000
Add: Outstanding	1,500	3,500	By Entrance fees		500
To Telephone charges		300	(50% of 1000)
To Electricity charges		600	By Bank interest	450
To Entertainment expenses	900		Add: Outstanding interest	150	600
			By Interest on investment		200
Add: Outstanding expense	500	1,400	By Hall rent		300
To Miscellaneous expenses		600
To Depreciation on furniture		375
To Surplus (Excess of income		7,075
over expenditure)
		14,000			14,000

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

Dr Revaluation A/c Cr

Particulars	Rs	Rs	Particulars	Rs	Rs
To stock A/c		1,000	By Building A/c		9,000
To Deptors A/c		1,000	By Loss on revaluation transferred to
To Unrecorded liability A/c		8,000
			Kannans capital A/c	500
			Rahim's capital A/c	300
			John's capital A/c	200
					1,000
		10,000			10,000

Dr Capital Account Cr

Particulars	Kannan Rs	Rahim Rs	John Rs	Particulars	Kannan Rs	Rahim Rs	John Rs
To Profit and Loss A/c	10,000	6,000	4,000	By Balance b/d	1,00,000	80,000	40,000
To Revaluation A/c	500	300	200	By Workmens Compensation fund	15,000	9,000	6,000
To Bank	-	-	41,800	compensation
To Balance c/d	1,04,500	82,700	-	fund	15,000	9,000	6,000
	1,15,000	89,000	46,000		1,15,500	89,000	46,000
				By Balance b/d	1,04,500	82,700

 

Balance Sheet as on 31st December 2017

Liabilities	Rs	Rs	Assets	Rs	Rs
Capital accounts			Buildings	90,000
			Add:Appreciation	9,000	99,000
Kannan	1,04,500		Machinary		60,000
Rahim	82,700	1,87,200
			Deptors	30,000
Sudry creditors		20,000	Less,Bad debts	1,000	29,000
Unrecorded liability		8,000
			Stock	20,000
			Less: Depreciation	1,000	19,000
			Cash at bank	50,000
			Less: Amount paid to John	41,800	8,200
		2,15,200			2,15,200

Computation of transfer to capital to capital reserve.
Amount forfeited for 1500 shares       = Rs.12,000
Amount forfeited for 1200 shares       = \(\frac{12,000}{1500}\) x 1200
= Rs. 9,600
Less: Loss on reissue = Rs.2,400
Net gain transferred to capital reserve = Rs. 7,200

In the books of kanchana Ltd Journal entries

Date	Particulars		L.F	Debit Rs.	Credit Rs.
	Bank A/c (70,000 x 1)	Dr		70,000
	To Share application A/c				70,000
	(Application money received on Rs.70,000 shares @ per share
	Share application A/c	Dr		8,000
	To Bank				8,000
	(Excess share app. Money received)
	Share application A/c	Dr		62,000
	To Share allotment				12,000
	To Share capital				50,000
	(Share app. Money tr. to share capital)
	Share allotment A/c	Dr		2,50,000
	To Share capital A/c				2,50,000
	(Allotment money due)
	Bank A/c	Dr		2,38,000
	To Share allotment A/c				2,38,000
	(Application money received)
	Share first call A/c (50,000 x 2)	Dr		1,00,000
	To Share capital A/c				1,00,000
	(First call money due)
	Bank A/c	Dr		1,00,000
	To Share first call A/c				1,00,000
	(First call money received)
	Share second and final call (50,000 x 2)	Dr		100,000
	To Share capital A/c				1,00,000
	(Allotment money received)
	Bank A/c (50,000 - 1,500 x 2)	Dr		97,000
	To Share second and final A/c				97,000
	(Second and final call money received on)
	Equity share capital A/c (1500 x 10)	Dr		15,000
	To Share second and final A/c				3,000
	To Forfeited shares A/c				12,000
	(Shares forfeited for nonpayment of final call money)
	Bank A/c (1,200 x 8)	Dr		9,600
	Forfeited share A/c (1200 x 2)	Dr		2,400
	To Share capital A/c				12,000
	(1,200 forfeited shares reissued at 8 per share)
	Forfeited shares A/c	Dr		7,200
	To Capital reserve A/c				7,200
	(gain on reissue credited to capital reserve A/c)

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

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

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

Dr  Partnes' Capital Account  Cr

Date	Particulars	Arun Rs.	Selvam Rs.	Date	Particualrs	Arun Rs.	Selvam Rs.
	To Balance c/d (B/F)	2,20,000	2,20,000		By Balance b/d	2,20,000	1,50,000
					By Bank (Additional capital)	-	70,000
		2,20,000	2,20,000			2,20,000	2,20,000
					By Balance b/d	2,20,000	2,20,000

Dr                                                         Partners' Current Account                                                                              Cr

Date	Particulars	Arun Rs.	Selvam Rs.	Date	Particulars	Arun Rs.	Selvam Rs.
	To Balance b/d	4,250	-		By Balance b/d	-	10,000
	To Drawings A/c	10,000	20,000		By Profit and loss appropriation A/c (Share of profit)	22,000	15,000
	To Interest on drawings	750	600		By Interest on capital	1,100	750
					By Commission A/c		-
					By Salary A/c	-	6,850
		30,000	32,600			30,000	32,600
					By Balance b/d	15,000	12,000

Dr Partnes' Capital Account Cr

Date	Particulars	Rooban Rs.	Deri Rs.	Date	Particualrs	Rooban Rs.	Deri Rs.
2018 March 31	To Balance c/d (Balancing figure)	88,000	66,000	2018  1 April	By Balance b/d	70,000	50,000
					By Bank (Additional capital)	18,000	16,000
		88,000	66,000			88,000	66,000
				2019 April 1	By Balance b/d	88,000	66,000

Dr Partners' Current Account Cr

Date	Particulars	Rooban Rs.	Deri Rs.	Date	Particulars	Rooban Rs.	Deri Rs.
	To Drawings	10,000	6,000		By Balance b/d	25,000	15,000
	To Interest on drawings	500	300		By Profit and loss appropriation A/c (Share of profit)	35,000	25,800
	To Balance c/d (B/F)	65,000	55,000		By Interest on capital	3,500	2,500
					By Salary	-	18,000
					By Commission	12,000	-
		75,500	61,300			75,500	61,300
					By Balance b/d	65,000	55,000

Dr In the books of Mayiladuthurai Recreation club Receipts and Payments Account for the year ended 31^st March, 2019 Cr

Receipts	Rs.	Rs.	Payments	Rs.
To Balance b/d			By Refreshments charges	l3,000
Cash in hand	15,000		By Construction of tennis
Cash at bank	25,000	40,000	cocert	7,000
To Donation received		48,000	By Rent paid	1,000
To Sale of old equipment		26,000	By Salary of watchman	12,000
To Club annual day			By Club annual day expenses	15,000
To Receipts from charity show		4,000	By Entertainment expenses	13,500
To Sale of investments		12,000	By Billiards table purchased	5,000
			By Expenses of charity show	3,000
			By Balance cld
			Cash in hand	12,000
			Cash at bank	50,000
		1,48,000		1,48,000

(i) Intra-firm comparison is comparison within the organisation among different departments, division etc
(ii) Inter-firm comparison is comparison of one firm with other firm or firms in the industry.

No, the accountant is not correct. He has not recorded the interest on loan currently because the interest on loan is a charge against profits and not an appropriation of profits.

No, due to legal restrictions, a company cannot maintain its accounts under single entry system.

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

Current ratio = \(\frac{Current\ assets}{Current\ liabilities}\) = \(\frac{8,00,000}{4,00,000}\) = 2:1
Current assets = Current investments + Inventories + Trade receivables + Cash and cash equivalents + Prepaid expenses
= 80,000 + 1,60,000 + 4,00,000 + 1,20,000 + 40,000 = Rs.8,00,000
Current liabilities = Trade creditors + Bills payable + Expenses payable
= 1,60,000 + 1,00,000 + 1,40,000 = Rs.4,00,000
(ii) Quick ratio
Quick ratio gives the proportion of quick assets to current liabilities. It indicates whether the business concern is in a position to pay its current liabilities as and when they become due, out of its quick assets. Quick assets are current assets excluding inventories and prepaid expenses. It is otherwise called liquid ratio or acid test ratio. It is calculated as follows:
Quick ratio = \(\frac{Quick\ assets}{Current\ liabilities}\)
Quick assets = Current assets – Inventories – Prepaid expenses
Higher the quick ratio, better is the short-term financial position of an enterprise.

When a shareholder fails to pay the amount due on allotment or on calls, the amount remaining unpaid is known a calls in arrears. In other words, the amount called up but not paid is calls in arrear.

Comparative income statement of Daniel Ltd for the year ended 2016 and 2017

Particulars	2015-16 Rs.	2016-17 Rs.	Absolute amount of increase (+) or decrease (-) Rs.	Percentage increase (+) or decrease (-)
Revenue from Operations	40,000	50,000	+ 10,000	+ 25
Less: Operating expenses	25,000	27,500	+ 2,500	+ 10
Profit before tax	15,000	22,500	+ 7,500	+ 50
Less: Income tax	4,500	6750	+ 2,250	+ 50
Profit after tax	10,500	15,750	+ 5,250	+ 50

Note:
Percentage increase for revenue from operations = \(\frac{10,000}{40,000}\) x 100 = 25%
Percentage increase for operating expenses = \(\frac{2,500}{25,000}\) x 100 = 10%
Percentage increase for profit before tax = \(\frac{7,500}{15,000}\) x 100 = 50%
Percentage increase for income for Income tax = \(\frac{2250}{4500}\) x 100 = 50%
Percentage increase for profit after tax = \(\frac{5250}{10,500}\) x 100 = 50%

Gaining ratio is 1:1 as Manohar’s share is taken up by Kumar and Kesavan equally.
Manohar’s share = \(\frac{1}{6}\)
Share gained = Retiring partner’s share × Proportion of share gained
Kumar \(=\frac{1}{6}\times\frac{1}{2}=\frac{1}{12}\)
Kesavan \(=\frac{1}{6}\times\frac{1}{2}=\frac{1}{12}\)
Therefore, gaining ratio of Kumar and Kesavan \(\frac{1}{12}:\frac{1}{12}\) that is 1:1
New share of continuing partners = Old share + Share gained
Kumar  \(=\frac{1}{2}+\frac{1}{12}=\frac{6+1}{12}=\frac{7}{12}\)
Kesavan  \(=\frac{1}{3}+\frac{1}{12}=\frac{4+1}{12}=\frac{5}{12}\)
Therefore, new profit sharing ratio of Kumar and Kesavan is \(\frac{1}{12}:\frac{1}{12}\) that is 7 : 5.

Routine accounting reports include
(a) Day books / Journal
(b) Ledger
(c) Trial balance
(d) Income statement
(e) Balance sheet
(f) Cash flow statement

Goodwill is the good name or reputation of the business which brings benefit to the business. It enables the business to earn more profit. It is the present value of a firm's future excess earnings. It is an intangible asset as it has no physical existence.

Goodwill = Average profit \(\times\) Number of years of purchase
Average profit = \(\frac { Total\ profit }{ Number\ ofyear } \)
= \(\frac { 4,000+3,000+5,000+4,500+3,500 }{ 5 } \)
= \(\frac { 20,000 }{ 5 } \)= Rs. 4,000
Goodwill =  Average profit \(\times\) Number of years of purchase
= 4,000 \(\times\) 3 = Rs.12,000

Dr Income and Expenditure Account for the
year end 31.12.18 Cr

Expenditure	Rs	Income	Rs	Rs
	-	By Subscription	1,72,000
		Add:
		Outstanding Subscription for 2018	8,000	1,80,000