(i) Long-term solvency means the firm's ability to meet its liabilities in the long run.
(ii) Long term solvency ratios help to determine the ability of the business to repay its debts in the long run.
(iii) The following ratios are normally computed for evaluating long term solvency of the business:
(i) Debt equity ratio
(ii) Proprietary ratio
(iii) Capital gearing ratio

(i) Public issue
Issue of equity shares to the public through prospectus by a public company is called public issue. It includes initial public offer and further public offer.
(ii) Private placement
Private placement means any offer of equity shares or invitation to subscribe equity shares to a select group of persons by a company (other than by way of public offer) through issue of a private placement offer letter and which satisfies the conditions specified in Section 42 of the Indian Companies Act, 2013.

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 .

(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)

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)

a. When shares are issued at par:

In the books of paradise Ltd Journal entries

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Assets A/c	Dr		4,40,000
	To Suganya Furniture Ltd A/c				4,40,000
	(Purchase of assets)
	Sugnaya Furniture Ltd A/c	Dr		4,40,000
	To Equity share capital A/c				4,40,000
	(Issue of Rs.44,000 shares of 10 each fully paid)

b. When shares are issued at a premium of 10%

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Asset A/c	Dr		4,40,000
	To Suganya Furniture Ltd A/c				4,40,000
	(Purchase of asset)
	Suganya Furniture Ltd A/c	Dr		4,40,000
	To Equity share capital A/c (40000 x 10				4,00,000
	To Securities premium A/c (40,000 x 1)				40,000
	(Issue of Rs.40000 shares of 10 each at a premium of 10%

 Computation of number of shares to be issued
Total amount = Rs.4,40,000
Face value of the shares = Rs.10
Premium = 10%; Therefore, premium amount
10 x 10% =1
Issue price = Face value + premium =10+1 =Rs.11
Number of equity shares to be Issued =\(\frac{Total amount}{Issue price}\) = \(\frac{4,40,000}{11}\) =Rs. 40,000

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 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

Calculation of income from subscription for the year 2018

Particulars	Rs.	Rs.
Subscription received during the year 2018		1,50,000
Add: Subscription received for 2018 in 2017	3,000
Subscription outstanding for 2018	7,000	10,000
		1,60,000
Less: Subscription outstanding in 2017	10,000
Subscription received in advance in 2018	5,000	15,000
Income from subscription for the year 2018		1,45,000

Current ratio = \(\frac { Current\ assets }{ Current\ liabilities } \)
Current assets Current investments + Inventories + Trade receivables + Cash and cash equivalents + Prepaid expenses
= 15,000 + 29,000 + 5,000 + 5,000 + 0
= Rs.54,000
Current liabilities = Trade creditors + Bills payable + Expenses payable
= 36,000 + 10,000 + 8,000 = Rs.54,000
∴ Current assets = \(\frac { 54,000 }{ 54,000 } \) = 1 : 1

Balance sheet as on 31'1 December 2018

Liabilities	Rs	Rs	Assets	Rs
Capital accounts:			Land	80,000
Sankar	50,000		Stock	20,500
Saleem	40,000		Debtors	30,000
Pandiyan	10,000	1,00,000	Cash at bank	14,000
General reserve		36,000	Profit and loss Ale (loss)	6,000
Sundry creditors		14,000
	1,50,000			1,50,000

New ratio:      Kokila :   Mala : Chandra
Old ratio             4      :       3    :         -
Old share           \(\frac{4}{3}\)     :     \(\frac{3}{7}\)    :          -
Sacrifice             \(\frac{2}{7}\)     :     \(\frac{1}{7}\)    :          -
New ratio = Old ratio - sacrifice
New share  \(=\frac { 4 }{ 7 } -\frac { 2 }{ 7 } \): \(\frac { 3 }{ 7 } -\frac { 1 }{ 7 } \) :    \(\frac { 3 }{ 7 } \)
                      = \(\frac { 2 }{ 7 } \)         :  \(\frac { 2 }{ 7 } \)        :     \(\frac { 3 }{ 7 } \)
∴New ratio  =  2         :  2         :    3 
Sacrifice ratio = 2 : 1

Statement of profit or loss

Particulars	Rs.
Closing capital	1,80,000
Add: Drawings	36,000
	2,16,000
Less: Additional capital	10,000
Adjusted closing capital	2,06,000
Less: Opening capital	1,06,000
Profit for the year	46,000

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

Balance Sheet as on 31^st March, 2016

Liabilities	Rs.	Rs	Assets	Rs.
subscription in advance		24,000	Cash in hand	12,000
Out standing expenses		40,000	Cash at bank	8,000
Capital fund	1,76,000		Books	16,000
(balanceing figure)			Billiard Table	24,000
Add:Surplus	20,000	1,96,000	Furniture	30,000
			Investment	30,000
			Prepaid expenses	20,000
			Building	1,00,000
			Subscription accrued	20,000
	2,60,000			2,60,000

Dr Revaluation A/c Cr

Particulars	Rs	Rs	Particulars	Rs	Rs
To Machinary A/c		30,000	By Profit on revaluation transferred
To Stock A/c		10,000	Rajesh capital A/c	24,000
To Debtors A/c		8,000	\(\left( 48,000\times \cfrac { 3 }{ 6 } \right) \)
			Sathish's capital A/c	16,000
			\(\left( 48,000\times \cfrac { 2 }{ 6 } \right) \)
			Mathan's capital A/c	8,000	48,000
			\(\left( 48,000\times \cfrac { 1 }{ 6 } \right) \)
		48,000			48,000

Dr Capital Account Cr

Particulars	Rajesh Rs	Sathish Rs	Mathan Rs	Particulars	Rajesh Rs	Sathish Rs	Mathan Rs
To Mathan's capital A/c	12,000	28,000	-	By Balance b/d	4,00,000	3,00,000	2,50,000
To Revaluation A/c	24,000	16,000	8,000	By General
To Mathans loan A/c	-	-	3,02,000	revenue	60,000	40,000	20,000
To Balance c/d	4,24,000	2,96,000	-	By Rajesh's
				capital A/c	-	-	12,000
				By Mathans
				capital A/c	-	-	28,000
	4,60,000	3,40,000	3,10,000		4,60,000	3,40,000	3,10,000
				By Balance b/d	4,24,000	2,96,000	-

NOTE:
(i) Computing of gaining ratio
Share gained = New share - Old Share
Rajesh =\(\cfrac { 3 }{ 5 } -\cfrac { 3 }{ 5 } =\cfrac { 18-25 }{ 30 } =\cfrac { 3 }{ 30 } \)

Sathish = \(\cfrac { 2 }{ 5 } -\cfrac { 1 }{ 6 } =\cfrac { 12-5 }{ 30 } =\cfrac { 7 }{ 30 } \)
Therefore, the gaining of Rajesh and Sathish is 3:7
(ii) Adjustment for goodwill
Goodwill of the firm = Rs. 1,20,000
Share of goodwill of Mathan = \(Rs.1,20,000\times \cfrac { 2 }{ 6 } =Rs.40,000\)
It is to be adjusted in the capital accounts of Rajesh and Sathis in the gaining ratio 3:7
That is,
Rajesh : \(40,000\times \cfrac { 3 }{ 10 } =Rs.12,000\)
Sathish : \(40,000\times \cfrac { 7 }{ 10 } =Rs.28,000\)

Balance Sheet as on 31st March 2017

Liabilities	Rs	Rs	Assets	Rs	Rs
Capital accounts			Premises		4,00,000
Rajesh	4,24,000		Machinery	4,20,000
Sathish	2,96,000	7,20,000	Less: Depreciation	30,000	3,90,000
Mathans loan A/c		3,02,000	Debtors	1,60,000
Creditors		50,000	Less: Depreciation	8,000	1,52,000
Bills payable		1,80,000
			Stock	3,00,000
			Less: Depreciation	10,000	2,90,000
			Cash at bank
		12,52,000			12,52,000

Common-size balance sheet of Saleem Ltd as on 31^st March, 2017 and 31^st March, 2018

Particulars	Absolute amount on 31st March 2017	Percentage of total assets on 31st March 2017	Absolute amount on 31st March 2018	Percentage of total assets on 31st March 2018
	Rs.		Rs.
I EQUITY AND LIABILITIES
1. Shareholders’ fund
a) Share capital	5,00,000	25	6,00,000	50
b) Reserves 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	3,00,000	15	-	-
Total	20,00,000	100	12,00,000	100
II ASSETS
1. 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 equivalents	2,00,000	10	2,40,000	20
	20,00,000	100	12,00,000	100

Common-size balance sheet of Maria Ltd as on 31^st March, 2018

Particulars	Absolute amount	Percentage of total assets
	Rs.
I EQUITY AND LIABILITIES
Shareholders’ funds	4,00,000	50
Non-current liabilities	3,20,000	40
Current liabilities	80,000	10
Total	8,00,000	100
II ASSETS
Non-current assets	6,00,000	75
Current assets	2,00,000	25
Total	8,00,000	100

Analysis of transactions, passing journal entries, identification of voucher type and group:

S.NO.	Particulars		Debit Rs.	Credit Rs.	Voucher type	Group
(1)	Cash A/c	Dr.	1,00,000		Receipt	Cash -in -Hand
	To Robert’s Capital A/c			1,00,000	Voucher	Capital Account
(2)	State Bank of India A/c	Dr.	30,000		Contra	Bank Accounts
	To Cash A/c			30,000	Voucher	Cash-in-Hand
(3)	Furniture A/c	Dr.	10,000		Payment	Fixed Assets
	To Cash A/c			10,000	Voucher	Cash-in-Hand
(4)	Purchases A/c	Dr.	20,000		Purchase	Purchase Accounts
	To Mohaideen A/c			20,000	Voucher	Sundry Creditors
(5)	Cash A/c	Dr.	8,000		Sales	Cash-in-Hand
	To Sales A/c			8,000	Voucher	Sales Accounts
(6)	Purchases A/c	Dr.	5,000		Purchase	Purchase Accounts
	To Cash A/c			5,000	Voucher	Cash-in-Hand
(7)	Rony A/c	Dr.	60,000		Sales	Sundry Debtors
	To Sales A/c			60,000	Voucher	Sales Accounts
(8)	Cash A/c	Dr.	9,000		Contra	Cash-in-Hand
	To Bank A/c			9,000	Voucher	Bank Accounts
(9)	Mohaideen A/c	Dr.	10,000		Payment	Sundry Creditors
	To Bank A/c			10,000	Voucher	Bank Accounts
(10)	Cash A/c	Dr.	5,000		Receipt	Cash -in -Hand
	To Arun A/c			5,000	Voucher	Sundry Debtors
(11)	Salaries A/c	Dr.	6,000		Payment	Indirect Expenses
	To Bank A/c			6,000	Voucher	Bank Accounts
(12)	Wages A/c	Dr.	3,000		Payment	Direct Expenses
	To Cash A/c			3,000	Voucher	Cash-in-Hand
(13)	Stationery A/c	Dr.	4,000		Journal	Indirect Expenses
	To Pandian Ltd. A/c			4,000	Voucher	Sundry Creditors

Following steps are to be followed to enter the transaction in Tally ERP 9
1. To create company
Company Info > Create Company
Type the Name as Robert 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
Gateway of Tally > Masters > Accounts Info > Ledgers > Single Ledger > Create

(i) To Create Devi's Capital A/c
Name: Devi's Capital A/c
Under Capital Account
Accept: Yes

(ii) To Create Indian Bank A/c
Name: Indian Bank A/c
Under: Bank Accounts
Accept: Yes

(iii) To Create Furniture A/c
Name: Furniture A/c
Under: Fixed Assets
Accept: Yes

(iv) To Create Purchases A/c
Name: Purchases A/c
Under: Purchase
Accept: Yes

(v) To Create Mohaideen A/c
Name: Mohaideen A/c
Under: Sundry Creditors
Accept: Yes

(vi) To Create Sales A/c
Name: Sales A/c
Under: Sales Account
Accept: Yes

(vii) To create Rony A/c
Name: Rony A/c
Under: Sundry Debtors
Accept: Yes

(viii) To create Salaries A/c
Name: Salaries A/c
Under: Indirect Expenses
Accept: Yes

(ix) To create Wages A/c
Name: Wages A/c
Under: Direct Expenses
Accept: Yes

(x) To create Stationery A/c
Name: Stationery A/c
Under: Indirect Expenses
Accept: Yes

(xi) To create Pandian Ltd. A/c
Name: Pandian Ltd. A/c
Under:Sundry Creditors
Accept: Yes

4. To enter transactions through vouchers
Gateway of Tally > Transactions > Accounting Vouchers
(i) Robert commenced a transport business with a capital of Rs. 1,00,000
F6: Receipt Voucher: Accounts: Cash
Particulars: Robert Capital A/c (Choose from List of Ledgers Accounts)
Enter the amount of Capital Rs. 1,00,000
Narration: Capital Introduced
Accept: Yes

(ii) An account was opened with State Bank of India and deposited Rs. 30,000
F4: Contra Voucher
Accounts: State Bank of India
Particulars: Cash
Amount: Rs. 30,000
Narration: Opened bank account in SBI
Accept: Yes

(iii) Purchased Furniture by paying cash Rs. 10,000
F5: Payment Vouchers
Account: Cash
Particulars: Furniture A/c
Amount: Rs. 15,000
Narration: Furniture bought by Cash
Accept: Yes

4 Goods purchased on credit from Mohaideen for Rs. 20,000
F9: Purchase voucher
Party A/c name: Mohaideen A/c
Particulars: Purchases A/c
Amount: Rs. 20,000
Narration: Goods purchased on
credit from Mohaideen
Accept Yes

(5) Cash sales made for Rs. 8,000
F8: Sales Voucher,
Account: Cash
Particulars: Sales A/c
Amount: Rs. 8,000
Narration: Cash Sales Mode
Accept: Yes

(6) Goods purchased from Rathinam for Rs. 5,000 and money deposited in CDM
F9: Purchase Voucher
Account: Bank
Particulars: Purchase A/c
Amount: Rs. 5,000
Narration: Goods Purchased

(vii) Goods sold to Rony on credit for Rs. 60,000
F8: Sales Voucher
Party: A/c Name: Rony A/c
Particulars: Sales A/c
Amount: Rs. 70,000
Narration: Goods sold on credit to Rony
Accept: Yes

(viii) Money withdrawn from bank for office use Rs. 9,000
F4: Contra Voucher
Account: Cash
Particulars: State Bank of India A/c
Amount: Rs. 9,000
Narration: Cash withdrawn from bank
Accept: Yes

(ix) Part payment of Rs 10,000 to Mohaideen by cheque
F5: Payment Vouchers
Account: State Bank of India
Particulars: Mohaideen A/c
Amount: Rs.10,000
Narration: Payment made to
Mohaideen by cheque
Accept Yes

(x) Rony made part payment of Rs. 5,000 by cash
F6: Receipt voucher
Account: Cash
Particulars: Rony A/c
Amount: Rs. 5,000
Narration: Cash received from Rony
Accept Yes.

(xi) Salaries Paid to Staff through ECS Rs. 6,000
F5: Payment Vouchers
Account: Indian Bank
Particulars: Salaries A/c
Amount: Rs 6,000
Narration: Salaries paid through ECS,
Accept: Yes

(xii) Wages of Rs. 3,000 paid by cash
F5: Payment voucher
Account: Cash
Particulars: Wages A/c
Amount: Rs. 3,000
Narration: Wages paid by cash
Accept Yes

(xiii) Purchased stationery from Pandian Ltd. on credit Rs.4,000
F7: Journal Voucher
Particulars: Computer A/c
Account: Muthu Ltd.
Amount: Rs. 4,000
Narration: Stationery bought on credit from Pandian Ltd.
Accept: Yes

To view reports
(i) To view Trial Balance
Gateway of Tally > Reports > Display > Trial Balance > Alt + F1 (detailed)

(ii) 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)

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

(iv) To view Ratio Analysis
F10: A/c Reports > Ratio Analysis (or)
Gateway of Tally > Reports > Ratio Analysis

(v) To view Day book
F10: A/c Reports > Day Book > Alt + F1 (detailed (or)
Gateway of Tally > Reports > Display > Day Books > Alt + F1 (detailed)

In the books of Thai Ltd. Journal entries

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Bank A/c	Dr.		5,00,000
	To Equity share application A/c				5,00,000
	(Application money received)
	Equity share application A/c	Dr.		5,00,000
	To Equity share capital A/c				5,00,000
	(Transfer of share application money to share capital)
	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	Dr.		2,00,000
	To Equity share allotment A/c				2,00,000
	(Allotment money received)
	Equity share first call A/c	Dr.		2,00,000
	To Equity share capital A/c				2,00,000
	(Share first call money due)
	Bank A/c	Dr.		2,00,000
	To Equity share first call A/c				2,00,000
	(Share first call money received)
	Equity share second and final call A/c	Dr.		1,00,000
	To Equity share capital A/c				1,00,000
	(Share second and final call money due)
	Bank A/c	Dr.		1,00,000
	To Equity share second and final call A/c				1,00,000
	(Share second and final call money received)

Average profit = \(\frac { Total\ profit }{ Number\ of\ year } \)
= \(\frac { 13,000+15,000+17,000 }{ 3 } \)
= \(\frac { 45,000 }{ 3 } \)
= Rs. 15,000
Normal profit = Capital employed \(\times\) Normal rate of return
= 50,000 × 10%
= Rs. 5,000
Super profit = Average profit - Normal profit
= 15,000 - 5,000
= Rs. 10,000
Goodwill = Super profit \(\times\) Value of annuity
= 10,000 \(\times\) 2.4868 = Rs. 24,868

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

Dr.                                         Partners’ Capital Account                                          Cr

Date	Particulars	Bragathish Rs.	Naresh Rs.	Date	Particulars	Bragathish Rs.	Naresh Rs.
	To Balance c/d	4,50,000	6,00,000		By Balance b/d	4,00,000	6,00,000
					By Bank A/c	50,000	-
					(Additional capital)
		4,50,000	6,00,000			4,50,000	6,00,000
					By Balance b/d	4,50,000	6,00,000

Dr.                                         Partners’ Current Account                                              Cr

Date	Particulars	Bragathish Rs.	Naresh Rs.	Date	Particulars	Bragathish Rs.	Naresh Rs.
	To Balance b/d	-	15,000		By Balance b/d	20,000	-
					By Profit and loss
	To Drawings A/c	45,000	60,000
					appropriation A/c	80,000	1,20,000
	To Interest on				(share of profi
		2,000	3,000
	To Balance c/d	90,000	1,10,000		By Interest on capita A/c	20,000	30,000
					By Commission A/c	17,000	-
					By Salary A/c	-	38,000
		1,37,000	1,88,000			1,37,000	1,88,000
					By Balance b	90,000	1,10,000

Dr.In the books of Madurai Mother Theresa Mahalir Mandram Receipts and payments Accounts for the year ended 31^st December 2018 cr

Receipts	Rs.	Rs.	Payments	Rs.
To Balance bid			By stationery purchased	6,000
Cash in hand	2,000		By Audit fees paid	2,000
Cash at bank	3,000	5,000	By Scholarship given	2,000
To Sale of old news papers		5,00	By Sundry charges	6,000
To Entrance fees received		3,000	By Fire insurance premium paid	1,500
To Subscription received		8,500	By Furniture purchased	6,000
To Sales of furniture		4,000	By Purchase of news papers	700
To Interest on investment		2,000	By Conveyance paid	1,000
To Balance c!d		4,700	By Balance cld
(Bank overdraft)			Cash in hand	2,500
		27,700		27,700

[Hint: As depreciation on furniture is a non cash item, it is excluded in receipts and payments account]

(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.

According to section 31 (1) of the Indian partnership Act 1932, a person can be admitted only with the consent of all the existing partners. A person who is admitted to the firm is known as an incoming or a new partner.

Quick ratio = \(\frac{Quick\ assets}{Current\ liabilities}\) = \(\frac{1,85,000}{1,00,000}\) = 1.85:1
Quick assets = Current assets – Inventories – Prepaid expenses
= 2,50,000 – 50,000 – 15,000
= Rs.1,85,000

Share gained by Arya = \(\frac{2}{8}\)
Gaining ratio = \(\frac{2}{8}\): 0 that is, \(\frac{1}{4}:\)0 or 1 : 0
New share of continuing partner = Old share + Share gained
Arya  \(=\frac{3}{8}+\frac{2}{8}=\frac{5}{8}\)
Benin \(=\frac{3}{8}+0=\frac{3}{8}\)
Therefore, new profit sharing ratio of Arya and Benin is \(\frac{5}{8}:\frac{3}{8}\) that is 5:3

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

Goodwill = Average profit \(\times\) Number of years of purchase
Average profit \(=\frac{Total\ profit}{Number\ of\ years}\)
\(=\frac{5,000+8,000-3,000+6,000}{4}\)
\(=\frac{16,000}{4}\) = Rs. 4,000
Average profit = Rs. 4,000
Goodwill = Average profit \(\times\) Number of years of purchase
4,000 \(\times\) 3 = 12,000
Goodwill = Rs. 12,000