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) = \(\frac { Number\quad of\quad months\quad in\quad a\quad year }{ Trade\quad payable\quad sturn\quad over\quad ratio } \quad \).

(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.

(a) Comparative statement
(i) A statement giving comparison of the net increase or decrease in the individual items of financial statements of two or more years of a business concern is called comparative statement.
(ii) It shows the actual figures at different periods of time, the increase or decrease in these figures in absolute terms and the percentages of such increase or decrease.
(b) Common srze statement:
(i) The common-size statements show the relationship of various items with some common base, expressed as percentage of the common base.
(ii) The common size statements include common-size income statement and common-size balance sheet.

(i) In sole proprietorship, the profit or loss in the profit and loss account is transferred directly to the sole proprietor's capital account. In partnership, profit and loss appropriation account is prepared to which net profit or loss from profit and to which net profit or loss from profit and loss account is transferred.
(ii) In the profit and loss appropriation account, adjustments for interest on capital, interest on drawings, salary and other remuneration due to the partners are shown. Finally, the balance in the appropriation account is transferred to the partner's capital account in the profit sharing ratio.
(iii) Capital account balance of the sole proprietor alone is shown in the balance sheet of sole proprietorship. The balance sheet of a partnership concern shows the balances in the individual capital accounts (an current accounts) of the partners.

(i) Under this method, goodwill is calculated by multiplying the weighted average profit by a certain number of years of purchase.
(ii) Goodwill = Weighted average profit x Number of years of purchase
(iii) In this method, weights are assigned to each year's profit. Weighted profit is ascertained by multiplying the weights assigned with the respective year's profit.
(iv) The sum of the weighted profits is divided by the sum of weights assigned to determine the weighted average profit
Weighted average profit
\(=\frac{Total\ of\ weighted\ profits}{Total\ of\ weights}\)

Ierald's share of goodwill = 45,000\(\times \frac{1}{3}\)
Rs. 15,000
As the sacrifice made by the existing partners is not mentioned, it is assumed that they sacrifice in their old profit sharing ratio is 1 : 1 : 1

Journal Entries

Date	Particulars	L.F	Debit Rs.	Credit Rs.
	Bank A/c                                          Dr		15,000
	To Deepaks capital A/c			5,000
	To Senthil's Capital A/c			5,000
	To Santhosh's capital A/c			5,000
	(Cash brought for goodwill credited to Old partner's capital account in sacrificing ratio)
	Deepak's capital A/c            Dr		2,500
	Senthil's Capital A/c             Dr		2,500
	Santhosh's Capital A/c        Dr		2,500
	To Bank A/c			7,500
	(Cash withdrawn by the partners)

As the new profit sharing ratio and gain made by the continuing partner is not mentioned, it is assumed that they gain in their old profit sharing ratio of 4:2. Therefore, gaining ratio
Suman's share goodwill = \(45000\times \cfrac { 3 }{ 9 } =Rs.15,000\)

Journal entry

Date	Particulars		L.F	Debit Rs	Credit Rs
	Rajan's capital A/c (15,000 x 4/6)	Dr		10,000
	lagan's capital A/c (15,000 x 2/6)	Dr		5,000
	To Suman's capital A/c				15,000
	(Suman's share of goodwill is adjusted)

Inventory turnover ratio = \(\frac{Cost\ of\ revenue\ from\ operations}{Average\ inventory}\) = \(\frac{1,20,000}{30,000}\) = 4 times
Cost of revenue from operations
= Opening inventory + Net Purchases + Direct expenses (carriage inwards) – Closing inventory
= 40,000 + 90,000 + 10,000 – 20,000
= Rs.1,20,000
Average inventory = \(\frac{Opening\ inventory + Closing\ inventory}{2}\)
= \(\frac{40,000 + 20,000}{2}\) = Rs.30,000
Inventory conversion period (in months) = \(\frac{Number\ of\ months\ in\ a\ year}{Inventory\ turnover\ ratio}\) = \(\frac{12}{4}\) = 3 months

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

(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

Particulars	Rajan		Devan
	Rs.	Rs.	Rs.	Rs.
Capital on 31st December 2018		1,00,000		80,000
Add: Drawings		20,000		10,000
		1,20,000		90,000
Less: Additional capital	40,000		30,000
Profit already credited*	20,000	60,000	10,000	40,000
[ Rajan (30,000 x 2/3) = 20,000 Devan (30,000 x 1/3) = 10,000]
Capital as on 1st January 2018		60,000		50,000

(*Profit earned = Profit earned 70,000 - Balance profit as per balance sheet Rs. 40,000 = Rs. 30,000.
This amount is distributes in their profit sharing ration of 2 : 1.)
Calculation of interest on capital
Rajan:
On opening capital for 1 year = 60,000 \(\times\) \(\frac{6}{100}\)                       = Rs. 3600
On additional capital for 9 months = 40,000 \(\times\) \(\frac{6}{100}\) \(\times\) \(\frac{9}{12}\)     = Rs. 1,8000
(April to December)
                                                                                                               ___________
                                                                 Total Interest on capital = Rs. 5,400
                                                                                                               ____________
Devan: 
On opening capital for 1 year = 50,000 \(\times\) \(\frac{6}{100}\) \(\times\) \(\frac{4}{12}\)               = Rs. 600
(September to December)
                                                                                                              ___________
                                                                     Total Interest on capital = Rs. 3,600
                                                                                                              ____________

Following are the essential features of partnership
(1) The balance being the profit or loss is transferred to the partner's capital or current account in the profit sharing ratio.
(2) There should be an agreement among the persons to share the profit or loss of the business.
(3) The agreement must be carryon a business and to share the profits of the business.
(4) The business may be carried on by all the partners or any of them acting for all.

(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 of Vedaranyam sports club Cr

Expenditure	Rs	Rs	Income	Rs
To Stationery			By Sale of
consumed (bat & ball)			bats and balls	2,000
Opening stock	3,000
Add: Purchases	17,000
	20,000
Less: Closing stock	4,000	16,000

Balance Sheet of Vedaranyam Sports club

Liabilities	Rs	Assets	Rs
		Stock of bats and balls	4,000

(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.
In the books of Trichy Educational Society Receipts and Payments Account for the year ended 31^st December, 2018 Cr.

Receipts	Rs.	Payments	Rs.
To Balance b/d		By Investments made	80,000
Cash in hand	20,000	By Honorarium paid	3,000
To Donation received	80,000	By Audit fees	2,000
To Locker rent received	12,000	By General expenses	7,000
To Sale of furniture	5,000	By Postage	1,000
To Subscription	10,000	By Balance c/d
		Cash in hand	34,000
	1,27,000		1,27,000

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

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

Particulars	Rs
Closing capital (as on 31.3.2018)	2,75,000 20,000
Add: Drawings during the year (balancing figure)
	2,95,000 30,000
Less: Additional capital introduced during the year
Adjusted closing capital	2,65,000 2,50,000
Less: Opening capital (as on 1.4.2017)
Profit made during the year	15,000

As the sacrifice made by the existing partners is not mentioned, it is assumed that they sacrifice in their old profit sharing ratio 5:3. Therefore, sacrificing ratio is 5:3.

Journal Entry

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
2019		Dr..		8,000
January 1	To Amudha’s capital A/c (5/8)				5,000
	To Bhuvana’s capital A/c (3/8) (Cash brought for goodwill credited to Amudha and Bhuvana in sacrificing ratio)				3,000
	Amudha’s capital A/c	Dr.		5,000
	Bhuvana’s capital A/c	Dr.		3,000
	To Bank A/c (Amount withdrawn by the partners)				8,000

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)

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

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

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

Journal entries

Date	Particulars		L.F	Debit Rs.	Credit Rs.
2017 April 1	Building A/c	Dr.		12,000
	To Revaluation A/c				12,000
	(Increase in the value of building accounted)
"	Revaluation A/c	Dr.		15,000
	To Furniture A/c				8,500
	To Outstanding salary A/c				6,500
	(Reduction in the value of furniture and outstanding salary accounted)
"	Prabu’s capital A/c	Dr.		1,500
	Ragu’s capital A/c	Dr.		1,000
	Siva’s capital A/c	Dr.		500
	To Revaluation A/c				3,000
	(Loss on revaluation transferred to capital accounts)

Dr. Revaluation Account Cr.

Particulars	Rs.	Particulars	Rs.	Rs.
To Furniture A/c	8,500	By Building A/c		12,000
To Outstanding salary A/c	6,500	By Loss on revaluation transferred to
		Prabu’s capital A/c (3/6)	1,500
		Ragu’s capital A/c (2/6)	1,000
		Siva’s capital A/c (1/6)	500	3,000
	15,000			15,000

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