(i) Inventory turnover ratio is a relationship between the cost of goods sold during a particular period of time and the cost of average inventory during a particular period. It is expressed in number of times.
(ii) Inventory turnover ratio indicates the number of times, the stock has been turned over during the period and evaluates the efficiency with which a firm is able to manage its inventory.

According to Myers, "Ratio analysis is a study of relationship among various financial factors in a business':

(i) A Management Information System (MIS) is a system that provides information for decision making at all levels of management.
(ii) It includes manufacturing information system, marketing information system, human resource information system and accounting information system.

Under subscription Over subscription 1. In under subscription all the shares offered
may not be taken up by the public. In over subscription all the shares
offered are taken up by the public 2. The shares cannot be allotted, if the
minimum subscription is not received Here all shares are subscribed, so
there is no question of minimum
subscription 3. Under subscription does not require any
special treatment in journal entries. In over subscription additional journal
entries are required for rejection and
adjustment of application money

Financial statement analysis is comparison of the various items in the financial statements by establishing and evaluating relationship among them. So that, it gives a better understanding of the performance and financial status of the business concern.

The difference between income and expenditure account and profit and loss account are

Basis	Income and Expenditure Account	Profit and Loss Account
Preparation	Income and Expenditure account is prepared by non-profit organisation.	Profit and loss account is prepared by organization whose main objective is to earn profit
Basis of preparation	It is prepared on the basis of receipts and payments account.	It is prepared on the basis of trial balance and additional information
Objective	Its main objective is to ascertain surplus or deficit	Its main objective is to ascertain net profit or loss
Balance	The balance in this account is either surplus or deficit	The balance in this account is either net profit or net loss.

The profit or loss on revaluation of assets and liabilities on the retirement of Mohana will be transferred to the capital accounts of the partners in their old ratio i.e. 4:3:2.

Profit and loss suspense account is opened to credit the share of profit of the deceased partner

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.

Interest on partner's capital and interest on drawings are an appropriation of profit and not a charge on profit and hence is recorded through profit and loss appropriation account instead of profit and loss account

Revaluation account will be credited

Statement of affairs prepared under single entry system is not called a balance sheet because statement of affairs is not prepared with the list of ledger balances kept on the basis of double entry system. Also value of assets and liabilities shown in statement of affairs are only the estimates and not the actual values.

New profit sharing ratio is the agreed proportion in which future profit will be distributed to the continuing partners

In the current account, the transactions relating to drawings, interest on capital, interest on drawings, salary, share of profit or loss etc, are recorded. Hence, the balance in the currents accounts change every year.

If the firm enjoys good reputations for its product's quality, there will be higher sales and the value of its goodwill will increase.

(i) These are the amount received by not-for-profit organizations as a gift. It may be a general donation or specific donation.
(ii) General donation: If the donation is received without any specific condition, then it is a general donation. It is a revenue receipt.
(iii) Specific donation: If the donation received with a specific condition particular purpose like donations for sports fund, prize fund, etc., It is known as a specific donation. It is a capital receipt.

Old ratio of Praveena and Dhanya = 7:3 that is \(\frac{7}{10}:\frac{3}{10}\)
New ratio of Paveena, Dhanya and Malini = 5:2:3 that is, \(\frac{5}{10};\frac{2}{10};\frac{3}{10}\)
Share sacrificed = Old share - New share
Praveena \(=\frac { 7 }{ 10 } -\frac { 5 }{ 10 } =\frac { 7-5 }{ 10 } =\frac { 2 }{ 10 } \)
Dhanya \(=\frac { 3 }{ 10 } -\frac { 2 }{ 10 } =\frac { 3-2 }{ 10 } =\frac { 1 }{ 10 } \)
Sacrificing ratio ofPraveena and Dhanya is \(\frac { 2 }{ 10 } :\frac { 1 }{ 10 } \) that is 2:1

Computation of sacrificing ratio and new profit sharing ratio
Share sacrificed \(=\frac{1}{14}:\frac{1}{14}\)
Sacrificing ratio of Vimala and Kamala is 1 : 1
Old ratio is 4: 3 that is \(\frac { 4 }{ 7 } :\frac { 3 }{ 7 } \)
New share of old partner = Old share - Share sacrificed
Vimala \(=\frac { 4 }{ 7 } -\frac { 1 }{ 14 } =\frac { 8-1 }{ 14 } =\frac { 7 }{ 14 } \)
Kamala \(=\frac { 3 }{ 7 } -\frac { 1 }{ 14 } =\frac { 6-1 }{ 14 } =\frac { 5 }{ 14 } \)
Share of new partner:
Vinitha = Sum of shares sacrificed by old partners
\(=\frac { 1 }{ 14 } +\frac { 1 }{ 14 } =\frac { 2 }{ 14 } \)
New profit sharing ratio of Vimala, Kamala and Vinitha is \(\frac { 7 }{ 14 } :\frac { 5 }{ 14 } :\frac { 2 }{ 14 } \) or 7:5:2

Profits and losses of previous years which are not distributed to the partners are called accumulated profit and losses. Any reserve and accumulated profits and losses belong to the oldpartners and hence these should be distributed to the old partners in the old profit sharing ratio.

Computation of sacrificing ratio and new profit sharing ratio
Old ratio of Anil, Sunil and Hari = 4 : 3 : 3 or \(\frac { 4 }{ 10 } :\frac { 3 }{ 10 } :\frac { 3 }{ 10 } \)
Raja’s share of profit = 20% or 20/100 or 1/5
Let the total share be 1
Remaining share =  \(1-\frac { 1 }{ 5 } =\frac { 5-1 }{ 5 } \)
= \(\frac { 4 }{ 5 } \)
New share of old partners = Remaining share × Old share
Anil = \(\frac { 4 }{ 5 } \times \frac { 1 }{ 10 } =\frac { 16 }{ 50 } \)
Sunil = \(\frac { 4 }{ 5 } \times \frac { 3 }{ 10 } =\frac { 12 }{ 50 } \)
Hari =  \(\frac { 4 }{ 5 } \times \frac { 3 }{ 10 } =\frac { 12 }{ 50 } \)
Share of new partner Raja =  \(\frac { 1 }{ 5 } \)
In order to equalise the denominator, multiply and divide Raja’s share by 10
Raja’s share = \(\frac { 1 }{ 5 } \times \frac { 10 }{ 10 } =\frac { 10 }{ 50 } \)
New profit sharing ratio of Anil, Sunil, Hari and Raja = \(\frac { 16 }{ 50 } :\frac { 12 }{ 50 } :\frac { 12 }{ 50 } :\frac { 12 }{ 50 } \) that is, 8 : 6 : 6 : 5.

Computation of sacrificing ratio and new profit sharing ratio
Share sacrificed =  \(\frac { 1 }{ 5 } ,\frac { 1 }{ 5 } \)
Sacrificing ratio of Hameed and Govind is 1:1
Old ratio is 5:3 that is \(\frac { 5 }{ 8 } :\frac { 3 }{ 8 } \)
New share of old partner = Old share - Share sacrificed
Hameed = \(\frac { 5 }{ 8 } -\frac { 1 }{ 5 } =\frac { 25-8 }{ 40 } =\frac { 17 }{ 40 } \)
Govind = \(\frac { 3 }{ 8 } -\frac { 1 }{ 5 } =\frac { 15-8 }{ 40 } =\frac { 7 }{ 40 } \)
Share of new partner
John = Sum of shares sacrificed by old partners
=\(\frac { 1 }{ 5 } +\frac { 1 }{ 5 } =\frac { 2 }{ 5 } \)
In order to equalise the denominator of John’s share, multiply and divide by 8 John’s share =\(\\ \frac { 2 }{ 5 } \times \frac { 8 }{ 8 } =\frac { 16 }{ 40 } \)
New profit sharing ratio of Hameed, Govind and John is \(\frac { 17 }{ 40 } :\frac { 7 }{ 40 } :\frac { 16 }{ 40 } \) or 17:7:16

Sunil = \(\frac{3}{10}+\frac{4}{10}=\frac{7}{10}\)
(Sundar share is  added with old ratio)
Sumathi = \(\cfrac { 3 }{ 10 } +0=\cfrac { 3 }{ 10 } \)
New ratio = 7 : 3
Sacrificing ratio = 4 : 0 

To transfer the amount due to the deceased  partner to the executor or legal representative of the deceased partner

Date	Particulars	L.F	Debit Rs	Credit Rs
	Deceased partner's capital AI c Dr.		xxx
	To Deceased partner's executor's A/c			xxx
	(Amount transferred to executor's account

Capital gearing ratio = \(\frac{Funds\ bearing\ fixed\ interest\ and\ fixed\ dividend}{Equity\ shareholders'funds}\)
= \(\frac{3,00,000}{4,00,000}\) = 0.75:1
Funds bearing fixed interest and dividend = 6% Preference share capital + 8% Debentures
= 1,00,000 + 2,00,000 = Rs.3,00,000
Equity shareholder’s funds = Equity share capital + General reserve + Surplus
= 2,00,000 + 1,25,000 + 75,000 = Rs.4,00,000

Working capital statement or schedule of changes in working is prepared to disclose net change in working capitals on two specific dates (generally two balance sheet dates). It is prepared from current assets and current liabilities
Working Capital = current Assets - Current Liabilities.

When the number of shares applied for is more than the number of shares offered for subscription, it is said to be over subscription.

(i) Return on investment shows the proportion of net profit. before interest and tax to capital employed (shareholders' funds and long term debts).
(ii) This ratio measures how efficiently the capital employed is used in the business.
(iii) It is an overall measure of profitability of a business concern.
(iv) It is computed as below: Return on Investment (ROI)
= \(\frac { Net\ profit\ before\ interest\ and\ tax }{ Capital\ employed } \) x 100
​​​​​​​Capital employed = Share holder's fund + Non currebt liablities greater the return on investment better is the profitability of a business and vice versa

Journal entry

Date	Particulars		L.F	Debit Rs.	Credit RS.
2019 January 1	Mary’s capital A/c	Dr.		25,000
	Meena’s capital A/c	Dr.		25,000
	Mariam’s capital A/c	Dr.		25,000
	To Profit and loss a/c				75,000
	(Accumulated loss transferred to all partners’ capital account in the old profit sharing ratio)

Group is a collection of ledgers of the same nature. There are predefined groups of accounts which are widely used in accounts of many orgaisation groups are categorised as primary group and sub - groups.

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

Journal entry

Date	Particulars	L.E.	Debit Rs.	Credit Rs.
2019	Kavitha’s capital A/c Dr.		40,000
January 1	Radha’s capital A/c Dr.		30,000
	To Profit and loss a/c (Accumulated loss transferred to old partners’ capital account in the old profit sharing ratio)			70,000

Goodwill = Average profit \(\times\) Number of years of purchase
Average profit \(=\frac{Total\ profit}{Number\ of\ years}\)
\(\frac{10,000+11,000+12,000+13,000+14,000}{5}\)
\(=\frac{60,000}{5}\) = Rs. 12,000
Average profit = Rs. 12,000
Goodwill Average profit \(\times\) Number of years of purchase
12,000 \(\times\) 2 = 24,000
Goodwill = Rs. 24,000

Partnership deed is a document in writing that contains the terms of the agreement among the partners. It is not compulsory for a partnership to have a partnership deed as per the Indian Partnership Act, 1932. But, it is desirable to have a partnership deed as it serve as an evidence of the terms of the agreement among the partners.

Calculation of interest on capital:
Arivazhagan:

On opening capital for 1 year	15,000 \(\times\) \(\frac{6}{100}\)	Rs. 900
On additional capital for 6 months	5,000 \(\times\) \(\frac{6}{100}\) \(\times\) \(\frac{6}{12}\)	Rs. 150
Interest on capital		Rs. 4,050

 Interest on Akbar’s capital:

On opening capital for 1 year	10,000 \(\times\) \(\frac{6}{100}\)	Rs. 600
On additional capital for 4 months	10,000 \(\times\) \(\frac{6}{100}\) \(\times\) \(\frac{4}{12}\)	Rs. 200
Total interest on capital		Rs. 800

 Note: Since the date of additional capital introduced by Akbar is not given, interest on additional capital is calculated for an average period of 6 months.

Dr Income and Expenditure Account of Sirkazhi singers Association Cr

Expenditure	Rs	Rs	Income	Rs
To statonary
Consumed:
Opening stock	2,600
Add:Purchase	6,500
	9,100
Less: Closing stock	2,200	6,900

i. Life membership fees
ii. Legacies
iii. Specific donation
iv. Sale of fixed asset
v. Special funds
vi. Prize fund
vii. Tournament fund.

(i) Some organisations are established for the purpose of rendering services to the public without any profit motive.
(ii) They may be created for the promotion of art, culture, education, sports, etc. These organisations are called not-for-profit organisation.
(iii) Charitable institutions, educational, institutions, cultural societies, sports and recreation clubs, hospitals, libraries and literary associations are some of the examples of not-for-profit organisations.

Dr. Income and Expenditure Account for the year ended 31^st March, 2017 Cr Expenditure Rs. Income Rs. Rs.     By Subscription 60,000       Add: Outstanding subscription for 2016-17 2,400       Subscription received in advance in         in advance in 1,000 63,400           Tutorial note
(i) Subscription for the year 2015-16 Rs. 7,500 and for the year 2017-18 Rs. 1,500 do not relate to the current year. So they should not be recorded in Income and Expenditure Account.
(ii) Subscription outstanding for the current year 2016-17 is Rs. 2,400. It should be added with the amount of subscription received during 2016-17.

Dr                       Total Debtors account                      Cr

Particulars	Rs.	Particulars	Rs
To Balance b/d	1,00,000	By Cash received	2,30,000
To Credit sales	2,80,000	By Discount allowd	5,000
(Balancing figure)		By Sales returns	25,000
		By Balance c/d	1,20,000
	3,80,000		3,80,000

Dr.              Total creditors account             Cr

Particulars	Rs.	Particulars	Rs.
To Cash A/c (paid)	1,60,000	By Balance b/d	50,000
To Returns outward A/c	6,000	By Credit purchases A/c	1,86,000
To Balance c/d	70,000	(balancing figure)
	2,36,000		2,36,000

Format of bills payable account

Dr.     Bills payable account      Cr.

Particulars	Rs	Particulars	Rs
To Cash / Bank A/c	xxx	By Balance b/d	xxx
(bills payable paid)		(opening balance)
To Sundry creditors A/c	xxx	By Sundry creditors A/c	xxx
(bills payable dishonoured)		(bills accepted)
To Balance c/d	xxx
(closing balance)
	xxx		xxx

Statement of profit or loss for the year ended 31^st March, 2017

Particulars	Rs.
Closing capital (as on 31.3.2017)	3,50,000 40,000
Add: Drawings during the year
	3,90,000
Less: Additional capital introduced during the year	70,000
Adjusted closing capital	3,20,000 2,00,000
Less: Opening capital (as on 1.4.2016)
Profit made during the year	1,20,000

Proprietary ratio = \(\frac{Shareholders ' funds}{Total assets}\) = \(\frac{2,00,000}{4,00,000}\) = 0.5:1
Shareholders’ funds = Equity share capital + Preference share capital + Reserves and surplus
= 1,00,000 + 75,000 + 25,000
= Rs. 2,00,000
(iii) Capital gearing ratio
Proprietary ratio gives the proportion of shareholders’ funds to total assets. Proprietary ratio shows the extent to which the total assets have been financed by the shareholders’ funds. It is calculated as follows:
Capital gearing ratio = \(\frac{Funds\ bearing\ fixed\ interest\ or\ fixed\ dividend}{Equity\ shareholders'\ funds}\)

Funds bearing fixed interest or fixed dividend	Equity shareholders’ funds
Preference share capital	Equity shareholders’ funds
Debentures	= Equity share capital + Reserves and surplus
Bonds
Long term borrowings carrying fixed interest

Capital gearing ratio is a measure of long term solvency as well as capital structure. When thecapital gearing ratio is greater than one, the firm is said to be high geared.

(i) Current ratio = \(\frac{Current assets}{Current liabilities}\) = \(\frac{1,50,000}{50,000}\) = 3:1
Current assets = Inventories + Trade receivables + Cash and cash equivalents + Prepaid expenses
= 45,000 + 70,000 + 30,000 + 5,000 = Rs.1,50,000
Current liabilities = Short term borrowings + Trade payables + Expenses payable + Short term provisions
= 17,000 + 25,000 + 3,000 + 5,000 = Rs.50,000
(ii) Quick ratio = \(\frac{Quick assets}{Current liabilities}\) = \(\frac{1,00,000}{50,000}\) = 2:1
Quick assets = Total current assets – Inventories – Prepaid expenses
= 1,50,000 – 45,000 – 5,000 = Rs.1,00,000

Comparative income statement of Abdul Co. Ltd for the years ended 31^st March, 2016 and 31^st March, 2017

Particulars	2015-16	2016-17	Absolute amount of increase (+) or decrease (–)	Percentage increase (+) or decrease (–)
	Rs.	Rs.	Rs.
Revenue from operations	3,00,000	3,60,000	+60,000	+20
Add: Other income	1,00,000	60,000	–40,000	–40
Total revenue	4,00,000	4,20,000	+20,000	+5
Less: Expenses	2,00,000	1,80,000	–20,000	–10
Profit before tax	2,00,000	2,40,000	+40,000	+20
Less: Tax (30%)	60,000	72,000	+12,000	+20
Profit after tax	1,40,000	1,68,000	+28,000	+20

Interest on drawings = Amount of drawings x Rate of interest x Period of interest

Withdrawal on March 1	= Rs. 4,000 x \(\frac{6}{100}\) x \(\frac{10}{12}\)	= Rs.200
Withdrawal on June 1	= Rs. 4,000 x \(\frac{6}{100}\) x \(\frac{7}{12}\)	= Rs.140
Withdrawal on September 1	= Rs. 4000 x \(\frac{6}{100}\) x \(\frac{4}{12}\)	= Rs.80
Withdrawal on December 1	= Rs.4,000 x \(\frac{6}{100}\) x \(\frac{1}{12}\)	= Rs.20
Total interest on drawings		= Rs.440

Average profit = \(\frac { Total\quad profit }{ Number\quad ofyear } \)
= \(\frac { 40,000+50,000+48,000+46,000 }{ 4 } \)
= \(\frac { 1,84,000 }{ 4 } \)
= Rs. 46,000

Average profit before adjusting fair remuneration of the partner	Rs. 46,000
Less: Fair remuneration of partners	6,000
Average profit	40,000

Goodwill = Average profit \(\times\) Number of years of purchase
= 40,000 \(\times\) 3 = Rs. 1,20,000

Income expenditure A/c for the year ended 31.12.18

Particulars	Rs	Rs
By Subscription	45,000	45,000
Add: Outstanding 31.12.18	5,000
	50,000
(-) O/s sub. 1.1.2018	3,000
	47,000
(-) Subscription received in advance 31.12.18	7,000
	40,000
(+) Sub.Received. Adv. 1.1.2018	4,000	44,000

Dr                         Total debtors account                       Cr

Particulars	Rs	Particulars	Rs
To Balance b/d	50,000	By Cash A/c	1,50,000
To Sales A/c (credit)	1,90,000	By Returns inward A/c	15,000
(balancing figure)		By Bad debts A/c	5,000
		By Balance c/d	70,000
	2,40,000		2,40,000

Total Sales = Cash Sales + Credit Sales
= Rs.1,40,000 + Rs.1,90,000
= Rs. 3,30,000
(ii) Format of bills receivable account

Dr. Bills receivable account Cr.

Particulars	Rs.	Particulars	Rs.
To Balance b/d	xxx	By Cash / Bank A/c	xxx
(opening balance)		(Bills receivable honoured)
To Sundry debtors A/c	xxx	By Sundry debtors A/c	xxx
(Bills receivable received during the year)		(Bills receivable dishonoured)
		By Balance c/d	xxx
		(closing balance)
	xxx		xxx

 

In the books of Khan Ltd. Journal entries

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Bank A/c (1,40,000 × 3)	Dr.		4,20,000
	To Equity share application A/c				4,20,000
	(Application money received)
	Equity share application A/c (1,00,000 × 3)	Dr.		3,00,000
	To Equity share capital A/c				3,00,000
	(Transfer of share application money to share capital)
	Equity share application A/c (5,000 × 3)	Dr.		15,000
	To Bank A/c				15,000
	(Excess application money refunded)
	Equity share application A/c (35,000 × 3)	Dr.		1,05,000
	To Share allotment A/c				1,05,000
	(Excess share application money utilised for allotment)
	Equity share allotment A/c (1,00,000 × 4)	Dr.		4,00,000
	To Equity share capital A/c				4,00,000
	(Share allotment money due)
	Bank A/c	Dr.		2,95,000
	To Equity share allotment A/c				2,95,000
	(Allotment money received)

Comparative balance sheet of Chandra Ltd as on 31^st March 2016 and 31^st March 2017

Particulars	2015-16	2016-17	Absolute amount of increase ( +) or decrease (–)	Percentage increase (+) or decrease (–)
	Rs.	Rs.	Rs.
I EQUITY AND LIABILITIES
Shareholders’ fund	1,00,000	2,60,000	+1,60,000	+160
Non-current liabilities	50,000	60,000	+10,000	+20
Current liabilities	25,000	30,000	+5,000	+20
Total	1,75,000	3,50,000	+1,75,000	+100
II ASSETS
Non-current assets	1,00,000	2,00,000	+1,00,000	+100
Current assets	75,000	1,50,000	+75,000	+100
Total	1,75,000	3,50,000	+1,75,000	+100