Yes, it is true that the liquidity of a business firm is measured by its ability to pay its long-term obligations as they become due. Here, the longterm obligation means payment of principal amount on the due date and payment of interest on the regular basis.
For measuring the long term solvency of any business, we calculate the following ratio.
(i) Debt equity ratio
(ii) Proprietary ratio

High total assets to debt ratio indicates that assets have been mainly financed by owner's funds and the long-term debt is adequately covered by assets.

The benefits he will get from computerised records are
(i) High speed
(ii) Accuracy
(iii) Reliablility
(iv) Versatility
(v) Storage
Value indicated is - Taking care of public health by showing manufacturing and expire date electronically.

According to Lord Justice Lindley, A company is an association of many persons who contribute money or money's worth to - a common stock and employ it in some trade or business and who share the profit and loss arising there from. The common stock so contributed is denoted in money and is the capital of the company. The persons who contributed in it or form it, or to whom it belongs, are members. The proportion of capital to which each member is entitled is his share.

Yes, common size statement is also known as 100 % statement. Since in this statement, all items are expressed as percentage of the base item i.e. revenue from operations in case of common size statement of profit and loss or total assets in case of common size balance sheet.

Trend refers to the tendency of movement. Trend analysis refers to the study of movement of figures over a period. The trend may be increasing trend or decreasing trend or irregular

Income and expenditure account is prepared by a non-profit organization and is a summary of income and expenditure of the accounting year.
Income and expenditure account is akin to profit and loss account because of the following similarities
which are observed amongst these accounts.
(i) Both are nominal accounts.
(ii) Both are one prepared on accrual basis.
(iii) Both record revenue items related to current accounting year only.
(iv) In both the accounts, expenses and losses are recorded on the debit side and incomes and gains
are recorded on the credit side

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.

According to Indian partnership Act, 1932 in the absence of partnership deed, profits are shared equally among the partners. So, the claim of Ramesh to share the profits in the ratio of capitals is not valid.

Revaluation account will be debited. Increase in bills payable is a loss for the firm. Being a nominal account, to record this loss, revaluation account will have to be debited.

A partner may retire from the firm:
(i) With the consent of all the partners.
(ii) In accordance with an express agreement by the partners.

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.

Following are the features of not-for-profit organizations.
(i) Not-for-profit organizations are the organizations which function without any profit motive.
(ii) Their main aim is to provide service to a specific group or the public act large.
(iii) Generally, they do not undertake business or trading activities.
(iv) Their main sources of income include subscription from members, donations, grant-in-aid and legacies

Computation of sacrificing ratio and new profit sharing ratio
Old ratio of Ambika, Dharani and Padma \(5:3:2\quad or\quad \frac { 5 }{ 10 } :\frac { 3 }{ 10 } :\frac { 2 }{ 10 } \)
Ramya's share of profit = 25% or \(\frac { 25 }{ 100 } or\frac { 1 }{ 4 } \)
Let the total share be 1 
Remaining share \(=1-\frac { 1 }{ 4 } =\frac { 4-1 }{ 4 } =\frac { 3 }{ 4 } \)
New share of old partners = Remaining share \(\times\) Old share
Ambika \(=\frac { 3 }{ 4 } \times \frac { 5 }{ 10 } =\frac { 15 }{ 40 } \)
Dharani \(=\frac { 3 }{ 4 } \times \frac { 3 }{ 10 } =\frac { 9 }{ 40 } \)
Padma \(=\frac { 3 }{ 4 } \times \frac { 2 }{ 10 } =\frac { 6 }{ 40 } \)
Share of new partner
Ramya \(=\frac { 1 }{ 4 } \)
In order to equalise the denominator, multiply and divide Ramya's share by 10 
Rarnyas share \(=\frac { 1 }{ 4 } \times \frac { 10 }{ 10 } =\frac { 10 }{ 40 } \)
New profit sharing ratio of Ambika, Dharani, Padma and Ramya \(=\frac { 15 }{ 40 } :\frac { 9 }{ 40 } :\frac { 6 }{ 40 } :\frac { 10 }{ 40 } \), that is 15: 9: 6: 10

Computation of sacrificing ratio and new profit sharing ratio
Old share = 5 : 4 that is, Govind \(\frac{5}{9}\) and Gopal \(\frac{4}{9}\)
Share scarified = Old share \(\times\) Proportion of share sacrificed
Govind \(=\frac { 5 }{ 9 } \times \frac { 2 }{ 9 } =\frac { 10 }{ 81 } \)
Gopal \(=\frac { 4 }{ 9 } \times \frac { 1 }{ 9 } =\frac { 4 }{ 81 } \)
Sacrificing ratio of Govind and Gopal is \(\frac{10}{81}\) and \(\frac{4}{81}\), that is 10:4 or 5:2
New share =Old share - Share sacrificed
Govind \(=\frac { 5 }{ 9 } -\frac { 10 }{ 81 } =\frac { 45-10 }{ 81 } =\frac { 35 }{ 81 } \)
Gopal = \(=\frac { 4 }{ 9 } -\frac { 4 }{ 81 } =\frac { 36-4 }{ 81 } =\frac { 32 }{ 81 } \)
Share of new partner = Sum of shares sacrificed by Govind and Gopal
Rahim \(=\frac { 10 }{ 81 } +\frac { 4 }{ 81 } =\frac { 10+4 }{ 81 } =\frac { 14 }{ 81 } \)
New profit sharing ratio of Govind, Gopal and Rahim \(=\frac { 35 }{ 81 } :\frac { 32 }{ 81 } :\frac { 14 }{ 81 } \), that is 35: 32: 14

Computation of sacrificing ratio and new profit sharing ratio
Share sacrificed by old partners 
Ananth = \(\frac{1}{5}\)
Suman = 0
Sacrificing ratio = 1 : 0
Old profit of Ananth and Suman is 3 : 2 that is \(\frac { 3 }{ 5 } :\frac { 2 }{ 5 } \)
New share of old partner = Old share - Share sacrificed
Ananth \(=\frac { 3 }{ 5 } -\frac { 1 }{ 5 } =\frac { 3-1 }{ 5 } =\frac { 2 }{ 5 } \)
Suman = \(\frac { 2 }{ 5 } \)
Share of new partner Saran = \(\frac { 1 }{ 5 } \)
New profit sharing ratio of Ananth, Suman and saran is \(\frac { 2 }{ 5 } :\frac { 2 }{ 5 } :\frac { 1 }{ 5 } \) that is 2:2:1

Jourbal Entry

Date	Particular	L.F	Debit Rs.	Credit Rs.
	Old partner's capital/current Ale (in old ratio) Dr		xxx
	To goodwill A/c			xxx
	(Existing goodwill written off)

As the sacrifice made by the existing partners is not mentioned, it is assumed that they sacrifice
in their old profit sharing ratio of 5:1. Therefore, sacrificing ratio is 5:1.
Tharun’s share of goodwill = 27,000 \(\times\) \(\frac { 2 }{ 9 } \) = Rs. 6,000

Journal entry

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Tharun’s capital A/c	Dr.		6,000
	To Ashok’s capital A/c (5/6)				5,000
	To Mumtaj’s capital A/c (1/6) (Tharun’s share of goodwill credited to the old partners’ capital account in the sacrificing ratio)				1,000

Computation of sacrificing ratio and new profit sharing ratio
Old share = 3:2 that is, Prasanth \(\frac { 3 }{ 5 } \) and Nisha \(\frac { 2 }{ 5 } \)
Share sacrificed = Old share × Proportion of share sacrificed
Prasanth = \(\frac { 3 }{ 5 } \times \frac { 2 }{ 5 } =\frac { 6 }{ 25 } \)
Nisha = \(\frac { 2 }{ 5 } \times \frac { 2 }{ 5 } =\frac { 4 }{ 25 } \)
Sacrificing ratio of Prasanth and Nisha is \(\frac { 6 }{ 25 } \) and \(\frac { 4 }{ 25 } \), that is, 3:2
New share = Old share - Share sacrificed
Prasanth = \(\frac { 3 }{ 5 } -\frac { 6 }{ 25 } =\frac { 15-6 }{ 25 } =\frac { 9 }{ 25 } \)
Nisha = \(\frac { 2 }{ 5 } -\frac { 4 }{ 25 } =\frac { 10-4 }{ 25 } =\frac { 6 }{ 25 } \)
Share of new partner = Sum of shares sacrificed by Prasanth and Nisha
Ramya = \(\frac { 6 }{ 25 } +\frac { 4 }{ 25 } =\frac { 6+4 }{ 25 } =\frac { 10 }{ 25 } \)
New profit sharing ratio of Prasanth, Nisha and Ramya = \(\frac { 9 }{ 25 } :\frac { 6 }{ 25 } :\frac { 10 }{ 25 } \) that is, 9:6:10

Old ratio of Anbu and Raju = 3:2 that is, \(\frac { 3 }{ 5 } :\frac { 2 }{ 5 } \)
New ratio of Anbu, Raju and Akshai = 5:3:2, that is, \(\frac { 5 }{ 10 } :\frac { 3 }{ 10 } :\frac { 2 }{ 10 } \)
Share sacrificed = Old share - New share
Anbu = \(\frac { 3 }{ 5 } -\frac { 5 }{ 10 } =\frac { 6-5 }{ 10 } =\frac { 1 }{ 10 } \)
Raju =  \(\frac { 2 }{ 5 } -\frac { 3 }{ 10 } =\frac { 4-3 }{ 10 } =\frac { 1 }{ 10 } \)
Sacrificing ratio of Anbu and Raju is \(\frac { 1 }{ 10 } :\frac { 1 }{ 10 } \) that is 1:1

Gopu 's share = \(\cfrac { 7 }{ 15 } \)
Share gained = Retiring partner's share x proportion of share gained
Ramu =\(\cfrac { 7 }{ 15 } \times \cfrac { 3 }{ 4 } =\cfrac { 21 }{ 60 } \)
Somu = \(\cfrac { 7 }{ 15 } \times \cfrac { 7 }{ 4 } =\cfrac { 7 }{ 60 } \)
Gaining ratio = \(\cfrac { 21 }{ 60 } :\cfrac { 7 }{ 60 } \) that is 3 : 1
New share of continuing partner = Old share + Share gained
Ramu = \(\cfrac { 3 }{ 15 } +\cfrac { 21 }{ 60 } =\cfrac { 12 }{ 21 } =\cfrac { 33 }{ 60 } =\cfrac { 11 }{ 20 } \)
Somu =  \(\cfrac { 5 }{ 15 } +\cfrac { 7 }{ 60 } =\cfrac { 20+7 }{ 60 } =\cfrac { 27 }{ 60 } =\cfrac { 9 }{ 20 } \)
The new ratio of Ramu and Somu is \(\cfrac { 11 }{ 20 } :\cfrac { 9 }{ 20 } \) that is 11 : 9

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

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

Financial statements are the statements prepared by the business concern at the end of the accounting period to ascertain the operating results and the financial position. The basic financial statements prepared by business concerns are income statement and balance sheet.

When a shareholder defaults in making payment of allotment andlor call money, the shares may be forfeited. On forfeiture, the share allotment is cancelled and to that extent paid up share capital a reduced. The person ceases to be a shareholder of the company after the shares are forfeited.

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

As the new profit sharing ratio and gain made by the continuing partners is not mentioned, it is assumed that they gain in their old profit sharing ratio of 2:1. Therefore, gaining ratio is 2:1.
Suresh’s share of goodwill \(=36000\times\frac{3}{6}=Rs.18000\)

Journal Entries

Date	Particulars		L.f	Debit Rs.	Credit Rs.
	Senthamari’s capital A/c (18,000 × 2/3)	Dr.		12,000
	Raj’s capital A/c (18,000 × 1/3)	Dr.		6,000
	To Suresh’s capital A/c				18,000
	(Suresh’s share of goodwill adjusted)

Rohit's share \(\frac{2}{10}\)
Share gained = Retiring partner’s share × Proportion of share gained
Rahul = \(\frac{2}{10}\times\frac{3}{5}=\frac{6}{50}\)
Ravi  =  \(\frac{2}{10}\times\frac{2}{5}=\frac{4}{50}\)
Gaining ratio \(\frac{6}{50}:\frac{4}{50}\) that is, 3 : 2
New share of continuing partners = Old share + Share gained
Rahul \(=\frac{5}{10}+\frac{6}{50}=\frac{25+6}{50}=\frac{31}{50}\)
Ravi  \(=\frac{3}{10}+{4}{50}=\frac{15+4}{50}=\frac{19}{50}\)
The new profit sharing ratio of Rahul and Ravi is \(\frac{31}{50}:\frac{19}{50}\) that is 31 : 19.

Share gained = New share – Old share
Vinoth \(=\frac{2}{3}-\frac{3}{10}=\frac{20-9}{10}=\frac{11}{30}\)
Vimal \(=\frac{1}{3}-{2}{10}=\frac{10-6}{30}=\frac{4}{30}\)
Therefore, the gaining ratio of Vinoth and vimal \(\frac{11}{30}:\frac{4}{30}\), that is, 11:4

(i) Quick ratio gives the proportion of quick assets to current liabilities.
(ii) 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.
(iii) It is otherwise called liquid ratio or acid test ratio.
(iv) It is calculated as follows:
Quick ratio = \(\frac { Quick\ assets }{ Current\ liabilities } \).
Quick assets = Current assets - Inventries - prepaid expenses. higher the Quick ratio better is the short - term financial position of an enterprises.  

Comparative income statement of Tharun Co. Ltd for the years ended 31^st March, 2017 and 31^st March, 2018

Particulars	2016-17	2017-18	Absolute amount of increase ( +) or decrease (–)	Percentage increase (+) or decrease (–)
	Rs.	Rs.	Rs.
Revenue from operations	2,00,000	2,50,000	+50,000	+25
Add: Other income	50,000	40,000	–10,000	–20
Total revenue	2,50,000	2,90,000	+40,000	+16
Less: Expenses	1,50,000	1,20,000	–30,000	–20
Profit before tax	1,00,000	1,70,000	+70,000	+70

Computation of percentage increase for revenue from operations
\(\cfrac { Absolute\ amount\ of\ increase\ or\ decrease }{ Year\ 1\ amount } \times 100=\cfrac { 50,000 }{ 2,00,000 } \times 100=25%\)

Super profit is the excess of average profit over the normal profit. Average profit is calculated by dividing the total adjusted actual profit of certain number of years by the total number of such years. Normal profit is the profit earned by the similar business, firms under normal conditions.
Normal profit = Capital employed \(\times\) Normal rate of return.
Capital employed = Fixed assets + Current assets - Current liabilities.

Calculation of interest on drawings of Kevin (using average period)
Total amount of drawings = Rs. 5,000 x 4 = Rs. 20,000
If drawings are made at the end of every quarter, average period = 4.5
Interest on drawings = Total amount of drawing x Rate of interest x \(\frac{Average \ period}{12}\)
= Rs. 20,000 x \(\frac{6}{100}\) x \(\frac{4.5}{12}\)
Interest on drawings of Kevin = Rs. 450

Total capitalised value of the average profit = \(\frac { Average\ profit }{ Normal\ rate\ of\ return } \)\(\times\) 100
=\(\frac { 60,000 }{ 10 } \) \(\times\) 100
= Rs. 6,00,000
Goodwill = Total capitalised value of the average profit – Capital employed
= 6,00,000 – 4,50,000
= Rs. 1,50,000

Following are the journal entries to be made in the books of the partnership firm.
a. For providing interest on capital:

Date	Particulars	L.F	Debit Rs.	Credit Rs.
	Interest on capital A/c Dr		XXXX
	To partner's capital I currentA/c			XXXXX

b. For closing interest on capital account:

Date	Particulars	L.F	Debit Rs.	Credit Rs.
	Profit and loss appropriation A/c Dr		XXXX
	To Interest on Capital A/c			XXXXX

Interest on Drawings = 30,000 \(\times\) \(\frac { 10 }{ 100 } \times \frac { 6 }{ 12 } \) = Rs. 1,500

Calculation of interest on capital:
Interest on Antony’s capital:

On opening capital for 1 year	60,000 \(\times\) \(\frac{6}{100}\)	Rs. 3,600
On additional capital for 9 months	10,000 \(\times\) \(\frac{6}{100}\) \(\times\) \(\frac{9}{12}\)	Rs. 450
Interest on capital		Rs. 4,050

 Interest on Akbar’s capital:

On opening capital for 1 year	40,000 \(\times\) \(\frac{6}{100}\)	Rs. 2,400
On additional capital for 6 months	5,000 \(\times\) \(\frac{6}{100}\) \(\times\) \(\frac{6}{12}\)	Rs. 150
Interest on capital		Rs. 2,550

 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.

Balance sheet of Chennai tennis club as on 31^st March, 2019

Liabilities	Rs	Rs	Assets	Rs
Match fund	24,000
Add: Receipt the fund	26,000
	50,000
Less: Match expenses	33,000	17,000

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

Expenditure	Rs	Income	Rs	Rs
		By Subscription received
		during the year	50,000
		Less: Subscription received for
		2017	5000
			45,000
		Less: Subscription received for 2019	7,000
			38,000
		Add: Subscription due for 2018	6,000
			44,000
		Add: Received in advance in
		2017 for 2018	4,000	48,000

Life membership fee is accounted as a capital receipt and added to capital fund on the liabilities side of Balance sheet. It is not recurring in nature.

Dr. Income and Expenditure Account for the year ended 31^st March, 2019 Cr.

Expenditure	Rs.	Rs.	Income	Rs.
To Sports materials consumed:			By Sale of old sports materials	500
Opening stock	3,000
Add: Purchased in the current year	9,000
	12,000
Less: Closing stock	4,000	8,000

Balance sheet as on 31^st March, 2019

Liabilities	Rs.	Rs.	Assets	Rs.	Rs.
			Stock of sports materials		4,000

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

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

Particulars	Rs.
Closing capital (as on 31.03.2019)	8,50,000
Add : Drawings during the year	70,000
	9,20,000
Less: Additional capital introduced during the year	1,20,000
Adjusted closing capital	8,00,000
Less: Opening capital (as on 1st April, 2018)	5,00,000
Profit for the year	3,00,000

Dr.                                  Bills receivable account                              Cr.

Particulars	Rs	Particulars	Rs
To Balance b/d	20,000	By Cash A/c	60,000
To Debtors A/c	75,000	By Debtors A/c	5,000
(Bills received during the year – balancing figure)		(Bills receivable dishonoured)
		By Balance c/d	30,000
	95,000		95,000

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

Debt equity ratio = \(\frac{Long\ term\ debt}{Shareholders'funds}\) = \(\frac{80,000}{1,60,000}\) = 0.5:1
Long term debt = Debentures = Rs.80,000
Shareholders’ funds = Equity share capital + Reserves and surplus
= 1,00,000 + 60,000 = Rs.1,60,000
(ii) Proprietary 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:
Proprietary ratio = \(\frac{Shareholders'funds}{Total\ assets}\)
Higher the proprietary ratio, greater is the satisfaction for lenders and creditors, as the firm is less dependent on external sources of finance.

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

In the books of Ooty Recreation Club

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

Expenditure	Rs.	Income	Rs.
To Sports materials purchased	10,000	By Rent received	10,000
To Stationery paid	7,000	By Subscription received	54,000
To Salaries	20,000
To Surplus	27,000
(Excess of income over expenditure)
	64,000		64,000

In the books of Bharath Ltd. Journal entries

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Bank A/c (1,20,000 × 5)	Dr.		6,00,000
	To Equity share application A/c				6,00,000
	(Application money received)
	Equity share application A/c (1,00,000 × 5)	Dr.		5,00,000
	To Equity share capital A/c				5,00,000
	(Transfer of share application money to share capital)
	Equity share application A/c (20,000 × 5)	Dr.		1,00,000
	To Bank A/c				1,00,000
	(Excess share application money refunded)
	Equity share allotment A/c	Dr.		3,00,000
	To Equity share capital A/c				3,00,000
	(Share allotment money due)
	Bank A/c	Dr.		3,00,000
	To Equity share allotment A/c				3,00,000
	(Allotment money received)
	Equity share first and final call A/c	Dr.		2,00,000
	To Equity share capital A/c				2,00,000
	(Share first and final call money due)
	Bank A/c	Dr.		2,00,000
	To Equity share first and final call A/c				2,00,000
	(Share first and final call money received)