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

(a) If profit is to be distributed on the basis of the previous year’s profit:
Ritika’s share of profit for 3 months \(=30000\times\frac{3}{12}\times\frac{1}{3}=Rs.2,500\)

Date	Particulars		L.F	Debit Rs.	Credit Rs.
2019 March 31	Profit and loss Suspense A/c	Dr.		2,500
	To Rithika’s capital A/c				2,500
	(Rithika’s current year share of profit credited to her capital account)

(b) If profit is to be distributed on the basis of the average profit of the past 3 years:
Average profit \(=\frac{5,000+10,000+30,000}{3}\)
= 15,000
Ritika’s share of profit for 3 months \(=15000\times\frac{3}{12}\times\frac{1}{3}=Rs.1,250\)

Date	Particulars		L.F	Debit Rs.	Credit Rs.
2019 March 31	Profit and loss Suspense A/c	Dr.		1,250
	To Rithika’s capital A/c				1,250
	(Rithika’s current year share of profit credited to her capital account)

In the books of Anu Company Journal entries

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Equity share capital A/c (200 × 10)	Dr.		2,000
	To Equity share final call A/c (200 × 3)				600
	To Forfeited shares A/c (200 × 7)				1,400
	(200 shares forfeited)
	Bank A/c (200 × 6)	Dr		1,200
	Forfeited shares A/c (200 × 4)	Dr		800
	To Share capital A/c (200 × 10)				2,000
	(Forfeited shares reissued)
	Forfeited shares A/c (1,400-800)	Dr.		600
	To Capital reserve A/c				600
	(Gain on reissue of forfeited shares transferred to capital reserve account)

(i) Inventory conversion period is the time taken to sell the inventory.
(ii) A shorter inventory conversion period indicates more efficiency in the management of inventory.
(iii) It is computed as follows:
Inventory conversion period (in days)
= \(\frac { Number\ of\ days\ in\ a\ year }{ Inventory\ turnover\ ratio } \)
Inventory conversion period (in months)
= \(\frac { Number\ of\ month\ in\ a\ year }{ Inventory\ turnover\ ratio } \).

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)

Calculation of adjusted profit

Particulars	2016 Rs.	2017 Rs.	2018 Rs.
Profit	1,75,000	1,50,000	2,00,000
Less: Non - recurring-income	45,000	-	-
	1,30,000	1,50,000	2,00,000
Less: Over valuation of closing stock	-	30,000	-
	1,30,000	1,20,000	2,00,000
Add: Over valuation of Opening stock	-	-	30,000
Profit after adjustments	1,30,000	1,20,000	2,30,000

Average profit \(=\frac{Total\ profit}{Number\ of\ years}\)
\(=\frac{1,30,000+1,20,000+2,30,000}{3}\)
\(=\frac{4,80,000}{3}\) = Rs. 1,60,000
Goodwill = Average profit \(\times\) Number of years of purchase
= 1,60,000 \(\times\) 4
= Rs. 6,40,000

(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.

(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.

1) Nature:
It is an inscientific and insystematic way of recording transaction. Accounting principle and accounting standards are not followed properly.
2) Types of account maintained:
In general only cash and personal account maintained fully. Real account and nominal account are not maintained properly some transaction are correctly omitted.
3) Lack of uniformity:
There is no uniformity in recording the transaction among different Organisation. Different Organisation record their transaction according to their needs and conveniences.
4) Financial Statement may not represents true and fair view:
Due to the incomplete information and inaccurate record of account profit or loss calculated from these records cannot be realised upon. It may not represent true predictability. Assets and liabilities may not represent a true and fair view of financial position.
5) Suitability:
Only the business concerns which have no legal obligation to maintain books of account under double entry System may maintain incomplete record. Hence it may be maintained by small fixed sole traders and partnership items.
6) Mixing up of personal and business transactions:
Generally personal transactions of the owners, are mixed up with the business transaction. For example purchases of goods for own use may be mixed up along with business purchases.

Journal Entry

Date	Particulars	L.F	Debit Rs.	Credit Rs.
2018 January 1	Anjali's capital A/c (40,000\(\times\)5/8)    Dr		25,000
	Nithya's capital A/c (40,000 \(\times\) 3/8) Dr		15,000
	To Profit and loss A/c			40,000
	(Accumulated loss transferred to old partner's capital account in the old profit sharing ratio)