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

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)

Computation of sacrificing ratio and new profit sharing ratio:
Since share sacrificed, proportion of share sacrificed and new profit sharing ratio are not given, it is assumed that the existing partners sacrifice in their old profit sharing ratio, that is, 2:1. Sacrificing ratio of Vimal and Athi is 2:1
Let the total share be 1
Jeyam’s share = \(\frac { 1 }{ 4 } \)
Remaining share =  \(1-\frac { 1 }{ 4 } =\frac { 4-1 }{ 4 } \)
= \(\frac { 3 }{ 4 } \)
New share of old partners = Remaining share × Old share
Vimal = \(\frac { 3 }{ 4 } \times \frac { 2 }{ 3 } =\frac { 6 }{ 12 } \)
Athi = \(\frac { 3 }{ 4 } \times \frac { 1 }{ 3 } =\frac { 3 }{ 12 } \)
Share of new partner Jeyam = \(\frac { 1 }{ 4 } \)
In order to equalise the denominator, multiply and divide by 3
Jeyam’s share = \(\frac { 1 }{ 4 } \times \frac { 3 }{ 3 } =\frac { 3 }{ 12 } \)
New profit sharing ratio of Vimal,  Athi and Jeyam = \(\frac { 6 }{ 12 } :\frac { 3 }{ 12 } :\frac { 3 }{ 12 } \) that is, 2 : 1 : 1.

Gaining Ratio is the proportion of the profit which is gained by the continuing partner.
Gaining ratio = Ratio of share gained by the Conitinuing partners.
Share gained = New share - Old share

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

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 a shareholder fails to pay the amount due on allotment or on calls, the amount remaining unpaid is known a calls in arrears. In other words, the amount called up but not paid is calls in arrear.

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

Common size income statement for the year ended 31st March, 2019 31st March, 2017

Particulars	Maria Ltd		Kala Ltd
	Absolute amount	Percentage of revenue from operations	Absolute amount	Percentage of revenue from operations
	Rs.	Rs.	Rs.
Revenue from Operations	1,00,000	100	2,00,000	100
Add: Other income	10,000	10	30,000	15
	1,10,000	110	2,30,000	115
Less: Expenses	70,000	70	1,20,000	60
Profit before tax	40,000	40	1,10,000	55

Note: In Maria Ltd:
Computation of percentage for other income = \(\frac{10,000}{1,00,000}\) x 100 = 10%
Percentage for Expenses = \(\frac{70,000}{1,00,000}\) x 100 = 70%
Percentage for before tax = \(\frac{40,000}{1,00,000}\) x 100 = 40%
In Kala Ltd:
Percentage for other income \(\frac{30,000}{2,00,000}\) x 100 = 15%
Percentage for Expenses = \(\frac{1,20,000}{2,00,000}\) x 100 = 60%
Percentage for profit before tax = \(\frac{1,10,000}{2,00,000}\) x 100 = 55%

Common-size income statement of Raja Ltd for the year ended 31^st March, 2017

Particulars	Absolute amount Rs.	Percentage of revenue from operations
Revenue from Operations	4,50,000	100
Add: Other income	67,500	15
Total revenue	5,17,500	115
Less: Expenses	1,35,000	30
Profit before tax	3,82,500	85

Note:
Computation of percentage for other income = \(\frac{67,500}{4,50,00}\times\) = 15
Percentage for Total revenue = \(\frac{5,17,500}{4,50,000}\times100\) = 115%
Percentage for Expenses = \(\frac{1,35,000}{4,50,000}\times\)100 = 30%
Percentage for Profit before tax = \(\frac{3,82,500}{4,50,000}\) x 100 = 85%

Comparative income statement of Daniel Ltd for the year ended 2016 and 2017

Particulars	2015-16 Rs.	2016-17 Rs.	Absolute amount of increase (+) or decrease (-) Rs.	Percentage increase (+) or decrease (-)
Revenue from Operations	40,000	50,000	+ 10,000	+ 25
Less: Operating expenses	25,000	27,500	+ 2,500	+ 10
Profit before tax	15,000	22,500	+ 7,500	+ 50
Less: Income tax	4,500	6750	+ 2,250	+ 50
Profit after tax	10,500	15,750	+ 5,250	+ 50

Note:
Percentage increase for revenue from operations = \(\frac{10,000}{40,000}\) x 100 = 25%
Percentage increase for operating expenses = \(\frac{2,500}{25,000}\) x 100 = 10%
Percentage increase for profit before tax = \(\frac{7,500}{15,000}\) x 100 = 50%
Percentage increase for income for Income tax = \(\frac{2250}{4500}\) x 100 = 50%
Percentage increase for profit after tax = \(\frac{5250}{10,500}\) x 100 = 50%

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.

(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

(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.  

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.

Accounting report is a compilation of accounting information that are derived from the accounting records of a business concern. Accounting reports may be classified as routine reports and special purpose reports.

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.

Goodwill is the good name or reputation of the business which brings benefit to the business. It enables the business to earn more profit. It is the present value of a firm's future excess earnings. It is an intangible asset as it has no physical existence.

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

Dr Revaluation Account Cr

Particulars	Rs	Rs	Particulars	Rs
To Deptors A/c		2000	By Building A/C	10,000
To profit revaluaion			By Stock Ale	3,000
to transferred
Jame's capital A/c	5,500
Justona's capital a/c	5,500	11,000
		13,000		13,000

Dr Capital Account Cr

Particulars	James Rs	Justina Rs	Balan Rs	Particulars Rs	James Rs	Justina Rs	Balan Rs
To Balance c/d	58,000	68,000	25,000	By Balance b/d	40,000	50,000	-
				By Reserve fund A/c	7,500	7,500	-
				By Bank Ale	-	-	25,000
				By Revaluation AI	5,500	5,500	-
				By Bank A/c share of good will	5,000	5,000	-
	58,000	68,000	25,000		58,000	68,000	25,000
				By Balance bid	58,000	68,000	25,000

Dr Cash at Bank Account Cr

Particulars	Rs	Particulars	Rs
To Balance b/d	15,000	By Balance c/d	50,000
To Balan's capital A/c	25,000
To Jame's capital A/c	5,000
To Justina's capital A/c	5,000
	50,000		50,000

Dr Balance sheet as on 1st January 2017 Cr

Liabilities	Rs	Rs	Assets	Rs	Rs
Capital Account			Building	70,000
James's A/c	58,000		Add: Appreciation	10,000	80,000
Justina A/c	68,000		Stock	30,000
Balan A/c	25,000	1,51,000	Less: Appreciation	3,000	33,000
Creditors		35,000	Debtors	20,000
			Less: Undervalued	2,000	18,000
			Bank		50,000
			Prepaid insurance		5,000
		1,86,000			1,86,000

Journal entries

Date	Particulars		L.F	Debit Rs	Credit Rs
2017	Building A/c	Dr		30,000
April 1	To Revaluation A/c				30,000
	(Value of building inreased)
2017	Revaluation A/c	Dr		18,000
April1	To Stock A/c				5,000
	To Furniture A/c				12,000
	To Outstanding liability A/c				1,000
	(Decrease in value of assets and outstanding liability recorded
2017	Revaluation A/c	Dr		12,000
April1	To Roja's capital A/c				4,800
	To Neela's capital A/c				3,600
	To Kanaga's capital A/c				3,600
	(profit on recaluation distributed)

Dr                       Revaluation Account                              Cr

Particulars	Rs	Rs	Particulars	Rs
To Stock A/c		5,000	By Building A/c	30,000
To Furniture A/c		12,000
To Outstanding liability A/c		1,000
To Profit on revaluation transferred to
Roja's capital A/c	4,800
Neela's capital A/c	3,600
Kanaga's capital A/c	3,600
		12,000
		30,000		30,000

(i) When final call money is not paid.

In the books of United Industries Ltd., Journal Entries

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Equity Share capital A/c (250 x 10)	Dr		2,500
	To Equity Share second and final call A/c (250 x 2)				500
	To Forfeited shares A/c (250 x 8)				2,000
	(250 Shares forfeited)

Since the premium amount is received by the company, premium should not be cancelled.
(ii) When allotment, first call money and second and final call money is not paid.

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Share capital A/c (250 x 10)	Dr		2,500
	Share premium A/c (250 x 1)	Dr		250
	To Share allotment A/c (250 x 4)				1,000
	To Share first call A/c (250 x 2)				500
	To Share Second and final call A/c (250 x 2)				500
	To Shares Forfeited A/c (250 x 3)				750
	(250 Shares Forfeited)

(iii) When allotment and first call money is not paid.

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Share capital A/c (250 x 8)	Dr		2,000
	Share premium A/c (250 x 1)	Dr		250
	To Share allotment A/c (250 x 4)				1,000
	To Share first call A/c (250 x 2)				500
	To Shares Forfeited A/c (250 x 3)				750
	(250 Shares Forfeited)

Case 1: Operating profit ratio = \(\frac { Operating\ profit }{ Revenue\ from\ operations } \) \(\times\) 100
=\(\frac { 2,00,000 }{ 8,00,000 } \) \(\times\) 100 = 25%
Case 2: Operating profit ratio = \(\frac { Operating\ profit }{ Revenue\ from\ operations } \) \(\times\) 100
Operating profit = Revenue from operations - Operating Cost
= Rs.20,00,000 - 14,00,000 = Rs.6,00,000
∴ Operating profit ratio = \(\frac { 6,00,000 }{ 20,00,000 } \) \(\times\) 100 = 30%
Case 3: Operating profit ratio = \(\frac { Operating\ profit }{ Revenue\ from\ operations } \) \(\times\) 100
Operating profit = Gross profit - Operating expenses
Gross profit = 25% of 10,00,000 = Rs.2,50,000
Operating profit = 2,50,000 - 1,00,000 = Rs.1,50,000
∴ Operating profit ratio = \(\frac { 1,50,000 }{ 10,00,000 } \) \(\times\) 100 = 15%

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

Following steps are to be followed to enter the transactions in Tally ERP 9
1. To create company:
Company Info > Create Company
Type the Name as Peral 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 with opening balances:
Gateway of Tally > Masters > Accounts Info> Ledgers> Single Ledger> Create

Creation of	Name	Under	Opening balance	Accept
Bright’s Capital A/c	Bright’s Capital A/c	Capital Account	2,26,000	Yes
Ramesh A/c (Sundry creditors)	Ramesh A/c	Sundry Creditors	24,000	Yes
Machinery A/c	Machinery A/c	Fixed Assets	1,00,000	Yes
Furnitures A/c	Furnitures A/c	Fixed Assets	10,000	Yes
Opening stock	Opening stock	Stock-in -Hand	20,000	Yes
Shankar A/c (Sundry debtors)	Shankar A/c	Sundry Debtors	50,000	Yes
Cash in hand	Cash	Cash-in-Hand	15,000	Yes
Cast at bank	Bank	Bank Accounts	55,000	Yes

Note: 
Cash account need not be created as it is a default ledger. Only the opening balance has to be recorded by altering the cash account.
To record the opening balance of Cash
Gateway of Tally > Masters > Accounts Info > Ledgers > Single Ledger > Alter

After creating the ledgers and recording the opening balances of ledger accounts the balance sheet of Bright is shown as in the following figure:

4. To create ledger accounts for transactions

Creation of	Name	Under	Accept
Wages A/c	Wages A/c	Direct Expenses	Yes
Salaries A/c	Rent A/c	Indirect Expenses	Yes
Purchases A/c	Purchases A/c	Purchases Account	Yes
Senthamarai A/c	Senthamarai A/c	Sundry Creditors A/c	Yes
Sales A/c	Sales A/c	Sales Account	Yes
Pushparaj A/c	Pushparaj A/c	Sundry Debtors A/c	Yes
Depreciation A/c	Depreciation A/c	Indirect Expenses	Yes

5. To enter transactions through vouchers
Gateway of Tally > Transactions > Accounting Vouchers
Example: Wages of Rs. 2,000 paid by Cash
F5: Payment Voucher
Account: Cash
Particulars: Wages A/c
Amount: Rs. 2,000
Narration: Wages paid by cash
Accept: Yes
In the similar way, record the other transactions. Use Payment Voucher for Salaries paid and payment to Senthamarai.
Use Purchase Voucher for credit purchases from Senthamarai and cash purchases.
Use Sales Voucher for credit sales to Pushparaj and cash sales.
Use Receipt Voucher for cash received from Shankar.
Use Journal Voucher for depreciation.
To record closing stock:
Since maintain accounts only is set to 'Yes' and integrate accounts and inventory is set to "No" under accounting features. Stock has to be recorded manually. Hence the closing stock has to be recorded by altering the stock account and while entering the data of closing stock, the date of opening stock has to be entered. The following procedure is to be followed:
Gateway of Tally > Masters > Accounts Info > Ledgers > Single Ledger > Alter > Stock > Closing balance > Date (opening date) > Amount > Accept Yes

6. To view reports:
(i) To view Profit and Loss Account:
F10: A/c Reports > Profit & Loss A/c > Alt + F1 (detailed) (or)
Gateway of Tally > Report > Profit & Loss A/c > Alt + F1 (detailed)

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

Calculation of adjusted profit

Particulars	2016 Rs.	2017 Rs.	2018 Rs.
Profit	25,000	23,000	26,000
Less: Non -recurring income	2,500	-	-
	22,500	23,000	26,000
Add: Stock destroyed by fire (abnormal loss)	-	3,500	-
Profit after adjustments	1,30,000	1,20,000	2,30,000

Average profit \(=\frac{Total\ profit}{Number\ of\ years}\)
\(=\frac{22,000+26,000+26,000}{3}\)
\(=\frac{75,000}{3}\) = Rs. 25,000

	Rs.
Average profit before adjusting insurance premium payable in future	25,000
Less: Insurance premium payable in future	250
Average profit	24,750

Goodwill = Average profit \(\times\) Number of years of purchase
= 24,750 \(\times\) 2 = 49,500
Goodwill = Rs. 49,500

Calculation of sacrificing ratio
Sacrificing ratio = Old share - New share
Varun \(=\frac { 5 }{ 9 } =\frac { 1 }{ 3 } =\frac { 5-3 }{ 9 } =\frac { 2 }{ 9 } \)
Bharath \(=\frac { 4 }{ 9 } =\frac { 1 }{ 3 } =\frac { 4-3 }{ 9 } =\frac { 1 }{ 9 } \)
Therefore, sacrificing ratio is 2 : 1

Journal Entry

Date	Particulars	L.F	Debit Rs.	Credit Rs.
	Cash   A/c                    Dr		10,000
	Damn's capital A/c        Dr		5,000
	To Varun's capital A/c (2/3)			10,000
	To Bharath's Capital A/c (1/3)			5,000
	(Share of goodwill of Damu credited to old partner's capital account)

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.

Journal entries

Date	Particulars		L.F	Debit Rs.	Credit Rs.
	(a) Rathna’s Executor A/c	Dr.		1,00,000
	To Bank A/c				1,00,000
	(Amount due paid immediately)
	(b) Rathna’s Executor A/c	Dr.		1,00,000
	To Rathna’s Executor loan A/c				1,00,000
	(Amount due transferred to loan account)
	(c) Rathna’s Executor A/c			1,00,000
	To Bank A/c				60,000
	To Rathna’s Executor loan A/c				40,000
	(Rs. 60,000 paid and the balance transferred to loan account)

Trend analysis for Kavitha Ltd.

Particular	Rs. in thousands			Trends percentage
	2015-16	2016-17	2017-18	2015-16	2016-17	2017-18
Revenue from operations	100	125	150	100	125	150
Add: Other income	20	25	30	100	125	150
Total revenue	120	150	180	100	125	150
Less: Expenses	100	120	80	100	120	80
Project before tax	20	30	100	100	150	500
Less Income tax (30%)	6	9	30	100	150	500
Profit after tax	14	21	70	100	150	500

Note: 2016 -17
Percentage for Revenue from operations = \(\frac{125}{100}\) x 100 = 125%
Percentage of other income = \(\frac{25}{20}\) x 100 = 125%
Percentage of total revenue = \(\frac{150}{120}\) x 100 = 125%
Percentage for expenses = \(\frac{120}{100}\) x 100 = 120%
Percentage for before tax = \(\frac{30}{20}\) x 100 = 150%
Percentage for profit before tax = \(\frac{21}{14}\) x 100 = 150%
In 2017 - 18
Percentage for revenue from operations = \(\frac{150}{100}\) x 100 = 150%
Percentage for other income = \(\frac{25}{20}\) x 100 = 125%
Percentage of total revenue \(\frac{180}{120}\) x 100 = 150%
Percentage for expenses = \(\frac{80}{100}\) x 100 = 80% 
Percentage for profit before tax = \(\frac{100}{20}\) x 100 = 500%
Percentage for profit after tax = \(\frac{70}{14}\) x 100 = 500%

Journal entry

Date	Particulars		L.F	Debit Rs.	Credit Rs.
	Share capital A/c (50 x 8)	Dr		400
	To Share allotment A/c (50 x 4)				200
	To Share first call A/c (50 x 2)				100
	To Forfeited shares A/c (50 x 2)				100
	(Shares forfeited)

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)

Capitalised value of the business = \(\frac{Average\ profit}{Normal\ rate\ of\ return}\times100\)
= \(\frac{20,000}{10}\times100\)
= Rs. 2,00,000
Capital employed = Fixed assets (excluding goodwill) + Current assets - Current Liabilities
Capital employed = Tangible assets of the firm - Liabilities of the firm
Net tangible assets = 2,20,000 - 70,000 = Rs. 1,50,000
Goodwill = Total capitalised value of the average profit - Capital employed
= 2,00,000 - 1,50,000
= Rs. 50,000