Mefa Problems

RATIO ANALYSIS ---- MEFA IMPORTANT QUESTIONS AND PROBLEMS (8th unit)
1. The following figures are available relating to a business for the year 2004 Calculate:
particulars Amount particulars Amount a.Cost of goods sold
Opening stock 20000 Closing Stock 10000 b.Gross profit
purchases 100000 Indirect Expenses 10000 c.Net profit
purchase returns 10000 Sales 125000
Direct expenses 15000 sales returns 5000
Dr Trading Account Cr
Particulars Amount Particulars Amount
To Opening stock 20000 By Sales 125000
To Purchases 100000 Less:Sales returns 5000
Less:purchase 10000 120000 120000
returns 90000 90000 By Closing Stock 10000
To Direct expenses 15000
To Gross Prrofit(c/d) 5000
Total 130000 Total 130000
Dr Profit and loss Account Cr
To Indirect Expenses 10000 By Gross Profit (b/d) 5000
By Net Loss (c/d) 5000

10000 10000
To Net Loss (b/d) 5000
a. Cost of goods sold= Opening stock+(Purchases- purchase returns)+Direct expenses -Closing stock
20000+(100000-10000)+15000-10000= 115000.
b.Gross Profit=5000 (or) Gross Profit =Sales- COGS (125000-5000)-115000=5000
c. Net Loss = 5000 (or) Net Profit=Gross profit-Indirect expenses, 5000-10000=5000
So Net loss = 5000.
2.From the following balance sheet of ABC Co.,Ltd.,Calculate the following ratios
i.Current Ratio ii. Quick ratio iii. Debt equity ratio
Liabilities Rs Assets Rs
Equity share capital 1000 Plant and Machinery 975
Debentures 900 Stock 550
Creditors 200 Debtors 550
Outstanding expenses 100 Cash in hand 375
Profit and loss account 100 Prepaid expenses 50
Bank loan(Long term) 200
Total 2500 2500
i.Current assets= Current Assets 1525 5.08

Current liabilities 300
Current assets= Stock + Debtors + Cash in hand + Prepaid Expenses
550+550+375+50=1525
Current Liabilities= Creditors+Out Standing expenses
200+100=300
5.08:1 it means that the company is accumulating more of 4% assets extra which is not advisable
The Ideal Current ratitio is 2:1 for Point of current liability there should be 1 point of current asset
ii. Quick ratio = Quick Assets 1025 3.41

Quick liabilities (or) Current liabilities 300
Quick Assets=Current Assets-(Stock+Prepaid expense)

1525-(550+50)=1025
Quick liabilities=current liabilities- Bank Overdraf

300 (since we don’t have bank overdraf in the information taking only the current liability
3.41:1 it means that the company is accumulating the extra 2% of current assetst with it which is not good for the
The ideal quick ratio is 1:1 for 1 point of quick assets there shoul be 1 point of current liability
iii. Debt Equity ratio= Long term debts(out siders funds) 1100 1
Share holders funds 1100
Long term debts= Debentures+ long term loan

900+200=1100
Share holders fund= Equity share capital + Profit & loss account.
1000+100=1100
1:1 debt equity ratio is acceptable.
3. The following are the extracts from the financial statements of Blue and Red Ltd., as on 31st March 2001 and 2002 respectiv
Particulars 31-Mar-01 31-Mar-02 Compute for both the years the following
Rs Rs
Stock 10000 25000 a. Current ratio
Debtors 20000 20000 b. Acid rartio
Bills receivables 10000 5000 c. Stock turnover ration
Cash in hand 18000 15000
Bills payable 15000 20000 Also interpret the results there of .
Bank Overdraf 2000
9% debentures 500000 500000
Sales for the year 350000 300000
Gross profit 70000 50000
Mar-01
a. Current asset = Current assets 58000 3.86
Current assets = Debtors + Bills Receivables+ stock+ Cash in hand

20000+10000+10000+18000=58000
Current liabilities= Bills Payable+ Bank Overdraf

15000 (bank overdraf not given in march 2001)
3.86:1 ratio is not acceptable Assets are accumulated by extra 2%.
Mar-02
Current ratio= Current assets 65000 2.95

Current assets=Stock+Debtors+Bills recievables+Cash in hand

25000+20000+5000+15000=65000
Current liabilities=Bills payable+ Bank overdraf

20000+2000=22000
Assets are accumulated more by 1% not acceptable.
Mar-01
b. Acid ratio (or) Quick ratio= Quick assets 48000 3.2
Quick liabilities 15000
Quick assets= Current Assets- (Stock)

58000-10000=48000
Quick Liabilities = Current liabilities-Bank overdraf

15000
Mar-02
Quick assests=Current assets-Stock

65000-25000=40000
Quick liabiliaties= Current liabilities- Bankoverdraf
22000-2000=20000
Quick assets 40000 2

Quick liabilities 20000
2:1 is not advisable.
Mar-01
c. Stock turn over ratio = Cost of goods sold (COGS) 280000
Average inventory at cost (or ) average stock 17500
COGS = Sales - Gross profit

350000- 70000=280000
Average Stock = Opening stock+ Closing Stock

2
10000+25000 35000 17500

2 2
Mar-02
Stock turn over ratio= COGS 250000 14.2

Average stock 17500
COGS = Sales- Gross Profit

300000- 50000= 250000
Average stock = Opening stock + Closing stock

2
10000+25000 35000 17500

2 2
Stock turn over ratio should be 6 times , but it is 16 times in 2001 and 14 times in 2002 . So it is not advisable.
4. Calculate Capital employed turn over ratio for the following information of a company
fixed assets current assets current liabilities sales

Rs.2000000 Rs.1200000 Rs.700000 Rs.2550000
Capital turn over ratio= Cost of sales 2550000 1.02

Capital employed 2500000
Capital employed= Fixed assets+ Current assets - current liabilities

2000000+1200000-700000
2500000
5.From the following information calculte following ratios

a.Gross profit ratio
b. Current ratio
c.Stock turn over ratio
Sales 2520000
Cost of sales 1920000
Net Profit 360000
Opening stock 300000
Closing stock 500000
other current assets 760000
Fixed assets 1440000
Net worth 1500000
Debts(long term) 900000
a. Gross profit ratio = Gross profit *100 600000 *100 23.8

Net sales 2520000
Gross profit = Net sales- Cost of goods sold

2520000-1920000
600000
b. Current ratio = Current assets = 1560000 2.6

Current assets= Opening stock + Closing stock + Other current assets

300000 +500000+ 760000= 1560000
c. Stock turn over ratio = COGS 1920000 4.8

Average stock 400000
Average stock= Opening stock + Closing stock

2
300000+500000 800000 400000

2 2
6. Calculate & interpret the Current & Liquid ratios from the following information
Liabilities Amount Rs Assets Amount R

Share Capital 110000 Fixed Assets 150000
Debentures 115000 Liquid assets 120000
Current liabilities 65000 Stock 10000
a. Current ratio = Current assets 130000 2

2:1 is an ideal ratio for the company
Current assets= Liquid assets + Stock
120000+10000= 130000
Current liabilities = 65000
b. Liquid ratio (or) quick (or ) Acid ratio= Quick assets

Current (or) Quick liabilities
Quick assets = Current assets - stock

130000- 10000=120000
Quick (or) current liabilities= 65000
liquid ratio = Quick assets 120000 1.846

1.846:1 is an ideal ratio for the company.
7. Calcualate Stock turnover ratios in the following cases
a. Cost of goods sold Rs 200000

Average stock Rs 40000
b . Sales Rs 220000
Average stock Rs 40000
Sales returns Rs 20000
Gross profit Rs.20% on sales
c. Opening Stock Rs 21000

Closing stock Rs 29000
Purchases Rs100000
Wages Rs 10000
a. Stock turn over ratio = Cost of goods sold = 200000 5

Average stock 40000
b. Gross profit ratio = Gross profit *100

Net sales
20 Gross profit *100
200000
200000 * 20 = Gross Profit * 100
Gross profit = 200000 * 20 40000
100
STOR = Sales - Gross profit
Average stock
200000- 40000 160000 4
40000 40000
c. Stock turn over ratio = Cost of goods sold 102000 4.08

Average stock 25000
Cost of goods sold= Opening stock + purchases + Direct expenses - Closing stock.
21000+100000+10000-29000 = 102000
Average stock = Opening stock + closing stock
2
21000 + 29000 25000
2
8. Calculate Capital employed turn over ratio for the following information of a company
Fixed assets Rs2000000

Current assets Rs120000
Current liabilities Rs700000
Sales Rs2550000
Capital = Current assets + Fixed assets - current liabilities.

1200000 + 2000000-700000
= 3200000- 700000 = 2500000
Capital employed (or) turn over ratio= Cost of sales

Capital employed
2500000= 2550000
Capital employed
Capital employed = 2550000 1.02
2500000
9. Calculate the following ratios from the details given below

a. Current ratio b. Acid test ratio c. Operating ratio
d. Gross profit ratio
Debtors Current Stock Sales Operating Cost of

Liabilities Expenses goodssold
70000 35000 30000 120000 40000 60000
a. Current assets = Current assets 100000 2.85

Current assets = Debtors + Stock
= 70000+ 30000 = 100000
B. Acid test ratio = Quick assets 70000 2

Quick Assets = Current Assets - Stock
= 100000- 30000= 70000
Current liabilities = 35000
c. Operating ratio = Cost of goods sold - Operating expenses

Net sales
= 60000-40000
120000
20000 0.16
120000
d. Gross profit ratio = Gross profit * 100 60000 *100 5
Net sales 120000
Gross profit = Net sales - Cost of goods sold
= 120000- 60000 = 60000
10 The following ratios relate to Cosmos Ltd.

Gross Profit ratio 15%
Debtors velocity 3 months
Stock velocity 6 months
creditors velocity 3 months
Gross profit for the year ended was Rs.90,000 Closing and opening stocks are of the
same amount
Find out
i.Sales
ii. Closing stock
iii. Sundry Debtors
iv. Sundry creditors
i. Sales
Gross profit ratio = Gross profit *100
Net sales
15 90,000 (Gross profit ratio given so no need to
100 Net sales multiplied by 100 to gross profit)
Net sales * 15 = 90,000 * 100
Net sales * 15 = 90,00000
Net sales = 90,000,00 = 6,00,000
15
Net sales = 6,00,000
ii. Closing stock

Stock turn over ratio = Sales
Closing stock
6 6,00,000
1 Closing stock
Closing stock * 6 = 6,00,000

Closoing stock = 6,00,000 1,00,000
6
iii. Sundry Debtors

Debtors turn over ratio = Net Credit sales
Average trade debtors
= 6,00,000 2,00,000
3

Creditors turn over ratio= Net credit purchases
Average trade creditors
Net credit purchases = Sales + Closing stock + Opening stock - Gross profit
6,00,000 + 90,000 + 90,000 - 90,000 = 6,90,000
11 Following are the ratios of the business of Tewari Textiles Ltd. Dealing in textile for
the year ending 31st March, 2009
Average collection period 4 months

Stock turn over 2 times
Average payment period 3 months
Gross profit ratio 20%
Opening Receivables Rs. 4,00,000
Gross profit for the year ended 31st March
amounted to Rs.6,00,000
Closing stock of the year is Rs 10,000
above the opening stock
Bills receivables amounted to Rs.30,000
Bills payables amounted to Rs. 5,000
Find out
a.Sales
b.Closing stock
c. Sundry Debtors
d. Sundry Creditors
a. Sales
Gross profit ratio = Gross profit it *100
Net sales
20 6,00,000 No need to multiplied by 100 to
100 Net sales Gross profit b.coz Gross profit ratio given
Net sales * 20 = 6,00,000 * 100

Net sales = 6,00,000,00 30,00,000
20
Net sales = 30,00,000
ii. Closing stock

STOR = Cost of goods sold (or) Sales
Average stock Closing stock
2 30,00,000
1 Closing stock
Closing stock * 2 = 30,00,000
Closing stock = 30,00,000

2
Closing stock = 15,00,000
Closing stock is 10,000 more than opening stock.
so, opening stock = 14,90,000
iii. Sundry debtors

Debtors turn over = Net credit sales
Average trade debtors
30,00,000 7,50,000
4

Creditors turn over ratio = Net credit purchases
Average trade creditors
Net credit purchases = sales+ closing stock + opening stock - Gross profit
30,00,000 +,15,00,000 + 14,90,000 - 6,00,000 = 53,90,000
53,90,000 17,96,666
3
12 With the following ratios and further information givern below , prepare trading and profit and loss
and a balance sheet of Mr. Yogesh Vijay.
a. Gross profi t ratio 25%
b. Net profit ratio 20%
c. Stock turn over ratio 10 times
d. Net profit / Capital 1/5
e Capital to external liability 1/2
f. Fixed assets / Capital 5/4
g fixed assets / Total current assets ts 5/7
h fixed assets Rs.5,00,000
i. Closing stock Rs.50,000
g.Ratio of fixed assets to Total current assets Afer solving the ratios with the resulted information have
Fixed assets 5 prepare the trading and profit and loss account and Balanc
Total current assets 7
Current assets 7,00,000
5,00,000 = 5 Capital 4,00,000
Current assets 7 External liability 8,00,000
Net profit 80,000
Current assets * 5 = 5,00,000 * 7 Net sales 4,00,000
Gross profit 1,00,000
Current asset s = 35,00,000 7,00,000 Opening stock 10,000
5 Cost of goods sold 3,00,000
f. Ratio of fixed assets to capital Dr Trading account

Fixed assets 5 Particulars Amount Particulars
Capital 4 To cost of goods s 3,00,000 By sales
sold
5,00,000 5 To Gross profit(c/d) 1,00,000
Capital 4 Total 4,00,000
Dr Profit account
Capital = 20,00,000 4,00,000 Particulars Amount Particulars
5 Operating 20,000 By gross profit(b/d)
Capital = 4,00,000 expenses(c/d)
To Net profit 80,000
e. Ratio of capital to external liability Total 1,00,000
Capital 1 Balance sheet
External liability 2 Liabilities Amount Assets
Capital 4,00,000 Fixed assets
4,00,000 1 External liability 8,00,000 Current assets
E.Liability 2 Total 12,00,000
External liability = 8,00,000 Cost of goods directly should be entered in th e trading ac

because opening stock and closinfg stock only given
d. Ratio of Net profit to capital so , COGS= Sales - Gross profit.
Net profit 1 4,00,000- 1,00,000 3,00,000
capital 5
Operating expenses should be created in the balance shee
Net profit = 4,00,000 80,000 because any other details not given and the remaining sho
5 mean that external liability.
Net Profit = 80,000
c. Stock turn over raito = Cost of goods sold

Averager stock
Cost of goods sold = sales - Gross profit

COGS = 4,00,000 - 1,00,000 = 3,00,000
STOR = Sales - Gross profit

Average stock
10 = 4,00,000 - 1,00,000
Average stock
10= 3,00,000
Avg. stock
Average stock * 10 = 3,00,000
Avg stock = 3,00,000 30,000

10
Avg stock = Opening stock + Closing stock

2
30,000 = opening stock + 50,000
2
60,000 = opg + 50,000
opg = 60,000 - 50, 000

opg = 10,000
b. Net profit ratio = Net profit *100

Net sales
20 80,000
100 Net sales
Net sales = 80,000 * 100
20
Net sales = 4,00,000
a. Gross profit ratio = Grosss profit *100

Net sales
25 Gross profit
100 4,00,000
Gross profit = 4,00,000 *25

100
Gross profit = 1,00,000.

(COGS)
urrent asset
only the current liability
it which is not good for the company

current liability
ch 2001 and 2002 respectively

16
loss account
e resulted information have to
and loss account and Balance sheet.
Cr
Particulars Amount
4,00,000
Total 4,00,000
Cr
Particulars Amount
By gross profit(b/d) 1,00,000
Total 1,00,000
Amount
Fixed assets 5,00,000
Current assets 7,00,000
Total 12,00,000
e entered in th e trading account

sinfg stock only given
created in the balance sheet
given and the remaining should
7th unit Financial Accounting. Problems and solutions
1. Journalise the following transactions

Ramesh introduced capital into business Rs . 200000
Ramesh withdrawn capital from business for his personal use Rs.20000
Purchased bullock cart worth Rs. 4000 for the business
Paid sweepers salary Rs. 3000
Purchased furniture for Rs . 10000 of which Rs. 5900 on credit basis from Guruprasad And company
Purchased post card for Rs.100 and envelops for Rs. 200 and stationery for Rs. 500
Purchased raw materials from Preetilal on credit basis for Rs 45000
Deposited cash into bank Rs. 22000
Particulars Debit Rs Credit RS

Cash A/C D 200000 _
To Capital A/C _ 200000
Cash A/C D 20000 _
To Drawings A/c _ 20000
Bullock cart A/c D 4000 _
To Cash A/C _ 4000
Salaries A/C D 3000 _
To Cash A/C _ 3000
Furniture A/C D 10000 _
To Cash A/C _ 4100
To Guruprasad A/C _ 5900
Post Card A/C Dr 100 _
Envelops A/C Dr 200 _
Stationery A/C Dr 500 _
To Cash A/C _ 800
Purchases A/C Dr 45000 _
To Preetilal A/C _ 45000
Bank A/C Dr 22000 _
To Cash A/C _ 22000
Total 3,04,800 3,04,800
2 Girishwar prasad started business on 1st July 2000 with a capital of Rs .150000 .
The following is the Trial Balance as on 30th July 2001. Prepare Trading and Profit and Loss Account for the
year ended 30th June 2001.
Particulars Debit Rs Credit RS

Capital 150000
Purchases 200000
Wages 12000
Sales 300000
Furniture 8000
Travelling expenses 7000
Salaries 9000
commission 3000 4680
Cash in hand 10000
Cash in bank 34000
Repairs 5000
Building 160000
Sales returns 5000
Purchases returns 7000
Debtors 45000
Bill receivables 6000
Bills Payables 8000
Telephone 5200
Interest 480
Creditors 40000
Total 509680 509680
On 30th June , 2001 , the value of closing stock was Rs . 50,000.
To Purchases 200000 By sales 300000
Less:Purchase Less:Sales
returns 7000 returns 5000
193000 193000 295000 295000
To wages 12000 By Closing stock 50000
To Gross Profit (c/d) 140000
Particulars Amount Particuars Amount
To Travelling expenses 7000 By Gross profit(b/d) 140000
To Salaries 9000 By Commission received 4680
To Commission Paid 3000
To Repairs 5000
To Telephone 5200
To Interest 480
To Net Profit (c/d) 115000
Balance sheet not necessary to do in this given information, but if it is necessary and asked
to do , here it is .
Balance sheet
Liabilities Amount Assets Amount
Capital 150000 Furniture 8000
Add:Net Profit 115000 Building 160000
265000 265000 Cash in hand 10000
Creditors 40000 cash in bank 34000
Bills payables 8000 Debtors 45000
Billls receivables 6000
closing stock 50000
3 Jornalise the following transaction in the books of X
Date Particulars
March 1st 2002 Started business with Rs. 4000 in cash
3rd Bought gooods from Prasad Rs. 3271
5th Cash sales Rs. 372
12th Sold goodss to Babulal Rs. 631
15th Paid to Prasad on account Ts . 1500
18th Paid salary to manager Rs. 500
29th Office rent pid to land lord Kumar Rs. 400
Date Particulars Debit Credit

March 1st 2002 Cash A/C Dr 4000 -
To Capital A/C - 4000
3rd Purchases A/C Dr 3271 -
To Prasad A/C - 3271
5th Cash A/C Dr 372 -
To Sales A/C - 372
12th Babulal A/C Dr 631 -
To Sales A/C - 631
15th Prasad A/C Dr 1500 -
To Cash A/C - 1500
18th Salaries A/C Dr 500 -
To Cash A/C - 500
29th Rent A/C Dr 400 -
To Cash A/C - 400
Total 10,674 10,674
4 Journalise the following transactions and post them to Ledger
a Ram invests Rs. 10,000 in cash

b He bought goods worth Rs. 2,000 from shyam
c.He bought a machine for Rs Rs. 5,000 form Lakshman on account
d He paid to Lakshman Rs. 2,000
e He Sold goods for cashsh Rs .3,000
f. He sold goods to A on account Rs . 4,000
g He paid to shyam Rs. 1,000
h He received amount from A Rs. 2,000
Particulars Debit Rs Credit Rs

Cash A/c Dr 10,000 -
To Capital A/C - 10,000
Purchases A/C Dr 2,000 -
To Shyam A/C - 2,000
Machine A/C Dr 5,000 -
To Lakshman A/C - 5,000
Lakshman A/C Dr 2,000 -
To Cash A/C - 2,000
Cash A/c Dr 3,000 -
To Sales A/c - 3,000
A,s A/c Dr 4,000 -
To Sales A/c - 4,000
Shyam A/C Dr 1,000 -
To Cash A/C - 1,000
Cash A/c Dr 2,000 -
To A,s A/C - 2,000
Total 29,000 29,000
Posting the journals into the Ledger Accounts
Dr Capital Account Cr
Particulars L, folio Amount Particulars L, folio Amount
To Balance (c/d) 10,000 By Cash 10,000
Total 10,000 Total 10,000

By Balance (b/d) 10,000
Dr Cash Account Cr
To Capital 10,000 By Lakshman 2,000
To Sales 3,000 By Shyam 1,000
To A,s 2,000
By Balance (c/d) 12,000
To Balance (b/d) 12,000
Dr Purchases Account Cr
Particulars L ,folio Amount Particulars L, folio Amount
To Shyam 2,000 By Balance (c/d) 2,000

Dr Sales Account Cr
To Balance (c/d) 7,000 By Cash 3,000
By A,s 4,000
By Balance(b/d) 7,000
Dr Machines Account Cr
To Lakshman 5,000 By Balance (c/d) 5,000

Dr A,s Account Cr
Particulars L, folio Amount Particulars L,folio Amount
To Sales 4,000 By Cash 2,000
By Balance (c/d) 2,000
Dr Shyam Account Cr
To Cash 1,000 By purchases 2,000
To Balance (c/d) 1,000
Dr Lakshman Account Cr
Particulars L , folio Amount Particulars L, folio Amount
To Cash 2,000 By Machine 5,000
To Balance (c/d) 3,000
If Trial Balance asked you should do this way , take all the accounts where ever the
balance is closed on the higher amount , means with balance (b/d) with To or By.
Trial Balance
Capital 10,000
Cash in Hand 12,000
Purchases 2,000
Sales 7,000
Machines 5,000
Debtors (A,s) 2,000
Creditors (Shyam) 1,000
" (Lakshman) 3,000
Total 21,000 21,000
5 Mr. Sharma is Providing you the list of balances of his business on 31-12-98. Prepare
the final accounts for him.
Trial balance on 31-12-98
Capital - 50,000
Drawings 7,500 -
Purchases and Sales 72,100 95,000
Returns 1,300 2,700
Debtors , Creditors 18,200 35,750
Stock 19,800 -
Bad Debts 3,000 -
Bills Receivables 12,000 -
Bills Payable - 23,000
Cash in Hand 800 -
Office Expenses 6,210 -
Sales Van 15,000 -
Expenses of sales van 1,400 -
Discount - 2,910
Rent , Taxes 10,700 -
Telephone Charges 1,050 -
Postal charges 950 -
Furniture and fittings 5,000 -
Printing and stationery 2,750 -
Commission 8,400 -
Carriage inward 3,200 -
Salaries and Wages 20,000 -
2,09,360 2,09,360
Adjustments:
Closing Stock Rs 61,700/-
Depreciate furniture by 10% , Sales van by 20%.
Rent outstanding Rs . 900/-
To opening stock 19,800 By Sales 95,000
To Purchases 72100 less:sales 1300
less: purchase returns 2700 Returns 93,700 93,700
69,400 69,400 By Closing Stock 61,700
To Carriage inward 3,200
To Gross Profit (c/d) 63,000
Total 1,55,400 Total 1,55,400
To Salaries and Wages 20,000 By Gross profit (b/d) 63,000
To Office Expenses 6,210 By Discount Received 2,910
To Rent and Taxes 10,700
Add:Outstanding 900
rent 11,600 11,600
To Expenses of sales Van 1,400
To Depreciate on Sales Van 3,000
To Depreciate on Furniture 500
To Telephone Charges 1,050
To Postal Charges 950
To Printing and stationery 2,750
To Commission Paid 8,400
To Bad Debts 3,000
To Net Profit (c/d) 7,050
Balance Sheet
Capital 50,000 Furniture and fittings 5,000
Add: Net Profit 7050 less:depreciate 10% 500
57,050 4,500 4,500
less: Drawings 7,500 Sales van 15,000
49,550 49,550 less: Depreciate 20% 3,000
To Creditors 35,750 12,000 12,000
Bills Payable 23,000 Debtors 18,200
Out standing Rent 900 Bills Receivables 12,000
cash in Hand 800
Closing stock 61,700
Total 1,09,200 Total 1,09,200
In profit and loss account you should mention the depreciation values of furniture
and fittings amount and also the sales van amount and also the outstanding rent (losses)
and these values should mention in the balance sheet also . Outstanding rent
in liabilities side and depreciation values should minus from the furniture and fittings
and from the sales van of 10% & 20% respectively.
and salaries and wages should mention in profit and loss only because separately
not given which word starts first if salaries in p/L account, if wages and salaries together
mentions should enter in the trading account.
6 From the following Trial Balance of Rao and sons , Prepare the Trading and profit
and loss account and balance sheet as on 31-12-98.

Debtors 12,000 -
Creditors - 7,900
Capital - 30,000
Drawings 2,900 -
Rent and Taxes 570 -
Trading Expenses 350 -
Purchases 8,640 -
Sales - 14,290
Purchase Returns - 280
sales Returns 190 -
Carriage Inward 250 -
Wages 2,920 -
Salaries 1,200 -
Stock 3,100 -
Discount allowed 80 -
Discount received - 240
Bad Debts 300 -
Machinery 3,510 -
Furniture and Fittings 1,000 -
Cash at Bank 300 -
Cash in Hand 15,400 -
Total 52,710 52,710
Stock as on 31-12-98 is Rs 14,220/-

particulars Amount Particulars Amount
To Opening stock 3,100 By Sales 14,290
To Purchases 8,640 less: Sales returns 190
less:Purchases returns 280 14,100 14,100
8,360 By closing stock 14,220
To Trading expenses 350
To Carriage Inward 250
To Wages 2,920
To Gross profit (c/d) 13,340
Dr Profit and Loss Account Cr
To Rent and Taxes 570 By Gross profit (b/d) 13,340
To salaries 1,200 By Discount received 240
To Discount allowed 80
To Bad debts 300
To Net profit (c/d) 11,430
Balance sheet
Capital 30,000 Machinery 3,510
Add: Net profit 11,430 Furniture and fittings 1,000
41,430 Debtors 12,000
Less: Drawings 2,900 Cash In Hand 15,400
38,530 38,530 Cash at Bank 300
To Creditors 7,900 Closing Stock 14,220
46,430 46,430
6 From the following Ledger Balances Prepare Final Accounts for Messers Rajindra Bros. As
on 31st March ,2009.
Ledger Balances: (All are given in Rupees)
Capital 18000, Stock 3,720 , B.p 4,827 , Creditors 7,581 , BR 3,291 , Sales 12,439, Cash at Bank 1900,
Machinery 6710, Buildings 5290 , Commission (cr) 390 , Insurance 119 , Postage 132, Discount (cr) 627,
purchases 10492, returns inward 1000, returns outward 1200 , Cash in hand 400, salaries 1400, Carriages 400,
wages 1510, depreciation 600.
Adjustment item :
Closing stock valued at Rs 17,929.
If it is given like this you have to make a Trial balance first

Trial Balance
Capital - 18,000
Stock 3,720 -
B.P ( Bill payable) - 4,827
Creditors - 7,581
B.R ( Bills Receivables) 3,291 -
Sales - 12,439
Cash at Bank 1,900 -
Machinery 6,710 -
Buildings 5,290 -
Commission - 390
Insurance 119 -
Postage 132 -
Discount (cr) - 627
Purchases 10,492 -
Returns inwards 1,000 -
Returns outwards - 1,200
Cash in hand 400 -
Salaries 1,400 -
Carriage 400 -
Wages 1,510 -
Depreciation 600 -
36,964 45,064
This is a differential Trial balance where the debit and

credit amounts are not the same , the difference amount
is 8,100. this same amount should come in the Balance sheet.
Particulars Amount particulars Amount
To Opening stock 3,720 By sales 12,439
To Purchases 10,492 less:Returns inwards 1,000
less:Returns outwards 1200 11,439 11,439
9,292 9,292 By Closing stock 17,929
To Carriage 400
To Wages 1,510
Particulars Amount particulars Amount
To Insurance 119 By Gross profit (b/d) 14,446
To Postage 132 By Commission 390
To salaries 1,400 By Discount 627
To Depreciation 600
To Net profit (c/d) 13,212
Balance sheet
Capital 18,000 Machinery 6,710
Add:Net Profit 13,212 Buildings 5,290
31,212 31,212 Bills Receivables 3,291
Bills Payable 4,827 Cash at bank 1,900
Creditors 7,581 Cash in hand 400
Closing stock 17,929
Because the information is a differential trial balance the difference of amount of

8,100 has also appeared in the Balance sheet .
7 From the following ledger balances Prepare trading account , profit and loss account. Ledger
Balances :
Interest Paid 3,400 , Wages 27,890, Carriage inwards 1,720, salaries 5,990, Insurance 600, Opening
stock 38,500, Audit fees 1,000 , Law costs 710, Drawings 13,200 , Purchases 61,900 , Repairs 3,300,
Closing stock was valued at Rs , 12,560, Commission Received 9,000 , Sales 1,30,000, Returns out wards
2,570.00
Trial Balance
Particulars Debit Credit
Interest paid 3,400 --
Wages 27,890 -
Carriage inwards 1,720 -
Salaries 5,990 -
Insurance 600 -
Opening stock 38,500 -
Audit fee 1,000 -
Law costs 710 -
Drawings 13,200 -
Purchases 61,900 -
Repairs 3,300 -
Commission received 9,000
Sales 1,30,000
Return out wards 2,570
15,8,210 1,41,570
This is a differential trial balance and the full information

not given related to the balance sheet . So . Only trading account
and profit and loss account only should do.
Dr Trading account Cr
To Opening stock 38,500 By sales 1,30,000
To Purchases 61,900 By Closing stock 12,560
less:Returns outwards 2,570
59,330
To Wages 27,890
To Carriage inwards 1,720
Total 1,42,560 Total 1,42,560
Dr profit and loss Account Cr
To Interest Paid 3,400 By Gross Profit (b/d) 15,120
To salaries 5,990 By Commission received 9,000
To Insurance 600
To Audit fee 1,000
To Law Costs 710
To Repairs 3,300
To Net profits (c/d) 9,120
8 Prepare trial Balance from the following ledger balances.

Capital 64,000, Sales 1,74,000, Purchases 1,54,000, Carriage inwards 1300, Purchase
returns 2000 , Carriage outwards 1800, sales returns 4000, furniture 600, premises
24000 , Motar van 3000, Opening stock 32000, debtors 26000, drawings 2000, creditors
8700
Trail Balance
Capital - 64,000
Sales - 1,74,000
Purchases 1,54,000 -
Carriage inwards 1,300 -
Purchase returns 2000
Carriage outwards 1,800 -
Sales returns 4,000 -
Furniture 600 -
Premises 24,000 -
Motor van 3,000 -
Opening stock 32,000 -
Debtors 26,000 -
Drawings 2,000 -
Creditors - 8,700
Total 2,48,700 2,48,700
9 Enter the following transactions in the three column cash book of M/s Gayatri and
company
Cash in hand Rs. 300. Balance at Bank Rs.700.
2007 December 1st Received from Smitha Rs.590, Alllowed him discount Rs.10.
2nd Paid Salaries Rs.200, Cash Sales Rs.200.
5th Paid to Bobby by Cheque Rs.300, Cash purchases Rs.50.
7th paid to Sharmila by cheque Rs.380, received discount Rs.200.
8th paid cartage and coolie Rs.10, Cash sales Rs.150.
9th with drew from bank Rs.200, paid rent in cash Rs.50.
10 Cash sales Rs.250, received from Raman Rs.240 by cheque, discount allowed Rs.10.
17th Deposited into Bank Rs.1000, Purchased truck Rs.1800 and paid through cheque
21st Received a cheque from Vani Rs.490, discount allowed Rs.10
24th Cash sales Rs.500.
31st Deposited with bank Rs.200 and paid wages Rs.50.
For the Cash book you have to draw the three column that is discount column , cash
column andd bank column , here all the incomes should be entered in the credit
column and expensed and payments should enter into the debit column column
if payment by cheque and received payment by cheque enter in the bank column ,
cash payment and receiving the cash in the cash column ,discount allowed and
received in the discount column.
cash transactions purely related the real account
means Debit what comes in and Credit what goes out .
you should mention "TO" in the debit and "BY" in the Credit ,these have to follow
when u enter a transaction.
Dr Cash Book
Date Particular Discount Cash Bank Date Particular
To Balance Allowed
2007Dec 1 To Balance 300 700 2nd By Salaries
1st To Smitha 10 590 5th By Bobby
2nd To Sales 200 5th By Purchases
2nd To Sales 150 7th By Sharmila
9th To Bank 200 8th By Cartage&Coolie
10th To Sales 250 9th By Rent
10th To Raman 10 240 17th By Purchases
17th To Cash 1000 31st By Wages
21st To vani 10 490
24th To Sales 500
31st To Cash 200 By Balance (c/d)
30 2190 2630
To Balance (b/d) 1830 150
In Cash Book ,Debit, how the cash came in and with what reason and credit ,how the cash went out and with what
10 Prepare Sales Book from the following transactions

2009 Jan 6th Sold goods woth Rs 7,000 to Sai invoice no: 620
Jan 12th Sold goods worth Rs 6,000 to Ravi invoice no: 621
Jan 18th Sold goods worth Rs 5,000 to Deep invoice no :622
Jan 25th Sold goods worth Rs.3,000 to nag invoice no: 623
Jan 28th Sold goods worth Rs 5,000 to Kamal invoice no : 624
Here , in Sales Book you have to draw Invoice no column , ledger folio column ,
Amount Rs. Column.
Date Particular Invoice L.F Amount

2009Jan 6 Sai 620 7,000
12th Ravi 621 6,000
18th Deep 622 5,000
25th Nag 623 3000
28th Kamal 624 5,000
Its easy to do a Sales book , be careful about the

columns.
11 Journalise the following transaction in the books of X.
Date Particulars
Mar12002Started business with Rs.4000 in cash
3rd Bought goods from Prasad Rs.3271
5th Cash Sales Rs.372
12th Sold goods to Babulal Rs.631
15th Paid to Prasad on account Rs.1500
18th Paid Salary to manager Rs.500
29th Office rent paid to land lord Kumar Rs.400
Book of Mr.X
Date Particulars Debit Rs Credit Rs
Mar12002Cash A/C Dr 4000 -
To Capital A/C - 4000
3rd Purchases A/C Dr 3271 -
To Prasad A/C - 3271
To Sales A/C - 372
12th Babulal A/C Dr 631 -
To Sales A/C - 631
15th Prasad A/C Dr 1500 -
To Cash A/C - 1500
To Cash A/C - 500
29th Rent A/C Dr 400 -
To Cash A/C - 400
Total 10,674 10,674
12 Pass the journal entries int following cases:

Mar12006paid RS 4000 as Wages
2nd Received Rs.3000 for a bad debt return off
2 years each.
3rd Paid cash to Sangeetha Rs.1500.
4th Sold goods to Mr.Y.800
5th Received Commission Rs.50.
18th Deposited into bank Rs.1500.
19th Paid Salaries Rs.500.
Date Particulars Debit RS Credit Rs

Mar12006Wages A/C Dr 4000 -
To Cash A/C - 4000
2nd Cash A/C Dr 3000 -
To Bad debts reco - -
vered A/C - 3000
3rd Sangeetha A/C Dr 1500 -
To Cash A/C - 1500
4th Mr.Y. A/C Dr 800 -
To Sales A/C - 800
ToCommission A/C - 50
18th Bank A/C Dr 1500 -
To Cash A/C - 1500
To Cash A/C - 500
11,350 11,350
ad And company
nd Loss Account for thee

f
sh at Bank 1900,
2, Discount (cr) 627,
laries 1400, Carriages 400,
e 600, Opening
0 , Repairs 3,300,
, Returns out wards
Discount Cash Bank
Received
200
300
50
200 380
10
50
1800
50
1830 150
200 2190 2630
he cash went out and with what reason

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RATIO ANALYSIS ---- MEFA IMPORTANT QUESTIONS AND PROBLEMS (8th unit)

By Net Loss (c/d) 5000

i.Current assets= Current Assets 1525 5.08

ii. Quick ratio = Quick Assets 1025 3.41

Quick Assets=Current Assets-(Stock+Prepaid expense)

Quick liabilities=current liabilities- Bank Overdraf

Long term debts= Debentures+ long term loan

1:1 debt equity ratio is acceptable.

Current assets = Debtors + Bills Receivables+ stock+ Cash in hand

Current liabilities= Bills Payable+ Bank Overdraf

3.86:1 ratio is not acceptable Assets are accumulated by extra 2%.

Current ratio= Current assets 65000 2.95

Current assets=Stock+Debtors+Bills recievables+Cash in hand

Current liabilities=Bills payable+ Bank overdraf

Assets are accumulated more by 1% not acceptable.

Quick assets= Current Assets- (Stock)

Quick Liabilities = Current liabilities-Bank overdraf

Quick assests=Current assets-Stock

Quick assets 40000 2

COGS = Sales - Gross profit

Average Stock = Opening stock+ Closing Stock

10000+25000 35000 17500

Stock turn over ratio= COGS 250000 14.2

COGS = Sales- Gross Profit

Average stock = Opening stock + Closing stock

10000+25000 35000 17500

fixed assets current assets current liabilities sales

Capital turn over ratio= Cost of sales 2550000 1.02

Capital employed= Fixed assets+ Current assets - current liabilities

5.From the following information calculte following ratios

a. Gross profit ratio = Gross profit *100 600000 *100 23.8

Gross profit = Net sales- Cost of goods sold

b. Current ratio = Current assets = 1560000 2.6

Current assets= Opening stock + Closing stock + Other current assets

c. Stock turn over ratio = COGS 1920000 4.8

Average stock= Opening stock + Closing stock

300000+500000 800000 400000

Liabilities Amount Rs Assets Amount R

a. Current ratio = Current assets 130000 2

Current liabilities = 65000

b. Liquid ratio (or) quick (or ) Acid ratio= Quick assets

Quick assets = Current assets - stock

Quick (or) current liabilities= 65000

liquid ratio = Quick assets 120000 1.846

1.846:1 is an ideal ratio for the company.

7. Calcualate Stock turnover ratios in the following cases

a. Cost of goods sold Rs 200000

c. Opening Stock Rs 21000

a. Stock turn over ratio = Cost of goods sold = 200000 5

b. Gross profit ratio = Gross profit *100

c. Stock turn over ratio = Cost of goods sold 102000 4.08

Fixed assets Rs2000000

Capital = Current assets + Fixed assets - current liabilities.

Capital employed (or) turn over ratio= Cost of sales

9. Calculate the following ratios from the details given below

Debtors Current Stock Sales Operating Cost of

a. Current assets = Current assets 100000 2.85

B. Acid test ratio = Quick assets 70000 2

c. Operating ratio = Cost of goods sold - Operating expenses

10 The following ratios relate to Cosmos Ltd.

ii. Closing stock

Closing stock * 6 = 6,00,000

iii. Sundry Debtors

a. Gross profit ratio = Gross profit 100 600000 100 23.8