From the following trial balance as on March 31, 2006 prepare the trading and profit and loss account and the balance sheet: i Depreciate plant and railways by 10%; furniture and building by 5%; ii Write off a third of the promotion expenses; iii Value of silver ore on March 31, 1969 Rs. Functional Classification: This classification reflects the functional need and the purpose of calculating ratio. The excess of current assets over current liabilities provide a sense of safety and security to the creditors. Chiefly, accounting today is much more advanced than just bookkeeping and the formation and preparation of financial reports. In other words current assets are required to run day to day business activities; e.
The accounting information assist the government in the formulation of various policies measures and to address various economic problems like employment, poverty etc. The nature of the financial statements depends upon the following aspects like recorded facts, conventions, concepts and personal judgement. Besides the above while preparing financial statements, certain concepts are adhered to. What is the value of transfer payments made by the government and firms to the households? Between net investment and capital which is a stock and which is a flow? They may develop standard ratios and design uniform system of accounts. Thus, personal judgements help in determining the nature of the financial statements.
Preparation of revaluation account and balance sheet. Current Ratio- It explains the relationship between current assets and current liabilities. A higher Gross Profit Ratio implies a better position of a business, whereas a low Gross Profit Ratio implies an inefficient unfavourable sales policy. The board has also announced the date of the exams. The complete course of Accountancy at the senior secondary stage introduces the learners to the world of business and emphasize on strengthening the fundamentals of the subject. Answer : Inventory Turnover Ratio: This ratio is computed to determine the efficiency with which the stock is used.
Data: Entry, validation and verification. The actual amount calculated was Rs. Provisions for doubtful debts are made on estimates and personal judgments. If you present the same Solution in final Exam, there is no doubt in scoring handsome marks. Nature Net investment is flow variable.
Generating Accounting Information — Payroll. Activity Ratio: These ratios are calculated for measuring the operational efficiency and efficacy of the operations. Going concern concept assumes that the enterprise is treated as a going concern and exists for a longer period of time. Return on Investment or Capital Employed- It shows the relationship between the profit earned and the capital employed to earn that profit. Liquid Ratio- It explains the relationship between liquid assets and current liabilities. Answer False d Recorded facts are based on replacement cost.
Explain the process of preparing income statement and balance sheet. Its syllabus content provide students a firm foundation in basic accounting concepts and methodology and also acquaint them with the changes taking place in the preparation and presentation of financial statements in accordance to the applicable accounting standards and the Companies Act 2013. This is because, the heavy stocks like machinery, heavy tools etc. Profit and Loss Account and Balance Sheet. Answer Capital Meaning Net investment is the amount invested by any company for purchase of fixed assets. The personal income taxes paid by them is Rs 600 crores and the value of retained earnings of the firms and government is valued at Rs 200 crores.
Their prime considerations in their investment decisions are security and liquidity of their investment with reasonable profitability. Reconstitution of a Partnership Firm — Admission of a Partner 4. Compare net investment and capital with flow of water into a tank. Inventory Turnover Ratio: This ratio is computed to determine the efficiency with which the stock is used. Divide 1 — x² by x — 2x² by long division. So, it is a flow concept. Note: Exceptional items, extraordinary items and profit loss from discontinued operations are excluded.
Answer: Question 14: Handa Ltd. The following is the trial balance of Alfa Ltd, for the year ended June 30, 2011 Prepare the profit and loss account and balance sheet of the company after taking the following particulars into consideration a The original cost of land and building plant and machinery and furniture and fittings was Rs. Adjusting entries, preparation of balance sheet, profit and loss account with closing entries and opening entries. Answer : Profitability ratios are calculated on the basis of profit earned by a business. Accounting for Share Capital 7.
Of the remaining Rs 450, Raju pays sales tax worth Rs 30, takes home Rs 200 and retains Rs 220 for improvement and buying of new equipment. The above solution has been worked out accordingly and the answer given as per the textbook is same as per the above solution. Land is necessary for any type of production activities. Explain how financial statements are useful to the various parties who are interested in the affairs of an undertaking? Answer Balance sheet e Profit and loss account is also called————-statement. The Traditional Classification further bifurcates accounting ratios on the basis of the accounts to which the elements of a ratio belong.