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[PDF] Unit – II Module - III Ratio Analysis Practical Problems (With Solutions)

2158_6RATIOANALYSISSOLVEDPROBLEMS.pdf Unit - II

ModuleͲIII

RatioAnalysis

Practical

Problems

(With

Solutions)

ProblemͲ1

ThefollowingTradingandProfitandLossAccountofFantasyLtd.fortheyear31Ͳ3Ͳ2000isgiven below:

ParticularRs.ParticularRs.

ToOpeningStock

"Purchases "CarriageandFreight "Wages "GrossProfitb/d

ToAdministrationexpenses

"SellingandDist.expenses "NonͲoperatingexpenses "FinancialExpenses

NetProfitc/d76,250

3,15,250

2,000 5,000

2,00,000

5,98,500

1,01,000

12,000

2,000 7,000

84,000

2,06,000BySales

"Closingstock

ByGrossProfitb/d

"NonͲoperatingincomes: "InterestonSecurities "Dividendonshares "Profitonsaleofshares

5,00,000

98,500

5,98,500

2,00,000

1,500 3,750 750

2,06,000

Calculate:

1. GrossProfitRatio2.ExpensesRatio3.OperatingRatio

1. NetProfitRatio5.Operating(Net)ProfitRatio6.StockTurnoverRatio.

X100 =17.40%

6.StockTurnoverRatio=

Costofgoodssold

Avg.Stock

3,00,000

87,375

=3.43times

ProblemͲ2

TheBalanceSheetofPunjabAutoLimitedason31Ͳ12Ͳ2002wasasfollows:

ParticularRs.ParticularRs.

EquityShareCapital

CapitalReserve

8%LoanonMortgage

Creditors

Bank overdraft

Taxation:

Current

Future

ProfitandLossA/c

40,000

8,000

32,000

16,000

4,000 4,000 4,000

12,000

1,20,000PlantandMachinery

LandandBuildings

Furniture

&Fixtures Stock

Debtors

Investments(ShortͲterm)

Cashinhand

24,00040,00016,00012,000

12,000

4,000

12,000

1,20,000

Fromtheabove,compute(a)theCurrentRatio,(b)QuickRatio,(c)DebtͲEquityRatio,and(d)

ProprietaryRatio.

Solution-2(ProblemrelatedtoBalanceSheetRatio)

1.CurrentRatio=CurrentAssets

Currentliabilities

CurrentAssets=Stock+debtors+Investments(shortterm)+

CashInhand

CurrentLiabilities=Creditors+bankoverdraft+Provisionfor

Taxation(current&Future)

CA=12000+12000+4000+12000

=40,000

CL=16000+4000+4000+4000

=28,000 =40,000

28,000

=1.43:1

2.QuickRatio=

QuickAssets

QuickLiabilities

QuickAssets=CurrentAssetsͲStock

QuickLiabilities=CurrentLiabilities-(BOD+PFTfuture)

QA=40,000-12,000

=28,000

QL=28,000-(4,000+4,000)

=20,000 =28,000

20,000

=1.40:1

3.Debt-EquityRatio=LongTermDebt(Liabilities)

ShareholdersFund

LTL=Debentures+longtermloans

SHF=Eq.Sh.Cap.+Reserves&Surplus+PreferenceSh.

Cap.-FictitiousAssets

LTL=32,000

SHF=40,000+8,000+12,000

=60,000 =32,000

60,000

=0.53:1

4.ProprietaryRatio=Shareholders'Funds

TotalAssets

SHF=Eq.Sh.Cap.+Reserves&Surplus+PreferenceSh.

Cap. -FictitiousAssets

TotalAssets=TotalAssets-FictitiousAssets

SHF=40,000+8,000+12,000

=60,000

TA=1,20,000

=60,000

1,20,000

=0.5:1

ProblemͲ3[Sau.Uni.T.Y.,April,2000]

ThedetailsofShreenathCompanyareasunder:

Sales(40%cashsales)15,00,000

Less:Costofsales7,50,000

GrossProfit:7,50,000

Less:OfficeExp.(includingint.ondebentures)1,25,000

SellingExp.1,25,000

2,50,000

ProfitbeforeTaxes:5,00,000

Less:Taxes2,50,000

NetProfit:2,50,000

BalanceSheet

ParticularRs.ParticularRs.

Equitysharecapital

10%Preferencesharecapital

Reserves

10%Debentures

Creditors

Bank Ͳ overdraft

Billspayable

Outstandingexpenses20,00,000

20,00,000

11,00,000

10,00,000

1,00,000

1,50,000

45,000

5,000

64,00,000FixedAssets

Stock

Debtors

Billsreceivable

Cash

FictitiousAssets55,00,000

1,75,000

3,50,000

50,000

2,25,000

1,00,000

64,00,000

Besidethedetailsmentionedabove,theopeningstockwasofRs.3,25,000.Taking360daysofthe year,calculatethefollowingratios;alsodiscussthepositionofthecompany: (1)Grossprofitratio.(2)Stockturnoverratio.(3)Operatingratio.(4)Currentratio.(5)Liquid ratio.(6)Debtorsratio.(7)Creditorsratio.(8)Proprietaryratio.(9)Rateofreturnonnetcapital employed.(10)Rateofreturnonequityshares.

Solution-3(ProblemrelatedtoCompositeRatio)

1.GrossProfitMargin=

Grossprofit

Sales X100

7,50,000

15,00,000

X100 =50%

2.StockTurnoverRatio=Costofgoodssold

Avg.Stock

Avg.stock=OpeningStock+ClosingStock

COGS=Sales-GP

3,25,000+1,75,000

AS=2,50,000

COGS=15,00,000-7,50,000

7,50,000

=7,50,000

2,50,000

=3times

3.OperatingProfitRatio=Op.Profit

NetSalesX100

OperatingProfit=Sales-(Op.Exp.+COGS.)

OP=15,00,000-(7,50,000+1,25,000+

25,000)

=6,00,000 (excludingInterestonDebentures) =6,00,000

15,00,000X100

=40%

4.CurrentRatio=CurrentAssets

Currentliabilities

CurrentAssets=Stock+debtors+Billsreceivable+Cash

CurrentLiabilities=Creditors+bankoverdraft+Billspayable+

Outstandingexpenses

CA=1,75,000+3,50,000+50,000+2,25,000

=8,00,000

CL=1,00,000+1,50,000+45,000+5,000

=3,00,000 =8,00,000

3,00,000

=2.67:1

5.QuickRatio/LiquidRatio=

LiquidAssets

LiquidLiabilities

(Liquid)QuickAssets=CurrentAssetsͲStock (Liquid)QuickLiabilities=CurrentLiabilities-BOD

QA=8,00,000-1,75,000

=6,25,000

QL=3,00,000-1,50,000

=1,50,000 =6,25,000

1,50,000

=4.17:1

6.DebtorsRatio=Debtors+Billsreceivable

CreditsalesX365/360days

=3,50,000+50,000

9,00,000

(60%of15,00,000)X360days =0.444X360days =160days

7.CreditorsRatio=Creditors+Billspayable

CreditPurchaseX365/360days

=1,00,000+45,000

7,50,000

Notes:Ifcreditpurchasecouldnotfindout

atthatpointCostofGoodssoldconsider

CreditpurchaseX360days

=0.193X360days =69days

8.ProprietaryRatio=Shareholders'Funds

TotalAssets

SHF=Eq.Sh.Cap.+Reserves&Surplus+PreferenceSh.

Cap. -FictitiousAssets

TotalAssets=TotalAssets-FictitiousAssets

SHF=20,00,000+20,00,000+11,00,000-1,00,000

=50,00,000

TA=64,00,000-1,00,000

=63,00,000 =50,00,000

63,00,000

=0.79:1

Notes:

RateofReturnonCapital

EmployedRateofReturnonShare

holdersFundRateofreturnonEquity

Shareholders

Fund =EBIT

CapitalemployedX100=PAT

SHFX100=PAT-Pref.Div.

ESHF X100 CE=EqSh.Cap.+Pref.Sh.SHF=Eq.Sh.Cap.+Pref.Sh.ESHF=Eq.Sh.Cap.+

Cap.+Reserves&Surplus+

Debenture+LongTermLoan

-FictitiousAssetsCap.+Reserves&Surplus-

FictitiousAssetsReserves&Surplus-

FictitiousAssets

Sales

15,00,000

Less:Costofgoodssold

7,50,000

Grossprofit

7,50,000

Less:Operatingexpenses(includingDepreciation)

1,50,000

EarningsbeforeInterest&Tax(EBIT)

6,00,000

Less:InterestCost

1,00,000

EarningsbeforeTax(EBT)

5,00,000

Less:Taxliability

2,50,000

EarningsafterTax(EAT/PAT)

2,50,000

Less:Preferencesharedividend

2,00,000

DistributionalProfit

50,000

9.10.11.

RateofReturnonCapital

EmployedRateofReturnonShare

holdersFundRateofreturnonEquity

Shareholders

Fund =EBIT

CapitalemployedX100=PAT

SHFX100=PAT-Pref.Div.

ESHF X100

CE=EqSh.Cap.+Pref.Sh.

Cap.+Reserves&Surplus+

Debenture+LongTermLoan

-FictitiousAssetsSHF=Eq.Sh.Cap.+Pref.Sh.

Cap.+Reserves&Surplus-

FictitiousAssetsESHF=Eq.Sh.Cap.+

Reserves&Surplus-

FictitiousAssets

CE=20,00,000+20,00,000

11,00,000+10,00,000-

1,00,000SHF=20,00,000+20,00,000

11,00,000-1,00,000

ESHF=20,00,000+

11,00,000-1,00,000

=60,00,000=50,00,000=30,00,000 =6,00,000

60,00,000X100=2,50,000

50,00,000X100=50,000

30,00,000X100

=10%=5%=1.67%

Problem=4

FromthefollowingparticularsextractedfromthebooksofAshok&Co.Ltd.,computethefollowing ratios andcomment: (a)Currentratio,(b)AcidTestRatio,(c)StockͲTurnoverRatio,(d)DebtorsTurnoverRatio,(e) Creditors'TurnoverRatio,andAverageDebtCollectionperiod.

1Ͳ1Ͳ200231Ͳ12Ͳ2002

Rs.Rs.

BillsReceivable30,00060,000

BillsPayable60,00030,000

SundryDebtors1,20,0001,50,000

SundryCreditors75,0001,05,000

StockͲinͲtrade96,0001,44,000

Additionalinformation:

(a) On31Ͳ12Ͳ2002,therewereassets:BuildingRs.2,00,000,CashRs.1,20,000andCashatBankRs.

96,000.

(b) CashpurchasesRs.1,38,000andPurchasesReturnswereRs.18,000. (c) CashsalesRs.1,50,000andSalesreturnswereRs.6,000. Rateofgrossprofit25%onsalesandactualgrossprofitwasRs.1,50,000.

Solution-4(Problemrelatedtofindoutmissingitem)

Notes:Inthisproblemavailableinformationisnotenoughtosolveratiosaskedso thatneedtoprepareTradingAccounttoidentifyvalueswhicharenotgiveninthequestion.

Trading

Account

ParticularAmount

Rs.ParticularAmount

Rs.

ToOpeningStock96,000BySales:Cash:1,50,000

ToPurchase:Cash:1,38,000Credit:4,56,000

Credit:3,78,0006,06,000

5,16,000Less:S/R 6,0006,00,000

Less:P/R 18,0004,98,000ByClosingStock1,44,000

ToGrossProfit1,50,000

7,44,0007,44,000

1.GrossProfitMargin=

Grossprofit

Sales X100

25%=1,50,000

Sales X100

Sales=1,50,000

25X100

Sales=6,00,000

2.CurrentRatio=CurrentAssets

Currentliabilities

CurrentAssets=Stock+debtors+Billsreceivable+Cash+

Bank

Balance

CurrentLiabilities=Creditors+Billspayable

CA=1,44,000+1,50,000+60,000+1,20,000+96,000

=5,70,000

CL=1,05,000+30,000

=1,35,000 =5,70,000

1,35,000

=4.22:1

3.AcidTestRatio=

Cash&CashEquivalentAssets

LiquidLiabilities

Cash&CashequivalentAssets=Cash+Bank+Short

termInvestments (Liquid)QuickLiabilities=CurrentLiabilities-BOD =1,20,000+96,000 =2,16,000

QL=1,05,000+30,000

=1,35,000 =2,16,000

1,35,000

=1.6:1

4.StockTurnoverRatio=Costofgoodssold

Avg.Stock

Avg.stock=OpeningStock+ClosingStock

COGS=Sales-GP

96,000+1,44,000

AS=1,20,000

COGS=6,00,000-1,50,000

4,50,000

=4,50,000

1,20,000

=3.75times

5.DebtorsRatio=

(Avg.debtcollectionperiod)Debtors+Billsreceivable

CreditsalesX365/360days

=1,50,000+60,000

4,56,000X365days

=0.461X365days =168days

6.CreditorsRatio=Creditors+Billspayable

CreditPurchaseX365/360days

=1,05,000+30,000

3,78,000X365days

=0.357X365days =130days

ProblemͲ5

FollowingisthesummarisedBalanceSheetofMonaLtd.ason31Ͳ3Ͳ04.

ParticularRs.ParticularRs.

EquitySharesofRs.10each10%

Pref.Sh.ofRs.100eachReserves

andSurplus

15%Debentures

SundryCreditors

BankOverdraft

10,00,000

4,00,000

7,00,000

5,00,000

2,40,000

1,60,000

30,00,000FixedAssets

Investments

Closing

Stock

SundryDebtors

BillsReceivable

CashatBank

Preliminary

Expenses

20,00,000

2,00,000

4,60,000

60,000

20,000

30,00,000

SummarisedProfitandLossAccountisasunderfortheyearendingon31Ͳ3Ͳ'04: Rs.

Sales(25%Cashsales)80,00,000

Less:Costofgoodssold56,00,000

GrossProfit24,00,000

Netprofit(Beforeinterestandtax50%)9,00,000

Calculatethefollowingratios:

(1)RateonReturnonCapitalEmployed(2)ProprietaryRatio(3)DebtͲEquity(4)Capitalgearing Ratio(5)DebtorsRatio(365daysoftheyear.)(6)RateofReturnonShareholders'Funds(7)Rateof

Return

onEquityshareholdersfund

SolutionͲ5StatementofProfitability

Sales80,00,000

Less:Costofgoodssold

56,00,000

Grossprofit

24,00,000

Less:Operatingexpenses(includingDepreciation)

15,00,000

EarningsbeforeInterest&Tax(EBIT)

9,00,000

Less:InterestCost

75,000

EarningsbeforeTax(EBT)

8,25,000

Less:Taxliability(50%)

4,12,500

EarningsafterTax(EAT/PAT)

4,12,500

Less:

Preferencesharedividend

40,000

DistributionalProfit

3,72,500

1.6.7.

RateofReturnonCapital

EmployedRateofReturnonShare

holdersFundRateofreturnonEquity

Shareholders

Fund =EBIT

CapitalemployedX100=PAT

SHFX100=PAT-Pref.Div.

ESHF X100

CE=EqSh.Cap.+Pref.Sh.

Cap.+Reserves&Surplus+

Debenture+LongTermLoan

-FictitiousAssetsSHF=Eq.Sh.Cap.+Pref.Sh.

Cap.+Reserves&Surplus-

FictitiousAssetsESHF=Eq.Sh.Cap.+

Reserves&Surplus-

FictitiousAssets

CE=10,00,000+4,00,000

7,00,000+5,00,000-20,000

=25,80,000SHF=10,00,000+4,00,000+

7,00,000Ͳ20,000

=20,80,000ESHF=10,00,000+7,00,000 -20,000 =16,80,000 =9,00,000

25,80,000X100=4,12,500

20,80,000X100=3,72,500

16,80,000X100

=34.88%=19.83%=22.17%

2.ProprietaryRatio=Shareholders'Funds

TotalAssets

SHF=Eq.Sh.Cap.+Reserves&Surplus+PreferenceSh.

Cap. -FictitiousAssets

TotalAssets=TotalAssets-FictitiousAssets

SHF=10,00,000+7,00,000+4,00,000Ͳ20,000

=20,80,000

TA=30,00,000-20,000

=29,80,000 =20,80,000

29,80,000

=0.70:1

3.Debt-EquityRatio=LongTermDebt(Liabilities)

ShareholdersFund

LTL=Debentures+longtermloans

SHF=Eq.Sh.Cap.+Reserves&Surplus+PreferenceSh.

Cap.-FictitiousAssets

LTL=5,00,000

SHF=10,00,000+7,00,000+4,00,000Ͳ20,000

=20,80,000 =5,00,000

20,80,000

=0.24:1

4.CapitalGearingRatio=FixedInterestorDividendSecurities

EquityShareholdersFund

FIS=Debentures+Preferencesharecapital

ESHF=Eq.Sh.Cap.+Reserves&Surplus-Fictitious

Assets

LTL=9,00,000

ESHF=10,00,000+7,00,000Ͳ20,000

=16,80,000 =9,00,000

16,80,000

=0.54:1

5.DebtorsRatio=

(Avg.debtcollectionperiod)Debtors+Billsreceivable

CreditsalesX365/360days

=4,60,000+60,000

20,000

10,000

3,70,000LandandBuildings

Machinery

Debtors

BillsReceivable

Stock Bank

Balance

CashBalance

Profit&LossA/c1,00,000

90,000

53,000

20,000

75,000

15,000

2,000

ͲͲͲͲ

3,55,00090,000

90,000

30,000

12,000

90,000

35,000

13,000

10,000

3,70,000

AdditionalInformation:

2002Ͳ'032003Ͳ04

Rs.Rs. (1)Sales3,65,0002,19,000 (2)CostofGoodssold2,19,0001,46,000 (3)Netprofit(BeforePref.Dividend)35,000 47,500 (4)Stockon1Ͳ4Ͳ'0271,000 ͲͲͲ Calculatefollowingratiosandgiveyouropinionaboutcompanypositionin2003Ͳ'04incomparison with2002Ͳ'03.Whetheritispositiveornegative? (1) Currentratio(2)Liquidratio(3)Debtorsratio(Take365daysforcalculations)(4)Grossprofit ratio(5)StockTurnoverratio(6)RateofreturnonequityshareͲholders'funds. SolutionͲ6(problemrelatedtocomparativeanalysisbetweentwoyears)

1.CurrentRatio=CurrentAssets

Currentliabilities

CurrentAssets=Stock+debtors+Billsreceivable+Cash+

Bank

Balance

CurrentLiabilities=Creditors+Billspayable

2002Ͳ03:

=53,000+20,000+75,000+15,000+2,000

30,000+10,000+10,000+5,000

=1,65,000

55,000

=3:1

2003Ͳ04:

=30,000+12,000+90,000+35,000+13,000

35,000+25,000+20,000+10,000

=1,80,000

90,000

=2:1

2.LiquidRatio=LiquidAssets

Liquidliabilities

(Liquid)QuickAssets=CurrentAssetsͲStock (Liquid)QuickLiabilities=CurrentLiabilities-BOD

2002Ͳ03:

=1,65,000Ͳ75,000

55,000Ͳ10,000

=90,000

45,000

=2:1

2003Ͳ04:

=1,80,000Ͳ90,000

90,000Ͳ20,000

=90,000

70,000

=1.29:1

3.DebtorsRatio=

(Avg.debtcollectionperiod)Debtors+Billsreceivable

CreditsalesX365/360days

2002Ͳ03:

=53,000+20,000

3,65,000X365days

=73,000

3,65,000X365days

=73days

2003Ͳ04:

=30,000+12,000

2,19,000X365days

=42,000

2,19,000X365days

=70days

4.GrossProfitMargin=Grossprofit

SalesX100

GP=SalesͲCOGS

2002Ͳ03:

365000Ͳ219000

=1,46,000

75000+90000

2 =82,500

2002Ͳ03:

=2,19,000

73,000

=3times

2003Ͳ04:

=1,46,000

82,500

=1.77times 7.

RateofreturnonEquityShareholdersFund:

2002Ͳ03

=PAT-Pref.Div. ESHF X100

ESHF=Eq.Sh.Cap.+Reserves&Surplus-

FictitiousAssets

ESHF =1,00,000+30,000+20,000 =1,50,000 =35,000Ͳ5,000

1,50,000X100

=20%

2003Ͳ04:

ESHF:1,50,000+30,000Ͳ10,000

=1,70,000 =47,500Ͳ5,000

1,70,000X100

=25%

ProblemͲ7

TheBalanceSheetason2002and2003areasunder:

Liabilities20022003Assets20022003

Equitysharecapital

GeneralReserveProfit&

LossA/cCreditors

Billspayable

O/s.Expenses

ProvidentFund1,00,000

12,500

10,000

5,000 3,750 1,250 7,500

1,40,0001,25,000

15,000

7,500 6,250 7,500 3,750 5,000

1,70,000LandandBuildings

PlantMachinery

Stock

Debtors

Cash&Bank

BillsReceivable

Preliminary

Exp.50,00057,50010,000

7,500 5,000 2,500 7,500

1,40,00075,00055,00012,50010,000

7,500 5,000 5,000

1,70,000

Profit&LossA/c.

Particulars20022003Particulars20022003

ToOp.Stock

ToPurchase

ToOfficeExp.

ToSellingexp.

ToFin.Exp.

ToNetProfit5,000

37,500

7,500 5,000 2,500

17,500

75,00010,00047,50010,00012,500

15,000

30,000

1,25,000BySales

ByClosingStock

ByProfitonSaleof

Furniture62,50010,000

2,500

75,0001,12,500

12,500

ͲͲͲͲ

1,25,000

Findout(1)CurrentRatio(2)StockTurnoverRatio(3)GrossProfitRatio(4)LiquidRatio(5)Debtor Ratio(workingdays300)(6)ReturnonEquityCapitalemployed(7)OwnershipRatio.

SolutionͲ7

1.CurrentRatio=CurrentAssets

Currentliabilities

CurrentAssets=Stock+debtors+Billsreceivable+Cash&

Bank

Balance

CurrentLiabilities=Creditors+Billspayable+O/sExp.+PF 2002:
=10,000+7,500+5,000+2,500

5,000+3,750+1,250+7,500

=25,000

17,500

=1.43:1

2003Ͳ04:

=12,500+10,000+7,500+5,000

6,250+7,500+3,750+5,000

=35,000

22,500

=1.56:1

2.StockTurnoverRatio=Costofgoodssold

Avg.Stock

Avg.stock=OpeningStock+ClosingStock

2002Ͳ03:

5000+10000

2 =7,500

2003Ͳ04:

10000+12500

2 =11,250 Gross

Profit=Sales+ClosingStockͲ(Opening

Stock+Purchase)

COGS=SalesͲGP

2002:=62,500+10,000Ͳ(5,000+37,500)

=30,000

COGS=62,500Ͳ30,000

=32,500

2003:=1,12,500+12,500Ͳ(10,000+47,500)

=67,500

COGS=1,12,500Ͳ67,500

=45,000

2002Ͳ03:

=32,500 7,500 =4.33times

2003Ͳ04:

=45,000

11,250

=4times

3.GrossProfitMargin=Grossprofit

SalesX100

GP=SalesͲCOGS

2002Ͳ03:

2002:=62,500+10,000Ͳ

(5,000+37,500) =30,000

2003Ͳ04:=1,12,500+12,500Ͳ

(10,000+47,500) =67,500

2002Ͳ03:

=30,000

62,500X100

=48%

2003Ͳ04:

=67,500

1,12,500X100

=60%

4.LiquidRatio=LiquidAssets

Liquidliabilities

(Liquid)QuickAssets=CurrentAssetsͲStock (Liquid)QuickLiabilities=CurrentLiabilities-BOD

2002Ͳ03:

=25,000Ͳ10,000

17,500

=15,000

17,500

=0.86:1

2003Ͳ04:

=35,000Ͳ12,500

22,500

=22,500

22,500

=1:1

5.DebtorsRatio=

(Avg.debtcollectionperiod)Debtors+Billsreceivable

CreditsalesX300days

2002Ͳ03:

=7,500+2,500

62,500X300days

=10,000

62,500X300days

=48days

2003Ͳ04:

=10,000+5,000

1,12,500X300days

=15,000

1,12,500X300days

=40days 6.

RateofreturnonEquityShareholdersFund:

2002
=PAT-Pref.Div. ESHF X100

ESHF=Eq.Sh.Cap.+Reserves&Surplus-

FictitiousAssets

ESHF =1,00,000+12,500+10,000Ͳ7,500 =1,15,000 =17,500

1,15,000X100

=15.22% 2003:

ESHF:1,25,000+15,000+7,500Ͳ5,000

=1,42,500 =30,000

1,42,500X100

=21.05%

7.OwnershipRatio=Shareholders'Funds

TotalAssets

SHF=Eq.Sh.Cap.+Reserves&Surplus-FictitiousAssets

TotalAssets=TotalAssets-FictitiousAssets

2002=SHF=1,00,000+12,500+10,000Ͳ7,500

=1,15,000

TA=1,40,000Ͳ7,500

=1,32,500 =1,15,000

1,32,500

=0.87:1 OR =87%

2003=SHF=1,25,000+15,000+7,500Ͳ5,000

=1,42,500

TA=1,70,000Ͳ5,000

1,65,000

=1,42,500

1,65,000

=0.86:1 OR =86%

ProblemͲ8

FollowingareincompleteTrading&ProfitandLossA/c.andBalanceSheet.

TradingA/c.

ParticularRs.ParticularRs.

ToOp.stock

ToPurchase

ToPurchaseReturn

ToGrossProfit

3,50,000

(?)

87,000

7,18,421

14,96,710BySales

ByClosingStock(?)

(?)

14,96,710

Profit&LossA/c.

ParticularRs.ParticularRs.

ToOfficeExp.

ToInt.onDeb.

ToTax.Provision

ToNetProfit

3,70,000

30,000

18,421

3,50,000

(?)ByGrossProfit

ByCommission7,18,421

(?) (?)

BalanceSheet

ParticularRs.ParticularRs.

Paid

UpCapital

GeneralReserve

P&La/c.

10%Debenture

CurrentLiabilities

5,00,000

(?) (?) (?)

6,00,000

(?)Plant&machinery Stock

Debtors

Bank

OtherFixedAssets7,00,000

(?) (?)

62,500

(?) (?) Findoutmissingitemswiththehelpofotherdetailsareasunder:

1. CurrentRatiowas2:1.

2. ClosingStockis25%ofSales.

3. ProposedDividendwas40%ofpaidupcapital.

4. GrossprofitRatiowas60%.

5. AmounttransfertoGeneralReserveissameasproposedDividend.

6. BalanceofP&LAccountiscalculated10%ofproposeddividend.

7. Commissionincomeis1/7ofNetprofit.

8. BalanceofGeneralreserveistwicethecurrentyeartransferamount.

SolutionͲ8

TradingA/c.

ParticularRs.ParticularRs.

ToOp.stock3,50,000BySales(?)11,97,368

ToPurchase(?)3,41,289ByClosingStock(?)2,99,342

ToPurchaseReturn87,000

ToGrossProfit7,18,421

14,96,71014,96,710

Profit&LossA/c.

ParticularRs.ParticularRs.

ToOfficeExp.3,70,000ByGrossProfit7,18,421

ToInt.onDeb.30,000ByCommission(?)50,000

ToTax.Provision18,421

ToNetProfit3,50,000

7,68,4217,68,421

BalanceSheet

LIABILITIES

AMOUNTASSETSAMOUNT

Paid

UpCapital5,00,000Plant&machinery7,00,000

GeneralReserve(?)6,00,000Stock(?)2,99,342

P&La/c.(?)20,000Debtors(?)8,38,158

10%Debenture(?)3,00,000Bank(?)62,500

CurrentLiabilities6,00,000OtherFixedAssets1,20,000

20,20,00020,20,000

1.GrossProfitMargin=Grossprofit

SalesX100

60
=7,18,421

SalesX100

Sales=7,18,421

60X100

Sales=11,97,368

2.ClosingStock=Salesx25%

11,97,368x25%

CS=2,99,342

3.ProposedDividend=PaidupCapitalx40%

=5,00,000x40%

PD=2,00,000

4.GeneralReserve=GRfindoutasperProposed

Dividend

Proposed

Dividendis

2,00,000

Sothat

Proposed

Dividend=General

Reserve

GR=2,00,000

5.Commission=Itis1/7partofNetProfit

Commission=3,50,000x1/7

Commission=50,000

6.Profit&LossAccount=Itis10%ofProposedDividend

P&LA/c.=2,00,000x10%

P&LA/c.=20,000

7.Debenture=RateofInterestis10%

Interest

amountisRs.30,000

Sothat,Debenturevalueis

=30,000x10/100 =3,00,000

8.CurrentRatio=CurrentAssets

Currentliabilities

2=Stock+debtors+BankBalance

CurrentLiability

2=2,99,342+debtors+62,500

6,00,000

12,00,000=Debtors+3,61,842

Debtors=12,00,000Ͳ3,61,842

Debtors=8,38,158

8.CurrentRatio=CurrentAssets

Currentliabilities

2=Stock+debtors+BankBalance

CurrentLiability

2=2,99,342+debtors+62,500

6,00,000

12,00,000=Debtors+3,61,842

Debtors=12,00,000Ͳ3,61,842

Debtors=8,38,158

8.BalanceofGeneral

Reserve=ItistwiceofcurrentyearprovisionforGeneralReserve

CurrentyearprovisionisRs.2,00,000

Sothat,BalanceofG.R.=2,00,000x2

BalanceofGR=4,00,000

Now,

GeneralReserve=4,00,000+2,00,000

GR=6,00,000

ProblemͲ9

Fromthefollowinginformation,preparetheBalanceSheetofABBLtd.Showingthedetailsof working: