# Model Question Papers

acct-xii-qp-2008-set1

acct-xii-qp-2008-set2

acct-xii-qp-2008-set3

delhi 07-08 accts

foreign07-08accts

outside delhi07-08accts

questionpaper08

sqp-accountancy-xii-2008

## Revised Balance Sheet Schedule VI

#### Revised Balance Sheet , Schedule VI of Companies Act, 1956

Reference Sources

26885cajournal_june2012-16

SeminarScheduleVI_16.06.2012

schedule+VI+revised+checklist

Revised Schedule VI print disabled (1)

Presentation_on_Revised_Schedule_VI

Meaning

Guidance_Note_Rev_ScheduleVI

Format-of-Revised-Schedule-VI-to-the-Companies-Act-1956-in-excel

Format-of-Revised-Schedule-VI-to-Companies-Act-1956

110878_982522_revised_schedule_vi

## CBSE XII BOARD TIME TABLE MARCH 2011

### Class XII -, MARCH 2011

Exam Timings: 10:30 AM

## ACCOUNTING RATIOS

Accounting Ratios
for Financial Statement Analysis

 Liquidity Analysis Ratios Current Ratio

 Current Assets Current Ratio = ———————— Current Liabilities

 Quick Ratio

 Quick Assets Quick Ratio = ———————- Current Liabilities

 Quick Assets = Current Assets – Inventories

 Net Working Capital Ratio

 Net Working Capital Net Working Capital Ratio = ————————– Total Assets

 Net Working Capital = Current Assets – Current Liabilities

 Profitability Analysis Ratios Return on Assets (ROA)

 Net Income Return on Assets (ROA) = ———————————- Average Total Assets

 Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2

 Return on Equity (ROE)

 Net Income Return on Equity (ROE) = ——————————————– Average Stockholders’ Equity

 Average Stockholders’ Equity  = (Beginning Stockholders’ Equity + Ending Stockholders’ Equity) / 2

 Return on Common Equity (ROCE)

 Net Income Return on Common Equity (ROCE) = ——————————————– Average Common Stockholders’ Equity

 Average Common Stockholders’ Equity  = (Beginning Common Stockholders’ Equity + Ending Common Stockholders’ Equity) / 2

 Profit Margin

 Net Income Profit Margin = —————– Sales

 Earnings Per Share (EPS)

 Net Income Earnings Per Share (EPS) = ——————————————— Number of Common Shares Outstanding

 Activity Analysis Ratios Assets Turnover Ratio

 Sales Assets Turnover Ratio = —————————- Average Total Assets

 Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2

 Accounts Receivable Turnover Ratio

 Sales Accounts Receivable Turnover Ratio = ———————————– Average Accounts Receivable

 Average Accounts Receivable  = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2

 Inventory Turnover Ratio

 Cost of Goods Sold Inventory Turnover Ratio = ————————— Average Inventories

 Average Inventories = (Beginning Inventories + Ending Inventories) / 2

 Capital Structure Analysis Ratios Debt to Equity Ratio

 Total Liabilities Debt to Equity Ratio = ———————————- Total Stockholders’ Equity

 Interest Coverage Ratio

 Income Before Interest and Income Tax Expenses Interest Coverage Ratio = ——————————————————- Interest Expense

 Income Before Interest and Income Tax Expenses  = Income Before Income Taxes + Interest Expense

 Capital Market Analysis Ratios Price Earnings (PE) Ratio

 Market Price of Common Stock Per Share Price Earnings (PE) Ratio = —————————————————— Earnings Per Share

 Market to Book Ratio

 Market Price of Common Stock Per Share Market to Book Ratio = ——————————————————- Book Value of Equity Per Common Share

 Book Value of Equity Per Common Share  = Book Value of Equity for Common Stock / Number of Common Shares

 Dividend Yield

 Annual Dividends Per Common Share Dividend Yield = ———————————————— Market Price of Common Stock Per Share

 Book Value of Equity Per Common Share  = Book Value of Equity for Common Stock / Number of Common Shares

 Dividend Payout Ratio

 Cash Dividends Dividend Payout Ratio = ——————– Net Income

 ROA = Profit Margin X Assets Turnover Ratio ROA = Profit Margin X Assets Turnover Ratio

 Net Income Net Income Sales ROA = ————————  = ————–  X ———————— Average Total Assets Sales Average Total Assets

 Profit Margin = Net Income / Sales  Assets Turnover Ratio = Sales / Averages Total Assets

Financial statement analysis includes financial ratios. Here are three financial ratios that are based solely on current asset and current liability amounts appearing on a company’s balance sheet:

 Financial Ratio How to Calculate It What It Tells You Working Capital = = = Current Assets – Current Liabilities \$89,000 – \$61,000 \$28,000 An indicator of whether the company will be able to meet its current obligations (pay its bills, meet its payroll, make a loan payment, etc.) If a company has current assets exactly equal to current liabilities, it has no working capital. The greater the amount of working capital the more likely it will be able to make its payments on time. Current Ratio = = = Current Assets ÷ Current Liabilities \$89,000 ÷ \$61,000 1.46 This tells you the relationship of current assets to current liabilities. A ratio of 3:1 is better than 2:1. A 1:1 ratio means there is no working capital. Quick Ratio (Acid Test Ratio) = = = = [(Cash + Temp. Investments + Accounts Receivable) ÷ Current Liabilities] : 1 [(\$2,100 + \$100 + \$10,000 + \$40,500) ÷ \$61,000] : 1 [\$52,700 ÷ \$61,000] : 1 0.86 : 1 This ratio is similar to the current ratio except that Inventory, Supplies, and Prepaid Expenses are excluded. This indicates the relationship between the amount of assets that can quickly be turned into cash versus the amount of current liabilities.

Four financial ratios relate balance sheet amounts for Accounts Receivable and Inventory to income statement amounts. To illustrate these financial ratios we will use the following income statement information:

 Example Corporation Income Statement For the year ended December 31, 2009

Sales (all on credit) \$500,000
Cost of Goods Sold   380,000
Gross Profit   120,000

Operating Expenses
Selling Expenses 35,000
Total Operating Expenses    80,000

Operating Income 40,000
Interest Expense    12,000

Income before Taxes 28,000
Income Tax Expense     5,000

Net Income after Taxes \$ 23,000

 Financial Ratio How to Calculate It What It Tells You Accounts Receivable Turnover = = = Net Credit Sales for the Year ÷ Average Accounts Receivable for the Year \$500,000 ÷ \$42,000 (a computed average) 11.90 The number of times per year that the accounts receivables turn over. Keep in mind that the result is an average, since credit sales and accounts receivable are likely to fluctuate during the year. It is important to use the average balance of accounts receivable during the year. Days’ Sales in Accounts Receivable = = = 365 days in Year ÷ Accounts Receivable Turnover in Year 365 days ÷ 11.90 30.67 days The average number of days that it took to collect the average amount of accounts receivable during the year. This statistic is only as good as the Accounts Receivable Turnover figure. Inventory Turnover = = = Cost of Goods Sold for the Year ÷ Average Inventory for the Year \$380,000 ÷ \$30,000 (a computed average) 12.67 The number of times per year that Inventory turns over. Keep in mind that the result is an average, since sales and inventory levels are likely to fluctuate during the year. Since inventory is at cost (not sales value), it is important to use the Cost of Goods Sold. Also be sure to use the average balance of inventory during the year. Days’ Sales in Inventory = = = 365 days in Year ÷ Inventory Turnover in Year 365 days ÷ 12.67 28.81 The average number of days that it took to sell the average inventory during the year. This statistic is only as good as the Inventory Turnover figure.

The next financial ratio involves the relationship between two amounts from the balance sheet: total liabilities and total stockholders’ equity:

 Financial Ratio How to Calculate It What It Tells You Debt to Equity = = = (Total liabilities ÷ Total Stockholders’ Equity) : 1 ( \$481,000 ÷ \$289,000) : 1 1.66 : 1 The proportion of a company’s assets supplied by the company’s creditors versus the amount supplied the owner or stockholders. In this example the creditors have supplied \$1.66 for each \$1.00 supplied by the stockholders.

## CASH FLOW STATEMENT

HIGH ORDER THINKING SKILLS QUESTIONS

CASH FLOW STATEMENT

1.         Arvind, an industrialist purchased a machinery worth Rs.5 crores on hire purchase basis.  Categories the (i) payment of installment and (ii) interest into operating/investing or financing activity as per cash flow statement.

Ans.:   (i) The purchase of machinery is categorized as on investing activity and

(ii) Interest payable on installments is a financing activity.

2.         Give two examples of movements of cash and cash equivalents, which are not recorded in the Cash Flow Statement.

Ans.:   Certain transactions as per Accounting Standards – 3 (revised) though involve movement of cash or cash equivalent are not recorded in cash flow statement as they just involve cash management of cash of an enterprise.

Examples (any two) of such transactions are –

(a)                Cash deposited into bank out of cash in hand.

(b)               Cash withdrawn from bank from business purposes.

(c)                Sale/purchase of cash equivalents, like marketable securities.

3.         Give one example each of an extra ordinary item under operating, investing and financing activity.

Examples of extraordinary items under:-

(a)    Operating activity – claim received from insurance company against loss of stock.

(b)   Investing activity – amount of compensation received against acquisition of land belonging to the enterprise.

(c)    Financing activity – payment for buy-back of equity shares of the company.

4.         M/s.Lakshmi Electrical Appliances furnish the following information –

Calculate net cash flow from financing activities:-

# Particulars

31.12.2007 31.12.2008
Equity share capital 2,00,000 4,50,000
10% debentures 1,00,000
6% preference shares 3,00,000

(a)                Interest paid on debentures Rs.5,000/-.

(b)               Dividend paid on equity shares Rs.40,000/-.

(c)                Bonus shares were issued to existing shareholders in the ratio of 4:1 during the year.

Ans.:   CALCULATION OF NET CASH FLOW FROM FINANCING ACTIVITIES

# Particulars

Rs.
Cash proceeds from issue of 3,00,000
Pref. Shares + equity shares 2,50,000
Redemption of 10% debentures (1,00,000)
Interest paid (5,000)
Dividend paid on equity shares (40,000)

## Net cash flow from financing activity

4,05,000

Bonus share is not shown in cash flow statement, as there is no cash flow.

5.         P.Ltd. purchased a business premises for Rs.6,60,000 from Z.Ltd.   Half the payment was made in cash and the remaining half by issue of equity shares of Rs.100 each at a premium of 10% in favour of Z.Ltd.  How will this transaction be shown in the cash flow statement.

Cash payment of Rs.6,60,000 X ½ = Rs.3,30,000 will be shown under investing activities as an outflow.

Issue of equity shares is not depicted in cash flow statement as there is no flow of cash.

6.         The Board of Directors of M/s.Elite Industries require your advice regarding categorization of payment of various taxes in a cash flow statement – advice him based on information given below:-

(i)                 Income tax on capital gains which have arisen out of sale of land – Rs.40,00,000.

(ii)               Income tax      – 70,00,000.

(iii)             Dividend tax   – 10,00,000.

(a)                Income tax on capital gains – investing activities.

(b)               Income tax – operating activity

(c)                Dividend tax – financing activity.

7.         From the following information, calculate cash flow from investing and financing activities:-

# Particulars

Opening Closing
Furniture (cost) 2,00,000 2,80,000
Accumulated depreciation on furniture 60,000 90,000
Capital 10,00,000 4,00,000
Loan from bank 2,50,000 1,50,000

During the year, furniture costing Rs.40,000 was sold at a profit of Rs.30,000.  Depreciation charged on furniture amounted to Rs.50,000.

Cash Flow from investing activities –

# Particulars

Rs.
Inflow from fresh issue of capital 4,00,000
Outflow from repayment of bank loan (50,000)
Net cash flow financing activities 3,50,000

Cash Flow from investing activities –

# Particulars

Rs.
Inflow from sale of furniture 50,000
Outflow from purchased of furniture (1,20,000)
Net cash flow from investing activities (outflow) (70,000)

Furniture Account

 To balance b/d 2,00,000 By Bank 50,000 To profit on sale 30,000 By Accum. Dept. 20,000 To Bank (balancing figure being furniture purchased 1,20,000 By balanace c/d. 2,80,000 3,50,000 3,50,000

Accumulated Depreciation

 To Furniture A/c. (Balancing figure being accumulated dep. on furniture sold) 20,000 By balanace b/d. 60,000 To balance c/d. 90,000 By depreciation 50,000 1,10,000 1,10,000

Sale price =     cost – accumulated dep. + Profit on sale

40,000 – 20,000 + 30,000 = 50,000

8.         A company had the following balance –

# Particulars

Rs.
Investment at the beginning of the period 3,40,000
Investment at the end of the period 2,80,000

During the year, the company sold 40% of investments at the beginning at a profit of 84,000.  Calculate cash fro, investing activities –

# Particulars

Rs.
Inflow from sale of investment

Cost of investment Gold

(40% of Rs.340000)     =  136000

Add profit on sale         =    84000

2,20,000

Out flow on purchase of investment (76,000)
Net cash flow from investing activities 1,44,000

Investment A/c.

 To balance b/d. 3,40,000 By Cash sale of investment 2,20,000 To profit on sale 84,000 To bank a/c. (purchase) 76,000 By balance c/d. 2,80,000 5,00,000 5,00,000

9.         Apoorv Ltd. incurred as loss of Rs.7000 during the year 2008-09.

The following is the position of current assets and current liabilities of the firm:-

# Particulars

2008 2009
Pre-paid insurance 5,000 8,000
Stock 10,000 15,000
B/P 15,000 18,000

(a)                Calculate cash flow from operating activities.

(b)               Prepare cash flow statement from following information.

Opening cash balance Rs.15,000, closing cash balance Rs.19,000.  Increase in creditors Rs.13,000, decrease in debtors Rs.17,000.  Fixed assets purchased Rs.30,000.  Redemption of 12% debentures Rs.14,000.  Profit during the year 18,000.

10.       M/s.Sukriti traders suffered loss of their buildings to the tune of Rs.50 lacs due to an earthquake.  However, only Rs.25,00,000 was received as insurance claim.  How will you depict it in a cash flow statement.

## FINANCIAL STATEMENTS AND RATIO ANALYSIS

Analysis of finical statement

Q.1      Under What heads will you classify the followings:

1)                  Proposed Dividends

2)                  Interest Accrued and due on secured loans

3)                  Interest Accrued and due on unsecured Loans

4)                  Provision for Taxation

5)                  Arrears of fixed accumulative dividends

7)                  Share Forfeiture account.

(Answer any four) – 2 Marks

Q.2      Under What headings will you show the following items in the Balance sheet of a company

2)                  Preliminary Expenses

3)                  Bills Receivable

4)                  Goodwill

5)                  Authorised share Capital

(Answer any four) – 2 Marks

Q.3      Prepare a Comparative Income statement with the help of the following information

 Particulars 2005 2006 Sales 2000000 3000000 Gross Profit 40% 30% Indirect Expenses 50% 40% Income Tax 50% 50%

4 Marks

Q.4      Explain three purposes or objectives of Financial Analysis.               2 Marks.

Q.5      Mention three limitations of financial statement Analysis.                2 Marks

Q.6      From the following Balance Sheets U.K Ltd. on 31st Dec 2006 & 2007.Prepare comparative Balance Sheet.

Balance Sheet

As on 31st Dec 2006 & 2007

 Liabilities 2006 2007 Assets 2006 2007 Current Liabilities 200000 400000 Current Assets 500000 900000 Reserves 300000 200000 Fixed Assets 1000000 1500000 12% Loan 500000 800000 Share Capital 500000 1000000 1500000 2400000 1500000 2400000

Q.7      (a)        The ratio of current Assets (Rs. 600000) to current Liabilities ( Rs.   400000) is 1.5:1.The Accountant of the firm is interested in maintaining a current Ratio be 2:1 by paying off a part of Liabilities. Calculate the amount of Current Liabilities that should be paid.

(b)        The Current Assets to Current Liability of a firm is Rs. 800000 to Rs. 300000. The Accountant of the firm wishes that current Ratio be 2:1 by acquiring current assets on credit. Calculate the amount of current Assets.

(3+3) = 6 Marks

Q.8      (a)        A business has current Ratio of 4:1 & a Quick Ratio of 1.2:1 . If working capital is Rs. 180000. Calculate total current Assets and Stock

(b)        Calculate current Ratio and Quick Ratio from the followings:

Working capital Rs. 150000, Total Debts Rs.400000, Long term debts Rs. 310000, Stock Rs. 110000, Prepaid Expenses Rs. 10000

Q.9      (a)        Calculate current Ratio and Quick Ratio from the following information:

Total Assets                Rs. 350000

Fixed Assets               Rs. 175000

Investment                  Rs.   70000

Fictitious Assets          Rs.     5000

Share holders fund      Rs.  200000

Long term Debts         Rs. 100000

Inventory                    Rs.   45000

(b)               From the following information calculate the stock turnover ratio.

Sales Rs. 200000, G.P 25% on cost, Opening Stock was 1/3rd of the value of closing stock

Closing stock was 30% of sales

(3 + 3)=6 Marks

Q.10    (a)       Determine the amount of gross profit and sales from the followings:

Debtors Turnover Ratio = 4 Times

Loss of goods sold = Rs. 640000

Gross Profit Ratio = 20%

Closing Debtors were Rs. 20000 more than at the beginning.

Cash sales being 33 1/3 % of credit sales.

(3 + 3)=6 Marks

Q.11    (a)        If Current Ratio is 2:1 state giving reason of the following transaction   would

(i)                 Improve  (ii) Reduce or (iii) Not change Current Ratio

(1)               Bills Receivable drawn

(2)               Bills Receivable Dishonoured

(3)               Bills Receivable endorsed to Creditors

(4)               Sales of Goods for cash at par

(5)               Sales of Goods for cash at Profit

(6)               Sales of Assets for Cash

(7)               Bills Payable given to creditors

(Answer any 4 Questions) 2 Marks

(b)        If the Liquid ratio is 1:1, find whether the following transactions would

(ii)               Improve  (ii) Reduce or (iii) Not change Liquid Ratio

1)                  Purchase of goods for cash

2)                  Purchase of goods on credit

3)                  Payment of Tax Provision

4)                  Sales of short term investment at par

5)                  Sales of Investment at profit

(Answer any 4 Questions) 2 Marks

Q.12    (a) Calculate and Closing stock from the following information:-

Total sales Rs 600000

Gross Profit 25% on Sales

Stock Turnover Ratio = 5 times

Closing stock is Rs. 12000 more than opening stock

(b)  Gross Profit Ratio of a company was 25%. Its cash sales were Rs. 200000 and its credit Sales was 90% of the total sales. If the indirect expenses of the Company were Rs. 20000. Calculate net Profit ratio.

(3 + 3)=6 Marks

Q.13    With the help of the following information. Prepare Comparative Income Statement of XYZ Ltd.

2007                            2008

Sales                                                    50000                          80000

Cash of Goods Sold                           60% of Sales               70% of Sales

Indirect Expenses                               10% of Gross profit

Rate of Income Tax                            50% of Net profit before tax

4 Marks

Q.14    (a) Calculate Return on Investment from the following

Gross Profit Rs.100000, Office Expenses Rs. 10000, Selling and Distribution expenses Rs. 25000, Interest on Bank Loan Rs. 8000, Income tax Rs. 12000, Fixed Assets Rs. 300000, Current Assets Rs. 150000 & Current Liabilities Rs. 125000

(b)        Calculate the earning per share from the following data

15000 Equity Share of Rs. 10 each                150000

10 % Preference Share Capital                       100000

Net Profit before Tax                                      55000

Q.15    The Debt-equity ratio of a company is 1:2, state giving reasons which of the following would improve, reduce or no change the ratio:-

1)                  Debenture redeemed for cash

2)                  Issue new equity shares

3)                  Payment of Proposed dividends

4)                  Goods Purchased on Credit

5)                  Goods Purchased on Cash

6)                  Redemption of Debentures against the Purchase of a Fixed Assets

(Answer any four ) – 2 Marks

CBSE HOTS SOLUTION

Ans 1

1)                  Provisions :- Proposed Dividend

2)                  Secured Loans : – Interest Accrued and due on Secured Loans

3)                  Unsecured Loans:- Interest Accrued and due on unsecured Loans

4)                  Provision : Provision for Taxation

5)                  Contingent Liabilities :- Arrears of Fixed Cumulative dividend

6)                  Reserves & Surplus :- Security Premium Account

7)                  Share Capital Account: – Share forfeiture Account.

Ans 2

1)                  Securities Premium Account :- Under Reserves & Surplus, Liabilities side

2)                  Preliminary Expenses :- Under Miscellaneous Expenditures, Assets side

3)                  Bills Receivables :- Under Loans & Advance on assets side.

4)                  Goodwill :- Under Fixed Assets, Assets side

5)                  Authorised Capital :- Under Share Capital, Liabilities side

Ans 3

Comparative Income Statement

For the year ended 31st Dec, 2006

 Particulars Absolute Change Change in Percentage 2005            2006 Rs.                      % Changes Sales Less: Cost of Goods sold 2000000 1200000 3000000 2100000 1000000 900000 50% 75% Gross Profit Less : Indirect Exp. 800000 400000 900000 360000 100000 (40000) 12.5% 10% Profit before tax Less: Tax 50% 400000 200000 540000 270000 140000 70000 35% 35% Net Profit after tax 200000 270000 70000 35%

Ans.4               Following are the purposes of Financial Analysis:

1)      Judging earning capacity of business

2)      Judging managerial efficiency of business

3)      Judging short term long term Solvency

Ans 5   Following are the Limitation of Financial statement Analysis

1)                    Historical Analysis

2)                    Ignore price level changes

3)                    Quantities aspect ignored

Ans.6                           Comparative Balance Sheet

For the year ended 31st Dec, 2006 & 2007

 Particulars 2006 2007 Increase or Decreases % Increase or Decrease Fixed Assets Working Capital (C.A-C.L) 1000000 300000 1500000 500000 500000 200000 50% 66.7% Capital Employed Less 12% Loan 1300000 500000 2000000 800000 700000 300000 53.8% 60% Shareholders fund 800000 1200000 400000 50% Represented by share capital Reserves 500000 300000 1000000 200000 500000 (-) 100000 100% -33.3% 800000 1200000 400000 50%

Ans 7   A)

a)      Let Current Liabilities = X

b)

Current Ratio after making payment of x is 2:1

Current Ratio = Current Assets / Current Liabilities

2  = 6000000-x

1       400000 – x

Rs. 800000-2 x= Rs600000 – x

Rs. 800000-600000=2x-x

Rs. 200000=x

Current Liabilities paid off Rs. 200000

B)        Let amount of Current Assets Purchased on credit is = x

Current Ratio = Current Assets

Current Liabilities

2                      =          800000+x

1                                  300000 + x

Rs. 600000 + 2x = Rs 800000 + x

2x-x=800000-600000

X= 200000

Current Assets be purchased Rs. 200000

Ans. 8     A)     Current Ratio = Current Assets          =          4

Current Liabilities                1

Let C.L = x

C.A= 4x

Working Capital = C.A- C.L

180000= 4x-x

180000=3x

X= 180000      =          60000

3

Current Assets = 4x = 4 * 60000 = Rs. 240000

Quick Ratio = Q.A                 =          1.2

C.L                              1

Since Current Liabilities are = X

Liquid Assets = 1.2x

Liquid Assets = 1.2* 60000= Rs. 72000

Stock = C.A – Q.A

=240000-72000 = Rs. 168000

B)     C.R =     C.A

C.L

C.L = Total Debts – Long term debts

=          400000-310000= Rs. 90000

Working Capital = C.A – C.L

Rs. 150000 = C.A – 900000

C.A = 150000+ 90000

C.A = 240000

C.R = 240000             = 2.66:1

90000

Q.R = Q.A

C.L

Q.A= C.A – (Stock + Prepaid Expenses)

=          240000 – ( 110000 + 10000)

=          120000

Q.R = 120000             = 1.30:1

900000

Ans.9 A)     Total Assets  =  Fixed Assets + Investment + Current    Assets +    Fictitious Assets

350000 = 175000+70000+Current Assets +5000

Current Assets = 350000-250000

Current Assets = 100000

Liquid Assets = Current Assets – Inventory

= 100000 – 45000 = 55000

Total Assets = Total Liabilities

Total Assets = Shareholders Fund + Long Term Debts +Current Liabilities

350000 = 200000+100000+Current Liabilities

Current Liabilities = 350000- 300000

Current Liabilities = 50000

Current Ratio = Current Assets

Current Liabilities

=          100000            = 2:1

50000

Quick Ratio = Quick Assets                                                               Current Liabilities

=          55000            = 1.1:1

50000

B)     Stock Turnover Ratio = Cost of Sale

Average Stock

Sales = 200000

G.P = 25% on Cost

Let Cost of Sale = Rs. 100

G.P =   25

Sales    125

G.P = 200000 * 25              = 40000

125

Cost of Sales= Sales – G.P

= 200000-40000

= 160000

Closing Stock = 30 % of Sale

= 200000 * 30/100 = 60000

Opening Stock = 1/3 of Closing Stock

= 1/3 * 60000

= 20000

Average Stock = Opening Stock + Closing Stock

2

= 20000 + 60000/ 2

= 80000/2 = 40000

Stock Turnover Ratio = 160000         = 4 Times

40000

Ans 10 A)       Inventory Turnover Ratio = Cost of Sales

Average Stock

6/1 = Cost of Sales

60000

Cost of Sales = 60000 * 6 = 360000

Case 1)

Let Cost of Sale = 100

G.P = 25 % above Cost

Sales = 125

If Cost of Sale 100 Sale = 125

If Cost of Sale 1 Sale = 125/100

If Cost of Sale 360000 = 125/100 * 360000

= 450000

Gross Profit = 450000 – 360000

= 90000

Case 2)

Let Sales= 100

G.P = -25/75

If Cost of Sale 75 Sales = 100

If Cost of Sale 1 Sale = 100/75

If Cost of Sales 360000 Sales = 100/75 * 360000

=       480000

Gross Profit = 480000 – 360000 = 120000

B)     1)         Sales = Cost of Goods Sold – Gross Profit

Let Sales = 100

G.P = -20

Cost of Goods Sold = 80

If Cost of Good Sold 80 G.P = 20

If Cost of Goods Sold 1 G.P = 20/80

If Cost of Goods Sold 640000 G.P = 20/80*640000

= 160000

Thus Sales = 640000-160000 = 800000

2)                  Let Credit Sale = 100

Cash Sale = 33 1/3 = 100/3

Total Sale = 100 + 100/3 = 400/3

If Sales 400/3 Credit Sales = 100

If Sales 1 Credit Sales = 100* 3/400 = ¾

If Sale 800000 Credit Sales = ¾ * 80000 = 600000

Debtors Turnover Ratio = Net Credit Sales

Average Debtors

4/1=     600000

Average Debtors

Average Debtors = 600000*1             =150000

4

150000 = 2x+20000

2

2x = 300000-20000

X = 280000     = 140000

2

Hence Opening Debtors = 140000

Closing Debtors = 140000 + 20000

= 160000

Ans 11             A)                                            B)

1)      Not Change                       1)         Reduce

2)      Not Change                       2)         Reduce

3)      Improve                             3)         Improve

4)      Not Change                       4)         Not Change

5)      Improve                             5)         Improve

6)      Improve

7)      Not Change

Ans. 12 A)               Sales = 600000

G.P = 600000*25/100 = 150000

Cost of Goods Sold = Sales – G.P

= 600000-150000 = 450000

Stock Turnover Ratio = Cost of Goods Sold

Average Stock

5/1 =            450000

Average Stock

Average Stock = 450000/5 = 90000

Opening Stock = Average Stock – ½ of Rs. 12000

= 90000-6000= 840000

Closing Stock = Average Stock + ½ of Rs 12000

= 90000 + 6000 = 960000

B)        Net Profit Ratio =        Net Profit                  * 100

Sales

Let Total Sales = 100

Credit Sales = 90 %

Cash Sales 10 % or 200000

Total Sales = 100/10* 200000

= 20000

G.P = 20000*25/100

= 500000

Net Profit = G.P – Indirect Expenses

= 500000 – 20000 = 480000

Net Profit Ratio = 480000      *  100

2000000

= 24 %

Ans 13                         Comparative Income Statement of XYZ Ltd.

For the year ended 31st, Dec 1997 & 1998

 Particulars 1997 1998 Absolute Change Percentage Change A Sales 50000 80000 30000 60% B Less Cost of Goods Sold 30000 56000 26000 86.67% C Gross Profit (A-B) 20000 24000 4000 20% D Less Indirect Expenses 2000 2400 400 20% E Profit Before Tax (C-D) 18000 21600 3600 20% F Less Income Tax 9000 10800 1800 20% 9000 10800 1800 20%

Ans. 14 A)

Return on Investment = Profit before Interest & Tax               * 100

Capital Employed

Profit before Interest & Tax = 100000-10000-25000= 65000

Capital Employed = 300000+150000-125000= 325000

ROI = 65000               * 100

325000

= 20%

B)        E.P.S =  Net Profit – Preferential Dividend

No. of Equity Shares

55000 – 10000

15000

45000            = 3 per Share

15000

Ans 15

1)                  Reduce

2)                  Increase

3)                  Decrease

4)                  Increase

5)                  Not Change

6)                  Increase

7)                  Increase

## ISSUE OF SHARES HOTS – SOLUTION

Solutions To Questions

ISSUE OF SHARES

1. Employees stock option plan as introduced by companies (Amendment) Act, 2000 means an option (right and not an obligation). Given to the whole time directors and employees right to purchase shares of a company at a pre-determined price, which usually is lower than the market price.

1. Issued capital is that part of Authorised capital which is actually offered to the public for subscription. Issued Capital may or may not be different from Authorised Capital depending upon whether the whole amount is offered to the public or not.

1. 3.      Reserve capital

Only at the time of winding up of the Company.

Capital Reserve

To write off capital losses any time during the life of the Company

1. Private placement of shares means raising capital through private sources and contacts. In such a case shares are issued to promoters, their friends and relatives, share holders of group companies, mutual funds, NRI’s, Financial Institutions etc.

Options:

a)      Sweat Equity Shares

b)      Employees Stock Option Plan

1. At the rate of 5% p.a.

1. 6.      JOURNAL

 Rs. Rs. Share Capital A/C       Dr To Share Discount   A/C To Share Allotment  A/C To Share Forfeiture   A/C (Being forfeiture of 10 shares, Rs. 6 called up) Bank A/C                  Dr To Share premium A/C To Share Premium A/C (Being reissue of 8 shares @ Rs. 9 each, Rs. 8 called up) Share Forfeiture A/C Dr To Capital Reserve (Being reissue of 8 shares) 60 72 24 10 20 30 64 8 24

1. 7.      Journal

 Sundry Assets A/C                         Dr        To Bhwnesh Ind. Corp. (Being Assets purchased) 41,80,000 41,80,000 a) Bhwnesh Ind. Corp A/C          Dr To Equity Share Capital              A/C (Being issue of 41,800 shares of Rs. 100 each) b) Bhwnesh Ind. Corp. A/C        Dr To Equity Share Capital A/C To share Premium A/C (Being issue of shares of Rs. 100 each at a premium of 10%) c) Bhwnesh Ind. Corp.       A/C      Dr Discount on issue of shares   A/C  Dr To Equity share capital (Being issue of 44,000 shares of Rs. 100 each at a discount of 5%) 41,80,000 41,80,000 41,80,000 2,20,000 41,80,000 38,00,000 3,80,000 44,00,000

1. Journal

 Authorised Capital (1,00,000 shares of Rs. 10 each) Issued Capital (90,000 shares of Rs. 10 each) Subscribed Capital: (85,000 shares of Rs. 10 each) called-up capital: (85,000 shares, Rs. 6 per share) Paid-up capital: Share Capital:5,10,000 Less: Calls-in-arrears 1,000 5,09,000 Rs. 10,00,000 9,00,000 8,50,000 5,10,000

1. Journal

 (i) Assets A/C          Dr To Kailash (Being Assets purchased) (ii) Kailash A/C        Dr To share Capital       A/C To Share Premium   A/C To Cash (Being payment by issue of 15,000 shares of Rs. 10 each at a premium of 10% and balance in cash) (iii)Bank A/C      Dr. To share Application A/C (Being issue of 20,000 shares of Rs. 10 each at per) (iv)Share Application A/C      Dr To Share Capital A/C (Being transfer of applications money to share capital) (v) Incorporation Cost A/C  Dr Discount  A/C  Dr To Equity Share Capital A/C (Being issue of 400 shares of Rs. 10 each at a discount of 5% to promoters. Rs. 2,00,000 2,00,000 2,00,000 2,00,000 3,800 200 RS. 2,00,000 1,50,000 15,000 35,000 2,00,000 2,00,000 4,000

10.  CASH BOOK

 Dr Date Particulars Amount Date Particulars Cr Amount Rs. To Share Application A/C To Share Allotment A/C To Share First Call A/C To Share Final Call A/C 64,000 31,000 29,000 24,000 1,48,000 By Balance c/d 1,48,000 1,48,000

JOURNAL

 Rs Rs Building A/C                               Dr To Vendors A/C (Being building purchased) Endor’s A/C                                Dr To share capital          A/C (Being payment made by issue of 8000 shares of Rs. 20 each) Share Application A/C Dr. To Share Capital A/C (Being the transfer of application money to share capital) Share Allotment A/C     Dr To share Capital  A/C (Being Rs. 2 due on allotment in respect of 16,000 shares) Calls-in-Arrears A/c    Dr To share Allotment  A/C (Being arrears on Allotment received) Share First  call A/c    Dr To share capital A/C (Being amount due on First Call-16000 shares @ Rs. 2 each) Calls-in-arrears A/C    Dr To share First Call    A/C (Being arrears on First call amount received) Share Final call A/C    Dr To share capital A/C (Being amount due on Final Call) Calls in Arrears A/C Dr To share Final call A/C (Being arrears on Final call amount received) Share capital A/C   Dr To share Allotment  A/C To share First call A/C To share Final call A/C To share Forfeiture A/C (Being the forfeiture of 1500 shares on which less than Rs. 8 per share has been received.) 1,60,000 1,60,000 64,000 32,000 1000 32,000 3,000 32,000 8,000 15,000 1,60,000 1,60,000 64,000 32,000 1000 32,000 3,000 32,000 8,000 1,000 3,000 3,000 8,000

11.

X ltd.

Journal

 Bank A/C                                              Dr To share Application A/C (Being Application money received on 3000 share @ Rs. 2 each) Share Application A/C   Dr         To share Capital  A/C         To share Allotment A/C         To Bank A/C (Being the transfer of application money on allotment) Share allotment A/C   Dr        To share Capital A/C        To share Premium A/C (Being Allotment amount due) Bank A/C Calls-in-arrears A/C       To share allotment (Being amount received) Share First Call A/C  Dr       To share Capital A/C (being amount due on First call)       Bank A/C  Dr Calls-in-arrears A/C       To share First call A/C (Being amount received on First call of Rs. 3) Share Final call A/C  Dr        To share capital A/c (Being amount due on Final call) Bank A/C                          Dr Calls-in-arrears A/C           Dr       To share Final Call A/C (Being amount received on final call @ Rs. 2) Working Notes: Applies for 3000 shares Alloted to 2400 applicants         2400:2,000 Pro-vata         6:5 Ramesh:- Allotted 40 share. Therefore, Applied 40/5*6=48 shares. Application money     =48*2=Rs 96 Less: To share capital =40*2=Rs 80 Surplus                                   = 16 Allotment due=40*5=200 Therefore arrears on allotment=Rs 184 Arrars on 1st call 40+60=100*3=Rs. 300 Arrears on inal call 40+60=100*2=Rs 200 6,000 6,000 10,000 9,016 184 6,000 5,700 300 4,000 3,800 200 6000 4,000 800 1,200 6,000 4,000 9,200 6,000 6,000 4,000 4,000

12                JOURNAL

 a) Share Capital  A/C  Dr          To share application & allotment a/C          To share forfeited A/c (Being 200 shares forfeited) Bank A/c                   Dr Share Forfeited A/C    Dr         To share capital A/C (Being reissue of 50 shares) Share Foreited  A/c   Dr To capital Reserve (Being gain on reissue of 50 shares) b) Share Capital A/C Dr      To share First call A/C      To share Forfeiture A/C (Being forfeiture of 300 shares of Rs. 10 each (Rs. 8 called up) Bank A/C      Dr      To share capital  A/C (being reissue  of 75 shares @ Rs. 8 each) Share forfeiture A/C Dr      To capital Reserve (Being gain on reissue of 75 shares) c)      Share Capital A/C Dr 20,000        To share Final call A/C        To share forfeiture A/C (Being forfeiture of 2000 shares of Rs. 10 each) Bank A/C  Dr Share Foreiture A/C Dr     To share  capital A/C (Being reissue of 1800 shares @ Rs. 6 each) Share Forfeiture A/C   Dr To Capital Reserve (Being gain on reissue) d) Share Capital A/C   Dr To share first cal  A/C To share final call A/C To share forfeiture A/C ( Being 100 shares forfeited for non payment of first call Rs. 30 and final call of Rs. 20) Bank A/C   Dr Share forfeiture A/C  Dr To share capital A/C (Being reissue of 40 shares @ Rs. 90 each) Share forfeiture A/C  Dr To capital Reserve (Being gain on reissue) e) Share Capital A/C    Dr To Discount  A/C To share allotment A/C To share forfeiture A/C (Being forfeiture of 10 shares on which Rs. 2 are paid Rs 6 called-up) Bank A/C              Dr To share capital A/C To share premium A/C (Being 8 shares reissued @ Rs. 9 each) Share forfeiture A/C  Dr To capital Reserve (Being gain on reissue) 1600 400 100 150 2400 600 375 20,000 10800 7,200 6,300 10,000 3600 400 1600 60 72 16 600 1000 500 150 900 600 375 5,000 15,000 18,000 6,300 3,000 2,000 5,000 4,000 1600 10 30 20 64 8 16

13.                                                       Shashi Ltd.

Journal

 Bank A/C              Dr      To share Application A/C (Being application money received on 1,25,000 shares @ Rs. 4.50 each) Share application A/C    Dr       To share capital     A/C       To share allotment A/C       To Bank A/c (Being transfer of application money on allotment) Share allotment A/c Dr. 7,50,00     To share capital A/C     To share premium A/C (Being allotment amount Rs 750 On 1,00,000 shares due) Bank a/c Calls-in-arrears A/C    To share Allotment A/C (Being amount received on allotment) Share First call A/C   Dr    To share Capital  A/C (Being Rs. 2 on 1,00,000 shares due) Bank A/C  Dr Calls in arrears A/C  Dr   To share First Call A/C (Being amount receive) Share Capital A/C  Dr Share Premium   A/C   To share allotment  A/C   To share first call A/C   To share forfeited A/c (Being 2000 shares forfeited on non payment) Share final call A/C Dr   To share capital A/C (Being final call @ rs. 1 due On 98,000 shares) Bank A/C  Dr Calls-in-arrears A/C Dr   To share final call A/c (Being amount received) Share capital A/C Dr   To share first call A/c   To share final call A/c To share forfeiture A/C (Being forfeiture of 3000 shares) Bank A/c  Dr Share forfeiture A/C  Dr   To share capital A/C (Being reissue of 5,000 shares @ Rs. 8 per share) Share forfeiture A/C  Dr   To capital reserve (Being gain on reissue of share transferred to capital reserve) 5,62,500 5,62,500 7,50,000 6,46,800 13,200 2,00,000 1,90,000 10,000 18,000 10,000 98,000 95,000 3,000 30,000 40,000 10,000 Dr 21,800 5,62,500 4,50,000 90,000 22,500 2,50,000 5,00,000 6,60,000 2,00,000 2,00,000 13,200 4,000 10,800 98,000 6,000 3,000 21,000 50,000 21,800