D. K. Goel solutions for अकाउंटेंसी वॉल्यूम १ एण्ड २ [अंग्रेजी] कक्षा १२ आईएससी chapter 15 - Project Work [Latest edition]

     After doing their graduation, Banerjee suggested to his classmate Chatterjee to form a partnership to start a computer business. Chatterjee agreed to the proposal and requested to admit his friend Diwedi also to the proposed firm. All of them formed a partnership and prepared a partnership deed containing the following clauses:

1. Name of the firm will be ‘Progressive Computers’.
2. Capital: Banerjee will contribute ₹6,00,000, Chatterjee ₹5,00,000, and Diwedi ₹4,00,000.
3. Profit-Sharing Ratio: Profits and Losses are to be shared equally, irrespective of their capital contribution.
4. Interest on Capital: Interest on Capital shall be allowed @ at 8% per annum. Interest on capital will be allowed only when there is a profit.
5. Interest on Drawings: No interest is to be charged on drawings.
6. Salary to a Partner: No partner is entitled to any salary or commission for taking part in running the firm’s business.
7. Interest on Loan: Interest at the rate of 6% per annum is to be allowed on a partner’s loan to the firm. Such interest shall be paid even if there are losses to the firm. 
8. Admission of a New Partner: Without the consent of all existing partners, no new partner can be admitted to the firm.
9. Each partner can participate in the conduct of business.
10. Each partner can inspect the books of firm and can take a copy of the same.

     They started business on 1^st April 2022, and the partners contributed the entire share of their capitals by cheques drawn in the firm’s name. On the same date, they deposited the cheques in the bank.

     On the same date, they purchased 20 computers of ₹50,000 each. They deposited ₹20,000 for the electric connection with the Electricity Board and also deposited ₹1,50,000 with the VSNL for Internet and telephone connection.

     They spent ₹40,000 for getting the Computer Cafe furnished and also spent ₹6,000 in getting the pamphlets printed and distributed.

     All payments were to be made by cheques and all the receipts were to be deposited in the bank on the same day.

     At the end of the year, the results were:

     Drawings made by partners were: Banerjee ₹50,000, Chatterjee ₹40,000, and Diwedi ₹20,000.

     You are required to:

1. Journalize the above transactions, post them into the Ledger, and prepare a trial balance.
2. Prepare Trading and Profit & Loss Account and Balance Sheet, taking into consideration that a telephone bill of ₹6,800 is yet to be paid.
3. Depreciate furniture by 20% and computers by 30%.
4. Calculate profitability ratios and comment on the efficiency of the business ifthe norms set for Gross Profit Ratio and Net Profit Ratio in similar type of business enterprises are 60% and 15% respectively.
5. Partners want to expand their business. They approached the bank for a loan of ₹5,00,000. Mention the ratios that the bank manager will take into consideration before granting the loan.

What is Capital?

What are Liabilities?

What are Assets?

What is Revenue?

What is meant by Purchases?

What do you mean by the term sales?

Answer in One Sentence:

What is Drawings?

Answer in One Sentence:

What is Journal?

Why is the Journal called a book of Original Entry?

Answer in one sentence only:

What is Ledger?

Why is the Ledger called the Book of Final Entry?

What is meant by journalising?

What is L.F.?

What is J.F.?

What is Double Entry System of Book-Keeping?

What is a trial balance?

Is a trial balance conclusive proof of the accuracy of the books of accounts?

What are Financial Statements?

Answer in One Sentence:

What is a Trading A/c?

Answer in One Sentence:

What do you mean by Gross Profit?

Answer in One Sentence:

What do you mean by Profit & Loss A/c?

Answer in One Sentence:

What is Net Profit?

What is a Balance Sheet?

What are the characteristics of a Balance Sheet?

Define or explain the following concept:

Depreciation

What is meant by Provision?

What is meant by Current Assets?

What is meant by Current Liabilities?

What is Current Ratio?

What are liquid assets?

What is Liquid Ratio?

What is meant by debt-equity ratio?

    Manish and Naveen, after completing their graduation in commerce, decided to enter into a partnership to deal in Refrigerators. Sachin, a fresh graduate in business administration who was a close friend of both of them, also requested them to take him into partnership. They also took Sachin into partnership and prepared a partnership deed containing. The following clauses:

1. Name of the firm will be ‘Ganga Refrigerators.’
2. Capital: Manish and Naveen will contribute ₹12,00,000 each, whereas Sachin will contribute ₹6,00,000.
3. Profit-Sharing Ratio: Profits and Losses are to be shared in the ratio of their Capital contribution.
4. Interest on Capital: No interest on capital shall be allowed to the partners.
5. Interest on Drawings: Interest on drawings is to be charged @ 10% p.a.
6. Salary to a Partner: No partner is entitled to any salary or commission for taking part in running the firm’s business.
7. Interest on Loan: Interest at the rate of 6% per annum is to be allowed on a partner’s loan to the firm. Such interest shall be paid even if there are losses to the firm.
8. Admission of a New Partner: Without the consent of all existing partners, no new partner can be admitted to the firm.
9. Each partner can participate in conduct of business.
10. Each partner can inspect the books of firm and can take a copy of the same.

    On 1^st April, 2022, the partners contributed their share of capital, and the entire amount of Capital was deposited into the bank. On the same date, they entered into an agreement with L.G. Limited to sell the Refrigerators, bought from them on a one-month credit basis.

    At the beginning of the year they purchased the following assets making payments through bank:

    Refrigerators were to be sold for cash only and the cash proceeds were to be deposited in the bank on the same day. All expenses were to be paid only through bank.

    The following transactions were affected through bank during the year ended 31st March, 2023:

    Manish withdrew for his personal use ₹10,000 per month at the end of each month.

    Naveen withdrew for his personal use ₹8,000 per month at the beginning of each month.

    Sachin withdrew for his personal use ₹40,000 during the year.

    The purchases for the month of March 2023 amounted to ₹1,40,000. L.G. Limited was paid for purchases as per the terms agreed upon.

Other Information:

1. Salaries have been paid for 11 months.
2. Telephone expenses ₹1,000 and Electricity expenses ₹800 are yet to be paid.
3. The closing stock as at 31st March, 2023, were as follows:

   Refrigerators	₹3,50,000
   Stationery	₹600

4. Charge depreciation on building @ 4% and on Office Equipment and Furniture @ 20%.

    Prepare Journal Entries, Ledger Accounts, and Trial Balance as on 31st March, 2023, Trading and Profit & Loss Account for the year ended on 31st March, 2023, and a Balance Sheet as at that date.

Further:

1. L.G. Ltd. wants to know the short-term financial position of the Firm before extending the agreement on credit policy for the next year.
2. Partners want to know the profitability of their business in terms of sales and capital employed into the business.

    You are required to compute the required ratios and comment upon them.

What is outstanding expense?

What journal entry will be passed for outstanding salary?

What adjustment is made of outstanding expenses while preparing final accounts?

What is prepaid expense?

What journal entry will be passed for prepaid insurance?

What treatment is made of prepaid expenses while preparing final accounts?

How will you assess the liquidity or short-term financial position of a business?

What is Current Ratio?

What is Liquid Ratio?

How will you assess the profitability of a business in terms of sales?

What is G.P. Ratio?

What is N.P. ratio?

How will you measure the profitability of a business in terms of Capital employed?

X Ltd. has applied for a short-term loan of ₹10 Lac from State Bank of India. The bank manager, while making a decision about granting the loan, wants to have an idea about the Sources and Utilisation of Cash. You are required to submit a project report to the bank manager, which would enable him to decide about granting the loan. Following particulars are related to X Ltd.

Note:

Additional Information:

1. Provision for Tax made during the year 2022-23 amounted to ₹2,25,000.
2. An interim dividend of ₹2,00,000 was paid during the year.
3. Machinery costing ₹8,00,000 (accumulated depreciation thereon being 1,80,000) were sold during the year at a loss ₹1,20,000.
4. Interest received on Investments amounted to ₹30,000.
5. Interest on long-term borrowings paid during the year amounted to ₹1,20,000.

What is a Cash Flow Statement?

Give any two objectives of Cash Flow Statement.

Give one limitation of Cash Flow Statement.

What is meant by ‘Cash Flows’?

When does a Cash Flow arise?

Short Answer Question:

State the meaning of the term: Cash Equivalents

What is meant by ‘operating activities’?

Give two examples of cash flows from operating activities.

What is meant by Investing Activities?

Give two examples of Cash Flows from Investing Activities.

What is meant by financing activities?

Give two examples of cash flows from financing activities.

     The General Manager of Galaxy Foods Ltd. was surprised to find that, though the company earned a profit during the year ended 31^st March, 2023, yet the bank overdraft has increased during the period.

     The financial statements of the company are given below:

Notes:

Additional Information:

1. Depreciation on machinery charged during the year was ₹85,000.
2. Machinery discarded during the year ₹50,000.
3. Interest on long-term borrowings paid during the year was ₹12,000.
4. Provision for tax made during the year was ₹42,000.
5. Interim Dividend paid during the year ₹50,000.

     You are required to prepare a statement to show as to why the bank overdraft has increased in spite of higher profits.

How will you treat payment of tax and payment of dividend in a cash flow statement?

How will you treat Bank Overdraft in a Cash flow statement?

Where will you show purchase of Computer in Cash flow statement?

From the following information, you are required to prepare a Cash Flow Statement of Messrs Nirmal & Co. Ltd. for the year ended 31^st March, 2023, and give your comments about the same.

Note:

Additional Information:

1. Interest paid on long-term borrowings ₹20,000.
2. Depreciation charged during the year ₹60,000.
3. Machinery discarded during the year ₹20,000.
4. Provision for tax made during the year was ₹40,000.
5. Interim Dividend paid ₹10,000.

What are the two methods which can be employed to calculate net Cash flows from operating activities?

Under which Accounting Standard, Cash flow statement is prepared?

How are the various activities classified as per AS-3 (revised) while preparing a cash flow statement?

How do you treat depreciation in calculating cash flow from operating activities?

Why do we add back depreciation to net profit while calculating cash flows from operating activities?

Why do we add back preliminary expenses to net profit while calculating cash flows from operating activities?

How will you treat ‘Interest on debentures’ while preparing a cash flow statement?

How will you treat decrease in prepaid expenses in the cash flow from operating activities?

The board of Directors of Suvidha Appliances Ltd. was not able to comprehend why the bank overdraft of ₹5,00,000 has arisen inspite of continuous increase in profits over the last three years. Following information is obtained from the books of the company:

Notes to Accounts:

Additional Information:

1. Plant & Machinery costing ₹5,00,000 was sold during the year at a loss of ₹2,30,000.
2. Depreciation charged on plant & machinery during the year was ₹4,20,000.
3. Tax paid during the year amounted to ₹1,40,000.
4. Mortgage loan was taken on 1^st July, 2022, @ 15% p.a. Up to date, interest has been paid on the loan.
5. Interim Dividend @ 8% on share capital was paid during the year.

     You are required to prepare a statement for the Board of Directors to show how the overdraft has arisen. Also, give your suggestions to extinguish the overdraft and provide funds for expansion.

Give two examples of ‘significant non-cash transactions.’

Classify the following into Cash flows from (i) Operating Activities, (ii) Investing Activities, and (iii) Financing Activities while preparing a Cash flow statement:

1. Purchase of fixed Assets
2. Issue of share capital
3. Payment of income tax
4. Payment of dividend
5. Payment of interest
6. Sale of long-term investments
7. Interest received
8. Dividend received
9. Repayment of long-term borrowings

For calculating ‘Cash flow from operating activities,’ why decrease in debtors or bills receivables are added to operating profits?

What adjustments are required for a decrease or an increase in creditors/bills payable while calculating ‘cash flow from operating activities’?

How do you treat profit or loss on sale of fixed assets for calculating cash flow from operating activities?

From the following Balance Sheets of M/s Devendra Ltd., prepare a Comparative as well as Common-size Balance Sheet and comment upon the changes:

From the following information, prepare a Comparative as well as Common-size Statement of Profit & Loss of Victor Ltd.:

The following information relate to Shailja Ltd. for the years ending March 31, 2023, and 2022.

Notes to Accounts:

1. Face Value of Company’s Equity Share is 10.

2. 	2023 (₹)	2022 (₹)
   Long-term Borrowings
   9% Debentures	15,00,000	13,40,000

3. 	2023 (₹)	2022 (₹)
   Short-term Provision:
   Income Tax Provision	56,000	36,000

     You are required to prepare a project report commenting upon the performance and financial position of the firm on the basis of ratio analysis.

Is it true that a high current ratio means that the firm is in a position to pay its current liabilities in time?

What is an ideal current ratio?

Current ratio of Goodluck Paints Ltd. is 1.75 at present. In future, it wants to improve this ratio to 2. Suggest any two accounting transactions for improving the current ratio.

What is an operating profit?

What are Operating Expenses?

What are non-operating expenses?

What is the difference between ‘Operating Profit’ and ‘Net Profit’?

What is Stock (Inventory) Turnover Ratio?

How is average Inventory computed?

What is indicated by High Inventory Turnover Ratio?

What will be the impact of ‘Cash Paid to Creditors’ on a Current Ratio of 2:1? State the reason.

What will be the impact of ‘Cash Paid to Creditors’ on a Current ratio of 1:1? State the reason.

What will be the impact of ‘Cash Paid to Creditors’ on a Current ratio of 8:1? State with reason.

What will be the impact of ‘Cash collected from debtors’ on a Current ratio of 1:1? State with reason.

What will be the impact of ‘Cash Collected from Debtors’ on a liquid ratio of 1:1? State with reason.

Why stock (inventory) is excluded from liquid assets?

Why prepaid expenses are considered as Current assets?

Why prepaid expenses are not considered as liquid assets?

Why is the Bank Overdraft included in Current Liability?

The debt-equity ratio of Bajaj Auto and LML are 1:1 and 2:1, respectively. Which company, in your opinion, has got better debt-equity ratio and why? If LML wants to reduce its ratio, state any two remedies available to it to do so.

What is meant by solvency of business?

What will a higher debt-equity ratio indicate?

What is proprietary ratio?

What does proprietary ratio indicate?

What are the other names of liquid ratio?

Why liquid ratio is considered more dependable than current ratio?

Why provision for doubtful debts is not deducted from debtors while calculating ‘Debtors Turnover Ratio’?

What is the numerator to be used in Debtors Turnover Ratio?

What is the denominator to be used while calculating Debtors Turnover Ratio?

What is the significance of Debtors Turnover Ratio?

Y Ltd. is facing a problem of high operating ratio of 81.82%. The directors of the company want you to suggest any two remedial measures to be taken, so as to bring down this ratio up to a satisfying level.

Assume you are a loan officer of a bank, and two companies require a loan of equal amount to be repaid over the next five years based on the following information:

If you could grant a loan to only one company, which company will it be and why?

What do you mean by Equity?

What are the components of shareholders’ funds?

Name any fictitious assets?

What are the differences between Current Ratio and Quick Ratio?

Can Current Ratio and Quick Ratio be same at any moment?

What does activity ratio show?

Name two important activity ratios.

Give one limitation of ratio analysis.

No single ratio tells us the whole story. Do you agree? Explain.

The following particulars are related to X Ltd.:

Notes to Accounts:

1. Face Value of Company’s Equity Share is 10.

2. 	2020 (₹)	2019 (₹)
   Long-term Borrowings
   10% Mortgage Loan	11,00,000	8,00,000

3. 	2020 (₹)	2019 (₹)
   Short-term Provision:
   Tax Provision	1,80,000	1,50,000

    You are required to comment upon the efficiency and financial position of the company by preparing a project report with the help of ratio analysis.

Manoj, Naresh and Om were commerce students. They had opted Computers as a vocational subject while doing their B.Com. They decided to start a computer business after doing their B.Com. They prepared a partnership deed containing the following clauses:

1. Name of the firm will be ‘First Computers.’
2. Capitals: Manoj will contribute 4,00,000 and Naresh and Om 3,00,000 each.
3. Profit Sharing Ratio: Profits will be shared in the ratio of capital contribution.
4. Interest on Capital: Interest on capital will be allowed @7% p.a. It will be allowed only when there is profit.
5. Interest on Drawings: Interest on drawings is to be charged @12% p.a.
6. Salary to a Partner: No partner is entitled to any salary or commission for taking part in the conduct of business.

     They started business on 1st April, 2022, and each partner deposited his share of capital in the bank.Account opened in Firm’s name. On the same date, they purchased 10 computers @ ₹60,000 each and made the payment from the bank.

     They deposited ₹20,000 for the electric connection with the Electricity Board and paid a deposit of ₹1,20,000 with VSNL for Internet and telephone connection.

     They got the Computer Cafe furnished by paying ₹30,000. They also spent ₹5,000 on advertisement.

     All payments were to be made by cheques and all the receipts were to be deposited in the bank on the same day.

     At the end of the year, the results were:

     They withdrew from the bank for their personal use as follows: Manoj ₹50,000, Naresh ₹20,000, and Om ₹10,000.

You are required to:

1. Journalize the above transactions, post them into the ledger accounts, and prepare a trial balance.
2. Prepare a trading and profit & loss account and balance sheet, taking into consideration that a telephone bill of ₹15,000 and an electricity bill of ₹3,000 are yet to be paid.
3. Charge depreciation at the rate of 25% on computers and 15% on furniture.
4. Comment on the efficiency of the business if the gross profit ratio and net profit ratio in similar types of business concerns are 45% and 20%, respectively.
5. They approached the bank for a loan of ₹4,00,000. Compute the ratios that the banker will require before granting the loan.

Bhardwaj and Yadav, after getting their Bachelor of Engineering degrees, entered into a partnership for dealing in electronic goods. They also admitted Sinha, who is a fresh Chartered Accountant.

    They prepared a partnership deed containing the following clauses:

1. Name of the Firm: ‘Present-day Electronics’
2. Capitals: Capitals will be Bhardwaj ₹5,00,000, Yadav ₹3,00,000 and Sinha ₹2,00,000.
3. Profit-Sharing Ratio: Profit and Losses are to be shared in the ratio of 2:2:1.
4. Interest on Capital: Interest on capital shall be allowed to the partners @8% p.a.
5. Interest on Drawings: Interest is to be charged on drawings @ 10% p.a.
6. Salary to a Partner: No Partner is entitled to any salary or commission for taking part in running the firm’s business.
7. Interest on Loan: Interest at the rate of 12% per annum is to be allowed on a partner’s loan to the firm. Such interest shall be paid even if there are losses to the firm.
8. Admission of a New Partner: Without the consent of all existing partners, no new partner can be admitted to the firm.
9. Each partner can participate in the conduct of business.
10. Each partner can inspect the books of the firm and can take a copy of the same.

   They commenced the business on 1^st April, 2022 and entered into an agreement with 'OKAI LTD' to sell the Televisions, purchased from them on two-month credit basis. Entire amount of capital was deposited in HDFC bank.

   During the year they purchased furniture for ₹6,00,000 and office equipment for ₹3,00,000. Televisions were to be sold for cash only and the proceeds were to be deposited in the bank on the same day.

   The following transactions were made through bank during the year ended 31^st March, 2023.

Drawings:

• Bhardwaj: ₹10,000 at the beginning of each quarter.
• Yadav: ₹10,000 at the end of each quarter. 
• Sinha: ₹40,000

     The purchases for the months of February and March 2023 amounted to ₹3,00,000. OKAI LTD. was paid for purchases as per terms agreed upon.

Other Informations:

1. Other outstanding Exp. were: Salaries ₹4,000; Electricity bill ₹800 and Telephone bill ₹1,200. 
2. Insurance Premium was paid on 1^st January, 2023.
3. The closing stock of Televisions as at 31^st March, 2023 amounted to ₹1,20,000.
4. Depreciate office equipment by 20% and furniture by 15%.

    Prepare Trial Balance as at 31^st March, 2023, Profit & Loss Account for the year ended on 31st March, 2023 and a Balance Sheet as at that date.

    OKAI LTD. wants to ascertain the short-term financial position of the firm before extending the agreement on credit for the next year.

    Partners also want to ascertain the profitability of their business in terms of sales and capital employed into the business.

    You are required to Prepare Journal entries, Ledger accounts, Trial balance, Trading & Profit & Loss Account and the Balance Sheet of the firm. Also compute the requisite ratios and comment on them.

Star Products Ltd. has applied for a short-term loan of ₹15 lac from HDFC Bank. The bank manager is in a dilemma whether to grant the loan or not. You are required to calculate the sources and utilization of cash, which will enable him to make a decision about granting the loan. Following particulars are submitted by Star Products Ltd.:

Note:

Additional Information:

1. Depreciation charged during the year ₹20,00,000. 
2. Interest on Long term borrowings paid during the year ₹3,00,000. 
3. Income from Non-Current Investments ₹2,00,000. 
4. Provision for Tax made during the year ₹30,00,000. 
5. Interim Dividend paid during the year ₹6,00,000.

     The management of Rama Ltd. was unable to understand why overdraft had to be taken from the bank in spite of increase in profit during the year.

     The financial statements of the Company are given below:

Note:

Additional Information:

1. Machinery costing ₹2,00,000, were sold for ₹80,000 during the year.
2. One Machinery standing in the books at ₹20,000 was discarded during the year.
3. Depreciation ₹60,000 was charged during the year.
4. Provision for Tax made during the year ₹54,000.
5. Interim Dividend paid during the year ₹20,000. 

     You are required to prepare a statement to show why the overdraft had to be taken from the bank in spite of profits earned during the year.

Prepare a Cash-Flow Statement from the following information relating to Garden Honey Ltd. and give your comments about the same:

Notes:

Additional Information:

1. Interest paid on debentures during the year amounted to ₹1,500.
2. Depreciation charged on plant & machinery ₹20,000.
3. Provision made for Taxes ₹35,000. 
4. Interim Dividend paid ₹28,000. 
5. Plant & Machinery costing ₹50,000 was sold during the year for ₹10,000 only.

Following are the Balance Sheets of Vindhya Papers Ltd. as at 31^st March, 2023 and 2022

Notes:

Additional Information:

1. Tax paid during the year ₹1,00,000. 
2. Depreciation charged during the year ₹6,30,000
3. Machinery costing ₹5,00,000 (accumulated depreciation ₹2,10,000) were sold at a profit of ₹30,000. 
4. Interim Dividend paid during the year ₹2,50,000. 

    Company is unable to understand why the cash balance has decreased and bank overdraft has increased. The profits of the company were going up, and the profit of current year was the highest as compared to the corresponding figures of the last three years.

    You have been asked to prepare a statement to show the causes of decrease in Cash Balance and increase in Overdraft. You are also required to suggest the remedial measures for the same.

Following are the summarized Balance Sheets of R.P. Ltd. Prepare a Comparative as well as Common-Size Balance Sheet:

Prepare a Comparative & Common Size Statement of Profit & Loss from the following information:

Following information is extracted from the books of Rupa & Co. for the periods ending 31^st March, 2023 and 2022:

Note:

1. Share Capital Consisted of 18,000 shares of 100 each
2. Long term Borrowings carried 8% p.a. interest.

3. Short-term Provision:	31.3.2023	31.3.2022
   Provision for Tax (₹)	1,37,700	1,00,000

You are required to:

1. Prepare the Statement of Profit & Loss of Rupa & Co. for the years ended 31^st March, 2023 and 2022.
2. Prepare a Project Report commenting upon the performance and financial position of Rupa & Co. on the basis of ratio analysis.

The following information is related to Bengaluru Silk Ltd.:

Note:

1. Share Capital Comprises of equity shares of ₹10 each.
2. Rate oflnterest on long term borrowings is 12% p.a.

3. Short term Provision	31.3.2023 (Figures in ₹’000)	31.3.2022 (Figures in ₹’000)
   Provision for Tax	300	220

     You are required to prepare a Project Report to be submitted to board of directors commenting upon the working and financial position of the firm on the basis of appropriate ratios.