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Financial Accounting and Analysis

The document contains multiple examples of financial accounting entries including transactions for investing capital, purchasing furniture partially on credit, purchasing and selling goods, and paying expenses. It also defines the key components that contribute to a profit and loss account including revenue, tax rates, depreciation, cost of goods sold, and operating expenses. Additionally, it provides a current assets and liabilities statement and calculates the current ratio to analyze liquidity.

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fluxfusionmarket10362
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11 views

Financial Accounting and Analysis

The document contains multiple examples of financial accounting entries including transactions for investing capital, purchasing furniture partially on credit, purchasing and selling goods, and paying expenses. It also defines the key components that contribute to a profit and loss account including revenue, tax rates, depreciation, cost of goods sold, and operating expenses. Additionally, it provides a current assets and liabilities statement and calculates the current ratio to analyze liquidity.

Uploaded by

fluxfusionmarket10362
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Financial Accounting & Analysis

Answer 1 =

Date Particular Debit Credit


3 – Dec Cash A/c 5,000
Bank A/c 5,00,000
To Capital A/c 5,05,000
(Being amount invested in
Mrs.Veena Business)
5 – Dec Furniture A/c 60,000
To Bank A/c 30,000
To Account Payable A/c 30,000
(Being furniture purchased and
50% amount payable)
7 – Dec Purchase A/c 3,15,000
To Bank A/c 3,15,000
(Being Goods purchased)
8 – Dec Cash A/c 5,00,000
To Sale A/c 5,00,000
(Being good sold off )
10 – Dec Electricity Bill A/c 10,000
Salary A/c 10,000
Rent A/c 10,000
To Bank A/c
(Being amount paid for 30,000
Expenses)

Answer 2 = The Five component which contribute in profit and loss account are:-

Depreciation
Revenue Tax rate and financial
charges

cost of good Operating


sold Expenses
1) Revenue = It is the total amount of income or money generated from sale of good or by
lending services to customer.
2) Tax Rate = It is rate which levied on income generated . In profit and loss account when
you subtract all expenses from the income, then you get profit before tax and tax
expenses are calculated on profit before tax.
3) Depreciation and financial charge = Depreciation is a charged which deduction from
fixed assets on the account of wear and tear or obsolescence. Similarly, financial charges
like interest on loans are a charge on profits paid to debtors of the company.
4) Cost of Good Sold = It says that total cost incurred in production of a good that can be
sold.We deduct Gross profit from Cost of good sold to incurred revenue.
5) Operating Expenses = Operating Expenses include all the expenses involved in the
normal course of operation like rent, salaries, insurance, maintenance etc.

Answer 3 a =

Liabilities Amount Assets Amount


Account payable 540 Account receivable 250
Salaries payable 150 Equipment 1500
Unearned revenue 200 Supplies 150
Retained earnings 860 Cash 550
Common stock 1000 Prepaid Insurance 300
Total 2750 2750

Answer b = # Current Ratio = Current Assets / Current Liabilities

= 1250 / 890
=1.4044

# Current Ratio = The ratio is the liquidity ratio that indicates a company’s capacity to repay
short-term loan dues by the next year

# It explains to investors and analysts how a business can use its present assets to the fullest
extent possible to pay down its current liabilities and other payables.

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