Accounting for Managerial Decisions, SYBMS

St. Andrew’s College of Arts, Science & Commerce

Chapter 1: Analysis of Financial Statements

BASIS FOR FINANCIAL ACCOUNTING MANAGEMENT ACCOUNTING

COMPARISON

Meaning Financial Accounting is an The accounting system which

accounting system that focuses on provides relevant information to
the preparation of financial the managers to make policies,
statement of an organization to plans and strategies for running the
provide the financial information business effectively is known as
to the interested parties. Management Accounting.

Is is Yes No
compulsory?

Information Monetary information only. Monetary and non-monetary

information

Objective To provide financial information To assist the management in

to outsiders. planning and decision making
process by providing detailed
information on various matters.

Q. 1 Journalise the following transactions:

Jan 1,2006 Mr. Sundar has started business with a capital of ₹ 2,50,000

Jan 2, 2006 Goods purchased ₹ 1,00,000

Jan 5, 2006 cash sales ₹ 5,0000

Jan 10, 2006 Goods purchased from Mittal & co ₹ 20,000

Jan 11, 2006 Goods sold to Ganesh & co ₹ 30,000

Jan 12, 2006 Goods returned to Mittal & co ₹ 1,500

Jan 20, 2006 Goods returned from Ganesh ₹ 2,000

Jan 31, 2006 Office Rent paid ₹ 3,500

Feb 2, 2006 Interim Dividend received ₹ 3,000

Feb 8, 2006 Cash withdrawn from bank ₹ 12,000

Q.2 Pass Journal Entries:

On 1st March, 2020 Mr. Mohit started a Furniture business by investing ₹ 50,00,000.

March 2 Cash deposited into the bank ₹ 30,00,000.

March 3 Goods purchased for cash ₹ 8,00,000 at 25% trade discount .

March 4 Machinery Purchased ₹ 5,50,000 from Purnima Ltd. and installation expenses paid ₹
50,000.

March 8 Computer Purchased ₹ 50,000 from Global Net, half amount paid.

March 13 Goods sold to Minal Associates ₹ 7,00,000.

March 17 Carriage paid ₹ 18,000 and Advertisement Expenses paid by cheque ₹ 1,20,000.

March 19 Goods purchased from Dinesh & company ₹ 12,50,000 at 20% trade discount .

March 22 Goods Sold to Mohit & Brothers ₹ 20,00,000 at 40% trade discount.

March 24 purchased by cheque ₹ 2,00,000.

March 27 Cash withdrawn for personal use ₹ 40,000.

March 29 Received from Minal Associates ₹ 6,75,000 in full settlement.

March 30 Paid necessary amount to Global Net.

Q.3 Following are the balances as on 31-3-2018 in the books of Ratnagiri Mango Products
Ltd. You are required to prepare a Vertical Balance Sheet.
Particulars Amount Particulars Amount
10% Debentures 2,55,000 Plant and Machinery 3,75,000
Land and Building 3,00,000 Patents 1,75,000
Creditors 1,25,000 Debtors 60,000
Trade Investment 65,000 Bank Overdraft 40,000
Equity Share Capital 5,10,000 Stock 15,000
Share Issue Expenses 25,000 Profit and Loss A/c (Cr. Bal.) 85,000

Q. 4 Prepare a vertical Income Statement from the following:

Particulars Amount Particulars Amount
Opening Stock 40,000 Octroi 3,175
Closing Stock 65,000 Insurance 12,500
Sales 5,85,000 Audit fees 15,825
Purchases 3,55,000 Wages 12,000
Salaries 88,000 Sundry expenses 11,500
Rent received 18,000 Advertisement 35,500
Interest on Loan 5,000 Carriage Inward 7,250
Profit on sale of land 32,000 Carriage Outward 9,250
Q. 5 Prepare a Vertical Balance Sheet in the books of Rose Ltd.
Balance Sheet as on 31st March 2016
Liabilities Amt. Assets Amt.
Equity shares 1,91,000 Building 2,00,000
Capital Reserve 70,000 Plant 55,000
Revenue Reserve 30,000 Furniture 20,000
Creditors 40,000 Freehold property 12,000
Bills payable 60,000 Goodwill 30,000
Bank O/d 80,000 Cash 20,000
Provisions 20,000 Debtors 35,000
Inventories 57,000
Investment (Temporary) 42,000
Bills receivable 20,000
4,91,000 4,91,000

Q.6 Prepare a vertical Income Statement from the following information:

Dr. Trading and Profit & Loss A/c for the year ended 31st March 2022 Cr.

Particulars Amount Amount Particulars Amount Amount

To Opening stock 1,55,000 By Sales 11,75,000
To Purchases 5,55,000 (-) Return Inward (75,000) 11,00,000
(-) Return Outward (25,000) 5,30,000
To Carriage 35,000
To Royalties 40,000
To Trade Expenses 25,000 By Closing Stock 1,85,000
To Gross profit c/d 5,00,000
12,85,000 12,85,000
To Conveyance 38,200 By Gross profit b/d 5,00,000
To Stationary 12,700 By Rent received 17,000
To Depreciation on 41,600 By Bad debts 3,500
building recovered
To Showroom rent 30,000 By Dividend 8,000
received
To Interest on bank 2,500
overdraft
To Mobile bill 5,700
To Loss on sale of 11,800
old machine
To Net profit c/d 3,86,000
5,28,500 5,28,500
Adjustment: Provision for tax is created @ 10%
Q.7 Prepare Vertical Revenue Statement and Balance sheet from the following:

Particulars Debit Amount Credit Amount

Purchases and Sales 46,700 85,000
Equity Share Capital 60,000
Reserve fund 15,000
Preference share capital 20,000
Sundry Debtors and Creditors 28,000 25,000
Bills Receivable and payable 5,000 6,000
Commission 4,600 1,800
Opening stock 18,000
Wages 9,900
Investment in Govt. Bonds 13,500
Postage and Telegrams 3,600
Interest 1,200
Plant and Machinery 40,700
Furniture 18,000
Cash in hand 2,500
Dock charges 3,200
Bad debts 400
Prepaid Rent 7,000
Salaries 10,500
2,12,800 2,12,800
Adjustments:
 Closing stock is valued at ₹ 31,000.
 Outstanding expenses were Wages ₹ 1,400 and Salary ₹ 800.
 Depreciate Plant by 10% and Insurance of ₹ 500 is paid in advance.
Q.8 From the following information, prepare a Trend analysis of the Income Statement:
Particulars 2018 2019 2020
Sales 5,00,000 6,00,000 7,20,000
Cost of goods sold 3,20,000 3,80,000 4,60,000
Gross Profit 1,80,000 2,20,000 2,60,000
(-) Operating expenses 1,10,000 1,35,000 1,62,000
Earnings before Interest & Tax 70,000 85,000 98,000
(-) Interest 30,000 30,000 30,000
Net Operating Profit 40,000 55,000 68,000

Q.9 From the following information, prepare a Trend Balance Sheet:

Particulars 2018 2019 2020
Sources of Fund
1. Owner’s Fund 2,00,000 3,00,000 4,00,000
2. Loan fund 2,50,000 5,00,000 6,00,000
Total Funds available 4,50,000 8,00,000 10,00,000
Application of Fund
1. Fixed Assets 1,80,000 5,00,000 4,50,000
2. Investment 1,50,000 1,20,000 2,00,000
3. Working Capital 1,20,000 1,80,000 3,50,000
Total Funds applied 4,50,000 8,00,000 10,00,000
Q.10 From the following information, prepare a Common size Income Statement in the
books of M/s Sejal Ltd.:
Particulars 2019
Net Sales 6,00,000
Cost of goods sold 3,80,000
Salaries 90,000
Interest paid 30,000
Advertisement 25,000
Loss on sale of furniture 15,000
Income tax rate 20%

Q.11 From the following information, prepare a Common size Balance Sheet in the books of
M/s Sejal Ltd.
Balance Sheet as on 31st March 2020
Liabilities Amt. Assets Amt.
Equity shares 2,50,000 Building 2,75,000
Capital Reserve 1,00,000 Furniture 85,000
Creditors 60,000 Cash 20,000
Loan from IDBI 85,000 Debtors 75,000
Bank Overdraft 5,000 Inventories 27,000
Investment (Temporary) 18,000

Total 5,00,000 Total 5,00,000

Q.12 From the following information, complete the given Comparative Balance Sheet:
Particulars 2019 2020 Absolute Percentage
(Amount (Amount Increase / Increase /
in ₹) in ₹) Decrease Decrease
Application of Funds
1. Fixed Assets ? ? 60,000 75.00
2. Working Capital
Current Assets 1,40,000 1,20,000 ? ?
(-) Current Liabilities ? ? 0 0.00
Working Capital 80,000 60,000 ? ?
Total Funds applied ? 2,00,000 20,000 ?

Q.13 From the following information, complete the given Comparative Income Statement:
Particulars 2019 2020 Absolute Percentage
(Amount (Amount Increase / Increase /
in ₹) in ₹) Decrease Decrease
Gross Profit 2,10,000 ? 2,02,500 ?
(-) Operating expenses 70,000 1,12,500 ? ?
Net Operating Profit ? 3,00,000 1,60,000 ?
(+) Non-Operating Income ? ? 5,000 20.00
Net Profit before tax ? ? 1,65,000 100.00