On Ist April, 2018, Mrs. Kanchan Walia started a gym and physical fitness centre with a capital of %14,00,000. She opened a bank account by depositing %9,60,000 in it, She purchased a building in her locality for setting up her gym, it cost €4,00,000. The payment was made through cash. She /{€4,00,000 (principal) + 120,000 st) Y 85.2009 Fann gr wcsig wi ty am in All payments were to be made by ch ‘on the same day. The membership 0 im, shy, dep seques,Allthe receipts were in cash to be deponied i ate fy was avatlable for €5,000 for six week.” a aeann arse tis year (let March, 201) the position of her business showed the following “Total revenue realised (services were provided charging CGST and 193.9209 SGST @6% each) ‘Outstanding Electricity Charges (GST Not applicable) Lt Telephone Charges 4010 Peuty Expenses $8010 Entertainment Expenses 40.010 0010 “Maintenance Expenses “The above mentioned expenses are subjected to levy of CGST and SGST @6% cach, Purchase of fitness magazines CDs and books ‘Wages for the staf maintaining the gym 22000 1.2600 772,000 for their serves 1ess trainers for the gym. They were tobe paid €3. hr tstanding, She withdrew €24,000 by cheque each mor ‘She appointed three itn "At the end of the year, she paid instalment of bank loan wi Burt their salaries forthe year were ou hher household and personal expenses interes. You are required 1 {@ Journalise the above transactions. Post them into ledgers and prepare Trial Balan (i) Prepare Final Accounts of Kanchan Walia. }) Charge depreciation @ 25% on machines and equipments, 10% on fur 5% 0n building, (io) Calculate profitability ratios. (c) She approached the bunk for farther loan. Compute the ratios thatthe bake before granting the loan. (Current ratio, Quick ratio and Debtequity rath) (oi) Comment om the efiiency ofthe business if the net profit ratio and gress PF {ype of business concerns are 20% and 50% respectively Solution: Introduction of the Project: “The projec requirements are: ©) to make accounting records ofall the accounting transactions. (i) to prepare a tral balance ofthe business. (ii) to prepare financial statements of the business. id ftwresam joins”sate prot the busines peony ofthe Baines Cee panty of erodes try foreach ransacton and prepare ledger pee Trial Balance of the busines. a oti and Los count and Balance Sheet at the end ofthe year. rs Profit Ratio ad Nt Profi Ratio ose the profi of te busines, Fae ae Rati and Debt-Euity Ratio tases the solvency ofthe busines Ss vo = oe Or. "14,00,000 1 i earn | c0000| 10 | geogapntemeis) jousea Ne OF 4,00,000 soos acne a sear Or. 9,60,000 be 12.00.00 ‘Totaktsen Ale lomenenttenionteny | joes {eis nd Egupmers Ae a sissies ettOST Ae es | TaBeaac 288,000| ramon) acines end equipments purchased ps GST @ 8%)‘March 31 | Purchases Ale ~ “eaan Ne (enngecis magus costae) | Mar 2 | Fepore ares Ae Pe Euan Ne o neranen pees Ne o “Maintenance Expenses Alc o Input CGST Ave o input SST Ac = Te Bex ne te |g wenn pas ST ant 0st Ge vet) _| srt | Wao AE o 1.00 | To a Ne ‘ata [teapot stage toc [Bros Ne 2.00 cane 2m cary ent wun boop March 31 | Capaal Ale mm nae Toon Ae 2m) ee oct [Ene Bot ann cs 12000 Teoma Ae 1200 oon mrt on kan 8) sro | Baio oe smow Taare sm000| coin ntl Bark an pi cg eres) ] set [Ompeatin NE m 420000 Tesmarg Ate 00 ‘etc on asp Ne am Teron an Fas Ne ‘oa a toc 3 [Bey Cures Ae o 24000 etary Ones Pape Ne es} |g essing cic cee) uc |S m: area To utng Saat Ne ane ig lars ost) Dr. Bank Account, = (ou [Parioaare | [ate [Parteutrs az. a] i 8 ] Irons | Toca We 900000] Aga's- | yMachres ans Eaveris eon is ea |ToBon too ne ramon] |oyreaiosrae 2s) aap By city Bout Ac | Mar 31 | To Revenue fom By Future and Fixtures Ac van) Meroenne esas Fauna Soins Ne el |To Opa COST A 1.195520) [By Input COST Ac - one sast Ae 13820] [aymewsosr Ae by avetenen A By conpuen NeBy np COST AE 35100] By ings SOT Ae 35,00 By VEN Depont Ne 10000 2o19_ [oy recases tess bosons || 220000 fie 31 | mogutron Ae By Teepe Eagan Ne 4.000 9yPety Excenes Ae 2000 By Eneraeet Eanes Ae 0.0 2 Maranrce Eoeees Ne ‘omm By ngacST NE ere ynpa soST A wa) | By wages Ae aes By Orange Ne 2000 By Bank oan Ne sans00 010 31 | Baace 8 |_sevaeo | aso ley, [renamed =e Cash Account a ase hci TE a » = — Ee [ra Capt A 14,00,000/Apnt 1 [By Bank Alc senoe} ‘on {aoa joy oussing Ac lore ar 21 [oy Batance a sou P [YSNIDeposit AccountDe aera apes Aeon ae Fete aa sos0ola 3 [oyPea anton ne fe | = Dr. ‘Furniture and Fixtures Account = pe Ee pets fropenae sonst fo epucmon A ecuwsee | Taal re tua Ss [Dae Jrarteiars = |rots foterae e00)uar. 31 foy Pe and Loss We EE | e000) b: orcas Account (Boks and Magan) = ane bow = fat romana 2zn¢nfi 3 fy Peta tao De Tec Chage Acros [Dae [ste Jparticuars es ea Ns fe yc Pe ‘24a fy Peta A Lapa De Salaries Account Parvcuiars lar. ae [Particulars lave bre feat fr nag at sale 3 fan am De Meiatemnes Exes Acoos (bow Parca lu. ‘Coa = ee feat roman saz fy Potato Ne aa L De aainnanees saneqr 3 fy Ponte ie. i+ javcam ne \ | s4p0n00 5) | | snafats fpameneen ef (Mer. 31 Jey Balance ct | aa Zs hononennt \ we | | E Machines snd aipments Account & Ts ane | | seach ee L | =| tet fenton |__| sso _] » Bank Lown Account & I mT on re ae Be femme || ssumpons ova ne | | semen Mo leaner | | sp | jen veto aMa. 38 Interest on Bank Loan Account [te love | Ime. 21 [ro Bank Loan Ne 1.20.00} 34 120,009 | Dr. Electricity Board Account (Security Deposit) | Parca: lr. Date = foe fore {a Inet |ro ean nc 4000) 31 [ay Balance ot al 69 “ ow ace a lott lrotauee be .) Dr. Outstanding Salaries Account fs [Da [ae rela a ore fore 7—4 Mer. 31 [To Bane os 1472.00). 31 Joy slaies Ac arm Sapo ay lors iz Jon loyeaane ws sry Dr. Revenue from Membership Fees and Services Account © i (Joa JParicare | fore ore Mar 31 |roProft an toss Neut CGST Account sat 31 March, 2019, be. ee Parca pe. 2 ; 7 some ot 18, 1,19,520| 41 Balance ia 1.19,520] t— np A c. 5 Sr be ©] 2 sumac 19 20}t 91 fy Banca er) 1.9820 bt by saan 119520 Input CCST Account or. Oba Paican Le | 7 Ne furan Ft vatofie 3 yan saazo bet he Con) 2s et omen a aaa aa aie saa Input SST Account cr 7 (bes Parcs in ry a mn Fae serfs rears say To Bark Alc (Computers), aa To Bark (Expenses) aan }+—__| ms jaa] a] “ial BalanceProfit and Loss Account Dr for the ear ending on 31st March 2019 Petcare (| Parca Torches Ne 22000 | By Renu Mai Ford Toone Ne 12800 Toes Peto tun Tiwae00 ‘Tomtmet on teen Ae 1.2000 | By Gross rot bt To Toupone parses Ae ee ToPety Expenses Ne Bee ToEmerannen Expense Ne fae To Asmraamert Expenses Ne my To Bec Crate Ac ‘ain To Marna Ae eat Totes shee Toapecan Ne ecard Eases 40000 ‘00 Frauen Fines 10000 | 49000 Tone Prt Balance Sheet sat 31st March, 2019 ewe — sence | Machines and Equipments (Less dapreciaton) ee 2ano leone 1.12900 |Buiaings (Less depreciation) fr 420,000 32,000] Fumiture and Fixtures (Less depreciation) Pe '£,00,000|v8NL (seourty dan08H) [Becrety Cowes Payaia ‘arn mary Boar (weet eatomnes 372,000] Cash in Hand ‘40.009 cos (1.19520 ~ 58.620) 160,700/Bank 57400 se s0sT (1.18820 ~ 58.820) 60700 nput IGS 298,00 [28400 7249400 Profitability Ratio: 1. Gross Profit Ratio = Gross Profit___ 199 - 21646000 , 199 Revenue from Operations 1992000 2 Net Profit Ratio = Net Profit___ gq _ %4,20000 , j 9 Revenue from Operations 1992000 Both the ratios are satisfactory ‘The bank will see the following ratios before granting the loan: Current Assets / Quick Assets surrent Ratio/Quick Ratio = Lo Bgl Current Liabilities Cash + Bank Electricity Charges Payable +Outstanding Salaries = £587,400 _ = Bee hoe Debt (Bank Loan) 200 959-1 2. Debt-Equity Ratio Equity (Capital) 333 ve, should grant the loan, a the ratios are favourable. The business operations whe —. oa neat io and Net Profit Ratio are higher than the ratios of similar business are good since Gross Profi concerns.PROJECT 2 (SPECIFIC—RATIO AN 4s at 3st March, 2015, 2016 and 2017 NE) The company JKU is in the business of manufacturing household plastic wares, The com, concerned about its financial position. Therefore, it wants to analyse ts liquidity, aciviy 2 solvency position. On the basis of the given information, you are required ta judge, analyse ang Present the liquidity, activity and solvency position of the company, : Balance Sheet of JKU Ltd. Particulars Note No. | 313.2015 (@) | 313.2016 @ | maz |. EQUITY AND LIABILTES 1. Shareholders’ Funde (@) Share Capital 700,000] 10,00,000 sna (©) Reserves and Surplus 1 1,00,000| 3,50,000] 2sa00 2. Non-currentLiaiites: Longtem Sonowings 2 3,50,000| 450.000 s2s0m 3. Curent Liabilities: (2) Shortterm Borrowings 3 75,000) 50,000] 1.9000" (©) Short4erm Provisions ‘ 25000] ‘eaaoo] ae Total ¥3,50,000| _19,50,000] 2.25000 It. ASSETS. | 1. Non-Current Assets: (4) Fixed Assets: | sons ( Tangible 5 ote ret ntangie 8 paseo] tang] —_ ee (©) Non-current investments 100° eess t r "0 amy, es ™ mid | a) sina | tO ‘m0 nm i by yy we, VA, = mame | nam0e seg) a I 7 128000 1.00000, 250000) 125,000, ‘on n00] a0) 1045000) 1678000) 18,40.000) (140000) 19000) (2aoi 395 0] ‘a5 900] van wel a m operation forthe year ended 3, I ebm respec Opening inveniny as at In ApH, 2014 wa 80H.000, It March, 2015, 2016 and 2017 waa tion Introduction ofthe Project! ‘The projet requirements ae ne (© ope an. tote enti (0 a prevent aExecution ofthe Project! (a) Following ratios wll be computed Current Rati Debt to Equity Ratio i) Liquid Ratio (io) Total Assets to Debt Ratio “ (i) Inventory Turnover Ratio (©) Proprietary Ratio {oy Presentation and asesment ofthe result through commenting onthe rt ‘ona graph A Pig Analysis: | Stet March 2016 23500 226000 er ‘3000 = 1800 ore baat Dano ity Rate - 2% asa moms eyay rae» Oa + AOE ass To Asatte ato 1350000 ~y = SSR as 1950000 amet 35000 soo * 4 Peon ato = Petr Fuse ‘Toul (enon Tame Rata _ St ct Reeve tar Optra ere roy 709001 3 121000 +9790 Comments and Presentation (i) Current (Carre Ratio ofthe company sapproximatey mein thefirst two years. However dion the ded yar. should be nosed that current at of he company tomer han el ce ill he dhe years. an indkaton thatthe company notable o py of 1 liabilities. The current ratio ofthe company is required to be increased furtherFr ry wabove than the teal iui rato of 0 line in the second year. It shows that the fist and the dir sums uate neta ow rt es te sed Ya § ‘ ein i I as a | ea 076, ee ’ |e eeryes 2 si of:1is considered an appropriate ratio. The debt equity ratio iskower pebu to Euity «id Gover pe three yea shows that the company is dependent on the shareholders fund rather vara borrowings Lenders of the company are at lower risk ‘ham the external OM, a Dette Eaaty Rabo os os i ome Eos 0 02 —— a a eo Go Toa sets to Deb rato ofthe company ismore than $n llth three years Heshows that debe of he Teeny are covered by the aves f the company ta satisfactory extent, Lang term lenders of the company ae in a safe position.at shareholders funds of the company ate suing ate all three years. Therefore, the creditor nf ty margin for the creditors, pany nate company in he all a adequate sl of com to Propriary ai : ‘covered by the total assets of core more ret tthe i sit (si) Inventory turnover ratio ofthe company is2 times in 2015, 3 times in 2016 and it has increased {05 times in 2017. Therefore, it indicates that in company 5 times inventory was converted ing sales, In 2017, more sales are being made by a rupee investment in inventories. It shows that the ‘company has started to sell and replace itsinventory ata higher number of times during the ye ended on 31st March, 2017. . nvr Trove ati ae ae) gq SEIS Pragati Lid. wants to raise a bank loan of €10,00,000. "The mana reg wan caton aaa gai Lid. is required 9 aeranting the loan, Following Balance Sheets are related to Pra enable the banker to deve = —, ati Lid a Draaen | att ag 7 EOUTY AND LIABILITIES eit one 1. Sharaboter’ Funds | (a) Share Capt eel a (py Reserves and Supls : | ae 2 Noncorent isis | . - 3 196.000! 188.000. Caren abies | {) Sextem Borowings «| peal asm (2) Te Payaies 08000) 3.3800 (e) Stam Provisions saat Tout seassers 1 Non Curent Assats | (a) Fn set | a eocaey ¢ | romao| — avosee 12 caret Aanets eee 9.80,000| 840,000 a 6.72.00} $60,000 (©) Caan and Cash Equivalents a, ae Mcrae cman pee , 14.000 ‘a00| = [os aEquity Share Captal 12% Preference Share Capital 2. Reserves and Surplus ‘Statement of Proft and Lots 19% Deoertes 4 Shorter Booming: | Sere Bok Loan 20400 [120400 asco 5. snonttrm Provslon: | Pron or Tnaon 200000] zou 200005 aa 6 Fund Asst: Tangle Ase 112000] 1am Los: Depaciton 420000| stam | arena ‘Additional information: (9 An interim dividend of €1,26,000 has been paid during the year. (ii) Income tax of 898,000 has been paid during the year. (ii) Fixed assets (costing €2,80,000 and provision for depreciation up tothe date of se €81” ‘were sold for €1,40,000. ((v) Preference dividend paid during the year €33,600. ‘Also give a report commenting on the cash positon of a company. station: Introduction of the Project: (The aim of the project isto submit a report about the inflow and outflow of sh ‘enable the banker to decide about granting the loan, ‘The data is provided for the years ended on $1st March, 2018 and 2019 Preparing cashflow statement. Hence, the project work is planned and a Cash Flow StatementCash Flow Statement ortega ened 319, Mar 2012 —- praia Re », ©) ro Pen ca nse te aa se rae wet ae Aaa oct om eat Za nee 154,000, | 3.19200 enc a | ween soncr rue Ne ie wean 1900 al el verte wong antl OE 39300 or mrss tet tusem| | nin Te Rao o.n2.000 creecn Pro eT eon | eons Tre PPS 000) | orn fom Opera Act 307s | toes wea TaxPad ssn econ tom opti ns oo | ama | Te connie tom sin ei | son Foe es s.anc00 | pronto ses | somo st Cash used in investing ACHES ” (1,12.000) | fo) cats Foe tom Financing Ace ssn Se Cala sgn00o | enngonPrefroce Shae oo | tae totes 0 apanen cabrio Ban 8” 9st) Seay Oakiond Pat (1.26.00) Preterence Divdend Paid 3600) a Interest on Debentures: L ae), cab nd anc a eee eens o. in Caah and Cash Equivalonta (K+ * 2) i stn tc rt ea fo ss | cash and Cash Euivalnts at the en of he yor |‘Working Notes: be ied Assets Account — ey re | rosea ve 1140020] 1 [by cannes een 2s Provan bp ve Ctuscrororeverg | 282000 [by Sino cere ‘purchase) (oss on ale) Come oy Asan us a ion for Depreciation Account [ba [Paes [0st [Parise 18 ore mw 2 | Toro Ane Ae esata |oyaaanc be 019 ar 3 [roca 4.2000 na. 3 |, Dereston ne (Sherere Pav) {aaa ir Provision fr Taxation Account [ow [potatoe [oui [Parcue 018 re tr 31 [roan sono |rer + |pyeaonce v9 tt |o Bans ot 2.900031 [oy Stoner of tans ot eae Fre) = It is assumed that new debentures have been issued atthe end ofthe year Report on Cash Position of the Company 7 © Cash generated from all the activities is positive which is a good sign but the nega balance in the beginning ofthe year makes the closing cash balance negate; () Cash generated from operations is €3,07,440 which has been used for financing of activities. (i) Inventories, Trade Receivables and Prepaid Expenses show increasing trend. THe are advised to keep the optimum inventory level and they should take ne prompt collection of debtors (iv) Trade payables and repayment ofbank loan show decreasing trend whi of cash.(ay The result of eiferent activities is depicted by preparing Bar di gram, Activities Sern we eg Ae 4 aan used in investing Actives 208m | ash used in Financing Activities (1.12.00 | (33.040) Bar Diagram Presentation » culty nan eertaton of — (@ 112,000) 1180000