Chapter:-

Ratio Analysis

[Model Problems]
A.Liquidity Ratios [Short Term Solvency ]

List of Items Included in

--Current Assets

List of Items Included

in --Current Liabilities

1.Cash and Bank Balance

2.Debtors

1.Creditors
2.Bills Payable
[After Deducting
3.Bank Overdraft
Provisions]
4.Short Term Loans
3.Bills Receivable
and Advances
[After
Deducting
[Cr.Balance]
Provisions]
5.O/S Expenses
4.Stock
6.Provision for
5.Marketable Securities
Taxation
6.Prepaid Expenses
7.Unclaimed Dividend
7.Advance Payments
Received in
8.Income Accrued But Not 8.Income
Advance
Due or Received

List of Items Not

Included ---In Quick
Assets
1.Stock
2.Prepaid Expenses

Q.No Problem
.

Q.1 Following Information is available for the Year

2012,calculate Gross Profit ratio:--Sales:Cash-----------------25,000

Credit ---------------75,000
Purchases : Cash -------15,000
Credit -----60,000
Carriage Inwards -------2,000
Salaries -------------------25,000
Decrease in Stock -----10,000
Return Outwards ------2,000
Wages --------------------5,000
Q.2 Op Stock:Rs.60,000 ;Closing Stock Rs.1,00,000
Stock Turnover Ratio :8 Times ;Selling Price :25% above
cost.
Calculate the Gross Profit Ratio
Q.3 i).A Business has a current Ratio of 3:1 and Quick Ratio of
1.2:1.If the working capital is Rs.1,80,000,Calculate the
Stock T.O Ratio.
Q.4

ii) Calculate the Stock T.O Ratio.

Calculate the Gross Profit Ratio from the following data:
Avg Stock---Rs.1,60,000
Stock T.O Ratio----Rs.8 Times

Reference
G.P R-10%
[P-263 Q.19NCERT]

G.P R-20%
[P-S.59Q.50]Scanner

Illus.79

Q.5

Avg Debtors---Rs.2,00,000
Debtors T.O Ratio---6 times
Cash Sales ----25% of Net Sales.
From the following information .Find out:-------a)Current assets
b)Current Liabilities.
c)Liquid Assets
d)Proprietors Fund
e)Share capital
f)Fixed Assets
g)Stock in trade
Information:
Current Ratio---2.5 ;Liquid Ratio---1.5
Proprietary Ratio----[Fixed Assets/Proprietary Funds]:0.75
Working Capital:---Rs.60,000
Reserve and Surplus:---Rs.40,000
Bank Overdraft:--Rs.10,000
There is no long term loan or fictitious assets.

Illus.106

Illustration 5
Prepare Trading and Profit Loss Account for the year ending 31st
March 2002 from the books of Mr. Siva Subramanian.
Rs. Rs.
Stock (31.3.2001) 15,000 Carriage outwards 4,000
Purchases 1,65,000 Wages 30,000
Purchases return 10,000 Sales return 5,000
Postage 3,000 Salaries 20,000
Discount received 5,000 Stationeries 2,000
Bad debts 1,000 Interest 8,000
Sales 3,00,000 Insurance 4,000
Stock (31.3.2002) 80,000
Solution:
Trading and Profit & Loss A/c of Mr. Siva Subramanian
for the year ended 31st March 2002
Dr. Cr.
Particulars Rs. Rs. Particulars Rs. Rs.
To Opening stock 15,000 By Sales 3,00,000
To Purchases 1,65,000 Less returns 5,000
Less Returns 10,000 2,95,000
1,55,000 By Closing stock 80,000
To Wages 30,000
To Gross profit 1,75,000
(transferred to
P&L A/c)
3,75,000 3,75,000
To Salaries 20,000 By Gross profit 1,75,000
To Postage 3,000 (transferred from
To Bad debts 1,000 trading A/c)
To Carriage outwards 4,000 By Discount
To Stationeries 2,000 received 5,000
To Interest 8,000
To Insurance 4,000
To Net profit 1,38,000
(transferred Capital A/c)

1,80,000 1,80,000

Illustration 6
From the following trial balance of Mr.John, prepare Trading,
Profit and Loss Account for the year ending 31.12.2002.
Debit Credit
Particulars
Rs.
Particulars
Rs.
Purchases 5,40,000 Sales 10,40,000
Salaries & wages 3,50,000 Returns outward 12,000
Office expenses 4,000 Discount received 6,000
Trading expenses 8,000 Interest received 3,000
Factory expenses 11,000 Capital 1,78,000
Carriage inwards 8,000
Returns inward 12,000
Discount allowed 4,000
Commission 2,000
Stock 60,000
Income tax 40,000
Cash in hand 2,00,000
12,39,000 12,39,000
Closing stock is valued at Rs. 1,35,000.
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trial balance. (As it appears outside the trial balance, first it

will be recorded in the credit side of the trading account and
then shown in the assets side of the balance sheet).
Illustration 1
Prepare a Trading Account from the following information of a
trader.
Total purchases made during the year 2003 Rs.2,00,000.
Total sales made during the year 2003 Rs.2,50,000
Solution:
Trading Account for the year ending 31st March 2003
Dr. Cr.
Particulars Rs. Particulars Rs.
To Purchases 2,00,000 By Sales 2,50,000
To Gross profit c/d 50,000
(transferred to P&L A/c)

2,50,000 2,50,000

Illustration 2
From the following information, prepare a Trading Account for
the year ended 31.12.2003.
2003 Jan 1 Opening stock Rs.15,000
2003 Dec 31 Purchases Rs.16,500
Sales Rs. 30,600
Closing stock Rs. 13,500
Solution:

Trading Account for the year ending 31.12.2003

Particulars Rs. Particulars Rs.
To Opening stock 15,000 By Sales 30,600
To Purchases 16,500 By Closing stock 13,500
To Gross profit c/d 12,600
(transferred to P&L A/c)
44,100 44,100

Illustration 3
Prepare Trading Account for the year ending 31st March 2002
from the following information.
Opening stock Rs. 1,70,000 Purchases return Rs. 10,000
Sales Rs.2,50,000 Wages Rs. 50,000
Sales return Rs. 20,000 Purchases Rs. 1,00,000
Carriage inward Rs. 20,000 Closing stock Rs. 1,60,000
Solution:
Trading Account for the year ending 31st March 2002
Dr. Cr.
Particulars Rs. Rs. Particulars Rs. Rs.
To Opening stock 1,70,000 By Sales 2,50,000
To Purchases 1,00,000 Less Sales return 20,000
Less Purchases return 10,000
2,30,000
90,000
To Wages 50,000 By closing stock 1,60,000
To Carriage inwards 20,000
To Gross profit c/d 60,000
(transferred to P&L A/c)
3,90,000 3,90,000

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