Accounts: Profit & Loss, Financial Position, Depreciation, Ratios, Payback & NPV Methods

Accounts

TABLE OF CONTENTS
Q1. ...................................................................................................................................................3
a) Statement of profit & loss for the year ended September 2019...............................................3
b) Statement of financial position for the year 2019....................................................................3
Q2. ...................................................................................................................................................4
a) Calculation of depreciation using Straight line method...........................................................4
b) Computation of depreciation using Sum of digit method........................................................5
c) Arguments made for and against two methods........................................................................5
Q3.....................................................................................................................................................7
a) Computation of current ratio with its measure and interpretation for 2018 & 2019 year.......7
b) Calculation of debt equity ratio with measure and interpretation for the period 2018 & 2019
......................................................................................................................................................7
c) Determination of return on equity with its measures and interpretation.................................8
d) Calculation of gross profit ratio by considering its measures and interpretation for period
2018 & 2019................................................................................................................................8
e) Two users of financial statement.............................................................................................9
Q4. ...................................................................................................................................................9
a) Access of following projects using two methods:...................................................................9
b) Pay back period method..........................................................................................................9
c) Net present value method......................................................................................................10
b) Advise to the director............................................................................................................11
c) Advantages and limitations of two methods.........................................................................11
REFERENCES..............................................................................................................................13

Q1.
a) Statement of profit & loss for the year ended September 2019
Particulars As at 30-09-2019
Income:
Revenue from operations 120000
Less: Return inwards 5000
Total revenue from operations 115000
COGS:
Opening inventory 850
Add: Purchases 90000
Add: Direct expenses:
Wages and salaries 14264
Less: Closing inventory 11500
Total COGS 93614
Gross profit 21386
Other expenses:
Rent 920
Discount allowed 1440
Light and heat 940
General expenses 5520
Insurance 405
Depreciation of motor van 265
Total of other expenses: 9490
Net profit 11896

b) Statement of financial position for the year 2019
Particulars Amount
Equity & liability:
Capital 70220
Less: Drawings 5461
Total of capital after drawings treatment 64759
Add: Net profit 11896
Total of equity & liability 76655
Current liabilities:
Trade payables 9200
Total of current liabilities: 9200
Total liabilities 85855
Non-current assets:
Plant and machinery at cost 31625
Office furniture and fittings at cost 19780
Motor van at cost 2650
Less: Depreciation 265
Motor van at cost after depreciation 2385
Total of non-current assets 53790
Current assets:
Trade receivables 16100
Inventories 11500