CBSE Class 12 Accountancy Issue And Redemption of Debentures Worksheet Set C

Analysis of Financial Statements

Question. Which of the following is not required to be prepared under the Companies Act.
(A) Statement of profit and loss
(B) Balance Sheet
(C) Report of Director’s and Auditor’s
(D) Funds Flow Statement
Answer: (D)

Question. 50,000, 9% Debentures redeemable within 12 months of the date of Balance Sheet will be shown under:
(A) Short-term Borrowings
(B) Short-term Provision
(C) Other Current Liability
(D) Trade Payables
Answer: (C)

Question. Under which heading the item ‘Bills Discounted but not yet matured’ will be shown in the Balance Sheet of a company?
(A) Current Liability
(B) Current Assets
(C) Contingent Liabilities
(D) Unamortized Expenditure
Answer: (C)

Question. Financial analysis becomes significant because it:
(A) Ignores price level changes
(B) Measures the efficiency of business
(C) Lacks qualitative analysis
(D) Is effected by personal bias
Answer: (B)

Question. For whom analysis of financial statements is not significant?
(A) Political Adviser of Prime Minister
(B) Investors
(C) Management
(D) Financial Institutions
Answer: (A)

Question. Payment of Income Tax is considered as
(A) Direct Expenses
(B) Indirect Expenses
(C) Operating Expenses
(D) None of the Above
Answer: (D)

Question. Net profit is obtained by deducting ………………from Gross Profit.
(A) Operating Expenses
(B) Non-Operating Exp.
(C) Operating and Non-Operating Exp.
(D) None of the Above
Answer: (C)

Question. Main objective of common Size Statement of Profit & Loss is :
(A) To present changes in assets and liabilities
(B) To judge the financial soundness
(C) To establish relationship between revenue from operations and other Items of statement of Profit & Loss
(D) All of the Above
Answer: (C)

Question. Current assets include only those assets which are expected to be realised Within ……………
(A) 3 months
(B) 6 months
(C) 1 year
(D) 2 years
Answer: (C)

Question. Which of the following transactions will improve the quick ratio?
(A) Sale of goods for cash
(B) Sale of goods on credit
(C) Issue of new shares for cash
(D) All of the Above
Answer: (D)

Question. Under which major heads and sub-heads the following items will be places in the Balance Sheet of a company as per revised Schedule VI, Part I of the Companies Act, 1956 (Schedule III, Part I of the Companies Act, 2013)?
(i) Accrued Incomes
(ii) Loose Tools
(iii) Provision for Employees Benefits
(iv) Unpaid Dividend
(v) Short-term Loans
(vi) Long-term Loans
Answer:
(i) Accrued Incomes: Current Assets - Other Current Assets
(ii) Loose Tools: Current Assets - Inventories
(iii) Provision for Employees Benefits: Non-Current Liabilities - Long-term Provisions (or Short-term Provisions if due within 12 months)
(iv) Unpaid Dividend: Current Liabilities - Other Current Liabilities
(v) Short-term Loans: Current Liabilities - Short-term Borrowings
(vi) Long-term Loans: Non-Current Liabilities - Long-term Borrowings

Question. Under which sub-heads will the following items be placed in the Balance Sheet of a company as per revised Schedule VI, Part I of the Companies Act, 1956 (Schedule III, Part I of the Companies Act, 2013)?
(i) Capital Reserve
(ii) Bonds
(iii) Loans repayable on Demand
(iv) Vehicles
(v) Goodwill
(vi) Loose Tools
Answer:
(i) Capital Reserve: Reserves and Surplus
(ii) Bonds: Long-term Borrowings
(iii) Loans repayable on Demand: Short-term Borrowings
(iv) Vehicles: Property, Plant and Equipment (Tangible Assets)
(v) Goodwill: Intangible Assets
(vi) Loose Tools: Inventories

Question. From the following Balance Sheet of Exe Ltd. As at 31st March, 2020, Prepare Comparative Balance Sheet:
BALANCE SHEET as at 31 March, 2020
Particulars | 31st March, 2020 (₹) | 31st March, 2019 (₹)
I. EQUITY AND LIABILITIES
1. Shareholders’ funds
Share Capital (Equity) | 18,00,000 | 12,00,000
2. Non-Current Liabilities
Long-term Borrowing: 8% Debentures (Secured) | 6,00,000 | 6,00,000
3. Current Liabilities
Trade Payables | 6,00,000 | 3,00,000
Total | 30,00,000 | 21,00,000

II. ASSETS
1. Non-Current Assets
Fixed Assets: Tangible Assets | 18,00,000 | 15,00,000
2. Current Assets
(a) Trade Receivables | 10,00,000 | 5,00,000
(b) Cash and Cash Equivalents | 2,00,000 | 1,00,000
Total | 30,00,000 | 21,00,000
Answer: [Comparative Balance Sheet Table:
1. Share Capital: Absolute Change ₹ 6,00,000; % Change 50%
2. Debentures: Absolute Change Nil; % Change Nil
3. Trade Payables: Absolute Change ₹ 3,00,000; % Change 100%
4. Tangible Assets: Absolute Change ₹ 3,00,000; % Change 20%
5. Trade Receivables: Absolute Change ₹ 5,00,000; % Change 100%
6. Cash: Absolute Change ₹ 1,00,000; % Change 100%]

Question. From The following information, prepare a Comparative Statement of Profit and Loss:
Particulars | 31st March, 2017 | 31st March, 2016
Revenue from Operations | ₹ 24,00,000 | ₹ 18,00,000
Other Incomes (% of Revenue from Operations) | 15% | 25%
Expenses (% Revenue from Operations) | 60% | 50%
Tax Rate | 40% | 40%
Answer: [Comparative P&L Analysis:
2016: Revenue 18,00,000; Other Inc 4,50,000; Total Inc 22,50,000; Exp 9,00,000; PBT 13,50,000; Tax 5,40,000; PAT 8,10,000.
2017: Revenue 24,00,000; Other Inc 3,60,000; Total Inc 27,60,000; Exp 14,40,000; PBT 13,20,000; Tax 5,28,000; PAT 7,92,000.
Absolute Change in PAT: ₹ (18,000) (Decrease); % Change: -2.22%]

Question. Prepare Common-size Statement of Profit and Loss from the following Information:
Particulars | 31st March, 2020 | 31st March, 2019
Revenue from Operations | ₹ 10,00,000 | ₹ 7,50,000
Other Income | ₹ 1,00,000 | ₹ 75,000
Purchases of stock-in-Trade | ₹ 7,50,000 | ₹ 6,00,000
Change in Inventories of Stock-in-Trade | ₹ (50,000) | ₹ 10,000
Other Expenses | ₹ 10,000 | ₹ 7,500
Rate of Income Tax | 50% | 50%
Answer: [Common Size Statement (% based on Revenue from Operations):
2019: Revenue 100%; Other Inc 10%; Purchases 80%; Change Inv 1.33%; Other Exp 1%; Net Profit (PAT) 10.5%.
2020: Revenue 100%; Other Inc 10%; Purchases 75%; Change Inv -5%; Other Exp 1%; Net Profit (PAT) 14.5%.]

Question. Prepare Common-size Balance Sheet from the following information:
Particulars | 31st March, 2019 (₹) | 31st March, 2020 (₹)
Shareholders’ Funds | 12,00,000 | 18,00,000
Non-current Liabilities | 6,00,000 | 6,00,000
Current Liabilities | 2,00,000 | 6,00,000
Non-current Assets | 14,00,000 | 21,00,000
Current Assets | 6,00,000 | 9,00,000
Answer: [Common Size % (Total Assets/Liabilities = 100%):
2019: Shareholders' Funds 60%; Non-current Liab 30%; Current Liab 10%; Total 100%.
2020: Shareholders' Funds 60%; Non-current Liab 20%; Current Liab 20%; Total 100%.]

Question. Calculate Liquid Ratio/Quick Ratio/Acid Test Ratio from the following:
Working Capital ₹ 1,80,000; Total Debts, i.e., Outside Liabilities ₹ 3,90,000; Long-term Debts ₹ 3,00,000; Inventories ₹ 90,000.
Answer:
Current Liabilities = Total Debts - Long-term Debts = 3,90,000 - 3,00,000 = ₹ 90,000.
Current Assets = Working Capital + Current Liabilities = 1,80,000 + 90,000 = ₹ 2,70,000.
Quick Assets = Current Assets - Inventories = 2,70,000 - 90,000 = ₹ 1,80,000.
Quick Ratio = Quick Assets / Current Liabilities = 1,80,000 / 90,000 = \( 2:1 \).

Question. From the following information, compute Debt to Equity Ratio:
Long-term Borrowing 5,00,000
Long-term Provisions 1,00,000
Equity Share Capital 2,00,000
General Reserve 2,00,000
Surplus, i.e., Balance in Statement of Profit and Loss (Dr.) 1,00,000
Answer:
Debt = Long-term Borrowing + Long-term Provisions = 5,00,000 + 1,00,000 = ₹ 6,00,000.
Equity = Equity Share Capital + General Reserve - Surplus (Dr.) = 2,00,000 + 2,00,000 - 1,00,000 = ₹ 3,00,000.
Debt to Equity Ratio = Debt / Equity = 6,00,000 / 3,00,000 = \( 2:1 \).

Question. From the following information, calculate Proprietary Ratio, Debt to Equity Ratio and Total Assets to Debt Ratio:
Non-current Assets ₹ 40,00,000; Current Assets ₹ 40,00,000; Long-term Borrowing ₹ 25,00,000; Long-term Provisions ₹ 15,00,000; Current Liabilities ₹ 20,00,000.
Answer:
Total Assets = 40,00,000 + 40,00,000 = ₹ 80,00,000.
Debt = 25,00,000 + 15,00,000 = ₹ 40,00,000.
Equity = Total Assets - Total Liabilities (Debt + Current Liab) = 80,00,000 - (40,00,000 + 20,00,000) = ₹ 20,00,000.
Proprietary Ratio = Equity / Total Assets = 20,00,000 / 80,00,000 = \( 0.25:1 \) or 25%.
Debt to Equity Ratio = Debt / Equity = 40,00,000 / 20,00,000 = \( 2:1 \).
Total Assets to Debt Ratio = Total Assets / Debt = 80,00,000 / 40,00,000 = \( 2:1 \).

Question. From the following details obtained from the financial statement of Jeev Ltd., calculate Interest Coverage Ratio:
Net Profit after Tax ₹ 1,20,000
12% Long-term Debt ₹ 20,00,000
Tax Rate 40%
Answer:
Interest = 12% of 20,00,000 = ₹ 2,40,000.
Net Profit before Tax = 1,20,000 / (1 - 0.40) = ₹ 2,00,000.
Net Profit before Interest and Tax (EBIT) = 2,00,000 + 2,40,000 = ₹ 4,40,000.
Interest Coverage Ratio = EBIT / Interest = 4,40,000 / 2,40,000 = \( 1.83 \text{ times} \).

Question. ₹ 2,00,000 is Cost of Revenue from Operations (Cost of Goods Sold); Inventory Turnover Ratio 8 times; Inventory in the beginning is 1.5 Times more than the Inventory at the end. Calculate values of Opening And Closing Inventory.
Answer:
Average Inventory = Cost of Revenue / Ratio = 2,00,000 / 8 = Rs 25,000.
Let Closing Inventory be \( x \).
Opening Inventory = \( x + 1.5x = 2.5x \).
Average Inventory = \( (2.5x + x) / 2 = 25,000 \)
\( 3.5x = 50,000 \)
\( x \text{ (Closing)} = Rs 14,286 \)
Opening Inventory = \( 2.5 \times 14,286 = Rs 35,715 \).

Question. From the following information, calculate Trade Receivables Turnover Ratio:
Cost of Revenue from Operations (Cost of Goods-₹3,00,000 Opening Debtors-₹50,000
Gross Profit on Cost – 25% Closing Debtors-₹1,00,000
Cash Sales – 20% of Total Sales
Answer:
Gross Profit = 25% of 3,00,000 = ₹ 75,000.
Total Sales (Revenue from Operations) = 3,00,000 + 75,000 = ₹ 3,75,000.
Cash Sales = 20% of 3,75,000 = ₹ 75,000.
Credit Sales = 3,75,000 - 75,000 = ₹ 3,00,000.
Average Trade Receivables = (50,000 + 1,00,000) / 2 = ₹ 75,000.
Ratio = Credit Sales / Average Trade Receivables = 3,00,000 / 75,000 = \( 4 \text{ times} \).

Question. Current Assets ₹ 12,00,000; Current Liabilities ₹ 2,40,000; Sales: Credit ₹ 24,00,000 and Cash ₹ 5,20,000; Sales Return ₹ 40,000; Calculate Working Capital Turnover Ratio from the above information.
Answer:
Working Capital = Current Assets - Current Liabilities = 12,00,000 - 2,40,000 = ₹ 9,60,000.
Net Revenue from Operations = (24,00,000 + 5,20,000) - 40,00,00 = ₹ 28,80,000.
Working Capital Turnover Ratio = Net Revenue / Working Capital = 28,80,000 / 9,60,000 = \( 3 \text{ times} \).

Question. Opening Inventory ₹ 5,00,000; Closing Inventory ₹ 3,00,000. Inventory Turnover Ratio 8 Times. Selling price 25% above cost. Calculate Gross Profit Ratio.
Answer:
Average Inventory = (5,00,000 + 3,00,000) / 2 = ₹ 4,00,000.
Cost of Revenue = Average Inventory \(\times\) Inventory Turnover Ratio = 4,00,000 \(\times\) 8 = ₹ 32,00,000.
Gross Profit = 25% of 32,00,000 = ₹ 8,00,000.
Revenue from Operations = 32,00,000 + 8,00,000 = ₹ 40,00,000.
Gross Profit Ratio = (Gross Profit / Revenue) \(\times\) 100 = (8,00,000 / 40,00,000) \(\times\) 100 = 20%.

Question. Calculate ‘Return on Investment’ and ‘Debt to Equity Ratio’ from the following information:
Net Profit after Interest and Tax ₹ 3,00,000
10% Debentures ₹ 5,00,000
Tax Rate 40%
Capital Employed ₹ 40,00,000
Answer:
Net Profit before Tax = 3,00,000 / 0.60 = ₹ 5,00,000.
Interest = 10% of 5,00,000 = ₹ 50,000.
Net Profit before Interest and Tax (EBIT) = 5,00,000 + 50,000 = ₹ 5,50,000.
Return on Investment = (EBIT / Capital Employed) \(\times\) 100 = (5,50,000 / 40,00,000) \(\times\) 100 = 13.75%.
Equity = Capital Employed - Long-term Debt = 40,00,000 - 5,00,000 = ₹ 35,00,000.
Debt to Equity Ratio = Debt / Equity = 5,00,000 / 35,00,000 = \( 0.14:1 \).

Please click on below link to download CBSE Class 12 Accountancy Issue And Redemption of Debentures Worksheet Set C