FINANCIAL ACCOUNTING & ANALYSIS

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Question 1

Income statement for the year ended 31st March 17, is as under

   (Rs in lacs)

	Previous year 2016	Current Year 2017
Gross Sales Less: Returns	1200 225	15000 300
Net sales Less: Cost of goods sold	975 438.75	1200 600
Gross profit Less: Selling and distribution Exp.	536.25 140	600 180
Operating Profit Less: Interest expenses	396 101	420 126
Earnings before taxes Less: Taxes	295 118	294 117.6
Earnings after taxes	177	176.4
Required: Convert it into common size income statement.

Question 2

The matching concept of accounting suggests that in order to calculate accurateamount of profit or loss for the period the expenses or revenues should berecognized correctly. Thus, it is important to differentiate between thecapital and revenue items. Mr. Ramchandani purchased Shaper Jet 3D printer atRs90000, extra printer cartridges and ink for Rs10000 for his business. Discusshow the expenditure will be treated while preparing the financial statements.Provided the rate of depreciation on printer and related assets is 10 % p.a.

Question 3

a) TCD Ltd provided Rs50 lacs for inventory obsolescence in 2013-14. In thesubsequent year, it was determined that 25 % of such stocks are usable. Theaccounts manager of the company wants to adjust the same through prior periodadjustment account, as the provision was made in the earlier years. Give youropinion whether the contention of the accounts manager is correct or not.

b) Rectify the following errors by passing Journal entry

•          Paid Rs15000 for advertisement debited to electricity expenses
•          Received Rs250000 on account of cashsales to Jannaak omitted to recorded in the books