Ms.

Helen decided to run a franchise of an international

Montessori school in a building constructed at a cost of
4,00,000. She invested 10,00,000 more on that. It was
decided that the Centre will be utilized as a Montessori school in
the morning session and Montessori teachers training institute in
the afternoon session. She prepared an estimate which summed
up to 16,00,000 for the cost of Montessori materials and writing
boards, hence she approached IDBI bank for a loan of the same
and 75%of the estimate was sanctioned (12,00,000).
It was agreed that the loan would be repaid in 3 annual
installments as follows:
At the end of 1st year = 4,00,000 + 1,20,000 interest
At the end of 2nd year = 4,00,000 + 80,000 interest
At the end of 3rd year = 4,00,000 + 40,000 interest
She inaugurated the Centre on 1st April 2013. On the same day,
she deposited 9,60,000 in the bank.
She gave 4,00,000 to the franchiser as 25% of the value of the
Montessori materials purchased and 12,00,000 out of the bank
loan availed.
She deposited the following amounts as security deposit to the
following departments:
4,000 - Electricity Board
20,000 - Airtel (Broadband Connection)
3,80,000 - Franchiser

She spent an amount of 1,00,000 for the furniture and fxtures

and 18,000 for advertisements on Facebook.
All the payments were to be made by cheque, and all the
receipts were in cash to be deposited in the bank on the same
day.
At the end of the year, their results showed the following:
Revenue from fees received by Montessori school 10,08,000
Revenue on account of fees from teachers training students 8,00,000

Revenue form sale of Montessori materials - 1,84,000

Purchase of Montessori materials (stationary and textbooks) 2,20,000

Mobile Charges - 28,000

Salary - 72,000

Water Charges - 36,000

Internet Charges - 48,000

Entertainment expenses - 24,000

Wages - 24,000

Miscellaneous Expenses - 56,000

She withdrew 24,000 by cheque each month for personal
expenses. She paid the bank loan regularly.
Required:
1. Journalize the above transactions, post them into the ledger
and prepare Trial Balance.

2. Prepare Proft and Loss Account and Balance Sheet after

taking into account, that electricity charges of 4,96,000 is
yet to be paid.
3. Charge depreciation at the rate of 25% on Montessori
materials, 10% on furniture and fxtures and 5% on buildings.
4. Calculate proftability ratios and comment on the efficiency of
the business if the Net Proft Ratio and Gross Proft Ratio in
similar type of business concerns are 20% and 50%
respectively.