ULTIMATE BOOK OF ACCOUNTANCY

(Author: Dr. Vinod Kumar, Publisher: Vishvas Publications)

Class - XII Accountancy (Text Book Solutions)

Chapter -04 (Part – B): Accounting Ratios Part-3

41. Gross Profit = 4,00,000 x 25/125 = 80,000

Closing Inventory = 4,00,000 x 30/100 = 1,20,000
Opening Inventory = 1,20,000 x 1/3 = 40,000
Average inventory = 1,20,000 + 40,000 = 1,60,000/2 = 80,000
Cost of Revenue from operations = Revenue from operations – Gross profit
3,20,000 – 4,00,000 – 80,000
Stock Turnover Ratio = 3,20,000/80,000 = 4 Times

42. Gross Profit = 2,00,000 x 25/100 = 50,000

Cost of Revenue from operations = Revenue from operations – Gross Profit
1,50,000 = 2,00,000 – 50,000
Closing Stock = 2,00,000 x 40/100 = 80,000
Opening Stock = 80,000 x ¼ = 20,000
Average Inventory = 20,000 + 80,000 = 1,00,000/2 = 50,000
Stock Turnover Ratio = 1,50,000/50,000 = 3 Times
43. Inventory Turnover Ratio = Cost of Revenue from operations/Average inventory
Cost of Revenue from operations = Cost of material consumed + change in inventories of
finished goods and WIP
8,40,000 = 7,60,000 + 80,000
Average Inventory = 2,00,000 + 1,40,000 + 2,40,000 + 60,000 = 6,40,000/2 = 3,20,000
Inventory Turnover Ratio = 8,40,000/3,20,000 = 2.63 Times

44. Inventory Turnover Ratio = Cost of Revenue from operations/Average inventory

Cost of Revenue from operations = Purchase of stock in trade + wages & salary (direct exp)
8,84,000 = 8,00,000 + 60,000 + 24,000
Average Inventory = 1,00,000 + 40,000 = 1,40,000/2 = 70,000
Inventory Turnover Ratio = 8,84,000/70,000 = 12.63 Times

45. Gross Loss = 4,00,000 x 10/100 = 40,000

Cost of Revenue from operations = Revenue from operations + Gross Loss
4,40,000 = 4,00,000 + 40,000
Inventory Turnover Ratio = 4,40,000/55,000 = 8 Times

46. Debtors Turnover Ratio = Net Cr. Sales/Average Trade Receivable

Average Trade Receivable = 60,000 + 20,000 + 1,80,000 + 60,000 = 3,20,000/2 = 1,60,000
Debtors Turnover Ratio = 6,40,000/1,60,000 = 4 Times

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47. Debtors Turnover Ratio = Net Cr. Sales/Average Debtors = 3,60,000/Average Debtors = 4
Average Debtors = 3,60,000/4 = 90,000
Total value of opening debtors + closing debtors = 90,000 x 2 = 1,80,000
Closing Debtors = 2 Times in comparison to opening debtors
Closing Debtors = 1,80,000 x 2/3 = 1,20,000 (ratio of opening and closing debtors is 1:2)
Opening Debtors = 1,80,000 x 1/3 = 60,000

48. Sales = Cost of goods sold + Gross Profit

Gross Profit = 3,20,000 x 20/100 -20 = 80,000
Total Sales = 3,20,000 + 80,000 = 4,00,000
Ratio of Cash sales and credit sales = 33.33% : 100
Total Sales = 33.33% + 100 = 133.33%
Cash Sales = 4,00,000 x 33.33%/133.33% = 1,00,000
Credit Sales = Total Sales – Cash Sales
3,00,000 = 4,00,000 – 1,00,000
Debtors Turnover Ratio = Net Cr. Sales/ Average Debtors = 3,00,000/average debtors = 4
Average Debtors = 3,00,000/4 = 75,000
Opening Debtors = 75,000 – 5,000 (10,000 x ½) = 70,000
Closing Debtors = 75,000 + 5,000 (10,000 x ½ ) = 80,000

49. Average period = 365/Debtors Turnover Ratio = 52 Days

= 365/52 = 7.0192
Cr.Sales = 25,00,000 – 12,22,500 = 12,77,500
Average Trade Receivables = 12,77,500/Average Trade Receivable = 7.0192 Times
Average Trade Receivable = 12,77,500/7.0192 = 1,82,000
If Average Trade Receivables Rs.1,82,000
Then total average trade receivables will be = 1,82,000 x 2 = 3,64,000
Closing Debtors = 3,64,000 – 1,74,000 = 1,90,000

50. Debtors Turnover Ratio = Net Cr.Sales/Average Debtors

Year 2012
Net Sales = Total Sales – Sales Return
16,00,000 = 18,00,000 – 2,00,000
Average Debtors = 1,66,000 + 2,34,000 = 4,00,000/2 = 2,00,000
Debtors Turnover Ratio = 16,00,000/2,00,000 = 8 Times
Year 2013
Net Sales = 15,00,000 – 1,00,000 = 14,00,000
Average Debtors = 2,34,000 + 1,66,000 = 4,00,000/2 = 2,00,000
Debtors Turnover Ratio = 14,00,000/2,00,000 = 7 Times

51. Net Credit Sales = 12,00,000 – 1,60,000 = 10,40,000

Average Trade Receivables = 74,000 + 86,000 = 1,60,000/2 = 80,000
Debtors Turnover Ratio = 10,40,000/80,000 = 13 Times
Average Collection period = 365 days/Debtors Turnover Ratio = 365/13 = 29 days

52. Average period = Debtors + B/R/Net Cr. Sales per day

Net Cr. Sales (per day) = 1,20,000/365 = 328.76
Average Period = 10,000 + 10,000/328.76 = 60 or 2 months

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 Debtors Turnover Ratio = 1,20,000/20,000 = 6 Times

53. Creditors or Trade Payable Turnover Ratio = Net Cr. Purchase/Average Trade payables
Average Trade payable = 10,00,000 + 6,00,000/2 = 8,00,000
Creditors Turnover Ratio = 24,00,000/8,00,000 = 3 Times

54. Creditors or Trade Payable Turnover Ratio = Net Cr. Purchase/Average Trade payable
Net Cr. Purchase = 5,00,000 – 1,00,000 – 10,000 = 3,90,000
Average Trade Payables = 62,500 + 20,000 + 37,500 + 10,000/2 = 65,000
Creditors or Trade Payable Turnover Ratio = 3,90,000/65,000 = 6 Times
Average payament period in days = 365 days/6 (creditors turnover ratio) = 61 days

55. Creditors Turnover Ratio = Net Cr. Purchase/Average Trade payables

Net Credit Purchase = Total Purchase – Cash purchase – Return outwards
3,90,000 = 5,00,000 – 1,00,000 (20% of total purchase) – 20,000
Total Trade Payables = 50,000 + 47,500 = 97,500
Creditors Turnover Ratios = 3,90,000/97,500 = 4 Times
Average Payament Period = 365 days/4 (creditors turnover ratio) = 92 days

56. Liquid Ratio = Liquid Assets/Current Liabilities

Liquid Assets = Total Current Assets – Closing Stock – Prepaid Insurance
88,000 = 1,00,000 – 10,000 – 2,000
Liquid Ratio = 88,000/60,000 = 1.47
Debt Equity Ratio = Debt/ Equity = 63,500/191,500 = 0.33:1
Debts = Fixed Assets + Total Current Assets + Preliminary Exp – Sh. Capital – Reserves and
Surplus – Total Current Liabilities
Equity = Sh.Capital + Reserves and Surplus – Preliminary Exp

57. Debt Equity Ratio = Debt/Equity = 2,00,000/4,00,000 = 0.5:1

Debt = 1,50,000 + 50,000
Equity = 3,00,000 + 1,00,000
Working Capital Turnover Ratio on Sales = 30,00,000/4,00,000 = 7.5
Working Capital Turnover Ratio on Cost = 22,50,000/4,00,000 = 5.63
Working Capital = Other Current Assets + Closing inventory – Current Liabilities

58. Debt Equity Ratio = Debt/Equity = 1,00,000/3,50,000 = 0.29

Equity = Sh.Capital + General Reserve + Profit – Preliminary Exp
Interest Coverage Ratio = PBIT/Interest payable = 1,59,000/9,000 = 17.67 Times
PBIT = Profit + Tax + Interest i.e. 75,000 + 75,000 + 9,000
Working Capital Turnover Ratio = 7,50,000/50,000 = 15 Times

59. Current Ratio = CA/CL = 53,000/26,500 = 2:1

CA = Inventory + Debtors + Cash + Prepaid Exp
CL = Creditors + Bank Overdraft
Acid Test Ratio = 29,400/26,500 = 1.11:1
Liquid Assets = Debtors + Cash
Working Capital Turnover Ratio = 15,900/26,500 = 0.6 Times
Working Capital = CA – CL = 53,000 – 26,500 = 26,500

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60. Gross Profit Ratio = Gross Profit/Net Sales x 100
Credit sales = 1,20,000 i.e. 75% of Total Sales
Total Sales = 1,20,000 x 100/75 = 1,60,000
Cash Sales = 1,60,000 – 1,20,000 = 40,000
Cost of Goods sold = Purchases – Excess of closing inventory over opening inventory
1,38,000 – 10,000 = 1,28,000
Gross Profit = Net Sales – Cost of goods sold
32,000 = 1,60,000 – 1,28,000
Gross Profit Ratio = 32,000/1,60,000 x 100 = 20%

61. Gross Profit Ratio = Gross profit/Net Sales x 100

Credit Sales are twice of its cash sales i.e. 1,00,000
Hence, Cash sales = 1,00,000/2 = 50,000
Total Sales = Cash Sales + Cr. Sales
1,50,000 = 1,00,000 + 50,000
Gross Profit = 1,50,000 x 20/120 = 25,000
Gross Profit Ratio = 25,000/1,50,000 x 100 = 16.67%

62. Gross Profit = 10,00,000 x 25/125 = 2,00,000

Gross Profit Ratio = Gross Profit/net sales x 100 = 2,00,000/10,00,000 x 100 = 20%

63. Stock Turnover Ratio = Cost of goods sold/Average Inventory = 6

= Cost of goods sold/40,000 = 6
Cost of goods sold = 40,000 x 6 = 2,40,000
Gross Profit = 2,40,000 x 25/100 = 60,000
Sales = Cost of goods sold + Gross Profit
3,00,000 = 2,40,000 + 60,000

64. Stock Turnover Ratio = Cost of goods sold/Average Inventory = 8

= Cost of Revenue from operations/40,000 = 8
Cost of goods sold = 40,000 x 8 = 3,20,000
Gross Profit = 3,20,000 x 25/100 = 8,00,000
Sales = 3,20,000 + 80,000 = 4,00,000
Gross Profit Ratio = Gross Profit/Net Sales x 100 = 80,000/4,00,000 x 100 = 20%

65. Operating Profit Ratio = 100% - Operating Ratio

8% = 100% - 92%
Operating Profit = Net Sales x 8/100 = 2,80,000 x 8/100 = 22,400
Gross Profit = Operating Profit + Operating exp
67,900 = 22,400 + 45,500
Cost of goods sold = Net Sales – Gross Profit
2,12,100 = 2,80,000 – 67,900

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