3b) Old price 500 old qty 20000

New price 400 new qty 25000

Difference in price = 100 (500-400)

= 20000

Difference in quantity 5000 (25000-20000)

= 5000 = 500

100 20000

= 2500000

2000000

=5

= 1.25
3b) ratio =

Current ratio = current assets

current liabilities

= 1250000

890000

= 1.4044 (approx.)

= 1.4:1 (approx.)

3a)

Y = 20000

Y1 = 25000

Y = 25000-20000=5000

Q= 40units

Q1= 60units

Q = 60-40 = 20

The formula for calculating income elasticity of demand is

Ey = Q x Y

Y Q

= 20 x 20000

5000 40

= 400000

200000

= 2.
B)

P = 500

P= 100 (a fall in price; 500-400=100)

Q = 20000

Q= 5000 (25000-20000)

By substituting values in above formula, we get:

Ep = Q x P

P Q

= 5000 x 500

100 20000

= 2500000

2000000

= 1.25
1) Revenue from operations (sales)
Revenue can be used for services as well as sales. Any income generated from normal course of
business is revenue from operations

2) Other income
Any income apart from revenue from operations are known as other incomes.
Eg ; deposit of cash in the bank and bank gives interest on it, this is not revenue from sales, sale
of fixed assets.
3) –
4) Expenses:
i) Cost of materials consumed – purchase of raw materials/components/spareparts
ii) Purchase of stock in trade-(purchase and sale of finished goods)
iii) Changes in inventories of F.G, W.I.P, Stock in trade
Out of purchase of raw materials, some units wont be sold and remains with the entity
which is known as opening stock- closing stock = change in stock in trade
So whatever change in F.G, W.I.P entity has is shown here
Change in inventory : consumed that inventory hence positive side
Change in inventory: negative side, expenses
iv) Employee benefit expense
It is an expense done for the benefit of employees working for an organization like
bonus, perquisites, cost of recruitment of employees etc
v) Finance cost:
If any amount is paid on the finance raised, it is called finance cost
Eg; payment of interest to bank for loan , payment of interest on debentures
vi) Depreciation and amortization expense
Fall in value of fixed asset because of the wear and tear of it, after use this depreciation
is considered as an expense. There are various methods of calculating depreciation. It is
a non-cash expense.
For tangible asset- it is depreciation
For intangible asset- it is amortization
Eg- purchased a license which will expire in 3years so every year 1/3 rd cost ie 33.33%
value of license falls
5) –
6) Exceptional items:
Not recorded in balance sheet. If certain item which is not going to recur again and again every
year, it is not in course of business, it is required to be shown as exceptional item
Eg; major flood : repair machinery, loss of stock, repair of infrastructure which causes significant
loss then it is exceptional item,
land purchased for 5 lakhs in 1990, now in 2022 its value is 1cr; so the profit of 95 lakh is
exceptional item which is not going to recur again.