NMIMS Global Access

School for Continuing Education (NGA-SCE)

Course: Financial Accounting & Analysis
Internal Assignment Applicable for December 2022 Examination

Question 1:

The Golen rules are:

Real Account: DR. what comes in

CR. what goes out

Personal Account: DR. the receiver

CR. the giver

Nominal Account: DR. all expenses and losses

CR. all incomes and gains

3-Dec - Mrs. Veena started business by introducing cash Rs5000 and Rs

500000 as transfer from her saving bank account in the business

Journal entry:

Cash a/c Dr. 5,000

Bank A/c Dr. 5,00,000

To Capital A/c 5,05,000

(being a cash and bank balance contributed in capital to start a business)

5-Dec - She Purchased furniture worth Rs 60000, 50% payment made through the bank account of the
business and the rest amount is payable

Furniture A/c. Dr. 60,000

To Cash 30,000

To Bank 30,000

7-Dec - She purchased goods for sale, costing her Rs 315000 and made the payment through the business
bank account.

Purchase A/c. Dr 3,15,000

To Bank. 3,15,000
 8-Dec - She sold off the entire goods at Rs 500000

Bank A/c. Dr 5,00,000

To Sales 5,00,000

10-Dec - She paid rent, electricity, salary to employees Rs10000 of each type of expense through the bank
account

Rent A/c Dr. 10,000

Electricity A/c Dr. 10,000

Salary A/c Dr. 10,000

To Bank 30,000

Question 2: The Profit and Loss Account statement of an enterprise is essential for representing the state of
business activities in an organization.

Following are the key components required for the preparation of a P&L Account.

Components:

1) Revenue: Revenue is the sum of the revenue earned from the operating activities of a business and the
other non-operating income earned by a business. For instance, for a manufacturing unit, the operating income
can be the sale of finished goods. Non-Operating Income can be interest earned on financial investments.

2) Cost of Goods Sold: The Cost of Goods Sold indicates the total cost incurred in the production of goods
and services. It includes costs incurred in the purchase of raw materials, direct labour and production.

Gross Profit is derived from the deduction of the Cost of Goods sold from Total Revenue.

3) Operating Expenses: Operating Expenses include all the expenses involved in the normal course of
operation like rent, salaries, insurance, maintenance etc.

4) Depreciation and Financial Charges: Depreciation is charged as a deduction in the value of fixed assets
on the account of wear and tear or obsolescence. Similarly, financial charges like interest on loans are a
charge on profits paid to debtors of the company.

5) Tax Rate: To arrive at the Net Profit, first expenses (3) and (4) are deducted from the Gross Profit, post
which the applicable tax is deducted.
Question 3 a:

LIABILITIES AMOUNT ASSETS AMOUNT

Retained Earnings 860 Account Receivable 250
Salaries Payable 150 Supplies 150
Accounts Payable 540 Equipment 150
Unearned Revenue 200
Cash 550
Prepaid Insurance 300
Common Stock 1000

Question 3 b:

Current Ratio - Current Asstes/Current Liabilities

= 550/540

= 1.018

A liquidity ratio called the current ratio assesses a company's capacity to settle short-term debts or those that
are due within a year.
It explains to investors and analysts how a business can use its present assets to the fullest extent possible to
pay down its current liabilities and other payables.