Question No 1:

Answer:
INTRODUCTION:
A journal is a thorough account that documents all of a company's financial activities. It
is used for account reconciliation in the future and for the transfer of data to other formal
accounting records, including the general ledger. A journal often uses the double-entry
accounting approach and includes the date of a transaction, the accounts that were
impacted, and the sums.
Concept:
A journal is a written record or digital file maintained as a book, spreadsheet, or data in
accounting software for accounting reasons. A bookkeeper records the financial
transaction as a journal entry whenever a business transaction occurs. The journal entry
will also specify which business accounts the spending or income affects. In order to
maintain objective records, journaling is crucial. It also enables quick inspections and
records transfers later on in the accounting process. Along with the general ledger,
journals are frequently inspected as part of a trade or audit procedure. Sales, costs,
cash flow changes, inventory changes, and debt are all common items that are noted in
a diary. It is suggested to capture this data right away rather than later so that the data
is precisely captured without having to guess at a later time.
In addition to being crucial for a company' performance by allowing for proper planning
and mistake detection, maintaining an accurate journal is essential when filing taxes.

Mrs. Veena’s Journal:

Date Particulars L.F Dr. Amount Cr. Amount
(Rs.) (Rs.)
03 Dec-  Cash account Dr. 5000 -
 Business Bank Account Dr. 500000
 To Capital Account
(being the amount 505000/
invested by Mrs. Veena
in her business)
 Dec-05  Furniture Account Dr. 60000
 To Business Bank
Account 30000
 To creditor Account 30000
(being furniture
purchased 50% from
bank and 50% on
credit)
Dec-07  Purchase Account Dr 315000
 To Business Bank 315000
Account (being goods
purchased from
business bank account)
Dec-08  Business Bank Account Dr. 500000
 To sell Account (being
entire goods sold) 500000

Dec-10  Rent Account Dr 10000

 Electricity Account Dr 10000
 Salary to Employee Dr. 10000
Account
 To Business Bank 30000
Account (being rent
electricity salary paid
from business bank
account)

Conclusion
Being paid for the bank's salaries, power, and rent
 1,410,000 carried forward to balance

Question No 2:
Answer:
INTRODUCTION:
The production of a profit and loss account is a time-consuming operation, but it is also
a highly intriguing one, as stated in the questioned statement. I wholeheartedly concur
with this remark since a profit and loss statement helps us to understand the profitability
of a firm's operations. There are eight parts that go into creating a profit and loss
statement, and five of them are listed here.
A company’s statement of profit and loss is portrayed over a period of time, typically a
month, quarter, or fiscal year.
The main categories that can be found on the P&L include:

 Revenue (or Sales)

 Cost of Goods Sold (or Cost of Sales)
 Selling, General & Administrative (SG&A) Expenses
 Marketing and Advertising
 Technology/Research & Development
 Interest Expense
 Taxes
 Net Income
Concept and application

 Gross profit:
Gross profit is the amount of money a company keeps after deducting all of the
expenses incurred in producing and offering its goods or services. By subtracting the
cost of goods sold (COGS) from your total sales, you may determine gross profit.
Include all items sold during a financial quarter when computing total sales; do not
include sales of fixed assets like buildings or equipment. Gross profit is a metric
reflecting how well a business uses labour and resources to produce items or provide
services to customers. When evaluating a company's financial performance and
profitability, this number is crucial. You may better comprehend revenue-generating
expenses by looking at gross profit. The gross profit value declines when the cost of
goods sold (COGS) rises, leaving you with less money to cover operational costs. You
will have more money available to spend on running your firm if the profit rises as the
COGS value falls.
Gross profit = Total revenue – Cost of goods sold

 Cost of Goods Sold (COGS):

The direct expenses of manufacturing the products that a business sells are referred to
as its cost of goods sold (COGS). The cost of the labour and materials directly
employed to make the item are also included in this sum. It doesn't include indirect
expenditures like those associated with the sales staff and distribution. As a company's
gross profit is calculated by subtracting COGS from its revenues, COGS is a crucial
financial statement statistic. The gross profit is a measure of profitability that assesses
how effectively a business manages its workers and resources during the production
process.
COGS = Beginning Inventory + P − Ending Inventory
Where P = Purchases during period

 Operating Profit:
Operating expenses are subtracted from gross profit to get operating profit. All costs
involved in the regular course of business, such as rent, salaries, insurance,
maintenance, etc., are included in expenditures.

 Net Profit:
Net profit is the amount of money your company makes during a specific time period
after subtracting all operational, interest, and tax costs. You need to know a company's
gross profit to calculate this figure. Net loss is the term used when net profit is negative.
Net profit = Gross profit – Expenses

 Income Tax:
The word "income tax" refers to a category of tax that governments levy on revenue
produced by organizations and people under their control. Taxpayers are required by
law to file an income tax return each year in order to establish their tax liabilities.
Governments receive funding from income taxes. They are used to pay for obligations
owed to the government, fund public services, and supply citizens with goods. Many
states and local governments, in addition to the federal government, also demand
payment of income tax.
To calculate income tax, you’ll need to add up all sources of taxable income earned in a
tax year. The next step is calculating your adjusted gross income (AGI). Once you have
done this, subtract any deductions for which you are eligible from your AGI.
Conclusion:
One of the main jobs of a professional financial analyst is to analyze the P&L of a
company in order to make recommendations about the financial strength of the
company, attractiveness of investing in it, or acquiring the entire business.
Examples of P&L statement analysis include:
  Comparing year-over-year numbers (horizontal analysis) as well as industry
benchmarking
 Looking at margins: gross profit margin, EBITDA margin, operating margin, net
profit margin
 Trend analysis: are metrics improving or deteriorating
 Rates of return: return on equity (ROE), return on assets (ROA)
 Valuation metrics: EV/EBITDA, P/E ratio, Price to Book, etc.

Question No 3A:
INTRODUCTION
A trial balance is an accounting worksheet where the balances of all ledgers are totaled
into equal amounts in the columns for the debit and credit accounts. A corporation
occasionally creates a trial balance, often at the conclusion of each reporting period. To
check that the entries in a company's bookkeeping system are mathematically valid, a
trial balance is generally produced. A trial balance is not a complete audit of the
accounts; rather, it tests a key component of the books in question. A trial balance is
frequently the first phase in an audit process since it enables auditors to confirm that the
bookkeeping system is free of mathematical mistakes before going on to more
complicated.

BALANCE SHEET OF Z AND X, LLP

LIABILITIES ASSETS

Particulars Amount Particulars Amount

Common stock 1000 Equipment 1500

Retained 860 Accounts 250

Earnings Receivable
Unearned 200 Supplies 150
Revenue
 Salaries 150 Cash 550
payable
Accounts 540 Prepaid 300
payable Insurance

Conclusion:
A worksheet with two columns—one for debits and one for credits—called a trial
balance is used to check the accuracy of a company's bookkeeping. All business
transactions for a corporation during a specific time period are included in the debits
and credits, including the total of accounts for assets, costs, liabilities, and revenues. A
trial balance's debits and credits must add up in order for there to be no arithmetic
mistakes. The accounting systems may still contain inaccuracies or errors,
nevertheless. Between comprehensive annual audits, a company's financial situation
can be evaluated using a trial balance.

Question No 3B:
INTRODUCTION:
Current ratio:
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 may use its present assets to the fullest extent possible to pay down its
current liabilities and other payables.
In general, an appropriate current ratio is one that is comparable to the industry norm or
just a little bit higher. The likelihood of distress or default may be increased by a current
ratio that is lower than the industry norm. In a similar vein, if a company's current ratio is
significantly higher than that of its peer group, it suggests that management might not
be making the most use of its resources. Because it includes all current assets and
current liabilities, unlike some other liquidity measures, the current ratio is named
current. The working capital ratio is another name for the current ratio.
Concept:
Current ratio is the relation of Current Asset and Current liability and it can be calculated
by below mention equation:
Current Ratio = Current Asset/Current Liability
For given balance sheet of Z and X, LLP,
Current Ratio = (250+150+550+300) / (200+150+540) = 1.40
Relevance:
The current ratio is calculated to determine a company's capacity to pay down its short-
term commitments using its current assets. All present assets are expected to be
transformed into cash in order to settle the company's immediate liabilities. In other
words, this ratio is determined to assess a firm's ability to sustain itself over the near
term. One of the best current ratios is 2:1. Thus, the firm's current liabilities should be
equal to double its current assets. However, if the current ratio is too high, it is assumed
that funds are idle, the company has poor inventory control, and the turnover of its
debtors is slow.
Conclusion:

KEY LESSONS
 The current ratio contrasts the total current assets and liabilities of a business.
 These are often described as obligations that will be paid in a year or less and
assets that are cash or will be converted into cash in a year or less.
 The current ratio enables investors to compare a company's financial
performance to that of its peers and rivals on an equal footing and to learn more
about a company's capacity to pay down short-term debt using current assets.
 The difficulty of comparing the metric across industrial groupings is one
shortcoming of the existing ratio.
 The exact asset and debt balances were overgeneralized, and trend information
was lacking.