Financial and

Managerial Accounting

Name - Maitri Shah

DM22B035
Q-1 JOURNAL ENTRY
Date Payment particulars L. Amount Amount
F. Debited Credited
1 July Cash a/c Dr 80,000
Furniture a/c Dr 20,000
To Capital a/c 1,00,000
(Being cash and and furniture
brought in business)
2 July Bank a/c Dr 30,000
To Cash a/c 30,000
(Being cash deposited in bank)
3 July Purchase a/c (12,000-6%=11280) Dr 11,280
To Mahindra a/c 11,280
(Being goods purchased at 6%
trade discount)
5 July Cash a/c Dr 2,000
Narendra a/c Dr 4,750
(7500-10%-2000=4750)

To Sales a/c 6,750

(Being goods sold at 10% trade
discount)
6 July Drawing a/c (Ins. prem) Dr 6,000
Drawing a/c (Sch. fees) Dr 2,200
To Cash a/c 8,200
(Being expenses paid from the
shop)
8 July Mahindra a/c Dr 7,200
To Bank a/c 7,200
(Being payment made to Mahindra )
10 July Bank a/c (with disc.) Dr 4,750
To Narendra a/c 4,750
(Being payment received )
11 July Furniture a/c Dr 5,000
To Bank a/c 3,000
To Cash a/c 2,000
(Being furniture purchased)
Total amounts 1,77,260 1,77,260
Q-2 RATIO ANALYSIS

Concept:
Accounting Ratios-
Accounting ratios, also known as financial ratios, are used to
calculate a company's performance and profitability based
on its financial statements. They provide a means of
expressing the relationship between one accounting data
point and another and are the source of ratio analysis.

Given:
Stocks In Trade=200000
Cash=40000
Bills Receivable=10000
Sundry Debtor=100000
Bills Payable=50000
Debenture@12%(Current Portion Of Long Term Debt,
Payable In One Year Time Period)=50400
Sundry Creditor=100000
Share Capital=200000
Reserves= 40000
Inventory=200000

Find:
Current ratio
Inventory to working capital ratio
Debt to equity ratio
Proprietary ratio
Capital gearing ratio
Solution:
Current Ratio= ( Current Assets/Current Liabilties )
Currents Assets= cash+ A/c Receivable+ Inventory+ Other
Current
Assets( liquidated in less than 1 year)
Current Liabilities= A/c Payable + Wages + Taxes payable+
shorts
debt( need to be paid less than 1 year)+ current portion of
long term
debts
Total Current Assets =40000+10000+200000+100000
=350000
Total Current Liabilities=50000+50400+100000
=200400
Current Ratio= 350000/200400
Current Ratio= 1.74

Inventory To Working Capital Ratio:=

( Inventory/Working Capital )
Inventory=200000

Working Capital=Total Current Assets - Total Current

Liabilities

Working Capital=350000 - 200400 = 146000

Inventory To Working Capital Ratio = 200000 / 146000
Inventory To Working Capital Ratio= 1.369
 Debt To Equity Ratio=
( Total Debt / (Shareholder Equity(Capital)+ Reserves))
Total Debt=Short Term Debt+ Long term Debt + Other
Fixed
Payments=420000
Total Equity= Share holders Equity(Capital)+Reserves
=200000+40000=240000

Debt To Equity Ratio=420000/240000=1.75

Proprietary Ratio: = (Shareholders Funds/ Total Assets)
Shareholders Funds= Share Capital+ Reserves
Share Capital=200000
Reserves= 40000
Shareholders Funds=200000+40000-240000
Total Assets=840000

Proprietary Ratio=240000/840000=0.28
Capital gearing ratio= Common Stockholders' Equity /
Fixed Interest bearing funds
Common stockholder's Equity
= 200000+30000+40000=270000

Capital Gearing Ratio = 270000/420000

Capital Gearing Ratio = 0.64
Hence, from the balance sheet of Manco Ltd. we can conclude that
it's-
Current Ratio= 1.74
Inventory To Working Capital Ratio= 1.369
Debt To Equity Ratio=420000/240000=1.75
Proprietary Ratio=240000/840000=0.28
Capital Gearing Ratio = 0.64
Q-3 DECISION-MAKING

(a) The break-even point in dollars using the contribution

margin (CM) ratio.
Contribution Margin= Sales -Variable cost
=$30-$20 =$10
Contribution Margin Ratio= Sales -Variable cost/Sales
= $10/$30 33.33%
Break Even Sales (Dollars)
= Fixed Cost/Contribution Margin Ratio
=$200,000/33.33%
= $ 600060

(b) The margin of safety percentage assuming actual sales

are $715,000 - 600,060 = 114,940
Margin of Safety Margin of Safety / Sales
= Margin of Safety %
=114,940/715,000
= 16.08%

(c) The sales required in dollars to earn net income of

$120,000.
(Fixed Costs + Target Income) / Contribution Margin Ratio
=$200,000+120,000)/33.33%
=320,000/0.3333
=$960,096
Thank you