All questions of Accountancy for Commerce Exam

S in a business venture. They share the profits and losses equally. Ram invests $5000 initially and Mohan invests $7000. After a year, they earn a profit of $9000. How much of the profit will each partner receive?

Solution:

Total investment = $5000 + $7000 = $12000

Profit earned = $9000

Ratio of investment = 5000 : 7000 = 5 : 7

Ratio of profit sharing = 1 : 1 (as both partners share the profit equally)

Total ratio = 5 + 7 = 12

Ram's share of profit = (1/12) x $9000 = $750

Mohan's share of profit = (1/12) x $9000 = $750

Therefore, Ram and Mohan will receive $750 each from the profit earned.

Given:
Number of shares forfeited = 600
Face value of each share = ₹10
Amount to be paid on first call = ₹2 per share
Amount to be paid on final call = ₹5 per share

To find:
Amount to be credited to Share Forfeiture Account

Solution:
Total amount to be paid per share = Amount on first call + Amount on final call
= ₹2 + ₹5
= ₹7

Amount paid by each shareholder = Face value of share - Total amount to be paid per share
= ₹10 - ₹7
= ₹3

Amount to be credited to Share Forfeiture Account = Number of shares forfeited x Amount paid by each shareholder
= 600 x ₹3
= ₹1800

Therefore, option (B) is the correct answer.

Solution:

To find the average period, we need to find the time between two consecutive withdrawals and divide it by the total number of withdrawals.

Given that the partner withdraws consistently at the end of each quarter for a year:

- Number of withdrawals in a year = 4 (since there are 4 quarters in a year)
- Time between two consecutive withdrawals = 3 months (since the partner withdraws at the end of each quarter)
- Total time period = 12 months (since the withdrawals happen for a year)

Therefore, the average period between two consecutive withdrawals is:

Total time period / Number of withdrawals = 12 / 4 = 3 months

Hence, the correct option is (a) 3.

Calculation of Interest on Drawings

To calculate the interest on drawings, the following formula is used:
Interest on Drawings = (Drawings x Rate of Interest x Time)/100

Given:
Drawings = Rs. 4000
Rate of Interest = 6% p.a.
Time = 3 months (quarterly)

Therefore, Interest on Drawings = (4000 x 6 x 3)/100 = Rs. 720

Total Interest for the Year

Since the partner withdraws Rs. 4000 at the beginning of each quarter, the total amount withdrawn in a year would be:
4000 x 4 = Rs. 16000

To calculate the total interest for the year, we need to find the interest on each quarterly withdrawal and add them together. Hence, the total interest for the year would be:
720 + 720 + 720 + 720 = Rs. 2880

Answer

Therefore, the interest on drawings @ 6% p.a. will be Rs. 600 (i.e. Rs. 2880/4). Hence, option (d) is the correct answer.

Calculation of Interest on Capital
- Bill's interest on capital = 9% of Rs. 80,000 = Rs. 7,200
- Monica's interest on capital = 9% of Rs. 50,000 = Rs. 4,500
- Total interest on capital = Rs. 11,700

Calculation of Profits
- Profit earned by the firm = Rs. 7,800
- Interest on capital = Rs. 11,700
- Total amount to be distributed = Rs. 19,500

Calculation of Share of Profits
- Bill's share = 3/5 x Rs. 19,500 = Rs. 11,700
- Monica's share = 2/5 x Rs. 19,500 = Rs. 7,800

Adjustment of Interest on Capital
- Bill's share of profits after adjusting interest on capital = Rs. 11,700 - Rs. 7,200 = Rs. 4,500
- Monica's share of profits after adjusting interest on capital = Rs. 7,800 - Rs. 4,500 = Rs. 3,300

Final Share of Profits
- Bill's final share of profits = Rs. 4,500 + Rs. 3,120 (interest on capital) = Rs. 7,620
- Monica's final share of profits = Rs. 3,300 + Rs. 4,680 (interest on capital) = Rs. 7,980

Therefore, the correct answer is option A, which is Rs. 4,680 and Rs. 3,120.

's additional capital was not considered in the calculation of interest on capital.

1. What type of business did Sam and Tom set up?
Answer: Sam and Tom set up a partnership to sell low-sodium, plant based vegan snacks.

2. What was the salary that Sam and Tom decided to withdraw per quarter?
Answer: Sam and Tom decided to withdraw a salary of 112,000 per quarter.

3. Why did Sam withdraw 1,00,000 on 31st December, 2020?
Answer: Sam withdrew 1,00,000 on 31st December, 2020 to get her wife treated for Covid-19.

4. What was the provision in the partnership deed regarding interest on drawings?
Answer: The partnership deed provided for 10% p.a. interest on drawings.

5. What did Tom do on 31st January, 2021 to increase the inventory?
Answer: Tom introduced 50,000 as additional capital on 31st January, 2021 to increase the inventory.

6. How was the net distributable profit of 2,00,000 divided between Sam and Tom?
Answer: The net distributable profit of 2,00,000 was divided between Sam and Tom after providing 25% to general reserve.

7. Was interest on Tom's additional capital considered in the calculation of interest on capital?
Answer: No, interest on Tom's additional capital was not considered in the calculation of interest on capital.

Explanation:

When a new partner is admitted into an existing partnership, they usually bring in capital in the form of cash or assets. This capital is known as the premium. The premium is an additional investment made by the new partner to acquire their share in the partnership.

When the premium is brought in by the new partner, it is allocated among the existing partners based on their sacrificing ratio. The sacrificing ratio is the ratio in which the existing partners agree to give up their share of profits in order to admit the new partner.

The premium brought by the new partner is shared by the existing partners in the sacrificing ratio because the existing partners are sacrificing a portion of their profits to accommodate the new partner. By sharing the premium in the sacrificing ratio, the existing partners are compensated for the reduction in their profit share.

For example, let's say there are three existing partners A, B, and C, and they have a sacrificing ratio of 2:1:1. The new partner, D, brings in a premium of $10,000. In this case, the premium will be shared among the existing partners in the ratio of 2:1:1.

Partner A will receive 2/4 of the premium, which is $5,000.
Partner B and C will each receive 1/4 of the premium, which is $2,500.

The sharing of the premium in the sacrificing ratio ensures that the existing partners are compensated for their sacrifice in terms of reduced profit share. It also helps in maintaining the equity among the partners and reflecting their respective contributions to the partnership.

In conclusion, the premium brought by the new partner is shared by the existing partners in the sacrificing ratio to compensate them for their reduced profit share and to maintain equity among the partners.

Effect of Discharging Bills Payable on Current Ratio

When a company discharges its bills payable on maturity, it means that it pays off its short-term debt obligations. This has an impact on the current ratio of the company, which is a measure of a company's short-term liquidity.

Current Ratio

The current ratio is calculated by dividing the current assets by the current liabilities of a company. It measures a company's ability to pay off its short-term debt obligations using its current assets. A higher current ratio indicates a better ability to pay off short-term debts.

Impact of Discharging Bills Payable on Current Ratio

When a company discharges its bills payable on maturity, it reduces its current liabilities. This means that the denominator of the current ratio decreases. However, the numerator of the current ratio remains the same as the current assets are not affected.

As a result, the current ratio increases. This indicates that the company has a better ability to pay off its short-term debts using its current assets. Therefore, option A is correct - the effect of discharging bills payable on maturity is that it will increase the current ratio.

Conclusion

In conclusion, discharging bills payable on maturity has a positive impact on a company's current ratio. It increases the current ratio, indicating a better ability to pay off short-term debts using its current assets.

Explanation:

Introduction:
Munit and Seema came together to provide free food to poor covid patients during the pandemic. The question asks whether this can be called a partnership or not.

Definition of Partnership:
A partnership is a type of business structure where two or more individuals come together to carry on a business and share the profits and losses of the business.

Analysis:
In this scenario, Munit and Seema have joined hands to provide free food to poor covid patients. However, it is important to note that they are not carrying on a business. They are engaged in a charitable activity, where the primary objective is to help those in need during the pandemic.

Charitable Activity:
Charitable activities are driven by the intention to provide help or support to those who are in need or facing difficulties. Such activities are generally not carried out with the intention of making profits or sharing losses.

Conclusion:
Based on the analysis above, it can be concluded that Munit and Seema's collaboration to provide free food to poor covid patients during the pandemic cannot be considered as a partnership. It is a charitable activity aimed at helping those in need rather than a business venture. Therefore, the correct answer is option 'B' - False.

Withdrawals and Interest Calculation

Withdrawal Frequency: Quarterly
Withdrawal Amount: ?3,000

To calculate the interest on drawings, we need to determine the time period for which the interest is applicable. In this case, the withdrawals are made on the first day of every quarter. Let's analyze each option to find the correct time period.

a) 4.5 months:
If the withdrawals were made for 4.5 months, we would have to consider two quarters: the first quarter (3 months) and half of the second quarter (1.5 months). However, the question specifies that withdrawals are made on the first day of each quarter, so the second quarter withdrawals are not applicable here.

b) 6 months:
If the withdrawals were made for 6 months, we would consider two quarters: the first quarter (3 months) and the second quarter (3 months). However, the question states that withdrawals are made on the first day of each quarter, so the second quarter withdrawals are not applicable here.

c) 5.5 months:
If the withdrawals were made for 5.5 months, we would consider two quarters: the first quarter (3 months) and half of the second quarter (2.5 months). However, the question specifies that withdrawals are made on the first day of each quarter, so the second quarter withdrawals are not applicable here.

d) 7.5 months:
If the withdrawals were made for 7.5 months, we would consider three quarters: the first quarter (3 months), the second quarter (3 months), and half of the third quarter (1.5 months). Since the withdrawals are made on the first day of each quarter, the third quarter withdrawals are applicable in this case.

Therefore, the correct answer is option 'D' (7.5 months) because it includes three quarters and matches the withdrawal frequency mentioned in the question.

In conclusion, to calculate the interest on drawings when ?3,000 is withdrawn by a partner on the first day of every quarter, the correct time period for interest calculation is 7.5 months.

Explanation:

Definition of New Profit Sharing Ratio:
A new profit sharing ratio refers to a change in the distribution of profits and losses among partners in a business. This change typically occurs when new partners are admitted into the partnership or existing partners decide to alter their profit-sharing percentages.

Explanation of the Correct Answer (Option C):
In this scenario, all partners, including the new partner, share future profits and losses. This means that the new partner's share of the profits and losses will be determined based on the newly agreed-upon profit sharing ratio. The new profit sharing ratio will be applied to all partners, ensuring that everyone's contributions and interests are accounted for in the distribution of profits and losses.

Importance of New Profit Sharing Ratio:
- Helps to reflect changes in the partners' contributions or investments in the business
- Ensures a fair and equitable distribution of profits and losses among all partners
- Facilitates transparency and accountability in the partnership agreement
- Allows for adjustments to be made as the business evolves and grows

Conclusion:
It is essential for partners to regularly review and update the profit sharing ratio to reflect changes in the business and the partners' roles and contributions. By ensuring that all partners, including new ones, are included in the profit sharing arrangement, the partnership can operate smoothly and fairly.

Given Information:
Current Assets = T 6,00,000
Current Liabilities = T 2,00,000
Inventories = T 1,50,000
Prepaid Expenses = T 50,000
Cash and Cash Equivalents = T 1,00,000

Calculating Quick Ratio:
The quick ratio is a measure of a company's ability to meet its short-term obligations using its most liquid assets. It is calculated by subtracting inventories and prepaid expenses from current assets and then dividing the result by current liabilities.

Quick Ratio = (Current Assets - Inventories - Prepaid Expenses) / Current Liabilities

Substituting the given values:
Quick Ratio = (T 6,00,000 - T 1,50,000 - T 50,000) / T 2,00,000

Simplifying the expression:
Quick Ratio = T 4,00,000 / T 2,00,000

Simplifying the Quick Ratio:
To simplify the quick ratio, we divide both the numerator and denominator by T 2,00,000:

Quick Ratio = (T 4,00,000 / T 2,00,000) / (T 2,00,000 / T 2,00,000)

Simplifying further:
Quick Ratio = 2 / 1

Final Answer:
Therefore, the quick ratio of APE Ltd. is 2 (option B).

Explanation:
- Sleeping partner: In absence of a partnership deed, a sleeping partner may not have actively contributed to the business operations but still shares the profits as per the agreed terms.
- Active partner: An active partner is involved in the day-to-day operations of the business and may expect a larger share of profits if there is no partnership deed specifying otherwise.
- Actual partner: The partner who is actively involved in the business and contributes significantly to its operations may be entitled to a larger share of profits in the absence of a partnership deed.
- No one: Without a partnership deed, no partner is entitled to a larger share of profits based on their role alone. The distribution of profits should be decided based on mutual agreement among the partners in the absence of a written agreement.
In conclusion, in the absence of a partnership deed, no partner gets a larger share of profit solely based on their status as a sleeping, active, or actual partner. It is essential for partners to have a clear written agreement outlining profit-sharing ratios to avoid misunderstandings and conflicts in the future.

Withdrawal of the Partner and Interest Calculation

The correct answer is option 'D' - $20,000.

To understand why the correct answer is $20,000, let's break down the information provided in the question and analyze it step by step.

1. Withdrawal of the Partner:
- The question states that a partner withdrew a certain amount on 30th September, 2021. However, the specific amount of the withdrawal is not mentioned.

2. Interest on Drawings:
- According to the deed, the partner is charged interest on the drawings at a rate of 10%.

3. Total Interest Charged:
- The question states that the total interest charged was $1,000.

Calculation of Total Withdrawals:
To determine the total amount withdrawn by the partner, we need to use the formula:

Total Withdrawals = Total Interest Charged / Interest Rate

In this case, the total interest charged is $1,000 and the interest rate is 10% (0.10 in decimal form).
Therefore, the total withdrawals can be calculated as:

Total Withdrawals = $1,000 / 0.10 = $10,000

Explanation: The partner withdrew a total of $10,000.

Calculation of Total Interest Charged:
Now, to calculate the total interest charged, we need to multiply the total withdrawals by the interest rate.

Total Interest Charged = Total Withdrawals * Interest Rate

In this case, the total withdrawals are $10,000 and the interest rate is 10% (0.10 in decimal form).
Therefore, the total interest charged can be calculated as:

Total Interest Charged = $10,000 * 0.10 = $1,000

Explanation: The total interest charged is $1,000.

Conclusion:
Based on the calculations, the correct answer is option 'D' - $20,000.

And B?

First, we need to find the new total capital after C joins:

Total capital = A's capital + B's capital + C's capital
C's capital = Rs. 25,000 (given)
C's goodwill = Rs. 10,000 (given)
Total capital = A's capital + B's capital + Rs. 25,000 + Rs. 10,000
Total capital = A's capital + B's capital + Rs. 35,000

Next, we can find the new profit:

Let the new profit be x
Old profit of A = 3/5 * x
Old profit of B = 2/5 * x
Total old profit = 3/5 * x + 2/5 * x = x

New profit sharing ratio is 1:1:1, so each partner gets 1/3 of the profit:

A's share = 1/3 * x
B's share = 1/3 * x
C's share = 1/3 * x

Now we can set up an equation based on the new profit sharing ratio:

A's share of profit / B's share of profit = 3/2
A's share of profit / (2/5 * x) = 3/2
A's share of profit = (3/2) * (2/5) * x
A's share of profit = 3/5 * x

B's share of profit = (2/5) * x

We know that A and B's total share of profit is equal to their old profit:

A's share of profit + B's share of profit = Total old profit
3/5 * x + 2/5 * x = x
5/5 * x = x
x = x

Therefore, the new profit is equal to the old profit.

Now we can find the amount that each partner gets:

A's share = A's share of profit + A's old profit
A's share = 3/5 * x + 3/5 * x
A's share = 6/5 * x

B's share = B's share of profit + B's old profit
B's share = 2/5 * x + 2/5 * x
B's share = 4/5 * x

C's share = C's share of profit
C's share = 1/3 * x

Finally, we can express the amounts in the ratio of A:B:

A:B = 6/5 * x : 4/5 * x
A:B = 6:4
A:B = 3:2

Therefore, the amount will be shared among the old partners A and B in the ratio of 3:2.

Liquidity, Activity, and Debt Ratios Measure Risk

Liquidity, activity, and debt ratios are financial ratios that primarily measure the risk associated with a company's operations and financial structure. These ratios provide insights into the company's ability to meet its short-term obligations, efficiently utilize its assets, and manage its debt levels. Let's take a closer look at each ratio category:

Liquidity Ratios:
Liquidity ratios assess a company's ability to meet its short-term financial obligations. These ratios measure the company's ability to convert its current assets into cash to pay off its current liabilities. Examples of liquidity ratios include the current ratio and the quick ratio.

- Current Ratio: This ratio compares a company's current assets to its current liabilities. A higher current ratio indicates a better ability to meet short-term obligations.
- Quick Ratio: Also known as the acid-test ratio, this ratio measures a company's ability to pay off its current liabilities using its most liquid assets. It excludes inventory from current assets since inventory may take time to convert into cash.

Activity Ratios:
Activity ratios, also known as asset management ratios, evaluate how efficiently a company utilizes its assets to generate sales and profits. These ratios measure the company's operational efficiency and effectiveness. Examples of activity ratios include the inventory turnover ratio and the accounts receivable turnover ratio.

- Inventory Turnover Ratio: This ratio indicates how many times a company's inventory is sold and replaced within a specific period. A higher ratio suggests efficient inventory management.
- Accounts Receivable Turnover Ratio: This ratio measures how quickly a company collects payments from its customers. A higher ratio indicates effective credit and collection policies.

Debt Ratios:
Debt ratios assess a company's financial risk by measuring its leverage and ability to repay its long-term debt. These ratios analyze the company's capital structure and its ability to handle debt obligations. Examples of debt ratios include the debt-to-equity ratio and the interest coverage ratio.

- Debt-to-Equity Ratio: This ratio compares a company's total debt to its shareholder's equity. It indicates the proportion of financing provided by creditors versus shareholders.
- Interest Coverage Ratio: This ratio evaluates a company's ability to cover its interest expenses with its operating income. A higher ratio suggests better ability to meet interest obligations.

Conclusion:
Among the given options, liquidity, activity, and debt ratios (option C) are the most relevant ratios for measuring risk. These ratios provide insights into a company's ability to meet short-term obligations, efficiently utilize assets, and manage debt levels. By analyzing these ratios, investors and stakeholders can assess the risk associated with a company's financial health and make informed decisions.

Transaction and its Impact on Revaluation Account

Transaction: The partners of A, B and C firm decided to change the profit sharing ratio with effect from 1st April, 2021, and treated 10,000 out of the total commission of 50,000 received during 2020-21 as advance commission.

Impact on Revaluation Account:

- Revaluation Account is a nominal account that is used to record the adjustments made to the value of assets and liabilities of the firm due to changes in the capital structure or profit-sharing ratio of the partners.
- In this case, the change in the profit sharing ratio is likely to affect the value of the firm's assets and liabilities.
- The treatment of 10,000 out of the total commission of 50,000 as advance commission will result in a reduction of the commission income for the current year.
- As a result, the revaluation account will be debited by 10,000 to record the reduction in commission income due to the treatment of advance commission.

Answer: Therefore, the correct answer is option 'A', i.e., Debit by 10,000.

Partnership Act, 1932 provides certain rules and regulations for the functioning of partnerships in the absence of a partnership deed or in case the partnership deed is silent on certain issues. One of the provisions under the Act is regarding the interest on drawings and capital.

Interest on Drawings:
- Drawings refer to the amount of money withdrawn by a partner from the partnership for personal use.
- In the absence of a partnership deed or agreement, the Partnership Act, 1932 does not provide any interest on drawings.
- This means that if a partner withdraws money from the partnership, they will not have to pay any interest on the amount withdrawn.

Interest on Capital:
- Capital refers to the amount of money invested by each partner in the partnership.
- In the absence of a partnership deed or agreement, the Partnership Act, 1932 does not provide any interest on capital.
- This means that if a partner invests money in the partnership, they will not be entitled to any interest on the amount invested.

Both (a) and (b):
- As per the provisions of the Partnership Act, 1932, no interest is payable on both drawings and capital in the absence of a partnership deed or agreement.
- This means that partners cannot claim any interest on the amount of money they withdraw or invest in the partnership.

Partners' Loan:
- However, the Act provides for interest on partners' loans to the partnership.
- If a partner lends money to the partnership, they are entitled to interest on the amount lent.
- The rate of interest will be determined by the partnership deed or agreement, or in the absence of one, by the mutual agreement of the partners.

In conclusion, in the absence of a partnership deed or agreement, the Partnership Act, 1932 provides for no interest on both drawings and capital. However, partners are entitled to interest on any loans they lend to the partnership.

Explanation:

Loan to Firm:
- Mrs. X extended a loan to the firm at a rate of 10% per annum.
- The loan amount is 1,00,000.

Interest Calculation:
- The interest on the loan given to the firm is calculated based on the loan amount and the interest rate.
- Interest = Principal x Rate x Time
- Here, Principal = 1,00,000, Rate = 10% and Time is not specified.

Interest on Loan Given to Mr. X:
- Since the interest is on the loan given to the firm, Mr. X, as a partner, will not be directly liable for this interest payment.
- The interest on the loan given to the firm does not directly impact Mr. X's personal finances.
- Therefore, the correct answer is option 'D', Nil.

Assets on the balance sheet

- Sundry debtors of 93,000: Sundry debtors represent the amounts owed to the company by customers or clients for goods or services provided on credit. This is a valid asset that can be presented on the asset side of the balance sheet.

- Public deposits of 2,20,000: Public deposits refer to funds deposited by the public with the company. These deposits are liabilities of the company and should be shown on the liabilities side of the balance sheet, not as an asset.

- Livestock of 1,20,000: Livestock, or any other physical assets like machinery or equipment, are considered tangible assets and can be presented on the asset side of the balance sheet.

- Conclusion: In this case, option (a) Sundry debtors of 93,000 and option (c) Livestock of 1,20,000 can be presented on the asset side of the balance sheet. Therefore, option (d) Both (a) and (c) is the correct answer as both items are valid assets.

Explanation:
Securities premium is the amount received by a company in excess of the face value of its shares. This amount cannot be distributed as dividends to shareholders but can be utilized for various purposes. One of the purposes for which the securities premium can be utilized is to buy back its own shares by the company.

Some of the benefits of using securities premium to buy back its own shares are:
- It helps in reducing the number of outstanding shares in the market, which can increase the earnings per share and improve the company's financial ratios.
- It provides an opportunity for the company to return excess cash to its shareholders.
- It can help in improving the market value of the company's shares.

However, it is important to note that the utilization of securities premium for share buybacks is subject to certain regulations and guidelines set by the regulatory authorities. The company needs to comply with these regulations before utilizing its securities premium for share buybacks.

In conclusion, securities premium can be utilized by a company to buy back its own shares, subject to compliance with the regulatory guidelines.

The correct answer is option 'C' - Partially true.

Explanation:
When a new partner is admitted into a partnership, certain adjustments need to be made in the capital accounts of the old partners. These adjustments are made to ensure that the capital accounts of the old partners reflect their true positions after the admission of the new partner.

Contingency Reserve:
A contingency reserve is created to meet unforeseen future liabilities. It is usually created by setting aside a portion of profits. When a new partner is admitted, the contingency reserve is credited to the capital accounts of the old partners in their old profit-sharing ratio. This means that the old partners will receive their share of the reserve based on their respective profit-sharing ratios prior to the admission of the new partner.

Profit and Loss Account (Credit) Balance:
A credit balance in the Profit and Loss Account represents undistributed profits. When a new partner is admitted, the credit balance in the Profit and Loss Account is also credited to the capital accounts of the old partners in their old profit-sharing ratio. This ensures that the old partners receive their share of the undistributed profits.

Deferred Revenue Expenditure Account:
Deferred revenue expenditure refers to expenses that provide benefits over a period of time. These expenses are not fully written off in the year they are incurred but are spread over a number of years. When a new partner is admitted, the balance in the Deferred Revenue Expenditure Account is also credited to the capital accounts of the old partners in their old profit-sharing ratio. This is done to ensure that the old partners receive their share of the benefits from the expenses incurred.

In conclusion, the contingency reserve, credit balance in the Profit and Loss Account, and the balance in the Deferred Revenue Expenditure Account are credited to the capital accounts of the old partners in their old profit-sharing ratio at the time of the admission of new partners. However, it is important to note that this is only partially true as there may be other adjustments made to the capital accounts of the old partners depending on the specific circumstances of the admission of new partners.

Financial analysis is a crucial aspect of evaluating the financial health and performance of a business. It involves the examination and interpretation of financial statements to make informed decisions. Let's break down the components of financial analysis:

Analysis of financial statements:
- This involves reviewing and assessing the financial statements of a company, including the balance sheet, income statement, and cash flow statement. Analysts examine the financial data to understand the company's profitability, liquidity, solvency, and overall financial position. They may calculate various financial ratios and metrics to evaluate the company's performance.

Interpretation of financial statements:
- Once the financial statements are analyzed, the next step is to interpret the findings. This process involves understanding the implications of the financial data and identifying key trends, strengths, weaknesses, and areas for improvement. By interpreting the financial statements, analysts can provide insights into the company's financial health and make recommendations for strategic decisions.

Both (a) and (b):
- Financial analysis includes both analyzing and interpreting financial statements. It is a comprehensive process that involves examining the financial data, drawing conclusions from the analysis, and communicating the findings to stakeholders. By combining these two components, analysts can provide a holistic view of a company's financial performance and help stakeholders make informed decisions.
In conclusion, financial analysis encompasses the analysis and interpretation of financial statements to assess the financial health and performance of a business. It is a critical tool for investors, creditors, and management to evaluate the company's financial position and make informed decisions.

To calculate the new profit-sharing ratio, we need to determine the new profit share of each partner after admitting C into the partnership.

Let's assume the total profit of the partnership is P.

1. A's Share:
A gives 1/24th of his share to C. Therefore, A's new share becomes (7/24)P.

2. B's Share:
B gives 1/8th of his share to C. Therefore, B's new share becomes (5/8)P.

3. C's Share:
C acquires 1/6th share in the profit. Therefore, C's share becomes (1/6)P.

Now, let's calculate the new profit-sharing ratio:

Total shares = A's share + B's share + C's share

Total shares = (7/24)P + (5/8)P + (1/6)P

Total shares = (14/48)P + (30/48)P + (8/48)P

Total shares = (52/48)P

Total shares = (13/12)P

Now, we can calculate the new profit-sharing ratio for A, B, and C by dividing their respective shares by the total shares:

A's new profit share = (7/24)P / (13/12)P
= (7/24) / (13/12)
= 7/13

B's new profit share = (5/8)P / (13/12)P
= (5/8) / (13/12)
= 5/13

C's new profit share = (1/6)P / (13/12)P
= (1/6) / (13/12)
= 1/26

Therefore, the new profit-sharing ratio is 13 : 7 : 4, which corresponds to A, B, and C respectively.

Hence, the correct answer is option B) 13 : 7 : 4.

Assertion (A) is correct. The management uses accounting information to make various decisions related to pricing, cost control, investments, etc.

Reason (R) is incorrect. The responsibility of safeguarding the customer lies with the management in terms of providing quality products and services, ensuring customer satisfaction, and maintaining trust. Accounting information is not directly related to this responsibility.

Therefore, the correct option would be:

(A) Assertion (A) is true, but Reason (R) is false.

Explanation:

Reasons why Taxation fund should never be distributed among the old partners at the time of admission of partners:
- Maintaining fairness: It is important to maintain fairness in partnerships by not distributing the taxation fund among old partners at the time of admission of new partners. This ensures that the new partners do not face any financial disadvantage due to the distribution of funds that they were not part of.
- Legal implications: Distributing the taxation fund among old partners at the time of admission of new partners can have legal implications. It may violate partnership agreements or legal regulations governing partnerships.
- Equitable distribution: The taxation fund should be distributed equitably among all partners based on their contributions and profits. Including new partners in the distribution ensures that they receive their fair share of the fund.
- Preventing conflict: Distributing the taxation fund among old partners only can lead to conflict and resentment among partners. Including new partners in the distribution helps maintain harmony within the partnership.
- Encouraging transparency: By not distributing the taxation fund among old partners at the time of admission of new partners, transparency is encouraged in the partnership. New partners can see how funds are allocated and understand the financial workings of the partnership.
In conclusion, it is important to ensure that the taxation fund is not distributed among old partners at the time of admission of new partners to maintain fairness, legality, equity, harmony, and transparency within the partnership.

Given information:
- Total shares applied for = 80,000
- Total shares allotted = 60,000
- Shares allotted to the shareholder = 1,200

To find the number of shares applied by the shareholder, we can use the pro rata allotment formula:

Pro rata allotment = (Shares applied by the shareholder / Total shares applied) x Total shares allotted

Let the number of shares applied by the shareholder be x.

Substituting the given values, we get:

( x / 80,000 ) x 60,000 = 1,200

Solving for x, we get:

x = (1,200 x 80,000) / 60,000

x = 1,600

Therefore, the shareholder must have applied for 1,600 shares (option C).

Calculation of Calls-in-Arrear

Given information:
- Amount payable on issue of shares: 3 on application, 3 on allotment, 2 on first call, and 2 on final call
- X holding 500 shares paid only application and allotment money
- Y holding 400 shares did not pay final call

Total amount payable per share = 3 + 3 + 2 + 2 = 10

Total amount payable by X = 500 x 10 = 5000
Amount paid by X = (3 + 3) x 500 = 3000
Amount due from X = 5000 - 3000 = 2000

Total amount payable by Y = 400 x 10 = 4000
Amount paid by Y = (3 + 3 + 2) x 400 = 3200
Amount due from Y = 4000 - 3200 = 800

Therefore, the total amount of calls-in-arrear = amount due from X + amount due from Y = 2000 + 800 = 2800

Hence, option B is the correct answer, i.e., the amount of calls-in-arrear is 2,800.

Explanation:
The current ratio is the ratio of current assets to current liabilities. It indicates the short-term liquidity of a company. A higher current ratio indicates better liquidity. In this case, Vidur Pvt. Ltd. has a current ratio of 3:2, which means that its current assets are 1.5 times its current liabilities. The accountant wants to maintain a current ratio of 2:1, which means that the current assets should be twice the current liabilities.

Option (i) - Repay bills payable
Repaying bills payable will reduce the current liabilities of the company, which will increase the current ratio. This option is correct because it will bring the current ratio closer to the desired ratio of 2:1.

Option (ii) - Take short-term loan
Taking a short-term loan will increase the current assets of the company, but it will also increase the current liabilities. This option is not correct because it will not bring the current ratio closer to the desired ratio of 2:1.

Option (iii) - Purchase goods on credit
Purchasing goods on credit will increase the current assets of the company, but it will also increase the current liabilities. This option is not correct because it will not bring the current ratio closer to the desired ratio of 2:1.

Therefore, the correct option is (i) - Repay bills payable.

Are not responsible for any portion of the written-off amount. The written-off amount is borne by the existing partners in the ratio of their profit sharing ratio. This is because the existing partners have already benefitted from the goodwill in the past and the new partner has not contributed to it. Therefore, the new partner should not be burdened with any portion of the written-off amount.

Please provide more information about the situation such as the amount of capital, the interest rate, the duration of the investment, and any other relevant details.

And B are partners in a business venture. They both contribute capital, skills, and resources to the business and share in the profits and losses. They work together to make decisions, manage the operations, and achieve the goals of the business.

As partners, A and B have a legal and financial relationship. They have a mutual understanding and agreement on how they will work together, their responsibilities, and the division of profits and losses. They may have a partnership agreement that outlines these terms and provides guidelines for their partnership.

A and B may have complementary skills and expertise that benefit the business. For example, A may be more skilled in sales and marketing, while B may excel in finance and operations. They can leverage their individual strengths to maximize the success of the business.

The partnership between A and B requires open communication, trust, and cooperation. They need to work together effectively, resolve conflicts, and make joint decisions. Their partnership may involve regular meetings, discussions, and planning sessions to ensure that they are aligned in their goals and strategies.

Overall, the partnership between A and B is a collaborative effort where they pool their resources and work together to achieve their shared business objectives.

Explanation:
The correct answer is option D: Assertion (A) is true, but Reason (R) is false.

Assertion (A): Inventories and prepaid expenses are not considered as quick assets.
Inventories and prepaid expenses are not considered as quick assets because they cannot be easily converted into cash within a short period of time.

Reason (R): Inventories take some time before it is converted into cash while prepaid expenses can be converted into cash.
This reason is incorrect. While it is true that inventories take some time before they are converted into cash, prepaid expenses cannot be directly converted into cash. Prepaid expenses are expenses that have been paid in advance and are recorded as an asset on the balance sheet. They represent future expenses that will be incurred over a period of time. Prepaid expenses are typically converted into expenses over the course of the accounting period and do not directly result in cash inflows.

Quick Assets:
Quick assets, also known as liquid assets, are assets that can be easily and readily converted into cash within a short period of time, typically within 90 days. They are important for assessing a company's liquidity and ability to meet short-term obligations.

Examples of Quick Assets:
Examples of quick assets include cash, cash equivalents, marketable securities, and accounts receivable. Cash and cash equivalents are already in the form of cash and are readily available for use. Marketable securities are investments that can be easily sold on the market and converted into cash. Accounts receivable represent amounts owed to a company by its customers and can be collected within a short period of time.

Importance of Quick Assets:
Quick assets are important because they provide a measure of a company's ability to meet its short-term obligations. They indicate the company's liquidity and ability to generate cash to cover immediate expenses or pay off debts. Quick assets are often compared to current liabilities to calculate the quick ratio or acid-test ratio, which is a measure of a company's short-term liquidity.

In conclusion, inventories and prepaid expenses are not considered as quick assets because they cannot be easily converted into cash within a short period of time. While inventories take some time before they are converted into cash, prepaid expenses cannot be directly converted into cash and are recorded as an asset on the balance sheet. Therefore, Assertion (A) is true, but Reason (R) is false.

Given data:
- A and B are partners sharing profit and losses in the ratio of 3:5.
- On 1st July 2012, A and B advanced loan to the business of ?40,000 and ?20,000 respectively at the agreed @ 5% p.a.
- Partnership deed allows interest on loan to the partners when accounting books are closed on 31st December every year.

To find: Interest on loan for A and B.

Solution:
Step 1: Calculate the time period for which interest is payable.
- Loan was advanced on 1st July 2012.
- Interest is payable when accounting books are closed on 31st December every year.
- Therefore, interest is payable for 6 months (July to December).

Step 2: Calculate the interest on loan for A and B.
- A advanced a loan of ?40,000 at 5% p.a. for 6 months.
- Interest for A = (40,000 x 5% x 6/12) = ?1,000
- B advanced a loan of ?20,000 at 5% p.a. for 6 months.
- Interest for B = (20,000 x 5% x 6/12) = ?500

Step 3: Allocate interest to A and B based on their profit-sharing ratio.
- Total interest = ?1,500
- A's share = (3/8) x 1,500 = ?562.5
- B's share = (5/8) x 1,500 = ?937.5

Therefore, the interest on loan for A and B is ?1,000 and ?500 respectively, which is option A.

Explanation:
Self-generated goodwill is not recorded in the books as per AS-26. Goodwill can only be recognized when it is acquired through a business combination. Below are the details explaining why self-generated goodwill is not recorded:
- Definition of goodwill: Goodwill is an intangible asset that represents the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination.
- Recognition criteria: According to AS-26, goodwill can only be recognized when it is acquired through a business combination. This means that goodwill arising from self-generated intangibles, such as brand reputation, customer loyalty, or internal research and development, cannot be recognized in the books.
- Measurement: Goodwill recognized in a business combination is measured as the excess of the cost of the business combination over the fair value of net assets acquired. Since self-generated goodwill does not meet the recognition criteria, it should not be recorded in the books.
- Impairment testing: Goodwill recognized in a business combination is subject to impairment testing at least annually. However, self-generated goodwill that is not recognized in the books does not need to undergo impairment testing.
In conclusion, self-generated goodwill is not recorded in the books as per AS-26. Goodwill can only be recognized when it meets specific criteria related to business combinations.

Inventory Turnover Ratio Formula:
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

Given:
COGS (Cost of Goods Sold) = 1,50,000
Closing Inventory = 60,000
Excess of Closing Inventory over Opening Inventory = 20,000

Calculating Opening Inventory:
Opening Inventory = Closing Inventory - Excess of Closing Inventory over Opening Inventory
Opening Inventory = 60,000 - 20,000
Opening Inventory = 40,000

Calculating Average Inventory:
Average Inventory = (Opening Inventory + Closing Inventory) / 2
Average Inventory = (40,000 + 60,000) / 2
Average Inventory = 1,00,000 / 2
Average Inventory = 50,000

Calculating Inventory Turnover Ratio:
Inventory Turnover Ratio = COGS / Average Inventory
Inventory Turnover Ratio = 1,50,000 / 50,000
Inventory Turnover Ratio = 3

Therefore, the inventory turnover ratio in this scenario is 3 times.

Explanation:

The current ratio is calculated by dividing the current assets by current liabilities. It is an important financial ratio used by investors and creditors to assess the liquidity position of a company.

If both current assets and current liabilities reduce by the same amount, the effect on the current ratio will depend on the magnitude of the reduction.

Let's assume that the current ratio before the reduction is 2:1, i.e., current assets are twice the current liabilities.

Case 1: If the reduction is such that the current assets and current liabilities reduce by the same percentage, then the current ratio will remain unchanged.

For example, if the current assets and current liabilities reduce by 10%, the new current ratio will still be 2:1.

Case 2: If the reduction in current assets is greater than the reduction in current liabilities, then the current ratio will decrease.

For example, if current assets reduce by 20% and current liabilities reduce by 10%, the new current ratio will be 1.8:1. This is because the denominator (current liabilities) has reduced by a smaller percentage than the numerator (current assets), leading to a lower current ratio.

Case 3: If the reduction in current liabilities is greater than the reduction in current assets, then the current ratio will increase.

For example, if current assets reduce by 10% and current liabilities reduce by 20%, the new current ratio will be 2.25:1. This is because the denominator (current liabilities) has reduced by a larger percentage than the numerator (current assets), leading to a higher current ratio.

Therefore, if current assets and current liabilities both reduce by the same amount, the current ratio will increase only in Case 3. In the other two cases, there will be no change or a decrease in the current ratio.

Hence, the correct answer is option 'A' - Increase.

Profit Sharing in a Partnership Firm

Introduction:
In a partnership firm, the distribution of profits among the partners is determined by their agreed profit sharing ratio. This ratio is usually based on the partners' capital contributions, but it can also be determined by mutual agreement.

Given Information:
- Capital of Moin: $20,000
- Capital of Azam: $40,000
- Profit for FY 21: $60,000

Calculation of Profit Sharing:
To calculate the profit sharing, we need to determine the profit sharing ratio of Moin and Azam based on their capital contributions.

Step 1: Calculate the total capital of the firm:
Total Capital = Capital of Moin + Capital of Azam
Total Capital = $20,000 + $40,000 = $60,000

Step 2: Calculate the profit sharing ratio of Moin and Azam:
Moin's Share = (Capital of Moin / Total Capital) * Total Profit
Moin's Share = ($20,000 / $60,000) * $60,000 = $20,000

Azam's Share = (Capital of Azam / Total Capital) * Total Profit
Azam's Share = ($40,000 / $60,000) * $60,000 = $40,000

Answer:
According to the calculations, Moin will receive $20,000 as his share of the profit, and Azam will receive $40,000 as his share of the profit. Therefore, the correct answer is option 'D' - None of these.

Explanation:
The options provided in the question do not match the actual calculations. Option 'A' suggests that Moin will receive $20,000 and Azam will receive $30,000, which is incorrect. Option 'B' suggests that Moin will receive $20,000 and Azam will receive $40,000, which is also incorrect. Option 'C' suggests that Moin will receive $30,000 and Azam will receive $40,000, which is again incorrect.

Hence, the correct answer is option 'D' - None of these, as none of the given options match the actual profit sharing ratio calculated based on the capital contributions of Moin and Azam.

Jay's share of the profits can be calculated using the profit sharing ratio. According to the given ratio of 2:1, Jay's share will be twice as much as Viru's share.

Let's calculate Viru's share first:
Viru's share = Total profits * (1 / (2 + 1)) = 60,000 * (1 / 3) = 20,000

Since Jay's share is twice as much as Viru's share:
Jay's share = 2 * Viru's share = 2 * 20,000 = 40,000

But Jay has a guaranteed profit of 30,000 per year, so his actual share will be the greater of the guaranteed profit or his calculated share:
Jay's share = max(30,000, 40,000) = 40,000

Therefore, Jay's share of the profits for 2020-21 is 40,000.

Introduction to Indian Partnership Act
The Indian Partnership Act is a crucial legislation that governs the formation and regulation of partnerships in India.

Year of Enactment
- The Indian Partnership Act was enacted in the year **1932**.
- This Act is significant in defining the rights and duties of partners in a partnership firm.

Key Features of the Act
- **Definition of Partnership**: The Act defines a partnership as a relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.
- **Types of Partnerships**: It classifies partnerships into general and limited partnerships, addressing the scope of liability and roles of each partner.
- **Rights and Duties**: The Act outlines the rights and duties of partners, ensuring clarity in operations and responsibilities within the partnership.
- **Dissolution of Partnership**: It provides guidelines on how partnerships can be dissolved, protecting the interests of partners and creditors.

Importance of the Act
- **Legal Framework**: The Indian Partnership Act establishes a legal framework that regulates partnerships, ensuring they operate within the law.
- **Business Operations**: It helps businesses define their internal structures and resolve disputes amicably by providing a clear set of rules.

Conclusion
Understanding the Indian Partnership Act of **1932** is essential for anyone involved in business partnerships in India, as it lays down the foundational principles governing their formation and operation.