Financial Accounting & Analysis

 June 2021 Examination

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1. Discuss and analyze the following transactions for X Ltd, using the concept of accounting equation (Assets, Liabilities and Equities).

1. Purchased Furniture for Rs675000

2. Capital Introduced by the business Owner by depositing 12 Lakhs in the bank account

3. Goods purchased on credit from Aman Enterprises for Rs105000

4. Goods sold on credit for Rs 400000. The cost of the goods sold was Rs 300000

5. Purchased goods from Sneha Enterprises for Rs 600000 and made the payment from the business's bank account (5*2 = 10 Marks)

Ans 1.

INTRODUCTION

The accounting equation is known as the backbone of the double-entry accounting system. The net assets are equal to the sum of the company's liabilities and shareholders' equity, as seen on its balance sheet. Each entry made on the debit side has matching access (or coverage) on the credit side. The financial state of every company, big or small, is obtained by two main balance sheet components: assets and liabilitie ........................................

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2. Love Doddle is a gifting enterprise of Ms. Dorati. The enterprise generates inflows by arranging gift hampers for the customer's loved ones. The inflows arises from the sale of gift hampers Rs 505000 and from bank interest, dividend receipt Rs4200. Ms. Dorati is confused on how to record these inflows. She would like to understand from you about the concepts Revenue from operation and other income, so that she can record the information so as to prepare the profit and loss statement of the enterprise. Define, share examples, and elaborate on your understanding towards the terms Revenue from Operation and Other Income (10 Marks)

Ans 2.

INTRODUCTION

Operating income and revenue are significant accounting figures that indicate that a business generates some capital from the operation of the company. However, the two figures are separate ways of expressing a company's profits, and their calculations require different discounts and credits. The revenue provided by a company's primary operations is referred to as operating revenue. The exact operation that produces operational income varies. Consider a retailer: a retailer's operating income from the sale of goods.

 

3. The following information is given with respect to the ratios of two companies

a. Define the concepts of Current and Quick ratio’s and also, reflect on your understanding towards the financial performance of the companies by looking to the above information (2marks for defining and 3 marks for interpretation and reasoning) (5 Marks)

Ans 3a.

INTRODUCTION

The Current Ratio is that assesses a company's willingness to give short-term or one-year commitments. It demonstrates to investors and analysts how any business can use existing assets on its financial statement sheet to give down current debt and other commitments.

 

 

b. Define the terms- Return on Investment and Debt equity ratio and also, reflect on your understanding towards the financial performance of the companies (2marks for defining and 3 marks for interpretation and reasoning) (5 Marks)

Ans 3b.

INTRODUCTION

Return on Investment (ROI) is a presenting metric for evaluating an investment's productivity or profitability, along with analyzing the returns of many investments. The Return on investment (ROI) attempts to explicitly calculate the profit made on a given investment in relation to its expense.

 

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