MBA Marketing Management

14) In the Books of X & Co. Journal Entries L.F. Debit Credit Rs. Rs. Date Particulars 2016 June 1. Cash A/c DV 60,000 60,000 To Capital A/c (Started business with Capital) 2. Bank A/c DV 30,000 30,000 To Cash A/c (Paid into Bank) 4. Purchases A/c DV 10,000 10,000 To Kamal A/c (Purchased goods from Kamal on credit) 6. Shrisam A/c DV 4,920 4,920 To Cash A/c (Paid Shrisam) 6. Cash A/c DV 80 5,000 To Discount Allowed A/c To Accounts Receivable A/c (Discount allowed) 8. Cash A/c Dr 20,000 20,000 To Sales A/c (Cash Sales) 12. Cash A/c Dr 5,000 5,000 To Sales A/c (Sold to Hameed) 15. Purchases A/c Dr 7,500 7,500 To Bhalat A/c (Being goods purchased on credit from Bhalat) 18. Salary A/c Dr 4,000 4,000 To Cash A/c (Paid Salaries) 20. Cash A/c Dr 2,480 2,480 To Prem A/c (Being Cash received from Prem) 16) Current Ratio = Current Assets / Current Liabilities. Current Assets = Inventories + Debtors + Short term Investment = 7,00,000 + 90,000 + 40,000 = 7,90,000 Current Liabilities = Sundry Creditors + Expenses outstanding + Provision for tax = 1,00,000 + 80,000 + 10,000 = 2,00,000 Current Ratio = 7,90,000 / 2,00,000 = 3.95 : 1 16th Working note E. Estimated Production = Expected Sales + Desired Closing Stock - Estimated Opening Stock = (50,000 + 14,000) - 10,000 = 64,000 - 10,000 = 54,000 units. 18. Material Purchase Budget Particulars Material A Material B Material required for Production: Material A @ 2 units for 54,000 Finished units 1,08,000 Material B @ 3 units for 54,000 Finished units 1,62,000 Add: Desired Closing balance of material at the end of the budget period 13,000 16,000 1,21,000 1,78,000 Less: Estimated Opening balance of Materials at the beginning of the budget period 12,000 15,000 Materials to be purchased during the Budget Period 19) Current Ratio = Current Assets / Current Liabilities Current Assets for 2015 Current Assets = Stock + Debtors + Cash at Bank = 25,000 + 10,000 + 5,000 = 40,000 Current Assets for 2016 Current Assets = Stock + Debtors + Cash at Bank = 40,000 + 16,000 + 4,000 = 60,000 Current Liabilities for 2015 Current Liabilities = Creditors + Bills Payable + Provision for tax + Bank Overdraft = 8,000 + 2,000 + 5,000 + 5,000 = 20,000 Current Liabilities for 2016 Current Liabilities = Creditors + Bills Payable + Provision for tax + Bank Overdraft = 15,000 + 3,000 + 7,000 + 15,000 = 40,000 Current Ratio for 2015 Current Ratio = 40,000 / 20,000 = 2:1 Current Ratio for 2016 Current Ratio = 60,000 / 40,000 = 1.5:1 b) Acid test Ratio = Quick Assets / Current Liabilities Quick Assets for 2015 Quick Assets = Current Assets - Stock = 40,000 - 25,000 = 15,000 Quick Assets for 2016 = Current Assets - Stock = 60,000 - 40,000 = 20,000 Acid test Ratio for 2015: Acid test Ratio = 15,000 / 20,000 = 0.75 : 1 Acid test Ratio for 2016 Acid test Ratio = 20,000 / 40,000 = 0.5 : 1 PART-B 13. TYPES OF ACCOUNTS WITH EXAMPLES According to the double entry system of bookkeeping, there are three types of accounts that help you to maintain an error-free record of your joural entries. Each account type has a rule to identify its debit and credit aspect called as the Golden Rule of Accounting. The accounts are: • Personal Accounts • Real Accounts • Nominal Accounts Personal Accounts Ledger accounts that contain transactions related to individuals or other organizations with whom your business has direct transactions are known as personal accounts. Some examples of personal accounts are customers, vendors, salary accounts of employees, drawings and capital accounts of owners, etc. The golden rule for personal accounts is: debit the receiver and credit the giver. Example: Payment of salary to employees In this example, the receiver is an employee and the giver will be the business. Hence, in the journal entry, the Employce's Salary account will be debited and the Cash / Bank account will be credited. Real Accounts The ledger accounts which contain transactions related to the assets or liabilities of the business are called Real accounts. Accounts of both tangible and intangible nature fall under this category of accounts, i.e. Machinery, Buildings, Goodwill, Patent rights, etc. These account balances do not come to zero at the end of the financial year unless there is a sale of the asset or payment made towards a liability or closure or acquisition of the business. These accounts appear in the Balance Sheet and the balances get carried forward to the next financial year. The golden rule for real accounts is: debit what comes in and credit what goes out. Example: Payment made for a loan In this transaction, cash goes out and the loan is settled. Hence, in the journal entry, the Loan account will be debited and the Bank account will be credited. Nominal Accounts Transactions related to income, expense, profit and loss are recorded under this category. These components actually do not exist in any physical form but they actually exist. For example, during the purchase and sale of goods, only two components directly get affected i.e money and stock. But, apart from this we may incur profit or loss out of such transactions and we might incur some expenses for these transactions to happen. These secondary components fall under the Nominal Category and the accounts that are in Profit and Loss statement are shown under this category. The golden rule for nominal accounts is: debit all expenses and losses and credit all income and gains. Example of Nominal Account: Shipping Charges account and Salary account.