INTRODUCTION TO

RATIOS
Team 1 - Riya Godbole(A021), Vidisha
Kedia(A033), Ruya Keshri(A034), Viya
Palrecha(A098)
 WHAT ARE RATIOS?

Ratio is a mathematical number that measures the relationship between two

accounting figures. It is also called as “Financial ratio”.
It can be expressed as fraction proportion or percentage in between two accounting
figures.
The use of different types of accounting ratios to evaluate the financial performance
of business is called Ratio Analysis.
Ratio analysis provide financial information and points out the areas which require
more application of arithmetical relationship to simplify the complex data.
TYPES OF RATIO
 BALANCE SHEET RATIOS
Balance sheet ratios, also known as financial ratios, are used to evaluate the financial
health and performance of a company. These ratios provide insights into various
aspects of a company's operations, such as its liquidity, leverage, and efficiency.
Leverage: The financial leverage ratio is an indicator of how much debt a company is
using to finance its assets. A high ratio means the firm is highly levered (using a large
amount of debt to finance its assets). A low ratio indicates the opposite.
Liquidity: Liquidity is a term that refers to the ease with which you can convert an
asset to cash, without affecting its market value.
 CURRENT RATIO
The current ratio is a liquidity measurement used to track how well a company may
be able to meet its short-term debt obligations. It compares the ratio of current assets
to current liabilities.
Current Ratio = Current Assets / Current Liabilities
Current Assets include: Cash and Bank Balance, Accounts Receivable(Debtors),
Prepaid Expenses, Marketable Securities, Stock/Inventory, Bills Receivable etc.
Current Liabilities include: Bank Overdraft, Accounts Payable(Creditors), Pre-
received income, Outstanding expenses, Unclaimed Dividend, Bills Payable etc.
The ideal current ratio for companies has to be a minimum of 2:1.

Measurements less than 1.0 indicate a company's potential inability to use current
resources to fund short-term obligations.

● The outcome indicates the number of times this company in question could
pay off its immediate liabilities with its total current assets
● The current ratio provides the most information when it is used to compare
companies of similar sizes within the same industry.
● It is also helpful to calculate a company's current ratio from year to year to
analyze whether it shows a positive or negative trend.
EXAMPLE 1:
A company had the following Current Assets and Current Liabilities:

Debtors - Rs. 1,95,060

Creditors - Rs. 61,200
Bills Payable - Rs. 20,320
Stock - Rs. 2,46,500
Prepaid Expenses - Rs. 7,600
Cash Balance - Rs. 5,400
Bank Overdraft - Rs. 50,000
Unclaimed Dividend - Rs. 20,000

Calculate current ratio and explain what this ratio indicates about the company’s short-
term financial health:
SOLUTION:
Current Assets = Debtors + Prepaid Expenses + Cash Balance + Stock
= 1,95,060 + 7,600 + 5,400 + 2,46,500
= Rs. 4,54,560
Current Liabilities = Creditors + Bills Payable + Bank Overdraft + Unclaimed Dividend
= 61,200 + 20,320 + 50,000 + 20,000
= Rs. 1,51,520
Current Ratio = Current Assets / Current Liabilities
= 4,54,560/1,51,520
Current Ratio = 3:1
A current ratio of 3.0 means that this company has Rs. 3.00 in current assets for every Rs. 1.00 of current
liabilities. This indicates that the company is in a strong position to meet its short-term obligations, as it
has thrice as many current assets as it has current liabilities.
EXAMPLE 2:
Total Assets = Rs. 5,32,500
Fixed Assets = Rs. 2,72,500
Capital Employed = Rs. 4,02,500
There were no long term investments. Calculate current ratio:
SOLUTION:
Current Assets = Total Assets - Fixed Assets
= 5,32,500 - 2,72,500
= Rs. 2,60,000
Current Liabilities = Total Assets - Capital Employed
= 5,32,500 - 4,02,500
= Rs. 1,30,000
Current Ratio = Current Assets / Current Liabilities
= 2,60,000 / 1,30,000
Current Ratio = 2:1
 LIQUID RATIO
Liquid Ratio is also known as the quick ratio or acid-test ratio. It is a financial metric used
to assess a company's short-term liquidity position. It measures a company's ability to pay
off its current liabilities without relying on the sale of inventory. The liquid ratio provides
a more stringent test of a company's liquidity compared to the current ratio.
● A liquid ratio of 1 or higher suggests that the company has enough liquid assets to
cover its short-term liabilities without selling inventory.
● A ratio below 1 might indicate potential liquidity issues, meaning the company could
struggle to meet its short-term obligations if they arise suddenly.
● The liquid ratio is particularly useful for stakeholders who are interested in
understanding how well a company can manage its immediate financial obligations.
FORMULAE:
1. Liquid Ratio = Liquid Assets / Current Liabilities
2. Liquid Assets = Current Assets - (Stock + Prepaid Expense)
OR
= Cash balance + Bank balance + Debtors +
Bills Receivable +
Marketable Securities
3. Liquid liabilities = Current Liabilities - (Bank overdraft and
Advance Received)
EXAMPLE 1:
A company has the following information on its
balance sheet. Calculate the liquid ratio:
- Cash: ₹10,000
- Accounts Receivable: ₹15,000
- Inventory: ₹20,000
- Prepaid Expenses: ₹5,000
- Current Liabilities: ₹30,000
SOLUTION:
Liquid Assets = Cash + Accounts Receivable
= 10,000 + 15,000
= ₹25,000

Liquid Ratio = Liquid Assets / Current Liabilities

= 25,000/30,000
Liquid Ratio = 0.83

The liquid ratio is 0.83, which is below 1. This suggests that the company
might have difficulty covering its current liabilities without selling inventory.
EXAMPLE 2:
A company has the following information on its balance sheet.
Calculate the liquid ratio:
- Cash: ₹8,000
- Accounts Receivable: ₹22,000
- Inventory: ₹15,000
- Marketable Securities: ₹5,000
- Prepaid Expenses: ₹3,000
- Accounts Payable: ₹20,000
- Short-term Debt: ₹12,000
SOLUTION:
Liquid Assets = Cash + Accounts Receivable + Marketable Securities
= 8,000 + 22,000 + 5,000
= ₹35,000

Current Liabilities = Accounts Payable + Short-term Debt

= 20,000 + 12,000
= ₹32,000

Liquid Ratio = Liquid Assets / Current Liabilities

= 35,000 / 32,000
Liquid Ratio = 1.09

The liquid ratio is approximately 1.09, indicating that the company has slightly more
than enough liquid assets to cover its current liabilities.
EXAMPLE 3:
In Year 1, a company has liquid assets of ₹40,000 and current liabilities of
₹50,000. In Year 2, the liquid assets increase to ₹60,000, and current
liabilities rise to ₹55,000. Calculate the liquid ratio for both years and
determine
SOLUTION: the change.

Year 1:
Liquid Ratio = Liquid Assets / Current Liabilities = 40,000/50,000 = 0.80
Year 2:
Liquid Ratio = Liquid Assets/Current Liabilities = 60,000/55,000 =
1.09(approx.)
The liquid ratio increased from 0.80 in Year 1 to approximately 1.09 in Year
2, indicating an improvement in the company’s liquidity position.
 INCOME STATEMENT RATIOS
Income statement ratio, also known as profitability ratio, is a financial metric used to evaluate a
company's ability to generate profit relative to its revenue, assets, equity, or other financial metrics.
These ratios are derived from the income statement and help assess a company's financial
performance over a specific period.
Income statement ratios are integral tools in financial analysis, offering insights into a company's
operational efficiency, profitability, and overall financial performance, helping stakeholders to
understand how effectively a company is generating income relative to its sales, assets, and equity.
By analyzing these ratios, they can make informed decisions regarding investments,
creditworthiness, and strategic management. For example, a high gross profit margin suggests that
the company efficiently controls its production costs, while a strong net profit margin indicates
effective cost management across the entire operation.
GROSS PROFIT RATIO:
The Gross Profit Ratio, also known as the Gross Margin Ratio, is a financial metric that shows the
relationship between a company's gross profit and its net sales. It measures the percentage of revenue
that exceeds the cost of goods sold (COGS) and is used to assess how efficiently a company is
producing and selling its goods.

● High Gross Profit Ratio indicates that the company is efficiently managing its production costs
relative to its sales, which can result in higher profitability. A higher ratio is generally favorable
as it suggests that the company retains a large portion of sales revenue after covering the cost of
production.
● Low Gross Profit Ratio suggests that production costs are consuming a larger share of sales
revenue, which might be due to high material costs, labor inefficiencies, or other factors. This
can be a red flag, indicating that the company may struggle to cover its operating expenses and
generate adequate profit.
FORMULAE:
1. Gross Profit Ratio = Gross Profit / Net Sales × 100
2. Gross Profit = Net Sales - Cost of Goods Sold
3. Cost of Goods Sold = Opening Stock + Purchase + Direct Expense - Closing
Stock
4. Net Sales = Sales - Sales Returns

● Net Sales is the total revenue generated by the company from its operations,
after subtracting returns, allowances, and discounts.
 EXAMPLE 1:
Calculate the Gross Profit Ratio given:

Sales - Rs. 7,50,000

Sales Return - Rs. 50,000
Opening Stock - Rs. 1,00,000
Closing Stock - Rs. 1,20,000
Net Purchases - Rs. 5,00,000

SOLUTION:
Net Sales = Sales - Sales Return
= 7,50,000 - 50,000
= Rs. 7,00,000
Cost of Goods Sold= Opening Stock + Purchase - Closing Stock
= 1,00,000 + 5,00,000 - 1,20,000
= Rs. 4,80,000

Gross Profit = Net Sales - Cost of Goods Sold

= 7,00,000 - 4,80,000
= Rs. 2,20,000

Gross Profit Ratio = Gross Profit / Net Sales * 100

Gross Profit Ratio = 2,20,000 / 7,00,000 * 100
Gross Profit Ratio = 31.43% (approx.)
EXAMPLE 2:
Calculate the Gross Profit Ratio from the given information:

Sales is Rs. 8,40,000 and the Gross Profit Ratio is 50% on cost.

SOLUTION:
Gross Profit is 50% on cost. Thus, goods costing Rs. 100 must have been sold for
Rs. 150. Hence, if sales are Rs. 150, then Gross Profit is Rs. 50. If sales are Rs.
8,40,000 then Gross Profit will be:
Gross Profit = 8,40,000 * 50/150 = Rs. 2,80,000
Gross Profit Ratio = Gross Profit/Net Sales * 100 = 2,80,000/8,40,000 * 100
Gross Profit Ratio = 33.33%
NET PROFIT RATIO:
Net profit shows the relationship between net profit and net sales. It is expressed in %.
This ratio indicates the percentage of revenue that remains as profit after all expenses, including
interest and taxes, have been deducted.
It helps calculate the return on investment, overall efficiency and profitability of a business.
The Net Profit ratio indicates how much of each rupee of revenue translates into profit. For example, a
Net Profit Ratio of 10% means that the company earns 10 paise in profit for every rupee of revenue.

● High Net Profit Ratio indicates efficient cost management and strong profitability. The company
is effectively converting revenue into actual profit.
● Whereas, Low Net Profit Ratio suggests higher costs relative to revenue, which could be due to
high operating expenses, interest costs, or other factors (need to apply cost reduction strategies)
FORMULAE:
1. Net Profit Ratio = Net Profit / Net Sales × 100
2. Net Profit Ratio = Net Profit Before Tax / Net Sales × 100
3. Net Profit Ratio = Net Profit After Tax / Net Sales × 100
4. Profit = Operating Profit + Non Operating Income - Non Operating Expense
5. Net Sales = Sales - Returns - Allowances

● Net Sales is the total revenue generated by the company from its operations,
after subtracting returns, allowances, and discounts.
EXAMPLE:
Calculate the net profit ratio from the following data:
Sales = Rs. 1400000
Cost of Goods Sold (COGS) = Rs. 800000
Administrative expenses = Rs. 140000
Selling and Distribution Expenses = Rs. 110000

SOLUTION:
Gross Profit = Sales - COGS = Rs. 1400000 - 800000 = Rs 600000
Indirect Expenses = Rs. 140000 + 110000 = Rs 250000

Net Profit = Gross Profit - Indirect Expenses = Rs 600000 - 250000 = Rs. 350000

Net Profit Ratio = Net Profit / Sales * 100 = 350000/1400000 * 100

Net Profit Ratio = 25%
OPERATING RATIO:
The Operating Expense Ratio is an income statement ratio that indicates the proportion of a
company's revenue that is used to cover its operating expenses.
It expresses the relationship between total operating costs and net sales and is expressed in percentage.
This ratio is essential for evaluating how efficiently a company is managing its operating costs relative
to its revenue.

● Low Operating Expense Ratio indicates higher efficiency, meaning the company is spending a
smaller portion of its revenue on operating costs, leaving more for profit, reinvestment, or other
uses.
● Whereas, High Operating Expense Ratio suggests that a larger portion of revenue is being
consumed by operating expenses, which could indicate inefficiency or high operational costs.
FORMULAE:
1. Operating Ratio = Cost Of Goods Sold + Operating Expenses / Net Sales × 100
2. Cost Of Goods Sold = Opening Stock + Purchases + Wages - Closing Stock
3. Net Sales = Sales - Sales Returns - Allowances

Types of Operating Expenses include:

4. Office and Administrative Expenses
5. Selling and Distribution Expenses
6. Finance Expenses (does not include interest on loans/debentures)

Operating Expenses include all expenses necessary to run the business, such as salaries, rent, utilities,
depreciation, and other administrative costs, but do not include cost of goods sold (COGS), interest, or
taxes.

COGS is the direct cost of producing the goods sold by a company. It is primarily the difference between
beginning and ending inventory, along with purchases and other related expenses.

Net Sales is the total revenue from the company’s operations, after subtracting returns, allowances, and
discounts.
EXAMPLE:

From the following details Calculate Operating Ratio:

Sales = Rs. 6,80,000
Sales Return = Rs. 80,000
Opening Stock = Rs. 4,70,000
Purchases = Rs. 2,50,000
Closing Stock = Rs. 3,20,000
Office and Administrative Expenses = Rs. 37,000
Selling and Distribution Expenses = Rs. 23,000
SOLUTION:
Cost Of Goods Sold = Opening Stock + Purchases - Closing Stock
= 4,70,000 + 2,50,000 - 3,20,000
= 3,00,000
Net Sales = Sales - Sales Returns
= 6,80,000 - 80,000
= 6,00,000
Operating Expenses = Office and Administrative Expenses + Selling and Distribution
Expenses
= 37,000 + 23,000
= Rs. 60,000
Operating Ratio = Cost Of Goods Sold + Operating Expenses / Net Sales × 100
= 3,00,000 + 60,000 / 6,00,000 × 100
Operating Ratio = 60%
CURRENT AND
MIXED RATIOS
Current Ratio
Current Assets
• In
accounting, a current asset is an asset that can reasonably be
expected to be sold, consumed, or exhausted through the normal
operations of a business within the current fiscal year, operating
cycle, or financial year. In simple terms, current assets are assets
that are held for a short period.
• Current assets are the resources that a business owns and expects
to use or sell within a year. Current assets are important to a
business because by converting them to cash they allow it to pay
its day-to-day operating expenses, bills and loan payments.
• Current assets include cash, cash equivalents, accounts
receivable, stock inventory, marketable securities, pre-paid
liabilities, and other liquid assets.
Current Liabilities
• Current liabilities are a company's short-term financial obligations
that are due within one year or within a normal operating cycle.
These liabilities are usually paid from a company's operating
activities and listed on its balance sheet.
• Current liabilities are different from non-current or long-term
liabilities, and they can also be contrasted with current assets. The
difference between current assets and current liabilities is known
as trade working capital.
• Eg– Accounts payable , Accrued expenses , Notes payable or bank
loans , Income taxes payable ,etc.
Q1] WHICH OF THE FOLLOWING IS
NOT A CURRENT ASSET ?
• OPTIONS-

1. Cash
2. Bills Recievable
3. Plant & Machinery
4. Debtors
Q2] WHICH OF THE FOLLOWING IS
NOT A CURRENT LIABILITY?
• OPTIONS

1. Accounts Payable
2. Creditors
3. Bonds
4. Outstanding expenses
 Current Ratio - Calculation
•Theratio compare the Current Assets with
current Liabilities
•It
measures short term solvency of business
enterprise
•It is a balance sheet ratio
•Current Ratio = Current assets / Current liabilities
 Question 1 – Calculate Current
Ratio Assets:
1. Cash and Cash Equivalents: 75,000
2. Accounts Receivable (Debtors): 150,000
3. Inventory: 200,000
4. Prepaid Expenses: 30,000
5. Short-term Investments: 45,000

• Additionally, there is an allowance for doubtful accounts of 5% on the total Accounts

Receivable. Also, 10% of the Inventory is considered obsolete and should be subtracted
from the total.

• Liabilities:
1. Accounts Payable (Creditors): 120,000
2. Short-term Debt: 80,000
3. Bank overdraft : 50,000
4. Accrued Expenses: 25,000
5. Income received in advance: 15,000
 Question 1 - Soln
1. Adjusted Accounts Receivable: Accounts Receivable (Debtors) = 5% of
₹1,25,00,000 = ₹6,25,000
• Adjusted Accounts Receivable = ₹1,25,00,000 -₹6,25,000 = ₹1,18,75,000

2. Adjusted Inventory: Inventory = ₹1,66,66,667

Obsolete Inventory = 10% of ₹1,66,66,667 =₹16,66,667
Adjusted Inventory = ₹1,66,66,667 - ₹16,66,667 =₹1,50,00,000

3.Total Current Assets = ₹62,50,000 + ₹1,18,75,000 +₹1,50,00,000 +

₹25,00,000 + ₹37,50,000 =₹4,95,75,000

4.Total Current Liabilities = ₹1,00,00,000 +₹66,66,667 + ₹41,66,667 +

₹20,83,333 + ₹12,50,000 =₹2,41,66,667
5.Current Ratio = Total Current Assets ÷ Total Current Liabilities
•Ans :Current Ratio = ₹4,95,75,000 ÷ ₹2,41,66,667 = 2.05
Question 2 – Calculate Current
Liabilities
1. Assets : 1. Accounts Receivable: 6%
allowance for doubtful accounts.
• Cash :3,50,000
2. Loose tools: 15% of the loose tools
• Debtors : 5,00,000 is obsolete and must be subtracted.
• Loose tools : 4,50,000
3. Prepaid Expenses: Overestimated
• Prepaid exp :1,20,000 by ₹20,000 (subtract this amount).
• Advances :2,00,000
• The company’s current ratio is 2.5.
• Machinery :20,00,000
• Land :40,00,000
 Question 2 : soln
• Adjusted Accounts Receivable:
Allowance for doubtful accounts = 6% of ₹5,00,000 =₹30,000
• Adjusted Accounts Receivable = ₹5,00,000 - ₹30,000
=₹4,70,000
Adjust loose tools
• 15% of ₹4,50,000 = ₹67,500
• Adjusted loose tools = ₹4,50,000 - ₹67,500 = ₹3,82,500
Adjusted Prepaid Expenses
• Adjusted Prepaid Expenses = ₹1,20,000 - ₹20,000 =₹1,00,000
 Question 2 – Soln
• Total Adjusted Current Assets =
₹3,50,000 + ₹4,70,000+ ₹3,82,500 + ₹1,00,000 + ₹2,00,000
= ₹14,02,500
• Given
that the Current Ratio = 2.5 and Total Current Assets =
₹14,02,500
• Current Liabilities= Current Assets / Current ratio
=14,02,500/2.5

= 5,61,000
 SIGNIFICANCE OF CURRENT
RATIOS
The current ratio is a financial metric that measures a company's liquidity
and ability to meet short-term debt obligations.
• Comparison

The current ratio is most useful when comparing companies of similar sizes
within the same industry
• Trend

Since assets and liabilities change over time, it's a good idea to calculate a
company's current ratio year after year to see if it's trending positively or
negatively.
Ideal ratio = “2:1”
 Questions
1. What does High current Ratio indicate?
Ans Firm is more likely to be able to pay its short-term debts.
2. What does current Ratio<1 indicates?
Ans It is a red flag and indicates firm is unable to pay short-term
debts.
3. What does Current Ratio >3 indicate?
Ans Indicates inefficiency in fund management.
Mixed Ratio
RETURN ON INVESTMENT
• This
ratio measures net profit before tax and interest and capital
invested.
• Thisratio is computed to measure the overall efficiency or
profitability of the business.
• Thisratio indicates the ability of the company to generate the
profit per rupee of Capital Employed.
• Return on Investment (ROI) = (Net Profit/Capital Employed)*100
• Capital employed = Fixed Assets + Current Assets – Current
Liabilities
RETURN ON INVESTMENT (ROI)
Q1)From the following details you are required to calculate Return
on Investment:
Sales = 17,50,000
Cost of goods sold = 2,50,000
Operating Expenses = 4,00,000
Capital = 22,00,000
Reserve = 3,50,000
Loan = 4,50,000
Q1) Answer
• Return on Investment = (Net Profit/Capital Employed)*100
• Net Profit = 17,50,000-2,50,000-4,00,000
=11,00,000
• Capital Employed = 22,00,000+3,50,000+4,50,000
=30,00,000
• Return on Investment (ROI) = (11,00,000/30,00,000)*100
=36.67%
 Q2) From the following details you are required to
calculate Return on Investment:
Sales = 55,00,000
Wages paid = 5,00,000
Closing Stock = 10,00,000
Gross Profit = 20,00,000
Operating Expenses = 5,00,000
Non-Operating Income = 50,000
Capital = 50,00,000
Loan = 20,00,000
 Q2) Answer
• Return on Investment = (Net Profit/Capital Employed)*100
• Net Profit =Gross Profit – Operating Expenses + Non-Operating Income
=20,00,000-5,00,000+50,000
=15,50,000
• Capital Employed = 50,00,000+20,00,000
=70,00,000
• Return on Investment (ROI) = (15,50,000/70,00,000)*100
=22.14%
Return on Capital Employed
• This ratio measures a relationship between net profit before
interest and Tax and shareholders fund. The funds are
supplied Equity and Preference Share holders.
• This ratio indicates whether shareholders fund is efficiently
used or not.
• This ratio should be higher than ROI.
ROCE = Net Profit before interest and Tax / Net Capital Employed/ Equity

Net Capital Employed = Total Assets - Current Liabilities

(Fixed Assets + Current Assets - Current Liabilities)
Question 1
Calculate ROCE from the following information:
Sales: ₹8,00,000
Cost of Goods Sold (COGS): ₹4,00,000
Operating Expenses: ₹2,50,000
Capital Employed: ₹5,00,000
Question 1 {Soln}
Net Profit = Sales - Cost of Goods Sold -
Operating Expenses
Net Profit=₹8,00,000−₹4,00,000−₹2,50,000
=₹1,50,000
ROCE Formula:
ROCE=Net Profit / Capital Employed×100
Substitute the values:
ROCE=1,50,000 / 5,00,000 × 100= 30%
Question 2
Calculate ROCE from the following information:
Sales: ₹12,00,000
Cost of Goods Sold (COGS): ₹6,50,000
Fixed Operating Expenses: ₹2,00,000
Variable Operating Expenses (10% of Sales): ?
Interest Expenses: ₹50,000
Capital: ₹10,00,000
Loan: ₹5,00,000
Question 2{Soln}
• Calculating Variable Operating Expenses:
Variable Operating Expenses=10% of Sales=10%×₹12,00,000=₹1,20,000
• Calculating Total Operating Expenses
Total Operating Expenses=Fixed Operating Expenses+Variable Operating
Expenses
Total Operating Expenses=₹2,00,000+₹1,20,000=₹3,20,000
• Calculate EBIT (Earnings Before Interest and Tax)
EBIT=Sales−Cost of Goods Sold−Total Operating Expenses
₹12,00,000−₹6,50,000−₹3,20,000=₹2,30,000
• Calculate ROCE
ROCE=Net Profit (EBIT) / Capital Employed × 100
ROCE=2,30,000/15,00,000​× 100 = 15.33%
 Thank You
By Harman(A014),
Pratham (A087),
Shridul (A038),
Khush (A026),
Hassnain (A088)
NET PROFIT
AND
OPERATING
PROFIT RATIOS

By - Mayank Dhaifule AO89 | Disha Maniar A094

Pal Maru A095 | Maitri Mehta A096
NET PROFIT
RATIO
INTRODUCTION
The net profit ratio (also known as net profit margin) is the
net profit after tax as a percentage of net sales.
Formula:
Net Profit Ratio = (Net Profit /Net Sales) x 100
In this formula,
Net Profit = Operating Profit – (Direct Cost + Indirect
Expenses),
Net Sales = Sales – Returns
EXAMPLE SOLUTION:
Net Sales = Sales - Returns
QUESTION: = 10,00,000 – 5,00,000
Let’s assume that XYZ = Rs. 5,00,000
company has sales of RS. Net Profit = Operating Profit – (Direct
10,00,000 and sales Cost + Indirect Cost)
returns of Rs. 5,00,000. Its = 5,00,000 – (1,00,000 +
operating profit is RS. 2,00,000)
5,00,000, it’s direct costs = 5,00,000 – 3,00,000
are of Rs. 1,00,000 and
indirect costs are of Rs. = 2,00,000
2,00,000. Then, what is the Net Profit Ratio = (Net Profit / Net
company's net profit ratio? Sales) x 100
=
(2,00,000 /5,00,000)100
= 0.4 x 100
= 40%
 How to improve Net Profit Ratio?
● One of the steps you can take to accomplish it is purchasing
in bulk, which lowers the cost of material per unit.
● Another method is to invest in product redesign and
automation to reduce the cost of labourers for product
assembling.
● Apart from that, businesses can increase sales, reduce
sales or do both to get a competitive advantage. This,
however, might involve spending more money. If you cut too
many costs, it might result in undesirable outcomes like
losses in quality, losing skilled workers or shifting to inferior
materials.
SIGNIFICANCE
´Profitability Indicator: Reflects Dividend Payouts : Determines a
´

how well a company converts company’s ability to pay dividends

revenue into actual profit after all
to shareholders.
expenses.
´Creditworthiness: Enhances
´Business Sustainability:
borrowing capacity with favourable
Consistent net profit ensures long-
term stability and survival in the loan terms.
market. ´Competitive Benchmarking:
Helps compare profitability with
´Investor Confidence: Attracts
investors by signaling financial industry peers.
health and potential for returns. ´Stakeholder Assurance: Builds
´Future Planning: Supports confidence among employees,
growth strategies, expansion, and suppliers, and partners regarding
efficient resource allocation. financial stability.
QUESTIONS
1] Calculate the net profit ratio of Mr. Sharma whose
gross profit for the financial year 2023-24 is Rs. 8,00,000.
Some expenses that he had incurred are as follows -
Salaries = Rs. 40,000
Rent = Rs. 35,000
Advertising expenses = Rs. 15,000
Interest on loan = Rs. 40,000
Other operating expenses = 10,000
Sales = Rs. 25,00,000
SOLUTION
Formula for Net Profit Ratio :- Net Profit Ratio = 6,60,000
*100/ 25,00,000
(Gross Profit - Total Cost) * 100/
Sales Net Profit Ratio = 660 / 25

Total Cost = 40,000 +

35,000 + 15,000 + 40,000 + Net Profit Ratio = 26.4%
10,000 = Rs. 1,40,000
Net Profit Ratio =
(8,00,000 – 1,40,000) *100/ Ans ] Net Profit Ratio of Mr
25,00,000 Sharma for the financial
year 2023-24 is 26.4%
2] From the given Information of Company
XYZ Ltd. Find its net profit ratio for the
financial 2022-23:-
Revenue = Rs. 4,55,000
Variable costs = Rs. 95,000
Fixed cost = 75,000
SOLUTION
Formula for Net Profit Ratio -: Net Profit Ratio = 2,85,000 * 100
Revenue – Total cost *100 / / 4,55,000
Revenue Net Profit Ratio = 28,500 / 455
Total Cost = Variable cost + Net Profit Ratio = 62.63%
Fixed cost
Total Cost = 95,000 + 75,000
Ans ] Net Profit Ratio of
Total Cost = Rs. 1,70,000 Company XYZ Ltd for the
financial year 2022-23 is 62.63%
Net Profit Ratio = (4,55,000 –
1,70,000) * 100 / 4,55,000
3] Calculate the net profit ratio of PQR Ltd with the
help of the following information -:
Sales = Rs. 18,00,000

Cost of sales = Rs. 9,50,000

Rent = Rs. 40,000

Commission to salesman = Rs. 45,000

Office Expenses = Rs. 50,000

Sundry Expenses = Rs. 60,500

SOLUTION
Formula for Net Profit Ratio -: [Sales – Net Profit Ratio = 18,00,000 – (9,50,000
(Cost of sales + indirect expenses)]*100 / + 1,95,000) *100 / 18,00,000
Sales
Net Profit Ratio = 6,55,000 *100 /
Indirect Expenses = 40,000 + 18,00,000
45,000 + 50,000 + 60,500 = Rs. 1,95,000

Net Profit Ratio = 18,00,000 – (9,50,000 +

1,95,000) *100 / 18,00,000 Net Profit Ratio = 655 / 18

Formula for Net Profit Ratio -: [Sales –

(Cost of sales + indirect expenses)]*100 /
Sales Net Profit Ratio = 36.39%

Indirect Expenses = 40,000 +

45,000 + 50,000 + 60,500 = Rs. 1,95,000 Ans ] Net Profit Ratio of Company PQR
Ltd is 36.39%
4] The following Trading and Profit and Loss Account of Radhika
Ltd. for the year 31‐3‐2000 is given below:
Particular RS Particular RS
To Opening Stock 55000 By Sales 600000

To Purchases 300000 By Goods withdrawn for 4500

personal use
To Carriage and Fr 4000
eight
7000
To Wages

2,38,50
To Gross Profit c/d 0 Total
6,04,50
Total 6,04,50 0
0
By Gross Profit b/d

To General By Interest on shares 2,38,50

expense 10000 0
By Baddebt recovery
To Advertisement 5000 1500

To Donations 3000 2000

Total
To Net Profit c/d 2,33,00
0 By Net Profit b/d
Total 2,42,00
2,42,00 0
0
2,33,00
SOLUTION
Net Profit Ratio= (Net Profit/Net Sales) x 100
= (2,33,000/6,00,000) x100
= 38.83%
5] The following Trading and Profit and Loss Account of SVJN Ltd. for the year 31‐3‐2005 is given below:

Particular RS Particular RS
To Opening Stock 80,000 By Sales
10,00,000
To Purchases 400000 9,95,000
Less: Returns
To Motive Power 7000 5,000
To Wages 2000 10,000

By Closing Stock
To Gross Profit c/d 5,16,000

Total 10,05,00 10,05,00

0 0
Total
5,16,000
To Office expense By Gross Profit b/d
7000 9500
To Commission By Interest on Govt.Bonds
5000 3000
To Rent By Interest on Drawings
6000

To Net Profit c/d

5,10,500
Total
5,28,500 5,28,500
Total
5,10,000
By Net Profit b/d
SOLUTION
Net Profit Ratio= (Net Profit/Net Sales) x 100
= (5,10,000/9,95,000) x 100
= 51.25%
6] The following Trading and Profit and Loss Account of LNT
Ltd. for the year 31‐3‐2010 is given below:
Particular RS Particular RS
To Opening Stock 1,00,00 By Sales
0 4,00,000
To Purchases 3,90,00
3,00,00 Less: Returns 0
To Fuel &Power 0 10,000
To Carriage
8500
By Closing Stock 50,000
To Gross Profit c/d
1500
Total

Total 4,40,00
0
To Sundry expense 30,000 By Gross Profit b/d
To Salary 4,40,00
By Discount 30,000
0
To Carriage By Interest on shares
Outward
6,000

1000
To Net Profit c/d 2,000

Total 9000
Total

3000 By Net Profit b/d

SOLUTION
Net Profit Ratio= (Net Profit/Net Sales) x 100
= (25,000/3,90,000) x 100
= 6.41%
OPERATING PROFIT
RATIO
INTRODUCTION
Operating Profit Ratio is one of the profitability ratios in accounting theory and
practice. Profitability ratios are the financial metric employed in order to
measure a firm’s ability to generate earnings. Accounting ratios that are used
to measure the profitability of the business are known as Profitability Ratios.

Operating Profit: Operating profit is the residual income left after deducting all
the operating expenses from the net revenue earned by the business during
an operating cycle. Operating expenses are those expenses that are relevant
to the day-to-day operations of the business and recurring in nature.

Net Sales: It refers to the revenue earned by the firm by selling its products
after adjusting all kinds of sales returns, discounts, allowances to the
customers, etc.
SIGNIFICANCE
The operational efficiency of the business is
measured by the Operating Profit ratio.
Management is considered efficient when the ratio is
higher and an improvement in the ratio over the
previous period shows an improvement in the
operational efficiency of the firm. The operating ratio
and operating profit ratio are complementary to each
other, which means that the higher the operating
profit ratio, the lower the operating ratio. Both are
calculated in percentage form.
FORMULA
´OPERATING PROFIT RATIO = (OPERATING PROFIT/
NET SALES) X 100
´WHERE,
´OP = Gross Profit - Operating Expenses
Or
´OP = Net sales – (Cost of goods sold + Administrative and
office expenses + Selling and distribution exp.)
´S= Sales - Return - Allowances
EXAMPLE
´Calculate the operating profit ratio from the following data available for ABC
Company
´Net Sales – ₹1,00,000, Gross Profit – ₹1,50,000, Administration expenses –
₹50,000, Selling Expenses – ₹40,000.
SOLUTION:
´Formula = OPERATING PROFIT RATIO = (OPERATING PROFIT/ NET SALES)
X 100
´Therefore,
´Operating profit= 1,50,000 - 50,000 - 40,000
´ = 60,000
´Operating profit ratio = (60,000/1,00,000) x 100
´ = 60%
QUESTIONS
SOLUTION:
Q1) ABC company has a net
sales revenue of Rs.5,00,000 ´Operating profit ratio =
and an operating profit of
(Operating profit / Net Sales) x
Rs.80,000. Calculate the
operating profit ratio. 100
Operating profit ratio =
80,000/5,00,000 x 100
=16%
Operating profit ratio = 16%
Q2)XYZ company has a net SOLUTION:
sales revenue of Operating profit ratio = (Operating
Rs.7,00,000 and its gross profit / Net Sales) x 100
profit is Rs.1,50,000. Operating profit = 1,50,000-20,000-
Administration expenses 25,000
and selling expenses are
=1,05,000
Rs. 20,000 and Rs. 25,000
respectively. Calculate Operating profit ratio =
1,05,000/7,00,000 x 100
operating profit ratio.
= 15%
Operating profit ratio = 15%
 SOLUTION:
Q3) PQR company's
Operating profit ratio =
net sales for the year (Operating profit / Net Sales) x
amounted to 100
₹800,000. If the So, Operating Profit =
operating profit ratio Operating Profit Ratio X Net
is 12.5%, calculate Sales
the operating profit. Operating Profit = 12.5/100 x
8,00,000
Operating Profit = 0.125 x
8,00,000
Operating Profit = 1,00,000
The operating profit is
Rs.100,000.
Q4) PQR company has SOLUTION:
net sales of Rs. ´Operating profit ratio =
9,50,000 . The
(operating profit/ net
company’s operating
profit is Rs. 40,000. sales)100
Calculate the
operating profit ratio. =40,000/9,50,000 x100
= 4.21%
´Hence, operating profit
ratio is 4.21%
 Q5) Calculate operating profit
ratio. Solution
Operating Profit = Revenue from
Revenue from 5,00,000 Operations – Cost of Goods Sold –
operations Office and Administration Expenses –
Selling and Distribution Expense
Cost of goods sold 2,50,000 = 5,00,000 – 2,50,000- 25,000 – 50,000
= ₹1,75,000
Wages 2,000
Operating Profit Ratio = Operating Profit/
Office and 25,000 Net Sales*100
administration = 1,75,000/ 5,00,000
expenses *100
= 35%
Selling and 50,000
distribution Hence, operating profit ratio is 35%
expenses
Q6) Calculate operating profit ratio from the Solution
given information. Cost of goods sold= Opening stock + purchases -
closing stock
= 1,00,000 + 10,00,000 - 2,00,000
= 9,00,000
Opening stock 1,00,000 Operating expenses = 1,80,000
Purchases 10,00,000 Operating cost = cost of goods sold + operating
expenses
Closing stock 2,00,000 = 9,00,000 + 1,80,000

Revenue from 15,00,000 = 10,80,000

operations Net sales= 15,00,000
Operating ratio = [operating cost/ net sales] x 100
Administrative and 1,80,000
selling expenses = 10,80,000/ 15,00,000
x100
Interest received 20,000 = 72%
Dividend received 30,000 Therefore, operating profit ratio= 100 - operating
ratio
= 100 - 72
= 28%
Return on Investment
Return on Investment assesses overall performance
(profitability) of the enterprise.

An enterprise should have a satisfactory ratio.

To assess whether the ratio is satisfactory or not, it

should be compared with its own ratios of the past years
or with ratios of similar enterprises in the industry.
 RETURN ON INVESTMENT
Return on investment = Profit (Before Interest, Tax, Dividend) x
100
Capital Employed

The ratio is expressed as a percentage

 NET PROFIT IS TAKEN BEFORE
INTEREST, TAX, DIVIDEND BECAUSE:
(1)Interest is not an operating cost

(2)Tax is levied on the profit earned by the company.

Thus, it is not an operating cost.

(3)Dividend is an appropriation of profit

COMPUTATION OF CAPITAL EMPLOYED
Assets Side Approach
Liabilities Side Computed by Adding:
Approach (1)Non-Current Assets
a)Fixed Assets (Tangible
Computed by Adding: and Intangible except
(1)Shareholders Funds Goodwill)
(Share Capital, b)Long term loans and
Reserves, Surplus) Advances)
(2)Non-Current Liabilities c) Non-Current
(Long term borrowings Investments
and Long term
Provisions) (2)Working Capital i.e
Current Assets-Current
Liabilities)
Q1 FROM THE FOLLOWING DETAILS GIVEN
CALCULATE RETURN ON INVESTMENT.

Particulars Amount in Rupees

Capital 500000
Reserves 150000
Loan from Maharashtra
200000
Bank
Investment in Assets 480000
Profit Earned 80000
Working Note:
• RETURN ON INVESTMENT: Net Profit (Profit before interest,tax) x100

Capital Employed
• CAPITAL EMPLOYED: Fixed assets + Current assets – Current
Liabilities.
But , Current assets – Current Liabilities = Working Capital
Thus , CAPITAL EMPLOYED = Fixed Assets + Working Capital.
Also, CAPITAL EMPLOYED = Share Capital + Non-Current Liabilities
Since there is no current liability ,
Capital employed = Rs.480000
Profit = Rs. 80000
Therefore,
Return On Investment = 80000/480000*100 = 16.66%
Q2 FROM THE FOLLOWING DETAILS GIVEN
CALCULATE RETURN ON INVESTMENT.

Particulars Amount in Rupees

Net profit after interest but 18000
before tax 0
60000
15% Long Term Debts
0
25000
Share Capital
0
Tax Rate 50%
Reserves 50000
Working Note:
• RETURN ON INVESTMENT: Net Profit (Profit before
interest,tax) x100
Capital Employed

• CAPITAL EMPLOYED: Fixed assets + Current assets – Current

Liabilities.
Here, Capital Employed = 600000 + 250000 + 50000 = Rs.900000
Since Given here is Net Profit AFTER INTEREST but before Tax
Thus ,Profit
Profit before interest before Profit
interest =
after interest before
Net Profit (Profit after interest and tax)
and tax tax

Profit Before Tax , Interest , Dividend = 180000 + 15% of 600000 = 180000 + 90000
= Rs.270000 Therefore,
Return on Investment : 270000/900000*100 = 30%
Q3 FROM THE FOLLOWING DETAILS GIVEN CALCULATE RETURN ON INVESTMENT.

Particulars Amount in Rupees

25000
Net profit after interest and tax
0
46000
Current assets
0
57500
Fixed assets
0
34500
Currents Liabilities
0
40000
12% Long term debts
0
Working Note:
• RETURN ON INVESTMENT: Net Profit (Profit before interest,tax)
x100
Capital Employed
• CAPITAL EMPLOYED: Share Capital + Non Current Liabilities
Here Capital Employed = 5750000 + 460000 – 345000 = Rs.690000
Now, Since Given is Profit AFTER INTEREST and TAX = Rs.250000
Step1. Profit before tax after interest = Profit after tax / 1 – Tax Rate
= 250000/ 1 – 0.20
= Rs.312500
Step2. Profit before interest =

= 312500 + 12% of 400000 = 312500 + 48000 = Rs.360500

Therefore,
RETURN ON INVESTMENT : 360500/690000*100 = 52.246%
Q4 FROM THE FOLLOWING CALCULATE RETURN ON
INVESTMENT:

Particulars Amount in Rs.

Share Capital 2,00,000
Reserves and Surplus 50,000
Non Current Assets 10,00,000
Current Assets 4,00,000
Current Liabilities 2,00,000
10% Long Term Borrowings 1,00,000
Profit Earned 4,40,000
Working Note
Return on investment = Profit (Before Interest, Tax, Dividend) x 100
Capital Employed
Net Profit = Net Profit + Interest on Long term Borrowings
= 4,40,000 + 1,00,000*10/100
= 4,40,000 + 10,000
= 4,50,000
Working Capital = Current Assets – Current Liabilities
= 4,00,000- 2,00,000
= 2,00,000
Capital Employed = Non Current Assets + Working Capital
= 10,00,000 + 2,00,000
= 12,00,000

Return on investment = 4,50,000 x 100

12,00,000
= 37.5 %

Return on investment is 37.5 %

Q5 FROM THE FOLLOWING CALCULATE RETURN ON
INVESTMENT:

Particulars Amount in Rs.

Net Profit after Interest and Tax 1,20,000
Tax 1,20,000
Net Fixed Assets 3,00,000
Current Assets 2,50,000
Share Capital 50,000
Reserves and Surplus 1,00,000
12% Debentures 4,00,000
 Working Note
Return on investment = Profit (Before Interest, Tax, Dividend) x 100
Capital Employed
Net Profit after Interest and Tax Rs. 1,20,000
Add: Interest on Debentures (4,00,000*12/100) Rs. 48,000
Add: Tax Rs. 1,20,000
Net Profit before Interest and Tax Rs. 2,88,000
Share Capital Rs. 50,000
Add: Reserves and Surplus Rs. 1,00,000
Add: 12% Debentures Rs.4,00,000
Capital Employed Rs. 5,50,000

Return on Investment= 2,88,000 x 100

5,50,000
Return on Investment is 52.36%
Q6 From the following calculate Return on
Investment
Particulars Amount in Rs.
Net Profit 2,30,000
Net Fixed Assets 6,90,000
Accumulated Depreciation 90,000
Current Assets 80,000
Current Liabilities 50,000
Loan from Bank 2,00,000
Working Note
Return on investment = Profit (Before Interest, Tax, Dividend) x 100
Capital Employed
Net Profit = Rs. 2,30,000
Working Capital = Current Asset – Current Liabilities
= 80,000-50,000
= 30,000
Capital Employed = Fixed Assets + Working Capital + 10% Loan
from Bank
= 6,90,000 + 30,000 + 2,00,000
Capital Employed = 9,20,000

Return on investment = 2,30,000 x 100

9,20,000

Return on investment is 25%

Note: Accumulated Depreciation is already adjusted in Net Fixed

RETURN ON
CAPITAL
EMPLOYED
Q4 FROM THE FOLLOWING INFORMATION GIVEN
BELOW,YOU ARE REQUIRED TO CALCULATE
RETURN ON CAPITAL EMPLOYED
SALES 25,00,000

COST OF GOODS SOLD 10,00,000

OPERATING EXPENSES 5,00,000

CAPITAL EMPLOYED 20,00,000

SOLU TION :

NET PROFIT=SALES-COST OF GOODS SOLD-OPERATING EXPENSES

=25,00,000-10,00,000-5,00,000=RS.10,00,000
CAPITAL EMPLOYED=RS.20,00,000
RETURN OF CAPITAL EMPLOYED= NET PROFIT x 100
CAPITAL EMPLOYED
=10,00,000 x 100
20,00,000
=50%
THUS, RETURN OF CAPITAL EMPLOYED IS 50%.
Q5 CALCULATE RETURN ON CAPITAL EMPLOYED

SALES 12,00,000

COST OF GOODS SOLD 8,00,000

FIXED ASSETS 3,00,000

CURRENT ASSETS 4,00,000

CURRENT LIABILITIES 2,00,000

 SOLUTION
NET PROFIT=SALES-COST OF GOODS SOLD
= 12,00,000-8,00,000=4,00,000
NET CAPITAL EMPLOYED=FIXED ASSETS+CURRENT ASSETS-CURRENT
LIABILITIES=3,00,000+4,00,000-2,00,000=5,00,000
RETURN ON CAPITAL EMPLOYED= NET PROFIT x 100
CAPITAL EMPLOYED
=4,00,000 x 100 = 80%
5,00,000
THUS RETURN ON CAPITAL EMPLOYED IS 80%.
Q6 FROM THE FOLLOWING INFORMATION,CALCULATE RETURN ON
CAPITAL EMPLOYED

NET PROFIT AFTER INTEREST AND TAX 4,00,000

TAX 20%

FIXED ASSETS 5,00,000

CURRENT ASSETS 4,50,000

CURRENT LIABILITIES 1,50,000

10% DEBENTURES 5,00,000

 SOLUTION

NET CAPITAL EMPLOYED=FIXED ASSETS+CURRENT ASSETS-CURRENT

LIABILITIES=5,00,000+4,50,000-1,50,000=8,00,000
NET PROFIT BEFORE TAX AFTER INTEREST=PROFIT AFTER TAX
1-TAX RATE
= 4,00,000 = RS.5,00,000
1-0.20
PROFIT BEFORE INTEREST=5,00,000+10% OF 5,00,000=RS.5,50,000
RETURN ON CAPITAL EMPLOYED=NET PROFIT BEFORE INTEREST,TAX x 100
NET CAPITAL EMPLOYED
= 5,50,000 x 100=68.75%
= 8,00,000
BY
A008
GURSAACHI
A016 HIYA
A035 SHRUTI
A100 KENISHA
 9.2.1
Comparative Financial Statement :
•Comparative statement compares financial data
at two points of time and helps in deriving the
meaning and conclusions regarding the changes
in financial positions and operating results.
•Meaning : Statement showing financial data for
two or more than two years placed side by side
to facilitate comparisons are called Comparative
Financial Statement.
 Methods for comparisons of Financial
Statement :
• (1) Comparative Balance Sheet

• (2) Comparative Income Statement.

Comparative balance sheet
• Comparative Balance Sheet as on two or more different dates can
be used for comparing assets and liabilities and finding out any
increase or decrease in those items.
• According to Faulke : Comparative Balance Sheet is the study of
the trend of the same items and compared items in two or more
Balance Sheet of same business enterprise of different dates.”
• Such comparison throws light on changes and progress made in
respect of each item of Assets and Liabilities. The main purpose of
Comparative Balance Sheet is to measure the short term and long
term solvency position of business.
Following steps have to be taken to
prepare the comparative Balance Sheet :
• Step 1 : Enter the details of Assets and Liabilities in the first column.

• Step 2 : Enter the amount of Previous years Balance Sheet in second column.

• Step 3 : Record the amount of Current years Balance Sheet in third column.

• Step 4 : Record the absolute changes (i.e. difference between column of current year and previous
year) in fourth column.
• Formula for Absolute Change = Current Year - Previous Year

• Step 5 : Record the percentage changes (i.e. expressing absolute change in percentage of figures of
previous year) in fifth column.

• Formula for % of change = Absolute Change Previous Year × 100

 9.2.1
Comparative Financial Statement :
•Comparative statement compares financial data
at two points of time and helps in deriving the
meaning and conclusions regarding the changes
in financial positions and operating results.
•Meaning : Statement showing financial data for
two or more than two years placed side by side
to facilitate comparisons are called Comparative
Financial Statement.
 Methods for comparisons of Financial
Statement :
• (1) Comparative Balance Sheet

• (2) Comparative Income Statement.

Comparative balance sheet
• Comparative Balance Sheet as on two or more different dates can
be used for comparing assets and liabilities and finding out any
increase or decrease in those items.
• According to Faulke : Comparative Balance Sheet is the study of
the trend of the same items and compared items in two or more
Balance Sheet of same business enterprise of different dates.”
• Such comparison throws light on changes and progress made in
respect of each item of Assets and Liabilities. The main purpose of
Comparative Balance Sheet is to measure the short term and long
term solvency position of business.
Following steps have to be taken to
prepare the comparative Balance Sheet :
• Step 1 : Enter the details of Assets and Liabilities in the first column.

• Step 2 : Enter the amount of Previous years Balance Sheet in second column.

• Step 3 : Record the amount of Current years Balance Sheet in third column.

• Step 4 : Record the absolute changes (i.e. difference between column of current year and previous
year) in fourth column.
• Formula for Absolute Change = Current Year - Previous Year

• Step 5 : Record the percentage changes (i.e. expressing absolute change in percentage of figures of
previous year) in fifth column.

• Formula for % of change = Absolute Change Previous Year × 100

 QUESTIONS:
Q1. From the following Balance Sheet of Ajanta Traders ltd. Prepare a Comparative Balance Sheet as on 31.03.2013
and 31.03.2024

Q1
Liabilities 31.3.23 31.3.24 Assets 31.3.23 31.3.24
Share
260000 324000Building 280000 325000
capital
Reserve
and 70000 95000Machinery 160000 145000
surplus
Cash at
Bank loans 120000 110000 212000 311000
bank
Creditors 250000 300000Debtors 80000 84000
Bills
32000 36000
payable

732000 865000 732000 865000

Q1. SOLUTION
In The Books Of
Ajanta Traders Ltd.
Particulars 31.3.23 31.3.24 Absolute change Percentage change

I.Sources of fund
a. Share Capital 260000 324000 64000 24.61% increase
b. Reserve and Surplus 70000 95000 25000 35.71% increase
A.Net Worth 330,000 419,000 89,000 26.96% increase
B.Borrowed Funds
a. Bank loans 120000 110000 10000 8.33 % decrease

Total Borrowed Funds 120,000 110,000 10,000 8.33 % decrease

Total Funds Available(A+B) 450,000 529,000 79,000 17.55% increase
II. Application of Funds
A.Building 280,000 325,000 45,000 16.07 % increase
B. Machinery 160,000 145,000 15,000 9.37 % decrease
C.Working Capital
1.Current Assets
a.Cash at Bank 212,000 311,000 99,000 46.69 % increase
b. Debtors 80000 84000 4000 5% increase
2.Current liabilities
a. Creditors 250,000 300,000 50,000 20% decrease
b.Bills payable 32,000 36,000 4,000 12.5% increase
Working capital( Current assets less current liabilities) 10,000 10,000 0 0
Total Funds Applied(A+B+C) 450,000 480,000 30,000 6.67% increase

Percentage of Change for Share Capital

Amount of Absolute Change × 100 = 64000 *100 =24.61% increase
Amount of Previous Year 260000
Q2. From the following Balance Sheet of Apoorva Company Ltd. Prepare a
Comparative Balance Sheet as o 31.03.2018 and 31.03.2019

Liabilities 31.03.23 31.3.24 Assets 31.03.23 31.03.24

Share
239000 183000Machinery 120000 90000
capital

Reserve and
85000 100000Land 160000 170000
surplus

Unsecured Current
50000 160000 200000 318000
loans assets

15%
preference 120000 140000Investments 82000 95000
shares

Current
68000 90000
liabilities
562000 673000 562000 673000
 SOLUTION 2
In The Books Of Apoorva Company Ltd.

Particulars 31.3.23 31.3.24 Absolute change Percentage change

I.Sources of fund
.
a.Share Capital 239000 183000 5600023.43 %decrease

b.Reserve and Surplus 85000 100000 1500017.64 %increase

A.Net Worth 324000 283000 4100012.65 %decrease

B.Borrowed Funds

a.Unsecured loans 50000 160000 11000022 %increase

b. !5% Preference shares 120000 140000 2000016.67 %increase

Total Borrowed Funds 170000 300000 13000076.47 %increase

Total Funds Available(A+B) 494000 583000 8900018.01 %increase

II. Application of Funds

A. a.Land 160000 170000 100006.25 %increase

b. Machinery 120000 90000 3000025% decrease

B.Investments 82000 95000 1300015.85 %increase

C.Working Capital

1. Current assets 200000 318000 11800059 %increase

Less: 2.Curent Liabilities 68000 90000 2200032.35 %increase

Working capital (current assets less Current liabilities) 132000 228000 9600072.72 %increase

Total Funds Applied(A+B+C) 494000 583000 8900018.01 %increase

Percentage of Change for Share Capital

Amount of Absolute Change × 100 = 56000 * 100 = 23.43 %increase

Q3. From the following Balance Sheet of Sunshine Company Prepare a Comparative
Blanace Sheet as o 31.03.2018 ad 31.03.2019
.

Liabilities 31.3.23 31.3.24 Assets 31.3.23 31.3.24

Equity Share
193000 224000Debtors 98000 115000
capital

Reserve and Plant and

56000 42000 295000 282000
surplus Mahinery

Bank loans 125000 110000Stock of goods 105000 112000

8% Debentures 170000 182000Patents 28000 36000
Current liabilities 47000 58000Cash 65000 71000

591000 616000 591000 616000

 SOLUTION 3
In The Books Of Sunshine Company

.
Particulars 31.3.23 31.3.24 Absolute change Percentage change

I.Sources of fund
a.Share Capital 193000 224000 31000 16.01%
b.Reserve and Surplus 56000 42000 14000 25%
A.Net Worth 249000 266000 17000 6.80%
B.Borrowed Funds
a.Bank loans 125000 110000 15000 12%
b.8% Debentures 170000 182000 12000 70%
Total Borrowed Funds 295000 292000 3000 10%
Total Funds Available(A+B) 544000 558000 14000 25%
II. Application of Funds
A.Plant and machinery 295000 282000 13000 44%
B.Patents 28000 36000 8000 28.50%
C.Working Capital
1. Current assets
Stock 105000 112000 7000 66.67%
Cash 65000 71000 6000 9.23%
Debtors 98000 115000 17000 17.34%
Less: 2.Curent Liabilities 47000 58000 11000 23.40%
Working capital (current assets less Current liabilities) 221000 298000 77000 34.84%
Total Funds Applied(A+B+C) 544000 616000 72000 13.23%

Percentage of Change for Share Capital

Amount of Absolute Change × 100
Amount of Previous Year
Q4. From the following Balance Sheet of Mangal Ltd. Prepare a Comparative Balance Sheet as on 31.03.2023 and
31.03.2024

Q4 Column1 Column2 Column3 Column4 Column5

Liabilities 31.3.23 31.3.24 Assets 31.3.23 31.3.24

Share capital 100,000 94,000 Land & building 105,000 75,000

General reserve 53,000 26,200 Investment 13,500 10,800

Bank overdraft 0 8,000 Stock 98,500 57,500

Sundry creditors 80,000 40,000 Cash 24,000 6,000

Profit and loss A/c 25,000 20,800 Sundry debtors 59,000 60,700

Bills payable 42,000 21,000

300,000 210,000 300,000 210,000

Particulars SOLUTION 4
31.3.23 31.3.24 Absolute change Percentage change

I.Sources of fund

a.Share Capital 100,000 94,000 6,000 6% decrease

b. Add: General Reserve 53,000 26,200 26,800 50.56% decrease

Add: Profit and loss A/c 25,000 20,800 4,200 16.8% decrease

A.Net Worth 178,000 141,000 37,000 20.78% decrease

B.Borrowed Funds 0 0 0 nil

a.Bank loans 0 0 0 nil

Total Borrowed Funds 0 0 0 nil

Total Funds Available(A+B) 178,000 141,000 37,000 20.78% decrease

II. Application of Funds

A. Fixed asset

Land & building 105,000 75,000 30,000 28.57% decrease

Total Fixed asset 105,000 75,000 30,000 28.57% decrease

B. Investment 13,500 10,800 2,700 20% decrease

C.Working Capital

1. Current assets

a. Quick assets

Cash 24,000 6,000 18,000 75% decrease

Sundry debtors 59,000 60,700 1,700 2.88% increase

Total quick assets 83,000 66,700 16,300 19.63% decrease

b. Non quick assets

Stock 98,500 57,500 41,000 41.62% decrease

Total non-quick assets 98,500 57,500 41,000 41.62% decrease

Total Current assets (Total quick assets+ Total non-quick assets) 181,500 124,200 57,300 31.5% decrease

Less: 2.Curent Liabilities

a. Quick Liabilities

Sundry creditors 80,000 40,000 40,000 50% decrease

Bills payable 42,000 21,000 21,000 50% decrease

Total quick Liabilities 122,000 61,000 61,000 50% decrease

b. Non quick Liabilities

Bank overdraft 0 8,000 -8,000

Total non-quick Liabilities 0 8,000 -8,000

Total Current Liabilities (Total quick Liabilities+ Total non-quick Liabilities) 122,000 69,000 53,000 43.44% decrease

Working capital (current assets less Current liabilities) 59,500 55,200 4,300 7.22% decrease

Total Funds Applied(A+B+C) 178,000 141,000 37,000 20.78% decrease

Percentage of Change

Amount of Absolute Change × 100

Amount of Previous Year

Particulars 31.3.23 31.3.24 Absolute change Percentage change

.
I.Sources of fund
a.Share Capital 100,000 94,000 6,000 6% decrease
b. Add: General Reserve 53,000 26,200 26,800 50.56% decrease
Add: Profit and loss A/c 25,000 20,800 4,200 16.8% decrease
A.Net Worth 178,000 141,000 37,000 20.78% decrease
B.Borrowed Funds 0 0 0 nil
a.Bank loans 0 0 0 nil
Total Borrowed Funds 0 0 0 nil
Total Funds Available(A+B) 178,000 141,000 37,000 20.78% decrease

II. Application of Funds

A. Fixed asset
Land & building 105,000 75,000 30,000 28.57% decrease
Total Fixed asset 105,000 75,000 30,000 28.57% decrease
B. Investment 13,500 10,800 2,700 20% decrease
C.Working Capital
1. Current assets
a. Quick assets
Cash 24,000 6,000 18,000 75% decrease
Sundry debtors 59,000 60,700 1,700 2.88% increase
Total quick assets 83,000 66,700 16,300 19.63% decrease
b. Non quick assets
Stock 98,500 57,500 41,000 41.62% decrease
Total non-quick assets 98,500 57,500 41,000 41.62% decrease
Total Current assets (Total quick assets+ Total non-quick assets) 181,500 124,200 57,300 31.5% decrease
Less: 2.Curent Liabilities
a. Quick Liabilities
Sundry creditors 80,000 40,000 40,000 50% decrease
Bills payable 42,000 21,000 21,000 50% decrease
Total quick Liabilities 122,000 61,000 61,000 50% decrease
b. Non quick Liabilities
Bank overdraft 0 8,000 -8,000
Total non-quick Liabilities 0 8,000 -8,000
Total Current Liabilities (Total quick Liabilities+ Total non-quick Liabilities) 122,000 69,000 53,000 43.44% decrease
Working capital (current assets less Current liabilities) 59,500 55,200 4,300 7.22% decrease
Total Funds Applied(A+B+C) 178,000 141,000 37,000 20.78% decrease

Percentage of Change
Amount of Absolute Change × 100
Amount of Previous Year
Q5. Following is the Balance Sheet of Chitra Ltd. as on 31.3.2015 and 31.3.2016. You
required to prepare Comparative Vertical Balance Sheet.

Q5

Liabilities 31.3.16 31.3.17 Assets 31.3.16 31.3.17

Equity shares 115,000 245,000 Preliminary expense 18,300 21,960

10% Preference Shares 35,000 35,000 Fixed assets 125,000 245,000

Reserve and surplus 26,500 39,350 Investment 50,000 134,000

Long term loans 35,000 17,000 Current assets 90,200 194,390

Suppliers 48,000 96,000

Outstanding expenses 24,000 58,000

10% Debentures 0 105,000

283500 595350 283,500 595,350

 Solution 5
SOLUTION 5

Particulars 31.3.23 31.3.24 Absolute change Percentage change

I.Sources of fund
a.Share Capital
Equity shares 115,000 245,000 130,000 113.04% increase
10% Preference Shares 35,000 35,000 0
Add: Reserve and surplus 26,500 39,350 12,850 48.5% increase
Less: Preliminary expense 18,300 21,960 3,660 20% increase
A.Net Worth 158,200 297,390 139,190 87.98% increase
B.Borrowed Funds
Long term loans 35,000 17,000 18,000 51.42% decrease
10% Debentures 0 105,000 105,000
Total Borrowed Funds 35,000 122,000 87,000 248.57% increase
Total Funds Available(A+B) 193,200 419,390 226,190 117.07% increase

II. Application of Funds

A. Fixed asset 125,000 245,000 120,000 96% increase
B. Investment 50,000 134,000 84,000 168% increase
C.Working Capital
1. Current assets 90,200 194,390 104,190 115.5% increase
Total Current assets 90,200 194,390 104,190 115.5% increase
Less: 2.Curent Liabilities
a. Quick Liabilities
Suppliers 48,000 96,000 48,000 100% increase
Outstanding expenses 24,000 58,000 34,000 141.67% increase
Total quick Liabilities 72,000 154,000 82,000 113.89% increase
b. Non quick Liabilities 0 0 0
Total non-quick Liabilities 0 0 0
Total Current Liabilities (Total quick Liabilities+ Total non-quick Liabilities) 72,000 154,000 82,000 113.89% increase
Working capital (current assets less Current liabilities) 18,200 40,390 22,190 121.92% increase
Total Funds Applied(A+B+C) 193,200 419,390 226,190 117.07% increase

Percentage of Change for Share Capital

Amount of Absolute Change × 100
Amount of Previous Year

Absolute change=Amount of current year-Amount of Previous Year

 .

Q6. From the following Balance Sheet of Sukriti Ltd. Prepare a Comparative Balance Sheet as on 31.03.18 and 31.03.2019

Q6

Liabilities 31.3.18 31.3.19 Assets 31.3.18 31.3.19

Share capital 100,000 370,000 Fixed assets 161,000 402,500

Securities Premium 60,000 80,000 Investment 70,500 141,000

14% Bank loan 20,000 40,000 Customers 70,000 133,000

Traders 90,000 135,000 Fictitious assets 6,500 8,500

Bank Overdraft 29,000 45,000 Prepaid expenses 1,000 5,000

Outstanding expenses 10,000 20,000

309000 690000 308,000 690000

 SOLUTION 6

Particulars 31.3.23 31.3.24 Absolute change Percentage change

I.Sources of fund
a.Share Capital 100,000 370,000 270,000 270% increase
b. Add: Securities Premium 60,000 80,000 20,000 133.34% increase
c. Less: Fictitious assets 6,500 8,500 2,000 30.76% increase
A.Net Worth 153,500 441,500 288,000 187.62% increase
B.Borrowed Funds 0 0 0
14% Bank loan 20,000 40,000 20,000 100% increase
Total Borrowed Funds 20000 40000 20000 100% increase
Total Funds Available(A+B) 173,500 481,500 308,000 177.52% increase

II. Application of Funds

A. Fixed asset 161,000 402,500 241,500 150% increase
B. Investment 70,500 141,000 70,500 100% increase
C.Working Capital
1. Current assets
a. Quick assets
Customers 70,000 133,000 63,000 90% increase
Total quick assets 70,000 133,000 63,000 90% increase
b. Non quick assets
Prepaid expenses 1,000 5,000 4,000 400% increase
Total non-quick assets 1,000 5,000 4,000 400% increase
Total Current assets (Total quick assets+ Total non-quick assets) 71,000 138,000 67,000 94.36% increase
Less: 2.Curent Liabilities
a. Quick Liabilities
Traders 90,000 135,000 45,000 50% increase
Outstanding expenses 10,000 20,000 10,000 100% increase
Total quick Liabilities 100,000 155,000 55,000 55% increase
b. Non quick Liabilities
Bank overdraft 29,000 45,000 16,000 55.17% increase
Total non-quick Liabilities 29,000 45,000 16,000 55.17% increase
Total Current Liabilities (Total quick Liabilities+ Total non-quick Liabilities) 129,000 200,000 71,000 55.03% increase
Working capital (current assets less Current liabilities) -58,000 -62,000 -4,000 6.89% increase
Total Funds Applied(A+B+C) 173,500 481,500 308,000 177.52% increase

Percentage of Change for Share Capital

Amount of Absolute Change × 100
Amount of Previous Year

Absolute change=Amount of current year-Amount of Previous Year

.
COMPARATIVE
INCOME STATEMENT
 MEANING
The Comparative Income
Statement report
summarizes and
compares
income ,expenses and
profit/loss across two or
more specified time
STEPS
•Prepare a vertical income statement with
the help of titles given in the question.
•Specify the values corresponding to current
and previous year/s
•Find the absolute change in the value of
years compared
•Find the percentage change for the same
and determine whether there is an increase
or decrease
•The percentage changes found can be used
to take decisions regarding various aspects
of business
FORMULAE
Formula for Absolute Change
= Current Year - Previous Year
Formula for % of change
= Amount of Absolute /Change Amount
of Previous Year × 100
Q1.From the following information prepare comparative income statement in
the book of Bluedrop co. Ltd.

Particulars 31-03-2019 31-03-2020

Sales 500000 450000

Less: Sales Return 100000 50,000

Gross Profit 400000 4,00,000

Less: Indirect Expenses 26000 60000

Net Profit before Tax 374000 3,40,000

Less: Income Tax 30% 112200 102000

Net Profit after Tax 261800 2,38,000

In the books of Bluedrop Co. Ltd.
Comparative Income Statemnt for the year ended 31-3-19 and 31-3-20
31-03- 31-03- Absolute Chan
Particulars 2020 2019 ge % Change
Sales 500000 450000 50000 11.11111111 increase
Less: Sales Return 100000 50,000 50,000 100 increase

Gross Profit 400000 4,00,000 0 0

Less: Indirect Expenses 26000 60000 34000 56.66666667 decrease
Net Profit before Tax 374000 3,40,000 34,000 10 increase
Less: Income Tax 30% 112200 102000 10200 10 increase
Net Profit after Tax 261800 2,38,000 23,800 10 increase
From the following information prepare comparative income statement in the book of
WINSINKO co. Ltd.

Particulars 31-03-2019 31-03-2020

Sales 750000 530000

Less: Sales Return 250000 1,30,000

Gross Profit Ratio 40% 50%

Office and Admin Expenses 80000 60000

Selling and Distribution Expens
e 72000 49,000

Other Income 37000 45000

Tax Rate 25% 20%

In the books of WINSINKO Co. Ltd.
Comparative Income Statemnt for the year ended 31-3-19 and 31-3-20

Particulars 31-03-2020 31-03-2019 Absolute Change % Change

Sales 750000 530000 220000 41.50943396 increase
Less: Sales Return 250000 1,30,000 120000 92.30769231 increase
Net Sales 500000 4,00,000 100000 25 increase
Less: Cost of Goods Sold 300000 2,00,000 100000 50 increase
Gross Profit 200000 2,00,000 0 0 increase
Less: Office and Administration Expenses 80000 60000 20000 33.33333333 increase
Less: Selling and Distribution Expenses 72000 49,000 23000 46.93877551 increase
Net Operating Profit 48000 91,000 -43000 -47.25274725 decrease
Add: Other Income 37000 45000 -8000 -17.77777778 decrease
120000 1,36,000 -16000 -11.76470588 decrease
Less: Tax 30000 27200 2800 10.29411765 increase
Net Profit After Tax 90000 1,08,800 -18800 -17.27941176 decrease

gross profit ratio=gross profit/net sales * 100

Let gross profit be Rs x

40%= x/5,00,000*100
x=5,000*40
x=2,00,000
From the following information prepare comparative income statement in the boo
k of Ashteri co. Ltd.

Particulars 31-03-2020 31-03-2019

Sales 250000 200000

Cost of Goods Sold 75000 68,000

Selling and Distribution Expen
se 6400 5,400

Other Income 28900 22490

Other Expenses 31520 22680

Interest 12000 13000

Tax Rate 20% 35%

In the books of Ashteri Co. Ltd.
Comparative Income Statemnt for the year ended 31-3-19 and 31-3-20

Particulars 31-03-2020 31-03-2019 Absolute Change % Change

Sales 250000 200000 50000 25 increase
Less: Cost of Goods Sold 75000 68,000 7,000 10.29411765 increase
Gross Profit 175000 1,32,000 43,000 32.57575758 increase
Less: Selling and Distributio
n Expenses 6400 5400 1000 18.51851852 increase
Net Operating Profit 168600 1,26,600 42,000 33.17535545 increase
Less: Other Expenses 31520 22680 8840 38.97707231 increase
Add: Other Income 28900 22,490 6,410 28.50155625 increase
Earnings before Income and
Taxes 165980 1,26,410 39,570 31.30290325 increase
Less: Interest 12000 13000 1,000 7.692307692 decrease
Earnings before Taxes 153980 1,13,410 40,570 35.77285954 increase
Taxes 30796 39693.5 8,898 22.41550884 decrease
Net Profit After Tax 123184 73,717 49,468 67.10505789 increase
Prepare a comparative income statement for PQR .Ltd as on
31-03-2006 and 31-03- 2007

Particulars 31-03-06 31-03-07

Sales 6,00,000 7,50,000
Cost of Sales 10,000 15,000
Office and
Administration
Expenses 54,000 68,000
Indirect Expenses 2,500 4,750
In the books of PQR Ltd,
Comparative Income Statement for the ended 31-03-2006
and 31-03-2007
Absolute % change
Particulars 31-03-06 31-03-07 Change
Sales 6,00,000 7,50,000 1,50,000 25%(Increase)
Less: Cost of Sales 10,000 15,000 5,000 50%(Increase)
24.57%
5,90,000 7,35,000 1,45,000
Gross Profit (Increase)
Less: Office and 22.22%
Adminsitrative Expenses 54,000 68,000 12,000 (Increase)
24.44%
5,36,000 6,67,000 1,31,000
Operating Profit (Increase)
Less: Indirect expenses 2,500 4,750 2,250 90%(Increase)
24.13%
5,33,500 6,62,250 1,28,750
Net Profit (Increase)
Prepare a comparative income statement for Bell Ltd . as on 31-03-2016 and
31-03-2017.
Particulars 31-03-16 31-03-17
Sales 5,50,000 7,25,000
Cost of goods sold 95,000 1,00,500
Indirect Expenses 7,800 9,200
Selling and
Distribution
Expenses 1,500 3,900
Tax rate 50% 50%
Finance Expenses 15,400 19,200
Profit on sale of
Machinery 1,000 3,500
Profit on sale of
Furniture 3,500 4,900
In the books of Bell Ltd,
Comparative Income Statement as on 31-03-2016 and 31-03-2017
Particulars 31-03-16 31-03-17 Absolute change % change
Sales 5,50,000 7,25,000 1,75,000 31.18%(Increase)
Less: Cost of Goods sold 95,000 1,00,500 5,500 5.78%(Increase)
Gross Profit 4,55,000 6,24,500 1,69,500 37.25%(Increase)
Less: Selling and Distribution Expenses 1,500 3,900 2,400 160% (Increase)
Operating Profit 4,53,500 6,20,600 1,67,100 36.84%(Increase)
Less: Indirect expenses 7,800 9,200 1,400 17.94%(Increase)
Less: Non- operating expenses 19,900 27,600 7,700 38.69%(Increase)
Net Profit before tax 4,25,800 5,83,800 1,58,000 37.01%(Increase)
Less:Tax Rate 50% 50% Nil 0%
Net Profit after tax 2,12,900 2,91,900 79,000 37.01%(Increase)

WORKING NOTES:

As on 31-03-2016 ,
Non-operating Expenses = Finance Expenses + Profit on Sale of Machinery + Profit on Furniture
= 15,400 + 1,000 + 3,500
= 19,900
As on 31-03-2017,
Non-operating Expenses = Finance Expenses + Profit on Sale of Machinery + Profit on Furniture
= 19,200 + 3,500 + 4,900
= 27,600
Prepare a comparative income statement for SW Ltd as on 31-03-2023
and 31-03-2024
Particulars 31-03-23 31-03-24
Sales 7,50,000 9,25,000
Sales Return 95,700 99,000
Income tax 50% 50%
Non-operating
Income 39,000 45,000
Purchases 1,60,000 6,80,000
Opening Stock 70,000 90,000
Direct expenses 43,000 52,000
Closing stock 90,000 1,05,000
Operating
Expenses 45,000 88,000
Carriage 1,000 3,400
Wages 34,000 66,000
In the books of SW Ltd,
Comparative Income Statement as 31-03-2023 and 31-03-2024
Particulars 31-03-23 31-03-24 Absolute change % change
Sales 7,50,000 9,25,000 1,75,000 23.33%(Increase)
Less: Sales Return 95,700 99,000 3,300 3.44%(Increase)
Add: Purchases 1,60,000 6,80,000 5,20,000 325%(Increase)
Add: Opening Stock 70,000 90,000 20,000 28.57%(Increase)
Less: Closing Stock 90,000 1,05,000 15,000 16.66% (Increase)
Add: Carriage 1,000 3,400 2,400 240%(Increase)
Add:Wages 34,000 66,000 32,000 94.11%(Increase)
Add: Direct Expenses 43,000 52,000 9,000 20.93%(Increase)
Gross Profit 8,72,300 16,12,400 7,39,200 84.74%(Increase)
Less: Operating Expenses 45,000 88,000 43,000 95.55% (Increase)
Operating profit 8,27,300 15,24,400 6,97,100 84.26% (Increase)
Add:Non- operating Income 39,000 45,000 6,000 95.55% (Increase)
Net profit before tax 8,66,300 15,69,400 7,03,100 81.61% (Increase)
Less: Income tax 50% 50% Nil 0%
Net profit after tax 4,33,150 7,84,700 3,51,550 81.61%(Increase)

Note:
Carriage is assumed to be Carriage Inwards since the question remains silent .
A17,18,30,97
COMMON SIZE STATEMENT
INCOME STATEMENT
What is common size income statement?
A common size income statement is an
income statement in which each line item is
expressed as a percentage of the value of
revenue or sales.

Formula

(Total item/Total Assets) * 100.

What is the Importance of an income statement?
An income statement helps business owners decide whether they can generate
profit by increasing revenues, by decreasing costs, or both. It also shows the
effectiveness of the strategies that the business set at the beginning of a financial
period. The business owners can refer to this document to see if the strategies have
paid off. Based on their analysis, they can come up with the best solutions to yield
more profit.

Who uses an income statement?

There are two main groups of people who use this financial statement: internal and
external users. Internal users include company management and the board of
directors, who use this information to analyze the business’s standing and make
decisions in order to turn a profit. They can also act on any concerns regarding cash
flow. External users comprise investors, creditors, and competitors. Investors check
whether the company is positioned to grow and be profitable in the future, so they
can decide whether to invest in the business. Creditors use the income statement
to check whether the company has enough cash flow to pay off its loans or take out
a new loan. Competitors use them to get details about the success parameters of a
business and get to know about areas where the business is spending an extra bit,
for example, R&D spends.
What are the major components of an income statement?
Revenue or sales: Operating revenue refers to the revenue gained by a company by
performing primary activities like manufacturing a product or providing a service. Non-
operating revenue is gained by performing non-core business activities such as
installation, operation, or maintenance of a system.
Cost of goods sold (COGS): This is the total cost of sales or services, also referred to as
the cost incurred to manufacture goods or services.
Gross profit: Gross profit is defined as net sales minus the total cost of goods sold in
your business.
Gains: Gain is a result of a positive event that causes an organization’s income to
increase. Gains indicate the amount of money realized by the company from various
business activities like the sale of an operating segment.
Expenses: Expenses are the costs that the company has to pay in order to generate
revenue.
Advertising expenses: These expenses are simply the marketing costs required to
expand the client base. They include advertisements in print and online media as well
as radio and video ads.
Administrative expenses: It can be defined as the expenditure incurred by a business or
company as a whole rather than being the ones associated with specific departments of
the same company.
Depreciation: Depreciation refers to the practice of distributing the cost of a long-term
asset over its life span.
What is the purpose of a common size Income Statement?
A common size income statement is used to standardize financial statements for comparative analysis. It
expresses each line item as a percentage of total revenue or sales, which helps:
1. Compare Companies: It allows for easier comparison of companies of different sizes or within different
industries by eliminating size-related differences.
2. Analyse Trends: It facilitates the analysis of trends over time within the same company by showing how each
expense and profit item varies relative to sales.
3. Benchmarking: It enables benchmarking against industry averages or competitors, highlighting strengths and
weaknesses.

How can the changes in the common size income statement signal financial problems?
4. Declining Gross Profit Margin: A decreasing gross profit margin indicates rising cost of goods sold or declining
sales prices, which could signal issues with pricing strategy, production inefficiencies, or higher material costs.
5. Increasing Operating Expenses: A growing percentage of operating expenses relative to revenue might suggest
inefficiencies in managing operating costs, potentially leading to reduced profitability.
6. Rising Interest Expense: An increase in interest expense as a percentage of revenue could indicate higher debt
levels or increasing interest rates, which can strain financial stability.
7. Decreasing Net Profit Margin: A falling net profit margin can signal problems with overall profitability,
potentially due to higher costs or declining revenue.
5. Fluctuations in Revenue Proportions: Significant changes in revenue-
related percentages might indicate underlying issues with revenue stability
or growth, such as loss of key customers or market share.

What are the advantages and disadvantages of using a Common

Size Income statement?
A Common Size Income Statement converts all line items to a percentage of
total revenue, allowing for easier comparison across companies or periods.
Advantages:
- Facilitates comparison between companies of different sizes.
- Simplifies the analysis of financial performance over time.
- Enhances the ability to identify trends and anomalies.
Disadvantages:
- Can obscure absolute figures and overall scale.
- May not reflect differences in business models or cost structures.- Less
useful for detailed financial analysis of specific areas.
Q1. Prepare a common size statement of profit and loss of XYZ and Co. with the help of the following
information:

Particulars 2023-24
(₹)

Revenue from operations 6,00,000

Indirect expense 25% of gross profit

Cost of revenue from operations 4,28,000

Other incomes 10,000

Income tax 30%

Common Size Income Statement
for the years ended March 31, 2024
Particulars Note 2023-24 Percentage of Sales
No. (₹)

1. Revenue from 6,00,000 100

Operations
2. Other Income 10,000 1.67
3. Total Revenue (1 6,10,000 101.67
+ 2)
4. Expenses
Cost of Revenue from 4,28,000 71.33
Operations (COGS)
Other Expenses 43,000 7.17
Total Expenses 4,71,000 78.5
5. Profit before Tax 1,39,000 23.167
(3 – 4)
Less: Income Tax (41,700) 5.35
6. Profit After Tax 97,300 16.22
Q2. Prepare a common size statement of profit and loss of ABC and Co. with the help of the following
information:

Particulars 2024-25
(₹)

Revenue from operations 8,00,000

Indirect expense 25% of gross profit

Cost of revenue from operations 7,28,000

Other incomes 12,000

Income tax 30%

Common Size Income Statement
for the years ended March 31, 2025
Particulars Note 2024-25 Percentage of
No. (₹) Sales

1. Revenue from Operations 8,00,000 100

2. Other Income 12,000 1.5
3. Total Revenue (1 + 2) 8,12,000 101.5
4. Expenses
Cost of Revenue from 7,28,000 91
Operations (COGS)
Other Expenses 18,000 2.25
Total Expenses 7,46,000 93.25
5. Profit before Tax (3 – 4) 66,000 8.25
Less: Income Tax (19,800)
6. Profit After Tax 46,200 5.775
Q3. Prepare a common size statement of profit and loss of PQR and Co. with the help of the following
information:

Particulars 2020-21 2021-22

Revenue from 14,00,000 16,00,000

Operations
Purchases 9,00,000 10,00,000

Change in Inventories 1,00,000 1,80,000

Finance Costs 80,000 90,000

Other Expenses 90,000 1,30,000

 Particulars Absolute Amount % of Sales

2020-21 2021-22 2020-21 2021-22

Revenue from 14,00,000 16,00,000 100 100
operations
Expenses

purchases 9,00,000 10,00,000 64.28 62.5

Change in inventories 1,00,000 1,80,000 7.14 11.25

Finance cost 80,000 80,000 5.71 5

Other expenses 90,000 1,30,000 6.43 8.12

total 11,70,000 13,90,000

Profit before income tax 2,30,000 2,10,00 16.43 13.13

Less: income tax 40,000 36,000 2.84 2.25

Profit after income tax 1,90,000 1,74,000 13.57 10.88

Q4. Prepare a common size income statement of PQR and Co. for the year and ended 31.03.17 and 31.03.18.

Particulars 31.03.2017 31.03.2018

Sales 2,00,000 2,50,000

Cost of Goods Sold 1,50,000 1,70,000

Office and Administrative 4,000 6,000

Expenses

Selling and Distribution 6,000 1,000

Expenses
Common Size Income Statement of PQR and Co for the year ended 31.03.2018 and 31.03.2019

Particulars Amount(31.03.17) Percentage% Amount(31.03.18) Percentage%

Sales 2,00,000 100% 2,50,000 100%

Less-Cost of goods 1,50,000 75% 1,70,000 68%
sold

Gross Profit 50,000 25% 80,000 32%

Less- Office and 4,000 2% 6,000 2.4%

Administrative
Expenses

Less-Selling and 6,000 3% 1,000 0.4%

Distribution
Expenses

Net Profit 40,000 20% 73,000 29.2%

Q5. Prepare a common size income statement Vivek and Co. with the help of the following formation :

Particulars 2022-2023(AMOUNT)

Revenue from Operations 5,00,000

Indirect Expenses 25% of gross profit

Cost of revenue from operations 3,00,000

Other Incomes 10,000

Income Tax 30%

Common Size Income statement of Vivek and Co. for the year ended 2022-2023

Particulars Amount Percentage%

1.Revenue from Operations 5,00,000 100%

2.Other Income 10,000 2%

3.Total Revenue(1+2) 5,10,000 102%

4.Expenses

Cost of Revenue from Operations (COGS) 3,00,000 60%

Other Expenses 50,000 10%

Total Expenses 3,50,000 70%

5.Profit before tax(3-4) 1,60,000 32%

Less:Income Tax 48,000 9.6%

6.Profit after tax 1,12,000 22.4%

Q6. Prepare a common Size Income Statement for Raj and Co. for the year ended 31 st March 2018
and 31st March 2019.

Particulars 31.03.2018 31.03.2019

(Amount) (Amount)

Net Sales 5,00,000 6,00,000

Cost of Goods Sold 1,40,000 1,80,000

Office and Administrative 80,000 20,000

Expenses

Selling and Distribution 50,000 1,20,000

Expenses
 Common Size Income Statement of Raj and Co. for the Year ended 31.03.2018 and 31.03.2019.

Particulars 31.03.2018 Percentage% Percentage%

(Amount) 31.03.2019
(Amount)
Net Sales 5,00,000 100% 6,00,000 100%
Less- Cost of Goods Sold 1,40,000 28% 1,80,000 30%

Gross Profit 3,60,000 72% 4,20,000 70%

Less-Office and Administrative 80,000 16% 20,000 3.33%

Expenses

Less-Selling and Distribution 50,000 10% 1,00,000 16.67%

Expenses

Net Profit 2,30,000 46% 3,00,000 50%

BALANCE SHEET
What is a common size balance sheet?
A common size balance sheet is a balance sheet that displays both the numeric value and relative percentage for
total assets, total liabilities, and equity accounts. Common size balance sheets are used by internal and external
analysts and are not a reporting requirement of generally accepted accounting principles (GAAP).​

What Is the Purpose of a Common Size Balance Sheet?​

The advantages of common size balance sheets are that they allow for quick comparison across line items
against their total value, such as a single asset compared to the value of total assets.​
Common size balance sheets also allow internal and external stakeholders to analyze trend lines and see any
major changes that may have occurred in the balance sheet.​
The idea Is to eliminate size differences between companies as well as to get an insight into the financial position
and capital allocation of the business​.

What are the Objectives of Common Size Balance Sheet?​

The basic objective of a Common-size Balance Sheet is to analyse the changes in the individual items of a
Balance Sheet.​It is also prepared to see the trends of different items of assets, equity and liabilities of a Balance
Sheet. ​Lastly, it is prepared for the assessment of the financial soundness of the organisation and to understand
its financial strategy.​
​
The formula for calculating a common
size balance sheet is:

Amount / Base amount *100

Base amount: The total assets of the

company
What does a high percentage of current liabilities on a common size balance sheet indicate?​
A high percentage of current liabilities may indicate potential liquidity issues or that a company relies heavily on
short-term financing. It suggests the company may need to manage its short-term obligations more carefully.​

How does a common size balance sheet facilitate industry comparisons?​

By converting figures into percentages, a common size balance sheet removes the impact of company size,
allowing for a more straightforward comparison of financial structure and performance across companies within
the same industry.​

What does a high percentage of fixed assets on a common size balance sheet indicate?​
A high percentage of fixed assets may indicate a capital-intensive business with significant investments in
property, plant, and equipment.​

What does a low percentage of cash and cash equivalents typically suggest?​
A low percentage of cash and cash equivalents could suggest that a company is investing a significant portion
of its assets in operations or other investments, potentially leading to liquidity risks.​
​
How can changes in the common size percentages signal potential financial problems?​
Significant changes in percentages, such as a rising proportion of liabilities or decreasing equity, can indicate
potential financial stress or deteriorating financial health.​
What is equity share capital?
You must have heard of an Initial Public Offering (IPO), a significant event where a company sells its shares to the
public for the first time. But what exactly happens during an IPO, and why is it so important? This process involves
raising equity share capital, a crucial component of a company's financial structure and growth strategy.​
Imagine you and three friends decide to start a small business selling homemade sweets. Each of you invests
₹10,000 into the business, making a total capital of ₹40,000. This pooled money is your business's equity capital,
representing the ownership each of you has in the business. Now, if your business grows and you need more money
to expand, you might decide to bring in more investors by selling them shares of your business. These new investors
become part-owners, just like you and your friends, and the money they invest becomes additional equity capital. ​
Equity share capital works similarly for companies. When a company wants to raise money, it sells shares to
investors in exchange for ownership stakes in the company. This capital is crucial as it provides the necessary funds
for a company to start or expand its operations. In return for their investment, shareholders gain the right to vote on
major company decisions and receive a portion of the profits, known as dividends.​
Equity share capital is a vital part of a company's financial structure, offering a way to fund growth without incurring
debt. This blog will delve into the meaning of equity share capital, its types, features, benefits, and more, helping
you understand its importance in the world of finance.​
​
Types Of Equity Share Capital​
​
1. Authorised share capital: This is the maximum amount of share capital that XYZ Ltd. is authorised to issue, as stated in
its memorandum of association. For example, XYZ Ltd. has an authorised share capital of ₹50 crore. This means the
company can issue shares up to this value.​
2. Issued share capital: Out of the authorised share capital, XYZ Ltd. decides to issue shares worth ₹20 crore to the public.
This portion is known as the issued share capital. For example, if each share is priced at ₹100, XYZ Ltd. will issue 20 lakh
shares (₹20 crore / ₹100 per share).​
3. Subscribed share capital: Investors agree to buy shares worth ₹18 crore out of the ₹20 crore issued by XYZ Ltd. This
agreed-upon amount is called subscribed share capital. For example, if each share is priced at ₹100, investors subscribe to
18 lakh shares (₹18 crore / ₹100 per share).​
4. Paid-Up Capital: Out of the ₹18 crore subscribed by investors, they actually pay ₹15 crore. This paid amount is the paid-
up capital. For example, if each share is priced at ₹100, the paid-up capital is 15 lakh shares (₹15 crore / ₹100 per share). ​
5. Right Shares: Suppose XYZ Ltd. decides to issue additional shares to existing shareholders to raise more funds while
preserving their ownership percentage. These additional shares are known as right shares. For example, XYZ Ltd. offers 1
right share for every 10 shares held at a price of ₹90.​
6. Sweat equity shares: As an appreciation for a job well done, XYZ Ltd. may issue shares to employees or directors at a
discount or for consideration other than cash. These shares are known as sweat equity shares. For example, XYZ Ltd. issues
1 lakh shares to its employees at ₹50 per share.​
7. Bonus Shares: XYZ Ltd. decides to issue additional shares to its existing shareholders in the form of a dividend, without
any additional cost. These are bonus shares. For example, XYZ Ltd. issues 1 bonus share for every 5 shares held.​
What Are Preference Shares?​
Preference shares, more commonly referred to as preferred stock, are shares of a company’s stock with dividends that are paid out to
shareholders before common stock dividends are issued. If the company enters bankruptcy, preferred stockholders are entitled to be paid from
company assets before common stockholders.​
Most preference shares have a fixed dividend, while common stocks generally do not. Preferred stock shareholders also typically do not hold any
voting rights, but common shareholders usually do.​

Preference Share Capital-Meaning​

Preference share capital is raised through the issuance of preference shares, which grant shareholders specific
privileges. These may include a fixed dividend payment, priority over common shareholders in receiving dividends, and
a preferential claim on company assets if it goes through liquidation.​

What are the main types of preference shares?​

There are four main types of preference shares: cumulative preferred, non-cumulative preferred, participating
preferred, and convertible. Holders of cumulative preferred shares are entitled to receive dividends retroactively for
any dividends that were not paid in prior periods, whereas non-cumulative preferred shares do not carry this provision.
For this reason, cumulative preferred shares will generally be more expensive than non-cumulative preferreds.
Similarly, participating preferred shares offer the benefit of additional dividends if certain performance targets are
reached, such as company profits exceeding a specified level. Convertible preferreds, like convertible bonds, allow the
holder to convert their preference shares into common shares at a specified exercise price.​
Q1. following is the summarized balance sheet of xyz ltd
as at 31 st March 2010and 2009
31st March, 31st March,
Particulars Note No. 2010 2009

I. EQUITY AND LIABILITIES

1. Shareholders' Funds
(a) Share Capital:
(i) Equity Share Capital 83000 77580
(ii) Preference Share Capital 50000 48520
(b) Reserves and Surplus 39650 42000
2. Non-Current Liabilities
(a) Long-term Borrowings 78520 65010
(b) Long-term Provisions 18580 19200
3. Current Liabilities
(a) Trade Payables (Creditors) 49500 50000
(b) bills payable 39980 35890
(c) short term provisions 5670 9000
Total 364900 347200

II. ASSETS
1. Non-Current Assets
(a) Fixed Assets (Tangible) 125000 106020
(b) intangible asset 47000 40280
(c) Non-Current Investments 85000 80600
2. Current Assets
(a) inventories 51030 42770
(b) trade receivables 11870 15430
(b) Cash and Cash Equivalents 39000 50000
(d) short term advances 6000 12100
Total 364900 347200
 in the books of xyz ltd.
common size balance sheet as at 31 st March 2009 and 2010
particulars note no. absoluteamounts percentage of balance sheet total
figures at the end of figures at the end of
previous year 2009 Rs. current year 2010 Rs. previous year 2009 ( %) current year 2010 ( %)

Equity and liabilities

shareholder's funds:

a) share capital
1. equity share capital 77580 83000 22.35 22.75
2. preference share capital 48520 50000 13.97 13.7
b) reserves and surplus 42000 39650 12.1 10.86

non -current liabilities

a) long term borrowings 65010 78520 18.73 21.51
b) long term provision 19200 18580 5.52 5.1

current liabilities
a) short term borrowings
b) trade payables 50000 49500 14.4 13.56
c) other current liabilities 35890 39980 10.34 10.96
d) short term provision 9000 5670 2.59 1.56

total 347,200 364,900 100% 100%

assets
non -current assets
a)proerty , plant & equipment
intangible assets
a) tangible fixed assets 106020 125000 30.54 34.26
b) intangible assets 40280 47000 11.6 12.9
c) non -current investments 80600 85000 23.22 23.3
d) long term loans & advances

current assets
a) current investments
b) inventories 42770 51030 12.32 13.98
c) trade receivables 15430 11870 4.44 3.25
d) cash and cash equivalents 50000 39000 14.4 10.66
e) short term loans & advances 12100 6000 3.48 1.65
f) other current assets

total 347200 364900 100% 100%

 Following is the summarised Balance Sheet of PQR LTD AS ON 31ST MARCH 2016 AND 2015

Q2. 31st March, 31st March,

Particulars Note No. 2016 2015

I. EQUITY AND LIABILITIES

1. Shareholders' Funds
(a) Share Capital:
(i) Equity Share Capital 520,000 480,000
(ii) Preference Share Capital 230,000 150,000
(b) Reserves and Surplus 180,000 110,000
2. Non-Current Liabilities
(a) Long-term Borrowings 1 310,000 350,000
(b) Long-term Provisions 50,000 100,000
3. Current Liabilities
(a) Trade Payables (Creditors) 680,000 480,000
(b) Short-term Provisions 70,000 60,000
Total 2,040,000 1,730,000
II. ASSETS
1. Non-Current Assets
(a) Fixed Assets (Tangible) 1,120,000 1,040,000
(b) Non-Current Investments 140,000 90,000
2. Current Assets
(a) Trade Receivables 580,000 470,000
(b) Cash and Cash Equivalents 2 200,000 130,000
Total 2,040,000 1,730,000

Notes to Accounts
31st March, 31st March,
Particulars 2016 2015

I. Long-term Borrowings
Bank Loan 255,000 350,000
8% Debentures 55,000 ...
310,000 350,000
2. Cash and Cash Equivalents
Bank Balance 170,000 110,000
Cash in Hand 30,000 20,000
200,000 130,000
 in the books of PQR ltd
common size balance sheet as at 31st march, 2015 and 2016
particulars note no. absoluteamounts percentage of balance sheet total
figures at the end of figures at the end of
previous year 2015 Rs. current year 2016 Rs. previous year 2015 ( %) current year 2016 ( %)

Equity and liabilities

shareholder's funds:

a) share capital
1. equity share capital 480,000 520,000 27.74 25.49
2. preference share capital 150,000 230,000 8.66 11.27
b) reserves and surplus 110,000 180,000 6.4 8.82
740,000 930,000
non -current liabilities
a) long term borrowings 1
1. bank loan 350000 255,000 20.23 12.51
2. 8% debentures nil 55,000 2.69
b) long term provision 100000 50000 5.77 2.45

current liabilities
a) short term borrowings nil nil
b) trade payables 480,000 680,000 27.74 33.34
c) other current liabilities
d) short term provision 60000 70000 3.46 3.43

Total 1,730,000 2,040,000 100.00% 100%

assets
non -current assets
a)proerty , plant & equipment
intangible assets
1. property, plant & equipment 1040000 1120000 60.12 57.6
(fixed assests)
2. intangible assets
b) non -current investments 90000 140000 5.2 5.43
c) long term loans & advances

current assets
a) current investments
b) inventories
c) trade receivables 470000 580000 27.17 27.17
d) cash and cash equivalents 2 130000 200000 7.51 9.8
e) short term loans & advances
f) other current assets

Total 1730000 2040000 100% 100%

 following is the summarized balance sheet of VI
Q3.
as at 31st March 2005 and 2004
31st March, 31st March,
Particulars Note No. 2005 2004

I. EQUITY AND LIABILITIES

1. Shareholders' Funds
(a) Share Capital:
(i) Equity Share Capital 210000 198900
(ii) Preference Share Capital 65780 62310
(b) Reserves and Surplus 51250 49860
2. Non-Current Liabilities
(a) Long-term Borrowings 75420 68000
(b) Long-term Provisions 64000 46820
3. Current Liabilities
(a) Trade Payables (Creditors) 31320 45880
(b) bills payable 44000 33000
(c) short term provisions 70030 65030
Total 611800 569800

II. ASSETS
1. Non-Current Assets
(a) Fixed Assets (Tangible) 289000 280000
(b) intangible asset 65000 63120
(c) Non-Current Investments 51640 50820
2. Current Assets
(a) inventories 63160 60000
(b) trade receivables 60410 36970
(b) Cash and Cash Equivalents 62590 52640
(d) short term advances 20000 26250
Total 611800 569800
 in the books of VI
common size balance sheet as at 31 st March 2004 and 2005
particulars note no. absoluteamounts percentage of balance sheet total
figures at the end of figures at the end of
previous year 2004 current year 2005 Rs. previous year 2004 ( %) current year 2005 ( %)
Rs.

Equity and liabilities

shareholder's funds:

a) share capital
1. equity share capital 198900 210000 34.9 34.32
2. preference share capital 62310 65780 10.93 10.75
b) reserves and surplus 49860 51250 8.75 8.38

non -current liabilities

a) long term borrowings 68000 75420 11.93 12.32
b) long term provision 46820 64000 8.21 10.46

current liabilities
a) short term borrowings
b) trade payables 45880 31320 8.06 5.12
c) other current liabilities 33000 44000 5.79 7.2
d) short term provision 65030 70030 11.41 11.45

total 569,800 611,800 100.00% 100%

assets
non -current assets
a)proerty , plant & equipment
intangible assets
1. property, plant & equipment 280000 289000 49.14 47.24
(fixed assests)
2. intangible assets 63120 65000 11.08 10.63
b) non -current investments 50820 51640 8.92 8.44
c) long term loans & advances

current assets
a) current investments
b) inventories 60000 63160 10.53 10.32
c) trade receivables 36970 60410 6.49 9.87
d) cash and cash equivalents 52640 62590 9.24 10.23
e) short term loans & advances 26250 20000 4.6 3.27
f) other current assets

total 569800 611800 100% 100%

Q4. Following is the summarised Balance Sheet of Wye Ltd. as at 31st March, 2019: arch 2019 and 2018

31st March, 31st March,

Particulars Note No. 2019 2018

I. EQUITY AND LIABILITIES

1. Shareholders' Funds
(a) Share Capital:
(i) Equity Share Capital 460,000 400,000
(ii) Preference Share Capital 180,000 100,000
(b) Reserves and Surplus 120,000 110,000
2. Non-Current Liabilities
(a) Long-term Borrowings 1 450,000 450,000
(b) Long-term Provisions 50,000 100,000
3. Current Liabilities
(a) Trade Payables (Creditors) 530,000 330,000
(b) Short-term Provisions 50,000 50,000
Total 1,840,000 1,540,000
II. ASSETS
1. Non-Current Assets
(a) Fixed Assets (Tangible) 1,060,000 1,040,000
(b) Non-Current Investments 100,000 100,000
2. Current Assets
(a) Trade Receivables 500,000 300,000
(b) Cash and Cash Equivalents 2 180,000 100,000
Total 1,840,000 1,540,000

Notes to Accounts
31st March, 31st March,
Particulars 2019 2018

I. Long-term Borrowings
Bank Loan 350,000 450,000
8% Debentures 100,000 ...
450,000 450,000
2. Cash and Cash Equivalents
Bank Balance 100,000 90,000
Cash in Hand 10,000 10,000
110,000 100,000
 in the books of Wye Ltd.

common size balance sheet as at 31st march, 2018 and 2019

particulars note no. absoluteamounts percentage of balance sheet total

figures at the end of previous year 2018 Rs. figures at the end of current year 2019 Rs.
previous year 2018 ( %) current year 2019 ( %)

Equity and liabilities

shareholder's funds:

a) share capital
1. equity share capital 400000 460000 25.98 25
2. preference share capital 100000 180000 6.49 9.79
b) reserves and surplus 110000 120000 7.14 6.52
610000 760000
non -current liabilities
a) long term borrowings 1
1. bank loan 450000 350000 29.22 19.02
2. 8% debentures nil 100000 5.43
b) long term provision 100000 50000 6.49 2.72

current liabilities
a) short term borrowings nil nil
b) trade payables 330000 530000 21.43 28.8
c) other current liabilities
d) short term provision 50000 50000 3.25 2.72

total 1,540,000 1,840,000 100% 100%

assets
non -current assets
a)proerty , plant & equipment
intangible assets

1. property, plant & equipment 1040000 1060000 67.52 57.6

(fixed assests)
2. intangible assets
b) non -current investments 100000 100000 6.5 5.43
c) long term loans & advances

current assets
a) current investments
b) inventories
c) trade receivables 300000 500000 19.48 27.17
d) cash and cash equivalents 2 100000 180000 6.5 9.8

e) short term loans & advances

f) other current assets

total 1540000 1840000 100% 100%

Q5. following is the summarized balance sheet of Tata motors

as at 31st March 2015 and 2014

31st March, 31st March,
Particulars Note No. 2015 2014

I. EQUITY AND LIABILITIES

1. Shareholders' Funds
(a) Share Capital:
(i) Equity Share Capital 191000 146800
(ii) Preference Share Capital 78860 82740
(b) Reserves and Surplus 61100 41410
2. Non-Current Liabilities
(a) Long-term Borrowings 62180 42000
(b) Long-term Provisions 56000 27000
3. Current Liabilities
(a) Trade Payables (Creditors) 44490 56740
(b) bills payable 46200 11000
(c) short term provisions 67870 82330
Total 607700 490020

II. ASSETS
1. Non-Current Assets
(a) Fixed Assets (Tangible) 287000 250000
(b) intangible asset 73000 56800
(c) Non-Current Investments 61670 54000
2. Current Assets
(a) inventories 59540 30000
(b) trade receivables 44600 29970
(b) Cash and Cash Equivalents 51400 26000
(d) short term advances 30490 43250
Total 607700 490020
 in the books of Tata Motors

common size
balance sheet as
at 31 st March
2015 and 2014
particulars note no. absoluteamounts percentage of balance sheet total
figures at the end of previous figures at the end of current year
year 2014 Rs. 2015 Rs. previous year 2014 ( %) current year 2015 ( %)

Equity and liabilities

shareholder's funds:

a) share capital
1. equity share capital 146800 191000 29.96 31.43
2. preference share capital 82740 78860 16.89 12.98
b) reserves and surplus 41410 61100 8.45 10.05

non -current liabilities

a) long term borrowings 42000 62180 8.57 10.23
b) long term provision 27000 56000 5.51 9.22

current liabilities
a) short term borrowings
b) trade payables 56740 44490 11.58 7.32
c) other current liabilities 11000 46200 2.24 7.6
d) short term provision 82330 67870 16.8 11.17

total 490,020 607,700 100% 100%

assets
non -current assets
a)proerty , plant & equipment
intangible assets
1. property, plant & equipment 250000 287000 51.02 47.23
(fixed assests)
2. intangible assets 56800 73000 11.59 12.01
b) non -current investments 54000 61670 11.02 10.15
c) long term loans & advances

current assets
a) current investments
b) inventories 30000 59540 6.12 9.8
c) trade receivables 29970 44600 6.11 7.34
d) cash and cash equivalents 26000 51400 5.31 8.46
e) short term loans & advances 43250 30490 8.83 5.01
f) other current assets

total 490020 607700 100% 100%

Q6.
following is the summarized balance sheet of reliance ltd
as at 31 st March 2015and 2014
31st March, 31st March,
Particulars Note No. 2015 2014

I. EQUITY AND LIABILITIES

1. Shareholders' Funds
(a) Share Capital:
(i) Equity Share Capital 75000 72940
(ii) Preference Share Capital 63000 39890
(b) Reserves and Surplus 47850 40000
2. Non-Current Liabilities
(a) Long-term Borrowings 65120 42010
(b) Long-term Provisions 21000 18650
3. Current Liabilities
(a) Trade Payables (Creditors) 46500 51430
(b) bills payable 37980 27000
(c) short term provisions 4000 9000
Total 360450 300920

II. ASSETS
1. Non-Current Assets
(a) Fixed Assets (Tangible) 100320 76020
(b) intangible asset 49000 38000
(c) Non-Current Investments 95000 72600
2. Current Assets
(a) inventories 44260 39770
(b) trade receivables 11870 12430
(b) Cash and Cash Equivalents 41000 50000
(d) short term advances 19000 12100
Total 360450 300920
 in the books of realiance ltd.

common size
balance sheet as
at 31 st March
2015 and 2014
particulars note no. absoluteamounts percentage of balance sheet total
figures at the end of previous year 2014 figures at the end of current
Rs. year 2015 Rs.
previous year 2014 ( %) current year 2015 ( %)

Equity and liabilities

shareholder's funds:

a) share capital
1. equity share capital 72940 75000 24.24 20.8
2. preference share capital 39890 63000 13.26 17.48
b) reserves and surplus 40000 47850 13.29 13.28

non -current liabilities

a) long term borrowings 42010 65120 13.96 18.06
b) long term provision 18650 21000 6.2 5.83

current liabilities
a) short term borrowings
b) trade payables 51430 46500 17.09 12.9
c) other current liabilities 27000 37980 8.97 10.54
d) short term provision 9000 4000 2.99 1.11

total 300,920 360,450 100% 100%

assets
non -current assets
a)proerty , plant & equipment
intangible assets
a) tangible fixed assets 76020 100320 25.26 27.83
b) intangible assets 38000 49000 12.63 13.6
c) non -current investments 72600 95000 24.13 26.36
d) long term loans & advances

current assets
a) current investments
b) inventories 39770 44260 13.22 12.28
c) trade receivables 12430 11870 4.13 3.29
d) cash and cash equivalents 50000 41000 16.61 11.37
e) short term loans & advances 12100 19000 4.02 5.27
f) other current assets

total 300920 360450 100% 100%

CASH FLOW STATEMENT
ADWITA KARKERA
SIA AGRAWAL
PRAPTI MEHTA
JHANVI. A
INTRODUCTION

CASH FLOW STATEMENT

• It is a statement that shows inflows and outflows of cash during the period
from operating activities, investing activities and financing activities.
• According to accounting standard 3,it should be classified into three
categories.
CASH FLOWS FROM OPERATING ACTIVITIES
• Operating activities are the principle revenue producing activities of the
enterprise and other activities that are not investing or financing activities.
CASH FLOWS FROM INVESTING ACTIVITIES
• Investing activities are related to tangible and intangible fixed assets and
long term investments.
CASH FLOWS FROM FINANCING ACTIVITIES
• Financing activities are related to share capital and borrowing: both, long
term and short term
Transactions not considered as cash flows

• Cash deposited in bank

• Cash withdrawn from bank
• Purchase or sales of short term investments/maketable
securities
Format for cash flow statement
 Question 1

LIABILITIES 31/3/2023 31/03/24 ASSETS 31/03/23 31/03/24

share capital 2,00,000 2,50,000

creditors 70,000 47,000 Cash 30,000 47,000

profit and loss a/c 10,000 23,000 Debtors 1,20,000 1,15,000

Stock 80,000 90,000

Land 50,000 68,000

2,80,000 3,20,000 2,80,000 3,20,000

 Answer 1
Sr no. Particulars

I. Cash flows from operating activities

Net profits. 13,000

Add:

Decrease in debtors. 5,000

Less:

Increase in stock. 10,000

Decrease in creditors. 23,000

Cash used in operations. (15,000)

II. Cash flows from investing activities

Less: purchase of land. 18,000

Cash used in investment. (18,000)

III. Cash flows from financing activities

Add: increase in share capital . 50,000

. Cash generated in finance. 50,000

IV. Net Increase or decrease in cash

. and cash equivalents. 17,000

 question 2

31/03/201 31/03/201 31/03/201 31/03/201

LIABILITIES 7 8 ASSETS 7 8

Capital 2,00,000 3,00,000 Cash 25,000 30,000

Creditors 70,000 92,000 Debtors 1,40,000 2,50,000

Profit and loss a/c 35,000 70,000 Stock 80,000 72,000

Land 60,000 1,10,000

3,05,000 4,62,000 3,05,000 4,62,000

Answer 2
Sr no. Particulars

I. Cash flows from operating activities

Net profits. 35,000

Add:

Increase in creditors 22,000

Decrease in stock. 8,000

Less: Increase in debtors 1,10,000

Cash used in operations. (45,000)

II. Cash flows from investing activities

purchase of land. 50 ,000

Cash used in investment. (50,000)

III. Cash flows from financing activities

increase in share capital . 1,00,000

. Cash generated in finance. 1,00,000

IV. Net Increase or decrease in cash

. and cash equivalents. 5,000

Add: cash balance on 31/3/17 25,000

. Cash & cash equivalents as on 31/3/18 30,000

 Question 3

1st April 31st March 1st April 31st March

LIABILITIES 2021 2022 Assets 2021 2022
Capital 1,48,000 1,49,000 stock 25,000 22,000

sundry creditors 36,000 41,000 debtor 35,000 38,400

long term loans 30,000 45,000 cash 4000 3,600

buildings 50,000 55,000

machinery 80,000 86,000

land 20,000 30,000

Total 2,14,000 2,35,000 2,14,000 2,35,000

Answer 3
Sr no. Particulars
I. Cash flows from operating activities
Net profits. 1,000
Add:
Increase in creditors 5000
Decrease in stock. 3,000
Less: Increase in debtors 3,400
Cash generated in operations. 5,600
II. Cash flows from investing activities
purchase of building 5000
purchase of machinery 6000
purchase of land 10,000
Cash used in investment. (21,000)
III. Cash flows from financing activities
borrowed long term loans 15,000
. Cash generated in finance. 15,000
IV. Net Increase or decrease in cash
. and cash equivalents. (400)
Add: cash balance on 31/3/21 4000
. Cash & cash equivalents as on 31/3/22 3,600
 Question 4

1st April 31st March 1st April 31st March

LIABILITIES 2013 2014 Assets 2013 2014
share capital 200,000 2,50,000 debtors 1,20,000 1,15,000
sundry
creditors 70,000 45,000 cash 30,000 47,000
profit and loss
a/c 10,000 23,000 stock 80,000 90,000
land 55000 60000

Total 2,80,000 265000 2,80,000 265000

Answer 4
Srno. Particulars
I. Cash flows from operating activities
Net profits. 13,000
Add:

Decrease in debtors 5,000

Less:

Increase in stock. 10,000

Decrease in creditors. 25,000

Cash used in operations. (17,000)

II. Cash flows from investing activities

Less: purchase of buildings 16,000

Cash used in investment. (16,000)
III. Cash flows from financing activities

Add: increase in share capital . 50,000

. Cash generated in finance. 50,000
IV. Net Increase or decrease in cash

. and cash equivalents. 17,000

Add: cash balance on 31/3/13. 30,000
. Cash & cash equivalents as on 31/3/14 47,000
 Question 5

LIABILITIES 31/03/2007 31/03/2008 ASSETS 31/03/2007 31/03/2008

share capital 2,00,000 3,00,000 cash 20,000 30,000

creditors 60,000 90,000 stock 80,000 70,000

profit and loss

a/c 40,000 70,000 building 60,000 1,10,000

debtors 1,40,000 2,50,000

3,00,000 4,60,000 3,15,000 5,25,000

Answer 5
Srno. Particulars

I. Cash flows from operating activities

Net profits. 30,000

Add:

Decrease in stock. 10,000

Increase in creditors. 30,000

Less:

Increase in debtors 110,000

Cash used in operations. (40,000)

II. Cash flows from investing activities

Less: purchase of buildings 50,000

Cash used in investment. (60,000)

III. Cash flows from financing activities

Add: increase in share capital . 1,00,000

. Cash generated in finance. 1,00,000

IV. Net Increase or decrease in cash

. and cash equivalents. 10,000

Question 6

PARTICULARS AMOUNT

OPENING CASH BALANCE 30,000

CLOSING CASH BALANCE 34,000

DECREASE IN STOCK 16,000

INCREASE IN BILLS PAYABLE 24,000

SALE OF FIXED ASSETS 60,000

PAYMENTS OF LONG TERM LOAN 1,00,000

NET PROFIT FOR THEY YEAR 4,000

Answer 6
Srno. Particulars

I. Cash flows from operating activities

Net profits. 4,000

Add:

Decrease in stock. 16,000

Increase in bills payable. 24,000

Cash generated in operations. 44,000

II. Cash flows from investing activities

Add sale of fixed assets 60,000

Less payment of long term loans. 1,00,000

Cash used in investment. . (40,000)

IV. Net Increase or decrease in cash

. and cash equivalents. 4,000

Add: opening cash balance. 30,000

. Closing cash balance. 34,000

THANKYOU
Vertical Income Statement
•AVertical Income Statement, also known as a Single-Step Income
Statement, is a financial statement that presents revenues and expenses
in a vertical format, with each category listed below the previous one. This
format provides a clear and concise overview of a company's financial
performance, making it easier to analyze and understand.
Importance Of vertical income statement

• Simplified Analysis: Vertical Income Statements simplify financial analysis

by grouping similar items together.
• Easy Comparison: Facilitates comparison between different periods or
companies.
• Revenue and Expense Tracking: Clearly displays revenue and expense
trends.
• Decision-Making: Helps management and investors make informed
decisions.
• Compliance: Meets financial reporting requirements.
Beneficiaries of Vertical Income Statement

• Investors
• Management

• Creditors
• Financial Analysts
• Regulatory Bodies
 Q1. In the books of…
Trading and Profit and Loss Account for the year ended 31st March 2018

Particulars Amount (in Rs.) Particulars Amount (in Rs.)

To Opening Stock 3,00,000By Sales 3,00,000
To Purchases 2,00,000By Closing Stock 2,00,000
To Carriage Inward 30,000By Gross Loss c/d 30,000
5,30,000 5,30,000

To Gross Loss b/d 30,000 By Commission A/c 30,000

To Office Expenses 30,000By Interest A/c 50,000
To Selling Expenses 10,000
To Net Profit c/d 10,000

80,000 80,000
 In the books of…
Vertical Income Statement for the year ended 31st March 2018
Sr. No.Particulars Amount (Rs.) Amount (Rs.)
1Sales 3,00,000
2Less: COGS
Opening Stock 3,00,000
ADD: Purchases 2,00,000
ADD: Carriage Inwards 30,000
5,30,000
Less: Closing Stock 2,00,000 3,30,000
3Gross Loss 30,000
4Less: Operating expenses
Selling Expenses 10,000
Office Expenses 30,000
OPERATING EXPENSES 40,000
5Operating Loss 70,000
ADD: Non-Operating Income
Commission 30,000
Interest 50,000 80,000
6Net Profit before tax 10,000
Less: Taxes
 Q2. In the books of…
Trading and Profit and Loss Account for the year ended 31st March 2023
Amount (in Amount (in
Particulars Rs.) Particulars Rs.)
To Opening Stock 3,00,000By Sales 6,00,000
To Purchases 4,00,000By Closing Stock 2,00,000
To Carriage Inward 5,000
To Wages 30,000

To Gross Profit c/d 65,000

8,00,000 8,00,000

To Taxes 14,000By Gross Profit b/d 65,000

To Office Expenses 30,000By Commission A/c 30,000

To Advertisement 10,000By Interest A/c 50,000
To Net Profit c/d 91,000
 In the books of…
Vertical Income Statement for the year ended 31st March 2023
Sr.
No. Particulars Amount (Rs.) Amount (Rs.)
1Sales 6,00,000
2Less: COGS
Opening Stock 3,00,000
ADD: Purchases 4,00,000
ADD: Carriage Inwards 5,000
ADD: Wages 30,000
7,35,000
Less: Closing Stock 2,00,000 5,35,000
3Gross Profit 65,000
4Less: Operating expenses
Advertisement 10,000
Office Expenses 30,000
OPERATING EXPENSES 40,000
5Operating Profit 25,000

ADD: Non-Operating Income

Commission 30,000
Interest 50,000 80,000
 Q3. In the books of…
Trading and Profit and Loss Account for the year ended 31st March 2024
Amount (in Amount (in
Particulars Rs.) Particulars Rs.)
To Opening Stock 20,000By Sales 70,000
To Purchases 30,000By Closing Stock 3,000
To Wages 10,000

To Gross Profit c/d 13,000

73,000 73,000

To Taxes By Gross Profit b/d 13,000

To Office Expenses 10,000By Dividend 2,000
To Advertisement 5,000
To Net Profit c/d 0
 In the books of…
Vertical Income Statement for the year ended 31st March 2024
Sr. Amount Amount
No. Particulars (Rs.) (Rs.)
1Sales 70,000
2Less: COGS
Opening Stock 20,000
ADD: Purchases 30,000

ADD: Wages 10,000

60,000
Less: Closing Stock 3,000 57,000
3Gross Profit 13,000
4Less: Operating expenses
Advertisement 5,000
Office Expenses 10,000
OPERATING EXPENSES 15,000
5Operating Profit -2,000
 Q4) Convert the following Trading and Profit and Loss Account into Vertical income Statement

Dr. Trading and Profit and Loss Account

Cr.
(for the year ended 31st March,2019)
Particulars Amount(₹) Particulars Amount(₹)
To Opening Stock 1,00,000 By Sales 10,00,000
To Purchases 5,50,000 By Closing Stock 1,50,000
To Wages 50,000
To Freight 3,000

To Gross Profit c/d 4,47,000

11,50,000 11,50,000
To Office Expenses 62,500 By Gross Profit b/d 4,47,000
To Finance Expenses 15,000
To Selling Expenses 50,000

To Net Profit c/d 3,19,500

4,47,000 4,47,000
 Vertical Income statement as on 31/3/2019
Sr no. Particular Amount(₹) Amount(₹)
1 Sales 10,00,000

2 Less:Cost of Goods Sold

Opening Stock 1,00,000

Add:Purchases 5,50,000

Add:Wages 50,000

Add:Freight 3,000

7,03,000

Less:Closing Stock 1,50,000 5,53,000

3 Gross Profit 4,47,000

4 Less:Operating expenses

Office expenses 62,500

Finance expenses 15,000

Selling expenses 50,000

5 Total Operating Expenses 1,27,500

6 Net Profit 3,19,500

 Q5) Convert the following Trading and Profit and Loss Account into Vertical income Statement
Dr. Trading and Profit and Loss Account
Cr.
(for the year ended 31st March,2020)
Particulars Amount(₹) Amount(₹) Particulars Amount(₹) Amount(₹)
To Opening Stock 2,50,000 By Sales 15,00,000

To Purchases 8,00,000 Less:Sales Returns 2,50,000 12,50,000

To Wages 50,000 By Closing Stock 3,00,000
To Coal,Gas.Fuel 1,000
To Carriage Inward 3,000

To Gross Profit c/d 4,46,000

15,50,000 15,50,000
To Administrative Expenses 30,000 By Gross Profit b/d 4,46,000
To Finance Expenses 75,000
To Insurance Premium 4,000
To Selling Expenses 1,500

To Net Profit c/d 3,35,500

4,46,000 4,46,000
 Vertical Income statement as on 31/3/2020
Sr no. Particular Amount(₹) Amount(₹)
1 Sales 15,00,000
Less:Sales Returns 2,50,000
Net Sales 12,50,000
2 Less:Cost of Goods Sold
Opening Stock 2,50,000
Add:Purchases 8,00,000
Add:Wages 50,000
Add:Carriage Inward 3,000
Add:Coal,Gas,Fuel 1,000
11,04,000
Less:Closing Stock 3,00,000 8,04,000
3 Gross Profit 4,46,000
4 Less:Operating expenses
Administrative expenses 30,000
Finance expenses 75,000
Selling expenses 1,500
5 Total Operating Expenses 1,06,500
Less:Non-Operating Expenses
Insurance Premium 4,000
6 Net Profit 3,35,500
 Q6) Convert the following Trading and Profit and Loss Account into Vertical income Statement
Dr. Trading and Profit and Loss Account
Cr.
(for the year ended 31st March,2021)
Particulars Amount(₹) Amount(₹) Particulars Amount(₹) Amount(₹)
To Opening Stock 3,00,000 By Sales 7,50,000
To Purchases 2,00,000 Less:Sales Returns 1,00,500 6,49,500
To Wages 35,000 By Closing Stock 4,50,000

To Works Manager's Salary 8,000

To Royalty on Production 7,000
To Power and Fuel 500

To Gross Profit c/d 5,49,000

10,99,500 10,99,500
To Finance Expenses 25,000 By Gross Profit b/d 5,49,000

To Administrative Expenses 10,000 By Dividend Received 4,000

To Insurance Premium 1,500 By Interest Received 3,000
To Selling Expenses 4,500
To Rent,Rates and Taxes 1,300
To Repairs 900

To Net Profit c/d 5,12,800

5,56,000 5,56,000
Q6)

Vertical Income statement as on 31/3/2021

Sr no. Particular Amount(₹) Amount(₹)
1 Sales 7,50,000
Less:Sales Returns 1,00,500
Net Sales 6,49,500
2 Less:Cost of Goods Sold
Opening Stock 3,00,000
Add:Purchases 2,00,000
Add:Wages 35,000
Add:Works Manager's Salary 8,000
Add:Royalties on Production 7,000
Add:Power and Fuel 500
5,50,500
Less:Closing Stock 4,50,000 1,00,500
3 Gross Profit 5,49,000
4 Less:Operating expenses
Administrative expenses 10,000
Finance expenses 25,000
Selling expenses 4,500
5 Total Operating Expenses 39,500
Add:Non-Operating Income
Dividend 4,000
Interest 3,000 7,000
Less:Non-Operating Expenses
Rent,Rates and Taxes 1,300
Repairs 900
Insurance Premium 1,500 3,700
6 Net Profit 5,12,800
 Q1. In the books of…
Balance sheet as on 31st March 2023

Liabilities Amount(₹) Assets Amount(₹)

Capital 40,000 Current Assets 40,000

Reseves 20,000 Investments 10,000

15%Loan 25,000 Fixed Assets 50,000

Current Liabilities 15,000

1,00,000 1,00,000
 Vertical balance sheet as on 31st March 2023

Particulars Amount(₹) Amount(₹)

1) Sources of Funds

a. Owner Fund

Capital 40,000

(+)Reserves 20,000

Net Worth 60,000

b. Borrowed Funds

15% Loan 25,000

Total Funds Available 85,000

2) Application Funds

Fixed Assets 50,000

Investment 10,000

Working Capital

Current Assets 40,000

Less:Current Liabilities (-)15000 25,000

Total Funds Applied 85,000

 Q2. In the books of…
Balance sheet as on 31st March 2022

Liabilities Amount(₹) Assets Amount(₹)

Capital 1,00,000 Current Assets 60,000

Reseves & Surplus 10,000 Investments 20,000

10%Loan 30,000 Fixed Assets 90,000

Current Liabilities 35,000 Fictious Assets 5,000

1,75,000 1,75,000
 Vertical balance sheet as on 31st March 2022

Particulars Amount(₹) Amount(₹)

1) Sources of Funds

a. Owner Fund

Capital 1,00,000

(+)Reserves & Surplus 10,000

(-)Fictious Assets 5,000

Net Worth 1,05,000

b. Borrowed Funds

10% Loan 30,000

Total Funds Available 1,35,000

2) Application Funds

Fixed Assets 90,000

Investment 20,000

Working Capital

Current Assets 60,000

Less:Current Liabilities (-)35000 25,000

Total Funds Applied 1,35,000

 Q3. In the books of…
Balance sheet as on 31st March 2024

Liabilities Amount(₹) Assets Amount(₹)

Capital 75,000 Fictious Assets 20,000

Current Liabilities 23,000 Fixed Assets 65,000

11%Loan 44,000 Investments 25,000

Reseves 13,000 Current Assets 45,000

1,55,000 1,55,000
 Vertical balance sheet as on 31st March 2024

Particulars Amount(₹) Amount(₹)

1) Sources of Funds
a. Owner Fund
Capital 75,000
(+)Reserves 13,000
(-)Fictious Assets 20,000
Net Worth 68,000

b. Borrowed Funds
11% Loan 44,000

Total Funds Available 1,12,000

2) Application Funds
Fixed Assets 65,000
Investment 25,000

Working Capital
Current Assets 45,000

Less:Current Liabilities (-)23000 22,000

Total Funds Applied 1,12,000

 Balance sheet as on
Liabilities Amt.(in Rs) Assets Amt.(in Rs)

Capital 90000 Machinery 30000

Reserves 45000 Investments 25000

6%Loan 45000 Debtors 45000

Creditors 10000 Furniture 90000

190000 190000
 In the books of ____ company ltd
Balance sheet as on …
Amt.(in
Particulars Rs)
I.Source of funds

A.Owners Fund

a.Share Capital

Equity share capital 90000

Preference share capital

b.Add-Reserves and Surplus 45000

c.Less fictitious assets

Net worth 135000

B.Borrowed Funds

6%loan 45000
II.Application of funds

1.Fixed assets

Machinery 30000

Furniture 90000

2.Investment 25000

3.Working Capital

Current Assets(CA)

Quick

Debtors 45000

Non Quick

Less-Current Liabilities(CL)

Quick

Creditors 10000

Non Quick

Working Capital(Total CA-CL) 35000

Total funds applied 180000

 Balance sheet as on

Liabilities Amt.(in Rs) Assets Amt.(in Rs)

Securities Loose tools 45500

Premium 10000

Capital(Equity) 123000Factory building 115000

Secured Loan 45000Bills receivable 25000

Wages Cash 1000

Outstanding 13000Accrued

Bank overdraft 3500Commission 8000

 Balance sheet as on

Particulars Amt.(in Rs) Amt.(in Rs)

I.Source of funds

A.Owners Fund

a.Share Capital

Equity share capital 123000

Preference share capital

b.Add-Reserves and Surplus

Securities Premium 10000

c.Less fictitious assets

Net worth 133000

B.Borrowed Funds

Secured loan 45000

Total Funds available 178000

 I.Application of funds
1.Fixed assets
Loose tools 45500
11500
Factory building 0
2.Investment

3.Working Capital
Current Assets(CA)
Quick
Cash 1000
Bills receivables 25000
Accrued commission 8000
Non Quick

Less-Current Liabilities(CL)
Quick
Wages outstanding 13000

Non Quick
Bank overdraft 3500
 Balance sheets as on

Liabilities Amt.(in Rs) Assets Amt.(in Rs)

Equity Land 45000

Share capital 20000

Preference share capital 10000Investments 10000

General reserve 20000Advertisement 20000

Bank loan 37000Cash 2000

Bills payable 10000Builing 20000

97000 97000
 Balance sheet as on
Amt.(in Amt.(in
Particulars Rs) Rs)
I.Source of funds
A.Owners Fund
a.Share Capital

Equity share capital 20000

Preference share capital 10000

b.Add-Reserves and Surplus

General reserve 20000

c.Less fictitious assets

Adverstisement 20000
Net worth 30000
B.Borrowed Funds
Bank loan 37000
II.Application of funds
1.Fixed assets
Land 45000
Building 20000
2.Investment 10000

3.Working Capital
Current Assets(CA)
Quick
Cash 2000

Non Quick

Less-Current Liabilities(CL)
Quick
Biils payable 10000

Non Quick
COMPUTERISED
ACCOUNTING
A005 Rashmi Behera
A101 Shlesha Sanghavi
A086 Ashmi Bhansali
CONCEPT OF COMPUTERISED ACCOUNTING

● A software that helps businesses to manage the big financial

transactions, data, reports, and statements with high
efficiency, speed, and better accuracy.
● Accounting done with the aid of a computer.
● Involves dedicated accounting software and digital
spreadsheets to keep track of a business or client's financial
transactions.
● Processes the financial transactions and events in
accordance to the Generally Accepted Accounting Principles
(GAAP) to produce reports as per the requirements of the
users.
 FEATURES OF COMPUTERISED ACCOUNTING
1.Integrated Data & Information:
● Computerized accounting systems streamline business processes like purchase,
sales, finance, inventory, payroll, and manufacturing for efficiency.
● Ensure accurate, up-to-date business information within a specific time limit.
● Systems are combined with Management Information Systems (MIS), offering
multilingual and data organization features to support the company
2.Accuracy & Speed:
● Customized templates and software for users which allows fast and accurate data entry
and transaction operations.
● After recording the business transactions it generates the various information and reports
automatically.
3.Quick Decision Making :
● Generates real-time information for quick decision.
● Company or firm can plan, its activities with the help of comprehensives MIS reports and
FEATURES OF COMPUTERISED ACCOUNTING
4.Reliability:
● Generates the report with consistency and accuracy.
● Minimization of errors makes the system more reliable.

5.Data Backup:
● The system can be configured to automatically back up financial data at regular
intervals (daily, weekly, etc.), ensuring that the most recent information is always
protected without manual intervention.
● In the event of data loss or corruption, a computerized accounting system allows
for quick restoration of financial records, minimizing downtime and ensuring
business continuity.
6.Scalability:
● Designed to accommodate growth and changes in business operations
● As the volume of transactions increases, the system can efficiently handle larger
data sets without compromising performance.
FEATURES OF COMPUTERISED ACCOUNTING

7. Immediate availability of books of accounts:

● Ability to access and view financial records and accounts in real time,at any
time,and from any location
● Enables business to respond quickly to changing financial
circumstances,make informed decisions and maintains accountability
8. Grouping of accounts:
● Business can streamline financial management,improve reporting and make
informed decisions
● Common accounts group include assets accounts,liability accounts,revenue
accounts,expense accounts,equity accounts etc
 FEATURES OF COMPUTERISED ACCOUNTING
9. Transparency and control:
● the organisation will have greater transparency for dat to day business
operations.It will boost stakeholder trust,ensure compliance and drive
informed decision making
● Some standards promoting transparency include Generally Accepted
Accounting Principles (GAAP),International Financial Reporting
Standards(IFRS),Securities and Exchange Commission (SEC)
10. Security:
● Under manual accounting system it is very difficult to secure such information
as it is open to inspection by any person dealing with books of accounts
● By implementing robust security measures like password protection,regular
security updates,regular backups etc can safeguard their financial data
 IMPORTANCE OF
COMPUTERIZED
ACCOUNTING SYSTEM
A-11
A-12
A-13
A-22
A-24
 1.Automation
 What do you mean by automation of accounting?
• It is the process of using software to automate the processes and
procedures of accounting. It is a way of improving efficiency and accuracy,
while making sure that all aspects of the business are being looked after.

 How do computerized accounting system automate work:

• Automated bookkeeping systems update records automatically, eliminating
the need for constant input from accountants. They also assist in
determining deductibles, allowing business owners to anticipate tax
preparation costs promptly .
 2.Multi User Facility

• Most of the automated accounting systems are inter-

linked through a network of computers.

• This
facilitates the availability of information to various
users at the same time on a real time basis (that is
spontaneously).
 3.Accuracy and Speed
 Speed:
• Accounting data is processed faster by using a computerized accounting system than it is achieved
through manual efforts.

• This is because computers require far less time than human beings in performing a task.

 Accuracy:
• The possibility of error is eliminated in a computerized accounting system because the primary
accounting data is entered once for all the subsequent usage and processes in preparing the
accounting reports.

• Normally, accounting errors in a manual accounting system occur because of repeated posting of the
same set of original data several times while preparing different types of accounting reports.
 4.Reduction In Cost
• Accounting software can save labour, reduce errors, and increase reliance on
outside consultants by eliminating manual tasks like data entry, reconciliation, and
payroll processing.

• It also internalises functions that require outside consultants, optimises inventory

and asset management, and reduces energy and infrastructure costs.

• Cloud-based software offers scalability and flexibility without additional costs.

 5.Up to Date information
• The accounting records, in a computerized accounting system are updated
automatically as and when accounting data is entered and stored.
Therefore, latest information pertaining to accounts get reflected when
accounting reports are produced and printed.

• For example, when accounting data pertaining to a transaction regarding

cash purchase of goods is entered and stored, the cash account, purchase
account and also the financial statements (trading and profit and loss
account) reflect the impact immediately.
 6.Huge Storage Capacity
and Compact Storage

• Thecomputerized accounting system allows the

users to store data in a manner that does not
require a large amount of physical space.
• Thisis because the accounting data is stored in
hard-disks, CD-ROMs, floppies that occupy a
fraction of physical space compared to books of
accounts in the form of ledger, journal and
other accounting registers. Besides, the system
permits fast and accurate retrieval of data and
information.
 7. Transferability

• Facilitatesthe owner to share information with

concerned parties, through digital transfer of records,
soft copy, print outs or transfer through an external
drive .ie. pendrive.
 COMPONENTS OF
COMPUTERIZED
ACCOUNTING SYSTEM
 The Following components form the
Computerized Accounting System:

A.Hardware
B.Software
C.Personnel
 A.Hardware
• Hardware is the term for the electronic devices, such as computers,
printers, displays, disc drives, and networks that link to them.
• The majority of contemporary accounting systems necessitate the use
of networks, which are systems of electronic connections that let
various computers share data among themselves.
• Numerous computers can be linked to the main computer, also known
as the server, which houses the program and data in a network
system.
• An auditor in Maharashtra can access a client's data in Kerala if the
hardware and software are communicating properly.
• The end result is a quicker audit for the customer, frequently at a
lesser cost than what would have been spent if the auditor had to do
the entire task on location in India.
 B.Software
• The collection of programs known as software is what
tells the computer what to do.

• Accounting software creates reports in addition to

accepting, editing, and storing transactions and data.
 C.Personnel
• Any endeavour needs personnel to succeed since people are the ones who
run the system.
• Personnel who are not accountants can access certain components of a
modern accounting system.
• In order to effectively manage an automated accounting system, data
security must be carefully planned for, and personnel who will have access
to the data must be trained.
• Passwords are codes that provide access to computerized records; they are
used to achieve security.
Generally speaking, Accounting Software uses the following
components:

Creation of accounting papers:

• A variety of accounting documents, including cash memos, vouchers,
receipts, invoices, and more, can be created with the aid of computer
software.

Transaction Recording:
• Day-to-day business transactions are recorded using accounting
software on computers. Paperwork is decreased.
 Ledger Accounts

Credit Debit

Liability Income Expenditure Asset

Profit & Loss

Account

Balance Sheet
 Trial balance and financial statement preparation:
• Using software, data is automatically entered into a ledger following transaction
recording.
• Based on information entered into the computer, vouchers are generated. The
trading, profit and loss, and balance sheet are automatically generated.

Input Processing Output

(Data) (Accounting) (Reports)
• Data from source documents, like purchase orders, bank deposit slips, and sales
receipts, is represented by input. Data inputs for computerized accounting systems
must be organized according to predetermined forms.
• The system rejects transactions that omit account numbers, dates, or other crucial
details. The reports produced in order to make decisions are called outputs. These
could include inventory, trial balances, income statements, balance sheets, and
statements of debtors and creditors, among other things.
 1
MANUAL ACCOUNTING
The process in which the accountants prepare paper-
based handwritten accounts in a register in the form of
ledgers, subsidiary books, and journals to record the
financial transactions is called Manual Accounting.
Manual accounting is time taking process, and it is not
quickly done.
The chances of human error in recording the data are
high in manual accounting.
 2
COMPUTERISED
The process inACCOUNTING
which the financial accounts are
systematically accounted for using specially developed
computer accounting software automatically in the
form of PDF, Tally, and Excel spreadsheet documents is
called Computerised Accounting.

It is a very quick process, as everything is

systematically automated using accounting software.
The chance of having any calculation error is very less
or null, and it gives precise output.
 DIFFERENCE
MEANING
Manual accounting is the Computerised Accounting
procedure where the is software-based
financial accounts are operations done by specific
recorded manually using account software which has
physical registers, ledgers, an automatic framework.
and subsidiary books.
 DIFFERENCE
TIME TAKEN
It is a time taking process The process of accounting
and the records are is much faster, more
maintained manually using reliable, and easy. All data
paper based account is maintained
books, and sometimes it is systematically and
not accurate. accurately using the
software.
 DIFFERENCE
MARGIN OF ERROR
Since the accounting is The accounting through
done manually, so there is software is automated and
a chance of human error in has very less chance of
calculations and accuracy. error and the transactions
are precisely recorded.
 DIFFERENCE
RELIABILITY
Computerised accounting is
Although it is not much
very reliable to store
easy to store physical
information on the computer
accounting books
in the form of format
everywhere, as they can be
documents like PDF,
misplaced or get damaged
Microsoft Excel, etc. and can
easily and cannot be sent
be sent digitally anywhere in
anywhere easily as
a fraction of a second
compared to.
 DIFFERENCE
SAFETY
The Books can be kept There is a chance of cyber
safely and cannot be stolen attacks to steal the data
easily, as it does not unless it is strongly secured
require any internet access using advanced anti-
to get stolen by a cyber hacking software, as this
attack. process requires the
internet.
 DIFFERENCE
EDITABLE
It is much more difficult to Any changes can be
edit the report or make performed easily as it’s
changes once entered easy to edit things in a
manually, a whole page computer system and
has to be re-entered if any doesn’t have to redo the
mistake occurs. whole work again.
 DIFFERENCE
TECHNOLOGY
It is exempted from such As a computer is a machine
maintenance as this so technical problems, like
process does not require a software freezing, system not
computer and the data is responding, data crash, etc.,
always available to access can be occurred once in a
while if proper maintenance
and use as every record is
is not done.
done physically and stored
safely.
 4
LICENSED
LicensedACCOUNTING
accounting software is
generally better than pirated
accounting software because it offers
more features and functionality, and
it's protected by copyright
 9
LICENSED ACCOUNTING
FEATURES UPDATES
Help with general ledger receives ongoing
management, accounts maintenance, updates, and
payable and receivable security patches. Pirated
tracking, inventory accounting software doesn't
management, payroll receive these updates.
processing, financial
SUPPORT
statement generation,
SECURITY Licensed accounting
budgeting, and tax
protected by copyright, software offers customer
management.
which limits its use, support. Pirated accounting
distribution, and modification. software doesn't offer
customer support
 TOPICS

1. STEPS IN CREATING ACCOUNTING DOCUMENTS

2. SOURCING OF ACCOUNTING SOFTWARE

CREATED BY : A23, A06, A102, A99

Business automation is one of the most prioritised processes
when an entrepreneur decides to enter the market. Not only
does automation saves precious time but also improves
business efficiency and operability.
Accounting Software is used for recording day to day business
transaction of a company. It maintains inventory management
system with computer. It is integrated with other business
applications such as Purchase. Sales, Finance, Payroll,
Inventory etc. with all accounting details.
Step 1: After entering into Accounting Software Tally, double click on the
option create company under company information.
To create company in Tally, follow the following navigation path
Gateway of Tally > Company Info > Create company.
Step 2 : The company creation window, display on the screen as shown
below in the image. Fill the detail information in the company creation
form.
List of 28 inbuilt ledger groups from
tally
1) How to create ledger account in Tally Software Path :

Gateway of Tally->Accounts info->Ledger->Create

CREATION OF VARIOUS
ACCOUNTING VOUCHERS
In
Tally
GATEWAY OF TALLY->ACCOUNTING VOUCHERS
F9: FOR RECEIPT ENTRIES
EG: CAPITAL BROUGHT IN BY MR X.
EG: ADVANCE GIVEN BY MR A
EG: INTEREST /DISCOUNT RECEIVED
F5: FOR PAYMENT
EG: OFFICE RENT PAID BY CHEQUE
EG: FURNITURE PURCHASED
EG : COMMISSION/CARRIAGE PAID
F9: FOR PURCHASES
EG: PURCHASED GOODS FROM SUMIT STEEL WORKS
F8: SALES
EG: SALES OF GOODS MADE
F4: FOR CONTRA ENTRIES
EG: DEPOSITED CASH INTO BANK
F7: FOR JOURNAL ENTRIES
EG: DEPRICATION CHARGED OON FURNITURE
PROFIT AND LOSS ACCOUNT
In Tally
 There are 2 types of expenses

DIRECT INDIRECT
EXPENSES EXPENSES

RELATED TO FACTORY/PRODUCTION RELATED TO

-POWER and FUEL,MOTIVE POWER OFFICE/SELLING/DISTRIBUTION
-COAL, GAS and WATER
-COMMISSION/ SALARIES
-CARRIAGE INWARDS
-RENT, RATES AND TAXES
-FACTORY RENT
-ADVERTISEMENTS
-FREIGHT/CARRIAGE INWARDS
-BANK CHARGES
-ROYALTIES/ IMPORT EXPENSES
-INTEREST
-UNLOADING CHARGES
-LEGAL CHARGES
-WAGES
-CARRIAGE OUTWARD
-WORK MANAGERS SALARY
-LOADING CHARGES
-PRODUCTION/MANUFACTURING EXP.
-ROYALTY ON SALES
-AUDIT FEES
GATEWAY OF TALLY-> REPORTS-> PROFIT AND LOSS A/C
THIS PROFIT AND LOSS A/C IS FORMED BY THE ABOVE ENTRIES
BALANCE SHEET
In
Tally
 Groups /headers of balance
sheet in tally
In Tally, the balance sheet is divided into two main sections: Liabilities and Assets. Under these sections, various groups and
headers are organized to reflect the financial structure of a company.
1. Liabilities- This section covers the financial obligations of the company. It is further divided into:
Capital Accounts
• Capital Account
• Reserves and Surplus (Retained Earnings)
• Partners' Capital A/c (for partnership firms)
Loans (Liabilities)
• Secured Loans (e.g., Bank Loans)
• Unsecured Loans (e.g., Loans from Directors)
Current Liabilities
• Sundry Creditors (Accounts Payable)
• Bills Payable
• Duties & Taxes (GST, VAT, etc.)
• Provisions (e.g., Provision for Taxes)
• Bank Overdraft (OD)
• Outstanding Expenses
• Other Current Liabilities (any other short-term liabilities)
2. Assets
This section covers the resources owned by the company. It is also divided into multiple groups:
Fixed Assets
• Land & Building
• Plant & Machinery
• Furniture & Fixtures
• Vehicles
• Intangible Assets (e.g., Goodwill, Patents)
Current Assets
• Sundry Debtors (Accounts Receivable)
• Cash-in-Hand (Cash on hand)
• Bank Accounts (e.g., Savings, Current Accounts)
• Bills Receivable
• Stock-in-Hand (Inventory)
• Loans & Advances (Assets side, loans given by the company)
• Deposits (Fixed deposits or other deposits)

In Tally, you can further customize groups based on the specific needs of your business by creating user-
defined groups for more detailed tracking.
Here is a step-by-step guide to
creating a Balance Sheet in Tally:
• Step 1: Open Tally and Select Your Company
• Step 2: Create Ledgers and Groups
• Step 3: Enter Transactions
• Once the ledgers and groups are set, start entering your transactions, which will automatically reflect in the balance sheet.
1. Gateway of Tally → Accounting Vouchers
2. Choose the appropriate voucher (e.g., Payment, Receipt, Sales, Purchase).
3. Enter transactions like payments, receipts, purchases, and sales that affect the balance sheet.
• Step 4: Generate the Balance Sheet
Go to Gateway of Tally → Display → Balance Sheet.
• Step 5: Configure the Balance Sheet Display (Optional)
• You can modify the display of the Balance Sheet to suit your needs:
1. Press F12 (Configure) to customize the report.
2. Options such as showing the detailed version, setting percentages, or filtering specific periods can be configured.
• Step 6: Print or Export the Balance Sheet
1. Press Alt + P to print the Balance Sheet.
2. To export the balance sheet to a file, press Alt + E, and choose the format (e.g., Excel, PDF, HTML).
HOW TO ENABLE GST IN TALLY

• GO TO GATEWAY OF TALLY-> PRESS F11-> CLICK ON

STATUTORY AND TAXATION -> ENABLE GST->
 SOURCING OF
ACCOUNTING SOFTWARE

Sourcing of accounting software refers to the process of identifying, selecting, and

acquiring accounting software solutions that meet a business ‘s financial management
needs.This includes evaluating various options based on functionality ,cost,scalability
and support.The goal is to find the most suitable software to enhance efficiency and
accuracy in accounting process.The need for accounting arises in two situations i.e
business operations and financial reporting and compliance
 Accounting Packages
• Accounting Packages are software solutions designed to facilitate and
automate financial management tasks within a business. They perform the
accounting activity i.e recording and storing of accounting data and
information and generate various reports as per the requirements of the user.
These packages typically include bookkeeping, financial reporting, invoicing
and billing, expense tracking,tax preparation,payroll management (handling
employee compensation, deduction) and budgeting and forecasting. The
accounting Packages are classified into
• Ready to use
• Free and open source
• Tailored

• Customized

these classifications help businesses choose software that best fits their
operational budget.
Accounting Packages
1. Ready to use
Accounting software that is easy to use is ideal for organisations that
run small/conventional businesses with a low frequency or volume of
accounting transactions. This is due to the low value of installation and
the limited number of users.
• Ready-to-use software is easier to find, and the adaptability of other
people (accountants) is extremely high. This also implies that the level
of secrecy is relatively low, making the software vulnerable to data
fraud. The training requirements are straightforward, and the seller
(supplier of software) may occasionally provide free software training.
However, there is limited scope for linking to other information
systems with this software
Accounting Packages
2.Free and open sources
• Free and open-source accounting software refers to programs that are both freely available
to use and modify, with their source code accessible to anyone. This means users can
download, use, and customize the software without cost, and they can contribute to its
development or improve it according to their needs. It promotes transparency, collaboration,
and community-driven improvements, making it an attractive option for businesses and
individuals seeking cost-effective accounting solution
• Here are some examples of free and open sources accounting software
• GnuCash: ideal for personal and small business accounting as a part of larger suite of
business applications, suitable for various business sizes
• Odoo: A comprehensive suite of business applications that includes accounting, inventory
management, and CRM. The community version is open-source.
• Gnukhata: It is the open source accounting software for small business as well as a personal
finance software
• These tools can help manage finances while being flexible and customizable to various
business needs.
Accounting Packages
3.Tailored
Accounting software is typically designed for large business organisations with multiple users and
geographically dispersed locations. Users will need specialised training to use this software. The
tailored software is intended to meet the specific needs of the users and is an important
component of the organisational MIS.
• The secrecy and authenticity checks in such software are robust, allowing for a high degree of
flexibility in terms of the number of users.
• Tailored accounting software refers to accounting systems that are customized to meet the
specific needs and requirements of a particular business or industry. Unlike off-the-shelf
solutions, tailored software can include unique features, workflows, and reporting capabilities
that align with a company’s operational processes, regulatory requirements, and industry
standards. This customization enhances efficiency, improves usability, and ensures that the
software supports the business’s specific financial management goals.
• Example
• Zoho books,xero etc
Accounting Packages
4.Customize

• Customizing accounting software means modifying an existing accounting system to

better suit the specific needs and workflows of a business. This can involve changing
features, user interfaces, reporting capabilities, and integrations with other software
to enhance usability and efficiency. The goal is to create a tailored solution that aligns
with the unique operational requirements and financial processes of the organization.
• Customizing accounting software involves modifying an existing accounting solution
to better fit a business’s unique processes and needs. This can include
• User Interface Modifications: Adjusting layouts and navigation for easier use by
specific teams
• Feature Additions: Implementing specific tools like inventory management, payroll, or
industry-specific reporting
Feature Additions: Implementing specific tools like inventory
management, payroll, or industry-specific reporting.
Integration: Connecting with other software systems (like CRM or
ERP) to streamline workflows and data sharing.
• Automated Workflows: Setting up automated invoicing, reminders,
and reporting to reduce manual tasks.
• Custom Reporting: Creating tailored financial reports and
dashboards that focus on key performance indicators relevant to
the business
• UserPermissions: Establishing role-based access to ensure data
security and proper usage.
• Businesses often work with developers or choose flexible software
platforms that allow for such customizations to better meet their
needs.
 OTHER
ACCOUNTING
SOFTWARE
By A019, A020, A039, A040
GoGravity
Based on Microsoft power
platform
Introduction
Gravity Software is a private company and Gravity Software is classified as a Non Government Company
founded by Darryl Henderson, Randall Ykema and Scott Jackson. Gravity Software is an Accounting
based company and has headquarters in Detroit, Michigan, United States. It was founded in 2013. Perfect
for mid-market businesses looking to replace their current entry-level and/or legacy application.

Why was Gravity made?

● Streamline financial management

● Replace entry-level applications
● Personalise features
● Provide a 360-degree view
● Ease of use:
User Interface Screenshots

GoGravity accounting software works within Microsoft collaborative workspace. It runs inside a browser with full
functionality and caters to areas like Financials, Expenses, Inventory and Revenue.
 Gravity Software (Gravity) was built on the Microsoft Power Platform, so it is the only accounting solution that can natively integrate with
Microsoft Teams. That means you can access all of your Gravity accounting functionality from within the Teams interface. The integration saves
you time not only moving data between systems, but also moving between screens. That time adds up over the course of a year, a savings that is
only achieved through a well-designed integration and user interface.
Products and Key Features
● Their cloud accounting software is built natively on the Microsoft Power Platform. This gives you built-in
business intelligence and the ability to create workflows specifically for the way you work without relying on
a developer.
● Gravity is designed specifically for multi-entity accounting, eliminating the need to manually enter the same
information dozens of times in different systems.
● By pairing Gravity with Microsoft Power BI (Business Intelligence Dashboards), you’ll be able to dive into
your complex data with actionable insights to grow your business smarter.
● Gravity Software's cloud-based accounting software offers a variety of products and features, including-
Financials, Operations, Insights, Automation, Integration and Real - Time Updates.
Industries
● Family Office
● Wholesale Distributors
● Construction Franchise
● Healthcare
● Hospitality
● Investment Firms
● Nonprofit
● Professional Services
● Subscription-Based
● Renewable Energy
Pricing

All plans are on an annual basis.

Artificial Intelligence
● Accounts Payable: Gravity’s new AP automation feature uses Microsoft Cognitive Services’ Azure
Form Recognizer to extract key data from invoices so you can review and process them quickly.
● Bank Reconciliation Statement: Bank reconciliation is an essential part of fraud detection and accurate
recordkeeping. Their new bank book integration with Plaid connects to more banks and automatically
matches checks processed in Gravity with bank records that have the same amount.
● Multi-dimensional budgeting: With Gravity’s new budgeting feature, you can tag each expense or revenue
stream with a category labelled accordingly.. Now, in addition to viewing expenses or creating budgets by
entity, you can add these new dimensions to help you better understand how much you spent across your
organisation in each category and how much you should forecast for the future.
 SAP
System Analysis Program
Development
Introduction
Founded in 1972, the company was initially called System Analysis programme Development,later abbreviated to SAP.
Since then, it has grown from a small, five-person endeavour to a multinational enterprise headquartered in Walldorf,
Germany, with more than 105,000 employees worldwide.
What is SAP software used for?
➢ Traditional business models often decentralise data management, with each business function storing its own
operational data in a separate database. This makes it difficult for employees from different business functions to
access each other’s information. Furthermore, duplication of data across multiple departments increases IT storage
costs and the risk of data errors.
➢ By centralising data management, SAP software provides multiple business functions with a single view of the truth.
This helps companies better manage complex business processes by giving employees of different departments easy
access to real-time insights across the enterprise. As a result, businesses can accelerate workflows, improve
operational efficiency, raise productivity, enhance customer experiences– and ultimately increase profits.
User Interface Screenshots

This is the window of SAP login which shows

the list of systems after which you can start the
process of logging in.
This snippet is of the menu page of the software.
This snippet is of how to create a sales transaction.
Products and its key features
● SAP Account Substantiation and Automation by BlackLine
● SAP Advanced Planning and Optimisation:
● SAP Ariba Buying And Invoicing
● SAP Business Integrity Screening
Artificial Intelligence
❖ SAP Business AI built into your supply chain processes:

● Transform your supply chain with AI-driven insights, recommendations, and automation integrated into
supply chain solutions from SAP. With SAP Business AI, you can predict events, make better informed
decisions, and modernise functions from design to operate.
● Predicts customer demand reliably with AI-powered demand forecasting
● Improves quality with intelligent anomaly detection and visual inspections.
● Synchronises operations and maximise efficiency with predictive maintenance.
● Intelligent access to information through the Joule copilot in SAP supply chain solutions.

❖ Some other generative AI innovations for your business:

● Drive intelligent HR self-service capabilities

● Create inclusive and comprehensive job descriptions
● Supercharge sales, boost e-commerce, and improve customer service
Target Audience

● SAP Visual Composer is a Web-based visual modelling tool that enables the modeller to quickly create and
adapt sophisticated application content, without coding. Visual Composer minimises the effort and time
required to create an application, resulting in faster go-live decision making.
● As the target users for Visual Composer, business process experts are defined as the key figures in customer
organisations, possessing in-depth knowledge and understanding of the business unit's operations and core
processes.
Sage Intacct
By Sage group plc
 Introduction
● Sage Group PLC, a multinational software company that develops and
distributes accounting and payroll software. Sage intacct is an accounting
software from “sage group plc”
● Sage’s target audience for its customers is quite wide spanning from small
businesses to scaling startups across all industries from construction to
biotech.
● They are able to do this by providing excellent support and maintain a
good customer satisfaction ratio.
Sage group plc is a publicly traded company on the british stock
exchange.

Stock price: SGE (LON) 1,025.00 GBX +7.50 (+0.74%)

 Features
1. Sage is hipaa [health insurance portability and accountability act],
aicpa[american institute of cpas] compliant.
2. Sage allows for comparing budgets and actual spend in real time, avoid
costly overruns.
3. Automating time-consuming accounting processes—saving hours every
week.
4. Eliminates scope of human error by detecting anomalies in books with
Ai.
5. Wide application to customers belonging to all industries.
6. It differentiates itself from other accounting softwares by its
impressive multi entity and multi currency capabilities.
 Pricing? Founders? Unique selling point?
★ At its most basic, Sage ★ Sage was used by a lot of ★ Founders: Graham Wylie,
Intacct annual subscription Paul Milford Muller,
price starts at $10,320. non-profits to minimise
wastage by comparing all David Goldman
★ However considering the possible combinations of
standard rates of acquiring costing ★ Founded: 27 April 1981,
an officially licensed
software and the Newcastle upon Tyne, Unit
employment costs. ★ Thereby allowing non ed Kingdom
profits to be more efficient
★ The pricing is pretty ★ Headquarters:
with resource allocation and
lucrative for the firm. Newcastle upon Tyne, Unit
pricing.
ed Kingdom
★ Sage Intacct offers financial
★ Number of employees:
reports, consolidated
11,565 (2023)
financial statements, and
entity-level reports.
Fun fact
Stuart broad, an english former
cricketer is the brand ambassador
for sage.

Broad was a member of the England

team that won the 2010 ICC World
Twenty20.

He was a member of the punjab

kings team in ipl too. :)
Dashboard
Marg books
From marg family
Introductions
● Marg Pharmacy software is a comprehensive retail pharmacy software
solution that includes an ERP for pharmacy.
● It offers robust features for inventory management, allowing you to
efficiently track and manage your pharmacy’s stock.
● It serves as an excellent pharmacy retail software solution, enabling you to
handle billing processes effectively.
● Additionally, it functions as pharmacy ERP software, providing you with a
complete business solution that covers everything from billing to return
filing.
THE BEST PHARMACY
RETAIL SOFTWARE IN
INDIA
MARG BOOKS
 Unique Selling Point

● Send invoices on whatsapp: Send invoices directly to your customers on

Whatsapp. Boost and streamline your business operations with Marg ERP.
Reduce paper usage and printing costs.

● Auto-Prescription Reminder: Directly send auto-prescription reminders to

customers on whatsapp and ensure that the medicines are delivered on time
resulting in building a strong relationship with them.

● Promise order: Easily mention and save the unavailable medicines during
billing in the promise order based on the customer’s needs. Send automatic
SMS to the customer once the medicines are back in stock.
 Unique Selling point
● Data Entry Free Software: Marg ERP is the only software that provides the
facility of barcode-wise billing to retailers. Now simply create bills for
barcode-free items with Marg’s All scan app.

● ERP-to-ERP Order: Directly place online orders from your ERP Software to
the distributor’s ERP Software without switching between the apps. Monitor
real-time stock levels to prevent losses from shortages.

● Digital Salesman (Flip): With Marg’s ERP’s Digital Salesman(Flip) feature,

easily suggest a substitute medicine to the customer and earn extra profit
and cash back on the items/medicines and also maintain a better customer
relationship.
 FEATURES AT GLANCE

● Stock management: Track your stock, set min/max stock level, make inventory
up to date. Marg Pharmacy Software with advanced inventory tracking helps to
streamline your entire pharmacy shop.

● Expiry management: Keep a track of expired and near expiry products sitting at
your shelves. Return the products to the supplier before expiry and save 100%
losses due to expiry.

● Prescription Management: Reach out to more customers by maintaining

records of medical evaluation of the patient’s health by accepting paper and e-
prescriptions.

● Rack Management: Easily maintain stock of multiple items rack-wise which

helps to identify which item is kept in which rack at the time of billing and
generate rack-wise stock reports.
 FEATURES AT GLANCE

● Free Drug Helpline: Get complete information of 4.5 Lakh medicines inside
Marg ERP. Increase 40-50% sales by searching substitutes and placing orders to
nearby suppliers.

● 24X7 Ordering: View stock updates, schemes and rates in real-time and place
online orders to nearby suppliers anytime anywhere with Marg eRetail App.

● Doctor Account Management: Generate doctor’s andMR’s commission,

incentives and company wise sales reports. Know the profit margins and increase
your sales accordingly.

● Family Ledger Management: Create and maintain the family-wise consolidated

ledger in a single ledger group and serve the entire family in a better way.