Suggested Solutions to Exercise in Financial Accounting for Management by Ramachandran & Kakani

Authored by Ram Kumar Kakani, Copyright with Tata McGraw Hill Education Private Limited, 2011


1
CHAPTER 3

Profit and Loss Account
Note: Answers to only half the questions have been provided. It gives you an opportunity to work
on the rest problems and discuss about the relevant solutions. You are requested to complete this
chapter before attempting the questions.

MULTIPLE CHOICE QUESTIONS
1. (d)
2.
3. (a)
4.
5. (d)
6.
7. (c)
8.
9. (c)
10.
11. (b)


EXERCISE


1. (A) Fill in the Blanks
1.1 Revenues, Expense
1.2
1.3 Expenses, Realized Revenues of the Period
1.4
1.5 Increases
1.6
1.7 Revenues, Cost Expiration
1.8
1.9 Cost of Goods Sold
1.10
1.11 Expenses
1.12
1.13 Accrual
1.14
1.15 Straight Line, WDV and Sum of Years Digit
1.16
1.17 Net Sales or Net Turnover
1.18


Suggested Solutions to Exercise in Financial Accounting for Management by Ramachandran & Kakani
Authored by Ram Kumar Kakani, Copyright with Tata McGraw Hill Education Private Limited, 2011


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(B) Mark True or False:
1. F
2.
3. F
4.
5. T
6.
7. T
8.
9. T
10.
11. F
12.
13. F
14.
15. T
16.


3. Classifying the Items

Column A Column B
Raw material consumed C
Interest received -
Dividends received B
Wages paid to manufacturing workers -
Carriage on goods sold D
Carriage on goods purchased -
Salary of clerical staff E
Rent for office -
Power and fuel C
Selling agents commission -
Advertising D
Auditors fees -
Sales tax A
Municipal rates on office premises -
Profit on sale of fixed assets B
Power used in administrative office -
Sales discount A
Purchase returns and allowances -
Dividends paid F
Interest expense on loans -




Suggested Solutions to Exercise in Financial Accounting for Management by Ramachandran & Kakani
Authored by Ram Kumar Kakani, Copyright with Tata McGraw Hill Education Private Limited, 2011


3
5.
Possible transactions:
Shantanu Real Estate Brokers
i. Shantanu contributed Rs 1,00,000 as capital to his business. So, the cash position has
increased
ii. Fixed Assets worth Rs 2,00,000 contributed by Shantanu
iii. Office furniture worth Rs 2, 50,000 has been purchased, but only Rs 50,000 has been
paid through cash. Rest Rs 2,00,000 is on credit
iv. Shantanu contributed again Rs 6,00,000 as capital
v. Rs 1,00,000 have been paid to the creditors. So, the cash position has decreased
vi. Shantanu withdraws Rs 2,00,000 from the capital account. So, the cash position has
been decreased by equivalent amount
vii. The firm sold goods on credit Rs 2,00,000
viii. Sales of Rs 2,00,000 , but only Rs 1,00,000 received in cash & rest on credit
ix. Rs 1,50,000 of accounts receivables have been realized. So, the cash position has
increased
x. Shantanu withdraws Rs 2,00,000 from capital account
xi. Rs 1,00,000 worth account payable have been settled, so equivalent cash balance has
reduced



REVIEW QUESTIONS

3. (a) The profit of S Paul for the quarter is Rs. 19,600
(b) Total assets of S Paul at the end of quarter is Rs. 7,59,660
4. Total assets of Kochi Oil Mills is Rs. 11,000.9
6. Total assets of Murthy and Murthy is Rs. 15,238.3
7. Profit of Malabar Constructions for the period is Rs. 1,47,84,750
8. Profit of Bong, Harry and Mallu is Rs. 6,49,740 and total assets of Bong, Harry and Mallu is Rs.
46,64,830