Problem 1

Arun and barun are two friends. They decided to start a partnership business on 1 st April,
2016 with Rs. 6,00,000.00. Arun and Barun contributed Rs. 3,00,000.00 each as capital.
They purchased a room for office with Rs. 4,00,000.00 on 1st June, 2016. They have taken a
loan from bank for Rs. 5,00,000.00 on 1 st July, 2016 with interest @6% per annum. On 1 st
july, 2016 they opened a bank account with Rs. 4,00,000.00. Bank credited his bank
account with the amount of loan of Rs. 5,00,000.00 on 1st July, 2016. The bank loan was to
be repaid in 5 equal annual installment on 31 st march every year.

The transaction for the year ending 31st March, 2017 were as follows.

Particulars Amount

Purchases 15,00,000.00
Sales 18,50,000.00
Salary 80,000.00
Electricity Charges 17,000.00
Purchase of furniture 60,000.00
Audit fees 48,000.00
Advertising 7,000.00
Insurance Premium 6,000.00
Travelling expenses 3,500.00

Closing stock was valued at Rs. 3,50,000.00. On 31 st March, 2017 the installment of loan
along with interest was duly paid to the bank. Arun and Barun also made drawings of Rs.
2,000.00 and Rs. 3,000.00 respectively per month from bank.

Requirement :
1. Journalize the above transaction
2. Post them into ledger accounts.
3. Prepare Trial Balance.
4. Prepare Trading account, Profit and Loss Account and Balance Sheet.
5. Compare and comment on its operational efficiency. In the similar type of business
following standards have been considered :
(i) Gross profit ratio.
(ii) Net profit ratio.
(iii) Return on capital employed.
(iv) Capital employed turnover ratio.
(v) Fixed assets turnover ratio.
(vi) Stock turnover ratio.
(vii) Debt-equity ratio.
6. Calculate cash flow from operating activities, investing activities and financial
activities.