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#### Page No 4.100:

 Equity = Share Capital + Reserve and Surplus = 5, 00,000 + 2, 00,000 + 3, 00,000 = Rs 10, 00,000

 Debt = Long Term Borrowings + Long Term Provision = 7, 00,000 + 50,000 = Rs 7, 50,000 = $\frac{7,50,000}{10,00,000}$ = 0.75:1

#### Page No 4.100:

 Debt = Total Debt – Current Liabilities = 1, 80,000 – 20,000 = Rs. 1, 60,000

 Equity = Total Assets – Current Liabilities – Non Current Liabilities = 2, 60,000 – 20,000 – 1, 60,000 = Rs. 80,000

#### Page No 4.100:

 Debt = Long Term Borrowings + Long Term Provision = 14, 00,000 + 1, 00,000 = Rs 15, 00,000

 Equity = Share Capital + Reserve and Surplus = 8, 00,000 + 2, 00,000 = Rs 10, 00,000 Debt Equity Ratio = $\frac{15,00,000}{10,00,000}$ = 1.5: 1

#### Page No 4.100:

Let’s take Debt = Rs. 50,000 and Equity = Rs. 1, 00,000

1. Issue of Shares say Rs 20,000, So

2. Cash received from Debtors Say Rs. 20,000, So

3. Redemption of Debentures Say Rs. 20,000, So

4. Purchase goods on credit sale Say Rs. 20,000

#### Page No 4.100:

 Debt = Long Term Borrowings + Long Term Provision = Rs 4, 50,000

 Equity = Share Capital + Reserve and Surplus = 2, 50,000 + 50,000 = Rs 3, 00,000 Debt Equity Ratio = $\frac{4,50,000}{3,00,000}$ = 1.5: 1

#### Page No 4.101:

 Debt = Long Term Borrowings + Long Term Provision = 2,00,000 + 50,000 = Rs 2,50,000

 Equity = Share Capital + Reserve and Surplus = 6, 00,000 – 1, 00,000 = Rs 5,00,000 Debt Equity Ratio = $\frac{2,50,000}{5,00,000}$ = 0.5: 1

#### Page No 4.101:

 Shareholder’s Fund = Share Capital + Reserve and Surplus = 4, 50,000 + 75,000 = Rs. 5, 25,000 Proprietary Ratio = $\frac{5,25,000}{7,50,000}$ = 0.7: 1

#### Page No 4.102:

 Debt = Long Term Borrowings + Long Term Provision = 8, 00,000 + 2, 00,000 = Rs 10, 00,000

#### Page No 4.102:

 Debt = Total Debt + Short Term Borrowings – Other Current Liabilities = 20, 00,000 - 4, 00,000 -4, 00, 000 = Rs 12, 00,000

Total Assets = Total Liabilities = 24, 00,000 + 20, 00,000 = Rs. 44, 00,000

#### Page No 4.102:

 Debt = Total Debt - Current Liabilities = 15, 00,000 – (4, 00,000 + 50, 000 + 10,000 + 1, 00,000) = 15, 00,000 - 5, 60,000 = Rs 9, 40,000

#### Page No 4.103:

 Shareholder’s Fund = Share Capital + Reserve and Surplus = 7, 00,000 + 2, 50,000 + 3, 00,000 + 2, 50,000 = Rs. 15, 00,000

 Total Assets = Fixed Assets + Investment + Current Assets = 35, 00,000 + 2, 00,000 + 8, 00,000 = Rs. 45, 00,000 Proprietory Ratio = $\frac{15,00,000}{45,00,000}$ = 0.33: 1

 Debt = Long Term Borrowings + Long Term Provision = 20, 00,000 + 5, 00,000 = Rs.25, 00,000

#### Page No 4.103:

 Shareholder’s Fund = Share Capital + Reserve and Surplus = 90,000 + 60,000 + 30,000 + 60,000 = Rs.2, 40,000

 Total Assets = Fixed Assets + Investment + Current Assets = 6, 00,000 + 60,000 + 3, 00,000 = Rs. 9, 60,000

 Debt = Long Term Borrowings + Long Term Provision = Rs 4, 80,000

#### Page No 4.104:

 Shareholder’s Fund = Share Capital + Reserve and Surplus = 6, 00,000 + 1, 50,000 = Rs.7, 50,000

 Debt = Long Term Borrowings + Long Term Provision = Rs 1, 00,000

#### Page No 4.104:

 Profit before Interest & Tax = 1, 70,000 + 30,000 + 40,000 = Rs 2, 40,000

#### Page No 4.104:

 Profit before Interest & Tax = 75,000 + 9,000 + 5,000 + 5,000 (Interest on Debenture) = Rs 94,000

#### Page No 4.106:

 Cost of Goods Sold = Rs. 5,00,000 Gross Profit = 5,00,000 × 20% = Rs. 1,00,000

 Sales = Cost of Goods Sold + Gross Profit = 5,00,000 + 1,00,000 = Rs. 6,00,000

 Cash Sales = 20% of 6,00,000 = Rs. 1,20,000 = 6,00,000 – 1,20,000 = Rs. 4,80,000

#### Page No 4.109:

Let Cost of Goods Sold be = x

Cost of Goods Sold = x = Rs 3,84,000

Cost of Goods Sold = Opening Inventory (Stock) + Purchases − Closing Inventory (Stock)

3,84,000 = Opening Inventory + 3,60,000 − 68,000

Opening Inventory = 3,84,000 − 2,92,000 = Rs 92,000

#### Page No 4.109:

Sales = 2,00,000

Gross Profit = 25% on Sales

Cost of Goods Sold = Total Sales − Gross Profit

= 2,00,000 − 50,000 = 1,50,000

Let Opening Inventory = x

Closing Inventory = x + 4,000

Opening Inventory = x = Rs 28,000

Closing Inventory = x + 4,000 = 28,000 + 4,000 = Rs 32,000

#### Page No 4.112:

Net Profit after Tax (as per Statement of Profit and Loss) = 45,000

Provision for Taxation = 10,000

Net Profit before Interest and Tax = 45,000 + 10,000 = 55,000

Capital Employed = Share Capital + Reserves and Surplus + Long-term Borrowings

= 2,00,000 + 1,00,000 + 1,00,000 = 4,00,000

#### Page No 4.113:

Net Fixed Assets = Fixed Assets (at cost) − Accumulated Depreciation

= 22,50,000 − 2,50,000 = 20,00,000

Capital Employed = Net Fixed Assets + Current Assets − Current Liabilities

= 20,00,000 + 12,00,000 − 4,00,000

= 28,00,000

Interest on 10% Debentures = 10% of 10,00,000 = 1,00,000

Let Profit before Tax be = x

Profit after Tax = Profit Before Tax − Tax

Tax Rate = 50%

∴ Tax = 0.5 x

x − 0.5 x = 6,50,000

x = 13,00,000

Net Profit before Tax = x = 13,00,000

Profit before Interest and Tax = Profit before Tax + Interest on Long-term Debt

= 13,00,000 + 1,00,000

= 14,00,000

#### Page No 4.113:

Net Profit before Interest and Tax = 2,50,000

Capital Employed = 10,00,000

#### Page No 4.113:

Net Profit before Interest and Tax = 6,00,000

Capital Employed = Net Fixed Assets + Net Working Capital

= 20,00,000 + 10,00,000 = 30,00,000

#### Page No 4.113:

Net Profit before Interest and Tax = 4,00,000

Capital Employed = 15% long-term Debt + Shareholders’ Funds

= 8,00,000 + 4,00,000 = 12,00,000

#### Page No 4.114:

Let Debt to be Rs. 2, 00,000 and Equity = Rs. 1, 00,000

a) Sale of Land book value Rs. 5,00,000, So

b) Issue of Share for Purchase of Plant& Machinery Rs. 10,00,000, So

c) Issue of Preference Shares for Payment of Redemption say Rs. 50,000, So

#### Page No 4.114:

 Debt = Total Debts – Current Liabilities = 10, 00,000 – 5, 00,000 = Rs. 5, 00,000

 Equity = Total Assets – Current Liabilities – Total Debts = 12, 50,000 – 10,00,0000 = Rs. 2, 50,000

#### Page No 4.114:

 Debt = Long Term Borrowings + Long Term Provision = 1, 10,000 + 20,000 = Rs 1, 30,000

 Equity = Share Capital + Reserve and Surplus = 5, 00,000 + 1, 00,000 + 40,000 = Rs 6, 40,000

#### Page No 4.114:

 Debt = Long Term Borrowings + Long Term Provision = 2, 00,000 + 50,000 = Rs 2, 50,000

 Equity = Share Capital + Reserve and Surplus = 10, 00,000 + 2, 40,000 = Rs 12, 40,000

#### Page No 4.115:

 Debt = Long Term Borrowings + Long Term Provision = Rs 30, 00,000

 Equity = Share Capital + Reserve and Surplus = 5, 00,000 + 15, 00,000 + 1, 00,000 + 4, 00,000 = Rs 25, 00,000

#### Page No 4.115:

 Debt = Long Term Borrowings + Long Term Provision = 2, 60,000 + 40,000 = Rs 3, 00,000

(A)

(B)

(A)

(B)

#### Page No 4.118:

 Current Assets = Debtors + Prepaid Expenses + Cash + Marketable Securities + Inventory = 2, 00,000 + 20,000 + 60,000 + 40,000 + 80,000 = Rs 4, 00,000

 Current Liabilities = Bills Payables + Creditors + Expenses Payables = 40,000 + 80,000 + 80,000 = Rs 2, 00,000

#### Page No 4.118:

$\begin{array}{l}\mathrm{Debt}\mathrm{}\mathrm{to}\mathrm{}\mathrm{Total}\mathrm{}\mathrm{Asset}\mathrm{}\mathrm{Ratio}\mathrm{}=\mathrm{}\frac{\mathrm{Debt}}{\mathrm{Total}\text{\hspace{0.17em}}\mathrm{Assets}}\\ \text{\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}\hspace{0.17em}}=\text{\hspace{0.17em}}\frac{80,00,000}{1,15,00,000}\text{\hspace{0.17em}}=\text{\hspace{0.17em}}0.6956:1\\ \mathrm{Debt}=\text{\hspace{0.17em}}12\mathrm{%}\text{\hspace{0.17em}}\mathrm{Debentures}\mathrm{}\text{\hspace{0.17em}}=\text{\hspace{0.17em}}\mathrm{Rs}\text{\hspace{0.17em}\hspace{0.17em}}80,00,000\\ \mathrm{Total}\text{\hspace{0.17em}}\mathrm{Assets}\text{\hspace{0.17em}\hspace{0.17em}}=\text{\hspace{0.17em}\hspace{0.17em}}\mathrm{Fixed}\text{\hspace{0.17em}}\mathrm{Assets}\text{\hspace{0.17em}}+\text{\hspace{0.17em}}\mathrm{Current}\text{\hspace{0.17em}}\mathrm{Assets}\text{\hspace{0.17em}\hspace{0.17em}}=\text{\hspace{0.17em}\hspace{0.17em}}75,00,000+\text{\hspace{0.17em}}40,00,000\text{\hspace{0.17em}}\\ =\text{\hspace{0.17em}}\mathrm{Rs}\mathrm{}\text{\hspace{0.17em}}1,15,00,000\end{array}$

#### Page No 4.119:

 Current Assets = Debtors + Stock + Cash = 10,000 + 15,000 + 15,000 = Rs. 40,000

 Current Liabilities = Bills Payables + Creditors = 6,000 + 14,000 = Rs. 20,000

(A)

(B)

(C)

(A)

(B)
(C)

(D)

(E)

(A)

(B)
(C)
(D)

(A)

(B)

(C)

(A)

(B)

(C)
(D)
(E)

(A)

(B)

(C)

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

A.

B.

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

#### Page No 4.97:

â€‹

 Current Assets = Debtors + Prepaid Expenses + Cash + Marketable Securities + Inventory = 2, 00,000 + 20,000 + 60,000 + 40,000 + 80,000 = Rs 4, 00,000

 â€‹Current Liabilities = Bills Payables + Creditors + Expenses Payables = 40,000 + 80,000 + 80,000 = Rs 2, 00,000

#### Page No 4.97:

 Current Liabilities = Creditors + Other Current Liabilities = 80,000 + 4, 00,000 = Rs 4, 80,000

 Working Capital = Current Assets – Current Liabilities 7, 00,000 = Current Assets – 4, 80,000 Current Assets = Rs 11, 80,000

#### Page No 4.97:

 Current Liabilities = Total Debt – Long Term Debts = 6, 50,000 – 5, 00, 000 = Rs. 1, 50,000

 Working Capital = Current Assets – Current Liabilities 3, 00,000 = Current Assets – 1, 50,000 Current Assets = Rs. 4, 50,000.

#### Page No 4.97:

 Working Capital = Current Asset* – Current Liabilities 5, 00,000 = 6, 00,000   – Current Liabilities Current Liabilities = Rs. 1, 00,000

 (Current Asset* = Current Assets- Loose tools – Stores & Spares = 8, 00,000 – 15, 00,000 -50,000 = 6, 00,000)

Case: 1

Case: 2

Case: 3

#### Page No 4.98:

Let’s take Current Asset = Rs. 2, 50,000 and Current Liability = Rs. 1, 00,000

a. Payment to Creditors say Rs 50,000, So

b. Sale of Machinery Say Rs. 50,000, So

c. Purchase of Goods for Cash Say Rs. 50,000, So

d. Issue of Equity Shares Say Rs. 50,000

#### Page No 4.98:

 Current Assets = Inventories + Trade Receivables + Cash = 18,600 + 9,600 +19,800 = Rs 48,000

 Current Liabilities = Bank Overdraft+ Trade Payables = 6,000 + 18,000 = Rs 24,000
Note: The answer provided in the book is 1 : 1, however, as per our solution the current ratio is 2 : 1.

#### Page No 4.98:

 Current Assets = Liquid Assets + Stock + Prepaid Expenses = 1, 87,500 + 50,000 + 12,500 = Rs 2, 50,000

 Working Capital = Current Assets – Current Liabilities 1, 50,000 = 2, 50,000 –Current Liabilities Current Liabilities = Rs 1, 00,000

#### Page No 4.98:

 Working Capital = Current Assets – Current Liabilities 5, 00,000 = 10, 00,000 –Current Liabilities Current Liabilities = Rs 5, 00,000

#### Page No 4.99:

 Working Capital = Current Assets – Current Liabilities 84,000 = 1, 00,000 – Current Liabilities Current Liabilities = Rs 16,000

#### Page No 4.99:

 Working Capital = Current Assets – Current Liabilities 2, 40,000 = 2.5Current Liabilities - Current Liabilities Current Liabilities = Rs 1, 60,000 Current Assets = 2.5  1, 60,000 = Rs 4, 00,000

#### Page No 4.99:

 Current Assets = Inventories + Trade Receivables + Cash + Advance Tax = 1, 00,000 + 1, 00,000 + 60,000 +8,000 = Rs 2, 68,000

 Current Liabilities = Trade Payables + Bank Overdraft = 2, 00,000 + 8,000 = Rs 2, 08,000

#### Page No 4.99:

 Current Assets = Inventories + Prepaid Expenses + Other Current Assets = 30,000 + 2000 + 50,000 = Rs 82,000