JOURNAL ENTRY
DATE 2009 9-Aug PARTICULARS Cash A/c Building A/c To Capital A/c (Being Cash and Building brought as capital) Bank A/c To Bank Loan A/c (Being Bank loan taken) Bank A/c To Cash A/c (Being cash deposited into bank) Computer A/c To Computer Company A/c (Being Computer purchased ) Dr. Dr. L/F AMOUNT (RS) 300000 200000 AMOUNT (RS)
5000000
9-Aug
Dr.
350000 350000
9-Aug
Dr.
250000 250000
9-Aug
Dr.
500000
500000
9-Aug
Computer Company A/c To Bank A/c (Being paid to computer company)
Dr.
450000 450000
9-Aug
Dr. Electrical Connection A/c To Bank A/c (Being money paid as electric connection)
2000 2000
9-Aug
Bsnl Internet connection A/c To Bank A/c (Being money paid as BSNL connection)
Dr.
150000 150000
9-Aug
Furniture A/c To Samrat Furniture A/c (Being Furniture purchased)
Dr.
20000 20000
B/F
2222000
2222000
9-Aug
Advertisement A/c To Bank A/c (Being Advertisement expense paid)
Dr.
5000 5000
2010 31-Mar
Bank A/c To Sales A/c (Being Sales money deposited in bank)
Dr.
550000 550000
31-Mar
Dr. Purchased A/c To Bank A/c (Being Goods Purchased and payment made)
75000 75000
31-Mar
Electricity Charges A/c To Bank (Being electricity charges paid)
Dr.
135000 135000
31-Mar
Telephone Charge A/c To Bank A/c (Being Telephone charges paid.)
Dr.
45000 45000
31-Mar
Petty Expenses A/c To Bank A/c (Being Petty expenses charged paid)
Dr.
15000 15000
31-Mar
Entertainment Charges A/c To Bank A/c (Being Entertainment charges paid)
Dr.
12000 12000
31-Mar
Maintenance Expenses A/c To Bank A/c (Being Maintenance charges paid)
Dr.
9500 9500
B/F
3068500
3068500
31-Mar
Dr. Staff Salary A/c To Bank A/c (Being Staff Salary 800x8 for August 2009 to March 2010)
6400 6400
31-Mar
Dr. Drawing A/c To Bank A/c (Being Cash withdrawn for personal use 5000x8)
40000 40000
31-Mar
Bank Loan A/c
Dr.
100000 50000 150000
Interest on loan A/c Dr. To Bank A/c (Being Bank loan amount and interest paid)
31-Mar
Dr. Depreciation A/c To Computer A/c To Furniture A/c To Building A/c (Being Depreciation charged on fixed assets) TOTAL
117000 100000 3000 7000 3381900 3381900
DATE 1.08.09
PARTICULARS To Capital A/c
In the books of . Ledger Account Cash Account J/F AMOUNT DATE PARTICULARS 300000 1.08.09 By Bank A/c 31.03.10 By Balance c/d 300000
J/F
Cr. AMOUNT 250000 50000 300000
DATE 1.08.09
PARTICULARS To Capital A/c
Building Account J/F AMOUNT DATE PARTICULARS 200000 31.03.10 By Depreciation A/c 31.03.10 By Balance c/d 200000 Capital Account J/F AMOUNT DATE 500000 1.08.09 1.08.09 500000 Bank Loan Account J/F AMOUNT DATE 100000 1.08.09 250000 350000
DATE PARTICULARS 31.03.10 To Bank A/c 31.03.10 To Balance c/d
PARTICULARS By Bank A/c
J/F
DATE 1.08.09
PARTICULARS To Computer company A/c
Computer A/c J/F AMOUNT DATE PARTICULARS 500000 31.03.10 By Depreciation A/c 31.03.10 By Balance c/d 500000 Computer Company Account J/F AMOUNT DATE PARTICULARS 450000 1.08.09 By Computer A/c 50000 500000 Deposit for Electricity connection J/F AMOUNT DATE PARTICULARS 2000 31.03.10 By balance c/d 2000
J/F
DATE PARTICULARS 1.08.09 To Bank A/c 31.03.10 To balance c/d
J/F
DATE 1.08.09
PARTICULARS To Bank A/c
J/F
DATE 1.08.09
PARTICULARS To Bank A/c
Bsnl Internet connection J/F AMOUNT DATE PARTICULARS 150000 31.03.10 By balance c/d 150000 Furniture A/c J/F AMOUNT DATE PARTICULARS 20000 31.03.10 By Depreciation A/c 31.03.10 By balance c/d 20000 Samrat Furniture A/c J/F AMOUNT DATE 20000 1.08.09 20000
PARTICULARS By Computer Com A/c By Deposit for Electricity A/c By Bsnl connection A/c By Advertisement A/c By Purchased A/c By Electric Charges A/c By Telephone Exp A/c By Petty Expense A/c BY Entertainment Exp A/c By Maintenance Exp A/c By Staff Salary A/c By Drawings A/c By Bank Loan A/c By Interest on Loan A/c By balance c/d
TRAIL BALANCE FOR THE YEAR ENDED 31ST MARCH 2010 SL .NO PARTICULARS L/F AMOUNT (RS.) Dr. Cash Building Capital Bank Bank loan Computer Computer Company Deposit for Electricity BSNL Internet Connection Furniture Samrat Furniture Advertisement Sales Purchase Electricity Charges Telephone Charges Petty Expense Entertainment expenses 75000 135000 45000 15000 12000 5000 550000 2000 150000 17000 20000 40000 50000 55100 250000 50000 186000 500000 AMOUNT (RS.) Cr.
Maintenance charges Staff Salary Drawings Interest on bank Loan Depreciation
9500 6400 40000 50000 117000
1370000
1370000
Dr. PARTICULARS To Purchased A/c To Gross profit
Trading & Profit & Loss A/c For the Year ended 31st March 2010 AMOUNT PARTICULARS (Rs) 75000 By Sales 475000 550000 By Gross Profit
Cr. AMOUNT (Rs) 550000 550000 475000
To Advertisement A/c To Electricity A/c To Telephone A/c To Petty Expense A/c To Entertainment A/c To Maintenance A/c To Staff Salary A/c To Interest On loan A/c To Depreciation A/c To Net profit transfer to b/s
LIABILITIES capital Account During the year Add: Net profit Less : Drawing
500000 80100 40000
Bank Loan Computer Company Samrat Furniture
BALANCE SHEET AS ON 31ST MARCH 2010 AMOUNT ASSETS Building Less Depreciation Computer Less Depreciation 540100 Furniture Less Depreciation 250000 Deposit for Electricity 50000 BSNL internet connection 20000 Bank Cash 860100
PROFITABILITY RATIO TO BE CONSIDERED GROSS PROFIT RATIO G.P Ratio = Gross Profit/Sales *100 G.P ratio = 475000/550000 *100 G.P Ratio = 86.36 % By the G.P Ratio we can know that the company is not having fixed and direct expenses. Net Profit Ratio Net Profit Ratio = Net Profit/Sales *100 Net Profit = 80100/550000*100 Net profit Ratio is 14.56% By net Profit Ratio we can concluded that the company as per the industry standard is not good but as for the new business and 1st year concerned it is good because not only in the first year it has covered all its expenses but came up with a profit of 14.56%
Next it is important for us to know the Liquidity of the company
LIQUID RATIO CURRENT RATIO Current Ratio = Current Assets/Current Liabilities Current Ratio = cash + bank/creditors Current Ratio = 55100+50000/20000+50000 Current Ratio = 1.57 Here the current ratio and the liquid ratio will be same because there is no closing stock of raw material or else the raw material will be deducted while calculating the liquid ratio. All the transaction is in cash so there are no debtors. So the ideal ratio is 2:1 but the ratio what the company has is also good. It means that the company has enough money to pay to the creditors. Bank looks for the fixed assets the company has and the Long and short term debts that the company has. Here we see that the company has taken a loan to purchased fixed assets. Though the net profit ratio as per industry is not very attractive but considering the first year of operation the company has performed well. Bank can give short term loan or the working capital loan but as per my suggestion bank should not take a risk to give further loan because the company has already has a burden to pay for the interest on capital that it has taken further loan can decrease the profit.