12th Accountancy - Book Back Answers - Unit 9 - English Medium Guides

  

 

12th Accountancy - Book Back Answers - Unit 9 - English Medium

Tamil Nadu Board 12th Standard Accountancy - Unit 9: Book Back Answers and Solutions

    This post covers the book back answers and solutions for Unit 9 – from the Tamil Nadu State Board 12th Standard Accountancy textbook. These detailed answers have been carefully prepared by our expert teachers at KalviTips.com.

    We have explained each answer in a simple, easy-to-understand format, highlighting important points step by step under the relevant subtopics. Students are advised to read and memorize these subtopics thoroughly. Once you understand the main concepts, you’ll be able to connect other related points with real-life examples and confidently present them in your tests and exams.

    By going through this material, you’ll gain a strong understanding of Unit 9 along with the corresponding book back questions and answers (PDF format).

Question Types Covered:

• 1 Mark Questions: Choose the correct answer, Fill in the blanks, Identify the correct statement, Match the following 
• 2 Mark Questions: Answer briefly 
• 3, 4, and 5 Mark Questions: Answer in detail

All answers are presented in a clear and student-friendly manner, focusing on key points to help you score full marks.

All the best, Class 12th students! Prepare well and aim for top scores. Thank you!

Unit 9: Ratio Analysis

I.Choose the correct answer

1. The mathematical expression that provides a measure of the relationship between two figures is called ……………..
(a) Conclusion
(b) Ratio
(c) Model
(d) Decision
Answer Key:
(b) Ratio

 

2. Current ratio indicates ……………..
(a) Ability to meet short term obligations
(b) Efficiency of management
(c) Profitability
(d) Long term solvency
Answer Key:
(a) Ability to meet short term obligations
  

3. Current assets excluding inventory and prepaid expenses is called ……………..
(a) Reserves
(b) Tangible assets
(c) Funds
(d) Quick assets
Answer Key:
(d) Quick assets

 

4. The debt equity ratio is a measure of ……………..
(a) Short term solvency
(b) Long term solvency
(c) Profitability
(d) Efficiency
Answer Key:
(b) Long term solvency

5. Match List-I with List-II and select the correct Answer Key using the codes given below: 

      List I                       List II
(i) Current ratio - 1. Liquidity
(ii) Net profit ratio  -2. Efficiency
(iii) Debt-equity ratio -3. Long term solvency
(iv) Inventory turnover ratio -4. Profitability
Codes:    (i)    (ii)    (iii)    (iv)
(a)            1     4       3       2
(b)            3     2       4       1
(c)            4     3       2       1
(d)            1     2       3       4
Answer Key:
(a) 1 4 3 2

6. To test the liquidity of a concern, which of the following ratios are useful?
(i) Quick ratio
(ii) Net profit ratio
(iii) Debt – equity ratio
(iv) Current ratio
Select the correct Answer Key using the codes given below:
(a) (i) and (ii)
(b) (i) and (iv)
(c) (ii) and (iii)
(d) (ii) and (iv)
Answer Key:
(b) (i) and (iv)

7. The proportion of shareholder’s funds to total assets is called ……………..
(a) Proprietary ratio
(b) Capital gearing ratio
(c) Debt equity ratio
(d) Current ratio
Answer Key:
(a) Proprietary ratio
 

8. Which one of the following is not correctly matched?
(a) Liquid ratio – Proportion
(b) Gross profit ratio – Percentage
(c) Fixed assets turnover ratio – Percentage
(d) Debt – equity ratio – Proportion
Answer Key:
(c) Fixed assets turnover ratio – Percentage
 
9. Current liabilities Rs. 40,000; Current assets Rs. 1,00,000 ; Inventory Rs. 20,000 . Quick ratio is ……………..
(a) 1:1
(b) 2.5:1
(c) 2:1
(d) 1:2
Answer Key:
(c) 2:1

 

10. Cost of revenue from operations Rs. 3,00,000; Inventory in the beginning of the year Rs. 60,000; Inventory at the close of the year Rs. 40,000. The inventory turnover ratio is
(a) 2 times
(b) 3 times
(c) 6 times
(d) 8 times
Answer Key:
(c) 6 times

 

II. Very short answer questions

1.   What is meant by accounting ratios?

•  The ratio is a mathematical expression of the relationship between two related or interdependent items. When ratios are calculated on the basis of accounting information, these are called ‘accounting ratios’.

 

2.   What is quick ratio?

•  Quick ratio gives the proportion of quick assets to current liabilities.
•  $Quick ratio=\frac{Current assets}{Current liabilities}$

3.  What is meant by debt equity ratio?

• $Debt equit\mathrm{y }ratio=\frac{Long term debt}{Shareholders funds}$
• Debt equity ratio is calculated to assess the long-term solvency position of a business concern.

 

4.  What does return on investment ratio indicate? 

• Return on investment shows the proportion of net profit before interest and tax to capital employed (shareholders’ funds and long-term debts).
• $Return on investment=\frac{Net profit before interest and tax}{Capital employed}\times 100$

 

5.  State any two limitations of ratio analysis.

• Ratios are only means: Ratios are not ended in themselves but they are the only means to achieve a particular purpose. Analysis of related items must be done by the management or experts with the help of ratios.
• Accuracy of financial information: The accuracy of a ratio depends on the accuracy of information taken from financial statements. If the statements are inaccurate, ratios computed based on that will also be inaccurate.

 

III. Short answer question

1. Explain the objectives of ratio analysis.

• To simplify accounting figures  
• To facilitate analysis of financial statements
• To analysis the operational efficiency of a business
• To help in budgeting and forecasting
• To facilitate inter firm and inter firm comparison of  performance

 

2.  What is inventory conversion period? How is it calculated? 

•  Inventory conversion period is the time taken to sell the inventory. A shorter inventory conversion period indicates more efficiency in the management of inventory. 
• $\mathrm{<b>In\; days </b>}$
• $Inventory Conversion Period=\frac{Number of days in a year}{Inventory turnover ratio}$
• $\frac{\mathrm{<b>In\; months</b>}}{}$
• $Inventory Conversion Period=\frac{Number of months in a year}{Inventory turnover ratio}$$\frac{ }{}$

$\frac{\mathrm{<br>}}{}$

3.  How is operating profit ascertained? 

• Operating cost ratio is the proportion of operating cost to revenue from operations. This ratio is a test of the operational efficiency of the business.
• $Operating cost ratio=\frac{Operating cost}{Revenue from operations}\times 100$

 

4.  State any three advantages of ratio analysis. 

 

 i)  Measuring operational efficiency:

• Ratio analysis helps to know operational efficiency of a business by finding the relationship between operating cost and revenues.

 ii)   Measuring financial solvency:

•  Ratio analysis helps to ascertain the liquidity or short-term solvency and long-term solvency of a business concern.

 iii)   Analysis the profitability:

•  Ratio analysis helps to analysis the profitability of a business in terms of sales and investments.

 

5.  Bring out the limitations of ratio analysis. 

i)   Ratios are only means:

•  Ratios are not end in themselves but they are only means to achieve a particular purpose.

 ii)   Accuracy of financial information:

• The accuracy of a ratio depends on the accuracy of information taken from financial statements.

 iii) Change in price level:

•  Ratio analysis may not reflect price level changes and current values as they are calculated based on historical data given in financial statements.

 

IV. Excercise  

Question 1.
Calculate the current ratio from the following information.

Answer Key:

 

$Current ratio=\frac{Current assets}{Current liabilities}$
Current assets = current investment + Inventories + Trade debtors + Bills receivable + Cash and cash equivalents
C. A = 40,000 + 2,00,000 + 1,20,000 + 80,000 + 10,000 = 4,50,000
Current liablities = Trade crditors + Bills payable + Expenses payable
C.L = 80,000 + 50,000 + 20,000 = 1,50,000

$Current ratio=\frac{4,\mathrm{50,000}}{1,\mathrm{50,000}}$

Question 2.

Calculate quick ratio: Total current liabilities Rs. 2,40,000; Total current assets Rs. 4,50,000; Inventories RS 70,000; Prepaid expenses Rs. 20,000
Answer Key:

$Quick ratio=\frac{Current assets}{Current liabilities}$

Quick ratio = Current assets – Inventory – Prepaid expenses
                   = 4,50,000 – 70,000 – 20,000
                   = 3,60,000

$Quick ratio=\frac{3,\mathrm{60,000}}{2,\mathrm{40,000}}=1.5:1$

$\mathrm{ }$

Question 3.
Following is the balance sheet of Lakshmi Ltd. as on 31st March, 2019:

Calculate:
(i) Current ratio (ii) Quick ratio
Answer Key:

$\mathrm{(i)C}urrent ratio=\frac{Current assets}{Current liabilities}$

$=\frac{6,\mathrm{00,000}}{4,\mathrm{00,000}}$

Current ratio = 1.5:1
Current assets = Inventories + Trade debtors + Cash and cash equivalents + other current assets prepaid expenses.
= 40,000 + 1,60,000 + 3,20,000 + 80,000
= 6,00,000
Current Liabilities = short-term loans + trade payables + Expenses payable + short term provision.
= 50,000 + 3,10,000 + 15,000 + 25,000
= 4,00,000

$\mathrm{(ii)Q}uick ratio=\frac{Quick assets}{current liabilities}$

$Quick Assets=Current assets-Inventory-Prepaid Expenses$

$\; =6,\mathrm{00,000}-1,\mathrm{60,000}-\mathrm{40,000}$

$\; =4,\mathrm{00,000}$

$Quick ratio=\frac{4,\mathrm{00,000}}{4,\mathrm{00,000\; =1:1}}$

$<span><span> \; </span><span> \; </span><span> \; </span><span> \; </span><span> \; </span></span>$

$<span><math\; xmlns="http://www.w3.org/1998/Math/MathML"> </math></span>$
Question 4.
From the following information calculate the debt-equity ratio.
Balance sheet (Extract) as on 31st March 2019:

Answer Key:

$Debt equit\mathrm{y }ratio=\frac{Long term debt}{Shareholders funds}$

$Debentures=6,\mathrm{00,000}$

$Shareholders funds=Equity share capital +Reserves and surplus$

$\; = 6,\mathrm{00,000}+2,\mathrm{00,000}$

$\; \; \; \; = 8,\mathrm{00,000}$

$Debt Equity ratio = \frac{6,\mathrm{00,000}}{8,\mathrm{00,000}}$

$\; \; = 0.75:1$    

Question 5.
From the following Balance Sheet of Pioneer Ltd. calculate proprietary ratio:
Balance sheet of Pioneer Ltd. as on 31.3.2019 

Answer Key:

$Proprietary Ratio=\frac{Shareholders funds}{Total tangible assaets}$

$\frac{\mathrm{Shareholders’\; funds\; =\; Equity\; share\; capital\; +\; Preference\; share\; capital\; +\; Reserves\; and\; surplus}}{}$

$\frac{\mathrm{=\; 2,50,000\; +\; 1,50,000\; +\; 50,000}}{}$

$\frac{\mathrm{=\; 4,50,000}}{}$$\frac{\mathrm{<br>}}{}$$\frac{\mathrm{Total\; tangible\; assets\; =\; Fixed\; assets\; capital\; +\; preference\; share\; capital\; +\; Reserves\; and\; surplus}}{}$

$\frac{\mathrm{=\; 2,50,000\; +\; 1,00,000\; +\; 40,000<br>=6,00,000\; <br>}}{}$

$Proprietary Ratio=\frac{4,\mathrm{50,000}}{6,\mathrm{00,000}}$

$\frac{\mathrm{ \; \; \; \; \; \; \; \; \; \; \; \; \; =\; 0.75:1 }}{}$

$\frac{\mathrm{<br>}}{}$

Question 6.

From the following information calculate the capital gearing ratio:
Balance Sheet (Extract) as on 31.03.2018

Answer Key: 

$Capital gearing ratio=\frac{Funds bearing fixed interest or fixed dividend}{Equity shareholders funds}$

$\; =\frac{4,\mathrm{00,000}}{8,\mathrm{00,000}}$

$\; =0.5:1$

Funds bearing fixed interest and dividend Preference share capital + Debentures

= 1,00,000 + 3,00,000 = 4,00,000
Equity shareholder’s funds = Equity share capital + General reserve + Surplus
= 4,00,000 + 2,50,000 + 1,5,000 = 8,00,000

 

Question 7.
From the following Balance Sheet of Arunan Ltd. as of 31.03.2019 calculate
1.Debt – equity ratio
2.Proprietary ratio
3.Capital gearing ratio
Balance Sheet of Arunan Ltd. as on 31.03.2019

Answer Key:

$Debt equit\mathrm{y }ratio=\frac{Long term debt}{Shareholders funds}$

 Long term debt = Debentures = 3,00,000
Shareholders’ funds = Equity share capital + Preference share capital + Reserves and surplus
= 2,50,000 + 2,00,000 + 1 ,50,000
= 6,00,000

$Debt Equity ratio =\frac{3,\mathrm{00,000}}{6,\mathrm{00,000}}$

$\frac{\mathrm{ \; \; \; \; \; \; \; \; \; =0.5:1}}{}$

$\frac{\mathrm{Total\; tangible\; assets=12,00,000}}{}$

$Proprietary Ratio=\frac{6,\mathrm{00,000}}{12,\mathrm{00,000}}=0.5:1$

$Capital gearing ratio=\frac{Funds bearing fixed interest or fixed dividend}{Equity shareholders funds}$

                                    

Funds bearing fixed interest or dividend = Preference share capital + Debentures + Long term borrowings.= 2,00,000 + 4,00,000
= 5,00,000
Equity shareholders’ funds = Equity share capital + Reserves and surplus
= 2,50,000 + 1,50,000
= 4,00,000

Question 8.
From the given information calculate the inventory turnover ratio and inventory conversion period (in months) of Sania Ltd.

Answer Key:

$Inventory turnover ratio=\frac{Cost of revenue from operations}{Average inventory}$

Cost of revenue from operations = Opening inventory + Net Purchases + Direct expenses (carriage inwards) – Closing inventory
= 1,70,000 + 6,90,000 + 20,000 – 1,30,000

= 7,50,000

$Average inventory=\frac{opening inventory+closing inventory}{2}$

$=\frac{1,\mathrm{70,000}+1,\mathrm{30,000}}{2}$

$Inventory turnover ratio=\frac{Cost of revenue from operations}{Average inventory}$

$Inventory conversion period=\frac{Number of months in a year}{Inventory turnover ratio}$

$=\frac{12}{5times}=2.4months$                                      

 

Question 9.
The credit revenue from operations of Velavan Ltd, amounted to 10,00,000. Its debtors and bills receivables at the end of the accounting period amounted to 1,10,000 and 1,40,000 respectively. Calculate trade receivables turnover ratio and also collection period in months.
Answer Key: 

$Trade receivables turnover ratio =\frac{Credit revenue from operations}{Average trade receivables}$
Average trade Receivables = Debtors + Bills receivable
Average Trade Receivables = 1,10,000+1,40,0002 = 2,50,000
Trade receivable turnover ratio = 10,00,0002,50,000 = 4 times

$Debt collection period =\frac{Number of months in a year}{Trade receivables turnover ratio}$ 

                                                 =$\frac{12}{4times}=3months$

 

Question 10.
From the following figures obtained from Kalpana Ltd, calculate the trade payables turnover ratio and credit payment period (in days).

Particulars	Rs.
Credit purchases during 2018 – 2019 Trade creditors as on 1.4.2018 Trade creditors as on 31.3.2019 Bills payable as on 1.4.2018 Bills payable as on 31.3.2019	9,50,000 60,000 50,000 45,000 35,000

Answer Key:

$Trade payable turnover ratio=\frac{Credit purchases}{Average trade payable}$

$Average trade payable=\frac{(Opening+Closing)(Creditors+Bills payable)}{2}$

$\; =\frac{\mathrm{60,000}+\mathrm{50,000}+\mathrm{45,000}+\mathrm{35,000}}{2}$

$\; =\frac{1,\mathrm{90,000}}{2}$

$\; =\mathrm{95,000}$

$\mathrm{<math\; xmlns="http://www.w3.org/1998/Math/MathML"><mi\; mathvariant="normal">Credit</mi><mo> </mo><mi\; mathvariant="normal">payment</mi><mo> </mo><mi\; mathvariant="normal">period</mi><mo>=</mo><mfrac><mrow><mi\; mathvariant="normal">No</mi><mo>.</mo><mi\; mathvariant="normal">of</mi><mo> </mo><mi\; mathvariant="normal">days</mi><mo> </mo><mi\; mathvariant="normal">in</mi><mo> </mo><mi\; mathvariant="normal">a</mi><mo> </mo><mi\; mathvariant="normal">year</mi></mrow><mrow><mi\; mathvariant="normal">Trade</mi><mo> </mo><mi\; mathvariant="normal">payable</mi><mo> </mo><mi\; mathvariant="normal">turnover</mi><mo> </mo><mi\; mathvariant="normal">ratio</mi></mrow></mfrac></math>}$

$\; =\frac{365}{10}$

$\frac{\mathrm{<math\; xmlns="http://www.w3.org/1998/Math/MathML"><mi> \; =36.5days</mi></math>}}{}$

Question 11.
From the following information of Geetha Ltd., calculate fixed assets turnover ratio:
1. Revenue from operations during the year was ₹ 55,00,000.
2. Fixed assets at the end of the year were ₹ 5,00,000.
Answer Key:

$\frac{}{}$$=\frac{55,\mathrm{00,000}}{5,\mathrm{00,000}}$

$=11 times$

$$

Question 12.
Calculate:

1. Inventory turnover ratio
2. Trade receivable turnover ratio
3. Trade payable turnover ratio and 
4. Fixed assets turnover ratio from the following information obtained from Aruna Ltd

 

Additional information:

1. Revenue from operations for the year ₹ 35,00,000
2. Purchases for the year ₹ 21,00,000
3. Cost of revenue from operations ₹ 16,00,000. Assume that sales and purchases are for credit.

Answer Key:

$Inventory turnover ratio=\frac{Cost of revenue from operations}{Average inventory}$ 

$Average inventory=\frac{opening inventory+closing inventory}{2}$

$=\frac{8,\mathrm{00,000}}{2}$

$Inventory turnover ratio=\frac{16,\mathrm{00,000}}{4,\mathrm{00,000}}=4times$

$$$Average trade receivables=\frac{7,\mathrm{40,000}+6,\mathrm{60,000}}{2}$

$$$\frac{\mathrm{=7,00,000}}{}$

$Trade receivable turnover ratio=\frac{35,\mathrm{00,000}}{7,\mathrm{00,000}}=5times$

$Trade payable turnover ratio=\frac{Credit purchases}{Average trade payable}$

$Average trade payable=\frac{1,\mathrm{90,000}+2,\mathrm{30,000}}{2}$

$=\frac{4,\mathrm{20,000}}{2}$

$=2,\mathrm{10,000}$

 =10times

$Fixed assets turnover ratio=\frac{Revenue from operations}{Average fixed assets}$

$\mathrm{Average} \mathrm{fixed} \mathrm{assets}=\frac{6,\mathrm{00,000}+8,\mathrm{00,000}}{2}$

$=\frac{14,\mathrm{00,000}}{2}$

$=7,\mathrm{00,000}$

$Fixed assets turnover ratio=\frac{35,\mathrm{00,000}}{7,\mathrm{00,000}}=5times$

Question 13.
Calculate gross profit ratio from the following:
Revenue from operations ₹ 2,50,000 Cost of revenue from operations ₹ 2,10,000 and purchases ₹ 1,80,000.

Answer Key:

$Gross profit ratio=\frac{Gross profit}{Revenue from operations}\times 100$

$Gross profit ratio=\frac{\mathrm{40,000}}{2,\mathrm{50,000}}\times 100$ =16%

 

Question 14.
Following is the statement of profit and loss of Padma Ltd. for the year ended 31^st March, 2018. Calculate the operating cost ratio.
Statement of Profit and Loss

Particulars	Note No	Amount ₹
I. Revenue from operations II. Other Income III. Total revenue(I+II) IV. Expenses:     Purchases of Stock-in-trade     Changes in inventories     Employee benefits expense(salaries)     Other expenses     Total expenses V. Profit before tax(III-IV)		15,00,000 40,000
		15,40,000
		8,60,000 40,000 1,60,000 1,70,000
		2,30,000
		3,10,000

Notes to Accounts

Particulars	Amount ₹
1. Other expenses      Office and administration expenses      Selling and distribution expenses      Loss on sale of furniture	50,000 90,000 30,000
	1,70,000

Answer Key:

$Operating cost ratio=\frac{Operating cost}{Revenue from operations}\times 100$

$\mathrm{Cost\; of\; revenue\; from\; operations\; =\; Purchases\; of\; stock-in-trade\; +\; Change\; in\; inventories\; of\; stock<br>=\; 8,60,000\; +\; 40,000\; =\; 9,00,000}$

$\mathrm{Operating\; expenses\; =\; office\; and\; administrative\; expenses\; +\; Selling\; and\; distribution\; expenses\; +\; Employee\; benefits\; expenses\; salaries<br>=\; 50,000\; +\; 90,000\; +\; 1,60,000\; =\; 3,00,000<br>Operating\; cost\; =\; Cost\; of\; revenue\; from\; operations\; +\; Operating\; expenses<br>=\; 9,00,000\; +\; 3,00,000<br>=\; 12,00,000}$

Question 15.
Calculate the operating profit ratio under the following cases.
Case 1: Revenue from operations ₹ 8,00,000, Operating profit ₹ 2,00,000.
Case 2: Revenue from operations ₹ 20,00,000, Operating cost ₹ 14,00,000.
Case 3: Revenue from operations ₹ 10,00,000, Gross profit 25% on revenue from operations, Operating expenses ₹ 1,00,000
Answer Key:$\mathrm{<b><span\; style="font-size:\; medium;"><math\; xmlns="http://www.w3.org/1998/Math/MathML"></math><span><mi><math\; xmlns="http://www.w3.org/1998/Math/MathML"><mo> </mo></math></mi></span></span></b>}$

Question 16.
From the following details of a business, concern calculate net profit ratio.

Particulars	₹
Revenue from operations Cost of revenue from operations Office and administration expenses Selling and distribution expenses	9,60,000 5,50,000 1,45,000 25,000

Answer Key:

Question 17.

From the following statement of profit and loss of Dericston Ltd. calculate

(1) Gross profit ratio
 (2) Net profit ratio.

Statement of Profit and Loss

Particulars	Note No	Amount ₹
I. Revenue from operations II. Other Income      Income on investment III. Total revenue(I+II) IV. Expenses:  Purchases of Stock-in-trade  Changes in inventories  Employee benefits expense   Other expenses  Provision for tax  Total expenses V. Profit before tax(III-IV)		24,00,000   70,000
		24,70,000
		18,80,000 -80,000 2,90,000  1,10,000 30,000
		22,30,000
		2,40,000

Answer Key:

$\mathrm{(1)\; G}ross profit ratio=\frac{Gross profit}{Revenue from operations}\times 100$

Question 18.

From the following trading activities of Rovina Ltd. calculate

(1) Gross profit ratio
(2) Net profit ratio
(3) Operating cost ratio
(4) Operating profit ratio

Statement of Profit and loss

Particulars	Amount ₹
I. Revenue from operations II. Other Income      Income from investment III. Total revenue(I+II) IV. Expenses: Purchases of Stock-in-trade Changes in inventories Finance cost Other expenses (Administration and selling) Total expenses V. Profit before tax(III-IV)	4,00,000   4,000
	4,04,000
	2,10,000 30,000 24,000 60,000
	3,24,000
	80,000

Answer Key:

Question 19.
Following is the extract of the balance sheet of Abdul Ltd., as on 31^st March, 2018:

Particulars	Amount ₹
I. EQUITY AND LIABILITIES 1. Shareholders' funds      (a) Share capital      (b) Reserves and surplus 2. Non-current liabilities     Long-term borrowings 3. Current liabilities   (a) Trade payables   (b) Other current liabilities   (c) Short-term provisions         Total	2,00,000 50,000   1,50,000   1,30,000 5,000 20,000
	5,55,000

Net profit before interest and tax for the year was ₹ 60,000. Calculate the return on capital employed for the year.

Answer Key:

Capital employed = Share capital + Reserves and surplus + Long term borrowings
= 2,00,000 + 50,000 + 1,50,000 = 4,00,000

$Return on capital employed=\frac{\mathrm{60,000}}{4,\mathrm{00,000}}\times \mathrm{100\; =15\%}$