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4.24 Management Accounting (Section B)—ISC XII

Subscribed Capital
Subscribed and fully paid-up
12,500 Equity Shares of ` 10 each 1,25,000
600, 8% Preference Shares of ` 100 each 60,000
1,85,000
2. Reserves and Surplus
(a) General Reserve:
Transferred from Surplus, i.e., Balance in Statement of Profit and Loss 25,000
(b) Surplus, i.e., Balance in Statement of Profit and Loss:
Opening Balance 7,250
Add: Profit for the Year 98,000
1,05,250
Less: Appropriations:
Transfer to General Reserve 25,000
80,250
Total (a + b) 1,05,250
3. Long-term Borrowings
400, 8% Debentures of ` 100 each 40,000
4. Short-term Provisions
Provision for Tax 42,000
5. Fixed Assets (Tangible)
Plant and Machinery 3,04,350
6. Cash and Bank Balances
Cash at Bank 17,250
Cash in Hand 3,650
20,900
7. Change in Inventories of Stock-in-Trade
Opening Inventories 24,000
Less: Closing Inventories 35,000
(11,000)
Additional Information:
(i) Trade Receivables on 1st April, 2019: ` 54,000.
(ii) Credit Revenue from Operations: 60% of Total Revenue from Operations.
(iii) Provide for Income Tax @ 30%.
Solution:
Cost of Revenue from Operations (Cost of Goods Sold)
(i) Inventory Turnover Ratio =
Average Inventory
` 3,15,000
= = 10.68 Times.
` 29,500
Cost of Revenue from Operations (Cost of Goods Sold)
= Purchases of Stock-in-Trade + Change in Inventories of
Stock-in-Trade

= ` 3,26,000 – ` 11,000 = ` 3,15,000.
Average Inventory = (Opening Inventories + Closing Inventories)/2
= (` 24,000 + ` 35,000)/2 = ` 29,500.