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Question 33 of 43
Q.
  1. Durai and Velan entered into a partnership agreement on 1st April 2018. Durai contributing ₹ 25,000 and Velan ₹ 30,000 as capital. The agreement provided that :
    1. Profits and losses to be shared in the ratio 2 : 3 as between Durai and Velan.
    2. Partners to be entitled to get interest on capital @ 5% p.a.
    3. Interest on drawings to be charged Durai : ₹ 300 Velan : ₹ 450.
    4. Durai to receive a salary of ₹ 5,000 for the year, and
    5. Velan to receive a commission of ₹ 2,000. During the year, the firm made a profit of ₹ 20,000 before adjustment of interest, salary and commission. Prepare the Profit and Loss appropriation account. OR
  2. From the following Balance Sheet of Arunan Ltd., as on 31.03.2019, calculate (i) Debt-equity ratio (ii) Proprietary ratio and (iii) Capital gearing ratio. Balance sheet of Arunan Ltd., as on 31.03.2019
Particulars₹
I. EQUITY AND LIABILITIES
1. Shareholders' funds
(a) Share Capital
Equity Share Capital1,50,000
8% Preference Share Capital2,00,000
(b) Reserves and Surplus1,50,000
2. Non-Current Liabilities
Long term borrowings (9% Debentures)4,00,000
3. Current Liabilities
(a) Short-term borrowings from banks25,000
(b) Trade payables75,000
Total10,00,000
II. ASSETS
1. Non-current Assets
Fixed Assets7,50,000
2. Current Assets
(a) Inventories1,20,000
(b) Trade receivables1,00,000
(c) Cash and cash equivalents27,500
(d) Other Current Assets — Expenses paid in advance2,500
Total10,00,000
Puducherry TnboardTamil Nadu HSC (DGE) Commerce Board 2024Subjective· 5mImportance★★★★★
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(a) After all appropriations, ₹11,000 is shared 2:3 → Durai ₹4,400, Velan ₹6,600. (b) Debt-Equity 0.8:1, Proprietary 0.5:1, Capital gearing 2:1.

(a) Profit and Loss Appropriation A/c — Durai and Velan (year ended 31.3.2019)

Interest on capital: Durai 25,000 × 5% = ₹1,250; Velan 30,000 × 5% = ₹1,500. Interest on drawings (Durai 300, Velan 450) is added back as an income of the firm.

Particulars₹Particulars₹
To Interest on capital:By Profit and Loss A/c (net profit)20,000
— Durai1,250By Interest on drawings:
— Velan1,500— Durai300
To Salary — Durai5,000— Velan450
To Commission — Velan2,000
To Share of profit:
— Durai (2/5)4,400
— Velan (3/5)6,600
Total20,750Total20,750

Distributable profit = 20,750 − (2,750 + 5,000 + 2,000) = ₹11,000; shared 2:3 → Durai ₹4,400, Velan ₹6,600.

(b) Ratios — Arunan Ltd. (as on 31.3.2019)

Shareholders' funds = Equity 1,50,000 + 8% Preference 2,00,000 + Reserves 1,50,000 = ₹5,00,000. Long-term debt (9% Debentures) = ₹4,00,000. Total assets = ₹10,00,000.

(i) Debt-Equity Ratio = Long-term Debt ÷ Shareholders' funds

=4,00,0005,00,000=0.8:1= \frac{4{,}00{,}000}{5{,}00{,}000} = 0.8 : 1

…

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