From the following information and ratios, PREPARE the Balance Sheet as on 31 st March 2023 and Income Statement for the year ended on that date for…

Division A: Descriptive Questions 1. Gross Profit = 1,20,000 Gross Profit Margin = 40% ∴ Sales = Gross Profit / Gross Profit Margin = 1,20,000 / 0.40 = 3,00,000 Net profit (PBT) = 3,00,000 x 10% = 30,000 PBIT/PBT = 2 PBIT = 2 x 30,000 PBIT = 60,000 Interest = 60,000 – 30,000 = 30,000 Credit Sales to Total Sales = 80% ∴ Credit Sales = 3,00,000×0.80 = 2,40,000 Total Assets Turnover = 0.4 times ∴ Total Assets = Sales / Total Assets Turnover = 3,00,000 / 0.4 = 7,50,000 Inventory turnover = 5 times Inventory = Sales / Inventory turnover = 3,00,000 / 5 = 60,000 Average Collection Period = 30 days ∴ Debtors turnover = 360 / Average Collection Period = 360/30 = 12 ∴ Debtors = Credit Sales / Debtors turnover = 2,40,000 / 12 = 20,000 Current ratio = 2 2 = Debtors + Inventory + Cash (Current Assets) / Creditors (Current Liabilities) 2 Creditors = (₹ 20,000 +60,000 + Cash) 2 Creditors = 80,000 + Cash .......... (i) Long-term Debt to Equity = 40% Shareholders' Funds (Equity) = 5,00,000 ∴ Long-term Debt = 5,00,000 × 40% = 2,00,000 Creditors = Total Assets – (Shareholder's fund + Long term debt) = 7,50,000 – (5,00,000 + 2,00,000) = 50,000 ∴ Cash = (₹ 50,000×2) - 80,000 = 20,000 [From equation (i)] Income Statement (₹) Sales 3,00,000 Less: Cost of Goods Sold 1,80,000 Gross Profit 1,20,000 Less: Operating Expenses 60,000 PBIT 60,000 Less: Interest 30,000 Net Profit 30,000 Balance Sheet Liabilities ₹ Assets ₹ Equity share capital 5,00,000 Fixed asset (bal. fig.) 6,50,000 Long term debt 2,00,000 Current assets: Current liability 50,000 Stock 60,000 Receivables 20,000 Cash 20,000 1,00,000 7,50,000 7,50,000