Dheer & Co., a sole proprietary Chartered Accountancy firm, has its office in a busy commercial area of the city. Since a substantial number of…

As per section 27 of the Chartered Accountants Act, 1949 if a chartered accountant in practice has more than one office in India, each one of these offices should be in the separate charge of a member of the Institute. However, a member can be in charge of two offices if the second office is located in the same premises or in the same city, in which the first office is located; or the second office is located within a distance of 50 kilometers from the municipal limits of a city, in which the first office is located. Further a member having two offices of the type referred to above, shall have to declare which of the two offices is his main office, which would constitute his professional address. In the present case, Dheer & Co., a sole proprietary Chartered Accountancy firm in practice with an office in a busy belt of a city and had great difficulty in regularly attending to the consultancy needs of his clients. Therefore, a facilitation centre was opened in the industrial cluster and the proprietor is managing both the office and facilitation centre. The facilitation centre at the industrial cluster is situated 26 kilometres from CA Dheer's existing office. Therefore, the distance is within the prescribed limit of 50 kilometres, and he may be in charge of both offices himself. However, he is required to comply with the prescribed requirement of intimating the Institute regarding the offices and declaring which of them is his main office/professional address. Since CA Dheer has not made the requisite intimation to the Institute and has also not declared his main office, he would be liable for professional misconduct in this respect. OR / Alternative Solution: To investigate the profitability of the business for judging the accuracy of the schedule of repayment furnished by the borrower, as well as the value of the security in the form of assets of the business already possessed and those which will be created out of the loan, the investigating accountant should take the under-mentioned steps: (I) Prepare a condensed income statement from the Statement of Profit and Loss for the previous five years, showing separately therein various items of income and expenses, the amounts of gross and net profits earned, and taxes paid annually during each of the five years. The amount of maintainable profits determined on the basis of foregoing statement should be increased by the amount by which these would increase on the investment of borrowed funds. (II) Compute the under-mentioned ratios separately and then include them in the statement to show the trend as well as changes that have taken place in the financial position of the company: (i) Sales to Average Inventories held. (ii) Sales to Fixed Assets. (iii) Equity to Fixed Assets. (iv) Current Assets to Current Liabilities. (v) Quick Assets (the current assets that are readily realisable) to Quick Liabilities. (vi) Equity to Long Term Loans. (vii) Sales to Book Debts. (viii) Return on Capital Employed. (III) Enter in a separate part of the statement the break-up of annual sales product-wise to show their trend.