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A_Team
A_Team
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  2. Ayushi Curious Pursuing CA

    The partnership act 1932 does not mention the types of partners specifically. It does have mentions of ‘partner who is minor’ in section 30 and ‘partner by holding out in section 28. But we do come across many types of partners in partnership firms. Following is the list of the types of partners weRead more

    The partnership act 1932 does not mention the types of partners specifically. It does have mentions of ‘partner who is minor’ in section 30 and ‘partner by holding out in section 28.

    But we do come across many types of partners in partnership firms. Following is the list of the types of partners we generally see:-

    1. Active partner: – It is the partner who provides the capital and is also actively involved in the management and daily activities of the firm. Such a type of partner is of utmost importance to the firm. Apart from a share in profit and loss, he is also eligible to draw remuneration from the firm.

     

    1. Sleeping/ Dormant partner: – This type of partner does not participate in the daily workings of the firm nor actively participates in the management of the firm. Such a type of partner has a large sum of capital invested in the firm and shares the profits as well as losses of the firm.

     

    1. Partner by holding out:- If any partner, who by his words or by his conduct, represents himself as a partner of a firm, then he is called a partner by holding out. Such a partner is actually not a partner of the firm and doesn’t receive any share of profit as he has contributed no capital.

    As per section 28, such a partner is liable to any person who has given credit to the firm on             the belief that he is a partner of the firm.

     

    1. Minor partner: – If any person who is less than 18 years of age is admitted into the firm, such partner is known as a minor partner. Such a partner is entitled to the profits of the firm based on his capital but is immune from losses suffered by the firm.

     

    1. Secret partner: – It is a partner of a firm whose membership is kept hidden from the outsiders such as creditors and other third parties. But he is equally liable as other partners for the outside liabilities.

     

    1. Outgoing partner: – A partner who voluntarily leaves the partnership without dissolving the firm is called an outgoing partner or retiring partner. Such a partner is liable to all liabilities incurred before his retirement. But he can be held liable to outside liabilities if he fails to give public notice of his retirement.

     

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A_Team
A_Team
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a) Current Liability b) As an appropriation of profits c) Either a or b d) None of the above

  2. AbhishekBatabyal Helpful Pursuing CA, BCOM (HONS)

    The correct option is (d) None of these. AS-3(Revised) deals with the preparation and presentation of cash flow statements. A cash flow statement is a statement that summarises the movement of cash and cash equivalents of an enterprise in an accounting year. It helps the stakeholder to know: the amoRead more

    The correct option is (d) None of these.

    AS-3(Revised) deals with the preparation and presentation of cash flow statements. A cash flow statement is a statement that summarises the movement of cash and cash equivalents of an enterprise in an accounting year. It helps the stakeholder to know:

    • the amount of cash generated by operating activities,
    • amount of cash invested in various assets or sale of assets,
    • the types of finance source utilised by an enterprise and
    • the net cash flow of the business.

    Provision for depreciation is actually a charge on profit, i.e. it will be deducted even if there is loss. Also, there is nothing mentioned in the AS-3(revised) from which we can consider the provision for tax as an appropriation of profit.

    Generally, the cash flow statement is prepared as per the ‘indirect method’ by most enterprises.

    As per the indirect method, the computation starts from Net Profit before tax and extraordinary items. To calculate this, we have to take the current year’s profit and add the current year’s provision for tax to it.

    The reason behind it is that we need to obtain the cash flow from operations and the provision for tax is a non-cash item that has reduced the net profit. So, we have to add it back to the current year’s profit.

     

    Option (A) Current Liabilities is wrong.

    Though the provision for tax is classified as a current liabilities in the balance sheet, it is not considered as a current liability when making adjustments for changes in working capital while preparing cash flow statement.

     Option (B) as appropriation of profit is wrong.

    An appropriation of profit is an item for which an amount is put aside when there is profit. For example, transfer to reserves. But the provision for tax is a charge on profit.

    Option (C) either (A) or (B) is also wrong because both the options are incorrect as discussed above.

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Jayesh Gupta
Jayesh GuptaCurious
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  2. PriyanshiGupta Graduated, B.Com
    This answer was edited.

    A Cash Flow Statement analyzes the effect of various activities in the company on cash and, that is, it shows the inflow and outflow of cash and cash equivalents. A Fund Flow Statement analyzes the financial position of a company by the inflow and outflow of funds. Both the statements are financialRead more

    A Cash Flow Statement analyzes the effect of various activities in the company on cash and, that is, it shows the inflow and outflow of cash and cash equivalents.

    A Fund Flow Statement analyzes the financial position of a company by the inflow and outflow of funds.

    Both the statements are financial statements and are used to analyze the financial performance of the company of two different reporting periods. Both the statements record the inflow and outflow of cash or funds, as the case may be.

    The primary objective of preparing a Cash Flow Statement is to gain an understanding of the changes in the net working capital of the company and to classify the activities in the company under three different heads which helps in better analysis of Financial Statements for management, outsiders, and investors.

    The primary objective of preparing a Fund Flow Statement is to track the movements of funds in the company, as the extent of use of long-term and short-term borrowings, frequency of their procurement, its application, etc.

    The components of the Cash Flow Statement are:

    • Cash Flow from Operating Activities- activities concerning the regular business operations and working capital are classified under this head.
    • Cash Flow from Investing Activities- investment in long-term assets or sale of such assets are considered under this head.
    • Cash Flow from Financing Activities- borrowings that a company makes to fund its operations, their interest payment, and repayment are covered under this head.

    The components of the Fund Flow Statement are:

    Sources of Funds:

    • Owners
    • Outsiders

    Application of Funds:

    • Funds deployed in Fixed Assets
    • Funds deployed in Current Assets

    A sample format of the Cash Flow Statement will be:

    Particulars Amount
    Cash Flow from Operating Activities XXX
    Cash Flow from Investing Activities XXX
    Cash Flow from Financing Activities XXX
    Net Increase (Decrease) in Cash and Cash Equivalents XXX
    Cash and Cash Equivalents at the beginning XXX
    Cash and Cash Equivalents at the end XXX

    A sample format of the Fund Flow Statement will be:

    Particulars Amount
    Sources of Funds XXX
    Funds from Operations XXX
    Sale of Fixed Assets XXX
    Issue of Shares XXX
    Issue of Debentures XXX
    Long Term Borrowings XXX
    Total (A) XXX
    Application of Funds XXX
    Loss from Operations XXX
    Payment of Tax XXX
    Repayment of Loan XXX
    Redemption of Debentures XXX
    Redemption of Preference Shares XXX
    Total (B) XXX
    Net Increase (Decrease) in Working Capital XXX

    To conclude the difference between Fund Flow and Cash Flow Statement will be:

    Cash Flow Statement Fund Flow Statement
    Record of inflow and outflow of cash. Record of sources and application of funds.
    Prepared to analyze cash used in various activities. Prepared to track the movement of funds and their applications.
    Components include:

    • Operating Activities
    • Investing Activities
    • Financing Activities
    		 Components include:

    ·       Sources of Funds

    ·       Application of Funds

     

     

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Aadil
AadilCurious
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  2. Pooja_Parikh Aspiring Chartered Accountant
    This answer was edited.

    A cash flow statement presents the changes in the cash and cash equivalents of a business. It classifies the cash flow items into either operating, investing, or financing activities. The cash flow statement provides information about the flow of cash over a period of time. General reserve is a reseRead more

    A cash flow statement presents the changes in the cash and cash equivalents of a business. It classifies the cash flow items into either operating, investing, or financing activities. The cash flow statement provides information about the flow of cash over a period of time.

    General reserve is a reserve created by taking a portion of the profits for future requirements.

    TREATMENT OF GENERAL RESERVE

    As per the indirect method, Since there is no actual flow of cash, any addition to reserves is added back to net profit for calculation of net profit before tax and extraordinary items. This net profit before tax will appear under cash flow from operating activities. If there is a reduction in reserve, then they are subtracted from net profit.

    As per the Direct method, an increase or decrease in general reserve will not affect the cash flow statement since non-cash items are not recorded. Only cash receipts and payments that come under operating activities are recorded. So, net profit is not shown in the direct method and hence neither is general reserve.

    General reserve does not fall under the head investing activities as investing activities involve the acquisition or disposal of long-term assets or investments. They do not fit in financing activities either as financing activities relate to change in capital or borrowings of the company.

    EXAMPLE

    If the balance in general reserve for the period of March was Rs 4,000 and in April the balance was Rs 7,000, then its treatment in cash flow would be:

     

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Jasmeet_Sethi
Jasmeet_SethiCurious
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  2. GautamSaxena Curious .
    This answer was edited.

    Sundry Debtors in Trial Balance The debtor is a company's asset, and assets are always debited in the trial balance. The trial balance is a statement maintained at the end of an accounting period, listing the ending balances in each general ledger account. There are two sides to this account, debit,Read more

    Sundry Debtors in Trial Balance

    The debtor is a company’s asset, and assets are always debited in the trial balance.

    • The trial balance is a statement maintained at the end of an accounting period, listing the ending balances in each general ledger account.
    • There are two sides to this account, debit, and credit and they include all the transactions done in the business over a particular accounting period.

     

    As we know, assets, expenses, and drawings are always debited. That applies not only in journals but here as well, hence, all of your assets are to be debited.

    Trial Balance Statement

     

    As we can see here, the sundry debtors (on the 4th) are debited like all the other assets, expenses, and losses. In the end, if the basic accounting equation i.e. assets=capital+liability is violated, a mismatch arises which in the balancing figure is shown under the name of suspense account. Such errors must not be found and corrected to avoid any mismatch in the balance sheet of the company.

    Total Assets = Capital + Other Liabilities.

    Therefore, this is how the sundry debtors are treated in the Trial Balance.

     

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Bonnie
BonnieCurious
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  2. A_Team (MBA - Finance Student) ISB College

    Profitability ratios measure how profitable a company is and are used to assess its performance and efficiency. Based on the income statement and balance sheet of a company, these ratios are calculated. In terms of profitability ratios, there are several types, each providing a different viewpoint.Read more

    Profitability ratios measure how profitable a company is and are used to assess its performance and efficiency. Based on the income statement and balance sheet of a company, these ratios are calculated.

    In terms of profitability ratios, there are several types, each providing a different viewpoint.

    The following are some common profitability ratios:

    Gross profit margin: This ratio measures the percentage of revenue that remains after the cost of goods sold has been deducted. Producing and selling efficiently is indicated by this metric.

    Net profit margin: An organization’s net profit margin is the portion of revenue left after all expenses have been deducted. A company’s profitability is measured by this indicator.

    Return on assets (ROA): This ratio measures how profitable a company’s assets are. In other words, it indicates how effectively a company generates profits from its assets.

    Return on equity (ROE): This ratio measures the profitability of a company’s equity. It shows how effectively a company generates profits from its shareholders’ investments.

    Analysts and investors use profitability ratios to evaluate a company’s performance and profitability ability.

    An investor or analyst can evaluate a company’s relative strength and identify potential opportunities or risks by comparing its profitability ratios with its peers or its industry averages.

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