Calculate the gross profit ratio and operating profit ratio

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Financial Accounting and Analysis
Question 1

You visited Subway that s the fast food restaurant to purchase a Combo worth Rs 499. The restaurant paid for the raw material and utilities amounting Rs105 for each sale. In addition to that, the restaurant also paid for certain expenses in cash in total Rs 50 per sale.

Discuss how these financial transactions will be recorded by way of journal entry, and

also, discuss the various stages of the whole accounting process. (10 Marks)

Question 2

The Companies Act 1956 was the first Act which governs the various Companies registered in India. However, in the year 2013, the Act was amended holistically to bring more transparency in terms of accountability, presentation and disclosure aspects in relation to various financial information of a company.

However one of your friend is of the opinion that there is only one difference between the two Act , that is , the presentation of financial statements , previously it was governed by Schedule VI and now Schedule III governs it.

Now, you are assigned with the task of convincing your friend that there is a huge difference between the two Acts, by briefing him on atleast five other points of differences

between the two. (10 Marks)

Question 3

The following information pertains to the Income statement of Beta Ltd.

revenue generated from sales 1258000
closing stock 102500
profit on sale of securities 25540
Opening stock 50000
purchase of raw material 500000
direct expenses 150000
manufacturing expenses 67550
administrative expenses 68420
depreciation 15840
preliminary expenses written
off 4700
selling and distribution 45000

expenses

loss on sale of machinery 15000
interest on loan 46510
Taxes paid 25500
Earnings Before Interest &
Taxes (EBIT) ?

a. Redraft the information in the vertical form of Income statement and also, calculate

Earnings After Taxes (EAT ) (5 Marks)

b. Calculate the gross profit ratio and operating profit ratio. Discuss, how they differ

from each other? (5 Marks)

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