Page 269 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Accounting for Companies-I

Notes Working Note:
1. Time Ratio:
Pre-incorporation period (from 1.10.2009 to 31.12.2009) = 3 months.
Post-acquisition period (1.1.2010 to 30.9.2010) = 9 months

Time ratio = 3 : 9 or 1:3
2. Sales Ratio 6,000 : 19,000 or
6 : 19
3. Assume ratio of cost of sales to sales in pre-acquisition period is x.

Ratio of cost of sales to sales in post-acquisition period will be
10x 9x
x  
100 10
According to question – The total cost of sales in the two periods will be:

9x
6,000x : 19,000 
10
6,000x : 17,100x
Thus, Cost of Sales Ratio will be 60 : 171

Statement showing Pre-incorporation and Post-incorporation
Profit for the year 2010
Pre-incorporation Post-incorporation
Particulars Basis of allocation

Sales
Less: Cost of sales Actual 6,000 19,000
(60:171) 4,156 11,844
1,844 7,156
Less: Administration Exps Time 442 1,326
Selling Commission Turnover 210 665
Goodwill written off — — 200
Interest to vendors (Time) 3 : 1 280 93
Distribution Expenses:
40% Fixed Time 125 375
60% Variable Turnover 180 570
Preliminary Expenses — — 330
Debenture Interest — — 320
Depreciation Time 111 333
Directors’ Fees — — 100
Net Profit 496 2,844

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requirements of the rural sector.

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