Page 33 - DCOM409_CONTEMPORARY_ACCOUNTING

Contemporary Accounting

Notes
Example: Following is the comparative balance sheet of ABC Ltd. as on 31st December
2007 and 2008:
Comparative Balance Sheet

2007 2008
(`) (`)
Assets
Cash and receivables 2,00,000 2,60,000
Inventories (FIFO method) 1,50,000 1,30,000
Land 40,000 40,000
Equipment 2,10,000 2,70,000
Less: Accumulated depreciation (Nil) (24,000)
6,00,000 6,76,000
Liabilities and Capital
Current liabilities 80,000 90,000
Long-term liabilities 1,00,000 1,16,000
Equity share capital (` 10) 1,40,000 1,40,000
Share premium 2,80,000 2,80,000
Reserves and surplus (Nil) 50,000
Total 6,00,000 6,76,000

The income statement of the company for the year 2008 disclosed the following information:
Income Statement
For the year ending 31st Dec. 2008
Particulars (`) (`)
Net Sales 8,00,000
Less: Cost of goods sold:
Opening Inventories (FIFO) 1,50,000
Purchases (Net) 5,00,000
Cost of goods available for sale 6,50,000
Less: Closing inventory (FIFO) 1,30,000 5,20,000
Gross Profit 2,80,000

Less: Operating expenses (excluding depreciation) 96000
Depreciation 24000 120000
Profit before tax 1,60,000
Less: Income Tax 70,000
Profit after tax 90,000
Less: Dividend paid 40,000
Retained earnings 50,000

Equipment costing `60,000 was acquired on July 1, 2008 when the general price index was 157.5.
The amount of depreciation has been calculated as follows:

`
10% on ` 2,10,000 21,000
5% on ` 60,000 (Rate being 10% p.a.) 3,000
24,000

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