Raio Analy

on the basu

t cuer raho
2 Liaud ratio peaatng rah'o rab'o
3 Absolti DebbosTuoer
id 3

4 Deteaui'by raho tao

Tatfo
ANet prot ratio
A Roam Dn JWest
5- Expeee Ratio
6- Tterest Couoage 5 Retm on Capilal
catio

Uumeut Raio w n t Asseto

wnt abi ihes.

Falaue Quice ratio er) ad rauio s i t d asset1

(Atd ratio) Cunent LialsUBes
(Stock)

preçnd epeoa)
Asseti

Abtoute liquid Asati

Cah at bautt +
MalcetabL secu Nes
tock
Cost
(reben
sale Coss sales Net
ebun) -(Sales
sold Cost Sales-
gaes Net
prafc Cross tatio Goss
Rotio ooth Net b ft Net t1
patio ield biudauo a
Pato
Rato Shoe
@atioemgloyed opitel Retn 6
u Iwestot Pebm
on 6
Ratlo cpexaliug
ft
3
Ratio
Pahio
Ratto atahy
 opouting eatio bpeatua ost
nNot Sales

opeat ost ost 3god sld + Adt vas,

exgenses + seliug aud duti buto0
exp

Opoalinq pofit Pato

Net sales.

opeang oft. Net sals - qesating cost

(b1)
Cross progtt - peaing aponea

Non -

Net pot Ralio Nt pot Ate Tax

Net sale
Netprs' bdront e t
Tavebut X (00.

shauhddeu hnd
tor) ueteut
N pit Net poft - (intexaxt t Taxa)

Rosesues aud uples

acwlala osses
 atuaw capital emplayed.
Nt poft Ater TaX

(or)

Noa pogt Atex Taxes

ofore teest
apltal enploped
(or)
Nterest

g capital emplOr) Net apia

omployed.

emplayed :Total ays - Cumet Ùabikes

Na opital
employed opesing onpi ermp t clesg cap enp
Ava aupital
(oT)

Net cop emp*9progt otten tax

Basis of Cost Accounting Management Financial
Distinction Accounting Accounting
1. Meaning Cost Accounting is the Management Financial Accounting is
process of accounting Accounting refers to the the art of recording,
for costs, from the very application of the classifving, and
starting till the end of accounting principles summarising the

the reporting period. and financial monetary transactions

Reports are prepared at management to create, and events in amanner
the end of the period in mrOtact
protect, preserve and useful for the
order to ascertain where increas the value of an stakeholders to interpret
the cost can be reduced organization for its the results thereof
or controlled. stakeholders.
2. Nature It records quantitative Itrecords quantitative as It records quantitative
aspect only. well as qualitative aspects only.
aspects.
3. Objective It basically records the It is performned in order It is undertaken to
cost of producing8 a to help the management prepare Profit and Loss
product or providing a make decisions by Account and Balance
service in which the providing the relevant Sheet for presentation to
business primarily information. shareholders and other
deals. external users.
4. Recording of Data is recorded using It is focused on the It records Historical
Data both, past and present projection of data for the data.
figures. future.
5. Rules and It follows certain It does not follow any It follows Accounting
Regulations principles and specific rules and Principles, Accounting
Standards and Indian
procedures weulations.
for regt
Accounting Standards.
recording costs.
6. Development It developed after the t developed to address| It developed before al
industrial revolution the need of modern other forms of
business world accounting.
7. Users of It is generally used by The information It is used by
Information internal management accumulated through shareholders,
management accounting customers,
authoi
regulatory
used by owners, orities, etc
employees, Creditors,
researchers, etc.
 carrying thetheChat lite A
calculating depre 20
working 9n
unde ocks and tramways 15
carlier
gared
to
specifies
in 5
the
reciation depr ICAI As- servers and networks 6
State 7.19
oecified 10
sed AIcational institutions
pment 10
auic works, prp Sluices 15
ILLUSTRATIONS
Straightline method: [Fixed percentage on original cost]
IlHustration 1
Acompany purchased aplant for Rs. 50,000. The useful life ofthe plant is 10
vears and the residual value is Rs. 10,000. Find out the rate of depreciation under
the straightline method. Periyar, BBA, May 2006/
|Bharathidasan, B. Com, Nov. 2005|| [Madras, B. Com., Sept. 1986)
Solution:

Cost- Estimated Scrap Value

Amount of Depreciation
No. of years of expected life
50,000 - 10,000
= Rs. 4,000
10 years

Rate of Depreciation = Depreciation x 100

Originalcost of Plant
4,000
x 100 = 8%
50,000
Illustration 2
Amachine purchased on 1st July
was spent on its 1983 at a cost of Rs. 14.000 and Rs. 1,00O
original cost everyinstaliation.
year.
The depreciation is written off at 10% on the
machine was sold for Rs. The
9.500
books are closed on 31st December each year. The
on 31st March 1986.
for all the years. the account
Show machinery
|Madras, BCom (CS) (New) Nov. 2008; (1/2 Figs) BCom(PZA)
Nov 2004: (PZIA) Nov 2003,
BCom Semester) Nov. 2003; Bharathiar BBM Nov 2003|
 22,500 ,500
1-1-97 By Balance b/d 7,500

Working note:
Machinery
Calculation ofLoss on sale of Rs.
50,000
Cost of Machinery on 1-1-95 to 1-7-96) 15,000
Less: Depreciation for years (i.e., from 1-1-95

Book value on 1-7-96 35,000

Less: Sale proceeds 20,000

Loss on sale 15,000

Diminishing Balance Method /Written Down Value Method

lustration 6
Acompany purchased a plant for Rs. 10,000. It is expected that its useful life
will be 3years andsalvage value Rs. 1,000. You are required to determine the rate
of depreciation and amount of depreciation to be provided in the first year as per
written down value method. [Madras, B.Com. Sept. 1990|
Solution:
where n :The expected useful life in years
s: The residual value
c:The acquisition cost
r:The rate of depreciation to be applied.
1,000

r=l-i10,000
1
=l-=l-,2.154 =l-464 =0.536
103
Rate of depreciation =0536>x 100 = 53.6%

x5360
Amount of depreciation = 10,000 100