Solution for Q 71 to 80 of Chapter 4 of Book 3 - Analysis of Financial Statements of T S Grewal Class 12 Accountancy 2026-27 are given below. The Chapter name is Ratio Analysis class 12. These Solutions are based on topics solvency ratios which includes debt to capital employed and then turnover ratios which include inventory turnover ratio, finding opening and closing inventory
Working notes are given with each solution. These help in understanding the steps and are also important for board exams as marks are given for steps.Debt equity ratio is a key ratio is finfing the long term solvency of any business and is critical business health parameter. A higher debt equity ratio is generally considered unhealthy for business as it indicates higher dependency on external funds and future solvency problems may arise.
These solutions are also useful for CA Foundation, CS Foundation and CMA Foundation students. The solutions will be helpful for students as well as teachers teaching class 12 accounts.
Question 71
| Step 1 | |||||
| Debt | = | Long Term Borrowings | |||
| = | 1200000 | ||||
| Step 2 | |||||
| Capital | = | Shareholders | + | Long Term | |
| Employed | Funds | Borrowings | |||
| = | 2400000 | + | 1200000 | ||
| = | 3600000 | ||||
| Step 3 | |||||
| Debt to | = | Debt | / | Capital Employed | |
| Capital Employed | |||||
| = | 1200000 | / | 3600000 | ||
| = | 0.33:1 | ||||
▶ Video Solution: Coming Soon
Question 72
| Step 1 | ||||||
| Debt | = | 9% Debentures | + | 8% Public Deposits | + | Long Term Provisions |
| = | 200000 | + | 500000 | + | 200000 | |
| = | 900000 | |||||
| Step 2 | ||||||
| Capital | = | Equity Share | + | Reserves & | + | Debt |
| Employed | Capital | Surplus | ||||
| = | 800000 | + | 500000 | + | 900000 | |
| = | 2200000 | |||||
| Step 3 | ||||||
| Debt to | = | Debt | / | Capital Employed | ||
| Capital Employed | ||||||
| = | 900000 | / | 2200000 | |||
| = | 0.41:1 | |||||
▶ Video Solution: Coming Soon
Question 73
| Step 1 | ||||
| Debt | = | 8% Debentures | ||
| = | 3600000 | |||
| Step 2 | ||||
| Capital | = | 8700000 | ||
| Employed | ||||
| Step 3 | ||||
| Debt to | = | Debt | / | Capital Employed |
| Capital Employed | ||||
| = | 3600000 | / | 8700000 | |
| = | 0.41:1 | |||
▶ Video Solution: Coming Soon
Question 74
| Step 1 | ||||
| Debt | = | Non Current Liabilities | ||
| = | 3750000 | |||
| Step 2 | ||||
| Capital | = | Shareholders | + | Non Current |
| Employed | Funds | Liabilities | ||
| = | 5000000 | + | 3750000 | |
| = | 8750000 | |||
| Step 3 | ||||
| Debt to | = | Debt | / | Capital Employed |
| Capital Employed | ||||
| = | 3750000 | / | 8750000 | |
| = | 0.43:1 | |||
▶ Video Solution: Coming Soon
Question 75
| Step 1 | ||||
| Current | = | Current | - | Working Capital |
| Liabilities | Assets | |||
| = | 2500000 | - | 500000 | |
| = | 2000000 | |||
| Step 2 | ||||
| Long Term | = | Total | - | Current |
| Debts | Debts | Liabilities | ||
| = | 6000000 | - | 2000000 | |
| = | 4000000 | |||
| Step 3 | ||||
| Total | = | Current | + | Non Current |
| Assets | Assets | Assets | ||
| = | 2500000 | + | 9500000 | |
| = | 12000000 | |||
| Step 4 | ||||
| Total | = | Total | ||
| Liabiities | Assets | |||
| = | 12000000 | |||
| Step 5 | ||||
| Capital | = | Total | - | Current |
| Employed | Liabilities | Liabilities | ||
| = | 12000000 | - | 2000000 | |
| = | 10000000 | |||
| Step 6 | ||||
| Debt to | = | Debt | / | Capital Employed |
| Capital Employed | ||||
| = | 4000000 | / | 10000000 | |
| = | 0.4:1 | |||
▶ Video Solution: Coming Soon
Question 76
| Step 1 | |||||||||
| Debt | = | 9% Loan from IDBI | |||||||
| = | 3000000 | ||||||||
| Step 2 | |||||||||
| Capital | = | Preference | + | Equity | + | Reserves & | + | Debt | |
| Employed | Shares | Shares | Surplus | ||||||
| = | 500000 | + | 1500000 | + | 200000 | + | 3000000 | ||
| = | 5200000 | ||||||||
| Step 3 | |||||||||
| Debt to | = | Debt | / | Capital Employed | |||||
| Capital Employed | |||||||||
| = | 3000000 | / | 5200000 | ||||||
| = | 0.58:1 | ||||||||
▶ Video Solution: Coming Soon
Question 77
| Step 1 | ||||||
| Debt | = | Long term Borrowings | + | Long Term Provisions | ||
| = | 1800000 | + | 600000 | |||
| = | 2400000 | |||||
| Step 2 | ||||||
| Debt to | = | 2:1 | ||||
| Equity Ratio | ||||||
| 2 | = | Debt | / | Equity | ||
| 2400000 | / | Equity | ||||
| Equity | = | 2400000 | / | 2 | ||
| = | 1200000 | |||||
| Step3 | ||||||
| Capital | = | Equity | + | Debt | ||
| Employed | ||||||
| = | 1200000 | + | 2400000 | |||
| = | 3600000 | |||||
| Step 3 | ||||||
| Debt to | = | Debt | / | Capital Employed | ||
| Capital Employed | ||||||
| = | 2400000 | / | 3600000 | |||
| = | 0.67:1 | |||||
▶ Video Solution: Coming Soon
Question 78
| Debt to Capital Employed | 0.4:1 |
| We assume the ratio to be 4:10 | ||||||||||
| Each transaction will be assumed to be of Rs 1 | ||||||||||
| Journal entries given here only for understanding the transaction and its impact | ||||||||||
| (i) | Journal Entry | |||
| Bank A/c Dr.. | ||||
| Profit and Loss A/c | ||||
| To Machinery A/c | ||||
| Debt to Capital Employed | 4 : 9 | = | 0.44:1 | |
| Debt to Capital employed | Increase | |||
| (ii) | Journal Entry | |||
| Inventory A/c (Purchases ) Dr.. | Current Assets | |||||||||
| To Creditors A/c | Current Liabilities |
| Debt to Capital Employed | same |
| Debt to Capital Employed | No Impact |
| None : As none of the accounts debited and credited is impacting | ||||||||||
| Either Debt or capital employed |
| (iii) | Journal Entry |
| Debentures A/c Dr.. | Current Liability | |||||||||
| To Equity Shares A/c | Capital Employed | Increase |
| Debt to Capital Employed | 4 : 11 | = | 0.36:1 |
| Debt to Capital Employed | Decrease | ||
| Note : Since the debentures are converted in current year, it means these were | ||||||||||
| redeemable within 12 months. Hence these are considered as part of current liabilities |
| (iv) | Journal Entry |
| Fixed Assets A/c Dr.. | 400000 | |||||||||
| To Long Term Loans A/c | 400000 | Debt | Increase |
| Debt to Capital Employed | 5 : 11 | = | 0.5:1 |
| Debt to Capital Employed | Increase | ||
| Note : Deferred basis means loan. So Loan term deferred basis means Long term loan | |||
▶ Video Solution: Coming Soon
Question 79
| Step 1 | |||||||
| Average | = | (Opening Inventory | + | Closing Inventory) | / | 2 | |
| Inventory | 250000 | + | 350000 | ||||
| = | 300000 | ||||||
| Step 2 | |||||||
| Inventory Turnover | = | Cost of Goods Sold | / | Average Inventory | |||
| Ratio | 900000 | / | 300000 | ||||
| = | 3 | Times | |||||
▶ Video Solution: Coming Soon
Question 80
| Note : Here first we have to find the value of closing inventory from the given information |
| Step 1 | |||||||
| Cost of Goods Sold | = | Opening Inventory | + | Purchases | - | Closing Inventory | |
| 500000 | = | 100000 | 550000 | CI | |||
| Closing Inventory | = | Opening Inventory | + | Purchases | - | Cost of Goods Sold | |
| 100000 | 550000 | 500000 | |||||
| = | 150000 | ||||||
| Step 2 | |||||||
| Average Inventory | = | (Opening Inventory | + | Closing Inventory) | / | 2 | |
| 100000 | + | 150000 | |||||
| = | 125000 | ||||||
| Step 3 | |||||||
| Inventory Turnover | = | Cost of Goods Sold | / | Average Inventory | |||
| Ratio | 500000 | / | 125000 | ||||
| = | 4 | Times | |||||
▶ Video Solution: Coming Soon