In this article we will discuss about the standard of comparison of ratios and projection of future through ratios. Standard of Comparison: The ratio analysis involves comparison for useful interpretation of the financial statements. Interpretation of financial statements of a firm with the help of ratios becomes significant and meaningful. The ratios should be compared […]

# Archive | Accounting

## Classification of Combined Ratios | Accounting

In this article we will discuss about the classification of combined ratios in accounting. They are:- 1. Activity Ratios or Turnover Ratios 2. Profit Cover Ratios. 1. Activity Ratios or Turnover Ratios: This category of ratios includes those ratios, which highlight upon the activity and operational efficiency of the business concern. The funds of creditors […]

## Profitability Ratios and it’s Categories | Accounting

The profitability of the firm is also measured in relation to investments. The term investment may refer to total assets, capital employed or the owners’ equity. The efficiency of an enterprise is judged by the amount of profits. But sometimes the conclusion drawn on the basis of profit-to- sales ratios may be misleading. Because it […]

## Classification of Profit and Loss Account Ratios | Accounting

In this article we will discuss about the classification of profit and loss account ratios in accounting. They are:- 1. Gross Profit Ratio 2. Operating Ratios 3. Expenses Ratio 4. Net Profit Ratio. 1. Gross Profit Ratio: The Gross Profit Ratio is also known as Gross Margin Ratio, Trading Margin Ratio etc. It is expressed […]

## Ratio Analysis: Problems and Solutions | Accounting

Here is a compilation of top thirteen accounting problems on ratio analysis with its relevant solutions. Problem 1: The following is the Balance Sheet of a company as on 31st March: Problem 2: From the following particulars found in the Trading, Profit and Loss Account of A Company Ltd., work out the operation ratio of […]

## Importance of Ratio Analysis | Accounting

The importance of ratio analysis are:- 1. Aid to Measure General Efficiency 2. Aid to Measure Financial Solvency 4. Facilitate Decision-Making 5. Aid in Corrective Action 6. Aid in Intra Firm Comparison 7. Act as a Good Communication 8. Evaluation of Efficiency 9. Effective Tool 10. Detection of Unfavourable Factors. 1. Aid to Measure General […]

## Limitations of Ratio Analysis | Accounting

Some of the limitations of the ratio analysis are:- 1. Differences in Definitions 2. Limitations of Accounting Records 3. Lack of Proper Standards 4. No Allowances for Price Level Changes 5. Changes in Accounting Procedure 6. Qualitative Factors are Ignored 7. Limited Use of Single Ratio 8. Background is Overlooked 9. Limited Use 10. Personal […]

## Double Entry System and Double Account System | Accounting

The upcoming discussion will update you about the difference between double entry system and double account system. Difference # Double Entry System: 1. Annual Account consists of: (a) Profit and Loss Account (b) Profit and Loss Appropriation A/c (c) Balance Sheet 2. Record of fixed assets and fixed liabilities is kept in Balance Sheet. 3. […]

## Important Features of Double Account System | Accounting

In this article we will discuss about the important features of double account system of accounting. 1. Generally, a public utility undertaking needs a large amount of capital which is invested in the acquisition of fixed assets. Therefore, fixed assets, fixed liabilities, current assets and current liabilities are to be separately dealt with. Fixed Assets […]

## Double Account System: Problems and Solutions | Accounting

Here is a compilation of top four accounting problems on double account system with its relevant solutions. Problem 1: The following balances are extracted from the books of M/s. Flashlight Electric Company Ltd: (i) Fixed assets: Expenditure up to 1.1.2006: (a) Land and Buildings Rs 10,00,000 ; (b) Machinery Rs 15, 00,000. (ii) Additions during […]