Accounting Paper 12 .... how was it ?

[Sjs1993]

well i think no, as in the short term debentures would increase cash and hence increase the production and revenue of the business, as the interest is usually fixed amount, it will not happen to have a big impact and in short term profits will increase where as in the long term, the firm will have to pay back the debentures and its effect will amortize as time passes increasing expenses and reducing profits

No. The cash injection would not increase the short run profits. We cant increase production so quickly!
And about the debenture interest, it'll be added to the expenses of the business hence decreasing short run profits.
I think this was a repeated question btw.

 

[wajiman]

No. The cash injection would not increase the short run profits. We cant increase production so quickly!
And about the debenture interest, it'll be added to the expenses of the business hence decreasing short run profits.
I think this was a repeated question btw.

bro as it increased cash, the business could use it to buy in bulk quantities and receive substantial discounts increases short run profits

 

[Usman17]

Correct. Answer is no effect on GP by cash discount and increase by improved system
As more closing stock will be there which will reduce cost of sales

What was the option C or D ?

 

[Usman17]

Ratio is most probably going to be GP. as was the only profitablity ratio given

I think it was current ration coz that would improve liquidity....

 

[hardik]

option was D.

any seller wud always think abt profitability he wud get from selling a product and not abt liquidity in normal circumstances.

 

[Usama93]

Well I answered no effect on GP from New inventory system and a decrease in GP( as cash discount is increased)

 

[hardik]

Gp will remain same. But net profit will decrease


Dont u include cash discount while making p&l in final accounts

 

[Usman17]

Gp will remain same. But net profit will decrease


I ticked option C... I made the entire trading account and I was getting C...