Briefly explain the accounting cycle with the help of suitable illustrations. Mention whether the given items should be considered in the balance sheet and preparation of book of accounts or not with suitable reasons: i. Purchase of the raw material worth Rs. 10,00,000 by Mr. TOM ii. Deteriorated health condition of the Managing Director of the Firm iii. Mr. Tire has repaired his Personal Car by paying Rs. 25,000 from his bank. iv. Fire in the inventory which has spoiled the goods worth Rs. 12,00,000 No. of releases 361 270 306 22 35 10 8 12 21 Gross Receipts (millions)

3844 1962 1371 1064 334 241 188 154 125

b) What are the major benefits and limitations of the Ratio Analysis (RA). Explain in brief when to use the given Ratios along with their estimation formulas. Also mention what they indicate about a firm/company: i. Solvency Ratio ii. Turnover Ratio