ISC ACCOUNTS 218

(Three hours)
(Candidates are allowed additional 15 minutes for only reading the paper.
They must NOT start writing during this time)
Answer Question 1 (compulsory) and Question 2 (compulsory) from Part I and any other five
questions from Part II.
The intended marks for questions or parts of questions are given in brackets [ ].
Transactions should be recorded in the answer book.
All calculations should be shown clearly.
All working, including rough work, should be done on the same sheet as, and adjacent to, the rest of
the answer.

PART I
Question 1

[10 2]

Q1. Interest on debentures has to be paid even if the company is

not earning a profit Justify.
Q2. What is the accounting treatment of abnormal losses in joint
venture?
Q3. What is meant by issue. of shares for consideration other than
cash ?
Q4. . Mention two advantages of preparing a Funds Flow
Statement.
Q5. . Why is there a need for revaluation of assets and liabilities of a firm if
there is a change in profit sharing ratio of partners.?
Q6. State two effects of forfeiture of shares.
Q7. Mention two uses of ratio analysis.

Question 2

[12)

The Balance Sheet of Mohit, Neeraj and Sohan who are partners in a firm sharing
profits according to their capitals as on March 31, 2014 was as under:
Liabilities
Providend fund
Workers compensation
reserve
contingency reserve
Creditors
Mohits Capital
Neerajs Capital
Sohans Capital
General Reserve
investmment fluctuation
fund
Cash at bank

Amount
(Rs.)
10,000
30.000
12,000
21,000
80,000
40,000
40,000
20,000
12.000
15,000
2,80,000

Assets

Amount
(Rs.)

Accumlated losses
investmment

20/000
20.000

Buildings
Machinery
Stock
Debtors
20,000
Less: Provision 1,000

80,000
63,000
18,000

motor car
Advertisement suspense
Goodwill

19,000
30,000
10,000
20,000
2,80,000

On that date, Neeraj decided to retire from the firm selling his share in the ratio of 3:2 to
Mohit and Sohan subject to the following:
1. Buildings to be appreciated by 20%.
2 All Debtors were good.
3. Machinery to be depreciated by 20%.
4 Motor car is taken over by Mohit at 25,000
5. Salary prepaid rs 4,000 and rent receivable rs 6.000
6.Claim against Workers compensation was Rs 12,000
7.Insurance paid Rs 24,000 was paid up to june 31, 2014
8 investmment was valued at Rs 18,000
9 Furniture purchased for R s 20,000 on 1st april 2011 was debited to profit and loss a/c.
Depriciation charged on furniture @ 10%/
10. Goodwill of the firm is to be calculated on the bases of 2.5 years purchase of
average profit of last 3 years. Profit of last 3 years were Rs 20,000(including

abnormal loss for accident rs 12,000) ,rs 42,000(including insurance claim received rs
8,000) and rs (6,000 loss)
11. The capital of the new firm be fixed at Rs. 1,20,000
RevaluationA/c,PartnersCapitalA/csandBalanceSheet
Question 3

[12)

Akhil,NikhilandSunilarepartnerssharingprofitsandlossesequally.TheirBalanceSheetason
31stDecember1992wasasfollows:
Liabilities
Amount Assets
Amount
Creditors
4,000 Buildings
20,000
GeneralReserve
4,500 PlantandMachinery
8,000
Capitals:
Akhil
Nikhil
Sunil

19,500
12,000
8,000

Stock
SundryDebtors
CashatBank

3,500
8,000 Sunil
diedon
8,500 1stMay
1993.
48,,000 Their

39,500
48,000
partnershipdeedprovidedthattheexecutorofadeceasedpartnerwasentitledto:
(i) BalanceofpartnerscapitalaccountandhisshareofGeneralReserve.
(ii) Shareofgoodwillcalculatedonthebasisofthreetimestheaverageprofitsofthelastfouryears.
(iii)
Shareofprofitfromtheclosureofthelastaccountingyeartillthedateofdeathonthebasis
oftheprofitoftheprecedingcompletedyearbeforedeath.
(iv) Interestoncapital@6%perannum.
Rs.5,000wastobepaidtothedeceasedpartnersexecutorimmediatelyandthebalancetobekeptin
hisloanaccount.
Profitandlossesfortheprecedingyearswere:
1989Rs.8,000(Profit);1990Rs.10,000(Loss);1991Rs.12,000(Profit);1992Rs.18,000(Profit).
PassnecessaryjournalentriesandprepareSunilsCapitalA/candSunilsExecutorsA/c.
Question 4

[12)

E,FandGwerepartnersinafirmsharingprofitsintheratioof3:1:1.On31.3.2004,
theirBalanceSheetwasasfollows:
Liabilities

Amount Assets

Amount

Creditors
BillsPayable

90,000 Bank
30,000 Debtors
Less:
Provision
Stock
Building
3,49,000 Goodwill

31,000

Capitals:
E
F
G

1,50,000
1,00,000
99,000

70,000
2,000

68,000
80,000
2,70,000
20,000

4,69,0004,69,000
OntheabovedateHisadmittedonthisdateonthefollowingterms:
1 New profit sharing is 3:2:1:1
1 Buildingwastobeappreciatedby10%.
2 10%provisionfordoubtfuldebtswastobemadeonsundrydebtors.
3 CreditorsRs.10,000willnotbeclaimed.
4 TherewasanoutstandingbillforrepairsofRs.2,000.
5 Claim against Workers compensation was Rs 12,000
6 GoodwillofthefirmwasvaluedonthebasisofH,scapital.
7 Aftermakingaboveadjustmentsthecapitalofthepartnerstobeadjustedaccording
toNew profit sharing
PrepareRevaluationA/c,PartnersCapitalA/csandBalanceSheet

Question 6

[12)

A,BandCwerepartnersinafirmsharingprofitsintheratioof3:2:1.On31st
December2006theirBalanceSheetwasasfollows:
Liabilities
Amount Assets
Amount
Creditors
BillsPayable
ProvidentFund
InvestmentFluctuationFund
AdvanceCommission
Capitals:
A
80,000
B
50,000
C
30,000

65,000
20,000
12,000
6,000
8,000

Cash
Debtors
Stock
Investment
Plant
Profit&LossA/c

22,500
52,300
36,000
15,000
91,200
54,000

1,60,000
2,71,000
2,71,000
Onthisdatethefirmwasdissolved.Awasappointedtorealisetheassets.A
wastoreceive5%commissiononthesaleofassets(exceptcash)andwas
tobearallexpensesofrealisation.Arealisedassetsasfollows:
DebtorsRs.30,000;StockRs.26,000;Investment75%ofbookvalue;Plant
Rs.42,750.ExpensesofrealisationwereRs.4,100.
Commissionreceivedinadvancewasreturnedtothecustomersafterdeducting
Rs.3,000.FirmhadtopayRs.7,200foroutstandingsalarynotprovidedforearlier.
CompensationpaidtoemployeesamountedtoRs.9,800.Thisliabilitywasnot
providedforintheabovebalancesheetRs.2,500andtobepaidforprovidentfund.

PrepareRealisationA/c,PartnersCapitalA/csandCashA/c.
Question7

[12)

X and Y were partners in a firm sharing profit in the ratio of 3:2 On

1.1.2010 their fixed capitals were Rs. 3,00,000 and Rs. 2,50,000
respectively. On 1.7.2010 they decided that their total fixed capital
should be Rs.6,00,000. They further decide that this capital should
be in their profit sharing ratio. Accordingly they
Introduced extra capital or withdrew excess capital. The partnership deed provided
for the following:
i) Interest on capital @ 12% p. a.
ii) Interest on drawings @ 18% p.a.
iii) A monthly salary of Rs.2000 to X and a monthly salary of Rs. 1500 to Y.
The drawings of X and Y during the year were as follows:
2010
X(Rs.)
Y(Rs.)
June 30
20,000
15,000
September 30
20,000
25,000
During the year ended 31.12.2010 the firm earned a net profit of Rs.
1,50,000.10% of this profit was to be transferred to general reserve.
You are required to prepare Profit and Loss Appropriation Account
and
Partner capital accounts.
Question7

[12)

A Ltd has an authorized capital of Rs. 2,00,000 divided into shares of Rs.10
each. Of these 6,000 shares were issued as fully paid up to the vendors for
Building purchased. The public subscribed for 8,000 shares and during the first
year Rs.5 per share was called up payable as Rs.2 on application, Rs.1 on
allotment, Rs.1 on first call and Rs.1 on second call. The amounts received in
respect of these shares were as follows
On 6,000 shares
Full amounts called
On 1,250 shares

Rs.4 per share

On 500 shares

Rs.3 per share

On 250 shares

Rs.2 per share

The directors forfeited the 750 shares on which less than Rs.4 per share has
been paid and later on reissued for Rs.4 per share as Rs.5 paid up.

SECTIONB
Answeranytwoquestions.
Question9
(a)

WhatisaComparativeBalanceSheet?

[2]

(b)

Fromtheinformationgivenbelow,prepareaCommonSizeIncomeStatementof
RelayLtd.:

[2]

Particulars
RevenuefromOperations
OtherIncome
PurchaseofStockinTrade
ChangeinInventories
OtherExpenses
(c)

st

31 March,2014
`
51,73,000
35,000
40,50,000
(90000)
1,70,000

st

31 March,2013
`
49,70,000
40,000
33,20,000
1,00,000
1,50,000

ThefollowingbalancesappearedinthePlant&MachineryAccountand
AccumulatedDepreciationAccountinthebooksofPiyushLtd:
Balancesasat
31.3.2014
31.3.2013
`
`
Plant&Machinery
9,32,000
8,50,000
Less AccumulatedDepreciation
(4,40,000)
(4,32,000)

[2]

YouarerequiredtocalculateCashfromInvestingActivities.
(d)

Fromthefollowinginformation,calculate(uptotwodecimalplaces):
(i) GrossProfitRatio
(ii) OperatingRatio
NetRevenuefromOperations
CreditRevenuefromOperations
GrossProfit
Depreciationonfixedassets

[4]

`
14,00,000
10,00,000
5,00,000
40,000

Profitonsaleofland
SellingExpenses

10,000
60,000

Question10
(a)

Classify thefollowingintocashflowsfromInvestingactivities,Financing
activitiesandOperatingactivitieswhilepreparingaCashFlowStatement:
(i)
ReceiptofDividend
(ii)
PurchaseofGoodwill
(iii)
RepaymentofPublicDeposits
(iv)
PaymentofTax

(b)

FromthefollowingBalanceSheetsofDiamondLimitedason31 March,2013,and

st

st

31 March,2014,prepareaCashFlowStatement(asperAccountingStandard3).
Particulars
I. EQUITY

LIABILITIES

NoteNo.
AND

(i) Shareholders Funds

(a)ShareCapital
(b)ReservesandSurplus
(ii)NonCurrentLiabilities
LongTermBorrowings
(iii)CurrentLiabilities
(a)TradePayables
(b)OtherCurrent
Liabilities
Total
II.ASSETS
1. NonCurrentAssets
FixedAssets(Tangible)
2. CurrentAssets
(a)Inventories
(b)TradeReceivables
(c)CashandCash
Equivalents
Total

1
2

3
4
5

7
8

st

st

31 March,201431 March,2013
` `

[2]

[8]

4,00,000

3,40,000

1,60,000

1,20,000

3,50,000

2,60,000

55,000

30,000

2,000
9,67,000

5,000
7,55,000

6,00,000

4,80,000

73,000
1,55,000
1,39,000

50,000
1,30,000
95,000

9,67,000

7,55,000

NotestoAccounts:

st

st

31 March,2014
`

31 March,2013
`

4,00,000

3,40,000

2. ReservesandSurplus
GeneralReserve
StatementofProfitandLoss

50,000
1,10,000

42,000
78,000

3. LongTermBorrowings
5%Debentures

3,50,000

2,60,000

45,000
10,000

18,000
12,000

2,000

5,000

Particulars
1. ShareCapital
EquityShareCapital

4. TradePayables
Creditors
BillsPayable
5. OtherCurrentLiabilities
Outstandingexpenses
6. FixedAssets

Building
PlantandMachinery

4,40,000
1,60,000

2,90,000
1,90,000

1,55,000

1,30,000

1,39,000

95,000

7. TradeReceivables
Debtors
8. Cash&CashEquivalents
CashatBank
AdditionalInformation:
(i)Depreciationchargedonbuilding`20,000.andabuildingcosting`1,05,000wassoldataprofitof
20%onitsbookvalue
(ii) Amachinewithabookvalueof`10,000wassoldfor`8,000.
Duringtheyear201314,thecompanyprovideddepreciationamountingto`80,000
(iii) Tavpaidduringtheyearrs12,000
st

(iv)Debentureswereissuedon1 April,2013,atadiscountof10%.Thediscountwas
writtenofffromGeneralReserve.

Question11
(a)

StatetheformulaforcomputinganyoneSolvencyRatio.

[2]

(b)

Fromthefollowinginformation,calculate:

[8]

(i)

RevenuefromOperations

(ii)

CostofRevenuefromOperations

(iii)

WorkingCapital

(iv)

CurrentAssets

TradeReceivablesTurnoverRatio

4times

CurrentLiabilities

`5,000

AverageDebtors

`1,80,000

WorkingCapitalTurnoverRatio

8times

CashRevenuefromOperations

25%ofRevenuefromOperations.

GrossProfitRatio

33 1 %
3