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KENDRIYA VIDYALAYA SANGATHAN

KOLKATA REGION

CAPSULE MATERIAL OF CLASS XII


ACCOUNTANCY
2019-20
PREPARED DURING THE 2-DAY REGIONAL
LEVEL WORKSHOP
8th & 9th JULY 2019

COURSE DIRECTOR :
MR. ROOPINDER SINGH
PRINCIPAL, KV BAMANGACHI

UNDER THE ABLE GUIDANCE OF :


MS. P B S USHA
DEPUTY COMMISSIONER
K V S RO KOLKATA
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Not-for-profit organization
MCQ (1MARK)

1. Sale of old newspaper is -


a] capital receipt b] revenue receipt c] asset d] profit
Ans – (b)
2. Receipt and payment account usually indicate -
a] surplus b] capital fund c] debit balance d] credit balance
Ans – (c)
3. In not-for-profit organization, excess of expenditure over income is called
a] loss b] profit c] deficit d] surplus
Ans –(c)
4. Legacy should be treated as –
A] Liability b] revenue receipt c] income d] none of these
Ans – (a)
5. Subscription received during the year Rs 50000; subscription outstanding at the end of the year Rs 8000;
subscription outstanding at the beginning of the year is RS 6000. Net income from the subscription will be –
a] rs 48000 b] rs 64000 c] rs 52000 d] rs 36000
Ans – (c)
6. Which of the following is not a income for not-for-profit organization –
a] subscription b] donation c] sale of match ticket d] endowment fund
Ans (d)
7. Life membership fee received by a club is –
A] Revenue receipt b] capital receipt c] a and b both d] none of these
Ans-(B)
8. Subscription received in cash during the year is rs 5000; amount received in advance for the next year is rs 300.
Amount outstanding for current year was rs 400. The amount to be credited in income and expenditure is –
A] rs 4000 b] rs v5100 c] rs 4200 d] rs 4600
Ans – (b)
10. Which of the following is not a not –for-profit organization
a] school b] hospital c] club d] partnership firm
Ans – (d)
11. Payment of honorarium to secretary is treated as –
a] capital expenditure b] revenue receipt c] asset d] none of these
Ans – (b)
12. Outstanding subscription is a/an –
a] income b] asset c] liability d] none of these
Ans – (b)
13. All receipt from sale of consumable item are treated as -
a] capital receipt b] revenue receipt c] both (a) and (b) d] none of these
Ans- (b)
14. Donation received for specific objective is shown in –
a] income and expenditure b] liability c] asset d] none of these
Ans – (b)
15. Entrance fee unless otherwise stated, is treated as –
a] revenue receipt b] capital receipt c] (a) and (b) both
Ans – (a)

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3 TO 4 MARKS QUESTIONS
1. CALCULATE CAPITAL FUND ON 1 APRIL 2019
PARTICULARS (AS ON 1 APRIL 2019) RS

SPORTS EQUIPMENT 12000

FURNITURE 15000

LAND AND BUILDING 25000

LOCKER RENT RECIEVEABLE 780

SUBSCRIPTION RENT RECEIVABLE 2300

CASH IN HAND 4500

OUTSTANDING SALARIES

SUBSCIPTIONS RECIEVED IN 950

ADVANCE 1450

ANS CAPITAL FUND 57180

2. CALCULATE MATCH FUND AND MATCH EXPENSES FOR THE YEAR ENDED 31 MARCH 2009 AND 31
MARCH 2010
DETAILS RS

MATCH EXPENSES (PAID DURING THE YEAR 2009-2010) 30000

MATCH FUND (AS ON 31.03.2009) 17000

DONATION FOR MATCH FUND (RECEIVED DURING THE YEAR 2009-2010) 9000

PROCEEDS FROM SALE OF MATCH TICKETS (RECEIVED DURING THE 3000


YEAR 2009-2010)

ANS: BALANCE SHEET AS ON 31 MAR 2019: MATCH FUND 17000


BALANCE SHEETS AS ON 31 MARCH 2019 MATCH EXPENSES 1000

3. GIVE THREE FEATURES OF THE RECEIPTS AND PAYMENTS ACCOUNT.

4. LIST ANY THREE FEATURES OF INCOME AND EXPENDITURE ACCOUNT.

5. CALCULATE SUBSCRIPTIONS TO BE SHOWN IN INCOME AND EXPENDITURE ACCOUNT AND CLOSING


BALANCE SHEET:

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RECEIPTS RS PAYMENTS RS

TO SUBSCRIPTIONS

2017 9000

2018 134400

2019 5200 148600

SUBSCRIPTIONS OUTSTANDING AS ON 31.03.2017 RS 9200


SUBSCRIPTIONS RECEIVED IN ADVANCE AS ON 31.03.2017 2800(INCLUDING 800 FOR 2018 ). THERE ARE
1440 MEMBERS EACH PAYING AN ANNUAL SUBSCRIPTION OF RS 100.
ANS: SUBSCRIPTION (CR) INCOME AND EXPENDITURE ACCOUNT: 144000
CLOSING BALANCE SHEET: SUBS. O/S :9000 ADV. SUBS : 7200

Q. 6 From the following extract of receipt and payment account and the additional information, compute income
from subscription for the year ending 31. March 2019 and show it in the final account of the firm.
RECEIPT AND PAYMENT a/c
AS AT 31 MARCH 2019 ACCOUNT

Receipt Amt[Rs] Payment Amt [Rs]

To subscriptions 30,000

Additional information;
As at 31. As at 31. march
March 2018 2019

Subscription outstanding 700 1000

Subscription received in advance 1200 500

Subscription still arrears for the year ending 2017-2018 Rs 400

Q.7 From the following information, calculate the amount of sports material to be debited to the income and
expenditure account of a sports club for the year ending 31. March 2019.
Particulars Amt {Rs ]

Balance as per 31. April 2018 20000

Balance as per 31 March 2019 15000

Creditors as per 1 April 2018 40000

Creditors as per 31 March 2019 45000

Payment made to the creditor for sports material during 31 March 2019 200000

Ans: 210000 {Dr} of income and expenditure a/c

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Q.8 From the following receipt/payment account of club. Prepare income and expenditure account for the year
ending 31st March 2019.
Receipt Amt[Rs} Payment Amt{Rs]

TO bal b/d 4000 By salaries 3500

TO subscription 38000 By drama expenses 4300

TO match receipt 2000 By postage 2700

TO interest on fixed deposit 1000 By 12 % FIXED deposits 40000

TO drama proceeds 6000 By bal b/d 4000

TO furniture {value 3000] 3500

54500 54500

Answer: surplus 38400


Q.9 Prepare income and expenditure account from the following particulars of the youth club for the year ending 31
.march 2018.
Receipt Amt [RS] Payment Amt [RS]

TO bal b/d 32500 By salaries 31500

TO subscription 2016-2017 1500 BY postage 1250

2017-2018 60000 By rent 9000

2018-2019 1800 BY Printing and stationary 14000

TO donation 90000 BY sports material 11500

TO entrance fee 1100 BY misc. expense 3100

TO sale of old magazines 450 By furniture 20000

BY 10%investments 70000

BY bal b/d 27000

Additional information;
1. Subscription outstanding as at 31 march 2018 Rs 16200.
2. Rs 1200 is still in arrear for the year 2016-2017
3. Value of sports material at the beginning and at the end of the year was 3000and RS 4000.
4. Depreciation to be 10% on furniture.
Answer: surplus ;10200

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10. Prepare income and expenditure account for the year ending 31 march 2019 from the following receipt payment
account.

RECEIPT AND PAYMENT ACCOUNT


AS AT 31 MARCH 2019
receipts Amt [RS] Payments Amt {RS]
TO bal b/d 12000 BY rent [500 for 17-18} 9000
TO SUBCRIPTION [rs 1250 for 17- 7250 BY salaries 11500
18]

TO tournament receipts 25000 BY furniture 2600

TO bank interest 2300 BY tournament expense 20000

TO dinner receipt 8450 BY telephone bill [400 for 17-18} 1900


TOTAL 55000 BY bal b/d 10000
Ans: surplus :250

6 TO 8 MARKS QUESTIONS

1. PREPARE INCOME AND EXPENDITURE ACCOUNT FOR 31 DEC 2018 AND BALANCE SHEET AS ON
THAT DATE
RECEIPTS AND PAYMENTS ACCOUNT
FOR THE YEAR ENDED 31 DEC 2018
RECEIPTS RS PAYMENTS RS

TO BALANCE B/D 190000 BY SALARIES 330000

TO SUBSCRIPTIONS 660000 BY SPORTS EQUIPMENTS 400000

TO INTEREST ON INVESTMENTS 40000 BY BALANCE C/D 160000


(@8% P.A FOR FULL YEAR)

890000 890000

ADJUSTMENTS
A) THE CLUB HAD RECEIVED RS 20000 FR SUBSCRIPTION IN 2017 FOR 2018
B) SALARIES HAD BEEN PAID ONLY FOR 11 MONTHS
C) STOCK OF SPORTS EQUIPMENTS AS ON 31 DEC 2017 WAS 300000 AND N 31 DEC 2018 WAS 650000.
ANS: SURPLUS : 310000 BALANCE SHEET TOTAL 1310000

2. PREPARE INCOME AND EXPENDITURE ACCOUNT FOR 31 DEC 2018 AND BALANCE SHEET AS ON
THAT DATE
RECEIPTS AND PAYMENTS ACCOUNT
FOR THE YEAR ENDED 31 DEC 2018
RECEIPTS RS PAYMENTS RS

TO BALANCE B/D 20000 BY SALARIES 25000

TO SUBSCRIPTIONS BY ENTERTAINMENT EXPENSES 400000

2017 2000 BY GENERAL EXPENSES 2000

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2018 22000 BY INVESTMENTS 15000

2019 3000 27000 BY PRINTING AND STATINERY 1500

TO ENTERTAINMENT RECEIPTS 15000 BY NEWSPAPERS 3000

TO FURNITURE ( BOOK VALUE RS 4000 BY FURNITURE 5000


5000)
BY BALANCE C/D 9000

66000 66000

ADJUSTMENTS :
A) THE CLUB HAS 300 MEMBERS EACH PAYING AN ANNUAL SUBSCRIPTION OF RS 100.
SUBSCRIPTION OF RS 500 IS STILL IN ARREARS FOOR 2017. IN 2017 TEN MEMBERS HAD PAID
THEIR SUBSCRIPTINS FOR 2018.
B) SALARIES PAID INCLUDED RS1500 FOR 2017 AND OUTSTANDING SALARIES FOR 2018
C) ON 31 DEC 2017 THE CLUB HAD LAND AND BUILDINGS WORTH RS 200000 AND FURNITURE
WORTH RS 20000
D) INTEREST FOR 4 MONTHS AT 10% PER ANNUM HAS ACCURED ON INVESTMENTS.
ANS : SURPLUS 7000 BALANCE SHEET:252500

3. PREPARE INCOME AND EXPENDITURE ACCOUNT FOR 31 MAR 2019 AND BALANCE SHEET AS ON
THAT DATE
RECEIPTS AND PAYMENTS ACCOUNT
FOR THE YEAR ENDED 31 MAR 2019
RECEIPTS RS PAYMENTS RS
TO BALANCE B/D 15000 BY SALARIES 72000
TO SUBSCRIPTIONS BY LIBRARY BOOKS 10000
2017 18000 BY ENTERTAINMENT EXPENSES 2000
2018 60000 BY GENERAL EXPENSE 18000
2019 12000 27000 BY ELECTRIC CHARGES 12000
TO SALE OF OLD NEWSPAPERS 10800 BY INVESTMENTS 3000
TO PROFIT FROM 44000 BY STATINERY 40000
ENTERTAINMENT BY AUDIT FEES 8000
TO FURNITURE ( BOOK VALUE RS 4000 BY POSTAGE 3000
6000) BY NEWSPAPERS 33800
TO LOCKER RENT 84000 BY FURNITURE 18000
BY BALANCE C/D
247800 247800

BALANCE SHEET
AS AT 31 MAR 2018
LIABILITIES RS ASSESTS RS
OUTSTANDING SALARY 6000 CASH 15000
CAPITAL FUND 694000 OUTSTANDING SUBSCRIPTION 18000
LIBRARY BOOKS 30000
FURNITURE 37000
LAND AND BUILDING 600000

700000 700000
ADJUSTMENTS:
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A) THE CLUB HAD 500 MEMBERS EACH PAYING AN ANNUAL SUBSCRIPTION OF RS 150
B) ON 31 MAR 2019 SALARIES OUTSATANDING AMOUNTED ON RS1200 AND SALARIES PAID
INCLUDED RS 6000 FOR THE YEAR 2017-18
C) PROVIDE 5% DEPRECIATION N LAND AND BUILDING
ANS :DEFICIT : 200 BALANCE SHEET : 707000

4. PREPARE INCOME AND EXPENDITURE ACCOUNT AND BALANCE SHEET FOR THE YEAR ENDING
31 DEC 2018
RECEIPTS AND PAYMENTS ACCOUNT
FOR THE YEAR ENDED 31 DEC 2018
RECEIPTS RS PAYMENTS RS
TO BALANCE B/D 16800 BY SALARIES 24000
TO SUBSCRIPTIONS 60200 BY BOOKS 6000
TO DONATIONS 3000 BY TRAVELLING EXPENSES 6000
TO ENTRANCE FEES 800 BY RENT 16000
TO LIFE MEMBERSHIP FEES 7000 BY REPAIRS 700
TO INTEREST. ON INV.(@5% FOR 5000 BY BUILDINGS 30000
FULL YEAR) BY BOOKS 6000
TO FURNITURE ( BOOK VALUE RS BY STATIONERY 2300
6000) 4000 BY BALANCE C/D 11800

96800 96800

ADDITIONAL INFORMATON:
PARTICULARS AS ON AS ON
01.01.18 31.12.18
1.SUBSCRIPTIONS RECEIVED IN ADVANCE 1000 3200
2.OUTSTANDING SUBSCRIPTIONS
3.STOCK OF STATIONERY 2000 3700
4.BOOKS 1200 800
5.FURNITURE 13500 16500
6.OUTSTANDING RENT 16000 8000
1000 2000
ANS : SURPLUS : 11100 BALANCE SHEET TOTAL : 170800

5. PREPARE INCOME AND EXPENDITURE ACCOUNT AS ON 31.12.16 AND BALANCE SHEET AS ON


31.12.16.
RECEIPTS AND PAYMENTS ACCOUNT
FOR THE YEAR ENDED 31 DEC 2016
RECEIPTS RS PAYMENTS RS
TO BALANCE B/D 10000 BY SALARIES 15000
TO SUBSCRIPTIONS 52000 BY BILLIARDS TABLE 20000
TO TOURNAMENT FUND 26000 BY OFFICE EXPENSE 6000
TO LEGACY 37000 BY TURNAMENT EXPENSE 31000
TO SALE OF OLD NEWSPAPERS 1000 BY SPORTS EQUIPMENT 40000
TO ENTRANCE FEES 5000 BY BALANCE C/D 19000

131000 131000

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ADDITIONAL INFORMATION:
A) OUTSTANDING SUBSCRIPTIONS 31.12.2016 RS 2000 AND ON 31.12.2015 SUBS OUTSTANDING
WAS 3000
B) SALARY OUTSTANDING ON 31.12.2016 WAS 15000.
C) ON 01.01.2016 THE CLUB HAD BUILDING 75000 FURNITURE 18000 12% INVESTMENTS RS
30000 AND SPORTS EQUIPMENTS RS 30000. DEPRECIATION CHARGED ON THESE ITEMS
INCLUDING BILLIARDS TABLE WAS 10%.
ANS : SURPLUS : 148000 BALANCE SHEET : 166000

6. PREPARE INCOME AND EXPENDITURE ACCOUNT AND BALANCE SHEET:


RECEIPTS AND PAYMENTS ACCOUNT
FOR THE YEAR ENDED 31 MAR 2019
RECEIPTS RS PAYMENTS RS
TO BALANCE B/D 2600 BY SALARIES 24000
TO SUBSCRIPTIONS 40000 BY RENT 18000
TO DONATION FOR BUILDING 23000 BY WAGES 7000
TO ENTRANCE FEES 3200 BY BILLIARD TABLE 14000
TO LIFE MEMBERSHIP FEES 7000 BY FURNITURE 10000
TO PROFIT FROM 3000 BY INTEREST 2000
ENTERTAINMENT BY POSTAGE 1000
TO LOCKER RENT 1200 BY BALANCE C/D 4000
80000 80000
ADDITIONAL INFORMATION:
A) SUBSCRIPTION. OUTSTANDING N 31.MAR 18 IS 1200 AND 2300 ON 31 MAR 19
B) OPENING STOCK OF POSTAGE STAMPS IS 300 AND CLOSING STOCK 200
C) RENT 1500 RELATED TO LASST YEAR AND 1500 IS STILL UNPAID.
D ) ON 1 APR 2018 FURNITURE 15000 ( VALUED 22500 ON 31 MAR 19 ). THE CLUB TAKEN A LOAN OF
RS 20000 @10% P.A IN 2017 – 18
DEFICIT: 6100 CAPITAL FUND 2400 BALANCE SHEET 43000

7. PREPARE INCOME AND EXPENDITURE ACCOUNT AND BALANCE SHEET


RECEIPTS AND PAYMENTS ACCOUNT
FOR THE YEAR ENDED 31 DEC 2018
RECEIPTS RS PAYMENTS RS
TO BALANCE B/D BY SALARIES 36000
CASH IN HAND 4000 BY BOOKS 7000
CASH AT BANK 15550 BY RENT 6500
TO SUBSCRIPTIONS BY GENERAL EXPENSE 3200
2017 1200 BY ELECTRIC CHARGES 3000
2018 26500 BY 10% FIXEED DEPOSIT 18000
2019 500 (30.06.18)
TO GOVT. GRANT 12000 BY POSTAGE CHARGES 300
TO SALE OF OLD NEWSPAPERS BY FURNITURE 10500
TO FURNITURE ( BOOK VALUE RS 1250 BY BALANCE C/D
5000) CASH IN HAND 3000
TO INT ON F. DEPOSIT 3700 CASH AT BANK 8200
450
65150 65150
ADDITIONAL INFORMATION:
A) SUBS OUTSTANDING AS ON 31 DEC 2017 RS 2000 AND ON 31 DEC 201`8 RS 2300

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B) ON 31 DEC 18 SALARY OUTSTANDING RS 600 AND ONE MONTH RENT PAID IN ADV.
C) ON 1 JAN 18 FURNITURE RS 12OOO BOOKS 5000
ANS: SURPLUS 22300 CAP. FUND 38550
BALANCE SHEET 61950

8. PREPARE INCOME AND EXPENDITURE ACCOUNT AND BALANCE SHEET.


RECEIPTS AND PAYMENTS ACCOUNT
FOR THE YEAR ENDED 31 DEC 2018
RECEIPTS RS PAYMENTS RS
TO BALANCE B/D 9300 BY SALARIES 7700
TO SUBSCRIPTIONS 19900 BY PAYMENT TO 1800
TO INTEREST. ON INV 1000 CREDITRS(STATIONERY)
BY SUBSCRIPTIONS FOR
PERIODICALS 1200
BY 10% INVESTEMETS (01.07.18) 5000
BY OTHER EXPENSE 6500
BY BALANCE C/D 8000
30200 30200
ADDITIONAL INFORMATION:
01.01.18 31.12.18

10% INVESTMENTS 10000 15000

SUBSCRIPTIONS OUTSTANDING 400 500

CREDITORS FOR STATIONERY 700 200

OUTSTANDING SALARY 600 700

PREPAID SALARY 250 ---

9. PREPARE INCOME AND EXPENDITURE ACCOUNT AND BALANCE SHEET.


RECEIPTS AND PAYMENTS ACCOUNT
FOR THE YEAR ENDED 31 DEC 2018
RECEIPTS RS PAYMENTS RS
TO BALANCE B/D 20000 BY SALARIES 30000
TO SUBSCRIPTIONS 30000 BY FURNITURE 5000
TO DONATIONS 1000 BY RENT 850
TO ENTRANCE FEES 15000 BY P0STAGE 1150
TO INTEREST. ON INV. 4000 BY INVESTMENTS 20000
BY HONORAIUM TO MANAGER 1000
BY BALANCE C/D 12000
70000 70000

ADDITIONAL INFORMATION:
A) 40% OF THE ENTRANCE FEES SHOULD BE CONSIDERED AS INCOME OOF THE CURRENT
YEAR.
B) OUT OF THE SUBSCRIPTIONS RECEIVED RS 200 ARE FOR THE PREVIOUS YEAR AND RS100
FOR THE NEXT YEAR .SUBSCRIPTONS OF RS 500 ARE OUTSTANDING FOR THE CURRENT
YEAR.

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C) RENT OF RS 200 IS UNPAID
D) INTEREST ACCRUED BUT NOT RECEIVED ON INVESTMENTS RS 500
E) PROVIDE DEPRECIATION ON FURNITURE AR 20%
F) CAPITAL FUND ON 1 JAN 2018 WAS 20200.
SURPLUS: 7500 BALANCE SHEET: 37000

FUNDAMENTALS OF PARTNERSHIP
MCQ (1 MARK)
1) Where there is no partnership agreement exists, between partners what will be the profit sharing ratio
between the partners? ans:equal
2) Under fluctuation method of capital, what is the treatment of ‘Interest on capital”?
a) Credited to capital account (b) Debited to capital account
(c ) No treatment or adjustment needed (d) Credited to current account
3) Which of the following is not generally the characteristic of a partnership business?
a) Limited life (b) Ease of formation
(c ) Mutual agency (d) Limited liability
4) In the absence of any agreement, the interest to partners on the amount of loan advanced to the firm, is
allowed at _________.
6%
5) In a business, A and B invested amounts in the ratio of 2 : 1, whereas the ratio between and B was 3 : 2. If
the firm earned a profit of Rs. 1,20,000, how much amount did B receive? 48000 ans:
6) A partnership deed provides for the payment of interest on capital but there was a loss instead of profit
during the year 2018-19. At what rate will the interest on capital will be allowed to the partners? :no interset will be allow
7) In which year was the Partnership Act passed?
a) 1932 (b) 1956 (c ) 1947 (d) 1956
8) What time would be taken into consideration if equal monthly amount is drawn as drawings at the beginning
of every quarter ?
a) 5 ½ months (b) 6 months (c ) 7 months (d) 7 ½ months
9) Which of the following is an appropriation of profit?
a) Interest on loan (b) Interest on Capital (c) Employees’ salary (d) Rent
10) Liability of a partner is :
(a) Limited (b) Unlimited (c ) Limited to Capital (d) None of these
11) State the collective term used for the partners. ans:firm
12) The written agreement of partnership is most commonly referred to as :
(a) Agreement (b) Partnership Deed
(c ) Partnership contract (d) Partnership Act
13) Which of the following is known as the value addition to a business because of business reputation,
customers’ loyalty, brand name etc :
a) Assets (b) Market capitalization (c) Goodwill (d) Market penetration
14) Rs. 700 is divided among A, B and C so that A receives half as much as B and B receives half as much as
C. Then C’s share is :
(a) Rs. 200 (b) Rs. 300 (c) Rs. 400 (d) Rs. 500
15) Partner’s salary is debited to :
(a) Trading A/c (b) Profit & Loss A/c
(c) Profit & Loss Appropriation A/c (d)None of these

SHORT ANSWER TYPE QUESTIONS (3 MARKS)


1) Ankita and Rinkita were partners in a firm sharing profits in the ratio of 2 : 3. Their fixed capitals were Rs.
2,50,000 and Rs. 4,50,000 respectively. After the final accounts of the year had been closed, it was found that
interest on capital at 10% per annum as provided in the partnership agreement has not been credited to the capital
accounts of the partners. Give necessary adjustment entry. ankita current a\c ...dr 3000
11 | P a g e to rinkita current a\c 3000
2)ans prince captial a\c... dr 400
to harsh captial a\c 400

2) Ayush, Harsh and Prince are partners in a firm sharing profits in the ratio of 5:3:2. Their capitals were Rs.
3,00,000 ; Rs. 2,00,000 and Rs. 1,00,000 respectively. For the year 2018-19, interest on capital accounts @ 8% p.a.
instead of 10% p.a. showing your working clearly, pass the necessary adjusting entry.
3) During the year 2018-19, Rahul withdrew Rs. 500 p.m. at the beginning of every month whereas Sahil
withdrew Rs. 1000 p.m. at the end of every month for their personal use. Interest on drawings is to be charged @
6% p.a. Calculate the amount of interest on drawings. int on drawings :rahul:Rs 195 ;sahil:RS 330;
4) X, Y and Z were partners, sharing profits in the ratio of 2 : 2 : 1. Z was guaranteed a minimum profit of Rs.
20,000. The profits of the firm for the year ended 31.03.2019 were Rs. 80000. Prepare Profit & Loss Appropriation
Account. X share Rs 30000;Y share Rs 30000;Z share Rs 20000;
5) On 1.4.2018 Anaya and Somya started a business and invested Rs. 60,000 and Rs. 80000 respectively as
their capital. On 30.09.2018 Somya brought an additional capital of Rs. 20000 whereas Anaya withdrew Rs. 10000
from her capital on 1.12.2018. Interest on capital is allowed @ 5% p.a. Calculate the amount of interest allowed to
both the partners at the end of the year when profits amounted to Rs. 1,00,000.
int on captial : anaya Rs. 4500;somya Rs .2833
SHORT ANSWER TYPE QUESTIONS (4 MARKS)
st
1) Rohit and Sanjay started a partnership business on 1 April 2018. Their capital contribution were Rs.
2,00,000 and Rs. 10,00,000 respectively. The partnership deed provided :
i) Interest on capitals @ 10% p.a.
ii) Rohit to get a salary of Rs. 2,000 p.m. and Sanjay Rs. 3,000 p.m.
iii) Profits are to be shared in the ratio of 3 : 2.
The profits for the year ended 31st March 2019 before making above appropriations were Rs.2,16,000.
Interest on drawings amounted to Rs. 2,200 for Rohit and Rs. 2,500 for Sanjay. Prepare Profit & Loss Appropriation
A/c. rohit gets Rs 66220;whereas sanjay gets Rs 149780
2) Suman and Poonam are partners in a firm sharing profits and losses in the ratio of 2 : 3. Their capitals are
Rs. 1,00,000 and Rs. 2,00,000 respectively on which they are entitled to get interest @ 5% p.a. In the year 2018-19,
the firm earned a profit of Rs. 12000. Prepare Profit and Loss Appropriation A/c to show the distribution of profits
between partners. int on captial suman Rs 4000 ;poonam Rs8000;
st
3) Nehal, Andrew and Sujal are partners in a firm sharing profits in the ratio of 2 : 3 : 5. On 1 April 2018, their
capitals were Rs. 50,000 , Rs. 80,000 and Rs. 60,000 respectively on which they were entitled to get interest @
10% p.a. The accountant omitted to allow interest on capital while distributing profits of Rs. 49000 at the end of the
year. Pass necessary journal entry to rectify the error.
4) A, B C and D are partners in a firm sharing profits in the ratio 1 : 2 : 3 : 5. Interest on drawings is charged @
5% p.a. Calculate interest on drawings in the following cases :
a) When A draws Rs. 2000 p.m. at the end of every month
b) When B draws Rs. 3000 p.m. at the middle of every month
c) When C draws Rs. 10000 during the year.
d) When D draws Rs. 4000 at the beginning of every two months.
5) Neha and Serna are partners in a firm sharing profits in the ratio of 2 : 3. Their fixed capitals are Rs. 40,000
and Rs. 50,000 respectively. As per partnership deed, partners are entitled to get interest on capital @ 10% p.a..
The firm earned profits of Rs. 30000 during the year 2018-19 which was distributed between the partners equally
without considering the partnership deed. Pass necessary journal entry.
LONG ANSWER QUESTIONS (6 MARKS)
1) X and Y are partners in a firm sharing profits and losses equally. Their capitals as on 1.4.2018 are Rs.
1,00,000 and Rs. 2,00,000 respectively. They are entitled to get interest on capital @ 10% p.a. Y is also entitled to
get a commission of 5% on profits before charging his commission but after allowing interest on capitals. During the
year 2018-19, the firm earned profits of Rs. 80000. Show the distribution of profits and calculate how much amount
each partner gets.
2) A, B and C entered into partnership on 1st April, 2018 to share profits & losses in the ratio of 4:3:3. A,
however, personally guaranteed that C's share of profit after charging interest on Capital @ 5% p.a. would not be
less than Rs. 40,000 in any year. The Capital contributions were:
A, Rs. 3,00,000; B, Rs. 2,00,000 and C, Rs. 1,50,000.The profit for the year ended on 31st March, 2019
amounted to Rs. 1, 60,000. Show the Profit & Loss Appropriation Account.

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3) Anandi and Khushi are partners in a firm. Their capitals are Rs. 60,000 and Rs. 80000 respectively. They
are entitled to get interest on capital @ 10% p.a. Anandi gets Rs. 5000 p.a. and Khushi gets Rs. 500 p.m. as salary.
At the end of the year 2018-19, there was a profit of Rs. 50000. Anandi has personally guaranteed Khushi, a
minimum profit of Rs.15000, excluding interest on capital and salary. Show the distribution of profits between the
partners and calculate the amount shared by both the partners.
4) Putul and Srishti are partners in a firm. Their profit & Loss sharing ratio is 2 : 3.Their capitals are Rs. 30000
and Rs. 40000 respectively. As per partnership :
a) Partners are entitled to get interest on capital @ 10% p.a.
b) Both the partners are entitled to get salary of Rs. 5000 p.a.
The firm earned a profit of Rs. 13,600 during the year 2018-19. Show how the amount of profits will be
distributed between the partners and how much does each partner get.
5) A, B and C are partners in a firm sharing profits in the ratio of 1 : 4 : 5. The partnership provides the
following :
i) All partners are entitled to get interest on capital @ 10% p.a.
ii) Interest on drawings is to be charged @ 5% p.a.
iii) A should get a salary of Rs. 5000 p.a.
Capitals of the partners are Rs. 2,00,000 each. A and B drew Rs. 20000 each during the year 2018-19.
Inadvertently, the accountant distributed the profits of Rs. 90000 equally among the partners. Pass necessary
journal entry.
LONG ANSWER QUESTIONS (8 MARKS)
1) X, Y and Z are partners in a firm. Their capitals are Rs. 20,000 , Rs. 30,000 and Rs. 40,000 respectively. As
per the partnership deed :
i) Partners are entitled to get interest on capital @ 10% p.a.
ii) Y and Z are entitled to get salary of Rs. 500 p.m. and Rs. 2000 p.a. respectively.
iii) Interest on drawings is to be charged @ 5% p.a.
During the year 2018-19, X and Y withdrew Rs. 10000 each whereas Z withdrew Rs. 20000 for their
personal use. The firm earned profits of Rs. 82000. Prepare Profit & Loss Appropriation A/c.
2) A, B and C entered into partnership on 1st April, 2018 to share profits & losses in the ratio of 2:3:5. Partners
are entitled to get interest on capital @ 5% p.a. A and B will get salary @ Rs. 500 p.a. where C will get salary of Rs.
8000 p.a. A and B, however, guaranteed that C's share of profit including interest on Capital and salary would not be
less than Rs. 1,00,000 in any year. Deficiency, if any, will be borne by A and B in the ratio of 1: 4. The Capital
contributions were: A, Rs. 3,00,000; B, Rs. 2,00,000 and C, Rs.2,00,000.
The profit for the year ended 31st March, 2019 amounted to Rs. 2,00,000. Show the Profit & Loss appropriation
Account.
3) Ajay, Vijay and Sanjay are partners in a firm sharing profits in the ratio of 1 : 4 : 5. Their fixed capitals are
Rs. 100000 each. As per the partnership deed :
a) Partners are entitled to get interest on capital @ 5% p.a.
b) A will get salary of Rs. 5000 p.a. and B will get a commission of Rs. 10000 p.a.
c) Interest on drawings will be charged @ 5% p.a.
During the year 2018-19, partners made drawings of Rs.20000 each. Profits earned by the firm was Rs.
90000. The accountant omitted to consider the partnership deed and distributed the profits equally among partners.
Pass necessary journal entry. Show the working note clearly.
4) Amit and Sumit commenced business as partners on 01.04.2018. Amit contributed Rs. 40000 and Sumit
Rs. 25000 as their share of capital. The partners decided to share their profits in the ratio of 2:1. Amit was entitled to
salary of Rs. 6000 p.a. Interest on capital was to be provided @ 6% p.a. The drawings of Rs. 4000 was made by
Amit and Rs. 8000 was made by Sumit. The profits after providing slary and interest on capital for the year ended
31st March 2019 were Rs. 12000.
Draw up the capital accounts of the partners :
a) When capitals are fluctuating
b) When capitals are fixed.
5) Ram and Shyam invested Rs. 20000 and Rs. 10000. Interest on capital is allowed @ 6% p.a. Profits are
shared in ratio of 2 : 3. Profits for the year ending 31.03.2019 is Rs. 1500. Show allocation of profits when
partnership deed.

13 | P a g e
(a) Allows interest on capital & deed is silent on treating interest as charge.
(b) Interest is charge against profit.

MARKING SCHEME
1 MARK QUESTIONS
Q. NO. ANSWER

1 Equal

2 (a)Credited to Capital A/c

3 (a)Limited life

4 6% p.a.

5 Rs. 48000

6 No interest will be allowed

7 (a)1932

8 (d)7 ½ months

9 (b)Interest on capital

10 (b)Unlimited

11 Firm

12 (b)Partnership Deed

13 (c)Goodwil

14 (c)Rs.400

15 (c)Profit & Loss Appropriation A/c

3 MARKS QUESTIONS
Q. NO. ANSWER

1 Ankita’s Current A/c …Dr. 3000

To Rinkita’s Current A/c 3000

2 Prince’s Capital A/c …… Dr. 400

To Harsh’s Capital A/c 400

3 Interest on Drawings : Rahul : Rs. 195 ; Sahil : Rs. 330

4 X’s share Rs. 30000 ; Y’s share Rs. 30000 Z’s share Rs. 20000

5 Interest on Capital : Anaya Rs. 4500 ; Somya Rs. 2833

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4 MARKS QUESTIONS
Q. NO. ANSWER

1 Rohit gets Rs. 66220 whereas Sanjay gets Rs. 149780

2 Interest on Capital : Suman Rs. 4000 ; Poonam Rs. 8000

3 Sujal’s Capital A/c …. Dr. 3500

To Nehal’s Capital A/c 1200

To Andrew’s Capital A/c 2300

4 (a)Rs. 600 ; (b) Rs. 900 ; (c) Rs. 250 ; (d) Rs. 1400

5 Neha’s Current A/c …. Dr. 2600

To Serna’s Current A/c 2600

6 MARKS QUESTIONS
Q. NO. ANSWER

1 X gets Rs. 33750 and Y gets Rs. 46250

2 A gets Rs. 65000 ; B gets Rs. 47500 ; C gets Rs. 47500

3 Anandi gets Rs. 21000 and Khushi gets Rs. 29000

4 Putul gets Rs. 6400 and Srishti gets Rs. 7200

5 A’s Capital A/c …. Dr. 2900

B’s Capital A/c …. Dr. 100

To C’s Capital 3000

8 MARKS QUESTIONS
Q. NO. ANSWER

1 X gets Rs. 23750 ; Y gets Rs. 30750 ; Z gets Rs. 27500

2 A gets Rs. 48100 ; B gets Rs. 51900 ; C gets Rs. 100000

3 Ajay’s current A/c …… Dr. 14350

To Vijay’s Current A/c 9100

To Sanjay’s Current A/c 5250

4 In case of (a) Capital Balance Amit Rs. 52400 (Cr.) Sumit Rs. 22500(Cr.)

In case of (b) Capital Balance Amit Rs. 40000 (Cr.) Sumit Rs. 25000(Cr.)

15 | P a g e
Current Balance Amit Rs.12400(Cr.) Sumit Rs. 2500 (Dr.)

5 In case of (a) :

Interest will be credited to Ram’s Capital A/c with Rs. 1000 and Shyam’s
A/c with Rs. 500

In case of (b) :

Interest to be credited to Ram’s Capital A/c with 1200 and Shyam,s Capital
A/c with Rs. 600 where Ram’s Capital A/c will be debited with a loss of Rs.
120 and Shyam’s Capital A/c will be debited with Rs. 180

Change in profit sharing Ratio.


Q.No Questions Marks

1 A Partnership is reconstituted due to:

(a) Change in profit sharing ratio among existing partners 1

(b) Admission of a partner

(c) Retirement/death of a partner

(d) All above.

2 Any change in the relationship of existing partners which results in an end of the existing
agreement and enforces making of a new agreement is called
1
(a) Revaluation of partnership (b) Reconstitution of partnership

(c) Realisation of partnership (d) None of the above

3 Sacrificing ratio of a partner is computed as:

(a) Old Ratio-New Ratio (b) New Ratio-Old Ratio

(b) Old Ratio-Gaining Ratio (d) None of these 1

4 A, B and C are partner in a firm sharing profits in the ratio 3:2:1. They decided to share profits
equally in future. B's sacrifice/gain will be:
1
(a) Sacrifice 1/6

(b) Gain 1/6

(c) No change

(d) None of these

5 The average capital employed of a firm is Rs.4,00000 and the normal rate of return is 15%. The
average profit of the firm is Rs.80,000 per annum. If the remuneration of the partners is estimated
to be Rs.10,000 per annum, then on the basis of two years purchase of super-profit, the value of 1
the Goodwill will be

16 | P a g e
(A) 10,000

(B) 20,000

(C) 60,000

(D) 80,000

6 Under the capitalisation method, the formula for calculating the goodwill is:

(A) Super profits multiplied by the rate of return 1

(B) Average profits multiplied by the rate of return

(C) Super profits divided by the rate of return

(D) Average profits divided by the rate of return

7 Gaining ratio of a partner is computed as:

(a) Old Ratio-New Ratio (b) New Ratio-Old Ratio 1

(c) New Ratio-Sacrificing Ratio (d) None of these.

8 A and B are partners in a firm sharing profits and losses equally. They decided to share profits in
the ratio of 3:2 in future. A's sacrifice/gain will be
1
(a) Sacrifice 1/10

(b) Gain 1/10

(c) Sacrifice 3/5

(d) Gain 3/5

9 X Y and Z Are partners sharing profits in the ratio of 3: 2:1. They decided to share future profits in
the ratio 2:1:1. Thus, Z's sacrifice/gain will be
1
(a) 4/12 gain

(b) 3/12 gain

(c) sacrifice 1/12

(d) 1/12 gain

10 Goodwill is assets.

(a) Wasting 1

(b) Intangible

(c) Tangible

(d) Fictitious

11 Capital invested in a firm is 5,00,000. Normal rate of return is 10%. Average profits of the firm are

17 | P a g e
64,000 (after an abnormal loss of 4,000). Value of goodwill at four times the super profits will be:

(A) 72,000 1

(B) 40,000

(C) 2,40,000

(D) 1,80,000

12 P and were partners sharing profits and losses in the ratio of 3:2. They decided that with effect
from 1st January, 2019 they would share profits and losses in the ratio of 5:3. Goodwill is valued at
Rs. 1,28,000. In adjustment entry:

(A) Cr. P by 3,200; Dr. Q by 3,200 1

(B) Cr. P by 37,000; Dr. Q by 37,000

(C) Dr. P by 37,000; Cr. Q by 37,000

(D) Dr. P by 3,200 Cr. Q by 3,200

13 The Goodwill of the firm is NOT affected by:

(A) Location of the firm

(B) Reputation of firm 1

(C) Better customer service

(D) None of the above

14 Weighted average method of calculating goodwill is used when :

(A) Profits are not equal

(B) Profits show a trend 1

(C) Profits are fluctuating

D) None of the above

15 The profits earned by a business over the last 5 years are as follows 12,000; 13,000; 14,000:
18,000 and 2,000 (loss). Based on 2 years purchase of the last 5 years profits, value of Goodwill
will be :

(A) 23,600 1

(B) 22,000

(C) 1,10,000

(D) 1,18,000

Answ 1(D), 2 (B), 3(A), 4(C), 5 (B), 6(A), 7(B), 8(B), 9(D), 10(B), 11(A), 12(D), 13(D), 14(B), 15(B),
er

1 At the time of change in profit sharing ratio among the existing partners, where will you record an
unrecorded liability ?

18 | P a g e
Ans.- Revaluation Account-Debit side 2

2 Give two characteristics of goodwill.

Ans.- (i) it is an intangible asset having a definite value. 2

(ii) It helps in earning more profit.

3 Name any two factors affecting goodwill of a partnership firm.

Ans-(i) Favourable location (ii) Time period 2

4 At the time of retirement of a partner give journal entry for writing off the existing goodwill.

Ans- All Partners Capital (including retiring) A/c Dr.

To Goodwill A/c 2

(Being old goodwill written off among all partners in, old ratio)

5 Give two circumstances in which gaining ratio can be applied

Ans. (i) Retirement of a partner (ii) Death of a partner. 2

6 Define gaining ratio.

Ans.- Gaining ratio is the ratio in which remaining/continuing partners acquire the share of the 2
outgoing partner(s).

7 At the time of admission of a new partner, workmen’s compensation reserve in appearing in the
Balance sheet as Rs 1,000. Give journal entry if workmen’s compensation at the time of admission
is estimated at Rs 1,200.

Ans.- Revaluation A/c Dr. 1200

To Workman compensation reserve A/c 1200 2

8 In case of admission of a new partner, goodwill was already appearing in the books of the firm.
Give journal entry for its treatment.

Ans.- Old Partners capital A/c Dr.

To. Goodwill A/c


2

9 The goodwill of a partnership is valued at Rs. 20,000. State the amount required by a new partner,
if he is coming for 1/5 share in profits.

2
Ans. Rs.4,000

10 Define Gaining ratio.

Answer: Sacrificing ratios is the ratio in which one or more partners gain a share of profit as a
result od sacrificed share in profits by one or more partners of a company.
2

19 | P a g e
1 Anu and Bala distributed profits and losses in the ratio 3:2 starting 1st April 2019, they accepted to
distribute profits evenly. Goodwill of the business was accounted for at ₹50,000. Prepare the
journal for the accounting of goodwill:

(a) When the goodwill is adjusted through Partners’ Capital Account

Answer: 3

Journal

Date Partculars L.F Dr.(₹) Cr.


(₹)

1st April Bala’s Capital A/c (₹50,000 x 1/10) 5,000 5,000


2019 To Anu’s Capital A/c
(Being the goodwill adjusted on a
change in profit-sharing ratio) (WN)

Working Note: Calculation of share of profit sacrificed/gained

Sacrificed Share/ Gaining Share= Old Share – New Share

Anu= 3/5- 1/2 = 6-5/10 =1/10 i.e. sacrifice made

Bala= 2/5 – 1/2 = 4-5/10 = -1/10 (being negative, it is a gain)

2 A, B, and C are partners sharing profits in the ratio of 5:3:2. They decided to share the profits in
the ratio of 2:3:5. Starting 1st April, they decided to adjust the following accumulated profits, losses
and reserves without affecting their book values, bypassing an adjustment entry.
3
Book Values ₹

Profit and Loss Account 15,000


General Reserve 60,000
Advertising Suspense Account 30,000

Answer: Dr. C and Cr. A with ₹13,500

3 Mention the points when a firm reconstitute.

Answer: A firm reconstituted in the event of.

 Change in the profit- sharing ratio among the existing partners 3

 Admission of a partner or partners

20 | P a g e
 The retirement of a partner

 Death of a partner

 The amalgamation of two or more partnership firms.

4 Define Investment Fluctuation Reserve

Answer: Investments are recorded in the book of a company at cost. However, in the market, it
might change. It may be higher or lower than the book value. Investment fluctuation reserve is a
reserve set aside out of profit to meet fall in the market value of the investment. 3

5 Explain the two types of the accounting treatment of Investment Fluctuation Reserve

Answer: The three types of the accounting treatment of Investment Fluctuation Reserve are.

 When the book value and market value of the investment are the same- The amount of
investment fluctuation reserve is transferred to partners’ capital account in their old profit- 3
sharing ratio.

 When the market value of investments is less than the book value- In this case, the
treatment on investment fluctuation reserve depends on the amount of decrease.

 When there is an increase in the market value of investment- The amount of investment
fluctuation reserve is distributed among partners and an increase in the value of the
investment is credited to revaluation account.

6 Hardeep and Sandeep are partners sharing profits in the ratio of 4:1. They decided to distributed
profits equally starting 1st April 2019. Their balance sheet as on 31st March 2019 shows a
balance of advertisement suspense of ₹20,000. Pass the journal entry at the time of change in
profit-sharing ratio.

Answer:
4

Journal

Date Particulars L.F Dr. ₹

1st April 2019 Hardeep’s Capital A/c Dr. 16,000


Sandee’s Capital A/c Dr. 4,000
To Advertisement Suspense A/c
(Being the advertisement suspense account written off)

7 X and Y are partners in firm sharing profits in the ratio 3: 2. hey decided to share future profit
equally. On the date of a change in the profit-sharing ratio, profit and loss account showed a debit
balance of ₹50,000. Pass journal entry for distribution of balance in profit and loss account
immediately before the change in the profit-sharing ratio.

Answer:
4

21 | P a g e
Journal

Date Particulars L.F Dr. ₹ Cr. ₹

X’s Capital A/c Dr. 30,000


Y’s Capital A/c Dr. 20,000
To Profit & Loss A/c 50,000
(Being the undistributed loss transferred to the capital accounts of the partners
on a change in the profit-sharing ratio.)

8 A , B and C were partners producing electronic goods and sharing profits and losses in the ratio of

2: 3:4. They decided to share future profits and losses in the ratio of 4:3:2. They also decided to
record the effect of the following without affecting their book value:

General Reserve Rs 1,60,000


4
Profit and Losses account (Cr) Rs 80,000

Advertisement suspense account Rs 60,000

You are required to give the necessary journal entries.

Ans.-

Calculation of Net Effect of Accumulated Profits/Losses

Rs

General Reserves 1,60,000

Add: Profit and Losses a/c 80,000

2,40,000

Less: Advertisement Suspense a/c 60,000

Net Effect 1,80,000

Calculation of Sacrificing and Gaining Ratio

A 2/9 – 4/9 =2/9 (GR)

B 3/9 – 3/9 = 0

C 4/9 – 2/9 = 2/9 (SR)

Particular Dr (Rs) Cr (Rs)

A’’s Capital a/c( 1,80,000X2/9) Dr 40,000

To C’s Capital a/c 40,000

(For Adjustment of G R. P&L a/c balance and


advertisement suspense a/c on change in Profit
sharing ratio )

22 | P a g e
9 Kiran, Ketan and Keshav are partners sharing profits in the ratio of 3:2:1. Goodwill appears in the
books at Rs 90,000. Ketan retires and the remaining partners decided to continue the firm.
Goodwill is valued at Rs 1, 20,000. Record the treatment of above transactions in the books of
kiran and Keshav who decided to share future profits in the ratio of 2:1.

4
Particular Dr (Rs) Cr (Rs)

Kiran’s Capital a/c Dr 45,000

Ketan’s Capital a/c Dr 30,000

Keshav ‘s Capital a/c Dr 15,000

To Goodwill a/c 90,000

(Being Exting goodwill written of o.p)

Kiran’s Capital a/c Dr 20,000

Keshav ‘s Capital a/c Dr 20,000

To Ketan’s Capital a/c 40,000

(For Ketan share of goodwill adjusted in G.R )

10 The average net profits Expected of the firm in future are Rs. 68,000 per year and capital invested
in the business by the firm is Rs. 3,50,000. The rate of interest expected from capital invested in
this class of business is 12%. The remuneration of the partners is estimated to be Rs. 8,000 for
the year. You are required to find out the value of goodwill on the basis of 2 years purchase of
4
super profits.

Answer- Average profit = 68,000-8000 = 60,000

Normal profit = 3,50,000 X 12/100 = 42,000

Super profit= 60,000 - 42,000 =18,000

Goodwill = 18,000 X 2 = 36,000

1 Parth, Raman and Zaisha are partners in a firm manufacturing furniture. They have been sharing
profits and losses in the ration of 5:3:2. From 1st April, 2019 they decided to share future profits
and losses in the ratio of 2:5:3. Their Balance Sheet showed a debit Balance of Rs. 4,000 in profit
and loss account; Balance of Rs. 36,000 in General Reserve and a balance of Rs.12,000 in
workmen’s compensation reserve. It was agreed that:
6
(i) The goodwill of the firm be valued at Rs.76,000.
(ii) The stock ( book value of Rs.40,000) was to be depreciated by 8%.
(iii) Creditors amounting to Rs.900 were not likely to be claimed.
(iv) Claim on account of workmen’s compensation amounted to Rs.20,000
(v) Investments (book value Rs.38,000) were revalued at Rs.40,000.
Pass necessary journal entries for the above.

23 | P a g e
TOPIC – ADMISSION OF A PARTNER

MULTIPLE CHOICE QUESTION :-


1 In case of admission of a partner, the entry for unrecorded investments will be : 1

a) Debit partners capital a/c and credit investment a/c


b) Debit revaluation a/c and credit investment a/c
c) Debit investment a/c and credit revaluation a/c
d) None of the above
2 Goodwill of a firm of A and B is valued at Rs 30000. It is appearing in the books at Rs 1
12000. C is admitted for ¼ share. What amount he is supposed to bring for goodwill ?

a) Rs 3000 b) Rs 4500 c) Rs 7500 d) Rs 10500


3 Ramesh and Suresh are partners sharing profits in the ratio of 2:1 respectively. Ramesh 1
Capital is Rs 102000 and Suresh Capital is Rs 73000. They admit Mahesh and agree to
th
give him 1/5 share in future profit. Mahesh brings Rs 14000 as his share of goodwill. He
agrees to contribute capital in the new profit sharing ratio. How much capital will be brought
by Mahesh ?

a) Rs 43750 b) Rs 45000 c) 47250 d) 48000


4 A and B are in partnership sharing profits in the ratio of 3:2 . They take C as a new partner. 1
Goodwill of the firm is valued at Rs 300000 and C brings Rs 30000 as his share of goodwill
in cash which is entirely credited to the Capital a/c of A. New profit sharing ratio will be :

a) 3:2:1 b) 6:3:1 c) 5:4:1 d) 4:5:1


th
5 X and Y are partners sharing profits in the ratio of 4:3. Z is admitted for 1/5 share and he 1
brings in Rs 140000 as his share of goodwill in cash of which Rs 120000 is credited to X
and remaining amount to Y. New profit sharing ratio will be :

a) 4:3:5 b)2:2:1 c) 1:2:2 d) 2:1:2


6 A and B are partners sharing profits in the ratio of 2:3. Their Balance Sheet shows 1
Machinery at Rs 200000; Stock at Rs 80000 and Debtors at Rs 160000.C is admitted and
new profit sharing ratio is agreed at 6:9:5. Machinery is revalued at Rs 140000 and a
provision is made for doubtful debts @5%. A’s share in loss on revaluation amount to Rs
20000. Revalued value Stock will be :

a) Rs 62000 b) Rs 100000 c) Rs 60000 d) Rs 98000


7 A, B and C are partners sharing profits in ratio of 3:2:1. They agree to admit D into the firm. 1
A, B and C agreed to give 1/3rd, 1/6th 1/9 th share of their profit. The share of profit of D will
be :

a) 1/10 b) 11/54 c) 12/54 d) 13/54


th
8 X and Y are partners sharing profits in the ratio 2 :3. They admitted Z for 1/5 share of 1
profits, for which he paid Rs 120000 against capital and Rs 60000 as goodwill. Find the
capital balances for each partner taking Z’s Capital as base capital.

a) Rs 300000, Rs 120000 and Rs 120000


b) Rs 300000, Rs 120000 and Rs 180000
c) Rs 192000, Rs 288000 and Rs 120000
d) Rs 300000, Rs 180000 and Rs 180000

24 | P a g e
rd
9 A,B, C and D are partners. A and B share 2/3 of profits equally and C and D share 1
remaining profits in the ratio of 3 : 2. Find the profit sharing ratio of A, B, C and D.

a) 5:5:3:2 b) 7:7:6:4 c) 2.5:2.5:8:6 d) 3:9:8:3


10 Sacrificing ratio is used to distribute…………..in case of admission of a partner : 1

a) Reserves b) Goodwill c) Revaluation Profit d) Balance in P&L a/c


11 X and Y are partners in a firm with capital of Rs 180000 and Rs 200000. Z was admitted for 1
rd
1/3 share in profits and brings Rs 340000 as capital, calculate the amount of goodwill :

a) Rs 240000 b) Rs 100000 c) Rs 150000 d) Rs 300000


12 A and B are partners sharing profits and losses in the ratio of 5:3 . On admission, C brings 1
Rs 70000 as Cash and Rs 43000 against Goodwill. New profit ratio between A, B and C is
7:5:4. The sacrificing ratio of A and B is :

a) 3:1 b) 1:3 c) 4:5 d) 5:9


13 A, B and C are partners in a firm. If D is admitted as a partner- 1

a) Old firm is dissolved


b) Old firm and partnership is dissolved
c) Old partnership is reconstituted
d) None of the above
14 A, B and C are partners in proportion of 3:6, 2:6 and 1:6 respectively. D was admitted in the 1
th
firm as a new partner with 1/6 share. What will be the new profit sharing ratios of the
partners.

a) 15:10:5:6 b) 10:15:6:5 c) 5:6:10:15 d) None of the above


15 What will be the entry when goodwill already appear in the books and new partner bring his 1
share of goodwill in case :

a) All partners capital a/c debit to goodwill a/c credit


b) Goodwill a/c debit to all partners capital a/c credit
c) Cash a/c debit to goodwill a/c credit
d) None of the above.

VERY SHORT ANSWER TYPE QUESTIONS :


1 What type of goodwill can be recorded in the books of accounts as per accounting standard 2
26.

2 What is meant by sacrificing ratio? 2

3 State any one purpose for admitting a new partner in a firm? 2

4 Define revaluation account. 2

5 State the treatment of existing goodwill at the time of admission of the partner. 2

6 When the new partner brings cash for goodwill,the amount credited to which account? 2

7 State one right acquired by a newly admitted partner 2

8 What is the nature of revaluation account? 2

9 What is meant by ‘Hidden Goodwill’ ? 2

10 Why should a new partner contribute towards goodwill on his admission ? 2

25 | P a g e
SHORT ANSWER TYPE QUESTIONS :
1 X and Y are partners sharing profits in the ratio of 3:2 Z joins with 1/5 share of profit 3
calculate and sacrificing ratio

2 Verma and Sharma are partners in a firm sharing profits and losses in the ratio of 5:3. They 3
admitted ghosh as a new partner fot 1/5 share of profits.ghosh is to bring Rs 20000 as
capital and Rs 4000 as his share of goodwill premium.give the necessary journal entries

a) When the amount of goodwill is retained in the business.


b) When the amount of goodwill is fully withdrawn
c) When 50% of the amount of goodwill is withdrawn.
3 A,B and C sharing profits and losses in the ratio of 4:3:2 , decide to admit D as a new 3
partner with effect from 1st April,2018. An extract of their balance sheet as at 31st
march,2018 is:

Liabilities Rs Assets Rs

Investment fluctuation reserve 18000 Investment(at cost) 200000

Show the accounting treatment of investment fluctuation reserve under the following
alternative cases.

Case 1. If there is no other information.

Case 2. If the market value of investment is Rs 200000

Case 3. If the market value of investment is Rs 191000

4 A and B are partners in a firm sharing profit and losses in the ratio of 4:1 they admitted C for 3
¼ share which she acquires from a find new profit sharing ratio

5 Rahul and Rakesh were partners in a firm sharing profits and losses in the ratio 5:3. They 3
admitted Hari as a new partner for 20% share in the profits and losses. Calculate new profit
sharing ratio among Rahul, Rakesh and Hari.

6 Pass entries in the firm’s Joounal for the following on admission of a partner: 4

i) Machinery be depreciated by Rs.16,000 and Building be appreciated by Rs.40,000.

ii) A provision be created for doubtful Debts @5% of Debtors amounting to Rs.80,000.

iii) A provision for warranty claims be increased by Rs.12,000.

7 At the time of admission of a new partner, the assets and liabilities of A and B were 4
revalued as follows.

i. A provision for Doubtful Debts @10% was made on sundry debtors (Sundry Debtors
Rs.50,000)

ii) Creditors were written back by Rs.5,000.

iii) Building was appreciated by 20% (Book Value of Building Rs.2,00,000)

iv) Unrecorded investments were worth Rs.15,000.

v) A provision of Rs.2,000 was made for an outstanding bill for repairs.

26 | P a g e
vi) Unrecorded Liability towards suppliers was Rs.3,000.

8 A and B are partners sharing profits in the ratio of 3:2. They admit C, a handicapped 4
graduate into partnership with 1/4th share in profits. The new profit sharing ratio is 5:4:3. C
brings into the business Rs. 1,00,000 for his capital but could not bring goodwill in cash. The
firms goodwill on C’ s admission was valued at Rs. 1,20,000. Goodwill appeared in the
books Rs.15,000.

a) Pass necessary journal entries in the books of the firm.


b) Point out the values in admitting C as a partner.
9 Hemant and N ishant were partners in a firm sharing in the profits of 3:2. Their capital were 4
Rs. 1,60,000 and Rs.1,00,000. They admitted Somesh on 1st April 2013 as a new partner
th
for 1/5 share in the future profits. Somesh bought Rs.1,20,000 as his capital. Calculate the
value of goodwill of the firm and record necessary journal entries fot the above transactions
on Somesh’s admission.

10 Amit and Sumit are partners sharing profits in the ratio of 5:3. They decided to admit Salma 4
(their old friend at Graduation level who has completed her MBA from Delhi University) as a
partner. Amit sacrificed 1/5th and Sumit 1/3rd of their profit share respectively in favour of
Salma.

i) Identify two values which in your opinion motivated Amit and Sumit to admit Salma as
their partner.

ii) Calculate new profit sharing ratio.

LONG ANSWER TYPE QUESTIONS :


1 A & B carrying on business in partnership and sharing profits and losses in the ratio of3:2 6
requires a partner when their Balance Sheet stood as follows:

Assets Amount Liabilities Amount

Creditors 11,800 Cash 1,500

A’s Capital 51,450 Stock 28,000

B’s Capital 36,750 88,200 Debtors 19,500

Furniture 2,500

Machinery 48,500

1,.00,000 1,00000

They admit C into partnership and gave him 1/8th share in the future profits in the following
terms.

i. Goodwill of ther firm will be valued twice the average of the last three years profits which
amounted to Rs.21,000; Rs.24,000 and Rs.25,560.

ii. C is to bring in cash for the amount of his share of goodwill.

iii. C is to bring Rs.15,000 as his capital.

Pass journal entries recording these transactions, draw out the Balance Sheet of the new
firm and state new profit sharing ratio.

27 | P a g e
st
2 Given below is the balance sheet of A and B who are carrying partnership business on 31 6
March 2018 A and B share profits and losses in the ratio of 2:1
st
Balance Sheet of A and B as on 31 March 2018

Assets Amount Liabilities Amount

Bills Payable 10,000 Cash in hand 10,000

Creditors 58,000 Cash at Bank 40,000

Outstanding Expenses 2,000 Sundry Debtors 60,000

Capital Accounts Stock 40,000

A-1,80,000 Plant 1,00,000

B-1,50,000 3,30,000 Building 1,50,000

4,00,000 4,00,000

C is admitted as a partner on the date of the Balance Sheet on the following terms
th
i. C will bring in Rs.1,00,000 as his capital and Rs. 60,0000 as his share of goodwill for 1/4
share in the profits.

ii. Plant is to be appreciated to Rs.1,20,000 and the value of Building is to be appreciated by


10%.

iii. Stock is found overvalued by Rs.4,000

iv. A provision for doubtful debts is to be created at 5% of Sundry Debtors.

v. A creditors were unrecorded to the extent of Rs.1,000.

Pass the necessaries journal entries. Prepare the revaluation account and Partner’s Capital
Account.
st
3 Charu and Harsha were partners in a firm sharing profits in the ratio of 3:2. On 1 April, 2014 6
their Balance Sheet was as follows:

Assets Amount Liabilities Amount

Creditors 17,000 Cash 6,000

General Reserve 4,000 Debtors 15,000

Workmen’s Comp Fund 9,000 Investment 20,000

InvFluc Fund 11,000 Plant 14,000

Provision for Doubtful Debts 2,000 Land and Building 38,000

Capital Account

Charu- 30,000

Harsha- 20,000 50,000

28 | P a g e
93,000 93,000

On the above date Vaishali was admitted for 1/4th share in the profits of the firm on the
following terms.

i. Vaishali will bring Rs.20,000 for her capital and Rs.4,000 for her share of goodwill
premium.

ii. All Debtors were considered good.

iii. The market value of Investments was Rs.50,000.

iv. There was a liability of Rs.6,000 for Workmen’s compensation.

v. Capital account of Charu and Harsha are to be adjusted on the basis of Vaishali’s Capital
by opening current Account.

Prepare Revaluation Account and partner’s Capital Account.

4 The balance sheet of Madhu and Vidhi who are sharing profits in the ratio of 2:3 as at 31st 6
March 2016 is given below

Liabilities Rs Assets Rs

Madhus capital 520000 Land and building 300000

Vidhis capital 300000 Machinery 280000

General reserve 30000 Stock 80000

Bills payable 150000 Debtors


300000
290000
Less:provision
10000 50000

Bank

1000000 1000000
st
Madhu and vidhi decided to admit gayatri as a new partner from 1 april 2016 and their new
profit sharing ratio will be 2:3:5.Gayatri bought Rs 400000a her capital and her share of
goodwill premium in cash.

A. Goodwill of the firm was valued at rs 300000


B. Land and building was found undervalued by rs 26000
C. Provision for doubtful debts was to be made equal to 5% of the debtors.
D. There was a claim of rs 6000 on account of workmen compensation.
E. Prepare revaluation account,partners capital accounts and the balance shreet
of the reconstituted firm
5 X and Y were partners in a firm sharing profits in 3:2 ratio. Z was admitted as a new partner 6
for 1/4th share in the profits on 1 st april 2019 the B/S of the firm as at 31st March 2019 was

Liabilities Amt Assets Amt

Creditors 10000 Cash 10000

29 | P a g e
Capital Debtors 9000

X 18000 Stock 10000

Y 34000 56000 Furniture 6000

General Reserve 34000 Machinery 20000

Building 45000

100000 100000

The terms of agreement an L’s admission were

i) Z will bring Rs 30000 for his capital and Rs 15000 for his share of goodwill.
ii) Building was valued at Rs 50000 and machinery at Rs 18000.
iii) The capital a/c of X and Y were to be adjusted in the profit sharing ratio.
Necessary cash was to be brought in or paid to them as the cash may be.
Prepare revaluation a/c, partners capital a/c and the balance sheet of X,Y and Z.

6 The Balance Sheet of Madan and Mohan who share profits and losses in the ratio of 3:2 as 8
st
at 31 March 2017 was as follows.

Liabilities Amount Assets Amount

Creditors 28,000 Cash at Bank 10,000

Workmen’s Comp Res 12,000 Debtors 65,000

General Reserve 20,000 - Provision for D/d 5,000 60,000

Capital Account Stock 30,000

Madan-60,000 Investment 50,000

Mohan-40,000 1,00,000 Patent 10,000

1,60,000 1,60,000

They decided to admit Gopal on 1st April 2017 for 1/4th share on the following terms.

i. Gopal shall bring Rs. 25,000 as his share of premium for goodwill.

ii. That unaccounted accrued income of Rs.500 be provided for.

Iii The market value of investment was Rs.45,000.

iv. A debtor whose dues of Rs.1,000 were written off as Rs. Bad Debts paid Rs. 800 in full
settlement.

v. A claim of Rs.2,000 on account of Workmen’s Compensation to be provided for.

vi. patents are undervalued by Rs.5,000.


th
vii. Gopal to bring in capital equal to 1/4 of the total capital of the new firm after all
adjustments.

Prepare revaluation account, Partner’s capital account and Balance Sheet of the new firm.

30 | P a g e
st
7 A,B and C were partners in a firm sharing profits in the ratio 3:2 :1. On 31 march,2015, 8
their balance sheet was as follows:

Liabilities Rs Assets Rs

Creditors 84000 Bank 17000

General reserve 21000 Debtors 23000

Capital a/c s Stock 110000

A 60000 Investments 30000

B 40000 Furniture and fittings 10000

C 20000 120000 machinery 35000

225000 225000

On the above date, D was admitted as a new partner and it was decided that:

a. The new profit sharing ratio between A,B,C and D will be 2:2:1:1
b. Goodwill of the firm was valued at rs 90000 and D bought his share of goodwill
premium in cash
c. The market value of investments was rs 24000
d. Machinery will be reduced to rs 29000
e. A creditor of rs 3000 was not likely tro claim the amount and hence to be written off
f. D will bring proportionate capital so as to give him 1/6th share in the profits of the
firm.
Prepare revaluation account, partners capital accounts and the balance sheet of the
reconstituted firm.

8 A and B are partners in a firm sharing profits in the ratio of 3:2 their Balance Sheet as at 31st 8
dec 2019 stood as under.

Liabilities Amt Assets Amt

Capital a/c Machinery 33000

A 35000 Furniture 15000

B 30000 65000 Investments 20000

General Reserve 10000 Stock 23000

Bank loan 9000 Debtors 19000

Creditors 36000 Less : Provision 2000 17000

Cash 12000

120000 120000

On that date they admitted into partnership for 1/4th share in the profit for the following
terms.

I) C brings capital proportionate to his share. He brings Rs 7000 in cash as his


share of goodwill.

31 | P a g e
II) All debtors are good.
III) Depreciate stock by 5% and furniture by 10%.
IV) An outstanding bill for repairs Rs 1000 will be brought in books.
V) Half of the investment were to be taken over by A & B in their profit sharing ratio
at book value.
VI) Bank loan is paid off.
VII) Partners agreed to share future profits in the ratio of 3:3:2.
Prepare revaluation a/c, partner’s capital a/c and Balance sheet of the new firm.
st
9 Raghu and Rishu are partners sharing profits in the ratio 3:2 their balance sheet as at 31 8
March 2009 was as follows –

Liabilities Amt Assets Amt

Creditors 86000 Cash in hands 77000

Employment provident fund 10000 Debtors 42000

Investment fluctuation reserve 4000 Less : provision 7000 35000

Capital a/c Investment 21000

Raghu 119000 Buildings 98000

Rishu 112000 231000 Plant & Machinery 100000

331000 331000

Rishabh was admitted on that date for 1/4th share of profit of the following terms :

i) Rishabh will bring Rs 50000 as his share of capital.


ii) Goodwill of the firm is valued at Rs 42000 and Rishabh will bring his share of
goodwill in cash.
iii) Buildings were appreciated by 20%.
iv) All debtors were good.
v) There was a liability of Rs 10800 included in creditors which was not likely to
arise.
vi) New profit sharing ratio will be 2:1:1.
vii) Capital of FRaghu, Rishi will be adjusted on the basis of Rishabh’s share of
capital and any excess or deficiency will be on the basis made by withdrawing
are bring in cash by the concerned partners as the case may be.
Prepare revaluation a/c, partners capital a/c and the balance sheet of the new firm.
st
10 A and B are partners sharing profits in the ratio of 4:3 the balance sheet as at march 31 8
2019 was as follows :

Liabilities Amt Assets Amt

Sundry creditors 25000 Cash 1800

Bills payable 5000 Bank 13000

Capital a/c Debtors 30500

A 80000 Less : provision 300 30200

B 60000 140000 Stock 25000

32 | P a g e
Plant 40000

Building 69000

170000 170000

They agreed to admit C into the partnership. C brings Rs 3500 as his share of goodwill and
also brings capital equal to 1/8 of the total capital of the new firm after all adjustments. After
c’s admission the revaluation a/c, partner’s capital a/c and the balance sheet of the new firm
were prepared complete the missing amounts in the following a/c :-

Revaluation A/c

Liabilities Amt Assets Amt

To Plant a/c By Building a/c

To Provision for BD a/c 350

To Profit transferred to

A’s capital a/c

B’s capital a/c

Capital A/c

Particulars A B C Particulars A B C

To bal c/d 83800 62850 By bal b/d

By Premium for
Goodwill

By Revaluation
a/c 1800 1350

By Cash a/c

83800 62850 83800 62850

Balance Sheet of the reconstituted firm as at 31st march 2019

Liabilities Amt Assets Amt

Creditors 25000 Building 67000

Bills payable 5000 Plant

Capital a/c Debtors 30500

A Less : Provision ------

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B Bank 13000

C Stock 25000

Cash

197600 197600

Retirement or death of a partner

1 marks question

1.What journal entry will be recorded for deceased partner share in profit from the closure of last balance sheet till
the date of his death?
2. Give any one difference between sacrificing and gaining ratio.
3. Why a retiring or heirs of deceased partner are entitled to a share of goodwill of the firm?
4. In which ratio do the remaining partners acquire the share of profit of the retiring partner?
5.X,Y and Z are partners sharing profits in the ratio, of 1/2, 2/5 and 1/10 find new ratio of remaining partner if Z
retires.
6. P,Q and R were partners in a firm sharing profit in the ratio of 5:4:3 respectively. Their capitals were 50000,
40000 and 30000 respectively. State the ratio in which the goodwill of the firm, amounting to 600000, will be
adjusted in the capital accounts of the remaining partners on the retirement of Q.
7. On the retirement of Hari from the firm of ‘Hari,Ram and Sharma’ the balance sheet showed a debit balance of
Rs12000 in the profit and loss account. How will you deal with this balance.
rd
8. Kumar, Verma and Naresh were partners in a firm sharing profit and loss in the ratio of 3:2:2. On 23 January,
2015 Verma died. Verma share of profit till the date of his death was calculated at Rs2350.
Pass necessary journal entry of the same in the books of the firm.
9.Akash, Navin and Jain are partners sharing profits in the ratio of 3:2:2. Jain died on 1st September, 2016. The total
amount owed by the firm to his executors was Rs 60000. The firm decided to pay him in three equal annual
installment carrying interest @6% p.abegening with 1st September, 2017. Pass the journal entry for recording the
above transaction on the date of Jains’s death.
10. A, B and C are partners sharing profits in the ratio of 4:3:2. B retires and his share was taken up by A and C in
the ratio of 3:2 find out the new ratio.
11. A, B and C are partners sharing in the ratio of 1/2:1/3:1/6. B retires and his share is taken by A and C in the ratio
of 5:3. Calculate the new ratio.
12. X, Y and Z are partners sharing profits in the ratio of 1/9:1/3 and 5/9. Z retires and surrenders ¾ of this share in
favor of X and remaining in favor of Y. calculate new ratio and gaining ratio.
13. P,Q,R and S were partners sharing profit in the ratio of 2:3:5:2. S retires and his share is acquired by Q and R in
the ratio of 3:2. Calculate the new ratio and gaining ratio.
st
14.A,B and C were partners in a firm. B died on 31 august, 2018. B’s share of profit from the closure of last
accounting year till the date of death was to be calculated on the basis of average of three completed years of profit
st
before death. Profit for the years ending 31 march 2016, 2017 and 2018 were Rs40000 : Rs50000 and 72000
respectively. The firm closes his book on 31st march every year. Calculate b’s share of profit till the date of her death
and pass the necessary journal entry.
15.A,B,C and D are partners sharing profits in the ratio of 4:3:2:1. A and C retires from the firm. Calculate the new
profit sharing ratio of B and D.

3&4 marks question

1, A,B and C were partners sharing profits in the ratio of 6:4:5 their capitals were A-Rs 100000, B-Rs80000 and C-
st
Rs60000. On 1 april 2018, B retired from the firm and the new profit sharing ratio between A and C was decided as
34 | P a g e
11:4. On B’s retirement the good will of the firm was valued at Rs 180000. Showing your calculations clearly pass
necessary journal entry for the treatment of goodwill on B’s retirement.
2. A,B,C and D are partners sharing profit in the ratio of 5:3:3:1. On the retirement of C, goodwill was valued at
Rs360000. C’s share of goodwill be adjusted into the capital accounts of A,B and D. pass necessary journal entry
for the treatment of goodwill when new profit sharing ratio is decided at 9:2:1.
3. A,B,C and D are partners sharing profits in the ratio of 4:3:2:1. On the retirement of B, goodwill was valued at
Rs300000. A,C and D decided to continue the firm sharing profits equally. Pass necessary journal entry.
4. .X,Y and Z are partners sharing profits in the ratio of 4:2:3. Y retires. On this date his capital after making
adjustment for reserves and revaluation exists at Rs200000. X and Z agreed to pay him Rs240000 in full settlement
of his account.Record necessary journal entry for the treatment of goodwill if X and Z decided to share future profits
equally
5.A,B and C are partners sharing profits in the ratio of 5:3:2. C retires and A and B agree to share future profits in
the ratio of 6:4. Good will is to be taken at two years purchased of the average profits of the last 5 years, which were
rs10000;rs25000;rs15000 (loss); Rs 36000 and Rs44000 respectively.
At the date of C’s retirement, following balances appeared in the books of the firm:
General reserve Rs120000
Profit and loss account (dr.) Rs30000
C’s capital Rs200000
You are require to record necessary journal entries in the books of the firm and prepare C’s capital account in his
retirement. (4)
6. A,B and C are sharing profits in the ratio of 4:3:2. A dies on 31st December, 2017 accounts are closed on 31st
st
march every year. Sales for the year ending 31 march 2017 amounted to Rs400000. Sale of Rs330000 amounted
between the period from 1 stapril 2017 to 31st December 2017. The profit for the year ending 31st march 2017
amounted to Rs60000. Calculate the deceased partners share in the current year profit of the firm.
(4)
5&6 marks question
1. Ajay, Vijay and Sanjay are partners in a firm sharing profits and losses in the ratio of 5:4:3. Vijay retires.
After making all adjustment relating to revaluation, goodwill and accumulated profits, etc. the capital
accounts of Ajay showed a credit balance of Rs200000 and that of Sanjay Rs100000. It was decided to
adjust capitals of Ajay and Sanjay in their profits sharing ratio. You are require to calculate the new capitals
of the partners and record necessary for surplus/deficit.
2. X,Y and Z are partners in a firm sharing profits in the ratio of 3:2:1. On april 1st 2018, X retires from the firm,
Y and Z agree that the capital of the new firm shall be fixed at Rs210000 in thas profit sharing ratio and the
capital accounts Y and Z after all adjustment on the date of retirement showed balances of 145000&63000
respectively. Sate the amount of actual cash to be brought in or to be paid to the partners.

3. The balance sheet of X,Y and Z who were shoring profits in the proportion of capitals as follows:
Liabilities Amount Assets Amount
Sundry cr. 7000 Cash at bank 15000
Capital account: Sundry Dr. 5000 4900
X Less prov. 100
Y 25000 Stock
Z Plant and machinery
20000 10000
Land and building
15000 11500

25000

35 | P a g e
67000 67000

Y retires and the following adjustments of the assets and liabilities have been made before the
ascertainment of the amount payable by the firm to Y:
(i) That the stock is depreciated by 5%
(ii) That the prov. Of doubtful debt be increased to 5% on debtors
(iii) That the land and building be appreciated at 20%.
(iv) That a prov of Rs750 be made on respect of O/S legal charges
(v) That the goodwill of entire firm be fixed at 16200 and Y shares of the same be adjusted into the
accounts of X and Z.
(vi) That X and Z decided to share future profit of the firm in equal proportion
(vii) That the entire capital of the new firm is fixed at Rs48000between X and Zin equal proportions. For
the purpose, actual cash to be brought in all paid off.
You are required to prepare the revaluation account, partner’s capital accounts , bank account and revised
balance sheet after Y retirement. Also indicate the gaining ratio.

4. The balance sheet of Sindhu, Rahul and kamlesh, who were sharing profits in the ratio of 3:3:4 respectively,
st
as at 31 march 2012 was as follows:
Liabilities amount Assets Amount
General reserve 10000 Cash 32000
Bills payable 20000 Stock 88000
Loan 24000 Investment 94000
Capitals Land and building 120000
Sindhu 120000 Sindhus’s loan 20000
Rahul 100000
kamlesh 80000 300000
354000 354000

Sindhu died on 31 stjuly 2012. The partnership deed provided for the following on the death of a partner:
(a) Goodwill of the firm be valued at two years purchase of average profit for the last three years which were
80000
(b) Sindus share of profit till the date of his death was to be calculated on the basis of sales .sales for the year
ended 31st march,2012 amounted to Rs800000 and that from 1stapril to 31stjuly 2012 Rs 300000. The profit
st
for the year ended 31 march 2012 was 200000
(c) Interest on capitals was to be provided @6% p.a
(d) According to Sindhu’s will, the executor should donate his share to “martichaya–an orphanage for girls”.
Prepare Sindhu’s capital account to be render to his executor. Also identify the value being highlighted in the
question
5. Brown and Smith are partners the partnership deed provides:
(i) That the accounts to be balanced on 31st December each year.
(ii) That the profit be divided as follows: Brown ½ :Smith1/3 and carry to a reserve account 1/6.
(iii) That in a event of death of a partner, his executors be entitled to be paid out:
(a) The capital to his credit at the date of death.
(b) His proportion of reserve at the date of the last balance sheet
(c) His proportion of profit to date of death based on the average profit of last three completed
years.
(d) By way of goodwill his proportion of the total profit for the three preceding years.

On 31st December, 2017 the ledger balances were:


Rs Rs
Brown capital 9000
Smith’s capital 6000

36 | P a g e
Reserve 3000
Creditors 3000
Bills receivable 2000
Investment 5000
cash 14000
21000 21000
The profits for three years were:
2015 Rs4200: 2016 Rs3900: 2017 Rs4500.Smith died on 1st may 2018. Show the accounts as
st
between the firm and smith’s executors as on May 1 , 2018.

Dissolution of partnership Firm

MCQ
Q.NO Question Mark

1. In which condition a partnership firm is deemed to be dissolved 1

(A) On a partner's admission

(B) On retirement of a partner

(C) On expiry of the period of partnership

(D) On loss in partnership

2. On firm’s dissolution, which one of the following account should be prepared at the last? 1

(A) Realisation Account


(B) partner's capital account
(C) Cash Account

(D) Partner's loan Account

3. Profit or loss of realisation account is transferred to: 1

(A) Profit & Loss Account

(B) Capital Accounts of Partners

(C) Balance Sheet

(D) None Of the above

4. On dissolution, if a partner undertakes to make payment of a liability of the 1

Firm ..............is debited

(A) Profit & Loss Account

(B) Realisation Account

(C) Partner's Capital Account

(D) Cash Account

5. Differentiate between dissolution of partnership and partnership firm on the basis of court’s 1

37 | P a g e
intervention.

Court’s Intervention

Ans:- Dissolution of partnership:- Court does not intervene because partnership is dissolved by
mutual agreement.

Dissolution of partnership firm :- A firm can be dissolved by the court’s order.

6. What shall be the journal entry for unrecorded assets in Realisation A/c 1

Ans:- Unrecorded Assets a/c .....Dr

To realisation A/C

7. On dissolution of a firm, out of the proceeds received from the sale of assets _________________ 1
will be paid first of all

a. Partner’s capital
b. Partner’s loan to firm
c. Partner’s additional capital
d. Outside creditors
8. ------------------is the journal entry for the treatment of partner’s loan appearing on the asset side of 1
the Balance Sheet, on dissolution of a partnership firm..
Ans: - Partner’s Capital A/c Dr.

To Partner’s Loan A/c

[Asset side loan of partner transferred to his


capital account on dissolution of firm]

9. On dissolution of a firm, cash in hand is transferred to: 1

a) Cash A/c
b) Realisation A/c
c) Creditor’s A/c
d) Partner’s Capital A/c
10. Realisation A/c is a: 1

a) Personal A/c
b) Real A/c
c) Nominal A/c
d) None of the above
11. In the event of dissolution of a partnership firm, the provision for doubtful debts is transferred to 1
a. Realisation a/c
b. Partners capital a/c
c. Sundry debtors
d. None of the above
12. On dissolution the balance of profit and loss a/c appearing on the assets side of a balance sheet is 1
transferred to
a. On the debit side of realization a/c
b. On the credit side of realization a/c
c. On the debit of partners capital a/c
d. On the credit side of partners capital a/c
13. An unrecorded asset was valued at RS 1,00,000. On firm,s dissolution, it was sold for 52%. 1

38 | P a g e
Realisation account will be credited with:

a) Rs 52,000

(b) RS 48,000

(c) Rs 1,00,000

(d) none of the above

14. At the time of dissolution, all assets are transferred to Realisation Account at their:- 1

a) Realized value
(b ) Market Value
c) Book value
d) Cost or markets price whichever is less.
15. Sundry Creditors amounted to Rs. 8,000. These were paid at a discount of 5% Realisation account 1
will be debited by...............

a) Rs. 8,000
b) Rs. 7,600
c) Rs. 400
d) Rs. 8,400

Q.NO Mark

1. Ramesh and Mahesh were in partnership sharing profits and losses in the ratio of 3:1.They 4
agreed to dissolve the firm. The assets realized Rs. 1, 50,000. The liabilities of the firm were
as follows:

Creditors Rs. 90,000; Loan from Ramesh Rs. 40000, Ramesh's capital Rs. 20,000 and
Mahesh's Capital Rs. 30,000. Show by mean of accounts the distribution of cash realized.

2. X, Y and Z are in partnership sharing in 7:5:8. They decided to dissolve the partnership. At the 4
date of dissolution their creditors amounted to Rs. 20,000, cash being Rs.1000 and in the
course of dissolution a contingent liability of Rs. 2,650 not brought into the accounts matured
and to be met. Their capitals stood at Rs. 12,000; Rs. 10,000; and 18,000 respectively. X had
lent to the firm in addition to capital Rs. 14,000. The assets

realises. 44,150.

Prepare the Realisation account and the partner's capital accounts. Also show the cash
account.

3. What journal entries would be passed for the following transactions on the dissolution of a firm, 4
after various assets (other than cash) and third parties liabilities have been transferred to
Realisation account?

a) Partner “A” took over the stock worth Rs.80, 000.


b) Firm paid Rs.40, 000 as compensation to employees.
c) Sundry creditors amounted to Rs.36, 000 which were settled at a discount of 15%.
d) There was an unrecorded bike of Rs.40, 000 which was taken over by partner “B” at
Rs.30, 000.
4. Pass the necessary Journal entries for the following transactions on the dissolution of the firm 4
of King and Singh after the various assets (other than cash) and outside liabilities have been
transferred to Realization Account:

39 | P a g e
(i) Bank Loan Rs.45,000 was paid

(ii) Stock worth Rs.60,000 was taken over by a partner Singh

(iii) King paid Rs.27,000 to a creditor

(iv) A liability not appearing in the books of accounts settled Rs.11,100

5. Pass necessary Journal entries for the following transaction on dissolution of the firm of Anita 4
st
and Ravi on 31 March 2018, after the various assets (other than cash) and the third party
liabilities have been transferred to Realisation A/c.

(a) Ravi was to get a remuneration of ₹ 23,000 for completing the dissolution process. He
also agreed to bear realization expenses. Realisation expenses of ₹ 10,000 were paid
by Ravi from the firm’s cash.
(b) Amitesh, an old customer whose account for ₹ 60,000 was written off as bad debt in
the previous year, paid 90%.
(c) Creditors of ₹ 40,000, accepted furniture valued at ₹ 38,000 in full settlement of their
claim.
Land and Building was sold for ₹ 3,00,000 through a broker who charged 2% commission.

6. Distinguish between “ Dissolution of partnership” and “ Dissolution of partnership firm” on the 3


basis of (i) Closure of Book ; (ii) Court’ s intervention and (iii) Economic Relationship

7. Give three points of distinguish between Revaluation Account and Realisation Account 3

8. State any three situations in which the court may order to dissolve a partnership firm. 3

9. Explain the provision of Section 48 of Indian partnership Act, 1932 dealing with the settlement 3
of accounts at time of dissolution of firm.

10. Distinguish between “Firm debt’s” and “Private Debts”. 3

Dissolution of Partnership Firm


Marking Scheme
Q.NO Mark

1. Realisation loss Rs. 30,000; Ramesh brings in Rs. 2,500 and Mahesh is paid Rs.22,500; Total of 4
cash A/c Rs. 1, 52,500

2. Realisation Loss Rs. 31500Total of cash A/c Rs. 45,150 4

3. A's capital a/c Dr ..................80,000 4

To Realisation a/c 80,000

(Being stock is taken over by “A”)

Realisation a/c Dr.............. 40,000

To bank a/c 40,000

(Being compensation paid to employee)

40 | P a g e
Realisation a/c Dr ........... 30,600

To Bank a/c 30,600

(Being stock is taken over by “A”)

B's capital a/c Dr................ 30,000

To Realisation a/c 30,000

(Being bike is taken over by “B”)

4. (i) For Loan : Realisation A/c Dr. and Bank’s A/c Cr with Rs.45,000 4

(ii) For Stock : Singh Dr. and Realisation A/c Cr.60,000

(iii) For Creditor’s Payment : Realisation A/c Dr and King Cr 27,000

(iv) For unrecorded liability: Realisation A/c Dr and Bank Cr 11,100

(1 marks for each)

5. (a)(i) Realisation A/c .................. Dr. 23,000 4

To Ravi’s Capital A/c 23,000

(ii) Ravi’s Capital A/c................Dr. 10,000 11/2

To Cash A/c 10,000

(b) Bank A/c ..........................Dr. 54,000 1

To Realisation A/c 54,000

(c) No Entry ½

(d) Bank A/c ..........................Dr. 2,94,000 1

To Realisation A/c 2,94,000

6. Difference between dissolution of partnership different from dissolution of partnership firm. 3


( 1 Mark for each)

7. 1 Mark for each correct difference. 3

8. 1 Mark for each correct definition. 3

9. 1 Mark for each correct definition 3

10. 1 Mark for each correct difference 3

LONG ANSWER TYPE QUESTIONS (8 MARKS)

Que. Marks
No.

41 | P a g e
1. Surjit and Rahi were sharing profits (losses) in the ratio of 3:2, their Balance Sheet as on 8
March 31, 2018 is as follows:

Balance Sheet of Surjit and Rahi as on March 31, 2018

Liabilities Amount Assets Amount

(Rs.) (Rs.)

Creditors Mrs. 38,000 Bank 11,500

Surjit loan 10,000 Stock 6,000

Reserve 15,000 Debtors 19,000

Rahi’s loan 5,000 Furniture 4,000

Capital’s: Plant 28,000

Surjit 10,000 Investment 10,000

Rahi 8,000 18,000 Profit and Loss 7,500

86,000 86,000

Additional Information

The firm was dissolved on March 31, 2018 on the following terms:

1. Surjit agreed to take the investments at Rs. 8,000 and to pay Mrs. Surojit’s loan.
2. Other assets were realised as follows: Stock Rs. 5,000, Debtors Rs. 18,500, Furniture
Rs. 4,500, Plant Rs. 25,000
3. Expenses on realisation amounted to Rs. 1,600.

4. Creditors agreed to accept Rs. 37,000 as a final settlement.

You are required to prepare Realisation account, Partner’s Capital account and Bank
account.

2. Shilpa, Meena and Nanda decided to dissolve their partnership on March 31,2018. Their profit 8
sharing ratio was 3:2:1 and their Balance Sheet was as under:

Balance Sheet of Shilpa, Meena and Nanda as on March 31, 2018

Liabilities Amount Assets Amount

(Rs.) (Rs.)

Capitals: Land 81,000

Shilpa 80,000 Stock 56,760

Meena 40,000 1,20,000 Debtors 18,600

Bank loan 20,000 Nanda’s capital 23,000

Creditors 37,000 Cash 10,840

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General reserve 12,000

Provision for doubtful debts 1,200

1,90,200 1,90,200

Additional Information

The stocks of value of Rs. 41,660 are taken over by Shilpa for Rs. 35,000 and she agreed to
discharge bank loan. The remaining stock was sold at Rs. 14,000 and debtors amounting to
Rs. 10,000 realised Rs. 8,000. Land is sold for Rs. 1,10,000. The remaining debtors realised
50% at their book value. Cost of realisation amounted to Rs. 1,200. There was a typewriter not
recorded in the books worth Rs. 6,000 which were taken over by one of the Creditors at this
value. Prepare Realisation Account, Capital account and Bank account.

3. Rita, Geeta and Ashish were partners in a firm sharing profits/losses in the ratio of 3:2:1. On 8
March 31, 2018 their balance sheet was as follows:

Liabilities Amount Assets Amount

(Rs.) (Rs.)

Capitals: Cash 22,500

Rita 80,000 Debtors 52,300

Geeta 50,000 Stock 36,000

Ashish 30,000 1,60,000 Investments 69,000

Creditors 65,000 Plant 91,200

Bills payable 26,000

General reserve 20,000

2,71,000 2,71,000

Additional Information:-

On the date of above mentioned date the firm was dissolved:

1. Rita was appointed to realise the assets. Rita was to receive 5% Commission on the
rate of assets (except cash) and was to bear all expenses of realisation,
2. Assets were realised as follows:
Debtors Rs. 30,000, Stock Rs .26,000; Plant Rs. 42,750

3. Investments were realised at 85% of the book value,


4. Expenses of realisation amounted to Rs. 4,100,
5. Firm had to pay Rs. 7,200 for outstanding salary not provided for earlier,
6. Contingent liability in respect of bills discounted with the bank was also materialised
and paid off Rs. 9,800,

Prepare Realisation account, Capital Accounts of Partner’s and Cash Account

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4. Anup and Sumit are equal partners in a firm. They decided to dissolve thePartnership on 8
December 31, 2018. When the balance sheet is as under :

Balance Sheet of Anup and Sumit as on December 31, 2018

Liabilities Amount Assets Amount

(Rs.) (Rs.)

Sundry Creditors 27,000 Cash at bank 11,000

Reserve fund 10,000 Sundry Debtors 12,000

Loan 40,000 Plants 47,000

Capital Stock 42,000

Anup 60,000 Lease hold land 60,000

Sumit 60,000 1,20,000 Furniture 25,000

1,97,000 1,97,000

Additional Information

The Assets were realised as follows:

Lease hold land Rs. 72,000; Furniture Rs. 22,500; Stock Rs. 40,500; Plant Rs. 48,000; Sundry
Debtors Rs. 10, 500; The Creditors were paid Rs. 25,500 in full settlement. Expenses of
realisation amount to Rs. 2,500.

Prepare Realisation Account, Bank Account, Partners Capital Accounts to close the books of
the firm.

5. Sanjay, Tarun and Vineet shared profit in the ratio of 3:2:1. On March 8

31,2019 their balance sheet was as follows :

Balance Sheet of Sanjay, Tarun and Vineet as on March 31, 2019

Liabilities Amount Assets Amount

(Rs.) (Rs.)

Capitals:- Plant 90,000

Sanjay 1,00,000 Debtors 60,000

Tarun 1,00,000 Furniture 32,000

Vineet 70,000 2,70,000 Investments 70,000

Creditors 80,000 Bills receivable 36,000

44 | P a g e
Bills payable 30,000 Stock 60,000

Cash in hand 32,000

3,80,000 3,80,000

Additional Information

On this date the firm was dissolved. Sanjay was appointed to realise the assets. Sanjay was to
receive 6% commission on the sale of assets (except cash) and was to bear all expenses of
realisation. Sanjay realised the asset as follows: Plant Rs. 72,000, Debtors Rs.54,000,
Furniture Rs. 18,000, Stock 90% of the book value, Investments Rs. 76,000; and Bills
receivable Rs.31,000. Expenses of realisation amounted to Rs.4,500.

Prepare Realisation Account, Capital Accounts and Cash Account

6. Lal and Pal were partners in a firm sharing profits in the ratio of 3:7. On 1.4.2015 their firm was 6
dissolved. After transferring assets (other than cash) and outsider’s liabilities to realisation
account, you are given the following information:-
a) A creditor of Rs 3,60,000 accepted machinery valued at Rs. 5,00,000 and paid to the
firm Rs. 1,40,000.
b) A second creditors for Rs 50,000 accepted stock at Rs. 45,000 in full settlement of his
claim.
c) A third creditor amounting to Rs. 90,000 accepted Rs. Rs. 45,000 in cash and
investments worth Rs. 43,000 in full settlement of his claim.
d) Loss on dissolution was Rs. 15,000.
Pass necessary journal entries for the above transactions in the books of firm assuming that all
payments were made by cheque

7. Srijan, Raman and Manan were partners in a firm sharing profits and losses in the ratio of 6
2:2:1. On 31st March, 2017 their Balance sheet was as follows:-
Balance sheet of Srijan, Raman and Manan as on 31.03.2017

Liabilities Amount Assets Amount

Creditors 75,000 Capital- Manan 10,000

Capital Plant 2,20,000

Srijan 2,00,000 Stock 50,000

Raman 1,50,000 3,50,000 Sundry Debtors 60,00

Bills Payable 40,000 Bank 10,000

Outstanding salary 35,000 Investment 70,000

Profit & Loss a/c 80,000

5,00,000 5,00,000

On the above date they dissolved the firm and following amounts were realised:-
a) Srijani was appointed to realised the assets and discharge the liabilities. Srijani was to
receive 5% commission on the sale of assets (except Cash) and was to bear all expenses of

45 | P a g e
realisation.
b) Assets were realised as follows:
(Rs.)
Plant 85,000
Stock 33,000
Debtors 47,000
c) Investments were realised at 95% of the book value.
d) The firm has to pay Rs. 7,500 for an outstanding repair bill not provided for earlier.
e) A contingent liability in respect of bills receivable, discounted with the bank had also
materialised and had to be discharged for Rs. 15,000.
f) Expenses of realisation accounting to Rs. 3,000 were paid by Srijan.
Prepare Realisation Account, partner’s capital account and Bank Account
st
8. A, B and C were partners in a firm sharing profits and losses in the ratio of 3:2:1. On 31 6
March, 2018 their Balance sheet was as follows:-
Balance sheet of A, Band C as on 31.03.2018

Liabilities Amount Assets Amount

Creditors 2,00,000 By Stock 3,00,000

Capitals By S. Debtors- 1,95,000

A 7,50,000 Less:- Provision for

B 3,00,000 doubtful debts 5,000 1,90,000

C 2,50,00 13,00,000 Cash at bank 3,00,00

Fixed Assets 7,10,000

15,00,000 15,00,000

On the above date they dissolved the firm and following amounts were realised:-
Fixed Assets Rs. 6,75,000; Stock Rs. 3,39,000; Debtors Rs. 1,35,000; Creditors were
Paid Rs. 1,85,000 in full settlement of their claim. Expenses on Realisation amounted to Rs.
19,000.
Pass the necessary journal entries on the dissolution of the firm.
9. Ashu and Harish are partners sharing profit and losses as 3:2. They decided to dissolve the 6
firm on December 31, 2019. Their balance sheet on the above date was:

Balance Sheet of Ashu and Harish as on December 31, 2019

Liabilities Amount Assets Amount

(Rs.) (Rs.)

Capitals: Building 80,000

Ashu 1,08,000 Machinery 70,000

Harish 54,000 1,62,000 Furniture 14,000

46 | P a g e
Creditors 88,000 Stock 20,000

Bank overdraft 50,000 Investments 60,000

Debtors 48,000

Cash in hand 8,000

3,00,000 3,00,000

Additional Information

Ashu is to take over the building at Rs. 95,000 and Machinery and Furniture is take over by
Harish at value of Rs. 80,000. Ashu agreed to pay Creditor and Harish agreed to meet Bank
overdraft. Stock and Investments are taken by both partner in profit sharing ratio. Debtors
realised for Rs. 46,000, expenses of realisation amounted to Rs. 3,000. Prepare necessary
ledger account

10. Rose and Lily shared profits in the ratio of 2:3. Their Balance Sheet on March31, 2019 was as 6
follows:

Balance Sheet of Rose and Lily as on March 31, 2019

Liabilities Amount Assets Amount

(Rs.) (Rs.)

Creditors 40,000 Cash 16,000

Lily’s loan 32,000 Debtors 80,000

Profit and Loss 50,000 Less: Provision 3,600 76,400

Capitals: Inventory 1,09,600

Lily 1,60,000 Bills receivable 40,000

Rose 2,40,000 4,00,000 Buildings 2,80,000

5,22,000 5,22,000

Additional Information

Rose and Lily decided to dissolve the firm on the above date. Assets (except bills receivables)
realised Rs. 4,84,000. Creditors agreed to take Rs. 38,000. Cost of realisation was Rs. 2,400.
There was a Motor Cycle in the firm which was bought out of the firm’s money, was not shown
in the books of the firm. It was now sold for Rs. 10,000. There was a contingent liability in
respect of outstanding electric bill of Rs. 5,000 Bill Receivable taken over by Rose at Rs.
33,000.

Show Realisation Account, Partners Capital Account, Loan Account and Cash Account.

MARKING SCHEME
47 | P a g e
Que Mark
. No. s

1. Loss on Realisation Rs. 6,600, Total of Cash Account Rs. 64,500) 8

2. Profit on Realisation Rs. 20,940, Total of Cash Account Rs. 1,64,650) 8

3. Loss on Realisation Rs. 1,15,970. Total of Cash Account Rs. 1,79,900 8

4. Realisation Profit Rs. 6,500. Total of Bank Account Rs-2,04,500 8

5. Loss on Realisation Rs.61,300, Total of Cash Account Rs.3,37,000 8

6. Journal Entry 6

Sl no. Particulars L.F Dr. Cr.

i) Realisation a/c.....Dr. 800

To bank a/c 800

(Being payment of dissolution expenses)

ii) Realisation a/c.....Dr. 800

To prabhu capital a/c 800

(Being dissolution expenses paid By Prabhu on behalf of t


he firm )

iii) Realisation a/c....Dr. 10000

To Geeta capital a/c 10000

(Being remuneration allowed to Geeta for dissolution work )

iv) Janki capital a/c....Dr. 500

Realisation a/c......Dr. 5000

To Mohan capital a/c 5500

(Being expenses paid by Mohan on behalf of Janki and co


mmission allowed to janki)

v) No entry

vi) No entry

7. Loss on Realisation- Rs. 2,02,575; Final Payment to Srijan- Rs. 98,545; Raman- Rs. 36,970; 6
Manan will bring Rs. 66,515. Total Bank a/c-Rs. 3,08,015.

8. 6

9. Loss on Realisation Rs. 6,000, Cash/Bank Total Rs. 59,600 6

10. Realisation Profit Rs. 15,600, Total of Cash Account Rs. 5,10,000 6

48 | P a g e
COMPANY ACCOUNTS

1 Marks MCQ Questions

1 A company forfeited 2,000 shares of Rs. 10 each (which were issued at par) held by A for non-payment
of allotment money of Rs. 4 per share. The called up value per share was Rs. 9.On forfeiture, the amount
debited to share capital is :

(a)

Rs. 10,000 (b) Rs. 8,000 (c) Rs. 2,000 (d) Rs. 18,000

2 The rate of interest paid on calls in advance as per table A is:(a)

5% p.a. (b) 6% p.a. (c) 10% p.a. (d) 4% p.a.

3 G Ltd. acquired assets worth Rs. 75,000 from H Ltd. by issued of share of Rs. 10 at a premium of Rs. 5.
The number of shares to be issued by G Ltd. to settle the purchaseconsideration.(a)

6,000 shares (b) 7,500 shares (c) 9,375 shares (d) 5,000 shares

4 ABC Ltd forfeited 20 shares of Rs. 10 each, Rs. 8 called up, on which X paid application and allotment
money of Rs. 2 and Rs. 3 respectively. These shares were re-issued to Y at Rs. 6fully paid. What was
the balance in share forfeiture account before shares were re-issued ?(a)

Rs. 40 (b) Rs. 60 (c) Rs. 100 (d) Rs. 160

5 Company formed by special act is called

(a)Chartered Company

(b)Statutory Company

(c)Registered Company
(d)None of the above

6 Companies act is governed by

(a)RBI

(b)SEBI

(c)Partnership Act

(d)Ministry of Corporate Affairs

49 | P a g e
7 Shares which have preferential rights are called

(a)Equity Share (b) Preference Share (c)Debenture (d) Bond

8 Capital which is called only at the time of winding –up of the company is called

(a)Capital Reserve (b)Reserve Capital (c) Issued Capital (d) Authorised Capital

9 A company issued 25000 shares and received applications for 35000 shares. Company wants to allot
shares to everyone who has applied. What will be the ratio of allotment?

(a)6:7

(b)7:5

(c)5:7

(d)7:6

10 A company issued 10000 shares of Rs. 10 each. Amount is payable as Rs. 2 on application, Rs. 5 on
allotment and Rs. 3 on first and final call. A shareholder who had 1000 shares failed to pay allotment and
first call amount on due date. After a month, he paid the due amount. What will be the amount received by
the company against issue of share?

(a)Rs. 92,000

(b)Rs.90,000

(c)Rs.1,00,000

(d)Rs.8,000

11 Equity shareholders are

(a)Creditors

(b)Owners

(c)Customer of the company

(d) None of the above

12 The profit on reissue of forfeited share is transferred to

(a)General Reserve

(b)Capital Redemption Reserve

(c)Capital Reserve

(d)Revenue Reserve

13 Which kind of preference share entitles its holders to receive arrear of dividends of previous years?

(a)Cumulative Preference Shares

(b) Non-Cumulative Preference Shares

(c) Convertible Preference Shares

50 | P a g e
(d)Non- Convertible Preference Shares

14 Under which section of Companies Act 2013,” Company means a company incorporated under this act on
any previous company law.”

(a)Section 2(20)

(b) Section 2(84)

(c) Section 2(44)

(d) Section 2(54)

15 Which section of the companies act 2013 deals with the Issued Capital?

(a)Section 2(50)

(b) Section 2(40)

(c) Section 2(30)

(d) Section 2(20)

1 Marks MCQ Questions Answers

1 (d) Rs. 18,000

2 (b) 6% p.a.

3 (d) 5,000 shares

4 (c) Rs. 100

5 (b)Statutory Company

6 d)Ministry of Corporate Affairs

7 (b) Preference Share

8 (b)Reserve Capital

9 (c)5:7

10 (c)Rs.1,00,000

11 (b)Owners

12 (c)Capital Reserve

13 (a)Cumulative Preference Shares

14 (a)Section 2(20)

15 Section 2(50)

51 | P a g e
3 Marks Questions

1 Rohit Ltd. forfeited 360 shares of Rs.10 each, Rs.8 called up, issued at a premium of Rs.2

per share to R for non-payment of allotment money of Rs.5 per share (including

premium). Out of these, 320 shares were re-issued to Sanjay as Rs.8 called up for

Rs.10 per share fully paid up. Give entries.

2 VK Limited forfeited 500 shares of Rs.100 each for the non-payment of first call of

Rs.30 per share. The final call of Rs.10 per share was not yet made. The forfeiture

shares were reissued for Rs.65,000 fully paid up. Give journal entries.

3 Lawrence Limited purchased Machinery for Rs.49,500 from Pinegrove Limited. The

payment to Pinegrove Ltd. was to be made by issue of Equity Shares of Rs.100 each.

Pass necessary journal entries in the books of Lawrence Limited for the above

transactions when:

(i) Shares were issued at 10% Premium.

(ii) Shares were issued at 10% Discount.

4 Enumerate the condition laid down under Companies Act 2013 regarding utilization of Securities Premium
Reserve Account.

5 On st 1 April, 2013 Janta ltd. was formed with an authorized capital of Rs 30,00,000 divided into 30,000
shares of Rs. 100 each. The company issued 10,000 shares at par. The issue price was payable as
follows: On application - Rs 30 per share On allotment - Rs 50 per share On final call - Rs 20 per share
The issue was fully subscribed and the company allotted shares to all the applicants. All money was
received except the final call money on 1,000 shares.Show the ‘share capital’in the balance sheet of st
the company as per Schedule III of the companies act,2013 as at 31 march,2014 and also show note to
accounts.

3 Marks Questions Answers

1 (i) Sh.Capital A/c Dr. 2,880; Securities Premium Dr.720; Sh. Allotment A/c Cr.1,800; Sh.

Forfeiture A/c Cr.1,800

(ii) Bank A/c Dr.3,200; Sh. Capital Cr.2,560; Securities Premium Cr.640

(iii) Sh. Forfeiture A/c Dr.1,600; Capital Reserve Cr Rs.1,600

2 (i) Sh.Capital A/c Dr. 45,000; Sh. Call A/c Cr.15,000; Sh. Forfeiture A/c Cr.30,000

(ii) Bank A/c Dr.65,000; Sh. Capital Cr.50,000; Securities premium Cr 15,000

(iii) Sh. Forfeiture A/c Dr.30,000; Capital Reserve Cr Rs.30,000

3 (i) Machinery A/c Dr. 49,500; Pinegrove Limited Cr 49,500

(ii) Pinegrove Limited Dr 49,500; Sh. Capital Cr 45,000; Securities Premium

52 | P a g e
Cr 4,500;

(iii) Pinegrove Limited Dr 49,500; Discount Dr 5,500; Sh. Capital Cr 55,000

Number of Shares to be issued (Case 1) = 450

Number of Shares to be issued (Case 2) = 550

4 SECURITIES PREMIUM RESERVE – It can be utilized for the purpose prescribed in section 52(2) of the
Companies Act, 2013, which are: (i ) writing off preliminary expenses; (ii) Writing off expenses such as
share such as share issue expenses, commission ,discount allowed on issue of securities ; (iii) Providing
for the premium payable on redemption of debentures or Preference Shares; or (iv) in buying-back its own
shares. (v) Issuing fully paid bonus shares;

4 Marks Questions

1 Virat Limited issued 15,000 Equity Shares @10 each at a discount of 10%, payable as

follows:

On Application................................... Rs.3

On Allotment..................................... Rs.4

Balance................................................. on first and final Call

Applications were received for 23,000 equity shares. Pro-rata allotment was made to

20,000 only and their excess money was utilized on allotment only. Sohan one

Share holder to whom 300 shares were allotted failed to pay allotment and call. Give

necessary journal entries.

53 | P a g e
2 Mahendra Limited issued 20,000 Equity Shares @10 each at a premium of 30%, payable as

follows:

On Application....................... Rs.5 ( including premium Rs.2)

On Allotment......................... Rs.4 ( including premium Re.1)

Balance.................................. on first and final Call

Applications were received for 30,000 equity shares. Pro-rata allotment was made to

24,000 only and their excess money was utilized on allotment only. Rohan one

shareholder who applied for 960 shares failed to pay allotment and call. Give

necessary journal entries.

3 13,000 Equity Shares of Rs.50 each issued at a premium of Rs.8 per share, were

forfeited for the non-payment of allotment money. (Including premium) of Rs.23 per

share. Application money of Rs.15 per share had been received on these shares and

the first and final call of Rs.20 per share was not made. The forfeited shares were

reissued at Rs.55 per share fully paid up. Give journal entries.

4 Pass necessary journal entries for the following transactions in the books of Vijay Ltd. :

(i) Purchased furniture for Rs. 2,50,000 from M/s Furniture Mart. The

payment to M/s Furniture Mart was made by issuing equity shares of

Rs.10 each at a premium of 25%.

(ii) Purchased a running business from Aman Ltd. for a sum of Rs.15,00,000.

The payment of Rs.12,00,000 was made by issue of fully paid equity shares

of Rs.10 each and balance by a bank draft. The assets and liabilities

consisted of the following :

Plant 3,50,000; Stock 4,50,000; Land and Building 6,00,000; Sundry

Creditors 1,00,000.

5 Rohit Limited forfeited 200 shares of Rs.10 each, issued at a discount of 10%. The

company has called up only Rs.8 per share. Final call of Rs.2 each has not been made

on these shares. These shares were allotted to Mr. Mohan, who did not pay the first

call of Rs.3. Out of which 120 shares were reissued at Rs.7 per share, as Rs.8 paid up.

Give journal entries

54 | P a g e
4 Marks Questions Answers

1 (i) Bank A/c Dr.69,000; Sh. Application A/c Cr. 69,000

(ii) Sh. Application A/c Dr. 69,000; Sh. Capital A/c Cr.45,000; Sh. Allotment Cr 15,000;

Bank A/c Cr 9,000

(iii) Sh. Allotment A/c Dr.60,000; Discount Dr 15,000; Sh. Capital A/c Cr.75,000

(iv) Bank A/c Dr.59,100; Sh Allotment A/c Cr.59,100

(v) Sh. 1st Call A/c Dr.30,000; Sh. Capital A/c Cr.30,000

(vi) Bank A/c Dr.29,400; Sh Allotment A/c Cr.29,400

2 (i) Bank A/c Dr.1,50,000; Sh. Application A/c Cr. 1,50,000

(ii) Sh. Application A/c Dr. 1,50,000; Sh. Capital A/c Cr.60,000; Sh. Allotment Cr 20,000;

Bank A/c Cr 30,000; Securities Premium Cr 40,000

(iii) Sh. Allotment A/c Dr.80,000; Sh. Capital A/c Cr.60,000; Securities premium Cr 20,000

(iv) Bank A/c Dr.57,600; Sh Allotment A/c Cr.57,600

(v) Sh. 1st Call A/c Dr.80,000; Sh. Capital A/c Cr.80,000

(vi) Bank A/c Dr.76,800; Sh Allotment A/c Cr.76,800

3 (i) Equity Sh. Capital A/c Dr. 3,90,000; Securities Premium Dr 1,04,000; Equity Sh.

Allotment Cr 2,99,000; Sh. Forfeiture A/c Cr 1,95,000.

(ii) Bank A/c Dr.7,15,000; Equity Sh. Capital A/c Cr 6,50,000; Securities premium Cr 65,000

(iii) Sh. Forfeiture A/c Dr. 1,95,000; Capital Reserve Cr 1,95,000

4 Case (a) (i) Assets A/c Dr 5,00,000; Liabilities Cr 3,00,000; Capital Reserve Cr 65,000;

Goodwill Limited Cr 1,35,000

(ii) Goodwill Limited Dr 1,35,000; Discount Dr 15,000; Sh. Capital Cr 1,50,000

Case (b) (i) Furniture A/c Dr 5,00,000; Ramprastha Limited Cr 5,00,000

(ii) Ramprastha Limited Dr 5,00,000; Sh. Capital Cr 4,00,000; Securities Premium

Cr 1,00,000

5 (i) Equity Sh. Capital A/c Dr. 1,600; Discount Cr. 200; Equity Sh. Call Cr600; Sh. Forfeiture

A/c Cr 800

(ii) Bank A/c Dr.840; Discount Dr. 120; Equity Sh. Capital A/c Cr 960;

(iii) Sh. Forfeiture A/c Dr. 240; Capital Reserve Cr 240.

55 | P a g e
6 Marks Questions

1 Jaspreet Limited invited applications for 1,00,000 equity shares of Rs.10 each payable

Rs.2 on application, Rs.3 on allotment and the balance on first and final call.

Applications were received for 3,00,000 shares and the shares were allotted on

prorata basis. The excess application money was to be adjusted against allotment

only. Mohan, a shareholder, who had applied for 3,000 shares, failed to pay the call

money and his shares were accordingly forfeited and reissued @Rs.8 per share fully

paid. Pass necessary journal entries.

2 (a) X Ltd. forfeited 30 shares of Rs 10 each fully called up held by Karim for nonpayment of allotment
money of Rs3 per share and Final call of Rs4 per share. He had paid the application money of Rs 3 per
share. These shares were reissued to Salim for Rs 8 per share.

(b) X ltd. Forfeited 20 shares of Rs 10 each, Rs 7 called up on which Mahesh had paid application and
allotment money of Rs 5 per share. Of these, 15 shares were reissued to Naresh as fully paid up for Rs 6
per share.

4 Star Ltd. Was registered with a capital of Rs. 4, 00,000 in shares of Rs. 100 each. It issued 2,000 of such
shares payable Rs. 25 per share on application; Rs. 25 on allotment; Rs. 20 on first call, and the balance
as and when required.
All moneys payable on application and allotments were duly received; but when the first call of Rs. 20 per
share was made, one shareholder holding 100 share failed to pay the amount due and another
shareholder holding 200 shares paid them in full.Record these transactions in the journal and also show
the Share Capital in the Balance Sheet of Star Ltd.

5 K. Ltd. invited applications for issuing 70,000 Equity Shares of Rs. 10 each at a premium of Rs. 35 per
share. The amount was payable as follows :
On Application Rs. 15 (including Rs. 12 premium)
On Allotment Rs. 10 (including Rs. 8 premium)
On First and Final Call Balance

56 | P a g e
Applications for 65,000 shares were received and allotment was made to all the applicants. A
shareholder, Ram, who was allotted 2,000 shares, failed to pay the allotment money. His shares were
forfeited immediately after allotment. Afterwards, the first and final call was made. Sohan, who had 3,000
shares, failed to pay the first and final call. His shares were also forfeited. Out of the forfeited shares,
4,000 shares were re-issued at Rs. 50 per share fully paid up. The re-issued shares included all the
shares of Ram.
Pass necessary journal entries for the above transactions in the books of R. K. ltd.

6 Marks Questions Answers

1 Capital Reserve Rs.3,000

2 (a) [Capital Reserve – 30]

(b) [Capital Reserve – 15]

4 Call in Advance 30000 and Calls in arrear 2000.

5 Capital Reserve Rs. 16,000.

8 Marks Questions

1 Anshika Ltd. issued applications for 2,00,000 equity shares of ₹10 each, at a premium of ₹4 per share.
The amount was payable as follows: On application ₹ 6 (including ₹2 premium) On allotment ₹ 7
(including ₹2 premium) Balance on first and final call Applications for 3,00,000 shares were received.
Allotment was made to all the applicants on pro-rata basis. Mehak to whom 400 shares were allotted,
failed to pay allotment and call money. Khushboo who had applied for 300 shares failed to pay call
money. These shares were forfeited after Final call. 400 of the forfeited shared (including all shares of
Khushboo) were reissued @ ₹8 per share as fully paid up. Pass necessary journal entries in the books of
Anshika Ltd. for the above transactions by opening calls in arrears and calls in advance account wherever
necessary.
capital reserve Rs 2400
2 Khyati Ltd. issued a prospectus inviting applications for 80,000 equity shares of ₹10 each payable as
follows: ₹2 on application ₹3 on allotment ₹2 on first call ₹3 on final call Applications were received for
1,20,000 equity shares. It was decided to adjust the excess amount received on account of over
subscription till allotment only. Hence allotment was made as under: (i) To applicants for 20,000 shares –
in full (ii) To applicants for 40,000 shares – 10,000 shares (iii) To applicants for 60,000 shares – 50,000
57 | P a g e
shares Allotment was made and all shareholders except Tammana, who had applied for 2,400 shares out
of the group (iii), could not pay allotment money. Her shares were forfeited immediately, after allotment.
Another shareholder Chaya ,who was allotted 500 shares out of group (ii), failed to pay first call. 50% of
Tamanna’s shares were reissued to Satnaam as ₹ 7 paid up for payment of ₹ 9 per share. Pass
necessary journal entries in the books of Khyati Ltd. for the above transactions by opening calls in arrears
and calls in advance account wherever necessary.
capital reserve Rs2400
3 ZX Limited invited applications for issuing 5,00,000 Equity shares of Rs. 10 each payable at a premium of
Rs. 10 each payable with Final call. Amount per share was payable

as follows: Rs.

On Application 2

On Allotment 3

On First Call 2

On Second & Final Call Balance.

Applications for 8,00,000 shares were received. Applications for 50,000 shares were rejected and the
application money was refunded. Allotment was made to the remaining applicants as follows: Category
Number of Shares Applied Number of Shares Allotted I 2,00,000 1,50,000 II 5,50,000 3,50,000 Excess
application money received with applications was adjusted towards sums due on allotment. Balance, if
any was adjusted towards future calls. Govind, a shareholder belonging to category I, to whom 1,500
shares were allotted, paid his entire share money with allotment. Manohar belonging to category II, who
had applied for 11,000 shares failed to pay ‘Second & Final Call money’. Manohar’s shares were forfeited
after the final call. The forfeited shares were reissued at Rs. 10 per share as fully paid up. Assuming that
the company maintains “Calls in Advance Account” and “Calls in Arrears Account”, pass necessary
Journal entries for the above transactions in the books of ZX Limited.
capital reserve RS 49000
4 Surya Ltd with a Registered capital of 10,00,000 Equity Shares of 10 each, issued 1,00,000 Equity Shares
payable 3 on Application, 2 on Allotment, 3 on First Call and 2 on Second and Final Call.
The amount due on Allotment was duly received except Mr. X holding 6,000 shares. His shares were
immediately forfeited. On the first call being made, Mr. Y holding 5,000 Equity shares paid the entire
balance on his holding. Second call was not made.
Pass the necessary Journal Entries to record the transactions and Show how the Share Capital will be
presented in the Balance Sheet of the Company. Also prepare notes to accounts

5
call in advances Rs 10000
DP Shah Company Ltd made an issue of 1,00,000 shares of `. 10 each at a premium of 30% payable as
follows:

On Application `3.50 per share,

On Allotment `. 6.50 per share including premium and

Balance on first and final call.

Applications were received for 2,00,000 shares and the directors made pro –rata allotment. Harsh who
had applied for 1,600 shares did not pay the allotment and final call money. With the result his shares
were forfeited. Later on 60% of the forfeited shares were reissued at`8 per share fully paid up.

Pass necessary journal entries in the books of the company.

share allotment a\c recevied - RS .297600


58 | P a g ecaptial reserve - Rs 2400
8 Marks Questions Answers

1 Capital Reserve Rs. 2400

2 Capital Reserve Rs. 2400

3 Capital Reserve Rs. 49,000

4 Call in advance Rs. 10,000

5 Share allotment account received- Rs.2,97,600

Capital Reserve – Rs.2,400

DENENTURES (COMPANY ACCOUNTS)

Multiple Choice Question (1 Mark)


1. Debenture holders are:
(A) Owners of the Company (B) Debtors of the Company
(C) Creditors of the Company (D) Promoters of the Company
2. A debenture holder is entitled to:
(A) Fixed dividend (B) Share in profits
(C) Voting rights in the company (D) Interest at the fixed rate
3. Discount on the issue of Debentures should be show on the:
(A) As Expenses in the Statement of Profit & Loss
(B) Equity & liabilities side of the Balance Sheet
(C) Assets side of the Balance Sheet
(D) As Income in the Statement of Profit & Loss
4. Debentures of a Company can be issued:
(A) For Cash (B) For Consideration other than Cash
(C) As a Collateral Security (D) Any of the above
5. On issue of debentures as a collateral security, which account is credited?
(A) Debentures Account (B) Bank Loan Account
(C) Debenture Holding Account (D) Debenture Suspense Account
6. X Ltd. wants to redeem 5,000, 5% Debentures of Rs. 100 each at 5% premium. How much amount it
transfer to Debenture Redemption Reserve, if it has already a balance of Rs. 1,00,000 in Debenture
Redemption Reserve Account ?
(A) Rs. 4, 00,000 (B) Rs. 25,000 (C) Rs. 2, 00,000 (D) Rs. 2, 50,000
7. Where is Debenture Redemption Reserve transferred after the redemption of all debentures?
(A) Capital Reserve Account (B) General Reserve Account
(C) State of Profit and Los (D) Sinking Fund Account
8. Profit on redemption of debentures is transfer to which account?
(A) Capital Reserve Account (B) General Reserve Account
(C) State of Profit and Los (D) Sinking Fund Account
9. As per SEBI guidelines an amount equal to ____________ of the debenture issue must be transferred to
Debenture Redemption Reserve before redemption begins.
(A) 50% (B) 80% (C) 25% (D) 100%
10. Interest on Debenture is:
(A) Appropriation of profit (B) Capital gain
(C) Charge against profit (D) Dividend
59 | P a g e
11. Which of the following type of companies are not required to create DRR as per Companies Rule, 2014?
(A) Construction Companies (B) Infrastructure Companies
(C) Banking Companies (D) Insurance Companies
12. Debentures can be redeemed:
(A) By issue of new shares (B) By existing resources
(C) By Accumulated profits (D) By all of the above
13. Premium on Redemption of Debentures Account is a:
(A) Personal Account (B) Real Account
(C) Nominal Account (D) None of these
14. The amount set aside out of surplus for redeeming the debentures is known as:
(A) General Reserve (B) Securities Premium reserve
(C) Debenture Redemption Reserve (D) None of the above
st
15. On 1 April 2007, Sunrise Limited issued 5,000, 8% debentures of Rs. 100 each at a discount of 5%. What
will be the amount of interest for the year ending 31st March 2008?
(A) Rs. 38,000 (B) Rs. 42,000 (C) Rs. 40,000 (D) Rs. 25,000

Short Answer Questions (3 Marks)


1. Pass necessary Journal entries for the following transaction:
Issued 60,000, 9% Debentures of Rs.75 each at a premium of Rs.25 per Debentures
2. Pass necessary journal entries in the books of Z Limited for the following transaction:
Issued 1875, 8% Debentures of Rs.100 each at a premium of Rs.10 each redeemable after three years.

3. Vinod Limited issued 60,000, 9% Debentures of Rs.100 each redeemable at a premium of 10% after three years.
Pass the necessary journal entries for the issue of 9%debentures.

4. On 1.4.2009 XYZ Limited issued 20,00,000, 6% debentures of Rs.100 each at a discount of 4% redeemable at a
premium of 5% after 3 years. The amount was payable as follows:
On Application ……………. Rs.50 per Debenture
On Allotment ……………... Balance after discount
Record necessary journal entries for the issue of debentures.

5. Mohal Limited issued 1,000, 7% Debentures of Rs.1,000 each at a discount of 5%.


Pass necessary journal entries for the issue of debentures in the following cases:
(i) When the debentures were redeemable at par
(ii)When the debentures were redeemable at a premium of 6%

Short Answer Questions (4 Marks)


1. Sultan Limited invited applications for issuing 7,500, 12% Debentures of Rs.100 each at a premium of Rs.35 per
debentures. The full amount was payable on application.
Applications were received for 10,000 Debentures. Applications for 2,500 Debentures were rejected and the
application money was refunded. Debentures were allotted to the remaining applicants.
Pass necessary journal entries for the above transactions in the books of Sultan Limited.

2. Sohan Limited issued 5,00,000, 7% Debentures of Rs.50 each. Pass necessary journal entries in the books of
the company for the issue of debentures when debentures were:
(i) Issued at Par, redeemable at 8% premium
(ii) Issued at 4% premium, redeemable at 5% premium
(iii) Issued at 5% premium, redeemable at par

3. Pass necessary Journal entries for the issue of 7% Debentures in the following cases:

60 | P a g e
(i) 100 Debentures of Rs.100 each issued at Rs.105 each payable at Rs.100 each.
(ii) 100 Debentures of Rs.100 each issued at Rs.100 each payable at Rs.105 each.
(iii) 100 Debentures of Rs.100 each issued at Rs.105 each payable at Rs.108 each.

4. Give journal entries in each of the following cases if the face value of a debenture is
Rs.100:
(i) A debenture issued at Rs.110 repayable at Rs.100.
(ii) A debenture issued at Rs.100 repayable at Rs.105.
(iii) A debenture issued at Rs.105 repayable at Rs.105.
(iv) A debenture issued at Rs.105 repayable at Rs.110.

5. XYZ Limited invited applications for issuing 3,000, 12% Debentures of Rs.100 each at a premium of Rs.50 per
Debenture. The full amount was payable on application.
Applications were received for 4,000 Debentures. Applications for 1,000 debentures were rejected and application
money was refunded. Debentures were allotted to the remaining applicants.
Pass necessary journal entries for the above transactions in the books of XYZ Limited.

5 Marks Questions
1. X Limited issued 20,000, 12% Debentures of Rs.50 each. Pass necessary journal entries for the issue and
redemption of debentures in the following cases:
(i) Issued at par and redeemable at a premium of 10%
(ii) Issued at a premium of 10% and redeemable at a premium of 20%.
(iii) Issued at par and 50% of the redemption to be made in cash and the balance to be redeemed at a premium of
20% through the issue of fresh debentures.

2. Pass the necessary journal entries for the issue and redemption of Debentures in the following cases:
(i) 15,000, 9% Debentures of Rs.250 each issued at 5% premium, repayable at 15% premium.
(ii) 2,00,000, 12% Debentures of Rs.10 each issued at 8% premium repayable at par.

3. Tata Limited issued 5,000, 9% Debentures of Rs.500 each. Pass the necessary journal entries for the issue of
debentures in the books of the company in the following cases:
(i) When Debentures are issued at 10% premium and redeemable at par.
(ii)When debentures are issued at par and redeemable at 10% premium
(iii) When Debentures are issued at 5% premium and redeemable at 10% premium.

4. Mohit Ltd. issued 5,000, 10% Debentures of Rs. 100 each on 1st April, 2012. The issue was fully subscribed.
According to the terms of issue, interest on debentures is payable half-yearly on 30th September and 31st March
and tax deducted at source is
10%. Pass the necessary journal entries related to the debenture interest for the half yearly ending on 31st March,
2013 and transfer of interest on debentures to Statement of Profit and Loss.

5. BG. Ltd. issued 2,000, 10% debentures of 100 each on 1" April 2012. The issue was fully subscribed. According
to the terms of issue, interest on the debentures is payable half-yearly on 30e September and 3l't March and the tax
deducted at source is 15%. Pass necessary journal entries related to the debenture interest for the halfyearly ending
31't March, 2013 and transfer of interest on debentures of the year

6 Marks Questions
1. B. Ltd. issued 1,000, 12% debentures of Rs.100 each on January 01, 2005 at a discount of 5% redeemable at a
premium of 10%. Give journal entries relating to the issue of debentures and debentures interest for the period
ending December 31, 2005 assuming that interest is paid half yearly on June 30 and December 31 and tax
deducted at source is 10%. B.Ltd. follows calendar year as its accounting year.

61 | P a g e
2. Saraswati Ltd. Issues 10000 6% Debentures of Rs.100 each at a premium of 5% on 1st April, 2010. Redeem
able on March 31, 2015. The issue was fully subscribed. The Board of Directors decided to transfer the required
amount to Debenture Redemption Reserve on March 31,2015 .It was decided to invest 15% of the face value o
f debentures to be redeemed towards Debentures Redemption Investment on 30th April, 2014. Investments we
re enchased and Debentures were redeemed on due date. Record necessary entries for issue and redemption
of debentures.
3. Poonam Ltd. had a balance of Rs. 5500000 in its Statement of Profit & Loss. Instead of declaring a dividend it
st
decided to redeem its Rs.50, 00,000, 8% debentures at a premium of 10% out of profits on 31 March, 2015. T
he Company invested the required amount in fixed deposit in a bank in 30th April ,2014 earning interest @ 8%
p.a. Tax was deducted on interest earned @ 10% by the bank. Pass the necessary journal entries in the books
of the company for the redemption of debentures.
4. Boots Ltd. issued Rs. 6,00,000, 8% Debentures at a discount of 6%. The debentures were redeemable in four
equal annual installments. Pass necessary journal entries for issue of debentures and prepare ‘Discount on iss
ue of debentures Account’ for four years. Show your workings clearly.
5. Suresh Limited purchased a running business of KK Limited on 1st April, 2012, which includes assets of the v
alue of Rs.12,00,000 and Liabilities worth Rs.1,40,000 at an agreed value of Rs.11,00,000. Company issued 12
% Debentures of Rs.100 each at a premium of 10% in full satisfaction of purchase consideration. The Debentur
es were redeemable 3 years later at a premium of 5%. Pass the entries to record the above including redemptio
n of debentures.

SUBJECT – ACCOUNTANCY (55)

Solution
Multiple Choice Question (1 Mark)
1-C
2- D
3- C
4- D
5- D
6- B
7- B
8- A
9- C
10- C
11- C
12- D
13-A
14-C
15-C

Short Answer Questions (3 Marks)


1. Security Premium Reserve Rs. 15,00,000
2. (i) Security Premium Reserve Rs. 18750
3. Loss on issue of debentures Rs. 6,00,000
Premium on redemption debentures Rs. 6,00,000
4. (i) Loss on issue of debentures Rs. 1,00,000
Premium on redemption debentures Rs. 1,00,000
Discount on issue of debentures Rs. 1,00,000
5. (i) Discount on issue of debentures Rs. 50,000
(ii) Discount on issue of debentures Rs. 50,000
62 | P a g e
Loss on issue of debentures Rs. 60,000
Premium on redemption debentures Rs. 60,000

Short Answer Questions (4 Marks)


1. Security Premium Reserve Rs. 2,62,5000
Refund by Bank Rs. 2,47,500
2. (i) Loss on issue of debentures Rs. 2,00,000
Premium on redemption debentures Rs. 2,00,000
(ii) Loss on issue of debentures Rs. 1,25,00,000
Security Premium Reserve Rs. 1,00,00,000
(iii) Security Premium Reserve Rs. 1,25,00,000
3. (i) Security Premium Reserve Rs. 500
(ii) Loss on issue of debentures Rs. 5,00
Premium on redemption debentures Rs. 500
(iii) Security Premium Reserve Rs. 5,00
Premium on redemption debentures Rs. 8,00
Loss on issue of debentures Rs. 8,00
4. (i) Security Premium Reserve Rs. 10
(ii) Premium on redemption debentures Rs. 5
Loss on issue of debentures Rs. 5

(iii)Security Premium Reserve Rs. 5


Premium on redemption debentures Rs. 5
Loss on issue of debentures Rs. 5
(iv) Security Premium Reserve Rs. 5
Premium on redemption debentures Rs. 10
Loss on issue of debentures Rs. 10
5. Security Premium Reserve Rs. 1,50,000
Return by bank Rs.1,00,000

5 Marks Questions
1. (i) Premium on redemption debentures Rs. 1,00,000
Loss on issue of debentures Rs. 1,00,000
(ii)Premium on redemption debentures Rs. 1,00,000
Loss on issue of debentures Rs. 1,00,000
(iii) Premium on redemption debentures Rs. 1,00,000
Loss on issue of debentures Rs. 1,00,000
2. (i) Loss on issue of debentures Rs. 5,62,000
Security Premium Reserve Rs. 1,87,500
(ii) Security Premium Reserve Rs. 1,60,000
3. (i) Security Premium Reserve Rs. 2,50,000
(ii) Premium on redemption debentures Rs. 2,50,000
Loss on issue of debentures Rs. 2,50,000
(iii) Premium on redemption debentures Rs. 1.25,000
Loss on issue of debentures Rs. 1,25,000
(iii) Premium on redemption debentures Rs. 2,50,000
Loss on issue of debentures Rs. 2,50,000
4. Interest on debentures Rs. 50,000
TDS Rs. 5,000
Debenture holders amount Rs. 45,000
5. Interest on debentures Rs. 20,000
TDS Rs. 3,000
Debenture holders amount Rs. 17,000

63 | P a g e
6 Marks Questions
1. Discount on issue of debentures Rs. 5,000
Loss on issue of debentures Rs. 10,000
Premium on redemption debentures Rs. 10,000
Interest on debentures Rs. 12,000
TDS Rs. 1200
Debenture holders amount Rs. 10,800
2. SPR 50,000
DRR 2,50,000
DRI 1,50,000
3. DRI 7,50,000
DRR 50,00,000
4. Discount on issue of debentures Rs. 36,000
5. Goodwill 40,000
Issue of debentures 10,000

FINANCIAL STATEMENT ANALYSIS:-

MCQS

1. Call in arrear appear in a Company’s Balance Sheet under

a) Reserve &Surplus b)Shareholder’s fund c)Contingent Liability d)Short term borrowings

2) Balance Sheet of a company is required to be prepared in the format given in

a) Sch III Part II b)TableA c) Sch III Part I d) Sch III part III

3) As per Companies Act the Balance Sheet of a company is required to be presented in

A) Horizontal form

B) Vertical form

C) Either horizontal or vertical form

D) Neither of the above

4) According to prescribed order of assets in a Company’s Balance Sheet _________assets


should be shown first of all.

A) Non Current Assets

B) Current Assets

C) Current Investments

D) Loans and Advancements

64 | P a g e
5) In a Company’s Balance Sheet ______________ appear under the head’ non-
current assets’.

A) Goodwill

B) Patents

C) Vehicles

D) All of the above

6) Main limitations of financial analysis

a)To know earning capacity b)to know financial strength c)do not reflect changes in price levels

7) A company s current liabilities decreased from 400000 to 300000.What is the % of change ?

a) 25% b) 33.3% c) 20% d) 40%

8)Which analysis depicts the relationship between two figures:

a) Ratio analysis b) Trend analysis c)Cumulative figures and averages d) Dividend analysis

9) No profit no loss is called

a) Fund flow statement b)Cash flow statement c) Trend analysis d)Break Even point

10)In a common size Balance sheet ,total liabilities are assumed to be equal to

a) 100 b) 10 c) 100 d) 1000

11) What is GP +materials consumed

A) Purchase b) Revenue from operations c) Opening inventory d) Closing Inventory

12) Payment of income taxis considered as

a) Direct Expenses b) Indirect Expenses c) Operating expenses d)None of the above

13) Trade investments appears under the subhead

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a) Current Investments b) Non Current Investments c) Intangible assets d) Short term loans

14) The most commonly used tool s for financial analysis are

a) Comparative statements b) Common size statements c) Accounting ratios d) All the above

15) Revenue from Operations less Cost of Revenue from Operations is called

a) Net Profit b) Operating profit c) GP d) Total Profit

Ans) 1b; 2c;3b;4a;5a;6c ; 7b; 8a;9d;10c;11b;12b;13b;14d;15c

3MARKS

Why is the government interested in analyzing financial statements ?

1 On the basis of analysis of financial statement , government can judge which industry is
progressing on the desired lines and which industry needs help.

2 State why the creditors for goods interested in analysing financial statements.

Creditors are interested to know the liquidity of the business whether the business is able to pay
their debts On maturity .

3 Why is the management interested in analysing financial statements ?

Management of a firm is interested in analysis of the financial statement to know the solvency ,
profitability and the capital structure of the form.

4 State any one objective of financial statement analysis .

The objective of financial analysis is to make comparative study of operational efficiency of similar
concerns engaged in the identical trade .

5 How the solvency of business is assessed by ‘financial statement analysis’ ?

Solvency of business is assessed by applying solvency ratios,e.g debt equity ratio, proprietary
ratio, total assets to debts ratio and interest coverage ratio.

66 | P a g e
4MARKS

1. TOOLS FOR ANALYSIS OF FINANCIAL STATEMENTS:-

1. COMPARATIVE STATEMENTS:- Comparative statements mean a comparative study


of individual components or elements or items of balance sheet and statement of profit
& loss of two or more years.
2. COMMON-SIZE STATEMENTS:- Common-size statements are statements in which
individual components or elements or items of financial statements of two or more years
are placed and then converted into percentages taking a common base.
3. RATIO ANALYSIS:- Ratio is an arithmetical expression of relationship between two
related and interdependent items. Accounting ratios, thus, is an arithmetical relationship
between two accounting variables.
4. CASH FLOW STATEMENT:- Cash flow statement is a statement showing flow of cash
and cash equivalents during an accounting period classified under appropriate heads. It
is prepared following Accounting Standard-3 (Revised), Cash Flow Statement issued by
the Institute of Chartered Accountants of India.

2. From the following Balance Sheets of Exe Ltd. As at 31st March, 2017 and 2016, prepare
Comparative Balance Sheet:

Balance Sheet as at 31.03.2017 and 2016

Particulars Note 31.03.2017 31.03.2016


No. (Rs.) (Rs.)

I. EQUITY AND LIABILITIES


1. Shareholders’ Funds
Share Capital (Equity)
18,00,000 12,00,000

2. Non-Current Liabilities
Long-term borrowings : 8% Debentures
6,00,000 6,00,000

3. Current Liabilities
Trade Payables
6,00,000 3,00,000

Total 30,00,000 21,00,000

II. ASSETS
1. Non-current Assets
Fixed Assets : Tangible Assets
18,00,000 15,00,000

2. Current Assets
(a) Trade Receivables
(b) Cash and Cash Equivalents 10,00,000 5,00,000

2,00,000 1,00,000

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Total 30,00,000 21,00,000

SOLUTION:-

Comparative Balance Sheet as at 31.03.2017 and 2016

Particulars Not 31.03.201 31.03.201 Absolute %


e 6 Rs. 7 Rs. Change Chang
No. e

I. EQUITY AND
LIABILITIES
1. Shareholders’ Funds
Equity Share Capital

12,00,000 18,00,000 6,00,000 50

2. Non-Current Liabilities
Secured Loan-8% Debentures

6,00,000 6,00,000 ------ -----

3. Current Liabilities
Trade Payables
3,00,000 6,00,000 3,00,000 100

Total 21,00,000 30,00,000 9,00,000 42.86

II. ASSETS
1. Non-Current Assets
Fixed Assets : Tangible
Assets

15,00,000 18,00,000 3,00,000 20

2. Current Assets
(a) Trade Receivables
(b) Cash & Cash Equivalents 5,00,000 10,00,000 5,00,000 100

1,00,000 2,00,000 1,00,000 100

Total 21,00,000 30,00,000 9,00,000 42.86

3. Following information is extracted from the Statement of Profit & Loss of Gold Star Ltd. For the
years ended 31.03.2017 and 2016. Prepare Comparative Statement of Profit & Loss.
Particulars Note 31.03.2017 31.03.2016
No. Rs. Rs.
Revenue from operations 40,00,000 32,00,000
Employees benefit expenses 20,00,000 16,00,000
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Depreciation and Amortisation Expenses 50,000 40,000
Other Expenses 1,50,000 3,60,000
Tax Rate 30% 30%
SOLUTION:-
Comparative Statement of Profit & Loss
For the years ended 31.03.2016 and 2017
Particulars Not 31.03.201 31.03.201 Absolut %
e 6 Rs. 7 Rs. e Chang
No. Change e
I. Revenue from operations
32,00,000 40,00,000 8,00,00 25
0
II. Expenses
(a) Employees benefit
expenses 16,00,000 20,00,000 4,00,00 25
(b) Depreciation & 0
amortization 25
expenses 40,000 50,000
(c) Other Expenses 10,000 (58.33)
3,60,000 1,50,000
(2,10,00
0)
Total Expenses 20,00,000 22,00,000 2,00,00 10
0
III. Profit before tax (I-II) 12,00,000 18,00,000 6,00,00 50
0
IV. Less: Tax @ 30% 3,60,000 5,40,000 1,80,00 50
0
V. Profit after tax (III-IV) 8,40,000 12,60,000 4,20,00 50
0

st
4. From the following Balance Sheets of Exe Ltd. As at 31 March, 2017 and 2016, prepare
Common-Size Balance Sheet:
Balance Sheet as at 31.03.2017 and 2016
Particulars Note 31.03.2017 31.03.2016
No. (Rs.) (Rs.)
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
Share Capital (Equity) 18,00,000 12,00,000
2. Non-Current Liabilities
Long-term borrowings : 8% Debentures 6,00,000 6,00,000
3. Current Liabilities
Trade Payables 6,00,000 3,00,000
Total 30,00,000 21,00,000
II. ASSETS
1. Non-current Assets
Fixed Assets : Tangible Assets 18,00,000 15,00,000
2. Current Assets
(a) Trade Receivables 10,00,000 5,00,000
(b) Cash and Cash Equivalents 2,00,000 1,00,000
Total 30,00,000 21,00,000

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SOLUTION:-
Common-size Balance Sheet as at 31.03.2017 and 2016
Particulars Not Absolute Amounts % of Total
e 31.03.201 31.03.201 31.03.2 31.03.2017
No. 6 Rs. 7 Rs. 016 % %
I. EQUITY AND
LIABILITIES
1. Shareholders’ Funds
Equity Share Capital 12,00,000 18,00,000 60
57.14
2. Non-Current Liabilities
Secured Loan-8% Debentures
6,00,000 6,00,000 28.57 20
3. Current Liabilities
Trade Payables 3,00,000 6,00,000 14.29 20
Total 21,00,000 30,00,000 100 100
II. ASSETS
1. Non-Current Assets
Fixed Assets : Tangible
Assets 15,00,000 18,00,000 71.43 60
2. Current Assets
(a) Trade Receivables 5,00,000 10,00,000 23.81 33.33
(b) Cash & Cash Equivalents
1,00,000 2,00,000 4.76 6.67
Total 21,00,000 30,00,000 100 100

5. Following information is extracted from the Statement of Profit & Loss of Gold Star Ltd. For the
years ended 31.03.2017 and 2016. Prepare Comparative Statement of Profit & Loss.
Particulars Note 31.03.2017 31.03.2016
No. Rs. Rs.
Revenue from operations 40,00,000 32,00,000
Employees benefit expenses 20,00,000 16,00,000
Depreciation and Amortisation Expenses 50,000 40,000
Other Expenses 1,50,000 3,60,000
Tax Rate 30% 30%
SOLUTION:-
Common-size Statement of Profit & Loss
For the years ended 31.03.2016 and 2017
Particulars Not Absolute Amounts % of Net Sales
e 31.03.201 31.03.201 31.03.2016 31.03.2017
No. 6 Rs. 7 Rs. %
I. Revenue from operations
32,00,000 40,00,000 100 100
II. Expenses
(a) Employees benefit
expenses 16,00,000 20,00,000 50 50
(b) Depreciation &
amortization
expenses 40,000 50,000 1.25 1.25
(c) Other Expenses
3,60,000 1,50,000 11.25 3.75

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Total Expenses 20,00,000 22,00,000 62.5 55
III. Profit before tax (I-II) 12,00,000 18,00,000 37.5 45
IV. Less: Tax @ 30% 3,60,000 5,40,000 11.25 13.5
V. Profit after tax (III-IV) 8,40,000 12,60,000 26.25 31.5

6 Under what heads and sub heads the following items will appear in the Balance Sheet of a
company as per schedule III , Part -1 of Company Act 2013

I. Premium on redemption of debentures

II. Loose Tools

III. Balance with Banks

IV. Tax Reserve

V. Interest on Call in Advance

VI. Stores and spares

VII. Mining Rights

VIII. Encashment of employees earned leave payable on retirement

IX. Vehicles

X. Debentures

Solution

Sr No Items Major Head Sub Head


(i) Premium on redemption of Non Current Liabilities Other long term
debentures liabilities

(ii) Loose Tools Current Assets Inventories

(iii) Balance with Banks Current Assets Cash and cash


equivalents
(iv) Tax Reserve Shareholder’s funds Reserves and Surplus

(v) Interest on Call in Advance Current Liabilities Other current


liabilities
(vi) Stores and spares Current Assets Inventories

(vii) Mining Rights Non Current Assets Fixed Assests


(Intangible )
(viii) Encashment of employees earned Non current liabilities Long term provisions
leave payable on retirement

(ix) Vehicles Non Current assets Fixed assets


(tangible)
(x) Debentures Non current liabilities Long term borrowings

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7 Prepare a Common-size statement of profit and loss from the following information:

Note
2011-12 2012-13
Particulars
No.
Revenue from Operations 1,00,000 1,30,000

Cost of Material Consumed 80,000 84,000

Other Expenses 12,000 9,000

Income Tax @ 50%

ANSWER

Note Percentage
2011-12 2012-13
Particulars No. 2011-12 2012-13
Revenue from Operations 1,00,000 1,30,000 100 100

Cost of Material Consumed 80,000 84,000


-80 -64.62
Other Expenses 12,000 9,000 -12 -6.92
Income Tax @ 50% -4 -14.23

8 Prepare a Comparative Balance Sheet of Deepankur Ltd. From the following information:

Note
Particulars 2012
No.
1.EQUITY AND LIABILTES

Shares Capital 9,00,000

General Reserves 2,25,000


Long-term Borrowings 3,00,000
Current Liabilities 5,55,000
Total 19,80,000

2. ASSETS

Fixed Assets 11,55,000


Current Assets 8,25,000
Total 19,80,000

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Answer:-
Percentage increase

Shares Capital = 20%

General Reserves=50%
Long-term Borrowings=28.57%

Current Liabilites= 5.12%

Fixed Assets=7.23 %
Current Assets=25%

9.prepare a comparative statement of profit and loss with the


help of following information:
PARTICULAR 2011-12 2012-13

Revenue from Operations 5,00,000 8,00,000

Cost of Revenue from


70% of Revenue from operations
Operations
5%
Other Expenses of Revenue from
operations
Rate of Income Tax 50% of profit before Tax

Answer

60% change in each item

10.From the following information, prepare a Comparative Balance Sheet of Deep Ltd.
Note
Particulars 31.03.2013
No.

1. EQUITY AND LIABILITES

Share Capital 25,00,000


Reserves and Surplus 6,00,000
Long-term Loans 15,00,000

Trade Payables 5,50,000


Total 51,50,000
2. ASSETS
Fixed Assets 36,00,000
Current Assets 10,50,000
Non-current Investments 5,00,000

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Total 51,50,000
Answers

Percentage increase
Share Capital=3.33%
Reserves and Surplus=20%
Long-term Loans=nil
Trade Payables=nil
Fixed Assets=20%
Current Assets=30%
Non-current Investments=nil

11.Under what heads and sub-heads following items will appear in the balance sheet of a company as per Schedule
III, Part I of the Companies Act, 2013:
(i) Tax Reserve
(ii) Mining Rights
(iii) Encashment of Employees Earned Leave payable on retirement
(iv) Provision for doubtful debts

Ans
Items Major Head Sub-head
(i) Tax Reserve Shareholders’ Funds Reserves & Surplus
(ii) Mining Rights Non-current Assets Fixed Assets – Intangible
Assets
(iii) Encashment of Non-current Liabilities Long-term Provisions
Employees’ Earned
Leave payable on
retirement
(iv) Provision for Current Assets Trade Receivables (By way
Doubtful Debts of deduction)

Q12. State under which major heading the following item will be presented in the balance sheet of a company as
per revised schedule III part 1 of the Companies Act 2013.
i. Long Term Borrowings
ii. Trade Payables
iii. Provision for Tax
iv. Securities Premium Reserve

Ans
Item Major Head
Long Term borrowings Non Current Liabilities
Trade payable Current Liabilities
Provision for Tax Current liabilities(short term provisions)
Securities Premium reserve Shareholders fund

13.Under which sub-heading will the following items be shown in the balance sheet of a company as per revised
schedule A (VI) part I of the companies act 2013 :
(I) Capital redemption reserve
(II) Goodwill
(III) Loose tools
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(IV) Outstanding Expenses

(V) Item Major Heading Sub Heading


(VI) Debenture Redemption Reserve Non-Current Liability Long Term Provisions
(VII) Goodwill Non-Current Assets Fixed Assets (Intangible)
(VIII) Loose tools Current Assets Inventory
(IX) Outstanding Expenses Current Liability Other Current Liability

Q14. From the following extract of the statement of P & L for the year ended 31st March 2014-15 of XYZ ltd. prepare
a comparative statement of Profit & Loss.
(4)
Particular 31.3.2015 31.3.2014
Revenue from operation 24,00,000 15,00,000
Employees Benefit Expenses 11,00,000 9,00,000
Other Expense 1,00,000 2,00,000
Tax Rate 50% 50%

15 Ans:-
Particular 31.3.2015 31.3.2014 Absolute Percentage
Change Change
I. Revenue from operation 24,00,000 15,00,000 9,00,000 60%
II. Other Income ----- ----- ------
III. Total Revenue(I+II) 24,00,000 15,00,000 9,00,000 60%
IV. Less Expenses:-
Employees Benefit Expenses 11,00,000 9,00,000 2,00,000 22.22%
Other Expense 1,00,000 2,00,000 (1,00,000) (50%)
Total expenses 12,00,000 11,00,000 1,00,000 .09%
V. Profit Before tax 12,00,000 4,00,000 8,00,000 200%
Tax Rate (6,00,000) (2,00,000) (4,00,000) (200%)
VI. PAT 6,00,000 2,00,000 4,00,000 200%

16. From the following Statement of Profit and Loss of ROHIT LTD., for the years ended 31st March 2011 and 2012,
prepare a Comparative Statement of Profit and Loss.
Particulars Note No. 2011 2012
Revenue from Operations 6,00,000 7,00,000
Other Income 50,000 80,000
Purchase of Stock-in-Trade Employees 1,80,000 2,00,000
Benefits Expenses Other Expenses 90,000 1,00,000
Tax Rate 80,000 80,000
30% 40%

17. From the following information prepare a Comparative Statement of Profit and Loss of Poonam Ltd. for the year
st
ended 31 March, 2015:
Particulars 31 st March,2015 31st March, 2014
Amt. (Rs.) Amt. (Rs.)
Revenue from Operations 20,00,000 10,00,000
Cost of Material consumed 15,00,000 6,00,000
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Other Expenses 12% Cost of Material 10% of Cost of Material
consumed consumed
Tax Rate 40% 30%

st
ANS. Comparative Statement of Profit and Lossfor the year ended 31 March,2014 and 2015
Particulars Note.no 2013-14 2014-15 Absolute Percentage
change change
I Revenue from 10,00,000 20,00,000 10,00,000 100
Operations
II Expenses:
(a) Cost of 6,00,000 15,00,000 9,00,000 150
material
consumed
(b) Other Exps 60,000 1,80,000 1,20,000 200
Total Expenses 6,60,000 16,80,000 10,20,000 154.5
III Profit before Tax 3,40,000 3,20,000 (20,000) (5.8)
IV Less: Tax 1,02,000 1,28,000 26,000 25.5
V Profit after Tax 2,38,000 1,92,000 (46,000) (19.3)

18 (a) State two objectives of Financial Statement Analysis.


(b) Name the major heads under which the following items will be presented in the Balance Sheet of a company as
per schedule III of the Companies Act, 2013.
(i) Loose Tools (ii) Unpaid Dividend
(iii)Copy Rights and Patents (iv) Land and Building
ANS .(a) Any two objectives of Financial Statement analysis:
(i) To measure the earning capacity or profitability
(ii) To measure Solvency
(iii) To measure the Financial Strength
(iv) To make comparative Study with other firms
(v) To measure the capability of payment of interest and dividend.
(b)(i) Loose Tools – Current Assets
(ii) Unpaid Dividends – Current Liabilities
(iii) Copyrights and Patents – Non-Current Assets
Land and Building – Non-Current Assets
19 (a) Under which major headings and sub-headings the following items will be shown in the Balance Sheet of a
Companies Act as per Schedule III
1. Bank Overdraft
2. Cheques in hand
3. Loose Tools
4. Provision for warranties

(a) Major Heads and subheads

1 Bank Overdraft------- Current liabilities---- Short termborrowings


2 Cheques in hand----- Current assets---- Cash and cashequivalents

3 Loose Tools------ Current assets---- Inventories


4 Provision for warranties Non-current liabilities--- Long term provisions
Long Term Provisions------

20.Particulars 2015 2014


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Revenue from operations 20,00,000 30,00,000
Expenses 12,00,000 21,00,000
Other incomes 4,00,000 3,60,000
Income Tax 50% 50%
Prepare a ‘Comparative Statement of Profit & Loss’ with the help of following information

Particulars 2014 2015 Absolute Absolute


Figures Percentage

I. Revenue from
operations 20,00,000 30,00,000 10,00,000 50%

II. Add: other Incomes 4,00,000 3,60,000 (40,000) 10%

III. Total Revenue (I+II) 24,00,000 33,60,000 9,60,000 40%

Less Expenses 12,00,000 21,00,000 9,00,000 75%

Profit before Tax 12,00,000 12,60,000 60,000 5%

IV. Less Tax (50%) 6,00,000 6,30,000 30,000 5%

PROFIT AFTER TAX 6,00,000 6,30,000 30,000 5%

21 From the following information, prepare a Comparative Statement of Profit and Loss :
Particulars 31st March, 2017 31st March, 2016
Revenue from operations ` 24,00,000 ` 18,00,000
Other incomes (% of revenue from operations) 15% 25%
Expenses (% of revenue from operations) 60% 50%
Tax rate 40% 40%

Revenue from operations 33.33%


Other incomes (20)
Total Revenue 22.67
Expenses 60
Profit after tax (2.22)

22 .Financial statements are prepared following the consistent accounting


concepts, principles, procedures and also the legal environment in which
the business organisations operate. These statements are the sources of
information on the basis of which conclusions are drawn about the
profitability and financial position of a company so that their users can
easily understand and use them in their economic decisions in a
meaningful way.
State under whichmajor headings and sub-headings the following items will be presented in
the Balance Sheet of a company as per Schedule III of the Companies
Act, 2013.
(i) Capital Reserve
(ii) Calls-in-Advance

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(iii) Loose Tools
(iv) Bank Overdraft

a. Heads Sub-heads
(v) Capital Reserves Shareholders’ funds Reserves and Surplus
(vi) Calls -in-advance Current Liabilities Other Current Liabilities
(vii) Loose Tools Current assets Inventories
(viii) Bank Overdraft Current Liabilities Short term borrowings

Ratio Analysis
MCQ Questions on ratio Analysis
1. Determine Operating ratio, if operating expenses is Rs 60,000, Sales is Rs 9,40,000, Sales Return is Rs
40,000 and Cost of net goods sold is Rs 6,60,000.
a. 80%
b. 15%
c. 25%
d. 11%

2. Determine Debtors turnover ratio if, closing debtors is Rs 40,000, Cash sales is 25% of credit sales and
excess of closing debtors over opening debtors is Rs 20,000.
a. 4 times
b. 2 times
c. 6 times
d. 8 times

3. What will be the Gross Profit if, total sales is Rs 2,60,000, cost of net goods sold is Rs 2,00,000 and sales
return is Rs 10,000?
a. 13%
b. 28%
c. 26%
d. 20%

4. Liquidity ratios are expressed in


a. Pure ratio form
b. Percentage
c. Rate or time
d. None of the above

5. Collection of debtors
a. Decreases current ratio
b. Increases current ratio
c. Has no effect on current ratio
d. None of the above

6. Return on Proprietors funds is also known as:


a. Return on net worth
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b. Return on Shareholders fund
c. Return on Shareholders Investment
d. All of the above

7. Which of the following is not included in current assets?


a. Debtors
b. Stock
c. Cash at bank
d. Cash in hand
8. Determine stock turnover ratio if, Opening stock is Rs 31,000, Closing stock is Rs 29,000, Sales is Rs 3,20,000
and Gross profit ratio is 25% on sales.
a. 31 times
b. 11 times
c. 8 times
d. 32 times

9. Quick ratio is 1.8:1, current ratio is 2.7:1 and current liabilities are Rs 60,000. Determine value of stock.
a. Rs 54,000
b. Rs 60,000
c. Rs 1,62,000
d. None of the abov

10. The most precise test of liquidity is


a. Quick ratio
b. Current ratio
c. Absolute Liquid ratio
d. None of the above

11. Higher the ratio, the more favorable it is, doesn’t stand true for
a. Operating ratio
b. Liquidity ratio
c. Net profit ratio
d. Stock turnover ratio

12. Liquid assets is determinedby


a. Current assets – stock - Prepaid expenses
b. Current assets + stock + prepaid expenses
c. Current assets +Prepaid expenses
d. None of the above

13. Debt-equity ratio is a sub-part of


a. Short-term solvency ratio
b. Long-term solvency ratio
c. Debtors turnover ratio
d. None of the above

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14. Stock is considered as a liquid asset as anytime it can be converted into cash immediately.
a. Yes
b. No

15. Liquid ratio is also known as


a) Quick ratio
b) Acid test ratio
c) Working capital ratio
d) Stock turnover ratio
a. A and B
b. A and C
c. B and C
d. C and D

16. Current ratio is stated as a crude ratio because


a. It measures only the quantity of current assets
b. It measures only the quality of current assets
c. Both a and b
d. Offerings dimension

17. The ideal level of current ratio is a.


4:2
b. 2:1
c. Both a and b
d. None of the above

18. Which ratio is considered as safe margin of solvency?


a. Liquid ratio
b. Quick ratio
c. Current ratio
d. None of the above
Answer Key

Sr. Key Sr. Key Sr. Key Sr. Key Sr. Key Sr. Key Sr. Key
No No No No No No No

1 A 6 D 10 C 15 A 20 C 25 A 30 B

2 A 7 B 11 A 16 A 21 A 26 C 31 A

3 D 8 C 12 A 17 C 22 C 27 A 32 A

4 A 9 A 13 B 18 C 23 A 28 D 33 C

5 A --- -- 14 B 19 B 24 C 29 C 34 D

19. DetermineWorkingcapital turnover ratio if, Current assets is Rs 1,50,000, current liabilities is Rs 1,00,000
and Cost of goods sold is Rs 3,00,000.

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a. 5 times
b. 6 times
c. 3 times
d. 1.5 times
20. Working capital turnover ratio can be determined by:
a. (Gross Profit / Working capital)
b. (Cost of goods sold / Netsales)
c. (Cost of goods sold / Working capital)
d. None of the above
21. Debtors Turnover ratio is also known as
A) Receivables turnover ratio
B) Debtors velocity
C) Stock velocity
D) Payable turnover ratio
a. A and B
b. A and C
c. B and C
d. C and D
22. Stock velocity establishes a relationship between
a. Cost of goods sold in a given period and the average amount of inventory held during that period
b. Cost of goods sold in a given period and the average amount of stock held during that period
c. Both a and b
d. None of the above
23. The lower turnover ratio highlights the under utilizations of the resources accessible at the disposal of the
firm.
a. True
b. False
24. Turnover ratios are also known as
a. Activity ratios
b. Performance ratios
c. Both a and b
d. None of the above
25. While calculating Earnings per share, if both equity and preference share capitals are there, then
a. Preference share is deducted from the net profit
b. Equity share capital is deducted from the net profit
c. Both a and b
d. None of the above
26. Return on equity capital is calculated on basis of:
a. Funds of equity shareholders
b. Equity capital only
c. Either a or b
d. None of the above
27. Overall Profitability ratios are based on
a. Investments
b. Sales
c. Both a and b

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d. None of the above
28. Which of the following is expenses ratio?
A) Administrative expenses ratio
B) Selling and Distribution expenses ratio
C) Factory expenses ratio
D) Finance Expenses ratio
a. A, B and D
b. A, C and D
c. A, B and C
d. A, B, C, D
29. Operating ratio is calculated by
a. (Operating Cost / Gross sales) * 100
b. (Operating Cost / Gross sales) * 100
c. (Operating cost / Net sales) * 100
d. None of the above
30. Net operating profit ratio determines _ while net profit ratio determines
a. Overall efficiency of the business, working efficiency of the management
b. Working efficiency of the management, overall efficiency of the business
c. Overall efficiency of the external market, working efficiency of the internal management
d. None of the above
31. If sales is Rs 10,00,000, sales returns is Rs 50,000, Profit Before Tax is Rs 2,00,000, Income tax is 40%,
Net profit ratio is
a. 12.63%
b. 20%
c. 10%
d. 50%
32. If sales is Rs 5,00,000 and net profit is Rs 1,20,000 Net Profit ratio is a.
24%
b. 416%
c. 60%
d. None of the above
33. Net Profit ratio is calculated by
a. (Gross Profit / Gross sales) * 100
b. (Gross Profit / Net sales) * 100
c. (Net Profit / Net sales) * 100
d. None of the above

34. Gross Profit ratio should be adequate to cover


a. Selling expenses
b. Administrative expenses
c. Dividends
d. All of the above

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RATIO ANALYSIS(3/4 marks questions)
Current Ratio
CA/CL
1.Question: Current Assets Rs. 2,00,000; Inventories Rs. 1,00,000; Working Capital Rs. 1,20,000;
Calculate Current Ratio.
Solution : Current liabilities = Current Assets – Working Capital
= Rs. 2,00,000 – Rs. 1,20,000 = Rs. 80,000
Current Ratio = Current Assets/ Current liabilities
= Rs. 2,00,000/Rs. 80,000
= 2.5:1
QUICK RATIO/LIQUID RATIO/ACID TEST RATIO
Liquid assets/CL
2.Question 1: Liquid Assets Rs. 6,80,000, Inventories Rs. 1,90,000, Prepaid Expenses Rs. 10,000, Working
Capital Rs. 2,00,000. Calculate the Current Ratio and Quick Ratio.
Question 2. The Quick Ratio of a company is 2:1. State giving reason, which of the following would
improve, reduce or not change the ratio:
(i) Purchase of Stock-in-trade(costing Rs.10,000) for Rs. 11,000.
(ii) Sale of an office furniture (Book value Rs. 10,000) for Rs. 9,000.
(iii) Payment of Dividend.
(iv) Issue of Equity shares.

SOLVENCY RATIOS

Debt/ Equity

3.Question: From the following information. Calculate Debt-equity Ratio:


Equity Share Capital 1,50,000
Preference Share capital 1,00,000
Reserves and Surplus 1,50,000
Long-term Borrowings 6,00,000
Long-term Provisions 2,00,000
Solution:
Debt = Long-term Borrowings + Long-term Provisions
= Rs. 6,00,000 + Rs. 2,00,000 = Rs. 8,00,000
Equity = Equity Share Capital + Pref. Share Capital + Reserves & Surplus
= Rs. 1,50,000 + Rs. 1,00,000 + Rs. 1,50,000 = Rs. 4,00,000
Debt-Equity Ratio = Debt/Equity = Rs. 8,00,000/Rs. 4,00,000= 2:1
Question: X ltd. Has a liquid ratio of 1.5:1. Its Net working Capital is Rs. 1,20,000 and its inventories
areRs 80,000. Total Assets Rs. 3,80,000. Total Debt Rs. 2,80,000. Calculate Debt-Equity Ratio.
(Ans. 2:1)
Total Assets to Debt Ratio

4.Question: From the following information, calculate Proprietory Ratio:


Share Capital Rs. 2,50,000 Reserves & Surplus Rs. 1,50,000
Non-current Assets Rs. 11,00,000 Current Assets Rs. 5,00,000.
Solution :Rs. 4,00,000/Rs. 16,00,000 X 100 = 25%
INTEREST COVERAGE RATIO
EBIT/Fixed int charges
5.Question : P ltd has a long term loan Rs. 10,00,000. Interest on the loan for the year is Rs. 1,25,000
and its profit before interest and tax is Rs. 5,00,000. Calculate Interest coverage ratio.
Solution : Interest coverage ratio = 5,00,000/1,25,000
= 4 times.

TURNOVER OR ACTIVITY OR PERFORMANCE RATIOS


INVENTRY TURNOVER RATIO
COGS/AVG inventory
6.Question: Calculate Inventory turnover ratio:
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Cost of goods sold/Revenue from operations Rs. 9,00,000
Inventories in the beginning Rs. 2,00,000
Inventories at the end Rs. 2,50,000
Solution: Inventory turnover ratio = 9,00,000/2,25,000
= 4 times
Trade receivables/Debtors turnover ratio

Net credit sales/ avg accts receivables


7.Question: Calculate Trade receivable or Debtors turnover ratio and Average collection period.

Credit revenue from operation for the year is Rs. 12,00,000, Debtors Rs. 1,00,000; Bills receivable Rs.
1,00,000.
Solution: Debtors turnover ratio = 12,00,000/2,00,000
= 6 times
Average collection period = No. of days in a year/Trade receivable ratio
=365/6
= 61 days approx..
Trade payables/Creditors turnover ratio
Net credit purchases/avg accounts payables
8.Question: Closing Trade Payables Rs. 45,000, Net Purchases Rs. 3,60,000, Cash Purchases Rs. 90,000,
Reserve for Discount on Closing Trade Payables Rs. 5,000. Calculate the Creditors Turnover Ratio.
Solution: Creditors Turnover Ratio = (Rs. 3,60,000 – Rs. 90,000)/Rs. 45,000
= 6 times
Average Payment Period = 12 months/Creditors turnover ratio = ……..months
Working capital turnover ratio
Working Capital/net sales
9.Questions: Calculate Working capital turnover ratio from the following:
Cost of revenue from operations Rs. 3,00,000
Current Assets Rs. 2,00,000
Current liabilities Rs. 1,50,000
Solution: Working capital turnover ratio
= 3,00,000/50,000
= 6 times.

PROFITABILITY RATIOS
Gross Profit Ratio:
Gross profit/net sales *100
10.Question: Calculate Gross Profit Ratio:
Revenue from operations – Rs. 6,00,000
Gross profit 25% on cost.
Solution: Let the cost = Rs.100
Gross profit = Rs. 25
Revenue from operations = Rs.125
Cost of revenue from operations = 100/125 X 6,00,000
= 4,80,000
Gross Profit = 6,00,000 – 4,80,000
= 1,20,000
Gross Profit Ratio = 1,20,000 /6,00,000 X 100
= 20%
Operating Profit Ratio
Operating profit/net sales
11.Question: Revenue from operations Rs. 6,00,000, Operating Cost Rs. 5,10,000. Cost of Revenue form
operationsRs. 4,00,000. Calculate Operating Profit Ratio.
Solution: Operating Profit = Rs. 6,00,000 – 5,10,000 = Rs. 90,000
Operating Profit Ratio = Rs. 90,000/Rs. 6,00,000 X 100
= 15%

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Operating ratio
Operating cost/Net sales
12.Question: From the following information calculate operating ratio
Cost of revenue from operation = Rs. 6,00,000
Operating expenses = Rs. 40,000
Revenue from operation = Rs. 8,20,000
Revenue return from operations = Rs. 20,000
Solution:
Operating ratio =( 6,00,000 + 40,000/8,00000)X100 = 80%
Net profit ratio
13.Question: Revenue from Operations Rs. 10,00,000, Gross Profit Ratio 25%, Operating Ratio 90%,
Operating Rs. 1,00,000, Non-operating Expenses Rs. 5,000, Non-operating income Rs 55,000. Calculate
Net Profit Ratio.
Solution:
Operating Profit Ratio = 100 – Operating Ratio = 100 - 90% = 10%
Operating Profit = Rs. 10,00,000 X 10/100 = Rs. 1,00,000
Net Profit = Operating Profit + Non-operating Incomes – Non-Operating Expenses
= Rs. 1,00,000+Rs. 55,000 – Rs. 5,000 = Rs. 1,50,000
Net Profit Ratio = Rs. 1,50,000/Rs. 10,00,000 X 100 = 15%
Return on Investment or Return on Capital Employed =
EBIT *100
Capital Employed
14.Question: From the following information calculate Return on Investment
Net profit after interest and tax – Rs. 1,20,000
Tax – Rs 1,20,000

Net fixed Assets – Rs.. 5,00,000


Long term trade investment – Rs. 50,000
Current assets – Rs. 2,20,000
12% debentures – Rs. 4,00,000
Equity share capital – Rs. 50,000
10% preference share capital – Rs. 50,000
Reserve and surplus – Rs. 1,00,000
Current liability – Rs. 1,70,000
Solution : Return on Investment = 1,20,000+ 1,20,000 + 48,000
5,00,000 + 50,000 + 50,000 = 6,00,000
= 2,88,000 X 100
= 48%

QUESTIONS: 4 marks

1. From the following information calculate:


(i) Gross Profit Ratio (ii) Inventory Turnover Ratio (iii) Current Ratio (iv) Liquid Ratio
(v) net Profit ratio (vi) Working Capital Ratio
Revenue from operations Rs. 25,20,000
Net Profit Rs. 3,60,000
Cost of Revenue from operations Rs. 19,20,000
Long-term Debt Rs, 9,00,000
Trade Payables Rs. 2,00,000
Average Inventory Rs. 8,00,000
Other Current Assets Rs. 7,60,000
Fixed Assets Rs. 14,40,000
Current liabilities Rs. 6,00,000
Net Profit before interest and tax Rs. 8,00,000

2. From the following calculate :


(a) Net Profit Ratio
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(b) Operating Profit Ratio
Revenue from operations Rs. 2,00,000
Gross Profit Rs. 75,000
Office Expenses Rs. 15,000
Selling Expenses Rs. 26,000
Interest on Debentures Rs. 5,,000
Accidental Losses Rs. 12,000
Income from Rent Rs. 2,500
Commission received Rs. 2,000
( Ans Net profit ratio = 10,75% and Operatin profit ratio = 18%
3. Find the value of current liabilities and current assets if Current Ratio is 2.5:1. Liquid Ratio is
1.2:1 and the value of inventory of the firm is Rs. 78,000.
(Ans. Current Assets = Rs. 1,50,000; Current liabilities = Rs. 60,000)
4. Current Ratio is 3.5. Working Capital is RS. 90,000. Calculate the amount of Current Assets and
Current Liabilities.
Hint: Current Assets – 1,26,000
5. Shine Limited has current ratio 4.5:1 and quick ratio 3:1; if the inventory is Rs. 36,000, calculate
current liabilities and current assets.
Hint: Current Assets – 1,08,000
6. Current liabilities of a company are Rs. 75,000. If current ratio is 4:1 and liquid ratio is 1:1,
calculate value of current assets, liquid assets and inventory.
Hint: Inventory – 2,25,000
7. Handa Ltd. has inventory of Rs. 20,000. Total liquid assets are Rs. 1,00,000 and quick ratio is
2:1. Calculate current ratio.
Hint: Current Ratio: 2:4:1

8. Calculate Debt-Equity ratio from the following information:


Total Assets Rs. 625000
Total Debt Rs. 500000
Current Liabilities Rs. 250000
Hint: Debt Equity Ratio – 2:1
9. Calculate following ratios from the following information:
i. Current Ratio
ii. Acid – Test Ratio
iii. Operating Ratio
iv. Gross Profit Ratio
Current Assets Rs. 35000
Current Liabilities Rs. 17,500
Inventory Rs. 15,000
Operating Expenses Rs. 20,000
Revenue from OperaionsRs. 60,000
Cost of revenue from Operations Rs. 30,000
Hint: 2:1, 1.14:1, 83.3%, 50%
10. Akshara Ltd. has 8% Debentures of Rs. 5,00,000. Its profit before interest & tax is Rs. 2,00,000.
Calculate Interest Coverage Ratio.
Hint: 5 times

ACCOUNTANCY
CASH FLOW STATEMENT - MCQ

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1. As per Accounting Standard-3, Cash Flow is classified into

a) Operating activities and investing activities


b) Investing activities and financing activities
c) Operating activities and financing activities
d) Operating activities, financing activities and investing activities

2. Cash Flow Statement is also known as

a) Statement of Changes in Financial Position on Cash basis


b) Statement accounting for variation in cash
c) Both a and b
d) None of the above.

3. The objectives of Cash Flow Statement are

A) Analysis of cash position


B) Short-term cash planning
C) Evaluation of liquidity
D) Comparison of operating Performance

4. In cash flow statement, the item of interest is shown in

A) Operating Activities
B) Financing Activities
C) Investing Activities

a) Both A and B
b) Both A and C
c) Both B and C
d) A, B, C

5. Cash Flow Statement is based upon

a) Cash basis of accounting


b) Accrual basis of accounting
c) Credit basis of accounting
d) None of the above

6. Which of the following statements are false?

A) Cash Flow Statement is helpful in the formation of policies.


B) Cash Flow Statement is useful for external analysis
C) Cash Flow Statement is helpful in estimating future cash flow

a) Both A and B
b) Both A and C
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c) Both B and C
d) None of the above

7. Which of the following statements are true?

A) Cash flow reveals only the inflow of cash


B) Cash flow reveals only the outflow of cash
C) Cash flow is a substitute for income statement
D) Cash flow statement is not a replacement of funds flow statement.

a) Only A
b) Only B
c) Both B and C
d) Only D

8. Cash flow statement is based upon _________ while Funds Flow Statement
recognizes _______.

a) Cash basis of accounting, accrual basis of accounting


b) Accrual basis of accounting, cash basis of accounting
c) Both are based on cash basis of accounting
d) None of the above

9. Cash Flow Statement studies causes of change in working capital.

a) True
b) False

10. _________ reconciles the opening cash balance with the closing cash balance
of a given period on the basis of net decrease or increase in cash during that
period.

a) Cash Flow Statement


b) Funds Flow Statement
c) Both a and b
d) None of the above

11. Cash deposit with the bank with a maturity date after two months belongs to
which of the following in the cash flow statement.

a) Investing activities b) Financing activities


c) Cash and cash equivalent d) Operating activities

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12. Given salary expenses Rs 40,000, Outstanding in the beginning of the year: Rs 5,000
and outstanding at the end of the year Rs 10,000. Cash outflow on salary will be:

a) Rs 45,000
b) Rs 35000
c) Rs 55,000
d) Rs 15,000
13. Which of the following are added to net profit after tax and extraordinary items to
reach to net profit before tax and extraordinary items?

A) Provision for tax made during the year


B) Proposed dividend made during the year
C) Interim dividend
D) Transfer to General reserves and other reserves

a) Both A and B
b) Both A and C
c) Both B and C
d) A, B, C and D

14. Acquisition and disposal of long term assets is included in

a) Cash flow from investing activities


b) Cash flow from financing activities
c) Cash flow from operating activities
d) None of the above

15. ABC Ltd had investment of Rs 68,000 as on 31.3.2013 and investment of Rs 56,000
as on 31.3.2019. During the year ABC Ltd sold 40% of its investments being held in the
beginning of period at a profit of Rs 16,800. Determine cash flow from investing activities.

a) Rs 59,200
b) Rs 28,800
c) Rs 72,800
d) None of the above

16. Financing activities brings changes in

a) Size and composition of owner’s equities


b) Borrowing of the enterprise
c) Both a and b
d) None of the above

17. Which of the following items is not considered as cash or cash equivalent?
a) Cash on hand
b) Demand deposit
c) Bank borrowings
d) Investment with a maturity of two months from the date of acquisition

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18. In a statement of cash flows, a company investing in short-term financial
investments and in fixed assets results in

a) increased cash
b) decreased cash
c) increased liabilities
d) increased equity

19) A company who issues bonds or stocks in result raised funds which finally

a) increases liabilities
b) increases equity
c) increases cash
d) decreases cash

20) Which of the following is considered to be as cash equivalent?


a) Marketable securities
b) Debtors
c) Investment
d) Bill of exchange

ANSWERS:
1) d 2) c 3) d 4) c 5) a 6) d 7) d 8) a 9) b 10) a 11) c 12) b 13) d
14) a 15) b 16) c 17) c 18) b 19) c 20) a

Cash Flow Statement( 3,4 &6 marks question)

1. Give the meaning of cash flow statement. (2017- AI-1mark)


Ans. Cash flow statement is a statement that shows flow of cash and cash equivalents during a given
period of time. It shows the net increase and net decrease of cash and cash equivalent under
each of operating, investing and financing activity.
2. State any two objectives of preparing cash flow statement. (2012 & 2016)
Ans. The objective of preparing of cash flow statement is to ascertain the cash inflow or outflow
arising from operating, investing and financing activities separately.
3. What is meant by ‘cash equivalents’ while preparing cash flow statement? (2014 & 2016)
Ans. Cash equivalent are short term highly liquid investment that are readily convertible into known
amounts of cash and which are subject to an insignificant risk of change in value.
4. Short term investments are not considered while preparing cash flow statement. Why? (2017 )

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Ans. Short term investments or current investments or marketable securities are a part of cash and
cash equivalents. Therefore they are not considered under any of the three activities (operating,
investing and financing).
5. Net increase in working capital other than cash and cash equivalent will increase, decrease or not
change cash flow from operating activities. Give reasons in support of your answer. (2017 )
Ans. Net increase in working capital means that the decrease in current assets and increase in current
liabilities is more than the increase in current assets and decrease in current liabilities. So the net
effect is increase in cash flow from operating activities.
6. Payment of receipt of interest and dividend is classified as which type of activity while preparing
cash flow statement? (2017 )
Ans. Payment of interest and dividend is classified as Financing Activity.
Receipt of interest and dividend is classified as Investing Activity.
7. Cheque and drafts in hand are not considered while preparing cash flow statement. Why?
Ans. Cheque and drafts in hand are not considered while preparing cash flow statement as being cash
and cash equivalent they are part of cash management of enterprise.

8. State any two advantages of preparing cash flow statement.


Ans. Advantages of cash flow statement (Any Two)
I. It helps in short term financial planning by providing information about sources and application
of cash and cash equivalent for a specific period.
II. It helps in efficient cash management as it gives information relating to surplus and deficit of
cash.
III. It facilitates comparative study by enabling comparison of actual cash flow with budgeted cash
flows.
IV. It helps investors and creditors evaluating management decisions by providing information
relating to company’s investing and financing activities.
V. It helps in deciding how much dividend should be paid as it provides information about
availability of cash and cash equivalents.
9. Normally, what should be the maturity period for a short-term investment from the date of its
acquisition to be qualified as cash equivalents? (2017-All India-1mark)
Ans. Maximum maturity period is 90 days or 3 months for a short term investment from the date of
its acquisition to be qualified as cash equivalents.
10. State the primary objective of preparing a cash flow statement.

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Ans. The primary objective of cash flow statement is to find out the inflows and outflows of cash and
cash equivalent from Operating, Investing and Financing Activities.
11. Will net decrease in working capital other than cash and cash equivalent, increase, decrease or
not change cash flow operating activities? Give reasons in support of your answer. (2017-all
India-1mark)
Ans. Increase.
Reason: Net decrease in working capital implies outflow of cash and cash equivalent.
12. What is meant by ‘cash flow from investing activities?
Ans. Cash flow from investing activities means inflows and outflows of cash and cash equivalents
from sale or acquisition of fixed assets and non-current investment.
13. J. K. Ltd purchased machinery on deferred payment basis. During the year ended 31-03-2016 the
company paid an instalment of Rs.4,00,000 which included interest of Rs.40,000. While preparing
cash flow statement, under which type of activities will this payment be classified? Also, mention
the amount involved in each activity.
Ans. Payment of Rs.3,60,000 will be shown under cash outflows from investing activities. Payment of
Rs.40,000 will be shown under cash outflows from financing activities
14. ,Cash advances and loans’ made by financial enterprises will be shown under which type of
activity while preparing cash flow statement? Give reason in support of your answer.
Ans. Operating activity.
Reasons: Advances and Loan made by financial enterprises is their main operating activity.
15. The patents of X Ltd. increased from Rs.3,00,000 in 2013-14 to Rs.3,50,000 in 2014-15. What will
be its treatment while preparing cash flow statement for the year ended 31st March, 2015.
(sample paper -2017)
Ans. It will be taken as purchase of patents of Rs.50,000 and will be shown under cash from investing
activities an outflow of cash.
16. Kartik Mutuals, a mutual fund company provides you the following information:
Particulars 31st March, 2013 31st March, 2014
Proposed dividend Rs.20,000 Rs.15,000
Additional information
Equity share capital raised during the year
Rs.3,00,000
10% bank loan repaid was Rs.1,00,000
Dividend received during the year was Rs.20,000

Find out the cash flow from financing activities.


Ans. Proceeds from equity share capital: Rs. 3,00,000
Less: Repayment of Bank Loan Rs. (1,00,000)
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Rs. 2,00,000
Dividend paid Rs (20,000)
Cash flow from financing activities Rs (1,80,000)

* Dividend received during the year Rs.20,000 will be shown in the Investing Activities.
17. List any two investing activities which result in outflow of cash. (AI-2017)
Ans. (i) Purchase of fixed assets (ii) Purchase of investment
18. Why is separate disclosure of cash flows from investing activities important? State. (AI-2014 &16)
Ans. The separate disclosure of cash flows from investing activities is important because the cash
flows represent the extent to which expenditure have been made for resources intended to
generate future income and cash flows by way of investing activities.
19. Under which type of activity, will you classify ‘Proceeds from sale of investment’ while preparing
cash flow statement? (AI-2013)
Ans. Investing Activity.
20. When does a Cash Flow arise?
Ans. When the net result of a transaction either increases or decreases in cash or cash equivalent, a
cash flow arises.
21. Deepu Ltd, a non financing company received dividend on shares. How will it be presented while
preparing ‘cash flow statement’? (2016)
Ans. Under Investing Activities.
22. under which type of activity will you classify ‘cash received from debtor’ while preparing cash
flow statement?
Ans. Operating Activity.

23. Following is the balance sheet of R.S. Ltd. as at 31st March, 2016 :

Balance Sheet of R.S. Ltd. as at 31-03-2016


Particulars Note No. 31-03-2016 Rs. 31-03-2015 Rs.
I. Equity and Liabilities :
1. Shareholder’s funds
a) Share Capital 9,00,000 7,00,000
b) Reserve and Surplus 1 2,50,000 1,00,000
2. Non-current Liabilities
Long term borrowings
3. Current Liabilities
2 4,50,000 3,50,000
a) Short term borrowings
b) Short term provisions 3 1,50,000 75,000
4 2,00,000 1,25,000
Total 19,50,000 13,50,000
II. Assets
1. Non-current Assets
a) Fixed Assets
5
i. Tangible
ii. Intangible
6 14,65,000 9,15,000
b) Non-current Investment 1,00,000 1,50,000
2. Current Assets 1,50,000 1,00,000
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a) Current Investments
b) Inventories 7 40,000 70,000
c) Cash and Cash Equivalent 1,22,000 72,000
73,000 43,000
Total 19,50,000 13,50,000
Notes to Accounts:

Note No. Particulars 31-03-2016 Rs. 31-03-2015 Rs.


Reserves and Surplus
Surplus i.e. balance in statement of
(1) 2,50,000 1,00,000
profit and loss
2,50,000 1,00,000
Long term borrowings -12%
4,50,000 3,50,000
(2) debentures
4,50,000 3,50,000
Short term provisions- Proposed
2,00,000 1,25,000
(3) dividend
2,00,000 1,25,000
Tangible Assets
Machinery 16,75,000 10,55,000
(5)
Accumulated Depreciation (2,10,000) (1,40,000)
14,65,000 9,15,000
Intangible Assets -Goodwill 1,00,000 1,50,000
(6)
1,00,000 1,50,000
Inventories
(7) Stock in trade 1,22,000 72,000
1,22,000 72,000
Additional information:
(1) Rs.1,00,000, 12% debentures were issued on 31st March 2016.
(2) During the year a piece of machinery costing Rs.80,000, on which accumulated depreciation was
Rs.40,000, was sold at a loss of Rs.10,000.
Prepare a cash flow statement.
Ans.
Cash Flow Statement of RS Ltd.
For the year ended 31st March 2016 as per AS-3
Particulars Amount Amount
1. Cash flows from operating activities:
Net Profit before tax & extraordinary items (WN1) 3,50,000
Add: Non cash and non operating expenses
Goodwill written off 50,000
Depreciation on machinery (WN-3) 1,10,000
Interest on debentures 42,000
Loss on sale of machinery 10,000
Operating profit before working capital changes 5,62,000
Less : Increase in Current Assets
Increase in inventories (50,000)
Net cash generated from Operating Activities: (A) 5,12,000
2. Cash flow from investing activities:
Purchase of machinery (WN-2) (7,00,000)
Sale of machinery 30,000
Purchase of non-current investments (50,000)

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Net cash used in investing activities (B) (7,20,000)
3. Cash flows from financing activities:
Issue of Share Capital 2,00,000
Issue of 12% debentures 1,00,000
Interest on Debentures paid (42,000)
Dividend paid (1,25,000)
Bank overdraft raised 75,000
Net cash flow from Financing Activities (C) 2,08,000
4. Net increase/decrease in cash and cash equivalents (A+B+C) Nil
5. Add : Opening Balance of Cash and Cash Equivalents
Current Investments 70,000
43,000 1,13,000
Cash and Cash Equivalent

6. Closing balance of cash and cash equivalents


Current investments 40,000
Cash and cash equivalent 73,000 1,13,000

Working Notes:
1. Calculation of net profit before tax: Rs.
Net profit as per statement of profit and loss 1,50,000
Add : proposed dividend 2,00,000
Net profit before tax and extraordinary items 3,50,000
WN-2 Machinery Account
Particulars Amount Particulars Amount
To balance b/d 10,55,000 By cash A/c 30,000
To cash A/c (Bal. fig) 7,00,000 By statement of P&L (Loss) 10,000
(Purchase) By accumulated Dep. A/c 40,000
By balance c/d 16,75,000
17,55,000 17,55,000

WN-3 Accumulated Depreciation Account


Particulars Amount Particulars Amount
To Machinery A/c 40,000 By balance b/d 1,40,000
To Balance c/d 2,10,000 By Statement of P&L (Bal. Fig.) 1,10,000

2,50,000 2,50,000

24. from the following information, calculate cash flow from operating activities: (2016)

31st March-2015 31st March-2014


Particulars
Rs. Rs.
Surplus (i.e. balance in the statement of Profit and Loss) 71,000 89,000
Inventory 12,000 4,000
Trade receivables 58,000 45,000
Outstanding expenses 14,600 10,000
Goodwill 57,000 27,000
Cash in hand 9,000 12,000
Machinery 82,000 56,000
(i) A piece of machinery costing Rs.50,000 on which depreciation of Rs.20,000 had been charged
was sold for Rs.10,000. Depreciation charged during the year was Rs.18,000.
(ii) Income tax Rs.23,000 was paid during the year.
(iii) Dividend paid during the year was Rs.36,000.

Ans. Calculation of cash flow from operating activities for the year ended 31st March 2015

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Particulars Amount Amount
Net profit before tax and extraordinary items (WN) 41,000
Add: Non-cash and Non-operating items:
Depreciation on machinery 18,000
Less: on sale of machinery (50,000-20,000-10,000) 20,000 38,000
Operating profit before working capital changes 79,000
Add : increase in current liabilities:
Outstanding expenses (14,600-10,000) 4,600
Less : increase in current assets 83,600
Inventory (12,000-4,000) 8,000
Trade receivable (58,000-45,000) 13,000 21,000
Cash generated from operating activities before tax 62,600
Less : Tax Paid 23,000
Cash flow from operating Activities after Tax 39,600
Working Note:

Particulars Amount Amount


Calculation of net profit before tax and extraordinary items:
Surplus (i.e. Balance in the statement of Profit and Loss as on 31st march 2015) 71,000
Less: Surplus (i.e. Balance in the statement of Profit and Loss as on 31st march 89,000
2014) (18,000)
Net Loss during the year
36,000
Add: Dividend paid
23,000 59,000
Tax paid
41,000
Net Profit before Tax and Extraordinary Items

25. State the category of the following items for a financial as well as non-financial company
(i) Dividend received (ii) Dividend paid
(iii) Interest paid (iv) Interest received

Answer
Financial company non-financial company
Dividend received operating activity investing activity
Dividend paid financing activity financing activity
Interest paid operating activity financing activity
Interest received operating activity investing activity

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BLUE PRINT CLASS XII ACCOUNTANCY 2019-20

UNIT OTQ(1) VSA(3) SA(4) LA(6) VLA(8) TOTAL

1. NOT FOR PROFIT 1 1 1 3(10)


ORGANISATION

2. ACCOUNTING FOR 8 2 1 1 12(30)


PARTNERSHIP
FIRM

3. ACCOUNTING FOR 8 1 1 10(20)


COMPANIES

4. ANALYSIS OF 1 1 2 4(12)
FINANCIAL
STATEMENT

5. CASH FLOW 2 1 3(8)


STATEMENTS

TOTAL 20(1) 2(3) 5(4) 3(6) 2(8) 32(80)

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KENDRIYA VIDYALAYA SANGATHAN,KOLKATA REGION ‘EXAMINATION 2020
CLASS XII ACCOUNTANCY
TIME3 HOURS MAXIMUM MARKS 80
GENERAL GUIDELINES:-
1. This question paper contains 7 pages
2. This question paper contains two parts : Part A and part B
3. Both the parts arecompulsory.
4. Attempt question of one part at one placetogether.

PART A:ACCOUNTING FOR PARTNERSHIP FIRMS


AND COMPANIES
…………… is an amount received by a NPO as per the WILL of a deceased
partner- (a) Prize (b) legacy (c) Annuity (d) endowment
If a partnership is running business without a partnership deed , how much
interest on their capital is given – (a) no interest on capital (b) 6% interest
on capital (c) 10% interest on capital (d) none of these
From the following identify a situation when fixed capitals of the
partners may changes?-
(a) when current accounts are opened
(b) when drawing are made by the partners
(c) When there’s a loss in the business
(d) When additional capital is introduced
Any change in the relations of partners without affecting the
existing of Partnership firm is called
(a) Retirement
(b) Reconstitution
(c) Reassessment
(d) Revolution
………….. ratio in which the partners share all the accumulated
profits, reserves, losses and fictitious assets in case of
reconstitution of partnership firm: -
(a) New ratio
(b) Gaining ratio
(c) Old ratio
(d) Sacrificing ratio
Treatment of Goodwill is made under which accounting standard: -
(a) AS-3
(b) AS-26
(c) AS-10
(d) None of these
A and B are partners in a firm sharing profits in the ratio 2:1. They
admit C as a new partner for 1Ans.5th share. If new ratio is 8:4:3,
then sacrificing ratio will be: -
(a) 2:1
(b) 1:7

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(c) 3:5
(d) 1:2
X, Y and Z are partners sharing profits and losses in the ratio
8:7:5.Z retires and his share is taken equally by X and Y. the new
profit sharing ratio:-
(a) 5:7
(b) 21:19
(c) 19:21
(d) 7:5
…………………………… is issued out of the amount of securities
premium reserve (fill the gap)
M Ltd issued 10,000 shares of Rs.50 each. The amount of share
was payable as follows :Rs. 15 on application, Rs. 10 on allotment
and balance of first and final call. Applications for 15,000 shares
were received and allotment was made to all the applicants on
pro-rata basis. Directors decided to adjust excess application
money towards allotment. Calculate the amount transferred to
Share Allotment. (A) Rs. 60,000 (B) Rs. 70,000 (C) Rs. 85,000 (D)
None of these

Total capital employed in the firm is Rs.8,00,000, reasonable rate


of return is 15% and Profit for the year is Rs.12,00,000. The value
of goodwill of the firm as per capitalization method would be (A)
Rs.82,00,000 (B) Rs.12,00,000 (C) Rs.72,00,000 (D) Rs.42,00,000

XY Limited issued 2,50,000 equity shares of Rs.10 each at a premium of Rs.1


each payable as Rs.2.5 on application, Rs.4 on allotment and balance on the
first and final call. Applications were received for 5,00,000 equity shares but
the company allotted to them only 2,50,000 shares. Excess money was
refunded after adjustment for further calls. Last call on 500 shares were not
received and shares were forfeited after due notice. This is a case of (A)
Over subscription (B) Pro-rata allotment (C) Forfeiture of shares (D) All of
the above
Z Limited forfeited 200 fully called up shares of Rs.10 each on
which Rs.1,300 had been received; later on these shares were
reissued as fully paid up @ Rs.9 per share. The amount to be
transferred from share forfeited account to capital reserve account
will be A. Rs.1,800 B. Rs.2,000 C. Rs.1,100 D. Nil

Omega Limited, a listed company acquires assets worth


Rs.7,50,000 from Alpha Limited and issue shares of Rs.10 each at
a premium of 25%. The number of shares to be issued by Omega
Ltd., to settle the purchase consideration will be (A) 60,000 (B)
75,000 (C) 1,00,000 (D) 1,25,000

State whether true or false: fresh issue of share cannot be made


at discount rate(1)

The cost of supplying uniform to employees is a (A) Capital expenditure (B)


Revenue expenditure (C) Deferred revenue expenditure (D) None of the
above

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Correct the statement: banking companies are required to
maintain minimum 25% debenture redemption reserve

Show how would deal with the following items in Income &
Expenditure A/c and Balance Sheet of Diamond club as on
31.3.2020: -
Particulars Debit Credit
Tournament fund 12,000
Tournament fund 12,000
investment 600
Income from the tournament 400
fund investment Tournament
expenses
R Ltd. Has an authorised capital of 10,000 equity shares of Rs 100
each. It issued 6,000 equity shares to public for subscription payable
Rs. 30 on application; Rs 30 on allotment; Rs 20 on first call and
balance on final call. The whole issue was subscribed and paid up
except first and final call money on 400 shares and these shares were
forfeited. Out of the forfeited shares 300 shares were reissued @ Rs
110 each fully paidup.
Show share capital in the Balance Sheet of the company as
per schedule III of companies Act 2013 as at 31st march 2020.

B and S are partners sharing profit and loss in the ratio 3:2. they
admit R for 1Ans.5th share which he takes from B and S in 2:3.
goodwill of the firm is valued at Rs 1,20,000. R contributes 90,000 as
capital and is unable to contribute 80% of his share of goodwill in
cash. Pass journal entries and also calculate newratio.

Alka and Bela started business in partnership on 1stjan 2019 and


contributed Rs. 1,00,000 and Rs. 80,000 respectively for capital the
term of partnership deed are as follows:-
a) Interest on capital and drawing @10% and 12%respectively.
b) Alka to get a monthly salary of Rs 2,000 and Bela to
Get commission of Rs 10,000 p.a
c) Profit and loss to be shared in the ratio of theircapital
The profit for the year was Rs 1,30,030 before making the above
adjustments. The drawings were Rs 20,000 and Rs 16,000 of Alka
and Bela respectively. Prepare Profit and Loss appropriation
Account and capital account assuming capitals are fixed for the
year ended 31-12-2019.

0R

Munna, Nisha and Priyanka are partners in a firm. They contributed


Rs 50,000 each as capital three years ago. At that time priyanka
agreed to look after the business as Munna and nisha were busy. The
profit of past 3 years were Rs 15,000, Rs25,000 and Rs50,000
respectively. While going through books of account Munna noticed
that profit had been distributed in the ratio of 1:1:2. When he
enquired from Priyanka about this, priyanka replied that since she
looked after the business she should get more profit. Munna
100 | P a g e
disagreed and it was decided to distribute profit equally,
retrospectively for the last three years. You are required to pass
necessary adjustment entry for the corrections of theabove.

A,B and C were partners in a firm sharing profits in the ratio of


3:2:1. The Balance Sheet as on 31-3-2020 was asfollows:-
Liabilities Amount( Assets Amount(
Rs.) Rs.)
Creditors 4,000 Building 20,000
Reserve 6,000 Plant and machinery 16,000
Capitals Stock 5,100
A 24,000 Debtors 6,000
B 12,000 Cash at bank 6,900
C 8,000
54,000 54,000
A died on 30-9-2020 under the partnership agreement the
executors of deceased partners were entitled to:-
a) Amount standing to the credit of partner’s capitalaccount.
b) Interest on capital @12% p.a
c) Share of goodwill on the basis of four year purchase of last 3 years’
averageprofit.
d) Share of profit from the closing of last financial year to the
date of death on the basis of last year’s profit. Profit for the
year 2018,2019 and 2020 were Rs 8,000, Rs12,000 and
Rs7,000respectively.
Prepare A’s capital A/.c to be rendered to his executors.
Or
(a) the amount payable to Z on his retirement amounted to Rs
1,96,000. He took over stock worth Rs 24,000 and 25% of the
investment after which an amount of Rs 90,000 was due and
transferred to his loan AAns.c. calculate the value ofinvestment.
(b) S and P are partners in a firm in the ratio 3:2.the fixed capital of
S is Rs 1,20,000 and P is Rs 75,000. On 1stapril 2020 they
admitted K as a new partner for 1Ans.5th share in future profits. K
brought Rs 75,000 as his capital. Calculate the value of goodwill of
the firm and record journal entries on K’s admission.
1. Prepare income and expenditure account for year ended
31stdec 2019 and a Balance Sheet as at that date from the
following receipt and payment account for the year ended
31.12.2019 relating to a club:
Receipt Amount(Rs.) Payment Amount(Rs.
)
To balance 1025 By salaries 600
bAns.d To By expenses 75
Subscription By drama expenses 450
2018 40 By newspapers 150
2019 2050 2150 By municipal taxes 40
2020 60 540 By charity 350
To donations
To Proceeds from drama 950 By 6% investments 2000
tickets To sales of waste 45 (made on
1.8.2019)
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paper By electrical 145
charges
By balance bAns.d 900

4710 4710
There are 500 members , each paying an annual subscription of Rs 5. Rs50
are still in arrears for the year 2018. Municipal taxes amounting to Rs 40
per year have been paid up to 31st march 2020 and 50 are outstanding for
salaries. Building stands in the books at Rs5,000.
A and B are equal partners and their Balance Sheet as on 30thjune
2019 stood as under
Liabilities Amount Assets Amount
(Rs.) (Rs.)
Creditors 5,000 Stock 3,500
Bank overdraft 1,500 Debtors 6,100
Capitals Fixtures& fittings 250
A 2,100 Cash 50
B 1,600 Investments 300
10,200 10,200
It is agreed that C shall be taken into partnership with conditions
that C's share of goodwill will be Rs200 which C is unable to bring
but he brings capital of Rs1,000 for his 1Ans.3rd share. On the
date of C’s admission, following adjustments were made:-
a) To write off bad debt amounting to Rs1,500.
b) To write down the Fixture& Fittings by Rs150
c) To depreciate stock in trade by15%
d) To write off loss upon investments by25%
e) Capital of partners will be adjusted as per C’scapital.
Prepare Revaluation A/c, Partners’ capital A/c and Balance Sheet of the new
firm
OR
A,B and C are partners in 3:2:1 and their Balance Sheet 31st
December 2019was as follow:-
Liabilities Amount(R Assets Amount(R
s.) s.)
Capital Accounts; Plant & Machinery 30,000
A 18,000 Furniture 2,000
B 16,000 Debtors 35,00
0
C 10,000 Less: provision 2,000 33,000
Trade creditors 20,000 Cash in hand 1,000
Worksmen 5,000 Profit and loss A/c 3,000
compensation
Fund
69,000 69,000
C retired on this date. It was agreed that plant and machinery is to be
revalued at Rs 40,000 and the existing provisions for bad debt is to be
increased by 50% and liability for worksmen compensation was decided at
Rs 2,000. C’s share of goodwill was valued at Rs8,000.
Total amount payable to C was brought in by A and B in such a
way so as to make their capital A/c in Proportion to their share of Profit
which is equal. You are required to prepare Revaluation A/c, Partners’
capital A/c and Balance Sheet after all adjustments are carried out.

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Dolce Ltd invited application for the issuing 70,000 equity share of
Rs 10 each on which Rs 7 per share were called up, which were
payable asfollow:
On application Rs 2
per share On
allotment Rs 3 per
share On first
callbalance
The amount was received as follow:
On 40,000 shares Rs 7
parshare On 20,000
shares Rs 5 parshare
On 10,000 shares Rs 2
parshare
The director forfeited 30,000 shares on which less than Rs 7 per
share were received. Later on the forfeited share were reissued at
Rs 5 per share, as Rs 7 per share paid up.
Pass necessary journal entries for the above transactions in the
books of the company.

OR
Pass necessary journal entries in the books of Ram Ltd for the following
transactions:-
a) 400 equity shares of Rs 100 each issued were forfeited for
the non payment of final call of Rs 20 per share.the
forfeited shares were reissued for Rs 38,000 fully paid up.
b) 300 equity shares of Rs 100 each issued were forfeited
for the non payment of allotment money of Rs 40 per
share.the first and final call of Rs 20 per share was not
made. the forfeited shares were reissued for Rs 29,000
fully paidup.
c) Define minimumsubscription.

PART B;ANALYSIS OF FINANCIAL STATEMENTS


What is ideal quick ratio?

Rent Received is classified under:


a) Financing Activities
b) Investing Activities
c) Cash and Cash Equivalents
d) Operating Activities

Give one example of cash equivalent other than cash and


bank balance.

from the given information calculate the inventory


turnover ratio:- Revenue from operation Rs
2,00,000
Gross profit -25% on cost
Inventory at the beginning is 1Ans.3rd of the stock at the end which
was 30% of revenue from operations.

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under what heads the following items will be shown in the
Balance Sheet of a company.
i) mortgageloan ii) Bankbalance iii) Government securities
iv) plant andmachinery v) workinprogress vi) share forfeitureAAns.c

from the following particulars, prepare comparative statements/common size


statement of profitandloss.
Particulars Not 31.3.2019 31.3.2020
e
no.
Revenue from operation 60,00,000 40,00,000
Other income(% of 12% 20%
revenue from operation) 70% 60%
Expenses(% of operating 40% 40%
revenue)
Tax rate
from the following Balance Sheet of Vikas Ltd, prepare cash flowstatements:-
Particulars Not 31.03.20 31.03.20
e 19 20
no.
I.Equity&
Liabilities:-
Shareholders’ 90,000 1,30,000
fund: Share 30,000 55,000
capital 20,000 30,000
General reserve
Profit and Loss (2,000) (1,000)
Account
Preliminary 17,400 22,000
Expenses
Current
liabilities:
Trade
creditors
Total 1,55,400 2,36,000
II.Assets:
Non current
assets: Fixed 93,400 1,66,000
assets
Current 22,000 26,000
assets 36,000 39,000
Stock
Debtors 4,000 5,000
Cash and cash equivalents
Total 1,55,400 2,36,000
Additional Information:-
Depreciation charged on fixed assets for the year 2019-2020 was
Rs20,000.
Income Tax Rs 5,000 has been paid in advance during the year.

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KENDRIYA VIDYALAYA SANGATHAN, KOLKATA REGION ‘EXAMINATION 2020
CLASS XII ACCOUNTANCY
MARKING SCHEME
TIME3 HOURS MAXIMUM MARKS 80
GENERAL GUIDELINES:-
5. This question paper contains 7 pages
6. This question paper contains two parts : Part A and part B
7. Both the parts arecompulsory.
8. Attempt question of one part at one placetogether.

PART A:ACCOUNTING FOR PARTNERSHIP FIRMS AND COMPANIES


1 …………… is an amount received by a NPO as per the WILL of a deceased
partner- (a) Prize (b) legacy (c) Annuity (d) endowment
Ans. b
2 If a partnership is running business without a partnership deed , how much
interest on their capital is given – (a) no interest on capital (b) 6%
interest on capital (c) 10% interest on capital (d) none of these
Ans. a.
3 From the following identify a situation when fixed capitals of the
partners may changes?-
(e) when current accounts are opened
(f) when drawing are made by the partners
(g) When there’s a loss in the business
(h) When additional capital is introduced
Ans. d.
4 Any change in the relations of partners without affecting the existing
of Partnership firm is called
(e) Retirement
(f) Reconstitution
(g) Reassessment
(h) Revolution
Ans. b.
5 ………….. ratio in which the partners share all the accumulated profits,
reserves, losses and fictitious assets in case of reconstitution of
partnership firm: -
(e) New ratio
(f) Gaining ratio
(g) Old ratio
(h) Sacrificing ratio
Ans. c.
6 Treatment of Goodwill is made under which accounting standard: -
(e) AS-3
(f) AS-26

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(g) AS-10
(h) None of these
Ans. b.
7 A and B are partners in a firm sharing profits in the ratio 2:1. They
admit C as a new partner for 1Ans.5th share. If new ratio is 8:4:3,
then sacrificing ratio will be: -
(e) 2:1
(f) 1:7
(g) 3:5
(h) 1:2
Ans. a.
8 X, Y and Z are partners sharing profits and losses in the ratio 8:7:5.Z
retires and his share is taken equally by X and Y. the new profit
sharing ratio:-
(e) 5:7
(f) 21:19
(g) 19:21
(h) 7:5
Ans. b.
9 …………………………… is issued out of the amount of securities premium
reserve (fill the gap)
Ans. Bonus share.
10 M Ltd issued 10,000 shares of Rs.50 each. The amount of share was
payable as follows :Rs. 15 on application, Rs. 10 on allotment and
balance of first and final call. Applications for 15,000 shares were
received and allotment was made to all the applicants on pro-rata
basis. Directors decided to adjust excess application money towards
allotment. Calculate the amount transferred to Share Allotment. (A)
Rs. 60,000 (B) Rs. 70,000 (C) Rs. 85,000 (D) None of these

Ans. d.
11 Total capital employed in the firm is Rs.8,00,000, reasonable rate of
return is 15% and Profit for the year is Rs.12,00,000. The value of
goodwill of the firm as per capitalization method would be (A)
Rs.82,00,000 (B) Rs.12,00,000 (C) Rs.72,00,000 (D) Rs.42,00,000

Ans. c.
12 XY Limited issued 2,50,000 equity shares of Rs.10 each at a premium of
Rs.1 each payable as Rs.2.5 on application, Rs.4 on allotment and
balance on the first and final call. Applications were received for
5,00,000 equity shares but the company allotted to them only 2,50,000
shares. Excess money was refunded after adjustment for further calls.
Last call on 500 shares were not received and shares were forfeited after
due notice. This is a case of (A) Over subscription (B) Pro-rata allotment
(C) Forfeiture of shares (D) All of the above
Ans. d.
13 Z Limited forfeited 200 fully called up shares of Rs.10 each on which
Rs.1,300 had been received; later on these shares were reissued as
fully paid up @ Rs.9 per share. The amount to be transferred from
share forfeited account to capital reserve account will be A. Rs.1,800
B. Rs.2,000 C. Rs.1,100 D. Nil

Ans. d.
14 Omega Limited, a listed company acquires assets worth Rs.7,50,000
from Alpha Limited and issue shares of Rs.10 each at a premium of
25%. The number of shares to be issued by Omega Ltd., to settle the
purchase consideration will be (A) 60,000 (B) 75,000 (C) 1,00,000
(D) 1,25,000

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Ans. a.
15 State whether true or false: fresh issue of share cannot be made at
discount rate(1)

Ans. True
16 The cost of supplying uniform to employees is a (A) Capital expenditure
(B) Revenue expenditure (C) Deferred revenue expenditure (D) None of
the above
Ans. b.
17 Correct the statement: banking companies are required to maintain
minimum 25% debenture redemption reserve

Ans. Not required to maintained.


18 Show how would deal with the following items in Income &
Expenditure A/c and Balance Sheet of Diamond club as on
31.3.2020: - (3)
Particulars Debit Credit
Tournament fund 12,000
Tournament fund 12,000
investment 600
Income from the tournament fund 400
investment Tournament expenses
Ans. Closing balance of tournament fund to be shown in the liability side of balance
sheet Rs 12,200
Tournament fund investment is to be shown in assets side of balance sheet Rs
12,000
19 R Ltd. Has an authorised capital of 10,000 equity shares of Rs 100 each.
It issued 6,000 equity shares to public for subscription payable Rs. 30 on
application; Rs 30 on allotment; Rs 20 on first call and balance on final
call. The whole issue was subscribed and paid up except first and final
call money on 400 shares and these shares were forfeited. Out of the
forfeited shares 300 shares were reissued @ Rs 110 each fully paidup.
Show share capital in the Balance Sheet of the company
as per schedule III of companies Act 2013 as at 31st march
2020.

Ans. Share capital Rs 5,96,000


20
B and S are partners sharing profit and loss in the ratio 3:2. they admit
R for 1Ans.5th share which he takes from B and S in 2:3. goodwill of the
firm is valued at Rs 1,20,000. R contributes 90,000 as capital and is
unable to contribute 80% of his share of goodwill in cash. Pass journal
entries and also calculate newratio.

Ans. Cash account Dr 94,800


To R’s capital account Rs 90,000
To premium for goodwill account Rs 4,800

Premium for goodwill account Dr 4,800 To B’s capital account1,920


To S’s capital account2,880

R’s current account DrRs 19200 To B’s capital account7680


To s’s capital account 11,520

New ratio =13:7:5


21 Alka and Bela started business in partnership on 1stjan 2019 and
contributed Rs. 1,00,000 and Rs. 80,000 respectively for capital the
term of partnership deed are as follows:-
d) Interest on capital and drawing @10% and 12%respectively.

107 | P a g e
e) Alka to get a monthly salary of Rs 2,000 and Bela to
Get commission of Rs 10,000 p.a
f) Profit and loss to be shared in the ratio of theircapital
The profit for the year was Rs 1,30,030 before making the
above adjustments. The drawings were Rs 20,000 and Rs
16,000 of Alka and Bela respectively. Prepare Profit and Loss
appropriation Account and capital account assuming capitals
are fixed for the year ended 31-12-2019.

0R

Munna, Nisha and Priyanka are partners in a firm. They contributed Rs


50,000 each as capital three years ago. At that time priyanka agreed to
look after the business as Munna and nisha were busy. The profit of past
3 years were Rs 15,000, Rs25,000 and Rs50,000 respectively. While
going through books of account Munna noticed that profit had been
distributed in the ratio of 1:1:2. When he enquired from Priyanka about
this, priyanka replied that since she looked after the business she should
get more profit. Munna disagreed and it was decided to distribute profit
equally, retrospectively for the last three years. You are required to pass
necessary adjustment entry for the corrections of theabove.

Ans. Profit distributed to AlkaRs 44,550 and BelaRs 35,640[3marks for profit and
loss appropriation +3marks for partners capital account]
or
Priyanka’s capital account Dr 15,000
To Mohan’s capital account 7,500
To Nisha’s capital account 7,500[1.5 marks for working+1.5 marks for
journal]
22
A,B and C were partners in a firm sharing profits in the ratio of 3:2:1.
The Balance Sheet as on 31-3-2020 was asfollows:-
Liabilities Amount(Rs Assets Amount(Rs
.) .)
Creditors 4,000 Building 20,000
Reserve 6,000 Plant and machinery 16,000
Capitals Stock 5,100
A 24,000 Debtors 6,000
B 12,000 Cash at bank 6,900
C 8,000
54,000 54,000
A died on 30-9-2020 under the partnership agreement the
executors of deceased partners were entitled to:-
e) Amount standing to the credit of partner’s capitalaccount.
f) Interest on capital @12% p.a
g) Share of goodwill on the basis of four year purchase of last 3 years’
averageprofit.
h) Share of profit from the closing of last financial year to the
date of death on the basis of last year’s profit. Profit for the
year 2018,2019 and 2020 were Rs 8,000, Rs12,000 and
Rs7,000respectively.
Prepare A’s capital A/.c to be rendered to his executors.
Or
(a) the amount payable to Z on his retirement amounted to Rs
1,96,000. He took over stock worth Rs 24,000 and 25% of the
investment after which an amount of Rs 90,000 was due and
transferred to his loan AAns.c. calculate the value ofinvestment.
(b) S and P are partners in a firm in the ratio 3:2.the fixed
108 | P a g e
capital of S is Rs 1,20,000 and P is Rs 75,000. On 1stapril 2020
they admitted K as a new partner for 1Ans.5th share in future
profits. K brought Rs 75,000 as his capital. Calculate the value
of goodwill of the firm and record journal entries on K’s
admission.
Ans. Amount due to A’s executors Rs 48,190
Or
Total value of investment 3,28,000
K’s share of goodwill Rs 21,000
23 2. Prepare income and expenditure account for year ended
31stdec 2019 and a Balance Sheet as at that date from the
following receipt and payment account for the year ended
31.12.2019 relating to a club:
Receipt Amount(Rs.) Payment Amount(Rs.)
To balance 1025 By salaries 600
bAns.d To By expenses 75
Subscription By drama expenses 450
2018 40 By newspapers 150
2019 2050 2150 By municipal taxes 40
2020 60
540 By charity 350
To donations
950 By 6% investments 2000
To Proceeds from drama
tickets To sales of waste 45 (made on 1.8.2019)
paper By electrical charges 145
By balance bAns.d 900

4710 4710
There are 500 members , each paying an annual subscription of Rs 5.
Rs50 are still in arrears for the year 2018. Municipal taxes amounting
to Rs 40 per year have been paid up to 31st march 2020 and 50 are
outstanding for salaries. Building stands in the books at Rs5,000.
Ans. Surplus Rs 2,235
Opening capital fund Rs 6,115
Total of closing balance sheet Rs 8,460
24 A and B are equal partners and their Balance Sheet as on 30thjune
2019 stood as under
Liabilities Amount Assets Amount
(Rs.) (Rs.)
Creditors 5,000 Stock 3,500
Bank overdraft 1,500 Debtors 6,100
Capitals Fixtures& fittings 250
A 2,100 Cash 50
B 1,600 Investments 300
10,200 10,200
It is agreed that C shall be taken into partnership with
conditions that C's share of goodwill will be Rs200 which C is
unable to bring but he brings capital of Rs1,000 for his
1Ans.3rd share. On the date of C’s admission, following
adjustments were made:-
f) To write off bad debt amounting to Rs1,500.
g) To write down the Fixture& Fittings by Rs150
h) To depreciate stock in trade by15%
i) To write off loss upon investments by25%
j) Capital of partners will be adjusted as per C’scapital.
Prepare Revaluation A/c, Partners’ capital A/c and Balance Sheet of the
new firm
OR
A,B and C are partners in 3:2:1 and their Balance Sheet 31st

109 | P a g e
December 2019was as follow:-
Liabilities Amount(Rs.) Assets Amount(Rs.)
Capital Accounts; Plant & Machinery 30,000
A 18,000 Furniture 2,000
B 16,000 Debtors 35,000
C 10,000 Less: provision 2,000 33,000
Trade creditors 20,000 Cash in hand 1,000
Worksmen 5,000 Profit and loss A/c 3,000
compensation
Fund
69,000 69,000
C retired on this date. It was agreed that plant and machinery is to be
revalued at Rs 40,000 and the existing provisions for bad debt is to be
increased by 50% and liability for worksmen compensation was
decided at Rs 2,000. C’s share of goodwill was valued at Rs8,000.
Total amount payable to C was brought in by A and B in
such a way so as to make their capital A/c in Proportion to their
share of Profit which is equal. You are required to prepare
Revaluation A/c, Partners’ capital A/c and Balance Sheet after all
adjustments are carried out.

Ans. Loss on revaluation Rs 2,250


Cash withdrawal by A Rs275 and brought in by B Rs 225 and total of the balance
sheet Rs 8,900
Or
Profit on revaluation Rs 12,000
Cash paid to C Rs 19,500
Total of balance sheet Rs 75,000
25 Dolce Ltd invited application for the issuing 70,000 equity share of Rs
10 each on which Rs 7 per share were called up, which were payable
asfollow:
On
application
Rs 2 per
share On
allotment
Rs 3 per
share On
first
callbalance
The amount was received as follow:
On 40,000 shares
Rs 7 parshare
On 20,000
shares Rs 5
parshare On
10,000 shares
Rs 2 parshare
The director forfeited 30,000 shares on which less than Rs 7 per
share were received. Later on the forfeited share were
reissued at Rs 5 per share, as Rs 7 per share paid up.
Pass necessary journal entries for the above transactions in
the books of the company.

OR
Pass necessary journal entries in the books of Ram Ltd for the following
transactions:-
d) 400 equity shares of Rs 100 each issued were forfeited for
110 | P a g e
the non payment of final call of Rs 20 per share.the
forfeited shares were reissued for Rs 38,000 fully paid up.
e) 300 equity shares of Rs 100 each issued were forfeited for
the non payment of allotment money of Rs 40 per
share.the first and final call of Rs 20 per share was not
made. the forfeited shares were reissued for Rs 29,000
fully paidup.
f) Define minimumsubscription.

Ans. Amount received on allotment Rs 1,80,000 On first call Rs 80,000


Capital reserve Rs 60,000
Or
Amount transferred to capital reserve Rs30,000
Amount transferred to capital reserve Rs11,000

When number of share applied by public is at least 90 percent or more of


number of share issued, then only share allotment can be started . this
minimum limit of subscription is called minimum subscription
PART B;ANALYSIS OF FINANCIAL STATEMENTS
26 What is ideal quick ratio?
Ans. 1:1
27 Rent Received is classified under:
e) Financing Activities
f) Investing Activities
g) Cash and Cash Equivalents
h) Operating Activities

Ans. b
28 Give one example of cash equivalent other than cash and bank
balance.

Ans. Draft in hand, marketable securities, cheque in hand (any one)


29 from the given information calculate the inventory
turnover ratio:- Revenue from operation Rs 2,00,000
Gross profit -25% on cost
Inventory at the beginning is 1Ans.3rd of the stock at the end which
was 30% of revenue from operations.

Ans. 4 times
30 under what heads the following items will be shown in the Balance
Sheet of a company.
j) mortgageloan ii) Bankbalance iii) Government securities
iv) plant andmachinery v) workinprogress vi) share forfeitureAAns.c

Ans. Non currentliabilitiee


Currentassets
Non currentassets
Non currentassets
Current assets
Shareholders’fund
31 from the following particulars, prepare comparative statements/common size statement
of profitandloss.
Particulars Note no. 31.3.2019

Revenue from operation 60,00,000


Other income(% of revenue from 12%
operation) Expenses(% of operating 70%
revenue) 40%

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Tax rate 40%

Ans. ½ mark for absolute change and ½ mark for % change


Or
½ mark for each correct percentage.
32 from the following Balance Sheet of vikas Ltd, prepare cash flowstatements:-
Particulars Note 31.03.201 31.03.20
no. 9 20
I.Equity&
Liabilities:-
Shareholders’ 90,000 1,30,000
fund: Share 30,000 55,000
capital
20,000 30,000
General reserve
(2,000) (1,000)
Profit and Loss
Account Preliminary
Expenses 17,400 22,000
Current
liabilities: Trade
creditors
Total 1,55,400 2,36,000
II.Assets:
Non current
assets: Fixed 93,400 1,66,000
assets
Current 22,000 26,000
assets Stock
36,000 39,000
Debtors
4,000 5,000
Cash and cash equivalents
Total 1,55,400 2,36,000
Additional Information:-
Depreciation charged on fixed assets for the year 2019-2020 was Rs20,000.
Income Tax Rs 5,000 has been paid in advance during the year.

Ans. Cash flow from operating activities Rs 53,600 Cash used in investing activities Rs 92,600
Cash flow from financing activities Rs 40,000

**************************

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