STUDY MATERIALS FOR AISSCE-2014 - हिन्दी · PDF file · 2014-01-16(b) Next Rs 1,00,000 in the ratio of 4:3:1. ... was Rs 30,000 which have been duly distributed among

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NAVODAYA VIDYALAYA SAMITI

SHILLONG REGION (Ministry of Human Resource Development,

Dept. Of Secondary and Higher Education, Govt. of India)

Website: nvsroshillong.gov.in

STUDY MATERIALS FOR AISSCE-2014

SUBJECT: ACCOUNTACY (055) CLASS XII

Prepared by:

Shri O. P. Sharma, Principal, JNV, Morigaon Dr. S. K. Prasad, PGT – Commerce, JNV, Kamrup Shri Sibi N. K. PGT – Commerce, JNV, Dibrugarh

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ACCOUNTANCY (055)

CHAPTER WISE MODEL QUESTIONS INCLUDING HOTS & VALUE BASED QUESTIONS FOR HIGHER ACHIEVERS

PART-A

ACCOUNTING FOR PARTNERSHIP FIRMS-FUNDAMENTALS

Marking scheme

(Total Marks allotted for the unit-10)

1 mark question -1no. (These questions can be answered in the shortest possible way) 3 mark question -1no. 6 mark - question 1no. (Most probably from profit & Loss Appropriation Account/past adjustment)

FREQUENTLY ASKED QUESTIONS IN THE BOARD EXAMN

1 Mark Questions

1. What is meant by ‘Unlimited Liability of a partner? 2. If the partners capital are fixed, where will you record interest on drawings and share of profit of

a partner? 3. Will interest paid to a partner on loan be debited to Profit & Loss A/c or Profit & Loss

Appropriation A/c? Give reasons. 1 4. What is partnership Deed? 5. State the provisions of Indian partnership act regarding the payment one remuneration to a

partner for the services rendered.(hint: In the absence of Deed no remuneration) 6. A&B are partners in a firm without a partnership Deed .A is an active partner and claims a salary

of Rs.18,000p.m State with reason whether the claim is valid or not. 7. Suresh and Ramesh are partners in a firm with capitals of Rs.3,00,000 and Rs.4,00,000

respectively. They do not have a Partnership Deed. Ramesh wants to share the profits in the ratio of capitals. State with reasons whether the claim is valid?

8. A,B & C are partners decided that no interest on drawings is to be charged to any partner. But after one year, C wants that interest on drawings should be charged to every partner. State how she can do this?

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9. If the partners capital accounts are fixed, where will you record interest on drawings and share of profit of partners?

10. Mention two items that may appear on the credit side of a partners fixed capital account.(hint: opening balance and additional capital introduced)

11. List any two items that may appear on the credit side of the capital account of a partner when the capital account is fluctuating .

12. In case of fluctuating capital where will you record drawings and interest on drawings. 13. If a fixed amount is withdrawn on the first day of every quarter, for what period the

interest on total interest will be calculated. 14. A partnership Deed provides for the payment of interest on capital. But there was a loss

instead of profit during the year. At what rate, will the interest on capital will be allowed.

3 and 6 Mark Questions

1. A and B are partners sharing profits in the ratio of 3:2, with capitals of Rs 5,00,000 and Rs 3,00,000 respectively. Interest on capital is agreed @6% p.a. B is to be allowed an annual salary of Rs 60,000. During the year 2009-10, the profits prior to the calculation of the interest on the capital but after charging B’s salary amounted to Rs 1,80,000. A provision of 5% of the profit to be made in respect of commission to the manager. Prepare profit and loss Appropriation account showing the distribution of profit and the partner’s capital accounts of the year ending March 31,2010. 6

2. X and Y are partners in a firm. Their capitals as on April 1,2009 were Rs 2,50,000 and Rs

1,80,000 respectively. They share profits equally. On july 1,2009, they decided that their capitals should be Rs 2,00,000 each. The necessary adjustments in the capitals were made by withdrawing or introducing cash. According to the partnership deed, interest on capitals is to be allowed 8% p.a. X is to get an annual salary of Rs 4,000 and Y is allowed a salary of Rs 800. It was found that Y was regularly withdrawing his monthly salary. The manager of the firm is entitled to a commission of 10% of the profit before any adjustment is made according to the partnership deed. Net profit for the year ended on March 31st,2010, before charging interest on capital and salary, was rs 80,000. Prepare the profit and loss appropriation account, partner’s capital accounts and currents accounts. 6

3. A and B entered into partnership on 1st April, 2009 without any partnership deed. They introduced capitals of rs 5,00,000 and rs 3,00,000 respectively. On 31st October 2009, A advanced Rs 2,00,000 by way of loan to the firm without any agreement as to interest. The profit and loss account of the year ended 31.3.2010 showed a profit of Rs 4,30,000, but the partners could not agree upon the amount of interest on the loan to be charged and the basis of division of profits. Pass a journal entry for the distribution of the profits between the partners and prepare the capital A/Cs of both the partners and Loan A/c of A. 3

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4. A and B are partners sharing profits and losses in the ratio of 2:1 with capitals of Rs 10,00,000 and Rs 5,00,000 respectively. Each partner is entitled to 8% p.a. interest on his capital. B is entitled to a salary of Rs 3,500 p.m. together with a commission of 10% of net profit remaining after deducting interest on capitals and salary and after charging his commission. The profits for the year prior to calculation of interest on capital but after charging salary of B amounted to Rs 4,50,000. Prepare Partner’s capital Accounts: (1) when capitals are fixed, and (2) when capitals are fluctuating. 6

5. A,B and C were partners in a firm having capitals of Rs 2,00,000; Rs 2,00,000 and Rs 80,000 respectively. Their Current Account balances were A: Rs20,000; B:10,000 and C:5,000(Dr.). According to the partnership deed the partners were entitled to interest on capital @ 10% p.a. B being working partner was also entitled to a salary of Rs 6, 000 per quarter. The profits were to be divided as follows:

(a) The first Rs 60,000 in proportion to their capitals. (b) Next Rs 1,00,000 in the ratio of 4:3:1. (c) Remaining profits to be shared equally. Prepare profit and loss appropriation Account. 6

6. Lata and Mamta are partners with capitals of Rs 3,00,000 and Rs 2,00,000 respectively sharing profits as Lata 70% and Mamta 30%. During the year ended 31st March 2005 they earned a profit of Rs 2,26,440 before allowing interest on partner’s loan. The terms of partnership are as follows: (a) Interest on capital is to be allowed @ 7% p.a. (b) Lata to get salary of Rs 2,500 per month. (c) Interest on Mamta’s loan account of Rs 80,000 for the whole year. (d) Interest on drawings of partners at 8% per annum. Drawings being Lata Rs 36,000 and Mamta Rs 48,000. (e) 1/10th of the distributable profit should be transferred to general Reserve. Prepare profit and loss appropriation Account. 6

7. Calculate the interest on Drawings of Mr. Aditya @ 8% p.a. for the year ended 31st March 2007, in each of the following alternative cases: Case (a) If he withdraw Rs 5,000 in the beginning of each quarter. (b) If he withdraw Rs 6,000 at the end of every quarter. (c) If he withdrew Rs 10,000 during the middle of each quarter. 3

8. Calculate the interest on drawings of Sh. Ganesh @ 9% p.a. for the year ended 31st March, 2007, in each of the following alternative cases: Case (a) If he withdrew Rs 4,000 in the beginning of every month

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(b) If he withdrew Rs 5,000 per month at the end of every month. (c) If he withdrew Rs 6,000 p.m. 3

9. On 1st April, 2010 the capitals of A and B were Rs 40,000 and Rs 20,000 respectively. They divided profits in their capital ratio. Profits for the year ended 31st, March, 2011 was Rs 30,000 which have been duly distributed among the partners, but the following transactions were not passed through the books:- (a) Interest on capitals @ 12% p.a. (b)Interest on Drawings A Rs 1,200; B Rs 1,000. (c) Commission due to B Rs 2,000 on a special transaction.

(d) A is to be paid a salary of Rs 5,000. Pass adjustment entry for the transactions. 3

Reconstitution of Partner ship Firm and Dissolution Marking scheme


1 mark question -3nos. (These questions can be answered in the shortest possible way) 4 mark question -2nos. 6 mark question 1no. (Most probably from Death of partner/Dissolution of a partner) 8 mark question-1 no. (Most probably from Admission of partner/Retirement of a partner)

ADMISSION OF A PARTNER 1 MARK QUESTIONS

1. How can a partner be admitted? 2. Give any two rights of a partner. 3. State any one purpose for admitting a new partner. 4. Why is sacrificing ratio calculated? 5. Unless given otherwise, what will be the ratio of sacrifice of the old partners in the case

of admission of a new partner? 6. State any two reasons for the preparation of ‘Revaluation Account’ on the admission of

a partner. 7. What are accumulated profits? 8. State the need for treatment goodwill at the admission of a partner. 9. Pawan and Dhawan are partners. Bindia is admitted for 1/4th share. What is the ratio in

which Pawan and Dhawan will sacrifice their share in favor of Bindia. (Ans: Equally

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4 MARKS QUESTIONS 1. A and B are partners in a firm sharing profits in the ratio of 2:1. C joins the firm. A surrenders 1/4th of his share and B 1/5th of his share in favor of C. Find the new profit sharing ratio.

2. A and B are partners in a firm sharing profits in the ratio of 3:2. They admit X and Y as new partner. A surrenders 1/3rd of his share in favor of X and B surrenders 1/4th of his share in favor of Y. Calculate the new profit sharing ratio.

3. K and Y are partners in a firm sharing profits in 3:2 ratios. They admitted Z as a new partner for 1/3rd share in the profits of the firm. Z acquired his share from K and Y in 2:3 ratio. Z brought Rs 80000 for his capital and Rs 30000 for his 1/3rd share as premium. Calculate the new profit sharing ratio of K, Y and Z and pass necessary journal entries for the above transactions in the books of the firm.

4. (i) A and B are partners in firm sharing profits in the ratio of 2:1. C is admitted as a new partner. A and B surrenders ½ of their respective share in favour of C. find the new profit sharing ratio and also sacrificing ratio.

(ii) C is to bring his share of premium for goodwill as a new partner in firm in cash. The goodwill of the firm is estimated at Rs 30000. Pass necessary entries for the record of goodwill.

6 / 8 MARKS QUESTIONS

1. The following is the Balance sheet of A, B and C sharing profit and losses in proportion of 6;5;3 respectively

Liabilities Amount Assets Amount Creditors Bills Payable General Reserve Capitals A B C

18900 6300

10500

35400 29850 14550

Cash Debtors Stock Furniture Land and building Goodwill

1890 26460 29400

7350 45150

5250

115500 115500 They agreed to take D into Partnership and give him 1/8 share on the following terms: i. The furniture be depreciated by Rs 920 ii. An old customer, whose account was written off as bad, has promised to pay Rs

2000 in full settlement of his full debt. iii. That a provision of Rs 1320 be made for outstanding repair bills. iv. That the value of land and building having appreciated be brought up to Rs

54910.

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v. That D should bring in Rs 14700 as his Capital. vi. That D should bring in Rs 14070 as his share of Goodwill. vii. That after making the above adjustments, the capital accounts of old partners be

adjusted on the basis of the proportion of D’s capital to his share in business i. e. actual cash to be paid off or brought in by old partners, as the case may be. Pass the necessary Journal Entries and prepare the Balance of the new firm.

2. X and Y were partners in a firm sharing profits in 5:3 ratio .They admitted Z as a new partner for 1/3 share in profits. Z was to contribute Rs 20000 as his capital. The balance sheet of X and Y on 1-4-2007 the date of Z’s admission was as follows:

Liabilities Amount Assets Amount Creditors Capital: X Y General Reserve

27000

50000 35000 16000

Land and building Plant and machinery Stock Debtors 20000 Less:provision for doubtful debts 1500 Investment Cash

25000 30000 15000

18500 20000 19500

128000 128000 Other terms Agreed upon were:

I. Goodwill of the firm was valued at Rs 12000 II. Land and building were to be valued at Rs 35000 and plant and machinery at Rs

25000. III. The provision for doubtful debts was found to be in excess by Rs 400. IV. A liability for Rs 1000 included In creditors was not likely to arise . V. The capitals of the partners be adjusted on the basis of Z’s contribution of capital in

the firm. VI. Excess or shortfall if any to be transferred to current account.

Prepare Revaluation account, Partners capital accounts and the balance sheet of the new firm.

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3. The following is the balance sheet of A and B who share profits in the ratio of 2:1.

They admitted C into partnership on this date. New profit sharing ratio is agreed as 3/6:2/6:1/6. C brings proportionate capital after the following adjustment:

i. C brings in Rs 10000 in cash as his share of goodwill. ii. Provision for doubtful debts is to be reduced by Rs 2000. iii. There is an old typewriter valued Rs 2600. It does not appear in the books of the firm. It

is now to be recorded. iv. Patents are valueless. v. 2% discount is to be received from creditors.

Prepare Revaluation A/c, Capital accounts and the opening balance sheet.

4. Jain and Gupta were partners sharing profit in the ratio of 3:2. Their balance sheet on 31st march2008 was as follows

They agreed to admit Mishra for 1/4th share from 1-4-2008 subject to the following terms:

Liabilities Amount Assets Amount

Bank overdraft Reserve fund Sundry creditors Capitals: A B

15000 12000 20000 40000 30000

Sundry debtors 40000 Less: provision 3600 Stock Building Patents machinery

36400 20000 25000 2000 33600

117000 117000

Liability Amount Assets Amount Creditors Bills payable Bank overdraft Reserve Jain’s capital Gupta’s capital

20000 3000

17000 15000 70000 60000

Cash Debtors 20500 Less: provision for bad debts 300 Stock Plant Building Motor vehicles

14800

20200 20000 40000 70000 20000

185000 185000

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(a) Mishra to bring in capital equal to 1/4th of the total capital of Jain and Gupta after all adjustments including premium for goodwill.

(b) Building to be depreciated by Rs 14000 and stock to be depreciated by Rs 6000 (c) Provision for bad debts on debtors to be raised to Rs 1000. (d) A provision be made for Rs 1800 for outstanding legal charges. (e) Mishra’s share of goodwill/premium was calculated at Rs 10000 which is brought by

him in cash Prepare Revaluation account, partner’s capital accounts and the balance sheet of the new firm on Mishra’s admission.

5. A and B are partners and the profit is divided as follows: 1/2 to A, 1/3 to B and 1/6 carried to a reserve account. They admit C as a p[partner on 1st April, 2009 on which date the Balance Sheet of the firm was as under:

Following terms were agreed upon:

i. Stock is undervalued by 10% ii. Depreciation of Rs 30000 had been omitted on Plant and Machinery for the year

ended 31st March 2009. iii. Creditors include a contingent liability of Rs 50000 which had been decided by

the court at Rs 43000. iv. In respect of debtors the following debts proved bad or doubtful;

Rs 15000 due from Ram ---- bad to the full extent. Rs 20000 due from Shyam ---- Insolvent, estate expected to pay only 40%.

v. Goodwill of the firm is valued at Rs 60000. However C is unable to bring his share of Goodwill in cash.

vi. C is given 1/5th share of profits which he acquires equally from A and B. C is to bring in capital proportionate to his share of profits in the firm.

You are required prepare Revaluation Account, Capital Account and the New Balance of the firm.

Liability Amount Assets Amount Creditors Outstanding Exp Reserve A’s capital B’s capital

160000 12000 90000

318000 200000

Cash at bank Debtors Stock Plant and Machinery Building Advertisement Expenditure

20000 220000 180000 150000 200000

10000

780000 780000

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6. A and B were partners in a firm sharing profits in the ratio 3:2. They admitted C as a new partner for 1/6th share in the profits. C was to bring ` 40000as his capital and the capitals of A and B were to be adjusted on the basis of C’s capital having regard to profit sharing ratio. The balance sheet of A and B as on 31.3.2008 was as follows:

Liabilities ` Assets ` Creditors Bills payable General reserve Capital: A B

36000 20000 24000

150000 80000

Cash Debtors Stock Machinery Building

10000 34000 24000 42000

200000

310000 310000 The other terms of agreement on C’s admission were as follows: i. C will bring ` 12000 for his share of goodwill. ii. Building will be valued at ` 185000 and machinery at ` 40000. iii. A provision of 6% will be created on debtors for bad debts. iv. Capital accounts of A and B will be adjusted by opening current

account.

Prepare necessary ledgers and balance sheet (opening).

RETIREMENT OF A PARTNER

1 Mark Questions

1. Give two circumstances in which gaining ratio is applied. 2. State two ways in which a partner can retire from the firm. 3. Distinguish between sacrifice ratio and gaining ratio. 4. What entry is needed when final settlement of retiring partner’s account is done, if he is being

paid in cash partly and the balance transferred to loan account? 5. List out the items to which a retiring partner is entitled. 6. What is meant by surrender value of Joint Life Policy? How is it treated on retirement of a

partner? 7. Why is gaining ratio calculated? 8. State the need for treatment of goodwill on retirement of partner. 9. For which share of goodwill a partner is entitled at the time of his retiremet? 10. How goodwill is recorded on the reirement or death of a partner?

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6 / 8 Mark Questions

Q1. A,B and C were partners in a firm whose Balance sheet as on 31st, march, 2012 was as bellow :

Liabilities Rs Assets Rs Creditors General reserve Capitals: A B C

7,096 3,000 8,000 6,000 4,000

Cash at bank Debtors Stock Furniture

6,496 9,000 10,600 2,000

28,096 28,096 B retired on that date and this connection it was decided to make the following adjustments: (a) To reduce stock and furniture by 5% and 10% respectively; and (b) To provide for doubtful debts at 5% on debtors. Rent outstanding (not provided for as yet) was Rs 260. Goodwill was valued at Rs 4,200. A and C decided:

i. To share profits and losses in 5:3 respectively ii. Not to show goodwill in books iii. To re-adjust their capitals in profit sharing ratio; and iv. To bring in sufficient cash to pay of B immediately and to leave a balance of Rs 1,000 in the bank. B was paid off. Give journal entries to record the above and draft the balance sheet of the new firm.

Q2. The balance Sheet of X, Y and Z who were sharing profits in the ratio of 5:3:2 as at march 31, 2007:

Liabilities Rs Assets Rs Creditors Employs provident fund Profit & Loss A/C Capitals A/cs X Y Z

50,000 10,000 85,000 40,000 62,000 33,000

Cash at Bank Sundry debtors Stock Fixed Assets

40,000 1,00,000 80,000 60,000

2,80,000 2,80,000 X retired on March 31, 2007 and Y and Z decided to share profits in future in the ratio of 2:3 respectively.

The other terms on retirement were as follows:

i. Goodwill of the firm is to be valued at Rs 80,000. ii. Fixed Assets are to be depreciated to Rs 57,000. iii. Make a provision for doubtful debts at 5% on debtors. iv. A liability for claim, included in creditors for Rs 10,000, is settled at Rs 8,000.

The amount to be paid to X by Y and Z in such a way that their capitals are proportionate to their profit sharing ratio and leave a balance of Rs 15,000 in the Bank account.

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Prepare profit and loss adjustment account (Revaluation Account) and partners’ Capital accounts.

Q3. Ram, Shyam and Mohan were in partnership sharing profits and losses in the proportions of 3:2:1. On 1st April, 2011, Shyam retires from the fir. On that date their balance sheet was as follows:

Liabilities Rs Assets Rs Trade creditors Bills payable Expenses owing Reserve fund Workmen’s compensation fund Capitals: Ram Shayam Mohan

30,000 27,000 45,000 1,05,000 48,000 2,00,000 1,50,000 1,00,000

Cash in hand Debtors 1,60,000 Less: 10,000 Stock Factory Premises Investment Loose Tools

90,000 1,50,000 1,20,000 2,25,000 80,000 40,000

7,05,000 7,05,000 The terms were:

i. Goodwill of the firm to be valued at 2 times of Average Super profits of last Three years. Taking into consideration the risk of the business, normal profits of the are estimated at Rs 5,00,000 every year. But actual profits of last three years ending 31st march were as 2009: Rs 6,00,000, 2010 : Rs 5,50,000, 2011: Rs 5,75,000.

ii. Expenses owing to be brought down to Rs 37, iii. Investments are revalued at Rs 72,000. Ram took investments at this value. iv. Factory premises is to be revalued at Rs 2,43,000; and loose tools at Rs 36,000. v. Provision doubtful debts to be increased by Rs 19,500. vi. Claim on workmen’s compensation fund is Rs 18,000. vii. Shyam be paid Rs 50,000 in cash and balance due to him treated as a loan carrying interest @

6% per annum. Show journal entry for goodwill adjustment; prepare necessary ledger accounts and balance sheet of the continuing partners. Q4. Following is the balance sheet of G, K & W as on 31st march, 1993 who share profits in the ratio of 3:2:1.

Liabilities Rs Assets Rs Capital accounts: G K W Sundry creditors Bills payable General reserve

22,000 13,000 9,000 10,000 4,000 12,000

Goodwill Stock Sundry debtors Land and building Plant and Machinery Motor vehicles

7,500 12,500 12,000 15,000 18,000 5,000

70,000 70,000

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On the above date, G retired and the following arrangements were agreed upon: i. Goodwill of the firm is to be valued at Rs 15,000. ii. The assets and liabilities are to be valued as under : Stock Rs 10,000; Sundry

debtors Rs 11,500; Land and building Rs 18,000; Plant and machinery Rs 16,500; and sundry Creditors Rs 9,200.

iii. Liability for Workmen compensation amounting to Rs 500 is to be brought into the book.

iv. The entire capital of the firm as newly constituted be fixed at Rs 35,000 between K and W in the proportion of 4:3 and the actual cash is to paid off or to be brought in by continuing partner as the cash may be.

v. Rs 13,150 were paid to G. The balance due to him was to be paid in through installments. Give necessary ledger accounts, the balance sheet of the firm after G’s retirement.

Q. 5. A, B and C were equal partners. Their Balance Sheet as on 31st March, 2008 was as under:

Liabilities Rs Assets Rs Capital accounts: A B C Bills Payable Sundry creditors General reserve Profit & Loss

60000 40000 32000 20000 40000 30000

6000

Bank Stock Furniture Sundry debtors 45000 Less: RBDD 5000 Land & Building

20000 20000 28000

40000

120000

228000 228000 B Retired on 1st April, 2008. A &C decided to continue the business sharing profits in the ratio of 3:2. Following terms were agreed upon:

i. Goodwill of the firm was valued at Rs 57600 ii. Reserve for Bad and Doubtful Debts to be maintained at 10% on debtors. iii. Land and building to be increased to Rs 132000. iv. Furniture to be reduced by Rs 8000. v. Rent outstanding (not provided for as yet) was RS 1500.

Remaining partners decided to bring sufficient cash in the business to pay off B and to maintain a bank balance of Rs 24800. They also decided to readjust their capitals as per their new profit sharing ratio.

6. Following is the balance sheet of X, Y and Z as on 31st March 2008. They shared profits in 3:3:2. The B/S was given below:

Liabilities ` Assets ` Sundry creditors General reserve Partner’s loan A/c

250000 80000

Bank Bills receivable Debtors 80000

50000 60000

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X Y Capital A/c X Y Z

50000 40000

100000 60000 50000

Less : prov. 4000 Stock Fixed Assets Advertisement Suspense A/c P/L A/c

76000 124000 300000

16000 4000

630000 630000 On 1st April, 2008 Y decided to retire from the firm on the following terms: a. Stock to be depreciated by 12000. b. Advertisement suspense A/c to be written off. c. Provision for bad and doubtful debts to be increased to ` 6000. d. Fixed Assets be appreciated by 10%. e. Goodwill of the firm be valued at ` 80000 and the amount due to the

retiring partner be adjusted in X and Z’ capital accounts. Prepare ledgers and opening balance sheet.

4 MARKS QUESTIONS

DEATH OF A PARTNER

1. X,Y and Z are sharing in 2:2:1.Y dies on March 1 st ,2011 and his share is taken over by X and Y in the ratio of 3:2.Profits up to December 31 st ,2010 is Rs.50,000.Total goodwill of the firm on the date of his death is Rs.40,000. Journalise in the books of the firm.

2. A, Band C are partners in a firm whose books are closed on March 31st each year. B died on 30th June 2009 and according to the agreement, the share of profits of a deceased partner up tothe date of the death is to be calculated on the basis of the average profits for the last five years. The net profits for the last 5 years have been: 2005, Rs. 14,000; 2006, Rs. 18,000; 2007, Rs. 16,000; 2008, Rs. 10,000 (loss) and 2009, Rs. 16,000. Calculate B's share of the profits upto the date of death and pass. Necessary journal entry. 3 2010

6 MARKS QUESTIONS

1. A, B and C were partners in firm sharing profits in the ratio of 5:3:2. On 31st March,2005, the B/S stood as under:

Liabilities ` Assets ` Creditors Reserve Capital: A B C

7000 10000

30000 25000 15000

Building Machinery Stock Patents Cash

20000 30000 10000 6000

21000

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87000 87000

C died on 1- 10- 2005. It was agreed between his executors and remaining

Partners that:

i. Goddwill be valued at 2 years purchase of the average profits of the previous five years which were 2001 – 15000, 2002 – 13000, 2003 – 12000, 2004 – 15000 and 2005- 20000

ii. Patents be valued at ` 8000; machinery at ` 28000; building at 30000. iii. Profits for the year 2005 -06 are taken as having accrued at the same rate as the

previous year. iv. Interest on capital be provided at 10% p. a. v. A sum of ` 7750 was paid to his executor immediately.

Prepare C’s capital account and his executors account. 2. A, B and C were partners sharing profits in the ratio of one-half, one-fourth and one-

fourth respectively. Their balance sheet on 31st March, 2011 was as follows:

Liabilities Amount Assets Amount Sundry Creditors A’s Capital B’s Capital C’s Capital

40000 100000

60000 40000

Cash Sundry Debtors Stock-in Trade Loan to A Freehold Premises

10000 45000 55000 30000

100000

240000 240000 A died on 1st April, 2011. According to the partnership agreement, the goodwill was to be calculated at two years’ purchase of average profits of three completed years preceding the death or retirement of partner. The deceased partner’s share of capital and goodwill, etc., was paid out in cash on 1st June, 2011, the available cash balance being supplemented by a loan from firm’s banker on the security of the freehold property. The net profits of the years ending 31st March, 2009, 2010 and 2011 were Rs 55000, Rs 48000 and Rs 65000 respectively.

You are required to show the journal entries, the ledger accounts of the partners and the balance sheet of B and C.

3. The balance sheet of P, Q and R as on 31st December, 2009 was as follows:

Liabilities Amount Assets Amount Bills payable Employees provident fund Workmen compensation reserve Loans

20000 50000

90000

171000

Cash at bank Bills receivable Stock Sundry debtors Furniture

158000 8000

90000 160000

20000

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P’s Capital Q’s Capital R’s Capital

227500 152500 120000

Plant and machinery Building Advertisement Suspense

65000 300000

30000

831000 831000 The profit sharing ratio was 3:2:1. R died on 30th April, 2010. The partnership deed

provides that:

i. Goodwill is to be calculated on the basis of 3 years purchase of the preceding 5 years average profits. The profits were: 2009 Rs 240000; 2008 Rs 160000; 2007 Rs 200000; 2006 Rs 100000; 2005 Rs 50000.

ii. The deceased partner should be given share of profits up to the date of date on the basis of profits for the previous year.

iii. The assets have been revalued as under:

Stock Rs 100000, Debtors Rs 150000, Furniture Rs 15000; Plant and Machinery Rs 50000; Building Rs 350000. A bill for Rs 6000 was found worthless.

iv. A sum of Rs 72330 was paid immediately to R’s executors and the balance to be paid later on.

Prepare Revaluation Account and R’s Executors Account

4. X, Y and Z were partners sharing profits in the ratio of 3:2:1. On 31st March, 2008, their balance sheet stood as under:

Z died on May 31st, 2008. It was agreed that:

i. Goodwill was valued at 3 years purchase of the average profits of the last five years, which were 2003 Rs 40000; 2004 Rs 40000; 2005 Rs 30000; 2006 Rs 40000; 2007 Rs 50000.

ii. Machinery was valued at Rs 70000, patents at Rs 20000 and building at Rs 66000.

Liabilities Amount Assets Amount X’s Capital Y’s Capital Z’s Capital Creditors General Reserve

75000 70000 50000 72000 24000

Cash at bank Investments Patents Stock Debtors Building Machinery

70000 50000 15000 25000 20000 75000 36000

291000 291000

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iii. For the purpose of calculating Z’s share of profits till the date of death, it was agreed that the same be calculated based on the average profits for the last two years.

iv. The executor of the deceased partner is to be paid the entire amount due by means of cheque. Prepare Z’s Capital Account to be rendered to the executor and also a journal entry for the settlement of the amount due to Z’s executors.

DISSOLUTION OF PARTNERSHIP FIRM 6/8 MARKS QUESTIONS

5. Runi, Muni and Chuni are prtners sharing profits and losses in the ratio of 5:3:2. The decided to dissolve their firm on 31.12.2002, the Balance sheet was as follows:

Liabilities ` Assets ` Creditors Bills Payable Loan from Runi Investment Fluctuation Fund Capital: Runi Muni Chuni

60,000 25,000 20,000

8000

60000 40000 35000

Bank Stock Debtors 42000 Less:prov.4000 Investment Furniture Machinery

42000 26000

38000 32000 45000 65000

248000 248000 The Following additional information is given:

Investment was taken over by Muni at 10% discount. Furniture was taken over by Chuni for ` 34000 Liability of bills payable was paid off by Runi at book value less 10%. Stock realized ` 20000, Debtors ` 40000 and machinery ` 70000. Realization expenses ` 300.

Prepare necessary ledger accounts. 6. Following is the balance sheet of X and Y, who share profits and Losses in the ratio

4:1, as at 31st March, 2009:

Liabilities ` Assets ` Sundry Creditors Bank Overdraft X’s brothers loan Y’s Loan Investment Fluctuation Fund X’s Capital Y’s Capital

8000 6000 8000 3000

5000

50000 40000

Bank Debtors 17000 Less: Prov. 2000 Stock Investment Buildings Goodwill Profit and Loss A/c

20000

15000 15000 25000 25000 10000 10000

120000 120000

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The firm was dissolved on the above date and the following arrangement were decided upon: i. X agreed to pay off his brother’s loan. ii. Debtors of ` 5000 proved bad. iii. Other assets realized – Investment 20%less; and Goodwill at 60%. iv. One of the creditors of ` 5000 was paid only ` 3000. v. Buildings were auctioned for ` 30000 and the auctioneer’s commission

amounted to ` 1000. vi. Y took over part of stock at ` 4000 (being 20% less than the book value).

Balance stock realized 50%. vii. Realization expenses amounted to ` 2000.

Prepare” a. Realization Account b. Partner’s Capital Account c. Bank Account.

7. Pass the necessary journal entries for the following transactions on the dissolution of the firm of Sudha and Shiva after the various assets (other than cash) and outside liabilities have been transacted to Realization Account: i. Sudha agreed to pay off her husband’s loan Rs 19000

ii. A debtor whose debt of Rs 9000 was written off in the books paid Rs 7500 in full settlement.

iii. Shiva took over all investment at Rs 13000.

iv. Sundry creditors Rs 10000 were paid at 9% discount. v. Realization expenses Rs 3400 were paid by Sudha for which she was allowed Rs

3000. vi. Loss on realization Rs 9400 was divided between Sudha and Shiva in 3:2 ratios.

8. A, B and C were partners in a firm sharing profits in the ratio of 4:3:3. On 1-4-03 they decided to dissolve the firm. On that date A’s capital was Rs.125000, B’s capital was Rs. 45000 and C’s capital was Rs.15000 (Dr). The creditors amounted to ` 23150 and cash in hand was Rs.3920. The assets realized Rs.144910 and the expenses of dissolution were Rs.1860. Prepare realization account and show your workings clearly.

9. P, Q and R were partners in a firm sharing profits and losses in the ratio of 2:1:1 and firm is to be dissolved as on 31st December, 2008. P agreed to bear all realization expenses. For this service he was paid Rs. 100. However, it was further agreed that actual expenses were paid by the firm at first instance. Following was the Balance Sheet as on that date:

Balance Sheet as on 31.12.08 Liabilities Amount Assets Amount

Creditors 6,000 Bank 1,000

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Bank overdraft 3,000 Debtors 3,000

P’s Capital a/c 10,000 Inventory 4,000

Q’s Capital a/c 5,000 Plant & Machinery 15,500

R’s Capital a/c 1,000 Land 1,500

25,000 25,000

Half of the Inventory realized Rs. 1,750. Plant And Machinery realized Rs. 11,000. Debtors realized Rs. 2,550. Remaining Inventory was taken over by Q at Rs. 1,200. Cost of realization was Rs. 150. There was a bill of Rs. 5,000 received from Mr. Ram Lal, Which was under discount. Mr. Ram Lal was adjudged insolvent and 60 paisa in a rupee was received from his estate. Show Realization A/c, Partners’ Capital A/c and Bank A/c.

10. Following is the Balance Sheet of P, Q & R who were sharing Profits & Losses in the ratio of 3:2:

Liabilities Amt. (Rs.) Assets Amt. (Rs.)

Bank Balance

Creditors

Mrs. P’s Loan

Capital Accounts

P

Q

R

12,000

70,000

25,800

1,20,000

95,000

5,000

Debtors 20,000

Less : Provision 1,200

Stock

3,000 Shares in ‘A’ Ltd.

Motor Car

Plant

Advertisement Suspense A/c

18,800

40,000

30,000

75,000

80,000

84,000

3,27,800 3,27,800

The firm was dissolved on that date and the following arrangement were made:

a) Assets realized as follows: Debtors Rs.15,000; Plant at 30% discount.

b) Stock was valued at Rs.36,000 and this was taken over by P & Q equally.

c) Market value of the shares of A Ltd. is Rs.15 per share. Half the shares were sold in the market

and the balance half were taken over by P & Q in their Profit sharing ratio.

d) A Creditor for Rs.50,000 took over Motor Car in full settlement of his claim and the balance of

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creditors were paid at a discount of 2%.

e) Expenses of realisation amounted to Rs.6,000. P agreed to discharge his wife’s Loan.

Show the necessary Ledger Accounts.

11. X and Y are in partnership sharing profits and losses in the proportion of two-fifth and three-fifth. Following is their Balance Sheet as on 31st March, 2009.

Liabilities Rs. Assets Rs. Creditors Y’s Loan Profit and Loss A/c Capital A/c X 1,60,000 Y 2,40,000

40,000 32,000 50,000 4,00,000 5,22,000

Cash Debtors 80,000 Less: Provision for Doubtful Debts 3,600 Stock Bills Receivable Buildings

16,000 76,400 1,09,600 40,000 2,80,000 5,22,000

They decide to dissolve the partnership on this date. Assets (except Bills Receivable) realized Rs.4,84,000. Creditors agreed to take Rs. 38,000 in settlement of their claims. Realization expenses were 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 an outstanding electricity bill of Rs. 5,000. Bills Receivable taken over by Y at Rs. 33,000. You are required to prepare the Realization Account; Partner’s Capital Accounts and the Cash Account

12. G and H were partners in a firm sharing profits and losses in the ratio of 3 : 1. On 28.2.2007 their firm was dissolved. The Balance Sheet of the firm on that date of dissolution was as follows

Balance Sheet of G and H as on 28.2.2007

Liabilities Amount Rs. Assets Amount Rs.

Bank Loan

Creditors

Capitals :

G 3,00,000

H 1,00,000

70,000

1,30,000

4,00,000

Cash

Building

Stock

Profit & Loss A/c

10,000

5,00,000

40,000

50,000

6,00,000 6,00,000

Building realised Rs. 3,00,000; Stock Rs. 15,000. Rs. 1,05,000 were paid to the creditors in full settlement of their account. The firm had a joint life policy of Rs. 10,00,000 which was surrendered for Rs. 70,000

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on the date of dissolution. The annual premium paid on the joint life policy was debited to the Profit and Loss Account.

Prepare Realisation Account, Cash Account and Partners’ Capital Accounts.

13. A and B were partners in a firm sharing profits and losses equally. On 28.2.2007 they decided to dissolve the partnership. On the date of dissolution A’s capital was Rs. 60,000 and B’s capital was Rs. 45,000. There was a cash balance of Rs. 4,000.Creditors on that date were Rs. 20,000 and there was a balance of Rs. 39,000 in the general reserve account.

Sundry assets realised Rs. 1,02,000. Expenses on dissolution were Rs. 5,000.

Prepare Realisation Account, Cash Account and Partners’ Capital Accounts. (2007)

Ravi and Mohan were partners in a firm sharing profits in the ratio of 3 : 2. On 1.3.2007

the firm was dissolved. On that date the Balance Sheet of the firm was as follows :

Balance Sheet of Ravi and Mohan as on 1.3.2007

Liabilities Amount Rs.

Assets Amount Rs.

Loan

Creditors

Capitals :

Ravi 6,00,000

Mohan 2,00,000

1,40,000

2,60,000

8,00,000

Cash

Building

Stock

Profit & Loss A/c

20,000

10,00,000

80,000

1,00,000

12,00,000 12,00,000

Building realised Rs. 4,50,000; Stock Rs. 2,00,000. Rs. 2,40,000 were paid to the creditors in full settlement of their account. The firm has a joint life policy of Rs. 2,00,000 which was surrendered for Rs. 90,000. The annual premium paid on the joint life policy was debited to the Profit and Loss Account.

Prepare Realisation Account, Cash Account and Partners’ Capital Accounts.

14. Following is the Balance Sheet as on 31stMarch , 2009 of Arun and Tarun sharing profits in the ratio of 2 : 3.

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Liabilities Amount(Rs.) Assets Amount(Rs.)

Creditors 65,000 Cash 14,000

Bills Payable 5,000 Stock 12,000

Arun’s Capital 8,000 Debtors (net) 17,000

Tarun’s Capital 10,000 Plant 30,000

Investments 10,000

P & L A/C (Dr.) 5,000

88,000 88,000

Note :There is a balance of Rs.1,000 in provision for doubtful debts A/C. On the above date , the firm was dissolved. Arun took over investments at Rs.8,000. Stock realized Rs. 10,000 ; Plant realized Rs. 3,000 less ;

Debtors were sold to a collection agency for Rs.16,500 ; Liabilities were settled at a discount of 10 % ; and incurred Rs. 2,000 as cost of realization.

Prepare Realisation A/C , Partners’ Capital A/C and Cash A/C.

15. Heera and Moti are partners in a firm sharing profits and losses in the ratio of 1:2. on31st March 2010, their Balance Sheet was :-

Balance Sheet of Heera and Moti as on 31st March 2010

Liabilities Amount Assets Amount

Capital:-Heera-1,50,000

Moti-2,50,000

4,00,000

Bank 30,000

General Reserve 75,000 Investment 70,000

Bills Payable 20,000 Debtors-60,000

Less:-Provision-5,000

55,000

Investment Fluctuation Fund:- 10000 Stock 45,000 Mrs.Heera's Loan 90,000 Furniture 1,00,000 Moti's Loan 50,000 Building 3,50,000 Creditors 80,000 Patents 1,30,000 Bank Overdraft 1,25,000 Goodwill 70,000 8,50,000 8,50,000

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On that date the partners decide to dissolve the firm under the following arrangements:-

(a) Heera promised to pay off Mrs.Heera's Loan and took investment at Rs. 60,000.

(b) Other assets were realized as follows:-

Debtors:- Full amount, stock:- Rs40,000 Furniture:- 1,10,000, Patents and Goodwill:-10% less, A part of building at Rs. 54,000 (Being 10% less than the book value) and remaining building 20% more than the book value.

(c) Expenses on realization amounted to Rs. 2000.

(d) Creditors and Bills payable of the firm agreed to accept 10% less.

You are required to close the books of the firm by preparing Realization Account, Partner's Capital Accounts and Bank Account.

COMPANY ACCOUNTS-ISSUE OF SHARES

Marking scheme


1 mark question -2nos. (These questions can be answered in the shortest possible way) 4 mark question -2nos.(numerical only) 8 mark - question 1no. (numerical only)

1 Mark Questions

1. What are preference Shares? 2. What is buy- back of Share? 3. What is meant by Authorized capital of a company? 4. What is meant by called up capital? 5. What is meant by reserve capital of a company? 6. What is meant by capital reserve? 7. Give on point of distinction between reserve capital and capital reserve. 8. What is meant by private placement of shares? 9. What is meant by preferential allotment of share?

Ans: a preferential allotment is one in which entire allotment is made at a pre-determined price to the pre-identified people who wish to take strategic stake in the company such as promoters, venture capitalists, financial institutions etc.

10. What are preliminary expenses? 11. What is meant by ‘issue of shares at par’? 12. What is meant by ‘issue of shares at a discount’? 13. State two provisions of the Companies Act 1956 for the issue of shares at a discount.

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14. State two purposes for which securities premium can be used by a company. 15. What is over subscription? 16. Distinguish between over subscription and under subscription 17. What is pro-rata allotment of shares? 18. What is meant by ‘Minimum Subscriptions’? 19. What are calls in arrear? 20. What are calls in advance? 21. What is meant by issue of shares for consideration other than cash? 22. What is meant by forfeiture of shares? 23. Identify the purpose of utilizing the ‘securities premium’ that would maximize the

return to shareholders? Ans: the utilization of securities premium by a company for buy-back of its own shares would maximize the return to shareholders.

4 Mark questions

1. S. S. C. Ltd has a paid up share capital of ` 60,00,000 and a balance of ` 15,00,000

in securities Premium Account. The company management does not want to carry over the balance. State the purposes for which the balance can be utilize. Hint: State the provisions of section 78 regarding the uses of securities premium.

2. Y Ltd. wants to issue 1,00,000 equity shares of ` 100 each at discount. State clearly the conditions which should be fulfilled by the company to issue these shares. Hint: State the provisions of section 79 regarding the issue of shares at a discount.

3. What maximum amount of discount can be allowed at the time of re-issue of forfeited shares when shares were originally issued at a premium? Ans: Amount of discount should not exceed the amount credited to Shares Forfeited Account.

4. Z Ltd forfeited 1000 equity shares of ` 100 each for the nonpayment of first call of ` 20 per share and second and final call of ` 25 per share. State: i. Can these shares be re-issued? ii. If yes, state the minimum amount at which these shares can be re-issued. iii. If these shares were re-issued at `50 per share fully paid up, what will be

the amount of capital reserve?

Ans:

i. Yes, these shares can be re-issued. ii. The minimum amount ` 45 per share. iii. Amount transferred to capital reserve ` 5000.

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5. Give journal entries to record the following transactions of forfeiture and reissue of shares and open share forfeited account in the books of the company.

i. C Ltd forfeited 1000 shares of Rs 100 each issued at a discount of 8%. On

these shares the first call of Rs 30 per share was not received and the final call of Rs 20 per share was yet to be called. These shares were subsequently re-issued at Rs 70 per share Rs 80 paid up.

ii. D Ltd forfeited 470 equity shares of Rs 10 each issued at a premium of Rs 5 per share for nonpayment of allotment money of Rs 8 per share (including premium Rs 5 per share) and the first and final call of Rs 5 per share. Out of these 60 equity shares were subsequently re-issued at Rs 14 per share.

6. D. Pharma Ltd. Purchased machinery worth Rs 10,00,000 from M. Pharma Ltd. Rs 5,50,000 was paid by issue of 9% preference share of Rs 100 each at premium of 10%. The balance was paid in cash. Pass necessary journal in the books of D. Pharma Ltd. and prepare ledger of M. Pharma account. (Answering method: Write 2 jouirnal entries.For the purchase of assets and for issue of shares(preferably combined entry)

7. X Ltd. purchased land costing Rs 9,50,00,000 from Y Ltd. Rs 50,00,000 were

paid through bank draft and the balance by issuing equity share of Rs 100 each at a discount 10%. Pass entries in the books of X Ltd and prepare ledger of Y Ltd account. (Answering method: Write 2 jouirnal entries.For the purchase of assets and for issue of shares(preferably combined entry)

8 Mark Questions (Most frequently asked model questions)

1. ABC Ltd invited applications for 50000 shares of Rs10 each. The amount was

payable as follows:

On application Rs 3 per share On allotment Rs 4 per share On first and final call Rs 3 per share Applications were received for 75000 shares and pro-rata allotment was made as under: Applicants for 40000 shares were allotted 30000 shares on prorate basis.

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Applicants for 35000 shares were allotted 20000 shares on prorate basis.

Rana, to whom 1200 shares allotted out of the group applying for 40000 shares failed to pay the allotment money. His shares were forfeited immediately after allotment. Tania, who had applied for 700 shares out of the group applying for 35000 shares failed to pay the first and final call. His shares were also forfeited. Out of the forfeited shares 1000 shares were re-issued @ Rs 8 per share as fully paid up. The reissued shares include all the shares of Tania.

Pass necessary journal entries to record the above transactions.

(Hint: prepare category table, find out ratio of allotment and make the journal entries)

2. ABC Ltd issued 40000 equity shares of Rs 10 each at a premium of Rs 2.50 per share. The amount was payable as follows:

On application Rs 2 per share On allotment Rs 4.50 per share (including premium) On call Rs 6 per share Owing to heavy subscription the allotment was made on pro - rata basis as follows: a. Applicants for 20000 shares were allotted 10000 shares. b. Applicants for 56000 shares were allotted 14000 shares. c. Applicants for 48000 shares were allotted 16000 shares.

It was decided that excess money received on applications would be utilized on allotment and the surplus would be refunded. Ram, to whom 1000 shares were allotted, who belongs to category (a), failed to pay allotment money. His shares were forfeited after the call.

Pass necessary journal entries in the books of the company.


3. A ltd invited application for 15,000 equity shares of Rs.10 each payable as follows:

On Application Rs.3 per share On Allotment Rs.3 per share On First Call Rs.4 per share On Second Call Re.1 per share All the shares have been subscribed and paid for except the following: i) X who held 300 shares failed to pay the money on allotment and on calls.

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ii) Y to whom 200 shares have been allotted failed to pay the money due on first call and final call.

iii) Z to whom 500 shares were allotted has not paid the amount due on final call

The shares of X,Yand Z are forfeited and are subsequently re-issued for cash as fully paid at a discount of 10%

Give necessary journal entries to record these transactions in the books of A Ltd.

(Hint: find out ratio of allotment, calculate pro rata allotment category wise and make the journal entries)

4. Laxmi Ltd. invited applications for issuing 10,00,000 equity shares of Rs. 100 each at a premium of Rs. 25 per share. The amount was payable as follows :

On Application Rs. 50 (including premium) On Allotment Rs. 50 On First and Final call — Balance Applications for 17,50,000 shares were received. Applications for 2,50,000 shares were rejected and pro-rata allotment was made to the remaining applicants. Overpayments received on

application were adjusted towards sums due on allotment. Victor, to whom1,000 shares were allotted, failed to pay allotment and first and final call. His shares were forfeited. The forfeited shares were reissued for Rs. 11,000 fully paid up. Pass necessary journal entries in the books of Laxmi Ltd.


5. Petromax Ltd. issued 50,000 shares of. Rs. 10 each at a premIum of . Rs. 2 per share payable as Rs. 3 on application, Rs. 5 including premium on allotment and the balance in

equal instalments over two calls. Applications were received for 92,000 shares and the allotment was done as under:

A. Applicants of 40,000 shares - Allotted 30,000 shares B. Applicants of40,000 shares - Allotted 20,000 shares C. Applicants of 12,000 shares - Nil Suresh who had applied for 2,000 shares (category A) did not pay any money other than application money. Chandar who was allotted 800 shares (category B) paid the call money due along with allotment. All other allottees paid their dues as per schedule. Pass necessary journal entries in the books of Petromax Ltd.' to record the above.

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6. X Ltd. issued 50,000 shares of Rs. 10 each at a premium of Rs. 2 pershare payable as

follows: Rs. 3 on Application Rs. 6 on Allotment (including premium) and Rs. 3 on call. Applications were received for 75,000 shares and pro-rata allotment was made as follows: To the applicants of 40,000 shares, 30,000 shares were issued and for the rest 20,000 shares were issued. All moneys due were received except the allotment and call money from Ram who had applied for 1,200 shares (out of the group of 40,000 shares). All his shares were forfeited. The forfeited shares were re-issued for Rs. 8 per share fully paid-up. Pass necessary journal entries for the above transactions.

7. Reliable Investments Limited issued a prospectus inviting applications for 4,000 Equity shares of Rs. 20 each at a premium of Rs.4 per share payable as follows:On Application Rs.4; on Allotment Rs.10 (including premium); on First Call Rs.6; on Second call Rs.4. Applications were received for 6,000 shares and allotment was made pro rata to the applicants of 4,800 shares, the applications for remaining shares being refused. Money overpaid on application was used on account of sums due on allotment. Harish, to whom 80 shares were allotted, could not pay the allotment money and on his subsequent failure to pay the First call, his shares were forfeited after the First Call. Mukesh, to whom 120 shares were allotted, failed to pay the two calls and his shares were forfeited after the Second Call.

Of the shares forfeited, 160 shares were sold to Suresh credited as fully paid at Rs. 18 per share, all of Harish’s forfeited shares being included.

Pass the Journal entries in the books of the company to record the above transactions. 8. XYZ Ltd. invited applications for 5,000 shares of Rs. 25 each at a premium of Rs. 5 per

share payable as follows: On Application Rs. 15 (including Rs. 2 as premium) On Allotment Rs. 5 (including Re.1 as premium) On First and final call Rs. 10 (including Rs. 2 as premium) Applications were received for 7,500 shares and prorate allotment was made to applications for 6,000 shares. Remaining applications were rejected. Ram, to whom 100 shares were allotted, failed to pay the allotment money and call money. Shyam, a holder of 150 shares failed to pay the first and final call. These shares were forfeited

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after the final call was made. 200 shares were reissued (including all of Ram’s shares) at Rs. 15 each fully paid. Journalize.

VALUE BASED QUESTIONS 9. Jayashri Ltd. invited applications for 12,000 equity shares of Rs. 10 each issued at a

premium of 10%. The amount was payable as under :

On application—Rs. 4

On allotment--- 7 (including premium). Applications were received for 17,000 shares. First 2000 applicants were allotted no shares and remaining applicants were allotted shares on pro-rata basis. Excess money received on application was adjusted towards sums due on allotment. Lakshmi to whom 400 were allotted failed to pay allotment money. Her shares were accordingly forfeited. The forfeited shares were re-issued @ Rs. 8 per share fully paid up. What value do you find affected? Pass necessary journal entries in the books of Jayashri Ltd.

Suggest the different alternatives to allot the shares.

10. Jothi Ltd. issued for public subscription 50,000 equity shares of the value of Rs.10 each at the discount of 10% payable as follows.Rs.2 on application, Rs.3 on allotment, Rs. 2 on first call, Rs. 2 on final call. The company received application for 1,25,000 shares . The allotment was done as follows.

A. Applicants of 25,000 shares were refunded the application money. B. Applicants of 60,000 shares were allotted 30,000 shares C. Remaining applicants were allotted 20,000 shares

The excess application money to be adjusted allotment and call if any. Mohan, A share holder who had applied for 3000 shares (Group B) failed to pay the allotment money and both calls. Babu a holder (Group C) who was allotted 1500 paid the calls money along with allotment money.

Pass journal entry to record the above.

What value do you find affected?

Suggest any two alternatives to allot the shares.

1

5

30

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DEBENTURE

Marking scheme


1 mark question -1no. (These questions can be answered in the shortest possible way) 3mark question -2nos.(numerical/theory)

1 Mark Questions 1. What is meant by Debenture? 2. What is meant by ‘Secured or Mortgaged Debenture’? 3. What is meant by Convertible Debenture? 4. What is meant by Non-Convertible Debenture? 5. What is meant by Fully Convertible Debenture and Partly Convertible Debenture? 6. What is the nature of interest on debenture?

Ans: interest on debenture is a charge against the profit which means interest on debenture shall always be paid whether profits are sufficient or not.

7. What is Zero Coupon Bond? Ans: A Zero Coupon Bond is one which does not carry any specific rate of interest. In order to compensate the investors, such bonds are issued at a substantial discount. The difference between issue price and the redemption price represents the total interest to be spread over the duration of the bond.

8. Give any two points of distinction between Share and Debenture. 9. Why would an investor prefer to invest in the debentures of a company rather than in

its Shares? Ans: interest on debenture is payable irrespective of the Company making a profit of incurring a loss whereas dividend on shares is paid only when there is profit in the company.

10. Why would an investor prefer to invest partly in debentures and partly in shares of a company? Ans: An investor would prefer to invest partly in shares and partly in debenture because shares provide liquidity and capital appreciation and debentures provide safety and assured interest.

11. What is meant by debenture issued as collateral security?

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3 mark questions

1. Sunrise Ltd. has 5000, 9% Debenture of ` 100 each due for redemption on 31st March, 2011. Assume that Debenture Redemption Reserve has a balance of ` 1, 90,000 on that date. Record the necessary entries at the time of redemption. (Hint: Pass 4 entries by creating DRR at 100% out of profits)

2. XYZ Ltd had ` 800000, 6% debenture due to be redeemed out of profits on 1st Oct. 2008 at a premium of 5%. The company had a DRR of ` 414000. Record the necessary entries at the time of redemption.

3. Suresh Ltd. Acquired assets of the value of ` 600000 and liabilities worth ` 70000 from T & Co. at an agreed value of ` 550000. Suresh Ltd issued 12% debentures of ` 100 each at a premium of 10% in full satisfaction of purchase consideration. The debentures were redeemable 3 years later at a premium of 5%. Pass necessary journal for above issue of debentures. {Hint: Make 4 entries for purchase of assets and liabilities (combined entry),issue of debenture(combined)}

4. Hindustan Ltd issued ` 2000000, 8% debentures at a premium of 5%. Out of these ` 200000, 8% debentures were redeemed by converting them into equity shares of ` 100 each issued at par and ` 500000, 8% debentures were converted into 10% preference shares of ` 100 each issued at a premium of 25%. Pass the necessary journal entries in the books of the company for redemption.

5. Arindum Ltd.has 4000, 8% Debenture of ` 100 each due for redemption on 31st March, 2010. Assume that Debenture Redemption Reserve account has a balance of ` 1,50,000 on that date. Record the necessary entries at the time of redemption.

6. Z Ltd had ` 10,00000, 8% debenture due to be redeemed out of profits on 1st Nov. 2009 at a premium of 5%. The company had a DRR of ` 414000. Record the necessary entries at the time of redemption.

7. Tip Top Ltd. Acquired assets of the value of ` 700000 and liabilities worth ` 80000 from Rock & Co. at an agreed value of ` 630000. Tip Top Ltd issued 12% debentures of ` 100 each at a premium of 5% in full satisfaction of purchase consideration. The debentures were redeemable 5 years later at a premium of 4%. Pass necessary journal for above issue and redemption of debentures.

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8. D Ltd redeemed ` 3000000, 8% debentures issued at a premium of 5% as follows: ` 1200000, 8% debentures were converted into equity shares of ` 100 each issued at premium of ` 25 per share and the balance by converting them into 8% preference shares of ` 100 each issued at discount of ` 10 per share. Pass the necessary journal entries in the books of the company for redemption. {Hint: First calculate number of shares issued by dividing amount of redemption of debenture by issue price of each share}

PART-B

ANALYZIS OF FINANCIAL STATEMENTS

FINANCIAL STATEMENTS OF COMPANIES

Marking scheme

Total Marks allotted -12

1 mark question -1no. (These questions can be answered in the shortest possible way) 3 mark question -1no.(usually asked from co.Balance sheet comparative/common size statements) 4 mark - question 2nos.{usually asked from ratios (numerical)}

QUESTIONS CARRYING 1 MARK

1. What is meant by ‘Financial Analysis’? 2. List any one objective of analyzing financial statements. 3. What is Horizontal Analysis? 4. What is Vertical Analysis? 5. Give one Limitation of Financial analysis. 6. What is the interest of shareholders or investors in the analysis of financial statement? 7. State the interest of tax authorities in the analysis of financial statement. 8. How the ‘Solvency’ of a business is assessed by Financial Statement Analysis? 9. How the ‘Earning Capacity’ of a business is assessed by Financial Statement Analysis? 10. How is ‘Window Dressing’ a limitation Financial Statement Analysis? 11. How does ‘Subjectivity’ become a limitation Financial Statement Analysis?

QUESTIONS CARRYING 3 MARKS

1. State who may be interested in the Financial Statement Analysis and why? 2. How is analysis of financial statement important to Government Authorities?

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3. Why is analysis of financial statement important to Creditors? 4. What is Horizontal analysis of financial statement? 5. What is Vertical analysis of financial statement? 6. What is the importance of analysis of financial statement? 7. Explain briefly any three objectives of analysis of financial statement? 8. What are the limitations of analysis of financial statement? 9. Briefly explain the advantages of analysis of financial statement? 10. What is meant by analysis of financial statement? What is its importance to

shareholders and creditors? 11. Explain briefly the interest of shareholders, lenders and taxation authorities in the

analysis of financial statement of a company.

Comparative Statements


1. Prepare a Comparative Statement of Profit and Loss with the help of following information:

Particulars 2011 2012 Revenue from operations Expenses Other Incomes Income Tax

20,00,000 12,00,000

4,00,000 50%

30,00,000 21,00,000

3,60,000 50%

2. Prepare a Comparative Statement of Profit and Loss with the help of following information:

Particulars 2012 2011 Revenue from operations Cost of Materials Consumed Indirect Expenses Income Tax

600000 70% of Revenue from

Operation 20% of Cost of Materials

Consumed 40% of Net Profit before Tax

400000 60% of Revenue from

Operation 25% of Cost of Materials

Consumed 40% of Net Profit before Tax

3. Prepare comparative income statement from the following:

Particulars 31st March 2012 31st March 2011 Revenue from operations Expenses

40,00,000 58% of Revenue from

operations

30,00,000 60% of Revenue from

operations

Interest on investment @2,00,000 and taxes payable @50%.

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4. Prepare a Comparative income statement from the following information: Particulars 2012 2011

Revenue from operations Materials Consumed Other Expenses Income Tax

150% of Materials Consumed 20,00,000

20% of Materials Consumed 40%

120% of Materials consumed 10,00,000

10% of Materials Consumed 40%

5. Prepare a Comparative Statement of Profit and Loss with the help of following information: Particulars 2011 2012

Revenue from operations Purchase of Stock in Trade Changes in inventories Other expenses

30,00,000 19,00,000 (1,00,000)

1,80,000

40,00,000 20,00,000

2,00,000 1,76,000

Common Size Statements


1. What is meant by Common Size Statement? Give any two uses of common size statements.

2. What is Common Size Statement? (1 Mark) 3. Prepare Common Size Balance Sheet From the following Balance Sheets of X Ltd and Y

Ltd:

4. Prepare Common Size Income Statement of X Ltd. from the following information:

Particulars Note No X Ltd Y Ltd EQUITY & LIABILITIES Shareholder’s Fund Non Current Liabilities Current Liabilities

900000 400000 200000

1200000

350000 250000

TOTAL 1500000 1800000 ASSETS Non Current Assets Current assets

1000000

500000

1600000

200000 TOTAL 1500000 1800000

Particulars 31.3.2003 31.3.2002 Revenue from Operations Cost of Materials Consumed Employee Benefit Expenses Other Expenses

18,00,000 10,86,300

2,75,760 45,000

15,00,000 9,24,000 2,50,650

35,000

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RATIO ANALYSIS

QUESTIONS CARRYING 1 MARK

1. Quick Ratio of Company is 1.5: 1. State giving reason whether the ratio will improve, decline or not change on payment of dividend by the company.

2. State with reason whether repayment of long term loan will result in increase, decrease

or no change of debt – equity ratio. 3. The debt equity ratio of a company is 0.8 : 1. State whether the long term loan obtained

by the company will increase, decrease or not change the ratio. 4. The debt equity ratio of X Ltd. is 1 : 2. What is the effect of conversion of debentures

into preference shares on this ratio? 5. The inventory turnover ratio of a company is 3 times. State, giving reason, whether the

ratio improves declines or does not change because of increase in the value of closing inventory by 5000.

6. The gross profit ratio of a company is 50%. State with reason whether the decrease in rent received by 15000 will increase, decrease or not change the ratio.

7. What will be the operating profit ratio, if operating ratio is 83.64%? (Ans: 100-83.64 = 16.36)

8. What will be the operating profit ratio, if operating ratio is 88.94%? (Ans: 100-88.94= 11.06)


1. “Comparison with the help of Ratios is not possible if different firms follow different accounting policies.” Comment.

2. How does ratio analysis become less effective due to price level changes? 3. Briefly explain the meaning and significance of any two of the following ratios:

i. Debt – Equity Ratio ii. Inventory Turn Over Ratio iii. Trade Receivable Turn Over Ratio

4. Briefly explain the meaning and significance of any two of the following ratios: i. Gross Profit Ratio ii. Current Ratio iii. Inventory Turn Over Ratio

5. Briefly explain the meaning and significance of any two of the following ratios: i. Debt – Equity Ratio ii. Operating Ratio iii. Trade Receivable Turn Over Ratio

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6. Briefly explain the meaning and significance of any two of the following ratios: i. Gross Profit Ratio ii. Inventory Turn Over Ratio iii. Quick Ratio

7. From the given information, calculate the Inventory Turn Over Ratio Revenue from operation: Rs 2, 00,000; GP: 25%: Opening inventory was 1/4th of the value of closing inventory. Closing inventory was 40% of revenue from operations. (Ans: 3 Times)

8. Rs 3, 00,000 is the cost of revenue from operation, inventory turnover 8 times; inventory at the beginning is 2 times more than the inventory at the end. Calculate the value of opening and closing stock. (Ans: Opening Inventory Rs 56250 and Closing Inventory Rs 18750)

9. Rs 1,50,000 is the cost of revenue from operation, inventory turnover 8 times; inventory at the beginning is 1.5 times more than the inventory at the end. Calculate the value of

opening and closing stock. (Ans: Opening Inventory Rs 26786 and Closing Inventory Rs 10714)

10. A company earns a gross profit of 25% on cost. Its credit revenues from operations are twice its cash revenue from operations. If credit sales are Rs 8, 00,000, calculate the gross profit ratio of the company. (Ans: 20%)

11. Average inventory Rs 60000; inventory turnover ratio 5 times; Selling Price 40% above cost. Calculate Gross Profit Ratio. (Ans: 28.57%)

12. From the following details, calculate (i) Opening Inventory; (ii) Closing Inventory; Inventory Turn Over Ratio 6 times; Gross Profit 20% on revenue from operation ; Revenue from operations Rs 1,80,000; Closing Inventory is Rs 15000 in excess of Opening Inventory. (Ans: Opening inventory Rs 16500 and closing inventory Rs 31500)

13. Calculate current assets of a company from the following information: i. Inventory turnover 4 times ii. Closing inventory is Rs 20000 more than inventory at the beginning. iii. Revenue from operation Rs 3,00,000 iv. Gross profit ratio 20% v. Current liabilities Rs 40,000 vi. Quick ratio 0.75. (Ans: Rs 1,00,000, Hint: closing inventory Rs 70,000)

14. The current ratio of a company is 2:1. State which of the following would improve, reduce or not change the ratio: i. Repayment of current liability ii. Purchasing goods on credit iii. Sale of motor vehicle at a profit of 10% iv. Sale of goods at a profit of 10%

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v. Payment of dividend vi. Repayment of long term liabilities.

15. Current liabilities of a Company are Rs 350000. Its current ratio is 3:1 and Acid Test Ratio is 1.75: 1. Calculate the value of Current Assets, Liquid Assets and Inventories.

16. Current assets of a company are Rs 360000. Its current ratio is 2.4:1 and acid test ratio is 1.3:1. Calculate the value of current liabilities, Liquid Assets and Inventories.

17. Working capital of a company is Rs 30000. Its current ratio is 2.5:1. Calculate the value of current assets, current liabilities, Acid Test Ratio, assuming inventories of Rs 26000.

18. A business has a current ratio of 3:1 and quick ratio of 1.2:1. If the working capital is Rs 180000, calculate the total Current Assets and Inventory.

19. The ratio of current assets (Rs 600000) to current liabilities (Rs 400000) is 1.5:1. The accountant of the firm is interested in maintaining a current ratio of 2:1, by paying off a part of the current liabilities. Compute the amount of current liabilities that should be paid, so that the current ratio at the level of 2:1 may be maintained.

20. The Debt Equity Ratio of a company is 1:2. Which of the following would improve,

reduce or not change the ratio: i. Repayment of long term borrowings of Rs 40000 ii. Purchasing of fixed assets for Rs 50000 on long term deferred payment basis iii. Issued new equity shares of Rs 75000. iv. Declaration of a final dividend amounting to Rs 20000 v. Payment of final dividend already declared. vi. Goods purchased on credit.

21. Assuming that the Debt Equity Ratio 2:1, state giving reasons, which of the following transactions would increase, Decrease or not alter the debt equity ratio: i. Sale of fixed assets at a loss. ii. Purchasing of fixed assets on credit of two months iii. Issued of new shares (Equity/ Preference) for cash. iv. Purchasing of fixed a assets on long term deferred payment basis v. Issue of bonus shares.

22. Calculate the Gross Profit Ratio from the following information: Revenue from operations Rs 400000; Gross Profit 25% on Cost.

23. Net profit after interest but before tax Rs 140000; 15% Long Term debts Rs 400000; Shareholders funds Rs 240000; Tax Rate 50%. Calculate Return on Capital Employed.

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CASH FLOW STATEMENT

Marking scheme

Total Marks allotted -8

1 mark question -2nos. (These questions can be answered in the shortest possible way) 6 mark question- 1no.(numerical)

1 MARK QUESTIONS

1. Under which type of activity will you classify ‘Commission’ and ‘Royalty Received’ while preparing cash flow statement?

2. Give an example of the activity which remains financing activity for every enterprise.

3. Under which type of activity will you classify ‘Proceeds from sale of patents’ while preparing cash flow statement?

4. State with reason whether ‘Old Furniture written off’ would result into inflow/outflow or no flow of cash?

5. What is the objective of preparing of cash flow statement? 6. While preparing cash flow statement, what type of activity is ‘Payment of cash to

acquire shares to another company by a trading company? 7. Give any two objectives of cash flow statement. 8. State why cash flow statement is not a substitute for income statement? 9. What is meant by the term ‘Cash Flows’? 10. When does a cash flow arise? 11. State whether conversion of debenture into equity share by a financing company

will result inflow, outflow or no flow of cash. 12. State whether the payment of cash to trade payables will result in inflow,

outflow or no flow of cash. 13. State whether depreciation charged by a company will result in inflow, outflow

or no flow of cash. 14. What is meant by cash equivalent? 15. What is meant by operating activity? 16. List any two investing activities which result in outflow of cash. 17. List any two financing activities which result in outflow of cash. 18. Under which type of activity will you classify ‘Proceeds from sale of investments’

while preparing cash flow statement? 19. Under which type of activity will you classify ‘Refund of income Tax’ while

preparing cash flow statement?

40

20. Under which type of activity will you classify ‘Interest paid on long term borrowings’ while preparing cash flow statement?

21. Interest received by a financing company is classified under which kind of activity while preparing a cash flow statement?

22. State with reason whether cash deposited I bank will result I inflow, out flow of no flow of cash?

23. State with reason whether short term deposited I bank will result I inflow, out flow of no flow of cash?

24. Dividend paid is classified under which kind of activity while preparing a cash flow statement?

25. State why non cash transactions are ignored while preparing cash flow statement?

26. When dividend received is considered as operating activity? 27. When interest received is considered as operating activity?

28. Dividend paid by a trading or manufacturing company is classified under which kind of activity while preparing cash flow statement?

29. Interest paid by an investment company will come under which kind of activity while preparing cash flow statement?

30. Give any two examples which give inflow of cash.

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6 MARKS QUESTIONS 1. Prepare cash flow statement of A Ltd. From the following:

Particular 2011 2012

I Equity and Liabilities Share holders’ fund

Share capital 300000 500000 Profit and loss A/c 130000 210000

Non-current Liabilities 10% Debentures 200000 100000

Current Liabilities Creditors 50000 60000 B/P 20000 15000

Provision for taxation 30000 40000 730000 925000

II Assets Non – current assets

Goodwill 60000 45000 Land and Building 200000 150000 Plant 300000 270000 Investments - 300000

Current Assets Debtors 55000 60000 Stock 70000 50000 Cash and bank 45000 50000

730000 925000 Additional information:

1. Dividend was proposed and paid during the year Rs 45000 2. Income tax paid includes Rs 4500 as dividend tax 3. Land and Building was sold at a profit of 100%

{Hint: Prepare ledger accounts of Provision for Tax and Land and Building. For dividend consider the amount as proposed and paid}

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2. Following are the Balance Sheets of HCL Ltd. as on 31.3.2011 and 31.3.2012:

Particulars Note no. 31.3.2011 31.3.2012 I EUITY AND LIABILITIES Shareholders fund Share capital Reserve and surplus Noncurrent liabilities Long term borrowings Current liabilities Trade payables Outstanding expenses TOTAL II ASSETS Non-current assets Fixed assets non – current investment Current assets Inventory Trade receivable Cash and cash equivalents TOTAL

1

2

4,00,00 (50,000)

2,00,000

1,10,000

10,000 6,70,000

3,00,000 2,00,000

50,000

1,00,000 20,000

6,70,000

7,00,000 (3,20,000)

4,00,000

1,50,000

20,000 9,50,000

5,00,000 1,40,000

1,00,000 1,70,000

40,000 9,50,000

NOTES: (1) Reserve and Surplus: 31.3.2011 31.3.2012 Profit & loss balance (50,000) (3, 20,000) (2) Long term borrowings: 9% debenture 2, 00,000 4, 00,000 Additional information:- Included in the fixed assets was a piece of machinery costing Rs. 70,000 on which depreciation charged was Rs. 40,000 and it was sold for Rs. 30,000. During the year Rs. 1, 40,000 depreciation was charged on fixed assets. Prepare a cash flow statement. {Hint: prepare ledger accounts for fixed assets, calculate interest on debenture on the opening balance}

43

3. From the following balance sheets of XY Ltd as on 31 3 2011 and 31.3 2012 prepare a cash flow statement

Particulars Note No. Current year (Rs)

Previous year (Rs)

I EQUITY AND LIABILITIES 1.Share holders fund a) Share capital b) Reserves and surplus 2.Non-Current Liabilities Long term borrowings

1 2

3

8,50,000 1,70,000

1,80,000

4,60,000 2,40,000

2,00000

Total 12,00,000 9,00,000 II ASSETS 1.Non-current Assets a) Fixed Assets 2.Current Assets a) Inventories(stock) b) Trade Receivables(debtors) c)Cash & cash Equivalents (Bank)

7,00,000

2,50,000 1,90,000

60,000

5,00,000

2,10,000 1,40,000

50,000 Total 12,00,000 9,00,000 Notes to Accounts

Current year (Rs)

Previous year (Rs)

Note No.1 Share holders Funds Equity share capital 8%preference shares

7,50,000 1,00,000

4,00,000

60,000 8,50,000 4,60,000

Note No.2 Reserves & surplus General reserve Balance in statement of Profit & Loss

50,000

1,20,000

70,000

1,70,000 1,70,000 2,40,000

Note No.3 Long Term borrowings 10% Debentures

1,80,000

2,20,000

Additional information:

During the year machine costing Rs.80,000 was sold for Rs.50,000.Dibvidend paid Rs.80,000

Ans (30,000) ; (2,30,000) ; 2,70,000

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4. From the following balance sheets of Vijaya Ltd as on 31. 3 .2011 and 31.3 .2012 prepare a cash flow statement


Previous year (Rs)

I EQUITY AND LIABILITIES 1.Share holders fund a) Share capital b) Reserves and surplus 2.Current Liabilities Trade Payables (creditors)

1

65,000 42,500

45,000 24,000

Total 1,18,500 77,700 II ASSETS 1.Non-current Assets a) Fixed Assets 2.Current Assets a) Inventories(stock) b) Trade Receivables(debtors) c)Cash & cash Equivalents (cash)

83,000

13,000 19,500

3,000

46,700

11,000 18,000

2,000 Total 1,18,500 77,700 Notes to Accounts

Current year (Rs)

Previous year (Rs)

Note No.2 Reserves & surplus General reserve Balance in statement of Profit & Loss Preliminary expenses

27,500 15,000 --------

15,000 10,000 (1,000)

42,500 24,000 Additional information:

Depreciation on Fixed Assets for the year 2011-2012 was Rs.14,700

An interim Dividend Rs.7,000 was paid to the share holders during the year.

Ans:39,000 (51,000) 13,000 {Hint: consider interim dividend as proposed dividend and dividend paid}

45

5. From the following balance sheets of Goodwill Ltd you are required to prepare a cash flow statement as per AS III.


Previous year (Rs)

I EQUITY AND LIABILITIES 1.Share holders fund a) Share capital b) Reserves and surplus 2. Current Liabilities Trade Payables (creditors)

1

2

45,000 18,500

10,500

30,000 5,000

8,500

Total 74,000 43,500 II ASSETS 1.Non-current Assets a) Fixed Assets 2.Current Assets a) Inventories(stock) b) Trade Receivables(debtors) c)Cash & cash Equivalents (Bank)

48,000

9,000 9,000 8,000

20,000

8,000 12,000

3,500 Total 74,000 43,500 Notes to Accounts

Current year (Rs)

Previous year (Rs)

Note No.1Reserves & surplus Balance in statement of Profit & Loss

18,500

5,000

Note No.2 Trade Payables Creditors Bills Payables

8,500 2,000

10,500

6,000 2,500

8,500 Additional information:

i) Income Tax paid during the year was Rs.3,500 ii) Dividend paid during the year was @10%

Ans:20500(28,000) 12,000 {Hint: Calculate dividend on the opening balance of share capital}

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6. From the following balance sheets of Bright Ltd as on 31. 3 .2011 and 31.3 .2012 prepare a cash flow statement


Previous year (Rs)

I EQUITY AND LIABILITIES 1.Share holders fund a) Share capital b) Reserves and surplus 2.Current Liabilities Trade Payables

1 2

3,90,000 60,000 60,500

3,50,000 27,500 40,000

Total 5,10,500 4,17,500 II ASSETS 1.Non-current Assets a) Fixed Assets i) Tangible –Machinery ii) Intangible -Goodwill 2.Current Assets a) Trade Receivables b) Inventories c)Cash & cash Equivalents

1,10,000 25,000

1,62,500

40,000 1,73,000

1,75,000 30,000

62,500 37,500

1,12,500

Total 5,10,500 4,17,500 Notes to Accounts

Current year (Rs)

Previous year (Rs)

Note No.1 Share holders Funds Equity share capital 10% preference share capital

3,25,000

65,000 3,90,000

2,00,000 1,50,000 3,50,000

Note No.2 Reserves & surplus General reserve Securities Premium Reserve Balance in statement of Profit & Loss

17,500 25,000 17,500

10,000

5,000 12,500

60,000 27,500 Additional information:

Depreciation Provided during the year 2011-2012 was Rs.20,000

Dividend paid during the year was Rs.20,000

During the year 2011-2012 machinery having book value Rs.50,000 was sold for Rs.40,000

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Ans:14,500 (35,000) 40,000{Hint: increase of security premium will be shown under financing activities as inflow}

7. a) Calculate cash flow from operating activities:

Particulars 31.3.2011 (Rs)

31.3.2012 (Rs)

Surplus in statement of Profit and Loss General Reserve Provision for depreciation on plant Out standing expenses Goodwill Sundry Debtors

30,000 10,000 30,000

5,000 20,000 40,000

35,000 15,000 35,000

3,000 10,000 35,000

An item of plant costing Rs.20,000 having book value of Rs.14,000 was sold for Rs.18,000 during 2011-12

b) X ltd provides the following information,calculate cash flow from financing activities.


31.3.2012 (Rs)

Equity share capital 14% Debentures 12% Debentures

4,00,000 1,00,000

----------

5,00,000

--------- 2,00,000

Additional information

Interest paid on debentures Rs.19,000

Dividend paid Rs.50,000

During the year 2011-12,X ltd issued bonus shares in the ratio of 4:1 by capitalizing reserve.

ANS: a)30,000 b)31000(Hint: issue of bonus shares will not affect cash flow)

48

8. From the following balance sheets of Raj Ltd as on 31. 3 .2011 and 31.3 .2012 prepare a cash flow statement


31.3.2013 (Rs)

I EQUITY AND LIABILITIES 1.Share holders fund a) Share capital b) Reserves and surplus 2.Non-Current Liabilities a) Long term Borrowings:9% Debentures Current Liabilities Trade Payables Other Current Liabilities: Out standing liabilities

7,00,000 (3,20,000)

4,00,000

1,50,000

20,000

4,00,000 (50,000)

2,00,000

1,10,000

10,000 Total 9,50,000 6,70,000 II ASSETS 1.Non-current Assets a) Fixed Assets b) Investments 2.Current Assets a) Inventories b)Trade Receivables c)Cash & cash Equivalents

5,00,000 1,40,000

1,00,000 1,70,000

40,000

3,00,000 2,00,000

50,000

1,00,000 20,000

Total 9,50,000 6,70,000 Additional information

Included in the fixed assets was a piece of machinery costing Rs.70,000 on which depreciation charged was Rs.40,000 and it was sold for Rs.30,000.During the year Rs.1,40,000 depreciation was charged on fixed assets

Ans: (1,82,000)( 2,80,000 )4,82,000

49

SOME SELECTED VALUE BASED QUESTIONS

IMPORTANT NOTE FOR THE STUDENTS:

CBSE has included value based questions of 3 to 5 marks.These questions are usualy asked under the topics given below.These questions are divided in to two parts. One part is numerical in general and the second part is of value based.Some samples questions are given below:

PARTNER SHIP - FUNDAMENTALS Q1. A, B and C are partners sharing profits in the ratio 3:2:1 and contribute capital Rs. 1, 00,000; Rs. 80,000 and Rs. 60,000 respectively. Profit before adjustments is Rs. 84,000. Interest on capital is to be provided @ 10% p.a. Since C has to take care of his physically challenged brother, his share of profit should not be less than Rs. 15,000. A and B have agreed to bear the deficiency. Prepare Profit and Loss Appropriation Account. (2) What values are reflected on the part of A and B that they are ready to sacrifice their share to meet the deficiency of guaranteed profit? (2) Ans: 1st part- Prepare Profit and Loss Appropriation Account 2nd part-value points mentioned below Compassionate Sacrificing nature Contentment Commitment ADMISSION OF A PARTNER Q2. A & B are partners sharing profits in the ratio 1:1. C wants to join their firm as it enjoys a good reputation in the industry. A and B were initially reluctant to his admission but agreed to admit him for 1/5th share in profits. For this, they ask him to pay an unreasonable amount of goodwill in cash irrespective of his share in the profits. Compute Sacrificing ratio and New Profit sharing ratio. (2) What values are being overlooked by the firm at the time of C’s admission? (2) Ans: 1st part- Compute Sacrificing ratio and New Profit sharing ratio. 2nd part-value points mentioned below Value Points Respect for Professional ethics Integrity Fairness Considerate RETIREMENT OF A PARTNER Q3. Ram, Ramesh and Rajesh are partners in a business sharing profits and losses in the ratio 3:2:1. Rajesh retires and both the existing partners agree to share profits in the ratio 2:1 .Later Rajesh requests the other partners that his physically challenged son should be inducted as a partner in his place. After discussing it amongst themselves both the partners, Ram and Ramesh agree to take his son as a partner. Calculate the gaining ratio on Rajesh’s retirement (2) Which values have been taken into consideration while taking Rajesh’s son as a partner? (2) Ans: 1st part- Compute gaining ratio

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2nd part-value points mentioned below Value Points Compassion Socially responsible behaviour Mutual Cooperation Equal Opportunity to all Q4. A, B and C are partners carrying on an illegal business without forming a partnership deed. C wants to retire but A and B are not willing to give his share. Their profit sharing ratio is 3:2:1. Value Based Identify the values which should have been incorporated while formulating partnership. (2) Ans: value points mentioned below Value Points Respect for law Righteous behaviour Responsibility towards society Morality DEATH OF A PARTNER Q5. A, B and C are partners in a firm. B died on 28 February, 2010. On his death, his wife (legal executor) needs money for her son’s operation next week. His share of profit was to be calculated on the basis of last three years’ average profits. The profits were 2007- Rs.10, 000; 2008- Rs. 15,000 and 2009- Rs 20,000. Goodwill is calculated on the basis of 2 years’ purchase of last three years’ average profit. The firm decides to settle the executor’s account immediately and absorb his wife as an employee in the firm. Calculate the amount payable to his legal executor. (3) Which value is exhibited in the firm’s decision? (2) Ans: 1st part- Prepare deceased partners capital account 2nd part-value points mentioned below Value Points Concern for the bereaved wife and family Sympathy Humanity Fairness Q6.Mr.Ramesh had personal assets worth Rs. 10, 00,000 and liabilities to be paid worth Rs. 4, 00,000 (borrowed money from his friend). Mr. Ramesh dies & his son Ram decides to give equal share to his sisters and pay off the liability immediately. What values does Ram exhibit by taking this decision? (2) Ans: value points mentioned below Value Points Honesty Responsibility Equal status to women in family Prompt in discharging obligations

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ISSUE OF SHARES Q.7 Springs ltd decided to set up a handicraft based export oriented unit in a remote area of Bihar. Their business model involves sourcing of raw materials from neighbouring villages. For this purpose a prospectus was issued inviting applications for 50,000 shares of Rs 10 each fully payable on application. Applications were received for 75,000 shares allotment was made on prorata basis to all the applicants. Give necessary journal entries. (3) Which values are being considered by the management of Spring Ltd. in setting up this unit? (2) Ans: 1st part- Give necessary journal entries 2nd part-value points mentioned below Value Points Generating employment opportunities in backward areas. (by setting up unit in remote area), Promoting balanced regional development Promoting craft based industry Equality (Pro rata allotment to all applicants) ANALYSIS OF FINANCIAL STATEMENTS Q8. Preeti Ltd. has a pending suit in court. Incase the ruling goes in favour of other party, compensation of Rs. 10,00,000 will be payable by Preeti Ltd. The management decides not to disclose this fact in the financial statement. Satish, an employee is not in favour of this decision and tries to convince the management to change their decision. What values do you think are lacking in company’s decision? (1) Suggest the most suitable way for company to deal with this situation. (2) Ans: 1st part- value points mentioned below Honesty Responsibility towards other stakeholders Adherence to principles of accounting. 2nd part- maintain contingency reserve to tackle the situation CASH FLOW STATEMENT Q9. ABC Ltd. acquired a land of Rs. 20 crores & gave it on a very nominal rent to a school for blind children. How will you record it in cash flow statement? (1) Mention the social values which are reflected in this decision of ABC Ltd. (2) Ans: 1st part- rent will be shown in operating activities under extra ordinary item and in investing activities as land acquired 2nd part-value points mentioned below Concern, Compassion Social responsibility Sensitivity towards differently abled. Q10. Mr. X, purchase manager of a company was entrusted with the responsibility of purchasing machinery. The machinery was worth Rs. 1 crore in the market .However X purchased it from his brother in law in lieu of shares in the company worth Rs.1.5 crore as purchase consideration. Under which activity (in cash flow statement) will you classify the transactions stated in the above case? (1)

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State the values that are being ignored by the company as indicated in the above case. (2] Ans: 1st part-Under investing activity as purchase of machinery Rs.50,000 2nd part-value points mentioned below Transparency Honesty Responsibility Morality

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STUDY MATERIALS FOR AISSCE-2014 - हिन्दी · PDF file · 2014-01-16(b) Next Rs 1,00,000 in the ratio of 4:3:1. ... was Rs 30,000 which have been duly distributed among