Sunday, March 01, 2015

AHSEC - CLASS 12: ACCOUNTANCY MOST IMPORTANT QUESTIONS FOR MAR' 2017 EXAM

AHSEC – CLASS 12: ACCOUNTANCY QUESTION BANK
Expected Marks – (1+2+5)
ACCOUNTING FOR NOT FOR PROFIT ORGANISATION
LONG ANSWER TYPE QUESTIONS
1.       Briefly explain with example the Trading concerns having profit motive and Non Trading concerns having service motive. Also distinguish between them.
2.       Mention five features of a Non Trading Organization.            
3.       What is receipts and payments account and Income and expenditure account?
4.       Mention five features of Receipts and Payments Account and Income and Expenditure account.
5.       Give five points of distinction between a Receipts and Payments Account and an Income and Expenditure Account.
6.       How following items are treated at the time of preparing Income and Expenditure Account - Sale of old fixed assets, Legacy, Sale of sports materials, Sale of old news papers, Entrance Fees, endowment fund.
7.       Write objectives and limitations of preparation of Receipts and Payments Account.
8.       Define Deferred revenue expenditure. Give two special features of Deferred revenue expenditure.            
9.       What is capital fund?
PRACTICAL PROBLEMS

1. From the following information ascertain the amount of subscription to be credited to the Income and Expenditure Account for the year 2010.
(i) Subscription received during the year Rs. 11,750 (including Rs. 1,000 for 2009 and Rs. 500 for 2011)
(ii) Subscription received in 2009 for 2010 Rs. 700.
(iii) Subscription outstanding on 31st Dec, 2010 Rs. 900.
2. In 2008 the amount of subscription received was Rs. 20,000. This includes Rs. 500 for 2007 and Rs. 800 for 2009. On 31st December, 2008, subscription due but not received was Rs.        1,000. Ascertain the amount of subscription that should be credited to the income and Expenditure account prepared for the year ended 31st December, 2008.      
3. Calculate from the following information the amount to be posted to Income and Expenditure Account for the year ending 31.12.98 under the head stationery expenses.
Stock of stationery (1.1.98) Rs. 300
Stock of stationery (31.12.98) Rs. 50
Creditors for stationery outstanding Rs. 200
Amount paid for stationery during the year 1998 Rs. 1080.
4. From the following information ascertain the amount of subscription relating to the year 2000 for a club.
(i) Subscription relating to the year 2000 received in 1999 – Rs. 200.
(ii) Subscription relating to the year 1999 received in 2000 Rs. 500.
(iii) Subscription relating to the year 2001 received in 2000 – Rs. 400.
(iv) Total subscription received in the year 2000 was – Rs. 8,000.               
5. From the following ascertain the subscription Income of a club for the year ended 31.12.2004.
(i) Subscription received during the year 2004 Rs. 20,000.
(ii) Outstanding subscription on 1.1.2004 Rs. 2,000.
(iii) Subscription for 2004 received in 2003 Rs. 1,000.        
6. Tournament fund appears in the books Rs. 15,000 and expenses on tournament during the year were Rs. 18000. How will you show this in format while preparing financial statement of a not-for-profit organisation?
7. As per Receipt and Payments account for the year ended on March 31, 2008, the subscription received were Rs. 2,50,000. Addition information given is as follows:
(i) Subscriptions outstanding on 01-04-2007 Rs. 50,000.
(ii) Subscription outstanding on 31-03-2008 Rs. 35,000.
(iii)Subscription Received in advance as on 31-03-2008 Rs. 30000.
Ascertain the amount of income from subscription for the year 2007-08.
8. From the following extracts of Receipts and Payments Account and the additional information given below, compute the amount of income from subscriptions and show us how they would appear in the Income and Expenditure Account for the year ending March 31, 2007and the Balance sheet on that date:
Receipts and Payments A/C
For the year ending March 31, 2007
Receipts
Rs.
Payments
Rs.
Subscription :-
2005-06 =   7000
2006-07 = 30000
2007-08 =  5000



42000


Additional information:-
a)      Subscription outstanding on March 31, 2006 Rs. 8500.
b)      Total subscriptions outstanding on March 31, 2007 Rs. 18,500.
c)       Subscriptions received in advance as on March 31, 2006 Rs. 4000.
9. From the following particulars of a club, calculate the amount of salaries to be shown in Income and expenditure account for the year ended 31 March, 2008:
a)      Total salaries paid during the year 2007-08  Rs. 87,000
b)      Outstanding salaries on 01-04-2007 Rs. 17,000
c)       Prepaid salaries on 01-04-2007 Rs. 19,000
d)      Outstanding salaries on 31-03-200 Rs. 32,000
e)      Prepaid salaries on 31-03-2008  Rs 20,000
10. Calculate the amount to be debited to Income and Expenditure account under the heading sports items for the year 2006-07 in respect of the Osmosis club:
a)      Stock of sports items on 01-04-2006  Rs. 44,700
b)      Stock of sports items on 31-03-2007  Rs. 24,500
c)       Paid for sports items during the year Rs. 97,900
d)      Creditors for supplies of sports items 31-03-2007 Rs. 26,500.
11. Show the following information in the Balance Sheet of the Cosmos club as on 31st March 2007:-
Particulars
Dr (Rs)
Cr (Rs)
Tournament Fund
-
1,50,000
Tournament Fund Investment
1,50,000
-
Income From Tournament Fund Investment

18,000
Tournament Expenses
12,000
-
Additional Information: Interest accrued on Tournament Fund Investment Rs. 6000.
12. Calculate the amount medicines to be debited in the Income and Expenditure Account of a Hospital on the basis of the following information:-
 
01-04-2006 Rs.
31-03-2007 Rs.
Stock of Medicines
90,000
1,24,000
Creditors for Medicines
2,40,000
2,04,000
Amount paid for medicines during the year was Rs. 6,79,000.
13. Given below is the Receipts and Payments Account of New Star Sporting Club for the year ended March, 31, 1996.
Receipt
Rs.
Payments
Rs.
Balance b/d
Cash in Hand
Entrance Fees
Subscriptions
    1994-95
    1995-96
    1996-97
Interest on Investments
Hire of Lecture Hall

300
400

1,000
9,000
1,400
400
2,400
By Salaries
Electric charges
Rent
Printing & Stationery
Furniture purchased  (on 1.10.95)
Investment @ 12% p.a. purchased
  (on 1st July, 1995)
Sundry expenses
Balance c/d
Cash at Bank
4,000
300
800
500
4,000
6,000

1,000
200
1,800

18,600

18,600
Prepare an Income and Expenditure Account for the year ended 31st March, 1996 after taking into consideration the following additional information.
(i) On 31st March, 1996 salary outstanding was Rs. 800 and subscriptions accrued were Rs. 600.
(ii) Depreciate furniture @ 10% per annum.
(iii) On 1st April, 1995, the club possessed furniture value Rs. 6,000 and Rs. 400 on account of salary was outstanding.
14. Novodoi Club of Doomdooma had a cash and balance of Rs. 740 and Rs. 16,300 respectively on 1.4.98. From the following details prepare its Receipt and Payments Account for the year               ending 31st March, 1999. [H.S.’ 2000]
Entrance fees received
Donation received
Donation received for new club building
Salaries paid to staff (including Rs. 4,000 of 1997-98)
Furniture purchases
Repairs to building
Rent received from auditorium
Honorarium to coaches
Wages paid to laborers’
Receipt from sale of old newspaper
Expenses for tournament paid
Subscription received from members:
    1997-98
    1998-99
    1999-2000
Life membership fee received
Balance at Bank as on 31.3.99.

10,000
20,000
80,000
14,400
20,000
1,900
2,400
3,400
6,240
1,050
8,300

4,000
24,000
6,800
2,000
1,10,000


15. Following is the Receipts and Payments A/c  of Youngmen’s Library for the year ended 31st Dec. 2000. [H.S.’ 01]
Receipts and Payments Account
Receipts
Rs.
Payments
Rs.
1.1.2000 to
Balance b/d
To cash in Hand
To Admission fees
To subscriptions
To Lecture Hall hire charges
To Miscellaneous Receipts
To Interest on Investments
To life subscriptions
To sale to furniture


4,400
3,500
19,500
2,500
350
600
2,000
100
By Salaries & Wages
By rent
By Investments
By postage & stationery
By Electric Charges
By books purchased
By outstanding expenses
By balance c/d
Cash in hand
6,800
8,250
3,500
1,250
750
6,000
700

5,700

32,950

32,950
Additional information:
Outstanding subscription Rs. 1,000
60% of admission fees and the whole of life subscriptions are to be capitalised.
Depreciation on books is Rs. 600.
Prepare an Income and Expenditure Account of the Library for the year ended 31.12.2000.
16. Jorhat Club had a cash and bank balance of Rs. 950 and Rs. 1,800 respectively on 1.4.2000. From the following details, prepare it receipts and payments account for the year ending 31st March, 2001.    [H.S.’ 02]
Subscription received during the year from members.
1999 – 2000                                                                                         Rs. 3,000
2000 – 2001                                                                                         Rs. 25,000
2001 – 2002                                                                                         Rs. 7,000
Entrances fees                                                                                  Rs. 8,000
Donation received                                                                           Rs. 15,000
Life Membership fees                                                                   Rs. 2,000
Rent received From Auditorium                                                                Rs. 1,600
Salaries to staff                                                                                 Rs. 13,200
Outstanding salary                                                                          Rs. 6,800
Repairs to building                                                                           Rs. 950
Sale of old newspaper                                                                   Rs. 685
Furniture purchased                                                                       Rs. 21,520
Balance at Bank on 31.3.2001                                                      Rs. 45,000
17. From the following Receipts and Payments A/c for the year ended 31st December 2002 and other details of Sankardev Club prepare an Income and Expenditure Account for the year 31st          December 2002. [H.S.’ 03]
Receipts
Rs.
Payments
Rs.
Cash in hand on 1.1.02
Subscription :
         2001
         2002
         2003
Sales of news papers
Life Membership Fees
Donation
Donation for building
Interest
Maintenance Grant
Sale of Furniture
12,000

900
20,000
2,000
100
5,000
6,000
8,000
200
2,000
1,000
Salaries
Honorarium
Travelling Expenses
Sports Expenses
Investment
Construction of Building
Rent
Scholarship
Cash in hand on 31.12.2002
14,000
3,000
2,000
5,000
10,000
7,000
2,000
1,000
13,200

57,200

57,200
Additional Information:
(i)      Outstanding subscription Rs. 2,500
(ii)    Outstanding salaries Rs. 1,000
(iii)   Subscription for 2002 received in 2001.
18. From the following Receipts and Payments Account for the year ended 31st Dec, 2004 and other details of Sunrise Club, prepare an Income Expenditure Account for the year that ended 31st Dec, 2004.               [H.S.’ 05]
Receipts and Payments A/c
Receipts
Rs.
Payments
Rs.
Cash in hand on 1.1.04
Subscription received
Entrance Fees
Donation received
Donation for Club house
Life membership fees
Maintenance Grant
Sale of Furniture
10,000
20,000
1,000
8,000
7,000
5,000
6,000
1,000
Salaries
Rent & Taxes
Electric charges
Sports goods purchased
Maintenance of Club house
Construction of Club house
Payment of outstanding expenses
Annual dinner
Cash in hand on 31.12.2004
12,000
6,000
3,000
15,000
2,000
12,000
500
5,000
2,500

58,000

58,000
Additional information
(i) Subscriptions received include Rs. 500 for 2003 and Rs. 200 for 2005 and subscription for 2004 received in 2003 was Rs. 200.
(ii) 50% of Entrance Fees and total life membership fees are to be capitalised.
(iii) Depreciation on sport goods is Rs. 3000.
19. Star Cricket Club has a cash balance of Rs. 500 a bank balance of Rs. 1000 on 1.4.2004. From the following details, prepare its Receipts and Payments Account for the year ended 31.3.2005.                           [H.S.’ 06]                                                                                                                                                 Rs.
Subscription received for the year                                                           16,000
Subscription outstanding on 31.3.05                                                        2,000
Subscription for 2003 – 04 received during the year                          1,000
Life membership fees received                                                                 5,000
Donation for the club house received                                                     10,000
Rent paid for the year                                                                                    6,000
Advance Rent paid                                                                                          600
Sale of furniture (Book value Rs. 600)                                                     500
Honorarium to coach                                                                                      5,000
Sports Expenses                                                                                               8,000
Construction of club house                                                                          9,000
Salary                                                                                                                    6,000
Maintenance Grant                                                                                        1,000
Depreciation                                                                                                      1,000
Salary outstanding on 31.3.2005                                                                500
Cash in hand on 31.3.2005                                                                            1,400
20. From the following Receipts and Payments A/c for the year ended 31st March, 2006 and other details of Evergreen Club, prepare an Income and Expenditure A/c for the year ended 31st March, 2006.    [H.S.’ 07]
                Receipts and Payments A/c
Receipts
Rs.
Payments
Rs.
Cash in hand on 1.4.05
Cash at bank on 1.4.05
Entrance Fees
Subscriptions :
    2004-05
    2005-06
    2006-07
Interest on investments
Hire of Lecture Hall
Maintenance Grant
600
6,000
2,000

1,000
9,000
1,500
800
3,000
5,000
Salaries
Electric charges
Rent
Printing & Stationery
Furniture (Purchased on 1.10.05)
Investment @ 12%  (on 1.7.05)
Sundry Expenses
Cash in hand on 31.3.06
Cash at bank on 31.3.06
5,000
600
1,200
1,000
4,000
10,000
1,000
500
5,600

28,900

28,900
Additional information :
(i)      On 31st March, 2006 Rent and Salary outstanding were Rs. 800 and Rs. 1,200 respectively and subscriptions accrued were Rs. 1,000.
(ii)    Furniture is to be depreciated @ 10% p.a.
(iii)   On 1st April, 2005 the Club possessed furniture valued Rs. 6,000 and outstanding salary was Rs. 500.
(iv)  50% of the Entrance fees is to be capitalised.
21. Young Star Club had a Cash and Bank Balance of Rs. 950 and Rs. 18,000 respectively on 1.4.2006. From the following details, prepare its Receipts and Payments A/c for the year ended 31st March, 2007.                        [H.S.’ 08]
Subscriptions received during the year                 
2005-06                                                                                                                3,000
2006-07                                                                                                                25,000
2007-08                                                                                                                7,000
Subscriptions outstanding on 31.3.2007                                                                 5,000
Entrance fees received                                                                                                 8,000
Donation received                                                                                                           15,000
Life Membership fees received                                                                                 2,000
Rent received from Auditorium                                                                                 1,600
Salaries to staff                                                                                                                 13,200
Outstanding salaries on 31.3.07                                                                                 6,800
Depreciation                                                                                                                      2,000
Capital Grant                                                                                                                      5,000
Repairs to Building                                                                                                           950
Sale of old Newspaper                                                                                                  685
Furniture Purchased                                                                                                       21,250
Balance at Bank on 31.3.07                                                                                           45,000
22. From the following Receipts and Payments A/c for the year ended 31st Dec, 2008 and other details of Tezpur Club, prepare an Income and Expenditure A/c for the year ended 31st Dec, 2008.                          [H.S.’ 09]
Receipts
Rs.
Payments
Rs.
Cash in hand 1.1.08
Subscription received
Entrance Fees
Donation received
Donation for club house
Life membership fees
Maintenance Grant
Capital Grant
Sale of furniture

10,000
20,000
10,000
18,000
17,000
5,000
6,000
7,000
1,000
Salaries
Rent & Taxes
Electric charges
Sports Goods purchased
Annual dinner
Construction of club house
Sundry expenses
Payment of
outstanding expenses
Cash in hand on 31.12.08
12,000
6,000
3,000
25,000
5,000
36,000
2,000

500
4,500

94,000

94,000
Additional information :
(i) Subscriptions received include Rs. 5,000 for 2007 and Rs. 2,000 for 2009. Subscription for 2008 received in 2007 was Rs. 8,000.
(ii) Total of Entrance fees and Life membership fees are to be capitalised.
(iii) Depreciation of sports goods is Rs. 2,500.
(iv) Book value of Furniture sold on the date of sale was Rs. 1,500.
23. From the following Receipts and Payments A/c and information given below. Prepare Income and Expenditure A/c of Maharana Club for the year ending 31st Dec, 2006.
Receipts
Amount
Payment
Amount
To balance b/d
To Entrance fees
To Subscription :
    2005
    2006
    2007
To Lockers rent
To Special subscription for Governors Party
1,900
2,650

600
50,800
900
2,500
12,350
By Rent
By Printing & Stationery
By Wages
By Table Tennis Board
By Electric Bill
By Interest
By balance c/d
16,600
9,200
16,900
12,500
2,400
4,600
9,500

71,700

71,700
Locker rent Rs. 180 relates to 2005 and Rs. 270 is outstanding. Rent Rs. 3,900 has been paid for 2005 and Rs. 3,900 is outstanding. Printing & Stationery Rs. 936 relates to 2005 and Rs. 1,092 is yet to be paid. Subscription unpaid for 2006 Rs. 2,604, special subscription for Governor’s party is outstanding Rs. 1,650. Sport materials of the value of Rs. 48,000 were owned by the Club on 1st January, 2006. This was valued at Rs. 40,500 on 31st Dec, 2006. [H.S.’ 10]
24. Tangla Tea Managers club had a cash and bank balance of Rs. 6,200 and Rs. 10,500 respectively on 1st April, 2009. From the following information, prepare a Receipt and Payment A/c for the year ended 31st March, 2010. [H.S.’11]
Entrance fees received                                                                                 4,000
Salaries paid                                                                                       7,600
Donations                                                                                           5,000
Subscription received                                                                    5,000
    2008-2009                                                                                        2,100
    2009-2010                                                                                        24,500
    2010-2011                                                                                        3,000
Outstanding subscription for 2009-2010                                 4,200
Sports materials purchased                                                         18,000
Sundry expenses                                                                             1,500
Life membership fees                                                                    10,000
Annual sports day expenses                                                       9,600
Outstanding salaries for 2009-10                                               800
Repairs                                                                                                                 1,000
Books purchased                                                                             10,000
Donation for building                                                                     15,000
Honorarium                                                                                        6,000
Municipal tax paid                                                                           7,000
Cash in hand 31.3.2010                                                                  4,200
(Entrance fee to be treated as revenue receipt)
Accounting for Partnership Firms – Basics
(Expected Marks: 1+2+5)
Q.1. Define Partnership. What are its features?
Q.2. Mention two rights and Liabilities of Partners.
Q.3. What is Partnership Deed? What are its contents? Mention the rules to be followed in the absence of partnership deed.
Q.4. Distinguish between fixed and fluctuating capital.
Q.5. What is profit and loss appropriation account? Mention the adjustment entries for p/l appropriation account.
Q.6. What do you mean by guarantee of profit, current account of partners, JLP and Hidden goodwill? 2Marks each
Q.7. What is a Joint Venture? State four points of similarities and distinction between Joint Venture and a partnership.
Q.8. A, B and C were partners in a firm having capitals of Rs. 60,000, Rs. 60,000 and Rs. 80,000 respectively. Their current account balances were A- Rs. 10,000, B- Rs. 5000 and C- Rs. 2000 (Dr.). According to the partnership deed the partners were entitled to an interest on capital @ 5% p.a. C being the working partner was also entitled to a salary of Rs. 6,000 p. a. The profits were to be divided as follows:
            (i) The first Rs. 20,000 in proportion to their capitals.
            (ii) Next Rs. 30,000 in the ratio of 5:3:2.
            (iii) Remaining profits to be shared equally.
During the year the firm made a profit of Rs. 1,56,000 before charging any of the above items. Prepare the profit and loss appropriate on A/C.
Q.9. A and B are partners sharing profits in proportion of 3:2 with capitals of Rs. 40,000 and Rs. 30,000 respectively. Interest on capital is agreed at 5 % p.a. B is to be allowed an annual salary of Rs. 3000 which has not been withdrawn. During 2001 the profits for the year prior to calculation of interest on capital but after charging B’s salary amounted to Rs. 12,000. A provision of 5% of this amount is to be made in respect of commission to the manager. Prepare profit and loss appropriation account showing the allocation of profits.
Q.10. Arun and Barun are partners in a firm. Arun is entitled to a commission of 10% on net profit after charging interest on capitals and such commission. Net profit of the firm is Rs. 27,000. Interest on Arun’s capital and Barun’s capital are Rs. 3,000 and Rs. 2,000 respectively. Calculate Arun’s commission.
Q.11. Arup and Birup are partners in a partnership firm sharing profit and losses in the ratio of 3:2. On 1st January, 2007 their capitals were Rs. 30,000 and Rs. 25,000 respectively. The partnership deed provided that:
(i) Partners shall be entitled to interest on capital 6% p.a.
(ii) Interest on drawings shall be charged at 6% p.a. During the year ended 31st December, 2007 the firm made a profit of Rs. 15, 500 before adjustment of interest on capital and drawings. The partners withdrew during the year Rs. 4,000 each at the end of every quarter commencing for 31st March, 2007. You are to prepare the Profit & Loss Appropriation Account of the firm for the year ended 31st December, 2007.
Q.12. Comprehensive profit and loss appropriation account: Ravi and Mohan were partner in a firm sharing profits in the ratio of 7:5. Their respective fixed capitals were Ravi Rs. 10, 00,000 and Mohan Rs. 7, 00,000. Ravi also provided a loan of Rs. 1, 00,000 to the firm. The partnership deed provided for the following:-
(i)      Interest on capital @ 12% p.a.
(ii)    Ravi’s salary Rs. 6000 per month and Mohan’s salary Rs. 60000 per year.
(iii)   Drawings made by the partners: Ravi – Rs. 5000 at the end of each month. Mohan – Rs. 5000 in the beginning of each quarter.
(iv)  Commission to Ravi @ 10% on net profit after charging interest on capital and salary but before charging such commission.
(v)    Commission to Mohan @ 10% on net profit after charging interest on capital and salary and such commission.
(vi)  Interest charged on drawings @ 10% p.a.
(vii) Ravi guaranteed Mohan that his share of profit will not be less Rs. 1, 00,000 in any year.
The profit for the year ended 31-03-2007 was Rs. 5, 04,000. Pass an adjustment Entry, Prepare profit and loss appropriation account and partner’s capital account.
Q.13. Arup and Birup are partners in a partnership firm sharing profit and losses in the ratio of 3:2. On 1st January, 2007 their capitals were Rs. 30,000 and Rs. 25,000 respectively. The partnership deed provided that:
(i) Partners shall be entitled to interest on capital 6% p.a.
(ii) Interest on drawings shall be charged at 6% p.a. During the year ended 31st December, 2007 the firm made a profit of Rs. 15, 500 before adjustment of interest on capital and drawings. The partners withdrew during the year Rs. 4,000 each at the end of every quarter commencing for 31st March, 2007. Arup personally guarantees Birup that his share of profit will not be less than Rs. 2,500 in any year. You are to prepare the Profit & Loss Appropriation Account of the firm for the year ended 31st December, 2007.
Q.14. A and B are partners in a firm. Their capital as on Jan 01, 2007 was Rs. 60,000 and Rs. 50,000. A introduced additional capital of Rs. 20000 on Oct 01 2007 and B introduces Rs. 5000 on 1st October 2007 and withdraw Rs. 5000 on 1st Jan 2008. Calculate interest on capital @ 9% p.a. and Capital ratio.
Q.15. Alka, Barkha and Charu are partners in a firm having no partnership agreement. Alka, Barkha and Charu contributed Rs. 20,000, Rs. 30,000 and Rs. 1, 00,000 respectively. Alka and Barkha desire that the profit should be divided in the ratio of capital contribution. Charu does not agree to this. How will you settle the dispute?
Q.16. A and B are partners in a firm without a partnership deed. A is an active partner and claims a salary of Rs. 18,000 per month. State with reason whether the claim is valid or not.
Q.17. Chandra and Suman are partners in a firm without a partnership deed. Chandra’s capital is Rs. 10,000 and Suman’s capital is Rs. 14,000. Chander has advanced a loan of Rs. 5000 and claim interest @ 12% p.a. State whether his claim is valid or not.
Q.18. R, S, and T entered into a partnership of manufacturing and distributing educational CD’s on April 01, 2006. R looked after the business development, S content development and T financed the project. At the end of the year (31-03-2007) T wanted an interest of 12% on the capital employed by him. The other partners were not inclined to this. How would you resolve this within the ambit of the Indian Partnership Act, 1932?
Q.19. A, B and C are partners in a firm.
A withdrew Rs. 1000 in the beginning of each month of the year.
B withdrew Rs. 1000 at the end of each month of the year.
B withdrew Rs. 1000 in the middle of each month of the year.
B withdrew Rs. 1000 in the middle of each month for 6 months only.
A withdrew Rs. 1000 in the beginning of each month for 6 months only.
B withdrew Rs. 1000 at the end of each month for 6 months only.
Calculate interest on drawing @ 6% p.a. for each case.
Q.20. X, Y, and Z are partners sharing profits and losses in the ratio of 3:2:1. After the final accounts have been prepared it was discovered that interest on drawings @ 5 % had not been taken into consideration. The drawings of the partner were X Rs. 15000, Y Rs. 12,600, Z Rs. 12,000. Give the necessary adjusting Journal entry.
Q.21. Ravi and Mohan were partner in a firm sharing profits in the ratio of 7:5. Their respective fixed capitals were Ravi Rs. 10,00,000 and Mohan Rs. 7,00,000. The partnership deed provided for the following:
(i) Interest on capital @ 12% p.a.
(ii) Ravi’s salary Rs. 6000 per month and Mohan’s salary Rs. 60000 per year.
The profit for the year ended 31-03-2007 was Rs. 5,04,000 which was distributed equally without providing for the above. Pass an adjustment Entry.
Valuation of Goodwill
(Expected Marks: 3)
Q.1. What is Goodwill? Mention the situation when valuation of goodwill become necessary.
Q.2. What is Hidden goodwill? Mention the factors affecting goodwill of a Partnership Firms.
Q.3. Explain three methods for valuation of goodwill.
Q.4. What are various types of goodwill?
Q.5. A business has earned average profit of Rs. 60,000 during the last few years. The assets of the business are Rs. 5, 40,000 and its external liabilities are Rs. 80,000. Cash included in assets Rs. 40,000. External liabilities include Rs.50, 000 due to creditors. The normal rate of return is 10%. Calculate the value of goodwill on the basis of:
Ø  Capitalisation of super profits.
Ø  Capitalisation of Average profits
Q.6. The capital of a firm of Arpit and Prajwal is Rs. 10, 00,000. The market rate of return is 15% and the goodwill of the firm has been valued Rs. 1, 80,000 at two years purchase of super profits. Find the average profits of the firm.
Q.7. The profits for last 5 years of a firm are Rs. 20,000; Rs.50, 000; Rs. 60,000; Rs. (50,000) and Rs. 70,000. Value of assets of the firm is Rs. 1, 00,000 and value of liabilities of the firm is Rs. 45,000. Expected profit from the similar business is @10%. Calculate the amount of goodwill on the basis of:
Ø  2 year’s purchase of average profit of last 5 years.
Ø  3 years purchase of super profit of last 4 years.
Ø  Capitalisation of super profit of last 5 years.
Q.8. The profits for last 5 years of a firm are Rs. 20,000; Rs.50, 000; Rs. 60,000; Rs. (50,000) and Rs. 70,000. Weight assigned to the years are 1,2,3,4 and 5 respectively. Value of assets of the firm is Rs. 1, 00,000 and value of liabilities of the firm is Rs. 45,000. Expected profit from the similar business is @10%. Calculate the amount of goodwill on the basis of:
Ø  2 year’s purchase of weighted average profit of last 5 years.
Ø  3 years purchase of weighted super profit of last 4 years.
Ø  Capitalisation of weighted super profit of last 5 years.
Final Accounts of Partnership Firm
Expected Marks - 8
[A.H.S.E.C – 1996]. Mili and Juli are partners in a firm sharing profits and losses in the ratio of 3:1. The following is their Trial Balance as at 31st March 2006.
Trial Balance as on 31st March, 2006
Debit
Rs.
Credit
Rs.
Plant and Machinery
Cash at Bank
Wages
Stock on 1.4.2005
Salaries
Purchases
Bills Receivable
Furniture
Electric Installations
Discount
Return Inward
Carriage Inward
Carriage Outward
Sundry Debtors
Freight
Cash in hand
Drawings :
     Mili
     Juli
15,000
13,500
3,450
10,150
2,500
43,300
8,400
5,000
12,500
200
350
315
280
14,670
335
200

6,500
3,500
Reserve
Sundry Creditors
Sales
Return Outwards
Discount Received
Bills Payable
Commission
Capital :
     Mili
     Juli
8,000
10,250
70,000
500
2,000
3,750
10,500

15,000
10,000




1,30,000

1,30,000
You are required to prepare a Trading and Profit and Loss Account and Profit and Loss Appropriation Account for the year ended 31st March, 2006 and Balance Sheet as at that date taking into account the following adjustments:
a)      Closing Stock Rs. 15,000.
b)      Outstanding Liabilities: Salaries Rs. 750. Wages Rs. 500.
c)       Depreciate Plant and Machinery @ 20% p.a. Furniture @10% p.a.
d)      Sundry Debtors include Rs. 670 bad, which is to be written off and @ 5% provision is to be made for Doubtful Debts.
e)      Mili is entitled to a salary of Rs. 300 per month and Juli is to receive a commission of 10% on the net profit.
f)       The partners are allowed 5% per annum interest on their capital.
[A.H.S.E.C. – 1997]. Illustration. The following balances have been extracted from the books of M/s Roy & Das, a partnership firm as at 31st March, 2006.
Trial Balance
Debit
Rs.
Credit
Rs.
Purchases
Return Inwards
Carriage Inwards
Carriage Outwards
Rent
Stock on 1.4.2005
Debtors
Salaries
Wages
Printing & Stationery
Bills Receivable
Goodwill
Octroi Duty
Plant & Machinery
Furniture
Advertisement
Bad Debts
Investments
Royalties
Cash at Bank
Cash in hand
Drawings :
     Roy
     Das
37,600
500
250
350
1,250
7,500
20,000
5,750
3,000
150
1,500
4,000
1,000
25,000
5,000
250
250
10,000
1,000
14,650
50

3,000
2,050
Capital :
     Roy
     Das
Creditors
Sales
Bills Payable
Reserve
Return Outwards
Interest
Provision for Doubtful Debts.


10,000
20,000
12,500
87,500
2,000
8,000
2,600
300
1,100

1,44,000

1,44,000
You are required to prepare a Trading and Profit and Loss Account for the year ended 31st March, 2006 and a Balance Sheet as at that date after taking into consideration the following information:
a)      Closing Stock is valued at Rs. 17,500;
b)      Plant and Machinery is to be depreciated at 10% and Furniture at 15%;
c)       A further bad debt of Rs. 250 is to be written off and provision for doubtful debts is to be maintained at 4% on Sundry Debtors;
d)      Interest due but not received within the accounting year Rs. 250;
e)      Partners are entitled to 5% p.a. interest on Capital and salary @ Rs. 2,000 p.a. each.
[A.H.S.E.C. – 1998]. Jack and Jill were partners in a firm sharing profits and losses in the ratio of 73:73 respectively. The Trial Balance of the firm as on 31st March, 2006 was follows:
Trial Balance
Debit
Rs.
Credit
Rs.
Stock on 1st April 2005
Plant & Machinery
Furniture
Building
Debtors
Purchase
Sales Return
Wages
Carriage Inward
Carriage Outward
Manufacturing Expenses
Salaries
Discount
Bad Debts
Back Charge
Cash in hand
Cash at Bank
Insurance
Drawings :
     Jack              8,000
     Jill                 6,000

18,000
34,000
3,000
30,000
22,000
60,460
172
12,000
800
840
10,000
5,600
300
300
252
60
280
600


14,000
Capital Accounts :
     Jack
     Jill
Purchase Return
Sales
Discount Received
Sundry Creditors
Bank Overdraft
Provision for Doubtful Debts

25,000
25,000
1,060
1,35,000
1,404
16,000
8,000
1,200

2,12,664

2,12,664
Prepare a Trading and Profit and Loss Account for the year ended 31st March 2006, and a Balance Sheet as at that date after taking into consideration the following:
a)      Stock on 31st March, 2006 valued at Rs. 15,100.
b)      Outstanding expenses: Salaries Rs. 200; Wages Rs. 100; Interest on Bank Overdrafts Rs. 200.
c)       Plant and Machinery including a Machine worth Rs. 10,000 purchases on 1st Jan, 2006.
d)      Provide depreciation on Plant and machinery and Furniture @ 10% p.a. and on Building at 2.5% and a provision for doubtful debts @10% on debtors.
e)      Prepaid expenses: Salary Rs. 100; Insurance Rs. 200;
f)       Interest on Capital is to be allowed @ 10% p.a.
[A.H.S.E.C – 1999]. Arup and Prabhat are partners in a firm sharing profits and losses in the ratio of 53:53 respectively. The Trial Balance of the firm as on 31st March 2006 was as follows:
Trial Balance
Debit
Rs.
Credit
Rs.
Plant & machinery
Furniture
Building
Debtors
Carriage Outward
Salaries
Bad Debts
Cash in hand
Cash at Bank
Insurance
Drawings
     Prabhat      6,000
     Arup           8,000
Closing Stock

34,000
3,000
30,000
22,000
840
5,600
300
60
280
600


14,000
15,000
Capital Accounts :
     Arup                 25,000
     Prabhat            25,000
Sundry Creditors
Bank Overdrafts
Provision for Doubtful Debts
Wages Outstanding
Trading Account (Gross Profit)


50,000
16,000
8,000
1,200
100
50,380

1,25,680

1,25,680
                Prepare Profit and Loss Account and Profit and Loss Appropriation Account for the year ended 31st March, 2006 and Balance Sheet as at that date after taking into consideration the following:
a)      Outstanding Expenses: Salaries Rs. 200; Interest on Bank Overdraft Rs. 150;
b)      Plant and Machinery included a machine worth Rs. 10,000 purchases on 1st Oct, 2005.
c)       Provide depreciation on Plant and Machinery and Furniture at 10% p.a. and on Buildings at 2.5%.
d)      Provision for Doubtful Debts to be maintained at 10% p.a.
e)      Interest on Capital to be allowed at 10% p.a.
f)       Salaries paid include salaries Rs. 1,000 paid to the partner Arup.
[A.H.S.E.C. – 2000]. Abhijit and Surojit are partners in a firm sharing Profit and Loss in the ratio of 3:2 respectively. The Trial Balance of the firm as on 31st March, 2007 was as follows:
Trial Balance
Debit
Rs.
Credit
Rs.
Furniture
Land & Building
Drawings :
       Abhijit
       Surojit
Cash at Bank
Sundry Debtors
Salaries
Insurance
Bad Debts
Closing Stock
6,250
21,000

1,200
800
7,900
10,000
13,250
1,900
100
7,580
Rent Received
Provision for doubtful debts
Capital Accounts :
        Abhijit
        Surojit
Wages outstanding
Trading Account (Gross Profit)
600
800

20,000
13,000
200
35,380

69,980

69,980
Prepare Profit and Loss Account and Profit and Loss Appropriation Account for the year ended 31st March, 2007 and a Balance Sheet as at that date after taking into consideration the following:
a)      Outstanding expenses: Salaries Rs. 350;
b)      Insurance was prepaid to the extent of Rs. 200;
c)       Depreciate Furniture @ 4% p.a.
d)      Provision for doubtful debts to be maintained at 3% of Debtors;
e)      Interest on capital to be allowed @ 5%
f)       Surojit was to receive a salary of Rs. 250 per month.
[A.H.S.E.C. - 2001]. Following is the Trial Balance of Bora Brothers as on 31st March, 2007.
Debit
Rs.
Credit
Rs.
Plant & Machinery
Salaries
Freight on Sales
Building
Goodwill
Furniture
Sundry Debtors
Bad Debts
Cash at Bank
Investment
Cash in hand
Establishment
Stock
Environment Protection Expenses
Drawings :
   Ramen Bora    5,000
   Pradip Bora     3,000
Publicity
35,000
15,850
2,140
54,000
15,000
10,000
48,200
1,400
1,200
10,000
170
13,000
10,000
5,500


8,000
5,000
Capital Account :
  Ramen Bora
  Pradip Bora
Trading Account (Gross Profit)
Creditors
Bank Loan
Sundry Receipts
Commission
Outstanding Wages
Provision for Doubtful Debts.

50,000
30,000
85,700
44,560
21,000
1,000
1,000
200
1,000






2,34,460

2,34,460
Prepare the Profit and Loss Account and the Profit and Loss Appropriation Account of the firm for the year ended 31.3.2000 and Balance Sheet as at that date after taking into consideration of the following:
a)      Outstanding salary Rs. 500;
b)      Prepaid publicity Rs. 500;
c)       Depreciate plant and machinery @ 10% p.a.
d)      Commission received in advance Rs. 200;
e)      Provide for doubtful debts @ 5% on sundry debtors;
f)       Allow interest on partner capitals @ 5% p.a.
[A.H.S.E.C. – 2002]. Saurav and Gaurav are partners in a firm sharing Profit and Loss equally. The Trial Balance of the firm as on 31st March, 2001 was as follows:
Trial Balance
Debit
Rs.
Credit
Rs.
Sundry Debtors
Furniture
Land & Building
Salaries
Insurance
Bad debts
Cash at Bank
Discount
Bank charges
Carriage Outward
Drawings :
     Saurav
     Gaurav
10,000
16,000
21,000
13,200
2,000
200
15,000
580
420
570

4,000
2,500
Trading Account
    (Gross Profit)
Rent received
Provision for bad debts
Outstanding wages
Sundry Creditors
Bills Payable
Commission
Sundry receipts
Capital :
     Saurav
     Gaurav

35,620
600
800
200
10,000
2,000
250
1,000

20,000
15,000

85,470

85,470
Prepare Profit and Loss Account and Profit and Loss Appropriation Account for the year ended 31st March, 2001 and a Balance Sheet as at that date after taking into consideration the followings:
a)      Outstanding Salary Rs. 300;
b)      Prepaid Insurance Rs. 200;
c)       Depreciate furniture 10%, Land & Building 10%;
d)      Provision for Doubtful Debts to be maintained at 10% of Debtors.
e)      Saurav was to receive a Salary of Rs. 300 per month.
[A.H.S.E.C. - 2003]. Following is the Trial Balance of Jadu and Madhu as on 31st March, 2002:
Debit
Rs.
Credit
Rs.
Machinery
Furniture
Copy Right
Building
Salaries
Taxes
General Expenses
Bills Receivable
Debtors
Charity
Investment
Bank Balance
Cash in hand
Drawings :
                 Jadu
                 Madhu
Closing Stock
3,00,000
8,000
10,000
1,35,000
16,000
800
1,000
1,800
42,800
1,400
30,000
15,000
600

12,000
8,000
20,000
Capital :
             Jadu
             Madhu
Reserve Fund
Outstanding Wages
Bad Debts Provision
Bills Payable
Sundry Creditors
Trading Account (Gross Profit)
Profit from Joint Venture
Profit from Branch

2,40,000
1,60,000
19,000
400
1,400
42,400
13,200
1,24,600
1,000
400


6,02,400

6,02,400
Prepare Profit and Loss Account and Profit and Loss Appropriation Account for the year ended 31st March, 2002 and also a Balance Sheet as on that date after taking into consideration the following adjustments:
a)      Partners are entitled to interest of Capital at 5% p.a.
b)      Transfer 10% of Net Profit to Reserve Fund.
c)       Bad Debts provision has to be increased to 5% on Debtors.
d)      Interest on Investment accrued Rs. 500.
e)      Depreciate Machinery @10%
[A.H.S.E.C. – 2004]. Kamal and Bimal are partners in a partnership firm sharing profits and losses in the ratio of 2:1 respectively. The Trial Balance of the firm as on 31st March, 2003 was as follows:
Debit
Rs.
Credit
Rs.
Furniture
Land & Buildings
Drawings :
                 Kamal
                 Bimal
Closing Stock
Insurance
Salaries
Sundry Debtors
Cash at Bank
Discount
16,000
20,000

1,500
1,000
8,500
2,000
12,500
10,000
8,200
2,000
Capital :
             Kamal
             Bimal
Trading Account (Gross Profit)
Bad Debts Provision
Creditors
Sundry Receipts

20,000
15,000
40,250
300
4,150
2,000

81,700

81,700
Prepare Profit and Loss Account, Profit and Loss Appropriation Account for the year ended 31st March, 2003 and also a Balance Sheet as on that date after taking into consideration the following adjustments:
a)      Outstanding salary Rs. 500.
b)      Provision for bad debts to be created @ 5% on Sundry Debtors.
c)       The Partners are entitled to interest on capital @ 5% p.a.
d)      Depreciate land & building @ 10% p.a.
[A.H.S.E.C. – 2005]. Amal and Bimal are partners of a firm. The Trial Balance of the firm as on 31st March, 2004 was as follows:
Trial Balance
Debit
Rs.
Credit
Rs.
Plant & Machinery
Goodwill
Sundry Debtors
Stock on 31st March 2004
Salaries
Depreciation On Plant & Machinery
Books and Stationary
Establishment
Cash in Hand
Investment
Drawings :
         Amal         4,000
         Bimal        2,000
50,000
5,000
31,000
20,000
7,000
5,000
1,000
2,000
1,000
10,000


6,000
Capital :
       Amal         40,000
       Bimal        30,000
Sundry Creditors
Commission
Sundry Receipts
Outstanding Wages
Interest on Investment
Trading Account (Gross Profit)
Bank Overdraft


70,000
10,000
3,000
200
600
200

50,000
4,000


1,38,000

1,38,000
Additional Information:
a)      Write off Rs. 1000 as Bad Debt and provide a 5% Reserve on remaining Debtors for Doubtful Debts.
b)      Commission received in advance Rs. 500.
c)       Transfer 10% of Net profit to General Reserve.
d)      Allow interest on Capital @ 5% p.a.
From the above Trial Balance and additional information, prepare a Profit and Loss Account and Profit and Loss Appropriation Account for the tear ended 31st March, 2004 and a Balance Sheet as on that date.
[A.H.S.E.C. – 2006]. Shiva and Dhruba are partners in a firm. The Trial Balance of the firm as on 31st March, 2005 was as follows:
Trial Balance
Debit
Rs.
Credit
Rs.
Machinery
Goodwill
Patent
Sundry Debtors
Cash in hand
Closing Stock on 31.3.05
Investments
Depreciation on Machinery
Establishment
Carriage Outward
Taxes
Telephone Charge
Conveyance
Drawings :
   Shiba              5,000
   Dhruba           4,000
Salaries
Bank Charges
54,000
10,000
20,000
21,000
1,000
25,000
10,000
6,000
10,000
1,000
500
3,600
800


9,000
8,000
100
Capital :
   Shiba           50,000
   Dhruba         40,000
Sundry Creditors
Interest on Investment
Sundry Receipts
Bills payable
Bank Overdraft
Outstanding wages
Trading Account (Gross profit)
Discount


90,000
5,000
400
200
2,000
10,000
500
71,000
900



1,80,000

1,80,000
Prepare a Profit and Loss Account and Profit and Loss Appropriation Account for the year ended 31st March, 2005 and also a Balance Sheet as on that date after taking into consideration the following adjustments:
a)      Write of Rs. 1,000 as Bad Debt and provide a 5% Provision on Sundry Debtors for Doubtful Debts.
b)      Interest on investment Accrued Rs. 600.
c)       Interest on Partner’s Capital is allowed @ 5% p.a.
d)      Create a General Reserve by taking Rs. 5,000 out of Profit.
[A.H.S.E.C. – 2007 – Old course]. Following is the Trial Balance of X and Y Firm as on 31.3.2006.
Debit
Rs.
Credit
Rs.
Furniture
Plant & Machinery
Salaries for 11 months
Telephone
Cash discount on sale
Contingencies
Insurance for 12 months ending on 30.06.2006.
Establishment
10% Investment (purchased on 1.10.2005)
Cash in hand
Cash at Bank
Stock
Drawings :
                 X
                 Y
Loss by Fire
Debtors
5,000
25,000
11,000
300
500
1,000

1,200
2,500

10,000
2,000
14,500
80,000

10,000
8,000
5,000
20,000
Gross profit
Capital :
             X
             Y
Loan from X on 1.1.2006
Reserve
Creditors
Cash discount on purchases
Commission
Bad Debt recovered
Outstanding wages

93,300

25,000
25,000
6,000
14,000
30,000
700
800
200
1,000

1,96,000

1,96,000
Prepare Profit and Loss Account and Profit and Loss Appropriation Account for the year ended 31st March, 2006 and Balance Sheet as at that date after taking into consideration of the following adjustments:
a)      Plant and Machinery includes new purchase of plant and machinery for Rs. 10,000 made on 1.10.2005.
b)      Insurance claim accepted by Insurance Company Rs. 4,000.
c)       Depreciate Plant and Machinery at 10% p.a.
d)      Write off Rs. 1,000 as bad debt and provide a Reserve for Doubtful Debts at 5% on Sundry Debtors.
e)      Interest on capital is allowed at 5% p.a.
[A.H.S.E.C. - 2007]: Dhiraj and Rohit are partners in a firm. The trial balance of the firm as on 31st march 2006 was as follows:
Trial Balance
Debit
Amount
Credit
Amount
Goodwill
Debtors
Trade marks
Plant and machinery
Building
Furniture
10% Investment
Cash in hand
Cash at Bank
Stock on 31 – 3 – 2006
Bills receivable
Salaries
Telephone charges
Printing and stationery
Advertisement
Drawings:
Dhiraj
Rohit
Bad Debts
Interest on Bank loan
4000
20000
30000
25000
30000
5000
10000
1050
14650
17500
1500
5750
1600
150
250

2050
3000
250
3000
Capital:
Dhiraj
Rohit
Creditors
Bills payable
Reserves
Interest on investments
Provision for doubtful debts
Bank loan
Commission received in advance
Trading account (Gross Profit)

40000
20000
12500
2000
11000
300
1100
30000
1000
56850

174750

174750
Prepare a Profit and loss Account, a Profit and loss appropriation Account for the year ended on 31st march 2006 and also a balance sheet as on that date after taking in to account the following adjustments:
a.       Plant and machinery to be depreciated at 10% and furniture at 15%
b.      Interest on investment due but not received within the accounting year Rs. 700.
c.       A further bad debt of Rs. 250 is to be written off and provision for doubtful debts is to be maintained at 4% on sundry debtors.
d.      Each of the partners is entitled to interest on capital @5% per annum and salary @ Rs. 2000 per annum.
[A.H.S.E.C. - 2008]: Sonali and Rupali are partners in a firm sharing profits and losses in the ratio of 3:1. The following is their trial balance as at 31st December 2007.
Trial Balance
Debit
Amount
Credit
Amount
Machinery
Salaries
Carriage outward
Building
Goodwill
Furniture
Debtors
Bad debts
Cash at bank
Investment
Cash in hand
Establishment
Stock as on 31-12-2007
Depreciation on machinery
Environment protection expenses
Publicity
Drawings:
Sonali
Rupali
35000
15850
2140
54000
15000
10000
48200
1400
1200
10000
1170
13000
10000
3500
5500
5000

5000
3000
Capital account:
Sonali
Rupali
Trading account (Gross profit)
Creditors
Bank loan
Discount
Commission
Outstanding wages
Provision for doubtful debts

50000
30000
85700
44560
21000
4500
1000
1200
1000


238960

238960
Additional Information:
a.       Prepaid publicity Rs. 500.
b.      Commission received in advance Rs. 200.
c.       Provide for doubtful debts @ 5% on sundry debtors.
d.      Allow interest on capital @ 5% p.a.
From the above trial balance and additional information, prepare a profit and loss account, a profit and loss appropriation account for the year ended 31st December 2007 and a balance sheet as on that date.
[A.H.S.E.C. - 2009: Rakesh and Mahesh are partners in a firm sharing profits and losses in the ratio of 3: 2 respectively. The Trial Balance of the firm as on 31st March, 2008 was as follows:
Debit
Rs.
Credit
Rs.
Furniture
Land & Building
Cash at Bank
Sundry Debtors
Salaries
Insurance
Bad debts
Closing Stock 
Drawings:
       Rakesh                
       Mahesh
Depreciation on Furniture
6,240
1,21,000
7,900
10,000
13,250
1,900
100
7,580

1,200
800
260
Rent Received
Provision for Doubtful Debts
Capital A/c:
Rakesh
Mahesh
Wages Outstanding
Trading A/c (Gross Profit)
Commission
600
800

70,000
63,000
200
35,380
250


1,70,230

1,70,230
Prepare a Profit & Loss Account and a Profit & Loss Appropriation Account for the year ended 31st March, 2008 and also a Balance Sheet as on that date after taking into consideration the following adjustments:
         i.            Outstanding salary Rs. 350;
       ii.            Provision for doubtful debts to be maintained at 3% of Debtors;
      iii.            Allow interest on capital @ 5% per annum; and
     iv.            Mahesh was to receive salary of Rs. 250 per month.
[A.H.S.E.C. - 2010]. Abhijit and Rabijit are in a partnership firm sharing profits and losses in the ratio of 1:1. The Trial balance of the firm as on 31st December, 2008 was as under: -
Debit
Rs.
Credit
Rs.
Land & Building
Furniture
Sundry Debtors
Salaries
Rent
Bad Debts
Cash at Bank
Commission
Bank Charges
Carriage Outward
Drawings:
       Abhijit                3,500
       Rabijit                2,000
20,000
18,000
12,000
14,100
2,500
400
16,000
600
500
450


5,500
Gross Profit
Discount
Provision for Bad Debts
Outstanding Wages
Sundry Creditors
Bills Payable
Interest on Investment
Capital:
        Abhijit                   25,000
        Rabijit                    16,000
29,600
1,800
1,200
450
12,000
2,500
1,500


41,000

90,050

90,050
Prepare Profit & Loss Account and Profit & Loss Appropriation Account for the year ended 31st December, 2008 and a Balance Sheet as on that date after considering the following adjustments:
         i.            Rent outstanding Rs. 600;
       ii.            Depreciate furniture by 5% and appreciate Land & Building by 10%;
      iii.            Salaries prepaid Rs. 500;
     iv.            Provision for doubtful debts to be maintained at 8% of Debtors and
       v.            Interest on capital @ 5% should be allowed to partners.
[A.H.S.E.C. - 2011]: Kajal and Karina are in partnership in a firm sharing profit in the ratio of 32:24. Their Trial Balance as on 31st December 2010 was as follows:
Trial Balance
Debit                               
Amount
Credit                           Amount (Rs)
Amount
Investment
Sundry Debtors
Advertisement
Salaries
Commission
Bad debt
Stock
Carriage outward
Drawings:-                              
Kajal
Karina
Machinery
25,000
10,700
6,000
17,600
900
1,200
32,000
650

5,000
3000
36,000
Capital :
Kajal
Karina
Reserve fund
Gross profit
Rent received
Sundry creditors
Outstanding rent
Bank overdraft
Loan from Kajal (on 1.7.2010)

40,000
25,000
7,500
41,550
500
12,000
1,000
4,500
6,000

1,38,050

1,38,050
Prepare Profit and Loss account and Profit and Loss Appropriation account for the year ended 31st December 2010 and a Balance Sheet as on that date after taking into consideration the following adjustment:
(i)      Salaries outstanding Rs 400
(ii)    Interest on investment accrued Rs. 300
(iii)   Interest on capital to be allowed @ 5% p.a.
(iv)  Interest on drawings : Kajal Rs. 120, Karina Rs. 80
[A.H.S.E.C. - 2012]. Choudhury and Barua are partners in a firm sharing profit and losses in the ratio of 50:50 respectively. The trial balance of the firm as on 31st march 2011 was as follows:
Trial Balance
Particulars
Amount
Particulars
Amount
Machinery
Furniture
Buildings
Debtors
General expenses
Insurance
Salaries
Bad debts
Cash in hand
Stationery
10% investment
Drawings:
Barua
Choudhury
Closing stock
51000
4500
45000
31500
460
800
8400
450
90
900
15000

9000
12000
21000
Capital account:
Choudhury
Barua
Sundry creditors
Bank overdraft
Provision for doubtful debts
Wages outstanding
Trading account (Gross Profit)

40000
80000
32500
12000
1800
150
74070


200520

200520
Prepare Profit and loss account, Profit and loss Appropriation account for the year ended 31st March, 2011 and a balance sheet as at that date after taking into consideration the following:
a.       Outstanding expenses: Salaries Rs. 300, Interest on Bank overdraft Rs. 225.
b.      Machine worth Rs. 15000 purchased on 1st October, 2010.
c.       Provide depreciation on machinery and furniture @ 10% p.a. and on building @ 2.5% p.a.
d.      Interest on capital to be allowed @ 10% p.a.
e.      Prepaid insurance Rs. 150.
f.        Partners are entitled to a salary of Rs. 1000 p.a. each.
[A.H.S.E.C. - 2013].Shiba and Dhruba are partners in a firm. The trial balance of the firm as on 31.03.2011 was as follows:
Trial Balance
Debit
Amount
Credit
Amount
Machinery
Goodwill
Patents
Sundry debtors
Cash in hand
Closing stock on 31.03.2011
Investments
Depreciation on machinery
Establishments
Carriage outward
Taxes
Telephone charges
Conveyance
Drawings:
Shiba
Dhruba
Salaries
Bank charges
54000
10000
20000
21000
1000
25000
10000
6000
10000
1000
500
3600
800

5000
4000
8000
100
Capital:
Shiba
Dhruba
Sundry creditors
Interest on investment
Sundry receipts
Bank overdraft
Outstanding wages
Trading account (Gross profit)
Discount
Bills payable


50000
40000
5000
400
200
10000
500
71000
900
2000

180000

180000
Prepare a profit and loss account and a profit and loss appropriation account for the year ended on 31.03.2011 and also a balance sheet as on that date after taking into consideration the following adjustments:
a.       Write off Rs. 1000 as bad debts and provide a 5% provision on sundry debtors for doubtful debts.
b.      Interest on investments accrued Rs. 600.
c.       Interest on partner’s capital is allowed @ 5% p.a.
d.      Create a general reserve by taking Rs. 5000 of profits.
[A.H.S.E.C. - 2014] The following is the Trial Balance of X and Y firm as on 31.3.2013:                                      
Trial Balance
Debit
Amount
Credit
Amount
Fixed Assets
Advance Income Tax
Salaries
Taxes
Miscellaneous Expenses
Bills Receivable
Sundry Debtors
Closing Stock
Charity
Investment
Bank Balance
Drawings:
X
Y
453000
200
16000
800
1000
1800
42800
20000
1400
30000
15600

12000
8000
Reserve Fund
Outstanding Wages
Bad Debt Provision
Sundry Creditors
Capital:
X
Y
Profit from Joint Venture
Profit from Branch
Trading Account (Gross Profit)
19000
600
1400
55600

240000
160000
1000
400
124600

602600

602600
Prepare Profit and Loss Account and Profit and Loss Appropriation Account for the year ended 31.3.2013 and a Balance Sheet as on that date after taking into consideration the following adjustments:
a)      The Partners are entitled to Interest on Capital @ 5% and they are charged interest on drawings: X – 300 and Y – 200.
b)      Transfer 10% of the net profit to Reserve Fund.
c)       Provide manager’s commission @5% on net profit before charging such commission.
d)      Bad Debt reserve is to be increased to 5% on debtors.
e)      Interest on investment accrued Rs.500.
[A.H.S.E.C. - 2015]. Preety and Jyoty are partners in a firm sharing profits in the ratio of 3:2. The Trial Balance of the firm as on 31-03-2014 was as follows:
Trial Balance
Particulars
Debit (Rs.)
Particulars
Credit (Rs.)
Debtors
Furniture
Machinery
Salaries
Insurance Premium on Machinery
Bad Debts
Cash in hand
Rent
Back charges
Carriage Outward
Depreciation on Furniture
Drawings :
    Preety
    Jyoty
10,000
10,000
31,000
13,200
1,200
200
10,400
6,000
420
1,450
1,000

4,000
2,500
Trading A/c
Bad debt recovered
Sundry receipts
Provision for bad debts
Commission
Creditors
Rent Payable
Bills Payable
Capital A/c :
    Preety
    Jyoty

41,120
600
1,000
800
250
10,000
200
2,400

20,000
15,000


91370

91,370
Prepare the Profit and Loss A/c and the Profit and Loss Appropriation A/c of the firm for the year ended on 31-03-14 and a Balance Sheet as on that date after considering the following adjustments:
(i)      Machinery is to be depreciated by 10%.
(ii)    Provision for bad debt is to be increased by Rs. 200/-.
(iii)   Preety was to receive, salary @ Rs. 300/- per month.
(iv)  Interest on Capital is allowed @ 5% p.a.
Final Accounts of Partnership Firm – Comprehensive problem
Q. Comprehensive final account: Dhiraj and Rohit are partners in a firm. The trial balance of the firm as on 31st march 2014 was as follows:
Trial Balance
Debit
Amount
Credit
Amount
Goodwill
Debtors
Trade marks
Plant and machinery
Building
Furniture
10% Investment (1 – 10 – 2013)
Cash in hand
Cash at Bank
Stock on 31 – 3 – 2006
Bills receivable
Salaries
Telephone charges
Printing and stationery
Advertisement
Drawings:
Dhiraj
Rohit
Bad Debts
Interest on Bank loan
Rent paid in advance
Establishment
Environment protection expenses
Loss by fire
4000
20000
30000
25000
30000
5000
10000
1050
14650
17500
1500
5750
1600
150
250

2050
3000
250
3000
5000
5000
5000
1000
Capital:
Dhiraj
Rohit
Creditors
Bills payable
Reserves
Interest on investments
Provision for doubtful debts
15% Bank loan (1 – 4 – 2013)
Commission received in advance
Trading account (Gross Profit)
Outstanding Wages
Workmen compensation reserve
Sundry Receipts
Sales tax payable

40000
20000
12500
2000
11000
300
1100
30000
1000
56850
5000
5000
5000
1000
190750
190750
Prepare a Profit and loss Account, a Profit and loss appropriation Account for the year ended on 31st march 2014 and also a balance sheet as on that date after taking in to account the following adjustments:
b.   Plant and machinery to be depreciated at 10% and furniture at 15%
c.    Outstanding expenses: Salaries Rs. 300, Interest on Bank overdraft Rs. 225.
d.   Machine worth Rs. 15000 purchased on 1st October, 2010.
e.   Some Interest on investment due but not received within the accounting year.
f.     A further bad debt of Rs. 250 is to be written off and provision for doubtful debts is to be maintained at 4% on sundry debtors.
g.    Each of the partners are entitled to interest on capital @5% per annum and salary @ Rs. 2000 per annum.
a.    Interest on partner’s drawings is charged @ 5% p.a.
h.   Create a general reserve by taking Rs. 5000 of profits.
i.      Provide manager’s commission @ 5% on net profit after charging such commission.
j.     Insurance claim on loss by fire Rs. 600.
k.    1/5th of advertising written off.
Admission, Retirement and Death of a Partner
(Expected Marks: 1 + 2 + + 3 + 5 +  5 + 5 + 8)
Q.1. What do you mean by “reconstitution of a firm”? Mention the situations when such reconstitution of firm takes place.
Q.2. Why assets and liabilities are valued? Mention the circumstances when a revaluation of assets and liabilities becomes necessary.
Q.3. What is sacrificing and gaining ratio? Distinguish between them.
Q.4. What is revaluation account? Pass necessary revaluation entries.
Q.6. How the amount due to retiring partner is calculated?
Q.7. How the amount due to executor’s of deceased is calculated?
Q.8. Why a new partner is admitted?
Q.9. What do you mean by retirement of a partner? Why a partner is retired?
Q.10. Mention the provisions of Sec.37 in case of death of a partner.
Q.11. How the profit upto date of death of a partner is calculated?
Q.12. Define in two lines: Hidden goodwill, super profit,  memorandum revaluation account, Joint life policy.
Coming soon
Q.13. Practical Problems: Preparation of new balance sheet. Main points treatment of goodwill if cash is brought for goodwill or not brought, provision for bad debt and workmen compensation fund treatment in revaluation account, unrecorded assets and liabilities, calculation of new profit sharing ratio (refer RG’S Question bank), preparation of memorandum revaluation account.
Q.14. Practical Problems: Calculation of new ratio when retiring partners share acquired by remaining partners, treatment of goodwill, calculation of deceased partners share of profit upto date of death on the basis of sales or average profit or last year’s profit, preparation of new balance sheet, preparation of deceased partner’s capital account.
Dissolution of Partnership
(Expected Marks: 2+3+5)
Q.1. What is dissolution of partnership and dissolution of partnership firms? Distinguish between them.
Q.2. What is realisation account? Distinguish between realisation and revaluation account.
Q.3. How Accounts are settled in case of dissolution of partnership?
Q.4. Mention various modes for dissolution of partnership:
a)      Compulsory dissolution
b)      Dissolution of partnership at will
c)       Dissolution by the court
d)      Dissolution on the happening of certain events
Q.5. Amal and Bimal are two partner in a firm. They share profits in the ratio of 3:2. Following is their Balance Sheet as on 31st December, 2008 on which day they dissolved their partnership firm.
Balance Sheet
Liabilities
Amount
Assets
Amount
Creditors
Reserve fund
Capital :
Amal    = 20,000
Bimal   = 15,000

20,000
5,000


35,000
Fixed assets
Stocks
Debtors
Cash
Profit & Loss A/c
30,000
10,000
15,000
3,000
2,000

60,000

60,000
Fixed assets realised Rs. 28,000. Stock at 8,000 and Debtors at Rs. 13,000. Creditors were paid at a discount of 10%. Expenses of realisation were Rs. 1,500. Pass the Journal entries in the books of the firm.
Q.6. Kumar and Gaurav are partners sharing profits and losses as three – fourth and one – fourth. They agreed to dissolve their firm. On the date of dissolution, they have the following Balance Sheet was as follows:
Liabilities
Rs.
Assets
Rs.
Capital A/c :
Kumar                                                    40.000
Gaurav                                                   35,000
Creditors
Loan from Mrs. Gaurav


75,000
16,000
13,000
Land & Building
Plant & Machinery
Sundry Debtors                                    22,000
Less : Reserve                                         2,000
Bills Receivable
Cash in hand
50,000
18,000

20,000
7,500
8,500

1,04,000

1,04,000
The assets realised as follows :
(i)      Land & Building Rs. 48,000.
(ii)    Sundry Debtors Rs. 18,000.
(iii)   Goodwill Rs. 16,500.
Kumar took over the plant and machinery at 5% more than the book value. Gaurav agreed to discharge his wife’s loan. Creditors are paid expenses on realisation amounted Rs. 700. You are required to show Realisation Account , Cash Account and Capital Accounts of the partners on dissolution.
Q.7. Ram and Shyam share the profits equally. They decided to dissolve their firm. Their liabilities were : Ram’s Capital Rs. 25,000; Shyam’s Capital Rs. 30,000; Creditors Rs. 12,500; Bills payable Rs.7,500; Assets of the firm realized Rs.1,00,000. Prepare a Realization Account.
Q.8. Kumar, Yash and Zakir commenced business on January 1, 2001 with capitals of Rs. 1,00,000, Rs. 80,000 and Rs. 60,000 respectively. Profits are shared in the ratio 4:3:3. Capitals carried interest at 5% p.a. During 2001 and 2002 they made profits of Rs. 40,000 and Rs. 50,000 (before allowing interest on capitals). Drawings of each partner were Rs. 10,000 per year. On December 31, 2002 the firm was dissolved. Creditors on that date were Rs. 24,000. The assets realized Rs. 2,60,000 net. Prepare the necessary accounts to close the books of the firm.
Q.9. The following is the Balance Sheet of Anju and Manju sharing profits in the ratio of 3:2 as on December 31, 2003 :
Balance Sheet as at December 31, 2003
Liabilities
Amount
Assets
Amount
Creditors
Loan by Anju’s brother
Loan by Manju
General Reserve
Capitals :
Anju
Manju
Profit and Loss
19,000
 5,000
7,500
1,250

5,000
4,000
2,500
Plant and Machinery
Furniture and Fixtures
Investment
Stock
Debtors                                                           10,000
Less: provision                                                     500
Bank
14,000
2,000
5,000
3,000

9,500
5,750

41,750

41,750
The firm was dissolved on March 31, 2003. As a result,
(a)    Anju took over investments at an agreed value of Rs. 4,000 and agreed to pay loan taken from her brother
(b)   Realization of assets is as follows : Stock Rs. 2,500, Debtors Rs. 9,250, Furniture and Fixture Rs. 2,250, Plant and Machinery Rs. 12,500
(c)    Expenses of realization were Rs. 300
(d)   Creditors allowed 2.5% discount in full settlement. Record necessary journal entries and close the books of the firm.
Q.10. Dinesh, Ramesh and Satish were partners in a firm sharing-profits in the ratio of 5:3:2. They agreed to dissolve their partnership firm on March 31, 2002. Dinesh was asked to realize the assets and pay off liabilities. He had to bear the realization expenses for which he was promised a lump sum amount of Rs. 2,000. Their financial position on that date was as follows :
Balance Sheet as at March 31, 2002
Liabilities
Amount
Assets
Amount
Creditors
Investment fluctuation fund
Capitals :
Dinesh
Ramesh
Suresh
27,500
9,000

75,000
30,000
16,000
Plant and Machinery
Investment
Stock
Debtors                                                          14,200
Less: provision                                                   900
Bank
Profit and losses account
60,000
30,000
11,000

13,300
11,200
32,000

1,57,500

1,57,500
Dinesh agreed to purchase investments at Rs. 25,000. Ramesh took over stock at Rs. 10,500 and Debtors at Rs. 11,800. Plant and Equipment was sold for Rs. 45,000. Unrecorded assets realized cash of Rs. 3,000. Actual realization expenses amounted to Rs. 1,800. Prepare necessary ledger accounts on the dissolution of firm.
Q.11. Lata, Geeta and Neeta were partners sharing profits in the ratio of 5:3:1. They decided to dissolve the partnership on March 31, 2001 and their balance sheet was as under.
Balance Sheet Lata, Geeta and Neeta as at March 31, 2001
Liabilities
Amount
Assets
Amount
Creditors
Bills Payable
Mortgage loan
General Reserve
Capitals :
Lata
Geeta
Neeta
16,600
3,400
15,000
4,500

22,000
18,000
10,000
Plant and Machinery
Investment
Stock
Debtors                                                          25,000
Less: provision                                                5,000
Bank
Deferred Revenue Expenditure
Suspense
30,000
10,000
10,000

20,000
9,500
5,000
5,000

89,500

89,500
There was a typewriter written off which realised Rs. 500. They had a joint life policy of Rs. 20,000 which was surrendered for Rs. 5,000. Goodwill was sold for Rs. 5,000. Other assets realized – stock Rs. 6,700; debtors 50%; plant and machinery 10% less than its book value. Creditors were paid Rs. 16,000. But an outstanding bill of Rs. 400 for repairs was to be paid off. Expenses on realization amounted to Rs. 620. Give journal entries to record the above transactions and also prepare necessary ledger accounts.
Q.12. Following is the Balance Sheet of Raman and Ramesh on June 30, 2002.
Liabilities
Amount
Assets
Amount
Creditors
Bills Payable
Bank overdraft
Mrs. Raman’s loan
Investment fluctuation fund
Employees provident fund
Ramesh’s loan
General Reserve
Raman’s Capital
Ramesh’ Capital
20,000
20,000
10,000
10,000
2,800
1,200
10,000
2,000
20,000
20,000
Goodwill
Building
Plant and fitting
Investment
Stock
Debtors                                                          17,000
Less: provision                                                2,000
Bills Receivable
Deferred Revenue Expenditure
Suspense
10,000
25,000
25,000
15,300
8,700

15,000
10,000
2,000
5,000

1,16,000

89,500
The firm was dissolved on June 30, 2002 and following was the position:
a)      Raman agreed to pay off his wife’s loan.
b)      Debtors realized Rs. 12,000.
c)       Ramesh took away all the investments at Rs. 12,000.
d)      Other assets realized as follows : Plant and Fittings 20,000, Building 50,000, Goodwill 6,000
e)      Sundry creditors and Bills payable were settled at 5% discount.
f)       Raman accepted stock at Rs 8,000 and Ramesh took over bills receivable at 20% discount.
g)      Realization expenses amounted to Rs. 2,000.
Record journal entries and also prepare various ledger accounts.
AHSEC - Accounting for Share capital – Comprehensive Practical problems for March’ 2017 Exam
Average 22 marks expected from this chapter
MCQ – 2, Theoretical Question – 2+5, Practical problems – 5+8
A. Questions relating to Cash book and Balance sheet (Long Questions Carrying 8 Marks)
Issue of Shares
(Expected Marks: 1 + 1 + 2 + 5 + 5 + 8)
Q.1. What is a Joint Stock Company? Mention their four features. Write two advantages and disadvantages of Joint stock company.
Q.2. What are various types of shares?  Mention three important features of each. Distinguish between equity shares and preference shares.
Q.3. What do you mean by issue of shares at a premium? Mention the purposes for which securities premium can be utilized.
Q.4. What do you mean by issue of shares at a discount? What are the conditions for issue of shares at a discount?
Q.5. Mention 5 statutory books and statistical books of a company.
Q.6. What do you mean by “Forfeiture of Shares” and “Re-issue of forfeited shares? Discuss the procedure of forfeiture of shares.
Q.7. What are various types of capital? Explain them briefly.
Q.8. Define in two line: Minimum subscription, over-subscription and under- subscription.
Q.9. Comprehensive Practical Problems:
Q. (2010). A. Ltd was registered with an authorised capital of 5, 00,000 divided into 50,000 Equity shares of Rs. 10 each. The company issued 30,000 shares to the public payable as follows:
On application Rs. 2 per share.
On allotment Rs. 3 per share and the balance in two equal calls.
The company received applications for 20,000 shares and received all the money except the final call on 200 shares held by Raju. Expenses on issue amounted to Rs. 500. Pass Journal entries and show how these figures will appear in the Balance Sheet of the company.
Q. (2012). Ashok Publications Ltd. issues 3,000 shares of Rs. 10 each, payable as follows:
On application Rs. 2
On allotment Rs. 3
On first call Rs. 2
And the balance when required.
                3,200 shares were applied for applications for Rs. 3,000 were accepted by the Directors and the balance applications were rejected and money returned. Allotment money was duly received and First call money was received on 2,950 shares. Pass Journal entries in the books of the company for the above transactions.
Q. (2014, 2016). Assam Tea Ltd. has an authorized capital of Rs. 10, 00,000/- divided into Rs. 1, 00,000 equity shares of Rs. 10/- each. The directors decided to issue 50,000 shares to the public at a premium of 10% payable as follows:
On Application Rs. 3/-
On Allotment (including premium) Rs. 5/-
And the balance on 1st and final call.
The company received applications for 60,000 shares. The directors decided to reject the excess applications and the money thereon was refunded. All the shares were duly subscribed for, called up and paid up. Give Journal entries and prepare a Cash Book in the books of the Company.        
Q. Assam Tea Ltd. has an authorized capital of Rs. 10, 00,000/- divided into Rs. 1, 00,000 equity shares of Rs. 10/- each. The directors decided to issue 50,000 shares to the public at a premium of 20% payable as follows:
On Application (including premium @ Rs. 1 per share) Rs. 3/-
On Allotment (including premium @ Rs. 1 per share) Rs. 5/-
And the balance on 1st and final call.
The company received applications for 60,000 shares. The directors decided to reject the excess applications and the money thereon was refunded. All the shares were duly subscribed for, called up and paid up. Give Journal entries and prepare a Cash Book in the books of the Company.                                        
Q. (2015). X Ltd. Issued 2,000 shares of Rs. 100/- each at a premium of Rs. 20 payable as follows:
Rs. 30/- on Application.
Rs. 50/- on Allotment (including securities premium Rs. 20/-)
Rs. 40/- on First Call & Final Call.
All the shares were duly subscribed for, called up and paid up, except Miss Nitu who holding 300 shares failed to pay First & Final call money. Show entries in the Cash Book and Journal of the company for the above transactions.              
Q. (2011.)TCL Ltd. issued 12,000 equity shares of Rs. 10 each, payable Rs.2 On application, Rs. 3 on allotment, Rs. 3 on first call and balance in final call. All the share were applied and allotted. The company made up to first call. One share holder who was allotted 400 shares paid his entire amount on first call and another share holder who was allotted 300 shares failed to pay first call money. Journalise the above transaction in the books of the company.
Q. TCL Ltd. issued 12,000 equity shares of Rs. 10 each, payable Rs.2 On application, Rs. 3 on allotment, Rs. 3 on first call and balance in final call. All the share were applied and allotted. The company made up to first call. One share holder who was allotted 400 shares paid his entire amount on first call and another share holder who was allotted 300 shares failed to pay first call money which he paid with final call money. Final call is made after 2 months from the date of first call. Interest on arrear and calls in advance is charges as per Table “A”. Journalise the above transaction in the books of the company. Also prepare cash book and balance sheet.
Q. (2002). Guwahati Company Ltd. Issued 10,000 equity shares of Rs. 10 each at a premium of Rs. 2 per share payable as follows:
On application Rs. 3 per share.
On allotment Rs. 5 per share (including premium)
On first and final call Rs. 4 per share.
                All the shares were subscribed for and the allotment money was received in full. In due course the first and final call was made and the amount due was received with the exception of 100 shares. These 100 shares were forfeited and 50 of the forfeited shares were subsequently reissued as fully paid for a consideration of 8 per share. Give Journal entries in the books of      the company.
Q. (2005). ABC Ltd has issued 10,000 equity shares of Rs. 10 each at a premium of Rs. 2 each. Payable as follows:
Rs. 2 on application.
Rs. 5 on allotment including premium of Rs. 2
And Rs. 5 on first and final call.
The shares have been fully subscribed called up and paid up except the following:
(a) Allotment and first and final call money on 500 shares held by X and
(b) First and final call money on 600 shares held by Y.
All these shares have been forfeited and reissued at 10% discount as fully paid. Expenses on reissue have been Rs. 500. Give journal entries in the books of Company.
Q. (2006). Assam Cement Ltd. issued 50,000 equity shares of Rs. 10 each at a premium of Rs. 2 each, payable as under:
On application Rs. 2
On allotment Rs. 5 (including premium Rs. 2)
On first and final call Rs. 5.
All the shares were subscribed, called up and paid up except allotment and call money on 500 shares. These shares were forfeited and 300 of them were re-issued at Rs. 9 each as fully paid. Expenses on reissue were Rs. 200. Pass the necessary journal entries to record the above transactions.
Q. (2007). Sony Ltd. issued 10,000 equity shares of Rs. 100 each, payable as Rs. 30 on application, Rs. 50 on allotment and Rs. 20 on first and final call. The shares were fully subscribed, called up and paid up except the following:
(a) Rajeev holding 500 shares failed to pay allotment and call money and
(b) Sanjeev holding 800 shares failed to pay the call money.
All these shares were forfeited and subsequently reissued as fully paid at a discount of Rs. 20 per share. Expenses on reissue were Rs. 500. Give Journal entries in the books of the company.
Q. (2009). Kamrup Foods Ltd. issued 10,000 Equity shares of Rs. 10 each at a discount of 10% payable as under:
On application Rs. 2 per share;
On allotment Rs. 3 per share (including discount);
On first and final call Rs. 4 per share.
Applications were received for 8,000 shares and all these applications were accepted. All money due were received except the first and final call money on 300 shares which were   forfeited. Subsequently 200 of the forfeited shares were reissued at Rs. 7 per share as fully paid up. Pass necessary journal entries to record the above transactions.
Q. (2013). Karan Ltd. decided to issue 10000 shares of Rs.100 each at a discount of 10%, payable as follows:
On Application – Rs.30
On Allotment – Rs.40 (After deducting discount)
Balance on 1st and final call.
The company received 9000 applications. All the shares were duly accepted and allotted. All the calls were duly made and all call money received accordingly. Give Journal Entries and prepare a Balance Sheet.
Q. Famous Company Ltd. issued 6,000 equity shares of Rs. 10 each at a premium of Rs. 2 per share payable as follows:
On application Rs. 3 per share
On allotment Rs. 5 per share including premium.
On first and final call Rs. 4 per share.
Subscriptions were received for Rs. 10,000 shares. The excess money was refunded and the allotment money was received in full. In due course, the first and final cal was made and the amount due was received with the exception of 200 shares. These 200 shares were forfeited and 50 of the forfeited shares were subsequently reissued as fully paid for a consideration of Rs. 6 per share. Pass necessary journal entries and prepare the Cash book of the Company recording the above transactions. Also show the equity shares capital account and Balance sheet.       
Q. (2001). Eastern Traders Ltd. Offered for public subscription 20,000 equity shares of Rs. 10 each at a premium of Rs. 10 per share. The payment was to be made as follows:
On application Rs. 20 per share.
On allotment Rs. 40 (including premium).
On first and final call Rs. 50.
Applications received were for 35,000 shares. Applications for 10,000 shares were rejected and money was returned and those totaling for 15,000 shares were allotted 10,000 shares on prorata and remaining application were allotted in full. The directors made the final call and one shareholder hold the 500 shares failed to pay the call money and as a consequences his shares were forfeited. 200 of these shares were re-issued as fully paid at Rs. 80 per share and the amount was received. Give Journal entries in the books of the company.
Q. (1999). Famous Company Ltd. issued 6,000 equity shares of Rs. 10 each at a premium of Rs. 2 per share payable as follows:
On application Rs. 3 per share
On allotment Rs. 5 per share including premium.
On first and final call Rs. 4 per share.
Subscriptions were received for Rs. 10,000 shares. The excess money was refunded and the allotment money was received in full. In due course, the first and final cal was made and the amount due was received with the exception of 200 shares. These 200 shares were forfeited and 50 of the forfeited shares were subsequently reissued as fully paid for a consideration of Rs. 6 per share. Prepare the Cash book of the Company recording the above transactions. Also show the equity shares capital account.
Q. Eastern Traders Ltd. Offered for public subscription 20,000 equity shares of Rs. 10 each at a premium of Rs. 10 per share. The payment was to be made as follows:
On application Rs. 20 per share.
On allotment Rs. 40 (including premium).
On first and final call Rs. 50.
Applications received were for 35,000 shares. Applications for 10,000 shares were rejected and money was returned and those totaling for 15,000 shares were allotted 10,000 shares on prorata and remaining application were allotted in full. The directors made the final call and one shareholder hold the 500 shares failed to pay the allotment and call money and as a consequences his shares were forfeited. 200 of these shares were re-issued as fully paid at Rs. 80 per share and the amount was received. Give Journal entries in the books of the company.
B. Questions Relating to Forfeiture of Shares and Re-issue of forfeited shares:  (5 Marks Expected)
a)      A Ltd. forfeited 500 shares of Rs. 10/- each, Rs. 8/- paid, for non-payment of final call of Rs. 2/- each. Give Journal entry of forfeiture of share.        2016
b)      X Ltd. Decided to forfeit 1,000 shares of Rs. 10/- each for non-payment of allotment money for Rs. 4/- each and 1st and final call money of Rs. 3/- each. Give journal entry for the forfeiture of shares. 2015
c)       X Ltd. company forfeited 800 shares of Rs.10 each issued at par for non-payment of 1st call Rs.2 and final call Rs.3 each. Out of these, 500 shares are re-issued at 10% discount. Give journal entries in the books of the company. 2014
d)      Patowary Co. forfeited 400 shares of Rs. 10 each fully called up for non-payment of final call                of Rs. 3 per share, 250 of these shares were re-issued as fully paid up for Rs. 8 per share. Journalise the above transaction in the books of company.  (2011)
e)      800 Shares of Rs. 10 each issued at per were forfeited for the non-payment of final call of Rs. 2 per share. These shares were reissued at Rs. 10 per share fully paid-up.
f)       800 Shares of Rs. 10 each issued at per were forfeited for the non-payment of final call of Rs. 2 per share. 700 shares were reissued at Rs. 8 per share fully paid-up. Expenses on re-issue amounted to Rs.100.
g)      800 Shares of Rs. 10 each issued at per were forfeited for the non-payment of first call of Rs. 2 per share. Final call of Rs. 2 per share is not made. These shares were reissued at Rs. 8 per share fully paid-up. Expenses on re-issue amounted to Rs.100.
h)      800 Shares of Rs. 10 each issued at per were forfeited for the non-payment of first call of Rs. 2 per share. Final call of Rs. 2 per share is not made. These shares were reissued at Rs. 7 per share partly paid-up.
i)        800 Shares of Rs. 10 each issued at per were forfeited for the non-payment of first call of Rs. 2 per share. Final call of Rs. 2 per share is not made. These shares were reissued at Rs. 10 per share for Rs.8 paid up.
j)        800 Shares of Rs. 10 each were forfeited for the non-payment of first call of Rs. 2 per share. Final call of Rs. 2 per share is not made. 100 shares were reissued at Rs. 7 per share fully paid-up.
k)      800 Shares of Rs. 10 each issued at a premium of Re.1 per share were forfeited for the non-payment of first call of Rs. 2 final call of Rs. 2 per share. These shares were reissued at a discount of Rs. 3 per share.
l)        800 Shares of Rs. 10 each issued at a premium of Re.1 per share were forfeited for the non-payment of first call of Rs. 2 final call of Rs. 2 per share. These shares were reissued at Rs. 12 per share fully paid-up.
m)    800 Shares of Rs. 10 each issued at a premium of Rs. 2 per share were forfeited for the non-payment of first call of Rs. 2 final call of Rs. 2 per share. These shares were reissued at Rs. 10 per share fully paid-up.
n)      800 Shares of Rs. 10 each issued at a premium of Rs. 2 per share were forfeited for the non-payment of allotment Rs. 3, first call of Rs. 2 and final call of Rs. 2 per share. These shares were reissued at Rs. 12 per share fully paid-up.
o)      Nitin a shareholder, holding 1,000 shares of Rs. 10 each did not pay the allotment of Rs. 4 (including premium of Rs. 1) and the first and final call of Rs. 3. His shares were forfeited after the first and final call. Pass the journal entry to give effect to the forfeiture.
p)      Nitin a shareholder, holding 1,000 shares of Rs. 10 each did not pay the allotment of Rs. 4 (including premium of Rs. 1) and the first and final call of Rs. 3. His shares were forfeited for non-payment of allotment and call money. Pass the journal entry to give effect to the forfeiture.
q)      (2004, 2008, 2013). Indian Express Ltd has forfeited the following shares of Rs. 100 each for non-payment of allotment and call money.
(a) 100 shares held by X who has paid only the application money @ Rs. 10 each.
(b) 200 shares held by Y who has paid only the application and allotment money @ Rs. 10 and Rs. 20 each respectively.
(c) 300 shares held by Z who has paid only the application, allotment and the first call money @ Rs. 10, Rs. 20 and Rs. 30 respectively. Shares have been fully called up. All the shares are forfeited and are re-issued at 10% discount. Give journal entries.
Issue and Redemption of Debenture – Comprehensive Practical problems for March’ 2017 Exam
Average 17 marks expected from this chapter
MCQ – 1, Theoretical Question – 2+3, Practical problems – 8+5
Issue and Redemption of Debentures
(Expected Marks: 1 + 3 + 5 + 8)
Q.1. What is debentures? Mention its 4 features. Write three advantages and disadvantages of it.
Q.2. Mention various types of Debentures.
Q.3. What do you mean by “issue of debentures as collateral security”? Explain its accounting treatment.
Q.4. Distinguish between Shares and Debentures.
Q.5. What is sinking fund? How it is created?
Q.6. What do you mean by “Discount on issue of shares” and “Loss on issue of debentures”? Explain their treatment.
Q.7. What do you mean by Redemption of debentures? Explain various methods for redemption of debentures.
Q.8. Practical Problems:
Issue of Debentures for cash (2014, 2016)
1. A company issued 10%, 1,000 debentures of Rs. 100 each at 10% premium payable full on application. Give journal entries.
2. A company issued 10%, 1,000 debentures of Rs. 100 each at 10% premium payable Rs. 50 on application and Rs. 60 on allotment all the debentures are fully subscribed. Give journal entries.
3. A company issued 10%, 1,000 debentures of Rs. 100 each at 10% discount, payable Rs. 50 on application and Rs. 40 on allotment. Debentures are fully subscribed. Give journal entries.
4. Fair Deal Ltd. invited applications for the issue of 2000, 10%Debentures of Rs.100 each at a discount of 10% payable Rs.30 on application on 1st May, 2010, Rs.30 on allotment (after deducting discount) on 1st June, 2010 and balance on first and final call on 1st July, 2010. All the debentures were fully subscribed. Debentures money was duly called and paid up.  Give the Journal Entries and show how the debentures and Debenture Discount will be shown in the Balance sheet of the company.
5. Tata Motors Ltd. invited applications for the issue of 3,000, 10% debentures of Rs. 100/- each at a premium of 10% payable Rs. 30/- on application, Rs. 40/- on allotment (including premium) and the balance on first and final call. All the debentures were subscribed and the debenture money was duly called and paid up. Give Journal entries and show how Debentures Account will be shown in the Balance Sheet of the Company.
6. Tata Motors Ltd. invited applications for the issue of 3,000, 10% debentures of Rs. 100/- each at a premium of 10% payable Rs. 30/- on application, Rs. 40/- on allotment (including premium) and the balance on first and final call. Applications were received for 2800 debentures and the debenture money was duly called and paid up except allotment and call money on 500 debentures. Give Journal entries and show how Debentures Account will be shown in the Balance Sheet of the Company.
7. Tata Motors Ltd. invited applications for the issue of 3,000, 10% debentures of Rs. 100/- each at a premium of 10% payable Rs. 30/- on application, Rs. 40/- on allotment (including premium) and the balance on first and final call. Applications were received for 4,000 debentures and excess application money of 600 debentures were sent letter of regret and balance transferred to allotment. All the debentures were duly called and paid up. Give Journal entries and show how Debentures Account will be shown in the Balance Sheet of the Company. Also prepare cash book.
Issue of Debentures with redemption option (2012, 2013, 2014, 2015, 2016 exam)
1. Show by means of Journal entries how you will record the following issue:  
(a) X. Ltd. issue 8,000, 12% debenture of Rs 100 each at par, redeemable at the end of 5 year at par.
(b) Y. Ltd. issue 8,000, 12% debenture of Rs 100 each at a discount of 5%, redeemable at the end of 5 year at par.
(c) Z. Ltd. issue 8,000, 12% debenture of Rs 100 each at a premium of 5%, redeemable at the end of 5 year at par.
(d) P. Ltd. issue 5,000, 12% debenture of Rs 100 each at a discount of 5%, redeemable at the end of 5 year at a premium of 5%.
(e) A. Ltd. Issues 6,000, 10% debenture of Rs 100 each at a premium of 5%, redeemable at the end of 5 year at a premium of 10%.
(f) B. Ltd. issue 7,000, 11% debenture of Rs 100 each at par, redeemable at the end of 5 year at a premium of 5%.
2. Swadip Petrochemicals Ltd. issued Rs. 10, 00,000 12% Debentures of Rs.100 each. Give Journal Entries for issue and redemption of debentures in the books of the company under the following situations:                      
(a) Issued at par and redeemable after 5 years at par.
(b) Issued at Par and redeemable after 5 years at a premium of 5%.
(c) Issued at a premium of 5% and redeemable after 5 years at par.
(d) Issued at a premium of 5% and redeemable after 5 years at a premium of 10%.
(e) Issued at a discount of 5% and redeemable after 5 years at par.
(f) Issued at a discount of 5% and redeemable after 5 years at a premium of 10%.
Issue of Debentures for consideration other than cash
1. A company purchased a machinery from Y at an agreed value of Rs. 3,60,000 to be discharged by issuing 10% debentures of Rs. 100 each at par. Give journal entries.
2. A company purchased a machinery from Y at an agreed value of Rs. 3,60,000 to be discharged by issuing 10% debentures of Rs. 100 each at 10% discount. Give journal entries.
3. A company purchased a machinery from Y at an agreed value of Rs. 4,40,000 to be discharged by issuing 10% debentures of Rs. 100 each at a premium of 20%. Give journal entries.
4. A company purchased a machinery from Y at an agreed value of Rs. 4,17,000 to be discharged by issuing 10% debentures of Rs. 100 each at a premium of 10%. Fractional debentures are paid in cash. Give journal entries.
5. A company purchased a machinery from Y at an agreed value of Rs. 3,60,000 to be discharged by issuing 3,000 10% debentures of Rs. 100 each. Give journal entries.
6. A company took assets of Rs. 2, 00,000 and liabilities of Rs. 50,000 and issued 10% debenture of Rs. 100 each. Record the entries.
7. A company purchased assets of book value of Rs. 2,00,000 and liabilities of Rs. 50,000 at a purchase consideration of Rs. 1,65,000 to be discharged by issuing 10% debenture of Rs. 100 each at a premium of Rs. 10 each. Give journal entries.
8. A company purchased assets of book value of Rs. 2,00,000 and liabilities of Rs. 50,000 at a purchase consideration of Rs. 1,20,000 to be discharged by issuing 10% debenture of Rs. 100 each at a premium of 10%. Give journal entries.
9. A company purchased assets of book value of Rs. 2,00,000 and liabilities of Rs. 50,000 at a purchase consideration of Rs. 1,20,000 to be discharged by paying Rs. 32,000 in cash and balance by issuing 10% debenture of Rs. 100 each at a premium of 10%. Give journal entries.
10. A company purchased assets of book value of Rs. 2,00,000 and liabilities of Rs. 50,000 at a purchase consideration of Rs. 1,20,000 to be discharged by paying Rs. 32,000 in cash and balance by issuing 10% debenture of Rs. 100 each at a discount of 10%. Give journal entries.
Treatment of Discount and Loss on issue of debentures (2013, 2015)
1. A Company has issued Rs.1, 00,000 10%Debenture at 5% discount repayable at 5% premium after 4 years. Give journal entries for issue and show the loss on issue of debentures account over 4 years.              
2. Guwahati Engineering Limited issued 10000 6% Debentures of Rs.10 each at a discount of 5% but repayable after 5 years at a premium of 10%. Show the entries in the books of the company and also the accounting treatment of loss on issue of debentures for 5 years.               
3. A company has issued Rs. 2, 00,000, 10% debentures at 5% discount, repayable for four annual equal instalments at 5% premium. Give Journal entries and show the Loss on Issue of Debenture A/c over 4 years.
4. A company has issued Rs. 1, 00,000 debentures at a discount of 10% on 1st Jan. 2016. The debentures are repayable at par by:
1st Year = Nil
2nd Year = 25,000
3rd Year = 50,000
4th Year = 25,000
Give Journal entry for issue and show the Discount Account over the years.
5. A company has issued Rs. 1, 00,000 debentures at a discount of 10% on 1st Jan. 2016. The debentures are repayable at par by:
1st Year = Nil
2nd Year = 25,000 (At the end of 6 months)
3rd Year = 50,000 (At the end of 3 months)
4th Year = 25,000 (At the end of the year)
Give Journal entry for issue and show the Discount Account over the years.
Redemption of Debentures – Purchase of own Debentures
1. A company purchased its own debenture of Rs. 100 each of the face value of Rs. 30,000 from open market for cancellation at Rs. 95 out of profits. Record the transaction.
2. A company purchased its 300 own debenture of Rs. 100 each from open market for cancellation at Rs. 95. Record the transaction.
3. X Ltd. decided to redeem Rs. 1, 00,000, 10% debentures. It purchased Rs. 80,000 debentures in the open market at Rs. 97.50, the expenses being Rs. 400 and balance at Rs. 99. Pass Journal entries.
4. X Ltd. purchased 5,000 of its own 8% debentures of Rs. 1,000 each at Rs. 987 per debenture. It also purchased another lot of 600 debentures of the same series at Rs. 986 per debenture. The debentures were purchased for the purpose of cancellation. Record necessary journal entries in the books of the company.
Redemption of Debentures – Conversion of Debentures
1. Redeemed 800, 9% debentures of Rs. 100 each by converting the same into equity shares of Rs. 100 each issued at a premium of 25%.
2. Rs. 2, 00,000, 14% Debentures of Rs. 100 each issued at a 5% discount and redeemable at 10% premium after 4 years by converting them 15% Preference shares of Rs. 10 each issued at a premium of 10%.
3. Rs. 2, 00,000, 14% Debentures of Rs. 100 each issued at 5% premium and redeemable at 10% premium after 4 years by converting them into equity shares of Rs. 10 each issued at a premium of 10%.
4. Rs. 2, 00,000, 14% Debentures of Rs. 100 each issued at par and redeemable at 20% premium after 4 years by converting them into 10% Debentures of Rs. 10 each issued at a discount of 30%.
5. Pass necessary journal entries in the books of the Company in following cases for redemption of 1,000, 12% Debentures of Rs. 100 each issued at par:
a)      Debentures redeemed at a premium of 10% by conversion into Equity Shares issued at par.
b)      Debentures redeemed at a premium of 10% by conversion into Equity Shares issued at a premium of 25%.
c)       Debentures redeemed at a premium of 10% by conversion into Equity Shares issued at a discount of 20%.
6. Janata Iron Stores Pvt. Ltd. redeemed Rs. 30, 00,000, 8% debentures issued at premium of 5% as follows: Rs. 12, 00,000, 8% debentures were converted into equity shares of Rs. 100 each issued at a premium of Rs. 25 per share and the balance by converting them into 8% preference shares of Rs. 100 each issued at a discount of Rs. 10 per share. Pass the necessary journal entries of in the books of the company.
Redemption of Debentures – Sinking fund method
1. On 1st April 2016 Assam Ltd. issue 3,000, 10% Debentures of Rs. 100 each, repayable at par at the end of 3 years. It has been decided to set up a Sinking Fund for this purpose of their redemption. The investments are expected to earn interest at 4% p.a. The Sinking Fund table shows that Rs. 0.320348 invested each year amount to Rs. 1 @ 4% p.a. in three years. Investments were sold at par on 31st March 2017 and debentures are paid off. Pass journal entrie3s and necessary ledger account ignore interest on debentures.
2. The following balances appeared in the books of Assam Steel Industries Ltd. on 1.4.2015
14% Debentures Rs. 10, 00,000.
Sinking Fund Rs. 8, 00,000
12% Sinking Fund Investments – Rs. 8, 00,000. (Representing Sinking Fund: Face value Rs. 8, 60,000)
Annual instalments to be added to Sinking Fund were Rs. 1, 00,000. On 31.3.2016, balance at bank was Rs. 5, 60,000 after the receipt of interest of investments. Investments were sold at 95% and debentures paid off at par 31.3.2011. Give Ledger Accounts for the year ended 31.3.2016.
3. A Ltd has the following balances of accounts on 1.4.2016
10% Debentures – Rs. 1, 00,000
Sinking Fund – Rs. 80,000
10% Sinking Fund Investment (face value Rs. 85,000) – Rs. 80,000
Annual instalments – Rs. 20,000.
Investments are realised at 96% on 31.3.2017 and debentures are redeemed on that day at 5% premium. Cash at bank before interest and sale proceeds of investment was Rs. 60,000. Give the ledger Accounts.
Redemption of Debentures – Out of profit and DRR
1. X Ltd. had Rs. 10, 00,000, 9% debentures due to be redeemed out of profits on 1st October 2016. The company had a Debenture Redemption Reserve of Rs. 4, 14,000. Pass necessary journal entries at the time of redemption.
2. Janata Iron Store Ltd. redeemed Rs. 25, 00,000, 9% debentures at a premium of 5% out of profit on 31.3.2016. Pass necessary journal entries for the redemption of debenture.
3. Assam Iron Stores Pvt. Ltd. issued Rs. 1, 00,000, 15% Debentures of Rs. 100 each at a premium of 5%, redeemable at a premium of 10% at the end of 4 years. The board of directors decided to transfer the minimum required amount to ‘Debenture Redemption Reserve Account’ at the time of redemption. Give necessary journal entries for redemption.
4. Pawan Hardware Pvt. Ltd. has 4,000, 8% Debentures of Rs. 100 each due for redemption on 31st March, 2016. There is a balance of Rs. 1, 50,000 in Debenture Redemption Reserve on the date of redemption. Record the necessary entries at the time of redemption of debentures. Here Pawan Hardware Pvt. Ltd is an infrastructure company.
5. Balaji Marvel Ltd. has issued 20,000, 9% Debentures of Rs. 100 each of which half the amount is due for redemption on 31st March 2016. The company has in its Debenture Redemption Reserve Account a balance of Rs. 4, 40,000. Record the necessary entries at the time of redemption of debentures.
6. Lohia Hardware Ltd. had a balance of Rs. 11, 00,000 in its Profit and Loss Account. Instead of declaring dividend it decided to redeem in its Rs. 10, 00,000, 9% debentures at a premium of 10%. Pass necessary journal entries in the books of the company for the redemption of debentures.
7. The company had a balance of Rs. 6, 00,000, 8% debentures. Out of these 25% debentures were redeemed by draw of lots at a premium of 25%.
8. X Ltd. has Rs. 5, 00,000, 10% Debentures outstanding on 1st April 2016. Give journal entries relating to debenture interest for the period ended 31st March, 2016 assuming that the interest is payable annually on 31st March every year.
Financial Statement and Financial Statement analysis
(Expected Marks: 2 + 3 + 5)
Q. 1. What are financial statements? What constitute financial statements? What are its essential features?
Q.2. Mention the objectives of financial statements(2)? List out the external and internal users of financial statement and financial statement analysis.
Q.3. What are uses and importance of financial statements? Mention five limitations of financial statements.
Q.4. What is financial statements analysis? Discuss its importance and limitations. (5 points only)
Q.5. What are various types of financial analysis? Mention them.
Q.6. What are various techniques of financial analysis? Explain them with their respective merits and demerits. (2 points only)
Q.7. What is contingent liabilities? Give some examples.
Q.8. Draft a format of Company’s Balance sheet and Income Statement. (Major headings and their elements)
Q.9. From the following Balance Sheet as at 31st March, 2012 and 2013, prepare Comparative  and Common Size Balance Sheet:
Particulars
2012 (Rs.)
2013 (Rs.)
I. EQUITY AND LIABILITIES
1.       Shareholder’s Funds
a)      Share Capital
b)      Reserve and Surplus
2.       Non-Current Liabilities
Long-term Borrowings (12% Debentures)
3.       Current Liabilities (Trade Payables)


7,50,000
4,50,000

7,50,000
3,00,000


15,00,000
3,00,000

12,00,000
6,00,000
Total
22,50,000
36,00,000
II. ASSETS
1.       Non-Current Assets
Fixed Assets
2.       Current Assets


15,00,000
7,50,000


22,50,000
13,50,000
Total
22,50,000
36,00,000
[Percentage Change: Share Capital 100%; Reserves (33.33%); Loan 60%; Current Liabilities 100%; Fixed Assets 50%; Current Assets 80%]
Q.10. From the following Balance Sheets as at 31at March, 2012 and 2013, prepare Comparative and Common size Balance Sheet:
Particulars
2012 (Rs.)
2013 (Rs.)
I. EQUITY AND LIABILITIES
2.       Shareholder’s Funds
a)      Share Capital
b)      Reserve and Surplus
3.       Non-Current Liabilities  - Long-term Borrowings (12% Loan)
4.       Current Liabilities
a)      Short-term Borrowings
b)      Trade Payables
c)       Short-term Provisions


7,50,000
4,50,000
7,50,000
1,75,000
1,00,000
25,000


15,00,000
3,00,000
12,00,000
3,50,000
2,00,000
50,000
Total
22,50,000
36,00,000
II. ASSETS
2.       Non-Current Assets
Fixed Assets (Tangible)
3.       Current Assets
a)      Inventories
b)      Trade Receivables
c)       Cash and Cash Equivalents

15,00,000

2,50,000
4,50,000
50,000

22,50,000

4,50,000
8,00,000
1,00,000
Total
22,50,000
36,00,000
[Percentage change: Share Capital 100%; Reserves (33.33%); Loan 60%; Current Liabilities: Short-term Borrowings 100%; Trade Payables 100%; Short-term Provisions 100%; Current Assets 80%; Fixed Assets 50%; Total 60%]
Q.11. Prepare Comparative and common size Income Statement from the following Statement of Profit and Loss:
Particulars
2012 (Rs.)
2013 (Rs.)
I. Income
Revenue from Operations (Sales)

3,00,000

3,50,000
II. Expenses
Purchase of Stock-in-Trade
Changes in Inventories of Stock-in-Trade
Employees Benefit Expenses
Other Expenses

1,80,000
20,000
15,000
5,000

2,10,000
15,000
17,500
7,500
Total
2,20,000
2,50,000
III. Net Profit (I – II)
80,000
1,00,000
Q.12. Prepare Comparative Income Statement from the following Statement of Profit and Loss:
Particulars
2012 (Rs.)
2013 (Rs.)
I. Income
Revenue from Operations (Sales)

2,50,000

3,00,000
II. Expenses
Cost of Materials Consumed
Changes in Inventories of WIP and Finished Goods
Employees Benefit Expenses (Wages)
Other Expenses

1,00,000
5,000
25,000
20,000

1,20,000
(2,000)
30,000
22,000
Total
1,50,000
1,70,000
III. Net Profit (I – II)
1,00,000
1,30,000

Ratio Analysis
Expected Marks: 5
Q.1. What is ratio analysis? What are its objectives?
Q.2. Explain the importance and limitations of Ratio analysis.
Q.3. Mention various types of accounting ratios. Give some examples of Liquidity Ratios, Solvency Ratios, Activity (Turnover) Ratios and Profitability Ratios.
Q.4. What is short term and long term solvency ratio?
Accounting Ratios Practical Problems
1. Current Ratio 2.5; Working Capital Rs. 60,000. Calculate the amount of Current Assets and Current Liabilities.
2. X Ltd. has a Current Ratio 3.5 : 1 and Quick Ratio 2 : 1. If the stock is Rs. 24,000; Calculate the total Current Liabilities and Current Assets.
3. XYZ Ltd. stock is Rs. 3,00,000. Total Liquid Assets are Rs. 12,00,000 and Quick Ratio is 2 : 1. Work out of the Current Ratio.
4. A Limited Liquidity Ratio is 2.5 : 1. Stock is Rs. 6,00,000. Current Ratio is 4 : 1. Find out the Current Liabilities.
5. Current Liabilities of a company are Rs. 6,00,000. Its Current Ratio is 3 : 1 and Liquid Ratio is 1 : 1. Calculate the value of Stock-in-Trade.
6. Current Liabilities of a company are Rs. 1,50,000. Its Current Ratio is 3 : 1 and Acid Test Ratio (Liquid Ratio) is 1 : 1. Calculate the values of Current Assets, Liquid Assets and Inventory.
7. Current Ratio 4; Liquid Ratio 2.5; Inventory Rs. 6,00,000. Calculate the Current Liabilities, Current Assets and Liquid Assets.
8. X Ltd. had a Current Ratio of 4.5 : 1 and a Quick Ratio of 3 : 1. If its inventory is Rs. 36,000, find out its total Current Assets and Total Current Liabilities.
9. Quick assets Rs. 1,50,000; Inventory Rs. 40,000; Prepaid Expenses Rs. 10,000; Working Capital Rs. 1,20,000. Calculate Current Ratio.
10. Current Assets Rs. 3,00,000; Stock Rs. 45,000; Prepaid Expenses Rs. 15,000; Working Capital Rs. 2,52,000. Calculate the Quick Ratio. [Quick Ratio = 5 : 1]
11. From the following information, calculate Current Ratio and acid-test ratio:
Particulars
Amount
Particulars
Amount
Inventory
Debtors
Cash
Creditors
Bills receivable
Advance Tax
Bills Payable
Bank overdraft
Debentures
Accrued Interest
55000
40000
37000
48000
20000
4000
28000
4000
200000
4000
Marketable securities(Short term investment)
Provision for bad debt
Income received in advance
Coins
Cheque and Draft in hand
Treasury bills Purchased
Dividend payable
Sales tax payable
Provision for tax
Interest due on debentures
10000
5000
5000
2000
5000
6500
2000
2000
2000
5000
12. Calculate Acid-Test Ratio from the following:               Current Assets Rs.50000. Current assets include the following: Stock Rs.14000. Pre-paid Expenses Rs. 1000. Current liabilities Rs.20000. Current liabilities include Bank overdraft Rs.5000.
Debt Equity Ratio, Proprietary ratio and ratio of total asset to debt:
Q. Calculate Debt Equity Ratio, Proprietary ratio and ratio of total asset to debt:
Particulars
2012 (Rs.)
2013 (Rs.)
I. EQUITY AND LIABILITIES
5.       Shareholder’s Funds
c)       Share Capital
d)      Reserve and Surplus
6.       Non-Current Liabilities  - Long-term Borrowings (12% Loan)
7.       Current Liabilities
d)      Short-term Borrowings
e)      Trade Payables
f)       Short-term Provisions


7,50,000
4,50,000
7,50,000
1,75,000
1,00,000
25,000


15,00,000
3,00,000
12,00,000
3,50,000
2,00,000
50,000
Total
22,50,000
36,00,000
II. ASSETS
4.       Non-Current Assets
Fixed Assets (Tangible)
5.       Current Assets
d)      Inventories
e)      Trade Receivables
f)       Cash and Cash Equivalents

15,00,000

2,50,000
4,50,000
50,000

22,50,000

4,50,000
8,00,000
1,00,000
Total
22,50,000
36,00,000
Stock Turnover Ratio or Inventory Turnover Ratio
1. From the following details, calculate the Inventory Turnover Ratio:
Cost of Goods Sold
Inventory in the beginning of the year
Inventory at the close of the year
4,50,000
1,25,000
1,75,000
2. Opening Inventory Rs. 76,250; Closing Inventory Rs. 98,500; Revenue from Operations, i.e. Sales Rs. 5,20,000; Sales Returns Rs. 20,000; Purchases Rs. 3,22,250. Calculate the Stock or Inventory.
3. Calculate the Stock or Inventory Turnover Ratio from the data given below:
Inventory in the beginning of the year
Inventory at the end of the year
Purchases
20,000
10,000
50,000
Carriage Inwards
Revenue from Operations, i.e. Sales
5,000
1,00,000
4. From the following details, calculate the value of Opening Inventory.
Closing Inventory
Total Sales
Total Purchases
Goods are sold at a profit of 25% on cost.
68,000
4,80,000 (including Cash Sales Rs. 1,20,000)
3,60,000 (including Credit Purchases Rs. 2,39,200)
5. Calculate the Stock or Inventory Turnover Ration from the following:
Opening Inventory
Closing Inventory
Revenue from Operations, i.e. Sales
29,000
31,000
3,20,000
6. From the following information, determine the Opening and Closing Inventories: Inventory Turnover Ratio 5 Times, Total Sales Rs. 2,00,000, Rate of Gross Profit on Sales 25%. Inventory is more by Rs. 4,000 than the Opening Inventory.
7. Rs. 2,00,000 is the Cost of Goods Sold i.e. Cost of Revenue from Operations during 2011-12. If Inventory Turnover Ratio is 8 times, calculate the inventories at the end of the year. Inventories at the end are 1.5 times than that in the beginning.
8. Sales (Revenue from Operations) Rs. 4,00,000; Gross Profit Rs. 1,00,000; Closing Inventory Rs. 1,20,000; Excess of Closing Inventory over Opening Inventory Rs. 40,000. Calculate the Stock or Inventory Turnover Ratio.
9. Cost of Goods Sold i.e. (Revenue from Operations) Rs. 5,00,000; Purchase Rs. 5,50,000; Opening Inventory Rs. 1,00,000. Calculate the Stock Turnover Ratio.
10. Following figures have been extracted from Shivalika Mills Ltd.:
Stock in the beginning of the year Rs. 60,000;
Inventory at the end of the year Rs. 1,00,000.
Inventory Turnover Ratio 8 Times;
Selling price 25% above cost.
Compute the amount of Gross Profit and Sales (Revenue from Operations).
11. Following figures have been extracted from Shivalika Mills Ltd.:
Stock in the beginning of the year Rs. 60,000;
Inventory at the end of the year Rs. 1,00,000.
Inventory Turnover Ratio 8 Times;
Selling price 25% Sales.
Compute the amount of Gross Profit and Sales (Revenue from Operations).
12. Stock Turnover Ratio 5 times; Cost of Goods Sold Rs. 18,90,000. Calculate the Opening Inventory and Closing Inventory if Inventory at the end is 2.5 times more than that in the beginning.            [Opening Inventory – Rs. 1,68,000 and Closing Inventory – Rs. 5,88,000]
13. Rs. 3,00,000 is the Cost of Goods Sold. Inventory Turnover Ratio 8 times; Inventory in the beginning is 2 times more than the Inventory at the end. Calculate the value of Opening and Closing Inventories.            [Opening Inventory – Rs. 56,250 and Closing Inventory – Rs. 18,750]
14. From the given information, calculate the stock Turnover Ratio: Sales = Rs. 4, 00,000; Gross Profit Ratio=25%; Opening Stock was 1/3rd of the value of the Closing stock. Closing Stock was 30% of Sales.
Debtors’ Turnover Ratio
1. Compute the Debtors’ turnover Ratio from the following:
Gross Sales (Revenue from Operations)
Debtors in the beginning of year
Debtors at the end of year
Sales Return
9,00,000
83,000
1,17,000
1,00,000
7,50,000
1,17,000
83,000
50,000
2. Rs. 1,75,000 is the Net Sales (i.e. Revenue from Credit Sales) of a concern during 2011-12. If Debtors’ turnover Ratio is 8 times, calculate debtors in the beginning and at the end of the year. Debtors at the end is Rs. 7,000 more than that in the beginning.          
Creditors’ Turnover Ratio or Payable Turnover Ratio
1. Calculate the Creditors’ Turnover Ratio for the year 2011-12 in each of the alternative cases:
Case 1: Closing Trade Payable Rs. 35,000; Net Purchases Rs. 3,60,000; Purchases Return Rs. 60,000; Cash Purchases Rs. 90,000.
Case 2: Opening Trade Payables Rs. 15,000; Closing Trade Payables Rs. 45,000; Net Purchases Rs. 3,60,000.
Case 3: Closing Trade Payables Rs. 45,000; Net Purchases Rs. 3,60,000.
Case 4: Closing Trade Payables (including Rs. 25,000due to a supplier of machinery) Rs. 55,000; Net Credit Purchases Rs. 3,60,000.
2. Calculate the Creditors’ Turnover Ratio and Average Debt Payment Period for the year 2011-12 from the following information:


Sundry Creditors
Bills Payable
1st April, 2011
Rs.
1,50,000
50,000
31st March, 2012
Rs.
4,50,000
1,50,000
Total Purchases Rs. 21,00,000; Purchases Return Rs. 1,00,000; Cash Purchases Rs. 4,00,000.
Gross Profit Ratio
1. From the following, calculate the Gross Profit Ratio:  Gross Profit: Rs. 50,000; Revenue from Operations, i.e. Sales Rs. 5,50,000; Sales Return: Rs. 50,000.
2. (i) Compute the Gross Profit Ratio from the following information: Cost of Goods Sold Rs. 5,40,000; Net Sales (Revenue from Operation) Rs. 6,00,000; Sales Return Rs. 10,000.
(ii) Compute the Gross Profit Ratio from the following information: Revenue from Operations, i.e. Sales = Rs. 4,00,000; Gross Profit 25% on Cost.
3. (i) Revenue from Operations: Cash Sales Rs. 4,20,000; Credit Sales Rs. 6,00,000; Return Rs. 20,000. Cost of Goods Sold Rs. 8,00,000. Calculate the Gross Profit Ratio.
(ii) Average Inventory Rs. 1,60,000; Stock Turnover Ratio 6 Times; Selling Price 25% above cost. Calculate the Gross Profit Ratio.
(iii) Opening Inventory Rs. 1,00,000; Closing Inventory Rs. 60,000; Stock Turnover Ratio 8 Times; Selling Price 25% above cost. Calculate the Gross Profit Ratio.
Operating Ratio
1. Cost of Goods Sold Rs. 3,00,000. Operating Expenses Rs. 1,20,000. Revenue from Operations: Cash Sales  Rs. 5,20,000; Return Rs. 20,000. Calculate the Operating Ratio.
2. From the following details, calculate the Operating Ratio:

Cost of Goods Sold
Operating Expenses
Rs.
52,000
18,000

Revenue from Operations (Sales)
Sales Return
Rs.
88,000
8,000
3. Operating Ratio 92%; Operating Expenses Rs. 94,000; Revenue from Operations, i.e. Sales Rs. 6,00,000; Sales Return Rs. 40,000. Calculate the Cost of Goods Sold.
4. (i) Cost of Goods Sold Rs. 2,20,000; Net Revenue from Operations i.e. Sales Rs. 3,20,000; Selling Expenses             Rs. 12,000; Office Expenses Rs. 8,000; Depreciation Rs. 6,000. Calculate the Operating Ratio.
(ii) Net Revenue from Operations, i.e. Cash Sales Rs. 4,00,000; Credit Sales Rs. 1,00,000; Gross Profit Rs. 1,00,000; Office and Selling Expenses Rs. 50,000. Calculate the Operating Ratio.
Operation Profit Ratio
1. Calculate the Operating Profit Ratio in each of the following alternatives cases:
Case 1: Sales (Net Revenue from Operations) Rs. 10,00,000; Operating Profit Rs. 1,50,000.
Case 2: Sales (Net Revenue from Operations) Rs. 6,00,000; Operating Cost Rs. 5,10,000.
Case 3: Sales (Net Revenue from Operations) Rs. 3,60,000; Gross Profit 20% on sales; Operating Expense Rs. 18,000.
Case 4: Sales (Net Revenue from Operations) Rs. 4,50,000; Cost of Goods Sold Rs. 3,60,000; Operating Expenses Rs. 22,500.
Case 5: Cost of Goods Sold Rs. 8,00,000; Gross Profit 20% on Sales; Operating Expenses Rs. 50,000.
Cash Flow Statement
Expected Marks: 6
Q.1. What is Cash flow statement according to AS - 3? What are its need and objectives?
Q.2. Mention some features of cash flow statement.
Q.3. Mention three examples of cash flow from operating activities, investing activities and financing activities.
Q.4. Practical Problems: Preparation of cash flow statement using Direct method and Indirect method. Coming soon

MULTIPLE CHOICE QUESTIONS AND ANSWERS FOR AHSEC – CLASS 12
Accounting for Not for Profit organisation
State whether each of the following statements in true or false:
a)      Receipts and Payments Account is a real account. True
b)      Income and Expenditure Account is a real account. False
c)       Receipts and Payments Account records only the revenue receipts and revenue payments. False
d)      Receipts and Payments Account records only capital receipts and capital payments. False
e)      Receipts and Payments Account records both revenue and capital receipts and payments. Received or paid during a year. True
f)       Income and Expenditure Account of non-trading concern is equivalent to profit and loss account of a trading concern. True
g)      An Income and Expenditure Account open with a balance. False
h)      Balance of Receipts and Payments Account at the close of the period is the profit earned by the concern.  False
i)        An Income and Expenditure Account is not followed by a balance sheet. False
j)        A Receipts and Payments Account is followed by a balance sheet. False
k)      Receipts and payment account shows receipts and payments for a particular period. True
l)        Subscription in arrear is shown on the credit side of income and expenditure account and assets side of balance sheet.                   True
m)    Admission fees should be treated as revenue unless the amount is pretty large.       True
n)      Profit on sale of furniture is credited to income and expenditure account.                    True
o)      Life membership fees should be capitalized.                               2011                                                       True
p)      If there is a specific fund for prize, then income or expenditure relating to prize distribution should not be shown in the income and expenditure account.                                                                                                True
q)      Income from investment of any fund is added with the respective firm.                        True
r)       Receipts and Payments account is prepared on cash basis of accounting.       2013       True
s)       Income and expenditure account is prepared on accrual basis of accounting.                               True
Fill in the blanks:
a)      Fund based accounting is maintained by Non trading Concern.           2009
b)      A life membership fee is a Capital Receipt2014
c)       Income and Expenditure account records transactions of Revenue nature only.                         2012
d)      Receipts and Payments account record transactions of both capital and revenue nature.                      2010
e)      A debit balance in the Income and Expenditure A/c denotes excess of Expenditure over Income.
f)       A credit balance in the Income and Expenditure A/c denotes excess of Income over Expenditure.
g)      Debit balance in income and expenditure a/c is Deficit and credit balance is Surplus.
h)      Receipts and Payments account is a Real Account.  
i)        Income and expenditure account is a Nominal Account.
j)        Not for profit organisation prepares Income and Expenditure a/c and Receipts and Payments a/c. 2010
k)      Subscription received in advance is treated as Liability. (any amount received in advance is a liability)          2012
l)        Legacy is an item of Non-recurring nature. (Non-recurring = capital receipt)
m)    Endowment fund is a capital receipt.                              2011
n)      Receipts and Payments Account and Income and Expenditure Account are prepared by a Non-trading concern.
o)      Income and Expenditure Account is a Revenue Account.
p)      Income received in advance is a Liability.
q)      Receipts and Payments Account generally starts with a balance.
r)       An Income accrued is shown on the assets side of the balance sheet.
s)       Interest received on the investment of a specific fund is credited to Specific Fund Account
t)       Capital Grant is added to Capital Fund.
u)      Expenses of tournament are debited to Tournament Fund Account.
v)      Income and Expenditure Account starts with No balance.
w)    Receipts and Payments account is prepared on Cash basis.
x)      Income and Expenditure Account is prepared on Accrual basis.
Choose the correct alternative in the following:
(a) Receipts and Payments account shows:
(i) Income and expenditure
(ii) Cash receipts and cash payments.
(b) Income and Expenditure Accounts reveals:
(i) Cash in hand and at bank.
(ii) Surplus or deficit.
(c)   Income and Expenditure Account records transactions of:-
(i) Both revenue and capital nature.
(ii) Only revenue nature.
(d) Receipts and Payments Account is:
(i) An Asset Account.
(ii) A Revenue Account.
(e)  Donation received for a special purpose is:-
(i) Credited to the Income and Expenditure Account.
(ii) Credited to a separate Account.
(f) Subscription received in advance is:
(i) An asset.
(ii) A liability.
ACCOUNTING FOR PARTNERSHIP
Choose the correct alternative:
(i) Partnership:
(a) Increases individual risk,
(b) Decreases individual risk,
(c) Does not involves any individual risk,
(ii) In the absence of any agreement partners share profits and losses –
(a) In the ratio of Capital;
(b) Equally;
(c) time devoted to the business;
(iii) In the absence of any agreement, interest on partner’s loan –
(a) Shall be allowed @ 5%.
(b) shall be allowed @6%.
(c) Should not be allowed at all.
(iv) In the absence of any agreement, partners,
(a) Shall be allowed salaries
(b) Shall not be allowed salaries
(c)  Shall be allowed salaries to those who work for the business.
(v) Unless otherwise agreed upon, the partner’s capitals should be:
(a) Fixed
(b) Fluctuating
(c) Any of the above two methods.
(vi) Interest on capital is credited to –                     2016
(a) Partner’s Capital Accounts;
(b) Profit & Loss Account;
(c) Interest Account.
(vii) Current Account of the partners should be opened when –
(a) Capitals are fluctuating;
(b) Capitals are fixed;
(c)  Capital is either fixed or fluctuating.
(viii) Interest on Capital is a –
(a) Charge against profits;
(b) Appropriation of profits.
(c) None of the two.
(ix) Interest on partner’s capital is paid –
(a) Out of profits;
(b) Out of capital;
(c) None of the above two.
(x) In the absence of any agreement interest on partner’s capital is calculated
(a) @6%
(b) @5%
(c) At no rate.
(xi) Interest on capital is generally calculated on –
(a) Opening capital;
(b) Closing capital;
(c) Average capital.
(xii) Current Account of a partner may show –
(a) Credit balance
(b) Debit balance
(c) Either of the two.
(xiii) In a partnership firm on partner can be admitted without the consent of
(a) Majority of existing partners.
(b)Senior most partners.
(c) All the existing partners.
Fill up the blanks:
a.       Sec. 4 (3/4/5) of the Indian Partnership Act 1932 defines a partnership.                          2010
b.      A partnership is an Association of two or more partners.                      2008
c.       The document which contains the terms and conditions of partnership is called Partnership is called Partnership Deed.
d.      Liability of a partner is Unlimited.
e.      Registration of a partnership firm is Voluntary.
f.        The members of a Partnership business are collectively known as Firm.         2016
g.       A new partner can be admitted into the firm only when all partners Agree.
h.      Minimum number of partners is Two and the maximum is twenty for a non banking firm.
i.         Partners are mutual Agents for each other.
j.        A Partner acts as an agent for the firm.                          2015
k.       Interest on Partner’s loan is to be credited to his loan account.          2009
l.         When partner’s capital account is fixed then partner’s current account is prepared.  2010, 2013, 2015
m.    If drawing made with equal amount in the beginning of every month for whole year, interest on drawings is to be calculated for an average period of 6.5 months.
n.      In absence of Partnership agreement interest on partner’s loan will be calculated at 6% p.a. (5% / 6% / 8%) [H.S.’ 11], 2016
o.      The partner who does not participate actively in partnership business is knows as nominal (nominal / inactive) partner.       [H.S. 11]
p.      Usually interest on partner’s capital and partner’s salaries is paid out of profits.         2008       True
State whether each of the following statements is true or false.
a.       It is necessary to have a partnership agreement in writing. False
b.      Usually interest on Partner’s Capital is paid, only out of profits.          [H.S.’ 08]              True
c.       Liability of partner in a partnership firm is limited.                     2009                       False
d.      Partnership arises from contract not from status. True
e.      It is necessary to have a partnership agreement in writing.   False
f.        The business of the firm can be conducted even by one partner. False
g.       The right to share a profit is full proof of one being a partner. False
h.      Interest on partner’s capital is allowed @ 6% p.a. False
i.         Under fixed capital method an addition to capital will be shown in partner’s capital account. False
j.        In case of fixed capital, a partner’s Capital Account always shows a credit balance.    2016       True
k.       Partner’s current account may show both debit and credit balance.                 True
l.         Rent on the partner’s property is a charge against profit.                      True
m.    Interest on a partner’s loan shall be paid even if there are losses in the firm. True
n.      Usually interest on capital is paid only out of profits. True
o.      In the absence of any agreement regarding profit sharing ratio, profit or loss must be shared equally. True
p.      In the absence of partnership deed, no interest is charged on drawings.       2009                       True
q.      A partnership can be formed only for a legal business.                           True
r.        Liability of a partner is limited.            2009       False
FINAL ACCOUNTS OF PARTNERSHIP FIRMS
Stare whether the following statements are True or False:
a)      A partnership from of business has to follow a statutory form of Balance Sheet while it prepares its final accounts. False
b)      Interest on Capital is a charge against profits. False
c)       Transfer of profit to Reserve is an appropriation of profits. True
d)      Legal fees on the acquisition of land are to be debited to profit and Loss account. False
e)      Interest on loan is compulsory unless otherwise stated in the partnership deed.  True
Fill in the blanks:
a.       The revenue expenditure from which benefit is expected in future is called deferred revenue expenditure.
b.      Carriage incurred on the purchase of assets is debited to asset account.
c.       Interest on partner’s loans is to be credited to his Loan account.
d.      When goods are bought on credit but are omitted to be recorded, the purchase account will be debited and creditors account will be credited with the price of the goods.
e.      When goods are sold on credit but are omitted be recorded in the books, the same is to be debited to debtors account and to be credited to sales account.
f.        When goods are sold but are included in closing stock because of non-delivery of such goods, it increases gross profit.
g.       Closing stock should be valued at cost price or market price whichever is lower.
h.      When the sales include the sale of an asset, sales account is debited and assets account is credited with the sale price of the asset.
i.         When purchases include goods bought for private use of partner, it is to be debited to drawings account and credited to purchase account with the value of such goods.
j.        Under valuation of closing stock decreases gross profit and over valuation closing stock increases gross profit.
k.       Use of goods as free sample is to be debited to advertisement account and credited to purchase account.
ADMISSION OF A PARTNER
State whether each of the following statements is ‘True’ or ‘False’:
a.       When a new partner is admitted, the old firm has to be dissolved. False
b.      Premium brought in by an incoming partner is shared by the old partners in their old profit sharing ratio. False
c.       On admission, when goodwill is raised, it is to be credited to the old partner’s capital accounts in their old profit sharing ratio. True
d.      When goodwill exists in the Balance Sheet at its full value, the incoming partner is to bring in proportionate amount of such goodwill as his share of premium for goodwill. False
e.      Goodwill raised on admission of a partner is written off in sacrificing ratio. False
f.        Profit on revaluation is credited to old partner’s capital accounts in their old profit sharing ratio. True
g.       Increase in the value of an asset on revaluation is debited to the revaluation account. False
h.      On admission, undistributed profit is divided among the old partners in the old profits sharing ratio. True
i.         Provision made against debtors is credited to debtors account. False
j.        When the altered values on revaluation are not being taken into accounts, a memorandum Revaluation Account is opened. True
Choose the correct alternative:
(a) When a new partner brings in premium, the same is credited to –
(i) Cash Account.
(ii) Goodwill Account.
(iii) None of the two.
(b) In case of admission of a new partner.
(i) The firm is dissolved.
(ii) The partnership is dissolved.
(iii) Both the partnership and the firm are dissolved.
(c) When a new partner is admitted, it requires the consent of
(i) All the partners.
(ii) Majority of the partners.
(iii) Any one of the partners.
(d) The premium brought in by the incoming partner is shared by the old partners –
(i) In their sacrificing ratio.
(ii) In their profit sharing ratio.
(iii) In their capital ratio.
(e) Goodwill is –
(i) An intangible asset.
(ii) A fictitious assets.
(iii) A current asset.
Fill in the blanks:
a.       Premium for goodwill brought in by the incoming partner is a compensation for the loss suffered by the old partners in terms of share in profits.
b.      When a new partner does not bring his share of premium goodwill is raised in the books at its full value.
c.       The value of goodwill varies on the basis of profits of the business.
d.      Revaluation account is a nominal account.
e.      Profits or losses arise on the revaluation of assets and liabilities are shared by the old partner’s in old ratio.                         2011, 2014
f.        A revaluation account is to be opened when the values of assets and liabilities are required to be altered.
g.       Goodwill is an intangible asset.                         2010
h.      Memorandum Revaluation Account is opened when after revaluation the values of assets and liabilities are kept unaltered.
i.         When goodwill appears in the Balance Sheet at its full value, premium brought in by the new partner is credited to Capital Account of the new partner.
j.        Premium brought in by an incoming partner should be proportionate to his gaining ratio.
k.       On admission, a new partner gets two rights viz-right to assets and right to share profits.
l.         Assessed value of reputation of a business is known as goodwill.
m.    Extra earning capacity of a firm is known as Goodwill.                            2013, 2015
n.      In a partnership firm, no new partner can be admitted without the consent of all the existing partners.
o.      The document containing terms and conditions is called the Partnership Deed.
p.      The registration of a partnership firm is voluntary.
q.      In a partnership firm, doing banking business, the maximum number of members is ten.
r.        In case of admission of a partner, the incoming partner has to pay his share of premium to the old partner in his ratio of gain.
s.       Goodwill is written off in the new ratio in case of partnership after the admission of new partner.
t.        In case of retirement of a partner, the goodwill payable to the retiring partner is to be shared by the remaining partners in their ratio of gains.
u.      In case of retirement of partner, the premium brought in by the incoming partner is shared by the old partner in their ration of sacrifice.
v.       In case of retirement of partner, the retiring partner gets his share of goodwill from the remaining partners in the ratio of gains.
RETIREMENT & DEATH OF A PARTNER
State whether each of the following is true or false:
a.       When a partner dies, the Joint Life Policy money is only to be credited to the decreased partner’s executor’s account. False
b.      A retiring partner may claim a share in the profits of the firm even after his retirement if his accounts are not settled. True
c.       The retiring partner’s share of goodwill is debited to the remaining partners capital accounts in the gaining ratio. True
d.      A dormant partner is to give a public notice of his retirement. False
e.      In case of admission, retirement or death of a partner, unrecorded assets brought into account is credited to revaluation account.                       2012       True
f.        In case of admission, retirement or death of a partner, unrecorded liabilities brought into account is debited to revaluation account.                       True
g.       The amount due to the retiring partner is transferred to his loan account if it is not settled immediately. True                                                                2014, 2016
h.      The object of a Joint Life Policy is to provide funds for the payment of decreased partner’s balance of capital account. True
i.         The deceased partner’s executor is entitled to a share of profit for the period upto his/her death. True                                 2015
Choose the most appropriate answer:
(a) In the event of a death of a partner, accumulated profits and Losses are shared by partners:                2015
(i) In old profit sharing ratio.
(ii) In new profit sharing ratio.
(iii) In the gaining ratio.
(b) When a partner retires and his claim is not settled by the remaining partners. He is entitled to: -
(i) Interest at 6% p.a. on the amount due to him.
(ii) A share of profit proportionate to the amount due to him.
(iii) Either of the above two at his option.
(c) On retirement, profit on revaluation of assets and liabilities is credited to:-
(i) All the partners in old profit sharing ratio.
(ii) Remaining partners in new profit sharing ratio.
(iii) The capital account of the retiring partners only.
(d) On retirement, retiring partner’s share of goodwill is credited to:-
(i) All partners.
(ii) Remaining partners.
(iii) Retiring partner only.
(e) On retirement of partner, when the remaining partners continue the business:
(i) The partnership is dissolved.
(ii) The Firm is dissolved.
(iii) None of the above two.
Dissolution of Partnership
Q. Multiple Choice Questions: Choose the correct answer to the following:
1. Realisation A/c is a (a) Nominal A/c (b) Real A/c (c) Personal A/c (d) None of the above.
2. When the realisation expenses are to be borne by a partner, it is credited to: (a) Partner's capital A/c (b) Cash A/c (c) Realisation A/c (d) Profit & Loss A/c.
3. At the time of dissolution of a firm, assets taken over by a partner should be (a) Credited to Realisation A/c (b) Debited to Realisation A/c (c) Realisation A/c should neither be debited nor credited.     2012
4. An unrecorded asset realised at the time of realisation is credited to: (a) Realisation A/c (b) Revolution A/c (c) Capital Accounts.             2013
5. Unrecorded liability when paid on dissolution of a firm is debited to (a) Realisation A/c (b) Liability A/c (c) Partner's Capital A/c
6. Profit or loss on realisation should be divided among partners in the. (a) Profit sharing ratio (b) Equally (c) Capital ratio
7. Provision for doubtful debts appearing at the time of dissolution of a firm transferred to: (a) Debtors A/c (b) Realisation A/c (c) Cash A/c
8. General reserve appearing at the time of dissolution is transferred to (a) Bank A/c (b) Realisation A/c (c) Capital A/c’s.
9. Goodwill A/c is closed at the time of dissolution by transferring to: (a) Realisation A/c (b) Liability A/c (c) Capital A/c
10. Joint life policy reserve appearing at the time of dissolution of a firm is transferred to (a) Capital A/c’s (b) Realisation A/c (c) Neither two
11. At the time of dissolution, all the assets of the firm are transferred to the realisation account at ________ values. (a) Market (b) Book (c) Asset
12. The first step in the dissolution process is to: (a) Prepare a balance sheet on the date of dissolution; (b) Distribute the available cash to the creditors; (c) None of these.
13. If the business is sold as a going concern, cash balance is also transferred to:                                2014
a) Realisation account
b) Revaluation account
Q. Given below are certain statements. Some of these statements are true and some of these are false. Write T’ against true statement and ‘F’ against false statements.
a)      Dissolution of firms and dissolution of partnership are two distinct legal concepts.                    T
b)      At the time of dissolution an account including cash and bank are transferred to realisation account. F
c)       On dissolution of a firm, business operations of the firm are closed down. T
d)      After the preparation of realisation account, Gain or loss of realisation account transferred to Partners capital account. T
e)      Amount realised from the sale of an unrecorded asset is recorded in Realisation Account. T
f)       Balance of general reserve is transferred to partners’ capital account. T
g)      Realisation expenses paid by the partners on behalf of the firm are recorded in realisation account and partners capital account. T
h)      When partnership is dissolved, a liability taken by partner is debited to his capital A/c. F
i)        If any partner has a debit balance in his capital A/c, then he is required to bring in Cash to clear it off. T
j)        A secured creditor always stands in a stronger position than an unsecured creditor. T
k)      Partner’s capitals are transferred to the Realisation Account with other liabilities of the firm. F
l)        Partner's loan is transferred to the Realisation Account. F
m)    Advance to a partner is transferred to Realisation Account. F
n)      Loan from the wife of a partner is not transferred to Realisation Account. F
o)      Employee’s provident fund is transferred to the Capital accounts of the partners in their profit sharing ratio. F
p)      Investment Fluctuation Reserve is transferred to the Realisation Account. T
q)      Realisation account is prepared to find out the net effect of realisation of various assets and payment of various liabilities. T
r)       All fictitious assets are transferred to the partners' capital accounts in the ratio of their respective capitals. F
s)       The liability of the partners is joint and several. T
SHARES AND DEBENTURES
State whether the following statements are true or false.
a.       Share application, share allotment and share call is a personal account.                          True
b.      Company has perpetual succession. True
c.       Every member of a company can take part in management of the company. False
d.      The shareholders of a company are liable for the acts of the company. False
e.      A company is an artificial person. True
f.        A member can bind the company by his action. False
g.       A company can sue and be sued by its members. True
h.      Shares of a company are generally transferable.  True                                            2014
i.         The liability of the members of a company is generally limited. True                 2008
j.        A company has a separate legal entity different form its members.  True
k.       A private can issue a prospectus. False
l.         A preference shareholder gets interest at a fixed rate.          False                     2015
m.    A preference shareholder gets divided at a fixed rate.           True      
n.      Dividend is an appropriation of profit.                            True
o.      Debenture interest is a charge against profit.              True
p.      Debenture interest is payable only when a company earns profits.                                  False     2013
q.      Discount on reissue of forfeited shares cannot exceed the amount received on forfeited shares. True 2012, 2013
In each of the following cases select the correct alternatives.
(a) Preference shareholders have preferential rights as to:
(i) Dividend only.
(ii) right as regards taking part in management.
(iii) both dividend and return of capital on winding up.
(b) Equity/Preference shareholders are
(i) Members OR owners.
(ii) Creditors.
(iii) Customers of the company.
(c) Public Limited Companies in India cannot issue –
(i) Preference share.
(ii) Equity share.
(iii) Deferred share.
(d) Premium on issue of shares can be used for –
(i) Payment of dividend.
(ii) Issue of bonus shares.
(iii) Remuneration to management.
(e) Premium on issue of shares should be shown –
(i) On the assets side of the Balance Sheet.
(ii) On the liabilities side of the Balance Sheet.
(iii) In the Profit and Loss Account.
(f) Share premium can’t be used for –
(i) Transferring to general reserve.
(ii) Writing off discount on Shares.
(iii) Writing off Preliminary expenses.
(g) Subject to the permission of the court, share discount cannot be more than –
(i) 5% on the nominal value.
(ii) 10% on the nominal value.
(iii) 15% of the nominal value.
(h) The portion of the capital which can be called up only on winding up of the company is called –   2013
(i) Authorised Capital.
(ii) Subscribed Capital.
(iii) Reserve Capital.
(i) Right shares can be issued only to –
(i) Directors.
(ii) Existing shareholders.
(iii) New shareholders.
(j) Balance of shares forfeited account after reissue is transferred to –
(i) Reserve Fund.
(ii) Profit & Loss Account.
(iii) Capital Account.
(k) Share application money cannot be less than –
(i) 10% of the material value of a share.
(ii) 5% of the material value of a share.
(iii) 7 ½ of the material value of a share.
(l) Debenture holders are:           2010, 2014, 2016
(i) The member of a company.
(ii) The creditor of a company.
(iii) The customers of a company.
(m) Balance sheet shows:                            2015
(i) Financial position of a company
(ii) Cash flow of a company
(iii) Earning efficiency of a company
(n) Profit and loss account shows:
(i) Financial position of a company
(ii) Cash flow of a company
(iii) Earning efficiency of a company
Fill in the blanks:
a.       Shares having preferential right as to dividend and repayment of capital are known as Preference shares.
b.      A situation when public subscription is less than the shares offered is known as Under subscription.
c.       A public company cannot start its business unless it gets a certificate of Commencement.
d.      Profit and loss account is also known as Income Statement.                 2016
e.      Balance sheet is also known as Position Statement.                                               
f.  Minimum number of members of a public limited company is 7 and that of a private limited company is 2.
g.       Minimum number of directors of a public limited company is 3 and that of a private company is 2.
h.      A public limited company cannot proceed with the allotment of shares unless it receives minimum subscription.
i.         A public limited company is to write Limited after its name and a private limited company is to write the words Private Limited after its name.
j.        The person who take initiative in the formation of a company are known as promoters.
k.       Memorandum of Association is the constitution of a company.
l.         Articles of Association contains rules for internal management.                         2008
m.    Rates of Interest on calls in arrear and calls in advance as per table ‘A’ are 10% and 12% respectively.  2014
n.      A newly promoted company cannot issue shares at a discount.

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