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IGNOU Solved Question Papers: ECO - 14 (December' 2013)



Term-End Examination: December, 2013
ECO-14: ACCOUNTANCY-II
Note: Attempt any four questions including question no. 1 which is compulsory.
1. Attempt any two of the following questions: 7, 7
(a) What do you mean by departmental accounts? Why are they considered necessary?
(b) What are preference shares? State the rules relating to their redemption.
(c) State the legal provisions for settlement of accounts of a partnership firm after dissolution.
(d) Explain the nature and limitations of financial statements of a company.
2. RST Ltd. sells goods on hire purchase terms at a profit of 25% on hire purchase price (33. 1/3 % of cost) following are the transactions for the year ending March 31, 2012: 12


Rs.
April 1 :
Stock out on hire purchase (at cost)
Stock on hand at shop  (at cost)
Installments due but not yet received
Cash received
3,00,000
50,000
30,000
8,00,000
March 31 :
Stock out on hire purchase (at cost)
Stock on hand at shop (at cost)
Installments due but not yet received
3,45,000
70,000
50,000
Ascertain the profit or loss on hire purchase business by preparing Hire Purchase Trading Account. Also show your working notes for ascertainment of missing figures, if any.
Ans:
H.P. Trading A/c
To Opening balance :
H.P. Stock (IP)
Instalment due
To Goods Sold on H.P.
Cost  =    6,60,000
Profit =    2,20,000
To Stock reserve A/c (loading)
To Profit for the year

4,00,000
30,000


8,80,000
1,15,000
2,05,000
By Cash
By Goods sold on H.P. A/c (loading)
By Stock reserve A/c (loading)
By Closing balance :
H.P. Stock (IP)
Instalment due
8,00,000
2,20,000
1,00,000

4,60,000
50,000

16,30,000

16,30,000
Stock on Hand A/c
To Balance b/d
To Purchase A/c (Balancing figure)
50,000
6,80,000
By Goods Sold on H.P. A/c (Cost)
By Balance c/d
6,60,000
70,000

7,30,000

7,30,000
H.P. Stock A/c (At I.P)
To Balance b/d (3,00,000 + 1,00,000)
To Goods sold on H.P. A/c (At I.P)
4,00,000
8,80,000
By Instalment due A/c
By Balance c/d (3,45,000 + 1,15,000)
8,20,000
4,60,000

12,80,000

12,80,000
Instalment due A/c
To Balance b/d
To H.P. Stock A/c
(Instalment due during  the year)
30,000
8,20,000
By Cash A/c
By balance c/d
8,00,000
50,000

8,50,000

8,50,000

3. A, B and C were partners in a firm sharing profits and losses in the ratio of 5: 3: 2 respectively. The balance sheet of the firm as on 31st March, 2012 stood as follows: 12
Liabilities
Amount(Rs.)
Assets
Amount(Rs.)
Sundry Creditors
Bills Payable
General Reserve
Capitals :
               A
               B
               C
50,000
75,000
1,00,000

1,50,000
2,00,000
1,25,000
Cash at Bank
Debtors :                                               85,000
Less Prov. For D.D.                              12,500
Stock
Machinery
Furniture
Buildings
27,500

72,500
50,000
2,00,000
1,00,000
2,50,000

7,00,000

7,00,000
C retires on that date subject to the following adjustments:
(a) Goodwill of the firm to be valued at Rs. 75,000.
(b) Machinery to be depreciated by 10%.
(c) Buildings to be appreciated by 10%.
(d) Stock to be appreciated by 20%.
(e) Provision for doubtful debts is increased by Rs. 7,500.
Prepare Revaluation Account, Partners Capital Accounts and the new balance sheet of the firm after C's retirement.
Ans:
Revaluation Account
To Machinery
To Provision for b/d
To Profit on revaluation
A = 7,500 x 5/10
B = 7,500 x 3/10
C = 7,500 x 2/10
20,000
7,500

3,750
2,250
1,500
By Building
By Stock
25,000
10,000

35,000

35,000
Partner's Capital A/c
Particulars
A
B
C
Particulars
A
B
C
To C’s Capital A/c
To C/s Loan A/c
To Balance c/d
9375

1,94,375
5625

2,26,625

1,61,500
By balance b/d
By General reserve A/c
By Revaluation A/c
By A’s Capital A/c
By B’s Capital A/.c
1,50,00
50,000
3,750
2,10,000
30,000
2,250
1,25,000
20,000
1,500
9,375
5,625

2,03,750
2,32,250
1,61,500

2,03,750
2,32,250
1,61,500
Balance Sheet
Liabilities
Amount
Assets
Amount
Sundry Creditors
Bills Payable
C’s Loan A/c
Capitals
A = 1,94,375
B = 2,26,625
50,000
75,000
1,61,500


4,21,000
Cash at Bank
Debtors                                                     85,000
Less : Provision For doubtful debt       20,000
Furniture
Machinery (2,00,000 – 20,000)
Buildings (2,50,000 + 25,000)
Stock (5,000 + 20%)
27,500

65,000
1,00,000
1,80,000
2,75,000
60,000

7,07,500

7,07,500
Working Note: -
(i) A: B: C = 5: 3: 2 (old ratio)
A: B = 5: 3 (new ratio)
Gaining ratio (A: B) = 5: 3
(ii) C’s share of goodwill = 75,000 x 2/10 = 15,000
Contributed by A = 15,000 x 5/8 = 9375
Contributed by B = 15,000 x 3/8 = 5,625
4. G Ltd. offered for public subscription 20,000 equity shares of Rs. 10 each at a premium of 10% payable Rs. 2 on application, Rs. 4 on allotment including premium, Rs. 3 on first call, and Rs. 2 on second and final call. Applications for 26,000 shares were received. The applications for 4,000 shares were rejected, and pro-rata allotment was made to the remaining applicants. Both the calls were made and all the monies were duly received except the final call on 500 shares which were forfeited. These were later reissued at Rs. 8.50 per share as fully paid. Give the necessary journal entries to record these transactions in the books of the company and prepare the balance sheet.
Ans:
Journal entries
In the books of G Ltd.
Particulars
L.F.
Amount
Amount
Bank A/c                                                                     Dr.
To Equity share application A/c
 (Being the application money received on 26,000 shares @ Rs.2 each)

52,000

52,000
Equity Share application A/c                                       Dr.
To Equity share Capital A/c
To Equity share allotment A/c
To Bank A/c
(Being the application money on 20,000 shares transferred to equity share capital and excess application of 4000 shares were rejected and balance transferred to allotment)

52,000


40,000
4,000
8,000
Equity Share allotment A/c (20,000 x 4)                       Dr.
To Equity share capital A/c
To Securities premium A/c
(Being the allotment money due on 20,000 shares @ Rs.4 each including premium of Re.1 per share)

80,000

60,000
20,000
Bank A/c (80,000 – 4,000)                                           Dr.
To Equity share allotment A/c
(Being the allotment money received after adjusting excess application money)

76,000


76,000
Equity share 1st Call A/c (20,000 x 3)                           Dr.
To Equity Share Capital A/c
(Being the 1st call money due on 20,000 shares @ Rs.3 each)

60,000

60,000
Bank A/c                                                                       Dr.
To Equity Share 1st Fall A/c
(Being the 1st call money received on 20,000 shares @ Rs.3 each)

60,000

60,000
Equity Share 2nd & Final call A/c                                         Dr.
To Equity Share Capital A/c
(Being the 2nd and final call money due on 20,000 shares @ Rs.2 each)

40,000

40,000
Bank A/c                                                                       Dr.
Calls in arrear A/c                                                         Dr.
To Equity Share 2nd and final Call A/c
(Being the 2nd and final call money received on 19,500 shares @ Rs.2 each)

39,000
1,000


40,000
Equity Share Capital A/c                                               Dr.
To Share forfeiture A/c (500 x 8)
To Call in arrears A/c. (500 x 2 )
(Being the 500 shares forfeited due to non-payment of 2nd and final call of Rs.2 each)

5,000

4,000
1,000
Bank A/c Dr.
Share forfeiture A/c (1.50 x 500)                                   Dr.
To Equity Share Capital A/c
(Being the 500 forfeited shares reissued @ Rs.8.50 each)

4,250
750


5,000
Equity Share Capital A/c                                               Dr.
To Capital reserve A/c
(Being the profit on reissue of forfeited shares transferred to capital reserve)

3,250

3,250
Balance Sheet of A Ltd.
Particulars
Amount
Equity & Liabilities :
I. Shareholders Fund
(a) Equity share Capital
20,000 shares @ Rs. 10 each.
(b) Reserve & Surplus
Capital reserve
Securities Premium
Total



2,00,000

3,250
       20,000
2,23,250
Assets :
I. Current Assets
Cash & Cash equivalent


2,23,250

5. (a) What do you mean by debentures issued for consideration other than cash? How is such issue recorded in the books of account of the issuing company? 4, 8
(b) Kabir and Co. of Kanpur has their branch at Moradabad. The following are the transactions relating to the branch for the year ended on 31st march, 2012:
Particulars
Rs.
Rs.
Opening Stock on 1-4-2011
Goods supplied to branch
Goods sent to branch :
Rent
Expenses
Cash Received from the branch during the year
Closing Stock on 31-3-12
Closing balance of Paltry Petty Cash on 31-3-12



2,000
1,000
2,00,000
5,00,000



6,00,000
1,50,000
100
Moradabad Branch Account
For the year ended on 31st March, 2012
Particulars
Amount
Particulars
Amount
To Opening balance Stock
To Goods sent to Branch
To Bank (Expenses) :
Rent                  2,000
Petty Cash        1,000
To Branch Profit for the year
2,00,000
5,00,000


3,000
47,100
By Cash (Remittance)
By Closing Balance :
Stock
Petty Cash

6,00,000

1,50,000
100

7,50,100

7,50,100
Goods Sent to Branch A/c
To Purchase A/c
(Balancing figure)
5,00,000
By Moradabad Branch  A/c
5,00,000

5,00,000

5,00,000

6. (a) State the uses of cash flow statements. 5, 7
(b) From the following particulars, you are required to compute
(i) current ratio, and
(ii) quick ratio, and comment on the liquidity of the firm.
Particulars
Rs.
Stock
Debtors
Bills Receivable
Advance (recoverable in cash)
Gross Profit
Cash in hand
Creditors
Bills Payable
Bank Overdraft
Sales
Net Profit
5,00,000
4,00,000
1,00,000
40,000
5,00,000
3,00,000
6,00,000
4,00,000
40,000
70,00,000
3,00,000
Ans:
Current assets = Stock + Debtors + Bills receivable + Advances
= 5, 00,000 + 4, 00,000 + 1, 00,000 + 40,000
= 10, 40,000

Current Liabilities = Creditors + Bills Payable + Bank overdraft
= 6, 00,000 + 4, 00,000 + 40,000
= 5, 40,000


(i) Current ratio  
(ii) Quick ratio

Comment: Short term liquidity position of firm is weak because current ratio is 1: 1 as compared to Standard current ratio is 2: 1 and Quick ratio is also less is compared to Standard quick ratio of 1: 1.

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