Question

Paper 2015 Foreign set 1

CBSE Class 12 ACCOUNTANCY

General Instructions:

This question paper contains two parts A and B.

Part A is compulsory for all.
Part B has two options – Analysis of Financial Statements and Computerized
Accounting.
Attempt only one option of Part B.
All parts of a question should be attempted at one place.

PART – A

(Accounting for Partnership Firms and Companies)

Q1. In the absence of partnership agreement, interest on drawings of a partners is

charged:
(i) at 6% per annum.
(ii) at 9% per annum.
(iii) at 12% per annum.
(iv) no interest is charged.

Ans. In the absence of partnership agreement, no interest on drawings is charged from any
partners.
Hence, the correct answer is option (iv).

Q2. Kamal and Vimal were partners in a firm sharing profits in the ratio of 3 : 2. Ghosh
was admitted as a new partner for 15th share in the profits.
On Ghosh's admission the Balance Sheet of the firm showed a credit balance of Rs
10,000 in its Profit and Loss Account which was debited by the accountant of the firm in
the accounts of Kamal and Vimal. Did the accountant give correct treatment to the
balance of Profit and Loss Account? If 'yes' give the reason and if 'not' give the correct
treatment.

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Ans. At the time of admission of a partner, the balance of accumulated profits and losses is
transferred among the old partners in the old ratio. The capital accounts of the old partners
are to be debited or credited depends whether the balance available in the fund is a credit
balance or a debit balance. Here, Profit and Loss Account had a credit balance of Rs 10,000.
This implies that the capital accounts of the old partners (Kamal and Vimal) should have
been credited in the ratio of 3 : 2 (old ratio). Thus, the accountant has wrongly debited the
capital accounts of the old partners.
The correct Journal entry in this case is given below.

Journal

Debit Credit
Date Particulars L.F. Amount Amount
(Rs) (Rs)

Profit and Loss A/c Dr. 10,000

To Kamal’s Capital A/c 6,000

To Vimal’s Capital A/c 4,000

(Credit balance in Profit and Loss A/c

distributed among the old partners in old
ratio)

Q3. Anurag and Bhawana entered into partnership on 1.4.2014. On 1.1.2015 they
admitted Monika as a new partner for 310th share in the profits which she acquired
equally from Anurag and Bhawana. The new profit sharing ratio of Anurag, Bhawana
and Monika was 4 : 3 : 3. Calculate the profit sharing ratio of Anurag and Bhawana at
the time of forming the partnership.

Ans.

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Q4. Deepak, Farukh and Lilly were partners in a firm sharing profits in the ratio of 3 : 2
: 1. On 28.2.2015 Farukh retired from the firm. On Farukh's retirement there was a
balance of Rs 12,000 in Workmen's Compensation Reserve which was no more required.
On Farukh's retirement this amount will be :
(a) Debited to the Capital accounts of all the partners in their profit sharing ratio.
(b) Credited to the Capital accounts of all the partners in their profit sharing ratio.
(c) Credited to the Capital accounts of Deepak and Lilly in their profit sharing ratio.
(d) Credited to the Capital account of Farukh.

Ans. On Farukh's retirement, the amount of Workmen's Compensation Reserve will be

credited to the Capital Accounts of all the partners in their profit sharing ratio. This is
because the reserve has been build-up using the surplus earned by the firm in the past,
which includes the efforts made by all the partners.
Hence, the correct answer is option (b).

Q5. Give the meaning of forfeiture of shares.

Ans. Cancellation of shares on non-payment of due calls is known as forfeiture of shares.

Q6. 'Samta Limited' invited applications for issuing 6,750 equity shares of Rs 10 each.
The amount was payable as follows:
On application − Rs 3 per share

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On allotment − Rs 5 per share
On first and final call − Rs 2 per share
The issue was fully subscribed. Subhash applied for 250 shares and paid his entire
share money with application. Moti applied for 175 shares and paid allotment money
also with application. The amount received with applications was :
(a) Rs 16,750
(b) Rs 16,000
(c) Rs 19,250
(d) Rs 22,875

Ans.

Hence, the correct answer is option (d).

Q7. State any three purpose other then 'buy-back of shares' for which securities
premium can be utilized.

Ans. The Companies Act, 1956 imposes certain restrictions on the utilisation of amount
received as securities premium. As per the Section 78 of the Companies Act of 1956, the
amount of securities premium received can be utilised for several purposes. Three of such
purposes are listed below.
i. For issuing fully paid bonus shares.
ii. For writing-off the preliminary expenses of the company.
iii. For writing-off the expenses of, or the commission paid or the discount allowed on, any
issue of shares or debentures of the company.

Q8. A and B are partners in a firm sharing profits in the ratio of 3 : 2. On 31.3.2014, the
Balance Sheet of the firm was as follows :

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 Liabilities Amount Assets Amount
Rs Rs

Capitals: Sundry Assets 80,000

A 60,000

B 20,000 80,000

80,000 80,000

The Profit of Rs 80,000 for the year ended 31.3.2014 was divided between the partners
without allowing interest on capital @ 12% per annum and a salary to A at Rs 1,000 per
month. During the year A withdrew Rs 10,000 and B Rs 20,000.
Pass a single journal entry to rectify the error.

Ans.

Journal Entry

Debit Credit
Date Particulars L.F. Amount Amount
Rs Rs

B’s Capital A/c Dr. 5,280

To A’s Capital A/c 5,280

(Rectification done for omission

of interest on capital and salary)

Adjusting Table:

Particulars A B Total

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 Interest on Capital to be credited @ 12% (Cr.) 2,640 960 3,600

Salary to A (Cr.) 12,000 - 12,000

Profit to be credited (Cr.) 38,640 25,760 64,400

Profit wrongly credited (Dr.) 48,000 32,000 80,000

Difference 5,280 (Cr.) 5,280 (Dr.) Nil

Calculation of Opening Capital

Particulars A B

Capital at the end 60,000 20,000

Less: Profit already credited 48,000 32,000

Add: Drawings already debited 10,000 20,000

Capital at the beginning 22,000 8,000

Calculation of Interest of Capital

Q9. 'Telecom Limited' is registered with an authorized capital of Rs 8,00,00,000 divided

into 80,00,000 equity shares of Rs 10 each. The company issued 1,00,000 shares at a
premium of Rs 2 per share. The amount was payable as follows:
On application − Rs 3 per share
On allotment − Rs 5 per share (including premium)
On first and final call − The balance
All calls were made and were duly received except the first and final call on 1,000
shares held by Asha.
Present the 'Share Capital' in the Balance Sheet of the company as per Schedule VI Part
I of the Companies Act, 1956.

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Ans.

Telecom Limited

Balance Sheet

Note Amount
Particulars
No. Rs

I. Equity and Liabilities

1. Shareholders’ Funds

a. Share Capital 1 9,96,000

b. Reserves and Surplus 2 2,00,000

11,96,000

II. Assets

1. Current Assets

a. Cash and Cash Equivalents 3 11,96,000

11,96,000

NOTES TO ACCOUNTS

Amount
Note No. Particulars
(Rs)

1 Share Capital

Authorised Capital

80,00,000 shares of Rs 10 8,00,00,000

Issued Capital

1,00,000 shares of Rs 10 10,00,000

Subscribed, Called-up and Paid-up Capital

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 1,00,000 shares of Rs 10 10,00,000

Less: Calls-in-arrears (1,000 shares of Rs 4) 4,000 9,96,000

2 Reserves and Surplus

Securities Premium 2,00,000

3 Cash and Cash Equivalents

Cash at Bank 11,96,000

Q10. 'Panipat Blankets Limited' are the manufacturers and exporters of blankets. The
company decided to distribute 1,000 blankets free of cost to five villages of Kashmir
which had been damaged by the floods. It also decided to employ 100 young persons
from these villages in their newly established factory at Ludhiana in Punjab. To meet
the requirements of funds for its new factory, the company issued 1,00,000 equity
shares of Rs 10 each and 2,000, 9% debentures of Rs 100 each to the vendors of
machinery purchased for Rs 12,00,000.
Pass necessary journal entries for the above transactions in the books of the company.
Also identify any one value which the company wants to communicate to the society.

Ans.

Journal
In the books of Panipat Blankets Ltd.

Credit
Debit Amount
Date Particulars L.F. Amount
Rs
Rs

Machinery A/c Dr. 12,00,000

To Vendor 12,00,000

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 (Purchased machinery)

Vendor Dr. 12,00,000

To Equity Share Capital A/c 10,00,000

To 9% Debentures A/c 2,00,000

(Issued 1,00,000 equity shares and

2,000 debentures to the vendor)

Values involved in the above scenario:

(i) Creation of employment opportunities
(ii) Working for social welfare

Q11. Joshi, Pandey and Agarwal were partners in a firm sharing profits in the ratio of 2 :
2 : 1. On 31.3.2014, their Balance Sheet was as follows:

Amount Amount
Liabilities Assets
Rs Rs

Creditors 51,000 Cash 24,000

Bills Payable 36,000 Debtors 39,000

Agarwal’s Loan 84,000 Bills Payable 27,000

Capitals : Furniture 81,000

Joshi 2,10,000 Machinery 3,75,000

Pandey 2,04,000 4,14,000 Agrawal’s Capital 39,000

5,85,000 5,85,000

On 31.12.2014, Agarwal died. The partnership deed provided for the following to the
executors of the deceased partner :

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(a) His share in the goodwill of the firm, calculated on the basis of three year's
purchase of the average profits of the last four years.The profits of the last four years
were Rs 2,70,000; Rs 3,00,000; Rs 5,40,000 and Rs 8,10,000 respectively.
(b) His share in the profits of the firm till the date of his death, calculated on the basis
of the average profits of the last four years.
(c) Interest @12% per annum on the credit balance, if any, in his Capital account.
(d) Interest on his loan @12% per annum.
Prepare Agarwal's Capital Account to be presented to his executors.

Ans.

Agarwal’s Capital A/c

Dr. Cr.

Amount Amount
Particulars Particulars
Rs Rs

Balance b/d 39,000 Joshi’s Capital A/c 1,44,000

Executor’s A/c 4,12,560 Pandey’s Capital A/c 1,44,000

Profit and Loss Suspense A/c 72,000

Agarwal’s Loan A/c 84,000

Interest on Agarwal’s Loan 7,560

4,51,560 4,51,560

Working Notes:

WN1 Calculation of Interest on Agarwal’s Loan

WN2 Calculation of Agarwal’s share in Profits

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WN3 Adjustment of Goodwill

Note: Since, here no information is given regarding the share acquired by Joshi and Pandey,
therefore, their gaining ratio is same as their new profit sharing ratio i.e. 2 : 2 or 1 : 1

Q12. Jain, Gupta and Singh were partners in a firm. Their fixed capitals were : Jain Rs
4,00,000 ; Gupta Rs 6,00,000 and Singh Rs 10,00,000. They were sharing profits in the
ratio of their capitals. The firm was engaged in the processing and distribution of
flavoured milk. They partnership deed provided for interest on capital at 10% per
annum. During the year ended 31st March 2014 the firm earned a profit of Rs 1,47,000.
Showing your working notes clearly, prepare Profit and Loss Appropriation Account of
the firm.

Ans.

Profit and Loss Appropriation Account

for the year ended March 31, 2014

Dr. Cr.

Amount Amount

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 Particulars Rs Particulars Rs

Interest on Capital: Profit and Loss A/c 1,47,000

Jain’s Current A/c 29,400

Gupta’s Current A/c 44,100

Singh’s Current A/c 73,500 1,47,000

1,47,000 1,47,000

Working Notes:

WN1: Calculation of Interest on Capital

WN2: Calculation of Proportionate Interest on Capital

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Q13. On 1.4.2013 Mohan and Sohan entered into partnership for doing business of dry
fruits. Mohan introduced Rs 1,00,000 as capital and Sohan introduced Rs 50,000. Since
Sohan could introduce only Rs 50,000 it was further agreed that as and when there will
be a need Sohan will introduce further capital. Sohan was also allowed to withdraw
from his capital when the need for the capital was less. During the year ended 31.3.2014,
Sohan introduced and withdrew the following amounts of capital:

Date Capital Introduced Capital Withdrawn

01.5.2013 10,000 ___

30.6.2013 ___ 5,000

30.9.2013 97,000 ___

01.2.2014 ___ 87,000

The partnership deed provided for interest on capital @ 6% per annum. Calculate
interest on capitals of the partners.

Ans.

Interest on Mohan’s Capital = Rs 6,000

Interest on Sohan’s Capital = Rs 5,365

Working Notes:

WN1: Calculation of Interest on Mohan’s Capital

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WN2: Calculation of Interest on Sohan’s Capital

Capital Months remained Product = Column 2 ×

During 2013
Balances in the business Column 3

From Apr. 01 to Apr 30 50,000 1

From May 01 to June.

60,000 2
30

From July. 01 to Sept.

55,000 3
30

From Oct. 01 to Jan. 31 1,52,000 4

From Feb. 01 to Mar.

65,000 2
31

Total Interest on Sohan’s Capital Rs 5,365

Q14. 'Chennai Fibers Limited' was registered with an authorized capital of Rs 40,00,000
divided into 4,00,000 equity shares of Rs 10 each. The company had issued 1,00,000
shares and the dividend paid per share was Rs 3 for the year 2007 - 08. The management
of the company decided to export its readymade apparels to European countries. To
meet the requirement of additional funds, the finance manager put up before the Board
of Directors the following three alternative proposals :
(i) Issue of 1,54,000 equity shares at par.
(ii) Obtain a loan of Rs 15,40,000 from a financial institution for a period of 5 years. The
loan was available @ 12% per annum.
(iii) Issue 16,000, 9% debentures of Rs 100 each at a discount of 10% redeemable in
instalments at the end of third, fourth, fifth and sixth year as per details given below :

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 Amount
Year
Rs

III 2,00,000

IV 3,00,000

V 4,00,000

VI 7,00,000

After comparing the alternatives, the company decided in favour of the third alternative and
issued debentures on 1.4.2008.
Prepare 9% debentures account for the years 2008 - 09 to 2013 - 14.

Ans.

9% Debentures A/c

Dr. Cr.

Amount Amount
Date Particulars J.F. Date Particulars J.F.
(Rs) (Rs)

2008- 2008- Debenture

Balance c/d 16,00,000 14,40,000
09 09 Application A/c

Loss on Issue of
1,60,000
Debentures A/c

16,00,000 16,00,000

2009- 2009-
Balance c/d 16,00,000 Balance b/d 16,00,000
10 10

16,00,000 16,00,000

2010- Debentureholders’ 2010-

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 11 A/c 2,00,000 11 Balance b/d 16,00,000

Balance c/d 14,00,000

16,00,000 16,00,000

2011- Debentureholders’ 2011-

3,00,000 Balance b/d 14,00,000
12 A/c 12

Balance c/d 11,00,000

14,00,000 14,00,000

2012- Debentureholders’ 2012-

4,00,000 Balance b/d 11,00,000
13 A/c 13

Balance c/d 7,00,000

4,00,000 4,00,000

2013- Debentureholders’ 2013-

7,00,000 Balance b/d 7,00,000
14 A/c 14

7,00,000 7,00,000

Q15. Chopra, Shah and Patel were partners sharing profits in the ratio of 3:2:1. On
31.3.2014 their firm was dissolved. The assets were realized and liabilities were paid
off. The accountant prepared Realisation Account, Partner's Capital Accounts and Cash
Account but forgot to post few amounts in these accounts. You are required to complete
the below give accounts by posting correct amounts.

Realisation Account

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 Dr. Cr.

Amount Amount
Particulars Particulars
Rs. Rs.

To Plant and Machinery 1,60,000 By Sundry Creditors 1,50,000

To Stock 1,50,000 By Mrs. Chopra’s Loan 1,30,000

By Repairs and Renewals

To Sundry Debtors 2,00,000 12,000
Reserve

To Prepaid Insurance 4,000 By Provision for Bad Debts 10,000

To Investments 30,000 By Cash A/c – (Assets sold) :

To Chopra’s Capital A/c Plant 1,00,000

(Mrs. Chopra’s Loan) 1,30,000 Stock 1,20,000

To Cash A/c (Dishonoured

50,000 Debtors 1,60,000 3,80,000
Bill)

By Chopra’s Capital A/c

To Cash (Creditors) 1,50,000 20,000
(Investments)

To Cash (Expenses) 8,000 ………… ……….

8,82,000 8,82,000

Partner’s Capital Accounts

Dr. Cr.

Chopra Shah Patel Chopra Shah Patel

Particulars Particulars
Rs Rs Rs Rs Rs Rs

To Realisation 20,000 By bal. b/d

(Investments)

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 ……. ……. ……. ……. By 1,30,000
Realisation

(Loan)

……. ……. ……. ……. ……. ……. ……. …….

2,30,000 1,50,000 30,000 2,30,000 1,50,000 30,000

Cash Account

Dr. Cr.

Amount Amount
Particulars Particulars
Rs Rs

By Realisation A/c (Dishonoured

……. ……. 50,000
Bill)

……. ……. By Realisation (Sundry Creditors) 1,50,000

To Patel’s Capital A/c 10,000 ……. …….

By Chopra’s Capital A/c 1,20,000

By Shah’s Capital A/c 90,000

4,18,000 4,18,000

Ans.

Realisation Account

Dr. Cr.

Amount Amount
Particulars Particulars
Rs Rs

Plant and Machinery 1,60,000 Sundry Creditors 1,50,000

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 Stock 1,50,000 Mrs. Chopra’s Loan 1,30,000

Sundry Debtors 2,00,000 Repairs and Renewals Reserve 12,000

Prepaid Insurance 4,000 Provision for Bad Debts 10,000

Investments 30,000 Cash (assets sold)

Chopra’s Capital A/c

1,30,000 Plant 1,00,000
(Mrs. Chopra’ Loan)

Cash A/c
50,000 Stock 1,20,000
(Dishonoured Bill)

Cash A/c (Creditors) 1,50,000 Debtors 1,60,000 3,80,000

Chopra’s Capital A/c

Cash A/c (Expenses) 8,000 20,000
(Investments)

Loss transferred to:

Chopra’s Capital A/c 90,000

Shah’s Capital A/c 60,000

Patel’s Capital A/c 30,000 1,80,000

8,82,000 8,82,000

Partners’ Capital Account

Dr. Cr.

Particulars Chopra Shah Patel Particulars Chopra Shah Patel

Realisation A/c
20,000 Balance b/d 1,00,000 1,50,000 20,000
(Investments)

Realisation A/c Realisation

90,000 60,000 30,000 A/c (Loan) 1,30,000

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 (Loss)

Bank A/c 1,20,000 90,000 Bank A/c 10,000

2,30,000 1,50,000 30,000 2,30,000 1,50,000 30,000

Cash Account

Dr. Cr.

Amount Amount
Particulars Particulars
Rs Rs

Balance b/d 28,000 Realisation A/c (Dishonoured Bill) 50,000

Realisation A/c
3,80,000 Realisation A/c (Sundry Creditors) 1,50,000
(Assets sold)

Patel’s Capital A/c 10,000 Realisation A/c (Expenses) 8,000

Chopra’s Capital A/c 1,20,000

Shah’s Capital A/c 90,000

4,18,000 4,18,000

Q16.'Nigam Limited' invited applications for issuing 15,000 equity shares of Rs 10 each
at a discount of Rs 1 per share. The amount was payable as follows:
On application − Rs 2 per share
On allotment − Rs 3 per share
On first and final call − Rs 4 per share
Applications for 18,000 shares were received. Shares were issued proportionately to all
applicants. Excess money received with applications was adjusted towards sums due on

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allotment. Ramesh who had applied for 360 share failed to pay allotment, and first and
final call money. Naresh to whom 150 shares were allotted failed to pay the first and
final call money. Shares of both Ramesh and Naresh were forfeited. Out of the forfeited
shares, 200 shares were re-issued at Rs 9 per share as fully paid up. The re-issued shares
included all the shares of Naresh.
Pass necessary journal entries for the above transactions in the books of 'Nigam
Limited'.

OR

'Guru Limited' invited applications for issuing 80,000 equity shares of Rs 10 each at a
premium of Rs 10 per share. The amount was payable as follows:
On application and allotment − Rs 10 (including Rs 5 premium)
On first and final call − Rs 10 (including Rs 5 premium)
Applications for 1,00,000 share were received. Applications for 10,000 shares were
rejected and application money was refunded. Shares were allotted on pro-rata basis to
the remaining applicants. Excess application money received from applicants to whom
shares were allotted on pro-rata basis was adjusted towards sums due on first and final
call. All calls were made and were duly received except the first and final call money
from Kumar who had applied for 1,800 shares. His shares were forfeited. The forfeited
shares were re-issued at Rs 9 per share as fully paid up.
Pass necessary journal entries for the above transactions in the books of 'Guru
Limited'.

Ans.

In the books of Nigam Ltd.

Journal Entry

Debit Credit
Date Particulars L.F. Amount Amount
Rs Rs

Bank A/c Dr. 36,000

To Equity Share Application A/c 36,000

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 (Application money received on
18,000 shares)

Equity Share Application A/c Dr. 36,000

To Equity Share Capital A/c 30,000

To Equity Share Allotment A/c 6,000

(Application money transferred to

share capital account and excess
money is adjusted in allotment)

Equity Share Allotment A/c Dr. 45,000

Discount on Issue of Shares A/c Dr. 15,000

To Equity Share Capital A/c 60,000

(Amount due on allotment)

Bank A/c (45,000 – 6,000 – 780) Dr. 38,220

To Equity Share Allotment A/c 38,220

(Amount received on allotment)

Equity Share First and Final Call A/c Dr. 60,000

To Equity Share Capital A/c 60,000

(Amount due on first and final call)

Bank A/c (60,000 – 1,200 – 600) Dr. 58,200

To Equity Share First and Final Call

58,200

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 A/c

(Amount received on first and final

call)

Equity Share Capital A/c Dr. 4,500

To Equity Share Forfeiture A/c 1,470

To Equity Share Allotment A/c 780

To Discount on Issue of Shares A/c 450

To Equity Share First and Final Call

1,800
A/c

(Shares of Ramesh and Naresh were

forfeited)

Bank A/c Dr. 1,800

Discount on Issue of Shares A/c Dr. 200

To Equity Share Capital A/c 2,000

(Forfeited shares were reissued for Rs

9 as fully paid-up)

Equity Share Forfeiture A/c Dr. 670

To Capital Reserve A/c 670

(Excess amount on forfeiture is

transferred to capital reserve)

Working Notes:

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WN1: Calculation of Amount not received on Allotment and First and Final Call

WN2: Calculation of amount not received on first and final call

WN3: Calculation of amount transferred to Capital Reserve

Out of the forfeited shares of Ramesh, only 50 shares were reissued

OR

In the books of Guru Ltd.

Journal Entry

Debit Credit
Date Particulars L.F. Amount Amount
Rs Rs

Bank A/c Dr. 10,00,000

To Equity Share Application and

10,00,000

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 Allotment A/c

(Application money received on

1,00,000 shares)

Equity Share Application and

Dr. 10,00,000
Allotment A/c

To Equity Share Capital A/c 4,00,000

To Securities Premium A/c 4,00,000

To Equity Share First and Final Call

1,00,000
A/c

To Bank A/c 1,00,000

(Application money transferred to

share capital account and excess

money is adjusted in first and final
call account)

Equity Share First and Final Call A/c Dr. 8,00,000

To Equity Share Capital A/c 4,00,000

To Securities Premium A/c 4,00,000

(Amount due on first and final call)

Bank A/c (8,00,000 – 1,00,000 – 14,000) Dr. 6,86,000

To Equity Share First and Final Call

6,86,000
A/c

(Amount received on first and final

call)

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 Equity Share Capital A/c Dr. 16,000

Securities Premium A/c Dr. 8,000

To Equity Share Forfeiture A/c 10,000

To Equity Share First and Final Call

14,000
A/c

(Kumar’s shares were forfeited)

Bank A/c Dr. 14,400

Equity Share Forfeiture A/c Dr. 1,600

To Equity Share Capital A/c 16,000

(Forfeited shares were reissued for

Rs 9 as fully paid-up)

Equity Share Forfeiture A/c Dr. 8,400

To Capital Reserve A/c 8,400

(Excess amount on forfeiture is

transferred to capital reserve)

Working Notes:

WN1:

Computation Table

Money First
Money Money transferred and

Shares Shares received on

transferred to Excess Final

Categories Applied Allotted Application to Share Securities Application Call due

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 @ Rs 10 Capital Premium money @ Rs 10
each @ Rs 5 each @ Rs 5 each (5 + 5)
each

10,000 - 1,00,000 - - - -
I

II 90,000 80,000 9,00,000 4,00,000 4,00,000 1,00,000 8,00,000

(4,00,00
+
4,00,000

1,00,000 80,000 10,00,000 4,00,000 4,00,000 1,00,000 8,00,000

WN2: Calculation of Amount not received on First and Final Call

WN3: Calculation of amount credited in Share Forfeiture Account

Amount received on Application and Allotment = Rs 18,000
Less: Amount received for Securities Premium = Rs 8,000 (1,600 × 5)
Amount to be credited in Share Forfeiture Account = Rs 10,000

Q17. A, B and C were partners in a firm sharing profits in the ratio of 3 : 2 : 1. On

1.4.2014 their Balance Sheet was as follows :

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 Amount Amount
Liabilities Assets
Rs Rs

Creditors 25,200 Bank 8,200

Provident Fund 3,000 Debtors 60,000

General Reserve 21,000 Less: Provision 2,000 58,000

Capital Accounts : Stock 50,000

A 80,000 Investments 20,000

B 73,000 Patents 10,000

C 40,000 1,93,000 Machinery 96,000

2,42,200 2,42,200

On the above date C retired. It was agreed that:

(i) Goodwill of the firm be valued at Rs 5,400.
(ii) Depreciation of 10% was to be provided on machinery.
(iii) Patents were to be reduced by 20%.
(iv) Liability on account of Provident Fund was estimated at Rs 2,500.
(v) C took over investments for Rs 31,700.
(vi) A and B decided to adjust their capitals in proportion to their profit sharing ratio.
For this purpose current accounts were opened.
Prepare Revaluation Account and Partners' Capital Accounts on C's retirement.

OR

O, R and S were partners in a firm sharing profits in the ratio of 3 : 2 : 1. On 1.4.2014

their Balance Sheet was as follows :

Amount Amount
Liabilities Assets
Rs Rs

Capital Accounts : R’s Current Account 7,000

O 1,75,000 Land and Building 1,75,000

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 R 1,50,000 Plant and Machinery 67,500

S 1,25,000 4,50,000 Furniture 80,000

Current Accounts : Investment 36,500

O 4,000 Bills Receivable 17,000

S 6,000 10,000 Sundry Debtors 43,500

General Reserve 15,000 Stock 1,37,000

Profit and Loss Accounts 7,000 Bank 43,500

Creditors 80,000

Bills Payable 45,000

6,07,000 6,07,000

On the above date, H was admitted on the following terms :

(i) H will bring Rs 50,000 as his capital and will get 1/6th share in the profits.
(ii) He will bring necessary cash for his share of goodwill premium. The goodwill of the
firm was valued at Rs 90,000.
(iii) The new profits sharing ratio will be 2 : 2 : 1 : 1.
(iv) A liability of Rs 7,004 will be created against bills receivables discounted.
(v) The value of stock, furniture and investments is reduced by 20% whereas the value
of land and building and plant and machinery will be appreciated by 20% and 10%
respectively.
(vi) The Capital accounts of the partners will be adjusted on the basis of H's Capital
through their current accounts.
Prepare Revaluation Account and Partner's Current Accounts and Capital Accounts.

Ans.

Revaluation Account

Dr. Cr.

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 Amount Amount
Particulars Particulars
Rs Rs

Machinery 9,600 Investments A/c 11,700

Patents 2,000 Provident Fund 500

Profit transferred to:

A’s Capital
300
A/c

B’s Capital
200
A/c

C’s Capital
100 600
A/c

12,200 12,200

Partners’ Capital Account

Dr. Cr.

Particulars A B C Particulars A B C

Investments
31,700 Balance b/d 80,000 73,000 40,000
A/c

General
C’s Capital A/c 540 360 10,500 7,000 3,500
Reserve

Revaluation
Loan A/c 12,800 300 200 100
A/c

Current A/c 11,800 A’s Capital A/c 540

Balance c/d 1,02,060 68,040 B’s Capital A/c 360

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 Current A/c 11,800

1,02,600 80,200 44,500 1,02,600 80,200 44,500

Working Notes:
WN1 Adjustment of Goodwill

WN2 Adjustment of Capital

Note: Since, here no information is given regarding the share acquired by A and B, therefore,
their gaining ratio is same as their new profit sharing ratio i.e. 3 : 2.

OR

Revaluation Account

Dr. Cr.

Amount Amount
Particulars Particulars
Rs Rs

Stock 27,400 Land and Building 35,000

Furniture 16,000 Plant and Machinery 6,750

Investments 7,300 Loss transferred to:

Liability against
Bills Receivable 7,004 O 7,977
discounted

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 R 5,318

S 2,659 15,954

57,704 57,704

Partners’ Current Account

Dr. Cr.

Particulars O R S Particulars O R S

Balance b/d 7,000 Balance b/d 4,000 6,000

Revaluation
7,977 5,318 2,659 General Reserve 7,500 5,000 2,500
(Loss)

Profit and Loss

3,500 2,333 1,167
A/c

Premium for
Balance c/d 97,023 45,015 82,008 15,000
Goodwill

Capital A/c 75,000 50,000 75,000

1,05,000 57,333 84,667 1,05,000 57,333 84,667

Partners’ Capital Account

Dr. Cr.

Particulars O R S H Particulars O R S

Current A/c 75,000 50,000 75,000 Balance b/d 1,75,000 1,50,000 1,25,000

Cash A/c

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 Balance c/d 1,00,000 1,00,000 50,000 50,000

1,75,000 1,50,000 1,25,000 50,000 1,75,000 1,50,000 1,25,000

Working Notes:

WN1Calculation of Sacrificing Ratio

WN2 Distribution of Goodwill

WN3 Adjustment of Capital

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Q18.Which of the following transactions will result into flow of cash?
(i) Cash withdrawn from bank Rs 71,000.
(ii) Issue of 9% debentures of Rs 1,00,000 to the vendors of machinery.
(iii) Received from debtors Rs 74,000.
(iv) Redeemed 10% debentures by converting the same into equity shares.

Ans. Amount received from debtors Rs 74,000 will be received in cash. This is the only
transaction that results in flow (inflow) of cash into the business.
Why other options are incorrect?
1. Deposit of cash into bank and withdrawal of cash from bank are merely the cash
management activities of the business. They do not involve any cash flow.
2. Conversion of debentures into equity shares is a mere change in capital structure of the
company. It does not result in cash flow.

Hence, the correct answer is option (iii).

Q19. The accountant of 'Nav Jeevan Limited' while preparing Cash Flow Statement
added the proposed dividend of the current year to net profit while calculating cash
flow from operating activities. Was he correct in doing so ? Give reason.

Ans. Yes, the accountant was correct while adding proposed dividend of the current year to

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net profits while calculating cash flow from operating activities. This is done in order to
compute the correct net profit before tax and extraordinary items.

Q20. Under which major heads and subheads will the following items be placed in the
Balance Sheet of a company as per Schedule VI Part I of the Companies Act, 1956:
(i) Bank overdraft.
(ii) Cash and Cash equivalents.
(iii) Securities premium.
(iv) Negative balance of the Statement of Profit and Loss.
(v) Goodwill.
(vi) Trademark.
(vii) 5 years loan obtained from SBI.
(viii) Investments.

Ans.

S.No. Items Head Sub-head (if any)

i Bank Overdraft Current Liabilities Short Term Borrowings

Cash and Cash

ii Current Assets Cash and Cash Equivalents
Equivalents

iii Securities Premium Shareholder’s Funds Reserves and Surplus

Negative Balance of
Shown by way of deduction
iv Statement of Profit and Shareholder’s Funds
from Reserves and Surplus
Loss

v Goodwill Non-Current Assets Intangible Fixed Assets

vi Trademark Non-Current Assets Intangible Fixed Assets

vii 5 Years Loan from SBI Non-Current Liabilities Long Term Borrowings

viii Investments Non-Current Assets Non-Current Investments

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Q21.The Current Ratio of a company is 2.5:1.5. State with reasons which of the following
transactions will increase, decrease or not change the ratio :
(i) Discounted a bills receivable of Rs 10,000 from bank, Bank charged discount of Rs
200.
(ii) A bill receivable Rs 8,000 discounted with bank was dishonoured.
(iii) Cash deposited into bank Rs 7,000.
(iv) Paid cash Rs 5,000 to the creditors.

Ans.

S.No. Items Effect Explanation

Discounting a B/R
from bank reduces
Discounted a bills receivable
asset by Rs 10,000
(i) of Rs 10,000 from bank. Bank Decrease
(B/R) and increases
charged discount of Rs 200.
asset by Rs 9,800 (bank
balance).

Dishonour of
discounted B/R results
A bill receivable Rs 8,000 in increase in asset
(ii) discounted with bank was No Change (debtors) and decrease
dishonoured. in asset (Bank) with
the same amount.

Increase in one asset

(bank) with a
simultaneous decrease
Cash deposited into bank Rs
(iii) No Change in other current asset
7,000.
(cash) leaves current
ratio unaffected.

Payment of current

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 liabilities (creditors)
Paid cash Rs 5,000 to the
(iv) Increase will improve the
creditors.
current ratio from
1.67 (2.5 : 1.5) to 2 (2 :
1).

Q22.The motto of 'Nav Hind Pharma Limited', a company engaged in the manufacturing
and distribution of Aurvedic medicines, is 'Healthy India'. Its management and
employees are hardworking, honest and motivated. The net profit of the company
doubled during the year ended 31.3.2014. Encouraged by its performance, the company
decided to pay one month's extra salary to all its employees.
Following is the Comparative Statement of Profit and Loss of the company for the years
ended 31.3.2013 and 31.3.2014 :

Nav Hind Pharma Limited

Comparative Statement of Profit and Loss

Note 2012 − 13 2013 − 14

Particulars
No. Rs Rs

Revenue from operations 40,00,000 60,00,000

Less : Employees benefit expenses 24,00,000 28,00,000

Profit before tax 16,00,000 32,00,000

Tax @ 50% 8,00,000 16,00,000

Profit after tax 8,00,000 16,00,000

(i) Calculate New Profit Ratio for the years ending 31.3.2013 and 31.3.2014.
(ii) Identify any two value which 'Nav Hind Pharma Limited' is trying to communicate.

Ans. For 2013

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For 2014

The following are the values that are propagated by Nav Hind Pharma Ltd.
(i) Staff Welfare (since it depicts concerns for its staff members)
(ii) Boosting the morale of employees

Q23. Following is the Balance Sheets of Wind Power Ltd. as at 31.3.2014:

Wind Power Ltd.

Balance Sheet as at 31.3.2014

Note 2013–14 2012–13

Particulars
No. Rs Rs

I. Equity and Liabilities:

1. Shareholder's Funds:

(a) Share Capital 48,00,000 44,00,000

(b) Reserves and Surplus 1 12,00,000 8,00,000

2. Non-Current Liabilities:

Long-Term Borrowings 9,60,000 6,80,000

3. Current Liabilities:

(a) Trade Payables 7,16,000 8,16,000

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(b) Short-Term Provisions 2,00,000 3,08,000

Total 78,76,000 70,04,000

II. Assets:

1. Non-Current Assets:

(a) Fixed Assets:

(i) Tangible 2 42,80,000 34,00,000

(ii) Intangible 3 1,60,000 4,80,000

2. Current Assets:

(a) Current Investments 9,60,000 4,48,000

(b) Inventories 5,16,000 4,84,000

(c) Trade Receivables 6,80,000 5,72,000

(d) Cash and Cash equivalents 12,80,000 16,20,000

Total 78,76,000 70,04,000

Notes to Accounts

As on As on
S.
Particulars 31.3.2014 31.3.2013
No.
Rs Rs

1. Reserves and Surplus

Surplus (Balance in Statement of Profit and Loss) 12,00,000 8,00,000

2. Tangible Assets

Machinery 50,80,000 40,00,000

Less : Accumulated Depreciation (8,00,000) (6,00,000)

3. Intangible Assets

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 Goodwill 1,60,000 4,80,000

Additional Information:
During the year a piece of machinery, costing Rs 96,000 on which accumulated
depreciation was Rs 64,000 was sold for Rs 24,000.
Prepare Cash Flow Statement.

Ans.

Cash Flow Statement

for the year ended March 31, 2014

Amount Amount
Particulars
(Rs) (Rs)

A Cash Flow from Operating Activities

Profit as per Statement of Profit and Loss 4,00,000

Profit Before Taxation 4,00,000

Items to be Added:

Amortisation of Goodwill 3,20,000

Depreciation 2,64,000

Loss on Sale of Fixed Assets 8,000 5,92,000

Operating Profit before Working Capital

9,92,000
Adjustments

Less: Increase in Current Assets

Inventories 32,000

Trade Receivables 1,08,000

Less: Decrease in Current Liabilities

Trade Payables 1,00,000

Short-Term Provisions 1,08,000 3,48,000

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 Net Cash Generated from Operating Activities 6,44,000

B Cash Flow from Investing Activities

Sale of Machinery 24,000

Purchase of Machinery (11,76,000)

Net Cash Used in Investing Activities (11,52,000)

C Cash Flow from Financing Activities

Proceeds from Issue of Share Capital 4,00,000

Proceeds from Long Term Borrowings 2,80,000

Net Cash Flow from Financing Activities 6,80,000

Net Increase or Decrease in Cash and Cash

D 1,72,000
Equivalents

Add: Cash and Cash Equivalent in the beginning

20,68,000
of the period

Cash and Cash Equivalents at the end of the

22,40,000
period

Working Notes:

Machinery Account

Dr. Cr.

Amount Amount
Particulars Particulars
(Rs) (Rs)

Balance b/d 40,00,000 Bank A/c (Sale) 24,000

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 Bank A/c (Purchase- Bal. Depreciation on Part of
11,76,000 64,000
Fig.) Machinery

Profit and Loss A/c (Loss on

8,000
Sale)

Balance c/d 50,80,000

51,76,000 51,76,000

Accumulated Depreciation Account

Dr. Cr.

Amount Amount
Particulars Particulars
(Rs) (Rs)

Machinery A/c 64,000 Balance b/d 6,00,000

Profit and Loss A/c (Dep. charged

Balance c/d 8,00,000 2,64,000
during the year- Bal. Fig.)

8,64,000 8,64,000

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