MODEL TEST PAPER

SUBJECT ; ACCOUNTANCY (CLASS XII)

SET – I
ROLL NO _________
TIME ALLOWED – 3 HRS. MAX MARKS : 80
Day & Date of Examination :
Name and Signature of Candidate :
Name and Signature of Invigilator :
General Instructions :
(1) Please check that this question paper contains printed ___ pages
(2) Please write down the serial number of the question before attempting it.
(3) 15 minutes time has been allotted to read this question paper. The question paper will be distributed at 08:45
a.m. From 08:45 a.m. to 09:00 a.m. the students will read the question paper only and will not write any
answer script during this period.
(4) Please check that this question paper contains 25 questions.
(5) All questions are compulsory.
(6) Marks are indicated against each question.
(7) Avoid overwriting and cutting.
(8) Give calculations or working notes wherever required.
PART – A
(ACCOUNTING FOR PARTNERSHIP FIRMS AND COMPANIES)
1. What is meant by partnership and state any two essential elements of partnership. (1)
2. State the two main rights that a newly admitted partner acquires in the firm. (1)
3. When is the “Partner’s Executor’s A/c” is prepared ? (1)
4. State any two factors which influence the valuation of goodwill of a partnership firm. (1)
5. What are Preliminary Expenses ? (1)
6. State any two purposes for which securities premium can be utilized. (1)
7. Which companies are exempted from creating Debenture Redemption Reserve (DRR) by SEBI ? (1)
8. A, B and C are partners in a firm having fixed capital of Rs. 80,000, Rs. 40,000 and Rs. 50,000 respectively
sharing profits as 7 : 6 : 4. The rate of interest on capital was agreed at 10% p.a. but was wrongly credited to
them @ 12% p.a. Give the necessary adjustment entry to adjust the balance of partners capital a/c. (3)
9. Give the journal entries in each of the following cases at the time of issue of debentures.
(1) A debenture issued at Rs. 110, repayable at Rs. 100
(2) A debenture issued at Rs. 100, repayable at Rs. 105
(3) A debenture issued at Rs. 105, repayable at Rs. 105 (3)
10. Mohit Ltd. Has 10,000 , 12% debentures of Rs. 100 each due for redemption on 31 st March 2011. Assuming that
debentures are to be redeemed out of profit fully and DRR has a balance of Rs. 3,60,000 on that date, record
necessary journal entries at the time of redemption of debentures. (3)
st
11. A, B and C were partners sharing profits in the ration of 5 : 3 : 2. Their Balance Sheet as on 1 April 2012 was as
follows :
Balance Sheet of A, B and C as on 1st April 2012
Liabilities Amount (Rs.) Assets Amount (Rs.)
Creditors 20,000 Cash 16,000
Employees Provident fund 26,000 Debtors 16,000
Capital : Stock 80,000
A Rs. 1,00,000 Furniture 34,000
B Rs. 70,000 Building 1,20,000
C Rs. 50,000
2,20,000
2,66,000 2,66,000
C retires on the above date and it was agreed that :
(1) C’s share of goodwill was Rs. 8,000
(2) 5% provision for doubtful debts was to be made on debtors
 (3) Creditors were valued Rs. 4,000 more than book value.
Pass the necessary journal entries for the above transactions on C’s retirement. (4)
st
12. On 1 April 2012, an existing firm had assets of Rs. 75,000 including cash of Rs. 5,000 the partners capital a/cs
showed a balance of Rs. 60,000 and the reserve constituted the rest . If the normal rate of return is 10% and
goodwill of the firm is to be valued at Rs. 24,000 @ 4 years purchase of super profit, find the average profits of
the firm. (4)
13. X Ltd. Purchased machinery for Rs. 5,00,000 from Y Ltd. Rs. 1,25,000 was paid by issuing a crossed cheque, and
Rs. 1,25,000 by accepting a bill of exchange drawn by Y Ltd. Payable after 3 months. The balance was paid by
issue of equity shares of Rs. 10 each at a premium of 25 %. Pass the necessary journal entries. (4)
14. (a) Distinguish between reserve capital and capital reserve. (Any two)
(b) What is meant by Private placement and Under-subscription of shares ? (4)
15. P, Q and R are partners with capitals of Rs. 40,000 , Rs. 30,000 and Rs. 20,000 respectively. The partnership
deed provided the following :
(1) R to get salary Rs. 2,000 p.a.
(2) Q to get commission Rs. 1,500
(3) P’s loan Rs. 20,000 @ 6% p.a.
(4) Drawings of partners were : P : Rs. 5,000 ; Q : Rs. 4,000 and R : Rs. 3,000
(5) Profit sharing ration 2 : 1 : 1
The profits for the year ended 31st December 2008 without taking the above facts amounted to Rs. 12,700.
Prepare Profit & Loss Appropriation A/c and Partners’ capital a/c. (6)
16. A, B and C are partners in a trading firm, the firm has a fixed total capital of Rs. 60,000 held equally by all
partners. Under the partnership deed, the partners were entitled to :
(1) A and B to a salary of Rs. 1,800 and Rs. 1,600 per month respectively.
(2) In the event of death of a partner, goodwill was to be valued at 2 years’ purchase of the averae profit of the
last 3 years.
(3) Profit upto the date of death based on the profits of previous year.
(4) Partners were to be charged interest on drawings @ 5% p.a. and allowed interest on capital @ 6% p.a.
B died on 1st Jan 2011, his drawings to the dte of death were Rs. 2,000 and the interest thereon was Rs. 60,
the profits for the three years ended 31 st March 2008, 2009 and 2010 were Rs. 21,200 ; Rs. 3,200 (Dr.) and
Rs. 9,000 respectively. Prepare B’s Capital A/c to calculate the amount to be paid to his executors. (6)
17. Aamir and Anuj, belonging to two different religions and states of a country were close friends, formed a
partnership. Their profit sharing ratio is 3 : 2Their balance sheet as at 31 st March 2013 was under :
Liabilities Amount (Rs.) Assets Amount (Rs.)
Creditors 10,000 Debtors 22,000
Employees Provident fund 8,000 Less: Provision 1,000 21,000
General Reserve 30,000 Land & Building 18,000
Workmen Compensation Reserve 15,000 Plant & Machinery 12,000
Capital A/c : Stock 11,000
Aamir : 15,000 Bank 21,000
Anuj : 10,000 25,000 Advertisement Expenss 5,000

88,000 88,000

They admit Zeenat, a different abled girl as a third partner for 1/6 th share in the profit on the following terms :
(1) Value of land and building be increased by Rs. 3,000
(2) Stock is undervalued by Rs. 2,500
(3) Provision for doubtful debts by increased by Rs. 1,500
(4) The liability of workmen compensation reserve was determined to be Rs. 20,000
(5) Zeenat brought her share of goodwill Rs. 10,000 in cash. Goodwill amount withdrawn by partners.
(6) Zeenat was to bring in further cash of Rs. 15,000 as her capital
(a) Prepare revaluation a/c, partners’ capital a/c and Balance sheet of new firm.
(b) Identify any two values which according to you motivated them to form a partnership firm.
OR
 Following is the Balance Sheet of X and Y, who share profits and losses in the ratio of 4 : 1, as at 31 st March 2009
Liabilities Amount (Rs.) Assets Amount (Rs.)
Sundry Creditors 8,000 Bank 20,000
Bank Overdraft 6,000 Debtors 17,000
X’s Brother’s Loan 8,000 Less: Provision 2,000 15,000
Y’s Loan 3,000 Stock 15,000
Investment Fluctuation Fund 5,000 Investment 25,000
Capital A/c : Building 25,000
Aamir : 50,000 Goodwill 10,000
Anuj : 40,000 90,000 Profit & Loss 10,000
1,20,000 1,20,000

The firm was dissolved on the above date and the following arrangements were decided upon :
(1) X agreed to pay off his brother’s loan
(2) Debtors of Rs. 5,000 proved bad
(3) Other assets realized – investment 20% less, and goodwill at 60%.
(4) One of the creditors for Rs. 5,000 were paid only Rs. 3,000.
(5) Building was auctioned for Rs. 30,000 and the auctioner’s commission amounted to Rs. 1,000
(6) Y took over part of stock at Rs. 4,000 (being 20% less than book value), balance stock realized 50%.
(7) Realisation expenses amounted Rs. 2,000
(8) A motor bike (which was brought out of the firm’s money) was not shown in the books of the firm. It is now
sold for Rs. 10,000.
During the course of dissolution it was noticed by partners that the firm had taken goods worth R. 12,500 on
credit from Mr. Mohit in the year 2007 but both the parties (i.e., the firm and Mr. Mohit) have forgotten the
same to record in their respective books. Instead of charging interest amount due from the firm, Mr. Mohit
himself agreed to accept Rs. 10,000 in full settlement of claim.
(A) Prepare realization a/c, partners’ capital a/c and Bank a/c
(B) Identify the values which according to you motivated the firm to settle liability.
(C) Identify the values which according to you motivated Mr. Mohit to accept Rs. 10,000 instead of Rs. 12,500

18. Dinesh Ltd. Invite applications for issuing 10,000 equity shares of Rs. 10 each. The amount was payable as
follows :
On application - Re. 1
On allotment - Rs. 2
On first call - Rs. 3
On second & final call - Balance
The issue was fully subscribed. Ram to who 100 shares were allotted failed to pay the allotment money and his
shares were forfeited immediately after allotment. Shyam, to whom 150 shares were allotted, failed to pay the
first call, his shares were also forfeited after the first call. Afterwards, the second & final call was made. Mohan
to whom 50 shares were allotted failed to pay second & final call. His shares were also forfeited. All the forfeited
shares were re-issued at Rs. 9/- per share fully paid up. Pass the necessary journal entries in the books of
Dinesh Ltd.
OR
(1) Poonam Ltd. Forfeited 400, 8% preference shares of R. 100 each, issued at discount of 10% for the non
payment of first call of Rs. 20 per share has not yet been made. The forfeited shares were re-issued at Rs.
44,000 fully paid. Pass the necessary journal entries for the forfeiture and issue of shares.
(2) X Ltd. Forfeited 150 shares of Rs. 20 each issued at premium of Rs. 5 per share for the non payment of
second and final call of Rs. 7 per share. 100 of these shares were re-issued @ Rs. 21 per share fully paid.
Journalise the above transactions regarding the forfeiture and re-issue.
(3) M Ltd. Forfeited 2000 shares of Rs. 10 each (fully called up) for the non-payment of allotment money of Rs.
6 per share including Rs. 2 as premium. Of these, 1,500 shares were re-issued to A @ Rs. 9 per share fully
paid. Journalise the above transactions in the books of M Ltd.
 PART –B
(ANALYSIS OF FINANCIAL STATEMENTS)
19. Give two areas of interest for investors while analyzing the financial statements. (1)
20. State any two objectives of preparing ‘Cash Flow Statement’ (1)
21. Give one transaction which may result into outflow of cash and one which may result into no flow of cash. (1)
22. Give the major headings and sub-headings under which the following items will be shown in a company’s
Balance Sheet as per revised Schedule VI, Part I of the Companies Act 1956 :
(1) Trade payable
(2) Loose tools
(3) Gross Fixed Assets
(4) Provision for tax
(5) 8% Debentures
(6) Statement of Profit & Loss
23. From the following statement of Profit & Loss of Goldstar Ltd. For the year ended 31 st March 2013 and 2014,
prepare comparative Statement of Profit and Loss : (4)
st st
Particulars 31 March 31 March
2014 (Rs.) 2013 (Rs.)
Revenue from operations 20,00,000 16,00,000
Purchase of Stock in Trade 8,00,000 6,40,000
Change in inventories of stock in trade 25,000 15,000
Employees benefit expenses 3,00,000 2,00,000
Other incomes 2,00,000 3,00,000

24. (a) Current ratio of ABC Ltd. Is 5 : 1 and liquid ratio is 3 : 1, inventories are Rs. 2,00,000. Find current liabilities.
(b) Cost of revenue from operations Rs. 2,40,000, inventories Turnover ratio 8 times. Find out the value of
opening inventories if, opening inventories is Rs. 10,000 less than the closing inventories.
25. The Balance Sheet of Kewal Ltd. as at 31st March 2006 and 31st March 2007 were :
Particulars 31st March 2007 31st March 2006
(Rs.) (Rs.)
I.EQUITY AND LIABILITIES
1. Shareholders’ funds
(a) Share Capital 10,00,000 7,00,000
(b) Reserves & Surplus : Balance Statement of Profit & Loss 2,50,000 1,50,000
2. Currrent Liabilities :
Short term liabilities : Proposed dividend 50,000 40,000
TOTAL 13,00,000 8,90,000
II.ASSETS
1.Non Current Assets
Fixed Assets (Tangible)
Plant & Machinery 8,00,000 5,00,000
2.Current Assets
(a) Inventories (Stock) 1,00,000 75,000
(b) Cash 4,00,000 3,15,000
13,00,000 8,90,000
Additional Information :
(1) Rs. 50,000 deprciation has been charged to plant and machinery during the year 2007
(2) A piece of machinery costing Rs. 12,000 (Book value Rs. 5,000) was sold at 60% profit on book value.

Prepare Cash Flow Statement. (6)

MODEL TEST PAPER

 SUBJECT ; ACCOUNTANCY (CLASS XII)
SET – II
ROLL NO _________
TIME ALLOWED – 3 HRS. MAX MARKS : 80
Day & Date of Examination :
Name and Signature of Candidate :
Name and Signature of Invigilator :
General Instructions :
(9) Please check that this question paper contains printed ___ pages
(10) Please write down the serial number of the question before attempting it.
(11) 15 minutes time has been allotted to read this question paper. The question paper will be distributed at 08:45
a.m. From 08:45 a.m. to 09:00 a.m. the students will read the question paper only and will not write any
answer script during this period.
(12) Please check that this question paper contains 25 questions.
(13) All questions are compulsory.
(14) Marks are indicated against each question.
(15) Avoid overwriting and cutting.
(16) Give calculations or working notes wherever required.
PART – A
(ACCOUNTING FOR PARTNERSHIP FIRMS AND COMPANIES)
1. What is a Partnership Deed ? State any two contents of a Partnership Deed. (1)
2. What is meant by goodwill and its nature ? (1)
3. Give any two circumstances in which gaining ratio may apply? (1)
4. State any two occasions on which a partnership firm may be constituted. (1)
5. What is meant by ‘Minimum Subscription’? (1)
6. What is meant by forfeiture of shares ? . (1)
7. What do you mean by debenture issued as collateral security? (1)
8. A,B anc C are partners in a firm. On 1.4.2005, their capitals stood at Rs. 50,000, Rs. 25,000 and Rs. 25,000
respectively. As per the provisions of the partnership deed :
(1) C was entitled for a salary of Rs. 5000 p.a.
(2) Partners were entitled to interest on capital @ 5% p.a.
(3) Profits were to be shared in the ratio of partners’ Capitals.
The net profit for the year ended 2005-06 of Rs. 33,000 was distributed equally without providing above terms.
Pass the adjustment entry in journal in rectify the above error. (3)
9. X Ld. Secured a loan of Rs. 8,00,000 from the Bank of Baroda by issuing 10,000 9% debenture of Rs. 100 each as
a collateral security. How will you show the issue of such debenture in the Balance Sheet ? (3)
10. Thandak refrigerators Ltd. had an outstanding balance of Rs. 5,00,000 , 6% Debentures of Rs. 100 each
redeemable at a premium of 10%. According to the terms of redemption, the company redeemed 10% of these
debentures by converting them into 8% preference shares of Rs. 100 each issued at a premium of 10%. Calculate
the number of shares to be issued on conversion and record the journal entries for the redemption.
(3)
11. Pass the necessary journal entries for the following transactions on dissolution of the firm of A & B after the
various assets (other than cash) and outside liabilities have been transferred to realization a/c : C’s share of
goodwill was Rs. 8,000
(1) Stock of Rs. 7,400 was taken over by A for Rs. 7,000
(2) B agreed to pay his wife’s loan Rs. 70,000
(3) A liability not appearing in the books settled at Rs. 3,700
(4) Loss on dissolution of Rs. 4,500 was divided between A & B in their profit sharing ratio 4 : 5 (4)
12. Arti and Bharti are partners in a firm sharing profits in the ratio of 3 : 2. They admitted Sarthi as a new parner
and the new profit sharing ratio will be 2 : 1 : 1. Sarthi brought in Rs. 10,000 for her share of goodwill. Goodwill
already appeared in the books of Arti & Bharti at Rs. 5,000. Goodwill amount withdrawn by partners. Pass the
necessary journal entries. (4)
13. 24 x 7 Marketing Ltd was authorized capital of Rs. 10,00,000 divided into 1,00,000 equity shares of Rs. 10 each.
It has existing subscribed capital of 20,000 equity shares of Rs. 10 each and it further issued 50,000 equity
shares to public for subscription on 1 st Feb 2013 payable Rs. 5 along with the application Rs. 3 on allotment and
balance on first & final call. All the shares were applied for and issued by the company. The company received
allotment money on all the shares except on 2000 equity shares. Out of these 2000 equity shares first & final
call on 1000 shares on which both allotment and calls were not paid were forfeited after giving due notice to the
defaulting shareholders. Show shareholders in Balance Sheet of the Company at 31 st March 2014. (4)
14. Exe Ltd purchased assets of the book value of Rs. 4,00,000 and took over the liabilities of Rs. 50,000 from
Mohan Bros. It was agreed that the purchase consideration, settled at Rs. 3,80,000 be paid by issuing shares of
Rs. 100 each.
What journal entries will be made in the following cases :
(a) At a discount of 10% ; and
(b) At a premium of 10%. It was agreed any fraction of shares be paid in cash (4)
15. P & Q are partners sharing profit in the ratio 3 : 2 with a capital of Rs. 50,000 and Rs. 30,000 respetively. As per
partnership deed, partners agreed that :
(1) Q be allowed salary of Rs. 5,000 p.a.
(2) Interest on capital is agreed @ 6% p.a.
During 2007, profit of the year prior to calculation of interest on capital but after charging salary amounted Rs.
15,000. A provision of 5% of profit be made for manager’s commission. Prepare Profit & Loss Appropriation a/c
and Partners’ Capital A/c.(6)
16. On 31st Dec 2003, the Balance Sheet of P, Q and R who were partners in a firm was as under :
Liabilities Amount (Rs.) Assets Amount (Rs.)
S. Creditors 25,000 Buildings 26,000
Reserve fund 20,000 Investments 15,000
Capital A/c : Debtors 15,000
P: 15,000 Bill Receivable 6,000
Q : 10,000 Stock 12,000
R: 10,000 35,000 Cash 6,000
80,000 80,000
The partnership deed provides that the profit should be shared in the ratio of 2 : 1 : 1 and in the event of death
of a partners, his executors will be entitled to be paid out :
1) The capital to his credit at the date of Balance Sheet
2) His proportion of reserve at the date of last Balance Sheet
3) His proportion of profits to the date of death based on average profit of the last three completed years, plus
10%.
4) By way of goodwill, his proportion of total profits for the three preceding years.
5) The new profits for the last three years were : 2001 – Rs. 16,000 ; 2002 – Rs. 16,000 ; 2003 – Rs. 15,400
R died on 1st April 2004. He had withdrawn Rs. 5,000 to the date of his death. The investments were sold at par
and R’s executors were paid off.
Prepare R’s capital a/c and R’s Executor’s a/c. (6)
17. A and B are partners in a firm sharing profits in the ratio of 3 : 2. Their Balance Sheet as at 31 st Dec 2004 stood as :
Liabilities Amount (Rs.) Assets Amount (Rs.)
Capital a/c : Machinery 33,000
A: 35,000 Furniture 15,000
B: 30,000 65,000 Investment 20,000
General Reserve 10,000 Stock 23,000
Bills Payable 5,000 Patents 3,000
Bank Loan 9,000 Debtors 19,000
Creditors 36,000 Less Provision 2,000 17,000
Cash 12,000
Profit and Loss 2,000
1,25,000 1,25,000

On that date they admit C into partnership for 1/4 th share in the profit on the following terms :
 (1) C brings capital proportionate to his share. He brings Rs. 7,000 in cash as his share of goodwill.
(2) Debtors are all good.
(3) An outstanding bill for repair Rs. 1000 will be brought in the books.
(4) Half of the investment were to be taken over by A and B in the respective profit sharing ratio at book value.
(5) Patents are valueless.
(6) Partners agreed to share future profit in the ratio 3 : 3 : 2.
Prepare revaluation a/c, partners capital a/c and Balance Sheet after admission of C into firm
OR
Jyoti, Ruchi and Yogesh were sharing profits and losses in proportion to their capitals. Their Balance Sheet as at
31st March 2012 was :
Liabilities Amount (Rs.) Assets Amount (Rs.)
S. Creditors 21,600 Building 1,00,00
Capital A/c : Machinery 48,000
Jyoti : 80,000 Stock 18,000
Ruchi : 60,000 Debtors 20,000
Yogesh 40,000 1,80,000 Less Provision 400 19,600
Bank 8,000
Cash 8,000
2,01,000 2,01,000
Ruchi decided to retire due to old age. They agreed to the following adjustment in the books of account to
decide Ruchi’s share :
(1) Building to be appreciated by 20%
(2) The provision for doubtful debts to be increased by 5% on debtors.
(3) Out of total insurance premium paid Rs. 3000 to be treated as prepaid insurance. This amount was earlier
debited to the profit & loss a/c.
(4) Machinery to be depreciated by 20%.
(5) Goodwill of the entire firm to be valued at Rs. 72,000. Ruchi’s share to be adjusted in the accounts of Jyoti
and Yogesh
(6) Jyoti and Yogesh also decided that the total capital of the firm after Ruchi’s retirement be Rs. 1,80,000 in
their profit sharing ratio i.e., actual cash to be brought in or paid to a partner as the case may be.
You are required to prepare the :
(1) Revaluation a/c
(2) Partners’ Capital a/c
(3) Balance Sheet of Jyoti and Yogesh
18. Petromax Ltd. issued 50,000 shres of Rs. 10 each at a premium of Rs. 2 per share payable as Rs. 3 on application,
Rs. 5 on allotment (including premium and the balance in equal instalments over two calls. Applications were
received for 92,000 shares and the allotment was done as under :
(A) Applicants of 40,000 shares – allotted 30,000 shares
(B) Applicants of 40,000 shares – allotted 20,000 shares
(C) Applicants of 12,000 shares – allotted nil
Suresh, who had applied for 2,000 shares (category A) did not pay any money other than application money.
Chander, who was allotted 800 shares (category B) paid the call money due along with allotment.
All other allottees paid their dues as per schedule.
(i) Pass the necessary journal entries
(ii) Which value has been affected by the rejection of applications of category ‘C’. Suggest an alternative.
(8)

OR
 AB Ltd. invited applications for 40,000 equity shares of Rs. 10 each at a discount of 10%. The amount was
payable as follows :
On application - Rs. 4 per share
On allotment - Balance after discount
Applications were received for 60,000 shares. Applications for 12,000 shares were rejected and pro-rata
allotment was made to remaining applicants. Excess money received on application was adjusted towards sums
due on allotment. Mohan, to whom 400 shares were allotted failed to pay the allotment money. His shares were
forfeited. The forfeited shares were re-issued @ Rs. 8 per share fully paid up,
(1) Pass the necessary journal entries
(2) Which value has been affected by rejection of applications. Suggest an alternative for the same.

PART –B
(ANALYSIS OF FINANCIAL STATEMENTS)
19. ‘Analysis of Financial Statements ignores price level changes’. Comment (1)
20. What will be the result in inflow, outflow or no flow of cash from the following transactions.
(1) Cash deposited into bank
(2) Depreciation charged on plant and machinery. (1)
21. What is meant by a ‘Cash Flow Statement’ ? (1)
22. List any two items each of the Balance Sheet of a company under the head ‘Reserves & Surplus’ , ‘Current
Liabilities’ and ‘Current Assets’. (3)
23. Prepare Comparative Statement of Profit and Loss from the following information (4)
st st
Particulars 31 March 31 March
2014 (Rs.) 2013 (Rs.)
Revenue from operations (% of other income) 300% 200%
Other income Rs. 1,00,000 Rs. 2,00,000
Cost of material consumed (% of operating revenue) 50% 60%
Other expenses ( % of material cost) 10% 20%
Tax rate 30% 30%

24. From the following information, calculate any two of the following ratios : (4)
(1) Gross Profit ratio (2) Working capital turnover ratio (3) Proprietary ratio
Information :
Paid up Capital Rs. 8,00,000
Current Assets Rs. 5,00,000
Credit sales Rs. 3,00,000
Cash Sales 75% of credit sales
9% Debentures Rs. 3,40,000
Current Liabilities Rs. 2,90,000
Cost of goods sold (cost of revenue from operations) Rs. 6,80,000
25. The following Balances appeared in Machinery a/c and accumulated depreciation a/c in the books of Jai Bharti
Ltd. :
Balances as at → 31st March 2003 31st March 2004
(Rs.) (Rs.)
Machinery a/c 17,78,985 26,55,450
Accumulated Depreciation a/c 3,40,795 4,75,690
Additional Information :
Machinery costing Rs. 2,65,000 on which accumulated depreciation was Rs. 1,00,000 was sold for Rs. 75,000.
You are required to :
(a) Compute the amount of machinery purchased. Depreciation charged for the year ended and loss on sale of
machinery.
(b) How shall each of the items related to machinery be shown in ‘Cash Flow Statement ? (6)
MODEL TEST PAPER
SUBJECT ; ACCOUNTANCY (CLASS XII)
 SET – I
ROLL NO _________
TIME ALLOWED – 3 HRS. MAX MARKS : 80
Day & Date of Examination :
Name and Signature of Candidate :
Name and Signature of Invigilator :
General Instructions :
(1) Please check that this question paper contains printed ___ pages
(2) Please write down the serial number of the question before attempting it.
(3) 15 minutes time has been allotted to read this question paper. The question paper will be distributed at 08:45
a.m. From 08:45 a.m. to 09:00 a.m. the students will read the question paper only and will not write any
answer script during this period.
(4) Please check that this question paper contains 25 questions.
(5) All questions are compulsory.
(6) Marks are indicated against each question.
(7) Avoid overwriting and cutting.
(8) Give calculations or working notes wherever required.
PART – A
(ACCOUNTING FOR PARTNERSHIP FIRMS AND COMPANIES)

1. Give two circumstances in which the fixed capitals of partners may change ? (1)
2. A & B share profit & loss in the ratio of 4 : 3. They admit C with 3/7 share which he gets 2/7 from A and 1/7th
th th

from B. What is the new profit sharing ratio ? (1)

3. State any two items of deduction that may have to be made from the amount payable to a retiring partner ? (1)
4. Name any two items which are credited to the account of deceased partner while calculating the amount due to
his legal representatives excluding opening balance of capital account. (1)
5. Give any two alternatives available to a company for the allotment of shares in case of over subscription. (1)
6. State any two conditions for the issue of shares at discount as per section 79 of the companies Act. (3)
7. What is meant by Secured Debentures ? (3)
8. A, B and C are partners in a firm sharing profit in the ratio of 2 : 2 : 1. C is guaranteed a minimum amount of Rs.
10,000 as his share of profit every year. Deficiency if any, on that account shall be borne by B. The profit for two
years ended 31st March 2003 and 31st March 2004 were Rs. 50,000 and Rs. 40,000 respectively. Prepare the
profit and loss appropriation account for the two years. (3)
9. SSS Ltd. issued 25,000 , 10% debentures of Rs. 100 each. Give the journal entries in the following case when : (3)
(1) The debenture were issued at a premium of 20%.
(2) The debenture were issued as a collateral security to bank against a loan of Rs. 20,00,000.
(3) The debenture were issued to a supplier of a machinery costing Rs. 28,00,000 as his full and final payment.
10. Exe Ltd. issued 4,000 , 10% debentures of Rs. 100 each which are repayable at par after 5 years. However,
company gave an offer to debenture holders to get their debentures converted into equity shares after 2 years.
(1) Pass the necessary journal entries at the time of redemption of debentures.
(2) Identify two values involved in this decision of the company. (3)
11. A, B and C were partners in a firm sharing profits equally. On 1.4.2012 B died. On that date, goodwill of the firm
was valued at Rs. 90,000. There was a balance of Rs, 2,70,000 in General Reserve. As executors of B were not
financially strong enough. So A proposes that the executors of B shall be given ½ share of general reserve and
remaining portion shall be distributed between A and C in new ratio which is equal. C accepted to it.
(a) Identify the two values which according to you motivated them to introduce such special clauses in the
Partnership deed.
(b) Pass necessary journal entries on B’s death. (4)
12. A and B are partners with capitals of Rs. 1,60,000 and Rs. 1,20,000 respectively. They admit C as a partner on 1 st
Jan 2012 for 1/4th share in profits of the firm. C brings in Rs. 1,60,000 as his share of capital. Give the journal
entries of C’s admission regarding goodwill. (4)
st
13. Akash Ltd. issued 1,00,000 shares of Rs. 10 each payable as follows – Rs. 2 on application payable on 1 March
2006 ; Rs. 3 on allotment payable on 1 st May 2006 ; Rs. 2 on first call payable on 1 st Aug 2006 and Rs. 3 on
second & final call on 1st Dec 2006. All these shares were subscribed for the amount duly received. Akriti, who
had 8000 shares paid the amount on both the calls along with allotment.
Suniti, who had 4000 shares, paid the amount to second and final call with the first call. Calculate the amount of
interest on Calls-in-advance payable to Akriti and Suniti. Pass the necessary journal entries. (4)
14. (a) 20,000 shares of Rs. 10 were issued for public subscription at a premium of 10%. Full amount was payable on
application. Applications were received for 30,000 shares and the Board decided to allot the share on pro-rata
basis. Pass the necessary journal entries.
(b ) Distinguish between shares and debentures (Any two points) (4)
15. (a) In a partnership, partners are charged interest on drawings @ 15% p.a. during the year ended 31 st March
2012. A partner drew as follows : (6)
st
1 May Rs. 2000
st
1 Aug Rs. 5000
th
30 Sept. Rs. 2000
31st Jan Rs. 6000
st
31 Mar Rs. 2000
What is the interest chargeable to the partner ?Also pass necessary journal entries.
16. A, B and C started business on 1 st April 2011 with capitals of Rs. 1,00,000 ; Rs. 80,000 and Rs. 60,000 respectively
sharing profits & losses in the ratio of 4 : 3 : 3. For the year ended 31 st March 2012, the firm suffered a loss of Rs.
50,000. Each of the partners withdrew Rs. 10,000 during the year. On 31 st March 2012, The firm was dissolved.
The creditors of the firm stood at Rs. 24,000 on that date and cash in hand was Rs. 4000. The assets realized Rs.
3,00,000 and creditors were paid Rs. 23,500 in full settlement of their claims. Prepare the realization a/c,
partners capital a/c and Cash a/c. Also show your workings. (6)
17. A, B and C are partners sharing profit and losses in the ratio of 2 : 3 : 5. On 31 st March 2012, their balance sheet
was : (8)
Liabilities Amount (Rs.) Assets Amount (Rs.)
Capital a/c : Cash 24,000
A : 36,000 B/R 44,000
B : 44,000 Furniture 28,000
C : 52,000 1,32,000 Stock 18,000
Creditors 64,000 Debtors 42,000
B/P 32,000 Investments 32,000
Profit & Loss A/c 14,000 Machinery 34,000
Goodwill 20,000
2,42,000 2,42,000
They admit D into partnership from 1 st April 2012 on the following terms :
(1) Stock is undervalued by 10%
(2) Furniture, investments, machinery to be depreciated by 15%
(3) Prepaid salaries Rs. 800
(4) Outstanding rent amounted to Rs. 1800
(5) D brings in Rs. 32,000 as his capital and Rs. 6000 for goodwill in cash for 1/6 th share in profit.
(6) Capital of the partners shall be proportionate to their profit sharing ratio taking D’s capital as base.
(7) Adjustment of capital to be made in cash.
Prepare revaluation a/c, partners capital a/c and Balance Sheet.

OR
 R, M and L are partners in a firm sharing profits in the ratio of 5 : 3 : 2. Partner R died on 20 th Feb 2011. The
balance sheet of the firm on that date was as follows :
Liabilities Amount (Rs.) Assets Amount (Rs.)
Capital a/c : Machinery 41,000
R : 12,000 Furniture 6,000
M : 16,000 Stock 9,000
L : 10,000 38,000 Debtors 15,000
Loan from R 7,000 Cash 3,000
General Reserve 20,000 Profit & Loss A/c 10,000
Creditors 19,000
84,000
According to the partnership deed, on the death of a partner, the executor of the deceased partner will be
entitled to :
(1) Balance in capital A/c
(2) His share in profit & loss on revaluation of assets & liabilities which were as follows :
(a) Machinery is revalued at Rs. 45,000 and furniture at Rs. 7,000
(b) A provision of 10% was to be created for doubtful debts.
(c) There was an unearned income of Rs. 500 and accrued income of Rs. 500.
(3) The net amount payable to R was transferred to R’s executor’s loan a/c which was to be paid later.
Prepare revaluation a/c, Partner’s capital a/c, R’s Executor’s a/c, Balance Sheet of L and M who decided to
continue the business keeping their capital balances in their new profit sharing ratio. Any surplus or deficit was
to be transferred to partner’s current a/c.
18. Arti Ltd. invited applications for issuing 80,000 shares of Rs. 10 each at a premium of Rs. 4 per share. The
amount was payable as follows : (8)
On application Rs. 5 per share
On allotment Rs. 9 per share (including premium)
Applications were received for 1,40,000 shares. Allotment was made on following basis :
(1) To applicants of 80,000 shares - 60,000 shares
(2) To applicants of 60,000 shares - 20,000 shares
Money overpaid on applications was utilized towards sums due on allotment
Rajiv belonging to category (1) who applied for 1,200 shares failed to pay his dues and his shares were forfeited.
Pass the necessary journal entries.
OR
Jain Ltd. invited applications for issuing 75,000 equity shares of Rs. 200 each at a discount of 5%. The amount
was payable as follows :
On application Rs. 80
On allotment Rs. 60
On First & final call Balance
Applications for 70,000 shares were received. Allotment was made to all the applicants and the company
received all the money due on allotment except from Ravi to whom 900 shares were allotment and his shares
were immediately forfeited. Vishesh, the holder of 700 shares failed to pay first and final call, his shares were
also forfeited. All the forfeited shares of Ravi and 350 shares of Vishesh were reissued for Rs. 195 per share fully
paid up. Pass the journal entries.
 PART – B
(ANALYSIS OF FINANCIAL STATEMENTS)

19. The current ratio of a company is 2 : 1. State with reason whether the sale of goods Rs. 11000 (cost Rs. 10,000)
would improve, reduce or not change the ratio. (1)
20. Give one limitation of Cash Flow Statement. (1)
21. What are two major inflow and outflows of cash from financing activities. (1)
22. Give the format of the balance sheet of a company main headings only, as per the requirement of schedule VI of
the Companies Act, 1956. (3)
23. From the following Balance Sheet of Sanyog Ltd, prepare Common Size Balance Sheet : (4)
st st
Particulars Note No. 31 March 2013 31 March 2012
(Rs.) (Rs.)
I.EQUITY AND LIABILITIES
1. Shareholders’ funds
(a) Share Capital 40,00,000 30,00,000
(b) Reserves & Surplus 7,50,000 10,00,000
2. Non Current Liabilities
Long term borrowings 13,50,000 9,00,000
2. Currrent Liabilities :
Trade payables 3,00,000 2,00,000
TOTAL 64,00,000 51,00,000
II.ASSETS
1.Non Current Assets
(a) Fixed Assets
(1) Tangible Assets 40,00,000 32,00,000
(2) Intangible Assets 13,00,000 11,00,000
2.Current Assets
(a) Inventories 8,00,000 6,00,000
(b) Cash & Cash equivalents 3,00,000 2,00,000
TOTAL 64,00,000 51,00,000

24. (a) Calculate the Debt to Equity ratio from the following :
S.No. Items Amount (Rs.)
1 Long Term Borrowings 2,00,000
2 Long term Provisions 1,00,000
3 Current liabilities 50,000
4 Non-current liabilities 3,00,000
5 Current Assets 40,000

(c) Calculate the current assets from the following information :

(1) Stock turnover ratio : 4 times
(2) Stock at the end is Rs. 20,000 more than stock in the beginning
(3) Sales Rs. 3,00,000
(4) Gross profit ratio 25%
(5) Current liabilities Rs. 40,000
(6) Quick ratio 0.75 (4)
25. From the following Balance Sheet of X Ltd., prepare cash flow statement :
Particulars Note No. 31st March 2013 31st March 2012
(Rs.) (Rs.)
I.EQUITY AND LIABILITIES
1. Shareholders’ funds
(a) Share Capital 1 6,30,000 5,60,000
(b) Reserves & Surplus :
Surplus i.e., balance in statement of Profit & Loss 3,08,000 1,82,000
2. Currrent Liabilities :
(a)Trade payables 2,80,000 1,82,000
(b) Other current liabilities 14,000 28,000
TOTAL 12,32,000 9,52,000
II.ASSETS
1.Non Current Assets
Fixed Assets : Plant and Machinery 3,92,000 2,80,000
2.Current Assets
(a) Inventories 1,26,000 1,82,000
(b) Cash & Cash equivalents 84,000 70,000
(c ) Trade receivables 6,30,000 4,20,000
TOTAL 12.32000 9,52,000
Notes to accounts
(1) Share Capital
Particulars 31st March 31st March 2012
2013(Rs.) (Rs.)
Share Capital
Equity Share Capital 4,30,000 3,60,000
8% Preference Share Capital 2,00,000 2,00,000
6,30,000 5,60,000
Additional Information :
(1) An old machinery having book value of Rs. 42,000 was sold off Rs. 56,000
(2) Depreciation provided on machinery during the year was 28,000
(3) Dividend paid during the year Rs. 56,000 (6)
 Accounting for Partnership Firms – Fundamentals

Q1. Which of the following statements will be applicable to Partnership firm in the absence of Partnership deed?
(Any one of the following).

i) Salary allowed to a partner for extra work done.

ii) Interest on capital of partners will be 5% p.a.
iii) Interest on partner’s loan @ 6% p.a.
iv) Profit sharing ratio.

Answer - i) No ii) No iii) Yes iv) Equal

Q2. List any two items appearing on the debit side of a partner’s current account.

Answer – i) Drawing ii) Interest on drawing.

Q3. List any four items that are credited to Capital Account of a partner when the capital Account is fluctuating.

Answer – i) Interest on Capital ii) Salary

iii) Commission iv) Profit Share

Q4. For how much period of Interest of drawing will be calculated if the equal amounts are drawn for one year.

i) On 1st Day of every Month , ii) End of every Month, iii) Middle of every Month

Answer – i) 6.5 Months ii) 5.5 Months iii) 6 Months.

Q5. State one difference between Fixed capital account and Fluctuating Capital account of Partners?

Q6. Ram and Shyam were partners in a firm sharing profits in the ratio of 3:5. Their fixed capitals were – Ram Rs.
5,00,000 and ShyamRs. 9,00,000. After the accounts for the year hadbeen closed, it was found that the interest on
capital @10% p.a. as provided in partnershipagreement had not been credited to the Capital Accounts of the
partners. Pass a necessary entry to rectify the error.

Solution:

Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)

Ram’s Current A/C 2,500
 To Shyam’s Current A/C 2,500
(For adjustment of omission of Interest on capital made)

Q7. 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 the interest on drawing had not been taken in to consideration. The interest on
drawings of the partners amounted to X - Rs. 250, Y – Rs. 180 and Z – Rs. 100.

Give the necessary adjustment journal entry.

Solution:

Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)

Y’s Capital A/C 3
Z’s Capital A/C 12
To X’s Capital A/C 15
(For Interest on drawing omitted, now corrected)

Q8. Malti, Paroand Arti are partners in a firm having fixed capital of Rs. 80,000, Rs. 40,000 and Rs. 50,000
respectively sharing profits as 7:6:4. The raet of Interest on capital was agreed at 10% p.a., but was wrongly
credited to them as 12% p.a. Give the necessary adjustment entry to adjust the balance of Partner’s Capital
Accounts.

Solution:

Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)

Malti’s Current A/C 200
Arti’s Current A/C 200
To Paro’s Current A/C 400
(Excess Interest on Capital credited, now corrected)

Q9(a).Sachin, Kapil and Rashmi have been sharing profits and losses in the ratio of 3:2:1 respectively. Rashmi
wants that she should share the profits equally with Sachin and Kapil. She further wants that change in profit
sharing ratio should be applicable retrospectively for the last three years. Other partners have no objection to
this. The profits for the last three years were Rs. 60,000, Rs. 47,000 and Rs. 55,000.

Record the adjustment by means of journal entry. Give working.

Solution:

Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)

Sachin’s Capital A/C Dr. 27,000
To Rashmi’s Capital A/C 27,000
(For change due to profit sharing ratio rectified)

Q9(b). Point out whether any value is involved in the decision taken by Sachin and Kapil to share profit equally
with Rashmi.

Solution: Following values are involved in this decision:

 i) Promotion of equality among partners.
ii) Showing respect towards woman partner by eliminating gender biasness.

Q10. A, B, and C were partners in a firm. On 1st January 2009, their capitals were Rs. 60,000, Rs. 30,000 and Rs.
30,000 respectively. As per partnership deed, partners were entitled to:

i) Salary to C atRs. 500 per monthii) Interest on Capital @ 5% p.a.iii) Profits to be shared in the Capital ratio.

Q11. 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. 5,000 and C: Rs. 2,000 (Dr.). According to the partnership
deed the partners were entitled to 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 ration of 5:3:2.
iii) Remaining profits to be shared equally.

The firm made a profit of Rs. 1,56,000 before charging any of the above items. Prepare the Profit & Loss
Appropriation Account and pass necessary journal entry for apportionment of Profit.

Answer:

Q12. A and B are partners sharing profits in the ration of 3:2 with capitals of Rs. 50,000 and Rs. 30,000
respectively. Interest on capital is agreed @ 6% p.a. B is to be allowed an annial salary of Rs. 2,500. During 1995,
profits of the year prior to calculation of interest on capital but after charging B’s salary amounted to Rs. 12,500.
Manager is to be allowed a commission of 5% on the profits remaining after deducting salary and interest on
capitals but before charging such commission.

Prepare an account showing allocation of profits and partners capital accounts.

Solution:

Profit and Loss Appropriation Account

For the Year ending……..

Particulars Amount (Rs.) Particulars Amount (Rs.)

To Interest on Capitals: By Profit & Loss A/c
A 3,000 (Net Profit after B’s Salary) 12,500
B 1,800 4800

To Manager’s Commission:
5% on (Rs. 12,500 – Rs. 4,800)
i.e 7,700 * 5/100 385
To Profit transferred to Capital A/c:
A (3/5) 4,389
B (2/5) 2,926 7,315
12,500 12,500
Capital Balances: A: Rs. 57,389 B: Rs. 37,226

Q13. A, B and C were partners in a firm sharing profits in the ration of 2:2:1. C was guaranteed to be given a profit
of Rs. 50,000 per year. Deficiency if any, on that account hall be borne by A and B in the ratio of 3:2. The net profit
of the firm for the year ended 31-3-2004 was Rs.2,00,000

Prepare Profit & Loss Appropriation Account of A, B and C.

Solution:

Particulars Amount (Rs.) Particulars Amount (Rs.)

To Profit Trans. to Capital A/cs: By Profit & Loss A/c
A – 2/5 80,000 (Net Profit) 2,00,000
Less: Transfer to C 6,000 74,000

B – 2/5 80,000
Less: Transfer to C 4,000 76,000

C – 1/5 40,000
Add from: A 6,000
B 4,000 50,000
2,00,000 2,00,000

Q14. A and B are partners with capitals of Rs. 1,00,000 and Rs. 80,000 respectively. On 1 st January 2009, the
trading profit of the firm for the year before appropriation as per partnership deed was Rs. 67,500.

As per partnership deed, they were entitled to:

i) Interest on Capital @ 9% p.a.

ii) A to get salary Rs. 1,000 p.m.
iii) B to get commission Rs. 10,000.
iv) Drawings of A and B were Rs. 6,000 and Rs. 5,000 respectively and interest thereon amounts to Rs.
400 and Rs. 300 respectively.
Show how the profits for the year 2009 will be distributed between A and B and also show Capital Accounts
under:

a) Fixed Capital
b) Fluctuating Capital.

Answer:

i) Divisible Profit Rs. 30,000; A’s share Rs. 15,000 and B’s share Rs. 15,000 in ratio 1:1

(A) Capital of A - Rs. 1,00,000, B – Rs. 80,000; Current A/c: A – Rs. 29,600, B – 26,900
(B) Fluctuating Capital: A – Rs. 1,29,600, B – Rs. 1,06,900

Valuation of Goodwill

Q1. Define goodwill.

Ans. Goodwill refers to capacity of a Business to earn more profits over and above the normal profits earned by the
similar frims.

Q2. State any four reasons for Valuation of goodwill in relation to partnership firm.

Ans. Valuation of goodwill is required whenever the mutual rights of partners change. It is required in following
cases:

i) Change in the profit sharing ration among the existing partners.

ii) Admission of a new partner.
iii) Retirement of a partner.
iv) Death of a partner.
v) Sale of partnership firm.

Q3. Explain any three features of Goodwill.

Ans: Features of goodwill are:

i) In is an intangible asset but not a fictitious asset.

ii) Value of goodwill is subject to change with the passage of time.
iii) Valuation of goodwill is subjective in nature.

Q4. List any four factors that help in the creation of goodwill of a partnership firm.

Ans. Factors affecting valuation of goodwill are:

i) Location of business. ii) Nature of business. iii) Longevity of business.

iv) Quality of products. v) Degree of competition. vi) Brand image.

Q5. A business has earned profits of Rs. 1,00,000; Rs. 80,000 and Rs. 60,000 during the last three years. The assets
of the business are Rs. 8,00,000 and its external liabilities are Rs. 2,00,000. The normal rate of return is 10%. Find
goodwill if

i) Goodwill is valued at 2 years purchase of average profit of last three years.

ii) Goodwill is valued at 3 years purchase of super profits.
 iii) Goodwill is valued by capitalization of average profits.
iv) Goodwill is valued by capitalization of super profits.
Ans.

Q6. The average capital employed in a business is Rs. 2,50,000 and average net profit earned is Rs. 35,000 p.a. The
normal rate of return on average capital employed is 10%. The remuneration amounting to Rs. 5,000 p.a. is
considered reasonable to owners. Compute goodwill on the basis of 2 years purchase of Super profit.

Solution:

i) Actual Average Profit: Rs. 35,000 – Rs, 5,000 = Rs. 30,000

ii) Normal Profit = Rs. 2,50,000 * 10/100 = Rs. 25,000
iii) Super Profit = Rs. 30,000 – Rs. 25,000 = Rs. 5,000
iv) Goodwill = Super Profit * No. of Years Purchase
= Rs. 5,000 * 2 = Rs. 10,000

Q7. The average profit earned by a firm is Rs. 55,000 which includes abnormal income of Rs. 5,000 on an average
basis. The capital invested in the business is Rs. 5,00,000 and the normal rate of return is 8%. Calculate goodwill
of the firm on the basis of 4 times of super profit.

Solution:

Total average profit = Rs. 55,000

Less: Abnormal Profit = Rs. 5,000

i) Actual average Profit = Rs. 50,000

ii) Normal Profit = Capital Employed * Normal rate of return

100

= Rs. 5,00,000*8 = Rs. 40,000

100

iii) Super Profit = Average Profit – Normal Profit

= Rs. 50,000 – Rs. 40,000 = Rs. 10,000

iv) Goodwill = Super Profit * No. of Years Purchase

= Rs. 10,000 * 4 = Rs. 40,000

Q8. The average profit of a firm is Rs. 1,20,000. The total tangible assets in this firm are Rs, 15,00,000 and outside
liabilities are Rs. 4,00,000. The normal rate of return is 10% on capital employed. Calculate goodwill by
capitalization method on the basis of

a) Super profit method. b) Average profit method.

Solution:

With the given information, we can use either of the two methods based on capitalization:

A) Based on Super Profit

i) Capital employed or Net Tangible Assets = Tangible Assets – Outside Liabilities
= Rs. 15,00,000 – Rs. 4,00,000 = Rs. 11,00,000

ii) Normal Rate of Return = 10%

iii) Normal Profit = Capital Employed * Normal rate of return

100

= Rs. 11,00,000 * 10 = Rs. 1,10,000

100

iv) Super Profit = Average Profit – Normal Profit

= Rs. 1,20,0000 – Rs. 1,10,000 = Rs. 10,000

v) Goodwill = Super Profit * 100

Normal Rate of Return
= Rs. 10,000 * 100 = Rs. 1,00,000
10

B) Based on Average Profit

i) Average Profit = Rs. 1,20,000 ( Given)

Average Profit * 100

=
ii) Capital value of Average Profit Normal Rate of Return

Rs. 1,20,000 * 100 = Rs. 12,00,000

=
10

iii) Capital Employed (See Part A) = Rs. 11,00,000

iv) Goodwill = Capital Value of Average Profit – Actual Capital Employed

= Rs. 12,00,000 – Rs. 11,00,000 = Rs. 1,00,000

Changein Profit Sharing Ratio

Q1. What is sacrificing ratio?

Ans. The ratio in which the partners have agreed to sacrifice their share in profit in favour of other partner or
partners, is called as sacrificing ratio.

Q2. Define gaining ratio?

Ans. Due to change in the profit sharing ratio, one or more partners gain their profit share, it is called gaining ratio.
 ADMISSION OF A PARTNER
1 MARK QUESTION
Q1- State any one purpose for admitting a new partner in a firm.
Q2- State the two main rights that a newly admitted partner acquires in the firm.
3 MARKS QUESTION
Q3- P & Q are partners sharing profits in the ratio of 3:2.They admit R for ¼ th share. P & Q
decided to share profits equally. Calculate new profit sharing ratio & sacrificing ratio.
Ans: New Profit sharing ratio-3:3:2, sacrificing ratio- 9:1.
Q4- A & B are partners in a firm sharing profits in the ratio of 3:2. C is admitted as a partner. A
& B surrender ½ of their respective shares in favour of C. Find new profit sharing ratio &
sacrificing ratio.
Ans: New profit sharing ratio: 3:2:5. Sacrificing ratio: 3:2.
Q4- X & Y are partners sharig profits in the ratio of 7:5. They admit z as a partner who
acquires 1/12th share from X & 1/6th from Y as his share. Calculate new profit sharing
ratio & sacrificing ratio.
Ans: New profit sharing ratio-2:1:1. Sacrificing ratio- 1:2.
8 MARKS QUESTION
Q5- M & N are partners in a firm sharing profits in the ratio of 3:1. Their balance Sheet as on
31-03-2004 was as follows:
Liabilities Rs Assets Rs
Creditors 28,000 Cash 50,000
Bills Payable 40,000 Debtors 60,000
Outstanding salary 2,000 Stock 40,000
Capitals Plant 1,00,000
M 2,00,000 Land & Building 1,50,000
N 1,30,000 3,30,000
4,00,000 4,00,000
On the above date O was admitted as a partner for 1/4th share in profits on following
terms:
(i) O will bring Rs 1,50,000 as his capital & Rs 90,000 as his share of premium for goodwill for
his share of profits.
(ii) Plant is to be appreciated to Rs 1,30,000 & the value of land & building is to be appreciated
by 5%.
(iii) Stock is overvalued by Rs 6,000.
(iv) A provision for bad & doubtful debts is to be created at 5% on debtors.
(v) There were unrecorded creditors Rs 4,500.
 Prepare Revaluation Account, Partner’s Capital Accounts and the Balance Sheet.
Ans: Revaluation profit- Rs 24,000 , Capital Accounts- M- Rs 2,85,500, N- Rs 1,58,500,
O- 1,50,000. Balance Sheet – Rs 6,68,500.
Q6- A & B are equal partners. On 1st January 2009, they decided to admit C into partnership
on the basis of the following Balance Sheet as on 31-12-2008:
Liabilities Rs Assets Rs
Creditors 16,000 Cash at bank 10,800
Outstanding expenses 3,000 Debtors
Workmen’s compensation 5,000 Less: Provision for d/d 17,200
fund Stock 32,000
Capitals: Fixed Assets 55,000
A 50,000 Profit & Loss A/c 3,000
B 40,000 90,000
Employees Provident Fund 4,000
1,18,000 1,18,000
The following terms were agreed upon:
(i) New profit sharing ratio should be 2:1:1 respectively and C brought Rs 30,000 as capital.
(ii) Fixed assets is to be appreciated by Rs 10,000.
(iii) Bad debts amounting to Rs 2,000 to be written off.
(iv) A provision of 2% was to be made for discount on creditors.
(v) Outstanding expenses be brought down to Rs 2,440.
(vi) The liability on workmen’s compensation fund is determined at Rs 2,000.
(vii) Employees provident fund be raised by Rs 1,000.
(viii) C is unable to bring goodwill in cash. Goodwill is valued at Rs 28,000.
Prepare Revaluation Account, Capital Accounts and Balance sheet of new firm.
Ans: Revaluation profit- Rs 8,680, Capitals- A- Rs 54,340, B- Rs 51,340, C-Rs 23,000,
Balance Sheet total- Rs 1,53,800.

Q7- P & Q are partners sharing profits in the ratio of 4:3. Their Balance Sheet is as follows on
31-03-2008:
Liabilities Rs Assets Rs
Creditors 26,000 Bank 10,000
Bills Payable 10,500 Debtors 40,000
R’s Loan 25,000 Less: Prov. d/d 1,500 38,500
Reserve Fund 7,700 Stock 41,000
Capitals: Investment 16,000
P 40,800 Plant 30,000
Q 36,000 76,800 Goodwill 10,500
 1,46,000 1,46,000
R is admitted into partnership. New profit sharing ratio is 3:2:1. Other terms were:
(i) R’s loan be treated as capital.
(ii) Goodwill is valued at 2 years’ purchase of average profits of 3 years which was
Rs 12,600.
(iii) P & Q took over investments for Rs 10,500 in their profit sharing ratio.
(iv) Provision for doubtful debts should be 5% on debtors & provision for discount on debtors
@ 2% be made.
(v) Stock be reduced by 10% & plant is valued at Rs 32,000.
(vi) R is not to bring his share of goodwill in cash.
Prepare Revaluation account , capital Accounts & Balance sheet.
Ans: Revaluation Loss: 3,360, Capitals P- Rs 33,080, Q- Rs 31,260 ,R- Rs 20,800,
Balance Sheet- Rs 1,21,640.
Q8- P & Q are partners sharing profits in the ratio of 2:1. Their balance sheet as on 31 st
December 2008 was as follows:
Liabilities Rs Assets Rs
Bank Overdraft 5,000 Debtors 40,000
Creditors 30,000 Less: Prov. d/d 3,600 36,400
Reserve Fund 12,000 Stock 20,000
Capitals Patents 2,000
P 40,000 Machinery 23,600
Q 30,000 70,000 Building 35,000
1,17,000 1,17,000
R was admitted on this date. New profit sharing ratio agreed was 3:2:1.
(i) R brings in Rs 19,120 as capital & Rs 10,000 as his share of goodwill in cash.
(ii) Provision for doubtful debts be reduced by Rs 2,400.
(iii) Investments worth Rs 2,600 remains unrecorded in the books. It is to be recorded now in the
books.
(iv) Patents are valueless.
(v) 2% discount is to be received on creditors.
Prepare Revaluation Account, Capital Accounts & the Balance Sheet.
Ans: Revaluation profit Rs 3,600 , Capitals: A- 60,400, B- Rs 35,200, C- Rs 19,120,
Balance sheet- Rs 1,44,120
Q9-B & C were partners sharing profits in the ratio of 3:2. Their Balance Sheet as o 31-03-2011
was as follows:
Liabilities Rs Assets Rs
Capitals Land & Building 80,000
B 60,000 Machinery 20,000
C 40,000 1,00,000 Furniture 10,000
Provision for bad debts 1,000 Debtors 25,000
Creditors 60,000 Cash 16,000
Profit & Loss A/c 10,000
1,61,000 1,61,000
D was admitted to partnership for 1/5 share of profits on the following terms:
(i) The new profit sharing ratio is 2:2:1.
(ii) D will bring Rs 30,000 as capital & Rs 15,000 for his share of goodwill.
(iii) Half of the goodwill amount was withdrawn by the partner who sacrificed his share of profit in
favour of D.
(iv) A provision of 5% of bad & doubt ful debt was to be maintained.
(v) An item of Rs 500 included in creditors was not likely to be paid.
(vi) A provision of Rs 800 was to be made for claims for damages against the firm.
After making the above adjustments the capital accounts of B & C were to be adjusted on the basis of
D’s capital. Actual cash to be brought in or paid off.
Prepare Revaluation Account, Partner’s Capital Accounts & Balance Sheet.
Ans: Revaluation Loss Rs 550, capitals- B-Rs 60,000, C -Rs 60,000, D- Rs 30,000,
Balance sheet Rs 2,10,300.

Q10-A & B are partners sharing profits in the ratio of 3:2. They admit C for 1/5 share in
Profits who was an unemployed graduate. On that date Balance Sheet was as under-

Liabilities Rs Assets Rs
Capitals Goodwill 5,000
A 60,000 Plant & Machinery 65,000
B 50,000 1,10,000 Furniture 15,000
General reserve 10,000 Investments 20,000
Sundry Creditors 50,000 Stock 20,000
Sundry Debtors 30,000
Cash in hand 15,000
1,70,000 1,70,000
C was admitted on following terms:
(i) C is to bring in Rs 40,000 as capital & goodwill Rs 15,000. New Profit sharing ratio is 5:3:2.
(ii) Investments will be appreciated by 20 % & furniturs will bw depreciated by 10%.
(iii) One customer who owed the firm Rs 2,000 becomes insolvent & nothing could be realized from
him.
(iv) Creditors will be written off Rs 2,000.
(v) Outstanding bill for repairs Rs 1,000 will be provided for.
(vi) Interest accrued on investments Rs 2,000.
(vii) Capitals of the partners shall be in profit sharing ratio on the basis of C’s capital.
 Prepare Revaluation account, Capital Accounts & the Balance Sheet of new firm.Point out the values
involved.
Ans: Revaluation profit Rs 3,500, Capitals A – Rs 1,00,000, B- Rs 60,000 C Rs 40,000.
Balance Sheet Rs 2,49,000
Values- creating employment opportunities, Promoting entrepreneurial opportunities.

RETIREMENT OF A PARTNER FROM PARTNERSHIP FIRM

3 MARKS QUESTION
Q1- X, Y & Z are partners sharing profits in the ratio of 4:3:2. X retired due to prolonged illness & his share
is being taken by Y & Z in the ratio of 2:3. As per deed the amount due to X is to has to be paid in 3 annual
installments, but they decided to make full payment in cash immediately. They took bank loan for this
purpose. You are required to calculate new profit sharing ratio. Also identify the values involved in taking
such decision.
Ans: New profit ratio- 23:22.
(i) Values involved- recognition of personal relations over business relations,
(ii) Just & equitable in making prompt payment in cash,
(iii) Fulfillment of moral values & human values towards retired person.

Q2- A, B & C are partners sharing profits in the ratio of 4:3:2. B retires & Goodwill of the firm is
valued at Rs 18,000. Pass journal entry for the treatment of goodwill.
Ans: Gaining ratio: 2:1.
Journal
Date Particulars L Dr Cr
F
A’s capital A/c Dr 4,000
C’s Capital A/c Dr 2,000
To B’s capital A/c 6,000
(Being B’s share of goodwill adjusted
through capital accounts.)

Q3- A, B & C are partners sharing profits in the ratio of 4:3:3. On C’s retirement the value of firm’s
goodwill was agreed at Rs 30,000. A & B agreed to share profits & losses in the ratio of 7:3 respec
- tively. Give necessary journal entry for the treatment of Goodwill.
Ans: Journal
Date Particulars L Dr Cr
F
A’s capital A/c Dr 9,000
 To C’s capital A/c 9,000
(Being C’s share of goodwill adjusted with
gaining partner A.)

Q4- X, Y & Z were partners sharing profits in the ratio of 3:2:1. Z retired & new profit sharing ratio
between X & Y was 1:2. On Z’s retirement the goodwill of the firm was valued at Rs. 30,000. Pass
necessary journal entry for treatment of goodwill.

Ans: Journal
Date Particulars L Dr Cr
F
Y’s Capital A/c Dr 10,000
To X’s capital A/c 5,000
To Z’s Capital A/c 5,000
(Being Y compensated X & Z for their
sacrifice in the form of goodwill.)
8 MARKS QUESTION
Q5- On 31st December, 2006 the Balance sheet of A, B & C who were sharing profits in the ratio of
their capitals stood as follows:
Liabilities Rs Assets Rs
Creditors 10,800 Cash at bank 8,000
Capitals Debtors 10,000
A 45,000 Less: Prov. For d/d 200 9,800
B 30,000 Stock 9,000
C 15,000 90,000 Machinery 24,000
Land & Building 50,000
1,00,800 1,00,800
B retires & following adjustments of assets & liabilities have been agreed upon before the ascertainment
of the amount payable to B.
(i) That land & Building be appreciated by 12%.
(ii) That provision for doubtful debts be brought upto 5% of debtors.
(iii) That a provision of Rs 3,900 be made in respect of outstanding bill for repairs.
(iv) That goodwill of the entire firm be fixed at Rs 18,000 & B’s share of the same be adjusted
through the capital accounts of A & C who have agreed to share future profits in the ratio of
3:1.
(v) That B be paid Rs 5,000 immediately and the balance be transferred to his loan account.
Prepare Revaluation Account, Capital Accounts & the Balance Sheet of the new firm.

Ans: Revaluation profit Rs. 1,000, Capitals A- Rs. 41,400, C- Rs. 13,800, B’s Loan- Rs. 31,600
Balance Sheet Rs. 1,01,500.
Q6- A, B & C were equal partners. On 31st December 2008 the Balance Sheet of the firm was as
follows :

Liabilities Rs Assets Rs
Creditors 36,000 Cash at Bank 10,000
Provision for doubtful debts 1,000 Debtors 30,000
Reserve 21,000 Stock 35,000
Provident Fund 4,000 Building 57,000
Capitals- Goodwill 18,000
A 30,000
B 30,000
C 28,000 88,000
1,50,000 1,50,000
On 1st January, 2009, B retires & the following conditions were agreed upon:
(i) The Value of building be appreciated to Rs 65,000 & stock be reduced by Rs 3,000.
(ii) A debtor for Rs 3,000 became insolvent & nothing could be recovered from him.
(iii) Liability for provident fund is Rs 500 more.
(iv) There is also a unforeseen liability for Rs 1,000.
(v) A & C agreed to share future profits in ratio 2:1.
(vi) Goodwill of the firm was valued at Rs 30,000.
(vii) B is paid Rs 6,500 in cash & balance be transferred to his loan account.
Prepare Revaluation Account, Capital Accounts & Balance Sheet of A & C.
Ans: Revaluation profit Rs 1,500 , Capitals A- Rs 21,500 C- Rs 29,500, B’s loan Rs 35,000,
Balance sheet Rs 1,27,500.
Q7- A, B & C were in partnership sharing profits in proportion to their capitals. Their Balance sheet as on
31-03-2008 as follows:
Liabilities Rs Assets Rs
Creditors 15,600 Cash at Bank 16,000
Reserve 6,000 Debtors 20,000 19,600
Less: Prov. For Bed Debts 400
A’s Capital 90,000
Stock 18,000
B’s Capital 60,000
Machinery 48,000
C’s Capital 30,000
Building 1,00,000

2,01,600 201,600
On the above date, B retired due to ill health and following adjustments were agreed upon:
(i) Building be appreciated by 10%.
(ii) Provision for doubtful debts be increased to 5% of debtors.
(iii) Machinery be Depreciated by 15%.
 (iv) Goodwill of the firm was valued at Rs 36,000 and adjusted into capital accounts of A & C. Who
will share profits in future in the ratio of 3:1.
(v) A provision be made for outstanding repairs bill for Rs. 3,000.
(vi) Included in the creditors is Rs. 1,800 for an outstanding legal claim, which is not likely to arise.
(vii) Out of the insurance premium paid, Rs. 2,000 is for next year but it was debited to profit and
loss account.
(viii) Partners decide to fix the capital of new firm as Rs. 1,20,000 in the profit sharing ration
(ix) B is to be paid Rs. 9,000 in cash and balance to be transferred to his loan account.
Prepare Revaluation Account, Partners Capital Accounts & Balance Sheet of new firm.

Ans: Revaluation profit Rs. 3,000, Capital’s A Rs. 90,000, C Rs. 30,000. B’s loan account Rs. 66,000,
Balance Sheet total Rs. 2,02,800.

DEATH OF A PARTNER
6 MARKS QUESTION
Q8. Arti, Bharti and Seema are partners sharing profits in the proportion of 3:2:1 and their balance sheet
as on 31st March, 2003 stood as follows:
Liabilities Rs Assets Rs
Bills Payable 12,000 Buildings 21,000
Creditors 14,000 Cash in Hand 12,000
General Reserves 12,000 Bank 13,700
Capital A/cs: Rs. Debtors 12,000
Arti 20,000 Bills Receivable 4,300
Bharti 12,000 Stock 1,750
Seema 8,000 40,000 Investment 13,250

78,000 78,000
Bharti died on 30th 2003, and according to the deed her executors were entitled to be paid as under:
(i) The capital to her credit at the time of her death and interest thereon @ 10%. P.a.
(ii) Her share of General reserve.
(iii) Her share of profits for the intervening period will be based on the sales during that period.
Sales were Rs. 1,20,000 and the rate of profit had been 10% on sales.
(iv) Goodwill according to her share of profit to be calculated by taking twice the amount of profits
of last three years. The profits of the previous three years were Rs. 8200, Rs. 9,000 and Rs.
9,800.
(v) The executors of Bharti were paid off.
Prepare Bharti’s capital account and her executors account.

Ans: Amount paid to Bharti’s executors Rs. 38,300,Share of profit Rs 4,000,Firm’s Goodwill-
Rs 54,000, Interest on capital Rs300.

Q9- A, B & C are partners in a firm. The firm has a fixed capital of Rs 60,000 held equally by all the
Partners. Under partnership deed the partners were entitled to:
(i) A & B to a salary of Rs 1,800 & Rs 1,600 p.m. respectively.
 (ii) In the event of the death of a partner, Goodwill be valued at 2 years’ purchase of the average
profits of last three years.
(iii) Profits up to the date of death based on the profits of the previous year.
(iv) Partners were to be charged interest on drawings @ 5% p.a. & interest on capital @ 6% p.a.
B died on 1st January, 2011. His drawings to the date of death were Rs 2,000 & the interest there on Rs
60. The profits for three years ended 31st March, 2008, 2009 & 2010 were
Rs. 21,200, Rs. 3,200 (Dr) & Rs. 9,000 respectively.
Prepare B’s Capital Account to calculate the amount payable to his executors.
Ans: Amount Payable to B’s Executors - Rs 41,490, Firm’s goodwill- Rs 18,000, B’s share of profit- Rs 2,250,
Interest on capital Rs 900.
DISSOLUTION OF PARTNERSHIP FIRM
1 MARK QUESTION
Q1- What is meant by dissolution of a firm?
Ans- It means dissolution of partners among all the partners of the firm along with the termination of
the firm’s business.

Q2- What is Dissolution of partnership?

Ans: It refers to the change in the existing relations of the partners. The firm continues its business.
Q3- Differentiate between Dissolution of partnership & Dissolution of partnership firm.
Ans:
Basis Dissolution of partnership Dissolution of partnership firm
Continuation of It does not affect the continuation It involves discontinuation of
business of business. business.
Realisation of assets It requires revaluation of the It requires winding up of the firm &
& liabilities assets & liabilities. assets are realized , liabilities paid off.
Dissolution of firm It may or may not involve It involves Dissolution of firm.
Dissolution of firm
Closure of books It does not require closure of It requires closure of books.
books.
6 MARKS QUESTION
Q4- A, B & C were partners in a firm sharing profits in the ratio of 4:3:3. The firm was dissolved.
After transfer of assets & liabilities to realization Account, the following transactions took
place-
(i) L, a creditor to whom Rs 16,000 were due to be paid, took over machinery at Rs 20,000.
Balance was paid by him in cash.
(ii) An unrecorded liability of the firm Rs 7,800 was paid by A.
(iii) Expenses of realization amounted to Rs 7,400.
(iv) Debtors were realized by debt collecting agency by Rs 18,000.
(v) Stock of Rs 7,400 were taken over by A for Rs 7,000.
(vi) Bank Loan of Rs 15,000 was paid.

Q5- Pass necessary journal entries for the following transactions on the dissolution of firm of
K & L after various assets (other than cash) & external liabilities are transferred to realization
account.
(i) Expenses of realization Rs 7,400 were paid by L , a partner.
(ii) There was a debit balance of Rs 7,500 in the P & L A/c.
(iii) L agreed to pay off his wife’s loan.
 (iv) Sundry creditors Rs 20,000 were paid at 5% discount.
(v) Expenses of realization Rs 4,900 were paid by partner L.
(vi) Loss on dissolution Rs 9,000 was divided between K & L in the ratio of 3:1.

Q6- Following is the Balance Sheet of X & Y who share profits & losses in the ratio of 4:1 as at 31 st
March 2008:
Liabilities Rs Assets Rs
Sundry Creditors 8,000 Bank 20,000
Bank Overdraft 6,000 Debtors 17,000
Less: Provision for doubtful debts 2,000 15,000
X’s Brothers Loan 8,000
Stock 15,000
Y’s Loan 3,000
Investments 25,000
Investment Fluctuation Fund 5,000
Capital Building 25,000
X 50,000 Goodwill 10,000
Y 40,000 90,000 Profit and Loss A/c 10,000
1,20,000 1,20,000

The firm was dissolved on the above date and the following arrangements were decided upon:
i) X agreed to pay off his brother’s Loan.
ii) Debtors of Rs. 5,000 proved bad.
iii) Other assets realized – Investments 20% less; and Goodwill at 60%.
iv) One of the creditors for Rs. 5,000 was paid only Rs. 3,000.
v) Building was auctioned for Rs. 30,000 and the auctioneer’s commission amounted to Rs. 1,000.
vi) Y took over part of stock at Rs. 4,000 (being 20% less than the book value). Balance stock
realized 50%.
vii) Realisation expenses amounted to Rs. 2,000.

Prepare:
a) Realisation Account.
b) Partner’s Capital Accounts and
c) Bank Account.

ACCOUNTING FOR SHARE CAPITAL

1 MARK QUESTION
Q1- Define Share
Ans- The capital of the company is divided into certain indivisible units of fixed amount. These
units are called shares.
Q2- What are the types of share capital?
Ans: Authorised share capital.
Issued share Capital
Subscribed Capital.
Q3- Give the meaning of Call in Arrears.
Ans: It refers to that part of the capital which has been called up but not yet paid by the share
holder.
Q4- Give the meaning of Calls in Advance.
Ans: It refers to the amount paid by the shareholder in excess of the amount due from them.
3 MARKS QUESTION
Q5- What is Minimum Subscription?
Q6- Distinguish between Reserve Capital & capital Reserve.
Q7- State the purposes for which securities premium amout can be utilized as per section 78 of
the Companies Act.
Q8- What are the conditions for the issue of shares at discount?

Q9- 20,000 shares of Rs. 10 each were issued for public subscription at a premium of 10%. Full
amount was payable on Application. Applications were received for 30,000 shares and the
Board decided to allot the shares on a pro rata basis. Pass the Journal entries.

Date Particulars L.F. Dr. Cr.

Bank A/c ………. Dr. 3,30,000
To share application and Allotment A/c 3,30,000
(Being the application money received on 30,000
shares @ Rs. 11,000 each)
Share Application and Allotment A/c …………. Dr. 3,30,000
To Share Capital A/c (20,000 * 10) 2,00,000
To Securities Premium A/c (20,000 * Rs.1) 20,000
To Bank A/c (10,000 * Rs. 11) 1,10,000
(Being the share application money adjusted and
surplus refunded)

Q9- Rohit Ltd. purchased assets from Rohan & Co. for Rs 3,50,000. A sum of Rs 75,000 was paid
by means of a bank draft & for the balance due Rohit Ltd. issued equity shares of Rs 10 each
at a premium of 10%. Journalise the above transactions in the books of the company.

Date Particulars L.F. Dr. Cr.

Assets A/c ………. Dr. 3,50,000
To Rohan & Co. 3,50,000
(Being the assets purchased from Rohan & Co.)
Rohan & Co. …………. Dr. 3,50,000
To Bank A/c 75,000
To Equity Share Capital A/c 2,50,000
To Securities premium A/c 25,000
(Being amount paid by draft & 25,000 shares issued at
10% premium.)

Q11- X Ltd. purchased machinery for Rs 5,00,000 from Y Ltd. Rs 50,000 was paid by accepting a
bill of exchange drawn by Y Ltd. payable after 3 months. The balance was paid by issue of
equity shares of Rs 10 each. Pass journal entries in the following cases:
(i) When shares are issued at discount of 10%.
(ii) When shares are issued at par.
Ans- No. of shares (i) 50,000 shares (ii) 45,000 shares.

Q12- Sagar Ltd. was registered with an authorized capital of Rs 1,00,00,000 divided into 1,00,000
shares @ Rs 100 each. The company offered for public subscription 60,000 shares.
Applications for 56,000 shares were received & allotment was made to all applicants. All the
 calls were made & duly received except the second & final call on 700 shares. Prepare the
Balance Sheet of the company showing different types of share capital.
Ans: BALANCE SHEET OF SAGAR LTD. as at………..
Particulars Note No. Rs
I. EQUITY & LIABILITIES
Shareholders’ funds
Share Capital 1. 55,86,000
II. ASSETS
Current Assets
Cash & Cash Equivalents 2. 55,86,000
Notes:
1. Share Capital
Authorised Share Capital
1,00,000 equity share capital @ Rs 100 each 1,00,00,000
Issued Share Capital
60,000 Equity Shares @ Rs 100 each 60,00,000
Subscribed Share Capital
Subscribed, but fully paid up
55,300 shares @ Rs 100 each 55,30,000
Subscribed but not fully paid up
700 shares @ Rs 100 each 70,000
Less: Calls in arrears 14,000 56,000
55,86,000
2. Cash & Cash Equivalents: Cash at Bank 55,86,000

Q13- P Ltd. issued 4,000 shares of Rs 100 each at a premium of 10% payable as follows:
On application Rs 30
On allotment Rs 50 (including premium)
On First & Final Call Rs 30.
All shares were applied for & money received on due date with the exception of allotment
& call money on 200 shares. These shares were forfeited & reissued at Rs 105 per share.
Pass necessary journal entries in the books of the company.
Ans: Amount transferred to capital reserve A/c Rs 6,000.

Q14- X Ltd. issued 10,000 shares of Rs 100 each at a discount of 5% payable as follows:
On Application Rs 30
On Allotment Rs 25
On first Call Rs 40
Company received applications for 9,000 shares & all of them were accepted. All money is received except
first call money on 200 shares which were forfeited. 100 shares were reissued at Rs 80 per share. Pass
necessary journal entries.
Company also decided to open a school for the children of employees & children of nearby area. Which
value is served by this decision?

Ans: Capital Reserve Rs 4,000.

Value- Sensitivity of the company towards education of children of employees & others.

Q15- X Ltd. issued 20,000 shares of Rs 10 each payable Rs 3 on application, Rs 4 on allotment,

Rs 3 on first & final call. It received applications for 25,000 shares. Allotment was made on
proportionate basis on all applicants.
All shareholders paid their dues except ‘A’ who was allotted 200 shares failed to pay
allotment & call money. His shares were forfeited & reissued at Rs 8 per share. Pass
necessary journal entries to record the transactions .Which value has been followed by the
company while making allotment of shares.
Ans: Amount transferred to capital reserve- Rs 350.
 Value – Equality followed while making allotment to all shareholders.

3 Marks Question
Q16- PS Ltd. forfeited 500 shares of Rs 100 each for the non payment of first call of Rs 30 per share. The
final call of Rs 10 per share was not yet made. The forfeited shares vwere reissued at Rs 65,000 fully paid
up. Pass necessary journal entries in the books of the company.
Ans: Capital reserve- Rs 30,000.

ACCOUNTING FOR DEBENTURES

Q1-Name the sources of redemption of Debentures.

Q2- Enumerate the methods of redemption of debentures.

3 MARKS QUESTION
Q3- SSS Ltd. issued 25,000 10% Debentures of Rs 100 each as a collateral security to bank against
a loan of Rs 20,00,000. Give necessary journal entries & show the effect in the Balance Sheet.
Ans:
Date Particulars L.F. Dr. Cr.
Bank A/c ………. Dr. 20,00,000
To Bank Loan A/c 20,00,000
(Being the loan taken from bank.)
Debenture Suspense A/c …………. Dr. 25,00,000
To Debentures A/c
(Debentures issued as collateral security for bank loan) 25,00,000

BALANCE SHEET OF SSS Ltd. as at

Particulars Note No Rs
I Equity & Liabilities
Non Current Liabilities
(a) Long term borrowings 1 20,00,000
II Assets
Current Assets
Cash & Cash Equivalents 2 20,00,000

Notes to accounts:
1. Long term borrowings
Bank Loan 20,00,000
Debentures A/c 25,00,000
Less: Debenture suspense A/c 25,00,000
20,00,000
2. Cash & Cash equivalents
Cash at bank 20,00,000

Q4- Journalise the following:

(i) A debenture issued at Rs 100, repayable at Rs 105.
(ii) A debenture issued at Rs 95, repayable at Rs105.
(iii) A debenture issued at Rs 110, repayable at Rs 105.
The face value of 8% debenture is Rs 100.
Ans:
Date Particulars L.F. Dr. Cr.
(i) Bank A/c ………. Dr. 100
To Debenture application & allotment A/c 100
(Being application money received.)
 Debenture application & allotment A/c …………. Dr. 100
Loss on issueof debentures A/c …………..Dr. 5
To 8% Debentures A/c 100
To premium on redemption of debentures A/c 5
(Debentures issued at par, redeemable at premium .)
(ii) Bank A/c ………. Dr. 95
To Debenture application & allotment A/c 95
(Being application money received.)
Debenture application & allotment A/c …………. Dr. 95
Loss on issueof debentures A/c …………..Dr. 10
To 8% Debentures A/c 100
To premium on redemption of debentures A/c 5
(Debentures issued at discount ,redeemable at
premium .)
(iii) Bank A/c ………. Dr. 110
To Debenture application & allotment A/c 110
(Being application money received.)
Debenture application & allotment A/c …………. Dr. 110
Loss on issue of debentures A/c …………..Dr. 5
To 8% Debentures A/c 100
To premium on redemption of debentures A/c 5
To securities premium A/c 10
(Debentures issued at premium, red. At prem .)
ANALYSIS OF FINANCIAL STATEMENTS

FINANCIAL STATEMENTS OF A COMPANY

1 mark question
Q1- What is meant by Financial Statements?
Ans- Financial statements are those statements of a company that depict the financial position & result of
business activities at the end of the accounting period.
3 mark questions
Q2- List the major heads under which ‘Equity & Liabilities’ are presented in the Balance sheet of a
Company as per Schedule VI(Revised), Part I to the Companies Act ,1956.
Ans-
Particulars Note No. 31-03-2013(Rs) 31-03-2012(Rs)
I. Equity & Liabilities
(i) Shareholder’s Funds
(ii) Share Application Money
pending allotment
(iii) Non Current Liabilities
(iv) Current Liabilities
Total

Q3- List the major heads on the assets side of the Balance sheet of a Company as per Schedule VI
(Revised), Part I to the Companies Act ,1956.
Ans: The major heads o the assets side are:
II ASSETS
(i) Non Current Assets
(ii) Current Assets.

Q4-List the items which are shown under the headings ‘Current liabilities’ as per Schedule Vi of Companies
Act,1956.
Ans- The major items under Current Liabilities-
(i) Short term borrowings
 (ii) Trade Payables
(iii) Other Current Liabilities
(iv) Short term provisions.

Q5- List the items under head ‘Reserves & Surplus’ in the Balance sheet of a Company as per Schedule
VI(Revised), Part I to the Companies Act ,1956.
Ans: The major items under Reserves & Surplus-
(i) Capital reserve.
(ii) Capital redemption Reserve.
(iii) Securities Premium Account.
(iv) Debenture Redemption Reserve.
(v) Profit & Loss(Cr) balance.
Q6- List the major items under the head ‘ Current assets’ in the Balance sheet of a Company as per
Schedule VI(Revised), Part I to the Companies Act ,1956.
Ans: The items under the head ‘Current Assets’-
(i) Current investments.
(ii) Inventories.
(iii) Trade receivables.
(iv) Cash & Cash Equivalents.
(v) Short term Loans & Advances.
(vi) Other Current assets.
Q7- Under which Heading & sub heading following items are shown as per revised schedule VI:
(i) Proposed Dividend.
(ii) Creditors & B/P.
(iii) Provision for tax.
(iv) Security Deposit.
(v) Work in progress.
(vi) Debtors.
(vii) Cash at bank.
(viii) Prepaid Expenses.
(ix) Loose tools.
(x) Trade marks.
TOOLS FOR FINANCIAL STATEMENTS- COMPARATIVE & COMMON SIZE STATEMENTS
3 marks question
Q1- From the following Balance Sheet of Universe Ltd. as on 31st March 2011 & 2012, Prepare Comparative
balance sheet-
Particulars Note No. 2011-12(Rs) 2010-11(Rs)
EQUITY & LIABILITIES
(A) Shareholders’ funds
(i) Share capital 20,00,000 15,00,000
(ii) Reserves & Surplus 3,00,000 4,00,000
NON CURRENT LIABILITIES
(I) Long term borrowings 9,00,000 6,00,000
CURRENT LIABILITIES
(I) Trade payables 3,00,000 2,00,000
TOTAL 35,00,000 27,00,000
ASSETS
(A) NON CURRENT ASSETS
Fixed Assets
(i) Tangible 20,00,000 15,00,000
(ii) Intagible 9,00,000 6,00,000
(B) CURRENT ASSETS
(i) Inventories 3,00,000 4,00,000
(ii) Cash & Cash Equivalents 3,00,000 2,00,000
TOTAL 35,00,000 27,00,000
Q2- Prepare a ‘ Comparative Statement of Profit & Loss’ with the help of following information:
Particulars 2011(Rs) 2012(Rs)
Revenue from operations 20,00,000 30,00,000
Expenses 12,00,000 21,00,000
Other Income 4,00,000 3,60,000
Income tax 50% 50%

ACCOUNTING RATIOS
1 mark question

Q1- What is meant by Accountig ratios?

Q2-What are the limitations of ratio analysis?

Q3- Compute liquid ratio from the following information:

Current assets Rs 90,000; Stock Rs 30,000; Prepaid expenses Rs 10,000; and working capital
Rs 40,000.
Ans: Liquid ratio 1:1.

Q4- The Current Assets of a company are Rs 15,00,000. Its current is 3 and Liquid ratio is 1.25.
Calculate the amount of Current Liabilities , Liquid Assets and Inventory.
Ans: Current Liabilities- Rs 5,00,000; Liquid assets Rs 6,25,000; Inventory Rs 8,75,000.

Q5- Compute Debt Equity ratio from the following information-

Total Assets Rs 4,00,000, Total Debts Rs 2,50,000, Current Liabilities Rs 1,00,000.
Ans: Debt Equity ratio-1:1.

Q6- Rs 4,00,000 is the cost of revenue from operations, inventory turnover ratio is 5 times, Stock
at the beginning is 1.5 times more than the stock at the end. Calculate the value of opening
& closing stock.
Ans: Opening stock Rs 1,14,285 & Closing stock Rs 45,714.

Q7- Find Gross profit ratio-

Revenue from operations (Sales) Rs 6,00,000, Cost of revenue from operations Rs 4,80,000,
Direct expenses Rs 40,000.
Ans Gross profit ratio 20%.