Accountancy. Class Chapter 1 (Partnership Accounts (Fundamentals)

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1 Accountancy Class - +2 Chapter 1 (Partnership Accounts (Fundamentals) Questions : - 1. Jain and Gupta Were Partners in a firm sharing profits in 3 : 2 ratio. Their fixed capitals were Jain Rs. 1,00,000 And Gupta Rs. 1,50,000. After the accounts of the year had been closed it was discovered that interest on capital at 10% per annum as provided in the partnership agreement has not been credited to the capital accounts of the partners before distribution of profits. Pass the necessary journal entry to rectify the error. Ans. Jain debited and Gupta credited by Rs. 5, R, S and T were partners in a firm sharing profits in the ratio 5 : 3 : 2 with capitals of Rs. 50,000, Rs. 24,000 and Rs. 26,000 respectively. Partners were entitled for an 6% per annum on their capitals. R and S had guaranteed T that his share of profits in any year would not be less than Rs. 10,000 excluding interest. During the year the firm had earned a profit of Rs. 48,000 before charging the interest on capital. R and S had also withdrawn Rs. 5,000 and Rs. 7,400 respectively. Prepare the P & L Appropriation Account. Ans. Share of Profit- R: Rs. 20,000, S: Rs. 12,000 and T: Rs. 10, Mohan, Neeraj and Peeyush are partners in a firm. They contributed Rs. 75,000 each as capital three years ago. At that time Peeyush agreed to look after the business as Mohan and Neeraj were busy. The profits for the past three years were Rs. 45,000, Rs. 30,000 and Rs. 60,000 respectively. While going through the books of accounts. Mohan noticed that profit had been distributed in 1 : 1: 2 ratio. When he enquired from Peeyush about this, Peeyush answered that since he looked after the business he should get more profit. Mohan disagreed and it was decided to distributed profits equally with retrospective effect for the last three years. (a) You are required to make necessary corrections in the books of accounts of Mohan, Neeraj and Peeyush by passing and adjustment entry. (b) Identify the value which is being ignored by Peeyush. Ans. (a) Mohan and Neeraj both credited with Rs. 11,250 each by debiting Peeyush with Rs. 22, L, M and N were partners in a firm sharing profits in the ratio of 3 : 4 : 5. Their fixed capitals were L-Rs. 4,00,000, M- Rs. 5,00,000 and N- Rs. 6,00,000 respectively. The partnership deed provided or the following : (i) Interest on 6% p.a. (ii) Salary of Rs. 30,000 p.a. to N. (iii) Interest on partner s drawings will 12% p.a. Online Guess Papers : Mobile : ,

2 During the year ended the firm earned a profit of Rs, 2,70,000. L withdrew Rs. 10,000 on , M withdrew Rs. 12,000 on and N withdrew Rs. 15,000 on Prepare Profit and Loss Appropriation Accounts for the year ended Ans. Net Profit Rs. 1,52,370 Hints. Interest on drawing- L Rs. 1,200, M Rs. 7820, N Rs A and B entered into partnership on 1 st April 2009 without any partnership deed. They introduced capitals of Rs. 5,00,000 and Rs. 3,00,000 respectively. On 31 st October 2009, A advanced Rs. 2,00,000 by way of loan to the firm without any agreement as to interest. The Profit and Loss Account for the year ended showed a profit of Rs. 4,30,000, but the partners could not agree upon the amount of interest on loan to be charged and the basis of division of profits. Pass a journal entry for the distribution of the profit between the partners and prepare the Capital A/cs of both the partners and Loan A/c of A. Ans. Share of profit- A: Rs.2,12,500; B: Rs. 2,12,500, Balance of Capital Account- A: Rs. 7,12,500; B: Rs. 5,12,500; Balance of A s Loan A/c: Rs. 2,05,000 6.A,B,C And D are partners sharing Profits and Losses in the ratio of 4 : 3 : 3: 2. Their respective fixed capitals on were Rs. 60,000, Rs. 90,000, Rs. 1,20,000, and Rs. 90,000. After preparing the final accounts for the year ended it was discovered that interest on 12% p.a. was not allowed and interest on drawings amounting to Rs. 2,000, Rs. 2,500, Rs. 1,500 and Rs. 1,000 respectively was also not charged. Pass the necessary adjustment journal entry showing your workings clearly. Ans. A- Dr. 6,867; B- Dr. Rs. 750; C-Cr. Rs. 3,850; D-Cr. Rs. 3, A, B and C were partners in a firm. On their fixed capitals stood at Rs. 50,000, Rs. 25,000 and Rs. 25,000 respectively. As per the provisions of the partnership deed: (a) B was entitled for a salary of Rs. 5,000 p.a. (b) All the partners were entitled to interest on capital at 5% p.a. (c) Profits were to be shared in the ratio of capitals. The net profit for the year ending of Rs. 33,000 and of Rs. 45,000, was divided equally without Journal entry to rectify the above error. Pass an adjustment Journal entry to rectify the above error. Ans. A- Cr. Rs. 8,000; B- Cr. Rs. 1,000; C- Dr. Rs. 9,000 Online Guess Papers : Mobile : ,

3 8. Lalan and Balan were partners in a firm sharing profits in the ratio of 3 : 2. Their fixed capitals on were Lalan Rs. 1,00,000 and Balan Rs. 2,00,000. They agreed to allow interest on 12% per annum and to charge on 15% per annum. The firm earned a profit, before all above adjustments, of Rs. 30,000 for the year ended The drawings of Lalan and Balan during the year were Rs. 3,000 and Rs. 5,000 respectively. Showing your calculations, clearly prepare Profit and Loss Appropriation A/c of Lalan and Balan. The interest on capital will be allowed even if the firm incurs a loss. Ans. Share of Loss- Lalan Rs. 3,240; Balan Rs. 2,160. Hint. Interest on Drawing will be 15% p.a. for six months because the actual date of drawing is not given. 9. Anit, Sunil and Ravinder entered into a Partnership on 1 st January 2011 to share profits in the ratio of 2 : 1 : 1. It was provided in the deed that Ravinder s share of profit will not be less than Rs. 70,000 per annum. The losses for the year ended December 31 st 2011 were Rs. 2,00,000 before allowing interest Rs. 8,000 on Anit s loan which is due for the current year. Prepare Profit and Loss appropriation Account for the year ended 31 st December Ans. Share of Loss- Anit Rs. 1,85,333; Sunil Rs. 92, Ravi and Jain are partners in a firm. Their fixed capitals are Rs. 3,00,000 and Rs. 4,00,000 respectively. They admitted Gupta as a new partner for 1/4 th share in the profits. According to the conditions of partnership deed, Gupta was given a guarantee of profit of Rs. 50,000. Deficit in the guaranteed amount to Gupta will be borne by Ravi and Jain in the ratio of 3 : 2. The firm earned a profit of Rs. 1,60,000 for the year ended Prepare the Profit and Loss Appropriation Account and show your working clearly. Ans. Share of Profit- Ravi Rs. 54,000; Jain Rs. 56,000; Gupta Rs. 50,000 Hint. Profit Sharing Ratio of Ravi and Jain is equal. 11. Rehman, Suleman and Hanuman were partners in a firm sharing profits in the ratio o 7 : 2 : 1 respectively. Their fixed capitals were as follows: Rehman Rs. 3,00,000; Suleman Rs. 2,00,000 and Hanuman Rs. 1,00,000. The partnership deed provided for the following for the division of profit: (i) 10% of the trading profits will be transferred to Reserve Account. (ii) Hanuman was guaranteed a profit of Rs. 50,000. Any loss because of guarantee to Hanuman will be shared by Rehman and Suleman equally. The trading profit of the firm for the year ended was Rs. 2,00,000. Prepare the Profit and Loss Appropriation Account of Rehman, Suleman and Hanuman for the year ended Online Guess Papers : Mobile : ,

4 Ans. Share of Profit- Rehman Rs. 1,10,000l; Suleman Rs. 20,000; Hanuman Rs. 50, Ahmed, Bheem and Daniel are Partners in a firm. On 1 st April 2011 the balance in their capital accounts stood at Rs. 8,00,000; Rs. 6,00,000 and Rs. 4,00,000 respectively. They shared profits in the proportion of 5 : 3 : 2 respectively. Partners are entitled to interest on 5% per annum and salary to Rs. 3,000 per month and a commission of Rs. 12,000 to Daniel as per the provisions of the partnership deed. Ahmed s share of profit, excluding interest on capital, is guaranteed at not less than Rs. 25,000 p.a. Bheem s share of profit, including interest on capital but excluding salary, is guaranteed at not less than Rs. 55,000 p.a. Any deficiency arising on that account shall be met by Daniel. The profits of the firm for the year ended 31 st March 2012 amounted to Rs. 2,16,000. Prepare Profit and Loss Appropriation Account for the year ended 31 st March Ans. Share of profit- Ahmed Rs. 39,000; Bheem Rs. 25,000; Denial Rs. 14, Sita and Geeta were partners in a firm. On 1 st April, 2011 hey admitted Neha as a partner for 1/3 share in the profits of the firm. She is differently abled. The new partnership deed provides for the following: (i) 5% of the trading profit will be donated to Red Cross Society. (ii) 10% of the trading profit will be donated to the Prime Minister s Relief Fund. (iii) Products will be sold to people below poverty line at a discount of 15% on maximum retail price. (iv) New retail shops will be opened in the backward areas of the country. (v) New recruitment of salespersons will be reserved for the girls belonging to Scheduled Castes and Scheduled Tribes. The trading profit of the firm for the year ended was Rs. 12,00,000. Identify any four values that were kept in mind by Sita, Geeta and Neha while preparing the new partnership deed. Also prepare the Profit and Loss Appropriation Account of the firm for the year ended Questions : - Chapter 2 Partnership Accounts (Goodwill- Nature and Valuation) 1. A Partnership firm earned net profit during the last three years as follows: Years Net profit ,90, ,20, ,50,000 Online Guess Papers : Mobile : ,

5 The Capital employed in the firm throughout the above mentioned period has been Rs. 4,00,000. Having regard to risk involved, 15% is considered to be a fair return on the capital. The remuneration of all the partners during this period is estimated to be Rs. 1,00,000 per annum. Calculate the value of goodwill on the basis of (i) two year s purchase of super profits earned on average basis during the above mentioned three years and (ii) by capitalization method. Ans. (i) 1,20,000; (ii) 4,00, The capital employed in a firm is Rs. 10,00,000 and the market rate of interest is 15% Annual salary of the partners is Rs. 80,000. The profits of the last three years were Rs. 3,00,000; Rs. 4,00,000 and Rs. 5,00,000 respectively. Calculate the value of goodwill on the basis of two years purchase of the average super profits of last three years. Ans RS Questions : - Chapter 3 Partnership Accounts (Reconstitution) 1. A, B and C were partners in a firm. They had no partnership deed. They had been in business for 4 years and their P & L for this period was : year ending March 2004 Rs. 39,000, March 2005 Rs. 54,000, March 2006 Rs. 18,000 (loss) and March 2007 Rs. 75,000. During the year , they agreed to share profits and losses in the ratio of 2 : 2 : 1 with retrospective effect from the year It was also decided that an interest (charge) of 5% p.a. was to be provided on capitals (fixed). Their capitals were Rs. 80,000, Rs. 60,000 and Rs. 60,000 respectively. Pass a single adjustment entry to adjust the capital accounts of the partners. Ans. C debited Rs. 16,000 by crediting A Rs. 10,000 and B Rs. 6,000 Questions : - Chapter 4 Partnership Accounts (Admission) 1. A and B are partners with capitals of Rs. 90,000 and Rs. 1,00,000 respectively. They decide to admit C into the partnership for 1/4 th share in the future profits. C is to bring in a sum of Rs. 80,000 as his capital. Calculate the amount of goodwill. Ans. Rs. 50, A and B are partners sharing profits in the ratio of 5 : 4. They admit C for a 1/3 rd share, which he acquires in equal proportion from both. Find the new profit sharing ratio. Online Guess Papers : Mobile : ,

6 Ans. 7 : 5 : 6 3. Sumit and Puneet are partners in a firm sharing profits in the ratio of 3 : 2 respectively. The fixed capital of sumit is Rs. 2,40,000 and Puneet is Rs. 1,50,000. On they admitted Kashish as a new partner for 1/5 th share in future profits. Kashish brought Rs. 1,50,000 as his capital. Calculate the value of goodwill of the firm and record necessary Journal Entries on Kashish s admission. Ans. Value of Goodwill Rs. 2,10,000; Kashish debited by Rs. 42,000; Sumit and Puneet credited by Rs. 25,200 and Rs. 16,200 respectively, for share of goodwill. 4. Anil and Sunil are partners in a firm with fixed capitals of Rs. 3,20,000 and Rs. 2,40,000 respectively. They admitted Charu as a new partner for 1/4 th Share in the profits of the firm on 1 st April, Charu brought Rs. 3,20,000 as her share of capital. Calculate the value of the goodwill of the firm and record necessary Journal Entries. Ans. Value of goodwill Rs. 4,00,000; Charu debited by Rs. 1,00,000; Anil & Sunil credited by Rs. 50,000 each for share of goodwill. 5. A and B are partners in a firm sharing profits in the ratio of 3 : 1. They admitted C as a new partner. The new profits sharing ratio of A, B and C will be 2 : 1 : 1. C brought Rs. 2,50,000 for his capital but could not bring his share of goodwill (premium) Rs. 10,000 in cash. Pass necessary journal entries in the books of the firm for the amount of capital brought in by C and for the treatment of goodwill. Ans. trf. From C s capital A/c capital A/c for C s share of goodwill of Rs. 10, A and B are partners in a firm sharing profits in the ratio of 3 : 4. They admit C for 3/10 th share of profits which he acquires, in equal proportions from both of them. Find the new profit sharing ratio. (b) C brings Rs. 42,000 as his share of premium for goodwill in cash. Pas journal entries for recording goodwill. Ans. (a) 39 : 59 : 42 (b) C s share of goodwill trf. to-a: Rs. 21,000; B : Rs. 21, A and B were partners in a firm sharing profits in the ratio of 4 : 3. They admitted C as a new partner for 3/7 th share in the profits of the firm. The new profit sharing ratio will be 2 : 2 : 3. C brought Rs. 2,00,000 as his capital and Rs. 60,000 for his share of premium as goodwill, half of which was withdrawn by A and B from the firm. Calculate sacrificing ratio and pass necessary journal entries in the books of the firm for the above transactions. Ans. Sacrificing ration = 2 : 1 Online Guess Papers : Mobile : ,

7 8. Asin and Shreyas are partners in a firm. They admit ajay as a new partner with 1/5 th share in the profits of the firm. Ajay brings Rs. 5,00,000 as his share of capital. The value of the total assets of the firm was Rs. 15,00,000 and outside liabilities were valued at Rs. 5,00,000 on the date. Give the necessary Journal entry to record goodwill ate the time of Ajay s admission. Also show your workings. Ans. Ajay s share of goodwill of Rs. 2,00,000 transfer to Asin and Shreyas equally. 9. L and M were partners in a firm sharing profits in 4 : 3 ratio. They admitted O as a new partner. The new profit sharing ratio of L, M and O will be 3 : 3 4. O brought Rs. 2,00,000 for his capital. The goodwill of the firm on O s admission was valued at Rs. 70,000. O brought his share of goodwill in cash. Calculate sacrificing ration of L and M and pass necessary journal entries for the above transaction on O s admission. Ans. Sacrificing ratio = 19 : 9; O s share of goodwill of Rs. 28,000 credited to L Rs. 19,000 and M Rs. 9, X and Y were partners in a firm sharing profits in 3 : 1 ratio. They admitted Z as a new partner for 1/4 th share in the profits. Z was to bring Rs. 20,000 as his capital and the capitals of X and Y were to be adjusted on the basis of Z s capital in the profit sharing ratio. The Balance Sheet of X and Y on was as follows: Balance Sheet of X and Y on Liabilities Assets Creditors 18,000 Cash 5,000 Bills payable 10,000 Debtors 17,000 General reserve 12,000 Stock 12,000 X s capital 25,000 Machinery 21,000 Y s capital 10,000 Building 20,000 75,000 75,000 Others terms of agreement on Z s admission were as follows: (i) Z will bring Rs for his share of goodwill. (ii) Building will be valued ate Rs. 25,000 and machinery at Rs. 19,000. (iii) A provision at 5% on debtors will be created for bad debts. (iv) Capital accounts of X and Y were adjusted by opening current accounts. Prepare Revaluation Account, Partners Capital Accounts and the Balance Sheet of X, Y and Z. Online Guess Papers : Mobile : ,

8 Ans. Profit on revaluation = Rs. 2,150; Capital accounts- X: Rs. 45,000; Y : Rs. 15,000; Z : Rs. 20,000; B/S Total Rs. 1,08,037 Hint. Balance of Current Accounts- X: Rs. 4,887 (Dr); Y: Rs. 37 (Cr) 11.Jain and Gupta were partners sharing profits in the ratio of 3 : 2. Their Balance Sheet on was as follows: Liabilities Assets Creditors 20,000 Cash 14,800 Bills payable 3,000 Debtors 20,500 Bank overdraft 17,000 Less Prov. For doubtful debts ,200 Reserve 15,000 Stock 20,200 Jain s Capital 70,000 Plant 40,000 Gupta s Capital 60,000 Buildings 70,000 Motor Vehicles 20,000 1,85,000 1,85,000 They agree to admit Mishra for 1/4 th share from subject to following terms : (a) Mishra to bring in capital equal to 1/4/th of the total capital of Jain and Gupta after all adjustments including premium for goodwill. (b) Buildings to be appreciated by Rs. 14,000 and stock to be depreciated by Rs. 6,000/ (c) Provision for doubtful debts (on debtors) to be raised to Rs. 1,000. (d) A provision be made for Rs. 1,800 for outstanding legal charges. (e) Mishra s share of goodwill/premium was calculated at Rs. 10,000. Prepare Revaluation Account, Partners Capital Accounts and the Balance Sheet of the new firm on Mishra s Admission. Ans. Profit on Revaluation Rs. 5,500; Balance of capital accounts- Jain Rs. 88,300; Gupta Rs. 72,200; Mishra Rs. 30,125; B/S total Rs. 2,32,425 Hint. Cash bring in by Mishra as capital Rs. 40, Rao and Reddy were partners in a firm sharing profits in the ratio of 3 : 1. They admitted Kutty as a new partner for 3/8 th share in the profits. The new Profit sharing ratio will be 3 : 2 : 3. Kutty brought Rs. 2,00,000 for his capital and Rs. 50,000 for his share of premium for goodwill. On , the date of Kutty s admission. The Balance Sheet of Rao and Reddy was as follows : Online Guess Papers : Mobile : ,

9 Balance Sheet of Rao and Reddy as on Liabilities Assets Creditors 60,000 Cash 90,000 Bills Payable 20,000 Debtors 80,000 Capitals: Stock 1,50,000 Rao 4,00,000 Furniture 50,000 Reddy 1,00,000 5,00,000 Machinery 2,10,000 5,80,000 5,80,000 It was agreed that : (i) Stock is valued at Rs. 2,00,000. (ii) Machinery will be depreciated by 12% (iii) Furniture will be depreciated by Rs. 2,000. (iv) A provision of 5% for bad and doubtful debts will be made on debtors. (v) The Capital Accounts of all the partners were adjusted in the new profit sharing ratio after admission. For surplus or deficiency, the Current Accounts were to be opened. Prepare Revaluation Account, Partners Capital Accounts and the Balance Sheet of the new firm. Ans. Profit on revaluation Rs. 18,800; Balance of Capital A/c- Rao Rs. 2,88,300; Reddy Rs. 1,92,200; Kutty Rs. 2,88,300; B/S Total Rs. 10,24,600 Hint. Balance of Current A/c- Rao Rs. 1,75,800 (Cr); Reddy Rs. 87,500 (Dr); Kutty Rs. 88,300 (Dr). 13. The Balance Sheet of Ram and Shyam, Who were sharing profits in the ratio of 3 : 1, on 31dt March 2009 was as follows: Liabilities Assets Online Guess Papers : Mobile : ,

10 Creditors 2,800 Cash at bank 2,000 Employees Provident Fund 12,00 Debtors 20,500 General Reserve 2,000 Less Reserve for Capitals: Doubtful debts (-) 500 6,000 Ram 6,000 Stock 3,000 Shyam 4,000 10,000 Investments 5,000 16,000 16,000 They decided to admit Mohan on April 1 st 2009 for 1/5 th share on the following terms : (i) Mohan shall bring Rs. 6,000 as his share of premium. (ii) That unaccounted accrued income of Rs. 100 be provided for. (iii) The market value of investments was Rs. 4,500. (iv) A debtor whose dues of Rs. 500 was written off as bad debts paid Rs. 400 in full settlement. (v) Mohan to bring in capital to the extent of 1/5 th of the total capital of the new firm. Prepare Revaluation A/c, Partners Capital A/cs and the Balance Sheet of the new firm. Ans. Profit on revaluation = Nil; Capital introduce by Mohan Rs. 4,500; B/S Total Rs. 26, Ishu and Vishu are partners sharing profits in the ratio of 3 : 2. Their Balance Sheet on 31 st March was as follows. Liabilities Assets Creditors 66,000 Cash at bank 87,000 Employees Provident Fund General Reserve Capitals: Ishu 1,19,000 Vishu 1,12,000 10,000 4,000 2,31,000 Debtors 42,000 -) Prov. For Doubtful debts 7,000 Investments (market price 19,000) Buildings 35,000 21,000 98,000 70,000 3,11,000 Plant & Machinery 3,11,000 Nishu was admitted on that date for 1/6 th share on the following terms: (i) Nishu will bring Rs. 56,000 as his share of capital. (ii) Goodwill of the firm is valued at Rs. 84,000 and Nishu will bring his share of goodwill in cash. (iii) Plant and Machinery be appreciated by 20% Online Guess Papers : Mobile : ,

11 (iv) All debtors are good. (v) There is a liability of Rs. 9,800 included in Sundry creditors that is not likely to arise. (vi) Capital of Ishu and Vishu will be adjusted on the basis of Nishu s capital and any excess or deficiency will be made by withdrawing or bringing in cash by the concerned partner. Prepare the Revaluation Account, the Partner s Capital Accounts and the Balance Sheet of the firm after the above adjustments. Ans. Profit on Revaluation Rs. 32,800; Cash bring in by Ishu Rs. 14,920; Cash paid to Vishu Rs. 22,720; B/S Total Rs. 3,92,200. Hint. Balance of Capital Accounts- Ishu Rs. 1,68,000; Vishu Rs. 1,12,000; Nishu Rs. 56,000; Net Balance of Investment Fluctuation Fund of Rs. 2,000 credited to Revaluation Account. 15. Murari and Vohra were partners in a firm with capitals of Rs. 1,20,000 and Rs. 1,60,000 respectively. On they admitted Yadav as a partner for one-fourth share in profits on his payment of Rs. 2,00,000 as his capital and Rs. 90,000 for his one fourth share of goodwill. On that date the creditors of Murari and Vohra were Rs. 60,000 and Bank overdraft was Rs. 15,000. Their assets apart from cash included Stock Rs. 10,000; Debtors Rs. 40,000; Plant and Machinery Rs. 80,000; Land and Building Rs. 2,00,000. It was agreed that stock should be depreciated by 2,000; Plant and Machinery by 20%, Rs. 5,000 Should be written off as bad debts and Land and Building should be appreciated by 25%. Prepare Revaluation Account, Capital Accounts of Murari, Vohra and Yadav and the Balance sheet of the new firm. Ans. Profit on Revaluation Rs. 27,000 Balance of Partner s Capital A/c-Murari Rs. 1,78,500; Vohra Rs. 2,18,500: Yadav Rs. 2,00,000; Balance Sheet Total Rs. 6,72,000. Hint. Cash balance before admission of Yadav = Rs. 25, The Balance Sheet of Madan and Mohan who share profits and losses in the ratio of 3 : 2 on was as follows: Liabilities Assets Creditors 28,000 Cash at bank 10,000 Workmen s Compensation Fund General Reserve Capitals: Rs. Madan 60,000 12,000 20,000 1,00,000 Debtors 65,000 Less: Reserve for Doubtful debts 5,000 Stock 60,000 30,000 50,000 Online Guess Papers : Mobile : ,

12 Mohan 40,000 Investments Patents 10,000 1,60,000 1,60,000 They decided to admit Gopal on for 1/4 th share on the following terms: (i) Gopal shall bring Rs. 20,000 as his. Share or premium for goodwill. (ii) That unaccounted accrued income of Rs. 1,000 be provided for. (iii) The market value of investments was Rs. 45,000. (iv) A debtor whose dues of Rs. 5,000 were written of as bad debts paid Rs. 4,000 in full settlement. (v) A claim of Rs. 3,000 on account of workmen s compensation to be provided for. (vi) Patents are over-valued by Rs. 2,000. (vii) Gopal to bring in capital equal to 1/4 th of the total capital of the firm after all adjustments. Prepare the Revaluation Account, Capital Accounts of the partners and the Balance Sheet of the new firm. Ans. Loss on Revaluation Rs. 2,000; Balance of Capital Accounts- Madan Rs. 88,200; Mohan Rs. 58,800; Gopal to bring capital Rs. 49,000 (i.e. 88,200 + Rs. 59,800) x4/3x1/4)); B/S Total Rs. 2,27, Atal and Madan were partners in a firm sharing profits in the ratio of 5 : 3. On they admitted Mehra as a new partner for 1/5 th share in the profits. The new profit sharing ratio was 5 : 3 : 2. On Mehra s admission the Balance Sheet of the firm was as follows: Liabilities Assets Capital : Land and Building 1,50,000 Atal : 1,50,000 Machinery 40,000 Madan : 90,000 2,40,000 Patents 5,000 Provision for bad debts 1,200 Stock 27,000 Creditors 20,000 Debtors 47,000 Workmen Fund Compensation 32,000 Cash Profit and Loss Account 4,200 20,000 On Mehra s admission it was agreed that 2,93,200 2,93,200 (i) Mehra will bring Rs. 40,000 as his capital and Rs. 16,000 for his share of goodwill premium, half of which was withdrawn by Atal and Madan; (ii) A provision of 21/2% for bad and doubtful debts was to be created; Online Guess Papers : Mobile : ,

13 (iii) Included in the sundry creditors was on item of Rs. 2,500 which was not to be paid; (iv) A provision to be made for an outstanding bill for electricity Rs. 3,000; (v) A claim of Rs.325 for damages against the firm was likely to be admitted. Provision for the same was to be made. After the above adjustments, the capitals of Atal and Madan were to be adjusted on the basis of Mehra s capital. Actual cash was to be brought in or to be paid off to Atal and Madan as the case may be. Prepare Revaluation Account, Capital Accounts of the partners and the Balance Sheet of the new firm. Ans. Loss on Revaluation Rs. 800; Balance of Capital Accounts- Atal Rs. 1,00,000; Madan Rs. 60,000; Mehra Rs. 40,000; B/S Total Rs. 2,67,825. Hint. Final payment made to- Atal Rs. 62,000; Madan Rs. 37,200 by arranging overdraft of Rs. 47, Raghu and Rishu are partners sharing profits in the ratio of 3 : 2. Their Balance Sheet as on 31 st March 2009 was as follows : Balance Sheet of Raghu and Rishu as on 31 st March 2009 Liabilities Assets Creditors 86,000 Cash in hand 77,000 Employee provident Fund 10,000 Debtors 42,000 Investment Fluctuation Fund 4,000 Less: Reserve for Capitals: Raghu : 1,19,000 Rishu : 1,12,000 Doubtful debts - 35,000 7,000 21,000 2,31,000 Investments 98,000 Buildings 1,00,000 Plant and Machinery 3,31,000 3,31,000 Rishabh was admitted on that date for 1/4 th share of profit on the following terms : (i) Rishab will bring Rs. 50,000 as his share of capital. (ii) Goodwill of the firm is valued at Rs. 42,000 and Rishabh will bring his share of Goodwill in cash. (iii) Buildings were appreciated by 20% (iv) All debtors were good. (v) There was a liability of Rs. 10,800 included in creditors which was not likely to arise. (vi) New profit sharing ratio will be 2 : 1 : 1. (vii) Capital of Raghu and Rishu will be adjusted on the basis of Rishab s share of capital and any excess or deficiency will be made by withdrawing or bringing in cash by the concerned partners as the case may be. Prepare Revaluation Account, Partner s Capital Accounts and the Balance Sheet of the new firm. Online Guess Papers : Mobile : ,

14 Ans. Profit on Revaluation Rs. 41,400; Balance of Capital Accounts- Raghu Rs. 1,00,000; Rishu Rs. 50,000; Rishabh Rs. 50,000; B/S Total Rs. 2,85,200. Hint. Cash withdrawn by- Raghu Rs. 48,040; Rishu Rs. 84,860; Market Value of Investment is assumed to be same as Cost Price and Investment Fluctuation Fund of Rs. 4,000 transfer to Revaluation Account. 19. Sarthak and Vansh are partners sharing profits in the ratio of 2 : 1. Since both of them are specially abled sometimes they find it difficult to run the business on their own. Mansi, a common friend, decides to help them. Therefore they admit her into partnership for 1/3 rd share in profits. She brings Rs. 60,000 for goodwill and proportionate capital. At the time of admission of Mansi, the Balance Sheet of Sarthak and Vansh was a under : Liabilities Assets Capital Accounts : Plant 66,000 Sarthak : 70, 000 Furniture 30,000 Vansh : 60, 000 1,30,000 Investments 40,000 General Reserve 18,000 Stock 46,000 Bank Loan Creditors 18, Debtors 38,000 Less: Provision for Bad Debts - 4,000 34,000 22,000 2,38,000 Cash 2,38,000 It was decided to : (i) Reduce the value of Stock by Rs. 10,000 (ii) Plant is to be valued at Rs. 80,000. (iii) An amount of Rs. 3,000 included in Creditors was not payable. (iv) Half of the Investments were taken over by Sarthak and remaining were valued at Rs. 25,000. Prepare Revaluation Account, Partners Capital Accounts and Balance Sheet of reconstituted firm. Identify the value being conveyed in the question. Ans. Profit on Revaluation Rs. 12,000; Balance of Capital Account- Sarthak Rs. 1,10,000; Vansh Rs. 90,000; B/S Total Rs. 3,87,000 Hint. Capital introduced by Mansi Rs. 1,00,000 Online Guess Papers : Mobile : ,

15 20. Karim and Rehman are partners in a firm sharing profits in the ratio of 2 : 3 respectively. They admitted Naval as a new partner for 1/2 share in the profits. Naval will bring Rs. 5,00,000 for his capital and the capitals of Karim and Rehman will be adjusted in the profit sharing ratio. Fr this Current Accounts will be opened. The Balance Sheet of the firm as at before Naval s admission was as follows : Balance Sheet of Karim and Rehman as at Liabilities Assets Creditors 1,20,000 Cash in hand 40,000 Bills Payable 1,60,000 Sundry Debtors 2,00,000 General Reserve 80,000 Furniture 2,00,000 Capitals: Rs. Machinery 3,10,000 Karim : 3,75,000 Building 1,10,000 Rehman : 1,25,000 5,00,000 The other terms of the agreement were as follows : 8,60,000 8,60,000 (i) Naval will bring Rs. 1,75,000 for his share of goodwill. (ii) Building will be revalued at Rs. 3,90,000 and Rs. 70,000 depreciation will be charged on machinery. (iii) A provision of 2% was to be made on debtors for bad debts. Prepare Revaluation Account, Partners Capital Accounts, Partners Current Accounts and the Balance Sheet of the new firm. Ans. Profit on Revaluation Rs. 2,06,000; Balance of Capital Accounts- Karim Rs. 2,00,000; Rehman Rs. 3,00,000; Naval Rs. 5,00,000; Balance of Current Accounts- Karim Rs, 3,59,400(cr); Rehman Rs. 1,01,600(cr); B/S Total Rs. 17,41,000 Questions : - Chapter 5 Partnership Accounts (Retirement and Death) 1. P, /Q and R were partners in a firm sharing profits in the ratio of 5 : 4: 3. Their capitals were Rs. 40,000, Rs. 50,000 and Rs. 1,00,000 respectively. State the ratio in which the goodwill of the firm amounting to Rs. 1,20,000 will be adjusted on the retirement of R. Ans. 5 : 4 Online Guess Papers : Mobile : ,

16 2. Give the Journal entry to distribute Workmen Compensation Reserve of Rs. 70,000 at the time of retirement of Neeti when there is a claim of Rs. 25,000 against it. The firm has three partners Raveena, Neeti and Rajat. Hint. Raveena, Neeti and Rajat credited by Rs. 15,000 each by debiting Workmen Compensation Resave A/c. 3. A, B and C were partners in a firm sharing profits in the ratio of 5 : 4 : 3. B retires and his share is taken up equally by A and C. Find the new profit sharing ratio. Ans. 7 : 5 4. R, S and M are partners sharing profits in the ratio of 2/5, 2/5 and 1/5. M decides to retire from the business, and his share is taken by R and S in the ratio of 2 : 1. Calculate the new profit sharing ratio. Ans. 8 : 7 5. X, Y and Z were partners sharing profits in the ratio of 3 : 2 : 1. On , their Balance Sheet stood as under. Liabilities Assets Capitals : Cash at bank 70,000 X : 75,000 Investments 50,000 Y : 70,000 Patents 15,000 Z : 50,000 1,95,000 Stock 25,000 Creditors 72,000 Debtors 20,000 General Reserve 24,000 Buildings 75,000 Machinery 36,000 X died on It was agreed that: 2,91,000 2,91,000 (a) Goodwill was valued at 3 years purchase of the average profits of the last five years, which were, 2003 : Rs. 40,000; 2004 : Rs. 40,000; 2005 : Rs. 30,000; 2006 : Rs. 40,000 and 2007 : Rs. 50,000. (b) Machinery was valued at Rs. 70,000, Patents at Rs. 20,000 and Buildings at Rs. 66,000. (c) For the purpose of calculating X s share of profits till the date of death, it was agreed that the same be calculated based on the average profits for the last 2 years. (d) The executor of the deceased partner is to be paid the entire amount due by means of a cheque. Online Guess Papers : Mobile : ,

17 Prepare X s Capital Account to be rendered to his executor and also a journal entry for the settlement of the amount due to the executor. Ans. paid to Executor of X Rs. 1,65,750 Hint. Profit on revaluation Rs. 30, Ramesh, Suresh and Dinesh were partners in a firm sharing profits in the ratio of 3 : 3 : 4. Their capitals were Rs. 5,00,000; Rs. 4,00,000 and Rs. 5,00,000 respectively. The firm closes its books on 31 st March every year. On Ramesh died. The executor of a deceased partner, according to the agreement, was entitled for the following: (i) Interest on capital from the first day of the accounting year till the date of his 9% p.a. (ii) His share of goodwill- The goodwill of the firm on Ramesh s death was valued at Rs. 1,80,000. (iii) His share of profits- The profit of the firm for the year ended was Rs. 1,20,000. Ramesh s executor was paid the sum due in two equal annual installments with 10% p.a. Prepare Ramesh s Capital Account as on to be presented to his executor and his executor s loan account for the years ending and Ans. due to Ramesh s Executor Rs. 6,35,000; paid on Rs. 3,81,000; on : Rs. 3,49, (a) X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 2 : 1. On April 1 st 2009, Y retires from the firm. X and Z agree that the capital of the new firm shall be fixed at Rs. 2,10,000 in the profit sharing ratio. The capital accounts f X and Z after all adjustments on the date of retirement showed balances of Rs. 1,45,000 and Rs. 63,000 respectively. State the amount of actual cash to be brought in or to be paid off to the partners. (b) A, B and C are partners in a firm shoes books are closed on March 31 st each year. B died on 30 th June 2009 and according to the agreement, the share of profits of a deceased partner up to the date of the death is to be calculated on the basis of the average profits for the last five years. The net profits for the last 5 years have been : 2005, Rs. 14,000; 2006, Rs. 18,000; 2007, Rs. 16,000; 2008, Rs. 10,000 (loss) and 2009, Rs. 16,000. Calculate B s share of the profits upto the date of death and pass necessary journal entry. Ans. (a) Cash brought in by X-Rs. 12,500, cash paid to Z-Rs. 10,500 (b) Ramesh, Naresh and Sudesh were partners in a firm sharing profits in the ratio of 2 : 2 : 1. On their Balance Sheet was as follows: Liabilities Assets Online Guess Papers : Mobile : ,

18 Creditors 60,000 Bank 90,000 Bills payable 40,000 Stock 70,000 General Reserve 30,000 Debtors 40,000 Capital :. Land and Building 5,00,000 Ramesh : 3,00,000 Profit and Loss A/c 1,60,000 Naresh : 3,00,000 Sudesh : 1,30,000 7,30,000 8,60,000 8,60,000 Naresh died on The partnership deed provided for the following on the death of a partner : (i) Goodwill of the firm was to be valued at 2 years purchase of the average profits of last 5 years. The profits for the years ending , , and were Rs. 50,000; Rs. 80,000; Rs. 1,10,000 and Rs. 2,20,000 respectively. (ii) Naresh s share of profit or loss till the date of his death was to be calculated on the basis of he profit or loss for the year ending Your are required to calculate the following : (i) Goodwill of the firm and Naresh s share of goodwill ate the time of his death. (ii) Naresh s share in the profit or loss of the firm till the date of his death. (iii) Prepare Naresh s Capital Account at the time of his death to be presented to his executors. Ans. (i) Rs. 1,20,000; Rs. 48,000 (ii) Loss Rs. 16,000 (iii) due to Naresh s executor Rs. 2,80, 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 the partners. Under the partnership deed the partners were entitled to, (a) A and B to a salary of Rs. 1,800 and Rs. 1,600 per month respectively. (b) In the event of the death of a partner, Goodwill was to be valued at 2 years purchase of the average profits of the last 3 years. (c) Profit upto the date of the death based on the profits of the previous year. (d) Partners were to be charged interest on drawings at 5% p.a. and allowed interest on capitals at 6% p.a. A died on His drawings to the date of death were Rs. 2,000 and the interest thereon was Rs. 60. The profits for the three years ending , 2009 and 2010 were, Rs. 21,200, Rs. 3,200 (Dr) and Rs. 9,000 respectively. Prepare A s Capital Account to calculate the amount to be paid to his executors. Online Guess Papers : Mobile : ,

19 Ans. paid to A s Executors : 43, The Balance Sheet of Sindhu, Rahul and Kamlesh, who were sharing profits in the ratio of 3 : 3 : 4 respectively, as on 31 st March 2012 was as follows: Liabilities Assets General Reserve 10,000 Cash 32,000 Bills payable 20,000 Stock 88,000 Loan 24,000 Investments 94,000 Capital :. Land and Building 1,20,000 Sindhu : 1,20,000 Sindhu s Loan 20,000 Rahul : 1,00,000 Kamlesh : 80,000 3,00,000 3,54,000 3,54,000 Sindhu died on 31 st July The partnership deed provided for the following on the death of a partner: (a) Goodwill of the firm be valued at two years purchase of average profits for the last three years which were Rs. 80,000. (b) Sindhu s share of profit till the date of his death was to be calculated on the basis of sales. Sales for the year ended 31 st March 2012 amounted to Rs. 8,00,000 and that from 1 st April to 31 st July 2012 Rs. 3,00,000. The profit for the year ended 31 st March 2012 was Rs. 2,00,000. (c) Interest on capital was to be 6% p.a. (d) According to Sindhu s will, the executors should donate his share to Matri Chaya-an orphanage for girls. Prepare Sindhu s Capital Account to be rendered to his executor. Also identify the value being highlighted in the question. Ans. Balance of Sindhu s Capital a/c Rs. 1,75, A, B and C were in partnership sharing profits in proportion to their capitals. Their Balance Sheet on b was as follows : Liabilities Assets Online Guess Papers : Mobile : ,

20 Creditors 15,600 Building 1,00,000 Reserve 6,000 Machinery 48,000 A s Capital 90,000 Stock 18,000 B s Capital 60,000 Debtors 20,000 C s Capital 30,000 Less Prov. For doubtful debts ,600 Cash 16,000 2,01,600 2,01,600 On the above date B retired owing to ill health and the following adjustments were agreed upon: (a) Buildings be appreciated by 10% (b) Provision for doubtful debts be increased to 5% of debtors. (c) Machinery be depreciated by 15% (d) Goodwill of the firm be valued at Rs. 36,000 and be adjusted into the Capital Accounts of A and C who will share profits in future in the ratio of 3 : 1. (e) A provision be made for outstanding repairs bill of Rs. 3,000. (f) Included in the value of creditors is Rs. 1,800 for an outstanding legal claim, which is not likely to arise. (g) Out of the insurance premium paid Rs. 2,000 is for the next year. The amount was debited to P & L A/c. (h) The partners decide to fix the capital of the new firm as Rs. 1,20,000 in the profit sharing ratio. (i) B to be paid Rs. 9,000 in cash and the balance to be transferred to his Loan Account. Prepare Revaluation Account, Partners Capital Accounts and the Balance Sheet of the new firm after B s retirement. Ans. Profit on revaluation Rs. 3,000; Balance of Capital Accounts- A: Rs. 90,000; C: Rs. 30,000; B/S Total Rs. 2,02,800; trf. to B s Loan A/c Rs. 66, Following is the Balance Sheet of X, Y and Z as on They shared profits in the ratio 3 : 3 : 2. Balance sheet of X, Y and Z as on Liabilities Assets Sundry Creditors 2,50,000 Cash at Bank 50,000 General Reserve 80,000 Bills Receivables 60,000 Partners Loan A/c s Debtors 80,000 X 50,000 -) Prov. For bad debts 4,000 76,000 Y 40,000 Stock 1,24,000 Online Guess Papers : Mobile : ,

21 Capital A/c s Fixed Assets 3,00,000 X 1,00,000 Advertisement Suspense A/c 16,000 Y 60,000 Profit & Loss A/c 4,000 Z 50,000 6,30,000 6,30,000 On 1 st April, 2008, Y decided to retire from the firm on the following terms : (a) Stock to be depreciated by Rs. 12,000 (b) Advertisement Suspense A/c to be written off. (c) Provision for Bad and doubtful debts to be increased to Rs. 6,000. (d) Fixed Assets be appreciated by 10%. (e) Goodwill of the firm, valued at Rs. 80,000 & the amount due to the retiring partners be adjusted in X s & Z s Capital A/c s. Prepare Revaluation A/c, Partners Capital A/c s and the Balance Sheet to give effect to the above. Ans. Profit on Revaluation = Rs. 16,000; Balance of Capital A/c- X; Rs. 1,10,500; Z: Rs. 57,000; due to Y Rs. 1,58,500; B/S Total Rs. 6,26, X, Y and Z were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. On their Balance Sheet was as follows : Liabilities Assets Capital Accounts: Building 50,000 X : 75,000 Patents 15,000 Y : 62,000 Machinery 75,000 Z : 37,500 1,75,000 Stock 37,500 Sundry Creditors 42,500 Debtors 20,000 Cash at Bank 20,000 Z died on It was agreed that : 2,17,500 2,17,500 (a) Goodwill be valued at 21/2 years purchase of the average profits of the last four years, which were as follows : Year Profits ,500 Online Guess Papers : Mobile : ,

22 , , ,500 (b) Machinery be valued at Rs. 70,000: Patents at Rs. 20,000 and Building at Rs. 62,500. (c) For the purpose of calculating Z s share of profits in the year of his death the profits in should be taken to have been accrued on the same scale as in (d) A sum of Rs. 17,500 was paid immediately to the executors of Z and the balance was paid in four half yearly instilments together with interest at 12% p.a. starting from Give necessary journal entries to record the above transactions and Z s executors account till the payment of installments due on Ans. Profit on Revaluation Rs. 12,500; Balance of Z s Executor A/c on ; Rs. 31,875 Hint. Z s share of Goodwill : Rs. 17,500, Z s share of profit (upto ) Rs. 2, Khanna, Seth and Mehta were partners in a firm sharing profits in the ratio of 3 : 2 : 5. On the Balance Sheet of Khanna, Seth and Mehta was as follows : Liabilities Assets Capital: Goodwill 3,00,000 Khanna : 3,00,000 Land And Building 5,00,000 Seth : 2,00,000 Machinery 1,70,000 Mehta : 5,00,000 10,00,000 Stock 30,000 General Reserve 1,00,000 Debtors 1,20,000 Loan from Seth 50,000 Cash 45,000 Creditors 75,000 Profit and Loss Account 60,000 On 14 th March 2011, Seth died. 12,25,000 12,25,000 The partnership deed provided that on the death of a partner the executor of the deceased partner is entitled to : (i) Balance in Capital Account : (ii) Share in profits upto the date of death on the basis of last year s profit; (iii) His share in profit/loss on revaluation of assets and re-assessment of liabilities which were as follows : Online Guess Papers : Mobile : ,

23 (a) Land and Building was to be appreciated by Rs. 1,20,000; (b) Machinery was to be depreciated to Rs. 1,35,000 and Stock to Rs. 25,000; (c) A provision of 21/2% for bad and doubtful debts was to created on debtors; (iv) The net amount payable to Seth s executors was transferred to his loan account which was to be paid later. Prepare Revaluation Account, Partners Capital Accounts, Seth s Executors A/c and the Balance Sheet of Khanna and Mehta who decided to continue the business keeping their capital balances in their new profit sharing ratio. Any surplus or deficit to be transferred to current accounts of the partners. Ans. Profit on Revaluation Rs. 77,000; Balance of Partner s Capital Account- Khanna Rs. 3,35,100 and Mehta Rs. 5,58,500; B/S Total Rs. 12,42,000; due to Seth s Executor Rs. 2,71, Hint. Share of Loss to Seth upto is Rs. 2,400 iers...60, Following is the Balance Sheet of Kusum, Sneh and Usha as on 31 st March 2009, who have agreed to share profits and losses in proportion of their capitals : Balance Sheet of Kusum, Sneh and Usha as on 31 st March 2009 Liabilities Assets Capital: Land And Building 4,00,000 Kusum : 4,00,000 Machinery 6,00,000 Sneh : 6,00,000 Closing Stock 2,00,000 Usha : 4,00,000 Employee provident Fund Workmen Compensation Fund Sundry Creditors 14,00,000 70,000 30,000 1,00,000 Sundry 2,20,000 Less Provision for Debtors Doubtful debts - 20,000 2,00,000 2,00,000 16,00,000 Cash at Bank 16,00,000 On March 31 st 2009, Kusum desired to retire from the firm and the remaining partners decided to carry on the business. It was agreed to revalue the assets and re-assess the liabilities on that date, on the following basis : (i) Land and Building be appreciated by 30% (ii) Machinery be depreciated by 30% (iii) There were Bad debts of Rs. 35,000 Online Guess Papers : Mobile : ,

24 (iv) The claim on account of Workmen Compensation Fund was estimated at Rs. 15,000. (v) Goodwill of the firm was valued at Rs. 2,80,000 and Kusum s share of goodwill was adjusted against the Capital accounts of the continuing partners sneh and Usha who have decided to share future profits in the ratio of 3 : 4 respectively. (vi) due to Kusum be settled by paying Rs. 1,00,000 in cash and balance by transferring to her Loan A/c which will be paid later on. Prepare Revaluation Account, Capital Accounts of Partners and Balance Sheet of the new firm after Kusum s retirement. Ans. Loss on Revaluation Rs. 75,000; Balance of Capital Accounts- Sneh Rs. 6,00,000; Usha Rs. 8,00,000; Balance of Current Accounts- Sneh Rs. 25,714(Dr); Usha Rs. 4,97,143; B/S Total Rs. 19,47, The Balance Sheet of Lalit, Puneet and Rahul who are partners in a firm sharing profits according to their capital as on 31 st March, 2012 was as follows: Liabilities Assets Lalit capital 3,20,000 Building 4,00,000 Puneet s capital 1,60,000 Machinery 2,00,000 Rahul s capital 1,60,000 Stock 72,000 Debtors 80,000 General Reserve 80,000 Less : Provision for Creditors 84,000 Bad Debts -4,000 76,000 Cash in Bank 56,000 8,04,000 8,04,000 On that date Puneet decided to retire from the firm and was paid for his share in the firm subject to the following : (i) Buildings was to be appreciated by 20% (ii) Provision for Bad Debts to be increased to 15% on Debtors. (iii) Machinery to be depreciated by 20% (iv) Goodwill of the firm is valued at Rs. 2,88,000 and the retiring partner s share is adjusted through the capital accounts of remaining partners. (v) The capital of the new firm be fixed at Rs. 4,80,000. Online Guess Papers : Mobile : ,

25 Prepare Revaluation Account, Capital Accounts of the partners, Bank Account and the Balance Sheet after Puneet s retirement. Ans. Profit on Revaluation Rs. 32,000; Balance of Capital Accounts- Lalit Rs. 3,20,000; Rahul Rs. 1,60,000; B/S Total Rs. 7,80,000 Hint. (i) Final amount paid to Puneet Rs. 2,60,000 by arranging overdraft of Rs. 2,04,000 (ii) Balance of Current Account- Lalit Rs. 8,000(cr); Rahul Rs. 4,000(cr). Questions : - Chapter 6 Partnership Accounts (Dissolution) 1. B, C and D are partners in a firm sharing profits in the ratio of 2 : 1 : 2 respectively. On the firm was dissolved. After transferring assets (other than cash) and third party liabilities to the Realization Account you are provided with the following information : (i) There was a debit balance of Rs. 24,000 in the firm s Profit and Loss Account. (ii) A piece of Machinery not recorded in the books was sold for Rs. 4,000. (iii) Creditors of Rs. 50,000 were paid Rs. 45,000 in full settlement of accounts. Pass necessary Journal Entries for the above transactions in the books of the firm at the time of dissolution. 2. What journal entries would be passed for the following transaction on the dissolution of a partnership firm, after transferring various assets (other than cash) and third party liabilities to the Realization Account? (i) Bank loan Rs. 50,000 were paid. (ii) An unrecorded asset realized Rs. 17,000. (iii) Stock worth Rs. 20,000 was taken over by a partner Rohan for Rs. 14,000. (iv) Loss on realization was Rs. 14,000 which was distributed between the partners Rohan and Mohan in the ratio of 3 : Pass the necessary journal entries for the following transactions on the dissolution of the firm of James and Haider who were sharing profits and losses in the ratio of 2 : 1. The various assets (other than cash) and outside liabilities have been transferred to Realization Account : (i) James agreed to pay of his brother s loan Rs. 10,000 (ii) Debtors realized Rs. 12,000 (iii) Haider took over all investments at Rs. 12,000 Online Guess Papers : Mobile : ,

26 (iv) Sundry creditors Rs. 20,000 were paid at 5% discount. (v) Realization expenses amounted to Rs. 2,000/ (iv) Loss on realization was Rs. 10,2000 Pass the necessary journal entries for the following transactions on the dissolution of the firm of Sudha and Shiva after the various assets (other than cash) and outside liabilities have been transferred to Realization Account : (i) Sudha agreed to pay off her husband s loan R. 19,000 (ii) A debtor whose debt of Rs. 9,000 was written off in the books paid Rs. 7,500 in full settlement. (iii) Shiva took over all investments at Rs. 13,300. (iv) Sundry creditors Rs. 10,000 were paid at 9% discount. (v) Realization expenses Rs. 3,400 were paid by Sudha for which she was allowed Rs. 3,000. (iv) Loss on realization Rs. 9,400 was divided between Sudha and Shiva in 3 : 2 ratio. 4. Sanjay and Sameer were partners in a firm sharing profits in the ratio of 2 : 3. On their Balance Sheet was as follows: Balance Sheet of Sanjay and Sameer as on Liabilities Assets Capital: Land And Building 3,00,000 Sanjay : 2,00,000 Stock 1,00,000 Sameer : 3,00,000 5,00,000 Debtors 1,50,000 Creditors 1,05,000 Bank 1,55,000 Workmen Fund Compensation 1,00,000 7,05,000 7,05,000 The firm was dissolved on and the Assets and liabilities were settled as follows : (i) Sanjay agreed to take over Land and Building at Rs. 3,50,000 by paying cash; (ii) Stock was sold for Rs. 90,000 (iii) Creditors accepted Debtors in full settlement of their claim. Online Guess Papers : Mobile : ,

27 Pass necessary Journal entries for dissolution of the firm. Ans. Loss on Realization Rs. 5,000; Final payment to- Sanjay Rs. 2,38,000; Sameer Rs. 3,57, Sudha and Joshi were partners in a firm sharing profits in the ratio of 3 : 7. On their Balance Sheet was as follows : Balance Sheet of Sudha and Joshi as on Liabilities Assets Capital: Land And Building 6,00,000 Sudha : 3,00,000 Machinery 5,00,000 Joshi : 7,00,000 10,00,000 Stock 40,000 Creditors 2,77,000 Debtors 2,00,000 Profit and Loss Account 1,23,000 Bank 60,000 14,00,000 14,00,000 The firm was dissolved on and the Assets and Liabilities were settled as follows : (i) Creditors accepted stock and debtors in their full and final settlement of the claim; (ii) Land and Building was sold for Rs. 7,00,000 and Machinery as taken over by Joshi by paying cash less than 30% of its book-value. Pass necessary Journal entries for dissolution of the firm. Ans. Loss on Realization Rs. 13,000; Final payment to Sudha Rs. 3,33,000; Joshi Rs. 7,77, Achal and Vichal were partners in a firm sharing profits in the ratio of 3 : 5. On their Balance Sheet was as follows : Balance Sheet of Achal and Vichal as on Liabilities Assets Capital: Land And Building 4,00,000 Achal : 3,00,000 Machinery 3,00,000 Vichal : 5,00,000 8,00,000 Debtors 2,22,000 Online Guess Papers : Mobile : ,

28 Creditors Employees Provident Fund 1,79,000 21,000 Cash at Bank 78,000 10,00,000 10,00,000 The firm was dissolved on and the Assets and Liabilities were settled as follows : (i) Land and Building realized Rs. 4,30,000; (ii) Debtors realized Rs. 2,25,000 (with interest) and Rs. 1,000 were recovered for bad debts written off last year; (iii) There was an unrecorded investment which was sold for Rs. 25,000; (iv) Vichal took over Machinery at Rs. 2,80,000 for cash; (v) 50% of the creditors were paid Rs. 4,000 less in full settlement and the remaining creditors were paid full amount. Pass necessary Journal entries for dissolution of the firm. Ans. Profit on Revaluation Rs. 43,000; Final Payment to- Achal Rs. 3,16,125; Vichal Rs. 5,26, Parul, Payal and Priyanka are partners. They decided to dissolve their firm. Pass necessary Journal entries for the following after various Assets (other than Cash and Bank) and the third party liabilities have been transferred to Realization Account : (a) There were total debtors of Rs. 76,000. A provision of bad and doubtful debts also stood in the books at Rs. 6,000. Rs. 12,000 debtors proved bad and rest paid the amount. (b) Parul agreed to pay off her husband s loan of Rs. 7,000 at a discount of 5%. (c) A machine which was not recorded in the books was taken over by Payal at Rs. 3,000. whereas its expected value was Rs. 5,000. (d) A contingent liability (not provided for) of Rs. 4,000 was also discharged. (e) The firm had a debit balance of Rs. 27,000 in the Profit and Loss Account on the date of dissolution. (f) Priyanka paid the realization expenses of Rs. 15,000 out of her pocket and she was to get a remuneration of Rs. 18,000 for completing the dissolution process. 8. A, B and C were partners sharing profits in the ratio of 3 : 1 :1. Their Balance Sheet as on March 31 st 2009, the date on which they dissolve their firm, was as follows : Liabilities Assets Online Guess Papers : Mobile : ,

29 Capital: A : 27,500 B : 10,000 Sundry Assets Stock Debtors 24,200 17,000 7, 800 C : 7,000 44,500 Less Provision for Loan 1,500 Doubtful debts (-)1,200 23,000 Creditors 6,000 Bills Receivables 1,000 Cash 3,200 52,000 52,000 It was agreed that (a) A to take over Bills Receivables at Rs. 800, debtors amounting to Rs. 20,000 at Rs. 17,200 and the creditors of Rs. 6,000 were to be paid by him at this figure. (b) B is take over all stock for Rs. 7,000 and some sundry assets at Rs. 7,200 (being 10% less than the book value). (c) C to take over remaining sundry assets at 90% of the book value and assume the responsibility of discharge of loan together with accrued interest of Rs (d) The expenses of realization were Rs The remaining debtors were sold to a debt collecting agency at 50% of the book value. Prepare Realization A/c, Partners Capital A/cs and Cash A/c. Ans. Loss on realization Rs. 6,970; Final amount received from B- Rs. 5,594; C- Rs. 694; Final amount paid to A- Rs. 11, Ram, Rahim and Rehman were partners in a firm sharing profits in the ratio of 4 : 1 : 5. On the firm was dissolved. On the date of dissolution the Balance Sheet of the firm was as follows: Liabilities Assets Bank Loan 4,34,000 Bank 48,000 Creditors General Reserve 3,80,000 1,40,000 Debtors 2,74,000 Online Guess Papers : Mobile : ,

30 Capital : Less : Provision for 2,66,000 Ram 14,00,000 Bad debts 1,08,000 Rahim 6,00,000 8,000 1,32,000 Rehman 10,00,000 30,00,000 Stock 4,00,000 Furniture 30,00,000 Machinery 39,54,000 39,54,000 Building Assets realized as follows : Debtors Rs. 2,70,000, Stock at 15% less, Furniture was taken over by Ram for Rs. 79,000. Building was sold for Rs. 29,00,000. Rehman took over 50% of the machinery at 5% less than the book-value. Bank loan was paid with interest Rs. 9,500. Creditors allowed a discount of 5%. Expenses of dissolution Rs, 7,000 were paid by Rehman. Remaining machinery was sold at 50% profit. Prepare Realization Account, Partners Capital Accounts and Bank Account. Ans. Loss on Realization Rs. 72,700; Final payment to Partners- Ram Rs. 13,47,920; Rahim Rs. 6,06,730; Rehamn Rs. 8,50, X, Y and Z were partners sharing profits in the ratio of 2 : 2 : 1. The Balance Sheet on when they dissolved the firm was as follows: Liabilities Assets X s Capital 1,27,500 Other Sundry Assets 1,17,000 Y s Capital 1,10,000 Furniture 11,000 Z s Capital 17,000 Debtors 1,24,000 Loan 11,500 -) Prov. For doubtful debts 1,200 1,23,000 Creditors 16,000 Stock 17,800 Cash 13,200 It was agree that 2,82,000 2,82,000 (a) Z to take over furniture at Rs. 8,000 and debtors amounting to Rs. 1,20,000 at Rs. 1,17,200 and the creditors of Rs. 16,000 were to be paid by him at this figure. Online Guess Papers : Mobile : ,

31 (b)x is to take over all stock for Rs. 17,000 and some sundry assets at Rs. 72,000 (being 10% less than the book value). (c) Y to take over remaining sundry assets at 80% o the book value and assume the responsibility of discharge of loan together with accrued interest of Rs. 2,300. (d) The expenses of realization were Rs. 2,700. The remaining debtors were sold to a debt collecting agency at 50% of the value. Prepare necessary accounts to close the books of the firm : Ans. Loss on Realization Rs. 27,900; Final payment to X- Rs. 27,340; Y- Rs. 83,040; Final amount received from Z- Rs. 97, Prashant and Rajesh were partners in a firm sharing profits in the ratio of 3 : 2. In spite of repeated reminders by the authorities, they kept dumping hazardous material into a nearby river. The court ordered for the dissolution of their partnership firm on 31 st March Prashant was deputed to realize the assets and to pay the liabilities. He was paid Rs. 1,000 as commission for his services. The financial position of the firm on 31 st March 2012 was as follows: Liabilities Assets Creditors 80,000 Building 1,20,000 Mrs. Prashant s Loan 40,000 Investments 30,600 Rajesh s Loan 24,000 Debtors 34,000 Investment Fluctuation Fund 8,000 Less: Provision for Capitals : Doubtful debts -4,000 30,000 Prashant : 42,000 Bills receivable 37,400 Rajesh : 42,000 84,000 Cash 6,000 Profit and Loss A/c 8,000 Goodwill 4,000 2,36,000 2,36,000 Following was agreed upon : (i) Prashant agreed to pay off his wife s loan. (ii) Debtors realized Rs. 24,000. (iii) Rajesh took away all investments at Rs. 27,000. Online Guess Papers : Mobile : ,

32 (iv) Building realized Rs. 1,52,000. (v) Creditors wee payable after 2 months. They were paid immediately at 10% discount. (vi) Bills Receivable were settled at a loss of Rs. 1,400. (vii) Realization expenses amounted to Rs. 2,500. Prepare realization account, Partners Capital Accounts and Cash Account to close the books of the firm. Identify the value being conveyed in the question. Ans. Profit on Realization Rs. 29,500; Final Payment to- Prashant Rs. 95,900; Rajesh Rs. 37,600. Questions : - Chapter 7 Company Accounts - (Share Capital) 1. MCS ltd. Issued 40,000 shares of Rs. 10 each payable as Rs. 2 per share on application, Rs. 4 per share on allotment and the balance in two equal installments. Applications were received for 80,000 shares and the allotment was made as follows: (a) Applications of 50,000 shares were allotted 30,000 shares (b) Applications of 30,000 shares were allotted 10,000 shares Neeraj to whom 600 shares were allotted from category (a), failed to pay the allotment money. Pass the Journal entries upto allotment only. Hint. Cash received on allotment Rs. 78,400; Call in arrears Rs. 1, DN Ltd. Issued 50,000 shares of Rs. 10 each at a discount of 10% payable as Rs. 2 per share on application, Rs. 3 on allotment and Rs. 2 each on first and final call. Applications were received for 70,000 shares. It was decided that (a) refuse allotment to the applicants of 10,000 shares, (b) allot 10,000 shares to Mohan who had applied for a similar number, and (c) allot the remaining shares on a pro-rata basis. Mohan failed to pay the allotment money and Sohan who belonged to category (c) and was allotted 3,000 shares, paid both the calls with allotment. Calculate the amount received on allotment. Ans. Rs. 1,12, Shanker Ltd. Purchased machinery for Rs. 1,98,000 from Parvati Ltd. The payment to Parvati Ltd. Was to be made by issue of Equity Shares of Rs. 100 each. Pass necessary journal entries in the books of Shanker Ltd. For the above transactions when Online Guess Papers : Mobile : ,

33 (i) shares were issued at 10% premium and (ii) Shares were issued at 10% discount. Hint. No. of equity shares issued- (i) 1,800 (ii) 2, Goodluck Ltd. Purchased machinery costing Rs. 10,00,000 from Fair Deals Ltd. The company paid the price bye issue of Equity shares of Rs. 10 each at a premium of 25%. Pass necessary journal entries for the above transactions in the books of Goodluck Ltd. Ans. No. Of Shares issued = 80, TAG Ltd. Forfeited 400 shares of Rs. 10 each issued at a premium of Rs. 1 per share for the non-payment of allotment money of Rs. 4 per share (including premium). The first and final call of Rs. 3 per share has not been made as yet. 50% of the forfeited shares were re-issued at Rs. 8 per share fully paid up. Pass necessary entries for the forfeiture and reissue of shares. Ans. transfer to Capital Reserve Rs. 400, Balance of Share Forfeiture Rs Sundram Ltd. Purchased furniture for Rs. 3,00,000 from Ravindram Ltd. Rs. 1,00,000 were paid by drawing a Promissory Note in favour of Ravindram Ltd. The Balance was paid by issue of Equity Shares of Rs. 10 each at a Premium of 25%. Pass necessary Journal entries in the books at Sundram Ltd. Hint. Face value of Equity Shares Issued Rs. 1,60, Ramesh & Co. forfeited 1,000 shares of Rs. 10 each issued at a discount of Rs. 1 per share for the nonpayment of the first call of Rs. 3 per share. The final call of Rs. 2 per share has not yet been made. 400 of these shares are reissued at Rs. 6 per share Rs. 8 paid up, and 400 shares reissued at Rs. 7 per share fully paid. Pass journal entries in the books of Ramesh & Co. to record the forfeiture and reissue of shares. Ans. trf. to capital reserve Rs. 2,000. Hint. Balance of share forfeiture account Rs. 800 (for verification purpose) 8. Nikhil Ltd. Purchased a running business from Sonia Ltd. For a sum of Rs. 22,00,000 by issuing 20,000 fully paid equity shares of Rs. 100 each at a premium of 10%. The assets and liabilities consisted of the following. Machinery Rs. 7,00,000, Debtors Rs. 2,50,000, Stock Rs. 5,00,000, Building Rs. 11,50,000 and Bills Payable Rs. 2,50,000. Pas necessary Journal entries in the books of Nikhil Ltd. For the above transactions. Hint. Capital reserve Rs. 1,50,000. Online Guess Papers : Mobile : ,

34 9. M Ltd. Purchased from N Ltd. Land costing Rs. 12,00,000. Rs. 40,00,000 were paid to N Ltd. Through a bank draft and fro the balance amount equity shares of Rs. 100 each were issued at a premium of 25%. Pass necessary Journal Entries for the above transactions in the books of M Ltd. Show your working notes clearly. Hint. Face value of equity shares issued Rs. 6,40, On 1 st April, 2011 Aradhana Ltd. Was formed with an authorized capital of Rs. 90,00,000 divided into 90,000 shares of Rs. 100 each. The company invited applications for issuing 75,000 eqity shares. The amount was payable as follows: On application Rs. 20 per share On allotment Rs. 50 per share On first and final call balance amount The issue was fully subscribed and the company allotted shares to all the applicants. All money was received except the first and final call on 5,000 shares. Show the Share Capital in the Balance Sheet of the company as per Schedule VI Part I of the Companies Act, 1956 as at 31 st March, 2012 and also show Notes to Accounts. 11. Sona Ltd. Purchased machinery costing Rs. 17,00,000 from Mona Ltd. Sona Ltd. Paid 20% of the amount by cheque and for the balance amount issued equity shares of Rs. 100 each at a premium of 25%. Pass necessary Journal Entries for the above transactions in the books of Sona Ltd. Show your working notes clearly. Ans. Face value of Equity Shares issued Rs. 10,88, On 1 st April, Janak Ltd. Was formed with an authorized capital of Rs. 20,00,000 divided into 2,00,000 equity shares of Rs. 10 each. The company issued 1,00,000 shares at par. The issue was fully subscribed and the company allotted shares to all the applicants. All money was received except the final call on 2,500 shares. Show the Share Capital in the Balance Sheet of the company as per Schedule VI part I of the Companies Act, 1956 as at 31 st March, 2012 and also show Notes to Accounts. 13. Tarun Ltd. Purchased land costing Rs. 70,00,000 form Varun Ltd. Tarun Ltd. Paid 10% of the amount by cheque and for the balance amount equity shares of Rs. 100 each were issued to Varun Ltd. At a premium of 25%. Pass necessary Journal Entries for the above transactions in the books of Tarun Ltd. Show your working notes clearly. Ans. Face value of equity shares issued Rs. 50,40,000. Online Guess Papers : Mobile : ,

35 14. On 1 st April, 2011, Prarthana Ltd. Was formed with an authorized capital of Rs. 90,00,000 divided into 90,000 equity shares of Rs. 100 each. The company invited applications for issuing 80,000 equity shares. The amount was payable as follows : On application Rs. 30 per share On allotment Rs. 40 per share On 1 st and final call balance amount Applications for 1,00,000 shares were received. Applications for 20,000 shares were rejected and the application money was refunded. All calls were made. A shareholder holding 600 shares, did not pay the first and final call. Show the Share Capital in the Balance Sheet of the company as per Schedule VI part I of the Companies Act, 1956 as at 31 st March, 2012 and also show Notes to Accounts. 15. A Ltd. Issued 20,000 equity shares of Rs. 10 each at a discount of Re. 1 payable as Rs. 3 on application, Rs. 3 on allotment (after discount) and Rs. 3 on call. The issue was oversubscribed to the extent of 15,000 shares, and the allotment was done as follows: (a) applicants of 5,000 shares were given full allotment, (b) other applicants of shares were allotted shares on a pro-rata basis. The excess application money received was to be adjusted against allotment only. All moneys due were received with the exception money exception of the call money on 600 shares. Pass necessary journal entries to record the above transactions. Ans. Call in arrears = Rs. 1,8000. Hint. Cash Balance = 1,78,200 (for verification purpose). 16. Janata Ltd. Invited application for issuing 1,00,00 equity shares of Rs. 100 each at a discount of 5%. The amount was payable as follows: On application Rs. 30 On Allotment Rs. 40 Balance on first and final call Applications for 1,30,000 shares were received. Applications for 10,000 shares were rejected and pro-rata allotment was made to the remaining applicants. Overpayments received on applications were adjusted towards sums due on allotment. Vinod, to whom 500 shares wee allotted, failed to pay allotment and first and final call. His shares were forfeited. The forfeited shares were re-issued for Rs. 55,000 fully paid up. Pass necessary journal entries in the books of Janata Ltd., Showing the workings clearly. Ans. trf. to capital reserve Rs. 18,000. Hint. Cash balance Rs. 95,25,500 (for verification purpose). Online Guess Papers : Mobile : ,

36 17. Pass necessary journal entries in the books of Arjun Ltd. For the following transactions : (i) 600 8% preference shares of Rs. 100 each issued at a discount of Rs. 5 per share were forfeited for the non-payment of final call of RS. 30 per share. The forfeited shares were reissued for Rs. 66,000 fully paid up. (ii) 1,000 equity shares of RS. 100 each issued at a premium of RS. 20 per share were forfeited for the nonpayment of allotment money (including premium) of Rs. 30 per share. Application money of Rs. 30 per share had been received on these shares. The first and final call of Rs. 60 per share was not made. The forfeited shares were re-issued for Rs. 75,000 fully paid up. Ans. trf. to capital reserve- (i) Rs. 39,000; (ii) Rs. 5, M Ltd. Was registered with a capital of Rs. 4,00,000 divided into equity shares of Rs. 100 each. The company offered to the public 3,000 shares at a premium of Rs. 10 per share payable as follows : Rs. 20 on application, Rs. 40 on allotment including premium and Rs. 50 on first and final call per share. Applications wee received for 4,000 shares of which 500 were rejected and the balance allotted on a pro-rata basis. The excess application money was adjusted towards the allotment and call money on 150 shares held by Rakesh. Sandeep who held 200 shares paid the call money along with the allotment money. Pass journal entries to record the transactions in the books of M Ltd. Ans. Calls in arrears Rs. 13,000 Hint. Cash balance Rs. 3,17,000 (for verification purpose). 19. X Ltd. Issued 50,000 shares of Rs. 10 each at a premium of Rs. 2 per share payable as follows : Rs. 3 on Application Rs. 6 on Allotment (including premium) and Rs. 3 on call. Applications were received for 75,000 shares and pro-rata allotment was made as follows: To the applicants of 40,000 shares, 30,000 shares were issued and for the rest 20,000 shares were issued. All moneys due were received except the allotment and call money from Ram who had applied for 1,200 shares (out of the group of 40,000 shares). All his shares were forfeited. The forfeited shares were re-issued for Rs. 8 per share fully paid-up. Pass necessary journal entries for the above transactions. Ans. transfer journal entries for the above transactions. Hint. Cash balance Rs. 6,00,000 (for verification purpose); received on allotment Rs. 2,20, Janata Ltd. Invited application for issuing 2,00,000 equity shares of Rs. 10 each at a discount of 10%. The amount was payable as follows: Online Guess Papers : Mobile : ,

37 On Application Rs. 2 per share On Allotment Rs. 3 per share On First and Final call balance amount The issue was undersubscribed to the extent of 20,000 shares. Shares were allotted to all the applicants. All calls were made and were duly received. A to whom 1,500 shares were allotted, failed to pay allotment and call money and B to whom 1,200 shares were allotted paid the full amount due at the time of allotment. The shares on which allotment and call money was not received were forfeited. The forfeited shares were reissued at Rs. 8 per share fully paid up. Pass necessary journal entries in the books of Janata Ltd. For the above transactions. Ans. transfer to Capital Reserve Rs. 1,500 Hint. Cash balance Rs. 16,21,500 (for verification purpose). 21. Shiva Ltd. Invited applications for issuing 2,00,000 Equity Shares of Rs. 100 each at a premium of Rs. 60 per share. The amount was payable as follows: On application Rs. 30 per share (including premium Rs. 10). On allotment Rs. 70 per share (including premium of Rs. 50). On first and final call the balance amount. Applications for 1,90,000 shares were received. Shares were allotted to all the applicants and the company received all money due on allotment except Jain who had been allotted 1,000 shares, and his shares were immediately forfeited. Afterwards first and final call was made. Gupta did not pay the first and final call on his 2,000 allotted shares. His shares were also forfeited. 50% of the forfeited shares of both Jain and Gupta were re-issued for Rs. 90 per share fully paid up. Pass necessary journal entries in the books of Shiva Ltd. For the above transactions. Ans. transfer to Capital Reserve Rs. 35,000. Hint. Cash balance Rs. 3,02,85,000 and Balance of Share Forfeiture A/c Rs. 50,000 (fir verification purpose). 22. Dena Ltd. Invited applications for issuing 3,00,000 Equity shares of Rs. 10 each at a discount of 3%. The amount was payable as follows: On Application Rs. 2 per share On Allotment Rs. 4 per share On First and Final Call The balance amount. The issue was fully subscribed. Shares were allotted to all applicants. A to whom 4,000 shares were allotted paid the entire amount of his share money at the time of allotment. B to whom 1,800 shares were allotted Online Guess Papers : Mobile : ,

38 failed to pay the allotment money and his shares were immediately forfeited. Afterwards the first and final call was made. C did not pay the first and final call on his 750 shares of C were reissued for Rs. 8 per share fully paid up. Pass necessary journal entries in the books of Dena Ltd. For the above transactions. Ans. transfer to Capital Reserve Rs. 2,690 Hint. Cash balance Rs. 29,11,765 and Balance of Share Forfeiture A/c Rs. 1,500 (for verification purpose). 23. (a) Dinesh Ltd. Invited applications for issuing 10,000 Equity shares of Rs. 10 each. The amount was payable as follows; On Application Rs. 1 On Allotment Rs. 2 On First Call Rs. 3 On Second and Final Call Balance The issue was fully subscribed. Ram to whom 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 and final call was made. Mohan to whom 50 shares were allotted failed to pay the second and final call. His shares were also forfeited. All the forfeited shares were re-issued at Rs. 9 per share fully paid up. Pass necessary journal entries in the books of Dinesh Ltd. Ans. transfer to Capital Reserve Rs. 550 Hint. Cash Balance Rs. 1,00,550 (for verification purpose). 24. Moti Ltd. Invited application for issuing 10,00,000 Equity shares of Rs. 10 each at a premium of Rs. 2 per share. The amount was payable as follows: On Application Rs. 5 (including premium) On Allotment Rs. 4 On First and Final Call Rs. 3 Applications for 15,00,000 shares were received. Applications for 3,00,000 shares were rejected and pro-rata allotment was made to the remaining applications. Excess application money was utilized towards sums due on allotment. Giri who had applied for 24,000 shares failed to pay the allotment and call money. His shares were forfeited. Out of the forfeited shares 10,000 shares were reissued for Rs. 8 per share fully paid up. Pass necessary journal entries in the books of Moti Ltd. Ans. Balance of Share Forfeited A/c: Rs. 40,000; transfer to Capital Reserve Rs. 20,000. Hint. Cash Balance Rs. 1,19,60,000 (for verification purpose). Online Guess Papers : Mobile : ,

39 25. A company invited applications for the issue of 30,000 Equity Shares of Rs. 10 each at a discount of Re. 1 per share. Applications were received for 40,000 shares. 10% of the total applications were rejected and the balance were allotted shares on pro-rata basis. The amounts were payable as follows: Rs. 2 on Application, Rs. 3 on allotment and balance on the first and final call. M who had applied for 3,000 shares failed to pay the allotment money and his shares were immediately forfeited. S who was allotted 2,000 shares, paid only Rs. 4,000 on allotment. On the failure to pay the first call, S s shares were also forfeited. Pass necessary Journal entries to record the above transactions. Ans. Share forfeiture a/c Rs. 14,800 (i.e. Rs. 6,000 + Rs. 8,800). Hint. Cash balance Rs. 2,44,300 (for verification purpose). 26. D.P. Shah Company Ltd. Made an issue of 1,00,000 Equity Shares of Rs. 10 each at a premium of 30% payable as follows : On Application Rs. 3,50 per share On allotment Rs per share On 1 st and final call Balance. Application were received for 2,00,000 Equity shares and the directors made pro-rata allotment. Harsh who had applied for 1,600 shares, did not pay the allotment and final call money. With the result his shares were forfeited. Later on 60% of the forfeited shares were re-issued at Rs. 8 per share fully paid up. Pass necessary Journal entries for the above mentioned transactions in the books of the company. Ans. trf. to Capital Reserve Rs. 2,400. Hint. Balance of share forfeiture a/c Rs. 2,240 and Balance of Cash a/c Rs, 12,99,040 (for verification purpose). 27. R.K. Ltd. Invited applications for issuing 70,000 Equity Shares of Rs. 10 each at a premium of Rs. 35 per share. The amount was payable as follows: On Application Rs. 15 (including Rs. 12 premium) On Allotment Rs. 10 (including Rs. 8 Premium) On First and Final Call Balance Applications for 65,000 shares were received and allotment was made to all the applications. A Shareholder, Ram, who was allotted 2000 shares, failed to pay the allotment money. His shares were forfeited immediately after allotment. Afterwards, the first and final call was made. Sohan, who had 3000 shares, failed to pay the first and final call. His shares were also forfeited. Out of the forfeited shares, 4000 shares were re-issued at Rs. 50 per share fully paid up. The re-issued shares included all the shares of Ram. Pass necessary Journal entries for the above transactions in the books of R.K. Ltd. Online Guess Papers : Mobile : ,

40 Ans. transfer to Capital Reserve Rs. 16,000 Hint. Balance of Cash Rs. 30,05,000; Security Premium Rs. 23,44,000; Share Forfeiture A/c Rs. 5,000 (for verification purpose). 28. Ashish Ltd. Invited applications for issuing 75,000 Equity Shares of Rs. 10 each at a discount of 10%. The amount was payable as follows: On Application Rs. 2 per share On Allotment Rs. 2 per share On First and Final call Balance Applications for 1,50,000 shares were received. Applications for 25,000 shares were rejected and application money of these applicants was refunded. Shares were allotted on pro-rata basis to the remaining applicants. Excess money received with these applications was adjusted towards sums due on allotment. Suman, who had applied for 1250 shares, failed to pay allotment and first and final call money. Dev did not pay the first and final call on his 1000 shares. All these shares were forfeited and later on 1000 of these shares were reissued at Rs. 17 per share full paid up. The re-issued shares of Suman. Pass the necessary Journal entries in the books of Ashish Ltd. For the above transactions. Ans. transfer to Capital Reserve Rs. 3,500 Hint. Cash balance Rs. 6,82,750; Balance of Share Forfeiture A/c Rs. 3,000 (for verification purpose). 29. The Shakti Ltd. Invited applications for issuing 50,000 shares of Rs. 100 each at a premium of Rs. 10 per share payable follows: Rs. 50 per share on Application Rs. 35 per share on Allotment (including premium) Balance on First and Final Call. Application for 82,500 shares were received. Applications for 20,000 shares were rejected and allotment was made on pro-rata basis to the remaining applicants. Sahil who had applied for 1,250 shares failed to pay the amount due on allotment and call. The company forfeited his shares. Later on, out of the forfeited shares, Company re-issued 500 Rs. 105 per share fully paid up. Pass necessary Journal entries in the books of Shakti Ltd. Ans. transfer to Capital Reserve Rs. 31,250 Hint. Cash Balance = Rs. 55,0,5000 (for verification purpose). 30. Geetanjali Ltd. Issued 60,000 shares of Rs. 10 each at a discount of Rs. 1 per share payable as follows: Online Guess Papers : Mobile : ,

41 Rs. 3 per share on application Rs. 2 per share on Allotment Balance on first and Final call. The applications were received for 1,00,000 shares. Applications for 20,000 shares were rejected and allotment was made on pro-rata basis to the remaining applications. Nimesh who had applied for 3,200 shares failed to pay the amount due on allotment and call. The Company forfeited his shares. Later on, out of the forfeited shares, company re-issued 1,600 shares at Rs. 10 per share full paid up. Pass necessary Journal entries in the books of Geetanjali Ld. Ans. transfer to Capital Reserve Rs. 6,400 Hint. Balance of Cash A/c Rs. 5,44,000 And Share Forfeiture A/c Rs. 3,200 (for verification purpose). 31. Starplus Company issued for public subscription 1,50,000 shares of the value of Rs. 100 each at a discount of 10% payable per share as follows: Rs. 20 on application, Rs. 30 on allotment and Rs. 40 on call. The company received application for 3,00,000 shares. The allotment was done as under: (a) Applicants of 30,000 shares were allotted 10,000 shares. (b) Applicants of 1,40,000 shares were allotted 80,000 shares. (c) Remaining applicants were allotted 60,000 shares. After adjusting excess money in allotment, the money was returned. Harit, a shareholder who had applied for 7,000 shares of group (b), failed to pay allotment and call money. Roshan, another shareholder who was allotted 6,000 shares, paid the call money along with the allotment. Roshan also belonged to group (b). Pass necessary Journal entries to record the above transactions in the books of the company. Show your working noted clearly. Hint. (i) Cash Balance Rs. 1,32,80,000 (for verification purpose); (ii) Money received at the time of allotment Rs. 17,80,000 (including calls in advance). 32. Record the Journal entries for forfeiture and reissue in the following cases: (a) X Ltd. Forfeited 200 shares of Rs. 100 each, Rs. 70 called up, on which the shareholder had paid application and allotment money of Rs. 50 per share. Out of these, 150 shares were re-issued to Naresh as Rs. 70 paid up for Rs. 80 per share. (b) Y Ltd. Forfeited 180 shares of Rs. 10 each, Rs. 8 called up, issued at a premium of Rs. 2 per share to R for non-payment of allotment money of Rs. 5 per share (including premium). Out of these, 160 shares were reissued to Sanjay as Rs. 8 called up for Rs. 10 per share fully paid up. Online Guess Papers : Mobile : ,

42 (c) Z Ltd. Forfeited 30 shares of Rs. 100 each issued at a discount of Rs. 10 per share for non-payment of first and final call money of Rs. 30 per share. Out of these, 20 shares were reissued at Rs. 30 per share fully paid up. Ans. transfer to Capital Reserve- (a) Rs. 7,500 (b) 800 (c) Nil. 33. Sangam Ltd. Invited application for issuing 80,000 equity shares of Rs. 10 each. The amount was payable as follows: On application 2. per share On allotment Rs. 4 per share On first and final call Rs. 4 per share Applications for 1,00,000 shares were received. Allotment was made on pro-rata basis to all the applicants. Excess money received on application was adjusted on sums due on allotment. Satnam, who had applied for 1,000 shares, failed to pay the allotment money and his shares were immediately forfeited. Harnam did not pay the first and final call on 800 shares allotted to him. His shares were also forfeited. All the forfeited shares were re-issued at Rs.12 per share fully paid up. Pass necessary Journal Entries in the books of Sangam Ltd. For the above transactions. Also show your workings clearly. Ans. transfer to Capital Reserve Rs. 6,800 Hint. Cash Balance Rs. 8,10,000 (for verification purpose). 34. Pass necessary Journal Entries in the books of the company for the following transactions : (a) Goverdhan Ltd. Forfeited 500 equity shares of Rs. 50 each issued at a discount of 10% for the nonpayment of first call of Rs. 10 per share. Second and final call of Rs. 15 per share was not yet made on these shares. Out of the forfeited shares 400 shares were re-issued at Rs. 55 per share fully paid up. (b) G. Ltd. Forfeited 7,000 equity shares of Rs. 100 each for the non-payment of first call of Rs. 30 per share. These shares were issued at a premium of Rs. 30 per share. The second and final call of Rs. 20 per share was not yet made. The forfeited shares were re-issued at Rs. 80 per share fully paid up. (c) Priya Ltd. Forfeited 1000 share of Rs. 100 each issued at a discount of 10% for nonpayment of allotment money of Rs. 50 per share. The first and final call money of Rs. 20 per share on these shares was not made. The forfeited shares were re-issued for Rs. 7,000 as fully paid up. Hint. transfer to Capital Reserve- (a) Rs. 8,000 (b) 2,10,000 (c) Nil. Questions : - Chapter 8 Company Accounts - (Issue of Debentures) Online Guess Papers : Mobile : ,

43 1. Shruti Ltd. Bought the business of Shinkey Ltd. On consisting of Sundry assets of Rs. 5,60,000 and Creditors Rs. 1,00,000, for a purchase consideration of Rs. 5,00,000. Rs. 1,00,000 was paid in cash on and for the balance 6% debentures were issued at a premium of 25% on Pass necessary journal entries in the books of Shruti Ltd. For the above mentioned transactions. Ans. F.V. of debentures issued Rs. 1,00, X Ltd. Obtained a loan of Rs. 4,00,000 from IDBI Bank. The Company issued 5000, 9% debentures of Rs. 100 each as a collateral security for the same. Show how these items will be presented in the Balance Sheet of the company. 3. Nav Lakshmi Ltd. Invited application for issuing 3000, 12% Debentures of Rs. 100 each at a premium of Rs. 50 per Debenture. The full amount was payable on application. Applications were received for 4000 debentures. Applications for 1000 debentures were rejected and application money was refunded. Debentures were allotted to the remaining applicants. Pass necessary Journal entries for the above transactions in the books of Nav Lakshmi Ltd. 4. Pranshu Ltd. Purchased assets worts Rs. 1,80,000 and took over the liabilities (creditors) of Rs. 40,000 of Mahesh Ltd. For a purchase consideration of Rs. 1,76,000. Pranshu Ltd. Paid half the amount by cheque and balance was settled by issuing 12% debentures of Rs. 100 each at a premium of 10%. Pass necessary Journal entries in the books of Pranshu Ltd. Hint. Goodwill Rs. 36,000; Face value of Debentures issued Rs. 80, Pass the necessary Journal entries for the issue of 7% Debentures in the following cases: (i) 200 Debentures of Rs. 150 each issued at 10% premium redeemable at Rs. 200 each. (ii) 200 Debentures of Rs. 200 each issued at a discount of 10% redeemable at par. Ans. Loss on issue of Debentures- (i) Rs. 7,000 (net) (ii) 4, Pass the necessary Journal entries for the issue of Debentures in the following cases : (i) Rs. 40,000, 15% Debentures of Rs. 100 each issued at a discount of 10% redeemable at par. (ii) Rs. 80,000, 15% Debentures of Rs. 100 each issued a a premium of 10% redeemable at a premium of 10%. Ans. Loss on issue of Debentures- (i) Rs. 4,000 (ii) Nil (net). 7. Beeta Ltd. Issued 5,000, 9% debentures of Rs. 500 each. Pass the necessary journal entries for the issue of Debentures in the books of the company in the following cases: (i) when debentures are issued at 10% premium and redeemable at per. (ii) When debentures are issued at par and redeemable at 10% premium. Online Guess Papers : Mobile : ,

44 (iii) When debentures are issued at 5% premium and redeemable at 10% premium. (iv) When debentures are issued at a premium of 25% to the vendors for machinery purchased for Rs. 6,25, Pass the necessary journal entries for the issue and redemption of Debentures in the following ceses : (i) 15,000, 9% Debentures of Rs. 250 each issued at 5% premium, repayable at 15% premium. (ii) 2,00,000, 12% Debentures of Rs. 10 each issued at 8% premium, repayable at par. Ans. (i) Loss on issue of Debentures (Dr.) = Rs. 3,75,000 (i.e. Rs. 5,62,500 Rs. 1,87, Pass necessary Journal entries relating to issue of debentures for the following : (i) Issued Rs. 28,000, 10% debentures of Rs. 100 each at a premium of 15% redeemable at per. (ii) Issued Rs. 30,000, 10% debentures of Rs. 100 each at a premium of 10% and redeemable at a premium of 15%. (iii) Issued Rs. 80,000, 10% debentures of Rs. 100 each at par, repayable at a premium of 10%. Ans. Loss on issue of Debentures- (ii) Rs. 1,500 (net); (ii) Rs. 8,000. Questions : - Chapter 9 Company Accounts - (Redemption of Debentures) 1. X Ltd. Redeemed 1000, 6% Debentures of Rs. 100 each by converting them into Equity shares of Rs. 100 each. The 6% Debentures were redeemable at a premium of 5% for which the Equity shares were issued at a premium of 25%. Pass the necessary journal entries for the redemption of the above mentioned Debentures in the books of X Ltd. Ans. No. of shares issued = Manish Ltd. Issued Rs. 38,00,000, 8% debentures of Rs. 100 each on The terms of issue stated that the debentures were to be redeemed at a premium of 5% on The company decided to transfer out of profits Rs. 11,00,000 to Debenture Redemption Reserve on and Rs. 8,00,000 on Pass necessary Journal entries regarding the issue and redemption of debentures, without providing for either the interest of loss on issue of debentures. 3. Tuteja Constructions Ltd. Had an outstanding balance of Rs. 1,26,00,000, 9% debentures of Rs. 200 each redeemable at a premium of 3%. According to the terms of redemption, the company redeemed 50% of the above debentures by converting them into shares f Rs. 10 each at a discount of 10%. Record the entries for redemption of Debentures in the books of Tuteja Constructions Ltd. Online Guess Papers : Mobile : ,

45 4. Anupama Ltd. Had issued 10,000, 9% Debentures of Rs. 100 each which is due for redemption on The company has in its Debenture Redemption Reserve Account a balance of Rs. 4,00,000. The Record the necessary Journal entries at the time of Redemption of Debentures. 5. Pass necessary journal entries for the redemption of debentures in the following cases in the books of Jain Ltd : (i) Redeemed 5,400, 12% debentures of Rs. 100 each by draw of lots. (ii) Converted 667, 12% debentures of Rs. 100 each into equity shares of Rs. 100 each issued at a premium of 25%. 6. Pass necessary journal entries for the redemption of debentures in the following cases in the books of X Ltd : (i) X Ltd. Converted Rs. 8,00,000, 12% debentures into equity shares of Rs. 100 each at a premium of 25%. (ii) X Ltd redeemed its 1000, 12% debentures of Rs. 100 each at 10% premium by draw of lots. Ans. (i) No. of Equity share issued = 6, X Ltd. Had Rs. 10,00,000 9% debentures due to be redeemed out of profits on 1 st October 2009 at a premium of 5%. The company had a Debenture Redemption reserve of Rs. 4,14,000. Pass necessary journal entries at the time of redemption. 8. F Ltd. Issued Rs. 1,00,000, 15% Debentures of Rs. 100 each at a premium of 5%, redeemable at a premium of 10% at the end of 4 years. The Board of Directors decided to transfer the minimum required amount to Debenture Redemption Reserve Account at the time of redemption. Pass Journal entries at the time of Redemption of Debentures. Ans. transfer to DRA A/c Rs. 50,000 9.A Join Stock Company issued 15,000, 9% debentures of Rs. 100 each at a premium of 5%. These debentures were to be redeemed at a premium of 10% through the issue of shares at a premium of 25%. Journalize the issue and redemption of debentures. Ans. Face value of Share issued = Rs. 13,20, On April 1 st 208 following were the balances of Blue Bird Ltd. : 10% Debentures (redeemable on April 1 st, 2010) Rs. 15,00,000 Debenture Redemption Reserve Rs. 5,00,000 ON 31 March 2010 the Board of Directors decided to follow the guidelines of SEBI for maintaining Debenture Redemption Reserve and transferred to required amounts to DRR and redeemed the debentures. Pass necessary Journal entries for the above transactions in the books of the company. Online Guess Papers : Mobile : ,

46 11.Mudra Ltd. Had 10,000, 12% Debentures of Rs. 100 each due for redemption at a premium of 5% on March 31, The board of directors of the company decided to follow SEBI guidelines for maintaining Debenture Redemption Reserve. They transferred the required amount to Debenture Redemption Reserve and redeemed the Debentures fully. Pass necessary Journal entries relating to transfer of the required amount to DRR and Redemption of Debentures. 12. Devi Ltd. On 1 st April 2006 acquired assets of the value of Rs. 6,00,000 and liabilities worth Rs. 70,000 from P & Co., at an agreed value of Rs. 5,50,000. Devi Ltd issued 12% Debentures of Rs. 100 each at a premium of 10% in full satisfaction of purchase consideration. The debentures were redeemable 3 years later at a premium of 5%. Pass journal entries to record the above including redemption of debentures. Ans. Goodwill Rs. 20,000; No. of Debenture issued Rs. 5, on Raja Ltd. Issued 1,000, 9% debentures of Rs. 100 each. 40% of these debentures were redeemable at the end of 3 rd ear by converting them into Equity shares of Rs. 100 each at par. The remaining debentures were redeemable at the end of 4 th year by converting the same into Equity Shares of Rs. 100 each issued at a premium of 25%. Pass necessary journal entries in the books of the company for the issue and redemption of Debentures. Ans. No. of equity shares issued- 3 rd year = 400; 4 th year = On a Public Limited Company issued 15,000, 10% Debentures of Rs. 100 each at par which were repayable at a premium of 15% on On the date of maturity, the company decided to redeem the above mentioned 10% Debentures as per the terms of issue, out of profits. The Profit & Loss A/c shows a credit balance of Rs. 20,00,000 on this date. The offer was accepted by all the Debenture-holders and the debentures were redeemed. Pass the necessary journal entries in the books of the Company only for the redemption of Debentures, if the company follows Sec. 117 C of the Companies Act. Ans. paid to debenture holders Rs. 17,25, Pass necessary Journal entries for issue and redemption of debentures in the following cases : 20,000 12% debentures of Rs. 50 each were issued and to be redeemed as follows : (a) Issued at par and redeemed at a premium of 10%. (b) Issued at a premium of 10% and redeemable at a premium of 20%. (c) Issued at par and 50% of the redemption to be made in cash and the balance to be redeemed at a premium of 20% through the issue fresh debentures. Ans. Loss on issue of Debentures- (a) Rs. 1,00,000 (b) Rs. 1,00,000 (Net) (c) Rs. 1,00,000. Online Guess Papers : Mobile : ,

47 16. Pass necessary Journal entries for the following transactions in the books of Fortune Ltd : (i) Redeemed Rs. 96,000, 12% Debentures by conversion into Equity Shares of Rs. 100 each. The Equity Shares were issued at a discount of 4%. (ii) Converted 4,800, 12% Debentures of Rs. 100 each into New 13% Debentures of Rs. 100 each. The New Debentures were issued at a premium of 25%. Ans. (i) Face value of Equity Shares issued = Rs. 1,00,000; (ii) Face value of New 13% Debentures issued = Rs. 3,84,000 Questions : - Chapter 10 Financial Statement of a Company (Balance Sheet only) 1. Give the major heading under which the following items will be shown in a company s Balance Sheet as per Schedule VI Part I of Companies Act, 1956 : (i) Sundry Creditors; (ii) Provision for Tax; (iii) Preliminary Expenses; (iv) Loose Tools; (v) Interest accrued on investments and (vi) Goodwill. 2. State the major headings under which the following items will be put as per Schedule VI Part I of the Companies Act, (i) Long term investments; (ii) Bills of Exchange; (iii) Motor Car; (iv) Discount on issue of shares; (v) Securities Premium and (vi) Unclaimed dividend. 3. Enumerate any three items of Current Assets and any three items of Current Liabilities included in each of these major headings as per Schedule VI Part I of the Companies Act Under what heads and sub-heads will the following items appear in the Balance Sheet of accompany as per Revised Schedule VI Part I of the Companies Act 1956 : (i) Debentures; (ii) Loose tools; (iii) Calls-in-advance. 5. Under which heads and sub-heads will the following items appear in the Balance Sheet of a company as per Revised Schedule VI Part I of the Companies Act 1956 : (i) Subsidy Reserve; (ii) Mining Rights; (iii) Provision for doubtful debts. 6. Under what heads and sub-heads will the following items appear in the Balance Sheet of a company as per Revised Schedule VI Part I of the Companies Act 1956 : (i) Stores and Spares; (ii) Proposed Dividend; (iii) Computer Software. Online Guess Papers : Mobile : ,

48 Chapter 12 Techniques of Financial Statement Analysis Questions : - 1. The Profit and Loss Account of Hiralal & Co. for the years ended March 31,2005 and 2006 are as follows : Particulars Net sales Cost of goods sold Gross profit Operating expenses Net profit Income tax 50% of net profit 5,32,500 3,43,000 1,89,500 70,000 1,19,500 59,750 5,12,000 3,32,500 1,80,500 62,500 1,18,000 59,000 Compute percentage changes from 2005 to Prepare a common size statement from the following for the year ended : Sales Rs. 21,00,000 Cost of goods sold Rs. 9,90,000 Operating Expenses Rs. 3,90,000 Interest on investments Rs. 80,000 Taxes 50% 3. From the following information provided, prepare a comparative income statement for the period 2008 and 2009 : Sales 6,00,000 8,00,000 Gross Profit 40% on Sales 50% on Sales Administrative expenses 20% of Gross Profit 15% of Gross Profit Income Tax 50% 50% 4. From the following information prepare a Comparative Income Statement for the period : Online Guess Papers : Mobile : ,

49 Rs. Rs. Sales 5,00,000 6,00,000 Materials Consumed 2,30,000 4,00,000 Manufacturing and Office expenses 1,20,000 1,80,000 Other incomes 30,000 30,000 Other Information : (a) Income tax is (b) Manufacturing expenses are 50% of the total of that category. 5. Prepare a Comparative Income Statement from the following : Sales Cost of goods sold Operating expenses ,00,000 6,00,000 40, ,50,000 7,50,000 50,000 Interest on investments Rs. 50,000 and taxes 50% 6. From the following information, prepare Comparative Income Statement of Zee Ltd : Sales Cost of goods sold Indirect expenses Income tax % of Cost of Goods sold 10,00,000 10% of Gross Profit 40% % of Cost of Goods sold 20,00,000 20% of Gross Profit 40% 7. From the information given below prepare a Comparative Income Statement : Sales 3,00,000 4,00,000 Online Guess Papers : Mobile : ,

50 Sales returns 1,00,000 2,00,000 Cost of goods sold 60% of Sales 50% of Sales Administrative expenses 20% of Gross Profit 10% of Gross Profit Income tax 40% 40% 8. Prepare a Comparative Income Statement from the following information : Particulars sales Cost of goods sold Wages paid Operating expenses Other Incomes Income tax 40,000 30,000 16,000 2,500 2,000 4,750 50,000 35,000 14,000 3,000 3,000 7, From the following Income Statement, Prepare a Common Size Income Statement of Jayant ltd. For the year ended : Income Statement of Jayant Ltd. For the year ended Particulars Income : Sales 25,38,000 Other Incomes 38,000 Total Income 25,76,000 Expenses : Cost of Goods sold 14,00,000 Operating expenses 5,00,000 Total Expenses 19,00,000 Tax 3,38, Prepare a Comparative Income Statement form the following information : Online Guess Papers : Mobile : ,

51 Particulars sales Cost of goods sold Operating expenses Rate of Income Tax Rs. 15,00,000 60% of Sales 8% of Sales 50% of Net Profit before tax Rs. 20,00,000 60% of Sales 8% of Sales 50% of Net Profit before tax 11. From the following Statement of Profit and Loss of Moontrack Ltd., for the years ended 31 st March 2011 and 2012, Prepare a Comparative Statement of Profit and Loss. Particulars Not No. Rs. Rs. Revenue form operations 40,00,000 24,00,000 Other Incomes 24,00,000 18,00,000 Expenses 24,00,000 14,00, From the following Statement of Profit and Loss of Sudha Ltd. Prepare a Comparative Statement of Profit and Loss : Particulars Not No. Rs. Rs. 1. Revenue form operations 20,00,000 16,00, Expenses 60,000 40, Other Income 10,00,000 8,00, Income Tax 40% 40% Questions : - Chapter 13 Ratio Analysis 1. The Current ratio of a company is 3 : 1. State with reason whether the payment of Rs. 20,000 to the creditors will increase, decrease or not change the ratio. Ans. Ratio will increase 2. The Current ratio of a company is 2.5 : 1. State giving reason whether Purchase of goods for cash will improve, reduce or not change the ratio. Online Guess Papers : Mobile : ,

52 Ans. No Change 3. The Operating ratio of X Ltd. Is 84%. State giving reason whether conversion of Debentures into Equity shares will improve, reduce or will bring no change in the ratio. Ans. No change 4. Calculate return on investment from the following information : Net Profit after tax : Rs. 6,50,000; Convertible debentures : Rs. 8,00,000; Income tax : 50%; Fixed assets at cost : Rs. 24,60,000; Depreciation reserve : Rs. 4,60,000; Current assets : Rs. 15,000; Current liabilities : Rs. 7,00,000. Ans. (a) 50% 5. The quick ratio of a company is 1 : 1. State which of the following would improve, reduce or not change the ratio : (a) Purchase of goods for cash; (b) Purchase of goods on credit; (c) Sale of goods at cost; (d) Sale of goods at a profit; (e) Cash received from debtors; (f) Cash paid to creditors. Ans. (a) & (b) Reduce; (c) & (d) Improve; (e) & (f) Change. 6. X Ltd. Has a current ratio of 3 : 1 and quick ratio of 2 : 1. If the excess of current assets over quick assets as represented by stock is Rs. 40,000, Calculate current assets and current liabilities. Ans. Rs. 1,20,000; Rs. 40, The debt-equity ratio of Ratan Ltd. Is 3 : 1. Giving reasons, state whether the ratio will increase, decrease or not change because of the following transactions : (i) Issues equity shares of Rs. 1,00,000. (ii) Discounting a bill of exchange of Rs. 50,000 at a discount of 10%. (iii) Redemption of 9% debentures of Rs. 70,000. Ans. (i) Decrease (ii) No Change (iii) Decrease. 8. From the given information, Calculate the stock turnover ratio: Sales Rs. 2,00,000; G.P. : 25%; Opening stock was 1/4 th of the value of closing stock. Closing stock was 40% of sales. (c) A business has a current ratio of 4 : 1 and a quick ratio of 1.2 : 1. If the working capital is Rs. 1,80,000, calculate the total Current assets and stock Ans. (a) 3 times (b) Rs. 2,40,000; Rs. 1,68, The following are the summarized Profit and Loss Account and the Balance Sheet of Ashoka Ltd. As on : Online Guess Papers : Mobile : ,

53 Ashoka Ltd. Profit and Loss Account for the year ended Particulars Particulars Opening stock 20,000 Sales 2,20,000 Purchases 1,25,000 Closing Stock 10,000 Direct expenses 15,000 Gross profit 70,000 2,30,000 2,30,000 Salary 16,000 Gross profit 70,000 Loss of Sale of machinery 4,000 Net Profit 50,000 70,000 70,000 Ashoka Ltd. Balance Sheet as on Liabilities Assets Equity share capital 1,50,000 Land 2,00,000 Profit and Loss a/c 50,000 Stock 10,000 Creditors 75,000 Debtors 50,000 Outstanding expenses 25,00 Cash 40,000 3,00,000 3,00,000 Calculate any two of the following ratios on the basis of the information given in the above mentioned financial statements : (j) Gross Profit Ratio; (ii) Stock Turnover Ratio; (iii) Proprietary Ratio. Ans. (i) 31.82% (ii) 10 times (iii) 66.67% 10. (a) Cash sales are 25% of total sales; Purchase Rs. 2,76,000; Credit sales Rs. 2,24,000; Excess of closing stock over opening stock Rs. 20,000; Calculate gross profit ratio. Online Guess Papers : Mobile : ,

54 (b) A trader carries an average stock of Rs. 60,000. His stock turnover is 12 times if he sells goods at a profit of 25% on sales, find out his profit. Ans. (a) 205 (b) Rs. 2,40,000 Hint. (a) G.P. Rs. 64, (a) Net profit after Interest but before tax : Rs. 1,40,000; 15% Long-term debts: Rs. 4,00,000; Shareholders funds : Rs. 2,40,000; Tax rate 50%. Calculate Return on Capital Employed. (b) Opening Stock : Rs. 60,000; Closing Stock : Rs, 1,00,000; Stock Turnover Ratio 8 times Selling price 25% above cost. Calculate the Gross Profit Ratio. Ans. (a) 31.25% (b) 20% 12. From the following information, Calculate any two of the following ratios: (i) Operating ratio (ii) Stock Turnover ratio (iii) Proprietary ratio Information : Cash Sales Rs. 10,00,000 Credit Sales 120% of Cash Sales Operating Expenses 10% of Total Sales Rate of Gross Profit 40% Opening Stock Rs. 1,50,000 Closing Stock Rs. 20,000 more than Opening Stock Current Assets Rs. 3,00,000 Current Liabilities Rs. 2,00,000 Share Capital Rs. 6,00,000 Fixed Assets Rs. 5,00,000 Ans. (i) 79% (ii) 8.25 times (iii) From the following information, calculate any two of the following ratios : (i) Liquid ratio Online Guess Papers : Mobile : ,

55 (ii) Debt-Equity ratio (iii) Fixed Assets Turnover ratio Information : Rs. Net Sales 3,00,000 Gross Profit 1,00,000 Total Current Assets 2,00,000 Closing Stock 20,000 Prepaid Insurance 4,000 Total Current Liabilities 1,20,000 Share Capital 3,50,000 Reserves & Surplus 40,000 Preliminary Expenses 7,000 Fixed Assets 4,30,000 Ans. (i) 1.47 (ii) Debt Equity ratio = 0.64; Long term debt to equity = 0.33; (iii) (i.e. Net sale/fixed assets). # This ratio is now not in syllabus. 14. (a) A business has a current ratio of 3 : 1 and a quick ratio of 2 : 1. If the working capital is Rs. 1,80,000, Calculate the total current liabilities and value of stock. (b) From the given information calculate the Stock turnover ratio : Sales : Rs. 2,00,000; GP : 25 % on cost; Stock at the beginning is 1/3 of the stock at the end which was 30% of Sales. Ans. (a) Rs. 90,000; Rs. 90,000 (b) 4 times 15. From the following information, calculate any two of the following ratios : (i) Liquid Ratio (ii) Gross Profit Ratio (iii) Debt-Equity Ratio Information : Net Sales Rs. 4,00,000; Opening Stock- Rs. 10,000; Closing Stock- Rs. 3,000 Less than Opening Stock; Net Purchases- 80% of Net sales, Direct expenses Rs. 20,000; Current assets Rs. 1,00,000; Prepaid expenses- Online Guess Papers : Mobile : ,

56 Rs. 3,000; Current liabilities- Rs. 60,000; 9% Debentures- Rs. 4,00,000; Long term loan from Bank- Rs. 1,50,000; Equity Share Capital- Rs. 8,00,000; 8% Preference Share Capital- Rs. 3,00,000. Ans. (i) 1.5 : 1 (ii) 14.25% (iii) Debt Equity Ratio = 0.55 : 1; Long Term Debt to Equity Ratio = 0.50 : Calculate Current Ratio of a company from the following information : Stock Turnover Ratio : 4 times Stock in the end was Rs. 20,000 more than stock in the beginning. Sales Rs. 3,00,000 Gross Profit Ratio 25% Current Liabilities Rs. 40,000 Quick Ratio 0.75 : 1 Ans Times Hint. Closing stock = Rs. 66, The quick ratio of a company is 1 : 1. State giving reasons, (for any four) which of the following would improve, reduce or not change the ratio? (a) Purchase of machinery for cash (b) Purchase of goods on credit (c) Sale of Furniture at cost (d) Sale of goods at a profit (e) Redemption of debentures at a premium. Ans. (a), (b) & (e) reduce, (c) & (d) improve 18. From the following information, calculate any two of the following ratios : (a) Debt-Equity Ratio; (b) Working Capital Turnover Ratio; (c) Return on Investment. Information : Equity Share Capital Rs. 10,00,000; 12% General Reserve Rs. 1,00,000; Profit and Loss Account after Tax and Interest Rs. 3,00,000; 12% Debentures Rs. 4,00,000; Creditors Rs. 3,00,000; Land and Building Rs. 13,00,000; Furniture Rs. 3,00,000; Debtors Rs. 2,90,000; Cash Rs. 1,10,000 and Preliminary expenses Rs. 1,00,000. Online Guess Papers : Mobile : ,

57 Sales for the year ended was Rs. 30,00,000 and Tax paid 50% Ans. (a) Debt-Equity Ratio = 0.54 : 1; Long term Debt-Equity Ratio = 0.31 ; 1; (b) 30 Times (c) 38.12% 19. Calculate Return on Investment' and 'Debt-Equity Ratio' from the following information : Net Profit interest and tax Rs. 6,00,000 10% Debentures Rs. 10,00,000 Tax Rate 40% Capital Employed Rs.80,00,000 Ans % : (a) Compute 'Debtors Turnover Ratio' from the following information : Total Sales Rs. 5,20,000. Cash sales 60% of the Credit Sales, Closing Debtors Rs. 80,000 Opening Debtors are 3/4th of Closing Debtors. Ans. (a) 4.64 Times (b) Rs. 2,40,000 (c) Rs. 4,00,000 Questions : - 1. Give the meaning of 'Cash Flow Statement'. Chapter 14 Cash Flow Statement A Ltd., engaged in the business of retailing of two wheelers, invested Rs. 50,00,000 in the shares of a manufacturing company. State with reason whether the divided received on this investment will be cash flow from operating activities or investing activities. 2. List any two inflows and any tow outfiows from investing activities. (a) Issue of debentures Rs. 5,00,000; (b) Interest on loan paid by a trading from Rs. 1,00,000; (c) Sale of goods Rs. 5,00,000; (d) Receipt of interest by a manufacturing company Rs. 25, Fro the following summarized balance sheets of a company, calculate the cash flow from operating activities : Liabilities Assets Online Guess Papers : Mobile : ,

58 Creditors 20,000 25,000 Cash 20,000 30,000 Bills payable 20,000 25,000 Investments 40,000 30,000 Other current liabilities 6% Debentures Profit & Loss A/c 40,000 60,000 90,000 45,000 80,000 1,10,000 Stock Debtors Gross Block 30,000 30,000 1,10,000 45,000 40,000 1,40,000 2,30,000 2,85,000 2,30,000 2,85,000 Ans. Rs. 13,600 Hint. It is assumed that interest is not paid on debentures issued during the year 4. Seema Ltd. Had a profit of Rs. 20,00,000 for the year ended after considering the following : Depreciation on building Rs. 55,000 Depreciation on plant and machinery Rs. 37,000 Goodwill written off Rs. 14,000 Loss on sale of plant and machinery Rs. 8,000 Following was the position of the Current Assets and Current Liabilities of the company as on and Particulars Stock Debtors Cash Creditors Outstanding expenses Bills payable 65,000 40,000 47,000 94,000 5,000 49,000 69,000 25,000 74,000 1,03,000 3,000 58,000 Calculate Cash Flow from Operating Activities. Ans. Rs. 21,41, X Ltd. Made a profit of Rs. 1,00,000 after considering the following items : (a) Depreciation on Fixed Assets Rs. 20,000 Online Guess Papers : Mobile : ,

59 (b) Writing off preliminary expenses Rs. 10,000 (c) Loss on sale of Furniture Rs. 1,000 (d) Provision for Taxation Rs. 1,60,000 (e) Transfer to General Reserve Rs. 14,000 (f) Profit on sale of Machinery Rs. 6,000 The following additional information is available to you : Items Debtors Creditors Bills Receivable Bills Payable Prepaid Expenses 24,000 20,000 20,000 16, ,000 30,000 17,000 12, Calculate Cash Flow from Operating Activities. Ans. Rs. 3,01, From the following Balance Sheet Provided Prepare a Cash Flow Statement as per AS-3 (revised): Liabilities Assets Share Capital 12,000 15,000 Furniture 5,000 8,000 P & L Account 5,000 6,000 Stock 6,000 4,000 Creditors 15,000 11,000 Debtors 10,000 8,000 Cash 11,000 12,000 32,000 32,000 32,000 32,000 A dividend of Rs. 3,000 was paid during the year Ans. Net cash from operating activities Rs. 4,000; Net cash used in investing activities Rs. 3,000; Net increase in cash and cash equivalents Rs. 1, Following are the Balance Sheets of Sewak Ltd. As on and : Online Guess Papers : Mobile : ,

60 Liabilities Assets Share capital 4,00,000 7,00,000 Fixed Assets 3,00,000 5,00,000 Debentures 2,00,000 4,00,000 Investments 2,00,000 1,40,000 Creditors 1,10,000 1,50,000 Stocks 50,000 1,00,000 Outstanding expenses 10,000 20,000 Debtors Cash 1,00,000 20,000 1,70,000 40,000 Profit & Loss Account 50,000 3,20,000 7,20,000 12,70,000 7,20,000 12,70,000 Additional information : Included in the fixed assets was a piece of machinery costing Rs. 70,000 on which depreciation charged was Rs. 40,000 and it was sold for Rs. 30,000. During the year Rs. 1,40,000 depreciation was charged on fixed assets. Prepare a Cash Flow Statement. Ans. Net Cash used in operating activities Rs. 2,00,000; Net cash used in investing activities Rs. 2,80,000; Net cash from financing activities Rs. 5,00,000; Net increase in cash and cash equivalents Rs. 20, From the following Balance Sheets of Vikas Ltd. As on and , Prepare a Cash flow Statement : Liabilities Assets Share Capital 90,000 1,30,000 Fixed Assets 93,400 1,66,000 General Reserve 30,000 55,000 Stock 22,000 26,000 Profit & Loss Account Trade Creditors 20,000 17,400 30,000 22,000 Debtors Cash 36,000 4,000 39,000 5,000 Preliminary 2,000 1,000 Expenses 1,57,400 2,37,000 1,57,400 2,37,000 Additional Information : Online Guess Papers : Mobile : ,

61 (i) Depreciation charged on fixed assets for the year was Rs. 20,000. (ii) Income Tax Rs. 5,000 has been paid in advance during the year. Ans. Net Cash from operating activities Rs. 53,600; Net cash from financing activities Rs. 40,000; Net cash used in investing activities Rs. 92,600; Net increase in cash and cash equivalents Rs. 1, From the following Balance Sheets and the additional information of Goods Wood Co., Your are required to prepare Cash Flow Statement as per AS 3: Liabilities Assets Share Capital 30,000 45,000 Fixed Assets 20,000 49,000 Profit & Loss Account Sundry Creditors Bills payable 7,000 8,000 2,500 18,500 9,500 4,000 Stock in Hand Debtors Cash in hand 9,000 12,000 6,500 9,000 10,000 9,000 47,500 77,000 47,500 77,000 Additional Information : (a) Income tax paid during the year was Rs. 4,500 (b) Dividends paid during the year was!2%. Ans. Net Cash from operating activities Rs. 20,100; Net cash from financing activities Rs. 11,400; Net cash used in investing activities Rs. 29,000; Net increase in cash and cash equivalents Rs. 2, From the following Balance Sheets of B.C.R. Ltd. As on and , Prepare a Cash Flow Statement : Balance Sheet of B.C.R. Ltd. As on and Liabilities Assets Equity share capital Profit and Loss A/c 5,00,000 2,00,000 1,00,000 7,00,000 3,50,000 50,000 Patents Equipments Investments 1,00,000 5,00,000 95,000 5,00,000 1,00,000 Bank Loan 50,000 70,000 Debtors 80,000 1,47,000 Proposed 30,000 50,000 Stock 55,000 1,30,000 Online Guess Papers : Mobile : ,

62 Dividend Provision for tax 55,000 52,000 Bank 2,00,000 3,00,000 9,35,000 12,72,000 9,35,000 12,72,000 Creditors Additional Information : During the year Equipment costing Rs. 1,00,000 was purchased. Loss on sale of Equipment amounted to Rs. 12,000. Rs. 18,000 depreciation was charged on Equipment. Ans. Net cash from operating activities Rs. 1,30,000; Net cash from financing activities Rs. 1,00,000; Net cash used in investing activities Rs. 1,30,000; Net increase in cash and cash equivalents Rs. 1,00, From the following information, prepare a Cash Flow Statement of Balaji Ltd. : Balance Sheets of Balaji Ltd. As on March 31 st Liabilities Assets Equity capital Securities Premium share Profit and Loss A/c 12% Debentures Current Liabilities` 2,50,000 40,000 60,000 1,50,000 3,50,000 25,000 1,00,000 1,25,000 Fixed Assets Investments Current Assets Discount issue of Debentures of Profit and Loss A/c 2,00,000 1,00,000 1,50,000 20,000 5,00,000 6,00,000 Cash 5,00,000 6,00,000 30,000 2,80,000 1,00,000 1,60,000 20,000 40,000 Additional information : (i) Debentures were issued on (ii) During the year a machine included in Fixed Assets costing Rs. 1,20,000 was purchased and another machine of the book value of Rs. 30,000 was sold at a loss of Rs. 2,000. Ans. Net cash used in operating activities Rs. 51,000; Net cash used in investing activities Rs. 92,000; Net cash from financing activities Rs. 1,53,000; Net increase in cash and cash equivalents Rs. 10,000. Online Guess Papers : Mobile : ,

63 12. Following are the Balance Sheet of Krishtec Ltd. For the year ended 31 st March 2011 and 2012 : Particulars Equity and liabilities (1) Shareholders Funds : (a) Share Capital (b) Reserves and Surplus (Profit and Loss Balance) (2) Non-Current Liabilities : Long term Borrowings (3) Current Liabilities : Trade Payable 12,00,000 3,50,000 4,40,000 60,000 8,00,000 4,00,000 3,50,000 50,000 Total 20,50,000 16,00,000 II. Assets (1) Non-Current Assets : (a) Fixed Assets : (i) Tangible Assets (2) Current Assets (a) Inventories (b)trade Receivables (c) Cash and Cash equivalents 12,00,000 2,00,000 3,10,000 3,40,000 9,00,000 1,00,000 2,30,000 3,70,000 Total 20,50,000 16,00,000 Prepare a Cash Flow Statement after taking into account the following adjustments : (a) The company paid interest Rs. 36,000 on its long term borrowings. (b) Depreciation charged on tangible fixed assets was Rs. 1,20,000. Ans. Net cash used in investing activities Rs. 4,20,000; Net cash from financing activities Rs. 4,54,000; Net cash used in investing activities Rs. 4,20,000; Net decrease in cash and cash equivalents Rs. 30, Prepare a Cash Flow Statement from the following Balance Sheet of Shyam Ltd.: Online Guess Papers : Mobile : ,

64 Balance Sheet Shyam Ltd. As at 31th March, Particulars Rs Rs. 1. Equity and liabilities (1) Shareholders Funds : (a) Share Capital (b) Reserves and Surplus (Profit and Loss Balance) (2)Share Application money Pending allotment (3) Non-Current Liabilities : Long term Borrowings (4) Current Liabilities : Trade Payable 40,00,000 6,00,000 4, ,00,000 34,00,000 8,00,000 2,00,000 2,00,000 Total 51,00,000 46,00,000 II. Assets (1) Non-Current Assets : (a) Fixed Assets : (i) Tangible Assets (ii) Intangible Assets (b) Non-current investments (2) Current Assets (a) Inventories (b)trade Receivables 16,00,000 12,00,000 6,00,000 2,00,000 +,00,000 9,00,000 18,00,000 10,00,000 5,00,000 5,00,000 8,00,000 (c) Cash and Cash equivalents 51,00,000 46,00,000 Total Additional Information : Online Guess Papers : Mobile : ,

65 Depreciation of Rs. 2,00,000 was Provided on Tangible Assets during the year. Ans. Net cash used in Operating Activities Rs. 4,00,000; Net Cash from Financing Activities Rs. 8,00,000; Net cash used in Investing Activities Rs. 3,00,000; Net increase in cash and cash equivalents Rs. 1,00,000. Online Guess Papers : Mobile : ,