Studymate Solutions to CBSE Board Examination

Studymate Solutions to CBSE Board Examination 2015-2016 Series : ONS/1 Code No. 67/1/1 Roll No. Candidates must write the Code on the title page of the answer-book. 4 Please check that this question paper contains 23 printed pages. 4 Code number given on the right hand side of the question paper should be written on the title page of the answer-book by the candidate. 4 Please check that this question paper contains 23 questions. 4 Please write down the Serial Number of the question before attempting it. 4 15 minute time has been allotted to read this question paper. The question paper will be distributed at 10.15 a.m. From 10.15 a.in. to 10.30 a.m., the students will read the question paper only and will not write any answer on the answer-book during this period. ACCOUNTANCY [Time allowed : 3 hours] [Maximum marks : 80] General Instructions: (i) This question paper contains two parts A and B. (ii) Part A is compulsory for all. (iii) Part B has two options - Option - I Analysis of Financial Statements and Option - II Computerized Accounting. (iv) Attempt only one option of Part B. (v) All parts of a question should be attempted at one place.

PART-A (Accounting for Partnership Firms and Companies) 1. What is the maximum number of partners that a partnership firm can have? Name the Act that provides for the maximum number of partners in a partnership firm. According to section 464 of the companies Act, 2013 has been modified w.e.f. 01.04.2014 wherein sub section (1) provides for maximum number of partners permisible for business firm at 50. 2. A, B and C were partners in a firm sharing profits in the ratio of 3:2:1. They admitted D as a new partner for 1/8th share in the profits, which he acquired l/16th from B and l/16th from C. A Calculate the new profit sharing ratio of A, B, C and D. C 3 6 0 = 3 8 24 6 8 = 48 B 1 6 1 8 3 5 = = D 16 48 48 New Ratio = 24 : 13 : 5 : 6 2 6 1 16 1 16 3 = = 16 48 + 1 2 3 16 = 16 3 = 3. Distinguish between Dissolution of Partnership and Dissolution of Partnership Firm on the basis of Economic Relationship. Basis Dissolution of Partnership Dissolution of Partnership Firm Economic Relationship Economic relationship will exist among the partners but in different terms. 13 48 6 48 Economic relationship will end between partners. 4. State the provisions of the Companies Act, 2013 for the creation of Debenture Redemption Reserve. As per Rule 18(7), the company shall create a DRR with the following conditions: (a) No DRR is required for debentures issued by RBI and Banking Companies. For other companies including manufacturing and infrastructure companies, the adequacy of DRR will be 25% of the value of debentures through public issued. 5. On 1-1-2016 the first call of Rs. 3 per share became due on equity shares issued by Kamini Ltd. Karan a holder of 500 shares did not pay the first call money. Arjun a shareholder holding 1000 shares paid the second and final call of Rs. 5 per share along with the first call. Pass the necessary journal entry for the amount received by opening Calls-in-arrears and Calls-in-advance account in the books of the company. Bank A/c Call in Arrears A/c To Share Ist Call A/c To Call in Advance A/c (Being amount received on Ist call) 3,03,500 1,500 3,00,000 5,000 6. Nusrat and Sonu were partners in a firm sharing profits in the ratio of 3:2. During the year ended 31-3-2015 Nusrat had withdrawn Rs. 15,000. Interest on her drawings amounted to Rs. 300. Pass necessary journal entry for charging interest on drawings assuming that the capitals of the partners were fixed. 2

Nursat Current A/c To Interest on Drawing A/c (Being Interest on Drawing charged) Interest on Drawings A/c To Profit & Loss Appropriation A/c (Being Interest on Drawing transfer to profit and loss appropriate a/c) 300 300 300 300 7. KTR Ltd., issued 365, 9% Debentures of Rs. 1,000 each on 4-3-2016. Pass necessary journal entries for the issue of debentures in the following situations: (a) When debentures were issued at par redeemable at a premium of 10%. (a) When debentures were issued at 6% discount redeemable at 5% premium. Date Date Bank A/c Particulars To Debenture Application A/c 3 (Being debenture application money received) Debenture Application A/c Loss on Issue of Debenture A/c To 9% Debenture A/c To premium on redemption of debenture (Being debenture application money transfered) Bank A/c Particulars To Debenture Application A/c (Being debenture application money received) Debenture Application A/c Loss on Issue of Debenture A/c To 9% Debenture A/c To premium on redemption of debenture (Being debenture application money transfered) L. F. L. F. 3,65,000 3,65,000 36,500 3,43,100 3,43,100 40,150 3,65,000 3,65,000 36,500 3,43,100 3,65,000 18,250 8. State any three circumstances other than (i) admission of a new partner; (ii) retirement of a partner and (iii) death of a partner, when need for valuation of goodwill of a firm may arise. Other three circumstances are: (i) Change in profit sharing ratio (ii) Amalgamation of two or more firm (iii) Dissolution of a firm 9. Sandesh Ltd. took over the assets of Rs. 7,00,000 and liabilities of Rs. 2,00,000 from Sanchar Ltd. for a purchase consideration of Rs. 4,59,500. Rs. 8,500 were paid by accepting a draft in favour of Sanchar Ltd. payable after three months and the balance was paid by issue of equity

shares of Rs. 10 each at a premium of 10% in favour of Sanchar Ltd. Assets A/c To Liabilities A/c To Sanchar Ltd. A/c To Capital Reserve A/c (Being Asset acquired from Sanchar Ltd.) Sanchar Ltd. A/c To Bill s Payable A/c To Equity Share Capital A/c To Security Premium Reserve A/c (Being Amount Paid by issuing 41,000 share of Rs. 10 each @ premium of 10% and balance through bill s payable. 7,00,000 4,59,500 2,00,000 4,59,500 40,500 8,500 4,10,000 41,000 10. To provide employment to the youth and to develop the Naxal affected backward areas of Chattisgarh. X Ltd. decided to set-up a power plant. For raising funds the company decided to issue 7,50,000 equity shares of Rs. 10 each at a premium of 50%. The whole amount was payable on application. Applications for 20,00,000 shares were received. Applications for 50,000 shares were rejected and shares were allotted to the remaining applicants on pro-rata basis. Pass necessary journal entries for the above transactions in the books of the company and identify any two values which X Ltd. wants to propagate. In the Books of X Ltd. Journals Bank A/c To Share Application and Allotment A/c (Being application money received) Share Application and Allotment A/c To Share Capital A/c To Security Premium A/c (Being Share application money accepted) Values: Social Welfare; Youth empowerment. 3,00,00,000 3,00,00,000 3,00,00,000 75,00,000 37,50,000 1,87,50,000 11. P and Q were partners in a firm sharing-profits in the ratio of 5:3. On 1-4-2014 they admitted R as a new partner for l/8th share in the profits with a guaranteed profit of Rs. 75,000. The new profit sharing ratio between P and Q will remain the same but they agreed to bear any deficiency on account of guarantee to R in the ratio 3:2. The profit of the firm for the year ended 31-3-2015 was Rs. 4,00,000. Prepare Profit and Loss Appropriation Account of P, Q and R for the year ended 31-3-201.5. 4

In the Books of P, Q and R Profit and Loss Appropriate A/c as on 31-3-2015 Liabilities Amount Assets Amount Profit trans. to capital A/c P 2,18,750 () Grantee to R 15,000 Q 1,31,250 () Grantee to R 10,000 R 50,000 Deficiency Bonus by P 15,000 by Q 10,000 2,03,750 1,21,250 75,000 Net Profit 4,00,000 4,00,000 4,00,000 12. Vikas, Vishal and Vaibhav were partners in a firm sharing profits in the ratio of 2:2:1. The firm closes its books on 31st March every year. On 31-12-2015 Vaibhav died. On that date his Capital account showed a credit balance of Rs. 3,80,000 and Goodwill of the firm was valued at Rs. 1,20,000. There was a debit balance of Rs. 50,000 in the profit and loss account. Vaibhav s share of profit in the year of his death was to be calculated on the basis of the average profit of last five years. The average profit of last five years was Rs. 75,000. Pass necessary journal entries in the books of the firm on Vaibhav s death. In the Books of Vikas, Vishal and Vaibhav Journals Working Note: Vikas Capital A/c Vishal Capital A/c To Vaibhav Capital A/c 5 (Being share of goodwill credited to Vaibhav Capital A/c) Vikas s Capital A/c Vishal s Capital A/c Vaibhav s Capital A/c To Profit and Loss A/c (Being the accumulated loss distributed to partners) Profit and Loss Suspense A/c To Vaibhav Capital A/c (Being the share of profit till the date of death given) Vaibhav Capital A/c To Vaibhav Executor A/c (Being the final amount transferred to Vaibhav s executor s A/c) Calculation of Profit = 75, 9 1 000 11 250 12 5 =, 12,000 12,000 20,000 20,000 10,000 11,250 4,05,250 24,000 50,000 11,250 4,05,250

13. L and M were partners in a firm sharing profits in the ratio of 2:3. On 28-2-2016 the firm was dissolved. After transferring assets (other than cash) and outsiders liabilities to realization account you are given the following information : (a) (c) A creditor for Rs. 1,40,000 accepted building valued at Rs. 1,80,000 and paid to the firm Rs. 40,000. A second creditor for Rs. 30,000 accepted machinery valued at Rs. 28,000 in full settlement of his claim. A third creditor amounting to Rs. 70,000 accepted Rs. 30,000 in cash and investments of the book value of Rs. 45,000 in full settlement of his claim. (d) Loss on dissolution was Rs. 4,000. Pass necessary journal entries for the above transactions in the books of the firm assuming that all payments were made by cheque. In the Books of L & M Journal Bank A/c To Realisation A/c (Being building accepted by creditor and balance paid by him) No entry Realisation A/c (Being cash and investment paid to creditor) L Capital A/c M Capital A/c To Realisation A/c (Being loss on dissolution distributed to partners) 40,000 30,000 1,600 2,400 40,000 30,000 4,000 14. Ashok, Bhim and Chetan were partners in a firm sharing profits in the ratio of 3:2:1. Their Balance Sheet as on 31-3-2015 was as follows: ors Bills Payable General Reserve Capitals: Balance Sheet of Ashok, Bhim and Chetan as on 31-3-2015 Liabilities Amount Assets Amount Ashok 2,00,000 Bhim Chetan 50,000 40,000 60,000 3,50,000 Land Building Plant Stock Debtors Bank 2,00,000 80,000 60,000 10,000 5,50,000 5,50,000 Ashok, Bhim and Chetan decided to share the future profits equally, w.e.f. April 1, 2015. For this it was agreed that: (i) Goodwill of the firm be valued at Rs. 3,00,000. (ii) Land be revalued at Rs. 1,60,000 and building be depreciated by 6%. (iii) ors of Rs. 12,000 were not likely to be claimed and hence be writtenoff. 6

Prepare Revaluation Account, Partners Capital Accounts and Balance Sheet of the reconstituted firm. Building A/c In the Books of Ashok, Bhim and Chetan Revaluation A/c Liabilities Amount Assets Amount Profit transferred to Ashok 33,000 Bhim 22,000 Chetan 11,000 6,000 66,000 Land A/c or A/c 60,000 12,000 72,000 72,000 Capital A/c Particular Ashok Bhim Chetan Particular Ashok Bhim Chetan Ashok Cap. A/c Bal c/d 3,13,000 1,42,000 ors Bills Payable Capitals: 50,000 21,000 Bal b/d G. Reserve Chetal Cap. A/c Revaluation A/c 2,00,000 30,000 50,000 33,000 20,000 22,000 50,000 10,000 11,000 3,13,000 1,42,000 71,000 3,13,000 1,42,000 71,000 Balance Sheet Liabilities Amount Assets Amount Ashok 3,13,000 Bhim 1,42,000 Chetan 21,000 Working Notes: Calculation of GR & SR New Old Ratio Ashok = 1 3 3 2 3 1 6 = 6 = 6 (S) Bhim = 1 2 2 2 0 = = (NIL) 3 6 6 6 88,000 40,000 4,76,000 Land Building Plant Stock Debtors Bank 1,60,000 94,000 2,00,000 80,000 60,000 10,000 6,04,000 6,04,000 Chetan = 1 1 = 3 6 2 1 1 = ( G) 6 6 Chetan s gain = 300000 1 = 50000 6 Ashok s Sacrifice : 300000 1 = 50000 6 15. On 1-4-2013 JN Ltd. had 10,000, 9% Debentures of Rs. 100 each outstanding. (i) (ii) (iii) On 1-4-2014 the company purchased in the open market 2000 of its own debentures for Rs. 101 each and cancelled the same immediately. On 1-4-2015 the company redeemed at par debentures of Rs. 4,00,000 by draw of a lot. On 28-2-2016 the remaining debentures were purchased for immediate cancellation for Rs. 3,97,000. 7

Pass necessary journal entries for the above transactions in the books of the company ignoring debenture redemption reserve and interest on debentures. In the Books of JN Ltd. Journals (i) Apr 1 2014 Apr 1 2014 (ii) Apr. 1 2015 Apr. 1 2015 (iii) Feb. 28 2016 Feb. 28 2016 Feb. 28 2016 Own Debenture A/c (2,000 101) (Being own debentures purchased) 8 9% Debentures Loss on cancellation of own debentures To Own debentures A/c (Being 2,000 own debentrues cancelled) 9% Debenture A/c To Debenture holders A/c (Being amount due to debenture holders) Debenture holders A/c (Being final payment made to debenture holders) Own Debenture A/c (Being 4,000 debenture purchased for immediate cancellation) 9% Debenture A/c To Own Debentures A/c To Gain on cancellation of own debentures A/c (Being 4,000, 9% debenture cancelled against own debentures) Gain on cancellation of own deb. A/c To Capital Reserve A/c (Being gain on cancellation transferred to capital reserve) 2,02,000 2,00,000 2,000 4,00,000 4,00,000 3,97,000 4,00,000 3,000 2,02,000 2,02,000 4,00,000 4,00,000 3,97,000 3,97,000 3,000 3,000 16. KS Ltd. invented applications for issuing 1,60,000 equity shares of Rs. 10 each at a premium of Rs. 6 per share. The amount was payable as follows: On Application Rs. 4 per share (including premium Rs. 1 per share) On Allotment Rs. 6 per share (including premium Rs. 3 per share) One First and Final Call Balance. Applications for 3,20,000 shares were received. Applications for 80,000 share were rejected and application money refunded. Shares were allotted on pro-rata basis to the remaining applicants. Excess money received with applications was adjusted towards sums due on attoment. Jain holding 800 shares failed to pay the allotment money. His shares were forfeited immediately after allotment. Afterwords the final call was made. Gupta who had applied for 1200 shares failed to pay the final call. This shares were also forfeited. Out of the forfeited shares 1000 shares were re-issued at Rs. 8 per share fully paid up. The re-issued shares included all the forfeited shares of Jain.

Pass necessary journal entries for the above transactions in the books of KS Ltd. OR GG Ltd. had issued 50,000 equity shares of Rs. 10 each at a premium of Rs. 2 per share payable with application money. The incomplete journal entries related to the issue are given below. You are required to complete these blanks. Books of GG Ltd. JOURNAL 2015, Jan. 10 To (Amount received on application for 70,000 shares @ Rs. 5 per share including premium) Jan. 16 Equity Share Application A/c To To To To (Transfer of application money to share capital, securities premium, money refunded for 8000 shares for rejected applications and balance adjusted towards amount due on allotment as shares were allotted on Pro-rata basis.) Jan. 31 To (Amount due on allotment @ Rs. 4 per share) Feb. 20 To (Balance amount received on allotment) Apr. 1 To (First and final call money due) Apr. 20 Calls-in-arrears A/c To (Money received on first and final call) Aug. 27 To To (Forfeited the shares on which call money was not received) 1,500 9

Oct. 3 To (Re-issued the forfeited shares @ 8 per share fully paid up) To ( ) Bank A/c To Share Application A/c (Being share application money received) Share Application A/c To Share Capital A/c To SPR A/c To Share Allotment A/c (Being share application money adjusted) Share Allotment A/c To Share Capital A/c To Security Premium Reserve A/c (Being share allotment money due) Bank A/c To Share Allotment A/c (Being share allotment money received) Share Captial A/c Security Premium Reserve A/c To Share forfeited A/c To Share Allotment A/c (Being share forfeited) Share Ist & Final Call A/c To Share Capital A/c To Security Premium Reserve A/c (Being share Ist & final call money due) Bank A/c To Share Ist & Final Call A/c (Being share Ist & final call money received) Share Captial A/c Security Premium Reserve A/c To Share forfeited A/c To Share Ist & Final Call A/c (Being share forfeited) 12,80,000 12,80,000 9,60,000 6,36,800 4,800 2,400 9,55,200 9,50,400 8,000 1,600 12,80,000 4,80,000 1,60,000 3,20,000 3,20,000 4,80,000 4,80,000 6,36,800 4,000 3,200 6,36,800 3,18,400 9,50,400 4,800 4,800 10

Bank A/c Share forfeited A/c To Share Capital A/c (Being share reissued) Share forfeited A/c To Capital Reserve A/c (Being amount transferred to capital reserve) OR 8,000 2,000 3,200 10,000 3,200 2015, Jan. 10 Bank A/c To Equity Share Application A/c (Amount received on application for 70,000 shares @ Rs. 5 per share including premium) Jan. 16 Equity Share Application A/c To Equity Share Capital A/c To Securities Premium Reserve A/c To Equity Share Allotment A/c (Transfer of application money to share capital, securities premium, money refunded for 8000 shares for rejected applications and balance adjusted towards amount due on allotment as shares were allotted on Pro-rata basis.) Jan. 31 Equity Share Allotment A/c To Equity Share Capital (Amount due on allotment @ Rs. 4 per share) Feb. 20 Bank A/c To Equity Share Allotment A/c (Balance amount received on allotment) Apr. 1 Equity Share Ist & Final Call A/c To Equity Share Capital A/c (First and final call money due) Apr. 20 Bank A/c Calls-in-arrears A/c To Equity Share Ist & Final Allotment (Money received on first and final call) Aug. 27 Equity Share Capital A/c To Equity Share Forfeited A/c To Calls in Arrears A/c (Forfeited the shares on which call money was not received) 3,50,000 3,50,000 2,00,000 1,40,000 1,50,000 1,48,500 1,500 5,000 3,50,000 1,50,000 60,000 40,000 2,00,000 1,40,000 1,50,000 1,50,000 3,500 1,500 11

Oct. 3 Bank A/c Share Forfeiture A/c To Equity Share Capital A/c (Re-issued the forfeited shares @ 8 per share fully paid up) Oct. 3 Share Forfeiture A/c To Capital Reserve A/c (Being amount transferred to capital reserve) 4,000 1,000 2,500 5,000 2,500 17. A, B and C were partners in a firm sharing profits in the ratio of 3:2:1. On 31-3-2015 their Balance Sheet was as follows : ors General Reserve Capitals: Balance Sheet of A, B and C as at 31-3-2015 Liabilities Amount Assets Amount A 60,000 B 40,000 C 20,000 84,000 21,000 1,20,000 Bank Debtors Stock Investments Furniture & Fittings Machinery 17,000 23,000 1,10,000 30,000 10,000 35,000 2,25,000 2,25,000 On the above date D was admitted as a new partner and it was decided that: (i) The new profit sharing ratio between A, B, C and D will be 2:2:1:1. (ii) Goodwill of the firm was valued at Rs. 90,000 and D brought his share of goodwill premium in cash. (iii) The market value of investments was Rs. 24,000. (iv) Machinery will be reduced to Rs. 29,000. (v) (vi) A creditor of Rs. 3,000 was not likely to claim the amount and hence to be written-off. D will bring proportionate capital so as to give him 1/6th share in the profits of the firm. Prepare Revaluation Account, Partner s Capital Accounts and the Balance Sheet of the reconstituted firm. OR X, Y and Z were partners in a firm sharing profit s in the ratio of 5:3:2. On 31-3-2015 their Balance Sheet was as follows : ors Balance Sheet of X, Y and Z as at 31st March, 2015 Liabilities Amount Assets Amount Investment Fluctuation Fund P & L Account Capitals: X 50,000 Y 40,000 Z 20,000 21,000 10,000 40,000 1,10,000 Land and Building Motor Vans Investments Machinery Stock Debtors 40,000 Less: Provision 3,000 Cash 52,000 20,000 19,000 12,000 15,000 37,000 16,000 1,81,000 1,81,000 On the above date Y retired and X and Z agreed to continue the business on the following terms: 12

(1) Goodwill of the firm was valued at Rs. 51,000. (2) There was a claim of Rs. 4,000 for Workmen s Compensation. (3) Provision for bad debts was to be reduced by Rs. 1,000. (4) Y will be paid Rs. 8,200 in cash and the balance will be transferred in his loan account which will be paid in four equal yearly instalments together with interest @ 10% p.a. (5) The new profit sharing ratio between X and Z will be 3:2 and their capitals will be in their new profit sharing ratio. The capital adjustments will be done by opening current accounts. Prepare Revaluation Account, Partners Capital Accounts and the Balance Sheet of the reconstituted firm. In the Books of A, B, C and D Revaluation A/c To Investment To Machinery Particular Amount () 6,000 6,000 By ors Particular By Loss transferred to Capital A/c A 4,500 B 3,000 C 1,500 Amount (Cr.) 3,000 9,000 12,000 12,000 Partners Capital A/c Particular A B C D Particular A B C D To Revaluation A/c 4,500 3,000 1,500 By Balance b/d 60,000 40,000 20,000 To Balance c/d 81,000 44,000 22,000 29,400 By General Exp. 10,500 7,000 3,500 By Cash 29,400 ors Capitals: By Premium 15,000 85,000 47,000 23,570 29,400 85,000 47,000 23,570 29,400 Balance Sheet as at 31st March 2015 Liabilities Amount Assets Amount A 81,000 B 44,000 C 22,000 D 29,400 Working Notes: 81,000 1,76,400 Bank (17,000 + 29,400 + 15,000) Debtors Stock Investment Furniture and Fittings Machinery 61,400 23,000 1,10,000 24,000 10,000 29,000 2,57,400 2,57,400 Combined Capital of A, B and C = 81,000 + 44,000 + 22,000 = Rs. 1,47,000 Combined share of A, B and C = 1 1 5 = 6 6 Total Capital = 1, 47, 000 6 = (29,400 6) 5 O s capital = 29, 400 6 1 = Rs. 29,400 6 13

Particular To Workmen compensation (Claim) OR In the Books of XYZ Revaluation A/c Amount () Particular 4,000 By Provision For Bad Debt By Loss transferred to Capital A/c X 1,500 Y 900 Z 600 Amount (Cr.) 1,000 3,000 4,000 4,000 Partners Capital A/c Particular X Y Z Particular X Y Z To Y (G.W.) A/c To Revaluation A/c To Y s Loan To Cash To Balance b/d 5,100 1,500 68,400 900 61,200 8,200 10,200 600 19,200 By Balance b/d By X & Z (G.W.) By IFF By P&L A/c 50,000 5,000 20,000 40,000 15,300 3,000 12,000 20,000 2,000 8,000 To X s Current A/c To Balance c/d 75,000 70,300 30,000 75,000 70,300 30,000 15,840 52,560 35,040 By Balance b/d By Z s current A/c 68,400 19,200 15,840 68,400 35,040 68,400 35,040 Balance Sheet as at 31, March 2015 Capitals A/c: Liabilities Amount Assets Amount X 52,560 Z 35,040 Y s Loan A/c X s Current A/c Claim for Workmen s comp. ors Particular 87,600 61,200 15,840 4,000 21,000 Land & Building Motor Vans. Investment Debtor 40,000 () Provision 2,000 Machinery Stock Z s Current A/c Cash A/c 62,000 20,000 19,000 38,000 12,000 15,000 15,840 7,800 1,89,640 1,89,640 Amount () Cash A/c Particular To Balance b/d 16,000 By Y s capital A/c By Balance c/d Amount (Cr.) 8,200 7,800 16,000 16,000 14

Working Notes 1: 3 5 6 5 1 X = = = 5 10 10 10 1 : 2 Working Notes 2: Capital of X and Z = 68,400 + 19,200 = 87,600 NR = 3 : 2 X = 52,560 Z = 35,040 87,600 2 2 4 2 2 Z = = = 5 10 10 10 PART-B (Analysis of Financial Statements) 18. An enterprise may hold securities and loans for dealing or trading purposes in which case they are similar to inventory acquired specifically for resale. Is the statement correct? Cash flows from such activities will be classified under which type of activity while preparing Cash Flow Statement? Yes, Cash flows from such activities are classified under the head operating activities. 19. Give the meaning of Cash Equivalents for the purpose of preparing Cash Flow Statement. Cash equivalents are those current assets which can be converted into cash within a short period without much fall in their values. For example, cheque in hand, marketable security. 20. (a) One of the objectives of Financial Statements Analysis is to identify the reasons for change in the financial position of the enterprise. State two more objectives of this analysis. (a) Name any two items that are shown under the head Other Current Liabilities and any two items that are shown under the head Other Current Assets in the Balance Sheet of a company as per Schedule III of the Companies Act, 2013. Two more objectives are: (i) (ii) To evaluate the business in terms of profit in present and future. To evaluate the efficiency of various parts or departments of the business. Other Current Liabilities: (i) (ii) Unpaid dividend Current maturities of long term debt Other Current Assets: (i) (ii) Discount in issue of debenture (to be written off within 12 months) Accrued incomes 21. (a) What is meant by solvency of business? (a) From the following details obtained from the financial statements of Jeev Ltd., calculate interest coverage ratio : Net Profit after tax Rs. 1,20,000, 12% Long-term Debt Rs. 20,00,000, Tax Rate 40%. Solvency is the ability of a company to meet its long-term financial obligations. Profit before Interest and Tax = Profit after Interest and Tax + Tax + Interest on debts PBIT = 120 000 120 000 40,, +,, + 240,, 000 = 1,20,000 + 80,000 + 2,40,000 = 4,40,000 60 ICR = Profit before interest and tax Interest on long term debt 440,, 000 = = 1.83 times 240,, 000 15

22. Following is the statement of Profit and Loss of Sun India Ltd. for the year ended 31st March, 2015: Particulars Revenue from operations Other Income Employee benefit-expenses Other expenses Tax Rate Note No. 25,00,000 31-3-2015 31-3-2014 (Rs.) 60% of total Revenue 10% of employee benefit expenses 50% 20,00,000 5,00,000 50% of total Revenue 20% of employee benefit expenses 40% The motto of Sun India Ltd. is to produce and supply green energy in the rural areas of India. It has also taken up a project of constructing a road that will pass through five villages, so that these villages could be connected to the nearby town. It will use the local resources and employ local people for construction of the road. You are required to prepare a Comparative Statement of Profit and Loss of Sun India Ltd. from the given statement of Profit and Loss. Also identify any two values that the company wishes to convey to the society. In the books of Sun India Ltd. Comparative Statement of Profit and Loss I. RFO II. Particular Add: Other Incomes Note No. 31-3-2014 (Rs.) 20,00,000 5,00,000 16 31-3-2015 (Rs.) 25,00,000 Absolute Charge (Rs.) 5,00,000 4,00,000 Percentage Charge (%) III. Total Income 25,00,000 26,00,000 4 IV. Expenses: Employee benefit expenses Other Expenses 12,50,000 5,00,000 15,60,000 1,56,000 3,10,000 (3,44,000) 25 80 24.8 (68.8) V. Total Expenses 17,50,000 17,16,000 (34,000) (1.94) VI. PBT (III V) VII. Less Tax 7,50,000 3,00,000 8,84,000 4,42,000 1,34,000 1,42,000 17.86 47.33 VIII. PAT 4,50,000 4,42,000 (8,000) (1.77) Values: (i) (ii) Upliftment of backward areas Environmental concern 23. Following is the Balance sheet of K.K. Ltd. as at 31-3-2015: K K. Ltd. Balance Sheet as at 31-3-2015 Particulars Note No. 31-3-2015 (Rs.) 31-3-2014 (Rs.) I. Eqnity and liabilities : (1) Shareholders Funds: (a) Share Capital Reserves and Surplus (2) Non-current Liabilities: Long-term borrowings (3) Current Liabilities: (a) Short-term borrowings Short-term provisions 1 2 3 4 10,00,000 4,00,000 9,00,000 3,00,000 1,40,000 8,00,000 () 10,00,000 1,80,000 Total 27,40,000 19,80,000

II. Assets: (1) Non-current Assets: (a) Fixed Assets: (i) Tangible (ii) Intangible Non-current Investments (2) Current Assets: (a) Current Investments Inventories (c) Cash and Cash Equivalents 5 6 7 20,06,000 40,000 2,00,000 2,14,000 1,80,000 14,40,000 60,000 1,50,000 1,20,000 90,000 1,20,000 Total 27,40,000 19,80,000 Notes to Accounts: Note No. 1 Reserves and Surplus Particulars 31-3-2015 (Rs.) 31-3-2014 (Rs.) (Surplus i.e. Balance in Statement of Profit and Loss) 4,00,000 () 2 Long-term borrowings: 4,00,000 () 12% Debentures 9,00,000 10,00,000 3 Short-term borrowings: 9,00,000 10,00,000 Bank Overdraft 3,00,000 4 Short-term provisions: 5 Tangible Assets: 3,00,000 Provision for tax 1,40,000 1,80,000 Machinery Accumulated Depreciations 6 Intangible Assets: Goodwill 7 Inventories: Stock in trade Additional Information: (i) 12% Debentures were redeemed on 31-3-2015. (ii) 1,40,000 1,80,000 24,06,000 (4,00,000) Tax Rs. 1,40,000 was paid during the year. Prepare Cash Flow Statement 16,42,000 (2,02,000) 20,06,000 14,40,000 40,000 60,000 40,000 60,000 2,14,000 90,000 2,14,000 90,000 17

Cash Flow Statement Particular A. Cash Flow from operating activities Surplus Add: Provision for tax 5,00,000 PBT 6,00,000 Add: Non-Cash and Non-operating items Depreciation Goodwill w/o Interest on debenture 1,98,000 20,000 1,20,000 Operating profit before working capital changes 9,38,000 Add: Decrease in C.A. and Increase in C.L. Less: Increase in C.A. and decrease in C.L. Increase in Stock in trade (1,24,000) Cash Generated from operations Less: Tax paid Cash flow from operating activities 8,14,000 (1,40,000) 6,74,000 B. Cash flow from investing activities Purchase of machinery Purchase of Non-current investments (7,64,000) (50,000) Cash used in investing activities (8,14,000) C. Cash flow from financing activities Issue of shares Redemption of debentures Interest on debentures Bank overdraft 2,00,000 () (1,20,000) 2,00,000 Cash flow from financing activities Net increase in cash and cash equivalents 1,80,000 40,000 Add: Cash and Cash equivalents in the beginning (1,20,000 + 1,20,000) 2,40,000 Cash and Cash equivalents at the end (1,80,000 + ) 2,80,000 Working Notes: Provision for Tax A/c Particulars Amount Particulars Amount To Balance C/d 1,40,000 1,40,000 By Balane b/d By Statement of P/L 1,80,000 2,80,000 2,80,000 18

Studymate Solutions to CBSE Board Examination 2015-2016 Series : ONS/1 Code No. 67/1/2 Uncommon Questions 7. VKR Ltd., issued 975, 9% Debentures of Rs. 500 each on 4-3-2016. Pass necessary journal entries for the issue of debentures in the following situations: (a) When debentures were issued at a premium of 10% redeemable at a premium of 6%. (a) When debentures were issued at a par redeemable at 9% premium. Date Particulars (i) Bank A/c (975 550) To Debenture App. & Allot. A/c (Being debenture application money received) (ii) Deb. App. and Allot. A/c (975 550) Date Loss on issue of Debenture (975 30) To 9% Debenture A/c (975 500) To S.P.R. A/c (975 50) 19 To Prem. on Red. of Deb. A/c (975 30) (Being debenture application money accepted) Particulars (i) Bank A/c (975 500) (ii) To Debenture App. & Allot. A/c (Being debenture application money received) Debenture Appriciation & Allotment A/c Loss on issue of Deb. A/c (975 45) To 9% Debenture A/c To Premium on Red. of Deb. A/c (Being debenture application money accepted) L. F. L. F. 5,36,250 5,36,250 29,250 4,87,500 4,87,500 43,875 5,36,250 4,87,500 48,750 29,250 4,87,500 4,87,500 43,875 9. Samachar India Ltd. took over the assets of Rs. 14,00,000 and liabilities of Rs. 4,00,000 from News Ltd. for a purchase consideration of Rs. 9,19,000. Samachar India Ltd. issued a promissory note of Rs. 17,000 payable after 60 days in favour of News Ltd. and the balance amount was paid by issue of equity shares of Rs. 100 each at a premium of Rs. 25 per share. Pass necessary Journal entries for the above transactions in the books of Samachar India Ltd.

In the Books of Samachar India Ltd. Journal (i) S. Assets A/c To S. Liabilities A/c To News Ltd. To Capital Reserve A/c (Being the business purchased) (ii) News Ltd. A/c To Bill s Payable A/c (Being Rs. 17,000 pay by issuing a promissonary note) (iii) News Ltd. A/c To Eq. Share Capital A/c (7216 100) To S.P.R. A/c (7216 25) (Being shares issued at premium against purchase consideration) 14,00,000 17,000 9,02,000 4,00,000 9,19,000 81,000 17,000 7,21,600 1,80,400 13. C and D were partners in a firm sharing profits in the ratio of 3:2. On 28-2-2016 the firm was dissolved. After transferring assets (other than cash) and outsiders liabilities to realization account you are given the following information : (a) (c) A creditor for Rs. 2,00,000 accepted building of Rs. 2,80,000 at Rs. 2,20,000 and paid to the firm Rs. 20,000. A second creditor for Rs. 75,000 accepted furniture at Rs. 60,000 in full settlement of his claim. A third creditor amounting to Rs. 80,000 accepted Rs. 20,000 in cash and investments of the book value of Rs. 65,000 in full settlement of his claim. (d) Loss on dissolution was Rs. 7,500. Pass necessary journal entries for the above transactions in the books of the firm assuming that all payments were made by cheque. In the Books of L & M Journal Bank A/c To Realisation A/c (Being furniture accepted by creditor and balance paid by him) No entry Realisation A/c (Being cash and investment paid to creditor) C s Capital A/c D s Capital A/c To Realisation A/c (Being loss on dissolution distributed to partners) 20,000 20,000 4,500 3,000 20,000 20,000 7,500 20

15. On 1-4-2013 KL Ltd. had 5,000, 10% Debentures of Rs. 100 each outstanding. (i) (ii) (iii) On 1-4-2014 the company purchased in the open market 2000 of its own debentures for Rs. 105 each and cancelled the same immediately. On 1-4-2015 the company redeemed at par debentures of Rs. by draw of a lot. On 28-2-2016 the remaining debentures were purchased for immediate cancellation for Rs. 1,97,000. Pass necessary journal entries for the above transactions in the books of the company ignoring debenture redemption reserve and interest on debentures. In the Books of KL Ltd. Journals (i) Apr 1 2014 Apr 1 2014 (ii) Apr. 1 2015 Apr. 1 2015 (iii) Feb. 28 2016 Feb. 28 2016 Feb. 28 2016 Own Debenture A/c (2,000 105) (Being own debentures purchased) 10% Debentures Loss on cancellation of own debentures To Own debentures A/c (Being 2,000 own debentrues redeemed) 10% Debenture A/c To Debenture holders A/c (Being amount due to debenture holders) Debenture holders A/c (Being final payment made to debenture holders) Own Debenture A/c (Being 2,000 debenture purchased for immediate cancellation) 10% Debenture A/c To Own Debentures A/c To Gain on cancellation of own debentures A/c (Being 2,000, 10% debenture cancelled against own debentures) Gain on cancellation of own deb. A/c To Capital Reserve A/c (Being gain on cancellation transferred to capital reserve) 21. (a) What is meant by Liquidity of Business? (a) From the following information calculate operating ratio: 2,10,000 2,00,000 10,000 1,97,000 2,00,000 3,000 2,10,000 2,10,000 1,97,000 1,97,000 3,000 3,000 Revenue from operations Rs. 6,80,000; Rate of Gross Profit on cost 25%; Selling expenses Rs. 1,44,000; Administrative expenses Rs. 73,000. A measure of the extent to which a business has cash to make immediate and short term obligations. Cost of revenue fromoperation+operating Exp. Operating Ratio = 100 Revenue fromoperation 21

Cost of RF = RFO Gross profit Gross profit = cost of RFO Rate 100 Rate OR RFO 100 + Rate Gross profit = 6,80,000 25 125 = 1,36,000 Cost of RFO = RFO Gross profit = 6,80,000 1,36,000 = Rs. 5,44,000 So, operating ratio = 544000 + 144000 + 73000 100 680000 761000 = 100 = 111.91% or 112% 680000 22

Studymate Solutions to CBSE Board Examination 2015-2016 Series : ONS/1 Code No. 67/1/3 Uncommon Questions 13. E and F were partners in a firm sharing profits in the ratio of 7:3. On 28-2-2016 the firm was dissolved. After transferring assets (other than cash) and outsiders liabilities to realization account you are given the following information : (a) (c) A creditor for Rs. 3,00,000 accepted building valued at Rs. 3,75,000 and paid the firm Rs. 75,000. A second creditor for Rs. 93,000 accepted stock valued at Rs. 90,000 in full settlement of his claim. A third creditor amounting to Rs. 60,000 accepted Rs. 37,000 in cash and investments of the book value of Rs. 40,000 in full settlement of his claim. (d) Loss on dissolution was Rs. 7,000. Pass necessary journal entries for the above transactions in the books of the firm assuming that all payments were made by cheque. In the Books of E & F Journal 2016 (a) 28 Feb. Bank A/c 28 Feb. To Realisation A/c (Being building accepted by creditor and balance paid by him) No entry (c) 28 Feb. Realisation A/c To Bank (Being cash and investment paid to creditor) (d) 28 Feb. E s Capital A/c F s Capital A/c To Realisation A/c (Being loss on dissolution distributed to partners) 75,000 37,000 4,900 2,100 75,000 37,000 7,000 15. On 1-4-2013 NK Ltd. had 20,000, 11% Debentures of Rs. 100 each outstanding. (i) (ii) (iii) On 1-4-2014 the company purchased in the open market 4000 of its own debentures for Rs. 102 each and cancelled the same immediately. On 1-4-2015 the company redeemed at par debentures of Rs. 8,00,000 by draw of a lot. On 28-2-2016 the remaining debentures were purchased for immediate cancellation for Rs. 7,89,900. 23

Pass necessary journal entries for the above transactions in the books of the company ignoring debenture redemption reserve and interest on debentures. In the Books of NK Ltd. Journals (i) Apr 1 2014 Apr 1 2014 (ii) Apr. 1 2015 Apr. 1 2015 (iii) Feb. 28 2016 Feb. 28 2016 Feb. 28 2016 Own Debenture A/c (4,000 102) (Being own debentures purchased) 11% Debentures Loss on cancellation of own debentures To Own debentures A/c (Being 4,000 own debentrues redeemed) 11% Debenture A/c To Debenture holders A/c (Being amount due to debenture holders) Debenture holders A/c (Being final payment made to debenture holders) Own Debenture A/c (Being 8,000 debenture purchased for immediate cancellation) 11% Debenture A/c To Own Debentures A/c To Gain on cancellation of own deb. A/c (Being 8,000, 11% debenture cancelled against own debentures) Gain on cancellation of own deb. A/c To Capital Reserve (Being gain on cancellation transferred to capital reserve) 21. (a) What is meant by Profitability of business? From the following information calculate Operating Profit Ratio: Amount (Rs.) 4,08,000 4,00,000 8,000 8,00,000 8,00,000 7,89,900 8,00,000 10,100 Amount (Rs.) 4,08,000 4,08000 8,00,000 8,00,000 7,89,900 7,89,900 10,100 10,100 Opening Stock Rs. 10,000; Purchases Rs. 1,20,000; Revenue from operations Rs. 4,00,000; Purchase Returns Rs. 5,000; Returns from Revenue from operations Rs. 15,000; Selling Expenses Rs. 70,000;p Administrative Expenses Rs. 40,000; Closing Stock Rs. 60,000. (a) Profitability is the ability of a business to earn a profit and profit is what is left of the revenue a business generates after it pays all expenses directly related to the generation of revenue. Operating Profit Operating Profit Ratio = Revenue fromoperations 100 Net revenue from operations = 4,00,000 15,000 = Rs. 3,85,000 Cost of RFO = Opening stock + purchases purchase return closing stock = 10,000 + 1,20,000 5,000 60,000 = Rs. 65,000 Operating profit = Net revenue firm operations cost of RFO selling expenses administrative expenses 24

= 3,85,000 65,000 70,000 40,000 = 3,85,000 1,75,000 = Rs. 2,10,000 Operating profit ratio = 210000 385000 100 = 54.54% 25