grade xii accountancy top 100 important -...
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Grade XIIAccountancy
Top 100 Important Questions
Quick Analysis
Estimated Chapter-wise Weightage
Section A : 60 Marks
(Accounting for Partnership Firms and
Companies)
Marks Section B : 20 Marks
(Financial Statement Analysis)
Marks
Ch.1 Financial Statements of Not-for-
Profit-Organizations 10
Ch.1 Financial Statements of a
Company
12 Ch.2 Accounting for Partnership: Basic
Concepts
35
Ch.2 Analysis of Financial
Statements
Ch.3 Change in Profit Sharing Ratio Ch.3 Accounting Ratios
Ch.4 Admission of a Partner Ch.4 Cash Flow Statement 8
Ch.5 Retirement/Death of a Partner
Ch.6 Dissolution of a Partnership Firm
Ch.7 Accounting for Share Capital
15
Ch.8 Issue and Redemption of
Debentures
On the basis of the previous year trends we can say that the topics- Admission of a partner,
Retirement of a Partner, Issue of Shares by Pro-Rata Allotment, Cash Flow Statement, and
Financial Statements as per Schedule III, Companies Act 2013 are very important.
Also, since, NPO has been newly added to the syllabus of XII grade, questions regarding the
financial statements of NPO are expected.
Although partnership has the highest weightage as compared to other units, a thorough practice
and study of all the chapters is required! So, do not miss any chapter!
Difficulty Level Analysis
Accountancy Board Paper
Analysis of Difficulty Level (% share) over the last three years
Year Easy Average Difficult
2016 26.1% 43.5% 30.4%
2017 39.13% 43.48% 17.39%
2018 36.25% 37.5% 26.25%
From the trend it can be seen that in 2016, the difficulty level was quite high with a sudden dip
seen in 2017, where only 17% of the questions were on the difficult side. However, last year
again a surge was seen with 26% of questions as difficult. On the basis of the pattern, we can say
that on an average the papers have relatively been more moderate with the difficult questions
ranging between 17-30%.
On the basis of past trends, we can expect that the difficulty level in the upcoming board exam
will lie between the same range of 15-30%.
Moreover, it was seen that the last year paper was relatively lengthier, so this year as well a
lengthy accountancy paper is expected. So, practice on speed and time management!
All the best!
Top 100 Questions in Accountancy XII
Ques. 1 Show the distribution of profit or loss by preparing appropriate accounts in the following
given cases.
Case a) A and B are partners sharing profit and loss in the ratio 3:2, their partnership firm
incurred a loss of Rs 20,000.
Case b) A and B are partners sharing profit and loss in the ratio 3:2, their partnership firm earned
a profit of Rs 20,000.
Answer
Case a)
Profit and Loss (Adjustment) Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
To Net Loss 20,000 By Loss transferred to:
A’s Capital 12,000
B’s Capital 8,000 20,000
20,000 20,000
Case (b)
Profit and Loss Appropriation Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
To Profit transferred to: By Profit and Loss 20,000
A’s Capital 12,000
B’s Capital 8,000 20,000
20,000 20,000
Ques. 2 Which of the following statements cannot be regarded as a right of partner?
a) Every partner has the right to share profits or losses with other partners as per the agreement.
b) Only active partners have a right to take part in the management of the business.
Answer
b) Only active partners have a right to take part in the management of the business.
Ques. 3 Anand, Rahul and Vijay are partners in a firm sharing profits and losses in the ratio
3:2:1. Their fixed capital accounts are Rs 3,00,000, Rs 2,00,000 and Rs 1,00,000 respectively.
Anand is entitled to salary of Rs 5,000 per month and Rahul is entitled to commission of Rs
20,000. Interest on capital is provided at 10% per annum. Drawings made during the year by
Anand, Rahul and Vijay are Rs 50,000, Rs 30,000 and Rs 20,000 respectively. Interest on
drawings is to be charged at 10% irrespective of the period. Net profit for the year is Rs
4,00,000. Prepare the Profit and Loss Appropriation Account and Partners’ Current Account.
Answer
Books of Anand, Rahul and Vijay
Profit and Loss Appropriation Account
Dr.
Cr.
Particulars Amount
Rs Particulars
Amount
Rs
To Anand’s Salary (Rs 5,000 x 12) 60,000 By Net Profit transferred from Profit
and Loss A/c
4,00,000
To Rahul’s Commission 20,000 By Interest on Drawings:
To Interest on Capital: Anand 5,000
Anand 30,000 Rahul 3,000
Rahul 20,000 Vijay 2,000 10,000
Vijay 10,000 60,000
To Profit transferred to
Anand’s Current 1,35,000
Rahul’s Current 90,000
Vijay’s Current 45,000 2,70,000
4,10,000 4,10,000
Partners’ Current Account
Dr.
Cr.
Particulars Anand Rahul Vijay Particulars Anand Rahul Vijay
To Drawings 50,000 30,000 20,000 By Interest on
Capital
30,000 20,000 10,000
To Interest on
Drawings
5,000 3,000 2,000 By Salary 60,000
To Balance c/d 1,70,000 97,000 33,000 By Commission 20,000
By Profit and Loss
Appropriation
1,35,000 90,000 45,000
2,25,000 1,30,000 55,000 2,25,000 1,30,000 55,000
Ques. 4 Is rent paid to partner debited to Profit and Loss Account or Profit and Loss
Appropriation Account?
Answer
Rent paid to partner is debited to Profit and Loss Account because it is expenditure of a firm not
an appropriation of profit.
Ques. 5 Mug, Cup and Glass are partners in a firm. They are sharing profits and losses in the
ratio of 2:5:4. With mutual agreement, they decided to change their profit sharing ratio to 7:4:3.
Ascertain the sacrifice or gain share of Cup?
Answer
Ques. 6 What is the need for revaluation of assets and reassessment of liabilities at the time of
change in profit-sharing ratio among the partners?
Answer
Usually, the assets and liabilities do not appear at its current value in the books of accounts.
However, their value might have increased or decreased with the passage of time. Thus,
Revaluation Account is prepared in order to reflect the changes in the values of assets and
liabilities in the books of accounts.
Ques. 7 Pass the necessary Journal entries for the following.
(a) Risha and Isha are partners. On 1st April, 2014, they decided to change their profit-sharing
ratio from 2:3 to equally. On this date, Investments is appearing in the books amounting to Rs
56,000 (market value Rs 60,000). There also exists Investment Fluctuation Fund amounting to
Rs 6,000.
(b) X, Y and Z are partners sharing profits and losses in the ratio of 2:2:1. They decided to
change their future profit-sharing ratio to 1:1:3. At the time of change in profit-sharing ratio,
there was an unrecorded asset (computer) of Rs 12,000, which was taken over by one of the
partner Z at Rs 11,800.
(c) Roshan and Arbaz are partners in a firm sharing profits and losses in the ratio of 1:2. With
effect from 31st March, 2014 they decided to change their future profit-sharing ratio in the
ratio of 2:1. On the date, value of goodwill appearing in the books was Rs 30,000.
Answer
(a)
Journal Entry
Date Particulars L.F.
Debit
Amount
Rs
Credit
Amount
Rs
Investment Fluctuation Fund Dr. 6,000
To Risha’s Capital A/c 2,400
To Isha’s Capital A/c 3,600
(Investment Fluctuation Fund distributed
among the partners)
Investment A/c
Dr.
4,000
To Revaluation A/c 4,000
(Value of Investment increased)
Revaluation A/c
Dr.
4,000
To Risha’s Capital A/c 1,600
To Isha’s Capital A/c 2,400
(Profit on revaluation of assets distributed
among all the partner’s in old profit-sharing
ratio)
(b)
Journal Entry
Date Particulars L.F.
Debit
Amount
Rs
Credit
Amount
Rs
Z’s Capital A/c Dr. 11,800
To Revaluation A/c 11,800
(Unrecorded computer taken over by Z at Rs
11,800)
Revaluation A/c Dr. 11,800
To X’s Capital A/c 4,720
To Y’s Capital A/c 4,720
To Z’s Capital A/c 2,360
(Profit on revaluation of assets distributed among
all the partners in old ratio)
(c)
Journal Entry
Date Particulars L.F.
Debit
Amount
Rs
Credit
Amount
Rs
Roshan’s Capital A/c Dr. 10,000
Arbaz’s Capital A/c Dr. 20,000
To Goodwill A/c 30,000
(Goodwill appearing the books written-off in the
old ratio)
Ques. 8 When do we record Partners’ Capital Account on the Asset side of the Balance Sheet?
Answer
Usually, Partners’ Capital Account shows credit balance which is shown on the Liabilities side
of the Balance Sheet. However, in case, the capital accounts reveal a debit balance, then it will
be shown on the Assets side of the Balance Sheet.
Ques. 9 Green, Blue and White are partners in a firm sharing profits and losses in the ratio of
4:1:1. Their Balance Sheet on 31st March, 2014 is as follows.
Balance Sheet
Liabilities Amount
(Rs) Assets
Amount
(Rs)
Capital: Furniture and Fixtures 72,000
Green 1,56,000 Land and Building 95,000
Blue 84,000 Patents 30,000
White 95,000 3,35,000 Bulk Cart 36,000
Sundry Creditors 24,000 Goodwill 54,000
Accumulated Profits 36,000 Debtors 50,000
Workmen Compensation
Fund
12,000 Less: Bad-Debts (2,000) 48,000
Cash at Bank 60,000
Cash in Hand 12,000
4,07,000 4,07,000
They agreed to share future profits and losses in the ratio of 3:2:1 on the following terms.
1. Furniture and Fixtures is to be appreciated to Rs 84,000 and patents were written off by Rs
14,000.
2. Sohan, from whom Rs 2,000 is receivable, treated as bad.
3. Provision for Bad-debts is to be maintained at 5%.
4. Creditors include a contingent liability of Rs 10,000, now it is decided by court at Rs
12,000.
5. A typewriter of Rs 14,000 was unrecorded, now at the time of reconstitution it is taken into
consideration.
Prepare Revaluation Account, Partners’ Capital Account and Balance Sheet.
Answer
Revaluation Account
Dr. Cr.
Particulars Amount
(Rs) Particulars
Amount
(Rs)
Patents 14,000 Furniture and
Fixtures
12,000
Debtors (Bad-Debts) 2,000 Typewriter 14,000
Provision for Bad-debts 2,300
Creditors 2,000
Profit transferred to:
Green 3,800
Blue 950
White 950 5,700
26,000 26,000
Partners’ Capital Accounts
Dr. Cr.
Particulars Green Blue White Particulars Green Blue White
Goodwill 36,000 9,000 9,000 Balance b/d 1,56,000 84,000 95,000
Balance c/d 1,55,800 83,950 94,950 Revaluation A/c
(Profit)
3,800 950 950
Accumulated Profits 24,000 6,000 6,000
Workmen
Compensation Fund
8,000 2,000 2,000
1,91,800 92,950 1,03,950 1,91,800 92,950 1,03,950
New Balance Sheet as on 31 March, 2014
Liabilities Amount
(Rs) Assets
Amount
(Rs)
Capital: Furniture and Fixtures 72,000
Green 1,55,800 Add: Appreciated Value 12,000 84,000
Blue 83,950 Patents 30,000
White 94,950 3,34,700 Less: written-off (14,000) 16,000
Sundry Creditors 24,000 Debtors 50,000
Add: Liability
increased
2,000 26,000 Less: Bad-Debts (4,000)
Less: Provision for Bad-
Debts
(2,300) 43,700
Typewriter 14,000
Land and Building 95,000
Bulk Cart 36,000
Cash at Bank 60,000
Cash in Hand 12,000
3,60,700 3,60,700
Ques. 10 The following data of Building has been extracted from the books of Hindustan Old
Age Home.
Particulars Rs
Building Fund on January 01, 2012 5,00,000
Donation for Construction of Building during the year 2012 2,00,000
Expenditure for Construction of Building during the year 2012 3,00,000
Capital fund on January 01, 2012 4,00,000
Building on January 01, 2012 6,00,000
How will you treat the above items while preparing the financial statements of Hindustan Old
Age Home for the year ended December 31, 2012.
Answer
The given items will be shown in the Closing Balance Sheet of Hindustan Old Age Home in the
following manner:
The given items will be shown in the Closing Balance Sheet of Hindustan Old Age Home in the
following manner.
Balance Sheet Hidustan Old Age Home as on December 31, 2012
Liabilities Amount
Rs Assets
Amount
Rs
Capital Fund 4,00,000 Building 6,00,000
Add: Transferred
from
Building
Fund 3,00,000 7,00,000
Add: Construction
of Building
3,00,000 9,00,000
Building Fund 5,00,000
Add: Donations 2,00,000
Less: Transferred
to Capital (3,00,000) 4,00,000
Fund
Ques. 11 State whether the following statement is true or false.
‘A new partner can be admitted into a partnership firm with the consent of majority of partners.’
Answer
The statement is false. A new partner can only be admitted if all partners of the partnership firm
agree (i.e. on the agreement of all the existing partners).
Ques. 12 Malvika and Arpita were partners sharing profits and losses in the ratio of 3:2. They
admited Disha for th share in the firm’s profit. On the date of admission, the capital account
balances of Malvika and Arpita were Rs 2,50,000 and Rs 2,00,000 respectively, General Reserve
Rs 1,00,000, Profit and Loss (Dr.) Rs 50,000. Disha was to bring in sufficient cash in order to
make her capital 25% of the firm’s capital after adjusting all the above adjustments. Calculate the
capital account balances of all the three partners by preparing Partners’ Capital Account. Also
show the working notes properly.
Answer
Books of Malvika, Arpita and Disha
Partners’ Capital Account
Dr. Cr.
Particulars Malvika Arpita Disha Particulars Malvika Arpita Disha
Profit and Loss 30,000 20,000 Balance b/d 2,50,000 2,00,000
Balance c/d 2,80,000 2,20,000 1,50,000 General Reserve 60,000 40,000
Cash (W.N.) 1,50,000
3,10,000 2,40,000 1,50,000 3,10,000 2,40,000 1,50,000
Working Notes:
Computation of Disha’s Capital
Capital of Malvika after adjustments (2,50,000 + 60,000 –
30,000)
= 2,80,000
Capital of Arpita after adjustments (2,00,000 + 40,000 – 20,000) = 2,20,000
Combined capital of Malvika and Arpita for share = 5,00,000
Total capital of the new firm =
= 6,00,000
Disha’s share in Capital =
= 1,50,000
Ques. 13 Payal owned a business. Her Balance sheet as on March 31, 2010 is:
Balance Sheet
Liabilities Amount
Rs Assets
Amount
Rs
Bills Payable 70,000 Cash in Hand 30,000
Sundry Creditors 70,000 Cash at Bank 50,000
Salaries Outstanding 20,000 Sundry Debtors 90,000
General Reserve 40,000 Stock 70,000
Capital 3,00,000 Machinery 1,00,000
Building 1,60,000
5,00,000 5,00,000
She admitted Swati into partnership on April 01, 2011 on the following terms.
a. The profits of the firm was decided to be shared in the ratio of 2:1.
b. She need to bring her share of capital in the form of Machinery of Rs 2,00,000 and goodwill in
form of cash of Rs 50,000.
c. Building is to be appreciated by 20%
d. A provision for doubtful debts is to be created by 5% on Debtors
e. Machinery to be depreciated by 10%
Prepare Revaluation Account, Capital Account and Balance Sheet.
Answer
Books of Payal and Swati
Revaluation Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Machinery A/c 10,000 Building A/c 32,000
Provision for Doubtful Debts 4,500
Profit transferred to Payal’s Capital 17,500
32,000 32,000
Partners’ Capital Account
Dr. Cr.
Particulars Payal Swati Particulars Payal Swati
Balance c/d 4,07,500 2,00,000 Balance b/d 3,00,000
Machinery 2,00,000
Premium for Goodwill 50,000
General Reserve 40,000
Revaluation 17,500
4,07,500 2,00,000 4,07,500 2,00,000
Balance Sheet
as on 31st March, 2012
Liabilities Amount
Rs Assets
Amount
Rs
Bills Payable 70,000 Cash in Hand 80,000
Sundry Creditors 70,000 Cash at Bank 50,000
Salaries Outstanding 20,000 Sundry Debtors 90,000
Capitals: Less: Provision for 4,500 85,500
Payal 4,07,500 Doubtful Debts
Swati 2,00,000 6,07,500 Stock 70,000
Machinery (W.N.) 2,90,000
Building 1,92,000
7,67,500 7,67,500
Working Note: Calculation of Value of Machinery
Machinery as on April 01, 2011 1,00,000
Less: Depreciation 10% (10,000)
90,000
Add: Machinery brought by Swati 2,00,000
2,90,000
Ques. 14 Enlist any two modes of reconstitution of partnership other than retirement and death
of partner.
Answer
The following are the two modes of reconstitution of partnership other than retirement and death
of partner.
1. Admission of new partner/s.
2. Change in profit sharing ratio (agreement) among the existing partners.
Ques. 15 Mention any two rights that are acquired by a newly admitted partner in a partnership
firm.
Answer
A newly admitted partner acquires the following rights.
(i) Like old partners, a newly admitted partner has the right to share the property of the firm.
(ii) A newly admitted partner has the right to claim his/her share in the firm’s profit earned after
his/her admission.
Ques. 16 Calculate new and sacrificing ratio in each of the following cases.
(i) A and B are partners sharing profits and losses in the ratio 7:3. They admitted C for
1/5th
share.
(ii) A and B are partners sharing profits and losses in the ratio 7:3. They admitted C for
1/5th
share, which he takes 1/3rd
from A and 2/3rd
from B.
(iii) A and B are partners sharing profits and losses in the ratio 7:3. They admitted C for
1/5th
share, which he takes equally from A and B.
(iv) A and B are partners sharing profits and losses in the ratio 7:3. C is admitted in the firm. A
surrenders 1/10th
of his share and B surrenders 1/8th
of his share in favour of C.
Answer
(i)
A B
Old Ratio 7 : 3
Let the total profit of the firm be 1
C’s share = share
Remaining share of A and B
A’s New Ratio = Old Ratio × Remaining share of A and B
B’s New Ratio = Old Ratio × Remaining share of A and B
New Ratio = A
B
C
=
:
:
=
28 : 12 : 10
50
=
:
:
Sacrificing Ratio = Old Ratio – New Ratio
NOTE: When new and sacrificing ratio is not given in the question, then it is assumed that old
partners will sacrifice in the same proportion as they shared before admission of new partner.
Hence, in this question, sacrificing ratio will be equal to the old ratio.
(ii)
New Ratio = Old Ratio – Sacrificing Ratio
New Ratio of all partners = A
B
C
=
:
:
=
19 : 5 : 6
30
(iii)
New Ratio of all partners = A
B
C
=
:
:
=
6 : 2 : 2
10
= 6 : 2 : 2
(iv)
Sacrificing Ratio = A : B
=
:
= 28 : 15
400
= 28 : 15
= A : B : C
New Ratio of All partners =
:
:
= 252 : 105 : 43
Ques. 17 X and Y were partners in a business sharing profits and losses in the ratio 3:2. They
admitted C for1/4th
share. On the date of C’s admission the Balance Sheet was as given below.
Balance Sheet
Liabilities Amount
Rs. Assets
Amount
Rs.
Sundry Creditors 15,000 Cash 2,000
Outstanding Expenses 2,000 Sundry Debtors 6,000
Capital : Stock 8,000
X 40,000 Investment 12,000
Y 33,000 73,000 Machinery 20,000
Building 40,000
Goodwill 2,000
90,000 90,000
C brought Rs. 30,000 as his share of capital but unable to brought Rs. 10,000 as his share of
goodwill.
On C’s admission, Creditors were increased by Rs. 2,000, Debtors Rs. 200 proved bad, Building
appreciated by 10%.
In the new firm, capital of the all partners was to be kept in proportion of their profit sharing
ratio and any surplus or deficiency in the capital is to be adjusted by opening partners’ current
account.
C’s share of capital was taken as base for determining the capital of the new firm.
Pass necessary Journal entries and prepare Revaluation Account, Partners Capital Account and
Balance Sheet.
Answer
Journal
Date Particulars L.F.
Debit
Amount
Rs.
Credit
Amount
Rs.
X’s Capital A/c Dr. 1,200
Y’s Capital A/c Dr. 800
To Goodwill A/c 2,000
(Goodwill written off)
Cash A/c Dr. 30,000
To C’s Capital A/c 30,000
(C brought his capital)
C’s Current A/c Dr. 10,000
To X’s Capital A/c 6,000
To Y’s Capital A/c 4,000
(C’s share goodwill adjusted between A and B)
Revaluation A/c Dr. 2,200
To Creditors 2,000
To Debtors 200
(Asset and Liabilities revalued)
Building A/c Dr. 4,000
To Revaluation A/c 4,000
(Building appreciated)
Revaluation A/c Dr. 1,800
To X’s Capital A/c 1,080
To Y’s Capital A/c 720
(Revaluation profit transferred to Capital A/c in old
ratio)
Revaluation Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Creditors 2,000 Building 4,000
Debtors 200
Profit transferred to Capital
Account:
X 1,080
Y 720 1,800
4,000 4,000
Partners’ Capital Account
Dr. Cr.
Particulars X Y C Particulars X Y C
Goodwill 1,200 800 Balance b/d 40,000 33,000
Cash 30,000
C’s Current 6,000 4,000
Balance c/d 45,880 36,920 30,000 Revaluation 1,080 720
47,080 37,720 30,000 47,080 37,720 30,000
Y’s Current 920 Balance b/d 45,880 36,920 30,000
Balance c/d
(Proportionate)
54,000 36,000 30,000 X’s Current 8,120
54,000 36,920 30,000 54,000 36,920 30,000
Balance Sheet
Liabilities Amount
Rs Assets
Amount
Rs
Sundry Creditors 15,000 Cash (2,000 + 30,000) 32,000
Add: Revaluation 2,000 17,000 Sundry Debtors 6,000
Outstanding Expenses 2,000 Less: Revaluation 200 5,800
Capital Stock 8,000
X 54,000 Investment 12,000
Y 36,000 Machinery 20,000
C 30,000 1,20,000 Building 40,000
Y’'s Current 920 Add: Revaluation 4,000 44,000
C’'s Current 10,000
X’'s Current 8,120
1,39,920 1,39,920
Working Note: Calculation of Capital Balances of the Old Partners-A and B
Capital of the new firm on the basis of C’s Capital = 30,000 ×4/1= Rs 1,20,000
New firms’ Capital 1,20,000
Less: C’s Capital (30,000)
Combined capital of X and Y in the new firm 90,000
Ques. 18 State any two circumstances when calculation of gaining ratio becomes inevitable.
Answer
The following are the two circumstances when gaining ratio is calculated:
1. At the time of retirement or death of a partner.
2. At the time of change in profit sharing ratio among the existing partners.
Ques. 19 Who is entitled to receive the payment in case of death of a partner?
Answer
In case of the death of a partner, his/her legal representative is entitled to receive the payment
from the partnership firm.
Ques. 20 A, B and C are partners in a firm sharing profits and losses in the ratio of 3:3:2. A
retires and his share is acquired by B and C in the ratio of 1:2 Calculate the new profit sharing
ratio.
Answer
Ques. 21 Sunil, Sanjay and Gagan were partners in a firm sharing profits and losses in the ratio
of 3:2:1. On June 30, 2010 Sunil died. His capital was Rs 1,20,000. The goodwill of the firm was
valued at Rs 1,20,000. His executor is entitled for the following receipts.
1. Interest on Sunil’s capital at 10% per annum
2. Salary of Rs 24,000 per annum
3. Profit up to the date of Sunil’s death is to be calculated on the basis of the previous year’s
profit of Rs 3,00,000.
The firm closes its books on March 31 every year. Calculate the amount payable to the Sunil’s
Executor by preparing Sunil’s Capital Account.
Answer
Books of Sanjay and Gagan
Sunil’s Capital Account
Dr. Cr.
Date Particulars J.F. Amount
Rs Date Particulars J.F.
Amount
Rs
2010 2010
June 30 Sunil’s Executors 2,26,500 March 31 Balance b/d 1,20,000
June 30 Interest on Capital 3,000
Salary 6,000
Profit and Loss Suspense 37,500
Sanjay’s Capital 40,000
Gagan’s Capital 20,000
2,26,500 2,26,500
Working Notes:
1. Calculation of Interest of Capital
Interest on Capital = Balance in Capital Account Time
Period Rate
2. Calculation of Sunil’s Salary
Salary
3. Calculation of Sunil’s Share in Profit
Share of Profit = Previous year profit × Time Period × Share in
Profit
4. Calculation of Sunil’s Share in Profit
Sunil’s Share of Goodwill
5. Calculation of Gaining Ratio
Gaining Ratio = New Ratio – Old Ratio
Gaining Ratio between Sanjay and Gagan = 2 : 1
Ques. 22 Vipin, Varun and Vijay are partners in a firm sharing profits and losses in the ratio
3:2:1. On March 31, 2010, the Balance Sheet of the firm is as follows:
Balance Sheet
Liabilities Amount
Rs Assets
Amount
Rs
Creditors 50,000 Cash 10,000
Bills Payable 30,000 Debtors 50,000
General Reserve 1,20,000 Stock 1,00,000
Capitals: Plant and Machinery 3,00,000
Vipin 3,00,000 Building 2,80,000
Varun 2,00,000 Profit and Loss 60,000
Vijay 1,00,000 6,00,000
8,00,000 8,00,000
Vijay retires on March 31, 2010 on the following terms:
a. Building to be valued at Rs 4,00,000.
b. Plant and Machinery to be depreciated by Rs 55,000.
c. 10% provision to be created on Debtors.
Prepare Revaluation Account, Capital Account and Balance Sheet after Vijay’s retirement.
Answer
Books of Vipin and Varun
Revaluation Account
Particulars Amount
Rs Particulars
Amount
Rs
Plant and Machinery 55,000 Building 1,20,000
Provision for Debtors 5,000
Profit on Revaluation transferred to
Capitals:
Vipin 30,000
Varun 20,000
Vijay 10,000 60,000
1,20,000 1,20,000
Partners’ Capital Account
Dr.
Cr.
Particulars Vipin Varun Vijay Particulars Vipin Varun Vijay
Profit and Loss 30,000 20,000 10,000 Balance b/d 3,00,000 2,00,000 1,00,000
Vijay’s Loan 1,20,000 General Reserve 60,000 40,000 20,000
Balance c/d 3,60,000 2,40,000 Revaluation 30,000 20,000 10,000
3,90,000 2,60,000 1,30,000 3,90,000 2,60,000 1,30,000
Balance Sheet as on March 31, 2010
Liabilities Amount
Rs Assets
Amount
Rs
Creditors 50,000 Cash 10,000
Bills Payables 30,000 Debtors 50,000
Less: Provision for Debtors 5,000 45,000
Vijay’s Loan 1,20,000 Stock 1,00,000
Capitals: Plant and Machinery 2,45,000
Vipin 3,60,000 Building 4,00,000
Varun 2,40,000 6,00,000
8,00,000 8,00,000
Ques. 23 A, B and C were partners sharing profits and losses in the ratio 5:3:2. C died on April
01, 2010.As per the partnership deed, the deceased partner’s share of profit from the beginning
of accounting year to the date of death is to be calculated on the basis of average profit of the
immediate three preceding years. Profits of the last three years before the death of C were Rs
10,000, Rs 15,000 and Rs 20,000, respectively. Pass the necessary Journal entries for the profit
share to be given to the deceased partner assuming the books are closed on 31st December every
year.
Answer
Profit and Loss Suspense A/c Dr. 750
To C’s Capital A/c 750
(C’s share of profit debited to Profit and Loss Suspense
Account)
Ques. 24 P, Q and R were partners sharing profits and losses in the ratio 2:2:1. Q died in an
accident on May 1, 2010. As per the partnership deed, the deceased partners’ share will be given
to his executor in the following manner:
(a) His balance of capital.
(b) His share of profit from the beginning of the accounting period till the date of death will be
considered on the basis of previous year’s turnover.
(c) His share in General Reserve and Accumulated Profit
(d) His share of Goodwill.
The capital account of Q showed a credit balance of Rs. 80,000 and his current account showed a
debit balance of Rs 10,000. Sales Rs. 3,00,000 was made evenly throughout the year 2009. Profit
earned at 20% on sales.
On December 31, 2009, Balance Sheet showed General Reserve Rs 10,000 and Goodwill Rs
12,000.
Goodwill of the firm is equal to 20% of the previous year’s turnover.
Pass the necessary Journal entries and prepare Q’s Capital Account, Q’s Current and Q’s
Executor’s Account, assuming that the partners want to show General Reserve and Goodwill
without altering its values. The balance of Q’s executors will be transferred to his Loan Account.
Answer
Journal Entry
Date Particulars L.F.
Debit
Amount
Rs.
Credit
Amount
Rs.
P’s Current A/c Dr. 2,667
R’s Current A/c Dr. 1,333
To Q’s Current A/c 4,000
(Q’s share of General Reserve adjusted)
P’s Current A/c Dr. 12,800
R’s Current A/c Dr. 6,400
To Q’s Current A/c 19,200
(Q’s share of Goodwill adjusted)
Profit and Loss Suspense A/c Dr. 8,000
To Q’s Current A/c 8,000
(Q’s share of profit credited to his current account)
Q’s Current A/c
Dr.
21,200
To Q’s Capital A/c 21,200
(Balance of Q’s Current Account transferred to his
Capital Account)
Q’s Capital A/c
Dr.
1,01,200
To Q’s Executor’s A/c 1,01,200
(Q’s Capital transferred to Q’s Executors’ Account)
Q’s Executor’s A/c
Dr.
1,01,200
To Loan A/c 1,01,200
(Balance of Q’s executors transferred to Loan)
Q’s Capital Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Balance b/d 80,000
Q’s Executor 1,01,200 Q’s Current 21,200
1,01,200 1,01,200
Q’s Current Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Balance b/d 10,000 P’s Current (General Reserve) 2,667
Q’s Current (General Reserve) 1,333
Q’s Capital (Balance c/d) 21,200 P’s Current (Goodwill) 12,800
Q’s Current (Goodwill) 6,400
Profit and Loss Suspense 8,000
31,200 31,200
Q’s Executor’s Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Loan 1,01,200 Q’s Capital 1,01,200
1,01,200 1,01,200
Goodwill of the new firm = Rs 60,000
Less: Goodwill already in the firm = Rs (12,000)
Goodwill to be adjusted = Rs 48,000
As goodwill already appearing in the books at Rs 12,000, so Q’s share of goodwill will be
adjusted in proportion of Rs 48,000 not in proportion of Rs 60,000.
Ques. 25 Is Partner’s Spouse’s Loan treated as Partner’s Loan?
Answer
No, the Partner’s Spouse’s loan is not treated as Partner’s Loan because partner’s spouse is not a
partner. The amount of spouse’s loan is treated as an external liability to the business. It is
transferred to the Realisation Account whereas the Partner’s Loan is transferred to Partners’
Capital Account and to the Realisation Account.
Ques. 26 Guru and Abhishek are partners in a firm sharing profits and losses in the ratio of 7:5.
After transferring assets and liabilities from the Balance Sheet to the Realisation Account the
following transactions took place:
a) Pretam, a creditor to whom the firm owed Rs 3,00,000, took over a building of Rs 5,00,000
and the remaining amount after adjustment was returned by him.
b) Dilip, a creditor to whom the firm owed Rs 3,00,000, accepted stock of Rs 1,00,000, debtors
of Rs 50,000, vehicle Rs 1,00,000, and cash for the remaining balance.
c) An unrecorded asset of Rs 1,20,000 was taken by both the partners in their profit sharing ratio.
Pass the necessary Journal entries.
Answer
Books of Guru and Abhishek
Journal
Date Particulars L.F. Amount
Rs
Amount
Rs
(a) Cash A/c Dr. 2,00,000
To Realisation A/c 2,00,000
(Cash received from Pretam after adjusting
the amount due to him)
(b) Realisation A/c Dr. 50,000
To Cash A/c 50,000
(Balance amount paid to creditor after adjusting
assets taken by him)
(c) Guru’s Capital A/c Dr. 70,000
Abhishek’s Capital A/c Dr. 50,000
To Realisation A/c 1,20,000
(Unrecorded asset taken by the partners in their
profit sharing ratio)
Ques. 27 The following are the Balance Sheet as on December 31, 2010 and Receipts and
Payments Account as on December 31, 2011 of Netra Jyoti Hospital Trust.
Balance Sheet as on December 31, 2010
Liabilities Amount
Rs. Assets
Amount
Rs.
Outstanding Medicine Bills 5,000 Cash in Hand 20,000
Shivir Fund 1,00,000 Cash at Bank 50,000
Capital Fund 4,80,000 Stock of Medicine 15,000
Medical Equipments 1,00,000
Hospital Building 4,00,000
5,85,000 5,85,000
Receipts and Payments Account for the year ended December 31, 2011
Dr. Cr.
Receipts Amount
Rs. Payments
Amount
Rs.
Balance b/d Expenses on Shivirs 50,000
Cash in Hand 20,000 Doctors’ Honorarium 1,20,000
Cash at Bank 50,000 Salary to Clerk 15,000
Fee Collection 1,10,000 Payments for Medicine 80,000
Subscription 50,000 Medical Equipment 10,000
Donation 10,000 Expenses for Jan Jagrati 5,000
Municipal Grant 25,000 Balance c/d
Donation for Shivir 25,000 Cash in Hand 4,000
Cash at Bank 6,000
2,90,000 2,90,000
Prepare Income and Expenditure Account and Balance Sheet for the year ended December 31,
2011.
Answer
Income and Expenditure Account for the year ended December 31, 2011
Dr. Cr.
Expenditure Amount
Rs. Income
Amount
Rs.
Doctors’ Honorarium 1,20,000 Fee Collection 1,10,000
Salary Clerk 15,000 Subscription 50,000
Medicine 80,000 Donation 10,000
Add: Stock 15,000 Municipal Grant 25,000
Less: Outstanding for 2010 (5,000) 90,000 Deficit (Balancing Figure) 35,000
Expenses for Jan Jagrati 5,000
2,30,000 2,30,000
Balance Sheet as on December 31, 2011
Liabilities Amount
Rs. Assets
Amount
Rs.
Shivir Fund 1,00,000 Cash in Hand 4,000
Add: Donation 25,000 Cash at Bank 6,000
Less: Expenses (50,000) 75,000 Medical Equipments 1,00,000
Add: Purchases 10,000 1,10,000
Capital Fund 4,80,000 Hospital Building 4,00,000
Less: Deficit (35,000) 4,45,000
5,20,000 5,20,000
Ques. 28 Consider the Receipts and Payments Account of National Educational Society as on
December 31, 2010.
Receipts and Payments Account
Dr. Cr.
Receipts Amount
Rs. Payments
Amount
Rs.
Balance b/d: Salary to Teachers 20,000
Cash in Hand 2,000 Rent 2,500
Cash at Bank 5,000 Salary to Peon 5,000
10% Fixed Deposits 20,000 27,000 Furniture 12,500
Subscriptions: Balance c/d:
2010 20,000 Cash in Hand 1,000
2009 5,000 25,000 Cash at Bank 2,700
Interest on Fixed Deposit 1,500 10% Fixed Deposits 20,000 23,700
Sale of Furniture 200
(Book-value of Rs 500)
Donations 10,000
63,700 63,700
Additional Information: 1. Subscription Outstanding for 2010 is Rs 2,000
2. Rent included Rs 200 outstanding for 2009 and rent still due for 2010 is Rs 500
3. On January 01, 2010, society had Furniture Rs 10,000 and Building Rs 30,000.
4. Provide depreciation on Furniture @ 10% p.a.
Prepare Income and Expenditure Account and the Balance Sheets as on January 01, 2010, and
December 31, 2010.
Answer
Income and Expenditure Account for the year ended December 31, 2010
Dr. Cr.
Expenditure Amount
Rs. Income
Amount
Rs.
Salary to Teachers 20,000 Subscriptions 25,000
Depreciation on Furniture 2,200 Less: Outstanding 2009 (5,000)
Salary to Peon 5,000 Add: Outstanding 2010 2,000 22,000
Rent 2,500 Interest on Fixed Deposits 1,500
Less: Outstanding 2009 (200) Add: Accrued Interest 500 2,000
Add: Outstanding 2010 500 2,800 Donations 10,000
Loss on Sale of Furniture 300
Surplus 3,700
34,000 34,000
Balance Sheet as on December 31, 2010
Liabilities Amount
Rs. Assets
Amount
Rs.
Rent Outstanding 500 Subscription Outstanding 2,000
Capital Fund 71,800 Furniture 10,000
Add: Surplus 3,700 75,500 Add: Purchase 12,500
Less: Sale (Book-value) (500)
22,000
Less: 10% Depreciation (2,200) 19,800
Building 30,000
10% Fixed Deposit 20,000
Add: Accrued Interest 500 20,500
Cash in Hand 2,700
Cash at Bank 1,000
76,000 76,000
Balance Sheet as on January 01, 2010
Liabilities Amount
Rs. Assets
Amount
Rs.
Rent Outstanding 200 Subscription Outstanding 5,000
Capital Fund (Balancing figure) 71,800 10% Fixed Deposit 20,000
Furniture 10,000
Building 30,000
Cash in Hand 2,000
Cash at Bank 5,000
72,000 72,000
Ques. 29 What are Sweat Equity Shares?
Answer
As per the Companies Act, 2013, ’Sweat Equity Shares’ refer to those equity shares which are
issued by the company to its employees or directors at a discount or for consideration other than
cash for providing know-how or intellectual property right or value additions by, whatever name
called. In simple words, these shares are issued to the employees and the directors of a company
at discounted rate in order to motivate them and give them a sense of ownership of a part of
company’s capital. For example, Infosys first started issuing Sweat Equity Shares in India.
Ques. 30 Consider the following extract from the books of Blue Swimming Club:
Particulars Rs.
Locker rent received during the year 2010-11 60,000
Locker rent outstanding on March 31, 2011 4,000
Locker rent outstanding on April 01, 2010 3,000
Locker rent received in advance on April 10, 2010 1,500
Locker rent received in advance on March 31, 2011 2,000
Ascertain the amount of locker rent that is to be shown in the Income and Expenditure Account
as on March 31, 2011
Answer ↵
Income and Expenditure Account for the year ended March 31, 2011
Dr. Cr.
Expenditure Amount
Rs.
Income Amount
Rs.
Locker Rent 60,000
Add: Outstanding 2010-
11
4,000
Less: Outstanding 2009-
10
(3,000)
Add: Advance on April
01, 2010
1,500
Less: Advance on March
31, 2011
(2,000) 60,500
Ques. 31 Use the following information to answer the next question.
Manika Ltd. forfeited 1,000 equity shares due to non-payment of Rs. 20 each. The company had
called Rs. 60. Later, these shares were re-issued by the company @ Rs. 70 called-up for Rs. 90
per share.
Pass the entries for forfeiture and re-issue of shares.
Answer
Books of Manika Ltd. Journal
Date Particulars L.F.
Debit
Amount
Rs.
Credit
Amount
Rs.
Equity Share Capital A/c Dr. 60,000
To Equity Share forfeiture A/c 40,000
To Calls-in-arrears A/c 20,000
(1,000 equity shares were forfeited
due to non-payment of Rs 20 each)
Bank A/c
Dr.
90,000
To Equity Share Capital A/c 70,000
To Securities Premium A/c 20,000
(1,000 forfeited equity shares were
re-issued @ Rs 70 called-up for Rs
90 per share)
Share Forfeiture A/c
Dr.
40,000
To Capital Reserve A/c 40,000
(Profit on forfeiture of equity shares
transferred to Capital Reserve)
Ques. 32 Lucks Ltd. issued 10,000 shares of Rs. 50 each at a premium of Rs 10 payable as Rs.
20 on application, Rs. 25 on allotment (including premium), Rs. 7.5 on first call and the balance
on final call. Applications were received for 18,000 shares. The company made the allotment on
the following basis:
Category- A: To the applicants for 6,000 shares- Full
Category- B: To the applicants for 5,000 shares- Rejected
Category- C: To the applicants for 3,000 shares- 2,000 shares
Category- D: To the applicants for 4,000 shares- 2,000 shares
The excess money on application (if any) was utilised towards allotment.
Amit, a shareholder of 300 shares, (belonging to Category C) failed to pay the allotment and call
money and his shares are forfeited immediately after first call. Saurabh, another shareholder to
whom 200 shares were allotted failed to pay both the calls. His shares were forfeited after
making the final call.
Out of the forfeited shares, 400 shares were reissued (which included all the shares of Amit) by
the company at Rs 40 as fully paid-up. Record the above transactions by passing necessary
Journal entries and also prepare Company’s Balance Sheet as per Schedule III of the Companies
Act, 2013.
Answer
Books of Lucks Ltd.
Journal
Date Particulars
L.F.
Debit
Amount
Rs.
Credit
Amount
Rs.
Bank A/c (18,000 shares × Rs 20) Dr. 3,60,000
To Equity Share Application A/c 3,60,000
(Share application money received for 18,000
shares at Rs 20 each)
Equity Share Application A/c
Dr.
3,60,000
To Share Capital A/c (10,000 shares × Rs 20
each)
2,00,000
To Share Allotment A/c 60,000
To Bank A/c (5,000 shares × Rs 20 each) 1,00,000
(Share application money on 10,000 shares
transferred to share capital, 5,000 shares money
were refunded and the balance adjusted on
allotment)
Share Allotment A/c (10,000 shares × Rs 25)
Dr.
2,50,000
To Share Capital A/c (10,000 shares × Rs 15) 1,50,000
To Securities Premium A/c (10,000 shares × Rs
10)
1,00,000
(Allotment money due)
Bank A/c (2,50,000 – 60,000 – 4,500)
Dr.
1,85,500
To Share Allotment A/c 1,85,500
(Share allotment money received)
Share First Call A/c
Dr.
75,000
To Share Capital A/c 75,000
(Share first and final call due on 10,000 shares at
Rs 7.50 each)
Bank A/c (75,000– 2,250 – 1,500)
Dr.
71,250
To Share First Call A/c 71,250
(Share first call received)
Share Capital A/c (300 shares × Rs 42.50)
Dr.
12,750
Securities Premium A/c (300 shares × Rs 10) Dr. 3,000
To Share Forfeiture A/c 9,000
To Share Allotment A/c 4,500
To Share First Call A/c 2,250
(Amit’s shares forfeited after first call)
Share Final Call A/c (9,700 × Rs 7.5)
Dr.
72,750
To Share Capital A/c 72,750
(Share first and final call due on 10,000 shares at
Rs 7.50 each)
Bank A/c (72,750 – 1,500)
Dr.
71,250
To Share Final Call A/c 71,250
(Share final call received)
Share Capital A/c (200 shares × Rs 50)
Dr.
10,000
To Share Forfeiture A/c (200 shares × Rs 35) 7,000
To Share First Call A/c (200 shares × Rs 7.50) 1,500
To Share Final Call A/c (200 shares × Rs 7.50) 1,500
(Saurabh’s shares forfeited after final call)
Bank A/c (400 shares × Rs 40)
Dr.
16,000
Share Forfeiture A/c (400 shares × Rs 10) Dr. 4,000
To Share Capital A/c (400 shares × Rs 50) 20,000
(Re-issue of 400 forfeited shares)
Share Forfeiture A/c
Dr.
8,500
To Capital Reserve A/c 8,500
(Share forfeiture amount transferred to capital
reserve)
Balance Sheet of Lucks Ltd. as per Schedule III of the Companies Act, 2013
Lucks Ltd.
Balance Sheet
Particulars Note No. Amount
(Rs.)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 4,98,500
b. Reserves and Surplus 2 1,05,500
2. Non-Current Liabilities
3. Current Liabilities
Total 6,04,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 3 6,04,000
Total 6,04,000
NOTES TO ACCOUNTS
Note No. Particulars Amount
(Rs.)
1 Share Capital
Authorised Share Capital
…… shares of Rs 10 each
Issued Share Capital
10,000 shares of Rs 50 each 5,00,000
Subscribed, Called-up and Paid-up Share Capital
9,900 shares of Rs 50 each 4,95,000
Add: Shares Forfeited 3,500 4,98,500
2 Reserves and Surplus
Capital Reserve 8,500
Securities Premium 97,000 1,05,500
3 Cash and Cash Equivalents
Cash at Bank 6,04,000
Working Notes:
Computation Table
1 2 3 4 5 6 7
Category Shares
Applied
Shares
Allotted
Money
Received on
application
at Rs. 20
each
Application
Money
transferred
to Share
Capital
at Rs.20 each
Excess
money on
application
Bank
(Refund)
A 6,000 6,000 1,20,000 1,20,000 -
B 5,000 Nil 1,00,000 - - 1,00,000
(Refunded)
C 3,000 2,000 60,000 40,000 20,000 -
D
(Balancing
figure)
4,000 2,000 80,000 40,000 40,000
Total 18,000 10,000 3,60,000 2,00,000 60,000 1,00,000
WN2Calculation of Amount Unpaid on Allotment by Amit
Number of shares allotted = 300 shares
Amount received on application (450 shares × Rs.
20)
9,000
Less: Utilised on application (300 shares × Rs. 20) (6,000)
Excess amount received on application 3,000
Amount due on allotment (300 shares × Rs 25) 7,500
Less: Excess amount received on application (3,000)
Amount unpaid on allotment 4,500
WN3Calculation of Amount to be transferred to Capital Reserve
Amount forfeited on Amit’s 300 shares 9,000
Amount forfeited on Saurabh’s 200 shares 7,000
Amount forfeited on Saurabh’s 100 shares
3,500
12,500
Less: Discount allowed on 400 shares reissued (4,000)
Amount to be transferred to Capital Reserve 8,500
Ques. 33 State any two ways in which the amount of Securities Premium can be utilised.
Answer
Amount of Securities Premium can be utilised for the below mentioned purposes.
1. For writing-off the preliminary expenses
2. For issuing fully-paid bonus shares.
Ques. 34 (a) Baba Wool Garments Ltd. forfeited 300 shares of Rs 10 each, on which Rs 8 was
called for the non-payment of first call of Rs 3. Of the forfeited shares, 200 shares were reissued
at Rs 7 per share Rs 8 paid-up, 60 shares at Rs 9 per share Rs 8 paid-up and remaining were
reissued at Rs 10 per share fully paid-up.
(b) Modern Food Products Ltd. forfeited 400 shares of Rs 10 each issued at premium of Rs 2 per
share for the non-payment of allotment Rs 5 (including premium) and first and final call of Rs 2
per share. Out of the forfeited shares, 200 shares were reissued at Rs 9 per share, 100 shares at
Rs 10 per share, 80 shares at Rs 12 per share and the rest 20 shares remained unsold.
Pass the necessary Journal entries for forfeiture and reissue of shares for each of the above
cases.
Answer
(a)
Books of Baba Wool Garments Ltd.
Date Particulars
L.F.
Debit
Amount
Rs
Credit
Amount
Rs
Share Capital A/c
To Share Forfeiture A/c
To Calls-in-Arrears A/c
(300 shares of Rs 10 each, Rs 8 called-up
forfeited for non-payment of first call Rs 3 per
share)
Bank A/c
Share Forfeiture A/c
To Share Capital A/c
(200 shares of Rs 10 each reissued at Rs 7 per
Dr.
Dr.
Dr.
2,400
1,400
200
1,500
900
1,600
share Rs 8 paid-up)
Bank A/c
To Share Capital A/c
To Securities Premium A/c
(60 shares reissued at Rs 9 per share Rs 8 paid-
up)
Bank A/c
To Share Capital A/c
(40 shares reissued at Rs 10 each fully paid-up)
Share Forfeiture A/c
To Capital Reserve A/c
(Balance of share forfeiture of 300 shares after
reissue share transferred to capital Reserve)
Dr.
Dr.
Dr.
540
400
1,300
480
60
400
1,300
(b)
Books of Modern Food Products Ltd.
Date Particulars
L.F.
Debit
Amount
Rs
Credit
Amount
Rs
Securities Premium A/c
Share Capital A/c
To Share Forfeiture A/c
To Calls-in-Arrears A/c
(400 shares of Rs 10 each at Rs 2 premium were
forfeited for non-payment of allotment and first
and final call)
Bank A/c
Share Forfeiture A/c
To Share Capital A/c
(200 share reissued at Rs 9 per share fully paid-up)
Bank A/c
To Share Capital A/c
(100 share reissued at Rs 10 each fully paid-up)
Bank A/c
To Share Capital A/c
To Securities Premium
Dr.
Dr.
Dr.
Dr.
Dr.
Dr.
800
4,000
1,800
200
1,000
960
2,000
2,800
2,000
1,000
800
160
(80 share reissued at Rs 12 per share fully paid-up)
Share Forfeiture A/c
To Capital Reserve A/c
(Balance 380 shares in Share Forfeiture Account
transferred to Capital Reserve)
Dr.
1,700
1,700
Ques. 35 Swastik Medicines Ltd. undertook a gage to provide the poor and destitute children
with free medicines on World Health Day on April 07, 2012. For this purpose, it issued 20,000
shares of Rs 10 each at a premium of Rs 2 per share payable as Rs 3 on application (including
Re. 1 premium), allotment Rs 4 (including Re. 1 premium), Rs 2 on first call and Rs 3 on final
call.
Applications were received for 30,000 shares of which 2,000 shares were allotted in
full (Category-I), 1,000 were rejected and remaining shares were allotted on pro-rata
basis (Category-II). Application money of rejected shares were returned outright and money
overpaid on application from the applicants of allotted shares was adjusted on allotment.
Two shareholders failed to pay the allotment and calls money; one holding 200 shares belonging
to the Category-I and another holder holding 360 shares belonging to the Category-II.
These shares were subsequently forfeited and reissued, except 100 shares of Category-I, at Rs 9
per share fully paid-up. Pass the Journal entries for issue, forfeiture, reissue and capital reserve.
Also, prepare the Company's Balance Sheet as per Schedule III of the Companies Act, 2013.
Answer
Date Particulars
L.
F.
Debit
Amount
Rs.
Credit
Amount
Rs.
Bank A/c (30,000 x 3)
To Share Application A/c
(Money received on application for 30,000 share at
Rs 3 per share)
Share Application A/c
To Share Capital A/c (20,000 x 2)
To Securities Premium A/c (20,000 x 1)
To Share Allotment A/c
To Bank A/c
(Share Application of 20,000 shares transferred to
Share Capital A/c. Application money on 1,000
shares returned and remaining amount transferred to
Share Allotment A/c)
Share Allotment A/c (20,000 x 4)
To Share Capital A/c (20,000 x 3)
To Securities Premium A/c (20,000 x 1)
(Share Allotment due on 20,000 shares at Rs 4 each
including Re. 1 premium)
Bank A/c
Calls-in-Arrears A/c
To Share Allotment A/c
(Share allotment money received, except on 560
shares)
Share First Call A/c
To Share Capital A/c
(Share First Call money due on 20,000 shares at Rs 2
each)
Bank A/c
Calls-in-Arrears A/c (560 shares × Rs 2)
To Share First Call A/c
(Share First Call money received on all shares, except
560 shares)
Share Final Call A/c
To Share Capital A/c
Dr.
Dr.
Dr.
Dr.
Dr.
Dr.
Dr.
Dr.
Dr.
90,000
90,000
80,000
51,300
1,700
40,000
38,880
1,120
60,000
90,000
40,000
20,000
27,000
3,000
60,000
20,000
53,000
40,000
40,000
60,000
(Share Final Call money due on 20,000 shares at Rs 3
each)
Bank A/c
Calls-in-Arrears A/c (560 shares × Rs 3)
To Share Final Call A/c
(Share Final Call money received on all shares except
560 shares)
Share Capital A/c
Securities Premium A/c
To Share Forfeiture A/c (1620 – 360)
To Calls-in-Arrears A/c (900 + 1,800)
(360 shares of the Category-II forfeited for non-
payment of allotment and calls money)
Share Capital A/c
Securities Premium A/c
To Share Forfeiture A/c
To Calls-in-Arrears A/c
(200 shares of the Category-I forfeited for non-
payment of allotment and calls)
Bank A/c (460 shares × Rs 9 )
Share Forfeiture A/c (460 shares × Re 1)
To Share Capital A/c
(460 shares reissued at Rs 9 per share)
Share Forfeiture A/c
To Capital Reserve A/c
(Balance in the Share Forfeiture A/c of 460 shares
transferred to the Capital Reserve)
Dr.
Dr.
Dr.
Dr.
Dr.
Dr.
Dr.
Dr.
58,320
1,680
3,600
360
2,000
200
4,140
460
1,000
60,000
1,260
2,700
400
1,800
4,600
1,000
As per Schedule III of the Companies Act, 2013, the following is the Balance Sheet for
Swastik Medicine Ltd.
Swastik Medicines Ltd.
Balance Sheet
Particulars Note No. Amount
(Rs.)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 1,99,200
b. Reserves and Surplus 2 40,440
2. Non-Current Liabilities
3. Current Liabilities
Total 2,39,640
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 3 2,39,640
Total 2,39,640
NOTES TO ACCOUNTS
Note No. Particulars Amount
(Rs.)
1 Share Capital
Authorised Share Capital
…… shares of Rs 10 each -
Issued Share Capital
20,000 shares of Rs 10 each 2,00,000
Subscribed, Called-up and Paid-up Share Capital
19,900 shares of Rs 10 each 1,99,000
Add: Shares Forfeited 200 1,99,200
2 Reserves and Surplus
Capital Reserve 1,000
Securities Premium 39,440 40,440
3 Cash and Cash Equivalents
Cash at Bank 2,39,640
Working Notes: 1. Shares belong to the category of pro-rata allotment
Number of shares applied =
2. Calculation of Excess Money on Application
Money Received on application for 540 shares @ Rs 3 per
share
Less: Money transferred to capital and premium for 360
share @ Rs 3 per share
1,620
(1,080)
Excess money on Application for 360 shares 540
3. Calculation of Call-in-Arrears on Allotment
Allotment due on 360 shares @ Rs 4 each
Less: Excess money adjusted on Allotment
1,440
540
Calls-in-Arrears of 360 shares on Allotment 900
Calls-in-Arrears of 200 shares on Allotment (200 × 4) 800
Total Calls-in-Arrears on Allotment 1,700
4. Calculation of Capital Reserve Amount for 360 shares
Share forfeiture credited for 360 shares (Rs 1,620 – Rs 360 sec. prem. on application)
Share forfeited debited for 360 share @ Re 1 each
1,260
360
Capital Reserve for 360 shares 900
5. Calculation of Capital Reserve Amount for 100 shares
Shares forfeiture credited for 200 shares at Rs 2 per share
Forfeiture for 100 shares
Credit (Cr.)
Debit (Dr.)
200
100
Capital Reserve for
100 shares
100
Total Capital Reserve = 900 + 100 = Rs 1,000
Ques. 36 Is Premium on Redemption a gain for a limited company?
Answer
No, Premium on Redemption is not a gain for a limited company. It is a liability which is to be
paid along with the amount of debenture.
Ques. 37 Akrosh Ltd. issued 2,000 13% debentures of Rs 100 each at a premium of 10%,
redeemable at a premium of 9%. Show how the relevant items (involved in this transaction) will
appear in the Company’s Balance Sheet as per the Schedule III of the Companies Act, 2013.
Answer
Akrosh Ltd.
Balance Sheet
Particulars Note No. Amount
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Reserves and Surplus 1 20,000
2. Non-Current Liabilities
a. Long-Term Borrowings 2 2,00,000
b. Deferred Tax Liabilities
c. Other Long-Term Liabilities 18,000
Total 2,38,000
II. Assets
1. Non-Current Assets
a. Other Non-Current Assets 3 18,000
2. Current Assets
a. Cash and Cash Equivalents 4 2,20,000
Total 2,38,000
NOTES TO ACCOUNTS
Note
No. Particulars
Amount
(Rs)
1 Reserves and Surplus:
Securities Premium 20,000
2 Non-Current Liabilities:
a. Long-Term Borrowings
2,000, 10% Debentures of Rs 100 each 2,00,000
a. Other Long-Term Liabilities
Premium on Redemption 18,000
3 Other Non-Current Assets
Loss on Issue of Debentures 18,000
4 Cash and Cash Equivalents
Cash at Bank 2,20,000
Working Notes:
Books of Akrosh Ltd.
Journal
Date Particulars L.F.
Amount
(Rs)
Amount
(Rs)
Bank A/c Dr. 2,20,000
To Debentures Application A/c 2,20,000
(Application money received on 2,000 debentures
at Rs 110 each)
Debentures Application A/c
Dr.
2,20,000
Loss on Issue of Debentures A/c Dr. 18,000
To 10% Debentures A/c 2,00,000
To Securities Premium A/c 20,000
To Premium on Redemption A/c 18,000
(2,000 debentures issued at a premium of 10%
repayable at 9% premium)
Ques. 38 ZA Ltd. took a loan of Rs 5,00,000 from ICICI Bank and issued 12% Debentures for
Rs 7,00,000 as collateral security to the bank. Company also bought a machine costing Rs
10,00,000 from YB Ltd. and issued 12% Debentures of Rs 9,00,000 in full consideration of the
machinery to YB Ltd. Pass the necessary Journal entries and also show the relevant items in the
Balance Sheet of the ZA Ltd. as per the Schedule III of the Companies Act, 2013.
Answer
Books of ZA Ltd.
Journal
Date Particulars L.F. Amount
Rs
Amount
Rs
Bank A/c Dr. 5,00,000
To Bank Loan A/c 5,00,000
(Loan taken from ICICI Bank)
Debenture Suspense A/c Dr. 7,00,000
To 12% Debentures A/c 7,00,000
(Issued 12% Debentures of Rs 7,00,000 as collateral
security
against a loan of Rs 5,00,000 from ICICI Bank)
Machinery A/c Dr. 10,00,000
To YB Ltd 10,00,000
(Machinery purchased from YB Ltd.)
YB Ltd Dr. 10,00,000
To 12% Debentures A/c 9,00,000
To Securities Premium A/c 1,00,000
(Issued 12% debentures at premium)
The Balance Sheet of ZA Ltd. as per the Schedule III of the Companies Act, 2013 is as
follows.
ZA Ltd.
Balance Sheet
Particulars Note
No.
Amount
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Reserves and Surplus 1 1,00,000
2. Non-Current Liabilities
a. Long-Term Borrowings 2 14,00,000
3. Current Liabilities
Total 15,00,000
II. Assets
1. Non-Current Assets
a. Tangible Assets
i. Machinery 3 10,00,000
2. Current Assets 5,00,000
a. Cash and Cash
Equivalents
4
Total 15,00,000
NOTES TO ACCOUNTS
Note
No. Particulars
Amount
(Rs)
1 Reserves and Surplus
Securities Premium 1,00,000
2 Long-Term Borrowings
Secured:
Loan From ICICI Bank (Secured against issue of Debentures
of Rs 7,00,000)
5,00,000
12% Debentures (Issued as Collateral Security
against Loan)
7,00,000
Less: Debenture Suspense Account 7,00,000 -
12% Debentures issued for consideration other than cash 9,00,000
14,00,000
3 Tangible Assets
Machinery 10,00,000
4 Cash and Cash Equivalents
Cash at Bank 5,00,000
Ques. 39 Max Pvt. Ltd issued 6000 5% Debentures of Rs 100 each at 10% premium on January
20, 2010, redeemable at a premium of 12%. Out of these, 80% debentures were due for
redemption on December 31, 2012. At that time Company has balance of Rs 70,000 in its
Debenture Redemption Reserve. Pass the necessary Journal entries at time of issue and
redemption of debentures assuming company closes its books on March 31 every year.
Answer
Books of Max Pvt Ltd.
Journal
Date Particulars L.F.
Debit
Amount
(Rs)
Credit
Amount
(Rs)
2010
Jan. 20 Bank A/c Dr. 6,60,000
To Debenture Application A/c 6,60,000
(Application money received)
Jan. 20
Debenture Application A/c
Dr.
6,60,000
Loss on Issue of Debentures A/c Dr. 72,000
To 5% Debentures A/c 6,00,000
To Securities Premium A/c 60,000
To Premium on Redemption of Debentures A/c 72,000
(Issue of debentures at premium and redemption at
premium)
2012
Mar. 31 Statement of Profit and Loss Dr. 80,000
To Debenture Redemption Reserve A/c 80,000
(Amount transferred to Debenture Redemption
Reserve)
Apr. 30
Debenture Redemption Investment A/c
Dr.
72,000
To Bank A/c 72,000
(Investment is made in specified securities equal to the 15%
of the value of the debentures redeemed)
Dec. 31
5 % Debenture A/c
Dr.
4,80,000
Premium on Redemption of Debenture A/c Dr. 57,600
To Debentureholders’ A/c 5,37,600
(Amount due to debentureholder on redemption)
Dec. 31
Bank A/c
Dr.
72,000
To Debenture Redemption Investment A/c 72,000
(Investment made in specified securities, now
encashed)
Dec. 31
Debentureholders’ A/c
Dr.
5,37,600
To Bank A/c 5,37,600
(Payment made to debentureholders)
Working Note:
1. Calculation of amount to be transferred to DRR
25% of 6,00,000 (i.e. Face Value of
debentures)
1,50,000
Less: Existing Debenture Redemption
Reserve
(70,000)
DRR to be transferred 80,000
DRR is not transferred to General Reserve as all debentures are not redeemed.
2. Calculation of Amount Invested in Securities
As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every
company required to create/maintain DRR shall on or before the 30th day of April of each year,
deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the
amount of its debentures maturing during the year ending on the 31st day of March next
following year. Accordingly, entries for DRR and Investment have been passed in the previous
accounting year.
Since 80% of debentures are redeemed this year, so, amount invested in the securities will be
calculated on this 80% only i.e. Rs 4,80,000.
Ques. 40 On January 01, 2007 Pushpak Ltd. has issued 50,000 10% debentures of Rs 100 each at
a discount of 5%. These debentures are redeemable at 20% premium as under:
On March 31, 2009 30,000 debentures
On March 31, 2012 20,000 debentures
Debenture interest is payable annually on March 31st of every year till all the debentures are
redeemed. Pass the necessary Journal Entries assuming that the Company has sufficient balance
in its Debenture Redemption Reserve.
Answer
Books of Pushpak Ltd.
Journal
Date Particulars L.F.
Debit
Amount
(Rs)
Credit
Amount
(Rs)
2007
Jan. 01 Bank A/c Dr. 47,50,000
To Debenture Application A/c 47,50,000
(Application money received on 50,000 debentures at Rs 95
at a discount of Rs 5 per debenture)
Jan. 01
Debenture Application A/c
Dr.
47,50,000
Loss on Issue of Debentures A/c (2,50,000 +
10,00,000)
Dr. 12,50,000
To 10% Debentures A/c 50,00,000
To Premium on Redemption of Debentures A/c 10,00,000
(Issue of debentures at discount and redeemable at
premium)
Mar. 31
Deb. Interest A/c (50,00,000 × 10/100 × 3/12)
Dr.
1,25,000
To Debentureholders’ A/c 1,25,000
(Interest due on debentures for 3 months)
Mar. 31
Debentureholders’ A/c
Dr.
1,25,000
To Bank A/c 1,25,000
(Interest payment made)
Mar. 31
Statement of Profit and Loss
Dr.
1,25,000
To Deb. Interest A/c 1,25,000
(Interest transferred to Statement of Profit and Loss)
2008
Mar. 31 Deb. Interest A/c Dr. 5,00,000
To Debentureholders’ A/c 5,00,000
(Interest due on debentures)
Mar. 31
Debentureholders’ A/c
Dr.
5,00,000
To Bank A/c 5,00,000
(Interest payment made)
Mar. 31
Statement of Profit and Loss
Dr.
5,00,000
To Deb. Interest A/c 5,00,000
(Interest transferred to Statement of Profit and Loss)
Apr. 30
Debenture Redemption Investment A/c
Dr.
4,50,000
To Bank A/c 4,50,000
(Investment is made in specified securities equal to
15% of the value of debentures)
2009
Mar. 31 Deb. Interest A/c Dr. 5,00,000
To Debentureholders’ A/c 5,00,000
(Interest made due on debentures)
Mar. 31
10 % Debenture A/c
Dr.
30,00,000
Premium on Redemption of Debenture A/c Dr. 6,00,000
To Debentureholders’ A/c 36,00,000
(Amount due on redemption)
Mar. 31
Bank A/c
Dr.
4,50,000
To Debenture Redemption Investment A/c 4,50,000
(Investment made in specified securities, now
encashed)
Mar. 31
Debentureholders’ A/c (36,00,000 + 5,00,000)
Dr.
41,00,000
To Bank A/c 41,00,000
(Payment made to debentureholders on redemption along
with interest)
Mar. 31
Statement of Profit and Loss
Dr.
5,00,000
To Deb. Interest A/c 5,00,000
(Interest transferred to Statement of Profit and Loss)
2010
Mar. 31 Deb. Interest A/c (20,00,000 × 10/100) Dr. 2,00,000
To Debentureholders’ A/c 2,00,000
(Interest due on remaining debentures)
Mar. 31
Debentureholders’ A/c
Dr.
2,00,000
To Bank A/c 2,00,000
(Interest payment made)
Mar. 31
Statement of Profit and Loss
Dr.
2,00,000
To Deb. Interest A/c 2,00,000
(Interest transferred to Statement of Profit and Loss)
2011
Mar. 31 Deb. Interest A/c Dr. 2,00,000
To Debentureholders’ A/c 2,00,000
(Interest due on debentures)
Mar. 31
Debentureholders’ A/c
Dr.
2,00,000
To Bank A/c 2,00,000
(Interest payment made)
Mar. 31
Statement of Profit and Loss
Dr.
2,00,000
To Deb. Interest A/c 2,00,000
(Interest transferred to Statement of Profit and Loss)
Apr. 30
Debenture Redemption Investment A/c
Dr.
3,00,000
To Bank A/c 3,00,000
(Investment is made in specified securities equal to
15% of the value of debentures)
2012
Mar. 31 Deb. Interest A/c Dr. 2,00,000
To Debentureholders’ A/c 2,00,000
(Interest made due on debentures)
Mar. 31
10 % Debenture A/c
Dr.
20,00,000
Premium on Redemption of Debenture A/c Dr. 4,00,000
To Debentureholders’ A/c 24,00,000
(Amount made due to debentureholdesr on redemption)
Mar. 31
Bank A/c
Dr.
3,00,000
To Debenture Redemption Investment A/c 3,00,000
(Investment made in specified securities, now
encashed)
Mar. 31
Debentureholders’ A/c
Dr.
26,00,000
To Bank A/c 26,00,000
(Payment made)
Mar. 31
Statement of Profit and Loss
Dr.
2,00,000
To Deb. Interest A/c 2,00,000
(Interest transferred to Statement of Profit and Loss)
Mar. 31
Debenture Redemption Reserve A/c
Dr.
12,50,000
To General Reserve A/c 12,50,000
(Debenture redemption reserve transferred to general
reserve)
Notes:
1. As it is mentioned that the Company is having sufficient balance in its DRR Account, so no
entry has been passed for transferring profits to DRR Account.
However, after the redemption of all the debentures, the balance in DRR account will be
transferred to General Reserve Account.
2. As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every
company required to create/maintain DRR shall on or before the 30th day of April of each year,
deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the
amount of its debentures maturing during the year ending on the 31st day of March next
following year. Accordingly, entries for DRR and Investment have been passed in the previous
accounting year.
Debentures worth Rs 30,00,000 are to be redeemed on March 31, 2009
So, the amount of DRI on April 30, 2008 will be:
Debentures worth Rs 20,00,000 are to be redeemed on March 31, 2012
So, the amount of DRI on April 30, 2011 will be:
Ques. 41 a) Cafe Coffee Ltd. issued 8,000, 5% debentures of Rs 100 each as collateral security
for loan of Rs 6,00,000 from State Bank. Pass the necessary Journal entries and also disclose the
relevant items in Company’s Balance Sheet as per Schedule III of Companies Act, 2013.
b) State any two provisions for creation of debenture redemption reserve.
Answer
a)
Books of Cafe Coffee Ltd.
Journal
Particulars
L.F.
Debit
Amount
Rs
Credit
Amount
Rs
Bank A/c Dr. 6,00,000
To Bank Loan A/c 6,00,000
(Loan of Rs 6,00,000 taken from State Bank)
Debenture Suspense A/c
Dr.
8,00,000
To 5% Debentures A/c 8,00,000
(Company issued 8,000 5% Debentures of Rs
100 each as collateral security)
Balance Sheet as at March 31, 2013
Particulars Note
No.
Amount
(Rs)
I. Equity and Liabilities
2. Non-Current Liabilities
a. Long-Term Borrowings 1 6,00,000
Total 6,00,000
II Assets
2. Current Assets
a. Cash and Cash Equivalents 2 6,00,000
Total 6,00,000
NOTES TO ACCOUNTS
Note
No. Particulars
Amount
(Rs)
1 Long-Term Borrowings
Secured:
Loan from State Bank (secured by issue of debentures as
collateral security)
6,00,000
8,000, 5% debentures of Rs 100 each issued as
collateral security
8,00,000
Less: Debenture Suspense A/c 8,00,000 -
6,00,000
2 Cash and Cash Equivalents
Cash at Bank 6,00,000
b) The following are the provisions for debenture redemption reserve as per the Schedule III of
the Companies Act, 2013.
(i) As per Section 71 (4) of the Companies Act, 2013 and Companies (Share Capital and
Debentures) Rules, 2014, every company issuing debentures is required to create Debenture
Redemption Reserve of an amount that is atleast equal to 25% of the total nominal (face)
value of debentures that are redeemable by it.
(ii) As per Rule 18 (7) of the Companies (Share Capital and Debentures) Rules, 2014 requires
every company required to create DRR shall on or before 30th April in each year, invest or
deposit in specified securities, a sum of at least equal to fifteen percent of the amount of
debentures maturing for payment during the year ended 31st March of the next year.
Ques. 42 Show the accounting treatment of subscription in the Income and Expenditure Account
and in the Balance Sheet from the given below extract of Receipts and Payments Account.
Receipts and Payments Account for the year ending 2013
Dr. Cr.
Receipts Amount
(Rs) Payments
Amount
(Rs)
Subscription
2012 2,300
2013 7,000
2014 1,500 10,800
Additional Information: Subscription received in 2012 for 2013 is Rs 1,000. Subscription
outstanding at the end of 2012 is Rs 3,500. Subscription outstanding as on December 31, 2013
amounted to Rs 3,000.
Answer
Income and Expenditure Account for the year ending 2013
Dr. Cr.
Expenditure Amount
(Rs) Income
Amount (Rs)
Subscription 11,000
Balance Sheet
Liabilities Amount Assets Amount
(Rs) (Rs)
Subscription received in
advance 1,500 Subscription outstanding
2012 1,200 2013 3,000 4,200
Working Notes:
Subscription Account Dr. Cr.
Outstanding at the beginning
of the year (2013)
3,500 Received in advance at the
beginning of the year (2013)
1,000
Received in advance at the
end of year (2013)
1,500 Bank A/c 10,800
Outstanding at the end of year
Income and Expenditure A/c
(balancing figure)
11,000 For 2012 1,200
For 2013 3,000 4,200
16,000 16,000
Ques. 43 List the various sources through which a company can raise funds to redeem its
debentures.
Answer
The following are the various sources through which the funds can be raised to redeem the
debentures.
a. Fresh issue of debentures
b. Free Reserves
c. Raising Loan
d. Sale of Assets
Ques. 44 Why Premium on Redemption of Debentures is considered as a liability at the time of
allotment of debentures?
Answer
As per the Principle of Conservatism, Premium on Redemption of Debentures is considered as a
liability at the time of allotment of debentures. Based on this principle, Premium on Redemption
being a liability is credited at the time of allotment of debentures.
Ques. 45 Manish Ltd. has taken loan of Rs. 15,00,000 from PNB Ltd. and Rs. 20,00,000 from
ICICI Bank. It has issued 20,000 10% debentures of Rs 100 each as Collateral Security to PNB
and 25,000 10% debentures of Rs 100 each to ICICI against their respective loans. Pass
necessary Journal Entries in books of Manish Ltd. if:
i) No entry is passed in books for issue of debenture as Collateral Security against Loan PNB
Ltd.
ii) Entry is passed in books for issue of debenture as Collateral Security against Loan ICICI
Bank.
Also prepare the Company’s Balance Sheet of Manish Ltd. as per the Schedule III of the
Companies Act, 2013.
Answer
Books of Manish Ltd.
Journal
Date Particulars L.F.
Debit
Amount
(Rs)
Credit
Amount
(Rs)
Bank A/c Dr. 35,00,000
To PNB Ltd. 15,00,000
To ICICI Bank A/c 20,00,000
(Loan taken)
Debentures Suspense A/c
Dr.
25,00,000
To 10% Debentures A/c 25,00,000
(25,000 debentures of Rs 100 each issued as
Collateral Security against loan from ICICI Bank)
Manish Ltd.
Balance Sheet
Particulars Note No. Amount
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
2. Non-Current Liabilities
a. Long-Term Borrowings 1 35,00,000
3. Current Liabilities
Total 35,00,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 2 35,00,000
Total 35,00,000
NOTES TO ACCOUNTS
Note
No. Particulars
Amount
(Rs)
1 Long Term Borrowings
Secured:
Loan from PNB Ltd. (Secured by issue of Debentures of
Rs 20,00,000 as Collateral Security) 15,00,000
Loan from ICICI Bank 20,00,000
10% Debentures of Rs 100 each (Issued as
Collateral Security against ICICI Bank
Loan)
25,00,000
Less: Debenture Suspense Account (25,00,000) -
35,00,000
2 Cash and Cash Equivalents
Cash at Bank 35,00,000
Ques. 46 Pass the necessary Journal entries for each of the following cases. Also calculate the
number of debentures issued in the respective cases.
a. X Limited issued 15% Debentures of Rs 100 each at premium of 10% to Y Limited for the
purchase of machinery costing Rs 1,00,000.
b. X Limited issued 14% Debentures of Rs 100 each at 10% discount to Y Limited in
consideration of purchase of plant costing Rs 1,00,000
c. P Limited purchased business of Q Limited for Rs 14,00,000. Business purchase consisting
assets Rs 14,00,000 and liabilities Rs 3,00,000. 60% of the purchase consideration was settled
through bank draft and the balance amount was paid by issuing 16% Debentures of Rs 100 each
at 40% premium.
Answer
a.
Books of X Limited
Date Particulars L.F.
Debit
Amount
Rs
Credit
Amount
Rs
Machinery A/c Dr. 1,00,000
To Y Limited 1,00,000
(Machinery purchased from Y Limited)
Y Limited
Dr.
1,00,000
To 15% Debentures A/c 90,900
To Securities Premium A/c 9,090
To Bank A/c 10
909, 15% Debentures of Rs 100 each issued at premium
of Rs 10 per debenture and amount of fraction Rs 10
paid through bank to Y Ltd.
Note: The number of debentures cannot be in fraction, however; if it comes in fraction, then the
fractional amount of debenture is paid through bank. In the above solution, 909 debentures is
issued and the fractional portion (0.1 debentures) is paid through bank (0.1 × Rs 100 = Rs 10).
b.
Books of X Limited
Date Particulars L.F.
Debit
Amount
Rs
Credit
Amount
Rs
Plant A/c Dr. 1,00,000
To Y Limited 1,00,000
(Plant purchased from Y Limited)
Y Limited
Dr.
1,00,000
Discount on Issue of Debentures A/c Dr. 1,1,110
To 14% Debentures A/c 1,11,100
To Bank A/c 10
1,111, 14% Debentures of Rs 100 each issued at 10%
discount to Y Limited and fraction paid in cash)
Note: In the solution, 1111 debentures is issued and the fractional portion (0.10 debentures) will
be paid through bank (0.10 × Rs 100 = Rs 10).
c.
Journal Entry
Date Particulars L.F.
Debit
Amount
Rs
Credit
Amount
Rs
Goodwill A/c Dr. 3,00,000
Sundry Assets A/c Dr. 14,00,000
To Sundry Liabilities A/c 3,00,000
To Q Ltd. A/c 14,00,000
(Business of Q Limited taken over)
Q Limited
Dr.
8,40,000
To Bank A/c 8,40,000
(60% of the amount due to Q Limited paid)
Q Limited
Dr.
5,60,000
To 16% Debentures 4,00,000
To Securities Premium A/c 1,60,000
(4,000 Debentures of Rs 100 each issued at 20%
premium to Q Limited for the settling the balance
amount due)
Ques. 47 Show the following item on the Equity and Liabilities side of the Company's Balance
Sheet as per Schedule III of the Companies Act.
Particulars Rs
Securities Premium 50,000
Issued Capital (90% subscribed) 6,00,000
Calls in Arrears 1,200
Calls in Advance 2,400
8% Debentures 2,40,000
Fixed Deposits 1,00,000
Creditors 55,000
Provision for Taxation 24,000
Profit and Loss (Dr.) 12,000
General Reserve 2,00,000
Answer
Balance Sheet
Particulars Note No. Amount
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 5,38,800
b. Reserves and Surplus 2 2,38,000
2. Non-Current Liabilities
a. Long-Term Borrowings 3 3,40,000
3. Current Liabilities
a. Trade Payables 4 55,000
b. Other Current Liabilities 5 2,400
c. Short-Term Provisions 6 24,000
Total 11,98,200
II. Assets
1. Non-Current Assets
2. Current Assets
Total
NOTES TO ACCOUNTS
Note No. Particulars Amount
(Rs)
1 Share Capital
Authorised Share Capital
…… shares of Rs … each -
Issued Share Capital
…… shares of Rs … each 6,00,000
Subscribed, Called-up and Paid-up Share Capital
….. shares of Rs … each 5,40,000
Less: Calls-in-Arrears (1,200) 5,38,800
2 Reserves and Surplus
Securities Premium 50,000
General Reserve 2,00,000
Profit and Loss (12,000) 2,38,000
3 Long-Term Borrowings
8% Debentures (Secured) 2,40,000
Fixed Deposits (Unsecured) 1,00,000 3,40,000
4 Trade Payables
Creditors 55,000
5 Other Current Liabilities
Calls-in-Advance 2,400
6 Short-Term Provision
Provision for Tax 24,000
Ques. 48 The following figures were extracted from the Trial Balance of Mandeep Ltd:
Particulars Rs
Building 2,00,000
Land 5,00,000
Goodwill 50,000
Live Stock 60,000
Discount on Issue of Shares 5,000
9% Government Securities (50,000) 45,000
Shares (in X Ltd.) 60,000
Interest accrued on Investment 5,000
Bills of Exchange 13,000
Show the relevant items on the Assets side of the Balance Sheet of Mandeep Ltd. as per
Schedule III of the Companies Act, 2013
Answer
Mandeep Ltd.
Balance Sheet
Particulars Note No. Amount
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
2. Non-Current Liabilities
3. Current Liabilities
Total
II. Assets
1. Non-Current Assets
a. Fixed Assets
i. Tangible Assets 1 7,60,000
ii. Intangible Assets 2 50,000
b. Non-Current Investments 1,05,000
c. Other Non-Current Assets 5,000
2. Current Assets
a. Trade Receivables 13,000
b. Other Current Assets 5,000
Total 9,38,000
NOTES TO ACCOUNTS
Note No. Particulars Amount
(Rs)
1 Tangible Assets
Building 2,00,000
Land 5,00,000
Live Stock 60,000 7,60,000
2 Intangible Assets
Goodwill 50,000
3 Non-Current Investments
9% Government Securities 45,000
Shares in X Ltd. 60,000 1,05,000
4 Other Non-Current Assets
Discount on Issue of Shares 5,000
5 Trade Receivables
Bills of Exchange 13,000
6 Other Current Assets
Interest accrued on Investment 5,000
*Discount on Issue of Shares has been assumed to be in respect of Sweat Equity shares and
whole of the amount is still to be written off.
Ques. 49 Preet Ltd. has an authorised capital of Rs 50,00,000 divided into shares of Rs 100 each.
The company invited application for 40,000 shares from the general public and it subscribed
only 95% of the issued shares. All calls were made and duly received except the final call of Rs
30 on 300 shares, out of which 100 shares were forfeited. Money received from the issue of
shares is utilised for the purchase of Building of Rs 20,00,000, Machinery Rs 10,00,000 and
Stock Rs 5,00,000. Show the items in the Balance Sheet of the Company as per schedule III of
the Companies Act, 2013.
Answer
Preet Ltd.
Balance Sheet
Particulars Note No. Amount
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 37,91,000
2. Non-Current Liabilities
3. Current Liabilities
Total 37,91,000
II. Assets
1. Non-Current Assets 30,00,000
2. Current Assets
a. Inventories 3 5,00,000
b. Cash and Cash Equivalents 4 2,91,000
Total 37,91,000
NOTES TO ACCOUNTS
Note No. Particulars Amount
(Rs)
1 Share Capital
Authorised Share Capital
50,000 shares of Rs 100 each …
Issued Share Capital
40,000 shares of Rs 100 each 4,00,000
Subscribed, Called-up and Paid-up Share Capital
37,900 shares of Rs 100 each 37,90,000
Less: Calls-in-Arrears (200 × 30) (6,000)
Add: Shares Forfeited (100 × 70) 7,000 37,91,000
2 Fixed Assets
Building 20,00,000
Machinery 10,00,000 30,00,000
3 Inventories
Stock 5,00,000
3 Cash and Cash Equivalents
Ques. 50 Under which head ‘Interest accrued but not due’ is shown in the Company’s Balance
Sheet as per Schedule III of the Companies Act, 2013.
Answer
‘Interest accrued but not due’ is shown as Other Current Liabilities under the main head of
Current Liabilities on the Equity and liabilities side of the Company’s Balance Sheet as per
Schedule III of the Companies Act, 2013.
Ques. 51 Match the items with their Sub-heads as per Schedule III of the Companies Act.
Items Major Heads
Calls-in-Arrears Short Term Borrowings
Loose Tools Other Current Liabilities
Investment Fluctuation Reserves Capital Work-in-Progress
Bank Overdraft Other Current Assets
Interest Accrued on Investments Other Non-Current Assets
Building under Construction Reserves and Surplus
Shares Issue Expenses Inventories
Calls-in-Advance Share Capital
Answer
In adherence to Schedule III, the above items can be matched with their respective heads as
follows.
Items Major Heads
Calls-in-Arrears Share Capital
Loose Tools Inventories
Investment Fluctuation Reserves Reserves and Surplus
Bank Overdraft Short-Term Borrowings
Interest Accrued on Investments Other Current Assets
Building under Construction Capital Work-in-Progress
Shares Issue Expenses Other Non-Current Assets
Calls-in-Advance Other Current Liabilities
Ques. 52 Present the following items in the Company’s Balance Sheet as per Schedule III of the
Companies Act, 2013.
a. Authorised Capital
20,000 Equity Shares @ Rs 10 each
5,000 14% Preference Shares @ Rs 10 each
b. Subscribed and Called-up Capital
8,000 Equity share @ Rs 10 each Rs 7 called-up
4,000 14% Preference Shares @ Rs 10 each Rs 5 called-up
c. Calls-in-Arrears on Equity Shares Rs 2,000
Cash at Bank 2,91,000
d. Capital Reserve Rs 3,000
e. Discount on Issue of Shares Rs 4,000
f. Underwriting Commission Rs 3,000
g. Capital Redemption Reserve Rs 5,000
h. Debenture Sinking Fund Rs 8,000
i. Debenture Sinking Fund Investments Rs 5,000
j. Profit and Loss (Debit) Rs 6,500.
k. Livestock Rs 50,000
l. Stock on March 31, 2012 were valued as Football Rs 1,200; Cricket Bat Rs 350; Basket Balls
Rs 550; Baseball Bats Rs 250
Answer
Balance Sheet
Particulars Note
No.
Amount
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 74,000
b. Reserves and Surplus 2 9,500
2. Non-Current Liabilities
3. Current Liabilities
Total
II. Assets
1. Non-Current Assets
a. Fixed Assets
i. Tangible Assets 3 50,000
b. Non-Current Investment 4 5,000
c. Other Non-Current Assets 5 7,000
2. Current Assets
a. Inventories 6 2,350
Total
NOTES TO ACCOUNTS
Note No. Particulars Amount
(Rs)
1 Share Capital
Authorised Share Capital
20,000 Equity Shares of Rs 10 each 2,00,000
5,000 14% Preference Shares of Rs 10 each 50,000
Issued Share Capital
8,000 Equity Shares of Rs 10 each 80,000
4,000 14 % Preference Shares of Rs 10 each 40,000
Subscribed, Called-up and Paid-up Share Capital
8,000 Equity Shares of Rs 10 each, Rs 7 Called-up 56,000
4,000 14% Preference Shares of Rs 10 each, Rs 5 Called- 20,000
up
Less: Calls-in-Arrears on Equity Shares (2,000) 74,000
2 Reserves and Surplus
Capital Reserve 3,000
Capital Redemption Reserves 5,000
Debenture Sinking Fund 8,000
Profit and Loss (Debit) (6,500) 9,500
3 Tangible Assets
Livestock 50,000
4 Non-Current Investments
Debenture Sinking Fund 5,000
5 Other Non-Current Assets
Discount on Issue of Shares 4,000
Underwriting Commission 3,000 7,000
6 Inventories
Footballs 1,200
Cricket Bats 350
Basket Balls 550
Baseball Bats 250 2,350
Ques. 53 Highlight any two importance of the Financial Analysis.
Answer
The following are the two main importance of Financial Analysis.
a. It helps in evaluating the relative financial status of a firm in comparison to other competitive
firms.
b. It assists management in decision making process, drafting various plans and also in
establishing an effective controlling system.
Ques. 54 State the meaning of Analysis and Interpretation.
Answer
Analysis and Interpretation refers to a systematic and critical examination of the financial
statements. It not only establishes cause and effect relationship among the various items of the
financial statements but also presents the financial data in a proper manner. The main purpose of
Analysis and Interpretation is to present the financial data in such a manner that is easily
understandable and self explanatory. This helps the accounting users to derive meaningful
conclusions without any ambiguity.
Ques. 55 List any two tools for analysing the Financial Statements.
Answer
The two important tools for analysing the Financial Statements are as follows:
a. Comparative Financial Statements
b. Common Size Financial Statements
Ques. 56 The following are the Balance Sheets of Amita Ltd. for the years 2011-12 and 2012-13.
Prepare a Common Size Balance Sheet.
Particulars Note
No. 2011-12 2012-13
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1,00,000 1,15,000
2. Current Liabilities
a. Trade Payables 50,000 2,35,000
Total 1,50,000 3,50,000
II. Assets
1. Non-Current Assets
a. Fixed Assets
i. Tangible Assets 60,000 55, 000
2. Current Assets
a. Inventories 52,500 1,45,000
b. Trade Receivables 30,000 1,05,000
c. Cash and Cash
Equivalents
7,500 45,000
Total 1,50,000 3,50,000
Answer
Common Size Balance Sheet as on year ended 2012 and 2013
Particulars
Absolute Amount
(Rs)
Percentage of Total of
Balance Sheet
(%)
2011-12 2012-13 2011-12 2012-13
I. Equity and Liabilities
1. Shareholder’s Funds
a. Share Capital 1,00,000 1,15,000 66.67 32.86
2. Current Liabilities
a. Trade Payables 50,000 2,35,000 33.33 67.14
Total 1,50,000 3,50,000 100 100
II. Assets
1. Non-Current Assets
a. Fixed Assets
i. Tangible Assets 60,000 55, 000 40 15.71
2. Current Assets
a. Inventories 52,500 1,45,000 35 41.43
b. Trade Receivables 30,000 1,05,000 20 30
c. Cash and Cash Equivalents 7,500 45,000 5 12.86
Total 1,50,000 3,50,000 100 100
Ques. 57 State any two objectives of financial statement analysis.
Answer
The following are the two objectives of financial statement analysis.
a. It helps in evaluating the profit earning capacity and financial feasibility of a business.
b. It helps in evaluating the relative financial status of a firm in comparison to other competitive
firms.
Ques. 58 Mention any two limitations of financial statement analysis.
Answer
The following are the two important limitations of financial statement analysis.
a. Misleading and Wrong Information- The financial analysis fails to reveal the change in the
accounting procedures and practices. Consequently they may provide wrong and misleading
information.
b. Ignores Changes in the Price level- The financial analysis fails to capture the change in price
level. The figures of different years are taken on nominal values and not in real terms (i.e. not
taking price change into considerations). This may prove financial statement analysis
meaningless, if the difference between the two selected time-periods is too long (for example, 10
years, 20 years, etc).
Ques. 59 Use the following Comparative Balance Sheet to comment on the change in the
following financial items.
a. Fixed Assets in relation to Shareholders’ Funds
b. Short-term liquidity position of the organisation
Comparative Balance Sheet as on March 31, 2012 and 2013
Particulars 2012 2013
Absolute
Change
(Rs)
Percentage
Change
(%)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Equity Share Capital 2,00,000 3,00,000 1,00,000 50
b. 10% Preference Share Capital 1,00,000 1,50,000 50,000 50
c. Reserve and Surplus 1,00,000 1,00,000 - -
2. Non-Current Liabilities - - - -
3. Current Liabilities
a. Short-Term Borrowings
(Bank Overdraft)
1,35,000 1,47,500 12,500 9.26
Total 5,35,000 6,97,500 1,62,500 30.37
II. Assets
1. Non-Current Assets
a. Fixed Assets
i. Tangible Assets 3,00,000 4,00,000 1,00,000 33.33
2. Current Assets
a. Trade Receivables (Debtors) 1,90,000 1,40,000 (50,000) (26.32)
b. Cash and Cash Equivalents 45,000 1,57,500 1,12,500 250
Total 5,35,000 6,97,500 1,62,500 30.37
Answer
Interpretation a. On analysing Shareholders’ funds in comparison of Fixed Assets, we can say that while
Total Shareholders’ Funds have increased by 37.5%, whereas, Tangible Assets have
increased by 33.33%. Form this; we can infer that the company has purchased Fixed
Assets using the long-term sources of fund.
b. The Total Current Assets of the company have increased from Rs 2,35,000 (in 2012) to
Rs 2,97,500 (in 2013). On the other hand, the Current Liabilities have increased by
9.26%. Analysing these figures, we can conclude that the short-term liquidity position of
the company has marginally improved, as the Current Ratio in 2012 was 1.77:1, which
increased to 2.02:1 in 2013.
Ques. 60 Complete the given Comparative Income Statement.
Comparative Income Statement
Particulars 2012 2013
Absolute
Change
(Rs)
Percentage
Change
(%)
I. Revenue from operations a 10,00,000 2,00,000 b
II. Other Incomes 10,000 c d 50
Total Revenue (I + II) e f g h
Less: Expenses
Cost of Material Consumed i 2,00,000 (40,000) j
Employees Benefit cost 5,000 k 10,000 l
Finance Costs 1,50,000 m n 20
Other Expenses 12,000 15,000 o p
Profit Before Tax q r s t
Less: Provision for Tax @ 20% u v w x
Profit After Tax
Answer
Comparative Income Statement
Particulars 2012 2013
Absolute
Change
(Rs)
Percentage
Change
(%)
I. Revenue from operations 8,00,000 10,00,000 2,00,000 25
II. Other Incomes 10,000 15,000 5,000 50
Total Revenue (I + II) 8,10,000 10,15,000 2,05,000 25.31
Less: Expenses
Cost of Material Consumed 2,40,000 2,00,000 (40,000) (16.66)
Employees Benefit cost 5,000 15,000 10,000 200
Finance Costs 1,50,000 1,80,000 30,000 20
Other Expenses 12,000 15,000 3,000 25
Profit Before Tax 4,03,000 6,05,000 2,02,000 50.12
Less: Provision for Tax @ 20% 80,600 1,21,000 40,400 50.12
Profit After Tax 3,22,400 4,84,000 1,61,600 50.12
Ques. 61 From the given below information, prepare Comparative Income Statement.
Comparative Income Statement
Particulars 2012 2013
Revenue from operations 15,16,000 22,74,000
Less: Expenses
Cost of Material Consumed 5,45,600 6,54,720
Purchase of Stock-in-Trade 1,35,200 1,89,280
Work-in-Progress and Stock-in-
Trade
82,000 73,800
Employees Benefit cost 1,06,000 2,12,000
Finance Costs 95,000 76,000
Depreciation and Amortization
Expenses
64,500 83,850
Other Expenses 26,000 19,000
Profit Before Tax 4,61,700 9,65,350
Less: Provision for Tax 1,50,000 4,50,000
Profit After Tax 3,11,700 5,15,350
Answer
Comparative Income Statement
Particulars 2012 2013
Absolute
Change
(Rs)
Percentage
Change
(%)
Revenue from operations 15,16,000 22,74,000 7,58,000 50
Less: Expenses
Cost of Material Consumed 5,45,600 6,54,720 1,09,120 20
Purchase of Stock-in-Trade 1,35,200 1,89,280 54,080 40
Work-in-Progress and Stock-in- 82,000 73,800 (8,200) (10)
Trade
Employees Benefit cost 1,06,000 2,12,000 1,06,000 100
Finance Cost 95,000 76,000 (19,000) (20)
Depreciation and Amortisation
Expenses
64,500 83,850 19,350 30
Other Expenses 26,000 19,000 (7,000) (26.92)
Profit Before Tax 4,61,700 9,65,350 5,03,650 109.09
Less: Provision for Tax 1,50,000 4,50,000 3,00,000 200
Profit After Tax 3,11,700 5,15,350 2,03,650 65.34
Ques. 62 State whether the outstanding interest on long-term loan is included in debt while
calculating Debt Equity Ratio?
Answer
If outstanding interest on loan has accrued and due, then it will be included in debt while
calculating Debt Equity ratio. But if the outstanding interest has accrued but not due, then it will
be treated as a current liability and thereby would not be included in debt while calculating Debt
Equity ratio.
Ques. 63 What will be the Operating Ratio, if Operating Profit Ratio is 27.5%?
Answer
Operating Ratio = 100 – Operating Profit Ratio.
Operating Ratio = 100 – 27.5% = 72.5%
Ques. 64 Sales Rs 6,00,000, Gross Profit 20% on Cost, Inventory Turnover Ratio is 5 times, and
Opening Stock is Rs 20,000 more than Closing Stock.
Calculate Opening Stock and Closing Stock.
Answer
Gross Profit is 20% on Cost.
Let Cost is 100%
or, Sales = Cost + Profit
or, Sales = 100%+20% = 120%
If Sales are Rs 6,00,000
Then, Cost
Let Closing stock be x
Opening Stock = Closing Stock + 20,000
= x + 20,000
or, 2,00,000 = Opening Stock + Closing Stock
or, 2,00,000 = x + 20,000 + x
or, 2,00,000 = 2x + 20,000
x = Rs 90,000
Closing Stock = Rs 90,000
Opening Stock = x + 20,000 = 90,000 + 20,000 = Rs 1,10,000
Ques. 65 Consider the given Balance Sheet of a limited company.
Balance Sheet as on March 31, 2012
Particulars Note
No.
Amount
(Rs)
I. Equity and Liabilities
1. Shareholder’s Funds
a. Equity Share Capital 2,00,000
b. Reserve and Surplus 80,000
2. Non-Current Liabilities
a. Long-Term Borrowings 2,50,000
3. Current Liabilities
a. Trade Payable (Creditors) 70,000
b. Short-Term Provisions 20,000
Total 6,20,000
II. Assets
1. Non-Current Assets
a. Fixed Assets
i. Tangible Assets 3,20,000
ii. Intangible Assts 1,80,000
2. Current Assets
a. Inventories 52,000
b. Trade Receivables 46,000
c. Cash and Cash Equivalents 22,000
Total 6,20,000
Sales during the year amounted to Rs 3,60,000. You are required to calculate:
i. Debt-Equity Ratio
ii. Working Capital Turnover Ratio
iii. Current Ratio and Liquid Ratio
iv. Total Assets to Debt Ratio
Answer
(i)
Debt = Long-Term Borrowings = Rs 2,50,000
Equity = Share Capital + Reserves and Surplus = 2,00,000 + 80,000 = Rs 2,80,000
(ii)
Sales = Rs 3,60,000
Working Capital = Current Assets – Current Liabilities
Current Assets = Inventories + Trade Receivables + Cash and Cash Equivalents
= 52,000 + 46,000 + 22,000 = Rs 1,20,000
Current Liabilities = Trade Payable + Short-Term Provisions
= 70,000 + 20,000 = Rs 90,000
Working Capital = 1,20,000 – 90,000 = 30,000
(iii)
Liquid Assets = Current Assets – Stock (Inventories)
= 1,20,000 – 52,000 = 68,000
(iv) Total Assets to Debt Ratio
Total Assets = Current Assets + Non-Current Assets
Current Assets = Rs 1,20,000
Non-Current Assets = Tangible Assets + Intangible Assets
= 3,20,000 + 1,80,000 = Rs 5,00,000
Total Assets = 1,20,000 + 5,00,000 = Rs 6,20,000
Long-Term Debts = Rs 2,50,000
Ques. 66: Calculate Current Assets of a company from the following information:
a. Quick Ratio is 1.5 times
b. Current Liabilities Rs 50,000
c. Sales Rs 5,00,000
d. Gross Profit 20% of Sales
e. Stock Turnover Ratio : 2 times
f. Closing Stock is Rs 10,000, more than Opening Stock
Answer
Quick Assets = 1.5× 50,000
Quick Assets = Rs 75,000
Gross Profit = Sales × Gross Profit Ratio
or
Cost of Goods Sold = Sales – Gross Profit
or, 5,00,000 – 1,00,000 = Rs 4,00,000
Let Opening Stock be x, then the Closing Stock = x + 10,000
or,
or, 4,00,000 = 2x + 10,000
or, 2x = 4,00,000 – 10,000
or, 2x = 3,90,000
x = Rs 1,95,000
Opening Stock = Rs 1,95,000
Closing Stock = Rs 1,95,000 + Rs 10,000 = Rs 2,05,000
Current Assets = Quick Assets + Stock
Current Assets = 75,000 + 2,05,000 = Rs 2,80,000
Ques. 67 Existing working capital Rs 2,50,000 and Current Liabilities Rs 2,00,000.
Consider the following cases.
(a) If stock costing Rs 20,000 sold for cash at profit of 50%
(b) If machinery Rs 1,00,000 bought of which 20,000 paid by cheque and remaining amount
transferred to long-term loan
(c) If creditors Rs 40,000 is settled by paying cash Rs 20,000 in full satisfaction of their claim
(d) If a bill of exchange Rs 30,000 is received from a debtor
(e) If goods list price Rs 50,000 is bought at 10 % trade discount on cash
(f) If machinery book value Rs 1,00,000 is sold for Rs 80,000 in cash
Calculate Current Ratio in all the aforementioned cases and also comment on whether the
Current Ratio has improved, reduced or remained unchanged.
Answer
Working Capital = Current Assets – Current Liabilities
or, 2,50,000 = Current Assets – 2,00,000
or, Current Assets = 2,50,000 + 2,00,000 = Rs 4,50,000
(a)
(b)
(c)
(d)
A bill of exchange of Rs 30,000 received from a debtor does not affect Current Assets. This is
because both debtors and bills of exchange are current assets and are increasing and decreasing
with the same amount. Moreover, as this transaction does not affect current liability, so the
Current Ratio will remain unchanged.
(e)
Bought of goods list price Rs 50,000 at 10% trade discount for cash increases the stock for Rs
45,000 and decreases the cash balances by Rs 45,000, so it will not affect Current Assets. This is
because both stock and cash are increasing and decreasing with the same amount. Further, this
transaction leaves Current Liabilities unchanged. Hence, Current Ratio will remain same.
(f)
As Current Assets and Current Liabilities are unaffected, so Current Ratio remains the same.
Ques. 68 Consider the following financial items.
Particulars Amount
Rs
12% Debentures 1,00,000
Long-term Loans 2,00,000
Sundry Creditors 50,000
Bills Payable 20,000
Provision for Taxation 10,000
Proposed Dividend 20,000
Bills Receivable 30,000
Sundry Debtors 60,000
Stock 40,000
Cash in Hand 5,000
Cash at Bank 30,000
Marketable Securities 15,000
Investment in Shares and Debentures 2,00,000
Sales during the year 12,00,000
Gross Profit Ratio 20%
Debt Equity Ratio 2 : 1
Purchases during the year 7,00,000
40% of the Total Sales and 20% of the Total Purchases were
made on credit
Calculate the following ratios based on the aforementioned financial items.
(a) Shareholder's Fund
(b) Liquid Ratio (Acid Test Ratio)
(c) Debtors Turnover Ratio and Average Collection Period (in months)
(d) Working Capital Turnover Ratio
(e) Fixed Asset Turnover Ratio
(f) Stock Turnover ratio
Answer
(a)
(b)
(c)
(d)
(e)
(f)
Ques. 69 Use given data to find the information required in each of the following cases.
(a) Operating Ratio is 78%. Compute the operating profit in percentage.
(b) Net Profit Ratio is 40%, Gross Profit is Rs. 20,000 and ratio of Gross Profit to Sales is 50%.
Calculate Net Profit and Net Sales.
(c) Current Ratio is 2 : 1, Liquid Ratio is 1.5 : 1 and Current Liabilities is Rs. 50,000. Calculate
the value of Current Asset, Liquid Asset and Stock
(d) Profit before Interest and Tax is Rs. 20,000 and Capital Employed is Rs. 1,00,000. Calculate
Return on Investments.
(e) A company has 5,000 Equity Shares of Rs.10 each (market price of Rs. 20 per share). Profit
after Interest and Tax is Rs. 20,000, calculate Earnings per Share and Price Earnings Ratio.
(f) Closing Stock is Rs. 30,000, Stock Turnover Ratio is 5 Times and the Closing Stock is Rs.
5000 more than that of the beginning. Calculate Cost of Goods Sold and Opening Stock.
Answer
(a)
Let Sales = 100%,
Operating Cost = 78%
Sales = Operating Cost + Operating Profit
100% = 78% + Operating Profit
Operating Profit = 100 % – 78 %
Operating Profit = 22%
(b)
(c)
(d)
(e)
(f)
Closing Stock = Opening Stock + 5,000
or, 30,000 = Opening Stock + 5,000
Opening Stock = Rs. 25,000
Ques. 70 Complete the following sentence with the help of the option in the brackets.
The payment of tax on the capital gain due to the sale of fixed asset is considered as
____________ activity. (Operating / Investing / Financing)
Answer
The payment of tax on the capital gain due to the sale of fixed asset is considered as Investing
activity.
Ques. 71 Do you agree with the below statement.
‘Dividend paid by a finance company should be classified as financing activity in Cash Flow
Statement.’
Answer
The above statement is true. Dividend paid by any company is classified as financing activity as
dividend is paid only to the shareholders of the company. Thus, the dividend paid is considered
as a financing activity irrespective of the nature of company, i.e. whether it is a finance company
or non-finance company.
Ques. 72 State the nature of the cash flows of the following transactions and also ascertain their
resulting cash flows.
a. Plant purchased for Rs 6,00,000; Rs 1,00,000 was paid immediately in form of cash and
debentures costing Rs 5,00,000 were issued for the balance.
b. Building costing Rs 10,00,000 was sold for Rs 1,00,000. Depreciation charged on the Building
is Rs 9,00,000 till date.
c. Loan taken from HDFC bank on July 1, 2010 of Rs 10,00,000 at 10% interest p.a. Account are
closed on March 31, every year.
Answer
S.No. Inflow/Outflow of Cash Activity Amount
Rs
a. Outflow (Purchase of Plant) Investing 1,00,000
b. Inflow (Sale of Building) Investing 1,00,000
c. Inflow (Loan taken) Financing 10,00,000
Note: Interest payment of Rs 75,000, for 9 months, will be shown as an addition in the Operating
Activities (being the non-operating expense) and will be deducted from the Financing Activities.
Ques. 73 Prepare Cash Flow Statement of Shubhankar Ltd.
Shubhankar Ltd.
Balance Sheet
Particulars Note No. 2010
(Rs)
2011
(Rs)
I. Equity and Liabilities
1. Shareholders’ Fund
a. Share Capital 1 5,00,000 6,00,000
b. Reserves and Surplus 2 1,00,000 1,60,000
2. Non-Current Liabilities
a. Long-Term Borrowings 3 1,00,000 2,60,000
3. Current Liabilities
a. Short Term Borrowings 4 18,000 25,000
b. Trade Payables 5 30,000 30,000
c. Short Term Provisions 6 16,000 12,000
Total 7,64,000 10,87,000
II. Assets
1. Non-Current Assets
a. Fixed Assets
i. Tangible Assets 7 5,18,000 7,85,000
ii. Intangible Assets 8 1,00,000 90,000
2. Current Assets
a. Trade Receivables 9 85,000 1,25,000
b. Inventories 10 52,000 75,000
c. Cash and Cash Equivalents 11 9,000 12,000
Total 7,64,000 10,87,000
NOTES TO ACCOUNTS
Note No. Particulars
2010
Amount
(Rs)
2011
Amount
(Rs)
1 Share Capital
Equity Share Capital 5,00,000 6,00,000
2 Reserves and Surplus
General Reserve 70,000 1,00,000
Profit and Loss 30,000 60,000
1,00,000 1,60,000
3 Long Term Borrowings
Loan from PNB - 2,00,000
Debentures 1,00,000 60,000
1,00,000 2,60,000
4 Short Term Borrowings
Bank Overdraft 18,000 25,000
5 Trade Payables
Creditors 20,000 22,000
Bills Payable 10,000 8,000
30,000 30,000
6 Short Term Provisions
Provision for Tax 16,000 12,000
7 Tangible Assets
Machinery 3,68,000 4,85,000
Land - 1,80,000
Furniture 1,50,000 1,20,000
5,18,000 7.85,000
8 Intangible Assets
Patents 1,00,000 90,000
9 Trade Receivables
Debtors 60,000 1,10,000
Bills Receivable 25,000 15,000
85,000 1,25,000
10 Inventories
Stock 52,000 75,000
11 Cash and Cash Equivalents
Cash 3,000 4,000
Marketable Securities 6,000 8,000
9,000 12,000
Additional Information:
1. Interim Dividend of Rs 10,000 paid during the year.
2. Tax paid during the year amounts to Rs 25,000.
3. In the beginning of the year, a part of machinery sold at a profit of 20% on cost for Rs 60,000.
4. Depreciation charged during the year on Machinery Rs 20,000 and on Furniture Rs 5,000.
Answer
Cash Flow Statement
Particulars Amount
Rs
Amount
Rs
(A) Cash Flow from Operating Activities
Profit for the year (60,000 – 30,000) 30,000
Transfer to Reserve 30,000
Provision for Tax (WN1) 21,000
Interim Dividend 10,000
Profit before Taxation 91,000
Add: Items to be Added:
Depreciation 25,000
Patents written-off 10,000
Less: Items to be Deducted:
Profit on Sale of Fixed Assets (WN2) (10,000)
Operating Profit before Working Capital Changes 1,16,000
Add: Decrease in Current Assets and Increase in Current Liabilities:
Decrease in Bills Receivable 10,000
Increase in Creditors 2,000
Less: Increase in Current Assets and Decrease in Current Liabilities:
Decrease in Bills Payables (2,000)
Increase in Debtors (50,000)
Increase in Stock (23,000)
Cash Generated from Operations 53,000
Less: Income Tax Paid (25,000)
Cash flow from Operating Activities 28,000 28,000
(B) Cash Flow from Investing Activities
Purchase of Land (1,80,000)
Purchase of Machinery (WN4) (1,87,000)
Proceeds from Sale of Furniture (WN3) 25,000
Proceeds from Sale of Machinery 60,000
Cash Used in Investing Activities (2,82,000) (2,82,000)
(C) Cash Flow from Financing Activities
Proceeds from Loan taken from PNB 2,00,000
Proceeds from Issue of Equity Shares 1,00,000
Repayment of Debentures (40,000)
Increase in Bank Overdraft 7,000
Interim Dividend Paid (10,000)
Cash Flow from Financing Activities 2,50,000 2,57,000
Net Decrease in Cash and Cash Equivalents (A+B+C) 3,000
Add: Opening Cash and Cash Equivalents 9,000
Closing Cash and Cash Equivalents 12,000
Working Notes:
WN1
Provision for Tax Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Bank A/c (Tax Paid) 25,000 Balance b/d 16,000
Balance c/d 12,000 Profit and Loss A/c
(Provision made) (Balancing
Figure)
21,000
37,000 37,000
WN2 Calculation of Profit/Loss on Sale of Machinery
Sale Value = Rs 60,000
Profit = 20% on Cost
Let Cost be x
WN3
Furniture Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Balance b/d 1,50,000 Bank A/c (Sale) (Balancing
Figure)
25,000
Depreciation A/c 5,000
Balance c/d 1,20,000
1,50,000 1,50,000
WN4
Machinery Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Balance b/d 3,68,000 Bank A/c (Sale) 60,000
Profit on Sale of Machinery (WN) 10,000 Depreciation A/c 20,000
Bank A/c (Purchases) (Balancing
Figure)
1,87,000 Balance c/d 4,85,000
5,65,000 5,65,000
Ques. 74 Which part of the current assets is not considered, when ‘Cash Flow from Operating
Activities’ is ascertained by using indirect method? Also state the reasons for their exclusion?
Answer
Cash in hand, Cash at bank and Marketable Investments are not taken into consideration for
ascertaining Cash Flow from Operating Activities. This is because these are considered as cash
and cash equivalents which are subjected to insignificant risk of change in their value.
Ques. 75 The following balance has been extracted taken from the financial statements of X Ltd.
Particulars Year-2010
Rs
Year-2011
Rs
Machinery (Book-value) 4,00,000 7,00,000
Goodwill 10,000 15,000
Patents 40,000 35,000
Investments in 10% Government Bonds 1,00,000 1,20,000
Investment in 12% Debentures of Y Ltd. 50,000 60,000
Building (Cost) 4,00,000 5,00,000
Accumulated Depreciation on Building 80,000 1,00,000
Plant (Cost) 2,50,000 3,00,000
Accumulated Depreciation on Plant 40,000 50,000
Additional Information: a) In 2011, depreciation Rs 60,000 charged on machinery. A machine book-value of Rs 1,50,000
was sold for Rs 1,10,000. During the year, 50% of the machinery purchased was on credit.
b) Additional debentures were purchased on July 01, 2011.
c) Depreciation Rs 30,000 charged was on building during the year 2011. A building book-value
of Rs 80,000 was sold for Rs 1,10,000.
d) Plant costing Rs 50,000 (accumulated depreciation Rs 10,000) was sold for Rs 30,000.
e) There were no sales or purchase of patents.
f) Accrued interest of Rs 10,000 is included in the Government Bonds during the year 2011.
Ascertain the Cash Flow from Investing Activities
Answer
Cash Flow from Investing Activities
Particulars Amount
Rs
Inflow
Proceeds from sale of Machinery 1,10,000
Proceeds from sale of Building 1,10,000
Proceeds from Sale of Plant 30,000
Interest Received on 12% Debentures 6,600
Outflow
Purchase of Machinery in Cash (2,55,000)
Purchase of Building (1,90,000)
Purchase of Plant (1,00,000)
Purchase of Goodwill (5,000)
Purchase of 10% Government Bonds (10,000)
Purchase of 12% Debentures of Y Ltd. (10,000)
Net Cash used in Investing Activities (3,13,400)
Working Notes: 1.
Machinery Account (Book Value)
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Balance b/d 4,00,000 Bank (Sale) - Inflow 1,10,000
Bank - Outflow 2,55,000 Profit and Loss (loss) 40,000
Creditors for Machinery 2,55,000 Depreciation 60,000
Balance c/d 7,00,000
9,10,000 9,10,000
Total machinery purchased during the year 2011 = Rs 5,10,000
Machinery purchased on credit = 5,10,000 × 50% = Rs 2,55,000
2. Calculation of Interest on Debentures
For whole year (January to December)
Rs 6,000
From July to December
+ Rs 600
Interest received on 12% Debentures Rs 6,600
3.
Building Account (Original Cost)
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Balance b/d 4,00,000 Bank (Sale) - Inflow 1,10,000
Profit and Loss (Profit) (50,000 –
20,000)
30,000 Accumulated Depreciation 10,000
Bank (Balancing figure-
Purchases)
1,90,000 Balance c/d 5,00,000
6,20,000 6,20,000
Accumulated Depreciation on Building Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Building (Balancing figure) 10,000 Balance b/d 80,000
Balance c/d 1,00,000 Depreciation 30,000
1,10,000 1,10,000
4.
Plant Account (Original Cost)
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Balance b/d 2,50,000 Bank - Inflow 30,000
Accumulated Depreciation 10,000
Profit and Loss (loss) (50,000 –
10,000 – 30,000)
10,000
Bank (Balancing figure-
Purchases)
1,00,000 Balance c/d 3,00,000
3,50,000 3,50,000
Accumulated Depreciation on Plant Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Plant 10,000 Balance b/d 40,000
Balance c/d 50,000 Depreciation (Balancing figure) 20,000
60,000 60,000
Ques. 76 The following are the Balance Sheets of Mohan Ltd. for two consecutive years ending
March 31, 2010 and 2011. With the help of these Balance Sheets along with the additional
information prepare Cash Flow Statements.
Mohan Ltd.
Balance Sheet as on March 31, 2010 and 2011
Particulars Note No. 2010
(Rs)
2011
(Rs)
I. Equity and Liabilities
1. Shareholders’ Fund
a. Share Capital 1 8,00,000 7,00,000
b. Reserves and Surplus 2 1,40,000 1,20,000
2. Non-Current Liabilities
a. Long-Term Borrowings 3 1,80,000 4,00,000
3. Current Liabilities
a. Trade Payables 4 30,000 52,000
Total 11,60,000 12,90,000
II. Assets
1. Non-Current Assets
a. Fixed Assets
i. Tangible Assets 5 6,29,000 7,11,000
ii. Intangible Assets 6 2,50,000 2,75,000
b. Other Non-Current Assets 7 50,000 1,10,000
2. Current Assets
a. Trade Receivables 8 85,000 47,000
b. Inventories 9 84,000 1,02,000
c. Cash and Cash Equivalents 10 62,000 45,000
Total 11,60,000 12,90,000
NOTES TO ACCOUNTS
Note No. Particulars 2010
(Rs)
2011
(Rs)
1 Share Capital
Equity Share Capital (Rs 10 each) 3,00,000 3,00,000
10% Preference Share Capital (Rs 100 each) 5,00,000 4,00,000
8,00,000 7,00,000
2 Reserves and Surplus
General Reserve 60,000 80,000
Profit and Loss 80,000 40,000
1,40,000 1,20,000
3 Long Term Borrowings
12% Debentures 1,80,000 4,00,000
4 Trade Payables
Creditors 30,000 52,000
5 Tangible Assets
Plant (at cost) 2,50,000 4,85,000
Less: Accumulated Depreciation (82,000) (1,25,000)
Plant (at WDV) 1,68,000 3,60,000
Land 4,61,000 3,51,000
6,29,000 7,11,000
6 Intangible Assets
Goodwill 2,50,000 2,00,000
Copyrights - 75,000
2,50,000 2,75,000
7 Other Non-Current Investments
Investment in Reliance Ltd, Shares 50,000 50,000
Investment in ICICI Bonds - 60,000
50,000 1,10,000
8 Trade Receivable
Debtors 85,000 47,000
9 Inventories
Stock 84,000 1,02,000
10 Cash and Cash Equivalents
Bank 62,000 45,000
Additional Information:
1. New Debentures were issued on October 01, 2010.
2. 15% Dividend was proposed on Equity Shares during the year.
3. Preference Shares were redeemed on March 31, 2011 at a premium of 20%. Preference
Dividend was also paid on the same date.
4. Depreciation charged during the year on Machinery was Rs 46,000. Also, a part of Machinery
of Book Value of Rs 30,000 was sold for Rs 20,000 during the year.
5. Amounts of Proposed dividend as on 31st December 2010 and 2011 were Rs.10,000 and
Rs.15,000
Answer
Cash Flow Statement
Particulars Amount
(Rs)
Amount
(Rs)
(A) Cash Flow from Operating Activities
Profit for the year (80,000 – 40,000) (40,000)
Transfer to Reserve 20,000
Equity Shares Dividend 45,000
Preference Shares Dividend 50,000
Profit before Taxation 75,000
Add: Items to be Added:
Interest on Debentures (WN) 28,200
Loss on Sale of Machinery 7,000
Depreciation 46,000
Goodwill Written-Off 50,000
Premium on Redemption of Preference Shares 20,000
Less: Items to be Deducted: -
Operating Profit before Working Capital Changes 2,26,200
Add: Decrease in Current Assets and Increase in
Current Liabilities:
Decrease in Debtors 38,000
Increase in Creditors 22,000
Less: Increase in Current Assets and Decrease in
Current Liabilities:
Increase in Stock (18,000)
Cash Generated from Operations 2,68,200
Less:Income Tax Paid -
Cash Flow from Operating Activities 2,68,200 2,68,200
(B) Cash Flow from Investing Activities
Purchase of Copyright (75,000)
Purchase of ICICI Bonds (60,000)
Purchase of Machinery (2,65,000)
Proceeds from Sale of Land 1,10,000
Proceeds from Sale of Machinery 20,000
Cash Used in Investing Activities (2,70,000) (2,70,000)
(C) Cash Flow from Financing Activities
Proceeds from Issue of 12% Debentures 2,20,000
Redemption of Preference Shares (1,00,000 +
20,000)
(1,20,000)
Interest on Debentures (28,200)
Equity Dividend Paid (WN2) (37,000)
Preference Dividend Paid (50,000)
Cash Used in Financing Activities (15,200) (15,200)
Net Decrease in Cash and Cash Equivalents
(A+B+C)
(17,000)
Add: Opening Cash and Cash Equivalents 62,000
Closing Cash and Cash Equivalents 45,000
Working Notes:
WN1 Calculation of Interest on Debentures
Total Amount of Interest = 21,600 + 6,600 = Rs 28,200
WN2
Proposed Dividend Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Bank A/c (Dividend Paid) (Balancing
Figure)
37,000 Balance b/d 10,000
Balance c/d 18,000 Profit and Loss A/c (Equity
Dividend proposed /made)
45,000
55,000 55,000
WN3
Machinery Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Balance b/d 2,50,000 Bank A/c (Sale) 20,000
Loss on Sale
(30,000 – 3,000 – 20,000) 7,000
Accumulated Depreciation A/c 3,000
Bank A/c (Purchase) (Balancing Figure) 2,65,000 Balance c/d 4,85,000
5,15,000 5,15,000
Accumulated Depreciation Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Machinery A/c (Balancing figure) 3,000 Balance b/d 82,000
Balance c/d 1,25,000 Depreciation (during the
year)
46,000
1,28,000 1,28,000
Ques. 77 Which of the following reasons allows a partner to be exempted from bearing the
losses?
(a) Admission of a partner to share profits only
(b) Losses incurred due to willful negligence of other partners
(c) Admission of a partner who has not attained 18 years of age
(d) All of the above
Answer
Usually, all the partners are liable to borne the losses incurred. However, there may be certain
instances when a partner is exempted from bearing the losses of the firm. These are:
a. When a partner is admitted to share profits only (and not to bear any losses)
b. When the losses are incurred due to the negligence of the other partners
c. When a minor partner is admitted into partnership (a minor partner is not liable to bear any
losses, he/she is entitled to enjoy a share in the profits of the firm only)
Therefore, all the above reasons justify the exemption of a partner from bearing a share in the
firm’s losses.
Hence, the correct answer is option (d).
Ques. 78 Poorvi Ltd. forfeited 2,250 shares of Rs 15 each issued at a premium of Re 1 to Parth
on which he has paid Rs 10 per share and Final call of Rs 5 per share has not been received. Out
of these shares, sufficient shares were reissued to Creditors of Rs 10,000 in full settlement at Rs
8 as Rs 10 called-up. Pass the necessary Journal entries for the forfeiture and reissue of shares.
Answer
Books of Poorvi Ltd.
Journal
Date Particulars L.F.
Debit
Amount
Rs
Credit
Amount
Rs
Share Capital A/c Dr. 33,750
To Share Forfeiture A/c 22,500
To Share Final Call A/c 11,250
(2,250 shares were forfeited due to non-
payment of Rs 5 each)
Creditors A/c
Dr.
10,000
Share Forfeiture A/c Dr. 2,500
To Share Capital A/c 12,500
(1,250 shares were reissued to Creditors at Rs
8 as Rs 10 called-up)
Share Forfeiture A/c (WN2)
Dr.
10,000
To Capital Reserve A/c 10,000
(Profit on forfeiture of shares is transferred to
capital reserve)
Working Notes: (1) Calculation of number of shares issued to Creditors
(2) Amount of Capital Reserve:
Ques. 79 On April 01, 2009, Chaipani Limited issued 5,000, 12% debentures of Rs 50 each at
discount of 10% redeemable at a premium of 13% after 3 years. The company had a balance of
Rs 62,500 in its DRR Account. The company redeemed 4,000 debentures at the end of the
second year. Interest is payable on the debentures assuming income tax is payable at 5% on the
amount of interest. Pass the necessary Journal entries in the books of the company for the first
two years.
Answer
Journal
Date Particulars L.F.
Debit
Amount
Rs
Credit
Amount
Rs
2009 At the time of Issue
Apr.
01
Bank A/c
Dr.
2,25,000
To Debenture Application A/c 2,25,000
(5,000 debentures of Rs 50 each issued
at 10% discount)
Apr.
01
Debenture Application A/c
Dr.
2,25,000
Loss on Issue of Debenture A/c (25,000
+ 32,500)
Dr. 57,500
To 12% Debenture A/c 2,50,000
To Premium on Redemption A/c 32,500
(Debentures issued at 10% discount with
a term redeemable at 13% premium)
2010 At the end of First Year
Mar.
31
Debenture Interest A/c
Dr.
30,000
To Debentureholders’ A/c 28,500
To Income Tax Payable A/c 1,500
(Interest due on debentures @ 12%)
Mar.
31
Debentureholders’ A/c
Dr.
28,500
Income Tax Payable A/c Dr. 1,500
To Bank A/c 30,000
(Payment made to Debentureholders and
Government)
Mar.
31
Statement of Profit and Loss
Dr.
30,000
To Debenture Interest A/c 30,000
(Interest on debentures transferred to
Statement of Profit and Loss)
2010 Redemption Year
Apr.
30
Debenture Redemption Investment A/c
Dr.
30,000
To Bank A/c 30,000
(Investment is made in specified
securities equal to 15% of the value of
debentures redeemable)
2011 At the end of Second Year
Mar.
31
Debenture Interest A/c
Dr.
30,000
To Debentureholders’ A/c 28,500
To Income Tax Payable A/c 1,500
(Interest due on debentures @ 12%)
Mar.
31
Debentureholders’ A/c
Dr.
28,500
Income Tax Payable A/c Dr. 1,500
To Bank A/c 30,000
(Payment made to Debentureholders and
Government)
Mar.
31
Statement of Profit and Loss
Dr.
30,000
To Debenture Interest A/c 30,000
(Interest on debentures transferred to
Statement of Profit and Loss)
Mar.
31 Debenture A/c (4,000 × Rs 50) Dr. 2,00,000
Premium on Redemption A/c (4,000 ×
Rs 6.5)
Dr. 26,000
To Debentureholders’ A/c 2,26,000
(Amount due the debentureholders)
Mar.
31
Bank A/c
Dr.
30,000
To Debenture Redemption Investment A/c 30,000
(Investments encashed)
Mar.
31
Debentureholders’ A/c
Dr.
2,26,000
To Bank A/c 2,26,000
(Payment to the debentureholders)
Working Notes:
1. Company is required to maintain DRR at 25% of the value of debentures
Total Debentures = 5,000 50 = Rs 2,50,000
Amount of DRR = 25% =
Since Rs 62,500 already appears in the DRR Account, so, DRR will not be created further.
2. Company is required to invest in securities, an amount equivalent to 15% of the value of
debentures redeemable in a year.
Debentures of value Rs 2,00,000 are redeemed on March 31, 2011. So, DRI will be
created on April 30 of the redemption year i.e. on April 30, 2010.
Amount of DRI =
Ques. 80 Akash Limited decided to purchase 1,000, 10% Debentures of face value Rs 10 each
from open market for immediate cancellation. The debentures were purchased as:
Debentures of face value Rs 5000 at Rs 9.5 per Debenture
Debentures of face value Rs 5,000 at Rs 9.6 per Debenture
Expenses incurred on purchase of debentures amounted to Rs 300.
Pass the necessary Journal entries for the redemption of debentures.
Answer
Books of Akash Limited
Journal
Date
Particulars L.F.
Amount
Rs.
Amount
Rs.
Own Debentures A/c Dr. 9,850
To Bank A/c 9,850
(Purchased of 500 own debentures @ Rs 9.5 and
another 500 own debentures @ Rs 9.6, expenses
for purchase of Rs 300)
10% Debentures A/c Dr. 10,000
To Own Debentures A/c 9,850
To Profit on Cancellation of Debentures A/c 150
(1,000 own debentures cancelled)
Profit on Cancellation of Debentures A/c Dr. 150
To Capital Reserve A/c 150
(Profit on cancellation of own debentures
transferred to Capital Reserve)
Note: It is assumed that the company has sufficient balance in its DRR Account and also have
made investment in DRI @ 15% of the debentures to be redeemed during the financial year.
Hence, the entries related to DRR and DRI and encashment of DRI are not being passed.
Ques. 81 At the time of admission of a new partner, in which ratio the debit balance of Profit and
Loss Account (appearing in the Balance Sheet) is written-off?
(a) Sacrificing Ratio
(b) Old Profit-sharing Ratio
(c) In the ratio of their capitals
(d) Is not distributed and appears in the Balance Sheet of new firm
Answer
At the time admission of a new partner, if any Profit and Loss Account (Debit) appears on the
Assets side of the Balance Sheet, then it is written-off in the old profit sharing ratio among the
old partners.
Hence, the correct answer is option (b).
Ques. 82 A and B are two partners sharing profits and losses in the ratio of 2 : 1. On January 01,
2011, their capital account showed balances of Rs 1,20,000 and Rs 90,000, respectively.
Drawings made by A and B during the year were Rs 20,000 and Rs 16,000 respectively. As per
their partnership deed, interest on drawings is to be charged at 15% p.a. After closing the
accounts for the year 2011, it was found that the profit was distributed without charging interest
on drawings. Pass the necessary Journal entry for adjustment of interest on drawings.
Answer
Date Particulars
L.F.
Debit
Amount
Rs
Credit
Amount
Rs
B’s capital A/c
To A’s Capital A/c
(Interest on drawings adjusted)
Dr.
300
300
Working Notes:
Particulars A B
Total
Interest on Drawings Omitted (1,500) (1,200) = (2,700)
Rs 2,700 Profit Wrongly Distributed in the
ratio 2:1
1,800
900
=
2,700
300 (300) NIL
Ques. 83 Abhishek, Rahul and Deepak are partners in a firm sharing profits and losses in ratio of
5 : 3 : 2. They decided to dissolve their firm. On March 31, 2012 their Balance Sheet was as
follows.
Balance Sheet as on March 31, 2012
Liabilities Amount
Rs Assets
Amount
Rs
Capital A/cs: Leasehold Premises 75,000
Abhishek 72,000 Furniture 15,000
Rahul 54,000 Investment 50,000
Deepak 60,000 1,86,000 Sundry Debtors 40,000
Investment Fluctuation Fund 14,000 Cash at Bank 45,000
Deepika’s Loan 15,000 Deferred Revenue Expenditure 8,000
Sundry Creditors 18,000
2,33,000 2,33,000
Dissolution is based on the following terms.
i. Deepak took over investment at 20% above book value. He sold 50% of the investment below
10% of purchase price and remaining investment he kept with himself.
ii. Creditors due to good relation with company agree to forego their dues.
iii. Fixed Assets were sold 10% above their book value.
Pass the necessary Journal entries for dissolution of Partnership firm
Answer
Journal
Date Particulars L.F.
Debit
Amount (Rs)
Credit
Amount (Rs)
Realisation A/c Dr. 1,80,000
To Leasehold Premises 75,000
To Furniture 15,000
To Investment 50,000
To Sundry Debtors 40,000
(Assets transferred to Realisation Account)
Deepika’s Loan A/c
Dr.
15,000
Sundry Creditors A/c Dr. 18,000
Investment Fluctuation Fund A/c Dr. 14,000
To Realisation A/c 47,000
(Liabilities transferred to Realisation Account)
Abhishek’s Capital A/c
Dr.
4,000
Rahul’s Capital A/c Dr. 2,400
Deepak’s Capital A/c Dr. 1,600
To Deferred Revenue Expenditure A/c 8,000
(Deferred Revenue Expenditure distributed among
partner in old ratio 5:3:2)
Bank A/c
Dr.
99,000
To Realisation A/c 99,000
(Fixed assets realised 10% above book-value)
Deepak’s Capital A/c
Dr.
60,000
To Realisation A/c 60,000
(Deepak took over Investment at 20% above their
book value)
Realisation A/c
Dr.
15,000
To Bank A/c 15,000
(Deepika’s Loan paid)
Realisation A/c
Dr.
11,000
To Abhishek’s Capital A/c 5,500
To Rahul’s Captal A/c 3,300
To Deepak’s Capital A/c 2,200
(Profit on realisation transferred to partners in their
profit sharing ratio)
Abhishek’s Capital A/c
Dr.
73,500
Rahul’s Capital A/c Dr. 54,900
Deepak’s Capital A/c Dr. 600
To Bank A/c 1,29,000
(Balance of partners settled)
Note: If no information is given regarding the realised value of an asset, then it is assumed to
have realise nothing. Therefore, debtors have not been realised.
Ques. 84 Amir and Saif are partners sharing profits and losses in the ratio of 7 : 3. They decided
to admit Akshay as a partner who earlier worked as a manager. The Balances Sheet before the
admission of Akshay is as follows.
Balance Sheet
Liabilities Amount
Rs Assets
Amount
Rs
Sundry Creditors
Bills Payable
Akshay’s Loan
15,000
3,000
20,000
Cash at Bank
Sundry Debtors
Less: Provision for Doubtful
Debts
18,000
(200)
3,200
17,800
Capital A/cs:
Amir
Saif
40,000
20,000
60,000
10% Investment
Machinery
Furniture
Building
12,000
10,000
15,000
40,000
98,000 98,000
Akshay is admitted for 1/3rd
share and he needs to bring sufficient capital so that his capital
becomes 1/3rd
of the total capital of the firm. Akshay’s loan is to be converted into his capital
and any excess or deficiency after the conversion is to be adjusted through Bank Account. On the
admission of Akshay, Sundry Creditors of Rs 2,000 remained unclaimed and the Provision for
Doubtful Debts was not required anymore. Interest was accrued on Investment for two months.
Building is to be depreciated by 10%.
The total capital of the new firm is to be determined on the basis of the combined capital of Amir
and Saif after all the given adjustments. Prepare Revaluation Account, Partners’ Capital Account
and Balance Sheet.
Answer
Revaluation Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Building 4,000 Sundry Creditors
Provision for Doubtful Debts
Interest Accrued on Investment
2,000
200
200
Loss transferred to:
Amir’s Capital A/c
Saif’s Capital A/c
1,120
480
1,600
4,000 4,000
Partners’ Capital Accounts
Dr. Cr.
Particulars Amir Saif Akshay Particulars Amir Saif Akshay
Revaluation A/c
(Loss)
Balance c/d
1,120
38,880
480
19,520
Balance b/d
Akshay’s Loan
40,000 20,000
20,000
40,000 20,000 20,000 40,000 20,000 20,000
Balance c/d
(adjusted)
38,880
19,520
29,200
Balance c/d
Bank A/c
38,800 19,520 20,000
9,200
38,880 19,520 29,200 38,880 19,520 29,200
Balance Sheet
Liabilities Amount
Rs Assets
Amount
Rs
Sundry Creditors
Less: Unclaimed Creditors
15,000
(2,000)
13,000
Cash at Bank (3,200 +
9,200)
Sundry Debtors
12,400
18,000
Bills Payable
Capital:
Amir
Saif
Akshay
38,880
19,520
29,200
3,000
87,600
10% Investment
Accrued Interest on
Investment
Machinery
Furniture
Building
40,000
12,000
200
10,000
15,000
Less: 10% Depreciation (4,000) 36,000
1,03,600 1,03,600
Working Notes: Combined Capital of Amir and Saif (after all adjustments) = 38,880 + 19,520 = Rs 58,400
Total amount to be brought in by Akshay
Akshay Capital 29,200
Less: Loan (20,000)
Akshay to bring in Cash 9,200
Ques.85 Calculate the amount of Opening Debtors from the following data:
Credit Sales 5,00,000
Debtors at the end of the year 60,000
Credit Collection Period 60 days
Answer
Ques. 86 Which of the following would not affect the cash flow from operating activities?
(a) Cash receipts from insurance enterprises for premiums and claims, annuities and other policy
benefits
(b) Cash payments relating to future contracts held for trading purpose
(c) Refund of Income tax
(d) Buy back of equity shares
Answer
Operating activities are the principal revenue generating activities of an enterprise. The cash
flows from such activities imply inflow and outflow of cash and cash equivalents during the
normal course of ordinary business activities. Accordingly, cash inflows will include cash
received from sale of goods and services i.e. receipts from customers, receipt of royalties,
commission, fees, etc. and cash outflows will include payment made to creditors, employees,
income tax paid, etc. Thus,
1. cash receipts from insurance enterprises for premiums and claims, annuities and other policy
benefits
2. cash payments relating to future contracts held for trading purpose
3. refund of income tax
All will affect the cash flow from operating activities. However, buy back of equity shares is an
item of cash outflow affecting financing activities as these are the activities related to long term
funds or capital of an enterprise i.e. results into change in capital or borrowed funds.
Hence, the correct answer is option (d).
Ques. 87 Anika Ltd. has authorised capital of Rs 5,00,000 divided into equity shares of Rs 10
each. The company issued 30,000 shares to vendor for purchase of Machinery and remaining
shares issued to the general public at 20% premium. The amount was payable in the following
manner:
Rs 2 per share on application
Rs 6 per share (including premium) on allotment
Rs 2 per share on first call
Rs 2 per share on second and final call
All the shares were subscribed and allotted. Mahindra, a holder 200 shares failed to pay the last
two calls, consequently and his shares were forfeited. These shares were immediately reissued at
Rs 9 per share as fully paid-up. Prepare the Company’s Balance Sheet as per the Schedule
III and also prepare Notes to Accounts of the Share Capital.
Answer
Anika Ltd.
Balance Sheet
Particulars Note
No.
Amount
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 5,00,000
b. Reserves and Surplus 2 41,000
2. Non-Current Liabilities
3. Current Liabilities
Total 5,41,000
II. Assets
1. Non-Current Assets
a. Tangible assets
i. Machinery 3 3,00,000
2. Current Assets
a. Cash and Cash Equivalents 4 2,41,000
Total 5,41,000
NOTES TO ACCOUNTS
Note
No. Particulars
Amount
(Rs)
1 Share Capital
Authorised Share Capital
50,000 equity shares of Rs 10 each 5,00,000
Issued Share Capital
30,000 shares of Rs 10 each issued to vendor 3,00,000
20,000 shares of Rs 10 each issued to general public 2,00,000 5,00,000
Subscribed, Called-up and Paid-up Share Capital
30,000 shares of Rs 10 each issued to vendor 3,00,000
20,000 shares of Rs 10 each issued to general public 2,00,000 5,00,000
2 Reserves and Surplus
Securities Premium 40,000
Capital Reserve 1,000 41,000
3 Tangible Assets
Machinery 3,00,000
4 Cash and Cash Equivalents
Cash at Bank 2,41,000
Working Note:
Ques. 88 There are 800 members in a club each paying an annual subscription Rs 50.
Particulars Amount (Rs.)
Subscription received during the year 2011-12
2010-11 800
2011-12 37,500
2012-13 1,500 39,800
Subscription Outstanding as on March 31, 2011 1,200
Calculate the amount of Subscription Outstanding as on March 31, 2012.
Answer
Subscription Account
Dr. Cr.
Particulars Amount
(Rs.) Particulars
Amount
(Rs.)
Subscription Outstanding (in the
beginning)
1,200 Bank/Cash 39,800
Income and Expenditure (800
members × Rs. 50 each)
40,000 Subscription Outstanding
(Balancing figure)
2,900
Subscription received in Advance 1,500
42,700 42,700
Hence, the Outstanding Subscription on March 31, 2011 is Rs. 2,900
Ques. 89 The following figures were extracted from the Trial Balance of Jeet Limited:
Particulars Rs
Building 2,00,000
Land 3,00,000
Livestock 50,000
Prepaid Rent 3,000
Discount on Issue of Debentures 5,000
Share in Alpha Ltd. (Face-value Rs 20,000) 18,000
Interest accrued on Investment 2,000
Show the above items in the Balance Sheet of Jeet Ltd. as per Schedule III of the Companies
Act, 2013.
Answer
Jeet Limited
Balance Sheet
Particulars Note No. Amount
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
2. Non-Current Liabilities
3. Current Liabilities
Total
II. Assets
1. Non-Current Assets
a. Fixed Assets
i. Tangible Assets 1 5,50,000
b. Non-Current Investments 2 18,000
c. Other Non-Current Assets 3 5,000
2. Current Assets
a. Other Current Assets 4 5,000
Total
NOTES TO ACCOUNTS
Note
No. Particulars
Amount
(Rs)
1 Tangible Assets
Land 3,00,000
Building 2,00,000
Livestock 50,000 5,50,000
2 Non-Current Investments
Share in Alpha Ltd. (Face-value Rs 20,000) 18,000
3 Other Non-Current Assets
Discount on Issue of Debentures 5,000
4 Current Assets
Interest Accrued on Investments 2,000
Prepaid Rent 3,000 5,000
Ques. 90 Y and S are partners sharing profits and losses in the ratio of 1:1 and their capital
balances on January 01, 2012 were Rs 40,000 and Rs 50,000 respectively.
As per the partnership deed, profit earned is to be distributed in the following manner.
1. Y is entitled to 5% commission on net profit and S 5% commission on net profit after charging
commission.
2. Salary to Y 500 p.a.
3. Interest on drawings to be charged at 2%.
4. S was guaranteed by Y that under any circumstances, his profit would not be less than 12,000.
During the year, Y withdrew Rs 4,000 on January 01, 2012 and S withdrew Rs 6,000 on October
31, 2012. At the end of the year, profit after charging salary amounts to Rs 21,605.
Show the distribution of profit by preparing Profit and Loss Appropriation Account.
Answer
Profit and Loss Appropriation Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Commission to: Profit (21,605 + 500)
(Profit before charging salary)
22,105
Y 1,105 Interest on Drawings:
S 1,000 2,105 Y (4,000 × 2%) 80
Salary to Y 500 S (6,000 × 2%) 120 200
Profit transferred to:
Y’s Capital A/c 7,700
S’s Capital A/c 12,000 19,700
22,305 22,305
Working Notes: WN1 Calculation of Commission to Partners
WN2 Calculation of Profit Share of each Partner
Profit available for distribution = (22,105 + 200) – (2,105 + 500) = Rs 19,700
S has been guaranteed by Y of minimum profit of Rs 12,000.
Deficiency in S’s profit share = 12,000 – 9,850 = Rs 2,150
Y’s Final Profit Share = 9,850 – 2,150 = 7,700
Ques. 91 Ramesh Ltd. has an authorised share capital of Rs 10,00,000 divided into equity shares
of Rs 100 each. Out of this, the company has already issued shares of Rs 1,00,000 last year. This
year, the company offered Rs 5,00,000 shares to the general public, Rs 50,000 shares to its
existence shareholders as bonus issue and Rs 25,000 shares to its employees as Sweat Equity
shares. The company also offered shares of Rs 1,00,000 as purchase consideration for the
purchase of machinery to the vendor. Prepare the Company’s Balance Sheet as per Schedule III
of the Companies Act, 2013 and also prepare the Notes to Accounts for Share Capital, assuming
that all the shares offered were subscribed.
Answer
Ramesh Ltd.
Balance Sheet
Particulars Note
No.
Amount
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 7,75,000
2. Non-Current Liabilities
3. Current Liabilities
Total 7,75,000
II. Assets
1. Non-Current Assets
2. Current Assets
Total
NOTES TO ACCOUNTS
Note
No. Particulars
Amount
(Rs)
1 Share Capital
Authorised Share Capital
10,000 shares of Rs 100 each 10,00,000
Issued Share Capital
General Public: 6,500 shares of Rs 100 each 6,50,000
Employees: 250 shares of Rs 100 each 25,000
Vendor: 1,000 shares of Rs 100 each 1,00,000 7,75,000
Subscribed, Called-up and Paid-up Share Capital
General Public: 6,500 shares of Rs 100 each 6,50,000
Employees: 250 shares of Rs 100 each 25,000
Vendor: 1,000 shares of Rs 100 each 1,00,000 7,75,000
Ques. 92 Kumar Limited purchased furniture of Rs 2,50,000 from Furniture Mart. 1/4th
of the
amount for purchase of furniture was paid through demand draft and the balance was discharged
by issuing 10% Debentures of Rs 100 each at a premium of 25%. Pass the necessary Journal
entries in the books of Kumar Limited.
Answer
Journal in the books Kumar Limited
Date Particulars L.F.
Debit
Amount
(Rs)
Credit
Amount
(Rs)
Furniture A/c Dr. 2,50,000
To Furniture Mart 2,50,000
(Furniture purchased from Furniture Mart)
Furniture Mart
Dr.
2,50,000
To Bank A/c 62,500
To 10% Debentures A/c 1,50,000
To Securities Premium A/c 37,500
(Balance of Furniture Mart Limited discharged by
paying 1/4th
in cash and the balance by issuing
10% Debentures of Rs 100 each at 25% premium)
Working Note:
Ques. 93 A and B are partners in a partnership firm. Their capital balances as on January 01,
2011 were Rs 30,000 and 60,000 respectively. As per their partnership deed, interest on capital is
to be provided at 10% p.a. and interest on drawings at 4%. Besides these, the firm is obliged to
pay interest of Rs 1,000 on A’s loan. Profit after all adjustments is to be distributed in the ratio of
3 : 2. During the year 2011, the firm had a profit of Rs 9,000 before above adjustments.
Drawings made during the year by both the partners amounted to Rs 5,000 each. Prepare Profit
and Loss Appropriation Account showing the distribution of profit.
Answer
Profit and Loss Appropriation Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Interest on Capital: Profit and Loss A/c (9,000 – 1,000) 8,000
A 2,800 Interest on Drawings:
B 5,600 8,400 A 200
B 200 400
8,400 8,400
Working Notes:
WN1Interest on Partners’ Drawings
WN2Interest on Partners’ Capital
Ques. 94 A and B are partners sharing profits and losses in the ratio of 3 : 2. A withdrew Rs
2,000 per month in the beginning of every month, whereas, B withdrew Rs 6,000 on July 01,
2012 and Rs10,000 on October 01, 2012. After preparation of accounts, it was found that profit
for the year 2012 distributed after charging interest on drawings at 9% p.a. instead of 6% p.a.
Pass a single adjusted Journal entry to rectify the mistake committed.
Answer
Journal
Date Particulars L.F.
Debit
Amount
Rs
Credit
Amount
Rs
B’s Capital A/c Dr. 57
To A's Capital A/c 57
(Interest on drawings adjusted)
Working Notes: Calculation of Interest on Partners’ Drawings
Interest on A’s Drawings @ 9% p.a. =
Interest on A’s Drawings @ 6% p.a. =
Interest on B’s Drawings @ 9% p.a. =
Interest on B’s Drawings @ 6% p.a. =
Statement showing Adjustment
Particulars A B Total
Interest on Drawings @ 9% p.a. 1,170 495 1,665
Interest on Drawings @ 6% p.a. (780) (330) (1,110)
(390) (165) (555)
Amount already credited Rs 555 (3:2) 333 222 555
(57) 57 NIL
Ques. 95 Desh Premi Ltd. purchased business from Mera Desh Ltd. It took over assets and
liabilities by paying Rs 2,50,000 through cheque and remaining by issuing 15% Preference
Shares of Rs 100 each at 10% premium. The following are the assets and the liabilities taken
over by Desh Premi Ltd.
Particulars Amount
(Rs)
Plant and Machinery 1,50,000
Furniture and Fixtures 50,000
Debtors 25,000
Building 7,75,000
Creditors 1,35,000
Bills Payable 65,000
Pass the necessary Journal entries in the books of Desh Premi Ltd.
Answer
Books of Desh Premi Ltd.
Journal
Date Particulars L.F.
Debit
Amount
Rs
Credit
Amount
Rs
Plant and Machinery A/c Dr. 1,50,000
Furniture and Fixtures A/c Dr. 50,000
Debtors A/c Dr. 25,000
Building A/c Dr. 7,75,000
To Creditors A/c 1,35,000
To Bills Payable 65,000
To Mera Desh Ltd. (Balancing Figure) 8,00,000
(Assets and liabilities of Mera Desh Ltd. taken-
over)
Mera Desh Ltd. Dr. 8,00,000
To Bank A/c 2,50,000
To 15% Preference Share Capital A/c 5,00,000
To Securities Premium A/c 50,000
(Rs 2,50,000 paid in cash and 5,000 15% Preference
Shares of Rs 100 each issued at 10% premium to Mera
Desh Ltd.)
Working Note:
Ques. 96 A, B and C were partners sharing profits and losses in the ratio of 3 : 3 : 2. On
December 31, 2012 their Balance Sheet was as follows:
Liabilities Amount
Rs Assets
Amount
Rs
Capital: Building 45,000
A 50,000 Machinery 30,000
B 45,000 Investment 15,000
C 35,000 1,30,000 Stock 32,000
Workmen Compensation Reserve 10,000 Sundry Debtors 25,000
General Reserve 4,000 Cash at Bank 10,000
Creditors 18,000 Cash in Hand 5,000
1,62,000 1,62,000
C died on October 01, 2012. On the date of his death, the following revisions were made:
1. There was a liability for workmen compensation of Rs 5,000.
2. Goodwill of the firm valued on 2 years’ of purchase on the basis average profit of past 3 years.
Profit for the last three years were: 2009- Rs 12,000, 2010- Rs 30,000 and 2011- Rs 18,000.
3. C’s executor is entitled to balance of C’s Capital, Interest on Capital at 6% p.a. and his share
of Goodwill, General Reserve and Workmen Compensation Reserve. C withdrew Rs 2,000 till
date of death in 2012. The interest on his drawings was calculated as Rs 40. The profit to the date
of his death was calculated on the basis of last year’s profit.
Prepare C’s Capital and his Executor’s Account.
Answer
C’s Capital Account
Dr. Cr.
Particulars Amount
Rs Particulars
Amount
Rs
Drawings A/c 2,000 Balance b/d 35,000
Interest on Drawings A/c 40 Workmen Compensation Reserve 1,250
General Reserve 1,000
A’s Capital (Goodwill) 5,000
B’s Capital (Goodwill) 5,000
C’s Executor’s A/c 50,160 Interest on Capital 1,575
Profit and Loss Suspense 3,375
52,200 52,200
C’s Executor’s Account
Particulars Amount
Rs Particulars
Amount
Rs
C’s Capital A/c 50,160
Balance c/d 50,160
50,160 50,160
Working Notes:
WN1 Calculation of Firm’s Goodwill
Goodwill = Average Profit × No. of Years’ Purchase
WN2 Calculation of C’s Interest on Capital
WN3 Calculation of C’s Share Profit
Ques. 97 Calculate Stock Turnover Ratio using the following data.
i. Sales Rs 5,00,000
ii. Gross Profit is 25% on Sales
iii. Closing Stock is 40% of Gross Profit
iv. Opening Stock is Rs 10,000 less than the Closing Stock
Answer
Gross Profit = Sales × Gross Profit Ratio
Closing Stock = Gross Profit × 40%
Opening Stock = Closing Stock – 10,000
= 50,000 – 10,000 = Rs 40,000
Cost of Goods Sold = Sales – Gross Profit
Cost of Goods Sold = 5,00,000 – 1,25,000 = Rs 3,75,000
Stock Turnover Ratio = 8.33 times
Ques. 98 Consider the following given information of M/s. Mahaveer Prasad for the year ended
March 31, 2012.
Particulars Amount
(Rs)
Opening Stock 50,000
Closing Stock 1,00,000
Purchases 5,00,000
Sales 7,00,000
Direct Expenses 50,000
Gross Profit 2,00,000
Rent 30,000
Salaries 50,000
Depreciation 40,000
Net Profit 80,000
With the help of the given financial items calculate the following ratios.
1. Gross Profit Ratio.
2. Net Profit Ratio.
3. Stock Turnover Ratio.
Answer
1. Gross Profit Ratio
2. Net Profit Ratio
3. Stock Turnver Ratio
Ques. 99 a) She Ltd. invited application for issuing 70,000 equity shares of Rs 10 each at a
premium of Rs 2 per share. The amount was payable as follows:
On application Rs 4 per share (including premium)
On allotment Rs 3 per share
On First and final call - Balance.
Application for 1,00,000 share were received. Applications for 10,000 shares were rejected.
Shares were allotted to the remaining applicants on pro-rata basis. Excess money received with
applications were adjusted towards sums due on allotment. All calls were made and were duly
received except first and final call on 700 shares allotted to Shvetika. His shares were forfeited.
The forfeited shares were re-issued for Rs 77,000 fully paid up.
Pass necessary journal entries in the books of the company for the above transactions.
b) Puri Ltd purchased a running business from Karan Ltd. for a sum of Rs 5,00,000 payable as
Rs 4,40,000 in fully paid equity shares of Rs 10 each and balance by a bank draft. The assets and
liabilities consisted of the following :
Plant & Machinery Rs 1,80,000; Building Rs 1,80,000; Sundry Debtors Rs 60,000; Stock Rs
1,00,000; Cash Rs 40,000; Sundry Creditors Rs 40,000.
Answer
a)
In the books of She Ltd.
Journal
Date Particulars L.F.
Debit
Amount
Rs
Credit
Amount
Rs
Bank A/c (1,00,000 shares × Rs 4) Dr. 4,00,000
To Share Application A/c 4,00,000
(Applications money received on 1,00,000 shares at Rs 4 per
share including premium)
Share Application A/c (1,00,000 shares × Rs 4) Dr. 4,00,000
To Share Capital A/c (70,000 shares × Rs 2) 1,40,000
To Securities Premium A/c (70,000 shares × Rs 2) 1,40,000
To Share Allotment A/c (20,000 shares × Rs 4) 80,000
To Bank A/c (10,000 shares × Rs 4) 40,000
(Application money adjusted towards share capital and share
allotment and balance refunded)
Share Allotment A/c
Dr.
2,10,000
To Share Capital A/c 2,10,000
(Allotment money made due on 70,000 shares)
Bank A/c
Dr.
1,30,000
To Share Allotment A/c 1,30,000
(Being allotment money received (2,10,000 - 80,000)
Share First and Final Call A/c
Dr.
3,50,000
To Share Capital A/c 3,50,000
(First and final call money due on 70,000 shares at Rs 5 each)
Bank A/c
Dr.
3,46,500
To Share First and Final Call A/c 3,46,500
(First and final call money received with exception of call money
on 700 shares)
Share Capital A/c
Dr.
7,000
To Share Forfeiture A/c 3,500
To Share First and Final Call A/c 3,500
(700 shares forfeited due to non-payment of first and final call)
Bank A/c
Dr.
77,000
To Share Capital A/c 70,000
To Securities Premium A/c 7,000
(Forfeited shares reissued at Rs 77,000)
Share Forfeited A/c
Dr.
3,500
To Capital Reserve A/c 3,500
(Profit on reissue transferred to Capital Reserve)
b)
Journal
Date Particulars L.F. Debit
Amount
Credit
Amount
Rs Rs
Plant and Machinery A/c Dr. 1,80,000
Building A/c Dr. 1,80,000
Sundry Debtors A/c Dr. 60,000
Stock A/c Dr. 1,00,000
Cash A/c Dr. 40,000
To Creditors A/c 40,000
To Karan Ltd. 5,00,000
To Capital Reserve A/c (Balancing Figure) 20,000
(Purchase of business from Karan Ltd.)
Karan Ltd. Dr. 5,00,000
To Equity Share Capital A/c 4,40,000
To Bank A/c 60,000
(Issue of 44,000 shares of Rs 10 each and
remaining payment is made through bank
draft)
Ques. 100 Sara Ltd. forfeited 500 shares of Rs 10 each issued at par for the non-payment of first
and final call Rs 2 per share. Of the forfeited shares, 200 shares were reissued at Rs 7 per share
and 100 at Rs 11 per share and remaining shares for Rs 2,000. Pass the necessary Journal entries.
Answer
Books Sara Ltd.
Journal
Date Particulars L.F.
Debit
Amount
Rs
Credit
Amount
Rs
Share Capital A/c (500 x 10) Dr. 5,000
To Share Forfeiture A/c (500 x 8) 4,000
To Share First and Final Call A/c (500 x 2) 1,000
(500 shares of Rs 10 each issued at par, forfeited for non-
payment of first and final call Rs 2 per share)
Bank A/c (200 x 7) Dr. 1,400
Share Forfeiture A/c Dr. 600
To Share Capital A/c 2,000
(200 shares of Rs 10 each reissued at Rs 7 per share fully paid-
up)
Bank A/c (100x 11) Dr. 1,100
To Share Capital A/c 1,000
To Securities Premium A/c 100
(100 shares of Rs 10 each reissued at Rs11 per share fully
paid-up)
Bank A/c Dr. 2,000
To Share Capital A/c 2,000
(200 shares of Rs 10 each reissued for Rs 2,000)
Share Forfeiture A/c Dr. 3,400
To Capital Reserve A/c 3,400
(Share forfeiture of reissued transferred to Capital Reserve
Account)