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Class 12 - Accountancy
Sample Paper 03
Maximum Marks: 40
Time Allowed: 90 minutes
General Instructions:
Read the following instructions very carefully and strictly follow them:
1.
2.
3.
4.
This question paper comprises three PARTS – I, II and III. There are 69 questions in the question paper.
Part - I -is compulsory for all candidates.
Part - II Analysis of Financial Statement
There is an internal choice provided in each Sections.
I. Part-I, contains three Sections -A, B and C. Section A has questions from 1 to 18 and Section B has
questions from 19 to 36, you have to attempt any 15 questions each in both the sections.
II. Part I, Section C has questions from 37 to 41. You have to attempt any four questions.
III. Part II, contains two Sections – A and B. Section A has questions from 42 to 48, you have to attempt any
five questions and Section B has questions from 49 to 55, you have to attempt any six questions.
5. All questions carry equal marks. There is no negative marking.
6. Specific Instructions related to each Part and subdivisions (Section) is mentioned clearly before the
questions. Candidates should read them thoroughly and attempt accordingly.
Part - I (Section - A)
1. Below are listed Content of partnership Deed except:
a. Ratio in which profit or losses shall be share
b. Interest on Partners capital and drawings
c. Interest on Debentures
d. Name of the firm
2. Revaluation Account will be debited when:
a. Value of fixed asset decreases
b. Value of fixed asset increases
c. When provision for doubtful debts decreases
d. Value of liabilities reduces
3. Mohit and Rohit were partners in a firm with capitals of ₹ 80,000 and ₹ 40,000 respectively. The firm
earned a profit of ₹ 30,000 during the year. Mohit's share in the profit will be:
a. ₹ 18,000
b. ₹ 15,000
c. ₹ 20,000
d. ₹ 10,000
4. Match the following
1. Average Profit
(a) Internally generated goodwill
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2. Purchase Goodwill
(b) Acquired by making payment
3. Generated Goodwill
(c) Normal business profits
a. 1.(a) , 2. (b), 3. (c)
b. 1.(c) , 2. (b), 3. (a)
c. 1.(b) , 2. (c), 3. (a)
d. 1.(b) , 2. (b), 3. (a)
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5. A and B are partners in a firm sharing profits and losses in the ratio of 3:2. They admit C into
partnership for
share. C brings ₹30,000 as capital and ₹10,000 as goodwill. At the time of admission
of C, goodwill appears in the balance sheet of A and B at ₹3,000. New profit sharing ratio of partners
shall be 5:3:2. What will be the entry for existing goodwill written off?
a.
A's capital A/c
Dr.
1,500
C's capital A/c
Dr.
1,500
To Goodwill
3,000
b.
A's capital A/c
Dr.
1,700
B's capital A/c
Dr.
1,300
To Goodwill
3,000
c.
A's capital A/c
Dr.
1,500
B's capital A/c
Dr.
1,500
To Goodwill
3,000
d.
A's capital A/c
Dr.
1,800
B's capital A/c
Dr.
1,200
To Goodwill
3,000
6. A, B and C are partners sharing profits in the ratio of capitals (old 5:3:2 and new 2:3:5). Their capital
after adjustment in the new capital ratio is Rs 20,000, Rs 30000, Rs 50000. Who will bring the amount of
actual cash for adjustment?
a. None of these
b. C
c. B
d. A
7. Total Assets (excluding goodwill) - outside liabilities will be:
a. Fictitious Assets
b. Capital employed
c. Average Profits
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8.
9.
10.
11.
12.
13.
14.
d. Super Profit
Ram is admitted as a partner on M/s Iron and Steel Co. a partnership firm of Naman and Manik. The
firm has reserve of `50000 and accumulated profit of 100000. At the time of admission Arpit an
accountant distributed the reserve and accumulated profit in their profit sharing ratio. Naman was of
the opinion that reserve and profit should not be distributed because even if they do not distribute
reserve and profit, they will remain in business and can be distributed when partners retire or firm is
dissolved. Do you agree with Naman give reason?
a. No, it puts Naman and Manik to disadvantage
b. Yes, it puts Ram and Manik to advantage
c. Yes , it puts Naman and Manik to advantage
d. No, it puts Ram to disadvantage
The average net profits expected of a firm in future are Rs.68,000 per year and capital invested in the
business by the firm is Rs.3,50,000. The rate of interest expected from Capital invested in this class of
business is 12%. The remuneration of the partners is Estimated to be Rs.8,000 for the year. You are
required to find out the super profit.
a. Rs.18000
b. Rs.35000
c. Rs.36000
d. Rs.20000
Geeta and Sita are partners in a firm sharing-profits in the ratio of 3 : 2. They decide to share future
profits equally. For this purpose, the goodwill of the firm has been valued at Rs. 50,000. Record
necessary adjustment entry for the same.
a. Dr. Sita and Cr. Geeta by Rs. 5,000
b. Dr. Sita and Cr. Geeta by Rs. 4,500
c. Dr. Sita and Cr. Geeta by Rs. 4,000
d. Dr. Geeta and Cr. Sita by Rs. 5,000
If partners capitals are fixed, premium for goodwill will be:
a. Credited to the Partners’ Capital A/cs
b. Credited to the P/L A/c
c. Credited to the sacrificing partner's current A/c
d. Credited to the P/L Adjustment A/c
The balance in the Investments Fluctuation Fund, after meeting the loss on revaluation of investments,
at the time of admission of a partner will be transferred to
a. the General Reserve
b. the Old Partners' Capital Accounts
c. none of these
d. the Revaluation Account
Which of the following factors decreases the value of goodwill?
a. Continuously incurring losses
b. Customer Satisfaction
c. Favourable Contracts
d. Favourable Location
When the incoming partner brings in his share of premium for goodwill in cash, it is adjusted by
crediting to:
a. Sacrificing Partners' Capital Accounts
b. Incoming Partner's Capital Account
c. Premium for Goodwill Account
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15.
16.
17.
18.
19.
20.
21.
22.
d. None of these
How sacrificing ratio is calculated
a. Sacrificing ratio = Old ratio - Gaining ratio
b. Sacrificing ratio = New ratio - Old ratio
c. Sacrificing ratio = Old ratio - New ratio
d. Sacrificing ratio = Old ratio + New ratio
Securities Premium Reserve collected by the company can be used for:
a. None of these
b. Payment of dividend
c. Issue of bonus shares
d. Any business purpose
Revaluation account shows the ________.
a. Revaluation of assets and Reassessment of liabilities
b. Valuation of assets and assessment of liabilities
c. Revaluation of assets and Valuation of liabilities
d. Assessment of assets and reassessment of liabilities
Vinod Ltd. forfeited 1,000 equity shares of ₹100 each for the non-payment of first call ₹20 per share
and second and final call of ₹25 per share. These shares were reissued at ₹50 per share fully paid up.
Find out the capital reserve.
a. Rs.7,000
b. Rs.5,000
c. Rs.6,000
d. Rs.5,500
Part - I (Section - B)
Which of the following statement is correct?
a. Goodwill is a current asset
b. Goodwill is an intangible asset
c. Goodwill is a wasting asset
d. Goodwill is a fictitious asset
Sacrifice ratio is used only for:
a. Distribution of premium for goodwill
b. Revaluation of profit
c. Distribution of Reserve
d. Revaluation of loss
What is the correct order of the following items under head share capital in notes to accounts in the
balance sheet?
A. Authorised Capital
B. Subscribed but not fully paid-up
C. Issued Capital
D. Subscribed and Fully paid-up
a. (C), (C), (D), (A)
b. (C), (A), (D), (B)
c. (A), (C), (D), (B)
d. (A), (D), (C), (B)
Assertion (A): Capital account of partners generally has a credit balance.
Reason (R): Current account has either a debit or credit balance.
a. Both A and R are true and R is the correct explanation of A.
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23.
24.
25.
26.
27.
28.
29.
b. Both A and R are true but R is not the correct explanation of A.
c. A is true but R is false.
d. A is false but R is true.
Nominal share capital is:
A. That part of authorised capital which is issued by the company.
B. The amount of capital which is actually applied by prospective shareholders.
C. The amount of capital which is paid by the shareholders.
D. The maximum amount of share capital that a company is authorised to issue.
a. Only C
b. Only B
c. Only D
d. Only A
If the incoming partner is to bring in premium for goodwill in cash and also a balance exists in the
Goodwill Account, then this Goodwill Account is written off among the old partners in:
a. the old profit-sharing ratio
b. the sacrificing ratio
c. none of these
d. the new profit-sharing ratio
What journal entry will take place at the time of receipt of calls in arrears?
a. Bank A/c ... Dr.
To Share Application A/c
b. Calls in arrears A/c ... Dr.
To Bank A/c
c. Bank A/c ... Dr.
To Calls in Arrears A/c
d. Bank A/c ... Dr.
To Calls in Advance A/c
Assertion (A): A change in profit sharing ratio amounts to dissolution of partnership firm.
Reason (R): Existing agreement comes to an end and a new agreement comes into existence.
a. Both A and R are true and R is the correct explanation of A.
b. Both A and R are true but R is not the correct explanation of A.
c. A is true but R is false.
d. A is false but R is true.
Which of the following is not true about a company?
a. Company is a Natural Person
b. Company has a common seal
c. Company has a separate entity
d. Company is an Artificial Person
Goodwill of the firm is not affected by
a. Location of the firm
b. None of these
c. Better customer service
d. Favourable contracts
X Limited forfeited 1,000 shares of 10 each for the non-payment of the final call of Rs.2 per share. These
shares were reissued @ Rs.8 per share fully paid up. Find out the amount of capital reserve.
a. Capital Reserve ₹4,000
b. Capital Reserve ₹6,000
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30.
31.
32.
33.
34.
35.
36.
c. Capital Reserve ₹8,000
d. Capital Reserve ₹10,000
When shares are issued to the promoters which account is debited:
a. Share capital A/c
b. Bank A/c
c. Incorporation Expenses A/c
d. Preliminary Expenses A/c
Assertion (A): Equity shares are those shares that do not preference shares.
Reason (R): Equity shares are the least issued class of shares and carry the minimum risks and
rewards of the business.
a. Both A and R are true and R is the correct explanation of A.
b. Both A and R are true but R is not the correct explanation of A.
c. A is true but R is false.
d. A is false but R is true.
Subscribed share capital is a part of ________.
a. Paid-up capital
b. Authorised Share Capital
c. Issued share capital
d. Un issued capital
With the ________ into the firm number of partner increase.
a. Dissolution of a new partner
b. Admission of a new partner
c. Death of new partner
d. Retirement of new partner
Which statement is false:
A. Payment of interest on calls-in-advance is not allowed at all
B. A company cannot raise fund beyond its authorized capital
C. Called up share capital is that part of subscribed capital that has been called up
D. A company can call up lump sum or in installments amount on application
a. (D)
b. (A)
c. (C)
d. (B)
E, F and G are partners sharing profits in 7 : 6 : 5 ratio. Their fixed capitals are Rs, 70,000, Rs. 40,000 and
Rs. 80,000 respectively. It is now decided that the total capital of the firm should be Rs. 3,60,000 and
should be in the profit sharing ratio of the partners. Calculate the amount of capital to be contributed
by the individual partners.
a. E will contribute Rs 20,000; F 80,000 and G Rs 70,000
b. E will contribute Rs 80,000; F 70,000 and G Rs 20,000
c. E will contribute Rs 70,000; F 20,000 and G Rs 80,000
d. E will contribute Rs 70,000; F 80,000 and G Rs 20,000
The directors of Axim Ltd. forfeited 20,000 equity shares of ₹10 each, ₹8 per share called up for nonpayment of first call of ₹2 per share. Final call of ₹2 per share has not been yet called. Half of the
forfeited shares were reissued as fully paid up for ₹15 per share. The amount transferred to Capital
Reserve will be:
a. ₹60,000
b. ₹40,000
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c. ₹1,20,000
d. ₹2,00,000
Part - I (Section - C)
Question No. 37 to 38 are based on the given text. Read the text carefully and answer the
questions:
Batra Ltd. issued 20,000 shares of ₹ 100 each at a premium of ₹ 25 per share, payable as follow
₹ 20 per share on application
₹ 45 per share on the allotment (including premium of ₹ 15)
₹ 60 per share on first and final call (including premium of ₹ 10)
The issue was over subscribed by 10,000 shares. Applicants of 8,000 shares were allotted only 1,000
shares and applicants of 1,000 shares were sent letters of regret. The excess amount received at the
time of application was to be adjusted only against allotment and overpayments exceeding the amount
due on allotment were to be refunded. All the money at the time of allotment and call was duly
received.
37. What pro-rata allotment is made in the question?
a. 22,000 : 20,000
b. 21,000 : 19,000
c. 21,000 : 18,000
d. 30,000 : 20,000
38. Amount refunded to shareholders
a. ₹ 1,25,000
b. ₹ 1,00,000
c. ₹ 1,30,000
d. ₹ 1,15,000
Question No. 39 to 41 are based on the given text. Read the text carefully and answer the
questions:
X and Y are partners in a firm sharing profits and losses equally. On 1st April, 2018, the capitals of the
partners were ₹ 2,00,000 and ₹ 1,50,000 respectively. The profit and loss appropriation account of the
firm showed a net profit of ₹ 3,75,000 for the year ended 31 st March, 2019. The terms of partnership
deed provided the following
I. Transfer 10 % of distributable profits to reserve fund.
II. Interest on capitals @ 6% p.a.
III. Interest on drawings @6 % p.a. Drawings being X ₹ 40,000 and Y ₹ 30,000.
The partners decided to provide clean drinking water and build toilets in a nearby school.
39. What is the average period for which Interest on drawings will be calculated?
a. 6
b. 12
c. 3
d. 9
40. The total interest on capital provided is ________.
a. 12,000
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41.
42.
43.
44.
45.
46.
47.
48.
b. 21,000
c. None of these
d. 9,000
The lesser interest on drawings charged (to any of the partner) is ₹ ________.
a. None of these
b. 1,200
c. 2,100
d. 900
Part - II (Section - A)
Assertion (A): All contingent liabilities are shown in the non-current liabilities section of the balance
sheet.
Reason (R): A contingent liability refers to the claim which is uncertain to arise/which may or may not
a rise/which is dependent on a happening in future.
a. Both A and R are true and R is the correct explanation of A.
b. Both A and R are true but R is not the correct explanation of A.
c. A is true but R is false.
d. A is false but R is true.
Computer software is shown under the ________.
a. Fixed intangible Assets
b. Fictitious Assets
c. Fixed Tangible Assets
d. Current Assets
Analysis of financial statements involve:
a. Trading A/c
b. All of these
c. Profit & Loss statement
d. Balance Sheet
Vinod Limited has Liquid Ratio of 2:1. If its inventories are ₹20,000 and its total current liabilities are
₹50,000. What will be the current ratio?
a. 1:2
b. 2.4:1
c. 2:1
d. 2.5:2
1,000; 10% Debentures of ₹ 100 each out of 10,000, 10% Debentures are redeemable within the 12
months of the date of Balance Sheet. They will be shown in the Current Liabilities as:
a. Short-term Borrowings
b. Other Current Liabilities
c. Short-term Provisions
d. Trade Payables
Analysis of Financial statements suffers from the limitation of window dressing which means….
a. All of these
b. may overvalue closing stock to show higher profits
c. hide some vital information
d. show items at incorrect value to portray better profitability
If Revenue from Operations is ₹1,60,000 and Gross Profit is ₹40,000, Gross Profit Ratio will be:
a. 30%
b. 40%
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49.
50.
51.
52.
53.
54.
55.
c. 25%
d. 50%
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Part - II (Section - B)
Trend ratios and trend percentage are used in:
a. Dynamic analysis
b. Static analysis
c. Vertical Analysis
d. Horizontal analysis
Proprietary Ratio is:
a. Total Assets/Shareholder’s Funds
b. Shareholder’s Funds/Fixed Assets
c. Long Term Debts/Shareholder’s Funds
d. Shareholder’s Funds/Total Assets
Comparative Statements are also known as:
a. Vertical Analysis
b. External Analysis
c. Horizontal Analysis
d. Dynamic Analysis
Assertion (A): Higher the Gross Profit ratio, good for the business, lower ratio not good for the
business.
Reason (R): It reflects the efficiency with which a firm produces its products. A high gross profit ratio
indicates that the organization is able to produce at a relatively lower cost.
a. Both A and R are true and R is the correct explanation of A.
b. Both A and R are true but R is not the correct explanation of A.
c. A is true but R is false.
d. A is false but R is true.
Assertion (A): Financial statements help in drawing out meaningful conclusions.
Reason (R): Financial Statements Analysis presents financial data in a simplified and understandable
form.
a. Both A and R are true and R is the correct explanation of A.
b. Both A and R are true but R is not the correct explanation of A.
c. A is true but R is false.
d. A is false but R is true.
An ideal Current Ratio is:
a. 2 : 1
b. 4 : 1
c. 1 : 1
d. 3 : 1
Inventories include the following except
a. Stores and spares
b. Work-in-progress
c. Goods acquired for trading
d. Patents
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Class 12 - Accountancy
Sample Paper 03
Solution
Part - I (Section - A)
1. (c) Interest on Debentures
Explanation: Interest paid on debentures is a charge against the profit. Partnership Deed is mainly
concerned with the appropriations and some charge. Main contents of partnership deed are interested
on capital, interest on drawings, name of the firm, partners, their names and address etc. Interest paid
on debentures is not a content of a partnership firm.
2. (a) Value of fixed asset decreases
Explanation: There are some rules for the preparation of Revaluation Account :
i. When Increase in assets, revaluation A/c is Credited.
ii. When Decrease in the asset , Revaluation A/c is Debited.
iii. When Increase in liabilities, Revaluation A/c is Debited.
iv. When Decrease in liabilities, Revaluation A/c is credited.
3. (b) ₹ 15,000
Explanation: In the absence of a partnership deed, profits are to be shared equally among the
partners. Therefore, Mohit’s share of profit will be ₹15,000 (i.e. 30,000
)
4. (b) 1.(c) , 2. (b), 3. (a)
Explanation:
1. Average Profit means normal business profits (average of previsous years profits).
2. Purchased Goodwill is acquired by making extra payment on purchase of a running business.
3. Self Generated Goodwill is internally generated goodwill which is not shown in the books of
accounts.
5. (d)
A's capital A/c
Dr.
1,800
B's capital A/c
Dr.
1,200
To Goodwill
3,000
Explanation: At the time of admission of a new partner, old goodwill given in the balance sheet will be
written off by the old partners in their old profit sharing ratio.
A' share of Goodwill = 3,000
B' share of Goodwill = 3,000
= 1,800
= 1,200
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6. (b) C
Explanation: Adjustment of the amount shall be made as follows:
i. Total Capital = 20,000 + 30,000 + 50,000 = 1,00,000
ii. Capitals before adjustments were : 50,000; 30,000 and 20,000 (5:3:2)
iii. Capitals After adjustment = Rs.20,000, 30000,and 50000 (2:3:5)
iv. C will bring amount = old capital - New capital = 50000 - 20000 = 30,000
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7. (b) Capital employed
Explanation: Formula to calculate Value of Goodwill: Total Assets - outside liabilities, is used to find
out the value of capital employed. Capital employed is that part of the capital which is active in the
business at present. Calculation of capital employed is necessary to find out the goodwill while
following the super profit method.
8. (a) No, it puts Naman and Manik to disadvantage
Explanation: It is always better to distribute all the accumulated profits and reserves at the time of
admission of a new partner. All accumulated profits and reserves belong to the old partners only, to
avoid the future disputes, it is better to distribute all the profits and reserves (by old partners)
otherwise it will be a disadvantage for them.
9. (a) Rs.18000
Explanation: Calculation of Super Profit:
Actual Average profit = 68,000 – 8,000 (remuneration) = 60,000
Normal profit = 3,50,000 × 12/100 = 42,000
Super Profit = 60,000 – 42,000 = 18,000
10. (a) Dr. Sita and Cr. Geeta by Rs. 5,000
Explanation: Adjutment of goodwill amount at the time of change in profit sharing ratio:
Old Ratio = 3:2 and New Ratio 1:1
Formula = Old Share - New Share
Geeta’s Sacrifice =
Sita’s Gain =
-
=
=
=
=
Share in goodwill = 50,000
= 5,000
11. (c) Credited to the sacrificing partner's current A/c
Explanation: When capitals of the partners are fixed, in such a case current account should be opened
to record all the transactions related to premium for goodwill, revaluation profit/loss, distribution of
reserves and accumulated profits or losses etc and all entries are passed through Current account.
12. (b) the Old Partners' Capital Accounts
Explanation: Investment Fluctuation reserve is a reserve which has been set aside from free
reserves only for making the adjustment for losses on the valuation of Investment. In Other Words, the
Investment Fluctuation reserves are having a credit balance and appear in the Balance Sheet on the
liability side of Balance Sheet (also, Investments will be shown in the Balance Sheet as an asset).
Sometimes, the firm creates investment fluctuation reserve/ fund for adjusting the decrease in the
value of the investment made (it will appear on the liability side of the Balance Sheet). The three
situations arise when such reserves appear in the Balance Sheet.
The accounting entry is:
Investment Fluctuation Reserve a/c ... Dr.
To Partner's capital a/c
13. (a) Continuously incurring losses
Explanation: Continuously incurring losses
14. (a) Sacrificing Partners' Capital Accounts
Explanation: When the incoming partner brings in his share of the premium for goodwill in cash, it is
adjusted by crediting to Incoming Partner's Capital Account.
The accounting entry is:
Premium for goodwill a/c ... Dr.
To Old partner's Capital a/c
15. (c) Sacrificing ratio = Old ratio - New ratio
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16.
17.
18.
19.
20.
21.
22.
23.
24.
Explanation:
i. Mainly sacrificing ratio is calculated at the time of change in existing profit sharing ratio and
admission of a new partner.
ii. Total of each old partner's sacrifice will be equal to the new ratio of a newly admitted partner or a
gainer partner or both in case of a change in existing profit sharing ratio.
iii. Goodwill will be adjusted at the time of admission of a partner in sacrifice ratio.
iv. Formula: Old share - New share
Journal entry:
Gaining partner's capital/ current A/c ... Dr
To Sacrificing partner's capital/current A/c
(b) Payment of dividend
Explanation: Payment of dividend
(a) Revaluation of assets and Reassessment of liabilities
Explanation: At the time of admission or retirement or death of a partner, the existing assets and
liabilities in the balance sheet have to be revalued and the profit or loss arising out of it have to be
transferred to the old partners capital account / current account (in case of fixed capital account
method) in the old ratio. So revaluation account is prepared which shows the revaluation of assets and
reassessment of liabilities.
(b) Rs.5,000
Explanation: The formula for calculating the amount of capital reserve = (amount of shares forfeited
/no of shares forfeited
no of shares reissued) - amount of discount on the reissue
Amount forfeited on 1,000 shares = 1,000 shares
55 = Rs.55,000
Less: Discount on reissue 1,000 shares
50 = Rs.50,000
Amount to be transferred to capital reserve = 55,000 - 50,000 = Rs. 5,000
Part - I (Section - B)
(b) Goodwill is an intangible asset
Explanation: Goodwill is an intangible asset
(a) Distribution of premium for goodwill
Explanation: At the time of admission of a new partner, the main use of sacrificing ratio is to adjust
the premium for goodwill brought by a new partner. which is distributed to sacrificing partner in
sacrificing ratio.
(c) (A), (C), (D), (B)
Explanation: Correct order of Share Capital in notes to accounts is:
A. Authorised Capital- it is the max amount of capital that the company is authorised to issue during
its lifetime.
B. Issued Capital- it is that part of authorised capital that has been issued or offered by the company
for public subscription.
C. Subscribed and Fully paid-up- it is that part of issued capital which has been subscribed by the
public and fully called up by the company and paid up by the public.
D. Subscribed and not fully paid-up- it is that part of issued capital which is subscribed by the public
by either not fully called up by the company and not fully paid up by some of the shareholders.
(b) Both A and R are true but R is not the correct explanation of A.
Explanation: The capital account of partners generally has a credit balance after all adjustments.
(c) Only D
Explanation: Nominal Share Capital:- The maximum amount of share capital that a company is
authorised to issue.
(a) the old profit-sharing ratio
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25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
Explanation: C is to bring his share of the premium for goodwill in cash. If the incoming
partner brings the amount of goodwill in Cash and also a balance exists in goodwill
account, then this goodwill account is written off among the old partners in the old profit-sharing ratio.
(c) Bank A/c ... Dr.
To Calls in Arrears A/c
Explanation: On receipt of calls in arrears, the following entry will take place:
Bank A/c ... Dr.
To Calls in Arrears
This entry is passed if calls in arrears have been debited at the time they were due and not received.
(d) A is false but R is true.
Explanation: A change in profit sharing ratio amounts to dissolution of partnership only, not
partnership firm.
(a) Company is a Natural Person
Explanation: A company is not a natural person i.e it is an artificial person. Following three points are
correct about a company:
i. Company is an Artificial Person
ii. Company has a separate entity
iii. Company has a common seal
iv. Company has perpetual existence
v. Company has unlimited liability
vi. Management and ownership of the company are separate
(b) None of these
Explanation: None of these
(b) Capital Reserve ₹6,000
Explanation: The amount of capital reserve will be calculated as = (amount of shares forfeited/no of
shares forfeited
no of shares reissued) - amount of discount on the reissue
Forfeited Shares A/c ... Dr. 6,000
To Capital Reserve 6,000
Amount forfeited = 8000
Amount used on reissue = 2000
Capital Reserve = 8,000 - 2,000 = 6,000
(c) Incorporation Expenses A/c
Explanation: Following journal entry is to be recorded when shares are issued to the promoters:
Incorporation Expenses A/c ... Dr.
To Share Capital A/c
(Being shares issued to the promoters)
Such shares are issued when the company is started.
(c) A is true but R is false.
Explanation: Equity shares are the most commonly issued class of shares and carry the maximum
risks and rewards of the business.
(c) Issued share capital
Explanation: Subscribed share capital is a part of the issued share capital that is subscribed. The
subscribed share capital has two types paid up and not fully paid up.
(b) Admission of a new partner
Explanation: Number of partners in a firm will increase when a new partner is admitted. Total
partners in a firm will be equal to old partners + new partner.
(b) (A)
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35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
Explanation: If the Articles of the Company are silent about the rate of interest on calls-in-advance,
then the rate of interest is 6% p.a. Such an interest is a charge on profits and has to be paid to the
concerned shareholder even if there is no profit.
Calls in advance are the amount received in advance by the company from shareholders.
(d) E will contribute Rs 70,000; F 80,000 and G Rs 20,000
Explanation: Adjustment of capital of partners :
Old Capitals = 70,000; 40,000 and 80,000
New Capitals of partners = 1,40,000; 1,20,000 and 1,00,000 (3,60,000 in 7:6:5 ratio)
Amount of capital contributed by partners i.e.
E = 70,000
F = 80,000
G = 20,000
(a) ₹60,000
Explanation: Amount Transfer to Capital Reserve A/c = ₹60,000 (10,000 share
Rs. 6)
Part - I (Section - C)
(b) 21,000 : 19,000
Explanation: 21,000 : 19,000
(d) ₹ 1,15,000
Explanation: ₹ 1,15,000
(a) 6
Explanation: 6
(b) 21,000
Explanation: 21,000
(d) 900
Explanation: 900
Part - II (Section - A)
(d) A is false but R is true.
Explanation: All contingent liabilities are shown as a footnote to the balance sheet.
(a) Fixed intangible Assets
Explanation: Computer software is an intangible asset because it is an identifiable non-monetary asset
without physical substance. It does not have a physical nature.
(b) All of these
Explanation: All the options are involved in analysis of financial statements of an enterprise.
(b) 2.4:1
Explanation: Current Ratio will be 2.4 : 1 (1,20,000/50,000)
i.e. Liquid Ratio = 2; it means liquid assets 50,000 x 2 = 1,00,000
Current Assets = 1,00,000 + 20,000 = 1,20,000
(b) Other Current Liabilities
Explanation: Shown in the Current Liabilities as Other Current Liabilities.
(a) All of these
Explanation: Window dressing is the limitation of accounting which is directly concerned with:
hide some vital information
show items at incorrect value to portray better profitability
may overvalue closing stock to show higher profits
(c) 25%
Explanation: Formula of Gross Profit Ratio =
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=
= 25%
Part - II (Section - B)
49. (d) Horizontal analysis
Explanation: Both are used in the horizontal analysis only.
50. (d) Shareholder’s Funds/Total Assets
Explanation: Proprietary Ratio = Shareholder’s Funds/Total Assets.
51. (c) Horizontal Analysis
Explanation: Comparative Statements are also known as horizontal analysis. A common size
statement shows the profitability and financial position of a firm for different periods of time in a
comparative form to give an idea about the position of two or more periods.
52. (a) Both A and R are true and R is the correct explanation of A.
Explanation: The gross profit should be sufficient to cover all operating expenses and to build up
reserves after paying all fixed interest charges and dividends.
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53. (a) Both A and R are true and R is the correct explanation of A.
Explanation: Both A and R are true and R is the correct explanation of A.
54. (a) 2 : 1
Explanation: An ideal current ratio is 2:1. It means a business must try to maintain its current assets
twice of current liabilities. High ratio indicates under trading and over capitalisation.
55. (d) Patents
Explanation: Inventories include the following items except for Patents:
Work-in-progress
Goods acquired for trading
Stores and spares
A patent is a government license that gives the holder exclusive rights to a process, design or new
invention for a designated period of time. It is intangible assets, not inventories.
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