CHAPTER:4
RECONSTITUTION OF APARTNERSHIP FIRM
RETIREMENT /DEATH OF A PARTNER
Q.1 Distinguish between Sacrificing Ratio and Gaining Ratio.
Ans. 1
Basis
Sacrificing Ratio
(i) Meaning
Proportion in which old partners sacrifice their
share in favour of new partner.
(ii) Occasion
(iii) Formula
Sacrificing ratio is calculated at the time of
admission of new partner.
Sacrificing ratio = Old ratio – New ratio
Gaining Ratio
Proportion in which continuing partner
gain the share of outgoing partner on his
retirement.
Gaining ratio is calculated at the time of
retirement or death of a partner.
Gaining ratio – Old ratio
Q.2
Kamal, Kishore and Kunal are partners in a firm sharing profits equally. Kishore retires
from the firm. Kamal and Kunal decide to share the profits in future in the ratio 4:3.
Calculate the Gaining Ratio.
Ans. 2 Gaining Ratio = New ratio – Old ratio
Kamal’s Gain = 4/7 – 1/3 = 5/21
Kunal’s Gain = 3/7 – 1/3 = 2/21
Gaining Ratio = 5:2
Q.3
P, Q and R are partners sharing profits in the ratio of 7:2:1. P retires and the new profit
sharing ratio between Q and R is 2:1. State the Gaining Ratio.
Ans. 3 Old ratio
= P Q R
7: 2: 1
New ratio
=Q R
2:1
Gaining Ratio = New ratio – Old ratio
Q’s gain
= 2/3 – 2/10 = 14/30
R’s gain
= 1/3 – 1/10 = 7/30
Gaining Ratio = 14:7 or 2:1
Q.4
A, B and C are partners in a firm sharing profits in the ration of 2:2:1. B retires and his
share is acquired by A and C equally. Calculate new profit sharing ratio of A and C.
Ans. 4 A’s gaining share = 2/5 X ½ = 1/5
A’s new share = 2/5 + 1/5 = 3/5
C’s gaining share = 2/5 X ½ = 1/5
C’s New share = 1/5 + 1/5 = 2/5
New ratio of A and C = 3:2
Q.5
X, Y and Z are partners sharing profits in the ratio of 4/9, 1/3 and 2/9. X retires and
surrenders 2/3rd of his share in favour of Y and remaining in favour of Z. Calculate new
profit sharing ratio and gaining ratio.
Ans. 5
Y’s gaining share
Z’s gaining share
Y’s new share
Z’s new share
= 4/9 X 2/3 = 8/27
= 4/9 – 8/27 = 4/27
= Old share + gain
= 1/3 + 8/27 = 17/27
= 2/9 + 4/27 = 10/27
New Ratio
Gaining ratio
= 17:10
= 8/27 : 4/27 or 2:1
Q.6
X, Y and Z have been sharing profits and losses in the ratio of 3:2:1. Z retires. His share is
taken over by X and Y in the ratio of 2:1. Calculate the new profit sharing ratio.
Ans. 6
Old Ratio
=
3:2:1
Z Retire
X’s Gaining
= 1/6 X 2/3 = 2/18
X’s New share
= 3/6 + 2/18 = 11/18
Y’s Gaining
= 1/6 X 1/3 = 1/18
Y’s new share
= 2/6 + 1/18 = 7/18
New Ratio
= 11/18, 7/18 Or 11:7
Q.7
P, Q and R were partners in a firm sharing profits in 4:5:6 ratio. On 28-02-2008 Q retired
and his share of profits was taken over by P and R in 1:2 ratio. Calculate the new profit
sharing ratio of P and R.
Ans. 7 Old ratio
=PQR
= 4:5:6
Q retired
P’s gaining
= 1/3 X 5/15 = 1/9
P’s new share
= 4/15 + 1/9 = 17/45
R’s Gaining share
= 2/3 X 5/15 = 2/9
R’s new share
= 6/15 + 2/9 = 28/45
New Ratio
= 17:28
Q.8
Mayank, Harshit and Rohit were partners in a firm sharing profits in the ratio of 5:3:2.
Harshit retired and goodwill is valued at Rs 60000. Mayank and Rohit decided to share
future profits in the ratio 2:3. Pass necessary journal entry for treatment of goodwill.
Ans. 8 Rohit’s capital A/C
Dr. 24000
To Mayank’s capital A/C
6000
To harshit’s Capital A/C
18000
(Adjustment Entry for treatment of goodwill in gaining ratio.)
Q.9
Ramesh, Naresh and Suresh were partners in a firm sharing profits in the ratio of 5:3:2.
Naresh retired and the new profit sharing ratio between Ramesh and Suresh was 2:3. On
Naresh retirement the goodwill of the firm was valued at Rs. 120000. Pass necessary
journal entry for the treat.
Ans. 9 Suresh capital A/C
Dr. 48000
To Ramesh’s capital A/C
12000
To Naresh capital A/C
36000
(Goodwill adjusted among the gaining partner in gaining ratio.)
Q.10 L, M and O were partners in a firm sharing profits in the ratio of 1:3:2. L retired and the
new profit sharing ratio between M and O was 1:2. On L’s retirement the goodwill of the
firm was valued Rs. 120000. Pass necessary journal entry for the treatment of goodwill.
Ans. 10 O’s capital A/C
Dr. 40000
To C’s capital A/C
20000
To M’s capital A/C
20000
(Adjustment of goodwill in gaining partners in their gaining ratio.)
Q.11 State the journal entry for treatment of deceased partners share of profit for his life period
in the year of death.
Ans. 11 Profit and loss suspense A/C
To deceased partner’s capital A/C
Dr
Q.12 X, Y and Z were partners in a firm sharing profits and losses in the ratio of 3:2:1. The
profit of the firm for the year ended 31st March, 2007 was Rs. 3,00000. Y dies on 1st July
2007. Calculate Y’s share of profit up to date of death assuming that profits in the year
2007- 2008 have been accured on the same scale as in the year 2006-07 and pass
necessary journal entry.
Ans. 12 Total profit for the year ended 31st March 2007
=
Rs 300000
Y’s share of profit up to date of death
=
300000 X 2/6 X 3/12
=
25000
Profit and Loss suspense A/C
Dr. 25000
To Y’s capital A/C
25000
( Y’s share of profit transferred to Y’s capital A/C)
Q.13 A, B and C were partners in a firm sharing profits in 3:2:1 ratio. The firm closes its books
on 31st March every year. B died on 12-06-2007. On B’s death the goodwill of the firm
was valued at Rs. 60000. On B’s death his share in the profit of the firm till the time of
his death was to be calculated on the basis of previous years which was Rs.150000.
Calculate B’s share in the profit of the firm. Pass necessary journal entries for the
treatment of goodwill and B’s share of profit at the time of his death.
Ans. 13 Profit and Loss suspense A/C
Dr. 10000
To B’s capital A/C
10000
(B’s share of profit transferred to B’s capital A/C)
A’s capital A/C
Dr. 15000
C’s capital A/C
Dr. 5000
To B’s capital A/C
20000
(B’s share of goodwill transferred to B’s capital A/C and debited to remaining
partners capital A/C in their gaining ratio.)
B’s share of profit
B’s share of profit
=
=
=
=
Number of days from 1 April to 12th June 2007
73 Days
150000 X 1/3 X 73/365
Rs. 10000
Q.14 A, B and C were partners in a firm sharing profits in the ratio of 2:2:1. C dies on 31 st July,
2007. Sales during the previous year upto 31st march, 2007 were Rs. 6,00,000 and profits
were Rs. 150000. Sales for the current year upto 31st July were Rs. 250000. Calculate C’s
share of profits upto the date of his death and pass necessary journal entry.
Ans. 15 Profit & Loss suspense A/C
Dr. Rs. 12,500
To C’s capital A/C
Rs. 12,500
RETIREMENT OF PARTNER
6 to 8 marks
Q.1 The balance sheet of X, V, Z who was sharing profits in proportion of capital as follows :Particulars
Sunday creditors
Capitals
Amount Particulars
Amount
1,000 Cash at bank
25,000 Debtors
X
20,000 Less provision
Y
15,000
Z
67,000 Stock
P/M
11,500
Furniture
25,000
67,000
15,600
5,000
4,900
100
10,000
67,000
Y retires arid the following adjustment of the assets and liabilities has been made before the
ascertainment of the amount payable by the firm to Y
1.
That the stock be depreciated by 5%
2.
That the provision for doubtful debts be increased to 5% on debtors.
3.
That a provision of RS.750 be made in respect of outstanding legal charges.
4.
That the land and building be appreciated by 20%.
5.
That the goodwill of the entire firm be fixed at Rs. 16,200 and V share of the same be
adjusted into the account of X and Z (No good will account is to be raised)
6.
That X and Z decide to share future profits of the firm in equal proportions
7.
That the entire capital of the new firm at Rs. 48000 between X and Z in· equal proportion.
For
the purpose, actual cash is to be brought in or paid off.
You are required to prepare the revolution account; partner’s capital account and bank account and
revised balance sheet after V’s retirement also indicate the gaining rates.
Solution 1
Dr.
Revaluation A/c
Particulars
To stock A/c
To provision for doubtful debts a/c150
To outstanding
Legal charges
To profit transferred to
Capital A/c
X
1500
Y
1200
Z
900
Dr.
Rs. Assets
500 By land and building
Cr.
Rs.
5,000
750
3,600
5,000
Partner’s Capital Accounts
5,000
Cr.
Particulars
ARs.
B Rs.
C Rs. Particulars
To Y’s Cap A/c
1350
—
1050 By bal b/d
To Y’s loan A/c
-
2600
251150
-
To bal C/d
A Rs.
B Rs.
C Rs.
25,000 25,000 15,000
- By Rev. A/c
11850 By X’s Cap A/c
1500
1250
900
-
1350
-
-
4050
-
(G/W)
By X’s cap A/c
(G/W)
26500
26600
15900
26500 26600 15900
To bank A/c
1150
-
To Bal C/d
24000
-
24000 By Bank
25150
-
24000
- By bal b/d
Dr.
25150
- 11850
-
- 12150
25150 24000 25150
Bank A/c
Cr.
To Bal B/d
15,600 By X’s cap A/c
To Z’s Capital A/c
12,150 By bal c/d
26,600
27,750
27,750
Liabilities
BALANCE SHEET OF THE NEW FIRM
Rs. Assets
Sundry Creditors
7,000 Cash at bank
Outstanding legal charges
750 Sundry debtors (5000-250)
Y’s Loan
26,600 Stock
Capital
X
24000
Z
24000
48,000
1,150
Rs.
26,600
4,750
9,500
Plan & Machinery
11,500
Land & Building
30,000
83,250
83,250
Q.2 The Balance Sheet of A, B and C on 31st December 2007 was as under :
BALANCE SHEET
as at 31.12.2007
Liabilities
Amount Assets
Amount
A’s Capital
400,00 Buildings
20,000
B’s Capital
30,000 Motor Car
18,000
C’s Capital
20,000 Stock
20,000
General Reserve
17,000 Investments
Sundry Creditors
1,20,000
1,23,000 Debtors
40,000
Patents
12,000
2,30,000
2,30,000
The partners share profits in the ratio of 8 : 4 : 5. C retires from the firm on the same date subject to
the following term S and conditions:
i) 20% of the General Reserve is to remain’ as a reserve for bad and doubtful debts. ;
ii)
Motor)r Car is to be decreased by 5%.
iii)
Stock is to be revalued at Rs.17, 500.
iv)
Goodwill is valued at’ 2 ½ years purchase of the average profits of last 3 years.
Profits were; 2001: Rs.11,000; 200l: Rs. 16,000 and 2003: Rs.24,000.
C. was paid in July A and B borrowed the necessary amount from the Bank on the security of
Motor Car and stock to payoff C.
Prepare Revaluation Account, Capital Accounts and Balance Sheet of A and B.
Ans.2 SOLUTION
REVALUATION ACCOUNT
Particulars
Rs. Particulars
To Motor Cars A/C
900 By Loss transferred to
To Stock A/C
Rs.
2,500 A’s Capital A/c Rs.
1,600
B’s Capital A/c Rs.
800
C’s Capital A/c Rs.
1,000
3,400
3,400
3,400
PARTNERS CAPITAL ACCOUNT
Particulars
ARs.
B Rs.
To C’s Capital A/c
8,334
4,166
To Revaluation A/c (Loss) 1,600
800
To Bank A/c
Balance c/d
-
C Rs. Particulars
- By Balance b/d
A Rs.
B Rs.
C Rs.
40,000 30,000 20,000
1,000 By General Reserve A/c 6,400
3,200
4,000
-
35,500 By A’s Capital A/c
-
-
8,334
36,466 28,234
- By B’s Capital A/c
-
-
4,166
46,400 33,200
36,500
46,400 33,200 36,500
By Balance b/d
36,466 28,234
-
BALANCE SHEET OF A AND B
Liabilities
Rs. Assets
Sundry creditors
1,23,000 Building
Bank Loan
Capital A
B
35,500 Motor Card
36,466
28,234
Stock
64,700 Investment
Debtors
Patents
2,23,200
Rs.
20,000
17,100
17,500
1,20,000
36,600
12,000
2,23,200
Q.3 A, Band C were partners in a firm sharing profits equally: Their Balance Sheet on.31.12.2007 stood
as:
BALANCE SHEET AS AT 31.12.07
Liabilities
Rs. Assets
Rs.
A
Rs. 30,000
Goodwill
18,000
B
Rs. 30,000
Cash
38,000
C
Rs. 25,000
85,000 Debtors
Bills payable
20,000 Less: Bad Debt provision
Creditors
18,000 Bills Receivable
. 43,000
3,000
40,000
25,000
Workers Compensation Fund
8,000 Land and Building
60,000
Employees provide4nt Fund
60,000 Plant and Machinery
40,000
General Reserve
30,000
2,21,000
2,21,000
It was mutually agreed that C will retire from partnership and for this purpose following terms were
agreed upon.
i)
Goodwill to be valued on 3 years’ purchase of average profit of last 4 years which were
2004 : Rs.50,000 (loss); 2005 : Rs. 21,000; 2006: Rs.52,000; 2007 : Rs.22,000.
ii)
The Provision for Doubtful Debt was raised to Rs. 4,000.
iii)
To appreciate Land by 15%.
iv)
To decrease Plant and Machinery by 10%.
v)
Create provision of Rs;600 on Creditors.
vi)
A sum of Rs.5,000 of Bills Payable was not likely to be claimed.
vii)
The continuing partners decided to show the firm’s capital at 1,00,000 which would be in
their new profit sharing ratio which is 2:3. Adjustments to be made in cash
Make necessary accounts and prepare the Balance Sheet of the new partners.
Ans.3
REVALUATION ACCOUNT
Particulars
Rs. Particulars
Rs.
To Provision for Debts A/c
1,000 By Land A/c
To Plant & Machinery A/c
4,000 By Provision on Creditors A/c
To Profit transferred to
9,000
600
By Bills Payable A/c
A’s Capital A/c
Rs. 3,200
B’s Capital A/c
Rs. 3,200
C’s Capital A/c
Rs. 3,200
5,000
9,600
14,600
14,600
PARTNER’S CAPITAL ACCOUNTS
Particulars
ARs.
B Rs.
C Rs. Particulars
To Goodwill A/c
6,000
6,000
6,000 By Balance b/d
To C’s Capital A/c
2,250
9,000
-
-
To C’s Loan A/c
- By General Reserve
46,116 By Worksmen A/c
A Rs.
B Rs.
C Rs.
30,000 30,000 25,000
10,000 10,000 10,000
2,667
2,667
2,666
3,200
3,200
3,200
By A’s Capital A/c
-
-
2,250
By B’s Capital A/c
-
-
9,000
By Cash A/c (Deficiency) 2,383 29,133
-
Compensation Fund
To Balance c/d
40,000 60,000
48,250 75,000
- By Revalu A/c (profit)
52,116
48,250 75,000 52,116
By Balance b/d
40,000 60,000
-
BALANCE SHEET
Liabilities
Bills Payable
Creditors
Employees Provident Fund
C’s Loan
A’s Capital
40000
B’S Capital
60000
as at 31.12.07
Rs. Assets
15,000 Debtors
17,400 Less: Provision
60,000 Bills Receivables
46,116 Land & Buildings
Plant & Machinery
1,00,000 Cash
2,38,516
Rs.
Rs. 43,000
Rs. 4,000
39,000
25,000
69,000
36,000
69,516
2,38,516
Q.4 A, Band C were partners in a firm .sharing profits in the ratio of 5: 3: 2. On 31st March, 2005 their
Balance Sheet was as under:
Liabilities
Rs. Assets
Creditors
7,000 Buildings
20,000
Reserve
10,000 Machinery
30,000
Accounts:
Rs.
Stock
A
30,000
B
25,000
C
15,000
Patents
10,000
6,000
Debtors
8,000
70,000 Cash
13,000
87,000
87,000
A died on 1st October, 2005. It was agreed between his executors and the remaining partners that
a.
Goodwill be valued at 2 years’ purchase of the average profits of the previous five years,
which were 2001: Rs. 15,000; 2002: Rs. 13,000; 2003: Rs. 12,000; 2004: Rs. 15,000 and
2005: Rs. 20,000.
b.
Patents be valued at Rs. 8,000; Machinery at Rs. 28,000; Buildings at Rs. 30,000.
c.
Profit for the year 2005-06 is taken as having accrued at the same rate as the previous
year.
Ans.4
d.
Interest on capital be provided at 10% p.a.
e.
A sum of Rs. 11,500 was to be paid to his executors immediately.
Prepare A’s Capital Account and his executors’ account at the time of his death.
A’s Capital A/c
Particulars
Executor’s A/c
Rs.
61,500
Particulars
Rs.
By Balance b/d
30,000
By Reserves [10,000× ]
5,000
By B’s Capital A/c [15,000 × ]
9,000
By C’s Capital A/c [15/000 × ]
6,000
By Revaluation A/c [10,00 × ]
5,000
By Profit & Loss Suspense A/c
5,000
By Interest on Capital A/c [30/000 × × ]
1,500
60,500
61,500
A’s EXECUTORS ACCOUNT
Particulars
Balance c/d
Rs. Particulars
Rs.
61,500 By A’s Capital A/c
61,500
61,500
61,500
By Balance b/d
61,500
Q.5 A, B and C were partners in ka firm sharing profits in the ratio of 5:3:2 On 31st March 2005 their
Balance Sheet was as under :
Liabilities
Rs. Assets
Reserves
10,000 Buildings
Creditors
7,000 Machinery
A’s Capital
30000
Stock
B’s Capital
25000
Patents
C’s Capital
15000
Rs.
20,000
30,000
10,000
6,000
70,000 Cash
21,000
87,000
87,000
C died on 1st Oct. 2005. It was agreed between his executors and the remain partners that:
a.
Goodwill be valued at 2 years’ purchase of the average profits of the pre five years, which
were 2001 :Rs. 15,000; 2002 : Rs. 13,000; 2003 : Rs. 12,000; Rs. 15,000 : 2004 and 2005
: Rs. 20,000.
b.
Patents be valued at Rs. 8,000; Machinery at Rs. 28,000; Buildings at Rs. 30,
c.
Profit for the year 2005-06 be taken as having accrued at the same rate previous year.
d.
Interest on capital be provided at 10% p.a.
e.
A sum of Rs. 7,750 was paid to his executors immediately.
Prepare C’s Capital Account and his executors account at the time of his death.
Ans.5
C’S CAPITAL ACCOUNT
Particulars
To C’s Executor’s A/c
Rs. Particulars
27,750 By Balance b/d
Rs.
15,000
By Reserves
2,000
By Revaluation A/c
2,000
By p& L Suspense A/c
2,000
By Interest on Capital
750
By A’s Capital A/c
3,750
By B’s Capital A/c
2,250
27,750
27,750
C’S EXECUTOR’S ACCOUNT
Particulars
To Cash A/c
Rs. Particulars
Rs.
7,750 By C’s Capital A/c
27,750
To Executor’s Loan A/c
or Bal c/d
20,000
27,750
Q.6 Anil, Jatin and Ramesh were sharing profit in the ratio of 2:1:1. Their Balance Sheet as at
31.12.2001 stood as follows:BALANCE SHEET
as at 31.12. 2001
Liabilities
Rs. Assets
Creditors
24,400 Cash
Bank Loan
10,000 Debtors
Profit and Loss A/c
18,000 Less : Provision
Bills Payable
2,000 Stock
Rs.
1,00,000
20000
1600
18,400
10,000
Anil’s Capital
50,000 Land & Building
20,000
Jatin’s Capital
40,000 Investment
14,000
Ramesh’s Capital
40,000 Goodwill
22,000
1,84,400
1,84,400
Ramesh died on 31st March 2002. The following adjustments were agreed upon(a)
Building be appreciated by Rs. 2,000
(b)
Investments be valued at 10% less than the book value.
(c)
All debtors (except 20% which are considered as doubtful) were good.
(d)
Stock be increased by 10 %
(e)
Goodwill be valued at 2 years’ purchase of the average profit of the past five years.
(f)
Ramesh’s share of profit to the death be calculated on the basis of the profit of the
preceding year. profit for the years 1997, 1998, 1999 and 2000 were Rs. 26,000, Rs.
22,000, Rs. 20,000 and Rs. 24,000 respectively.
Ans.6 Prepare revaluation account, partner’s capital Account, Ramesh ‘s Executors’ Account and
Balance sheet immediately after Ramesh’s death assuming that Rs. 18, 425 be paid immediately
to
his executors and balance to b left to the Ramesh’s Executor’s Account
REVALUATION ACCOUNT
Particulars
Rs. Particulars
Rs.
To Investment A/c
1,400 By Building A/c
2,000
To Provision for doubtful debt A/c
2,400 By Stock A/c
1,000
By Loss transferred to
Anil’s Capital A/c
Rs.400
Jatin’s Capital A/c
Rs. 200
Ramesh’s Capital A/c
Rs. 200
800
3,800
3,800
PARTNERS’ CAPITAL ACCOUNTS
Particulars
Anil
Jatin
Ramesh
Rs.
Rs.
Rs.
Particulars
Anil
Rs.
Jatin Ramesh
Rs.
Rs.
To Goodwill A/c
11,000
5,500
5,500
7,333
3,667
-
400
200
200
-
-
50,925
40,267
35,133
-
To Ramesh Capital A/c
To Revaluation A/c (Loss)
To Ramesh’s Executor’s A/c
To Balance c/d
59,000
41,500
By Balance b/d
By Profit and Loss A/c
9,000
4,500
4,500
By Profit &Loss Susp A/c
-
-
1,125
By Anil’s Capital A/c
-
-
7,333
By Jatin’s Capital A/c
-
-
3,667
56,625
59,000 41,500 56,625
By Balance b/d
Date
Particulars
Rs.
2002
50,000 40,000 40,000
Date
40,267 35,133
Particulars
-
Rs.
2002
Mar. 31
To Cash A/c
18,425
Dec. 31
To Balance A/c
32,500
Mar. 31 By Raeesh’s Capital A/c
50,925
50,925
50,925
2003
Jan.1
By Balance b/d
32,500
BATANCE SHEET
Liabilities
Rs. Assets
Bank Loan
10, 000 Cash
Creditors
20,400 Debtors
Bills Payable
Rs.
81,575
Rs. 20,000
2,000 Less: Provision
Rs. 4,000
16,000
Ramesh’s Executor’s Loan
32,500 Stock
11,000
Anil’s Capital
40,267 Land and Building
22,000
Jatin’s Capital
35,133 Investments
12,600
Profit and Loss Suspense A/c
1,44,300
1,44,300
1,125
Retirement and Death of a Partner
Q.1
What is meant by retirement of a partner?
Ans.
Retirement of a partner is one of the modes of reconstituting the firm in which
old partnership comes to an end and a new partner among the continuing
(remaining) partners (i.e., partners other than the outgoing partner) comes into
existence.
Q.2
‘How can a partner retire from the firm?
Ans.
A partner may retire from the firm;
i)
in accordance with the terms of agreement; or
ii) with the consent of all other partners; or
iii) where the partnership is at will, by giving a notice in writing to all the
partners of his intention to retire.
Q.3
What do you understand by ‘Gaining Ratio*?
Ans.
Gaining Ratio means the ratio by which the share in profit stands increased. It
is computed by deducting old ratio from the new ratio.
Q.4
What do you understand by ‘Gaining Partner’?
Ans
Gaining Partner is a partner whose share in profit stands increased as a result
of change in partnership.
Q.5
Ans.
Q.6
Distinguish between Sacrificing Ratio and Gaining Ratio.
Distinction between Sacrificing Ratio and Gaining Ratio
Give two circumstances in which gaining ratio is computed. Ans.
Gaining
Ratio is computed in the following circumstances: (i) When a partner retires or
dies. (ti) When there is a change in profit-sharing ratio.
Q.7
Why is it necessary to revalue assets and reassess liabilities at the time of
retirement of a partner ?
Ans.
At the time of retirement or death of a partner, assets are revalued and
liabilities are reassessed so that the profit or loss arising on account of such
revaluation upto
the
date of retirement or death of a partner may be
ascertained and adjusted in all partners’ capital accounts in their old profitsharing ratio.
Q.8
Why is it necessary to distribute Reserves Accumulated, Profits and Losses at
the time of retirement or death of a partner?
Ans.
Reserves, accumulated profits and losses existing in the books of account as
on the date of retirement or death are transferred to the Capital Accounts (or
Current Accounts) of all the partners (including outgoing or deceased partner)
in their old profit-sharing ratio so that the due share of an outgoing partner in
reserves, accumulated profits/losses gets adjusted in his Capital or Current
Account.
Q.9
What are the adjustments required on the retirement or death of a partner?
Ans.
At the time of the retirement or death of a partner, adjustments are made for
the following:
(i) Adjustment in regard to goodwill.
(ii) Adjustment in regard to revaluation of assets and reassessment of
liabilities.
(iii) Adjustment in regard to undistributed profits.
(iv) Adjustment in regard to the Joint Life Policy and individual policies.
Q.10
X wants to retire from the firm. The profit on revaluation of assets on the date of
retirement is Rs. 10,000. X is of the view that it be distributed among all the
partners in their profit-sharing ratio whereas Y and Z are of the view that this
profit be divided between Y and Z in new profit-sharing ratio. Who is correct in
this case?
Ans.
X is correct because according to the Partnership Act a retiring partner is
entitled to share the profit upto the date of his retirement. Since the profit on
revaluation arises before a partner retires, he is entitled to the profit.
Q.11
How is goodwill adjusted in the books of a firm -when a partner retires from
partnership?
Ans.
When a partner retires (or dies), his share of profit is taken over by the
remaining partners. The remaining partners then compensate the retiring or
deceased partner in the form of goodwill in their gaining ratio. The following
entry is recorded for this purpose:
Remaining Partners’ Capital A/cs
...Dr.
[Gaining Ratio]
To Retiring/Deceased Partner’s Capital A/c
[With his share of goodwill]
If goodwill (or Premium) account already appears in the old Balance Sheet, it
should be written off by recording the following entry :
All Partners’ Capital/Current A/cs ...Dr.
[Old Ratio]
To Goodwill (or Premium) A/c
Q.12
X, V and Z are partners sharing profits and losses in the ratio of 3 : 2 :1. Z
retires and the following Journal entry is passed in respect of Goodwill:
Y’s Capital A/c
...Dr.
20,000
To X’s Capital A/c
10,000
To Z’s Capital A/c
10,000
The value of goodwill is Rs. 60,000. What is the new profit-sharing ratio
between X and Y?
Ans.
Without calculating the gaining ratio, the amount to be adjusted in respect of
goodwill can be calculated directly with the help of following statement:
STATEMENT SHOWING THE REQUIRED ADJUSTMENT FOR GOODWILL
Particulars
X(Rs.)
V(Rs.)
Z(Rs.)
Right of goodwill before retirement (3:2:1)
30,000
20,000
10,000
(Old Ratio) Right of goodwill after retirement
20,000
40,000
—
(-) 10,000
(+) 20,000
(-) 10,000
(Balancing Figure) (New Ratio)
Net Adjustment
The new ratio between X and Y is 1 : 2.
Q.13
State the ratio in which profit or loss on revaluation will be shared by the
partners when a partner retires. ;
Ans.
Profit or loss on revaluation of assets/liabilities will be shared by the partners
(including the retiring partner) hi their old profit-sharing ratio.
Q.14
How is the account of retiring partner settled?
Ans.
The retiring partner account is settled either by making payment in cash or by
promising the retiring partner to pay in installments along with interest or by
making payment partly in call and partly transferring to his loan account. The following Journal entry is passed:
Retiring Partner’s Capital A/c
...Dr.
To Cash*
[If paid in cash]
Or
To Retiring Partner’s Loan
[If transferred to loan]
Q.15
What is Joint Life Policy?
Ans.
Joint Life Policy is an insurance policy taken on the lives of the partners jointly.
Premium of the policy is paid by the firm.
Q.16
What is the objective of taking a Joint Life Policy by a partnership firm?
Ans.
A partnership firm takes a Joint Life Policy with the objective of receiving
sufficient amount in cash and thereby enabling itself to pay the amount payable
to the retiring partner or to the representatives of the deceased partner, without
adversely affecting the financial position and working of the business.
Q.17
When does the Joint Life Policy become due?
Ans.
Joint Life Policy becomes due for payment by the Insurance Company either on
the death of any partner or on its maturity, whichever is earlier. The policy may
also be surrendered before its maturity.
Q.18
What is Surrender Value?
Ans.
Surrender Value is the value of the insurance policy that the insurance
company pays on the surrender of a policy before the date of its maturity.
Q.19
How is the share of profit of a deceased partner calculated from the date of last
balance sheet to the date of death?
Ans.
If a partner dies on any date after the date of balance sheet; then his share of
profit is calculated from the beginning of the year to the date of death on the
basis of average profits or last year’s profit. It is calculated on either of the
following two bases:
(i) On the Basis of Time: In this method, it is assumed that the profits had
accrued uniformly in the previous year. On the basis of time, deceased
partner’s share in the profits till the date of death is calculated as follows:
Share of Deceased Partner
= Average Profits x x Proportion of Deceased Partner
(ii) On the Basis of Sales: Deceased partner’s share in profit till the date of
death
shall be:
= Sales for the period* x x Proportion of Deceased Partner
*Period = from the beginning of the year to the date of death.
Q.20
How is amount payable to the representative of a deceased partner calculated?
Ans.
In the case of death of a partner, the legal representatives of a deceased
partner are entitled to the following:
(i) The amount standing to the credit of the deceased partner’s capital
account.
(ii) His share in the goodwill of the firm.
(iii) His share of profit on the revaluation^ assets and reassessment of
liabilities. (iv) His share of reserves and accumulated profits.
(v) His share of profits earned from the date of last balance sheet of the date
of death.
(vi) Interest on capital provided in the partnership agreement.
(vii) His share of the proceeds of Joint Life Policy.
The following amounts will be debited to his account:
(i) His share in the reduction in the value of goodwill, if any.
(ii) His share of loss on revaluation of assets and reassessment of liabilities.
(iii) His drawings.
(iv) Interest on drawings, if provided in the partnership deed.
(v) His share of loss from the date of last balance sheet to the date of death.
The balance in the capital account is transferred to his Executor’s Account.
Q.21
Can an outgoing partner or Legal Representative of Deceased Partner share in
the subsequent profits?
Or
What will happen if deceased or retired partner’s dues are not settled
immediately?
Ans.
As per the provisions of Section 37 of the Partnership Act, 1932 if full or part
amount of outgoing partner still remains to be paid then
(i) He will be entitled to interest or share in profit or nothing as has been
mutually agreed among partners.
(ii) If nothing is agreed among the partners, then outgoing partner or his
representatives have the choice to get either of the following till final settlement:
(a)
Interest @ 6% per annum on the balance amount.
(b)
Share in the profit earned proportionate to their amount outstanding
to
total capital.
Share in Profit =
Normally he will opt for the better of (a) or (b).
CHAPTER:5
DISSOLUTION OF PARTNERSHIP FIRM
Q.1 Distinguish between dissolution of partnership and dissolution of partnership firm on the
basis of continuation of business.
Ans. 1 In case of dissolution of partnership, the firm may continue its business operation but in
case of dissolution of partnership firm, the business operations are discontinued.
Q.2 Why is Realisation Account prepared on dissolution of partnership firm?
Ans. 2 Realisation account is prepared to ascertain profit or loss on sale of assets and payment of
liabilities.
Q.3 State any one point of difference between Realisation Account and Revaluation Account.
Ans. 3 Realisation Account is prepared on dissolution of partnership firm and Revaluation
account is prepared on reconstitution of partnership firm.
Q.4 All partners wish to dissolve the firm. Yastin, a partner wants that her loan of Rs. 2,00000
must be paid off before the payment of capitals to the partners. But, Amart, another
partner wants that the capital must be paid before the payment of Yastin’s loan. You are
required to settle the conflict giving reasons.
Ans. 4 Yustin’s claim is valid as according to section 48 (b) of partnership Act, partners loan are
to be paid before any amount is paid to partners on account of their capitals.
Q.5 On a firms dissolution debtors as shown in the Balance sheet were Rs. 17000 out of these
Rs. 2000 became bad. One debtor of Rs. 6000 became insolvent and 40% could be
recovered from him. Full recovery was made from the balance debtors. Calculate the
amount received from debtors and pass necessary journal entry.
Ans. 5 Cash A/C
Dr. 11400
To Realisation A/C
11400
(For debtors realized on dissolution of firm)
Q.6 On dissolution of a firm, Kamal’s capital account shows a debit balance of Rs. 16000. His
share of profit on realization is Rs. 11000. He has taken over firms creditors at Rs. 9000.
Calculate the final payment due to /from him and pass journal entry.
Ans. 6 Kamal’s capital A/C
Dr. 4000
To cash A/C
4000
(for final payment to Kamal)
Q.7 A and B were partners in a firm sharing profits and losses equally. Their firm was dissolved
on 15th March, 2004, which resulted in a loss of Rs. 30,000. On that date the capital A/C
of A showed a credit balance of Rs. 20,000 and that of B a credit balance of Rs. 30000.
The cash account has a balance of Rs. 20000. You are required to pass the necessary
journal entries for the (i) Transfer of loss to the capital accounts and (ii) making final
payment to the partners.
Ans. 7 (i) A’s capital A/C
Dr. 15000
B’s capital A/C
Dr. 15000
To realization A/C
30000
(For transfer of loss on dissolution)
(ii) A’s capital A/C
Dr. 5000
B’s capital A/C
Dr. 15000
To cash A/C
20000
(For final payment to partners)
Q.8 What journal entries would be passed in the books of A and B who are partners in a firm,
sharing profits in the ratio of 5:2, for the following transactions on the dissolution of the
firm after various assets (other than cash) and third party liabilities have been transferred
to Realisation Account?
(a)
(b)
(c)
(d)
(e)
(f)
Bank loan Rs. 12,000 is paid.
Stock worth Rs. 6000 is taken over by B.
Loss on Realisation Rs. 14,000.
Realisation expenses amounted to Rs. 2,000, B has to bear these expenses.
Deferred Revenue Advertising Expenditure appeared at Rs. 28,000.
A typewriter completely written off in the books of the firm was sold for Rs. 200.
Ans. 8
JOURNAL
(a)
(b)
(c)
(d)
(e)
(f)
Realisation A/C
To Bank A/C
B’s capital A/C
To realisation A/C
A’s capital A/C
B’s capital A/C
To Realisation A/C
B’s capital A/C
To bank A/C
A’s capital A/C
B’s capital A/C
To deferred revenue advertising expenditure A/C
Bank A/C
To realisation A/C
Dr.
Dr. (Rs)
12000
Dr.
6,000
Dr.
Dr.
10,000
4,000
Cr. (Rs.)
12000
6,000
14000
Dr.
2,000
2,000
Dr.
Dr.
20,000
8,000
28,000
Dr.
200
200
CBSE SAMPLE PAPER
ACCOUNTANCY
CLASS - XII
Time Allowed : 3 Hours
Maximum Marks : 80
General Instructions:
1.
This question paper contains three parts A, B and C.
2.
Part A is compulsory for all.
3.
Attempt onfy one part of the remaining parts B and C.
4.
All parts of questions should be attempted at one place.
PART-A
PARTNERSHIP AND COMPANY ACCOUNTS
1.
Not-for-profit organisations have some distinguishing features from that of profit
organisations. State any one of them,
[1]
2.
Alka, Barkha and Charu are partners in a firm having no partnership agreement.
Alka Barkha and Charu contributed Rs. 2,00,000, Rs. 3,00,000 and Rs. 1,00,000
respectively. Alka and Barkha desire that the profits should be divided in the ratio
of capital contribution. Charu does not agree to mis. How will you settle the
dispute?
[1]
3.
Give the formula for 'calculating gaining share' of apartner in a partnership firm.
[1]
4.
Pawan and Jayshree are partners. Bindu is admitted for l/4th share. What is the ratio
in which Pawan and Jayshree will sacrifice their share in favour of Bindu?
[1]
5.
What is meant by Convertible debentures?
6.
Show the following information in the Balance Sheet of the Cosmos Club as on 31st
March, 2007:
[1]
Particulars
Tournament Fund
Tournament Fund Investment
Income from Tournament Fund Investment
Tournament Expenses
Debit Rs.
Credit Rs.
-
1,50,000
1,50,000
-
-
18,000
12,000
-
Additional Information :
Interest Accrued on Tournament Fund Investment Rs. 6,000.
7.
[3]
Shubh Limited has the following balances appearing in its Balance Sheet:
Rs.
Securities Premium
22,00,000
9% Debentures
120,00,000
Underwriting Commission
10,00,000
The company decided to redeem its 9% Debentures at a premium of 10%. You are
required to suggest the ways in which the company can utilise the securities
premium amount.
[3]
8.
20,000 Shares of Rs. 10 each were issued for public subscription at a premium of
10% Full amount was'pavaD'e °n application. Applications were received for
30,000 shares and the Board decided to allot the shares on a pro-rata basis. Pass
Journal entries. [3]
9.
A, B and C are partners in a firm. They have omitted interest on capital @ 10%
pa.a. for three years ended 31st March, 2007. Their fixed capitals on which interest
was to be calculated throughout were :
A
Rs. 1,00,000
B
Rs. 80,000
C
Rs. 70,000
Give the necessary adjusting journal entry with working notes.
10.
[4]
'X, Y'and Z were sharing profits and losses in the ratio of 5:3:2. They decided to
share future profits and losses in the ratio of 2:3:5 with effect from 1.4.2007. They
decided to record the effect of the following, without effecting their book values:i)
Profit and Loss Account
Rs. 24,000
ii)
Advertisement Suspense Account
Rs. 12,000
Pass the necessary adjusting entry.
[4]
11. Sajal Limited had issued shares of Rs. 100 each at a discount of 5%, payable as
follows:
On application
Rs. 25 per share
On allotment
Rs. 25 per share
On first and final call
Balance
One shareholder, Pran holding 50 shares did not pay his first and final call. As a res!
his shares were forfeited.
Of these, 40 shares were reissued to Ram as fully paid up @ Rs. 110 per share, Pass
necessary journal entries to record the forfeiture and reissue of shares in: books of
Sajal Limited.
[4]
12 (a) Raghav Limited purchased a running business from Krishna Traders for a sum
of Rs. 15,00,000, payable Rs. 3,00,000 by cheque and for the balance issued 9%
Debentures of Rs. 100 each at par.
The assets and liabilities consisted of the following :
Rs.
Plant and Machinery
4,00,000
Buildings
6,00,000
Stock
5,00,000
Sundry Debtors
3,00,000
Sundry Creditors
2,00,000
Record necessary journal entries in the books of Raghav Limited,
(b) On January 1,2004, Rhythm Limited issued 1,000 10% debentures of Rs. 500
each at par. Debentures are redeemable after 7 years. However, the company gave
an option to debenture holders to get their debentures converted into equity shares
of Rs. 100 each at a premium of Rs. 25 per shareany time after the expiry of one
year.
to
Shivansh, holder of 200 debentures, informed on Jan. 1, 2006 that he wanted
exercise the option of conversion of debentures into equity shares.
The company accepted his request and converted debentures into equity
shares.
Pass necessary journal entries to record the issue of debentures on Jan. 1,2004
and conversion of debentures on Jan. 1,2006.
(3+3 = 6)
13. From the following Receipts and Payments Account of Sonic Club and from the
given additional information; prepare Income and Expenditure Account for the year
ending 31st December, 2006 and the Balance Sheet as on that date :
RECEIPTS AND PAYMENTS ACCOUNT
for the year ending 31st December, 2006
Cr.
Dr.
Receipts
Rs. Payments
To Balance b/d
1,90,000 By Salaries
To Subscriptions
6,60,000 By Sports Equipment
To Interest on Investments
@ 8% p.a. for full year
By Balance c/d
Rs.
3,30,000
30,000
1,60,400
40,000
8,90,000
8,90,000
Additional Information :
(a)
The club had received Rs. 20,000 for subscription in 2005 for 2006.
(b)
Salaries had been paid only for 11 months
(c)
Stock of Sports Equipment on 31st December, 2005 was Rs. 3,00,000 and on
31
st December, 2006 Rs. 6,50,000.
(6)
14. Ram, Mohan and Sohan were partners sharing profits and losses in the ratio of
5:3:2. On 31 st March, 2006 their Balance Sheet was as under:
Liabilities
Rs. Assets
Capitals :
Rs
Leasehold
Ram
1,50,000
Patents
Mohan
1,25,000
Machinery
Sohan
75,000 3,50,000 Stock
Creditors
Workmen's Compensation
1,50,000 Cash at Bank
Rs.
1,25,000
30,000
1,50,000
1,90,000
40,000
30,000
Reserve
5,35,000
5,35,000
Sohan died on 1st August, 2006. It was agreed that:
i)
Goodwill of the firm is to be valued at Rs. 1,75,000.
ii)
Machinery be valued at Rs. 1,40,000; Patents at Rs. 40,000; Leasehold at Rs.
1,50,000 on this date,
iii) For the purpose of calculating Sohan?s share in the profits of 2006-07, the
profits should be taken to have accrued on the same scale as in 2005-06, which
were Rs. 75,000.
Prepare Sohan's Capital Account and Revaluation Account.
(6)
15. Srijan Limited issued Rs. 10,00,000 new capital divided into Rs. 100 shares at a
premium of Rs. 20 per share, payable as under:
On Application
Rs. 10 per share
On Allotment
Rs 0 per share (including
premium of Rs, 10 per share)
On First and Final Call
Balance
Over-payments on application, were to be applied towards sums due on allotment
and first and final call. Where no allotment was made, money was to be refunded in
full. The issue was oversubscribed to the extent of 13,000 shares. Applicants for
12,000 shares were allotted only 2,000 shares and applicants for 3,000 shares were
sent letters of regret and application money was returned to them. All the money
due was duly received.
Give Journal Entries to record the above transactions (including cash transactions)^
the books of the company.
[8]
OR
Sangita Limited invited application for issuing 60,000 shares of Rs. 10 each at par.
amount was payable as follows:
On Application
Rs. 2 per share
On Allotment
Rs. 3 per share
On First and Final Call
Rs. 5 per share
Applications were received for 92,000 shares. Allotment was made on the following
basis :
i)
To applicants for 40,000 shares - Full
ii) To applicants for 50,000 shares - 40% (iii) To applicants for 2,000 Shares Nil Rs. 1,08,000 was realised on account of allotment (excluding the amount
carried first application money) and Rs. 2,50,000 on account of call.
The directors decided to forfeit shares of those applicants to whom full allotment^
made and on which allotment money was overdue.
Pass journal entries in the books of Sangita Limited to record the above
transactions.
[5]
16. L and M share profits of a business in the ratio of 5:3. They admit N into the firm
for a fourth share in the profits to be contributed equally by L&M. On the date of
admission the Balance Sheet of L&M is as follows :
BALANCE SHEET
as at......
Liabilities
Rs. Assets
L's Capital
30,000 Machinery
26,000
M's Capital
20,000 Furniture
18,000
Reserve Fund
Bank Loan
Creditors
Rs.
4,000 Stock
10,000
12,000 Debtors
8,000
2,000 Cash
6,000
68,000
68,000
Terms of N's admission were as follows :
i)
N will bring Rs. 25,000 as his capital.
ii) Goodwill of the firm is to be valued at 4 years? purchase of the average super
profits of the last three years. Average profits of the last three years are Rs. 20,000;
while the normal profits that can be earned on the capital employed are Rs. 12,000.
iii) Furniture is to be appreciated to Rs. 24,000 and the value of stock into by
20%.
Prepare Revaluation-Account, Partners Capital Accounts and the Balance
Sheet
of the firm after admission of N .
(8)
OR
On 31st December, 2006 the Balance Sheet of A. B and C, who were sharing profits
and losses in proportion to their capitals, stood as follows :
Liabilities
Amount Assets
Creditors
Capitals :
Amount
10,800 Cash at Bank
Rs.
Debtors
A
45,000
Less : Provision
B
30,000
Stock
C
15,000
90,000 Machinery
8,000
Rs 10,000
200
9,800
9,000
24,000
Land and Buildings
1,00,800
50,000
1,00,800
B retires and the following readjustments of assets and liabilities have been agreed
upon before the ascertainment of the amount payable to B :
i)
That Land and Buildings be appreciated by 12%.
ii)
That provision for Doubtful Debts be brought upto 5% of debtors.
iii) That a provision of Rs. 3,900 be made in respect of an 'outstanding bill for
repairs,
iv) That Goodwill of the entire firm be fixed at Rs.. 18,000 and B?s share of the
same be adjusted into the accounts of A&C, who are going to share future profits in
the proportion of 3/4th and l/4th respectively,
v) That B be paid Rs. 5,000 immediately and the balance to be transferred to his
Loan Account.
Prepare Revaluation Account, Capital Accounts of Partners and the Balance
Sheet
of the firm of A and C.
(8)
PART-B
ANALYSIS OF FINANCIAL STATEMENTS
17. Assuming that the Current Ratio is 2:1, state giving reason whether the ratio will
improve, decline or will have no change in case a Bill Receivable is dishonoured.(1)
18. State whether cash deposited in bank will result in inflow, outflow or no flow of
cash.(1)
19. Interest received by a finance company is classified under which kind of activity
while preparing a cash flow statement ?
(1)
20. Show the major headings into which the liabilities side of a Company's Balance
Sheet is organised and presented as per Schedule VI Part 1 of the Companies Act,
1956.(3)
21. Prepare a Comparative Income Statement with the help of the following information
:
(4)
Particulars
2006
2007
Sales
Rs. 20,00,000
Rs. 30,00,000
Gross Profit
Indirect Expenses
Income Tax
22.
40%
30%
50% of G P.
40% of G.P.
50%
50%
Following is the Balance Sheet of X Ltd. as on 31st March, 2006 :
Liabilities
Share Capital
Reserves
10% Loans
Amount Assets
Amount
20,00,000 Fixed Assets (Net)
5,00,000 Current Assets
29,00,000
25,00,000
10,00,000 Underwriting
Commission
Current Liabilities
8,00,000
Profit for the year
12,00,000
55,00,000
1,00,000
55,00,000
Find out 'Return on Capital Employed;
23.
From the following balance sheets of ABC Ltd., Find out cash from operating
activities only.
Liabilities
31.3.2006 31.3.2007
Rs.
Rs.
Assets
31.3.2006 31.3.2007
Rs.
Rs.
Equity Share Capital
General Reserve
Profit & Loss Account
10% Debentures
Sundry Creditors
Provision for Depreciation
on Machinery
30,000
10,000
21,000
8,500
35,000
15,000
7,000
25,000
12,500
9,000
13,000
78,500
Goodwill
Machinery
10% Inv.
Stock
Cash and Bank
Discount on
Debentures
Profit & Loss
Account
1,07,500
10,000
41,000
3.000
6,000
12,000
8,000
54,000
8.000
24,500
13,000
500
-
6,000
-
78,500
1,07,500
Additional Information :
*Debentures were issued on 31.3.2007.
* Investments were made on 31.3.2007.
ANNUAL PAPER
ACCOUNTANCY
CLASS - XII
Time Allowed : 3 Hours
Maximum Marks : 80
General Instructions :
1.
This question paper contains three parts A, B and C.
2.
Part A is Compulsory for all candidates.
3.
Candidates can attempt only one part of the remaining parts B and C.
4.
All parts of the questions should be attempted at one place.
PART-A
(Not for Profit Organisations, Partnership Firms and Company Accounts)
1.
Distinguish between Income and Expenditure Account and Receipt and Payment
Account on the basis-of nature of items recorded therein.
[1]
2.
Ram and Mohan are partners in a firm without any partnership deed. Their capitals
are
Ram Rs.8,00,000 and Mohan Rs.6,00,000. Ram is an active partner and looks after
the business. Ram wants that profit should be shared in proportion of capitals. State
with reason whether his claim is valid or not.
[1]
3.
Defined goodwill.
[1]
4.
State any two reasons for the preparation of 'Revaluation Account' on the admission
of a partner.
[1]
5.
Give the meaning of 'minimum subscription'.
6.
Calculate the amount of sports material to be debited to the Income and Expenditure
Account of Capital Sports Club for the year ended 31.3.2007 on the basis of the
following information
[1]
1.4.2006
31.3.2007
Rs.
Rs.
Stock of sports material
7,500
6,400
Creditors for sports material
2,000
2,600
Amount paid for sports material during the year was Rs. 19,000.
7.
Samta Ltd. forfeited 800 equity shares of Rs. 100 each for the non-payment of first
call of Rs. 30 per share. The final call of Rs.20 per share was not yet made. Out of
the share 400 were re-issued at the rate of Rs.105 per share fully paid up.
Pass necessary journal entries in the books of Samta Ltd. for the above transaction.
[3]
8.
Deepak Ltd. purchased furniture Rs.2,20,000 from M/s Furniture Mart. 50% of the
amount was paid to Furniture Mart by accepting a bill of exchange and for the
balance the company issue 9% debentures of Rs.100 each at a premium of 10% in
favour of Furniture Mart. Pass necessary journal entries in the books of Deepak Ltd.
for the above transactions.
[3]
9.
Kumar and Raja were partners in a firm sharing profits in the ratio of 7 :3. Their
fixed capital were: Kumar Rs.9,00,000 and Raja Rs.4,00,000. The partnership deed
provided for the following but the profit for the year was distributed without
providing for:
i)
Interest on capital @ 9% p.a.
ii)
Kumar's salary Rs.50,000 per year and Raja's salary Rs.3,000 per month.
The profit for the year ended 31.3.2007 was Rs.2,78,000.
Pass the adjustment entry.
[4]
10. P, Q and R were partners in a firm sharing profits in 2 : 2 :1 ratio. The firm closes its
book on 31 March every year. P died three months after the last accounts were
prepared. On that date the goodwill of the firm was valued at Rs.90,000. On the
death of a partner his share of profit in the year of death was to be calculated on the
basis of the average profits of the last four years The profits of last four years were :
Year ended 31.3.2007
Rs.2,00,000
Year ended 31.3.2006
Rs. 1,80,000
Year ended 31,3.2005
Rs. 2,10,000
Year ended 31.3.2004
Rs. 1,70,000 (Loss)
Pass necessary journal entries for the treatment of goodwill and P's share of profit
on his death.
Show clearly the calculation of P's share of profit.
(4)
11. Sagar Ltd. was registered with an authorised capital of Rs. 1,00,000 divided into
1,00,000 equity shares of Rs.100 each. The company offered for public subscription
60,000 equity shares.
Applications for 56,000 shares were received and allotment was made to all the
applicants. All the calls were made and were duly received except the second and
final call of Rs.20 per share on 700 shares. Prepare the Balance Sheet of the
company showing the different types of share capital.
(4)
12. Following is the Receipt and Payment Account of Indian Sports Club for the year
ended 31.12.2006.
Receipts
Amount Payments
Amount
To Balance b/d
10,000 By Salary
15,000
To Subscriptions
52,000 By Billiards Table
20,000
To Entrance Fee
To Tournament Fund
To Sale of old newspapers
To Legacy
5,000 By Office Expenses
26,000 By Tournament Expenses
1,000 By Sports Equipment
37,000 By Balance c/d
1,31,00
6,000
31,000
40,000
19,000
1,3 1,000
Other Information:
On 31.12.2006 subscription outstanding was Rs.2,000 and on 31.12.2005
subscription outstanding was Rs.3,000. Salary outstanding on 31.12,2006 was
Rs.1,500.
On 1.1.2006 the club had building Rs.75,000, furniture Rs. 18,000,12% investment
Rs.30,000 and sports equipment Rs.30,000, Depreciation charged on these items
including purchases was 10%.
Prepare Income and Expenditure Account of the Club for the year ended 31.12.2006
and ascertain the Capital Fund on 31.12.2005.
(6)
13. K and Y were partners in a firm sharing profits in 3 :2 ratio. They admitted Z as a
new partner for l/3rd share in the profits of the firm. Z acquired his share from K
and Y in 2 : 3 ratio. Z brought Rs.80,000 for his capital and Rs.30,000 for his 1/3"1
share as premium. Calculate the new profit sharing ratio of K, Y and Z and pass
necessary journal entries for the above transactions in the books of the firm.
(6)
14. Pass necessary journal entries in the books of Varun Ltd. for the following
transactions: i) Issued 58,000, 9% debentures of Rs.l,000each at a premium of
10%.
ii) Converted 350,9% debentures of Rs. 100 each into equity shares of Rs. 10
each issued at premium of 25%.
iii)
Redeemed 450, 9% debentures of Rs.100 each by draw of lots.
(6)
15. R, S and T were partners in a firm sharing profits in 2 :2 : 1 ratio. On 1.4.2004 their
Balance Sheet was as follows :
Liabilities
Amount Assets
Amount
Bank Loan
12,800 Cash
51,300
Sundry Creditors
25,000 Bills Receivable
10,800
Debtors
35,600
44,600
Capitals :
R
80,000
Stock
S
50,000
Furniture
7,000
T
40.000
1,70,000 Plant and Machinery
19,500
Profit: and Loss A/c
9,000 Building
2,16,800
48,000
2,16,800
S retired from the firm on 1.4.2004 and his share was ascertained on the revaluation
of assets as follows:
Stock Rs.40,000; Furniture Rs.6,000; Plant and Machinery Rs. 18,000; Building
40,000, Rs.1,700 were to be provided for doubtful debts. The goodwill of the firm
was valued at Rs. 12,000.
S was to be paid Rs. 18,080 in cash on retirement and the balance in three equal
yearly instalments. Prepare Revaluation Account, Partner's Capital Accounts, S's
Loan Account and Balance Sheet on 1.4.2004.
OR
D and E were partners in a sharing profits in 3 :1 ratio. On 1.4.2007 they admitted F
as a new partner for 1/4th share in the firm which he acquired from D. Their
Balance Sheet on the date was as follows:
Liabilities
Amount Assets
Amount
Creditors
Capitals :
D
1,00,000
S
70.000
General Reserve
54,000 Land and Building
Machinery
Stock
1,70,000 Debtors
40,000
32,000 Less provision
for bad debts
3,000
37,000
Investments
50,000
Cash
44,000
2,56,000
2,56,000
F will bring R. 40,000 as his capital and the other terms agreed upon were :
i)
Goodwill of the firm was valued at Rs. 24,000
ii)
Land and Building were valued at Rs. 70,000
iii)
Provision for bad debts was found to be in excess by Rs.800
iv)
A liability for Rs.2,000 included in sundry creditors was not likely to arise.
v)
Excess or shortfall, if any, to be transferred to current accounts.
'
Prepare Revaluation Account, Partner's Capital Accounts and the Balance Sheet of
the New firm.
16. Janata 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
Balance
Applications for 1,00,000 shares 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 Kanwar. His shares were forfeited.
The forfeited shares were re-issued for Rs.77,000 fully paid up.
Pass necessary journal entries for the books of the company for the above
transactions.
(8)
OR
Shubham Ltd. invited applications for the allotment of 80,000 equity shares of
Rs.10 each at a discount of 10%. The amount was payable as follows :
On application
Rs.2 per share
On allotment
Rs.3 per share
On first and final call-
Balance
Applications for 1,10,000 shares were received. Applications for 10,000 shares
were rejected. Shares were allotted on pro-rata basis to the remaining applicants.
Excess application money received on application was adjusted towards sums due
on allotment. All calls were made and were duly received. Manoj who had applied
for 2,000 shares failed to pay the allotment and first and final call. His shares were
forfeited. The forfeited shares were re-issued for Rs.24,000 fully paid up. Pass
necessary journal entries in the books of the company for the above transaction.
PART-B
(Analysis of Financial Statements)
17. The stock turnover ratio of a company is 3 times. State, giving reason, whether the
ratio improves, declines or does not change because of increase in the value of
closing stock by Rs.5,000.
(1)
18. State whether the payment of cash to creditors will result in inflow, outflow or no
flow of cash.
(1)
19.
Dividend paid by a manufacturing company is classified under which kind of
activity while preparing cash flow statement?
(1)
20. Show the major headings on the liabilities side of the Balance Sheet of a company as
per Schedule VI Part I of the Companies Act, 1956.
(3)
21. From the following information prepare a comparative Income Statement of Victor
Ltd:
(4)
2006
2007
Rs.
Rs.
Sales
15,00,000
18,00,000
Cost of goods sold
11,00,000
14,00,000
20% of Gross Profit
125% of Gross Profit
50%
50%
Indirect Expenses
Income Tax
22. From the following information calculate any two of the following ratios
(4)
i)
Net Profit Ratio
ii)
Debt-Equity Ratio
iii)
Quick Ratio
Paid up Capital
Capital Reserve
9% Debentures
Net Sales
Gross Profit
Indirect Expenses
Current Assets
Current Liabilities
Opening Stock
Closing Stock : 2% more than opening stock.
Rs.
20,00,000
2,00,000
8,00,000
14,00,000
8,00,000
2,00,000
4,00,000
3,00,000
50,000
23. From the following Balance Sheets of Som Ltd. as on 31.3.2006 and 31.3.2007
prepare a Cash Flow Statement :
Liabilities
Amount
Equity Share Capital
2,00,000
5,00,000
Profit and Loss
1,25,000
10% Debentures
Assets
Amount
Fixed Assets
3,00,000
4,50,000
25,000
Stock
1,00,000
1,50,000
1,00,000
75,000
Debtors
75,000
1,25,000
8% Preference Shares Capital
50,000
75,000
Bank
45,000
65,000
General Reserve
45,000
1,15,000
5,20,000
7,90,000.
5,20,000
7,90,000
During the year machine costing Rs.70,000 was sold for Rs. 15,000. Dividend paid
Rs.24,000
(6)
ANSWERS
SET-1
(Not for Profit Organisations, Partnership Firms and Company Accounts)
1.
Income and Expenditure Account records items of revenue nature whereas Receipt
and Payments Account records items of both capital and revenue nature.
2.
His claim is not valid because in the absence of a partnership deed, profits and
losses should be shared equally.
3.
Goodwill is the value of the reputation of a firm is respect of the profits expected in
future over and above the normal profits earned by other similar firms belonging to
the same industry.
4.
The two reasons are :
(i)
To show the assets and liabilities at their current / correct values.
ii) To ensure that no partner is at an advantage or disadvantage due to change in
the value of assets and liabilities.
5.
Minimum subscription is the minimum amount which in the opinion of the Board of
Directors must be raised through the issue of shares so that the company has
necessary funds to carry out its objectives as stated in its memorandum of
Association.
Minimum subscription, according to SEB1 guidelines is 90% of the issued capital.
6.
Dr.
Cr.
STOCK OFSPORTS MATERIAL ACCOUNT
Particulars
Amt. (Rs.) Particulars
To Balance b/d
Amt (Rs.)
7,500 By Income & Expenditure A/c -
20,700
(stationery consumed)
To Creditors -
19,600 By Balance c/d
(purchases)
27,100
6,400
27,100
Dr.
27,100
CREDITORS FOR SPORTS MATERIAL ACCOUNT
Particulars
To Cash (paid)
To Balance c/d
Amt. (Rs.) Particulars
Cr.
Amt (Rs.)
19,000 By Balance b/d
2,000
2,600 By Purchases A/c
19,600
(credit -bal.fig.)
21,600
21,600
OR
Calculation of Sports Material consumed during the year
Cash paid during the year
19,000
Add Opening Stock of sports Material
7,500
Less Closing stock of sports Material
6,400
Less Creditors in the beginning
2,000
Add Creditors at the end
2.600
Amount to be debited to Income & Expenditure A/c
20,700
JOURNAL OF SAMTALTD.
7.
Date
Particulars
L.F.
Dr. (Rs.)
Share Capital A/c
Dr.
Cr.(Rs)
64,000
To Share Forfeited A/c
40,000
To Share First Call A/c / Calls in Arrears A/c
24,000
(Being 800 shares forfeited for noh payment of
first call)
Bank A/c
Dr.
42,000
To Share Capital A/c
40,000
To Securities Premium A/c
2,000
(Being 400 Shares reissued)
Share Forfeited A/c
Dr.
20,000
To Capital Reserve A/c
20,000
(Being amount transferred to Capital Reserve)
8.
JOURNAL OF DEEPAK LTD.
Date
Particulars
Furniture A/c
L.F.
Dr.
Dr. (Rs.)
2,20,000
Cr.(Rs)
To M/s Furniture Mart A/c
2,20,0001
(Being furniture purchased)
Ms Furniture Mart A/c
Dr.
1,10,000
To Bills Payable A/c
1,10,000:,
(Being Bill payable Accepted)
M/s Furniture Mart A/c
Dr.
1,10,000
To 9% Debentures A/c
1,00,000
To Securities Premium
10,000
(Being Debentures issued at 10% premium)
9.
JOURNAL
Date
Particulars
L.F.
Kumar's Current A/c
Dr.
To Raja's Current A/c
Dr. (Rs.)
Cr.(Rs)
11,100
11,100
(Being adjustment made which was omitted
earlier)
Working Notes:
STATEMENT SHOWING ADJUSTMENTS
Particulars
Kumar (Rs.)
Raja (Rs.)
Interest on Capitals
81,000 (Cr.)
36,000 (Cr.)
Salaries
50,000 (Cr.)
36,000 (Cr.)
Wrong Profits
1,94,600 (Dr.)
83,400 (Dr.)
Actual Profits
52,500 (Cr.)
22,500 (Cr.)
Adjustments
11,100 (Dr.)
11,100 (Cr.)
10.
JOURNAL
Date
Particulars
L.F.
P & L Suspense A/c
Dr.
Dr. (Rs.)
Cr.(Rs)
10,500
To P's Capital A/c
10,500
(Being share of profit credited to his A/c)
Q's Capital A/c
Dr.
24,000
R's Capital A/c
Dr.
12,000
To P's Capital A/c
36,000
(Being adjustment made in respect of P's share
of goodwill)
Working Note :
(a)
P's Share of profit
Average Profit
P's share of profit
=
Average profit x 3/12 x 2/5
=
2,00,000 + 1,80.000 + 2,10,000 -1,70,000
= Rs.1,05,000
=
1,05,000 x 3/12 x 2/5 = Rs.l0,500
P's share in goodwill = Rs.90,000 x 2/5 = Rs. 36,000
11.
BALANCE SHEET OF SAGAR LTD.
.
as at ..........
Liabilities
Amount (Rs.)
SHARE CAPITAL
Authorised Capital
1,00,00,000
Assets
Amount (Rs.)
1,00,000 equity shares of Rs. 100 each
Issued Capital
60,000 equity shares of Rs. 1 00 each
60,00,000
Subscribed Capital
56,000 equity shares of Rs.100 each
56,00,000
Less calls in arrears
14.000
55,86,000
OR
Liabilities
Amount (Rs.)
Assets
Amount (Rs.)
A uthorised Capital
1,00,000 Equity Shares of Rs.100 each
1,00,00,000
Issued Share Capital
60,000 Equity Shares of Rs.100 each
60,00,000
Subscribed Share Capital
56,000 Equity Shares of Rs. 100 each
56,00,000
Called up and Paid up Share Capital
56,000 Equity Shares of Rs. 100 each
Less, calls in arrears
56,00,000
14.000
55,86,000
Note : If the Issued Capital is taken as Rs.56,00,000, full credit was given.
12.
INCOME & EXPENDITURE ACCOUNT
for the year ended 31st December 2006
Expenditure
To Salary
Amt. (Rs.) Income
15,000
By Subscription
Amt (Rs.)
52,000
Add: Outstanding Salary
1,500
To Office Expenses
16,500 Add: Subscription Outstanding
6,000 at the end
2,000
To Excess of Expenses
Over Tournament Fund
5,000 Less: Subscription
(31,000-26,000)
Outstanding in the
beginning
3.000
To Depreciation on Building
7,500 By Entrance Fees
5,000
To Depreciation on Furniture
1,800 By Sale of old Newspaper
1,000
To Depreciation on Sports Equipment
7,000
To Surplus
16,800 By Accrued Interest
60,600
3,600
60,600
BALANCE SHEET
as at 31" December 2005
Liabilities
Capital
Amount (Rs.)
1,66,000
Assets
Cash
Amount (Rs)
10,000
Subscription
Outstanding
3,000
Building
75,000
Furniture
18,000
Sports
1,66,000
Notes :
Equipment
30,000
1 2% Investments
30,000
1,66,000
1. If Billiards Table is included in furniture, then depreciation On furniture would be
Rs.3,800
and the surplus would be Rs.l 4,800.
2. No marks were deducted if depreciation has been charged on Investments. The
surplus
would change accordingly.
13.
Old Ratio
=
3:2
Z's share
=
1/3
Z acquires from K = 1/3 x 2/5 = 2/15
Z acquires from Y = 1/3 x 3/5 = 3/15
K's new share = Old share-share to Z = 3/5-2/15 = 7/15
Y's new share = Old share - share to Z = 2/5 -3/15 = 3/15
New profit sharing ratio = 7:3:5
JOURNAL
Date
Particulars
Cash A/c
L.F.
Dr.
Dr. (Rs.)
Cr.(Rs)
1,10;000
To Z's Capital A/c
80,000
To Premium A/c
30,000
(Being Capital and share of goodwill brought in by
the new partner)
Premium A/c
Dr.
30,000
To K's Capital A/c
12,000
To Y's Capital A/c
18,000
(Being the amount of premium distributed in
Sacrificing ratio)
14.
i)
Date
JOURNAL OF VARUN LTD.
Particulars
L.F.
Bank A/c
Dr.
Dr. (Rs.)
Cr.(Rs)
6,38,00,000
To Debenture Application and Allotment A/c
6,38,00,000
(Being Debenture Application money received)
Debenture Application and Allotment A/c
Dr.
6,38,00,000
To 9% Debentures A/c
5,80,00,000
To Securities Premium A/c
58,00,000
(Being issue of Debentures at Premium of 10%)
II)
Date
JOURNAL
Particulars
L.F.
9% Debentures A/c
Dr.
Dr. (Rs.)
Cr.(Rs)
35,000
To Debenture Holders
35,000
(Being amount due to Debenture Holders)
Debenture holders A/c
Dr.
To Equity Share Capital A/c
28,000
To Securities Premium A/c
7,000
(Being 2,800 Equity Shares issued at a premium of 25%)
III)
35,000
JOURNAL
Date
Particulars
L.F.
9% Debentures A/c
Dr.
Dr. (Rs.)
Cr.(Rs)
45,000
To Debenture Holders
45,000
(Being amount due to Debenture Holders)
Debenture Holders A/c
Dr.
45,000
To Bank A/c
45,000
(Being amount paid to Debenture Holders)
REVALUATION ACCOUNT
15.
Expenditure
Amt. (Rs.) Income
Amt (Rs.)
To Stock
4,600 By Loss transferred to
To Furniture
1,000 Partners capital A/cs :
To Plant &. Mach.
1,500
R 6,720
To Building
8,000
S 6,720
To Provision for
T 3,360
Doubtful Debts
16,800
1,700
16.800
16.800
CAPITAL ACCOUNTS
Particulars
R Rs.
S Rs.
T Rs. Particulars
6,720
6,720
3,360 By Balance b/d
R Rs.
S Rs.
T Rs
To
Revaluation A/c
By P&L A/c
To S's Capital A/c
To Cash A/c
3,200
18,080
80,000 50,000 40,000
3,600
3,600
1,800
_
3,200
-
1,600 By R's
Capital A/c
To S's Loan
A/c
By T's
- 33,600
- Capital A/c
To Bal. c/d
83,600 58,400
41,800
-
1,600
-
73,680 36,840
83,600 58,400 41,800
BALANCE SHEET
as at 1.4.2004
Liabilities
Amt (Rs.) Assets
Bank Loan
12,800 Cash
33,220
Sundry Creditors
25,000 Bill Receivables
10,800
S'sLoan
33,600 Debtors
Capital
Less Provision
Amt (Rs.)
35,600
1,700
33,900
R
73,680
Stock
T
36,840
Furniture
40,000
6,000
1,10,520 Plant & Machinery
18,000
Building
40,000
1,81,920
1,81,920
S's LOAN ACCOUNT
Cr.
Date
Dr.
Particular
Amount (Rs,)
Date
33,600
2004
To Balance c/d
Apr. 1
Particular
Amount (Rs.)
By S's Capital
33,600
33,600
33,600
OR
REVALUATION ACCOUNT
Cr.
Dr,
Particulars
Amt (Rs.) Particulars
Amt (Rs.)
To Profit TVansferred to
By Land and building
Partner's Capital A/c
By Provisions for doubtful debts
D
17,100
E
20,000
800
By Sundry Creditors
2,000
5,700 22,800
22,800
22,800
PARTNERS' CAPITAL ACCOUNTS
Particulars
D Rs.
E Rs.
F Rs. Particulars
To
67,100 43,700
-- By Balance b/d
Current A/c
80,000 40,000
40,000 By Revaluation A/c
D Rs.
E Rs.
F Rs.
1,00,000 70,000
--
17,100
5,700
--
By General Reserve
24,000
By Cash A/c
--
By F's Current A/c
1,47,000 83,700
8,000
46,000
6,000
--
-- 40,000
--
1,47,000 83,700 46,000
BALANCE SHEET
as at 1" April 2007
Liabilities
Amt (Rs.) Assets
Creditors
Amt (Rs.)
52,000 Land & Building
Capital A/c's
70,000
Debtors
40,000
D
80,000
Less Provision
E
40,000
Machinery
F
40,000
2.200
60,000
1,60,000 Stock
Current A/c's
37,800
15,000
Investment
50,000
84,000
D
67,100
Cash
E
43,700
F's Current A/c
6,000
1,10,800
3,22,800
3,22,800
Note: Full credit was given if an examinee has calculated the adjusted capitals as: D Rs. 68,000; E
Rs.34,000 and F Rs.34,000 and the total of the Balance Sheet is Rs,3,16,800.
16.
IN THE BOOKS OF JANTA LTD.
JOURNAL
Date
Particulars
Bank A/c
L.F.
Dr.
To Share Application A/c
(Being application money received on 1,00,000 shares
Dr. (Rs.)
Cr.(Rs)
4,00,000
4,00,000
@ Rs.4 per share including premium)
Share Application A/c
Dr.
4,00,000
To Share CapitaVA/c
1,40,000
To Securities Capital A/c
1,40,000
To Share Allotment A/c
80,000
To Bank A/c
40,000
(Being application money adjusted to wards share capital
& Share allotment & balance refunded)
Share Allotment A/c
Dr.
2,10,000
To Share Capital A/c
2,10,000
(Being amount due on share allotment)
Bank A/c
Dr.
1,30,000
To Share Allotment A/c
1,30,000
(Being allotment money-received)
Share First & Final Call A/c
Dr.
3,50,000
To Share Capital A/c
3,50,000
(Being amount due on share first & final call
on 70,000 share @ Rs.5 each)
Bank A/c
Dr.
3,46,500
To Share First & Final Call A/c
3,46,500
(Being first & final call received)
OR
Bank A/c
Dr.
3,46,500
Calls in Arrears A/c
Dr.
3,500
To Share First & Final Call A/c
3,50,000
(Being first & final call received)
Share Capital A/c
Dr.
7,000
To Share Forfeited A/c
3,500
To Share First & Final Call / Calls in Arrears A/c
3,500
(Being 7010 shares forfeited due to non payment of
first & final call)
Bank A/c
Dr.
77,000
To Share Capital A/c
7,000
To Securities Premium A/c
70,000
(Being forfeited share reissued @ Rs.77,000)
Share Forfeited A/c
Dr.
3,500
To Capital Reserve A/c
3,500
(Being Capital Profit on reissued shares transferred to
capital reserve A/c)
OR
Date
Particulars
Bank A/c
L.F.
Dr.
Dr. (Rs.)
Cr.(Rs)
2,20,000
To Share Application A/c
2,20,000
(Being application money received on 1,10,000 share
@ Rs.2 per share)
Share Application A/c
To Share Capital A/c
Dr.
2,20,000
1,60,000
To Share Allotment A/c
40,000
To Bank A/c
20,000
(Being application money adjusted to wards share capital
& Share allotment & balance refunded)
Share Allotment A/c
Dr.
2,40,000
Discount on Issue of Shares A/c
Dr.
80,000
To Share Capital A/c
3,20,000
(Being amount due on share allotment)
Bank A/c
Dr.
1,96,000
To Share Allotment A/c
1,96,000
(Being allotment money received)
OR
Bank A/c
Dr.
1,96,000
Calls in Arrears A/c
Dr.
4,000
To Share Allotment A/c
2,00,000
(Being first & final call received)
Share First & Final Call A/c
Dr.
3,20,000
To Share Capital A/c
3,20,000
(Being amount due on share first & final call on 80,000
shares @ Rs.4 each)
Bank A/c
Dr.
3,13,600
To Share First & Final Call A/c
3,13,600
(Being first & final call received)
OR
Bank A/c
Dr.
3,31,600
Calls in Arrears A/c
Dr.
6,400
To Share First & Final Call A/c
(Being first & final call received)
3,20,000
Share Capital A/c
Dr.
16,000
To Share Forfeited A/c
4,000
To Share allotment A/c
4,000
To Share First & Final Call A/c
6,400
To Discount on Issue of Shares A/c
1,600
(Being 1,600 shares forfeited due to non payment of
allotment & first & final call)
OR
Share Capital A/c
Dr.
16,000
To Share Forfeited A/c
4,000
To Calls in Arrears A/c
10,000
To Discount on Issue of Shares A/c
1,600
(Being 1,600 shares forfeited due to non payment of
allotment & first &. final call)
Bank A/c
Dr.
24,000
To Share Capital A/c
16,000
To Securities Premium A/c
8,000
(Being forfeited shares reissued @ Rs.24,000)
Share Forfeited A/c
Dr.
To Capital Reserve A/c
4,000
4,000
(Being Capital Profit on reissued shares transferred to
capital reserve A/c)
PART-B
(Analysis of Financial Statements)
17.
Stock turnover ratio will decline because die amount of average stock will increase, cost c goods
sold remaining the same.
18.
Outflow of Cash
19.
Financing Activity
20. The major headings on the liability side of the balance sheet are:
i)
Share Capital
ii)
Reserves & Surplus
iii)
Secured Loans
iv)
Unsecured Loans
v)
Current Liabilities & Provisions
a)
Current Liabilities
b)
Provisions
21.
COMPARATIVE INCOME STATEMENT OF VICTOR LTD.
Particulars
2006 Rs.
2007 Rs.
Absolute Change
%age Change
15,00,000
18,00,000
3,00,000
20
11,00,000
14,00,000
3,00,000
27,27
4,00,000
4,00,00
--
--
80,000
1,00,000
20,000
25
Tax
3,20,000
3,00,000
(20,000)
(6.25)
Less : Income Tax
1,60,000
1,50,000
(10,000)
(6.25)
Net Profit After Tax
1,60,000
1,50,000
(10,000)
(6.25)
Sales
Less Cost of
goods Sold
Gross Profit
Less Indirect
Expenses
Net Profit before
22.
Any Two of the following ratios:
i) Net Profit Ratio
=
Net Profit / Net Sales X 100
=
Gross Profit - Indirect expenses
=
8,00,000-2,00,000
=
Rs.6,00,000
Net Profit Ratio
=
6,00,000 / 40,00,000 x 100 = 42.86%
ii)Debt Equity Ratio
=
Debt / Equity
Debt
=
Debentures = Rs.8,00,000
Equity
=
Equity Share Capital + Capital Reserve
=
Rs.20,00,000 + Rs.2,00,000
=
Rs.22,00,000
=
8,00,000 / 22,00,000 = 4:11
Net Profit
Debt Equity Ratio
Note : Full credit was given if net profit is added to equity. Then debt equity Ratio
= Rs.8,00,000 / Rs.28,00,000 = 2 : 7
23.
.
iii) Quick Ratio
=
Liquid Assets / Current Liabilities
Liquid Assets
=
Current Assets - Closing Stock
Liquid Assets
=
Rs.4,00,000 - Rs.60,000 = Rs.3,40,000
Current Liabilities
=
Rs.3,00,000
Quick Ratio
=
3,40,000 / 3,00,000= 17: 15 or 1.13 : 1
Calculation of Net Front / Loss before tax :
Profit for the year
(1,00,000)
Add: Transferred to Reserve
70,000
Add: Dividend
24,000
(6,000)
CASH FLOW STATEMENT
for the year ended 31st March 2007
Particulars
(Rs.)
(Rs.)
A Cash Flows from Operating Activities
Net Loss as per Profit & Loss A/c
(6,000)
Adjustments :
Add: Debenture Interest
Loss on sale of machinery
10,000
55,000
Operating Profit before Working Capital changes
65,000
59,000
Adjustments for Working Capital Changes
Less: Increase in Current Assets
Stock
(50,000)
Debtors
(50,000)
Net Cash used in Operating Activities
(1,00,000)
(41,000)
(41,000)
B. Cash Flow from Investing Activities :
Sale of Fixed Assets
15,000
Purchase of Fixed Assets
(2,20,000)
Net Cash used in Investing Activities
(2,05,000)
(2,05,000)
C. Cash Flow from Financing Activities:
Issue of Equity Share Capital
Issue of {Preference Share Capital
3,00,000
25,000
Redemption of Debentures
(25,000)
Dividend Paid
(24,000)
Interest on Debentures paid
(10,000)
Net Cash Flaw from Financing Activities
2,66,000
2,66,000
Net Increase / Decrease in Cash & Cash Equivalents
Add Opening Cash and Cash Equivalents
20,000
Add Opening Cash and Cash Equivalents
45,000
Closing Cash and Cash Equivalents
65,000
Working Notes :
Dr.
FIXED ASSETS ACCOUNT
Cr.
Particulars
Amt (Rs.) Particulars
To Balance b/d
3,00,000 By Machinery Sold A/c
To Bank-purchase
2,20,000 By Balance c/d
4,50,000
5,20,000
5,20,000
Cr.
Particulars
To Fixed Assets A/c
Amt (Rs.)
70,000
MACHINERY SOLD ACCOUNT
Amt (Rs.) Particulars
Cr.
Amt (Rs.)
70,000 By Bank .Sale
15,000
By P&C A/c (Less on Sate)
70,000
55,000
70,000
Note 1 : Full credit was given to an examinee if he /she has taken preference dividend separately.
The answers would be:
Net Profit before tax
= Rs.(2,000)
Cash used in operating activities
= Rs.(37,000)
Cash used in investing activities
= Rs.(2,05,000)
Cash generated from financing activities
= Rs.2,62,000
Note 2 : In case, interest on debentures and dividend on preference shares has been
calculated on the closing balances, no marks were deducted.
**************