Breaking News

Monday, October 26, 2020

AHSEC Class 12: Accountancy Solved Question Papers' 2012 | AHSEC | SOLVED QUESTION PAPERS

AHSEC SOLVED QUESTION PAPERS
2012 (ACCOUNTANCY)
Full Marks: 100
Pass Marks: 30, Time: Three Hours


Q.1: (A) Fill in the blanks with appropriate word:             1x4=4
(i) Income and Expenditure Account records transactions of Revenue nature.
(ii) On admission, unrecorded assets brought into account are credited to revaluation account.
(iii) A company can issue shares at a discount only if at least one year has elapsed since the company became entitled to commence the business.
(iv) If a partner takes over an asset, such partner’s capital accounts is debited.
(B) Choose the correct alternative:                         1x2=2
(i) Subscription received in advance is treated as: 
(a) An income
(b) An asset
(c) A liability
(d) Capital
(ii) Profit on revaluation of assets and liabilities is shared by the old partners in:
(a) Sacrificing ratio
(b) New ratio
(c) Old ratio
(d) Gaining ratio
(C) State whether the following statements are true or false.              1x2=2
(i) Dissolution of firm and dissolution of partnership are two distinct legal concepts.                         True
(ii) Discount on reissue of forfeited shares cannot exceed the amount received on forfeited shares.       True
Q.2: Give the adjustment entry required for recording interest on capital when Capital Account is maintained under Fixed Capital method.      (2)
Ans: Interest on Capital Account              Dr.
To Partners’ Current a/c
Q.3: What is meant by ‘Gaining Ratio ‘on retirement of a partner?          (2)
Ans. Gaining Ratio: Gaining Ratio is calculated at the time of retirement or death of partner. It is the excess of new ratio over old ratio of old partners except retire or dead partner. Gaining Ratio = New Ratio - Old Ratio.
Q4: What is meant by ‘Loss on issue of debenture’?      (2)
Ans. When debentures are redeemable at a premium, the extra amount payable over and above the nominal value on redemption is called “Loss on Issue of Debenture”. Discount on issue of shares is also added at the with loss on issue of debenture.
Q.5: What are the types of Financial Statements Analysis?     (2)
Ans: Types of financial Statement analysis:
a)      External analysis: This analysis is performed by outside parties such as trade creditors, investors, suppliers of long term debt etc.
b)      Internal analysis: This analysis is performed by the corporate finance and accounting department and is more detailed than external analysis.
c)       Horizontal analysis: This analysis compares the financial statements viz., profit and loss accounts and balance sheet of previous year along with the current year.
d)      Vertical analysis: This analysis converts each element of the information into a percentage of the total amount of statement so as to establish relationship with other components of the same statement.
e)      Trend analysis: This analysis compares ratios of different components of the financial statements related to different period to those of a base year.
Q.6: What do you mean by Ratio Analysis?    (2)
Ans. Ratio analysis is one of the techniques of financial analysis to evaluate the financial condition and performance of a business concern. Simply, ratio means the comparison of one figure to other relevant figure or figures.
According to Myers, “Ratio analysis of financial statements is a study of relationship among various financial factors in a business as disclosed by a single set of statements and a study of trend of these factors as shown in a series of statements."
Q.7: Mention three Features of Receipts and Payments Accounts.     (3)
Ans. Following are the main features of Receipts and Payments Account:
a)      It is prepared at the end of the year taking items from the cash book.
b)      It is the summary of all cash transactions of a year put under various heads.
c)       It records all cash transactions which occurred during the year concerned irrespective of the period they
Q.8: Mention three situations when valuation of goodwill becomes necessary.     (3)
Ans. Reasons for Valuation of Goodwill: In case of a partnership firm, the need for valuation of goodwill may arise under the following circumstances:
·         When a new partner is admitted,
·         When a partner retires or dies,
·         When the firm is sold as a going concern,
·         When there is a change in profit sharing ratio among partners,
·         When partnership firm is sold to a company.
Q.9: Write three points of distinction between Shares and debenture.     (3)
Ans: Refer Q.N. 22 (Or), asked in 2017 exam
Q.10: Give three characteristics of an ideal financial statement.     (3)
Ans. Characteristics of Ideal financial Statements are:
a)      Understandability:  The information must be readily understandable to users of the financial statements.
b)      Relevance:  The information must be relevant to the needs of the users, which is the case when the information influences the economic decisions of users.
c)       Reliability:  The information must be free of material error and bias, and not misleading.
d)      Comparability:  The information must be comparable to the financial information presented for other accounting periods.
Q.11: Give three objectives of Ratio Analysis.     (3)
Ans. Objectives of Ratio analysis
1. To know the area of the business which need more attention.
2. To know about the potential areas which can be improved with the effort in the desired direction.
3. To provide a deeper analysis of the profitability, liquidity, solvency and efficiency levels in the business.
4. To provide information for decision making.
5. To provide information for inter-firm and intra-firm comparison.
Q.12: From the following information, ascertain the amount of subscription to be credited to the Income and Expenditure Account for the year 2012.      (5)
(i) Subscription received during the year Rs 11,750 (including Rs 1000 for 2011 and Rs 500 for 2013)
(ii) Subscription received in 2011 for 2012 Rs 700
(iii) Subscription outstanding on 31st December 2012 Rs 900
Solution: Calculation of Subscription for the year 2012
Subscription received during the year
Less: Subscription for 2011 received in 2012
Less: Subscription for 2013 received in 2012
Add: Subscription received in 2011 for 2012
Add: Subscription outstanding on 31st Dec 2010
11,750
(1,000)
(500)
700
900

11,850
OR
Give five points of Distinction Existing between Receipt and Payments Accounts and Income and Expenditure Account.     (5)
Ans. Difference between Receipts and Payments Account and Income and Expenditure Account
Basic
Receipt and Payment Account
Income and Expenditure Account
1. Nature
It is a Real Account
It is nominal Account.
2. Recording
It records receipt and payments of both capital and revenue nature.
It records incomes and expense of revenue nature only.
3. Period of items
It records the items received or paid during the current year, whether relating to past, present or future periods.
It includes expenses or incomes relating to current year only.
4. Non cash items
It ignores non-cash items like depreciation, credit purchase, credit sales etc.
It records non-cash items also.
5. Balance of account
It usually shows a debit balance.
It may show a debit or a credit balance.
Q.13: A and B are partners sharing profits in the ratio of 5:4. They admit C in the firm for 1/4th Share of profit. C takes 3/16th from A and 1/16th from B. C brings in Rs 25,000 as capital and Rs 8,000 as premium for goodwill. The partners withdraw 40% of their respective share of premium. Pass the necessary Journal entries on C’s admission.     (5)
Solution:
Journal Entries
In the books of firm
Particulars
L/f
Amount Dr.
Amount Cr.
Cash A/c                                                                                            Dr.
To C’s Capital A/c
To Premium for Goodwill A/c
(Being the capital and premium for goodwill brought in cash)

33,000

25,000
8,000
Premium for Goodwill A/c                                                            Dr.
To A’s Capital A/c
To B’s Capital A/c
(Being the premium for goodwill distributed in Sacrifice ratio)

8,000

6,000
2,000
A’s Capital A/c                                                                                 Dr.
B’s Capital A/c                                                                                 Dr.
To Cash A/c
(Being the 40% of Premium withdrawn)

2,400
800


3,200
Working Note:
Calculation of Sacrifice ratio: Sacrificing Ratio = 3/16 : 1/16 = 3 : 1
OR
What is super profit? What are the steps to be followed for valuation of goodwill under super profit method? 1+4=5
Ans. Super Profit Method: Super Profits means profits earned in excess of the normal Profit, i.e., Actual Profit –Normal. Normal profits mean the profit which the firms could normally earns in a particular business.
Under this method, the following steps are to be followed for calculation of goodwill:
ü  Calculate average normal profit of business as mentioned above
ü  Calculate normal profit
ü  Calculate super profit. Super profit is the excess of average normal profit over normal profit
ü  Calculate goodwill = super profit x no. of year’s purchase
Q.14: Can a company issue shares at a premium? If so, state the purpose for which the share premium account can be utilized?     (5)

AHSEC SOLVED QUESTION PAPERS

AHSEC CLASS 12 ACCOUNTANCY SOLVED QUESTION PAPERS

2012

2014

2016

2018

2020

2013

2015

2017

2019



Ans: If Shares are issued at a price, which is more than the face value of shares, it is said that the shares have been issued at a premium. The Company Act, 2013 does not place any restriction on issue of shares at a premium but the amount received, as premium has to be placed in a separate account called Securities Premium Account.
Under Section 52 of the Company Act 2013, the amount of security premium may be used only for the following purposes:
a)      To write off the preliminary expenses of the company.
b)      To write off the expenses, commission or discount allowed on issued of shares or debentures of the company.
c)       To provide for the premium payable on redemption of redeemable preference shares or debentures of the company.
d)      To issue fully paid bonus shares to the shareholders of the company.
e)      In purchasing its own shares (buy back).
OR
Distinguish between Equity share and Preference shares giving five points of differences.
Ans. Difference between Equity Shares and Preference Shares               
Basis of Difference
Preference Share
Equity Share
a)      Right of Dividend
Preference shares are paid dividend before the Equity shares.
Equity shares are paid dividend out of the balance of profit available after the dividend paid to preference shareholders.
b)      Rate of Dividend
Rate of dividend is fixed.
Rate of dividend is decided by the Board of Directors, year to year depending on profits.
c)       Convertibility
Preference Shares may be converted into Equity shares, if the terms of issue provide so.
Equity shares are not convertible.
d)      Voting Right
Preference shareholders do not carry the voting right. They can vote only in special circumstances.
Equity shareholders have voting rights in all circumstances.
e)      Redemption of Share Capital
Preference shares may be redeemed.
A company may buy-back its equity shares.

Q.15: Show by means of Journal entries how you will record the following issue:       (5)
(a) A. Ltd. Issues 6,000, 10% debenture of Rs 100 each at a discount of 5%, redeemable at the end of 5 year at par.  
(b) B. Ltd. issue 7,000, 11% debenture of Rs 100 each at par, redeemable at the end of 5 year at a premium of 5%.
(c) X. Ltd. issue 8,000, 12% debenture of Rs 100 each at a discount of 5%, redeemable at the end of 5 year at premium of 5%.
Solution:
Journal Entries
In the books of A Ltd.

Particulars
L/f
Amount Dr.
Amount Cr.
(a)
At the time of Issue
Bank A/c                                                                                     Dr.
Discount on issue of debentures A/c                                    Dr.
To 10% Debenture A/c
(Being the 6000 10% Debentures issued at a discount of 5%)


5,70,000
30,000



6,00,000

At the time of redemption
10% Debentures A/c                                                               Dr.
To Bank A/c
(Being the 6000 10% Debentures redeemed at par)


6,00,000


6,00,000

Journal Entries
In the books of B Ltd.

Particulars
L/f
Amount Dr.
Amount Cr.
(b)
At the time of Issue
Bank A/c                                                                                  Dr.
Loss on Issue of Debentures A/c                                         Dr.
To 11% Debenture A/c
To Premium on Redemption of Debentures A/c
(Being the 7000 11% Debentures issued at par, but redeemable at a premium of 5%)


7,00,000
35,000



7,00,000
35,000

At the time of redemption
11% Debentures A/c                                         Dr.
Premium on redemption of Debentures A/c     Dr.
To Bank A/c
(Being the 7000 11% Debentures redeemed at a premium of 5%)


7,00,000
35,000



7,35,000

Journal Entries
In the books of C Ltd.

Particulars
L/f
Amount Dr.
Amount Cr.
(c)
At the time of Issue
Bank A/c                                                                                    Dr.
Loss on Issue of Debentures A/c                                           Dr.
To 12% Debenture A/c
To Premium on Redemption of Debentures A/c
(Being the 8000 10% Debentures issued at a discount of 5%, but redeemable at a premium of 5%)


7,60,000
80,000



8,00,000
40,000

At the time of redemption
12% Debentures A/c                                                                 Dr.
Premium on redemption of Debentures A/c                         Dr.
To Bank A/c
(Being the 8000 12% Debentures redeemed at a premium of 5%)


8,00,000
40,000



8,40,000

OR
What is meant by redemption of debenture? State any three methods of redemption of debenture.  (2+3=5)
Ans: Meaning of Redemption of Debentures: Redemption of debenture is the discharge of debenture liability. It can be done either by repaying the money to debenture holders or converting the debenture into shares. The conditions of redemption are clearly stated at the time of issue of debenture in the prospectus. Debentures can be redeemed at par, premium or discount as per the terms of issue. The period of maturity, redemption amount, yield on redemption etc. will be mentioned in the prospectus. In case the non convertible debentures proposed to be rolled over (repayment extended for an additional period), a compulsory option should be given to the debenture holders who wish to withdraw from the debenture programme, as per the guidelines issued by SEBI.
Methods of Redemption of Debentures
i) Redemption In lump-sum, at the end of stipulated period: Under this method the entire debentures are redeemed at the stipulated date stated in the prospectus for the issue of debentures. The drawback of this method is that the company has to arrange a large amount at the time of redemption.
ii) By Draw of Lots: Under this method the company does not redeem all the debentures at the same time. Instead it will call back only a portion of its debentures in the market for redemption each year. The company selects the debentures of a predetermined value, by drawing lot and they are redeemed that year.
iii) By Purchasing in the Open Market: Debentures can be redeemed by purchasing them from the open market. If a company finds its debentures are available in the open market at cheap rate it will purchase those debentures and cancel them.
Q.16: Name the major headings under which the liabilities side of a company’s Balance Sheet is organised and presented.     (5)
Ans:
Proforma of Balance Sheet
Name of the Company …………………………………….
Balance Sheet as at……………………………………..
Particulars
Note
No.
Amount
(Current Year)
Amount
(Previous Year)
I. EQUITY AND LIABILITIES
(1) Shareholders’ Funds
(a) Share capital
(b) Reserves and surplus
(c) Money received against share Warrants
(2) Share application money pending allotment
(3) Non – current liabilities
(a) Long term borrowings
(b) Deferred tax liabilities (net)
(c) Other long term liabilities
(d) Long term provisions
(4) Current liabilities
(a) Short term borrowings
(b) Trade payables
(c) Other current liabilities
(d) Short term provisions



Total



II ASSETS
(1) Non-Current Assets
(a) Fixed assets
(i) Tangible assets
(ii) Intangible assets
(iii) Capital work in progress
(iv) Intangible assets under development
(b) Non-current investments
(c) Deferred tax assets (net)
(d) Long term loans and advances
(e) Other non-current assets
(2) Current Assets
(a) Current investments
(b) Inventories
(c) Trade receivables
(d) Cash and cash equivalents
(e) Short term loans and advances
(f) Other current assets



Total



OR
Discuss any five limitations of Financial Statements
Ans. Limitations of financial statements:
Financial Statements suffers from various limitations which are given below:
(i)     Historical Records: The information given in these statements is historic in nature and does not reflect the future.
(ii)   It Ignores Price Level Changes: Business transactions and events are recorded at historical cost and changes in prices over the years are ignored.
(iii) Qualitative aspect Ignored: Financial statements considered only those items which can be expressed in terms of money. Financial Statements ignores the qualitative aspect.
(iv)  Not free from Bias: Financial statements are largely affected by the personal judgments of the accountant.
(v)    Variation is accounting practices: Different firms follow different accounting practices. Therefore, a meaningful comparison of their financial statements is not possible.
Q.17: Prepare a comparative income Statements of Sunny Ltd. with the help of the following information.   (5)
Particulars
2011 (Rs)
2012 (Rs)
Sales
Cost of Goods sold
Administrative expenses
Income Tax
6,00,000
40% of sales
20% of gross profit
50%
 8,00,000
 50% of Sales
 15% of gross profit
50%
Solution:
Comparative Income Statement
Particulars
2009
2010
Absolute change
Percentage change
Sales
Less: Cost of goods sold
6,00,000
(2,40,000)
8,00,000
(4,00,000)
2,00,000
(1,60,000)
33.33
66.67
Gross Profit
Less: Administrative Expenses
3,60,000
72,000
4,00,000
60,000
40,000
(12,000)
11.11
(16.67)
Operating Profit
Less: Income Tax – 50%
2,88,000
1,44,000
3,40,000
1,70,000
52,000
26,000
18.05
18.05

1,44,000
1,70,000
26,000
18.05
OR
What do you understand by Financial Statement Analysis? Discuss its importance to management. (Any four points).      (1+4=5)
Ans: Financial Statement Analysis: It is the process of identifying the financial strength and weakness of a firm from the available accounting and financial statements. The analysis is done by properly establishing the relationship between the items of balance sheet and profit and loss account.
In the words of Myer “Financial Statement analysis is largely a study of relationship among the various financial factors in a business, as disclosed by a single set of statements, and a study of trends of these factors, as shown in a series of statements.”
In simple words, analysis of financial statement is a process of division, establishing relationship between various items of financial statements and interpreting the result thereof to understand the working and financial position of a business.
Q.18: Ascertain Cash Flows from operating activities under the Direct Method from the Following data Related to the accounting year 2010 – 11     (5)
Total sales: 44,000 (Cash Rs 4,000, Credit Rs 40,000)
Cash received from customers: 35,000
Closing Account Receivables: 8,000
Cash paid to Suppliers: 42,000
Cash paid to employees: 7,000
Furniture purchased from (M/s. Decorators on credit): 9,000
Income tax paid: 3,000
Donation paid: 1,000
Office expenses, total Rs 6,000, paid: 3,000
Solution:
Cash Flow from Operating Activities (Direct Method)
Particulars
Amount
Cash Sales
Cash Received from customer
Cash paid to suppliers
Cash paid to employees
Office expenses
Donation paid
4,000
35,000
(42,000)
(7,000)
(3,000)
(1,000)

Less: Income Tax paid
(14,000)
(3,000)
Cash used from operating activities
(17,000)
OR


What is Cash Flow Statement? Briefly explain any four objectives of preparing a Cash Flow Statement.  (1+4=5)
Ans: Cash Flow Statement:  Cash­ flow is made up of two words i.e. Cash and Flow, whereas Cash means cash balance in hand including cash at bank balance, and Flow means changes (which may be increase or decrease) in the cash movements of the business. Cash Flow Statement is simply a summary of cash receipts and payments whereby reconciling the opening cash balance with the closing cash including bank balances in done.
Objectives of Cash Flow Statement
The Cash Flow Statement is prepared because of number of merits, which are offered by it. Such merits are also termed as its objectives. The important objectives are as follows:
Ø  To Help the Management in Making Future Financial Policies: The management can make its future financial policies and is in a position to know about surplus or deficit of cash.
Ø  To Help in taking Dividend Decisions: Cash Flow Statement is very helpful in declaring dividends etc.
Ø  To Help in devising the cash requirement:  Cash flow statement is helpful in devising the cash requirement for repayment of liabilities and replacement of fixed assets.
Ø  To Helps in predicting sickness of the business:  Cash flow is helpful in predicting sickness of the business with the help of different ratios.
Q.19: Choudhury and Barua are partners in a firm sharing profit and losses in the ratio 50:50 respectively. The Trial Balance of the firm as on 31st March, 2011 was as follows:
Trial Balance
Particulars
Amount
Particulars
Amount
Machinery
Furniture
Building
Debtors
General expenses
Insurance
Salaries
Bad debts
Cash in hand
Cash at bank
Stationery
10% investment (1-4-2010)
Drawings:
Chaudhury                              9,000
Barua                                     12,000
Closing stock
51,000
4,500
45,000
31,500
460
800
8,400
450
90
420
900
15,000


21,000
21,000
Capital Accounts:
Choudhury                           40,000
Barua                                     40,000
Sundry creditor
Bank overdraft
Provision for doubtful debt
Wages outstanding
Trading Account(Gross Profit)


80,000
32,500
12,000
1,800
150
74,070
2,00,520
2,00,520




Prepare Profit and loss Account, Profit and Loss Appropriation Account for the year ended 31st March, 2011 and a Balance Sheet as at that date after taking into consideration the following.
(a) Outstanding Expenses – Salaries Rs 300, Interest on Bank overdraft Rs 225
(b) Machine worth Rs 15,000 purchased on 1st Oct, 2010.
(c) Provide depreciation on machinery and furniture @ 10% p.a. and on Building @ 21/2 % p.a.
(d) Interest on capital to be allowed @ 10% p.a.
(e) Prepaid Insurance Rs 150.
(f) Partners are entitled to salary of Rs 1,000 per annum each.
Solution:
Profit & Loss A/c
For the year ended 31-3-2011
Particulars
Amount
Particulars
Amount
To Depreciation:
Building                       1,125
Machinery                  4,350
Furniture                       450
To General Expenses
To Insurance                            800
Less: Prepaid                           150
To Salaries                            8,400
Add: Outstanding                   300
To Bad debt
To Stationery
To Interest on B/Overdraft
To Net Profit



5,925
460

650

8,700
450
900
225
60,060
By Gross profit
By Interest on Investment
By Provision for d/debt
74,070
1,500
1,800

77,370

77,370
Profit & Loss Appropriation A/c
For the year ended 31-3-2011
Particulars
Amount
Particulars
Amount
To Interest on capital
Choudhury                        4,000
Barua                                 4,000
To salary
Choudhury                        1,000
Barua                                 1,000
To Partners Capital A/c
Choudhury                        25,030
Barua                                 25,030


8,000


2,000


50,060
By Net Profit
60,060

60,060

60,060
Partner’s Capital A/c
Particulars
Choudhury
Barua
Particulars
Choudhury
Barua
To Drawings
To Balance c/d
9,000
61,030
12,000
58,030
By Balance b/d
By Interest on Capital
By P/L Appropriation A/c
By Partner’s Salary
40,000
4,000
25,030
1,000
40,000
4,000
25,030
1,000

70,030
70,030

70,030
70,030
Balance Sheet
As on 31-03-2011
Liabilities
Amount
Assets
Amount
Capital A/c:
Choudhury                   61,030
Barua                            58,030
Outstanding Salary
Sundry Creditors
Bank Overdraft                               12,000
Add: Interest on B/Overdraft            225
Wages Outstanding



1,19,060
300
32,500

12,225
150
Building                                                         45,000
Less: Depn                                                       1,125
Machinery                                                      51,000
Less: Depn                                                    
(36,000 x 10/100 = 3,600)                           
(15,000 x 10/100 x 6/12 =750)                     4,350
Furniture                                                         4,500
Less: Depn                                                          450
Debtors
Cash in hand
Cash at bank
10% Investment                                          15,000
Add: Interest on investment                      1,500
Prepaid Insurance
Closing stock

43,875



46,650

4,050
31,500
90
420

16,500
150
21,000

1,64,235

1,64,235
Q.20: Ashok publications Ltd. issues 3,000 shares of Rs 10 each, payable as follow:                  (8)
On Application Rs 2
On Allotment Rs 3
On first call Rs 2 And the balance when required.
3,200 shares were applied for, application for 3000 was accepted by the Directors and the balance application was rejected and money returned. Allotment money was duly received and first call was received on 2950 shares. Pass journal entries in the books of the company for the above transactions.
Solution:
Journal Entries
In the books of Ashok Publications Ltd.
Particulars
L/f
Amount Dr.
Amount Cr.
Bank A/c                                                                                                                     Dr.
To Share Application A/c
(Being the application money received on 3200 shares @ Rs. 2 each)

6,400

6,400
Share Application A/c                                                                                              Dr.
To Share Capital A/c
To Bank A/c
(Being the application money on 3000 shares @ Rs. 2 each transferred to Share Capital & excess refunded)

6,400

6,000
400
Share Allotment A/c                                                                                                Dr.
To Share Capital A/c
(Being the allotment money due on 3000 shares @ Rs. 3 each)

9,000

9,000
Bank A/c                                                                                                                    Dr.
To Share Allotment A/c
(Being the allotment money received on 3000 shares @ Rs. 3 each)

9,000

9,000
Share 1st Call A/c                                                                                                      Dr.
To Share Capital A/c
(Being the first call money due on 3000 shares @ Rs. 2 each)

6,000

6,000
Bank A/c                                                                                                                   Dr.
Calls-in-arrear A/c                                                                                                   Dr.
To Share 1st Call A/c
(Being the first call money received on 2950 shares)

5,900
100


6,000
OR
What do you mean by ‘forfeiture of share’? Discuss the procedure of forfeiture of share and re-issue of such share.
Ans: Forfeiture of shares: Cancellation of shares due to non-payment of allotment and call money is called forfeiture of shares. A company has no inherent power to forfeit shares. The power to forfeit shares must be contained in the articles. Where a share holder fail to pay the amount due on any call, the directors may, if so authorized by the articles, forfeit his shares. Shares can only be forfeited for non-payment of allotment and calls. An attempt to forfeit shares for other reasons is illegal. Thus where the shares are declared forfeited for the purpose of reliving a friend from liability, the forfeiture may be set aside.
Before the shares are forfeited the shareholder:
i) Must be served with a notice requiring him to pay the money due on the call together with interest;
ii) The notice shall specify a date, not being earlier than the expiry of 14 days from the date of service of notice, on or before which the payment is to be made and must also state that in the event of non-payment within that date will make the shares liable for forfeiture;
iii) There must be a proper resolution of the board;
iv) The power of forfeiture must be exercised bonafide and for the benefit of the company.
A person, whose shares have been forfeited, ceases to be a member of the company. But he shall remain liable to pay to the company all moneys which at the date of forfeiture were payable by him to the company in respect of the shares. The liability of such a person shall cease as and when the company receives payment in full in respect of the shares.
Reissue of the forfeited shares:
The directors of the company have the power to re-issue the forfeited shares on such terms as it think fit. Thus the forfeited shares can be reissued at par, or at premium or at discount. However, if the forfeited shares are reissued at discount, the amount of discount should not exceed the amount credited to the share forfeiture A/c. If the discount allowed on reissue is less than the forfeited amount there will be the surplus left in the share forfeited A/c. This surplus will be of the nature of capital profits so it will be transferred to the Capital Reserve A/c.
Procedure for reissue of forfeited shares
a)      The forfeited shares may then be disposed by sale or in any other manner as directed by the Board.  
b)      Short particulars of reissued shares will be advised to the stock exchange concerned.  
c)       To give effect to the sale of forfeited shares, the Board will authorise some person, preferably the director or Secretary, to transfer the shares sold to the purchaser thereof and to make a declaration in connection therewith.  
d)      The defaulting members will be asked to return the share certificates. If they fail to do so fresh certificates will be issued.  
e)      Public and stock exchange will be advised not to deal with the old certificates.  
f)       Any surplus arising out of sale after adjusting the amount due to the company in respect of the shares will be refunded to the member concerned.
Q.21: Kumar and Gaurav are partners sharing profit and losses as three-fourth and one-fourth. They agreed to dissolve their firm. On the date of dissolution, they have following Balance sheet:             (8)
Liabilities
Amount
Assets
Amount
Capital Account:
Kumar 40,000
Gaurav 35,000
Creditor
Loan From Mrs. Gaurav


75,000
16,000
13,000
Land and Building
Plant and machinery
Sundry Debtors      22,000
Less reserve               2000
Bills receivable
Cash in hand     
50,000
18,000

20,000
7,500
8,500
1,04,000
1,04,000
The Assets Realised as follows:
(i) Land and Building Rs.48, 000
(ii) Sundry Debtors Rs.18, 000
(iii) Goodwill Rs.16, 500
Kumar took over plant and machinery at 5% more than the book value. Gaurav agreed to discharge his wife’s loan. Creditors are paid Rs.12, 000 in full settlement of their claim and expenses on realisation amounted to Rs.700. You are required to show Realisation Account, Cash Account and Capital Accounts of the Partners on dissolution.
Solution:
Realisation A/c
Particulars
Amount
Particulars
Amount
To Land & Building
To Plant & Machinery
To Sundry Debtors
To Bills Receivable
To Cash A/c (Payment of liabilities)
To Cash A/c (Expenses)
To Gaurav Capital
(Mrs. Gaurav Loan taken over)
To Profit on realisation
Kumar:       9,200 x 3/4
Gaurav:     9,200 x ¼
50,000
18,000
22,000
7,500
12,000
700
13,000


6,900
2,300
By Provision for doubtful debts
By Creditors
By Loan of Mrs. Gaurav
By Cash A/c (Assets realised)
By Gaurav Capital A/c
(P/M Taken over)
2,000
16,000
13,000
82,500
18,900

1,32,400

1,32,400
Partner’s Capital A/c
Particulars
Kumar
Gaurav
Particulars
Kumar
Gaurav
To Realisation A/c
To Cash A/c
18,900
28,000

50,300
By Balance c/d
By Realisation A/c
By Realisation A/c
40,000

6,900
35,000
13,000
2,300

46,900
50,300

46,900
50,300
Cash A/c
Particulars
Amount
Particulars
Amount
To Balance b/d
To Realisation (Assets realised)
8,500
82,500
By Realisation A/c (Payment of liabilities)
By Realisation (expenses)
By Kumar’s Capital A/c
By Gaurav’s Capital A/c
12,000
700
28,000
50,300

91,000

91,000
OR
What do you mean by Dissolution of a Firm? Mention Difference Between dissolution of a Firm and Partnership.
Ans. Dissolution of a firm means discontinuation of the firm’s business and the relationship between the partners. According to Sec. 39 of Indian Partnership Act 1932, “Dissolution of firm means dissolution of partnership between all the partners in the firm."
Therefore when a firm is dissolved, assets of the firm are disposed off, liabilities are paid off and the accounts of all the partners are also settled.
Difference between dissolution of partnership and dissolution of firm.
Basis of distinction
Dissolution of partnership
Dissolution of firm
Relationship
Relationship amongst all the partners does not come to an end.
Relationship amongst all the partners comes to an end.
Continuation of business
Business of the firm may continue.
Business of the firm does not continue.
Inter relationship
Dissolution of partnership may or may not result in dissolution of the firm.
Dissolution of the firm necessarily results in dissolution of partnership.
Books of accounts
Books of accounts are not closed.
Books of accounts are closed.
Nature
Dissolution of partnership is voluntary.
Dissolution of partnership may sometimes compulsory or sometimes voluntary.
Account
Revaluation account is prepared.
Realisation account is prepared.
Q.22: X, Y and Z were partners in firm Sharing profit in 5:3:2 ratios. On 31st march, 2011 Z retired from the firm. On the date of Z’s retirement, the Balance Sheet of the Firm Was as Follows:     (8)
Balance Sheet of X, Y, Z as at 31st March 2011
Liabilities
Amount
Assets
Amount
Creditors
Bills payable
Outstanding Rent
Provision for legal claims
Capitals:
X -1,27,000
Y -90,000
Z -71,000
27,000
13,000
22,500
57,500



2,88,000
Bank
Debtor          20,000
Less Reserve      500
Stock
Furniture
Land and Building
80,000

19,500
21,000
87,500
2,00,000
4,08,000
4,08,000
On Z’s retirement it was agreed that:
(a) Land and building will be appreciated by 5% and furniture will be depreciated by 20%
(b) Provision for Doubtful debts will be made at 5% on Debtor and provision for legal claim will be made at Rs. 60,000.
(c) Goodwill of the firm was valued at Rs.60, 000
(d) Rs. 70,000 from Z’s Capital Account will be transferred to his loan account and the balance will be paid to him by cheque.
Prepare Revaluation Account, Partners Capital Accounts and Balance sheet of X and Y after Z’s Retirement.
Solution:
Revaluation A/c
Particulars
Amount
Particulars
Amount
To Furniture
To Provision for legal claims
To Provision for doubtful debts
17,500
2,500
500
By Land & Building
By Loss on revaluation
X: 10,500 x 5/10 = 5,250
Y: 10,500 x 3/10 = 3,150
Z: 10,500 x 2/10 = 2,100
10,000
10,500

20,500

20,500
Partner’s Capital A/c
Particulars
X
Y
Z
Particulars
X
Y
Z
To Z’s Capital
To Revaluation A/c
To Z’s Loan A/c
To Bank A/c 
To Balance c/d
7,500
5,250


1,14,250
4,500
3,150


82,350
-
2,100
70,000
10,900
By Balance b/d
By X’s Capital A/c
By Y’s Capital A/c
1,27,000
90,000
71,000
7,500
4,500

1,27,000
90,000
83,000

1,27,000
90,000
83,000
Balance Sheet
As on 31st March, 2011
Liabilities
Amount
Assets
Amount
Capital:
X:                   1,14,250
Y:                       82,350
Z’s Loan A/c
Sundry Creditors
Bills Payable
Outstanding Rent
Provision for legal claims


1,96,600
70,000
27,000
13,000
22,500
60,000
Land & Building
Furniture                             87,500
Less: Depreciation           (17,500)     
Stock
Debtors                                 20,000
Less: Provision                     (1,000)

Bank (80,000 – 10,900)
2,10,000

70,000
21,000

19,000

69,100

3,89,100

3,89,100
OR
Explain the term “Reconstitution of a firm”. Mention the situations when such reconstitution of a firm takes place. (3+5=8)
Ans: Reconstitution of Partnership: Reconstitution of a partnership refers to a situation when there is a change in the existing partnership agreement. A Partnership agreement is an agreement between two or more persons for carrying out various business activities. In case of reconstitution, a new partnership agreement is formed to replace the old partnership agreement. It means the firm continues to exist and the only change will take place in existing partnership agreement.  Thus, reconstitution of a partnership takes place in each of the following cases:
a)      Admission of a partner
b)      Retirement of a partner
c)       Death of a partner
d)      Change on profit sharing ratio

Popular Posts for the Day