Thursday, February 01, 2018

AHSEC Class 12: Accountancy Solved Question Papers' 2013

AHSEC SOLVED QUESTION PAPERS
2013 (ACCOUNTANCY)
Full Marks: 100
Pass Marks: 30, Time: Three Hours
1. (a) Fill in the blanks with appropriate word:  1x4 = 4
(i) A Receipts and Payments account is prepared on accrual basis of accounting.
(ii) When Partner’s Capital Account is fixed, then Partner’s current Account is prepared.
(iii) Goodwill is the extra earning capacity of a business.
(iv) Unrecorded assets when realised are credited to realisation Account.
(b) Choose the correct alternative:         1x2=2
(i) An Income and Expenditure Account reveals:
(1) Cash Position
(2) Surplus or Deficit
(3) Capital Fund
(4) None of the above
(ii) The portion of capital which can be called up only on the winding up of the company is called:
(1)    Authorised Capital
(2)    Issued capital
(3)    Uncalled capital
(4)    Reserve capital
(c) State whether the following statements are true or false:    1x2=2
(i) Discount on reissue of forfeited shares cannot exceed the amount received on forfeited shares.  True
(ii) Interest on Debenture is payable only when a company earns profits.  False
2. What is sacrificing ratio?         2
Ans:  Sacrificing Ratio: At the time of admission of an incoming partner, existing partners have to surrender some of their share in favour of the new partner. The ratio in which they surrender their profits is known as sacrifice ratio.
3. Give two grounds on which a court may dissolve a firm.          2
Ans. Dissolution by Court: A court may order a partnership firm to be dissolved in the following cases:
a)      When a partner becomes of unsound mind
b)      When a partner becomes permanently incapable of performing his/her duties as a partner,
c)       When partner deliberately and consistently commits breach of agreements relating to the management of the firm;
d)      when a partner’s conduct is likely to adversely affect the business of the firm;
e)      when a partner transfers his/her interest in the firm to a third party;
f)       When the court regards dissolution to be just and equitable.
4. Name any two items that can be shown under sub head “Reserves and Surplus”.       2
Ans: Reserves and Surplus: Under this head the following items are shown:
a)      Capital Reserve
b)      Securities Premium (Reserve)
5. Give two objectives of cash flow statement.                 2
Ans. Refer Question No. 18 (or), of 2012
6. What is joint life policy?         2
Ans. A Joint Life Policy is an assurance policy taken on the joint lives of the partners. On the death of a partner, the firm becomes liable to pay the executors of deceased partner his capital, interest on capital, his share of profit from the closing of the previous year to the date of death and his share of reserves, goodwill etc. The total amount thus becoming due to the executors is usually significant and immediate payment of such heavy amount out of firm’s resources is likely to affect firm’s finances very adversely.
7. What are the sources of Cash Flow?  3
Ans. (i) Operating Activities; (ii) Investing Activities; and (iii) Financing Activities.
Examples of Operating Activities: (Sources of cash flow)
Ø  Cash receipts from the sale of goods and rendering of services.
Ø  Cash receipts from royalties, fees, commission and other revenue.
Examples of Investing Activities: (Sources of cash flow)
Ø  Cash payments to acquire fixed assets.
Ø  Cash receipts from the disposal of fixed assets (including intangibles).
Examples of Financing Activities: (Sources of cash flow)
Ø  Cash proceeds from the issue of shares or other similar instruments.
Ø  Cash proceeds from the issue of debentures, loan notes, bonds and other short term borrowings.
8. Explain average profit method of valuation of goodwill.          3
Ans. Average Profits Method: In this method, normal profits of business of a number of years are taken into account. Such profits are totaled up and their average is arrived at. The average profits are multiplied by the number year’s purchases to arrive at the value of goodwill.
For calculation of goodwill following steps are to be followed
ü  Calculate past normal profit. Past Normal Profit = Net Profit + Abnormal loss – Abnormal Gain
ü  Calculate Average normal Profit = Total Past normal profit/no of years
ü  Calculate goodwill = Average normal profit x no. of year’s purchase
Or
What are the circumstances when a revaluation of assets and liabilities becomes necessary?   3
Ans: When? Revaluation of Assets and Liabilities 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
Why? The actual value of the assets and liabilities may be different from their book value as shown by the balance sheet. So Revaluation account is prepared at the time of reconstitution of partnership to record any increase/decrease in the value of assets and liabilities. The value of some assets may increase with time and some may show a decrease. Similarly some liabilities may also show an increase/decrease in the value. The Revaluation account is credited if there is an increase in the value of assets or decrease in the value of liabilities. On the other hand it is debited if there is any decrease in the value of assets or an increase in the value of liabilities. This account is a nominal account and is sometimes also called Profit and Loss adjustment account. The profit or Loss arising due to revaluation is divided among the old partners in their old ratio.
9. Mention the uses of Securities Premium.       3
Ans: 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
Mention three advantages of issuing debentures.          3
Ans. Advantages of debentures
a)      Less Costly: It involves less cost to the firm than the equity financing.
b)      Long Term Source of Fund: Debentures provide Funds to the company for a long period.
c)       Definite period of Finance: Debentures provide funds to the company for a specific period.
d)      Fixed interest Rate: In a period of rising prices, debenture issue is advantageous.
10. What are contingent liabilities? Mention any two items.      3
Ans: Contingent Liabilities: Those liabilities which may or may not arise because they are dependent on a happening in future. It is not recorded in the books of accounts but is disclosed in the Notes to Accounts for the information of the users. Examples:
a)      Claims against the company not acknowledged as debts.
b)      Guarantees.
c)       Other money for which the company is contingently liable.
Or
What is the importance of Financial Analysis?   3
Ans. Objectives (Purposes) and significance of Financial Statement analysis:
Financial analysis serves the following purposes and that brings out the significance of such analysis:
a)      To judge the financial health of the company: The main objective of the financial analysis is to determine the financial health of the company. It is done by properly establishing the relationship between the items of balance sheet and profit and loss account.
b)      To judge the earnings performance of the company: Potential investors are primarily interested in earning efficiency of the company and its dividend paying capacity. The analysis and interpretation is done with a view to ascertain the company’s position in this regard.
c)       To judge the Managerial efficiency: The financial analysis helps to pinpoint the areas wherein the managers have shown better efficiency and the areas of inefficiency. Any favourable and unfavourable variations can be identified and reasons thereof can be ascertained to pinpoint weak areas.
d)      Inter-firm Comparison: Inter-firm comparison becomes easy with the help of financial analysis. It helps in assessing own performance as well as that of others.
e)      Understandable: Financial analysis helps the users of the financial statement to understand the complicated matter in simplified manner.
11. From the following information, calculate Current Ratio:        3
Particulars
Amount
Inventory
Debtors
Cash
Creditors
Bills receivable
Advance Tax
Bills Payable
Bank overdraft
Debentures
Accrued Interest
55000
40000
37000
48000
20000
4000
28000
4000
200000
4000
Solution:
Current Ratio = Current Assets/Current Liabilities
Current Assets = Inventory + Debtors + Cash + Bills Receivable + Advance Tax + Accrued Interest
= 55,000 + 40,000 + 37,000 + 20,000 + 4,000 + 4,000
= 1,60,000
Current Liabilities = Creditors + Bills Payable + Bank Overdraft
= 48,000 + 28,000 + 4,000
= 80,000
\ Current Ratio = 1,60,000/80,000
= 2 : 1
12. The Star Cricketer club had a cash balance of Rs.500 and a Bank balance of Rs.1000 on 1.4.2011. From the following details, prepare a Receipts and Payments Account for the year ended 31.03.2012:            5
Particulars
Amount
Subscription received for the year
Subscription outstanding on 31.03.12
Subscription for 2010-11 received during the current year
Life member fees received
Donation for club house received
Rent paid for the year
Advance rent paid
Sale of Furniture (book value Rs.600)
Honorarium to coach
Sports expenses
Construction of club house
Salary
Printing and Stationery
Postage and Telegram
Maintenance Grant
Depreciation during the year
Salary Outstanding on 31.03.2013
Outstanding Salary on 01.04.2011 paid during the year
Cash in hand on 31.03.2012
Stationery in hand on 31.03.2012
16000
2000
1000
5000
10000
6000
600
500
5000
8000
9000
4500
400
600
1000
1000
500
500
1400
100

Solution:
Receipts & Payments Account of the Star Cricketer Club
For the year ended on 31st March, 2012
Receipts
Amount
Payments
Amount
To Balance b/d
Cash
Bank
To Subscription
To Subscription (2010 – 11)
To Life membership fees
To Donation for club house received
To Sale of furniture
To maintenance grant
To Balance C/d         
Bank overdraft

500
1,000
16,000
1,000
5,000
10,000
500
1,000

1,000
By Rent
By Prepaid rent
By Honorarium to coach
By sports expenses
By Construction of club house
By Salary
By Printing & Stationery
By Postage & Telegram
By Outstanding Salary
By Balance c/d
Cash
6,000
600
5,000
8,000
9,000
4,500
400
600
500

1,400

36,000

36,000
13. Pari and Puja are partners sharing profits as 3:2. Their capitals are 80000 and 60000 respectively as on 01.04.2011. Net profit of the business for the year 2011-12 was Rs. 40000 before considering the following:          5
(i) Interest on Capital @ 5% p.a.
(ii) Salary to Puja Rs.6000 p.a.
(iii) Commission to Puja @ 10% of Net Profit after deducting Interest on capital and Salary but before charging such commission. Prepare a profit and Loss Appropriation Account for the year ended on 31.03.2012.
Solution:
Profit & Loss Appropriation A/c
For the year ended on 31.3.2012
Particulars
Amount
Particulars
Amount
To Interest on capital
Pari: 80,000 x 5/100
Puja: 60,000 x 5/100
To Partner’s Salaries
Puja:
To Partner’s Commission
Puja: 27,000 x 10/100
To Share of Profit
Pari: 24,300 x 3/5 – 14,580
Puja: 24,300 x 2/5 – 9,720

4,000
3,000

6,000

2,700


24,300
By Net Profit
40,000

40,000

40,000
14. Rohan and Sohan are partners sharing profits and losses in the ratio of 3:2. Mohan joins the firm as a new partner for 1/4th share of future profit. Mohan brings Rs.20,000 as capital and required amount of premium. The goodwill of the firm was valued at Rs. 30,000. Give journal entries assuming that partner’s capitals are fixed.                5
Solution:
Journal Entries
In the books of firm
Particulars
Amount (Dr.)
Amount (Cr.)
Cash A/c                                                                                                           Dr.
To Mohan’s Capital A/c
To Premium for goodwill A/c
(Being the Capital and premium for goodwill brought in cash by New Partner)
27,500

20,000
7,500
Premium for Goodwill A/c                                                                            Dr.
To Rohan’s Current A/c
To Sohan’s Current A/c
(Being the premium for goodwill distributed between Sacrificing partners)
7,500

4,500
3,000
Or
A and B are partners sharing profits and losses A – 75% and B – 25% respectively. Their Balance sheet as on 31.03.2012 is given below:      5
Liabilities
Amount
Assets

Amount
Sundry Creditors
Profit and Loss Account
Capital Accounts:
A - 30000
B – 20000
40000
10000


50000
Cash
Sundry Debtors
Less: Provisions for Bad debts
Stock
Furniture
Plant and Machinery

16000
1000
20000

15000
35000
5000
25000

100000


100000
X was admitted as a new partner on the following terms:
(i) That Plant and machinery is to be reduced by 25%.
(ii) Furniture is to be depreciated by 10%.
(iii) Bad debts amounted to Rs.1750 and are to be written off.
(iv) There was an unrecorded typewriter valued at Rs.5000.
(v) Outstanding legal charges estimated at Rs.1250.
Prepare a Revaluation Account.
Solution:
Revaluation A/c
To P/M
To Furniture
To Provision for b/d (1,750 – 1,000)
To Outstanding legal charges
6,250
500
750
1,250
By Typewriter
By Loss on revaluation:
A = 3,750 x 3/4
B = 3,750 x ¼
5,000

2,812.50
937.50

8,750

8,750
15. What is a Sinking Fund? How is it created?  5
Ans: Sinking fund is a fund into which a company sets aside money over time, in order to retire its preferred stock, bonds or debentures. Such fund is created mainly for some specific purposes which are:
1.       To redeem or repay long term liabilities.  For example: debentures, long term loans etc.
2.       To replace wasting assets. For example: mines etc.
3.       To replace an asset of depreciable nature. For example fixed assets.
Creation of Sinking fund for redemption of debentures:
For redemption of debentures or other long term liabilities, a fixed amount is kept aside yearly as sinking fund for the specific purpose and the same amount is invested in securities etc.  for a specific period so that the sufficient amount is available at the time of redemption of long term liabilities. The amount to be set aside can be determined with the help of Sinking fund table. The amount kept aside should not be debited to Profit and loss account but to Profit and loss appropriation account because the same is an allocation of profit not expenditure.
16. A Company has issued Rs.100000, 10%Debenture at 5% discount repayable at 5% premium after 4 years. Give journal entries for issue and show the loss on issue of debentures account over 4 years.                             5
Solution:
Journal Entries
In the books of A company

Particulars
L/f
Amount Dr.
Amount Cr.

Bank A/c                                                                                                             Dr.
Loss on issue of debentures A/c                                                                    Dr.
To 10% Debentures A/c
To Premium on redemption A/c
(Being the 1000 10% Debentures of Rs. 100 each issued at a discount of 5%, but repayable at a premium of 5%)

95,000
10,000


1,00,000
5,000
Loss on issue of Debentures A/c
Date
Particulars
Rs.
Date
Particulars
Rs.
Year 1
To 10% Debentures
To Premium on redemption A/c
5,000
5,000
Year 1
By Profit and Loss A/c
By Balance c/d
2,500
7,500


10,000


10,000
Year 2
To Balance b/d

7,500
Year 2
By Profit and Loss A/c
By Balance c/d
2,500
5,000


7,500


7,500
Year 3
To Balance b/d
5,000

Year 3
By Profit and Loss A/c
By Balance c/d
2,500
2,500


5,000


5,000
Year 4
To Balance b/d
2,500
Year 4
By Profit and Loss A/c
2,500


2,500


2,500

Working Note:
Amount to be written off each year.
= Amount of loss on issue of debentures/ No. of years  = 10,000/5 = 2,500
17. What are the uses and importance of financial statements?                                5
Ans. Uses and Importance of Financial Statements to its various users
a)      To Management: Management is interested in knowing the existing profits, earnings per share, chances of survival, possibility of growth and diversification etc. from the financial statements so that is can frame suitable strategy for its entity.
b)      Potential investors: Potential investors are keen to know the earning potential of the business. They want to know how safe the investment already made is and how safe the proposed investment will be.
c)       Bankers and financial institutions: These institutions are interested in the security of the loan advanced, entity’s capacity to repay the principal interest as per terms. Financial statements help these institutions to check the operating efficiency and financial position.
d)      Shareholders: Shareholders of the business are interested to know the earning capacity of the business and its prospects of future growth.
e)      Taxation authorities: Income tax authorities are interested in knowing the profits of the business so that income tax can be imposed thereon. Financial statements help them a great deal in determining the taxes payable.
Or
What are the limitations of Financial Statement Analysis?          5
Ans. Limitations of financial analysis:  Financial analysis suffers from various limitations which are given below:
a)      Historical Analysis: Financial analysis analysed what has happened till date but it does not reflect the future.
b)      Ignores Price Level Changes: A change in the price level makes the financial analysis of different accounting years invalid because accounting records ignores change in value of money.
c)       Qualitative aspect Ignored: Since the financial statements are based on quantitative aspects only, the quality aspect such as quality of management, quality of labour force etc., are ignored.
d)      Suffers from the Limitations of financial statements: Since analysis of financial statements is based on the information given in the financial statements, it suffers from all such limitations from which the financial statements suffer.
e)      Not free from Bias: Financial statements are largely affected by the personal judgment of the accountant in selecting accounting policies.
18. How would you compute the amount due to a Retiring Partner?       5
Ans. Calculation of amount due to the retiring partner: The amount due to the retiring partner is paid according to the terms of partnership agreement. The retiring partners’ claim consists of:             
(a) The credit balance of Capital Account;
(b) His/her share in the Goodwill of the firm;
(c) His/her share in the Revaluation Profit:
(d) His/her share in General Reserve and Accumulated Profit;
(f) Interest on Capital
But, the following deductions are made from his/her Capital Account on account of:
(a) His/her share in the Revaluation loss;
(b) His/her Drawings and Interest on Drawings up to the date of retirement
(c) His/her share of any accumulated losses
(d) Loan taken from the firm.
The total amount so calculated is the claim of the retiring partner. He/she is interested in receiving the amount at the earliest. Total payment may be made immediately after his/her retirement. However, the resources of the firm may not be adequate to make the payment to the retiring partner in lump sum, then firm makes payment to retiring partner in installments.
19. X, Y and Z are in a partnership sharing profits in the proportion of 5:3:2. On 31.03.2011 their Balance sheet was as under:                  8
Liabilities
Amount
Assets
Amount
Creditors
Reserve
Capital Account:
X – 35000
Y – 20000
Z – 15000
7000
10000



70000
Building
Machinery
Stock and Debtors
Patents
Cash
20000
30000
18000
6000
13000

87000

87000
X died on 01.10.2011. It was agreed between his executors and the remaining partners that:
(i) Goodwill is valued at 2 years purchase of the average profit of the previous 5 years which were:
2006 – 07:15000, 2007 – 08: 13000, 2008 – 09: 12000, 2009 – 10: 15000, 2010 – 11: 20000.
(ii) Patents are valued at Rs.8000, Machinery at Rs.28000, and Building at Rs.30000.
(iii) Profit for the year 2011 – 12 is taken as having accrued at the same rate as the previous year.
(iv) Interest on Capital is provided at 10% p.a.
(v) A sum of Rs.11500 was to be paid to his executors immediately.
Prepare X’s Capital Account and his Executor’s Account at the time of his death.
Solution:
X’s Capital A/c
Particulars
Amount
Particulars
Amount
To X’s Executors A/c
66,750
By balance b/d
By Reserve A/c
By Revaluation A/c
By P/L suspense A/c
By Interest on capital A/c
By Y’s Capital A/c
By Z’s Capital A/c
35,000
5,000
5,000
5,000
1,750
9,000
6,000

66,750

66,750


X’s Executors A/c
Particulars
Amount
Particulars
Amount
To Bank A/c
To balance c/d
11,500
55,250
By X’s capital A/c
66,750

66,750

66,750
Revaluation A/c
Particulars
Amount
Particulars
Amount
To Machinery
To Profit on Revaluation
X: 10,000 x 5/10 = 5,000
2,000
10,000
By Patents
By Building
2,000
10,000

12,000

12,000
Working Note:
1. Profit of X = 20,000 x 5/10 x 6/12 = 5,000
2. Interest on Capital = 35,000 x 10/100 x 6/12 = 1,750
3. Goodwill = (15,000 + 13,000 + 12,000 + 15,000 + 20,000)/5 x 2
= (75,000/5) x 2
= 30,000
\X’s share of goodwill = 30,000 x 5/10 = 15,000
Y’s Contribution = 30,000 x 3/10 = 9,000
Z’s Contribution = 30,000 x 2/10 = 6,000
20. Karan Ltd. decided to issue 10000 shares of Rs.100 each at a discount of 10%, payable as follows:
On Application – Rs.30
On Allotment – Rs.40 (After deducting discount)
Balance on 1st and final call.
The company received 9000 applications. All the shares were duly accepted and allotted. All the calls were duly made and all call money received accordingly. Give Journal Entries and prepare a Balance Sheet.
Solution:
Journal Entries
In the books of Karan Ltd.
Particulars
L/f
Amount Dr.
Amount Cr.
Bank A/c                                                                                                                      Dr.
To Share Application A/c
(Being the application money received on 9000 shares @ Rs. 30 each)

2,70,000

2,70,000
Share Application A/c                                                                                                Dr.
To Share Capital A/c
(Being the application money transferred to share Capital)

2,70,000

2,70,000
Share Allotment A/c                                                                                                  Dr.
Discount on issue of share A/c                                                                                Dr.
To Share Capital A/c
(Being the allotment money due on 9000 shares @ Rs. 40 each after deducting discount)

3,60,000
90,000


4,50,000
Bank A/c                                                                                                                      Dr.
To Share Allotment A/c
(Being the allotment money received on 9000 shares @ Rs. 40 each)

3,60,000

3,60,000
Share 1st Call & Final Call A/c                                                                                   Dr.
To Share Capital A/c
(Being the first and final call money due on 9000 shares @ Rs. 20 each)

1,80,000

1,80,000
Bank A/c                                                                                                                      Dr.
To Share 1st & Final call A/c
(Being the first and final call money received)

1,80,000

1,80,000
Or
Ram, Shyam and Mohan were in partnership sharing profits and losses in the ratio of 3:2:1. On 01.01.2010 Shyam retires from the firm. On that date the Balance Sheet of the firm was as follows:                             8
Liabilities
Amount
Assets

Amount
Sundry Creditors
Reserve
Bills Payable
Capitals:
Ram –     20000
Shyam – 15000
Mohan – 12000
30000
6000
2600



47000
Cash in Hand
Investments
Debtors
Less: Provision
Stock
Furniture
Premises


15000
1500
600
25000

13500
18500
8000
20000

85600


85600
The terms of retirement were:
(i) Goodwill is to be valued at Rs.12000.
(ii) Premises to be appreciated by Rs.5000.
(iii) Furniture to be depreciated by Rs.1000.
(iv) Provision for bad debts to be increased by Rs.400.
(v) Investments were sold at book value and the amount due to Shyam was paid off.
Pass Journal Entries to record the necessary adjustments for retirement of Shyam.
Solution:
Journal Entries
In the books of firm
Particulars
L/f
Amount Dr.
Amount Cr.
Premises A/c                                                                                  Dr.
To Revaluation A/c
(Being the profit on revaluation of premises transferred to revaluation account)

5,000

5,000

Revaluation A/c                                                                             Dr.
To Furniture A/c
To Provision for doubtful debts A/c
(Being the profit on revaluation of premises transferred to revaluation account)

1,400

1,000
400
Revaluation A/c                                                                              Dr.
To Shyam’s Capital  A/c
To Ram’s Capital A/c
To Mohan’s Capital A/c
(Being the profit on revaluation distributed amongst the old partners)

3,600

1,200
1,800
600
Reserve A/c                                                                                     Dr.
To Ram’s Capital A/c
To Shyam’s Capital A/c
To Mohan’s Capital A/c
(Being the reserves distributed amongst the partners)

6,000

3,000
2,000
1,000
Ram’s Capital A/c                                                                            Dr.
Mohan’s Capital A/c                                                                       Dr.
To Shyam’s Capital A/c
(Being the shyam’s share of goodwill adjusted amongst the partners)

3,000
1,000


4,000
Bank A/c                                                                                          Dr.
To Investments A/c
(Being the investment sold at book value)

25,000

25,000
Shyam’s Capital A/c                                                                       Dr.
To Bank A/c
 (Being the final payment made to the retiring partner)

22,200

22,200

Working Note:
Goodwill
Gaining Ratio = New Ratio – Old Ratio
= 3/4 – 3/6 : 1/4 – 1/6
= 9 – 6/12 : 3 – 2/12
= 3/12 : 1/12 = 3:1
Shyam’s share of goodwill = 2/6 x 12,000 = 4,000
Ram’s Contribution = 4,000 x 3/4 = 3,000
Mohan’s Contribution = 4,000 x 1/4 = 1,000
21. Shiba and Dhruba are partners in a firm. The trial Balance of the firm as on 31.03.2011 was as follows:            8
Trial Balance
Debit
Amount
Credit
Amount
Machinery
Goodwill
Patents
Sundry Debtors
Cash in Hand
Closing Stock on 31.3.2011
Investments
Depreciation on Machinery
Establishments
Carriage outward
Taxes
Telephone charges
Conveyance
Drawings:
Shiba    – 5000
Dhruba – 4000
Salaries
Bank Charges
54000
10000
20000
21000
1000
25000
10000
6000
10000
1000
500
3600
800


9000
8000
100
Capital:
Shiba    – 50000
Dhruba – 40000
Sundry Creditors
Interest on Investment
Sundry Receipts
Bank overdraft
Outstanding Wages
Trading Account (Gross Profit)
Discount
Bills Payable




90000
5000
400
200
10000
500
71000
900
2000

180000

180000
Prepare a Profit and Loss Account and a Profit and Loss Appropriation Account for the year ended 31.03.2011 and also a Balance Sheet as on that date after taking into consideration the following adjustments:
(i) Write off Rs.1000 as bad debts and provide a 5% provision on sundry debtors for doubtful debts.
(ii) Interest on investments accrued Rs.600.
(iii) Interest on Partner’s Capital is allowed @ 5% p.a.
(iv) Create a General Reserve by taking Rs.500 out of profits.
Solution:
Profit & Loss A/c
For the year ended on 31.03.2011
Particulars
Amount
Particulars
Amount
To B/d
To Provision for d/d
To Depreciation on Machinery
To Establishments
To Carriage outward
To Taxes
To Telephone Charge
To Conveyance
To Salaries
To Bank Charge
To Net Profit
1,000
1,000
6,000
10,000
1,000
500
3,600
800
8,000
100
41,100
By Gross Profit
By Interest on Investment      400
Add: Accrued                              600

By Sundry Receipts
By Discount

71,000

1,000

200
900

73,100

73,100
Profit & Loss Appropriation A/c
For the year ended 31.03.2011
Particulars
Amount (Dr)
Particulars
Amount (Cr)
To Interest on Capital:
Shiba         = 50,000 x 5%
Dhruba     = 40,000 x 5%
To Transfer to Reserve
To Share of Profit:
Shiba       = 36,100 x 1/2
Dhruba   = 36,100 x 1/2

2,500
2,000
500

18,050
18,050
By Net Profit
41,100

41,100

41,100
Partner’s Capital A/c
Particulars
Shiba
Dhruba
Particulars
Shiba
Dhruba
To Drawings
To Balance c/d
5,000
65,550
4,000
56,050
By Balance b/d
By Interest on Capital
By P/L Appropriation A/c
50,000
2,500
18,050
40,000
2,000
18,050

70,550
60,050

70,550
60,050
Balance Sheet
As on 31.03.2011
Liabilities
Amount
Assets
Amount
Sundry Creditors
Bank Overdraft
Outstanding wages
Bills Payable
Reserve
Capital Accounts:
Shiba
Dhruba
5,000
10,000
500
2,000
500

65,550
56,050
Machinery
Goodwill
Patents
Sundry Debtors                           21,000
Less: B/d                                         1,000
20,000
Less: Provision for d/d @ 5%     1,000
Cash in hand
Investment
Accrued Int. on Investment
Closing Stock
54,000
10,000
20,000



19,000
1,000
10,000
600
25,000

1,39,600

1,39,600

22. Fair Deal Ltd. invited applications for the issue of 2000, 10%Debentures of Rs.100 each at a discount of 10% payable Rs.30 on application on 1st May, 2010, Rs.30 on allotment (after deducting discount) on 1st June, 2010 and balance on first and final call on 1st July, 2010. All the debentures were fully subscribed. Debentures money was duly called and paid up.  Give the Journal Entries and show how the debentures and Debenture Discount will be shown in the Balance sheet of the company.            8
Solution:
Journal Entries
In the books of Fair Deal Ltd.
Date
Particulars
L/f
Amount Dr.
Amount Cr.
1st May
Bank A/c                                                                                                           Dr.
To 10% Debentures Application A/c
(Being the debenture application money received on 2,000 debentures)

60,000

60,000

10% Debenture Application A/c                                                                    Dr.
To 10% Debenture A/c
(Being the debentures application money transferred to debentures a/c)

60,000

60,000
1st June
10% Debenture Allotment A/c                                                                      Dr.
Discount on issue of debentures A/c                                                           Dr.
To 10% Debentures A/c
(Being the allotment money due on 2000 debentures @ Rs. 30 each after deducting discount @Rs. 10 per debenture)

60,000
20,000


80,000

Bank A/c                                                                                                            Dr.
To 10% Debenture Allotment A/c
(Being the allotment money received on 2000 debentures)

60,000

60,000
1st July
10% Debentures 1st and Final Call A/c                                                         Dr.
To 10% Debentures A/c
(Being the 1st and final call money due on 2000 debentures @ Rs. 30 each )

60,000

60,000

Bank A/c                                                                                                             Dr.
To 10% Debentures 1st & Final call A/c
(Being the 1st and final call money received on 2000 debentures)

60,000

60,000
Balance Sheet of Fair Deal Ltd.
Particulars
Amount
Equity & Liabilities:
1.       Non-Current Liabilities
Debentures: 2,000 debentures @ 100 each


2,00,000
Total
2,00,000
Assets:
1.       Non Current Assets
Other non-current assets
Discount on issue of shares
2.      Current Assets
Cash and Cash equivalents



20,000

1,80,000
Total
20,000

Or
Janata Iron Ltd. has forfeited the following shares of Rs.10 each fully called up for non-payment of allotment and call moneys.                              8
(a) 200 shares held by A who has paid Application money of Rs.2 each only.
(b) 300 shares held by B who has paid application and allotment money of Rs.2 and Rs.3 each respectively.
(c) 400 shares held by C who has paid application, allotment and first call money of Rs.2, Rs.3 and Rs.2 each respectively.
All the above forfeited shares have been re-issued at a discount of 10%. Expenses on re-issue amounted to Rs.500. Give the journal entries in the books of Janata Iron Ltd.
Solution:
Journal Entries
In the books of Janata Iron Ltd.

Particulars
L/f
Amount Dr.
Amount Cr.

Share Capital A/c                                                                                            Dr.
To Forfeited Share A/c
To Share Allotment A/c
To Share First Call A/c
To Share Final Call A/c
(Being the 200 shares forfeited due to non-payment of allotment and call money)

2,000

400
600
400
600

Share Capital A/c                                                                                            Dr.
To Forfeited Share A/c
To Share First Call A/c
To Share Final Call A/c
(Being the 300 shares forfeited due to non-payment of call money)

3,000

1,500
900
600

Share Capital A/c                                                                                             Dr.
To Forfeited Share A/c
To Share Final Call A/c
(Being the 400 shares forfeited due to non-payment of call money)

4,000

2,800
1,200

Bank A/c                                                                                                            Dr.
Forfeited Share A/c                                                                                         Dr.
To Share Capital A/c
(Being the 900 forfeited shares reissued @ Rs. 9 per share)

8,100
900


9,000

Expenses on reissue A/c                                                                                 Dr.
To Bank A/c
(Being the expenses on reissue of forfeited shares paid)

500

500

Forfeited Share A/c                                                                                         Dr.
To Expenses on reissue A/c
To Capital Reserve A/c
(Being the profit on reissue of forfeited shares transferred to capital reserve)

3,800

500
3,300

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