AHSEC SOLVED QUESTION PAPERS
2015 (ACCOUNTANCY)
Full Marks: 100
Pass Marks: 30, Time: Three Hours
The figures in the margin indicate full marks for the questions.
1. (a) Fill in the blanks with appropriate word: 1x4=4
(i) If a partner takes over a liability of the firm, the partner’s capital account is credited.
(ii) A partner acts as an agent for the firm.
(iii) When Partner’s Capital Accounts are fixed, then their current accounts.
(iv) Goodwill is the extra earning capacity of a firm.
(i) In the event of death of a partner, the amount of general reserve is transferred to the Partner’s Capital Accounts in:
1) New Profit sharing ratio.
2) Old Profit sharing ratio.
3) Capital ratio.
4) None of the above.
(ii) Balance Sheet shows:
1) Financial Position of a Company.
2) Profit or Loss of a Company.
3) Cash flow of a Company.
4) None of the above.
(c) State whether the following statements are true or false: 1x2=2
(i)The decreased partner’s executor is entitled to a share of Profit for the period upto his / her death. Ans. True.
(ii) A Preference shareholder gets interest at a fixed rate. Ans. False.
2. State any two features of a Not-for-profit organization. 2
Ans. Characteristics of Not-for-profit organisations: Following are the main characteristics or the salient features of Not for Profit organisations:
a) The objective of such organisations is not to make profit but to provide service to its members and to the society in general.
b) The main source of income of these organisations is admissions fees, subscriptions, donations, grant-in-aid, etc.
3. A, B and C are partner sharing profits in the ratio of 2:2:1. C retires. A and B have decided to share future profits and losses in the ratio of 2: 1. Calculate the gaining ratio. 2
Solution: A : B : C = 2 : 2 : 1
C to retires; A : B = 2 : 1
\Gaining Ratio = New Ratio – Old Ratio
\A: B (gaining ratio) = (2/3 – 2/5) : (1/3 : 2/5) = (2/3 – 2/5) : (1/3 : 2/5)
= (10/15 – 6/15) : (5/15 – 6/15) = (10/15 – 6/15) : (5/15 – 6/15)
= 4/15 : – 1/15)
4. Mention any two features of debentures. 2
Ans. The characteristics of debentures can be summarised as follows:
a) Debentures are debt instruments.
b) Interest is payable on debentures at a fixed rate irrespective of the profit earned by the business.
5. Mention any two methods of valuation of goodwill. 2
Ans: Methods of Valuation of Goodwill:
1) Average profits method
2) Weighted average profit method
1) 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.
2) Weighted average method: Goodwill is calculated as follows:
ü Weighted average profit = (Total Product of Profit / Total of Weights)
ü Value of goodwill = Weighted average profit × number of year of purchase
6. X Ltd. Decided to forfeit 1,000 shares of Rs. 10/- each for non-payment of allotment money for Rs. 4/- each and 1st and final call money of Rs. 3/- each. Give journal entry for the forfeiture of shares 2
Solution:
Journal Entry
In the books of X Ltd.
Particulars
|
L/f
|
Amount
Dr.
|
Amount
Cr.
|
Equity Share Capital A/c Dr.
To Forfeited share A/c
To Share allotment A/c
To Share 1st & Final call A/c
(Being the 1000 shares forfeited due to non-payment of allotment & call money)
|
10,000
|
3,000
4,000
3,000
|
7. X, Y and Z are partners sharing profits in the ratio 3:2:1. It is now agreed that they will share the future profits equally. Goodwill of the firm is valued at Rs. 60,000/- and the same does not appear in the books. Pass necessary journal entries. 3
Ans:
Journal Entry
Particulars
|
Amount (Dr.)
|
Amount (Cr.)
|
Z’s Capital A/c Dr.
To X’s Capital A/c
(Being the goodwill adjusted amount the partners)
|
10,000
|
10,000
|
Working Note:
X : Y : Z = 3 : 2 : 1 (Old ratio)
X : Y : Z = 1 : 1 : 1 (New ratio)
X’s Sacrifice = 3/6 – 1/3 = (3 – 2)/6 = 1/6
Y’s = 2/6 – 1/3 = (2 – 2)/6 = 0
Z’s gain = 1/6 – 1/3 = (1 – 2)/6 = 1/6
8. Briefly explain any three objectives of analysis of financial statements. 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.
Or
From the following calculate Current Ratio:
Particulars
|
Rs.
|
Sundry Debtors
Stock
Prepaid Expenses
Sundry Creditors
Bank Overdraft
Dividend payable
10% Debenture
Machinery
|
50,000/-
40,000/-
2,000/-
38,000/-
10,000/-
10,000/-
40,000/-
50,000/-
|
Solution:
Current Ratio = Current Assets/Current Liabilities
Current Assets = Sundry Debtors + Stock + Prepaid Expenses = 50,000 + 40,000 + 2,000 = 92,000
Current Liabilities = Sundry Creditors + Bank Overdraft + Dividend Payable = 38,000 + 10,000 + 10,000 = 58,000
\ Current Ratio = 92,000/58,000 = 46 : 29
9. What do you mean by Forfeiture of Shares? Discuss the procedure of forfeiture of shares. 3
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.
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.
10. What is meant by Common Size Statements? Mention any two uses of Common Size statements. 3
Ans. Common Size Statements: Common size statement is the statement in which amounts of individual item of balance sheet and profit and loss account for two or more years are written. These amounts are further converted into percentage to some common base. It can be net sales in the case of profit and loss account and total of balance sheet for the balance sheet.
Merits of Common Size Statements:
(i) A common size statement facilitates both types of analysis, horizontal as well as vertical. It allows both comparisons across the years and also each individual item as shown in financial statements.
(ii) Comparison of the performance and financial condition in respect of different units of the same industry can also be done.
Or
Give any three distinctions between sacrificing ratio and gaining ratio. 3
Ans. Distinguish between sacrificing ratio and gaining ratio:
Basis
|
Sacrifice Ratio
|
Gaining Ratio
|
Meaning
|
Sacrificing Ratio is a ratio in which the old partners have agreed to surrender their share of profit in favour of new partner.
|
Gaining Ratio is ratios in which remaining partners’ gain the retiring partner’s share.
|
Objective
|
The main purpose to calculate the sacrificing ratio is to ascertain the compensation to be paid by incoming partner to the sacrificing partner’s in the form of goodwill.
|
The main purpose to calculate the gaining ratio is to find out the compensation to be paid by the gaining partner’s to the retiring partner.
|
When to Calculate
|
Sacrificing Ratio is calculated at the time of admission of a new partner.
|
Gaining Ratio is calculated at the time of retirement of a partner.
|
Method
|
Sacrificing Ratio = Old Ratio – New Ratio
|
Gaining Ratio = New Ratio – Old Ratio
|
11. Mention any three objectives of Receipts and Payment Account. 3
Ans. Objectives or Need for preparing Receipts and Payments Account
As most of the transactions of Not-for-Profit Organizations are for cash, the Receipts and Payments Account shows most of the items at one place.
a. As it is in a summary form, it gives an idea of large number of transactions at a glance.
b. It contains accounting information under various heads. So it gives information item wise for the accounting year.
c. It shows the closing cash or/and bank balance, this cash/Bank balance is taken to the Balance Sheet.
d. The Receipts and Payments Account serves the purpose of trial balance and becomes the basis of preparing financial statements i.e. Income and Expenditure Account and Balance sheet for the organisation.
12. Given the new format of the Balance Sheet of a Company (main heading only) as per the requirement of schedule VI of the Companies Act, 1956. 5
Ans: Refer Q.N. 16 , asked in 2012 exam
Or
Distinguish between a Company’s Balance Sheet and Balance Sheet of a Partnership Firm. 5
Basis
|
Company’s Balance sheet
|
Firm’s Balance Sheet
|
1. Format
|
Balance sheet is prepared in a format prescribed in Schedule III of the Companies Act, 2013.
|
Firm’s balance sheet is prepared in a traditional format.
|
2. Capital
|
Total capital of a company is shown under one head named as “Shareholder’s fund”.
|
More than one capital account is shown in balance sheet depending on the number of partners.
|
3. Period
|
Figures of current year and previous year are shown together in a company’s balance sheet.
|
Balance sheet of a firm is prepared for current year only.
|
4. Presentation of assets and liabilities
|
Assets and liabilities are shown under different head in a company’s balance sheet.
|
Assets and liabilities are grouped or marshaled on their respective side. No separate head for different categories of assets.
|
5. Reserves and Surplus
|
Reserves and Surplus are shown separately under the head “Reserves and Surplus”.
|
Reserves and surplus are normally distributed between/amongst the partners at the end of accounting year.
|
13. Assam Cricket Club has a Cash and Bank Balances of Rs. 1,600/- and Rs. 20,000/- respectively on 01-04-2013. From the following details, prepare a Receipts and Payments Account for the year ended 31-03-2014. 5
Particulars
|
Rs.
|
Donation received
Entrance fee received
Donation received for Building
Furniture purchased
Salary paid for the year
Salary paid in advance
Repair to Building
Rent received
Wages paid
Outstanding Salaries
Depreciation of furniture
Maintenance Grant
|
18,000/-
6,000/-
90,000/-
18,000/-
10,500/-
2,000/-
1,500/-
1,500/-
6,000/-
1,500/-
2,000/-
900/-
|
Subscription received :
For 2012 – 13
For 2013 – 14
For 2014 – 15
Life Membership Fees
Balance of Bank on 31-03-14
|
8,000/-
25,000/-
1,000/-
4,000/-
1,35,000
|
Solution:
Receipts & Payments Accounts of Assam Cricket Club
For the year ended on 31st March, 2014
Receipts
|
Amount
|
Payments
|
Amount
|
To Balance b/d
Cash
Bank
To Donation received
To Entrance Fees received
To Donation received for building
To Rent received
To Maintenance Grant
To Subscription:
For: 2012 – 13
For: 2013 – 14
For: 2014 – 15
To Life Membership fees
|
1,600
20,000
18,000
6,000
90,000
1,500
900
8,000
25,000
1,000
4,000
|
By Furniture
By Salary
By Prepaid Salary
By Repairs to Building
By Wages
By Balance c/d
Cash
Bank
|
18,000
10,500
2,000
1,500
6,000
3,000
1,35,000
|
1,76,000
|
1,76,000
|
14. X Ltd. Made a profit of Rs. 5, 00,000/- after considering the following items: 5
Rs.
| |
Goodwill written off
Depreciation on Fixed Assets
Loss on Sale of Machinery
Provision for doubtful debt
Gain on sale of land
|
5,000/-
50,000/-
20,000/-
10,000/-
7,500/-
|
Additional Information:
Particulars
|
31-03-2014
|
31-03-2013
|
Bills Receivable
Prepaid Expenses
Bills Payable
Expenses Payable
|
78,000/-
3,000/-
51,000/-
20,000/-
|
52,000/-
2,000/-
40,000/-
34,000/-
|
Calculate Cash and Operating Activities for the year ended 31st March, 2014.
Solution:
Cash Flow from Operating Activities
Particulars
|
Amount
|
Net Surplus
Add: Non Cash and non operating expenses and losses
Goodwill
Depreciation on fixed Assets
Loss on sale of machinery
|
5,00,000
5,000
50,000
20,000
|
Less: Non Cash and non operating incomes and gains
Gain on sale of land
|
5,75,000
(7,500)
|
Effect on Working Capital Changes
Increase in Bills Receivable
Increase in Prepaid Expenses
Increase in Bills Payable
Decrease in Expenses Payable
Increase in Provision for doubtful debts
|
5,67,500
(26,000)
(1,000)
11,000
(14,000)
10,000
|
Cash Flow from operating expenses
|
5,47,500
|
Or
What is Cash Flow statement? Briefly explain any four objectives of preparing a Cash Flow statement. 1+4=5
Ans. Refer Question No. 18 (or), of 2012
15. From the given information, calculate the stock Turnover Ratio: 5
Sales = Rs. 4, 00,000/-
Gross Profit Ratio = 25%
Opening Stock was 1/3rd of the value of the Closing stock.
Closing Stock was 30% of Sales.
Solution:
Gross Profit = 25% on sales
= 4,00,000 x 25/100
= 1,00,000
\ Cost of goods sold = Sales – Gross Profit
= 4,00,000 – 1,00,000
= 3,00,000
And, Closing Stock = 30% of sales
= 30/100 x 4,00,000
= 1,20,000
And, Opening Stock = 1/3 of Closing stock
= 1/3 x 1,20,000
= 40,000
\ Stock Turnover Ratio = Cost of goods sold/Average Cost
= 3,00,000/1,20,000+40,000/2
= 3,00,000/80,000
= 15 : 4 = 3.75 Times
Or.
How are the accounts settled between partners on the dissolution of a Partnership Firm? 5
Ans: Settlement of Accounts: As soon as a firm is dissolved, it ceases to transact normal business. The mode of settlement of accounts between partners after the dissolution of a firm is determined by the partnership agreement. In the absence of any specific agreement as to the mode of settlement of accounts after the dissolution of the firm, the Partnership Act laid down the following provisions (Sec. 48) for settlement of accounts:
1. When a partnership firm is dissolved, its assets are disposed of and the proceeds there from are utilised in paying the creditors. In case the assets of the firm are more than sufficient to meet the liabilities in full, then the surplus may be utilised in the following order, subject to any agreement to the contrary:
(a) First, in paying off the debts of the firm due to third parties;
(b) Then in paying to each partner ratably any advances or loans given by him in addition to or apart from his capital contribution;
(c) If any surplus is available after discharging the above liabilities, the capital contributed by the partners may be returned, if possible, in full or otherwise ratably;
(d) The surplus, if any, shall be divided among the partners in their profit-sharing ratios.
2. If the amount realised by sale of assets is not sufficient to discharge the claims of the creditors in full, the deficiency can be recovered proportionately from the personal properties of the partners. If any partner becomes insolvent, the remaining solvent partners will bear the loss in their capital ratio.
3. Losses, including deficiencies of capital, shall be paid first out of profit, next out of capital, and lastly, if necessary, by the partners individually in their profit-sharing ratio.
16. The Balance Sheet of A, B and C who were sharing profits in proportion to their Capitals stood as follows on 31st March, 2014:
Balance Sheet
Liabilities
|
Rs.
|
Assets
|
Rs.
|
Sundry Creditors
Capital Accounts :
A = 18,000/-
B = 13,500/-
C = 9,000/-
|
14,400
40,500
|
Cash at Bank
Sundry Debtors
Stock
Investments
Land of Building
|
5,500
4,900
8,000
11,500
25,000
|
54,900
|
54,900
|
B retired on the above date on the following terms and conditions:
a) That stock is depreciated by 6%.
b) That a provision for doubtful debts be created @ 5% on the Debtors.
c) That Land and Buildings be appreciated by 20%.
d) That the Goodwill of the entire firm be fixed at Rs. 10,800/- and B’s share goodwill be adjusted into the accounts of A and C who are going to share future profits in the ratio of 5: 3. (No Goodwill account is to be raised.)
Pass the necessary journal entries in the books of the firm. 5
Solution:
Journal Entries
In the books of firm
Particulars
|
L/f
|
Amount Dr.
|
Amount Cr.
|
Revaluation A/c Dr.
To Stock A/c
To Provision on doubtful debts A/c
(Being the loss on revaluation of asset transferred to rev. a/c)
|
725
|
480
245
| |
Land & Building A/c Dr.
To Revaluation A/c
(Being the profit on revaluation of asset transferred to rev. a/c)
|
5,000
|
5,000
| |
Revaluation A/c Dr.
To A’s Capital A/c
To B’s Capital A/c
To C’s Capital A/c
(Being the profit on revaluation distributed amongst the partners)
|
4,275
|
1,900
1,425
950
| |
A’s Capital A/c Dr.
C’s Capital A/c Dr.
To B’s Capital A/c
(Being the goodwill adjusted amongst the partners)
|
1,950
1,650
|
3,600
| |
B’s Capital A/c Dr.
To B’s Loan A/c
(Being the amount due to B transferred to his loan account)
|
18,525
|
18,525
|
Working Note:
A : B : C (Capital Ratio) = 18,000: 13,500: 9,000
= 4 : 3 : 2
Gaining Ratio (A : C) = (5/8 – 4/9) : (3/8 – 2/9)
= (45/72 – 32/72) : (27/72 – 16/72)
= 13/72 : 11/72 = 13 : 11
Now, B’s Share of goodwill = 10,800 x 3/9 = 3,600
A’s Contribution = 3,600 x 13/24 = 1,950
C’s Contribution = 3,600 x 11/24 = 1,650
Or.
Explain the issue of Shares at par, at a discount and at a premium.
Ans: Shares are divisions of the share capital of a company. There are two basic types of share capital based on the types of shares which can be issued by a company i.e. (a) preference shares and (b) equity shares. Shares of a company may be issued in any of the following three ways:
Ø At Par
Ø At discount
Ø At premium
When shares are issued and payable in installments then first installment is called as “application money”. Second installment is called as “allotment money “. Third installment is called as “first call money” and last installment is called as “Final call Money”.
Issue of Shares at par: When shares are issued at the face value means when the issue price is equal to the face value then it is called as the issue of shares at par.
Issue of shares at discount: When the shares are issued at a price lower than the face value, they are said to be issued at discount. Any company could not offer the shares at discount when it is a new company and it is a new class of shares even though of an old company. The discount on issue of shares is treated as a loss of capital nature.
Issue of Shares at Premium: When shares are issued at a price higher than the face value then it is called as the issue of shares at premium. The excess of issue price over the face value is the amount of premium. The premium on issue of shares is treated as revenue profits.
17. A, B and C were partners in a firm sharing profits in the ratio 5:3:2. On 31st March, 2013, their Balance Sheet was as follows:
Balance Sheet
Liabilities
|
Rs.
|
Assets
|
Rs.
|
Creditors
Reserves
Capital :
A = 30,000/-
B = 25,000/-
C = 15,000/-
|
11,000/-
6,000/-
70,000/-
|
Buildings
Machinery
Stock
Debtors
Cash at Bank
|
20,000/-
30,000/-
10,000/-
19,000/-
8,000/-
|
87,000/-
|
87,000/-
|
A died on 1st October, 2013. It was agreed between his executors and the remaining partners that:
(i) Goodwill to be valued at 2.5 years purchase of the average profits of the previous four years which were:
Year
|
Profit (Rs.)
|
2009 – 2010
2010 – 2011
2011 – 2012
2012 – 2013
|
13,000/-
12,000/-
20,000/-
15,000/-
|
(ii) Machinery and Building be valued at Rs. 28,000/- and Rs. 25,000/- respectively.
(iii) Profit for the year 2013 – 14 is taken as having accrued at the same ratio as that of the previous year.
(iv) Interest on capital is provided at 10% p.a.
(v) The mount due to A shall be transferred to his Executor’s Account.
Prepare A’s Capital Account as on the date of his death. 5
Solution:
A’s Capital A/c
Particulars
|
Amount
|
Particulars
|
Amount
|
To A’s executor’s A/c
|
58,500
|
By Balance b/d
By Revaluation A/c
By Interest on Capital
By P/L Suspense A/c
By B’s Capital A/c
By C’s Capital A/c
By Reserve A/c
|
30,000
1,500
1,500
3,750
11,250
7,500
3,000
|
58,500
|
58,500
|
Working Note:
(1) Interest on Capital = 30,000 x 10/100 x 6/12
= 1,500
(2) Profit of A = 15,000 x 5/10 x 6/12 = 3,750
(3) Goodwill = 13,000 + 12,000 + 20,000 + 15,000/4 x 2.5
= 60,000/4 x 25/10
=37,500
\A’s share of goodwill = 37,500 x 5/10 = 18,750
B’s share of goodwill = 37,500 x 3/10 = 11,250
C’s share of goodwill = 37,500 x 2/10 = 7,500
18. A and B are partners sharing profits in the ratio of 3:2. Their Balance Sheet as on 31.03.14 was as follows:
Balance Sheet
Liabilities
|
Rs.
|
Assets
|
Rs.
|
Capital :
A = 10,000/-
B = 2,000/-
General Reserve
Sundry Creditors
|
12,000/-
2,500/-
7,500/-
|
Sundry Assets
Profit & Loss A/c
|
17,000/-
5,000/-
|
22,000/-
|
22,000/-
|
The firm is dissolved on the above date. Assets are realised at Rs. 13,500/-. Dissolution expenses came to Rs. 250/-. Give journal entries to close the books of the firm. 5
Solution:
Journal Entries
In the books of the firm
Particulars
|
L/f
|
Amount Dr.
|
Amount Cr.
|
Realisation A/c Dr.
To Sundry Assets A/c
(Being the Sundry assets transferred to realisation A/c)
|
17,000
|
17,000
| |
Sundry Creditors A/c Dr.
To Realisation A/c
(Being the sundry creditors transferred to realisation A/c)
|
7,500
|
7,500
| |
Cash A/c Dr.
To Realisation A/c
(Being the sundry assets realised)
|
13,500
|
13,500
| |
Realisation A/c Dr.
To Cash A/c
(Being the creditors paid off)
|
7,500
|
7,500
| |
Realisation A/c Dr.
To Cash A/c
(Being the realisation expenses paid)
|
250
|
250
| |
General Reserve A/c Dr.
To A’s Capital A/c
To B’s Capital A/c
(Being the general reserve distributed between the partners)
|
2,500
|
1,500
1,000
| |
A’s Capital A/c Dr.
B’s Capital A/c Dr.
To Profit & Loss A/c
(Being the debit balance of P/L A/c distributed)
|
3,000
2,000
|
5,000
| |
A’s Capital A/c Dr.
B’s Capital A/c Dr.
To Realisation A/c
(Being the loss on realisation distributed between the partners)
|
2,250
1,500
|
3,750
| |
A’s Capital A/c Dr.
To Cash A/c
(Being the final payment made to the partners)
|
6,250
|
6,250
| |
Cash A/c Dr.
To B’s Capital A/c
(Being the cash realised from B)
|
500
|
500
|
19. Preety and Jyoty are partners in a firm sharing profits in the ratio of 3:2. The Trial Balance of the firm as on 31-03-2014 was as follows:-
Trial Balance
Particulars
|
Debit (Rs.)
|
Particulars
|
Credit (Rs.)
|
Debtors
Furniture
Machinery
Salaries
Insurance Premium on Machinery
Bad Debts
Cash in hand
Rent
Back charges
Carriage Outward
Depreciation on Furniture
Drawings :
Preety
Jyoty
|
10,000
10,000
31,000
13,200
1,200
200
10,400
6,000
420
1,450
1,000
4,000
2,500
|
Trading A/c
Bad debt recovered
Sundry receipts
Provision for bad debts
Commission
Creditors
Rent Payable
Bills Payable
Capital A/c :
Preety
Jyoty
|
41,120
600
1,000
800
250
10,000
200
2,400
20,000
15,000
|
91370
|
91,370
|
Prepare the Profit and Loss A/c and the Profit and Loss Appropriation A/c of the firm for the year ended on 31-03-14 and a Balance Sheet as on that date after considering the following adjustments: 8
(i) Machinery is to be depreciated by 10%.
(ii) Provision for bad debt is to be increased by Rs. 200/-.
(iii) Preety was to receive, salary @ Rs. 300/- per month.
(iv) Interest on Capital is allowed @ 5% p.a.
Solution:
Profit & Loss A/c
For the year ended on 31.3.2014
Particulars
|
Amount
|
Particulars
|
Amount
|
To Provision for b/d
To Depreciation on Machinery
To Salaries
To Insurance Premium on Machinery
To Provision for b/d (800+200)
To Rent
To Bank Charge
To Carriage Outward
To Depreciation on Furniture
To Net Profit
|
200
3,100
13,200
1,200
1,000
6,000
420
1,450
1,000
16,200
|
By Gross Profit
By Bad debt recovered
By Sundry receipts
By Provision for b/d (Old Provision)
By Commission
|
41,120
600
1,000
800
250
|
43,770
|
43,770
|
Profit & Loss Appropriation A/c
For the year ended on 31.3.2014
Particulars
|
Amount (Dr)
|
Particulars
|
Amount (Cr)
|
To Interest on Capital:
Preety = 20,000 x 5%
Jyoty = 15,000 x 5%
To Salaries
Preety (300 x 12)
To Share of Profit:
Preety = 10,850 x 3/5
Jyoty = 10,850 x 2/5
|
1,000
750
3,600
6,510
4,340
|
By Net Profit
|
16,200
|
16,200
|
16,200
|
Partner’s Capital A/c
Particulars
|
Preety
|
Jyoty
|
Particulars
|
Preety
|
Jyoty
|
To Drawings
To Balance c/d
|
4,000
27,110
|
2,500
17,590
|
By Balance b/d
By Interest on Capital
By Salaries
By P/L Appropriation A/c
|
20,000
1,000
3,600
6,510
|
15,000
750
-
4,340
|
31,110
|
20,090
|
31,110
|
20,090
|
Balance Sheet
As on 31.3.2014
Liabilities
|
Amount
|
Assets
|
Amount
|
Sundry Creditors
Rent Payable
Bills Payable
Capital Accounts:
Preety
Jyoty
|
10,000
200
2,400
27,110
17,590
|
Sundry Debtors 10,000
Less: Provision for b/d 1,000
Furniture
Machinery 31,000
Less: Depreciation @ 10% 3,100
Cash in hand
|
9,000
10,000
27,900
10,400
|
57,300
|
57,300
|
20. X Ltd. Issued 2,000 shares of Rs. 100/- each at a premium of Rs. 20 payable as follows:
Rs. 30/- on Application.
Rs. 50/- on Allotment (including securities premium Rs. 20/-)
Rs. 40/- on First Call & Final Call.
All the shares were duly subscribed for, called up and paid up, except Miss Nitu who holding 300 shares failed to pay First & Final call money. Show entries in the Cash Book and Journal of the company for the above transactions. 8
Solution:
Cash Book
Particulars
|
Amount
|
Particulars
|
Amount
|
To Share Application A/c
To Share Allotment A/c
To Share 1st & Final Call A/c
|
60,000
1,00,000
68,000
|
By Balance c/d
|
2,28,000
|
2,28,000
|
2,28,000
|
Journal Entries
In the books of the Company
Particulars
|
L/f
|
Amount Dr.
|
Amount Cr.
|
Share Application A/c Dr.
To Share Capital A/c
(Being the application money received on 2000 shares @ Rs. 30 each)
|
60,000
|
60,000
| |
Share Allotment A/c Dr.
To Share Capital A/c
To Securities Premium Reserve A/c
(Being the allotment money due on 2000 shares @ Rs. 50 each including Premium @ Rs. 20 per share)
|
1,00,000
|
60,000
40,000
| |
Share 1st and Final Call A/c Dr.
To Share Capital A/c
(Being the first & final call money due on 2000 shares @ Rs. 40 each)
|
80,000
|
80,000
| |
Calls-in-arrear A/c Dr.
To Share 1st and Final Call a/c
(Being the call money not received on 300 shares @ Rs. 40 each)
|
12,000
|
12,000
|
21. Give journal entries in respect of the following: 8
(i) Debentures issued at par, redeemable at a premium.
(ii) Debentures issued at a premium, redeemable at par.
(iii) Debentures issued at a discount, redeemable at par.
(iv) Debentures issued at a discount, redeemable at premium.
Solution:
Journal Entries
In the books of _______________
Particulars
|
L/f
|
Amount
|
Amount
| |
(i)
|
At the time of Issue
Bank A/c Dr.
Loss on Issue of Debentures A/c Dr.
To Debenture A/c
To Premium on Redemption of Debentures A/c
(Being the ___________ Debentures issued at par, but redeemable at a premium of ____)
| |||
At the time of redemption
Debentures A/c Dr.
Premium on redemption of Debentures A/c Dr.
To Bank A/c
(Being the ____________ Debentures redeemed at a premium of ____)
| ||||
(ii)
|
At the time of Issue
Bank A/c Dr.
To Debenture A/c
To Securities Premium Reserve A/c
(Being the ___________ Debentures issued at a premium of _______, but redeemable at par)
| |||
At the time of redemption
Debentures A/c Dr.
To Bank A/c
(Being the ___________ Debentures redeemed at par)
| ||||
(iii)
|
At the time of Issue
Bank A/c Dr.
Discount on issue of Debentures A/c Dr.
To Debenture A/c
(Being the ___________ Debentures issued at par, but redeemable at a premium of ______________)
| |||
At the time of redemption
Debentures A/c Dr.
To Bank A/c
(Being the ___________ Debentures redeemed at par)
| ||||
(iv)
|
At the time of Issue
Bank A/c Dr.
Loss on Issue of Debentures A/c Dr.
To Debenture A/c
To Premium on Redemption of Debentures A/c
(Being the ___________ Debentures issued at a discount of ____, but redeemable at a premium of ____)
| |||
At the time of redemption
Debentures A/c Dr.
Premium on redemption of Debentures A/c Dr.
To Bank A/c
(Being the ____________ Debentures redeemed at a premium of ____)
|
Or
What is meant by Redemption of Debentures? Discuss briefly any three methods of the Redemption of Debentures. 2+6=8
Ans: Refer Q.N. 15 (or), asked in 2012 Exam
22. Ram and Shyam are partners sharing profits and losses in the ratio of 3:1. Their Balance Sheet as on 31-03-2014 is given below:
Balance Sheet
As on 31-03-2014
Liabilities
|
Rs.
|
Assets
|
Rs.
|
Capital :
Ram = 60,000
Shyam 40,000
Reserve
Sundry Creditors
|
1,00,000
20,000
80,000
|
Plant & Machinery
Furniture
Stock
Debtors
Cash at Bank
|
50,000
10,000
70,000
15,000
55,000
|
2,00,000
|
2,00,000
|
Hari was admitted as a new partner on the following conditions:-
a) That Hari bring Rs. 40,000/- for his capital and Rs. 20,000/- for the premium.
b) That Hari will get 1/3rd share in future profit.
c) That the value of stock is be reduced by Rs. 7,000/-
d) That the value of Plant and Machinery is to be depreciated by 20%.
e) Furniture is to be reduced by 10%.
f) Bad debts amounted to Rs. 2,000/- and are to be written off.
g) There was an unrecorded computer valued at Rs. 10,000/- and the same is to be brought into books now.
Prepare a Pre-valuation Account, Partner’s Capital Account and the re-constituted Balance Sheet after Hari’s admission. 3+2+3=8
Solution:
Pre-Valuation A/c
Particulars
|
Amount
|
Particulars
|
Amount
|
To Stock A/c
To Plant & Machinery
To Furniture
To Sundry Debtors (Bad Debt)
|
7,000
10,000
1,000
2,000
|
By Computer
By Loss on Revaluation
Ram: 10,000 x 3/4 = 7,500
Shyam: 10,000 x 1/4 = 2,500
|
10,000
10,000
|
20,000
|
20,000
|
Partner’s Capital A/c
Particulars
|
Ram
|
Shyam
|
Hari
|
Particulars
|
Ram
|
Shyam
|
Hari
|
To Revaluation A/c
To Balance c/d
|
7,500
82,500
|
2,500
47,500
|
40,000
|
By Balance b/d
By Cash A/c
By Premium for
goodwill
By Reserve
|
60,000
15,000
15,000
|
40,000
5,000
5,000
|
40,000
|
90,000
|
50,000
|
40,000
|
90,000
|
50,000
|
40,000
|
Balance Sheet
As on 31.03.2014
Liabilities
|
Amount
|
Assets
|
Amount
|
Capital:
Ram: 82,500
Shyam: 47,500
Hari: 40,000
Creditors
|
1,70,000
80,000
|
Plant & Machinery 50,000
Less: Depreciation @ 20% (10,000)
Computer
Furniture 10,000
Less: Depreciation @ 10% (1,000)
Stock 70,000
Less: Depreciation @ 10% (7,000)
Debtors
Cash (55,000 + 40,000 + 20,000)
|
40,000
10,000
9,000
63,000
13,000
1,15,000
|
2,50,000
|
2,50,000
|
Working Note:
Let the Total share be 1
\Hari share = 1 – 1/3 = 2/3
\Ram’s new share = 3/4 x 2/3 = 6/12
Shyam new share = 1/4 x 2/3 = 2/12
\New Ratio = 6/12 : 2/12 : 1/3
= 6 : 2 : 4
= 3 : 1 : 2
\Sacrificing Ratio = 3/4 – 3/6 : 1/4 – 1/6
=( 9/12 – 6/12) : (3/12 – 2/12)
= 3/12 : 1/12
= 3 : 1
\Ram’s share of premium for goodwill = 20,000 x 3/4 = 15,000
Shyam’s share of premium for goodwill = 20,000 x 1/4 = 5,000
Or.
Who are the users of financial statement? Explain the information they require from financial statements. 3+5=8
Ans: Users of accounting information may be categorized into (1) Internal Users; and (2) External Users.
(1) Internal Users:
(i) Owners: Owners are always interested in knowing the profitability and financial strength of the company.
(ii) Management: It helps them in decision making as well as in controlling and self evaluation.
(iii) Employees and Workers: Employees and workers are entitled to bonus at the year end besides the salary and wages which is directly linked with the profits of the enterprise.
(2) External Users:
(i) Banks and Financial Institutions: Banks and Financial Institutions provide loans to the businesses. They watch the performance of the business to ensure the safety and recovery of the loan advanced.
(ii) Investors and Potential Investors: Investors uses financial statements to assess the earning capacity of the enterprise and ensure the safety of their investment.
(iii) Creditors: Creditors before granting credit wants to satisfy themselves about the creditworthiness of the business.
(iv) Government authorities: The government makes use of financial statements to compile national income accounts and other information.
(v) Consumers: Customers have an interest in information about the continuance of an enterprise.
