Thursday, February 01, 2018

AHSEC Class 12: Accountancy Solved Question Papers' 2017

2017 (ACCOUNTANCY)
Full Marks: 100
Pass Marks: 30, Time: Three Hours
1. (a) Fill in the blanks with appropriate word/words:                                      1x4=4
a)      Unrecorded assets when realized are credited to Realisation A/c
b)      When Partner’s Capital Accounts are fixed, their current Accounts are prepared.
c)       Partner’s Loan Account is paid before payment of partner’s capital.
d)      If a partner takes over a liability of the firm, the partner’s capital account is Credited.
(b) Choose the correct alternative:                                                                          1x2=2
                     i.            Financial Statements are
1)      Summarized reports of recorded facts.
2)      Detailed reports of the recorded facts.
3)      Summarized reports of only cash transactions.
4)      None of the above.
Ans. Summarized report of recorded facts
                   ii.            Financial Statements of a company include:
1)      Only Balance Sheet.
2)      Only Profit and Loss Account.
3)      Only Cash Flow Statement.
4)      All of the above.
Ans. All of the above
(c) State whether the following statements are true or false:                      1x2=2
a)      Financial analysis is used only by the creditors.  Ans. False
b)      The deceased partner’s executor is entitled to a share of profit for the period upto his/her death.Ans. True
2. What is a Capital Fund?                                           2
Ans: In case of non trading organisations, excess of assets over liabilities is called “Capital Fund”. The capital fund is built up out of surplus derived from income and expenditure account. It also includes donation, legacy and entrance fees to the extent capitalised.
3. Ram, Shyam and Hari are partners sharing profits in the ratio of 2:2:1. Hari retires. Ram and Shyam have decided to share future profits and losses in the ratio of 2:1. Calculate the gaining ratio.       2
Solution:
Ram : Shyam : Hari = 2 : 2 : 1 (Old Ratio)
Hari Retires; Ram : Shyam = 2 : 1 (New Ratio)
\Gaining Ratio (Ram : Shyam) = 2/3 – 2/5 : 1/3 – 2/5
= 10/15 – 6/15 : 5/15 – 6/15
= 4/15 : -1/15
\Gaining Ratio cannot be calculated.
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. Assam Tea Ltd. decided to forfeit 1,000 shares of Rs. 20/- each for non-payment of allotment money of Rs. 5/- each and 1st and final call money of Rs. 2/- each. Give journal entry for the forfeiture of shares.    2
Solution:
Journal
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 1,000 equity shares forfeited due to non payment of allotment and call money)

20,000

13,000
5,000
2,000
6. 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.
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
2)      Weighted average method: This method is a modified version of average profit method. In this method each year profit is assigned a weight i.e. 1, 2, 3, 4 etc. Thereafter each year profit is multiplied by the weight and find product. The total of products is divided by the total of weight. As a result we find the weighted average profit. After this the value of goodwill is calculated by multiplying the weighted average profit with the agreed number of year’s purchase. Thus the 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
7. What are the sources of Cash Flows as per AS-3 (Revised)?                     3
Ans: AS-3 requires a Cash Flow Statement to be prepared and presented in a manner that it shows cash flows from business transactions during a period classifying them into:
(i) Operating Activities; (ii) Investing Activities; and (iii) Financing Activities.
Examples of Operating Activities: 2013 (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.
Ø  Cash payments to suppliers of goods and services.
Ø  Cash payments to and on behalf of employees for wages, etc.
Examples of Investing Activities: 2013 (Sources of cash flow)
Ø  Cash payments to acquire fixed assets.
Ø  Cash receipts from the disposal of fixed assets (including intangibles).
Ø  Cash flow from purchase or sale of shares, warrants, or debt instruments of other enterprises.
Ø  Cash receipts from repayments of advances and loans made to third parties.
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.
Ø  Buy-back of equity shares.
Ø  Cash repayments of the amounts borrowed including redemption of debentures.
Or
From the following details, calculate Current Ratio:                                          3

Rs.
Sundry Debtors
Stock
Prepaid Expenses
Sundry Creditors
Bank Overdraft
Interest Payable
Debentures
Buildings
10,000/-
8,000/-
6,000/-
8,000/-
2,000/-
2,000/-
50,000/-
1,00,000/-
Solution:
Current Ratio = Current Assets/Current Liabilities
Current Assets = Sundry Debtors + Stock + Prepaid Expenses
= 10,000 + 8,000 + 6,000
= 24,000
Current Liabilities = Sundry Creditors + Bank Overdraft + Interest Payable
= 8,000 + 2,000 + 2,000
= 12,000
\ Current Ratio = 24,000/12,000 = 2 : 1
8. Explain the meaning of financial statements.                                                  3

Ans: Introduction: Financial statements are the summarized statements of accounting data produced at the end of accounting process by an enterprise through which accounting information are communicated to the internal and external users.
In the words of Myer,” The financial statements provide a summary of accounts of a business enterprise, the balance sheet reflecting the assets, liabilities and capital as on a certain date and income statement showing the result of operations during a certain period”.
Or
What is trend analysis? Mention its usefulness.                                                 1+2=3
Ans. Trend Analysis: Trend analysis is an important tool of horizontal financial analysis. This is helpful in making a comparative study of the financial statements for several years. Under this method trend percentages are calculated for each item of the financial statements taking the figure of base year as 100. The starting year is taken as the base year. The trend percentages show the relationship of each item with its preceding year’s percentages.
Merits of Trend analysis:
(i)        Trend percentages can be presented in the form of Index Numbers showing relative change in the financial statements during a certain period.
(ii)      Trend analysis will exhibit the direction to which the concern is proceeding.
(iii)    The trend ratio may be compared with the industry, in order to know the strong or weak points of a concern.
9. What is Common Size Statement? What do they show?                            1+2=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.
(iii)    These statements help the management in making forecasts for the future.
Or
Explain any one 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
10. State any three features of Receipts and Payments Account.                               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 relate to i.e. previous/current/next year.
d)      It records cash transactions both of revenue nature and capital nature.
e)      Like any other account it begins with opening balance and ends with closing balance.
Or
Explain the meaning of Fund-based Accounting.                                               3
Ans: In fund based accounting separate accounts are maintained for specific activities of the organisation such as sports fund, price fund etc. All items related the specific funds are recorded fund wise and consolidation of these statements or accounts are presented in the financial results.
11. Mention any three limitations of Financial Statements.                        1x3=3
Ans: Refer Q.N. 16 (or) , asked in 2012 exam
12. Guwahati Sports Club has a Cash and Bank balances of Rs. 5,000/- and Rs. 10,000/- respectively on 01/04/2015. From the following details, prepare a Receipts and Payments Account for the year ended 31/03/2016:                       5

Rs.
Entrance fees received
Donation received
Donation received for Building
Computer purchased
Salary paid
Repair to Building
Rent received
Wages paid
Outstanding salaries
Depreciation on Furniture
Maintenance Grant received
Subscription received
Life Membership Fees received
Cash in hand on 31/03/2016
8,000/-
10,000/-
10,000/-
12,000/-
5,000/-
6,000/-
5,000/-
3,000/-
2,800/-
13,000/-
8,000/-
10,000/-
10,000/-
40,000/-
Solution:
Receipts & Payments A/c of Guwahati Sports Club
For the year ended 31/03/2016
Receipt
Amount
Payment
Amount
To Balance b/d
Cash
Bank
To Entrance fees
To Donation received
To Donation received for Building
To Rent received
To Maintenance grant
To Subscription received
To Life Membership fee received

5,000
10,000
8,000
10,000
10,000
5,000
8,000
10,000
10,000
By Computer Purchased
By Salary paid
By Repair to Building
By wages paid
By Balance c/d
Cash
Bank (Bal. fig)
12,000
5,000
6,000
3,000

40,000
10,000

76,000

76,000
Or
Mention any five distinctions between Receipts and Payments Account and Income and Expenditure Account.    5
Ans: Refer Q.N. 12 (or), asked in 2012 exa
13. From the following information, ascertain “Cash Flow from Investing Activities”:

Rs.
Land and Buildings purchased during the year
Additional furniture purchased during the year
Investments purchased
Investments sold
Loss on Sale of Investments
Plant and Machinery sold during the year
Dividend received
Interest received
Sale of land
Profit on Sale of land
2,00,000/-
50,000/-
50,000/-
1,00,000/-
5,000/-
40,000/-
15,000/-
20,000/-
3,00,000/-
1,50,000/-
Solution:
Cash Flow Investing Activities
Particulars
Amount
Purchase of Land & Building
Additional Purchase of Furniture
Investments Purchased
Investment Sold
Sale of Plant & Machinery
Dividend Received
Interest Received
Sale of Land
(2,00,000)
(50,000)
(50,000)
1,00,000
40,000
15,000
20,000
3,00,000
Cash Flow From Investing Activities
1,75,000
Or
Explain the meaning of Cash Flow Statement. Mention any three objectives of Cash Flow Statement.          2+3=5
Ans. Refer Question No. 18 (or), of 2012
14. From the following information, calculate (i) Current Assets (ii) Current Liabilities and (iii) Quick Ratio.                  5
                Working Capital = Rs. 40,000/-
                Current Ratio = 2:1
                Stock = Rs. 30,000/-
Solution:
Current Ratio = Current Assets/Current Liabilities
Þ 2/1 = Current Assets/Current Liabilities
Þ Current Assets = 2 x Current Liabilities
And,
Working Capital = Current Assets – Current Liabilities
Þ 40,000 = 2 x Current Liabilities – Current Liabilities
Þ Current Liabilities = 40,000
\ Current Assets = 2 x Current Liabilities
= 2 x 40,000
= 80,000
Quick Ratio = Quick Assets/Quick Liabilities
Quick Assets = Current Assets – Stock
= 80,000 – 30,000
= 50,000
\ Quick Liabilities = Current Liabilities
\ Quick Ratio = 50,000/40,000 = 5 : 4
Or
What do you mean by Activity Ratios? Explain the method of calculating any one of Activity Ratios.          2 ½ +2 ½=5
Ans. Efficiency or turnover or activity Ratios: These ratios are calculated to study the efficiency with which the resources of the unit have been used. For example: Inventory turnover ratio, debtor’s turnover ratio, creditor’s turnover ratio and fixed assets turnover ratios are covered under this group.
Some of the useful ratios are explained below:
A. Current Ratio: Current ratio is calculated in order to work out firm’s ability to pay off its short-term liabilities. This ratio is also called working capital ratio. This ratio explains the relationship between current assets and current liabilities of a business. It is calculated by applying the following formula:
Current Ratio = Current Assets/Current Liabilities
Current Assets include Cash in hand, Cash at Bank, Sundry Debtors, Bills Receivable, Stock of Goods, Short-term Investments, Prepaid Expenses, and Accrued Incomes etc.
Current Liabilities includes Sundry Creditors, Bills Payable, Bank Overdraft, Outstanding Expenses etc.
15. The Balance Sheet of Ram, Shyam and Hari who were sharing profits in proportion to their capital stood as follows on 31st March, 2016:
Balance Sheet
Liabilities
(Rs.)
Assets
(Rs.)
Sundry Creditors
Capital Account:
     Ram:              20,000/-
     Shyam:          20,000/-
     Hari:               10,000/-
10,000



50,000
Cash at Bank
Sundry Debtors
Stock
Investments
Buildings
5,000
6,000
9,000
10,000
30,000

60,000

60,000
Shyam retired on the above date on the following terms and conditions:
a)      That stock be depreciated by Rs. 1,000/-
b)      That Building be appreciated by 20%.
Pass the necessary journal entries and prepare the opening Balance Sheet of the new firm.                                        5
Solution:
Journal Entries
In the books of the Firm
Particulars
L/f
Amount Dr.
Amount Cr.
Revaluation A/c                                                                              Dr.
To Stock A/c
(Being stock revalued)

1,000

1,000
Building A/c                                                                                     Dr.
To Revaluation A/c
(Being Building revalued)

6,000

6,000
Revaluation A/c                                                                              Dr.
To Ram’s Capital A/c
To Shyam’s Capital A/c
To Hori’s Capital A/c
( Being revaluation profit transferred)

5,000

2,000
2,000
1,000
Shyam’s Capital A/c                                                                       Dr.
To Shyam’s Loan A/c
( Being shyam’s capital account balance transferred to shyam’s loan a/c)

22,000

22,000
Balance Sheet
As on 31-3-2016
Liabilities
Amount
Assets
Amount
Capital:
Ram’s Capital :                20,000
Add: Revaluation              2,000
Hori’s Capital                 10,000
Add: Revaluation            1,000
Shyam’s Loan A/c
Sundry Creditors


22,000

11,000
22,000
10,000
Cash at Bank
Sundry Debtors
Stock                                           9,000
Less: Depreciation                  (1,000)
Investments
Building
5,000
6,000

8,000
10,000
36,000

65,000

65,000
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.
16. A, B and C were partners in a firm sharing profits in the ratio of 3:2:1. Their Balance Sheet as on 31/03/16 was as follows:
Liabilities
(Rs.)
Assets
(Rs.)
Sundry Creditors
Capital Account:
     A:       =       20,000/-
     B:       =       10,000/-
     C:       =       20,000/-
4,000



50,000
Buildings
Machinery
Stock
Debtors
Cash at Bank
20,000
16,000
4,000
15,000
5,000

60,000

60,000
A died on 30/09/2016. Under the agreement, the executors of the deceased partner were entitled to:
a)      Amount outstanding to the credit of partner’s capital account.
b)      Interest on capital at 12% per annum.
c)       Share of goodwill on the basis of four year’s purchase of the average profit of last three years.
d)      Share of profit from closing of the last financial year to the date of death on the basis of last year’s profit.
e)      Profits for the last three years were:
Year
Profits
2013-14
2014-15
2015-16
8,000/-
12,000/-
7,000/-
Prepare A’s capital Account on the date of his death.                                                                                                                      5
Solution:
A’s Capital A/c
Particulars
Amount
Particulars
Amount
To A’s executor’s A/c
43,950
By Balance b/d
By Interest on Capital
By B’s Capital A/c
By C’s Capital A/c
By Profit & Loss Suspense A/c
By Reserves A/c
20,000
1,200
12,000
6,000
1,750
3,000

43,950

43,950
Working Note:
1. Interest on Capital = 20,000 x 6/12 x 12/100 = 1,200
2. Average Profit = 8,000 + 12,000 + 7,000/3 = 27,000/3 = 9,000
\Goodwill = 9,000 x 4 = 36,000
\Gaining Ratio = 2/3 – 2/6 : 1/3 – 1/6
= 4 – 2/6 : 2 – 1/6
= 2/6 : 1/6
\Goodwill of B = 36,000 x 2/6 = 12,000
\Goodwill of C = 36,000 x 1/6 = 6,000
3. Profit of A = 7,000 x 3/6 x 6/12 = 1,750
4. Reserve of A = 6,000 x 3/6 = 3,000
Or
How would you compute the amount due to a retiring partner or the executors of a deceased 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.
17. Akash and Bikash are partners sharing profits in the ratio of 3:2. Their Balance Sheet as on 31/03/2016 was as follows:
Balance Sheet
Liabilities
(Rs.)
Assets
(Rs.)
Capital:
      Akash =   12,000/-
      Bikash =    8,000/-
General Reserve
Sundry Creditors


20,000
10,000
10,000
Sundry Assets
40,000
40,000

40,000

The firm is dissolved on the above date. Assets are realized at Rs. 60,000/- Dissolution expenses came to Rs. 2,000/- 5
Solution:
Journal Entries
In the books of the firm
Particulars
L/f
Amount Dr.
Amount Cr.
Realisation A/c                                                                              Dr.
To Sundry Assets
( Being sundry assets transferred to realisation account))

40,000

40,000
Sundry Creditors A/c                                                                   Dr.
To Realisation A/c
( Being sundry Creditors transferred to realisation account)

10,000

10,000
Cash A/c                                                                                         Dr.
To Realisation A/c
(Being Assets  realized )

60,000

60,000
Realisation A/c                                                                              Dr.
To Cash A/c
( Being creditors paid )

10,000

10,000
Realisation A/c                                                                             Dr.
To Cash A/c
( Being dissolution expenses paid)

2,000

2,000
General Reserve A/c                                                                    Dr.
To Akash’s Capital A/c
To Bikash’s Capital A/c
( Being General reserve transferred to capital A/c)

10,000

6,000
4,000
Realisation A/c                                                                              Dr.
To Akash’s Capital A/c
To Bikash’s Capital A/c
( Being realisation profit transferred)

18,000

10,800
7,200
Akash’s Capital A/c                                                                    Dr.
Bikash’s Capital A/c                                                                    Dr.
To Cash A/c
(Being final payment made to the partners)

28,800
19,200


48,000
Or
Explain any five distinctions between Revaluation Account and Realisation Account.                                                        5
Ans. Difference between Revaluation Account and Realisation Account
Basis
Revaluation Account
Realisation Account
Meaning
Revaluation account is prepared in order to work out the profit or loss on revaluation of assets and liabilities.
Realisation account is prepared to work out the profit or loss on realisation of assets and payment to liabilities.
Preparation
Revaluation account is prepared at the time of admission, retirement of death of a partner.
Realisation account is prepared at the time of dissolution of a partnership firm.
Closing of accounts
After preparing the revaluation account the firm’s business gets going with the same set of books.
After preparation of Realisation account the firms business comes to an end.
Remaining balance
Balance of this account is transferred to the capital account of old partners.
Balance of this account is transferred to the capital account of all partners.
Accounting entries
Entries are based on the difference between the book value and the revalued amount of assets and liabilities.
Entries are based on the book value of assets and liabilities.
18. What do you mean by preliminary expenses? Mention the items which are usually included in the list of preliminary expenses.                                                           2+3=5
Ans. Preliminary Expenses: Expenses incurred to the formation of a company are called ‘Preliminary Expenses’. Preliminary expenses include the following - Expenses incurred in order to get the company registered, Expenses incurred for the preparation, printing and issue of prospectus, Cost of preliminary books and Common Seal, Duty payable on Authorized Capital, Underwriting Commission etc.
Preliminary Expenses are to be written off out Securities Premium Account or it may be written off out of the Profit & Loss A/c gradually over some period. The balance left of preliminary expenses is to be shown in the asset side of the balance sheet of the company under the heading of ‘Other non-current assets’.              
Or
Give the new format of the Balance Sheet of a company (main headings only) as per the requirements of the revised Schedule-VI of the Companies Act.                                         5
Ans: Refer Q.N. 16 , asked in 2012 exam
19. Following is the Trial Balance of ANIMA and PRATIMA as on 31st March, 2016:                            8
Trial Balance
Particulars
(Rs.)
Particulars
(Rs.)
Machinery
General Expenses
Furniture
Salaries
Cash in hand
Investments
Cash at Bank
Bad debt
Sundry Debtors
Buildings
Publicity
50,000
5,000
10,000
20,000
5,000
12,000
8,000
2,000
40,000
50,000
8,000
Capital:
      ANIMA           =      60,000
      PRATIMA       =      40,000

Trading Account
-          Gross Profit

Sundry Creditors
Commission


1,00,000


90,000

10,000
10,000

2,10,000

2,10,000
Prepare the Profit & Loss Account and the Profit & Loss Appropriation Account of the firm for the year ended 31st March, 2016 and a Balance Sheet as on that date after taking into consideration the following additional information:
a)      Depreciate Machinery @ 10% per annum.
b)      Partners will get interest on capital @ 10% per annum.
Solution:
Profit & Loss A/c of the firm
For the year ended on 31-3-2016
Particulars
Amount
Particulars
Amount
To General Exp.
To Salaries
To Bad debts
To Publicity
To Depreciation on Machinery
To Net Profit
5,000
20,000
2,000
8,000
5,000
60,000
By Gross Profit
By Commission
90,000
10,000

1,00,000

1,00,000
Profit & Loss Appropriation A/c
For the year ended on 31-3-2016
Particulars
Amount
Particulars
Amount
To Interest on Capital
Anima: 60,000 x 10/100
Pratima: 40,000 x 10/100
To Share of Profit
 Anima: 50,000 x ½   = 25,000
Pratima: 50,000 x ½ = 25,000

6,000
4,000


50,000
By Net Profit
60,000

60,000

60,000
Balance Sheet of the Reconstituted firm
As on 31-3-2016
Liabilities
Amount
Assets
Amount
Capital:
Anima:                                     60,000
Add: Interest on Capital         6,000
Add: Share of Profit              25,000

Pratima:                                  40,000
Add: Interest on Capital        4,000
Add: Share of Profit             25,000
Sundry Creditors



91,000



69,000
10,000
Machinery                                50,000
Less: Depreciation                   (5,000)

Furniture
Cash in hand
Investments
Cash at Bank
Sundry Debtors
Buildings

45,000

10,000
5,000
12,000
8,000
40,000
50,000

1,70,000

1,70,000
20. NE Traders Ltd. issued 5,000 shares of Rs. 20/- each at a par payable as follows:
                Rs. 5/- on Application
                Rs. 5/- on Allotment
                Rs. 5/- on First Call
                Rs. 5/- on Second and Final Call
All the shares were duly subscribed for, called up and paid up. Show the necessary entries in 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 Call A/c
 To Share 2nd & Final Call A/c
25,000
25,000
25,000
25,000
By Balance c/d

1,00,000

1,00,000

1,00,000
Journal Entries
In the Books of NE traders LTd
Particulars
L/f
Amount Dr.
Amount Cr.
Share Application A/c                                                                                               Dr.
To Share Capital A/c
( Being the application money transferred)

25,000

25,000
Share Allotment A/c                                                                                                  Dr.
To Share Capital A/c
( Being Allotment money  due)

25,000

25,000
Share 1st Call A/c                                                                                                        Dr.
To Share Capital A/c
( Being the Share 1st Call due)

25,000

25,000
Share 2nd & Final Call A/c                                                                                          Dr.
To Share Capital A/c
(Being the Share 2nd & Final Call due)

25,000

25,000
Or
Write short notes:                                           2x4=8
a)      Minimum Subscription.
Ans. It means the minimum amount that, in the opinion of directors, must be raised to meet the needs of business operations of the company. AS per SEBI guidelines, the minimum subscription of capital cannot be less than 90% of the issued amount.
b)      Authorised share Capital.
Ans. Authorized Capital: This is the amount of the capital which is stated in Memorandum of Association and with which the company is registered. Nominal capital is the maximum amount which the company is authorised to raise from the public.
c)       Reserve Capital.
Ans. Reserve Capital: A company may by special resolution determine that any portion of its share capital which has not been already called up shall not be capable of being called-up, except in the event of winding up of the company. Such type of share capital is known as reserve-capital.
d)      Preference share.
Ans. Preference Share: According to Sec. 43 (a) of the Companies Act 2013, a share that carries the following two preferential rights is called ‘Preference Share’ i.e. preferential rigts in respect to payment of dividend and preferential rights in respect to repayment of capital.
21. Give the journal entries in respect of the following:                                                  8
a)      Debentures issued at par, redeemable at a premium.
b)      Debentures issued at a premium, redeemable at par.
c)       Debentures issued at a discount, redeemable at par.
d)      Debentures issued at a discount, redeemable at premium.
Solution:
Journal Entries
In the books of _______________

Particulars
L/f


(a)
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 ____)



(b)
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 _______)




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



(c)
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)



(d)
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
Explain the different methods of redemption of debentures.                                   8
Ans: Refer Q.N. 15 (or), asked in 2012 Exam
22. Ram and Shyam are partners in a firm sharing profits and losses in the ratio of 3:1. Their Balance Sheet as on 1st April, 2016 was us under:
Balance Sheet
Liabilities
(Rs.)
Assets
(Rs.)
Sundry Creditors
Reserve
Capital:
      Ram       =     30,000/-
      Shyam   =     24,000/-
12,000
9,000


54,000
Cash at Bank
Goodwill
Sundry Assets
6,000
12,000
57,000

75,000

75,000
On that date, Barun was admitted as a new partner. He paid Rs. 30,000/- towards his capital, but was unable to bring his share of Goodwill of Rs. 6,000/- in cash. The new profit sharing ratio was agreed to be 3:2:2. Pass Journal entries in the books of the new firm and show the Balance Sheet of the new firm.                                       8
Solution:
Journal Entries
In the books of the Firm
Particulars
L/f
Amount Dr.
Amount Cr.
Cash A/c                                                                                           Dr.
To Barun’s Capital A/c
(Being the Capital and Premium for Goodwill brought in cash)

30,000

30,000
Barun’s Capital A/c                                                                             Dr.
Shyam’s Capital A/c                                                                            Dr.
To Ram’s Capital A/c
(Being the goodwill adjusted amongst the partners)

6,000
750


6,750
Reserve A/c                                                                                          Dr.
To Ram’s Capital A/c
To Shyam’s Capital A/c
(Being the reserve distributed between the partners)

9,000




6,750
2,250

Ram’s Capital A/c                                                                                Dr.
Shyam’s Capital A/c                                                                            Dr.
To Goodwill A/c
(Being the goodwill written off)

9,000
3,000


12,000
Balance Sheet of the New firm
As on ___________
Liabilities
Amount
Assets
Amount
Capital:
Ram:                   34,500
Shyam:               22,500
Barun:                24,000
Sundry Creditors



81,000
12,000
By Cash at Bank (6,000 + 30,000)
By Sundry Assets
36,000
57,000

93,000

93,000
Working Note
Sacrificing Ratio = (3/4 – 3/7): (1/4 – 2/7)= (21/28 – 12/28) : (7/28 – 8/28) =9/28 : -1/28
Goodwill of Ram = 9/8 x 6,000 = 6,750
Goodwill of Shyam = 1/8 x 6,000 = 750
Or
What do you mean by debenture? Explain any six points of distinctions between shares and debentures.         2+6=8
Ans: Meaning of Debentures: According to Sec. 2 (30) of the companies Act, 2013, debentures include “debenture stock, bonds and any other securities of a company evidencing a debt, whether constituting a charge on the assets of the company or not.
Debentures are debt instruments issued by a joint stock company. Amounts collected by way of debentures form part of the loan capital of a company. They are repayable after a fixed period. Debenture holders get interest on their debentures. They are creditors of the company. They do not get dividend. Only shareholders get dividend.
 Difference between Shares and Debentures
Basis of Difference
Shares
Debentures
a)            Ownership
Shareholders are the owners of the Company.
Debenture holders are the Creditors of the Company.
b)            Repayment

Normally, the amount of share is not returned during the life of the company.
Debentures are issued for a definite period.
c)             Convertibility
Shares cannot be converted into debentures.
Debentures can be converted into shares.
d)            Restrictions
There are legal restrictions to be fulfilled to issue shares at a discount.
There are no restrictions on the issue of debentures at a discount.
e)             Forfeiture
Shares can be forfeited for non-payment of allotment and call monies.
Debentures cannot be forfeited for non-payment of call monies.


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