AHSEC Class 12: Accountancy Solved Question Papers' 2019 | AHSEC | SOLVED QUESTION PAPERS

AHSEC ACCOUNTANCY SOLVED QUESTION PAPERS
2019 (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 / words:           1x4=4

1)      The liability of every shareholder of a company is LIMITED.           1

2)      Outstanding Subscription is shown on the assets side of the Balance Sheet.    1

3)      If a partner takes over a liability of the firm, that partner’s capital account is credit.  1

4)      Current ratio is the relationship between current assets and current liabilities.   1

(b) Choose the correct alternative:        1x2=2

1)      Annual Report is issued by a company to its:

a)      Directors.

b)      Auditors.

c)       Shareholders.

d)      Management.

2)      Financial statement of a company include:

a)      Only Cash Flow Statement.

b)      Only Profit and Loss Account.

c)       Only Balance Sheet.

d)      All of the above.

(c) State whether the following statements are ‘True’ or ‘False’:

1)      The deceased partner is entitled to a share of profit for the period upto his death.  1  True

2)      Profit or Loss on revaluation of assets and liabilities is distributed among old partners in sacrificing ratio.  1 False, It is divided between old partners in old ratio.

2. Give two distinctions between a not-for-profit organization and a trading organization.  2

Ans: Difference between Not – for profit organisation and Profit earning organisation

Basis	Not-For-Profit Organization	Profit motive Organization
1.    Motive	Main Motive is to provide services to the society.	Main Motive is to earn profits by selling goods and services.
2.    Source of Revenue	Main sources of revenue are donations, subscriptions, grant-in-aid etc.	Main source of revenue is sale of goods and services.
3.    Distribution of profit	Surplus is added with the capital fund.	Profits is transferred to sole proprietor’s capital account or distributed amongst the partners.

 3. A and B are two partners sharing profits and losses in the ratio of 3 : 2. C admitted as a new partner for 3/10^th share which he acquires 2/10^th from A and 1/10^th from B. Calculate new profit sharing ratio.       2

Ans:

Or

Give two conditions under which a partnership firm is dissolved.

Ans: The Indian Partnership Act, 1932 provides that a partnership firm may be dissolved in any of the following modes:

(i) Dissolution by agreement: A firm may be dissolved with the consent of all the partners. A partnership is set up by an agreement; similarly, it can be dissolved by an agreement.

(ii) Dissolution by Notice of Partnership at Will: Where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm. The firm is dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice.

4. Mention any two features of a debenture.     2

Ans: The characteristics/features 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. What is the meaning of Cash Flow from Investing Activities?         2

Ans: The investing activities of a business include all cash flow arises due to acquisition and disposal of long term assets (whether tangible and intangible) and investments. Acquisition or disposal of companies also comes under investing activities. These are separately discloses in cash flow statement.

6. What is meant by “super profit” in relation to valuation of goodwill?     2

Ans: Super Profits means excess of actual average maintainable profits over normal Profit of a firm. Normal profits mean the profit which the firms could normally earns in a particular business. It is calculated by multiplying capital employed in the firm with normal rate of return. Goodwill under this method is calculated by multiplying super profit with the agreed number of year’s purchase.

7. Mention three objectives of preparing financial statements.    3

Ans: Objectives of Financial Statements:                            

a)      To provide information about economic resources and obligations of a business.

b)      To provide information about earning capacity of the business.

c)       To provide reliable information about the changes in economic resources.

8. Calculate liquid ratio from the following information:    3

Ans:

Or

What is Comparative Statement? Mention two objectives of preparing Comparative Statement.   1+2=3

Ans: Comparative Financial Statements: Financial statements are prepared for a particular period to show the operating efficiency and financial position of a concern. But comparative financial statements compare figures of financial statements of two or more periods to show the changes in absolute terms and in terms of percentage.

Objectives of comparative statement:

(i)     To identify the size and direction of changes in financial position of an enterprise.

(ii)   To ascertain the weakness and soundness about liquidity, profitability and solvency of an enterprise.

9. What are contingent liabilities? Mention any two items.           1+2=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

Explain the average profit method of valuation of goodwill.             3

Ans: Average Profits Method: In this method, Actual maintainable profits of business over a number of years are taken into account. Actual maintainable profits earned over a number of years are totalled and average is determined by dividing total with number of years. The average profits so determined are multiplied by the number of year’s purchases to arrive at the value of goodwill.

For calculation of goodwill following steps are to be followed

1.       Calculate Actual maintainable profits with the help of following formula. Actual maintainable profits = Net Profit + Abnormal loss – Abnormal Gain – regular business expenses not considered in accounts.

2.       Calculate Average maintainable Profit = Total Actual maintainable profits /no of years.

3.       Calculate goodwill = Average maintainable Profit x no. of year’s purchase

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ALSO READ (AHSEC ASSAM BOARD CLASS 12):

1. AHSEC CLASS 12 ACCOUNTANCY CHAPTERWISE NOTES

2. AHSEC CLASS 12 ACCOUNTANCY IMPORTANT QUESTION (THEORY)

3. AHSEC CLASS 12 ACCOUNTANCY IMPORTANT QUESTION BANK (PRACTICAL)

4. AHSEC CLASS 12 ACCOUNTANCY PAST EXAM PAPERS (FROM 2012 TILL DATE)

5. AHSEC CLASS 12 ACCOUNTANCY SOLVED QUESTION PAPERS (FROM 2012 TILL DATE)

6. AHSEC CLASS 12 ACCOUNTANCY CHAPTERWISE MCQS

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10. Calculate amount of medicines consumed to be shown in the Income and Expenditure A/c for the year ended 31-12-2018:                     3

	01-01-2018	31-12-2018
Stock of Medicines Creditors for Medicines	3,000 2,000	500 1,300

Amount paid for medicines during 2018 was Rs. 10,800/-

Ans: Calculation of Medicine Consumed during the year

Particulars	(Rs.)
Amount paid for medicine during 2018 Add: Opening Stock of Medicine Less: Closing Stock of Medicine Less: Creditors for Medicine in the beginning Add: Creditors for Medicines at the end	10,800 3,000 500 2,000 1,300
Medicine Consumed during the year	12,600

Or

Mention any three distinctions between Receipts and Payments A/c and Income and Expenditure A/c.               3

Ans: Difference between Receipts and Payments Account and Income and Expenditure Account

Basic	Receipt and Payment Account	Income and Expenditure Account
1. Nature	It is a Real Account in nature.	It is nominal Account in nature.
2. Recording	All receipts and payments are recorded in this account whether these are of revenue nature or capital nature.	It includes only revenue items whether cash or non-cash but capital items are not shown in income and expenditure account.
3. Period of items	All cash receipts and payments are recorded in this account whether these belong to current year or next year or previous year.	All incomes and expenses of present year only are recorded in this account.
4. Non cash items	It ignores non-cash items like depreciation, credit purchase, credit sales etc.	It records non-cash items of revenue nature.

 11. Mention any three limitations of Financial Statements.      3

Ans: Limitations of financial statements: Financial Statements suffers from various limitations which are given below:

(i)     Historical Records: The information given in these statements is historic in nature and does not reflect the future.

(ii)   It Ignores Price Level Changes: Business transactions and events are recorded at historical cost and changes in prices over the years are ignored.

(iii) Qualitative aspect Ignored: Financial statements considered only those items which can be expressed in terms of money. Financial Statements ignores the qualitative aspect.

(iv)  Not free from Bias: Financial statements are largely affected by the personal judgments of the accountant.

Or

Write three objectives of preparing Realization Account.            3

Ans: The main objectives of preparing realisation account are:                

1) To close all the books of account at the times of dissolution of the firm.

2) To record all the transactions relating to the sale of assets and payment of liabilities.

3) To determine profit or loss due to the realisation of assets and liabilities.

12. North East Club had a Cash balance of Rs. 20,000/- and Bank balance of Rs. 35,000/- respectively on 01/04/2017. From the following details prepare a Receipts and Payments A/c for the year ended 31/03/2018:                        5

Particulars

(Rs.)

Subscription Received:                        (Rs.) 2016-17                                      30,000 2017-18                                   2,25,000 2018-19                                      10,000 Donation for Building Entrance Fee Life Membership Fee Printing and Stationery Lighting Expenses Rent and Taxes Paid Telephone Charges Postage Salaries Insurance Interest Received Locker Rent Received Purchase of Furniture Cash in hand as on 31-03-2018

2,65,000 60,000 23,000 20,000 38,750 26,250 17,000 2,600 2,000 88,000 15,000 18,000 42,000 2,00,000 23,400

Ans:

Receipts and Payment A/c of North east club

For the year ended on 31-03-2018

Receipts	Amount	Payment	Amount
To Opening Balance -          Cash -          Bank To Subscription         2016-17=30,000         2017-18=2,25,000         2018-18=10,000 To Donation for Building To Entrance fees To Life Membership fees To Interest received To Locker rent received	20,000 35,000       2,65,000 60,000 23,000 20,000 18,000 42,000	By Printing & Stationery By Lighting Expenses By Rent & taxes paid By Telephone charges By Postage By Salaries By Insurance By Furniture By Closing Balance -          Cash -          Bank	38,750 26,250 17,000 2,600 2,000 88,000 15,000 2,00,000   23,400 70,000
	4,83,000		4,83,000

Or

Explain in brief the treatment of the following items in preparation of Income and Expenditure Account:          5

1)      Subscription.

2)      Life Membership Fee.

3)      General Donation.

4)      Specific Donation.

5)      Legacy.

(1) Subscription: Since it is a major source of income of the non-trading concern and is recurring in nature, therefore shown on the credit side of income and expenditure account. Subscription to be shown in income and expenditure account or subscription received during the year to be shown in receipts and payments account is calculated by preparing subscription account.

(2) Life membership fee: Only recurring receipts (revenue receipt) are treated as income but life membership is non-recurring in nature. Therefore, the life membership fees is capitalized and added with capital fund in balance sheet but not shown in income and expenditure account. 

(3) General donation: It is a donation which is received not for some specific purpose. It can be of two types:

(i) General donation of big amount: It is treated as capital receipt. It is debited to receipts and payments account but not shown in income and expenditure account.

(ii) General donation of small amount: It is treated as revenue receipt. It is debited to receipts and payments account and shown as income in income and expenditure account.

(4) Specific donation: It is a donation received for a specific purpose. Examples of such donations are: donation for library, donation for building, etc. It is treated as capital receipt. It is debited to receipts and payments account but not shown in income and expenditure account.

(5) Legacy: It is the amount which is received by organisations as per the will of a deceased person. It is treated as a capital receipt and hence debited to receipts and payments account. It is recorded in Receipts and payments account but not considered as income because it is non-recurring in nature. It is added with capital fund. However, legacy of small amount may be considered as income. 

13. What is Cash Flow Statement? Explain its three limitations.               2+3=5

Ans: Cash Flow Statement:  Cash­ flow is made up of two words i.e. Cash and Flow, whereas Cash means cash balance in hand including cash at bank, and Flow means changes (which may be increase or decrease) in the cash movements of the business. So, Cash Flow Statement is a statement which shows the movement of cash and cash equivalents over a particular period of time and also analyses the reasons for changes in balance of cash in hand and at bank between two accounting period. It shows the inflows and outflows of cash and cash equivalents.

LIMITATIONS OF CASH STATEMENT

Though the Cash Flow Statement is a very useful tool of financial analysis, it has its limitations which must be kept in mind at the time of its use. These limitations are:

a)      Non-cash Transactions are ignored: Cash flow statement is prepared on cash basis. It shows only inflows and outflows of cash. It does not show non-cash transactions like the purchase of buildings by the issue of shares or debentures to the vendors or issue of bonus shares or depreciation which largely affect the results and position of the business.

b)      Historical in Nature:  It rearranges the existing information available in the income statement and the balance sheet. It is historical in nature. It will become more useful if it is accompanied by the projected Cash Flow Statement.

c)       Ignorance:  It is prepared on cash basis of accounting. It ignores basic accounting concept, i.e., accrual concept.

Or

From the following information calculate the cash from operating activities:                    

	2016 (Rs.)	2017 (Rs.)
Profit and Loss A/c Bills Receivable Provision for Depreciation Outstanding Wages Prepaid Insurance Goodwill Provision for Doubtful Debts Debtors Cash and Bank Balance	3,00,000 20,000 60,000 18,000 6,000 40,000 10,000 1,20,000 30,000	2,50,000 18,000 80,000 15,000 9,000 32,000 14,000 80,000 25,000

Ans:

Calculation of Cash flow from operating activities:

Particulars	Amount
Net for the year loss Add:- Non – Cash & non – operating expenses & loss                  Depreciation                  Goodwill written off   Effect of Working Capital change                 Decrease in B/R                 Decrease in outstanding Expenses                 Increase in Prepaid Insurance                 Increase in Provision for d/d                 Decrease in Debtors	(50,000)   20,000 8,000
	(22,000)   2,000 (3,000) (3,000) 4,000 4,000
Cash flow from operating activities	18,000

14. A business has a current ratio of 3:1 and a quick ratio of 1.2 : 1. If the Working Capital is Rs. 1,80,000, calculate current assets and stock.              5

Ans:

Or

What are profitability ratios? What is the significance of gross profit and operating profit ratio?             3+2=5

Ans: Profitability Ratio: These ratios show relationship between profits and sales and profit & investments. It reflects overall efficiency of the organizations, its ability to earn reasonable return on capital employed and effectiveness of investment policies. Example : i) Profits and Sales : Operating Ratio, Gross Profit Ratio, Operating Net Profit Ratio, Expenses Ratio etc. ii) Profits and Investments : Return on Investments, Return on Equity Capital etc.

Objective and Significance of gross profit ratio: Gross Profit Ratio provides guidelines to the concern whether it is earning sufficient profit to cover administration and marketing expenses and is able to cover its fixed expenses. This ratio can also be used in stock-inventory control. Maintenance of steady gross profit ratio is important .Any fall in this ratio would put the management in difficulty in the realisation of fixed overheads of the business.

Objective and Significance of net profit ratio: In order to work out overall efficiency of the concern Net Profit ratio is calculated. This ratio is helpful to determine the operational ability of the concern. While comparing the ratio to previous years’ ratios, the increment shows the efficiency of the concern.

15. A, B and C were partners sharing profits in the ratio of 3:2:1 respectively. Balance sheet of the firm as at 31^st March, 2017 stood as follows:                   5

Balance Sheet

Liabilities	(Rs.)	Assets	(Rs.)
Sundry Creditors Capital: A                         20,000/- B                           7,500/- C                          12,500/-	16,000       40,000	Building Debtors Stock Patent Bank	23,000 7,000 12,000 8,000 6,000
	56,000		56,000

“B” retired on the above date on the following terms:

1)            Building to be appreciated by Rs. 8,800.

2)            Provision for doubtful debts to be made @ 5% on debtors.

3)            Goodwill of the firm be valued at Rs. 9,000.

Pass necessary Journal Entries.

Ans:

Journal Entries

In the Book of the firm

Particulars	L/F	Amount (Dr.)	Amount (Cr.)
Building A/c                             Dr.                   To Revaluation A/c (Being the profit on revaluation of Building transferred to revaluation A/c)		8,800     350     8,450         2,250 750     13,317	8,800     350     4,225 2,817 1,408       3,000     13,317
Revaluation A/c                        Dr.                   To Provision for d/d A/c (Being the provision for b/d transferred to revaluation A/c)
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 partners)
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)
B’s capital A/c                                       Dr.                     To B’s loan A/c (Being the amount due to transferred to his loan A/c)

Or

What is share forfeiture? State the procedure of forfeiture of shares.                                   2+3=5

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 shareholder fails to pay the amount due on allotment or any call, the directors may, if so authorized by the articles, forfeit his shares. Shares can only be forfeited for non-payment of allotment and calls. An attempt to forfeit shares for other reasons is illegal. Thus where the shares are declared forfeited for the purpose of reliving a friend from liability, the forfeiture may be set aside.

Before the shares are forfeited the shareholder:

i) Must be served with a notice requiring him to pay the money due on the call together with interest;

ii) The notice shall specify a date, not being earlier than the expiry of 14 days from the date of service of notice, on or before which the payment is to be made and must also state that in the event of non-payment within that date will make the shares liable for forfeiture;

iii) There must be a proper resolution of the board;

iv) The power of forfeiture must be exercised bonafide and for the benefit of the company.

A person, whose shares have been forfeited, ceases to be a member of the company. But he shall remain liable to pay to the company all moneys which at the date of forfeiture were payable by him to the company in respect of the shares. The liability of such a person shall cease as and when the company receives payment in full in respect of the shares.

16. What is Partnership Deed? Mention its four principal clauses.                                           1+4=5

Ans: Partnership deed: Meaning

A partnership is formed by an agreement. This agreement may be oral or in writing. Though the law does not expressly require that the partnership agreement should be in writing, it is desirable to have it in writing. A written agreement, which contains the terms of partnership, as agreed to by the partners is called ‘Partnership Deed.’

Importance: It is a very important document of the firm which defines relationship amongst the partners. It is necessary to avoid disputes amongst the partners and can be presented in the court as evidence.

Contents (Clauses) of the Deed:

a)      Name and address of the firm.

b)      Names and addresses of the partners.

c)       Nature of Business.

d)      Amount of capital to be contributed by each partner.

e)      Profit or loss sharing ratio.

f)       Date of commencement of partnership.

g)      Interest of Capital, if provided the rate of interest must be specified.

h)      Partner’s salaries and commission, if provided.

i)        Interest on Drawings, if charged, the rate of interest should also be specified.

Or

Following is the Balance Sheet of P, Q, and R as on March 31, 2018.                                         5

Balance Sheet

Liabilities	(Rs.)	Assets	(Rs.)
Sundry Creditors General Reserve Capital: P                         30,000/- Q                         20,000/- R                         20,000/-	16,000 16,000       70,000	Bills Receivable Furniture Stock Sundry Debtors Cash at Bank Cash in Hand	16,000 22,600 20,400 22,000 18,000 3,000
	1,02,000		1,02,000

Q died on June 30, 2018. Under the agreement the executors of the deceased partner were entitled to:

a)            Amount standing to the credit of Partner’s Capital A/c.

b)            Interest on Capital @ 5% p.a.

c)             Share of goodwill on the basis of twice the average of the past three years profit.

d)            Share of profit from the closing of the last financial year to the date of death on the basis of last year’s profit (2017-18)

e)            Profit for the last three years were:

Year	Profit (Rs.)
2015 – 16 2016 – 17 2017 – 18	12,000/- 16,000/- 14,000/-

Prepare Q’s capital account on the date of his death.

Ans:

17. Distinguish between Realization A/c and Revaluation A/c.                                   5

Ans: Difference between dissolution of partnership and dissolution of firm

Basis of distinction	Dissolution of partnership	Dissolution of firm
Relationship	Relationship amongst all the partners does not come to an end.	Relationship amongst all the partners comes to an end.
Continuation of business	Business of the firm may continue.	Business of the firm does not continue.
Inter relationship	Dissolution of partnership may or may not result in dissolution of the firm.	Dissolution of the firm necessarily results in dissolution of partnership.
Books of accounts	Books of accounts are not closed.	Books of accounts are closed.
Nature	Dissolution of partnership is voluntary.	Dissolution of partnership may sometimes compulsory or sometimes voluntary.
Account	Revaluation account is prepared.	Realisation account is prepared.

Or

A and B are partners sharing profits equally, Balance Sheet on September 2018 was as follows:     5

Balance Sheet

The firm is dissolved on the above date. Assets are realized at Rs. 49,600. Creditors allowed a discount of 2% and Dissolution Expenses came to Rs. 544. Give Journal Entries to close the books of the firm.

Journal Entries

In the Books of the Firm

Particulars	L/F	Amount	Amount
Realisation A/c                      Dr. To Sundry assets A/c (Being the sundry assets transferred to realisation A/c.)		59,000	59,000
Creditors A/c                    Dr. Bills Payable A/c                     Dr. To Realisation A/c (Being the sundry liabilities transferred to realisation A/c)		11,200 1,800	13,000
Cash A/c                                        Dr. To Realisation A/c (Being the sundry assets realized)		49,600	49,600
Realisation A/c [1,800 + 10,976]             Dr. To Cash A/c (Being the creditors and Bills payable paid off.)		12,776	12,776
Realisation A/c                        Dr. To Cash A/c (Being the realisation Expenses paid)		544	544
Reserve Fund A/c                           Dr. To A’s Capital A/c To B’s Capital A/c (Being the reserve fund distributed between the partners.)		6,000	3,000 3,000
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.)		4,860 4,860	9,720
A’s Capital A/c                 Dr. B’s Capital A/c                               Dr. To Cash A/c (Being the loss on realisation distributed between the partners.)		18,140 18,140	36,280

18. Discuss the process for allotment of shares of a company in case of oversubscription.       5

Ans: Oversubscription and Pro-rata allotment: When the number of shares applied is more than the number of shares issued by a company, the issue of shares is said to be oversubscribed. The company cannot allot shares more than those offered for subscription. In case of over-subscription, there are three possibilities arise:

(a) Some applicants may not be allotted any shares. This is known as ‘rejection of applications’.

(b) Some applicants may be allotted less number of shares than they have applied for. This is known as partial or pro-rata allotment.

(c) Some applicants may be allotted the full number of shares they have applied for. This is known as full allotment.

In such a situation if shares are allotted in proportion of shares issued to shares applied, then such an allotment is called partial or prorata allotment. For example, if company allots shares to the applicants of 70,000 shares. It is a pro-rata allotment in the proportion of 5:7. In such cases, excess application money is transferred to allotment. 

Or

Prepare a Comparative Income Statement from the following particulars:             5

Particulars	2017 (Rs.)	2018 (Rs.)
Sales Cost of Goods Sold Administrative Expenses Other Income Income Tax	4,00,000 2,00,000 40,000 20,000 60,000	5,00,000 3,00,000 1,00,000 30,000 70,000

Ans:

Comparative Income Statement

Particulars	2017	2018	Changes
			Absolute	%
Sales Less:-Cost of goods sold Gross profit Less:-Administration Expenses   Add:-Other Income Net profit before tax Less:-Income tax	4,00,000 2,00,000	5,00,000 3,00,000	1,00,000 1,00,000	25 50
	2,00,000 40,000	2,00,000 1,00,000	Nil 60,000	Nil 150
	1,60,000 20,000	1,00,000 30,000	(60,000) 10,000	37.50 50
	1,80,000 60,000	1,30,000 70,000	(50,000) 10,000	27.78 16.67
Net profit after tax	1,20,000	60,000	(60,000)	50

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ALSO READ (AHSEC ASSAM BOARD CLASS 12):

1. AHSEC CLASS 12 ACCOUNTANCY CHAPTERWISE NOTES

2. AHSEC CLASS 12 ACCOUNTANCY IMPORTANT QUESTION (THEORY)

3. AHSEC CLASS 12 ACCOUNTANCY IMPORTANT QUESTION BANK (PRACTICAL)

4. AHSEC CLASS 12 ACCOUNTANCY PAST EXAM PAPERS (FROM 2012 TILL DATE)

5. AHSEC CLASS 12 ACCOUNTANCY SOLVED QUESTION PAPERS (FROM 2012 TILL DATE)

6. AHSEC CLASS 12 ACCOUNTANCY CHAPTERWISE MCQS

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 19. Following is the Trial Balance of Rana and Raju as on 31^st March, 2018:     8

Trial Balance

Particulars	(Rs.)	Particulars	(Rs.)
Machinery Furniture Rent Salaries Debtors Cash in Hand Cash at Bank Drawings: Rana       =         4,000 Raju        =         3,000 Closing Stock Commission	10,000 20,860 19,740 9,000 40,500 16,300 45,000     7,000 12,500 5,000	Capital: Rana              =    65,000 Raju               =    40,000 Creditors Commission Bank Loan Trading Account: Gross Profit	1,05,000 18,400 300 5,000   57,200
	1,85,900		1,85,900

Prepare the Profit and Loss A/c and Profit and Loss Appropriation A/c for the year ended 31^st March, 2018 and a Balance Sheet of the Firm as on that date after taking into consideration the following additional information:

1)      Depreciate Machinery @ 10% p.a. and Furniture @ 20% p.a.

2)      Partners will get interest on capital @ 5% p.a.

3)      Raju is entitled to a salary of Rs. 1,800 p.a.

4)      The Profit sharing ratio between Rana and Raju was 3 : 2.

Ans:

Profit & Loss A/c

For the year ended on 31-03-2018 

Particulars	Amount	Particulars	Amount
To Depreciation on Machinery To Depreciation on Furniture To Rent To Salaries To Commission To Net profit	1,000 4,172 19,740 9,000 5,000 18,588	By Gross profit b/d By Commission	57,000 300
	57,500		57,500

P/L Appropriation A/c

For the year ended on 31-03-2018

Particulars	Amount	Particulars	Amount
To Interest on Capital - Rana = 65,000*5% - Raju = 40,000*5% To Partner’s Salary - Raju To Share of profit - Rana = 11,538*3/5 - Raju = 11,538*2/5	3,250 2,000   1,800   6,923 4,615	By Net profit	18,588
	18,588		18,588

Balance Sheet

As on 31-03-2018

Liabilities	Amount	Assets	Amount
Creditors Bank loan Capital -          Rana                                   65,000 Add:-Interest on capital                   3,250 Add:-Share of profit                          6,923 Less:-Drawings                                   4,000 -          Raju                                    40,000 Add:-Interest on Capital                  2,000 Add:-Raju’s salary                             1,800 Add:-Share of profit                         4,615 Less:-Drawings                                  3,000	18,400 5,000         71,173         45,415	Machinery                                   10,000 Less:-Depreciation@10%            1,000 Furniture                                      20,860 Less:-Depreciation@20%             4,172 Debtors Cash in hand Cash at Bank Closing Stock	9,000   16,688 40,500 16,300 45,000 12,500
	1,39,988		1,39,988

20. M. S. Limited issued 1,000 equity shares of Rs. 100 each payable as follows:             8

All the shares were duly subscribed for, called-up and paid-up, except Mr. A holding 400 shares did not pay the final call money. Show the entries in the Cash Book and Journal of the company for the above transactions.

Ans:

Cash Book

Particulars	Amount	Particulars	Amount
To Share Application A/c (1000 shares @ Rs. 25 each) To Share Allotment A/c (1000 shares @ Rs. 25 each) To Share first call A/c (1000 shares @ Rs. 20 each) To Share final call A/c (600 shares @ Rs. 30 each)	25,000   25,000   20,000   18,000	By Balance c/d	88,000
	88,000		88,000

Journal Entries

In the books of M.S. Ltd.

Particulars	L/f	Amount Dr.	Amount Cr.
Share Application A/c                                                                      Dr. To Share Capital A/c (Being the application money on 1,000 shares @ Rs. 25 each transferred to Share Capital & excess refunded)		25,000	25,000
Share Allotment A/c                                                                          Dr. To Share Capital A/c (Being the allotment money due on 1,000 shares @ Rs. 25 each)		25,000	25,000
Share 1st Call A/c                                                                                 Dr. To Share Capital A/c (Being the first call money due on 1,000 shares @ Rs. 20 each)		20,000	20,000
Share 2nd and Final Call A/c                                                               Dr. To Share Capital A/c (Being the first call money due on 1,000 shares @ Rs. 30 each)		30,000	30,000
Calls-in-arrear A/c                                                                                Dr. To Share 2nd and Final Call A/c (Being the first call money received on 400 shares)		12,000	12,000

Or

Write short notes on:                                    3+3+2=8

a)      Redemption of Debentures.

b)      Loss on Issue of Debentures.

c)       Minimum Subscription.

(a) Redemption of Debentures: Redemption of debenture is the discharge of debenture liability. It can be done either by repaying the money to debenture holders or converting the debenture into shares. The conditions of redemption are clearly stated at the time of issue of debenture in the prospectus. Debentures can be redeemed at par or at a premium as per the terms of issue. The period of maturity, redemption amount, yield on redemption etc. will be mentioned in the prospectus.

(b) Loss on issue of debentures: When debentures are issued at a price lower than its face value, then such debentures are said to be issued as “Debentures issued at a Discount”. Discount on issue of debentures is a Capital loss and is show in the Balance sheet on the Assets side under the head “Other not-current asset” till it is written off. When debentures are redeemable at a premium, the extra amount payable over and above the nominal value on redemption is called “Loss on Issue of Debenture”.  Again when debentures are issued at a discount, the discount on issue of debenture is also a loss on issue of debentures. Thus when debentures are issued at a discount and redeemable at a premium both the losses are amalgamated under the head “Loss on Issue of Debenture Account”. It is a Capital loss and is show in the Balance sheet on the Assets side under the head “Other not-current asset” till it is written off.

(c)Minimum Subscription: 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.      

21. S. K. issued 1,000, 12% Debentures of Rs. 100 each. Give Journal entries for Redemption of debentures in the books of the company under the following conditions:     2+3+3=8

1)      Issued at Par and Redeemable at par after 5 years.

2)      Issued at Par and Redeemable at a premium of 5% after 5 years.

3)      Issued at a Premium of 5% Redeemable at Par after 5 years.

Journal Entries

In the books of S.K. Ltd.

No.	Particulars	L/f	Amount Dr.	Amount Cr.
a)	At the time of Issue Bank A/c                                                                        Dr. To 12% Debentures A/c (Being the 1000 12% Debentures of Rs. 100 each issued at par and also redeemed at par)		1,00,000	1,00,000
	At the time of Redemption 12% Debentures A/c                                                    Dr. To Bank A/c (Being the 1000 12% Debentures of Rs. 100 each redeemed at par)		1,00,000	1,00,000
b)	At the time of Issue Bank A/c                                                                        Dr. Loss on issue of debentures A/c                               Dr. To 12% Debentures A/c To Premium on redemption of debentures A/c (Being the 1000 12% Debentures of Rs. 100 each issued at par, but repayable at a premium of 5%)		1,00,000 5,000	1,00,000 5,000
	At the time of Redemption 12% Debentures A/c                                                    Dr. Premium on Redemption of debentures A/c          Dr. To Bank A/c (Being the 1000 12% Debentures of Rs. 100 each redeemed at a premium of 5%)		1,00,000 5,000	1,05,000
c)	At the time of Issue Bank A/c                                                                          Dr. To 10% Debentures A/c To Securities Premium Reserve A/c (Being the 1000 12% Debentures of Rs. 100 each issued at a discount of 5%, but repayable at a premium of 5%)		1,05,000	1,00,000 5,000
	At the time of Redemption 12% Debentures A/c                                                         Dr. To Bank A/c (Being the 1000 12% Debentures of Rs. 100 each redeemed at par)		1,00,000	1,00,000

Or

Write short notes on:                                              2+2+2+2=8

1)      Authorized Share Capital.

2)      Calls-in-Arrear.

3)      Pro-Rata Allotment.

4)      Preference Share.

1)      Authorised Share capital: Nominal/Authorized/Registered 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.

2)      Calls-in-Arrears: The amount which is not paid by shareholders when money is demanded by the company, such amount is known as ‘Calls-in-Arrears’. The maximum rate of interest to be provided on calls in arrear must not exceed 10% per annum.              

3)      Pro-Rata allotment: When the number of shares applied is more than the number of shares issued by a company, the issue of shares is said to be oversubscribed. The company cannot allot shares more than those offered for subscription. In such a situation if shares are allotted in proportion of shares issued to shares applied, then such an allotment is called partial or prorata allotment. For example, if company allots shares to the applicants of 70,000 shares. It is a pro-rata allotment in the proportion of 5:7. In such cases, excess application money is transferred to allotment.

4)      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) Preference shares have a right to receive dividend at a fixed rate before any dividend given to equity Shares.      

(ii) Preference shares have a right to get their capital returned, before the capital of equity shareholders is returned in case the company is going to wind up.

22. Vimal and Nirmal are partners in a firm sharing profits and losses in the ratio 3 : 2. Their Balance Sheet as on 31^st December, 2018 was as under:                                                  8

Balance Sheet

Liabilities	(Rs.)	Assets	(Rs.)
Sundry Creditors  Capital Accounts: Vimal          =               60,000/- Nirmal        =               32,000/- Profit and Loss A/c	20,000     92,000 20,000	Cash Debtors Machinery Stock Goodwill	14,000 18,000 50,000 40,000 10,000
	1,32,000		1,32,000

On that date Kailash was admitted as a new partner. He paid Rs. 40,000 as his capital and Rs. 20,000 for his share of goodwill. The new profit sharing ratio was agreed to be 2 : 1 : 1. Pass Journal Entries in the books of the firm and show the Balance Sheet of the new firm.

Ans:

Journal Entries

In the books of the firm

Particulars	L/F	Amount (Dr.)	Amount (Cr.)
Cash A/c                    Dr.           To Kailash’s capital A/c           To Premium for goodwill A/c (Being the capital and premium for goodwill brought in cash)		60,000       20,000         6,000 4,000     20,000	40,000 20,000     8,000 12,000         10,000     12,000 8,000
Premium for goodwill A/c                               Dr.                 To Vimal’s capital A/c                 To Nirmal’s capital A/c (Being the premium for goodwill distributed between sacrificing partners)
Vimal’s capital A/c                               Dr. Nirmal’s capital A/c                                         Dr.                 To Goodwill A/c (Being the Goodwill written off)
P/L A/c                     Dr.                 To Vimal’s capital A/c                 To Nirmal’s capital A/c (Being the P/L distributed between old partners)

Balance Sheet of the new firm

As on 31-12-2018

Liabilities	Amount	Assets	Amount
Sundry creditors Capital A/cs               Vimal               Nirmal               Kailash	20,000   74,000 48,000 40,000	Cash Debtors Machinery Stock	74,000 18,000 50,000 40,000
	1,82,000		1,82,000

W.N.

Vimal: Nirmal=3:2(old ratio)

Vimal: Nirmal: Kailash=2:1:1(New ratio)

Now,

Vimal’s sacrifice = (3/5 – 2/4) = 2/20

Nirmal’s sacrifice = (2/5 – ¼) = 3/20

Sacrifice ratio  = 2:3

Or

What is goodwill? Mention four factors affecting the goodwill of a firm. Mention three conditions when valuation of goodwill becomes necessary.                    1+4+3=8

Ans: Goodwill: Goodwill is an intangible asset which indicates the value of the reputation of a firm. It comes into existence due to various favourable factors such as favourable location, efficient management, good quality of product and services etc. It is one factor which distinguishes an old established business from a new business. It can also be defined as the capacity of a business to earn extra income.

In the words of Eric L. Kohler “Goodwill is the present value of expected future profits in excess of a normal return on the investment in tangible assets.

Factors affecting the value of Goodwill are:

a)      Skill in Management: If the management is capable and efficient, the firm will earn good profits and that will raise the value of goodwill.

b)      Location Factor: If the business is located at a favourable place, it can increase the volume of sales which correspondingly increases the value of goodwill.

c)       Quality: If the quality of goods and services are high, then there will be a ready market for the goods and the value of its goodwill will be high.

d)      Favourable Contracts: Sometimes, a firm enters into long term contracts for sale and purchase of goods at favourable prices. This will also affect profits and goodwill of the firm.

Reasons for Valuation of Goodwill

In case of a partnership firm, the need for valuation of goodwill may arise under the following circumstances:

a)      When a new partner is admitted, goodwill is valued and new partner compensate the sacrificing partners on the basis of goodwill valued.

b)      When a partner retires from the firm, valuation of goodwill is necessary because remaining partners are required to compensate the retiring partner.

c)       When a partner dies, valuation of goodwill is necessary because remaining partners are required to compensate the executors of deceased partners on the basis of such goodwill.