CBSE Board Exam Study Solutions

Studymate Solutions to CBSE Board Examination 2010-2011

Series : SMA/1 Code No. 67/1/1
Candidates must write the Code on
Roll No. the title page of the answer-book.

 Code number given on the right hand side of the question paper should be written on the title page of
the answer-book by the candidate.

 Please check that this question paper contains 23 questions.

 Please write down the Serial Number of the questions before attempting it.

 15 minutes time has been allotted to read this question paper. The question paper will be distributed at
10.15 a.m. From 10.15 a.m. to 10.30 a.m., the student will read the question paper only and will not
write any answer on the answer script during this period.

ACCOUNTANCY

[Time allowed : 3 hours] [Maximum marks : 80]

General Instructuions:

(i) This question paper contains three parts A, B and C.

(ii) Part A is compulsory for all candidates.

(iii) Candidates can attempt only one part of the remaining parts B and C.

(iv) All parts of the questions should be attempted at one place.

1 P.T.O.

STUDYmate Accountancy Class XII

PART-A
(Accounting for Not for Profit Organisations, Partnership Firms and Companies)
1. Name the financial statement prepared by a Not-For-Profit Organisation on accrual
basis. [1]
Ans. Income and Expenditure A/c

2. State the provisions of Indian Partnership Act regarding the payment of remuneration
to a partner for the services rendered. [1]
Ans. If deed is present, as per the deed.
If deed is absent, no remuneration to any partner.

3. For which share of Goodwill a partner is entitled at the time of his retirement? [1]
Ans. The retiring partner is entitled to his share of goodwill valued at the time of retirement.

4. State any two occasions on which a firm can be reconstituted. [1]
Ans. Any two of the following:
(a) Change in profit sharing ratio among existing partners.
(b) Admission of a partner
(c) Retirement of a partner
(d) Death of a partner

5. Give any one advantage for the redemption of debentures by purchase in the open
market? [1]
Ans. Any one of the following:
(a) Reduction in Principal liability.
(b) Reduction in interest burden.
(c) Saving equal to amount of discount.
(d) Saving equal to premium payable on redemption.

6. From the following information, calculate the amount of income from subscriptions to
be shown in the Income and Expenditure Account for the year ended 31-3-2011: [3]
Subscriptions received during the year 2010-2011 ` 3,40,000
Subscriptions outstanding as on 31-3-2011 ` 47,000
Subscriptions received in advance as on 31-3-2011 ` 35,000
Subscriptions outstanding as on 1-4-2010 ` 28,000
Subscriptions received in advance as on 1-4-2010 ` 25,000
Ans. Statement showing Calculation of Subscription for the year 2010-11.
Particulars `
Subscription received during the year 3,40,000
Less: Subscription outstanding as on 1-4-2010 (28,000)
Add: Subscription outstanding as on 31-3-2011 47,000
Less: Subscription in advance as on 31-3-2011 (35,000)
Add: Subscription in advance as on 1-4-2010 25,000
Subscription for the year 2010-11 3,49,000

2 P.T.O.


Income & Expenditure A/c (Extract)
For the year ended 31-3-2011
Expenditures ` Incomes `
By Subscription 3,49,000

7. Jain Ltd. purchased Building for ` 10,00,000 from Gupta Ltd. 10% of the payable
amount was paid by a cheque drawn in favour of Gupta Ltd. The balance was paid by
issue of Equity Shares of ` 10 each at a discount of 10%. [3]
Ans. In the books of Jain Ltd.
Journal
Date Particulars LF Debit (`) Credit (`)
Building A/c Dr. 10,00,000
To Gupta Ltd. A/c 10,00,000
(Being Building Purchased from Gupta Ltd.)
Gupta Ltd. A/c Dr. 1,00,000
To Bank A/c 1,00,000
(Being 10% payment made by cheque)
Gupta Ltd. A/c Dr. 9,00,000
Discount on issue of shares A/c Dr. 1,00,000
To Equity shares A/c 10,00,000
(Being 1,00,000 shares issued at a
discount of 10%)
Working Notes:
Calculation of Number of Equity shares:
9,00,000
= 1,00,000 shares
10  1

8. Narain Laxmi Ltd. invited applications for issuing 7,500, 12% Debentures of ` 100
each at a premium of ` 35 per Debenture. The full amount was payable on application.
Applications were received for 10,000 Debentures. Applications for 2500 Debentures
were rejected and the application money was refunded. Debentures were allotted to
the remaining applicants.

Pass necessary Journal Entries for the above transactions in the books of Narain
Laxmi Ltd. [3]

3 P.T.O.


Ans. In the books of Narain Laxmi Ltd.
Journal
Bank A/c Dr. 13,50,000
To Debenture Application A/c 13,50,000
(Being application amount received on
10,000 debentures with Securities
Premium)
Debenture Application A/c Dr. 13,50,000
To 12% Debentures A/c 7,50,000
To Securities Premium A/c 2,62,500
(Being Debentures Allotted to 7500 shares
and excess being refunded)

9. Arun and Arora were partners in a firm sharing profits in the ratio of 5 : 3. Their fixed
capitals on 1-4-2010 were: Arun ` 60,000 and Arora ` 80,000. They agreed to allow
interest on capital @ 12% p.a. and to charge on drawings @ 15% p.a. The profit of the
firm for the year ended 31-3-2011 before all above adjustments were ` 12,600. The
drawings made by Arun were ` 2,000 and by Arora ` 4,000 during the year. Prepare
Profit and Loss Appropriation Account of Arun and Arora. Show your calculations
clearly. The interest on capital will be allowed even if the firm incurs loss. [4]
Ans. Profit & Loss Appropriation A/c
Particulars ` Particulars `
To Interest on Capital By Net Profit 12,600
Arun 7,200 By Interest on Drawing A/c
Arora 9,600 16,800
Arun 

15
 2, 000 
6 
150
 100 12 

450
Arora 

15
 4, 000 
6 
300
 100 12 

By Loss transferred to
Arun’s capital A/c 2344
Arora’s capital A/c 1406 3,750
16,800 16,800

10. Arjun, Bhim and Nakul are partners sharing profits & losses in the ratio of 14 : 5 : 6
respectively. Bhim retires and surrenders his 5/25th share in favour of Arjun. The
goodwill of the firm is valued at 2 years purchase of super profits based on average
profits of last 3 years. The profits for the last 3 years are ` 50,000, ` 55,000 and `
60,000 respectively. The normal profits for the similar firm are ` 30,000. Goodwill
already appears in the books of the firms at ` 75,000. The profit for the first year after
Bhim’s retirement was ` 1,00,000. Give the necessary Journal Entries to adjust
Goodwill and distribute profits showing your workings. [4]

4 P.T.O.


Ans. In the books of _______________
Journal
Arjun’s Capital A/c Dr. 42,000
Bhim’s Capital A/c Dr. 15,000
Nakul’s Capital A/c Dr. 18,000
To Goodwill A/c 75,000
(Being old goodwill written off in old ratio)
Arjun’s Capital A/c Dr. 10,000
To Bhim’s Capital A/c 10,000
(Being share of goodwill adjusted)
Profit & Loss A/c Dr. 1,00,000
To Arjun’s Capital A/c 76,000
To Nakul’s Capital A/c 24,000
(Being Profit for Ist year after retirement
distributed in new ratio)
Working Note:
Normal Profit = ` 30,000
50,000  55,000  60,000
Average Profit = = ` 55,000
3
Super Profit = ` 55,000 – ` 30,000 = ` 25,000
Goodwill = 2 × 25,000 = 50,000
5
Bhim’s share =  50,000 = 10,000
25
New Ratio among Arjun and Nakul.
14 5 19
Bhim’s share taken by Arjun only, i.e.  
25 25 25
6
Nakul =
25
New Ratio = 19 : 6.

11. Shakti Ltd. decided to redeem its 750, 12% Debentures of ` 100 each. The company
purchased 500 Debentures at ` 94 per Debenture from the open market. The
remaining debentures were redeemed out of profits. The company had already made a
provision for Debenture Redemption Reserve in its books.
Pass necessary Journal Entries in the books of the company for the above
transactions. [4]

5 P.T.O.


Ans. In the books of Shakti Ltd.
Journal
Own Debentures A/c Dr. 47,000
To Bank 47,000
(Being 500 own debentures purchased from
open market)
12% Debentures A/c Dr. 50,000
To Own Debentures A/c 47,000
To Profit on redemption of deb. A/c 3,000
(Being debentures redeemed)
12% Debentures A/c Dr. 25,000
To Debenture-holder’s A/c 25,000
(Being 250 debentures redeemed and
amount made due to debenture holders)
Debenture-holder’s A/c Dr. 25,000
To Bank A/c 25,000
(Being payment made to debenture-holder)
Profit on redemption of Debenture A/cDr. 3,000
To Capital Reserve A/c 3,000
(Being Profit on redemption transferred to
capital reserve)

12. Pass necessary Journal Entries for the following transactions in the books of
Sudarshan Ltd.
(i) Redeemed 750, 12% Debentures of ` 75 each by converting into Equity Shares
of ` 100 each. The Equity Shares were issued at a discount of 10%.
(ii) Converted 550, 12% Debentures of ` 1,000 each into New 13% Debentures of
` 100 each. The New Debentures were issued at premium of 10%. [6]
Ans. In the books of Sudarshan Ltd.
Journal
A. (i) 12% Debentures A/c Dr. 56,250
To Debenture-holders A/c 56,250
(Being 750 debentures of ` 75 each
redeemed and payment made due to
debenture-holders)
(ii) Debenture-holders A/c Dr. 56,250
Discount on issue of shares A/c Dr. 6,250
To Equity share capital A/c 62,500
(Being 625 equity shares issued at a
discount of 10%)
6 P.T.O.


B. (i) 12% Debentures A/c Dr. 5,50,000
To Debenture-holder’s A/c 5,50,000
(Being 550 debentures of ` 1,000 each
debenture-holders)
(ii) Debenture-holder’s A/c Dr. 5,50,000
To Securities Premium A/c 50,000
(Being 50,000 13% debentures issued at a
premium of 10%)
Working Notes:
56,250
(i) = 625 shares
100  10
5,50,000
(ii) = 50,000 13% debentures
110

13. Verma and Sharma were partners sharing profits in the ration of 3 : 1. On 31-3-2011
their Balance Sheet was as follows:
Balance Sheet of Verma and Sharma as on 31-3-2011
Liabilities ` Assets `
Capitals: Land and Building 70,000
Verma 1,20,000 Machinery 60,000
Sharma 80,000 2,00,000 Debtors 80,000
Creditors 70,000 Bank 60,000
2,70,000 2,70,000
The firm was dissolved on 1-4-2011 and the Assets and Liabilities were settled as
follows:
(i) Creditors of ` 50,000 took over Land and Building in full settlement of their
claim.
(ii) Remaining Creditors were paid in cash.
(iii) Machinery was sold at a depreciation of 30%.
(iv) Debtors were collected at a cost of ` 500.
(v) Expenses of realization were ` 1,700.
Pass necessary Journal Entries for dissolution of the firm. [6]
Ans. In the books of Verma and Sharma
Journal
(i) Realisation A/c Dr. 2,10,000
To Land & Building A/c 70,000
To Machinery A/c 60,000
To Debtors A/c 80,000
7 P.T.O.


(Being Assets transferred to Realisation
A/c)
(ii) Creditors A/c Dr. 70,000
To Realisation A/c 70,000
(Being Creditors transferred to Realisation
A/c)
(iii) No entry for Land and Building taken over
creditors.
(iv) Realisation A/c Dr. 20,000
To Bank A/c 20,000
(Being payment of creditors)
(v) Bank A/c Dr. 42,000
(Being machine sold at depreciation of 30%)
(vi) Bank A/c Dr. 79,500
(Being debtors collected at a cost of 500,
i.e., 80,000 – 500)
(vii) Realisation A/c Dr. 1,700
To Bank A/c 1,700
(Being payment of realisation expenses)
(viii) Verma’s Capital A/c Dr. 30,150
Sharma’s Capital A/c Dr. 10,050
(Being distribution of loss on realisation)
(ix) Verma’s Capital A/c Dr. 89,850
To Bank A/c 89,850
(Being Verma’s Capital A/c settled)
(x) Sharma’s Capital A/c Dr. 69,950
To Bank A/c 69,950
(Being Sharma’s capital A/c settled)
Working Note:
Partners Capital A/c’s
Dr. Cr.
Particular Verma Sharma Particular Verma Sharma
To Realisation A/c 30,150 10,050 By bal. b/d 1,20,000 80,000
To Bank 89,850 69,950
1,20,000 80,000 1,20,000 80,000

8 P.T.O.


14. From the following ‘Receipt and Payment’ of ‘Green Delhi Club’ for the year ended 31-
3-2011. Prepare ‘Income and Expenditure Account’.
Receipts and Payments Account of
‘Green Delhi Club’ for the year ended 31-3-2011
Receipts ` Payments `
To Balance b/d 13,200 By Salary (paid for 11
To Subscriptions 25,500 months) 2,200
To Entrance Free 2,000 By Rent 800
To Donations (includes ` 1,000 By Electricity 3,500
for buildings) 3,000 By Taxes 2,600
To Hall rent 2,500 By Printing & stationary 800
To Sale of investments (Book To Books 10,000
value ` 4,000) 3,500 By 9% Fixed deposits (on
31-1-2011) 13,000
By Balance c/d 16,800
49,700 49,700
For the Year ending 31st March 2011
Dr. Cr.
Expenditure Amount Incomes Amount
(`) (`)
To Salary 2,200 By Subscriptions 25,500
(+) O/s salary 200 2,400 By Entrance Fees 2,000
To Rent 800 By Donations 2,000
To Electricity 3,500 By Hall Rent 2,500
To Taxes 2,600 By Accrued Interest on
To Printing & Stationery 800 investment 195
To Loss on sale of Investments 500
To Surplus 21,595
32,195 32,195

15. ‘B’ and ‘C’ were partners sharing profits in the ratio of 3 : 2. Their Balance Sheet as
on 31-3-2011 was as follows:
Balance Sheet of Band C as on 31-3-2011
Liabilities Amount Assets Amount
Capitals: Land and Building 80,000
‘B’ 60,000 Machinery 20,000
‘C’ 40,000 1,00,000 Furniture 10,000
Provision for bad debts 1,000 Debtors 25,000
Creditors 60,000 Cash 16,000
Profit and Loss Account 10,000
1,61,000 1,61,000

9 P.T.O.


‘D’ was admitted to the partnership for l/5th share in the profits on the following
terms:
(i) The new profit sharing ratio was decided as 2 : 2 : 1.
(ii) D will bring ` 30,000 as his capital and ` 15,000 for his share of goodwill.
(iii) Half of goodwill amount was withdrawn by the partner who sacrificed his
share of profit in favour of ‘D’.
(iv) A provision of 5% for bad and doubtful debts was to be maintained.
(v) An item of, ` 500 included in Sundry Creditors was not likely to be paid;
(vi) A provision of ` 800 was to be made for claims for damages’ against the firm.
After making the above adjustments the Capital Accounts of ‘B’ and ‘C’ were to be
adjusted on the basis of D’s Capital. Actual cash was to be brought in or to be paid
off as the case may be.
Prepare Revaluation Account, Partner’s Capital Accounts and Balance Sheet of the
new firm.
OR
‘G’, ‘E’ and ‘F’ were partners in a firm sharing profits in the ratio of 7 : 2 : 1. The
Balance Sheet of the firm as on 31st March, 2011 was as follows:
Balance Sheet of ‘G’, ‘E’ and ‘F’ as on 31st March, 2011
Amount Amount
Liabilities Assets
` `
Capitals: Goodwill 40,000
‘G’ 70,000 Land & Buildings 60,000
‘E’ 20,000 Machinery 40,000
‘F’ 10,000 1,00,000 Stock 7,000
General Reserve 20,000 Debtors 12,000
Loan from ‘E’ 30,000 Cash 5,000
Creditors 14,000
1,64,000 1,64,000
‘E’ died on 24th August 2011. Partnership deed provides for the settlement of claims
on the death of a partner in addition to his capital as under:
(i) The share of profit of deceased partner to be computed upto the date of death
on the basis of average profits of the past three years which was ` 80,000.
(ii) His share in profit/loss on revaluation of assets and re-assessment of liabilities
which were as follows:
Land and Buildings were revalued ·at ` 94,000, Machinery at ` 38,000 and
Stock at ` 5,000. A provision of 2½ % was to be created on debtors for bad and
(iii) The net amount payable to ‘E’s executors was transferred to his Loan Account,
to be paid later on.
Prepare Revaluation Account, Partner’s Capital Accounts E’s Executor A/c. and
Balance Sheet of ‘G’ and ‘F’ who decided to continue the business keeping their
capital balances in their new profit sharing ratio. Any surplus or deficit to be
transferred to current accounts of the partners.

10 P.T.O.


Ans. Revaluation A/c
Dr. Cr.
Particular Amount Particular Amount
(`) (`)
To Provision for Bad Debts 250 By Creditors 500
To Claim for damages 800 By Loss on Revaluation
B 330
C 220 550
1,050 1,050

Dr. Cr.
Particular B C D Particular B C D
To P & L A/c 6,000 4,000 By bal. b/d 60,000 40,000
To Revaluation A/c 330 220 By Cash A/c 30,000
To Cash A/c 7,500 By Premium A/c 15,000
To Cash A/c 1,170 By Cash A/c 24,220
To Bal. c/d 60,000 60,000 30,000
75,000 64,220 30,000 75,000 64,220 30,000

Balance sheet of B, C & D
as on 01.04.2011
Liabilities Amount (`) Assets Amount (`)
Capital A/c’s Land & Buildings 80,000
B 60,000 Machinery 20,000
C 60,000 Furniture 10,000
D 30,000 1,50,000 Debtors 25,000
Creditors 59,500 (–) Provision 1,250 23,750
Claim for damages 800 Cash (16,000 + 30,000 + 15,000
+ 24,220 – 7,500 – 1,170) 76,550
2,10,300 2,10,300
D’s share of capital = ` 30,000
1
D’s share in profit =
5
5
Capital of the new firm = ` 30,000 × = ` 1,50,000
1
2
B’s share = ` 1,50,000 × = ` 60,000
5
2
C’s share = ` 1,50,000 × = ` 60,000
5
OR

11 P.T.O.


Ans. Revaluation A/c
Dr. Cr.
Particulars Amount Particulars Amount
(`) (`)
To Machinery 2,000 By Land & Buildings 34,000
To Stock 2,000
To Provision for Bad Debts 300
To Profit on Revaluation
G 20,790
E 5,940
F 2,970 29,700
34,000 34,000
Dr. Cr.
Particular G E F Particular G E F
To Goodwill 28,000 8,000 4,000 By bal. b/d 70,000 20,000 10,000
To E’s Executors - 58,340 - By Gen. Reserve 14,000 4,000 2,000
To Balance c/d 1,27,837.50 - 18,262.50 By Revaluation 20,790 5,940 2,970
By P & L Suspense 6,400
 146 2 
 80, 000   
 365 10 
By E’s Loan A/c 30,000
By Current A/c 51,047.50 – 7,292.50
155,837.50 66,340 22,262.50 155,837.50 66,340 22,262.50
Dr. E’s Executors A/c Cr.
Amount Amount
Particulars Particulars
(`) (`)
To E’s Executors Loan A/c 58,340 By E’s Capital A/c 58,340
58,340 58,340

Balance sheet of G & F
as on 24th August, 2011
Amount Amount
Liabilities Assets
(`) (`)
Capital A/c’s Land & Buildings 94,000
G 1,27,837.50 Machinery 38,000
F 18,262.50 146,100 Stock 5,000
Creditors 14,000 Debtors 12,000
E’s Executors Loan A/c 58,340 (–) Prov. 300 11,700
Cash 5,000
P & L Suspense A/c 6,400
G’s Current A/c 51,047.50
F’s Current A/c 7,292.50
2,18,440 2,18,440
12 P.T.O.


16. Shyam Ltd invited applications for issuing 80,000 Equity Shares of ` 10 each at a
premium of ` 40 per share. The amount was payable as follows:
On Application ` 35 per share (including ` 30 Premium)
On Allotment ` 8 per share (including ` 4 Premium)
On First and Final Call – Balance
Applications for 77,000 shares were received. Shares were allotted to all the
applicants. Sundram to whom 7,000 shares were allotted failed to pay the allotment
money. His shares were forfeited immediately after allotment. Afterwards the first and
final call was made. Sat yam the holder of 500 shares failed to pay the first and final
call. His shares were also forfeited. Out of the forfeited shares 1,000 shares were re-
issued at ` 50 per share fully paid up. The re-issued shares included all the shares of
Satyam.
OR
Jain Ltd. invited applications for issuing 35,000 Equity Shares of ` 10 each at a
discount of 10%. The amount was payable as follows:
On Application ` 5 per share.
On Allotment ` 3 per share.
On First and Final Call – Balance.
Applications’ for 50,000 shares were received. Applications for 8,000 shares were
rejected and the application money of these applicants was refunded. Shares were
allotted on pro-rata basis to the remaining applicants and the excess money received
with applications from these applicants was adjusted towards sums due on
allotment. Jeevan who had applied for 600 share’s failed to pay allotment and first
and final call money. Naveen the holder of 400 shares failed to pay first and final call
money. Shares of Jeevan and Naveen were forfeited. Of the forfeited 800 shares were,
re-issued at ` 15 per share fully paid up. The re-issued shares included all the shares
of Naveen.
Ans. In the Books of Shyam Ltd.
Journal
Date Particulars LF Debit Credit
Bank A/c Dr. 26,95,000
To Share Application A/c 26,95,000
(For share application money received)
Share Application A/c Dr. 26,95,000
To Share Capital A/c 3,85,000
(For Application money adjusted)
Share Allotment A/c Dr. 6,16,000
(For allotment money made due)
Bank A/c Dr. 5,60,000
To Share Allotment A/c 5,60,000
(For allotment money received)
Share Capital A/c Dr. 63,000
Securities Premium A/c Dr. 28,000
To Share Allotment A/c 56,000
To Share Forfeiture A/c 35,000
(Being 7000 shares forfeited)

13 P.T.O.


Share First & Final Call A/c Dr. 4,90,000
To Share Capital A/c 70,000
(For first & final call made due)
Bank A/c Dr. 4,86,500
To Share First & Final Call A/c 4,86,500
(For first & final call money received)
Securities Premium A/c Dr. 3,000
To Share First & Final Call A/c 3,500
(For 500 shares forfeited)
Bank A/c Dr. 50,000
(For 1000 Shares re-issued)
Share Forfeiture A/c Dr. 7,000
(For amount of share forfeiture
transferred to capital reserve)

OR

Ans. In the Books of Jain’s Ltd.
Journal
Date Particulars LF Debit Credit
Bank A/c Dr. 2,50,000
To Share Application A/c 2,50,000
(For share application money received)
Share Application A/c Dr. 2,50,000
To Bank A/c 40,000
(For Application money adjusted)
Share Allotment A/c Dr. 1,05,000
Discount on issue of Shares A/c 35,000
(For allotment money made due)
Bank A/c Dr. 69,000
(For allotment money received)
Share First & Final Call A/c Dr. 35,000
(For first & final call made due)
Bank A/c Dr. 34,100

14 P.T.O.


To Share First & Final Call A/c 34,100
(For first & final call money received)
To Discount on issue of Share A/c 900
To Share First & Final Call A/c 900
(Being 900 shares forfeited)
Bank A/c Dr. 12,000
(For 800 Shares reissued)
Share Forfeiture A/c Dr. 5,600
(For amount of share forfeiture
transferred to capital reserve)

Part B
(Financial Statements Analysis)

17. State the significance of Analysis of Financial Statements to the ‘Lenders’.
Ans. To know the long term solvency of the enterprise.

18. State the purpose of preparing a ‘Cash Flow Statement’.
Ans. To ascertain the specific inflows/outflows (i.e. operating, investing or financing
activities) from which cash and cash equivalents are generated or used by the
enterprise.

19. While preparing Cash Flow Statement what type of activity is, ‘Payment of cash to
acquire Debentures by an Investment company’?
Ans. Operating activities.

20. O.M. Ltd. Has a Current Ratio of 3.5 : 1 and Quick Ratio of 2 : 1. If the excess of
Current Assets over Quick Assets as represented by Stock is ` 1,50,000, calculate
Current Assets and Current Liabilities.
Ans. Current ratio = 3.5 : 1

15 P.T.O.


Current Assets 3.5
 
Current Liabilities 1

 Current Assets = 3.5 Current Liabilities …(i)
Quick Ratio = 2 :1
Quick Assets 2
 
Current Liabilities 1

 Quick Assets = 2 Current Liabilities.
 Current Assets – Stock = 2 Current Liabilities

[ Quick Assets=Current Assets- stock]

From equation (i) , we get
3.5 Current Liabilities – 1,50,000 = 2 Current Liabilities
= 3.5 Current Liabilities – 2 Current Liabilities = 1,50,000
= 1.5 Current Liabilities = 1,50,000
1,50,000
Current Liabilities = = ` 1,00,000
1.5
Current Assets = 3.5 Current Liabilities
= 3.5 × 1,00,000
= ` 3,50,000

21. From the following information, calculate any two of the following ratios :
(a) Debt-Equity Ratio
(b) Working Capital Turnover Ratio and
(d) Return on Investment
Information : Equity Share Capital ` 50,000, General Reserve ` 5,000; Profit and Loss
Account after tax and interest ` 15,000; 9% Debentures ` 20,000; Creditors ` 15,000;
Land and Building ` 65,000; Equipments ` 15,000; Debtors ` 14,500 and Cash
` 5,500. Discount on issue of shares ` 5,000.
Sales for the year ended 31-3-2011 was ` 1,50,000. Tax rate 50%.
Debt
Ans. (a) Debt – Equity Ratio =
Equity

9% Debentures
=
Equity Share Capital  General Reserve  P & L Account  Discount on issue of Shares

16 P.T.O.


20,000
 
50,000  5,000  15,000  5,000

20,000
   
65,000

   0.38 : 1 times
Net Sales
(b) Working capital turnover ratio =
Net Working Capital

1,50,000

14,500  5,500  15,000

1,50,000

5,000

 30 times
Net Profit before Interest, Tax and Dividend
(c) Return on investment =  100
Capital Employed

15,000  15,000 (tax)  1,800(Interest)

50,000  5,000  15,000  20,000  5,000

31,800
    100
85,000

 37.41 %

22. Following is the Income Statement of Raj Ltd. for the year ended 31-3-2011 :
Particulars Amount
`
Income :
Sales 2,00,000
Other Incomes 15,000
Total Income 2,15,000

Expenses :
Cost of goods sold 1,10,000
Opening expenses 5,000
Total Expenses 1,15,000
Tax
40,000

Prepare a common size Income Statement of Raj Ltd. for the year ended 31-3-2011.

17 P.T.O.


Ans. Common Size Income Statement
for the year ended 31-3-2011.
Particulars Year end Percentage change
31-3-2011
Net Sales 20,0000 100%
Less Cost of Goods Sold 1,10,000 (55%)
Gross Profit 90,000 45%
Less Operating Expenses 5,000 (2.5%)
Add Other Incomes 15,000 7.5%
Net Profit Before Tax 1,00,000 50%
Less Tax 40,000 (20%)
Profit After Tax 60,000 30%

23. From the following Balance Sheets of Sonam Ltd as on 31-03-2010 and 31-3-2011,
prepare a Cash Flow Statement:
Liabilities 31-3-2010 31-3-2011 31-3-2010 31-3-2011
Assets
(`) (`) (`) (`)
Equity Share Patents 12,500 11,250
Capital 1,00,000 1,50,000 Building 1,50,000 1,50,000
Profit & Loss Investment — 18,750
Account 25,000 50,000 Debtors 50,000 63,750
Bank Loan 50,000 25,000 Stock 2,500 3,750
Proposed 20,000 15,000 Cash 5,000 21,250
Divided 10,000 17,500
Provision for tax
Creditors 15,000 11,250
2,20,000 2,68,750 2,20,000 2,68,750
Additional Information :
During the year a Building having book value ` 50,000 was sold at a loss of ` 2,000
and depreciation charged on Building was ` 4,000
Ans. Cash Flow Statement
for the year ended 31-3-2011
A. Cash Flow from operating activities
Net profit as per P & L A/c 25,000
(+) Proposed dividend 15,000
(+) Provision for tax 17,500
Net Profit before extra-ordinary items 57,500
(+) Non-operating/Non-cash items
Patents 1,250

18 P.T.O.


Depreciation 4,000
Loss on sale of Buildings 2,000
64,750
(–) Non-operating incomes NIL
Operating profits before changes in working capital 64,750
(+) Decrease in CA/Increase in CL NIL
(–) Increase in CA/Decrease in CL
Debtors (13,750)
Stock (1,250)
Creditors (3,750)
46,000
(–) Tax paid during the year 10,000
Cash flow from operating activities 36,000
B. Cash Flow from investing activities
Purchase of Building (54,000)
Sale of building 48,000
Purchase of Investments (18,750)
Cash used in investing activities (24,750)
C. Cash Flow from financing activities
Issue of shares 50,000
Repayment of Bank Loan (25,000)
Proposed dividend (20,000)
Cash flow from financing activities 5,000
Increase in cash and cash equipments 16,250
(+) Opening balance of cash and cash equivalents 5,000
Closing balance of cash and cash equivalents 21,250

Building A/c
To Balance b/d 1,50,000 By Depreciation 4,000
To cash A/c (Balance figure) 54,000 By Cash A/c 48,000
By P & L A/c 2,000
By Balance c/d 1,50,000

2,04,000 2,04,000

*****

19 P.T.O.


UNCOMMON QUESTION ONLY
12. Pass necessary Journal Entries for the following transactions in the books of Jay Ltd.
(i) Redeemed 1,500, 9% Debentures of ` 150 each by converting into Equity Shares
of ` 10 each. The Equity Shares were issued at a discount of 10%.
(ii) Converted 1,100, 8% Debentures of ` 1,000 each into 12% New Debentures of
` 100 each. The New Debentures were issued at premium of 10%. [6]
Journal
A. (i) 9% Debentures A/c Dr. 2,25,000
To Debenture-holders A/c 2,25,000
(Being 1,500 debentures of ` 150 each
debenture-holders)
(ii) Debenture-holders A/c Dr. 2,25,000
To Equity share capital A/c 2,50,000
(Being 25,000 equity shares issued at a
discount of 10%)
(Being 1,100 debentures of ` 1,000 each
debenture-holders)
(Being 1,00,000 12% debentures issued at
a premium of 10%)
Working Notes:
2,25,000
(i) = 25,000 shares
10  1
11,00,000
(ii) = 1,00,000 12% debentures
110

20 P.T.O.


13. Raman and Richa were partners in a firm sharing profits in the ration of 7 : 3. On
31-3-2011 their Balance Sheet of the firm was as follows:
Balance Sheet of Raman and Richa as on 31-3-2011
Capitals: Land and Building 7,50,000
Raman 7,00,000 Furniture 1,20,000
Richa 3,00,000 10,00,000 Debtors 1,32,000
Sundry Creditors 1,75,000 Stock 1,03,000
Cash 70,000
11,75,000 11,75,000
follows:
(i) Land and Building was taken over by Raman at a depreciation of 10% for cash.
(ii) Creditors of ` 1,25,000 took over stock and debtors in full settlement of their
claim.
(iii) Remaining Creditors were paid by Richa.
(iv) Furniture realized ` 5,000 less than the book value.
(v) Expenses of realization were ` 400.
Ans. In the books of Raman and Richa
Journal
To Land & Building A/c 7,50,000
To Furniture A/c 1,20,000
To Debtors A/c 1,32,000
To Stock A/c 1,03,000
(Being Assets transferred to Realisation A/c)
(ii) Creditors A/c Dr. 1,75,000
To Realisation A/c 1,75,000
A/c)
(iii) Bank A/c Dr. 6,75,000
(Being Land & Building taken by Raman for
cash at 10% discount)
(iv) No entry for stock and debtors taken over
by creditors.
(v) Realisation A/c Dr. 50,000
To Richa A/c 50,000
(Being creditors taken by Richa)
21 P.T.O.


(v) Bank A/c Dr. 1,15,000
(Being furniture realised)
(vii) Realisation A/c Dr. 400
To Bank A/c 400
(Being payment of realisation expenses)
(viii) Raman’s Capital A/c Dr. 1,33,280
Richa’s Capital A/c Dr. 57,120
(ix) Raman’s Capital A/c Dr. 5,66,720
(Being Raman’s Capital A/c settled)
(x) Richa’s Capital A/c Dr. 2,92,880
(Being Richa’s capital A/c settled)
Working Note:
Dr. Cr.
Particular Raman Richa Particular Raman Richa
To Realisation A/c 1,33,280 57,120 By bal. b/d 7,00,000 3,00,000
To Bank 5,66,720 2,92,880 By Realisation A/c 50,000

7,00,000 3,50,000 7,00,000 3,50,000
14. From the following ‘Receipt and Payment’ of ‘Eco Club’ for the year ended 31-3-2011.
Prepare ‘Income and Expenditure Account’.
‘Eco Club’ for the year ended 31-3-2011
To Entrance Free 3,000 By Rent 2,400
To Donations (includes ` 1,000 By Electricity 700
for buildings) 2,100 By Taxes 400
To Hall rent 2,700 By Printing and
To Sale of investments (Book stationary 900
value ` 9,000) 8,500 To Books 5,000
By 9% Fixed deposits (on
31-1-2010) 14,000
By Balance c/d 500
41,900 41,900

22 P.T.O.


Dr. Cr.
(`) (`)
(+) O/s salary 6,000 24,000 By Entrance Fees 3,000
To Rent 2,400 By Donations 1,100
To Electricity 700 By Hall Rent 2,700
To Taxes 400 By Accrued Interest on
To Printing & Stationery 900 investment 315
To Loss on sale of Investments 500 By Deficit 1,785
28,900 28,900

Part B

23. From the following Balance Sheets of J.N. Ltd as on 31-03-2010 and 31-3-2011,
Liabilities 31-3-2010 31-3-2011 31-3-2010 31-3-2011
Assets
(`) (`) (`) (`)
Equity Share Patents 75,000 62,500
Capital 6,00,000 9,00,000 Building 9,00,000 9,00,000
Profit & Loss Investment — 1,12,500
Account 1,50,000 3,00,000 Debtors 3,00,000 3,82,500
Bank Loan 3,00,000 1,50,000 Stock 15,000 22,500
Proposed 1,20,000 90,000 Cash 30,000 1,32,500
Divided 60,000 1,05,000
Provision for tax
Creditors 90,000 67,500
13,20,000 16,12,500 13,20,000 16,12,500
During the year a Building having book value ` 1,25,000 was sold at a loss of ` 8,000

23 P.T.O.


Net profit as per P & L A/c 1,50,000
(+) Provision for tax 1,05,000
Net Profit before extra-ordinary items 3,45,000
Patents 12,500
Depreciation 20,000
3,85,500
Operating profits before changes in working capital 3,85,500
Debtors (82,500)
Stock (7,500)
Creditors (22,500)
2,73,000
Cash flow from operating activities 2,13,000
Purchase of Building (1,45,000)
Sale of building 1,17,000
Purchase of Investments (1,12,500)
Cash used in investing activities (1,40,500)
Issue of shares 3,00,000
Repayment of Bank Loan (1,50,000)
Proposed dividend (1,20,000)
Increase in cash and cash equipments 1,02,500
Closing balance of cash and cash equivalents 1,32,500
Building A/c
To cash A/c (Balance figure) 1,45,000 By Cash A/c 1,17,000
By P & L A/c 8,000
10,45,000 10,45,000

24 P.T.O.


UNCOMMON QUESTION ONLY
12. Pass necessary Journal Entries for the following transactions in the books of N.R.
Ltd.:
(i) Redeemed 1,200, 9% Debentures of ` 175 each by converting into New 10%
Debentures of ` 100 each issued at a premium of 5%.
(ii) Redeemed 19,000, 6% Debentures of ` 50 each by converting them into Equity
shares of ` 100 each. The Equity Shares were issued at a discount of 5%. [6]
Journal
A. (i) 12% Debentures A/c Dr. 2,10,000
To Debenture-holders A/c 2,10,000
debenture-holders)
(Being 2,000 10% debentures issued at a
premium of 10%)
debenture-holders)
(ii) Debenture-holders A/c Dr. 9,50,000
To Equity share capital A/c 10,00,000
(Being 10,000 equity shares issued at a
discount of 10%)
Working Notes:
2,10,000
(i) = 2,000 10% debentures
100  5
9,50,000
(ii) = 10,000 shares
100  5

25 P.T.O.


13. A and B were partners in a firm sharing profits in the ration of 3 : 2. On 31-3-2011
their Balance Sheet of the firm was as follows:
Balance Sheet of A and B as on 31-3-2011
Capitals: Building 2,40,000
A 3,00,000 Furniture 1,75,000
B 2,00,000 5,00,000 Debtors 80,000
Sundry Creditors 1,17,000 Stock 75,000
Cash 47,000
6,17,000 6,17,000
follows:
(i) Building was taken over by the creditors as their full and final payment.
(ii) Furniture was taken over by B for cash payment at 5% less than the book value.
(iii) Debtors were collected by a debt collection agency at a cost of ` 5,000.
(iv) Stock realized ` 70,500.
(v) ‘B’ agreed to bear all realization expenses. For this service B is paid ` 500.
Actual expenses on realization amounted to ` 1,000.
Ans. In the books of A and B
Journal
To Building A/c 2,40,000
To Furniture A/c 1,75,000
To Debtors A/c 80,000
To Stock A/c 75,000
(Being Assets transferred to Realisation
A/c)
(ii) Creditors A/c Dr. 1,17,000
A/c)
(iii) No entry for Building taken over creditors.
(iv) Bank A/c Dr. 1,66,200
(Being furniture sold at discount of 5%)
(v) Bank A/c Dr. 75,000
(Being debtors collected at a cost of 5,000,
i.e., 80,000 – 5000)
26 P.T.O.


(vi) Bank A/c Dr. 70,500
(Being stock realised)
(vii) Realisation A/c Dr. 500
To B’s Capital A/c 500
(Being amount paid to B for realisation
purpose)
(viii) A’s Capital A/c Dr. 1,75,080
B’s Capital A/c Dr. 1,16,720
(ix) A’s Capital A/c Dr. 1,24,920
(Being A’s Capital A/c settled)
(x) B’s Capital A/c Dr. 83,780
To Bank A/c 83,780
(Being B’s capital A/c settled)
Working Note:
1. Partners Capital A/c’s
Dr. Cr.
Particular A B Particular A B
To Realisation A/c 1,75,080 1,16,720 By bal. b/d 3,00,000 2,00,000
To Bank 1,24,920 83,780 By Realisation A/c 500

3,00,000 2,00,500 3,00,000 2,00,500
2. It is assumed that actual expenses of realization are paid by B himself.

14. From the following ‘Receipt and Payment’ of ‘New Club’ for the year ended 31-3-2011.
Prepare ‘Income and Expenditure Account’.
‘New Club’ for the year ended 31-3-2011
To Entrance Free 5,750 By Rent 3,000
To Donations (includes ` 1,000 By Electricity 2,750
for buildings) 2,100 By Honorarium 5,000
To Hall rent 7,550 By Books 7,500
To Sale of investments (Book By 9% Fixed deposits (on
value ` 16,000) 15,400 31-1-2010) 10,000
By Balance c/d 2,9500
55,200 55,200

27 P.T.O.


Dr. Cr.
(`) (`)
(+) O/s salary 12,000 36,000 By Entrance Fees 5,750
To Rent 3,000 By Donations 1,100
To Electricity 2,750 By Hall Rent 7,550
To Honorarium 5,000 By Accrued Interest on
To Loss on sale of Investments 600 investment 675
By Deficit 11,275
47,350 47,350

Part B

23. From the following Balance Sheets of C.P. Ltd as on 31-03-2010 and 31-3-2011,
Liabilities 31-3-2010 31-3-2011 31-3-2010 31-3-2011
Assets
(`) (`) (`) (`)
Share Capital 3,00,000 4,50,000 Patents 37,500 31,250
Profit & Loss Building 4,50,000 4,50,000
Account 75,000 1,50,000 Investment — 56,250
Bank Loan 1,50,000 75,000 Debtors 1,50,00 1,91,250
Proposed Stock 7,500 11,250
Divided 60,000 45,000 Cash 15,000 66,250
Provision for tax 30,000 52,500
Creditors 45,000 33,750
6,60,000 8,06,250 6,60,000 8,06,250
During the year a Building having book value ` 1,50,000 was sold at a loss of ` 6,000

28 P.T.O.


Net profit as per P & L A/c 75,000
(+) Provision for tax 52,500
Net Profit before extra-ordinary items 1,72,500
Patents 6,250
Depreciation 16,000
2,00,750
Operating profits before changes in working capital 2,00,750
Debtors (41,250)
Stock (3,750)
Creditors (11,250)
1,44,500
Cash flow from operating activities 1,14,500
Purchase of Building (1,66,000)
Sale of building 1,44,000
Purchase of Investments (56,250)
Cash used in investing activities (78,250)
Issue of shares 1,50,000
Repayment of Bank Loan (75,000)
Proposed dividend (60,000)
Increase in cash and cash equipments 51,250
Closing balance of cash and cash equivalents 66,250
Building A/c
To cash A/c (Balance figure) 1,66,000 By Cash A/c 1,44,000
By P & L A/c 6,000
6,16,000 6,16,000

*****
29 P.T.O.

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