CBSE Sample Papers for Class 12 Accountancy Set 4 with Solutions

Students must start practicing the questions from CBSE Sample Papers for Class 12 Accountancy with Solutions Set 4 are designed as per the revised syllabus.

CBSE Sample Papers for Class 12 Accountancy Set 4 with Solutions

Time : 3 Hr.
Max. Marks : 80

General Instructions:

This question paper contains 34 questions. All questions are compulsory.
This question paper is divided into two parts, Part A and B.
Part – A is compulsory for all candidates.
Part – B has two options i.e.
- Analysis of Financial Statements and
- Computerised Accounting. Students must attempt only one of the given options.
Question 1 to 16 and 27 to 30 carries 1 mark each.
Question 17 to 20, 31 and 32 carries 3 marks each.
Question from 21, 22 and 33 carries 4 marks each.
Question from 23 to 26 and 34 carries 6 marks each. .
There is no overall choice. However, an internal choice has been provided in 7 questions of one mark, 2 questions of three marks, 1 question of four marks and 2 questions of six marks.

PART – A (60 Marks)
(Accounting For Partnership Firms & Companies)

Question 1.
M and N are partners sharing profit or loss in the ratio of 3 : 2.0 is admitted into partnership as a new partner. M sacrifices 1/3rd of his share and N sacrifices 1/4th of his share in favour of O. What will be the O’s share in the firm?
(a) 1/5
(b) 2/10
(c) 3/10
(d) None of the above (1)
Answer:
(c) 3/10
Explanation:
Old Profit Sharing Ratio of M and N = 3: 2
Anil sacrifices 1/3rd of his share and N sacrifices
1/4th of his share in favour of O.
M’s contribution in favour of O
= 3/5 x 1/3 = 3/15
N’s contribution in favour of O
= 2/5 x 1/4 = 2/20
O’s share= 3/15 + 2/20
= 18/60 or 3/10

Question 2.
Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R):
Assertion (A): The balance of Partners’ Capital Account always remain fixed, under fluctuating capital method.
Reason (R): Under fixed capital method, the capital of the partner shall remain fixed even after deduction of capital or withdrawn from the business. In the context of the above two statements, which of the following is correct?
Codes:
(a) Both (A) and (R) are correct and (R) is the correct explanation for (A).
(b) Both (A) and (R) are correct, but (R) is not the correct explanation for (A).
(c) (A) is correct, but (R) is incorrect.
(d) Both (A) and (R) are incorrect. (1)
Answer:
(d) Both (A) and (R) are incorrect.

Explanation: Under Fixed Capital Method, balance of Partners’ Capital Account remain fixed, but may change due to addition of capital or withdrawal of capital or both during the year.

Question 3.
Golden Limited took over assets worth ₹ 10,00,000 including machinery and liabilities of ₹ 3,00,000 of Gaba Limited. Out of the purchase consideration of ₹ 12,00,000; ₹ 2,00,000 of bill payable accepted and the balance paid by issue of shares of ₹ 100 each at 25% premium. How much amount will be credited to Securities Premium Reserve Account?
(a) ₹ 1,75,000
(b) ₹ 2,50,000
(c) ₹ 3,00,000
(d) ₹ 2,00,000

Glanco Limited acquired machinery and building worth ₹ 30,00,000 from Jinco Limited. The amount was paid by issue of equity shares of ₹ 100 each at a premium 25%. What number of shares will be issued by Glanco Limited to Jinco Limited to settle down the purchase consideration?
(a) 24,000 shares
(b) 30,000 shares
(c) 36,000 shares
(d) 40,000 shares (1)
Answer:
(d) ₹ 2,00,000
Explanation:
Purchase Consideration = ₹ 12,00,000
Bills Payable Accepted = ₹ 2,00,000
Amount of Shares Issued = ₹ 12,00,000 – ₹ 2,00,000 = ₹ 10,00,000
Number of Shares Issued = \(\frac { 10,00,000 }{ (100 + 25) }\)
Amount credited to Securities Premium Reserve
Account = 8,000 x ₹ 25 = ₹ 2,00,000

(a) 24,000 shares
Explanation:
No. of shares issued by Glanco Limited

= \(\frac { ₹ 30,00,000 }{ ₹ (100 + 25) }\)
= 24,000

Question 4.
Amit and Sumit are partners in a firm sharing profits in the ratio of 3: 2. They decided to admit Rajan, their landlord as a partner in the firm. Rajan brought sufficient amount of capital and his share of goodwill premium. The accountant of the firm passed the entry of rent paid for building to Rajan. The Journal entry will be:

	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
(a)	Profit and Loss A/c To Rajan’s Capital A/c	Dr.
(b)	Profit and Loss Appropriation A/c To Rajan’s Capital A/c	Dr.
(c)	Profit and Loss Suspense A/c To Rajan’s Capital A/c	Dr.
(d)	No entry

OR
J and K were partners in a firm sharing profits and losses in the ratio of 3: 2. They decided that with effect from 1st January, 2021 they would share profits and losses in the ratio of 5: 3. Goodwill is valued at ₹ 1,20,000. In adjustment entry:
(a) Cr. J by ₹ 3,000; Dr. K by ₹ 3,000
(b) Cr. J by ₹ 30,000; Dr. K by ₹ 30,000
(c) Dr. J by ₹ 30,000; Cr. K by ₹ 30,000
(d) Dr. J by ₹ 3,000; Cr. K by ₹ 3,000 (1)
Answer:
(a) Profit and Loss A/c Dr.
To Rajan’s Capital A/c

Explanation: According to the Indian Partnership Act, 1932, rent paid is a charge against the profit and hence, it should be debited in Profit and Loss Account.

Related Theory
The balances treated in Profit and Loss Appropriation Account are: interest on capital interest on drawings, partner’s salary, partner’s commission etc. Profit and Loss Suspense Account is prepared to settle the share of profits to a deceased partner.

(d) Dr. J by ₹ 3,000; Cr. K by ₹ 3,000

Explanation:
Old Profit Sharing Ratio = 3: 2
New Profit Sharing Ratio = 5: 3
Sacrificing Ratio = Old Share – New Share
J = 3/5 – 5/8 = -1/40 (Gain)
K = 2/5 – 3/8 = 1/40 (Sacrifice)
Amount of Goodwill to be adjusted
= ₹ 1,20,000 x \(\frac { 1 }{ 40 }\)
= ₹ 3,000

Question 5.
Rohit, Mohit and Shobhit are partners sharing profits in the ratio of 5 : 3 : 2. Rohit withdraws ₹ 4,000 per quarter on the first day of quarter for first 9 months of the year. Calculate interest on drawings made by Rohit, if interest on drawings is chargeable @ 10% p.a.
(a) ₹ 300
(b) ₹ 900
(c) ₹ 600
(d) ₹ 1,200 (1)
Answer:
(b) ₹ 900
Explanation:

Total drawings of Rohit = 4,000 x 3 = ₹ 12,000

= \(\frac { 12 + 6 }{ 2 }\) = 9 month
Interest on drawings
= 12,000 x \(\frac { 10 }{ 100 }\) x \(\frac { 9 }{ 12 }\)
= ₹ 900

Related Theory
If the drawings are made on the first day of every month throughout the year, the average period would be:

= \(\frac { 12 + 1 }{ 2 }\)
= 6.5 months

Question 6.
Globe Ltd. issued 5,000,12% Debentures of ₹ 100 each at a discount of 2%, redeemable at a premium of 5%. In such case:
(a) Loss in issue will be credited by ₹ 10,000
(b) Loss on issue will be debited by ₹ 35,000
(c) Loss on issue will be debited by ₹ 25,000
(d) Loss on issue will be credited by ₹ 35,000

Loss on issue of debentures is written off:
(a) In the year of issue of debentures
(b) During the lifetime of the debentures
(c) Within three years of issue of debentures
(d) In the year of redemption of debentures (1)
Answer:
(b) Loss on issue will be debited by ₹ 35,000

Explanation:
Loss in issue = (5,000 x 100) x 2/100
= 5,00,000 x 2/100 = ₹ 10,000
Loss on redemption
= 5,00,000 x 5/100 = ₹ 25,000
Total Loss on issue of debentures
= ₹ 10,000 + ₹ 25,000 = ₹ 35,000
Being loss on issue, it will be debited to Loss on issue of debentures A/c

(b) In the year of issue of debentures Explanation: All the losses on issue of debentures including the loss on redemption of debentures, i.e. premium on redemption, is written off in the year of issue of debentures itself.

Question 7.
For which purposes Securities Premium Reserve can be used:
(I) For writing off the discount on debentures of the company.
(II) For writing off the preliminary expenses of the company.
(III) In providing for the premium payable on the redemption of preference shares.
(a) Both I & II
(b) Both I & III
(c) Only I
(d) All of the above. (1)
Answer:
(d) All of the above.

Explanation: The amount of Securities Premium Reserve can be used for:

Writing off the preliminary expenses of the company.
Writing off the expenses, commission or discount allowed on issue of shares or debentures of the company.
Issuing fully paid bonus shares to the shareholders of the company.
Providing for the premium payable on the redemption of redeemable preference shares or debnetures of the company.
Buy back of its own shares.

Question 8.
D and E are partners in a firm sharing profits and losses in the ratio of 3: 2. They admitted F into partnership for 1/5th share in profit. He pays ₹ 1,00,000 as goodwill. The ratio of the partners D, E and F in the new firm would be 3:1:1. Goodwill will be credited to:
(a) Only D ₹ 1,00,000
(b) Only E ₹ 1,00,000
(c) D ₹ 60,000; E ₹ 40,000
(d) D ₹ 75,000; E ₹ 25,000

A and B were partners in a firm. They admitted C as a new partner for 20% share in the profits. After all adjustments regarding general reserve, goodwill, gain or loss on revaluation, the balances in capital accounts of A and B were ₹ 3,85,000 and ₹ 4,15,000 respectively. C brought proportionate capital to give him 20% share in the profits.
Calculate the amount of capital to be brought by C.
(a) ₹ 1,80,000
(b) ₹ 2,00,000
(c) ₹ 2,20,000
(d) ₹ 240,000 (1)
Answer
(b) Only E ₹ 1,00,000

Explanation:
Old Profit Sharing Ratio of D and E = 3 : 2
New Profit Sharing Ratio of D, E and F = 3 : 1 : 1
Sacrificing Ratio = Old Share – New Share
D = 3/5 – 3/5 = Nil
E = 2/5 – 1/5 = 1/5 (Sacrifice)
Goodwill brought by F will be transferred to E’s Capital Account, as he is the only sacrificing partner.

(b) ₹ 2,00,000

Explanation: Combined capital of A and B
= 3,85,000+ 4,15,000
= 8,00,000
C’s Share = 1/5th of total capital

Read the following hypothetical situation, Answer Question No. 9 and 10
Janak and Ghanshyam were college friends; they completed their graduation and postgraduation together from the same institute and now started business in partnership. After some years Janak and Ghanshyam want to expand their business but due to insufficient cash they are not able to do so.

So they decided to admit a new partner in the partnership firm. The capitals of Janak and Ghanshyam stand at ₹ 2,40,000 and ₹ 3,20,000 respectively. On 1st April, 2022, they admitted their common friend Shivay as a new partner for one- fourth share in profits on his payment of ₹ 4,00,000 as his capital and ₹ 1,80,000 for his share of goodwill.

On that date, Creditors were ₹ 1,20,000 and Bank Overdraft ₹ 30,000. The assets of the firm apart from cash included Machinery ₹ 1,60,000; Stock ₹ 20,000; Debtors ₹ 80,000; Land & Building ₹ 4,00,000. On Shivay’s admission partners decided that:

Stock of the firm should be reduced by ₹ 4,000.
Machinery be depreciated by 20%.
Land & Building should be appreciated by 25%.
₹ 10,000 should be written off as bad debts. (1)

Question 9.
What is the value of the goodwill of the partnership firm?
(a) ₹ 16,00,000
(b) ₹ 7,20,000
(c) ₹ 5,40,000
(d) None of the above (1)
Answer:
(b) ₹ 7,20,000

Explanation: Shivay is admitted as a new partner for one – fourth share in profits and his share of goodwill is ₹ 1,80,000. Therefore, Goodwill of the Firm = ₹ 1,80,000 x 4 = ₹ 7,20,000

Question 10.
On the admission of Shivay, the sacrifice for providing his share of profits would be done by:
(a) Janak only
(b) Ghanshyam only
(c) Janak and Ghanshyam in their capital contribution ratio
(d) Janak and Ghanshyam equally (1)
Answer:
(d) Janak and Ghanshyam equally.

Explanation: In the absence of any information regarding the sacrifice for providing new partner’s share of profits would be done the old partners in their old profit sharing ratio.

Question 11.
State the order of payment of the following in case of dissolution’of partnership firm:
(i) Payment to Partners (Capital)
(ii) Payment to Creditors
(iii) Partner’s Loan
(a) (i), (ii), (iii)
(b) (ii), (iii), (i)
(c) (ii), (i), (iii)
(d) (iii), (ii), (i) (1)
Answer:
(b) (ii), (iii), (i)

Explanation: In case of dissolution of firm, the firm disposes off all its assets to satisfy all the claims against it. The amount realised from assets is utilised first to pay off outside liabilities such as creditors, bank overdraft, loans, bills payables etc.; the balance should be applied to pay loans and advances made by partners to the firm. The remaining balance is distributed among the partners in their profit sharing ratio.

Question 12.
4,00,000 equity shares were issued by Satyam Construction Limited of ₹ 10 each at par. The amount to be payable as under: On Application: ₹ 2 On Allotment: ₹ 4 On First & Final Call: Balance Amount Applications were received for 5,00,000 shares by the company. Directors of the company allotted the shares to applicants on pro-rata basis. How much amount will be received by the company on First & Final Call?
(a) ₹ 14,00,000
(b) ₹ 16,00,000
(c) ₹ 18,00,000
(d) ₹ 20,00,000 (1)
Answer:
(b) ₹ 16,00,000

Explanation:
Amount Received on First & Final Call = 4,00,000 x ₹ 4
= ₹ 16,00,000

Question 13.
One of the conditions, in addition to others, for the allotment of shares by a company is:
(a) Resolution in General Meeting
(b) Receiving Minimum Subscription
(c) Full Subscription by Public
(d) Full Payment on Application (1)
Answer:
(b) Receiving Minimum Subscription.

Explanation: As per SEBI, a Company needs to receive minimum subscription of 90% of the shares issued.

Question 14.
Prabhu and Deva ware partners in a firm. Their Balance Sheet showed Furniture at ₹ 2,00,000; Stock at ₹ 1,40,000; Debtors at ₹ 1,62,000 and Creditors at ₹ 60,000. Yogi was admitted and new profit-sharing ratio was agreed at 2 : 3 : 5. Stock was revalued at ₹ 1,00,000, Creditors of ₹ 15,000 are not likely to be claimed, Debtors for ₹ 2,000 have become irrecoverable and Provision for doubtful debts to be provided @ 10%. Prabhu’s share in loss on revaluation amounted to ₹ 30,000. Revalued value of Furniture will be:
(a) ₹ 2,17,000
(b) ₹ 1,03,000
(c) ₹ 3,03,000
(d) ₹ 1,83,000 (1)
Answer:
(d) ₹ 1,83,000
Dr. Revaluation Account Cr

Value of Furniture is reduced by ₹ 17,000.
Revalued value of Furniture = ₹ 2,00,000 – ₹ 17,000 = ₹ 1,83,000

Note: As profit sharing ratio of Prabhu and Deva is not provided in the question, so it is assumed they are sharing profits and losses equally.

Question 15.
What period would be taken into consideration if equal monthly amount is drawn as drawings at the beginning of each month?
(a) 5 months
(b) 6 months
(c) 6.5 months
(d) 7 months

Punit, Sunit and Amit are partners in a partnership firm. They share profits in equal ratio. Punit withdraw ₹ 20,000 on the first day of the year. Partnership is silent regarding the interest on drawings. What rate of interest shall be chargeable on partners’ drawings?
(a) 6% p.a.
(b) 9% p.a.
(c) 12% p.a.
(d) None of these (1)
Answer:
(c) 6.5 month

Explanation: When equal amount of drawings are made at the beginning of each month, interest on drawings is calculated for 6.5 months.

= \(\frac { 12 + 1 }{ 2}\) = \(\frac { 13 }{ 2 }\)
= 6.5 months

(d) None of these

Explanation: As per Indian Partnership Act, 1932, no interest on drawings is chargeable.

Question 16.
Amit and Sumit are partners in a firm. Amit advance a loan of ₹ 50,000 @ 12% p.a. on 31st December, 2021. For the year ending 31st March, 2022, the firm incurs a loss of ₹ 40,000 before charging interest. What amount of profit or loss will be transferred to partners?
(a) ₹ 38,500
(b) ₹ 40,000
(c) ₹ 41,500
(d) No amount (1)
Answer:
(c) ₹ 41,500

Explanation: Interest on partner’s loan is a charge against profit and shall be charged whether the firm earns profit or incurs Loss.
Interest on Loan = 50,000 x \(\frac { 3 }{ 12 }\) x \(\frac { 12 }{ 100 }\) = ₹ 1,500
Loss for the year before interest = ₹ 40,000
Total loss for the year = 40,000 + 1500 = ₹ 41,500
Amount transferred to Amit
= ₹ 41,500 x \(\frac { 1 }{ 2 }\)
= ₹ 20,750 (Debit)
Amount transferred to Sumit
= ₹ 41,500 x \(\frac { 1 }{ 2 }\)
= ₹ 20,750 (Debit)

Question 17.
In a partnership firm ‘Sarega Limited’, Samar, Reeta and Gagan are partners sharing profits and losses in the ratio 4:3:1.
As per the terms of the Partnership Deed of the firm, on the death of any partner, goodwill was to be valued at 50% of the net profits credited to that Partner’s Capital Account during the last three completed year before his/her death. The profits and losses for the last five years were:
2016-17 ₹ 1,20,000
2017-18 ₹ 1,94,000
2018-19 ₹ 2,10,000
2019-20 ₹ 60,000
2020-21 ₹ 1,68,000

On 1st April, 2021, Samar dies. On that date, land and building was found undervalued by ₹ 1,60,000, which was to be considered. Calculate the amount of Samar’s share of goodwill in the firm and pass the necessary adjusted journal entries of goodwill and revaluation of assets. (3)
Answer:
In the Books of Sarega Limited
Journal

Working Note:
Total Profit of last three years = ₹ 2,10,000 + ₹ 60,000 + ₹ 1,68,000 = ₹ 4,38,000
Samar’s share in profit already credited to his account = ₹ 4,38,000 x \(\frac { 4 }{ 8 }\)
= ₹ 2,19,000
Samar’s share of goodwill = Rs, 2,19,000 x \(\frac { 50 }{ 100 }\)
= ₹ 1,09,500

Question 18.
Amit, Babu and Charu set up a partnership firm on April 1, 2021. They contributed ₹ 50,000, ₹ 40,000 and ₹ 30,000, respectively as their capitals and agreed to share profits and losses in the ratio of 3 : 2 :1. Amit is to be paid a salary of ₹ 1,000 per month and Babu, a Commission of ₹ 5,000.

It is also provided that interest to be allowed on capital at 6% p.a. The drawings for the year were Amit ₹ 6,000, Babu ₹ 4,000 and Charu ₹ 2,000. Interest on drawings of ₹ 270 was charged on Amit’s drawings, ₹ 180 on Babu’s drawings and ₹ 90, on Charu’s drawings. The net profit as per Profit and Loss Account for the year ending March 31, 2020 was ₹ 35,660.

Nusrat, Sonu and Himesh are partners sharing profits and losses in the ratio of 5:3:2. The partnership deed provides for charging interest on drawing’s @ 10% p.a. The drawings of Nusrat, Sonu and Himesh during the year ending March 31, 2022 amounted to ₹ 20,000, ₹ 15,000 and ₹ 10,000 respectively.

After the final accounts have been prepared, it was discovered that interest on drawings has not been taken into consideration. Give necessary adjusting journal entry. (3)
Answer:
Dr. Profit and Loss Appropriation Account Cr.

OR
journal

journal

Question 19.
On 9th April, 2021, Sunshine Ltd. issued 500,10% Debentures of ₹ 1,000 each credited as fully paid-up to the promoters for their services to incorporate the company. On 18th May, 2021, the company issued 100,10% Debentures of ₹ 1,000 each credited as fully paid- up to the underwriters towards their commission. Pass necessary journal entries in the books of the company.

Suhana Limited purchased machinery from Vikrant Manufacturers Limited. The company paid the vendors by issue of some equity shares and debentures and the balance through Bill payable on acceptance in their favour payable after three months.

The accountant of the company, while journalising the above mentioned transactions left some items blank. You are required to fill in the blanks. (3)

Answer:
In the Books of Sunshine Limited
Journal

In the Books of Suhana Limited
Journal

Working Notes:
Amount payable to Vikrant Manufacturers Limited is satisfied by:

Bills Payable Issued = ₹ 14,00,000 – ₹ 13,30,000
= ₹ 70,000

Question 20.
In a partnership firm, Guruprakash and Sadguru were partners sharing profits and losses is the ratio of 3 : 1. On 1st April, 2022 partners decided to dissolve the firm. After transferring the assets (other than cash) and outsider’s liabilities of the firm to Realisation Account, you are given the following information:

A creditor of ₹ 1,44,000 accepted furniture valued at ₹ 2,00,000 and paid to the firm ₹ 56,000.
A second creditor for ₹ 20,000 accepted stock at ₹ 18,000 in full settlement of his claim.
A third creditor amounting to ₹ 36,000 accepted ₹ 18,000 is cash and investment worth ₹ 17,200 is full settlement of his claim.

Pass the necessary journal entries for the above transaction in the books of the partnership firm assuming that all payments were made by cheque. (3)
Answer:
In the Books of Guruprakash and Sadguru
Journal

Question 21.
The authorised capital of Sudershan Ltd. is ₹ 10,00,000 divided into 10,000 shares of ₹ 100 each. Out of these, the company issued 5,000 shares at a premium of ₹ 10 per share. The amount was payable as follows:
₹ 50 per share on application
₹ 30 per share on allotment (including premium)
₹ 30 per share on First and Final call.
The issue was fully subscribed. All money was duly received.
Prepare Company’s Balance Sheet (Extract) as per Schedule ill of The Companies Act, 2013 and also prepare notes to accounts. (4)
answer:
Balance Sheet (Extract)

Notes to Accounts:

Question 22.
Manoj, Deepak and Ankur are partners sharing profits and losses equally. The Balance sheet as at 31st March 2019 as follows:
Balance Sheet
as at 31st March 2019

The partners decided to share profits in the ratio 2 : 2 : 1 w.e.f. 1st April 2019. Thay decided that:

Value of stock to be reduced to ₹ 1,25,000
Value of machinery to be decreased by 10%
Land and Building to be appreciated by ₹ 62,000
Provision for doubtful debts to be made 5% on sundry debtors.
Deepak was to carry out reconstitution of the firm at a remuneration of ₹ 10,000.

Pass necessary journal entries to give effect to the above. (4)
Answer:
journal

Working Notes:
(i) Distribution of general reserve: \(\frac { 90,000 }{ 3 }\) = ₹ 30,000 each

(ii) Distribution of advertisement suspense \(\frac { 6,000 }{ 3 }\) = ₹ 2,000

(iii) Profit on revaluation = 62,000 – (15,000 + 25,000 + 4,000) – 10,000
= 62,000 – 44,000 – 10,000
= ₹ 8,000

(iv) Distribution of profit on revaluation = \(\frac { 8,000 }{ 3 }\)
= ₹ 2666.67 each.

Question 23.
Hind Co. Ltd. invited applications for issuing 1,00,000 equity shares of ₹ 10 each at a premium of ₹ 10 per share. The amount was payable as follows: On application – ₹ 10 per share (including ₹ 5 premium) On allotment – Balance

The issue was fully subscribed. A shareholder holding 300 shares paid the full share money with application. Another shareholder holding 200 shares failed to pay the allotment money. His shares were forfeited. Later on these shares were re-issued for ₹ 4,000 as fully paid up. Pass necessary journal entries for the above transactions in the books of Hind Co. Ltd.

High Light India Ltd. invited applications for 30,000 shares of ₹ 100 each at a premium of ₹ 20 per share payable as follows:
On application – ₹ 40 (including ₹ 10 premium)
On allotment – ₹ 30 (including ₹ 10 premium)
On First call – ₹ 30
On Second and final call – ₹ 20
Applications were received for 40,000 shares and pro-rata allotment was made on the applications for 35,000 shares. Excess application money is to be utilised towards allotment. Rohan to whom 600 shares were allotted failed to pay the allotment money and his shares were forfeited after allotment.

Aman who applied for 1,050 shares failed to pay first call and his shares were forfeited after first call. Second and final call was made. All the money due on second call was received. Of the shares forfeited, 900 shares forfeited from Aman were re-issued as fully paid up for ₹ 80 per share. Record necessary journal entries in the books of High Light India Ltd. (6)
Answer:
In the books of Hind Co. Ltd.
Journal

In the books of High Light India Ltd.
Journal

Working Notes:
(i) Excess Amount received on application:
Amount received on application = 40,000 x 40 = ₹ 16,00,000
Amount refunded = 5,000 x 40 = ₹ 2,00,000
Amount due on application = 30,000 x 40 = ₹ 12,00,000
Amount adjusted on allotment = 16,00,000 – 2,00,000 – 12,00,000 = ₹ 2,00,000

(ii) Amount received on allotment:
Amount due on allotment = 30,000 x 30 = ₹ 9,00,000
Amount adjusted from application = ₹ 2,00,000
Allotment amount not received on 600 shares of Rohan
Shares applied by Rohan = \(\frac { 35,000 }{ 30,000 }\) x 600 = 700 shares
Application money paid by Rohan = 700 x 40 = ₹ 28,000
Application money due on allotted 600 shares of Rohan = 600 x 40 = ₹ 24,000
Application money of Rohan adjusted on allotment = 28,000 – 24,000 = ₹ 4,000
Allotment money on 600 shares of Rohan = 600 x 30 = ₹ 18,000
Amount unpaid by Rohan allotment = 18,000 – 4,000 = ₹ 14,000
Total amount received on allotment = 9,00,000 – 2,00,000 – 14,000 = ₹ 6,86,000

(iii) First call money due on 29,400 shares = 29,400 x 30 = ₹ 8,82,000
Shares allotted to Aman = \(\frac { 1,050 x 30,000 }{ 35,000 }\) = 900 shares
Amount unpaid by Aman on first call = 900 x 30 = ₹ 27,000
Total amount received on first call = 8,82,000 – 27,000 = ₹ 8,55,000

(iv) Profit on re-issue of forfeited shares:
Amount received on 900 forfeited shares of Aman = 900 x 50 (excluding premium) = ₹ 45,000
Discount on re-issue of shares = 900 x (100 – 80) = 900 x 20 = ₹ 18,000
Total profit on re-issue of forfeited shares = 45,000 – 18,000 = ₹ 27,000

Question 24.
(A) Ajay, Akash and Ajit are partners in a firm. Net profit of the firm for the year ended 31st March, 2020 is ₹ 30,000, which has been duty distributed among the partners, in their agreed ratio of 3 : 1 : 1 respectively. It is discovered that the undermentioned transactions were not passed through the books of account of the firm for the year ended 31st March, 2020.

Interest on Capital @ 6% per annum, the capital of Ajay, Akash and Ajit ‘ being ₹ 50,000, ₹ 40,000 and ₹ 30,000 respectively.
Interest on drawings: Ajay ₹ 350; Akash ₹ 250; Ajit ₹ 150.
Partner’s salaries: Ajay ₹ 5,000; Akash ₹ 7,500
Commission due to Ajay ₹ 3,000 You are required to pass a journal entry, which will not affect profit and loss account, and rectify the partner’s accounts.

(B) A and B are equal partners. They decided do admit C for l/3rd share. For the purpose of admission of C, the goodwill of the firm is to be valued at four year’s purchase of super profits. The average capital employed in the firm is ₹ 1,50,000 and the normal rate of return in Similar business is 15%. Average profits of the firm is ₹ 40,000. Calculate the value of goodwill.

Raj, Sanjeev and Mukesh are partners sharing profits and losses in the ratio of 5 : 3 : 2. Their balance sheets as at 31st March 2020 stood as follows:

Balance Sheet as at 31st March, 2020

They decide to share profits equally w.e.f. 1st April 2020. They also agreed that:

Value of land and building be decreased by 5%
Value of machinery by increased by 5%
A provision for doubtful debts to be created @ 5% on sundry debtors.
A motorcycle valued at ₹ 20,000 was unrecorded and is now to be recorded in the books.
Out of sundry creditors, ₹ 10,000 is not payable
Goodwill is to be valued at 2 years’ purchase of 3 years profits. Profits being for 2019 – 20 – ₹ 50,000 (Loss) 2018 – 19 ₹ 2,50,000 and 2017-18 – ₹ 2,50,000.
Mukesh was to carry out the work for reconstituting the firm at a remuneration, including expenses of ₹ 5,000.

Expenses came to ₹ 3,000. Pass journal entries and prepare Revaluation Account. (6)
Answer:
(A) journal

Statement showing Adjustments

Working Notes:
(i) Calculation of divisible profit:
30,000 – 7,200 – 12,500 – 3,000 + 750 = ₹ 8,050
Ajay’s profit = 8050 x \(\frac { 3 }{ 5 }\) = ₹4,830
Akash’s profit = 8050 x \(\frac { 1 }{ 5 }\) = ₹ 1,610
Ajit’s profit = 8050 x \(\frac { 1 }{ 5 }\) = ₹ 1,610

= 1,50,000 x \(\frac { 15 }{ 100 }\)
= ₹ 22,500
Super profits = Average profits – Normal profits
= 40,000 – 22,500 = ₹ 17,500
Goodwill = Super profits x No. of years purchase
= 17,500 x 4
= ₹ 70,000

Journal

Dr. Revaluation A/c Cr.

Working Notes:
(i) Calculation of sacrificing/gaining ratio:
Raj = \(\frac { 1 }{ 3 }\) – \(\frac { 5 }{ 10 }\) = \(\frac { 10 – 15 }{ 30 }\) = – \(\frac { 5 }{ 30 }\) (Sacrifice)
Sanjeev = \(\frac { 1 }{ 3 }\) – \(\frac { 3 }{ 10 }\) = \(\frac { 10 – 9 }{ 30 }\) = – \(\frac { 1 }{ 30 }\) (Gain)
Mukesh = \(\frac { 1 }{ 3 }\) – \(\frac { 2 }{ 10 }\) = \(\frac { 10 – 6 }{ 30 }\) = – \(\frac { 14 }{ 30 }\) (Gain)

(ii) Calculation of goodwill:
Goodwill = 2 ears purchase of 3 gears average profits
Average profits of 3 gears = \(\frac { (-50,000)+2,50,000+2,50,000 }{ 3 }\)
= \(\frac { 4,50.000 }{ 3 }\)
= ₹ 1,50.000
Goodwill of firm = 2 x 1,50,000
= ₹ 3,00,000

(iii) Adjustment of goodwill:
Raj = 3,00,000 x \(\frac { 5 }{ 30 }\) = ₹ 50,000
Sanjeev = 3,00,000 x \(\frac { 1 }{ 30 }\) = ₹ 1o,ooo
Mukesh = 3,00,000 x \(\frac { 4 }{ 30 }\) = ₹ 40,000

Question 25.
Balance Sheet of Leena, Meena and Neena as at 31st March, 2021, who were sharing profits in the ratio of 5 : 3 :1, was:

The partners decided to dissolve the business on 31st March, 2022.
The Assets of the business were realised as follows:

Stock realised ₹ 23,400.
Debtors realised 50% amount.
Other Fixed Assets were realised at 10% less than their book value.

Bills Payable were settled for ₹ 32,000. There was an Outstanding Bill of Electricity of ₹ 800 which was paid off. Realisation expenses ₹ 1,250 were also paid. You are required to prepare Realisation Account, Partner’s Capital Accounts and Bank Account of the firm. (6)
Answer:
Dr. Reatisation Account Cr.

Dr. Partner& CapitaL Account Cr.

Dr. Bank Account Cr.

Question 26.
Pacific Foods Limited, a FMCG company has an equity share capital of ₹ 20,00,000. The company earns a return on investment of 15% on its capital. The company needed funds for diversification. The finance manager had the following two options:
(i) Borrow ₹ 10,00,000 @ 15% p.a. from a bank payable in four equal quarterly instalments starting from the end of the fifth year.

(ii) Issue ₹ 10,00,000, 9% Debentures of ₹ 100 each to the public at par, redeemable after five years at a premium of 10%.

After all deliberations, on 1st April, 2021, the board of directors of the company opted for option (ii), to increase the return to the shareholders. The Balance Sheet of the company on 1st April, 2021 shows a balance of ₹ 3,00,000 in Capital Reserve which the company decided to use for writing off the discount on issue of debentures. You are required to answer the following questions:
(A) Pass journal entry for receipt of application money of debentures.
(B) Pass journal entry to be passed at the time of allotment of debentures.
(C) Pass journal entry to write off loss on issue of debentures.
(D) Prepare Loss on Issue of Debentures Account.
(E) Calculate the amount of annual fixed obligation associated with debentures. (6)
Answer:
(A) In the Books of Pacific Foods Limited
Journal

(B) Journal

(D) Dr. Loss on Issue of Debentures Account Cr.

(E) Interest on 9% Debentures = ₹ 10,00,000 x 9/100 = ₹ 90,000

PART – B 20 Marks
(Analysis of Financial Statements) Option – I

Question 27.
Securities Premium Reserve appears under …………. in the company’s Balance Sheet.
(a) Share Capital
(b) Long-term Provisions
(c) Short-term Provisions
(d) Reserves and Surplus

Which of the following will be shown under the head ‘Reserves and Surplus’ in the Balance Sheet as per Schedule III, Part-1 of the Companies Act, 2013?
(I) Capital Redemption Reserve
(II) Revaluation Reserve
(III) Capital Reserve Choose the correct option:
(a) Both I & III
(b) Only II
(c) Both II & III
(d) All of the above (1)
Answer:
(d) Reserves and Surplus.

Explanation: Securities Premium Reserve comes under sub-heading ‘Reserves and Surplus’and heading ‘Shareholders’ Funds’ of the Balance Sheet.

(d) All of the above
Explanation: According to Schedule III, Part-1 of the Companies Act, 2013, Capital redemption Reserve, Revaluation Reserve and Capital Reserve are shown under the head ‘Reserves and Surplus’ in the Balance Sheet.

Question 28.
When opening stock is ₹ 50,000 closing stock ₹ 60,000 and cost of goods sold is ₹ 2,20,000, then Inventory turn over ratio is:
(a) 2 times
(b) 3 times
(c) 4 times
(d) 5 times (1)
Answer:
(c) 4 times

Explanation: Inventory Turnover Ratio

Average Stock = \(\frac { 50000 + 60000 }{ 2 }\)
Inventory Turnover Ratio
= \(\frac { 220000 }{ 55000 }\) = 4 times

Question 29.
Balance Sheet (Extract only)

Assets	Note No.	31.03.2019	31.03.2020
Machinery		5,22,500	8,37,500

Depreciation of machinery for the year 2019 – 2020 amounted to ₹ 11,20,000. How much amount will be shown in investing activity in cash flow statement for the year ending 31st March 2020:
(a) Inflow ₹ 3,15,000
(b) Outflow ₹ 3,15,000
(c) Inflow ₹ 4,35,000
(d) Outflow ₹ 4,35,000

Under which of the following major head is “Unpaid dividend” shown in the Balance sheet of a company as per schedule 111 of the companies Act, 2013?
(a) Reserve and Surplus
(b) Current Liabilities
(c) Non current liabilities
(d) Shareholder Fund (1)
Answer:
(d) Outflow ₹ 4,35,000

Explanation:
Value of machinery purchased = Closing balance + depreciation – opening balance
= 8,37,500 + 1,20,000 – 5,22,5000 = ₹ 4,35,000
The value of machinery purchased during the year 2019-2020 is ₹ 4,35,000 resulting in outflow of in investing activities.

(b) Current liabilities

Explanation: Unpaid dividend is a short term liability which needs to be paid within twelve months or less. Hence, it will be shown under the head current liabilities in the Balance sheet.

Question 30.
If the net profits made during the year are ₹ 50,000 and the bills receivables have decreased by ₹ 10,000 during the year, then the cash flow from operating activities will be equal to:
(a) ₹ 50,000
(b) ₹ 40,000
(c) ₹ 60,000
(d) No change (1)
Answer:
(c) ₹ 60,000

Explanation:
Cash flow from operating activities = Net profit + decrease in assets
= ₹ 50,000 + ₹ 10,000 = ₹ 60,000

Question 31.
Under which major headings and sub¬headings, the following items will be shown in the Balance Sheet of a company as per Schedule III of The Companies Act, 2013.
(i) Cheque in hand
(ii) Loose tools
(iii) Long term provisions
(iv) Provision for employee benefits
(v) Computer Software
(vi) Interest on Calls in Advance (3)
Answer:

Items	Major Heading	Sub-Heading
(i) Cheque in hand	Current assets	Cash and cash equivalents
(ii) Loose Tools	Current assets	Inventories
(iii) Long-term provisions	Non-current liabilities	Long-term provisions
(iv) Provision for employee benefits	Non-current liabilities	Long-term provisions
(v) Computer Software	Non-current assets	Fixed assets – Intangible assets
(vi) Interest on Calls in advance	Current Liabilities	Other Current Liabilities

Question 32.
(i) One of the objectives of ‘Financial Statement Analysis, is to identify the reasons for change in the financial position of the enterprise. State two more objectives of this analysis.Name any two items that are shown under the head ‘Other Current Liabilities’ and any two items that are shown under the head ‘Other Current Assets’ in the Balance Sheet of a company as per Schedule III of the Companies Act, 2013. (3)
Answer:
(i) The objectives of Financial Statement Analysis are:

To evaluate the business in Terms of profit in present and future.
To evaluate the efficiency of various parts or departments of the business.

(ii) Other Current Liability

Unpaid dividend
Current maturity of long term debts.

Other Current Assets

Discount in issue of debentures (to be written off within 12 months).
Accrued incomes.

Question 33.
For the year ended 31st March, 2022, Net Profit after tax of Shri Real Estate Ltd. was ₹ 6,00,000. The company has ₹ 4,00,000, 12% Debentures of ₹ 100 each. Calculate Interest Coverage Ratio assuming 40% tax rate. State its significance also. Willi the Interest Coverage Ratio change if during the year 2022-23, the company decides to redeem debentures of ₹ 5,00,000 and expects to maintain the same rate of Net Profit and assume that the Tax Rate will not change.

(i) The Quick Ratio of the company is 1.5 : 1. State with reason which of the following transactions would Increase, Decrease or Not change the ratio:
(1) Paid rent ₹ 3,000 in advance

(2) Trade receivable included a debtor who paid his entire amount due ₹ 9,700.

(3) From the following information, compute Proprietary Ratio:

Long-term Borrowings 2,00,000
Long-term Provisions 1,00,000
Current Liabilities 50,000
Non-Current Assets 3,60,000
Current Assets 90,000 (4)

Answer:

Net Profit after Tax = ₹ 6,00,000, Tax Rate = 40%

= \(\frac { 6,00,000 x 1oo }{ 60 }\)
= ₹ 10,00,000
Net Profit before Interest and Tax = Net Profit before Tax + Interest on Long Term Debts
= ₹ 10,00,000 + 4,80,000 = ₹ 14,80,000

= \(\frac { 14,80,000 }{ 4,80,000 }\)
= 3.08 Times

Significance of Interest Coverage Ratio:
It reveals the number of times, interest on long term debts is covered by the profits available. A higher ratio ensures safety of interest on Long Term Debts. The Interest Coverage Ratio wilt improve if the company decides to redeem ₹ 5,00,000 debentures assuming that Net Profit after interest and tax rate will be the same.

Question 34.
From the following Balance Sheet of Aditya Ltd. as on 31.03.2018 and 31.03.2019, prepare a Cash Flow Statement:
Balance Sheet
as at 31.03.2018 and 31.03.2019

Notes to Accounts:

Additional Information:
(i) Depreciation on Fixed assets for the year 2018-19 was ₹ 14,700.
(ii) An interim dividend of ₹ 7,000 has been paid the Shareholders during the year. (6)
Answer:
Cash Flow Statement
for the year ended 31st March, 2019

Working Notes:
(i) Calculation of Profit Before Tax:

(ii) Dr. Fixed Asset Account Cr.