CBSE Sample Papers for Class 12 Accountancy Set 7 with Solutions

Students must start practicing the questions from CBSE Sample Papers for Class 12 Accountancy with Solutions Set 7 are designed as per the revised syllabus.

CBSE Sample Papers for Class 12 Accountancy Set 7 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.
Amit and Sumit are partners in a business of manufacturing apparels. They admitted Rohit to the partnership for \(\frac { 1 }{ 4 }\) th share of profits. Madhur was to bring in a capital of ₹ 3,00,000 and his share of goodwill in cash. Goodwill appeared in the books of Amit and Sumit at ₹ 60,000 and had to be written off. The journal entry for adjustment of Goodwill was as follows:

The new profit sharing ratio of Amit, Sumit and Madhur will be :
(a) 9 : 6 : 5
(b) 2 : 1 : 1
(c) 3 : 1 : 2
(d) 5 : 3 : 2 (1)
Answer:
(a) 9:6:5

Explanation: Since goodwill appearing in the 2. books is written off among the old partners in old profit share ratio Old profit sharing ratio among Amit andSumit = 36,000: 24,000 = 3:2
Profit share of Madhur = \(\frac { 1 }{ 4 }\)
Remaining share = 1 – \(\frac { 1 }{ 4 }\) = \(\frac { 3 }{ 4 }\)
Amitsnewshare = \(\frac { 3 }{ 5 }\) x \(\frac { 3 }{ 4 }\) = \(\frac { 9 }{ 20 }\)
Sumitsnewshare = \(\frac { 2 }{ 5 }\) x \(\frac { 3 }{ 4 }\) = \(\frac { 6 }{ 20 }\)
Madhur’s share = \(\frac { 1 }{ 4 }\) = \(\frac { 5 }{ 20 }\)
New profit sharing ratio = 9:6:5

Question 2.
Assertion (A) : Out of existing goodwill of ₹ 1,0, 000 in the balance sheet, ₹ 50,000 is written off among the existing partners in profit sharing ratio and the balance is carried forward in the balance sheet.
Reason (R): Revaluation Account is nominal in nature.
(a) (A) is correct but (R) is wrong
(b) Both (A) and (R) are correct, but (R) is not the correct explanation of (A)
(c) Both (A) and (R) are incorrect.
(d) Both (A) and (R) are correct, and (R) is the correct explanation of (A) (1)
Answer:
(b) (A) is incorrect but (R) is correct.

Explanation: Increase in value of assets and decrease in value of liabilities are credited to Revaluation A/c. Thus Assertion is false. The Revaluation Account is a nominal account. Thus reason is true.

Question 3.
A building was purchased by Gagandeep Limited for ₹ 18,00,000 and payment was made by issue of shares ₹ 100 per share at 20% premium. Securities Premium Reserve Account will be:
(a) Debited by ₹ 3,60,000
(b) Credited by ₹ 3,60,000
(c) Debited by ₹ 3,00,000
(d) Credited by ₹ 3,00,000

Debentures are shown in the Balance Sheet of a company under the head of:
(a) Non-Current Liabilities
(b) Current Liabilities
(c) Share Capital
(d) None of these (1)
Answer:
(d) Credited by ₹ 3,00,000

Explanation: No. of shares issued = Amount Pagable/lssue Price
= ₹ 18,00,000/120
= 15,000 shares
Amount of Premium = 15,000
shares x ₹ 20 = ₹ 3,00,000
Securities Premium Account is credited by ₹ 3,00,000

Question 4.
A and B are partners sharing profits and losses in the ratio of 2 : 1. They take C as partner for \(\frac { 1 }{ 5 }\)th share. Goodwill account appears in the books at ₹ 15,000. For the purpose of C’s admission, goodwill of the firm is valued at ₹ 30,000. C is to pay proportionate premium for goodwill which he pays to A and B privately. The journal, entry for adjustment of goodwill will be:

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 of the firm 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: (b)

Explanation: Goodwill already existing in the books is written off among old partners in old profit sharing ratio. Goodwill brought in by C is not recorded in the books as the amount of goodwill is privately paid to A and B.

Related Theory
Reserves, if any, shall be distributed among the old partners in their old profit sharing ratio.

(d) Dr. J by ₹ 3,000; Cr. K by ₹ 3,200

Explanation:
Old Profit Sharing Ratio = 3: 2
New Profit Sharing Ratio = 5: 3
Sacrificing Ratio = Old Share – New Share
J = \(\frac { 3 }{ 5 }\) – \(\frac { 5 }{ 8 }\) = – \(\frac { 1 }{ 40 }\)(Gain)
K = \(\frac { 2 }{ 5 }\) – \(\frac { 3 }{ 8 }\) = – \(\frac { 1 }{ 40 }\)(Sacrifice)
Amount of Goodwill to be adjusted
= ₹ 1,20.000\(\frac { 1 }{ 40 }\) = ₹ 3,000

Question 5.
Amit, Sumit and Punit are partners in a firm sharing profits in the ratio of 3: 2: 1. As per partnership deed, Sumit is guaranteed a minimum profit of ₹ 20,000. Net profit for the year is ₹ 45,000. The deficiency of Sumit’s profit would be:
(a) ₹ 15,000
(b) ₹ 5,000
(c) ₹ 10,000
(d) ₹ 20,000 (1)
Answer:
(b) ₹ 5,000
Explanation: Sumit’s guaranteed share of profit = ₹ 20,000
Actual profit of Sumit = 45,000 x \(\frac { 2 }{ 6 }\) = ₹ 15,000
Therefore, Deficiency of Sumit’s Profit
= ₹ 20,000 – ₹ 15,000 = ₹ 5,000

Question 6.
Zebra Ltd. issued 20,000, 12% of ₹ 100 each at par. The debentures are redeemable at a premium of 20% after 5 years. The amount of loss on redemption of debentures should be:
(a) ₹ 5,00,000
(b) ₹ 4,00,000
(c) ₹ 3,00,000
(d) ₹ 16,00,000

ABC Ltd. issued 5,000, 8% Debentures of ₹ 100 each at a premium of 5% on 1st April, 2021. The interest on debentures for the year 2021-22 would be:
(a) ₹ 40,000
(b) ₹ 42,000
(c) ₹ 48,000
(d) ₹ 52,000 (1)
Answer:
(b) ₹ 4,00,000

Explanation: Debentures are redeemed at a premium of 20% after 5 years.
Premium on redemption of debentures
= 20,000 x (20% of ₹ 100)
= 20,000 x 20
= ₹ 4,00,000
Loss on redemption of debentures = ₹ 4,00,000

(a) ₹ 40,000
Explanation: Interest on debentures
= (50,000 x 100) x \(\frac { 8 }{ 100 }\) = ₹ 40,000

Question 7.
If applicants for 80,000 shares were allotted 60,000 shares on pro-rata basis, a shareholder, Rakesh who was allotted 1,200 shares must have applied for:
(a) 900 shares
(b) 3,600 shares
(c) 1,600 shares
(d) 4,800 shares (1)
Answer:
(c) 1,600 shares

Explanation: Ratio of allotment of shares = 80,000 : 60,000 = 4 : 3
Shares applied by Rakesh = \(\frac { 4 }{ 3 }\) x 1,200 = 1,600

Question 8.
Arun, Tarun and Deepak are partners in a firm sharing profits in the ratio of 2 :1:1. Deepak died on 31st December, 2021. His Capital was ₹ 4,00,000 on 31st March, 2021. Interest on Capital is payable to the partners @ 5% p.a. What amount is due to the deceased partner asinterest on capital?
(a) ₹ 15,000
(b) ₹ 20,000
(c) ₹ 10,000
(d) ₹ 12,000

Ashish and Nitesh were partners in a firm with capitals of ₹ 2,00,000 and ₹ 1,00,000 respectively. Ashish is entitled for a salary of ₹ 12,000 per year. The firm earned a profit of ₹ 72,000 during the year. Nitesh’s share of profit will be:
(a) ₹ 20,000
(b) ₹ 30,000
(c) ₹ 10,000
(d) ₹ 36,000 (1)
Answer:
(a) ₹ 15,000
Explanation: Period for interest = 9 months
Interest on Deepak’s Capital for 9 months
= 4,00,000x \(\frac { 5 }{ 100 }\) x \(\frac { 9 }{ 12 }\)
= ₹ 15,000

(b) ₹ 30,000
Explanation:
Profit of the firm = ₹ 72,000
Profit after Ashish’s salary = 72,000 – 12,000
= ₹ 60,000
Nitesh’s share of profit = \(\frac { 60,000 }{ 2 }\)
= ₹ 30,000
As per Indian partnership Act 1932, the profits and losses of the firm are shared by all the partners equally.

Related Theory
The other important provisions of Indian Partnership Act, 1932 are: Profits and losses of the firm shall be shared by the partners equally, no partner is entitled for any interest on capital and no interest on drawings is chargeable. In case of any loan from partners, interest @ 6% per annum is payable.

Question 9.
What would be the Net Effect of Accumulated Profits and Losses?
(a) ₹ 1,50,000
(b) ₹ 1,80,000
(c) ₹ 1,35,000
(d) ₹ 2,25,000 (1)
Answer:
(c) ₹ 1,35,000

Explanation: Net Effect of Accumulated Profits and Losses = Balance of Profit & Loss Account + General Reserve – Advertisement Suspense Account = ₹ 1,20,000 + ₹ 60,000 – ₹ 45,000 = ₹ 1,35,000.

Read the following hypothetical situation, ‘Answer Question No. 9 and 10
Raj, Lakshmi and Sitara were college friends who completed their studies and decided to start a business in partnership. With the support of their families and friends, they started a readymade clothes showroom in partnership in Noida.

At this point of time, they decided to share profits and losses in the ratio of \(\frac { 2 }{ 9 }\) \(\frac { 1 }{ 3 }\) and \(\frac { 4 }{ 9 }\) respectively. After some years, they are dissatisfied with their profit sharing ratio, so they decided to share future gains and losses in the ratio of 4: 3: 2. They also made the decision to record the effect of the following without altering their book values:

Profit & Loss Account ₹ 1,20,000
General Reserve ₹ 60,000
Advertisement Suspense Account ₹ 45,000

Question 10.
What would be the sacrifice or gain of the partners, as a result of change in profit sharing ratio?
(a) Raj \(\frac { 2 }{ 9 }\) Gain; Sitara \(\frac { 2 }{ 9 }\) Sacrifice.
(b) Raj \(\frac { 2 }{ 9 }\) Sacrifice; Sitara \(\frac { 2 }{ 9 }\) Gain.
(c) Lakshmi \(\frac { 2 }{ 9 }\) Gain; Sitara \(\frac { 2 }{ 9 }\) Sacrifice.
(d) Raj \(\frac { 2 }{ 9 }\) Gain; Lakshmi \(\frac { 2 }{ 9 }\) Sacrifice. (1)
Answer:
(a) Raj \(\frac { 2 }{ 9 }\) Gain; Sitara \(\frac { 2 }{ 9 }\) Sacrifice
Explanation: Old Ratio of Raj, Lakshmi and Sitara = 2: 3: 4
New Ratio of Raj, Lakshmi and Sitara = 4: 3 : 2
Raj’s Gain or Sacrifice = \(\frac { 2 }{ 9 }\) – \(\frac { 4 }{ 9 }\) = – \(\frac { 2 }{ 9 }\) (Gain)
Lakshmi’s Gain or Sacrifice = \(\frac { 3 }{ 9 }\) – \(\frac { 3 }{ 9 }\) = Nil
Sitara s Gain or Sacrifice = \(\frac { 4 }{ 9 }\) – \(\frac { 2 }{ 9 }\) = \(\frac { 2 }{ 9 }\) (Sacrifice)

Question 11.
What will be the correct sequence of events?
(I) Average Profit
(II) Value of Goodwill
(III) Total Profit
(IV) Superprofit Options:
(a) (I), (II), (III), (IV)
(b) (III), (I), (IV), (II)
(c) (II), (III), (IV), (I)
(d) (IV), (II), (I), (III) (1)
Answer:
(b) (III), (I), (IV), (II)

Explanation: For calculating the value of goodwill by super profit method, firstly total profits of past years is calculated, on the basis of which average profit is calculated. Afterwards, super profit is calculated to compute the value of goodwill of the firm.

Question 12.
12,000 shares of ₹ 100 each forfeited due to non-payment of ₹ 40 per share. First & final call of ₹ 30 per share not yet made. These shares were re-issued at ₹ 80 per share for ₹ 70 per share. Which of the following forfeited amount will be transferred to Capital Reserve Account?
(a) ₹ 4,80,000
(b) ₹ 3,60,000
(c) ₹ 1,20,000
(d) ₹ 2,40,000 (1)
Answer:
(b) ₹ 3,60,000
Explanation: Re-issue of shares made at a premium of (₹ 80 – ₹ 70) ₹ 10 per share. Therefore, full forfeited amount i.e., 12,000 x ₹ 30 = ₹ 3,60,000 will be transferred to Capital Reserve.

Question 13.
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 14.
Anil, Bimal and Chetan are equal partners. Dhruv is admitted to the firm for one-fourth share. Dhruv brings ₹ 2,00,000 as capital and ₹ 50,000 being half of the premium for good will The value of goodwill of the firm is:
(a) ₹ 1,00,000
(b) ₹ 4,00,000
(c) ₹ 3,00,000
(d) None of these (1)
Answer:
b) ₹ 4,00,000
Explanation: Dhruv’s share = 1/4
Dhruv’s share of Goodwill = ₹ 50,000 x 2
= ₹ 1,00,000
Value of Goodwill of the Firm = ₹ 1,00,000 x 4
= ₹ 4,00,000

Question 15.
If a fixed amount is withdrawn on 1st day of every quarter, for what period the interest on total amount withdrawn will be calculated?
(a) 5.5 months
(b) 6 months
(c) 4.5 months
(d) 7.5 months

Ram is a partner and draws ₹ 5,000 per month at the end of the month. Interest on drawings is to be charged @15% p.a. His interest on drawings will be:
(a) ₹ 4,250
(b) ₹ 4,125
(c) ₹ 4,000
(d) ₹ 9,000 (1)
Answer:
(d) 7.5 months

Month’s left after first drawing = 12
Month’s left after last drawing = 3
= \(\frac { 12+3 }{ 2 }\) = \(\frac { 15 }{ 2 }\) =7.5 months

(b) ₹4125
Explanation: 12 x 5000
= ₹ 60,000
= Total Drawings in a year Interest on Drawings
= 60000 x \(\frac { 15 }{ 100 }\) x \(\frac { 5.5 }{ 12 }\)
= 4125

Caution
Average Period Method is used in solving this question, If the partners withdraw fixed amount at fixed time interval, interest on drawings mag be calculated on the basis of the average period. Fixed time interval refers to withdrawal made monthlg, quarterlg, halfgearlg, once in 2 months and once in 4 months.

Question 16.
Sita, Rita and Meeta are partners sharing profit and losses in the ratio of 2:2:1 Their balance sheet as on March 31, 2021 is as follows:

They decided to dissolve the business. The following amounts were realised: Plant and Machinery ₹ 4,250, Stock ₹ 3,500, Debtors ₹ 1850, Furniture ₹ 750. Sita agreed to bear all realisation paid by the firm expenses. For the service Sita is paid ₹ 60. Actual expenses on realisation paid by the firm amounted to ₹ 450. Creditors paid 2% less. There was an unrecorded assets of ₹ 250, which was taken over by Rita at ₹ 200 Gain/Loss on realisation will be:
(a) ₹ 140 (Gain)
(b) ₹ 140 (Loss)
(c) ₹ 530 (Gain)
(d) ₹ 530 (Loss) (1)
Answer:
(c) ₹ 530 (Gain)
Explanation:
Dr. Realisation Account Cr.

Question 17.
Hanny, Pammy and Sunny are partners sharing profits in the ratio of 3:2:1. Goodwill is appearing in the books at a value of ₹ 60.000. Pammy retires and at the time of Pammy’s retirement, goodwill is valued at ₹ 84.000. Hanny and Sunny decided to share future profits in the ratio of 2:1. Record the necessary journal entries. (3)
Answer:
journal

Working Notes

Pammy’s share of current value of goodwill \(\frac { 1 }{ 3 }\) of ₹ 84,000 = ₹ 84,000 x \(\frac { 1 }{ 3 }\) = ₹ 28,000
Gaining Share = New Share – Old Share

Hanny’s Gaining Share = \(\frac { 2 }{ 3 }\) – \(\frac { 3 }{ 6 }\) = \(\frac { 1 }{ 6 }\)
Sunny’s Gaining Share = = \(\frac { 1 }{ 3 }\) – \(\frac { 3 }{ 6 }\) = \(\frac { 1 }{ 6 }\)
Thus, gaining Ratio of Hanny and Sunny is = \(\frac { 1 }{ 6 }\) : \(\frac { 1 }{ 6 }\) = 1 : 1

Question 18.
Amitabh and Babul are partners sharing profits in the ratio of 3 : 2 with capitals of ₹ 50,0 and ₹ 30,000 respectively. Interest on capital is agreed @ 6% p.a. Babul is to be allowed an annual salary of ₹ 2,500. During the year 2021-22, the profits prior to the calculation of interest on capital but after charging Babul’s salary amounted to ₹ 12,500. A provision of 5% of the profit is to be made in respect of commission to the manager.

Rajesh and Mahesh were partners in a firm sharing profits and losses in the ratio of 7 : 5. Their respective fixed capitals were ₹ 10,00,000 and ₹ 7,00,000. The partnership deed provided for the following:

Interest on capital @ 12% p.a.
Rajesh’s salary ₹ 6,000 per month and Mahesh’s salary ₹ 60,000 per year.

The profit for the year ended 31st March, 2022 was ₹ 5,04,000 which was distributed in the ratio of 3 : 2 without providing for the above. Pass an adjustment entry. (3)
Answer:
Dr. Profit and Loss Appropriation Account Cr.
for the year ending 31st March, 2022

Working Notes:
Manager’s commission = 5% of profit
Profit before Babul’s salary = 12,500 + 2,500 = ₹ 15,000
Therefore, Manager’s commission = ₹ 15,000 x \(\frac { 5 }{ 100 }\) = ₹ 750

Journal

Question 19.
Moon Ltd. issued 7,000, 10% Debentures of ₹ 500 each at a premium of ₹ 50 per debenture redeemable at a premium of 10% after 5 years. According to the terms of issue, ₹ 200 was payable on application and balance on allotment. Record necessary Journal Entries at the time of issue of 10% debentures.
OR
Future Ltd. purchased machinery from Present Ltd. for ₹ 10,00,000 to expand its running business of apparel manufacturing. It made the payment as follows:

₹ 4,00,000 by cheque, ₹ 6,00,000 by issue of fully paid equity shares of ₹ 10 each at a premium of 20%. Pass journal entries in the books of Future Ltd. (3)
Answer:
In the Books of Moon Ltd.
Journal

In the Books of Future Ltd.
Journal

Question 20.
Sonu, Monu and Tanu were partners in a firm sharing profits and losses in the ratio of 4 : 3 : 1. The firm closes its books on 31st March every year. As per the agreement, on death of any partner, the share of Goodwill of deceased partner will be calculated at 50% on the basis of net profits of last four completed years before death. Sonu died on 30th June, 2019. The profits for the last four years were:

Year	2015-16 (₹)	2016-17 (₹)	2017-18 (₹)	2018-19 (₹)
Profit	97,000	1,05,000	30,000	84,000

His share of profit in the year of his death was to be calculated on the basis of sales. Sales for the year ended 31st March, 2019 was ₹ 21,00,000. From 1st April, 2019 to 30th June, 2019 the firm’s sales was ₹ 2,00,000. Pass necessary journal entries relating to the amount of Goodwill and Profit to be trans ferred to Sonu’s Capital Account.

Reena and Raman are partners with capitals of ₹ 3,00,000 and ₹ 1,00,000 respectively. The profit for the year ended 31st March, 2019 was ₹ 1,20,000. Interest on Capital is to be allowed at 6% p.a. Raman was entitled to a salary of ₹ 30,000 p.a. The drawings of partners were ₹ 30,000 and ₹ 20,000. The interest on drawings to be charged to Reena was ₹ 1,000 and to Raman ₹ 500. Assuming that Reena and Raman are equal partners, state their share of profits after necessary appropriations. (3)
Answer:
Journal

Working Notes:
(i) Calcutation of Goodwill
50% of Net Profit of last four years = \(\frac { 9 7.000 + 1,05.000 + 30,000 + 84,000 }{ 2 }\) = \(\frac { 3,16,000 }{ 2 }\)
= ₹ 1,58,000
Sonu’s Share of Goodwill = 1,58,000 x \(\frac { 4 }{ 2 }\) = ₹ 79,000
Gaining ratio of Moriu = New share – Old Share
= \(\frac { 3 }{ 4 }\) – \(\frac { 3 }{ 8 }\) = \(\frac { 6-3 }{ 8 }\) = \(\frac { 3 }{ 8 }\)
Gaining ratio of Tanu = \(\frac { 1 }{ 4 }\) – \(\frac { 3 }{ 8 }\) = \(\frac { 2-1 }{ 8 }\) = \(\frac { 1 }{ 8 }\)
Goodwill borne by Monu = 79.000 x \(\frac { 3 }{ 4 }\) = ₹ 59,250
Goodwill borne by Tanu = 79,000 x \(\frac { 1 }{ 4 }\) = ₹ 19,750

(ii) Sonu’s Share of Profit
Ratio of last year profit = \(\frac { 84,000 }{ 21,00,000 }\) = 0.04
Profit for the current year = 2,00,000 x 0.04 = ₹ 8,000
Sonu’s share of Profit = 8,000 x \(\frac { 4 }{ 8 }\) = ₹ 4,000

Profit and Loss Appropriation Account
Dr. for the year ending 31st March, 2019 Cr.

Share of Profits:
Reena = ₹ 33,750
Roman = ₹ 33,750

Question 21.
On 1st April 2021, Supreme Motors Ltd. was formed with an authorised capital of ₹ 20,00,000 divided into 2,00,000 equity shares of ₹ 10 each. The company issued prospectus inviting applications for 1,80,000 equity shares.

The company received applications for 1,70,000 shares. During the first year, ₹ 8 per share were called. Poorvi holding 2,000 shares and Namita holding 4,000 shares did not pay the first call of ₹ 2 per share. Namita’s shares were forfeited after the first call and lateron 3,000 of the forfeited shares were re-issued at ₹ 6 per share, ₹ 8 called up.
Show the following:

Share Capital in the Balance Sheet of the company as per Schedule III, Part I of the Companies Act, 2013.
Also prepare notes to accounts. (4)

Answer:
Balance Sheet of Supreme Motors Ltd. as at …………..

Notes to accounts:

Question 22.
Sita, Rita and Mita are partners sharing profits and losses in the ratio of 2 : 2:1. Their Balance Sheet as on 31st March, 2020 is as follows:
Balance Sheet
as at 31st March, 2020

They decided to dissolve the business. The following amounts were realised: Plant and Machinery ₹ 4,250; Stock ₹ 3,500; and Debtors ₹ 1,850. Sita agreed to bear all realisation expenses. For the service, Sita is paid ₹ 60. Actual expenses on realisation amounted to ₹ 450. Creditors were paid 2% less. There was an unrecorded asset of ₹ 250, which was taken over by Rita at ₹ 200. Prepare the necessary accounts to close the books of the firm. (4)
Answer:
Reatisation Account

Dr. Bank Account Cr.

Dr. Bank Account Cr.

Assumption: Since no information is given on realisation expenses, they are treated as borne by firm and ₹ 60 paid to Sita as commission for realisation.

Question 23.
Robert Ltd. invited applications for 1,00,000 shares of ₹ 10 each at a premium of ₹ 2 per share payable as follows: On application ₹ 5; On allotment ₹ 5 (including premium); On first call ₹ 2. The company received applications for 1,50,000 shares and allotment was made on pro rata basis.

Over-subscribed money received on application was adjusted with the amount due on allotment. Mr. Rajan to whom 500 shares were allotted failed to pay the allotment money and first call. On his subsequent failure to pay his arrears, his shares were forfeited. Later on, the forfeited shares were reissued for ₹ 9 per share as fully

paid up. Pass necessary journal, entries for recording the above transactions.

Ashoka Ltd. issued 50,000 equity shares of ₹ 10 each at a premium of ₹ 2 per share, payable as follows:
₹ 3 per share on application; ₹ 3 per share on allotment (including premium); and balance on call. The applications were received for 75,000 shares and the allotment was made as follows:

List I – Applicants for 5,000 shares were allotted in full
List II – Applicants for 40,000 shares were allotted 30,000 shares on pro rata basis.
List III – Applicants for 30,000 shares were allotted 15,000 shares on pro rata basis.

All the shareholders paid the amount due on allotment and call except Arjun (who was allotted 1,500 shares under List II) and Karan (who was allotted 1,000 shares under List III). They did not pay money due on allotment and first call. Their shares were forfeited and reissued for ₹ 6 fully paid up. Pass the necessary journal entries to record the above transactions.(6)
Answer:
journal

journal

Question 24.
Ram, Laxman and Bharat were partners in a firm sharing profits and losses in the ratio of 3:2:1. On 31st March, 2022, their balance sheet was as follows: Balance Sheet of Ram, Laxman and Bharat as on 31.03.2022
Balance Sheet
as on 31st March, 2020

On the above date Shatrugan was admitted as a new partner and it was decided that:

The new profit sharing ratio between Ram, Laxman, Bharat and Shatrugan will be 2 : 2 :1:1.
Goodwill of the firm was valued at ₹ 90,000 and Shatrugan brought his share of goodwill in cash.
The market value of investments was ₹ 24,000.
Machinery will be reduced to ₹ 29,000.
A creditor of ₹ 3,000 was not Likely to claim the amount and hence to be written off.
Shatrugan wilt bring proportionate capital so as to give th share in the \(\frac { 1 }{ 6 }\) profits of the firm. Prepare Revaluation Account and Partners’ Capital Accounts.

The Balance Sheet of Mohit, Neeraj and Sohan who are partners in a firm sharing profits according to their capitals , as on 31st March, 2022 was as under:
Balance Sheet as
at 31st March, 2022

On that date, Neeraj decided to retire from the firm and was paid for his share in the firm subject to the following:

Buildings to be appeciated by 20%.
Provision for Bad Debts to be increased to 15% on Debtors.
Machinery to be depreciated by 20%.
Goodwill of the firm is valued at ₹ 72,000 and the retiring partner’s share is adjusted through the capital accounts of remaining partners.
The capital of new firm to be fixed at ₹ 1,20,000. Prepare Revaluation Account and Partner’s Capital Accounts. (6)

Answer:
Dr.Revaluation Account Cr.

Dr. Partner’s CapitaL A/c Cr.

Working flotes:
(i) Combined Capital of Ram, Laxman and Bharat = ₹ 81,000 + ₹ 44,000 + ₹ 22,000 = ₹ 1,47,000
Combined share of Rom, Laxman and Bharat = 1 – \(\frac { 1 }{ 6 }\) = \(\frac { 5 }{ 6 }\)
Totalcapitatoffirm = ₹ 1,47,000 x \(\frac { 6 }{ 5 }\) = ₹ 1,76,400
Shatrugan’s Capital = ₹ 1,76,400 x \(\frac { 1 }{ 6 }\) = ₹ 29,400

(ii) Calculation of Sacrificing ratio
Sacrificing ratio = New share — Old share
Ram= \(\frac { 2 }{ 6 }\) – \(\frac { 3 }{ 6 }\) = – \(\frac { 1 }{ 6 }\) (Sacrifice)
Laxman = \(\frac { 2 }{ 6 }\) – \(\frac { 2 }{ 6 }\) = 0
Bharat= \(\frac { 1 }{ 6 }\) – \(\frac { 1 }{ 6 }\) = 0

(iii) Premium of Goodwill to be brought by Shatrugan
= ₹ 90,000 x \(\frac { 1 }{ 6 }\) = ₹ 15,000 which shall be credited to Ram’s Capital A/c

Dr. Revatuation Cr.

Dr. Partner’s Capital, Account Cr.

Question 25.
X, Y and Z decided to dissolve their partnership firm on 31st March, 2021. Their profit sharing ratio was 3:2:1 and their Balance Sheet was as under:
Balance Sheet of X, Y and Z
as at 31st March, 2021

It is agreed as follows:

The stock of value of ₹ 41,660 are taken over by X for ₹ 35,000 and he a9reed t0 discharge bank loan.
The remaining stock was sold at ₹ 14,000.
Debtors amounting to ₹ 10,000 realised ₹ 8,000. The remaining debtors realised 50% at their book value.
Land is sold for ₹ 1,10,000.
The cost of realisation amounted to ₹ 1,200.
There was a typewriter not recorded in the books worth of ₹ 6,000 which was taken over by one of the Creditors at this value. Prepare Realisation Account, Partners’ Capital Accounts, and Cash Account to close the books of the firm.

Kanika, Disha and Kabir were partners in a partnership firm sharing profits and losses in the ratio of 2 :1:1. On 31st March, 2019, their Balance Sheet was as under:

Balance Sheet
as at 31st March, 2019

Kanika retired on 1st April, 2019. For this purpose, the following adjustments were agreed upon:
(i) Goodwill of the firm was valued at 2 years’ purchase of average profits of three completed years preceding the date of retirement. The profits for the year were:
2016- 17 ₹ 1,00,000
2017- 18 ₹ 1,30,000

(ii) Fixed Assets were to be increased to ₹ 3,00,000.

(iii) Stock was to be valued at 120%.

(iv) The amount payable to Kanika was transferred to her Loan Account.
You are required to prepare Revaluation Account, Capital Accounts of the partners and the Balance Sheet of the reconstituted firm. (6)
Answer:
Dr. Realisation Account Cr.

Dr. Partners’ Capital Accounts Cr.

Dr. Cash Account Cr.

Dr. Revaluation Account Cr.

Dr. Partners’ Capital Account Cr.

Balance Sheet
as on 31St March, 2019

Working Note:
Calculation of Good will:
Good will = Average Profits x Number of Years’ Purchase

= \(\frac { ₹ 1,00,000 + ₹ 1,30,000 – ₹ 20,000 }{ 3 }\)
= \(\frac { ₹ 2,10,000 }{ 3 }\)
= ₹ 70,000
Goodwill of the Firm= 70,000 x 2 = ₹ 1,40,000
Kanika’s share of Goodwill= 1,40,000 x \(\frac { 2 }{ 4 }\) = ₹ 70,000
which will be borne b gaining partners in their gaining ratio
Disha will compensate= 70,000 x \(\frac { 1 }{ 2 }\) = ₹ 35,000
Kabir will compensate= 70,000 x \(\frac { 1 }{ 2 }\) = ₹ 35,000
Note: Since no information is given about the share of gain, ¡t is assumed that the old partners are gaining
in their old profit sharing ratio.

Question 26.
Pass necessary journal entries related to issue of 10,000,9% Debentures of ₹ 100 each in the following cases:

When debentures are issued at par and redeemable at par.
When debentures are issued at par and redeemable at a premium of 10%
When debentures are issued at a premium of 25% to the vendors for the purchase of machinery worth ₹ 1,25,000.
When debentures are issued at a premium of ₹ 250 and redeemable at par. (6)

Answer:
journal

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

Question 27.
Which one of the following is not a limitation of Financial Statement Analysis?
(a) Variations in accounting practices
(b) Ignore qualitative aspects
(c) Judge the ability of the firm to repay its debt
(d) Does not consider price level changes.

Debt equity ratio of a company is 3 : 1. The company wants to bring it to standard ratio of 2 :1. Following options are available:
(i) Issue of equity shares
(ii) Issue of debentures
(iii) Purchase goods on credit
Choose the correct option:
(a) Only (i) is correct
(b) Only (ii) is correct
(c) Only (i) and (ii) are correct
(d) Only (ii) and (iii) are correct (1)
Answer:
(c) Judge the ability of the firm to repay its debt

Explanation: To judge the ability of the firm to repay its debt is one of the objective of financial system analysis. Analysis of financial statements reveals important facts covering managerial performance and the eff iciency of the firm.

(a) only (i) is correct

Explanation: Debt equity ratio measures the relationship between long term debt and equity. To reduce the debt equity ratio, new shares can be issued to thereby increasing the equity and long term debt remaining the same.

Question 28.
What will be the effect on Proprietory ratio when a loan is obtained from a bank payable after 10 years?
(a) Increase
(b) Decrease
(c) No Change
(d) Name of these (1)
Answer:
(b) Decrease

Explanation: Because there is no change in capital but net assets will increase.

Related Theory
The different solvency ratios are debt equity ratio, debt ratio, proprietary ratio, total assets to debt ratio and interest coverage ratio.

Question 29.
‘Claims against the company not acknowledged as debts’ will be shown under the head of the Balance Sheet.
(a) Current Liabilities
(b) Non-Current Liabilities
(c) Commitments
(d) Contingent Liabilities

“Unpaid dividend” shown in the Balance Sheet of a company as per Schedule III of the Companies Act, 2013?
(a) Reserve and Surplus
(b) Current Liabilities
(c) Non-Current liabilities
(d) Shareholders Fund (1)
Answer:
(d) Contingent Liabilities

Explanation: All claims which the company doesn’t acknowledge as debt, should be disclosed as contingent liability in the Balance Sheet of a company.

(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.

Assets	31.03.2019 (₹)	31.03.2020 (₹)
Plant and Machinery	10,00,000	12,60,000

During the year, piece of machinery costing ₹ 23,000 on which accumilated depreciation was ₹ 15,000 was sold for ₹ 5,000. How much amount will be shown in Investing activity for cash flow statement for the year ended 31st March, 2020.
(a) Outflow ₹ 2,78,000
(b) Inflow ₹ 2,78,000
(c) Outflow ₹ 15,000
(d) Inflow ₹ 15,000 (1)
Answer:
(a) Outflow ₹ 2,78,000
Dr. Machinery Account Cr.

There is a purchase of machinery worth ₹ 2,83,000 during the year ended 31st March 2020 resulting in outflow of cash. There is inflow of cases of ₹ 5,000 from sale of old machinery. The total outfolow is ₹ 2,78,000.

Question 31.
Under which major heading and sub-heading will the following items be presented in the Balance Sheet of a company as per Schedule III of The Companies Act, 2013.

Copyrights
Sundry Creditors
Debenture Sinking Fund
Calls in advance
Security deposits with telephone exchange
Patents (3)

Answer:
Particulars

Copyrights
Sundry Creditors
Debenture Sinking Fund
Call in advance
Security deposits with Telephone Exchange
Patents

Major Heading

Non-current Assets
Current Liabilities
Shareholders’ Funds
Current Liabilities
Non-current Assets
Non-current Assets

Sub-Heading

Tangible Assets
Trade Payable
Reserve and Surplus
Other Current Liabilities
Loans and Advances
Intangible Assets

Question 32.
(i) One of the objectives of analysis of financial statement is to ascertain the relative importance of the different components of the financial position of the firm’. State two other objective of this analysis.

(ii) List any four items of ‘reserve’ that are shown under the headings ‘Reserves and Surplus’ in the Balance Sheet of a company as per schedule III of the Companies Act 2013. (3)
Answer:
(i) Objectives of Analysis Statement:

(1) Assessing the earning capacity or profitability of the firm as a whole as well as its different departments so as to judge the financial health of the firm,

(2) Judging the ability of the firm to repay its debts and assessing the short term as well as long term liquidity position of the firm.

Reserve and Surplus
Capital Reserve
Securities Premium Reserve
Capital Redemption Reserve

Question 33.
Following information is given by a company from its books of accounts as on March 31, 2022:

Particulars	Amount (₹)
Inventory	1,00,000
Total Current Assets	1.60,000
Shareholders’ funds	4,00,000
13% Debentures	3,00,000
Current liabilities	1,00,000
Net Profit Before Tax	3,51,000
Cost of revenue from operations	5,00,000

Calculate:

Current Ratio
Liquid Ratio
Debt Equity Ratio
Interest Coverage Ratio

The Current Ratio of company is 2.1 : 1.2. State with reasons which of the following transactions decrease or not change the ratio:

Redeemed 9% debentures of ₹ 1,00,000 at a premium of 10%
Received from Debtors ₹ 17,000
Issued ₹ 2,00,000 equity shares to the vendors of machinery.
Accepted bills of exchange drawn by the creditors ₹ 7,000. (4)

Answer:

= \(\frac { 1,60,000 }{ 1,00,000 }\) = 1.6 : 1

(ii) Liquid Assets = Current assets – Inventory = ₹,60,000 – ₹ 1,00,000 = ₹ 60,000 Liquid Ratio = Liquid Assets/Current Liabilities = 60,000/₹ 1,00,000 = 0.6 : 1

(iii) Debt-Equity Ratio = Long-term Debts/ Shareholders’ Funds
= ₹ 3,00,000/ ₹ 4,00,000 = 0.75 : 1

(iv) Net Profit before Interest Net Profit before
Tax + Interest on Long & Tax term Debts = ₹ 3,51,000 + (13% of ₹ 3,00,000)
= ₹ 3,5 1,000 + ₹ 39,000 = ₹ 3,90,000
Interest Coverage Ratio = Net Profit before Interest & Tax
Interest on Long Term Debts = ₹ 3,90,000/ ₹ 39,000 = 10 times

Given that Current ratio = 2.1 : 1.2; Let Current Assets = ₹ 2,10,000
Then Current liability = ₹ 1,20,000

(i) Due to redemption of ₹ 1,00,000, 9% Debentures at a premium of 10% Current assets will decrease ₹ 1,10,000 as there will be reduction in cash balance.
New Current Assets = 2,10,000 – 1,10,000 = ₹ 1,00,000
New Current ratio = \(\frac { 1,00,000 }{ 1,20,000 }\) = 0.83 : 1
Therefore, Current ratio will decrease

(ii) Received from debtors ₹ 17,000 Will not change the Current Assets and Current Liabilities as there will be reduction in debtors and corresponding increasing in Cash balance. Therefore, Current Ratio will not change.

(iii) Issued ₹ 2,00,000 Equity shares to the vendor of machinery Current Assets and Current Liabilities will not change and thus, Current Ratio will not change.

(iv) Accepted bills of exchange drawn by the creditors ₹ 7,000. It will not change the value of Current Assets and Current Liabilities and thus, Current Ratio will not change.

Question 34.
Read the following hypothetical text and answer the given questions on the basis of the same: Sunshine Power Ltd. is a leading company in the manufacturing of Solar power plants. The company plan to raise funds by way of issue of 12% Debentures to meet its expansion plans. The Balance Sheet of the company as at 31.03.2022 is as follows:
Balance Sheet of Sunshine Ltd.
As at 31.03.2022

Notes

Additional Information:
(i) ₹ 50,000, 12% Debentures were issued on 31.03.2022

(ii) During the year, a piece of machinery costing ₹ 40,000, on which accumulated depreciation was ₹ 20,000 was sold at a Loss of 5,000.

You are required to:

Calculate net profit before tax and extraordinary items.
Calculate operating profit before working capital changes.
Calculate cost of machinery purchased.
Calculate Cash flow from investing activities.
Calculate Cash flow from financing activities. (6)

Answer:
(i) Calculation of Profit Before Tax:
Balance as per Profit and Loss A/c (Change in

(ii) Calculation of operating profit before working capital changes
Net Profit before Tax ₹ 1,75,000

(iii) Calculation of cost of rnachiner purchased
Add : Adjustment for Non-Cash and Non-

Dr. Machinery Account Cr.

(iv) Calculation of Cash flow from investing activities
Sale of Machinery – Purchase of Machinery – Purchase of Non-current Investment
= 15,0 – 3,55,000 – 25,000 = (₹ 3,65,000)
There is a cash outflow of ₹ 3,65,000 from investing activities

(v) Calculation of Cash flow from financing activities Issue of Share Capital + Issue of 12% Debentures – Interest on Debentures Paid – Dividend Paid + Bank overdraft raised ₹ 1,00,000 + ₹ 50,000 – ₹ 21,000 – ₹ 62,500 + ₹ 37,500
Net cash inflow from financing activities = ₹ 1,04,000