CBSE Sample Papers for Class 12 Accountancy Set 8 with Solutions

Students must start practicing the questions from CBSE Sample Papers for Class 12 Accountancy with Solutions Set 8 are designed as per the revised syllabus.

CBSE Sample Papers for Class 12 Accountancy Set 8 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.
Ajit and Varun are partners running a business of manufacturing PVC pipes. To expand their they
decided to admit Rohit for \(\frac { 1 }{ 5 }\) th share of profits. The journal entry for adjustment of General Reserve was as follows:

The new profit sharing ratio of Ajit, Varun and Rohit will be:
(a) 17 : 7 : 6
(b) 8 : 4 : 3
(c) 2 : 1 : 2
(d) 5 : 3 : 2 (1)
Answer:
(b) 8 : 4 : 3

Explanation: Since general reserve is distributed among the old partners in old profit share ratio Old profit sharing ratio among Ajit and Varun = 24,000 : 12,000 = 2:1
Profit share of Rohit = \(\frac { 1 }{ 5 }\)
Remaining share = 1 – \(\frac { 1 }{ 5 }\) = \(\frac { 4 }{ 5 }\)
Ajits new share = \(\frac { 2 }{ 3 }\) x \(\frac { 4 }{ 5 }\) = \(\frac { 8 }{ 15 }\)
Varun’s new share = \(\frac { 1 }{ 3 }\) x \(\frac { 4 }{ 5 }\) = \(\frac { 4 }{ 15 }\)
Rohit’s share = \(\frac { 1 }{ 5 }\) = \(\frac { 1 }{ 5 }\)
New profit sharing ratio = 8 : 4 : 3

Question 2.
Assertion (A) : Out of existing goodwill of ₹ 1,00,000 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) : Goodwill existing in the books is purchased goodwill and therefore, is not written off completely.
(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:
(c) Both (A) and (R) are incorrect.

Explanation: ₹ 1,00,000 goodwill must be written off from the books completely not partially. Thus both Assertion and Reason are false

Question 3.
Issued Capital – 50,000 shares of ₹ 10 each Subscribed Capital – 40,000 shares with ₹ 8 called up Calls in arrears – ₹ 25,000 The amount of paid up Capital will be:
(a) ₹ 2,95,000
(b) ₹ 5,00,000
(c) ₹ 3,20,000
(d) ₹ 4,75,000
OR
A company issued 1,000, 10% debentures of ₹ 100 each at a premium of 5%. The total amount of interest for one year will be ……………….
(a) ₹ 10,500
(b) ₹ 5,000
(c) ₹ 5,250
(d) ₹ 10,000 (1)
Answer:
(a) ₹ 2,95,000
Explanation:
Paid up Capital = Called up capital – Calls in arrears
= (40,000 x 8) – 25,000 = 3,20,000 – 25,000 = ₹ 2,95,000

Related Theory
The other heads of Share Capital are: Authorised Capital, Issued Capital and Subscribed Capital.

Explanation: Interest on debentures shall be payable @ 10% on face value i.e. ₹ 100 each. Total face value of debentures
= 1000 x 100 = ₹ 1,00,000
Interest on debentures
= 1,00,000 x 10/100 = ₹10,000

ReLated Theory
Interest paid an debentures shalt be transferred to statement of profit and loss at the end of the financial year.

Question 4.
Radha and Sudha were partners in a firm sharing profits equally. Their fixed capitals were ₹ 2,00,000 and ₹ 1,00,000
respectively. The partnership deed provided for interest on capital @ 10% per annum. For the year ended 31st March, 2019 the profits of the firm were distributed without providing interest on capital. The journal entry to rectify the error would be:

OR
The capital accounts of Ram and Shyam showed balances of ₹ 80,000 and ₹ 40,000 as on 1st April, 2021. They shared profits and losses in the ratio of 3 : 2. They allowed interest on capital @ 10% p.a. and interest on drawings @ 12% p.a. During the year, Ram withdrew ₹ 2,000 per month at the beginning of every month and Shyam withdrew ₹ 1,000 per month at the end of every month. Profit for the year, before the above mentioned adjustments, was ₹ 41,500. The profit transferred to their capital accounts would be:
(a) Ram – ₹ 24,900; Shyam – ₹ 16,600
(b) Ram – ₹ 19,032; Shyam – ₹ 12,688
(c) Ram – ₹ 17,700; Shyam – ₹ 11,800
(d) Ram – ₹ 23,568; Shyam – ₹ 15712 (1)
Answer:

Particulars	Radha	Sudha	Total
Interest on capital	20,000	10,000	30,000
Profit taken back	15,000	15,000	30,000
Net Effect	+5,000 (Cr.)	-5,000 (Dr.)	Nil

interest on capital @ 10% per annum shall be ₹ 30,000, (₹ 20,000 for Radha and ₹10,000 for Sudha), which shall be credited to their current accounts. Accordingly, the profit is reduced by the same amount and the current accounts are debited by ₹ 15,000 each, the profit sharing ratio being equal. The difference is adjusted by single entry. It is assumed that the capitals of the partners are fixed.

Related Theory
All adjustments in respect of partner’s salary, partner’s commission, interest on capital, interest on drawings, commission, interest on capital, interest on drawings etc. are made through Profit and Loss Appropriation Account.

(b) Ram – ₹ 19,032; Shyam – ₹ 12,688
Explanation:
Interest on capital
Ram – ₹ 80,000 x \(\frac { 10 }{ 100 }\) = ₹ 8,000
Shyam – ₹ 40,000 x \(\frac { 10 }{ 100 }\) = ₹ 4,000
Interest on Drawings
Ram’s Drawings = ₹ 2,000 x 12
= ₹ 24,000
Interest on Ram’s Drawings
= ₹ 24,000 x \(\frac { 12 }{ 100 }\) x \(\frac { 6.5 }{ 12 }\)
= ₹ 1,560
Shyam’s Drawings = ₹ 1,000 x 12 = ₹ 12,000
Interest on Shyam’s drawings
= ₹ 12,000 x \(\frac { 12 }{ 100 }\) x \(\frac { 5.5 }{ 12 }\)
= ₹ 660
Dr. Profit and Loss Appropriation Account Cr.

Question 5.
Hemant, Manish and Sameer are partners sharing profits in the ratio of 3:3:2. According to the partnership agreement, Sameer is to get a minimum amount of ₹ 80,000 as his share of profits every year and any deficiency on this account is to be personally borne by Hemant. The net profit for the year ended 31st March 2021 amounted to ₹ 3,12 ,000. The amount of deficiency to be borne by Hemant is:
(a) ₹ 1,000
(b) ₹ 4,000
(c) ₹ 8,000
(d) ₹ 2,000 (1)
Answer:
(d) ₹ 2,000
Explanation :
Profit Sharing Ratio of Hemant, Manish and Sameer = 3 : 3 : 2
Net Profit for the year ended 31st March, 2021 = ₹ 3,12 ,000
Sameer’s share in profit = ₹ 3,12,000 x \(\frac { 2 }{ 8 }\)
= ₹ 78,000
Profit guaranteed to Sameer = ₹ 80,000
Amount of Deficiency in Sameer’s profit share to be borne by Hemant
= ₹ 80,000 – ₹ 78,000
= ₹ 2,000

Question 6.
A company issued 1,000, 10% debentures of ₹ 100 each at a premium of 5%. The total amount of interest for one year will be …………….
(a) ₹ 10,500
(b) ₹ 5,000
(c) ₹ 5,250
(d) ₹ 10,000

Surya Ltd. issued 5000, 8% debentures of ₹ 100 each at a discount of 10% redeemable at a premium of 5% after 4 years. According to the terms of issue, ₹ 30 was payable on application and balance on allotment of debentures. As regards to the above information, which of the following statement is not matching with the accounts of Surya Ltd.:
(a) Loss on issue of debentures ₹ 75,000
(b) Premium on redemption of debentures ₹ 25,000
(c) Allotment money received on debentures ₹ 4,00,000
(d) Debenture application money received ₹ 1,50,000 (1)
Answer:
(c) ₹ 10,000
Explanation: Interest on debentures shall be payable @ 10% on face value i.e. ₹ 100 each. Total face value of debentures
= 1000 x 100 = ₹ 1,00,000
Interest on debentures
= 1,00,000 x 10/100 = ₹ 10,000

Related Theory
Interest paid an debentures shall be transferred to statement of profit and loss at the end of the financial

Explanation: Allotment money received on debentures = Face value of debentures – Amount received, on application – Discount
= 100 – 30 – 10 = 60 each
= 5,000 x 60 = 3,00,000

Assumption: It is assumed that the discount on debentures ¡s adjusted on allotment, issue is fully subscribed and alt the money ¡s duly received.

ReLated Theory
Loss on issue of debentures
= Discount on issue + Premium on redemption
=(10 % of ₹100 x 5000) + (5% of ₹100 x 5000)
= (10 x 5000) + (5 x 5000)
= 50,000 + 25,000 = ₹ 75,000
Premium on redemption = 5% of 100 x 5000
= 5 x 5000 = 25,000
Amount received on application = 30 x 5000
= 1,5o,ooo
Hence, all other statements are as per the accounts.

Question 7.
Akshara, a shareholder of a company to whom 12,000 shares were allotted of ₹ 100 each, failed to pay allotment money of ₹ 30 per share and call money of ₹ 30 per share. Akshara had paid only application money. Pro-rata allotment proportion is 5 : 6. What will be the amount of calls-in-arrears on allotment?
(a) ₹ 3,60,000
(b) ₹ 2,64,000
(c) ₹ 96,000
(d) None of the above (1)
Answer:
(b) ₹ 2,64,000
Explanation:
Allotment Money Due on Akshara’s shares
= 12,000 x ₹ 30 = ₹ 3,60,000
Shares Applied by Akshara = \(\frac { 6 x 12,000 }{ 5 }\) = 14,400
Excess application money
= {(14,400 – 12,000) x ₹ 40}
= 2,400 x ₹ 40
= ₹ 96,000
Calls-in-Arrears on Allotment = Allotment Money Due – Excess application money
= ₹ 3,60,000 – ₹ 96,000
= ₹ 2,64,000

Question 8.
Ram, Shyam and Ghanshyam are partners sharing profits in the ratio of 5 : 3 : 2. Shyam retires, and the new profit sharing ratio between Ram and Ghanshyam is 1 : 1. The goodwill of the firm is valued at ₹ 1,00,000. Shyam’s share of goodwill will be adjusted by:
(a) Debiting Ram’s Capital A/c and Ghanshyam’s Capital A/c with ₹ 15,000 each.
(b) Debiting Ram’s Capital A/c with ₹ 21,429 and Ghanshgam’s Capital A/c with ₹ 8,571.
(c) Debiting Ghanshgam’s Capital A/c with ₹ 30,000
(d) Debiting Shgam’s Capital A/c with ₹ 30,000

Amit and Sumit are partners in a firm. Amit advance a loan of ₹ 50,000 @ 12% p.a. on 31st December, 2019. For the gear ending 31st March, 2020, 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)

Read the following hgpothetical situation, Answer Question No. 9 and 10

Dhara and Agam were MBA and worked together in a renowned compang. Due to – pandemic theg both lost their jobs in March, 2020. After failing to get ang job, theg decided to start their own business. With the support and guidance of their familg, theg started ‘Star Herbal Products’ compang in partnership in Pune on 1st April, 2020.

Their initial contribution was ₹ 2,00,000 and ₹ 3,00,000 respectivelg. As the major efforts to start the business were made bg Agam, so theg both agreed to share profits and losses in the ratio of 1: 2. On 1st October, 2020 some financial emergencg occurred in the firm, so Dhara and Agam granted loans of ₹ 50,000 and ₹ 30,000 respectivelg to the 14. firm.
Answer:
(c) Debiting Ghanshyam’s Capital A/c with ₹ 30,000
Explanation: Shyam’s share of Goodwill
= \(\frac { 3 }{ 10 }\) of ₹ 1,00,000
= \(\frac { 3 }{ 10 }\) x 1,00,000 = ₹ 30,000
Ram’s Gain = New share – Old share
= \(\frac { 1 }{ 2 }\) – \(\frac { 5 }{ 10 }\) = \(\frac { 5 – 5 }{ 10 }\) = \(\frac { 0 }{ 10 }\) = 0
Ghanshyam’s Gain = New share – Old share
= \(\frac { 1 }{ 2 }\) = \(\frac { 2 }{ 10 }\) = \(\frac { 5 }{ 10 }\) = \(\frac { 2 }{ 10 }\) = \(\frac { 3 }{ 10 }\)
Therefore, Ghanshyam’s share of goodwill
= \(\frac { 3 }{ 10 }\) of 1,00,000
= ₹ 30,000
Explanation: The share of goodwill is shared by the continuing partners in gaining ratio. Here, the gain for Ghanshyam is 3/10, hence, the goodwill to Shyam will be paid by Ghanshyam and his capital account will be debited by ₹ 30,000. Since, Ram is not gaining he will not share for goodwill.

Related Theory
In case of goodwill already existing in the books, it shall be written off among the old partners in their old profit sharing ratio.

(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)

Related Theory
Omissions or errors, if any, left while preparing final accounts of a firm are adjusted through Profit and Loss Appropriation account.

Question 9.
If the profit before interest at 31st March, 2021 amounted to ₹ 6,000, what amount would be transferred to Dhara’s Capital Account and Agam’s Capital Account for the gear ended 31st March, 2021?
(a) Dhara ₹ 2,400; Agam ₹ 1,200
(b) Dhara ₹ 1,200; Agam ₹ 2,400
(c) Dhara ₹ 2,000; Agam ₹ 4,000
(d) Dhara ₹ 2,800; Agam ₹ 5,600 (1)
Answer:
(b) Dhara ₹ 1,200; Agam ₹ 2,400

Explanation:
Profit to be transferred to capital accounts of Dhara and Agam = ₹ 6,000 (Profit before Interest) -₹ 1,500 (Interest on Dhara’s Loan) – ₹ 900 (Interest on Agam’s Loan) = ₹ 3,600 Dhara’s share of profit = ₹ 3,600 x \(\frac { 1 }{ 3 }\) = ₹ 1,200
Agam’s share of profit = ₹ 3,600 x \(\frac { 2 }{ 3 }\) = ₹ 2,400

Question 10.
If the profit before interest at 31st March, 2021 amounted to ₹ 1,500, what amount would be transferred to Dhara’s Capital Account and Agam’s Capital Account for the gear ended 31st March, 2021?
(a) Dhara ₹ 300; Agam ₹ 600
(b) Dhara ₹ 1,200; Agam ₹ 2,400
(c) Dhara ₹ 1,300; Agam ₹ 2,600
(d) Dhara ₹ 600; Agam ₹ 300 (1)
Answer:
(a) Dhara ₹ 300; Agam ₹ 600

Explanation: Loss to be transferred to capital accounts of Dhara and Agam = ₹ 1,500 (Profit before Interest) – ₹ 1,500 (Interest on Dhara’s Loan) – ₹ 900 (Interest on Agam’s Loan) = ₹ 900 Dhara’s share of loss = ₹ 900 x \(\frac { 1 }{ 3 }\) = ₹ 300 .
Agam share of loss = ₹ 900 x \(\frac { 2 }{ 3 }\)
= ₹ 600

Question 11.
What will be the correct sequence of events?
(I) Adjustment of Capital
(II) Accounting Treatment of Reserves, Accumulated Profits and Losses
(III) Determination of Sacrificing Ratio and Gaining Ratio
(IV) Revaluation of assets and reassessment of liabilities
(a) (I), (II), (III), (IV)
(b) (II), (I), (IV), (III)
(c) (IV), (III), (I), (II)
(d) (III), (II), (IV), (I) (1)
Answer:
(d) (III), (II), (IV), (I)

Explanation: The issues that need to be dealt with at the time of change in profit-sharing ratio are: determination of sacrificing ratio and gaining ratio; accounting treatment of goodwill; accounting treatment of reserves, accumulated profits and losses; revaluation of assets and reassessment of liabilities; and adjustment of capital.

Question 12.
A compang issued 60,000 shares of ₹ 10 each. The amount to be paid as: ₹ 4 on application, ₹ 2 on allotment, ₹ 2 on first call and the remaining moneg on final call. The called-up value per share was ₹ 8. The compang forfeited 1,200 shares of Mr. X for non-pagment of first call moneg. On forfeiture of shares the share capital account will be:
(a) Debited bg ₹ 9,600
(b) Debited bg ₹ 12,000
(c) Credited bg ₹ 9,600
(d) Credited bg ₹ 12,000 (1)
Answer:
(a) Debited bg ₹ 9,600

Explanation:
Called-up amount on shares = ₹ 8
No. of Shares Forfeited of Mr. X = 1,200
Amount of Share Capital Account
= No. of Shares Forfeited x Called-up Amount
= 1,200 x ₹ 8 = ₹ 9,600

Question 13.
Share issued bg a compang to its emplogees or directors in consideration of ‘Intellectual Propertg Rights’ are known as:
(a) Sweat Equitg Shares
(b) Private Equitg Shares
(c) Right Equitg Shares
(d) Bonus Equitg Shares (1)
Answer:
(a) Sweat Equity Shares

Explanation: Sweat equity shares are issued by a company to its directors or employees at a discount or for consideration, other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called.

Question 14.
In PK Limited, P and K are partners sharing profits in the ratio of 3: 2. R is admitted for l/5th share and he brings in ₹ 1,68,000 as his share of goodwill which is credited to the Capital Accounts of P and K respectivelg with ₹ 1,26,000 and ₹ 42,000. New profit sharing ratio will be:
(a) 3:1:5
(b) 3:2:5
(c) 9:7:4
(d) 7:9:4 (1)
Answer:
(c) 9 : 7 : 4
Explanation:
Old Profit Sharing Ratio of P and K = 3 : 2
Rs share = \(\frac { 1 }{ 5 }\)
Goodwill brought by R has been credited to the Capital Accounts of P and K respectively with ₹ 1,26,0 and ₹ 42,000,
Sacrificing Ratio of P and K
= 1,26,000 : 42,000 or 3: 1 13
P’s contribution in favour of R = \(\frac { 1 }{ 5 }\) x \(\frac { 3 }{ 4 }\) = \(\frac { 3 }{ 20 }\)
K’s contribution in favour ofR = \(\frac { 1 }{ 5 }\) x \(\frac { 1 }{ 4 }\) = \(\frac { 1 }{ 20 }\)
P’s new share = \(\frac { 3 }{ 5 }\) – \(\frac { 3 }{ 20 }\) = \(\frac { 9 }{ 20 }\)
K’s new share = \(\frac { 2 }{ 5 }\) – \(\frac { 1 }{ 20 }\) = \(\frac { 7 }{ 20 }\)
New Profit-sharing Ratio = \(\frac { 9 }{ 20 }\) : \(\frac { 7 }{ 20 }\) : \(\frac { 1 }{ 5 }\) or 9 : 7 : 4

Question 15.
If a partner withdraws equal amount at end of each month, then …………….. are considered for interest on total drawings.
(a) 5.5 months
(b) 6 months
(c) 6.5 months
(d) 7.5 months
OR
Prabhu draws ₹ 500 per month on the last dag of everg month. If the rate of interest is 5% p.a., then the total interest on drawings will be:
(a) ₹ 132.5
(b) ₹ 137.5
(c) ₹ 275
(d) ₹ 127.5 (1)
Answer:
(a) 5.5 months

\(\frac { 12-1 }{ 2 }\) = \(\frac { 11 }{ 2 }\)
= 5.5 Months

Related Theory
In case of withdrawal at the beginning of the month, the formula would be total number of
one divided by 2 i.e. \(\frac { 12+1 }{ 2 }\) = 6.5
months plus

(b) R 137.5
Explanation:
Interest on Prabhu’s Drawings
= (500 x 12) x 5/100 x 5.5/12
= ₹ 137.5

Question 16.
At the time of dissolution of a firm, there is a loan from partner outstanding in the Balance Sheet. Partner’s loan is paid after payment of outside liabilities. What journal entry is recorded in the books of accounts at the time of dissolution of firm? (1)
(a) journal

Answer:
(a) journal

Explanation: At the time of dissolution of firm, first of all outside liabilities are paid off from the amount realised by disposing off the assets of the firm and available cash and bank balance. The remaining balance is used to first repay the partner’s loan. Hence, partner’s loan A/c is debited and Bank A/c is credited being the payment made.

Related Theory
In case of dissolution of firm, a Realisation Account is prepared to ascertain the net effect on realisation of assets and payment of liabilities which may be transferred to the partner’s capital accounts in their profit sharing ratio.

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.
Anoop and Ajay are partners sharing profits and losses in the ratio of 2 : 1. They admit Sanjay as partner with 1/4th share in profits with guarantee that his share of profit shall be at least ₹ 55,000. The net profit of the firm for the year ending 31st March, 2022 was ₹ 1,60,000.
Prepare Profit and Loss Appropriation Account.
OR
Shashank, Prashant and Devesh are partners in a firm. Their capital accounts on 1st April, 2019, stood at ₹ 2,00,000, ₹ 1,20,000 and ₹ 1,60,000 respectively. Each partner withdrew ₹ 15,000 during the financial year 2021-22.

As per the provisions of their partnership deed:

Interest on capital was to be allowed @ 5% per annum.
Interest on drawings was to be charged @ 4% per annum.
Profits and losses were to be shared in the ratio 5: 4: 1.

The net profit of ₹ 72,000 for the year ended 31st March 2022, was divided equally amongst the partners without providing for the terms of the deed. You are required to pass a single adjustment entry to rectify the error (Show workings clearly). (3)
Answer:
Profit And Loss Appropriation Account
Dr. for the year ending 31st March, 2019 Cr.

Working Notes:
Sanjay s Share = \(\frac { 1 }{ 4 }\)
Anoop’s share in deficiency = \(\frac { 2 }{ 3 }\) x \(\frac { 3 }{ 4 }\) = \(\frac { 2 }{ 4 }\)
Ajay’s new Share = \(\frac { 1 }{ 3 }\) x \(\frac { 3 }{ 4 }\) = \(\frac { 1 }{ 4 }\)
New Profit Sharing ratio = 2 : 1 : 1
Sanjay’s actual profit = ₹ l,60,000 x \(\frac { 1 }{ 4 }\)
= ₹ 40,000
Deficiency in Sanjay’s profit
= ₹ 55,000 – ₹ 40,000
= ₹ 15,000
Deficiency to be borne by Anoop and Ajay in the ratio of 2 :1
Anoop’s share in deficiency
= 15,000 x \(\frac { 2 }{ 3 }\) = ₹ 10,000
Ajay’s share in deficiency
= ₹ 15,000 x \(\frac { 1 }{ 3 }\) = ₹ 5,000 3
Anoop’s profit = 1,60,000 x \(\frac { 2 }{ 4 }\) – ₹ 10,000
= ₹ 80,000 – ₹ 10,000 = ₹ 70,000
Ajay’s Profit = 1,60,000 x \(\frac { 1 }{ 4 }\) – ₹ 5,000
= ₹ 40,000 – ₹ 5,000 = ₹ 35,000
OR
Journal

Adjustment Table

Particulars	Shashank	Prashant	Devesh	Firm
1. Interest on Capital 2. Interest on Drawings 3. Profit Wrongly Distributed in equal ratio	11,410 (300) (24,000)	6,000 (300) (24,000)	8,000 (300) (24,000)	(24,000) 900 72,000
Total	(14,300)	(18,300)	(16,300)	(48,900)
Distribution of profit in the ratio of 5 : 4 : 1	24,450	19,960	4,890	48,900
Net Effect	10,150	1,260	(11,410)

Working notes:
(i) Interest on Capital:
Shashank = ₹ 2,00,000 x \(\frac { 5 }{ 100 }\) = ₹ 10,000
Prashant = ₹ l,20,000 x \(\frac { 5 }{ 100 }\) = ₹ 6,000
Devesh = ₹ 1,60,000 x \(\frac { 5 }{ 100 }\) = ₹ 8,000

(ii) Interest on drawings:
Shashank, Prashant and Devesh
= ₹ 15,000 x \(\frac { 5 }{ 100 }\) x \(\frac { 6 }{ 12 }\)
= ₹ 300 each
Since the date to drawings is not given, it is assumed that equal amount is withdrawn in middle of every month and hence time period of 6 months is taken as average period for calculation of interest on drawings.

(iii) Amount of Profit already distributed
= ₹ 72,000 x \(\frac { 1 }{ 3 }\)
= ₹ 24,000 each

(iv) Profit to be distributed
Divisible Profit
= ₹ 72,000 – (10,000 + 6,000 + 8,000) + (300 + 300 + 300)
= ₹ 72,000 – 24000 + 900 = ₹ 48,900
Shashank’s share of Profit
= ₹ 48,900 x \(\frac { 5 }{ 10 }\)
= ₹ 24,450
Prashant’s share of profit
= ₹ 48,900 x \(\frac { 4 }{ 10 }\)
= ₹ 19,560
Devesh”s share of profit
= ₹ 48,900 x \(\frac { 1 }{ 10 }\)
= ₹ 4,890

Question 19.
On 1st Nov. 2020, Tata Ltd. issued 20,000, 10% debenture of ₹ 100 each at a discount of 5%, redeemable at par after four years. The debentures were fully subscribed. It has a balance of ₹ 40,000 in capital reserve and ₹ 75,000 in Securities Premium Reserve which the company decided to use for writing off the discount on issue of debentures. Pass the journal entries for issue of debentures and writing off the discount. Also prepare discount on issue of Debentures Account.

Perfect Solar Limited purchased the business of Santner Limited consisting assets of the book value ₹ 20,00,000 and the liabilities of ₹ 2,50,000. It was agreed that the purchase consideration, settled at ₹ 19,00,000 be paid by issuing 12% Debentures of ₹ 100 each. Pass journal entries in the books of the firm, if the debentures are issued:

at a discount of 10%; and
at a premium of 10%. It was agreed that any fraction of debentures be paid in cash. (3)

Answer:
Journal of Tata Ltd.

Dr. Discount on Issue of Debentures Account Cr.

In the Books of Perfect Solar Limited
Journal

(i) When Debentures are issued at 10% Discount
Journal

Working Notes:
Number of Debentures Issued =

= \(\frac { 19,00,000 }{ 100-10 }\)
= \(\frac { 19,00,000 }{ 90 }\)
= 21,111.11 or 21,111

(ii) When Debentures are issued at 10% premium
Journal

Working Notes:
Number of Debentures Issued =

= \(\frac { 19,00,000 }{ 100+10 }\)
= \(\frac { 19,00,000 }{ 110 }\)
= 17,272.11 or 17,272

Question 20.
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 under mentioned 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. (3)
Answer:
Journal

Statement showing Adjustments

Particular	Ajay		Akash		Ajit		Firm
Particular	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.
Profit Wrongly Credited	18,000	—	6,000	—	6,000	—	’ —	30,000
Interest on Capital	—	3,000	—	2,400	—	1,800	7,200	—
Interest on drawings	350	—	250	—	150	—	—	750
Salaries	—	5,000	— .	7,500	—	—	12,500	—
Commission	—	3,000	—	—	—	—	3,000	—
Actual Profits	—	4,830	—	1,610	—	1,610	8,050	—
Total	18,350	15,830	6,250	11,510	6,150	3,410	30,750	30,750
Net effect	—	2,520	5,260	—	—	2,740	—	—

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

Question 21.
Vijeta Ltd. has an authorised capital of ₹ 50,00,000 divided into equity shares of ₹ 100 each. The company invited applications for 40,000 shares, applications for 36,000 shares were received. All calls were made and duly received except for 500 shares on which the final call of ₹ 20 was not received. The company forfeited 200 shares on which final call was not received. Show how share capital will appear in the balance sheet of the company. Also prepare ‘Notes to Accounts’ for the same. (4)
Answer:
In the books of Vijeta Ltd.
Balance Sheet (Extract) as at ……………..

Particulars

Note No.

Amount (₹)

Equity and Liabilities

1. Shareholder’s Fund (a) Share Capital

35,90,000

Notes to accounts:

Question 22.
Amar, Akbar and Anthony shared profits in the ratio of 3 : 2 :1. On 31st March, 2020 their balance sheet was as follows:
Balance Sheet
as on 31st March, 2020

On this date, the firm was dissolved. Amar was appointed to realise the assets. Amar was to receive 6% of the amount realised on sale of assets. Amar realised the assets as follows: Plant ₹ 72,000; Debtors ₹ 54,000; Furniture ₹ 18,000; Stock 90% of Book Value; Investments ₹ 76,000; and Bills Receivable ₹ 31,000. Expenses on realisation amounted to ₹ 4,500. Prepare Realisation Account. (4)
Answer:
Dr. Reatisation Account Cr.

Working Notes:
(i) Amar’s Commission on Realisation: 6% of realisation of assets

(ii) Amount received from realisation of assets
= Plant + Debtors + Furniture + Stock + Investments + Bills Receivable
= 72,000 + 54,000 + 18,000 + 54,000 + 76,000 + 31,000 = ₹ 3,05,000
6% of 3,05,000 = \(\frac { 6 }{ 100 }\) x 3,05,000 = ₹ 18,300

(ii) Share of loss transferred to Partner’s Capital Account:
Total loss on realisation = ₹ 65,800
Amar’s share = \(\frac { 3 }{ 6 }\) of 65,800 = ₹ 32,900
Akbar’s Share = \(\frac { 2 }{ 6 }\) of 65,800 = ₹ 21,933
Anthony’s share = \(\frac { 1 }{ 6 }\) of 65,800 = ₹ 10,967

Assumption: It is assumed that realisation expenses are paid separately and not included in Amar’s Commission.

Question 23.
Surya Ltd. invited applications for issuing 50,000 Shares of ₹ 10 each at par. The amount was payable as follows:
On Application ₹ 2 per share
On Allotment ₹ 4 per Share
On First and Final call – Balance
The issue was over subscribed three times. Applications for 30% was rejected and money refunded. Allotment was made to remaining applicants as under:

Category	No. of Shares Applied	No. of Shares Alloted
I	80,000	40,000
II	25,000	10,000

Excess money paid by the applicants who were allotted shares was adjusted towards the sum due on allotment. Manish, a shareholder belonging to Category I who had applied for 1,000 shares, failed to pay the allotment money. Sanjeev, a shareholder holding 100 shares also failed to pay the allotment money.

Sanjeev belonged to Category II. Shares of both Manish and Sanjeev were forfeited immediately after allotment. Afterwards, first and final call was made and was duly received. The forfeited shares of Manish and Sanjeev were reissued at ₹ 11 per share fully paid up. Pass necessary journal entries for the above transactions in the books of the company.

Sudershan Ltd. invited applications for 10,000 equity shares of ₹ 10 each at a premium of 80%, payable as follows:
On Application – ₹ 8 (including premium ₹ 4)
On Allotment – ₹ 5 (including premium ₹ 2)
On First call – ₹ 3 (including premium ₹ 1)
On Second and Final call – ₹ 2 (including balance premium)
Applications were received for 30,000 shares and allotment was made as follows:
Category I – Applicants of 10,000 Shares – Nil
Category II – Applicants for 8,000 Shares -20%
Category III – Applicants for 7,000 Shares – 60%
Category IV – Applicants for 5,000 Shares – remaining Shares

Excess Application money was utilised on allotment and first call only. Mr. John from Category IV who applied for 250 shares did not pay second and final call and his shares were forfeited immediately. The forfeited shares were re-issued for ₹ 10 per share fully paid up. Pass necessary journal entries. (6)
Answer:
Journal

Working Notes:
Total Applications Received = 50,000 x 3 = 1,50,000 Shares

Share Allotment Table

Category	Shares Applied	Shares Alloted	Application Money reed. (₹)	Application Money due (₹)	Excess (₹)	Adjusted on Allotment(₹)	Refund(₹)
1	80,000	40,000	1,60,000	80,000	80,000	80,000	–
2	25,000	10,000	50,000	20,000	30,000	30,000	–
3	45,000	Nil	90,000	Nil	90,000	–	90,000
Total	1,50,000	50,000	3,00,000	1,00,000	2,00,000	1,10,000	90,000

(i) Application rejected = 30% of 1,50,000
= \(\frac { 30 }{ 100 }\) x 1,50,000 = 45,000

(ii) Pro rata ratio for shares allotted:
Category I = 80,000 : 40,000 = 2:1
Category II = 25,000 : 10,000 = 5:2

(iii) Manish’s Allotted Shares = 1,000 x \(\frac { 1 }{ 2 }\) = 500 shares
Application Money received = 1,000 x 2 = ₹ 2,000
Less Application Money due = 500 x 2 = ₹ 1,000;
Excess = 2,000 – 1000 = ₹ 1,000
Allotment money due = 500 x 4 = ₹ 2,000
Allotment money not paid by Manish = 2,000 – 1,000 = ₹ 1,000

(iv) Sanjeev’s Allotted Shares = 100
Shares applied by Sanjeev = 100 x \(\frac { 5 }{ 2 }\) = 250
Application Money received = 250 x 2 = ₹ 500
Application Money due = 100 x 2 = ₹ 200
Excess = 500 – 200 = ₹ 300
Amount due on allotment = 100 x 4 = ₹ 400
Amount not paid by Sanjeev = 400 – 300 = ₹ 100
Total amount not paid on allotment = 1,000 + 100 = ₹ 1,100

(iv) Total amount due on allotment = 50,000 x 4 = ₹ 2,00,000
Excess Amount received on application = ₹ 1,10,000
Amount received on allotment = 2,00,000 – 1,10,000 – 1,100 = ₹ 88,900

(v) Forfeited amount of Manish’s Shares = (500 x 6) – 1,000 = 3,000 – 1,000 = ₹ 2,000
Forfeited amount of Sanjeev’s Shares = (100 x 6) – 100 = 600 – 100 = ₹ 500
Total amount of forfeited shares = 2,000 + 500 = ₹ 2,500

Journal

Working Notes:
(i) Shares Allotment Table

Category	Shares Applied	Shares Alloted	Application money reed (₹)	Application money due (₹)	Excess (₹)	Allotment money due (₹)	First Call due (₹)	Refund (₹)	Second Call due (₹)
1	10,000	Nil	80,000	Nil	80,000	0	0	80,000	0
II	8,000	1,600	64,000	12,800	51,200	8,000	4,800	38,400	3,200
III	7,000	4,200	56,000	33,600	22,400	21,000	12,600	0	8,400
IV	5,000	4,200	40,000	33,600	6,400	21,000	12,600	0	8,400
Total	30,000	10,000	2,40,000	80,000	1,60,000	50,000	30,000	1,18,400	20,000

(ii) Amount of Share Forfeiture A/c:
Share applied by Mr. John = 250
Ratio of allotment to category IV = \(\frac { 4200 }{ 5000 }\)
Shares allotted to Mr. John = \(\frac { 4200 }{ 5000 }\) x 250 = 210 Shares
Amount paid by Mr. John towards Share Capital:
On application – ₹ 4 per share
On allotment – ₹ 3 per share
On first call – ₹ 2 per share
Total = 4 + 3 + 2 = ₹ 9 per share
Amount of share forfeiture A/c = 210 x 9 = ₹ 1,890

Question 24.
The Balance sheet of Ritesh and Dinesh who shared profits in the ratio of 3 :2 was as follows on 31st December, 2021
Balance Sheet of Ritesh and Dinesh as on 31st December, 2021

On this date, Sumit was admitted as a partner on the following conditions:
(i) He was to get \(\frac { 4 }{ 15 }\) th share of profit.

(ii) He had to bring in ₹ 30,000 as his Capital

(iii) He would pay cash for Goodwill which would be based on 2\(\frac { 1 }{ 2 }\) years purchase of the profits of the past four years.

(iv) Ritesh and Dinesh would withdraw half the amount of Goodwill brought by Sumit.

(v) The assets would be valued as: Sundry Debtors at book value less a provision of 5%; Stock at ₹ 20,000; Plant and Machinery at ₹ 40,000; and Patents at ₹ 12,000.

(vi) Liabilities were valued at ₹ 23,000, one bill for goods purchased was omitted from the books.

(vii) Profits for past four years were:
2016 ₹ 15,000
2017 ₹ 20,000
2018 ₹ 14,000
2019 ₹ 17,000
Pass necessary journal entries and prepare Revaluation Account to record the above.

Amit, Balan and Chander were partners in a firm sharing profits and losses in the proportion of \(\frac { 1 }{ 2 }\), \(\frac { 1 }{ 3 }\) and \(\frac { 1 }{ 6 }\) respectively. Chander retired on 31st March, 2022. The Balance Sheet of the firm on the date of Chander’s retirement was as follows:
Balance Sheet
as on 31st March, 2022

It was agreed that:
(i) Goodwill will be valued at ₹ 27,000.

(ii) Depreciation of 10% was to be provided on Machinery.

(iii) Patents were to be reduced by 20%.

(iv) LiabiLity on account of Provident Fund was estimated at ₹ 2,400.

(v) Chander took over Investments for ₹ 15,800.

(vi) Amit and Balan decided to adjust their capitals in proportion of their profit sharing ratio by opening Current Accounts. Prepare Revaluation Account and Partners’ Capital Accounts on Chander’s retirement. (6)
Answer:
Journal

Dr. Realisation Account Cr.

Explanation: Working Notes:
Goodwill of the firm = 2 – \(\frac { 1 }{ 2 }\)
years purchase of average profits of last four years
Average profits of last four years = ₹ \(\frac { 15,000 + 20,000 + 14,000 + 17,000 }{ 4 }\) = ₹ \(\frac { 66,000 }{ 4 }\) = ₹ 16,500
Goodwill of the firm = 2 – \(\frac { 1 }{ 2 }\) x ₹ 16,500 = \(\frac { 5 }{ 2 }\) x 16,500 = ₹ 41,250
Sumit’s share of goodwill = \(\frac { 4 }{ 15 }\) x 41,250 = ₹ 11,000

OR
Dr. Revaluation Account Cr.

Dr. Partners’ CapitaL Account Cr.

Working Notes:
(1) Adjustment of Goodwill:
Goodwill of Firm = ₹ 27,000
Cha nder’s share of Goodwill = ₹ 27,000 x \(\frac { 1 }{ 6 }\) = ₹ 4,500
which will be compensated by Amit and Balan in their Gaining Ratio, i.e., 3: 2
Amit wilt compensate = ₹ 4,500 x \(\frac { 3 }{ 5 }\) = ₹ 2,700
Batan will compensate = ₹ 4,500 x \(\frac { 2 }{ 5 }\) = ₹ 1,800

(2) Adjustment of Capital:
Adjusted Old Capital of Amit = ₹ 40,000 + ₹ 300 + ₹ 4,500 – ₹ 2,700
= ₹ 42,100
Adjusted Old Capital of Balan = ₹ 36,500 + ₹ 200 + ₹ 3,000 – ₹ 1,800
= ₹ 37,900
Total Adjusted Capital of Amit and Balan = ₹ 42,100 + ₹ 37,900 = ₹ 80,000
New Profit Sharing Ratio of Amit and Balan = 3 : 2
Amit’s New Capital = ₹ 80,000 x \(\frac { 3 }{ 5 }\) = ₹ 48,000
Balan’s New Capital = ₹ 80,000 x \(\frac { 2 }{ 5 }\) = ₹ 32,000
Note: Since, here no information is given regarding the share acquired by Amit and Balan, therefore, their
gaining ratio ¡s same as their new profit sharing ratio, i.e., 3:2.

Question 25.
Anil, Bhanu and Chandu were partners in a firm sharing profits in the ratio of 5:3:2. On March 31, 2021, their
Balance Sheet was as under:
Books of Anil, Bhanu and Chandu
Balance Sheet as on March 31, 2022

Anil died on October 1, 2021. It was agreed between his executors and the remaining partners that:

(i) Goodwill to be valued at 2-1/2 year’s purchase of the average profits of the previous four years which were:
Year 2017-18 – Rs.13,000,
Year 2018-19 – Rs. 12,000,
Year 2019-20 – Rs.20,000,
Year 2020-21 – Rs.15,000

(ii) Patents be valued at Rs.8,000; Machinery at Rs.28,000; and Building at Rs.25,000.

(iii) Profit for the year 20121-22 be taken as having accrued at the same rate as that of the previous year.

(iv) Interest on capital be provided at 10% p.a.

(v) Half of the amount due to Anil be paid immediately.

Prepare Revaluation Account, Anil’s Capital Account and Anil’s Executor’s Account as on October 1, 2021. (6)
Answer:

Working notes:
Goodwill = 2\(\frac { 1 }{ 2 }\) jears’ purchase x Average Profit
Average Profit = \(\frac { 13, 000+ 12,000+ 20,000+15,000 }{ 2 }\)
= \(\frac { 60,000 }{ 4 }\) = ₹ 15,000
Goodwill = \(\frac { 5 }{ 2 }\) x Rs. 15,000 = ₹ 37,500
Anil’s Share of Goodwill = \(\frac { 5 }{ 10 }\) x ₹ 37,500 = ₹ 18,750
Profit from the date of last balance sheet to date of death (April 1, 2021 to October 1, 2021)
= 6 months Profit for 6 months
= 15,000 x \(\frac { 6 }{ 12 }\) = ₹ 7500
Anil’s share of profìt= 7,500 x \(\frac { 5 }{ 10 }\) = ₹ 3,750
Interest on Capital (April 1, 202 ito October 1, 2021) = ₹ 30,000 x \(\frac { 10 }{ 100 }\) x \(\frac { 6 }{ 12 }\) = ₹ 1,500

Question 26.
Johnson Ltd. issued 10,000, 8% Debentures of ₹ 100 each. Pass necessary Journal entries in the books of the company for the issue of debentures, when debentures were:

Issued at Par, redeemable at 5% Premium
Issued at 5% Premium, redeemable at 5% Premium
Issued at 5% Premium, redeemable at Par. (6)

Answer:

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 efficiency 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.

Related Theory
Debt equity ratio measures the degree of indebtedness of an enterprise and gives an idea to the long-term lender regarding extent of security of the debt.

Question 28.
If total assets are ₹ 13,20,000, non current assets ₹ 6,00,000 and capital employed is ₹ 12,00,000, which of the following correctly represents the current ratio? (1)
(a) 2:1
(b) 4:1
(c) 6:1
(d) 7:1 1
Answer:
(c) 6: 1
Explanation:

Current assets = Total assets – non current assets
= 13,20,000 – 6,00,000
= 7,20,000
Current Liabilities = Total assets – Capital employed
= 13,20,000 – 12,00,000
Current ratio = \(\frac { 7,20,000 }{ 1.20.000 }\) = \(\frac { 6 }{ 1 }\)
= 6 : 1

Related Theory
Current ratio is a part of Liquidity ratios. Liquidity ratios are calculated to have indications about the short term solvency of the business i.e., the firm’s ability to meet its current’obligations. The other liquidity ratio is quick ratio.

Question 29.
A firm has inventory turnover of 3 times and cost of revenue from operations is ₹ 2,70,000. With better inventory management, the inventory turnover is increased to 5 times. This would result in:
(a) Increase in inventory by ₹ 54,000.
(b) Decrease in inventory by ₹ 36,000
(c) Increase in cost of revenue from operations by ₹ 20,000
(d) Decrease in inventory by ₹ 90,000

Which of the following are correct?
(I) Inventory Turnover Ratio = Cost of Revenue from Operations/Inventory
(II) Working Capital Turnover Ratio = Revenue from Operations/Working Capital
(III) Proprietory Ratio = Shareholders’ Funds/ Total Assets
Choose the correct option:
(a) Both I & II
(b) Both II & III
(c) Both I & III
(d) All of the above (1)
Answer:
(b) Decrease in inventory by ₹ 36,000

Explanation:
Inventory Turnover Ratio

Average Inventory = ₹ \(\frac { 2,70,000 }{ 3 }\) = ₹90,000
After inventory management,
Inventory Turnover Ratio =

Average Inventory = ₹ \(\frac { 2,70,000 }{ 5 }\) = ₹ 54,000
Change in Inventory = ₹ 90,000 – ₹ 54,000
= ₹ 36,000

(b) Both II & III

Explanation: Correct formula for calculating Inventory Turnover Ratio is dividing Cost of Revenue from Operations bj Average Inventory. Average Inventory is calculated by dividing the sum of Opening Inventory and Closing Inventory by two.

Question 30.
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 (1)
Answer:
(a) (i) – b; (ii) – c; (iii) – a

Explanation: The mouse is used for all the operations required and for navigation in worksheet, except data entry, but some of the important operations and navigations can be performed by using key strokes. Sometimes ‘ two keys are to be pressed together to get one key stroke.

In a worksheet, to reach the top of the worksheet Ctrl and Home keys needs to be pressed together. Ctrl and End keys are pressed together to reach the end of the worksheet i.e. where the last column and last row intersects. Home key is used to go to the beginning of the row.

Related Theory
Some other important keys for navigation on the worksheet are : Enter key to move one cell down; Up arrow key (↑) to move one cell up; Left arrow key (←) to move one cell left; Tab key to move one cell right.

Question 31.
Give the major heading and sub-heading of the following items which is to be presented in the Balance Sheet of a company as per Schedule III of The Companies Act, 2013.
(i) Sundry Creditors
(ii) Calls-in-advance
(iii) Copyrights
(iv) Investment (Trade) (3)
Answer:

Items	Major Heading	Sub-Heading
(A) Sundry Creditors	Current Liabilities	Trade Payables
(B) Calls in advance	Current Liabilities	Other Current Liabilities
(C) Copyrights	Non-current Assets	Fixed-Intangible Assets
(D) Investments (Trade)	Non-current Assets	Non-current Investment

Given, Current Ratio = 3 : 5 : 1
Quick Ratio = 2 : 1
Let Current liabilities be x
Therefore, current assets = 3.5x
and Quick assets = 2x

We know,
Stock = Current Assets – Quick Assets
24,000 = 3.5x – 2x
24,000 = 1.5x
x = ₹ 16,000
:. Current liabilities is 16,000 and,
Current Assets = 3.5x
= 3.5 x 16,000 = ₹ 56,000

Question 32.
“Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by properly establishing relationships between the various items of the balance sheet and the statement of profit and loss. Financial analysis can be undertaken by management of the firm, or by parties outside the firm.” Explain the importance of financial analysis for
(i) labour unions, and
(ii) creditors. (3)
Answer:
(i) Importance for Labour Unions: Labour unions analyse the financial statements to assess whether it can presently afford a wage increase. and whether it can absorb a wage increase through increased productivity or by raising the prices.

(ii) Importance for Creditors: Creditors through an analysis of Financial Statements appraises at only the ability of the company to meet its short term obligations but also judges the probability of its continued ability to meet its financial obligations in future.

Question 33.
From the following information, calculate Operating ratio and Quick ratio:
Revenue from operation ₹ 4,50,000; Opening Inventory ₹ 25,000; Purchases ₹ 1,65,000; Wages ₹ 60,000; Closing Inventory ₹ 90,000; Selling and Distribution Expenses ₹ 20,000; Current Assets ₹ 3,00,000 and Current Liabilities ₹ 2,10,000.

A company is having a current ratio of 3 : 1. Its current liabilities are ₹ 90,000. The accountant of the firm is interested in maintaining it to its standard ratio by purchasing certain assets on credit. Find out the value of the assets to be purchased. (4)
Answer:

Cost of revenue from operations = Purchases + Opening inventory – Closing inventory
= 1,65,000 + 25,000 – 90,000
= ₹ 1,00,000
Operating Expenses = Wages + Selling and Distribution expenses
= 60,000 + 20,000 = ₹ 80,000
Operating ratio = \(\frac { 1.00,000 + 80,000 }{ 4,50,000 }\) x 100
= 40%

Quick Assets = Current Assets – Closing inventory
= 3,00,000 – 90,000
= ₹ 2,10,000
Quick ratio = \(\frac { 2,10,000 }{ 2,10,000 }\)
= 1 : 1

Particulars	Major Heading	Sub – Heading
(A) Copyrights	Non-Current Assets	Fixed – Tangible Assets
(B) Sundry Creditors	Current Liabilities	Trade Payables
(C) Debenture Sinking Fund	Shareholders Funds	Reserve and Surplus

The (imitations of Computer Accounting Software are:
(i) Due to fast development and innovations, existing technology gets obsolete very soon and as investment in new technology is required in short period of time

(ii) Data may be lost or corrupted due to power interruptions or other problems.

(iii) Data are prone to hacking.

(iv) Un-programmed and un-specified reports cannot be generated.

Question 34.
Read the following hypothetical text and answer the given questions on the basis of the same: Horizon Computers Ltd., a web developing company, is engaged in the business of maintaining web portals of its clients. The company plans to expand its business and needs to raise funds for the same. One of its clients is interested in investing in its business and hence assesses its Balance Sheet. The Balance sheet for the year ending 31.03.2022 is as follows :
Balance Sheet
As at 31.03.2021 and 31.03.2022

Note No.	Particulars	31.03.2022 (₹)	31.03.2021 (₹)
1	Long-term Borrowings Bank Loan	25,000	50,000
2	Short-term Provisions Provision for tax	17,500	10,000
3	Intangible Assets Patents	11,250	12,500
4	Contingent Liabilities Proposed Dividend	15,000	20,000

Additional Information:
During the year, a building having book value of ₹ 50,000 was sold at a loss of ₹ 2,000. Depreciation charged on building was ₹ 4,000. You are required to :

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

Answer:
(1) Net profit before tax and extraordinary items:
Batance as per Profit and Loss A/c

(ii) Calculation of operating profit before working capital changes

(iii) Calculation of cost of building purchased
Dr. Reatisation Account Cr.

(iv) Calculation of Cash flow from investing activities
Sale of Building – Building Purchased – Investment Purchased ₹ 48,000 – ₹ 54,000 – ₹ 18,750 = – ₹ 24,750
There is a cash outflow of ₹ 24,750 from investing activities

(v) Calculation of Cash flow from financing activities Cash Proceeds of Equity Shares – Repayment of Bank Loan – Dividend Paid – ₹ 50,000 – ₹ 25,000 – ₹ 20,000 = ₹ 5,000
Net cash inflow from financing activities = ₹ 5,000

(vi) Calculation of closing Cash and Cash Equivalents Closing Cash and Cash Equivalents = Opening balance cash and cash equivalents + Cash flow from operating activities + Cash flow from investing activities + Cash flow from financing activities ₹ 5,000 + ₹ 36,000 + ₹ (- 24,750) + ₹ 5,000 = ₹ 21,250