Question

Paper 2016 Delhi (Set 2)

CBSE Class 12 ACCOUNTANCY

Time allowed: 3 hours Maximum Marks: 90

General Instructions:
1) This question paper contains two parts A and B.
2) Part A is compulsory for all.
3) Part B has two Options-Option-I Analysis of Financial Statements and Option-II
Computerized Accounting.
4) Attempt only one option of Part B.
5) All parts of a question should be attempted at one place.

Section A
(i) This section consists of 17questions. ?
(ii) All the questions are compulsory. ?
(iii) Question Nos. 1 to 6 are very short-Answer questions carrying 1 mark each. ?
(iv) Question Nos. 7 to 10 carry 3 marks each. ?
(v) Question Nos. 11 and 12 carry 4 marks each. ?
(vi) Question Nos. 13 to 15 carry 6 marks each. ?
(vii) Question Nos. 16 and 17 carry 8 marks each. ?

Section B
(i) This section consists of 6questions. ?
(ii) All questions are compulsory?
(iii) Question Nos. 18 and 19 are very short-Answer questions carrying 1 mark each. ?
(iv) Question Nos. 20 to 22 carry 4 marks. ?
(v) Question No. 23 carries 6marks. ?

Section A

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Q1 Nusrat and Sonu were partners in a firm sharing profits in the ratio of 3:2. During
the year ended 31-3-2015 Nusrat had withdrawn Rs 15,000. Interest on her drawings
amounted to Rs 300.
Pass necessary journal entry for charging interest on drawing assuming that the
capitals of the partners were fixed.
Ans:

Journal
Debit Credit
Date Particulars L.F. Amount Amount
(Rs) (Rs)
Nusrat’s Current A/c Dr. 300
To Interest on Drawings A/c 300

(Charging interest on drawings to Nusrat’s

Current A/c)

Q2 State the provisions of the Companies Act, 2013 for the creation of 'Debenture
Redemption Reserve'.
Ans: As per Section 71 (4) of the Companies Act, 2013 and Companies (Share Capital and
Debentures) Rules, 2014, every company issuing debentures is required to create Debenture
Redemption Reserve of an amount that is atleast equal to 25% of the total nominal (face)
value of debentures that are redeemable by it.

Q3 A, B and C were partners in a firm sharing profits in the ratio of 3:2:1. They admitted
D as a new partner for 1/8th share in the profits, which he acquired 1/16th from B and
1/16th from C.
Calculate the new profit sharing ratio of A, B, C and D.
Ans: Profit Sharing Ratio of A, B and C = 3 : 2 : 1

D’s share = (acquired share each from B and C)

A’s share = (retained original share)

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B’s new share =

C’s new share =

New Ration of A, B, C and D = or 24 : 13 : 5 : 6

Q4 On 1-1-2016 the first call of Rs 3 per share became due on 1,00,000 equity shares
issued by Kamini Ltd. Karan a holder of 500 shares did not pay the first call money.
Arjun a shareholder holding 1000 shares paid the second and final call of Rs 5 per share
along with the first call.
Pass the necessary journal entry for the amount received by opening 'Calls-in-arrears'
and 'Calls-in-advance' account in the books of the company.
Ans:

In the books of Kamini Ltd.

Journal Entry
Debit Credit
Date Particulars L.F. Amount Amount
Rs Rs

2016 Equity Share First Call A/c Dr. 3,00,000

Jan. 01 To Equity Share Capital A/c 3,00,000

(First call money due on 1,00,000

equity shares @ Rs 3 each)
Bank A/c Dr. 3,03,500
Calls-in-Arrears A/c Dr. 1,500

To Equity Share First Call A/c 3,00,000
To Calls-in-Advance A/c 5,000
(Amount received on first call except 500
shares @ Rs 3 each and second and final call

received in advance @ Rs 5 each on 1,000
shares)

Q5 Distinguish between 'Dissolution of Partnership' and 'Dissolution of Partnership

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Firm on the basis of 'Economic Relationship'.
Ans:

Basis Dissolution of Partnership Dissolution of Firm

Economic Economic relationship continues between Economic Relationship comes
Relationship the partners to an end

Q6 What is the maximum number of partners that a partnership firm can have? Name
the Act that provides for the maximum number of partners in a partnership firm.
Ans: The maximum number of partners that a partnership firm can have is 50. The limit has
been given as per the Rule (10) of Companies (Miscellaneous) Rules Act 2014.

Q7 VKR Ltd. issued 975; 9% Debentures of Rs 500 each on 4-3-2016. Pass necessary
journal entries for the issue of debentures under the following situations:
(a) When debentures were issued at a premium of 10% redeemable at a premium of 6%.
(b) When debentures were issued at a par redeemable at 9% premium.
Ans:

Journal
Debit Credit
Date Particulars L.F. Amount Amount
(Rs) (Rs)
(a) Bank A/c (975×550) Dr. 5,36,250
To Debenture Application A/c 5,36,250
(Debenture application money received)
Debenture Application A/c Dr. 5,36,250
Loss on Issue of Debentures A/c (975×30) Dr. 29,250
To 9% Debentures A/c 4,87,500
To Premium on Redemption of
29,250
Debentures A/c (975×30)
To Securities Premium A/c (975×50) 48,750
(Debentures issued at premium,

redeemable at premium)
(b) Bank A/c (975×500) Dr. 4,87,500

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 To Debenture Application A/c 4,87,500
(Debenture application money received)
Debenture Application A/c Dr. 4,87,500
Loss on Issue of Debentures A/c (975×45) Dr. 43,875
To 9% Debentures A/c 4,87,500
To Premium on Redemption of
43,875
Debentures A/c (975×45)
(Debentures issued at par, redeemable at

premium)

Q8 To provide employment to the youth and to develop the Naxal affected backward
areas of Chattisgarh. X Ltd. decided to set-up a power plant. For raising funds the
company decided to issue 7,50,000 equity shares of Rs 10 each at a premium of 50%. The
whole amount was payable on application. Applications for 20,00,000 shares were
received. Applications for 50,000 shares were rejected and shares were allotted to the
remaining applicants on pro-rata basis.
Pass necessary journal entries for the above transactions in the books of the company
and identify any two values which X Ltd. wants to propagate.
Ans:

In the books of X Ltd.

Journal Entry

Debit Credit
Date Particulars L.F.
(Rs) (Rs)

Bank A/c Dr.

To Equity Share Application & Allotment 3,00,00,000
3,00,00,000
A/c
(Amount received on 20,00,000 equity
shares @ Rs 10 each at a premium of

50%)

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 Equity Share Application &
Dr.
Allotment A/c 3,00,00,000
To Equity Share Capital A/c 75,00,000
To Securities Premium A/c 37,50,000
To Bank A/c 1,87,50,000
(Application money is transferred to
share capital and excess amount
refunded)

The following are the two values that X Ltd. wants to propagate.
1. Providing employment in the backward areas.
2. Value of Equality by allotting shares on pro-rata basis to 19,50,000 shareholders

Q9 Samachar India Ltd. took over the assets of Rs 14,00,000 and liabilities of Rs 4,00,000
from News Ltd. for a purchase consideration of Rs 9,19,000. Samachar India Ltd. issued
a promissory note of Rs 17,000 payble after 60 days in favour of News Ltd. and the
balance amount was paid by issue of equity shares of Rs 100 each at a premium of Rs 25
per share.
Pass necessary Journal entries for the above transactions in the books of Samachar
India Ltd.
Ans:

Samachar Ltd.
Journal
Debit Credit
Date Particulars L.F. Amount Amount
(Rs) (Rs)
(i) Sundry Assets A/c Dr. 14,00,000
To Sundry Liabilities A/c 4,00,000
To News Ltd. 9,19,000
To Capital Reserve A/c 81,000
(Purchase of assets and liabilities of

News Ltd.)
(ii) News Ltd. Dr. 9,19,000

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 To Equity Share Capital A/c 7,21,600
To Securities Premium A/c 1,80,400
To Bills Payable A/c 17,000
(7,216 Equity Shares issued of Rs 100
each at a premium of Rs 25 per share
and a promissory note of Rs 17,000)

Working Notes:
WN1: Calculation of Number of Equity Shares

Number of Shares Issued =

= = 7,216 equity shares

Q10 State any three circumstances other than (i) admission of a new partner; (ii)
retirement of a partner and (iii) death of a partner, when need for valuation of
goodwill of a firm may arise.
Ans: The need for valuation of goodwill basically arises at the time of reconstitution or
dissolution of partnership firms. However, valuation of goodwill is also done in the following
cases:
(i) When there is a change in the profit-sharing ratio: In case the existing partners in the
firm to mutually change the profit sharing ratio between them, there is a need to value the
goodwill.
(ii) When the partnership firm is sold as a going concern: In case the partnership firm is
sold to some other concern on going concern basis, goodwill is required to be valued.
(iii) When two firms amalgamate: In case of amalgamation of two firms that is merger or
acquisition of two businesses, there is need of valuation of goodwill.

Q11 Vikas, Vishal and Vaibhav were partners in a firm sharing profits in the ratio of
2:2:1. The firm closes its books 31 st March every year. On 31-12-2015 Vaibhav died. On
that date his Capital account showed a credit balance of Rs 3,80,000 and Goodwill of the
firm was valued at 1,20,000. There was a debit balance of Rs 50,000 in the profit and loss
account. Vaibhav's share of profit in the year of his death was to be calculated on the
basis of the average profit of last five years. The average profit of last five years was Rs

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75,000.
Pass necessary journal entries in the books of the firm on Vaibhav's death.
Ans:

Journal

Debit Credit
Date Particulars L.F. Amount Amount
(Rs) (Rs)
Vikas’s Capital A/c Dr. 12,000
Vishal’s Capital A/c Dr. 12,000
To Vaibhav’s Capital A/c 24,000
(Adjustment of goodwill done in gaining

ratio)
Vikas’s Capital A/c Dr. 20,000
Vishal’s Capital A/c Dr. 20,000
Vaibhav’s Capital A/c Dr. 10,000
To Profit and Loss A/c 50,000
(Debit balance in P&L A/c written-off

among all partners in old ratio)
Profit and Loss Suspense A/c Dr. 11,250
To Vaibhav’s Capital A/c 11,250
(Vaibhav’s share of profit up to date of
death dispensed through P&L Suspense
A/c)
Vaibhav’s Capital A/c Dr. 4,05,250
To Vaibhav’s Executor’s A/c 4,05,250
(Amount due to Vaibhav transferred to

his Executor’s A/c)

Working Notes:

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WN1: Calculation of Vaibhav’s Share of Goodwill
Vaibhav’s share of Goodwill = Firm’s Goodwill his profit share

= = Rs 24,000

Rs 24,000 will be borne by gaining partners in gaining ration.

Since, nothing is specified, it is assumed that continuing partners gain in the their old profit
sharing ratio of 2:2.

Vikas’s gain = = Rs 12,000

Vishal’s gain = = Rs 12,000

WN2: Calculation of Share of Debit balance in P&L A/c

Vikas’s share = = Rs 20,000

Vishal’s share = = Rs 20,000

Vaibhav’s share = =Rs 10,000

WN3: Calculation of Share in Profit (earned during the year)

Vaibhav’s share = Average Profits number of months vaibhav remained his profit share

= Rs 11,250

WN4: Calculation of Amount transferred to Vaibhav’s Executor’s A/c

Amount due to Vaibhav = Capital + Credit Items – Debit Items
= 3,80,000 + 24,000 – 10,000 + 11,250
= Rs 4,05,250

Q12 P and Q were partners in a firm sharing profits in the ratio of 5:3. On 1-4-2014 they
admitted R as a new partner for 1/8th share in the profits with a guaranteed profit of Rs
75,000. The new profit sharing ratio between P and Q will remain the same but they
agreed to bear any deficiency on account of guarantee to R in the ratio 3:2. The profit of

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the firm for the year ended 31-3-2015 was Rs 4,00,000.
Prepare Profit and Loss Appropriation Account of P, Q and R for the year ended 31-3-
2015.
Ans:

Profit and Loss Appropriate Account

For the year ended March 31, 2015
Amount Amount
Particulars Particulars
Rs Rs
Profit transferred to: Profit and Loss A/c 4,00,000
P’s Capital A/c 2,03,125
Q’s Capital A/c 1,21,875
R’s Capital A/c 75,000 4,00,000
4,00,000 4,00,000

Working Notes:

R’s share in profit = = Rs 50,000

Minimum profit Guarantee to R = Rs 75,000

Deficiency = Rs. 25,000 (75,000 – 50,000)
Deficiency to be borne by P and Q in the ration of 3:2

Amount to be borne by P = = Rs 15,000

Amount to be borne by P = = Rs 10,000

Therefore, P’s profit share = = Rs 2,03,125

And Q’s profit share = = Rs 1,21, 875

Q13 C and D were partners in a firm sharing profits in the ratio of 3:2. On 28-2-2016 the
firm was dissolved. After transferring assets (other than cash) and outsiders' liabilities
to realization account you are given the following information:

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(a) A creditor for Rs 2,00,000 accepted building of Rs 2,80,000 at Rs 2,20,000 and paid the
firm Rs 20,000.
(b) A second creditor for Rs 75,000 accepted furniture at Rs 60,000 in full settlement of
his claim.
(c) A third creditor amounting to Rs 80,000 accepted Rs 20,000 in cash and investments
of the book value of Rs 65,000 in full settlement of his claim.
(d) Loss on dissolution was Rs 7,500.
Pass necessary journal entries for the above transactions in the books of the firm
assuming that all payments were made by cheque.
Ans:

In the books of ...

Journal Entry
Debit Credit
Date Particulars L.F. Amount Amount
Rs Rs

(a) Bank A/c Dr.

20,000
To Realisation A/c 20,000
(Creditors paid Rs 20,000 to the firm)
(b) No entry
(c) Realisation A/c Dr. 20,000
To Bank A/c 20,000
(Third creditor accepted 20,000 in cash and

investments of the book value of Rs 65,000 in
full settlement of his claim)
(d) C’s Capital A/c Dr. 4,500
D’s Capital A/c Dr. 3,000
To Realisation A/c 7,500

(Loss on dissolution transferred to

partners’ capital accounts)

Note: No entry will be made when asset is taken over by the creditor

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Q14 Ashok, Bhim and Chetan were partners in a firm sharing profits in the ratio of
3:2:1.
Their Balance Sheet as on 31-3-2015 was as follows:

Balance sheet of Ashok, Bhim and Chetan

As on 31-3-2015
Amount Amount
Liabilities Assets
Rs Rs
Creditors 1,00,000 Land 1,00,000
Bills Payable 40,000 Building 1,00,000
General Reserve 60,000 Plant 2,00,000
Capitals: Stock 80,000
Ashok 2,00,000 Debtors 60,000
Bhim 1,00,000 Bank 10,000
Chetan 50,000 3,50,000
5,50,000 5,50,000

Ashok, Bhim and Chetan decided to share the future profits equally, w.e.f. April 1, 2015.
For this it was agreed that:
(i) Goodwill of the firm be valued at Rs 3,00,000.
(ii) Land be revalued at Rs 1,60,000 and building be depreciated by 6%.
(iii) Creditors of Rs 12,000 were not likely to be claimed and hence be written off.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the
reconstituted firm.
Ans:

Revaluation Account
Amount Amount
Particulars Particulars
(Rs) (Rs)
Building A/c 6,000 Land A/c 60,000
Revaluation Profit Creditors A/c 12,000
Ashok 33,000
Bhim 22,000
Chetan 11,000 66,000

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 72,000 72,000

Partners’ Capital Account

Dr. Cr.
Particulars Ashok Bhim Chetan Particulars Ashok Bhim Chetan
Ashok’s
50,000 Balance B/d 2,00,000 1,00,000 50,000
Capital A/c
R/v Profit 33,000 22,000 11,000
General
30,000 20,000 10,000
Reserve
Chetan’s
50,000
Capital A/c
Balance c/d 3,13,000 1,42,000 21,000
3,13,000 1,42,000 71,000 3,13,000 1,42,000 71,000

Balance Sheet

Amount Amount
Liabilities Assets
(Rs) (Rs)
Capital A/c Land 1,00,000
Ashok 3,13,000 Add: Increase 60,000 1,60,000
Bhim 1,42,000 Building 1,00,000
Chetan 21,000 66,000 Less: Dep 6,000 94,000
Plant 2,00,000
Creditors 1,00,000 Bank 10,000
Less: Written-off 12,000 88,000 Stock 80,000
Bills Payable 40,000 Debtors 60,000

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 6,04,000 6,04,000

Working Notes:
Old ratio = 3 : 2 :1
New ratio = 1 : 1 : 1

S/R of Ashok = old ratio – New Ratio = = sacrificing

S/R of Bhim = Old ratio – New ratio =

S/R of Chetan = Old ratio – New Ration = = Gaining ratio

Chetan will compensate Ashok, since he is gaining

Chetan’s Capital A/c Dr. 50,000
To Ashok’s Capital A/c 50,000

Q15 On 1-4-2013 KL Ltd. had 5,000, 10% Debentures of Rs 100 each outstanding.
(i) On 1-4-2014 the company purchased in the open market 2000 of its own debentures
for Rs 105 each and cancelled the same immediately.
(ii) On 1-4-2015 the company redeemed at par debentures of Rs 1,00,000 by draw of a lot.
(iii) On 28-2-2016 the remaining debentures were purchased for immediate cancellation
for Rs 1,97,000.
Pass necessary journal entries for the above transactions in the books of the company
ignoring debenture redemption reserve and interest on debentures.
Ans:

Books of KL Ltd.
Journal
Debit Credit
Date Particulars L.F. Amount Amount
Rs Rs
(i) 2014
Own Debentures A/c Dr. 2,10,000
Apr.01
To Bank A/c 2,10,000

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 (Purchase of 2,000 own debentures @

Rs 105 each)
10% Debentures A/c Dr. 2,00,000
Loss on Cancellation of Own
Dr. 10,000
Debentures A/c
To Own Debentures A/c 2,10,000
(Cancellation of own debentures)
Statement of P&L/Capital Profits A/c Dr. 10,000
To Loss on Cancellation of Own
10,000
Debentures A/c
(ii) 2015
9% Debentures A/c Dr. 1,00,000
Apr.01
To Debentureholders’ A/c 1,00,000
(9% Debentures due for redemption)

Debentureholders’ A/c Dr. 1,00,000
To Bank A/c 1,00,000
(Amount paid to debentureholders)
(iii) 2016
Own Debentures A/c Dr. 1,97,000
Feb.28
To Bank A/c 1,97,000
(Purchase of 2,000 own debentures)
10% Debentures A/c Dr. 2,00,000
To Own Debentures A/c 1,97,000
To Gain (Profit) on Cancellation 3,000
(Own debentures purchased and

cancelled)
Gain (Profit) on Cancellation Dr. 3,000
To Capital Reserve A/c 3,000
(Transfer of Gain (Profit) on
redemption of debentures to Capital
Reserve)

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Q16 A, B and C were partners in a firm sharing profit in the ratio of 3:2:1. On 31-3-2015
their Balance Sheet was as follows:

Balance Sheet of A, B and C

As on 31-3-2015
Amount Amount
Liabilities Assets
(Rs) (Rs)
Creditors 84,000 Bank 17,000
General Reserve 21,000 Debtors 23,000
Capitals: Stock 1,10,000
A 60,000 Investments 30,000
B 40,000 Furniture & Fittings 10,000
C 20,000 1,20,000 Machinery 35,000
2,25,000 2,25,000

On the above date D was admitted as a new partner and it was decided that:
(i) The new profit sharing ratio between A, B, C and D will be 2:2:1:1.
(ii) Goodwill of the firm was valued at Rs 90,000 and D brought his share of goodwill
premium in cash.
(iii) The market value of investments was Rs 24,000.
(iv) Machinery will be reduced to Rs 29,000.
(v) A creditor of Rs 3,000 was not likely to claim the amount and hence to be written-off.
(vi) D will bring proportionate capital so as to give him 1/6th share in the profits of the
firm.
Prepare Revaluation Account, Partner’s Capital Accounts and the Balance Sheet of the
reconstitute firm.

OR

X, Y and Z were partners in a firm sharing profit’s in the ratio of 5:3:2. On 31-3-2015
their Balance Sheet was as follows:

Balance Sheet of X, Y and Z

As on 31st March, 2015

Liabilities Amount Assets Amount

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 (Rs) (Rs)
Creditors 21,000 Land and Building 62,000
Investment Motor Vans 20,000
Fluctuation Fund 10,000 Investments 19,000
P & L Account 40,000 Machinery 12,000
Capitals: Stock 15,000
X 50,000 Debtors 40,000
Y 40,000 Less: Provision 3,000 37,000
Z 20,000 1,10,000 Cash 16,000
1,81,000 1,81,000

On the above date Y retired and X and Z agreed to continue the business on the
following terms:
(1) Goodwill of the firm was valued at Rs 51,000.
(2) There was a claim of Rs 4,000 for Workmen’s Compensation.
(3) Provision for bad debts was to be reduced by Rs 1,000.
(4) Y will be paid Rs 8,200 in cash and the balance will be transferred in his loan
account which will be paid in four equally yearly instalments together with interest @
10% p.a.
(5) The new profit sharing ratio between X and Z will be 3:2 and their capitals will be in
their new profit sharing ratio. The capital adjustments will be done by opening current
accounts.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the
reconstituted firm.
Ans:

Revaluation Account
Particulars Amount (Rs) Particulars Amount (Rs)
Investments 6,000 Creditors 3,000
Loss on Revaluation
A’s capital A/c 4,500
machinery 6,000 B’s capital A/c 3,000 9,000
C’s capital A/c 1,500

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 12,000 12,000

Partner’s Capital Account

Particular A B C D Particular A B C D

Reval. A/c 4,500 3,000 1,500 Bal. b/d 60,000 40,000 20,000

Gen.
Bal. c/d 81,000 44,000 22,000 29,400 10,500 7,000 35000
reserve
Premium
for 15,000
goodwill
Cash A/c 29,400

85,500 47,000 23,5000 29,400 85,500 47,000 23,5000 29,400

Balance Sheet
As on March 31, 2015
Amount Amount
Liabilities Assets
(Rs) (Rs)
Creditors 81,000 Bank (17,000+29,400+15,000) 61,400
Capitals: Debtors 23,000
A 81,000 Stock 1,10,000
B 44,000 Investments 24,000
C 22,000 Furniture & Fittings 10,000
D 29,400 1,76,400 Machinery 29,000
2,57,400 2,57,400

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Working Notes:

WN1: Calculation of Sacrificing Ratio

Sacrificing Ration = old ratio – new ration

A’s =

B’s =

C’s =

WN2: Adjustment of Goodwill

D’s share of Goodwill = = Rs 15,000

Rs 15,000 will be credited to A’s Capital A/c, as he is the only sacrificing partner.

WN3: Calculation of D’s Proportionate Capital

Adjusted old capital of A = 60,000 + 10,500 + 15,000 – 4,500 = Rs 81,000
Adjusted old capital of B = 40,000 + 7,000 - 3,000 = Rs 44,000
Adjusted old capital of C = 20,000 + 3,500 - 1,500 = Rs 22,000
Total Adjusted Capital = 81,000 + 44,000 + 22,000 = Rs 1,47,000
D’s Proportionate Capital = Total Adjusted capital D’s profit share Reciprocal of combined
new share of old partners

= = Rs 29,400

OR

Revaluation Account
Amount Amount
Particulars Particulars
Rs Rs
Claim for Workmen
4,000 Provision for Doubtful Debts 1,000
Compensation
Loss on Revaluation
X’s Capital A/c 1,500

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 Y’s Capital A/c 900
Z’s Capital A/c 600 3,000
4,000 4,000

Partner’s Capital Account

Particulars X Y Z Particulars X Y Z
Revaluation A/c 1,500 900 600 Balance b/d 50,000 40,000 20,000
Y’s Capital A/c 5,100 10,200 IFF 5,000 3,000 2,000
Cash A/c 8,200 P&L A/c 20,000 12,000 8,000
Y’s Loan A/c 61,200 X’s Capital 5,100
Balance c/d 68,400 19,200 Z’s Capital 10,200
75,000 70,300 30,000 75,000 70,300 30,000
Current A/c 15,840 Balance b/d 68,400 19,200
Balance c/d 52,560 35,040 Current A/c 15,840
68,400 35,040 68,400 35,040

Balance Sheet
As on March 31, 2015
Amount Amount
Liabilities Assets
(Rs) (Rs)
Creditors 21,000 Land and Building 62,000
Capitals: Motor Vans 20,000
X 52,560 Investments 19,000
Z 35,040 87,600 Machinery 12,000
X’s Current A/c 15,840 Stock 15,000
Claim for Workmen Comp. 4,000 Debtors 40,000
Y’s Loan A/c 61,200 Less: Provision 2,000 38,000
Cash (16,000 - 8,200) 7,800
Z’s Current A/c 15,840

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 1,89,640 1,89,640

Working Notes:

WN1: Calculation of Gaining Ratio

Gaining ration = new ratio – old ration

X’s =

Z’s =

Gaining Ration = 1 : 2

WN2: Adjustment of Goodwill

Y’s share of Goodwill = = Rs 15,300

Rs 15,300 will be debited to gaining partners (X and Z) in the ratio of 1:2.

X’s share = = 5,100

Z’s share = = Rs 10,200

WN3: Adjustment of Capital

Adjusted capital of X = 50,000 + 5,000 + 20,000 – 1,500 – 5,100 = Rs 68,400
Adjusted capital of Z = 20,000 + 2,000 + 8,000 – 600 – 10,200 = Rs 19,200
Total adjusted capital = 68,400 + 19,200 = Rs 87,600

X’s new capital = = Rs 52,560

Z’s new capital = = Rs 35,040

Z’s New capital > Z’s adjusted capital (Z owes Rs 15,840 to the firm)
X’s new capital < X’s adjusted capital (Firm owes Rs 15,840 to X)

WN4: Amount transferred to Y’s Loan A/c

Amount to be transferred = (Credit side - Debit side) - Cash Paid
= (70,300 - 900) - 8,200 = Rs 61,200

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Q17 KS Ltd. invited applications for issuing 1,60,000 equity shares of Rs 10 each at a
premium of Rs 6 per share. The amount was payable as follows:
On Application Rs 4 per share (including premium Rs 1 per share)
On Allotment Rs 6 per share (including premium Rs 3 per share)
On First and Final Call – Balance.
Applications for 3,20,000 shares were received. Applications for 80,000 share were
rejected and application money refunded. Shares were allotted on pro-rata basis to the
remaining applicants. Excess money received with applications was adjusted towards
sums due on allotment. Jain holding 800 shares failed to pay the allotment money. His
shares were forfeited immediately after allotment. Afterwards the final call was made.
Gupta who had applied for 1200 shares failed to pay the final call. This shares were also
forfeited. Out of the forfeited shares 1000 shares were re-issued at Rs 8 per share fully
paid up. The re-issued shares included all the forfeited shares of Jain.
Pass necessary journal entries for the above transactions in the books of KS Ltd.

Or

GG Ltd. had issued 50,000 equity shares of Rs 10 each at a premium of Rs 2 per share
payable with application money. The incomplete journal entries related to the issue are
given below. You are required to complete these blanks

Books of GG Ltd.
Journal

Debit Credit
Date Particulars L.F. Amount Amount
(Rs) (Rs)
2015
........ Dr. .....
Jan. 10
To ........... .....
(Amount received on application for

70,000)shares @ Rs 5 per share including
premium

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Jan. 16 Equity Shares Application A/c Dr. .....
To ........... .....
To ........... .....
To ........... .....
To ........... .....
(Transfer of application money to share
capital, securities premium, money
refunded for 8,000) shares for rejected

applications and balance adjusted towards
amount due on allotment as shares were
allotted on Pro-rata basis.
Jan. 31 ........ Dr. .....
To ........... .....

(Amount due on allotment @ Rs 4 per share)
Feb. 20 ........ Dr. .....

To ........... .....

(Balance amount received on allotment)
April 01 ........ Dr. .....
To ........... .....

(First and final call money due)
April 20 ........ Dr. .....
Calls-in-arrears A/c. Dr. 1,500
To ......... .....

(Money received on first and final call)
Aug. 27 ........ Dr. .....
To ......... .....
To ......... .....
(Forfeited the shares on which call money

was not received
Oct. 3 ........ Dr. .....
........ Dr. .....

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 To ......... .....
(Re-issued the forfeited shares @ 8 per share

fully paid up)
...... ....... Dr. .....
To ....... .....
(.....................)

Ans:

In the books of KS Ltd.
Journal Entry

Debit Credit
Date Particulars L.F. Amount Amount
Rs Rs

Bank A/c Dr. 12,80,000

To Equity Share Application A/c 12,80,000

(Application money received on

3,20,000 shares)
Equity Share Application A/c Dr. 12,80,000
To Equity Share Capital A/c 4,80,000
To Securities Premium A/c 1,60,000
To Equity Share Allotment A/c 3,20,000
To Bank A/c 3,20,000
(Amount of application transferred to

Share Capital and excess money is

adjusted towards allotment)

Equity Share Allotment A/c Dr. 9,60,000

To Equity Share Capital A/c 4,80,000
To Securities Premium A/c 4,80,000
(Amount due on allotment)

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 Bank A/c (9,60,000 – 3,20,000 – 3,200) Dr. 6,36,800
To Equity Share Allotment A/c 6,36,800
(Amount received on share allotment)
Share Capital A/c Dr. 4,800
Securities Premium A/c Dr. 2,400
To Share Forfeiture A/c 4,000
To Share Allotment A/c 3,200
(800 shares of Jain are forfeited due to

non-payment of allotment money)
Equity Share First and Final Call A/c Dr. 9,55,200
To Equity Share Capital A/c 6,36,800

To Securities Premium A/c 3,18,400

(Amount due on first and final call on

1,59,200 shares)
Bank A/c (9,55,200 – 4,800) Dr. 9,50,400
To Equity Share First and Final Call
9,50,400
A/c
(Amount received on first and final

call)
Equity Share Capital A/c Dr. 8,000
Securities Premium A/c Dr. 1,600
To Equity Share Forfeiture A/c 4,800
To Equity Share First and Final Call
4,800
A/c
(Shares of Gupta were forfeited)
Bank A/c Dr. 8,000
Share Forfeiture A/c Dr. 2,000
To Equity Share Capital A/c 10,000
(Forfeited shares were reissued at Rs

8 per share fully paid-up)
Equity Share Forfeiture A/c Dr. 3,200

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 To Capital Reserve A/c 3,200

(Excess amount on forfeiture is

transferred to capital reserve)

Working Notes:
Computation Table

Computation Table

Money
Money
Money transfer
transfer Amount
received to Excess
Shares Shares to Share adjusted
Categories on App. Securities App. Money
Applied Allotted Capital on
@ Rs 4 Premium money refunded
@ Rs 3 Allotment
each @ Re 1
each
each
I 80,000 - 3,20,000 - - 3,20,000 - 3,20,000
II 2,40,000 1,60,000 9,60,000 4,80,000 1,60,000 3,20,000 3,20,000
3,20,000 1,60,000 12,80,000 4,80,000 1,60,000 6,40,000 3,20,000 3,20,000

Calculation of amount unpaid on Allotment:

Share applied by Jain = = 1,200 shares

Excess money received from Jain = Rs 1,600

Amount due on Allotment = 2,400

Less: Excess Application Money = 1600

Amount unpaid on allotment = 800
Amount unpaid on securities premium = 2400

Total amount unpaid on allotment = Rs 3,200

Calculation of amount received from Jain (Share Forfeiture – Cr.)
Amount received on application = 2,400 = excluding premium

Add: Excess Application money = 1,600

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Share forfeiture (Cr.) = 4,000
Unpaid amount on First and Final call

Share allotted to Gupta = = 800 shares

Unpaid amount on allotment = Rs 4,800

Calculation of amount receive from Gupta (Share Forfeiture – Cr.)

Amount received on application = 2,400 = excluding premium

Amount received on allotment = 2,400 = excluding premium

Total amount received = Rs 4,800

Calculation of Capital Reserve

(i) 800 shares of Jain are reissued
Share forfeiture (Cr.) = 4,000
Less: Share Forfeiture (Dr.) = 1600

Capital Reserve = Rs 2,400

(ii) 200 shares of Gupta are reissued

Share forfeiture (Cr.) for 200 shares = 1,200

Less: Share forfeiture (Dr.) = 400

Capital Reserve = Rs 800

Total amount of Capital Reserve = Rs 3,200 (2,400 + 800)

Or

Books of GG Ltd.
Journal

Date Particulars L.F. Debit (Rs) Credit (Rs)
2015
Bank A/c Dr. 3,50,000
Jan. 10

To Equity Application A/c 3,50,000

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(Amount received on application for 70,000

shares @ Rs 5 per share including premium
Jan. 16 Equity Shares Application A/c Dr. 3,50,000
To Equity Share Capital A/c 1,50,000
To Securities Premium A/c 1,00,000
To Equity Share Allotment A/c
60,000
(12,000 × 5’)
To Bank A/c (8,000 × 5) 40,000
(Transfer of application money to share
capital, securities premium, money refunded
for 8,000 shares for rejected applications and

balance adjusted towards amount due on
allotment as shares were allotted on Pro-rata
basis.
Jan. 31 Equity Share Allotment A/c Dr. 2,00,000
To Equity Share Capital A/c 2,00,000

(Amount due on allotment @ Rs 4 per share)
Feb. 20 Bank A/c Dr. 1,40,000

To Equity Share Allotment A/c 1,40,000

(Balance amount received on allotment)

April Equity Share First & Final Call
Dr. 1,50,000
01 (50,000 × 3)
To Equity Share Cap[ital A/c 1,50,000

(First and final call money due)
April
Bank A/c Dr. 1,48,500
20
Calls-in-arrears A/c. (500 × 3) Dr. 1,500
To Equity Share First & Final Call A/c 1,50,000

(Money received on first and final call)
Aug.
Equity Share Capital A/c (500 × 10) Dr. 5,000
27

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 To Equity Share Forfeiture A/c (500 × 3,500
7)
To Equity Share First & Final Call A/c 1,500
(Forfeited the shares on which call money

was not received
Oct. 03 Bank A/c (500 × 8) Dr. 4,000
Equity Share Forfeiture A/c (500 × 2) Dr. 10,000
To Equity Share Capital A/c 5,000
(Re-issued the forfeited share @ 8 per share
fully paid up)

Oct. 03 Equity Share Forfeiture A/c Dr. 2,500

To Capital Reserve A/c 2,500
(Amount Transferred to Capital Reserve)

Q18 Give the meaning of 'Cash Equivalents' for the purpose of preparing Cash Flow
Statement.
Ans: These are short-term highly liquid investments that can be easily convertible into cash.
These are subject to an insignificant risk of change in value and are held for the purpose of
meeting short-term cash commitments. A few of the examples of cash equivalents are
treasury bills, commercial papers, etc.

Q19 'An enterprise may hold securities and loans for dealing or trading purposes in
which case they are similar to inventory acquired specifically for resale.' It the
statement correct? Cash flows from such activities will be classified under which type
of activity which preparing Cash Flow Statement?
Ans: Operating Activity

Q20 (a) One of the objectives of 'Financial Statements Analysis' is to judge the ability of
the firm to repay its debt and assessing the short-term as well as the long-term liquidity
position of the firm. State two more objectives of this analysis.
(b) 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

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Sheet of a company as per Schedule III of the Companies Act, 2013.
Ans: (a) The following are the objectives of the financial analysis.
1) It enables the conduct of meaningful comparisons of financial data. It provides better and
easy understanding of the changes in the financial data overtime.
2) It helps in designing effective plans and better execution of plans by enabling control and
checks over the use of the financial resources.
(b)

Other Current Liabilities Other Current Assets

Income received in advance Prepaid expenses,
Unpaid Dividends Taxes paid in advance

Q21 (a) What is meant by 'Liquidity of Business'?

(b) From the following information calculate operating ratio:
Revenue from operations Rs 6,80,000; Rate of Gross Profit on cost 25%; Selling expenses
Rs 1,44,000; Administrative expenses Rs 73,000.
Ans: (a) Liquidity of business refers to the ability of a business to meet its immediate and
short term obligations.

(b) Operating Ration =

Operating Cost = Cost of Goods Sold + Operating Expenses

Gross Profit = of cost (or of sales)

Gross Profit = = Rs 1,36,000

Let cost of Goods Sold be ‘x’

1,36,000 =

x = 5,44,000 (Cost of Goods Sold)

Operating Cost = 5,44,000 + 1,44,000 + 73,000 = Rs 7,61,000

Operating Ratio = = 111.91%

Note: Operating expenses include selling and administrative expenses.

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Q22 Following is the statement of Profit and Loss of Sun India Ltd. for the year ended
31st March, 2015:

Particulars Note No. 31-3-2015 (Rs) 31-3-2014 (Rs)

Revenue from
25,00,000 20,00,000
operations
Other Income 1,00,000 5,00,00
Employee benefit-
60% of total Revenue 50% of total Revenue
expenses
10% of employee benefit 20% of employee benefit
Other expenses
expenses expenses
Tax Rate 50% 40%

The motto of Sun India Ltd. is to produce and supply green energy in the rural areas of
India. It has also taken up a project of constructing a road that will pass through five
villages, so that these villages could be connected to the nearby town. It will use the
local resources and employ local people for construction of the road.
You are required to prepare a Comparative Statement of Profit and Loss of Sun India
Ltd. from the given statement of Profit and Loss. Also identify any two values that the
company wishes to convey to the society.
Ans:

Comparative Statement of Profit and Loss

For the years ended March 31, 2014 and 2015

31st March, 31st March,

Note Absolute Percentage
Particulars 2014 2015
No. Change (Rs) Change
(Rs) (Rs)
1. Revenue from
20,00,000 25,00,000 5,00,000 25.00
Operations
5,00,000 1,00,000 (4,00,000) (80.00)
2. Other Income

3. Total Revenue (1 +

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 2) 25,00,000 26,00,000 1,00,000 4.00

4. Expenses
Employees Benefit
12,50,000 15,60,000 3,10,000 24.80
Expenses
Other Expenses 2,50,000 1,56,000 (94,000) (37.60)
Total Expenses 15,00,000 17,16,000 2,16,000 14.40
5. Profit before Tax (
10,00,000 8,84,000 (1,16,000) (11.60)
3- 4)
Less: Income Tax 4,00,000 4,42,000 42,000 10.50
6. Profit After Tax 6,00,000 4,42,000 (1,58,000) (26.30)

The values conveyed by Company are:

(i) Rural Upliftment
(ii) Providing employment opportunities to the masses.

Q23 Following is the Balance Sheet of K.K. Ltd. as at 31-3-2015:

K.K. Ltd. Balance Sheet as at 31-3-2015

Particulars Note No. 31-03-2015 (Rs) 31-03-2014 (Rs)

I. Equity and Liabilities :

(1) Shareholders’ Funds :

(a) Share Capital 10,00,000 8,00,000

(b) Reserves and Surplus 1 4,00,000 (1,00,000)
(2) Non-current Liabilities :
Long-term borrowings 2 9,00,000 10,00,000
(3) Current Liabilities :
(a) Short-term borrowings 3 3,00,000 1,00,000

(b) Short-term provisions 4 1,40,000 1,80,000

Total : 27,40,000 19,80,000

II. Assets :
(1) Non-current Assets :

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 (a) Fixed Assets
(i) Tangible 5 20,06,000 14,40,000
(ii) Intangible 6 40,000 60,000
(b) Non-current Investments 2,00,000 1,50,000
(2) Current Assets :
(a) Current Investments 1,00,000 1,20,000
(b) Inventories 7 2,14,000 90,000
(c) Cash and Cash Equivalents 1,80,000 1,20,000
Total : 27,40,000 19,80,000

Notes to Accounts
31-03-2015 31-03-2014
Note No. Particulars
(Rs) (Rs)
1. Reserves and Surplus
(Surplus i.e. Balance in Statement of
4,00,000 (1,00,000)
Profit and Loss)
4,00,000 (1,00,000)
2. Long-term borrowings :
12% Debentures 9,00,000 10,00,000
9,00,000 10,00,000
3. Short-term borrowings :
Bank Overdraft 3,00,000 1,00,000
3,00,000 1,00,000
4. Short-term provisions :
Provision for tax 1,40,000 1,80,000
1,40,000 1,80,000
5. Tangible Assets :
Machinery 24,06,000 16,42,000
Accumulated Depreciations (4,00,000) (2,02,000)
20,06,000 14,40,000

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 6. Intangible Assets :
Goodwill 40,000 60,000
40,000 60,000
7. Inventories :
Stock in trade 2,14,000 90,000
2,14,000 90,000

Additional Information:
(i) 12% Debentures were redeemed on 31-3-2015.
(ii) Tax Rs 1,40,000 was paid during the year.
Prepare Cash Flow Statement.
Ans:

Cash Flow Statement

For the year ended 31st March, 2015
Amount Amount
Particulars
(Rs) (Rs)
I Cash Flow from Operating Activities
A. Net Profit before Tax and Extraordinary items* 5,00,000

Adjustments for Non-cash and Non-operating items

B.Add: Items to be Added

Depreciation 1,98,000
Intangible Assets Written off 20,000
Interest on Debentures (12% of 10,00,000) 1,20,000
Provision for Tax 1,00,000 4,38,000
C.Less: Items to be Deducted
D.Operating Profit before Working Capital
9,38,000
Adjustments (A + B – C)
E. Add: Decrease in Current Assets and Increase in
Current Liabilities

F. Less: Increase in Current Assets and Decrease in

Current Liabilities

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 Inventories 1,24,000 (1,24,000)
Cash Generated from Operations (D + E – F) 8,14,000
Less: Income Tax Paid (Net of Refund) 1,40,000 (1,40,000)
Net Cash Flows from (or used in) Operating Activities 6,74,000
II Cash Flow from Investing Activities
Purchase of Fixed Assets (24,06,000 – 16,42,000) (7,64,000)
Purchase of Non-Current Investments (50,000)
Net Cash Flows from (or used in) Investing Activities (8,14,000)
III Cash Flow from Financing Activities
Proceeds from Issue of Share Capital 2,00,000
Redemption of Debentures (1,00,000)
Interest Paid on Debentures (1,20,000)
Increase in Bank Overdraft 2,00,000
Net Cash Flow from Financing Activities 1,80,000
Net Increase or Decrease in Cash and Cash
IV 40,000
Equivalents (I + II + III)
Add: Cash and Cash Equivalent in the beginning of the
period 2,40,000

(Includes Current Investments of Rs 1,20,000)

Cash and Cash Equivalents at the end of the period 2,80,000
(Includes Current Investments of Rs 1,00,000)

Provision for Tax Account

Amount Amount
Particulars Particulars
(Rs) (Rs)
Bank A/c 1,40,000 Balance b/d 1,80,000
Balance c/d 1,40,000 Statement of Profit and Loss 1,00,000
2,80,000 2,80,000

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