1. John, Mayank and Vijay are partners, their Partnership Deed provides for interest on drawings 8% per annum, Mayank withdrew a fixed amount in the middle of every month and his interest on drawings amounted to ₹ 24,000 at the end of the year. What was the amount of his monthly drawings?
(a) ₹ 50,000
(b) ₹ 25,000
(c) ₹ 6,00,000
(d) ₹ 4,00,000
Ans. (a) ₹ 50,000
2. Assertion (A): In the absence of Partnership Deed, interest on loan by partner is paid @ 6% p.a.
Reason (R): In the absence of Partnership Deed, interest on loan by partner is paid as is provided in the Partnership Act, 1932, i.e., @ 6% p.a.
(a) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation for Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation for Assertion (A).
(c) Assertion (A) is false and Reason (R) is true.
(d) Assertion (A) is true and Reason (R) is false
Ans. (a) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation for Assertion (A).
3. ABC Ltd. forfeited 700 shares of ₹ 10 each issued at a premium of 10% for non-payment of allotment money of ₹5 per share (including premium) and first and final call of ₹3 per share. On forfeiture of these shares, ‘share forfeiture account’ will be credited with
(a) ₹ 7,000
(b) ₹ 1,400
(c) ₹ 4,900
(d) ₹ 2,100
Ans. (d) ₹ 2,100
OR
Elite Ltd. issued 20,000, 9% Debentures of ₹100 each at a discount of 10%, redeemable at a premium. On issue of these debentures, “Loss on Issue of Debentures Account was debited with ₹ 4,00,000. The premium on redemption of debentures is
(a) ₹ 4,00,000
(b) ₹ 6,00,000
(c) ₹ 2,00,000
(d) ₹ 10,00,000
Ans. (c) ₹ 2,00,000
4. Mona and Tina were partners in a firm sharing profits in the ratio of 3: 2. Naina was admitted with 1/6th share in the profits of the firm. At the time of admission, Workmen’s Compensation Reserve appeared in the Balance Sheet of the firm at ₹ 32,000. The claim on account of workmen’s compensation was determined at ₹ 40,000. Excess of claim over the reserve will be:
(a) Credited to Revaluation Account.
(b) Debited to Revaluation Account
(c) Credited to old partners Capital Accounts
(d) Debited to old partners’ Capital Accounts
Ans. (b) Debited to Revaluation Account
OR
X and Y are partners sharing profits in the ratio of 3: 2, and capitals as Rs. 100,000 and Rs. 50,000 respectively. Z is admitted for 1/5th share in profits. The amount contributed as capital by Z will be
(a) Rs. 50,000
(b) Rs. 35,000
(c) Rs. 37,500
(d) Rs. 60,000
Ans. (c) Rs. 37,500
5. The profits for the previous three years are given below: 2018-2019 Rs. 23,000 (including an abnormal gain of Rs, 8,000) 2019-2020 Rs. 40,000 (after charging an abnormal loss of Rs. 12,000) 2020-2021 Rs. 38,000 (after writing off bad debts amounting to Rs. 6,000) The amount of goodwill at two years purchase of the average profits of the last three years will be ______.
(a)Rs. 65,000
(b) Rs. 70,000
(c) Rs. 68,000
(d) Rs. 35,000
Ans. (b) Rs. 70,000
6. A company forfeited 4,000 shares of ₹10 each on which application money of ₹3 has been paid. Out of these 2,000 shares were reissued as fully paid up and ₹4,000 has been transferred to capital reserve. Calculated the rate at which these shares were reissued :
(a) ₹10 per share
(b) ₹9 per share
(c) ₹11 per share
(d) ₹8 per share
Ans. (b) ₹9 per share
OR
Z Ltd. issued 500 shares on which application money ₹30 and allotment money ₹20 (including premium ₹10) has been received. Due to non-payment of first and final call of ₹ 60 per share,These shares were forfeited. The amount to be shown in Shares Forfeiture Account is:
(a) ₹ 25,000
(b) ₹ 15,000
(c) ₹ 20,000
(d) ₹ 10,000
Ans. (c) ₹ 20,000
7. Which of the following statements is incorrect?
(a) Interest on debentures is a charge and not an appropriation
(b) Debentures can be issued at discount
(c) Debenture holders do not have voting rights
(d) Debentures cannot be converted into shares
Ans. (d) Debentures cannot be converted into shares
8. On dissolution of a firm, a partner took over the investments of Rs. 15,000 at Rs. 19,000. By how much amount the Realization Account will be credited?
(a) Rs.4,000
(b) Rs. 19,000
(c) Zero
(d) Rs.23,000
Ans. (b) Rs. 19,000
OR
On dissolution of the firm, sundry assets were of ₹ 1,17,000. Mohan took part of sundry assets at ₹ 72,000 (being 10% less than the book value). Sohan took remaining sundry assets at 80% of the book value. Realization Account is to be credited with
(a) ₹ 1,01,600
(b) ₹ 1,08,000
(c) ₹ 72,000
(d) ₹ 84,000
Ans. (a) ₹ 1,01,600
9. Sangeet and Suman were partners in a firm sharing profits and losses in the ratio of 7: 3. During the year ended 31.3.2023, the firm earned a profit of ₹1,00,000, After preparation of the financial statements it was discovered that salary to Suman @3,000 per month had been omitted. The necessary adjustment entry for the same will be
(a) Profit and Loss Appropriation A/c Dr. 36,000
To Suman’s Capital A/c. 36,000
(b) Sangeet’s Capital A/c. Dr. 36,000
To Suman’s Capital A/c. 36,000
(c) Profit and Loss Adjustment A/c. Dr. 36,000
To Suman’s Capital A/c. 36,000
(d) Sangeet’s Capital A/c. Dr. 25,200
To Suman’s Capital A/c. 25,200
Ans. (d) Sangeet’s Capital A/c. Dr. 25,200
To Suman’s Capital A/c. 25,200
10. At the time of dissolution of a firm, Creditors are ₹ 70,000, Firm’s Capital is ₹ 1,20,000, Cash Balance is ₹ 10,000. Other assets realized ₹ 1,50,000. Gain/Loss in the realization account will be:
(a) ₹ 30,000 (Loss)
(b) ₹ 40,000 (Gain)
(c) ₹ 40,000 (Loss)
(d) ₹ 30,000 (Gain)
Ans. (a) ₹ 30,000 (Loss)
11. A and B are partners in business. They have not issued any specific instructions as to the maintenance of their capital accounts. Where should interest on drawings be appeared in the books of accounts?
(a) On the debit side of the capital account
(b) On the debit side of the current account
(c) On the credit side of the capital account
(d) On the credit side of the current account
Ans. (a) On the debit side of the capital account
12. Shares issued as sweat equity can be issued (i) at par. (ii) at discount (iii) at a premium, Which of the following is correct?
(a) Only (i) is correct
(b) Both (i) and (ii) are correct.
(c) All are correct
(d) Only (ii) is correct
Ans. (c) All are correct
13. Anil Ltd. forfeited 20,000 equity shares of ₹ 100 each for non-payment of first and final call of ₹ 40 per share. The maximum amount of discount at which these shares can be re-issued will be:
(a) ₹ 28,00,000
(b) ₹ 20,00,000
(c) ₹ 12,00,000
(d) ₹ 20,000
Ans. (c) ₹ 12,00,000
14. A, B and C were partners sharing profits and losses in the ratio of 7:3:2. From 1st April, 2023 they decided to share profits and losses in the ratio of 8:4:3. General reserves appear in the books at ₹ 1,20,000 which they decided to continue in books as it is. The Adjustment entry for this will be:
(a) Cr. A by ₹ 6,000; Dr. B by ₹2,000; Dr. C by ₹4,000
(b) Dr. A by ₹ 6,000; Cr. B by ₹ 2,000; Cr. C by ₹4,000
(c) Cr. A by ₹ 6,000; Dr. B by ₹ 4,000; Dr. C by ₹ 2,000
(d) Dr. A by ₹ 6,000; Cr. B by ₹ 4,000; Cr. C by ₹2,000
Ans. (a) Cr. A by ₹ 6,000; Dr. B by ₹2,000; Dr. C by ₹4,000
15. Shiv and Mohan are sharing profits and losses in the ratio of 5: 3. They admit Jea as a partner and give her 3/10th share of the profits. This share she will get 1/5th from Shiv and 1/10th from Mohan. The new profit-sharing ratio will be
(a) 5:6:3
(b) 2:4:6
(c) 17:11:12
(d) 18:24:38
Ans. (c) 17:11:12
OR
A, B and C are sharing profits in the ratio 2:2:1. B died on 30th June 2024. Accounts are closed on 31st March each year. Sales and profits for the year ended 31st March 2024 were ₹ 28,00,000 and ₹ 8,40,000 respectively. The sales of the firm amounted to ₹ 12,00,000 between the period from 1st April 2024 to 30th June 2024. The amount of profit to be credited to B’s executors’ A/c will be:
(a) ₹ 72,000
(b) ₹ 1,80,000
(c) ₹ 1,44,000
(d) ₹ 1,54,000
Ans. (c) ₹ 1,44,000
16. X and Y are partners sharing profits and losses in the ratio of 3:2. Z was admitted for the 1/5th share and for this he brings ₹ 150,000, as capital. If capitals are to be proportionate to profit-sharing ratio, the respective capitals of the partners will be
(a) ₹3,00,000 ₹3,00,000 ₹1,50,000
(b) ₹3,60.000 ₹2,40,000 ₹1,50,000
(c) ₹1,50,000 ₹1,50,000 ₹1,50,000
(d) ₹1,50,000 ₹2,00,000 ₹4,00,000
Ans. (b) ₹3,60.000 ₹2,40,000 ₹1,50,000
17. Give journal entries at the time of dissolution of a firm for the below transactions:
(i) Realization expenses of ₹ 5,000 paid by Sohan, a partner.
(ii) Realization expenses of ₹ 6,000 are to be paid and borne by Mohan, a partner.
(iii) Realization expenses of ₹ 4,000 paid by the firm on behalf of Rohan, a partner.
Ans. i) Realization A/c. Dr. 5,000
To Ram’s Capital A/c. 5,000 (For dissolution expenses paid by Ram)
(ii) No journal entry is required.
(iii) Rohan’s Capital A/c. Dr. 4,000
To Cash/Bank A/c. 4,000 (For dissolution expenses paid by the firm on behalf of Rohan)
18. A, B and C were partners sharing profits in the ratio of 3:2:1. The firm closes its books on 31st March every year. B died on 30th June, 2022. On his death, Goodwill of the firm was valued at Rs. 6,00,000. B’s share profit or loss till the date of death was to be calculated on the basis of previous year’s profit which was Rs. 15,00,000 (Loss). Pass necessary Journal entries for goodwill and his share of loss.
Ans. i) A’s Capital A/c. Dr. 1,50,000
C’s Capital A/c. Dr. 50,000
To B’s Capital A/c. 2,00,000
(Being Compensated
(ii) B’s Capital A/c. Dr. 1,25,000
To Profit & Loss Suspense A/c. 1,25,000
(Being Capital Written-off with the share of loss)
OR
Average profits of a firm during the last few years are₹80,000 and the normal rate of return in a similar business is 10%. If the goodwill of the firm is ₹ 1,00,000 at 4 years’ purchase of super profit, find capital employed by the firm.
Ans. Goodwill at 4 years’ purchase of Super Profit = 1,00,000
Super Profit = ₹1,00,000/4 = 25,000
Average Business Profit – Normal Business Profit = Super Profit
Normal Business Profit = Average Business Profit – Super Profit.
₹80,000 – ₹25,000 = ₹55,000
Capital Employed = 100/NRR. × Normal Business Profit
= 100/10 × 55,000 = 5,50,000
19. Vimal Ltd. purchased assets worth ₹ 5,00,000 and took over liabilities of ₹ 1,00,000 of Kapil Ltd. for a purchase consideration of ₹ 4,50,000. Vimal Ltd. paid one third of the amount by cheque and balance was settled by issuing 11% Debentures of ₹ 100 each at a premium of 20% Pass necessary Journal entries in the books of Vimal Ltd. for the above transactions.
Ans.
OR
Ratan Ltd. forfeited 3,000 shares of ₹ 10 each (issued at ₹ 2 premium) for non-payment of first call of ₹ 2 per share. Final call of ₹ 3 per share was not yet made. Out of these, 2,000 shares were reissued at ₹ 10 per share as fully paid. Pass entries for forfeiture and reissue of shares.
Ans.
20. Ramesh, Suresh and Dinesh are partners sharing profits and losses in the ratio of 4: 3: 2, and decided to share the future profits and losses in the ratio of 2:3:4 with effect from 1st April, 2018. An extract of their Balance Sheet as at 31st March, 2018 is: Workmen Compensation Reserve is ₹ 1,80,000 .Show the accounting treatment with the help of journal entries under the following alternative cases:
Case (i) If there is no other information.
Case (ii) If a claim on account of workmen compensation is estimated at ₹90,000
Case (iii) If a claim on account of workmen compensation is estimated at ₹1,98,000.
Ans.
21. Mohan Ltd. forfeited 10,000 shares of ₹ 10 each, ₹ 8 called up, for nonpayment of allotment money of ₹ 3 per share and first call of ₹ 3 per share. Out of these, 2000 shares were reissued for ₹ 7 per share, ₹ 8 paid up. Pass entries for forfeiture & reissue of shares.
Ans.
22. Anil, Bhanu and Chandu were partners in a firm sharing profits in the ratio of 5:3:2. On March 31, 2017, their Balance Sheet was as under:
Anil died on October 1, 2017. It was agreed between his executors and the remaining partners that :
(a) Goodwill to be valued at 2.5 year’s purchase of the average profits of the previous four years which were: Year 2013-14 -₹ 13,000, Year 2014-15 – ₹12,000, Year 2015-16 – ₹ 20,000, Year 2016-17 -₹ 15,000
(b) Patents are valued at ₹ 8,000; Machinery at ₹ 28 000; and Building at ₹ 25,000.
(c) Profit for the year 2017-18 be taken as having accrued at the same rate as that of the previous year.
(d) Interest on capital be provided at 10% p.a
Prepare Anil’s Capital Account.
Ans. Anil’s Capital Account
23. Raunak Cotton Ltd. issued a prospectus inviting applications for 6,000 equity shares of ₹ 100 each at a premium of ₹ 20 per shares, payable as follows:
On application ₹ 20
On allotment. ₹ 50 (including premium)
On the first call ₹ 30
On final call. ₹ 20
Applications were received for 10,000 shares and allotment was made pro-rata to the applicants of 8,000 shares, the remaining applications being rejected. Money received in excess on the application was adjusted toward the amount due on allotment.Rohit, to whom 300 shares were allotted failed to pay allotment and two calls money, his shares were forfeited. Itika, who applied for 600 shares, failed to pay the two calls and her shares were also forfeited. All these shares were sold to Kartika as fully paid for ₹ 80 per share.
Give journal entries in the books of the company
Ans.
OR
Pass the necessary journal entries for the following:
i. Avi Ltd. issued 150, 12% Debentures of ₹1000 each at a discount of 5 % and redeemable at a premium of 10%
ii. Anil Ltd. issued 1000, 9% Debentures of ₹100 each at a premium of ₹10 per debenture and redeemable at a premium of ₹10 per Debenture.
iii. Blue Prints Ltd., purchased building worth ₹ 1,50,000, machinery worth ₹ 1,40.000 and furniture worth ₹ 10,000 from XYZ Co., and took over its liabilities of ₹ 20,000 for a purchase consideration of ₹ 3,15,000, Blue Prints Ltd. paid the purchase consideration by issuing 12% debentures of ₹ 100 each at a premium of 5%. Record necessary journal entries
Ans.
24. Suraj, Pawan and Kamal are partners in a firm sharing profits and losses in the ratio of 3:2:1. Their Balance Sheet as at 31st March, 2023 is:
Pawan retired on 1st April, 2023 on the following terms:
(a) Provision for Doubtful Debts be raised by ₹ 1,000.
(b) Stock to be reduced by 10% and Furniture by 5%.
(c) There is an outstanding claim of damages of ₹ 1,100 and it is to be provided for.
(d) Creditors will be written back by ₹ 6,000.
(e) Goodwill of the firm is valued at ₹ 22,000.
(f) Pawan is paid in full with the cash brought in by Suraj and Kamal in such a manner that their capitals are in proportion to their profit-sharing ratio and Cash in Hand remains at ₹ 10,000.
Prepare Revaluation Account, Partners’ Capital Accounts
Ans.
OR
Ahmad, Bheem and Daniel are partners in a firm. On 1st April 2011 the balance in their capital accounts stood at ₹ 8,00,000, ₹ 6,00,000 and ₹ 4,00,000 respectively. They shared profits in the proportion of 5:3:2 respectively. Partners are entitled to interest on capital @5% per annum and salary to Bheem @ ₹ 3,000 per month and a commission of ₹ 12,000 to Daniel as per the provisions of the partnership deed.
Ahmad’s share of profits excluding interest on capital is guaranteed at not less than ₹ 25,000 p.a. Bheem’s share of profit including interest on capital but excluding salary is guaranteed at not less than ₹ 55,000 p.a. Any Deficiency arising on that account shall be met by Daniel. The profit of the firm for the year ended 31st March 2012 amounted to ₹ 2,16,000. Prepare profit and loss appropriation account for the year ended 31st March 2012.
Ans.
25. Parth and Shivika were partners in a firm sharing profits in the ratio of 3: 2. The Balance Sheet of the firm on 31st March, 2014 was as follows:
On the above date, the firm was dissolved. The assets were realized and the liabilities were paid off as follows:
(i) 50% of the furniture was taken over by Parth at 20% less than book value. The remaining furniture was sold for ₹ 1,05,000
(ii) Debtors realized ₹ 26,000.
(iii) Stock was taken over by Shivika for ₹ 29,000.
(iv) Shivika’s sister’s loan was paid off along with interest of ₹ 2,000
(v) Expenses on realization amounted to ₹ 5,000.
Prepare Realization Account, Partners’ Capital Accounts and Bank Account.
Ans.
26. Read the following hypothetical situation and answer question number (i) to (iv) on the basis of the given information:
Health and Purity Ltd. is registered with an authorized capital of ₹7,00,00,000 as per its Memorandum of Association. The share capital of the company is divided into 7,00,000 equity shares of ₹100 each.
For providing employment to the local youth and for the development of the rural areas of Jharkhand State, the company decided to set up a food processing unit in Hazaribagh. The company also decided to set up skill development centers at Ranchi, Hazaribagh and Ramgarh. The company issued 50,000 shares to the vendor of modern machinery and equipment purchased and 2,00,000 shares were issued to the public. The amount was payable as follows:
On application and allotment- ₹ 20 per share
On first call- ₹ 50 per share
On second and final call- balance
All calls were made and were duly received except on 100 shares held by Rajani, who failed to pay the second and final call. Her shares were forfeited.
Choose the correct options:
(i) The issued capital of Health and Purity Ltd. cannot exceed:
(a) ₹ 2,00,000,00
(b) ₹ 1,99,900
(c) ₹ 7,00,00,000
(d) ₹ 7,00,000
Ans. (c) ₹ 7,00,00,000
(ii) How many equity shares of the company have been subscribed and fully paid?
(a) 2,49,900
(b) 2,50,000
(c) 50,000
(d) 1,99,900
Ans. (a) 2,49,900
(iii) Subscribed equity share capital reflected in the Balance Sheet of the company would be
(a) ₹ 2,97,49,000
(b) ₹2,49,00,000
(c) ₹ 2,49,97,000
(d) None of these
Ans. (c) ₹ 2,49,97,000
(iv) How much amount would be forfeited on the shares held by Rajani?
(a) ₹3,000
(b) ₹10,000
(c) ₹5,000
(d) ₹7,000
Ans. (d) ₹7,000
Part B: Analysis of Financial Statements
27. ________analysis deals with the same items of different period.
(a) Static
(b) Horizontal
(c) Vertical
(d) Internal
Ans. (b) Horizontal
OR
The Current Ratio of a company is 2:1. Which of the following transactions would decrease the ratio?
(a) Purchase of goods worth ₹80,000 on cash
(b) Sale of furniture worth ₹50,000
(c) Purchase of goods worth ₹50,000 on credit
(d) Paid creditors ₹40,000
Ans. (c) Purchase of goods worth ₹50,000 on credit
28. Revenue from Operations ₹ 9,00,000, Gross Profit 25% on Cost, Operating Expenses ₹ 90,000, Operating Ratio will be
(a) 100%
(b) 50%
(c) 90%
(d) 10%
Ans. (c) 90%
29. A company issued 20,000;9% Debentures of ₹100 each at 10% Discount. These debentures were to be redeemed at 15% Premium at the end of 5 years. The balance in the Securities Premium Account as on the date of Issue was ₹ 3,70,000. How will this transaction be reflected in the Cash Flow Statement?
(a) Added ₹ 1,30,000 under Operating Activities as Loss on Issue of Debentures written off and Inflow of ₹ 20,00,000 under Financing Activities.
(b) Added ₹ 5,00,000 under Operating Activities as Loss on Issue of Debentures written off and Inflow of ₹ 18,00,000 under Financing Activities.
(c) Added ₹ 1,30,000 under Operating Activities as Loss on Issue of Debentures written off and Inflow of ₹ 18,00,000 under Financing Activities.
(d) Added ₹ 5,00,000 under Operating Activities as Loss on Issue of Debentures written off and Inflow of ₹ 20,00,000 under Financing Activities.
Ans. (c) Added ₹ 1,30,000 under Operating Activities as Loss on Issue of Debentures written off and Inflow of ₹ 18,00,000 under Financing Activities.
OR
From the following information, find out the inflow of Cash by sale of Office equipment.
Additional Information: Depreciation for the year 2021-22 was ₹ 40,000. Office Equipment purchased during the year ₹ 30,000 Part of Office Equipment sold at a profit of ₹12,000
(a) ₹1,00,000
(b) ₹ 1,02,000
(c) ₹ 90,000
(d) ₹ 1,12,000
Ans. (b) ₹ 1,02,000
30. Given below are two statements Statement (A) and Statement (B):
Statement (A): Increase in General Reserve is deducted to Net profit for the year to determine Net profit before Tax and Extraordinary Items.
Statement (B): Increase in value of goodwill is an investing activity. Choose the correct alternative from the following:
(a) Both statement (A) and statement (B) are correct.
(b) Both statement (A) and statement (B) are incorrect.
(c) Statement (A) is correct and statement (B) is incorrect.
(d) Statement (A) is incorrect and statement (B) is correct.
Ans. (d) Statement (A) is incorrect and statement (B) is correct.
31. State under which major headings and sub- headings will the following items be presented in the Balance Sheet of a company as per Schedule III, Part I of the Companies Act, 2013?
(i) Prepaid insurance
(ii) Investment in debentures
(iii) Bank Overdraft
(iv) Capital Reserve
(v) Loose tools
(vi) Debtors
Ans.
32. From the following information, prepare Common size statement of profit and loss for the year ended March 31, 2016 and March 31, 2017:
Ans. Common size statement of Profit and Loss for the year ended March 31, 2016 and March 31, 2017:
33. From the following details, calculate interest coverage ratio: Net Profit after tax ₹ 60,000
15% Long-term debt ₹ 10,00,000
Tax rate 40%
Ans.
OR
Calculate debt equity ratio from the following information
Total Assets ₹ 15,00,000
Current Liabilities ₹ 6,00,000
Total Debts ₹ 12,00,000
Ans.
34. From the following balance Sheet of DCX Ltd. and the additional information as at 31st March, 2018 . Prepare a Cash Flow Statement. Balance Sheet of DCX Ltd. as at 31st March, 2018
Notes to Accounts
Additional Information:
i) During the year a machinery costing ₹ 8,00,000 on which accumulated depreciation was ₹3,20,000 was sold for ₹ 6,40,000.
ii) Debentures were issued on 1st April, 2017.
Ans.
