If there is a ‘Match Fund’, than match expenses and incomes are transferred to
a) Liabilities side of Balance Sheet.
b) Income and Expenditure Account.
c) Assets side of Balance Sheet.
d) both Income and Expenditure Account and to Balance Sheet.
The correct option is (a).
Special funds created for meeting expenses such as prize fund, tournament or sports fund will be shown on the liabilities side.
Amount received from sale of grass by a club should be treated as a
a) revenue expenditure.
b) capital receipt.
c) sale of asset.
d) revenue receipt.
The correct option is (d).
Revenue receipts are the receipts which are received as an income by the organisation in carrying out the activities. For example: sale of old newspaper, sale of grass by a club, rent received.
In the year ended 31st March, 2019 subscriptions received were ₹14,00,000.
These subscriptions include:
₹20,000 for the year ended 31st March 2018.
₹30,000 for the year ending 31st March 2020.
On 31st March, 2019 subscriptions due but not received were ₹13,000.
Determine the amount that should be credited to Income and Expenditure Account as subscriptions for the year ended 31st March, 2019.
a) ₹14,00,000
b) ₹13,63,000
c) ₹13,50,000
d) ₹13,37,000
The correct option is (b).
| Particulars | ₹ | |
| Subscriptions received during the year ended 31st March 2019 | 14,00,000 | |
| Less: Relating to the year ended 31st March, 2018 | 20,000 | |
| Less: Received in advance for the year ended 31st March, 2020 | 30,000 | 50,000 |
| 13,50,000 | ||
| Add: Subscriptions due for the year ended 31st March, 2019 | 13,000 | |
| Subscriptions for the year ended 31st March, 2019 to be credited to the Income and Expenditure Account | 13,63,000 | |
Total Goodwill of firm is ₹48,000. Z is admitted for 1/3rd share. What will be the amount of goodwill brought by Z?
a) ₹48,000
b) ₹1,44,000
c) ₹16,000
d) ₹24,000
The correct option is (c).
Z's share of goodwill would be = ₹48,000 x 1/3 = ₹16,000.
If capital of the partners are fixed, adjustment entries are passed through
a) Partners’ Current Account.
b) Partners’ Capital Account.
c) Profit and Loss Adjustment Account.
d) Profit and Loss Appropriation Account.
The correct option is (a).
Current account is maintained to record transactions other than transactions relating to capital such as drawings against profit, interest allowed on capital, interest charged on drawings etc.
X, Y and Z are partners sharing profits in the ratio of 2:2:1. On death of Y, his share of goodwill was ₹45,000. The contribution of X and Z to compensate Y, is
a) ₹12,000 and ₹6,000 respectively.
b) ₹22,500 each.
c) ₹15,000 and ₹30,000 respectively.
d) ₹30,000 and ₹15,000 respectively.
The correct option is (d).
Amount of Y’s share of goodwill will be borne by remaining partners in gaining ratio. In this case new and gaining ratio of remaining partners is 2:1.
The Accumulated Reserves at the time of admission of a new partner are credited to
a) Old partners' capital account.
b) Revaluation account.
c) New partners' capital account.
d) Profit and loss adjustment account.
The correct option is (a).
If, at the time of admission of a partner, any reserves exist in the books of the firm, these should be transferred to old partners' capital accounts in their old profit sharing ratio since the reserves up to the date of admission of a new partner belong to the old partners and not to the new partner.
If, at the time of admission of a partner, any reserves exist in the books of the firm, these should be transferred to old partners' capital accounts in their old profit sharing ratio since the reserves up to the date of admission of a new partner belong to the old partners and not to the new partner.
a)
| Debit | Credit |
| General Reserve account | Profit and Loss Appropriation account |
b)
| Debit | Credit |
| Profit and Loss Appropriation account | General Reserve account |
c)
| Debit | Credit |
| Profit and Loss account | General Reserve account |
d)
| Debit | Credit |
| General Reserve account | Profit and Loss account |
The correct option is (b).
Reserve is an amount set aside out of profit to strengthen the financial position of the firm or to meet an unforeseen liability. Amount is taken away from profit and loss appropriation account and transferred to general reserve.
If the full amount of claim is paid to the retiring partner on the date of retirement itself, the entry will be
a)
| Debit | Credit |
| Retiring partner’s Capital A/c | Cash/Bank A/c |
b)
| Debit | Credit |
| Cash/Bank A/c | Retiring partner’s Capital A/c |
c)
| Debit | Credit |
| Retiring partner’s Capital A/c | Profit and Loss A/c |
d)
| Debit | Credit |
| Retiring partner’s Capital A/c | Revaluation A/c |
The correct option is (a).
The entry will be:-
| L.F. | Dr. ₹ | Cr. ₹ | ||
| Retiring Partner’s Capital A/c | Dr. | xxxx | ||
| To Cash/Bank A/c | xxxx | |||
A share of ₹500 issued at a premium of ₹100 on which, the full amount has been called and ₹350 (including premium) paid is forfeited, share forfeiture account should be credited with
a) ₹70.
b) ₹250.
c) ₹90.
d) ₹100.
The correct option is (b).
Amount already paid is credited to the share forfeiture account. He has paid ₹350, but it includes ₹100 for premium, which will be ignored.
Share forfeiture A/c should be credited with ₹250.
A share of ₹100 on which, ₹ 80 has been paid is forfeited, the minimum price at which, it can be re-issued is
a) ₹100.
b) ₹20.
c) ₹80.
d) ₹10.
The correct option is (b).
The maximum discount, which the company can allow, is equal to the forfeited amount on the share.
So the company can issue it for ₹20 (₹100 - ₹80).
When shares are forfeited, share capital account is debited with
a) called-up amount up to the date of forfeiture.
b) paid-up value of shares.
c) market value of shares.
d) nominal value of shares.
The correct option is (a).
On forfeiture, share capital account is debited with the called-up amount up to the date of forfeiture and not by the nominal (face) value of shares.
Share Allotment Account and/or Shares Call Account is credited with amount called-up on forfeited shares but not paid by the shareholders.
Interest on debenture is calculated at a fixed rate of interest on its
a) market value.
b) nominal value.
c) price value.
d) minimal value.
The correct option is (b).
Interest on debentures is calculated at fixed rate on its nominal (face) value payable quarterly, half yearly or yearly as per the terms of issue.
Rate of interest is prefixed to the debenture, say 9% Debentures and, therefore, is payable even if the company incurs loss
Section 71 (4) of The Companies Act, 2013 together with the Specified Rule 18 (7) (b) of the Companies (Share capital and Debentures) Rules, 2014 requires a company to create Debenture Redemption Reserve (DRR) and the company shall transfer at least
a) 25% of the total nominal (face) value of outstanding debentures to DRR.
b) 15% of the total nominal (face) value of outstanding debentures to DRR.
c) 10% of the total nominal (face) value of outstanding debentures to DRR.
d) 50% of the total nominal (face) value of outstanding debentures to DRR.
The correct option is (a).
The amount to be transferred to DRR is specified in Rule 18(7) (b) of the Companies (Share Capital and Debentures) Rules, 2014.
The rule prescribes that a company shall transfer at least 25 per cent of the nominal value of the outstanding debentures to DRR.
The Adarsh Control Device Ltd. was registered with the authorised capital of ₹3,00,000 divided into 30,000 shares of ₹ 10 each, which were offered to the public. Amount payable as ₹3 per share on application, ₹ 4 per share on allotment and ₹3 per share on first and final call.
These shares were fully subscribed and all money was dully received. Prepare journal and Cash Book.
Journal Entries
| Particulars | ₹ | ₹ | ||||
| Share application a/c | Dr. | 90,000 | ||||
| To share capital a/c | 90,000 | |||||
| (Application money transferred to share capital account on 30,000 shares @ ₹ 3 per share) | ||||||
| Share allotment a/c | Dr. | 1,20,000 | ||||
| To equity share capital a/c | 1,20,000 | |||||
| (Share allotment money due on 30,000 shares @ ₹4per share) | ||||||
| Share first and final call | Dr. | 90,000 | ||||
| To share capital a/c | 90,000 | |||||
| (Share first and final call due on 30,000 shares @ ₹3 per share) | ||||||
Cash Book (Bank column only)
| Particulars | ₹ | Particulars | ₹ |
| To share | By balance c/d | 3,00,000 | |
| application a/c | 90,000 | ||
| To share | |||
| allotment a/c | 1,20,000 | ||
| To share first and | |||
| final call | 90,000 | ||
| 3,00,000 | 3,00,000 |
On the basis of information given below calculate the amount of medicines to be debited to the ‘Income and Expenditure Account’ of Good Health Hospital for the year ended 31.3.2019:
| 1.4.2018 | 31.3.2019 | |
| ₹ | ₹ | |
| Stock of Medicines | 1,75,750 | 1,44,650 |
| Creditors for Medicines | 15,06,900 | 18,20,700 |
Medicine purchased during, the year ended 31.3.2019 were ₹ 60, 80,700.
| Calculation of Amount to be debited to Income and Expenditure account. | |
| Particulars | Amount (₹) |
| Medicine purchased during the year. | 60,80,700 |
| Add: Opening stock of medicine (i.e. on 1.4.2018) | 1,75,750 |
| Less: Closing stock of medicine (i.e. on 31.3.2019) | (1,44,650) |
| Less: Opening Creditors for medicine (i.e. on 1.4.2018) | (15,06,900) |
| Add: Closing Creditors for medicine (i.e. on 31.3.2019) | 18,20,700 |
| Amount to be debited in Income and Expenditure account. | 64,25,600 |
Alex, Dino and Priya were partners in a firm sharing profits and losses in the ratio 5:3:2 respectively. On 31st Dec. 2018, their Balance Sheet was as follows:
| Liabilities | ₹ | Assets | ₹ | |
| Sundry Creditors | 31,000 | Goodwill | 5,000 | |
| Workmen Compensation Reserve Fund | 6,000 | Land | 20,000 | |
| Capitals: |
| Patents | 6,000 | |
| Alex | 30,000 |
| Machinery | 30,000 |
| Dino | 25,000 |
| Stock | 10,000 |
| Priya | 15,000 | 70,000 | Debtors | 28,000 |
|
|
| Cash at Bank | 8,000 | |
|
| 1,07,000 |
| 1,07,000 | |
Priya died on 30th April 2019.
It was agreed that the:
i. Goodwill of the firm to be valued at two and a half years purchase of the average profits of the last four years.
ii. Profits for the last four years were ₹13,000; ₹ 12,000; ₹ 16,000 and ₹15,000 respectively.
iii. Machinery to be valued at ₹ 28,000; patents at ₹ 8,000; land be valued at ₹ 25,000 on 30th April 2019.
iv. For the purpose of calculating Priya’s share of profits for 2015, the profits should be taken to have accrued on the same scale as in 2018.
Prepare Priya’s Capital Account to be rendered to her legal heir.
| Dr. | Priya’s Capital Account | Cr. | |||||
| Date | Particulars | ₹ | Date | Particulars | ₹ | ||
| 2019 | 2019 | ||||||
| Apr.30 | To Goodwill A/c | 1,000 | Jan.1 | By Balance b/d | 15,000 | ||
| To Priya’s Executors A/c | 24,200 | Apr.30 | By Revaluation | ||||
| A/c (profit) | 1,000 | ||||||
| By Alex’s Capital | 4,376 | ||||||
| By Dino’s Capital | 2,624 | ||||||
| By P&L Suspense | 1,000 | ||||||
| By Workmen | |||||||
| Comp. Fund | 1,200 | ||||||
| 25,200 | 25,200 | ||||||
Working Notes:
On 1st April, 2018, Ashok Ltd. was formed with an authorized capital of ₹1,00,00,000 divided into 2,00,000 equity shares of ₹50 each. The company issued prospectus inviting applications for 1,50,000 shares. These issue price was payable as under.
On Application: ₹15
On Allotment: ₹20
On Call: Balance.
The issue was fully subscribed and the company allotted shares to all the applicants.
The Company did not make the call during the year.
The company also issued 5,000 shares of ₹50 each fully paid up to the vendor for purchase of office premises.
Show the:
(a)
| Balance Sheet of Ashok Ltd. | |||
| as at 31st March 2019 (Extract) | |||
| (₹in ‘000’) | |||
| Particulars | Note | 31/03/19 | |
| Equity and Liabilities | |||
| 1.Shareholder’s funds | |||
| 1 | 5500 | ----- |
| Total | 5500 | ------- | |
(b)
Notes to Accounts (1)
| (₹in ‘000’) | |
| Particulars | 31/03/2019 |
| Authorized Capital: | |
| 2,00,000 equity shares of ₹50 each | 10,000 |
| Issued Capital: | |
| 5000 shares of ₹50 each (fully paid up issued | |
| issued To vendors) | 250 |
| 1,50,000 shares ₹50 each issued to public | 7,500 |
| Subscribed Capital: | |
| Subscribed and Fully paid | |
| 5000 shares ₹50 each issued to vendors | 250 |
| Subscribed but not fully paid | |
| 1,50,000 shares of ₹50 each issued to public | |
| ₹35 called up | 5,250 |
| Total | 5,500 |
Following is the summary of cash transactions of Friends Club for the year ended 31st December 2018. Prepare Income and Expenditure Account for the year ended 31st December 2018 and also balance sheet as at that date:
| Receipts | ₹ | Payments | ₹ |
| To balance b/d | 7,900 | By salaries | 11,000 |
| To Entrance fees | 3,200 | By Tennis Courts | 17,500 |
| To Donation for Building | 2,200 | By printing & stationery | 5,500 |
| To legacy | 37,500 | By office expenses | 4,100 |
| To subscriptions | 52,000 | By electric charges | 2,300 |
| To Match fund | 26,000 | By Match | |
| To Misc. income | 1,250 | Expenses | 18,500 |
| To sale of sports good (Costing ₹ 2200 ) | 2,500 | By repair of ground | 2,000 |
| To sale of newspaper | 750 | By furniture purchased | 7,700 |
| By sports equipment | 12,000 | ||
| By cash at bank | 22,700 | ||
| By 10% fixed deposit (On 1.10.18 for 10% p.a.) | 30,000 | ||
| 1,33,300 | 1,33,300 |
Additional information:
Subscription outstanding on 31st December 2018- ₹1,200 and ₹3,200 on 31st December 2017. Misc. Income outstanding on December 31, 2018- ₹250. Salaries outstanding on 31 December 2018- ₹1,000.
On 1st January 2018, the club has a building of ₹36,000, furniture ₹12,000, sports equipment ₹17,500. Depreciation charged on these items @ 10 % (including purchases).
| Books of Friends Club Dr. Income and Expenditure A/c Cr. For the year ending 31st December 2018 | |||||
| Expenditure | ₹ | Income | ₹ | ||
| To salaries | 11,000 | By subscription | 52,000 | ||
| Add Outstanding | 1,000 | 12,000 | Add outstanding | 3,200 (end) | |
| To printing and stationery | 5,500 | Less outstanding | 1,200 (beg.) | 54,000 | |
| To office expenses | 4,100 | ||||
| To electric charges | 2,300 | By entrance fees | 3,200 | ||
| To repair of ground | 2,000 | By Misc. income 1,250 | |||
| To depreciation on building | 3,600 | Add outstanding 250 | 1,500 | ||
| To depreciation on sports equipment | 2,730 | By sale of old newspapers | 750 | ||
| To dep. on furniture | 1,970 | By interest accrued on FD | 7,50 | ||
| To surplus | 26,300 | By gain on sale of sports goods | 300 | ||
| 60,500 | 60,500 | ||||
| Balance Sheet As on 31.12.2018 | ||||
| Liabilities | ₹ | Assets | ₹ | |
| Capital fund | 74,600 | Tennis Courts | 17,500 | |
| Add surplus | 26,300 | 1,00,900 | Furniture ₹ (12,000+7,700-1,970) | 17,730 |
| Donation for Building | 2,200 | Sports equipment ₹(17,500 + 12,000 - 2200 - 2730) | 24,570 | |
| Legacy Match | 37,500 | Building | 32,400 | |
| Fund | 26,000 | Misc. income outstanding | 250 | |
| Less expenses | 18,500 | 7,500 | Subscription out. | 3,200 |
| Outstanding salary | 1,000 | Accrued int. on FD | 750 | |
| Cash at bank | 22,700 | |||
| 10% fixed deposit | 30,000 | |||
| Total | 1,49,100 | 1,49,100 | ||
Working note:
| Calculation of opening capital fund Opening Balance Sheet As on 01.01.2018 | |||
| Liabilities | ₹ | Assets | ₹ |
| Capital Fund (Balancing Figure) | 74,600 | Cash at bank | 7,900 |
| Subscription out. | 1,200 | ||
| Sports Equipment | 17,500 | ||
| Furniture | 12,000 | ||
| Building | 36,000 | ||
| 74,600 | 74,600 | ||
X, Y and Z were the partners sharing profits in the ratio 3:3:1. On 2-5-2019 their firm was dissolved. The assets were realised and the liabilities were paid off.
Given below are the realisation, partners capital account and bank account. The accountant left a few amounts not posted in these accounts. You are required to complete these accounts by posting the correct amounts:
| Dr. | Realisation Account | Cr. | |||||
| Particulars | ₹ | Particulars | ₹ | ||||
| To Sundry Assets: | By Sundry Liabilities: | ||||||
| Machinery | 20,000 | Mr. X’s loan | 4,000 | ||||
| Stock | 4,025 | Creditors | 10,250 | ||||
| Investment | 10,415 | Investment Fluctuation Fund | 3,000 | ||||
| Debtors | 4,700 | 39,140 | Provision for Doubtful Debts | 350 | 17,600 | ||
| To X’s (Mr. X’s Loan) | 4,000 | By X (Investment) | 8,750 | ||||
| To Bank A/c (Creditors) and Realisation expenses) | 10,500 | By Y (Stock) | 3,750 | ||||
| To _____________ | By Bank (Assets) | 27,350 | |||||
| 57,450 | 57,450 | ||||||
| Dr. | Capital Accounts | Cr. | |||||
| Particulars | X | Y | Z | Particulars | X | Y | Z |
| ₹ | ₹ | ₹ | ₹ | ₹ | ₹ | ||
| To Bal. b/d | 5,750 | By Bal. b/d | 25,000 | 5,000 | |||
| To Real A/c | 8,750 | 3,750 | |||||
| To ________ | |||||||
| 30,633 | 6,633 | 5,750 | 30,633 | 6,633 | 5,750 | ||
| Dr. | Bank Account | Cr. | |||
| Particulars | ₹ | Particulars | ₹ | ||
| To Balance b/d | 2,710 | By Realisation A/c | 10,500 | ||
| To Realisation A/c | 27,350 | By __________ | |||
| ___________ | _____ | By __________ | |||
| 35,266 | 35,266 | ||||
| Dr. | Realisation Account | Cr. | |||||
| Particulars | ₹ | Particulars | ₹ | ||||
| To Sundry Assets: |
| By Sundry Liabilities: |
| ||||
| Machinery | 20,000 |
| Mr. X’s loan | 4,000 |
| ||
| Stock | 4,025 |
| Creditors | 10,250 |
| ||
| Investment | 10,415 |
| Investment Fluctuation Fund | 3,000 |
| ||
| Debtors | 4,700 | 39,140 | Provision for Doubtful Debts | 350 | 17,600 | ||
| To X’s (Mr. X’s Loan) | 4,000 | By X (Investment) | 8,750 | ||||
| To Bank A/c (Creditors) and Realisation expenses) | 10,500 | By Y (Stock) | 3,750 | ||||
| To Profit transferred to |
| By Bank (Assets) | 27,350 | ||||
| X | 1,633 |
|
|
| |||
| Y | 1,633 |
|
|
| |||
| Z | 544 | 3,810 |
|
| |||
|
| 57,450 |
| 57,450 | ||||
| Dr. | Capital Accounts | Cr. | |||||
| Particulars | X | Y | Z | Particulars | X | Y | Z |
|
| ₹ | ₹ | ₹ |
| ₹ | ₹ | ₹ |
| To Bal. b/d |
|
| 5,750 | By Bal. b/d | 25,000 | 5,000 |
|
| To Real A/c | 8,750 | 3,750 |
| By Realisation (Profit) | 1,633 | 1,633 | 544 |
| To Bank A/c | 21,883 | 2,883 |
| By Realisation | 4,000 |
|
|
|
|
|
|
| By Bank |
|
| 5,206 |
|
| 30,633 | 6,633 | 5,750 |
| 30,633 | 6,633 | 5,750 |
| Dr. | Bank Account | Cr. | |||
| Particulars | ₹ | Particulars | ₹ | ||
| To Balance b/d | 2,710 | By Realisation A/c | 10,500 | ||
| To Realisation A/c | 27,350 | By X | 21,883 | ||
| To Z | 5,206 | By Y | 2,883 | ||
|
| 35,266 |
| 35,266 | ||
On 1st April 2019, Samir, Lalit and Pooja started a business:
| ₹ | |
| Samir | 7,50,000 |
| Lalit | 6,75,000 |
| Pooja | 3,75,000 |
According to Partnership agreement:
Profit earned in any year will be distributed as under:
Upto ₹4,50,000 equally.
Excess over ₹4,50,000 (1/5th to Samir, 2/5th to Lalit and 2/5th to Pooja).
Allow interest on capital @5% p.a. and charge interest on drawings @8% p.a.
Samir and Pooja are entitles to get monthly salaries of ₹6,750 and ₹8,250 respectively. In addition to Salaries, both are entitles to get a commission of 4% each on net profit after taking into consideration salaries, interest and all commissions.
| ₹ | |
| Samir withdrew regularly at the end of every month | 13,500 |
| Lalit withdrew regularly at the beginning of every month | 12,000 |
| Pooja withdrew during the year | 75,000 |
The profit of the firm for the year before charging all of the above adjustments was ₹8,21,820.
Distribute the profit among the partners and prepare partner’s current accounts when capitals are fixed.
| Books of Samir, Lalit and Pooja Profit & Loss Appropriation A/c For the year ended 31st March 2019 | |||||
| Particulars | ₹ | Particulars | ₹ | ||
| To Interest on Capital: | By Profit & Loss A/c | 8,21,820 | |||
| Samir | 37,500 | By Interest on Drawings: | |||
| Lalit | 33,750 | Samir | 5,940 | ||
| Pooja | 18,750 | 90,000 | Lalit | 6,240 | |
| To Salary | Pooja | 3,000 | 15,180 | ||
| Samir | 81,000 | ||||
| Pooja | 99,000 | 1,80,000 | |||
| To Commission | |||||
| Samir | 21,000 | ||||
| Pooja | 21,000 | 42,000 | |||
| To Profit transferred to: | |||||
| Samir’s Current A/c | 1,65,000 | ||||
| Lalit’s Current A/c | 1,80,000 | ||||
| Pooja’s Current A/c | 1,80,000 | 5,25,000 | |||
| 8,37,000 | 8,37,000 | ||||
| Dr. | Partner’s Current A/cs | Cr. | |||||
| Particulars | Samir ₹ | Lalit ₹ | Pooja ₹ | Particulars | Samir ₹ | Lalit ₹ | Pooja ₹ |
| To Drawings | 1,62,000 | 1,44,000 | 75,000 | By Interest on Capital | 37,500 | 33,750 | 18,750 |
| To Int. on Drawings | 5,940 | 6,240 | 3,000 | By Salary | 81,000 | 99,000 | |
| To Balance c/d | 1,36,560 | 63,510 | 2,40,750 | By Commission | 21,000 | 21,000 | |
| By P & L Appropriation A/c | 1,65,000 | 1,80,000 | 1,80,000 | ||||
| 3,04,500 | 2,13,750 | 3,18,750 | 3,04,500 | 2,13,750 | 3,18,750 | ||
Working Notes:
Balance of Profit:
=₹8,21,820 + ₹15,180 – ₹90,000 – ₹1,80,000 = ₹5,67,000
Commission to Samir and Pooja is 4% to each after charging such commission.
Hence, the commission will be 4/108 to each partner.
Divisible Profit = ₹5,67,000 – ₹21,000 – ₹21,000 = ₹5,25,000
| Samir ₹ | Lalit ₹ | Pooja₹ | |
| Upto ₹4,50,000 Equally | 1,50,000 | 1,50,000 | 1,50,000 |
| ₹5,25,000 –₹ 4,50,000 = ₹75,000 in 1/5:2/5:2/5 | 15,000 | 30,000 | 30,000 |
| 1,65,000 | 1,80,000 | 1,80,000 |
Pass the necessary adjustment entry for the following errors:
(i) Paul, Mary and Nancy share profits in the ratio of 3:2:1 The profits of the last three years were ₹ 1,40,000, ₹ 84,000 and ₹ 1,06,000 respectively. These profits were by mistake shared equally for all the three years. It is now decided to correct the error..
(ii) X, Y and Z are partners sharing profits and losses in the ratio of 3:2:1. After the final accounts have been prepared, it was discovered that interest on drawings had not been taken into consideration. The interest on drawings of the partners amounted to X - ₹ 250 , Y - ₹ 180, and Z- ₹ 100.
| Particulars | L.F. | Dr. ₹ | Cr. ₹ | |
| Nancy’s Capital A/c | Dr. | 55,000 | ||
| To Paul’s Capital A/c | 55,000 | |||
| (Being entries wrongly done now rectified) | ||||
Working Notes:
i. Profit of the last three years
= ₹ (1,40,000 + 84,000 + 1,06,000)
= ₹ 3,30,000.
ii. Calculation of Excess or Short Profit:
| Particulars | Paul | Mary | Nancy |
| Profit that should have been credited (₹ 3,30,000 in 3:2:1) | 1,65,000 | 1,10,000 | 55,000 |
| Profit credited ₹ 3,30,000 equally | 1,10,000 | 1,10,000 | 1,10,000 |
| Difference to be Credited/ Debited | 55,000 | (55,000) |
(ii)
| Particulars | L.F. | Dr.₹ | Cr. ₹ |
| Y’s capital A/c Dr. | 3 | ||
| Z’s capital A/c Dr. | 12 | ||
| To X’s capital A/c | 15 | ||
| (Being omission of interest on drawings, now rectified) |
Workings:
i. ₹ 530 is income from the firm’s viewpoint. As such the profits of the previous years will be increased by it. Hence ₹ 530 will be shared by partners in the ratio of 3:2:1 which amounts to X-₹ 265, Y -₹ 177 and Z- ₹ 88.
ii. Adjustment Table :
| Particulars | X (₹) | Y (₹) | Z (₹) | Total |
| Interest on drawings (Dr.) | 250 | 180 | 100 | 530 |
| ₹ 530 in the ratio of 3:2:1 | 265 | 177 | 88 | 530 |
| Difference | Cr. 15 | Dr. 3 | Dr. 12 |
Sonam Ltd. issued 60,000 equity shares of ₹10 each at a premium of 20%. The amount was payable as follows:
On application - ₹ 2 per share
On allotment - ₹ 5 per share (including premium)
On first and final call – ₹ 5 per share
Applications for 75,000 shares were received. Shares were allotted to all the applicants on pro-rata basis. Excess money received on applications was adjusted towards sums due on allotment.
All calls were made, Sam who was allotted 1,200 shares failed to pay the amount due on allotment and first and final call. Roy who had applied for 1,500 shares failed to pay the first and final call. Shares of both Sam and Roy were forfeited. The forfeited shares were re-issued for ₹ 21,600 as fully paid up.
Pass necessary journal entries for the above transactions in the books of Sonam Ltd.
In the Books of Sonam Ltd.
Journal
| Particulars | Dr. ₹ | Cr. ₹ | ||||||||
| Bank A/c | Dr. | 1,50,000 | ||||||||
| To Share Application A/c | 1,50,000 | |||||||||
| (Share application money rcvd.) | ||||||||||
| Share Application A/c | Dr. | 1,50,000 | ||||||||
| To Share Capital A/c | 1,20,000 | |||||||||
| To Share Allotment A/c | 30,000 | |||||||||
| (Share application & allotment money transferred) | ||||||||||
| Share Allotment A/c | Dr. | 3,00,000 | ||||||||
| To Share Capital A/c | 1,80,000 | |||||||||
| To Security premium reserve | 1,20,000 | |||||||||
| (Share allotment money due) | ||||||||||
| Bank A/c | Dr. | 2,64,600 | ||||||||
| To Share Allotment A/c | 2,64,600 | |||||||||
| (Share allotment money rcvd.) | ||||||||||
| Share 1st& Final Call A/c | Dr. | 3,00,000 | ||||||||
| To Share capital A/c | 3,00,000 | |||||||||
| (Share 1st call money due) | ||||||||||
| Bank A/c | Dr. | 2,88,000 | ||||||||
| To Share 1st& Final Call A/c | 2,88,000 | |||||||||
| (Share 1st Call money received) | ||||||||||
| Share Capital A/c | Dr. | 12,000 | ||||||||
| Security Premium Reserve | Dr. | 2,400 | ||||||||
| To Forfeited share A/c | 3,000 | |||||||||
| To Share Allotment A/c | 5,400 | |||||||||
| To Share 1st& Final call A/c | 6,000 | |||||||||
| (Sam’s share forfeited) | ||||||||||
| Share Capital A/c | Dr. | 12,000 | ||||||||
| To Forfeited share A/c | 6,000 | |||||||||
| To 1st& Final call A/c | 6,000 | |||||||||
| (Roy’s shares forfeited) | ||||||||||
| Bank A/c | Dr. | 21,600 | ||||||||
| Forfeited Share A/c | Dr. | 2,400 | ||||||||
| To Share Capital A/c | 24,000 | |||||||||
| (All forfeited shares re-issued) | ||||||||||
| Forfeited share A/c | Dr. | 6,600 | ||||||||
| To Capital reserves | 6,600 | |||||||||
| (Balance of forfeited share trfd. to Capital Reserve A/c) | ||||||||||
Working Note 1:
| Applied | Allotted | Excess |
| 75,000 | 60,000 | 15,000 |
Working Note 2:
| Particulars | ₹ |
| Sam | |
| Application money received on | |
| 1500 x ₹2) | 3,000 |
| Less: App. Money adjusted on | |
| (1200 x ₹2) | (2,400) |
| Excess money | 600 |
| Allotment money due | |
| (1200 x ₹5) | 6,000 |
| Less: Excess money | (600) |
| Amount not paid on allotment | 5,400 |
Shares allotted to Roy = 1,500 x 60/75 = 1,200 shares
Metallic Ltd. invited applications for issuing 40,000 equity shares of ₹10 each at par. The amount was payable as follows:
On application and allotment – ₹ 4 per share.
On first call –₹ 3 per share.
Applications for 39,000 shares were received and allotment was made to all the applicants.
The payment was received as per the following details:
On 30,000 shares – Full amount.
On 6,000 shares – ₹ 7 per share.
On 3,000 shares – ₹ 4 per share.
The Directors forfeited those shares on which less than ₹ 7 per share were received.
The forfeited shares were re-issued at ₹ 8 per share as fully paid up.
Pass necessary Journal Entries in the books of the company for the above transactions.
| Metallic Ltd. | |||||||
| Journal | |||||||
| Particulars | Dr. ₹ | Cr. ₹ | |||||
| Bank A/c | Dr. | 1,56,000 | |||||
| To Share App. & Allotment A/c | 1,56,000 | ||||||
| (Being application received for 39,000 shares @ ₹ 4 per share) | |||||||
| Share App. & Allotment A/c | Dr. | 1,56,000 | |||||
| To Share Capital A/c | 1,56,000 | ||||||
| (Being application and allotment money trfd. to share capital ) | |||||||
| Share 1st Call A/c | Dr. | 1,17,000 | |||||
| To Share Capital A/c | 1,17,000 | ||||||
| (Being 1st Call money due on 39,000 shares @ ₹ 3 per share) | |||||||
| Bank A/c | Dr. | 1,08,000 | |||||
| Calls in Arrears A/c | Dr. | 9,000 | |||||
| To Share 1st Call A/c | 1,17,000 | ||||||
| (Being 1st Call money received On 36000 shares @ ₹ 3 per share & calls in arrears on 3,000 share) | |||||||
| Share 2nd& Final Call A/c | Dr. | 78,000 | |||||
| To Share Capital A/c | 78,000 | ||||||
| (Being 2nd& Final call money due on 39,000 shares @ ₹ 2 each) | |||||||
| Bank A/c | Dr. | 60,000 | |||||
| Calls in Arrears A/c | Dr. | 18,000 | |||||
| To Share 2nd& Final Call A/c | 78,000 | ||||||
| (Being 2nd& Final call money Received on 33,000 share @ ₹ 2 per share & Calls in Arrears on 6,000 shares) | |||||||
| Share Capital A/c | Dr. | ||||||
| (3,000 x 10) | 30,000 | ||||||
| To Forfeited Shares (3,000 x ₹ 4) | 15,000 | ||||||
| To Calls in Arrears (3,000 x ₹ 5) | 15,000 | ||||||
| (Being 3,000 shares forfeited on | |||||||
| which only ₹ 4 per share paid) | |||||||
| Bank A/c (3,000 x ₹ 8) | Dr. | 24,000 | |||||
| Forfeited Shares A/c | Dr. | ||||||
| (3,000 x ₹ 2) | 6,000 | ||||||
| To Share Capital A/c | 30,000 | ||||||
| (3,000 x ₹ 10) | |||||||
| (Being all the forfeited shares | |||||||
| reissued @ ₹ 8 per share) | |||||||
| Forfeited Shares A/c | Dr. | 9,000 | |||||
| To Capital Reserve A/c | 9,000 | ||||||
| (Being amount of forfeited share | |||||||
| t/frd to capital reserve) | |||||||
On 31st March 2019, the Balance Sheet of Maureen and Suri, who were sharing profits in the ratio 3:1 was as follows:
| Liabilities | ₹ | Assets | ₹ | ||
| Capitals; | Bank | 3,000 | |||
| Maureen | 9,000 | Trade Stock | 4,500 | ||
| Suri | 6,000 | 15,000 | Debtors | 9,750 | |
| Reserves | 3,000 | Less: Reserve | |||
| EPF | 1,800 | for bad debts | 750 | 9,000 | |
| Bills payables | 4,200 | Shares in X Ltd. | 7,500 | ||
| 24,000 | 24,000 | ||||
They decided to admit Alex on 1st April 2019 for 1/5th share on the following terms:
(i) Alex will bring ₹9,000 as his share of premium.
(ii) The unaccounted accrued interest of ₹ 150 to be provided for.
(iii) The market value of shares of X Ltd. was ₹ 6,750.
(iv) A debtor whose dues of ₹ 750 were written off as bad debts to be paid ₹ 600 in full settlement.
(v) Alex to bring in the capital to the extent of 1/5th of the total capital of the new firm.
Prepare a Revaluation A/c, Partners’ Capital A/c and the Balance Sheet of the new firm.
| Dr. | Revaluation Account | Cr. | |||
| Particulars | ₹ | Particulars | ₹ | ||
| To Shares in X Ltd. | 750 | By Accrued Interest | 150 | ||
| By Bad debts recovered | 600 | ||||
| 750 | 750 | ||||
| Dr. | Partners’ Capital Accounts | Cr. | |||||||
| Par. | Maureen ₹ | Suri ₹ | Alex₹ | Par. | Maureen ₹ | Suri ₹ | Alex ₹ | ||
| To Bal. c/d | 18,000 | 9,000 | 6,750 | By Bal. b/d | 9,000 | 6,000 | |||
| By Reserve | 2,250 | 750 | |||||||
| By Premium | 6,750 | 2,250 | |||||||
| By Cash A/c | 6,750 | ||||||||
| 18,000 | 9,000 | 6,750 | 18,000 | 9,000 | 6,750 | ||||
| Balance Sheet as on 1st April 2019 | ||||
| Liabilities | ₹ | Assets | ₹ | |
| Bills Payable | 4,200 | Bank | 19,350 | |
| EPF | 1,800 | Trade Stock | 4,500 | |
| Capital: | Debtors | 9,750 | ||
| Maureen | 18,000 | Less: Reserve | ||
| Suri | 9,000 | for bad debts | 750 | 9,000 |
| Alex | 6,750 | Shares in X Ltd. | 6,750 | |
| Accrued income | 150 | |||
| 39,750 | 39,750 | |||
Working Note:
Calculation of Amount of capital of Mr. Alex;
| Particulars | ₹ |
| Capital of Maureen after all adjustment | 18,000 |
| Add: | |
| Capital of Suri after all adjustment = | 9,000 |
| Total capital of both for 4/5 share in the firm | 27,000 |
| Thus total capital of the firm ( ₹ 27,000 x 5 /4) | 33,750 |
| Share of Alex for 1/5 share ( ₹ 33,750 x 1/5) | 6,750 |
A, B and C were carrying on partnership business, sharing profits in the ratio of 3:2:1 respectively. On March 31, 2019 the balance sheet of the firm stood as follows:
| Balance Sheet | ||||
| Liabilities | ₹ | Assets | ₹ | |
| Creditors | 13,590 | Cash | 4,700 | |
| Capital A/c’s: | Debtors | 8,000 | ||
| A | 15,000 | Stock | 11,690 | |
| B | 10,000 | Building | 23,000 | |
| C | 10,000 | 35,000 | Profit & Loss | 1,200 |
| 48,590 | 48,590 | |||
B Retired on the above-mentioned date on the following terms:
(i) Building to be appreciated by ₹ 7,000.
(ii) Provision for doubtful debts to be made at 5% on debtors.
(iii) Goodwill of the firm is valued at ₹ 18,000 and adjustments in this respect to be made in the continuing partner’s capital accounts without raising goodwill account.
(iv) ₹ 3,000 are to be paid to B immediately and the balance to be transferred to his loan account.
Prepare Revaluation account, Capital accounts, Cash account and the Balance Sheet after B’s Retirement.
| Dr. Revaluation Account Cr. | ||||
| Particulars | ₹ | Particulars | ₹ | |
| To Provision for Doubtful Debts | 400 | By Buildings | 7,000 | |
| To Profit trfd to: | ||||
| Capital A/c’ s: | ||||
| A | 3,300 | |||
| B | 2,200 | |||
| C | 1,100 | 6,600 | ||
| 7,000 | 7,000 | |||
| Dr. Partner’s Capital Account Cr. | |||||||
| Particulars | A ₹ | B ₹ | C ₹ | Particulars | A ₹ | B ₹ | C ₹ |
| To B’s Capital | 4,500 | 1,500 | By Bal. b/d | 15,000 | 10,000 | 10,000 | |
| To P & L A/c | 600 | 400 | 200 | By Revaluation | 3,300 | 2,200 | 1,100 |
| To Cash A/c | 3,000 | By A’s Capital | 4,500 | ||||
| To B’s Loan A/c | 14,800 | By B’s Capital | 1,500 | ||||
| To Balance c/d | 13,200 | 9,400 | |||||
| 18,300 | 18,200 | 11,100 | 18,300 | 18,200 | 11,100 | ||
| Dr. Cash Account Cr. | |||
| Particulars | ₹ | Particulars | ₹ |
| To Bal. b/d | 4,700 | By B’s Capital | 3,000 |
| By Bal. c/d | 1,700 | ||
| 4,700 | 4,700 | ||
| Balance Sheet | ||||||
| Liabilities | ₹ | Assets | ₹ | |||
| Creditors | 13,590 | Cash | 1,700 | |||
| B’s Loan | 14,800 | Debtors | 8,000 | |||
| Capitals: | Less: | |||||
| A | 13,200 | Prov. | 400 | 7,600 | ||
| C | 9,400 | 22,600 | Stock | 11,690 | ||
| Building | 30,000 | |||||
| 50,990 | 50,990 | |||||
Calls-in advance will be shown, under the sub-head
a) Short-term borrowing.
b) Short-term provision.
c) Trade payables.
d) Other current liabilities.
The correct option is (d).
Calls-in advance is shown as ‘Current Liabilities’ under sub-head ‘Other Current Liabilities’.
In a company’s balance sheet, loss incurred during the year, is shown under
a) Other non-current liabilities.
b) Share capital.
c) Profit and loss account.
d) Reserves and surplus.
The correct option is (d).
Loss computed by statement of profit and loss is shown under reserves and surplus as a negative balance in the notes to accounts.
In a company’s Balance Sheet, share forfeiture account is shown under
a) Owner’s funds.
b) Share capital.
c) Reserves and surplus.
d) Current liabilities and provisions.
The correct option is (b).
Share forfeiture account is shown in the liabilities part of the balance sheet under the head share capital.
The following information is given:
| Details | (₹) |
| Gross Profit | 30,00,000 |
| Employee benefit expenses | 8,00,000 |
| Depreciation and amortisation expenses | 2,00,000 |
| Other operating expenses | 4,00,000 |
Income from operation will be
a) ₹14,00,000.
b) ₹16,00,000.
c) ₹12,00,000.
d) ₹20,00,000.
The correct option is (b).
All the three belong to operating expenses category
Income from operation = ₹30,00,000 - ₹8, 00,000 - ₹2,00,000- ₹4,00,000 = ₹16,00,000.
Cash inflow from investing activity include
a) issue of shares.
b) payment of dividend.
c) repayment of long term debts.
d) receipt of interest on investment.
The correct option is (d).
Investing activities are related to the purchase and sale of assets and investments. Receipt of interest on investment is the cash inflow from investing activity.
KK Ltd. made a profit of ₹9,00,000 after considering the following items –
Depreciation on fixed assets ₹1,50,000.
Gain on sale of land ₹1,05,000.
Cash flow from operating activities will be
a) ₹9,00,000.
b) ₹9,45,000.
c) ₹8,55,000.
d) ₹10,50,000.
The correct option is (b).
= ₹9,00,000 + ₹1,50,000 (non-cash expense) –₹1,05,000 (non-operating income)
= ₹9,45,000.
| Calculate Operating Ratio and Proprietary Ratio from the following information.
|
Working Note:
1. Calculation of Operating Cost
Operating Cost =
Cost of revenue from operations + Operating Expenses
Cost of revenue from operations =
Total revenue from operations – Gross Profit
Total revenue from operations =
Cash revenue from operations + Credit revenue from operations
a)
Calculate Deb Equity Ratio from the following information:
| Items | ₹ |
| Long-term Borrowings | 1,50,000 |
| Long-term Provisions | 75,000 |
| Current Liabilities | 37,500 |
| Non-current Assets | 2,70,000 |
| Current Assets | 67,500 |
(2 Marks)
b)
The proprietary ratio is 0.6:1. State whether ‘purchase of a fixed asset for cash' will increase, decrease or not change the ratio.
(2 Marks)
a)
Debt = Long term Borrowings ₹1,50,000 + Long term Provisions ₹75,000 = ₹2,25,000
Shareholders’ Funds =
Non Current Assets ₹2,70,000 + Current Assets ₹67,500 – Current Liabilities ₹37,500 – Long Term Borrowings ₹1,50,000 – Long Term Provisions ₹75,000
= ₹75,000
b)
Purchase of a fixed asset for cash will not change: Neither the Shareholders’ funds nor the total assets are affected since it is a conversion of one asset (cash) into another asset (fixed asset).
From the following Statement of Profit and Loss of Sun Ltd., for the years ended 31st March, 2018 and 2019, prepare a Common Size Statement:
| Particulars | Note No. | 2018-19 | 2017-18 |
|
|
| ₹ | ₹ |
| Revenue from operations |
| 30,00,000 | 20,00,000 |
| Expenses |
| 12,00,000 | 10,00,000 |
| Other incomes |
| 3,60,000 | 4,00,000 |
| Income Tax |
| 50% | 40% |
Common Size Statement of Profit and Loss
For the year 31st March 2018 and 2019
| Particulars | Note No. | Absolute Amounts | Percentage of Revenue from operations | ||
|
|
| 2017-18 | 2018-19 | 2017-18 | 2018-19 |
|
|
| ₹ | ₹ | % | % |
|
| 20,00,000 | 30,00,000 | 100 | 100 |
|
| 4,00,000 | 3,60,000 | 20 | 12 |
|
| 24,00,000 | 33,60,000 | 120 | 112 |
|
| 10,00,000 | 12,00,000 | 50 | 40 |
|
| 14,00,000 | 21,60,000 | 70 | 72 |
|
| 5,60,000 | 10,80,000 | 28 | 36 |
|
| 8,40,000 | 10,80,000 | 42 | 36 |
Note: Figures of the year 2017-18 will be presented first in comparison to 2018-19.
From the following Balance Sheets of Samta Ltd., as at 31st March, 2019 and 31st March, 2018, prepare Cash Flow Statement:
| Particulars | 31/03/2019 | 31/03/2018 |
|
| ₹ | ₹ |
| EQUITY AND LIABILITIES |
|
|
| 1) Shareholders Funds |
|
|
| Share Capital | 20,00,000 | 15,00,000 |
| Reserves and Surplus | 4,00,000 |
|
| 2) Current Liabilities |
|
|
| Other Current Liabilities | 4,00,000 | 3,00,000 |
| Short-term Borrowings | 2,00,000 | 1,00,000 |
| TOTAL | 30,00,000 | 19,00,000 |
| ASSETS |
|
|
| 1) Non-Current Assets |
|
|
| Fixed Assets | 18,00,000 | 12,00,000 |
| 2) Current Assets | 12,00,000 | 7,00,000 |
| TOTAL | 30,00,000 | 19,00,000 |
|
|
|
|
Additional Information:
1) Contingent Liability :
Proposed Dividend for 2018 - ₹1,00,000
Proposed Dividend for 2019: ₹2,00,000
2) During the year ₹80,000 depreciation was charged on fixed assets.
3) A piece of machinery included in fixed assets costing ₹20,000 on which depreciation charged was ₹8,000 sold for ₹10,000.
| Samta Ltd. CASH FLOW STATEMENT for the year ended 31st March, 2019 | ||
| Particulars | ₹ | ₹ |
| (A) Cash Flow from Operating Activities | ||
| Net Profit before Tax (WN 1) | 5,00,000 | |
| Add: Depreciation on Fixed Assets | 80,000 | |
| Loss on sale of Machinery (WN 2) | 2,000 | |
| Operating Profit before Working Capital Changes | 5,82,000 | |
| Add; Increase in Current Liabilities | 1,00,000 | |
| Add: Increase in Other Current Liabilities | 1,00,000 | |
| 7,82,000 | ||
| Less: Increase in Current Assets | 5,00,000 | |
| Cash Flow from Operating Activities | 2,82,000 | |
| (B) Cash Flow from Investing Activities | ||
| Sale of Fixed Assets | 10,000 | |
| Purchases of Fixed Assets | (6,92,000) | |
| Cash Used in Investing Activities | (6,82,000) | |
| (C) Cash Flow from Financing Activities | ||
| Increase in Share Capital | 5,00,000 | |
| Dividend Paid | (1,00,000) | |
| Cash Flow from Financing Activities | 4,00,000 | |
| (D) Net Increase in Cash and Cash Equivalents (A+B+C) | 0 | |
Working Notes:
| 1. Calculation of Net Profit before Tax | ₹ |
| Net profit | 4,00,000 |
| Add : Proposed Dividend (Previous Year i.e. 31st March 2018) | 1,00,000 |
| 5,00,000 |
| Fixed Assets Account | |||
| Particulars | ₹ | Particulars | ₹ |
| To Balance b/d | 12,00,000 | By Depreciation A/c | 80,000 |
| To Bank A/c (Purchases) | 6,92,000 | By Bank | 10,000 |
| Bal. figure |
| By Loss on Sale of fixed Assets A/c (Statement of Profit and Loss) | 2,000 |
|
|
| By Balance c/d | 18,00,000 |
|
| 18,92,000 |
| 18,92,000 |
|
| ₹ |
| Book value on the date of sale of Fixed Assets (₹20,000 – ₹8,000) | 12,000 |
| Less: Selling Price | 10,000 |
| Loss on Sale of Machinery | 2,000 |
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