Solutions to RAC–DS2/Set-1

1. (c) 22:13
4 3
+c × m= +
2 2 12 10 + 12 22
Gabbar →
= =
7 7 5 7 35 35 35
4 2
Billu → + c × m = +
1 1 8 5 + 8 13
= =
7 7 5 7 35 35 35
2. (a) (A) is correct but (R) is wrong.
3. (a) Preferential Allotment
Or
(b) Debited to Goodwill Account

4. (a) Increase of ` 75,000
5. (d) A–(iii); B–(iv); C–(i); D–(ii)
Or
(b) ` 2,025

6. (b) Credited by the face value of debentures
Or
(b) Irredeemable Debenture

7. (d) ` 55,90,000
8. (d) Dr. Revaluation A/c ` 35,000
Or
(c) Partner’s Wife’s Loan

9. (a) ` 85,000
10. (c) Dr. Teena’s Current A/c ` 17,000, Cr. Heena’s Capital A/c ` 8,500 and Sudha’s Capital A/c
` 8,500
11. (d) (ii), (iv), (iii), (i)
12. (b) ` 65 per share
13. (d) No interest will be paid
14. (d) ` 45,000
15. (d) A new partner has to bring relatively higher capital as compared to the existing partners.
Or
(c) Realisation A/c Dr. 40,000
To Bank A/c 10,000
To Milind’s Capital A/c 30,000

Accountancy—12

(1)
 16. (b) ` 1,55,000
17. Adjusted previous year’s profit:
(`)
Last year profit 2,55,000
Less: Gain on sale of Machinery (20,000)
Add: Loss of goods by fire 5,000
2,40,000

X’s share of profit for broken period (i.e., from 1st April 2022 to 31st August 2022)
5 3
= ` 2,40,000 ×
×
12 10
= ` 30,000
Journal

Date Particulars L.F. Dr. (`) Cr. (`)

Profit and Loss Suspense A/c Dr. 30,000

To X’s Capital A/c 30,000
(Being X’s share of profit credited to his account)

18. In the books of M/s Croma Enterprises

Dr. Partners’ Capital Accounts Cr.

Apple Jio Apple Jio

Particulars Particulars
(`) (`) (`) (`)

To Balance c/d 5,60,000 3,95,000 By Bank A/c 5,00,000 3,00,000

By Furniture A/c 60,000 —
By Machinery A/c — 95,000

5,60,000 3,95,000 5,60,000 3,95,000

Dr. Partners’ Current Accounts Cr.

Apple Jio Apple Jio

Particulars Particulars
(`) (`) (`) (`)

To Drawings A/c 25,000 30,000 By Interest on Capital A/c 31,800 20,850

To Interest on Drawings A/c 625 750 By Salary to Partner A/c 11,000 —
To Balance c/d 47,175 30,100 By Commission to partner A/c — 10,000
By Profit and Loss
Appropriation A/c 30,000 30,000
(Share in divisible profit)

72,800 60,850 72,800 60,850

Accountancy—12

(2)
 Working Notes:
(i) Interest on Capitals:
Interest on Apple’s Capital: (`)
12 6
On Cash Contribution c ` 5, 00, 000 # × m 30,000
100 12
12 3
On Asset Contribution c ` 60, 000 # × m 1,800
100 12
Total Interest 31,800
Interest on Jio’s Capital:
12 6
On Cash Contribution c ` 3, 00, 000 # × m 18,000
100 12
12 3
On Asset Contribution c 95, 000 # × m 2,850
100 12
Total Interest 20,850
(ii) Interest on Drawings:
10 3
Interest on Apple’s drawings = ` 25,000 × # = ` 625
100 12
10 3
Interest on Jio’s drawings = ` 30,000 × # = ` 750
100 12
(iii) Salary payable to Apple = ` 2,200 × 5 months = ` 11,000. (i.e. from 1st November 2021 to 31st
March 2022)
5
(iv) Commission payable to Jio = 5% on Net sales = × ` 2,00,000 = ` 10,000
100
(v) Division of Net profit: As profit sharing ratio is not given in the problem, the net divisible profit
1
is divided equally between Apple and Jio. Each of them will get of ` 60,000 = ` 30,000
2
Or
Journal

Date Particulars L.F. Dr. (`) Cr. (`)

Malvika’s Current A/c Dr. 38,000

To Rishita’s Current A/c 38,000
(Being omission of partnership deed provisions)

Working Note:
Statement of Adjustment

Rishita Malvika Total

Particulars
(`) (`) (`)

Interest on capital omitted 1,20,000 84,000 2,04,000

Salary to be provided 72,000 60,000 1,32,000
Correct profit (` 5,04,000 – ` 2,04,000) 98,000 70,000 1,68,000
Amount to be received (` 1,32,000 in 7:5) (Cr.) 2,90,000 2,14,000 5,04,000
Amount already received (` 5,04,000 in 1 : 1) (Dr.) 2,52,0000 2,52,000 5,04,000

Net Adjustment 38,000 (Cr.) 38,000 (Dr.) —

Accountancy—12

(3)
 19. In the Books of Accounts Guru Ltd.
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
(i) Bank A/c Dr. 5,00,000
To Debenture Application A/c 5,00,000
(For applications received for 10,000 debentures
@ ` 50 per debenture)
(ii) Debenture Application A/c Dr. 5,00,000
To 12% Debentures A/c 5,00,000
(For application money on 10,000 debentures @
` 50 per debenture transferred to 12% Debentures A/c)
(iii) Debenture Allotment A/c Dr. 4,00,000
Loss on Issue of Debentures A/c Dr. 2,00,000
To 12% Debentures A/c 5,00,000
To Premium on Redemption of Debentures A/c 1,00,000
(For allotment money due on 10,000 debentures
@ ` 40 per debenture issued at a discount of 10%
redeemable at a premium of ` 10 per debenture)
(iv) Bank A/c Dr. 4,00,000
To Debenture Allotment A/c 4,00,000
(For allotment money received on 10,000 debentures
@ ` 40 per debenture)
Or
In the Books of Kajal Ltd.
Journal
Date Particulars L.F. Dr. (`) Cr. (`)

(i) Sundry Assets A/c Dr. 50,00,000

To Sundry Liabilities A/c 20,00,000
To Vikas Ltd. 25,00,000
To Capital Reserve A/c (Bal. fig.) 5,00,000
(For assets and liabilities of Vikas Ltd. acquired
for a consideration of ` 25,00,000 and difference
transferred to capital reserve)

(ii) Vikas Ltd. Dr. 18,00,000

Discount on Issue of Debentures A/c Dr. 2,00,000
To 12% Debentures A/c 20,00,000
(For allotment of 40,000 debentures of ` 50 each
at a discount of 10%)

(iii) Vikas Ltd. Dr. 7,00,000

To Bank A/c (` 25,00,000 – ` 18,00,000) 7,00,000
(For part payment made in cash to Vikas Ltd.)

Accountancy—12

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 20. Journal

Date Particulars L.F. Dr. (`) Cr. (`)

(i) Bank A/c Dr. 30,000

To Vikas’s Capital A/c 30,000
(Being deficit capital brought in by partner Vikas)

(ii) Yogesh’s Capital A/c Dr. 40,000

To Bank A/c 40,000
(Being balance amount due paid to partner Yogesh)

Working Note:

Total capital of the new firm = Adjusted closing capital balances of remaining partners + Amount
payable to the retiring partner + Cash required in future – Cash
available with the old firm

= ` 50,000 + ` 40,000 + ` 40,000 + ` 11,000 – ` 21,000

= ` 1,20,000
2
New Capital of Vikas = ` 1,20,000 × = ` 80,000
3
1
New Capital of Kunal = ` 1,20,000 × = ` 40,000
3
21. Balance Sheet of Hindustan Ltd. (Extract)

Current Year Previous Year

Particulars Note No.
(`) (`)
I. Equity and Liabilities
1. Shareholders’ Funds:
(a) Share Capital 1 32,80,000 —

Notes to Accounts:

Particulars `

1. Share Capital:
Authorised Capital:
  50,000 shares of ` 100 each 50,00,000
Issued Capital:
  38,000 shares of ` 100 each 38,000,00
Subscribed Capital:
  32,000 shares of ` 100 each, fully called up 32,00,000
 Add: Shares Forfeited ( 1,000 × ` 80) 80,000 32,80,000

Accountancy—12

(5)
 22. (i) Application money received = ` 60,00,000
5
(ii) Amount to be debited to loss on issue of debentures will be ` 3,00,000 c ` 60, 00, 000 × m
100
(iii) Securities Premium A/c Dr. 80,000
Statement of Profit and Loss Dr. 2,20,000
To Loss on Issue of Debentures A/c 3,00,000
(Being loss on issue of debentures written off from securities
premium and balance from statement of profit and loss)
23. Journal

Date Particulars L.F. Dr. (`) Cr. (`)

2022 Equipment A/c Dr. 80,000

April 1 To Sukhmeet’s Capital A/c 80,000

(Being capital brought in the form of Equipment)

April 1 Bank A/c Dr. 36,000

To Premium for Goodwill A/c 36,000

(Being premium for goodwill brought in by

1
Sukhmeet for her th share)
4
April 1 Premium for Goodwill A/c Dr. 36,000

To Raman’s Current A/c 24,000

To Shyam’s Current A/c 12,000

(Being premium divided among partners in their

sacrificing ratio 2 : 1)

April 1 Reserve Fund A/c Dr. 7,200

To Raman’s Current A/c 4,800

To Shyam’s Current A/c 2,400

(Being reserve fund transferred to old partners

in their old profit sharing ratio)

April 1 Revaluation A/c Dr. 19,640

To Provision for Doubtful Debts A/c 1,600

To Loose Tools A/c 18,040

(Being provision for doubtful debts raised and

loose tools written off)

Accountancy—12

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 April 1 Outstanding Rent A/c Dr. 10,000

To Bank A/c 9,040

To Revaluation A/c 960

(Being outstanding rent paid and discount credited

to revaluation A/c)

April 1 Livestock A/c Dr. 2,600

To Revaluation A/c 2,600

(Being value of live stock increased)

April 1 Raman’s Current A/c Dr. 10,720

Shyam’s Current A/c Dr. 5,360

To Revaluation A/c 16,080

(Being loss on revaluation divided among old

partners in their old profit sharing ratio)

Dr. Revaluation A/c Cr.
Amount Amount
Particulars Particulars
(`) (`)
To Provision for Doubtful Debts 1,600 By Rent A/c (Discount) 960
To Loose Tools 18,040 By Livestock 2,600
By Partners’ Current A/cs (Loss):
Raman’s Current A/c 10,720
Shyam’s Current A/c 5,360 16,080
19,640 19,640

Or

Dr. Revaluation A/c Cr.
Amount Amount
Particulars Particulars
(`) (`)
To Stock A/c 3,000 By Furniture A/c 2,000
To Machinery A/c 7,000 By Creditor A/c 1,000
To Provision for Doubtful Debts A/c 5,000 By Partners’ Capital A/cs (Loss)
Saksham 4,500
Anil 4,500
Deepak 3,000 12,000
15,000 15,000

Accountancy—12

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 Dr. Partners’ Capital Accounts Cr.
Particulars Saksham Anil Deepak Particulars Saksham Anil Deepak
(`) (`) (`) (`) (`) (`)

To G
 oodwill A/c 5,000 5,000 — By Balance b/d 1,10,000 1,50,000 80,000
(Written off in By Reserve Fund A/c — — 10,000
gaining ratio 1:1) By Goodwill A/c — — 10,000
To Revaluation A/c 4,500 4,500 3,000 (Raised with Deepak’s
To Deepak’s Loan A/c — — 97,000 share only)
(Bal. Fig.)
To Balance c/d 1,00,500 1,40,500 —
(Bal. Fig.)

1,10,000 1,50,000 1,00,000 1,10,000 1,50,000 1,00,000

Balance Sheet
as at 1st April 2022
Liabilities Amount (`) Assets Amount (`)
Saksham’s Capital A/c 1,00,500 Building 1,00,000
Anil’s Capital A/c 1,40,500 Machinery 1,07,000
Deepak’s Loan A/c 97,000 Less: Depreciation (7,000) 1,00,000
Reserve Fund 40,000 Furniture 1,00,000
Less: Transfer to Deepak’s A/c (10,000) 30,000 Add: Appreciation 2,000 1,02,000
Bills Payable 30,000 Debtors 50,000
Creditors 90,000 Less: Provision for Doubtful
Less: Claim written off (1,000) 89,000 Debts @ 10% (5,000) 45,000
Stock 66,000
Less: Decrease in value (3,000) 63,000
Cash 77,000
4,87,000 4,87,000

24. Anand Ltd.

Journal
Date Particulars L.F. Dr. (`) Cr. (`)
(i) Bank A/c Dr. 4,80,000
To Share Application A/c 4,80,000
(Being application money received on 1,60,000
shares @ ` 3 per share)
(ii) Share Application A/c Dr. 4,80,000
To Share Capital A/c 3,00,000
To Share Allotment A/c 90,000
To Bank A/c 90,000
(Being shares allotted and excess application
money adjusted)

Accountancy—12

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 (iii) Share Allotment A/c Dr. 6,00,000
To Share Capital A/c 4,00,000
To Securities Premium A/c 2,00,000
(Being allotment money due)

(iv) Bank A/c Dr. 5,08,500

Calls-in-Arrear A/c Dr. 1,500
To Share Allotment A/c 5,10,000
(Being allotment money received)

(v) Share First call A/c Dr. 3,00,000

To Share Capital A/c 3,00,000
(Being first call money due)

(vi) Bank A/c Dr. 2,98,200

Calls-in-Arrear A/c Dr. 1,800
(100(s) × ` 3 + 200(s) × ` 3 + 300(s) × ` 3)
To Share First Call A/c 3,00,000
(Being first call money received)

(vii) Share Capital A/c Dr. 6,000

Securities Premium A/c (200 + 400) Dr. 600
To Shares Forfeited A/c 3,300
(100(s) × `3 + 300(s) × `3 + 300(s) × `7)
To Calls in Arrear A/c (`1,800 + `1,500) 3,300
(Being 600 shares forfeited)

(viii) Bank A/c Dr. 2,400

Share Forfeited A/c Dr. 600
To Shares Capital A/c 3,000
(300 Shares reissued)

(ix) Share Forfeited A/c Dr. 600

To Capital Reserve A/c 600
(Share forfeited Amount transferred to capital
reserve)

Working Notes
Excess Application Adjusted to
(i) Shares Applied Shares Alloted Refund
Money Allotment
30,000 Nil — — 90,000
40,000 40,000 — — —
90,000 60,000 90,000 90,000 —
1,60,000 1,00,000 90,000 90,000 90,000

Accountancy—12

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 (ii) Calculation of calls in arrears on allotment by a shareholder holding 200 shares issued under pro-rata:
90, 000 (s)
Number of shares applied = × 200 (s) = 300 shares
60, 000 (s)
Excess application money = (300(s) – 200(s)) × ` 3 = ` 300
Net amount not received on Allotment = 200(s) × ` 6 – (excess application money)
= ` 1,200 – ` 300 = ` 900
Or
(a)
Journal

Date Particulars L.F. Dr. (`) Cr. (`)

(i) Share Capital A/c (100(s) × ` 6) Dr. 600

To Share Forfeited A/c (100(s) × 2) 200
To Calls-in-Arrear A/c (100(s) × 4) 400
(Being 100 shares forfeited)

(ii) Bank A/c (60(s) × ` 6 + 20(s) × ` 9) Dr. 540

Shares Forfeited A/c (60(s) × ` 2 + 20(s) × `1) Dr. 140
To Share Capital A/c 680
(Being 80 shares reissued)

(iii) Share Forfeited A/c Dr. 20

To Capital Reserve A/c 20
(Being shares forfeited transferred to capital reserve)

Working Note:
Amount forfeited
Amount transferred to Capital Reserve: × Shares reissued – Discount on reissue
Shares forfeited
` 200
= × 80(s) – ` 140
100 (s)
= ` 20

(b)
Journal

Date Particulars L.F. Dr. (`) Cr. (`)

(i) Share Capital A/c Dr. 10,000

Securities Premium A/c Dr. 2,000
To Shares Forfeited A/c 5,000
To Calls-in-Arrear A/c 7,000
(Being 1,000 shares forfeited)

Accountancy—12

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 (ii) Bank A/c Dr. 6,600
To Share Capital A/c 6,000
To Securities Premium A/c 600
(Being 600 shares reissued @ ` 11 per share )

(iii) Shares Forfeited A/c Dr. 3,000

To Capital Reserve A/c 3,000
(Being shares forfeited amount transferred to
Capital Reserve)

Working Note:
` 5000
Amount transferred to Capital Reserve = × 600(s) – 0 = ` 3,000
1000 (s)
25. (i) Gagan’s share of interim profit
Last year's profit

= × Sales till the death in the current year × Profit share
Last year's sales
` 1, 20, 000 2

= × ` 1, 80, 000 ×
` 6, 00, 000 5
2

= ` 36,000 × = ` 14,400
5
(ii) Journal

Date Particulars L.F. Dr. (`) Cr. (`)

Profit and Loss Suspense A/c Dr. 14,400

To Gagan’s Capital A/c 14,400
(Being Gagan’s share of profit credited to his
capital Account)

26. Dr. Realisation A/c Cr.

Amount Amount
Particulars Particulars
(`) (`)

To Sundry Assets A/c 4,80,000 By Creditors A/c 2,00,000

To Bank A/c 2,00,000 By Bank A/c (Assets realised) 4,50,000
By Loss transferred to:
A 15,000
B 15,000 30,000

6,80,000 6,80,000

Accountancy—12

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Working Note:

Memorandum Balance Sheet

as at 31st March, 2022
Liabilities Amount (`) Assets Amount (`)
Capitals : B’s Loan 20,000
A 1,70,000 Sundry Assets (Bal. Fig.) 4,80,000
B 30,000 2,00,000
A’s Loan 1,00,000
Creditors 2,00,000
5,00,000 5,00,000

27. (b) Other Income

Or
(c) Current Liabilities, Short-term Borrowings

28. (d) Both (a) and (b)
29. (d) Sale of stock at cost
Or
(b) Amortization of patents

30. (d) Financing Activity

31. L.F. Head Sub-head

(i) Provision for Tax Current Liabilities Short-term Provisions

(ii) Live Stock Non-current Assets Property, Plant and Equipments

(Tangible Assets)
(iii) Capital Advances Non-current Assets Long-term Loans and Advances

(iv) Commission received in Advance Current Liabilities Other Current Liabilities

(v) Advance recoverable in cash Current Assets Short-term Loans and Advances
within the operating cycle
(vi) Outstanding Rent Current Liabilities Other Current Liabilities

32. (i) Interest Coverage Ratio: A higher ratio indicates that the concern can meet its interest burden regularly
even if its earnings before interest and taxes is low and vice-versa. An interest coverage ratio of 6
or 7 times is considered better.
(ii) Operating Ratio: The operating ratio is the yardstick to measure the operational efficiency of the
business. It is very useful for inter-firm as well as intra-firm comparisons. A lower operating ratio
is considered a very healthy sign.

Accountancy—12

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 (iii) Inventory Turnover Ratio: This ratio indicates the rate at which inventory of finished goods are
converted into revenue from operations (sales). It is also a measure of liquidity. It determines how
many times inventory is purchased or replaced during an year. The higher the ratio, the better it
is for the business, since it means that inventory is being sold quickly. Concerns having too high
inventory turnover ratio may be operating with low margin of profit. Low turnover of inventory
may be due to bad buying, obsolete inventory and is a danger signal.
Profit before Interest and Tax
33. (a) Return on Capital Employed = × 100
Capital Employed
` 1, 65, 000
= × 100
8, 00, 000
= 20.62%
Working Notes:
Net profit after interest and Tax = ` 1,00,000
Tax rate = 20%
Let Profit before Tax = ` x
20
x– x = ` 1,00,000
100
80
x = ` 1,00,000
100 100
x = ` 1,00,000 ×
80
x = ` 1,25,000
10
Interest on Long-term Debt = ` 4,00,000 ×
100
= ` 40,000
Profit before Interest and Tax = ` 1,25,000 + 40,000 = ` 1,65,000
Capital Employed = Fixed Assets + Current Assets – Current Liabilities
=
` 6,00,000 + ` 4,00,000 – ` 2,00,000 = ` 8,00,000
Net Profit before Interest and Tax
(b) Interest Coverage Ratio =
Interest on Long - term Debts
` 1, 65, 000
= = 4.12 Times
` 40, 000
Or
Gross Profit (Loss)
(a) Gross Profit Ratio = × 100
Revenue from operations
]1, 55, 000g
= × 100 = (29.52)%
5, 25, 000
Working Notes:
Gross Profit = Revenue from Operations – Cost of Revenue from Operations
= ` 5,25,000 – ` 6,80,000
Gross Loss = ` 1,55,000
Revenue from Operations = Credit Revenue from Operations + Cash Revenue from Operations
75
= ` 3,00,000 + c ` 3, 00, 000 × m
100

Accountancy—12

(13)
 = ` 3,00,000 + ` 2,25,000
= ` 5,25,000
Proprietory Funds
(b) Proprietory Ratio =

Total Assets
` 6, 45, 000
= × 100 = 50.58%
12, 75, 000
Working Notes:
Proprietory Funds = Paid up Share Capital + Reserve and Surplus
= ` 8,00,000 + (` 1,55,000)
= ` 6,45,000
Total Assets = Total Liabilities
= Share Capital + Reserves and Surplus + 9% Debentures + Current Liabilities
= ` 8,00,000 + (` 1,55,000) + ` 3,40,000 + ` 2,90,000
= ` 12,75,000
34. Cash Flow Statement
for the year ended 31st, March, 2022
Particulars Amount (`) Amount (`)
A. Cash Flow from Operating Activities
Net Profit before Tax 1,90,000
Adjustment for non-cash and non-operating items:
Add: Depreciation on Machinery 60,000
Goodwill written off 60,000
Operating Profit before Working Capital Changes 3,10,000
Add: Increase in Current Liabilities
Trade Payables 40,000
3,50,000
Less: Increase in Current Assets:
Inventory (50,000)
Trade Receivables (2,00,000) 2,50,000
Cash generation from operations 1,00,000
Less: Tax paid 70,000
Net Cash from Operating Activities 30,000
B. Cash Flow from Investing Activities
Purchase of Machinery (7,60,000)
Net Cash used in Investing Activities (7,60,000)
C. Cash flows from Financing Activities
Issue of Share Capital 4,00,000
Proceeds from Long-term Borrowings 3,60,000
Net Cash flow from Financing Activities 7,60,000
D. Net Increase in Cash and Cash Equivalents (A + B + C) 30,000
Add: Cash and Cash equivalents in the beginning of the period 60,000
E. Cash and Cash Equivalents at the end of the period 90,000

Accountancy—12

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Working Notes:
(i) Calculation of Net Profit before Tax: `
Profit and Loss Balance on 31st March, 2022 5,00,000

Less: Profit and Loss Balance on 31st March, 2021 4,00,000

1,00,000

Add: Provision for Tax for 2021-22 90,000

Net Profit before Tax 1,90,000

(ii) Accumulated Depreciation on 31-3-2022 1,60,000

Less: Accumulated Depreciation on 31-3-2021 1,00,000

Current year’s Depreciation 60,000

(iii)
Dr. Provision for Tax A/c Cr.
Amount Amount
Particulars Particulars
(`) (`)
To Bank A/c (Payment made) 70,000 By Balance b/d 60,000
To Balance c/d 80,000 By S
 tatement of Profit and Loss
(Balancing figure, being
provision made in 2021-22) 90,000
1,50,000 1,50,000

Accountancy—12

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