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Solution – Accountancy
March - 2024
Section – A

Question No. 1 - Answer Key

Part No. Answer Part No. Answer
i C – 6 months x F
ii D - Revise xi F
iii B - Goodwill xii F
iv C–2:1 xiii F
v -- xiv F
vi -- xv Nominal
vii -- xvi Gain
viii -- xvii Reconstitution
ix -- xviii Jointly

v. What is Legacy?
Ans. Amount received as per will of deceased person by not for profit organisations.
vi. What is Partnership Deed?
Ans. Partnership is the result of an agreement. This agreement may be written or oral. It is desirable to have partnership agreement
in writing to avoid future disputes. It is a document prepared with the mutual consent of all the partners, covering all details of
partnership.
vii. What is meant by admission of a new partner?
Ans. When a new partner is admitted into an existing firm.
viii. At what rate interest is payable on the amount remaining unpaid to the executor of deceased partner?
Ans. 6 % p.a.
ix. What is dissolution of firm by notice?
Ans.When one partner gives a notice in writing to other partners of the firm to dissolve the firm.

Q. 2. What do you understand by Retirement of a Partner?

Ans. A partner may wish to withdraw voluntarily from the business for various reasons like old age, ill health, better business
opportunity, differences with the other partners etc. Such a withdrawal from the business is termed as ‘Retirement of a Partner.’
Q. 3. Solution:
Dr. Furniture Account Cr.
Particulars ₹ Particulars ₹
To Balance b/d 30,000 By Bank (Sales) 7,500
To Bank (Purchases) 10,000 By Depreciation (B.F.) 7,500
By Balance c/d 25,000

40,000 40,000
OR

Particulars ₹
Value of furniture as on 01-04-2021 30,000
Add : Purchased during the year 10,000
40,000
Less : Sold during the year 7,500
32,500
Less : Value of furniture as on 31-03-2022 25,000
Amount of Depreciation to be charged during the year 7,500

Q. 4. Solution: Calculation of Goodwill by capitalisation of super profit method:

Average Profit = ₹ 1,80,000

Normal Rate of Return
Normal Profits = Capital Invested 
100
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Capital Invested = 20,00,000 - 8,40,000 = ₹ 11,60,000

Normal Profits = 11,60,000  = ₹ 1,74,000

Super Profit = Average Profit – Normal Profit

= 1,80,000 – 1,74,000 = ₹ 6,000
Goodwill = Super Profit x 100
Normal Rate
= 6,000  = ₹ 40,000

Q. 5. Solution:
JOURNAL
Date Particulars L.F. Dr. (₹) Cr. (₹)

(i) Bank Account Dr. 4,00,000

To Suman’s Capital Account 4,00,000
(Capital brought by Suman)
(ii) Suman’s Current Account Dr. 1,00,000
To Neha’s Capital Account 60,000
To Rekha’s Capital Account 40,000
(Suman’s share of goodwill i.e., 1/3rd of ₹ 3,00,000 credited
to Neha and Rekha in sacrificing ratio of 3 : 2)
In this case Old Ratio = Sacrificing Ratio

Q. 6. Solution:
Previous year profit = ₹ 1,05,000
Proportional Profit for 3 months (January, 2022 to March, 2022) = 1,05,000 × = ₹ 26,250
Thus, Y’s share = 26,250 × = ₹ 10,500
Q. 7. Solution:
JOURNAL
Date Particulars L.F. Dr. (₹) Cr. (₹)
(a) Bank Account Dr. 93,000
To Realisation Account 93,000
(Debtors realised at 7% discount)
(b)
No Entry Required

Q. 8. What is Entrance Fees?

Ans. Entrance fees. Entrance fees is usually charged by a non-profit organisation from the new members apart from the amount
of annual subscription. It appears on the receipts side of receipts and payments account. Accountants differ on treatment of
entrance fees. Some prefer to treat it as a capital receipt because entrance fee is paid by every member only once but others say
that it should be treated as income as members are enrolled every year and therefore receipt of entrance fees is a regular receipt.
So, instructions given in the question must be noted carefully and in the absence of the instructions any one of the above treatments
may be followed but students should append a note justifying their treatment.

Q. 9. What do you mean by Change in Profit Sharing Ratio?

Ans. Change in the profit sharing ratio among existing partners means it is reconstitution of the firm without admission of new
partner(s) or retirement or death of a partner. Change in profit sharing ratio basically implies the purchase of share of profit by
one partner from another partner. As a result of change in profit sharing ratio, one partner may gain and other may sacrifice. The
gaining partner has to compensate the sacrificing partner.

Prepared By: State Commerce Team

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Q. 10 (i) Write any four points showing Importance of Partnership Deed.

Ans: Importance of Partnership Deed:

The importance of Partnership Deed can be understood from the following points:
1. Less Disputes: By having a written agreement between the partners, the disputes in the firm can be minimized. The
partnership Deed is signed by every partner and so every partner has to obey its clauses.
2. Good Relations: Partnership Deed helps in maintaining good relations among partners. The rights and duties of every
partner become clear from the Partnership Deed.
3. Proper Remuneration: If a partner is devoting more time or is putting extra efforts to develop the business of the firm
then proper remuneration can be given to him by inserting Salary Clause in Deed.
4. Evidence in the Court of Law: Partnership Deed is written and registered proof of agreement entered into by all the
partners. So, it can be used as evidence in the Court of Law.
5. Prevent Misunderstandings: Partnership Deed prevent misunderstandings between partners because they outline all the
partnership’s terms and conditions beforehand.
6. Proper Description of Responsibilities: Partnership Deed properly describe each partner’s powers, role,
responsibilities, and liabilities.

(ii) Solution:
BOOKS OF FIRM
Dr. REVALUATION ACCOUNT Cr.
Particulars ₹ Particulars ₹
To Furniture 6,000 By Investments 12,000
To Profit transferred to
Nyra’s Capital A/c 3,600
Mehu’s Capital A/c 2,400 6,000
12,000 12,000

Dr. CAPITAL ACCOUNTS Cr.

Particulars Nyra Mehu Rajan Particulars Nyra Mehu Rajan
₹ ₹ ₹ ₹ ₹ ₹
To Investments 24,000 16,000 – By Balance b/d 1,40,000 120,000 –
To Balance c/d 1,68,800 1,25,200 98,000 By General Reserve 24,000 16,000 –
By Revaluation A/c 3,600 2,400 –
¤ (Profit)
By Premium for
Goodwill A/c 14,400 1,600 –
By Rajan’s Current A/c 10,800 1,200 -
By Cash A/c
- - 98,000
1,92,800 1,41,200 98,000 1,92,800 1,41,200 98,000
Working Note (1):
Calculation of Sacrificing Ratio:
3 3 24  15 9
Nyra =   
5 8 40 40
2 3 16  15 1
Mehu =   
5 8 40 40
Sacrificing Ratio = 9 : 1.
Working Note (2):
Capital Brought by Rajan for his 1/4th share of profit:
Combined capital of Nyra and Mehu for 3/4th share = 1,68,800 + 1,25,200 = ₹ 2,94,000
Total capital of the firm = 2,94,000 X 4/3 = ₹ 3,92,000
Rajan’s Share in total capital= 3,92,000 X ¼ = ₹ 98,000

Prepared By: State Commerce Team

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(iii) Solution:
Dr. REALISATION ACCOUNT Cr.
Particulars ₹ Particulars ₹
To Debtors A/c 84,000 By Provisions for Doubtful Debts A/c 12,000
To Stock A/c 24,000 By Creditors A/c 1,20,000
To Investments A/c 36,000 By Investment Fluctuation Fund A/c 4,000
To Plant and Machinery A/c 78,000 By Cash A/c (Assets Realised)
To Cash A/c (Creditors) Debtors 75,600
(₹ 1,20,000 – ₹ 70,200) 49,800 Investments 28,800 1,04,400
To Y’s Loan A/c (Interest) 1,000 By Y’s Capital A/c (Stock taken) 14,000
To X’s Capital A/c (Expenses) 1,200 By Loss on Realisation transferred to:
X’s Capital A/c 9,800
Y’s Capital A/c 9,800 19,600
2,74,000 2,74,000

Note: Investment Fluctuation Fund is transferred to the credit side of Realisation A/c, but it is not to be paid, as it is not a
liability. It is to be further noted that IFF will be transferred to Realisation A/c, only if investments are appearing on the Asset
side, otherwise it will be credited to Capital Accounts of the Partners.

(iv) Write any four limitations of Receipts and Payments account.

Ans. Limitations of the Receipts and Payments account

1. No information about non-cash transactions: The Receipts and Payments account only provide information about cash
transactions. It does not provide any information about non-cash transactions such as credit sales, purchase of goods on
credit, or depreciation of fixed assets. Non-cash transactions are an essential part of a complete financial statement, and
the Receipts and Payments account cannot provide a complete picture of the organization's financial position.
2. No differentiation between capital and revenue: The Receipts and Payments account does not differentiate capital and
revenue expenses and incomes. This is because it shows transactions of both natures together at the same place without
any showcase of difference.
3. No information about outstanding expenses and incomes: The Receipts and Payments account only show the cash
Receipts and Payments made during the accounting period. It does not provide any information about outstanding
expenses and incomes. Outstanding expenses and incomes are those that are due but have not yet been paid or received.
The absence of information about outstanding expenses and incomes can affect the accuracy of the financial statements.
4. No information about accruals: The Receipts and Payments account does not provide any information about accruals.
Accruals are expenses and incomes that are recognized in the financial statements but have not yet been paid or received.
The absence of information about accruals can affect the accuracy of the financial statements.
5. No information about the organization's financial position: The Receipts and Payments account only show the cash
Receipts and Payments made during the accounting period. It does not provide any information about the organization's
financial position. The financial position of an organization is determined by its assets, liabilities, and equity. The Receipts
and Payments account does not provide any information about these components of the organization's financial position.
6. No information about the profitability of the organization: The Receipts and Payments account only shows the cash
Receipts and Payments made during the accounting period. It does not provide any information about the profitability of
the organization. Profitability is an essential aspect of an organization's financial performance, and the Receipts and
Payments account is incapable of showing surpluses and deficits at the end of the year.

Section - B
Question No. 11 - Answer Key
Part No. Answer Part No. Answer
i F vii A - 30
ii F viii B – 60 %
iii T ix B – Source ₹ 10,000
iv 3 x --
v Interest xi --
vi Static xii --

Prepared By: State Commerce Team

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x. What is Preference share?
Ans. Preference share is that part of share capital of the company which carries preferential rights as to payment of
dividend and the repayment of capital.
xi. What is Debenture Redemption Reserve?
Ans: Debenture Redemption Reserve is a reserve created out of profits for the purpose of redemption of debentures.

xii. Explain Financing activities.

Ans. In Cash Flow Statement, Financing Activities mean change in Cash from change in capital and borrowings (loans) of
the organisations.

Q. 12. Explain any two limitations of ratio analysis.

Ans. The limitations of ratio analysis are as follows:

(1) Lack of adequate standards: There are no well accepted standards or rules of thumb for all ratios which can be
accepted as norms. Every firm has to work in different situations and circumstances. So a particular ratio cannot be supposed
to be standard for everyone. Lack of adequate standard renders interpretation of ratios difficult.
(2) Limited use of a single ratio: A single ratio is meaningless by itself and acquires significance when it is studied
along with other ratios. To make a better interpretation several ratios must be calculated which is likely to confuse the
analysis than help him in making any meaningful conclusion.
(3) Ignores Qualitative Factors: Ratio analysis is a quantitative measurement of performance of the business. It
ignores the qualitative aspects of concern. So, it may prove distortive as ratio analysis is primarily a quantitative analysis
and not a qualitative analysis.
(4) Historical in nature: Ratio analysis is basically historical in nature.

Q. 13. Solution:
In the books of X Ltd.
JOURNAL

Date Particulars L.F. Dr. (₹) Cr. (₹)

Share Capital A/c Dr. 4,000
To Share Final Call A/c 800
To Share Forfeiture A/c 3,200
(Forfeiture of 400 shares)
Bank A/c Dr. 4,000
To Share Capital A/c 4,000
(Re-issue of 400 shares @ ₹ 10 each)
Share Forfeiture A/c Dr. 3,200
To Capital Reserve A/c 3,200
(Profit on 400 re-issued shares transferred to Capital
Reserve)

Q. 14. Solution:
BOOKS OF VIJAY LTD.
JOURNAL
Date Particulars L.F. Dr. (₹) Cr. (₹)
(i) Bank A/c Dr. 1,86,00,000
To 10% Debenture Application & Allotment A/c 1,86,00,000
(Receipt of application money)
(ii) 10% Debenture Application & Allotment A/c Dr. 1,86,00,000
Loss on Issue of Debentures A/c Dr. 30,00,000
To 10% Debentures A/c 2,00,00,000
To Premium on Redemption of Debentures A/c 16,00,000
(Transfer of application money)

W. Note: Loss on Issue of Debentures = 14,00,000 + 16,00,000 = 30,00,000

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15. Solution:
Current Liabilities = Total Debt – Long-term Debt
= ₹ 2,00,000 – ₹ 1,20,000 = ₹ 80,000
Current Assets = Working Capital + Current Liabilities
= ₹ 1,60,000 + ₹ 80,000 = ₹ 2,40,000
Current Assets
Current Ratio =
Current Liabilities
2,40,000
= = = 3:1
80,000 1
Q. 16. Solution:
Dr. Land Account Cr.
Particulars ₹ Particulars ₹
To Balance b/d 4,00,000 By Bank (Sale of Land) B.F. 3,20,000
To Gain on Sale 1,20,000 By Balance c/d 2,00,000

5,20,000 5,20,000

Q. 17. Write any two features of a company.

Ans. Following are the essential features of a company:
1. Company is an artificial person in corporate form.
2. Company has distinct legal entity separate from its members.
3. Liability of members of a company is limited to the extent of face value of shares subscribed by each of them.
4. A company has perpetual existence, its existence is not affected by the death, lunacy, insolvency or retirement
of its members.
5. Company has a common seal which acts as official signature of the company.

Q. 18. What is meant by Redemption of Debentures?

Ans. Redemption of debentures means repayment of the amount of debentures to debenture holders. In other words,
redemption refers to discharge of liability on account of debentures by repaying the due amount of debentures. Debentures
can be redeemed at par, at premium or at discount.

19. (i) Solution:

COMPARATIVE STATEMENT OF PROFIT & LOSS
FOR THE YEARS ENDED 31ST MARCH 2022 AND 31ST MARCH 2023
Particulars 31st March 31st March Absolute Percentage
2022 2023 Change Change
(Increase or (Increase
Decrease) or Decrease)
1 2 3 4 5
A B (B – A = C) C/A  100 = D
₹ ₹ ₹ %
I. Revenue from Operations 10,00,000 12,50,000 2,50,000 25.00
II. Add : Other Incomes 30,000 30,000 – –
III. Total Revenue (I + II) 10,30,000 12,80,000 2,50,000 24.27
Less : Expenses
Cost of Materials Consumed 5,00,000 6,50,000 1,50,000 30.00
Other Expenses 50,000 60,000 10,000 20.00
IV. Total Expenses 5,50,000 7,10,000 1,60,000 29.09
V. Profit before Tax (III – IV) 4,80,000 5,70,000 90,000 18.75

(ii) Write any four advantages of ‘Cash Flow statement’ in detail.

Ans. Preparation of Cash Flow statement has following advantages:

1. Helps in Short term planning: Business enterprise will have to pay cash to its creditors, for expenses and purchase of
fixed assets and payment of its loan. Thus, Cash Flow Statement with short term analysis helps the management in planning
for cash by looking to past cost flow.
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2. Helpful to decide dividend Policies and repayment of loan: Cash flow from operating activities help the manager to
know the cash generated from operating activities and thus helps in deciding payment of dividends and loans etc.
3. Helpful in efficient Cash management: It helps the management to know how much cash it need and from what sources
it will come. How much is generated internally and how much to take from outside.
4. Helpful in preparing the Cash Budget: Cash Flow Statements are helpful in preparing the Cash Budget. It
inform the management about the surplus or deficit period of cash.
(iii) Solution:
In the books of Shankar Ltd.
JOURNAL
Date Particulars Dr. (₹) Cr. (₹)
1. Bank A/c (35,000  50) Dr. 17,50,000
To Equity Share Application A/c 17,50,000
(Application money received)
2. Equity Share Application A/c Dr. 17,50,000
To Equity Share Capital A/c 12,50,000
To Equity Share Allotment A/c 5,00,000
(Transfer of application money on prorate allotment)
3. Equity Share Allotment A/c Dr. 10,00,000
To Equity Share Capital A/c 5,00,000
To Securities Premium A/c 5,00,000
(Allotment money due)
4. Bank A/c Dr. 4,50,000
Call in Arrears A/c Dr. 50,000
To Equity Share Allotment A/c 5,00,000
(Allotment money received except 2,500 shares)
5. Equity Share First and Final Call A/c Dr. 7,50,000
To Equity Share Capital A/c 7,50,000
(First and Final call due)
6. Bank A/c Dr. 6,75,000
Call in Arrears A/c Dr. 75,000
To Equity Share First and Final Call A/c 7,50,000
(First and final call received except 2,500 shares)
7. Equity Share Capital A/c (2,500  100) Dr. 2,50,000
Securities Premium A/c Dr. 50,000
To Call in Arrears A/c 1,25,000
To Share Forfeited A/c (3500  50) 1,75,000
(2500 shares forfeited for non-payment of allotment and
calls)
Working Notes:

(1) Calculation of amount received on allotment:

₹
Total amount due on allotment (25,000  40) 10,00,000
Less : Excess application money received adjusted 5,00,000
Balance 5,00,000
Less : Amount not receive 50,000
Amount received on allotment 4,50,000
(2) Calculation of numbers of shares on which allotment not paid:
Total Pending Allotment money = ₹ 50,000
Pending Allotment money per share = ₹ 20 (As ₹ 20 already received with application)
50,000
Thus No. of Shares = = 2,500
20
(3) Securities Premium is demanded with allotment money. Allotment money is not received in full, thus Securities
Premium A/c will be debited while forfeiting the shares.



Prepared By: State Commerce Team