BIKASH AGARWAL  9831421813 ------ ISC - CLASS XII - ACCOUNTS 2015

[This is merely a suggestion so do not depend totally on it. However student are requested to learn &
Practice each and every questions given in this suggestion to get good marks in the examination as well
as to gain confidence in himself/ herself]

SHORT QUESTIONS
1.) What is authorised capital?
Ans : It is the capital with which a joint stock company is registered. It is described in detail under the
clause ‘capital’ of the Memorandum of Association. It is also known as Nominal or registered capital

2.) What is meant by ‘forfeiture of shares’?

Ans : When a shareholder fails to pay any call on his shares, the directors of the company may forfeit
the shares held by the defaulting shareholder. Forfeiture of shares means cancellation of shares held
by him and the amount paid by him will transferred to share forfeiture account

3.) What do you mean by Issue of shares at discount?

Ans : Issue of shares at discount means that the company has issued share at less than the amount of
its face value. The discount is a loss to the company and it is charged to an account called discount on
share account. A new company cannot issue share at a discount. Only an existing company can do so.
The discount on issue of shares must be treated as a loss of capital nature.

4.) Difference between preference shares and equity shares

Ans : The difference between preference shares and equity shares are as follows:
Preference Shares Equity Shares
Rate of dividend is fixed Rate of dividend vary with the profit
These shareholders cannot vote in General These shareholders are entitled to vote on
Meeting of the company all matters in the General Meeting of the
company

5.) Name the two accounts which are prepared, when each co-venturer keeps a record of his own
transactions only in his books
Ans : (a) Memorandum Joint Venture A/c (b) In the book of one Venturer, Joint Venture Account with
another Partner

5.) How will you deal with the following items in the absence of a partnership deed:
(a) Interest on Capital (b) Interest on Drawings (c) Interest on Partner’s Loan to the firm (d) Share in
Profit and Loss
Ans : (a) No interest on capital shall be allowed to partners
(b) No interest is to be charged on Drawings
(c) Interest @ 6% is to be allowed on partner’s loan to the firm. Such interest shall be paid even if there
are losses in the firm
(d) Profit & losses are to be shared equally irrespective of their capital contribution

6.) State two differences between a revaluation account and a realisation account
Ans : The differences between revaluation account and realisation account are as follows:
Revaluation A/c Realisation A/c
This account is prepared to make necessary This account is prepared to find out the
adjustment in the value of assets and liabilities profit & loss on the sale of assets and
payment of liabilities
Even after the preparation of this account the firm The firm comes to an end after preparation
continues to function, though with a change of of this accounts
relationship among the partners

7.) What is ‘fictitious asset’? Give example

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Ans : Fictitious assets are the assets which do not have any physical existence, they are expected not
to realise any value or render any service in future. These assets are to be written off against profit and
loss a/c. Examples : Preliminary Expenses, Discount on issue of Shares or Debentures

8.) What is meant by ‘issue of debentures as collateral security’?

Ans : Sometimes, when a company takes a loan from a bank or from some other party, the company
may have to issue debentures as a secondary security in addition to the principal security. It is addition
to the principal security. No interest is payable on the debentures issued as collateral security. The
liability of company is for the amount of loan and not for the face value of debentures issued

9.) What is meant by ‘cash equivalents’?

Ans : These are short term, a highly liquid investments that are readily convertible into known amounts
of cash and which present insignificant risk of changes in their values. Example of cash equivalents are
treasury bills, commercial paper, short term investment, etc.

11.) What do you mean by Debenture?

Ans : The word debenture has been derived from the Latin word ‘debere’ meaning ‘to owe’. Debenture
can be defined as an undertaking of the company in writing for acknowledging a debt and containing a
contract for the payment of the principal sum at a specified date and for the payment of interest at a
fixed rate of interest

12.) What is partnership?

Ans : According to Sec 4 of the Indian Partnership Act, 1932, the term Partnership is defined as ‘the
relation between persons who have agreed to share the profits of a business carried on by all or any of
them acting for all

13.) Give any four circumstances under which a court may order for the dissolution of a firm
Ans : The court may order the dissolution of the firm in any of the following ways:
¾ Where a partner has become of unsound mind
¾ Where a partner is guilty of misconduct which is likely to affect the firm
¾ When the court is unsatisfied on any just and equitable ground
¾ When the business of the firm cannot be carried on except at loss

14.) Mention three activities as AS-3

Ans : According to AS-3, cash flow statement is classified into three categories:
• Investing Activities
• Financing Activities
• Operating Activities

15.) Distinguish between Fixed and Fluctuating capital account

Ans : The difference between fixed and fluctuating capital account are as follows:
Fixed Capital Fluctuating Capital
The balance of fixed capital is not allowed to The balance of fluctuating capital is allowed to
change change
Capital & current account is opened for all Capital account is opened for all transactions
transactions

16.) Mention any four accounting problems which arise at the time of retirement of a partner
Ans : The four accounting problems which arise at the time of retirement of a partner are as follows:
• Treatment of Goodwill
• Revaluation of Assets and Liabilities
• Distribution of Accumulated Profit
• Calculation of New ratio and Gaining ratio

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17.) What is contingent liability?
Ans : A contingent liability is liability which is not an actual liability bur which will crystallize into an
actual liability on the happening of same events which is uncertain. Contingent liabilities have two
characteristics (a) Uncertainty as to whether the amount will be payable at all and (b) Uncertainty
about the amount involved

18.) Why is memorandum revaluation account prepared?

Ans : If all the partners including the new partner agrees to revalue the assets and liabilities of the firm
to show then at the old book value then Memorandum Revaluation Account is prepared

19.) Distinguish between share and debenture

Ans : The difference between share and debenture are as follows:
Share Debenture
Share are a part of capital of the company Debentures constitute loan capital of the
company
Return on a share is known as dividend Return on a debenture is known as interest

20.) What is Non-recurring expenses?

Ans: All such expenses as normally increase the value of goods are termed as ‘Non-recurring expenses’
or ‘Direct Expenses’. A proportionate part of such expenses must be added while valuing consignment
stock

23.) Why are unsold goods disposed off in the case of a Joint Venture A/c
Ans : A joint venture is not a continuing or going concern. It is for a limited period or for a specific job.
When the period or purpose is over the venture is closed and in order to do so it is necessary to
dispose off the unsold goods

24.) What is the effect of decrease in current assets and decrease in current liabilities on cash from
operations?
Ans : Decrease in current asset will increase cash from operations, whereas, decrease in current
liabilities will result in decrease in cash from operations

25.) What do you mean by term ‘funds’?

Ans : In a limited sense, the term ‘fund’ means ‘cash’. But this is not the correct meaning of the term
‘fund’ because there are many transactions in the business which increase or decrease funds, without
affecting cash. Funds stand for working capital

27.) What is meant by ‘forfeiture of shares’?

Ans : When a shareholder fails to pay any call on his shares, the directors of the company may forfeit
the shares held by the defaulting shareholder. Forfeiture of shares means cancellation of shares held
by him and the amount paid by him will transferred to share forfeiture account

28.) Explain the terms Reserves and Provisions

Ans : The term ‘Reserve’ covers any saving which is neither a provision nor a liability and therefore, it
describes amounts set aside out of profits to provide for prospective losses. The term ‘Provision’ means
any amount retained in the business in order to provide any known reduction in the value of an asset
or for any known liability

29.) What do you mean by capital reserves?

Ans : Capital reserve are those created out of profits which are extraordinary in nature, i.e. profits
which do not result from the operations carried on by the company. There may be a legal capital
reserve or a reserve designated as capital by the directors. Capital reserve are not available for
distribution as dividends.

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30.) How will you treat the following items in case of admission of a partner in the firm: (i) Reserve Fund
(ii) Contingency Reserve
Ans (i) Reserve Fund : Reserve fund is transferred to the credit side of the old partners’ capital
accounts in old profit sharing ratio
(ii) Contingency Reserve : Contingency Reserve is transferred to the credit side of old partners’ capital
accounts in the old profit sharing ratio

30.) Give two circumstances in which gaining ratio may be calculated

Ans : The gaining ratio may be calculated under the following two circumstances:
• When a partner retires
• When there is a change in the profit sharing ratio

31.) Give any four circumstances under which a partnership can be dissolved
Ans : The circumstances under which a partnership can be dissolved:
¾ On admission of new partner
¾ On retirement of a partner
¾ On death of a partner
¾ On insolvency of a partner

32.) List the types of Debentures

Ans : The types of dentures are as follows:
¾ Bearer Debentures
¾ Registered Debentures
¾ Secured Debentures
¾ Unsecured Debentures
¾ Redeemable Debentures
¾ Irredeemable or Perpetual Debentures
¾ Convertible Debentures
¾ Non-convertible Debentures

33.) What do you mean by Issue of shares at discount?

Ans : Issue of shares at discount means that the company has issued share at less than the amount of
its face value. The discount is a loss to the company and it is charged to an account called discount on
share account. A new company cannot issue share at a discount. Only an existing company can do so.
The discount on issue of shares must be treated as a loss of capital nature.

34.) Give two characteristics of joint venture account

Ans : The characteristics of joint venture account are as follows:
It is a temporary partnership coming into existence for doing a specific business deal
It comes to an end when the particular deal is over

35.) Why should new partner pays goodwill in cash?

Ans ; In fact, the business was started by the old partner who took all pains in establishing the
business. The new partner has been attracted by handsome earning and wishes to join. Under this
circumstances the new partner must pay for goodwill

36.) List the rules applicable in absence of partnership deed, contained in section 12 to 17 of the Indian
Partnership Act, 1932
Ans : The rules applicable are:
a) Any partner will not be entitled for salary, rent or commission
b) Interest will not be allowed on capital or charged on drawings
c) Loan advanced to the firm by any partner will carry 6% interest on it
d) The divisible profit will be shared equally between all partners

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37.) Why does the profit ratio change on the admission of a partner?
Ans : A newly admitted partner will be entitled to share the profits or bear the losses with the other
partners. Existing partners sacrifice their share to some extent for this purpose. Hence the profit
sharing ratio of the partners will change

38.) Distinguish between ‘retirement’ and ‘death’ of a partner

Ans : The difference between retirement and death are as follows:
Retirement Death
Generally a partner takes retirement from Death is uncertain. Any partner may die at any
the firm at the end of the financial year or day of the financial or accounting year
accounting year
In the case of retirement, a retiring partner In the case of death, payment is made to the
can himself see the accounts. He also gets legal representatives or legal executors of the
amount personally from the firm deceased partner

39.) What are activity ratios?

Ans : Activity ratios are calculated on the basis of ‘cost of sales’ or sales. Therefore, these ratios are
also called as turnover ratios. These ratio indicate how efficiently the working capital and stock is being
used to obtain sales. Activity ratios includes inventory turnover ratio, debtors turnover ratio, net
working capital turnover ratio, capital turnover ratio.

40.) Difference between preference shares and equity shares

Ans : The difference between preference shares and equity shares are as follows:
Preference Shares Equity Shares
Rate of dividend is fixed Rate of dividend vary with the profit
These shareholders cannot vote in General These shareholders are entitled to vote on
Meeting of the company all matters in the General Meeting of the
company

41.) What are the limitations of ratio analysis?

Ans : The limitations of ratio analysis are as follows:
¾ Dependence on correct data : The efficiency of ratio analysis depends upon the correctness of
accounting data.
¾ Incomparability : Inter firm comparison with the help of ratios becomes meaningful only when
firms in question adopt uniform accounting principles and procedures.
¾ Price level changes : The price level changes very often distort trend analysis done with the help
of ratios.
¾ Historical : Ratios are generally computed from past financial statements and are not true
indicators of the future.

42.) Write short notes on Current ratio

Ans : It is the ratio of current assets to current liabilities

Current Assets
Current Ratio =
Current Liabilities
Current Assets = Cash + Bank + Bills Receivable + Prepaid Expenses + Marketable Securities +
Accrued Income + Work – in – Progress + Debtors
Current Liabilities = Creditors + Bills Payable + Short Term Loan + Outstanding Expenses +
Provision for Tax + Proposed Dividend + Bank Overdraft +
Advance from Customers + Income received in Advance
Significance & Interpretation
Current ratio measures short term solvency or liquidity position of the firm. It indicates how much
current assets in rupees are being held by the company for each rupee of current liabilities. Current
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ratio 2 : 1 is taken as standard which means that each rupee of current liabilities should be backed by
current assets valued two rupees. It only provides a crude measure of liquidity position.

43.) Write short notes on Quick ratio

Ans : It is the ratio of quick assets to quick liabilities. It is a measure for judging immediate solvency
position of a firm.
Quick Assets
Liquid Ratio =
Quick Liabilities
Quick Assets = CA – Stock – Prepaid Expenses
Quick Liabilities = CL – Bank Overdraft
Significance & Interpretation
This ratio is a refinement of current ratio. As it excludes inventory from current assets, it can more
effectively measure the short term debt paying ability. Acid test ratio 1 : 1 is taken as standard
indicating that each rupee of quick liabilities should be backed by quick assets of equal value. It is
widely used as indicator of firm’s liquidity.

44.) Write short notes on Capital Gearing ratio

Ans :This ratio expresses the relation between fixed income bearing capital and equity shareholders
fund in the capital structure of the firm.
Fixed Interest bearing Securities
Capital Gearing Ratio =
Equity Shareholders Fund
Fixed interest bearing Securities = Pref. Share Capital + Debenture + Long Term Loan
Significance & Interpretation
A firm with capital gearing ratio more than 1 is called highly geared firm while a firm with capital
gearing ratio less than 1 is called low geared firm. The implication of gearing ratio may be considered
from the viewpoint of long term solvency of the firm and return of equity shareholders. A high gearing
ratio means greater dependence of the firm on debt and preference capital. A too high gearing ratio is
not preferable from solvency point of view. It is double edged sword. It should be carefully planned so
that equity shareholders’ interest is not impaired.

45.) Distinguish between Fund Flow Statement and Cash Flow Statement?
Ans : There are some differences between these two:
Fund Flow Statement Cash Flow Statement
1. It is concerned with changes in working capital 1. It is concerned with changes in one item of
between two Balance Sheet dates. working capital i.e., cash.
2. It is generally prepared and becomes useful for 2. It is useful in short period.
long period.

47.) Distinguish between Profit & Loss Appropriation A/c and Profit & Loss A/c?
Ans : There are some differences between these two:
Profit & Loss Appropriation A/c Profit & Loss A/c
1. It show how profit and loss has been distributed 1. It shows the net profit and loss of the firm
amongst the partner
2. It start with the net profit as disclosed by Profit & 2. It start with gross profit as disclosed by
Loss A/c Trading A/c

48.) What do you mean by Goodwill in the business?

Ans : It is defined as the benefit and advantage of good name or reputation of a business. It enables
the business to earn more profit on the capital employed by the firm by attracting their customers to
various media

58.) What is the purpose of making a joint venture account?

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Ans : A joint venture is a temporary partnership entered into between two or more persons to share
profits or losses in respect of business transactions in which their individual capabilities can be
profitably pooled. In a joint venture the co-venturer’s share profit and loss arises from the venture. Co-
venturers are short term partners.

59.) What are the methods of recording joint venture transactions?

Ans : There are three methods of recording joint venture transactions, which are as follows:
¾ One co-venturer maintaining the accounts.
¾ All co-venturer maintaining the accounts (Memorandum Joint Venture Account).
¾ Separate set of Books (Joint Bank Method).

60.) State two advantages of joint venture business

Ans : Two advantages of joint venture are:
¾ A joint venture is formed for a single venture and terminate on the completion of project.
¾ When the project is large, joint venture is the best for that as resources of more than one party
may be applied without forming partnership firm.

JOINT VENTURE
1.) A and R entered into a joint venture and agreed to share profits and losses in the ratio of 4 : 3. A
supplied goods worth ` 13,000 from his own stock. He spent ` 900 on freight and insurance and drew a
bill on R for ` 9,000 for 3 months. R accepted the bill which was discounted by A @ 12% p.a. R paid `
600 towards clearing charges and ` 700 for rent. Goods were sold by R for ` 21,000. R was entitled to a
commission of 6%. R sent the draft to A towards settlement of his account. Prepare in the books of A:
Joint Venture Account and R’s Account.

2.) X and Y agreed to enter into a Joint Venture, each contributing ` 2,000 and agree to divide profits
equally. They purchased 100 quintals of coal @ ` 40 per quintal, X sold 75 quintals @ ` 50 per quintal
and paid the following expenses: storage ` 70; insurance ` 100; carriage ` 240; travelling expenses `
20 and other expenses ` 10. Y sold the balance at ` 52 per quintal and paid commission of ` 1 per
quintal. His expenses were in insurance ` 36 and other expenses ` 64. Each co-venturer recording his
own transactions in his account books. Also prepare Memorandum Joint Venture account.

3.) A and B entered into a joint venture for guaranteeing the subscription at par 1,00,000 shares of ` 10
each of a Joint Stock Company. They agree to share profits and losses in the ratio of 2:3. The terms
with the company are 41/2 % commission in cash and 6,000 shares of the company as fully paid up. The
public took up 88,000 of the shares and the balance shares of the guaranteed issue are taken up by A
and B who provide cash equally. The commission in cash is taken by partners in the ratio of 4 : 5.
The entire shareholding of the joint venture s then sold through brokers- 25% at a price of ` 9/-; 50% at
a price of ` 8.75; 15% at a price of ` 8.50 and the remaining 10% are taken over by A and B equally at
` 8/- per share. The sale proceeds of the shares are taken by the partners equally. Prepare a Joint
Venture Memorandum Account and the separate accounts of A and B in the books of B and A
respectively showing the adjustment of the final balance between A and B. Ignore interest and income-
tax.
4.) M and N decided to work in partnership with the following scheme, agreeing to share profits as
under:
M- 3/4th share & N- 1/4th share.
They guaranteed the subscription at par of 10,00,000 shares of ` 1 each in S Ltd. and to pay all
expenses upto allotment in consideration of S Ltd., issuing to them 50,000 other shares of ` 1 each
fully paid together with a commission @ 5% in cash which will be taken by M and N in 3 : 2. M and N
introduced cash as follows:
`
M- Stamp, Charges, etc., 4,000
Advertising Charges 3,000
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Printing Charges 3,000
N- Rent 2,000
Solicitor’s Charges 3,000
Application fell short of the 10,00,000 shares by 30,000 shares and N introduced ` 30,000 for the
purchase of those shares. The guarantee having been fulfilled S Ltd. handed over to the ventures
50,000 shares and also paid the commission in cash. All their holdings were subsequently sold by the
ventures N receiving ` 18,000 and M ` 50,000. Write up necessary accounts in the books of both the
parties on the presumption that Memorandum Joint Venture Account is opened for the purpose.

5.) Das and Krishnan entered into a joint venture sharing profit and losses as 3 : 2. They opened a Bank
Account by Depositing ` 40,000 each. Das purchased 800 kgs. of an item @ ` 60 and his expenses
were ` 13,000. Krishnan purchased a second item of 10,000 kgs. @ ` 2.10 and his expenses were `
11,000. Expenses were met from private sources and purchases were paid for from Bank Account.
Krishnan sold 600 kgs. of the first item @ ` 100 and his selling expenses were ` 5,500. Das sold 8,000
kgs. of the second item @ ` 5.00 and his selling expenses were ` 6,000. All the sale proceeds were
deposited in the Bank Account and expenses were met from private sources.
Write up necessary accounts in the books of the venture. Also prepare a Balance Sheet of the venture.

6.) X and Y are doing business separately as engineering contractors. They undertake jointly to build
and install new machinery for a company for a contract price of ` 1,34,000, ` 84,000 payable in
installments in cash and the balance as fully paid shares in the new company. A bank account is
opened in joint, X paying ` 45,000 and Y ` 20,000.They agree to share profits and losses in the
proportion of 3/5 and 2/5 respectively. The transactions were as follows:
`
Amount advanced to suppliers for supply of materials 52,000
Value of materials supplied by suppliers 89,000
Balance amount paid to suppliers in full and final settlements 35,500
Paid Wages 36,000
Materials purchased in Cash 2,500
Materials supplied by X from stock 9,250
Engineering consultant’s fees paid 3,250
Value of stock lost by fire and not covered by Insurance 3,500
The contract was completed and price was duly received. X took all the shares at an agreed value of `
47,000 and Y took the balance stock of materials worth ` 3,500 at an agreed value of ` 2,750.
Show the necessary ledger accounts assuming that separate set of books is maintained.

7.) Sakti and Sadhan agree to enter into a joint venture to buy and sell T.V. sets. Profits and losses
were to be shared equally. On 5th May, 2006, Sakti purchased three Television sets for ` 3,000, ` 3,500,
` 4000 respectively. He bought a special cabinet costing ` 750 which he fixed for one of the sets. 31st
May, 2006, he sold two of the sets for ` 4,000 each paying the proceeds into his private bank account.
On 15th June, 2006, he sold the other set for ` 4,500 which amount he paid over to Sadhan who paid it
into his bank account.
On 6th May, 2006, Sadhan purchased a T.V. set for ` 3,000 having incurred expenditure on ` 200 on
repairing, sold it on 14th May, 2006 for ` 3,800, paying the proceeds into his own bank account. This
set developed mechanical trouble and on 26th May, 2006, Sadhan agreed to take the set back at a
price of ` 2,800 which he paid out of his bank account. The set was still unsold at 30th June, 2006 and it
was agreed that Sadhan should take it over for his personal use at a valuation of ` 2,600. Sakti incurred
` 300 as showroom charges and Sadhan incurred ` 225 as travelling and postage.
You are required to prepare (1) the account of Joint Venture with Sakti as it would appear in the books
of Sadhan and (2) Memorandum Joint Venture Account showing the net profit.

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8.) S, T and W having agreed to share profits and losses equally, entered into a joint venture to
construct a building at a price of ` 10,00,000. A joint bank account was thus opened where S paid `
4,00,000, T – ` 2,00,000 and W – ` 3,00,000.
Expenses incurred on behalf of the joint venture were as follows:
Materials – ` 2,00,000; wages ` 1,50,000 and expenses ` 1,25,000.
Materials supplied by S from his stock amounted to ` 1,25,000.
Finally, the venture was closed by T taking the closing stock at a valuation of ` 1,00,000. From the
above, you are required to prepare the joint venture account, co-ventures’ accounts and the joint bank
account.

9.) Ritesh and Abhishek entered into a Joint Venture paying ` 30,000 and ` 50,000 respectively into a
Joint Bank account, sharing profits and losses in the proportion of 3 : 2. It was agreed that the Joint
Bank Account was to be used for purchases and sales, while each partner was to meet his joint venture
expenses out of his private funds. Each partner was entitled to a commission of 5% on the sales made
by him.
The transactions were as follows : Ritesh purchased 80 quintals of maida at ` 600 per quintal and his
expenses were ` 3,000. Abhishek sold 60 quintals of maida at ` 750 per quintals and his expenses were
` 2,000.
Abhishek purchased 20 quintals of dal moong for ` 21,000 and his expenses were ` 1,000. Ritesh sold
16 quintals of dal moong for ` 19,000 and his expenses were ` 1,200.
Prepare Joint Venture a/c, Joint Bank a/c, Personal a/c of the co-venturer and also prepare the Balance
Sheet of the Joint Venture.

ISSUE OF SHARES
1.) S Co. Ltd. issued 2,00,000 shares of ` 10 each payable as ` 2 on application, ` 3 on allotment, ` 2 on
first call and ` 3 on final call. The company does not make the final call. It receives the amounts on due
dates with the exception of first call on 1,000 shares. These shares are forfeited for non-payment of
call. Subsequently the company issued 600 of these shares @ ` 6 per share, ` 7 per share paid up. Pass
the necessary journal entries as to forfeiture and re-issue.

2.) Raman Ltd. issued 20,000 shares of ` 10 each at a discount of 10% payable as follows:
` 2.50 on application payable on 1st May 2010
` 1.50 on allotment payable on 1st July 2010
` 2 on first call payable on 1st Oct 2010
Balance on second call payable on 1st Feb 2011
All these shares were subscribed and amount received. Shareholder, ‘A’ who had been allotted 200
shares, paid the amount of the first and second calls with allotment. Another shareholder ‘B’ holding
100 shares did not pay the final call till the date of the Balance sheet. According to the Articles of
Association of the company, interest at the rate of 4% p.a. is payable by the company on any calls in
advance. The interest was paid by the company to the shareholder on 1st Feb 2011. Pass the necessary
journal entries in the books of the company.

3.) The authorised capital of Shyam Co. Ltd. is ` 20,00,000 which is divided into 20,000 shares of ` 100
each. Out of these 15,000 shares were issued to public as under:
` 20 per share on Application
` 20 per share on Allotment
` 30 per share on First call
` 30 per share on Final call
All the amounts were duly received except the following:
Ashok did not pay allotment, first call and second call on 30 shares
Rajesh did not pay first and second call on 20 shares
Suresh did not pay second call on 10 shares
Directors forfeited these shares and issue to Amit on the following terms:

BIKASH AGARWAL Page No. 9  9831421813

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Ashok’s shares were issued @ ` 90 per share, Rajesh’s share were issued @ ` 70 per share, Suresh’s
share were issued @ ` 50 per share. Pass necessary journal entries assuming that Amit has paid all the
amounts due to him.

4.) B T Ltd. invited applications for 1,00,000 equity shares of ` 10 each at ` 4 per share. The amount
was payable as follows:
On application ` 6 (including premium ` 2)
On allotment ` 6 (including premium ` 2)
Balance on first and final call
Applications for 1,50,000 shares were received. Allotment was made to all applicants on pro-rata basis.
Subodh, to whom 200 shares were allotted, failed to pay allotment and call money. Vikram, to whom
100 shares were allotted, failed to pay the call money. Their shares were forfeited and afterwards re-
issued @ ` 8 per share fully paid up. Pass the necessary journal entries.

5.) Raj ltd. issued equity shares of ` 10 each on the following terms:
` 2 on Application
` 4 on Allotment
` 2 on First call
` 2 on Final call
Sri A Agarwal, to whom 300 shares were allotted, failed to pay the allotment and on his subsequent
failure to pay the first call, his shares were forfeited. S Agarwal the holder of 100 shares failed to pay
the first call and his shares were forfeited. The forfeited shares were re-issued subsequently for ` 11
per share as fully paid. Journalise the transactions of forfeiture and also show forfeiture account.

6.) PQR Ltd. with an authorised capital of 1,00,000 equity shares of ` 10 each made a public issue of
80,000 shares at a premium of ` 3 per share payable ` 2 on application, ` 5 on allotment (including
premium), ` 3 on first call and the balance after some time.
Application were received for 1,00,000 shares. The Board of Directors decided to refund the excess
application money and thereafter allot the remaining shares. During allotment Mr. M holding 1,000
shares failed to pay the allotment money while Mr. N holding 2,000 shares paid the entire amount due
up to the second and final call.
Thereafter the first call was made and after giving sufficient notice to Mr. M the company decided to
forfeit his shares and subsequently re-issued 800 of the forfeited shares to Mr. O at ` 11 each fully paid
up. You are required to journalise the above issue of shares through calls in arrears and calls in
advance account along with other entries in the books of PQR Ltd.

7.) Give journal entries to record forfeiture and re-issue of shares in the books of the company:
ANC Ltd. forfeited 150 equity shares of ` 10 each issued at a premium of ` 5 per share, for non-
payment of allotment money of ` 8 per share (including premium of ` 5 per share), the first call of ` 2
per share and the final call of ` 3 per share. Out of these 100 equity share were re-issued at ` 14 per
share
VK Ltd. forfeited 10 shares of ` 10 each (` 6 called up) issued at a discount of 10% to Y on which he
paid the application money of ` 2 per share. Out of these, 8 shares were re-issued to Z at ` 6 per share,
` 8 called up.
AB Ltd. forfeited 100 share of ` 10 each issued at premium of ` 2 per share for non-payment of
allotment money of ` 4 (including premium), first & final call ` 5. Company re-issued all forfeited share
at ` 8 per share fully paid up.

8.) X Ltd. issued 60,000 shares of ` 10 each as a premium 20% payable as follows:
On application ` 5 (including premium)
On allotment ` 3
On final call ` 4
The company received application for 75,000 shares and allotment was made as follows:
List I : Applications for 40,000 shares were allotted in full
BIKASH AGARWAL Page No. 10  9831421813
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BIKASH AGARWAL  9831421813 ------ ISC - CLASS XII - ACCOUNTS 2015
List II : Applications for 25,000 shares were allotted 20,000 shares
List III : Applications for 10,000 shares were allotted Nil shares
A shareholder to whom 200 shares were allotted under List I paid full amount of shares along with
allotment money. Another shareholder holding 600 shares failed to pay the amount due on call. His
shares were forfeited and 500 of these share were received as fully paid @ ` 110 per shares. Expenses
on issue came to ` 20,000 written off against premium a/c.

9.) Y Ltd. invited applications for 1,00,000 shares of ` 10 each at a discount of 60 paisa per share
payable as follows:
On application ` 2.50
On allotment ` 2.40
On final call ` 4.50
The application were of 90,000 shares and all of these were accepted, all the money was duly received
except the first call on 1,000 shares which were forfeited, of these 500 shares were re-issued at ` 9 as
fully paid. Pass necessary journal entries in the cash book and in the journal of the company.

10.) Winston was allotted 100 equity shares of ` 100 each by Diplod Ltd. originally issued at a discount
of 6% per share. He failed to pay the final call at ` 35. These shares were forfeited and out of these, 50
shares were re-issued to Morgan at ` 90 each as fully paid up. Journalise the transactions in respect of
forfeiture and re-issue of shares only.
ISSUE OF DEBENTURE
1.) P Ltd. issued 5,000 15% debenture bonds of ` 100 each at a discount of 5% repayable after 5 years
at a premium of 5%. You are required to show: (i) Journal entries at the time of issue of debentures and
(ii) the loss on issue of debentures account in the books of the company over the period.

2.) S Ltd. issues for cash 2,000 17% debentures of ` 100 each. Pass journal entries if debentures are
redeemable at par and are issued:
a) At par
b) At a discount of 10%
c) At a premium of 5%

3.) Journalise the following:

a) A debenture issued at ` 97 repayable at ` 100
b) A debenture issued at ` 95 repayable at ` 105

4.) Saradha Industries Ltd. purchase machinery worth ` 1,98,000 from S Ltd. The payment was made
by issue of 5% debenture of ` 100 each. Pass necessary journal entries for the purchase of machinery
and issue the debenture when:
a. The debenture are issued at par
b. The debenture are issued at discount of 10%
c. The debenture are issued at 10% premium

5.) Show by means of journal entries how you will record the following issues. Also show how they will
appear in the respective balance sheet.
a) A ltd issues at par 5,000 14% debenture of ` 100 each repayable also at par
b) B ltd issues 7,000 15% secured debenture of ` 100 each at a discounts of 5% to be repaid at par
at the end of 5 years
c) C ltd issues 12% debentures of the total face value of ` 10,00,000 at 105% to be redeemed at
par
d) D ltd issues ` 4,00,000 debentures at par but redeemed at the end of 10 years at 105%
e) E ltd issues ` 5,00,000 debentures at a discount of 5% repayable at a premium of 10% at the
end of 5 years

6.) X Ltd. Purchased assets of Y Ltd. As under:

BIKASH AGARWAL Page No. 11  9831421813
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BIKASH AGARWAL  9831421813 ------ ISC - CLASS XII - ACCOUNTS 2015
Plant & Machinery of ` 20,00,000 at ` 18,00,000; Land & Building of ` 30,00,000 at ` 42,00,000 for
purchase consideration of ` 55,00,000 and paid ` 10,00,000 in cash and remaining by issue of 8%
Debentures of ` 100 each at a premium of 20%. Record the necessary entries in the books of X Ltd.

7.) G Ltd. Issued 4 0,000 10% Debentures of ` 50 each at a discount of 90% on 1 April, 2000,
redeemable in four equal annual installments starting from 31" March, 2003. Securities Premium
account shows a balance of ` 70,000. Compute the amount of discount to be written off and prepare
the discount on issue of debentures account for the first three years. The financial year of the company
ends on 3l'st March every year.

8.) Samriti Ltd. issued 50,00,000, 8 % Debenture of ` 100 each, payable on application and redeemable
at par any time after 6 years. Record necessary entries for issue of debenture in the books of Samriti
Ltd.

9.) Richstech Ltd. offered 20,00,000, 10% Debenture of ` 200 each at a discount of 7 % redeemable at
premium of 8% after 9 years. Record necessary entries in the books of Richstech Ltd.

10.) Monga Ltd. took over assets of ` 9,00,00,000 and liabilities of ` 3,00,00,000 of Sita Ltd. and issued
8% Debenture of ` 100 each. Record necessary entries in the books of Monga Ltd.

11.) Chuni Company Ltd. issued 10,0,00,000, 6 % Debenture of ` 100 each at a discount of 6 % on April
1, 2001 redeemable at the end of fourth year. Record necessary journal entries to record the issue of
debentures and writing off discount on issue of debenture.

12.) Taj Bengal Co. Ltd. issued 8,000 15% Debentures of ` 100 each. Give the journal entries if the
debentures are – (i) issued at par, (ii) issued at a discount of 10% (iii) issued at a premium of 10%. The
debentures are to be redeemed at par in each case.

13.) Show Journal entries for the issue of Debenture in each of the following cases:
(a) A Ltd. issued 10,000, 6% Debentures of ` 100 each at par repayable at premium of 5% after 5
years.
(b) A Ltd. issued 10,000, 6% Debentures of ` 100 each at a discount of 10% repayable at premium of
5% after 5 years.
(c) A Ltd. issued 10,000, 6% Debentures of ` 100 each at a premium of 5% repayable at premium of
10% after 5 years.
RATIO ANALYSIS
1.) Calculate the following ratios from the financial statements of ABC Ltd.:
(a) Gross profit ratio (b) Net profit ratio (c) Working Capital Turnover ratio (d) Stock Turnover ratio (e)
Quick ratio (f) Proprietary ratio (g) Current ratio
Profit & Loss Account for the year ended 31st March 2009
Amounts Amounts
Particulars Particulars
` `
To Opening Stock 30,000 By Sales 68,000
To Purchases 28,000 By Closing Stock 40,000
To Gross Profit 50,000
1,08,000 1,08,000
To Office Expenses 10,000 By Gross Profit 50,000
To Selling Expenses 9,000 By Interest 1,000
To Financial Expenses 5,000
To Loss on sale of Plant 2,000
To Net Profit 25,000
51,000 51,000

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BIKASH AGARWAL  9831421813 ------ ISC - CLASS XII - ACCOUNTS 2015
BALANCE SHEET AS ON 31ST MARCH 2009
Amounts Amounts
Liabilities Assets
` `
Equity share capital 1,20,000 Plant & Machinery 1,40,000
Preference share capital 30,000 Stock 40,000
Reserve & surplus 25,000 Debtors 20,000
10% Debentures 30,000 Bank 10,000
Bills payable 10,000 Cash 25,000
Creditors 20,000
2,35,000 2,35,000

2.) Assuming that the current ratio is 2 : 1, state, giving reasons, which of the following transactions
would (i) improve (ii) reduce or (iii) not alter the current ratio:
a) Cash collected from debtors or cash received against B/R on its maturity
b) B/R received from debtors
c) B/R endorsed to creditors
d) B/R dishonoured
e) Sale of stock at par for cash
f) Sale of stock at profit for cash
g) Sale of stock at loss for cash
h) Sale of stock at par on credit
i) Sale of stock at profit on credit
j) Sale of stock at loss on credit

3.) The following informations are derived from the accounts of the company:
`
Net credit sales 1,86,000
Cost of goods sold 1,24,000
Debtors : On 01.01.2007 24,000
On 31.12.2007 28,000
Inventory : On 01.01.2007 10,000
On 31.12.2007 16,000
You are required to calculate (a) Debtors turnover ratio (b) Debtors collection period in days (c)
Inventory turnover ratio (d) Age of inventory in days (e) Operating cycle

4.) From the following information, calculate:

(a) Debts equity ratio (b) Interest Coverage ratio (c) Debts to total fund ratio (d) Return on investment
(e) Capital turnover ratio
`
Share capital 1,60,000
General reserve 60,000
Profit & loss a/c 1,00,000
Loan @ 15% interest 2,00,000
Sales for the year 5,60,000
Tax paid during the year 40,000
Profit for the year after interest & tax 80,000

5.) Following information is given to you:

Stock turnover ratio – 5 times
Stock at the end is ` 5,000 more than the stock at the beginning
Sales (all credit) - ` 2,00,000
Gross profit ratio – ¼ on cost
Current liabilities - ` 60,000
Quick ratio – 0.75
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BIKASH AGARWAL  9831421813 ------ ISC - CLASS XII - ACCOUNTS 2015
Calculate (a) cost of goods sold (b) opening stock & closing stock (c) quick assets & current assets

6.) The following is the balance sheet of RS Ltd. as on 31.3.2006

Amounts Amounts
Liabilities Assets
` `
Equity share capital 1,00,000 Premises 1,50,000
Reserve 50,000 Plant 2,00,000
Accounts Payable 1,00,000 Stock 50,000
Outstanding Expenses 30,000 Short term Investment 70,000
Profit & Loss A/c 70,000 Cash 80,000
15% Long term loan 2,00,000
5,50,000 5,50,000
Calculate (i) Current ratio (ii) Quick Ratio (iii) Debt Equity Ratio (iv) Total Assets to Debt Ratio

7.) From the following ratio compute the ‘Debt-Equity’ ratio of DKM Ltd.
Proprietary Ratio 1 : 3

8.) Given : Current Ratio = 2.5, Quick Ratio = 1 and Current Assets ` 20,000. Calculate Closing Stock.

9.) Given : Current Assets ` 1,50,000

Current Liabilities ` 1,29,000
Fixed Assets / Net worth 0.7
No debt Capital. Calculate : Value of Fixed Assets

10.) The following financial statement is summarised from the books of A Ltd. as at 31.03.1983
Liabilities ` Assets `
Equity Share of Rs. 10 each 15,00,000 Fixed Assets 16,50,000
Reserve & Surplus 6,00,000 Inventory 9,10,000
10% Debenture 5,00,000 Sundry Debtors 12,40,000
Sundry Creditors 12,00,000 Investment (Short Term) 1,60,000
Bank Overdraft 2,00,000 Cash 40,000
40,00,000 40,00,000
Annual Sales ` 74,40,000, Gross Profit ` 7,44,000 & Bank overdraft is payable on demand.
You are required to calculate the following ratios for the year and comment on the financial position as
revealed by these ratios:
(a) Debt Equity Ratio & Current ratio
(b) Proprietary Ratio & Gross Profit Ratio
(c) Debtors Turnover Ratio
(d) Stock Turnover Ratio
CASH FLOW ANALYSIS
1.) Calculate cash flow from operating activities from the following:
Profit made during the year ` 2,50,000 after considering the following items:
`
Depreciation 10,000
Amortization 5,000
Transfer to General Reserve 7,000
Profit on sale of machinery 3,000
The following is the position of current assets and current liabilities:
Closing balance Opening balance
Debtors 15,000 12,000
Creditors 10,000 15,000
Bills Receivable 8,000 10,000
Prepaid Expenses 4,000 6,000

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BIKASH AGARWAL  9831421813 ------ ISC - CLASS XII - ACCOUNTS 2015

2.) Given below is the balance sheet of M/s Raj Limited

2007 2008 2007 2008
Liabilities Amounts Amounts Assets Amounts Amounts
` ` ` `
Share capital 1,60,000 1,60,000 Plant 3,00,000 1,80,000
Profit & Loss A/c 60,000 1,60,000 Stock 1,00,000 2,40,000
Long term loan 1,50,000 - Sundry debtors 1,60,000 1,72,000
Sundry creditors 92,000 1,80,000 Bills receivables 30,000 22,000
Provision for taxation 24,000 30,000 Cash 10,000 26,000
Proposed dividend 40,000 60,000
Bank overdraft 74,000 50,000
6,00,000 6,40,000 6,00,000 6,40,000
Additional information:
1) Loan was paid in the beginning of the year 2007
2) Depreciation provided on Plant during the year was ` 20,000
From the above information prepare a cash flow statement as per AS-3

3.) The balance sheet of A. Ltd. as at 31-3-2005 and 31-3-2006 were as follows:
31-3-2005 31-3-2006 31-3-2005 31-3-2006
Liabilities Assets
` ` ` `
Equity share capital 45,000 65,000 Fixed assets 46,700 83,000
General reserve 5,000 7,500 Stock 11,000 13,000
Profit & loss a/c 10,000 15,000 Debtors 18,000 19,500
11% Debenture 10,000 20,000 Cash 2,000 2,500
Trade creditors 8,700 11,000 Preliminary expenses 1,000 500
78,700 1,18,500 78,700 1,18,500
Additional information:
1) Depreciation on fixed assets for the year 2005-06 were ` 11,700
2) Interest paid on debenture ` 1,100

4.) From the following information, prepare a Cash Flow Statement for the year ended 31-03-1991.
Liabilities 31.03.90 31.03.91 Assets 31.03.90 31.03.91
(`. ‘000) (` ‘000) (` ‘000) (` ‘000)
Share Capital 200.0 250.0 Land & Building 200.0 190.0
General Reserve 50.0 60.0 Plant & Machinery 150.0 169.0
Profit & Loss A/c 30.5 30.6 Stock 100.0 74.0
Bank Loan 70.0 - Debtors 80.0 64.2
Sundry Creditors 150.0 135.2 Cash 0.5 0.6
Provision for Taxation 30.0 35.0 Bank - 13.0

530.5 510.8 530.5 510.8

a.) Dividend of ` 23,000 was paid.
b.) Further machinery was purchased ` 25,000 during the year.
c.) Depreciations written off on Building ` 10,000; Machinery ` 14,000.
d.) Income tax paid during the year ` 28,000.

5.) From the following information given below, calculate “Cash Flows from Operating Activities”:
Operating Profit before changes in operating assets ` 57,500
Debtors (Decrease) ` 5,000
Stock (Increase) ` 2,000
Bills Payable (Decrease) ` 4,500
Creditors (Increase) ` 3,200

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BIKASH AGARWAL  9831421813 ------ ISC - CLASS XII - ACCOUNTS 2015
Cash at Bank (Increase) ` 20,000

6.) Balance Sheet of Bhaskar Soumya Company are given below:

Liabilities 1999 2000 Assets 1999 2000
Current Liabilities 2,40,000 2,80,000 Cash 30,000 20,000
Loan from Bhaskar - 1,20,000 Debtors 2,50,000 2,70,000
Bank Loan 3,20,000 2,90,000 Stock 1,90,000 1,60,000
Capital 9,60,000 10,00,000 Land 2,00,000 2,50,000
Building 3,70,000 4,40,000
Machinery 4,80,000 5,50,000
15,20,000 16,90,000 15,20,000 16,90,000
During the year Bhaskar and Soumya introduced additional capital of ` 20,000 and drew ` 60,000.
Provision for depreciation on machinery – Op. Bal. ` 2,00,000 and Cl. Bal. ` 2,20,000. No depreciation
was provided on other assets. The value of building was increased by ` 25,000 and the same was
adjusted with Capital Account.
Prepare a Cash Flow Statement of Bhaskar and Soumya Company.

7.) The following are the Balance Sheets of Gyan Ltd. as on 31st March 2005 and 3110 March 2006.
31.03.05 31.03.06 31.03.05 31.03.06
Liabilities Assets
` ` ` `
Share Capital 2,50,000 2,72,000 Land & Building 1,00,000 1,45,000
Profit & Loss A/c 75,000 1,26,000 Machinery 1,75,000 1,80,000
Debentures 1,00,000 1,20,000 Debtors 73,500 69,000
Creditors 60,000 52,500 Stock 1,25,000 1,37,000
Provision for Doubtful Debts 2,500 2,000 Bank 41,500 72,500
Provision for Preliminary Expenses 2,500 2,000
Dep on Plant 15,000 16,000
Depreciation Buildings 15,000 17,000

6,17,500 6,05,500 5,17,500 6,05,500

Additional Information:
(1) During the year, part of the machinery costing ` 3,500 (Accumulated depreciation thereon ` 500)
was sold for ` 2,500.
(ii) Dividend of ` 25,000 was paid during the year ended 3181 March 2006.
Prepare : Cash Flow Statement.

8.) From the following information, prepare a Cash Flow Statement for the year ended 31-03-1988.
Liabilities 30.04.81 30.04.82 Assets 30.04.81 30.04.82
Capital 3,00,000 3,50,000 Land & Building 2,20,000 3,00,000
Bank Overdraft 3,20,000 2,00,000 Machinery 4,00,000 2,80,000
Bills Payable 1,00,000 80,000 Stock 1,00,000 90,000
Creditors 1,80,000 2,50,000 Debtors 1,40,000 1,60,000
Cash 40,000 50,000
9,00,000 8,80,000 9,00,000 8,80,000
a.) Net profit for the year 1988 amounted to ` 1,20,000.
b.) During the year a machinery costing ` 50,000 (accumulated depreciation ` 20,000) was sold for `
26,000.
c.) The provision for depreciation against machinery as on 31.12.87 was ` 1,00,000 and on 31.12.88 `
1,70,000.
PROFIT & LOSS APPROPRIATION ACCOUNT

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BIKASH AGARWAL  9831421813 ------ ISC - CLASS XII - ACCOUNTS 2015
1.) On 1.1.2005, P, Q and R entered into partnership with capital of ` 60,000, ` 50,000 and ` 30,000
respectively. R advanced ` 10,000 as loan to the partnership on 1.7.2005. The partnership deed
contained the following clauses:
a. Interest on capital at 6%
b. Interest on drawings at 6%. Each drew ` 4,000 at the end of each quarter commencing from
31.3.2005.
c. Working partners P and Q to get salaries of ` 200 and ` 300 per month
d. Interest on loan was given to R at 6%
e. Profits and losses to be shared in the ratio of 4 : 2 : 1 up to ` 70,000 and above ` 70,000
equally.
f. Net profit of the firm for the year ending 31.12.2005 (before above adjustments) was `
1,11,000.
Prepare profit & loss appropriation and personal accounts of partners assuming capitals to be fixed.

2.) A, B & C are in partnership sharing profits two-fifths, two-fifths and one fifth and throughout the half
year ended 31st December 2005 their capital accounts have remained unchanged at ` 60,000, `
40,000 and ` 30,000 respectively. Their current account balances on 1st July 2005 were:
A : ` 8,550 (Dr.)
B : ` 6,550 (Dr.)
C : ` 12,000 (Cr.)
During 2005, A withdraws ` 200 at the beginning of each month, B withdrew ` 400 at the end of each
month while C withdraws ` 1,800 during the period of six months. Their partnership deed provides that:
a. Partners are allowed interest on capital @ 5%
b. Partners are allowed or charged interest on current balances @ 4% p.a.
c. Interest on drawings @ 6% p.a.
d. C is entitled to a salary of ` 500 per month
e. A is entitled to a commission of 5% of the correct net profit of the firm
f. B is entitled to a commission of 5% of the correct net profit of the firm after charging such
commission
During the half year ended 2005, the net profit of the firm was ` 2,07,000 after charging C’s salary
which had been debited to wages & salaries account.
You are required to prepare the profit & loss appropriation account of the firm only.

3.) Hill, Vale and Dale are in partnership sharing profit and losses in the ratio 2 : 2 : 1 respectively.
Interest is charged on partners drawings @ 6% p.a. and credited on partners capital a/c balance @ 6%
p.a. Vale is the firm’s marketing manager and for his specialised services he is credited with a salary of
` 2,000 per quarter. During the year ended on 31st March 2005, the net profit of the firm was ` 62,000
and the partners drawings were: Hill : ` 12,000; Vale : ` 8,000; Dale : ` 8,000
In each case, the above drawings were withdrawn in two equal installments on 30th September 2004
and 31st March 2005. On 30th September 2004 the firm agreed that Hill should withdraw ` 10,000
from his capital account and that Dale should subscribe a similar amount to his capital account. The
balances of the partners account at 1st April 2004 were as follows:
All credit Balance Capital a/c Current a/c
Hill ` 80,000 ` 6,400
Vale ` 70,000 ` 5,600
Dale ` 60,000 ` 4,800
Transfer 5% of the net profit to the reserve fund of the firm.
Required:
a) Prepare the firm’s profit & loss appropriation account for the year ended 31st March 2005
b) Prepare the partner’s capital and current account for the year ended 31st March 2005
GOODWILL TREATMENT
1.) Lucy, Rahul and Sanjay are partners sharing profits and losses in the ratio of 1 : 2 : 3. Arun is
admitted as a partner who brings in ` 20,000 as his capital for 1/5th share in the profit. Goodwill of the
firm is to be valued at an average of the last three years profits which were ` 25,000, ` 28,000 and `
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37,000 respectively. Arun is unable to bring in cash towards his share of premium of goodwill. Give the
journal entries if goodwill already appears in the books at ` 24,000

2.) X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2. Z who joins the firm for
1
/3 share is to pay ` 25,000 as premium for goodwill but he cannot pay anything. As between X and Y, it
is decided to share profits equally. Pass the necessary journal entries in respect of the above.

3.) A, B and C were partners sharing profits in proportions to 5 : 3 : 2. Goodwill does not appear in the
books, but it is agreed to be worth ` 1,00,000. A retires from the firm and B & C decided to share future
profits equally. You are required to make adjustment entry for goodwill without opening goodwill a/c at
all.

4.) A, B & C were partners sharing profit and loss as 3 : 2 : 1. They admitted D as a new partner giving
him 1/6 share of future profits. D acquired 3/24 from A and 1/24 from B. Calculate the new profit sharing
ratio. Show the journal entries when D unable to bring his share of goodwill of ` 6,000.

5.) Sumit and Sarvesh are partners sharing profits and losses in the ratio of 2 : 1. On 1st April, 1999
they admit Krishna as partner who is unable to bring goodwill in cash but pays ` 20,000 as his capital.
Goodwill of the firm is valued at two year’s purchase of the last five years average profits. The results
for the last five years were as follows:
Year 2000-01 2001-02 2002-03 2003-04 2004-05
Profit (`) 16,000 6,000 (Loss) 4,000 12,000 19,000
The new ratio of partners will be 5 : 3 : 2. Give necessary journal entries when goodwill amount is
raised in the books but it is immediately written off.

6.) Seema and Sanyukta are partners sharing profit and losses in the ratio of 4 : 3. On 1st April 1999,
they admit Shuchita as partner who is unable to bring goodwill is cash but pays ` 20,000 as capital. The
Goodwill of the firm is valued ` 21,000. The new profit sharing ratio will be 5 : 3 : 2. Make journal
entries when goodwill account is raised in the books but is immediately written off.

7.) A and B are partners sharing the profits in the ratio of 3 : 2. C is admitted into the partnership with
1/5 share of future profits. Calculate the new profit sharing ratio and the sacrificing ratio.
ADMISSION OF PARTNER
1.) A and B sharing profits in the proportions of three-fourth and one-fourth showed the following as
their Balance Sheet as 31st March 1999:
Amounts Amounts
Liabilities Assets
` `
Creditors 37,500 Cash at Bank 22,500
General reserve 4,000 Bills receivable 3,000
Capital A/c Debtors 16,000
A 30,000 Stock 20,000
B 16,000 Furniture 1,000
Land & Building 25,000
87,500 87,500
They admit C into partnership on 1st April 1999 on the following terms:
a. C pays ` 10,000 as his capital for one-fifth share in the future profits
b. A goodwill account be raised in the books of the firm at a value of ` 20,000
c. Stock and furniture be reduced by 10% and a 5% provision for doubtful debts are created on
debtors.
d. The value of land and building be appreciated by 20%
e. The capital accounts of all partners be re-adjusted on the basis of their profit sharing
arrangements and any additional amount be temporarily credited to their current accounts and
be immediately withdrawn by them.
Prepare (i) Journal Entries (ii) Revaluation A/c (iii) Capital A/c and (iv) Balance Sheet of Firm.
BIKASH AGARWAL Page No. 18  9831421813
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2.) F and H are equal partners in a firm. They decide to admit B as a new partner and to readjust the
balance sheet values for this purpose. The balance sheet as on 31st March 2008 was as follows:
Amounts Amounts
Liabilities Assets
` `
Creditors 10,000 Cash 6,000
Bills payable 10,000 Debtors 12,000
Capital A/c Stock 10,000
F 17,000 Furniture 4,000
H 15,000 Machinery 20,000
52,000 52,000
The following adjustments were to be made on B’s admission:
1. ` 300 was to be provided for doubtful debts
2. Furniture to be valued at ` 3,500
3. Investment worth ` 2,500 not in the balance sheet was to be taken into account
4. B brings ` 12,000 as capital and ` 10,000 doe ¼ share of goodwill which he acquires equally
from F and H
5. A liability to the extent of ` 500 is to be created in respect of a claim for damages against the
firm
6. Goodwill not to remain in the books
Prepare revaluation account and the balance sheet of the new firm after the admission of B.

3.) The following was the balance sheet of A and B who were sharing profits in the ratio of 2 : 1 on 31st
March 2005:
Amounts Amounts
Liabilities Assets
` `
Creditors 65,900 Buildings 50,000
General Reserve 30,000 Plant & Machinery 35,000
Capital A/c Stock 20,000
A 30,000 Debtors 9,700
B 20,000 Cash 31,200
1,45,900 1,45,900
On this date C was admitted into partnership on the following terms:
1) C was to bring ` 15,000 as his capital and ` 6,000 as goodwill for one-fourth share in the firm
2) That the values of the stock and plant & machinery were to be reduced by 5%
3) That a provision of ` 750 was to be created in respect of sundry debtors
4) That the building were to be appreciated by 10%
5) That goodwill money was to be retained in the business
6) Prepaid expenses and outstanding expenses on 31st March 2000 not taken into account were `
300 and ` 900 respectively.
Prepare (i) Revaluation Account (ii) Partners’ Capital Account (iii) Balance Sheet of the New Firm

4.) A and B are carrying on business in partnership as chemists; sharing profits and losses in the ratio
of 2 : 3 respectively. Their balance sheet on 31st March 2005 was as under:
Amounts Amounts
Liabilities Assets
` `
Creditors 24,870 Cash 1,420
Capital A/c Cash at Bank 23,850
A 68,100 Sundry Debtors 11,000
B 68,100 Stock 36,000
Furniture 8,800
Building 80,000
1,61,070 1,61,070

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On that date they admitted C into partnership and give him one third share in future profits on the
following terms:
1. Stock and furniture are to be reduced in value by 12.5%
2. Buildings are to be appreciated by ` 15,000
3. A provision of 5% is to be created on sundry debtors for doubtful debt
4. C is to bring in ` 60,000 as his capital and ` 40,000 as goodwill, which is to remain in the
business
5. The values of assets and liabilities other than cash are not to be altered
Draft journal entries to record the above arrangement and show the opening balance sheet of the new
firm

5.) The Balance Sheet of Asif, Abid as on 31st Dec, 1998 is set below sharing profit and losses in the
ratio of 2 : 1
Amounts Amounts
Liabilities Assets
` `
Asif Capital 39,800 Freehold property 20,000
Abid Capital 31,000 Furniture 6,000
General Reserve 24,000 Stock 12,000
Creditors 16,000 Debtors 60,000
Cash 12,800

1,10,800 1,10,800
They agreed to admit Nafeez into the firm in subject to the following terms and conditions:
1) Nafeez will bring ` 9,000 as goodwill and pay in sufficient amount of capital
2) He will be entitled to ¼ share of profit
3) 50% of the general reserve is to remain in business
4) Depreciation is to be provided on furniture @ 5%
5) Stock is to be revalued at ` 10,500
6) The capital of all parties is to be adjusted in new profit sharing ratio
Show Revaluation A/c, Capital A/c and Balance Sheet.

6.) Mathur and Gupta share profits in the ratio of 3 : 1. Their Balance sheet as on 31st March 2005 was
as under:

Amounts Amounts
Liabilities Assets
` `
Sundry Creditors 16,000 Land & Buildings 25,000
Bills payable 14,000 Plant & Machinery 35,000
Capital Sundry debtors 20,000
A 50,000 Less : Provision 600 19,400
B 25,000 75,000 Patents 6,000
Stock 15,000
Bank 4,600
1,05,000 1,05,000
Agarwal is admitted into partnership on the following terms:
1) The new profit sharing ratio will be : Mathur 5, Gupta 3 and Agarwal 2
2) Agarwal will pay ` 20,000 as capital and the capital of partners will be in the same ratio as the
profit sharing ratio.
3) Goodwill of the firm is valued at ` 20,000 but no account for goodwill should remain in books
4) Plant & machinery is to be depreciated by 20% and stock by 10%. Provision for bad debts is to
be increased by ` 900. Land & building are to be appreciated by ` 5,000
Journalise the transactions and give the adjusted Balance Sheet.

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DISOLUTION OF FIRM
1.) Ram & Shyam are partners sharing equally. Their balance sheet on 31-03-2007 was as under:
Amounts Amounts
Liabilities Assets
` `
Ram’s capital 2,000 Sundry assets 4,000
Sundry creditors 3,000 Cash 200
Shyam’s capital 800
5,000 5,000
Firm is dissolved. Assets realised 50% of book values. Expenses are ` 200. Shyam had a surplus of `
100 from own private source, Ram had nothing. Close the books of the firm.

2.) A, K and M were partners sharing profits and losses in the ratio 3 : 2 : 1. They decided to dissolve
the firm as on 31st December 2010
BALANCE SHEET AS ON 31ST DECEMBER 2010
Amounts Amounts
Liabilities Assets
` `
Capital Accounts Cash 2,000
A 7,000 Machinery 10,000
K 5,000 Furniture 1,000
M 1,000 Stock 5,000
Bills Payable 3,000 Sundry Debtors 3,000
Sundry creditors 6,000 Profit & Loss a/c 1,000
22,000 22,000
The assets were realised as follows: Machinery - ` 5,000 and Stock - ` 3,000. Realisation expenses were
` 1,000. Prepare necessary accounts to close the books of the firm.

3.) R, S and N are partners in a business dividing profits equally.

BALANCE SHEET AS ON 31ST MARCH 2005
Amounts Amounts
Liabilities Assets
` `
Sundry Creditors 10,000 Furniture 2,100
Bills payable 2,000 Stock 15,400
Capital A/c Sundry debtors 18,000
R 12,000 Less : Provision 900 17,100
S 9,000 N’s current A/c 5,000
N 1,000 22,000 Cash at Bank 1,400
Current A/c
R 2,000
S 2,000 4,000
Reserve fund 3,000
41,000 41,000
N is insolvent and his estate pays ` 1,800 to the firm. The partnership is consequently dissolved and
sundry debtors, stock and furniture realised ` 23,600. Sundry creditors were settled at ` 8,000. You are
required to prepare ledger accounts to close the books of the firm in accordance with the decision in
Garner v/s Murray.

4.) R and S who share profit and losses in the ratio of 5 : 3 agree to dissolve the firm on 30th September
2000. The position of the firm is indicated by the following Balance Sheet:
Amounts Amounts
Liabilities Assets
` `
Sundry creditors 9,316 Goodwill 4,000
Loan from R 3,684 Fixtures 1,000
Loan from S 400 Machinery 2,000
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Capital Stock 9,200
R 8,000 Due from Customers 10,000
S 5,400 Cash at Bank 200
Accumulated Loss 400
26,800 26,800
The assets were realised as follows:
`
Goodwill 2,000
Fixtures 800
Stock 8,500
Debtors 9,200
S took over the machinery at 2,100
Creditors were paid ` 9,290 in full settlement. Realisation expenses amounted to ` 150. A bill for ` 160
due for sales tax was received during the course of realisation and this was also paid. Prepare (a)
Realisation A/c (b) Capital A/c and (c) Bank A/c

5.) Robert and Smith were partners sharing profits and losses in the ratio of 3: 2.
On the date of dissolution, their capitals were:
Robert – ` 7,650 and Smith – ` 4,300
The Creditors amounted to ` 27,500. The balance of cash was ` 760. The assets realised ` 25,430. The
expenses on dissolution were ` 1,540.
All the partners are solvent.
Close the books of the firm showing the realisation, capital and cash accounts.

6.) A, B, C and D were partners in a firm. Their balance sheet on the date of dissolution was as follows:
Amounts Amounts
Liabilities Assets
` `
A’s Capital 20,000 Cash in Hand 45,000
B’s Capital 15,000 C’s Capital 19,000
Creditors 14,000 D’s Capital 5,000
Realisation A/c 20,000
69,000 69,000
C is insolvent and cannot contribute anything. Show the partners capital accounts assuming:
a) Garner vs Murray is applicable
b) Garner vs Murray is not applicable
DEATH & RETIREMENT OF PARTNERS
1.) A, B and C are in partnership sharing profits equally. A dies on 30th June 2005 and the partnership
deed provided the following information:
a. The share of the deceased partner’s capital account shall be taken at the balance on his capital
account as at the date of the last financial close less the withdrawals if any made to the date of
death.
b. That his share of profit to the date of death be calculated on the basis of the average of the
three preceding years
c. That the goodwill of the firm shall be taken at one year’s purchase of the average profits of the
preceding five years.
d. That the firm’s freehold property shall be taken at an independent valuation
The firm’s Balance Sheet was as under:
Amounts Amounts
Liabilities Assets
` `
Creditors 37,800 Cash in hand 1,000
Capital Accounts Cash at Bank 9,000
A 60,000 Debtors 20,000
B 40,000 Stock 30,000

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C 40,000 Freehold Property 80,000
Goodwill 37,800
1,77,800 1,77,800
Freehold property was valued at ` 1,16,000. The profits for the five years ended on 31st march 2005:
2000-01 23,000
2001-02 28,000
2002-03 18,000
2003-04 16,000
2004-05 20,000
Pass journal entries and show A’s capital account and the Balance Sheet of surviving partners.

2.) The following was the balance sheet of A, B and C who share profits in the ratio of 1 : 2 : 2 as on
31st March 2005. C died on 30th June 2005. His accounts has to be settled under the following terms:
Amounts Amounts
Liabilities Assets
` `
Sundry Creditors 10,000 Goodwill 15,000
Bank Loan 30,000 Building 30,000
Capital Sundry debtors 10,000
A 10,000 Less : Provision 2,000 8,000
B 20,000 Stock 10,000
C 20,000 50,000 Investments 10,000
General Reserve 5,000 Machinery 20,000
Investment Fund 3,000 Cash 5,000
98,000 98,000
Goodwill is to be calculated @ 2 years purchase on the basis of average 5 years profit. The deceased
partner’s share of profit to date of death is to be calculated on the basis of the average profits for the
last 3 years. The firm profits are : 2000-01 ` 3,000; 2001-02 ` 7,000; 2002-03 ` 10,000; 2003-04 `
14,000; 2004-05 ` 12,000 (Loss)
During 2004-05 an old moped costing ` 4,000 was purchased and debited to travelling account on
which depreciation is to be calculated @ 25%. Other values agreed on assets are stock ` 12,000;
Buildings ` 35,000 and Machinery ` 25,000. Investment are valued at ` 8,000. Any change in the value
of investment is to be adjusted in investment fund. Prepare Partner’s capital account and Balance
Sheet of the firm after C’s death

3.) The following is the Balance Sheet of A, B and C sharing profit and losses in the ratio of 10 : 6 : 4 as
on 31st March 2005:
Amounts Amounts
Liabilities Assets
` `
Sundry Creditors 38,000 Goodwill 1,00,000
Bills payable 59,000 Furniture 12,000
Capital Sundry debtors 1,80,000
A 2,00,000 Less : Provision 7,000 1,73,000
B 1,00,000 Stock 1,00,000
C 1,00,000 4,00,000 Investments 50,000
A’s loan 28,000 Bank 89,000
Cash 1,000
41,000 5,25,000
A retired from the date on the following terms:
a) His capital account was credited with ` 50,000 for his further share of goodwill and B and C
decide to raise goodwill in the books at full value.
b) Furniture & Stock be depreciated by 10%
c) The provision for bad debts was increased to 5%
d) Investments were appreciated by 2%
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e) A was paid off by cheque leaving a balance of ` 4,000 at bank
f) The partners decided that after A’s retirement the goodwill should be eliminated from the books
by B and C equally.
Prepare (i) Revaluation A/c (ii) Capital A/c and (iii) Balance Sheet after A’s retirement

4.) A, B and C were partners sharing profit and loss in the ratio of 5 : 3 : 2 respectively. They had a Joint
Life Policy of ` 1,00,000. The surrender value of this policy was ` 20,000 on 31-12-2005. The balance
sheet of this date was as follows:
Amounts Amounts
Liabilities Assets
` `
Creditors 40,000 Fixed Assets 1,25,000
Capital Accounts Stock 55,000
A 1,00,000 Debtors 60,000
B 50,000 Cash 10,000
C 40,000
Outstanding Expenses 5,000
Reserve 15,000
2,50,000 2,50,000
B retires on 31-12-2005 and for this purpose goodwill was valued at ` 75,000. Fixed assets were valued
at ` 1,50,000, stock was considered worth ` 50,000
B was to be paid in cash brought in by A and C in such a way so as to make their capital proportionate
to their new profit sharing ratio which is 3 : 2 respectively. Joint life policy is to appear in the new
balance sheet. Prepare capital accounts and the balance sheet of A and C

5.) Amar and Akbar are in partnership sharing profit & losses in the ratio of 2 : 1. They took a joint life
policy for ` 1,00,000 at an annual premium of ` 5,000. Amar died 6 months after the date of last
balance sheet, the legal representative of the deceased partners are entitled to:
• His capital as per last balance sheet
• Interest on capital @ 5% p.a.
• His share of profits to the date of death calculated on the basis of three years average profit
• Interest on drawings @ 4% p.a.
The net profits of the last 3 years after debiting insurance premium were ` 30,000, ` 35,000 and `
25,000 respectively. Amar’s capital as per last balance sheet was ` 50,000 and his drawings upto the
date of death were ` 10,000. Prepare Amar’s capital account
APPLICATION OF SCHEDULE VI
1.) From the following details show in a neatly drawn balance sheet how the capital structure and other
items relating to a limited company would appear.
The authorised capital consisted of 3,000 10% cumulative preference share of ` 100 each and 8,000
ordinary share of ` 100 each, out of which 1,000 cumulative preference share were issued to public ,
fully called and paid up and 3,000 ordinary share have been issued and fully called up but there are
arrears of ` 8,000. Capital reserve ` 15,000, Mortgage debentures ` 50,000, Bank overdraft ` 25,000,
Profit & loss a/c ` 76,000, Securities premium ` 22,000

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BIKASH AGARWAL Page No. 24  9831421813
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