Accountancy – II 1

REVISIONARY PROBLEMS
Chapter - 1
BILLS OF EXCHANGE

1. Madhav purchased goods worth of Rs.10,000 with a trade discount of 10% from Kranthi
on 31st July 2006. Kranthi draw a bills of Exchange on Madhav for the amount for 3
months. Madhav accepted and returned the bill. On the due date the bill was duly
honoured.
Pass Journal entries in the books of both the parties.

2. Nagaraju draft a bills of exchange on Omkar for Rs.15,000 on 1 st November 2004 for 4
months. Omkar accepted and returned the same to Nagaraju. Nagaraju endorsed the
same to his Creditor Keerti in full settlement of his debt of Rs.15,500. Keerti endorsed
the same bill to his creditor Kali on the same day. The bill was duly met on maturity.
Enter the above transactions in the books of Nagaraju and Omkar.

3. A bill of exchange for Rs.5,000 is drawn by Kapoor on Syam and accepted by the later
payable after 3 months. Show the journal entries in the books of Kapoor in each of the
following cases.
(a) If he ratined the bill till the due date and realised it on maturity.
(b) If he got it discounted with his bank for Rs.4,800
(c) If he endorsed it to his creditor Kota in full settlement of his dues of Rs.5,100.
(d) If he sent the bill to his bank for collection.

4. On 15th October 2006, Neelima drew a bill for Rs.6,000 on Sita for 4 months. On
maturity, Sita failed to honour the bill. Pass necessary journal entries in the books of
Neelima.
(a) If she had retained the bill with her till maturity.
(b) If she discounted the bill with her banker at a discount of 5% p.a.
(c) If she endorsed the bill to Jeenath her creditor on 1st November
(d) If she sent the bill to her banker for collection.

5. On 1st March 2006, Mr. Mitra sent to Mr. Sukla a three months bill for Rs.5,000 Mr. Sukla
accepted the bill and returned it to Mr. Mitra, who there upon discounted it @ 6% p. a. on
Accountancy – II 2

maturity the bill was dishonoured and Mr. sukla gave another acceptance for 2 months
for the full amount of the original debt plus 6% p.a. interest. The Second bill was paid on
the due date.
Pass the entries in the books of both the parties.

6. Mahesh draws a two months bill on Kesav on 1st January 2006 for Rs.4,000. On 1st
March Kesav approached Mahesh and asked for the renewal of the bill. Nagur agreed to
this and added Rs.30 for extension of Credit. Pass journal entries in the books of both
the parties.
(a) If the bill was honoured on the due date
(b) If the bill was dishonoured on the due date and noting charges Rs.20.

7. On 15th October 2006 Basu sold goods to Dasu for Rs.9,000 and drew upon him a bill for
3 months for the amount. Dasu accepted the draft. On the due date Dasu expressed his
inability to meet the bill and offered to pay Rs.2,000 in cash and to accept a new bill for
the balance plus interest at 12% p. a. for two months. Basu agreed to the proposal. On
maturity the bill was dishonoured on account of insolvency and 10 paise in rupee was
received from Dasu ‘s estates.
Pass necessary journal entries in the books of both the parties.

Chapter – 2

AVERAGE DUE DATE

1. Calculate Average Due date from the following

Due date Amount
Rs.
5th July 2006 500
10th August 2006 850
25th September 2006 350
10th November 2006 650

2. Find out the Average Due date of the following bills.

Date of bill drawn Due date of the bill Amount
Rs.
18th April 2006 6th June 2006 400
30th April 2006 5th August 2006 500
3rd June 2006 6th July 2006 200
Accountancy – II 3

15th June 2006 14th Sept 2006 300

3. Bhaskar accepted the following bills on various dates.

Date of bill drawn Maturity period Bill Amount
Rs.
(months)
5th January 2006 2 600
16th January 2006 3 500
15th April 2006 2 400
th
6 April 2006 1 700
He wishes to accept a new bill for the whole amount payable on Average Due date. Find
the date.

4. Find out the Average due date from the following particulars. If the amount is paid on 29 th
May 2003. What would be the interest at 5% per annum.
Due date Amount
Rs.
10-3-2006 400
18-6-2006 200
19-4-2006 300
9-5-2006 500

5. Calculate the Average due date of the following bills.

Date of bill Bill Amount
Credit period (Months)
Rs.
10th January 2006 2 100
th
19 February 2006 2 200
19th March 2006 2 500
The debtor has paid the total Amount on 14 th August 2003. The creditor charged interest
at 10% per annum. Calculate the amount of interest on the amount.

6. A partner has withdrawn the following amounts from the firm on various dates. Calculate the amount of
interest payable to the firm, if the firm charges interest at the rate 10% per annum.
Date of Drawings Amount
Rs.
10th January 2006 600
20th January 2006 400
19th February 2006 800
21st March 2006 600

7. Kumar is a partner of a firm. The firm charge interest at the rate of 6% per annum. His
withdrawals for the half year ending on 31 st December 2003 are given calculate the amount of
interest payable by him.
Accountancy – II 4

Date of withdrawal Amount

Rs.
10th July 2006 200
9th August 2006 300
8th September 2006 600
8th October 2006 400
7th November 2006 200
7th December 2006 100

Chapter - 3
ACCOUNT CURRENT

1. The following transactions took place between Chetan and Rahul from 1 st January to 30th
June 2005.
2005 Rs.
Jan 1 Sold goods to Rahul 1,230
Jan 10 Received Rahul ‘s acceptance for 2 months 600
Feb 15 Bought goods from Rahul 1,000
Mar 5 Accepted Rahul ‘s bill for one month 400
April 30 Goods sold to Rahul (Due on May 31) 800
June 15 Rahul returned goods 350
You are required to made an account current to be rendered by Krishna Kumar as on June
30, 2005, taking interest into account at the rate of 5% p.a.

2. Kumar owed Rs.5,000 on 1st January 2006 to Murali. The following transactions took
place between them during the six months. It was agreed between the parties that
interest at the rate of 5% per annum be charged on the amount.
2006 Rs.
Jan 10 Goods sold to Kumar 2,040
Feb 15 Purchased goods from Kumar 1,000
Feb 20 Goods returned by Kumar 440
Mar 15 Cash received from Kumar 500
Apr 20 Cash paid to Kumar 300
May 25 Goods returned to Kumar 100
th
Make out an account current to be rendered by Murali to Kumar as on 30 June 2003.

3. Prepare an Account Current be rendered by Bhavani to Lakshmi for the quarter ending
31st March 2006 charging interest at the rate of 12% per annum.
2006 Rs.
Jan 4 Sold goods to Lakshmi 10,000
Jan 15 Received Cheque from Lakshmi 4,000
Accountancy – II 5

Jan 20 Received a bill for 3 months from Lakshmi. 2,000

Feb 20 Purchased goods from Lakshmi 3,000
Feb 25 Returned goods to Lakshmi 250
Mar 12 Sold goods to Lakshmi 1,000

4. From the following prepare Account Current to be rendered by Kalyan to Ram as on 30 th

September 2005.
2005 Rs.
July 12 Goods sold to Ram 1,430
July 18 Received Cash from Ram 500
Aug 5 Cash paid to Ram 800
Aug 8 Sold goods to Ram 1,200
Sept 13 Goods returned by Ram 300
Sept 18 Cash received from Ram 400
Interest is to be charged at the rate of 10% per annum.

5. Make out an Account Current to be rendered by Vani to Bhavani as on 30 th September,

2006.
2006 Rs.
July 1 Balance due to Bhavani 500
July 3 Sold goods to Bhavani 750
July 12 Goods sold to Bhavani due July 27th (Trade discount at 10%) 1,450
July 25 Bills receivable received from Bhavani (Due two months after 4,000
date)
Aug 17 Goods sold to Bhavani at one month credit 1,000
Sept 28 Bhavani dishonoured his bills due this day, noting charges 30

Interest is to be calculated at the rate of 6% p. a. and to the nearest rupee.

6. From the following information prepare an account current to be rendered by Raja to

Kaveri, up to 30th September 2005. Interest to be calculated at the rate of 5% p. a. on the
amount.
2005 Rs.
July 12 Goods sold to Kaveri 4,000
July 18 Cash received from Kaveri 1,000
Aug 2 Cash paid to Kaveri 500
Aug 17 Goods returned to Kaveri 100
Sep 10 Bought goods by Kaveri 1,000
Sep 14 Cash received from Kaveri 700

7. From the information given below, prepare an “Account Current” to be rendered by

Ranga to Khan up to 31st December 2006. Interest is to be calculated at 10% p.a.
2006 Rs.
Aug 2 Goods sold to Khan 900
Aug 20 Cash received from Khan 450
Accountancy – II 6

Oct 10 Khan purchased goods from Ranga (Due on Nov 10) 2,000
Oct 25 Cash received from Khan 1,500
Nov 2 Goods returned by Khan 300
Nov 30 Cash sent to Khan 1,000

8. The following transactions took place between Gupta and Modi. Prepare Account
Current to be rendered by Rajesh on 30th June 2006.
2006 Rs.
April 1 Balance due from Gupta 4,000
April 20 Cash paid to Gupta 2,400
May 10 Purchased goods from Gupta 1,600
May 25 Goods sold to Gupta 3,000
June 12 A bill for two months drawn on Gupta 2,400
June 25 Goods purchased by Gupta 1,000

Interest to be Calculated at 10% per annum.

9. Sridevi opened a Current Account in Andrha Bank. Her transactions for three months
ending 30th June 2006 are as follows:
Deposits: Rs.
2006
April 1 4,000
May 20 1,000
June 6 3,000
June 22 6,000
Withdrawals:
May 10 11,000
June 12 2,000
June 15 3,000

Interest is to be charged at the rate of 12% p. a. on debit balances and allowed at the
rate of 2% p. a. on Credit Balances, show the account of the customer in the books of
the bank as on 30th June 2006.

Chapter - 4
DEPRECIATION

I. Fixed Installment Method :

1. Furniture is purchased for Rs.35,000. It is decided to depreciate the asset on straight line
method at 10% per annum. Show furniture account for 5 years.
Accountancy – II 7

2. A firm purchased a Plant and Machinery for Rs.40,000 on 1 st January 1999. The life of
the asset was estimated to be four years and it was decided to depreciate 90% of the
cost by straight line method over a period of estimated life. Show the plant and
machinery account for 4 years.

3. Venkat purchased an asset for Rs.48,000. He spents.2,000 for its erection. The
estimated life of the asset is 10 years. The residual value at the end of its life period is
Rs.5,000. Calculate annual depreciation and the rate of depreciation on the asset. Under
equal installment method prepare asset account for 4 years.

4. Sainath purchased a machine on 1st July at a cost of Rs.50,000. It was estimated to have
a scrap value of Rs.5,000 at the end of its life 10 years. It was installed at a cost of
Rs.5,000. Show machinery amount for the years 2000 to 2002 under fixed installment
method assuming that the accounts are closed on 31st December every year.

5. On 1-1-99, Sastry purchased machinery worth Rs.50,000. On 1-4-2000 additional

machinery worth Rs.10,000 was purchased. On 30-6-2001, machinery purchased on 1 st
January 99 became unsuitable and was sold for Rs.35,000. Prepare Machinery account
for 4 years charging the depreciation @ 15% p. a. on both the machines under Fixed
Installment Method.

II. Diminishing Balance Method :

6. On 1st January 2000 a firm purchased a machine for Rs.30,000. Assuming the
depreciation is charged @ 10% on Diminishing Balance Method. Prepare Machinery
account for three years.

7. A second hand machine was purchased for Rs.12,000 on 1-1-2000 and Rs.3,000 spent
towards repairs. On 30-6-2003 the machine became unsuitable and was sold for
Rs.10,000. Charge depreciation @ 15% on Diminishing Balance Method. Show the Profit
or loss on the sale of the machine.
Accountancy – II 8

8. A firm purchased a second hand machine for Rs.12,000 on 1-1-2000. It spent Rs.3,000
on its over haul and installation. Depreciation is charged @ 12 ½% per annum as per
Diminishing Balance Method. On 31-12-2002 the machine was found unsuitable and
sold for Rs.7,000. Prepare Machinery account up to 31-12-2002.

9. Naidu purchased a machine on 30-6-99, for Rs.80,000 and spent Rs.5,000 for its
installation. On 1-1-2000 he purchased another machine worth Rs.15,000. The machine
purchased on 30-6-99, was unsuitable and was sold for Rs.70,000 on 31-12-2002. Find
the machinery value as on 31-12-2002 charging depreciation @ 10% on Reducing
Balance Method.

III. Both Methods :

10. A firm purchased a machine for Rs.20,000 as on 1-4-98 charge depreciation p.a. as per
Fixed Installment Method on 31st December every year. With effect from 1-1-2001 the
firm decided to charge the method of depreciation into Diminishing Balance Method
charging depreciation @ 12% per annum. Find the machinery account as on 31-12-
2002.

11. Reddy purchased a machine worth Rs.70,000 on 30th June 1999. Charge depreciation @
10% per annum on the machinery. Prepare machinery account up to 31 st December
2002 under.

(a) Fixed installment Method

(b) Diminishing Balance Method.

Chapter - 5
CONSIGNMENT ACCUNTS
1. Lal consigned goods to Siva & Sons to be sold at 2% commission in addition to Del
credare commission 2%. Cost of the goods to Lal was Rs.50,000. He paid carriage and
cartage Rs.2,000. An advance of Rs.20,000 was received from Siva & Sons.
Accountancy – II 9

Siva & Sons sent an account sales from which it appeared that ¾ of the consignment
realized Rs.44,000 and he had deducted his expenses Rs.2,000 and commission. A
cheque was encashed for the balance. Prepare necessary ledger Accounts in the books
of Lal.

2. Patel of Ahmedabad consigned 100 sewing machine to Murthy of Hyderabad to be sold

at his risk. The cost of one sewing machine was Rs.150, but invoice at Rs.200. Patel
paid Rs.800 towards freight and insurance. Murthy sent a draft to Patel for Rs.8,000 as
advance and later sent an account sales showing that 80 sewing machines were sold at
Rs.210 each. Expenses incurred by Murthy were: carriage inwards Rs.50 Octroi Rs.100
Godown rent Rs.400 and advertisement Rs.200. Murthy is entitled to a commission of
5% on sales.
Journalise the above transaction in both the books.

3. On 1st January 2006 Usha & Co. of Mumbai consigned to Badari & Co. of Tenali, 1,000
table fans invoiced at Rs.100 each which was 25% above their cost price. The
consignment paid Rs.400 for packing, Rs.450 for insurance and Rs.250 for carriage. On
31st December 2006, Badari & Co. sold 800 fans for Rs.80,000 and expenses amounting
to Rs.750 were incurred by them. Commission at 5% and 3% del – credere commission
on sales was charged. They have remitted Rs.40,000 on account. Give the necessary
Journal entries in the books of both parties.

4. Sagar of Guntur, consigned to Das of Warangal 250 radios invoiced at Rs.750 each,
which was 25% above their cost price. Sagar paid packing Rs.1,000 insurance Rs.500
and Carriage Rs.3,000. Das sold 225 radios for Rs.1,82,000; the expenses there on
being Rs.5,300. Their commission was 5% on sales. They remitted Rs.1,50,000 on
account. Pass journal entries in the books of consignor and show the necessary ledger
accounts.

5. 500 cycles were consigned by Jeevan of Delhi to Gupta, Hyderabad at Rs.150 each.
Jeevan, paid freight Rs.5,000 and insurance in transit Rs.750. During the transit 50
cycles were totally damaged by fire. Gupta, took delivery of remaining cycles and paid
Rs.765 for Octroi. Sunder Co., sent a bank draft to Jeevan, for Rs.25,000 as advance
payment and later sent an account sales showing that 400 cycles were sold at Rs.220
each. Expenses incurred by Sunder & co., are entitled to commission of 5% prepare
consignment Account, abnormal loss account and Gupta, account in the books of
Jeevan.
Accountancy – II 10

Chapter - 6
RECTIFICATION OF ERRORS
1. Rectify the following Errors.
(a) An amount of Rs.500 received from Khan has been posted to Khanna Account.
(b) Discount allowed Rs.100 to Sastry for which Preliminary entry has not been posted.
But it was posted to Sastry’s Account.
(c) Goods sold to Ramu was Rs.500 was not posted to his account
(d) Rs.2,000 drawings debited to Trade Expenses Account
(e) No posting has been found in purchases book in respect of Rs.500 credit purchases
from Ketan.
(f) Rs.43 purchases of goods was recorded as Rs.34 in the Purchases Book.

2. Rectify the following Errors.

(a) Machinery installation charges Rs.300 Omitted to be entered in the Day Book
(b) Old furniture sold Rs.1000 credited to Sales Account
(c) Sales book overcast by Rs.200
(d) The total of Sales returns book overcast by Rs.50
(e) Miscellaneous Expenses Rs.75 included in proprietor ‘s drawings Account.

3. Rectify the following Errors.

(a) A cheque for Rs.990 given by Omesh a debtor directly received by the Proprietor
was deposited into his Personal Account.
(b) Repairs to furniture Rs.200 was debited to Furniture Account
(c) Salary paid to Prasad was omitted to be entered in the books
(d) General expenses Rs.65 paid to Vijay was debited to his personal account.

4. How would you rectify the following errors by opening suspense account.
(a) The Sales Rs.12,000 has been undercast by Rs.100
(b) Goods worth Rs.154 returned by a Customer have been posted in the purchases
book
(c) Furniture Purchased from Khadar & co. for Rs.1000 was recorded in Purchases Book
(d) A purchase of goods for Rs.250 from Modi stands posted to the debit of supplier.
(e) A discount of Rs.15 claimed from Bobby does not appear in the Cash Book.

5. Rectify the following Errors by Opening Suspense Account.

Accountancy – II 11

(a) Cash received from Sasi Rs.300 was debited to Usha

(b) While carrying forward the total of one page of Purchase Book to the next page, the
amount of Rs.1,235 was written as 1,325.
(c) Ledger Expenses Rs.119 paid to Kiran was debited to his personal Account
(d) Sales Book overcast by Rs.100
(e) Trade expenses Rs.18 was posted in the account as Rs.80
(f) A sale of Rs.500 to Jaya was wrongly debited to Vijaya
(g) A bill received for Rs.155 was written in Bills payable Book. The bill was given to
Radha.
Pass necessary entries for the rectification of above errors.

Chapter - 7
NON - TRADING CONCERNS
1. From the following Receipts and Payments
account of Visakha club prepare the Income and
Expenditure for the year ended 31-3-2006:
Receipts Amount Payments Amount
Rs. Rs.
To Balance b/d By Charities 29,000
Cash 500 By Salaries 5,200
Bank 5,000 By Printing and Stationery 800
Fixed Deposits 30,000 By Rent & Taxes 2,400
To Donations 16,000 By Advertisements 500
To Subscriptions 8,000 By Purchase of furniture 2,000
To Legacies 12,000 By Government Bonds 32,000
To Receipts for building fund 30,000 By Advance to Building 16,000
construction
To Interest on Investments 19,000 By Balance c/d
To Interest on deposits 300 Cash 1,050
To Sale of old furniture 150 Bank 2,000
Fixed Deposits 30,000
1,20,950 1,20,950
Additional Information:
1. Treat half of amount received on legacies and donations as income.
Accountancy – II 12

2. Outstanding expenses at the end of the year Rent Rs.400, Salaries Rs.600,
Advertisements Rs.100
3. Interest on Investments Rs.500 had accrued but not received.

2. Tirupathi Sports club ‘s Receipts and Payments

account for the year ending 31-3-2006 is given
here under.
Receipts Amount Payments Amount
Rs. Rs.
To Cash in hand 250 By Salary to workmen 2,000
To Cash at Bank 2,250 By Grass Cutting Machine 1,000
To Subscriptions 6,750 By Rent 450
To Tournament fund 2,500 By Games expenditure 3,500
To Life Membership fee 1,500 By Tournament expenditure 1,000
To Entrance fee 250 By Office expenditure & 2,250
Postage
To Donation for pavilion 4,000 By Games equipment 1,500
To Sale of grass 200 By Balance c/d
Cash in hand 750
Cash at Bank 5,250
17,700 17,700
Additional Information’s:
1. Subscriptions receivable for 2004 – 05 were Rs.1,000 and for 2005 –06
Ars.1,050.
2. Games equipment in the beginning was Rs.1,000 and at the end Rs.1,250
3. Provide depreciation at 10% on grass cutting machine
Prepare Income and Expenditure for the year ending 31-3-2006 and opening and closing
Balance sheets.

3. From the under mentioned Receipts and Payment account for the year ending 31-3-2006
of Gymkhana, prepare Income and Expenditure Account and Balance Sheet on that
date.
Receipts & Payable Account (for the year ended 31-3-2006)
Dr.
Cr.
Receipts Amount Payments Amount
Rs. Rs.
To Balance b/d By Purchase of furniture 5,000
(30th June 2005)
Bank 25,000 By Salaries 2,000
To Subscriptions By Telephone expenses 300
Accountancy – II 13

2004 – 05 1,500 By Electricity Charges 600

2005 – 06 10,000 By Postage & Stationery 150
2006 –07 500 By Purchase of Books 2,500
To Donations 2,000 By Entertainment expenses 900
To Rent 300 By Purchase of govt. bonds 8,000
5% (September 2005)
To Interest on Bank Deposits 450 By Miscellaneous expenses 600
To Entrance Fees 1,000 By Balance c/d
Cash 300
Bank 20,400
40,750 40,750
The following additional information is available:
1. Salaries outstanding Rs.1,500
2. Entertainment expenses outstanding Rs.500
3. Bank Interest receivable Rs.150
4. Subscriptions outstanding Rs.400
5. 50% of entrance fee is to be capitalised
6. Furniture is to be depreciated at 10% per annum

4. From the given Receipts and Payments account of a Sangareddy Sports Club as on 31-
3-2004 prepare the Income and Expenditure account.
Receipts & Payable Account (for the year ended 31-3-2003)
Dr.
Cr.
Receipts Amount Payments Amount
Rs. Rs.
To Balance b/d 5,000 By Purchase of furniture 1,500
To Subscriptions By Administrative expenses 400
2003 – 04 800 By Games & Sports expenses 300
2004 – 05 9,000 By Salaries 1,800
2005 – 06 600 By Travelling expenses 400
To Entrance fee 4,000 By gardening 500
To Donations 2,000 By Postage 100
To Tournament fund 1,500 By Cricket goods purchased 800
To Furniture sales (Value 100 By Investments 2,000
Rs.120)
To Entertainment receipts 500 By Tournament expenses 1,000
By Balance c/d 14,700
23,500 23,500
Adjustments:
1. Salaries per month Rs.200
2. Postage stamps opening balance Rs.50 closing balance Rs.75
3. Cricket goods opening balance Rs.200 closing balance Rs.150
4. Subscriptions due for the year Rs.1,000
5. Treat entrance fee as capital income
Accountancy – II 14

Chapter - 8
PARTNER SHIP ACCOUNTS – I

1. A and B are carrying on business in a partnership, sharing Profit & Loss in the ratio of 2:
3. Their Balance Sheet as at 31-3-2006 was as under.
Balance sheet
Dr. Cr.
Particulars Amount Particulars Amount
Rs. Rs.
Sundry Creditors 50,000 Cash in hand 30,000
Capital Accounts: Cash at Bank 20,000
A 2,80,000 Sundry Debtors 1,00,000
B 4,20,000 7,00,000 Stock 2,00,000
Furniture 50,000
Buildings 3,50,000
7,50,000 7,50,000
On that date they admit ‘C’ into partnership and give him 1/4th share in the future parofits
on the following terms.
(a) ‘C’ is to bring in Rs.3,00,000 as his Capital and Rs.1,00,000 as goodwill, which
sum is to remain in the business.
(b) Stock & Furniture are to be reduced in value by 10%
(c) Buildings are to be appreciated by Rs.50,000
(d) A provision of 5% to be created on Sundry Debtors for doubtful debts.
Write Journal entries to record the above arrangement & show the opening Balance
Sheet of the new firm.

2. Reddy and Naidu are partners in a business. On 31-3-2006, their Balance Sheet stood
as following:
Liabilities Amount Assets Amount
Rs. Rs.
Creditors 1,00,000 Cash 15,000
Bank Overdraft 95,000 Stock 1,00,000
Capital accounts: Debtors 2,50,000
Reddy ‘s Capital 2,50,000 Less: R.D.D. 50,000 2,00,000
Naidu ‘s Capital 2,50,000 Land & Buildings 4,00,000
Profit & Loss a/c 20,000
7,15,000 7,15,000
They have admitted Gupta into partnership for 1/3rd share on the following terms.
(a) Stock is revalued at Rs.80,000
(b) Land & Buildings are revalued at Rs.6,00,000
Accountancy – II 15

(c) Provision for bad debts is to be reduced by Rs.20,000

(d) Creditors are to be paid Rs.10,000 more
(e) Goodwill is created at on average of the last 3 years profits, which amounted to
Rs.40,000, Rs.80,000, Rs.60,000.
(f) Gupta should introduce 40% of the adjusted Capitals of both Reddy and Naidu.
Open various ledgers a/c ‘s & show opening balance sheet after the admission of Gupta.

3. The following is the balance sheet of Raghu & Tendulkar who had been sharing Profits &
Losses in the ratio of 3:1 on 31-3-2006.
Liabilities Amount Assets Amount
Rs. Rs.
Creditors 3,50,000 Cash at Bank 3,00,000
General Reserve 1,00,000 Debtors 2,00,000
Capital Accounts: Stock 1,50,000
Bindu 3,00,000 Land & Buildings 2,00,000
Sindhu 2,00,000 5,00,000 Furniture 1,00,000
9,50,000 9,50,000
They agreed to take Sonal into partnership on the following terms:
(a) Hindu pays Rs.2,00,000 as his Capital for 1/5th share in the future profits.
(b) Stock & Furniture be reduced by 10% & 5% provision for doubtful debts be
created on debtors.
(c) The value of Land & Buildings be appreciated by 20%
(d) Goodwill to be valued at Rs.80,000
(e) The Capital accounts of the partners, are to re-adjusted on the basis of their profit
sharing arrangement. Adjustment of Capitals to be made by cash.
Prepare Balance Sheet, Revaluation Account, Capital Accounts is new firm.

4. Mary and Rajani are partners sharing their profits in the ratio of 3:2 on 31-12-2005. The
Balance Sheet is as under.
Liabilities Amount Assets Amount
Rs. Rs.
Creditors 16,000 Cash in hand 2,000
Bank Overdraft 10,000 Cash in Bank 10,000
Bills payable 12,000 Debtors 20,000
Capital Accounts: Stock 18,000
Mary 48,000 Furniture 10,000
Rajani 24,000 72,000 Buildings 30,000
Machinery 20,000
1,10,000 1,10,000
Adjustments:
1-1-97 Bindu was admitted as partner in the following conditions:
(a) Firm ‘s Goodwill valued for Rs.10,000
Accountancy – II 16

(b) Depreciate stock, Furniture, Machinery @ 10%

(c) Appreciate Buildings @ 10%
(d) Provide Reserve for Bad debts at 5% on the debtors
(e) Bindu has to bring Rs.16,000 in cash for his share of Capital
Prepare necessary accounts & the new balance sheet of the firm after Rajesh ‘s entry.

5. Given below is the Balance Sheet of A and B who are carrying on a partnership business
as on 31-3-2005. A and B share Profits and Losses in the ratio of 2:1.
Liabilities Amount Assets Amount
Rs. Rs.
Bills payable 10,000 Cash in hand 10,000
Creditors 58,000 Cash at Bank 40,000
Outstanding Expenses 2,000 Sundry debtors 60,000
Capital Accounts: Stock 40,000
A 1,80,000 Plant & Machinery 1,00,000
B 1,50,000 3,30,000 Buildings 1,50,000
4,00,000 4,00,000
‘C’ is admitted as a partner on the date of the Balance Sheet on the following terms
(a) ‘C’ will bring in rs.1,00,000 as his Capital & Rs.60,000 as his Capital & Rs.60,000
as his share of Goodwill for ¼ share of profits.
(b) Plant & Machinery is to be appreciated to Rs.1,20,000 & the value of Building is
to be appreciated by 10%
(c) Stock is found over valued by Rs.4,000
(d) A provision for bad & doubtful debts is to be created at 5% on debtors.
(e) Creditors were unrecorded to the extent of Rs.1,000
Pass the Journal entries, prepare the profit & Loss adjustment account and show the
Balance sheet after the admission of ‘C’.

6. A and B sharing profits in the proportion of 3/5th & 2/5th showed the following as their:
Balance Sheet as on 31-3-2006
Liabilities Amount Assets Amount
Rs. Rs.
Creditors 40,000 Cash at Bank 5,000
Bills payable 12,000 Land and Buildings 25,000
Reserve Fund 10,000 Plant and Machinery 35,000
Capital Accounts: Furniture & Fixtures 1,500
A 45,000 Stock 20,500
B 25,000 70,000 Debtors 45,000
1,32,000 1,32,000
They admitted ‘C’ into partnership on 1-4-2006.
(a) C shall bring in cash Rs.5,000 as his share of Goodwill, the amount to be
ratained in the business & that the shall bring in Rs.15,000 as Capital for a fourth
Accountancy – II 17

share in the future profits. For the purpose of ‘C’ admission the firms assets were
agreed to be revalued as under.
Land and Building to be taken at Rs.30,000. Plant and Machinery to be reduced
by 10% and provision of 5% on debtors is to be made for doubtful debts. The
stock is to be taken at a value of Rs.25,000
Prepare the necessary ledger accounts in the books of the firm and opening Balance
sheet of a new firm.

7. P and Q are in Partnership and their Balance Sheet as on 31-3-2006 is given below:
Liabilities Amount Assets Amount
Rs. Rs.
Prepaid expenses 20,000 Cash in hand 8,000
Creditors 60,000 Cash at Bank 76,000
Bank overdraft 80,000 Debtors 80,000
Bills payable 40,000 Furniture 24,000
Reserve 36,000 Machinery 84,000
Capital Accounts: Buildings 1,14,000
P 90,000
Q 60,000 1,50,000
3,86,000 3,86,000
They decide to admit ‘R’ as a new partner on the following terms:
(a) Depreciation to be calculated at 5% on Machinery, Buildings and Furniture
(b) Provide reserve on debtors at 5%
(c) Creation of Goodwill account for Rs.60,000
(d) ‘R’ to bring Rs.90,000 as Capital for his 1/4th share.
Prepare Profit & Loss Adjustments and the new Balance Sheet. Give also the new ratio.

Chapter - 9
PARTNER SHIP ACCOUNTS – II
1. A, B, C have been partners in a firm on 31st March 2006 on which date A proposed to retire, the
following was a statement of the position of the firm.
Liabilities Amount Assets Amount
Rs. Rs.
Creditors 8,000 Bank Balance 5,000
Reserve Fund 10,000 Plant and Machinery 20,000
Capital accounts: Furniture 8,000
A 15,000 Debtors 25,000
B 15,000 Reserve for 2,000 23,000
Bad debts
C 15,000 45,000 Goodwill 6,000
Patents 1,000
Accountancy – II 18

63,000 63,000
For the purpose of A’s retirement, the following adjustments were agreed upon.
(a) The Reserve for bad debts was considered unnecessary.
(b) Patents were worthless.
(c) An outstanding Liability for Rs.400 for expenses was to be brought into the
books.
(d) Goodwill is to be taken at the Value shown in the Balance Sheet.
(e) A agreed to have the amount due to him as a loan to the firm carrying interest at
5% p. a. Show the necessary accounts and draft the Balance Sheet of the new
firm.

2. Usha, Asha, Mesha are partners sharing profit and losses in the ratio of 5:3:2. Their Balance Sheet as on
March 31, 2006 is given below:
Liabilities Amount Assets Amount
Rs. Rs.
Creditors 1,21,000 Cash 50,500
Bills payable 10,000 Sundry debtors 31,000
Reserve Fund 20,000 Less: Reserve for
Bad debts 500 30,500
Capital Accounts: Stock 20,000
Usha 80,000 Machinery 1,40,000
Asha 60,000 Buildings 80,000
Mesha 30,000 1,79,000
3,21,000 3,21,000
Mesha retires on the following adjustments.
(1) Appreciate Building by 10% and depreciate Machinery by 20%
(2) Bad debts reserve is to be increased up to Rs.1,200
(3) Goodwill is to be created for Rs.49,000
Prepare Profit and loss adjustment account and new balance sheet.

3. Ram, Rahim and David are partners in a firm sharing profits and losses in the ratio of
3:2:1. On 31st March 2006 their Balance Sheet was as follows:
Liabilities Amount Assets Amount
Rs. Rs.
Creditors 1,20,000 Cash in hand 14,000
Bills payable 80,000 Cash at Bank 1,00,000
Bank Overdraft 70,000 Debtors 1,80,000
Capital Accounts: Less: Reserve 4,000 1,76,000
Ram 4,00,000 Furniture 2,40,000
Rahim 3,00,000 Stock 3,00,000
David 2,00,000 9,00,000 Plant & Machinery 4,00,000
Profit & Loss Account 60,000
12,30,000 12,30,000
Ram retired on 1st April 2006 after making the following adjustment:
Accountancy – II 19

(a) Furniture reduced by 10%

(b) Stock value reduced by Rs.15,000
(c) Plant & Machinery value increased by 20%
(d) Reserve for bad debts increased to Rs.9,000
(e) Goodwill was fixed at Rs.1,80,000
Prepare Journal Entries, Ledger Accounts and new balance Sheet.