ISC SEMESTER 1 EXAMINATION

SAMPLE PAPER 2
ACCOUNTS

Maximum marks : 80
Time allowed : One and a half hours
(Candidates are allowed additional 15 minutes for only reading the paper)
All questions of Section A are Compulsory.
All questions from either Section B or Section C are Compulsory.
Each correct answer carries 2 marks.
Select the correct option for each of the following questions.

SECTION A
Answer all questions.
Question 1
Pick the odd one out from the following:
(a) No interest on drawings
(b) No commission is allowed to a partner
(c) Interest on loan advanced by a partner to the firm is 6% pa
(d) Profits are to be shared in the ratio of capital

Question 2
Which one of the following is as part of Current Assets:
(a) A company has operating cycle of 12 months and the expected period of realization of
Trade Receivable is 14 months.
(b) A company has operating cycle of 15 months and the expected period of realization of
Trade Receivable is 12 months.
(c) A company has operating cycle of 20 months and the expected period of realization of
Trade Receivable is 24 months.
(d) None of the above

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 Question 3
Which of the following is not part of Other Current Liabilities in the Balance Sheet of a
companyprepared as per Schedule III of the Companies Act, 2013?
(a) Interest accrued on Debentures
(b) Interest accrued on Non Current investments
(c) Unpaid dividends
(d) Calls in advance

Question 4
The Rate of Interest on Calls-in-arrears is :
(a) 12% pa
(b) 5% pa
(c) 10% pa
(d) 6% pa

Question 5
The profits of last three years of the firm are; 2019-₹ 2,00,000; 2020- ₹ 2,40,000;
2021- ₹ 1,60,000. The average capital employed of the firm is ₹ 15,00,000 and the
NRR is 10%. Calculate Super Profit for the purpose of valuation of goodwill:
(a) ₹ 1,50,000
(b) ₹ 50,000
(c) ₹ 1,00,000
(d) ₹ 66,667

Question 6
X Ltd. Forfeited 5,000 equity shares of ₹ 100 each issued at a premium of 10% payable along
with allotment due to non payment of first call ₹ 30 and final call ₹ 10. It is reissued after
three months.
What is the minimum price at which these forfeited shared can be reissued?
(a) ₹ 60 per share
(b) ₹ 50 per share
(c) ₹ 40 per share
(d) ₹ 30 per share

Dr. Unni Jose

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 Question 7
A and B are partners in a firm sharing profit and losses in the ratio 2:1. They admit C on 1st
April, 2021. A has sacrificed 1/4th of his share and B sacrificed 1/3rd of his share on behalf of
C.
The new profit sharing ratio of partners will be:
(a) 2:1:2
(b) 9:5:4
(c) 9:4:5
(d) None of the above

Question 8
A, B and C are partners sharing profits and losses in the ratio 5:4:1. C is guaranteed that his
share of profit will not be less than ₹ 50,000. Profits of the year ending 31st March 2021 was
₹ 3,50,000. It was agreed that the shortfall will be borne by A and B in the ratio 3:2.
A’s share in the profits of the firm will be:
(a) ₹ 1,66,000
(b) ₹ 1,75,000
(c) ₹ 1,60,000
(d) None of the above

Question 9
A and B are partners in a firm sharing profits and losses equally. The balances of their fixed
capital accounts on 1st April, 2020, were: A ₹ 2,00,000, B ₹ 1,00,000
After the accounts for the year ended 31st March, 2021, were prepared, it was discovered that
interest on capital @ 10% per annum had been credited to the partners’ current accounts instead
of 12% per annum.
The error in A’s capital account / current account will be rectified by:
(a) Debiting his capital account with ₹ 1,000
(b) Crediting his current account with ₹ 1,000
(c) Debiting his current account with ₹ 1,000
(d) Crediting his capital account with ₹ 1,000

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 Question 10
A and B are partners sharing profits and losses in the ratio of 3:2. They admit C as a
partner who contributes ` 30,000 as his capital for 1/5th share in the profits of the firm. It is
decided that after C’s admission, the capitals of the A and B will adjusted on the basis
of C’s share of capital in the business, any surplus or deficiency to be adjusted through
current accounts. Before any adjustments were made, the capitals of A and B were:
` 59,000 and ` 35,000 respectively.
At the time of C’s admission:
(a) The firm’s goodwill was ` 40,000.
(b) General Reserve was ` 25,000.
(c) Loss on revaluation of assets and liabilities was ` 4,000.

(i) The surplus capital of A, that needs to be credited to his current account will be:
(a) 4,400
(b) 1,400
(c) 48,000
(d) 72,000
(ii) Deficiency in B’s capital that needs to be debited to his current account will be:
(a) ₹ 4,400
(b) ₹ 1,400
(c) ₹ 72,000
(d) ₹ 30,000

Question 11
On 1st April, 2020, A,B and C has entered into a partnership with fixed capitals of ₹ 5,00,000,
₹ 5,00,000 and ₹ 3,00,000 respectively.
On 3oth June, 2020, C gave a loan of ₹ 1,20,000 to the firm where in Mr. B has taken a loan of
₹40,000 from the firm @ 4% interest p.a on 1st January 2021.
The partnership deed contained the following clauses:
(a) Interest on drawings to be charged @ 8% per annum.
(b) A to be entitled to a rent of ₹ 20,000 per annum for allowing the firm to carry on the businessin
his premises.
(c) D, the manager is entitled for a monthly salary of ₹3000 p.m.
A withdrew ₹ 10,000 at the end of the month for the first six months. B withdrew Rs. 40,000 on 1st
October.

Net Profit of the firm for the year ending 31st March 2021 (before any interest but after rent on A’s
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 premises and manager’s salary) was ₹ 4,80,000.

(i) The Net Profit of the firm will be:

(a) ₹ 4,74,600
(b) ₹ 4,75,000
(c) ₹ 4,18,600
(d) ₹ 5,30,600
(ii) The total interest on Drawings credited to profit and loss appropriation account will be:
(a) ₹ 2,600
(b) ₹ 6,000
(c) ₹ 5,000
(d) None of the avove

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 Question 12
A,B and C were three partners sharing profits and losses in the ratio of 4:4:2. As on 1st April,
2020, their capital account balances stood at `80,000, `70,000 and `20,000 (Dr) respectively.
On this date they admitted D into the partnership with a capital of `40,000.
He is to have 1/5th share of the profits with a guaranteed minimum share of distributable profit
of `30,000.
It was decided that A,B and C would suffer any excess over 1/5th going to D in the ratio of 2 :
2 : 1 respectively.
The new profit sharing ratio among partners being A,B,C and D is 3 : 2 : 3 : 2.
The profit of the firm for the year 2013-14 was `1,50,000 before the following adjustments
were made:
Interest on Capital @ 10% p.a. to be allowed to the partners.
Interest on Drawings: B : `2,000; C: `4,000
Salary to Partners: B :`7,000; D:`10,000

(i) The sacrificing ratio of A,B and C will be:

(a) 1: 2 : -1
(b) 2: 2: 1
(c) 2: -2: 1
(d) 2: -1: 2
(ii) The total interest on capital allowed by the firm to the partners will be:
(a) ₹ 22,000
(b) ₹ 19,000
(c) ₹ 21,000
(d) ₹ 23,000
(iii) Deficiency in D’s profits will be:
(a) ₹ 8,000
(b) ₹ 7,500
(c) ₹ 12,000
(d) ₹ 6,000

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Question 13
Mr. A and Mr. B Are partners sharing profits and losses in the ratio 3:2. They admitted Mr.
C into partnership on 1st April 2021 for 1/4th share of profit and the A and B decided to
shares the remaining profits equally.
For this purpose, goodwill was valued at 2 years purchase of weighted average profit of
last four years. Weight to be assigned 2018-1; 2019-2; 2020-3 and 2021-4.
The profits of last four years were;
2018 March: ₹ 80,000 (Including abnormal loss of ₹ 20,000)
2019 March: ₹ 1,10,000 (Including interest received on investments ₹ 10,000)
2020 March: ₹ 1,15,000 (There was an over valuation of closing stock during the year ₹
15,000)
2021 March: ₹ 85,000

(i) What is the weighted average profit of last 4 years?

(a) ₹10,00,000
(b) ₹ 2,50,000
(c) ₹1,00,000
(d) ₹50,000
(ii) The amount of goodwill to be contributed by Mr. C will be:
(a) ₹1,00,000
(b) ₹50,000
(c) ₹10,00,000
(d) ₹ 2,00,000
(iii) Super profit is the :
(a) excess of normal profit over average profit
(b) excess of average profit over normal profit
(c) excess of the normal profit over capital employed
(d) None of the above

Question 14
A and B are partners sharing profits and losses in the ratio of 3:2. They admit C a new partner for 1/3rd
share of profit from 1st April, 2013.

LIABILITIES AMOUNT ASSETS AMOUNT

A’s Capital 32,600 Land and Building 6,000
B’s Capital 40,400 Investments (Market value 4,500) 5,000
Workman Compensation fund 2,000 Debtors 30,000
Investment Fluctuation fund 1,000 Stock 10,000
Employees’ Provident Fund 1,000 Bank 27,000
Provision for doubtful debts 1,000

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 TOTAL 78,000 TOTAL 78,000

Terms of C’s admission are as follows:

a) C brings in Rs.30,000 as his capital. His share of Goodwill was determined to be Rs.18,000. He could
bring in only 60% of his share.
b) Land & Building was found to be undervalued by ₹10,000, stock was found overvalued by
₹7,000 and provision for doubtful debts is to be made equal to 5% of the debtors.
c) Capital accounts of the old partners to be re-adjusted in the new profit sharing arrangement on the
basis of C’s capital, any excess or deficiency to be adjusted in cash.

(i) Investment Fluctuation Fund will be:

(a) Credited to A and B ₹ 500 each
(b) Credited to A and B ₹ 250 each
(c) Credited to A and B ₹ 300 and ₹ 200 respectively
(d) None of the above
(ii) The final result of revaluation account will be:
(a) Profit of ₹ 2,500
(b) Loss of ₹ 2,500
(c) Profit of ₹ 1,500
(d) Loss of ₹ 1,500
(iii) The provision for doubtful debts in the reconstituted firm will be:
(a) ₹ 1,000
(b) ₹ 500
(c) ₹ 1,500
(d) None of the above
(iv) The value of Goodwill in the reconstituted firm will be:
(a) ₹ 18,000
(b) ₹ 10,800
(c) ₹ 7,200
(d) None of the above

(v) The new profit sharing ratio between A,B and C will be:
(a) 3:2:1
(b) 6:4:5

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 (c) 1:1:1
(d) 3:2:2
Question 15
X Ltd forfeited 2,000 shares of ₹100 each, on which allotment money ₹ 40 (including a premium of
₹10) and first call money ₹ 20 has not been received. Final call ₹ 10 has not been made yet. Out of
which 1,500 shares has been reissued at ₹80 per share as ₹90 paid up.
Calculate the amount to be transferred to capital reserve.
(a) ₹ 45,000
(b) ₹ 65,000
(c) ₹ 50,000
(d) None of the above

Question 16
X Ltd has an authorized capital of 2,00,000 Equity shares of ₹ 100 each. They have issued 80,000
shares to the public at a premium of 20% to be collected along with allotment on 30th June 2020.
Application ₹ 30
Allotment ₹ 40
First call ₹ 20
Final call – Balance.
All the amount duly received except Allotment and call money on 5000 applicants. These shares were
forfeited after the calls. Out of which, 3000 shares were reissued at ₹ 110 per share as fully paid up.
The balance sheet of the company is prepared on 31st March every year as per the Schedule III of
Companies Act, 2013.

(i) The Securities Premium Reserve of the company to be shown in Notes to Accounts as at
31st March, 2021, under ‘Reserve and Surplus’ will be:
(a) ₹ 16,00,000
(b) ₹ 15,00,000
(c) ₹ 15,30,000
(d) ₹ 16,30,000

(ii) The Paid up capital shares of the company at the end of the year 2020-21 will be:
(a) ₹ 75,00,000
(b) ₹ 80,00,000
(c) ₹ 78,00,000
(d) ₹ 78,60,000

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(iii) Calculate the amount to be transferred to capital reserve.
(a) ₹ 90,000
(b) ₹ 1,50,000
(c) ₹ 1,20,000
(d) ₹ 60,000

(iv) Securities Premium Reserve of the company to be shown in the Balance Sheet abstract will
be:
(a) ₹ 15,30,000
(b) ₹ 16,00,000
(c) ₹ 16,30,000
(d) ₹ 15,00,000

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Question 17
X Ltd has forfeited equity shares having face value of ₹100 each of Mr. A for the non payment of
Allotment and calls (including a premium of 20%), however he had paid application money ₹ 30. He
had applied for 1,200 shares and allotted 1,000 shares on a pro rata basis.
Some of the forfeited share has been reissued at a premium of 20%.
Journal of X Ltd.
Date Particulars LF Debit (₹) Credit (₹)
Share capital A/c Dr 1,00,000
Securities Premium Reserve A/c Dr 20,000
To Share Forfeiture A/c …(a)……
To Calls in arrear A/c …(b)……
(Being 1,000 shares forfeited due to non payment of
allotment and calls )
Bank Dr …..…..
To Share capital ………..
To ………………………… ………..
(Being reissue of …(c)…. Equity shares at a premium of
20%)
Share forfeiture a/c Dr …(d )….
To Capital Reserve a/c ………
(Being net gain on reissued shares transferred
to Capital Reserve)
(i) At the time of forfeiture of shares, Share Forfeiture a/c was credited with:
(a) ₹ 30000
(b) ₹ 36000
(c) ₹ 50000
(d) ₹ 60000
(ii) At the time of forfeiture of shares, the Calls in arrear A/c was credited with:
(a) ₹ 1,20,000
(b) ₹ 90,000
(c) ₹ 84,000
(d) ₹ 80,000
(iii) Total number of shares being reissued is:
(a) 700 shares
(b) 500 shares

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 (c) 1000 shares
(d) 800 shares
(iv) The amount transferred to capital reserve was:
(a) ₹ 28,800
(b) ₹ 30000
(c) ₹ 36,000
(d) None of the above
(v) The balance of Share forfeiture amount, that will appear in the company balance sheet
under share capital:
(a) ₹ 7200
(b) ₹ 28,800
(c) ₹ 36,000
(d) Nil
SECTION B
Answer all questions
Question 18
Opening inventory Rs. 58,000; purchases Rs. 4,84,000; Gross profit ratio 25%.
Revenue from operation – Rs. 6,40,000
The inventory turnover ratio of the company will be:
(a) 10.67 Times
(b) 13.33 Times
(c) 8 Times
(d) None of the above
Question 19
The current ratio of a company is 2:1. State which of the following doesn’t lead to a change in the
ratio:
(a) Bills receivable dishonored
(b) Issue of debentures to the vendor for purchase of machinery
(c) Sale of inventory for cash
(d) Deposited cash into bank
Question 20
Profit after interest and tax ₹6,00,000
10% Debentures of Rs. 100 each ₹20,00,000
Tax Rate: 40%
Share capital; Equity shares of ₹100 each ₹12,00,000
General reserve ₹4,00,000
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 (i) The interest coverage ratio of the company will be:
(a) 6 Times
(b) 5 Times
(c) 5.5 Times
(d) 8 Times
(ii) EPS of the company will be:
(a) ₹50
(b) ₹30
(c) ₹100
(d) None of the above
Question 21
Net revenue from operations Rs. 5,00,000; cost of revenue from operations Rs. 3,00,000 and
operating expenses Rs. 1,00,000.
Operating ratio of the company will be:
(a) 20%
(b) 75%
(c) 80%
(d) None of the above
Question 22
Pick the odd one out from the following:
(a) Interest coverage ratio
(b) Debt to equity ratio
(c) Proprietary ratio
(d) Working capital turnover ratio

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 Answer Key
1. D 14. i) C
2. B ii) A
3. B iii) C
4. C iv) D
5. B v) B
6. C 15. A
7. C 16. i) C
8. A ii) D
9. B iii) A
10. i) A iv) A
ii) B 17. i) B
11. i) B ii) C
ii) C iii) D
12. i) A iv) A
ii) B v) A
iii) D 18. C
13. i) C 19. B
ii) B 20. i) A
iii) B ii) A
21. C
22. D

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Dr. Unni Jose
unni.jose@aol.com
Dr. Unni Jose
unni.jose@aol.com