Cbse Class XII Accountancy Sample Paper - 1: I. Ii. III

CBSE XII | Accountancy
Sample Paper – 1
CBSE
Class XII Accountancy
Sample Paper – 1
Time: 3 hrs Max. Marks: 80
General Instructions:
i. This question paper contains two parts A and B.
ii. Part A consists of 60 marks and Part B consists of 20 marks.
iii. All parts of a question should be attempted at one place.
Part A
1. Choose the correct answer from the options given below: [1]
P and Q are partners in the ratio of 1:1. They admit C for 1/5 share and C brings only
th
half of his share of goodwill i.e., `10,000 in cash. What would be the total amount of
goodwill of the firm?
a) `20,000
b) `25,000
c) `50,000
d) `1,00,000
A firm had an average profit of `30,000 and rate of return on capital investment is
12.5% p.a. The firm had assets worth of `5,00,000 and liabilities of `2,00,000. What
would be the amount of goodwill valued on the basis of two years’ purchase of super
profit?
a) `15,000
b) `30,000
c) `40,000
d) Nil
3. What steps can a company take other than rejecting applications in case of over
subscription? [1]
4. Explain what is collateral security? [1]
5. X, Y and Z are partners sharing profits in the ratio of 1/2, 2/5 and 1/10. Find the new
ratio of the remaining partners if Z retires. [1]
What will be the amount of goodwill valued at two years’ purchase of three years’
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Sample Paper – 1
average profit. The profit for the first year was `25,000, for second year twice the profit
of first year and for third year one and a half times the profit of second year.
a) `1,00,000
b) `2,00,000
c) `3,00,000
d) Cannot be determined
According to Sections 40 to 44 of the Indian Partnership Act, 1932, there are many
modes to dissolve a firm. Which mode of dissolution of the firm is correct?
a) Dissolution by Agreement
b) Dissolution by Notice
c) Dissolution by Court
d) All of the above
8. Adjustments for outstanding expenses, prepaid expenses or depreciation are not made
in receipts and payments accounts. Why? [1]
Which portion of the capital can be called-up only on winding up of the company?
a) Authorised Capital
b) Issued Capital
c) Subscribed Capital
d) Reserve Capital
A plant costing `4,50,000 is purchased and payment was made by issue of shares of
`100 each at a premium of 20%. The Securities Premium Reserve A/c will be
a) Debited by `75,000
b) Credited by `75,000
c) Debited by `90,000
d) Credited by `90,000
Debenture holders are
a) Owners of the Company
b) Debaters of the Company
c) Promoters of the Company
d) Lenders of the Company
A company issued 1,000, 10% debentures of `100 each at a premium of 5%. What will
be the total amount of interest for one year?
Sample Paper – 1
a) `10,500
b) `10,000
c) `5,250
d) `5,000
A and B are partners having capitals `2,00,000 and `3,00,000 respectively, sharing
profit and losses in the ratio of 3:2. They admitted C as a new partner for 1/4th share
and he brought `2,00,000 as his share of capital. What would be the amount of goodwill
brought in by C?
a) `25,000
b) `75,000
c) `1,00,000
d) `3,00,000
A firm had an average profit of `30,000 and rate of return on capital investment is
12.5% p.a. The firm had assets worth of `5,00,000 and liabilities of `2,00,000. What
would be the amount of goodwill valued on the basis of two years’ purchase of super
profit?
a) `15,000
b) `30,000
c) `40,000
d) Nil
15. In the year ended 31st March, 2018, subscriptions received were `2,10,000. These
subscriptions include `3,000 for the year ended 31st March, 2017 and `4,000 for the
year ending 31st March, 2019. On 31st March, 2018, subscriptions due but not received
were `5,000. The corresponding amount on 1st April, 2017 was `6,000. Determine the
amount that should be credited to Income and Expenditure Account as subscriptions
for the year ended 31st March, 2018. [3]
(OR)
Active Sports Club is a Not-for-Profit Organisation which undertakes various sports
activities for those who are interested in pursuing a sports carrier. The sports fund
available with the club on 1st April, 2017 is `2,00,000 which is invested in bank deposit
earning 10% returns. Expenses are incurred towards sports awards `10,000. Donation
received is `30,000. Determine the amount of funds to be shown in the balance sheet
along with its presentation in the books of Active Sports Club.
16. What are the adjustments required on the admission of a partner? [3]
17. Vinod, Ashish and Gaurav were partners sharing profits in the ratio of 4/7:2/7:1/7,
respectively. Following was their Balance Sheet as on 31st March 2016: [4]
Sample Paper – 1
Liabilities ` Assets `
Workmen Compensation 14,000 Preliminary Expenses
Reserve 14,000
Capital: Cash 14,000
Vinod 60,000 Stock 30,000
Ashish 40,000 Debtors 22,000
Gaurav 30,000 Building 40,000
Creditors 30,000 Plant 53,000
Bills Payable 4,000 Motor van 26,000
General Reserve 21,000
1,99,000 1,99,000
On the above date, Vinod retired and he donated half of his amount to an NGO working
for the education of girls belonging to the backward class. It was agreed that:
i. Assets and liabilities were valued as Stock `18,000, Debtors `21,000, Building
`51,200, Plant `50,000 and Creditors `28,000.
Amount due to Vinod will be transferred to Vinod’s loan account.
ii. Prepare Revaluation Account and Vinod’s Capital Account and identify any two
values disclosed by Vinod.
18. M, N and O are partners in a partnership firm where N is the partner who is entitled to
guaranteed profits. N is guaranteed profit in the business by all remaining partners. In
case where the actual profit as per the profit share is less than the guaranteed amount
of profit, how should N be paid to assure him the guaranteed profit? [4]
(OR)
Vinod, Deepak and Mukesh were partners in a firm sharing profits in the ratio of 4:4:2.
The firm closes its books on 31st March every year. Deepak died on 24 August 2009. On
Deepak’s Death the goodwill of the firm was valued at `1,50,000. The partnership deed
provided that on the death of a partner his share in the profits of the firm in the year of
his death will be calculated on the basis of last year’s profit. The profit of the firm for the
year ended 31st March 2009 was `4,00,000. Give necessary journal entries and
calculation of Deepak’s Share of profit.
19. Vinod and Dhruv were equal partners. They decided to admit a new partner Mr. Gaurav
in to firm and for this purpose goodwill of the firm is to be valued at two years purchase
of super profits. On the admission of Mr. Gaurav Average Profits of the firm were
calculated at `21,500 and Capital Employed at `2,00,000. The normal rate of return in
similar business is 10%.
Find out the value of goodwill. [4]
20. Vinod Ltd. has an authorised capital of `50, 00,000 divided into equity shares of `100
each. The company offered `42,000 shares to the public. The amount payable was as
follows: [6]
On Application – `30 per share
Sample Paper – 1
On Allotment – `40 per share (including premium)

On First and Final Call – `50 per share
Applications were received for 40,000 shares.
All sums were duly received except the following:
Lal, a holder of 100 shares, did not pay allotment and call money.
Pal, a holder of 200 shares, did not pay call money.
The company forfeited the shares of Lal and Pal. Subsequently, the forfeited shares
were reissued for `70 per share as fully paid-up. Show the entries for the above
transactions in the cash book and journal of the company.
(OR)
What do you mean by change in profit sharing ratio of partners and what are the issues
that need to be dealt with at the time of such change?
21. Explain the difference between Receipts and Payments Account and Cash Book. [6]
22. Vinod and Manthan are partners in a firm sharing profits in the ratio of 3:2. Their
Balance Sheet on 1st April, 2015 was as follows: [8]
Capital A/c: Plant 60,000
Vinod 60,000 Patents 20,000
Manthan 50,000 1,10,000 Stock 40,000
General Reserve 20,000 Debtors 36,000
Creditors 30,000 Cash 4,000
1,60,000 1,60,000
Devansh is admitted as a partner on the above date on the following terms:

i. He will pay `20,000 as premium for 1/4th share in the future profits.
ii. The assets are to be valued as: Plant `64,000; Stock `36,000; Debtors at book figure
less a provision of 5% for doubtful debts.
iii. It was found that creditors include a sum of `2,800 which was not to be paid. But it
was also found that there was a liability for compensation to workers amounting to
`4,000.
iv. Devansh was to introduce `40,000 as capital and the capitals of the other partners
were to be adjusted in the new profit sharing ratio. For this purpose current
accounts were to be opened.
Prepare Revaluation A/c, Partners Capital A/c and Balance Sheet and identify the value
being conveyed in the question.
(OR)
Record the journal entries for forfeiture and reissue in the following cases:
a. X Ltd. forfeited 200 shares of `100 each, `70 called up, on which the shareholders
had paid application and allotment money of `50 per share. Of these, 150 shares
were re-issued to Naresh as `70 paid up for `80 per share.
Sample Paper – 1
b. Y Ltd. forfeited 180 shares of `10 each, `8 called up, issued at a premium of `2 per
share to R for non-payment of allotment money of `5 per share (including
premium). Of these, 160 shares were re-issued to Sanjay as `8 called up for `10 per
share fully paid up.
c. Z Ltd. forfeited 30 shares of `100 each issued at a discount of `10 per share for
non-payment of first and final call money of `30 per share. Of these, 20 shares were
re-issued at `30 per share fully paid up.
23. Kush Ltd issued `30,00,000, 12% debentures of `100 each at a discount of 10% on 1
April 2008 redeemable at par through draw of lots as under: [8]
`10,00,000 Debentures on 31/03/2009
`10,00,000 Debentures on 31/03/2010
`10,00,000 Debentures on 31/03/2011
Compute the amount of discount to be written off in each was till debentures are paid.
Also prepare Discount on issue of Debentures Account.
(OR)
Pooja, Minal and Reena are partners sharing profits and losses in the ratio of 5:3:2.
Reena died on the 1st January, 2018. Profit sharing after death between Pooja and Minal
is agreed as 2:1. The partnership deed of the firm provides that in case of death of any
partner of the firm, share of goodwill of the deceased partner shall be calculated as half
of the profits credited to her account during the last 4 years. For this purpose profits of
last 4 years are mentioned as follows: 2013-2014 =70,000; 2014 - 2015 = 85,000; 2015-
2016 = 60,000; 2016 - 2017 = 90,000.
It is also given that on the date of Reena’s death, Machinery is to be appreciated by `
50,000 and Furniture was erroneously undervalued by `15,000 which is to be rectified
now.
From the above details, find the amount that should be credited to Reena’s Account as
her goodwill. Also give journal entries for the same when Goodwill Account is not
opened.
Part B
24. What is meant by outflow of cash while preparing the Cash Flow Statement? [1]
25. While preparing the Cash Flow Statement, the accountant of Vinod Ltd., a financing
company showed ‘Dividend received on Investments’ as ‘Investing Activity’. Was he
correct in doing so? Give reason. [1]
A sent 10,000 units of calculators to B at cost plus 30%. 2/3rd of the radios received
were sold by B for ` 6,50,000 at 25% above Invoice price. What is the total cost of goods
sent to B?
a) 4,00,000
Sample Paper – 1
b) 4,50,000
c) 6,00,000
d) 8,50,000
A Common-size Statement is also known as
a) Full-size Statement
b) Absolute Statement
c) 100% Statement
d) Competitive Statement
With a set of given items in the Balance Sheet of a firm, Quick ratio and Current ratio are
a) Different
b) Equal
c) Proportionate
d) None of these
Under which major headings, Goodwill will be presented in the Balance Sheet of a
company according to Schedule III of the Companies Act, 2013?
a) Shareholders’ Funds
b) Current Assets
c) Non-Current Assets
d) Current Liabilities
30. From the following information, calculate return on capital employed or investment
(ROI): [4]
Share Capital …………………………………………..`2, 00,000
Reserves & Surplus …………………………………`2, 00,000
10% Debentures ……………………………………. `8, 00,000
Net Profit after interest & Tax …………………. `2, 40,000
Tax …………………………………………………………. `2, 40,000
(OR)
From the information given below, calculate the Net Profit Ratio for the company:
Net Sales = 4, 00,000
Gross Profit Ratio = 20%
Operating Ratio = 90%
Non-Operating Expenses = 2,000
Non-Operating income = 50,000
Sample Paper – 1
31. With the help of the following information from the books of Vinod Limited, prepare
Comparative Statement of Profit and loss for the year ended 31st March 2016: [4]
Particulars 2015–16 2014–15

Revenue from operations 36,00,000 20,00,000
a. Cost of Material 1/3 of the Revenue 50% of the Revenue
Consumed from Operations from Operations
b. Other expenses 20% of the cost of 10% of the cost of
material consumed material consumed
Tax Rate of 50%

(OR)
Discuss whether the following statement is correct. Justify the same.
“Common size statement is known as 100% statement.”
32. Prepare the Cash Flow Statement from the following Balance Sheet of Vinod Limited: [6]
Note 31.3.2016 31.3.2015

Particulars
No. ` `
I EQUITY & LIABILITIES
1. Shareholders’ Funds
a. Share Capital 10,00,000 8,54,000
b. Reserves & Surplus 3,50,000 2,00,000
2. Non-Current Liabilities
a. Long-term Borrowings (Bank Loan) 1,00,000 2,00,000
3. Current Liabilities
a. Trade Payables 60,000 56,000
b. Short-term Provisions 1 1,90,000 1,50,000
Total 17,00,000 14,60,000
II Assets:
1. Non-Current Assets
a. Fixed Assets
i. Tangible Assets (Machinery) 8,00,000 8,00,000
ii. Intangible Assets (Goodwill) 1,60,000 2,00,000
b. Non-current Investment 1,40,000 --------
2. Current Assets
a. Inventories 1,50,000 1,00,000
b. Trade Receivables 3,50,000 3,00,000
c. Cash & Cash Equivalents 1,00,000 60,000
Total 17,00,000 14,60,000
Sample Paper – 1
Note
Particulars 2016 2015
No
1 Short Term Provisions:
Proposed Dividend 1,00,000 80,000
Provision for Tax 90,000 70,000
Additional Information:
During the year machinery costing `2, 50,000 was purchased. Loss on sale of machinery
amounted to `20,000. Depreciation `30,000 was charged on machinery.
Prepare the Cash Flow Statement.
Sample Paper – 1
CBSE
Sample Paper – 1
Part A
Answer 1
Option D: `1,00,000
Answer 2
Option D: Nil
Answer 3
A company has the following two options:
i. To make pro-rata allotment to all the applicants
ii. To allot full shares to some and make pro-rata allotment to the remaining applicants
Answer 4
Loans taken are secured by mortgage of the assets which are known as prime or principal
security. Security given in addition to the prime or principal security is termed or known as
Collateral Security. Such security is realised by the lender only if the due amount cannot be
recovered by realising the principal security.
Answer 5
Old share of X, Y and Z = 1/2, 2/5 and 1/10, i.e. 5:4:1
New share of X and Y after the retirement of Z = 5:4
Answer 6
Option A: `1, 00,000
Answer 7
Option D: All of the above
Answer 8
Because receipts and payment Account records all cash receipts and cash payments. It is a
consolidated cash book. It starts with opening balance of cash & bank and ends with closing
balance of cash & bank. It does not take into consideration outstanding amounts of receipts
and payments.
Sample Paper – 1
Answer 9
Option D. Reserve Capital
Answer 10
Option B: Credited by `75,000
Answer 11
Option D: Lenders of the Company
Answer 12
Option B: `10,000
Answer 13
Option A: `25,000
Answer 14
Option D: Nil
Answer 15
Statement showing Subscriptions to be Credited to the Income and Expenditure Account:
Particulars `
Subscriptions received on 31st march, 2018 2,10,000
Less: Relating to the year ended 31st March, 2017 (3,000)
Less: Received in advance for the year ended 31st March, 2019 (4,000)
Add: Subscriptions due for the year ended 31st March, 2018
(WN) 2,000
Subscriptions for the year ended 31st March, 2018 2,05,000
Working Note:
Subscriptions due but not received as at 31st March, 2018 `5,000. It, therefore, includes
subscriptions due but not received for the year ended 31st March, 2017 amounted to
`3,000 [i.e., 6,000 (Due) - 3,000 (received during the year ended 31st March, 2018)].
The subscriptions due for the year ended 31st March, 2018 amounted to only `2,000
(i.e., 5,000 - 3,000).
(OR)
In the books of Active Sports Club, the funds will be shown as follows:
Sports Fund
Opening Balance 2,00,000
Add: Donation 30,000
Interest earned on deposit 20,000
2,50,000
Less: Expenses for the year 10,000
Shown on the liabilities side of the Balance Sheet 2,40,000
Sample Paper – 1
Answer 16
Following are the adjustments required on the admission of a partner:
i. Determining the new profit sharing ratio and gaining/ sacrificing ratio.
ii. Goodwill valuation and its adjustment.
iii. Revaluation of Assets and reassessment of liabilities and adjustment of the net gain or
loss on such revaluation.
iv. Adjustment of reserves, accumulated profits and losses.
v. Adjustment of capital on the basis of new profit sharing ratio.
Answer 17
Revaluation Account
Dr. Cr.
Particulars ` Particulars `
To Stock A/c 12,000 By Building A/c 11,200
To Debtors A/c 1,000 By Creditors A/c 2,000
To Plant A/c 3,000 By Partner’s Capital A/c:
Vinod 1,600
Ashish 800
Gaurav 400 2,800
16,000 16,000
Vinod’s Capital Account

Dr. Cr.
To Preliminary Expenses A/c 8,000 By Bal. b/d 60,000
To Revaluation A/c 1,600 By General Reserve 12,000
To Vinod’s Loan A/c 70,400 By Workmen Comp. Res. 8,000
80,000 80,000
Values: (i) Welfare of society; (ii) Help in education
Answer 18
When actual share of profit is less than the guaranteed profit, the shortfall is known as
deficit. In case where the profits are guaranteed to one partner by all the remaining
partners, any deficit in the amount of guaranteed profit is to be borne by the remaining
partners. Such deficit amount shall be borne by the partners in the agreed ratio and where
the agreed ratio is not given, in their profit sharing ratio.
Accordingly, in the given case, deficit shall be paid to N by the remaining partners where
the deficit shall be borne by M and O in the agreed ratio and when no ratio is agreed, in the
profit sharing ratio.
(OR)
Deepak’s share of profit = 4,00,000 × 146/365 × 4/10 = 64,000
Sample Paper – 1
Journal
Dr. Cr.
Date Particulars L.F. `
`
Vinod’s Capital A/c Dr. 40,000

Mukesh’s Capital A/c Dr. 20,000
To Deepak’s Capital A/c 60,000
(Being adjustment of goodwill made at
the time of death of Deepak)
Profit and Loss Suspense A/c Dr. 64,000

To Deepak’s Capital A/c 64,000
(Being Deepak’s share of profit credited)
Answer 19
Average Profit of the firm = 21,500
Capital Employed = 2, 00,000
Normal Profit = Capital Employed × Normal rate of return/100
20,000 = 2,00,000 × 10/100
Super Profit = Average Profits – Normal Profit
1,500 = 21,500 – 20,000
Goodwill = Super Profit × No. of Years Purchase
3,000 = 1,500 × 2
Answer 20
Journal Entries
Debit Credit
Date Particulars L.F.
` `
Equity Share Application A/c Dr. 12,00,000
To Equity Share Capital A/c 12,00,000
(Being application money received on 40,000 shares)
Equity Share Allotment A/c Dr. 16,00,000

To Securities Premium A/c 8,00,000
(Being equity share allotment made)
Equity Share First Call A/c Dr. 20,00,000

Sample Paper – 1
(Being first call money due on 40,000 shares)
Equity Share Capital A/c Dr. 30,000

Securities Premium A/c Dr. 2,000
To Share Forfeiture A/c 13,000
To Equity Share Allotment A/c 4,000
To Equity Share First Call A/c 15,000
(Being 300 shares forfeited)
Share Forfeiture A/c Dr. 9,000

To Share Capital A/c 9,000
(Being forfeited shares reissued)

To Capital Reserve A/c 4,000
(Being forfeiture of reissued shares transferred)
Cash Book (Bank Column)

To Equity Share Application A/c 12,00,000 By Balance c/d 48,02,000
To Equity Share Allotment A/c 15,96,000
To Equity Share First Call A/c 19,85,000
To Equity Share Capital A/c 21,000
48,02,000 48,02,000
(OR)
 Meaning of change in profit sharing ratio: A change in the profit sharing ratio among the
partners means profit share of one or more partners decreases while that of other
partner increases.
 Issues that need to be considered at the time of change in profit sharing ratio:
i. Determining Sacrificing and Gaining ratio,
ii. Determining accounting treatment for Goodwill,
iii. Determining accounting treatment for Reserves and Accumulated Profit or losses,
iv. Revaluation of Assets and Reassessment of Liabilities, and
v. Adjusting the capital accounts of the partners for the same.
Answer 21
Following are the points of differences between Receipts and Payments Account and Cash
Book.
Sample Paper – 1
Basis Receipts and Payments Account Cash Book

1. Meaning It is a summary of Cash Book and is It records each transaction of
prepared from the Cash Book. receipt and payment separately.
2. Period It is prepared at the end of the It is written on daily basis.
accounting period.
3. Date It does not require the transactions It requires the date-wise
to be written date-wise. recording of the transactions.
4. Institutions It is prepared by the Not-for-Profit It is prepared by all types of

Organisation. organisation be it a commercial
or Not-for-Profit organisation.
5. Side It has receipts and payments side It is divided into debit and credit
instead of debit and credit. sides.
6. Ledger Folio It does not have column for ledger It has a separate column for
folio. Ledger Folio.
Answer 22
Revaluation Account
Dr. Cr.
To Stock A/c 4,000 By Plant A/c 4,000
To Prov. For Doubtful Debts 1,800 By Creditors A/c 2,800
To Compensation A/c 4,000 By Loss transferred
Vinod 1,800
Manthan 1,200 3,000
9,800 9,800
Partners’ Capital Account

Particulars Vinod Manthan Devansh Particulars Vinod Manthan Devansh
To Reval. A/c 1,800 1,200 By Balance b/d 60,000 50,000
To Current A/c 10,200 16,800 By Cash A/c - - 40,000
By Premium A/c 12,000 8,000
To Bal. c/d 72,000 48,000 40,000 By Gen. Res. A/c 12,000 8,000
84,000 66,000 40,000 84,000 66,000 40,000
Balance Sheet
Capital Accounts Plant 64,000
Vinod 72,000 Patents 20,000
Manthan 48,000 Stock 36,000
Devansh 40,000 1,60,000 Debtors 36,000
Compensation 4,000 Less: Provisions 34,200
Sample Paper – 1
Claim 1,800
Current Accounts
Vinod 10,200
Manthan 16,800 27,000
2,18,200 2,18,200
(OR)
(a)
Journal Entries
Debit Credit
` `
Share Capital A/c Dr. 14,000
---To Share Forfeiture A/c 10,000
---To Share Call A/c 4,000
Bank A/c Dr. 12,000
---To Share Capital A/c 10,500
---To Securities Premium Reserve A/c 1,500
(Being 150 shares re-issued)

---To Capital Reserve A/c 7,500
(Being amount transferred to capital reserve)
(b)
Journal Entries
Debit Credit
` `
Securities Premium A/ 360
--- To Share Allotment A/c 900
To Share Forfeiture A/c 900
Bank A/c Dr. 1,600

-To Share Capital A/c 1,280
- To Securities Premium A/c 320
Share Forfeiture A/c Dr. 800
- To Capital Reserve A/c 800
Sample Paper – 1
(c)
Journal Entries
Debit Credit
` `
To Share First & Final Call A/c 900
---To Discount on issue of shares A/c 300
---To Share Forfeiture A/c 1,800
Bank A/c Dr. 600

Discount on issue of shares A/c Dr. 1,200
---To Share Capital A/c 2,000
Share Forfeiture A/c Dr. Nil

---To Capital Reserve A/c Nil
Answer 23
i. Computation to show amount of discount on debentures:
Amount of discount = Rs.30, 00,000 x 10/100 = Rs.3, 00,000
Statement showing discount to be written off every year

Year Amount Utilised Ratio Discount to be written off
2008-09 30,00,000 3 3,00,000 × 3/6 = 1,50,000
2009-10 20,00,000 2 3,00,000 × 2/6 = 1,00,000
2010-11 10,00,000 1 3,00,000 × 1/6 = 50,000
ii. Discount on issue of Debentures Account:
Dr. Discount on issue of Debentures Account Cr.

Date Particulars Amount Date Particulars Amount
2008-09 To Debenture A/c 3,00,000 By P & L A/c 1,50,000
By Balance c/d 1,50,000
3,00,000 3,00,000
2009-10 To Balance b/d 1,50,000 By P & L A/c 1,00,000
By Balance c/d 50,000
1,50,000 1,50,000
Sample Paper – 1
2010-11 To Balance b/d 50,000 By P & L A/c 50,000

50,000 50,000
(OR)
Calculation of Goodwill that should be credited to Reena’s Account.

Total of 4 years profits given in the question = 70,000 + 85000 + 60,000 + 90,000
= 3,05,000
Reena’s share of profits already credited to his account = 3,05,000 * 2/10 = 61,000
Therefore, goodwill to be credited to Reena’s Account on her death = half of 61,000
= 30,500
i. Journal Entries to be passed when Goodwill Account is not opened:

Journal
Debit Credit
` `
Machinery A/c Dr. 50,000
2018
Furniture A/c Dr. 15,000
Jan 1 To Revaluation A/c 65,000
(Being the increase in the value of assets brought into
account)
Revaluation A/c Dr. 65,000

To Pooja’s Capital A/c 32,500
To Minal’s Capital A/c 19,500
To Reena’s Capital A/c 13,000
(Being the transfer of gain on revaluation to Partners’
Capital Accounts in their old profit sharing ratio)
Pooja’s Capital A/c Dr. 25,417

Minal’s Capital A/c Dr. 5,083
To Reena’s Capital A/c 30,500
(Being the goodwill adjusted by debiting gaining
partners in gaining ratio 5:1 and crediting sacrificing
partner)
Working Notes:
1. Calculation of Gaining Ratio:
Gain Ratio = New Share – Old Share
Sample Paper – 1
Particulars Pooja Minal

New Share 2/3 1/3
Old Share 5/10 3/10
Gaining Ratio 5/30 1/30
Therefore, gaining ratio between M and N is 5:1
Part B
Answer 24
Outflow of cash means decrease in cash and cash equivalents.
Answer 25
No, accounts was not correct because the dividend received on investment should be
considered as operating activities, but it is wrongly added to investing activities.
Answer 26
Option C: 6, 00,000
Answer 27
Option C: 100% Statement
Answer 28
Option A: different
Answer 29
Option: C: Non-Current Assets
Answer 30
Return on Capital Employed or Investment (ROI)
Net Profit before interest & tax
=  100
Capital Employed
5, 60, 000
=  100
12, 00, 000
 46.6%
Working Notes:
N/P before interest and tax = 2,40,000 profit + 80,000 int. on debentures + 2,40,000 Tax
= 5,60,000
Capital Employed = 2,00,000 Sh. Capital + 2,00,000 Reserves & surplus + 8,00,000 Deb.
= 12,00,000
(OR)
From the given information, Net Profit Ratio can be calculated as follows:
Sample Paper – 1
Net Profit Ratio = Net Profit/Net Sales *100

= 88,000/4,00,000 * 100 = 22%
Working Notes:
i. Operating Profit Ratio = 100 – Operating Ratio = 100-90 = 10%
ii. Operating Profit = 4,00,000 * 10% = 40,000
iii. Net Profit = Operating Profit + Non-operating income – Non operating expenses
= 40,000 +50,000 -2000 = 88,000.
Answer 31
Statement of Profit and Loss
For the years ended 31st March 2015 & 2016
Particulars 2014 – 15 2015 – 16 Absolute Change %age Change
Revenue from operations 20,00,000 36,00,000 16,00,000 80
Expenses:
(a) Cost of material consumed 10,00,000 12,00,000 2,00,000 20
(b) Other expenses 1,00,000 2,40,000 1,40,000 140.00
Total Expenses 11,00,000 14,40,000 3,40,000 30.90
Profit before tax 9,00,000 21,60,000 12,60,000 140.00
Less: Taxes @ 50% 4,50,000 10,80,000 6,30,000 140.00
Profit after Tax 4,50,000 10,80,000 6,30,000 140.00
(OR)
Common Size Financial Statements:
i. It is a vertical analysis of Financial Statements in which amounts of individual items of
Balance Sheet or Statement of Profit or Loss are written. These amounts are further
converted into percentages to a common base.
ii. These percentages can be compared with the corresponding percentages in other
period sand meaningful conclusions can be drawn.
iii. Such statements may be prepared for intra-firm and inter-firm comparison.
iv. Such statements may be prepared for Balance Sheet as well as Income Statement.
Since, in this statement all items are expressed as percentage of the base item [i.e., Revenue
from Operations or Net Sales (in case of Common-size Statement of Profit and Loss) or
Total Assets (in case of Common-size Balance Sheet)], such statement is correctly known as
100% Statement.
Sample Paper – 1
Answer 32
Dr. Cr.
Particulars
` `
A) Cash flows from Operating Activates:
Net Profit before tax & extraordinary items 3,40,000
Add: Depreciation on machinery 30,000
Add: Goodwill amortised 40,000
Add: Loss on sale of machinery 20,000
Operating profit before working capital changes 4,30,000
Add: Trade payables 4,000
Less: Trade Receivables 50,000
Less: Inventories 50,000
Cash flow from operating activities before tax 3,34,000
Less: Tax 70,000
Cash flow from Operating Activities 2,64,000
B) Cash flows from Investing Activates :
Add: Proceeds from sale of machinery 2,00,000
Less: Purchase of machinery 2,50,000
Less: Purchase of investments 1,40,000
Cash used in investing activities (1,90,000)
C) Cash flows from Financing Activates :
Issue of share capital 1,46,000
Bank Loan repaid (1,00,000)
Dividend paid (80,000)
Cash flow from financing Activities (34,000)
Net increase in cash & cash equivalents(A+B+C) 40,000
Add: Opening balance of cash & cash equivalents: 60,000
Closing Balance of cash & cash equivalents: 1,00,000
Machinery Account
Dr. Cr.
To Balance b/d 8,00,000 By Bank A/c (Sale) 2,00,000
To Bank A/c (purchase) 2,50,000 By Loss on Sale of Machinery 20,000
By Depreciation A/c 30,000
By Balance c/d 8,00,000
10,50,000 10,50,000
Sample Paper 2 – Question
CBSE
Sample Paper 2
Time: 3 hours Max. Marks: 80
1) This question paper contains two parts A and B.
2) Part A consists of 60 marks and Part B consists of 20 marks.
3) All parts of a question should be attempted at one place.
Part-A
1. Choose the correct answer from the given options: [1]

Which of the following statements is true?
a) Authorised Capital = Issued Capital
b) Authorised Capital > Issued Capital
c) Paid Up Capital > Issued Capital
d) None of the above

A company purchased machinery for `6, 00,000, out of which `1, 00,000 was paid
immediately and the balance amount was discharged by issue of equity shares of `10
each at 25% premium. How many shares will be issued by the company to the
vendor?
a) 50,000 shares
b) 40,000 shares
c) 60,000 shares
d) 48,000 shares

Which of the following is ‘Issue of shares at a price higher than its face value’?
a) Issue at profit
b) Issue at discount
c) Issue at premium
d) Issue at loss
4. What is a Memorandum Revaluation Account? [1]

Profit on revaluation of assets and liabilities at the time of death of a partner will be
credited to
a) Remaining partners in profit-sharing ratio
b) All the partners in their old profit-sharing ratio

c) To the deceased partner
d) Remaining partners in their gaining ratio
6. Vinod, Karan and Sampurna are partners. Vinod wants to admit his son Yuvraj into
business as a new partner, but Karan and Sampurna do not agree. Can Yuvraj become
a partner of the firm? [1]

If the vendors are issued fully paid shares of `80,000 in consideration of net assets of
`60,000, then the balance of `20,000 will be
a) Credited to securities premium reserve A/c
b) Debited to profit and loss A/c
c) Debited to goodwill A/c
d) Credited to capital reserve A/c
8. Distinguish between ‘Dissolution of partnership’ and ‘Dissolution of partnership firm’

on the basis of court’s intervention. [1]

According to Table F of the Companies Act, 2013, interest payable on calls-in-
advance is at the rate of
a) 6% p.a.
b) 7% p.a.
c) 12% p.a.
d) 18% p.a.
10. Explain the 2 types of donations received by a Not-for-Profit Organisation. [1]
In a partnership firm, new profit-sharing ratio minus old profit-sharing ratio is equal
to
a) Sacrificing Ratio
b) Gaining Ratio
c) New Ratio
12. What are the main provisions under which DRR can be created for a company
according to the new Companies Act, 2013? [1]
13. Vinod and Manthan are partners in a firm without any partnership deed. Their
capitals are `10,00,000 and `8,00,000, respectively. Vinod is an active partner and
looks after the business. Vinod wants a salary of `10,000 per month and profits
should be shared in the capital ratio. State with the reason whether his claim is valid
or not. [1]
14. Explain what is the need for Debenture Redemption Reserve [DRR] as per section
71[4] of the Companies Act, 2013? [1]
15. Ram, Mohan and Sohan were in a partnership sharing profits as 4:2:1, respectively. It
was provided that in no case Sohan’s share in profit should be less than `7500. The
profits for the year 2014 amounted to `31,500. You are required to show the
appropriation among partners. [3]
16. What amount of stationery will be recorded in Income & Expenditure A/c for the
year 2018: [3]
2017 2018
[`] [`]
Stock of Stationery 3,000 500
Creditors for Stationery 2,000 1,300
Advance Stationery 200 1,300
Amount paid for Stationery - 10,800
(OR)
What are the circumstances which necessitate valuation of Goodwill?
17. Champa, Kavita and Sonia were partners in a firm sharing profits in the ratio 5:3:2.
The firm closes its books on 31st March every year. Champa died on 30th June 2015.
On that date, her capital account showed a debit balance of `5,000 and goodwill of
the firm was valued at `3,70,000. There was a debit balance of `12,000 in the profit
and loss account. Champa’s share of profit in the year of her death was to be
calculated on the basis of the average profit of the last 5 years which was `80,000.
Pass necessary journal entries in the books of the firm on Champa’s death. [4]
18. MNO Ltd. acquires the business of XYZ Ltd. for a net consideration of `5,00,000. Total
assets acquired were valued at `10,00,000 and liabilities taken over were of
`6,00,000. Find the amount paid towards the goodwill of the company by the
purchaser. [4]
(OR)
A and B were partners who contributed `3,00,000 and `5,00,000 respectively
towards capital. The partnership was started on April 01, 2017 where the deed
provides for Interest on Capital @10% p.a. It also provided that Capital Accounts
were to be maintained following Fixed Capital Account Method. In the year ending
March 31, 2018, the firm earned net profit of `2,00,000.
Record the accounting entry for Interest on Capital.
19. Arun, Pukhraj and Mehul were partners in a firm sharing profits in the ratio 2:2:1. On
31st March 2016, their firm was dissolved. The Balance Sheet of the firm at the date
of dissolution was as follows: [4]
Creditors 1,60,000 Sundry Assets 2,60,000
Capitals: Cash in Hand 14,000
Arun 1,50,000 Mehul’s Capital A/c 46,000
Pukhraj 10,000 Profit and Loss A/c 50,000
3,70,000 3,70,000
The firm was dissolved on that date. Sundry assets were taken over by Mehul for
`1,30,000 and Arun took over the creditors for `1,50,000. Expenses of dissolution
paid by Pukhraj were `10,000.
Prepare the Revaluation Account, Partners Capital Account and Cash Account.
20. Prepare Income and Expenditure A/c for the year ending 31.12.2018 and Balance
sheet: [6]
Receipts ` Payments `
Balance b/d 95,000 Salary 1,65,000
Subscriptions 3,30,000 Sports equipment 2,00,000
Interest on investment 20,000 Balance c/d 80,000
[@8%p.a for full year ]
4,45,000 4,45,000
Additional information:
1. Club received `10,000 for subscription in 2017 for 2018.
2. Salary has been paid for 11 months.
3. Stock of sports equipment as on 31.12.2017 `1,50,000 and on 31.12.2018
`3,25,000.
(OR)
Vinod and Swami are partners in a firm sharing profits in the ratio 2:3. The balance
sheet of the firm as on 31 March 2015 is given below:
Balance Sheet
Amount Amount
Liabilities Assets
` `
Sundry Creditors 3,10,000 Land 5,00,000
Outstanding
70,000 Building 7,20,000
Expenses
Capitals: Plant 8,00,000
Vinod 8,00,000 Furniture 1,20,000
Swami 12,00,000 20,00,000 Stock 1,80,000
General Reserve 1,20,000 Sundry Debtors 1,50,000
Cash in hand 30,000
25,00,000 25,00,000
The partners decided to share profits in equal ratio w.e.f. 1 April 2015. The following
adjustments were agreed upon:
1. Goodwill of the firm was valued at `4,00,000, but it was not to appear in the
books.
2. They decided to show the General Reserve in the new Balance Sheet without
affecting its book value.
3. Land was valued at `8,00,000, Plant at `7,20,000 and Furniture at `1,00,000 and
were to appear at revalued amounts in the balance sheet. Pass necessary journal
entries to give effect to the above and prepare the Balance Sheet.
21. (a) VK Refrigerators Limited had an outstanding balance of `5,000, 6% debentures of

`100 each, redeemable at a premium of 10%. According to the terms of redemption,
the company redeemed 10% of these debentures by converting them into 8%
Preference Shares of `100 each issued at a premium of 10%. Calculate the number of
shares to be issued on conversion and record the journal entries for the redemption
in the books of the company.
(b) On 31st January 2005, Vinod Limited converted its `88,00,000, 6% Debentures
into equity shares of `20 each at a premium of `2 per share. Pass the necessary
journal entries in the books of the company for the redemption of debentures. [6]
(OR)
S and T are partners in a firm sharing profits and losses in the ratio of 3:2 and their
capitals were 80,000 and 50,000 respectively. New partner U is admitted in the firm
for 1/5th of share in future profits from 1st April, 2018. U introduced 60,000 as his
capital. Find the value of firm’s goodwill and record the necessary journal entries for
the same on admission of new partner.
22. Vinod Ltd. invited applications for 12,000 equity shares of `10 each at a premium of
`2 per share payable as follows:
On Application………………………………….. `2
On Allotment ……………………………………..`5 including premium
On First Call ………………………………………`3
On Final Call ……………………………………….`2
Applications were received for 24,000 shares and pro-rata allotment was made to
the applicants of 15,000 shares. Excess money was utilised for allotment only.
VK, a shareholder to whom 120 shares were allotted, failed to pay the allotment
money on the first call. His shares were forfeited after the first call.
DK, a shareholder of 180 shares, failed to pay after two calls; his shares were
forfeited after the second call. Of the forfeited shares, 240 were reissued [including
120 shares of VK] credited as fully paid for `9 per share.
Give journal entries. [8]
(OR)
RS Ltd. has issued 25,000 equity shares of `10 each at a premium of `2 per share
payable with application money. The incomplete journal entries related to the issue
are given below. You are required to complete these blanks.
Debit Credit
` `
…………………….. Dr. --------

To …………………….. --------
[Being application money received for 35000 shares @
`5 per share]
…………………….. Dr. --------

To …………………….. --------
To …………………….. --------
To …………………….. --------
To …………………….. --------
[Being transfer of share application money to share
capital a/c, securities premium a/c, refunded for 4000
shares for rejected applications and balance to share
allotment as shares were allotted on pro-rata basis]
…………………….. Dr. --------

To …………………….. --------
[Amount due on allotment @ `4 per share]
…………………….. Dr. --------

To …………………….. --------
[Being balance amount received on allotment]
…………………….. Dr. --------

To …………………….. --------
[Being first and final call money due]
…………………….. Dr. --------

Calls in Arrears Dr. --------
To …………………….. -------
[Being money received on first and final call except on
500 shares]
……………………. Dr. --------

To …………………….. --------
To ……………………… --------
[Being forfeited shares on which first and final call
money was not received]
…………………….. Dr. --------

…………………….. Dr. --------
To …………………….. --------
[Being re-issued forfeited shares @ `8 per share fully
paid-up]
…………………….. Dr. --------

To …………………….. --------
[Being……..……..……..……..….……..……..……..….……..……..……..
….]
23. Vinod and David are partners sharing profits in the ratio 3:2. Their Balance Sheet as
on 31st March 2016 was as follows:
Balance Sheet
Amount Amount
Liabilities Assets
` `
Capitals Office & Equipment 30,000
Vinod 5,00,000 Land & Building 5,00,000
David 3,00,000 8,00,000 Plant & Machinery 3,50,000
Creditors 1,80,000 Debtors 2,00,000
Bills Payable 1,20,000 Stock 1,20,000
Bank Loan 1,00,000 Cash in Hand 50,000
12,50,000 12,50,000
Madan was admitted as a partner on 1st April 2016 for 1/6th share and the following
was agreed upon:
1. Madan will bring `20,000 as premium for goodwill and `2,50,000 as his capital.
2. Assets are revalued as Debtors 10% less, Stock 10% more and plant and
machinery is to be appreciated by `20,000.
3. Creditors were undervalued by `20,000.
4. Vinod and David will adjust their capitals on the basis of Madan’s capital and
adjustment [if any] will be made in cash.
Prepare the Revaluation Account, Partners Capital Account and Balance Sheet of the
new firm. [8]
(OR)
Vinod, Dhruv and Devansh are partners sharing profits and losses in the ratio 2:2:1.
Their Balance Sheet as on 31st March 2016 is as follows: [8]
Balance Sheet
Amount Amount
Liabilities Assets
` `
Capitals Plant & Machinery 9,00,000
Vinod 6,00,000 Inventories 1,59,000
Dhruv 4,50,000 Debtors 1,50,000
Devansh 3,00,000 13,50,000 Less: Provision 9,000 1,41,000

Creditors 1,50,000 Cash in Hand 4,50,000
General Reserve 1,50,000
16,50,000 16,50,000
Devansh gets retirement on the above-mentioned date and it was decided to pay his
due amount in cash. Assets and liabilities are adjusted as follows:
1. Inventories will be revalued at `1,50,000.
2. Plant and machinery will be revalued at `9,90,000.
3. Provision for doubtful debts is to be maintained at 10% on debtors.
Prepare the Revaluation Account, Partners Capital Account and Balance Sheet of the
new firm.
Part-B
24. What is meant by a Cash Flow Statement? [1]
25. State under which major headings the Provision for Tax will be presented in the
Balance Sheet of a company as per Schedule III of the Companies Act, 2013. [1]
a) Current Liabilities
b) Current Assets
c) Shareholders’ Funds
d) Non-Current Assets
26. Which of the following is used as a tool for analysis of financial statements? [1]
a) Cash Flow Statement
b) Ratio Analysis
c) Comparative Statements
d) All of the above
27. While preparing the Cash Flow Statement, the accountant of Vinod Limited [a finance
company] showed dividend received on investments as ‘Investing Activity’. Was he
correct in doing so? Give reason. [1]
28. State under which major headings Patents will be presented in the Balance Sheet of a
company as per Schedule III of the Companies Act, 2013. [1]
a) Current Liabilities
b) Current Assets
c) Shareholders’ Funds
d) Non-Current Assets
29. Which of the following is not a type of Activity Ratio? [1]

a) Working Capital Turnover Ratio
b) Debt to Equity Ratio
c) Inventory Turnover Ratio

d) All of the above
30. Calculate the Gross Profit Ratio and Working Capital Turnover Ratio from the
following: [4]
Revenue from Operations `30,00,000

Cost of Revenue from Operations `20,00,000
Current Assets `6,00,000
Current Liabilities `2,00,000
Paid up Share Capital `5,00,000
(OR)
Following are the details given from which you need to determine the quick ratio.
Working Capital = 3,00,000
Total Outside Liabilities = 5,50,000
Long term debts = 4,00,000
Inventories = 1,80,000
31. From the following statement of profit and loss of Vinod Ltd. for the years ended 31st
March 2016, prepare the Comparative Statement of Profit & Loss. [4]
Particulars Note 31.03.2016 31.03.2015
Revenue from Operations 60,00,000 40,00,000
Other Income 15% of the Revenue 20% of the
from Operations Revenue from
Operations
Expenses 60% of the Revenue 50% of the
from Operations Revenue from
Operations
Tax Rate 50% 50%
(OR)
Explain the Nature of Financial Statements.
32. Prepare a Cash Flow Statement from the following Balance Sheets of Vinod Limited: [6]
31st Mar. 31st Mar.

Note
No.
` `
i. Equity and Liabilities
a. Share capital 15,00,000 11,00,000
b. Reserves and surplus 4,00,000 4,50,000
2. Non-current Liabilities
Long term borrowings 5,00,000 4,10,000
[Debentures]
3. Current liabilities
a. Trade payables 1,00,000 90,000
Total 25,00,000 20,50,000
ii. Assets
1. Non-Current assets
a. Fixed assets:
Tangible [Machinery] 15,00,000 12,00,000
2. Current assets
a. Inventories 4,00,000 3,00,000
b. Trade receivable 5,00,000 4,20,000
c. Cash and cash equivalents 1,00,000 1,30,000
Total 25,00,000 20,50,000
i. Depreciation charged on machinery during the year was `1,50,000.
ii. Company paid interest on debentures `40,000.
iii. Dividend paid `1,00,000.
Sample Paper 2 – Solution
CBSE
Part A
Answer 1
Option B: Authorised Capital > Issued Capital
Answer 2
Option B: 40,000 shares
Answer 3
Option C: Issue at premium
Answer 4
A Memorandum Revaluation Account is prepared by the partners of the firm when they
mutually decide to give effect to the revaluation of assets and reassessment of liabilities
without affecting the existing book values. It is prepared in 2 parts where the balance of the
first part is transferred to the Capital Accounts of all partners in their old profit sharing
ratio and the balance of the second part is transferred to the Capital Accounts of the
remaining partners or continuing partners in their new profit sharing ratio.
Answer 5
Option B: All the partners in their old profit-sharing ratio
Answer 6
Yuvraj cannot be admitted as a new partner in the firm because Karan and Sampurna have
not agreed. A new partner can be admitted only with the consent of existing partners. In
this case, existing partners are not ready to admit a new partner.
Answer 7
Option C: Debited to goodwill A/c
Answer 8
Basis Dissolution of partnership Dissolution of partnership firm
Court’s Court does not intervene because A firm can be dissolved by the
intervention partnership is dissolved by mutual court’s order.
agreement.
Answer 9
Option C: 12% p.a.
Answer 10
A charitable institution is a type of Not-for-Profit Organisation. One of the source of
incomes for a charitable institution is the donation that is received. This donation received
can be categorised as follows:
a. General Donation: It is the donation in which the donor does not specify any condition
for its use. It is accounted as an income and credited to Income and Expenditure
Account.
b. Specific Donation: It is a type of donation where the donor specifies the purpose for
which the donation can be used.
Answer 11
Option B: Gaining Ratio
Answer 12
According to the provisions of the Companies Act, 2013, companies are required to create a
Debenture Redemption Reserve of at least 25% of the face value of debentures before the
redemption of debentures commences.
Answer 13
Vinod’s claim is not valid because in the absence of a partnership deed, partners are not
entitled to salary and the profit-sharing ratio will be equal.
Answer 14
The need for creating the Debenture Redemption Reserve (DRR) is been prescribed by
section 71(4) of the Companies Act, 2013 which as follows:
i. Every company issuing debentures shall create Debenture Redemption Reserve (DRR);
ii. Out of its profits available for distribution as dividend; and
iii. The amount credited to DRR shall not be utilised by the company except for redemption
of debentures.
Answer 15
Profit and Loss Appropriation Account
Dr. Cr.
To Profit Transferred to By Profit 31,500
Ram (18,000 − 2,000) 16,000
Mohan (9,000 − 1,000) 8,000
Sohan (4,500 + 2,000 + 1,000) 7,500
31,500 31,500
Working Note: Sohan’s guaranteed amount is `7,500.

But he is getting only 4,500, i.e. 31,500 × 1/7 = 4,500.
Deficiency = 7,500 − 4,500 = 3,000 will be borne by Ram and Mohan in the ratio 4:2 OR 2:1.
Ram will give 3,000 × 2/3 = 2,000
Mohan will give 3,000 × 1/3 = 1,000
Answer 16
Amount will be recording in Income & Expenditure A/c:
Particulars `
Amount paid for stationery 10,800
Add: Outstanding of CY 1,300
Less: Outstanding of PY 2,000
Add: Stock of PY 3,000
Less: Stock of CY 500
Add: Advance of PY 200
Less: Advance of CY 1,300
11,500
(OR)
Following are the circumstances which necessitate valuation of goodwill:
i. Change in the profit sharing ratio.
ii. Admission of new partner.
iii. Retirement or death of partner.
iv. Sale of partnership as a going concern.
v. Amalgamation of two or more firms.
Answer 17
Journal Entries
Dr. Cr.
` `
2015
Jun.30 Kavita’s Capital A/c Dr. 1,11,000
Sonia’s Capital A/c Dr. 74,000
To Champa’s Capital A/c 1,85,000
(Being Champa’s share of goodwill adjusted to
the existing partners in their gain ratio)
Jun.30 Champa’s Capital A/c Dr. 6,000

To Profit & Loss A/c 6,000
(Being Champa’s share in debit balance of
Profit & Loss A/c transferred)
Jun.30 Profit & Loss Suspense A/c Dr. 10,000

To Champa’s Capital A/c 10,000
(Being Champa’s share of profit up to the date
of death transferred to her capital account)
Jun.30 Champa’s Capital A/c Dr. 1,84,000

To Champa’s executors’ A/c 1,84,000
(Being amount due to Geeta transferred to her
executors’ A/c)
Answer 18
The goodwill in the question is purchased goodwill as it arises on account of purchase of
business of XYZ Ltd. by MNO Ltd. Consideration paid in excess of net assets is termed as
goodwill. Therefore, as per the details given in the question:
Goodwill = Total Consideration Paid – Net Assets taken over
Goodwill = 5,00,000 – (Assets – Liabilities)
Goodwill = 5,00,000 – (10,00,000 – 6,00,000)
Goodwill = 1,00,000
(OR)
Journal Entries
Debit Credit
` `
Profit and Loss Appropriation A/c Dr. 80,000
To A’s Current A/c 30,000
To B’s Current A/c 50,000
(Being interest on capital transferred to Profit & Loss
Appropriation Account)
Working Notes:
Calculation of Interest on Capital:
10
A’s  3, 00, 000   30, 000
100
10
B’s  5, 00, 000   50, 000
100
Answer 19
Revaluation Account
Dr. Cr.
Amount Amount
Particulars Particulars
` `
To Sundry Asset 2,60,000 By Creditors 1,60,000
To Arun (Creditors) 1,50,000 By Mehul 1,30,000
To Pukhraj 10,000 By Loss Transferred:
Arun 52,000
Pukhraj 52,000
Mehul 26,000 1,30,000
4,20,000 4,20,000
Partner’s Capital Account

Dr. Cr.
Arun Pukhraj Mehul Arun Pukhraj Mehul
` ` ` ` ` `
To Bal. b/d - - 46,000 By Bal b/d 1,50,000 10,000 -
To Real. A/c 52,000 52,000 26,000 By Real A/c 1,50,000 10,000 -
To Real. A/c By General
- - 1,30,000 Res. 20,000 20,000 10,000
To P/L 20,000 20,000 10,000 By Cash 32,000 2,02,000
To Cash 2,48,000 - -
3,20,000 72,000 2,12,000 3,20,000 72,000 2,12,000
Cash Account
Dr. Cr.
Amount Amount
` `
To Bal b/d 14,000 By Arun 2,48,000
To Pukhraj 32,000
To Mehul 2,02,000
2,48,000 2,48,000
Answer 20
Income and Expenditure Account
for the year ending 31.12.18
Dr. Cr.
Expenditure ` Income `
To Salary (1,65,000+15,000) 1,80,000 By Subscription 3,30,000
Add :Advance of
To Consumed Sports Equipment 25,000 2016 10,000 3,40,000
(2,00,000+1,50,000–3,25,000)
To Surplus 1,55,000 By Interest on Investment 20,000
(Excess of Income over
Expenditure)
3,60,000 3,60,000
Balance Sheet
as on31.12.18
Capital Fund 4,85,000 Investment 2,50,000
Add: Surplus 1,55,000 6,40,000 Sports equipment 3,25,000
Outstanding Salary 15,000 Cash 80,000
6,55,000 6,55,000
Balance Sheet
as on31.12.17
Advance Subscription 10,000 Investment 2,50,000
Capital Fund (Balancing Figure) 4,85,000 Sports equipment 1,50,000
Cash 95,000
4,95,000 4,95,000
(OR)
Journal
Dr. Cr.
` `
--------To Swami’s Capital A/c 40,000
(Being goodwill adjusted)

--------To Swami’s Capital A/c 12,000
(Being general reserve adjusted)
Land A/c Dr. 3,00,000

--------To Revaluation A/c 3,00,000
(Being increase in the value of land recorded)
Revaluation A/c Dr. 1,00,000

--------To Plant A/c 80,000
--------To Furniture A/c 20,000
(Being decrease in the value of assets recorded)
Revaluation A/c Dr. 2,00,000

--------To Vinod’s Capital A/c 80,000
--------To Swami’s Capital A/c 1,20,000
(Being profit on revaluation transferred)
Balance Sheet
Amount Amount
Liabilities Assets
` `
Sundry Creditors 3,10,000 Land 8,00,000
Outstanding Expenses 70,000 Building 7,20,000
Capitals: Plant 7,20,000
Vinod 8,28,000 Furniture 1,00,000
Swami 13,72,000 22,00,000 Stock 1,80,000
General Reserve 1,20,000 Sundry Debtors 1,50,000
Cash in hand 30,000
27,00,000 27,00,000
Answer 21
(a)
Journal Entries
Dr. Cr.
` `
6% Debentures A/c Dr.
Premium on Redemption Dr. 50,000
To Debenture Holders A/c 5,000 55,000
(Being amount due on redemption)
Debenture Holders A/c Dr. 55,000

To Preference Sh. Capital A/c 50,000
To Securities Premium A/c 5,000
(Being conversion of debenture into preference
shares)
(b)
Journal Entries
Dr. Cr.
` `
6% Debentures A/c Dr. Dr. 88,00,000
To Debenture Holders A/c Dr. 88,00,000
(Being amount due on redemption)
Debenture Holders A/c Dr. 88,00,000

To Equity Sh. Capital A/c 80,00,000
To Securities Premium A/c 8,00,000
(Being conversion of debenture into equity
shares)
(OR)
A. Valuation of Goodwill:
Using the details mentioned in the above question, value of goodwill of firm is
determined as follows:
U is admitted for 1/5th share in the partnership where he introduces 60,000 as his
contribution towards capital of firm.
If 1/5th of total capital is 60,000, total capital of the firm will be = 60,000 * 5/1
= 3,00,000.
Therefore, amount of hidden goodwill in the mentioned scenario will be as follows:
Total Capital of the new firm 3,00,000
Less: Capital of S 80,000
Capital of T 50,000
Capital of U 60,000 1,90,000
Value of Goodwill of the firm 1,10,000
Thus, U’s share of Goodwill = 1,10,000 * 1/5th = 22,000
B. Journal Entries:
Date Particulars L.F. Dr. Cr.
2018 Bank A/c …Dr. 60,000

To U’s Capital A/c 60,000
April 1 (Being amount brought in by U as his
capital in the firm)
April 1 Us’ Capital A/c …Dr. 22,000

To S’s Capital A/c 13,200
To T’s Capital A/c 8,800
(Being the share of U in goodwill

credited to S and T in their
sacrificing ratio i.e.,3:2)
Answer 22
Journal
Dr. Cr.
` `
Bank A/c Dr. 48,000

-------- To Share Application A/c 48,000
(Being application money received)
Share Application A/c Dr. 48,000

-------- To Share Capital A/c 24,000
--------To Share Allotment A/c 6,000
--------To Bank A/c 18,000
(Being application money adjusted)
Share Allotment A/c Dr. 60,000

--------To Share Capital A/c 36,000
--------To Securities Premium A/c 24,000
(Being allotment money due)
Bank A/c Dr. 53,460

(Being allotment received)
Share First Call A/c Dr. 36,000

(Being first call money due)
Bank A/c Dr. 35,100

(Being allotment received)
Share Capital A/c Dr. 960

Securities Premium Dr. 240
--------To Share Allotment A/c 540
--------To Share First Call A/c 360
--------To Share Forfeiture A/c 300
Second & Final Call A/c Dr. 23,760

(Being second and final call due)
Bank A/c Dr. 23,400

--------To Second & Final Call A/c 23,400
(Being second and final call received)
Sh. Capital A/c Dr. 1,800

--------To Share First Call A/c 540
--------To Share Second & Final Call A/c 360
--------To Share Forfeiture A/c 900
Bank A/c Dr. 2,160

(Being reissue of shares)

--------To Capital Reserve A/c 660
(Being transferred to capital reserve)
(OR)
Journal Entries
Dr. Cr.
` `
Bank A/c Dr. 1,75,000
To Equity Share Application A/c 1,75,000
(Being amount received on application 35,000
shares @ `5 per share)
Equity Share Application A/c Dr. Dr. 1,75,000

To Securities Premium A/c 50,000
To Bank A/c 20,000
(Being transfer of share application money to
share capital, securities premium, money
refunded for 4000 shares rejected, applications
and balance adjusted towards amount due on
allotment as shares were allotted on a pro-rata
basis)
Equity Share allotment A/c Dr. 1,00,000

(Being amount due on allotment @ `4 per
share)
Bank A/c Dr. 70,000

(Being balance amount received on allotment)
Equity share first and final call A/c Dr. 75,000

(Being first and final call money due)
Bank A/c Dr. 73,500

Calls in Arrears A/c Dr. 1,500
To Equity Share First and Final Call A/c 75,000
(Being money received on first and final call
except on 500 shares)

To Shares Forfeited A/c 3,500
To Calls in Arrears A/c 1,500
(Being forfeited the shares on which call
money was not received)
Bank A/c Dr. 4,000

Shares Forfeited A/c Dr. 1,000
(Being re-issued forfeited shares @`8 per
share fully paid up)
Shares Forfeited A/c Dr. 2,500

To Capital Reserve A/c 2,500
(Being gain on reissue on forfeited shares
transferred to capital reserve account)
Answer 23
Revaluation Account
Dr. Cr
Amount Amount
` `
To Debtors 20,000 By Stock 12,000
To Plant & Machinery 20,000 By Loss Transferred:
To Creditors 20,000 Vinod 28,800
David 19,200
60,000 60,000

Dr. Cr.
Vinod David Madan Vinod David Madan
` ` ` ` ` `
To Rev. A/c 28,800 19,200 - By Bal. b/d 5,00,000 3,00,000 -
To Rev. A/c 5,13,200 3,08,800 2,50,000 By Cash - - 2,50,000
By Premium 12,000 8,000 -
By Gen. Res 30,000 20,000 -
5,42,000 3,28,000 2,50,000 5,42,000 3,28,000 2,50,000
By Bal b/d 5,13,200 3,08,800 2,50,000
By Bal. c/d By Cash
7,50,000 5,00,000 2,50,000 (Bal.fig) 2,36,800 1,91,200
7,50,000 5,00,000 2,50,000 7,50,000 5,00,000 2,50,000
Balance Sheet
Amount Amount
Liabilities Assets
` `
Capitals Office & Equipment 30,000
Vinod 7,50,000 Land & Building 5,00,000
David 5,00,000 Plant & Machinery 3,30,000
Madan 2,50,000 15,00,000 Debtors 1,80,000
Creditors 2,00,000 Stock 1,32,000
Bills Payable 1,20,000 Cash in Hand 7,48,000
Bank Loan 1,00,000
19,20,000 19,20,000
Working Note:
Total Capital of the firm = 2, 50,000 × 6/1 = 15,00,000 to be adjusted in 3:2:1.
(OR)
Revaluation Account
Dr. Cr.
Amount Amount
` `
To Inventories 9,000 By Plant & Machinery 90,000
To Provision for doubtful
debts 6,000
To Profit Transferred:
Vinod 30,000
Dhruv 30,000
Devansh 15,000
90,000 90,000

Dr. Cr.
Vinod Dhruv Devansh Vinod Dhruv Devansh
` ` ` ` ` `
To Cash - - 3,45,000 By Bal b/d 6,00,000 4,50,000 3,00,000
To Bal c/d 6,90,000 5,40,000 - By Gen. Res 60,000 60,000 30,000
By Rev. A/c 30,000 30,000 15,000
6,90,000 5,40,000 3,45,000 6,90,000 5,40,000 3,45,000
Balance Sheet
Amount Amount
Liabilities Assets
` `
Capitals Plant & Machinery 9,90,000
Vinod 6,90,000 Inventories 1,50,000
Dhruv 5,40,000 12,30,000 Debtors 1,50,000
Creditors 1,50,000 Less : Provision 15,000 1,35,000
Cash in hand 1,05,000
13,80,000 13,80,000
Part B
Answer 24
A statement which is prepared by a firm during a specified period of time to know the
inflows (receipts) and outflows (payments) is known as the cash flow statement.
Answer 25
Option A: Current Liabilities
Answer 26
Answer 27
The accountant was not correct because dividend received on investment is an operating
activity for a finance company and not an investing activity.
Answer 28
Option D: Non-Current Assets
Answer 29
Option B: Debt to Equity Ratio
Answer 30
a. Gross Profit Ratio = Gross Profit/Net Revenue from Operations × 100
Gross Profit = Revenue from Operations − Cost of Revenue from Operations
= 30,00,000 − 20,00,000
= 10,00,000
Net Revenue from Operations = 30,00,000
Gross Profit Ratio = 10,00,000/30,00,000 × 100 = 33.3%
b. Working Capital Turnover Ratio = Net Revenue from Operations/Working Capital

Net Revenue from Operations = 30,00,000
Working Capital = Current Assets − Current Liabilities
= 6,00,000 − 2,00,000 = 4,00,000
Working capital turnover ratio = 30,00,000/4,00,000 = 7.5 times
(OR)
Quick Ratio or Liquid Ratio can be calculated as follows:
Liquid/Quick Ratio = Liquid or Quick Assets/Current Liabilities
= 2,70,000/ 1,50,000 = 1.8:1
Working Notes:
Current Liabilities = Total Outside Liabilities – Long term debts
= 5,50,000 – 4,00,000 = 1,50,000
Current Assets = Working Capital + Current Liabilities
= 3,00,000 + 1,50,000 = 4,50,000
Liquid Assets = Current Assets – Inventories
= 4,50,000 – 1,80,000 = 2,70,000
Answer 31
Comparative Statement of Profit and Loss
for the years ended 31st March 2015 & 2016
Absolute %
Particulars 31.3.2015 31.3.2016
Change change
Revenue from Operations 40,00,000 60,00,000 20,00,000 50%
Other Income 8,00,000 9,00,000 1,00,000 12.5%
Less: Expenses
Other Expenses 20,00,000 36,00,000 16,00,000 80%
Profit before Tax 28,00,000 33,00,000 5,00,000 17.8%
Less: Tax @ 50% 14,00,000 16,50,000 2,50,000 17.8%
Profit after tax 14,00,000 16,50,000 2,50,000 17.8%
(OR)
Nature of Financial Statements can be understood as a result of a combination of the
following points:
i. Recorded Facts: It refers to the recorded transactions in the books of account on the
basis of evidences.
ii. Conventions: All the transactions that are recorded in the books of account should
follow all the relevant accounting conventions as may be applicable to the respective
transactions. Such conventions make financial statements reliable, understandable and
comparable.
iii. Accounting Concepts: All the transactions that are recorded in the books of account
should follow the accounting concepts. Such concepts make financial statements
reliable, understandable and comparable.
iv. Personal Judgements: Personal judgements also have an important bearing on the
financial statements as it facilitates the selection of methods, etc. when any one
alternative is to be chosen out of the various alternatives.
v. Source of Financial Information: When financial statement are prepared by using the
above points, it acts a source of financial information on the basis of which conclusions
and interpretations can be drawn about the financial performance and position of a
company.
Answer 32
Amount Amount
Particulars
` `
A. Cash Flow from Operating Activities

Net Profit before tax (50,000) + 40,000 interest + 1,00,000
Dividend 90,000
Add: Depreciation 1,50,000
Operating profit before working capital changes 2,40,000
Add: Trade Payable 10,000
Less: Trade Receivable (80,000)
Less: Inventories (1,00,000)
Cash flow from Operating Activities 70,000
B. Cash Flow from Investing Activities

Purchase of Machinery (4,50,000) (4,50,000)
C Cash Flow from Financing Activities

Issue of Shares 4,00,000
Debentures 90,000
Interest Paid (40,000)
Dividend Paid (1,00,000)
Cash Flow from Financing Activities 3,50,000
D Decrease in Cash and Cash Equivalents (A + B + C) (30,000)

Add: Cash and Cash Equivalents in the beginning 1,30,000
Cash and Cash Equivalents at the end 1,00,000
Working Notes:
Machinery Account
Particulars Amount Particulars Amount
To Balance b/d 12,00,000 By Depreciation 1,50,000
To Bank A/c (purchase) 4,50,000 By Balance c/d 15,00,000
16,50,000 16,50,000
CBSE
Sample Paper - 3
Time: 3 hrs Total Marks: 80
PART – A
1. A group of 35 people wants to form a partnership firm. These people want your advice
related to the maximum number of persons that can be there in a partnership firm and
name of the Act under whose provisions it is given. [1]
2. Capital Account is debited when an asset is taken over by a partner. Why? [1]
A ______________ Account is prepared by the partners of the firm when they mutually
decide to give effect to the revaluation of assets and reassessment of liabilities without
affecting the existing book values.
a) Revaluation
b) Realisation
c) Memorandum Revaluation
d) Profit and Loss Adjustment
4. Name the account to which the ‘Balance of Debentures Redemption Reserve’ is

transferred after all debentures have been redeemed. [1]
5. Sita, Geeta and Rita were partners in a firm sharing profits in the ratio 6:4:2
respectively. Their capitals were Rs. 60,000, Rs. 40,000 and Rs. 20,000 respectively.
State the ratio in which the goodwill of the firm, amounting to Rs. 10,00,000, will be
adjusted in the capital accounts of the remaining partners on the retirement of Geeta. [1]
The group of persons who undertake the responsibility to bring the company into
existence by promoting its objects and activities during the initial stage of
incorporating a company are known as _____________.
a) Directors
b) Shareholders
c) Owners
d) Promoters
In the event of Admission of a Partner, the share surrendered by the partner is
____________ his old share of profit to determine his share in the reconstituted firm.
a) deducted from
b) added to
c) divided by
d) none of the above
8. What is the treatment of reserves, accumulated profits or losses that exist in the books
of account at the time of change in profit sharing ratio among the partners of a firm? [1]
9. What do you mean by hidden goodwill? [1]
10. Shubam Ltd. forfeited 200 equity shares of Rs. 10 each issued at a premium of 20% for
non-payment of final call of Rs. 4 including premium. State the maximum amount of
discount at which these shares can be reissued. [1]
In case of forfeiture of shares, the company must give a clear ___________ notice to the
defaulting shareholder to pay the amount due on call and interest thereon if any.
a) 14 days’
b) 1 month
c) 30 days’
d) 45 days’
12. Explain what is Fixed Assets Fund? [1]
13. Where is general donation received shown in the final accounts of a Not-For-Profit
Organisation? [1]
Goodwill is the __________ of the expected future income in excess of a normal return on
the investment in tangible assets or for the excess of price paid for a business as a
whole over the book value.
a) Future Value
b) Present Value
c) Agreed Value
d) Historical Value
15. On the basis of the following information, calculate the amount to be debited to
Stationery Account in Income and Expenditure Account for the year end 31st March,
2018: [3]
Rs.
Stock of stationery on 1 April, 2017
st 30,000
Creditors for stationery on 1 April, 2017
st 20,000
Amount paid for stationery during 2017-18 1, 08,000
Stock of stationery on 31st March, 2018 5,000
Creditors for stationery on 31 March, 2018
st 13,000
OR
Show how the following information is showed in the final accounts for the year ended
31st March, 2019.
Dr. Receipts and Payments Account for the year ended 31st March, 2019 Cr.
Receipts Rs. Payments Rs.
By Payment for Sports Material 2,80,000
Extract of Balance Sheet as at 1st April, 2018

Liabilities Rs. Assets Rs.
Supplier of Sports Material 12,000 Sports Material 16,000
Value of Sports Material on 31st March, 2019 is Rs. 44, 000.
16. On 1st April, 2016, Bindu and Nirja entered into partnership to construct toilets in
government schools in the remote areas of Uttar Pradesh. They contributed capitals of
Rs. 20,00,000 and Rs. 30,00,000 respectively.
Their profit-sharing ratio was 2:3 and interest allowed on capital as provided in the
Partnership Deed was 12% per annum. During the year ended 31st March, 2017, the
firm earned a profit of Rs. 5,40,000.
Prepare Profit and Loss Appropriation Account of Bindu and Nirja for the year ended
31st March, 2017. [3]
OR
M, N and O are partners in a partnership firm. N is the partner who has guaranteed the
minimum earnings of Rs. 50,000 to the firm. During the period, the firm made earnings
of Rs. 41,000. Discuss what amount should be contributed by the partners to ensure
the minimum earnings to the firm.
17. Nakul, Divya and Akash are partners sharing profits in the ratio of 5 : 3 : 7. On April 1st,
2016, Nakul gave a notice to retire from the firm. Divya and Akash decided to share
future profits in the ratio of 2 : 3. The adjusted capital accounts of Divya and Akash
show a balance of Rs. 43,000 and Rs. 90,500 respectively. The total amount to the paid
to Nakul is Rs. 1,10,500. This amount is to be paid by Divya and Akash in such a way
that their capitals become proportionate to their new profit sharing ratio. Pass
necessary journal entries for the above transactions in the books of the firm. Show
working clearly. [4]
18. Rita and Shubhada are partners in a firm sharing profits and losses in the ratio of 3:2. They
1
admit Monika as a partner for th share in the profits of the firm.
4
Monika brings Rs. 60, 000 as his capital and his share of goodwill in cash. Goodwill of the
firm is to be valued at two years' purchase of average profits of the last four years. [4]
The profits of the firm during the last four years are given below:
Year Profit (Rs.)
2014 - 15 35,000
2015 - 16 47,500
2016 - 17 67,000
2017 - 18 74,500
The following additional information is given:
(i) To cover management cost an annual charge of Rs. 5,625 should be made for the
purpose of valuation of goodwill.
(ii) The closing stock for the year ended 31.3.2018 was overvalued by Rs. 1, 500.
Pass necessary journal entries on Monika's admission showing the working notes clearly.
OR
Compute the value of Goodwill from the information given below:
A and B had invested an amount of Rs. 1, 00,000 to start their firm. Average profit of
the firm is Rs. 32, 000 and the normal rate of return of the industry is 15%. Goodwill is
to be valued at four years’ purchase of profits in excess of profits @15% on the money
invested.
19. E, F and G are sharing profits and losses in the ratio of 3:2:1. G retires and on the date
of his retirement, following balances appeared in the books of the firm: [4]
Employees’ Provident Fund = 10,000
Workmen Compensation Reserve = 12,000 (no required in future)
Profit and Loss Account = 15,000 (Dr.)
General Reserve = 90,000
You are required to pass the necessary journal entries for the adjustment of the above
items on G’s retirement.
20. Laila and Praful were partners in a firm sharing profits in the ratio of 3:7. On 1.4.2016
their firm was dissolved. After transferring assets (other than cash) and outsider's
liabilities to realisation account, you are given the following information: [6]
a. A creditor of Rs. 4,80,000 accepted machinery valued at Rs. 8,00,000 and paid to
the firm Rs. 3,20,000.
b. A Second creditor for Rs. 65, 000 accepted stock at Rs. 53,000 in full settlement of
his claim.
c. A third creditor amounting to Rs. 1,05,000 accepted Rs. 45,000 in cash and
investments worth Rs. 47,000 in full settlement of his claim.
d. Loss on dissolution was Rs. 30, 000.
Pass necessary journal entries for the above transactions in the books of firm assuming
that all payments were made by cheque.
OR
On 1.4.2014 Ramila Ltd. had Rs. 50, 00,000, 9% debentures of Rs. 100 each
outstanding.
(i) On 1.4.2015 the company purchased in the open market 20,000 of its own
debentures at Rs. 98 each and cancelled the same immediately.
(ii) On 1.10.2015 the company redeemed at par debentures of Rs. 18, 00,000 by draw
of a lot.
(iii) On 31.3.2016 the remaining debentures were purchased for immediate
cancellation for Rs. 10,95,000. Ignoring interest on debentures and debenture
redemption reserve.
Pass necessary journal entries for the above transactions in the books of Ramila Ltd.
21. From the following Receipts and Payments Account of Adi National Club and from the
information supplied, prepare Income and Expenditure Account for the year ended
31st March, 2015 and Balance Sheet as at that date: [6]
RECEIPTS AND PAYMENTS ACCOUNT
for the year ended 31st March, 2015
Dr. Cr.
To Balance b/d 7,000 By Salaries 28,000
To Subscriptions: By General Expenses 6,000
2013-14 5,000 By Electricity Charges 4,000
2014-15 20,00
0 By Books 10,000
2015-16 4,000 29,000 By Newspapers 8,000
To Rent 14,000 By Balance c/d 4,000
(Received from the Use of Hall)
To Profit from Entertainment 8,000
To Sale of Old Newspapers 2,000
60,000 60,000
(a) The club has 50 members each paying an annual subscription of Rs. 500.
Subscriptions Outstanding on 31st March, 2014 were Rs. 6, 000.
(b) On 31st March, 2015, Salaries Outstanding amounted to Rs. 2,000. Salaries paid in
2014-15 included Rs. 6, 000 for the year 2013-14.
(c) On 1st April, 2014, the Club owned Building valued at Rs. 2,00,000; Furniture
Rs. 20,000 and Books Rs. 20,000.
(d) Provide depreciation on Furniture at 10%.
22. Devang, Darshan and Dashrath are partners in a firm sharing profits and losses as
5:4:3. Their Balance Sheet as at 31st March, 2016 was: [8]

Sundry Creditors 40,000 Cash at Bank 50,000
Outstanding Expenses 15,000 Sundry Debtors 2,10,000
General Reserve 85,000 Stock 3,00,000
Capital A/cs: Furniture 60,000
Devang 4,00,000 Plant and Machinery 4,20,000
Darshan 3,00,000
Dashrath 2,00,000 9,00,000
10,40,000 10,40,000
From 1st April, 2016, they agree to alter their profit-sharing ratio as 4:3:2. It is also
decided that
(a) Furniture be taken at 70% of its value.
(b) Stock be appreciated by 25%.
(c) Plant and Machinery be valued at Rs. 4, 00,000.
(d) Outstanding Expenses be increased by Rs. 14, 000.
Partners agreed that altered values are not to be recorded in the books and they also
do not want to distribute the General Reserve. You are required to pass a single Journal
entry to give effect to the above. Also, prepare revised Balance Sheet.
OR
Binny, Vinnie and Pooh entered into partnership on 1st April, 2014. They contributed
capital Rs. 40, 000, Rs. 30, 000 and Rs. 20, 000 respectively and agreed to share profits
in the ratio of 3:2:1. Interest on capital was to allowed @ 15% p.a. and interest on
drawings was to be charged at an average rate of 5%. During the years ended 31st
March, 2016, the firm made profit of Rs. 21,600 and Rs. 25,140 respectively before
allow or charging interest on capital and drawings. The drawings of each partner were
Rs. 6,000 per year. On 31st March, 2016, the partners decided to dissolve the
partnership due to difference of opinion. On that date, the creditors amounted to Rs.
20,000. The assets, other than cash Rs. 2,000, realized Rs. 1,21,000. Expenses of
dissolution amounted to Rs. 760.
Draw up necessary Ledger Accounts to close the books of the firm.
23. Rishi Ltd. is having an authorised capital of Rs. 60,00,000 divided into equity shares of
Rs. 100 each. The company offered 54,000 shares to the public. The amount payable
was as follows: [8]
On Application - Rs. 30 per share
On Allotment - Rs. 40 per share (including premium)
On First and Final Call - Rs. 50 per share

Applications were received for 40,000 shares.
All sums were duly received except the following:
Laxmi, a holder of 100 shares did not pay allotment and call money.
Prodeep, a holder of 200 shares did not pay call money.
The company forfeited the shares of Laxmi and Prodeep. Subsequently, the forfeited
shares were reissued for Rs.80 per share as fully paid-up. Show the entries for the
above transactions in the Cash Book and Journal of the company.
(OR)
Pass necessary Journal entries in the following cases:
i. Orange Ltd. converted 1,000; 9% Debentures of Rs. 100 each issued at a discount of
10% into equity shares of Rs. 100 each issued at a premium of 25%.
ii. Kitkat Ltd. redeemed 4,000; 13% Debentures of Rs. 100 each which were issued at
a discount of 10 per debenture by converting them into equity shares of Rs. 100
each, Rs. 90 paid up.
PART – B
24. What is the Cost of Materials Consumed if the closing inventory of material is Rs.
41, 000, opening inventory is 52,000 and materials purchased during the accounting
year is Rs.25, 000? [1]
a) Rs. 14, 000
b) Rs. 36,000
c) Rs. 11,000
25. Cash Flow Statement is not a substitute for income statement. Why? [1]
26. Compute Total Assets Turnover Ratio from the information given below: [1]
Fixed Assets net of depreciation = Rs. 4, 00,000;
Current Assets = Rs. 3, 00,000;
Revenue from Operations = Rs. 14, 00,000.
The type of Analysis which used by the investor to identify whether the firm is
fulfilling his expectations with regard to dividends, capital appreciation, etc. is known
as ________________.
a) Security Analysis
b) Dividend Decision
c) Debt Analysis
d) Credit Analysis
28. While calculating Cash Flow from Operating Activities of Shahrukh Ltd. 'Depreciation
provided on fixed assets' was added to net profit. Was the accountant correct in doing
so? Give reason. [1]
The amount that is kept aside to meet future liability with an amount that is difficult to
ascertain but may be estimated and only in case if liability will arise after 12 months
or after the period of operating cycle is known as _________________.
a) Contingent Liability
b) Long-term Provision
c) Short-term Provision
d) Contingent Asset
30. (a) Under what heads and following items will appear in the Balance Sheet of a
company as per Schedule III of the Companies Act, 2013: [4]
(i) Tax Reserve
(ii) Interest on Calls-in-Advance
(iii) Stores and Spares?
(iv) Mining Rights
(b) Which are the three financial characteristics which are analysed by Financial
Analysis?
OR
Prepare a 'Comparative Statement of Profit and Loss' from the following information:
Particulars 31st March, 2016 31st March, 2015
300% of Raw Materials Tax 250% of Raw Materials
Revenue from Operations Consumed Consumed
Expenses:
Cost of Raw Materials
Consumed Rs. 6,00,000 Rs. 4,00,000
6% of Revenue from
Other Expenses Operations 6% of Revenue from Operations
Rate of Income Tax 50% of Net Profit before Tax 50% of Net Profit before Tax
31. Calculate 'Return on Investment' and 'Debt to Equity Ratio' from the following
information: [4]
Net Profit after Interest and Tax Rs.6,00,000
10% Debentures Rs.8,00,000
Tax Rate 40%
Capital Employed Rs.40,00,000
OR
Following are the transactions for which effect on quick ratio is to be determined
along with the reason for the same:
1. Paid rent Rs. 10, 000 in advance.
2. Debentures of Rs. 45, 000 were converted into equity shares.
32. Balance Sheets of Krish Ltd. as at 31st March, 2016 and 31st March, 2015 were: [6]
31st 31st
March, March,
Particulars
2016 2015
(`) (`)
I. EQUITY AND LIABILITIES
(a) Share Capital 10,00,000 6,00,000
(b) Reserves and Surplus: Surplus, re., Balance in Statement of
Profit and Loss 2,50,000 1,50,000
Short-term Provisions: Proposed Dividend 50,000 40,000
Total 13,00,000 8,90,000
II. ASSETS
Fixed Assets (Tangible): Plant and Machinery 8,00,000 5,00,000
2. Current Assets
(a) Inventories (Stock) 1,25,000 75,000
(b) Cash and Cash Equivalents 5,00,000 3,40,000
Total 13,00,000 8,90,000
1. Rs. 50, 000 depreciation has been charged to Plant and Machinery during' the year
2016.
2. A piece of machinery costing Rs. 12, 000 (book value Rs. 5, 000) was sold at 60%
profit on book value.
Prepare Cash Flow Statement.
CBSE
Sample Paper 3
PART – A
Answer 1
A partnership firm can have minimum two and maximum 50 partners as per the new
Companies Act, 2013 and vide Rule 10 of the companies (Miscellaneous) Rules, 2014.
Answer 2
Capital Account is debited because the claim of Capital Account is reduced by the value of
the asset that is taken over by the partner.
Answer 3
Option C: Memorandum Revaluation
Answer 4
Any balance left in Debentures Redemption Reserve after all debentures have been
redeemed is transferred to ‘General Reserve Account.’
Answer 5
Gaining Ratio, i.e., 6 : 2
Answer 6
Option D: Promoters
Answer 7
Option A: deducted from
Answer 8
If any reserves and accumulated profits or losses exist in the books of firm at the time of
change in profit sharing ratio, they are to be transferred to the Partners’ Capital Accounts
or their Current Accounts in their old profit sharing ratio as such existing reserves and
profits are earned before the reconstitution of the firm.
Answer 9
The excess of desired total capital of the firm over the actual combined capital of all
partners is known as hidden capital.
Answer 10
These shares can be reissued upto a discount of ` 8 per share or ` 1600.
Answer 11
Option A: 14 days’
Answer 12
Fixed Asset Fund is a fund earmarked for investment in fixed assets or already invested in
fixed assets. Any amount invested in fixed assets during the year is transferred to Capital
Fund.
Answer 13
General Donation received is shown in Income and Expenditure Account on the Credit side.
Answer 14
Option B: Present Value
Answer 15
STATEMENT SHOWING STATIONERY CONSUMED DURING 2017-18
Particulars `
Amount paid for during the year 2017 – 18 1,08,000
Add : Stock of Stationery for 1st April 2017 30,000
Add : Creditors for stationery on 31st March, 2018 13,000
Less : Stock of stationery on 31st March, 2018 (5,000)
Less : Creditors for stationery on 1st April, 2017 (20,000)
Stationery used during the year 2017-18 1,26,000
OR

for the year ended March 31,2019 (Extract)
Dr. Cr.
To Sports Material 2,80,000

Add : Opening Stock 16,000
Less: Closing Stock (44,000)
Less: Creditors in the beginning (12,000) 2,40,000
Balance Sheet
as on March 31,2019 (Extract)
Stock of Sport Materials 44,000
Answer 16
PROFIT AND LOSS APPROPRIATION ACCOUNT
for the year ended 31st March, 2017
To Interest on Capital: By Profit and Loss A/c-Net Profit 5,40,000
Bindu’s Capital A/c 2,16,000
Nirja’s Capital A/c 3,24,000 5,40,000
5,40,000 5,40,000
Working Notes:
1. Interest on Capital to Bindu = ` 20,00,000 × 12/100 = 2,40,000
Interest on Capital to Nirja = ` 30, 00,000 × 12/100 = 3,60,000
Total Interest = 6,00,000
2. Total Interest due to Bindu and Nirja is ` 6,00,000. However, total distributable profit is
just ` 5,40,000. So, total profit of ` 5,40,000 will be distributed between Bindu and Nirja
in the ratio of their due interest on capitals, i.e., ` 2,40,000 : ` 3,60,000. i.e., 2:3
Interest allowed to Bindu = ` 5, 40,000 × 2/5 = ` 2, 16,000; and
Interest allowed to Nirja = ` 5, 40,000 × 3/5 = ` 3, 24,000.
OR
When any of the partners of the firm guarantees minimum earnings to the firm, any
shortfall in the earnings made by the firm shall be debited to the Partner’s Capital A/c who
guarantees such earnings. In the given situation, amount of earnings made by the firm are
short by Rs. 9,000 as actual earnings (Rs. 41,000) are less than the guaranteed earnings
(Rs. 50,000). Since, N has guaranteed minimum earnings to the firm, such shortfall shall be
borne by N. Therefore, amount of shortfall of Rs. 9,000 is to be debited to N’s Capital A/c.
No other partner shall bear the shortfall as only N has guaranteed such minimum earnings
to the firm.
Answer 17
Journal
Dr. Cr.
` `
Cash A/c Dr. 1,10,500

-------- To Divya's Capital A/c 54,600
-------- To Akash's Capital A/c 55,900
(Being cash brought in by Divya and Akash to
adjust their capital in new profit sharing ratio)
Divya's Capital A/c Dr. 44,200

Akash's Capital A/c Dr. 66,300

--------To Nakul’s Capital A/c 1,10,500
(Being payment made to Nakul on his
retirement)
Working Notes
Adjusted Capital of Divya = 43,000
Adjusted Capital of Akash = 90,500
Amount Payable to Nakul = 1,10,500
Total Capital of the New firm = Total Adjusted Capital of Divya and Akash + Amount
Payable
= (43,000 + 90,500) + 1,10,500 = 2,44,000
New Ratio = 2:3
New Capital of Divya and Akash after Nakul’s retirement will be:
2
New Capital of Divya= 2,44,000   97,600
5
3
New Capital of Akash = 2,44,000   1, 46, 400
5
Calculation of Amount to be Paid off/Brought in by David and Aslam
Particulars Divya Akash
New Capital Balance 97,600 1,46,400
Old Adjusted Capital 43,000 90,500
Amount to be brought in 54,600 55,900
(Deficit) (Deficit)
It is also mentioned that Nakul will be paid by Divya and Akash such that their capitals
becomes proportionate in their new profit sharing ratio.
Total capital = ` 2,44,000

Paid by Divya = ` 97,600/ ` 2,44,000 = 0.4 = 0.4 × ` 1,10,500 = ` 44,200
Paid by Akash = ` 1,46,400/ ` 2,44,000 = 0.6 = 0.6 × ` 1,10,500 = ` 66,300
Remaining Capital of Divya and Nakul

David = ` 53,400 (` 97,600 - ` 44,200)
Aslam = ` 80,100 (` 1,46,400 - ` 66,300)
Answer 18
Computation of Adjusted Profit:
Journal
Adjusted
Year Profit (`) Adjustments
Profit (`)
2014-15 ` 35,000 – ` 5,625 for Management Cost 29,375
` 74,500 – ` 5,625 for Management Cost 68,875
2017-18 – ` 1,500 overvaluation of closing 67,375
Stock (1,500)
Total Profit 2,00,000
` 2,00,000
Average Profit   ` 50,000
4
Goodwill  Average Profit  No. of years purchase  ` 50,000  2  ` 1,00,000
1
Monika's Share of Goodwill  ` 1,00,000   ` 25,000
4
In the books of Rita, Shubhada & Monika

Journal
Dr. Cr.
` `
2018
Apr. 1 Cash A/c Dr. 85,000
-------- To Monika’s Capital A/c 60,000
-------- To Premium for Goodwill A/c 25,000
(Being Monika’s Capital and share of goodwill
brought in cash)
Apr. 1 Premium for Goodwill A/c Dr. 25,000

-------- To Rita’s Capital A/c 15,000
-------- To Shubhada’s Capital A/c 10,000
(Being Goodwill distributed among sacrificing
partners in the ratio 3:2)
OR
Goodwill  Super Profit  Number of Years Purchase

Normal Rate Return
Normal Profit  Capital Employed 
100
15
 1,00,000   ` 15,000
100
Actual Profit  ` 32,000
Super Profit  Actual Profit  Normal Profit
 32,000  15,000  ` 17,000
Number of years purchase  4
Super Profit  17,000
 Goodwill  Super Profit  Number of Years Purchase
 Goodwill  17,000  4
 ` 68,000
Answer 19
Journal
Debit Credit
Particulars L.F.
` `
General Reserve A/c Dr. 90,000
Workmen Compensation Reserve A/c Dr. 12,000
----------To E’s Capital A/c 51,000
----------To F’s Capital A/c 34,000
----------To G’s Capital A/c 17,000
(Being Accumulated Profit distributed among partners in
old ratio)
E’s Capital A/c Dr. 7,500

F’s Capital A/c Dr. 5,000
G’s Capital A/c Dr. 2,500
----------To Profit and Loss A/c 15,000
(Being Debit balance in profit and Loss account distributed
among partners in old ratio)
Working Notes:
1. Total Credit Balance of Reserves
= General Reserve + Workmen Compensation Reserve
= 90,000 + 12,000
= 1, 02,000
Distribution of Reserves
3
E's share Reserve  1,02,000   51,000
6
2
F's share Reserve  1,02,000   34,000
6
1
G ' s share Reserve  1,02,000   17,000
6
2. Distribution of Debit Balance of Profit and Loss A/c
3
E's share  15,000   7,500
6
2
F 's share =15,000   5,000
6
1
G 's share=15,000   2,500
6
Note: Employees’ Provident fund being a liability will not be distributed.
Answer 20
In the books of ……
Journal
Dr. Cr.
` `
(a) Bank A/c Dr. 3,20,000

--------- To Realisation A/c 3,20,000
(Being a creditor of 4,80,000 accepted machinery
valued at 8,00,000 and paid 3,20,000 to the firm)
(b) No entry*
(c) Realisation A/c Dr. 45,000

-------- To Bank A/c 45,000
(Being third creditor of 1,05,000 accepted 45,000 in
cash and investments worth 47,000 in full settlement
of his claim)
(d) Laila’s Capital A/c Dr. 9,000

Praful’s Capital A/c Dr. 21,000
-------- To Realisation A/c 30,000
(Being Loss on dissolution transferred to partners
capital accounts)
*Note: No entry is required since both asset and liability are already transferred to the
Realization Account
OR
In the books of Ramlila Ltd

Journal
Dr. Cr.
` `
(i)
2014 Own Debentures A/c Dr. 19,60,000
Apr 01
-------- To Bank A/c 19,60,000
(Being purchase of 20,000 own debentures @
` 98 each)
9% Debentures A/c Dr. 20,00,000

-------- To own Debentures A/c 19,60,000
---------To Gain (Profit) on cancellation 40,000
(Being cancellation of own debentures)
Gain (Profit) on Cancellation A/c Dr. 40,000

-------- To Capital Reserve A/c 40,000
(Being transfer of Gain (Profit) on redemption of
debentures to Capital Reserve)
(ii)
2015 9% Debentures A/c Dr. 18,00,000
Oct.01
-------- To Debentureholders A/c 18,00,000
(Being 9% Debenture due for redemption)
Debenturesholders A/c Dr. 18,00,000

-------- To Bank A/c 18,00,000
(Being amount paid to debentureholders)
(iii)
2016 Own Debentures A/c Dr. 10,95,000
Mar.31
-------- To Bank A/c 10,95,000
(Being purchase of 12,000 own debentures)
9% Debentures A/c Dr. 12,00,000

-------- To Own Debentures A/c 10,95,000
-------- To Gain (Profit) on Cancellation 1,05,000
(Being own debentures purchased and
cancelled)
Gain (Profit) on Cancellation A/c Dr. 1,05,000

-------- To Capital Reserve A/c 1,05,000
(Being transfer of Gain (Profit) on redemption of
debentures to Capital Reserve)
Answer 21
In the books of Adi National Club
for the year ended March 31,2015
Dr. Cr.
To Salaries 28,000 By Subscription 25,000
(50 members × `500 each)
Add : Outstanding for 2015 2,000 By Rent Received from the use 14,000
of hall
Less: Outstanding for 2014 (6,000) 24,000 By Profit from Entertainment 8,000
To General Expenses 6,000 By Sale of Old Newspapers 2,000
To Electricity Charges 4,000
To Newspaper 8,000
To Depreciation on Furniture 2,000
(20,000  10%)
To Surplus (Balancing Fig.) 5,000
49,000 49,000
Balance Sheet
as on April 01,2014
Salaries Outstanding 6,000 Subscriptions Outstanding 6,000
Capital Fund 2,47,000 Building 2,00,000
(Balancing Fig.) Furniture 20,000
Books 20,000
Cash at Bank 7,000
2,53,000 2,53,000
Balance Sheet
as on March 31,2015
Advance Subscription 4,000 Subscription
Outstanding
Salaries Outstanding 2,000 For 2014-15 5,000
(25,000  20,000)
Capital Fund 2,47,000 For 2013-14 1,000 6,000
(6,000 – 5,000)
Add : Surplus 5,000 2,52,000 Building 2,00,000
Furniture 20,000
Less : 10 % (2,000) 18,000
Depreciation
Books 20,000
Add : Purchases 10,000 30,000
Cash and Bank 4,000
2,58,000 2,58,000
Answer 22
Journal
Debit Credit
` `
Devang’s Capital A/c Dr. 3,000
---------- To Dashrath’s Capital A/c Dr. 3,000
(Being revaluation profit and general reserve
adjusted on change in profit sharing ratio)
Balance Sheet
Sundry Creditors 40,000 Cash at Bank 50,000
Outstanding Expenses 15,000 Sundry Debtors 2,10,000
General Reserve 85,000 Stock 3,00,000
Capital A/cs: Furniture 60,000
Devang 4,00,000 Plant and Machinery 4,20,000
Darshan 3,00,000
Dashrath 2,00,000 9,00,000
10,40,000 10,40,000
Working Notes:
1. Calculation of Sacrificing (or Gaining) Ratio
Old Ratio = 5:4:3
New Ratio = 4:3:2
Sacrificing (or Gaining) Ratio= Old Ratio- New Ratio
5 4 15  16 1
Devang's Share =    (Gain)
12 9 36 36
4 3 12  12
Darshan's Share     (Nil)
12 9 36
3 2 98 1
Dashrath's Share =    (Sacrifice)
12 9 36 36
2. Calculation of Profit or Loss on Revaluation
Particulars Amount
(`)
Increase in Stock 75,000 (Cr.)
Decrease Furniture (18,000)(Dr.)
Decrease in Plant and Machinery (20,000)(Dr.)
Increase in Outstanding Expenses (12,000)(Dr.)
Profit on Revaluation 23,000(Cr.)
3. Adjustment of Profit on Revaluation and General Reserve

Amount for Adjustment = Profit on Revaluation + General Reserve = 23,000 + 85,000
= Rs. 1,08,000
1
Amount to be debited to Devang's Capital 1,08,000 3,000
36
1
Amount to be credited to Dashrath's Capital 1,08,000 3,000
36
4.
Partner’s Capital Accounts
Dr. Cr.
Particulars Devang Darshan Dashrath Particulars Devang Darshan Dashrath
To Dashrath’s
Capital A/c 3,000 - - By Balance B/d 4,00,000 3,00,000 2,00,000
By Devang’s
Capital A/c - - 3,000
To Balance c/d 3,97,000 3,00,000 2,03,000

4,00,000 3,00,000 2,03,000 4,00,000 3,00,000 2,03,000
OR

For the year ended March 31,2015
Dr. Cr.
To Interest on Capital A/c By Profit and Loss A/c 21,600
Binny (40,000×15%) 6,000 By Interest on Drawings A/c
Vinnie (30,000×15%) 4,500 Binny (6,000×5%) 300
Pooh (20,000×15%) 3,000 13,500 Vinnie (6,000×5%) 300
Pooh (6,000×5%) 300 900
To Profit transferred to:
Binny’s Capital A/c 4,500
Vinnie’s Capital A/c 3,000
Pooh’s Capital A/c 1,500 9,000
22,500 22,500
Partners' Capital Account

For the year 2014-15
Dr. Cr.
Particulars Binny Vinnie Pooh Particulars Binny Vinny Pooh
To Drawings A/c 6,000 6,000 6,000 By Cash A/c 40,000 30,000 20,000
To Interest on By Interest on
Drawings A/c 300 300 300 Capital A/c 6,000 4,500 3,000
By P&L
To Balance c/d 44,200 31,200 18,200 Appropriation A/c 4,500 3,000 1,500
50,500 37,500 24,500 50,500 37,500 24,500

Dr. Cr.
To Interest on Capital A/c By Profit and Loss A/c 25,140
Binny (44,200×15%) 6,630 By Interest on Drawings A/c
Vinnie (31,200×15%) 4,680 Binny(6,000× 5%) 300
Pooh (18,200×15%) 2,730 14,040 Vinnie (6,000× 5%) 300
To Profit transferred to: Pooh (6,000× 5%) 300 900
Binny’s Capital A/c 6,000
Vinnie’s Capital A/c 4,000
Pooh’s Capital A/c 2,000 12,000
26,040 26,040
Partners' Capital Account

Dr. Cr.
Particulars Binny Vinnie Pooh Particulars Binny Vinnie Pooh
To Drawings A/c 6,000 6,000 6,000 By Balance b/d 44,200 31,200 18,200
To Interest on By Interest on
Drawings A/c 300 300 300 Capital A/c 6,630 4,680 2,730
By P&L
To Balance c/d 50,530 33,580 16,630 Appropriation A/c 6,000 4,000 2,000
56,830 39,880 22,930 56,830 39,880 22,930
To Cash A/c 51,280 34,08016,880 By Balance b/d 50,530 33,580 16,630

By Realisation A/c
(Profit) 750 500 250
51,280 34,080 16,880 51,280 34,080 16,880
Realisation Account
Dr. Cr.
To Sundry Assets 1,18,740 By Creditors A/c 20,000
To Cash A/c By Cash A/c (Assets realized) 1,21,000
Creditors 20,000
Expenses 760 20,760
To Profit transferred to:
Binny’s Capital A/c 750
Vinnie’s Capital A/c 500
Pooh’s Capital A/c 250 1,500
1,41,000 1,41,000
Cash Account
Dr. Cr.
To Balance b/d 2,000 By Realiastion A/c 20,760
To Realiastion A/c 1,21,000 By Binny’s Capital A/c 51,280
By Vinnie’s Capital A/c 34,080
By Pooh’s Capital A/c 16,880
1,23,000 1,23,000
Memorandum Balance Sheet

As on March 31, 2016
Capital A/c: Cash 2,000
Binny 50,530 Sundry Assets 1,18,740
Vinnie 33,580
Pooh 16,630 1,00,740
Creditors 20,000
1,20,740 1,20,740
Answer 23
Journal
Debit Credit
` `
-------- To Equity Share Capital A/c 12,00,000
(Being application money transferred to share capital)
Equity Share Allotment (40,000  40) Dr. 16,00,000

-------- To Securities Premium Reserve A/c 8,00,000
(Being allotment money due)
Equity Share First and Final Call A/c (40,000  50) Dr. 20,00,000
(Being first call money due)
Equity Share Capital A/c (300  100) Dr. 30,000

Securities Premium Reserve A/c (100  20) Dr. 2,000
-------- To Equity Share Allotment A/c (100  40) 4,000
-------- To Equity Share First and Final Call (300 50) 15,000
-------- To Equity Share Forfeiture A/c 13,000
(Being 300 shares forfeited of nonpayment of allotment
and call money)
Equity Share Forfeiture A/c (300  30) Dr. 6,000

-------- To Equity Share Capital A/c 6,000
(Being share reissued)
Equity Share Forfeiture A/c Dr. 7,000

(Being profit on reissue transferred to capital reserve)
Cash Book
Dr. Cr.
Date Particulars J.F. ` Date Particulars J.F. `
To Equity Share Application A/c 12,00,000 By Balance c/d 48,02,000

(40,000  30)
To Equity Share Allotment A/c 15,96,000
(39,900  40)
To Equity Share First & Final Call
A/c (39,700  50) 19,85,000
To Equity Share Capital A/c
(300  80) 24,000
48,05,000 48,05,000
Working Notes :
Calculation of Share Forfeiture Amount
Application money received from Laxmi = `3,000 (100  `30)
Application & Allotment money received from Prodeep = `10,000 (200  50)
OR
Books of Orange Ltd.

Journal
Debit Credit
` `
9% Debenture A/c Dr. 1,00,000
-------To Debenture holders A/c 90,000
-------To Discount on issue of Debenture A/c 10,000
(Being 1,000, 9% debenture of ` 100 each (issue at
discount of 10%) due for redemption)
Debenture holders A/c Dr. 90,000

-------To Equity Share Capital A/c 72,000
-------To Securities Premium A/c 18,000
(Being payment made to debenture holder by
issuing 720 Equity share of `100 each at premium
of `25%)
Working Note:
Amount Payble to Debentureholder
Number of Shares to be issued 
price of a Share
90,000
Number of Shares to be issued   720 Equity Share
125(100  25)
Books of Kitkat Ltd.

Journal
Debit Credit
` `
13% Debenture A/c Dr. 4,00,000
-------To Debenture holders A/c 3,60,000
-------To Discount on issue of Debenture A/c 40,000
(Being 4,000 13% debenture of `100 each (issue at
discount of 10%) due for redemption)
Debenture holders A/c Dr. 3,60,000

Discount A/c Dr. 40,000
-------To Equity Share Capital A/c 4,00,000
(Being payment made to debenture holder by
issuing 4,000 equity share of `100 each at discount
of `10)
Working Note:
Amount Payble to Debentureholder
Number of Shares to be issued 
price of a Share
3,60,000
Number of Shares to be issued   4,000 Equity Share
90
PART – B
Answer 24
Option B: Rs.36, 000
(Hint: Cost of Material Consumed = Opening Inventory + Material Purchased – Closing
Inventory)
Answer 25
Income Statement takes into account both cash as well as non-cash transaction, Whereas
Cash Flow Statement takes into account only cash transaction. Cash Flow Statement does
not calculate profit or loss of the business. Hence, Cash Flow Statement cannot be
substituted for income statement.
Answer 26
Revenue from Operations
Total Assets Turnover Ratio =
Total Assets
14,00,000 14,00,000
 =  2 times
 4,00,000  3,00,000 7,00,000
Answer 27
Option A: Security Analysis
Answer 28
Yes, the accountant of Shahrukh Ltd. was correct because depreciation is a non-cash
expense.
Answer 29
Option B: Long-term Provision
Answer 30
(a)
Items Major Head
(i) Tax Reserve Shareholders' Funds
(ii) Interest on Calls-in-Advance Current liabilities
(iii) Stores and Spares Current Assets
(iv) Mining Rights Non-current Assets
(b)
The three financial characteristics which are analysed by financial analysis are Liquidity,
Profitability and Solvency.
OR
COMPARATIVE STATEMENT OF PROFIT AND LOSS for the years ended 31st March, 2015
and 2016
Absolute Percentage
31st
31st March, Change Change
March,
Particulars 2015 (Increase/ (Increase/
2016
(`) Decrease) Decrease)
(`)
(`) (%)
I. Revenue from Operations
(Total Revenue) 10,00,000 18,00,000 8,00,000 80
II. Expenses:
(a) Cost of Raw Materials
Consumed 4,00,000 6,00,000 2,00,000 50
(b) Other Expenses 60,000 1,08,000 48,000 80
Total Expanses 4,60,000 7,08,000 2,48,000 53.91
III. Net Profit before Tax
(I - II) 5,40,000 10,92,000 5,52,000 102.22
Less: Income Tax 2,70,000 5,46,000 2,76,000 102.22
IV. Net Profit after Tax 2,70,000 5,46,000 2,76,000 102.22
Answer 31
Interest and Tax Net Profit before
(i) Return on Investment   100
Capital Employed
10, 80,000(Note)
  100 = 27%
40,00, 000
Note: Calculation of Net Profit before Interest and Tax:
`
Net Profit after Interest and Tax 6,00,000
Add: Interest on 10% Debentures 80,000
6,00,000  40
Add: Tax 
60 4,00,000
Net Profit before Interest and Tax 10,80,000
Debt 8,00,000
 ii  Debt to Equity Ratio    1 : 4.
Equity 32,00,000
Note: Debt = 10% Debentures = `5,00,000
Equity = Capital Employed – Debt
= ` 40,00,000 - ` 8,00,000 = ` 32,00,000.
OR
Following are the transactions for which effect on quick ratio is given as follows along with
the reason for the same.
1. Paid rent Rs.10,000 in advance:
 Effect: Decrease
 Reason: Quick Assets have decreased by 10,000 but current liabilities have not
changed. Therefore, Quick Ratio will decrease.
2. Debentures of Rs.45,000 were converted into equity shares:
 Effect: No Change
 Reason: Neither Quick Assets nor Current Liabilities are affected.
Answer 32
CASH FLOW STATEMENT
Particulars ` `
(A) Cash Flow from Operating Activities
Net Profit before Tax and Extraordinary Items (WN 1) 1,50,000
Adjustments for Non-Cash and Non-Operative Items:
Add: Depreciation on Plant and Machinery 50,000
Less: Profit on Sale of Machinery (WIN 2) (3,000)
Operating Profit before Working Capital Changes 1,97,000
Less: Increase in Inventories (Stock) (50,000)
Cash Generated from Operations 1,47,000
Less: Tax Paid ----
Cash Flow from Operating Activities 1,47,000
(B) Cash Flow from Investing Activities
Sale Plant and Machinery (WN 2) 8,000
Purchase of Plant and Machinery (WN 2) (3,55,000)
Cash Used in Investing Activities (3,47,000)
(C) Cash Flow from Financing Activities
Issue Share Capital 4,00,000
Dividend Paid (40,000)
Cash Flow from Financial Activities 3,60,000
(D) Net Increase in Cash and Cash Equivalents (A+B+C) 1,60,000
Add: Opening Cash and Cash Equivalents 3,40,000
(E) Closing Cash and Cash Equivalents 5,00,000
Working Notes:
1. Calculation of Net Profit before Tax and Extraordinary Items: `
Closing Balance as per Surplus, i.e., Balance in Statement of Profit and Loss 2,50,000
Less: Opening Balance as per Surplus, i.e., Balance in Statement of Profit and
Loss 1,50,000
1,00,000
Add: Proposed Dividend (Current Year) 50,000
Net Profit before Tax 1,50,000
2.
Plant and Machinery A/c
To Balance b/d 5,00,000 By Depreciation A/c 50,000
To Gain on Sale of Machinery A/c
(Profit) 3,000 By Bank A/c (Sale) 8,000
(Statement of Profit and Loss) (` 5,000 + 60% of 5,000)
To Bank A/c - Balancing Figure 3,55,000 By Balance c/d 8,00,000
(Purchases)
8,58,000 8,58,000
CBSE
Sample Paper 4
PART – A
Guarantee given to Partner X by other partners ‘Y’ and ‘Z’ means
a. In case of loss ‘X’ will contribute towards that loss
b. In case of loss or insufficient profits ‘X’ will withdraw minimum guaranteed amount
c. In case of insufficient profits ‘X’ will receive only share of his profits and not the
minimum guaranteed amount
d. In case of loss ‘X” will be required to bring in profits equal to minimum guaranteed
profits
2. Ranjan and Rajani are partners in a firm without a partnership deed. Ranjan’s Capital is
Rs. 20,000 and Rajani’s capital is Rs. 28,000. Ranjan has advanced a loan of Rs. 10,000
and claims interest @ 12% p.a. on it. State with reasons whether his claim is valid or
not. [1]
Sunil and Suman were partners in a firm sharing profits in 3:2 ratio. From 1 March,
st
2016, they decided to change it to 3:1. For this purpose the goodwill of the firm was
valued at Rs. 2,60,000. Which of the following is correct accounting treatment of
goodwill.
a. Debit Sunil, Credit Suman by Rs. 39,000
b. Debit Suman, Credit Sunil by Rs. 2,60,000
c. Debit Suman and Credit Sunil by Rs. 39,000
d. Debit Sunil, Credit Suman by Rs. 2,60,000
4. Aman Club is a Not-for-Profit Organisation. It has now realized the importance of

preparing books of accounts but does not have much of idea of the accounting
treatments for the following items. Suggest Aman Club the accounting treatment for
the below mentioned items to help them prepare books of account: [1]
i. Admission fee
ii. Life Membership fee
5. Varun, Vrijesh and Vrunda were partners sharing profits in the ratio of 5:3:2. Vrijesh
retired on 1st January, 2016 with A and C agreeing to share the profits in future in the
ratio of 6:4. Which of the following correctly defines the Gaining Ratio of Varun and
Vrunda? [1]
a. 2 : 1
b. 1 : 2
c. 5 : 2
d. 1 : 3
6. On 20.2.2016 the first call of Rs. 2 per share became due on 50,000 equity shares
allotted by Indrani Ltd. Inder a holder of 1200 shares did not pay the first call money.
Indu a holder of 850 shares paid the second and final call of Rs.4 per share along with
the first call. [1]
Which of the following is correct accounting treatment of in case if company follows
practice of using calls - in - arrears and calls - in - advance account in similar
circumstances.
a. Debit Calls-in-Arrears by Rs. 2,400 and Credit Calls-in-Advance by Rs. 3,400
b. Debit Calls-in-Advance by Rs. 2,400 and Credit Calls-in-Arrears by Rs. 3,400
c. Debit Calls-in-Arrears by Rs. 3,400 and Credit Calls-in-Advance by Rs. 2,400
d. Debit Calls-in-Advance by Rs. 3,400 and Credit Calls-in-Arrears by Rs. 2,400
7. What is Capital Fund? [1]
8. As per Rule 18(7)(b) of the Companies (Share Capital and Debentures) Rules, 2014 a
company shall transfer __________ of the nominal value (face value) of the outstanding
debentures to Debenture Redemption Reserve. [1]
a. At least 15%
b. Exactly 25%
c. At least 25%
d. Exactly 100%
9. On the firm’s dissolution, Joint Life Policy was Rs. 35,000. It was shown in the Balance
Sheet at Rs. 15,000. Policy was surrendered at 80%. What amount will be credited to
the Realisation A/c? [1]
a. Rs. 7,000
b. Rs. 13,000
c. Rs. 28,000
d. Rs. 35,000
10. Which of the following is the value of goodwill of the firm if it is to be valued at 3 years
purchase of super profits given that firm’s average profits are Rs. 1,00,000 and Normal
Profits as Rs. 40,000? [1]
a. Rs. 1,50,000
b. Rs. 1,80,000
c. Rs. 2,50,000
d. Rs. 3,80,000
11. A, B and C are partners sharing profits and losses in the ratio 5:5:2. C dies on 31 March
2016. Accounts are closed on 31 December every year. Sales for the year 2015
amounted to Rs. 18,00,000. Sales from 1 January 2016 to 31 March 2016 amounted to
Rs. 7,20,000. The profit for the year 2015 amounted to Rs. 90,000. What will be the
share of the deceased partner in the profit for the year? [1]
a. Rs. 6,000
b. Rs. 15,000
c. Rs. 30,000
d. Rs. 36,000
12. Which portion of the capital can be called-up only on winding up of the company? [1]
a. Reserve Capital
b. Capital Reserve
c. Issued Capital
d. Called-up Capital
13. A company issued 1,000, 10% debentures of Rs.100 each at a premium of 5%. What
will be the total amount of interest for one year? [1]
a. Rs. 5,000
b. Rs. 7,500
c. Rs. 10,000
d. Rs. 15,000
14. The amount which is received as donation by a Not-for-Profit Organisation under WILL
of a deceased person is known as [1]
a. Legacy
b. Deceased Donation
c. Special Receipts
d. Subscription
15. From the following, find out the amount of subscriptions to be included in the Income
and Expenditure Account for the year ended 31st March, 2015. Subscriptions were
received during the year 2014 - 15 as:
For the year 2013 - 14 Rs. 200
For the year 2014 - 15 Rs. 3,000
For the year 2015 - 16 Rs. 300
Subscriptions outstanding as at 31st March, 2014 were Rs. 350 out of which Rs. 50
were considered to be irrecoverable. On the same date, subscriptions received in
advance for 2014-15 were Rs. 200. Subscriptions still outstanding as at 31st March,
2015 amounted to Rs. 600. [3]
OR
Active Sports Club is a Not-for-Profit Organisation which undertakes various sports
activities for those who are interested in pursuing a sports carrier. The sports fund
available with the club on 1st April, 2017 is Rs. 2,00,000 which is invested in bank
deposit earning 10% returns. Expenses are incurred towards sports awards Rs.
10,000. Donation received is Rs. 30,000. Determine the amount of funds to be shown in
the balance sheet along with its presentation in the books of Active Sports Club. [3]
16. M, N and O are partners in the firm sharing profits and losses in the ratio of 5:3:2. From
01.04.2018 onwards they decide to share the profits and losses in the ratio of 5:2:3.
Calculate each partner’s gain or sacrifice ratio due to the change in the profit sharing
ratio. [3]
17. Aadi, Bali and Khali were partners sharing profits in the ratio of 6:4:5. Their capitals
were Aadi- Rs. 8,00,000, Bali- Rs. 4,80,000 and khali- Rs. 4,60,000. On 1st April, 2016,
Bali retired from the firm and the new profit-sharing ratio between Aadi and khali was
decided as 11:4. On Bali's retirement, the goodwill of the firm was valued at Rs.
5,25,000. Show your working clearly and pass necessary Journal entry for the
treatment of goodwill on Bali's retirement. [4]
18. Nirmal Business House has acquired the business of MTC Operators where the amount
of consideration paid involves payment towards net assets and goodwill. Management
of acquiring company is of the opinion that such goodwill cannot be recorded in the
books of accounts as per AS-26 on Intangible Assets. Decide whether the contention of
the management is correct. [4]
Or
Explain what are the liabilities of a Retiring Partner?
19. Vijesh and Vishal were partners in a firm sharing profits in the ratio of 3:2.
On 1.4.2015, Vrushali was admitted as a new partner for 1/6th the share in the profits
with a guaranteed profit of Rs. 2,50,000. The new profit sharing ratio between Vishal
and Vijesh will remain the same but they decided to bear any deficiency on account of
guarantee to Vrushali in the ratio 2:3. The profit of the firm for the year ended
31.3.2016 was Rs. 12, 00,000.
Prepare Profit and Loss Appropriation Account of Vijesh, Vishal and Vrushali for the
year ended 31.3.2016. [4]
20. Following is the Receipts & Payments Account of a Star Club for the year ending
Dec. 31, 2015: [6]
To Balance b/d 1,90,000 By Salaries 4,40,000
To Subscriptions 6,70,000 By Sports Equipment 4,00,000
To interest on investments
@8% p.a. for full year 40,000 By Balance c/d 1,60,000
Additional information:
i. The club had received Rs. 30, 000 for subscription in 2014 for 2015.
ii. Salaries had been paid only for 11 months
iii. Stock of sports equipment on 31st December 2014 was Rs. 3,50,000 and on 31st
December 2015 Rs. 7,00,000. Prepare Income & Expenditure Account.
21. The company issued 12% debentures on 1st Jan. 2008 of Rs. 10, 00,000 at 8% discount
redeemable at par. Assume further that debentures are to be redeemed by draw of lots
method in the following manner:
Year end Amount (for value)
2 Rs. 1,00,000
3 Rs. 2,00,000
4 Rs. 3,00,000
5 Rs. 4,00,000
Calculate the amount of discount on debentures to be written off each year and also
prepare discount on issue of debenture account. [6]
OR
Rajeev, Sarvil and Tarun were partners in a firm sharing profit in the ratio of 1:2:3. On
31-3-2015 their Balance sheet was as follows:
Balance Sheet of Rajeev, Sarvil and Tarun
as on 31-3-2016
Amount Amount
Liabilities Assets
Rs. Rs.
Creditors 50,000 Land 50,000
Bills Payable 35,000 Building 50,000
Plant 1,05,000
Capitals Stock 40,000
Rajeev 1,00,000 Debtors 35,000
Sarvil 50,000 Bank 10,000
Tarun 25,000 1,75,000
2,90,000 2,90,000
On the above date Danish was admitted as new partner and it was decided that:
(i) Goodwill of the firm will be valued at Rs. 2,70,000
(ii) Land will be revalued at Rs. 80,000 and building be depreciated by 6%.
(iii) Creditors of Rs. 6,000 were not likely to be claimed and hence should be written off
Prepare Revaluations Account, Partner’s Capital Accounts and Balance Sheet of the
reconstitute firm.
22. Gagan Ltd has issued 50,000 equity shares of Rs. 10 each at a premium of Rs. 2 per share
payable with application money. The incomplete journal entries related to the issue are
given below. You are required to complete these blanks. [8]
Books of Gagan Ltd

Journal
Dr. Cr.
Rs. Rs.
2016
Jan Dr.
12 ___________ _____
-------- To _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _____
(Being amount received on application for 75,000
shares @ Rs. 5 per share including premium)
Jan Dr.
21 Equity Share Application A/c _____
-------- To _ _ _ _ _ _ _ _ _ _ _ _ _ _ _____
-------- To _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _____
-------- To _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _____
-------- To _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _____
(Being Transfer of application money to share
capital securities premium, money refunded for
10,000 shares for rejected application and balance
adjusted towards amount due on allotment as
shares were allotted on Pro-rata basis)
Jan Dr.
27 __________ _____
-------- To _ _ _ _ _ _ _ _ _ _ _ _ _ _ _____
(Being Amount due on allotment @ Rs. 4 per share)
Feb
19 ____________ _____
-------- To _ _ _ _ _ _ _ _ _ _ _ _ _ _ _____
(Being Balance amount received on allotment)
April Dr.
03 _________ _____
-------- To _ _ _ _ _ _ _ _ _ _ _ _ _ _ _____
(Being First and Final Call money due)
April Dr.
18 __________ _____
Calls – in – arrears A/c Dr. 1,500
-------- To _ _ _ _ _ _ _ _ _ _ _ _ _ _ _____
(Being Money received on First and Final Call)
April Dr.
23 _________ _____
-------- To _ _ _ _ _ _ _ _ _ _ _ _ _ _ _____
-------- To _ _ _ _ _ _ _ _ _ _ _ _ _ _ _____
(Being Forfeited the shares on which call money
was not received)
Oct 5 __________ Dr. _____

__________ Dr. _____
-------- To _ _ _ _ _ _ _ _ _ _ _ _ _ _ _____
(Being Re-issued the forfeited shares @ 8 per share
fully paid up)
____ Dr.
_ _ _ _ _ _ _ _ _ __ _____
-------- To _ _ _ _ _ _ _ _ _ _ _ _ _ _ _____
(_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ __ )
OR
Silent Ltd. invited applications for issuing 3, 20,000 equity shares of Rs. 10 each at a
premium of Rs. 5 per share. The amount was payable as follows:
On application Rs. 3 per share (including premium Rs. 1 per share)
On allotment Rs. 5 per share (including premium Rs. 2 per share)
On First and Final Call - Balance.
Applications for 4, 00,000 shares were received. Applications for 40,000 shares were
rejected and application money refunded. Shares were allotted on pro-rata basis to the
remaining applicants. Excess money received with applications was adjusted towards
sums due on allotment. Jagdish holding 800 shares failed to pay the allotment money
and his shares were immediately forfeited. Afterwards final call was made. Gajanan
who had applied for 2,700 shares failed to pay the final call. His shares were also
forfeited. Out of the forfeited shares 1,500 shares were re-issued at Rs. 8 per share
fully paid up. The re-issued shares included all the forfeited shares of Jagdish.
Pass necessary journal entries for the above transactions in the books of the company.
23. Jazz, Harry and Kimmi were partners in a firm sharing profits in the ratio of 5:3:2. On
31-3-2016 their Balance Sheet was as follows: [8]
Balance Sheet of Jazz, Harry and Kimmi

as on 31-3-2016
Amount Amount
Liabilities Assets
Rs. Rs.
Creditors 80,000 Land & Building 1,55,000
Investment Fluctuation
Fund 20,000 Motor Vans 47,000
P & L Account 80,000 Investments 38,000
Capitals Machinery 24,000
Jazz 1,00,000 Stock 30,000
Harry 80,000 Debtors 80,000
Kimmi 40,000 2,20,000 Less : Provision 6,000 74,000
Cash 32,000
3,62,000 4,00,000
On the above data Harry retires and Jazz and Kimmi agreed to continue the business
on the following terms:
(i) Goodwill of the firm was valued at Rs. 1,02,000.
(ii) There was a claim of Rs. 9,000 for workmen's compensation.
(iii) Provision for bad debts was to be reduced by Rs. 3,000.
(iv) Harry will be paid Rs.14,000 in cash and the balance will be transferred in his
loan account which will be paid in four equal yearly installments together with
interest @ 10% p.a.
(v) The new profit sharing ratio between Jazz and Kimmi will be 3:2 and their
capitals will be in their new profit sharing ratio. The capital adjustments will be
done by opening current accounts.
Prepare Revaluation Account, Partner’s Capital Accounts and Balance Sheet of the new
firm.
OR
Arbaaz, Birbal and Chintan were partners in a firm sharing profit in the ratio of 3:2:1. On
Balance Sheet of Arbaaz, Birbal and Chintan as on 31-3-2016
Amount Amount
Liabilities Assets
Rs. Rs.
Creditors 87,000 Bank 17,000
Stock 1,10,000
Capitals Investments 30,000
Arbaaz 60,000 Furniture & Fittings 10,000
Birbal 40,000 Machinery 38,000

Chintan 20,000 1,20,000
2,28,000 2,28,000
On the above date Dhaval was admitted as new partner and it was decided that
(i) The new profit sharing ratio between Arbaaz, Birbal, Chintan and Dhaval will be
2:1:1:1.
(ii) Goodwill of the firm was valued at Rs. 90,000 and Dhaval brought his share of
goodwill premium in cash.
(iii) The Market value of investments was Rs. 23,000
(iv) Machinery will be reduced to Rs. 31,000
(v) A Creditor of Rs. 5,000 was not likely to claim the amount and hence to be written
off.
(vi) Dhaval will bring proportionate capital so as to give him 1/6th share in the profits of
the firm.
Prepare Revaluations Account, Partner’s Capital Accounts and Balance Sheet of the
reconstitute firm.
PART – B
24. “Declaration of final dividend” will result into ___________. [1]

a. Cash Inflow
b. Cash Outflow
c. No Flow
d. Can’t Say
25. Oswal Ltd., is carrying on a Mutual Fund business. It invested Rs. 50,00,000 in shares
and Rs. 25,00,000 in debentures of various companies during the year. It received
Rs. 5,00,000 as dividend and interest. Find out Cash Flow from Investing Activities. [1]
a. Nil
b. 5,00,000 Inflow
c. 70,00,000 Inflow
d. 75,00,000 Outflow
26. Under what heads and following items will appear in the Balance Sheet of a company
as per Schedule III of the Companies Act, 2013: [1]
(i) Encashment of Employees Earned Leave payable on retirement
(ii) Mining Rights
27. Interest or Dividend received by a non-financial enterprise is regarded as _________. [1]

a. Cash Inflow from Operating Activities
b. Cash Inflow from Investing Activities
c. Cash Inflow from Financing Activities
d. No flow item and will not be recorded
28. Ascertain the amount of Net Profit from the information provided below: [1]
Opening Stock Rs. 30,000, Closing Stock Rs. 50,000, Purchases Rs. 1,80,000, Adjusted
Purchases Rs. 1,35,000, Carriage Rs. 5,000, Bad Debts Recovered Rs. 5,500, Freight
Outwards Rs. 3,000 and Sales Rs. 4,00,000.
a. Rs. 2,50,500
b. Rs. 2,58,500
c. Rs. 2,62,500
d. Rs. 2,65,500
29. If Total Assets are Rs. 13,20,000, Non-Current Assets Rs. 6,00,000 and Capital
Employed is Rs. 12,00,000. Which of the following correctly represents the current
ratio for the venture? [1]
a. 2 : 1
b. 4 : 1
c. 6 : 1
d. 7 : 1
30. From the details given below, calculate the following ratios. [4]
(a) Inventory (Stock) Turnover Ratio
(b) Operating Ratio
Rs. Rs.
Revenue from Operations
(Net Sales) 2,20,000 Debtors 16,000
Cost of Revenue from
Operations, i.e., Operating Expenses 19,000
Cost of Goods Sold 1,80,000 Net Fixed Assets 1,35,000
Opening Inventory 28,000
Closing Inventory 32,000
31. From the following information provided, prepare Comparative Statement of Loss for
the period 2016 and 2015: [4]
Revenue from Operations Rs. 8,00,000 Rs. 5,00,000
30% of Revenue 50% of Revenue
Cost of Materials Consumed from Operations from Operations
Other Expenses 5% 15%

% (Revenue from Operations - Cost of Materials
Consumed)
Income Tax 50% 50%
OR
Give the points of differences between Horizontal Analysis and Vertical Analysis.
32. Following are the Balance Sheets of Krishna Ltd. as on 31st March, 2016 and 2015: [6]
BALANCE SHEETS OF KRISHNA LTD.
as of 31st March, 2016 and 2015
Particulars Note No. 31st March, 31st March,
2016 2015
1. Shareholders' Funds
a. Share Capital 16,00,000 12,00,000
b. Reserves and Surplus 5,00,000 4,00,000
2. Non-Current Liabilities
a. Long-term Borrowings 7,80,000 4,20,000
Trade Payables 1,00,000 60,000
Short-term Provisions 2,80,000 2,00,000
Total 32,60,000 22,80,000
II. ASSETS
a. Fixed Assets:
i. Tangible Assets 16,00,000 9,00,000
ii. Intangible Assets 2,40,000 3,00,000
2. Current Assets
a. Inventories 4,00,000 3,50,000
b. Trade Receivables 8,50,000 6,50,000
c. Cash and Cash Equivalents 1,70,000 80,000
Total 32,60,000 22,80,000
Notes to Accounts
31st 31st
Particulars March, March,
2016 2015
1. Reserves and Surplus
Surplus, i.e., Balance in Statement of Profit and Loss 5,00,000 4,00,000
2. Short-term Provisions
Provision for Tax 80,000 60,000
3. Tangible Assets
Machinery 17,60,000 10,00,000
Less: Accumulated Depreciation (1,60,000) (1,00,000)
16,00,000 9,00,000
4. Intangible Assets
Goodwill 2,40,000 3,00,000
Prepare Cash Flow Statement after taking into account the following adjustment: Tax paid
during the year amounted to Rs. 1, 10,000.
CBSE
Sample Paper 4
PART – A
Answer 1
Option B: In case of loss or insufficient profits ‘X’ will withdraw minimum guaranteed
amount
Answer 2
Claim of Ranjan is not valid because in the absence of partnership deed, interest on
partner’s loan will be given @ 6% p.a.
Answer 3
Option A: Debit Sunil, Credit Suman by Rs. 39, 000
Date Particulars L.F. Debit Credit
Rs. Rs.
Sunil’s Capital A/c Dr. 39,000
--------To Suman’s Capital A/c 39,000
(Being adjustment made for goodwill at the time of change in
ratio)
Note: Goodwill adjustment amount = 2, 60,000 × 3/20 = 39,000
Answer 4
Accounting treatment for the following items is as follows:
i. Entrance/Admission Fee: It is an amount paid by the person at the time of becoming a
member of the club or trust or any Not-for-Profit Organisation. Such item is a revenue
receipt and therefore, is accounted as an income and credited to Income and
Expenditure Account.
ii. Life Membership Fee: It is not accounted as an income because a life member makes a
one-time payment and avails life time services. Therefore, it is accounted as a Capital
Receipt and added to Capital Fund on the liabilities side of the Balance Sheet.
Answer 5
Option B: 1 : 2
Working
Old Share = 5 :3: 2
New Share of Varun and Vrunda = 6:4 … (Given)
Gain Ratio = New Ratio− Old Ratio
A = 6/10 – 5/10 = 1/10

C = 4/10 – 2/10 = 2/10
Answer 6
Option A: Debit Calls-in-Arrears by Rs. 2,400 and Credit Calls-in-Advance by Rs. 3,400
In the books of Indrani Ltd

Journal
Dr. Cr.
Rs. Rs.
2016
Feb 20 Equity Share First Call A/c Dr. 1,00,000
(Being first Call money due on 50,000 equity shares
@ Rs.2 each)
Bank A/c Dr. 1,01,000

Calls – in – Arrears A/c Dr. 2,400
-------- To Equity Share First Call A/c 1,00,000
-------- To Calls – in – Advance A/c 3,400
(Being amount received on first call except 1200
shares @ Rs.2 each and second and final call
received in advance @ Rs.4 each on 850 shares)
Answer 7
Capital Fund is the excess of assets over liabilities of a Not-For-Profit Organisation.
Answer 8
Option C: At least 25%
Rule 18(7)(b) of the Companies (Share Capital and Debentures) Rules, 2014 prescribes that
a company shall transfer at least 25% of the nominal value (face value) of the outstanding
debentures to Debenture Redemption Reserve.
Answer 9
Option C: Rs. 28,000
On dissolution, Joint Life Policy is transferred to the realisation account like any other
asset. When Joint Life Policy is surrendered, it is credited to the realisation account at
realised value, i.e. 28,000. 35,000  80%
Answer 10
Option B: Rs. 1,80,000
Super Profit = Average Profit – Normal Profit

= 1,00,000 – 40,000 = 60,000
Goodwill = Super Profit × No. of years’ Purchase
= 60,000 × 3 = 1,80,000
Answer 11
Option A: ` 6,000
Calculation of Pr ofit from January 01, 2016 to March 31, 2016 on the basis of sales
If sales are ` 18,00,000 , Profit is ` 90,000
90,000
If sales are ` 7,20,000 , Profit = 7,20,000 × = ` 36,000
18,00,000
2
C's Share = 36,000 × = ` 6,000
12
Answer 12
Option A: Reserve Capital
Reserve Capital is a part of Subscribed Capital remaining uncalled that a company resolves,
by a Special Resolution, not to call except in the event of winding-up of the company.
Answer 13
Option C: Rs. 10, 000
Interest on debenture is always calculated on the face value of the debenture.

In the given question, the face value of the debentures is:
Rs. 100 × 1,000 = Rs. 1, 00,000
Accordingly the amount of interest on such debentures is:
1, 00,000 × 10% = Rs. 10, 000
Answer 14
Option A: Legacy
The amount which is received as donation by a Not-for-Profit Organisation under WILL of a

deceased person is known as Legacy. The accounting treatment of legacy depends upon the
nature of receipt and conditions specified with that receipt. In case there are any specific
conditions, then it is classified as a ‘Specific Donation’ and if there are no specific
conditions, then it is accounted as ‘General Donation’.
Answer 15
Subscriptions Account
Dr. Cr.
Date Particulars Rs. Date Particulars Rs.
2014 2014
April To Outstanding 350 April By Subscriptions Received
01 Subscription A/c 01 in
To Income and Expenditure 3,700 Advance A/c 200
A/c
(Balancing Figure) By Income and Expenditure 50
A/c
2015 (For Bad Debts)
March To Subscriptions Received By Bank A/c 3,500
31 in
Advance A/c 3,00 [Rs.(200 + 3,000 + 300)]
2015
March By Outstanding 600
31 Subscriptions A/c
4,350 4,350
OR
In the books of Active Sports Club, the funds will be shown as follows:
Sports Fund
Opening Balance 2, 00,000
Add: Donation 30,000
Interest earned on deposit 20,000
2, 50,000
Less: Expenses for the year 10,000
Shown on the liabilities side of the Balance Sheet 2, 40,000
Answer 16
From the details given in the question, sacrifice or gain ratio can be calculated using
following formula:
Sacrificed Share = Old Share – New Share
Accordingly,
Old Profit Sharing Ratio = 5;3:2
New Profit Sharing Ratio = 5:2:3
M = 5/10 – 5/10 = 0
N = 3/10 – 2/10 = 1/10 (Sacrifice)
O = 2/10 – 3/10 = -1/10 (Gain)
Therefore, from the above calculation, N will sacrifice 1/10th share and O will gain 1/10th of
share.
Answer 17
JOURNAL
Debit Credit
Rs. Rs.
2016
April 1 Aadi's Capital A/c Dr. 1,75,000
-------To Bali’s Capital A/c 1,40,000
-------To Khali’s Capital A/c 35,000
(Being the treatment of goodwill on Bali's
retirement)
Working Note:
Calculation of Gaining Ratio (New Ratio - Old Ratio)
11 6 5
Aadi's Gain    (Gain);
15 15 15
4 5 1
Khali's Gain     (Sacrifice)
15 15 15
Thus, Aadi is the only gaining partner. He will compensate not only Bali but also Khali, the
sacrificing partner.
Goodwill of the firm = Rs. 5,25,000
Bali's Share = Rs. 5,25,000 × 4/15 = Rs. 1,40,000
Aadi to compensate Khali to the extent of sacrifice made by him, Rs. 5,25,000 × 1/15
= 35,000.
Answer 18
As per AS-26 on Intangible Assets self-generated goodwill is not recognised as an asset in
the books of account. It means that the goodwill which is internally generated by the
company over past few years, cannot be recognised as it is self-generated by the business.
However, no such provision is mentioned for purchased goodwill which is acquired in the
event of purchasing business.
Accordingly, in the given question, goodwill has been purchased by Nirmal Business House
in the event of acquiring MTC Operators and hence it is the purchased goodwill and not
self-generated goodwill. Therefore, such purchased is to be shown in the books of account
as an asset and hence, opinion given by the management is not correct.
OR
Retirement of a partner means retiring from the partnership firm or ceasing to be a partner
of the firm.
Liability of the retiring partner can be explained as follows:
1. Liability for the Acts before Retirement: Retiring partner shall remain liable for all the
acts of the firm up to the date of his retirement. Such liability can be discharged by an
agreement between himself, third party and continuing partners.
2. Liability for the Acts after Retirement: Retiring partner also continues to be liable to
third parties for the acts of the firm even after his retirement until a public notice of his
retirement is given.
Answer 19
Dr. Cr.
Particulars
Amount Amount
Particulars
Rs. Rs.
To Profit transferred to : By Profit and Loss A/c 12,00,000
Vijesh’s Capital A/c 5,70,000
Vishal’s Capital A/c 3,80,000
Vrushali’s Capital A/c 2,50,000 12,00,000
12,00,000 12,00,000
Woring Notes :
1
Vrushali's Share in Profit = 12,00,000 × = 2,00,000
6
Minimum Guaranteed Profit to Vrushali = 2,50,000
Deficiency = 50,000 (2,50,000 - 2,00,000)
Deficiency to be borne by Vijesh and Vishal in the ratio of 2:3
2
Amount to be borne by Vijesh = 50,000 × = 20,000
5
3
Amount to be borne by Vishal = 50,000 × = 30,000
5
Remaining Profit Share = 9,50,000
3
Vijesh's Profit Share = 9,50,000 × = 5,70,000
5
2
& Vishal's Profit Share = 9,50,000 × = 3,80,000
5
Answer 20
For the year ended 31st December, 2015
Dr. Cr.
Expenditure Rs. Income Rs.
To Salaries 4,40,000 By Subscription 6,70,000
Add: Advance
Add: outstanding 40,000 4,80,000 Subscription
To Dep. on sports received (PY)
equipment: 30,000 7,00,000
By Interest on
Opening stock 3,50,000 investments 40,000
Add: Purchases 4,00,000
7,50,000
Less: closing stock 7,00,000 50,000
To Excess of income over
expenditure, i.e, Surplus 2,10,000
7,40,000 7,40,000
Answer 21
1. Statement showing amount of discount to be written off each year:
Amount of discount = 10,00,000 × 8/100 = 80,000
Year Amount Ratio Discount to be written off

utilised
1 10,00,000 10 80,000 × 10/40 = 20,000
2 10,00,000 10 20,000
3 9,00,000 9 18,000
4 7,00,000 7 14,000
5 4,00,000 4 8,000
2. Discount on issue of Debentures Account:
Dr. Discount on issue of Debentures Account Cr.

Date Particulars Amount Date Particulars Amount
2008 2008
Jan. 01 To Debentures A/c 80,000 Dec.31 By P & L A/c 20,000
80,000 80,000
2009 2009
Jan.01 To Balance b/d 60,000 Dec.31 By P & L A/c 20,000
60,000 60,000
2010 2010
40,000 40,000
2011 2011
22,000 22,000
2012 2012
OR
Revaluation Account
Dr. Cr.
Amount Amount
Rs. Rs.
To Building A/c 3,000 By Land A/c 30,000
To Revaluation Profit A/c By Creditors A/c 6,000

Rajeev 5,500
Sarvil 11,000
Tarun 16,500 33,000
36,000 36,000

Dr. Cr.
Rajeev Sarvil Tarun Rajeev Sarvil Tarun
Rs. Rs. Rs. Rs. Rs. Rs.
To Tarun’s
Capital A/c 45,000 By Balance b/d 1,00,000 50,000 25,000
By Revaluation
Profit A/c 5,500 11,000 16,500
By General Reserve
A/c 5,000 10,000 15,000
By Rajeev’s Capital
A/c 45,000
To Balance c/d 65,500 71,000 1,01,500
1,10,500 71,000 1,01,500 1,10,500 71,000 1,01,500
Balance Sheet
Amount Amount
Liabilities Assets
Rs. Rs.
Capital
Rajeev 65,500 Land 50,000
Sarvil 71,000 Add :Increase 30,000 80,000
Tarun 1,01,500 2,38,000 Building 50,000
Less : Depreciation 3,000 47,000
Creditors 50,000
Less : Written off 6,000 44,000 Plant 1,05,000
Bank 10,000
Bills payable 35,000 Stock 40,000
Debtors 35,000
3,17,000 3,17,000
Working Notes :
Old Ratio New Ratio
1 : 2 :3 1 :1 :1
1 1 1
Sacrificing Ratio of Rajeev = Old Ratio - New Ratio     Gaining
6 3 6
2 1 0
Sacrificing Ratio of Sarvil = Old Ratio - New Ratio   
6 3 6
3 1 1
Sacrificing Ratio of Tarun = Old Ratio - New Ratio      Sacrificing
6 3 6
Rajeev will compensate Tarun, since he is gaining

Rajeev’s Capital A/c Dr. 45,000
-------- To Tarun’s Capital A/c 45,000
Answer 22
Books of Gagan Ltd
Journal
Dr. Cr.
Rs. Rs.
2016
Jan 12 Bank A/c Dr. 3,75,000
-------- To Equity Share Application A/c 3,75,000
(Being amount received on application for 75,000)
shares @ Rs.5 per share including premium)
Jan 21 Equity Share Application A/c Dr. 3,75,000

-------- To Securities Premium A/c 1,00,000
-------- To Equity Share Allotment A/c 75,000
-------- To Bank A/c (10,000  Rs.5) 50,000
(Being transfer of application money to share
capital securities premium, money refunded for
10,000 shares for rejected application and balance
adjusted towards amount due on allotment as
shares were allotted on Pro-rata basis)
Jan 27 Equity Share Allotment A/c Dr. 2,00,000

(Being amount due on allotment @ Rs.4 per share)
Feb.19 Bank A/c 1,25,000
-------- To Equity Share Allotment A/c 1,25,000

(Being balance amount received on allotment)
April.03 Equity Share First & Final Call (50,000  Rs.3) Dr. 1,50,000
(Being first and Final Call money due)
April
18 Bank A/c Dr. 1,48,500
Calls – in – arrears A/c (500  Rs.3) Dr. 1,500
-------- To Equity Share First and Final Call A/c 1,50,000
(Being money received on First and Final Call)
April
23 Equity Share Capital A/c (500  Rs.10) Dr. 5,000
-------- To Equity Share Forfeiture A/c (500 Rs. 7) 3,500
-------- To Equity Share First & Final Call A/c 1,500
(Being forfeited the shares on which call money
was not received)
Oct.5 Bank A/c (500  Rs.8) Dr. 4,000

Equity Share Forfeiture A/c (500  Rs.2) Dr. 10,000
(Being re-issued the forfeited shares @ Rs.8 per
Oct.5 Equity Share Forfeiture A/c Dr. 2,500

(Being amount Transferred to Capital Reserve)
OR
Books of Silent Ltd

Journal
Dr. Cr.
Rs. Rs.
Bank A/c Dr. 12,00,000

-------- To Equity Share Application A/c 12,00,000
(Being amount received on application for 4,00,000)


-------- To Bank A/c 1,20,000
(Being Amount of application transferred to Share
Capital and excess money is adjusted towards
allotment)
Equity Share Allotment A/c Dr. 16,00,000

(Being Amount due on allotment)
Bank A/c (Rs.16,00,000 – Rs.1,20,000 – Rs.3,700) Dr. 14,76,300

(Being Amount Received on Share Allotment)

-------- To Share Forfeiture A/c 1,900
-------- To Share Allotment A/c 3,700
(Being 800 shares of Jagdish are forfeited due to non
– payment of allotment money)
Equity Share First and Final A/c Dr. 22,34,400

(Being Amount due on first and final call on
3,19,200shares)
Bank A/c (Rs.22,34,400 – Rs.16,800) Dr. 22,17,600

-------- To Equity Share First and Final Call A/c 22,17,600
(Being Amount received on first and final call)

-------- To Equity Share First and Final Call A/c 16,800
(Being Shares of Gajanan were forfeited)
Bank A/c Dr. 12,000

(Being Forfeited shares were re-issued at Rs.8 per

(Being Excess amount on forfeiture is transferred to
capital reserve)
Computation Table
Money
Money
Money transferr
transfer Amount
Received ed to Excess
red to Adjuste
Applied Shares on Securitie Applicat Money
Share d on
Categori Shares Allotted Applicati s ion refunded
Capital Allotme
es on @ Premium money
@ Rs.2 nt
Rs.3 each @ Rs.1
each
each
I 40,000 1,20,000 1,20,000 1,20,000
II 3,60,000 3,20,000 10,80,000 6,40,000 3,20,000 1,20,000 1,20,000
4,00,000 3,20,000 12,00,000 6,40,000 3,20,000 2,40,000 1,20,000 1,20,000
Calculation of amount unpaid on Allotment

3,60,000
Share Applied by Jagdish   800  900 shares
3,20,000
Excess money received from Jagdish = 300 (100  3)

Amount due on Allotment = 2,400 (800  3)
Less : Excess Application Money = Rs. 300
Amount unpaid on Allotment = 2,100
Amount unpaid on Securities Premium = 1,600 (800  2)
Total amount unpaid on allotment = Rs. 3,700
Calculation of amount received from Jagdish (Share Forfeiture.Cr.)

Amount received on application = 1,600 (800  2) ⇒ excluding premium
Add : Excess Application money = 300
Share Forfeiture (Cr.) = 1,900
Unpaid amount on First and Final Call

3,20,000
Share Allotted to Gajanan   2,700  2, 400 shares
3,60,000
Unpaid amount on First and Final Call  16, 800 (2, 400  7)
Calculation of amount received from Gajanan (Share Forfeiture.Cr.)

Amount received on application = Rs. 4,800 (2,400  2) ⇒ excluding premium
Amount received on allotment = Rs. 7,200 (2,400  3) ⇒ excluding premium
Total amount received = Rs. 12,000
Calculation of Capital Reserve

(i) 800 shares of Jagdish are reissued
Share forfeiture (Cr.) = 900
Less :Share forfeiture (Dr.) = 1,600 (800  2)
Capital Reserve = 300
(ii) 700 Shares of Gajanan are reissued

Share Forfeiture (Cr.) for 700 shares =  12,000 
3,500   700 
 2, 400 
Less : Share Forfeiture (Dr.) = 1400 (700  2)
Capital Reserve = 2,100
Total Amount of Capital Reserve = 2,400 (2,100 + 300)
Answer 23
Revaluation Account
Dr. Cr.
Amount Amount
Rs. Rs.
To Claim for Workman By Provision for Doubtful
Compensation A/c 9,000 Debts A/c 3,000
By Loss on Revaluation
Jazz’s Capital A/c 3,000
Harry’s Capital A/c 1,800
Kimmi’s Capital A/c 1,200 6,000
8,000 8,000

Dr. Cr.
Jazz Harry Kimmi Jazz Harry Kimmi
To Revaluation
A/c 3,000 1,800 1,200 By Balance b/d 1,00,000 80,000 40,000
To Harry’s Capital
A/c 10,200 20,400 By IFF A/c 10,000 6,000 4,000
To Cash A/c 14,000 By P&L A/c 40,000 24,000 16,000
To Harry’s Loan By Jazz’s Capital
A/c 1,24,800 A/c 10,200
To Balance c/d 1,36,800 38,400 By Kimmi’s Capital 20,400
A/c
1,50,000 1,40,600 60,000 1,50,000 1,40,600 60,000
To Current A/c 31,680 By Balance b/d 1,36,800 38,400
To Balance c/d 1,05,120 70,080 By Current A/c 31,680
1,36,800 70,080 1,36,800 70,080
Balance Sheet
as on March 31,2016
Amount Amount
Liabilities Assets
Rs. Rs.
Creditors 80,000 Land and Building 1,55,000
Motor Vans 47,000
Capitals Investment 38,000
Jazz 1,05,120 Machinery 24,000
Kimmi 70,080 1,75,200 Stock 30,000
Debtors 80,000
Jazz’s Current A/c 31,680 Less : Provision 3,000 77,000
Claim for Workmen Cash
Comp. 9,000 (32,000 – 14,000) 18,000
Harry’s Loan A/c 1,24,800 Kimmi’s Current A/c 31,680
4,20,680 4,20,680
Working Notes :
WN1 : Calculation of Gaining Ratio
Gaining Ratio = New Ratio - Old Ratio
3 5 1
Jazz's   
5
10 10
2 2 2
Kimmi's   
5 10 10
Gaining Ratio  1 : 2
2
Kimmi's share  30,600   20, 400
3
WN2 : Adjustment of Goodwill

3
Harry's Share of Goodwill  1,02,000   30,600
10
30,600 will be debited to gaining partners (Jazz and Kimmi) in the ratio of 1 : 2
1
Jazz's share  30,600   10,200
3
2
Kimmi's share  30,600   20, 400
3
WN3: Adjustment of Capital
Adjusted Capital of Jazz = 1,00,000 + 10,000 + 40,000  3,000  10,200 = Rs. 1,36,800
Adjusted Capital of Kimmi = 40,000 + 4,000 + 16,000  1,200 – 20,400 = Rs. 38,400
Total Adjusted Capital = 1,36,800 + 38,400 = Rs. 1,75,200
3
Jazz's New Capital  1, 75, 200   1, 05, 120
5
2
Kimmi's New Capital  1, 75, 200   70, 080
5
Kimmi’s New Capital > Kimmi’s Adjusted Capital (K owes 31,680 to the firm)
Jazz’s New Capital < Jazz’s Adjusted Capital (Firm owes 31,680 to Jazz)
WN4: Amount transferred to Harry’s Loan A/c

Amount to be transferred = (Credit side – Debit side) – Cash paid
= (1,40,600 – 1,800) – 14,000 = Rs. 1,24,800
OR
Revaluation Account
Dr. Cr.
Amount Amount
Rs. Rs.
To Investment A/c 7,000 By Creditors A/c 5,000
To Machinery A/c 7,000 By Loss on Revaluation

Arbaaz’s Capital A/c 4,500
Birbal’s Capital A/c 3,000
Chintan’s Capital A/c 1,500 9,000
12,000 12,000

Dr. Cr.
Chinta
Arbaaz Birbal Chintan Dhaval Arbaaz Birbal Dhaval
Particulars Particulars n
Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Rs.
To Revaluation By Balance
A/c 4,500 3,000 1,500 c/d 60,000 40,000 20,000
By General
To Balance c/d 81,000 44,000 22,000 29,400 Reserve A/c 10,500 7,000 3,500
By Premium
For Goodwill
A/c 15,000
By Cash A/c 29,400
85,500 47,000 23,500 29,400 85,500 47,000 23,500 29,400
Balance Sheet
Amount Amount
Liabilities Assets
Rs. Rs.
Creditors 82,000 Bank (17,000 + 29,400 + 15,000) 61,400
Capitals : Debtors 23,000

-----Arbaaz 81,000
-----Birbal 44,000 Stock 1,10,000
-----Chintan 22,000
-----Dhaval 29,400 1,76,400 Investments 23,000
Furniture & Fittings 10,000
Machinery 31,000
2,58,400 2,58,400
Working Notes :
WN1 : Calculation of Sacrificing Ratio
Sacrificing Ratio  Old Ratio  New Ratio
3 2 1
Arbaaz's   
6 6 6
2 2
Birbal's    Nil
6 6
1 1
Chintan's    Nil
6 6
WN 2: Adjustment of Goodwill
1
Dhaval's Share of Goodwill  90,000   15,000
6
15,000 will be credited to Arbaaz's Capital A / c, as he is the only sacrificing partner
WN3: Calculation of Dhaval’s Proportionate Capital

Adjusted Old Capital of Arbaaz = 60,000 + 10,500 + 15,000  4,500 = 81,000
Adjusted Old Capital of Birbal = 40,000 + 7,000  3,000 = 44,000
Adjusted Old Capital of Chintan = 20,000 + 3,500  1,500 = 22,000
Total Adjusted Capital = 81,000 + 44,000 + 22,000 = 1, 47,000
Dhaval’s Proportionate Capital
= Total Adjusted Capital  Dhaval’s Profit Share  Reciprocal of Combined New Share of Old
Partners
1 6
 1, 47,000    29, 400
6 5
PART – B
Answer 24
Option C: No Flow
“Declaration of final dividend” will result into no cash flow as dividend is only declared, i.e.,
it is proposed but not yet paid.
Answer 25
Option A: Nil
Cash Flow from Investing Activities is Nil as Oswal Ltd. is a financing Co.
Answer 26
Items Major Head
(i) Encashment of Employees Earned Leave Non-current Liabilities
payable on retirement
(ii) Mining Rights Non-current Assets
Answer 27
Option B: Cash Flow from Investing Activities
Interest or Dividend received on loans advanced by a non-financial enterprise is regarded
as Cash Inflow from Investing Activities.
Answer 28
Option C: Rs. 2,62,500
Cost of Goods Sold = Adjusted Purchases + Direct Expenses

= 1,35,000 + 5,000 = 1,40,000
Gross Profit = Sales – Cost of Goods Sold
= 4,00,000 – 1,40,000 = 2,60,000
Net Profit = Gross Profit – Indirect Expenses + Indirect Incomes
= 2,60,000 – 3,000 + 5,500 = Rs. 2,62,500
Answer 29
Option C- 6 : 1
Current Assets = Total Assets – Non-Current Assets

= 13,20,000 – 6,00,000 = 7,20,000
Current Liabilities = Total Assets – Capital Employed
= 13,20,000 – 12,00,000 = 1,20,000
Current Ratio:
Current Assets 7,20,000
  6 :1
Current Liabilities 1,20,000
Answer 30
(a) Inventory (Stock) Turnover Ratio
Cost of Revenue from Operations, i.e., Cost of Goods Sold 1,80,000
   6 Times.
Average Inventory 30,000
Note: Average Inventory (Stock) = (Opening Inventory (Stock) + Closing Inventory
(Stock))/2
= (Rs. 28,000 + Rs. 32,000)/2 =Rs. 30,000.
Cost of Revenue from Operations  Operating Expenses

 b Operating Ratio   100
Net Sales
` 1, 80,000 + ` 19,000
  100  90.45%
` 2,20,000
= Rs. 40,00,000 - Rs. 8,00,000 = Rs. 32,00,000.
Answer 31
COMPARATIVE STATEMENT OF PROFIT AND LOSS for the years ended 31st March, 2015
and 2016
Absolute Percentage
31st 31st
Change Change
March, March,
Particulars (Increase/ (Increase/
2015 2016
Decrease) Decrease)
Rs. Rs.
(Rs.) (%)
(Total Revenue) 5,00,000 8,00,000 3,00,000 60
II. Expenses:
(a) Cost of Materials Consumed 2,50,000 2,40,000 (10,000) (4)
(b) Other Expenses 37,500 28,000 (9,500) (25.33)
Total Expanses 2,87,500 2,68,000 (19,500) (6.78)
III. Net Profit before Tax (I - II) 2,12,500 5,32,000 3,19,500 150.35
Less: Income Tax 1,06,250 2,66,000 1,59,750 150.35
IV. Net Profit after Tax 1,06,250 2,66,000 1,95,750 150.35
OR
Following are the points of differences between Horizontal Analysis and Vertical Analysis:
Basis Horizontal Analysis Vertical Analysis
1. Period It requires comparative It requires financial

financial statements of 2 or statement of one period.
more accounting periods.
2. Components or items It deals with same item of It deals with different items
different period. of same period.
3. Information Information is provided in It provides information in

absolute and percentage terms. percentage terms.
4. Usefulness It is useful for Time Series It is generally used for Cross

Analysis. Sectional Analysis.
5. Comparison It is a part of Comparison. It is a step towards

comparison.
Answer 32
In the Books of Krishna Ltd.
CASH FLOW STATEMENT for the year ended 31st March, 2016
Particulars Rs. Rs.
I. Cash Flow from Operating Activities
Net Profit before Tax (WN 1) 2,90,000
Add: Non-operating/Non-cash Items:
Depreciation on Machinery 60,000
Goodwill Written off 60,000
Operating Profit before Working Capital Changes 4,10,000
Add: Increase in Trade Payables 40,000
4,50,000
Less: Increase in Inventories (50,000)
Increase in Trade Receivables (2,00,000) (2,50,000)
Cash Generated from Operations 2,00,000
Less: Income Tax paid (WN 2) 1,10,000
Cash Flow from Operating Activities 90,000
II. Cash Flow from Investing Activities
Purchase of Machinery (7,60,000)
Cash Used in Investing Activities (7,60,000)
III. Cash Flow from Financing Activities
Issue of Shares 4,00,000
Raised Long-term borrowings 3,60,000
Cash Flow from Financing Activities 7,60,000
IV. Net increase in Cash and Cash Equivalents (I + II + III) 90,000
V. Add: Opening Balance of Cash and Cash Equivalents 80,000
VI. Closing Balance of Cash and Cash Equivalents (IV +V) 1,70,000
Working Notes:
1. Calculation of Net Profit Before Tax: Rs.
Surplus, i.e., Balance in Statement of Profit and Loss 1,00,000
Add: Provision for Tax 1,90,000
Net Profit before Tax 2,90,000
PROVISION FOR TAX ACCOUNT

Particulars Rs. Particulars Rs.
To Cash A/c (Tax paid) 1,10,000 By Balance b/d 2,00,000
To Balance c/d 2,80,000 By Statement of Profit & Loss 1,90,000
(Provision made)
3,90,000 3,90,000
CBSE
Sample Paper 5
PART – A
1. If a firm prefers Partners’ Capital Accounts to be shown at the amount introduced by
the partners as capital in firm then entries for salary, interest, drawings, interest on
capital and drawings and profits are made in: [1]
a. Trading Account
b. Profit and Loss Account
c. Balance Sheet
d. Partners’ Current Account
2. As per Section 37 of Indian Partnership Act, 1932, the executors would be entitled at
their choice to the interest calculated from the date of death till the date of payment on
the final amount due to the dead partner at __________ percent per annum. [1]
a. 5
b. 6
c. 10
d. 12
3. Which of the following is true with regard to 8% Debentures issued at a discount of

10%? [1]
a. The carrying amount of debentures gets reduced each year at a rate of 20%
b. Issue price and the carrying amount of debentures are equal
c. At the time of redemption, the debenture holder will be paid the issue price
d. The face value and carrying amount of debentures are equal
4. Monika and Manav are partners in a firm without any partnership Deed. Their capitals
are Rs. 15,00,000 and Rs. 10,00,000 respectively. Monika is an active partner and looks
after the business. Monika wants that profit should be shared in proportion of capitals.
State with reasons whether her claim is valid or not. [1]
5. The capital of Aman and Bipasha are Rs. 15,00,000 and Rs. 13,00,000. To increase the
capital base of the firm to Rs. 40,00,000, they admit Kiran. To join the firm, Kiran is
required to pay a sum of Rs. 14,00,000. What is the amount of premium for Goodwill? [1]
a. Rs. 1,00,000
b. Rs. 2,00,000
c. Rs. 14,00,000
d. Rs. 40,00,000
6. The firm of Rajvi and Mandar was dissolved on 1.3.2016. According to the agreement,
realisation expenses of Rs. 10,000 were to be borne and paid by Rajvi. What will be the
Journal entry recorded for the payment of dissolution expenses? [1]
a. Debit Realisation Account and Credit Bank Account with Rs. 10,000
b. Debit Realisation Account and Credit Rajvi’s Account with Rs. 10,000
c. Debit Rajvi’s Account and Credit Bank Account with Rs. 10,000
d. No Entry
7. Bela and Albela are partners in a firm sharing profits in the ratio of 4:1 respectively.
They admitted Bijoy as a new partner for 1/4 share in the profit, which he acquired
wholly from Bela. Which of the following would be the new profit-sharing ratio of the
partners. [1]
a. 1 : 1 : 1
b. 2 : 1 : 1
c. 9 : 8 : 7
d. 11 : 4 : 5
8. Why non-cash expenditure such as depreciation is not shown in the Receipts and
Payments Account? [1]
9. After all the debentures have been redeemed, the ‘Balance of Debenture Redemption
Reserve’ will be transferred to which account? [1]
a. Capital Reserve Account
b. Goodwill Account
c. General Reserve Account
d. Capital Redemption Reserve
10. State any two occasions for the dissolution of the firm on Court’s orders? [1]
11. X, Y and Z are three partners in a firm where Y and Z share father and son relation-ship.
The profit sharing ratio between X, Y and Z is 3:2:1. Y, Z’s father died on April 01, 2018
and as per Z, he is the rightful owner of his father’s share and accordingly now the
profits of the firm should be shared equally between X and Z. X has altogether different
view and seeks advice from you. Which of the following would be the future profit
sharing ratio between X and Z as per the Partnership Act? [1]
a. 1 : 1
b. 2 : 1
c. 3 : 1
d. Partnership ceases to exist
12. Rajat and Rajan are partners sharing profits in the ratio of 2:1. They admit Rajni into the
partnership for 1/4th share in profits for which she brings in 25,000 as her capital.
Hence, the adjusted capital of Rajat and Rajni would be: [1]
a. Rs. 50,000 and Rs. 25,000 respectively
b. Rs. 1,00,000 and Rs. 50,000 respectively
c. Rs. 50,000 and Rs. 37,500 respectively
d. Rs. 75,000 and Rs. 50,000 respectively
13. Bharat National Bank Ltd. is to redeem 50,000, 10% Debentures of Rs. 100 each on 31st
December 2018. How much amount shall be transferred to DRR by Bharat National
Bank? [1]
a. Zero
b. Rs.75,000
c. 1,25,000
d. Rs.5,00,000
14. ABC Ltd. issued 10,000 equity shares of Rs. 100 each at a premium of 15%. Karan, who
was allotted 1,000 shares did not pay first and final call of Rs. 20 per share. On
forfeiture of Karan’s share, what will be the amount debited to Securities Premium
Reserve Account. [1]
a. Nil
b. Rs. 5,000
c. Rs. 10,000
d. Rs. 15,000
15. In 2016-17, the subscriptions received were Rs. 42,000. These subscriptions include Rs.
600 for 2015-16 and Rs. 800 for 2017-18. On March 31, 2017, the subscriptions due but
not received were Rs. 1,000. The corresponding amount on April 01, 2016 was Rs.
1,200. What amount should be credited to the Income and Expenditure Account as
subscriptions for the year 2015-17? [3]
OR
Determine the Cost of Good Consumed from the following information related to goods:
Stock of goods as on 1st April, 2018 50,000

Amount paid for goods purchased during the year 1,00,000
Stock of goods as on 31st March, 2019 40,000
Creditors for goods as on 1st April, 2018 32,000
Creditors for goods as on 31st March, 2019 45,000
16. Arun, Karan, Tarun are sharing profits and losses in the ratio of 5:3:2. They decide to
share profits and losses in the ratio of 2:3:5 with effect from 1st April 2019. They also
decided to record the effect of the following items without affecting their book values:
General Reserve: 1,50,000
Contingency Reserve: 20,000
Profit and Loss A/c (Cr.): 80,000
Advertisement Suspense A/c (Dr.): 1, 20,000
Pass necessary adjustment entry for the above transactions and adjustments. [3]
17. The following is the Balance Sheet of Anand, Bijal and Charu as on 31st March, 2016:
Amount Amount
Liabilities Assets
Rs. Rs.
Sundry Creditors 6,500 Cash In hand 900
Reserve Fund 6,400 Cash at bank 8,500
Capital Accounts Stock 9,000
Anand 15,000 Debtors 10,000
Bijal 7,500 Furniture 12,000
Charu 7,500 30,000 Tools 2,500
42,900 42,900
'Charu' died on 30 June, 2016. Under the terms of Partnership Deed, the executors of
the deceased partner were entitled to:
i. Amount standing to the credit of partner's capital account.
ii. Interest on capital @ 6% per annum.
iii. Share of goodwill on the basis of twice the average of past three years profits.
iv. Share of profit from the closing of last financial year to the date of death on the
basis of last year's profit. The profits of the last three years were as follows:
Year Profit
2013 - 2014 9,500
2014 - 2015 10,000
2015 - 2016 12,000
The firm closes its books on 31th March every year. The partners shared profits in the
ratio of their capitals.
Prepare Charu's Capital Account to be presented to his executors. [4]
OR
Explain meaning of partnership in terms of Indian Partnership Act, 1932. Also, state
what are the multiple occasions on which the firm is reconstituted?
18. Kishor, Guarav and Kabir were partners in a firm sharing profits and losses equally. The
firm was engaged in the storage and distribution of canned juice and its godowns were
located at three different places in the city. Each godown was being managed
individually by Kishor, Guarav and Kabir. Because of increase in business activities at
the godown managed by Guarav, he had devote more time. Guarav demanded that his
share in the profits of the firm be increased, to which Kishor and Kabir agreed. The new
profit sharing ratio was agreed to be 1: 2: 1. For this purpose the goodwill of the firm
was valued at two years purchase of the average profits of last five years. The profits of
the last five years were as follows:
Years Profit
Rs.
I 4,00,000
II 4,90,000
III 7,37,000
IV (Loss) 37,000
V 2,10,000
You are required to:

i. Calculate the goodwill of the firm.
ii. Pass necessary Journal Entry for the treatment of goodwill on change in profit
sharing ratio of Kishor, Guarav and Kabir. [4]
19. On 1.1.2010, Umesh and Kartik entered into partnership with fixed capitals of Rs.
18,00,000 and Rs. 12,00,000 respectively. They were doing good business and were
interested in its expansion but could not do the same because of lack of capital.
Therefore, to have more capital, they admitted Pujit as a new partner on 1.1.2012. Pujit
brought Rs. 10,00,000 as capital and the new profit sharing ratio decided was 3:2:5. On
1.1.2014, another new partner Harshal was admitted with a capital of Rs. 8,00,000 for
1/10th share in the profits, which he acquired equally from Umesh, Kartik and Pujit. On
1.4.2016 Pujit died and his share was taken over by Umesh and Harshal equally.
Calculate:
a. The sacrificing ratio of Umesh and Kartik on Pujit's admission.
b. New profit sharing ratio of Umesh, Kartik, Pujit and Harshal on Harshal's
admission.
c. New profit sharing ratio of Umesh, Kartik and Hashal on Pujit's death. [4]
20. Given below is the Receipts and Payments Account of a Sakshi club for the year ended
31st March, 2017:
Receipts And Payments Account

Dr. Cr.
To Balance b/d 1,02,500 By Salaries 60,000
To Subscription: By Expenses 7,500
2015-16 4,000 By Drama Expenses 45,000
2016-17 2,05,000 By Newspapers 15,000
2017-18 6,000 2,15,000 By Municipal Taxes 4,000
To Donations 54,000 By Charity 35,000
To Proceeds of Drama
Tickets 95,000 By Investments 2,00,000
By Electricity
To Sale of Waste Paper 4,500 Charges 14,500
4,71,000 4,71,000
Prepare club's Income and Expenditure Account for the year ended 31st March, 2017
and Balance Sheet as at that date after taking the following information into account:
(i) There are 5,000 members, each paying an annual subscription of Rs. 50, Rs. 5,000
are still in arrears for the year 2015-16.
(ii) Municipal Taxes amounted to Rs. 4,000 per year have been paid up to 30th June
and Rs. 5,000 are outstanding of salaries.
(iii) Building stands in the books at Rs. 5,00,000.
(iv) 6% interest has accrued on investments for five months [6]
21. 'Mugdha Ltd' had an authorized capital of Rs. 10,00,00,000 divided into 10,00,000
equity shares of Rs. 100 each. The company had already issued 2,00,000 shares. The
dividend paid per share for the year ended 31.3.2009 was Rs. 30. The management
decided to export its products to African countries. To meet the requirements of
additional funds, the finance manager put up the following three alternate proposals
before the Board of Directors
a. Issue 47,500 equity shares at a premium of Rs. 100 per share.
b. Obtain a long-term loan from bank which was available at 12% per annum.
c. Issue 9% debentures at a discount of 5%.
After evaluating these alternatives the company decided to issue 1,00,000, 9%
debentures on 1.4.2010. The face value of each debenture was Rs. 100. These
debentures were redeemable in four installments starting from the end of third year,
which was as follows:
Year Amount
III 10,00,000
IV 20,00,000
V 30,00,000
VI 40,00,000
Prepare 9% debenture account from 1.4.2010 till all the debentures were redeemed. [6]
OR
Pratik, Deep and Harshit were partners in a firm sharing profit in the ratio of 1:2:3. On
Balance Sheet of Pratik, Deep and Harshit as on 31-3-2015

Amount Amount
Liabilities Assets
Rs. Rs.
Creditors 25,000 Land 25,000
Bills Payable 15,000 Building 25,000
General Reserve 15,000 Plant 50,000
Capitals Stock 20,000
Pratik 50,000 Debtors 15,000
Deep 25,000 Bank 7,500
Harshit 12,500 87,500
1,42,500 1,42,500
Pratik, Deep and Harshit decided to Share the profits equally with effect from 1-4-2015. For
this it was agreed that:
(i) Goodwill of the firm will be valued at Rs. 75,000
(ii) Land will be revalued at Rs. 40,000 and building be depreciated by 6%.
(iii) Creditors of Rs. 3, 000 were not likely to be claimed and hence should be written off.
22. 'Golden Ltd.' was registered with an authorized capital of Rs. 4,00,000 divided into
40,000 shares of Rs. 10 each. 6,000 of these shares were issued to the vendor for
building purchased. 8,000 shares were issued to the public and Rs. 5 per share were
called up as follows: [8]
On application - Rs. 2 per share
On allotment - Rs. 1 per share
On first call - Balance of the called up amount
The amounts received on these shares were as follows:

On 6,000 shares - Full amount called
On 1,250 shares - Rs. 3 per share
On 750 shares - Rs. 2 per share
The directors forfeited 750 shares on which Rs. 2 per share were received.
Pass necessary journal entries for the above transactions in the books of Golden Ltd.
OR
'Ruby Ltd.' invited applications for issuing 10,000 equity shares of Rs. 100 each at a
premium of Rs.100 per share. The amount was payable as follows:
On application and allotment - Rs. 100 per share (including Rs. 50 premium)
On first and final call - The balance
The issue was fully subscribed. A shareholder holding 500 shares paid the full share money
with application. Another shareholder holding 300 shares failed to pay the first and final
call money. His shares were forfeited. The forfeited shares were re-issued for Rs. 28,000 as
fully paid up.
Pass necessary journal entries for the above transactions in the books of the company.
23. Charmi and Hemal were partners in a firm sharing profits in the ratio of 3:2. On 1-4-
2015 their Balance Sheet was as follows: [8]
Balance Sheet
Amount Amount
Liabilities Assets
Rs. Rs.
Workmen Compensation
Fund 9,000 Investments 20,000
Investment Fluctuation
Fund 11,000 Plant 14,000
Provision for bad debts 2,000 Land and building 38,000
Capitals
Charmi 30,000
Hemal 20,000 50,000
95,000 95,000
On the above date Vrinda was admitted for 1/4th share in the profits of the firm on the
following terms:
(a) Vrinda will bring Rs. 20,000 for her capital and Rs. 4,000 for her share of goodwill
premium.
(b) All debtors were considered good.
(c) The market value of investments was Rs. 14,000.
(d) There was a liability of Rs. 6,000 for workmen compensation.
(e) Capital accounts of Charmi and Hemal are to be adjusted on the basis of Vrinda's
capital by opening current accounts.
Prepare Revaluation Account and Partners' Capital Accounts.
OR
Olive, Rajni and Suhas were partners in a firm sharing profits in the ration of 3:2:1. On
1st April, 2016 their Balance Sheet was as follows:
Balance Sheet
Amount Amount
Liabilities Assets
Rs. Rs.
Capital Accounts Land and Building 3,64,000
Olive 3,58,000 Plant and Machinery 3,20,000
Rajni 3,00,000 Furniture 2,33,000
Suhas 2,62,000 9,20,000 Bills Receivables 38,000
General Reserve 48,000 Sundry Debtors 90,000
Creditors 1,80,000 Stock 1,11,000
Bills payable 95,000 Bank 87,000
12,43,000 12,43,000
On the above date Henry was admitted on the following terms:

(i) He will bring Rs. 1,00,000 for his capital and will get 1/10th share in the profits.
(ii) He will bring necessary cash for his share of goodwill premium. The goodwill of
the firm was valued at Rs. 3,00,000.
(iii) A liability of Rs. 18,000 will be created against bills receivables discounted.
(iv) The value of stock and furniture will be reduced by 20%.
(v) The value of land and building will be increased by 10%.
(vi) Capital accounts of the partners will be adjusted on the basis of Henry's capital in
their profit sharing ratio by opening current accounts.
Prepare Revaluation Account and Partner's Capital Accounts.
PART – B
24. Which of the following item appears as Short-term Provision in the Financial
Statements of a Company? [1]
a. Interest Accrued but not due
b. Current Maturities of Long-term Debt
c. Provision for Employee Benefits
d. All of the Above
25. “Sale of marketable securities at par” will result into cash inflow, cash outflow or no
cash flow. Explain with reason. [1]
26. If Operating ratio of a company is 87.68%, the operating profit ratio would be? [1]
a. 12.32%
b. 24.64%
c. 43.84%
d. 87.68%
27. 'Sanskruti Ltd'. was carrying on a business of packaging in Chennai and earned good
profits in the past years. The company wanted to expand its business and required
additional funds. To meet its requirements the company issued equity shares of Rs.
40,00,000. It purchased a computerised machine for Rs. 27,00,000. It also purchased
raw material amounting to Rs. 5,75,000. During the current year, the Net Profit of the
company was Rs. 23,00,000.
The net Cash flow from Operating Activities' from the above transactions would be: [1]
a. Rs. 23,00,000
b. Rs. 30,25,000
c. Rs. 61,25,000
d. Rs. 74,25,000
28. The detailed and accurate type of analysis done by the management of the enterprise to
determine the financial position and operational efficiency of the organization is known
as __________. [1]
a. External Analysis
b. Static Analysis
c. Internal Analysis
d. Horizontal Analysis
29. In case if the current ratio of a business is 0.8:1, state if payment of final dividend
already declared _______ the current ratio. [1]
a. will improve
b. will decline
c. will have no impact on
d. may or may not impact
30. From the following, calculate: [4]

(a) Current Ratio; and
(b) Working Capital Turnover Ratio.
Rs. Rs.
Revenue from Operational 2,10,000 Total Assets 2,00,000
Shareholders’ Funds 1,05,000 Non-current 35,000
Liabilities
Non-current Assets 1,10,000
OR
Following are the details given from which you need to determine the quick ratio.
Working Capital = 3,00,000
Total Outside Liabilities = 5,50,000
Long term debts = 4,00,000
Inventories = 1,80,000
31. Prepare Common-Size Statement of Profit and Loss from the following for the year
ended 31st March, 2016: [4]
Particulars Rs.
Revenue from Operations 25,00,000
Cost of Materials Consumed 7,80,000
Other Expenses 5,80,000
Interest on Investment 60,000
Tax Payable @50%
OR
Z Ltd. is a company which carries on business of financing funds to the borrowers.
Following is the information from the books of accounts of Z Ltd.
Interest on Loans = 5,00,000
Dividend = 90,000
Gain on Sale of Furniture = 55,000
Miscellaneous Income = 15,000
From the above information, compute the Revenue from Operations, Other Income and
Total Revenue for Z Ltd.
32. From the following Balance Sheet of Vishwas Ltd. as at 31st March, 2019 and 31st
March, 2018 , prepare Cash Flow Statements: [6]
Particulars Note 31st March, 31st March,

No. 2019 2018
(Rs.) (Rs.)
1. Shareholders' Funds
a. Share Capital 65,000 45,000
b. Reserves and Surplus 1 42,500 24,000
Trade Payables 15,000 12,700
Total 1,22,500 81,700
II. ASSETS
a. Fixed Assets: 85,000 48,700
2. Current Assets
a. Inventories (stock) 14,000 12,000
b. Trade Receivables (Debtors) 20,500 19,000
c. Cash and Cash Equivalents 3,000 2,000
Total 1,22,500 81,700
Note to Accounts
31st March, 31st March,
(Rs.) (Rs.)
1. Reserves and Surplus
General Reserve 27,500 15,000
Surplus, i.e., Balance in Statement of Profit and Loss 15,000 9,000
42,500 24,000
1. Depreciation on Fixed Assets for the year 2018-2019 was Rs. 12,700.
2. An interim dividend Rs. 7,000 has been paid to the shareholders during the year.
CBSE
PART – A
Answer 1
Option D: Partners’ Current Account
Answer 2
Option B: 6
Answer 3
Option D: The face value and carrying amount of debentures are equal
Answer 4
If the partnership deed does not exist among the partners of a firm, then according to the
Partnership Act of 1932, profits and losses are to be shared equally by all the partners of
the firm.
Answer 5
Option B: Rs. 2,00,000
The total capital of the firm is Rs. 28,00,000. To increase the capital base to Rs. 40,00,000,
Kiran is to bring Rs. 14,00,000 (i.e., Rs. 40,00,000 - Rs. 28,00,000). But Kiran brings in Rs.
14,00,000. Therefore, the excess, i.e., Rs. 2,00,000 is the premium for Goodwill.
Answer 6
Option D: No Entry
Entry for expenses of dissolution will not be passed because the expenses are to be borne
and paid by Rajvi.
Answer 7
Option D: 11 : 4 : 5
New Share of Bela = Old Share - Share Sacrifice in favour of Bijoy.
4 1 16  5 11
   
5 4 20 20
11 1 1 11 4 5
New Ratio of Bela, Albela and Bijoy  : :  : : or 11: 4 :5
20 5 4 20 20 20
Answer 8
Receipts and Payments Account prepared by Not for Profit Organisations is based upon
Cash basis of accounting. Accordingly, non-cash expenditure is not shown in Receipts and
Payments Account.
Answer 9
Option C: General Reserve Account
After all the debentures have been redeemed, the ‘Balance of Debenture Redemption
Reserve’ will be transferred to ‘General Reserve Account’.
Answer 10
Court may pass order for the dissolution of the firm when:
(a) A partner becomes a person of unsound mind, or
(b) Partnership agreement is breached persistently by a partner or partners.
Answer 11
Option C: 3:1
Z is incorrect as until and unless agreed, new profit sharing ratio of the continuing partners
remains the same as their old profit-sharing ratio, i.e. 3:1.
Answer 12
Option A: Rs. 50,000 and Rs. 25,000 respectively
Answer 13
Option A: Zero
As per Debenture Redemption Reserve Rules, All India Financial Institutions regulated by
RBI and Banking Companies are not required to create any DRR.
Answer 14
Option A: Nil
The securities premium amount must have been received with allotment money and it is
only first and final call money that was due and not received. Accordingly, no debit would
be done for Securities premium reserve,
Answer 15
Statement showing computation of amount of subscriptions to be credited to Income and
Expenditure Account:
Particulars Rs.
Subscriptions received during 2016-17 42,000
Add: Subscriptions due for year 2016-17 400
Less: Subscriptions for year 2015-16 600
Less: Received in Advance for 2017-18 800
Subscriptions for 2016-17 to be credited to the Income & Expenditure Account. 41,000
Working Note:
Subscription due but not received as at march 31, 2017: Rs. 1,000*
*includes subscriptions due not received for year 2015-16, i.e. Rs. 600 [1,200 (Due) – 600
(Received in 2015-16)].
Therefore, subscriptions due for year 2016-17 amounted to Rs. 400 (1,000 – 600).
OR
STATEMENT SHOWING GOODS CONSUMED DURING 2018-19
Particulars Amount Amount

Amount paid for goods during the year 1,00,000
Add: Stock of goods as on 1st April, 2018 50,000
Creditors for goods as on 31st March, 2019 45,000 95,000
Less: Stock of goods as on 31st March, 2019 40,000
Creditors for goods as on 1st April, 2018 32,000 72,000
Goods consumed during 2018-19 1,23,000
Answer 16
Calculation of Net Effect of Accumulated Profits, Losses and Reserves:
General Reserves + Contingency Reserve + P&L (Cr.) – Advertisement Suspense A/c (Dr.)
= 1,50,000 + 20,000 + 80,000 – 1,20,000 = 1,30,000
Calculation of Sacrifice & Gain

Sacrifice/Gain of Arun = Old Share – New Share = 5/10 – 2/10 = 3/10 (Sacrifice)
Sacrifice/Gain of Karan = Old Share – New Share = 3/10 – 3/10 = Nil
Sacrifice/Gain of Tarun = Old Share – New Share = 2/10 – 5/10 = -3/10 (Gain)
Share of Arun/Tarun (Sacrificing/Gaining) partners in accumulated profits, losses and

reserves:
= 3/10 × 1,20,000 = 36,000
Adjustment Entry:
Tarun’s Capital A/c Dr. 36,000
To Arun’s Capital A/c 36,000
(Being adjustment made for net accumulated profits, losses and reserves)
Answer 17
Charu’s Capital Account
Dr. Cr.
Particulars Amount Particulars Amount
Rs. Rs.
To Executor A/c 14,812.50 By Balance c/d 7,500
By Interest on Capital 112.50
By Profit and Loss Suspense A/c 750
By Anand’s Capital A/c 3,500

By Bijal’s Capital A/c 1,750
By Reserve Fund 1,600
15,212.50 15,212.50
Working Notes:
WN 1 Calculation of Interest on Charu’s Capital
6 3
Interest on Capital  7,500    112.50
100 12
WN2 Calculation of Charu’s share in profits
Profit of last financial year (2013-14) = 12,000
1 3
Charu's share in profits  12, 000    750
4 12
WN 3 Adjustment of Goodwill
9,500  10,000  12,000
Average Profit   10,500
3
Goodwill of the firm = 10,500  2 = 21,000
1
Charu's Share of Goodwill  21,000   5,250
4
So,
2
Anand will pay = 5,250   3,500
3
1
Bijal will pay = 5,250   1,750
3
WN4 Calculation of Charu’s Share in Reserve Fund
1
Charu's Share in Reserve Fund  6,400   1,600
4
Note : Since, here no information is given regarding the share acquired by Anand and Bijal,
therefore, their gaining ratio is same as their new profit sharing ratio i.e. 2:1
OR
 As per Section 4 of the Indian Partnership Act, 1932: “Partnership is 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.”
 Any change in existing agreement of partnership is reconstitution of the firm. Following

are the occasions on which the firm is reconstituted:
1. Change in profit sharing ratio among the partners.
2. Admission of a new partner.
3. Retirement of an existing partner.
4. Death of a partner.
5. Amalgamation of two or more partnership firms.
Answer 18
Journal
Dr. Cr.
Rs. Rs.
Guarav’s Capital A/c Dr. 1,20,000

--------- To Kishor’s Capital A/c 60,000
--------- To Kabir’s Capital A/c 60,000
(Being goodwill adjusted at the time of change
in profit sharing ratio)
Working Note:
WN1 Calculation of Gaining Ratio
Old Ratio = 1:1:1
New Ratio = 1:2:1
Gaining Ratio = New Ratio – Old Ratio
1 1 3 4 1
Kishor      (sacrifice)
4 3 12 12
2 1 64 2
Guarav     (Gain)
4 3 12 12
1 1 34 1
Kabir      (Sacrifice)
4 3 12 12
Only Guarav is gaining, Kishor and Kabir are sacrificing in the ratio of 1:1
WN2 : Calculation of Goodwill of the firm

Sum of years of profit
Average Profit 
Number of years
4,00,000  4, 90,000  7,37,000  37,000  2,10,000

5
18,00,000
  3,60,000
5
Goodwill is calculated on the basis of two years purchase of last 5 years average profit
Goodwill = 2  Average Profit
= 2  3, 60,000 = 7, 20,000
1
Amount of goodwill to be adjusted = 7, 20, 000 × = 60, 000
12
Answer 19
(i) Calculation of Sacrificing Ratio of Umesh and Kartik on Pujit’s admission
Old Ratio of Umesh and Kartik = 1:1
New Ratio of Umesh and Kartik and Pujit = 3:2:5
Sacrificing Ratio = Old Ratio – New Ratio
1 3 2
Umesh Sacrifice   
2 10 10
1 2 3
Kartik Sacrifice   
2 10 10
Sacrificing Ratio  2:3
(ii) Calculation of New Profit Sharing Ratio of Umesh, Kartik, Pujit and Harshal on
Harshal’s admission
Old Ratio of Umesh, Kartik and Pujit = 3:2:5
Harshal was admitted for 1/10th share, which was acquired by him equally from
Umesh, Kartik and Pujit
Sacrificing Share
1 1 1
Umesh   
3 10 10
1 1 1
Kartik   
3 10 30
1 1 1
Pujit   
3 10 30
New Profit Share  Old Share  Sacrificing Share
3 1 8
Umesh   
10 10 30
2 1 5
Kartik   
10 10 30
5 1 14
Pujit   
10 30 30
1 3
Harshal  or
10 30
Therefore, New Profit Sharing Ratio of Umesh, Kartik, Pujit and Harshal  8 :5:14 :3
(iii) Calculation of New Profit Sharing Ratio of Uday, Kaushal and Hari on Govind’s death
Old Ratio of Uday, kaushal, Govind and Hari = 8:5:14:3
 14 
Pujit died and his share   is acquired by Uday and Hari equally
 30 
Share Acquired
1 14 14
Umesh   
2 30 60
1 14 14
Harshal   
2 30 60
New Profit Share  Old Share  Share Acquired

8 14 30
Umesh   
30 60 60
3 14 20
Harshal   
30 60 60
5 10
Kartik  or
30 60
Therefore, New Profit Sharing Ratio of Umesh, kartik and Harshal  30:10:20 or 3:1 :2
Answer 20
In the books of Sakshi Club
for the year ended 31st March 2017
Dr. Cr.
Expenditure Rs. Income Rs.
By Subscription
(5,000 members  Rs.
To Municipal Taxes 4,000 50) 2,50,000
By Interest Accrued on
Add: Prepaid in 2015-16 1,000 Investment 5,000
(2,00,000  6/100
Less: Prepaid in 2016-17 (1,000) 4,000 5/12 )
To Salaries 60,000 By Profit from Drama:
Add: Outstanding 5,000 65,000 Proceeds 95,000
To Expenses 7,500 Less: Drama Expenses (45,000) 50,000
To Newspapers 15,000 By Sale of Waste Paper 4,500
To Charity 35,000 By Donations 54,000
To Electricity Charges 14,500
To Surplus (Balancing Fig.) 2,22,500
3,63,500 3,63,500
Balance Sheet
as on 01st April 2016
Subscription Outstanding 9,000
(4,000+5,000)
Capital Fund (Balancing Fig.) 6,12,500 Municipal Taxes Prepaid 1,000
Building 5,00,000
Cash and Bank 1,02,500
6,12,500 6,12,500
Balance Sheet
as on 31st March 2017
Advance 6,000 Subscriptions
Subscriptions Outstanding
Salaries Outstanding 5,000 2016-17
(2,50,000-2,05,000) 45,000
Capital Fund 6,12,500 2015-16 (arrears) 5,000 50,000
Add: Surplus 2,22,500 8,35,000 Prepaid Municipal
Taxes 1,000
Building 5,00,000
Investments 2,00,000
Add: Accrued Interest 5,000 2,05,000
Cash at Bank 90,000
8,46,000 8,46,000
Answer 21
9% Debentures A/c
Dr. Cr.
Date Particulars J.F. Amount Date Particulars J.F. Amount
Rs. Rs.
2010-11 2010-11 By Debenture
To Balance c/d 1,00,00,000 Application A/c 95,00,000
By Loss on Issue of
Debentures A/c 5,00,000
1,00,00,000 1,00,00,000
2011-12 To Balance c/d 1,00,00,000 2011-12 By Balance b/d 1,00,00,000
1,00,00,000 1,00,00,000
2012-13 To Debenture 2012-13

holder’s A/c 10,00,000 By Balance b/d 1,00,00,000
To Balance c/d 90,00,000
1,00,00,000 1,00,00,000
2013-14 To Debenture 2013-14

holder’s A/c 20,00,000 By Balance b/d 90,00,000
90,00,000 90,00,000
2014-15 To Debenture 2014-15

70,00,000 70,00,000
2015-16 To Debenture 2015-16

40,00,000 40,00,000
OR
Revaluation Account
Dr. Cr.
Amount Amount
Rs. Rs.
To Building A/c 1,500 By Land A/c 15,000
To Revaluation Profit A/c By Creditors A/c 3,000

Pratik 2,750
Deep 5,500
Harshit 8,250 16,500
18,000 18,000

Dr. Cr.
Pratik Deep Harshit Pratik Deep Harshit
To Harshit’s Capital
A/c 12,500 By Balance b/d 50,000 25,000 12,500
By Revaluation Profit
A/c 2,750 5,500 8,250
By General Reserve
A/c 2,500 5,000 7,500
By Pratik’s Capital A/c 12,500
To Balance c/d 42,750 35,500 40,750
55,250 35,500 40,750 55,250 35,500 40,750
Balance Sheet
as on 31 March 2015
Amount Amount
Liabilities Assets
Rs. Rs.
Capital
Pratik 42,750 Land 25,000
Deep 35,500 Add :Increase 15,000 40,000
Harshit 40,750 1,19,000 Building 25,000
Less : Dep 1,500 23,500
Creditors 25,000
Less : Written off 3,000 22,000 Plant 50,000
Bank 7,500
Bills payable 15,000 Stock 20,000
Debtors 15,000
1,56,000 1,56,000
Working Notes
Old Ratio New Ratio
1:2:3 1:1:1
1 1 1
Sacrificing Ratio of Pratik  Old Ratio  New Ratio      Gaining
6 3 6
2 1 0
Sacrificing Ratio of Deep  Old Ratio  New Ratio   
6 3 6
3 1 1
Sacrificing Ratio of Harshit  Old Ratio  New Ratio     Sacrificing
6 3 6
Pratik will compensate Harshit, since he is gaining

Pratik’s Capital A/c Dr. 12,500
-------- To Harshit’s Capital A/c 12,500
Answer 22
In the Books of Golden Ltd
Journal
Dr. Cr.
Rs. Rs.
Machinery A/c Dr. 60,000

------- To Vendor 60,000
(Being machinery purchased)
Vendor Dr. 60,000

(Being issued 6,000 shares to the vendor of
machinery)
Bank A/c Dr. 16,000

------- To Equity Share Application A/c 16,000
(Being application money received on 8,000
shares)
Equity Share Application A/c Dr. 16,000

(Being amount of application transferred to Share
Capital)
Equity Share Allotment A/c Dr. 8,000

(Being amount due on share allotment)
Bank A/c (8,000 – 750) Dr. 7,250

-------- To Equity Share Allotment A/c 7,250
(Being amount received on share allotment)
Equity Share First Call A/c Dr. 16,000

(Being amount due on share first call)
Bank A/c (16,000 – 2,500 – 1,500) Dr. 12,000

-------- To Equity Share First Call A/c 12,000
(Being amount received on share first call)

--------- To Equity Share forfeiture A/c 1,500
-------- To Equity Share Allotment A/c 750
-------- To Equity Share first call A/c 1,500
OR
In the books of Ruby Ltd

Journal Entry
Dr. Cr.
Rs. Rs.
Bank A/c Dr. 10,50,000

-------- To Equity Share Application and Allotment A/c 10,50,000
(Being amount received on application for 10,000
shares along with first call money on 500 shares)
Equity Share Application and Allotment A/c Dr. 10,50,000

-------- To Calls-in-Advance A/c 50,000
(Being amount of application transferred to Share
Capital and securities premium)
Equity Share First Call A/c Dr. 10,00,000

--------- To Equity Share Capital A/c 5,00,000
--------- To Securities Premium A/c 5,00,000
(Being amount due on first call)
Bank A/c (10,00,000 – 50,000 – 20,000) Dr. 9,30,000

Calls – in – Advances A/c Dr. 50,000
-------- To Equity Share First Call A/c 9,80,000
(Being amount received on share first call)

-------- To Equity Share First Call A/c 30,000
Bank A/c Dr. 28,000

(Being forfeited shares were reissued for Rs.28,000)

(Being excess amount on forfeiture is transferred to
capital reserve)
Working Notes:
WN1: Calculation of Amount received on Application
Application amount received on 10,000 shares = 10,00,000

Shareholders of 500 shares paid in advance = 50,000
(500  100)
Total amount = 10,50,000
Answer 23
Revaluation Account
Dr. Cr.
Amount Amount
Rs. Rs.
To Profit transferred to : By Provision for Bad debts A/c 2,000
Charmi’s Capital A/c 1,200
Hemal’s Capital A/c 800 2,000
2,000 2,000

Dr. Cr.
Charmi Hemal Vrinda Charmi Hemal Vrinda
To Current A/c 5,400 3,600 By Balance b/d 30,000 20,000
By General Reserve A/c 2,400 1,600
By Workmen 1,800 1,200
Compensation Fund A/c
By Investment Fluctuation 3,600 2,400
Fund
By Revaluation A/c 1,200 800
(Profit)
By Cash A/c 20,000
To Balance c/d 36,000 24,000 20,000 By Premium for Goodwill 2,400 1,600
A/c
41,400 27,600 20,000 41,400 27,600 20,000
Working Notes :
WN1
Calculation of New Profit Sharing Ratio
Old Ratio  3 : 2
Let the total profit of the firm  1
1 3
Remaining profit share of the firm  1  
4 4
So,
3 3 9
Charmi's New Share   
5 4 20
2 3 6
Hemal's New Share   
3 4 20
9 6 1
 New Profit Sharing Ratio  : :  9 : 6 : 5
20 20 4
WN2
Calculation of Sacrificing Ratio
Old Ratio = 3:2
New Ratio = 9:6:5
3 9 3
Charmi   
5 20 20
2 6 2
Hemal   
5 20 20
 Sacrificing Ratio  3:2
WN3
Distribution of Goodwill
3
Charmi will get  4,000   2, 400
5
2
Hemal will get  4,000   1,600
5
WN4
Adjustment of Capital
Total Capital of the firm = Vrinda’s Capital  Reciprocal of her share
4
 20, 000   80, 000
1
New Profit Sharing Ratio = 9:6:5
9
Charmi's New Capital  80,000   36,000
20
6
Hemal's New Capital  80,000   24,000
20
5
Vrinda's New Capital  80,000   20,000
25
OR
Revaluation Account
Dr. Cr
Amount Amount
Rs. Rs.
To Stock A/c 22,200 By Land and Building A/c 36,400
To Furniture A/c 46,600 By Loss transferred to:
To B/R Discounted 18,000 Olive 25,200
Rajni 16,800
Suhas 8,400 50,400
86,800 86,800

Dr. Cr.
Olive Rajni Suhas Henry Olive Rajni Suhas Henry
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
To
Revaluation By Balance
A/c (Loss) 25,200 16,800 8,400 b/d 3,58,000 3,00,000 2,62,000
To Rajni’s By General
Current A/c 9,200 Reserve A/c 24,000 16,000 8,000
To Suhas’s
Current A/c 1,16,600 By Cash A/c 1,00,000
To Balance By Premium
c/d 4,50,000 3,00,000 1,50,000 1,00,000 for Goodwill 15,000 10,000 5,000
By Olive’s
Current A/c 78,200
4,75,200 3,26,000 2,75,000 1,00,000 4,75,000 3,26,000 2,75,000 1,00,000
Working Notes:
WN1:
Calculation of New Profit Sharing Ratio
Old Ratio = 3:2:1
Let the total profit of the firm = 1
1
Remaining profit share of the firm  1 
10
So,
3 9 27
Olive's New Share   
6 10 60
2 9 18
Rajni's New Share   
6 10 60
1 9 9
Suhas's New Share   
6 10 10
6 1 6
Henry's Share   
6 10 60
WN2:
Calculation of Sacrificing Ratio
Old Ratio = 3:2:1
New Ratio = 9:6:3:2
3 9 30  27 3
Olive    
6 20 60 60
2 6 20  18 2
Rajni    
6 20 60 60
1 3 10  9 1
Suhas    
6 20 60 60
WN3:
Henry’s share of Goodwill
1
3,00,000   30,000
10
This will be credited to Olive, Rajni and Suhas in sacrificing ratio
WN4: Distribution of Goodwill

3
Olive will get  30, 000   15, 000
6
2
Rajni will get  30, 000   10, 000
6
1
Suhas will get  30, 000   5, 000
6
WN5:
Adjustment of Capital
Total Capital of the firm = Henry’s Capital  Reciprocal of her share
10
= 1,00,000  10,00,000
1
New Profit Sharing Ratio = 9:6:3:2
9
Olive's New Capital  10,00,000   4,50,000
20
6
Rajni's New Capital  10,00,000   3,00,000
20
3
Suhas's New Capital  10,00,000   1,50,000
2
2
Henry's New Capital  10,00,000   1,00,000
20
PART – B
Answer 24
Option C: Provision for Employees Benefits
Answer 25
“Sale of marketable securities at par” will result into no flow of cash as marketable
securities are part of cash equivalent.
Answer 26
Option A: 12.32%
Operating Profit Ratio = 100 – Operating Ratio = 100 – 87.68 = 12.32
Answer 27
Option A: Rs.23, 00,000
Cash Flow from Operating Activities = Net Profit of the company = Rs.23, 00,000.
Answer 28
Option C: Internal Analysis
Internal Analysis is a detailed and accurate type of analysis done by the management of the
enterprise to determine the financial position and operational efficiency of the
organisation. Since, management has access of complete information, they perform an
extensive type of analysis which is more detailed and accurate.
Answer 29
Option B: will decline
Both total current assets and total current liabilities will decline by the same amount but
the incidence of decline would be more on current liabilities. Thus, it will lead to decline in
the current ratio.
Answer 30
(a)
Current Assets 90,000
Current Ratio    1.5:1
Current Liabilities 60,000
Note:
Current Assets = Total Assets – Non-current Assets
= Rs. 2,00,000 – Rs. 1,10,000 = Rs. 90,000
Current Liabilities = Total Assets – Shareholders’ Funds – Non Current Liabilities
= Rs. 2,00,000 – Rs. 1,05,000 – Rs.35,000 = Rs. 60,000.
(b)
Revenue from Operationals
Working Capital Turnover Ratio 
Workings Capital
2,10,000
  7 Times
30,000
Note:
Working Capital = Current Assets – Current Liabilities
= Rs. 90, 000 – Rs. 60,000 = Rs. 30,000
OR
Quick Ratio or Liquid Ratio can be calculated as follows:
Liquid/Quick Ratio = Liquid or Quick Assets/Current Liabilities
= 2, 70,000/ 1, 50,000 = 1.8:1
Working Notes:
Current Liabilities = Total Outside Liabilities – Long term debts
= 5, 50,000 – 4, 00,000 = 1, 50,000
Current Assets = Working Capital + Current Liabilities
= 3, 00,000 + 1, 50,000 = 4, 50,000
Liquid Assets = Current Assets – Inventories
= 4, 50,000 – 1, 80,000 =2, 70,000
Answer 31
COMMON - SIZE STATEMENT OF PROFIT AND LOSS for the years ended 31st March, 2016
(%) of
Absolute
Particulars Revenue from
Amount (Rs.)
Operations
(Total Revenue) 25,00,000 100.00
Other Income (Interest on Investment) 60,000 2.40
Total Revenue 25,60,000 102.40
II. Expenses:
(a) Cost of Materials Consumed 7,80,000 31.20

(b) Other Expenses 5,80,000 23.20
Total Expanses 13,60,000 54.40
III. Net Profit before Tax (I - II) 12,00,000 48.00
Less: Income Tax 6,00,000 24.00
IV. Net Profit after Tax 6,00,000 24.00
OR
Particulars Amount Amount
Interest on Loans 5,00,000
Dividend 90,000
5,90,000
II. Other Income
Gain on Sale of Furniture 55,000
Miscellaneous Income 15,000 70,000
Total Revenue (I+II) 6,60,000
Answer 32
CASH FLOW STATEMENT for the year ended 31st March, 2019
Particulars Rs. Rs.
(A) Cash Flow from Operating Activities
Net Profit before Tax (WN 1) 25,500
Adjustments:
Add: Depreciation on Fixed Assets 12,700
Operating Profit before Working Capital Changes 38,200
Less: Increase in Current Assets:
Inventories (Stock) (2,000)
Trade Receivables (Debtors) (1,500) (3,500)
34,700
Add: Increase in Current Liabilities:
Trade Payables 2,300
Cash Flow from Operating Activities 37,000
(B) Cash Flow from Investing Activities

Purchase of Fixed Assets (WN 2) (49,000)
Cash Used in Investing Activities (49,000)
(C) Cash Flow from Financing Activities

Issue of Shares 20,000
Payment of Interim Dividend (7,000)
Cash Flow from Financing Activities 13,000
(D) Net Increase in Cash and Cash Equivalents
(A + B + C) 1,000
Add: Opening Balance of Cash and Cash Equivalents 2,000
(E) Closing Balance of Cash and Cash Equivalents 3,000
Working Notes:
1. Calculation of Net Profit Before Tax: Rs.
Net profit as per Statement of Profit and Loss
(Rs.15,000 - Rs.9,000) 6,000
Add: Transfer to general Reserve 12,500
Interim Dividend paid during the year 7,000
Net Profit before Tax 25,500
FIXED ASSETS ACCOUNT

Particulars Rs. Particulars Rs.
To Balance b/d 48,700 By Depreciation A/c 12,700
To Bank A/c
(Purchases- Balancing Figure) 49,000 By Balance c/d 85,000
97,700 97,700
CBSE XII | Business Studies
Sample Paper – 1
CBSE
Class XII Business Studies
Sample Paper – 1
i. Marks for questions are indicated against each question.
ii. Question Nos. 1–20 are objective type/MCQ questions carrying 1 mark each.
iii. Question Nos. 21-25 are short answer I questions carrying 3 marks each.
iv. Question Nos. 26–28 are short answer II questions carrying 4 marks each.
v. Question Nos. 29–31 are long answer I questions carrying 5 marks each.
vi. Question Nos. 32–34 are long answer II questions carrying 6 marks each.
SECTION A
1. “This Act defines the various relief alternatives in case the goods or services purchased
by a consumer are not as per implied conditions or warranties” Which of the following
Acts passed by the Government of India is being referred in the above statement?
(Choose the correct alternative) [1]
A. The Contract Act, 1982
B. The Competition Act, 2002
C. The Sale of Goods Act, 1930
D. The Essential Commodities Act, 1955
2. Consider the following information: [1]

‘This function of management involves setting standards of performance and
accordingly comparing the present performance with the set standards.’ Which of the
following functions of management is being described in the given statement?
A. Planning
B. Directing
C. Organising
D. Controlling
3. According to the functional foremanship technique, there would be a ____________ under

the production in-charge who would supervise the quality of work done. (Choose the
correct alternative and fill in the blank) [1]
A. Inspector
B. Workman
C. Gang boss
D. Disciplinarian
Sample Paper – 1
4. Which of the following statements is not true with respect to business environment? [1]
A. Business environment keeps changing.
B. It is very difficult to predict business environment.
C. Business environment remains the same across regions.
D. Various parts of a business are interrelated.
5. Organising stimulates creativity among managers and allows managers to reduce their
workload by assigning routine jobs to their subordinates. Which importance of
organising is stated here? [1]
6. What is meant by organisation structure? [1]
7. In case an aggrieved party is not satisfied with the judgment of the National
Commission, an appeal can be filed in the ___________. (Choose the correct alternative and
fill in the blank) [1]
A. State court
B. District court
C. Supreme court
D. None of the above
8. Which of the following statements is not true with regard to planning? [1]
A. Planning is done for an infinite time.
B. Planning is done by managers at all levels.
C. Planning is concerned with setting objectives.
D. Planning defines the course of action to be followed.
9. What is the basic objective of financial management? [1]
10. The process of selection starts with ______________. (Choose the correct alternative and fill
in the blanks) [1]
A. Tests
B. Screening
C. Personal interview
D. Background checks
11. What is meant by the term capital structure? [1]
12. Which of the following alternatives is correct with regard to the given statements?
Statement 1: Controlling identifies the deviation from pre-defined standards.
Statement 2: An effort must be made to control everything in the organisation.
A. Only Statement 1 is correct.
B. Only Statement 2 is correct.
Sample Paper – 1
C. Both statements are correct.

D. Both statements are incorrect.
13. What is meant by the term branding? [1]
14. A form of communication in which information flows in all directions is called

_______________ communication. [1]
A. Lateral
B. Vertical
C. Grapevine
D. Horizontal
15. “This Act provides for a three-tier machinery for the protection of a consumer.” Identify
the Act referred in the above statement and name the three levels of the consumer
protection machinery under the Act? [1]
16. Who of the following can file a complaint in the consumer court? (Choose the correct
alternative) [1]
A. Consumer
B. Central and state government
C. Registered consumer association
D. All of the above
17. All trade in securities must be settled within ______ days of the trade date. (Fill in the
blank by choosing the correct alternative) [1]
A. 3
B. 5
C. 2
D. 10
18. Capital structure is optimal when the ratio of debt and ______ is such that the value of
_________ increases. (Fill in the blank by choosing the correct alternative) [1]
A. Equity, debt
B. Equity, equity share
C. Retained earnings, debt
D. Retained earnings, equity share
19. ABC Ltd. is ready to take a financial risk but does not want to dilute control of its
management? Which of the following sources of finance should it opt for? [1]
A. Debt
B. Equity finance
C. Preference share capital
Sample Paper – 1
20. Which of the following financial instruments is not traded in the capital market?
A. Bonds
B. Equity
C. Debentures
D. Commercial paper
SECTION B
21. What is meant by planning? Why does planning precede all other functions of
management? Is planning required at all levels of management? Explain. [3]
22. AB Ltd. opened a new division in the organisation which deals with women’s apparel.
For this, it has identified and estimated the requirements of human resource. It now
plans to hire competent and skilled personnel for the same. [3]
a) Identify the function of management reflected in the question
b) State two points highlighting the importance of the function identified above.
23. Explain the any three principles of directing. [3]

(OR)
State any 3 differences between a manager and a leader.
24. PK Ltd. wants funds for opening a new factory. It finalised two sources for the same.
First, it identified a group of investors to which it sold its securities. Second, it offered
its existing shareholders new shares which would be a proportion of the shares already
held by them.
Identify the methods of floatation reflected in the above example. [3]
25. Kalpana Ltd. manufactures laptops, mobile phones and tablets. Which type of
organisational structure should be adopted by them? Write three advantaged of the
identified structure.
SECTION C
26. Explain the characteristics of management (Any 4) [4]
27. The business environment is constantly changing. It can be observed that increased
awareness of healthcare has increased the demand for many health products and
services such as Diet Coke, fat-free cooking oil and health resorts. There are also
continuous changes in fashion and tastes of consumers and technological
improvements.
Identify and explain the features of business environment given in above paragraph.
Also, quote the lines from the paragraph.
[4]
Sample Paper – 1
28. Explain the importance of consumer protection from the point of view of a business
(Any 2 points) [4]
(OR)
Explain in detail any two rights of a consumer
SECTION D
29. “Although planning is essential for an organisation, it is not always possible for it to
adhere to the plans and the planning may fail.” In light of the above statement, explain
any two limitations of planning [5]
(OR)
Explain any two features of planning in detail.
30. Shreya works as an accountant in AI Ltd. Although her salary is at par with industry
standards, she feels that her designation is not according to her knowledge and work
experience.
a) Identify the incentive which would be best suitable in the given situation.
b) Explain four other such incentives. [5]
(OR)
Explain the importance of motivation in an organisation.
31. Explain the modern techniques of controlling [5]
SECTION E
32. Who coined the term scientific management? Explain any two principles as given by
him? [6]
(OR)
Xavier Ltd is planning to launch a new product. Now, it has to decide the price of the
product. Identify the factors which it must consider for determining the price of the
product.
33. What is financial planning? What are its objectives? State any three points highlighting
the importance of financial planning. [6]
34. According to the governing rules for food items, it is mandatory to specify the
ingredients and contents of the product on the package of the product.
a) Identify the aspect of product reflected in the above question.
b) What are the functions performed by the aspect identified above? [6]
(OR)
Explain the role of marketing in a firm and in the economy.
Sample Paper – 1
CBSE
Sample Paper – 1
SECTION A
Answer 1
Option C: The Sale of Goods Act, 1930
Answer 2
Option D: Controlling
Answer 3
Option A: Inspector
Answer 4
Option C: Business environment remains the same across regions.
Answer 5
Development of personnel is the importance of organising indicated in the given
statement.
Answer 6
Organisational structure refers to the framework which defines the working relationships
in an organisation.
Answer 7
Option C: Supreme Court
Answer 8
Option A: Planning is done for an infinite time.
Answer 9
The basic objective of financial management is to maximise the wealth of shareholders.
Such financial decisions are taken wherein the anticipated benefits exceed the cost
incurred, which in turn implies an improvement in the market value of shares. An increase
in the market value of shares, in turn, is gainful for shareholders.
Sample Paper – 1
Answer 10
Option B: Screening
Answer 11
Capital structure refers to the ratio of debt and equity. Capital structure is said to be
optimal when the ratio of debt and equity is such that the value of equity share increases,
or in other words, the shareholder’s wealth increases.
Answer 12
Option A: Only Statement 1 is correct.
Answer 13
Branding refers to deciding a suitable name for the product. The name can be either a
generic name or brand name. The brand name acts as a basis of differentiation of the firm’s
product with that of its competitors.
Answer 14
Option C: Grapevine
Answer 15
The Act which is being referred in the question is the ‘Consumer Protection Act, 1986’. The
three levels of the machinery are District Forum, State Commission and National
Commission.
Answer 16
Answer 17
Option C: 2
Answer 18
Option B: Equity, equity share
Answer 19
Option A: Debt
Answer 20
Option D: Commercial Paper
Sample Paper – 1
SECTION B
Answer 21
Planning refers to the process of deciding what is to be done and how it is to be done. In
general terms, it formulates the basic idea of the nuances of a task. Planning is the basic
function of management and precedes all other functions. In fact, it is planning which lays
the foundation for all other functions. Various managerial functions are performed
according to the plans formulated by the organisation. Accordingly, planning is also called
the primary managerial function.
Yes, planning is required by all levels of management. It is not just limited to the top
level of management. Rather planning is undertaken by all levels of management and by all
departments. However, the nature and scope of planning may differ from one level of
management to another. For instance, while the top level of management would formulate
plans for the entire organisation, the middle level of management would formulate plans
for a particular department.
Answer 22
a) The function of management that is reflected in the question is staffing. Staffing refers
to the process of filling job positions in an organisation and maintaining the positions so
filled. It comprises various work functions such as recruitment, selection, training,
development, promotion, compensation and performance appraisal.
b) Following are the points highlighting the importance of staffing:
 Ensuring that the right personnel are assigned to the right job helps in improving the
performance in the organisation.
 It helps in avoiding the situations of both shortage of personnel and overmanning. In
this way, it helps in optimum use of human resources.
Answer 23
1) Maximum individual contribution: According to this principle, such a technique of
directing should be used which encourages workers to work efficiently and to the best
of their capabilities such that they contribute the maximum towards the common goals
of the organisation. For example, various financial and non-financial incentives can be
given to encourage workers.
2) Harmony of objectives: Often it is seen that the personal goals of an employee are not
in sync with the overall organisational goals. In such situations, the focus of directing
function should be to bring about convergence between the two. For example, while an
employee may wish to increase earnings, the goal of the organisation may be to
increase production. In such cases, the directing techniques used should encourage
workers to work harder such that production increases and they are able to earn better.
3) Unity of command: According to this principle, an employee should receive
instructions or orders from only one superior. In other words, he should be answerable
Sample Paper – 1
to only one superior. Violation of this principle leads to confusion and chaos in the
minds of the subordinate.
(OR)
Basis Manager Leader

Existence Exists only in a formal organisation.Exists in both formal and
informal organisation.
Objective The main objective of a manager is to The main objective of a leader
influence the behaviour of employees is to ensure individual
such that they work towards satisfaction and achievement
achieving the common goals of the of group goals of his followers.
organisation.
Power and A manager has formal power and A leader does not have any
Authority authority in the organisation through formal authority and power.
which he modifies the behaviour of He uses the values of trust and
employees. faith to influence behaviour.
Answer 24
The methods of floatation reflected in the above question is:
1. Private placement: Under this method, the company allots securities only to some
selected individuals or institutional investors. It is generally preferred by those
companies which are not in a position to afford public issue.
2. Rights issue: In this method, existing shareholders are offered new shares. The shares
offered are in proportion of the shares already held by them.
Answer 25
They should adopt a divisional structure. Following are the points highlighting the
advantages of the divisional structure of the organisation:
1. Managerial Efficiency: Under divisional structure, each division is headed by a
division head. The division head performs multiple functions for the division. In this
way, he gets multiple opportunities for new experience and development. It helps in
developing his skills and knowledge related to all the functions of a particular product.
2. Gauging Performance: Under divisional structure, each division is responsible for its
own profit and loss. In this way, the performance of each division of the organisation
can be clearly evaluated, and if required, necessary remedial actions can be taken.
3. Flexibility and Initiative: As under divisional structure, each division functions
independently. The divisional heads have the authority to take their own decisions i.e.
each division works as an independent unit. This promotes flexibility and initiative in
the organisation.
Sample Paper – 1
SECTION C
Answer 26
Following are the characteristics of management:
1. All pervasive: Management is pervasive in the sense that various activities of
management are followed by every organisation irrespective of its nature, geographical
location etc. For instance, a college must be managed as much as a post office. Similarly,
an organisation in India must be managed as much as an organisation in Japan. The only
difference is how the various activities of management are performed.
2. Goal Oriented: Every organisation exists with a particular goal or objective. These goals
and objectives of the organisation should be clearly defined. It is the management
which binds together the various activities and efforts in the organisation towards the
common goals of the organisation.
3. Continuous: Management is a continuous process. Various functions of management
are performed simultaneously by managers. In other words, several functions are
performed at a time.
4. Dynamic: Management is dynamic in the sense that it must continuously adapt to the
continuously changing business environment. As the economic, social or political
environment changes, the goals and objectives of the organisation must also change
accordingly.
Answer 27
The features of business environment discussed above are
1. Inter-relatedness: ‘increased awareness of healthcare has increased the demand for
many health products and services such as Diet Coke, fat-free cooking oil and health
resorts’
Different forces and factors such as legal, technological, political and social conditions of
business environment are closely related to each other. For example, an increase in the
income of consumers increases the demand for consumer durables such as televisions
and refrigerators. Thus, a change in one factor effects a change in the other factor.
2. Dynamic: ‘continuous changes in fashion and tastes of consumers and technological
improvements’
Any business should cope with the dynamic nature of the environment. Being a mixture
of numerous forces and factors, changes are bound to happen in a business
environment. For example, the tastes and preferences of a consumer, technology,
government rules and policies keep changing continuously.
Answer 28
Following are the points highlighting the importance of consumer protection form the
point of view of a business:
1) Long-term interest
Sample Paper – 1
For any business, consumer satisfaction is essential. In today’s times, with increasing
competition, consumer satisfaction has become all the more important. As the
organisation takes care of the interests of consumers, it builds goodwill and reputation
in the market. This in turn helps in increasing the sales and profits of the business.
Thus, protecting consumer’s interests benefits the business in the long run.
2) Use of society’s resources
Any business survives on the basis of society. It uses various resources of society for its
various activities. So, the business also needs to provide such goods and services which
are beneficial to the public at large. This will maintain the confidence of the people in
the company.
Ethical reasoning
Every business must follow basic moral and ethical values. It must not follow any such
business practices which lead to exploitation of consumers in any form.
(OR)
Following are the two rights of a consumer:
1) Right to be Informed
 Every consumer has the right to have complete information with regard to goods
and services. For instance, they must have information regarding quality, quantity,
price, ingredients and weight of goods and services.
 In India, it is mandatory under law for manufacturers to provide information about
the product on its package and the label. This helps the consumer in making an
informed choice.
2) Right to Choose
 A consumer has the right to have access to and choose from a wide variety of goods
and services available in the market at competitive prices.
 Accordingly, the retailers or suppliers should offer a large variety of products to
consumers.
 They must not be biased or force a customer towards buying a particular product.
SECTION D
Answer 29
Planning plays a vital role in the success of an organisation. However, it is not always
possible for the organisation to follow the pre-determined plans. Following are the points
highlighting the limitations of planning:
1) Rigidness
 In case of any unforeseen circumstances, the changes which can be made to a plan
are limited.
 A major change to an already created plan is neither possible nor would do any good
in the interest of an organisation.
Sample Paper – 1
 This rigid nature of a plan creates hurdles at times of unforeseen changes. Managers
may sometimes require a certain degree of flexibility so as to cope with the changes
in an appropriate manner.
 Rigidity in plans sometimes causes huge loses to the organisation and creates
obstacles in the completion of the objectives.
2) Unfavourable for a dynamic environment
 Nothing is constant in a business environment; it is dynamic in nature.
 Planning, on the other hand, completely depends on the anticipation of future
happenings. As a result, both do not go hand-in-hand.
 Planning cannot foresee all such changes in the business and is full of uncertainties.
This may lead to failure in the accomplishment of objectives.
 An organisation must adapt its functioning to the changing environment; long-term
planning will make this dynamic environment less effective.
(OR)
Following are the features of planning:
1. Focus on objectives
 Planning starts when an objective is set, and proper planning gives a boost to well-
organised and goal-oriented management.
 Plans ensure that the desired objective is attained economically and quickly if
possible.
 Managers must make sure that the plans made are purposeful, specific, realistic and
clear and should adhere to the company’s strategies, procedures and policies.
 For example, if the sales target is to be achieved, then the plans must be made in
sync with this objective.
2. Acts as a stepping stone

 A goal is achieved through planning, organising, staffing, directing and controlling.
 Planning thus serves as the stepping stone for all other functions of an organisation.
 The rest of the functions are conducted within the framework of the plans drawn,
i.e. the other functions are interrelated and interdependent on planning.
 Thus, planning acts as the primary function for all organisations.
Answer 30
a) The incentive which would work best in the given situation is the non-financial
incentive of status. Shreya can be given a designation in the organisation which is
according to her work experience and knowledge.
b) Four other kinds of non-financial incentives:
 Career opportunity: Employees must be given ample opportunities to develop their
skills and knowledge such that they are able to improve their career prospects. This
can be done through training and development programmes.
Sample Paper – 1
 Job enrichment: Employees must be offered various tasks and responsibilities. In

other words, the work must provide greater opportunities of growth and
experience.
 Security of job: Employees need a certain degree of security of job in the sense that
they must be certain about the income in the future. This is would enable them to
work with greater passion.
 Participation in decision making: Employees must be involved in decision making,
especially in issues pertaining to them.
(OR)
Motivation refers to the process of inducing employees to work towards the desired goals
and objectives.
Importance of motivation:
1. Improving performance: Good motivation stimulates workers to work to the best of
their capabilities and improves performance. With proper motivation, the needs of
employees are satisfied and they are encouraged to work efficiently towards the goals
of the organisation.
2. Helps develop positive attitude: Good motivation helps in developing positive attitude
among employees towards work and towards achieving organisational objectives. This
can be done through positive encouragement in the form of reward or praise.
3. Helps reduce employee turnover: Lack of motivation and incentives is one of the major
reasons for employees quitting the organisation. If the needs of the individual can be
properly identified and worked upon through incentives, then the employee would
better satisfied and encouraged to work.
4. Helps reduce absenteeism: Absenteeism in the organisation arises out of factors such
as poor working conditions and lack of incentives and rewards. Good motivation can
work towards improving such factors.
5. Introduction of change: With good motivation, resistance to change can be greatly
reduced. With motivation, employees can be convinced with respect to the benefits of
change.
Answer 31
Following are the modern techniques of controlling:
1) Return on investment: Return on investment refers to the benefits from investment.
In other words, it is an assessment of whether the investment is beneficial. In an
organisation, managers use this technique for comparing the performance of various
departments or for comparing present actions and past performance.
2) Ratio analysis: Various ratios are calculated to analyse financial statements. The most
commonly used ratios are as follows:
 Liquidity Ratio: Analyses the short-term solvency of a business
 Solvency Ratio: Evaluates the long-term solvency of a business
 Profitability Ratio: Determines the position of the business with regard to
profitability
Sample Paper – 1
 Turnover Ratio: Analyses whether the activities are carried out efficiently
3) Responsibility accounting: Under the system of responsibility accounting, various
divisions in the organisation are set up as responsibility centres. Each division is given a
target and it is the responsibility of the head of the division to achieve the set target.
Different types of responsibility centres in an organisation can be cost centre,
investment centre, profit centre and revenue centre.
4) Management audit: Under this technique, a systematic assessment is made of the
overall work and activities of the management of the company. The basic objective of
this technique is to evaluate efficiency and effectiveness in the tasks of the
management. Accordingly, it helps in identifying the areas which require corrective
actions.
5) PERT and CPM: Programme Evaluation and Review Technique (PERT) and Critical
Path Method (CPM) are based on network analysis. Under these techniques, the entire
task is divided into various smaller activities. Each activity is then accorded a timeline
and a cost estimate. In this way, it helps in effective execution of the tasks and activities.
SECTION E
Answer 32
The term scientific management was coined by F. W. Taylor. According to Taylor, a
scientific analysis of the wok must be done so as to find the best method of doing it. Three
principles of scientific management:
1. Science not rule of thumb:
 Before Taylor developed the Principles of Management, the Rule of Thumb was a
widely used concept.
 Under the rule of thumb, each manager handled a situation or problem based on
his/her understanding as and when it arose using a trial and error method.
 It was an easily applicable process but was a very vague and inaccurate technique of
determining solutions to problems.
 Taylor fostered the introduction of scientific methods. He believed that for every
work, there is only one best method of doing it.
 He wanted managers to take decisions on the basis of logic and science rather than
the rule of thumb.
 He proposed that various traditional methods used by managers should be studied
and the best method/solution among them should be adopted and followed by all
managers in the organisation.
 With such scientific management, he was able to increase efficiency to a large extent
2. Harmony, not Discord
 Taylor emphasised that managers and workers should maintain a harmonious work
environment.
 They should realise their interdependence and work in amity.
Sample Paper – 1
 He introduced this principle for the peaceful co-existence of the workers and
employees which will help to improve efficiency of work.
 In all types of organisations, there is always a conflict of thoughts between workers
and management.
 Workers generally feel that they are overburdened and underpaid, whereas the
management feels that workers are not focussed or do not work efficiently.
 To dismiss such a situation, Taylor showcased a need to bring about a mental
revolution. It implied on bringing a change in the thinking/attitude of both workers
and managers.
 Hence, this will help to build a friendly working environment which will develop
harmonious relations between them.
(OR)
Following are the factors which must be considered before price fixation:
1. Cost of production: It is the most important factor determining the price of the product.
Cost (including the cost of production, selling and distribution) forms the base for
determining price. Generally, firms fix such a price that they are able to cover the costs
and earn profits in the long run.
2. Intensity of demand: Generally, the firms fix a price according to the intensity of
demand. Higher the intensity of demand, higher would be the price which consumers
would be ready to pay and vice versa. In other words, if the product has inelastic
demand, the firm would be able to charge a higher price.
3. Competition in the market: If the competition in the market is high, the firm would
tend to fix a lower price. The firm must analyse carefully the price charged by
competitors, features and quality of their products. The price must be set in careful
consideration of all such factors.
4. Rules and regulations: Sometimes to protect the interests of consumers, the
government intervenes in the market and regulates the price which can be charged. The
firm must have sufficient knowledge of all the rules and regulations before setting the
price.
5. Objectives of pricing: One of the major objectives of pricing is profit maximisation. If
firms wish to maximise profits in the short run, it would tend to charge a higher price
per unit. On the other hand, if the objective is to maximise profits in the long run, it
would tend to charge a lower price so as to capture a greater share of the market.
Besides profit maximisation, other major objectives of pricing can be obtaining
leadership in market, surviving in competition and obtaining leadership in quality.
6. Methods of marketing used: Various elements of marketing also affect the price
charged by the firm. The other factors are the distribution channel used, advertising
used by the firm and facilities provided to customers.
Sample Paper – 1
Answer 33
Financial planning involves designing the blueprint of the overall financial operations of a
company such that the right amount of funds are available for various operations at the
right time.
Basic objectives of financial planning:

1) Identifying the sources from where the funds can be raised and ensuring that the
required funds are available to the firm as and when needed. For this, under financial
planning, an estimation is made regarding the amount of funds which would be
required for various business operations. In addition, an estimation is made regarding
the time at which the funds would be needed.
2) To ensure that there is proper utilisation of funds in the sense that there is neither
surplus nor inadequate funding by the firm. In other words, it ensures that situations of
both excess or shortage of funds are avoided. This is because while inadequate funds
obstruct operations of the firm, excess funding leads to wasteful expenditure by the
firm. Thus, proper financial planning ensures optimal utilisation of funds by the firm.
Points highlighting the importance of financial planning:
1. Helps in facing eventual situations:
 It helps to forecast things that are to happen.
 It helps a business to prepare itself to face future situations in a better manner.
 It helps in preparing a blueprint depicting alternative situations and equips
management in advance to tackle changed prevailing scenario
2. Improves Coordination:
 It helps in coordinating various business functions.
 For example, coordinating the functions of the sales, production and finance
departments by providing clear rules, policies and procedures
3. Evaluation of performance:
 By providing detailed business objectives and depicting all the financial plans for
varied business segments, it makes it easier to evaluate segment-wise business
performance.
Answer 34
a) The aspect of product reflected in the above question is labelling.
b) Following are the functions performed by labelling:
1. Description of use and contents: A label describes the product and specifies its
components or other useful information such as contents of the product, the
caution to be taken while using it, the procedure of use etc. For example, soup
ingredients along with the procedure of preparation are mentioned on a packet of
soup.
2. Identification: It helps consumers in identifying the product or brand. For
instance, name of the product is printed on the package which makes identification
of one’s favourite brand much easier. Similarly, the label provides other useful
Sample Paper – 1
information as well such as the contents of the product, weight of the product and
maximum retail price.
3. Grading: It enables grading of the product into various categories. For example, the
brand Lindt sells various flavours of chocolates under different label categories.
4. Promotion of the product: A label helps in attracting customers, thereby enabling
promotion of the product. Moreover, any information regarding the sales
promotion schemes is provided by the label.
5. Information required according to law: Information as required by the law is
also provided by the label of the product. For instance, it is mandatory for tobacco-
producing companies to print a warning message on the packet of the product.
(OR)
1. Role of Marketing in a Firm
 Marketing plays an important role in achieving the objectives of a firm.
 It lays utmost importance on customer satisfaction which is considered a key
element for survival and growth of the firm.
 It helps any kind of organisation to achieve its goals effectively.
 It assists the firm/organisation in identifying and analysing customer needs
which will help in designing and producing products or services as per customer
needs.
 Further, it will help the firm/organisation to make products available in the
market at an affordable price.
2. Role of Marketing in an Economy
 Marketing plays an important role in the development of the economy.
 It acts as a catalyst in economic development.
 It inspires people to undertake new activities and to set up enterprises for
producing goods which are needed by customers.
 It helps in overcoming the hurdles posed by high prices due to imbalances in
the levels of production and consumption.
 It helps in maintaining smooth flow of goods through efficient arrangements
made for the physical distribution of goods.
 It acts as a link between the business and consumption centres, accelerates
economic activity leading to higher incomes and more consumption, as well as
increased savings and investment.
Sample Paper – 2
CBSE
Sample Paper – 2
i. Marks for questions are indicated against each question.
ii. Question Nos. 1–20 are objective type/MCQ questions carrying 1 mark each.
iii. Question Nos. 21-25 are short answer I questions carrying 3 marks each.
iv. Question Nos. 26–28 are short answer II questions carrying 4 marks each.
v. Question Nos. 29–31 are long answer I questions carrying 5 marks each.
vi. Question Nos. 32–34 are long answer II questions carrying 6 marks each.
SECTION A
1. ‘It is the moral duty of an organisation to use such techniques of production which are
eco-friendly’. Name the objective of management being described. [1]
2. After standards are set, the next step in the controlling process is ______________.
(Choose the correct alternative and fill in the blank) [1]
A. To analyse deviation
B. To compare performance
C. To measure actual performance
D. Any of the above
3. ___________ is the impersonal mode of promoting a product. (Choose the correct

alternative and fill in the blank) [1]
A. Publicity
B. Advertising
C. Personal selling
D. Sales promotion
4. State the organisation structure which follows the scalar chain for communication. [1]
5. Sources of recruitment such as the website naukari.com fall under the category of
_____________. (Choose the correct alternative and fill in the blank) [1]
A. Advertisements
B. Web publishing
C. Placement agencies
D. Employment exchange
Sample Paper – 2
6. What is meant by delegation? [1]
7. Mr Dharam purchased a refrigerator for Rs 18000 from a company named ABC Ltd.
After two days of purchase, he found that the compressor of the refrigerator was
defective. In this situation, in which of the following forums should he file his
complaint? (Choose the correct alternative) [1]
A. District forum
B. State Commission
C. National Commission
8. According to Taylor, which worker is the most important in a factory system; the
performance of whom must be improved? [1]
9. What can be said to be a general responsive action in the face of a particular problem or
situation? (Choose the correct alternative) [1]
A. Rule
B. Policy
C. Strategy
D. Procedure
10. Ram works as a Project Manager in ABC Ltd. He delegates the responsibility of a task to
his team members, but he is responsible for the final outcome of the task. Which
element of delegation is reflected in the above case? (Choose the correct alternative) [1]
A. Authority
B. Responsibility
C. Accountability
11. State the twin objectives of financial planning. [1]
12. Which step in the organising process stresses on maintaining a hierarchy in the
organisation? (Choose the correct alternative) [1]
A. Departmentalisation
B. Assignment of duties
C. Identification of work
D. Establishing work relations
13. Which of the following is not a part of marketing? (Choose the correct alternative) [1]
A. After-sale activities
B. Pre-production activities
C. Post production activities
Sample Paper – 2
14. ‘Demand is never a problem; anything that is produced can be sold in the market.’ Name
the concept. [1]
15. Which of the following factors affect the choice of channel of distribution? (Choose the
correct alternative) [1]
A. Value of product
B. Monopoly
C. Market size is in large
D. All of the above
16. Which of the following steps is taken in the planning process after the alternative
courses of action are identified? (Choose the correct alternative) [1]
A. Implementing the plan
B. Developing the premises
C. Selecting an appropriate course of action
D. Evaluating the alternative courses of action
17. Raman bought an electric geyser which had a warranty of one year. However, the
geyser stopped functioning after six months. He approached the manufacturer
regarding the complaint for the same and asked for a replacement of the geyser.
However, the manufacturer refused the same. Raman then approached the consumer
forum and filed a case against the manufacturer in the district forum. A fine was
imposed on the manufacturer and Raman received monetary compensation.
Identify the consumer right being used in the given situation. [1]
18. Explain the term procedure. [1]
19. __________ refers to an institution which keeps securities of investors in the electronic
form. (Choose the correct alternative) [1]
A. Demat
B. Depository
C. Stock exchange
D. Financial market
20. Which of the following statements is not true with regard to management? (Choose the
correct alternative) [1]
A. Management is dynamic in nature.
B. All organisations require management.
C. Management as a process cannot be seen.
D. Various functions of management are performed one after the other.
Sample Paper – 2
SECTION B
21. Explain the following:

a) Planning may not be successful in the ever changing business environment.
b) Planning involves large costs both in terms of money and time. [3]
22. In the year, 2017, the Central Government of India came up with a law to ban non-
degradable plastic. This lead to change in consumer demand towards steel and aluminum
products. Manish a dealer in plastic, faced tremendous losses as the products manufactured
by him could not be sold in the market. He started manufacturing steel and aluminum
products. As these products were in demand, he earned a good amount of profit which
helped him to cover the losses occurred from the previous business. [3]
a) Which features/ characteristics of business environment is reflected in the above
question.
b) Explain that/those characteristic(s)
23. What are external sources of recruitment? Name and explain two external sources of
recruitment. [3]
(OR)
‘It refers to searching for suitable candidates for a job vacancy in an organisation and
prompting them to apply for the same.’
a) Identify the process being described in the statement.
b) List the various activities which are performed in the process identified in the above
question.
24. What is meant by stock exchange? Are transactions in the stock market safe? How does
the stock market contribute to economic growth? [3]
25. Explain National Commission as part of the three-tier machinery under the Consumer
Protection Act. [3]
SECTION C
26. What is meant by the organisational objective of management? What are the three basic
organisational objectives? Describe. [4]
27. Identify and explain the kind of leadership being followed in the following situations:
a) Shikha is of the opinion that once she has given orders, the subordinates must
follow them completely without any questioning or deviation.
b) Shekhar is of the opinion that subordinates must be given freedom with respect to
the way a task is to be performed. He is there only to support the subordinates. [4]
(OR)
There is no difference between a manager and a leader. Do you agree with the given
Sample Paper – 2
statement? Comment.
28. When was NSE set up? What were its basic objectives? [4]
SECTION D
29. Why is planning important for an organisation? [5]

(OR)
What is planning? Explain any two features of planning.
30. Explain the importance of motivation in an organisation. [5]

(OR)
Explain the process of satisfaction of human needs.
31. How is planning related to controlling? [5]
SECTION E
32. Explain the following techniques of scientific management: [6]

a) Method study
b) Standardisation and simplification
c) Differential piece wage system
(OR)
Explain the principle of 'Scalar Chain' and gang plank.
33. Explain the following terms: [6]

a) Capital structure
b) Financial risk
c) Financial leverage
d) Trading on equity
e) Interest coverage ratio
f) Floatation cost
(OR)
Explain factors affecting the requirement of working capital (Any 6)
34. Discuss about the rights of consumers under the Consumer Protection Act,1986 [6]
Sample Paper – 2
CBSE
Sample Paper – 2
SECTION A
Answer 1
The objective of management which is being described is ‘social objective’. Organisation
being a part of society must give back to it in the sense that it creates economic value for it.
It includes such obligations as using environment-friendly techniques, creating
employment opportunities, creating various social amenities such as schools, hospitals etc.
Answer 2
Option C: To measure actual performance
Answer 3
Option B: Advertising
Answer 4
The organisational structure which follows scalar chain is ‘formal organisational structure’.
In a formal organisational structure, the boundaries of authority are systematically and
clearly defined. In such an organisation, communication is according to the scalar chain or
the hierarchy defined in the organisation.
Answer 5
Option B: Web publishing
Answer 6
Delegation refers to the act of transferring authority to lower levels in the hierarchy.
Answer 7
Option A: District forum
Answer 8
According to Taylor, in a factory set up, the performance of the foreman must be improved.
The foreman forms the link between managers and workers. Accordingly, the planning,
production and control is dependent on the performance of the foreman. Thus, it is
necessary to improve the performance of the foreman to improve the overall performance
in the factory.
Sample Paper – 2
Answer 9
Option B: Policy
Answer 10
Option C: Accountability
Answer 11
Basic objectives of financial planning:
1. Identifying sources from where funds can be raised and ensuring that the required funds
are available to the firm as and when needed.
2. To ensure that there is no surplus or excess funding by the firm.
Answer 12
Option D: Establishing work relations
Answer 13
Option D: None of the above
Answer 14
The marketing management philosophy which is being described is the ‘production
concept’. According to this concept, demand in the market always exceeds the supply.
Accordingly, anything that is produced can be sold in the market. For profit maximisation,
the primary focus of the business should be on production.
Answer 15
Answer 16
Option D: Evaluating the alternative courses of action
Answer 17
The right being described in the given situation is ‘right to seek redressal’. Every consumer
has the right to seek redressal in case of a complaint or if the product is not according to
the expectations of the consumer.
Answer 18
Procedure refers to the chronological order of steps which must be followed in an activity.
In other words, a procedure defines the general steps which must be followed in an activity
with the aim of achieving the set objectives.
Sample Paper – 2
Answer 19
Option B: Depository
Answer 20
Option D: Various functions of management are performed one after the other.
SECTION B
Answer 21
a) The business environment is dynamic. The various dimensions of business—social,
political, economic, legal and technological—change continuously. Business
organisations must continuously adapt their operations to various changes. However,
continuous changes make it difficult to assess the future accurately. So, it becomes
difficult to formulate effective plans.
b) Planning involves huge costs in terms of time and money. Drafting detailed plans
requires research and calculations which prove costly. Moreover, there are other
expenses as well such as the expenses on meetings and discussions and investigations.
All these expenses make the planning expensive in terms of money. In addition, drafting
plans consumes much time, such that at times little time is left for actual
implementation.
Answer 22
a) There are two characteristics of business environment reflected in the above question:
1. Interrelation
2. Dynamic
b) Following is the explanation for the characteristics stated above:
1. Interrelation: Different forces and factors such as legal, technological, political and
social conditions of business environment are closely related to each other. For
example, an increase in the income of the consumers increases the demand for
consumer durables such as televisions and refrigerators. Thus, a change in one factor
affects the other factor.
2. Dynamic: Being a mixture of numerous forces and factors, changes are bound to
happen in a business environment. Any business should cope with the dynamic nature
of an environment. For example, the tastes and preferences of a consumer,
technology, government rules and policies keep changing continuously, therefore a
business must be well-equipped to adapt to these dynamic business environment
Answer 23
External sources of recruitment are the ones where job vacancies are filled from sources
outside the organisation.Following are the two external sources of recruitment:
Sample Paper – 2
1. Employment Exchanges: Employment exchanges serve as a link between job seekers

and employers. Exchanges are generally run by the government and are used for
recruitment of unskilled and skilled job positions. Many a times, records of the
employment exchange are not updated and candidates referred by them are unsuitable.
2. Campus Recruitment: Recruiting students from educational institutions is called
campus recruitment. This is now a popular source of recruitment. Mostly big
organisations hire from colleges and various engineering and management institutions.
(OR)
a) The process which is being described is ‘recruitment’. Recruitment refers to searching
for prospective candidates and convincing them to apply for job vacancies.
b) Recruitment involves the following activities:
 Identifying the sources of obtaining competent personnel
 Assessing the validity of the source
 Selecting the most suitable source
 Inviting applications from suitable candidates from the selected source
Answer 24
The stock exchange is an institution which is constituted with the primary objective of
assisting and controlling the sale and purchase of securities.
Transactions in a stock exchange are safe. Membership in the stock exchange is highly
regulated. Dealings in the stock market are according to the defined legal framework.
Accordingly, it ensures safety in transactions and a fair deal for investors.
The stock market contributes to economic growth in the sense that it acts as a channel
through disinvestment and reinvestment of securities. It helps in channelising the
securities to productive use which in turn leads to economic growth.
Answer 25
Important features of the National Commission:
1. The National Commission comprises a President and four additional members one of
whom is a woman. The members along with the President are appointed by the Central
Government.
2. A consumer can make a complaint in the National Commission when the value of the
good (along with the compensation claimed) is more than Rs 1 crore. In addition, an
appeal can be made in the National Commission if the consumer is not satisfied with the
orders of the State Commission.
3. A consumer can further appeal against the orders of the National Commission in the
Supreme Court.
Sample Paper – 2
SECTION C
Answer 26
Organisational objective of management refers to the objective of using various resources
optimally and efficiently such that they yield maximum advantage. In other words, it must
be able to fulfil the economic objective. According to the law, it is mandatory for tobacco-
producing companies to print a warning message regarding the effect of tobacco on the
packet of the product. So, the awareness among people regarding the health hazard of
consuming tobacco has increased significantly. Accordingly, the demand for tobacco has
reduced drastically.
Answer 27
a) The kind of leadership which is followed is authoritative. Under such kind of leadership,
the manager believes that once he has given the commands or orders, the subordinates
must follow them. The leader does not like contradiction. He believes in giving both
rewards and punishment. This leadership style promotes quick decision making. It
proves to be most suitable in factory settings.
b) The kind of leadership which is being followed is laissez faire. Under such leadership, the
leader believes that the subordinates must be given the freedom to work independently.
He believes that they must be encouraged to set their own objectives and work towards
them. In this way, he provides the subordinates the complete responsibility of work
while he supports them as and when required.
(OR)
No, I do not agree with the statement that managers and leaders are different. Differences
between managers and leaders are tabulated below:
Basis Manager Leader

Existence Exists only in a formal
Exists in both formal and
organisation. informal organisation.
Objective The main objective of a manager
The main objective of a
is to influence the behaviour of
leader is to ensure
employees such that they work individual satisfaction and
towards achieving the common achievement of group
goals of the organisation. goals of his followers.
Power and Authority A manager has formal power andA leader does not have any
authority in the organisation formal authority and
through which he modifies the power. He uses the values
behaviour of employees. of trust and faith to
influence behaviour.
Functional Spread The functions of a manager A leader primarily
include planning, organising, performs the function of
staffing and directing. directing.
Sample Paper – 2
Answer 28
NSE (National Stock Exchange) was incorporated in 1992. It was recognised as a stock
exchange in 1993 and started operations in 1994.
Basic objectives of NSE:
1. Establishing countrywide facility for trading
2. Ensuring that all investors get equal access through a proper communication network
3. Providing an electronic trading system which is fair and efficient
4. Enabling a book entry system and ensuring that settlement cycles are short
5. Ensuring that various operations and activities meet international standards
SECTION D
Answer 29
general terms, it formulates the basic idea of the nuances of a task.
Importance of planning for an organisation:
1. Guides action: Planning states clearly what is to be done and how it is to be done. In this
way, it guides the actions of managers. Planning promotes proper coordination in the
activities of various individuals and departments in an organisation.
2. Reduces uncertainty: Planning helps managers to anticipate in advance the changes
that may take place. Accordingly, it helps them to decide the suitable course of action to
be taken. It must be remembered that while changes that take place cannot be avoided,
planning helps managers to deal with them better.
3. Reduces wastages: Proper planning promotes coordination of activities of various
individuals and departments towards common goals and objectives. It states in advance
what is to be done and the course of action to be followed. In this way, it helps in
reducing the wastages of human and material resources.
4. Promotes creativity: Planning is a challenging activity which involves foreseeing the
future and defining the appropriate course of action. In this way, it promotes creativity
and innovation in ideas. New ideas and thinking forms the base of planning.
5. Forms base for controlling: Planning states in advance the goals and objectives to be
achieved. In this way, it sets the standards against which the actual performance is
evaluated. Accordingly, a corrective course of action can be developed. If there are no
objectives or goals in the first place, then there is nothing against which the actual
performance can be compared. Thus, planning forms the base for controlling.
(OR)
Planning implies to state in advance where to go and in which direction to move in order to
achieve a target. Following are the two features of planning:
1. Planning focusses on objectives:

1. Planning starts when an objective is set, and proper planning gives a boost to well-
organised and goal-oriented management.
Sample Paper – 2
2. Plans ensure that the desired objective is attained economically and quickly if
possible.
3. Managers must make sure that the plans made are purposeful, specific, realistic and
clear and should adhere to the company’s strategies, procedures and policies.
4. For example, if the sales target is to be achieved, then the plans must be made in sync
with this objective.
2. Planning is pervasive:
1. Planning must be done at all levels of management and in all departments of the
organisation.
2. However, its scope differs along the various dimensions of business levels.
3. For example, top level managers have to chalk out policies regarding the overall
management, whereas middle level managers plan out the authority to be assigned to
subordinates or are involved in departmental planning. On the other hand, lower level
managers have to perform day-to-day operational planning and make out small
targets.
Answer 30
Motivation refers to the process of inducing employees to work towards the desired goals
and objectives. Following are the points depicting the importance of motivation:
1. Improving performance: Good motivation stimulates workers to work to the best of
their capabilities and improves performance. With proper motivation, the needs of
employees are satisfied and they are encouraged to work efficiently towards the goals of
the organisation.
2. Helps develop positive attitude: Good motivation helps in developing positive attitude
among employees towards work and towards achieving organisational objectives. This
can be done through positive encouragement in the form of reward or praise.
3. Helps reduce employee turnover: Lack of motivation and incentives is one of the major
reasons for employees quitting the organisation. If the needs of the individual can be
properly identified and worked upon through incentives, then the employee would
4. Helps reduce absenteeism: Absenteeism in the organisation arises out of factors such as
poor working conditions and lack of incentives and rewards. Good motivation can work
towards improving such factors.
5. Introduction of change: With good motivation, resistance to change can be greatly
reduced. With motivation, employees can be convinced with respect to the benefits of
change.
(OR)
The process of satisfaction of human needs is the motivation process which is as follows:
1. Unsatisfied Want: An unsatisfied want is the basis of the motivation process.
2. Frustration: Because of the unsatisfied want, the individual develops frustration.
3. Drives: Frustration prompts the individual to search for alternatives to satisfy his need.
Sample Paper – 2
4. Behaviour: From among the numerous alternatives, he selects one and modifies his
behaviour according to it.
5. Satisfaction: After following a particular behavioural pattern, he evaluates whether his
need is satisfied.
6. Reduced Frustration: When the desired need is satisfied, the frustration which had
built up reduces.
Answer 31
Controlling is closely related to planning. A good control system requires that there are set
standards for evaluation. These standards are provided by the plans defined by the
organisation. In other words, plans serve as the base for controlling.
Controlling is essential for effective implementation of plans. It is essential to keep a close
watch on plans, identify any deviations and take appropriate corrective actions. Without
proper controlling, planning would be futile.
In a similar manner, planning forms the base for controlling. Without planning, there would
be nothing to control. Controlling is done only when there are predetermined standards
against which evaluation can be done.
While planning involves intellectual thinking, decision making and deciding a course of
action, controlling ensures that plans take the required course of action.
SECTION E
Answer 32
a) Method study: According to method study, one must determine the best way of doing a
particular task. The method so determined must aim at minimising the cost and
maximising the quality. For example, the concept of assembly line. Various activities in a
particular task are part of the method study.
b) Standardisation and simplification: Standardisation refers to the process wherein a
standard is set for various activities in production. The standard is then used as a
benchmark for evaluating the task done. On the other hand, simplification means that
unnecessary varieties in design and size add to the cost and thereby must be avoided.
c) Differential piece wage system: According to this technique, based on the fixed
standards and parameters, workers can be classified in two categories as efficient and
inefficient. Accordingly, higher wages must be given to those who are efficient compared
to those who are inefficient.
(OR)
Scalar chain refers to the formal line of authority (in the order of rank) as followed in the
organisation. Formal communication in an organisation follows the scalar chain:
A scalar chain refers to a pre-defined, formal path of authority and communication in the
order of highest to the lowest. For example, A is the project manager in an organisation and
he further has a project lead (B) and a team member (C) under him. So, the chain of
communication would be A-B-C. Suppose there is another hierarchical order wherein he
Sample Paper – 2
has a team manager (D) and a team member (E), i.e. the chain of communication is A-D-E.
Now, if C wants to communicate with E, then he would follow the communication path
C  B  A  D  E . That is, C would first contact the higher authorities C  B  A  who
would then send the message to E  A  D  E .
However, in case of an emergency situation, C may directly communicate with E through
'Gang Plank'.
Gang plank refers to a shorter emergency route through which workers can communicate
with each other.
Answer 33
a) Capital structure refers to the ratio of debt and equity. Capital structure is said to be
optimal when the ratio of debt and equity is such that the value of equity share
increases, or in other words, the shareholder’s wealth increases.
b) Financial risk refers to the risk that the borrowed funds would not be repaid. Debt
involves large financial risk.
c) Financial leverage refers to the proportion of debt in the total capital of the firm.
d) Trading of equity refers to a rise in profit of shareholders due to the presence of interest.
e) Interest coverage ratio refers to the number of times the interest obligations are covered
by earnings before interest and taxes.
f) Floatation costs refer to the cost of raising funds from different sources.
(OR)
Following are the factors affecting the requirement of working capital:
1. Type of business: The nature of business is one of the important determinants of
working capital requirement. For instance, trading organisations have shorter operating
cycles, i.e. no processing is done in such organisations. Accordingly, they require low
working capital. As against this, an organisation dealing in manufacturing would require
large working capital. This is because it involves a large operating cycle, i.e. the raw
materials first need to be transformed to finished goods before they are offered for sale.
2. Scale of operations: Firms which operate on a larger scale require greater working
capital than those which operate on a lower scale. This is because firms with greater
scale of operations are required to maintain high stock of inventory and debtors. As
against this, a business with smaller scale of operation requires less working capital.
3. Fluctuations in business cycle: In various phases of the business cycle, the
requirement of working capital is different. For instance, in the phase of boom, both
production and sales are higher. Accordingly, the requirement of working capital is also
Sample Paper – 2
high. As against this, in the phase of depression, the demand is low, and so production
and sale are low. Accordingly, there is less requirement of working capital.
4. Production cycle: Production cycle refers to the time gap between receiving goods and
their processing into final goods. Longer the production cycle for a firm, larger are the
requirements of working capital and vice versa. This is because a longer production
cycle would imply greater inventories and other related expenses, so greater
requirement of working capital.
5. Growth prospects: Higher growth prospects imply higher production, sales and inputs.
Accordingly, higher growth prospects for a company imply greater requirement of
working capital.
6. Seasonal factors: Companies require huge amount of working capital because of the
high level of activity in the peak season, whereas during the lean season they require
less as the activities reduce.
Answer 34
Following are the rights of the consumers:
1) Right to Safety
 It refers to the right of consumers to safeguard themselves against goods and services
which can be hazardous to life, health or property.
 For example, consumers can get injured if they use defective electrical appliances.
 Every consumer has the right to protect himself against such goods.
2) Right to be Informed
 Every consumer has the right to have complete information with regard to goods and
services. For instance, they must have information regarding quality, quantity, price,
ingredients and weight of goods and services.
 In India, it is mandatory under law for manufacturers to provide information about
the product on its package and the label. This helps the consumer in making an
informed choice.
3) Right to Choose
 A consumer has the right to have access to and choose from a wide variety of goods
and services available in the market at competitive prices.
 Accordingly, the retailers or suppliers should offer a large variety of products to
consumers.
 They must not be biased or force a customer towards buying a particular product.
4) Right to be Heard
 It refers to the right of consumers to be heard in an appropriate legal forum in case of
any grievance or dissatisfaction faced by them.
 A consumer has the right to file a complaint in case of any grievance with regard to
any product or service.
5) Right to Seek Redressal
 It refers to the right of consumers to seek redressal in case of a grievance and, if
required, demand a suitable compensation.
Sample Paper – 2
 The Consumer Protection Act provides for compensation in the form of replacement
of product, cash compensation and repair/removal of defects.
 Various redressal forums are set up under the Consumer Protection Act.
6) Right to Consumer Education
 It refers to the right of consumers to have knowledge and be aware of their rights and
responsibilities.
 They must have knowledge with regard to various legal remedies available in case
they face any form of exploitation. Various consumer organisations and NGOs actively
work in this regard.
Sample Paper – 3
CBSE
Sample Paper – 3
(i) Marks for questions are indicated against each question.
(ii) Question Nos. 1–20 are objective type/MCQ questions carrying 1 mark each.
(iii) Question Nos. 21-25 are short answer I questions carrying 3 marks each.
(iv) Question Nos. 26–28 are short answer II questions carrying 4 marks each.
(v) Question Nos. 29–31 are long answer I questions carrying 5 marks each.
(vi) Question Nos. 32–34 are long answer II questions carrying 6 marks each.
SECTION A
1. ‘The various principles of management must be moulded by the managers as per the
situation and applied in his/her own unique manner’. Identify the nature of
management being described. [1]
2. The process of selection starts with ______________.

a) Tests
b) Screening
c) Personal interview
d) Background checks
3. ‘As one goes up the hierarchy, the right to command the subordinates increases’.
State the element of delegation described. [1]
4. Which of the following statements is not true with regard to planning? [1]
a) Planning is done for an infinite time.
b) Planning is done by managers at all levels.
c) Planning is concerned with setting objectives.
d) Planning defines the course of action to be followed.
5. What is meant by standardisation of work? [1]
6. Rohan, an investor, wants to purchase 91 days treasury bills of ` 15,000. But, he was
informed that it is not possible. Identify the reason why Rohan could not invest in
treasury bills. [1]
Sample Paper – 3
7. Which of the following statements is incorrect with regard to controlling? [1]

a) It involves evaluation of tasks.
b) It involves setting standards for various tasks.
c) It helps in taking the required corrective actions.
8. This Act provides for a three-tier machinery for the protection of consumers. State the
Act being referred to. What are the three levels of the consumer protection machinery
under the Act? [1]
9. XYZ Ltd. opened a new factory in Kerala. Now it is planning to invest in new machinery
for the factory. Identify and state the financial decision being described. [1]
10. Vishal is the manager of the production department. He has four subordinates under
him. If a subordinate wishes to communicate with another subordinate, he must first
communicate with Vishal who would then pass on the message to the subordinate.
Which type of communication network is being described? [1]
a) Wheel network
b) Circular network
c) Inverted-v network
d) Single chain network
11. PN Ltd. deals in sale and purchase of women clothing. On the other hand, SP Ltd. is a
manufacturer of women apparel. How would the working capital requirements of the
two firms differ? [1]
12. ___________ is the impersonal mode of promoting a product. [1]

a) Advertising
b) Personal selling
c) Sales Promotion
13. State one advantage of personal selling. [1]
14. Which of the following financial instruments is not traded in the capital market? [1]
a) Commercial paper
b) Bonds
c) Equity
d) Debentures
Sample Paper – 3
15. Radhika bought a clothing iron. However, she found that it did not have the mandatory
ISI mark on it. Which consumer right is being violated in the given situation? [1]
16. Vikas is the head boy of St. Mary high school. He has developed a plan for the annual
function of his school. Identify the type of plan developed by Rohan. [1]
a) Standing plan
b) Method
c) Rule
d) Single use plan
17. What is interest coverage ratio and how does it affect the capital structure decision of a
company? [1]
18. Who of the following can file a complaint in the consumer redressal agency? [1]
a) Consumer
b) Central and state government
c) Registered consumer association
d) All of the above
19. Define marketing mix [1]
20. When do we call financial leverage to be favourable? [1]
SECTION B
21. “Planning is required at all levels of management.” Explain. [3]

OR
State any three limitations of planning
22. Recently there was a vacancy for the position of Senior Manager in the marketing
department of Sam Ltd. Vijay who worked as a manager in the department was
promoted for the position so created. [3]
a) Identify the source of recruitment being used in the given situation.
b) List two advantages of the source identified in (a) above.
23. What are the development functions of SEBI? [3]
24. State any three responsibilities of a consumer. [3]
25. Suppose an organisation deals with the manufacturing of four products—footwear,

garments, jewellery and leather accessories, and there are four divisions, each of which
reports to the Managing Director. Under each division, there are four departments—
production, sales, marketing and advertising. Identify and explain the organisational
structure reflected in the question. Explain. [3]
Sample Paper – 3
SECTION C
26. Why is management important for an organisation? (Any 4 points) [4]
27. What is meant by the term business environment? Explain how the various elements of
business environment are interrelated. Also, explain why business environment is said
to be uncertain in nature. [4]
28. Discuss any four qualities of a good leader? [4]

OR
What are the functions performed by supervisor? (Any 4)
SECTION D
29. Describe the different types of plans on the basis of what they aim to achieve. (Any 5) [5]
OR
Discuss the importance of planning (Any 5 points)
30. Explain the importance of directing. [5]

OR
‘The barriers to effective communication exists in all organisations to a greater or lesser
degree’. In the context of the given statement, explain the measures to overcome the
barriers. (Any 5)
31. Why is controlling important for an organisation? [5]
SECTION E
32. What is meant by principles of management? Describe their nature. [6]

OR
In ABC Ltd., there is an employee suggestion system, and any employee who gives good
suggestions which result in substantial cost/time reduction is rewarded. There is also
team spirit of unity and harmony among employees, which results in the spirit of
mutual trust and belongingness among team members. Besides this, employees give
priority to the interests of the organisation over their interests. Identify and briefly
explain the Fayol’s principles of management discussed above.
33. How does the following factors affect the working capital requirements of a firm: [6]
1. Production cycle
2. Scale of operations
3. Credit allowance
4. Level of competition
5. Availability of raw material
6. Operating efficiency
Sample Paper – 3
34. Explain any three marketing management philosophies in detail. [6]

OR
Explain the factors which affect the determination of price. (Any 3)
Sample Paper – 3
CBSE
Sample Paper – 3
SECTION A
Answer 1
In the given statement, management is being described as an art. Management has a bank
of theories and principles which were developed over years through continuous
observation and experimentation by managers in different organisations and situations.
However, managers must apply these theories and principles according to the situation in a
unique manner. Hence, due to these characteristics, management can be called an art.
Answer 2
Correct option: b
The first step in the selection process is the screening of applications made by the
candidates. Under this process, the basic qualification and other skills are checked to
evaluate whether they fulfil the basic criteria required for the job. Hence it helps in
rejecting candidate which are unfit or unqualified for job.
Answer 3
The element of delegation which is described is ‘authority’. It refers to the power of giving
commands and directions to subordinates. In other words, it also refers to the right to take
decisions. Authority flows from top to bottom, i.e. the top level management has the highest
authority, then the middle level and the lowest is the lower level management. Hence, as
one goes up the hierarchy, the right to command the subordinates.
Answer 4
Correct option: a
The statement ‘Planning is done for an infinite time’ is not correct. It must be remembered
by managers that plans must have a particular timeline. In other words, it is necessary that
plans are implemented within a given timeframe, else the planning exercise would be futile.
Answer 5
Standardisation refers to the process wherein a standard is set for various activities in
production. The standard is then used as a benchmark for evaluating the task done.
Sample Paper – 3
Answer 6
Rohan could not invest in treasury bills because they are available for a minimum of
` 25,000 and in multiples thereof.
Answer 7
Correct option: d
Controlling refers to the process of evaluation and assessment of the work done. Under the
process of controlling, standards are set for various tasks and activities. These are
evaluated against the set standards. Accordingly, deviations from the set targets are
identified and corrective actions are decided.
So, all of the statements in the question are correct.
Answer 8
The Act which is being called is the ‘Consumer Protection Act, 1986’. The three levels of the
consumer protection machinery includes a District Forum, State Commission and National
Commission.
Answer 9
The financial decision which is being described is investment decision (capital budgeting
decision). Capital budgeting decisions are long-term are investment decisions. For example,
investment in a new fixed asset and new machinery. Such investment involves a large
amount of money, so, it is very difficult to reverse such decisions. Such decisions have an
impact on the earning capacity of a business firm.
Answer 10
Correct option: a
The type of communication network being described is ‘wheel network’. In this network, all
the subordinates working under a superior communicate with each other only through the
superior. Subordinates are not allowed to communicate directly with each other.
Answer 11
Usually a trading firm requires less working capital as compared to a manufacturing firm.
This is because in a trading firm there is no processing. The goods are immediately sold in
the market as soon as they are received. On the other hand, the manufacturing firm first
converts raw material into finished goods before selling them in the market. Accordingly,
its working capital requirements are high.
In the given case, the working capital requirements of PN Ltd. will be higher than that of SP
Ltd.
Answer 12
Correct option: a
Advertising is an impersonal mode of promoting a product. This is because under
advertising there is no direct interaction between the customer and the advertiser.
Sample Paper – 3
Answer 13
One advantage of personal selling is that it helps to obtain direct feedback as there is direct
communication between the customer and the seller.
Answer 14
Correct option: a
Among the instruments mentioned in the question, commercial paper is not traded in the
capital market. Rather, it is traded in the money market. The capital market deals in equity,
bonds, debentures, preference shares etc.
Answer 15
The consumer right which is being violated is the ‘right to safety’. According to this, every
consumer has the right to be protected against goods which can be harmful to life, property
or health.
Answer 16
Correct option: d
The type of plan which is being described in the given situation is a single-use plan. A
single-use plan is drafted for a single project and is not used again in the future. In the
given situation, the plan is drafted particularly for the annual function.
Answer 17
Interest coverage ratio means the number of times 'earnings before interest and tax' can
meet the interest obligations. If this ratio is high, then it implies lower risk for the company,
thereby the company can opt for more debt.
Answer 18
Correct option: d
Under the Consumer Protection Act, the following can file a complaint in a consumer
redressal agency:
i. Any consumer
ii. Any registered consumer association or organisation
iii. The Central and State Government
iv. A consumer or a group of consumers on behalf of a number of consumers having
common interest.
v. A legal heir or a representative of the deceased consumer.
Answer 19
Marketing mix refers to the set of various marketing tools used by an organisation to
achieve the desired objectives of marketing in a target market.
Sample Paper – 3
Answer 20
Financial leverage refers to the proportion of debt in the total capital of the firm. It is said
to be favourable when the return on investment is higher than the cost of debt. Higher
return on investment implies higher earnings per share, which in turn implies a favourable
financial leverage.
SECTION B
Answer 21
Planning must be done at all levels of management and in all departments of the
organisation. However, its scope differs along the various dimensions of business levels.
For example, top level managers have to chalk out policies regarding the overall
management, whereas middle level managers plan out the authority to be assigned to
subordinates or are involved in departmental planning. On the other hand, lower level
managers have to perform day-to-day operational planning and make out small targets.
OR
Answer
Following are the limitations of planning
 Planning reduces creativity: Under planning, rigid plans are made and management
does not permit anyone to change or deviate from the plan. Hence, this reduces the
creativity as people think on the same lines as others and there is no innovation.
 False security of success: Good planning does not guarantee success. The probability
of attaining success once the plans have been put into action is odd. Often managers
tend to rely on previously tried and tested successful plans. However, the business
environment is dynamic in nature and a pretested plan may or may not work in the
future.
 Involves gigantic/huge costs: Planning involves analysis, research and scientific
calculations. These activities incur high cost and take much time. Moreover, sometimes
it might happen that benefits derived from planning fall short of the costs incurred.
Answer 22
a) The source of recruitment which is used is ‘internal source’. Internal sources are the
ones where the job vacancies are filled from within the organisation. In the given
situation, promotion of an existing employee is used to fill up the job vacancy.
b) Advantages of internal source of recruitment:
 Promotion of one employee will lead to a chain of promotions which always inspires
employees to work with commitment.
 Filling jobs internally is cheaper than hiring fresh candidates from outside.
Sample Paper – 3
Answer 23
Development functions of SEBI:
1. Training: SEBI provides training and development programmes for intermediaries of
the securities market. This helps in promoting healthy growth of the securities market.
2. Research: SEBI conducts research on various important areas of the securities market,
reports of which are then published. The reports by SEBI help investors and other
market players in decision making with regard to investment.
3. Flexible approach: SEBI has adopted a flexible approach towards various activities of
the securities market. For instance, it has permitted Internet trading and IPOs. This
encourages the development of the capital market.
Answer 24
Responsibilities of a consumer:
1) Awareness: A consumer must be aware about the availability of various goods and
services in order to take wise decisions.
2) Looking for quality marks: A consumer must always purchase goods and services
which have the concerned quality certification marks. For instance, they must look for
an ISI mark on electrical goods and the AGMARK on agricultural goods.
3) Asking for Cash Memo: For every purchase of a good or service, a consumer must
always ask for a cash memo or bill. The bill is the proof of purchase and can be used for
reference purposes.
Answer 25
Divisional structure is reflected in the question. It is an organisational structure wherein
various diversified business activities of an organisation are grouped in different divisions..
Each division is headed by a divisional manager who is responsible for the performance of
that division. Further, under each division, multiple functions are performed such as
production, sales and marketing. In other words, under each division, there is a functional
structure.
SECTION C
Answer 26
Management is a process wherein various activities and functions are performed to achieve
the goals and objectives of an organisation effectively and in an efficient manner.
Importance of management:
1. Achievement of goals: An organisation requires management for the achievement of
its various goals and objectives. The management unifies the activities and efforts in an
organisation towards the achievement of common goals and objectives.
2. Efficiency in work: Through management in the form of planning, organising,
directing, staffing and controlling, efficiency and productivity can be increased in the
organisation.
Sample Paper – 3
3. Creating dynamism: Every organisation must adapt itself to the continuously

changing business environment. Management helps the people of the organisation to
comfortably adapt to these changes.
4. Achievement of personal objectives: In addition to achieving the organisation goals,
management helps in achieving the personal goals of the individuals in the
organisation. This is done with motivation and leadership by the managers.
Answer 27
A business environment refers to the aggregate of external and internal factors that affects
the performance of the business. For example, consumers, social trends, change in taste
and preferences of consumers, change in government policies, change in political scenario,
etc., all make up the business environment. Following are the three features of business
environment:
1. Aggregate of external forces: Business environment can be considered the aggregate
sum of the external forces such as individuals, consumers, government and legal
matters which affect the performance of an organisation, either positively or
negatively.
example, an increase in the income of consumers increases the demand for consumer
durables such as televisions and refrigerators. Thus, a change in one factor affects the
other factor.
3. Dynamic in nature: Being a mixture of numerous forces and factors, changes are
bound to happen in a business environment. Any business should cope with the
dynamic nature of an environment. For example, the tastes and preferences of a
consumer, technology, government rules and policies keep changing continuously;
therefore, a business must be well-equipped to adapt to a dynamic business
environment.
Answer 28
Qualities of a good leader:
1. Honesty and Integrity: A good leader should maintain a high level of honesty and
integrity such that he is an idol or role model for others in terms of these values. He
must demonstrate an ethical behaviour.
2. Ability to take decisions: A leader must have the ability to take appropriate rational
decisions which are based on logic and facts. Moreover, once a decision is taken he
should be confident enough to hold on to it.
3. Social behaviour: He should be socially active and friendly. He must be supportive
and understanding towards the subordinates.
4. Effective communication skills: One of the important qualities of a good leader is to
possess effective communication skills. He must be able to express his thoughts and
ideas clearly. Moreover, he must be a good listener and counsellor. He must be able to
Sample Paper – 3
act as a link between the higher management and the subordinates such that he can
communicate the problems and grievances of the subordinates to the superiors.
OR
Answer
Functions performed by a supervisor are
1. A supervisor guides workers and provides support to them. He ensures that workers
work with harmony and unity. In case of internal differences, the manager tries to sort
it out and bring about a feasible solution.
2. He serves as the link of communication between the manager and workers. While on
one hand, he communicates the information and ideas of the management to workers,
on the other hand, he communicates the problems of workers to managers. In other
words, the management and workers communicate through the supervisor.
3. It is the responsibility of the supervisor to ensure that work is performed efficiently
and smoothly and that the set targets are met.
4. A good supervisor successfully influences employees and sets a high standard of
morale among workers.
SECTION D
Answer 29
On the basis of what they aim to achieve, plans can be classified as follows:
1. Objective: Objectives refers to a future position/goal of the organisation which are to
be achieved by the management by way its operations. In simple terms it means
objectives determines what is to be done or what is to be achieved. All managerial
activities are directed towards the achievement of objectives. Objectives must be
defined using specific terms which can be measured. It must be in a format of sentence
which expresses the desired results to be achieved within a given time.
2. Strategy: Strategy refers to a comprehensive plan for the accomplishment of
organisational objectives. It provides broad contours of an organisation’s business and
is regarded as the blue print of the business. It also defines the future decisions
regarding organisation’s directions and scope in the long run. These strategies are
formulated in consonance with the business environment i.e. after taking into
consideration the social, legal and technological environment which shall have an
affect over the business. A strategy includes three dimensions:
1. determining long-term objectives
2. adopting a particular course of action, and
3. allocating necessary resources to achieve the objective
3. Policy: Policy refers to the general guidelines for organisational behaviour and actions.
In other words, policy refers to the general response or action which would be taken in
a particular situation or in response to a particular problem. They guide managers in
the implementation of strategy. However, in actual situations, a manager may apply
the policy according to his own discretion or according to the need of the situation.
Policies are framed at all levels in the organisation. While major policies are for the
Sample Paper – 3
organisation as a whole and are known to even those outside the company, minor
policies contain minute details and information which are defined only for those
within the company.
4. Procedure: It refers to the chronological order of steps which must be followed in an
activity. In other words, they define the general steps which must be followed in an
activity with the aim of achieving the set objectives or enforcing policies. These
procedures are generally meant for insiders to follow. Procedures and policies are
linked to each other. One can also say that procedures are nothing but steps carried on
within the framework of an organisational policy.
5. Rule: Rules define what exactly is to be done. When a rule is defined, none of the
employees are allowed to deviate from it. Rules are said to be the simplest versions of
a plan. There can be no change in a rule unless a policy decision is taken.
OR
Answer
Importance of planning for an organisation:
1. Guides action: Planning clearly states what is to be done and how it is to be done
which means it sets clear objectives for the organisation and also develops an
appropriate action plan to achieve those objectives. In this way, it guides the actions of
every employee in an organisation and thereby promoting proper coordination in the
activities of various individuals and departments in an organisation.
2. Reduces uncertainty: Planning helps managers to anticipate in advance the changes
that may take place. Accordingly, it helps them to decide the suitable course of action
to be taken. Certain changes or events are unavoidable and so planning helps
managers to cope up with such changes.
3. Reduces wastages: Proper planning promotes coordination of activities of various
individuals and departments towards common goals and objectives. It states in
advance what is to be done and the course of action to be followed. This helps avoiding
confusion and reduces the wastages of human and material resources.
4. Promotes innovative ideas:. Planning is the first activity of management wherein
new and innovative ideas can be encouraged and moulded into definite plans. It is a
challenging activity which involves foreseeing the future and defining the appropriate
course of action. In this way, it promotes creativity and innovation in ideas which
forms the base of planning.
5. Forms base for controlling: Planning states in advance the goals and objectives to be
achieved. In this way, it sets the standards for the purpose of controlling against which
the actual performance is evaluated. Accordingly, a corrective course of action can be
developed to cope up with any deviations. If there are no objectives or goals in the first
place, then there is nothing against which the actual performance can be compared.
Thus, planning forms the base for controlling.
Sample Paper – 3
Answer 30
Following are the points that explain the importance of directing:
1. Initiates Action: Directing helps the employees to initiates actions and work towards
accomplishing the objectives of the organisation.
2. Integrates employee’s efforts: Directing helps to unite the efforts of all the
employees (individuals) towards achieving the organisational goals/ objectives. This
helps to ensure that every individual effort is only contribute towards the goals of the
organisation.
3. Means of motivation: Directing involves motivating and provision of an effective
leadership. This enables the employees to recognise their potential and abilities. It is
believed that a good leader has the ability to recognise the potential of the employees
working with him/her and ensures that they work up to their full potential by
motivating them.
4. Balance in the organisation: Directing as function of management tries to strike a
balance in the organisation which will help to build cooperation and commitment in
the works. A co-operative environment and commitment in the employees helps to
achieve balance amongst various groups. Activities and departments.
5. Facilitates Changes: Directing enables acceptance of changes in the organisation.
Generally every organisation is reluctant to accept any changes and this leads to
difficulties. However, with the help of directing, which involves motivation,
communication and leadership, resistance to the changes can be reduced, thereby,
paving a path for introducing changes in the organisation.
OR
Some measures which can be adopted to overcome various barriers of communication:
1. Clear idea for communication: Before communicating any ideas to the subordinates,
executive must be clear about all the perspectives of the problem which is possible
only after deep analysis and study of the entire problem. This will help the executive to
clearly communicate the problem and avoid any confusion.
2. Communication according to the receiver: The communicator must be well aware
about the level of understanding of the receiver and must make sure that the
information communicated must be according to the educational level of the
subordinates and their understanding.
3. Appropriate language tone and content: The language, tone and content of the
information should be such that the important aspects of the information are
communicated effectively to the receiver. And also it does not harm the sentiments of
the listener and stimulate response from them.
4. Communicate all aspects: The communication must be regarding all aspects i.e about
the existing commitments required to maintain consistency and also must take care
about the goal which an enterprise is required to meet in the future.
5. Follow up communication: Once the instructions are communicated clearly, there
must be follow up instruction so that it helps the subordinates to overcome any hurdle
in implementing the instructions.
Sample Paper – 3
Answer 31
Controlling refers to making sure that various activities and tasks in an organisation are
carried out according to predefined goals and objectives.
Importance of planning in an organisation:
1. Achieving goals: Controlling ensures that various activities are carried out correctly
according to plans. It ensures that deviations if any are identified and appropriate
corrective action is taken.
2. Reviewing standards: An effective control system ensures that the standards are set
accurately. As the business environment changes, it ensures that the standards are also
reviewed so as to adapt to the changes taking place.
3. Enables efficiency in resource utilisation: Effective control system ensures that
there is minimum wastage of resources. In other words, it ensures that resources are
utilised optimally and in the most efficient manner.
4. Better motivation: With controlling, employees know what is expected from them
and how their performance would be evaluated. This clarity motivates employees to
perform better.
5. Maintain order: Controlling helps keep a close watch on the activities and behaviour
of employees. In this way, it helps maintain order and discipline in the organisation.
6. Ensures coordination: With proper controlling, the efforts of the various
departments can be unified towards the common goals and objectives of the
organisation. The existence of predefined standards of evaluation ensures
coordination in the activities of various departments.
SECTION E
Answer 32
Principles of management refer to the guidelines for managerial behaviour in various
situations and problems. The principles of management guide managers in decision
making.
The following points describe the nature of principles of management:
1. Universally applicable: The principles of management are universally applicable in
the sense that they are applicable to all organisations irrespective of their nature and
size. However, the extent of application may vary from one organisation to another.
2. General guidelines: The principles of management are general guidelines for
managerial behaviour and actions in various problems and situations. However, as real
business situations are very complex, these principles do not provide straightforward
solutions. In other words, the principles are just guidelines for actions and decision
making which can be modified according to the situation.
3. Formation: The principles of management were formed by continuous observation
and experimentation by managers in different situations.
4. Flexibility: The principles of management are flexible and can be moulded by
managers according to the specific situation and circumstance.
Sample Paper – 3
5. Behavioural: The principles of management are behavioural in the sense that they
influence human behaviour and help in understanding the relationship between
human resources and material resources in an organisation.
6. Explains the cause and effect relationship: The principles of management explain
the effect of their application in different situations. In other words, they help in
explaining what would be the effect of application of a principle in a particular
situation. However, as the principles of management deal with human behaviour, the
effect of their behaviour cannot be predicted accurately.
7. Dependent on situation: The application of principles of management depends on the
particular situation. In other words, the principles must be moulded according to the
needs of the specific situation.
OR
The following Fayol’s principles of management have been discussed above:
1. Initiative: there is an employee suggestion system, and any employee who gives good
suggestions which result in substantial cost/time reduction is rewarded.
According to this principle, there must be motivation and an incentive among
employees to work. They must be encouraged to come up with new, exciting ideas and
suggestions. However, it must be ensured that the new initiatives and ideas are in
accordance with the usually followed rules and practices in the organisation. In
addition, good initiatives can be suitably rewarded by managers.
2. Esprit de corps: There is also team spirit of unity and harmony among employees,
which results in the spirit of mutual trust and belongingness among team members.
According to this principle, the management must work towards promoting team spirit
among employees. In other words, there must be unity in work. Employees must have
a feeling of belongingness and mutual trust towards each other. Following this
principle is specifically important for large organisations where team work is essential
for the achievement of objectives. Working together as a team helps in building mutual
understanding, which in turn helps in improving efficiency.
3. Subordination of individual interest to general interest: employees give priority to
the interests of the organisation over their interests.
According to this principle, employees should give priority to organisational objectives
over their personal objectives as interest of the organisation is more important than
the interest of any employee.
Answer 33
1. Production cycle: It refers to the time gap between receiving the goods and their
processing into final goods. Longer the production cycle for a firm, larger are the
requirements of working capital and vice versa. This is because a longer production
cycle would imply greater inventories and other related expenses, so greater
requirement of working capital.
2. Scale of operations: Firms which operate on a larger scale require greater working
capital than those which operate on a lower scale. This is because firms with greater
Sample Paper – 3
scale of operations are required to maintain high stock of inventory and debtors. As
against this, a business with smaller scale of operation requires less working capital.
3. Credit allowance: Credit policy refers to the average period for collection of sale
proceeds. This depends on the competition in the market and the credit worthiness of
clients. So, a company which allows liberal credit policy will require more working
capital and vice versa.
4. Level of competition: If the market is more competitive, the company will require
larger stocks of finished goods in order to supply goods on time. So, they maintain
higher inventories which require a large amount of working capital.
5. Availability of raw material: If raw materials are easily and continuously available,
then lower levels of stocks would suffice. This will help the firm/company to avoid
storing a large amount of raw materials, thereby reducing the need of working capital.
However, if the lead time between placing the order and supply of raw materials
increases, then the company will require to store a large amount of stock of raw
materials which will lead to more requirement of working capital.
6. Operating efficiency: Companies with a high degree of operating efficiency will
require less working capital, whereas companies having a low level of operating
efficiency will require more working capital because efficiency may help the
company/firm in reducing the level of raw materials required, average time for which
finished goods inventory is held etc.
Answer 34
Following are the three marketing management philosophies:
1. Production Concept: According to this philosophy the main focus of business
activities was on production of goods because due to Industrial Revolution, the
demand for industrial goods was greater than the supply and the number of producers
was less in comparison to the demand for the goods. Therefore, businesses believed in
undertaking production of activity on a large scale which would lower the cost of
production and maximise the profit. It was assumed that goods which are widely
available in the market at affordable prices will be preferred by the consumers. Thus
the only focus was upon improving the production and distribution processes of an
organisation to make it more efficient.
2. Marketing concept: This philosophy laid emphasis on customer satisfaction.
According to this philosophy, customer satisfaction determines the success of an
organisation and so every business firm needs to identify the needs of present and
prospective buyers and take steps to satisfy them in an effective manner in order to
maximise their profit. Thus all the decisions in the firm must be taken after taking into
consideration the perspective of customers.
3. Societal Concept: This philosophy gives adequate consideration to social problems
like environment pollution, deforestation, shortage of resources, overpopulation etc.
According to this philosophy all business activities which satisfy human wants and
needs but are detrimental to the interests of society cannot be said to be justified in
any way. Hence, Business should not ignore the interest of society at large but consider
Sample Paper – 3
the issues of long-term social welfare while serving customers. In short, the primary
focus of a business must be to satisfy customer needs along with taking care of
society’s well-being.
OR
Answer:
Following are the factors affecting determination of price:
1. Cost of product: Cost of the product is the most important factor determining the price.
The cost of product includes producing, selling and distributing costs. It can be
classified into the following three types:
 Fixed cost: These are costs which remain fixed irrespective of the level of output.
For example, cost of machinery, land etc.
 Variable cost: These are costs which vary according to the level of output i.e. directly
proportional to the level of activity. As the level of output increases, the variable
costs also increase and vice versa. For example, cost of labour and raw material.
 Semi-variable cost: Similar to variable costs, these are costs which vary with the
level of output but not in direct proportion with it. For example, commission paid to
intermediaries.
 Total costs: These costs are the sum total of fixed, variable and semi-variable costs
for a specific level of activity like quantity produced, volume of sales etc.
Generally, a firm decides such a price for its product so that it can cover the various
costs and earn a profit.
2. Utility and demand for the product: Utility of a product has a direct connection with
the price of the product. It helps the seller to charge a higher price keeping in mind the
utility of the product. A person may be ready to pay a price for the product up to the
period wherein the utility of product is equal to the sacrifice made by him/her in case
of the price paid for the product. Similarly, the seller tries to recover his costs from the
price of the product. This is how the interests of both parties, i.e. buyer and seller, are
reflected in the price of the product. Another important factor determining the price of
a product is the elasticity of demand for the product. Price elasticity of demand implies
how responsive the demand is to the changes in price.
 Elastic demand: The demand is said to be price elastic if a given proportionate
change in price leads to a more than proportionate change in demand. In such a
case, charging a higher price by the firm would lead to a large fall in demand.
 Inelastic demand: The demand is said to be price inelastic if a given proportionate
change in price does not bring about any significant change in demand. In such a
case, it is possible for a firm to charge a higher price. This is because even at a higher
price, the demand will not fall much.
So, goods generally having an elastic demand have a comparatively lower price than
those which have an inelastic demand.
3. Degree of competition in the market: The price of a product is influenced by the
nature and degree of competition prevalent in the market. In case there is high degree
of competition in the market, it is not possible for a firm to charge a higher price. This
Sample Paper – 3
is because if the firm charges a higher price, consumers would shift the demand to its
competitors. But if there is less competition in the market, sellers may charge a high
price for products. Apart from this, while fixing the price of a product, the firm must
also take into consideration the quality and features of competitive products.
Sample Paper – 4
CBSE
Sample Paper – 4
SECTION A
1. Ashwin works as the Vice President of the marketing department in ES Ltd. wherein his
responsibility is to coordinate the various activities of the department. Name the level
of management to which Ashwin belongs. [1]
2. State one point which depicts the importance of staffing. [1]
3. Identify and explain the type of plan that suggests action and non-action of employees.
Identify and explain this plan. [1]
4. Jyoti recently joined ABC Ltd. where her responsibilities include the following:
 Coordinate different activities in the organisation
 Keep an eye on the changes in the business environment
 Formulation of goals and objectives for the organisation
According to the given information, at which level of management has Jyoti joined? [1]
a. Top level of management
b. Middle level of management
c. Lower level of management
d. None of the above
5. An organisation must be either completely centralised or completely decentralised.

True or false. [1]
6. What is meant by span of management? [1]
7. What is meant by the principle of unity of direction? [1]
Sample Paper – 4
8. Who coined the term scientific management? [1]
9. PQ Ltd. operates business on a rented ground. Every year, it pays a huge rent. Moreover,
it is of the belief that the employees must be paid well. Accordingly, the cost to company
on the grounds of salary is also high. How would such expenses alter the debt
preference of the firm? [1]
10. Which of the following form the last step in the planning process? [1]
a. Follow-up action
b. Development of the premises
c. Implementation of the plan
d. Selection of an appropriate course of action
11. In locality A, there is huge competition in the women’s apparel market. How would it
alter the working capital requirements of the firms in the market? [1]
12. Under the New Industrial Policy, the number of industries under compulsory licensing
was reduced to ____. Fill in the blanks. [1]
a. 2
b. 7
c. 4
d. 6
13. Explain the term Critical Point Control [1]
14. In the packaging of biscuits, the biscuits are first packed in a packet which is then put in
a cardboard box. Identify the level of packaging which is being used. [1]
15. Sheena purchased gold jewellery from a jeweller. However, while purchasing the
jewellery, she did not ask for the hallmark. Which consumer responsibility is not being
followed in the given situation? [1]
16. According to the functional foremanship technique of scientific management under the
_______ in-charge worked a _________ who would prepare the instructions which were to
be given to workers. [1]
a. Planning, route clerk
b. Production, route clerk
c. Planning, instruction card clerk
d. Production, instruction card clerk
17. Which sources can be used by an organisation to fill the vacancies from within the
organisation? [1]
Sample Paper – 4
18. Ram is the manager of the production department. He remains quite busy with many
tasks. As a result he is not able to oversee the tasks of the workers. Because of his busy
schedule, the workers are also not able to communicate with him the problems faced by
them. Which of the following elements of direction is lacking in the given situation? [1]
a. Leadership
b. Motivation
c. Supervision
d. Communication
19. Overall performance of the management is assessed by ________________. [1]

a. Management audit
b. PERT
c. Ratio analysis
d. Management information system
20. Which concept increases the importance of the role of subordinates? [1]
SECTION B
21. Explain in brief the concept of planning. [3]

OR
What are budget and programmes?
22. ABBY Ltd. established a new division in the organisation. For its various operations, it
requires competent personnel. Based on the various activities which would be carried
out and the work load analysis, it has estimated its requirement of human resource. [3]
a. Explain the next step which it would take.
b. State the two sources which would help in completing the step.
23. Recently, the Reserve Bank announced a hike in Central Reserve Ratio. ABC Ltd., a
commercial bank, does not have enough funds to meet the increased requirements.
Which money market instrument can be used by the commercial bank to meet the
deficit? [3]
24. Which organisational structure is most suitable when the size of the organisation is
large, has diversified activities and operations require a high degree of specialisation?
Explain. [3]
25. Explain the following consumer rights as provided by the Consumer Protection Act,
1986. [3]
a. Right to be informed
b. Right to seek redressal
c. Right to safety
Sample Paper – 4
SECTION C
26. What is meant by the term business environment? Explain how the various elements of
business environment are interrelated. Also, explain why business environment is said
to be uncertain in nature. [4]
OR
Identify the dimension of business environment in the following situations:
a. An increase in awareness among people regarding health benefits of organic food
and thereby an increase in the demand for the same.
b. The government passed the Competition Act, 2002.
27. As part of a new marketing strategy, ABC Ltd. decided to organise a lucky draw wherein
a draw would be organised for those purchasing the product. The lucky winners would
get a mixer grinder. [4]
a. Identify the term being described in the given situation.
b. Explain any three activities used as a part of it.
28. State any four pints of distinction between money market and capital market. [4]
SECTION D
29. Vijay is appointed as the Vice President of the marketing department in AB Ltd. One of
his core responsibilities is planning with respect to increase the production and sales of
the company. How should he go about in making the plan? [5]
30. Ashwin is the team manager of the products team. Recently, the performance of one of
his team members reduced drastically. He knew that the reason is something beyond
the official boundaries.
a. Which communication channel would be helpful in extracting the concerned
information?
b. State the various types of communication channels identified in (i) above. [5]
OR
Explain the importance of motivation as an element of directing.
31. Planning and controlling cannot exist without each other. Elaborate. [5]
OR
Why is controlling important for an organisation?
Sample Paper – 4
SECTION E
32. What is meant by principles of management? Describe their nature. [6]

OR
Explain the technique of 'Functional Foremanship' and the concept of 'Mental

Revolution as enunciated by Taylor.
33. What are the various factors affecting the financial decisions of a firm? [6]
34. Explain in detail any three elements of marketing [6]

OR
Samara Ltd. is a company which produces house-cleaning liquids. It produced a new
range of house-cleaning liquids which led to many accidents as appropriate safety
warnings for use were not mentioned.
a. Identify the important product-related decision which was ignored by the marketer.
b. Explain the functions of the concept identified above.
Sample Paper – 4
CBSE
Sample Paper – 4
SECTION A
Answer 1
Ashwin belongs to the top level of management. Top level of management comprises the
senior executives in the organisation such as the CEO, President and Vice President. Top
level of management performs activities such as the following:
 Coordinate different activities in the organisation
 Keep an eye on the changes in the business environment
 Formulation of goals and objectives for the organisation
Answer 2
Staffing ensures that the right personnel are assigned to the right job helps in improving
the performance in the organisation.
Answer 3
Rules are the type of plan that suggest action and non-action of employees. Rules refer to
specific statements which lays down what is to be done and what is not to be done.
Answer 4
Correct option: a
According to the given information, Jyoti has joined at the top level of management. Top
level of management comprises senior executives in the organisation such as the Chief
Executive Officer (CEO) Chief or Financial Officer (CFO) and the President. The
responsibilities as given in the question are performed by the top level of management.
Answer 5
The statement mention mentioned in the question is false. An organisation must maintain a
balance between centralisation and decentralisation. As an organisation grows in size,
decentralisation becomes a necessity. However, complete decentralisation may hamper
smooth functioning towards common goals and objectives of the organisation.
Answer 6
The number of subordinates which can be handled by a manager in an efficient manner
refers to the span of management.
Sample Paper – 4
Answer 7
According to this principle, all the efforts and activities in a group must work towards one
single objective. They must be guided by a single plan. The main objective of this principle
is that there must not be any overlapping of activities of different groups.
Answer 8
The term scientific management was coined by F. W. Taylor. According to Taylor, a
scientific analysis of the wok must be done so as to find the best method of doing it.
Answer 9
Expenses such as salaries and rent are called fixed operating costs of the firm. If a firm has
high fixed operating costs, then it must reduce its financing cost. Accordingly, it must lower
the debt.
Answer 10
Correct answer: a
The last step in the planning process is follow-up action. Plans must be properly monitored.
It is important to ensure that plans are implemented successfully and the goals are
achieved.
Answer 11
Large competition implies that the firms must maintain high stock of goods. Accordingly,
their working capital requirements are large.
Answer 12
Correct option: d
Under the New Industrial Policy, the number of industries under compulsory licensing was
reduced to 6. Under the New Industrial Policy, the compulsory licensing system was
abolished for majority industries with only six industries requiring licensing for operation
by the private sector.
Answer 13
Critical point control is a technique of controlling. According to this technique, rather than
controlling all the activities in management, only the key result areas (KRAs) (those that
affect the entire organisation) should be focused on.
Answer 14
The level of packaging being described is secondary packaging. In this level of packaging,
an additional layer is used to pack the goods.
Sample Paper – 4
Answer 15
Purchase of standardised products (so that there is assurance of quality) is the
responsibility of the consumer which is not being followed by Sheena.
Answer 16
Correct option: c
According to the functional foremanship technique of scientific management, under the
factory manager there would be a planning incharge, who in turn would have four
personnel under him, namely, instruction card clerk, route clerk, time and cost clerk and
disciplinarian. They would be responsible for preparing instructions for workers,
determining the route to be followed in production, preparing sheets for time and cost, and
maintaining discipline, respectively.
Answer 17
Transfer and Promotions (internal sources) can be used by an organisation to fill the
vacancies from within the organisation?
Answer 18
Correct option: c
The element of direction that is lacking in the given situation is supervision. A supervisor
must be hired at the level between a manager and workers. The supervisor would be
responsible for directly overseeing the various activities of the workers. He would serve as
the link of communication between the manager and the workers. On one hand, he would
communicate the information and ideas of the management to the workers; on the other
hand, he would communicate the problems of the workers to the manager.
Answer 19
Correct option: a
Management audit refers to the critical appraisal of the overall performance of the
management. The basic objective of the audit is to improve performance effectiveness and
efficiency of the management. Under this technique, various activities of managers are
evaluated, and accordingly, deficiencies and deviations are identified.
Answer 20
Decentralisation increases the importance of the role of subordinates. Decentralisation
refers to the delegation of authority and power amongst all the levels in the hierarchy,
especially the lower levels.
Sample Paper – 4
SECTION B
Answer 21
1. Planning refers to the process of deciding what is to be done and how it is to be done. In
2. Planning is the basic function of management and precedes all other functions.
3. In fact, it is planning which lays the foundation for all other functions. Various
managerial functions are performed according to the plans formulated by the
organisation. Accordingly, planning is also called the primary managerial function.
4. Planning involves taking decisions and drawing a broad outline for the future. It seeks
to foresee the desired situation as against the present situation. For this, objectives are
set and accordingly, a suitable course of action is defined.
5. In other words, planning provides a systematic approach to the achievement of
objectives.
6. It must, however, be remembered that every plan must be given a particular timeline
i.e. it is necessary that the plans are implemented within a given time period, else the
planning exercise would go futile.
OR
Answer
 A budget is a single use plan which drafts the desired results in quantifiable figures. For
instance, a budget on production defines the number of machines or the number of
workers which would be required and the expected units of products which would be
produced. This representation in quantifiable figures makes it easier to compare the
actual results with the expected results, and thereby take corrective actions.
 Programme is a detailed outline of a project which consists of goals, policies,
procedures and rules. In other words, it would include the details of the various
activities involved in a project and how the project would contribute to the overall plan
and objective of the organisation.
Answer 22
a. The next step which would be taken is ‘recruitment’. Under this step, the organisation
would now search for prospective candidates and convince them to apply for the job
vacancies.
b. Two sources which would help in completing the step would be:
 Internal sources: Job vacancies are filled from within the organisation.
 External sources: Job vacancies are filled from outside the organisation.
Answer 23
The commercial bank can use ‘call money’. Call money is a money market instrument which
is used by commercial banks for interbank transactions with the basic objective of meeting
the cash reserve requirements. Call money has a maturity period of less than 15 days.
Interest paid on call money is called call rate. This rate is highly variable and varies from
day to day.
Sample Paper – 4
Answer 24
Functional structure is most suitable when the size of the organisation is large, has
diversified activities and operations require a high degree of specialisation. Points
highlighting the suitability of a functional structure:
1. Large Size: If a large size organisation is divided into smaller departments, it would
promote greater efficiency and smooth operations.
2. Varying Functions: To deal with a large number of diversified activities
simultaneously, a high degree of coordination is required. This coordination in activities
is provided by departmentalisation.
3. Requirement of Specialisation: Performance of varying functions smoothly and
efficiently requires specialisation. Under a functional structure, each department can
specialise in their respective functions.
Answer 25
a. Right to be informed: Every consumer has the right to have information with respect
to a product such as the ingredients, date of manufacturing, price etc.
b. Right to seek redressal: Every consumer has the right to seek redressal in case of a
complaint or if the product is not according to the expectations of the consumer.
c. Right to safety: Every consumer has the right to be protected against goods which can
be harmful to life, property or health.
SECTION C
Answer 26
A business environment refers to the aggregate of external and internal factors that affect
the performance of the business. For example, consumers, social trends, change in tastes
and preferences of consumers, change in government policies, change in political scenario
etc., all make up the business environment. Following points explain the features of
business environment:
example, an increase in the income of consumers increases the demand for consumer
durables such as televisions and refrigerators. Thus, a change in one factor affects the
other factor.
2. Dynamic in nature: Being a mixture of numerous forces and factors, changes are
bound to happen in a business environment. Any business should cope with the
dynamic nature of an environment. For example, the tastes and preferences of a
consumer, technology, government rules and policies keep changing continuously;
therefore, a business must be well-equipped to adapt to a dynamic business
environment.
OR
a. The dimension of business environment described is social environment. The social
dimension of business comprises the social forces such as customs, consumer tastes
Sample Paper – 4
and preferences, values of society etc. In the given situation, due to rising awareness,
the taste and preferences of consumers change in favour of organic food, and
accordingly, their demand rises.
b. The dimension of business environment described is legal environment. Legal
environment comprises the various laws and orders passed by the government.
Organisations in the economy must abide by the rules and regulations and perform the
business activities within the framework of these rules and regulations. In the given
situation, the passing of the Competition Act, 2002 by the government is a part of the
legal environment.
Answer 27
a. The term being described is sales promotion. Sales promotion refers to the various
short-term incentives which are offered to customers so as to influence them to
purchase the product.
b. Some sales promotion activities:
 Discount: It refers to offering a product for less than the listed price/market price.
 Product combination: Offering some other product which is used in combination
with the concerned product as a gift.
 Sampling: Offering a free sample of the product to potential customers.
Answer 28
Money Market Capital Market
Companies or institutions Companies or institutions
Type of capital approach money market for approach capital market for
working capital requirements fixed capital requirements
Short-term debt instruments Equity shares, preference
such as commercial papers, shares, bonds, debentures
Instruments traded
treasury bills, certificate of
deposits
Money market instruments Deals in long term and
have a maturity period of a medium term securities with a
Duration
maximum of one year maturity period of more than a
year
Securities traded are safe as Securities traded are risky
securities are traded for short with respect to both return
Risk
duration and the issuers are and principle repayment
financially sound
Sample Paper – 4
SECTION D
Answer 29
Steps involved in the formulation of a plan:
i. Setting goals and objectives: The first step in the planning process is to clearly define
and state the objectives which are to be achieved. These objectives may be for the
organisation as a whole or for the individual departments. The objectives which are set
must be clear to each department, division and individual employees. They must give
direction to actions.
ii. Premises: Planning involves anticipation of the future. In this regard, various
assumptions (premises) must be made. These premises form the basis of planning. It
must be ensured that the premises are clear to all who are involved in planning.
iii. Defining course of action: When the objectives are set, different alternative courses of
action must be developed for their implementation. In this regard, an innovative and
new route can also be identified. The alternative courses of action identified must also
be discussed with the concerned personnel in the organisation.
iv. Comparing courses of action: A thorough evaluation of the various alternative courses
of action must be done. Each alternative must be evaluated in terms of its positive and
negative aspects.
v. Selecting a course of action: When the various alternatives are evaluated, a course of
action which proves ideal in terms of feasibility and profitability must be selected.
Sometimes, the judgement or intuition of the manager may also be used in selecting a
plan.
vi. Implementation of plan: When the objectives are set and the course of action is
defined, it is necessary to implement the plan within a given time frame.
vii. Follow-up: Under this step, plans are monitored to ensure that plans are implemented
successfully and to verify that the conditions and presumptions assumed (while making
a plan) are true in the present situation or not. Also, this step helps to ensure that the
activities are performed as per the plan and which will help in achieving the objectives
of the organisation.
Answer 30
a. In the given situation, an informal communication channel should be used. Informal
communication is one where information flows freely without following the official
lines.
b. Various informal communication channels:
 Single strand: The flow of information is in a particular sequence, i.e. information
passes from one person to another and so on.
 Gossip network: Information is shared by one person with many others at a time.
 Probability network: Information is shared with other people at random. That is, the
person sharing the information is indifferent about whom he shares the information
with.
Sample Paper – 4
 Cluster network: In this network, the first two persons who trust each other share
information. One of them then passes the information to some third person who in
turn shares it with the fourth and so on.
OR
Answer
Following points depict the importance of motivation as an element of directing:
1) Improves the performance level of employees and organisation: Suitable
motivation satisfies the needs of employees which in turn encourages them to
contribute maximum efforts towards achieving organisational goals.
2) Helps to change the attitude of employees: Good motivation helps in developing
positive attitude among employees towards work and towards achieving organisational
objectives. This can be done through positive encouragement in the form of reward or
praise.
3) Helps to reduce employee turnover: Lack of motivation and incentives is one of the
major reasons for employees quitting the organisation. If the needs of the individual can
be properly identified and worked upon through incentives, then the employee would
4) Helps to reduce absenteeism: Absenteeism in the organisation arises out of factors
such as poor working conditions and lack of incentives and rewards. Good motivation
can work towards improving such factors.
5) Helps managers to introduce changes smoothly: Motivation plays a key role in
helping managers to swiftly implement changes and policies. A manager can implement
changes in the organisation only when he/she can convince employees that the
proposed changes will help them receive additional rewards.
Answer 31
1. Controlling is closely related to planning. A good control system requires that there are
set standards for evaluation. These standards are provided by the plans defined by the
organisation. In other words, plans serve as the base for controlling.
2. Controlling is essential for effective implementation of plans. It is essential to keep a
close watch on plans, identify any deviations and take appropriate corrective actions. It
can be said that without proper controlling, planning would be futile.
3. In a similar manner, planning forms the base for controlling. Without planning, there
would be nothing to control. Controlling is done only when there are predetermined
standards against which evaluation can be done.
4. While planning involves intellectual thinking, decision making and deciding a course of
action, controlling, on the other hand, ensures that plans take the required course of
action.
OR
Answer
Importance of controlling:
1. Achieving goals: Controlling ensures that various activities are carried out correctly
according to the plans. It ensures that deviations if any are identified and appropriate
Sample Paper – 4
corrective action is taken. This helps the organisation to be on track and achieve its
goals.
2. Reviewing standards: An effective control system ensures that the standards are set
accurately. As the business environment changes, it ensures that the standards are also
reviewed so as to adapt to the changes taking place.
3. Enables efficiency in resource utilisation: Effective control system ensures that there
is minimum wastage of resources. In other words, it ensures that resources are utilised
optimally and in the most efficient manner.
4. Better motivation: With controlling, employees know what is expected from them and
how their performance would be evaluated. This clarity motivates employees to
perform better.
5. Ensures coordination: With proper controlling, the efforts of the various departments
can be unified towards the common goals and objectives of the organisation. The
existence of predefined standards of evaluation ensures coordination in the activities of
various departments.
SECTION E
Answer 32
Principles of management refer to the guidelines for managerial behaviour in various
situations and problems. The principles of management guide managers in taking actions
and decisions.
The following points describe the nature of principles of management:
1. Universally applicable: The principles of management are universally applicable in
the sense that they are applicable to all organisations irrespective of their nature and
size. However, the extent of application may vary from one organisation to another.
2. Broad guidelines: The principles of management are broad guidelines for managerial
behaviour and actions in various problems and situations. However, as real business
situations are very complex, these principles do not provide straightforward
solutions. In other words, the principles are just the guidelines for actions and
decision making; the actual action decision making must be according to the situation.
3. Formation: The principles of management were formed by continuous observation
and experimentation by managers in different situations.
4. Flexibility: The principles of management are flexible and can be moulded by
managers according to the specific situation and circumstances.
5. Behavioural: The principles of management are behavioural in the sense that they
influence human behaviour and help in understanding the relationship between
human resources and material resources in an organisation.
6. Explains the cause and effect relationship: The principles of management explain
the effect of their application in different situations. In other words, they help in
explaining what would be the effect of application of a principle in a particular
situation. However, as the principles of management deal with human behaviour, the
effect of their behaviour cannot be predicted accurately.
Sample Paper – 4
7. Dependent on situation: The application of principles of management depends on the

particular situation. In other words, the principles must be moulded according to the
needs of the specific situation.
OR
Answer
a. Functional Foremanship
A foreman refers to the one who is in charge of workers at the operational level. He
forms the link between managers and workers. According to Taylor, it is necessary to
improve the performance of the foreman to improve the overall performance in the
factory. Taylor observed a few qualities which a good foreman must have such as
intelligence, tact, judgement and knowledge. However, he observed that no single
person can have all the qualities. So, he suggested that there must be eight persons who
would accomplish the work of the foreman. This technique was named Functional
Foremanship. Taylor suggested that the planning and production functions should be
separated from each other, each having a separate in-charge. Both production in-charge
and planning in-charge in turn would have four personnel under them.
Four persons who work under the planning in-charge:

1. Instruction Card Clerk: Providing instructions to workers
2. Route Clerk: Determining the route to be followed in production
3. Time and Cost Clerk: Preparing sheets about time and costs so as to minimise
wastage
4. Disciplinarian: To ensure that discipline is being maintained
Four persons who work under the production in-charge:

1. Speed Boss: To ensure that the task is completed in the stipulated time
2. Gang Boss: To ensure that various machines and tools are in place and ready for
workers
3. Repair Boss: To ensure that tools and machines are in the proper working condition
4. Inspector: To ensure that the quality of work is up to the mark
All the workers are required to take orders from the eight foreman in the related
process or function of production.
b. Mental Revolution
Mental Revolution implies a change in the attitude of workers and managers so as to
create a better working environment. While managers must share the benefits with
workers/employees, workers/employees must work to the best of their capabilities
and must willingly accept the changes which are required.
Sample Paper – 4
Answer 33
Factors affecting the financing decisions of a firm:
1. Cost of funds: Cost of raising funds is an important factor taken into consideration
while choosing a source of fund. Generally, the source of fund which is the cheapest will
be chosen.
2. Risk: Risk involved in each source of fund is different. However, funds with moderate to
low risk are chosen.
3. Floatation cost: Sources of funds which have high floatation costs are less attractive to
a firm.
4. Cash flow position: Cash flow position of a company impacts its decision when
choosing a source of fund. A company with a strong cash flow position will invest in
debt, whereas a company with a weak cash flow position will opt for investment in
equity.
5. Fixed operating costs: Companies having a high fixed operating cost must refrain from
investing in debt. This is because fixed operating costs like a building or rent require a
lot of finance which will increase their financing costs. On the other hand, companies
with low fixed operating cost may opt for investing more of debt financing.
6. Considerations of control: Companies which do not want to dilute the level of control
must invest in debt, as investing in equity will result in dilution of management’s
control over the business.
7. State of capital market: The status of the capital market is also a crucial factor in
determining the choice of the source of fund. In case the market is bullish, more people
invest in equity, whereas when the market is bearish, it is difficult for companies to
issue equity shares.
Answer 34
a. Labelling is the important aspect which is being ignored by the marketer in the given
scenario.
b. Functions of labelling:
1. Providing information about the product: The label of a product provides
targeted consumers with all the relevant information regarding the ingredients used
in the product. It also informs consumers about the procedure to use the product in
its best manner. Various safety guidelines are also provided on a label to make sure
consumers do not end up hurting themselves or damaging their health.
2. Brand building: A well-designed label assists in building a positive brand value of
the product in the minds of consumers. Consumers can recognise their desired
product from its label in the supermarket and be assured about the quality
standards. The labels also contains other information like name and address of the
manufacturers, net weight when packed, manufacturing date etc.
3. Grading the product: One of the other important functions performed by labels is
to grade the product into different categories. This grading also helps to indicate the
qualities which that particular product has.
Sample Paper – 4
4. Helps in promotion of products: Label of a product can induce the customers to

purchase it. Hence labels must be carefully designed in order to attract the attention
of the customers. The labels also play an important role in providing the customers
information about the sales promotional schemes launched by a company. For
example, 40% off on Buying 2 packets of biscuits.
5. Legal compliance: The label mentions relevant information which is required to be
displayed according to various consumer laws. This makes a company socially
responsible in the eyes of the law. It also saves the company from being sued under
various consumer laws.
OR
Answer
Elements of marketing:
 Product: Product refers to the tangible and intangible attributes of goods and services
which have a value and can be offered for sale. A product is defined not only in terms of
physical product (functional utility) but also in terms of satisfaction or utility provided
to the consumer. In addition, a product includes after sales services such as customer
care, addressing consumer complaints and taking feedback etc. Important decisions
relating to product are designing, features, labelling, branding, packaging etc.
 Price: Price refers to the amount of money which is paid by a consumer to obtain a
product. Basically, this money represents the total sum of value exchanged for obtaining
the benefit of having or using the product. Pricing occupies an important role in
marketing as the products cannot be sold in the market without a price tag or
guidelines to determine the price. The price of a product influences its demands.
Basically, it has an inverse relationship with demand. So, (in most cases) when the price
of goods increases, their demand decreases and vice versa. Marketers must suitably
decide a price by properly analysing the various related factors such as target
customers, pricing range of competitors and goals of the firm. The price which is set
must be at par with the value offered by the product, as it also becomes a basis on
which the firms/companies compete with each other. Hence, this can be a factor which
will positively or negatively affect the revenue and profits of a business.
 Promotion: Promotion refers to activities undertaken by a firm with the objective of
communicating to potential consumers about the availability of a product, its features,
special qualities and purpose. Products are promoted with the objective of influencing
potential customers to purchase the product. An organisation must decide which
medium of promotion must be used and accordingly take the required action.
Sample Paper – 5
CBSE
Sample Paper – 5
SECTION A
1. Name the process by which various functions of management bind together. [1]
2. Explain any one responsibility of a consumer. [1]
3. Shriram Ltd had received a Bulk order to manufacture bulbs. And in order to meet this
target and avoid wastage of time the management decided that everybody must report
to the office latest by 10 a.m. Strict action would be taken against those who reported
late. Identify the type of plan reflected in the given question. [1]
a. Rule
b. Strategy
c. Procedure
d. Policy
4. Name the organisational structure which allows free flow of communication in the
organisation. [1]
5. Which of the following is not a non-financial incentive? [1]

a. Position
b. Job security
c. Fringe benefits
d. Job enrichment
6. Give the meaning of the term accountability as an element of delegation. [1]
7. What is meant by the term ‘scalar chain’? [1]
Sample Paper – 5
8. After standards are set, the next step in the process of controlling is _________.
a. To analyse deviation
b. To compare performance
c. To measure actual performance
d. Any of the above
9. Name one credit rating agency in India [1]
10. How does publicity differ from advertising? [1]
11. “According to this marketing management philosophy the satisfaction of customer’s

needs is the key to the success of any organisation in the market.” Which of the
following marketing management philosophies is being mentioned in the given
statement? [1]
a. Sales concept
b. Product concept
c. Marketing concept
d. Production concept
12. Dev purchased a laptop worth 40,000 which had a warranty of six months. However,
within a month of purchase, the laptop stopped working. When he complained to the
manufacturer regarding the same, he refused any form of compensation. In which
forum according to the Consumer Protection Act should the complaint be filed? [1]
13. Define the term business environment. [1]
14. State and explain one limitation of planning [1]
15. The technique of managerial control in which the goals and objectives to be achieved
are defined in quantitative terms is ___________. [1]
a. Statistical reports
b. Break-even analysis
c. Personal observation
d. Budgetary control
16. Which concept enables assessment of the number and types of human resources
necessary for the performance of various jobs and accomplishment of organisational
objectives? [1]
17. Define the term motivation. [1]
18. State two sales promotion activities. [1]
Sample Paper – 5
19. A complaint can be filed in the District forum in case the value of goods, including the
compensation claimed is [1]
a. Less than Rs 20 lakh.
b. Less than Rs 10 lakh
c. Less than Rs 30 lakh
d. Between Rs 10 lakh and 30 lakh
20. Explain the term decentralisation [1]
SECTION B
21. What is cancelling or withdrawal of legal tender status of a unit of currency which is in
circulation called? Explain its features (Any 2)
22. Identify the human need which is not being satisfied in the following situations: [3]
a. Ram feels that he is not introduced to his colleagues in the organisation and
therefore he is unable to maintain friendly relations with them
b. Priya feels that she does not get due recognition for her work.
c. John is unsatisfied with the fact that his organisation does not have a pension
scheme for employees.
23. How does training benefit an employee? [3]

OR
Which sources can be used by an organisation to fill the vacancies from within the
organisation?
24. ‘These are short-term borrowing instruments of Government of India. They are issued by
Reserve Bank of India on behalf of the Central Government’.
Identify and explain the money market instrument being described. [3]
25. Why is Consumer Protection Act, 1986 important for consumers? [3]
SECTION C
26. What is coordination? Why is it important for an organisation? [4]
27. SASHA Ltd. has a very interactive and free work culture. The employees are free to
interact with each other without following the hierarchy. Women employees of the
organisation run a ladies club where they meet every Sunday and discuss recent issues
concerned with women. They spread awareness regarding various issues among the
local women and offer whatever help is possible.
i. Name the type of organising structure which is described.
ii. List two advantages of the organising structure identified in (i).
Sample Paper – 5
iii. State any value which is communicated. [4]
28. What can be the personal barriers in communication? [4]

OR
What are semantic barriers of communication?
SECTION D
29. All business firms would like to increase their sales and earn profits to be successful. All
managers dream of these. To turn their dreams into reality, managers need to work
hard in thinking about the future, in making business predictions and achieving targets.
The above lines describe one of the functions of management. Identify and define this
function. State any three features of this function. [5]
OR
Every function of management follows a particular process. In context of this statement,
explain the first five steps in the primary function of management.
30. Define directing as a function of management and Explain in detail about the elements
of directing? [5]
OR
State and explain any two types of leadership styles
31. Explain investment decisions and factors affecting investment decisions. (Any 3 factors)
SECTION E
32. Explain the following principles of management as given by Fayol

a) Authority and responsibility
b) Unity of command
c) Equity
d) Espirit de corps
e) Stability of personnel
f) Remuneration of employees [6]
OR
Management should find 'One best way' to perform a task. Which technique of scientific
management is defined in this sentence? Discuss the following techniques of Scientific
Management.
a. Fatigue Study
b. Method Study
c. Simplification and standardisation of work.
Sample Paper – 5
33. State any three differences between capital budgeting decisions and working capital
decisions. Explain the factors affecting the capital budgeting decisions of a
firm? (Any 3) [6]
34. State the differences between advertising and personal selling. [6]
OR
Discuss any six functions of marketing
Sample Paper – 5
CBSE
Sample Paper – 5
SECTION A
Answer 1
The various functions of management bind together by the process of coordination.
Coordination refers to the process through which the various functions of management are
synchronised together towards the common goals and objectives of the organisation.
Answer 2
Asking for a cash memo is a responsibility of a consumer. For every purchase of a good or
service, a consumer must always ask for a cash memo or bill. It acts as a proof of purchase.
Answer 3
Correct option: a
Rules define what exactly is to be done and what is not to be done. Once a rule is defined in
an organisation, employees are not allowed to deviate from it. Rules are said to be the
simplest versions of a plan.
Answer 4
The organisational structure which follows free flow of communication is informal
organisation. Informal organisation refers to a network of social relationships which
emerge from the interactions among employees in an organisation.
Answer 5
Correct option: c
A fringe benefit is not a non-financial incentive. It is a financial incentive which refers to the
additional benefits provided to employees over and above salaries. For example, housing
allowance, medical allowance etc.
Answer 6
Accountability means answerability to the outcome. It arises from the responsibility which
is assigned.
Answer 7
A scalar chain refers to the formal line of authority (in the order of rank) as followed in the
organisation. Formal communication in an organisation follows the scalar chain.
Sample Paper – 5
Answer 8
Correct option: c
After standards/targets are set, the next step in the controlling process is to measure the
actual performance of the employees by evaluating the work done by them. For this,
various techniques can be used such as personal observation, performance reports etc.
Answer 9
CRISIL (Credit Rating and Information Services of India Ltd.) is a credit rating agency in
India.
Answer 10
Publicity is different from advertising in the sense that while advertising is a paid form of
communication, publicity is non-paid.
Answer 11
Correct option: c
The statement in the question refer to a marketing management philosophy called
marketing concept. According to the marketing concept, the primary focus of business
should be on customer satisfaction. It is based on the belief that customer satisfaction
determines the success of an organisation.
Answer 12
Dev can file a complaint in the District Forum. A complaint can be filed in the District
Forum when the value of good (including the compensation claimed) is less than ` 20 lakh.
Answer 13
A business environment refers to the aggregate of external and internal factors that affect
the performance of the business. For example, consumers, social trends, change in tastes
and preferences of consumers, change in government policies, and change in political
scenario etc., all make up the business environment.
Answer 14
One of the limitations of planning is that planning lacks accuracy. Planning is a function of
management which is related to the future activities i.e. plans are made for the tasks to be
undertaken. In case of planning, many assumptions are made about the future which may
or may not be accurate. So if these assumptions do not hold true in present or in future, the
whole planning will fail until the required changes are made.
Sample Paper – 5
Answer 15
Budgetary control is a technique of managerial control wherein all the operations/
activities are planned in advance with the help of budgets. Here, the term budget refers to
defining the goals and objectives to be achieved in quantitative terms. Then the actual
results of the activities are compared with budgetary standards. Accordingly, the work
done is assessed and evaluated.
Answer 16
Workload analysis enables the assessment of the number and types of human resources
necessary for the performance of various jobs and accomplishment of organisational
objectives.
Answer 17
Motivation refers to inducing workers to work and perform in a desired manner so as to
achieve the goals/objectives of the organisation.
Answer 18
Two sales promotion activities are rebate and discount.
Answer 19
Under the three-tier machinery of Consumer Protection Act, a complaint can be filed in the
District forum in case the value of goods, including the compensation claimed is less than
` 20 lakh.
Answer 20
Decentralisation refers to the delegation of authority and power amongst all the levels in
the hierarchy i.e. all the levels of management.
SECTION B
Answer 21
Cancelling or withdrawal of legal tender status of a unit of currency which is in circulation
is called demonetisation. Features of demonetisation
1. Accounts the unaccounted wealth: As India had undertaken the step of
demonetisation of notes of ` 500 and ` 1,000, it was easy to deposit the cash in the bank
and get it exchange for the new notes. However, the ones having black money
(unaccounted wealth on which tax is not paid) were required to pay taxes at a penalty
rate.
2. Change in government’s attitude: The step of demonetisation proved the fact that the
government of India will not tolerate tax evasion and make sure that the entire country
becomes tax compliant
Sample Paper – 5
Answer 22
a. The human need that is not being satisfied is social needs. It refers to the need related
to love, affection friendship etc. These needs become more active only after satisfaction
of physiological and safety needs.
b. The need that is not being satisfied is esteem needs. It includes factors such as
recognition for work, autonomy and self-respect.
c. The human need that is not being satisfied is safety or security need. These needs refer
to the factors which provide protection (physical or economic) to the individual.
Answer 23
Proper training benefits employees of an organisation in the following manner:
1. Better career opportunities: Training helps in improving the knowledge of the
employee which in turn helps in improving his career prospects.
2. Earn more: By helping the individual to improve their knowledge and skills, it
improves the earning prospects of employees.
3. Less accident prone: With proper training, employees become more efficient in
handling complex machines. This helps in reducing the chances of an accident
OR
The following sources can be used by the organisation to fill the vacancies from within the
organisation:
1. Transfers: Employees are shifted from on job to another, one department to another
department or from one shift to another without any major changes in responsibilities
or job position of an employee in an organisation.
2. Promotions: Vacant positions at the higher level are filled by suitably promoting
employees at the lower level.
Answer 24
The money market instrument which is being described is ‘treasury bill’. A treasury bill has
the following features:
1. It is a short-term borrowing instrument of the Government of India, having a maturity
period of less than one year.
2. It is also known as Zero Coupon Bonds.
3. They are issued by the Reserve Bank of India on behalf of the Central Government.
4. They are issued as promissory notes and are a highly liquid instrument.
5. They are issued at a value lower than the face value and are repaid at par (the
difference being the interest receivable called discount).
Answer 25
Importance of Consumer Protection Act, 1986 for consumers:
1. Consumer ignorance
In India, consumers are unaware about their rights and available relief, so it becomes
important to educate them about the same.
Sample Paper – 5
2. Unorganised consumers
In India, consumers are unorganised. There are very few consumer organisations and
NGOs which are not powerful enough to protect the rights of consumers. This implies
the need of protecting consumers.
3. Consumer exploitation
Sellers are engaged in exploitative and unfair trade practices in order to increase sales,
implying the need for consumer protection.
SECTION C
Answer 26
Coordination refers to the process through which the various functions of management are
synchronised together towards the common goals and objectives of the organisation.
Importance of coordination:
1. Growth in size: When the size of the organisation increases, the need for coordination
also increases. This is because individuals working in large organisations belong to
different environments and they have their own requirements and objectives. So, it is
necessary to bring all their efforts jointly to achieve the common goal of the
organisation. In this situation, in order to achieve organisational efficiency, it is
important to harmonise the objectives of employees with the goals of the organisation
through proper coordination.
2. Difference in functions: In an organisation, there are different inter-linked and inter-
related departments. Coordination is required to bring together the activities of
different departments towards one common organisational goal. Also, it helps to
minimise the differences among departments.
3. Specialisation: As there are number of specialists working in the organisation, each of
them have their own way of working and consider themselves to be capable of judging
analysing and deciding So they are not willing to take any kind of suggestions or advice.
This results in chaos and misunderstanding in the work place. Therefore, coordination
helps in coordinating the activities of all the specialists in the right direction and
enables the achievement of the organisational goals.
Answer 27
1. The organisational structure which is described is ‘informal organisational structure’.
Informal organisation refers to the social relationships which emerge from the
interactions among employees in an organisation.
2. The following are two of the advantages of informal organisational structure:
 In such a system, information spreads quickly. This is because the flow of
communication does not follow the formal chain of hierarchy.
 This structure allows employees to interact with like-minded people.
3. This provides them with a greater sense of belongingness towards the organisation.
Sample Paper – 5
Answer 28
Personal barriers to communication arise out of personal factors affecting the sender and
the receiver. Some personal barriers to communication:
1. Authority: Sometimes, subordinates do not communicate freely with managers due to
the fear of authority. On the other hand, the manager may not also communicate certain
information with the subordinates if he feels that it would affect his authoritative
power.
2. Low confidence: If the manager does not have confidence in the skill and competence of
the subordinates, he would not seek their advice or opinion.
3. Lack of willingness: The subordinates, at times, are not willing to share information or
communicate with managers if they feel that it would affect their personal interests.
4. Lack of incentives: Many a times, there is no incentive (in the form of reward or
appreciation) for participation in communication. In such cases, the subordinates do
not take initiative for effective communication with the manager.
OR
Semantic barriers of communication refer to barriers where there is a problem in decoding
the message because of factors such as difficulty in interpretation, wrong translations or
wrong use of words. The following are some causes of semantic barriers:
i. There may be difficulty in expressing the information because of poor vocabulary or

wrong use of words.
ii. Sometimes, a single word may have many different meanings. In such cases, it may be
difficult for the receiver to interpret the intended meaning of the word.
iii. Sometimes, it may happen that there is a language barrier between workers such that
the level of proficiency of a language may be different for the two. For instance, while
managers may be proficient in English, workers may not be proficient in English. In
such cases, the information must be appropriately translated. However, in the process
of translation, the information may get misinterpreted.
iv. Sometimes, a senior or a specialist uses technical vocabulary which the subordinates
might find difficult to understand or interpret.
SECTION D
Answer 29
The function of management described in the question is planning. Planning refers to the
process of setting objectives for an organisation and also developing an appropriate course
of action to achieve the desired objectives. Following are the features of planning:
1. Planning focuses on objectives: Every organisation has a general purpose behind its
existence. Planning involves in setting specific objectives along with developing an
appropriate course of action in order to achieve these specific objectives. Thus,
planning is purposeful and holds value only when it contributes to the achievement of
goals/objectives of the organisation.
Sample Paper – 5
2. Planning is a primary function of management: Planning forms the basis on which

all the functions of management are dependent, which means that all the other
functions of management are performed within the framework of the plans drawn
under the process of planning. Thus it is called the primary function of management.
However, all the functions of management are interrelated and hold the same
significance in the process of management.
3. Planning is pervasive: Pervasiveness of planning means that it is required at all the
levels of management as well as in all the units/departments of an organisation. Hence,
it is a misconception that planning is a function undertaken by only the top level
management in an organisation. However, the scope of planning varies across the
different levels of management in an organisation.
OR
The primary function of management is planning. The first five steps involved in the
process of planning are:
1. Setting objectives: The first step in the planning process is to clearly define and state
the objectives which are to be achieved. These objectives may be for the organisation as
a whole or for the individual departments or units. The objectives which are set must be
clear to each department, division and individual employees. These objectives must
provide direction to all the departments. Once the objectives of an organisation are
clearly understood by the departments or units, they can form their own objectives
within the broad framework of organisation’s objectives.
2. Developing premises: Planning involves anticipation of the future. In this regard,
various assumptions must be made. These assumptions are called premises which form
the basis of planning. These premises can be in the form of forecasts, existing plans or
any past information. Assumptions or premises should be the same throughout the
organisation and all should be in total agreement on them. All managers involved in the
process of planning must well aware with the assumptions and use the same set for the
purpose of framing plans.
3. Identifying alternative course of action: When the objectives are set, different
alternative courses of action must be identified for achieving the objectives. It can
either be a routine alternative or an innovative one. In case of important projects, more
alternatives must be identified and discussed with the concerned personnel in the
organisation.
4. Evaluating alternatives: A thorough evaluation of the various alternative courses of
action must be done. Each alternative must be evaluated in terms of its positive and
negative aspects with respect to the objectives to be achieved by the organisation.
5. Selecting an alternative: When the various alternatives are evaluated, a course of
action which proves ideal in terms of feasibility and profitability and has the least
negative aspects/consequences must be selected. Sometimes, the judgement or
intuition of the manager may also be used in selecting a plan. A combination of plans
can also be selected instead of opting for one best plan.
Sample Paper – 5
Answer 30
Directing refers to the process of providing instructions, guidance, counselling and
motivation to employees towards achieving the goals and objectives of an organisation. It
involves the following elements:
1. Supervising: Supervision refers to the process where the activities of workers are
guided towards the pre-determined objectives. It involves directly overseeing the work
of workers. Through effective supervision, it is ensured that work is carried out
efficiently and towards the desired objectives. Moreover, good supervision helps in
maintaining harmony and unity among workers.
2. Motivation: Motivation refers to inducing workers to work and perform in a desired
manner so as to achieve the goals of the organisation. Motivation influences the
psychology of workers such that they are induced to work and perform better. In an
organisation, motivation can be provided in the form of promotion, appraisal and
recognition.
3. Leadership: Leadership refers to influencing the behaviour of employees such that
there is an improvement in their willingness to work and achieve organisational
objectives. Good leadership boosts the self-confidence of workers and induces workers
to work to the best of their capabilities.
4. Communication: Communication refers to the exchange of information, facts and
feeling such that a common understanding is created. A good communication network
is highly important for smooth and efficient functioning of an organisation. Good
communication is the key to good management.
OR
The two types of leadership are:
1. Autocratic leadership: It is a type of leadership wherein the leader exercises his

power over the subordinates and keeps a complete control over them. He expects the
subordinates to follow his orders. Hence, the communication in this type of leadership
is only one-way. This type of leadership is beneficial in getting productivity in situations
like a factory wherein the leader has to direct the work of the workers and is
responsible for the production on time. In short, in this type of leadership, the leader
may consider everyone’s ideas and opinions but take the final decision on his own.
2. Democratic leadership: In this type of leadership, the leaders creates plans and take
actions after consulting the subordinates. The leader also encourages the subordinates
to actively participate in the decision making process. This type of leadership is most
common in today’s business environment. Subordinates are given complete freedom to
set their objectives so that they can give their best effort to achieve them.
Answer 31
 Investment decisions: A firm must decide where to invest the funds such that it can
earn maximum returns. Such decisions are known as investment decisions and can be
classified as long-term and short-term investment decisions.
Sample Paper – 5
1. Long-term investment decisions:

 It refers to long-term investment decisions such as investment in a new fixed
asset, new machinery or land.
 They are also known as capital budgeting decisions.
It affects a firm’s long-term earning capacity and profitability and has long-term
implications on the business.
 Moreover, such investment involves a large amount of money, so it is very
difficult to revert such decisions.
 Examples: Decision to purchase a new fixed asset, opening a new branch etc.
2. Short-term investment decisions:
 These decisions are also known as working capital decisions and affect day-to-
day business operations.
 It also affects the liquidity and profitability of a business.
 Example: Decisions related to cash management, inventory management etc.
Three factors affecting investment decisions:
a) Rate of return: The investment decision is based on the rate of return from projects.
The greater the rate of return from a project, more likely that it will be given preference
by the company.
b) Investment criteria involved: Before investing in a project, various calculations are
made regarding the amount of investment, cash flow, rate of return and so on. Different
capital budgeting techniques are used to evaluate the proposals before finalising a
project.
c) Cash flows of a project: While investing a huge amount in a particular project, every
company expects to generate cash flow from that investment over a period of time. If a
particular company requires cash flow on regular basis, then they must invest in a
project which generates cash flow on regular basis. Therefore, analysis of cash flow will
have an impact on investment decisions taken by a company.
SECTION E
Answer 32
i. Authority and responsibility: Authority refers to the right for giving commands and
receiving obedience. Responsibility, on the other hand, arises out of authority.
According to Fayol, when a manager is given a responsibility, he must also be given
appropriate authority. However, it must be ensured that there is a balance between the
two such that there is no misuse of authority. Authority given must be such that the
responsibility can be dully fulfilled.
ii. Unity of command: According to this principle, one subordinate should receive
directions or command from only one superior. If a subordinate receives commands
from more than one superior, then it would lead to confusion.
Sample Paper – 5
iii. Equity: According to this principle, there must be equal and fair treatment of various
employees in an organisation. There must not be any discrimination on grounds such
as religion, gender, caste etc.
iv. Espirit de corps: According to this principle, the management must work towards
promoting team spirit among employees. The employees must have a feeling of
belongingness and mutual trust towards each other.
v. Stability of personnel: The management must ensure that there is stability of
personnel in the organisation. For this, the employee must be selected after a
thorough and rigorous selection process. When selected, the employee must work in
the organisation at least for the minimum fixed tenure.
vi. Remuneration of employees: The remuneration which is paid to employees must be
fair form the point of view of both employee and organisation. That is, the pay must
be such that it is at least enough for a decent standard of living and is also within the
affordability of the organisation.
OR
i. The technique of scientific management which is being described is Method Study.
According to this technique, one must determine the best way of doing a task. The
method so determined must aim at minimising the cost and maximising the quality.
ii. Techniques of Scientific Work Study

a. Time Study: According to this technique, there must be a standard time limit for
the completion of a task. With repeated observations with regard to time taken in
completing a task, a standard limit is set. This helps in deciding the number of
employees which would be required in completing a task. For example, if it is
observed that one person can manufacture one unit of a commodity in two hours,
then in a working day of 8 hours, each worker can manufacture 4 units of the
commodity.
b. Motion Study: Under motion study, various motions or movements involved in a
particular task are studied. These movements can be classified as productive,
incidental and unproductive. According to Taylor, unnecessary movements must
be avoided while doing a task so that efficiency increases.
c. Fatigue Study: This technique focuses on rest or break as required during work. It
is natural that if a worker works continuously, then fatigue sets in. This leads to
reduction in efficiency. Every worker requires regular rests or breaks. According
to Taylor, standard break timings must be provided to workers for improving
performance.
d. Method Study: According to method study, one must determine the best way of
doing a particular task. The method so determined must aim at minimising the
cost and maximising the quality. One of the popular examples of this study is the
assembly line production used by Ford Motors.
e. Simplification and Standardisation of Work: Standardisation refers to a
process wherein standards are set for any production activity. The standard is
then used as a benchmark for evaluating the tasks done. In simplification, on the
Sample Paper – 5
other hand, unnecessary varieties in design, size etc. which add to the cost should
be avoided. This technique aims at full and efficient utilisation of resources,
reducing inventories and increasing the turnover.
Answer 33
Difference between capital budgeting decisions and working capital decisions:
Basis Capital Budgeting Decisions Working Capital Decisions

Meaning Investment decisions which are Investment decisions which are
long-term are known as capital short-term are known as
budgeting decisions. working capital decisions.
Example Investment in a new fixed asset, new Decisions with respect to cash,
machinery etc. inventory etc.
Effect on Earning capacity of the firm Day-to-day working of the firm
Factors affecting the capital budgeting decisions of a firm:
 Expected cash flow: Generally with a high investment, there is expectation of greater
cash flow in the form of receipts and payments. These cash flows must be appropriately
analysed before taking a capital budgeting decision.
 Rate of return: Every firm takes capital budgeting decisions after taking into
consideration, the rate of return from the project. The expected return from each
investment alternative and the risk involved must be analysed and assessed properly.
Generally, those projects are chosen which are expected to generate higher return and
have a lower risk.
 Investment criteria: There are several capital budgeting techniques used to decide
whether or not a firm must invest in the project. This involves calculations with respect
to cash flows, interest rate, rate of return etc. Every investment proposal is analysed by
applying different capital budgeting techniques.
Answer 34
Points of difference between advertising and selling:
Advertising Personal Selling

Advertising is impersonal; i.e. there is no Personal selling involves direct
direct communication with potential communication with potential consumers.
consumers.
It is inflexible in the sense that the message It is flexible in the sense that the message
which is transmitted is standard. can be modified according to individual
consumer.
It has a wide reach. It has a limited reach.
Sample Paper – 5
In advertising per person cost is low. In personal selling, per person cost is
relatively high.
The medium of communication can be The medium of communication can only
television, newspapers, radio etc. be through sales persons.
As advertising is impersonal, direct As personal selling is involves direct
feedback of consumers cannot be taken. interaction with consumers, feedback can
be obtained easily.
OR
Answer
1. Gathering and analysing market information: Analysing the market is one of the
most important function of marketer which is required to be performed to identify the
needs of customers and take appropriate marketing decisions. It is important as on the
basis of this a marketer analyses the market and identifies the best opportunities and
threats as well as gauge the strengths and weaknesses of the organisation. This shall
also help in deciding which opportunities must be pursued.
2. Marketing planning: Creating a market plan to achieve marketing goals and objectives
of the organisation is an important function of marketing. Market research is conducted
to analyse preferences of customers to formulate a suitable plan.
3. Product designing and development: Design of a product is an important factor
which makes the product look attractive. This design shall help in attracting the
customers. Also, a good design of a product can improve its performance and provide a
competitive advantage over other products in the market. Hence, product designing and
development is an important function of marketing.
4. Customer Support Services: Customer support services like after sales service,
maintenance services, credit services etc., are developed by every organisation to
maximise the satisfaction obtained by the consumers by using the products or services.
Customer satisfaction is the key to marketing success in modern day business
environment. It helps in customer retention and developing a loyalty for the brand and
its products.
5. Promotion: Promotion refers to providing the customers information about the
product of the firm and its features and inducing them to purchase the products.
Various methods of promotion like personal selling, publicity, advertising etc., can be
used for promoting the products. A marketer needs to decide about various things like
the budget to be utilised for promotion, the combination of promotional tools to be used
etc.
6. Physical distribution: Managing physical distribution is one another important
function of marketing. Under this, the two important decisions to be taken are deciding
the channel of distribution to be used and the second one is regarding the physical
movement of goods from the place where it is produced to the place where it is
required by consumers. Along with this, the other important decision areas under
physical distribution are, inventory management, storage, warehousing and
transportation of one place to another.

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CBSE XII | Accountancy

Time: 3 hrs Max. Marks: 80

4. Explain what is collateral security? [1]

On Allotment – `40 per share (including premium)

Devansh is admitted as a partner on the above date on the following terms:

Particulars 2015–16 2014–15

Tax Rate of 50%

Note 31.3.2016 31.3.2015

Vinod’s Capital Account

Values: (i) Welfare of society; (ii) Help in education

Vinod’s Capital A/c Dr. 40,000

Profit and Loss Suspense A/c Dr. 64,000

Equity Share Allotment A/c Dr. 16,00,000

Equity Share First Call A/c Dr. 20,00,000

(Being first call money due on 40,000 shares)

Equity Share Capital A/c Dr. 30,000

Share Forfeiture A/c Dr. 9,000

Share Forfeiture A/c Dr. 4,000

Cash Book (Bank Column)

Basis Receipts and Payments Account Cash Book

4. Institutions It is prepared by the Not-for-Profit It is prepared by all types of

Partners’ Capital Account

84,000 66,000 40,000 84,000 66,000 40,000

Share Forfeiture A/c Dr. 7,500

Bank A/c Dr. 1,600

(Being amount transferred to capital reserve)

Bank A/c Dr. 600

Share Forfeiture A/c Dr. Nil

Statement showing discount to be written off every year

ii. Discount on issue of Debentures Account:

Dr. Discount on issue of Debentures Account Cr.

2010-11 To Balance b/d 50,000 By P & L A/c 50,000

Calculation of Goodwill that should be credited to Reena’s Account.

i. Journal Entries to be passed when Goodwill Account is not opened:

Revaluation A/c Dr. 65,000

Pooja’s Capital A/c Dr. 25,417

Particulars Pooja Minal

Therefore, gaining ratio between M and N is 5:1

Net Profit Ratio = Net Profit/Net Sales *100

1. Choose the correct answer from the given options: [1]

2. Choose the correct answer from the given options: [1]

3. Choose the correct answer from the given options: [1]

4. What is a Memorandum Revaluation Account? [1]

5. Choose the correct answer from the given options: [1]

b) All the partners in their old profit-sharing ratio

7. Choose the correct answer from the given options: [1]

8. Distinguish between ‘Dissolution of partnership’ and ‘Dissolution of partnership firm’

9. Choose the correct answer from the given options: [1]

10. Explain the 2 types of donations received by a Not-for-Profit Organisation. [1]

of dissolution was as follows: [4]

21. (a) VK Refrigerators Limited had an outstanding balance of `5,000, 6% debentures of

…………………….. Dr. --------

…………………….. Dr. --------

…………………….. Dr. --------

…………………….. Dr. --------

…………………….. Dr. --------

…………………….. Dr. --------

……………………. Dr. --------

…………………….. Dr. --------

…………………….. Dr. --------

Devansh 3,00,000 13,50,000 Less: Provision 9,000 1,41,000

24. What is meant by a Cash Flow Statement? [1]