Long Answer Type Question

Long answer Type Question
Chapter 1.
Fundamental of Partnership
1. Anita and Tony, each doing business as sole proprietors started a partnership on 1 st
April, 2018. Anita brought in plant and Machinery valued at Rs5,00,000 whereas Tony
brought in furniture costing Rs50,000 and Rs7,00,000 in cash.
Since the business needed more funds. Tony gave a loan of Rs2,00,000 to the firm on
30th June, 2018. Their partnership deed provided for:
(a) Interest on capital to be allowed @ 10% per annum.
(b) Interest on drawings to be charged @ 6% per annum.
(c) Anita to be given a commission of 4% on the corrected net profits before charging
commission.
(d) Tony to be given a salary of Rs12,000 per annum.
Tony withdrew Rs5,000 at the end of every month and Anita withdrew Rs30,000 on 1 st
August, 2018. The net profit of the firm, for the year 2018-19, after debiting Tony’s
salary of Rs12,000 per annum but before considering any interest due to and due from
the partners, was Rs4,00,000.
You are required to prepare for the year 2018-19:
(i) Profit and Loss Appropriation Account.
(ii) Partners’ Capital Accounts.
2. Ravi and Tiku are partners in a firm. According to their partnership deed:
(a) Interest on capital will be allowed @ 5% per annum.
(b) Interest on drawings will be charged @ 4% annum.
(c) Each partner will be given a salary of Rs1,000 per month.
(d) Partners will share profits and losses in the ratio of 2 : 1
Following are the particulars of the capitals and drawings of the partners:
Particulars Ravi (Rs) Tiku (Rs)

st
Capital (1 April, 2017) 60,000 50,000
Drawings (made on 1st June, 2017) 3,000 6,000
Ravi had taken a loan of Rs10,000 from the firm on which interest of Rs200 was due by
him to the firm.
The accounts for the year 2017-18 showed that the firm had made a profit of Rs77,000
before taking into account any interest, partners’ salaries and manager’s salary of
Rs18,000.
You are required to prepare:
(i) Profit and Loss Appropriation Account for the year 2017-18.
(ii) Partners’ Capital Account.
3. Shankar and Manu are partners in a firm. On 1st April, 2014, their fixed capital
accounts showed a balance of Rs2,00,000 and Rs4,00,000 respectively.
On this date, their current account balances were Rs50,000 and Rs1,00,000
respectively.
On 1st January, 2015, Shankar introduced additional capital of Rs2,00,000 while Manu
gave a loan of Rs1,50,000 to the firm.
The clauses of their partnership deed provided for:
(a) Interest on capital to be allowed at the rate of 10% per annum.
(b) Interest on drawings to be charged at the rate of 12% per annum.
(c) Profits to be shared by them in the ratio of 3 : 2.
(d) 10% of the correct net profit to be transferred to General Reserve.
During the financial year 2014-15, both partners withdrew Rs6,000 each at the
beginning of every quarter.
The net profit of the firm, before any interest, for the financial year 2014-15 was
Rs5,00,000.
(ii) Partners’ Fixed Capital Accounts.
(iii) Partners’ Current Accounts.
(iv) Partner’s Loan Account.
4. The partnership agreement of Rohit, Ali and Sneh provides that:
(a) Profits will be shared by them in the ratio of 2 : 2 : 1.
(b) Interest on capital to be allowed at rate of 6% per annum.
(c) Interest on drawings to be charged at the rate of 3% per annum.
(d) Ali to be given a salary of Rs500 per month.
(e) Ali’s guarantee to the firm that the firm would earn a net profit of at least Rs80,000
per annum and any shortfall I these profits would be personally met by him:
The capitals of the partners on 1st April, 2013, were:
Rohit- Rs1,20,000; Ali- Rs1,00,000; Sneh- Rs1,00,000.
During the financial year 2013-14, all the three partners withdraw Rs1,000 each at
the beginning of every month.
The net profit of the firm for the year 2013-2014 was Rs70,000.
5. Rahim and Sudesh, the two partners of a business firm, agreed to appropriate the
profits of their firm on the following terms:
(a) Interest is payable on capital @ 5% per annum.
(b) Rahim will be entitled to a salary of Rs500 per month.
(c) Interest on drawings to be charged form the partners @ 10% per annum.
(d) Interest on drawings to be charged from the partners @ 5% per annum.
(e) Sudesh will get commission @ 1% on the sales made during the year.
(f) Rahim is entitled to a rent of Rs25,000 per annum for allowing the firm to carry on
the business in his premises.
The net profit of the firm for the year ended 31st March, 2013, was Rs1,80,000 before
taking into account any of the above terms.
Capital Balance on 1st April, 2012 1,50,000 1,40,000

st
Loan advanced on 1 October, 2012 ----- 1,00,000
Drawings made during the year 40,000 30,000
During the year 2012-13, sales of the firm amounted to Rs7,00,000
From the above information, prepare:
(i) Profit and Loss Appropriation Account:
(ii) partners’ Capital Accounts.
6. The capital accounts of Amar and Harsh stood at Rs20,000 and Rs30,000 respectively
after the necessary adjustments in respect of drawings and net profit for the year
ended 31st March, 2017. It was subsequently ascertained that interest on capital @
12% per annum was not taken into account while arriving at the divisible profits for
the year.
During the year 2016-17, Amar had withdrawn Rs2,000 and Harsh’s drawings were
Rs1,000.
The net profit for the year amounted to Rs15,000.
The partners shared profits and losses in the ratio of 3 : 2.
You are required to pass the necessary journal entries to rectify the error in
accounting.
7. Hill, Vale and Dale are in partnership sharing profits and losses in the ratio of 2 : 2 : 1
respectively. Interest is charged on partners, drawings at the rate of 6% p.a. and
credited to Partner’s Capital A/c balance at the rate of 6% p.a.
Vale is the firm’s marketing manager and for his specialized services he is credited
with a salary of Rs2,000 per quarter.
During the year ended on 31st March, 2019, the Net Profit of the firm was Rs62,000
and the partners drawings were
Hill : Rs 12,000 Value : Rs 8,000 Date : Rs 8,000
In each case, the above drawings were withdrawn in two equal instalments on 30th
September, 2010 and 31st March 2019.
On 30th Sept. 2018 the firm agreed that Hill should withdraw Rs10,000 from his capital
account and that Dale should subscribe a similar amount to his Capital Account.
The balance of the partners account at 1st April, 2018 were as follows:
All Credit Balances : Capital A/c Current A/c
Hill Rs 80,000 Rs 6,400
Vale Rs 70,000 Rs 5,600
Dale Rs 60,000 Rs 4,800
Transfer 5% of the Net Profits to the reserve fund of the firm.
You are required to :
(i) Prepare the firm’s Profit and Loss Appropriation Account for the year ended 31 st
March, 2019
(ii) Prepare the partner’s Capital and Current Accounts for the year ended 31 st March,
2019.
Chapter 2.
Goodwill
1. Goyal general store acquired the business of Shri. Bhagvan for a purchase
consideration of Rs10,00,000 payable by cheque. The assets acquired and liabilities
taken over are:
Assets Amount Liabilities Amount

(Rs) (Rs)
Furniture 20,000 Creditors 10,40,000
Inventory 15,00,000 Salaries Payable 1,50,000
Debtors 3,00,000 Outstanding Expenses 30,000
You are required to pass the necessary journal entries in the books of Goyal general
store. Give suitable working notes wherever necessary.
2. X,Y and Z are partners sharing profits and losses equally. They agree to admit ‘A’ for
equal share. For this purpose, goodwill is to be valued at four year’s purchase of
average profit of last five years. Profits for the past five years.
Year Ended Profit/Loss (Rs)

st
31 March, 2016 60,000
31st March, 2017 1,40,000
31st March, 2018 2,00,000
31st March, 2019 2,80,000
31st March, 2020 (2,40,000)
On 1st April, 2019, 5 cycles costing Rs40,000 were purchased and were wrongly
debited to Travelling Expenses. Depreciation on cycles was to be charged @ 25%
calculate value of goodwill
3. Aakash and Rakesh are partners sharing profit in the ratio of 3 : 2. They admit Prakash
into partnership. It was agreed to value goodwill at three year’s purchase on the basis
of weighted average profit of the past five years. Weights being assigned to each years
were:
Year Ended Weights

st
31 March, 2016 1
31st March, 2017 2
31st March, 2018 3
31st March, 2019 4
31st March, 2020 5
The profit for these five years were :
Year Ended Profit (Rs)

st
31 March, 2016 3,60,000
31st March, 2017 3,20,000
st
31 March, 2018 5,00,000
st
31 March, 2019 6,00,000
st
31 March, 2020 7,00,000
Scrubing of the books of accounts revealed that:
(i) An abnormal gain of Rs40,000 was earned in the year ended 31 st March, 2017.
(ii) An abnormal loss of Rs20,000 was incurred in the years ended 31 st March, 2018.
(iii) Expense of Rs1,00,000 incurred to overhaul a machine on 1 st April, 2018 was debited
to Profit and Loss Account instead of being debited to machinery account. Depreciation
is charged on machinery @ 20% on written down value method.
(iv) Closing stock as on 31st March, 2019 was under valued by Rs40,000.
Calculate value of goodwill.
4. Nisha and Manisha are partners in M/s. Manisha enterprises. They admit Tanisha as
partner w.e.f. 1st April, 2021. They agreed to value goodwill at 3 year’s purchase by
super profit method for which they decided to take average of last 5 years profits. The
profits for the last five years were:
Year Ended (Rs)

31st March, 2017 4,00,000 (including gain of Rs5,000 form sale of
fixed assets)
31st March, 2018 3,40,000 (including abnormal loss of Rs1,00,000)
31st March, 2019 4,20,000
31st March, 2020 4,60,000
31st March, 2021 5,00,000
Capital employed in the firms is Rs30,00,000 and normal rate of return in similar
business is 10%.
Calculate value of goodwill.
5. Calculate the goodwill of a firm ABC enterprises on the basis of three year’s purchase
of the weighted average profit of the last four years. Profit of these four years ended
31st March, were:

st
31 March, 2016 80,800
st
31 March, 2016 99,200
st
31 March, 2016 80,000
st
31 March, 2016 1,20,000
The weights assigned to each year ended 31st March are 2016-1, 2017-2, 2018-3 and
2019-4.
Additional Information:
(i) On 31st March, 2018, a major plant repair was undertaken for Rs24,000 which was
charged to renenue. The said sum is to be capitalized for goodwill calculation subject
adjustment of depreciation of 10% p.a. on written down value method.
(ii) The closing stock for the year ended 31st March, 2017 was over valued by Rs9,600.
(iii) To cover management cost an annual charge of Rs19,200 should be made for the
purpose of goodwill valuation.
6. From the following information of M/s Agarwal and Gupta you are required to
calculate the value of goodwill:
(i) At three year’s purchase of average profit.
(ii) At three year’s purchase of super profit.
(iii) On the basis of capitalization of super profit
(iv) On the basis of capitalization of Average profit.
Information:
(a) Average Capital Employed = Rs2,00,000.
(b) Net Profit/Loss of the firm for the past years:
2018 Rs3,20,000 (Profit);
2019 Rs2,80,000 (Profit);
2020 Rs5,40,000 (Profit);
(c) Normal Rate of Return on Capital is 11%.
(d) Remuneration to each partner for his service to be treated as a charge on profit-
Rs5,000 per month
(e) Assets (excluding goodwill – Rs22,00,00. Liabilities – Rs2,00,000.
7. From the following information, calculate value of goodwill of M/s Aashi and Vishi:
(i) At three year’s purchase of Average Profit.
(ii) At the two year’s purchase of Super Profit.
(iii) On the basis of capitalisation of Super Profit.
(iv) On the basis of capitalisation of Average Profit.
Other Information:
(a) Average Capital Employed Rs12,00,000
(b) Net Profit/Loss of the firm for the past three years :
2018 Rs4,00,000 (Profit)
2019 Rs2,00,000 (Loss)
2020 Rs4,60,000 (Profit)
(c) Normal Rate of Return on capital is 12%.
(d) Remuneration of each partner Rs60,000 per annum to be considered as a charge
against profit
(e) Assets – Rs13,00,000;
Partners capital – Rs12,00,000
8. Mr. Mehta purchased Mr. Sharma’s business on 1st April, 2021. It was agreed to value
goodwill at three year’s purchase of average normal profit of the last four years. The
profit of Sharma’s business of the last four years were:

st
31 March, 2018 1,80,000
31st March, 2019 3,20,000
st
31 March, 2020 3,60,000
st
31 March, 2020 4,40,000
It was observed from the books of account that:
(i) During the year ended 31st March, 2018, an asset was sold at a gain (Profit) of
Rs20,000.
(ii) During the year ended 31st March, 2019, a machine got destroyed in accident and
Rs60,000 was written off as loss in Profit and Loss Account.
(iii) During the year ended 31.03.2020, firm’s assets were not insured due to oversight.
Insurance premium being Rs20,000.
Calculate the value of goodwill.
9. Following information is provided from the books of J.K. Lal
10. and Co.
(a) The profits for the last preceeding three years were:

31st March, 2018 1,00,000
31st March, 2018 60,000
31st March, 2018 30,000
The firm had abnormal gain of Rs10,000 during the year ended 31.3.2018.
(b) The average capital employed in the business by the firm is Rs4,00,000.
(c) Normal rate of return on capital employed in a similar business is 10%.
You are required to calculate goodwill of the firm by:
(i) Average profit method, in the case, if goodwill was agreed to be valued at two year’s
purchase of average profit of last three year.
(ii) Super profit method on the basis of two years purchase; and
(iii) Capitalisation of super profit method.
11. From the following particulars, calculate the value of goodwill of M/s. Ravi and
Krishan.
(i) At two years’ purchase of average profit.
(ii) At four years’ purchase of super profit.
(iii) On the basis of capitalisation of average profit.
(iv) On the basis of capitalisation of super profit.
Information:
(a) Average Capital Employed – Rs10,00,000
(b) Net Profit/Loss of the firm for the past years : 2014 – Rs1,60,000 (Profit); 2015-
Rs1,40,000 (Profit); 2016 – Rs2,70,000 (Profit).
(c) Normal rate of return on capital is 11%.
(d) Remuneration of each partner – Rs30,000 p.a.
(e) Assets (excluding goodwill) – Rs11,00,000; Liabilities – Rs1,00,000.
12. From the following information, calculate goodwill of the firm of Anmol and Sujay at
the time of admission of Dhruv:
(i) At three years’ purchase of Super Profit.
(ii) On the basis of Capitalisation of Super Profit.
(a) Actual Average Profits of the firm for the last three years is Rs25,000
(b) Normal Rate of Return is 10%
Balance Sheet of Anmol and Sujay

(as at 31st March, 2019)
Liabilities Amount Assets Amount

(Rs) (Rs)
Sundry Creditors 40,000 Plant and Machinery 40,000
Bills Payable 10,000 Land and Building 80,000
General Reserve 20,000 Investments (Non-trade) 50,000
Capital A/c : Sundry Debtors 15,000
Anmol Rs80,000 Bank 55,000
Sujay Rs90,000 1,70,000
2,40,000 2,40,000
Chapter 3.
Reconstitution of Partnershp:
Admission of a partner
1. Sunita and Punita are partners in a firm sharing profits and losses in the ratio of 3 : 2.
Their Balance Sheet as at 31st march, 2019, is as follows :
Balance Sheet of Smita and Punita

(Rs) (Rs)
Sundry Creditors 14,000 Cash in Hand 30,000
Bank Loan 6,000 Sundry Debtors Rs22,000
General Reserve 10,000 Less: Provision for Doubtful 20,000
Rs(2,000)
Debt
Capital A/c : Furniture 10,000
Smita Rs30,000 Stock 40,000
Punita Rs40,000 70,000
1,00,000 1,00,000
st
On 1 April, 2019, Mita is admitted as a new partner on the following terms :
(a) The new profit sharing ratio of Smita, Punita and Mita to 5 : 3 : 2.
(b) Provision for doubtful debts to raised to 10% of the debtors.
(c) Punita to take over the firm’s investments (not recorded in the books) at Rs3,000.
(d) Goodwill of the firm to be valued Rs50,000. Mita to bring in cash for her share of
goodwill.
(e) 50% of the goodwill to be withdrawn by the old partners.
(f) Mita to pay off the bank loan on behalf of the firm. The amount due to her by the
firm to be considered as part of her capital contribution.
(g) Mita to bring in the balance of her capital in cash, so as to make her capital equal to
1/5th of the total capital of the firm.
(i) Pass Journal entries at the time of Mita’s admission.
(ii) Prepare the Balance Sheet of the reconstituted firm.
2. Annie and Bonnie are partners in a firm, sharing profits and losses equally. Their Balance
Sheet as at 31st March 2017, was as follows :
Balance Sheet of Annie and Bonnie
(as at 31st March 2017)

(Rs) (Rs)
Sundry Creditors 21,000 Cash at Bank 20,000
General Reserve 15,000 Sundry Debtors 22,000
Capital A/c Less : Provision for Doubtful 21,000
Debts (1,000)
Annie 45,000 Stock 10,000
Bonnie 40,000 85,000 Plant & Machinery 60,000
Goodwill 10,000
1,21,000 1,21,000
th
Carl was to be taken as a partner for 1/4 share in the profits of the firm, with effect
form 1st April, 2017, on the following terms :
(a) Bad debts amounting to Rs1,5000 to be written off.
(b) Stock to be taken over by Annie at Rs12,000
(c) Plant and Machinery to be valued at Rs50,000.
(d) Goodwill of the firm to be valued at Rs20,000.
(e) Carl to bring in Rs50,000 as his capital. He was unable to bring in cash, his share of
goodwill.
(f) General Reserve not to be distributed. For this, it was decided that Carl would
compensate the old partners through his current account.
(i) Pass journal entries on the date of Carl’s admission.
3. Juliet and Rabani are partners in a firm, sharing profits and losses in the ratio of 3 : 1.
On 31st March, 2016, their Balance Sheet was as under :
Balance Sheet of Juliet and Rabani
(as at 31st March ,2016)
(Rs) (Rs)
Sundry Creditors 70,000 Plant and Machinery 1,760,000
General Reserve 30,000 Inventory 26,000
Provident Fund 40,000 Sundry Debtors Rs57,000
Capital A/c Less : Provision for
Juliet Rs1,10,000 Doubtful Debts (3,000) 54,000
Rabani Rs90,000 2,00,000 Cash at Bank 68,000
Profit and Loss A/c 16,000
3,40,000 3,40,000
Mike was taken as a partner for 1/4th share, with effect from 1st April, 2016, subject to
the following adjustment
(a) Plant and Machinery was found to be overvalued by Rs16,000. It was to be shown in the
books at the correct value
(b) Provision for Doubtful Debts was to be reduced by Rs2,000
(c) Creditors included an amount of Rs2,000 received as commission from Malini. The
necessary adjustment was required to be made.
(d) Goodwill of the firm was valued at Rs60,000. Mike was to bring in cash, his share of
goodwill along with his capital of Rs1,00,000.
(e) Capital Accounts of Juliet and Rabani were to be readjusted in the new profit sharing
arrangement on the basis of Mike’s capital, any surplus to be adjusted through current account
and any deficiency through cash.
You are required to prepare:
(i) Revaluation Account.
(iii) Balance Sheet of the reconstituted firm.
4. Gautam and Rahul are partners in a firm, sharing profits and losses in the ratio 2 : 3.
Their Balance Sheet as on 31st March 2014, was as follows :
Balance Shee

(Rs) (Rs)
Sundry Creditors 5,000 Goodwil 10,000
Bills Payable 15,000 Furniture 25,000
General Reserve 10,000 Stock 15,000
Capital A/c Sundry Debtors Rs12,000
Gautam Rs30,000 Less : Provision for
Rahul Rs40,000 70,000 Doubtful Debts Rs(2,000) 10,000
Cash in hand 40,000
1,00,000 1,00,000
Karim was to be taken as a partner with effect from 1st April, 2014, on the following
terms :
(a) The new profit sharing ratio of Gautam, Rahul and Karim would be 5 : 3 : 2.
(b) Provision for Doubtful Debts would be raised to 20% of debtors.
(c) Karim would bring in cash, his share of capital of Rs40,000 and his share of goodwill
valued at Rs10,000.
(d) Gautam would take over the furniture at Rs22,000.
(i) Pass journal entries at the time of karim’s admission.
5. Neha and Tara are partners in a firm sharing profits and losses in the ratio of 3 : 2.
Their Balance Sheet on 31st March, 2012, stood as follows :

(Rs) (Rs)
Capital A/c Rs Plant & Machinery 12,000
Neha 8,000 Land and Building Rs 14,000
Tara 10,000 18,000 Debtors 19,000
General Reserve 12,000 Less: Provision for Doubtful
Workmen’s Compensation Fund 5,000 Debts 4,000 15,000
Creditors 15,000 Stock 6,000
Cash 3,000
50,000 50,000
They agreed to admit Prachi into partnership for 1/5th share of profits on 1st April, 2012
on the following terms :
(a) All debtors to be considered as good and therefore the provision for doubtful debts
to be written back.
(b) Value of land and building to be increased to Rs18,000.
(c) Value of plant and machinery to be reduced by Rs2,000.
(d) The liability against Workmen’s Compensation Fund is determined at Rs2,000 which
is to be paid later in the year.
(e) Prachi to bring in her share of Goodwill of Rs 10,000 in cash.
(f) She will further bring in cash so as to make her capital equal to 20% of the total
capital of the new firm.
(Show your workings clearly)
You are required to prepare :
6. David and Bimal are partners sharing profits and losses in the ratio 3 : 2. Their Balance
Sheet an on 31st March, 2010, was as follows:
Balance Sheet
(as on 31st March, 2010)

(Rs) (Rs)
Sundry Creditors 82,000 Cash 32,000
Capital A/c Debtors 9,400
David 18,000 Less : Provision for
30,000 Doubtful debts 400 9,000
Bimal 12,000 Building 55,000
(3 : 2) Furniture 4,000
1,50,000 1,15,000
They admitted Chander as a new partner on 1.4.2010 and the new profit sharing ratio
became 5 : 3 : 2. Chander introduced a capital of Rs16,000. Chander was unable to
bring any cash for goodwill and so it was decided to value the goodwill on the basis of
his share in the profits and the capital contributed by him. The following revaluations
were made at the time of Chander’s admission :
(i) Stock had been overvalued by Rs750 and furniture by Rs500.
(ii)Provision for doubtful debts to be increased by Rs100.
(iv) A creditor for Rs2,350 was paid off by Bimal privately for which he was not be
reimbursed.
Prepare the Revaluation account, Partners’ capital accounts and a Balance Sheet of the
new firm on the date of Chander’s admission. Show your workings clearly.
7. Sumit and Dolly are in partnership sharing profits and losses in equal ratio. They
decided to admit Soni into the business on following terms that she will bring
Rs1,00,000 as capital for 1/8th share which she acquires 1/24th from Sumit and 1/12th
from Dolly Their Balance Sheet was as follows :
Balance Sheet

(Rs) (Rs)
Contingency Reserve 50,000 Cash in Hand 5,000
Creditors 20,000 Cash at Bank 15,000
Capital A/c Goodwil 24,000
Sumit 1,00,000 Plant 50,000
Dolly 2,00,000 3,00,000 Building 3,00,000
Profit and Loss Account 24,000
3,94,000 3,94,000
On that date assets and liabilities are revalued as follows:
(i) Plant is to be reduced to Rs45,000, Building is to be valued at Rs3,50,000
(ii) Insurance premium of Rs1,000 which relates to next year has been shown in Profit
and loss Account.
(iii) Goodwil of the firm is valued at Rs1,00,000
Prepare Revaluation Account and Partners’ Capital Account on the admission of Soni.
8. A, B and C were partners in a firm sharing profit in the ratio of 3 : 2 : 1. On31-3-2019
their Balance Sheet was as follows :
Balance Sheet of A, B and C

(Rs) (Rs)
Creditors 84,000 Bank 17,000
Contingency Reserve 21,000 Debtors 23,000
Capital A/c Stock 1,10,000
A 60,000 Investments 30,000
B 40,000 Furniture and Fittings 10,000
C 20,000 1,20,000 Machinery 35,000
2,25,000 2,25,000
On the above date, D was admitted as a new partner and it was decided that :
(i) The new profit sharing ratio between A, B , C and D will be 2 : 2 : 1 : 1.
(ii) Goodwill of the firm was valued at Rs90,000 and D brought his share of goodwill
premium in cash.
(iii) The market value of investments was Rs24,000.
(iv) Machinery will be reduced of Rs29,000.
(v) A creditor of Rs3,000 was not likely to claim the amount and hence to be written off.
(vi) D will bring proportionate capital so as to give him 1/6 th share in the profits of the
firm.
Prepare Revaluation Account and Partners’ Capital Accounts .
9. The balance sheet of a partnership firm Xavier and Youhan, who were sharing profits
in the ratio of 5 : 3 respectively, as on 31st March, 2020 was as follows :

(Rs) (Rs)
Xavier’s Capital 2,05,000 Land and Building 1,90,000
Youhan’s Capital 1,65,000 Plant and Machinery 85,000
Profit and Loss Appropriation A/c 56,000 Furniture 54,740
Trade Creditors 27,400 Stock 72,630
Debtors 30,000
Cash at Bank 21,030
4,53,400 4,53,400
On the above date, Zeus was admitted on the following terms:
(i) Zeus would get 1/5th share in the profits.
(ii) Zeus would pay Rs1,20,000 as his capital and Rs16,000 for his share of goodwill.
(iii) Machinery would be depreciated by 10% and building would to be appreciated by
30%. A provision for had debts @ 5% on debtors would be created. An unrecorded
liability amounting to Rs3,000 for repairs to building would be recorded in the books of
account.
(iv) The capital accounts of the old partners would be adjusted through the necessary
current accounts in such a manner that the capital accounts of al the partners would be
in their profit sharing ratio.
Prepare Revaluation Account, Partners’ Capital Accounts and the initial Balance Sheet
of the new firm.
10. The following was the Balance Sheet of A, B and C sharing profits and losses in the
proportion of 6/14th, and 3/14th respectively :

(Rs) (Rs)
Creditors 56,700 Land and Building 1,51,200
Bill Payable 48,900 Furniture 52,050
Capital A/c Debtors 79,380
A 1,19,7000 Cash at Bank 26,670
B 1,00,000
C 50,400 2,70,000
3,97,000 3,97,500
th
They agreed to take D into partnership and give 1/8 share of profits on the following
terms:
(i) That D brings in Rs48,000 as his capital.
(ii) That furniture be written down by Rs2,760 and stock be depreciated by 10%.
(iii) That provision of Rs3,960 be made for outstanding repair bills.
(iv) That the value of land and buildings be appreciated to Rs1,95,300.
(v) That the value of goodwill be fixed at Rs28,000 and an adjustment entry be passed
for D’s share of goodwill.
(vi) That the capitals of A, B and C be adjusted on the basis of D’s capital by opening
current accounts.
Pass the necessary journal entries and the balance sheet of the firm as newly
constituted.
11. The following was the balance Sheet of A and B who were sharing profits in the ratio of
2 : 1 on 31st March, 2020 :

(Rs) (Rs)
Sundry Creditors 65,900 Buildings 50,000
General Reserve 30,000 Plant and Machinery 35,000
Capital A/c Stock 20,000
A 30,000 Sundry Debtors 9,700
50,000 Cash in Hand 1,200
B 20,000 cash in Bank 30,000
1,45,900 1,45,900
On this date, C was admitted into partnership on the following terms :

(a) C was to bring Rs15,000 as his Capital and Rs6,000 as goodwill for one-fourth share
in the firm.
(b) That the values of the stock, Plant and Machinery were to be reduced by 5%.
(c) That a provision of Rs750 was to be created in respect of Sundry Debtors.
(d) That the Building was to be appreciated by 10%.
(e) That Goodwill money was to be retained in the business.
(f) Prepaid expenses and outstanding expenses on 31st March, 2020, not taken into
account were Rs300 and Rs900 respectively.
Prepare :
(i) Revaluation Account
(ii) Partners’ Capital Account
(iii) Balance Sheet of the New Firm.
12. Rishab and Rohit are partners sharing profit and losses in the ratio of 3 : 2. Their
Balance sheet as on 31.03.2019 was as follows:
Balance Sheet

(Rs) (Rs)
Bill Payable 20,500 Bill Receivable 4,000
Profit and Loss A/c 5,000 Debtors
General Reserve 20,000 60,000 57,000
Capital A/c: Less: Reserve for Bad Debts 10,000
Rishab 60,000 3,000 35,000
Rohit 30,000 90,000 Furniture 25,000
Stock of goods 40,000
1,92,500 Machinery 1,92,000
Buildings
On 1.4.2019 Rehan is admitted into partnership on the following terms as below:

(a) Rehan should bring Rs40,000 as capital for 1/4th share and Rs25,000 towards
goodwill
(b) Appreciate buildings by 20%.
(c) Depreciate furniture and machinery by 10%.
(d) An amount of Rs2,000 due to creditor, is not likely to be claimed and hence to be
written back.
(e) Increase reserve for bad debts on debtors to Rs6,000.
Prepare :
(i) Revaluation A/c
(ii) Partners’ Capital A/c
(iii) Balance Sheet
13. Karan and Tarun are partners sharing profit and losses in the ratio of 2 : 1. Their
Balance Sheet was as follows :
Balance Sheet of Karan and Tarun
(as on March 31, 2020)

(Rs) (Rs)
Creditors 10,000 Cash in hand 7,000
Bills payable 7,000 Debtors 26,000
Capital A/c Investment 15,000
Karan 40,000 Building 20,000
Tarun 30,000 70,000 Machinery 13,000
Stock 6,000
87,000 87,000
Nikhil is admitted as a partner and assets are revalued and liabilities reassessed as
followings:
(i) Create a provision for doubtful debt on debtors at Rs800.
(ii) Building and investment are appreciated by 10%.
(iii) Machinery is depreciated by 5%.
(iv) Creditors were overestimated by Rs500.
Pass journal entries and prepare Revaluation account before the admission of Nikhil.
14. The Balance Sheet of Asif and Abid as on 31st Dec. 2019 is set below. They share Profit
and Loss in the Ratio of 2 : 1.
Balance Sheet
Liabilities Amount (Rs) Assets Amount (Rs)

Asif’s Capital 39,800 Freehold Property 20,000
Abid’s Capital 31,000 Furniture 6,000
Creditors 16,000 Debtors 60,000
Cash 12,800
1,10,800 1,10,800
They agreed to admit Nafeez into the firm subject to the following terms and
conditions:
(i) Nafeez will bring Rs9,000 as goodwill and pay in sufficient amount of capital.
(ii) He will be entitled to ¼ share of profit.
(iii) 50% of the General reserve is to remain in business as provision for doubtful debts.
(iv) Depreciation is to be provided on furniture @ 5%.
(v) Stock is to be revalued at Rs10,500.
(vi) The capitals of all partners is to be adjusted in new profit sharing ratio.
Show Revaluation A/c, Partners’ Capital A/c and Balance Sheet.
15. The following is the Balance Sheet at 31st March, 2017 of S and T who are in
Partnership and share profits and losses in the proportion of three-fifth and two-fifth
respectively.

(Rs) (Rs)
Creditors 1,50,000 Freehold Premises 1,00,000
Bills payable 43,100 Machinery and Plant 45,000
Provision for Doubtful Debts 40,000 Furniture 9,000
Capital A/c : Stock 1,25,000
S 2,40,000 Debtors 2,25,000
T 90,000 3,30,000 Investments 42,500
Cash 16,600
5,63,100 5,63,100
They admit U Into partnership from 1st April 2017. The terms of agreement are as
under:
(i) U to bring in Rs60,000 as capital and Rs48,000 for goodwill in order to get two-
seventh share in profit.
(ii) Rs48,000 paid by U to be credited to the loan accounts of S and T in respective
proportion.
(iii) Freehold premises is undervalued by Rs50,000.
(iv) Machinery and Plant is overvalued by Rs5,000.
(v) Stock to be discounted at 10% and provision for doubtful debt to be reduced by
Rs10,00,000.
(vi) Investments are to be brought down at their market price, which is being Rs32,000.
Pass Journal entries and prepare capital accounts and opening Balance Sheet of the
Partnership firm. Also calculate the new ratio.
16. The following is the Balance Sheet as on 31-12-2018, of A and B who are in partnership
and share profit and losses in the proportion of 3 : 2 respectively.

(Rs) (Rs)
Bills Payable 4,310 Less : Provision for
Doubtful Debts 4,000 18,500
Capital A/c Freehold Premises 10,000
A 24,000 Plant and Machinery 4,500
B 9,000 33,000 Furniture 900
Stock 12,500
Investments 4,250
Cash 1,660
52,310 52,310
st
They admit C into partnership from 1 Jan., 2019. The terms of agreement are as
under:
(i) C to bring in Rs6,000 as capital and Rs4,800 for goodwill in order to get two-seventh
share in profit.
(ii) Rs4,800 paid by C to be credited to the Loan A/c of A and B in respective proportions.
(iii) Assets are to be revalued as : Freehold Premises Rs15,000; Plant and Machinery
Rs4,000; Stock to be depreciated at 10% and Provision for Doubtful Debts to be reduced
by Rs1,000.
(iv) Investments are to be brought down to Rs3,200.
Prepare Revaluation A/c partner’s Capital A/c and New Balance Sheet of the firm.
17. Anshul and Himanshu were partners sharing profit equally Their Balance Sheet at 31 st
March, 2017 was:
(Rs) (Rs)
Creditors 25,000 Cash 6,000
Bills Payable 7,500 Cash at Bank 7,500
Outstanding Expenses 1,500 Debtors 10,000
Capital A/c Less: Provision of Doubtful 9,750
Debts 250
Anshul 30,000 Stock 10,000
Himanshu 20,000 50,000 Furniture 5,000
Machinery 9,000
Land and Building 36,750
84,000 84,000
st
Ritik is admitted as a partner from 1 April, 2017 on the following terms :
(i) Ritik will get 1/5th share in profit and will bring in Rs10,000 as his capital and Rs2,500
as his share of goodwill.
(ii) Goodwill brought in by Ritik will be withdrawn by Anshul and Himanshu.
(iii) Provision for doubtful debt should be brought up to 5% on debtors.
(iv) Machinery be depreciated by Rs1,000 and furniture by 12.5%.
(v) Stock be valued at Rs11,500.
(vi) Land and building be appreciated by 20%.
(vii) Investment of Rs1,000 which did not appear in books should be recorded.
(viii) Out of the amount of insurance premium which was debited to profit and loss
account Rs2,500 be carried forward as unexpired insurance.
(ix) A bill for Rs2,500 for electricity expenses was omitted to be accounted.
Record necessary journal entries and prepare Balance Sheet of the new firm.
Chapter4.
Retirement and death of a
patner
1. Arun, Varun and Tarun were partners sharing profits and losses in the ratio of 5 : 3 : 2
respectively. The Balance Sheet on 31st March, 2019 was as follows :
Balance Sheet

(Rs) (Rs)
Creditors 40,000 Fixed Assets 1,25,000
Outstanding Expenses 5,000 Stock 55,000
General Reserve 15,000 Debtors 70,000
Capital A/c
Arun 1,00,000
Varun 50,000
Tarun 40,000
2,50,000 2,50,000
Varun retires on 31.3.2019. For this purpose, Goodwill was valued at Rs75,000, Fixed
assets were valued at Rs1,70,000 and stock at Rs50,000.
Varun was to be paid in cash brought in by Arun and Tarun in Such a way so as to
make their capitals proportionate to their new profit sharing ratio which is 3 : 2
respectively.
You are required to prepare Revaluation Account, Partner’s Capital Accounts and the
Balance Sheet after Varun’s retirement.
2. Ativ, Meha and Neelam were partners sharing profits and losses in the ratio of 5:3:2.
On 31.03.2016, their Balance Sheet was as under :

(Rs) (Rs)
Trade Creditors 26,500 Bank 25,000
Employee’s benefit expenses 23,500 Debtors 30,000
Ativ’s Capital A/c 1,00,000 Stock 55,000
Meha’s Capital A/c 50,000 Fixed Assets 1,20,000
Neelam’s Capital A/c 40,000 Advertisement expenditure 10,000
2,40,000 2,40,000
Ativ retired on 01-04-2016. For this purpose, the following adjustments were agreed
upon :
(i) Goodwill of the firm, was to be value at 2 years’ purchase of the average profits of
three completed years of preceding the date of retirement. The profits were as follows-
Rs55,000, Rs65,000 and Rs60,000.
(ii) Fixed assets were to be increased by Rs25,000.
(iii) Stock was overvalued by Rs5,000.
(iv) Rs20,000 were immediately paid to Ativ and the balance was transferred to his loan
Account.
Prepare Revaluation Account, Capital Accounts of partners and Balance Sheet of the
reconstituted firm.
3. X, Y and Z are partners in a firm sharing profits and losses in proportion of 1/2 , 1/6
and 1/3 respectively. The Balance Sheet as on April 1, 2019 was as follows :

(Rs) (Rs)
Employee’s provident fund 12,000 Freehold premises 40,000
Sundry creditors 18,000 Machinery 30,000
General Reserve 12,000 Furniture 12,000
X 30,000 Debtors 20,000
Y 30,000 Less : Provision for Bad Deb (1,000) 19,000
Z 28,000 88,000 Cash 7,000
1,30,000 1,30,000
Z retired on the above date and the partners agreed that:
(i) Machinery is to be depreciated by 10%.
(ii) Provision for bad debts is to be increased to Rs1,500.
(iii) Furniture was taken over by Z for Rs14,000.
(iv) The continuing partners have decided to adjust their capitals in their new profit
sharing ratio of 3 : 1 after retirement of Z. Surplus or deficit if any, in their capital
account will be adjusted through their current Accounts.
Prepare Revaluation Account and Partners’ Capital Accounts.
4. A, B and C were partners sharing profits and losses in the ratio of 1/2 : 1/3 : 1/6
respectively. The Balance Sheet of the firm on 31st March, 2019 stood as follows :

(Rs) (Rs)
Bill Payable 2,500 Debtors 8,000
Reserve Fund 6,000 Less: Provision for Doubtful
Capital A/c: Debts 250 7,750
A Stock 12,500
20,000 Motor Vans 4,000
B 15,000 47,500 Machinery 17,500
C 12,500 Buildings 22,500
65,500 65,500
B retired on that date subject to the following conditions
(i) Goodwill of the firm is to be valued at Rs9,000.
(ii) Machinery to be depreciated by 10% and Motor Vans by 15%.
(iii) Stock is to be appreciated by 20% and Building by 10%.
(iv) The provision for doubtful debts to be increased by Rs975.
(v) Liability for workmen’s compensation to the extent of Rs825 is to be created.
It was agreed that A and C will share profits in future in the ratio of 3 : 2 respectively.
You are required to prepare the Revaluation Account, Capital Accounts of the partners
and the Balance Sheet of the firm after the retirement of B.
5. The Balance Sheet of Archi, Akashi and Ayushi who were sharing profits in the ratio of
4 : 3 : 2 stood as follows as at 31st March, 2019:
Balance Sheet

(Rs) (Rs)
Creditors 55,000 Stock 2,50,000
Provident Fund 1,25,000 Cash at Bank 1,60,000
General Reserve 1,80,000 Debtors 1,55,000
Capital A/c: Advertisement Expenditure A/c 90,000
Archi 4,00,000 Plant and Machinery 2,05,000
Akashi 3,00,000 Building 4,50,000
Ayushi 2,50,000 9,50,000
13,10,00 13,10,00
Akashi retired on the above date on the following terms :
(i) The assets and liabilities need not be revalued.
(ii) The goodwill of the entire firm be fixed at Rs1,08,000 and Akashi’s share of the same
be adjusted into the accounts of Archi and Ayushi who are to share the profits in future
in the ratio of 5 : 3. Amount due to Akashi shall be treated as loan.
(iii) The entire capital of the new firm be fixed at Rs5,60,000 and the capitals of Archi
and Ayushi to be proportionate to their new profit sharing ratio. For this purpose actual
cash is to be brought in or paid off. Prepare :
(a) Capital accounts of Archi and Ayushi after the retirement of Akashi.
(b) Balance sheet of Archi and Ayushi after the retirement of Akashi.
6. The Balance Sheet of Adil, Bhawya and Cris as at 31st March 2018 was as follows :
Balance Sheet

(Rs) (Rs)
Capital Accounts : Buildings 1,20,000
Adil 40,000 Motor Car 18,000
Bhawya 30,000 Stock 20,000
Cris 20,000 investments 20,000
General Reserve 10,000 Debtors 40,000
Investment Fluctuation Reserve 7,000 Cash At Bank 12,000
sundry Creditors 1,23,000
2,30,000 2,30,000
The partners share profits in the ratio of 5 : 3 : 2. On 01-04-2018, Cris retire from the
firm on the following terms and conditions :
(i) 20% of the General Reserve is to remain as a reserve for bad and doubtful debts.
(ii) Motor car is to be reduced by 5%.
(iii) Stock is to be revalued at Rs17,500 and investment to be revalued at Rs18,000
(iv) Goodwill is to be valued at three years’ purchase of the average profits of last four
years. Profits of the last four years were – 2014-15 Rs,13,00, 2015 -16 Rs11,000, 2017-
18 Rs24,000.
(v) Cris was paid in full. Adil and Bhawya borrowed the necessary amount from the
Bank on the security of Building to pay off Cris.
Pass necessary Journal Entries.
7. The Balance Sheet of A, B and C who were sharing profits in proportion of their capitals,
i.e., 4 : 3 : 2 stood as follows on 31st March, 2018 :

(Rs) (Rs)
A 40,000 Less : Provision 200 9,800
B 30,000 Stock 16,000
C 20,000 90,000 Plant and Machinery 17,000
Factory Land and Building 50,000
1,03,800 1,03,800
B retires on 1st April, 2018 and the following adjustments of the assets and liabilities
have been agreed upon before the ascertainment of the amount payable by the firm to
B:
(i) The Stock be depreciated by 6%.
(ii) The Provision for Doubtful Debts be brought up to 5% on Debtors.
(iii) The Land and Building to be appreciated by 20%.
(iv) A provision of Rs1,540 be made in respect of outstanding legal charges.
(v) The Goodwill of the entire firm be fixed at Rs21,600 and B’s share of the same be
adjusted into the accounts of A and C who are going to share in future in the
proportions of 5/8 and 3/8 respectively (no Goodwill A/c is to be raised).
(vi) The entire Capital of the firm as newly constituted to be fixed at Rs56,000 between
A and C in the proportion of 5/8 and 3/8 after passing the entries in the accounts for
goodwill (i.e., actual cash to be paid off or to be brought in by the continuing partners,
as the case may be).
Pass Journal entries to give effect at the above arrangement and prepare the Balance
Sheet of A and C, transferring B’s share to a separate loan account in his name.
8. Priya, Quinni and Rinni were partners sharing profits in the ratio of 5 : 3 : 2
respectively. On 31st March, 2018 their Balance Sheet stood as follows :
Balance Sheet

(Rs) (Rs)
Priya’s Capital 5,00,000 Machinery 4,30,000
Quinni’s Capital 3,00,000 Furniture 1,64,000
Rinni’s Capital 2,00,000 Stock 3,51,000
Sundry Trade Creditors 1,56,000 Debtors 2,35,000
Bank Overdraft 24,000
11,80,000 11,80,000
Quinni retired as on the above mentioned date. It was agreed that :
(i) The firm’s goodwill was worth Rs2,50,000 and Quinni was entitled to the credit for
his share of goodwill.
(ii) Priya and Rinni would continue to be partners but would share profits in future in
the ratio of 7 : 3 respectively.
(iii) The amount due to Quinni would be paid immediately and for this purpose Priya
and Rinni would bring in cash in such a manner that the total capital of the reconstituted
firm was Rs10,00,000 and the capital accounts of the partners were in their new profit
sharing ratio.
Assuming that all the above mentioned conditions were fulfilled. Pass journal entries
in the books of the firm for all the transactions. Also, prepare the capital accounts of
all the partners.
9. A, B and C were carrying on business in partnership sharing profits in the proportion of
4 : 3 : 2. Their Balance Sheet on 31st March, 2019 stood as follows :

(Rs) (Rs)
A 60,000 Less : Provision for
B 45,000 Doubtful Debts 300 14,700
C 30,000 1,35,00 Stock 24,000
Plant and Machinery 25,500
Land and Building 75,000
1,55,700 1,55,700
B retired from the business on the same date and the following adjustments of the
assets and liabilities had been agreed upon before ascertaining the amount payable by
the firm to B.
(i) That the reserve for doubtful debts to be brought upto 5% on debtors.
(ii) Land and Building be appreciated by 20%.
(iii) Stock to be reduced by Rs1,750.
(iv) Provision of Rs2,000 be made in respect of outstanding audit fees.
(v) The goodwill of the firm be fixed at Rs32,400 and B’s share of the same be adjusted
into the accounts of A and C who decided to continue the business sharing profits or
losses in the proportion of 5 : 3 respectively.
(vi) The capital of the new firm be fixed at Rs84,000 between A and C in proportion of
their new profit sharing into and actual cash be brought in or paid off by or to the
continuing partners as the case may be.
(vii) Amount due to B was transferred to his loan A/c.
Pass the Journal entries to give effect to the above arrangements and prepare Balance
Sheet of the new firm following the retirement of B. Also prepare the Revaluation
Account and Capital Accounts of partners.
10. A, B and C were partners in a firm. Their profit sharing proportions being 4 : 3 : 2
respectively . Their Balance Sheet as at 31st March, 2018 on which date A retired :

(Rs) (Rs)
Bank Overdraft 5,000 Cash 1,000
Current A/c Motor Car 2,000
A 7,000 Furniture 1,000
B 4,000 Plant and Machinery 20,000
C 3,000 14,000 Land and Building 30,000
Capital A/c
A 20,000
B 20,000
C 10,000 50,000
80,000 80,000
The partnership agreement provided that on the retirement of a partner :
(a) The firm shall be continued by the other partners.
(b) Goodwill to be computed on the basis of two years’ purchase of the average of the
profits of three preceding accounting years.
(c) Fixed and Floating Assets are to be revalued.
(d) Amount paid to retiring partner to be transferred to his Loan A/c.
The profits of the three preceding accounting years were Rs30,000; Rs45,000 and
Rs60,000 respectively. On revaluation as at 31st March 2018 the amounts for Land and
Building, Plant and Machinery, Furniture. Motor Car and Stock came to Rs60,000;
Rs80,000; Rs3,000; Rs5,000 and Rs21,000 respectively while the Debtors were
considered good at the book figure less 10% reserve for Doubtful Debts.
Prepare :
(ii) Revised Balance Sheet as at 31st March, 2018.
11. A, B and C were partners sharing profits 4/10, 3/10, and 3/10, and 3/10 respectively.
Their Balance Sheet as on 31st March, 2015 was as follows :

(Rs) (Rs)
Capital A/c Building 90,000
A 80,000 Plant 70,000
Motor car 20,000
B 60,000 1,90,000 Stock 50,000
C 50,000 25,000 Debtors 35,00
Reserve 10,000 Less : Provision (5,000) 30,000
Bill payable 40,000 Cash at Bank 5,000
Creditors 2,65,000 2,65,000
B retires on that day on the following terms :
(a) The goodwill of the firm is to be valued at Rs35,000.
(b) Stock and Building are to be appreciated by 10%.
(c) Plant and Motor car are to be depreciated by 10%.
(d) Liability for the payment of gratuity to Rs10,000 is not yet recorded in the books but
it is to be provided for.
(e) Provision for bad debts is no more necessary.
(f) It is decided not to maintain goodwill account in the books.
(g) The amount payable to B was transferred to his loan A/c
(i)Revaluation Account
(ii) partners’ Capital Accounts
(iii) New Balance Sheet of A and C.
12. Angad, Kunal and Nitin were partners sharing profit and losses in the proportion of 2 :
2 : 1 respectively.
The Balance Sheet of their firm as on 31st March, 2013, stood as follows :

(Rs) (Rs)
Angad Rs12,500 Machinery 17,500
Kunal Rs15,000 Motor Van 4,000
Nitin Rs20,000 47,500 Buildings 22,500
Bills Payable 2,000 Debtors Rs8,000
General Reserve 6,000 Less : Provision for doubtful debts Rs250 7,750
65,500 65,500
Kunal retires on 1st April, 2013, subject to the following adjustments :
(a) Provision for bad and doubtful debts to be increased by Rs975.
(b) Stock to be appreciated by 20% and Building by 10%.
(c) Machinery to be depreciated by 10% and Motor Van by 15%.
(d) Goodwill of the firm to be valued at Rs9,000.
(e) The capitals of the continuing partners are to be adjusted according to the new
profit sharing ratio which is agreed between Angad and Nitin as 3 : 2 respectively.
(f) Excess or shortfall in Angad’s and Nitin’s and Nitin’s Capital Accounts to be
transferred to their respective Current Accounts.
13. Mohit Ali and John are partners in a firm, sharing profits and losses in the ratio of 3 :
1 : 1. Their Balance Sheet as at 31st March, 2018, was as follows :

(Rs) (Rs)
Trade Creditors 15,000 Cash at Bank 40,000
General Reserve 6,000 Sundry Debtors Rs30,000
Investment Fluctuation Fund 9,000 Less : Provision for
Capital A/c Doubtful Debts (5,000) 25,000
Mohit Rs70,000 Investments 35,000
Ali Rs50,000 (Market value Rs40,000)
John Rs50,000 1,70,000 Plant & Machinery 88,000
Goodwill 12,000
2,00,000 2,00,000
st
Mohit retired on 1 April, 2018, subject to the following adjustments :
(a) Goodwill of the firm to be valued at Rs20,000.
(b) Mohit to take over the investments at the market value.
(c) 25% of the General Reserve to be transferred to Provision for Doubtful Debts and
the balance to be distributed amongst all the partners.
(d) Creditors to be paid Rs3,000 less.
(e) Investment Fluctuation Fund not to be distributed For this, it was decided that the
remaining partners would compensate the retiring partner through their capital
accounts.
(f) Mohit to be paid Rs20,000 immediately on retirement and the balance to be
transferred to his loan account.
(i) Pass journal entries on the date of Mohit’s retirement.
14. Karan, Ali and Dev are partners in a firm sharing profits and losses in the ratio of 3 : 2 :
1. On 31st March, 2016, their Balance Sheet was as under :
Balance Sheet of Karan, Ali and Dev

(Rs) (Rs)
Capital A/c Building 1,00,000
Karan 1,00,000 Furniture 40,000
Ali 75,000 Investments 50,000
Dev 2,25,000 Debtors 30,000
50,000 30,000 Less : Provision for Doubtful Debts 29,000
Investment Fluctuation Reserv 10,000 Cash at Bank 43,000
Bills Payable 15,000 Goodwill 18,000
Creditors 2,80,000 2,80,000
Karan died on 1st July, 2016, An agreement was reached amongst Ali, Deb and Karan’s
legal representative that:
(a) Building be revalued at Rs93,000.
(b) Furniture be appreciated by Rs10,000
(c) To write off the provision for doubtful debts since all debtors were good.
(d) Investments be valued at Rs38,000.
(e) Goodwill of the firm be valued at Rs1,20,000.
(f) Karan’s share of profit to the date of his death, to be calculated on the basis of
previous year’s profit which was Rs25,000.
(g) Interest on capital to be allowed on Karan’s capital @ 6% per annum.
(h) Amount payable to Karan’s legal representative to be transferred to his legal
representative’s Loan Account.
You are required to:
(i) Pass Journal entries on the date of Karan’s death.
(ii) Prepare the Interim Balance Sheet of the reconstituted firm.
15. Albert, Boris and Cyril are partners sharing profits and losses in the ratio of 3 : 2 : 1
and their balance sheet as on 31st March, 1999 stood as under:
(Rs) (Rs)
Albert’s Capital 50,000 Building 70,000
Boris’s Capital 50,000 Machinery 25,000
Cyril Capital 50,000 Stock 32,000
Bank 25,000
1,67,000 1,67,000
st
Albert died on 1 July 1999 and the following decisions were taken by the surviving
partners. According to the partnership deed his executors were entitled to:
(i) The deceased partner’s capital as appearing in the last balance sheet and interest
thereon at 6% per annum upto the date of death.
(ii) His share of profit for the period he was alive based on the figure of 31 st March,
1999.
(iii) Goodwill according to his share of profit to be calculated by taking twice the
amount of the average profit of the last three years.
The profits of the previous years were:
31st March, 1999 - Rs11,000
st
31 March, 1998 - Rs15,000 and
st
31 March, 1997 - Rs10,000
(iv) Assets were to be revalued:
Building - Rs80,000
Stock - Rs30,000, and
Provision for bad debts @ 10%
Assuming that all the above changes are to be incorporated in the new firm and are
not to be written off (except goodwill) prepare the Revaluation Account, Partners
Capital Accounts and Balance Sheet as on 1st July, 1999.
(All calculations are to be made to the nearest rupee)
Chapter 5.
Dissolution of a Partnership
Firm
1. Aman, Ashish and Amil were partners in the firm sharing profit and losses in the ratio
of 3 : 2 : 1. Following was the Balance sheet at the date of dissolution :

(Rs) (Rs)
Creditors 1,85,000 Bank balance 10,000
Mrs. Aman’s Loan 50,000 Debtors 1,50,000
Aman’s Loan 80,000 Less : Provision for Doubtful
Workmen Compensation 3,00,000 Debts 10,000 1,40,000
Reserve
Investment Fluctuation 75,000 Stock 8,00,000
Fund Investments 2,00,000
Capital A/c 6,00,000 Plant 7,50,000
Aman 5,60,000 Goodwill 3,50,000
Ashish 4,00,000
Amit 22,50,000 22,50,000
Following transactions took place:
(i) Aman took over the ivestments at 25% more than the book value.
(ii) Ashish took over debtors amounting to Rs50,000 at Rs40,000. Remaining debtors
realised 75% of their book value.
(iii) Stock is sold for Rs5,90,000 and plant is sold for Rs4,00,000.
(iv) Expenses of realisation amounted to Rs10,000. It was also found that there is a
liability for Rs80,000 for damages which also had to be paid.
Prepare Realisation Account.
2. Following was Balance sheet of P, Q and R as at 28-02-2019.

(Rs) (Rs)
Bills Payable 10,000 Debtors 30,000
Q’s Loan 8,000 Stock 20,000
A’s Loan 12,000 Furniture 15,000
Workmen Compensation Reserve 26,000 Land and Building 2,45,000
Capital A/c Q’s Capital 20,000
P 1,00,000
R 1,50,000 2,50,000
3,56,000 3,56,000
The Firm was dissolved on the above date on the following terms :
(i) Debtors realised Rs28,000 and creditors and bill payable were paid at a discount of
10%.
(ii) Stock was taken over by R for Rs15,000 and furniture was sold to M for Rs12,000.
(iii) Land and building was sold for Rs2,80,000.
(iv) A’s loan was paid by a cheque for the same amount.
(v) There was an unrecorded asset of Rs1,50,000 which was sold for Rs1,00,000
(vi) Compensation to workmen paid by firm amounted to Rs20,000.
Prepare Realisation account.
3. Seema and Rekha are partners sharing profits in the ratio of 3 : 2. Their Balance Sheet
as on the date of dissolution stood as follows :

(Rs) (Rs)
Seema’s Loan A/c 8,000 Debtors 16,000
Seema’s Capital A/c 20,000 Stock 15,000
Rekha’s Capital A/c 10,000 Loose Tools 7,000
Goodwill 8,000
50,000 50,000
(i) On the dissolution of partnership the assets realised were as follows:
(Rs)
Debtors 14,000
Stock 18,000
Goodwill 10,000
Loose Tools 6,000
(ii) The realisation expenses amounted to Rs800.
(iii) The creditors were paid Rs11,400 in full settlement.
Prepare Realisation Account.
4. Following is the Balance Sheet of A and B who are in a partnership on 31st Dec., 2019.
Balance Sheet

(Rs) (Rs)
Mrs. A’s Loan 10,000 Stock in Trade 6,000

B’s Loan 15,000 Debtors 20,000
Reserve Fund 5,000 Less : Provision for Doubtful 1,000 19,000
Capital A/c: Debts
A 10,000 Fixtures and Fittings 4,000
B 8,000 Plant and Machinery 28,000
Investment 10,000
Profit and Loss A/c 7,500
86,000 86,000
st
The firm was dissolved on 31 December, 2019 and the following was the result :
(i) A took over the investment at an agreed value of Rs8,000. He also agreed to pay off
the loan to Mrs. A .
(ii) The assets realised as follows :
Stock Rs5,000
Debtors Rs18,500
Fixtures and fittings Rs4,500
Plant and Machinery Rs25,000
(iii) The expenses were Rs1,100
(iv) The sundry creditors were paid off less 2.5% discount.
A and B shared profits and losses in the ratio of 3 : 2.
Journalise the entries to be made on dissolution.
5. The following is the Balance Sheet of A, B and C on 31st March, 2019 :

(Rs) (Rs)
Creditors 4,000 Cash 1,000
Bank Loan 1,000 Stock 4,000
Bills Payable 1,000 Plant 4,000
A’s Capital 5,000 Debtors 2,000
B’s Capital 3,000 Bills Receivable 2,000
C’s Capital (Overdrawn) 1,000
14,000 14,000
It is decided to wind up the partnership. The assets realised were : Stock Rs3,200;
Plant Rs3,000; Debtors Rs1,500; Bills Receivable Rs1,400; Creditors were paid Rs40 less
for discount granted by them. Profits and losses are shared equally. Cost of realisation
amounted to Rs460. A debt which had been written off, realised Rs200. Outstanding
expenses paid Rs240.
Prepare Realisation Account, Partner’s Capital Accounts and Cash Account.
Chapter 6.
Issue of Shares
1. Sudesh Ltd. was registered with an authorized capital of Rs40,00,000 divided into
4,00,000 Equity Shares of Rs10 each.
The company offered 50,000 shares to the public at a premium of Rs2 per share,
payable as follows :
Rs3 on application
Rs6 on allotment (including premium ) (Rs4 + Rs2)
Rs3 on first and final call (due two months after allotment)
Applications were received for 60,000 shares and pro-rata allotment was made as
follows :
Category A : The applicants of 40,000 shares were allotted in full.
Category B : The applicants of 20,000 shares were allotted in full.
Excess money paid on application was utilized towards allotment.
Nobby, a shareholder from Category A, who had applied for 1,200 shares failed to pay
the allotment and call money.
Vineet, a shareholder from Category B, who had been allotted 1,000 shares, paid the
call money due, along with allotment.
The company forfeited Nobby’s shares after the first and final call ad paid interest on
Calls-in-advance to Vineet @ 12% per annum on the day of the final call.
(i) pass Journal entries to record the above transactions in the books of the company
(including entries for interest on Calls-in-advance).
(ii) Prepare Calls-in-arrears Account.
2. Meera Co. Ltd. invited applications for 50,000, equity shares of Rs10 each at a
premium of Rs2 per share.
Payable as follows :
On Application on 1st May, 2017 Rs 2
st
On Allotment on 1 July, 2017 Rs 5 (including premium)
st st
On 1 and Final Call on 1 October, 2017 Rs 5
The Company received applications for 62,500 shares.
It was decided to :
(a) Refuse allotment to the applicants of 2,500 shares.
(b) Allot in full to the applicants to 10,000 shares
(c) Allot the balance of the shares applied on a pro-rata basis among the other
applicants.
(d) Utilize the excess application money in part payment of allotment money.
(e) Charge interest on calls-in-arrears, if any, @ 10% per annum.
All the money due was received except from one shareholder to whom 200 shares had
been allotted in full. The amount was due by him to the company even till the date of
the Balance Sheet, which was 31st March 2018.
The company charged interest on call-in-arrears from the shareholders from the date
on which it was due till the Balance Sheet date.
You are required to, for the year 2017-18 :
(i) Prepare the Cash Book to record the above issue of shares.
(ii) Pass journal entries in the Journal Proper (including entries for interest on call-in-
arrears).
3. Saturn Ltd. was registered with an authorized capital of Rs12,00,000, divided Into
1,20,000 equity shares of Rs0 each. It issued 40,000 equity shares to the public at a
premium of Rs5 per share, payable as follows:
On application Rs 6
On allotment Rs 9 (including premium of Rs 5)
All the shares were applied for and allotted. One shareholder holding 500 shares did
not pay the allotment money and his shares were forfeited. Out of the forfeited
shares, the company reissued 400 shares at Rs 7 per share fully called up.
(a) Pass journal entries in the books of the company.
(b) Prepare :
(i) Securities Premium Reserve Account
(ii) Share Capital Account
4. Cargo Ltd. invited applications for the issue of 20,000 Equity shares of Rs10 each at a
premium of Rs1 per share, payable as follows :
On Application Rs3
On Allotment The balance (including premium Rs1)
Applications were received for 30,000 shares and pro-rata allotment was made to the
remaining applicants after refunding application money to 5,000 share applicants.
Nicholas, who was allotted 3,000 shares failed to pay the allotment money and his
shares were forfeited.
Out of these forfeited shares, 1,000 shares were reissued as fully paid-up @ Rs 8 per
share.
(i) Pass journal entries in the books of the company.
(ii) Prepare Calls-in-arrears Account.
(iii) Prepare Share Forfeiture Account.
5. Pinnacle Instruments Ltd. registered itself with a capital of Rs20,00,000 divided into
Equity Shares of Rs100 each.
On 1st June 2014, the company issued 5,000 Equity Shares as fully paid to Mila Herbals,
as purchase consideration for the purchase of plant and machinery.
The remaining shares were issued to the public at par.
Till the date of the Balance Sheet, the Directors had called from the public, 60% of the
nominal value of the shares.
The amount called was received by the company.
You are required to prepare as at 31st March, 25015 :
(i) The Balance Sheet of Pinnacle Instruments Ltd. as per Schedule III of the Companies
Act, 2013.
(ii) Notes to Accounts.
6. Pluto Ltd. issued 20,000 Equity shares of Rs10 each, payable as follows:
On Application Rs 4
On Allotment Rs 1
st
On 1 Call Rs 3
nd
On 2 and Final Call Rs 2
Applications were received for 30,000 shares and pro-rata allotment was made to all
the applicants. Excess money received on application was utilized towards allotment
and subsequent calls. One shareholder holding 100 shares did not pay the final call
and his shares were forfeited. Of the forfeited shares, the company reissued 70 shares
as fully paid-up at Rs12 per share.
You are required to pass journal entries in the books of the company for the year
ending 31st March, 2014.
7. In 2010, Ganga Ltd. was registered with an authorized capital of Rs1,00,000 in equity
shares of Rs10 each. Of these, 4,000 equity shares were issued as fully paid to vendors
for the purchase of Plant and Machinery and the remaining 6,000 shares were
subscribed for, by the public for cash. During the first year, Rs6 per equity share was
called up, on these 6,000 shares, payable Rs3 on application, Rs1 on allotment and Rs2
on the first call.
The amount received in respect of these shares were as follows :
On 5,000 shares, the full amount called.
On 600 shares, Rs4 per share.
On 400 shares, Rs 3 per share.
The company forfeited all those shares on which only Rs3 had been received and
reissued them at Rs4 per share , Rs6 called up.
Journalise the transaction in the books of the company and prepare a Calls-in Arrear
Account.
8. Sachdeva Tyres and Company Limited issued application for 1,00,000 equity shares of
Rs 10 each at a premium of Rs 3 per share. The amount was payable as follows :
(i) On application : Rs 2.
(ii) On allotment : Rs 5 (including premium).
(iii) Balance on the first and the final call.
Application were received for 1,50,000 shares. Allotment was made pro-rata to all
applicants. Sudhir who had applied for 300 shares failed to pay allotment and call
money. His shares were forfeited after the first and the final call. Of these, 170 shares
were reissued to Pramod at Rs9 per share fully paid.
Pass the necessary Journal Entries to show the above transactions. Show your working
clearly.
9. A company with an authorized capital of Rs3,00,000 invited applications for 20,000
shares of Rs10 each payable as Rs3 on application, Rs4 on allotment (including
premium) and Rs4 on first and final call. There was over subscription and application
were received for 36,000 shares. Allotment was made as follow:
To applicants of 15,000 shares 15,000 shares
To applicants of 2,500 shares Nil
To applicants of 18,500 shares 5,000 shares
Excess money on application was adjusted against the sums due on allotment and
call. All money due was duly received. Pass journal entries to record the above
transactions.
10. X Ltd. having a Nominal Capital of Rs20,00,000 divided into 2,00,000 equity shares
Rs10 each, offered to the public for subscription 1,00,000 equity shares at a premium
of Rs5 per share payable as under :
On Application Rs 2 per share.
On Allotment Rs 8 per share (including premium)
On First Call Rs 2 per share
On final Call Rs 3 per share
All the shares offered were applied for and allotted. The allotment money was
received in full. A shareholder, who held 100 shares, failed to pay the first call and his
shares were forfeited. These shares were re-issued at Rs 6 per share, Rs 7 per share
paid up. Final call has not been made.
(i) Pass the necessary Journal entries in the books of the company in respect of the
above transactions.
(ii) Show the Balance Sheet.
11. (i) ABC Ltd. forfeited 150 equity shares of Rs 10 each issued at a premium of Rs 5 per
share, for non-payment of allotment money of Rs 8 per share (including Premium of
Rs 5 per share), the first call of Rs 2 per share and the final call of Rs 3 per share. Out
of these 100 equity shares were re-issued at Rs 14 per share.
Pass Journal entries in the books of the company to record the forfeiture and re-issue
of Share .
(ii) V.K. Ltd. forfeited 100 Equity Shares of Rs 100 each issued at a premium of 50% (to
be paid on allotment) on which the first call money of Rs 30 per share was not receive
and the final call of Rs 20 is yet to be made. These Share were subsequently re-issued
@ Rs 70 per share of Rs 80 paid up.
Pass necessary journal entries to record the forfeiture and re-issue of shares.
(iii) A and B Ltd. forfeited 100 shares of Rs10 each issued at premium of Rs 2 per share
for non-payment of allotment money of Rs4 (including premium), first and final call Rs
5. Company reissued all forfeited shares at Rs 8 per share fully paid up.
Pass Journal entries to record forfeiture and re-issue of shares in the books of the
company.
12. M/s Reliable Investments issued a prospectus inviting applications for 4,000 Equity
Share of Rs 20 each at a premium of Rs4 per share payable as under :
On application Rs 4 per share
On allotment Rs 10 per share (including the premium)
On first call Rs 6 per share
On second call Rs 4 per share
Applications were received for 6,000 shares and allotment was made pro-rata to the
applicants of 4,800 shares, the applications for remaining shares being refused. Money
overpaid on application was used on account of sums due on allotment.
Harish to whom 80 shares were allotted, could not pay the allotment money and on
his subsequent failure to pay the first call, his shares were forfeited after the first call
Mukesh to whom 120 shares were allotted, failed to pay the two calls and his shares
were forfeited after the second call.
Of the shares forfeited, 160 shares were sold to Suresh credited as fully paid at Rs18
per share, all of Harish’s forfeited shares being included.
Pass Journal entries in the books of the Company to record the above transactions.
13. Divine limited issued 10,000 equity shares of Rs 100 each.
The amount was payable as under :
On Application Rs 20 On First call Rs 25
On Allotment Rs 30 On Second call rs 25
The company received applications for 10,000 equity shares. Allotment was made to
all the applicants and the entire amount was called up.
Mr. Albert holding 100 shares on which both the calls were not paid. They were re-
issued as fully paid @ Rs 75 per share.
Record the transactions in the journal of the company. Also show the relevant items
as they would appear in the Balance Sheet of the company.
14. Tata Ltd. invited applications for 40,000 shares of Rs 10 each payable as under :
On Application Rs 1 per share
On Allotment Rs 2 per share
On First Call Rs 3 per share
On Final Call Rs 4 per share
The entire issue was subscribed for and paid for with the following exceptions :
(a) Aparna who was allotted 200 shares failed to pay the money due on allotment and
calls.
(b) Prashant who held 150 shares failed to pay the first call and the final call.
(c) Prakul who held 50 shares failed to pay the amount due on final call.
The Board of Directors passed a resolution forfeiting the shares of Aparna, Prashant
and Prakul.
These shares were subsequently re-issued as fully paid at a discount of 10%.
(i) Pass Journal entries in the books of the company in respect of the above
transactions.
(ii) Show the Balance Sheet.
15. Hard-core Computers Limited having an authorized capital of 20,000 shares of Rs 10
each, issued 15,000 shares to the public. Applications were received for 10,000 shares.
The amount payable was as follows :
On application Rs 3 per share
On allotment Rs 4 per share (including premium Rs 2)
On first and final call Rs 5 per share
All sums were duly received by the company except the following :
Mr. Perfect, holder of 100 shares did not pay allotment and call money. Mr. Right,
holder of 200 shares did not pay call money.
The company forfeited all the shares of Mr. Perfect and subsequently reissued them at
Rs8 fully paid up.
Show the entries in the Cash Book and Journal of the company. Also prepare the
Balance Sheet.
16. Reliable Ltd. was registered with an authorized capital of Rs20,00,000 in Rs 10 per
equity share. It invited applications for issuing 1,00,000 equity shares at a premium of
Rs 2 per share. The amount was payable as follows :
On application Rs 4 per share (including premium)
On allotment Rs 3 pet share
st
Balance on 1 and Final Call.
Applications were received for 1,30,000 shares. Applications for 10,000 shares were
rejected and the application money received on them was refunded. Pro-rata
allotment was made to the remaining applications. Amount overpaid on these
applications was adjusted towards the amount due on allotment. Sameer, who had
applied for 1,200 shares, failed to pay the allotment and call money. The company
forfeited his shares, out of which 800 shares were reissued to Sanjay at Rs 9 per share
fully paid-up
(i) Pass the Journal Entries in the books of the company through Calls in Arrears
Account.
(ii) Prepare the Share Allotment Account
Chapter7.
Issue of Debentures
1. AB Ltd. issued 1000, 12% debentures of Rs100 each on April 1, 2017. The issue was
fully subscribed. According to the term of issue, interest on the debentures is payable
half-yearly on 30th September and 31st March and the tax deducted at source is 10%.
Pass necessary Journal entries related to the debentures interest for the half-yearly
ending 31st March, 2018 and transfer of interest on debentures of the year to the
statement of Profit and Loss.
2. Sean Technology Ltd. purchased assets from Raman Ltd. for a book value of
Rs1,00,000 and liabilities worth Rs15,000 for a purchase consideration of Rs90,000.
The two companies agreed to settle the purchase consideration by issue of 13%
debentures of Rs100 each.
Pass necessary journal entries in the books of Sean Technologies Ltd. assuming that :
(i) Debentures are issued at par.
(ii) Debentures are issued at 20% discount
(iii) Debentures are issued at 25% Premium.
3. Suvidha Ltd. purchased machinery worth Rs1,98,000 from Suppliers Ltd. The
payament was made by issue of 12% debentures of Rs100 each. Pass the necessary
journal entries for the purchase of machinery and issue of debentures when :
(i) Debentures are issued at par;
(ii) Debentures are issued at 10% discount; and
(iii) Debentures are issued at 10% premium
4. Jackson Ltd. issued 10,000, 14% Debentures of Rs100 each at a discount of 5%,
payable as follows :
On Application Rs 25
On Allotment Rs 30
On First and Final Call Balance Amount
The entire issue was subscribed and the amounts were duly received. Expenses on
issue of debentures amounted to Rs30,000.
You are required to pass the journal entries.
5. On 1st April, 2018 Rajat Ltd. took over assets of Rs 2,25,000 and liabilities of Rs 30,000
of Max Ltd. for the purchase consideration of Rs 2,20,000. It paid the purchase
consideration by issuing 8% Debenture of Rs 100 each at 10% premium.
You are required to pass the journal entries in the books of Sudarshan Ltd. to record
the above transactions.
6. Show by means of journal entries, how would you record the following issues :
(i) Rudolph Ltd. issues 30,000, 10% debentures of Rs100 each at a discount of 5% to
repaid at the end of 5 year at par.
(ii) Crux Ltd. issues 10% debentures of the face value of Rs 40,00,000 at a premium of
5% to be redeemed at par.
(iii) Darwin Ltd. issues Rs50,00,000, 12% debentures at par but redeemed at 105%.
(iv) Essex Ltd. issues Rs 60,00,000, 14% debentures at a discount of 5% repayable at a
premium of 10%.
(v) Fox Ltd. issues Rs70,00,000, 12% debentures of Rs 100 each at a premium of 5%
and redeemed at 110%.
7. You are required to pass journal entries for the issue of debentures in the following
conditions :
(i) Ben Ltd. issued 5,000, 12% Debentures of Rs 100 each at par, redeemable at 5%
premium.
(ii) Rex Ltd. issued Rs2,00,000, 12% Debentures of Rs 100 each at a discount of 2%,
redeemed at a premium of 5%.
(iii) Josh Ltd. issued 6,000, 12% Debentures of Rs100 each at a premium of 5%,
redeemable at a premium of 105.
(iv) Oxygen Ltd. issued Rs30,000, 7% debentures of Rs 100 each to a Creditor for Rs
25,000 in full satisfaction of his claim.
8. On 1st April, 2013, Sunshine Ltd. issued Rs 10,00,000, 15% Debentures of Rs 100 each
at 8% discount payable :
Rs40 on application
The balance on allotment.
These debentures were to be redeemed at a premium of 5%. All the debentures
were subscribed for by the public.
Interest on these debentures was to be paid half-yearly which was duly paid by the
company.
(i) Pass journal entries in the first year of debentures issue (including entries for
debenture interest).
(ii) Prepare the 15% Debenture Account for the year ending 31 st March, 2014.
9. You are required to pass journal entries to record the following issues of debentures
and to write off and capital losses.
(i) Zoom Ltd. issues 6,000, 12% Debentures of Rs100 each at par redeemable also at
par.
(ii) Zola Ltd. issues 5,000, 13% Debentures of Rs 100 each at a discount of 10% to be
redeemed at par.
(iii) Zubic Ltd issues 11% Debentures of the total face value of Rs 12,00,000 at a
premium of 5% to be redeemed at par.
(iv) Ruby Ltd. issues Rs 5,00,000, 12% Debentures at a premium of 5% to be redeemed
at 10% premium.
(v) Emerald Ltd. issues 3,000, 9% Debentures of Rs 100 each at a discount of 7% to be
redeemed at a premium of 10%.
10. (i) Gurung Ltd. took over assets of Rs 6,00,000 and liabilities of Rs 60,000 from Batra
Ltd. for the purchase consideration of Rs 5,50,000. It paid the purchase consideration
by issuing 8% debentures of Rs 100 each at 10% premium.
(ii) Gurug Ltd. purchased land from Jaiswal Ltd. for Rs 4,50,000. The consideration
was paid by issuing 5% debentures at a discount of 10%.
(iii) Gurung Ltd. issued 1,000, 6% debentures of Rs 100 each at a discount of 7%
repayable at a premium of 10%.
From the above particular, pass journal entries in the books of Gurung Ltd. to record
the transactions.
Chapter 8.
Redemption of Debentures
1. On 1st April, 2016, the following balances appeared in the books of Shikhar Ltd.
(Rs)
10% Debentures 14,00,000
Premium of Redemption of Debentures 1,40,000
Debenture Redemption Reserve 75,000
The Debentures were to be redeemed at a premium of 10% in two equal annual
installments beginning from 31st March, 2018. To meet the requirements of the
Companies Act, 2013, the company transferred the balance amount to Debenture
Redemption Reserve on 31st March, 2017, On 30th April, 2017 it met requirements
of the Companies Act, 2013 regarding Debenture Redemption Investment and
redeemed the debentures on then scheduled dates.
You are required to pass necessary Journal entries to record the above
transactions in the books of Shikhar Ltd. (Ignore interest on Debentures)
2. On 1st January, 2008 a company issued 10,000 6% debentures of Rs100 each
redeemable at per after 15 years. The terms of issue, however provided that the
debentures could be redeemed by giving 6 months’ notice at any time after 5 years
at a premium of 4% either by payment in cash or by allotment of preference
shares and/or other debentures according to the option of the debentureholders.
On 1st April, 2019 the company informed the debentureholders to redeem the
debentures on 1st October, 2019, either by payment in cash or by allotment of 8%
Preference shares of Rs 100 each at Rs130 per share or 7% 2 nd debentures accepted
the offer of 8% preference shares, holders of 4,800 debentures accepted the offer
of 7% debenture and the rest demanded cash. Pass journal entries for recording
the above redemption and prepare debentureholders A/c.
3. Himanshu Limited (an unlisted company) had issued Rs10,00,000, 9% debentures
which are due to be redeemed out of profits on 1st October 2020 at the premium
of 5%. The company had a Debenture Redemption Reserve of Rs 41,400. It was
decided to invest the required amount in debenture redemption investment. Pass
necessary Journal Entries for the redemption of debentures.
4. On 1st April 2018, Sudarshan Ltd. [An unlisted company] has 3,000, 8% debentures
of Rs100 each due for redemption at 5% premium in two equal annual installments
starting from March 31, 2019. Company transferred the required amount to
Debentures to Debentures Redemption Reserve on 31st March, 2018. The company
complied with the requirements with respect to Investment made in Government
securities on 30th April, 2018.
Pass necessary journal entries.
5. Pratap Ltd. [An unlisted company] issued 60,000, 12% Debentures of Rs 100 each
at a premium of 5%, on 1.4.17, redeemable at 110% on 31.3.22.
You are required to pass necessary journal entries for the issue and redemption of
debentures.
6. On 1st April, 2013, Rayon Ltd. [An unlisted company] issued 2,000, 9% Debentures
of Rs 100 each at a discount of 10%, redeemable at par on 31st March, 2017. The
issue was fully subscribed. To meet the provisions of the Companies Act, 2013, the
Board of Directors decided to transfer the required amount to Debenture
Redemption Reserve on 31st March, 2015. On 1st April, 2016, the company made
the required investment in government securities.
The investments were encashed and the debentures were redeemed on the due
date.
It is the policy of the company to write off capital losses in the year in which they
occur.
You are required to pass journal entries for issue and redemption of debentures
(ignore interest n debentures).
7. Poddar & Sona Ltd. [An unlisted company] issued 42,000, 7% Debentures of Rs 100
each on 1st April, 2011, redeemable at a premium of 8% on 31st March, 2015. The
company decided to create required Debenture Redemption Reserve on 31 st
March, 2014. The company invested the funds as required by law in a fixed deposit
with State Bank of India on 1st April, 2014 earning interest @ 10% per annum.
Tax was deducted at source by the bank on interest @ 10% per annum.
Pass necessary Journal Entries regarding issue and redemption of debentures.
8. Global Star Ltd. [An unlisted company] issued 60,000, 10% Debentures of Rs 10
each on 1st April, 2016 redeemable at par on 30th June, 2017, All the debentures
were duly subscribed for. The debentures were redeemed on the due date with
the required investment being made on 1st April, 2017.
You are required to pass necessary Journal Entries regarding issue and redemption
of debentures assuming that the interest was payable on 31st March every year.
9. Raman Ltd. [An unlisted company] issued Rs 2,00,000, 9% Debentures of Rs 100
each on April 1,2017 at a premium of 6% redeemable at a premium of 10% on 31 st
March, 2021. Assume that required investment was made in 10% Government
securities on April 30 of the financial year in which redemption is due.
Debentures were redeemed on the due date.
Pass the Journal Entries at the time of Issue and Redemption of Debentures.
10. Reflect Ltd. [An unlisted company] issued 15,000, 10% debentures of Rs 100 each
at par on 1st April, 2013 redeemable at 5% premium in three equal yearly
installments by draw of lots as follows :
On 31st March, 2015 3,000 debentures
st
On 31 March, 2016 6,000 debentures
st
On 31 March, 2017 6,000 debentures
The company complied with the legal requirements with respect to Debenture
Redemption Reserve and Investments.
You are required to prepare the necessary ledger accounts. Ignore interest and tax.
Chapter 9.
Final Accounts of Companies
1. The trainee accountant of Rudra Ltd. drafled the following Balance Sheet.
He did not prepare it according to the format prescribed as per Schedule III of the
Companies Act, 2013. He also classified a few items incorrectly.
Balance Sheet of Rudra Ltd.
(for the year ending 31st March, 2018)
Assets Amount Liabilities Amount

(Rs) (Rs)
General Reserve 1,20,000 Capital (1,30,000 Equity 13,00,000
Plant & Machinery 6,00,000 shares @ Rs 10 each
Land & Building 8,00,000 Share Forfeiture 10,000
Profit & Loss (Debit Balance) 1,50,000 Goodwill 1,00,000
Cash & Bank Balance 2,50,000 Trade Receivables 20,000
Unclaimed Dividend 30,000 Trade Payables 50,000
Calls-in-arrears (Rs4 per share) 40,000 Inventories 30,000
Fixed Deposit accepted 4,50,000
Calls-in-advance 30,000
19,90,000 19,90,000
Foot Note : The company had an authorised capital of 2,00,000 Equity shares of
Rs 10 each.
You are required to prepare, as at 31st March 2018 :
(i) The Balance Sheet of Rudra Ltd. as per Schedule III of the Companies Act, 2013.
2. The following balances have been extracted from the books of Vanity Ltd. as at
31st March,2017 :
Trial Balance as at 31st March, 2017
Particulars Debit Credit

(Rs) (Rs)
Equity Share Capital (5,000 shares of Rs 100 each fully paid) 5,00,000
Property Plant and Equipment and Intangible Assets 7,30,000
Reserve and Surplus 2,00,000
Inventories 50,000
Cash and Bank Balances 1,70,000
Creditors 40,000
Bills Payable 20,000
Underwriting Commission on issue of shares 10,000
5% Debentures (1/5 of the Debentures to be redeemed on 31st
March, 2018) 2,00,000
Proposed Dividend 12,000
Interest accrued and due on 5% Debentures 8,000
Trade Receivables 20,000
Total 9,80,000 9,80,000
You are required to prepare as at 31st March 2017 :
(i) The Balance Sheet of Vanity Ltd. as per Schedule III of the Companies Act,2013.
3. From the given Trial Balance, prepare the Balance Sheet of Moonlight Limited as
at 31st March, 2014.
Trial Balance as at 31st March, 2014
Particulars Debit Credit

(Rs) (Rs)
Share Capital (40,000 Equity Shares of Rs 10 each 4,00,000
Bills Receivable 90,000 ----
16% Mortgage Loan ----- 1,70,000
Stores and Spares 1,15,000 ----
Debtors 1,66,000 ----
Plant and Machinery 2,90,000 ----
Goodwill 40,000 ----
Provision for Tax --- 26,000
General Reserve --- 1,30,000
Cash in Hand 18,000 ---
Calls in Arrears 2,000 ---
Marketable Securities 5,000 ---
7,26,000 7,26,000
Total
4. From the following balances obtained from the Books of Kishore Ltd., prepare a
Balance Sheet as at 31st March, 2018 as per Schedule III of the Companies Act
2013 :
Particulars Note Amount

No. (Rs)
Bank Overdraft 45,500
Creditors 25,450
Sinking Fund 20,000
Bills Payable 10,000
Proposed Dividend (Not yet approved by shareholder) 22,000
Share Capital (29,000 shares @ 10 fully called up) 2,90,000
Tax Provision 20,550
Calls in Arrears 10,000
Buildings 1,80,000
Stock 82,500
Goodwill 45,000
Cash at Bank 77,500
Prepaid Expenses 58,000
Statement of Profit and Loss—Cr. 67,000
Discount on issue of Shares 10,000
Debtors 45,000
Provision for Depreciation on Building 30,000
5. Following balance have been extracted from the books of PM Co. Ltd. You are
required to prepare a Balance Sheet as per Schedule III of the Companies Act
2013.
Particulars Amount Particulars Amount

(Rs) (Rs)
Land and Building 11,09,50 Capital : 1,18,000 equity
0 shares of Rs 10 each fully
called up 11,80,000
Fixed Deposit accepted Preliminary Expenses 1,12,000
Furniture 1,15,000 10% Debentures 2,05,000
Goodwill 3,00,000 Provision for Taxation 1,22,000
Inventories 1,00,000 Discount on Issue of Shares 10,000
Sundry Creditors 34,000 Statement of Profit & Loss(Cr.) 48,000
Machinery 1,04,000 Investment in Zee Ltd. 96,000
Cash 25,000 Bills Receivable 7,000
Bills Payable 38,000 Debtors 9,000
Bank 7,000 Unclaimed Dividends 11,000
General Reserve 72,000 Authorised Capital – 2,00,000
Calls in Arrears 1,12,000 equity
(on1,000shares) 2,000 shares of Rs10 each
Securities Premium Reserv Share Forfeiture 500
10,000
6. From the following balance extracted from the Books of Fortune Ltd., prepare the
Balance Sheet as at 31st March 2013 as per Schedule III of Companies Act, 2013 :
Particular Note No. Amount

(Rs)
General Reserve 2,00,000
Provision for Taxation 1,35,000
Statement of Profit and Loss- Cr. 97,000
Short-term Loans and Advances 9,000
Land and Buildings (at cost) 7,19,000
Provision for Depreciation 1,89,000
Patents 1,00,000
Debtors 2,20,100
Stock-in-Trade 2,20,000
Creditors 1,50,100
Bank Overdraft 1,46,000
Public Deposits (unsecured) 45,000
Discount on Issue of Debentures 18,000
Equity Share Capital 3,60,000
8% Investments 1,71,000
7. Following balance have been extracted from the books of Dream Co. Ltd. You are
required to prepare a Balance Sheet as per Schedule III of Companies Act, 2013.
Particular Amount Particular Amount

(Rs) (Rs)
Building 9,15,000 Subscribed Capital :
Interest on Debentures 28,000 80,000 equity
Furniture 30,000 Shares of Rs 10 each fully
Goodwill 1,00,000 called up 8,00,000
Inventories 50,000 less : Calls in arrears (Rs 3 15,000
Sundry Creditors Rs 2,00,000 per share on 5,000 shares)
Machinery 1,30,000 Preliminary Expenses
Less : Provision for Depreciation 1,21,000 10 % Debentures 9,000
9,000 Discount on Issue of 2,80,000
Cash in hand 40,000 Debentures 10,000
Bill payable 76,000 Statement of P and L
Cash at Bank 80,000 Balance (Cr.) 1,50,000
Securities Premium Reserve 1,00,000 Debtors
Loan & Advance to staff 95,000 1,69,000
8. Prepare the Balance Sheet of Minorities Limited as required under Schedule III
Part I of Companies Act, 2013 :
Particular Amount
(Rs)
Term Loan 10,00,000
Sundry Creditors 11,45,000
Staff Advances 4,27,000
Provision for Taxation 1,70,000
Securities Premium Reserve 4,75,000
Loose Tools 50,000
Investments 2,25,200
Loss for the year 3,00,000
Sundry Debtors 12,25,000
Miscellaneous Expenditure 58,000
Advance from Debtors 2,00,000
provision for Doubtful Debts 20,200
Stores
property Plant and Equipment and Intangible Assets (Written Down 4,00,000
Value) 51,50,000
Finished Goods 7,50,000
Capital Reserve 27,00,000
Capital Work In Progress 2,00,000
9. The following balance have been extracted from the books of DEP Ltd. as on 31 st
March, 2018.
Trial Balance
Particular Debit (Rs) Credit

(Rs)
Public Deposit 2,00,000
Interest accrued but not due on Public Deposit 2,500
Debtors 5,20,000
Security Deposit 80,000
Interest accrued on Investments 6,000
Trade Payables 1,61,600
1,60,000. Equity Shares of Rs 10 each 16,00,000
5,000 10% Preference Shares of Rs 100 each 5,00,000
10% Secured Loan 1,80,000
Interest accrued and due on Secured Loan 9,000
Plant & Machinery 16,40,000
Vehicles 8,80,000
10% Govt. Bonds 1,00,000
Inventories 4,10,700
Prepaid Insurance 1,000
Share Issue Exp. 5,000
B/R 22,000
Cash and Bank 40,000
Land and Building 5,00,000 1,00,000
Workmen Compensation Fund 20,000
Outstanding Expenses 9,31,600
Net Profit for the year ended 31st March, 2018 42,04,700
42,04,70
0
You are required to prepare as on 31.3.2018 :
(i) The Balance Sheet of DEP Ltd. as per Schedule III of the Companies Act, 2013.
10.From the following balance extracted from the Books of Snow White Ltd., prepare a
Balance Sheet as on 31st March, 2019 as per Schedule III Part I of Companies Act,
2013 : (Rs)
Fixed Deposits 50,000
Accounts Receivable 20,000
Patents 40,000
Unclaimed Dividend 10,000
Work-in-progress 4,00,000
Discount on Issue of 14% Debentures 1,00,000
Investments in Government Bonds 4,00,000
Livestock 9,00,000
Statement of Profit and Loss- Dr. 50,000
Proposed Dividend 50,000
Creditors 2,00,000
Share Capital 10,00,000
11.The following balance have been extracted from the books of Watson Company
Limited as on 31st March, 2019.
Particular Debit Credit (Rs)

(Rs)
Machinery 1,60,000
Land and Buildings 6,74,000
Depreciation on Machinery| 16,000
Purchases (adjusted) 4,00,000
Closing Stock 1,50,000
Wages 1,20,000
Sales 10,00,000
Salaries 80,000
10% Debentures (issued on 1.04.18 1,00,000
Equity Share Capital -2,000 shares of Rs 100 each – fully 2,00,000
paid 1,00,000
Preference Share Capital-1,000, 6% shares of Rs 100 each-
fully paid 16,00,000 16,00,000
The Board of Directors decided to make the following appropriations :
(i) To declare an equity dividend @ 10%.
(ii) To Pay dividend on preference share capital in full.
(iii) To transfer Rs 20,000 to general reserve.
(iv) Statement of Profit and Loss (Cr.) Rs 3,54,000.
(v) Interest is accrued and due on 10% Debentures.
You are required to prepare the Balance Sheet of the company as on that date in
the prescribed form.
Note: Ignore Income Tax.
Chapter 10.
Financial Statement Analysis
1. From the following Balance Sheets of Harrison Ltd. as at 31st March, 2018 and 31st
March, 2019. Prepare Common Size Balance Sheet.
Balance Sheet
st
(as on 31 March, 2018 and 2019)
Particular Note 31-3-2019 31-3-2018

No. (Rs) (Rs)
I EQUITY AND LIABILITIES
1. Shareholders’ Funds :
(a) Share Capital (Equity) 72,500 50,000
(b) Reserves and Surplus 1 14,500 9,000
2. Non-Current Liabilities :
(a) Long-term Borrowings (11% Debentures) 20,000 10,000
3. Current Liabilities :
(a) Trade Payables (Creditors) 11,000 8,700
Total 1,18,000 77,700
II ASSETS
1. Non-Current Assets :
Property Plant and Equipment and Intangible 83,000 46,7000
Assets
2. Current Assets :
(a) Inventories (Stock) 32,500 29,000
(b) Cash and Cash Equivalents (Cash) 2,500 2,000
1,18,000 77,700
Total
Notes to Account:
Particular 31-3-2019 (Rs) 31-3-2018 (Rs)

1 Reserves and Surplus :
Statement of Profit and Loss (Cr.) 15,000 10,000
Less Preliminary Expenses 500 1,000
14,500 9,000
st
2. From the following Balance Sheets of Repsol Ltd., as at 31 March, 2019 and 2020,
prepare a Comparative Balance Sheet.
Particulars Note 31-3-2020 31-3-2019

No. (Rs) (Rs)
I EQITA AND LIABILITIES
1 Shareholders’ Funds :
(a) Share Capital 1 90,000 80,000
(b) Reserves and Surplus 7,400 6,000
2 Non-Current Liabilities :
Long-term Borrowings (Loans) 23,000 12,000
3 Current Liabilities :
(a) Short-term Borrowings (Cash Credit) 13,600 25,000
(b) Trade Payables (Creditors) 22,000 24,000
(c) Short-term Provisions (Provision for Tax) 20,000 16,000
Total 1,76,000 1,63,000
II ASSETS
1 Non-Current Assets : 50,000 60,000
Property Plant and Equipment and Intangi-
ble Assets
2 Current Assets : 48,000 40,000
(a) Trade Receivables (Debtors) 70,000 60,000
(b) Inventories 2 7,000 2,400
(c) Cash and Cash Equivalents 1,000 600
(d) Other Current Assets 1,76,000 1,63,000
Total
Notes to Account:
Particulars 31-3-2020 31-3-2019

(Rs) (Rs)
General Reserve 4,000 2,500
Statement of Profit and Loss-Cr. 3,400 3,500
7,400 6,000
2 Other Current Assets :
Prepaid Expenses 1,000 600
3. From the following data, prepare a Common Size Balance Sheet of Teak Wood Ltd.
:
Particular 31-03- 31-03-

2020 (Rs) 2019
(Rs)
Share Capital 3,00,000 2,40,000
Reserves and Surplus 80,000 70,000
Trade Payables 1,00,000 1,10,000
Trade Receivable 1,90,000 1,80,000
Short-term Provision 40,000 15,000
Property Plant and Equipment and Intangible Assets 2,90,000 2,30,000
Long-term Provision 80,000 65,000
Current Investments 10,000 8,000
Inventory 1,01,000 72,000
Cash and Cash Equivalents 9,000 10,000
4. From the following data, prepare a Common Size Balance Sheet of Palms Ltd. as at
31st March, 2018 : (All calculations up to two decimal places)
Particular 31-3-2018
(Rs)
Trade Payables 2,40,000
Property Plant and Equipment 20,00,000
Intangible Assets 2,00,000
Reserves and Surplus 3,60,000
Short-term Loans and Advances 2,00,000
Short-term Borrowings 40,000
Long-term Borrowings 1,60,000
Chapter 11.
Cash Flow Statement
1. From the following Balance Sheet of Uday Steel Ltd. as at 31st March 2018, prepare
its Cash Flow Statement :
Particular Note 31st March 31st March

No, 2018 (Rs) 2017 (Rs)
(a) Share Capital 1 7,00,000 5,00,000
(b) Reserves and Surplus 2 2,50,000 3,25,000
Long-term Borrowings 3 2,00,000 2,50,000
3 Current Liabilities:
Short-term Provisions 4 50,000 25,000
Total 12,00,000 11,00,000
II ASSETS
1 Non-Current Assets:
(a) Property Plant and Equipment Inta-
ngible Assets:
Property Plant and Equipment (Ma- 5,00,000 3,00,000
chinery) 2,00,000 1,40,000
(b) Non-current investments
2 Current Assets :
(a) Inventories 1,50,000 2,00,000
(b) Trade Receivables 1,80,000 1,50,000
(c) Cash and Cash Equivalents 1,70,000 3,10,000
12,00,000 11,00,000
Notes to Account :
Particulars 31st March 31st March

2018 (Rs) 2017 (Rs)
1 Share Capital:
Equity Share Capital 6,00,000 3,00,000
12% Preference Share Capital 1,00,000 2,00,000
7,00,000 5,00,000
2 Reserves and Surplus:
General Reserve 1,50,000 1,50,000
Surplus i.e., Balance in Statement of Profit and Loss 1,00,000 1,75,000
2,50,000 3,25,000
3 Long-term Borrowings:
9% Debentures 2,00,000 2,50,000
4 Short-term Provisions:
Provision for Tax 50,000 25,000
Additional Information :
(i) Machinery costing Rs 1,00,000 on which depreciation charged was Rs 70,000, was
sold at a profit of 20% on book value. Depreciation charged during the year
amounted to Rs 70,000.
(ii) Preference Shares were redeemed at par on 31st March, 2018.
(iii) Debentures were redeemed on 1st January, 2018 and Equity Shares were issued
on 1st April, 2017.
(iv) The company declared and paid interim dividend on Equity Shares @ 8% during
the year. It did not propose final dividend on Equity Shares.
(v) Non-current Investments costing Rs60,000 were sold at a profit of 20%.
(vi) Income tax Rs 45,000 was provided.
2. You are required to prepare a Cash Flow Statement (as per AS-3) for the year 2018-
19 from the following Balance Sheet .
Arrow Ltd.
Balance Sheet
(as at 31 March, 2019 and 31st March, 2018)
st
Particulars Note 31st Mar. 31st Mar.

No. 2019 (Rs) 2018 (Rs)
1 Shareholders’ Funds:
(a) Share Capital (Equity Share Capital) 6,00,000 4,00,000
(b) Reserves and Surplus (Statement of Profit and 2,00,000 1,00,000
Loss)
2 Non-Current Liabilities: 1,00,000 2,00,000
Long-term Borrowings
3 Current Liabilities ---- 10,000
(a) Short-term Borrowings (Bank Loan) 45,000 60,000
(c) Short-term Provisions 10,15,000 8,10,000
Total
II ASSETS
1 Non-Current Assets:
(a) Property Plant and Equipment and Intangi-
ble Assets: 6,00,000 6,00,000
(i) Property Plant and Equipment (Building) 45,000 50,000
(ii) Intangible (Patents) 75,000 ----
(b) Non-current Investments
2 Current Assets: 15,000 10,000
(a) Inventories 1,95,000 1,20,000
(b) Trade Receivables (Debtors) 85,000 30,000
(c) Cash and Cash Equivalents (Cash) 10,15,000 8,10,000
Total
Note to Account:
Particulars Note 31st Mar. 2019 31st Mar. 2018

No. (Rs) (Rs)
1 Short-term Provisions
Provision for Taxation 70,000 40,000
Note : Dividend proposed for the year 2017-18 and 2018-19 are Rs 60,000 and Rs
80,000 respectively.
During the year 2018-19 :
(i) Building costing Rs 75,000 was purchased.
(ii) An old building, the book value of which was Rs 63,000, was sold at a loss of Rs
5,000.
(iii) Tax provided during the year was Rs 80,000.
3. From the following Balance Sheets of X Ltd., prepare a Cash Flow statement.
Particulars Note 31-3-2020 31-3-2019

No. (Rs) (Rs)
I EQUITY AND LIABILITIES :
1. Shareholders’ Funds :
(a) Share Capital (Equity) 8,00,000 6,00,000
(b) Reserves and Surplus 1 1,30,000 40,000
2. Non-Current Liabilities :
Long-Term Borrowings (10% Debentures) --- 2,00,000
3. Current Liabilities :
(a) Trade Payables (Creditors) 1,05,000 1,25,000
(b) Short-Term Provisions (Provision for 72,000 55,000
Tax)
Total 11,07,000 10,20,000
II ASSETS :
1 Non-current Assets : 2
Property Plant and Equipment 6,02,000 5,70,000
2 Current Assets :
(a) Inventories (Stock) 2,45,000 1,90,000
(b) Trade Receivables (Debtors) 3 1,24,000 1,66,000
(c) Cash and Cash Equivalents 1,36,000 94,000
Total 11,07,000 10,20,000
Note to Account:
Particulars 31-3-2020 31-3-2019

(Rs) (Rs)
Capital Reserve 30,000 ----
Statements of Profit and Loss- Cr. 1,00,000 40,000
1,30,000 40,000
2 Property Plant and Equipment and Intangible Assets:
Land 3,50,000 4,00,000
Plant and Machinery 2,52,000 1,70,000
6,02,000 5,70,000
3 Cash and Cash Equivalents:
Bank 92,000 74,000
Cash 44,000 20,000
1,36,000 94,000
(i) A piece of land has been sold during the year ended 31st March, 2020 and the
profit on sale has been credited to capital reserve.
(ii) Machinery costing Rs20,000 (accumulated depreciation Rs 8,000) was sold for
Rs9,000.
(iii) Debentures were redeemed on 1st April, 2019 at a Premium of 6 % and the
premium on redemption was debited to Profit and Loss A/c.
4. From the following Balance Sheet, prepare a Cash Flow Statement for the year
ended 31st March, 2019 :
Particulars Note 31-03- 31-03-

No. 2019 (Rs) 2018 (Rs)
1 Shareholders Funds:
(a) Share Capital (Equity) 1,00,000 70,000
(b) Reserves and Surplus 1 45,000 36,000
2 Non Current Liabilities
Long-term Borrowings 2 82,500 86,000
(a) Short-term Borrowings (Bank Overdraft) ---- 4,000
(c) Other Current Liabilities (Outstanding 10,000 6,000
Expenses)
2,57,500 2,17,000
Total
II ASSETS
1 Non Current Assets: 3 1,40,000 1,15,000
(a) Property Plant and Equipment and Inta-
ngible Assets 20,000 27,000
(b) Non-Current Investment (Trade Investm -
Ents)
2 Current Assets: 4 87,500 67,000
(a) Trade Receivables 5 10,000 7,000
(b) Cash and Cash Equivalents ---- 1,000
(c) Other Current Assets (Prepaid Expenses) 2,57,500 2,17,000
Total
Notes to Accounts:
Particulars 31-03-2019 31-03-2018

(Rs) (Rs)
General Reserve 20,000 16,000
Profit and Loss A/c 25,000 20,000
45,000 36,000
2 Long-term Borrowings :
10% Debentures ---- 30,000
Public Deposits 82,5000 56,000
82,500 86,000
3 Property Plant and Equipment and Intangible Assets
Land and Buildings 10,000 15,000
1,40,000 1,15,000
4 Trade Receivables :
Debtors 80,000 60,000
Bills Receivable 7,500 7,000
87,500 67,000
5 Cash and Cash Equivalents
Cash in Hand 8,000 7,000
Cash at Bank 2,000 ---
10,000 7,000
Income Tax and Dividend paid during the year amounted to Rs10,00,000 and
Rs20,000 respectively.
5. Given below is the Balance Sheet of Gurmeet and Company as at 31 st March, 2020
and 2019.
Particulars Note 31-03- 31-03-2019

No. 2020 (Rs) (Rs)
(b) Reserves and Surplus 1 2,20,000 1,55,000
Long-term Borrowings (11% Debentures) 2,50,000 1,50,000
2 1,25,000 85,000
Trade Payables
Total 9,45,000 6,90,000
II ASSETS :
1 Non-Current Assets :
(a) Property Plant and Equipment and
Intangible Assets: 4,10,000 3,20,000
(i) Property Plant and Equipment
(Machinery) 80,000 1,00,000
(ii) Intangible Assets (Goodwill) 80,000 30,000
(b)Non-Current Investments (12% Investment)
2 Current Assets : 55,000 40,000
(a) Inventories 1,90,000 80,000
(b) Trade Receivables (Debtors) 1,30,000 1,20,000
(c)Cash and Cash Equivalents (Bank) 9,45,000 6,90,000
Total
Notes to Accounts :
Particulars 31-3-2020 (Rs) 31-3-2019 (Rs)

General Reserve 1,50,000 1,00,000
Statement of Profit and Loss – Cr. 70,000 60,000
Less : Debenture Issue Discount --- (5,000)
2,20,000 1,55,000
2 Trade Payable :
Creditors 1,10,000 75,000
Bills Payable 15,000 10,000
1,25,000 85,000
I Investments costing Rs36,000 were sold for Rs30,000 during the year 2020.
II New Debentures have been issued at the end of the current accounting year.
III New Investments have been purchased at the end of the current accounting year.
IV Depreciation charged on machinery during the current accounting year was
Rs10,000.
From the above information prepare a Cash Flow Statement as per Accounting
Standard-3.
6. From the following Balance Sheets of Mc Mohan Ltd., you are required to prepare
a Cash Flow Statement.
Particulars Note 31-12- 31-12-2018

No. 2019 (Rs)
(Rs)
(a) Share Capital 2,00,000 2,00,000
(b) Reserve and Surplus 1,52,000 80,000
(a) Trade Payables 1,28,000 1,39,000
(b) Other Current Liabilities (O/s salaries) --- 6,000
(c) Short-term Provisions (Provision for Tax) 45,000 35,000
Total 5,25,000 4,60,000
II ASSETS :
1. Non-Current Assets :
Property Plant and Equipment and Intangible
Assets: 2,00,000 1,50,000

(i) Property Plant and Equipment (Machinery) 30,000 40,000
(ii) Intangible (Goodwill)
2. Current Assets : 15,000 12,000
(a) Short term Investments 2,15,000 1,80,000
(b) Inventories 50,000 60,000
(c) Trade Receivables 10,000 8,000
(d) Cash and Cash Equivalents (Bank) 5,000 10,000
(e) Other Current Assets (Prepaid Expenses) 5,25,000 4,60,000
Total
Notes to Account :
Particulars 31-12-2019 31-12-2018

(Rs) (Rs)
Statement of Profit and Loss-Cr. 1,75,000 1,10,000
Less : Preliminary Expenses (16,000) (20,000)
Less : Underwriting Commission (7,000) (10,000)
1,52,000 80,000
(i) Machinery, the original cost of which was Rs50,000 was sold for Rs10,000 during
the year.
(ii) Depreciation on machinery charged during the year Rs20,000.
(Iii) Dividend paid during the year @ 10% on share capital.
7. From the Balance Sheets of India Electronics Ltd. As at 31-03-2019 and 31-03-2020,
prepare a Cash Flow Statement.
Particulars Note 31-03- 31-03-

No. 2020 (Rs) 2019 (Rs)
I EQUITY AND LIABILITIES :
(b) Reserves and Surplus 1 1,00,000 80,000
Long-Term Borrowings 2 1,89,000 1,31,000
3 14,000 14,000
(a) Trade Payables
(b) Other Current Liabilities (Outstanding 1,000 3,000
Expenses)
Total 4,84,000 3,78,000
II ASSES :
4
Assets :
(i) Property Plant and Equipment 3,20,000 2,30,000
(ii) Intangible Assets (Goodwill) 5,000 10,000
2 Current Assets : 5 75,000 60,000
(a) Inventories (Stock)
26,000 28,000
(b) Trade Receivables 6 50,000 40,000
(c) Cash and Cash Equivalents (Cash)
8,000 10,000
(d) Other Current Assets
4,84,000 3,78,000
Total
Note to Account:
Particulars 31-12-2015 31-12-2014

(Rs) (Rs)
General Reserves 30,000 30,000
Statement of Profit and Loss – Cr. 70,000 50,000
1,00,000 80,000
2 Long-Term Borrowings :
Secured : 12% Debentures 69,000 51,000
Unsecured : 12% Public Deposits 1,20,000 80,000
1,89,000 1,31,000
3 Trade Payables :
Creditors 10,000 8,000
Bills Payable 4,000 6,000
14,000 14,000
4 Property Plant and Equipment :
Building 2,20,000 1,50,000
Plant 1,00,000 80,000
3,20,000 2,30,000
Debtors 17,000 20,000
Bills Receivable 9,000 8,000
26,000 28,000
6 Other Current Assets :
Accrued Income 6,000 10,000
Prepaid Expenses 2,000 ---
8,000 10,000
(i) Depreciation charged on Building Rs10,000.
(ii) Depreciation charged on Plant Rs5,000.
(iii) Interest charged on Debentures Rs7,200 for the year.
(iv) Interest paid on Public Deposits Rs9,600 for the year.
8. You are required to prepare a Cash-Flow Statement (as per AS-3) for the year 2016-
17 from the following Balance Sheets.
Balance Sheet of Honesty Ltd.
(as at 31st March, 2016 and 31st March, 2017)
Particular Note 31-03- 31-03-

No. 2017 (Rs) 2016 (Rs)
1 Shareholders’ Funds
(a) Share Capital (Equity Share Capital) 14,00,000 10,00,000
(b) Reserves and Surplus (Statement of P/L) 5,00,00 4,00,000
2 Non-current Liabilities
Long-term Borrowings(10% Debentures) 5,00,000 1,40,000
(a) Short-term Borrowings 20,000 30,000
(Bank Overdraft)
1,00,000 60,000
(b) Trade Payables (Creditors) 1 60,000 30,000
(c) Short-term Provisions
25,80,000 16,60,000
Total
II ASSETS
1 Non-current Assets:
Assets: 2
16,00,000 9,00,000
(i) Property Plant and Equipment 1,40,000 2,00,000
(ii) Intangible (Goodwill)
3 Current Assets: 2,50,000 2,00,000
(a) Inventories 5,00,000 3,00,000
(b) Trade Receivables 90,000 60,000
(c) Cash and Bank Balances (Cash at Bank) 25,80,000 16,60,000
Total
Notes to Account :
Particulars 31-03- 31-03-2016

2017 (Rs) (Rs)
1 Short – term Provisions:
Provision for Taxation 60,000 30,000
2 Property Plant and Equipment and Intangible Assets:
Less : Accumulated Depreciation (1,60,000) (1,00,000)
16,00,000 9,00,000
During the year 2016-17 :
(i) A part of the machine, costing Rs50,000, accumulated depreciation thereon being
Rs20,000, was sold for Rs18,000.
(ii) Tax paid Rs20,000.
(iii) Interest of Rs50,000 paid on Debentures.
Chapter 12.
Ratio Analysis
1. From the following information, calculate the following ratios (up to two decimal
places).
(i) Debt to Total Assets Ratio
(ii) Proprietary Ratio
(iii) Inventory Turnover Ratio
Particulars Amount
(Rs)
Current Assets (including inventory of Rs20,00,000) 10,00,000
Shareholders’ Funds 14,40,000
Non-current Liabilities (10% Long-term Bank Loan) 8,00,000
Current Liabilities 5,00,000
Revenue from Operations 15,00,000
Gross Profit 6,00,000
2. From the following Statement of Profit and Loss of Gama Ltd. For the year 2017-18,
calculate (up –to two decimal place):
(i) Net Profit Ratio (iii) Current Ratio
(ii) Operating Profit Ratio (iv) Quick Ratio
Statement of Profit and Loss of Gama Ltd.
No. (Rs)
Revenue from operations 3,00,000
Other Income (Dividend received) 40,000
Total Revenue 3,40,000
Expenses :
Purchases 1,80,000
Change in Inventories (4,000)
Employee Benefit Expenses (Salaries) 10,000
Depreciation and Amortisation (Depreciation of property plant 28,000
and equipment and intangible assets)
Other Expenses 6,000
Total Expesnses 2,20,000
Total Expenses 2,20,000
Profit before tax 1,20,000
Less : Provision for Tax (48,000)
Profit after Tax 72,000
Notes to Account :
Note Particulars Amount

No. (Rs)
1 Change in Inventories
Opening Inventory 8,000
Closing Inventory 12,000
(4,000)
2 Other Expenses :
Carriage Outward 4,000
Rent 2,000
6,000
Total Current Liabilities as on 31st March, 2018 Rs50,000
st
Current Assets (other than inventory) as on 31 March, 2018 Rs70,000
3. From the following information calculate the following ratios (up to two decimal
places) :
(i) Earning per Share (ii) Price Earning Ratio
(iii) Return in Investments (iv) Working Capital Turnover Ratio
Particulars Amount
(Rs)
Net Profit after Interest and Tax 2,40,000
Tax 1,60,000
Net property plant and equipment and intangible assets 10,00,000
Non-current Investments (Non-Trade) 1,00,000
Equity Share Capital (face value Rs10 per share) 5,00,000
15% Preference Share Capital 1,00,000
Reserves and Surplus (including surplus of the year under
consideration) 2,00,000
Working Capital 1,00,000
Note : The market value of an equity share is Rs40.
4. From the information given below, calculate (up to two decimal places) :
(i) Operating Ratio. (ii) Quick Ratio
(iii) Debt to Equity Ratio (iv) Proprietary Ratio.
(v) Working Capital Turnover Ratio.
Particulars Amount
(Rs)
Net revenue from operations 12,00,000
Cost of revenue from operation 9,00,000
Operating expenses 15,000
Inventory 20,000
Other Current Assets 2,00,000
Current Liabilities 75,000
Paid-up Share Capital 4,00,000
Statement of Profit and Loss (Dr) 41,500
Total Debt 2,50,000
From the following Statement of Profit and Loss of Dixon Ltd. for the year 2014-
15, calculate (up to two decimal places) :
(i) Trade Receivable Turnover Ratio (iii) Net Profit Ratio
(ii) Inventory Turnover Ratio (iv) Operating Profit Ratio
Statement of Profit and Loss of Dixon Ltd.

No. (Rs)
Revenue from operations 2,00,000
Other income (Rent received) 10,000
Total Revenue 2,10,000
Expenses
Purchase 55,000
1
Change in Inventories 2 3,000
Employee Benefit Expenses 5,000
Depreciation 3 2,000
Other Expenses 5,000
Total Expenses 70,000
Profit Before Tax 1,40,000
Less : Tax (56,000)
Profit After Tax 84,000
Notes to Account :

No. (Rs)
1. Change in Inventories
Opening Inventory 6,000
Closing Inventory (3,000)
3,000
2. Employee Benefit Expenses
Wages 2,000
Salaries 3,000
5,000
3. Other Expenses
Carriage Inward 2,000
Carriage Outward 3,000
5,000
Debtors (as on 31st March, 2015) Rs7,000
st
Bill Receivable (as on 31 March, 2015) Rs5,000
Cash Revenue from operations Rs50,000
5. From the following information, calculate (upto two decimal places) :
(i) Liquid Ratio. (ii) Current Ratio.
(iii) Proprietary. (iv) Working Capital Turnover Ratio.
(v) Gross Profit Ratio. (vi) Operating Ratio.
(vii) Net Profit Ratio.
Particulars Amount
(Rs)
Cost of Goods Sold 6,00,000
Operating Expenses 50,000
Gross Sales 8,00,000
Sales Returns 10,000
Total Current Assets 3,00,000
Total Current Liabilities 1,00,000
Total Assets 7,00,000
Closing Stock 30,000
Prepaid Insurance 5,000
Preliminary Expenses 6,000
Reserves and Surplus 40,000
6. From the following information, calculate :
(i) Debt Equity ratio (ii) Interest Coverage Ratio
(iii) Proprietary Ratio (iv) Operating Profit Ratio
Information : Rs
General Reserve 60,000
Profit and Loss A/c (including Net Profit) 1,00,000
Loan @ 15% interest 2,00,000
Tax paid during the year 40,000
Profit for the year after interest and tax 80,000
7. Following information is given to you :
(a) Inventory turnover ratio = 5 times.
(b) Inventory at the end is Rs5,000 more than the Inventory at the beginning.
(c) Revenue from Operations (all credit) Rs2,00,000.
(d) Gross profit ratio ¼ on cost.
(e) Current liabilities Rs60,000.
(f) Quick ratio = 0.75.
Calculate :
(i) Cost of Revenue from Operations
(ii) Opening and Closing Inventory
(iii) Quick Assets and Current Assets.
8. From the following information, find out :
(i) Current Assets, (ii) Current Liabilities, (iii) Liquid Assets.
Information :
(a) Current ratio 2.5
(b) Liquid ratio 1.5
(c) Proprietary ratio (property and equipment and intangible assets/proprietary
funds) 0.75
(d) Working Capital R60,000
(e) Reserves and Surplus Rs40,000
(f) Bank Overdraft Rs10,000. There is not long-term or fictitious assets.
9. Following is the Statement of Profit and Loss of Relax Ltd. for the year ended 31 st
March 2019 :
No. (Rs)
I INCOME :
Revenue from Operations (Net Sales) 1,60,000
Other Income 1 4,800
Total 1,64,800
II EXPENSES :
Purchases of Stock-in-Trade 80,000
Changes in Inventory of Stock-in-Trade (12,000)
Employee Benefit Expenses 2 34,000
Finance Cost 3 800
Other Expenses 4 34,000
Total 1,36,800
Profit (I - II) 28,000
Note to Account :

No. (Rs)
1 Other Income
Interest on Investments 4,800
4,800
2 Employee Benefit Expenses
Wages 24,000
Salaries 10,000
34,000
3 Finance Cost
Interest on Loan 800
800
4
Other Expenses
Manufacturing Expenses 16,000
Selling and Distribution Expenses 4,000
Administration Expenses 12,800
General Expenses 1,200
34,000
You are required to Calculate :
(i) Gross Profit Ratio
(ii) Interest Coverage Ratio
(iii) Net Profit Ratio
10. From the following Balance Sheet of Alpha Ltd. for the year ended 31st March,
2018, compute
(i) Debt-Equity Ratio, (ii) Proprietary Ratio, (iii) Total Assets to Debt Ratio and (iv)
Current Ratio.
(Rs) (Rs)
1 Shareholders’ Fund : 1 Non-Current Assets :
Share Capital 3,50,000 Property Plant and Equip- 6,00,000
ment and Intangible Assets
Reserves and Surplus 1,50,000 Investments 1,00,000
2 Application Money Other Non-Current Assets
Pending Allotment 1,00,000 (Unamortised expenses) 20,000
3 Non-Current Liabilities : 2 Current Assets :
Long-term Borrowings 3,70,000 Inventories 1,20,000
4 Current Liabilities : Trade Receivables 1,30,000
Trade Payables 1,30,000 Cash and Cash Equivalents
3,70,000
1,20,000
Other Current Assets 10,000
(Unamortised expenses) 11,00,000
11,00,000
11. Calculate the following Ratios with the help of the information given below :
(i) Operating Ratio (iv) Working Capital Turnover Ratio
(ii) Gross Profit Ratio (v) Proprietary Ratio.
(iii) Quick Ratio
Information :
Equity share capital Rs1,00,000; 8% Preference share capital; Rs80,000; 9%
Debentures Rs60,000; General Reserve Rs10,000; Revenue from Operations
Rs2,00,000; Opening Inventory Rs12,000; Purchases Rs1,20,000; Wages Rs8,000;
Closing Inventory Rs18,000; Selling and Distribution expenses Rs2,000; Other
current assets Rs50,000; Property Plant and Equipment and Intangible Assets
Rs2,12,000 and Current liabilities Rs30,000.
12. Balance Sheet of X Ltd.
(as on 30th June, 2020)

No. (Rs)
(a) Share Capital (Equity) 1,50,000
(b) Reserves and Surplus 1 2,25,000
Long-term Borrowings (15% Bank Loan) 90,000
(a) Short-term Borrowings (Bank Overdraft) 25,000
(b) Trade Payables (Creditors) 34,000
2 41,000
(c) Other Current Liabilities 20,000
(d) Short-term provision (Provision for Tax) 5,85,000
Total
II ASSETS
3 2,00,000
Property Plant and Equipment and Intangible Assets:
(i) Property Plant and Equipment 10,000
(ii) Intangible Assets (Patents)
4 2,15,000
2 Current Assets :
5 1,00,000
(a) Inventories
6 50,000
(b) Trade Receivables (Debtors)
(c) Cash and Cash Equivalents 10,000
(d) Other Current Assets (Income tax paid in advance) 5,85,000
Total
Notes to Account :
Particulars Amount Amount

(Rs) (Rs)

Capital Reserve 1,00,000
Less : Share Issue Expenses (15,000) 85,000
Reserve for Contingencies 50,000
Statement of Profit and Loss (Cr.) 90,000
2,25,000
2 Other Current Liabilities :
Outstanding Salaries 5,000
Dividends Payable 36,000
41,000
3 Property Plant and Equipment:
Land and Buildings 1,00,000
1,50,000
Plant and Machinery 50,000
Less : Accumulated Depreciation -- 1,00,000
2,00,000
4 Inventories :
Stock of Finished Goods 2,00,000
Loose Tools 15,000
2,15,000
Debtors 1,08,000
Less : Provision for Doubtful Debts (8,000)
1,00,000
6 Cash and Cash Equivalents :
Cash 30,000
Marketable Securities 20,000
50,000
Calculate the Liquidity Ratios, Debt-Equity Ratio and Proprietary Ratio.
13. From the following information compute :
(i) Debt to equity Ratio (ii) Debt to Total Assets Ratio
(iii) Proprietary Ratio.
S.No. Particular Amount

(Rs)
1. Long-term Borrowings 10,00,000
2. Long-term Provisions 5,00,000
3. Current Liabilities 2,50,000
4. Non-current Assets 18,00,000
5. Current Assets 4,50,000
14. Calculate the following ratios with the help of the information given below :
(i) Operating Ratio (ii) Gross Profit Ratio
(ii) Quick Ratio (iv) Working Capital Turnover Ratio
(v) Proprietary Ratio
Information:
Equity Share Capital Rs1,00,000; 8% Preference Share Capital Rs80,000; 9%
Debentures Rs60,000; General Reserve Rs10,000; Revenue from Operations
Rs2,00,000; Opening Inventory Rs12,000; Purchases Rs1,20,000; Wages Rs8,000;
Closing Inventory Rs18,000; Selling and Distribution Expenses Rs2,000; Other
Current Assets Rs50,000 and Current Liabilities Rs30,000.
15. Calculate the Current Ratio from the following :
Particulars Amount
(Rs)
Total Assets 4,00,000
Non-Current Investments 55,000
Shareholders’ Funds 3,00,000
Non-Current Liabilites 40,000
(i) Revenue from Operations
(ii) Cost of Revenue from Operation
(iii) Working Capital
(iv) Current Assets
Trade Receivables Turnover Ratio 4 Time
Current Liabilities Rs50,000
Average Debtors Rs18,00,000
Working Capital Turnover Ratio 8 Times
Cash Revenue from Operations 25% of Revenue from Operation
Gross Profit Ratio
(i) Gross Profit Ratio, (ii) Net Profit Ratio, (iii) Interest Coverage Ratio, (iv)
Operating Profit Ratio.
Particulars 31-3-2019 31-3-2020

(Rs) (Rs)
Revenue from Operations 18,00,000 25,00,000
Operating Expenses 1,00,000 1,50,000
Cost of Revenue from Operations 10,00,000 12,00,000
Finance Cost (Interest on Loans) 2,00,000 3,00,000
Other Incomes 1,50,000 2,50,000

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