Accounts Homework Solutions

CA INTER
ACCOUNTING
PAPER - 1
HOME WORK
SOLUTIONS
INSURANCE CLAIMS FOR LOSS OF STOCK
AND LOSS OF PROFIT
HOME WORK SOLUTION
Ans.1 Memorandum Trading Account for the

Period 1st April, 2012 to 29th August 2012
₹ ₹
To Opening Stock 7,90,100 By Sales 45,36,000
To Purchases 33,10,700 By Closing stock 8,82,600
Less: Advertisement (41,000)

Drawings (2,000) 32,67,700
To Gross Profit
[30% of Sales - 13,60,800
Refer Working
Note]
54,18,600 54,18,600
Statement of Insurance Claim

₹
Value of stock destroyed by fire 8,82,600
Less: Salvaged Stock (1,08,000)
Add: Fire Fighting Expenses 4,700
Insurance Claim 7,79,300
Note: Since policy amount is more than claim amount, average clause will not apply.
Therefore, claim amount of ₹ 7,79,300 will be admitted by the Insurance Company.
Working Note:
Trading Account for the year ended 31st March, 2012
₹ ₹
To Gross Profit (b.f.) 24,00,000
87,90,100 87,90,100
Ans. 2 Statement showing valuation of stock as on 31.3.2012
₹ ₹
Stock as on 01.04.20X1 28,500
Less: Book value of abnormal stock 6,500
(₹ 10,000 – ₹ 3,500) 22,000
Add: Purchases 1,52,500
Manufacturing expenses 30,000
2,04,500
Less: Cost of Sales:
Sales 2,49,000
Less: Sale of abnormal stock (9,000)
2,40,000
Less: Gross profit @ 20% (48,000) (1,92,000)
Value of Stock as on 31st March, 20X2 12,500
Alternative Method (Trading Account Approach)

Computation of Gross Profit for the Year ₹
Total Sales 2,49,00
Less: Abnormal Sales __(9,000)
Regular Sales 2,40,000
A. Gross Profit on Regular Sales @ 20% 48,000
B. Gross Profit on Abnormal Sales [9,000 – 6,500*] ___2,500
Total Gross Profit (A+B) __50,500
Written down cost (Original Cost 10,000 less write off for 3,500)
Computation of Closing Stock as on 31st March, 2012
Opening Stock 28,500
Add: Purchases 1,52,500
Add: Manufacturing Expenses 30,000
Add: Gross Profit (as computed above) ___50,500
2,61,500
Less: Total Sales (2,49,000)
Value of Stock as on 31st March, 2012 ___12,500
Ans.3 Memorandum Trading Account for the period 1st April, 2013 to 30th Sept. 2013
₹ ₹
To Purchases 2,40,000 By Consignment 18,000*
stock
Less: Advertisement (2,500) By Closing Stock 1,41,500
(Bal.fig.)
Cost of goods taken by
proprietor (20,000) 2,17,500
To Wages 70,000
(75,000 – 5,000)
TO Gross Profit 62,000
(20% of Sales)
4,69,500 4,69,500
* For financial statement purposes, this would form part of closing stock (sine there is no
sale). However, this has been shown separately for computation of claim for loss of stock
since the goods were physically not with the concern and, hence, there was no loss of
such stock.
₹
Less: Salvaged Stock (27,000)
Note: Sine policy amount is less than claim amount, average clause will apply.
Therefore, claim amount will be computed by applying the formula
Claim = x Loss suffered
Claim amount = ₹ 60,689 (1,14,500 x 75,000/ 1,41,500)
Ans.4 M/s Raxby & Co.

Calculation of loss of stock:
(Rs. )
Closing stock of Normal Goods on the date of fire (WN 3) 1,23,000
Add: Value of abnormal stocks (WN 3) 1,000
Total value of stock 1,24,000
Less: Salvage value of stock (given) (10,000)
Loss of stocks 1,14,000
Applying average clause:
Amount of claim = Loss of Stock x Amount of Policy / Stock on date of Fire
= Rs. (1,14,000 x 1,00,000 / 1,24,000) = Rs. 91,935
Working Note
1. Raxby and Co
Trading A/c (for the year ending 31 -3-17)
Particulars Rs. Particulars Rs.
To Op. stock 1,20,000 By Sales 6,00,000
To Purchase 5,25,000 By Cl. stock 1,35,000
To G/P (20% on sales) 90,000 (1,30,000 + 5,000)
7,35,000 7,35,000
2. Calculation of Gross Profit rate

GP Ratio = (G.P. / Sale) x 100 = (90,000 /6,00,000) x 100 = 15%
3. Memorandum Trading A/c for the period from 1.4.07 to 11.11.07

Particulars Normal Abnormal Particulars Normal Abnormal
Amount Amount Amount Amount
To Opening stock 1,27,000 8,000 By Sales (1,66,000) 1,60,000 6,000
(1,35,000)
To Purchase 1,32,000 By Closing Stock (b/f) 1,23,000 1,000
(97,000 + 35,000) By, Gross Loss 1,000
To GP (15%) 24,000
2,83,000 8,000 2,83,000 8,000
Ans.5 Memorandum Trading Account for the period

1st April, 2011 to 29th August, 2012
₹ ₹
To Purchase 33,10,700 By Closing stock (Bal. Fig.) 8,82,600
Less: Advertisement (41,000)
Drawings (2,000) 32,67,700
To Gross Profit [30%
of Sales – Refer
Working Note] 13,60,800
54,18,600 54,18,600
₹
Less: Salvaged Stock (1,08,000)
Add: Fire Fighting Expenses 4,700
Note: since policy amount is more than claim amount, average clause will not apply.
Therefore, claim amount of ₹ 7,79,300 will be admitted by the Insurance Company.
Working Note:
Trading Account for the year ended 31st March, 2012
₹ ₹
To Gross Profit (b.f.) 89,90,100 87,90,100
Rate of Gross Profit in 2011-12

, ,
X 100 = X 100 = 30%
, ,
Ans. 6 Computation of loss of profit Insurance claim
(1) Rate of gross profit:

Net profit for the last financial year 90,000
Add: Insured standing charges _60,000
1,50,000
Turnover for the last financial year 5,00,000
₹ #,$ ,
Rate of gross profit = !₹ $, ,
x 100(
(2) Short sales:
Standard Turnover 2,40,000
Add: 10% increasing trend 24,000
2,64,000
Less: Turnover during the dislocation period (which is at
par with the indemnity period of 6 months) (80,000)
1,84,000
(3) Annual (Adjusted) Turnover:
Annual Turnover (1-3-20X1 to 28-2-20X2) 6,00,000
Add: 10% increasing trend 60,000
6,60,000
Note: Assumed that trend adjustment is required on total amount of annual turnover.
However, part of the annual turnover represents trend adjusted figure. Alternatively, the
students may ignore trend and take simply annual turnover. The claim would be ₹ 55,000
which is more than the claim computed in Para (5). So, the Insurance Company would insist
on trend adjusted on annual turnover.
(4) Additional Expenses: Least of the below shall be allowed ₹

(i) Actual Expenses 9,300
(ii) Gross profit on sales generated by additional expenses

30/100× (₹ 80,000 – ₹ 55,000) 7,500
) * +, - (- / )
(iii) x Additional
) * +, 1 2 , 1 3 45 , , 6 1 6
Expenses
7 % 9 ₹ :,: ,
x 9,300
7 % 9 :,: , 4₹ $,
₹ #,; ,
< 9,300 = 9,071
, 7,
Least of the above three figures, i.e. ₹ 7,500 allowable.
(5) Claim:
₹
Loss of profit on short sales (30% on ₹ 55,200
1,84,000)
Add: Allowable additional expenses 7,500

62,700
Less: Savings in insured standing charges (2,700)
60,000
Application of average clause
₹ #,:$,
!₹ 60,000 x (
₹ #,; , 50,000
Ans. 7 (1) Calculation of short sales:

₹
Sales for the period 15.6.2011 to 15.12.2011 2,40,000
Add: 25% increase in sales _ 60,000
Estimated sales in current year 3,00,000
Less: Actual sales from 15.6.2012 to 15.12.2012 (70,000)
Short sales 2,30,000
(2) Calculation of gross profit:
@ *A +, 4 , 6 1 6
Gross Profit = x 100
₹ , 4 ₹B ,
= x 100
₹ :, ,
₹ #,$ ,
= x 100
₹ :, ,
= 25%
(3) Calculation of loss of profit:
₹ 2,30,000 x 25% = ₹ 57,500
(4) Calculation of claim for increased cost of working:

Least of the following:
(i) Actual expense = ₹ 12,000
) C +, /
(ii) Expenditure x
) C +, D 4 5 , , 6 1 6
( $/# ) F ₹B, ,
₹ 12,000 x = ₹ 9,333 approx.
G( $ / # ) H ₹ B, , I 4₹ $ ,
Where,
Adjusted turnover ₹
Turnover from 16.06.2011 to 15.06.2012 5,60,000
Add: 25% increase 1,40,000
7,00,000
(iii) Gross profit on sales generated due to additional expenditure = 25% x ₹ 70,000
= ₹ 17,500.
₹ 9,333 being the least, shall be the increase cost of working.
(5) Calculation of total loss of profit

₹
Loss of profit 57,500
Add: Increased cost of working 9,333
66,833
Less: Saving in insured standing charges (2,000)
64,833
(6) Calculation of insurable amount:

Adjusted turnover x G.P. rate = ₹ 7,00,000 x 25% = ₹ 1,75,000
(7) Total claim for consequential loss of profit – Due to Average Clause
3
= x Total of profit
D 3
₹ #, ,
= x ₹ 64,833 = ₹ 51,866.40
₹ #,B$,
Ans. 8 Claim for loss of Stock

Memorandum Trading Account (for the period 1st April to 1st July, 2011)
Particulars Amt. (₹) Particulars Amt. (₹)
To Purchases 2,14,000 By Closing Stock 2,26,800
To Wages 51,000
To Manufacturing expenses 12,000
To Gross Profit @ 30% on sales 1,00,800
(W.N.)
5,62,800 5,62,800
Claim for loss of stock will be limited to ₹ 2,10,000 only which is the amount of insurance
policy and no average clause will be applied.
Loss of Profit
(a) Short Sales : Amount (₹)
Sales from 1st July, 2010 to 30th Sept. 2010 3,20,000

Add: 12% rise observed in 2011 – 12 over 2010 – 11
(April – June ₹ 3,36,000 instead of ₹ 3,00,000) 38,400
Less: Actual Sales from 1st July, 2011 to 30th Sept, 2011 3,58,400
Short – Sales (48,000)
3,10,400
(b) Gross profit ratio
@ * +, 4 , 6 1 6 ( # J##)
x 100
K ( # J##) 18%
₹: , 4₹ #,$:,
x 100
# , ,
Add: Expected rise due to decline in material cost 5%
Hence, Gross Profit Ratio 23%
(c) Loss of Gross Profit
23% on short sales ₹ 3,10,400 = ₹ 71,392
(d) Annual turnover (12 months to 1st July, 2011)
Sales for April 2010 – March 2011 12,00,000
Less From 1.4.2010 to 30.06.2010 (3,00,000)
9,00,000
Add: 12% increasing trend 1,08,000
10,08,000
Add: From 1.4.2011 to 30.06.11 3,36,000
13,44,000
Gross Profit on annual turnover @23 % 3,09,120
(e) Amount allowable in respect of additional expenses
Least of following
(i) Actual expenses 1,98,000
(ii) Gross Profit on sales during indemnity period 23% of ₹
48,000. 11,040
) C +, ( / )
(iii) x Additional Expenses
) C +, D 4 5 , 1 6 1,74,316
7, ;,#
x 1,98,000
7,$#,#
Least i.e. ₹ 11.040 is admissible
Claim
Loss of Gross Profit ₹ 71,392
Add: Additional expenses ₹ 11,040
₹ 82,432
Insurance claim for loss of profit will be of ₹ 82,432 only.
Working Note:
Rate of Gross Profit in 2010 – 11
) * +,
x 100
K
7, ,
x 100 = 25%
# , ,
In 2011 – 12. Gross Profit is expected to increase by 5% as a result of decline in material
cost, hence the rate of Gross Profit of loss of stock in taken at 30%.
Ans.9 In the books of M/s. Platinum Jewellers

Insurance Policy to be taken (₹)
Turnover of previous year 30,50,000
Add: Insurance in sales by 25% 7,62,500
Sales for Current Year 38,12,500
Less: Cost of Materials (18,60,000 + 25% Increase (23,25,000)
14,87,500
Less: Wages of Skilled Craftsmen (1,60,000 + 20%
Increase) (1,92,000)
Gross Profit for Current Year 12,95,500
Add: Increased standing changes:
Interest on overdraft 24,000
Salaries 28,000 52,000
Policy to be taken for current year 2015 13,47,500
Working Note:
Calculation of Sales
Trading and Profit and Loss account for the year ended 31.12.2014
Particulars Amount (₹) Particulars Amount (₹)
To Cost of material 18,60,000 By Sales (Balancing figure) 30,50,000
To Wages of skilled craftsman 1,60,000 By Interest Income 44,000
To Salaries 2,80,000
To Audit Fees 40,000
To Rent 64,000
To Bank Charges 18,000
To Net Profit 6,72,000
30,94,000 30,94,000
Ans.10 Statement showing the computation of Sum insured under various cases
Particulars (i) (ii) (iii) (iv) (v) (vi)

Sale 20,70,000 20,70,000 20,70,000 20,70,000 19,80,000 20,70,000
Less: Variable expense 16,33,000 16,33,000 18,77,950 15,51,350 15,62,000 14,69,700
Gross Profit (a-b) 4,37,000 4,37,000 1,92,050 5,18,650 4,18,000 6,00,300
Add: Increase in Insured - - 15,000 - 22,500 11,250*
standing charges
Less: Uninsured standing - (75,000) - - - (75,000)
charges
Sum Insurable 4,37,000 3,62,000 2,07,050 5,18,650 4,40,500 5,36,550
Note:
1. The above solution is based on the assumption that increase in sale is due to increase
in volume of sales. Alternatively, it may be assumed that this increase is because of
rise in selling price. In that case, there will be no proportionate increase in variable
expenses and the answer will get changed accordingly.
2. In case (vi), it is given in the question that 50% of the present standing charges are to
be insured. It is assumed in the above answer that 50% of the increased standing
charges are insured.
3. In case (iii), 15% increase in variable expenses has been calculated after
proportionate increase in variable expenses due to increase in turnover. Space to
write important points for revision.
Ans.11
@.*. + * , M 4 K , 6 N1 6
1. Gross Profit Ratio = X 100
+C , M
(7:, , F # %)4B, ,
= x 100
7:, ,
7,: , 4B, ,
= x 100
7:, ,
= 30 %
2. Calculation pf Policy amount:

Gross profit on Turnover of Current year
Turnover 36,00,000
Add: uptrend @ 25% 9,00,000
Adjusted turnover 45,00,000
G.P Ratio 30 % 13,50,000
Add: Additional Expenses 50,000
Insurable Sum 14,00,000
INVESTMENT ACCOUNTS
HOME WORK SOLUTION
Ans1. In the books of M/s Bull & Bear

Investment Account (for the period from 1st December 2021 to 1st March, 2013)
(Scrip: 12% Debentures of M/s. Wye Ltd.)
Nominal Nominal
Date Particulars Interest Cost (₹) Date Particulars Interest Cost (₹)
Value (₹) Value (₹)
To Bank By Bank
1.12.2012 10,00,000 20,000 10,00,100 1,03,2013 10,00,000 50,000 9,99,400
A/c (W.N.1) A/c (W.N.2)
To Profit & By Profit &

1.3.2013 1,3,2013
loss A/c 30,000 loss A/c 700
10,00,000 50,000 10,00,100 10,00,000 50,000 10,00,100
Working Notes:
(i) Cost of 12% debentures purchased on 1.12.2012
Particulars ₹
Cost Value (10,000 x ₹ 101) 10,10,000
Add: Brokerage (1% of ₹ 10,10,000) 10,100
Less: Cum Interest (10,000 x 100 x 12% x 2/12) (20,000)
Total 10,00,100
(ii) Sale proceeds of

12% debentures sold on 31st March, 2013
Particulars ₹
Sales Price (10,000 x ₹ 106) 10,60,000
Less: Brokerage (1% of ₹ 10,60,000) (10,600)
Less: Cum Interest (10,000 x 100 x 12% x 5/12) (50,000)
Total 9,99,400
Space to write important points for revision.

Ans2. Investment Account-Equity Shares in X Ltd.
No. of Dividend Amount No. of Dividend
Date Date Amount ₹
shares ₹ ₹ shares ₹
By Bank (dividend)
2011 20X1
To Bal. b/d 20,000 - 3,20,000 [20,000 x 10 x 15%] 30,000 7,500
Jan. 1 Oct. 20
[5,000 x 10 x 15%]
June 1 To Bank 5,000 - 70,000 Nov. 1 By Bank 20,000
2,60,000
1,429
Aug. 2 To Bonus Issue 5,000 — Nov. 1 By P & L A/c (W.N.2)
To Bank (Right) 1,96,071
Sep. 30 5,000 - 75,000 Dec. 31 By Balance c/d (W.N.3) 15,000
(W.N.1)
To Profit & Loss
Dec.31 A/c (Dividend 30,000
income)
4,65,000
35,000 30,000 4,65,000 35,000 30,000
Jan. 1,
To Balance b/d 15,000 1,96,071
2012
Working Notes:
1. Right shares
No. of right shares issued = (20,000 + 5,000 + 5,000)/ 3 = 10,000 shares No. of
right shares subscribed = 10,000 x 50% = 5,000 shares
Amount of right shares issued = 5,000 x 15 = ₹ 75,000 No. of right shares sold =
10,000 – 5,000 = 5,000 shares
Sale of right shares = 5,000 x 1.5 = ₹ 7,500 to be credited to statement of profit
and loss.
2. Cost of shares sold — Amount paid for 35,000 shares

₹
(₹3,20,000 + ₹ 70,000 + ₹ 75,000) 4,65,000
Less: Dividend on shares purchased on June 1 (since the dividend (7,500)
pertains to the year ended 31st March, 2011, i.e., the pre-
acquisition period)
Cost of 35,000 shares 4,57,500
Cost of 20,000 shares (Average cost basis) 2,61,429
Sale proceeds 2,60,000
Loss on sale 1,429
3. Value of investment at the end of the year

Assuming investment as current investment, closing balance will be valued
based on lower of cost or net realisable value.
Here, Net realisable value is ₹14 per share i.e. 15,000 shares x ₹ 14 = ₹ 2,10,000
, ,
and cost = x 15,000 = ₹ 1,96,071. Therefore, value of investment at the
,
end of the year will be ₹ 1,96,071.
Ans3. In the books of Mr. Brown
12% Bonds for the year ended 31st March, 2012
Income Amount Income Amount
Date Particulars No. Date Particulars No.
₹ ₹ ₹ ₹
2011 To Bank A/c 2011 By Bank-Interest(24,000 x
24,000 24,000 19,92,000 - 1,44,000
May, 1 (W.N.7) Sept. 30 100 x 12% x 6/12)
2012 To P & L A/c 2012 By Bank
- - 1,05,000 15,000 75,000 13,50,000
March 1 (W.N.1) Mar. 1 A/c (W.N.8)
By Bank-Interest(9,000 x
2012 To P & L A/c 2012
2,49,000 100 x 54,000
March 31 (b.f.) Mar. 31
12% x 6/12)
By Balance c/d (W.N.2)

9,000 - 7,47,000
24,000 2,73,000 20,97,000 24,000 2,73,000 20,97,000
Investment in Equity shares of Alpha Ltd. for the year ended 31st March, 2012
Date Particulars No. Income Amount Date Particulars No. Income Amount
₹ ₹ ₹ ₹
2011 To Bank A/c ([1,50,000 x 1,50,000 -- 38,25,000 2011 By Bank A/c 80,000 - 17,60,000
June 15 25] + [2% x (1,50,000 x 5)]) Oct. 31
Oct. 14 To Bonus Issue(1,50,000/3 1,00,000 - - 2012 By Bank A/c – 2,55,000
x 2) Jan. 1 dividend (1,70,000
x 10 x 15%)
2011 To P & L A/c(W.N.3) 5,36,000 March By Balancec/d 1,70,000 - 26,01,000
Oct. 31 31 (W.N.4)
2012 To P & L A/c
Mar. 31 2,55,000
2,50,000 2,55,000 43,61,000 2,50,000 2,55,000 43,61,000
Investment in Equity shares of Beeta Ltd. for the year ended 31st March, 2012
Date Particulars No. Income Amount Date Particulars No. Income Amount
₹ ₹ ₹ ₹
2011 To Bank A/c ([60,000 x 44] 60,000 -- 26,92,800 2012 By Bank – dividend - 1,18,800
July 10 + [2% x (60,000 x 44)]) Mar. 15 [(60,000 + 6,000) x
10 x 18%]
2012 To Bank A/c 6,000 - 30,000 March 31 By Balance c/d 66,000 - 27,22,800
Jan. 15 (W.N. 5) (bal. fig.)
March 31 To P & L A/c - 1,18,800 -
66,000 1,18,800 27,22,800 66,000 1,18,800 27,22,800
Working Notes:
1. Profit on sale of 12% Bond
Sales price ₹ 13,50,000
, ,
Less: Cost of bond sold = x 15,000 (₹12,45,000)
,
Profit on sale ₹ 1,05,000
2. Closing balances as on 31.3.2012 of 12% Bond

, ,
x 9,000 = ₹ 7,47,000
,
3. Profit on sale of equity shares of Alpha Ltd.

Sales price ₹17,60,000
, ,
Less: Cost of bond sold = x 80,000 (₹ 12,24,000)
, ,
Profit on sale ₹ 5,36,000
4. Closing balance as on 31.3.2012 of equity shares of Alpha Ltd.
, ,
x 1,70,000 = ₹ 26,01,000
, ,
5. Calculation of right shares subscribed by Beeta Ltd.

,
Right Shares = x 1= 15,000 shares
Shares subscribed by Mr. Brown = 15,000 x 40%= 6,000 shares
Value of right shares subscribed = 6,000 shares @ ₹ 5 per share = ₹ 30,000
6. Calculation of sale of right entitlement by Beeta Ltd.

No. of right shares sold = 15,000 - 6,000 = 9,000 shares
Sale value of right = 9,000 shares x ₹ 2.25 per share = ₹ 20,250
Note: As per para 13 of AS 13, sale proceeds of rights is to be credited to P &
L A/c.
7. Purchase of bonds on 01.05.2011

Interest element in purchase of bonds = 24,000 x 100 x 12% x 1/12 = ₹ 24,000
Investment element in purchase of bonds = (24,000 x 84) – 24,000 = ₹
19,92,000.
8. Sale of bonds on 01.03.2012

Interest element in purchase of bonds = 15,000 x 100 x 12% x 5/12 = ₹ 75,000
Investment element in purchase of bonds = 15,000 x 90 = ₹ 13,50,000.
Ans4. Investment A/c of Mr. Purohit

for the year ending on 31-3-2012 (Scrip: 8% Debentures of P Limited)
(Interest Payable on 30th September and 31st March)
Nomina Intere Cost Nomina Interest Cost
Date Particulars Date Particulars
lValue st ₹ ₹ lValue ₹ ₹
1,20,00 By Bank (1,300 x100 x
1.4.2011 To Balance b/d - 1,18,000 30.9.2011 - 5,200 -
0 8% x 6/12)
To Bank (ex-
1.7.2011 10,000 200 9,898 1.10.2011 By Bank W.N.4) 20,000 - 19,800
Interest) (W.N.1)
To Profit & Loss By Bank (ex-Interest)
1.10.2011 133 1.2.2012 20,000 533 19,602
A/c (W.N.4) (W.N.5)
To Bank (ex- By Profit & Loss A/c
1.1.2012 5,000 100 4,949 1.2.2012 64
Interest) (W.N.2) (W.N.5)
To Profit & Loss By Bank (950 x 100 x 8%
31.3.2012 - 9,233 31.3.2012 - 3,800 -
A/c (Bal. fig.) x 6/12)
31.3.2012 By Balance c/d (W.N.3) 95,000 - 93,514
1,35,00 1,32,98
9,533 1,32,980 1,35,000 9,533
0 0
Working Notes:
1. Purchase of debentures on 1.7.2011
Interest element = 100 x 100 x 8% x 3/12 = ₹ 200
Investment element = (100 x 98) + [1% (100 x 98)] = ₹ 9,898
2. Purchase of debentures on 1.1.2012

Investment element = {(50 x 98) + [1% (50 x 98)]} = ₹ 4,949
3. Valuation of closing balance as on 31.3.2012:
Market value of 950 Debentures at ₹ 99 = ₹ 94,050
Cost of
, ,
800 Debentures cost = 80,000 = 78,667
, ,
100 Debentures cost = 9,898
50 Debentures cost = 4,949
93,514
Value at the end = ₹ 93,514, i.e., whichever is less
4. Profit on sale of debentures as on 1.10.2011

₹
Sales price of debentures (200 x ₹ 100)
20,000
Less: Brokerage @ 1%
(200)
, ,
Less: Cost of Debentures x 20,000 19,800
, ,
(19,667)
Profit on sale 133
5. Loss on sale of debentures as on 1.2.2012

₹
Sales price of debentures (200 x ₹ 99) 19,800
Less: Brokerage @ 1% (198)
, , 19,602
Less: Cost of Debentures , ,
x 20,000
(19,666)
Loss on sale 64
Interest element in sale of investment = 200 x 100 x 8% x 4/12 ₹ 533
Ans5. Investment Account in the Books of A Ltd.

for the year ending 31/12/2015
Nominal Nominal
Date Particulars Interest Cost Date Particulars Interest Cost
Value Value
1/4/15 To Bank 2,00,000 - 2,16,000 30/9/15 By Bank (interest) - 12,000 -
1/7/15 To Bank 1,00,000 2,000 1,10,000 1/10/15 By Bank 80,000 - 84,000
31/12/15 To P&L A/c - 14,033 1/10/15 By P&L A/c - - 2,933
1/12/15 By Equity share 55,000 - 59,767
By Bank (interest
1/12/15 on convertible
733
debenture)
31/12/15 By Balance c/d 1,65,000 3,300 1,79,300
3,00,000 16,033 3,26,000 3,00,000 16,033 3,26,000
 Cost of Debenture purchased on 1st July
= ₹ 1,12,000 - ₹ 2,000 (Interest)
= ₹ 1,10,000
 Cost of Debenture sold on 1st Oct.
= (₹ 2,16,000 + ₹ 1,10,000) x 80,000 / 30,00,000
= ₹ 86,933
 Loss on sale of Debentures
= ₹ 86,933 - ₹ 84,000
= ₹ 2,933
Nominal value of debentures converted into equity share
= ₹ 55,000
[(₹ 3,00,000 – 80,000) x 0.25]
Interest received before the conversion of debentures
Interest on 25% of total debentures = 55,000 x 8% x 2/12 = ₹ 733
 Cost of Debentures converted
= (₹ 2,16,000 + ₹ 1,10,000) x 55,000 / 3,00,000
= ₹ 59,767
 Cost of closing balance of Debentures
= (₹ 2,16,000 + ₹ 1,10,000) x 1,65,000 / 3,00,000
= ₹ 1,79,300
 Closing balance of Debentures has been valued at cost being lower than the
market value i.e. ₹ 1,81,500 (₹1,65,000 @ ₹ 110)
 5,000 equity Shares in C Ltd. will be valued at cost of ₹ 59,767 being lower than the
market value ₹ 75,000 ( ₹ 15 x 5,000)
Ans6. In the books of T. Shekharan

Investment Account for the year ended 31st March, 2012
(Script: Equity Shares of V Ltd.)
Date Particulars Nominal Cost Date Particulars Nominal Cost
Value Value
(₹ ) (₹ ) (₹ ) (₹ )
1.4.20X1 To Bank A/c 5,00,000 6,15,000 31.3.20X2 By Bank A/c 2,50,000 2,20,500
(W.N.1) (W.N.2)
31.1.20X2 To Bonus 2,50,000  31.3.20X2 By Balance 5,00,000 4,10,000
31.3.20X2 To shares c/d
Profit and
Loss A/c (W.N.4)
(W.N.3) 15,500
7,50,000 6,30,500 7,50,000 6,30,500
Working Notes:
1. Cost of equity shares purchased on 1st April, 2011
= Cost + Brokerage + Cost of transfer stamps
= (5,000 x ₹ 120) + (2% of ₹ 6,00,000) + (½% of ₹ 6,00,000)
= ₹ 6,15,000
2. Sale proceeds of equity shares sold on 31st March, 2012
= Sale price – Brokerage
= (2,500 x ₹ 90) – (2% of ₹ 2,25,000)
= ₹ 2,20,500
3. Profit on sale of bonus shares

= Sales proceeds – Average cost
Sales proceeds = ₹ 2,20,500
Average cost = ₹ (6,15,000 /7,50,000) x 2,50,000 = ₹ 2,05,000
Profit = ₹ 2,20,500 – ₹ 2,05,000 = ₹ 15,500.
4. Valuation of equity shares on 31st March, 2012

Cost = ₹ [6,15,000 x 5,00,000/7,50,000] = ₹ 4,10,000, i.e., ₹ 82 per share
Market Value = 5,000 shares × ₹ 90 = ₹ 4,50,000
Closing stock of equity shares has been valued at ₹ 4,10,000 i.e. cost being lower
than the market value.
Ans7. In the Books of Mr. Z 9%

Central Government Bonds (Investment) Account
Particulars Nominal Interest Principal Particulars Nominal Interest Principal
Value Value
2011 ₹ ₹ ₹ 2011 ₹ ₹ ₹
Jan.1 To Balance b/d (W.N.1) 1,20,000 2,700 1,18,000 Mar. 31 By Bank A/c (W.N.3) - 6,300 -
March 1 To Bank A/c (W.N.2) 20,000 750 19,600 July 1 By Bank A/c (W.N.4) 50,000 1,125 50,000
July 1 To P&L A/c (W.N.5) - - 833 Sept. 30 By Bank A/c (W.N.6) - 4,050 -
Oct. 1 To Bank A/c (150 x 98) 15,000 - 14,700 Nov. 1 By Bank A/c (W.N.7) 30,000 225 29,700
Nov. 1 To P&L A/c (W.N.8) - - 200 Dec. 31 By Balance c/d 75,000 1,688 73,633
(W.N. 9 & W.N.10)
Dec. 31 To P&L A/c (b.f.) 9,938
(Transfer)
1,55,000 13,388 1,53,333 1,55,000 13,388 1,53,333
Working Note:
1. Interest element in opening balance of bonds = 1,20,000 x 9% x 3/12 = ₹ 2,700
2. Purchase of bonds on 1.3.2011

Interest element in purchase of bonds = 200 x 100 x 9% x 5/12 = ₹ 750
Investment element in purchase of bonds = 200 x 98 = ₹ 19,600
3. Interest for half-year ended 31st March = 1,400 x 100 x 9% x 6/12 = ₹ 6,300
4. Sale of bonds on 1.7.2011 Interest element = 500 x 100 x 9% x 3/12 = ₹ 1,125

Investment element = 500 x 100 = ₹ 50,000
5. Profit on sale of bonds on 1.7.20X1
Cost of bonds = (₹ 1,18,000/ 1,200) x 500 = ₹ 49,167
Sale proceeds = ₹ 50,000 Profit element = ₹ 833
6. Interest for half-year ended 30 September

= 900 x 100 x 9% x 6/12 = ₹ 4,050
7. Sale of bonds on 1.11.20X1

Investment element = 300 x 99 = ₹ 29,700
8. Profit on sale of bonds on 1.11.20X1

Cost of bonds = (₹ 1,18,000/ 1,200) x 300 = ₹ 29,500
Sale proceeds = ₹ 29,700
Profit element = ₹ 200
9. Closing value of investment

Calculation of closing balance: Nominal ₹
value
Bonds in hand remained inhand at 31st
December 20X1
From original holding 40,000 1,18,000 39,333
 40,000
(1,20,000 – 50,000 – 30,000) = 1,20,000
Purchased on 1st March 20,000 19,600
Purchased on 1st October 15,000 14,700
75,000 73,633
10. Interest element in closing balance of bonds = 750 x 100 x 9% x 3/12 = ₹ 1,688
HIRE PURCHASE AND INSTALLMENT
SALES
HOME WORK SOLUTION
Ans.1 Calculation of interest
Total Interest in Cash price in
(₹) each each
instalment (1) instalment (2)
Cash Price 80,000
Less: Down Payment (21,622) Nil ₹ 21,622
Balance due after down payment 58,378
Interest / Cash Price of - ₹ 58,378 ₹ 15,400 –
st
1 instalment X 10/100 = ₹ 5,838 =
₹ 5,838 ₹ 9,562
st
Less: Cash price of 1 instalment (9,562)
st
Balance due after 1 instalment 48,816
Interest/cash price of 2 nd - ₹ 48,816 x ₹15,400 –
instalment 10/100 = ₹ 4,882 =
₹4,882 ₹ 10,518
nd
Balance due after 2nd instalment 38,298
Interest/Cash price of 3 rd - ₹ 38,298 x ₹ 15,400 –
instalment 10/100 = ₹3,830 =
₹ 3,830 ₹ 11,570
rd
rd
Interest/Cash price of 4 th - ₹ 26,726 ₹ 15,400 –
instalment X 10/100 = ₹ 2,672 =
₹ 2,672 ₹ 12,728
th
Less: Cash price 4 instalment (12,728)
th
Interest/Cash price of 5 th - ₹ 14,000 ₹ 15,400 –
instalment X 10/100 = ₹ 1,400 =
₹ 1,400 ₹14,000
th
Total Nil ₹ 18,622 ₹ 80,000
Total interest can also be calculated as follow:

(Down payment + instalment) – Cash Price = ₹ [21,622 + (15,400 x 5)] - ₹ 80,000 = ₹ 18,622
Ans.2 Calculation of total Interest and Interest included in each instalment
Hire Purchase Price (HPP) = Down Payment + instalment
= 30,000 + 50,000 + 50,000 + 30,000 + 20,000 = 1,80,000
Total Interest = 1,80,000 – 1,50,000 = 30,000
Computation of IRR (considering two guessed rates of 6% and 12%)

Year Cash Flow DF @6% PV DF @12% PV
0 30,000 1.00 30,000 1.00 30,000
1 50,000 0.94 47,000 0.89 44,500
2 50,000 0.89 44,500 0.80 40,000
3 30,000 0.84 25,200 0.71 21,300
4 20,000 0.79 15,800 0.64 12,800
NPV 1,62,500 NPV 1,48,600
Interest rate implicit on lease in computed below by interpolation:

, , , ,
Interest rate implicit on lease = 6% + x (12 – 6) = 11.39%
, , , ,
Thus, repayment schedule and interest would be as under:

Instalment no. Principal at Interest Gross Instalment Principle
beginning included in amount at end
each instalment
Cash down 1,50,000 1,50,000 30,000 1,20,000
1 1,20,000 13,668 1,33,668 50,000 83,668
2 83,668 9,530 93,198 50,000 43,198
3 43,198 4,920 48,118 30,000 18,118
4 18,118 2,064 20,182 20,000 182*
30,182*
* Difference is on account of approximations
Ans.3 Calculation of Cash Price – The present value of an annuity of Re. 1 paid for 3 year @ 5%
= ₹ 2.723. Hence, the present value of 30,000 for 3 year = 2.723 x 30,000 = ₹ 81,690.
Thus, Cash Price will be computed as ₹ 81,690.
Cash Price may also be calculated using the annuity formula discussed above:
( )
Cash price = Annual instalment x
( )
= 30,000 x [(1+0.05)3 - 1]/0.05 (1 + 0.05)3
= ₹ 81697.
Note – The difference in cash price of ₹ 7 is on account of approximation.
Ans.4 In the Books of X Ltd.
Journal Entries
Dr. (₹) Cr. (₹)
I Year
Scooters purchased:
Scooters A/c Dr. 2,25,000
To Vendor A/c 2,25,000
(Being Purchase of 3 scooters on hire purchase at ₹
75,000 each)
On down payment:
Vendor A/c Dr. 45,000
To Bank 45,000
(Being down payment made)
I Year end
Interest A/c (₹ 1,80,000 @ 9%) Dr. 16,200
To Vendor A/c 16,200
Being Interest due on outstanding balance)
To Bank A/c (60,000 + 16,200) 76,200
(Being First Instalment paid along with Interest)
Depreciation A/c Dr. 45,000
To Scooters A/c 45,000
(Being depreciation provided @ 20%)
Profit & Loss A/c Dr. 61,200
To Depreciation 45,000
To interest A/c 16,200
(Being Interest and Depreciation charged to profit and
loss account)
II Year end
Depreciation A/c Dr. 36,000
To Scooters A/c 36,000
(Being Depreciation provided @ 20%)
Interest A/c Dr. 10,800
(1,20,000 @ 9%)
To Vendor A/c 10,800
(Being interest due on balance outstanding)
For Loss on Repossession:
Super Motors A/c (1,50,000 – 45,000 – 31,500) Dr. 73,500
Profit & Loss A/c (b.f.) Dr. 22,500
To Scooters A/c [(2,25,000 – 45,000 -36,000) x 96,000
2/3]
(Being re-possession of scooters)
To Bank 57,300
(Being vendor’s account settled)
Scooters Account
Year ₹ Year ₹
1 To Super Motors 2,25,000 1 end By Depreciation A/c 45,000
A/c
" By Balance c/d 1,80,000
2,25,000 2,25,000
2 To Balance b/d 1,80,000 2 end By Depreciation 36,000
By Super Motors
(Value of 2 scooters
after depreciation for 73,500
2 year @ 30%)
By P & L A/c
(balancing figure) 22,500
By Balance c/d (one
scooter less dep. For
2 year) @ 20% 48,000
1,80,000 1,80,000
Super Motors Account

Year ₹ Year ₹
1 To Bank A/c 45,000 1 By Scooters A/c 2,25,000
To Bank A/c 76,200 By Interest @ 9% on
₹ 1,80,000 16,200
To Balance c/d 1,20,000
2,41,200 2,41,200
2 To Scooters A/c 73,500 2 By Balance b/d 1,20,000
To Bank A/c 57,300 By Interest A/c 10,800
1,30,800 1,30,800
SINGLE ENTRY SYSTEM
HOME WORK SOLUTION
Ans1. A. Adamjee Trading and Profit & Loss
Account for the year ended 31st March 2012
₹ ₹ ₹
To Opening Inventory 3,900 By Sales 62,100
To Purchases 49,100 By Closing Inventory 5,700
To Gross profit c/d (b.f.) 14,800
67,800 67,800
To Salaries 6,500 By Gross Profit b/d 14,800
To Rent and Taxes 1,500 By Interest on investment 200
To General expenses 2,500
To Dep:
Machinery@ 10% 750
Furniture @ 10% 120 870
To Provision for doubtful debts 800
To Net profit
carried to Capital A/c (b.f.) 2,830
15,000 15,000
Balance Sheet as on 31st March 2012

Liabilities ₹ ₹ Assets ₹ ₹
A. Adamjee’s Capital Machinery 7,500
on 1st April, 2011 29,100 Less : Depreciation (750) 6,750
Add: Fresh Capital 6,000 Furniture 1,200
Add: Profit for the year 2,830 Less : Depreciation (120) 1,080
37,930
Less: Drawings (3,600) 34,330 Inventory-in-trade 5,700
Sundry debtors 17,600
Sundry creditors 7,900 Less : Provision for
Doubtful debts (800) 16,800
Investment 5,000
Cash at bank 6,400
Cash in hand 500
42,230 42,230
Working Notes:
1. Balance sheet of A. Adamjee as on 1st April 2011
Liabilities ₹ Assets ₹
Sundry creditors 5,800 Machinery 7,500
A. Adamjee’s capital 29,100 Furniture 1,200
(balancing figure) Inventory 3,900
Sundry debtors 14,500
Investments 5,000
Bank balance (from Cash statement) 2,800
34,900 34,900
2. Ledger Accounts
A. Adamjee’s Capital Account
₹ ₹
March 31 To Drawings 3,600 April 1 By Balance b/d 29,100
March 31 By Net Profit 2,830
March 31 To Balance c/d (b.f.) 34,330 March 31 By Cash 6,000
37,930 37,930
Sales Account
₹ ₹
March 31 To Trading A/c (b.f.) 62,100 March 31 By Cash 11,000
March 31 By Total Debtors 51,100

Account (Credit Sales)
62,100 62,100
Total Debtors Account

₹ ₹
April 1 To Balance b/d 14,500 March 31 By Cash 48,000
March 31 To Credit sales 51,100 March 31 By Balance c/d 17,600
(Balancing figure)
65,600 65,600
Purchases Account
₹ ₹
March 31 To Cash A/c 12,000 March 31 By Trading Account 49,100
To total Creditors A/c 37,100 (b.f.)
(credit Purchases)
49,100 49,100
Total Creditors Account

₹ ₹
March 31 To Cash 35,000 April 1 By Balance b/d 5,800
March 31 To Balance b/d 7,900 March 31 By Credit Purchases 37,100
(Balancing figure)
42,900 42,900
Ans2. Trading and Profit & Loss Account of Mr. Anup
for the year ended 31st March 2012
₹ ₹ ₹ ₹
To Opening Inventory 1,10,000 By Sales 9,59,750
To Purchases 4,54,100 Less: Sales Return (1,200) 9,58,550
Less: Purchases Return (4,200) 4,49,900 By Closing Inventory 1,90,000
To Gross Profit (b.f.) 5,88,650
11,48,550 11,48,550
To salary (9,200 x 12) 1,10,400 By Gross Profit 5,88,650
To Electricity & Tel. 20,900 By Discount 2,700
Charges (18,700 + 2,200)
To Legal expenses 17,000
To Discount (2,400 + 750) 3,150
To Shop exp. (600 x 12) 7,200
To Provision for claims for 1,55,000
damages
To Shop Rent 20,000
To Net Profit (b.f.) 2,57,700
5,91,350 5,91,350
Balance – Sheet as on 31st March 2012

Capital A/c (W.N.vi) 2,38,200 Building (from 3,72,000
summary cash and
bank A/c)
Add : Fresh capital introduced Furniture 25,000
Maturity value from LIC 20,000 Inventory 1,90,000
Rent 14,000 Sundry debtors 92,000
Add : Net Profit 2,57,700 Bills receivable 6,000
5,29,900 Cash at Bank 87,000
Less : Drawing(14,00 x12) (16,800) 5,13,100 Cash in Hand 5,300
Rent outstanding 20,000
Sundry creditors 56,000
Bills Payable 14,000
Outstanding expenses
Legal Exp. 17,000
Electricity &
Telephone charges 2,200 19,200
Provision for claims for
damages 1,55,000
7,77,300 7,77,300
Working Notes:
(i) Sundry Debtors Account
₹ ₹
To Balance b/d 70,000 By Bill Receivable A/c
To Bill receivable A/c 3,000 Bills accepted 40,000
Bills dishonoured by customers
To Bank A/c Cheque 5,700 By Bank A/c C 5,700
dishonoured heque received
To Credit sales 9,59,750 By Cash (from summary 8,97,150
(Balancing Figure) cash and bank account)
By Return inward A/c 1,200
By Discount A/c 2,400
By Balance c/d 92,000
10,38,450 10,38,450
(ii) Bills Receivable Account

₹ ₹
To Balance b/d 15,000 By Sundry creditors A/c
To Sundry Debtors A/c 40,000 (Bills endorsed) 10,000
(Bills accepted) By Bank A/c (20,000 – 750) 19,250
By Discount A/c 750
(Bills discounted)
By Bank
Bills collected on maturity 16,000
By Sundry debtors
Bills dishonoured (Bal. Fig) 3,000
55,000 55,000
(iii) Sundry Creditors Account

₹ ₹
To Bank 3,20,000 By Balance c/d 40,000
To Cash 77,200 By Credit purchase
(Balancing figure) 4,54,100
To Bill Payable A/c 24,000
To Bill Receivable A/c 10,000
To Return Outward A/c 4,200
To Discount Received A/c 2,700
To Balance b/d 56,000
4,94,100 4,94,100
(iv) Bills Payable A/c
₹ ₹
To Bank A/c (Balance figure) 22,000 By Balance b/d 12,000
To Balance c/d 14,000 By Sundry creditors A/c
Bills accepted 24,000
36,000 36,000
(v) Summary Cash and Bank A/c

Cash Bank Cash Bank
₹ ₹ ₹ ₹
To Balance b/d 5,200 90,000 By Bank 7,62,750
To Sundry debtors By Cash 1,21,000
(Bal. Fig) 8,97,150 By Shop exp. (600 x 12) 7,200
To Cash 7,62,750 By Salary (9,200 x 12) 1,10,400
To Bank 1,21,000 By Drawing A/c 16,800
(1,400 x 12)
By Bills Payable 22,000
To Sundry Debtors 5,700 By Sundry creditors 77,200 3,20,000
To Bills receivable 19,250 By Furniture 25,000
To Bills receivable 16,000 By Sundry Debtors 5,700
To Capital (maturity 20,000 By Electricity & Tel. 18,700
value of LIC policy) Charges
To Capital (Rent By Building (Bal. fig)
received) 14,000 3,72,000
By Balance c/d 5,300 87,000
10,23,350 9,27,700 10,23,350 9,27,700
(vi) Statement of Affairs as on 31st March 2011

Sundry Creditors 40,000 Inventory 1,10,000
Bills Payable 12,000 Debtors 70,000
Capital (Balancing figure) 2,38,200 Bills 15,000
receivable
Cash at Bank 90,000
Cash in Hand 5,200
2,90,200 2,90,200
Ans3. In the books of Tony Pharma Projected
Balance Sheet as on 31st March, 2012
₹ ₹
Capital 10,00,000 Fixed Assets
4,00,000
Profit & Loss Account Additions 1,00,000
as on 1st April, 20X1 60,000 5,00,000
Add: Profit for the year Less: Dep.
3,74,000 4,34,000 @ 10% (50,000) 4,50,000
Creditors (Trade) 1,10,000 Stock in trade 3,36,000
Sundry Debtors 2,00,000
Cash & Bank 5,58,000
Balances (working
note)
15,44,000 15,44,000
Working Notes:
1. Projected Trading and Profit and Loss Account for the year ended 31st
March, 2012
₹ ₹
(balancing figure)
To Gross Profit c/d 6,36,000
(30% on sales)
24,56,000 24,56,000
To Sundry Expenses 2,12,000 By Gross Profit b/d 6,36,000
(10% on sales)
To Depreciation 50,000
To Net Profit (b.f.) 3,74,000
6,36,000 6,36,000
Cash and Bank Account 1st April, 2011 to 31st March, 2012
₹ ₹
To Balance b/d 3,50,000 By Sundry Creditors 15,50,000
To Sundry Debtors 20,70,000 (₹ 1,40,000+₹ 14,10,000)
(₹ 1,50,000+₹ 19,20,000) By Expenses 2,12,000
By Fixed Assets 1,00,000
By Balance c/d (b.f.) 5,58,000
24,20,000 24,20,000
Ans4. Trading A/c of Moonlight Traders for the year ended 31.3.2014
Particulars Amount (₹) Particulars Amount
(₹)
To Purchase 9,00,000 By Cl. Stock 65,000
To Gross Profit (Note) 2,50,000
13,15,000 13,15,000
P/L A/c of Moonlight Traders for the ended 31.3.2014

Particulars Amount Particulars Amount
(₹) (₹)
To Discount 5,500 By Gross Profit 2,50,000
To Salaries Expenses 32,000 By Discount 4,500
To office Expenses (W.N.3) 37,000
To Selling expenses 15,000
To Interest on loan 15,000
(12% on ₹ 1,25,000)
To Bad Debts (2% of ₹ 2,25,000) 4,500
To Loss on sale of Machinery 15,000
To Depreciation :
Land and Building 25,000
Plant & Machinery
(W.N.4b) 23,750
Office Equipment (W.N.5) 12,750 61,500
To Tax Provision (69,000 x 30%) 20,700
To Net profit after tax 48,300
2,54,500 2,54,500
Note:
GP = on cost = on sale = on 12,50,000 = 2,50,000.
Balance sheet as on 31.3.2014
Liabilities ₹ ₹ Assets ₹
Capital (W.N. 6) 8,95,500 Land and Building
Add: Net Profit 48,300 9,43,800 (5,00,000 – 25,000) 4,75,000
Creditors for Plant and Machinery
Purchases (W.N.8) 1,05,500 (W.N. 4a) (3,30,000 – 3,08,250
Outstanding expenses 15,000 21,750)
Loan from SBI 1,00,000 Office Equipment 72,250
Tax Provision 30,000 (85,000 – 12,750)
Debtors less Bad debts 2,20,500
(W.N. 7)
Stock 65,000
Bank Balance (W.N.9) 53,300
11,94,300 11,94,300
Working Notes:
1. Calculation of Total Sales
Particulars ₹
Cash Sales 2,50,000
Credit Sales (80% of total sales)
Cash Sales (20% of total sales)
Thus total Sales (2,50,000*100/20) 12,50,000
Credit Sales (12,50,000*80/100) 10,00,000
2. Calculation of Total Purchases

Particulars ₹
Credit Purchases 5,40,000
Cash Purchases (40% of total purchases)
Credit Purchases (60% of total purchases)
Thus total Purchases (5,40,000 x 100/60) 9,00,000
Cash Purchases (9,00,00 x 40/100) 3,60,000
3. Office Expenses Account

To Bank A/c 42,000 By Balance b/d 20,000
To Balance c/d 15,000 By Profit & Loss A/c 37,000
57,000 57,000
4. (a) Plant and Machinery Account

To Opening Balance 2,20,00 By Bank (Sale) 40,000
To Bank (Purchases) 1,50,00 By Closing Balance 3,30,000
3,70,000 3,70,00
(b) Calculation of Depreciation on Plant & Machinery

Particulars Amt. ₹
Depreciation on 1,80,000 x 10% (for full year) 18,000
1,50,000* x 10 x 3/12 (for 3 months) 3,750
40,000 x 10% x 6/12 (for 6 months) 2,000
23,750
(c) Sale of Machinery Account

Particulars Amt. ₹ Particulars Amt. ₹
To Plant & Machinery 40,000 By Depreciation 2,000
By Profit and Loss A/c 15,000
By Bank (bal. fig) (Sale) 23,000
40,000 40,000
5. Calculation of Depreciation on office Equipment

Particulars ₹
Opening Balance 1,05,000
Less: Closing Balance 85,000
Sale of Office Equipment’s 20,000
Balance of office Equipment’s after sale on 01.04.2013 85,000
Depreciation @ 15% 12,750
6. Opening Balance Sheet as on 31.03.2013
Creditors 95,000 Land & Building 5,00,000
Creditor for Exp. 20,000 Plant & Machinery 2,20,000
Loan 1,25,000 Office Equipment 1,05,000
Provision for Tax 35,000 Debtors (W.N. 7) 1,55,500
Capital (Bal. fig) 8,95,500 Stock (from Trading A/c) 1,65,000
Bank 25,000
11,70,500 11,70,500
7. Sundry Debtors A/c

To Balance b/d (Bal. fig) 1,55,500 By Bank 9,25,000
To sales 10,00,000 By Discount 5,500
By bad Debts 4,500
By Bal. c/d 2,20,500
11,70,500 11,70,500
8. Sundry Creditors A/c

To Bank 5,25,000 By Balance b/d 95,000
To Discount 4,500 By Purchases 5,40,000
To Balance c/d (bal. fig) 1,05,500
6,35,000 6,35,000
9. Bank Account
To Balance b/d 25,000 By creditors 5,25,000
To Debtors 9,25,000 By Office Expenses 42,000
To Cash Sales 2,50,000 By Salary Expenses 32,000
To Sale of Machinery (W.N. 4c) 23,000 By Selling Expenses 15,000
To Sale of equipment 20,000 By Purchase (Cash) 3,60,000
By Purchase of Machinery 1,50,000
By Bank Loan & Interest
(W.N. 11) 40,000
By Tax (W.N. 10) 25,700
By Balance c/d (bal. fig) 53,300
12,43,000 12,43,000
10. Provision for Tax Account

To Bank (Bal. fig) 25,700 By Balance b/d 35,000
To Balance c/d 30,000 By Profit and Loss A/c 20,700
55,700 55,700
11. Repayment for Tax Account

Particulars Amt. ₹
Interest 1,25,000 x 12% 15,000
Loan (1,25,000 – 1,00,000) 25,000
40,000
Note:
The aforesaid solution has been worked out on the basis of the following assumptions:-
(i) Tax profit are the same as accounting profits.
(ii) The figure of ₹ 2,25,000, being the closing balance of Sundry Debtors as given
in the question is before providing for bad debts.
Accordingly, the closing balance has been reduced by the amount of bad debts.
Ans 5. In the books of M/s Care Traders

Bank Account as on 31.03.2015
To Opening Balance 12,800 By Creditors (Payment made) 14,86,250
To Cash Sales (WN 1) 5,58,000 (WN 6)
To Debtors (collection made) 16,24,600 By Machinery Purchased 1,14,000
(WN 4) By Advertisement expenses 80,000
To Furniture (sold) 9,500 By Rent 1,32,000
By Travelling expenses 86,200
(78,400 + 7,800)
By Repairs 36,500
By Petty Cash 28,300
By Interest on unsecured loan 8,750
By Balance c/d (bal. fig) 2,32,900
22,04,900 22,04,900
Trading and Profit and Loss Account

for the year ended 31st March, 2015
To Opening Stock 1,72,000 By Sales (WN 1) 22,32,000
TO Purchases (WN 2) 15,71,400 By Closing Stock 1,81,000
To Gross Profit b/d (WN 1) 6,69,600
24,13,000 24,13,000
To Rent (1,32,000 x 12/11) 1,44,000 By Gross Profit c/d 6,69,600
To Advertisement expenses 60,000
To Travelling expenses 86,200
To Repairs 36,500
To Petty Cash expenses 28,300
To Interest on unsecured loan 17,500
To Loss on Sale of Furniture 2,900
To Depreciation
Machinery (WN 8) 88,250
Furniture 23,260
To Net Profit 1,82,690
6,69,600 6,69,600
Balance Sheet of M/s. Care Traders
as on 01.04.2015
Liabilities (₹)
Share Capital 10,00,000
Profit and Loss
Opening Balance 1,47,800
Add: Profit for the year 1,82,690 3,30,490
Unsecured loan @ 10% 1,75,000
Interest on unsecured loan 8,750
Trade Payable (WN 5) 1,30,950
Outstanding expenses Rent 12,000
16,57,190
Assets
Machinery
Gross block value (WN 7) 9,39,500
Less: depreciation (88,250) 8,51,250
Furniture
Gross block value (WN 9) 1,16,300
Less: depreciation (23,260) 93,040
Inventory 1,81,000
Trade Receivables (WN 3) 2,79,000
Prepaid expenses (Advertisement) 20,000
Bank balance 2,32,900
16,57,190
Working Notes: -
1. Sale for the year ended 31.03.2015
Last year Sales 18,60,000
Add growth @ 20% 3,72,000
Sale for 2014 – 15 (A) 22,32,000
Cash Sale (25% of ₹ 22,32,000) 5,58,000
Credit sales (22,32,000 – 5,58,000) 16,74,000
Gross profit 30% on sales (B) 6,69,600
2. Purchases for the year ended 31.03.2015

Cost of Sales (A-B) (22,3200 – 6,69,000) 15,62,400
Add: Closing Stock 1,81,000
17,43,400
Less: Opening Stock (1,72,000)
Purchases during the year 15,71,400
3. Debtors as on 31.03.2015
Total credit sales 16,74,000
Debtors 2 months credit
(16,74,000 x 2/12) 2,79,000
4. Collections from Debtors account
Dr. Cr.
Amount. ₹ Amount. ₹
To Opening Balance 2,29,600 By Bank (collecting) Bal. fig. 16,74,000
To Credit sales 16,74,000 By Closing balance 2,29,600
19,03,600 19,03,600
5. Creditors as on 31.03.2015
Total Credit purchases (all creditors paid by cheque hence there 15,71,400
are no cash purchases)
Creditors 1 month credit
(15,71,400 x 1/12) 1,30,950
6. Payment to Creditors account

Dr. Cr.
To Bank (Payment) Bal. fig. 14,86,250 By Opening Balance 45,800
To Closing Balance 1,30,950 By Credit Purchases 15,71,400
16,17,200 16,17,200
7. Machinery Account
Dr. Cr.
Amount. Amount.
₹ ₹
To Opening Balance 8,25,500 By Closing Balance (Bal. fig) 9,39,500
To Machinery Purchased 1,14,000
9,39,500 9,39,500
8. Depreciation on Machinery
Existing Machinery for 1 year (₹ 8,25,500 x 10%) 82,550
New Machinery (Purchased on 1.10.2014)
For 6 months (₹ 1,14,000 x ½ x 10%) 5,700
88,250
9. Furniture Account
Dr. Cr.
To Opening Balance 1,28,700 By Bank (Sale0 9,500
By Loss on Sale 2,900
By Closing balance 1,16,300
1,28,700 1,28,700
Ans 6. Statement showing correct P/L of Mr. Aman
Particulars ₹ ₹
Closing Capital on 31/3/17 (28,40,000 – 5,80,000) 22,60,000
Add : Drawing (32,000 x 12) 3,84,000
Less : Additional Capital 50,000
Less : Opening Capital on 31/3/16 12,52,000

(16,65,000 – 4,13,000)
Correct Profit for 16-17 13,42,000
Less : Income disclosed by Aman 9,12,000

Income concealed 4,30,000
Income Tax Officer’s concealed is correct
Ans 7. Trading and Profit and Loss Account of Aman

for the year ended on 31st March, 2018
Particulars ₹ Particulars ₹
To Gross Profit c/d 3,60,000
21,00,000 21,00,000
To Business Expenses 2,00,000 By Gross Profit b/d 3,60,000
To Repairs 10,000
To Depreciation
Building 16,250
Furniture 2,500
Motor Car 18,000 36,750
To Traveling Expenses 15,000
To Loss by theft 20,000
To Net Profit 78,250
3,60,000 3,60,000
Balance Sheet of Aman as at 31st March, 2018
Capital 4,80,000 Building 3,25,000
Add: Net Profit 78,250 Less: Depre. (16,250) 3,08,750
5,58,250
Less: Drawings (75,000) 4,83,250 Furniture 50,000
Less: Depre. (2,500) 47,500
Loan 1,50,000 Motor Car 90,000
Creditors 4,75,000 Less: Depre. (18,000) 72,000
Outstanding 50,000 Stock 3,00,000
Expenses Debtors 2,10,000
Cash at Bank 2,20,000
11,58,250 11,58,250
Working Notes:
1. Sales for the year ended on 31st March, 2018
Particulars ₹
Gross Profit as per last year’s accounts 3,00,000
GP Ratio is cost plus 25%
So, Sales for last year 3,00,000 15,00,000
Increase of 20% as stated in question

3,00,000
Total Sales during 2017 – 18 18,00,000
2. Calculation for Creditors for Purchases
Particulars ₹
Creditors as on 31st March, 20017 3,10,000
Purchases during 20017 – 18 (All Credit) 15,40,000
(-) Payment to Creditors (by Cheques) (13,75,000)
Creditors as on 31st March, 2018 4,75,000
3. Calculation for Debtors for Sales
Particulars ₹
Debtors as on 31st March, 2017 1,70,000
Credit Sales during 2017 – 18 14,40,000
(-) Collection from debtors (14,00,000)
Debtors as on 31st March, 2018 2,10,000
4. Cash and Bank Account
Particulars Cash Bank Particulars Cash Bank
To Bal. b/d. 20,000. 85,000 By Payment to Creditors - 13,75,00
To Collection From 3,50,000 10,50,000 By Business Expenses 90,000 60,000
Debtors By Repairs 10,000 -
To Sales 3,60,000 By Traveling Expenses 15,000 -
To Cash - 7,15,000 By Personal Drawings - 75,000
To Bank 1,20,000 By Bank 7,15,000 -
By Cash - 1,20,000
By Balance c/d. - 2,20,00
By Balance. c/d. 20,000 -
(lost by theft)
8,50,000 18,50,000 18,50,000
Ans 8. Statement showing the amount of cash defalcated by the Cashier

₹ ₹
Cash balance as on 1.1.20X2 2,000
Add : Cash sales (W.N.2 and W.N.4) 1,16,250 1,18,250
Less : Salary to clerk (₹ 300 × 13) 3,900
Sundry expenses (₹ 50 × 13) 650
Drawings of Sri Srinivas (₹ 100 × 13) 1,300
Deposit into bank (₹ 1,25,000 – ₹ 30,000) 95,000 (1,00,850)
Cash balance as on 31.3.2012 (defalcated by cashier) 17,400
Trading and Profit and Loss Account of Sri Srinivas

for the 13 week period ended 31st March, 2012
₹ ₹ ₹
To Opening stock 70,000 By Sales :
To Purchases 91,000 Cash (W.N.2and W.N.4) 1,16,250
To Gross Profit c/d 30,250 Credit (W.N.3) 35,000 1,51,250
By Closing stock 40,000
191,250 1,91,250
To Salaries (300 x 13) 3,900 By Gross profitb/d 30,250
To Rent (₹ 4,000 – ₹ 1,000) 3,000
To Sundry Expenses (50 x 13) 650
To Loss of cash by theft 17,400
To Net Profit (b.f.) 5,300
30,250 30,250
Balance Sheet of Sri Srinivas as on 31st March, 2012
Capital as on 1.1.20X2 1,00,000 Furniture 10,000
Add : Profit 5,300 Stock 40,000
1,05,300 Debtors 30,000
Less : Drawings (1,300) 1,04,000 Cash at bank 60,500
Liabilities for goods 36,500
1,40,500 1,40,500
Working Notes:
(1) Purchases
Creditors Account
₹ ₹
To Bank A/c 75,000 By Balance b/d 20,500
To Balance c/d 36,500 By Purchases A/c (Bal. fig.) 91,000
1,11,500 1,11,500
(2) Total sales

₹
Opening stock 70,000
Add : Purchases 91,000
1,61,000
Less : Closing stock (40,000)
Cost of goods sold 1,21,000
Add : Gross profit @ 25% on cost 30,250
Total Sales 1,51,250
(3) Credit Sales

Debtors Account
₹ ₹
To Balance b/d 25,000 By Bank A/c 30,000
To Sales A/c (Bal. fig.) 35,000 By Balance c/d 30,000
60,000 60,000
(4) Cash Sales

₹
Total sales 1,51,250
Less : Credit Sales (35,000)
Cash sales 1,16,250
(5) Bank balance as on 31.3.2012

₹ ₹
To Balance b/d 14,500 By Creditors A/c 75,000
To Debtors A/c 30,000 By Rent A/c 4,000
To Cash A/c (1,25,000 – 30,000) 95,000 By Balance c/d (b.f.) 60,500
1,39,500 1,39,500
DEPARTMENTAL ACCOUNTS
HOME WORK SOLUTION

Ans.1 Calculation of correct Profits
Department X Department Y Department Z

₹ ₹ ₹
Profit after charging managers’ 36,000 27,000 18,000
commission
Add back: Managers’ 4,000 3,000 2,000
commission (1/9)
40,000 30,000 20,000
Less: Unrealised profit on stock (4,000) (4,500) (2,000)
(Working Note)
Profit before Manager’s 36,000 25,500 18,000
commission
Less: Commission for
Department
Manager @10% (3,600) (2,550) (1,800)
Departmental Profit after 32,400 22,950 16,200
Manager’s commission
Working Note:
Stock lying with
Dept. X Dept. Y Dept. Z Total
₹ ₹ ₹ ₹
Unrealised Profit of:

Department X 1/5 x 15,000 1/11 x 11,000 4,000
= 3,000 = 1,000
Department Y 0.15 x 14,000 0.22 x 12,000 4,500

= 2,100 = 2,400
Department Z 1/6 x 6,000 = 1,000 1/5 x 5,000 2,000
= 1,000
Ans.2 Departmental Trading and Profit & Loss A/c
Particulars A B C Particulars A B C
To Opening Stock 25,650 18,000 19,500 By Sales 2,70,000 1,65,000 86,700
To Purchase 2,35,000 1,56,000 84,200 By Closing Stock 55,300 31,800 42,500
To Transfer 8,500 By Transfer 9,300 1,500
Dept A 9,300
Dept B 1,500
To Gross Profit 73,950 12,000 27,000
3,34,600 1,96,800 1,30,700 3,34,600 1,96,800 1,30,700
To Salaries By Gross Profit 73,950 12,000 27,000
Admin Office 10,320 6,880 3,440 By Disc Received 650 600 400
Pantry 6,880 6,880 By Net Loss 12,064
To Royalty 3,200 3,200 1,600
To Parking fee 2,000 2,000 2,000
To Car Washing 1,440 1,440 720
To Disc Allowed 1,000 1,000 500
To Misc Exp 2,800 2,800 1,400
To Depreciation 464 464 232
To Net Profit 46,496 17,508
74,600 24,664 27,400 74,600 24,664 27,400
General Profit & Loss

Particulars ₹ ₹ Particulars ₹ ₹
To Net Loss 12,064 By Net Profit 64,004
To Stock Reserve 927
To Ram: 60% of 27,898
profit of Dept. A
To Mahaan: 60% of 10,505
Profit of Dept. C
To Share in
Combined Profit
Ram 5,044
Sham 5,044
Mahaan 2,522 12,610
64,004 64,004
Ans.3 Departmental Trading A/c for the year ending 31/12/2014.
Particulars P Q R Particulars P Q R
To Opening Stock 30,000 45,000 15,000 To Sales
To Purchases 1,60,000 1,30,000 60,000 Normal 1,77,000 1,60,000 89,000
Abnormal 11,000 6,000 4,000
To Gross Profit
Normal Goods 44,250 53,333 35,600 To Closing 46,000 63,000 18,000
Stock
Add/Less: Abnormal (250) 667 400
Goods
44,000 54,000 36,000
2,34,000 2,29,000 1,11,000 2,34,000 2,29,000 1,11,000
Working Notes:
P
1,88,000
Normal SP Others
1,77,000 11,000 SP
25 % Cost = (15,000 – 25%)

11,250
GP = 44,250 GP = (250)
Net GP = 44,000
Q
1,66,000
Normal SP Others
1,60,000 6,000
33.33 % Cost = (8,000 – 33.33 %)

5,333
GP = 53,333 GP = 667
Net GP = 54,000
R
93,000
Normal SP Others
89,000 4,000
40 % Cost = (6,000 – 40 %)
3,600
GP = 35,600 GP = 400
Net GP = 36,000
Ans.4 Departmental Trading Account for the year ended 31st March, 2011
Particulars A (₹) B (₹) C (₹) Particulars A (₹) B (₹) C (₹)
To Opening 14,400 10,800 30,000 By Sales 2,08,000 4,41,000 7,65,000

Stock
(W.N. 4) By Closing 9,600 16,200 21,000
Stock
To Purchase 1,20,000 2,70,000 4,50,000 (W.N. 4)
(W.N. 2)
To Gross profit 83,200 1,76,400 3,06,000
2,17,600 4,57,200 7,86,000 2,17,600 4,57,200 7,86,000
Working Notes:
1) Profit Margin Ratio

Selling price of units purchased: ₹
Department A (5,000 units x ₹ 40) 2,00,000
Department B (10,000 units x ₹ 45) 4,50,000
Department C (15,000 units x ₹ 50) 7,50,000
Total selling price of purchased units 14,00,000
Less: Purchases (8,40,000)
Gross profit 5,60,000
, ,
Profit Margin ratio = x 100 = x 100 = 40%
, ,
2) Statement showing department – wise per unit cost and purchase cost
Particulars A B C
Selling price per unit (₹) 40 45 50
Less: Profit margin @ 40% (₹) (16) (18) (20)
Purchase price per unit (₹) 24 27 30
No. of units Purchased 5,000 10,000 15,000
Purchases (Purchase cost per unit 1,20,000 2,70,000 4,50,000
x units purchases
3) Statement showing calculation of department – wise Opening Stock (in units)

Particulars A B C
Sales (Units) 5,200 9,800 15,300
Add: Closing Stock (Units) 400 600 700
5,600 10,400 16,000
Less: Purchases (Units) (5,000) (10,000) (15,000)
Opening Stock (Units) 600 400 1000
4) Statement showing department – wise cost of Opening and Closing Stock

Particulars A B C
Cost of Opening Stock (₹) 600 x 24 400 x 27 1,000 x 30
14,400 10,800 30,000
Cost of Closing Stock (₹) 400 x 24 600 x 27 700 x 30
9,600 16,200 21,000
Ans.5
S.No. Expenses Basis
i. Rent, rates & taxes, insurance of Floor area occupied by each department
building (if given) otherwise on time basis.
ii. Selling expenses such as discount, Sales of each department.
bad-debts ect.
iii. Carriage Inward Purchase of each department.
iv. Depreciation Value of assets of each department or
time basis.
v. Interest on loan Utilisation of loan amount in each
department (if identifiable) otherwise in
combined p & L A/c
vi. Interest or loss on sale of Equal or shown in general P & L A/c.
investment
vii. Wages Time devoted to each department.
viii. Lighting & Heating expenses Consumption of energy by each
department.
BRANCH ACCOUNTS
HOME WORK SOLUTION

Ans.1 In the books of Head Office – XYZ Company
Kolkata Branch Account (at invoice)

To Balance b/d By Stock reserve (opening) 6,000
Stock 30,000 By Remittances:
Debtors 18,000 Cash Sales 1,00,000
Cash in hand 800 Cash from Debtors 60,000 1,60,000
Furniture 3,000 By Goods sent to branch (loading) 32,000
To Goods sent to branch 1,60,000 By Goods returned by
To Goods returned by branch Branch (Return to H.O.) 2,000
(loading) 400 By Balance c/d
To Bank (expenses paid by Stock 28,000
H.O.) Debtors 16,880
Rent 1,800 Cash (800 – 600) 200
Salary 3,200 Furniture (3,000 – 300) 2,700
Stationary &
Printing 800 5,800
To Stock reserve (Closing) 5,600
To Profit transferred to
General Profit & Loss A/c 24,180
2,47,780 2,47,780
Working Note:
Debtors Amount
Particulars (₹) Particulars (₹)
To Balance b/d 18,000 By Cash account 60,000
To Sales account (credit) 60,000 By Sales return account 960
By Discount allowed account 160
78,000 78,000
Note: It is assumed that goods returned by branch are at invoice price.

Ans.2 a) In the books of Moon Star Ltd. – an Indian Company
Trial Balance (in Rupees) of Verginia (USA) Branch
As On 31st March, 2012
Particulars Dr. Cr. Convers Dr. Cr.
US $ US $ sion rate ₹ ₹
Office Equipment 43,200 50 21,60,000
Depreciation in Office 4,800 50 2,40,000
Equipment
Furniture and fixtures 2,880 50 1,44,000
Depreciation on 320 50 16,000
furniture and fixtures
Stock (1st April, 2011) 22,400 47 10,52,800
Purchases 96,000 45 43,20,000
Sales 1,66,400 45 75,88,000
Goods sent from H.O. 32,000 15,80,000
Carriage inward 400 18,000
Salaries (3,200 + 400) 3,600 45 1,62,000
Outstanding salaries 400 45
Rent, rate and taxes 800 50 36,000 20,000
Insurance 400 45 18,000
Trade expenses 400 45 18,000
Head Office A/c 45
Trade debtors 9,600 45,600 4,80,000
Trade Creditors 50 20,50,000
Cash at bank 2,000 6,800 50 1,00,000
Cash in hand 400 50 20,000 3,40,000
Exchange gain (bal. fig.) 50
4,66,800
2,19,200 2,19,200 1,03,64,800 1,03,64,800
b) Trading and Profit and Loss Account of Verginia Branch for the year ended 31st
March, 2012
Particulars (₹) Particulars (₹)
TO Purchases 43,20,000 By Closing Stock 10,75,000
To Goods from Head 15,80,000 (21,500 US $ x 50)
Office 18,000
To Carriage inward 15,92,200
To Gross profit c/d
85,63,000 85,63,000
To Salaries 1,62,000 By Gross profit b/d 15,92,200
To Rent, rates and taxes 36,000
To Insurance 18,000
To Trade expenses 18,000
To Depreciation of office
equipment 2,40,000
To Depreciation on
furniture and fixtures 16,000
To Net Profit c/d 11,02,200
15,92,200 15,92,200
Balance Sheet of Verginia Branch

As on 31st March, 2012
Head Office A/c 20,50,000 Office Equipment 24,00,000
Add: Net profit 11,02,200 31,52,200 Less: Depreciation 2,40,000 21,60,000
Foreign Currency Furniture and fixtures 1,60,000
Transaction Reserve 4,66,800 Less: Depreciation 16,000 1,44,000
Trade Creditors 3,40,000 Closing stock 10,75,000
Outstanding Salaries 20,000 Trade debtors 4,80,000
Cash in hand 20,000
Cash at bank 1,00,000
39,79,000 39,79,000
Ans.3 a) ABCD Ltd.

New York Branch Trail Balance
(As on 31st March 2013)
Particulars ($`000) (₹`000)
Dr. Cr. Conversion Dr. Cr.
rate per $
Plant & Machinery (cost) 100 ₹ 45 4,500
Plant & Machinery Dep. 20 ₹ 45 900
Reserve 60 20 ₹ 55 3,300 1,100
Trade receivable/payable 25 ₹ 50 1,250
Stock (1.4.2012) 4 ₹ 55 220
Cash & Bank Balances 25 125 ₹ 52 1,300 6,500
Purchase/Sales 30 Actual 1,500
Goods received from H.O. 18 ₹ 52 936
Wages & Salaries 6 ₹ 52 312
Rent 12 ₹ 52 624
Office expenses 100 ₹ 52 5,200
Commission Receipts 15 Actual 800
H.O. Current A/c 13,942 14,500
Exchange loss (bal. fig.) 558
280 280 14,500 14,500
Closing stock 0.010 ₹ 55 0.55
b) Trading and Profit & Loss Account
for the year ended 31st March, 2013 (₹ in `000)
H.O. Branch Total H.O. Branch Total
To Opening Stock 250 1,250.00 1,500.00 By Sales 600 6,500.00 7,100.00
To Purchase 275 1,300.00 1,575.00 By Goods sent to 1,500 - 1,500.00
To Goods received Branch
from Head By Closing Stock 200 0.55 200.55
Office - 1,500.00 1,500.00
To Wages & Salaries 100 936.00 1,036.00
To Gross profit c/d 1,675 1,514.55 3,189.55
2,300 6,500.55 8,800.55 2,300 6,500.55 8,800.55
To Rent - 312.00 312.00 By Gross profit b/d 1,675 1,514.55 3,189.55
To Office expenses 25 624.00 649.00 By Commission 275 5,200.00 5475.00
To Provision for receipts
Doubtful debts 25 165.00 190.00
@ 5%
To Depreciation 380 720.00 1,100.00
(W.N.1)
To Balance c/d 1,520 4,893.55 6,413.55
1,950 6,714.55 8,664.55 1,950 6,714.55 8,664.55
To Exchange loss 558.00 By Balance b/d 6,413.55
To Managing 50.00 By Branch Stock 64.89
Director’s Salary Reserve (W.N.2)
To Balance c/d 5,870.44
6,478.44 6,478.44
Working Notes:
1) Calculation of Depreciation (₹ in`000)
Particulars H.O. (₹) Branch (₹)
Building – Cost 1,000
Less: Dep. Reserve (200)
800
Depreciation @ 10% (A) 80
Plant & Machinery Cost 2,000 4,500
Less: Dep. Reserve (500) (900)
1,500 3,600
Depreciation @ 20% (B) 300 720
Total Depreciation (A+B) 380 720
2) Calculation of Additional Branch Stock Reserve (₹ in`000)

Particulars (₹)
Closing stock of Branch 0.55
Reserve on closing stock (0.55 x 1/5) 0.11
Less: Branch Stock Reserve (as on 1.4.2012) (65)
Reversal of Stock Reserve (64.89)
Ans.4 Books of Raju Industries, Kolkata
Delhi Branch Stock Account
₹ ₹
To Balance b/d – Op Stock 60,000 By Bank A/c – Cash Sales 2,00,000
To Branch Debtors A/c – 8,000 By Branch Debtors A/c – 3,60,000
Sales Return Credit Sales
To Goods sent to Branch 6,00,000 By Goods sent to Branch 12,000
A/c (Returns to H.O.)
TO Branch Adjustment A/c 24,000 By Balance c/d – Closing 1,20,000
(Excess of Selling Price Stock
over Invoice Price)
6,92,000 6,92,000
Delhi Branch Stock Adjustment Account

₹ ₹
To Goods sent to Branch A/c 2,400 By Balance b/d 12,000
(1/5 of ₹ 12,000) (on (1/5 of ₹ 60,000)
returns)
To Branch P & L A/c (Profit 1,29,600 By Goods send to Branch 1,20,000
on sales) – Bal fig A/c (1/5 of ₹ 6,00,000)
To Balance c/d (1/5 of ₹ 24,000 By Branch Stock 24,000
1,20,000)
1,56,000 1,56,000
Goods Sent to Branch Account

₹ ₹
To Delhi Branch Stock 1,20,000 By Delhi Branch Stock A/c 6,00,000
Adjustment A/c
To Delhi Branch Stock A/c 12,000 By Delhi Branch Stock Adj. 2,400
A/c
To Purchases A/c 4,70,400
6,02,400 6,02,400
Branch Debtors Account

₹ ₹
To Balance b/d 72,000 By Bank 3,20,000
To Branch Stock 3,60,000 By Branch P&L A/c Discount 6,000
By Branch P&L A/c – Bad Debts 4,000
By Branch Stock – Sales Returns 8,000
4,32,000 4,32,000
Branch Expenses Account
₹ ₹
To Bank A/c (Rent, Rates & 18,000 By Branch Profit & Loss 84,000
Taxes) A/c (Transfer)
To Bank A/c (Salaries & 60,000
Wages)
To Bank A/c (office exp.) 6,000
84,000 84,000
Branch Profit & Loss Account for the year ending 31st Dec. 20I4
₹ ₹
To Branch Expenses A/c 84,000 By Branch Stock Adj. A/c 1,29,600
To Branch Debtors A/c 6,000
To Branch Debtors A/c 4,000
To Net Profit transferred to
Profit & Loss A/c 35,600
1,29,600 1,29,600
Ans. 5 M/S Shyam Udyog

Memorandum Stock A/c
Particulars Dept X Dept Y Particulars Dept X Dept Y
To Balance b/d 4,20,000 8,37,000 By Sales 28,68,000 37,50,000
To Purchases A/c 30,36,000 42,03,000
3,10,500 By Mark down on 37,800
To Transfer A/c 3,10,500 Op. Stock
By Transfer A/c 2,76,000
By Shortage 15,600
By Mark down on Pu 10,800 60,000
By Balance b/d 2,47,800 15,40,500
34,56,000 53,50,500 24,56,000 53,50,500
Memorandum Mark Up A/c

Particulars Dept X Dept Y Particulars Dept X Dept Y
To Mark down on 37,800 By Mark up on Op. Stok 1,05,000 2,79,000
Op. Stock By Mark up on Purchase 7,59,000 14,01,000
To Mark up on Trf 69,000
To Mark down on 10,800 60,000 By Mark up on Trf. 1,03,500
Purchase
To Shortage 3,900
To Mark up on 61,950 4,93,500
Closing Stock
To Gross Profit 6,80,550 12,30,000
8,64,000 17,83,500 8,64,000 17,83,500
Working Nots:
1) Computation of Loading Margin
Dept X Dept Y
Cost 1/3 1/2
At IP 1/4 1/3
2) Calculation of Mark up on Closing Stock

Dept X = 2,47,800 X = 61,950
Dept Y = Cl. Stock – 15,40,500
Closing Stock At Reduce Price

Cost = 1,50,000
13,45,500 X IP = 1,50,000 + 50%
= 2,25,000
= 4,48,500 (-) Mark down (30,000)
SP 1,95,000
Total Stock Reserve = 4,48,500 + 45,000

= 4,93,500
3)
X = 22,77,000 + 7,59,000 = 30,36,000
Y = 28,02,000 + 14,01,000 = 42,03,000
Ans. 6 a) Journal entry in the books of Head Office
Date Particulars Dr. Cr.

₹ ₹
30th April, Dr.
2011 Mumbai Branch Account 3,000
Chennai Branch Account Dr. 70,000
To Delhi Branch Account 15,000
To Kolkata Branch Account 58,000
(Being Adjustment entry passed by head
office in respect of inter-branch
transactions for the month of April, 2011)
Working Note:
Inter-Branch transactions
Delhi Mumbai Chennai Kolkata

₹ ₹ ₹ ₹
A. Delhi Branch
1) Received goods 50,000 (Dr.) 35,000 (Cr.) 15,000 (Cr.)
2) Sent goods 45,000 (Cr.) 25,000 (Dr.) 20,000 (Dr.)
3) Received Bill 20,000 (Dr.) 20,000 (Cr.)
receivable
4) Sent acceptance 35,000 (Cr.) 25,000 ((Dr.) 10,000 (Dr.)
B. Mumbai Branch
5) Receivable goods 20,000 (Cr.) 35,000 (Dr.) 15,000 (Cr.)
6) Sent cash 15,000 (Dr.) 22,000 (Cr.) 7,000 (Dr.)
C. Chennai Branch
7) Received goods 30,000 (Dr.) 30,000 (Cr.)
8) Sent cash and 30,000 (Cr.) 30,000 (Dr.)
acceptances
D. Kolkata Branch
9) Sent goods 35,000 (Dr.) 35,000 (Cr.)
10) Sent cash 15,000 (Dr.) 15,000 (Cr.)
11) Sent acceptances 15,000 (Dr.) 15,000 (Cr.)
15,000 (Cr.) 3,000 (Dr.) 70,000 (Dr.) 58,000 (Cr.)
Ans. 7 * Line missing Reserves & Surplus in Bombay Column Credit Side ₹ 1,000 (in Question)
Sydney Branch Trial Balance (in Rupees)
As on 31st March, 2012
(₹`000)
Conversion Rate per A$ Dr. Cr.
Plat & Machinery (cost) ₹ 18 36,00
Plant & Machinery Dep. Reserve ₹ 18 23,40
Debtors/ Creditors ₹ 24 14,40 7,20
Stock (1.4.2011) ₹ 20 4,00
Cash & Bank Balance ₹ 24 2,40
Purchase / Sales ₹ 22 4,40 27,06
Good received from H.O. - 1,00
Wages & Salaries ₹ 22 9,90
Rent ₹ 22 2,64
Office Expanses ₹ 22 3,96
Commission Receipts ₹ 22 22,00
H.O. Current A/c 1,20
78,70 80,86
Exchange loss (Balancing figure) 2,16
80,86 80,86
Ans. 8 In the Books of Buckingham Bros, Bombay
Nagpur Branch Account
To Opening Branch Assets - By Bank -
Remittances received
from branch
Stock (24,000 + 16,000) 40,000 Cash Sales 45,000
Debtors 25,000 Cash from Debtors* 1,20,000
Cash in transit* 5,000 1,70,000
Imprest Cash 2,000 By Closing Branch
Assets
To Goods sent to Branch A/c 60,000 Stock (15,000 + 25,000
10,000)
To Creditors (Direct 45,000 Debtors (W.N.1) 24,000
Purchases Imprest Cash (W.N.2) 2,000
To Bank (Sundry exp.) 30,000
To Bank (Petty cash exp.) 4,000
To Net Profit transferred to 15,000
General Profit & Loss A/c
2,21,000 2,21,000
Working Note:
1. Memorandum Debtors A/c
To To Bal b/d 25,000 By By Sales Return 3,000
To To Sales 130,000 By By Bad Debts 1,000
By By Discount 2,000
By By Cash* 125,000
By By Bal c/d 24,000
155,000 155,000
2. Memorandum Petty Cash

To Bal b/d 2,000 By Expenses 4,000
(met by Branch)
To Transfer from H.O 4,000 By Bal c/d 2,000
6,000 6,000
* Collection from Debtors = Total Remittances (1,65,000+5,000) - Cash Sales (45,000)

= 1,25,000
Stock and Debtors method
If it is desired to exercise a more detailed control over the working of a branch, the accounts
of the branch are maintained under Stock and Debtors Method. According to this method, the
following accounts are maintained by the Head Office:
Account Purpose
1. Branch Stock Account (or Branch Ascertainment of shortage or surplus
Trading Account)
2. Branch Debtors Account Ascertainment of closing balance of debtors
3. Branch Expenses Account Ascertainment of total expenses incurred
4. Goods sent to Branch Account Ascertainment Of cost of goods sent to
branch
5. Branch Cash / Bank Account Know about cash flow at branch (eg: where
branch is allowed to incur expenses locally)
6. Branch Fixed Asset Account Control over branch Fixed Assets
7. Branch Profit and Loss Account Calculation of net profit or loss
The Manner in which entries are recorded in the above method is shown below:
Transaction Account debited Account credited
a) Cost of goods sent to Branch Stock A/c Goods sent to Branch
the branch A/c
b) Remittances for Branch Cash A/c Cash A/c
expenses
c) Any assets(e.g. Branch Asset (furniture Assets A/c
furniture) provided by A/c
H.O.
d) Cost of goods returned Goods sent to Branch Branch Stock A/c
by the branch A/c
e) Cash Sales at the Branch Cash A/c Branch Stock A/c
Branch
f) Credit Sales at the Branch Debtors A/c Branch Stock A/c
Branch
g) Return of goods by Branch Stock A/c Branch Debtors A/c
debtors to the Branch
h) Cash paid by debtor Branch Cash A/c Branch Debtors A/c
i) Discount & allowance Branch Expenses A/c Branch Debtors A/c
to debtors, bad debts
j) Remittances to H.O. Cash A/c Branch Cash A/c
k) Branch Expenses Branch Expenses A/c Cash A/c
directly paid by H.O.
l) Expenses met by Branch A/c Branch Cash A/c
Branch
(m) Closing Stock: Credit the Branch Stock Account with the value of closing stock at cost.
It will be carried down as opening balance (debit) for the next accounting period. The
Balance of the Branch Stock Account, (after adjustment therein the value of closing
stock), if in credit, will represent the gross profit on sales and vice versa.
Other Steps:
(n) Transfer Balance of Branch Stock Account to the Branch Profit and Loss Account.
(o) Transfer Balance of Branch Expenses Account to the debit of Branch Profit & Loss
Account
(p) The balance in the Branch P&L A/c will be transferred to the (HO) Profit & Loss
Account.
(q) The credit balance in the Goods sent to Branch Account is afterwards transferred to
the Head Office Purchase Account or Trading Account (in case of manufacturing
concerns), it being the value of goods transferred to the Branch.
Branch Trading and Profit and Loss Account (Final Accounts Method)
In this method, Trading and Profit and Loss accounts are prepared considering each branch
as a separate entity. The main advantage of this method is that, it is easy to prepare and
understand. It also gives complete information of all transactions which are ignored in the
other methods. It should be noted that Branch Trading and Profit and Loss account is merely
a memorandum account and therefore, the entries made there in do not have double entry
effect.
Ans. 9 Books of Sell Well

Branch Account
₹ ₹
To Goods sent to Branch 1,65,000 By Goods sent to Branch – Loading 15,000
A/c (1,50,000 + 10%)
To Goods sent to Branch 382 By Goods sent to Branch – returns 4,200
A/c (4,200 x 10/110)
By Bank 1,06,000
By Balance c/d – Closing Branch
Assets
To Stock Reserve (53,400 4,855 Stock 53,400
x 10/110)
To Net Profit (Bal fig) ts/f 37,363 Debtors (Sales – Collection) 29,000 82,400
to General P&L A/c
2,07,600 2,07,600
Working Note:
Memorandum Branch Debtors Account
₹ ₹
To Bal b/d --- By Cash/Bank 1,06,000
To Sales 1,35,000 By Balance c/d 29,000
1,35,000 1,35,000
Goods Sent to Branch Account

₹ ₹
To Branch A/c – Loading 15,000 By Branch A/c 1,65,000
To Branch A/c – Returns 4,200 By Branch A/c – Loading 382
To Purchases A/c 1,46,182 on returns
1,65,382 1,65,382
PLECEMEAL DISTRIBUTION OF CASH
HOME WORK SOLUTION
Ans1. I. Statement of Excess Capital
L M S
Capitals 15,00,000 10,00,000 5,00,000
PSR I I I
Unit Capital 15,00,000 10,00,000 5,00,000
Req. Cap. (S base) 5,00,000 5,00,000 5,00,000
Excess capital 10,00,000 5,00,000 NIL
Unit excess 10,00,000 5,00,000
Required excess (M base) 5,00,000 5,00,000
Extra excess 5,00,000 NIL
Scheme: -
1. First pay EEC ₹ 5,00,000 to L
2. Next pay EC – EEC ₹ 10,00,000 to L & M in 1 : 1
3. Balance to all in P.S.R.
II. Statement showing distribution of cash.

Particulars Cash Crs. BK Loan L. Loan L M S
Balance 2,00,000 5,00,000 10,00,000 15,00,000 10,00,000 5,00,000
1st Real 5,00,000
(-) Exp. (1,00,000)
4,00,000
(-) Crs & BK
Loan 2 : 5 (4,00,000) (1,14,286) (2,85,714)
NIL 85,714 2,14,286 10,00,000 15,00,000 10,00,000 5,00,000
Land Real 15,00,000
(-)Crs. & BK (3,00,000) 85,714 (2,14,286)
12,00,000
(-) C’s Loan (10,00,000) (10,00,000)
2,00,000
(-) L Cap. (2,00,000) (2,00,000)
EEC NIL NIL NIL NIL 13,00,000 10,00,000 5,00,000
Cash L M S
Balance 13,00,000 10,00,000 5,00,000
3rd Real 15,00,000
Less: L Cap EEC (3,00,000) (3,00,000)
12,00,000
Less: L & M 1 : 1 EC. (10,00,000) (5,00,000) (5,00,000) -
2,00,000
Less: All in PSR (2,00,000) (66,667) (66,667) (66,666)
NIL 4,33,333 4,33,333 4,33,334
4th Real 30,00,000
Less: All in PSR (30,00,000) (10,00,000) (10,00,000) (10,00,000)
Profit NIL 5,66,667 5,66,667 5,66,666
5th Real 3,00,000
Less: All in PSR (30,00,000) 10,00,000 10,00,000 10,00,000
Profit NIL 15,66,667 15,66,667 15,66,667
Ans2. I. Statement of Excess Capital
A B C
Capitals 40,000 10,000 20,000
Add: Gen. reserve 4,000 4,000 4,000
44,000 14,000 24,000
PSR 1 1 1
Unit Capital 44,000 14,000 24,000
Req. Cap. (B bone) 14,000 14,000 14,000
Excess Cap. 30,000 NIL 10,000
Unit Excess 30,000 10,000
Req. excess (C bone) 10,000 10,000
Extra excess 20,000 NIL
Scheme –
1. First pay ₹ 20,000 to A for EEC
2. Next pay ₹ 20,000 to A & C for EC – EEC in 1 : 1
3. Balance to all in PSR
II. Statement showing distribution of cash

Cash I. Tax Crs. A B C
Balance 5,000 5,000 15,000 40,000 10,000 20,000
(+) Gen. res. 4,000 4,000 4,000
5,000 5,000 15,000 44,000 14,000 24,000
(-) Set a side exp. (2,000)
3,000
(-) I Tax (3,000) (3,000)
NIL 2,000 15,000 44,000 14,000 24,000
31 – 10 – 2001 29,000
Less: I Tax (2,000) (2,000)
(-) Crs. (15,000) (15,000)
(-) A Cap EEC (12,000) (12,000)
NIL NIL NIL 32,000 14,000 24,000
Cash A B C
Balance NIL 32,000 14,000 24,000
25-11- 2001 46,000
Less: A Cap EEC (8,000) (8,000)
Less: A & C EC – EEC (20,000) (10,000) (10,000)
Less: to all in PSR (18,000) (6,000) (6,000) (6,000)
NIL 8,000 8,000 8,000
20-12-2001 19,000
(+) Bank 5,000
(+) Surp from exp.
(2000 – 1550) 450
24,450
(-) All in PSR (24,450) (8,150) (8,150) (8,150)
Profit NIL 150 150 150
Ans3. Statement showing distribution of cash
Cash Crs. A B C
Balance 28,000 2,10,000 1,40,000 70,000 14,000
(-) Set aside for cont. liab. (10,000)
18,000
Less: Crs. (18,000) (18,000)
NIL 1,92,000 1,40,000 70,000 14,000
31.07.2018 77,000
(-) Crs. (77,000) (77,000)
NIL 1,15,000 1,40,000 70,000 14,000
31.08.2018 1,20,600
(-) Crs. (1,15,000) (1,15,000)
5,600
(-) to A (5,600) (5,600)
NIL NIL 1,34,400 70,000 14,000
30.09.2018 65,100
Less: A & B (65,100) (50,050) (15,050) -
NIL NIL 84,350 54,950 14,000
31.10.2018 73,600
Less A , B & C (73,600) (44,500) (28,383) (717)
NIL 39,850 26,567 13,283
30.11.2018 32,000
(-) Cont. liab not required 10,000
42,000
(-) to all PSR (42,000) (21,000) (14,000) (7,000)
Loss NIL NIL 18,850 12,657 6,283
31.08.2018 – Max loss.

Total A B C
Balance 2,24,000 1,40,000 70,000 14,000
Cash (5,600) (1,09,200)
Max loss 2,18,400 (72,800) (36,400)
30,800 (28,000) (22,400)
Def of B & C tr. to A (25,200) 2800 22,400
5,600 - -
30.09.2018 – Max loss
Total A B C
Balance 2,18,400 1,34,400 70,000 14,000
Cash (65,100)
Max loss 1,53,300 (76,650) (51,100) (25,550)
57,750 18,900 (11,550)
Def. of C trfd. to AB
in Cap. Ratio 2 : 1 (7,700) (3,850) (11,550)
50,050 15,050 NIL
31.10.2018 – Max loss
Total A B C
Balance 1,53,300 84,350 54,950 14,000
Cash (73,600)
Max loss 79,700 (39,850) (26,569) (13,283)
44,500 28,383 717
Ans4. Statement showing distribution of cash
(External liabilities)
Particulars Cash Bank O/D Dayal Mrs. Alok
Balance 250 2,000 15,000 8,000
(+) 15 – 07 4,750
(+) 29 – 07 5,000
10,000
(-) Bank O/D
Dayal & Mrs. Alok
(2 : 15 : 8) (10,000) (800) (6,000) (3,200)
NIL 1,200 9,000 4,800
28.08 5,000
(-) to all liab. 2 : 15 : 8 (5,000) (400) (3,000) (1,600)
NIL 800 6,000 3,200
20-09 15,000
(-) to all liab. (10,000) (800) (6,000) (3,200)
5,000 NIL NIL NIL
Statement showing distribution of cash

(Partners Loan & Capital)
Cash A Loan A B K
Balance 5,000 7,000 20,000 NIL (5,000)
Less: A Loan (5,000) (5,000) - - -
NIL 2,000 20,000 NIL (5,000)
20.10 10,000
(-) A Loan (2,000) (2,000)
8,000
(-) A (8,000) (8,000)
NIL NIL 12,000 NIL (5,000)
20-11 3,000
(-) A (3,000) (3,000)
NIL 9,000 NIL (5,000)
20-12 1,000
Cash read B 900 900
(-) Paid to A (1,900) (1,900)
Loss NIL 7,100 900 (5,000)
WN 20 – 12
Total A B C
Balance 4,000 9,000 NIL (5,000)
Cash (1,000)
Max loss 3,000 (1,500) (900) (600)
7,500 (900) (5,600)
Def. of K tr. to A (5,600) - 5,600
1,900 (900) NIL
Ans5. Balance Sheet on at 31.03.1994
Capitals Cash / Bank 5,000
X 90,000 Building 45,000
Y 60,000
Z (DR) (10,000) 1,40,000 Others assets 1,50,000
Bills payable 10,000
Creditors 20,000
Bank O/D 30,000
2,00,000 2,00,000
Other assets 1,50,000
1/ 1/ 1/
3 3 3
B.V. 50,000 50,000 50,000

Cash 22,000 45,000 37,500
(90%) (75%)
Statement showing distribution of cash (External liabilities)

Cash Bank O/D Crs. B.P.
Balance 5,000 30,000 20,000 10,000
(-) Building E/o (27,000)
3,000
(-) Contingent liab (1,000)
(-) Est. real exp. (4,000)
NIL 3,000 20,000 10,000
30.04 22,000
(-) to all 3 : 20 : 10 (22,000) (2,000) (13,333) (6,667)
NIL 1,000 6,667 3,333
31-05 45,000
(-) to all liab. (11,000) (1,000) (6,667) (3,333)
34,000 NIL NIL NIL
Payment for Partners Capitals

Cash X Y Z
Balance 34,000 90,000 60,000 (10,000)
(-) Cash paid (34,000) (20,400) (13,600) -
NIL 69,600 46,400 (10,000)
30-06-94 37,500
(-) Excess exp. (11,000)
26,500
Cash received 11,625 11,625
(-) Cash paid (38,125) (22,875) (15,250) -
Loss NIL 46,725 31,150 1,625
Max Loss 31-05
Total X Y Z
Balance 1,40,000 90,000 60,000 (10,000)
Cash (34,000)
Max loss 1,06,000 (53,000) (35,333) (17,667)
37,000 24,667 27,667
Def. tr. to X. Y 9 : 6 (16,600) (11,067) 27,667
20,400 13,600 NIL
Max Loss 30-6

Total X Y Z
Balance 1,06,000 69,600 46,400 (10,000)
Cash (26,500)
Max loss 79,500 (39,750) (26,500) (13,250)
29,850 19,900 (23,250)
Cash received 11,625
(11,625)
Def. tr. fd. 9 : 6 (6,975) (4,650) 11,625
22,875 15,250 -
DISSOLUTION OF PARTNERSHIP FIRM
HOME WORK SOLUTION
Ans1. In the books of XYZ
Realisation a/c
To Fixed assets a/c 5,00,000 By Sundry credit a/c 3,20,000
To Stock in trade 3,00,000 By Cash / Bank a/c
To Sundry Dr. S a/c 5,00,000 FA. 5,20,000
To Cash / Bank a/c Drs. 4,40,000 9,60,000
Crs. 30,4000 By Y’s Cap 2,50,000
Exp. 6000 3,10,000 By Real loss
X 35,556
Y 26,667
Z 17,777 80,000
16,10,000 16,10,000
Partner Capital a/c
X Y Z X Y Z
To Real - 2,50,000 - By Bal. b/d 4,00,000 3,00,000 2,00,000
To Real loss 35,556 26,667 17,777 By Gen. res. 40,000 30,000 20,000
To Cl Bk 4,04,444 53,333 20,223
4,40,000 3,30,000 2,20,000 4,40,000 3,30,000 2,20,000
Cash / Bank a/c

To Balance b/d 10,000 By Cash / Bank (Crs. & exp) 3,10,000
To Realisation a/c (assets sold) 9,60,000 By X Cap 4,04,444
Y Cap 53,333
Z Cap 2,02,223
Q.2 P, Q, and R were partners sharing profit and losses in the ratio of 3: 2: 1, on partnership
salary or interest on capital being allowed. Their balance sheet on 30th June, 20X1 is as
follows:
Fixed Capital Fixed Assets:
P 20,000 Trademark 40,000
Q 20,000 Freehold Property 8,000
R 10,000 50,000 Plant and Equipment 12,800
Current A/c Motor vehicle 700
P 500 Current Assets
Q 9,000 9,500 Stock 3,900
Loan from p 8000 Trade Debtors 2000
Trade Creditors 12,400 Less: Provision (100) 1,900
Cash at Bank 200
Miscellaneous losses
R’s Current Account 400
Profit and Loss Account 12,000
79,900 79,900
On 1st July, 20X1 the partnership was dissolved. Motor Vehicle was taken over by Q at a
value of 500 but no cash passed specifically in respect of this transaction Sale of other
assets realized the following amounts:
₹
Trademark Nil
Freehold Property 7,000
Plant and Equipment 5,000
Stock 3,000
Trade Debtors 1,600
Trade Creditors were paid ₹11,700 in full settlement of their debts. The costs of dissolution
amounted to ₹1,500. The loan from P was repaid, P and Q were both fully solvent and able
to bring in any cash required but R was forced into bankruptcy and was only able to bring 1/3
of the amount due.
You are required to show:
(a) Cash and Bank Account,
(b) Realization Account, and
(c) Partners Fioxed Capital Accounts (ofter transferring Current Accounts balances)
Ans2. In the books of PQR

Realisation A/c
To Trade marks 40,000 By Provision 100

To Freehold prop. a/c 8,000 By Creditors 12,400
To Plant & 12,800 By Q’s cap (Mveh) 500
To Motor veh 700 By Cash / Bank
To Stock 3,900 Trademark NIL
To S. Debtors 2,000 F. Prop 7,000
To Cash / Bank Plant 5,000
Crs. 11,700 Stock 3,000
Exp. 1,500 13,200 Debtors 1,600 16,600
By Real Loss
P 25,500
Q 17,000
R 8,500 5,100
80,600 80,600
Partner Capital a/c
P Q R P Q R
To Current a/c - - 400 By bal. b/d 20,000 20,000 10,000
To P & L 6,000 4,000 2,000 By current a/c 500 9,000 -
To Real 500 - By Cl Bk - - 300
To Real Loss 25,500 17,000 8,500 By P Cap - - 300
To Reap 300 300 - By Q Cap - - 300
By C Bk 25,500 17,000 -
To Cl Bk 14,200 24,200
46,000 46,000 10,900 46,000 46,000 10,900
Cash / Bank a/c

To bal. b/d 200 By Real a/c (Crs. & exp.) 13,200
To Realisation a/c (assets sold) 16,600 By P’s Loan 8,000
To R’s Cap a/c 300 By P Cap 14,200
To P’s Cap a/c 25,500 By Q Cap 24,000
To Q’s Cap a/c 17,000
59,600 59,600
P’s Loan a/c

To Cash / Bank 8,000 By Bal. b/d 8,000
8,000 8,000
R’s Insolvency DR – CR 900

(-) Cash (300)
Deficiency 600
P Q
Fixed Capital 20,000 1:1 20,000
Deficiency 300 300
Ans3. In the books of Neptune, Jupiter, Venus & Pluto
Realisation a/c
To Premises 1,20,000 By S. Creditors 20,000
To Furniture 40,000 By M. Loans 80,000
To Stock 1,00,000 By Cash / Bank
To Debtors 40,000 Drs. 24,000
To Cash / Bank Stock 60,000
Exp. 4,000 Furn. 16,000
Crs. 32,000 Premises 90,000 1,90,000
M. Loan 80,000 1,16,000 By Realtors
N 54,000
J 36,000
V 18,000
P 18,000
4,16,000 4,16,000
Partner’s Capital a/c

To Bal - -10,000 12,000By bal. 1,00,000 60,000
To Real 54,000 36,000
18,000 18,000 By G.R 24,000 16,000 8,000 8,000
To V Cap 11,143 6,857- - By C.R 6,000 4,000 2,000 2,000
By N Cap - - 11,143 -
By J Cap - - 6,857 -
By Cl Bk 54,000 36,000 - 18,000
To Cl Bk 1,18,857 73,143 By Cl Bk - - - 2,000
1,84,000 1,16,00 28,000 30,000
1,84,000 1,16,000 28,000 30,000
0
Cash / Bank a/c

To bal. b/d 8,000 By Real a/c (liab. & exp) 1,16,000
To Realisation a/c (assets sold) 1,90,000 By N Cap 1,18,857
To N Cap 54,000 By J Cap 73,143
To J Cap 36,000
To P Cap 18,000
To P Cap 2,000
3,08,000 3,08,000
Venus’s deficiency
DR – CR 18,000
(-) Cash received _____-____
Capital Def 18,000
N 13:8 J
11.143 6,857
Capital Ratio
N J P
Capital 1,00,000 60,000 (12,000)
Gen. res. 24,000 16,000 8,000
Cap. Res. 6,000 4,000 2,000
1,30,000 80,000 (2,000)
Ans.4 In the books of Ajay, Vijaya, Ran & Shyam

Realisation a/c
To S. Debtors 3,50,000 By Doubtful debts 50,000
To Stock 2,00,000 By S. Creditors 3,00,000
To other assets 3,10,000 2,80,000
By A’s Cap (Dr. S)
To R’s cap (Crs.) 3,00,000 1,90,000
By S’s cap (stock)
To CL Bk (exp.) 30,000 3,00,000
By Cl Bk (other assets)
By Real Loss
A 28,000
V 7,000
R 14,000
S 21,000 70,000
11,90,000 11,90,000
Cash / Bank a/c

To bal. b/d 1,40,000 By Real a/c (exp.) 30,000
To real a/c 3,00,000 By A Cap 2,90,430
To V. Cap 21,900 By R Cap 1,50,000
To A Cap 28,000 By S Cap 54,470
To R Cap 14,000
To S Cap 21,000
5,24,900 5,24,900
Vijay’s Deficiency
DR – CR 2,07,000
(-) Cash (21,900)
1,81,500
A R S
7,00,000 (1,50,000) 3,00,000
X
7:3
Capital deficiency 1,85,100
A S
1,29,570 55,530

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Ans.1 Memorandum Trading Account for the

Less: Advertisement (41,000)

Statement of Insurance Claim

Alternative Method (Trading Account Approach)

Claim = x Loss suffered

Claim amount = ₹ 60,689 (1,14,500 x 75,000/ 1,41,500)

Ans.4 M/s Raxby & Co.

2. Calculation of Gross Profit rate

3. Memorandum Trading A/c for the period from 1.4.07 to 11.11.07

Ans.5 Memorandum Trading Account for the period

Rate of Gross Profit in 2011-12

Ans. 6 Computation of loss of profit Insurance claim

(1) Rate of gross profit:

(4) Additional Expenses: Least of the below shall be allowed ₹

(ii) Gross profit on sales generated by additional expenses

Least of the above three figures, i.e. ₹ 7,500 allowable.

Add: Allowable additional expenses 7,500

Ans. 7 (1) Calculation of short sales:

(4) Calculation of claim for increased cost of working:

(5) Calculation of total loss of profit

(6) Calculation of insurable amount:

Ans. 8 Claim for loss of Stock

Sales from 1st July, 2010 to 30th Sept. 2010 3,20,000

Ans.9 In the books of M/s. Platinum Jewellers

Particulars (i) (ii) (iii) (iv) (v) (vi)

2. Calculation pf Policy amount:

Ans1. In the books of M/s Bull & Bear

To Profit & By Profit &

10,00,000 50,000 10,00,100 10,00,000 50,000 10,00,100

(ii) Sale proceeds of

Space to write important points for revision.

2. Cost of shares sold — Amount paid for 35,000 shares

3. Value of investment at the end of the year

By Balance c/d (W.N.2)

2. Closing balances as on 31.3.2012 of 12% Bond

3. Profit on sale of equity shares of Alpha Ltd.

5. Calculation of right shares subscribed by Beeta Ltd.

6. Calculation of sale of right entitlement by Beeta Ltd.

7. Purchase of bonds on 01.05.2011

8. Sale of bonds on 01.03.2012

Ans4. Investment A/c of Mr. Purohit

2. Purchase of debentures on 1.1.2012

4. Profit on sale of debentures as on 1.10.2011

5. Loss on sale of debentures as on 1.2.2012

Ans5. Investment Account in the Books of A Ltd.

Ans6. In the books of T. Shekharan

3. Profit on sale of bonus shares

4. Valuation of equity shares on 31st March, 2012

Ans7. In the Books of Mr. Z 9%

2. Purchase of bonds on 1.3.2011

4. Sale of bonds on 1.7.2011 Interest element = 500 x 100 x 9% x 3/12 = ₹ 1,125

6. Interest for half-year ended 30 September

7. Sale of bonds on 1.11.20X1

8. Profit on sale of bonds on 1.11.20X1

9. Closing value of investment

Total interest can also be calculated as follow:

Computation of IRR (considering two guessed rates of 6% and 12%)

Interest rate implicit on lease in computed below by interpolation:

Thus, repayment schedule and interest would be as under:

Super Motors Account

Balance Sheet as on 31st March 2012

March 31 By Total Debtors 51,100

Total Debtors Account