ACCOUNTS

SECTION A (60 Marks)

Answer all questions.

Question 1
In subparts (i) to (iv) choose the correct options and in subparts (v) to (x) answer the questions
as instructed.

(i) Nikhil, Akhil and Amber are partners in a firm. At the time of Akhil’s retirement, [1]
Amber takes over furniture of ₹ 12,000 at ₹ 10,000.
Choose the correct journal entry from the following options to record this adjustment.

(a) Debit Furniture Account ₹ 10,000; Credit Amber’s Capital Account ₹ 10,000

(b) Debit Furniture Account ₹ 12,000; Credit Amber’s Capital Account ₹ 10,000;
Credit Revaluation Account ₹ 2,000

(c) Debit Amber’s Capital Account ₹ 10,000; Credit Furniture Account ₹ 10,000

(d) Debit Amber’s Capital Account ₹ 10,000; Debit Revaluation Account ₹ 2,000;
Credit Furniture Account ₹ 12,000

(ii) Select the correct statement from the following options. [1]

(a) A debenture holder is entitled to receive dividend on his debentures from the
company even if the company has incurred losses.

(b) A debenture holder is entitled to receive interest on his debentures from the
company only if the company has made profits.

(c) A debenture holder is entitled to receive interest on his debentures from the
company only after dividend has been paid by the company to its shareholders.

(d) A debenture holder is entitled to receive interest on his debentures from the
company even if the company has incurred losses.

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(iii) On the dissolution of the firm, Partner Rex agreed to take over the responsibility of [1]
completing the dissolution work at an agreed remuneration of ₹ 1,000 and to bear all
realisation expenses. The actual realisation expenses amounted to ₹ 1,300 which were
paid by the firm on Rex’s behalf.
What amount will be debited by the firm to the Realisation Account?

(a) ₹ 1,000

(b) ₹ 2,300

(c) ₹ 1,300

(d) ₹ 300

(iv) ABC Ltd. offered 60,000 shares of ₹ 10 each to the public. The public applied for [1]
1,00,000 shares. The company made pro-rata allotment in the ratio of 3:2 and the
remaining applications were rejected and money refunded to the applicants.
On how many shares did the company refund the application money?

(a) 40,000 shares

(b) 10,000 shares

(c) 30,000 shares

(d) 20,000 shares

(v) Give the formula used for calculating goodwill of a partnership firm by the Weighted [1]
Average Profit Method.

(vi) A firm had given a loan to one of its partners. Give the journal entry to close this Loan [1]
Account at the time of dissolution of the partnership firm.

(vii) Mention the heading and sub-heading under which Vehicles are shown in the Balance [1]
Sheet of a company prepared as per Schedule III of the Companies Act, 2013.

(viii) Sunrise Ltd., a listed NBFC, had outstanding 20,000, 7% Debentures of ₹100 each, [1]
due for redemption on 31st March, 2022.
As per the provisions of the Companies Act, 2013, what amount, if any, does the
company need to transfer to Debenture Redemption Reserve, before it can
redeem the debentures?

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(ix) Pooja and Meher are partners in a firm. They admit Rati into the firm on the following [1]
terms:

(a) Unrecorded Debtors of ₹1,000 to be brought into the books.

(b) Provision for doubtful debts to be created @ 5% on Debtors.

The recorded debtors in the Balance Sheet of Pooja and Meher on the date of Rati’s
admission were ₹ 25,000.
What will be the net debtors to be shown in the Balance Sheet of the reconstituted
firm?

(x) On 1st April, 2021, Bhim Ltd. issued 2,000, 5% Debentures of ₹ 100 each as [1]
follows:

(a) For cash at a discount of 5% ₹ 80,000 (Nominal)

(b) To a vendor for ₹ 60,000 in satisfaction of his claim ₹ 70,000 (Nominal)

(c) To Bankers for a loan of ₹ 40,000 as collateral ₹ 50,000 (Nominal)

security

The interest on these debentures was to be paid annually on 31st March every year by
the company.
You are required to calculate interest on these debentures payable by the
company on 31st March, 2022.

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Comments of Examiners
Suggestions for teachers
(i) Majority of the candidates chose the
− Teach the concept of change in the value
correct option. Some candidates,
of an asset /liability on reconstitution of
however, instead of option (d) chose
the firm through journal entries and
option (c), thereby not recording the loss
ledger account.
on revaluation of the asset.
− Explain the meaning and difference
(ii) Majority of the candidates chose the
between charge against profits and
correct option. A few candidates chose
appropriation of profits.
option (c) which clearly indicates the lack
− Spend time in explaining the treatment of
of understanding of the concepts of
realisation expenses – whether paid by
charge against profits and appropriation
the firm or by a partner or borne by a
of profits.
partner.
(iii) Almost all candidates chose the correct
− Explain the concept of pro-rata allotment
option.
of shares.
(iv) Most of the candidates took the difference
− Give adequate practice to the students to
between the shares applied and shares
calculate the number of shares allotted by
issued to get the shares rejected and so
giving the number of shares applied in
chose option (a) instead of the correct
case of over subscription of shares and
option (b).
vice-versa.
(v) Majority of the candidates could answer
− Ensure that the students know the
this question satisfactorily. However, a
formulae to calculate the goodwill of the
few candidates had no knowledge of
firm by all the methods given in the scope
valuation of goodwill using the weighted
of the syllabus.
average profit method.
− Give adequate practice in passing journal
(vi) Majority of the candidates wrote the
entries.
correct journal entry. However, a few
− When teaching journal entries, always
candidates, in the journal entry: (i) Did
write the complete entry having the
not specify the name of the partner to
partner’s name and with the suffix
whom the firm had extended the loan. (ii)
‘Capital A/c’/ ‘Current A/c ‘/ ‘Loan A/c’.
Debited Cash A/c instead of debiting
− Closely follow the scope of the syllabus.
Partner’s Capital A/c.
− Bring out the difference amongst the
(vii) Most of the candidates wrote the correct
head, sub-head & item.
heading but erred in the sub-heading
− Clearly explain the provisions of the
where they did not specify the sub-part
Companies Act, 2013, pertaining to
‘Property, Plant & Equipment’ under the
redemption of debentures.
sub-heading ‘Property, Plant & − Adequate practice needs to be given in
Equipment & Intangible Assets’. Some passing adjusting, payment and closing
candidates wrote the heading as ‘Assets’ entries of interest on debentures.
instead of ‘Non-Current Assets’ while a
few wrote ‘Fixed Assets’ as the sub-
heading.

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(viii) Many candidates could not attempt this
question satisfactorily. They calculated Suggestions for teachers
10% of the face value of the outstanding
debentures as amount to be transferred to − The meaning of gross debtors, net debtors
the Debenture Redemption Fund without and the concept of provision for doubtful
realizing that the company under debts should be dealt in detail in Class XI
consideration was a listed company, itself in the chapter on Final Accounts.
which as per provisions of the − Explain the concept of interest on
Companies Act, 2013, is not required to debentures in detail as how it is payable by
create a DRR. a company on its outstanding active
(ix) A large number of candidates were able debentures only.
to get the correct amount of net debtors.
However, some candidates did not add
the unrecorded debtors to the recorded ones. A few candidates were able to calculate the
provision for doubtful debts but did not subtract it from the gross debtors to get the net
debtors.
(x) Majority of the candidates calculated the correct interest on debentures. However, a few
candidates also included the interest on debentures issued as a collateral security in the total
interest payable to the debenture holders.

MARKING SCHEME
Question 1
(i) (d) or Debit Amber’s Capital Account ₹10,000, Debit Revaluation Account ₹2,000,
Credit Furniture Account ₹12,000.

(ii) (d) or A debenture holder is entitled to receive interest on his debentures from the
company even if the company has incurred losses.

(iii) (a) or ₹1,000

(iv) (b) or 10,000 shares

(v) Goodwill = Weighted Average Profits × No. of years’ purchase

OR
Total Products
= Total Weights
× No. of years’ Purchase
OR
Total of Weighted Profits
= × No. of years’ Purchase (Any one option)
Total Weights

(vi) Partner’s Capital A/c Dr

To Partner’s Loan A/c / Loan to Partner’s A/c

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(vii) Heading – Non-Current Assets
Sub-heading – Property, Plant & Equipment & Intangible Assets
(i) Property, Plant & Equipment

(viii) No amount

(ix) ₹ 24,700

(x) ₹ 7,500

Question 2 [3]

Pia, Sia and Jiya are partners in a firm sharing profits and losses in the ratio of 3:2:1. Pia died
on 31st October, 2021. Her capital as on 1st April, 2021, was ₹ 24,000 and her share of profit
for the year 2021-22 till the date of her death, was ascertained as ₹ 2,000.
Additional information:
(i) Office Equipment of the firm, the book value of which was ₹ 10,000 on 1st April,
2021, was revalued on the date of Pia’s death at ₹ 13,600.
(ii) The amount of ₹ 35,000 due to Pia’s executor in full settlement of the claim, was
transferred to her executor’s loan account.
You are required to prepare Pia’s capital account to be rendered to her executor.
OR
Vinay, Tarun and Arjun are partners in a firm sharing profits and losses in the ratio of 4:3:2
respectively. On Tarun’s retirement from the firm on 1st April, 2022, his capital account, after
all adjustments, stood at ₹1,14,000.
The partners decided that:
(i) Tarun to be paid 50% of the amount due to him immediately and the balance by
accepting a Bill of Exchange (without interest) payable at the expiry of 3 months.
(ii) The continuing partners to re-adjust their capitals in their new profit-sharing ratio
in the reconstituted firm. Any surplus / deficit in their capital accounts to be
adjusted through their current accounts.
Upon re-adjustment of their capitals, Vinay’s capital showed a deficit of ₹ 1,000 while Arjun’s
capital had a surplus of ₹1,000.
You are required to pass journal entries to record:
(i) The closing of the retiring partner’s capital account.
(ii) Adjustment of surplus / deficit in the capital accounts of the continuing partners.

6
Comments of Examiners
(i) Majority of the candidates were unable to
attempt this question satisfactorily. Many
candidates did not comprehend that they were
supposed to calculate the deceased partner's
share in the self-generated goodwill of the
firm. A few candidates transferred the
deceased partner’s share of profit to the P/L
A/c instead of P/L Suspense A/c.
OR
Not many candidates attempted this option.
From amongst those who did attempt it, most
of them were able to pass the correct journal
entry for closing the retiring partner’s capital
account. Some, however, were not clear about
the payment through a Bill of Exchange. They
credited the Bills of Exchange A/c / Bills
Receivable A/c instead of Bills Payable A/c.
(ii) Very few candidates were able to pass the
correct journal entries to adjust the surplus and
deficit in the capital accounts of the continuing
partners through their current accounts. They,
without increasing/ reducing the capital
accounts of the continuing partners, passed a
combined entry to open the respective current
accounts. The incorrect entry seen in the
answer scripts was:
Arjun’s Current A/c Dr
To Vinay’s Current A/c
MARKING SCHEME
Question 2
Pia’s Capital A/c
Particulars Amount
To Pia’s Executor’s A/c / Pia’s 35,000 By Balance b/d
Executor’s Loan A/c
By P/L Suspense A/c
By Revaluation A/c
By Sia’s Capital A/c
7
Suggestions for teachers
− The topic - calculation of 'Hidden
Goodwill' of the retiring / deceased
partner is stated in Unit 1 C II (ii) of the
scope of the syllabus. This concept
needs to be explained and sufficient
practice given to the students.
− To ensure complete clarity, the reason
for transferring the interim profit to P/L
Suspense A/c and not to P/L A/c should
be given to the students.
− Ensure that the chapter on Bills of
Exchange is done thoroughly in Class
XI.
− The concept of adjusting the continuing
partners’ capital accounts, whether
through cash or current accounts needs
to be done through journal entries.
− Adequate practice should be given to
prepare partners’ capital accounts in
problems dealing with capital
adjustments and then the presentation of
the capital and current account balances
of the continuing partners in the
Balance Sheet of the reconstituted firm.
Particulars Amount
24,000
2,000
1,800
4,800
 By Jiya’s Capital A/c 2,400
35,000 35,000
OR

Journal
Date Particulars LF Debit (₹) Credit (₹)
Tarun’s Capital A/c Dr 1,14,000
To Cash / Bank A/c 57,000
To Bills Payable A/c 57,000
(Being amount due to Tarun settled)

Vinay’s Current A/c Dr 1,000

To Vinay’s Capital A/c 1,000
(Being deficit in Vinay’s Capital A/c adjusted
through his Current A/c)

Arjun’s Capital A/c Dr 1,000

To Arjun’s Current A/c 1,000
(Being surplus in Arjun’s Capital A/c
adjusted through his Current A/c)

Question 3 [3]

On 1st April, 2022, Lighthouse Ltd. purchased land from Bricks Ltd. The payment was made
on the same day by:
(i) Issuing a bank draft for ₹ 20,00,000;
(ii) Drawing a Promissory Note in favour of Bricks Ltd. for ₹ 10,00,000;
(iii) Issuing 8,000, 10% Debentures of ₹ 100 each at par, redeemable at a premium of
10%, after three years.
You are required to pass necessary journal entries in the books of Lighthouse Ltd. on
the date of purchase of land.

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Comments of Examiners
Majority of the candidates were able to pass
the necessary journal entries.
A few common errors were:
- Crediting a Promissory Note Account
instead of a Bills Payable Account.
- Crediting Bank Draft A/c instead of
Bank A/c.
- Debiting Loss on redemption of
Debentures A/c / Loss on Debentures
A/c instead of Loss on Issue of
Debentures A/c.
- Passing a combined entry for purchase of
land and meeting its purchase
consideration instead of separate entries
for amount due to the vendor on
purchase of land followed by the
payment entry.
Suggestions for teachers
− Give ample practice to calculate
debentures issued for consideration
other than cash, whether issued at par,
discount or premium.
− Always teach the issue of debentures for
consideration other than cash whether to
a vendor or to promoters of the
company through two separate entries-
the first being the amount due and the
second one of issuing debentures to
honour the amount due.
− Ensure that the students are made to
practice journal entries related to bank
transactions and the topic on Bills of
Exchange needs a lot of attention in
Class XI.

MARKING SCHEME
Question 3
In the Books of Lighthouse Ltd.
Journal
Date Particulars LF Debit (₹) Credit (₹)
Land A/c Dr 38,00,000
To Bricks Ltd. 38,00,000
(Being land purchased)

Bricks Ltd. Dr 38,00,000

Loss on issue of Deb. A/c Dr 80,000
To Bank A/c 20,00,000
To Bills Payable A/c 10,00,000
To 10% Debentures A/c 8,00,000
To Premium on Redemption of Deb. A/c 80,000
(Being purchase consideration of land met)

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 Question 4 [3]
Jerome Ltd., an unlisted manufacturing company, had 20,000, 6% Debentures of ₹ 100 each
due for redemption at par on 31st March, 2022. On this date the company had the required
amount of ₹ 2,00,000 in its Debenture Redemption Reserve.
The Debenture Redemption Investment which was purchased on 30th April, 2021, was
realised at 98% on the date of redemption and the debentures were redeemed on the due date.
You are required to pass journal entries in the books of the company for the year 2021-
22. (Ignore interest on debentures).
OR
On 1st April, 2017, Gabriel Ltd., a listed company, issued 3,000, 8% Debentures of ₹100 each.
One- third of the Debentures were redeemed at par on 31st March, 2021, and the remaining
two-third on 31st March, 2022.
The company paid interest on debentures annually on 31st March.
After meeting the requirements of the Companies Act, 2013, regarding Debenture
Redemption Investment, the debentures were redeemed by the company.
You are required to record necessary journal entries in the books of the company only
on 31st March, 2022, including entries for interest on debentures.

Comments of Examiners
Most of the candidates did not record the loss
on sale of DRI in the entry for sale of the
Debentures Redemption Investment. A few
candidates, recorded the loss on sale of DRI by
directly transferring it to P/L A/c on the date
of sale and not through ‘Loss on sale of DRI
A/c’ which had to be opened on the date of sale
and then closed at the end of the year by being
transferred to P/L A/c.
OR
Most of the candidates who attempted this
question, were able to pass the required journal
entries. However, some candidates:
- Calculated the interest on debentures on the
total debentures issued and not on the
outstanding ₹ 2,00,000 debentures.
- Did not close the Interest on Debentures A/c
at the end of the year.
Suggestions for teachers
− Concept of recording gain/ loss on sale
of an asset to be made very clear in
Class XI itself.
− Give sufficient practice in passing
journal entries and preparing ledger
accounts on the topic ‘Redemption of
Debentures’.
− Explain to the students that on any
borrowings, interest is payable at the
end of the year on the amount which is
outstanding at the beginning of the year.
− Ensure that the students are clear about
the concept of closing of all expenses/
incomes at the end of the year whether
interest on debentures, interest on calls-
in arrears, interest on calls in advance,
interest on DRI, loss / gain on sale of
assets.

10
 MARKING SCHEME
Question 4
In the books of Jerome Ltd.
Journal
Date Particulars LF Debit (₹) Credit (₹)
30/04/21 Debenture Redemption Invest. A/c Dr 3,00,000
To Bank A/c 3,00,000
(Being DRI Purchased)

31/03/22 Bank A/c Dr 2,94,000

Loss on Sale of DRI A/c Dr 6,000
To Debenture Redemption Invest. 3,00,000
(Being DRI sold at a loss)

31/03/22 6% Debentures A/c Dr 20,00,000

To Debenture holders’ A/c 20,00,000
(Being amount due to debenture holder)

Debenture holders’ A/c Dr 20,00,000

To Bank A/c 20,00,000
(Being 6% Debentures redeemed)

31/03/22 Debenture Redemption Reserve A/c Dr 2,00,000

To General Reserve A/c 2,00,000
(Being DRR transferred to GR)

31/03/22 Statement of Profit & Loss Dr 6,000

To Loss on Sale of DRI A/c 6,000
(Being loss on sale of DRI written off)
OR
In the books of Gabriel Ltd
Journal
Date Particulars LF Debit (₹) Credit (₹)
31/03/22 Bank A/c Dr 30,000
To Deb. Redemption Investment 30,000
(Being DRI sold)

31/03/22 8% Debentures A/c Dr 2,00,000

To Debenture holders’ A/c 2,00,000

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 (Being amount due to the deb. holders)

31/03/22 Debenture holders’ A/c Dr 2,00,000

To Bank A/c 2,00,000
(Being debentures redeemed)

31/03/22 Int. on Debentures A/c Dr 16,000

To Debentures holders’ A/c 16,000
(Being interest due to debenture holders)

31/03/22 Debenture holders’ A/c Dr 16,000 16,000

To Bank
(Being interest paid to debenture holders)

31/03/22 Statement of P/L Dr 16,000

To Interest on Debentures A/c 16,000
(Being Int. on Debentures written off)

Alternate Solution
Journal
Date Particulars LF Debit (₹) Credit (₹)
31/03/22 Bank A/c Dr 30,000
To Deb. Redemption Investment 30,000
(Being DRI Sold)

31/03/22 8% Debentures A/c Dr 2,00,000

Interest on Debentures A/c Dr 16,000
To Debenture holders’ A/c 2,16,000
(Being amount due to debenture holders)

31/03/22 Debenture holders’ A/c Dr 2,16,000

To Bank 2,16,000
(Being amount paid to debenture holders)

31/03/22 Statement of P/L Dr 16,000

To Interest on Debentures A/c 16,000
(Being interest on debentures written off)

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Question 5 [3]
Viraj, Harsh and Akhil are partners in a firm sharing profits and losses in the ratio of
4� : 1� : 2� . Akhil dies on 31st March, 2022. Viraj acquires 4� of Akhil’s share and the
9 3 9 9
balance is acquired by Harsh.
On the date of Akhil’s death, it was decided to value the goodwill of the firm on the basis of
two years’ purchase of average super profit.
The average net profit made by the firm is ₹ 49,000 per annum.
The remuneration of the partners, considered as management cost, is estimated to be ₹ 9,000
per annum.
The total value of assets and liabilities of the firm is ₹ 2,20,000 and ₹ 80,000 respectively.
The normal rate of return in the industry is 15%.
You are required to calculate:
(i) The gaining ratio of the continuing partners.
(ii) The value of non-purchased goodwill of the firm.

Comments of Examiners
(i) Most of the candidates were unable to
calculate the gaining ratio of the
continuing partners. However, those who
did get it correct followed a long method
to arrive at the answer. Some candidates
calculated the new profit-sharing ratio and
mentioned it as the gaining ratio.
(ii) Majority of the candidates were unable to
answer this question satisfactorily. The
common errors made were:
- Not writing the formula for calculating
goodwill by the super profit method.
- Not deducting partners remuneration, a
charge against the profits, from the
average profits in order to get the
normal average profits.
Suggestions for teachers
− Give sufficient practice in calculating
the new ratio and gaining ratio of the
continuing partners on the retirement /
death of a partner. The explanation
should be given with examples of whole
numbers.
− Ensure, while teaching valuation of
goodwill, that the students write the
formulae in every sum which they do on
this topic.
− Give adequate examples of non-
operating incomes / gains and expenses
/ losses and their treatment to get the
correct annual profits.
− Provide sufficient practice of sums
dealing with charges against profits
which have not been considered to get
the annual profits of the firm.

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 MARKING SCHEME
Question 5
(i) Viraj : Harsh
Gaining Ratio 4 : 5

(ii) Goodwill = Super profit × No. of Years’ purchase

Super Profit = Actual / Average (maintainable profits) – Normal profits
Rate of Return
Normal profit = Capital Employed ×
100

Capital Employed = Total Assets less purchased goodwill, non-trade investment,

Fictious assets – Outside liabilities / Total Assets - Outside Liabilities

Average profit = ₹ 49,000 – ₹ 9,000 = ₹ 40,000

Capital Employed = ₹ 2,20,000 – ₹ 80,000 = ₹ 1,40,000
15
Normal Profit = 1,40,000 × 100 = ₹ 21,000

Super Profit = 40,000 – 21,000 = ₹ 19,000

Goodwill = 19,000 × 2 = ₹ 38,000

Question 6 [6]
Sunrise Ltd. was formed on 1st November, 2021, with a capital of ₹ 20,00,000 divided into
Equity shares of ₹ 20 each.
It offered 95% shares to the public which were all subscribed for.
60% amount was payable on application;
30% on allotment;
And the balance on final call.
The applicants paid ₹ 11,40,000 on application and ₹ 5,40,000 on allotment.
Final call was not made by the company till the Balance Sheet date.
You are required to prepare:
(i) An extract of the Balance Sheet showing Share Capital.
(ii) Notes to Accounts.

14
Comments of Examiners
Most of the candidates solved this problem
quite satisfactorily. However, a few common
errors were:
- Candidates wrote the incorrect date of the
preparation of the balance sheet of the
company. They wrote ‘Balance Sheet as
on/ at 1st November, 2021’ instead of
‘Balance Sheet as at 31st March, 2022’.
- A few candidates did not give the details
of the kinds of Share Capital- Authorised
/ Issued / Subscribed in the Notes to
Accounts.
- Some candidates were unable to
comprehend the difference between the
called-up capital and paid-up capital of
the company (both information given in
the question) as calls-in-arrears.
MARKING SCHEME
Question 6
Balance Sheet of Sunrise Ltd (an extract)
As at 31.3.2022/ 31st March, 2022
Particulars
I Equity and Liabilities
1. Shareholders’ Funds
(a) Share Capital (Equity)
Notes to Accounts:
Particulars
1. Share Capital
Authorised Capital
1,00,000 Equity Shares of ₹ 20 each
Issued Capital
95,000 Equity Shares of ₹ 20
15
Suggestions for teachers
− Ensure that kinds of share capital-
Authorised, Issued, Subscribed, is
shown in the Notes to Accounts even if
their details are not given in the
question.
− Give adequate practice to the students in
determining the called-up capital and
paid-up capital, both while teaching
‘Issue of Shares’ and ‘Final Accounts of
Companies’
− Explain to the students that the Balance
Sheet of a company is prepared at the
end of the financial year and not on the
date of its formation.
− Insist on the students writing the date of
the Balance Sheet of the company in
every Balance Sheet prepared by them.
Note 31.03.2022
No.
16,80,000
Amount
20,00,000
19,00,000
 Subscribed Capital
Subscribed but not fully paid
90,000 Equity shares @ ₹ 20 each, ₹ 18 called up 16,20,000
5,000 Equity Shares @ ₹ 20 each, ₹ 18 called up 90,000
Less Calls-in-arrears 30,000 60,000

Question 7 [6]
Mita and Sita, sharing profits in the ratio of 2:1, decided to dissolve their partnership firm
on 31st March, 2022, on which date their Balance Sheet was as under:
Balance Sheet of Mita and Sita
As at 31st March, 2022
Liabilities (₹) Assets (₹)
Sundry Creditors 40,000 Land & Building 29,000
Sita’s Son’s Loan 2,000 Plant & Machinery 20,000
Bank Overdraft 8,000 Stock 3,000
Capital Accounts: Debtors 26,400
Mita 20,000 Less Provision for
Sita 10,000 30,000 doubtful debts 400 26,000
Bank 2,000
80,000 80,000

The partnership firm was dissolved on the date of the Balance Sheet subject to the following
adjustments:
(a) Trade creditors accepted plant and machinery at an agreed valuation of 10% less than
the book value and the balance in cash in full settlement of their claims.

(b) Debtors of ₹ 1,000 proved bad.

(c) Sita took over the stock at a discount of 20%.

(d) Realisation expenses of ₹ 1,100 were paid by the firm.

You are required to prepare the Realisation Account.

16
Comments of Examiners
Majority of the candidates could not answer this
question satisfactorily.
The common errors were:
- Transferring net debtors to the Realisation
Account and thereby ignoring the amount of
provision for doubtful debts or clubbing it
with the outside liabilities which had to be
settled.
- Transferring the Bank balance given in the
Balance Sheet to the Realisation Account.
- Transferring Bank overdraft to the
Realisation Account.
- Not discharging the liability of Sita’s son’s
loan.
- Being unable to calculate the amount paid
to the creditors in cash.
- Recording the payment of realisation
expenses through Realisation Expenses A/c
and not through Bank A/c.
Suggestions for teachers
− Explain, with reason:
• why the bank balance and amount of
bank overdraft are not transferred to
Realisation A/c.
• why both gross debtors and
provision for doubtful debts are to be
transferred to Realisation A/c
separately.
• why transfer of provision for
doubtful debts on the credit side of
Realisation A/c is a separate posting
and not to be clubbed with the
outside liabilities which have to be
settled.
− Give sufficient practice to calculate the
amounts at which the liabilities are
discharged, and the assets realised.
− Explain, with reason, why every
liability needs to be discharged even if
no adjustment pertaining to it is given in
the question.

MARKING SCHEME
Question 7
Realisation Account
Particulars Amt. Particulars Amt.
(₹) (₹)
To Sundry Assets By Provision for doubtful debts 400
Land & Building 29,000 By Sundry Liabilities
Plant & Machinery 20,000 Sundry Creditors 40,000
Stock 3,000 Sita’s Son’s Loan 2,000 42,000
Debtors 26,400 78,400 By Bank/ Cash A/c
To Bank / Cash A/c Debtors 25,400
Creditors 22,000 By Sita’s Capital A/c 2,400
Sita’s Son’s Loan 2,000 By Mita’s Capital (loss) 22,200
Real. Expense 1,100 25,100 By Sita’s Capital (loss) 11,100
1,03,500 1,03,500

17
Question 8 [6]
Benu and Leena are partners in a firm sharing profits and losses in the ratio of 5:3. They admit
Deepa and Erica as two new partners.
The new profit-sharing ratio is decided to be 3:2:2:3.
Both the new partners introduce ₹ 1,00,000 each as capital.
Deepa pays ₹ 40,000 in cash for her share of goodwill but Erica is unable to contribute any
amount for her share of goodwill.
At the time of Deepa’s and Erica’s admission, the firm had an Advertisement Suspense
Account of ₹ 56,000 which is written off.
You are required to pass necessary journal entries to record the above adjustments at
the time of admission of Deepa and Erica.
OR
Greg and Rohit are partners in a firm sharing profits and losses in the ratio of 2:3.
Their Balance Sheet as at 31st March, 2022, is given below:
Balance Sheet of Greg and Rohit
As at 31st March, 2022
Liabilities (₹) Assets (₹)
Sundry Creditors 15,000 Goodwill 10,000
Outstanding Salary 5,000 Office Equipment 37,000
General Reserve 8,000 Sundry Debtors 6,400
Capital Accounts: Less Provision for
Greg 25,000 doubtful debts 400 6,000
Rohit 10,000 35,000 Cash 10,000
63,000 63,000
On 1st April, 2022, they admit Kunal as a new partner on the following terms:
(a) The new profit-sharing ratio of Greg, Rohit and Kunal to be 5:3:2.

(b) Kunal to bring his share of capital of ₹ 25,000 and his share of goodwill of ₹ 5,000 in
cash.
(c) Office Equipment to be valued at ₹ 42,000.

You are required to prepare Partners’ Capital Accounts.

18
Comments of Examiners
Very few students attempted this option, Suggestions for teachers
However, amongst those candidates who
− Explain the concept of self-generated
attempted this question, most of them were
goodwill and ensure that sufficient
able to solve it satisfactorily. Some candidates
practice is given to the students in
recorded one of the incoming partner’s share of
passing journal entries.
goodwill who was unable to bring in cash for
− Do sums with adjustments relating to
it, through the Capital A/c and not Current A/c.
the treatment of accumulated profits /
A few students wrote off the Advertisement
losses through a single journal entry as
Suspense A/c from the capital accounts of all
given in the scope of the syllabus.
the partners in the new ratio and not only from
− Give sufficient practice to the students
the old partners’ capital accounts in the old
in solving problems on admission of a
ratio.
partner, especially goodwill
OR
compensation, determining the new
Majority of the candidates solved this problem
profit-sharing ratio, gaining ratio.
quite satisfactorily. However, a few
candidates, while posting the new partner’s
compensation of non-purchased goodwill to the old partners, did it through Goodwill A/c instead
of Premium for Goodwill A/c. Some candidates were unable to calculate the gaining partner’s
compensation for goodwill to the sacrificing partner.

MARKING SCHEME
Question 8
Journal
Date Particulars LF Debit (₹) Credit (₹)
Cash A/c / Bank A/c Dr 2,40,000
To Deepa’s Capital A/c 1,00,000
To Erica’s Capital A/c 1,00,000
To Premium for goodwill 40,000
(Being capital contributed by Deepa & Erica &
Deepa contributing her share of goodwill)

Premium for Goodwill A/c Dr 40,000

Erica’s Current A/c Dr 60,000
To Benu’s Capital A/c 65,000
To Leena’s Capital A/c 35,000
(Being old partners compensating for goodwill
in the sacrificing ratio 13:7)
OR in lieu of the above entry
Premium for Goodwill A/c Dr 40,000

19
 To Benu’s Capital A/c 26,000
To Leena’s Capital A/c 14,000
(Being old partner compensated for Deepa’s
share of goodwill in the sacrificing ratio 13:7)
Erica’s Current A/c Dr 60,000
To Benu’s Capital A/c 39,000
To Leena’s Capital A/c 21,000
(Being old partner compensated for Erica’s share
of goodwill in the sacrificing ratio 13:7)

Beenu’s Capital A/c Dr 35,000

Leena’s Capital A/c Dr 21,000
To Advertisement Suspense A/c 56,000
(Being Advertisement Suspense A/c written off
in the old ratio)
OR
Partner’s Capital Accounts
Particulars Greg Rohit Kunal Particulars Greg Rohit Kunal
To Rohit’s Cap. A/c 2,500 By Balance b/d 25,000 10,000
To Goodwill 4,000 6,000 By Cash/Bank 25,000
To Balance c/d 23,700 19,300 25,000 By Gen. Reserve 3,200 4,800
By Premium for GW 5,000
By Greg’s Capital A/c 2,500
By Revaluation 2,000 3,000
30,200 25,300 25,000 30,200 25,300 25,000

Question 9 [10]
The fixed capital accounts of Shiv, Azeem and Angad, sharing profits and losses in the
ratio of 2:2:1, stood at ₹ 4,00,000, ₹ 6,00,000 and ₹ 2,00,000 respectively.
The accounts for the year ended 31st March, 2022, were drawn up and closed and the
Current Account balances of the partners were determined to be:
Shiv ₹ 35,000, Azeem ₹ 40,000 and Angad ₹ 25,000.
Subsequently the following errors were discovered on 1st April, 2022:
(a) Interest on capital @ 10% per annum had been allowed to the partners, although there was
no provision for it in the partnership deed.
(b) Salary of ₹ 16,000 per annum to Shiv and ₹ 20,000 per annum to Azeem was not allowed
to them, despite a provision for salary in the partnership deed.

(c) Commission of ₹ 24,000 was not allowed to Angad, despite a provision for commission in
the partnership deed.

20
You are required to prepare the adjusted Current Accounts of the partners on 1st April, 2022,
to rectify the lapse in accounting.
OR
Ruma and Neha started business on 1st April, 2021, with fixed capitals of ₹ 4,00,000 and ₹ 3,50,000
respectively.
On 1st October, 2021, they decided that their total capital (fixed) should be ₹ 8,00,000, in their
profit-sharing ratio of 3:2.
Accordingly, they introduced extra capital or withdrew excess capital.
Their partnership deed provided for the following:
(a) Interest on capital to be allowed @ 10% per annum.
(b) A monthly salary of ₹ 1,000 each to be allowed to both Ruma and Neha.
(c) Interest on drawings to be charged @ 18% per annum.
Ruma had withdrawn ₹ 12,000, during the year. As per the deed, the interest on her drawings
amounting to ₹ 1,080 to be charged from her.
During the year ending 31st March, 2022, the firm earned a net profit of ₹ 2,04,000 before charging
manager’s commission of ₹ 20,400 and interest on bank loan of ₹ 4,000.
You are required to:
(i) Give the journal entry to close Ruma’s Drawings Account.
(ii) Prepare Profit and Loss Appropriation Account for the year ending 31st March, 2022.

21
Comments of Examiners
Majority of the candidates who attempted this
option were able to solve it satisfactorily,
However, some candidates did not credit the
partners current accounts with the surplus profit
left with the firm after rectifying the errors. A
few candidates recorded the cancellation of
errors through P/L A/c or P/L Appropriation A/c
and not through P/L Adjustment A/c.
OR
(i) Most of the candidates were unable to give
the correct journal entry to close the
partner’s Drawings A/c. The common error
made by most of the candidates was to have
debited Ruma’s Capital A/c instead of
Ruma’s Current A/c. Some candidates gave
the entry to close the Interest on Drawings
A/c.
(ii) Majority of the candidates did not give any
indication that the P/L Appropriation A/c
being prepared was of a firm following the
fixed capital method. Many candidates
transferred the trading profits to the P/L
Appropriation A/c through ‘Net Profit A/c’
and not through ‘P/L Account’.
Some candidates did not take away the two
charges against profits- the manager’s
commission and interest on bank loan- given
in the question from the incorrect trading
profit given in the question in order to arrive at the correct trading profit.
22
Suggestions for teachers
− Ensure that all types of problems on past
adjustments and the rectification of
errors through single entry as well as
adjusting and closing journal entries are
done in the class.
− Explain the concept of P/L Adjustment
A/c in Class XI while teaching the topic
Rectification of errors.
− Adequate practice has to be given to the
students in preparing P/L Adjustment
A/c and Partners’ Capital/Current
Accounts.
− Teach the topic on Fundamentals of
Partnership through adjusting and
closing entries of all transactions- both
when the firm is following the fixed and
fluctuating capital methods.
− Sufficient practice needs to be given in
preparing the P/L Appropriation
Account with the correct date and also
by passing journal entries.
− Explain the treatment of items which
are a charge against profits and those
which are appropriation of profits.
 MARKING SCHEME
Question 9
Partners’ Current Accounts
Particulars Shiv Azeem Angad Particulars Shiv Azeem Angad
To Interest on 40,000 60,000 20,000 By Balance b/d 35,000 40,000 25,000
Capital
To Balance c/d 35,000 24,000 41,000 By Salary 16,000 20,000
By Commission 24,000
By P/L Adjustment 24,000 24,000 12,000
75,000 84,000 61,000 75,000 84,000 61,000

Alternate Solution
Partner’s Current Accounts
Particulars Shiv Azeem Angad Particulars Shiv Azeem Angad
To Angad’s Curr. 16,000 By Balance b/d 35,000 40,000 25,000
A/c
To Balance c/d 35,000 24,000 41,000 By Azeem’s Curr. 16,000
A/c
35,000 40,000 41,000 35,000 40,000 41,000
OR
(i) Journal
Date Particulars LF Amount Amount
Ruma’s Current A/c Dr 12,000
To Ruma’s Drawings 12,000
(Being Ruma’s Drawings A/c closed)
(ii) Profit & Loss Appropriation A/c
For the year ending 31st March 2022/ 31.3.2022/ For the year 2021-2022
Particulars Amount Particulars Amount
To Interest on Capital By P/L A/c 2,04,000
Ruma’s Curr. A/c 44,000 Less Man. Comm. (20,400)
Neha’s Curr. A/c 33,500 77,500 Less Int.on Bank Loan (4,000) 1,79,600
To Salary By Interest on Drawings
Ruma’s Curr. A/c 12,000 Ruma’s Current A/c 1,080
Neha’s Curr. A/c 12,000 24,000
To Ruma’s Current A/c (Pr) 47,508
To Neha’s Current A/c (Pr) 31,672
1,80,680 1,80,680

23
 [10]
Question 10
NH Ltd., with an authorized capital of ₹ 10,00,000 divided into 1,00,000 Equity shares of ₹ 10
each, issued 50,000 shares to the public at a premium of ₹ 2 per share, payable as follows:

₹ 5 on Application (including premium)

₹ 3 on Allotment
₹ 4 on First & Final Call.
The subscription was at par and the share money was received in full with the exception of the
allotment money on 4,000 shares held by shareholder Ravi and the call money on 6,000 shares
(including Ravi’s shares).
The above 6,000 shares were forfeited by the company and 5,000 of these (including the shares
which had been allotted to Ravi) were reissued at ₹ 8 per share as fully paid up.
You are required to pass journal entries to record the above transactions in the books of the
company.
OR
MV Ltd. was registered with a capital of ₹ 2,00,000 divided into 10,000 Equity shares of ₹ 20 each,
payable as follows:
On Application ₹ 5 per share
On Allotment ₹ 7 per share
On First & Final Call ₹ 8 per share
The company offered 5,000 shares to the public for subscription. It received applications for 6,700
shares.
From amongst the applicants:
(i) Vimal, who had applied for 1,500 shares, paid ₹ 7,500 on application, but was allotted
only 800 shares.
(ii) Abhay, who had applied for 2,000 shares, paid the full amount of ₹ 40,000 with his
application, but was allotted only 1,000 shares.
(iii) Nitin, who had applied for and allotted 500 shares, did not pay the allotment and call
money when due.
(iv) The remaining applicants paid as and when due.
The surplus money paid by both Vimal and Abhay was used towards allotment and call and any
surplus beyond the call was refunded.
The company forfeited Nitin’s shares after the final call.
You are required to pass journal entries to record the above transactions in the books of the
company.

24
Comments of Examiners
A large number of candidates were able to pass
the correct journal entries. Some candidates
were unable to calculate the correct net gain on
re-issue of forfeited shares to Capital Reserve.
Few candidates recorded the securities
premium at the time of receipt of share
application rather than with the entry to transfer
the share application to share capital.
OR
Very few candidates attempted this option.
However, from amongst those who attempted
it, majority of them were able to solve it satisfactorily.
Suggestions for teachers
− Sufficient practice needs to be given to
calculate the net gain on reissue of
forfeited shares, especially in those cases
where different lots of shares are
forfeited, and partial reissue made.
− Ensure that various types of problems on
over-subscription of shares are done with
the students.

MARKING SCHEME
Question 10
In the books of NH Ltd.
Journal
Date Particulars LF Debit (₹) Credit (₹)
Bank A/c Dr 2,50,000
To Share Application A/c 2,50,000
(Being share application received)

Share Application A/c Dr 2,50,000

To Equity Share Capital 1,50,000
To Securities Pr. Res / Securities Premium 1,00,000
(Being share to share capital and securities
premium)

Share Allotment A/c Dr 1,50,000

To Equity Share Capital A/c 1,50,000
(Being share allotment due)

Bank A/c Dr 1,38,000

Calls-in-arrears A/c Dr 12,000
To Share Allotment A/c 1,50,000
(Being share allotment received)

Share First & Final Call A/c Dr 2,00,000

To Equity Share Capital 2,00,000

25
 (Being share first & final due)

Bank A/c Dr 1,76,000

Calls-in-arrears A/c Dr 24,000
To Share First & Final Call A/c 2,00,000

Equity Share Capital A/c Dr 40,000

To Share Forfeiture A/c 12,000
To Calls-in-arrear A/c 28,000
(Being 4,000 shares forfeited)

Equity Share Capital A/c Dr 20,000

To Share Forfeiture A/c 12,000
To Calls-in-arrears A/c 8,000
(Being 2,000 shares forfeited)
OR in lieu of the two forfeiture entries.
Equity Share Capital A/c Dr 60,000
To Share Forfeiture A/c 24,000
To Calls-in-arrear A/c 36,000
(Being 6,000 shares forfeited)

Bank A/c Dr 40,000

Share Forfeiture A/c Dr 10,000
To Equity Share Capital A/c 50,000
(Being 5,000 forfeited shares reissued)

Share Forfeiture A/c Dr 8,000

To Capital Reserve A/c 8,000
(Being net gain on reissue of forfeited
shares transferred to Capital Reserve A/c)
OR

In the books of MV Ltd

Journal
Date Particulars LF Debit (₹) Credit (₹)
Bank A/c Dr 63,500
To Share Application A/c 63,500
(Being share application received)

Share Application A/c Dr 63,500

26
 To Equity Share Capital A/c 25,000
To Share Allotment A/c 10,500
To Calls-in Advance A/c 8,000
To Bank A/c 20,000
(Being share application transferred to
share capital)

Share Allotment A/c Dr 35,000

To Equity Share Capital A/c 35,000
(Being share allotment due)

Bank A/c Dr 21,000

Calls-in-arrears A/c Dr 3,500
To Share Allotment A/c 24,500
(Being share allotment received)

Share First & Final Call A/c Dr 40,000

To Equity Share Capital A/c 40,000
(Being share first & find call due)

Bank A/c Dr 28,000

Calls-in-advance A/c Dr 8,000
Calls-in-arrears A/c Dr 4,000
To Share First & Final Call A/c 40,000
(Being share final call received)

Equity Share Capital A/c Dr 10,000

To Share Forfeiture A/c 2,500
To Calls-in- arrears A/c 7,500
(Being 500 shares forfeited)

27
 SECTION B (20 Marks)
Answer all questions.

Question 11
In subparts (i) and (ii) choose the correct options and in subparts (iii) to (v) answer the
questions as instructed.
(i) A company had Current Assets of ₹ 3,00,000 and Current Liabilities of ₹ 1,50,000, [1]
having a Current Ratio of 2:1.
What will be the company’s revised Current Ratio after it collects ₹ 20,000 cash from
its debtors of ₹ 25,000, the remaining debtors being bad?
(a) 2·56:1
(b) 2·03:1
(c) 2·13:1
(d) 1·97:1
(ii) During the year 2021-22, SM Ltd. issued 10,000, 10% Debentures of ₹ 100 each at a [1]
discount of 10% to be redeemed after three years. The company had a balance of ₹
60,000 in its Securities Premium Reserve.
What amount will be added under Operating Activities as Discount on issue of
Debentures written off in the Cash Flow Statement of SM Ltd. for the year 2021-22?
(a) ₹ 10,00,000
(b) ₹ 60,000
(c) ₹ 1,00,000
(d) ₹ 40,000
(iii) State with reason whether Provision for Doubtful Debts is subtracted from Trade [1]
Receivables while computing Current Ratio.
(iv) While preparing its Cash Flow Statement, will a company consider an increase in its [1]
Bank Overdraft as an Operating Activity or as a Financing Activity?
(v) What is meant by inter-firm analysis? [1]

28
Comments of Examiners
(i) Majority of the candidates chose option
(c) instead of option (d). Candidates did
not realise that along with current assets
increasing by ₹ 20,000, there was also a
decrease in them by ₹ 25,000.
(ii) A large number of candidates selected
option (c) instead of option (d). The
concept of the capital loss being written
off from Securities Premium was not
clear to them.
(iii) Many candidates wrote that provision for
doubtful debts is subtracted from Trade
Receivables while computing Current
Ratio but were unable to give the reason.
(iv) Majority of the candidates wrote the
correct answer.
(v) Most of the candidates correctly wrote
that inter-firm analysis is a comparison
of financial statements of two or more
companies/ enterprises/ business but did
not write that the comparison is for the
same accounting period.
Suggestions for teachers
− Clearly explain the formulae of ratios.
− Explain through journal entries, the
effect on a ratio when there is an
increase or decrease in its components.
− Ensure that the students are given
sufficient practice in the provision of
AS 16, involving writing off the capital
losses, first from capital profits and if
need be, from revenue profits in the year
in which they occur.
− Clearly explain the objective behind
preparing the liquidity, solvency,
turnover and profitability ratios.
− Generally Accepted Accounting
Principles need to be explained with
examples in Class XI and reiterated in
Class XII.
− Explain with examples the meaning of
inter-firm and intra-firm analysis.

MARKING SCHEME
Question 11
(i) (d) or 1·97:1

(ii) (d) or ₹ 40,000

(iii) Yes
Reason: In order to determine the realizable value of Trade Receivables/ Net value
of Trade Receivables/ The amount which the Debtors will pay/ Good debtors/
Principle of Conservatism/ Principle of Prudence.

(iv) Financing Activity

(v) It is a comparison of financial statements/ variables of two or more companies/

enterprises/ business for the same accounting period.

29
 Question 12 [3]

From the following data of Horizon Ltd., you are required to prepare a Comparative
Statement of Profit and Loss.
Particulars 31.03.2022 31.03.2021
Revenue from Operations (% of Other Income) 100% 100%
Other Income ₹ 1,00,000 ₹ 50,000
Cost of Materials consumed ₹ 50,000 ₹ 20,000
Depreciation and Amortisation Expense ₹ 10,000 ₹ 5,000
Comments of Examiners
This question was well answered by almost Suggestions for teachers
all the candidates. However, the heading / − Ensure that while preparing a
date written by some candidates was comparative statement, the students
incomplete as it did not include the date of the always mention the dates/ years of both
previous year with which the current year’s the years under consideration.
figures were being compared. A few − Always make the students work out the
candidates prepared a Common Size % change up to two decimal places.
Statement of P/L. − Tell the students that the basic purpose
of preparing a Statement of P/L is to
determine profits. Hence even if the tax
rate is not given, they are expected to
calculate the difference between
Revenue and Expenses in order to arrive
at net profit before tax.

MARKING SCHEME
Question 12
Comparative Statement of Profit & Loss / Income Statement of Horizon Ltd.
For the years ending 31st March, 2021 & 31st March, 2022
Particulars 31.03.2022 31.03.2021 Absolute Change % Change
Revenue from Operations 1,00,000 50,000 50,000 100
Other Income 1,00,000 50,000 50,000 100
Total Revenue 2,00,000 1,00,000 1,00,000 100
Expenses
Cost of Materials Consumed 50,000 20,000 30,000 150
Dep. & Amortisation Exp. 10,000 5,000 5,000 100
Total Expense 60,000 25,000 35,000 140
Profit before tax 1,40,000 75,000 65,000 86·67

30
Question 13 [6]

From the following information of Hoopla Ltd., you are required to prepare a Cash
Flow Statement (as per AS 3) for the year 2021-22.
Particulars (₹)
(i) Profit for the year 2021-22, before considering dividend and tax but after
taking into account the following items: 15,80,000
(a) Depreciation on Property, Plant & Equipment 5,50,000
(b) Interest Payable on Bank Loan 3,80,000
(c) Profit on sale of investments, the book value of which was
₹ 2,20,000 1,00,000
(ii) During the year 2021-22:

(a) The company

• Paid Tax (which was provided in 2020-21) 4,40,000
• Issued 66,000 equity shares of ₹10 each 6,60,000
• Repaid Bank Loan 15,00,000
• Paid interest on Bank Loan 3,00,000
• Paid Dividend 5,00,000

(b) Trade payables decreased by 10,000

(c) Cash at bank increased from ₹ 60,000 on 1st April, 2021 to
₹ 7,00,000 on 31st March, 2022
OR
From the following Balance Sheets of Rainbow Ltd., you are required to prepare a
Cash Flow Statement (as per AS 3) for the year 2021-22.
Balance Sheets of Rainbow Ltd.
As at 31st March, 2022 and 31st March, 2021
Particulars Note 31.3.2022 31.3.2021
No. (₹) (₹)
I EQUITY AND LIABILITIES
1. Shareholders’ Funds
(a) Share Capital (Equity) 4,00,000 4,00,000
(b) Reserves and Surplus 1. 1,60,000 1,20,000
2. Non-Current Liabilities
Long-term Borrowings (5% Debentures) 3,50,000 2,60,000

31
 3. Current Liabilities
Short term Provision (Provision for Tax) 30,000 25,000
TOTAL 9,40,000 8,05,000
II ASSETS
1. Non-Current Assets
Property, Plant & Equipment & Intangible
Assets
(i) Property, Plant & Equipment 6,00,000 7,80,000
(Plant & Machinery)
2. Current Assets
Cash & Bank Balances (Cash at Bank) 3,40,000 25,000
TOTAL 9,40,000 8,05,000

Notes to Accounts:
Particulars 31.3.2022 31.2.2021
(₹) (₹)
1. Reserves and Surplus
General Reserve 30,000 20,000
Balance in Statement of Profit and Loss 1,30,000 1,00,000
Additional information:
During the year 2021-22, the company:
(i) Sold a machine for ₹ 90,000 at a loss of ₹ 10,000.
(ii) Issued the 5% Debentures on 31st March, 2022, at a discount of 10%. The discount
was written off from General Reserve.

32
Comments of Examiners
Not many candidates attempted this option.
From amongst those who attempted this
option, many did not add the profit on the sale
of investments to its book value to arrive at
the inflow of cash from investing activities.
OR
A large number of the candidates were able
to do this question correctly. However, some
candidates, did not record the interest on
debentures, a hidden adjustment, as a non-
operating expense under Operating Activities
and an outflow of cash under Financing
Activities. A few candidates wrote off the
discount on issue of debentures from the
revenue profits and not from General Reserve
which was a requirement of the question. A
few candidates also did not mention the
period for which the Cash Flow Statement
was being prepared.
MARKING SCHEME
Question 13
Cash Flow Statement of Hoopla Ltd
For the year ending 31st March, 2022 / 31.03.2022/ For the year 2021-22
Particulars
I. Cash from Operating Activities
Net profit before Tax
Add non-op/ non-cash expenses
Depreciation on Property, Plant & Equipment
Interest on Bank Loan
Less non-op/ non-cash income
Profit on Sale of Investments
Net Operating Profit before WC changes
Less Trade payables
33
Suggestions for teachers
− Give sufficient practice to the students
in calculating cash from investing
activities.
− Ensure that the students have clearly
understood the preparation of the Asset
A/c both at its Gross Value along with
the Accumulated Depreciation A/c and
the Asset A/c at its Net Value.
− Ensure that the students show the
calculation of 'Net Profit before Tax' as
a working note and not in the main body
of the Cash Flow Statement.
− Give sufficient practice to the students
in the treatment of writing off capital
losses from capital profits while
preparing a Cash Flow Statement.
− Sufficient number of problems with
hidden adjustments involving interest
on debentures and interest on
investments need to be done.
(₹) (₹)
15,80,000
5,50,000
3,80,000
25,10,000
(1,00,000)
24,10,000
(10,000)
 Cash from Operating Activities before Tax Paid 24,00,000
Less Tax Paid (4,40,000)
Cash flow from Operating Activities 19,60,000
II. Cash from Investing Activities
Sale of Investment 3,20,000
Cash flow from Investing Activities 3,20,000
III. Cash from Financing Activities
Issue of Share Capital 6,60,000
Repaid Bank Loan (15,00,000)
Dividend Paid (5,00,000)
Interest on bank Loan paid (3,00,000)
Cash used in Financing Activities (16,40,000)
Net increase in Cash as per I, II & III 6,40,000
Add Opening Cash & Cash Equivalents
Cash at bank 60,000
Closing Cash & Cash Equivalents
Cash at bank 7,00,000
7,00,000 7,00,000

OR
Working Note 1
General Reserve A/c
Particulars Amount Particulars Amount
To Discount on Debentures 9,000 By Balance b/d 20,000
To Balance c/d 30,000 By St of P/L 19,000
39,000 39,000
Or
General Reserve= 20,000 – 9,000 = 11,000; 30,000 – 11,000 = 19,000
Working Note 2 Plant & Machinery A/c
Particulars Amount Particulars Amount
To balance b/d 7,80,000 By Depreciation 80,000
By Cash A/c 90,000
By Loss on Sale A/c 10,000
By Balance c/d 6,00,000
7,80,000 7,80,000
Or
Depreciation = 7,80,000 – 1,00,000 – 6,00,000 = 80,000

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Working Note 3
Calculation of Net Profit before Tax ₹
Net profit for the year 30,000
Add General Reserve 19,000
Provision for Tax 30,000
Net Profit before Tax 79,000

OR
Cash Flow Statement of Rainbow Ltd.
For the year ending 31st March, 2022/ 31.03.2022/ For the year 2021-22
Particulars (₹) (₹)
I. Cash from Operating Activities
NP before Tax (WN 3) 79,000
Add non op / non cash exp
Depreciation on Plant & Machinery 80,000
Loss on sale of Plant & Machinery 10,000
Interest on 5% Debentures 13,000
Net Op Profit before WC changes / Cash from Operating 1,82,000
Activities before Tax Paid
Less Tax paid (25,000)
Cash flow from Operating Activities 1,57,000
II. Cash from Investing Activities
Sale of Plant & Machinery 90,000
Cash flow from Investing Activities 90,000
III. Cash from Financing Activities
Issue of 5% Debentures 81,000
Interest on 5% Debentures paid (13,000)
Cash Flow from Financing Activities 68,000
Net increase in Cash as per I, II and III 3,15,000
Add Opening Cash and Cash Equivalents
Cash at Bank 25,000
Closing Cash and Cash Equivalents
Cash at Bank 3,40,000
3,40,000 3,40,000

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Question 14 [6]

Answer any three of the following questions:

(i) Calculate Debt to Total Assets Ratio of Moonlight Ltd. (up-to two decimal
places) from the following information:
Particulars (₹)
Property, Plant & Equipment and Intangible Assets 20,00,000
Shares of XYZ Bank Ltd. 1,00,000
Long term Loans and Advances 1,00,000
Current Assets 10,00,000
Current Liabilities 4,00,000
Total Debt 12,00,000
(ii) Calculate Trade Payables Turnover Ratio (up-to two decimal places) from the
following information:

Particulars (₹)
Trade Payables at the beginning of the year 70,000
Trade Payables at the end of the year 80,000
Payment to Trade Payables 3,20,000
Returns to Credit Suppliers 30,000

(iii) Calculate Quick Ratio (up-to two decimal places) from the following
information:

Particulars (₹)
Total Current Assets 90,000
Working Capital 60,000
Prepaid Expenses 30,000

(iv) In the year 2021-22, Kartik Ltd.:

• Carried an average stock of ₹ 40,000.
• Its Inventory Turnover Ratio was 8 times.
• It sold goods at a profit of 25% on the cost of revenue from operations.
Calculate the profit made by Kartik Ltd. in the year 2021-22.

36
Comments of Examiners
(i) Majority of the candidates who attempted
this option did not consider the Long- Suggestions for teachers
term Loans and Advances as an asset and − Discuss the formulae of the ratios as per
hence were unable to get the correct the scope of the syllabus.
amount of Total Assets. − Ensure that the students write the
(ii) Most of the candidates considered the formula of the ratio when solving a
amount of payment to Trade Payables as problem.
the net credit purchases. They did not − Make sure that the answers calculated
prepare a Trade Payables Account to find are up to two decimal places and written
the amount of credit purchases. Some with the correct units.
candidates lost marks in the formula too. − Give sufficient practice to the students in
They wrote ‘Credit Purchases’ instead of finding the missing component.
‘Net Credit Purchases’.
(iii) Majority of the candidates were able to
calculate the Quick Ratio. However, some candidates wrote ‘Current Assets less Prepaid
expenses’ in the formula instead of ‘Current Assets less Inventory less Prepaid expenses’. A
few wrote ‘Quick Liabilities’ instead of ‘Current Liabilities’ while in some answer scripts
the formula itself was missing.
(iv) Majority of the candidates were able to calculate the correct profit.

MARKING SCHEME
Question 14
(i) Debt /Long term Debt
Debt to Total Assets Ratio =
Total Assets
8,00,000
=
32,00,000
= 0·25 : 1
(ii) Net Credit Purchases
Trade Payables Turnover Ratio = Average Trade Payables
3,30,000
= 75,000

= 4·4 times

(iii) Quick Ratio =

Quick Assets
Current Liabilites

Or
Liquid Assets
Current Liabilites

37
 Or
Current Assets−Inventory−Prepaid Expenses
Current Liabilites
60,000
=
30,000
=2:1

(iv) Inventory Turnover Ratio = Cost of Revenue from Operations

Average Inventory
Cost of Revenue from Operations
8= 40,000
Cost of revenue from operations = 8 × 40,000 = ₹ 3,20,000
Profit = ₹ 80,000

SECTION C (20 Marks)

Answer all questions.

Question 15
In subparts (i) and (ii) choose the correct option and in subparts (iii) to (v) answer the
questions as instructed.
(i) Which of the following formulas in Excel will NOT give any result? [1]
(a) = SUM(Sales)−A3
(b) = SUM(A1:A5)*·5
(c) = SUM(A1:A5) / (10−10)
(d) = SUM(A1:A5)−10
(ii) Which one of the following terms is NOT related to computerised databases? [1]
(a) Search
(b) Sort
(c) Field names
(d) Record grab
(iii) Which formula will capture the correct number of numerical values from the [1]
following range?
A2:A5 & C2:C5

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 (iv) Give the meaning of the MODE function in Excel with an example. [1]

(v) When editing a cell in Excel, which key or combination of keys is pressed to toggle [1]
between relative, absolute and mixed cell references?

Comments of Examiners
Very few candidates attempted this question. Suggestions for teachers
Give more practice to students in attempting
questions based on application of
spreadsheets.

MARKING SCHEME
Question 15
(i) (a) or = SUM(Sales)-A3

(ii) (a) or search

(iii) = COUNT(C2:C5,A2:A5)

(iv) MODE function returns the most frequently occurring number in a range / returns the
most frequently occurring number in a numeric data set.
For example, =MODE (1,2,4,4,5,5,5,6) returns 5. (Or any other example)

(v) F4 (Windows) or Command + T (Mac)

Question 16 [3]

(i) What is a view in SQL?

(ii) How is a view created in SQL?

Comments of Examiners
Very few candidates attempted this question.
Suggestions for teachers
Provide more practice to students in
attempting questions based on Database
Management System.

39
 MARKING SCHEME
Question 16
(i) A view is a virtual table based on the result-set of an SQL statement.

(ii) It can be created by using create view syntax.

[6]
Question 17
Uday and Bijoy are partners in a firm. On 1st April, 2022, they admit Kabir as a partner for
1� share in the profits. The adjustments on the date of admission are as follows:
3
2022
April 1 Bank Loan to be paid off.
April 1 Kabir to bring in capital of ₹ 40,000 but would be unable to bring in his share of
goodwill in cash.
These transactions are recorded in the following spreadsheet:
A B C D E

Date Particulars Ledger Folio Debit (₹) Credit (₹)

2022 Closing Balances
1 March 31 Bank A/c 15,000
2 March 31 Uday’s Capital Balance 40,000
3 March 31 Bijoy’s Capital Balance 30,000
4 March 31 Bank Loan 10,000
2022 Transactions
5 April 1 Bank A/c 40,000
6 April 1 To Kabir’s Capital A/c 40,000
7 April 1 Kabir’s Current A/c ?
8 April 1 To Uday’s Capital A/c 3,000
9 April 1 To Bijoy’s Capital A/c ?
10 April 1 Bank Loan A/c 10,000
11 April 1 To Bank A/c 10,000
Opening balances of reconstituted
2022 firm
12 April 1 Bank A/c ?
13 April 1 Uday’s Capital A/c ?

Based on the above transactions and the information given in the spreadsheet, answer
any three of the following questions:
(a) Write the formula to calculate Kabir’s share of the non-purchased goodwill in cell D7.

40
 (b) Write the formula to calculate Uday’s opening capital balance in cell E13.
(c) Write the formula to calculate the opening Bank balance of the reconstituted firm in
cell D12.
(d) Give the amount of total value of the non-purchased goodwill of the firm at the time of
Kabir’s admission.

Comments of Examiners
Suggestions for teachers
Very few candidates attempted this question.
Give more practice to students in attempting
questions based on application of
spreadsheets.

MARKING SCHEME
Question 17
(a) =E8*2

(b) =[E2+E8]

(c) =[D1+D5-E11]

(d) ₹ 18,000

Question 18 [6]

Answer any three of the following questions.

(i) Give the difference between Database State and Database Schema.
(ii) State the following rules of DBMS:
• Entity Integrity
• Referential Integrity
(iii) Give any two differences between Static (embedded) SQL and Dynamic SQL.
(iv) How is index hunting helpful? Give any two measures to achieve index hunting.

41
Comments of Examiners
Suggestions for teachers
Very few candidates attempted this question.
Provide more practice to students in
attempting questions based on Database
Management System.

MARKING SCHEME
Question 18
(i) The collection of information stored in a database at a particular moment in time is
called database state while the overall design of the database is called the
database schema.
(ii) Entity Integrity: This states a very important rule that the value of a Primary key can
never have a NULL value.
Referential Integrity: This rule is related to the Foreign key which states that either
the value of a Foreign key is a NULL value or it should be the primary key of any other
relation.
(iii) Static (embedded) SQL Dynamic SQL
1. The accessibility of database is The accessibility of database is
predetermined determined at run time.
2. It is swifter and more efficient. It is less swift and efficient.
3. SQL statements are compiled at SQL statements are compiled at run
compile time. time.
4. Parsing, validation, optimization and Parsing, validation, optimization and
generation of application plan are generation of application plan are
done at compile time. done at run time.
5. It is generally used for situations It is generally used for situations
where data is distributed uniformly. where data is distributed non-
uniformly.
6. EXECUTE IMMEDIATE, EXECUTE EXECUTE IMMEDIATE, EXECUTE
and PREPARE statements are not used. and PREPARE statements are used.
7. It is less flexible. It is more flexible.

(iv) Index hunting helps in improving the speed as well as the query performance of database.
Measures to achieve index hunting:
(i) The query optimizer is used to coordinate the study of queries with the workload
and the best use of queries based on this.
(ii) Index, query distribution along with their performance is observed to check their
effect.
(iii) Tuning databases to a small collection of problem queries is also recommended.

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