Accountancy XII 1-4

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U DAV PUBLIC
E SCHOOLSODISHAZONE
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B XII
A
SAMPLE QUESTION PAPER
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CONTRIBUTORS
NAME OF THE CHAPTER/SECTION
SL.NO SCHOOL
TEACHER ALLOTTED
Accounting for
Mr. Pratap Kumar
1 DAV P.S CHANDRASEKHAR partnership firms
Behera
PUR, BBSR (Fundamentals)
Mrs.Manaswini Goodwill- Nature and
2 DAV P.S POKHERIPUT , BBSR
Mohanty Valuation
Reconstitution of
Partnership firms –
3 Mrs.Karuna Jyotish DAV P.S , KANSHBAHAL
Change in Profit
Sharing Ratio
Reconstitution of
Mr. Sumanta Partnership firms –
4 DAVP.S,JHARSUGUDA
Kumar Behera Admission of a
partner
Reconstitution of
DAV P.S IB Partnership firms –
5 Mr. Rakesh Pandey
VALLEY,MCLBRAJARAJNAGAR Retirement of a
partner
Reconstitution of
Mr. Gour Chandra DAV P.S MCL, KALINGA
6 Partnership firms –
Sekhar AREA,TALCHER
Death of a partner
Dissolution of
7 Mr. R.C. Sahoo DAV PS,MCL, BANDHABAHAL
Partnership Firm
DAV PS MCL,
Accounting for Share
8 Mr. Ashok Mishra JAGANNATHAREA,
Capital
DERA,TALCHER
Dr. Jogesh Chandra Accounting for issue
9 DAV P.S UNIT-VIII, BBSR
Mohanty of Debentures
Financial Statement
of a Company and
10 Mr. R.C. Hota DAV PS,MCL BURLA
Analysis of Financial
Statements
Financial Statement
Mr. Balaram
11 DAV P.S ,ROURKELA Analysis (Tools)-
Behera
Ratio Analysis
Financial Statement
12 Mr. Debendra Naik DAV P.S CDA, CUTTACK Analysis (Tools)- Cash
Flow Statement
Guided By
Subject Co-cordinators
1. Mr. Balaram Mahapatra (DAVPS, IFFCO, Paradeep)
2. Mr. P. K. Panda
(DAV PS, Pragati Marg, Sunarimunda, Jharsuguda)
Accounting for partnership firms ( Fundamentals)
8-MCQ QUESTIONS
1. X,Y and Z are partners in a firm sharing profits and losses in the ratio of 6:4:1. X
guaranteed profit of Rs 15,000 to Z .Net profit for the year ending 31 st march,2019 was
Rs 99,000. X share in the future of the firm will be
a) Rs 30,000
b) Rs 15,000
c) Rs 48,000
d) Rs 45,000
2. A, B and C were partner in a firm sharing Profit in the ratio of 3:2:1 during the year the
firm earned profit of Rs. 84,000. Calculate the amount of Profit or Loss transferred to
the capital A/c of B.
a) Loss Rs. 87,000
b) Profit Rs. 87,000
c) Profit Rs.28,000
d) Profit Rs.14,000
3. X and Y are partners in a firm. X is to get commission of 10% of net profit before
charging any commission. Y is to get commission of 10% of net profit after charging all
commissions. Net profit for the year ended 31st March 2020 was Rs 55,000. Find the
commission of Y. rs 4500
4. Calculate interest on A‘s drawings @10% if he withdraw Rs 2,50,000 during the year. rs
12500
5. In the absence of partnership deed, interest on drawings of a partner is charged
a) @ 8% per annum
b) @ 9% per annum
c) @ 10% per annum
d) @ 12% per annum
6. Vidit and seema were partners in a firm sharing profits and losses in the ratio of 3:2.
Their capitals were Rs 1,20,000 and Rs 2,40,000 respectively. They were entitled to
interest on capitals @ 10% . The firm earned profit of Rs 18,000 during the year. The
interest on vidit‘s capital will be
a) Rs 12,000
b) Rs 10,800
c) Rs 7,200
d) Rs 6,000
7. X, Y and Z are partners in a firm sharing profits and losses in the ratio of 6:4:1. X
guaranteed a profit of Rs 15,000 to Z. the net profit for the year ending 31 st march 2019
was Rs 99,000. X‘s share in the profit of the firm will be
a) Rs 30,000
b) Rs 15,000
c) Rs 48,000
d) Rs 45,000
8. In the absence of partnership, interest on loan of a partner is allowed
a) @8 % per annum
b) @ 6% per annum
c) No interest is allowed
d) @ 12 % per annum
3MARK QUESTIONS
1. Bhanu and pratap are partners sharing profits in the equally. Their fixed capital as on 1 st
april, 2023 were Rs 8,00,000 and Rs 10,00,000 respectively. Their drawings during the
year were Rs 50,000 and Rs 1,00,000 respectively. Interest on capital is a charge and is
to be allowed @ 10 % p.a. and interest on drawings is to be charged @ 15% p.a. profit
for the year ended 31st march, 2022 before giving effect to the above was Rs 1,20,000.
Prepare profit and loss appropriation account.
2. Anita and ankita are partners sharing profits equally. Their capitals maintained
following fluctuating capital accounts method, as on 31st march 2021 were Rs 5,00,000
and Rs 4,00,000 respectively. Partnership deed provided to allow interest on capital @
10% p.a. The firm earned net profit of Rs 2,00,000 for the year ended 31 st March,2022.
Pass the journal entry for interest on capital.
3. Shiv, Mohan and Gopal are partners sharing profits and losses in the ratio of 2:2:1. Shiv
is entitled to a commission of 10% on the net profit .net profit for the year is Rs
1,10,000. Determine the amount of commission payable to shiv.
4. Ram and Mohan two partners drew for their personal use of Rs 1,20,000 and Rs 80,000.
Interest is chargeable @ 6% p.a. on the drawings. What is the amount of interest
chargeable from each partner?
5. Reya, mona and nisha shared profits in the ratio of 3:2:1. Profits for the last three years
were Rs 1,40,000, Rs 84,000 and Rs 1,06,000 respectively. These profits were by
mistake distributed equally. The error is now to be corrected. Give necessary
rectification journal entry.
4MARK QUESTIONS
1. A, B and C are partners in a firm sharing profits in the ratio of 4:2:1. It is provided that
C‘s share in profit would not be less than Rs 37,500. Profit for the year ended 31 st
March, 2019 was Rs 1,57,500. Prepare profit and loss appropriation account.
2. Nirmal and Pawan are partners sharing profits in the ratio of 3: 2. The firm had given
loan to Pawan of Rs 5,00,000 on 1st April, 2021. Interest was to be charged @ 10% pa.
The firm took loan of Rs 2,00.000 from Nirmal on lst October, 2021. Before giving
effect to the above, the firm incurred a loss of Rs 10,000 for the year ended 31st March,
2022. Determine the amount to be transferred to Profit & Loss Appropriation Account.
6MARK QUESTIONS
1. Atul and Mithun are partners sharing profits in the ratio of 3: 2. Balances as on 1st
April, 2021 were as follows: Capital Accounts (Fixed) Atul-Rs 5,00,.000 and Mithun-7
6,00,0oo. Loan Accounts: Atul-7 3,00,000 (Cr.) and Mithun -Rs 2,00,000 (Dr. ) It was
agreed to allow and charge interest @ 8% p.a. Partnership Deed provided to allow
interest on capital @10% p.a. Interest on Drawings was charged Rs 5,000 each.
Profit before giving effect to above Rs 28,000 for the year ended 31st March, Page-1
2022. Prepare Profit & Loss Appropriation Account.
2. A and B are partners in a firm sharing profits and losses in the ratio of 3:2. Following
was the balance sheet of the firm as at 31st March, 2018:
Liabilities Rs Assets Rs
Capital A/cs: Sundry Assets 80,000
A 60,000
B 20,000
80,000 80,000
st
Profits Rs 30,000 for the year ended 31 March, 2018 was divided between the partners
without allowing interest on capitals @ 12% p.a. and salary to A @ Rs1,000 per month.
During the year A withdraw Rs 10,000 and B Rs 20,000.
Pass necessary adjustment journal entry and show your working clearly.
A &R QUESTIONS
1) Assertion (A): it is necessary condition that all the partners should contribute capital in
the firm.
Reason(R): The essential condition is that a written agreement exists to share profits of
the business and the business may be carried on by all or any of them acting for all.
a) Both (A) and (R) true and (R) is the correct explanation of (A).
b) Both (A) and (R) true and (R) is not the correct explanation of (A).
c) (A) is true and (R) is false.
d) (A) is false and (R) is true.
2) Assertion (A): Partnership is the relation between persons who have agreed to share the
profits of a business carried on by all or any of them acting for all.
Reason(R): it is defined in the partnership act 1932.
e) Both (A) and (R) true and (R) is the correct explanation of (A).
f) Both (A) and (R) true and (R) is not the correct explanation of (A).
g) (A) is true and (R) is false.
h) (A) is false and (R) is true.
Goodwill- Nature and Valuation

1. Read the following statements: Assertion (A) and Reason (R). Choose one of the
correct alternatives given below:
Assertion (A): Goodwill is considered an intangible asset but not a fictitious asset.
Reason (R): Goodwill can neither be seen and touched nor it can be purchased or sold with
any other asset.
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanationof
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanationof Assertion (A).
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True
2. Read the following statements: Assertion (A) and Reason (R). Choose one of the
correct alternatives given below:
Assertion (A): Abnormal loss of a year should be subtracted from the net profit of the year for
the calculation of goodwill.
Reason (R): Future profits depend upon the average performance of the business in the past.
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanationof
Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
d) Assertion (A) is False but Reason (R) is True
3. If average capital employed in a firm is ₹8,00,000, average of actual profits is ₹1,80,000
and normal rate of return is10%, then value of goodwill as per capitalization of average
profits is:
a) ₹10,00,000
b) ₹18,00,000
c) ₹80,00,000
d) ₹78,20,000
Case based questions
Question no 4 and 5 are based on the hypothetical situation given below.
Bharat and Bhusan are partners in a retail business, They share their profits in 2:1. They
decided to change their ratio to 1:1. The balances in capital and current accounts as on 31 st
March 2019 were:
Name Capita accounts Current accounts
Bharat Rs 4,00,000 Rs 1,00,000
Bhusan Rs 4,80,000 Rs 20,000(Dr)
The firm earned a average profit of Rs 97,000.Normal rate of interest is 8%.
4. Find out the super profit of the firm

a) Rs 36,000
b) Rs20200
c) Rs76,800
d) Rs40,000
5. Find out the Goodwill of the firm on the basis of capitalization of super profit method.
a) Rs 2,34,000
b) Rs 2,25,000
c) Rs 2,52,500
d) Rs 3,34,000
6. A firm earned a profit of Rs 8,000, Rs 10,000, Rs 12,000 and Rs 16,000 during the
years I, II, III and IV years respectively. The firm has capital investments of
Rs50,000,Goodwill of the firm based on three year‘s purchase of average super profits
of last four years is Rs12,000.find out the rate of return on investment.
a) 12%
b) 10%
c) 15%
d) 8%
7. On 1st April an existing firm has assets Of Rs 75,000 including cash of Rs 5,000.The
normal rate of return is 10% and the Goodwill of the firm is valued at ---- year‘s
purchase of super profit,and the actual profit of the firm is given Rs13,500.
a) 3
b) 4
c) 6
d) 5
8. Total capital employed in the firm Rs 16,00,000 Reasonable rate of return 15%, profit
for the year Rs24,00,000. The value of goodwill using capitalisation method is:
a) Rs1,64,000
b) Rs24,00,000
c) Rs1,44,00,000
d) Rs84,00,000
3 marks questions
9. On April 1, 2018, a firm has assets of Rs 1,00,000 excluding stock of Rs 20,000. The
current liabilities were Rs10,000 and the balance constituted partner's capital Accounts.
If the normal rate of return is 8 %, the Goodwill of the firm is valued at Rs60.000 at
four years purchase of super profit, find the actual profits of the firm.
10.Average Profit of the firm is Rs1, 50, 000. Total tangible assets in the firm are Rs
12,00,000& outside liabilities are Rs 7,00,000. In the same type of business, the normal
rate of return is 20 %. Calculate the value of goodwill of the firm by Capitalisation of
Super Profit method if the goodwill is valued at 2 years. Purchase of Super Profit.
11. Average profit earned by a firm is Rs75,000 which includes undervaluation of stock of
Rs5000 on average basis. The capital invested in the business isRs 8,00,000& the
normal rate of return is 8 %. Calculate goodwill of the firm on the basis of 5 times the
Super Profit
12. On 1st April 2018, a firm had assets of Rs 3,00,000 including Cash of Rs5,000. The
Partner's Capital A/c showed a balance of Rs2, 00, 000 & the Reserve Constituted the
rest. If the normal rate of return of is 10 % & the goodwill of the firm is valued at Rs
200,000 at four years purchase of Super Profit. Find the average Profit of the firm.
13. A partnership firm earned net profits during the last three years ended 31st March, as
follows: 2017 − ₹ 17,000; 2018 − ₹ 20,000; 2019 − ₹ 23,000.
The capital investment in the firm throughout the above-mentioned period has been ₹
80,000. Having regard to the risk involved, 15% is considered to be a fair return on the
capital. Calculate value of goodwill on the basis of two years' purchase of average super
profit earned during the above-mentioned three years
4 marks questions
14.A business has earned average profits of Rs. 1,00,000 during the last few years and the
normal rate of return in similar business is 10%. Find out the value of goodwill by
(i) Capitalisation of super profit method.
(ii) Super profit method, if the goodwill is valued at 3 years‘ purchase of super profit.
The assets of the business were Rs. 10,00,000 and its external liabilities Rs. 1,80,000.
15.The capital employed in the firm throughout the above-mentioned period has been
Rs. 4,00,000. Having regard to the risk involved, 15% is considered to be a fair return
on the capital. The remuneration of all the partners during this period is estimated to be
Rs. 1,00,000 per annum.
Calculate the value of goodwill on the basis of
(i) 2 years‘ purchase of super profits earned on average basis during the above
mentioned 3 years and
(ii) By capitalisation method.
6 marks questions
16.Manbir and Nimrat are partners and they admit Anahat into partnership. It was agreed
to value goodwill at three tears' purchase on Weighted Average Profit Method taking
profits of last five years. Weights assigned to each year as 1, 2, 3, 4 and 5 respectively
to profit for the year ended 31st March, 2014 to 2108. The profit for these years were: ₹
70,000, ₹ 1,40,000, ₹ 1,00,000, ₹ 1,60,000 and ₹ 1,65,000 respectively.
Scrutiny of books of account revealed following information:
(i) There was an abnormal loss of ₹ 20,000 in the year ended 31st March, 2014.
(ii) There was an abnormal gain (profit) of ₹ 30,000 in the year ended 31st March,
2015.
(iii) Closing Stock as on 31st March, 2017 was overvalued by ₹ 10,000.
Calculate the value of goodwill.
17.A and B are partners sharing profits in the ratio of 3 : 2. They decided to admit C as a
partner from 1st April, 2018 on the following terms:
(i) C will be given 2/5th share of the profit.
(ii) Goodwill of the firm be valued at two years' purchase of three years' normal average
profit of the firm.
Profits of the previous three years ended 31st March, were:
2018 – Profit ₹ 30,000 ( after debiting loss of stock by fire ₹ 40,000).
2017 – Loss ₹ 80,000 (includes voluntary retirement compensation paid ₹ 1,10,000).
2016 – Profit ₹ 1,10,000 (including a gain (profit) of ₹ 30,000 on the sale of fixed
assets).
you are required to value the goodwill.
Reconstitution of Partnership firms – Change in Profit Sharing Ratio
1 X and Y share profit and loss in 3:2. From 1st January, 2017 they agreed to share 1
profit equally. Their sacrifice or gain will be :
(a) Sacrifice by X: 1/10
(b) Sacrifices by Y : 1/10
(c) Both (a) and (b)
(d) None of these
2 The entry to be passed for adjustment of goodwill when there is a change in profit 1
(loss) sharing ratio of partners, without opening goodwill account is
(a) Sacrificing Partners‘ Capital A/c Dr
To Gaining Partners‘ Capital A/c
(b) Gaining Partners‘ Capital A/c Dr
To Sacrificing Partners‘ Capital A/c
(c) Gaining Partners‘ Current A/c Dr
To Sacrificing Partners‘ Current A/c
(d) Either (b) or (c)
3 If there is a change in profit sharing ratio of existing partners and the question is 1
silent about investment fluctuation reserve, then it is distributed among partners in
(a) Old ratio
(b) New ratio
(c) Sacrificing ratio
(d) Gaining ratio
4 Whenever revaluation account is prepared, the journal entry for unrecorded assets 1
is:
(a) Unrecorded Assets A/c Dr
To Revaluation A/c
(b) Revaluation A/c Dr
To Unrecorded Assets A/c
(c) Revaluation A/c Dr
To Partner‘s Capital A/c
(d) None of the above
5 Asha ,Nisha and Disha shared profits and losses in the ratio of 3:2:1 respectively 1
.With effect from 1st April 2022,they agreed to share profits equally. The goodwill
of the firm was valued at Rs 18,000.Journal entry to record this effect will be:
(a) Asha‘s capital A/C…….Dr 3,000
To Disha‘s capital A/c 3,000
(b) Disha‘s capital A/C…….Dr 3,000
To Asha‘s capital A/c 3,000
(c) Asha‘s capital A/c ….Dr 9,000
Disha‘s capital A/c ….Dr 6,000
Nisha‘s capital A/c….Dr 3,000
To Goodwill A/c 15,000
(d) Disha‘s capital A/C…….Dr 3,000
To Nisha‘s capital A/c 3,000
Read the following hypothetical situation ,Answer Question No.6 and Q no. 7 1
A ,B and C are presently sharing profits and losses in the ratio of 5:3:2 .A due to
his illness is not able to contribute much in the business as before .he conveyed his
inability to B and C . After some discussion they decided to change their profit
sharing ratio in 2:3:5 as C is going to shoulder the responsibilities handled by A
due to this situation. At that time Investment Fluctuation Reserve was of Rs 20,000
and Investment (market value Rs 95,000) appears in the books at Rs 1, 00,000.
6 Journal entry for investment fluctuation reserve will be: 1
(a) Investment Fluctuation Reserve A/c…..Dr 20,000
To Investment A/c 5,000
To A‘s Capital A/c 3,000
To B‘s Capital a/c 4,500
To C ‗s capital a/c 7,500
(b) Investment Fluctuation Reserve A/c…..Dr 20,000
To Investment A/c 5,000
To C‗s capital a/c 3,000
(c) Investment Fluctuation Reserve A/c…..Dr 20,000
(d) Investment Fluctuation Reserve A/c…..Dr 20,000
7 Investment fluctuation reserve will be distributed in : 1
a) 5:3:2
b) 2:3:5
c) Gaining ratio
d) Sacrificing ratio
8 Read the following statements: Assertion and Reason. Choose one of the correct 1
alternatives given below:
Assertion (A): When partners decide to change their profit sharing ratio
mutually they can do so by framing a new partnership deed.
Reason (R): It will lead to reconstitution of partnership firm.
Alternatives:
(a) Both Assertion (A) and Reason (R) are True and Reason (R) is the correct
explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct
(c) Assertion (A) is True but Reason(R) is False.
(d) Assertion (A) is False but Reason (R) is True.
Assertion (A): change in profit sharing ratio is mostly made when there is change
in capitals of partners.
Reason (R): sacrificing ratio is the difference of old share and new share of the
partners. Alternatives:
Assertion (A): A firm may have accumulated profits during change in profit
sharing ratio.
Reason (R): These reserves are only for old partners and distributed to their
capital account only.
Alternatives:
11 X, Y and Z are partners of Shriram traders. They are sharing profits and losses in 3
the ratio of 3:2:1. They have unlimited liabilities as per the norms of partnership.
They also have gone through the provisions of Indian partnership act, 1932 and
accordingly for future security purpose they also have registered their firm.
However with time and circumstances they mutually decided to change their ratio
to equal. They found balances of Workmen compensation reserve Rs 50,000 where
as workers claim was Rs62, 000. Moreover they also had balance of investment
fluctuation reserve of Rs 40,000 in their balance-sheet while they came to know
that its market price is reached to Rs 50,000. X being one the intelligent accounts
student in his college days, suggested treatments of these items to other partners
nicely.
From the above situation:
I. In order to settle the treatment of WCR :
a) Partners‘ capital account will be debited with Rs 12,000 in 3:2:1.
b) Partners‘ capital account will be credited with Rs 12,000 in 1:1:1.
c) Partners‘ capital account will be debited with Rs 62,000 in 3:2:1.
d) Partners‘ capital account will be credited with Rs 50,000 in 3:2:1.
II. Complete Accounting treatment of IFR is:
a) It will be credited with Rs 40,000 and partners‘ capital account will be debited
in 3:2:1.
b) It will be debited with Rs 40,000 and partners‘ capital account will be credited
in 3:2:1 where as additional Rs 10,000 will be a profit.
c) Profit of Rs 10,000 received will be distributed among partners in 3:2:1.
d) Both (a) & (b).
III. When they decided to change their profit sharing ratio ,then:
a) They will frame a new agreement.
b) They will cancel the existing agreement.
c) They will close the business and again start a new business.
d) Both (a) & (b).
12 Hari, Kunal and Uma are partners in a firm sharing profits and losses in the ratio of 3
5: 3: 2. From 1st April, 2018 they decided to share future profits and losses in the
ratio of 2: 5: 3. Their Balance Sheet showed a balance of? 75,000 in the Profit and
Loss Account and a balance of Rs15, 000 in Investment Fluctuation Fund. For this
purpose, it was agreed that :
(i) Goodwill of the firm was valued at ₹ 3, 00,000.
(ii) Investments (having a book value of ₹ 50,000) were valued at ₹ 35,000.
(in) Stock having a book value of ₹ 50,000 will be depreciated by 10%.
Pass the necessary journal entries for the above in the books of the firm.
13 Kumar, Gupta and Kavita were partners in a firm sharing profits and losses 3
equally. The firm was engaged in the storage and distribution of canned juice and
its godowns were located at three different places in the city. Each godown was
being managed individually by Kumar, Gupta and Kavita. Because of increase in
business activities at the godown managed by Gupta, he had to devote more time.
Gupta demanded that his share in the profits of the firm be increased, to which
Kumar and Kavita agreed. The new profit sharing ratio was agreed to be 1: 2: 1.
For this purpose the goodwill of the firm was valued at two years‘ purchase of the
average profits of last five years. The profits of the last five years were as follows:
I 4,00,000
II 4,80,000
III 7,33,000
IV 33,000(loss)
V 2,20,000
You are required to:
(i) Calculate the goodwill of the firm.
(ii) Pass necessary Journal entry for the treatment of goodwill on change in profit
sharing ratio of Kumar,Gupta and Kavita.
14 A, B and C are partners sharing profits and losses in the ratio of 5: 4: 1. Calculate 3
new profit-sharing ratio, sacrificing ratio and gaining ratio in each of the following
cases:
Case 1. C acquires 1/5th share from A.
Case 2. C acquires 1/5th share equally form A and B.
Case 3. A, B and C will share future profits and losses equally.
Case 4. C acquires 1/10th share of A and 1/2 share of B.
15 X, Y and Z are sharing profits and losses in the ratio of 5: 3: 2. They decided to 3
share future profits and losses in the ratio of 2: 3: 5 with effect from 1st April,
2018. They also decided to record the effect of the following accumulated profits,
losses and reserves without affecting their book values by passing a single entry.
Book Value(₹)
General Reserve 6,000
Profit and Loss A/c ( Credit) 24,000
Advertisement Suspense A/c 12,000
Pass an Adjustment Entry.
16 Shruti and Kriti were childhood friends. They completed their schooling and 4
decided to take commerce as their stream and continued in the same college of
Delhi .After completing graduation and going through different subjects they were
very much interested to start their own business of boutique meanwhile their friend
Dhruv suggested them to start a partnership business where he also wanted to
invest. Initial investment of capital was Rs 1, 00,000 by Shruti, Rs 50,000 by Kriti
and Rs 50,000 by Dhruv. After one year they decided to change their PSR at 3:2:1
.At that time they found that they have goodwill of Rs 60,000 in their balance –
sheet while the general reserve was of Rs 45,000.at the same time their machinery
showed depreciation of Rs 10,000. They found that a laptop having estimated
value Rs 5,000 was not recorded in their books. However they all agreed to
process different accounting adjustments.
From the above case, answer the following questions:
I. What is their old profit sharing ratio:
a) 3:2:1
b) 2:1:1
c) 1:1:1
d) None of these
II. Goodwill will be adjusted in:
a) Old ratio
b) Sacrificing ratio
c) Gaining ratio
d) New ratio.
III. What will be treatment of general reserve?
a) It will be adjusted by gaining partners in gaining ratio.
b) It will be distributed among partners in old ratio.
c) It will be compensated by sacrificing partners in sacrificing ratio.
d) None of these
IV. Revaluation account will show:
a) Loss of Rs 10,000
b) Profit of Rs 5,000
c) Loss of Rs 10,000
d) Profit of Rs 10,000
17 Satish and Taruna were partners in a firm sharing profits and losses in the ratio of 4
3:2. From 1st April, 2018 they decided to share profits equally. On that date, their
Balance Sheet showed a credit balance of ₹ 35,000 in workmen compensation fund
and ₹ 40,000 in general reserve. The goodwill of the firm on that date was valued
at ₹ 50,000. The firm accepted a claim of ₹ 40,000 for workmen compensation.
Pass necessary journal entries for the above transactions on the reconstitution of
the firm.
18 R, S and T were partners in a firm sharing profits in 1: 2: 3 ratios. Their balance 6
sheet as at 31st March, 2015 was as follows:
LIABILITIES AMOUNT(RS) ASSETS AMOUNT(RS
)
Creditors 50,000 Land 50,000
Bills payable 20,000 Building 50,000
General reserve 30,000 Plant 1,00,000
Capital account: Stock 40,000
R 1,00,000 Debtors 30,000
S 50,000 Bank 5,000
T 25,000 1,75,000
2,75,000 2,75,000
From 1st April, 2015 R, S and T decided to share the future profits equally. For
this purpose it was decided that:
(i) Goodwill of the firm be valued at ₹ 1,50,000.
(ii) Land to be revalued at ₹ 80,000 and building be depreciated by 6%.
(iii) Creditors of ₹ 6,000 were not likely to be claimed and hence be written-off.
Prepare revaluation account, partners‘ capital accounts and the balance sheet of the
reconstituted firm.
19 6
A, B, C and D were partners in a firm sharing profits in the ratio of 3 : 2 : 3 : 2. On
1st April, 2016 their balance sheet was as follows
From the above date the partners decided to share the future profits in the ratio of
4: 3: 2: 1. For this purpose the goodwill of the firm was valued at ₹ 2, 70,000.
It was also considered that:
(i) Claim against workmen compensation reserve will be estimated at ₹ 30,000 and
fixed assets will be depreciated by 25,000.
(it) The capitals of the partners will be adjusted according to the new profit sharing
ratio by opening current accounts of the partners.
Reconstitution of Partnership firms – Admission of a partner

1 Mark MCQ QUESTIONS (8 Nos.)
1. Jadu and Madhu are partners sharing profits in the ratio of 3:2. Their capitals were ₹ 1
15,00,000 and ₹ 18,00,000 respectively. They admitted Sidhu on 1st April 2021 for
1/5th share in future profits and he brings certain amount of capital. If value of
goodwill (Hidden goodwill) came to be ₹ 7,00,000, find Sidhu‘s capital.
a. ₹ 5,00,000
b. ₹ 10,00,000
c. ₹ 15,00,000
d. ₹ 18,00,000
2. Sohan and Sudha are partners sharing profits in the ratio of 5:3. They took Puneet as 1
a partner for 1/8th share in future profits. Puneet gets his share in a certain ratio from
Sohan and Sudha and their new ratio comes to be 11:5:4. Find in what ratio Puneet
got his share from both the partners.
a. 3:5
b. 5:3
c. 4:5
d. 5:4
3. Om and Som are two partners selling grocery items. They were sharing profit in the 1
ratio of 4:7. They were earning ₹ 2, 00,000 profits on an average per month until the
pandemic Covid -19 caused a decline in their profits to the tune of ₹ 10,000 per
month during last four months. They decided to sell sanitisers, masks in addition to
the existing product. This is a case of ----------------.
a. Dissolution of firm
b. Dissolution of Partnership
c. Both a and b
d. Neither a nor b
4. Assertion (A): A new partner has a right to share in future profits of the firm. 1
Reason (R): He has also the right to share accumulated profits of the firm.
a. (A) is correct and (R) is the correct explanation of (A).
b. (A) is correct and (R) is not the correct explanation of (A).
c. (A) is correct and (R) is wrong.
d. Both (A) and (R) are incorrect.
5. Revaluation account is a 1
a. Real account
b. Personal Account
c. Nominal Account
d. Either a or b
6. John and Dick are partners sharing profits in the ratio of 2:3. Due to change in profit 1
sharing ratio John‘s sacrifice is 3/5 and Dick‘s gain is 3/5. Which is the correct
adjustment entry when advertisement suspense account shows a balance of ₹ 30,000?
a. John‘s Capital A/c Dr ₹ 12,000
To Dick‘s Capital A/c ₹ 12,000
b. Dick‘s Capital A/c Dr ₹ 18,000
To John‘s Capital A/c ₹ 18,000
c. John‘s Capital A/c Dr ₹ 18,000
d. Dick‘s Capital A/c Dr ₹ 18,000
7. How many more partners can be added to the firm of Sushil and Raghu who are 1
running the business along with ten other partners so that they will have the
maximum number of partners?
a. 28
b. 10
c. 30
d. 38
8. Goodwill appearing in the Balance Sheet of the firm will be 1
a. Credited to old partners in old profit sharing ratio
b. Debited to old partners in old profit sharing ratio
c. Credited to old partners in sacrificing ratio
d. Debited to old partners in gaining ratio
1. Write any three merits of admitting a partner. 3
2. Kunnu and Munnu are partners sharing profits in the firm in the ratio of 5:6. They 3
admitted Pyare for 1/8th share in profits. Pyare brought ₹ 2,00,000 as his capital and ₹
16,500 as his share of goodwill. Pass necessary journal entries.
3. Why workmen compensation reserve is created? X and Y are two partners sharing 3
profits equally. Z is admitted for 1/3rd share in future profits. Give accounting
treatment of workmen compensation reserve (₹ 48,000) when workmen
compensation claim is ₹ 40,000.
4. Pradeep, Pramod and Prateek are partnerssharing profits in the ratio of 3:2:1. Pabitra 3
was admitted to the firm for 1/6th share in the profits. Goodwill appeared in the books
at ₹ 60,000 and is valued at ₹ 72,000. Pass necessary entries for raising and writing
off goodwill.
5. Kapil and Azad are partners sharing profits in the ratio of 2:1. Kartik was admitted 2
into the firm who brought the following assets towards his capital and goodwill. +
Machinery ₹ 2,00,000; Furniture ₹ 1,20,000; Stock ₹ 80,000 and Cash ₹ 50,000. 1
=
Their new profit sharing ratio is 3:3:2. If Kartk‘s capital is considered as ₹ 3,80,000,
3
find the value of goodwill of the firm. Why a new partner should pay for goodwill?
1. Tina and Mina are partners in a firm sharing profits in the ratio of 5:3. They took their 4
manager Swati as a new partner for 1/4th share in the profits with minimum
guaranteed profit of ₹60,000 . Swati is to bring ₹ 50,000 as capital. She could not
bring any amount as goodwill. Goodwill is to be valued at 4 years purchase of super
profit when normal profit is given to be ₹ 1,20,000 and average profit is ₹ 2,00,000.
Profit for the year ended was ₹ 1,92,000.
From the above information choose the correct option.
i. What is the value of goodwill?
a. ₹ 80,000
b. ₹ 3,20,000
c. ₹ 2,00,000
d. ₹ 1,20,000
ii. What is the adjustment entry for goodwill?
a. Swatis‘ Current A/c Dr ₹ 80,000
To Tina‘s Capital A/c ₹ 80,000
b. Swatis‘ Current A/c Dr ₹ 80,000
To Mina‘s Capital A/c ₹ 30,000
c. Swatis‘ Current A/c Dr ₹ 60,000
d. Swatis‘ Current A/c Dr ₹ 80,000
iii. Deficiency in minimum guaranteed profit to Swati will borne by Tina and
Mina as
a. ₹ 7,500; ₹ 4,500 respectively
b. ₹ 4,500; ₹ 7,500 respectively
c. ₹ 8,000; ₹ 4,000 respectively
d. ₹ 6,000; ₹ 6,000 respectively
iv. What is new ratio of the partners₹?
a. 2:1:1
b. 3:3:2
c. 4:3:1
d. None of these
2. Dolly and Polly are two partners sharing profits in the ratio of 3:2. Milli was admitted 4
to the firm and their new ratio is 5:3:2 . Given below is an extract of Balance Sheet
items.
General Reserve ₹ 1,80,000; Contingency Reserve ₹ 30,000; P & L Account (Cr) ₹
90,000; Advertisement Suspense A/c ₹ 1,20,000.
Show accounting treatment
i. Without passing single adjustment entry
ii. By passing single adjustment entry
1. A, B and C are partners sharing profits and the ratio of 2:3:5. On 31st March 2019, 6
their Balance Sheet was as follows.
Balance Sheet
as at 31st March,2019
Liabilities (₹) Assets (₹)
Capital A/cs: Cash 18,000
A 36,000 Bills Receivable 24,000
B 44,000 Furniture 28,000
C 52,000 1,32,000 Stock 44,000
Creditors 64,000 Debtors 42,000
Bills Payable 32,000 Investments 32,000
P & L Account 14,000 Machinery 34,000
Goodwill 20,000
2,42,000 2,42,000
They admit D into partnership on the following terms:

1. D to bring (₹). 32,000 towards his capital for 1/6th share.
2. Goodwill is to be valued at (₹). 24,000 and D brought his share of
goodwill in cash.
3. Half of the goodwill was withdrawn.
4. Bad debts was (₹) 2,000 and a provision for doubtful debts be created at
5%.
5. An unrecorded liability of (₹) 3,000 was paid by A.
6. Appreciate investment by 15%.
Pass journal entry and prepare partners‘ capital accounts.
2. 6
Bablu and Dablu are partners sharing profits in the ratio of 3:2. Their Balance Sheet
as on 31st March, 2022 was as follows:
Balance Sheet
as at 31st March,2019
Liabilities (₹) Assets (₹)
Bablu 60,000 Bills Receivable 30,000
Dablu 40,000 1,00,000 Stock 45,000
Creditors 50,000 Debtors
Bills Payable 30,000 42,000 40,000
General Reserve 20,000 Less: Provision 35,000
Investment Fluctuation 2,000 15,000
Reserve 10,000 Investments 20,000
2,10,000 Machinery 2,10,000
Patents
They decided to admit Manglu on 1st April, 2022 for 1/5th Share which he
acquired from Bablu and Dablu in the ratio of 2:1. Other adjustment s are:
1. Patents were undervalued by 20%
2. Market value of investment is (₹) 40,000.
3. A claim of Rs 2,000 for workmen compensation was to be provided for.
4. Manglu will bring (₹) 6,000 as his share of premium for goodwill.
5. Create a provision for Doubtful Debts at 5%.
6. Depreciate machinery by 10%
7. Manglu will bring capital equal to 25% of combined capital of Bablu
and Dablu after all adjustments.
Prepare Revaluation Account, Partners‘ Capital Accounts and Balance Sheet of
the new firm.
ARQ/CASE STUDY QUESTIONS (2 Nos.)
1. Assertion (A): P and Q are two partners sharing profits in the ratio of 3:2. They 1
admitted R for 1/4th share in the profits of the firm. On that date deferred Revenue
Expenditure existed in the books at ₹ 1,20,000 which they wanted to carry forward as
it will benefit them in future.
Reason (R): Deferred Revenue Expenditure is written off at the time of reconstitution
of firm and is not carried forward.
a. (A) is correct and (R) is not the correct explanation of (A).
b. (A) is correct and (R) is the correct explanation of (A).
c. (A) is correct and (R) is wrong.
d. (A) is not correct but (R) is correct
2. Kundan and Nadan are partners engaged in the production and sales of electrical 1
items and equipment. Their capitals were ₹ 50,00,000 and ₹ 80,00,000 respectively.
Their profit sharing ratio was 5:4. As they are now looking forward to expand their
business, they decided to take Madan as a partner who would bring ₹ 60,00,000 for
1/6th share in profits which he acquired in the ratio of 3:2. What is new share of
Kundan?
a. 3/30b. 5/9 c. 9/90 d. 41/90
Reconstitution of Partnership firms – Retirement of a partner
S.N. Question Marks
1. P, Q and R are partners in a firm. Goodwill has been valued at ` 36,000. On 1
R‘s retirement from the firm, P and Q agree to share profits in the ratio of
3:2. Journal Entry for treatment of R‘s share of goodwill.
(a)
Date Particulars L.F. Amount Amount
P‘s Capital A/c 9,600
Q‘s Capital A/c 2,400
To R‘s Capital A/c 12,000
(Being R‘s share of
goodwill P and Q‘s
Capital A/cs debited in
gaining ratio)
(b)
gaining ratio)
(c)
gaining ratio)
(d)
gaining ratio)
Ans: (a)
2. Lalit, Mohit and Nitish are partners in 4:3:3 ratio. Nitish retires from the 1
firm. His capital was ` 1,50,000 and his share in reserves and profit on
revaluation was ` 20,000 and `30,000 respectively. Lalit and Mohit agreed to
pay him ` 2,21,000 on retirement. What will be the hidden goodwill?
(a) 22,000
(b) 23,000
(c) 24,000
(d) 21,000
Ans: (d)
3. A, B and C are partners in a firm sharing profits and losses in the ratio of 1
2:2:1. On March 31, 2019, C retired. Accounts are closed on Dec, 31 every
year. The sales for the year 2018 was ` 6,00,000 and the profits were `
60,000. The sales for the period from Jan 1, 2019 to March 31, 2019 were `
2,00,000. The share of retiring partner in the current year‘s profits on sales
is:
(a) ` 20,000
(b) ` 8,000
(c) ` 3,000
(d) ` 4,000
Ans: (d)
4. A, B and C were partners in a firm sharing profits and losses in the ratio of 1
2:2:1. The capital balance are ` 50,000 for A, ` 70,000 for B, ` 35,000 for C.
B decided to retire from the firm and balance in reserve on the date was `
25,000. If goodwill of the firm was valued at ` 30,000 and profit on
revaluation was ` 7,500 then, what amount will be payable to B?
(a) ` 70,820
(b) ` 76,000
(c) ` 75,000
(d) ` 95,000
Ans: (d)
5. Analyse the case given below and answer the questions that follow: 1
A, K and S were partners in a firm sharing profits in the ratio of 5: 3: 2.
Goodwill appeared in their books at the value of ` 60,000. ‗K‘ decided to
retire from the firm. On the date of his retirement, goodwill of the firm was
valued at ` 2,40,000. The new profit sharing ratio decided among A and S
was 2: 3.
(a) How much of the existing goodwill will be transferred to K‘s Capital ½
Account?
(a) ` 18,000
(b) ` 30,000
(c) ` 12,000
(d) `72,000
Ans: (a) ` 18,000
(b) What amount of goodwill will be transferred to K‘s capital account as ½
compensated by
A and S?
(a) ` 96,000
(b) ` 72,000
(c) ` 24,000
(d) ` 18,000
Ans: (b) ` 72,000
6. Assertion (A): 1
At the time of retirement of a partner, the combined profit share of the ren
continuing partners increases.
Reason (R):
Remaining or Continuing partners take a part of profit share of the retiring
partner their individual profit share increases:
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct and Reason (R) is the correct
explanation
(b) Assertion (A) and Reason (R) are correct but Reason (R) is not the
correct
(c) Assertion (A) is correct but Reason (R) is not correct
(d) Assertion (A) is not correct but Reason (R) is correct.
Ans: (b) Assertion (A) and Reason (R) are correct but Reason (R) is not the
correct
7. Assertion (A): At the time of death of a partner the deceased partner will get 1
his share in General Reserve and credit balance in Profit & Loss Account
Reason (R): Deceased partner will get his share of Workmen Compensation
Reserve remaining after claim if any in the context of above two statements,
which of the following a correct?
(a) Assertion (A) and Reason (R) are correct and Reason (R) is the correct
explanation
(b) Assertion (A) and Reason (R) are correct but Reason (R) is not the
correct
(c) Assertion (A) is correct but Reason (R) is not correct
(d) Assertion (A) is not correct but Reason (R) is correct.
Ans: (b) Assertion (A) and Reason (R) are correct but Reason (R) is not the
correct
8. Kumar, Verma and Naresh were partners in a firm sharing profit & loss in 1
the ratio of 3: 2: 2. On 23rd January, 2022 Verma died. Verma‘s share of
profit till the date of his death was calculated at ₹ 2,350.
Pass necessary journal entry for the same in the books of the firm.
Ans: Journal Entry
P & L suspense A/c Dr. 2,350
To Verma‘s Capital A/c 2,350
(Verma‘s share of profit up to 23rd June 2022)
9. Amita, Babli and Charmi are partners sharing profits in the ratio of 5:3:2. 3
Babli retires and new profit-sharing ratio between Amita and Charmi is
agreed at 2:3. They also decided to record the effect of the following without
affecting their book values:
General reserve ₹ 1,20,000
Contingency reserve ₹ 70,000
Profit & Loss A/c (Dr.) ₹ 30,000
Advertisement suspense Account ₹ 10,000
You are required to give single necessary adjusting entry.
Ans: Journal entry
Charmi‘s Capital A/c… Dr ₹ 60,000
To Babli‘s Capital A/c… ₹ 45,000
To Amita‘s Capital A/c ₹ 15,000
(Being adjustment made for accumulated profit and losses on Babli‘s
retirement)
10. From the following particulars, calculate new profit-sharing ratio of the 3
partners:
(a) Shiv, Mohan and Hari were partners in a firm sharing profits in the ratio
of 5:5:4. Mohan retired and his share was divided equally between Shiv and
Hari.
(b) P, Q and R were partners sharing profits in the ratio of 5: 4: 1. P retires
from the firm.
Ans: (a) Old Ratio (Shiv, Mohan and Hari) =
5: 5: 4 Mohan‘s Profit Share = 5/14
His share is divided between Shiv and Hari equally i.e. in the ratio
of 1: 1 Share of Mohan taken by Shiv : 5/14 x ½ = 5/28
Share of Mohan taken by Hari : 5/14 x ½ =5/28
New Profit Share = Old Profit Share + Share taken from
Mohan Shiv‘s new share = 5/14 + 5/28 = 15/28
Hari‘s new share = 4/14 + 5/28 = 13/28
∴ New Profit-Sharing Ratio (Shiv and Hari) = 15: 13
(b) Old Ratio (P, Q and R) = 5: 4: 1 P‘s Profit Share = 5/10

Since, no information is given as to how Q and R are acquiring P's profit
share after his retirement, so the new profit-sharing ratio between Q and R
becomes 4: 1
∴New Profit Ratio (Q and R) = 4: 1
11. X, Y and Z are partners in a firm sharing profits and losses in the ratio of 3
3:2:1. Z retires from the firm on 31st March, 2022. On the date of Z's
retirement, the following balances appeared in the books of the firm:
General Reserve ₹ 1,80,000
Profit and Loss Account (Dr.) ₹ 30,000
Workmen Compensation Reserve ₹ 24,000 which was no more
required Employees' Provident Fund ₹ 20,000.
Pass necessary Journal entries for the adjustment of these items on Z's
retirement
Ans: Journal entry
General Reserve A/c………. Dr ₹ 1,80,000
Workmen‘s compensation A/c. Dr ₹ 24,000
To X‘s capital A/c ₹ 1,02,000
To Y‘s Capital A/c ₹ 68,000
To Z‘s Capital A/c ₹ 34,000
(Accumulated profits distributed)
X‘s capital A/c… Dr ₹ 15,000

Y‘s Capital A/c…Dr ₹ 10,000
Z‘s Capital A/c. Dr ₹ 5,000
To Profit and Loss A/c… ₹ 30,000
(Accumulated loss distributed)
12. A, B, C and D are partners sharing profits in the ratio of 4:3:2:1. On the 3
retirement of B, Goodwill was valued at ₹ 3,00,000. A, C and D decide to
continue the firm sharing profits equally. Pass the necessary journal entry.
Ans: Journal entry
C‘s Capital A/c (4/30 x 3,00,000) Dr. ₹ 40,000
D‘s Capital A/c (7/30 x 3,00,000) Dr. ₹ 70,000
To A‘s Capital A/c (2/30 x 300,000) ₹ 20,000
To B‘s Capital A/c (3/10 x 3,00,000) ₹ 90,000
(Being adjustment for goodwill)
13. Amitabh, Bobby and Chiranjeevi are partners sharing profits and losses in 3
the ratio of 2:2:1. Amitabh retires and the new ratio between Bobby and
Chiranjeevi is agreed at 3:2. Give journal entries on Amitabh‘s retirement in
the following cases:
(a) Workmen Compensation Reserve appears in the books at ₹ 1,20,000 and
there is a claim of ₹ 1,50,000 against it.
(b) Investment Fluctuation Reserve appears in the books at ₹ 40,000, when
Investments (market value ₹ 1,00,000) appear at ₹ 85,000.
Ans: Journal entries
(a) Workmen Compensation Reserve A/c…… Dr ₹ 1,20,000
Revaluation A/c……………………………Dr ₹ 30,000
To Provision for Workmen Compensation Claim A/c ₹ 1,50,000
(Being Provision made for workmen claim and shortfall charged to
Revaluation A/c)
A‘s Capital A/c……………..Dr. ₹ 12,000
B‘s Capital A/c……………..Dr. ₹ 12,000
C‘s Capital A/c……………..Dr. ₹ 6,000
To Revaluation A/c ₹ 30,000
(Being Loss on Revaluation debited to Partner‘s Capital Accounts in
their old profit sharing ratio)
(b) Investment Fluctuation Reserve A/c…….Dr. ₹ 40,000
To A‘s Capital A/c ₹ 16,000
To B‘s Capital A/c ₹ 16,000
To C‘s Capital A/c ₹8,000
(Investments fluctuation reserve credited to Partners‘
Capital Accounts in their old profit-sharing ratio)
Investment A/c………………..Dr. ₹ 15,000
To Revaluation A/c ₹ 15,000
(Being value of investments brought up to market value)
Revaluation A/c………………….Dr. ₹ 15,000
To A‘s Capital A/c ₹ 6,000
To B‘s Capital A/c ₹ 6,000
To C‘s Capital A/c ₹ 3,000
(Being Profit on revaluation credited to partner‘s Capital
Accounts in their old profit-sharing ratio)
14. Case Study-01 4
Aarti, Bani and Cindy were partners in a firm sharing profits in the ratio of
2:2:1. On 31st March, 2021 their Balance Sheet was as follows:
Balance Sheet of Aarti, Bani and Cindy
as on 31st March, 2021
Liabilities ₹ Assets ₹
Sundry Creditors 45,000 Cash at Bank 42,000
Employees Provident 13,000 Debtors
Fund 20,000 60,000
General Reserve Less: Prov. 58,000
Capitals: 1,60,000 For D/D 80,000
Aarti 1,20,000 2,000 90,000
Bani 92,000 Stock 1,80,000
Cindy Furniture
Plant and Machinery
4,50,000 4,50,000
Bani retired on the above date. At the time of retirement:
Profit on Revaluation was ₹ 10,000. Goodwill of the firm was valued at ₹
3,00,00.
(i) Why are retiring/heirs of deceased partner entitled to a share of
goodwill of the firm?
(ii) At the time of retirement of a partner, state the condition when
there is no need to compute the gaining ratio.
(iii) Bani claims that the total amount of firm‘s goodwill as she was the
only working partner in the firm during initial years of business. Is
Bani right? Why?
(iv) She also claims that an amount of ₹ 5,00,000 should be transferred
to her loan account.
You are required to resolve their issues along with preparing the capital
accounts of the partners.
Ans: (i) The retiring partner or the heirs of deceased partner are entitled to his
share of goodwill because the level of reputation enjoyed by the firm or
goodwill earned by the firm is the result of efforts of all partners of firm in
the past.
(ii) There is no need to compute the gaining ratio when the continuing
partners decide to share profits in the same ratio that existed among them
prior to retirement.
(iii) Bani is not right in claiming the total value of firm‘s goodwill at the
time of her retirement.
Her share in goodwill will be calculated as follows:
=₹ 3,00,000 x 2/5 = ₹ 1,20,000
₹ 1,20,000 will be credited to her capital account as her share of goodwill.
(iv) Bani is incorrect in claiming a transfer of ₹ 5,00,000 to her loan account.
Capital account of Bani will be prepared to know the exact amount that will
be transferred to her loan account.
Therefore, that capital accounts of all partners are prepared as follows:
Dr.Partners' Capital AccountsCr.
Particulars Aarti Bani Cindy Particulars Aarti Bani Cindy
₹ ₹ ₹ ₹ ₹ ₹
To Bani's 80,000 — 40,000 By 1,60,000 1,20,000 92,000
Capital Balance
To Bani's
A/c — 2,52,000 — By
b/d General 8,000 8,000 4,000
Loan A/c Reserve
To 92,000 — 58,000 By
A/cReval 4,000 4,000 2,000
Balance A/c
By Aarti's — 80,000 —
c/d
Capital A/c
By Cindy's — 40,000 —
Capital
1,72,000 2,52,000 98,000 A/c 1,72,000 2,52,000 98.000
Hence, ₹ 2,52,000 will be transferred to Bani‘s Loan Account at the time of
her retirement.
15. Case Study-02 4
Karan, Sumit and Neeraj were partners in a firm sharing profits and losses in
proportion to their fixed capitals. Their Balance Sheet as at 31st March, 2021
was as follows:
Balance Sheet of Karan, Sumit and Neeraj
as on 31st March, 2021
Capitals: Bank 21,000
Karan 5,00,000 Stock 9,000
Sumit 3,00,000 Debtors
Neeraj 2,00,000 15,000
General Reserve 75,000 Less P/F/D/D 35,500
Creditors 23,000 1,000 2,00,000
Outstanding Salary 7,000 Karan‘s Loan 6,00,000
Sumit‘s Loan 15,000 Office Equipment 2,41,000
Office Premises
Profit and Loss A/c
11,20,000 11,20,000
On the date of above Balance Sheet, Neeraj retired from the firm.
It was decided that Goodwill of the firm will be valued at two years purchase
of the average profits of last three years. The profits for the year ended 31 st
March, 2020 were ₹ 4,00,000 and ₹ 3,00,000 respectively. Provision for
doubtful debts will be maintained at 5% of the debtors. Office Premises will
be appreciated by ₹ 90,000 and office equipment will be reduced to ₹
1,80,000. Karan agreed to repay his loan. The loan repaid by Karan was to
be utilised to pay Neeraj. The balance of the amount payable to Neeraj was
transferred to his Loan Account.
Answer the following questions on the basis of above information:
(i) In which ratio will Karan and Sumit compensate for the share of goodwill
to Neeraj?
(ii) Give any one distinction between sacrificing ratio and gaining ratio.
(iii) How will you calculate the Neeraj‘s share of goodwill at the time of his
retirement?
(iv) Neeraj claims that he should be given the total amount ₹ 90,000 has
been recorded as the increase in the value of office premises. Remaining
partners did, not agree on this. What will be the correct treatment to record
this amount?
Ans: (i) Karan and Sumit will compensate for share of goodwill to Neeraj in
gaining ratio.
(ii)
Basis of Sacrificing Ratio Gaining Ratio
Difference
Meaning It is the ratio in which the It is the ratio in which the
old partners surrenders a remaining partners acquire
part of their profit-sharing the outgoing (retired or
in favour of new partner. deceased) partner‘s share.
(iii) Evaluation of firm‘s Goodwill:
Average profit of last three years=4,00,000+3,00,000+2,41,000/3
=₹1,53,000
Goodwill = ₹1,53,000 x 2 = ₹3,06,000
Neeraj‘s Share of Goodwill = ₹ 3,06,000 x 2/10=₹ 61,200.
(iv) Neeraj is not correct in his claim. Revaluation Account is required to be
prepaid to know his share of profit or loss on revaluation as follows:
Dr. Revaluation Account Cr.
Particulars ` Particulars `
To Office Equipment 20,000 By Prov for D/D A/c 750
To Profit transferred to: By Office Premises A/c 90,000
Karan‘s Current A/c 35,375
Sumit‘s Current A/c 21,225
Neeraj‘s Current A/c 14,150
90,750 90,750
16. Digvijay, Brijesh and Parakaram were partners in a firm sharing profits in 4
the ratio of 2:2:1. Their Balance Sheet as on 31st March, 2022 were as
follows:
Balance Sheet of Digvijay, Brijesh and Parakaram

As on 31st March, 2022
Liabilities Amount Assets Amount
(`) (`)
Sundry Creditors 49,000 Cash in hand 8,000
Reserves 18,500 Debtors 19,000
Digvijay's Capital 812,000 Stock 42,000
Brijesh's Capital 60,000 Building 2,07,000
Parakaram's Capital 75,500 Patents 9,000
2,85,000 2,85,000
(i) Brijesh retired on 31st March, 2022 giving his share to the remaining
partners equally.
(ii) Loss on Revaluation upon Brijesh‘s retirement was ₹ 11000.
(iii) Goodwill of the firm was valued at ₹70,000
Pass necessary Journal entries.
Ans: Journal Entries in the Books of Partners
Date Particulars L.F Debit Credit
Digvijay‘s Capital A/c Dr. 4,400
Brijesh‘s Capital A/c Dr. 4,400
Parakram‘s Capital A/c Dr. 2,200
To Revaluation 11,000
(Being loss on revaluation distributed
among
all partners)
Digvijay‘s Capital A/c Dr. 14,000
Parakram‘s Capital A/c Dr. 14,000
To Brijesh‘s Capital A/c 28,000
(Being effect of goodwill brought into
account)
Reserve Dr. 18,500
To Digvijay‘s Capital A/c 7,400
To Brijesh‘s Capital A/c 7,400
To Parakram‘s Capital A/c 3,700
(Being reserve distributed among all
partners)
Brijesh‘s Capital A/c Dr. 91,000
To Brijesh‘s Loan A/c 91,000
(being capital transferred to Loan)
17. Banwari, Girdhari and Murari are partners in a firm sharing profits and 4
losses in the ratio of 4:5:6. On 31st March, 2021, Girdhari retired. On that
date the capitals of Banwari, Girdhari and Murari before the necessary
adjustments stood at ₹ 2,00,000, ₹ 1,00,000, and ₹ 50,000 respectively. On
Girdhari‘s retirement, goodwill of the firm was valued at ₹1,14, 000.
Revaluation of assets and reassessment of liabilities resulted in a profit of ₹
6,000. General Reserve stood in the books of the firm at ₹ 30,000.
The amount payable to Girdhari‘s was transferred to his loan account. The
firm closes its books on 31st March every year.
Prepare Girdhari‘s Capital account at the time of his retirement.
Ans: Girdhari‘s Capital Account
Particulars ₹ Particulars ₹
To Girdhari‘s Loan A/c 1,50,000 By Balance b/d 1,00,000
By Revaluation Profit 2,000
A/c 15,200
By Banwari‘s Capital 22,800
A/c 10,000
By Murari‘s Capital
A/c
By General Reserve
A/c
1,50,000 1,50,000
Total goodwill= ₹1,14,000
Girdhar‘s share=1,14,000 x 5/15 = ₹ 38,000
Banwari‘s Gain=38,000 x 4/10 = ₹15,200
Murari‘s Gain= 38,000 x 6/10 = ₹ 22,800
Girdhari‘s share in general reserve =30,000 x 5/15 = ₹10,000
18. Bhavin, Ankit and Kartik were equal partners. Their Balance Sheet as at 31st 6
March 2022 was:
Balance Sheet as at 31st March, 2022
Creditors 60,000 Cash Account 18,000
Reserve 30,000 Stock Account 20,000
Profit and Loss Account 6,000 Furniture Account 28,000
Capital A/c Debtors 45,000
Bhavin Account 60,000 Less: Prov for D/D 5,000 40,000
Ankit Account 40,000 Land and Building 1,20,000
Kartik Account 30,000
2,26,000 2,26,000
Ankit retired on 1st April, 2022. Bhavin and Kartik decided to continue the
business as equal partners on the following terms:
(a) Goodwill of the firm was valued at ₹ 30,000.
(b) The Provision for Bad Doubtful debts to be maintained @ 10 % on
Debtors.
(c) Land and Buildings to be increased to ₹ 1,42,000.
(d) Furniture to be reduced by ₹ 6,000.
(e) Rent outstanding (not provided for as yet) was ₹ 1,500.
Prepare the Revaluation Account, Partners‘ Capital Accounts.
Ans: Revaluation Profit: ₹ 15,000;
Partners‘ Capital Accounts
Bhavin‘s Capital Account = ₹ 72,000
Ankit‘s Loan Account= ₹ 67,000
Kartik‘s Capital Account= ₹ 42,000
19. M, N and O were partners sharing profit and losses in the ratio of 1:1:1. 6
Their Balance Sheet as at 31st March 2022 was:
Balance Sheet as at 31st March, 2022
Capital Accounts: Bank 38,000
M 70,000 Machinery 26,000
N 40,000 Furniture 28,000
O 40,000 Debtors
Bills Payable 15,000 45,000 40,000
Creditors 45,000 Less: Prov for D/D 1,20,000
General Reserve 33,000 5,000
Profit and Loss Account 9,000 Building
2,52,000 2,52,000
N retired on 1st April, 2022. M and O decided to continue the partnership
business on the following terms:
(a) Goodwill of the firm was valued at ₹ 60,000.
(b) The Provision for Bad Doubtful debts to be maintained @ 10 % on
Debtors.
(c) Buildings to be increased to ₹ 1,42,000.
(d) Furniture to be reduced by ₹ 6,000.
(e) Rent outstanding ₹ 1,500 was to be recorded.
(f) The new profit-sharing ratio between M and O will be 1:1
(g) Prepare the Revaluation Account, Partners‘ Capital Accounts.
Ans: Revaluation Profit: ₹ 15,000;
Partners‘ Capital Accounts
M‘s Capital Account = ₹ 79,000
N‘s Loan Account= ₹ 79,000
O‘s Capital Account= ₹ 49,000
Reconstitution of Partnership firms – Death of a partner
SECTION – A (QUESTIONS CARRYING 1 MARK)
1. Diwakar, Nandita and Veena were partners sharing profits and losses in the ratio of
3 : 2 : 1. Nandita died on 30th June,2022. Her share of profit for the intervening period
was based on the sales during that period, which were Rs.9,00,000. The rate of profit
during the past years had been 10% on sales. The firm closes its books on 31 st March
every year.
Which of the following Journal entry will be passed for transferring Nandita‘s share of
profit to her capital account ?
Date Particulars L.F Dr.Amt(Rs.) Cr.Amt(Rs.)
(a) Profit and Loss A/c…………..Dr. 30,000
To Nandita‘s Capital A/c 30,000
(b) Profit and Loss A/c…………..Dr. 45,000
(c) Profit and Loss Suspense A/c..Dr. 45,000
(d) Profit and Loss Suspense A/c..Dr. 30,000
2. Some of the items that need to be deducted from the grand total of sums due to the
deceased partner‘s legal heirs include:
(i) drawings made by the deceased partner
(ii) interest on drawings, if provided in the partnership deed.
(iii) share of losses upon revaluation of assets and liabilities.
(iv) share in the balance of Profit and Loss Account appearing on the liabilities side of
Balance Sheet.
(v) Advance or loan granted by him to the firm , if any
(a) (i), (ii), (iii), (v)
(b) (i), (iii), (iv), (v)
(c) (i), (ii), (iii)
(d) (i), (ii), (iv)
3. As per Section 37 of the Indian Partnership Act,1932, the executors would be entitled at
their choice to the interest calculated from the date of death till the date of payment of
the final amount due to the deceased partner at the rate of :
(a) 6% p.a. (b) 7% p.a. (c) 8% p.a. (d) 10% p.a.
4. M, N and P are partners in a firm, sharing profit in the ratio of 2 : 2 : 1. Their capital
accounts stand as Rs.1,00,000, Rs.1,00,000 and Rs.50,000 respectively. N retired from
the firm and balance in the reserve on that date was Rs.30,000. If goodwill of the firm is
Rs.60,000 and profit on revaluation is Rs.14,100. What amount will be transferred to
N‘sloan account?
(a) Rs.1,41,640 (b) Rs.17,640 (c) Rs.1,01,640 (d) None of these.
5. P, R and S are in partnership, sharing profits in the ratio of 4 : 3 : 1.It is provided in the
partnership deed that on the death of a partner his share of goodwill will be equal to one
half of the net profits credited to his account during the last three years. Accounting
books are closed on 31st March every year. R died on 1stJuly ,2022. The firm‘s profits
for the last 3 years were 2019-20 Rs.1,00,000 ; 2020-21 Rs.60,000 ; 2021-22 Rs.80,000.
For the adjustment of R‘s share of Goodwill, which of the following is correct ?
(a) Dr. R‘s Capital A/c Rs.45,000, Cr.P‘s Capital A/c Rs.9,000 , S‘s Capital A/c
Rs.36,000.
(b) Dr. P‘s Capital A/c Rs.9,000, S‘s Capital A/c Rs.36,000 , Cr.R‘s Capital A/c
Rs.45,000.
(c) Dr. P‘s Capital A/c Rs.36,000, S‘s Capital A/c Rs.9,000 , Cr.R‘s Capital A/c
Rs.45,000.
(d) Dr. P‘s Capital A/c Rs.45,000, S‘s Capital A/c Rs.45,000 , Cr.R‘s Capital A/c
Rs.90,000.
6. Match the following in case of death of a partner.
(i) General Reserve (A) Deceased Partner‘s Loan A/c is credited.
(ii) Accumulated Losses (B) Deceased Partner‘s Loan A/c is debited.
(iii) For payment of Instalment (C) Credited to Deceased Partner‘s Capital A/c
(iv) Interest provided on due amount (D) Debited to Deceased Partner‘s Capital A/c
(a) (i) (D), (ii) (C), (iii) (A), (iv) (B)

(b) (i) (C), (ii) (D), (iii) (A), (iv) (B)
(c) (i) (C), (ii) (D), (iii) (B), (iv) (A)
(d) (i) (D), (ii) (A), (iii) (B), (iv) (C)
7. A, B and C are partners in a firm. C died on 18th December,2019 and as per agreement
surviving partners A and B directed the accountant of the firm to prepare financial
statements as on 18th December,2019 and accordingly the share of profits of C( deceased
partner) was calculated as Rs.1,20,000. Which account will be debited to transfer C‘s
share of profits.
(a) Profit and Loss Suspense Account
(b) Profit and Loss Appropriation Account
(c) Profit and Loss Account
(d) None of the above.
8. Rajat ,Mishi and Tanvi were partners in a firm sharing profits and losses in the ratio of
5 : 3 : 2. Tanvi died on 31st October,2021. According to the partnership agreement , her
share of profits from the closure of last accounting year till the date of her death was to
be calculated on the basis of aggregate profits of two completed years before death.
Profits of the firm for the year ending 31st March,2019 and 31st March,2020 were
Rs.57,000 and Rs.63,000 respectively. The firm closes its books on 31st March every
year. Tanvi‘s share of profits till the date of her death will be :
(a) Rs.24,000 (b) Rs.7,000 (c) Rs.14,000 (d) Rs.12,000
9. Read the following two statements
Assertion(A) : A partnership will come to an end immediately whenever a partner dies,
although the firm may continue with the remaining partners.
Reason(R) : The payment of deceased partner‘s share will be received by his legal
heirs/ executors.
Choose the correct alternative from the following :
(a) Both Assertion (A) and Reason(R) are true and Reason(R) is the correct explanation
of Assertion(A)
(b) Both Assertion (A) and Reason(R) are true and Reason(R) is not the correct
explanation of Assertion (A)
(c) Assertion (A) is true but Reason(R) is false.
(d) Assertion (A) is false but Reason(R) is true.
10. Assertion (A) : If profits till the date of death are to be calculated on the basis of time,
on such arrangement last year‘s profit and sales are given together with
the sale of the current year upto the date of death of the partner. The
profit is ascertained proportionately and the share of profit of deceased
partner is calculated.
Reason(R) : Deceased partner‘s share of profit can be calculated on the basis of
time or on the basis of turnover.
Choose the correct alternative from the following:
(a) Both Assertion (A) and Reason(R) are true and Reason(R) is the correct
explanation of Assertion(A)
(b) Both Assertion (A) and Reason(R) are true and Reason(R) is not the correct
(c) Assertion (A) is true but Reason(R) is false.
(d) Assertion (A) is false but Reason(R) is true.
COMPETENCY / CASE BASED QUESTIONS

11. Rony , Bony and Tony are partners in a grocery trading firm. The firm has a fixed total
capital of Rs.4,50,000 held equally by all the partners. Bony died on 1 st January,2021
due to heart attack.
According to the partnership deed, the legal representatives of the deceased partner
Were entitled to the following
(i) Balance in his Capital Account
(ii) Interest on Capital @9% p.a.
(iii) Share of goodwill [ Goodwill of the firm on Bony‘s death was valued at Rs.80,000]
(iv) Share in the profits of the firm till the date of his death, calculated on the basis of
average profit of the last three years[ The average profit of the firm for the last
three years Rs.1,50,000.
The executor was paid Rs.10,300 in cash immediately and the balance in two equal
Annual instalments with interest @6% p.a. starting from 31 st March,2022. Accounts
are closed on 31st March each year.
Based on the above information you are required to answer the following questions :
1. Interest on Bony‘s Capital till the date of death will be :
(a) Rs.10,125 (b) Rs.13,500 (c) Rs.40,500 (d) Rs.30,325
2. ‗The amount due to deceased partner is paid to his wife‘. (True/ False)
3. Deceased partner‘s share of goodwill is debited to the remaining partner in their
_____
4. Journal entry for Bony‘s share of profit due till the date of death is :
(a) Debit Rony and Tony‘s Capital A/c by Rs.18,750 each and Credit Bony‘s Capital
A/c by Rs.37,500
(b) Debit Profit and Loss Suspense A/c by Rs.37,500 and Credit Bony‘s Capital
A/c by Rs.37,500
(c) Debit Profit and Loss A/c by Rs.37,500 and Credit Bony‘s Capital A/c by
Rs.37,500
(d) Debit Revaluation A/c by Rs.37,500 each and Credit Bony‘s Capital A/c by
Rs.37,500.
12. Monu, Nigam and Shreya were partners in a firm sharing profit and losses in the ratio
Of 4 : 3 :1. The firm closes its books on 31st March every year. As per the terms of
partnership deed on the death of any partner, the share of goodwill of the deceased
partner will be calculated on the basis of 50% of net profits credited to the partner‘s
capital account during the last four completed years before death . Monu died on 1 st
July,2021
Year 2017-18 2018-19 2019-20 2020-21
Profits (Rs.) 97,000 1,05,000 30,000 84,000
His share of profit in the year of his death was to be calculated based on sales. Sales for
the year ended 31st March,2021 amounted to Rs.21,00,000. From 1st April,2021 to 30th
June,2021 the firm‘s sales were Rs.2,00,000.
Based on the above information you are required to answer the following questions :
1. Monu‘s share of profit will be :
(a) Rs.12,000 (b) Rs.14,000 (c) Rs.4,000 (d) Rs.8,000
2. Journal entry for Goodwill will be :
(a) Dr.Monu‘s Capital A/c by Rs.79,000; Cr. Shreya‘s Capital A/c by Rs.19,750, Cr.
Nigam‘s Capital A/c by Rs.59,250.
(b) Dr.Nigam‘s Capital A/c by Rs.60,000; Dr.. Shreya‘s Capital A/c by Rs.20,000,
Cr.Monu‘s Capital A/c by Rs.80,000.
(c) Dr.Nigam‘s Capital A/c by Rs.59,250; Dr.. Shreya‘s Capital A/c by Rs.19,750, Cr.
Monu‘s Capital A/c by Rs.79,000.
(d) Dr. Goodwill A/c by Rs.79,000; Cr. Monu‘s Capital A/c by Rs.79,000.
3. Deceased partner‘s share of profit or loss can be estimated on the basis of ______ or
on the basis of _________
4. Gaining ratio between Nigam and Shreya will be :
(a) 1 : 1 (b) 4 : 3 (c) 4 : 1 (d) 3 : 1
Questions Carrying 3 – 4 Marks

13.Vikas , Vishal and Vaibhav were partners in a firm sharing profits in the ratio of 2 : 2 :
1. The firm closes its books on 31st March every year. On 31st December,2021Vaibhav
died. On that date his capital account showed a credit balance of Rs.3,80,000 and
goodwill of the firm was valued at Rs.1,20,000. There was a debit balance of Rs.50,000
in the Profit and Loss Account. Vaibhav‘sshae of profit in the year of his death was to
be calculated on the basis of the average profit of last five years. The average profit of
last five years was Rs.75,000.
Pass necessary journal entries in the books of the firm on Vaibhav‘s death.
14. Sumit, Gagan and Momita were partners in a firm sharing profits in the ratio of 2 : 2 :
1.The firm closes its books of accounts on 31st March every year. On 30thSeptember
,2022 Momita died. According to the provisions of partnership deed, the legal
representatives
of a deceased partner are entitled for the following in the event of his/her death :
(i) Capital as per the last Balance Sheet.
(ii) Interest on capital at 6% p.a. till the date of her death.
(iii) Her share of profits to the date of death calculated on the basis of average profits of
last four years.
(iv) Her share of goodwill to be determined on the basis of three years‘ purchase of the
average profits of last four years. The profits of last four years were :
Year Profit (Rs.)
2018-19 30,000
2019-20 50,000
2020-21 40,000
2021-22 60,000
The balance in Momita‘s capital account on 31st March,2022 was Rs.60,000 and she
had withdrawn Rs.10,000 till the date of her death. Interest on her drawings were
Rs.300.
Prepare Momita‘s capital account to be presented to her executors.
15. Girija, Yatin and Zubin were partners sharing profits in the ratio of 5 : 3 : 2. Zubin died
on 1st August ,2019. Amount due to Zubin‘s executor after all adjustments was
Rs.90,300. The executor was paid Rs.10,300 in cash immediately and the balance in
two equal annual instalments with interest (p.a) as per Section 37 of the partnership
Act,1932 starting from 31st March,2021. Accounts are closed on 31st March each year.
Prepare Zubin‘s Executors Account till he is finally paid.
16. Harihar, Hemang and Harit were partners with fixed capitals of Rs.3,00,000 ,
Rs.2,00,000 and Rs.1,00,000 respectively. They shared profits in the ratio of their fixed
capitals. Harit died on 31st May, 2020 due to COVID-2019, where as the firm closes its
books of accounts on 31st March every year.
According to their partnership deed.Harit‘s representatives would be entitled to get
share in the interim profits of the firm on the basis of sales. Sales and profit for the year
2019-20 amounted to Rs.8,00,000 and Rs.2,40,000 respectively and sales from 1st
April,2020 to 31stMay,2020 amounted to Rs.1,50,000. The rate of profit to sales
remained constant during these two years. You are required to :
(i) Calculate Harit‘s share in profit.
(ii) Pass journal entry to record Harit‘s share in profit.
17. A, B and C are equal partners in a firm whose books are closed on March 31 st each
year. A died on 30th June 2021 and according to the agreement the share of profits of a
deceased partner up to the date of the death is to be calculated on the basis of the
average profits for the last five years. The net profits for the last five years have been :
2016-17 Rs.14,000; 2017-18 Rs.18,000; 2018-19 Rs.16,000; 2019-20 Rs.10,000 (loss);
2020-21 Rs.16,000. Calculate A‘s share of the profits upto the date of death and pass
necessary journal entry if :
Case-1 : B and C decided not to change in their future profit sharing ratio.
Case-2 : B and C decided to share future profit in the ratio of 3 : 2.
18. X, Y and Z are partners in a firm sharing profits in the ratio of 5 : 3 :2 . Z died on 30 th
September 2022 and his share of profit till the date of death was to be calculated on the
basis of sales. Sales for the year ended 31st March,2022 amounted to Rs.1,50,000 and
that from 1st April to 30thSeptember,2022 amounted to Rs.90,000. The profit for the
year ended 31st March,2022 was Rs.50,000. Calculate Z‘s share of profit upto the date
of death and pass necessary journal entry if :
Case-1 : X and Y decided not to change in their future profit sharing ratio.
Case-2 : X and Y decided to share future profit in the ratio of 7 : 3.
19. Sita ,Reeta and Geeta are partners in a firm sharing profits and losses in the ratio of 4 :
3 : 1. As per the terms of partnership deed, on the death of any partner, goodwill was to
be valued at 50% of the net profits credited to that partner‘s capital account during the
last three completed years before her death. Sita died on 28th February,2022. The profits
for the last five years were :
2017 – Rs.60,000 ; 2018 – Rs.97,000 ; 2019 – Rs.1,05,000 ; 2020 – Rs.30,000 and
2021-Rs.84,000.
On the date of Sita‘sdeath , building was found undervalued by Rs.80,000, which was
to be considered. Calculate amount of Sita‘s share of goodwill in the firm and record
the adjustment journal entries of goodwill and revaluation of building .The new profit
sharing ratio between Reeta and Geeta will be equal.
Questions Carrying 6 Marks
20.Arun , Varun and Karan were partners in a firm sharing profits in the ratio of 4 : 3 : 3.
On 31st March,2022, their balance sheet was as follows :
Balance Sheet
As at 31st March,2022
Liabilities Amount(Rs.) Assets Amount(Rs.)
Creditors 17,000 Cash 8,000
Bills Payables 12,000 Debtors 13,000
Karan‘s Loan 28,000 Bills Receivables 9,000
Capital A/c Furniture 27,000
Arun 70,000 Machinery 1,25,000
Varun68,000 1,38,000 Karan‘s Capital 13,000
1,95,000 1,95,000
On 30th September,2022 Karan died. The partnership deed provided for the following to
the executors of the deceased partner.
(i) His share in the goodwill of the firm calculated on the basis of three years‘ purchase of
the average profits of the last four year.The profits of the last four years were
Rs.1,90,000, Rs.1,70,000. Rs.1,80,000 and Rs.1,60,000 respectively.
(ii) His share in the profits of the firm till the date of his death calculated on the basis of
the average profits of the last four years
(iii) Interest @8% per annum on the credit balance if any in his capital account.
(iv) Interest on his loan @12% per annum.
Prepare Karan‘s Capital account to be presented to his executors, assuming that his loan and
interest on loan were transferred to his capital account.
21. Following is the balance sheet of Ram, Mohan and Sohan as at 31 st December,2017
Balance Sheet
As at 31stDecember ,2017
Liabilities Amount(Rs.) Assets Amount(Rs.)
Sundry Creditors 10,000 Tools 3,000
Workmen Furniture 18,000
Compensations Reserve 7,500 Stock 16,000
Capital A/c Debtors 12,000
Ram 20,000 Cash at Bank 8,000
Mohan 10,000 Cash in hand 500
Sohan 10,000 40,000
57,500 57,500
Ram , Mohan and Sohan shared profits and losses in the ratio 2 : 2 : 1. Sohan died on 31 st
March,2018. Under the partnership agreement , the executors of Sohan were entitled to
(i) Amount standing to the credit of his capital account.
(ii) Interest on capital which amounted to Rs.150
(iii) His share of goodwill Rs.5,000
(iv) His share of profit from the closing of last financial year to the date of death which
amounted to Rs.750.
Sohan‘s executors were paid Rs.1,400 on 1st April,2018 and the balance in four equal annual
instalments from 31st March,2019 with interest @6% per annum.
Draw up Sohan‘s Capital account to be rendered to his executors and Sohan‘s executor‘s
accout till it is finally paid.
Dissolution of Partnership Firm

Q1.Generally,which of the followings accounts are merged at the time of
dissolution?
a) Cash and Bank Account b) Partner‘s capital accounts and Goodwill account.
c) Bank and Expenses Account d) Unrecorded Assets and Unrecorded liabilities
Account.
Q2.Which of the following is not debited to Realisation Accounts?
a) Liabilities paid b) Unrecorded Liabilities when paid c) Realisation expenses d)
Assets when realized.
Q3. Advertisement suspense at the time of dissolution is transferred to
a) Realisation Account. b) Partner‘s capital Account c) Cash Account d) None of
these.
Q4. At the time of dissolution, there were Debtors of Rs.1,32,000,Provision for
Doubtful Debts Rs.12,000 and Rs.24,000 of the Book Debt proved bad.The
amount of Rs……………….. realized from the debtors will be ………….in
the Realisation Account.
Q5. Dissolution of Firm means the dissolution of the partnership also. It is …..(True or False)
Q6.On the basis of the following data,how much final payment will be made to a partner on
firm‘s dissolution?.Credit balance of the partner was Rs.50,000 .Share of loss on realization
amounted to Rs.10,000.Firm‘s liability taken over by him was Rs.8,000.
a) Rs.32,000 b) Rs.48,000 c) Rs.40,000 d) Rs.52,000
Q7. Debt which the firm owes to its outsiders are known as………debt.
Q8. The firm paid realization expenses of Rs.20,000 on behalf of Rahul,a partner with whom
it was agreed at Rs.50,000.Realisation expenses came to Rs.70,000.Realisation Account will
be debited by;
a) Rs.20,000 b) Rs.50,000 c) Rs.70,000 d) Nil
03 Marks
Q1. Pass necessary journal entries on the dissolution of a partnership firm in the following
cases:
i) Dissolution expenses were Rs.32,000.Out of the said expenses,Rs.12,000 were to be
borne by the firm and balance by the partner X.But the whole expenses Rs.32,000 is
paid by the firm.
ii) Realisation expenses of Rs.25,000 were to be borne and paid by the firm.
iii) Realisation expenses of Rs.2,000 were to be borne by Raju,a partner.However,it was
paid by partner Biju.
Q2.Kavya,Preeti and Leela are three partners.They started a partnership firm by contributing
capitals of Rs.5,00,000,Rs.3,00,000 and Rs.2,00,000 respectively.They wanted to dissolve the
firm.On the date of dissolution the firm‘s assets were Furniture amounting
Rs.20,000,Machinery Rs.50,000 and goodwill Rs.12,000.The creditors was Rs.10,000.The
Machinery was realized 20% above its book value and creditors was paid at 10% discount.
Answer the following questions;
i) What is the realized value of Furniture and Goodwill.
ii) What is the amount paid for creditors.
iii) Find the realized value of Machinery.
Q3. What journal entries would be passed for the following transactions on the dissolution of
a firm,after various assets(other than cash) and third party liabilities have been transferred to
realization account.
i) There was an unrecorded asset of Rs.200,which was taken over by Kartik,a partner
at Rs.150.
ii) Ratan,a partner undertook to Mrs. Ratan‘s loan of Rs.10,000 and took over 50% of
the stock at a discount of 20% (Book value of the stock Rs.25,000)
iii) Balance of stock was sold at a loss of 10%.
Q4.Pass journal entries on the dissolution of the partnership firm assuming that all the assets
and outsider‘s liabilities are transferred to Realisation account.
i) P,a creditor having due amount Rs.10,000 undertook an unrecorded asset of
Rs.12,000 in full settlement.
ii) Bankers(who granted loan of Rs.14,000) accepted stock of Rs.12,000 at a discount
of 20% and the balance in cash.
iii) L,a creditor,to whom Rs.16,000 were due to be paid,took over machinery at
Rs.20,000 .Balance was paid in cash by him.
Q5. Pass journal entries for the following transactions at the time of dissolution.
i) Loan given by Partner,P of Rs.20,000 was settled at 20% discount.
ii) Amount owed by Partner,Nutan to firm of Rs.20,000 accepted to settle his Mrs.loan
of Rs.25,000.
iii) Amount owed by Firm to partner X of Rs.30,000 accepted furniture of
Rs.15,000(Already transferred to realization account) and balance in cash.
04 marks
Q1.Pass journal entries of the following transactions on the dissolution of firm of X,Y and
Z after transferring all Assets and external Liabilities to Realisation account.
i) Sundry Assets were of Rs.1,17,000.Y is to take some assets at Rs.72,000(being 10%
less than the book value) .Z is to take over remaining sundry assets at 80% of the
book value.
ii) Workmen compensation reserve was Rs.60,000 and workers claim Rs.75,000
iii) Workmen compensation reserve was Rs.60,000 and worker‘s claim was Rs.35,000.
iv) Building (Book Value Rs.5,00,000) sold for Rs.8,00,000 through a broker,who
charged 2%commission.
Q2. Angad,Bhim and Chintrang were partners sharing profits in the ratio of 5:3: 2.On 31 st
March,2022,Angad‘s capital and Bhim‘s capital were Rs.50,000,Rs.30,000 and Rs.20,000
respectitively.Chintang owed to the firm Rs.5,000 to the firm.The Sundry creditors were
Rs.20,000.The assets of the firm realized Rs.50,000. Prepare Realisation account.
06 marks
Q1. Mala,Neela and Kala were partners sharing profits in the ratio of 3:2:1.On 31st
march,2022 their firm was dissolved.The assets were realized and liabilities were paid-off.The
accountant prepared Realisation account,Partner‘s capital account and Cash account. You are
required to complete these below given accounts by preparing correct amounts.
Dr. Realization Account Cr.
Particulars Amount Particulars Amount
To Sundry Assets: By Provision for doubtful
Machinery 10,000 debts 1,000
Stock 21,000 By Sundry creditors 15,000
Debtors 20,000 By Sheela‘s loan 13,000
Pre-paid Ins. 400 By repairs and Renewals
Investment 3,000 54,400 Reserve 1,200
To Mala‘s capital A/c 13,000 By Cash-Assets sold
(Sheela‘s Loan) Machinery - 8,000
To cash – creditors paid 15,000 Stock 14,000
To cash-Dishonoured bill Debtors 16,000 38,000
Paid 5,000 By Mala‘s Capital- 2,000
To cash-expenses 800 Investments
By ………………
………..
---------------- …………….
88,200 …………
======= …………….. 88,200
……….. ========
……………..
………..
Dr. Partner‘s Capital A/c Cr.

Particulars Mala Neela Kala Particulars Mala Neela Kala
To …… …… ……. By………… …… …… …….
……………… … … . …….. …… … .
… …….. ……. ……. By………… …… …… …….
To…………… 12,000 9,000 …… ……… ….. … .
……. …… …… …… By Cash A/c …… …….. 1,000
To Cash A/c …… …. …. ….
3000
23000 15000 23000 15000 3000
Dr. Cash A/c Cr.

To Balance b/d 2,800 By Realisation A/c- 15,000
To Realisation A/c-sale of 38,000 Creditors paid 5,000
assets By Dishonoured bill
To Kala‘s Capital A/c 1,000 By ……………… ………..
By Mala‘s Capital A/c 12,000
By Neela‘s Capital A/c 9,000
41,800 41,800
======= ======
Q2. Pass necessary journal entries on the dissolution of a partnership firm in the following
cases:
i) Expenses of dissolution were Rs.9,000
ii) Expenses of dissolution Rs.3,400 were paid by partner,Vishal.
iii) Shiv,a partner agreed to do the work of dissolution for a commission of Rs.4,500.He
also agreed to bear the dissolution expenses.Actual dissolution expenses Rs.3,900
were paid from the firm‘s bank account.
iv) Naveen,a partner agreed to look after the dissolution work for which he was allowed
a remuneration of Rs.3,000.Naveen also agreed to bear the dissolution
expenses.Actual dissolution expenses on dissolution Rs.2,700 were paid by Naveen
v) Vivek,a partner was appointed to look after the dissolution work for a remuneration
of Rs.7,000.He agreed to bear the dissolution expenses.Actual dissolution expenses
Rs.6,500 were paid by Rishi,another partner on behalf of Vivek.
vi) Gourav,a partner was appointed to look after the work of dissolution for a
commission of Rs.12,500.He agreed to bear the dissolution expenses.Gourav took
over furniture of Rs.12,500 as his commission.The furniture had already been
transferred to realization account.
Assertion and Reason Based Questions

In the following questions a statement of assertion followed by a statement of reason
given.Choose the correct answer out of the following choices:
a) Both assertions and reasons are correct and Reason is the correct explanation of
Assertion.
b) Both assertions and Reasons are correct,but Reason is not the correct explanation of
Assetion.
c) Assertion is true but Reason is false.
d) Assertion is false but Reasons are true.
Q1. Assertion (A) : The procedure of converting assets into cash at the time of dissolution of a
firm called realization.
Reasons (R) : Realisation Account is opened to determine the correct amount of profits or
losses.
Q2.Assertion (A): An unrecorded asset would be transferred to the debit side of

Realisation Account.
Reasons(R): An unrecorded liability need not be transferred to the Realisation
Account.
Accounting for Share Capital
Sl.N QUESTIONS MKS

o
Q-1 Reserve share capital means : (1)
(a) Part of authorised capital to be called at the beginning
(b) Portion of uncalled capital to be called only at liquidation
(c) Over subscribed capital
(d) Under subscribed capital
Ans-(b) Portion of uncalled capital to be called only at liquidation

Q-2 Assertion (A): If the shareholder fails to pay the amount of one or more calls on his (1)
shares, the company may forfeit his shares after giving him due notice.
Reason (R): Even after the forfeiture of shares, the shareholder whose shares have
been forfeited is responsible to pay the amount due from him until the company
receives full amount on those shares. Now, select your answer according to the
Coding Scheme given below:
a) Both assertion and reason are correct
b) Assertion is correct but reason is wrong
c) Both assertion and reason are wrong
d) Assertion is wrong but reason is correct
Ans- a) Both assertion and reason are correct
Q-3 The difference between subscribed capital and called up capital is called : (1)
(a) Calls-in-arear
(b) Calls-in-advance
(c) Uncalled capital
(d) None of these
Ans-(c) Uncalled capital
Q-4 Which statement is issued before the issue of shares ? (1)

(a) Prospectus
(b) Articles of Association
(c) Memorandum of Association
(d) All of these
Ans-(d)- All of these
Q-5 Company can utilise securities premium for : (1)

(a) Writing off loss incurred on revaluation of asset
(b) Issuing fully paid bonus shares
(c) Paying divided
(d) Writing off trading loss
Ans-(b) Issuing fully paid bonus shares
Q-6 When a company issues fully paid shares to promoters (1)

for their services, the journal entry will be:
(a) Bank A/c Dr.
To Share Capital A/c
(b) Good will A/c Dr.
(c) Promoters Personal A/c Dr.
(d) Promotion Expenses A/c Dr.
Ans- (b) Good will A/c Dr.

Q-7 Share Application Account is : (1)

(a) Personal Account
(b) Real Account
(c) Nominal/ Account
(d) None of these
Ans- (a) Personal Account
Q-8 An issue of shares which is not a public issue but offered to a selected group of (1)
persons is called :
(a) Public offer
(b) Private placement of shares
(c) Initial public offer
(d) None of these
Ans-(d) None of these

Q-9 Leela LTD took over assets of RS. 4,25,000 and liabilities of RS. 35,000 from (3)
Veena LTD for the purchase consideration of RS. 6,60,000. Leela LTD paid the
purchase consideration by Issue of 10% Debentures of RS. 200 each at a
premium of 10%. Pass necessary journal entries in the books of Leela LTD for
the above.
Ans- In the books of Leea
JOURNAL
Dat Particulars L.F Dr(AMT Cr(AMT.)

e .)
(a) Sundry Assets A/c. 4,25,000
Dr 2,70,000
Goodwill A/c. 35,000
Dr 6,60,000
To sundry liabilities A/c
To Veena LTD.
( Purchase a running business)
(b) Veena LTD 6,60,000
Dr 6,00,000
To 10% Debenture. A/c 60,000
To Securities premium A/c
( Issue of Debentures at a
premium)
st
Q10 On 1 April,2019.XLtd. issued,5,000,9% Preference Shares of Rs.100 each at a (3)
premium of 6%. The entire amount was payable on application. The issue was
oversubscribed to the extent of 5,000 shares and the allotment was made
proportionately to all the applicants. . Give journal entries for the issue of shares
Ans-
2019 BankA/c…………...........................Dr. Dr.
April1 10,60,0
To Preference Share Application and
Allotment A/c 00 10,60,0
00
(Being application money received on 10,000
9%debentures)
April1 P. Share Application and AllotmentA/c Dr. 10,60,0
00
To Preference Share Capital A/c 5,00,00
To Securities Premium Reserve A/c 0
To Bank A/c 30,000
(Being shares allotted and the balance 5,30,00
refunded) 0
Q-11 Suraj Ltd. took over business of Bijay enterprises on 1-4-2020.The details (3)
of the agreement regarding the assets and liabilities to be taken over are :
Particulars Book Value(Rs.) Agreed Value(Rs.)
Building 5,00,000 6,00,000
Machinery 3,00,000 2,00,000
Stock 50,000 50,000
Creditors 1,00,000 1,50,000
It was decided to pay for purchase consideration as Rs.1,00,000 through
Cheque and balance by issue of 40,000,Equity shares of Rs.10 each at a
premium of 25%
Journalize the above transactions in the books of Suraj Ltd.
Ans-
i) Building 6,00,000
A/c……………………………… Dr. 2,00,000
Machinery 50,000
A/c……………………………Dr. 1,50,000
Stock 6,00,000
A/c…………………………………. 1,00,000
Dr.
To Creditors A/c
To Bijay Limited
To Capital Reserve
ii Bijay Ltd. 6,00,000
) A/c……………………………… Dr. 1,00,000
To Bank A/c 4,00,000
To Equity Share Capital A/c 1,00,000
To Securities Premium Reserve A/c
Q-12 Random Ltd. took over running business of Mature Ltd. comprising of Assets (3)
of 45,00,000 and Liabilities of 6,40,000 for a purchase consideration of
36,00,000. The amount was settled by bank draft of 1,50,000 and balance by
issuing 12% preference shares of 100 each at 15% premium. Pass entries in
the books of Random Ltd.
Ans-
i) Assets 45,00,000
A/c………………………………….
Dr. 6,40,000
To Liabilities A/c 36,00,000
To Mature Limited 2,60,000
To Capital Reserve
ii) Mature Ltd. 36,00,000
A/c……………………………Dr. 1,50,000
To Bank A/c 30,00,000
To Pre. Share Capital A/c 4,50,000
To Securities Premium Reserve A/c
Q-13 What are the alternatives for over subscriptions? (3)

Ans- Out rightly rejection of excess application ,
Prorata allotment to all
Partly Prorata and Partly Rejected
Q-14 Janta LTD had registered with RS. 2,00,000 capital, divided into equity shares (4)
of RS. 10 each. Company offered for subscription RS. 1,00,000 shares. The
issue was fully subscribed. The amount payable on application RS. 2, on
allotment and 1st and final call Rs. 4 each. A shareholder holding 100 shares
failed to pay the allotment money. His Shares were forfeited. The company did
not make the final call. Show how the "share capital" will be shown in the
Balance sheet of the company also prepare Note to accounts for the same.
Ans-
Balance Sheet as on
Particulars Note No. Amt (RS.)

(I) EQUITY AND LIABILITY
1. Shareholders Funds (1) 59,600
(a) Share capital
Notes to Accounts:-
Particulars Amt(RS.)
Authorised capital 2,00,000
Issued capital 1,00,000
Subscribed capital
Subscribed and not fully paid up
(10,000-100)×6
=59,400 59,600
Add: share forfeiture(100×2) =
200
Q-15 Complete the following Journal entries (4)
Journal entries in the books of Nandu Ltd.
Da Particulars L. DrAmount Cr
te F (Rs.) Amount(
Rs.)
Share Capital ?
A/c…………………...Dr. 10,000
Securities Premium ?
ReserveA/c….Dr 16,000
To Share Forfeiture A/c .
To Calls in Arrear A/c
(Being ___ shares forfeited for
non-payment of ___ including
premium of Rs.5 per share)
Bank ?
A/c……………………………..Dr ?
. ?
Share Forfeiture
A/c….…………….Dr.
(Being ___ shares reissued at Rs.8
per share as fully paid)
Share Forfeiture 7,500
A/c.……………….Dr 7,500
To Capital Reserve A/c
(Being forfeiture money
transferred to capital reserve)
Particulars Amount(Rs. Particulars Amount(Rs.)

)
To Share Capital A/c ? By Share Capital 14,000
To Capital Reserve A/c 7,500 A/c
To Balance c/d 3,500
Total 14,000 Total 14,000
Ans-
Share Capital- Rs-20,000

Share Forfeiture-Rs-14,000
Bank account-Rs-12,000
Share Forfeitures-Rs-3,000
Share Capital – Rs -15,000
In the ledger Account – Share Capital –Rs -3,000
Q16 X Ltd. Invited applications for issuing 5,00,000 equity shares of Rs.10 each at (6)
par. The amount per share was payable as follows :
On Application - Rs.1 per share
On Allotment -Rs.2 per share
On First Call - Rs.3 per share and
On Second and Final Call -Balance
Applications for 8,00,000 shares were received. Applications for 1,00,000

shares were rejected and pro-rata allotment was made to the remaining
applicants. Excess money received with applications was adjusted towards
sums due on allotment. All calls were made.
Ashok, a shareholder holding 5,000 shares, failed to pay the allotment and the
call money. Mohan, a shareholder who had applied for 7,000 shares, failed to
pay the first and second and final call. Shares of Ashok and Mohan were
forfeited after the second and final call. Of the forfeited shares 8,000 shares
were re-issued at Rs.12 per share fully paid-up. The reissued shares included all
the forfeited shares of Ashok.
Pass necessary Journal entries for the above transactions in the books of X Ltd.
Ans-
i) Bank 8,00,000
A/c……………………………………………… 8,00,000
………………………….Dr.
To Equity ShareApplication A/c
ii) (Being the application money received on 8,00,000
8,00,000shares of Rs.1 per 5,00,000
share)__________________________________ 2,00,000
_____ 1,00,000
iii) Equity share application A/c 10,00,000
…………………………………………..Dr. 10,00,000
iv) To Equity share capital A/c (5,00,000x1) 7,92,000
To Equity Share allotment A/c 8,000
ToBank A/c 8,00,000
v) (1,00,000x1)____________________________ 15,00,00
__ 15,00,000
vi) Equity share Allotment 14,70,000
A/c…………………………………………….D 30,000
r. 15,00,000
vii) To Equity share capital 20,00,000
A/c____________________________ 20,00,000
viii Bank 19,60,000
A/c……………………………………………… 40,000
…………………………Dr. 20,00,000
ix) Calls in Arrear 1,00,000
A/c…………………………................................ 22,000
..Dr. 78,000
x) To Equity share allotment 96,000
A/c__________________________ 80,000
Equity share first call 16,000
xi) A/c……………………………………………… 16,000
..Dr. 16,000
To Equity share capital A/c
____________________________
Bank
A/c………………………………………………
…………………………Dr.
Calls in Arrear
A/c…………………………................................
..Dr.
To Equity share First Call
A/c__________________________
Equity Share Second and Final Call
A/c……………………………Dr.
To Equity Share Capital
A/c____________________________
Bank
A/c………………………………………………
…………………………Dr.
Calls in Arrear
A/c…………………………................................
..Dr.
To Equity share Second and final Call
A/__________________
Equity Share Capital
A/c(10,000x10)……………………………….D
r.
To Share Forfeiture A/c (15,000+7,000)
To Calls in Arrear A/c (
8,000+30,000+40,000)_____________
Bank
A/c(8,000x12)………………………………Dr.
To Equity Share Capital A/c (8,000x10)
To Security Premium Reserve
A/c_______________________
Share forfeited
A/c…………………………………………Dr.
Working Note ( i) Calculation of allotment money and first and final call not
paid by Ashok
(ii) Calculation of Gain/ Profit on reissue to be transferred to Capital Reserve
Q-17 Manvet Ltd. Invited applications for issuing 10,00,000 equity shares of Rs.10 (6)
each at a premium of Rs.1 per share. The amount was payable as follows :
On application and allotment – Rs.4 per share ( including Rupee 1 premium)
On first call – Rs.4 per share
On second and final call – Rs.3 per share.
Applications for 15,00,000 shares were received and pro rata allotment was
made to all the applicants. Excess application money was utilisedon the
subsequent calls.
A shareholder who had applied for 6,000 shares did not pay the first, second
and final call money. His shares were forfeited after second and final call. 90%
of the forfeited shares were re-issued at Rs.8 per share fully paid-up.
Pass necessary Journal entries for the above transactions in the books of the
Company.
Ans-
i) Bank 60,00,000
A/c……………………………………………… 60,00,000
………………………….Dr.
To Equity ShareApplication and Allotment A/c
ii) (Being the application money received on 60,00,000
15,00,000shares of Rs.4 per 30,00,000
share)__________________________________ 10,00,000
_____ 20,00,000
iii) Equity share application and Allotment 40,00,000
A/c…………………..Dr. 40,00,000
iv) To Equity share capital A/c (10,000x3) 19,92,000
To Security Premium Reserve A/c (10,00,000x1) 8,000
To Calls in advance 20,00,000
A/c______________________________ 40,00,000
v) Equity share First Call 30,00,000
A/c…………………………………………….D 30,00,000
vi) r. 29,88,000
To Equity share capital 12,000
A/c____________________________ 30,00,000
vii) Bank 40,000
A/c……………………………………………… 20,000
…………………………Dr. 20,000
viii Calls in Arrear 28,800
) A/c…………………………................................. 7,200
.Dr. 36,000
Calls in Advance 10,800
ix) A/c……………………………………………… 10,800
……….Dr.
To Equity share First
CallA/c__________________________
Equity share Second and Final
CallA/c……………………………..Dr.
To Equity share capital A/c
____________________________
Bank
A/c………………………………………………
…………………………Dr.
Calls in Arrear
A/c………………………….................................
.Dr.
To Equity share Second and
FinalCallA/c________________
Equity Share Capital
A/c………………………………………………
….Dr.
To Share Forfeited A/c
To Calls in Arrear A/c_______
Bank A/c
(3,600x8)………………………………………
…………………Dr.
Share Forfeited A/c Dr.
To Equity Share Capital
A/c____________________________
Share Forfeited A/c Dr.
Q-18 Nidiya limited was incorporated on 1stApril 2017 with registered office in
Mumbai. The capital clause of memorandum of Association reflected a
registered capital of 8,00,000 equity shares of Rs.10 each and 1,00,000
preference shares of Rs.50 each.
Since some large investments were required for building and machinery the
company in consultation with vendors,Ms.VPS Enterprises, issued 1,00,000
equity shares and 20,000 preference shares at par to them in full consideration
of assets acquired.
Besides this the company issued 2,00,000 equity shares for cash at par payable
as Rs 3 on application, 2 on allotment, 3 on first call and 2 on second call.
Till date second call has not yet been made and all the shareholders have paid
except Mr. Ajay who did not pay allotment and calls on his 300 shares and Mr.
Vipul who did not pay first call on his 200 shares. Shares of Mr. Ajay were then
forfeited and out of them 100 shares were reissued at Rs.12 per share.
Based on above information you are required to answer the following questions.
Shares issue to vendors of building and machinery, Ms. VPS Enterprises, would
be classified as:
a. Preferential Allotment
b. Employee Stock Option Plan
c. Issue for Consideration other than cash
d. Right Issue of Shares
2 How many equity shares of the company have been subscribed?
a. 3,00,000
b. 2,99,500
c. 2,99,800
d. None of these
3 What is the amount of security premium reflected in the balance sheet at the
end of the year?
a. 200
b. 600
c. 400
d. 1,000
4 What amount of share forfeiture would be reflected in the balance sheet?

a. 600
b. 900
c. 200
d. 300
Ans-
1.( c) Issue for consideration other than cash.

2 ( c) Rs.2,99,800
3 ( c) Rs.400
4 (a) Rs. 600
Q-19 Read the following information carefully and give the answer for the questions
AB Ltd issued 3,00,000 shares of Rs 100 each at 20% premium through e-IPO,
payable as under:
On Application : Rs 40 (including 10% premium) per share
On Allotment : Rs 40 (excluding 10% premium) per share
On First & Final Call : Balance
Share was subscribed for 5,00,000 shares. 50,000 share applications were
rejected with letter of regret and pro-rata allotment was made to remaining
share applicants. All money was duly received except from Raghav, allotted to
whom 15,000 shares failed to pay allotment and calls.
These shares were forfeited and out of which 9,000 shares reissued Rs 75 per
share fully paid.
What the amount was called in first & final call per share?
(a)Rs 20 per share
(b)Rs 40 per share
(c) Rs 30 per share
(d) None of these
Ans-
(b)Rs 40 per share
Which of the following amount received on allotment of shares?
(a) Rs 1,50,00,000
(b) Rs 90,00,000
(c) Rs 57,00,000
(d) Rs 85,50,000
Ans-
c) Rs 57,00,000
Accounting for Issue of Debentures

Choose the correct option:
1. Which of the following statements is incorrect about debentures? (1)
a) Interest on debentures is an appropriation of profit.
b) Debenture holders are the creditors of a company and shareholders are the owners of a
company.
c) Premium Payable on Redemption of Debentures is shown as ‗other non-current
liability‘ under Non-current Liabilities in Equity and Liabilities part of Balance Sheet.
d) Issue of Debentures as collateral security means issuing debentures as an additional
security that may be offered against the loan in addition to principal security.
2. ₹12,000, 6% Debentures were issued by the Force Metal Ltd. on 1st April 2021. During the
year 2021-22, the company suffered a huge loss. In this case: (1)
a) Debentureholders will be entitled to interest of the year 2021-22.
b) Debentureholders will not be entitled to interest of the year 2021-22.
c) Debentureholders will be entitled to interest of the year 2021-22 at half rate.
d) Debentureholders will be entitled to interest of the year 2021-22 at a lower rate.
3. Mehar Ltd. issued ₹1,00,000, 12% Debentures of ₹100 each at a premium of 5%

redeemable at a premium of 2%. Premium on redemption account will be: (1)
a) Debited by ₹5,000 b) Credited by ₹5,000
c) Debited by ₹2,000 d) Credited by ₹2,000
4. 12% Debentures were issued at a discount of 10% to a vendor of machinery for payment
of ₹ 9,00,000. (1)
Date Particulars LF Dr. (₹) Cr. (₹)

Vendor A/c Dr. X
Discount on Issue of Debenture A/c Dr. Y
To 12% Debentures A/c Z
Here X, Y and Z are:
(a) ₹1,00,000, ₹9,00,000, ₹10,00,000 respectively
(b) ₹9,00,000, ₹1,00,000, ₹10,00,000 respectively
(c) ₹10,00,000, ₹9,00,000, ₹1,00,000 respectively
(d) ₹1,00,000, ₹8,00,000, ₹9,00,000 respectively
5. Rama Ltd. took over the following assets and liabilities of Krishna Ltd. on 1 st April, 2021.
(1)
Particulars ₹
Land and Building 50,00,000
Furniture 10,00,000
Stock 5,00,000
Creditors 7,00,000
The purchase consideration of ₹60,00,000 was paid by issuing 12% debenture of ₹ 100
each at a premium of 20%
In the books of Rama Ltd., 12% Debentures A/c will be:

(a) Debited by ₹ 60,00,000 (c) Credited by ₹ 50,00,000
(b) Credited by ₹ 60,00,000 (d) Debited by ₹ 50,00,000
6. Which of the following is incorrect about debentures? (1)

(i) Discount or Loss on Issue of Debentures, both are capital loss for the company
(ii) Loss on Issue of Debentures can be written off from:
 Securities Premium Reserve [Sec 52(2)]
 Statement of Profit and Loss
(iii) In case balance in Statement of Profit and Loss is not sufficient to write off the total
amount of discount or loss, on issue of debentures, it is written off from Statement
of Profit and Loss, to the extent of balance available in Securities Premium Reserve
and then the remaining balance is written off from Securities Premium Reserve.
(a) Only (ii) (b) Only (iii)

(c) Both (i) and (ii) (d) All (i), (ii) and (iii)
7. Given below are two statements – Statement (A) and Statement (B)
Statement (A) : ‗Loss on Issue of Debentures A/c‘ is a liability account, whereas
‗Premium on Redemption of Debentures A/c is an expenditure account.
Statement(B): At the time of making payment due (i.e. redemption of debentures),
‗Premium on Redemption of Debentures A/c‘ is credited.
Choose the correct alternative from the following: (1)
(a) Both statement (A) and statement (B) are correct.

(b) Statement (A) is correct and statement (B) is incorrect.
(c) Statement (A) is incorrect and statement (B) is correct.
(d) Both Statement (A) and satement (B) are incorrect.
8. As a purchase consideration of a machinery of ₹7,20,000, debentures of ₹100 each were

issued at a premium of ₹25 by the company. The number of debentures issued by the
company is: (1)
(a) 7,200 (c) 5,700
(b) 7,000 (d) 5,760
(3 Mark Questions)
1. Deepak Ltd. purchased furntiure of ₹2,20,000 from M/s Furniture Mart, 50% of the
amount was paid to Furniture Mart by accepting a bill of exchange and for the balance,
company issued 9% debentures of ₹100 each at a premium of 10% in favour of Furniture
Mart. Pass necessary journal entries in the books of Deepak Ltd. for above transactions.
(3)
2. Fill the blanks in the following entries: (3)
X Ltd.
Journal
Sundry Assets A/c Dr. 18,00,000

To Sundry Creditors A/c 2,00,000
To …………………….. …………..
To……………………... …………..
(Being business of Rohan & Co. purchased
for a consideration of ₹ 15,00,000)
…………..
………………….. Dr.
…………..
………………….. Dr.
To 9% Debentures A/c
…………..
(Being paid to Rohan & Co. by issue of
……….; 9% Debentures of ₹ 150 each at a
discount of ₹ 50 per debenture)
3. ―UZ Ltd‖ purchased Plant and Machinery from EIk Machine Ltd. for ₹6,90,000. EIk
Ltd. was paid by accepting a draft of ₹90,000 payable after three months and the
balance by issue of 6% debentures of ₹100 each at a discount of 20%.
Pass necessary journal entries for the above transactions in the books of ‗UZ Ltd.‘ (3)
4. On 1st April, 2018, R J Ltd. issued ₹10,00,000, 9% debentures of ₹100 each at a
discount of 10%. These debentures were redeemable at a premium of 5% after four
years.
Pass necessary journal entries for the issue of debentures and prepare 9% Debentures
Account. (3)
5. Complete the following entries in the Journal: (3)
XY Ltd.
Journal
Sundry Assets A/c Dr. 18,00,000

.............................. Dr. ………….
To Sundry Creditors 2,00,000
To ……………….. …………..
(Being business of Rohit & Co. purchased
for a consideration of ₹ 20,00,000
………………….. Dr. 20,00,000

………………….. Dr. …………
To 8% Debentures A/c
(Being paid to Rohit & Co. by issue of
……….; 8% Debentures of ₹ 150 each at a …………..
discount of ₹ 50 per debenture)
..
(4 Mark Questions)
1. SSS Ltd. issued 25,000; 10% Debentures of ₹100 each. Give Journal entries and the
Balance Sheet in each of the following cases when: (4)
(i) The debentures were issued at a premium of 20%
(ii) The debentures were issued as a collateral security to Bank against a loan of ₹
20,00,000
2. Pass the necessary journal entries for issue of 1,000, 7% Debentures of ₹100 each in the
following cases: (4)
(a) Issued at 5% premium redeemable at a premium of 10%.
(b) Issued at a discount of 5% redeemable at par.
(6 Mark Questions)
1. On 1st April, 2015, K.K. Ltd. issued 500, 9% Debentures of ₹500 each at a discount of
4%, redeemable at a premium of 5% after three years.
Pass necessary Journal Entries for the issue of debentures and debenture‘s interest for
the year ended 31st March, 2016 assuming that interest is payable on 30th September and
31st March. The company closes its books on 31st March every year.
(6)
2. (a) Mohit Ltd. took over assets of ₹8,40,000 and liabilities of ₹80,000 of
Ram Ltd. at an agreed value of ₹7,20,000. Mohit Ltd. paid to Ram Ltd., by issue
of 9% debentures of ₹100 each at premium of 20%. Pass necessary journal
entries to record the above transactions in the books of Mohit Ltd.
(b) Give Journal entries in each of the following cases if the face value of a 9%
debenture is ₹100.
(i) A debenture issued at ₹100 repayable at ₹105.
(ii) A debenture issued at ₹105 repayable at ₹105. (6)
Case-Based Questions
1. Rose Bond Ltd. is in the business of manufacturing electrical water pumps. It decides to
install some Godrej refrigerators and microwave ovens in the company for providing
facilities to its employees as the company is located in the remote area. It named its
welfare scheme as ―Employees Relief‖. On 1st April, 2021 the puchase price of
electrical appliances was paid by issuing 6% Debentures. Debentures of ₹20,00,000
were issued at a premium of 10% for this purpose.
In another case, the company agreed to issue 9% debentures of ₹100 each at ₹ 120 to
the vendors for the purchase of machinery worth ₹1,25,000.
Read the above information carefully and answer the following questions:
(i) Which of the following will be debited by ₹22,00,000 for the issue of debentures
for the purchase of electrical appliances for Rose Bond Ltd.?
(a) 6% Debentures A/c (b) Rose Bond Ltd.
(c) Godrej Ltd. (d) Both (a) and (b)
(ii) The number of 9% Debentures issued by the Company would be:
(a) 1,250 (b) 1,200
(c) 1,041 (d) 2,080
2. Fashionable Fabrics Ltd. has decided to start a new showroom. The Finance Manager of
the company has estimated the capital requirements at ₹12,50,000. The company has
arranged ₹5,00,000 from the internal sources to start the showroom. It has also decided
to call the unpaid amount of ₹3 per share on its 10,000 equity shares. The requirements
of the remaining capital was fulfilled by raising a loan from Bank of India payable after
five years. 8% Debentures of ₹100 each were issued for 1.5 times more amount than
that of loan as collateral security.
The management raised the following questions:

(i) What will be the total requirements of the loan raised by the company?
(ii) What will be total number of debentures issued by the company?
(iii) Is the company liable to pay the interest on these debentures?
(iv) How debentures will be shown in the financial statements of the company when
company has recorded the issue of debentures by passing a journal entry in the
books of company?
(v) How will you classify the loan raised as per the Schedule III of the Companies
Act,2013?
Financial Statements of a Company and Analysis of Financial Statements
Q1 Current maturities of long-term debt are shown under:

(a) Long term Provisions (b) Long term Borrowings [1]
(c) Short term Borrowings (d) Other Current liabilities
Q2 Which of the following is not the limitation of financial statement analysis? [1]
(a) Ignores price level changes (b) window dressing
(c) Qualitative aspect ignored (d) Inter firm comparisons
Q3 Indicate the item which appears as short-term provisions: [1]
(a) Provision for doubtful debts (b) Provision for gratuity
(c) Employee‘s Provident fund (d) Securities premium reserve
Q4 Match the following: [1]
1. Short term loan (i) Other current liabilities
2. Short term loans and advances (ii) Short term borrowing
3. Debentures (iii) Long term borrowings
4. Debentures redeemable during current year (iv) Current investments
Select the correct code:
(a) 1 – iii, 2 – ii, 3 – iv, 4 – i (b) 1 – iii, 2 – iv, 3 – ii, 4 - i
(c) 1 – ii, 2 – iv, 3 – iii, 4 – i (d) 1 – i, 2 – ii, 3 – iii, 4 – iv
Q5 Calls in Arrears appear in a Company's Balance Sheet under_______
(a) Reserve & Surplus (b) Shareholders Funds [1]
(c) Contingent Liabilities (d) Short-term Borrowings
Q6 Which analysis is considered as static [1]
(a) Horizontal Analysis (b) Vertical Analysis
(c) Internal Analysis (d) External Analysis
Q7 Which of the following is not included in sub heading ‗Cash and cash [1]
equivalents?
(a) Cash in hand (b) marketable securities
(c) Cash at Bank (d) Cheques in hand
Q8 Provision for Tax appears in a Company's Balance Sheet under Sub-
head_____
(a) Short-term Provisions (b) Reserves and Surplus [1]
(c) Long-term Provisions (d) Other Current Liabilities
Q9 On 1st June, 2017, K Ltd. issued 10,000, 7% Debentures of Rs. 100 each at a [3]
discount of 10% redeemable at a premium of 10% at the end of five year All
the debentures were subscribed and allotment was made. Prepare the Balance
Sheet (extract) as at 31st March, 2018.
Q10 List any three items that can be shown as contingent Liabilities in a company's [3]
Balance sheet.
Q11 X Ltd had a Time series analysis of Financial Statements. The Accounts [3]
manager found that the accountant had wrongly interpreted an increase in
Revenue from operations although there is no change in the physical quantity
of sales. Which limitation of Financial statement analysis is highlighted here.
Also explain any two other limitations of Financial Statement Analysis.
Q12 Classify the following items under Major heads and Sub-head(if any) in the
Balance Sheet of a Company as per schedule III of the Companies Act 2013.
(i) Accrued Incomes [3]
(ii) Current Maturities of Long term Debts.
(iii) Provision for Employees Benefits
(iv) Unpaid Dividend
(v) Short-term Loans
(vi) Long-term Loans
Q13 Under which sub-heads will the following items be placed in the Balance [3]
Sheet of a company as per Schedule III, Part I of the Companies Act,2013?
(i) Capital Reserve
(ii) Bonds
(iii) Loans repayable on Demand
(iv) Vehicles
(v) Goodwill
(vi) Loose Tools
Q14 (From the following case study choose the correct alternatives ) [4]
On1st April, 2013 Ajanta Ltd. was formed with an authorized capital of Rs.
30,00,000 divided into 30,000 shares of Rs.100 each. The company issued
10,000 shares at par. The issue price was payable as follows:
On application – Rs. 30 per share
On allotment – Rs. 50 per share
On final call – Rs. 20 per share
The issue was fully subscribed and the company allotted shares to all the
applicants. All money was received except the final call money on 1,000
shares.
(i). Which of the following amount will be shown into the balance sheet of the
company under the sub-head ‗Share Capital‘?
(a) Rs. 10,00,000 (b) Rs. 9,80,000
(c) Rs. 30,00,000 (d) Rs. 20,000
(ii). Which of the following amount will be shown as ‗subscribed and fully
paid capital‘?
(a) Rs. 9,80,000 (b) Rs. 9,00,000
(c) Rs. 10,00,000 (d) Rs. 30,00,000
(iii). Which of the following amount will be shown as ‗subscribed but not and
fully paid capital‘?
(a) Rs. 80,000 (b) Rs. 20,000
(c) Rs. 1,00,000 (d) Rs. 9,00,000
(iv). Calls in arrears are deducted from which of the following:
(a) Authorized capital (b) Subscribed but not fully paid capital
(c) Subscribed and fully paid capital (d) Issued capital
Q15 Alpha Ltd. had an authorized capital of Rs.10,00,000 divided into equity [4]
shares of Rs.10 each. The company offered for subscription 80,000 shares.
The issue was fully subscribed .The amount payable on application was Rs. 3
per share, Rs.2 per share were payable on allotment , Rs.3 on first call and the
balance on second and final call. A shareholder holding 2,000 shares failed to
pay the first call and second and final call money. His shares were forfeited.
How the Share Capital will be presented in the company‘s Balance Sheet as
per Schedule III,of Companies Act, 2013 ?Also prepare Notes to Accounts for
the same.
Q16 Classify the following items under Major heads and Sub-head(if any) in the [6]
Balance Sheet of a Company as per schedule III of the Companies Act 2013.
(i) Capital Advances
(ii)Income received in advance
(iii) Capital Work-in-Progress
(iv) Motor Vehicles
(v) Store and Spare Parts
(vI) 9% Debentures
(vii) Trade Payables
(viii) Provision for Tax
(ix) Bank Overdraft
(x) Unclaimed Dividend
(xi) Computer Software
(xii) Outstanding Salary
Q17 (From the following case study choose the correct alternatives ) [6]
Mona Ltd. Invited applications for 2,000 equity shares of Rs. 100 each,
payable as follows:
Rs. 25 on application, Rs. 40 on allotment, Rs. 35 on first and final call.
Applications were received for 2,500 shares. It was decided to allot the shares
as under:
W, who applied for 500 shares, was allotted 300 shares.
X, who applied for 1,200 shares, was allotted 1,000 shares.
Y, who applied for 800 shares, was allotted 700 shares.
All money was received except from X who did not pay anything after
application. His shares were forfeited after making all calls. Forfeited shares
were re-issued at Rs 95 per share fully paid.
(i). Profit on reissue of forfeited shares is transferred to?
(a) General reserve (b) Securities premium reserve
(c) Capital reserve (d) Call in Arrears
(ii). Which of the following amount will be transferred to capital reserve?
(a) Rs. 95,000 (b) Rs. 25,000
(c) Rs. 30,000 (d) Rs. 5,000
(iii). The amount of excess application money on pro-rata allotment will be
treated as:
(a) Adjusted at the time of allotment (b) Adjusted at the time of first and final
call
(c) Returned to W, X & Y (d) Shown as application money pending allotment
(iv). Maximum discount that could be given by Mona ltd. for re-issue of
forfeited shares of X is:
(a) Rs. 30,000 (b) Rs. 70,000
(c) Rs. 95,000 (d) Rs. 5,000
(v). Which of the following amount will be shown as ‗paid-up capital‘?
(a) Rs. 2,00,000 (b) Rs. 2,25,000
(c) Rs. 2,50,000 (d) Rs. 1,00,000
(vi) What will be the calls-in arrear on allotment?
(a) Rs.5,000 (b) Rs.6,000
(c) Rs.7,000 (d) Rs.8,000
Q18 Assertion (A) The objective of financial statement analysis is to measure the [1]
earning capacity and financial strength of a business and to facilitate
comparative study.
Reason (R) Financial statements of a company are to be prepared as per format
prescribed in Schedule III of the Indian Companies Act, 2013.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the
correct explanation of Assertion (A)
(c) Assertion (A) is false, but Reason (R) is true
(d) Assertion (A) is true, but Reason (R) is false
Q19 Assertion (A) In vertical analysis financial statements for a single year or on a [1]
particular date are reviewed and analyzed with the help of proper devices like
ratios.
Reason (R) Such type of analysis is based on data of a single year. As such it is
also called static analysis.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the
(c) Assertion (A) is false, but Reason (R) is true
(d) Assertion (A) is true, but Reason (R) is false
Financial Statement Analysis (Tools)- Ratio Analysis

MCQs
Q1 Working Capital is the:
(a) Cash and Bank Balance
(b) Capital borrowed from the Banks
(c) Difference between Current Assets and Current Liabilities
(d) Difference between Current Assets and Fixed Assets
Q2 Current assets include only those assets which are expected to be realised within
………………………
(a) 3 months (b) 6 months
(c) 1 year (d) 2 years
Q3. Current Ratio is 1.5:1. Working Capital is 30,000. What will be the amount of current
liabilities?
(a) 20,000 (b) 60,000
(c) 1,65,000 (d) 1,20,000
Q4. Capital Employed can be calculated by:
(a) Debt + Equity (b) Non-Current Assets + Working Capital
(c) Total Assets – Current Liabilities (d) Any of the above
Q5. Net Profit can be greater than Operating Profit when:
(a) Cost of Revenue from Operations is more than Operating Expenses
(b) Operating Expenses are more than Non-operating Expenses
(c) Non-operating Expenses are more than Non-operating Income
(d) Non-operating Expenses are less than Non-operating Income
Q6. From the following information, Calculate Return on Investment: Net Profit after Interest
and Tax Rs. 4,50,000,10% Debentures Rs. 15,00,000,Tax @ 10%, Capital employed Rs.2
6,00,000
(a) 17.31% 25%
(b) 15.85 10.98%
Q7. The ideal Current ratio is:
(a) 1:2 (b) 2:1
(c) 1:1 (d) 3:1
Q8. Opening Inventory of a firm is Rs. 80,000. Cost of revenue from operation is Rs.
6,00,000. Inventory Turnover Ratio is 5 times. Its closing inventory will be:
(a)RS.1,60,000 (b) RS.1,20,000
(c) RS.80,000 (d) RS. 2,00,000
ASSERTION AND REASON
Q1. Assertion (A): Activity Ratios are the ratios that are calculated for measuring the
efficiency of operations of business based on effective utilisation of resources.
Reason (R): Current ratio and Quick Ratio are liquidity ratios
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation
of Assertion (A).
c) Assertion (A) is true, but Reason (R) is False
d) Assertion (A) is false, but Reason (R) is true
Q2. Assertion (A): The limitations of financial statements also form the limitations of the ratio
analysis.
Reason (R): Since the ratios are derived from the financial statements, any weakness in the
original financial statements will also creep in the derived analysis in the form of Accounting
Ratios.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
d) Assertion (A) is false but Reason (R) is true
3 MARKS
Q1. Calculate ‗Liquidity Ratio‘ from the following information:
Current liabilities=Rs.50,000
Current assets = Rs.80,000
Inventories = Rs.20,000
Advance tax = Rs.5,000
Prepaid expenses =Rs.5,000
Q2. X Ltd., has a current ratio of 3.5 : 1 and quick ratio of 2 : 1. If excess of current assets
over quick assets represented by inventories is Rs. 24,000, calculate current assets and current
liabilities.
Q3. Shareholders‘ funds Rs. 1,40,000
Total Debts (Liabilities) Rs. 18,00,000
Current Liabilities = Rs. 2,00,000.
Calculate total assets to debt ratio
Q4. From the following information, calculate inventory turnover ratio:
Inventory in the beginning = 18,000
Inventory at the end = 22,000
Net purchases = 46,000
Wages = 14,000
Revenue from operations = 80,000
Carriage inwards = 4,000
Q5. Given the following information:

Revenue from 3,40,000
Operations
Cost of Revenue
1,20,000
from Operations
Selling expenses 80,000
Administrative
40,000
Expenses
Calculate Gross profit ratio and Operating ratio
4 MARKS-:
Q1.A pharmaceutical company wanted to analysis its profitability position along with a check
on its inventory level for the past two years. The following data is available for your reference
for the year ended.
31st March 31st March
2020 2021
Revenue from
42,00,000 60,00,000
Operations
Inventory 7,20,000 15,00,000
During the year 2019,20, the inventory increased by 20%. Gross Profit is 25% on the cost of
revenue of operations.
You are required to answer the following questions on the basis of the above information:
1. State the amount of inventory increased during the year 2019-20.
a)Rs.1,44,000
b)Rs.80,000
c)Rs.1,20,000
d)Rs.72,000
2. The average inventory of the year 2019-20 is _
a)Rs.6,60,000
b)Rs.9,36,000
c)Rs.9,12,000
d)Rs.6,80,000
3.The inventory turnover ratio of year 2019-20 is __
a)4.05times
b)5.7times
c)5.09times
d) 4.87 times
4. Inventory turnover ratio measured in:
a) proportion
b)times
c) fraction
d) percentage
Q2.Accounts Guru Ltd wants to analyse its liquidity position along with an assessment of
Inventory position from the given information.
Inventory Turnover Ratio = 4 times
Inventory, in the beginning, was Rs.20,000 less than Inventory at the end.
Revenue from Operations Rs.6,00,000, Current Liabilities Rs. 60,000.
Gross Profit Ratio 25%, Quick Ratio 0.75 : 1
From the following given above, answer the following questions:
1. State the amount of cost of Revenue from operations.
a)Rs.4,50,000 b)Rs.4,90,000
c)Rs.4,80,000 d)Rs.3,50,000
2. State the amount of average inventory.
a)Rs.1,25,000 b)Rs.1,12,500
c)Rs.2,50,000 d)Rs.1,52,000
3. State the amount of closing inventory.
a)Rs.1,12,000 b)Rs.1,12,500
c)Rs.1,67,500 d) Rs.1,22,500
4. State the current ratio of Accounts Guru Ltd.
a)2.4:1 b)2.5:1
c)2.79:1 d) 2.6:1
6 MARKS
Q1. The proprietary ratio of M. Ltd. is 0.80 : 1. State with reasons whether the following
transactions
will increase, decrease or not change the proprietary ratio :
(i) Obtained a loan from bank RS. 2,00,000 payable after five years.
(ii) Purchased machinery for cash RS. 75,000.
(iii) Redeemed 5% redeemable preference shares RS. 1,00,000.
(iv) Issued equity shares to the vendors of machinery purchased for RS. 4,00,000.
(v)issue of debenture for cash RS.1,00,000.
(vi) sale of goods at a loos rs.20,000
Q2.Assuming that the Debt-Equity Ratio is 2:1, state giving reasons which of the following
transactions would (i) Increase; (ii) Decrease; Not alter the Debt-Equity Ratio:
(i) Issue of new shares for cash
(ii) Conversion of debentures into equity shares.
(iii) Sale of a fixed asset at profit.
(iv) Purchase of a fixed asset on long-term deferred payment basis.
(v) Payment to creditors.
(vi) sale of goods on credit
Financial Statement Analysis (Tools)- Cash Flow Statement
SECTION-A (MCQs &ARQs 1 MARK)
1. If a machine whose original cost is Rs.40,000 having accumulated depreciation

Rs.12,000, were sold for Rs.34,000 then while preparing Cash Flow Statement its effect
on cash flow will be :
(A) Cash flow from financing activities Rs.34,000
(B) Cash flow from financing activities Rs.6,000
(C) Cash flow from investing activities Rs.34,000
(D) Cash flow from investing activities Rs.6,000
2. If 6% Pref. share capital Rs.2,00,000 were redeemed at a premium of 5%, while
preparing Cash Flow Statement its effect on cash flow will be :
(A) Cash used from financing activities Rs.2,12,000
(B) Cash received from financing activities Rs.2,12,000
(C) Cash used (Payment) from financial activities Rs.2,10,000
(D) Cash used (Payment) from financial activities Rs.2,00,000
3. Interest received by a finance company is classified under which kind of activity while
preparing a Cash flow statement?
(A) Cash Flow from Operating Activities
(B) Cash Flow from Investing Activities
(C) Cash Flow from Financing Activities
(D) No Cash Flow
4. A company receives a dividend of Rs.2 Lakhs on its investment in other company‘s
shares. In case of a Finance Company, it will be classified under which kind of activity?
(D) No Cash Flow
5. Which of the following item is not considered as Cash Equivalents?
(A) Short term Deposits in Bank
(B) Commercial Papers
(C) Treasury Bills
(D) Non-trade Investment
6. Cash deposit with the bank with a maturity date after two months belongs to which of
the following in the cash flow statement:
(A) Investing activities
(B) Financing activities
(C) Cash and Cash equivalent
(D) Operating activities
7. A Ltd., engaged in the business of retailing of two wheelers, invested Rs.50,00,000 in

the shares of a manufacturing company. Dividend received on this investment will be :
(D) Cash Equivalent
8. How will you deal increase in the balance of ‗Securities Premium Reserve‘ while
preparing a Cash Flow Statement?
(D) Cash Equivalent
9. Assertion (A): ‗Sale of Property is an Operating Activity for a Real Estate Company.
Reason (R): Sale/Purchase of property is the Principal Revenue Producing Activity for
a Real Estate Company.
a) Assertion (A) and Reson (R) are correct but the reason (R) is not the correct
b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct
c) Assertion (A) is correct but the Reason (R) is not correct
d) Both, Assertion (A) and Reason (R) are not correct
10. Assertion (A): Cash deposited into bank will not result in Flow of Cash or Cash
equivalents.
Reason (R): Cash deposited into bank is movement between items of Cash.
in the context of above two statements, which of the following is correct?
a) Assertion (A) and Reson (R) are correct but the reason (R) is not the correct
b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct
c) Assertion (A) is correct but the Reason (R) is not correct
d) Both, Assertion (A) and Reason (R) are not correct
SECTION -B (3 Marks )
11. Mevo Ltd a financial enterprise had advanced a loan of Rs. 3,00,000, invested Rs.
6,00,000 in shares of the other companies and purchased machinery for Rs. 9,00,000. It
received divided of Rs. 70,000 on investment in shares. The company sold an old
machine of the book value of Rs. 79,000 at a loss of Rs. 10,000. Compute cash flows
investing activities.
12. K Ltd a manufacturing company obtained a loan of Rs. 6,00,000, advanced a loan of
Rs. 1,00,000 and purchased machinery for Rs. 5,00,000. Calculate the amount of cash
flow from financing and investing activities.
13. A company had following balances

Investment in the beginning = 34000
Investment at the end = 28000
During the year, company sold 40% of its investments held in the beginning of the
period at a profit of 8400.
Calculate cash flow form investing activity.

14. Grand Hospitality Ltd., reported Net Profit after Tax of Rs. 6,40,000 for the year ended
31st March, 2021. The relevant extract from Balance Sheet as at 31st March, 2021 is:
31st 31st
March, March,
2021 2020
Particulars (Rs.) (Rs.)
Inventories 1,15,000 1,25,000
Trade Receivables 1,50,000 1,10,000
Prepaid Expenses 20,000 6,000
Trade Payables 1,10,000 80,000
Provision for Tax 20,000 15,000
Depreciation charged on Plant and Machinery Rs. 55,000, insurance claim

received Rs. 50,000, gain (profit) on sale of investment Rs. 20,000 appeared in the Statement
of Profit and Loss for the year ended 31st March, 2021. Calculate Cash Flow from Operating
Activities.
15.From the following information, calculate Cash Flow from Financing Activities:
31st March, 31st March,

2021 2020
Particulars ( Rs.) ( Rs.)
Equity Share Capital 10,00,000 9,00,000
Securities Premium Reserve 2,60,000 2,50,000
12% Debentures 1,00,000 1,50,000
Additional Information: Interest paid on debentures Rs. 18,000.
SECTION-C (4 marks)
16.Classify the following into Cash Flows from-

Operating Activities; Investing Activities; Financing Activities.
i. Cash sale of goods in cash

ii. Cash payment to acquire fixed assets
iii. Cash payments from issuing shares at a premium
iv. Payment of dividend
v. Interest received on Investment
vi. Interest Paid on debentures
vii. payment of income tax
viii. Cash repayment of long term loans
17. Grand Hospitality Ltd., reported Net Profit after Tax of Rs. 6,40,000 for the year ended
31st March, 2021. The relevant extract from Balance Sheet as at 31st March, 2021 is:
31st March, 31st March,
2021 2020
Inventories 1,15,000 1,25,000
Trade Receivables 1,50,000 1,10,000
Prepaid Expenses 20,000 6,000
Trade Payables 1,10,000 80,000
Depreciation charged on Plant and Machinery Rs. 55,000, insurance claim

received Rs. 50,000, gain (profit) on sale of investment Rs. 20,000 appeared in the Statement
of Profit and Loss for the year ended 31st March, 2021. Calculate Cash Flow from Operating
Activities.
SECTION-D (6 marks)
18. Prepare a Cash Flow Statement on the basis of the information given in the Balance
Sheet of Libra Ltd. as at 31st March, 2021 and 31st March 2020:
31st 31st
March, March,
Note 2021 2020
Particulars No. ( Rs.) ( Rs.)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital 8,00,000 6,00,000
(b) Reserves and Surplus 1 4,00,000 3,00,000
2. Non-Current Liabilities
Long-term Borrowings 1,00,000 1,50,000
3. Current Liabilities
(a) Trade Payables 40,000 48,000
Total 13,40,000 10,98,000
II. ASSETS
1, Non-Current Assets
(a) Fixed Assets:
Tangible Assets 8,50,000 5,60,000
(b) Non-Current Investments 2,32,000 1,60,000
2. Current Assets
(a) Current Investments 50,000 1,34,000
(b) Inventories 76,000 82,000
(c) Trade Receivables 38,000 92,000
(d) Cash and Cash Equivalents 94,000 70,000
Total 13,40,000 10,98,000
Notes to Accounts
31st 31st
March, March,
2021 2020
I. Reserves and Surplus
Surplus, i.e., Balance in Statement of Profit and Loss 4,00,000 3,00,000
19.Read the following hypothetical text and answer the given questions on the basis of the
same: Rashmi , an alumnus of DAV School, initiated her start up Smart pay, in 2015. Smart
pay is a service platform that processes payments via UPI and POS, and provides credit or
loans to their clients.. During the year 2020-21, Smart pay issued bonus shares in the ratio of
5:1 by capitalising reserves. The profits of Smart pay in the year 2020-21 after all
appropriations was Rs. 7,50,000. This profit was arrived after taking into consideration the
following items: -
Particulars Amount(Rs.)
Interim Dividend paid during the year 90,000
Depreciation on Machinery 40,000
Loss of Machinery due to fire 20,000
Insurance Claim received for loss of machinery due to fire 10,000
Interest on Non-Current Investments received 30,000
Tax Refund 20,000
Additional Information:
Particulars 31.03.2021(Rs.) 31.03.2020(Rs.)
Security Premium A/c 3,00,000 5,00,000
General Reserve 1,50,000 1,50,000
Investment in Marketable Securities 1,50,000 1,00,000
Cash in Hand 2,00,000 3,00,000
Machinery 3,00,000 2,00,000
10% Non-Current Investments 4,00,000 3,00,000
Bank Overdraft 2,50,000 2,00,000
Goodwill 30,000 80,000
(i) Goodwill purchased during the year was Rs. 20,000.

(ii) Proposed Dividend for the year ended March 31, 2020 was Rs. 1,60,000 and for the year
ended March 31,2021 was Rs. 2,00,000.
You are required to:
1. Calculate Net Profit before tax and extraordinary items.
2. Calculate Operating profit before working capital changes.
3. Calculate Cash flow from Investing activities.
4. Calculate Cash flow from Financing activities.
5. Calculate closing cash and cash equivalents.
MARKING SCHEME
Admission of a Partner
1. b. ₹ 10,00,000 1 1
Total capital for 4/5th share = ₹ 15,00,000 + ₹ 18,00,000 + ₹ 7,00,000
= ₹ 40,00,000
Sidhu‘s capital = ₹ 40,00,000 x 5/4 x 1/5
= ₹ 10,00,000
2. a. 3:5 1 1
Sohan‘s old share = 5/8
Sohan‘s new share 11/20
Sohan‘s sacrifice = 5/8 -11/20
= 3/40
Sudha‘s old share = 3/8
Sudha‘s new share = 5/20
Sudha‘s sacrifice = 3/8 – 5/20
= 5/40
Ratio Puneet got his share from both the partners is 3:5
3. b. Dissolution of partnership 1 1
4. c. (A) is correct and (R) is wrong. 1 1
5. c. Nominal Account 1 1
6. c. John‘s Capital A/c Dr ₹ 18,000 1 1
7. d. 38 1 1
8. b. Debited to old partne₹ in old profit sharing ratio 1 1
9. Three merits of admitting a partner are: 3 3
1. Firm‘s capital will increase.
2. Risk of partne₹ will be shared.
3. Better decision can be there. Any other suitable answer may be
accepted.
10. Journal 1 3
Dat Particulars L. Dr (₹) Cr (₹) +
e F 2
Cash A/c Dr 2,16,500
To Pyare‘s Capital A/c 2,00,0
Premium for Goodwill A/c 00
(Being amount brought for capital and 16,500
goodwill)
Premium for Goodwill A/c Dr 16,500
To Kunnu‘s Capital A/c 7,500
To Munnu‘s Capital A/c 9,000
(Being premium for goodwill distributed
in sacrificing ratio)
Sacrificing ratio will be same as old profit sharing ratio in the absence of
any specific information.
11. It is a reserve set aside (appropriated) out of firm‘s profits to meet possible 1 3
liability (claim) on account of any mishap as and when it arises. +
Journal 2
Dt Particulars L. Dr (₹) Cr (₹)
F
Workmen Compensation Reserve A/c 48,000
Dr 40,000
To Workmen Compensation Claim A/c 4,000
To X‗ s Capital A/c 4,000
To Y‘s Capital A/c
Premium for Goodwill A/c
(Being transfer of WCR after adjusting
WCC in OPSR)
12. Journal 1 3
Dt Particulars L. Dr (₹) Cr (₹) +
F 1
Goodwill A/c Dr 12,000 +
To Pradeep‘s Capital A/c 6,000 1
To Pramod‘s Capital A/c 4,000 (
To Prateek‘s Capital A/c 2,000 W
(Being goodwill raised and credited to old N
partners in OPSR) )
Pradeep‘s Capital A/c Dr 30,000
Pramod‘s Capital A/c Dr 20,000
Prateek‘s Capital A/c Dr 10,000
Pabitra‘s Capital A/c Dr 12,000
(Being goodwill written off in NPSR)
WN: Calculation of NPSR (1 mark)
Pabitra‘s share – 1/6
Remaining share 1 – 1/6 = 5/6
Pradeep‘s new share = 5/6 x 3/6 = 15/36
Pramod‘s new share = 5/6 x 2/6 = 10/36
Prateek‘s new share = 5/6 x 1/6 = 5/36
Pabitra‘s share = 1/6 x 6/6 = 6/36
NPSR = 15:10:5:6
13. Total value of assets brought by Kartik is = ₹ 2,00,000 + ₹ 1,20,000 + ₹ 3 3
80,000 + ₹ 50, 000
= ₹ 4,50,000
th
Kartik‘s goodwill for 2/8 share = ₹ 4,50,000 – ₹ 3,80,000 = ₹ 70,000
Firm‘s value of goodwill = ₹ 70,000 x 8/2 = ₹₹ 2,80,000
Because he is going to share in the future profits of the firm which makes other
partner/s to sacrifice.
14. i. a) ₹ 32,00,000 1 4
Super Profit = Avg. Profit – Normal Profit x
₹ 2,00,000 – ₹ 1,20,000 = ₹ 80,000 4
Value of Goodwill at 4 yea₹ purchase = ₹ 8,00,000 x 4 = ₹ 3,20,000 =
ii. b) Swatis‘ Current A/c Dr ₹ 80,000 4
Swati‘s share of goodwill = ¼ x 3,20,000 = ₹ 80,000
S.R same as OPSR as no new ratio is given.
iii. a) ₹ 7,500; ₹ 4,500 respectively
iv. d) None of these
Swati‘s Share ¼
Remaining Share = 1 – ¼ = ¾
Tina‘s Share = ¾ x 5/8 = 15/32
Mina‘s Share = ¾ x 3/8 = 9/32
Swati‘s Share = ¼ x 8/8 = 8/32 Or NPSR 15:9:8
15. i. 2 4
Journal +
Dat Particulars L. Dr (₹) Cr (₹) 2
e F =
General Reserve A/c Dr 1,80,00 4
Contingency Reserve A/c Dr 0
P & L Account A/c Dr 30,000
To Dolly‘s Capital A/c 90,000 1,80,000
To Polly‘s Capital A/c 1,20,000
(Being accumulated reserves and profit
credited to old partne₹ in OPSR)
Dolly‘s Capital A/c Dr 72,000
Polly‘s Capital A/c Dr 48,000
To Advertisement Suspense A/c 1,20,000
(Being deferred revenue expense debited
to old partne₹ in OPSR)
ii.
Journal
Dat Particulars L. Dr (₹) Cr (₹)
e F
Milli‘s Capital Ac Dr 36,000
To Dolly‘s Capital A/c 18,000
To Polly‘s Capital A/c 18,000
(Being adjustment made in SR and GR)
WN:1 Calculation of SR, GR
Dolly Polly Milli
Old profit Share 3/5 2/5
New Share 5/10 3/10 2/10
Difference 1/10 1/10
Sacrifice Sacrifice Gain
2 Net gain or loss
General Reserve 1,80,000
Contingency Reserve 30,000
P & L Account (Cr) 90,000
3,00,000
Less: Adv. Suspense A/c 1,20,000
Net Gain 1,80,000
Partner to be credited or debited
Milli Dr 1,80,000 x 2/10 = 36,000
Dolly Cr 1,80,000 x 1/10 = 18,000
Polly Cr 1,80,000 x 1/10 = 18,000
16. Journal 4 6
Dat Particulars L. Dr (₹) Cr (₹) +
e F 2
A‘s Capital A/c Dr 4,000 =
B‘s Capital A/c Dr 6,000 6
C‘s Capital A/c Dr 10,000
(Being existing goodwill written off in
OPSR)
P & L A/c Dr 14,000
To B‘s Capital A/c 4,200
To C‘s Capital A/c 7,000
(Being profit credited to old partners in
OPSR)
Cash A/c Dr 36,000
To D‘s Capital A/c 32,000
To Premium for Goodwill A/c 4,000
(Being cash brought in by D for capital
and goodwill)
Premium for Goodwill A/c Dr 4,000
To A‘s Capital A/c 800
To B‘s Capital A/c 1,200
To C‘s Capital A/c 2,000
(Being premium for goodwill distributed
in sacrificing ratio)
A‘s Capital A/c Dr 400
B‘s Capital A/c Dr 600
To Cash A/c 2,000
(Being half of premium for goodwill
withdrawn)
Bad Debts A/c Dr 2,000
To Sundry Debtors A/c 2,000
(Bad debts credited to S. Debtors)
Provision for Doubtful Debts A/c Dr 2,000
To S. Debtors A/c 2,000
(Being provision for Doubtful debts
created @ 5%)
Revaluation A/c Dr 4,000
To S. Debtors A/c 2,000
To Provision for Doubtful Debts A/c 2,000
(Being bad debts and provision for
doubtful debts debited to revaluation
account)
Revaluation A/c Dr 3,000
(Being unrecorded liability paid by A
debited to revaluation account)
Investment A/c Dr 4,800
To Revaluation A/c 4,800
(Being increase in the value of investment
credited to revaluation account)
A‘s Capital A/c Dr 440
B‘s Capital A/c Dr 660
(Being loss on revaluation debited to old
partners‘ capital account in OPSR)
Parners‘ Capital A/c
Dr
Dt Particulars A (₹) B (₹) C (₹) D (₹)
To Goodwill 4,000 6,000 10,000

A/c
To Cash A/c 400 600 1,000
To Revaluation 440 660 1,100
A/c
To Bal C/d 37,760 42,200 48,900 32,000
42,600 49,400 61,000 32,000
Cr
Dt Particulars A (₹) B (₹) C (₹) D (₹)
By Bal B/d 36,000 44,000 52,000

By Cash A/c 32,000
By Premium for 800 1,200 2,000
Goodwill A/c
By P & L A/c 2,800 4,200 7,000
By Revaluation 3,000
A/c
42,600 49,400 61,000 32,000
By Bal. b/d 37,760 42,200 48,900 32,000
17. Revaluation Account 3 6
DrCr +
Particulars ₹ Particulars ₹ 2
To Workmen 2,000 By Patents A/c 5,000 +
Compensation Claim 1
A/c =
To Provision for 100 By Investment A/c 5,000 6
Doubtful Debts A/c
To Machinery A/c 1,500
To Partners‘ Capita A/c
(Profit)
Bablu 3,840
Dablu 2,560 6,400
10,000 10,000
Partners‘ Capital A/c
Dr
Date Particulars Bablu (₹) Dablu (₹) Manglu (₹)
To Bal C/d 85,840 56,560 35,600

85,840 56,560 35,600
Cr
Date Particulars Bablu (₹) Dablu (₹) Manglu (₹)
By Bal B/d 60,000 40,000

By Cash A/c 35,600
By Premium for 4,000 2,000
Goodwill A/c
By Gen. Reserve 12,000 8,000
A/c
By Revaluation 3,840 2,560
A/c
By Inv. Fluc. 6,000 4,000
Reserve A/c
85,840 56,560 35,600
Balance Sheet
as at 31st March, 2022
Bablu 85,840 Bills Receivable 30,000
Dablu 56,560 Stock 45,000
Manglu 35,600 1,78,000 Debtors
Creditors 50,000 42,000 39,900
Bills Payable 30,000 Less: Prov. 40,000
Workmen 2,100 13,500
Compensation Claim 2,000 Investments 25,000
2,60,000 Machinery 2,60,000
Patents
18. d. (A) is not correct but (R) is correct 1 1

19. d. 41/90 1 1
Death of a Partner
Q.NO MARKS
1 Ans – (d) Profit and Loss Suspense A/c ………….Dr.30,000 1
To Nandita Capital A/c 30,000
2. Ans – (c) (i), (ii) , (iii) 1
3. Ans- (a) 6% p.a 1
4. Ans – (a) Rs.1,41,640 1
5. Ans- (c) Dr.9‘s Capital A/c Rs.36,000, S‘s Capital A/c Rs.9,000 ,Cr.R‘s 1
Capital A/c Rs.45,000
6. Ans – (c) (i)(C), (ii)(D), (iii)(B), (iv)(A) 1
7. Ans – (b) Profit and loss Appropriation Account 1
8. Ans- (c) Rs.14,000 1
9. Ans – (b) Both (A) and (R) are true and Reason(R) is not the correct 1
explanation of Assertion
10. Ans- ( a) Both (A) and (R) are true and Reason (R) is the correct 1
explanation of Assertion
11. Ans- 1. (a) Rs.10,125 2. False- The amount due to deceased partner is 4
paid to his legal executor 3. Gaining Ratio 4.(b) Debit Profit and loss
Suspense A/c by Rs.37,500 and Credit Bony‘s Capital A/c by Rs.37,500
12. Ans -1. (c) Rs.4,000 2. (c) Dr. Nigam‘s Capital A/c by Rs.59,250 ; 4
Dr.Shreya‘s Capital A/c by Rs.19,750 , Cr. Monu‘s Capital A/c by
Rs.80,000 3. Time Sales 4. Ans –(d) 3 : 1
13. Journal of Vikas, Vishal and Vaibhav 4
Date Particulars Lf Dr.Amt(Rs.) Cr.Amt(Rs.)
31/12/21 Vikas Capital A/c…….Dr. 12,000
Vishal Capital A/c……Dr. 12,000
To Vaibhav‘s CapitalA/c 24,000
Vaibhav‘s CapitalA/c…Dr 10,000
To Profit & Loss A/c 10,000
Profit & loss Suspense 11,250
A/c..Dr
To Vaibhav‘s Capital A/c 11,250
Vaibhav‘s Capital A/c..Dr. 4,05,250
To Vaibhav‘s executors A/c
4,05,250
Working Note : Vaibhav‘s share of current year profit =
Rs.75,000x9/12x1/5 = Rs.11,250.
Q.NO Momita‘s Capital A/c MARKS

14. 4
Particulars Amount(Rs.) Particulars Amount(Rs.)
To Drawings A/c 10,000 By Balance b/d 60,000
To Interest on By Profit &loss
drawings 300 Suspense A/c 4,500
To Momita‘s By Interest on
executors A/c 83,000 Capital A/c 1,800
By Vikas‘s
Capital A/c 13,500
By Gagan‘s
Capital A/c 13,500
93,300 93,300
Working Note – (i) Calculation of Interest on Capital =
Rs.60,000x6/100x 6/12 = Rs.1,800
(ii) Calculation of Momita‘s share of profit =
Rs.45,000x1/5x6/12=Rs4,500
(iii) Calculation of Momita‘s share of Goodwill =Rs.45,000x3x1/5=
Rs.27,000
15. Zubin‘s Executor‘s Account 3
Date Particulars Amt Date Particulars Amt
2019 2019
Aug,1 To Bank A/c 10,300 Aug,1 By Zubin‘s Cap 90,300
2020 2020
31/3/20 ToBalance C/d 83,200 31/3/20 By Interest
accrued A/c 3,200
93,500 93,500
2021 2020
31/3/21 To Bank A/c 48,000 1/4/20 By Balance b/d 83,200
31/3/21 To Balance C/d 40,000 2021
31/3/21 By Interest 4,800
(80,000x 6/100)
2022 2021
31/3/22 To Bank A/c 42,400 1/4/21 By Balance b/d 40,000
2022
31/3/22 By Interest A/c 2,400
42,400 42,400
16. (i) Calculation of Harit‘s share in profit : Ratio of profit to sales= 3
2,40,000/8,00,000 x 100 = 30% Profit upto the date of death =
Rs.1,50,000 x30/100 = Rs.45,000
Profit sharing Ratio between Harihar, Hemang and Harit= 3 : 2 : 1.
Harit‘s Share of Profit = Rs.45,000 x 1/6 = Rs.7,500
Journal entry : Profit and loss Suspense A/c …..Dr.7,5000
To Harit‘s Current A/c 7,500
Q.NO MARKS
17. Working Note : Average profit of the last 5 years = 3
Rs.14,000+Rs.18,000+Rs.16,000+Rs.16,000- Rs.10,000= Rs.54,000/5years =
Rs.10,800
A‘s Share of profit = Rs.10,800 x3/12 x1/3 = Rs.900
Case -1
Profit & Loss Suspense A/c….Dr. 900
To As Capital A/c 900
( Being A‘s share of profit
transferred to Profit and loss
Suspense A/c
Case-2
B‘s Capital A/c……………...Dr 720
C‘s Capital A/c………………Dr. 180
To As Capital A/c 900
( Being A‘s share of profit
adjusted through gaining partners‘
capital accounts)
B‘s Gain = 3/5 -1/3 = 4//15
C‘s Gain= 2/5 -1/3 =1/15
18. Working Note : Z‘s share of Profit = Rs.50,000/Rs.1,50,000 xRs.90,000 x2/10= 3
Rs.6,000
Case -1
Profit & Loss Suspense A/c….Dr. 6,000
To Zs Capital A/c 6,000
( Being Z‘s share of profit
transferred to Profit and loss
Suspense A/c
Case-2
X‘s Capital A/c……………...Dr 6,000
To Zs Capital A/c 6,000
( Being Z‘s share of profit
adjusted through gaining partners‘
capital accounts)
X‘s Gain = 7/10 -5/10 = 2//10
Y‘s Gain= 3/10 -3/10 =0/
19. Working Note : (i) Calculation of Gaining Ratio 3
Reeta = 1/2 -3/8 = 1/8 Geeta = 1/2 -1/8 = 3/8 Gaining Ratio= 1 : 3
(ii) Calculation of Sita‘s Share of Goodwill
Total of last three years profit = Rs.1,05,000+Rs.30,000+Rs.84,000 =
Rs.Rs.2,19,000
Sita Share of goodwill = Rs.2,19,000 x 4/8 x 50/100 = Rs.54,750
Sita‘s share of goodwill will be contributed by Reeta and Geeta in their gaining
ratio
Q.NO Journal MARKS

Building A/c………………..Dr. 80,000
( Being the increase in value of
building brought into account
Revaluation A/c…..…………Dr. 80,000
To Sita‘s Capital A/c 40,000
To Retta ‗s Capital A/c 30,000
To Geeta‘s Capital A/c 10,000
( Being Revaluation profit
transferred to partners capital
account in old ratio)
Reeta‘s Capital A/c…………..Dr 13,688
Geet‘s Capital A/c…………....Dr 41,062
To Sita‘s Capital A/c 54,750
(Being Sita‘s share of goodwill
adjusted in the capital accounts of
gaining partners in their gaining
ratio i.e 1 :3)
20. Karan‘s Capital A/c 4+2=6
Particulars Amount(Rs.) Particulars Amount(Rs.)
To Balance b/d 13,000 By Karan‘s loan A/c 28,000
To Karan‘s Executor‘s By Arun‘s Capital A/c 90,000
A/c 2,00,430 By Varun‘s Capital A/c 67,500
By Profit and loss
Suspense A/c 26,250
By Interest on loan A/c 1,680
2,13,430 2,13,430
Working Note : 1. Calculation of Karan‘s share of Goodwill
Average Profit = Rs.1,90,000+Rs.1,70,000 + Rs.1,80,000 + Rs.1,60,000/4 =
Rs.1,75,000 Goodwill of the firm = Rs.1,75,000 x 3 years purchase = Rs.5,25,000
Karan‘s share of goodwill = Rs.5,25,000 x 3/10 = Rs.1,57,500
2. Calculation of Karan Share of profit = Average Profit = Rs.1,75,000 Karan‘s
share of profit = Rs.1,75,000 x 3/10 x 6/12 = Rs.26,250
Note : Here there is no credit balance in capital account of Karan, so he will not get
interest on Capital
21. Sohan‘s Capital Account 6
2018 2018
To Sohan‘s Jan.1 By Balance b/d 10,000
Executor‘s A/c 17,400 Mar.31 By Interest on Cap 150
Mar.31 By Ram‘s Cap 2,500
Mar.31 By Mohan‘s Cap 2,500
Mar.31 By P&L Suspense 750
Mar.31 By WCR 1,500
17,400 17,400
Q.NO Sohan‘s Executor‘s Account MARKS

21.
2018 2018
Apr.1 To Bank A/c 1,400 Mar.31 By Sohan‘s Capital
Dec.31 To Balance c/d 16,720 A/c 17,400
Dec.31 By Interest A/c
(17,400-
1,400)x6/100x 9/12
720
18,120 18,120
2019 2019
Mar.31 To Cash A/c 4,960 Jan.1 By Balance b/d 16,720
(4,000+720+240) Mar.31 By Interest A/c
Dec.31 To Balance c/d 12,540 (16,000x6/100x3/12 240
Dec.31 By Interest A/c
(12,000x6/100x9/12 540
17,500 17,500
2020 2020
(4,000+540+180) Mar.31 By Interest A/c 180
Dec.31 To Balance c/d 8,360 (12,000x6/100x3/12
Dec.31 By Interest A/c 360
(8,000x6/100x9/12
13,080 13,080
2021 2021
Dec.31 To Balance c/d 4,180 (8,000x6/100x3/12
Dec.31 By Interest A/c 180
(4,000x6/100x9/12
8,660 8,660
2022 2022
(4,000x6/100x3/12
4,240 4,240
st
Note : (i) The date of closing the account is 31 December and date of payment of
instalment is 31st March
(ii) Total amount due to Sohan‘s executors is Rs.16,000 is payable in four equal
annual instalments
Therefore yearly instalment = Rs.16,000/4 = Rs.4,000 plus interest.
Dissolution of Partnership Firm

01 MARK
Q1. (a) Cash and Bank Account.
Q2. (d) Assets when realised.
Q3. (b) Partner‘s capital Account.
Q4. (i) Rs.1,08,000 , (ii) credited
Q5. True.
Q6. (b) Rs.48,000 (Rs.50,000 –Rs.10,000 + Rs.8,000)
Q7. Firm‘s Debt.
Q8. (b) Rs.50,000
03 MARKS
Q1.
Date Particulars L/F Amount Amount
X‘s Capital A/c.............................Dr. 20,000
To Bank A/c 20,000
(Being realisation expenses paid by Firm
on behalf of partner X.Rs.(32,000 –
12,000)
Realisation A/c ........................Dr. 25,000

To Bank A/c 25,000
(Being reralisation expenses borne and
paid by Firm)
Raju‘s capital A/c .......................Dr. 2,000
To Biju‘s Capital A/c 2,000
(Being realisation expenses paid by Raju
on behalf of Biju)
Q2. (i) Furniture – Rs.20,000 , Goodwill – Nil

(As per the changed rules in absence of any realised value of Fixed Assets,the fixed
assets realised at its book value and in case of fictitious asset like Goodwill,the realised value
will be nil.)
ii) Amount paid to creditors – (Rs.10,000 – 10% of Rs.10,000 ) = Rs.9,000
iii) Realised value of machinery – Rs.(50,000 + 20% of 50,000) = Rs.60,000
Q3.
i) Kartik‘s Capital A/c ..........................Dr. 150
To Realisation A/c 150
(Being unrecorded asset is taken over by
Kartik)
ii) ....................No Entry ..............
Or,
a) Realisation A/c .................Dr. 10,000
To Ratan‘s capital A/c 10,000
(Being Ratan undertook to pay his
Mrs.loan)
b) Ratan‘s capital A/c ..................Dr. 10,000
To Realisation A/c 10,000
(Being Ratan undertook stock)
Stock value = (50% of Rs.50,000 – 20%)
iii) Bank/Cash A/c ...........................Dr. 11,250
(Being balance of stock sold at 10% Loss)
(50% of 25,000 – 10%)
Q4.
i) ....................No entry.................
ii) Realisation A/c ............................Dr. 4,400
Cash A/c 4,400
(Being amount of loan paid after
adjustment of stock)
Rs.14,000 – (Rs.12,000 – 20%)
iii) Cash A/c ..................................Dr. 4,000
Realisation A/c 4,000
(Being cash received after adjustment of
loan amount)
Q5.
i) P‘s Loan A/c ..................................Dr. 20,000
To Bank A/c 16,000
(Being loan settled at discount)
ii) Realisation A/c .........................Dr. 25,000
To Nutan‘s loan A/c 20,000
To Nutan‘s capital A/c 5,000
(Being Nutan undertook to pay his
Mrs.loan)
iii) X‘s Loan A/c ..............................Dr. 30,000
To cash a/c 15,000
(Being X‘s loan is settled after adjustment
of furniture in cash)
04 Marks
Q1.
i) a) Y‘s Capital A/c 72,000
………………………Dr. 72,000
To Realiasation A/c
(Being sundry assets of value
Rs.80,000(72,000x100/90) taken over by
Y at Rs.72,000. 29,600
c) Z‘s capital A/c 29,600
………………………..Dr.
Realisation A/c
(Being the remaining sundry assets
taken over by Z)
(1,17,000-80,000) x 80/100
ii) a) W.C.R A/c 60,000
……………………………….Dr. 60,000
To Realisation A/c
(Being WCR transferred to
Realisation account) 75,000
b) Realisation A/c 75,000
…………………….Dr.
To Bank A/c
(Being liability on account of
workmen compensation paid0
iii) a) W.C.R A/c 35,000
…………………………….Dr. 35,000
To Realisation A/c
(Being WCR to the extent of worker‘s
claim transferred) 25,000
b) W.C.R A/c 25,000
…………………………….Dr.
To partner‘s capital A/c
(Being surplus of WCR transferred to
partner‘s capital account)
Iv) Bank A/c 7,84,000
……………………………….Dr. 7,84,000
To Realisation A/c
(Being Building value realised after
charging commission) (800000 – 2%)
Or, 8,00,000
a) Bank A/c 8,00,000
………………………….Dr.
(Being Building value realised) 16,000
b) Realisation A/c
…………………Dr.
To Bank A/c
(Being commission @2% paid)
Q2. Memorandum Balancesheet

Liabilities Amount Assets Amount
Sundry Creditors 20,000 Loan to Chintrang 5,000
Partners Capital Sundry Assets 1,15,000
Angad 50,000 1,00,000 (Balancing Figure)
Bhim 30,000
Chitrang 20,000
1,20,000 1,20,000
======== ========
Dr. Realisation Account Cr.

To Sundry Assets 1,15,000 By Sundry Creditors 20,000
To Bank A/c (S.Creditors) 20,000 By Bank A/c (Assets 50,000
realised)
By Loss on Realisation A/c 65,000
Angad 32,500
Bhim 19,500
Chintrang 7,000
1,35,000 1,35,000
======== =========
06 marks
Q1
Dr. Realization Account Cr.
To Sundry Assets: By Provision for doubtful
Machinery 10,000 debts 1,000
Stock 21,000 By Sundry creditors 15,000
Debtors 20,000 By Sheela‘s loan 13,000
Pre-paid Ins. 400 By repairs and Renewals
Investment 3,000 54,400 Reserve 1,200
To Mala‘s capital A/c 13,000 By Cash-Assets sold
(Sheela‘s Loan) Machinery - 8,000
To cash – creditors paid 15,000 Stock 14,000
To cash-Dishonoured bill Debtors 16,000 38,000
Paid 5,000 By Mala‘s Capital- 2,000
To cash-expenses 800 Investments
By Loss on Realisation 18,000
Transferred:
Mala 9,000
Neela 6,000
---------------- Kala 3,000
88,200 88,200
======= ========
Dr. Partner‘s Capital A/c Cr.

Particulars Mala Neela Kala Particulars Mala Neela Kala
To By Balance
RealisationA/c 9,000 6,000 3,000 b/d 10000 15000 2,000
To Realisation 2,000 --- --- By
A/c Realisation 13000
(Investment) A/c
To Cash A/c 12,000 9,000 --- By Cash A/c 1,000
…… -------
23000 ….. 3000 23000 15000 3000
===== 15000 ==== ==== ===== ====
==== =
=
Dr. Cash A/c Cr.

To Balance b/d 2,800 By Realisation A/c- 15,000
To Realisation A/c-sale of 38,000 Creditors paid
assets By Dishonoured bill 5,000
To Kala‘s Capital A/c 1,000 By Realisation A/c(Exp) 800
By Mala‘s Capital A/c 12,000
By Neela‘s Capital A/c 9,000
41,800 41,800
======= ======
Q2. Journal enries in the Books of ...............

i) Realisation A/c .............................Dr. 9,000
To Cash/Bank A/c 9,000
(Being dissolution exp. Paid)
ii) Realisation A/c 3,400
...............................Dr. 3,400
To Vishal A/c
(Being dissolution expenses paid by
Vishal)
iii) a) Realisation A/c 4,500
.....................Dr. 4,500
To Shiv‘s Capital A/c
(Being remuneration given to Shiv for
dissolution work) 3,900
b) Shiv‘s capital A/c 3,900
.................Dr.
To Bank A/c
(Being dissolution expenses
paid by firm on behalf of the
partner)
iv) Realisation A/c .........................Dr. 3,000
To Naveen‘s capital A/c 3,000
(Being dissolution exoenses paid by
Naveen and compensated by Firm)
v) a) Realisation A/c ..........................Dr. 7,000
Vivek‘s capital A/c 7,000
(Being remuneration to be given to
Vivek)
b)Vivek‘s Capital A/c ....................Dr. 6,500
Rishi‘s capital A/c 6,500
(Being dissolution expenses paid by
Rishi on behalf of Vivek)
vi) a) Realisation A/c ....................Dr. 12,500

To Gourav‘s Capital A/c 12,500
(Being remuneration given to
Gourav)
b) Gourav‘s capital A/c ...........Dr. 12,500
(Being furniture taken by Gourav as
remuneration)
Or,
---------No entry----------------
Assertion and Reason Based Questions
Q1.( a) Explanation: A Realisation Account is opened to determine the amount of profit or

loss from the realization of assets and payment of liabilities at the time of dissolution of
partnership firm.
Q2. (a) Explanation: It is to be kept in mind that an unrecorded asset would be transferred to
the debit side of the Realisation Account because the amount realized from its sale is in nature
of a gain and the Realisation Account is only credited accordingly. Similarly and unrecorded
liability need not be transferred to Realisation Account.
Financial Statements
Q1 (c) Short term Borrowings [1]

Q2 (d) Inter firm comparisons [1]
Q3 (a) Provision for doubtful debts [1]
Q4 (c) 1 – ii, 2 – iv, 3 – iii, 4 – i [1]
Q5 (b) Shareholders Funds [1]
Q6 (b) Vertical Analysis [1]
Q7 (b) marketable securities [1]
Q8 (a) Short-term Provisions [1]
Q9 Balance Sheet Of K Ltd.(Extract) [3]
Particulars Note No. Amount(Rs.)
I .EQUITIES & LIABILITIES
1. Share holder’s Funds
Reserve & Surplus 3 (2,00,000)
2. Non-Current Liabilities
a. Long term Borrowings 1 10,00,000
b. Other Long term 2 1,00,000
Liabilities
TOTAL 9,00,000
II.ASSETS
Current Assets
Cash & Cash Equivalents 4 9,00,000
TOTAL 9,00,000
Q10 contingent Liabilities. [3]
(i) Claims against the company not acknowledged as debts.
(ii) Bills Receivable discounted from Bank not yet due for payment
(iii)Proposed Dividend (Current Year)
Q11 .Ignores Price Level Changes [3]
Other Limitations are:
(i) Historical Analysis
(ii) Qualitative aspect Ignored.
(iii) Not Free from Bias
(iv) Variation in Accounting Practices
Q12 (i) Accrued Incomes-Current Assets- Other Current Assets
(ii) Current Maturities of Long term Debts.-Current Liabilities- Short
term Borrowings [3]
(iii) Provision for Employees Benefits-Non Current Liabilities-Long
term Provisions
(iv) Unpaid Dividend-Current Liabilities- Other Current Liabilities
(v) Short-term Loans- Current Liabilities- Short term Borrowings
(vi) Long-term Loans- Non Current Liabilities-Long term Borrowings
Q13 (i) Capital Reserve- Reserve & Surplus [3]
(ii) Bonds-Long term Borrowings
(iii) Loans repayable on Demand- Short term Borrowings
(iv) Vehicles-Property, Plant & Equipment
(v) Goodwill-Intangible Assets
(vi) Loose Tools-Inventories
Q14 (i) b [4]
(ii) b
(iii) a
(iv) b
Q15 Balance Sheet of Alpha Ltd. [4]
Particulars Note Currentyear Previous
year
I .EQUITY AND
LIABILITIES 1
1. Shareholder funds 7,90,000
(a) Share Capital
NOTES TO Particulars Amount ( Rs.)
ACCOUNTS 1. Share Capital
Authorised Capital
1,00,000 equity shares of Rs.10 each 10,00,000
Issued Capital
80,000 equity share of Rs.10 each 8,00,000
Subscribed Capital
Subscribed and fully paid-up
78,000 shares of Rs.10 each , fully called
Rs.7,80,000
Add: Forfeited shares (2,000x5)
10,000 7,90,000
Q16 (i) Capital Advances-Non-Current Assets-Long term Loans & Advances
(ii)Income received in advance-Current Liabilities- Other Current
Liabilities
(iii) Capital Work-in-Progress- Non-Current Assets- Property, Plant &
Equipment
(iv) Motor Vehicles- Non-Current Assets- Property, Plant & Equipment
(v) Store and Spare Parts- Current Assets- Inventories
(vI) 9% Debentures- Non Current Liabilities-Long term Borrowings
(vii) Trade Payables- Current Liabilities
(viii) Provision for Tax- Current Liabilities-Short term Provisions
(ix) Bank Overdraft- Current Liabilities-Short term Borrowings
(x) Unclaimed Dividend- Current Liabilities- Other Current Liabilities
(xi) Computer Software- Non-Current Assets- Property, Plant &
Equipment
(xii) Outstanding Salary- Current Liabilities- Other Current Liabilities
Q17 (i) c [6]
(ii) b
(iii) a
(iv) a
(v) a
(vi) c
Q18 (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the [1]
Q19 (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the [1]
Ratio Analysis
MCQS:
1. C 2. C 3. B 4. D 5. D 6. B 7. B 8. A
ASSERTION AND REASON
1. B 2. B
3 MARKS -:
1. Liquidity Ratio = Liquid Assets/Current Liabilities
Liquidity Assets = Current assets − (Inventories + Prepaid expenses + Advance tax)
= Rs.80,000 − (Rs.20,000 + Rs. 5,000 + Rs.5,000) = Rs.50,000
Liquidity Ratio = Rs.50,000 / 50,000 = 1 : 1
2. Current Ratio = 3.5: 1 Quick Ratio = 2 : 1
Let Current liabilities = x
Current assets = 3.5x and
Quick assets = 2x
Inventories = Current assets − Quick assets
24,000 = 3.5x − 2x
24,000 = 1.5x
Current Liabilities = Rs.16,000
Current Assets = 3.5x = 3.5 × Rs. 16,000 = Rs.56,000.
3.Total Assets to debt ratio = Total Assets / Long term Debts
= 32,00,000 / 16,00,000 = 2 : 1
Long term debts = total debts (Liabilities) − Current Liabilities
= 18,00,000 − 2,00,000 = 16,00,000
Total assets = shareholder funds + total debts (liabilities)
4. Inventory Turnover Ratio = Cost of Revenue from Operations / Average Inventory
Cost of Revenue from Operations = Inventory in the beginning + Net Purchases + Wages +
Carriage inwards − Inventory at the end
= Rs.18,000 + Rs.46,000 + Rs. 14,000 + Rs.4,000 − Rs.22,000 = Rs.60,000
Average Inventory = Inventory in the beginning + Inventory at the end / 2
= Rs.18,000 + Rs.22,000/ 2 = Rs. 20,000
∴ Inventory Turnover Ratio = Rs. 60,000/ Rs.20,000 = 3 Times
5.Gross Profit = Revenue from Operations − Cost of Revenue from Operations
= Rs.3,40,000 − Rs.1,20,000
= Rs.2,20,000
Gross Profit Ratio = Gross Profit / Revenue from operation × 100
= Rs.2,20,000 / Rs.3,40,000 × 100 = 64.71%
Operating Cost = Cost of Revenue from Operations + Selling Expenses + Administrative
Expenses
= Rs.1,20,000 + 80,000 + 40,000 = Rs.2,40,000
Operating Ratio = Operating Cost / Net Revenue from Operations × 100
= Rs.2,40,000 / Rs.3,40,000 x 100 = 70.59%
4 MARKS-:
1. C,A,C,B 2. A,B,D,C
6 MARKS-:
1. i. No change ii.No change iii.No change iv. No change
v. No change vi. decrease
2. i. Decrease ii. No change iii. Decrease iv. Increase

v. No change vi. increase
SAMPLE PAPER -1
GENERAL INSTRUCTIONS:
 This question paper contains 34 questions. All questions are compulsory.

 This question paper is divided into two parts, Part A and B.
 Part - A is compulsory for all candidates.
 Part - B has two options i.e. (i) Analysis of Financial Statements and (ii) Computerised
Accounting. Students must attempt only one of the given options.
 Question 1 to 16 and 27 to 30 carries 1 mark each.
 Questions 17 to 20, 31and 32 carries 3 marks each.
 Questions from 21 ,22 and 33 carries 4 marks each
 Questions from 23 to 26 and 34 carries 6 marks each
 There is no overall choice. However, an internal choice has been provided in 7
questions of one mark, 2 questions of three marks, 1 question of four marks and 2
questions of six marks.
PART-A :( ACCOUNTING FOR PARTNERSHIP FIRMS AND COMPANIES )
1. Mita and Sumit are Partners in a firm with capitals of 6,00,000 and 4,00,000 respectively.
Keshav was admitted as a new partner for 1/5th share in the profits of the firm. Keshav
brought 40,000 as his share of goodwill premium and 3,00,000 of his capital .The amount
of goodwill premium credited to Sumit will be
(a) 20,000 (b) 24,000 (c) 16,000 (d) 40,000 (1)
2. Assertion (A) : Rent to a partner is transferred to the debit of profit and loss account but
is not transferred to the debit of profit and loss appropriation Account.
Reason (R) : Rent to a partner is an expenses which is a charge against profits and not
an
appropriation of profit. Hence it is transferred to the debit of profit and loss
account .
In the context of above two statements which of the following is correct
(a) Assertion (A) and Reason (R) are correct but the Reason(R) is not the correct
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct
(c) Assertion (A) is correct but the Reason (R) is not correct.
(d) Assertion (A) is not correct but the Reason (R) is correct. (1)
3. Pawan and Gaurav were partners in a firm sharing profits and losses in the ratio of
2 :1 with effect from 1st January,2022 they decided to share profits and losses
equally. Individual partner‘s gain or sacrifice due to change in the ratio will be:(1)
(a) Gain by Pawan 1/6 , Sacrifice by Gaurav 1/6

(b) Sacrifice by Pawan 1/6 , Gain by Gaurav 1/6
(c) Gain by Pawan 1/2 , Sacrifice by Gaurav 1/2
(d) Sacrifice by Pawan 1/2 , Gain by Gaurav 1/2
OR
Raman and Rajan were partners in a firm sharing profits and losses in the ratio of
3 : 1 with effect from 1st April,2022 they agreed to share profits in the ratio of
2 : 1. Due to change in profit‘s sharing ratio Rajan‘s gain or sacrifice will be :
(a) Gain 1/12 (b) Sacrifice 1/12 (c) Gain 2/60 (d) Sacrifice 3/60 (1)
4. Amit Ltd offered 2,00,000 Equity shares of 10 each, of these 1,98,000 shares
were subscribed by the public . The amount was payable as 3 on application ,
4 on allotment and balance on first call. If a shareholder holding 3,000 shares has
defaulted on first call, what is the amount of money received on first call ?
(a) 9,00,000 (b) 5,85,000 (c) 5,91,000 (d) 6,09,000 (1)
5. Mona and Tina were partners in a firm sharing profits in the ratio of 3 : 2. Naina
were admitted with 1/6 th share in the profits of the firm. At the time of admission
Workmen‘s Compensation Reserve appeared in the Balance Sheet of the firm at
32,000. The claim on account of workmen‘s compensation was determined at
40,000. Excess of claim over the reserve will be :
(a) Credit to Revaluation Account
(b) Debit to Revaluation Account
(c) Credited to old partner‘s Capital Account
(d) Debited to old partner‘s Capital Account (1)
6. Globe Ltd. Issued 20,000, 9% Debentures of 100 each at a discount of 5%,
redeemable at the end of 5 years at a premium of 6%, for what amount ― Loss on
Issue of Debentures Account‘ will be debited.
(a) 1,00,000 (b) 1,20,000 (c) 2,80,000 (d) 2,20,000
OR
Shiva Ltd. Issued 80,000, 10% Debentures of 100 each at certain rate of discount and
were to be redeemed at 20% premium. Existing balance of Security Premium
before issuing of these debentures was 25,00,000 and after writing off loss on Issue of
debentures, the balance in Securities Premium was 5,00,000. At what rate of discount ,
these debentures were issued ?
(a) 10% (b) 5% (c) 25% (d) 15% (1)
7. Gold leaf Ltd. had allotted 10,000 shares to the applicants of 14,000 shares on pro-
rata basis. The amount payable on application was 2 per share. Mohan had
applied for 420 shares. The number of shares allotted and the amount carried
forward for adjustment against allotment money due from Mohan are
____________.
(a) 60 shares, 120 (b) 320 shares , 200
(c) 340 shares, 100 (d) 300 shares, 240 (1)
Read the following hypothetical situation, Answer Question 9 and 10
Raman and Rohan are partners in a Plastic Toys making firm. Their capitals were
5,00,000 and 10,00,000 respectively . The firm allowed Raman to get a
Commission of 10% on the Net profit before charging any commission and Rohan
to get a commission of 10% on the Net profit after charging all commission.
Following is the Profit and Loss Appropriation Account for the year ended 31 st
March,2022
Profit and Loss Appropriation Account
For the year ended 31st March,2022
Particulars Amount ( ) Particulars Amount ( )
To Raman‘s Capital A/c By Profit and Loss A/c -----------
(Commission) 44,000
_________ X 10/100
To Rohan‘s Capital A/c
(Commission) -----------
To Profit share
transferred to
Raman‘s Capital -----------
Rohan‘s Capital -----------
8. Rohan‘s Commission will be

(a) 40,000 (b) 44,000 (c) 36,000 (d) 36,440 (1)
9. Raman‘s Share of profit will be _____
(a) 1,80,000 (b) 1,44,000 (c) 2,16,000 (d) 1,60,000 (1)
10. Vidit and Seema were partners in a firm sharing profits and losses in the ratio of
3 : 2. Their capitals were 1,20,000 and 2,40,000 respectively. They were
entitled to interest on capital @10%. The firm earned profit of 18,000 during the
year . The interest on Vidit‘s Capital will be :
(a) 12,000 (b) 10,800 (c) 7,200 (d) 6,000 (1)
11. Which of the following statement does not relate to ‗Reserve Capital‘ ?
(a) It is part of uncalled capital of a company
(b) It can not be used during the life time of a company
(c) It can be used for writing off capital losses.
(d) It is part of subscribed capital. (1)
12. E, F and G are partners sharing profits in the ratio of 3 : 3 : 2. As per the
partnership agreement G is to get a minimum amount of 80,000 as his share of
profits every year and deficiency on this account is to be personally borne by E.
The net profit for the year ended 31st March, 2022 amounted to 3,12,000.
Calculate the amount of deficiency to be borne by E ?
(a) 1,000 (b) 4,000 (c) 8,000 (d) 2,000 (1)
13. Divya Ltd forfeited 7,000 equity shares of 100 each issued at a premium of 10%
For non- payment of first and final call of 40 per share. The maximum amount of
discount at which these shares can be reissued will be :
(a) 2,80,000 (b) 4,20,000 (c) 4,90,000 (d) 3,50,000 (1)
14. Blue and Black are partners in a firm . Blue draws a fixed amount at the
beginning of every month . Interest on drawings is charged @ 8% p.a. At the end
of the year Interest on Blue‘s drawings amounted to 2,600. Monthly drawings of
Blue were :
(a) 8,000 (b) 12,000 (c) 7,000 (d) 5,000
OR
Arjun a partner withdrew 5,000 in the beginning of each quarter and interest on
drawings was calculated as 1,500 at the end of accounting year 31st March,2022.
What is the rate of interest on drawings charged ?
(a) 6% p.a (b) 8% p.a (c) 10% p.a (d) 12% p.a (1)
15. On the basis of the following data how much final payment will be made to a
partner on firm‘s dissolution ?
Credit balance of capital account of the partner was 50,000, share of loss on
realisation amounted to 10,000, firm‘s liability taken over by him for 8,000
(a) 32,000 (b) 48,000 (c) 40,000 (d) 52,000 (1)
16. Ram , Krishna and Ganesh were sharing profits and losses in the ratio of 5 : 3 : 2.
Ram retires and Krishna and Ganesh share the future profits and losses equally.
Goodwill of the firm is valued at 1,00,000. Calculate the amount of goodwill to
be debited to Krishna and Ganesh‘s Capital Account
(a) 60,000 and 40,000 (c) 40,000 and 60,000
(b) 20,000 and 30,000 (d) 30,000 and 20,000
OR
Aman ,Bina and Chandan are partners in a firm with capital balances of 50,000,
70,000 and 80,000 respectively on 31st March,2022. Aman decides to retire
from the firm on 31st March,2022. With the help of the information provided ,
calculate the amount to be paid to Aman on his retirement. There existed a general
reserve of 7,500 in the balance sheet on that date. The goodwill of the firm was
valued at 30,000. Gain on revaluation was 24,000
(a) 88,500 (b) 90,500 (c) 65,375 (d) 70,500 (1)
17. P and Q were partners in a firm sharing profits and losses equally. Their fixed
capitals were 2,00,000 and 3,00,000 respectively. The partnership deed
provided for interest on capital @12% per annum. For the year ended 31st
March,2022, the profits of the firm were distributed without providing interest on
capital.
Pass necessary adjustment entry to rectify the error.
OR
A and B are partners in the ratio of 3 : 2. The firm maintains fluctuating capital
accounts and the balance of the same as on 31-03-2022 amounted to 1,60,000 and
1,40,000 for A and B respectively. Their drawing during the year were 30,000
each.
As per partnership deed, interest on capital @10% p.a on opening capitals had
been provided to them. Calculate opening capitals of partners given that their
profits were 90,000. Show your working clearly. (3)
18.X , Y and Z are equal partners in a firm whose books are closed on March 31 st
each year. X died on 31st July,2020 and his share of profit till the date of death
was to be calculated on the basis of sales. Sales for the year ended 31 stMarch,2020
amounted to 2,00,000 and that from 1st April to 31st July,2020 to 75,000.The
profit for the year ended 31st March, 2020 was 50,000. Y and Z decided to share
future profit in the ratio of 7 : 8. Calculate X‘s share of the profits upto the date of
death and pass necessary Journal entry. (3)
19.Arun Ltd issued 20,000 , 12% Debentures of 100 each at 10% discount to
Manoj Ltd. From whom Assets of 23,50,000 and liabilities of 6,00,000 were
taken over . Pass entries in the books of Arun Ltd. If these debentures were to
redeemed at 5% premium.
OR
Rohit Ltd. took over running business of Mathur Ltd. Comprising of Assets of
45,00,000 and Liabilities of 6,40,000 for a purchase consideration of
36,00,000. The amount was settled by bank draft of 1,50,000 and balance by
issuing 12% preference shares of 100 each at 15% premium. Pass entries in the
books of Rohit Ltd. (3)
20.Ashu purchased Balu‘s business with effect from 1st January,2022. It was agreed
that the firm goodwill is to be valued at two years‘ purchase of normal average
profit of the last three years. The profits of Balu‘s business for the last three
years were :
2019 - 80,000 ( including an abnormal gain of 10,000)
2020 - 1,00,000 ( after charging an abnormal loss of 20,000)
2021 - 90,000 (excluding 10,000 as insurance premium an firm‘s property-
now to be insured )
Calculate value of the firm‘s goodwill. (3)
21. X Ltd. With a nominal capital of 50,00,000 in Equity Shares of 10 each, issued
2,00,000 shares payable 2.50 per share on application , 2.50 per share on
allotment and 5 per share on first and final call three months later. All moneys
payable on allotment were duly received but one shareholder failed to pay the
amount due on allotment on his 2,500 shares, while another shareholder who held
2,000 shares paid for the shares first and final call also.
Present the Share Capital in the Balance Sheet of the Company as per Schedule III
of the Companies Act,2013. Also prepare ‗Notes to Accounts‘. (4)
22.Simar,Raja and Rita were partners in a firm sharing profits and losses in the ratio of
2:2:1. The firm was dissolved on 31st March,2020. After the transfer of assets (other
than cash) and external liabilities to the Realization Account ,the following transactions
took place:
(i)A debtor whose debt of .90,000 had been paid .88,000 in full settlement of his
account.
(ii)Creditors to whom .1,21,000 were due to be paid ,accepted stock at .71,000 and
the balance was paid to them by a cheque.
(iii)Raja had given a loan to the firm of .18,000.He was paid 17,000 in full
settlement of his loan.
(iv)Investments were .53,000 out of which investments worth 43,000 were taken
over by Simar a partner at .52,000 and the balance of the investments were sold for
12,000. (4)
23.Vishwas Ltd. had share capital of 80,00,000 divided in shares of 100 each and
20,000, 8% Debentures of 100 each as part of capital employed . The company need
additional funds of 55,00,000 for which they decided to issue debentures in
such a way that they got required funds after issuing debentures of the same class as
earlier , at 10% premium . These debentures were to be redeemed at 20% premium
after 5 years. These debentures were issued on 1stOctober ,2021.
You are required to :
(i) Pass entries for issue of Debentures
(ii) Prepare Loss on issue of Debentures Account assuming there was existing
balance of Securities Premium Account of 2,80,000.
(iii) Pass entries for interest on debentures on March,2022 assuming interest is
payable on 30th September and 31st March every year. (6)
24. A and B were partners in the profit sharing ratio of 3 : 2. Their balance sheet as
at March31,2022 was as follows :
Balance Sheet as at March31,2022
Liabilities Amount ( ) Assets Amount ( )
Sundry creditors 56,000 Building s 98,000
Reserve Fund 14,000 Plant and Machinery 70,000
X‘s Capital 1,19,000 Stock 21,000
Y‘s Capital 1,12,000 2,31,000 Debtors 42,000
(-) Provision
for d/d 7,000 35,000
Cash in hand 77,000
3,01,000 3,01,000
th
C was admitted for 1/6 share on the following terms :
(a) C will bring 56,000 as his share of capital, but was not able to bring any amount to
compensate the sacrificing partners.
(b) Goodwill of the firm is valued at 84,000
(c) Plant and Machinery were found to be undervalued by 14,000, Building was to brought
up to 1,09,000.
(d) All debtors are good
(e) Capitals of A and B will be adjusted on the basis of Z‘s Share and adjustments will be
done by opening current accounts
You are required to prepare revaluation account and partners‘ capital account.
OR
Lalit ,Madhur and Neena were partners sharing profits as 50% , 30% and 20%
respectively. On March31,2022 their Balance Sheet was as follows
Balance Sheet as at March31,2022
Liabilities Amount ( ) Assets Amount ( )
TradeCreditors 28,000 Cash in hand 34,000
Employees Provident Debtors 47,000
Fund 10,000 (-) Provision 3,000 44,000
Investment Fluctuation Stock 15,000
Fund Investment s 40,000
Capital Accounts 10,000 Goodwill 20,000
Lalit 50,000 Profit and Loss A/c 10,000
Madhur 40,000
Neena 25,000
1,15,000
1,63,000 1,63,,000
On this date, Madhur retired and Lalit and Neena agreed to continue on the
following terms :
(i) The goodwill of the firm was valued at 51,000
(ii) There was a claim for workmens‘ compensation to the extent of 6,000.
(iii) Investments were brought down to 15,000.
(iv) Provision for bad debt was reduced by 1,000
(v) Madhur was paid 10,300 in cash and the balance was transferred to his loan
account payable in two equal instalments together with interest @12% p.a.
Prepare Revaluation Account and Partners‘ Capital Accounts. (6)
25. Seema Ltd. was registered with an authorised capital of 1,00,000 equity shares of
100 each. The compay offered 60,000 shares for public subscription at 25%
premium. The share was payable as 40 on application and balance on allotment ,
with premium. Public had applied for 85,000 shares. Pro-rata allotment was made
in the ratio of 5 : 4 and remaining application s were sent letters of regret.
Mr.Anand holding 4,000 shares failed to pay allotment money and his shares
were forfeited. Out of these 3,000 shares were re-issued at a discount of 20 per
share. Pass necessary journal entries in the books of the Seema Ltd.
OR
Pass necessary entries for forfeiture and re-issue in both the following cases :
(a) Bikash Ltd forfeited 5,000 shares of Ramesh , who had applied for 6,000 shares
for non-payment of allotment money of 5 per share and first and final call of
2 per share. Only application money of 3 was paid by him. Out of these 3,000
shares were re-issued @ 12 per share as fully paid.
(b) Raja Ltd. forfeited 3,000 shares of 10 each ( issued at 2 premium) for non-
payment of first call of 2 per share. Final call of 3 per share was not yet
made. Out of these 2,000 shares were re-issued at 10 per share as fully paid.(6)
26. Ankit ,Bimit and Chandan were partners sharing profits and losses in the ratio
of 5 : 3 : 2. Ankit died on 30th june,2020. Entry for treatment of goodwill after his
death was passed as follows :
Date Particulars L.F Debit ( ) Credit( )
Bimit ‗s Capital A/c …………Dr. 1,80,000
Chandan‘s Capital A/c ………Dr. 1,20,000
To Ankit‘s Capital A/c 3,00,000
( Being Ankit share of goodwill is
compensated by Bimit and
Chandan )
Ankit‘s profit till date of death was estimated as 1,20,000, based on the average
profits of past three years . Final dues payable to Ankit‘s executors on the date of
death was calculated as 8,40,000 out of which 2,40,000 was paid immediately
by giving him furniture valued for the same and balance was to be paid in three
equal annual instalments starting from 30 june,2020, together with interest rate as
specified in section 37 of Indian Partnership Act,1932.
Pass necessary entry for profit share to be credited to A‘s Capital and also prepare
Ankit‘s executors account till final settlement. (6)
PART-B : ( ANALYSIS OF FINANCIAL STATEMENTS)

27. According to prescribed order of assets in a Company‘s Balance Sheet which asset should
be shown first of all ?
(a) Non-Current Assets
(b) Current Assets
(c) Current Investments
(d) Loans and Advances
OR
Which of the following will not covered under finance cost?
(a) Discount on issue of debentures written off
(b) Interest paid on bank overdraft
(c) Bank Charges
(d) Premium payable on redemption of debentures written off. (1)
28. Because of exclusion of non-liquid current assets which of the following ratio is
considered better than current ratio as a measure of liquidity position of the business?
(a) Debt-Equity Ratio
(b) Acid Test Ratio
(c) Proprietary Ratio
(d) Interest Coverage Ratio (1)
29.If fixed tangible assets whose original cost is 40,000 having accumulated depreciation
12,000 were sold for 34,000 then while preparing cash flow statement its effect on cash flow
will be :
(a) Cash flow from financing activities 34,000.
(b) Cash flow from financing activities 6,000.
(c) Cash flow from Investing activities 34,000.
(d) Cash flow from Investing activities 6,000.
OR
Operating profit of the year is 2,00,000. During the year, there was increase in inventory by
90,000 and decrease in trade receivables of 50,000. What is the amount of cash from
operations ?
(a) 60,000 (b) 1,60,000 (c) 2,40,000 (d) 3,40,000 (1)
30. ABC Ltd. had investment of 68,000 as on 31.3.2019 and 56,000 as on 31.3.2020.
During the year, ABC Ltd.sold 40% of its investments being held in the beginning of period at
a profit of 16,800. Determine Cash flow from investing activities.
(a) 59,200 (b) 28,800 (c) 72,800 (d) None of these. (1)
31. Classify the following items under Major heads and Sub-head (if any) in the Balance
Sheet of a Company as per Schedule III of the Companies Act.2013.
(i) Premium on Redemption of debentures
(ii) Subsidy Reserve
(iii) Mining Rights
(iv) Publishing titles
(v) Interest on Calls in Advance
(vi) Tax Reserve (3)
32.One of the objectives of ‗Financial Statement Analysis‘ is to judge the ability of the firm
to repay its debt and assessing the short term as well as the long term liquidity position of the
firm.
Identify the objective of Financial Statement Analysis highlighted in the above situation. Also
explain any two other objectives of Financial Statement Analysis apart from the identified
above. (3)
33. From the following information, calculate any two of the following ratios:
(a) Debt- Equity Ratio (b) Interest Coverage Ratio (c) Working Capital Turnover Ratio (d)
Return on Investment Ratio
Information :
Equity Share Capital 5,50,000; General Reserve 50,000 ; Profit after Tax and Interest
1,00,000 ; 9% Long term Borrowings 2,00,000; Trade Payables 1,00,000 ; Land and
Building 6,50,000 ; Equipment‘s 1,50,000 ; Trade receivables 1,45,000 ; Cash and
Cash Equivalents 55,000.
Revenue from operations for the year ended 31.3.2022 was 15,00,000 and Tax paid 50%.
OR
The Proprietary Ratio of MAX Ltd. is 0.80 : 1

State with reasons whether the following transactions will increase, decrease or not change the
proprietary ratio :
(i) Obtained a loan from bank 2,00,000 payable after five years.
(ii) Purchased a Machinery for cash 75,000.
(iii) Redeemed 5% redeemable preference shares 1,00,000.
(iv) Issue equity shares to the vendors of machinery purchased for 4,00,000. (4)
34. From the following Balance Sheet of Shiv Ltd.as on 31.3.2021 and 31.3.2022 and
additional informations.
Shiv Ltd. Balance Sheet as at 31.3.2016
Particulars Note 31.3.2022( ) 31.3.2021( )
no.
I. Equity and Liabilities
1. Shareholder's Funds:
(a) Share Capital 1 10,00,000 7,00,000
(b)Reserves and Surplus 2 2,95,000 1,60,000
2. Non-current Liabilities:
Long-term Borrowings (12% Debentures) 1,00,000 2,00,000
3. Current Liabilities:
(a) Trade Payables 1,68,000 1,74,000
(b) Short-term Provisions (Provision for Tax) 1,20,000 90,000
Total
13,24,000
16,83,000
II. Assets:
1. Non-current Assets:
(a) Fixed Assets:
(i) Tangible Assets
(ii) Intangible Assets ( Goodwill) 9,83,000 6,70,000
(b) Long term Investments 3 1,50,000 80,000
2. Current Assets: 2,40,000 1,40,000
(a) Inventories
(b) Trade Receivables 1,75,000 1,59,000
(c) Cash and Cash Equivalents 75,000 1,90,000
60,000 85,000
Total 16,83,000 13,24,000
Notes to Accounts:
Note no. Particulars 31.3.2022 ( ) 31.3.2021( )
1. Share Capital
Preference Share Capital 3,00,000 2,00,000
10,00,000 7,00,000
2. Reserves and Surplus
(Surplus i.e. Balance in the 1,95,000 1,00,000
Statement of Profit and Loss)
General Reserve 1,00,000 60,000
2,95,000 1,60,000
3. Tangible Assets
Plant and Machinery 11,03,000 7,50,000
Less: Provision for Depreciation (1,20,000) (80,000)
9,83,000 6,70,000
Note no. Particulars 31.3.2022 ( ) 31.3.2021( )

4. Trade Receivables
Debtors 35,000 1,20,000
Bills Receivables 40,000 70,000
75,000 1,90,000
Additional Information :
(i) Tax was provided during the year 1,05,000.
(ii) During the year one plant costing 1,20,000 ( accumulated depreciation 25,000) was
sold for 76,000.
(iii) Proposed dividend on shares for the year ended 31.3.2021 and 31.3.2022 are 60,000
and 90,000 respectively.
(iv) Debentures were redeemed on 31.3.2022.
Answer the following questions :
1. The amount of tax paid during the year is _____________.
2. The amount of depreciation charged during the year is _________.
3. Calculate the amount of plant and machinery purchased during the year.
4.The amount of Dividend paid during the year is _____.
5. Calculate the amount of interest paid on Debentures.
6.Calculate the amount of Cash flow from Operating Activities (6)
SAMPLE PAPER -2
1. This question paper contains 34 questions. All questions are compulsory.
2. This question paper is divided into two parts, Part A and B.
3. Part - A is compulsory for all candidates.
4. Part - B has two options i.e. (i) Analysis of Financial Statements and (ii) Computerised
5. Question 1 to 16 and 27 to 30 carries 1 mark each.
6. Questions 17 to 20, 31and 32 carries 3 marks each.
7. Questions from 21 ,22 and 33 carries 4 marks each
8. Questions from 23 to 26 and 34 carries 6 marks each
9. There is no overall choice. However, an internal choice has been provided in 7 questions of one
mark, 2 questions of three marks, 1 question of four marks and 2 questions of six marks.
Part-A
(Accounting for Partnership and Firms)
S.No. Question Marks
1. Any change in the relationship of existing partners which results in an 1
end of the existing agreement and enforces making of new· agreement is
called:
(a)Revaluation of partnership
(b)Reconstitution of partnership
(c)Realisation of partnership
(d)None of the above
2. Assertion(A): XYZ are partners with Fixed capitals of `9,00,000 each 1
the
partnership deed allowed for salary of `1,00,000 per annum toX and
interest
on capital @5% per annum. Net profit for the year is `5,00,000. Amounts
of
appropriation will be credited to their respective capital accounts
Reason (R): When capital accounts are fixed, all appropriations are
credited or
debited in the partners current accounts
(a) Assertion(A) and Reason(R) are correct and Reason(R) is the correct
(b) Assertion(A) and Reason(R) are correct and Reason(R) is not the
correct
(c) Assertion(A) is correct but Reason(R)is not correct
(d) Assertion(A) is not correct but Reason(R)is correct
3. X Ltd. purchased Sundry Assets of `600000 and Liabilities of 50000 1
from Y Ltd.9% Debentures of ` 100 each were issued as purchase
consideration of `475000. Amount of capitalReserve will be:
(a) `50,000
(b) `65,000
(c) `15,000
(d) `75000
Or
A company issued 6,000 shares of ` 10 each money to be called up:- On
application ` 3 onallotment ` 3 on first call ` 2 and remaining on second
call. On allotment one shareholdershaving 100 shares paid full amount
The amount collected on allotment..........
(a) `18,000
(b) `12,000
(c) `18,400
(d) `18,600
4. A and B are partners sharing profit and losses in the ratio of 3 : 2. A's 1
capital is ` 1,20,000and B's capital is ` 60,000. They admit C for
1/5thshare of profits. C should bring as his capital
(a) ` 36,000 (b) ` 48,000
(c) ` 58,000 (d) ` 45,000
Or
The Goodwill of firm ` 1,80,000 valued at three year's purchase of super
profit . If capitalemployed is ` 2,00,000 and Normal rate of return is 10%
per annum .The amount of averageprofit will be _____
(a) `80,000
(b) `60,000
(c) `20,000
(d) `18,000
5. Siddharth and Nitish were partners in a firm sharing profits and losses in 1
the
ratio of 3:2. Their capitals were Rs.3,00,000 and Rs.4,00,000
respectively.
They were entitled to interest on capital @ 10 %. The firm earned profit
of
Rs.21,000 during the year .The interest on Sidharth capital will be
(a) ₹12,000
(b) ₹9,000
(c) ₹30,000
(d) ₹40,000
6. A company issued 1000 7% Debentures of ` 100 at 5% Discount and 1
Repayable at 10 % Premium .What will be the amount of Loss on issue
of Debentures.:
(a) ` 10,000
(b) ` 20,000
(c) ` 15,000
(d) ` 30,000.
Or
Discount or loss of issue of debenture to be written off after 12 months
from the date of balance sheet or after the period of operating cycle in
shown as :
(a) Other current asset
(b) Other non current assets
(c) Other long term liability
(d) Other current liabilities
7. A company Forfeited 1,000 shares of ` 10 each ,` 7 called up. For the non 1
payment of ` 2First call . All these shares were reissued at ` 5 per share,
₹7 paid up. What will the amounttransferred to capital Reserve account :
(a) `2,000
(b) `3,000
(c) `4,000
(d) `5,000.
8. Manu,Binu and Sini are partners sharing profits in the ratio 5:4:1. Sini is 1
given
guarantee that her share in the year will not be less than `5000. Profit for
the
year ended 31 March 2023 is`40,000. Deficiency in the guaranteed profit
of
Sini is to be borne by Binu. Deficiency to be borne by Binu is
(a) ₹1,500
(b) ₹4,000
(c) ₹5,000
(d) ₹1,000
Or
Nisha, Nimi &Nikesh are partners sharing profits in the ratio 2:2:1. Nimi
retires from thefirm .The capital account of Nisha, Nimi &Nikesh are `
60,000 `70,000 and ` 50,000 respectively after adjustment of goodwill ,
reserves and Revaluation profit . Nimi was to paid incash brought in by
Nisha &Nikesh in such a way that their capital are in proportion of new
ratio . How much amount Nisha &Nikesh must bring to pay Nimi :
(a)` 50,000 by Nisha &` 20,000 by Nikesh
(b)` 60,000 by Nisha &` 10,000 by Nikesh
(c) `35,000 by Nisha and ` 35,000 by Nikesh
(d)` 40,000 by Nisha and ` 30,000 by Nikesh
Read the hypothetical text and Based on this case, answer questions 9
&10
Vineet & Dhanya were partners in firm sharing profits in the ratio 2:1.
As per partnershipdeed interest is allowed on capital @10% p.a. On
31/3/2022 their fixed capital account balances were₹3,00,000 and
₹2,00,000 respectively. On 30/6/2021 Vineet had withdrawn ₹50,000 out
of capital and Dhanya introduced ₹50,000 as additional capital. The firm
earned aprofit of ₹1,50,000 for the year ended 31/3/2022
9. Capital of Vineet on 1/4/2021 were ₹---------- 1
10. Net divisible profit of the firm for the year ended 31/3/2022 will be—— 1
——
11. In which of the following case, revaluation account is debited? 1
(a)Increase in value of asset
(b)Decrease in value of asset
(c)Decrease in value of liability
(d)No change in value of assets
12. Silver spoon Ltd had allotted 20,000 shares to the applicants of 28,000 1
shares
on pro rata basis. The amount payable on application was `2 per share
Mukesh had applied for 420 shares .The number of shares allotted and
the
amount carried forward for adjustment against allotment money due from
Mukesh are
(a) 300 shares, `240
(b) 340 shares, `200
(c) 320 shares , ` 100
(d) 60 shares `120
13. As per sec. of the companies Act amount. received as premium on 1
securities cannot be utilized for :-
(a)Issuing fully paid bonus shares to the members
(b)Purchase of fixed assets
(c)Writing off preliminary expenses
(d)Buy back of its own shares
14. Ravi,Sachin and Kapil are equal partners. Virat is admitted as a partner 1
in the
firm for 1/4th share. Virat brings `20,000 as capital and `5000 being half
of the premium for Goodwill. The value of goodwill of the firm is
(a) ₹10,000
(b) ₹20,000
(c) ₹40,000
(d) None of these
15. A,B&C are partners sharing profits in the ratio 5:3 :2. They decided to 1
share
future profits in the ratio of 2:3:5. Workmen compensation reserve in
balance
sheet is `50,000. No information as to workmen compensation claim is
given. Workmen compensation reserve will be
(a) distributed among A,B,C in the ratio 5:3:2
(b) distributed among A,B,C in the ratio 2:3:5
(c) distributed among A,B,C in the ratio 1:1:1
(d) will be carried forward to new balance sheet
Or
P,Q&R are partners sharing profits equally. P drew regularly ₹ 4,000 in
the beginning of everymonth for six months ended 30th September,
2020. Calculate interest of P‘s drawing @ 5%p.a.
(a) ₹350
(b) ₹200
(c)₹1,200
(d) ₹700
16. On Dissolution of firm X,a partner has taken over furniture at ` 7,200 ( 1
being 10% less thanbook value). Its book value is :-
(a)` 7,920
(b)` 8,000
(c)` 7,200
(d)` 7,000
17. Partiv, Mili and Reena are partners in a firm sharing profits in the ratio of 3
3: 2 : 1. Reena diesand the balance in her capital account after making
necessary adjustments on account of reserves, revaluation of assets and
liabilities workout to be ₹60,000. Partiv and Mili agreed topay to her
executor‘s ₹75,000 in full settlement of her claim.
Calculate goodwill of the firm and record Journal Entry for treatment of
goodwill on Reena'sdeath
18. Amita and Babu are partners sharing profits in the ratio of 3:2, with 3
capitals of ₹50,000 and ₹30,000 respectively. Interest on capital is agreed
@ 6% p.a. Babu is to be allowed an annualsalary of ₹2,500. During the
year 2021-22, the profits prior to the calculation of interest oncapital but
after charging Babu's salary amounted to ₹12,500. A provision of 5% of
the profitis to be made in respect of commission to the manager.Prepare
Profit and Loss Appropriationaccount .
Or
Pass necessary rectifying journal entries for the omissions committed
while preparing Profitand Loss Appropriation Account. You are also
required to show your workings clearly.Madhu and Sagar are partners in
a firm sharing profits in the ratio of 3:2. Their fixed capitalsare: Madhu
₹2,00,000, and Sagar ₹3,00,000. After the accounts for the year are
prepared it isdiscovered that interest on capital @10% p.a. as provided in
the partnership agreement, hasnot been credited in the capital accounts of
partners before distribution of profits.
19. A company issued 1,00,000, 9% debentures of ₹100 each at discount of 3
5%, but redeemableat premium of 5%. Give journal entries for issue of
debentures
Or
Dye&dye Ltd., purchased building worth ₹1,50,000, Machinery worth
`1,40,000 and furnitureworth `10,000 from Colours ltd, and took over its
liabilities of ₹20,000 for a purchase consideration of `3,15,000. Dye&dye
Ltd. paid the purchase consideration by issuing 12% debenturesof `100
each at a premium of 5%. Record necessary journal entries.
20. X and Y are partners in a firm sharing profit/loss in the ratio of 2:1. They 3
agree to admit Z as anew partner for 1/4th share. Z brought in ₹ 3,00,000
for share of capital and necessaryamount of cash for share of goodwill.
Goodwill valued at ₹ 1,20,000.
X and Y withdraw 40% of premium for goodwill from the firm.
Pass necessary Journal entries for the above in books of the firm
21. Beauty Unlimit Ltd. has an authorised capital of ₹10,00,000 divided into 4
equity shares of ₹10each. The company invited applications for 50,000
shares. Applications for 45,000 shareswere received. Final call of ₹3 per
share was not made.
All money were duly received except on first call of₹ 2 per share on
1,000 shares. 600 of theseshares were forfeited.
Present the 'Share Capital' in the Balance Sheet of the company.
Also prepare 'Notes to Accounts.
22. Abhishek &Navin were partners in a firm sharing profits and losses in 4
the ratio of 3:7. On 31stMarch,2022, their firm was dissolved. On that
date the Balance Sheet showed a stock of ₹90,000 and creditors of
₹1,00,000. After transferring the assets and liabilities to the realisation
account, the following transactions took place:
i. Abhishek took over 50% of the total stock at 10% discount.
ii. 20% of the total Stock was taken over by creditors of ₹20,000 and
balance was paid bycheque.iii. Remaining stock was sold at 10% loss.
iv. 40% of the remaining creditors were paid by cheque at a discount of
5% and the balancewere taken by Navin.
Journalise in the books of the firm.
23. Good bricks Limited issued for public subscription of 1, 20,000 equity 6
shares of ₹ 10 each at apremium of ₹2 per share payable as under:
With Application ₹3 per share
On allotment (including premium)₹ 5 per share
On First call. ₹ 2 per share
On Second and Final call. ₹ 2 per share
Applications were received for 1, 60,000 shares. Allotment was made on
pro-rata basis.Excess money on application was adjusted against the
amount due on allotment.
Manohar, whom 4,800 shares were allotted, failed to pay for the two
calls. These shares weresubsequently forfeited after the second call was
made. All the shares forfeited were reissuedto Sudha as fully paid at ₹7
per share.
Record journal entries in the books of the company to record these
transactions relating toshare capital.
Or
Pass journal entries for forfeiture and re-issue in both of the following
cases
(a) 200 shares of 100 each issued at a premium of 10 were forfeited for
the non-payment ofallotment money of `760 per share. The first and final
call of `20 per share on these shareswere not made. The forfeited shares
were reissued at `70 per share as fully paid-up.
(b)150 shares of `10 each issued at a premium of 4 per share payable
with allotment were forfeited for non payment of allotment money of ₹8
per share including premium. The first and
final call of ₹4 per share was not made. The forfeited shares were
reissued at `15 per sharefully paid-up.
24. Ram and Sanjay were partners sharing profits in the ratio of 2:1. On 1st 6
April 2022.They admitted Bharat, as a new partner for 1/4 share in
profits. Bharat will bring ₹ 60,000 for Goodwill and ₹1,50,000 as capital,
At the time of admission the Balance Sheet Ram and Lakshmanwas as
under
Liabilities ` Assets `
Capital Accounts Plant 66,000
Ram 70,000 Furniture 30,000
Sanjay 60,000 Investment 40,000
General Reserve 18,000 Stock 46,000
Bank Loan 18,000 Debtors
Creditors 72,000 38,000 34,000
Less: Provision 22,000
4000
Cash
2,38,000 2,38,000
It was decided to
(i) Reduce the value of stock by `10, 000.
(ii) Plant to be valued at `80,000.
(iii) An amount of `3,000 included in creditors was not payable.
(iv) Half of the investment were taken over by Ram and remaining were
valued at ₹25,000.
Prepare revaluation account, partners 'capital account and Balance sheet
of the reconstitutedfirm.
Or
A, B and C were partners in a firm sharing profits & losses in proportion
to their capitals. TheirBalance Sheet as at March 31, 2022 was as
follows:
Balance Sheet
as at March 31, 2022
Capitals Bank 21,000
A 5,00,000 Stock 9,000
B 3,00,000 Debtors
C 2,00,000 15,000
General Reserve 75,000 Less: Provision 35,500
Creditors 23,000 1,500 8,00,000
Outstanding Salary 7,000 Loan to A 2,41,000
B‘s Loan 15,000 Land & Building
Profit and Loss
Account
11,20,000 11,20,000
On the date of above Balance Sheet, C retired from the firm on the
following terms:
1. Goodwill of the firm will be valued at ₹ 3,00,000.
2. Provision for Bad Debts would be maintained at 5% of the Debtors.
3. Land & Building would be appreciated by `90,000.
4. A agreed to repay his Loan.
5. The loan repaid by A was to be utilized to pay C. The balance of the
amount payable to Cwas transferred to his Loan Account bearing interest
@ 12% per annum.
Prepare Revaluation Account, Partners' Capital Accounts and the
Balance Sheet of the
reconstituted firm.
25. Sandhya, Kiran and Sooraj were partners in a firm sharing profits and 6
losses in the ratio of2:2:1. On 31st March, 2022 their Balance Sheet was
as follows:
Balance Sheet of Sandhya, Karan and Sooraj as on 31.3.2022
Creditors 3,00,000 Fixed Assets 5,00,000
General Reserve 2,00,000 Stock 1,50,000
Capital Accounts Debtors 1,50,000
Sandhya 1,50,000 Bank 1,50,000
Kiran 2,00,000
Sooraj 1,00,000
9,50,000 9,50,000
Kiran died on 12.6.2022. According to the partnership deed, the legal
representatives of thedeceased partner were entitled to the following:
(i) Balance in his Capital Account.
(ii) Interest on Capital 12% p.a.
(iii) Share of goodwill. Goodwill of the firm on Kiran's death was valued
at `60,000.
(iv) Share in the profits of the firm till the date of his death, calculated on
the basis of lastyear's profit. The profit of the firm for the year ended
31.3.2022 was `3,65,000.
Prepare Kiran's Capital Acount to be presented to his representatives.
26. (i) "Alpha Ltd." purchased Machinery from Mukta Machine Ltd. for ₹ 6
6,90,000. Mukta Machine ltd. was paid by accepting a draft of ₹90,000
payable after three months and the balance by issue of 6% debentures of
`100 each at a discount of 20%. Pass necessary journal entries for the
above transactions in the books of "Alpha Ltd."
(ii)Savio Ltd. issued 2,500, 8% Debentures of 100 each at a discount of
10% on 1st April, 2019redeemable at par after five years. The company
has a balance of `15,000 in Securities Premium Reserve. The company
decided to use the Securities Premium Reserve for writing offthe loss on
issue of debentures and also decided to write off the remaining discount
in thefirst year itself. Pass the Journal Entries for Issue of Debentures and
writing off the Discounton Issue of Debentures.
Part-B
(Analysis of Financial Statements)
27. Under the sub head of short – term provision which one is shown from the 1
following :
(a) Interest accrued and due on borrowing
(b) Proposed dividend
(c) unpaid dividend
(d) calls in advance
Or
Current ratio 4:1, Current assets ` 60,000 quick assets are 2:5:1. Calculate
inventory
(a) `22,500
(b) `37,500
(c) `15,000
(d) `25,000
28. If Revenue from operations is `12,00,000 and cash revenue from 1
operations is 20% if creditrevenue from operations . What will be credit
revenue from operations :
(a)` 2,00,000
(b)`8,00,000
(c)` 10,00,000
(d)` 12,00,000
29. Investment costing Rs. 10,000 sold for Rs. 12,000. The amount shown in 1
investing activity is
(a) ` 2,000
(b) ` 10,000
(c) ` 12,000
(d) ` 2,200
Or
Interest received on investment by a financing company is shown under:
(a) Operating Activity
(b)Investing Activity
(c)Financing Activity
(d)Cash and Cash Equivalents
30. Plant and Machinery of Book Value of Rs. 5,00,000 at a loss of 5%. Inflow 1
under Investing Activities will be
(a)` 4,75,000
(b) ` 5,00,000
(c) ` 3,80,000
(d) ` 3,60,000
31. 3
Under which sub-heads will the following items be placed in the Balance
Sheet of the company as per Schedule III of Companies Act,2013?
(i) Cheques in hand
(ii) Loose tools
(iii) Securities Premium Reserve
(iv) Long-term Investments with maturity period less than six months
(v) Building under Construction
(vi) Livestock
32. The proprietary ratio of M. Ltd. is 0.80: 1. State with reasons whether the 3
following transactions will increase, decrease or not change the proprietary
ratio:
1.Obtained a loan from bank `2,00,000 payable after five years..
2. Purchased machinery for cash `75,000.
3. Redeemed 5% redeemable preference shares 1,00,000
33. From the following details, calculate Return on Investment and Total 4
Assets to Debt ratio:
Fixed Assets ₹ 75,00,000; Current Assets ₹ 40,00,000; Current Liabilities ₹
27,00,000;
12% Debentures ₹ 80,00,000; Net Profit after tax ₹ 2,94,000; Tax rate
40%.
Or
From the following information, compute ‗Debt-Equity Ratio‘ and Current
Ratio
Long-Term Borrowings. ₹ 2,00,000
Long-Term Provisions. ₹1,00,000
Current Liabilities. ₹50,000
Non-Current Assets ₹3,60,000
Current Assets. ₹90,000
34. 6
Read the following hypothetical text and answer the given question on
thebasis of the same.
Nimisha an MBA graduate had started a business in the year 2021 and
following are the results of the business for the year ended 31st March
2023
Particulars Note 2022-23 2021-22

No.
I. Equity and Liabilities:
(1) Shareholders Funds
(a) Share Capital 7,00,000 6,00,000
(b) Reserves and Surplus (Profit & 2,00,000 1,10,000
Loss Account)
(2) Non-Current Liabilities
Long-term Borrowings 3,00,000 2,00,000
(3) Current Liabilities
Trade Payables 30,000 25,000
Total 12,30,000 12,30,000

II. Assets
(1) Non-Current Assets
(a) Fixed Assets Tangible Assets 11,00,000 8,00,000
(2) Current Assets
(a) Inventories 70,000 60,000
(b) Trade Receivables 32,000 40,000
(c) Cash and Cash Equivalents 28,000 35,000
Total 12,30,000 12,30,000
1. Calculate cash flow from operating activities

2. Calculate cash flow from investing activities
3. Calculate cash flow from financing activities
MARKING SCHEME
SAMPLE PAPER-1
QSTN Value Points Marks Tota
NO Allotted l
1. Ans : (a) Rs.20,000 1 1

Ans : (b) Both Assertion (A) and Reason (R) are correct and Reason(R)
2. 1 1
is the correct explanation of Assertion (A)
Ans :(b) Sacrifice by Pawan 1/6 , Gain by Gaurav 1/6
3. OR (a) Gain 1/12 1 1
Ans :(b) Rs.5,85,000

4. 1 1
5. Ans :(b) Debited to Revaluation Account 1 1

Ans : (d) Rs.2,20,000
6. OR (b) 5% 1 1
Ans : (d) 300 shares, Rs.240
7. 1 1
8. Ans : (c) Rs.36,000 1 1

9. Ans : (a) Rs.1,80,000 1 1
10. Ans : (d) Rs.6,000 1 1
11. Ans : (c) It can be used for writing off capital losses 1 1
Ans : (d) G‘s share of profit = Rs.3,12,000 x 2/8 = Rs.78,000 However
12. G‘s minimum guaranteed profit is Rs.80,000, So deficiency of Rs.2,000 ( 1 1
Rs.80,000 – Rs.78,000) will be borne by E
Ans :(b) Rs.4,20,000 1
13. 1
Ans :(d) Rs.5,000
14. OR (d) 12% p.a 1 1
15. Ans : (b) Rs.48,000 1 1
16. Ans : (b) Rs.20,000 and Rs.30,000 1 1

OR Ans : (d) Rs.70,500
17. Journal Entry 1 +2 = 3 3
P‘s Current A/c ………………………………..Dr. 6,000
To Q‘s Current A/c 6,000
Adjustment Table
Particulars P Q
1. Interest on Capital @12% 24,000 36,000
to be credited
2. Share of profit to be
debited 30,000 30,000
6,000 (Dr.) 6,000 ( Cr.)
OR 2 +1 =3
Calculation of Opening Capital
Particulars A ( Rs.) B (Rs.)
3
Closing Capital 1,60,000 1,40,000
Add : Drawings 30,000 30,000
Less : Profits (37,800) (25,200)
1,52,200 1,44,800
Less : Interest on Capital (13,836) (13,164)
Opening Capital 1,38,364 1,31,636
Working Note : Total closing capital of A and B=
Rs.1,60,000+Rs.1,40,000 = Rs.3,00,000
Add Total drawings of A and B Rs. 60,000
Less : Profit including interest on capital (Rs. 90,000)
Total capital in the beginning of the year Rs.2,70,000
Interest on Capital = 10% of Rs.2,70,000 = Rs.27,000
Divisible profits = Rs.90,000 – Rs.27,000 = Rs.63,000
18. (i) Gaining Ratio between Y and Z = 2 : 3 1

(ii) X share of profit = Rs.6,250 1
(iii) Journal entry : 1
Y‘s Capital A/c…………………………………….Dr.2,500
3
Z‘s Capital A/c…………………………………….Dr.3,750
To X‘s Capital A/c
(Being X‘s share of profit adjusted to gaining partners capital accounts)
19.
Entries in the books of Arun Ltd.
D Particulars Llf Dr.(Rs.) Cr.(Rs.)
Assets A/c……Dr 23,50,000
Goodwill A/c..Dr 50,000
To Liabilities A/c 6,00,000 1½
Manoj Ltd. A/c 18,00,000 +1½
Manoj Ltd. A/c 18,00,000
Loss on issue of
debentures A/c 3,00,000
To 12% Debentures
A/c
To Premium on 20,00,000
Redemption of 1,00,000
debentures
OR
Entries in the books of Rohit Ltd. 1½
D Particulars Llf Dr.(Rs.) Cr.(Rs.) +1½
Assets A/c……Dr 45,00,000
To Liabilities A/c 6,40,000
To Mathur Ltd. A/c 36,00,000
To Capital Reserve 2,60,000
Mathur Ltd. A/c 36,00,000
To 12% Preference share
capital A/c 30,00,000
To Security Premium 4,50,000
20 Calculation of Goodwill
Average Maintainable profits Amount ( Rs.)
Profit for 2019 (Rs.80,000 – Rs.10,000) 70,000
Profit for 2020 (Rs.1,00,000 + Rs.20,000) 1,20,000 2 +1
Profit for 2021 (Rs.90,000 – Rs.10,000) 80,000 =3
Total 2,70,000
Average Profit = Rs.2,70,000/3 years = Rs.90,000
Goodwill of the firm = Average profit x 2 years purchase
i.e Rs.90,000x 2 years purchase = Rs.1,80,000
Balance Sheet of X Ltd. as on …………………..

21. Particulars Note Current Previous
No Year Amt. year Amt.
I.Equity and liabilities
(i) Shareholder funds
Share Capital 1 9,93,750 1½+
(ii) Current liabilities
Other current liabilities 2 10,000
Total 10,03,750
II Assets
Current Assets
Cash and Cash equivalents 10,03,750
Total 10,03,750
Notes to Accounts
Particulars Amount (Rs.)
1.Share Capital
Authorised Capital
5,00,000 Equity Shares of Rs.10 each 50,00,000 2½
Issued Capital
2,00,000 Equity Shares of Rs10 each. 20,00,000
Subscribed Capital
Subscribed but not fully paid up
2,00,000 Equity Shares of Rs.10 each called up
Rs.5 10,00,000
Less Calls in Arrears ( 2,500x 2.50) (6,250)
2. Other Current Liabilities 9,93,750
Calls in Advance 10,000
22. Journal
i) Cash/Bank A/c………………… Dr. 88,000
To Realization A/c 88,000
ii) Realization A/c…………………Dr. 50,000
To Bank A/c 50,000 1x4
iii Raja‘s Loan A/c………………...Dr. 18,000
To Bank/Cash A/c 17,000
iv Simar‘s Capital A/c…………… Dr. 52,000
Cash/Bank A/c………………… Dr. 12,000
4
(a) Books of Vishwas Ltd.
D Particulars Llf Dr.(Rs.) Cr.(Rs.)
(i) Bank 55,00,000
A/c…………………….Dr 55,00,000
23. To Debenture Application
and allotment A/c
(ii) Debenture Application and 55,00,000
allotment A/c……Dr
Loss on issue of Debentures
A/c…………Dr 10,00,000
To 8% Debenture A/c 50,00,000
To Security Premium A/c 5,00,000
To Premium on 10,00,000
Redemption of Debenture
A/c 2+2+2 6
(b) Loss on Issue of Debentures A/c

Date Particulars Amount Date Particulars
01.10. To 10,00,000 31.03. By
2021 Premium on 2022 Securities
Redemption Premium 7,80,000
of A/c
debentures
By
Statement 2,20,000
of P & L
A/c
10,00,000 10,00,000
(c) Journal Entries
Date Particulars L.F Dr(Rs.) Cr(Rs.)
31.03.2022 Debenture Interest A/c Dr. 2,00,000
To Debeture Holder 2,00,000
31.03.2022 Debenture holder A/c Dr 2,00,000
31.03.2022 Statement of P& L A/c 2,00,000
To Interest on dentures A/c 2,00,000
24. Revaluation Account
To Partner Capital A/c By Plant and
A - 19,200 Machinery A/c 14,000
B - 12,800 32,000 By Building A/c 11,000
By Provision for
doubtful debts A/c 7,000
32,000 32,000
Partners Capital Account
Particulars A B C Particulars A B C
To B‘s Current By Balance b/d 1,19,000 1,12,000 -
A/c 24,000 By Bank A/c 56,000
By C‘s Current 8,400 5,600
To Balance 1,68,000 1,12,000 56,000 A/c 8,400 5,600
C/d By GR A/c 19,200 12,800 -
By Rev
By A‘s Current
A/c 13,000
2 +4 = 6
TOTAL 1,68,000 1,36,000 56,000 Total 1,68,000 1,36,000 56,000
OR
Revaluation Account
To Prov for workmen By Provision for Bad debts
compensation claim A/c 6,000 A/c 1,000
To Investment A/c 15,000 By Loss transferred to
Capital of Lalit Rs.10,000
Madhur Rs. 6,000
Neena Rs. 4,000 20,000
21,000 21,000
Partners Capital Account

Particulars L M N Particulars L M N
To P & L 5,000 3,000 2,000 By 50,000 40,000 25,000
A/c 10,000 6,000 4,000 Balance 10,929
To 10,000 6,000 4,000 b/d 4,371
Goodwill 10,929 4,371 By L‘s
To Rev 10,300 Capital
A/c By N‘s
To M‘s 30,000 Capital
2+4 = 6
Cap A/c 14,071 10,629
To Cash
A/c
To M‘s
Loan A/c
To
Balance
c/d
TOTAL 50,000 55,300 25,000 Total 50,000 55,300 25,000
25
BOOKS OF SEEMA LTD. Journal Entries

(I) Bank A/c……………………………..Dr 34,00,000 ½
To Equity Share Application A/c 34,00,000
(ii) Equity Share Application 34,00,000
A/c………………Dr 24,00,000 1
To Equity Share Allotment A/c 4,00,000
To Bank A/c ½
(iii) Equity Share Allotment A/c 51,00,000
…………………Dr 36,00,000
To Security Premium A/c ½
(iv) Bank A/c 42,00,000
……………………………………………Dr 3,00,000
Calls in Arrear 45,00,000
A/c………………………………Dr 1½
To Equity Share Allotment A/c
(v) Equity Share Capital 4,00,000 1
A/c…………………….Dr. 1,00,000
Security Premium 3,00,000 1
A/c………………………..Dr. 2,00,000
To Calls in Arrear A/c
To Share forfeiture A/c
(vi) Bank A/c 2,40,000 OR
…………………………………………..Dr. 60,000
Share Forfeited A/c 3,00,000
………………………….Dr. 1x3 =3
To Equity Share Capital A/c
(vi) Share forfeiture A/c 90,000
………………………..Dr. 90,000
OR
(i)

(i) Share Capital A/c 50,000
……………………………Dr. 18,000 1x3 =3
To Share Forfeiture A/c 32,000
To Calls in Arrears A/c
(ii) Bank A/c 36,000
………………………………………. Dr 30,000
To Share Capital A/c 6,000
To Security Premium A/c
(iii) Share forfeiture 10,800
A/c………………………..Dr. 10,800
(ii)

(i) Share Capital A/c 21,000
……………………………Dr. 15,000
To Share Forfeiture A/c 6,000
To Calls in Arrears A/c
(ii) Bank A/c 20,000
………………………………………. Dr 20,000
(iii) Share forfeiture 10,000

A/c………………………..Dr. 10,000
26. 1+5 =6
Journal entries
Date Particulars L. Dr(Rs.) Cr(Rs.)
F
2020 Profit and loss Suspense A/c 1,20,000
June 30 To Ankit‘s Capital A/c 1,20,000
Ankit‘s Executors Account
Date Particulars Amoun Date Particulars Amount
t
2020 2020
June 30 To Furniture A/c 2,40,00 June 30 By Ankit‘s Capital 8,40,000
2021 0 2021 A/c
March,3 To Balance C/d March,3 27,000
1 6,27,00 1 By Interest A/c
0
8,67,00 8,67,000
0
2021 2021
June 30 To Bank A/c 2,36,00 April,1 By Balance b/d 6,27,000
2022 0 June 30 By Interest A/c 9,000
March,3 To Balance C/d 2022
1 4,18,00 March,3 By Interest A/c 18,000
0 1
6,54,00 6,54,000
0
2022 2022
2023 0 June 30 By Interest A/c 6,000
March,3 To Balance C/d 2023
1 2,09,00 March,3 By Interest A/c 9,000
0 1
4,33,00 4,33,000
0
2023 2023
0 June 30 By Interest A/c 3,000
2,12,00 2,12,000
0
PART –B ( ANALYSIS OF FINANCIAL STATEMENTS )

Q.NO TEXT MARKS
27. Ans – (a) Non –Current Assets 1
OR Ans- (c) Bank Charges
28. Ans : (b) Acid Test Ratio 1
29. Ans – (c) Cash flow from investing activities Rs.34,000 1
OR Ans – (b) Rs.1,60,000
30. Ans – (b) Rs.28,800 1
31. SL.No. Name of the item Head Sub-head ½ x6 = 3
(i) Premium on Non-current Other long
Redemption of liabilities term
debenture liabilities
(ii) Subsidy Reserve Shareholders‘ Reserve and
Fund Surplus
Q.NO TEXT MARKS
31. SL.No. Name of the item Head Sub-head
(iii) Mining Rights Non-Current Fixed Assets
Assets ( Intangible
Asset)
(iv) Publishing titles Non-Current Fixed Assets
Assets ( Intangible
Asset)
(v) Interest on Calls in Current Other current
advance liabilities liabilities
(vi) Tax Reserve Share holders‘ Reserve and
fund Surplus
32. Ans : Highlighted objectives of the situation – To know the Solvency 1+2 = 3
Other objectives :(i) To know the managerial efficiency (ii) To Make
comparative study with other similar firms.
33. Ans : (i)Debt Equity Ratio = 0.29 : 1 ( Rs.2,00, 000/ Rs.7,00,000) 4

(ii) Interest Coverage Ratio = 17.67 times ( Rs.2,18,000/ Rs.18,000)
(iii) Working Capital Turnover Ratio= 15 times ( Rs.15,00,000/
Rs.1,00,000)
(iv) Return on Investment Ratio= 24.22% (
Rs.2,18,000/Rs.9,00,000x100) (Any two)
OR
Ans :(i) Obtained loan from bank will decrease in the proprietary ratio
because shareholder‘s fund remains unchanged but total assets have
increased.
(ii) Purchased of Machinery for cash will not change the proprietary ratio
because shareholder‘s fund and total assets have not changed.
(iii) Reedmed Preference shares will decrease the proprietary ratio
because shareholder‘s fund and cash both decrease by same amount.
(iv) Issue of shares against machinery purchased will increase the
proprietary ratio because shareholder‘s funds and total assets have
increased by same amount.
34. Ans : (i) Rs.75,000 1x6 =6
(ii) Rs.65,000
(iii) Rs.4,73,000
(iv) Rs.60,000
(v) Rs.24,000
(vi) Rs.4,26,000
MARKING SCHEME
SAMPLE PAPER-2
1. This question paper contains 34 questions. All questions are compulsory.
2. This question paper is divided into two parts, Part A and B.
3. Part - A is compulsory for all candidates.
4. Part - B has two options i.e. (i) Analysis of Financial Statements and (ii) Computerised
5. Question 1 to 16 and 27 to 30 carries 1 mark each.
6. Questions 17 to 20, 31and 32 carries 3 marks each.
7. Questions from 21 ,22 and 33 carries 4 marks each
8. Questions from 23 to 26 and 34 carries 6 marks each
9. There is no overall choice. However, an internal choice has been provided in 7 questions of one
mark, 2 questions of three marks, 1 question of four marks and 2 questions of six marks.
Part-A
(Accounting for Partnership and Firms)
S.No. Question Marks
1. (b)Reconstitution of partnership 1
2. (d) Assertion(A) is not correct but Reason(R)is correct 1
3. (d)`75000 Or(c) `18,400 1
4. (d) ` 45,000 Or (a)` 80,000 1
5. (b) ₹9,000 1
6. (c) ` 15,000 Or (c) Other long term liability 1
7. (b) `3,000 1
8. (d)₹1,000. Or (b)` 60,000 by Nisha &` 10,000 by Nikesh 1
9. ₹350,000 1
10. ₹1,00,000 1
11. (b) Decrease in value of asset 1
12. (a) 300 shares, `240 1
13. (b)Purchase of fixed assets 1
14. (c) ₹40,000 1
15. (a)distributed among A,B,C in the ratio 5:3:2. Or (a) ₹350 1
16. (b) ` 8,000 1
17. Partiv's Capital A/c. Dr. `9,000 3
Mili's Capital A/c. Dr. `6,000
To Reena's Capital A/c. `15,000
(Reena's share of goodwill adjusted in Partiv's and Mili's capital accounts in their
gainingratio of 3:2)
18. Profit after charging Babu Salary 12,500 3
Add: Babu‘s Salary 2,500
15,000
Less: Provision for Manager‘s Commission (750)
5% of ` 15,000
Net Profit as per P&L Statement 14,250
Share of Profit transferred to Amita‘s Capital Account 14,170
Babu‘s Capital Account ` 2,780
Or
Madhu‘s Current A/c………..Dr. `10,000
To Sagar‘s Current A/c `10,000
(Being Adjustment for omission of interest on capitals)
19. Journal Entries 3
Bank A/c…………….Dr. `95,000
To 9% Debenture Application & Allotment A/c `95,000
(Being Debenture Application & Allotment money received)
9% Debenture Application & Allotment A/c ……………Dr. `95,000

Loss on Issue of Debentures A/c …………………………Dr. `10,000
To 9% Debentures A/c `1,00,000
To Premium on Redemption of Debentures A/c `5,000
(Being Debenture Application money transferred)
Or
Journal Entries
Building A/c ………………….Dr. `1,50,000
Plant & Machinery A/c……….Dr. `1,40,000
Furniture A/c………………….Dr. `10,000
Goodwill A/c …………………Dr. `35,000
To Liabilities A/c `20,000
To Colours Ltd. `3,15,000
(Being Purchase of assets and liabilities taken over)
Colours Ltd…………………………………Dr. `3,15,000

To 12% Debentures A/c `3,00,000
To Securities Premium Reserve A/c `15,000
(Being issue of 3,000 debentures at a premium of 5%)
Cash A/c Dr.`3,30,000
To Z‘s Capital A/c`3,00,000
To Premium for goodwill A/c`30,000
(Being cash brings for share of capital & premium for g/w)
Premium for goodwill A/c Dr.`30,000
To X‘s Capital A/c`20,000
To Y‘s Capital A/c`10,000
(Being premium for goodwill transferred in sacrificing ratio)
X‘s Capital A/c Dr.`8,000
Y‘s Capital A/c Dr.`4,000
To Cash A/c`12,000
(Being 40% of premium for goodwill withdrawn by X and Y)
21. Balance Sheet of Beauty Unlimit Ltd 4
Particulars Note No. Current Year Previous Year
EQUITY AND LIABILITIES
1. Shareholders‘ Funds
(a) Share Capital 1 3,13,000
Notes to Accounts:
Authorised Capital
1,00,000 equity shares of 10 each 10,00,000
Issued Capital
50,000 equity shares of 10 each issued to public 5,00,000
Subscribed Capital
Subscribed but not fully paid Capital
44,400 equity shares of 10 each, 7 called up 3,10,800
Add: Shares forfeited A/c (600 x5) 3,000
Less: Calls in Arrears (400 x 2) (800)
3,13,000
(i) Abhishek‘s Capital A/c …………….Dr. `40,500
To Realisation A/c `40,500
(Being 50% of Stock taken over)
(ii) Realisation A/c ………………….Dr. `2,000

To Bank A/c `2,000
(iii) Cash/Bank A/c ………………….Dr. `24,300

To Realisation A/c `24,300
(iv) Realisation A/c ………………….Dr. `78,400

To Bank A/c `30,400
To Navin‘s Capital A/c `48,000
(Being remaining creditors settled)
Equity Share Capital A/c (4,800×10). Dr`48,000
To Share First Call A/c (4,800×2)`9,600
To Share Final Call A/c (4,800×2)`9,600
To Share Forfeiture A/c (4,800×6)`28,800
(4,800 shares forfeited for the non-payment
of First Call and Final Call)
Bank A/c. Dr`33,600

Share Forfeiture A/c. Dr`14,400
To Equity Share Capital`48,000
(4,800 shares reissued @ ₹ 7 per share, fully
paid-up)

To Capital Reserve A/c`14,400
(Share forfeiture balance of 4,800 shares
transferred to capital reserve)
Amt received on application: `4,80,000

Allotment: `4,80,000 Share first call:
`2,30,400 Share final call: `2,30,400
Or
(a) Share Capital A/c. Dr`16,000
Securities Premium Reserve A/c. Dr`2,000
To Share Forfeiture A/c`6,000
To Share Allotment A/c/Calls-in-arrears A/c`12,000
(200 shares forfeited for non-payment of allotment money @ ₹60 including premium ,
`80 called up)
Bank a/c. Dr`14,000

To Share Capital A/c`20,000
(Reissue of 200 forfeited shares @ `70, asfully paid up)
(b) Share Capital A/c. Dr`900

Securities Premium Reserve A/c. Dr`600
To Share Forfeiture A/c`300
To Share Allotment A/c/Calls-in-arrearsA/c`1200
(Forfeiture of 150 shares, 6 called up)
Bank a/c. Dr`2,250

To Share Capital A/c`1500
To Securities Premium Reserve A/c.`750
(Re issue of 150 shares at Rs.15 as fullypaid)
Share Forfeiture A/c. Dr`300

To Capital Reserve A/c`300
(Balance of share forfeiture account transferred to capital reserve)
24. Revaluation profit Ram `8000 Sanjay `4000(3 marks); Partners capital account:Ram 6
`1,10,000 Sanjay `90,000 Bharat `50,000(3 marks), balance sheet `3,37,000(2
marks)
Or
Revaluation profit A ₹45,375, B ₹27 ,225 ,C ₹18,150
C loan account `209,450. Closing balance of Capital A -`4,24,875, B-`2,54,925
Balance sheet `9,34,250
25. Dr. Kiran‘s Capital A/c Cr. 6
Particulars ` Particulars `
To Kiran‘s Executors‘ A/c 3,38,000 By Balance b/d 2,00,000
By Interest on Capital A/c 4,800
By P&L Suspense A/c 29,200
By Sandhya‘s Capital A/c 16,000
By Sooraj‘s Capital A/c 8,000
By General Reserve A/c 80,000
3,38,000 3,38,000
(i) Plant and Machinery A/c. Dr`6,90,000
To Mukta Machine Ltd. A/c`6,90,000
(Being Machinery purchased.)
Mukta Machine Ltd. A/c. Dr.`6,90,000

Discount on Issue of Debentures A/c(7,500 × 20)`1,50,000
To Bills Payable A/c`90,000
To 6% Debentures A/c (7,500 x 100)`7,50,000
(Being Purchase consideration settled.)
(ii) Bank A/c (2,500 x 90). Dr.`2,25,000

To Debenture Application and AllotmentA/c`2,25000
(Being Application money received.)
Debenture Application and Allotment A/c`2,25000

Discount on Issue of Debentures A/c(2,500 × 10)`25,000
To 8% Debentures A/c (2,500 x 100)`2,50,000
(Being Debentures allotted.)
Securities Premium Reserve A/c. Dr.`15,000

Statement of Profit and Loss (Finance Cost)(25,000 - 15,000)`10,000
To Discount on Issue of Debentures A/c`25,000
(Being Discount on issue of Debentures
written off.)
Part-B
(Analysis of Financial Statements)
27. (b) Proposed dividend. Or (a) `22,500 1
28. (c) Rs 10,00,000 1
29. c) ` 12,000 Or (a) Operating Activity 1
30. a)Rs. 4,75,000 1
31. Items. Heading 3
i. Cheques in hand. Cash & Cash Equivalents
ii Loose tools. Inventories
iii Securities Premium Reserve. Reserves & Surplus
iv Long term Investments with maturity. Current Investment
period less than six months
v Building under Construction. Fixed Assets-Capital in Progress
vi. Livestock. Fixed Assets- Tangible Assets
(Each item 1⁄2 mark)
32. 1. Decrease 3
2. No change
3. Decrease
33. Return on Investment = {14,50,000/88,00,000} x100=16.48% 4
Total Assets to Debt Ratio = 1,15,00,000/80,00,000 = 1.44 : 1
Or
Debt-Equity Ratio = Debt / Equity (Shareholders‘ Funds) = 3,00,000 / 1,00,000
= 3 :1, Current ratio=9:5
34. 1. Cash flow from operating activities `3,08,000 6
2. Cash used in investing activities `5,15,000
3. Cash flow from financing activities `2,00,00
*****

Accountancy XII 1-4

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Accountancy XII 1-4

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Q

Goodwill- Nature and Valuation

The firm earned a average profit of Rs 97,000.Normal rate of interest is 8%.

4. Find out the super profit of the firm

Reconstitution of Partnership firms – Change in Profit Sharing Ratio

Reconstitution of Partnership firms – Admission of a partner

They admit D into partnership on the following terms:

(b) Old Ratio (P, Q and R) = 5: 4: 1 P‘s Profit Share = 5/10

X‘s capital A/c… Dr ₹ 15,000

Balance Sheet of Digvijay, Brijesh and Parakaram

(a) (i) (D), (ii) (C), (iii) (A), (iv) (B)

COMPETENCY / CASE BASED QUESTIONS

Questions Carrying 3 – 4 Marks

Dissolution of Partnership Firm

Dr. Partner‘s Capital A/c Cr.

Dr. Cash A/c Cr.

Assertion and Reason Based Questions

Q2.Assertion (A): An unrecorded asset would be transferred to the debit side of

Accounting for Share Capital

Sl.N QUESTIONS MKS

Ans-(b) Portion of uncalled capital to be called only at liquidation

Ans- a) Both assertion and reason are correct

Ans-(c) Uncalled capital

Q-4 Which statement is issued before the issue of shares ? (1)

Ans-(d)- All of these

Q-5 Company can utilise securities premium for : (1)

Ans-(b) Issuing fully paid bonus shares

Q-6 When a company issues fully paid shares to promoters (1)

Ans- (b) Good will A/c Dr.

Q-7 Share Application Account is : (1)

Ans- (a) Personal Account

Ans-(d) None of these

Ans- In the books of Leea

Dat Particulars L.F Dr(AMT Cr(AMT.)

Q-13 What are the alternatives for over subscriptions? (3)

Particulars Note No. Amt (RS.)

Particulars Amount(Rs. Particulars Amount(Rs.)

Share Capital- Rs-20,000

Applications for 8,00,000 shares were received. Applications for 1,00,000

4 What amount of share forfeiture would be reflected in the balance sheet?

1.( c) Issue for consideration other than cash.

Accounting for Issue of Debentures

3. Mehar Ltd. issued ₹1,00,000, 12% Debentures of ₹100 each at a premium of 5%

Date Particulars LF Dr. (₹) Cr. (₹)

In the books of Rama Ltd., 12% Debentures A/c will be:

6. Which of the following is incorrect about debentures? (1)

(a) Only (ii) (b) Only (iii)

(a) Both statement (A) and statement (B) are correct.

8. As a purchase consideration of a machinery of ₹7,20,000, debentures of ₹100 each were

Date Particulars LF Dr. (₹) Cr. (₹)

Sundry Assets A/c Dr. 18,00,000

Sundry Assets A/c Dr. 18,00,000

………………….. Dr. 20,00,000

The management raised the following questions:

Financial Statements of a Company and Analysis of Financial Statements

Q1 Current maturities of long-term debt are shown under:

Financial Statement Analysis (Tools)- Ratio Analysis

Q5. Given the following information:

Financial Statement Analysis (Tools)- Cash Flow Statement

SECTION-A (MCQs &ARQs 1 MARK)

1. If a machine whose original cost is Rs.40,000 having accumulated depreciation

7. A Ltd., engaged in the business of retailing of two wheelers, invested Rs.50,00,000 in

in the context of above two statements, which of the following is correct?

13. A company had following balances