Practice Question Paper-7

Part-A
(Accounting for Partnership Firms and Companies)
Q1 Assertion (A): Salary allowed to apartner is shown in Profit and Los Appropriation Alc.
Reason (R): Salary is allowed to apattner only when there is aprovision for the same in the partnership deed.
(a) A) is correct, but (R) incortect. (b) Both (A) and (R) are correct.
(c) (A) is incorrcct, but (R) is cortcct. (d) Both (A) and (R) are incorrect. (1 mark)
OR
Assertion (A): Commission provided to parther is shown in Profit and Loss Alc. (1 mark)
Reason (R): Commission provided to partner is charge against profits and is to be provided at fixed rate.
(a) (A) is correct but (R) is wrong (b) Both (A) and (R) are correct, but (R) is not the correct explanation of (A)
(c) Both (A) and (R) are incorrect. (d) Both (A) and (R) are correct, and (R) is the correctexplanation of (A)
Q2 On l October 2021, Reena and Raman commenced business in partnership with capitals of 3,00,000 and 1,00,000 respectively. The profit
for the year ended March 31, 2023 was 1,80,000, before paying rent for her personal building to be used as godown for firm to Reena
payable at 5,000per month. Interest on capital is to be allowed at 6% p.a. Raman was entitled to a salary of 30,000 p.a. The net profit
transferred to Profit and Loss Appropriation Account will be: (1 mark)
(a) 1,80,000 (b) 1,20,000 (c) 1,50,000 (d) 1,20,000
Q.3 Tvo items that may appear on the Credit side of a partner's fixed capital account are (1 mark)
(a) Opening Capital and Loan advanced by partner (b) Opening Capital and Additional Capital Introduced
(c) Partner's Loan and Additional Capital Introduced (d) Additional Capial Introduced and Permanent withdrawal of Capital
OR
The average period in months for charging interest on drawings for the same amount withdrawn at the beginning of each quarter is
(a) 7½ months (b) 6h months (c) 52 months (d) 4h months (1 mark)
Answer the question no. 4-6 on the basis of the following hypothetical case study:
Sudha, Naresh and Geeta were partners in a firmn sharing profits in the ratio of 5:3:2.Their fixed capitals were 6,00,000; 4,00,000 and 2,00,000
respectively. Besides her capital Geeta had given a loan of 75,000 to the firm. Their partnership deed provided for the following : () Interest on
capital 9% p.a. (ii) Interest on partner's drawings @ 12% p.a. (ii) Salary to Sudha 30,000 per month and to Naresh ?40,000 per quarter. (iv)
Interest on Geeta's loan 9% p.a. During the year Sudha withdrew?50,000 at the end of each quarter; Naresh withdrew 50,000 in the beginning
of each half year; Geeta withdrew 70,000 at the end of each half year. The profit of the firm for the year ended 31-3-2023 before allowing interest
on Geeta's loan was7,06,750.
Q.4 How much amount of net profit will be transferred to Profit and Loss Appropriation A/c? (1 mark)
(a) 7,06,750 (b) ?7,02,250 (c) 7,00,000 (d) None of these
Q.5 What will the amount of interest on drawings made by the partners? (1 mark)
(a) Sudha 2,250, Naresh?4,500 and Geeta 2,100 (b) Sudha 9,000,NareshR9,000 and Geeta 4,200
(c) Sudha 4,500, Naresh4,500 and Geeta 2,100 (d) None of the above
Q.6 What will the share of divisible profit of each partner? (1 mark)
(a) Sudha 47,100, Naresh 28,260 and Geeta 18,840 (b) Sudha 3,61,100,Naresh 2,16,660 and Geeta 1,44,440
(c) Sudha <36,000, Naresh 21,600 and Geeta 14,400 (d) None of the above
Q.7 X and Ywere partners in a firm sharing profits in the ratio of 7:3. Z was admitted for 1/5th share in the profits which he took 75% from X
and remaining from Y. The sacrificing ratio ofX and Y will be (1 mark)
(a) 7:3 (b) 3:1 (c) 1:1 (d) 5:1
OR
Harit and Leela are partners in a firm sharing profits and losses in the ratio of 2:3 Yash was admitted as a new partner for 1/5th share in the profits of
the irm. Yash acquires his share from Leela. New profit sharing ratio of Harit, Leela and Yash will be: (1mark)
(a) 2:3:5 (b) 2:2:1 (o) 5:3:2 (d) 3:5:1
Q.8 Kavita and Karan are partners in a firm sharing profits and losses in the ratio 4 : 1.On lst April, 2023, they admitted Mohit for 1/4th share
in theprofits of the firm. The balance sheet of Kavita and Karan showed stock at 45,000. On admission of new partner, the stock was found
undervalued by 10%. The journal entry to give effect to the above adjustment on Mohir's admision willbe: (1 mark)
(a) Revaluation A/c Dr. 5,000 (b) Stock Alc Dr. 4,500
To Stock Alc 5,000 To Revaluation Alc 4,500
(c) Stock Alc Dr. 5,000 (d) Revaluation Alc Dr. 4,500
To Revaluation Alc 5,000 To Stock Alc 4,500
Q9 XandYwere partners in afrm sharing profits and losses equally. Their capitals were 2,00,000 and 3,00,000 respectively. Zwas admitted as
anew partner for 1/4th share in the profits of the firm, Zbrought 2,00,000as hiscapital. The goodwill of the firm was: (1 mark)
(a) 1,00,000 (b) 25,000 (c) 2,00,000 (d) 7,00,000
 all
Q.10 Vikas, Vijay and Abhishek were partners sharing profits as 40%, 30% and 30% respectively. Vikas retired on 31 March, 2022. After
adjustment with respect to general reserves goodwill and revaluation, etc., the balances in their capital accounts stood at70.000, 60.000 and
50,000 respectively. The firm is not in aposition to make the payment to Vikas on his reeirement. Vikas agrees to receive ashare of profits
which has been earned with his money.The profit carned by the firm for the year 2022-23 was 90,000. What will be Vikas' share of profits
for the year 2022-23? (1 mark)
(a) 3,600 (b) 35,000 (c) 30,000 (d) Nil
Q.11 Match the columns: (1 mark)
() Dissolution of a firm which, on any ground, is regarded to be just and equitable. (A) Dissolution on the happening
of certain contingencies
(i) Dissolution of a firm by he death of a partner, subject to contract between the partners. (B) Dissolution by Court
(iüi) Dissolution ofa firm when some event has taken place which makes it unlawful for the partners (C) Compulsory Dissolution
to carry on the business of the firm in partnership.
(iv) Dissolucion of a firm in accordance with a contract between the partner. (D) Dissolution by Agreement
(a) (i) - (B), (ii) (A), (ii) (C), (iv) - (D) (b) (i) (A), (i) (B), (ii) (C), (iv) (D)
(c) ()- (A), (i) (B), (ii) (D), (iv) - (C) (d) () - (D), (i) (A), (ii) (C), (iv) - (B)
Q.12 Those debentures where a charge is created on the assets of the company for the purpose of payment in case of default are called: (1 mark)
(a) Perpetual debentures (b) Bearer debentures (c) Mortgaged debentures (d) Zero coupon rate debentures
OR
Debentures which are transferable by mere delivery are: (1 mark)
(a) Registered debentures (b) Perpetual debentures (c) Bearer debentures (d) Convertible debentures
Question number 13 and 14 are based on the hypothetical situation given below:
Sun India Ltd. invited applications for issuing equity shares of 10 each at a premium of 10%. The premium was payable on allotment. Because of
over-subscription all the applicants were divided into three categories for the purpose of allotment.
Category :Applications for 1,00,000 shares were allotted shares in full.
Category : 3,00,000 shares were allotted to the applicants of this category. For every 5shares applied, 3 shares were allotted.
Category II: 8,00,000shares were allotted to the applicants of 12,00,000shares.
Amount payable was as follows: On Application -2 per share, On Allotment -5 per share (including premium), On First and Final call - Balance
Excess money received with applications was adjusted towards sums due on allotment.
Q.13 How many shares were offered to the public for subscription? (1 mark)
(a) 12,00,000 (b) 24,00,000 (c) 14,00,000 (d) 30,00,000
Q.14 What was the amount of money received on allotment? (1 mark)
(a) 60,00,000 (b) 12,00,000 (c) 6,00,00,000 (d) 48,00,000
Q15 Statement-I: The amount on any call should not exceed 25% of the face value of shares.
Statement-I: There must be an interval of at least one month berween the making of two calls unlessotherwise provided by the articles of
association of the company.
(a) Both the statements are true. (b) Both the statements are false.
(c) Statement-I is true, Statement-II is false. (d) Statement-II is true, Statement-I is false. (1 mark)
OR
Statement-:The application money should be at least 5% of the face value of the share.
Statement-II: A minimum of 14 days' notice is given to the shareholders to pay the call money.
(a) Both the statements are true. (b) Both the statements are false.
(c) Statement-I is true, Statement-II is false. (d) Statement-II is true, Statement-I is false. (1mark)
0.16 Which of the following statements does not relate to 'Reserve Capital?
(1mark)
(a) It is a part of uncalled capital of a company. (b) It cannot be used during the lifetime of a company.
(c) It can be used for writing off capital losses. (d) It is a part of subscribed capital.
Q.17 On April , 2023, a frm had assets of 1,00,000exxcluding stock of 20,000. The external liabilities were ?10,000 and the balance constituted
Partners' Capital Accounts. If the normal rate of return is 8%, the Goodwill of the firm is valued at 60,000 at four years purchase of super
profit, find the actual profits of the firm. (3 marks)
Q.18 Anil, Bhanu and Chandu were partners in a firm sharing profits in the ratio of5 :3: 2. Anil died on October 1, 2023.
Goodwill to be
valued at 2.5 years purchase of the average profits of the previous four years which were: 2019-20 R13,000, 2020-21 -12,000; 2021-22
220,000, 2022-23 -15,000. Profit for the year 2023-24 be taken as having accrued at the same rate as that of the previous
Calculate Anil's share of goodwill and his share of profit till the date of death. Also, pass necessary journal entries for the same.year.
(3 marks)
OR
Alia, Karan and Shilpa were partners in a firm sharing profits in the ratio of 5:3:2. Goodwill appeared in their
books at a value of 60,000 and
general reserve at 20,000. Karan decided to retire from the firm, On the date of his retirement, goodwill of the firm was
new ratio of Alia and Shilpa was 2:3.
valued at 2,40,000. The
Record necessary Journal Entries on Karan's retirement.
(3 marks)
Q.19 Shruti, Shilpa, Shelly and Shweta were partners in a Arm. They had entered into partnership firm last year only, through a verbal agreement.
They contributed Capitals in the firm and to nect other financial requirements, few partners also provided loan to the firm. Within a year, their
conflicts arisen due to certain disagreements and they decided to dissolve the firm. The firm had appointed Ms. Shreya, who is a financial advisor
and legal consultant, to carry on the dissolution proccs. In the first instance, Ms. Shreya had transferred various assets and external liabilities
to Realisation Alc. Duc to her busy schedule; Ms. Shreya has delegated this assignment to you, being an intern in her firm. On the date of
dissolution, you have observed the following transactions:
() Shilpas Loan of 50,000 to the firm was settled by paying ? 42,000.
(ii) Shwetas Loan of 40,000was settled by giving an unrecorded asset ofR 45,000.
(iii) Loan to Shruti ofT 60,000 was settled by payment to Shruti's brother loan of the same amount.
You are required to pass necessary entries for all the above mentioned transactions. (3 marks)
Q.20 National Packaging Company purchased business of another company at apurchase consideration of1,90,000 whereas it took over the assets
of the value of T1,92,000 from che another company. National Packaging Company agrecd to make the payment of purchase consideration
by issuing 2.000, 10% debentures of 100each at a discount of 5%.
Record the necessary journal entries including entry for writing off discount on issue of debentures. (3 marks)
OR
Zed Ltd. issued 2,00,000,8% debentures of T100cach at a discount of 6% redeemable at a premium of 10% after 5 years. The amount was
payable as follows: On application-50 per debenture and; On allotment- balance. (3 marks)
Record the necessary journalentries for the issue of debentures only in the books of Zed Ltd.
Q.21 Aand Bare partners sharing profits and losses in the ratio of 3:2. Their capitals on 31st March, 2023 after alladjustments stood ar 1,65,500
and 1,27,600 respectively. Profitsamounting to S0,000 for the year 2022-23 were distributed after allowing interest on drawings @12% p.a.
During the year Awithdrew ? 15,000 at the beginning of every quarter and Bwithdrew 40,000 during the year. Partnership deed is silent on
interest on drawings but provides for interest on Capital e 5% p.a. Interest on Capital has not ben provided. Showing your workings,(4 pass the
marks)
adjustment entry to rectify the above errors.
Q22 Sunrise Company Lrd. has registered its capital as 40,00,000, divided into 4,00,000 shares of 10 each. The company offered to the public
for subscription of 2,00,000 shares of 10 each, as 2 on application, 3 on allotment, T3 on first clland the balance on inal call. The
company received applications for 2,50,000 shares. The company finalised the allotment on 2,00,000 shares and rejected applications for
50,000 shares. The company did not make the final call. The company received allthe amount except on 2,000 shares where call money has
not been received. Akshat, a shareholder, paid his call dues along with allotment on his holding of 1,000 shares.
(4 marks)
Present the 'Share Capital' in the company's Balance Sheet. Also show the Notes to Accounts.
stood as follows:
Q.23 Sunaina and Tamanna are partners in a firm sharing profits and losses in the ratio of 3:2. Their Balance Sheet as at 3lst March, 2023
Liabilities Amount O Assets Amount )
Capital Accounts: Sunaina 60,000 Plant & Machinery 1,20,000
Tamanna 80,000 1,40,000 Land and Building 1,40,000
Current Accounts: Sunaina 10,000 Debtors 1,90,000
40,000 Less: Provision for Doubtful debts (40.000) 150,000
Tamanna 30.000
1,20,000 Stock 40,000
General Reserve
50,000 Bank 30,000
Workmen's Compensation Reserve 20,000
Creditors 1,50,000 Goodwill
5,00,000 5,00,000

They agreed to admit Pranav into partnership for 1/5th share of profits on lst April, 2023. Al Debtors are good. Value of land and building
The liability against Workmen's Compensation Fund
to be increased to 1,80,000. Value of plant and machinery to be reduced by 20,000. (already included in above creditors),
is determined at 20,000 which is to be paid later in the year. Mr. Anil, to whom 40,000 were payable
exchange for 3 months which was duly accepted. Pranav to bring in capital of 1,00,000 and 10,000 premium for goodwill
drew a bill of (6 marks)
in cash. Journalise.
3:5:2. On 31st March, 2023, their balance sheet was as follows:
Q.24 Gita, Radha and Garv were partners in a firm sharing profits and losses in the ratio of
Amount ) Assets Amount
Liabilities
60,000 Cash 50,000
Sundry Creditors 80,000
General Reserve 40,000 Stock
Debtors 40,000
Capitals: Investments 30,000
Gita 3,00,000
5,00,000
Radha 2,00,000 Buildings
Gary 1,00,000 6,00,000
7,00,000 7,00,000

Radha retired on the above date and it was agreed that:

(a) Goodwill of the firm be valued at 3,00,000.
(b) Stock was to be appreciated by 20%.
(c) Buildings were found undervalued by 1,00,000.
(d) Investments were sold for34,000.
sharing ratio of the partners; the necessary adjustments for
(e) Capital of the new firm was fixed at 5,00,000 which will be in the new profit
this purpose were to be made by opening current accounts of the partners. (6 marks)
Prepare Revaluation Account and Partner's Capital Accounts on Radha's retirement.
 OR
Aditi, Kartik and Tinawere partners in afrm sharing profits and losses in 5:3 : 2. On 31st March, 2022, Their Balance Sheet was as follows:
Liabilities Amount () Assets Amount )
Creditors 96,000 Furniture 4,30,000
Capitals: Aditi 3,00,000 Stock 1,50,000
Kartik 2,00,000 Debtors 83,000
Tina 1.00,000 6,00,000 Bank 33,000
6,96,000 6,96,000
Aditi died on lst November, 2022. Goodwill of the firm be valued at 1,00,000. Aditi sold her share of goodwill to Kartik and Tina equally.
Profit for the ycar 2022-23 be taken as having accrued at the same rate as the previous year 2021-22. Profits for the year 2021-22 was 96,000.
Half the amount was paid to Aditi's executors immediately to be contributed by the continuing partners equally and the remaining half will be
paid at the end of the financial ycar 2022-23 with interest @6% p.a. Pass the necessary journal entries to record the above transactions in the
booksof the firm on che date of her death. Also prepare Aditi's Executors' Account till the final settlement. (6 marks)
Q25 On lApril 2022, Hassan Limited took a loan of 30,00,000 from ICICIbank against primary security worth R40,00,000 and issued 4,000,
6% debentures of 100 each as a collateral security. On the same date , the company issued to the public 5,000, 9% debentures of 1,000
cach at 20% premium, redeemable after 4 years at 5% premium.
() Record necessary journal entries related to issue of debentures only for the year 2022-23, if the company decided to record the issue of
6% debentures as a collateral security.
(ii) Calculate che amount of annual fixed obligation of Hassan Limited associated with debentures.
(ii) Show the presentation of the issue of debentures under the sub-head 'Long-term borrowings in che Balance Sheet of Hassan Limited.
(iv) Pass Journal entry to write off Loss on Issue of Debentures account. (6 marks)
Q26 AB Lrd. issued 30,000 shares of T10 each at par, payable as follows: 23 per share on application; 3 per share -on allotment and Balance on
first and final call. Owing to over subscription, allotment was made on pro-rata basis in the ratio of 4:3 and the applicants for 10,000 shares
were sent leters of regret. Natasha, who had applied for 1,600 shares, failed to pay the amount due on allocment and call. The company
forfeited her shares. Later on, theseforfeited shares were reissued at 10 per share as fully paid-up.
Pass the necessary journal entries in the books of AB Ltd. for the above transactions. (6 marks)
OR
(a) Cemto Ltd. forfeited 6,000 shares of10 each issued at a premium of 2 per share for the non-payment of final call of 3per share. 300
of the forfeited shares were reissued for 78 per share as fully paid up. Pass necessary journal entries for the forfeiture and re-issue of shares
and prepare share forfeited acCount. (4 marks)
(b) The Directors of a Company forfeited 200 shares of10 each issued at a premium of 3 per share, for the
non-payment of the First Call
Money of3 per share. The final call of 2per share has not been made. Half the forfeited shares were reissued at1,000 fully paid.
Record the Journal Entries for the forfeiture and reissue of shares. (2 marks)

Part-B
(Analysis of Financial Statements)
Q.27 The profit of Jova Ltd. for the year ended 31st March, 2023 after appropriation was 2,50,000.
Particulars
Amount )
Depreciation of Machinery 20,000
Goodwill writen off
9,000
Loss on sale of Furniture
2,000
Transfer to General Reserve
22,500
What is the amount of Operating Profit before working capital changes?
(1 mark)
(a) 2,72,500 (b) 2,83,500 (c) 2,94,500 (d) 3,03,500
Q.28 Assertion (A): Decrease in trade payables is deducted to calculate cash flows
from operating activities.
Reason (R): It will increase working capital, i.e. cash outflow from operating activities.
(a) Both(A) and (R) are true and (R is a correct explanation of (A).
(c) Both (A) and (R) are false.
(b) Both (A) and (R) are true, but (R) is not the correct
explanation of (A) (d) (A) is false, but (R) is true. (1 mark)
OR
Statement-I: Extraordinary items are non-recurring in nature, i.e, not the regular
Statement-II: Dividend paid is always a financing activity. phenomenon, e.g. loss due to theft or earthquake or flood.
(a) Both the
staterments are true, (b) Both the statements are false.
(c) Statement-I is true, Statement-II is false. (d) Sratement-II is true, Statement-I is false.
0.29 Total amount of Trade Receivables of Ashoka Ltd. as on 31st (1 mark)
March, 2023 were 3,00,000. It had created a provision of 5% for bad and
debts. What amount of Trade Receivables willbe taken to calculate Trade doubtful
Receivables Turnover Ratio? (1 mark)
(a) 3,00,000 (b) F2,85,000 (c) 15,000 (d) None of these
OR
 ABC Co. extends credit terms of 45 days to its customers. Its credit collection would be considered poor if its average collection petiod was
(1 mark)
(a) 30 days (b) 36 days (c) 47days (d) 37 days
Q.30 Which of the following is not a limitation of financial analysis? (1 mark)
(a) Subjecrivity (b) Qualitative aspects ignored (c) Inter-firm comparison (d) Window dressing
Q.31 From the following daca, calculate Current ratio and Liquid Ratio: (3 marks)
Particulars Amount )
Liquid Assets 75,000
Inventories (Includes Loose Tools of20,000) 35,000
10,000
Prepaid expenses
Working Capital 60,000
Q.32 Prepare Comparative Statement of Profit and Loss from the following information:
Particulars 2021-22 ) 2022-23 )
Revenue from operations 4,50,000 9,60,000
Opening stock 30,000 60,000
Closing stock 150% of openingstock 40,000 more than opening stock
Tax rate @50%
Q.33 (a) In acompany ate of Gross Profit on cost is 209%. Its Grossprofit is R4,00,000. Current Liabilities are 50% of the Current Assets, and
(2 marks)
Current Assets are 12,00,000.Calculate the Working Capital Turnover Ratio.
(b) Calculate the "Total Assets to Debt Ratio' from the following information: Current Assets 11,00,000; Working Capital R6,50,000;
Shareholder's Fund 750,000; Total Debts 19,50,000; Reserves and Surplus 2,50,000. (2 marks)
OR
Proprietary ratio of M. Ltd. is 0-8 : 1. State with reasons whether the given transactions will increase, decrease or not change the ratio: (4marks)
(i) Obtained a loan from bank 2,00,000 payable after five years.
(ii) Purchased machinery for cash 75,000.
(ii) Redeemed 5% redeemable preference shares 1,00,000.
(iv) Issued equity shares to the vendors of machinery purchased for 4,00,000.
Q.34 There was Nil' net cash flow from operating activities of Ashok Lrd. during the year ending 31st March., 2023. From che following Balance
Sheet of AshokLtd. as at 31st March, 2023, prepare a Cash Flow Statement.
Particulars Note No. 31.3.2023 ) 31.3.2022()
I. EQUITY AND LIABILITIES
1. Shareholder's Funds
19,00,000 11,00,000
(a) Share Capital
(b) Reserves and Surplus (Balance in the Statement of P&L) 1,60,000 2,00,000
2. Non-Current Liabilities
Long- term borrowings (8% Debentures) 1,00,000 4,00,000
3. Current Liabilities
(a) Short-Term Borrowings (Bank overdraft) 2,50,000 2,30,000
1,90,000 2,70,000
(b) Short-Term Provisions (Provision for Tax)
Total 26,00,000 22,00,000
II. ASSETS
1. Non-Current Assets
Property, Plant and Equipment and Intangible Assets:
15,00,000 11,00,000
(a) Property, Plant and Equipment
(b) Intangible Assets (Goodwill) 2,80,000 1,70,000
2. Current Assets:
130,000 2,90,000
(a) Current Investments
(b) Trade Receivables 3,90,000 4,10,000
3,00,000 2,30,000
(b) Cash and Cash Equivalents
Total 26,00,000 22,00,000
Notes to Accounts:
31.3.2023 ) 31.3.2022 )
Note No. Particulars
1. Property, Plant and Equipment:
16,30,000 11,70,000
Plant and Machinery
(1,30,000) (70,000)
Accumulated Depreciation
15,00,000 11,00,000
a loss of R6,000.
Additional information: (i) A machinery of the boolk value of R60,000, (depreciation provided thereon 20,000) was sold at (6 marks)
(ii) 8% Debentures were redeemed on lst uly, 2022.