By DeeCee – Divine Classes

PART – B ACCOUNTANCY TEST

Q.1 Credit Revenue from Operations Rs 9,00,000; Trade Receivables Turnover Ratio 6 times, Closing
Trade Receivables were 1.5 times than that in the beginning. Closing Trade Receivables will be: (1)

(a) Rs 1,20,000

(b) Rs 60,000

(c) Rs 1,80,000

(d) Rs 90,000

Or

Q. What will be the Current Ratio from the following?

Liquid Assets Rs 1,00,000; Inventory Rs 90,000 (including loose tools Rs 15,000); Prepaid Expenses Rs
5,000; Working Capital Rs 1,20,000.

(a) 1.5:1

(b) 3.25:1

(c) 3:1

(d) 1.625:1

Q.2 Which of the following is considered as Cash Equivalents? (1)

(a) Treasury Bills

(b) Current Investments

(c) Bank deposits for 3 months

(d) All of the above

Q.3 Insurance Claim received by Albert Co. Ltd. of Rs 5,00,000 for Loss of Machinery due to theft will
be recorded in Cash Flow Statement in which of the following manner? (1)

(a) Added under Operating Activities as Extraordinary Item and Subtracted from Operating Activities
also.

(b) Subtracted under Operating Activities as Extraordinary Item and Added to Operating Activities
also.

(c) Added under Operating Activities as Extraordinary Item and Outflow under Investing Activity also.

(d) Subtracted under Operating Activities as Extraordinary Item and Inflow under Investing Activities
also.

Or

Q. A company issued 20,000; 9% Debentures of Rs 100 each at 10% Discount. These debentures
were to be redeemed at 15% Premium at the end of 5 years. The balance in Securities Premium
Account as on the date of Issue was Rs 3,70,000. How this transaction will be reflected in Cash Flow
Statement?

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(a) Added Rs 1,30,000 under Operating Activities as Loss on Issue of Debentures written off and
Inflow of Rs 20,00,000 under Financing Activities.

(b) Added Rs 5,00,000 under Operating Activities as Loss on Issue of Debentures written off and
Inflow of Rs 18,00,000 under Financing Activities.

(c) Added Rs 1,30,000 under Operating Activities as Loss on Issue of Debentures written off and
Inflow of Rs 18,00,000 under Financing Activities.

(d) Added Rs 5,00,000 under Operating Activities as Loss on Issue of Debentures written off and
Inflow of Rs 20,00,000 under Financing Activities.

Q.4 Which of the following is not a limitation of financial statements analysis: (1)

(a) Affected by Window Dressing

(b) Ignores Quantitative aspects

(c) Do not reflect price level changes

(d) Ignores Qualitative aspects

Q.5 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. (3)

(i) Current maturities of long-term debts

(ii) Furniture and Fixtures

(iii) Provision for Warranties

(iv) Income received in advance

(v) Capital Advances

(vi) Advances recoverable in cash within the operating cycle

Q.6 Assuming that the debt to equity ratio is 2, state giving reasons whether this ratio would
increase, decrease or remain unchanged in the following cases: (3)

(i) Purchase of fixed asset on a credit of 2 months.

(ii) Purchase of fixed asset on a long-term deferred payment basis.

(iii) Issue of Bonus shares.

Q.7 From the following information calculate any two of the following ratios: (4)

(i) Gross Profit Ratio

(ii) Proprietary Ratio

Information:

Paid up capital Rs 8,00,000

Current assets Rs 5,00,000

Credit Revenue from Operations Rs 3,00,000

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Cash Revenue from Operations 75% of Credit Sales

9% Debentures Rs 3,40,000

Current liabilities Rs 2,90,000

Cost of Revenue from Operations Rs 6,80,000

Or

Calculate Net Assets Turnover Ratio from the following information:

Plant & Machinery Rs 1,80,000

Intangible Assets (Goodwill) Rs 20,000

Non-current Investments Rs 40,000

Inventory (including loose tools for Rs 20,000) Rs 1,50,000

Trade receivables Rs 1,00,000

Cash and Cash equivalents Rs 40,000

Trade payables Rs 30,000

Cost of revenue from operations (Cost of sales) Rs 12,80,000

Gross profit 25% on cost

Q.8 Following are the Balance Sheet of X Ltd.: (6)

BALANCE SHEET

Particulars Note. No. 31.3.2022 31.3.2021

I. EQUITY AND LIABILITIES:
(1) Shareholder’s fund
(a) Share capital 4,50,000 4,50,000
(b) Reserve and surplus 1 4,78,000 3,56,000
(2) Non-current liabilities:
Long-term Borrowings 2 1,70,000 -
(3) Current liabilities:
(a) Trade payable 1,09,000 2,03,000
(b) Short term provision 3 35,000 40,000
Total 12,42,000 10,49,000
II. ASSETS:
(1) Non-Current Assets
Property, plant & equipment and
intangible assets:
(i) Property, Plant & Equipment 4 3,20,000 4,00,000
(ii) Intangible Assets 5 60,000 50,000
(2) Current assets:
(a) Current Investments 70,000 78,000
(b) Inventory 1,70,000 2,15,000
(c) Trade receivables 4,55,000 2,10,000
(d) Cash and bank 1,67,000 96,000
Total 12,42,000 10,49,000

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Notes: (1) Reserve & Surplus: 31.3.2022 31.3.2021

Retained earnings 4,78,000 3,56,000

(2) Long-term borrowings:

Mortgage loan 1,70,000 -

(3) Short-term provision:

Provision for taxation 35,000 40,000

(4) Property, Plant and Equipment:

Land 1,40,000 2,50,000

Plant & Machinery 1,80,000 1,50,000

3,20,000 4,00,000

(5) Intangible assets:

Goodwill 60,000 50,000

Additional information: -

(i) Gain on sale of Land Rs 30,000.

(ii) Depreciation on plant & machinery was provided at 10% on last year’s balance.
(iii) Interest paid on Mortgage loan amounted to Rs 24,300.
(iv) Provision for income tax made during the year 2021-22 was Rs 32,000.

You are required to prepare a cash flow statement.

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Answer key

Ans.1 (c) Rs 1,80,000

Or

Ans.1 (c) 3:1

Ans.2 (d) All of the above

Ans.3 (d) Subtracted under Operating Activities as Extraordinary Item and Inflow under Investing
Activities also.

Or

Ans.3 (c) Added Rs 1,30,000 under Operating Activities as Loss on Issue of Debentures written off
and Inflow of Rs 18,00,000 under Financing Activities.

Ans.4 (b) Ignores Quantitative aspects

Ans.5

Items Headings Sub-Headings

(i) Current maturities Current liabilities short-term borrowings
of long-term debts
(ii) Furniture & Fixtures Non-current assets Property, plant-Equipments
and intangible assets property,
plant and Equipments
(iii) Provision for Non-current liabilities Long-term provisions
warranties
(iv) Income received in Current liabilities Other current liabilities
advance
(v) Capital advances Non-current assets Long-term loans and advances
(vi) Advances recoverable Current assets Short-term loans and advances
in cash within the
operating cycle

Ans.6

Tr.no. Effect Reason

(i) No change Neither the equity (shareholder’s funds) nor the debts are
affected.
(ii) Increase Debts are increased but equity (shareholder’s funds) remain
unchanged.
(iii) No change Neither the long-term debts nor the shareholder’s funds are
affected.

Ans.7 (i) Gross Profit Ratio = Gross profit/Net Revenue from Operation x 100

Net Revenue from operation = Credit Revenue from Operation + Cash Revenue from operations

= 3,00,000 + 75/100 of 3,00,000

= 3,00,000 + 2,25,000 = 5,25,000

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Gross profit = Net revenue from Operations – Cost of revenue from operations

= 5,25,000 – 6,80,000 = (-)1,55,000

Gross profit ratio = (-)1,55,000/5,25,000 = (-) 29.52%

(ii) Proprietary ratio = Shareholder’s Funds/Total Assets

Shareholder’s Funds = Paid Up Capital =8,00,000

Total assets = Total Equity & Liabilities side

= Paid up Capital + Debentures + Current liabilities

= 8,00,000 + 3,40,000 + 2,90,000

= 14,30,000

Proprietary Ratio = 8,00,000/14,30,000 x 100 = 55.94 %

Or

Ans.7 Net Assets or Capital Employed Turnover Ratio

= Revenue from Operations (Net Sales)

Net Assets (or Capital Employed)

Net Assets = Non-Current Assets + Working Capital

Non-Current Assets = Plant and Machinery + Intangible Assets + Non-Current

Investments

= 1,80,000 + 20,000 + 40,000 = 2,40,000

Working Capital = Inventory + Trade Receivable + Cash and cash equivalents –

Trade Payables

= 150,000 + 1,00,000 + 40,000 – 30,000

= 2,60,000

Net Assets = 2,40,000 + 2,60,000 = 5,00,000

Revenue from operations = 12,80,000 x 125/100 = 16,00,000

Net Assets Turnover Ratio = 16,00,000/5,00,000 = 3.2 times

Ans.8 CASH FLOW STATEMENT

For the year ended 31st March, 2022

PARTICULARS Rs. Rs.

A. Cash Flows from Operating activities:
Net Profit Before Tax (Note 1) 1,54,000
Adjustment for non-cash and non-operating items:
Add: Depreciation on Plant and Machinery 15,000
Interest paid on Mortgage Loan 24,300
1,93,300

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Less: Gain on Sale of land 30,000

Operating profit before working capital changes 1,63,300
Add: Decrease in Current Assets:
Inventory 45,000
2,08,300
Less: Increase in Current Assets:
Trade Receivables 2,45,000
Decrease in Current Liabilities:
Trade Payables 94,000 3,39,000
(1,30,700)
Less: Income Tax paid for 2021 (37,000)
Net Cash used in Operating activities (1,67,700) (1,67,700)
B. Cash flow from operating activities:
Purchase Net of Plant & Machinery (45,000)
Purchase of Goodwill (10,000)
Sale of Land 1,40,000
Net Cash from Investing Activities 85,000 85,000
C. Cash flows from Financing Activities:
Proceeds from Mortgage Loan 1,70,000
Interest on Mortgage Loan (24,300)
Net Cash from Financing activities 1,45,700 1,45,700
Net Increase in Cash and Cash equivalents 63,000
Add: cash and cash equivalents in the beginning off the 1,74,000
period
Cash and cash equivalents at the end of the period 2,37,000

Notes: (1) Calculation of Net Profit before tax:

Retained Earnings on 31st march, 2022 4,78,000

Less: Retained Earnings on 31st March, 2021 3,56,000

1,22,000

Add: Provision for Tax made during the Current year 32,000

Net Profit before Tax 1,54,000

(2) Dr. PLANT & MACHINERY ACCOUNT Cr.

(on Written Down Value)

Particulars Rs Particulars Rs.

To balance b/d 1,50,000 By Depreciation A/c 15,000
To Bank A/c (Balance figure, 45,000 By balance c/d 1,80,000
being purchase)
1,95,000 1,95,000

(3) Increase in Goodwill will be Treated as Purchase of Goodwill

(4) Dr. LAND ACCOUNT Cr.

Particulars Rs. Particulars Rs,

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To Balance c/d 2,50,000 By Bank A/c (Balancing Figure, 1,40,000

To Gain on Sale of Land A/c 30,000 Being Sale)
By Balance c/d 1,40,000
2,80,000 2,80,000

(5) Dr. PROVISION FOR TAX ACCOUNT Cr.

Particulars Rs Particulars Rs
To Bank A/c (Balancing 37,000 By Balance c/d 40,000
figure, being payment By Statement of Profit & 32,000
made) Loss (Provision made)
To Balance c/d 25,000 (given)
72,000 72,000

(6) As per CBSE guidelines Current Investments Will be Included in Cash and Cash Equivalent:

31.3.2022 31.3.2021

Cash and Bank 1,67,000 96,000

Current Investment 70,000 78,000

2,37,000 1,74,000