Accountancy Class - +2 Chapter – 1 (Partnership Accounts...

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Accountancy

Class - +2

Chapter – 1 (Partnership Accounts (Fundamentals)

Questions : -

1. Jain and Gupta Were Partners in a firm sharing profits in 3 : 2 ratio. Their fixed capitals were Jain Rs.

1,00,000 And Gupta Rs. 1,50,000. After the accounts of the year had been closed it was discovered that

interest on capital at 10% per annum as provided in the partnership agreement has not been credited to the

capital accounts of the partners before distribution of profits. Pass the necessary journal entry to rectify the

error.

Ans. Jain debited and Gupta credited by Rs. 5,000.

2. R, S and T were partners in a firm sharing profits in the ratio 5 : 3 : 2 with capitals of Rs. 50,000, Rs. 24,000

and Rs. 26,000 respectively. Partners were entitled for an interest @ 6% per annum on their capitals. R and S

had guaranteed T that his share of profits in any year would not be less than Rs. 10,000 excluding interest.

During the year the firm had earned a profit of Rs. 48,000 before charging the interest on capital. R and S had

also withdrawn Rs. 5,000 and Rs. 7,400 respectively. Prepare the P & L Appropriation Account.

Ans. Share of Profit- R: Rs. 20,000, S: Rs. 12,000 and T: Rs. 10,000.

3. Mohan, Neeraj and Peeyush are partners in a firm. They contributed Rs. 75,000 each as capital three years

ago. At that time Peeyush agreed to look after the business as Mohan and Neeraj were busy. The profits for

the past three years were Rs. 45,000, Rs. 30,000 and Rs. 60,000 respectively. While going through the books

of accounts. Mohan noticed that profit had been distributed in 1 : 1: 2 ratio. When he enquired from Peeyush

about this, Peeyush answered that since he looked after the business he should get more profit. Mohan

disagreed and it was decided to distributed profits equally with retrospective effect for the last three years.

(a) You are required to make necessary corrections in the books of accounts of Mohan, Neeraj and Peeyush

by passing and adjustment entry.

(b) Identify the value which is being ignored by Peeyush.

Ans. (a) Mohan and Neeraj both credited with Rs. 11,250 each by debiting Peeyush with Rs. 22,500.

4. L, M and N were partners in a firm sharing profits in the ratio of 3 : 4 : 5. Their fixed capitals were L-Rs.

4,00,000, M- Rs. 5,00,000 and N- Rs. 6,00,000 respectively. The partnership deed provided or the following :

(i) Interest on capital @ 6% p.a.

(ii) Salary of Rs. 30,000 p.a. to N.

(iii) Interest on partner’s drawings will charged @ 12% p.a.


During the year ended 31.3.2009 the firm earned a profit of Rs, 2,70,000. L withdrew Rs. 10,000 on 1.4.2008,

M withdrew Rs. 12,000 on 30.9.2008 and N withdrew Rs. 15,000 on 21.12.2008.

Prepare Profit and Loss Appropriation Accounts for the year ended 31.3.2009.

Ans. Net Profit Rs. 1,52,370

Hints. Interest on drawing- L Rs. 1,200, M Rs. 7820, N Rs. 450

5. A and B entered into partnership on 1st

April 2009 without any partnership deed. They introduced capitals

of Rs. 5,00,000 and Rs. 3,00,000 respectively. On 31st

October 2009, A advanced Rs. 2,00,000 by way of loan

to the firm without any agreement as to interest.

The Profit and Loss Account for the year ended 31.3.2010 showed a profit of Rs. 4,30,000, but the partners

could not agree upon the amount of interest on loan to be charged and the basis of division of profits. Pass a

journal entry for the distribution of the profit between the partners and prepare the Capital A/cs of both the

partners and Loan A/c of ‘A’.

Ans. Share of profit- A: Rs.2,12,500; B: Rs. 2,12,500, Balance of Capital Account- A: Rs. 7,12,500; B: Rs.

5,12,500; Balance of A’s Loan A/c: Rs. 2,05,000

6.A,B,C And D are partners sharing Profits and Losses in the ratio of 4 : 3 : 3: 2. Their respective fixed capitals

on 31.3.2010 were Rs. 60,000, Rs. 90,000, Rs. 1,20,000, and Rs. 90,000. After preparing the final accounts for

the year ended 31.3.2010 it was discovered that interest on capital @ 12% p.a. was not allowed and interest

on drawings amounting to Rs. 2,000, Rs. 2,500, Rs. 1,500 and Rs. 1,000 respectively was also not charged.

Pass the necessary adjustment journal entry showing your workings clearly.

Ans. A- Dr. 6,867; B- Dr. Rs. 750; C-Cr. Rs. 3,850; D-Cr. Rs. 3,767

7. A, B and C were partners in a firm. On 1.4.2008 their fixed capitals stood at Rs. 50,000, Rs. 25,000 and Rs.

25,000 respectively.

As per the provisions of the partnership deed:

(a) B was entitled for a salary of Rs. 5,000 p.a.

(b) All the partners were entitled to interest on capital at 5% p.a.

(c) Profits were to be shared in the ratio of capitals.

The net profit for the year ending 31.3.2009 of Rs. 33,000 and 31.3.2010 of Rs. 45,000, was divided equally

without Journal entry to rectify the above error.

Pass an adjustment Journal entry to rectify the above error.

Ans. A- Cr. Rs. 8,000; B- Cr. Rs. 1,000; C- Dr. Rs. 9,000


8. Lalan and Balan were partners in a firm sharing profits in the ratio of 3 : 2. Their fixed capitals on 1.4.2010

were Lalan Rs. 1,00,000 and Balan Rs. 2,00,000. They agreed to allow interest on capital @ 12% per annum

and to charge on drawings @ 15% per annum. The firm earned a profit, before all above adjustments, of Rs.

30,000 for the year ended 31.3.2011. The drawings of Lalan and Balan during the year were Rs. 3,000 and Rs.

5,000 respectively. Showing your calculations, clearly prepare Profit and Loss Appropriation A/c of Lalan and

Balan. The interest on capital will be allowed even if the firm incurs a loss.

Ans. Share of Loss- Lalan Rs. 3,240; Balan Rs. 2,160.

Hint. Interest on Drawing will be charged @ 15% p.a. for six months because the actual date of drawing is

not given.

9. Anit, Sunil and Ravinder entered into a Partnership on 1st

January 2011 to share profits in the ratio of 2 : 1 :

1. It was provided in the deed that Ravinder’s share of profit will not be less than Rs. 70,000 per annum. The

losses for the year ended December 31st 2011 were Rs. 2,00,000 before allowing interest Rs. 8,000 on Anit’s

loan which is due for the current year.

Prepare Profit and Loss appropriation Account for the year ended 31st December 2011.

Ans. Share of Loss- Anit Rs. 1,85,333; Sunil Rs. 92,667

10. Ravi and Jain are partners in a firm. Their fixed capitals are Rs. 3,00,000 and Rs. 4,00,000 respectively.

They admitted Gupta as a new partner for 1/4th

share in the profits. According to the conditions of

partnership deed, Gupta was given a guarantee of profit of Rs. 50,000. Deficit in the guaranteed amount to

Gupta will be borne by Ravi and Jain in the ratio of 3 : 2. The firm earned a profit of Rs. 1,60,000 for the year

ended 31.3.2002.

Prepare the ‘Profit and Loss Appropriation Account’ and show your working clearly.

Ans. Share of Profit- Ravi Rs. 54,000; Jain Rs. 56,000; Gupta Rs. 50,000

Hint. Profit Sharing Ratio of Ravi and Jain is equal.

11. Rehman, Suleman and Hanuman were partners in a firm sharing profits in the ratio o 7 : 2 : 1 respectively.

Their fixed capitals were as follows:

Rehman Rs. 3,00,000; Suleman Rs. 2,00,000 and Hanuman Rs. 1,00,000. The partnership deed provided for

the following for the division of profit:

(i) 10% of the trading profits will be transferred to Reserve Account.

(ii) Hanuman was guaranteed a profit of Rs. 50,000. Any loss because of guarantee to Hanuman will be

shared by Rehman and Suleman equally.

The trading profit of the firm for the year ended 31.3.2012 was Rs. 2,00,000.

Prepare the Profit and Loss Appropriation Account of Rehman, Suleman and Hanuman for the year ended

31.3.2012.


Ans. Share of Profit- Rehman Rs. 1,10,000l; Suleman Rs. 20,000; Hanuman Rs. 50,000.

12. Ahmed, Bheem and Daniel are Partners in a firm. On 1st

April 2011 the balance in their capital accounts

stood at Rs. 8,00,000; Rs. 6,00,000 and Rs. 4,00,000 respectively. They shared profits in the proportion of 5 : 3

: 2 respectively. Partners are entitled to interest on capital @ 5% per annum and salary to Bheem @ Rs. 3,000

per month and a commission of Rs. 12,000 to Daniel as per the provisions of the partnership deed.

Ahmed’s share of profit, excluding interest on capital, is guaranteed at not less than Rs. 25,000 p.a. Bheem’s

share of profit, including interest on capital but excluding salary, is guaranteed at not less than Rs. 55,000 p.a.

Any deficiency arising on that account shall be met by Daniel. The profits of the firm for the year ended 31st

March 2012 amounted to Rs. 2,16,000. Prepare ‘Profit and Loss Appropriation Account’ for the year ended

31st

March 2012.

Ans. Share of profit- Ahmed Rs. 39,000; Bheem Rs. 25,000; Denial Rs. 14,000.

13. Sita and Geeta were partners in a firm. On 1st April, 2011 hey admitted Neha as a partner for 1/3 share in

the profits of the firm. She is differently abled. The new partnership deed provides for the following:

(i) 5% of the trading profit will be donated to Red Cross Society.

(ii) 10% of the trading profit will be donated to the Prime Minister’s Relief Fund.

(iii) Products will be sold to people below poverty line at a discount of 15% on maximum retail price.

(iv) New retail shops will be opened in the backward areas of the country.

(v) New recruitment of salespersons will be reserved for the girls belonging to Scheduled Castes and

Scheduled Tribes.

The trading profit of the firm for the year ended 31.3.2012 was Rs. 12,00,000.

Identify any four values that were kept in mind by Sita, Geeta and Neha while preparing the new partnership

deed. Also prepare the Profit and Loss Appropriation Account of the firm for the year ended 31.3.2012.

Chapter – 2 Partnership Accounts (Goodwill- Nature and Valuation)

Questions : -

1. A Partnership firm earned net profit during the last three years as follows:

Years Net profit (Rs.)

2007-2008 1,90,000

2008-2009 2,20,000

2009-2010 2,50,000


The Capital employed in the firm throughout the above mentioned period has been Rs. 4,00,000. Having

regard to 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) two year’s purchase of super profits earned on average

basis during the above mentioned three years and (ii) by capitalization method.

Ans. (i) 1,20,000; (ii) 4,00,000

2. The capital employed in a firm is Rs. 10,00,000 and the market rate of interest is 15% Annual salary of the

partners is Rs. 80,000. The profits of the last three years were Rs. 3,00,000; Rs. 4,00,000 and Rs. 5,00,000

respectively.

Calculate the value of goodwill on the basis of two years’ purchase of the average super profits of last three

years.

Ans RS 340000

Chapter – 3 Partnership Accounts (Reconstitution)

Questions : -

1. A, B and C were partners in a firm. They had no partnership deed. They had been in business for 4 years

and their P & L for this period was : year ending March 2004 Rs. 39,000, March 2005 Rs. 54,000, March 2006

Rs. 18,000 (loss) and March 2007 Rs. 75,000. During the year 2007-2008, they agreed to share profits and

losses in the ratio of 2 : 2 : 1 with retrospective effect from the year 2003-2004. It was also decided that an

interest (charge) of 5% p.a. was to be provided on capitals (fixed). Their capitals were Rs. 80,000, Rs. 60,000

and Rs. 60,000 respectively. Pass a single adjustment entry to adjust the capital accounts of the partners.

Ans. C debited Rs. 16,000 by crediting A Rs. 10,000 and B Rs. 6,000

Chapter – 4 Partnership Accounts (Admission)

Questions : -

1. A and B are partners with capitals of Rs. 90,000 and Rs. 1,00,000 respectively. They decide to admit C into

the partnership for 1/4th

share in the future profits. C is to bring in a sum of Rs. 80,000 as his capital. Calculate

the amount of goodwill.

Ans. Rs. 50,000

2. A and B are partners sharing profits in the ratio of 5 : 4. They admit C for a 1/3rd

share, which he acquires in

equal proportion from both. Find the new profit sharing ratio.


Ans. 7 : 5 : 6

3. Sumit and Puneet are partners in a firm sharing profits in the ratio of 3 : 2 respectively. The fixed capital of

sumit is Rs. 2,40,000 and Puneet is Rs. 1,50,000. On 1.4.2012 they admitted Kashish as a new partner for 1/5th

share in future profits. Kashish brought Rs. 1,50,000 as his capital. Calculate the value of goodwill of the firm

and record necessary Journal Entries on Kashish’s admission.

Ans. Value of Goodwill Rs. 2,10,000; Kashish debited by Rs. 42,000; Sumit and Puneet credited by Rs.

25,200 and Rs. 16,200 respectively, for share of goodwill.

4. Anil and Sunil are partners in a firm with fixed capitals of Rs. 3,20,000 and Rs. 2,40,000 respectively. They

admitted Charu as a new partner for 1/4th

Share in the profits of the firm on 1st April, 2012. Charu brought Rs.

3,20,000 as her share of capital.

Calculate the value of the goodwill of the firm and record necessary Journal Entries.

Ans. Value of goodwill Rs. 4,00,000; Charu debited by Rs. 1,00,000; Anil & Sunil credited by Rs. 50,000 each

for share of goodwill.

5. A and B are partners in a firm sharing profits in the ratio of 3 : 1. They admitted C as a new partner. The

new profits sharing ratio of A, B and C will be 2 : 1 : 1. C brought Rs. 2,50,000 for his capital but could not

bring his share of goodwill (premium) Rs. 10,000 in cash.

Pass necessary journal entries in the books of the firm for the amount of capital brought in by C and for the

treatment of goodwill.

Ans. Amount trf. From C’s capital A/c capital A/c for C’s share of goodwill of Rs. 10,000

6. A and B are partners in a firm sharing profits in the ratio of 3 : 4. They admit C for 3/10th

share of profits

which he acquires, in equal proportions from both of them. Find the new profit sharing ratio.

(b) C brings Rs. 42,000 as his share of premium for goodwill in cash. Pas journal entries for recording goodwill.

Ans. (a) 39 : 59 : 42 (b) C’s share of goodwill trf. to-A: Rs. 21,000; B : Rs. 21,000

7. A and B were partners in a firm sharing profits in the ratio of 4 : 3. They admitted C as a new partner for

3/7th

share in the profits of the firm. The new profit sharing ratio will be 2 : 2 : 3. C brought Rs. 2,00,000 as his

capital and Rs. 60,000 for his share of premium as goodwill, half of which was withdrawn by A and B from the

firm.

Calculate sacrificing ratio and pass necessary journal entries in the books of the firm for the above

transactions.

Ans. Sacrificing ration = 2 : 1


8. Asin and Shreyas are partners in a firm. They admit ajay as a new partner with 1/5th

share in the profits of

the firm. Ajay brings Rs. 5,00,000 as his share of capital. The value of the total assets of the firm was Rs.

15,00,000 and outside liabilities were valued at Rs. 5,00,000 on the date. Give the necessary Journal entry to

record goodwill ate the time of Ajay’s admission. Also show your workings.

Ans. Ajay’s share of goodwill of Rs. 2,00,000 transfer to Asin and Shreyas equally.

9. L and M were partners in a firm sharing profits in 4 : 3 ratio. They admitted O as a new partner. The new

profit sharing ratio of L, M and O will be 3 : 3 4. O brought Rs. 2,00,000 for his capital. The goodwill of the

firm on O’s admission was valued at Rs. 70,000. O brought his share of goodwill in cash. Calculate sacrificing

ration of L and M and pass necessary journal entries for the above transaction on O’s admission.

Ans. Sacrificing ratio = 19 : 9; O’s share of goodwill of Rs. 28,000 credited to L Rs. 19,000 and M Rs. 9,000.

10. X and Y were partners in a firm sharing profits in 3 : 1 ratio. They admitted Z as a new partner for 1/4th

share in the profits. Z was to bring Rs. 20,000 as his capital and the capitals of X and Y were to be adjusted on

the basis of Z’s capital in the profit sharing ratio. The Balance Sheet of X and Y on 31.3.2006 was as follows:

Balance Sheet of X and Y on 31.3.2015

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Creditors

Bills payable

General reserve

X’s capital

Y’s capital

18,000

10,000

12,000

25,000

10,000

Cash

Debtors

Stock

Machinery

Building

5,000

17,000

12,000

21,000

20,000

75,000 75,000

Others terms of agreement on Z’s admission were as follows:

(i) Z will bring Rs. 6000 for his share of goodwill.

(ii) Building will be valued ate Rs. 25,000 and machinery at Rs. 19,000.

(iii) A provision at 5% on debtors will be created for bad debts.

(iv) Capital accounts of X and Y were adjusted by opening current accounts.

Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of X, Y and Z.


Ans. Profit on revaluation = Rs. 2,150; Capital accounts- X: Rs. 45,000; Y : Rs. 15,000; Z : Rs. 20,000; B/S

Total Rs. 1,08,037

Hint. Balance of Current Accounts- X: Rs. 4,887 (Dr); Y: Rs. 37 (Cr)

11.Jain and Gupta were partners sharing profits in the ratio of 3 : 2. Their Balance Sheet on 31.3.08 was as

follows:

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Creditors

Bills payable

Bank overdraft

Reserve

Jain’s Capital

Gupta’s Capital

20,000

3,000

17,000

15,000

70,000

60,000

Cash

Debtors 20,500

Less Prov. For doubtful debts 300

Stock

Plant

Buildings

Motor Vehicles

14,800

20,200

20,200

40,000

70,000

20,000

1,85,000 1,85,000

They agree to admit Mishra for 1/4th

share from 1.4.08 subject to following terms :

(a) Mishra to bring in capital equal to 1/4/th of the total capital of Jain and Gupta after all adjustments

including premium for goodwill.

(b) Buildings to be appreciated by Rs. 14,000 and stock to be depreciated by Rs. 6,000/

(c) Provision for doubtful debts (on debtors) to be raised to Rs. 1,000.

(d) A provision be made for Rs. 1,800 for outstanding legal charges.

(e) Mishra’s share of goodwill/premium was calculated at Rs. 10,000.

Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the new firm on Mishra’s

Admission.

Ans. Profit on Revaluation Rs. 5,500; Balance of capital accounts- Jain Rs. 88,300; Gupta Rs. 72,200; Mishra

Rs. 30,125; B/S total Rs. 2,32,425

Hint. Cash bring in by Mishra as capital Rs. 40,125

12. Rao and Reddy were partners in a firm sharing profits in the ratio of 3 : 1. They admitted Kutty as a new

partner for 3/8th

share in the profits. The new Profit sharing ratio will be 3 : 2 : 3. Kutty brought Rs. 2,00,000

for his capital and Rs. 50,000 for his share of premium for goodwill. On 31.3.2007, the date of Kutty’s

admission. The Balance Sheet of Rao and Reddy was as follows :


Balance Sheet of Rao and Reddy as on 31.3.2007

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Creditors

Bills Payable

Capitals:

Rao 4,00,000

Reddy 1,00,000

60,000

20,000

5,00,000

Cash

Debtors

Stock

Furniture

Machinery

90,000

80,000

1,50,000

50,000

2,10,000

5,80,000 5,80,000

It was agreed that :

(i) Stock is valued at Rs. 2,00,000.

(ii) Machinery will be depreciated by 12%

(iii) Furniture will be depreciated by Rs. 2,000.

(iv) A provision of 5% for bad and doubtful debts will be made on debtors.

(v) The Capital Accounts of all the partners were adjusted in the new profit sharing ratio after admission. For

surplus or deficiency, the Current Accounts were to be opened.

Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the new firm.

Ans. Profit on revaluation Rs. 18,800; Balance of Capital A/c- Rao Rs. 2,88,300; Reddy Rs. 1,92,200; Kutty

Rs. 2,88,300; B/S Total Rs. 10,24,600

Hint. Balance of Current A/c- Rao Rs. 1,75,800 (Cr); Reddy Rs. 87,500 (Dr); Kutty Rs. 88,300 (Dr).

13. The Balance Sheet of Ram and Shyam, Who were sharing profits in the ratio of 3 : 1, on 31dt March 2009

was as follows:

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)


Creditors

Employees’ Provident Fund

General Reserve

Capitals:

Ram 6,000

Shyam 4,000

2,800

12,00

2,000

10,000

Cash at bank

Debtors 20,500

Less Reserve for

Doubtful debts (-) 500

Stock

Investments

2,000

6,000

3,000

5,000

16,000 16,000

They decided to admit Mohan on April 1st

2009 for 1/5th

share on the following terms :

(i) Mohan shall bring Rs. 6,000 as his share of premium.

(ii) That unaccounted accrued income of Rs. 100 be provided for.

(iii) The market value of investments was Rs. 4,500.

(iv) A debtor whose dues of Rs. 500 was written off as bad debts paid Rs. 400 in full settlement.

(v) Mohan to bring in capital to the extent of 1/5th

of the total capital of the new firm.

Prepare Revaluation A/c, Partners Capital A/cs and the Balance Sheet of the new firm.

Ans. Profit on revaluation = Nil; Capital introduce by Mohan Rs. 4,500; B/S Total Rs. 26,500.

14. Ishu and Vishu are partners sharing profits in the ratio of 3 : 2. Their Balance Sheet on 31st

March was as

follows.

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Creditors

Employees’ Provident

Fund

General Reserve

Capitals:

Ishu 1,19,000

Vishu 1,12,000

66,000

10,000

4,000

2,31,000

Cash at bank

Debtors 42,000

-) Prov. For Doubtful debts

7,000

Investments (market price

19,000)

Buildings

Plant & Machinery

87,000

35,000

21,000

98,000

70,000

3,11,000 3,11,000

Nishu was admitted on that date for 1/6th

share on the following terms:

(i) Nishu will bring Rs. 56,000 as his share of capital.

(ii) Goodwill of the firm is valued at Rs. 84,000 and Nishu will bring his share of goodwill in cash.

(iii) Plant and Machinery be appreciated by 20%


(iv) All debtors are good.

(v) There is a liability of Rs. 9,800 included in Sundry creditors that is not likely to arise.

(vi) Capital of Ishu and Vishu will be adjusted on the basis of Nishu’s capital and any excess or deficiency

will be made by withdrawing or bringing in cash by the concerned partner.

Prepare the Revaluation Account, the Partner’s Capital Accounts and the Balance Sheet of the firm after the

above adjustments.

Ans. Profit on Revaluation Rs. 32,800; Cash bring in by Ishu Rs. 14,920; Cash paid to Vishu Rs. 22,720; B/S

Total Rs. 3,92,200.

Hint. Balance of Capital Accounts- Ishu Rs. 1,68,000; Vishu Rs. 1,12,000; Nishu Rs. 56,000; Net

Balance of Investment Fluctuation Fund of Rs. 2,000 credited to Revaluation Account.

15. Murari and Vohra were partners in a firm with capitals of Rs. 1,20,000 and Rs. 1,60,000 respectively. On

1.4.2010 they admitted Yadav as a partner for one-fourth share in profits on his payment of Rs. 2,00,000 as

his capital and Rs. 90,000 for his one fourth share of goodwill.

On that date the creditors of Murari and Vohra were Rs. 60,000 and Bank overdraft was Rs. 15,000. Their

assets apart from cash included Stock Rs. 10,000; Debtors Rs. 40,000; Plant and Machinery Rs. 80,000; Land

and Building Rs. 2,00,000. It was agreed that stock should be depreciated by 2,000; Plant and Machinery by

20%, Rs. 5,000 Should be written off as bad debts and Land and Building should be appreciated by 25%.

Prepare Revaluation Account, Capital Accounts of Murari, Vohra and Yadav and the Balance sheet of the new

firm.

Ans. Profit on Revaluation Rs. 27,000’ Balance of Partner’s Capital A/c-Murari Rs. 1,78,500; Vohra Rs.

2,18,500: Yadav Rs. 2,00,000; Balance Sheet Total Rs. 6,72,000.

Hint. Cash balance before admission of Yadav = Rs. 25,000

16. The Balance Sheet of Madan and Mohan who share profits and losses in the ratio of 3 : 2 on 31.3.2010

was as follows:

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Creditors

Workmen’s Compensation

Fund

General Reserve

Capitals: Rs.

Madan 60,000

28,000

12,000

20,000

1,00,000

Cash at bank

Debtors 65,000

Less: Reserve for

Doubtful debts

5,000

Stock

10,000

60,000

30,000

50,000


Mohan 40,000 Investments

Patents

10,000

1,60,000 1,60,000

They decided to admit Gopal’ on 1.4.2010 for 1/4th

share on the following terms:

(i) Gopal shall bring Rs. 20,000 as his. Share or premium for goodwill.

(ii) That unaccounted accrued income of Rs. 1,000 be provided for.

(iii) The market value of investments was Rs. 45,000.

(iv) A debtor whose dues of Rs. 5,000 were written of as bad debts paid Rs. 4,000 in full settlement.

(v) A claim of Rs. 3,000 on account of workmen’s compensation to be provided for.

(vi) Patents are over-valued by Rs. 2,000.

(vii) Gopal to bring in capital equal to 1/4th

of the total capital of the firm after all adjustments.

Prepare the Revaluation Account, Capital Accounts of the partners and the Balance Sheet of the new firm.

Ans. Loss on Revaluation Rs. 2,000; Balance of Capital Accounts- Madan Rs. 88,200; Mohan Rs. 58,800;

Gopal to bring capital Rs. 49,000 (i.e. 88,200 + Rs. 59,800) x4/3x1/4)); B/S Total Rs. 2,27,000.

17. Atal and Madan were partners in a firm sharing profits in the ratio of 5 : 3. On 31.3.2011 they admitted

Mehra as a new partner for 1/5th

share in the profits. The new profit sharing ratio was 5 : 3 : 2. On Mehra’s

admission the Balance Sheet of the firm was as follows:

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Capital :

Atal : 1,50,000

Madan : 90,000

Provision for bad debts

Creditors

Workmen Compensation

Fund

2,40,000

1,200

20,000

32,000

Land and Building

Machinery

Patents

Stock

Debtors

Cash

Profit and Loss Account

1,50,000

40,000

5,000

27,000

47,000

4,200

20,000

2,93,200 2,93,200

On Mehra’s admission it was agreed that

(i) Mehra will bring Rs. 40,000 as his capital and Rs. 16,000 for his share of goodwill premium, half of

which was withdrawn by Atal and Madan;

(ii) A provision of 2 1/2% for bad and doubtful debts was to be created;


(iii) Included in the sundry creditors was on item of Rs. 2,500 which was not to be paid;

(iv) A provision to be made for an outstanding bill for electricity Rs. 3,000;

(v) A claim of Rs.325 for damages against the firm was likely to be admitted. Provision for the same was

to be made.

After the above adjustments, the capitals of Atal and Madan were to be adjusted on the basis of Mehra’s

capital. Actual cash was to be brought in or to be paid off to Atal and Madan as the case may be.

Prepare Revaluation Account, Capital Accounts of the partners and the Balance Sheet of the new firm.

Ans. Loss on Revaluation Rs. 800; Balance of Capital Accounts- Atal Rs. 1,00,000; Madan Rs. 60,000; Mehra

Rs. 40,000; B/S Total Rs. 2,67,825.

Hint. Final payment made to- Atal Rs. 62,000; Madan Rs. 37,200 by arranging overdraft of Rs. 47,000.

18. Raghu and Rishu are partners sharing profits in the ratio of 3 : 2. Their Balance Sheet as on 31st

March

2009 was as follows :

Balance Sheet of Raghu and Rishu as on 31st March 2009

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Creditors

Employee provident Fund

Investment Fluctuation Fund

Capitals:

Raghu : 1,19,000

Rishu : 1,12,000

86,000

10,000

4,000

2,31,000

Cash in hand

Debtors 42,000

Less: Reserve for

Doubtful debts -

7,000

Investments

Buildings

Plant and Machinery

77,000

35,000

21,000

98,000

1,00,000

3,31,000 3,31,000

Rishabh was admitted on that date for 1/4th

share of profit on the following terms :

(i) Rishab will bring Rs. 50,000 as his share of capital.

(ii) Goodwill of the firm is valued at Rs. 42,000 and Rishabh will bring his share of Goodwill in cash.

(iii) Buildings were appreciated by 20%

(iv) All debtors were good.

(v) There was a liability of Rs. 10,800 included in creditors which was not likely to arise.

(vi) New profit sharing ratio will be 2 : 1 : 1.

(vii) Capital of Raghu and Rishu will be adjusted on the basis of Rishab’s share of capital and any excess or

deficiency will be made by withdrawing or bringing in cash by the concerned partners as the case may be.

Prepare Revaluation Account, Partner’s Capital Accounts and the Balance Sheet of the new firm.


Ans. Profit on Revaluation Rs. 41,400; Balance of Capital Accounts- Raghu Rs. 1,00,000; Rishu Rs. 50,000;

Rishabh Rs. 50,000; B/S Total Rs. 2,85,200.

Hint. Cash withdrawn by- Raghu Rs. 48,040; Rishu Rs. 84,860; Market Value of Investment is assumed to be

same as Cost Price and Investment Fluctuation Fund of Rs. 4,000 transfer to Revaluation Account.

19. Sarthak and Vansh are partners sharing profits in the ratio of 2 : 1. Since both of them are specially abled

sometimes they find it difficult to run the business on their own. Mansi, a common friend, decides to help

them. Therefore they admit her into partnership for 1/3rd

share in profits. She brings Rs. 60,000 for goodwill

and proportionate capital. At the time of admission of Mansi, the Balance Sheet of Sarthak and Vansh was a

under :

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Capital Accounts :

Sarthak : 70, 000

Vansh : 60, 000

General Reserve

Bank Loan

Creditors

1,30,000

18,000

18,000

72000

Plant

Furniture

Investments

Stock

Debtors

38,000

Less: Provision for Bad

Debts -

4,000

Cash

66,000

30,000

40,000

46,000

34,000

22,000

2,38,000 2,38,000

It was decided to :

(i) Reduce the value of Stock by Rs. 10,000

(ii) Plant is to be valued at Rs. 80,000.

(iii) An amount of Rs. 3,000 included in Creditors was not payable.

(iv) Half of the Investments were taken over by Sarthak and remaining were valued at Rs. 25,000.

Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of reconstituted firm. Identify the

value being conveyed in the question.

Ans. Profit on Revaluation Rs. 12,000; Balance of Capital Account- Sarthak Rs. 1,10,000; Vansh Rs. 90,000;

B/S Total Rs. 3,87,000

Hint. Capital introduced by Mansi Rs. 1,00,000


20. Karim and Rehman are partners in a firm sharing profits in the ratio of 2 : 3 respectively. They admitted

Naval as a new partner for 1/2 share in the profits. Naval will bring Rs. 5,00,000 for his capital and the capitals

of Karim and Rehman will be adjusted in the profit sharing ratio. Fr this Current Accounts will be opened. The

Balance Sheet of the firm as at 31.3.2012 before Naval’s admission was as follows :

Balance Sheet of Karim and Rehman as at 31.3.2012

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Creditors

Bills Payable

General Reserve

Capitals: Rs.

Karim : 3,75,000

Rehman : 1,25,000

1,20,000

1,60,000

80,000

5,00,000

Cash in hand

Sundry Debtors

Furniture

Machinery

Building

40,000

2,00,000

2,00,000

3,10,000

1,10,000

8,60,000 8,60,000

The other terms of the agreement were as follows :

(i) Naval will bring Rs. 1,75,000 for his share of goodwill.

(ii) Building will be revalued at Rs. 3,90,000 and Rs. 70,000 depreciation will be charged on machinery.

(iii) A provision of 2% was to be made on debtors for bad debts.

Prepare Revaluation Account, Partners’ Capital Accounts, Partners’ Current Accounts and the Balance Sheet

of the new firm.

Ans. Profit on Revaluation Rs. 2,06,000; Balance of Capital Accounts- Karim Rs. 2,00,000; Rehman Rs.

3,00,000; Naval Rs. 5,00,000; Balance of Current Accounts- Karim Rs, 3,59,400(cr); Rehman Rs. 1,01,600(cr);

B/S Total Rs. 17,41,000

Chapter – 5 Partnership Accounts (Retirement and Death)

Questions : -

1. P, /Q and R were partners in a firm sharing profits in the ratio of 5 : 4: 3. Their capitals were Rs. 40,000, Rs.

50,000 and Rs. 1,00,000 respectively. State the ratio in which the goodwill of the firm amounting to Rs.

1,20,000 will be adjusted on the retirement of R.

Ans. 5 : 4


2. Give the Journal entry to distribute ‘Workmen Compensation Reserve’ of Rs. 70,000 at the time of

retirement of Neeti when there is a claim of Rs. 25,000 against it. The firm has three partners Raveena, Neeti

and Rajat.

Hint. Raveena, Neeti and Rajat credited by Rs. 15,000 each by debiting Workmen Compensation Resave A/c.

3. A, B and C were partners in a firm sharing profits in the ratio of 5 : 4 : 3. B retires and his share is taken up

equally by A and C. Find the new profit sharing ratio.

Ans. 7 : 5

4. R, S and M are partners sharing profits in the ratio of 2/5, 2/5 and 1/5. M decides to retire from the

business, and his share is taken by R and S in the ratio of 2 : 1. Calculate the new profit sharing ratio.

Ans. 8 : 7

5. X, Y and Z were partners sharing profits in the ratio of 3 : 2 : 1. On 31.3.08, their Balance Sheet stood as

under.

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Capitals :

X : 75,000

Y : 70,000

Z : 50,000

Creditors

General Reserve

1,95,000

72,000

24,000

Cash at bank

Investments

Patents

Stock

Debtors

Buildings

Machinery

70,000

50,000

15,000

25,000

20,000

75,000

36,000

2,91,000 2,91,000

X died on 31.5.08. It was agreed that:

(a) Goodwill was valued at 3 years purchase of the average profits of the last five years, which were, 2003 :

Rs. 40,000; 2004 : Rs. 40,000; 2005 : Rs. 30,000; 2006 : Rs. 40,000 and 2007 : Rs. 50,000.

(b) Machinery was valued at Rs. 70,000, Patents at Rs. 20,000 and Buildings at Rs. 66,000.

(c) For the purpose of calculating X’s share of profits till the date of death, it was agreed that the same be

calculated based on the average profits for the last 2 years.

(d) The executor of the deceased partner is to be paid the entire amount due by means of a cheque.


Prepare X’s Capital Account to be rendered to his executor and also a journal entry for the settlement of the

amount due to the executor.

Ans. Amount paid to Executor of X Rs. 1,65,750

Hint. Profit on revaluation Rs. 30,000

6. Ramesh, Suresh and Dinesh were partners in a firm sharing profits in the ratio of 3 : 3 : 4. Their capitals

were Rs. 5,00,000; Rs. 4,00,000 and Rs. 5,00,000 respectively. The firm closes its books on 31st March every

year. On 31.3.2006 Ramesh died. The executor of a deceased partner, according to the agreement, was

entitled for the following:

(i) Interest on capital from the first day of the accounting year till the date of his death @ 9% p.a.

(ii) His share of goodwill- The goodwill of the firm on Ramesh’s death was valued at Rs. 1,80,000.

(iii) His share of profits- The profit of the firm for the year ended 31.3.2006 was Rs. 1,20,000.

Ramesh’s executor was paid the sum due in two equal annual installments with interest @ 10% p.a.

Prepare Ramesh’s Capital Account as on 31.3.2006 to be presented to his executor and his executor’s loan

account for the years ending 31.3.2007 and 31.3.2008.

Ans. Amount due to Ramesh’s Executor Rs. 6,35,000; Amount paid on 31.3.2007 Rs. 3,81,000; on 31.3.2008:

Rs. 3,49,250

7. (a) X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 2 : 1. On April 1st 2009, Y retires from

the firm. X and Z agree that the capital of the new firm shall be fixed at Rs. 2,10,000 in the profit sharing ratio.

The capital accounts f X and Z after all adjustments on the date of retirement showed balances of Rs.

1,45,000 and Rs. 63,000 respectively. State the amount of actual cash to be brought in or to be paid off to the

partners.

(b) A, B and C are partners in a firm shoes books are closed on March 31st each year. B died on 30

th June 2009

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 5 years

have been : 2005, Rs. 14,000; 2006, Rs. 18,000; 2007, Rs. 16,000; 2008, Rs. 10,000 (loss) and 2009, Rs. 16,000.

Calculate B’s share of the profits upto the date of death and pass necessary journal entry.

Ans. (a) Cash brought in by X-Rs. 12,500, cash paid to Z-Rs. 10,500 (b) 900

8. Ramesh, Naresh and Sudesh were partners in a firm sharing profits in the ratio of 2 : 2 : 1. On 31.12.2008

their Balance Sheet was as follows:

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)


Creditors

Bills payable

General Reserve

Capital :

Ramesh : 3,00,000

Naresh : 3,00,000

Sudesh : 1,30,000

60,000

40,000

30,000

.

7,30,000

Bank

Stock

Debtors

Land and Building

Profit and Loss A/c

90,000

70,000

40,000

5,00,000

1,60,000

8,60,000 8,60,000

Naresh died on 31.3.2009. The partnership deed provided for the following on the death of a partner :

(i) Goodwill of the firm was to be valued at 2 years purchase of the average profits of last 5 years. The profits

for the years ending 31.12.2007, 31.12.2006, 31.12.2005 and 31.12.2004 were Rs. 50,000; Rs. 80,000; Rs.

1,10,000 and Rs. 2,20,000 respectively.

(ii) Naresh’s share of profit or loss till the date of his death was to be calculated on the basis of he profit or

loss for the year ending 31.12.2008.

Your are required to calculate the following :

(i) Goodwill of the firm and Naresh’s share of goodwill ate the time of his death.

(ii) Naresh’s share in the profit or loss of the firm till the date of his death.

(iii) Prepare Naresh’s Capital Account at the time of his death to be presented to his executors.

Ans. (i) Rs. 1,20,000; Rs. 48,000 (ii) Loss Rs. 16,000 (iii) Amount due to Naresh’s executor Rs. 2,80,000.

9. A, B and C are partners in a trading firm. The firm has a fixed total capital of Rs. 60,000 held equally by all

the partners. Under the partnership deed the partners were entitled to,

(a) A and B to a salary of Rs. 1,800 and Rs. 1,600 per month respectively.

(b) In the event of the death of a partner, Goodwill was to be valued at 2 years purchase of the average

profits of the last 3 years.

(c) Profit upto the date of the death based on the profits of the previous year.

(d) Partners were to be charged interest on drawings at 5% p.a. and allowed interest on capitals at 6% p.a.

A died on 1.1.2011. His drawings to the date of death were Rs. 2,000 and the interest thereon was Rs. 60. The

profits for the three years ending 31.3.2008, 2009 and 2010 were, Rs. 21,200, Rs. 3,200 (Dr) and Rs. 9,000

respectively.

Prepare A’s Capital Account to calculate the amount to be paid to his executors.


Ans. Amount paid to A’s Executors : 43,290

10. The Balance Sheet of Sindhu, Rahul and Kamlesh, who were sharing profits in the ratio of 3 : 3 : 4

respectively, as on 31st March 2012 was as follows:

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

General Reserve

Bills payable

Loan

Capital :

Sindhu : 1,20,000

Rahul : 1,00,000

Kamlesh : 80,000

10,000

20,000

24,000

.

3,00,000

Cash

Stock

Investments

Land and Building

Sindhu’s Loan

32,000

88,000

94,000

1,20,000

20,000

3,54,000 3,54,000

Sindhu died on 31st July 2012. The partnership deed provided for the following on the death of a partner:

(a) Goodwill of the firm be valued at two years’ purchase of average profits for the last three years which

were Rs. 80,000.

(b) Sindhu’s share of profit till the date of his death was to be calculated on the basis of sales. Sales for

the year ended 31st

March 2012 amounted to Rs. 8,00,000 and that from 1st April to 31

st July 2012 Rs.

3,00,000. The profit for the year ended 31st March 2012 was Rs. 2,00,000.

(c) Interest on capital was to be provided @ 6% p.a.

(d) According to Sindhu’s will, the executors should donate his share to “Matri Chaya-an orphanage for

girls’.

Prepare Sindhu’s Capital Account to be rendered to his executor. Also identify the value being highlighted in

the question.

Ans. Balance of Sindhu’s Capital a/c Rs. 1,75,900

11. A, B and C were in partnership sharing profits in proportion to their capitals. Their Balance Sheet on

31.3.2008b was as follows :

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)


Creditors

Reserve

A’s Capital

B’s Capital

C’s Capital

15,600

6,000

90,000

60,000

30,000

Building

Machinery

Stock

Debtors 20,000

Less Prov. For doubtful debts. 400

Cash

1,00,000

48,000

18,000

19,600

16,000

2,01,600 2,01,600

On the above date B retired owing to ill health and the following adjustments were agreed upon:

(a) Buildings be appreciated by 10%

(b) Provision for doubtful debts be increased to 5% of debtors.

(c) Machinery be depreciated by 15%

(d) Goodwill of the firm be valued at Rs. 36,000 and be adjusted into the Capital Accounts of A and C

who will share profits in future in the ratio of 3 : 1.

(e) A provision be made for outstanding repairs bill of Rs. 3,000.

(f) Included in the value of creditors is Rs. 1,800 for an outstanding legal claim, which is not likely to

arise.

(g) Out of the insurance premium paid Rs. 2,000 is for the next year. The amount was debited to P & L

A/c.

(h) The partners decide to fix the capital of the new firm as Rs. 1,20,000 in the profit sharing ratio.

(i) B to be paid Rs. 9,000 in cash and the balance to be transferred to his Loan Account.

Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the new firm after B’s

retirement.

Ans. Profit on revaluation Rs. 3,000; Balance of Capital Accounts- A: Rs. 90,000; C: Rs. 30,000; B/S Total Rs.

2,02,800; Amount trf. to B’s Loan A/c Rs. 66,000.

12. Following is the Balance Sheet of X, Y and Z as on 31.3.3008. They shared profits in the ratio 3 : 3 : 2.

Balance sheet of X, Y and Z as on 31.3.2008.

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Sundry Creditors

General Reserve

Partners Loan A/c’s

X

Y

2,50,000

80,000

50,000

40,000

Cash at Bank

Bills Receivables

Debtors 80,000

-) Prov. For bad debts 4,000

Stock

50,000

60,000

76,000

1,24,000


Capital A/c’s

X

Y

Z

1,00,000

60,000

50,000

Fixed Assets

Advertisement Suspense A/c

Profit & Loss A/c

3,00,000

16,000

4,000

6,30,000 6,30,000

On 1st

April, 2008, Y decided to retire from the firm on the following terms :

(a) Stock to be depreciated by Rs. 12,000

(b) Advertisement Suspense A/c to be written off.

(c) Provision for Bad and doubtful debts to be increased to Rs. 6,000.

(d) Fixed Assets be appreciated by 10%.

(e) Goodwill of the firm, valued at Rs. 80,000 & the amount due to the retiring partners be adjusted in

X’s & Z’s Capital A/c’s.

Prepare Revaluation A/c, Partners’ Capital A/c’s and the Balance Sheet to give effect to the above.

Ans. Profit on Revaluation = Rs. 16,000; Balance of Capital A/c- X; Rs. 1,10,500; Z: Rs. 57,000; Amount due

to Y Rs. 1,58,500; B/S Total Rs. 6,26,000.

13. X, Y and Z were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. On 31.3.2010 their

Balance Sheet was as follows :

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Capital Accounts:

X : 75,000

Y : 62,000

Z : 37,500

Sundry Creditors

1,75,000

42,500

Building

Patents

Machinery

Stock

Debtors

Cash at Bank

50,000

15,000

75,000

37,500

20,000

20,000

2,17,500 2,17,500

Z died on 31.7.2010. It was agreed that :

(a) Goodwill be valued at 21/2 years’ purchase of the average profits of the last four years, which were as

follows :

Year Profits (Rs.)

2006-2007 32,500


2006-2008 30,000

2006-2009 40,000

2006-2010 37,500

(b) Machinery be valued at Rs. 70,000: Patents at Rs. 20,000 and Building at Rs. 62,500.

(c) For the purpose of calculating Z’s share of profits in the year of his death the profits in 2010-2011 should

be taken to have been accrued on the same scale as in 2009-2010.

(d) A sum of Rs. 17,500 was paid immediately to the executors of Z and the balance was paid in four half

yearly instilments together with interest at 12% p.a. starting from 31.1.2011.

Give necessary journal entries to record the above transactions and Z’s executors’ account till the payment of

installments due on 31.1.2011.

Ans. Profit on Revaluation Rs. 12,500; Balance of Z’s Executor A/c on 31.1.2011; Rs. 31,875

Hint. Z’s share of Goodwill : Rs. 17,500, Z’s share of profit (upto 31.7.2010) Rs. 2,500.

13. Khanna, Seth and Mehta were partners in a firm sharing profits in the ratio of 3 : 2 : 5. On 31.12.2010 the

Balance Sheet of Khanna, Seth and Mehta was as follows :

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Capital:

Khanna : 3,00,000

Seth : 2,00,000

Mehta : 5,00,000

General Reserve

Loan from Seth

Creditors

10,00,000

1,00,000

50,000

75,000

Goodwill

Land And Building

Machinery

Stock

Debtors

Cash


3,00,000

5,00,000

1,70,000

30,000

1,20,000

45,000

60,000

12,25,000 12,25,000

On 14th

March 2011, Seth died.

The partnership deed provided that on the death of a partner the executor of the deceased partner is

entitled to :

(i) Balance in Capital Account :

(ii) Share in profits upto the date of death on the basis of last year’s profit;

(iii) His share in profit/loss on revaluation of assets and re-assessment of liabilities which were as follows :


(a) Land and Building was to be appreciated by Rs. 1,20,000;

(b) Machinery was to be depreciated to Rs. 1,35,000 and Stock to Rs. 25,000;

(c) A provision of 21/2% for bad and doubtful debts was to created on debtors;

(iv) The net amount payable to Seth’s executors was transferred to his loan account which was to be paid

later.

Prepare Revaluation Account, Partners Capital Accounts, Seth’s Executors A/c and the Balance Sheet of

Khanna and Mehta who decided to continue the business keeping their capital balances in their new profit

sharing ratio. Any surplus or deficit to be transferred to current accounts of the partners.

Ans. Profit on Revaluation Rs. 77,000; Balance of Partner’s Capital Account- Khanna Rs. 3,35,100 and

Mehta Rs. 5,58,500; B/S Total Rs. 12,42,000; Amount due to Seth’s Executor Rs. 2,71,000.

Hint. Share of Loss to Seth upto 14.3.2011 is Rs. 2,400 2 73

. . .60,00010 365

i e Rs

× ×

14. Following is the Balance Sheet of Kusum, Sneh and Usha as on 31st March 2009, who have agreed to share

profits and losses in proportion of their capitals :

Balance Sheet of Kusum, Sneh and Usha as on 31st

March 2009

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Capital:

Kusum : 4,00,000

Sneh : 6,00,000

Usha : 4,00,000

Employee provident Fund


Fund

Sundry Creditors

14,00,000

70,000

30,000

1,00,000

Land And Building

Machinery

Closing Stock

Sundry Debtors

2,20,000

Less Provision for

Doubtful debts -

20,000

Cash at Bank

4,00,000

6,00,000

2,00,000

2,00,000

2,00,000

16,00,000 16,00,000

On March 31st 2009, Kusum desired to retire from the firm and the remaining partners decided to carry on

the business. It was agreed to revalue the assets and re-assess the liabilities on that date, on the following

basis :

(i) Land and Building be appreciated by 30%

(ii) Machinery be depreciated by 30%

(iii) There were Bad debts of Rs. 35,000


(iv) The claim on account of Workmen Compensation Fund was estimated at Rs. 15,000.

(v) Goodwill of the firm was valued at Rs. 2,80,000 and Kusum’s share of goodwill was adjusted against the

Capital accounts of the continuing partners sneh and Usha who have decided to share future profits in the

ratio of 3 : 4 respectively.

(vi) Amount due to Kusum be settled by paying Rs. 1,00,000 in cash and balance by transferring to her Loan

A/c which will be paid later on.

Prepare Revaluation Account, Capital Accounts of Partners and Balance Sheet of the new firm after Kusum’s

retirement.

Ans. Loss on Revaluation Rs. 75,000; Balance of Capital Accounts- Sneh Rs. 6,00,000; Usha Rs. 8,00,000;

Balance of Current Accounts- Sneh Rs. 25,714(Dr); Usha Rs. 4,97,143; B/S Total Rs. 19,47,857.

15. The Balance Sheet of Lalit, Puneet and Rahul who are partners in a firm sharing profits according to their

capital as on 31st March, 2012 was as follows:

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Lalit capital

Puneet’s capital

Rahul’s capital

General Reserve

Creditors

3,20,000

1,60,000

1,60,000

80,000

84,000

Building

Machinery

Stock

Debtors 80,000

Less : Provision for

Bad Debts -4,000

Cash in Bank

4,00,000

2,00,000

72 ,000

76,000

56,000

8,04,000 8,04,000

On that date Puneet decided to retire from the firm and was paid for his share in the firm subject to the

following :

(i) Buildings was to be appreciated by 20%

(ii) Provision for Bad Debts to be increased to 15% on Debtors.

(iii) Machinery to be depreciated by 20%

(iv) Goodwill of the firm is valued at Rs. 2,88,000 and the retiring partner’s share is adjusted through the

capital accounts of remaining partners.

(v) The capital of the new firm be fixed at Rs. 4,80,000.


Prepare Revaluation Account, Capital Accounts of the partners, Bank Account and the Balance Sheet after

Puneet’s retirement.

Ans. Profit on Revaluation Rs. 32,000; Balance of Capital Accounts- Lalit Rs. 3,20,000; Rahul Rs. 1,60,000;

B/S Total Rs. 7,80,000

Hint. (i) Final amount paid to Puneet Rs. 2,60,000 by arranging overdraft of Rs. 2,04,000

(ii) Balance of Current Account- Lalit Rs. 8,000(cr); Rahul Rs. 4,000(cr).

Chapter – 6 Partnership Accounts (Dissolution)

Questions : -

1. B, C and D are partners in a firm sharing profits in the ratio of 2 : 1 : 2 respectively. On 1.3.2013 the firm

was dissolved. After transferring assets (other than cash) and third party liabilities to the ‘Realization

Account’ you are provided with the following information :

(i) There was a debit balance of Rs. 24,000 in the firm’s Profit and Loss Account.

(ii) A piece of Machinery not recorded in the books was sold for Rs. 4,000.

(iii) Creditors of Rs. 50,000 were paid Rs. 45,000 in full settlement of accounts.

Pass necessary Journal Entries for the above transactions in the books of the firm at the time of dissolution.

2. What journal entries would be passed for the following transaction on the dissolution of a partnership

firm, after transferring various assets (other than cash) and third party liabilities to the Realization Account ?

(i) Bank loan Rs. 50,000 were paid.

(ii) An unrecorded asset realized Rs. 17,000.

(iii) Stock worth Rs. 20,000 was taken over by a partner Rohan for Rs. 14,000.

(iv) Loss on realization was Rs. 14,000 which was distributed between the partners Rohan and Mohan in the

ratio of 3 : 2.

3. Pass the necessary journal entries for the following transactions on the dissolution of the firm of James and

Haider who were sharing profits and losses in the ratio of 2 : 1. The various assets (other than cash) and

outside liabilities have been transferred to Realization Account :

(i) James agreed to pay of his brother’s loan Rs. 10,000

(ii) Debtors realized Rs. 12,000

(iii) Haider took over all investments at Rs. 12,000


(iv) Sundry creditors Rs. 20,000 were paid at 5% discount.

(v) Realization expenses amounted to Rs. 2,000/

(iv) Loss on realization was Rs. 10,2000

Pass the necessary journal entries for the following transactions on the dissolution of the firm of Sudha and

Shiva after the various assets (other than cash) and outside liabilities have been transferred to Realization

Account :

(i) Sudha agreed to pay off her husband’s loan R. 19,000

(ii) A debtor whose debt of Rs. 9,000 was written off in the books paid Rs. 7,500 in full settlement.

(iii) Shiva took over all investments at Rs. 13,300.

(iv) Sundry creditors Rs. 10,000 were paid at 9% discount.

(v) Realization expenses Rs. 3,400 were paid by Sudha for which she was allowed Rs. 3,000.

(iv) Loss on realization Rs. 9,400 was divided between Sudha and Shiva in 3 : 2 ratio.

4. Sanjay and Sameer were partners in a firm sharing profits in the ratio of 2 : 3. On 31.3.2011 their Balance

Sheet was as follows:

Balance Sheet of Sanjay and Sameer as on 31.3.2011

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Capital:

Sanjay : 2,00,000

Sameer : 3,00,000

Creditors


Fund

5,00,000

1,05,000

1,00,000

Land And Building

Stock

Debtors

Bank

3,00,000

1,00,000

1,50,000

1,55,000

7,05,000 7,05,000

The firm was dissolved on 1.4.2011 and the Assets and liabilities were settled as follows :

(i) Sanjay agreed to take over Land and Building at Rs. 3,50,000 by paying cash;

(ii) Stock was sold for Rs. 90,000

(iii) Creditors accepted Debtors in full settlement of their claim.


Pass necessary Journal entries for dissolution of the firm.

Ans. Loss on Realization Rs. 5,000; Final payment to- Sanjay Rs. 2,38,000; Sameer Rs. 3,57,000.

5. Sudha and Joshi were partners in a firm sharing profits in the ratio of 3 : 7. On 31.3.2011 their Balance

Sheet was as follows :

Balance Sheet of Sudha and Joshi as on 31.3.2011

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Capital:

Sudha : 3,00,000

Joshi : 7,00,000

Creditors


10,00,000

2,77,000

1,23,000

Land And Building

Machinery

Stock

Debtors

Bank

6,00,000

5,00,000

40,000

2,00,000

60,000

14,00,000 14,00,000

The firm was dissolved on 1.4.2011 and the Assets and Liabilities were settled as follows :

(i) Creditors accepted stock and debtors in their full and final settlement of the claim;

(ii) Land and Building was sold for Rs. 7,00,000 and Machinery as taken over by Joshi by paying cash less than

30% of its book-value.


Ans. Loss on Realization Rs. 13,000; Final payment to Sudha Rs. 3,33,000; Joshi Rs. 7,77,000

6. Achal and Vichal were partners in a firm sharing profits in the ratio of 3 : 5. On 31.3.2011 their Balance

Sheet was as follows :

Balance Sheet of Achal and Vichal as on 31.3.2011

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Capital:

Achal : 3,00,000

Vichal : 5,00,000

8,00,000

Land And Building

Machinery

Debtors

4,00,000

3,00,000

2,22,000


Creditors

Employees Provident Fund

1,79,000

21,000

Cash at Bank 78,000

10,00,000 10,00,000

The firm was dissolved on 1.4.2011 and the Assets and Liabilities were settled as follows :

(i) Land and Building realized Rs. 4,30,000;

(ii) Debtors realized Rs. 2,25,000 (with interest) and Rs. 1,000 were recovered for bad debts written off last

year;

(iii) There was an unrecorded investment which was sold for Rs. 25,000;

(iv) Vichal took over Machinery at Rs. 2,80,000 for cash;

(v) 50% of the creditors were paid Rs. 4,000 less in full settlement and the remaining creditors were paid full

amount.


Ans. Profit on Revaluation Rs. 43,000; Final Payment to- Achal Rs. 3,16,125; Vichal Rs. 5,26,875.

7. Parul, Payal and Priyanka are partners. They decided to dissolve their firm. Pass necessary Journal entries

for the following after various Assets (other than Cash and Bank) and the third party liabilities have been

transferred to Realization Account :

(a) There were total debtors of Rs. 76,000. A provision of bad and doubtful debts also stood in the books at

Rs. 6,000. Rs. 12,000 debtors proved bad and rest paid the amount.

(b) Parul agreed to pay off her husband’s loan of Rs. 7,000 at a discount of 5%.

(c) A machine which was not recorded in the books was taken over by Payal at Rs. 3,000. whereas its

expected value was Rs. 5,000.

(d) A contingent liability (not provided for) of Rs. 4,000 was also discharged.

(e) The firm had a debit balance of Rs. 27,000 in the Profit and Loss Account on the date of dissolution.

(f) Priyanka paid the realization expenses of Rs. 15,000 out of her pocket and she was to get a remuneration

of Rs. 18,000 for completing the dissolution process.

8. A, B and C were partners sharing profits in the ratio of 3 : 1 :1. Their Balance Sheet as on March 31st 2009,

the date on which they dissolve their firm, was as follows :

Liabilities Amount Assets Amount


(Rs.) (Rs.)

Capital:

A : 27,500

B : 10,000

C : 7,000

Loan

Creditors

44,500

1,500

6,000

Sundry Assets

Stock

Debtors 24,200

Less Provision for

Doubtful debts (-)1,200

Bills Receivables

Cash

17,000

7, 800

23,000

1,000

3,200

52,000 52,000

It was agreed that

(a) A to take over Bills Receivables at Rs. 800, debtors amounting to Rs. 20,000 at Rs. 17,200 and the creditors

of Rs. 6,000 were to be paid by him at this figure.

(b) B is take over all stock for Rs. 7,000 and some sundry assets at Rs. 7,200 (being 10% less than the book

value).

(c) C to take over remaining sundry assets at 90% of the book value and assume the responsibility of

discharge of loan together with accrued interest of Rs. 300.

(d) The expenses of realization were Rs. 270.

The remaining debtors were sold to a debt collecting agency at 50% of the book value.

Prepare Realization A/c, Partners Capital A/cs and Cash A/c.

Ans. Loss on realization Rs. 6,970; Final amount received from B- Rs. 5,594; C- Rs. 694; Final amount paid to

A- Rs. 11,318.

9. Ram, Rahim and Rehman were partners in a firm sharing profits in the ratio of 4 : 1 : 5. On 28.2.2010 the

firm was dissolved. On the date of dissolution the Balance Sheet of the firm was as follows:

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Bank Loan

Creditors

General Reserve

4,34,000

3,80,000

1,40,000

Bank

Debtors

2,74,000

48,000


Capital :

Ram 14,00,000

Rahim 6,00,000

Rehman 10,00,000

30,00,000

Less : Provision for

Bad debts

8,000

Stock

Furniture

Machinery

Building

2,66,000

1,08,000

1,32,000

4,00,000

30,00,000

39,54,000 39,54,000

Assets realized as follows : Debtors Rs. 2,70,000, Stock at 15% less, Furniture was taken over by Ram for Rs.

79,000. Building was sold for Rs. 29,00,000. Rehman took over 50% of the machinery at 5% less than the

book-value.

Bank loan was paid with interest Rs. 9,500. Creditors allowed a discount of 5%. Expenses of dissolution Rs,

7,000 were paid by Rehman. Remaining machinery was sold at 50% profit.

Prepare Realization Account, Partners’ Capital Accounts and Bank Account.

Ans. Loss on Realization Rs. 72,700; Final payment to Partners- Ram Rs. 13,47,920; Rahim Rs. 6,06,730;

Rehamn Rs. 8,50,000.

10. X, Y and Z were partners sharing profits in the ratio of 2 : 2 : 1. The Balance Sheet on 31.3.2010 when they

dissolved the firm was as follows:

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

X’s Capital

Y’s Capital

Z’s Capital

Loan

Creditors

1,27,500

1,10,000

17,000

11,500

16,000

Other Sundry Assets

Furniture

Debtors 1,24,000

-) Prov. For doubtful debts 1,200

Stock

Cash

1,17,000

11,000

1,23,000

17,800

13,200

2,82,000 2,82,000

It was agree that

(a) Z to take over furniture at Rs. 8,000 and debtors amounting to Rs. 1,20,000 at Rs. 1,17,200 and the

creditors of Rs. 16,000 were to be paid by him at this figure.


(b)X is to take over all stock for Rs. 17,000 and some sundry assets at Rs. 72,000 (being 10% less than the

book value).

(c) Y to take over remaining sundry assets at 80% o the book value and assume the responsibility of discharge

of loan together with accrued interest of Rs. 2,300.

(d) The expenses of realization were Rs. 2,700. The remaining debtors were sold to a debt collecting agency

at 50% of the value.

Prepare necessary accounts to close the books of the firm :

Ans. Loss on Realization Rs. 27,900; Final payment to X- Rs. 27,340; Y- Rs. 83,040; Final amount received

from Z- Rs. 97,780.

11. Prashant and Rajesh were partners in a firm sharing profits in the ratio of 3 : 2. In spite of repeated

reminders by the authorities, they kept dumping hazardous material into a nearby river. The court ordered

for the dissolution of their partnership firm on 31st

March 2012. Prashant was deputed to realize the assets

and to pay the liabilities. He was paid Rs. 1,000 as commission for his services. The financial position of the

firm on 31st March 2012 was as follows:

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Creditors

Mrs. Prashant’s Loan

Rajesh’s Loan

Investment Fluctuation Fund

Capitals :

Prashant : 42,000

Rajesh : 42,000

80,000

40,000

24,000

8,000

84,000

Building

Investments

Debtors 34,000

Less: Provision for

Doubtful debts -4,000

Bills receivable

Cash

Profit and Loss A/c

Goodwill

1,20,000

30,600

30,000

37,400

6,000

8,000

4,000

2,36,000 2,36,000

Following was agreed upon :

(i) Prashant agreed to pay off his wife’s loan.

(ii) Debtors realized Rs. 24,000.

(iii) Rajesh took away all investments at Rs. 27,000.


(iv) Building realized Rs. 1,52,000.

(v) Creditors wee payable after 2 months. They were paid immediately at 10% discount.

(vi) Bills Receivable were settled at a loss of Rs. 1,400.

(vii) Realization expenses amounted to Rs. 2,500.

Prepare realization account, Partners’ Capital Accounts and Cash Account to close the books of the firm.

Identify the value being conveyed in the question.

Ans. Profit on Realization Rs. 29,500; Final Payment to- Prashant Rs. 95,900; Rajesh Rs. 37,600.

Chapter – 7 Company Accounts - (Share Capital)

Questions : -

1. MCS ltd. Issued 40,000 shares of Rs. 10 each payable as Rs. 2 per share on application, Rs. 4 per share on

allotment and the balance in two equal installments.

Applications were received for 80,000 shares and the allotment was made as follows:

(a) Applications of 50,000 shares were allotted 30,000 shares

(b) Applications of 30,000 shares were allotted 10,000 shares

Neeraj to whom 600 shares were allotted from category (a), failed to pay the allotment money. Pass the

Journal entries upto allotment only.

Hint. Cash received on allotment Rs. 78,400; Call in arrears Rs. 1,600.

2. DN Ltd. Issued 50,000 shares of Rs. 10 each at a discount of 10% payable as Rs. 2 per share on application,

Rs. 3 on allotment and Rs. 2 each on first and final call. Applications were received for 70,000 shares. It was

decided that

(a) refuse allotment to the applicants of 10,000 shares,

(b) allot 10,000 shares to Mohan who had applied for a similar number, and

(c) allot the remaining shares on a pro-rata basis.

Mohan failed to pay the allotment money and Sohan who belonged to category (c) and was allotted 3,000

shares, paid both the calls with allotment. Calculate the amount received on allotment.

Ans. Rs. 1,12,000

3. Shanker Ltd. Purchased machinery for Rs. 1,98,000 from Parvati Ltd. The payment to Parvati Ltd. Was to be

made by issue of Equity Shares of Rs. 100 each.

Pass necessary journal entries in the books of Shanker Ltd. For the above transactions when


(i) shares were issued at 10% premium and

(ii) Shares were issued at 10% discount.

Hint. No. of equity shares issued- (i) 1,800 (ii) 2,200.

4. Goodluck Ltd. Purchased machinery costing Rs. 10,00,000 from Fair Deals Ltd. The company paid the price

bye issue of Equity shares of Rs. 10 each at a premium of 25%.

Pass necessary journal entries for the above transactions in the books of Goodluck Ltd.

Ans. No. Of Shares issued = 80,000.

5.TAG Ltd. Forfeited 400 shares of Rs. 10 each issued at a premium of Rs. 1 per share for the non-payment of

allotment money of Rs. 4 per share (including premium). The first and final call of Rs. 3 per share has not

been made as yet. 50% of the forfeited shares were re-issued at Rs. 8 per share fully paid up.

Pass necessary entries for the forfeiture and reissue of shares.

Ans. Amount transfer to Capital Reserve Rs. 400, Balance of Share Forfeiture Rs. 800.

6. Sundram Ltd. Purchased furniture for Rs. 3,00,000 from Ravindram Ltd. Rs. 1,00,000 were paid by drawing

a Promissory Note in favour of Ravindram Ltd. The Balance was paid by issue of Equity Shares of Rs. 10 each

at a Premium of 25%.

Pass necessary Journal entries in the books at Sundram Ltd.

Hint. Face value of Equity Shares Issued Rs. 1,60,000.

7. Ramesh & Co. forfeited 1,000 shares of Rs. 10 each issued at a discount of Rs. 1 per share for the non-

payment of the first call of Rs. 3 per share. The final call of Rs. 2 per share has not yet been made. 400 of

these shares are reissued at Rs. 6 per share Rs. 8 paid up, and 400 shares reissued at Rs. 7 per share fully

paid. Pass journal entries in the books of Ramesh & Co. to record the forfeiture and reissue of shares.

Ans. Amount trf. to capital reserve Rs. 2,000.

Hint. Balance of share forfeiture account Rs. 800 (for verification purpose)

8. Nikhil Ltd. Purchased a running business from Sonia Ltd. For a sum of Rs. 22,00,000 by issuing 20,000 fully

paid equity shares of Rs. 100 each at a premium of 10%. The assets and liabilities consisted of the following.

Machinery Rs. 7,00,000, Debtors Rs. 2,50,000, Stock Rs. 5,00,000, Building Rs. 11,50,000 and Bills Payable Rs.

2,50,000.

Pas necessary Journal entries in the books of Nikhil Ltd. For the above transactions.

Hint. Capital reserve Rs. 1,50,000.


9. M Ltd. Purchased from N Ltd. Land costing Rs. 12,00,000. Rs. 40,00,000 were paid to N Ltd. Through a bank

draft and fro the balance amount equity shares of Rs. 100 each were issued at a premium of 25%.

Pass necessary Journal Entries for the above transactions in the books of M Ltd. Show your working notes

clearly.

Hint. Face value of equity shares issued Rs. 6,40,000.

10. On 1st

April, 2011 Aradhana Ltd. Was formed with an authorized capital of Rs. 90,00,000 divided into

90,000 shares of Rs. 100 each. The company invited applications for issuing 75,000 eqity shares.

The amount was payable as follows:

On application – Rs. 20 per share

On allotment – Rs. 50 per share

On first and final call – balance amount

The issue was fully subscribed and the company allotted shares to all the applicants.

All money was received except the first and final call on 5,000 shares. Show the ‘Share Capital’ in the Balance

Sheet of the company as per Schedule VI Part I of the Companies Act, 1956 as at 31st March, 2012 and also

show Notes to Accounts.

11. Sona Ltd. Purchased machinery costing Rs. 17,00,000 from Mona Ltd. Sona Ltd. Paid 20% of the amount

by cheque and for the balance amount issued equity shares of Rs. 100 each at a premium of 25%.

Pass necessary Journal Entries for the above transactions in the books of Sona Ltd. Show your working notes

clearly.

Ans. Face value of Equity Shares issued Rs. 10,88,000.

12. On 1st

April, Janak Ltd. Was formed with an authorized capital of Rs. 20,00,000 divided into 2,00,000

equity shares of Rs. 10 each. The company issued 1,00,000 shares at par. The issue was fully subscribed and

the company allotted shares to all the applicants. All money was received except the final call on 2,500

shares.

Show the ‘Share Capital’ in the Balance Sheet of the company as per Schedule VI part I of the Companies Act,

1956 as at 31st March, 2012 and also show ‘Notes to Accounts’.

13. Tarun Ltd. Purchased land costing Rs. 70,00,000 form Varun Ltd. Tarun Ltd. Paid 10% of the amount by

cheque and for the balance amount equity shares of Rs. 100 each were issued to Varun Ltd. At a premium of

25%.

Pass necessary Journal Entries for the above transactions in the books of Tarun Ltd. Show your working notes

clearly.

Ans. Face value of equity shares issued Rs. 50,40,000.


14. On 1st April, 2011, Prarthana Ltd. Was formed with an authorized capital of Rs. 90,00,000 divided into

90,000 equity shares of Rs. 100 each. The company invited applications for issuing 80,000 equity shares.

The amount was payable as follows :

On application – Rs. 30 per share


On 1st

and final call – balance amount

Applications for 1,00,000 shares were received. Applications for 20,000 shares were rejected and the

application money was refunded. All calls were made. A shareholder holding 600 shares, did not pay the first

and final call.

Show the ‘Share Capital’ in the Balance Sheet of the company as per Schedule VI part I of the Companies Act,

1956 as at 31st March, 2012 and also show ‘Notes to Accounts’.

15. A Ltd. Issued 20,000 equity shares of Rs. 10 each at a discount of Re. 1 payable as Rs. 3 on application, Rs.

3 on allotment (after discount) and Rs. 3 on call. The issue was oversubscribed to the extent of 15,000 shares,

and the allotment was done as follows: (a) applicants of 5,000 shares were given full allotment, (b) other

applicants of shares were allotted shares on a pro-rata basis. The excess application money received was to

be adjusted against allotment only. All moneys due were received with the exception money exception of the

call money on 600 shares. Pass necessary journal entries to record the above transactions.

Ans. Call in arrears = Rs. 1,8000.

Hint. Cash Balance = 1,78,200 (for verification purpose).

16. Janata Ltd. Invited application for issuing 1,00,00 equity shares of Rs. 100 each at a discount of 5%. The

amount was payable as follows:

On application Rs. 30

On Allotment Rs. 40

Balance on first and final call

Applications for 1,30,000 shares were received. Applications for 10,000 shares were rejected and pro-rata

allotment was made to the remaining applicants. Overpayments received on applications were adjusted

towards sums due on allotment. Vinod, to whom 500 shares wee allotted, failed to pay allotment and first

and final call. His shares were forfeited. The forfeited shares were re-issued for Rs. 55,000 fully paid up.

Pass necessary journal entries in the books of Janata Ltd., Showing the workings clearly.

Ans. Amount trf. to capital reserve Rs. 18,000.

Hint. Cash balance Rs. 95,25,500 (for verification purpose).


17. Pass necessary journal entries in the books of Arjun Ltd. For the following transactions :

(i) 600 8% preference shares of Rs. 100 each issued at a discount of Rs. 5 per share were forfeited for the

non-payment of final call of RS. 30 per share. The forfeited shares were reissued for Rs. 66,000 fully paid up.

(ii) 1,000 equity shares of RS. 100 each issued at a premium of RS. 20 per share were forfeited for the non-

payment of allotment money (including premium) of Rs. 30 per share. Application money of Rs. 30 per share

had been received on these shares. The first and final call of Rs. 60 per share was not made. The forfeited

shares were re-issued for Rs. 75,000 fully paid up.

Ans. Amount trf. to capital reserve- (i) Rs. 39,000; (ii) Rs. 5,000

18. M Ltd. Was registered with a capital of Rs. 4,00,000 divided into equity shares of Rs. 100 each. The

company offered to the public 3,000 shares at a premium of Rs. 10 per share payable as follows :

Rs. 20 on application, Rs. 40 on allotment including premium and Rs. 50 on first and final call per share.

Applications wee received for 4,000 shares of which 500 were rejected and the balance allotted on a pro-rata

basis. The excess application money was adjusted towards the allotment and call money on 150 shares held

by Rakesh. Sandeep who held 200 shares paid the call money along with the allotment money. Pass journal

entries to record the transactions in the books of M Ltd.

Ans. Calls in arrears Rs. 13,000


19. X Ltd. Issued 50,000 shares of Rs. 10 each at a premium of Rs. 2 per share payable as follows :

Rs. 3 on Application

Rs. 6 on Allotment (including premium) and

Rs. 3 on call.

Applications were received for 75,000 shares and pro-rata allotment was made as follows:

To the applicants of 40,000 shares, 30,000 shares were issued and for the rest 20,000 shares were issued. All

moneys due were received except the allotment and call money from Ram who had applied for 1,200 shares

(out of the group of 40,000 shares). All his shares were forfeited. The forfeited shares were re-issued for Rs. 8

per share fully paid-up.

Pass necessary journal entries for the above transactions.

Ans. Amount transfer journal entries for the above transactions.

Hint. Cash balance Rs. 6,00,000 (for verification purpose); Amount received on allotment Rs. 2,20,500.

20. Janata Ltd. Invited application for issuing 2,00,000 equity shares of Rs. 10 each at a discount of 10%. The



On Application – Rs. 2 per share

On Allotment – Rs. 3 per share

On First and Final call – balance amount

The issue was undersubscribed to the extent of 20,000 shares. Shares were allotted to all the applicants. All

calls were made and were duly received. ‘A’ to whom 1,500 shares were allotted, failed to pay allotment and

call money and ‘B’ to whom 1,200 shares were allotted paid the full amount due at the time of allotment. The

shares on which allotment and call money was not received were forfeited. The forfeited shares were re-

issued at Rs. 8 per share fully paid up.

Pass necessary journal entries in the books of Janata Ltd. For the above transactions.

Ans. Amount transfer to Capital Reserve Rs. 1,500


21. Shiva Ltd. Invited applications for issuing 2,00,000 Equity Shares of Rs. 100 each at a premium of Rs. 60

per share. The amount was payable as follows:

On application Rs. 30 per share (including premium Rs. 10).

On allotment Rs. 70 per share (including premium of Rs. 50).

On first and final call the balance amount.

Applications for 1,90,000 shares were received. Shares were allotted to all the applicants and the company

received all money due on allotment except Jain who had been allotted 1,000 shares, and his shares were

immediately forfeited. Afterwards first and final call was made. Gupta did not pay the first and final call on his

2,000 allotted shares. His shares were also forfeited. 50% of the forfeited shares of both Jain and Gupta were

re-issued for Rs. 90 per share fully paid up.

Pass necessary journal entries in the books of Shiva Ltd. For the above transactions.

Ans. Amount transfer to Capital Reserve Rs. 35,000.

Hint. Cash balance Rs. 3,02,85,000 and Balance of Share Forfeiture A/c Rs. 50,000 (fir verification purpose).

22. Dena Ltd. Invited applications for issuing 3,00,000 Equity shares of Rs. 10 each at a discount of 3%. The


On Application – Rs. 2 per share

On Allotment – Rs. 4 per share

On First and Final Call – The balance amount.

The issue was fully subscribed. Shares were allotted to all applicants. ‘A’ to whom 4,000 shares were allotted

paid the entire amount of his share money at the time of allotment. ‘B’ to whom 1,800 shares were allotted


failed to pay the allotment money and his shares were immediately forfeited. Afterwards the first and final

call was made. ‘C’ did not pay the first and final call on his 750 shares of ‘C’ were reissued for Rs. 8 per share

fully paid up.

Pass necessary journal entries in the books of Dena Ltd. For the above transactions.


Hint. Cash balance Rs. 29,11,765 and Balance of Share Forfeiture A/c Rs. 1,500 (for verification purpose).

23. (a) Dinesh Ltd. Invited applications for issuing 10,000 Equity shares of Rs. 10 each. The amount was

payable as follows;

On Application Rs. 1

On Allotment Rs. 2

On First Call Rs. 3

On Second and Final Call – Balance

The issue was fully subscribed. Ram to whom 100 shares were allotted, failed to pay the allotment money

and his shares were forfeited immediately after allotment. Shyam to whom 150 shares were allotted, failed

to pay the first call. His shares were also forfeited after the first call. Afterwards the second and final call was

made. Mohan to whom 50 shares were allotted failed to pay the second and final call. His shares were also

forfeited. All the forfeited shares were re-issued at Rs. 9 per share fully paid up. Pass necessary journal

entries in the books of Dinesh Ltd.

Ans. Amount transfer to Capital Reserve Rs. 550

Hint. Cash Balance Rs. 1,00,550 (for verification purpose).

24. Moti Ltd. Invited application for issuing 10,00,000 Equity shares of Rs. 10 each at a premium of Rs. 2 per

share. The amount was payable as follows:

On Application Rs. 5 (including premium)

On Allotment Rs. 4

On First and Final Call Rs. 3

Applications for 15,00,000 shares were received. Applications for 3,00,000 shares were rejected and pro-rata

allotment was made to the remaining applications. Excess application money was utilized towards sums due

on allotment. Giri who had applied for 24,000 shares failed to pay the allotment and call money. His shares

were forfeited. Out of the forfeited shares 10,000 shares were reissued for Rs. 8 per share fully paid up. Pass

necessary journal entries in the books of Moti Ltd.

Ans. Balance of Share Forfeited A/c: Rs. 40,000; Amount transfer to Capital Reserve Rs. 20,000.

Hint. Cash Balance Rs. 1,19,60,000 (for verification purpose).


25. A company invited applications for the issue of 30,000 Equity Shares of Rs. 10 each at a discount of Re. 1

per share. Applications were received for 40,000 shares. 10% of the total applications were rejected and the

balance were allotted shares on pro-rata basis. The amounts were payable as follows:

Rs. 2 on Application, Rs. 3 on allotment and balance on the first and final call. M who had applied for 3,000

shares failed to pay the allotment money and his shares were immediately forfeited. S who was allotted

2,000 shares, paid only Rs. 4,000 on allotment. On the failure to pay the first call, S’s shares were also

forfeited. Pass necessary Journal entries to record the above transactions.

Ans. Share forfeiture a/c Rs. 14,800 (i.e. Rs. 6,000 + Rs. 8,800).


26. D.P. Shah Company Ltd. Made an issue of 1,00,000 Equity Shares of Rs. 10 each at a premium of 30%

payable as follows :

On Application Rs. 3,50 per share

On allotment Rs. 6.50 per share

On 1st

and final call – Balance.

Application were received for 2,00,000 Equity shares and the directors made pro-rata allotment.

Harsh who had applied for 1,600 shares, did not pay the allotment and final call money. With the result his

shares were forfeited. Later on 60% of the forfeited shares were re-issued at Rs. 8 per share fully paid up.

Pass necessary Journal entries for the above mentioned transactions in the books of the company.

Ans. Amount trf. to Capital Reserve Rs. 2,400.

Hint. Balance of share forfeiture a/c Rs. 2,240 and Balance of Cash a/c Rs, 12,99,040 (for verification

purpose).

27. R.K. Ltd. Invited applications for issuing 70,000 Equity Shares of Rs. 10 each at a premium of Rs. 35 per

share. The amount was payable as follows:

On Application Rs. 15 (including Rs. 12 premium)

On Allotment Rs. 10 (including Rs. 8 Premium)

On First and Final Call – Balance

Applications for 65,000 shares were received and allotment was made to all the applications. A Shareholder,

Ram, who was allotted 2000 shares, failed to pay the allotment money. His shares were forfeited

immediately after allotment. Afterwards, the first and final call was made. Sohan, who had 3000 shares,

failed to pay the first and final call. His shares were also forfeited. Out of the forfeited shares, 4000 shares

were re-issued at Rs. 50 per share fully paid up. The re-issued shares included all the shares of Ram.

Pass necessary Journal entries for the above transactions in the books of R.K. Ltd.



Hint. Balance of – Cash Rs. 30,05,000; Security Premium Rs. 23,44,000; Share Forfeiture A/c Rs. 5,000 (for

verification purpose).

28. Ashish Ltd. Invited applications for issuing 75,000 Equity Shares of Rs. 10 each at a discount of 10%. The


On Application Rs. 2 per share

On Allotment Rs. 2 per share

On First and Final call – Balance

Applications for 1,50,000 shares were received. Applications for 25,000 shares were rejected and application

money of these applicants was refunded. Shares were allotted on pro-rata basis to the remaining applicants.

Excess money received with these applications was adjusted towards sums due on allotment. Suman, who

had applied for 1250 shares, failed to pay allotment and first and final call money. Dev did not pay the first

and final call on his 1000 shares. All these shares were forfeited and later on 1000 of these shares were

reissued at Rs. 17 per share full paid up. The re-issued shares of Suman.

Pass the necessary Journal entries in the books of Ashish Ltd. For the above transactions.


Hint. Cash balance Rs. 6,82,750; Balance of Share Forfeiture A/c Rs. 3,000 (for verification purpose).

29. The Shakti Ltd. Invited applications for issuing 50,000 shares of Rs. 100 each at a premium of Rs. 10 per

share payable follows:

Rs. 50 per share on Application

Rs. 35 per share on Allotment (including premium)

Balance on First and Final Call.

Application for 82,500 shares were received. Applications for 20,000 shares were rejected and allotment was

made on pro-rata basis to the remaining applicants.

Sahil who had applied for 1,250 shares failed to pay the amount due on allotment and call. The company

forfeited his shares. Later on, out of the forfeited shares, Company re-issued 500 shares @ Rs. 105 per share

fully paid up.

Pass necessary Journal entries in the books of Shakti Ltd.


Hint. Cash Balance = Rs. 55,0,5000 (for verification purpose).

30. Geetanjali Ltd. Issued 60,000 shares of Rs. 10 each at a discount of Rs. 1 per share payable as follows:


Rs. 3 per share on application

Rs. 2 per share on Allotment

Balance on first and Final call.

The applications were received for 1,00,000 shares. Applications for 20,000 shares were rejected and

allotment was made on pro-rata basis to the remaining applications.

Nimesh who had applied for 3,200 shares failed to pay the amount due on allotment and call. The Company

forfeited his shares. Later on, out of the forfeited shares, company re-issued 1,600 shares at Rs. 10 per share

full paid up.

Pass necessary Journal entries in the books of Geetanjali Ld.


Hint. Balance of Cash A/c Rs. 5,44,000 And Share Forfeiture A/c Rs. 3,200 (for verification purpose).

31. Starplus Company issued for public subscription 1,50,000 shares of the value of Rs. 100 each at a discount

of 10% payable per share as follows:

Rs. 20 on application, Rs. 30 on allotment and Rs. 40 on call.

The company received application for 3,00,000 shares. The allotment was done as under:

(a) Applicants of 30,000 shares were allotted 10,000 shares.

(b) Applicants of 1,40,000 shares were allotted 80,000 shares.

(c) Remaining applicants were allotted 60,000 shares.

After adjusting excess money in allotment, the money was returned. Harit, a shareholder who had applied for

7,000 shares of group (b), failed to pay allotment and call money. Roshan, another shareholder who was

allotted 6,000 shares, paid the call money along with the allotment. Roshan also belonged to group (b).

Pass necessary Journal entries to record the above transactions in the books of the company. Show your

working noted clearly.

Hint. (i) Cash Balance Rs. 1,32,80,000 (for verification purpose); (ii) Money received at the time of

allotment Rs. 17,80,000 (including calls in advance).

32. Record the Journal entries for forfeiture and reissue in the following cases:

(a) X Ltd. Forfeited 200 shares of Rs. 100 each, Rs. 70 called up, on which the shareholder had paid

application and allotment money of Rs. 50 per share. Out of these, 150 shares were re-issued to Naresh as

Rs. 70 paid up for Rs. 80 per share.

(b) Y Ltd. Forfeited 180 shares of Rs. 10 each, Rs. 8 called up, issued at a premium of Rs. 2 per share to R for

non-payment of allotment money of Rs. 5 per share (including premium). Out of these, 160 shares were re-

issued to Sanjay as Rs. 8 called up for Rs. 10 per share fully paid up.


(c) Z Ltd. Forfeited 30 shares of Rs. 100 each issued at a discount of Rs. 10 per share for non-payment of first

and final call money of Rs. 30 per share. Out of these, 20 shares were reissued at Rs. 30 per share fully paid

up.

Ans. Amount transfer to Capital Reserve- (a) Rs. 7,500 (b) 800 (c) Nil.

33. Sangam Ltd. Invited application for issuing 80,000 equity shares of Rs. 10 each. The amount was payable

as follows:

On application – 2. per share


On first and final call – Rs. 4 per share

Applications for 1,00,000 shares were received. Allotment was made on pro-rata basis to all the applicants.

Excess money received on application was adjusted on sums due on allotment. Satnam, who had applied for

1,000 shares, failed to pay the allotment money and his shares were immediately forfeited. Harnam did not

pay the first and final call on 800 shares allotted to him. His shares were also forfeited. All the forfeited

shares were re-issued at Rs.12 per share fully paid up.

Pass necessary Journal Entries in the books of Sangam Ltd. For the above transactions. Also show your

workings clearly.


Hint. Cash Balance Rs. 8,10,000 (for verification purpose).

34. Pass necessary Journal Entries in the books of the company for the following transactions :

(a) Goverdhan Ltd. Forfeited 500 equity shares of Rs. 50 each issued at a discount of 10% for the non-

payment of first call of Rs. 10 per share. Second and final call of Rs. 15 per share was not yet made on these

shares. Out of the forfeited shares 400 shares were re-issued at Rs. 55 per share fully paid up.

(b) G. Ltd. Forfeited 7,000 equity shares of Rs. 100 each for the non-payment of first call of Rs. 30 per share.

These shares were issued at a premium of Rs. 30 per share. The second and final call of Rs. 20 per share was

not yet made. The forfeited shares were re-issued at Rs. 80 per share fully paid up.

(c) Priya Ltd. Forfeited 1000 share of Rs. 100 each issued at a discount of 10% for nonpayment of allotment

money of Rs. 50 per share. The first and final call money of Rs. 20 per share on these shares was not made.

The forfeited shares were re-issued for Rs. 7,000 as fully paid up.

Hint. Amount transfer to Capital Reserve- (a) Rs. 8,000 (b) 2,10,000 (c) Nil.

Chapter – 8 Company Accounts - (Issue of Debentures)

Questions : -


1. Shruti Ltd. Bought the business of Shinkey Ltd. On 1.4.2007 consisting of Sundry assets of Rs. 5,60,000 and

Creditors Rs. 1,00,000, for a purchase consideration of Rs. 5,00,000. Rs. 1,00,000 was paid in cash on 3.4.2007

and for the balance 6% debentures were issued at a premium of 25% on 5.4.2007. Pass necessary journal

entries in the books of Shruti Ltd. For the above mentioned transactions.

Ans. F.V. of debentures issued Rs. 1,00,000

2. X Ltd. Obtained a loan of Rs. 4,00,000 from IDBI Bank. The Company issued 5000, 9% debentures of Rs. 100

each as a collateral security for the same. Show how these items will be presented in the Balance Sheet of

the company.

3. Nav Lakshmi Ltd. Invited application for issuing 3000, 12% Debentures of Rs. 100 each at a premium of Rs.

50 per Debenture. The full amount was payable on application.

Applications were received for 4000 debentures. Applications for 1000 debentures were rejected and

application money was refunded. Debentures were allotted to the remaining applicants.

Pass necessary Journal entries for the above transactions in the books of Nav Lakshmi Ltd.

4. Pranshu Ltd. Purchased assets worts Rs. 1,80,000 and took over the liabilities (creditors) of Rs. 40,000 of

Mahesh Ltd. For a purchase consideration of Rs. 1,76,000. Pranshu Ltd. Paid half the amount by cheque and

balance was settled by issuing 12% debentures of Rs. 100 each at a premium of 10%.

Pass necessary Journal entries in the books of Pranshu Ltd.

Hint. Goodwill Rs. 36,000; Face value of Debentures issued Rs. 80,000.

5. Pass the necessary Journal entries for the issue of 7% Debentures in the following cases:

(i) 200 Debentures of Rs. 150 each issued at 10% premium redeemable at Rs. 200 each.

(ii) 200 Debentures of Rs. 200 each issued at a discount of 10% redeemable at par.

Ans. Loss on issue of Debentures- (i) Rs. 7,000 (net) (ii) 4,000.

6. Pass the necessary Journal entries for the issue of Debentures in the following cases :

(i) Rs. 40,000, 15% Debentures of Rs. 100 each issued at a discount of 10% redeemable at par.

(ii) Rs. 80,000, 15% Debentures of Rs. 100 each issued a a premium of 10% redeemable at a premium of 10%.

Ans. Loss on issue of Debentures- (i) Rs. 4,000 (ii) Nil (net).

7. Beeta Ltd. Issued 5,000, 9% debentures of Rs. 500 each. Pass the necessary journal entries for the issue of

Debentures in the books of the company in the following cases:

(i) when debentures are issued at 10% premium and redeemable at per.

(ii) When debentures are issued at par and redeemable at 10% premium.


(iii) When debentures are issued at 5% premium and redeemable at 10% premium.

(iv) When debentures are issued at a premium of 25% to the vendors for machinery purchased for Rs.

6,25,000.

8. Pass the necessary journal entries for the issue and redemption of Debentures in the following ceses :

(i) 15,000, 9% Debentures of Rs. 250 each issued at 5% premium, repayable at 15% premium.

(ii) 2,00,000, 12% Debentures of Rs. 10 each issued at 8% premium, repayable at par.

Ans. (i) Loss on issue of Debentures (Dr.) = Rs. 3,75,000 (i.e. Rs. 5,62,500 – Rs. 1,87,500.

9. Pass necessary Journal entries relating to issue of debentures for the following :

(i) Issued Rs. 28,000, 10% debentures of Rs. 100 each at a premium of 15% redeemable at per.

(ii) Issued Rs. 30,000, 10% debentures of Rs. 100 each at a premium of 10% and redeemable at a premium of

15%.

(iii) Issued Rs. 80,000, 10% debentures of Rs. 100 each at par, repayable at a premium of 10%.

Ans. Loss on issue of Debentures- (ii) Rs. 1,500 (net); (ii) Rs. 8,000.

Chapter – 9 Company Accounts - (Redemption of Debentures)

Questions : -

1. X Ltd. Redeemed 1000, 6% Debentures of Rs. 100 each by converting them into Equity shares of Rs. 100

each. The 6% Debentures were redeemable at a premium of 5% for which the Equity shares were issued at a

premium of 25%. Pass the necessary journal entries for the redemption of the above mentioned Debentures

in the books of X Ltd.

Ans. No. of shares issued = 840

2. Manish Ltd. Issued Rs. 38,00,000, 8% debentures of Rs. 100 each on 1.4.2007. The terms of issue stated

that the debentures were to be redeemed at a premium of 5% on 20.6.2009. The company decided to

transfer out of profits Rs. 11,00,000 to Debenture Redemption Reserve on 31.3.2008 and Rs. 8,00,000 on

31.3.2009.

Pass necessary Journal entries regarding the issue and redemption of debentures, without providing for

either the interest of loss on issue of debentures.

3. Tuteja Constructions Ltd. Had an outstanding balance of Rs. 1,26,00,000, 9% debentures of Rs. 200 each

redeemable at a premium of 3%. According to the terms of redemption, the company redeemed 50% of the

above debentures by converting them into shares f Rs. 10 each at a discount of 10%. Record the entries for

redemption of Debentures in the books of Tuteja Constructions Ltd.


4. Anupama Ltd. Had issued 10,000, 9% Debentures of Rs. 100 each which is due for redemption on

31.3.2008. The company has in its Debenture Redemption Reserve Account a balance of Rs. 4,00,000. The

Record the necessary Journal entries at the time of Redemption of Debentures.

5. Pass necessary journal entries for the redemption of debentures in the following cases in the books of Jain

Ltd :

(i) Redeemed 5,400, 12% debentures of Rs. 100 each by draw of lots.

(ii) Converted 667, 12% debentures of Rs. 100 each into equity shares of Rs. 100 each issued at a premium of

25%.

6. Pass necessary journal entries for the redemption of debentures in the following cases in the books of X

Ltd :

(i) X Ltd. Converted Rs. 8,00,000, 12% debentures into equity shares of Rs. 100 each at a premium of 25%.

(ii) X Ltd redeemed its 1000, 12% debentures of Rs. 100 each at 10% premium by draw of lots.

Ans. (i) No. of Equity share issued = 6,4000.

7. X Ltd. Had Rs. 10,00,000 9% debentures due to be redeemed out of profits on 1st

October 2009 at a

premium of 5%. The company had a Debenture Redemption reserve of Rs. 4,14,000. Pass necessary journal

entries at the time of redemption.

8. F Ltd. Issued Rs. 1,00,000, 15% Debentures of Rs. 100 each at a premium of 5%, redeemable at a premium

of 10% at the end of 4 years. The Board of Directors decided to transfer the minimum required amount to

‘Debenture Redemption Reserve Account’ at the time of redemption.

Pass Journal entries at the time of Redemption of Debentures.

Ans. Amount transfer to DRA A/c Rs. 50,000

9.A Join Stock Company issued 15,000, 9% debentures of Rs. 100 each at a premium of 5%. These debentures

were to be redeemed at a premium of 10% through the issue of shares at a premium of 25%. Journalize the

issue and redemption of debentures.

Ans. Face value of Share issued = Rs. 13,20,000

10. On April 1st

208 following were the balances of Blue Bird Ltd. :

10% Debentures (redeemable on April 1st

, 2010) Rs. 15,00,000

Debenture Redemption Reserve Rs. 5,00,000

ON 31 March 2010 the Board of Directors decided to follow the guidelines of SEBI for maintaining Debenture

Redemption Reserve and transferred to required amounts to DRR and redeemed the debentures.

Pass necessary Journal entries for the above transactions in the books of the company.


11.Mudra Ltd. Had 10,000, 12% Debentures of Rs. 100 each due for redemption at a premium of 5% on

March 31, 2009. The board of directors of the company decided to follow SEBI guidelines for maintaining

Debenture Redemption Reserve. They transferred the required amount to Debenture Redemption Reserve

and redeemed the Debentures fully.

Pass necessary Journal entries relating to transfer of the required amount to DRR and Redemption of

Debentures.

12. Devi Ltd. On 1st April 2006 acquired assets of the value of Rs. 6,00,000 and liabilities worth Rs. 70,000

from P & Co., at an agreed value of Rs. 5,50,000. Devi Ltd issued 12% Debentures of Rs. 100 each at a

premium of 10% in full satisfaction of purchase consideration. The debentures were redeemable 3 years later

at a premium of 5%. Pass journal entries to record the above including redemption of debentures.

Ans. Goodwill Rs. 20,000; No. of Debenture issued Rs. 5,000.

13. on 1.4.2005 Raja Ltd. Issued 1,000, 9% debentures of Rs. 100 each. 40% of these debentures were

redeemable at the end of 3rd

ear by converting them into Equity shares of Rs. 100 each at par. The remaining

debentures were redeemable at the end of 4th

year by converting the same into Equity Shares of Rs. 100 each

issued at a premium of 25%.

Pass necessary journal entries in the books of the company for the issue and redemption of Debentures.

Ans. No. of equity shares issued- 3rd

year = 400; 4th

year = 480

14. On 1.1.2007 a Public Limited Company issued 15,000, 10% Debentures of Rs. 100 each at par which were

repayable at a premium of 15% on 31.12.2011. On the date of maturity, the company decided to redeem the

above mentioned 10% Debentures as per the terms of issue, out of profits. The Profit & Loss A/c shows a

credit balance of Rs. 20,00,000 on this date. The offer was accepted by all the Debenture-holders and the

debentures were redeemed.

Pass the necessary journal entries in the books of the Company only for the redemption of Debentures, if the

company follows Sec. 117 C of the Companies Act.

Ans. Amount paid to debenture holders Rs. 17,25,000

15. Pass necessary Journal entries for issue and redemption of debentures in the following cases :

20,000 12% debentures of Rs. 50 each were issued and to be redeemed as follows :

(a) Issued at par and redeemed at a premium of 10%.

(b) Issued at a premium of 10% and redeemable at a premium of 20%.

(c) Issued at par and 50% of the redemption to be made in cash and the balance to be redeemed at a

premium of 20% through the issue fresh debentures.

Ans. Loss on issue of Debentures- (a) Rs. 1,00,000 (b) Rs. 1,00,000 (Net) (c) Rs. 1,00,000.


16. Pass necessary Journal entries for the following transactions in the books of Fortune Ltd :

(i) Redeemed Rs. 96,000, 12% Debentures by conversion into Equity Shares of Rs. 100 each. The Equity Shares

were issued at a discount of 4%.

(ii) Converted 4,800, 12% Debentures of Rs. 100 each into New 13% Debentures of Rs. 100 each. The New

Debentures were issued at a premium of 25%.

Ans. (i) Face value of Equity Shares issued = Rs. 1,00,000; (ii) Face value of New 13% Debentures issued =

Rs. 3,84,000

Chapter – 10 Financial Statement of a Company (Balance Sheet only)

Questions : -

1. Give the major heading under which the following items will be shown in a company’s Balance Sheet as per

Schedule VI Part I of Companies Act, 1956 :

(i) Sundry Creditors; (ii) Provision for Tax; (iii) Preliminary Expenses; (iv) Loose Tools; (v) Interest accrued on

investments and (vi) Goodwill.

2. State the major headings under which the following items will be put as per Schedule VI Part I of the

Companies Act, 1956.

(i) Long term investments; (ii) Bills of Exchange; (iii) Motor Car; (iv) Discount on issue of shares; (v) Securities

Premium and (vi) Unclaimed dividend.

3. Enumerate any three items of ‘Current Assets’ and any three items of ‘Current Liabilities’ included in each

of these major headings as per Schedule VI Part I of the Companies Act. 1956.

4. Under what heads and sub-heads will the following items appear in the Balance Sheet of accompany as per

Revised Schedule VI Part I of the Companies Act 1956 :

(i) Debentures; (ii) Loose tools; (iii) Calls-in-advance.

5. Under which heads and sub-heads will the following items appear in the Balance Sheet of a company as

per Revised Schedule VI Part I of the Companies Act 1956 :

(i) Subsidy Reserve; (ii) Mining Rights; (iii) Provision for doubtful debts.

6. Under what heads and sub-heads will the following items appear in the Balance Sheet of a company as per

Revised Schedule VI Part I of the Companies Act 1956 :

(i) Stores and Spares; (ii) Proposed Dividend; (iii) Computer Software.


Chapter – 12 Techniques of Financial Statement Analysis

Questions : -

1. The Profit and Loss Account of Hiralal & Co. for the years ended March 31,2005 and 2006 are as follows :

Particulars 2005

(Rs.)

2006

(Rs.)

Net sales

Cost of goods sold

Gross profit

Operating expenses

Net profit

Income tax 50% of net profit

5,32,500

3,43,000

1,89,500

70,000

1,19,500

59,750

5,12,000

3,32,500

1,80,500

62,500

1,18,000

59,000

Compute percentage changes from 2005 to 2006.

2. Prepare a common size statement from the following for the year ended 31.3.2007 :

Sales Rs. 21,00,000

Cost of goods sold Rs. 9,90,000

Operating Expenses Rs. 3,90,000

Interest on investments Rs. 80,000

Taxes payable @ 50%

3. From the following information provided, prepare a comparative income statement for the period 2008

and 2009 :

2008 2009

Sales (Rs.) 6,00,000 8,00,000

Gross Profit 40% on Sales 50% on Sales

Administrative expenses 20% of Gross Profit 15% of Gross Profit

Income Tax 50% 50%

4. From the following information prepare a Comparative Income Statement for the period 2009-2010 :


2009 2010

Rs. Rs.

Sales (Rs.) 5,00,000 6,00,000

Materials Consumed 2,30,000 4,00,000

Manufacturing and Office expenses 1,20,000 1,80,000

Other incomes 30,000 30,000

Other Information :

(a) Income tax is calculated @50%

(b) Manufacturing expenses are 50% of the total of that category.

5. Prepare a Comparative Income Statement from the following :

31.3.2007

(Rs.)

31.3.2008

(Rs.)

Sales

Cost of goods sold

Operating

expenses

10,00,000

6,00,000

40,000

12,50,000

7,50,000

50,000

Interest on investments Rs. 50,000 and taxes payable @ 50%

6. From the following information, prepare Comparative Income Statement of Zee Ltd :

2007

(Rs.)

2008

(Rs.)

Sales

Cost of goods sold

Indirect expenses

Income tax

120% of Cost of Goods sold

10,00,000

10% of Gross Profit

40%

150% of Cost of Goods sold

20,00,000

20% of Gross Profit

40%

7. From the information given below prepare a Comparative Income Statement :

31.3.2008 31.3.2009

Sales (Rs.) 3,00,000 4,00,000


Sales returns (Rs.) 1,00,000 2,00,000

Cost of goods sold 60% of Sales 50% of Sales

Administrative expenses 20% of Gross Profit 10% of Gross Profit

Income tax 40% 40%

8. Prepare a Comparative Income Statement from the following information :

Particulars 31.3.2009

(Rs.)

31.3.2009

(Rs.)

sales

Cost of goods sold

Wages paid

Operating expenses

Other Incomes

Income tax

40,000

30,000

16,000

2,500

2,000

4,750

50,000

35,000

14,000

3,000

3,000

7,500

9. From the following Income Statement, Prepare a Common Size Income Statement of Jayant ltd. For the

year ended : 31.3.2011

Income Statement of Jayant Ltd. For the year ended 31.3.2011

Particulars Amount (Rs.)

Income :

Sales 25,38,000

Other Incomes 38,000

Total Income 25,76,000

Expenses :

Cost of Goods sold 14,00,000

Operating expenses 5,00,000

Total Expenses 19,00,000

Tax 3,38,000

10. Prepare a ‘Comparative Income Statement’ form the following information :


Particulars 2010 2011

sales

Cost of goods sold

Operating expenses

Rate of Income Tax

Rs. 15,00,000

60% of Sales

8% of Sales

50% of Net Profit before tax

Rs. 20,00,000

60% of Sales

8% of Sales

50% of Net Profit before tax

11. From the following Statement of Profit and Loss of Moontrack Ltd., for the years ended 31st

March 2011

and 2012, Prepare a ‘Comparative Statement of Profit and Loss’.

Particulars Not

No.

2011-12

Rs.

2010-11

Rs.

Revenue form operations 40,00,000 24,00,000

Other Incomes 24,00,000 18,00,000

Expenses 24,00,000 14,00,000

12. From the following Statement of Profit and Loss of Sudha Ltd. Prepare a Comparative Statement of Profit

and Loss :

Particulars Not

No.

31.03.2012

Rs.

31.03.2011

Rs.

1. Revenue form operations 20,00,000 16,00,000

2. Expenses 60,000 40,000

3. Other Income 10,00,000 8,00,000

4. Income Tax 40% 40%

Chapter – 13 Ratio Analysis

Questions : -

1. The Current ratio of a company is 3 : 1. State with reason whether the

payment of Rs. 20,000 to the creditors will increase, decrease or not change the ratio.

Ans. Ratio will increase

2. The Current ratio of a company is 2.5 : 1. State giving reason whether ‘Purchase of goods for cash’ will

improve, reduce or not change the ratio.


Ans. No Change

3. The Operating ratio of X Ltd. Is 84%. State giving reason whether conversion of Debentures into Equity

shares will improve, reduce or will bring no change in the ratio.

Ans. No change

4. Calculate return on investment from the following information :

Net Profit after tax : Rs. 6,50,000; Convertible debentures : Rs. 8,00,000; Income tax : 50%; Fixed assets at

cost : Rs. 24,60,000; Depreciation reserve : Rs. 4,60,000; Current assets : Rs. 15,000; Current liabilities : Rs.

7,00,000.

Ans. (a) 50%

5. The quick ratio of a company is 1 : 1. State which of the following would improve, reduce or not change the

ratio :

(a) Purchase of goods for cash; (b) Purchase of goods on credit; (c) Sale of goods at cost; (d) Sale of goods at a

profit; (e) Cash received from debtors; (f) Cash paid to creditors.

Ans. (a) & (b) Reduce; (c) & (d) Improve; (e) & (f) Change.

6. X Ltd. Has a current ratio of 3 : 1 and quick ratio of 2 : 1. If the excess of current assets over quick assets as

represented by stock is Rs. 40,000, Calculate current assets and current liabilities.

Ans. Rs. 1,20,000; Rs. 40,000

7. The debt-equity ratio of Ratan Ltd. Is 3 : 1. Giving reasons, state whether the ratio will increase, decrease

or not change because of the following transactions :

(i) Issues equity shares of Rs. 1,00,000.

(ii) Discounting a bill of exchange of Rs. 50,000 at a discount of 10%.

(iii) Redemption of 9% debentures of Rs. 70,000.

Ans. (i) Decrease (ii) No Change (iii) Decrease.

8. From the given information, Calculate the stock turnover ratio:

Sales Rs. 2,00,000; G.P. : 25%; Opening stock was 1/4th

of the value of closing stock. Closing stock was 40% of

sales.

(c) A business has a current ratio of 4 : 1 and a quick ratio of 1.2 : 1. If the

working capital is Rs. 1,80,000, calculate the total Current assets and stock

Ans. (a) 3 times (b) Rs. 2,40,000; Rs. 1,68,000

9. The following are the summarized Profit and Loss Account and the Balance Sheet of Ashoka Ltd. As on

31.3.2006 :


Ashoka Ltd.

Profit and Loss Account for the year ended 31.3.2006

Particulars Amount

(Rs.)

Particulars Amount

(Rs.)

Opening stock

Purchases

Direct expenses

Gross profit

Salary

Loss of Sale of machinery

Net Profit

20,000

1,25,000

15,000

70,000

2,30,000

16,000

4,000

50,000

Sales

Closing Stock

Gross profit

2,20,000

10,000

2,30,000

70,000

70,000 70,000

Ashoka Ltd.

Balance Sheet as on 31.3.2006

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Equity share capital

Profit and Loss a/c

Creditors

Outstanding expenses

1,50,000

50,000

75,000

25,00

Land

Stock

Debtors

Cash

2,00,000

10,000

50,000

40,000

3,00,000 3,00,000

Calculate any two of the following ratios on the basis of the information given in the above mentioned

financial statements :

(j) Gross Profit Ratio; (ii) Stock Turnover Ratio; (iii) Proprietary Ratio.

Ans. (i) 31.82% (ii) 10 times (iii) 66.67%

10. (a) Cash sales are 25% of total sales; Purchase Rs. 2,76,000; Credit sales Rs. 2,24,000; Excess of closing

stock over opening stock Rs. 20,000; Calculate gross profit ratio.


(b) A trader carries an average stock of Rs. 60,000. His stock turnover is 12 times if he sells goods at a profit of

25% on sales, find out his profit.

Ans. (a) 205 (b) Rs. 2,40,000

Hint. (a) G.P. Rs. 64,000.

11. (a) Net profit after Interest but before tax : Rs. 1,40,000; 15% Long-term debts: Rs. 4,00,000; Shareholders

funds : Rs. 2,40,000; Tax rate 50% . Calculate Return on Capital Employed.

(b) Opening Stock : Rs. 60,000; Closing Stock : Rs, 1,00,000; Stock Turnover Ratio 8 times Selling price 25%

above cost. Calculate the Gross Profit Ratio.

Ans. (a) 31.25% (b) 20%

12. From the following information, Calculate any two of the following ratios:

(i) Operating ratio

(ii) Stock Turnover ratio

(iii) Proprietary ratio

Information :

Cash Sales – Rs. 10,00,000

Credit Sales – 120% of Cash Sales

Operating Expenses – 10% of Total Sales

Rate of Gross Profit – 40%

Opening Stock – Rs. 1,50,000

Closing Stock – Rs. 20,000 more than Opening Stock

Current Assets – Rs. 3,00,000

Current Liabilities – Rs. 2,00,000

Share Capital – Rs. 6,00,000

Fixed Assets – Rs. 5,00,000

Ans. (i) 79% (ii) 8.25 times (iii) 0.75

13. From the following information, calculate any two of the following ratios :

(i) Liquid ratio


(ii) Debt-Equity ratio

(iii) Fixed Assets Turnover ratio

Information : Rs.

Net Sales 3,00,000

Gross Profit 1,00,000

Total Current Assets 2,00,000

Closing Stock 20,000

Prepaid Insurance 4,000

Total Current Liabilities 1,20,000

Share Capital 3,50,000

Reserves & Surplus 40,000

Preliminary Expenses 7,000

Fixed Assets 4,30,000

Ans. (i) 1.47 (ii) Debt Equity ratio = 0.64; Long term debt to equity = 0.33; (iii) 0.698 (i.e. Net sale/fixed

assets).

# This ratio is now not in syllabus.

14. (a) A business has a current ratio of 3 : 1 and a quick ratio of 2 : 1. If the working capital is Rs. 1,80,000,

Calculate the total current liabilities and value of stock.

(b) From the given information calculate the Stock turnover ratio : Sales : Rs. 2,00,000; GP : 25 % on cost;

Stock at the beginning is 1/3 of the stock at the end which was 30% of Sales.

Ans. (a) Rs. 90,000; Rs. 90,000 (b) 4 times


(i) Liquid Ratio

(ii) Gross Profit Ratio

(iii) Debt-Equity Ratio

Information :

Net Sales – Rs. 4,00,000; Opening Stock- Rs. 10,000; Closing Stock- Rs. 3,000 Less than Opening Stock; Net

Purchases- 80% of Net sales, Direct expenses – Rs. 20,000; Current assets – Rs. 1,00,000; Prepaid expenses-


Rs. 3,000; Current liabilities- Rs. 60,000; 9% Debentures- Rs. 4,00,000; Long term loan from Bank- Rs.

1,50,000; Equity Share Capital- Rs. 8,00,000; 8% Preference Share Capital- Rs. 3,00,000.

Ans. (i) 1.5 : 1 (ii) 14.25% (iii) Debt Equity Ratio = 0.55 : 1; Long Term Debt to Equity Ratio = 0.50 : 1

16. Calculate Current Ratio of a company from the following information :

Stock Turnover Ratio : 4 times

Stock in the end was Rs. 20,000 more than stock in the beginning.

Sales Rs. 3,00,000

Gross Profit Ratio 25%

Current Liabilities Rs. 40,000

Quick Ratio 0.75 : 1

Ans. 2.41 Times

Hint. Closing stock = Rs. 66,250

17. The quick ratio of a company is 1 : 1. State giving reasons, (for any four) which of the following would

improve, reduce or not change the ratio ?

(a) Purchase of machinery for cash

(b) Purchase of goods on credit

(c) Sale of Furniture at cost

(d) Sale of goods at a profit

(e) Redemption of debentures at a premium.

Ans. (a), (b) & (e) reduce, (c) & (d) improve


(a) Debt-Equity Ratio;

(b) Working Capital Turnover Ratio;

(c) Return on Investment.

Information :

Equity Share Capital Rs. 10,00,000; 12% General Reserve Rs. 1,00,000; Profit and Loss Account after Tax and

Interest Rs. 3,00,000; 12% Debentures Rs. 4,00,000; Creditors Rs. 3,00,000; Land and Building Rs. 13,00,000;

Furniture Rs. 3,00,000; Debtors Rs. 2,90,000; Cash Rs. 1,10,000 and Preliminary expenses Rs. 1,00,000.


Sales for the year ended 31.3.2011 was Rs. 30,00,000 and Tax paid 50%

Ans. (a) Debt-Equity Ratio = 0.54 : 1; Long term Debt-Equity Ratio = 0.31 ; 1; (b) 30 Times (c) 38.12%

19. Calculate ‘Return on Investment' and 'Debt-Equity Ratio' from the following information :

Net Profit interest and tax Rs. 6,00,000

10% Debentures Rs. 10,00,000

Tax Rate 40%

Capital Employed Rs.80,00,000

Ans. 13.37%. 0.14 : 1.

20. (a) Compute 'Debtors Turnover Ratio' from the following information :

Total Sales Rs. 5,20,000. Cash sales 60% of the Credit Sales, Closing Debtors Rs. 80,000 Opening Debtors are

3/4th of Closing Debtors.

Ans. (a) 4.64 Times (b) Rs. 2,40,000 (c) Rs. 4,00,000

Chapter – 14 Cash Flow Statement

Questions : -

1. Give the meaning of 'Cash Flow Statement'.

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

manufacturing company. State with reason whether the divided received on this investment will be cash flow

from operating activities or investing activities.

2. List any two inflows and any tow outfiows from investing activities.

(a) Issue of debentures Rs. 5,00,000; (b) Interest on loan paid by a trading from Rs. 1,00,000; (c) Sale of goods

Rs. 5,00,000; (d) Receipt of interest by a manufacturing company Rs. 25,000.

3. Fro the following

summarized balance

sheets of a company,

calculate the cash

flow from operating

activities : Liabilities

2004

(Rs.)

2005

(Rs.)

Assets 2004

(Rs.)

2005

(Rs.)


Creditors

Bills payable

Other current

liabilities

6% Debentures

Profit & Loss A/c

20,000

20,000

40,000

60,000

90,000

25,000

25,000

45,000

80,000

1,10,000

Cash

Investments

Stock

Debtors

Gross Block

20,000

40,000

30,000

30,000

1,10,000

30,000

30,000

45,000

40,000

1,40,000

2,30,000 2,85,000 2,30,000 2,85,000

Ans. Rs. 13,600

Hint. It is assumed that interest is not paid on debentures issued during the year

4. Seema Ltd. Had a profit of Rs. 20,00,000 for the year ended 31.3.2006 after considering the following :

Depreciation on building Rs. 55,000

Depreciation on plant and machinery Rs. 37,000

Goodwill written off Rs. 14,000

Loss on sale of plant and machinery Rs. 8,000

Following was the position of the Current Assets and Current Liabilities of the company as on 31.3.2005 and

31.3.2006.


(Rs.)

31.3.2006

(Rs.)

Stock

Debtors

Cash

Creditors

Outstanding expenses

Bills payable

65,000

40,000

47,000

94,000

5,000

49,000

69,000

25,000

74,000

1,03,000

3,000

58,000

Calculate Cash Flow from Operating Activities.

Ans. Rs. 21,41,000

5. X Ltd. Made a profit of Rs. 1,00,000 after considering the following items :

(a) Depreciation on Fixed Assets Rs. 20,000


(b) Writing off preliminary expenses Rs. 10,000

(c) Loss on sale of Furniture Rs. 1,000

(d) Provision for Taxation Rs. 1,60,000

(e) Transfer to General Reserve Rs. 14,000

(f) Profit on sale of Machinery Rs. 6,000

The following additional information is available to you :

Items 31.3.2007

(Rs.)

31.3.2008

(Rs.)

Debtors

Creditors

Bills Receivable

Bills Payable

Prepaid Expenses

24,000

20,000

20,000

16,000

400

30,000

30,000

17,000

12,000

600

Calculate Cash Flow from Operating Activities.

Ans. Rs. 3,01,800

6. From the following Balance Sheet Provided Prepare a Cash Flow Statement as per AS-3 (revised):

Liabilities 2008

(Rs.)

2009

(Rs.)

Assets 2008

(Rs.)

2009

(Rs.)

Share Capital

P & L Account

Creditors

12,000

5,000

15,000

15,000

6,000

11,000

Furniture

Stock

Debtors

Cash

5,000

6,000

10,000

11,000

8,000

4,000

8,000

12,000

32,000 32,000 32,000 32,000

A dividend of Rs. 3,000 was paid during the year 2008-09.

Ans. Net cash from operating activities Rs. 4,000; Net cash used in investing activities Rs. 3,000; Net

increase in cash and cash equivalents Rs. 1,000.

7. Following are the Balance Sheets of Sewak Ltd. As on 31.3.2008. and 31.3.2009 :


Liabilities 31.3.2008

(Rs.)

31.3.2009

(Rs.)

Assets 31.3.2008

(Rs.)

31.3.2009

(Rs.)

Share capital

Debentures

Creditors

Outstanding

expenses

4,00,000

2,00,000

1,10,000

10,000

7,00,000

4,00,000

1,50,000

20,000

Fixed Assets

Investments

Stocks

Debtors

Cash

Profit & Loss

Account

3,00,000

2,00,000

50,000

1,00,000

20,000

50,000

5,00,000

1,40,000

1,00,000

1,70,000

40,000

3,20,000

7,20,000 12,70,000 7,20,000 12,70,000

Additional information :

Included in the fixed assets was a piece of machinery costing Rs. 70,000 on which depreciation charged was

Rs. 40,000 and it was sold for Rs. 30,000. During the year Rs. 1,40,000 depreciation was charged on fixed

assets.

Prepare a Cash Flow Statement.

Ans. Net Cash used in operating activities Rs. 2,00,000; Net cash used in investing activities Rs. 2,80,000;

Net cash from financing activities Rs. 5,00,000; Net increase in cash and cash equivalents Rs. 20,000.

8. From the following Balance Sheets of Vikas Ltd. As on 31.3.2009 and 31.3.2010, Prepare a Cash flow

Statement :

Liabilities 2009

(Rs.)

2010

(Rs.)

Assets 2009

(Rs.)

2010

(Rs.)

Share Capital

General Reserve

Profit & Loss

Account

Trade Creditors

90,000

30,000

20,000

17,400

1,30,000

55,000

30,000

22,000

Fixed Assets

Stock

Debtors

Cash

Preliminary

Expenses

93,400

22,000

36,000

4,000

2,000

1,66,000

26,000

39,000

5,000

1,000

1,57,400 2,37,000 1,57,400 2,37,000

Additional Information :


(i) Depreciation charged on fixed assets for the year 2009-2010 was Rs. 20,000.

(ii) Income Tax Rs. 5,000 has been paid in advance during the year.

Ans. Net Cash from operating activities Rs. 53,600; Net cash from financing activities Rs. 40,000; Net cash

used in investing activities Rs. 92,600; Net increase in cash and cash equivalents Rs. 1,000.

9. From the following Balance Sheets and the additional information of Goods Wood Co., Your are required to

prepare Cash Flow Statement as per AS 3:

Liabilities 2009

(Rs.)

2010

(Rs.)

Assets 2009

(Rs.)

2010

(Rs.)

Share Capital

Profit & Loss

Account

Sundry Creditors

Bills payable

30,000

7,000

8,000

2,500

45,000

18,500

9,500

4,000

Fixed Assets

Stock in Hand

Debtors

Cash in hand

20,000

9,000

12,000

6,500

49,000

9,000

10,000

9,000

47,500 77,000 47,500 77,000


(a) Income tax paid during the year was Rs. 4,500

(b) Dividends paid during the year was !2%.

Ans. Net Cash from operating activities Rs. 20,100; Net cash from financing activities Rs. 11,400; Net cash

used in investing activities Rs. 29,000; Net increase in cash and cash equivalents Rs. 2,500.

10. From the following Balance Sheets of B.C.R. Ltd. As on 31.3.2010 and 31.3.2011, Prepare a Cash Flow

Statement :

Balance Sheet of B.C.R. Ltd. As on 31.3.2010 and 31.3.2011


(Rs.)

31.3.2011

(Rs.)

Assets 31.3.2010

(Rs.)

31.3.2011

(Rs.)

Equity share

capital

Profit and Loss

A/c

Bank Loan

Proposed

5,00,000

2,00,000

1,00,000

50,000

30,000

7,00,000

3,50,000

50,000

70,000

50,000

Patents

Equipments

Investments

Debtors

Stock

1,00,000

5,00,000

…

80,000

55,000

95,000

5,00,000

1,00,000

1,47,000

1,30,000


Dividend

Provision for

tax

Creditors

55,000 52,000 Bank

2,00,000 3,00,000

9,35,000 12,72,000 9,35,000 12,72,000


During the year Equipment costing Rs. 1,00,000 was purchased. Loss on sale of Equipment amounted to Rs.

12,000. Rs. 18,000 depreciation was charged on Equipment.

Ans. Net cash from operating activities Rs. 1,30,000; Net cash from financing activities Rs. 1,00,000; Net

cash used in investing activities Rs. 1,30,000; Net increase in cash and cash equivalents Rs. 1,00,000.

11. From the following information, prepare a ‘Cash Flow Statement’ of Balaji Ltd. :

Balance Sheets of Balaji Ltd. As on March 31st

2010-2011


(Rs.)

31.3.2011

(Rs.)

Assets 31.3.2010

(Rs.)

31.3.2011

(Rs.)

Equity share

capital

Securities

Premium

Profit and Loss

A/c

12% Debentures

Current

Liabilities`

2,50,000

…

40,000

60,000

1,50,000

3,50,000

25,000

…

1,00,000

1,25,000

Fixed Assets

Investments

Current Assets

Discount of

issue of

Debentures

Profit and Loss

A/c

Cash

2,00,000

1,00,000

1,50,000

20,000

…

30,000

2,80,000

1,00,000

1,60,000

…

20,000

40,000

5,00,000 6,00,000 5,00,000 6,00,000

Additional information :

(i) Debentures were issued on 1.4.2010.

(ii) During the year a machine included in Fixed Assets costing Rs. 1,20,000 was purchased and another

machine of the book value of Rs. 30,000 was sold at a loss of Rs. 2,000.

Ans. Net cash used in operating activities Rs. 51,000; Net cash used in investing activities Rs. 92,000; Net

cash from financing activities Rs. 1,53,000; Net increase in cash and cash equivalents Rs. 10,000.


12. Following are the Balance Sheet of Krishtec Ltd. For the year ended 31st March 2011 and 2012 :

Particulars 2011-12 2010-11

1. Equity and liabilities

(1) Shareholders Funds :

(a) Share Capital

(b) Reserves and Surplus

(Profit and Loss Balance)

(2) Non-Current Liabilities :

Long term Borrowings

(3) Current Liabilities :

Trade Payable

Total

II. Assets

(1) Non-Current Assets :

(a) Fixed Assets :

(i) Tangible Assets

(2) Current Assets

(a) Inventories

(b)Trade Receivables

(c) Cash and Cash equivalents

Total

12,00,000

3,50,000

4,40,000

60,000

8,00,000

4,00,000

3,50,000

50,000

20,50,000 16,00,000

12,00,000

2,00,000

3,10,000

3,40,000

9,00,000

1,00,000

2,30,000

3,70,000

20,50,000 16,00,000

Prepare a Cash Flow Statement after taking into account the following adjustments :

(a) The company paid interest Rs. 36,000 on its long term borrowings.

(b) Depreciation charged on tangible fixed assets was Rs. 1,20,000.

Ans. Net cash used in investing activities Rs. 4,20,000; Net cash from financing activities Rs. 4,54,000; Net

cash used in investing activities Rs. 4,20,000; Net decrease in cash and cash equivalents Rs. 30,000.

13. Prepare a Cash Flow Statement from the following Balance Sheet of Shyam Ltd.:


Balance Sheet Shyam Ltd. As at 31th March, 2012.


Rs.

31.3.2011

Rs.

1. Equity and liabilities

(1) Shareholders Funds :

(a) Share Capital

(b) Reserves and Surplus

(Profit and Loss Balance)

(2)Share Application money

Pending allotment

(3) Non-Current Liabilities :

Long term Borrowings

(4) Current Liabilities :

Trade Payable

Total

II. Assets

(1) Non-Current Assets :

(a) Fixed Assets :

(i) Tangible Assets

(ii) Intangible Assets

(b) Non-current investments

(2) Current Assets

(a) Inventories

(b)Trade Receivables

(c) Cash and Cash equivalents

Total

40,00,000

6,00,000

…

4,00000

1,00,000

34,00,000

8,00,000

…

2,00,000

2,00,000

51,00,000 46,00,000

16,00,000

12,00,000

6,00,000

2,00,000

+,00,000

9,00,000

18,00,000

10,00,000

5,00,000

…

5,00,000

8,00,000

51,00,000 46,00,000



Depreciation of Rs. 2,00,000 was Provided on Tangible Assets during the year.

Ans. Net cash used in Operating Activities Rs. 4,00,000; Net Cash from Financing Activities Rs. 8,00,000; Net

cash used in Investing Activities Rs. 3,00,000; Net increase in cash and cash equivalents Rs. 1,00,000.

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