2015
ACCOUNTANCY
Solved Question Paper
1.(a) Fill in the blanks with appropriate word: 1x4= 4
(i) If a partner takes over a liability of the firm,
the partners’ capital account is ____ .
Ans: Credited
(ii) A
partner acts as an ___for the firm.
Ans: Agent.
(iii)
When partners’ capital accounts are fixed, then their ____Accounts are
prepared.
Ans: Current
(iv)
____is the extra earning capacity of a firm.
Ans: Goodwill
(b) Choose the correct alternative: 1x2=2
(i) In
the event of death of a partner, the amount of general reserve is transferred
to the partners’ capital accounts in:
a.
New profit sharing ratio
b.
Old profit sharing ratio
c.
Capital ratio
d.
None of the above
Ans: Old profit sharing ratio
(ii)
Balance sheet shows
a.
Financial position of a company
b.
Profit or loss of a company
c.
Cash flow statement
d.
None of the above
Ans: Financial position of a
company
(c)
State whether the following statements are True or False. 1x2=2
(i) The deceased partners’
executor is entitled to a share of profit for the period up to his/her death.
Ans: True
(ii)
A preference share holder gets interest at a fixed rate.
Ans: False
2.
State any two features of a not-for-profit organization. 2
Ans: Followings are
the features of non-trading organization:-
a. These
organizations carry their activities without any profit motive.
b. These
organizations are generally managed by an elected body of members or nominated
committee.
c. The main source of
fund of such organizations is subscriptions from members, donation, government
grant etc.
3. A, B
and C are partners sharing profits in the ratio of 2:2:1. C retires. A and B
have decided to share future profits and losses in the ratio of 2:1. Calculate
the gaining ratio. 2
Solution:
4.
Mention any two features of Debentures. 2
Ans: Following are the characteristics of Debentures:
a. It is an
acknowledgment of debt or loan taken by a company.
b. A debenture is
generally redeemable.
c. Its face value
is pre- determined
5.
Mention any two methods of valuation of goodwill. 2
Ans: Following
are the methods for valuation of goodwill:
(i) Average profit method:-
(a) Simple average profit method.
(b) Weighted average profit method.
(ii) Super
profit method.
(iii) Capitalization method:-
(a) Capitalization of average profit.
(b) Capitalization of super profit.
6. X Ltd. decided to forfeit 1,000 shares of ₹ 10/- each for
non-payment of allotment money for ₹ 4/- each and 1st and final call
money of ₹ 3/- each. Give journal entry for the forfeiture of shares. 2
Solution:
7. X, Y and Z are partners sharing profits in the ratio of 3:2:1. It is
now agreed that they will share the future profits equally. Goodwill of the
firm is valued at ₹ 60,000/- and the same does not appear in the books. Pass necessary
journal entries. 3
8.
Briefly explain any three objectives of analysis of financial statements. 3
Ans: The primary objectives of financial statement analysis is to understand
and diagnose the information contained in financial statement with a view to
judge the profitability and financial soundness of the firm, and to make
forecast about future prospects of the firm.
Followings are
the purposes or objectives of financial statement analysis to bring out the
importance of such analysis:
(I) Assessing
the creditability: The business may have to offer credit to prospective
dealers and buyers therefore it is essential to analysis their credit
worthiness.
(ii) Assessing the profitability: Analysing of financial statement helps in getting the view of profitability of
business. The profits can be matched with sales, capital employed, total assets
etc.
(iii) Progress of the business: It is very
essential to measure the progress and growth of business.
Or
From the following, calculate current Ratio : 3
9. What
do you mean by Forfeiture of shares? Discuss the procedure of Forfeiture. 3
Ans: Forfeiture
of shares means when a shareholder fail to pay calls on the day fixed for
payment thereof and fails to pay even after his attention is drawn to it by
registered notice, the Board of directors pass a resolution to the effect that
such shares be forfeited. Forfeiture of shares brings about compulsory
termination of membership and the company takes the shares from the defaulting
member by way of penalty of allotment and /or call money.
A company must follow the following procedure for forfeiture of share:
Notice before Forfeiture: When a shareholder fails to pay any calls, the
company may forfeit the shares. Before the shares can be forfeited the company
may serve a notice on the defaulting member requiring payment of the call. The
notice must give not less than fourteen days time from the date of service of
notice for the payment of the amount due. The notice must also state that in
the event of non-payment of the amount due within the period mentioned in the
notice the shares in respect of which call was made will be liable to forfeit.
Non-compliance of Notice: If the shareholder fails to comply with the
requirement of this notice, the directors may pass a resolution effecting the
forfeiture of shares.
Effect of Forfeiture: The effect of forfeiture of shares is that the
defaulting shareholder losses all his rights in shares and ceases to be a
member. The name of shareholder is removed from the register of members and the
amount already paid by him is forfeited.
10.
What is meant by common size statements? Mention two uses of common size
statements. 3
Ans: Common size statement is a statement where the items of income statement
and balance sheet of one or more years are expressed in terms of percentage of
a common base. Each item shows the relationship with the base item. There are
two types of common size statement:-
i. Common size
income statement
ii. Common size
balance sheet.
Uses of Common
size statements:
a. It is used
for vertical analysis, in which each line item in a financial statement is
represented as a percentage of a base figure within the statement.
b. Common size
financial statements help to analyze and compare a company’s performance over
several periods with varying sales figures.
Or
Give
any three distinctions between sacrificing ratio and gaining ratio. 3
Ans: Following
are difference between Sacrificing ratio and Gaining ratio:
11.
Mention any three objectives of Receipts and Payments Account. 3
Ans: Following are
the objectives of Receipts and Payments Account:
a. It is prepared by
a non-trading organization to find out the closing cash and bank balances at
the end of an accounting period.
b. It is prepared to
show the cash receipts and the cash payments under different heads during an
accounting period.
c. It serves as a
basis of preparing financial statements i.e., income and expenditure account
and balance sheet for the organization.
12.
Give the new format of the Balance sheet of a Company (main headings only) as
per the requirement of schedule VI of the Companies Act, 2013. 5
Or
Distinguish
between a company’s Balance sheet and a Balance sheet of a Partnership firm.
Ans: Following
are the difference between company’s balance sheet and partnership firm’s
balance sheet:
13. Assam
Cricket Club has a Cash and Bank Balances of ₹1,600/- and ₹20,000/-
respectively on 01-04-2013. From the following details, prepare a Receipts and
Payments Account for the year ended 31-03-2014 : 5
Subscription Received:
For 2012-12 8,000/-
For 2013-14 25,000/-
For 2014-15 1,000/-
Life Membership Fees 4,000/-
Balance of Bank on 31-03-14 135000/-
Or
14. X
Ltd. made a profit of ₹5,00,000/- after considering the following items :
Calculate Cash from Operating Activities for the year ended 31st March, 2014. 5
Or
What is
cash flow statement? Briefly explain any four objectives of preparing a cash
flow statement.
Ans: Cash
flow statement is a statement which describes the inflows and outflows of cash
and cash equivalents in an enterprise during a specified period of time. A cash
flow statement summarises the causes of changes in cash position of a business
enterprise between dates of two balance sheets.
Following are the objectives of cash flow statement:
a. To recognise the sources from operation, investing and financing
activities from where cash and cash equivalent are generated.
b.To recognises the uses by operating, investing and financing
activities for which cash and cash equivalents were used by the enterprise.
c. To compute the net changes in cash and cash equivalents indicating
the difference between sources and uses from operating, investing and financing
activities between the dates of two balance sheets.
15. From
the given information, calculate the stock Turnover Ratio : 5
Or
How are
the accounts settled between partners on the dissolution of partnership firm.
Ans: Following
are the procedure is followed in settlement of accounts, when a firm is
dissolved:-
(i) Realisation of assets: - All tangible and intangible assets
are realised, some assets are sold for cash and some assets may be taken over
by partners at agreed values.
(ii) Payments of realisation expenses: - Expenses incurred on
disposal of assets are to be met out of firm’s cash. Sometimes such expenses
are born by a partner when he undertakes to do the work of dissolution for some
commission.
(iii) Payment of liabilities to third parties:- After the
realisation of assets and payments of realisation expenses, liabilities to
third parties are to be paid out of remaining cash.
(iv) payment of partners loans: - After the payment of
liabilities to third parties, payment of partners loans will be paid off.
(v) Distribution of balance cash or other assets among partners:-
Balance cash or assets will be distributed among the partners in their final
capital ratio. If any partner’s capital account shows a debit balance, the
partner has to refund the balance to the firm, so that the partners having
credit balance may be paid in full.
16. The Balance Sheet of A, B and C who were sharing profits in
proportion to their capitals stood as follows on 31st March, 2014 :
B retired on the above date on the following terms and conditions :
(i) That stock be depreciated by 6%.
(ii) That a provision for Doubtful Debt be created @5% on Debtors.
(iii) That Land and Buildings be appreciated by 20%.
(iv) That the Goodwill of the entire firm be fixed at ₹ 10,800/- and B’s share goodwill be adjusted into the accounts of A and C who are going to share future profits in the ratio of 5:3.
(No Goodwill account is to be raised).
Pass the necessary journal entries in the books of the firm. 5
Or
Explain
the issue of shares at par, at a discount and at a premium.
Ans: A
company may issue shares at par, at premium and at a discount.
At par: Issue of shares
at par means issue of share at face value. For e.g., if the face value of a share is Rs. 100 and
same is issued at Rs. 100, it means that the shares have been issued at par.
At Premium: Issue of
shares at a premium means issue of shares at a price higher than its face
value. For e.g., if the face value of a share is Rs. 100 and the same is issued
at Rs. 110, it means that the shares have been issued at a premium.
At a discount: Issue of shares at a discount means issue of
shares at a price lower than its face value. For e.g., if the face value of a share is Rs. 100 and
the same is issued at Rs. 90, it means that the shares have been issued at a
discount.
17. A, B, and C were partners in a firm sharing profits in the ratio of
5:3:2. On 31st March 2013, their Balance Sheet was as follows :
A died on 1st October, 2013. It was agreed between his executors and the remaining partners that :
(ii) Machinery and Building be valued at ₹28,000/- and ₹25,000/- respectively.
(iii) Profit for the year 2013-14 be taken as having accrued at the same rate as that of the previous year.
(iv) Interest on capital be provided at 10% p.a.
(v) The amount due to A shall be transferred to his executor’s Loan Account.
Prepare A’s Capital Account as on the date of his death. 5
18. A and B are partners sharing Profits in the ratio of 3:2. Their
Balance Sheet as on 31.03.2014 was as follows :
The firm is dissolved on the above date. Assets are
realised at ₹13,500/-. Dissolution expenses came to ₹250. Give journal entries
to close the books of the firm. 5
19. Preety and Jyoti are
partners in a firm sharing profits in the ratio of 3:2. The Trial Balance of
the firm as on 31-03-2014 was as follows :-
Prepare the Profit and Loss A/c and the Profit and
Loss Appropriation A/c of the firm for the year ended on 31-03-14 and a Balance
Sheet as on that date after considering the following adjustments: 8
(i) Machinery is to be depreciated by 10%.
(ii) Provision for bad debt is to be increased by
₹200/-.
(iii) Preety was to receive, salary @ ₹300/- per
month.
(iv) Interest on Capital is allowed@ 5% p.a.
20. X Ltd. issued 2,000 shares of ₹100/- each at a premium of ₹20
payable as follows:
₹30/- on Application
₹50/- on Allotment (including securities premium
₹20/-)
₹40/- on First Call & Final Call.
All the shares were duly subscribed for, called up and
paid up, except Miss Nitu who holding 300 shares failed to pay First &
Final call money. Show entries in the Cash Book and Journal of the company for
the above transactions. 8
21. Give
journal entries in respect of the following : 8
(i) Debentures issued at par, redeemable at a premium.
(ii) Debentures issued at a premium, redeemable at
par.
(iii) Debentures issued at a discount, redeemable at
par.
(iv) Debentures issued at a discount, redeemable at
par.
Or
What is meant by Redemption of Debentures? Discuss
briefly any three methods of Redemption of Debentures.
Ans: Redemption of debentures means the repayment of debentures. As
debenture is shown in the liability side of balance sheet it is necessary for
the company to discharge these liabilities. Thus redemption of debentures denotes
discharge of liability on account of debentures by repayment to the debenture
holders. The redemption is made on the expiry of specified period mentioned in
the debenture certificates.
Following are the methods of redemption of debentures:-
(i) By payment in lump sum at the
end of fixed period: Redemption of debenture by making payment in
lump sum at the end of the fixed period means redemption of the whole of the
debentures on a fixed date by making payment at a time to the debenture holders.
(ii) Redemption in instalments: - Redemptions in instalment means that all the debentures are not
redeemed on a particular date. Instead when the company decides to redeem only
a part of the total debenture annually on a particular date and whole of the
debenture are redeemed within the fixed period from the date of issue of
debentures.
(iii) Redemption by purchase in open market: - Sometimes debentures of some companies are
quoted on the stock exchanges. When the price of such debentures quoted in the
stock exchange is lower than the amount agreed to be paid by the company at the
time of redemption as per the terms of issue, the company may discharge its
liabilities in respect of such debentures by purchasing them from the open
market.
(iv) Redemption by Conversion into shares:- Sometimes a company may issue fully
convertible debenture (FCD)/ partly convertible debenture (PCD) i.e. the
debentures are either fully or partly convertible into shares. If such
debentures are converted into shares, it means that the debentures have been
redeemed to the extent of conversion into shares.
22. Ram and Shyam are partners sharing profits and losses in the ratio
of 3:1. Their Balance Sheet as on 31-03-2014 is given below :
Hari was admitted as a new partner on the following conditions :
(i) That Hari will bring ₹40,000/- for his capital and
₹ 20,000/- for the premium for Goodwill.
(ii) That Hari will get 1/3rd share in future profit.
(iii) That the value of stock is be reduced by
₹7,000/-.
(iv) That the value of Plant and Machinery is to be
depreciated by 20%.
(v) Furniture is to be reduced by 10%.
(vi) Bad debts amounted to ₹2000/- and are to be
written off.
There was an unrecorded computer valued at ₹10,000 and
the same is to be brought into books now.
Prepare a Prevaluation
Account, Partners’ Capital Account and the reconstituted Balance Sheet
after Hari’s admission. 3+2+3=8
Or
Who are the users of financial statement? Explain the
information they require from financial statements.
Ans: Users of financial statements may be categorised into two parts:
a. Internal users
b. External users
a. Internal
users:
i. Owners:
Owners are interested to know the profitability and financial position of the
company.
ii. Management:
Management is interested in knowing the existing profits, earning per share,
chances of survival, possibility of growth and diversification, cost
information etc., from the financial statements so that it can chalk out
suitable strategy for its entity.
iii. Employees:
Employees are interested in job satisfaction, job security, bonus declarations,
employee’s welfare scheme etc. of their unit. So they want information on
profitability and future prospects of the company.
b. External
users
i. Creditors:
Creditors are interested in knowing entity’s capability to repay the amount and
interest as and when repayment becomes due. So, they are interested in finding
out profitability, cash flows etc., of the entity.
ii. Potential
investors: The potential investors are keen to know the earning potential
of the business and ensure the safety of their investment.
iii. Research
scholars: The financial statements being a mirror of the financial position
of a firm are of immense value to the research scholar who wants to make a
study into financial operations of a particular firm.
iv. Shareholders:
Shareholders of the business are interested in the well being of the business.
They are likely to know the earning capacity of the business and its prospects
of future growth.
v. Taxation
authorities: Income tax authorities are interested in knowing the profits
of the business so that tax can be imposed thereon.
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