2016
ACCOUNTANCY
Solved Question Paper
1.(a) Fill in the blanks with
appropriate word: 1x4= 4
(i) In the absence of Partnership Deed,
a partner who advances money to the firm beyond the account of his/her capital
is entitled to get interest thereon @ ____% p.a. as per Partnership Act, 1932
Ans: 6
(ii) The members of a partnership
business are collectively known as ____ .
Ans: Partners
(iii) The amount due to the retiring
partner is transferred to his/her ____account in case it is not paid
immediately.
Ans: Loan
(iv) In case of fixed capital, a
partners capital account always shows a ____ balance.
Ans: Credit
(b)
Choose the correct alternative: 1x2=2
(i) Financial Statements of a
company include
a. Balance sheet
b. Profit and loss Account
c. Cash flow statement
d. All of the above
Ans: All of the above
(ii) Profit and loss Account is also
known as _____ statement.
Ans: Income statement.
(c)
State whether the following statements are True or False. 1x2=2
(i) Interest on partners’ capital is
debited to partner’s capital account.
Ans: False
(ii) Debenture holders are creditors of
the company.
Ans: True.
2. State the meaning of not-for-profit
organization. 2
Ans:
Non-trading organizations are those organizations which are established not for
the purpose of earning profit but for the purpose of providing social services
to the people of the society. Such organizations are known as non-trading
organizations. In other words there are certain organizations which are
established with the main objective of rendering services to their members or
society at large. For e.g. club, public school, government hospital, charitable
institution, etc.
3. A and B are
partners sharing profits in the ratio 3:2. C is admitted as a new partner for
1/5th share in the future profits. Calculate the new profit sharing
ratio. 2
Solution:
4. Mention any two distinctions between
shares and debentures. 2
Ans: Following are the differences between Shares and Debentures:
5. A
Ltd. forfeited 500 shares of ₹10/- each, ₹8/- paid, for non-payment of final
call of ₹2/- each.
Give journal
entry of forfeiture of share. 2
6. A and B are
partners in a firm sharing profits in the ratio of 3:2. Their capitals as on
April 1, 2014, were ₹2,00,000/- and ₹1,80,000/- respectively. On October 1,
2014, A introduced an additional capital of ₹50,000/- and on January 1, 2015, B
introduced ₹70,000/-. Interest on capital is allowed at 10% p.a. Calculate interest
on capital for both the partners for the year ending March 31, 2015. 2
7. Explain any three objectives of
preparing a Cash flow statement.
3
Ans: 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.
Or
From the following details, calculate Current
Ratio and Liquid Ratio : 3
8. Mention any three items that can be
shown under the heading “ Reserves & Surplus” in a company’s Balance
sheet. 3
Ans: The three items that can
be shown under the heading “ Reserves & Surplus” in a company’s Balance
Sheet are:
(a) securities Premium
(b) General reserve
(c) Capital Reserve
(d) Surplus for the year
Or
Give three objectives of financial
statement analysis.
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.
9. What is meant by comparative
statements? What do they show? 3
Ans: The comparative financial statements are
statements of the financial position at different periods of time. The elements
of financial position are shown in a comparative form so as to give an idea of
financial position at two or more periods. There are two types of common size
statement:
i. Comparative income statement.
ii. Comparative balance sheet.
Uses of Comparative statements:
a. Comparative statements help to identify
the size and direction of changes in financial position of an enterprise.
b. Comparative statements help to
ascertain weakness and strength about liquidity, profitability and solvency of
an enterprise.
Or
Explain the Capitalization method of
valuation of goodwill.
Ans: Under this method, the average profits are capitalized on the
basis of normal rate of return. The figure ascertained is known as value of
business. From this the net assets of business is deducted, the balance left is
called goodwill.
Capitalised value of Business =
Average profit x 100/Normal rate
Capital Employed = Total assets –
outside liabilities.
Goodwill = Capitalized value of
business – Net assets or capital employed
10. Mention any three distinctions
between Fund-based Accounting and Non-fund based Accounting. 3
Ans: Following are the distinctions between Fund-based
Accounting and Non-fund based Accounting:
Or
Mention three features of a non-trading
organization.
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.
d.
These organizations are voluntary associations of some persons.
11. Mention any three limitations
Financial statements. 3
Ans: Following are the limitations of financial statements:
a. Financial statements are historical in
nature.
b. Financial statements are only interim
reports.
c. Financial statements are influenced by
accounting concepts etc.
d. Financial statements are influenced by
personal judgments.
e. Financial statements do not make use of
standardized terminology.
12. From the
following Receipts and Payments Account for the year ended 31st
December, 2015 and other details of the Sankardev Club, prepare an Income and
Expenditure Account for the year ended 31st December, 2015 : 5
Additional
Information :
(i) Outstanding
Subscription ₹2,500/-
(ii) Outstanding
Salaries ₹1,000/-
(iii) Subscription
for 2015 ₹400/- received in 2014.
Or
Mention any five distinctions between
Receipts & Payments Account and Income & Expenditure Account.
Ans:
Following are the difference between Receipts & Payments account and Incomes & Expenditure
account are:-
13. From the
following details, calculate cash from Investing and Financing Activities: 5
During the
year, machinery costing ₹15,000/- was sold at a loss of ₹3,000.
Depreciation
on machinery charges during the year amounted to ₹9,000.
Or
Explain any five advantages of Cash
flow statement.
Ans: Following are the uses and significance or advantages of cash flow
statement:
a. Cash flow
statement is based on the cash basis of accounting; it is very useful in the
evaluation of cash position of a firm.
b. Cash flow
statement is prepared in order to know the future cash position of a concern so
as to enable a firm to plan and coordinate its financial operations properly.
c. Cash flow
statement helps in planning the repayment of loans, replacement of fixed assets
and other similar long term planning of cash.
d. Cash flow
statement provides information of all activities classified under operating,
investing and financing activities.
e. Cash flow
statement is prepared according to AS-3 (Revised) is more suitable for making
comparisons than the funds flow statement as there is no standard format used
for the same.
14. From the
following details, calculate Gross profit and Sales : 5
Average
Stock= ₹60,000/-
Stock
Turnover ratio=6 times
Selling
Price is 20% above cost
Or
Name any five ratios used for analyzing
the liquidity position of a firm.
Ans: Liquidity ratios are the ratios meant for testing short term financial
positions of a business. Liquidity ratios measure the ability of the unit to
meet its short-term obligations and reveal the short term financial strength
and weakness.
To measure the
liquidity position of a firm, the following ratios can be calculated:
a. Current ratio
b. Quick or Acid Test or Liquid ratio.
c. Absolute Liquid Ratio or Cash position
ratio
d. Interval measure or defensive interval
ratio.
15. Partha, Pranoy and Prasanna are partners
sharing profits and losses in the ratio of 3:2:1. On 31st March,
2015, their Balance Sheet stood as follows :
Pranoy retires
on that date under the following terms :
(i) The Goodwill of the firm is valued at
₹36000/-.
(ii) Plant and Machinery is to be depreciated by
10%.
(iii) Inventory and Buildings are to be appreciated
by 20% and 10% respectively.
Give necessary journal entries in the books of the firm. 5
Or
Explain the procedure of forfeiture of
shares.
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.
16. Anupam,
Binoy and Chandan were partners in a firm sharing profits in the ratio of
2:3:5. On 31st March, 2014, their Balance Sheet was as follows ;
Anupam died on 1st October, 2014. It was agreed between
his executors and the remaining partners that :
(i) Goodwill
will be valued at 3 years purchase of the average profits of the last four
years which were :
(ii) Machinery
and Furniture be valued at ₹36,000/- and ₹56,000/- respectively.
(iii) Profit for
the year 2014-15 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 Anupam shall be transferred
to his Executors’ Loan Account.
Prepare
Anupam’s Capital Account as on the date of his death. 5
Or
Explain the causes of retirement of a
partner from a partnership firm. (any five causes)
Ans: Following are the causes of retirement of a partner from a partnership
firm:
a. A partner may
retire from the firm for various reasons such as old age, bad health, strain
relationship with other partners, financial compulsions or any other reason.
b. With the consent
of all other partners.
c. In accordance with
the express agreement made between the partners, and
d. If the partnership
is at will, by giving a notice in writing to all other partners of his
intention to retire.
17. R,
M and H were in partnership sharing profits and losses in the ratio of 8:5:3 respectively.
The firm’s balance sheet as on 31st March, 2015 was as under :
Or
What do you mean by dissolution of
partnership? State three grounds for dissolution of partnership.
Ans: Dissolution of partnership: Dissolution of partnership means a change in
the existing relationship of partners through reconstitution of the firm
without effecting the entity of the firm. The dissolution of partnership does
not involve the complete breakdown of relationship among the partners but it
merely means a change in the economic relationship.
- As per section 40,
41, 42, 43, 44 of the Indian Partnership Act, 1932 which states that there are
five modes of dissolution of partnership firm. They are as follows:
a. Dissolution by
agreement (Section 40)
b. Compulsory
dissolution (Section 41)
c. Dissolution on the
happening of certain contingencies (Section 42)
a. Dissolution by
agreement: A firm may be dissolved with the consent of all the partners or in
accordance with a contract between the partners.
b. Compulsory
dissolution:
A firm is compulsory
dissolved in the following cases:
(i) When all the partners, except one
become insolvent.
(ii) When all the partners become
insolvent
(iii) When the business becomes illegal,
and
(iv) When the number of partners exceed
twenty in case of an ordinary business or ten in case of a banking business.
c. Dissolution on the
happening of certain contingencies:
A firm may be
dissolved on the happening of any one the following contingencies
(i) By the expiry of the term or duration
of the firm.
(ii) By the completion of the venture for
which firm was constituted.
(iii) By the death of a partner, and
(iv) By the adjudication of a partner as
insolvent.
18. Give the new format to the Balance
sheet of a company (main headings only) as per requirements of Revised Schedule
VI of the companies Act, 1956
Ans:
Or
How would you compute the amount due to
a deceased partner’s Executor?
Ans: On the death of a partner, the legal heir or the executor of the
deceased partner is entitled to get the claim as per the provisions of
partnership deed. Like a retiring partner, the deceased partner’s legal heir is
also entitled to get the following:
a. The amount standing to the credit of
his account.
b. Share of goodwill.
c. Interest on capital, if provided in the
partnership deed.
d. Share of profit or loss on revaluation
of assets and liabilities.
e. Share of profit up to the date of his
death.
f. Share of undistributed reserves,
surplus and accumulated losses.
g. Share of joint life policy.
The following
specimen of deceased partner’s capital will help to find out the amount due to
the deceased partner.
The balancing figure
in capital account is transferred to a loan account opened in the name of the
executor of the deceased partner and the remaining partner will determine as to
how the amount will be paid off. In the absence of any agreement it is provided
by section 37 of Indian Partnership Act, the estate of a deceased partner has
the option either to claim interest on the amount of his share in the property
of the firm @ of 6% p.a. or to such a share of the subsequence profits as may
be attributable to the use of his share of the property of the firm.
19. Following
is the Trial Balance of Sudip and Pradip as on 31st March, 2015 :
Prepare the Profit & Loss Account and the
Profit & Loss Appropriation Account of the firm for the year ended 31st
March, 2015 and a Balance sheet as on that date after taking into consideration
the following additional information : 8
(i) Depreciate Plant & Machinery @ 10%
p.a.
(ii) Prepaid Publicity ₹500/-
(iii) Outstanding Salaries ₹1,150/-
(iv) Provide for doubtful debt @ 5% on Sundry
Debtors
(v) Partners will get interest on capital @
5% p.a
20. Assam
Tea Ltd. has an authorized capital of ₹ 10,00,000/- divided into ₹1,00,000
equity shares of ₹10/- each. The directors decided to issue 50,000 shares to
the public at a premium of 10% payable as follows :
On
Application ₹3/-
On Allotment
(including premium) ₹5/-
and the
balance on 1st and final call.
The company
received applications for 60,000 shares. The directors decided to reject the
excess applications and the money thereon was refunded. All the shares were
duly subscribed for, called up and paid up.
Give Journal entries and prepare a
cash Book in the books of the company. 8
Or
Write short notes on:
a. Calls in
Arrear
b. Calls in
advance
c.
Preference share
d. Right
share
Ans: a. Calls in Arrear: Calls in arrears: - Sometimes some shareholders do not pay their dues on
allotment and or on calls within the fixed period of time. The amount which is
not paid by shareholders is called calls-in-arrears. The company can charge
interest @ 10% p.a. for the period for which such amount remained in arrear
from the shareholders.
b. Calls in advance: Sometimes some shareholder may pay a portion or whole
of the amount due in shares before the amount is called up. Such amount paid in
advance against call is known as calls-in-advance. A company pay interest on
such amount received in advance @ 12% p.a. Interest on calls-in-advance is a
liability against the profits of the company.
c. Preference share: Shares which enjoy the preferential rights as to dividend and repayment
of capital in the event of winding up of the company over the equity shares are
called Preference shares. The holder of preference shares will get a fixed rate
of dividend.
d. Right share: Issue of shares by an existing company to existing shareholders are
known as right issues. Such further shares shall be offered to the person who
on that date are the holders of equity shares of the company proportionately to
their equity holdings on that date.
21. Tata Motors Ltd. invited applications for the
issue of 3,000, 10% debentures of ₹100/- each at a discount of 10% payable
₹30/- on application,₹30/- on allotment (after deducting discount) and the
balance on first and final call. All the debentures were subscribed and the
debenture money was duly called and paid up.
Give journal
entries and show how Debentures Account will be shown in the Balance Sheet of
the Company. 8
Or
Give the accounting entries for issue
of debentures under different situations with imagined figures. (Any four
situations)
Ans:
1. When
debentures are issued at par and repayable at par
At Issue
Bank Account Dr.
To
Debenture Account
At
Redemption
Debenture Account Dr.
To
Bank Account
2. When
debentures are issued at premium and repayable at par
At Issue
Bank Account Dr.
To
Debenture Account
To
Debenture Premium Account
At
Redemption
Debenture Account Dr.
To
Bank Account
3. When
debentures are issued at discount and repayable at par
At Issue
Bank Account Dr.
Discount on Issue of Debenture Account Dr.
To
Debenture Account
At
Redemption
Debenture Account Dr.
To
Bank Account
4. When
debentures are issued at par and repayable at premium
At Issue
Bank Account Dr.
Loss on Issue of Debenture Account Dr.
To
Debenture Account
To
Premium on Redemption of Debenture Account
At
Redemption
Debenture Account Dr.
Premium on Redemption of Debenture Account Dr.
To
Bank Account
22. A and B two partners sharing profits and
losses in the ratio of 3:2. Their Balance Sheet as on 31st March,
2015 was as follows :
On 01-04-2015, C was admitted as a new
partner for 1/4th share in the future profits on the following
conditions :
(i) C will bring ₹20,000/- as Capital and
₹6,000 as premium for goodwill.
(ii) The Land and Buildings will be revalued
at ₹35,000/-.
(iii) Plant and Machinery and Furniture will
be depreciated by 5% and 10% respectively.
(iv) Stock will be reduced by ₹2,000/-
Give journal entries and prepare the Balance
Sheet of the firm after C’s admission. 6+2=8
Or
Give the Accounting entries relating to
forfeiture and re-issue of shares with imaginary figures.
Ans: Journal entries relating to forfeiture and re-issue of
shares with imaginary figures:
XY Ltd. Company forfeited 1000 shares of Rs. 10 each issued
at par for non-payment of share 1st call of Rs. 2 and Share final
call of Rs. 3 each. Out of this forfeited share 800 shares were re-issued at a
discount of 10%.
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