2016 H.S. 2nd Year ACCOUNTANCY Solved Question Paper


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 ;

Balance Sheet
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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