2017
ACCOUNTANCY
Solved
Question Paper
1.(a) Fill in the blanks with appropriate word: 1x4= 4
(i) Unrecorded assets when realized are credited to
___ account.
Ans:
Realisation.
(ii) When partner’s capital accounts are fixed, their
____ accounts are prepared.
Ans: Current.
(iii) Partners
loan account is paid before payment of ____ .
Ans: Partners
capital.
(iv) If a
partner takes over a liability of the firm, the partner’s capital account is
___.
Ans: Credited
(b) Choose the
correct alternative 1x2=2
(i) Financial statements are
a. Summerised reports of recorded facts.
b. Detailed
reports of recorded facts.
c. Summarized reports of only cash transactions.
d. None of the above
Ans:
Summerised reports of recorded facts.
(ii) Financial statements of a company include
a. Only Balance sheet
b. Only profit & loss account
c. Only cash flow statement
d. All of the above
Ans: All of
the above.
(c) State whether the following statements are True or
False 1x2=2
(i) Financial analysis is used only by the creditors.
Ans: False
(ii) The decreased partner’s executor is entitled to a
share of profit for the period up to his/her death.
Ans: True
2. What is a capital Fund? 2
Ans: In case
of non trading organizations, excess of assets over liabilities is called capital
fund. The capital fund is built up out of surplus derived from income and
expenditure account. It also includes donation, legacy and entrance fees to the
extent capitalized.
3. Ram, Shyam and Hari are partners
sharing profits in the ratio of 2:2:1. Hari retires. Ram and Shyam have decided
to share future profits and losses in the ratio of 2:1. Calculate the gaining
ratio. 2
4. Mention any two features of debentures. 2
Ans:
Following are the features of debenture:
a. It is an acknowledgement of debt or loan taken by a company.
b. A debenture is generally redeemable.
c. Its face value is pre- determined.
5. Assam Tea Ltd. decided to forfeit 1,000 shares of
Rs. 20/- each for non-payment of allotment money of Rs. 5/- each and 1st
and final call money of Rs. 2/- each. Give journal entry for the forfeiture of
shares. 2
6. 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.
7. What are the sources of Cash Flows as per AS-3
(Revised)? 3
Ans:
Following are the sources of Cash Flows
as per AS-3 (Revised):
a. Cash flows
from operating activities.
b. Cash flows
from investing activities.
c. Cash flows
from financing activities.
Or
From the following details, calculate Current Ratio: 3
Rs.
Sundry Debtors
10,000/-
Stock
8,000/-
Prepaid Expenses
6,000/-
Sundry Creditors
8,000/-
Bank Overdraft 2,000/-
Interest Payable 2,000/-
Debentures 50,000/-
Buildings 1,00,000/-
8. Explain the meaning of financial statements. 3
Ans: Financial
statements are the end product of accounting records. It is prepared for the
purpose of presenting a periodical review on the progress made by the
organization. It also provides an overview of business profitability and
financial position in both short run and long run. Financial statements also
help to identify the strength and weakness of the business.
Or
What is Trend analysis? Mention its usefulness. 3
Ans: Trend analysis is also an important tool of horizontal financial
analysis. Under this technique of financial analysis, the ratios of different
items for various periods are calculated and than a comparison are made. The
information for a number of years is taken up and one year, generally the first
year, is taken as a base year. The figures of the base year are taken as 100
and trend ratios for other years are calculated on the basis of base year.
Uses of Trend
analysis:
a. Trend
analysis is a technique used in technical analysis that attempts to predict the
future stock price movements based on recently observed trend data.
b. Trend
analysis is based on the idea that what has happened in the past gives traders
an idea of what will happen in the future.
9. What is common size statement? What do they show? 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
Explain any one method of valuation of Goodwill. 3
Ans:
Calculation of Goodwill by average profit method.
The
average profit of given number of past years multiplied by an agreed number is
considered to be the value of goodwill.
Steps for
calculating the value of goodwill under average profit method:
(i) Calculate
the total profits of the agreed number of years.
(ii)
Calculate the average total profit divided by number of years.
(iii)
Calculate the value of goodwill = average profit x number of years purchase.
10. State any three features
of Receipts and Payments account. 3
Ans: Following are the features of Receipts and
Payments Account:
a. It is a real
account.
b. It is a summary
of cash book, like a cash book receipts are shown on the debit side and payments
are shown on the credit side.
c. It is
prepared on cash basis of accounting i.e. it does not include any non cash
items.
d. It includes
both capital and revenue nature item.
e. It records
all the items which are related to current year, previous year and next year.
Or
Explain the meaning of
Fund-based Accounting. 3
Ans: The term fund means cash
or cash equivalent. Fund based accounting is a system followed by a non trading
organization to manage their money. In fund based accounting specific fund is
exist for specific purposes. Fund based accounting essentially involves
preparation of financial statements and consolidation of those statements to
represent the financial position of the organization as a whole.
11. Mention any three
limitations of Financial Statements. 3
Ans: Following are the limitations of financial
statements:
1. Financial statements are historical in nature.
2. Financial statements are only interim reports.
3. Financial statements are influenced by accounting
concepts etc.
4. Financial statements are influenced by personal
judgments.
5. Financial statements do not make use of
standardized terminology.
12. Guwahati
Sports Club has a Cash and Bank Balances of Rs. 5,000/- and Rs. 10,000/-
respectively on 01-04-2015. From the following details, prepare a Receipts and
Payments Account for the year ended 31-03-2016: 5
Rs.
Entrance fee received 8,000/-
Donation received
10,000/-
Donation received for Building 10,000/-
Computer purchased 12,000/-
Salary Paid 5,000/-
Repair to Building 6,000/-
Rent received
5,000/-
Wages paid 3,000/-
Outstanding salaries 2,800/-
Depreciation on Furniture 13,000/-
Maintenance Grant received 8,000/-
Subscription received 10,000/-
Life Membership Fees received 10,000/-
Cash in hand on 31-03-2016 40,000/-
Or
Mention any five distinctions
between Receipts & Payments Account and Income & Expenditure Account. 5
Ans: Following
are the distinctions between Receipts & Payments Account and Income &
Expenditure Account:
13. From
the following information, ascertain “Cash Flow from Investing Activities”: 5
Or
Explain the meaning of Cash
Flow Statement. Mention any three objectives of Cash Flow Statement. 5
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.
14. From the following information, calculate (i) Current Assets (ii)
Current Liabilities and (iii) Quick Ratio. 5
Working Capital= Rs. 40,000/-
Current Ratio = 2:1
Stock = Rs. 30,000/-
Or
What do you mean
by Activity Ratios? Explain the calculation of any one of Activity Ratios. 5
Ans: Activity or turnover ratios are concerned with
measuring the efficiency in assets management. Efficiency implies effective
utilization of available resources. The term turnover refers to the utilization
of a resources or an asset in the process of business activity.
Types of activity ratios:
a. Inventory turnover ratio
b. Debtors turnover ratio
c. Creditors turnover ratio
d. Total asset turnover ratio
e. Fixed assets turnover ratio
f. Current turnover ratio
g. Working capital turnover ratio
Inventory turnover ratio:
This ratio establishes a relationship between costs of goods sold and average
inventory. The objective of computing this ratio is to ascertain the efficiency
with which the inventory is utilised. This ratio is computed by dividing the
costs of goods sold by the average inventory. This ratio is generally expressed
as number of times.
Formula for calculating
Inventory turnover ratio = Cost of goods sold/Average inventory.
15. The Balance Sheet of
Ram, Shyam and Hari who were sharing profits in proportion to their capital
stood as follows on 31st March, 2016:
Shyam retired on the above date on the following terms
and conditions:
(i) That stock be depreciated by Rs. 1,000/-
(ii) That Buildings be appreciated by 20%.
Pass the necessary journal entries and prepare the
opening Balance Sheet of the new firm. 5
Or
Explain the
issue of shares at par, at a discount and at a premium. 5
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.
16. A, B and C were partners in a firm sharing profits in the ratio of
3:2:1. Their Balance Sheet as on 31-3-2016 was as follow:
A died on 30-09-2016. Under the agreement, the
executors of the deceased partner were entitled to:
(a) Amount outstanding to the credit of partner’s
capital account.
(b) Interest on capital at 12% per annum.
(c) Share of goodwill on the basis of four years’
purchase of the average profit of last three years.
(d) Share of profit from closing of the last financial
year to the date of death on the basis of last year’s profit.
(e) Profits for the last three years were:
Year Profit
Rs.
2013-14 8,000/-
2014-15 12,000/-
2015-16 7,000/-
Prepare A’s capital Account on the date of his death. 5
Or
How do you
compute the amount due to retiring partner or the executors of a deceased
partner? 5
Ans: The
amount due to the retiring partner is paid off according to the agreement
between the partners. Retiring partner’s total claim has to be first
ascertained by preparing capital account of the retiring partner, before the
final payment is made to him. A brief account of what is to be credited and
debited to retiring partner account is given below:-
Credit:-
(i) Opening balance of capital and current account due to him.
(ii) Interest on capital.
(iii) Share in goodwill.
(iv) Share in revaluation profits.
(v) Share in accumulated profit and reserves.
(vi) Share in current year profits, if any i.e. from the closing of
previous year account to the date of retirement.
(vii) Share in life policy surrender value.
(viii) Liabilities taken over by partner.
Debits:-
(i) Opening balance of capital and current account due from him.
(ii) Interest on drawings.
(iii) Drawings.
(iv) Share in accumulated losses.
(v) Asset taken over by retiring partner.
(vi) Share in revaluation loss.
(vii) Share in current year losses, if any.
If the total of credit side is more than the debit side, the difference
is the amount due to him and in case the total of debit side is more than the
total of credit side, the difference is the sum due by him to the firm.
17. Akash and Bikash are partners sharing profits in the ratio of 3:2.
Their Balance Sheet as on 31-03-2016 was as follows:
The firm is dissolved on the above date. Assets are
realised at Rs. 60,000/- Dissolution expenses came to Rs. 2,000/-.
Give journal entries to close the books of firm. 5
Or
Explain any five
distinctions between Revaluation Account and Realisation Account. 5
Ans: Following are the distinctions between
Revaluation Account and Realisation Account:
18. What do you
mean by preliminary expenses? Mention the items which are usually included in
the list of preliminary expenses. 5
Ans: Preliminary
expenses are those expenses which are necessarily incurred in connection with the
formation of a company. These expenses are also known as promotion, floatation
or foundation expenses. Preliminary expenses may be written off against
securities premium account.
Preliminary expenses include:
a. Cost of drafting, printing and issuing prospectus.
b. Cost of preliminary books and common seal.
c. Cost of drafting and printing different documents for registration of
a company.
d. Stamp duty on authorised capital.
e. Underwriting commission payable.
Or
Give the new
format of the Balance Sheet of a company (main headings only) as per the
requirements of the revised schedule-VI of the companies Act. 5
19. Following is the Trial Balance of Anima and Pramita as on 31st
March, 2016:
Prepare the Profit & Loss A/c and the Profit &
Loss Appropriation A/c of the firm for the year ended 31st March,
2016 and a Balance Sheet as on that date after taking into consideration the
following additional information: 8
(i) Depreciate Machinery @ 10% p.a.
(ii) Partners will get interest on capital @ 10% p.a.
20. NE Traders Ltd. issued 5,000 shares of Rs. 20/- each at par payable
as follows:
Rs. 5/- on Application
Rs. 5/- on Allotment
Rs. 5/- on First call
Rs. 5/- Second and Final Call.
All the shares were duly subscribed for, called up and
paid up. Show the necessary entries in cash book & journal of the company
for the above transactions. 8
Or
Write short
notes on:
a. Minimum subscription
b. Authorised Share capital
c. Reserve capital
d. Preference share (4x2= 8)
Ans: a Minimum
subscription: Minimum subscription means the minimum amount
that in the opinion of the directors, must
be raised to meet the needs of business operations of the company relating to:
The price of any property purchased, or to be purchased, which has to be
met wholly or partly out of the
proceeds of issue.
Preliminary expenses payable by
the company and any commission payable in connection with the issue of share; the repayment of money borrowed by the company for the above two matters;
Working capital; and any other expenditure required for the usual conduct of business
operations.
It is to be noted that minimum subscription of capital cannot be less
than 90% of the issued amount according to SEBI guidelines.
b. Authorised Share capital: The amount of capital with which the company
intends to be registered is called authorised capital. This amount is mentioned in
the capital clauses of memorandum of association.
c. Reserve capital: Reserve capital is that portion of the
subscribed capital which not been called up, and the company has, by special
resolution, resolved that it can be called up only in the event of the winding
up of the company.
d. 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.
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
premium.
Or
Explain the
different methods of redemption of debentures. 8
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 in a firm sharing profits and losses in the ratio of
3:1. Their Balance sheet as on 1st April, 2016 was as under:
On that date, Barun was admitted as a new partner. He
paid Rs. 30,000/- towards his capital, but was unable to bring his share of
Goodwill of Rs. 6,000/- in cash. The new profit sharing ratio was agreed to be
3;2:2.
Pass journal entries in the books of the firm and show
the Balance Sheet of the new firm. 8
Or
What do you mean by
Debenture? Explain any six points of distinctions between shares and
debentures. 8
Ans: Debenture
is an instrument in writing given by a company acknowledging the liability for
the total amount received as a result of issue of debentures and agreeing
thereby to pay the money raised after the expiry of the stipulated period at a
certain rate of interest per annum.
Followings are the distinctions between shares and
debentures:
