2018
ACCOUNTANCY
SOLVED
QUESTION PAPER
1. (a) Fill in the blanks with appropriate word:1x4=
4
(i) The interest due to the retiring partner is
transferred to his ___ account in case it is not paid immediately.
Ans: Loan
(ii) A partner acts as _____ of the firm.
Ans: Agent
(iii) In case of fixed capital, a partner’s capital
account always shows a ______ balance.
Ans: Credit
(iv). Unrecorded assets when realized are credited to
_____ account.
Ans:
Realisation account
(b) Choose the correct alternative: 1x2=2
(i) Balance sheet shows:
a. Financial position of a company
b. Profit and loss of a company
c. Cash flow of a company
d. All of the above
Ans:
Financial position of a company
(ii) Financial statements are:
a. Detailed reports of the recorded facts.
b. Detailed reports of the cash transactions only.
c. Summarized reports of recorded facts.
d. Summarized reports of the financial institutions
only.
Ans: Summarized reports of recorded facts
(c) State whether the following statements are True or
False. 1x2=2
(i) Interest on partners capital is credited to
partners drawings account.
Ans: False
(ii) Life membership fee is a revenue receipt.
Ans: False
2. State any two features of a not-for-profit
organization. 2
Ans: Following are the features of a
not-for-profit organization:
a. Voluntary association: It is a voluntary
association of some persons.
b. Entity: Such organization has a separate entity
other than its members.
c. Non-profit motive: Such organization carries
on its activity without any profit motive.
3. What is a common size statement? 2
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.
4. Mention any two distinctions between shares and
debenture. 2
Ans:
Following are the distinctions between shares and debenture:
5. What do you mean by Forfeiture of shares? 2
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.
6. What do you mean by comparative statement? 2
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.
7. Explain the meaning of cash flow from financing
activities. 3
Ans: Cash flows from financing activities: Financing
activities are activities that result in changes in the size and composition of
the owner’s capital and borrowings of the enterprise. Cash flows arising from
financing activities is important because it is useful in predicting claims on
future cash flows by providers of funds to the enterprise.
Or
7. From the following information, calculate stock Turnover ratio. 3
8. Mention any
three objectives of financial statement analysis. 3
Ans: Followings are the objectives of financial statement analysis:
(i) Assessing the creditability: - The business
may have to offer credit to prospective dealers and buyers therefore it is
essential to analysis their creditworthiness.
(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
Briefly explain
the nature of financial statements. 3
Ans: Following are the nature of financial statements:
a. Financial
statements are prepared as per accounting conventions and as per generally
accepted accounting principles.
b. Financial
statements are influenced by the personal judgements of the policy makers.
c. Financial
statements are based on recorded facts.
d. Financial
statements are prepared usually at the end of an accounting period.
e. Financial
statements are summarized reports.
9. Mention any
three limitations of financial statements. 3
Ans: Followings 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.
Or
Explain the meaning of Ratio
Analysis. 3
Ans:
Ratio analysis is a technique of analysis and interpretation of financial
statements. It is the process of establishing and interpreting various ratios
for helping in making certain decisions. Ratio analysis is not an end in
itself. It is only a means of better understanding of financial strength and
weakness of a firm.
Classification of ratios:
(i) Liquidity ratios
(ii) Solvency ratios
(iii) Efficiency ratios
(iv) Profitability ratios.
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
What do you mean by Income and Expenditure
Account? 3
Ans: Income
and Expenditure account is a nominal
account which is usually prepared by a non trading- organization in lieu of
profit and loss account . It records revenue expenditure on debit side and
revenue income on the credit side. The balancing figure of this account
represents either surplus or deficit.
Following are
the features of income and expenditure account:-
(a) It is a
nominal account.
(b) It is
prepared on accrual basis of accounting.
(c) It is a
substitute of profit and loss account prepared by a non-trading organization at
the end of an
accounting period to find out surplus or deficits.
(d) It
includes only revenue nature items i.e., capital nature items are ignored.
(e) It
records revenue expenditure on the debit side and revenue income on the credit
side.
11. Amar and Bahadur are partners of a firm sharing
profit in the ratio of 3:2. They admit Mery as anew parter for 1/4 the share in
future profit. The new profit sharing ratio between Amar and Bahadur is agreed
to be 2:1. Calculate their sacrificing ratio. 3
Or
Ranjana, Sadhana and kamona are partners sharing
profits in the ratio of 4:3:2. Rajana retires; Sadhana and Kamona agree to
share future profits in the ratio of 5:3. Calculate the gaining ratio. 3
12.From the following Receipts and Payment Account for
the year ended 31:03:2017 and other details of KAZIRANGA SPORTING CLUB, prepare
an Income and Expenditure account for the year ended 3103.2017. 5
Additional Information:
(i) Outstanding salaries ₹2000/-
(ii) Prepaid rent = ₹1000/-
Solution :
Or
Explain the steps in preparation of Income and
Expenditure Account. 5
Ans.
Following are the procedure of preparing an income and expenditure account from
a given receipts and payments account:-
(a) Leave the
opening and closing balances of cash and bank balances given in the receipts
and payments account.
(b) Take only
revenue nature items of income and expenditure and ignore all capital nature
items.
(c) Make all
adjustments for outstanding and prepaid expenses, provision for depreciation
etc.
(d) Take only
the items related to current year .i.e. items relating to the previous year and
next year are to be ignored.
13.Charls Ltd. Made a profit of ₹1,00,000/- after
charging depreciation of ₹20,000/- on assets and transfer to general reserve of
₹30,000/-. The goodwill written off was ₹7,000/- and gain on sale of machinery
was ₹3,000. Other information available to you (changes in the value of current
assets and current liabilities) are: Debtors showed an income of ₹6,000/-;
Creditors an increase of ₹1,000/-; Prepaid expenses an increase of 200/-; Bills
receivable a decrease of ₹3,000/- bills payable a decrease of ₹4,000/- and
outstanding expenses a decrease of 2,000/-. Ascertain cash flows from operating
activities. 5
Solution:
Or
Explain the terms:
(i) Cash Equivalents
(ii) Cash inflows (3+2
= 5)
Ans: (i) Cash
Equivalents: Cash equivalents:
Cash equivalents are short term, highly liquid investments that are readily
convertible into cash and which are subject to an insignificant risk of changes
in value. Cash equivalents are held for the purpose of meeting short-term cash
commitments rather than for investment or other purposes.
(ii) Cash flows: cash flows are inflows and outflows of cash and cash
equivalents. Flow f cash is said to have taken place when any transaction makes
changes in the amount of cash and cash equivalents available before happening
of the transaction. If the effect of transaction results in the increase of
cash and its equivalents, it is called inflow (source) and if the effect of
transaction results in the decrease of total cash, it is known as outflow (use)
of cash.
14. Mention any five objectives of Ratio analysis. 5
Ans: Following are the limitations of ratio
analysis:
a. Lack of adequate standards: There are no well accepted standards or rules for all ratios which can
be accepted as norms. It renders interpretation of the ratios difficult.
b. Change of accounting procedure: Change in accounting procedure by a firm often makes ratio analysis
misleading.
c. Price level changes:
Changes in price levels often make comparison of figures for various years
difficult.
d. Inherent limitations of accounting: Like financial statements, ratios also suffer from the inherent
weakness of accounting records such as their historical nature. Ratios of the
past are not necessarily true indicators of the future.
e. Personal Bias:
Ratios are only means of financial analysis and not an end in itself. Ratios
have to be interpreted and different people may interpret the same ratio in
different way.
Or
Calculate current assets of a company from the
following information: 5
15. Shaym, Gagan an Ram are partners sharing profits
in the ratio of 2:2:1. On 31.3.2017, their Balance Sheet was as follows: 5
Gagan retired on that date and Shaym and Ram agreed to
share future profits on the ratio of 5:3.
Stock, machinery and Building were revalued at 20,000,
15,000/- and ₹45,000/-.
Prepare Revaluation A/c and Partners Capital A/c. 5
Or
Prepare the new format of the Balance sheet of a company
with major headings only. 5
Solution:
16. Mohit, Shohan and Rahul are parties sharing
profits in the ratio of 2:2:1. On 31st March, 2017, their balance
Sheet was as follows: 5
Sohan died on June 30, 2017. It was agreed between the
remaining partners and is executors that:
(i) Goodwill will be valued at ₹50,000/-
(ii) Interest on Capital to be provided at 10% P.A.
(iii) Profit for the year 2017-18 be taken as having
accrued at the same ratio as that of the previous year which was ₹40,000/-
(iv) The amount due to Shohan shall be transformed to
his Executors loan account.
Prepare Shohan’s capital Account as on the date of his
death. 5
Or
What is partnership deed? Mention any three
distinctions between Fixed and Fluctuating capital accounts of partners. 5
Ans: Partnership comes into existence on account of
an agreement. This agreement may be in writing or oral. This written document
containing the various terms and conditions among the partners is known as
partnership deed.
According to Kohler, “Partnership deed is an instrument drafted and
signed by partners for defining the various rules and regulations of the firm”.
Following are
the differences between Fixed capital and Fluctuating capital:
17. Sonu and Ashu were partners sharing profit in the
ratio of 3:1. Their Balance Sheet as on 31.03/2017 was as follows:
The firm was dissolved on the above date. The assets
were realized at ₹50,000. Creditors were paid at a discount of 20%. Sonu agreed
to pay off the loan. Realisation expenses were 2000. Prepaid Realisation A/c.
Partners Capital A/c and Bank A/c . 5
Solution:
Or
What do you mean by Dissolution of partnership? State
three grounds for Dissolution of partnership. 5
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)
d. Dissolution by notice of partnership at will (Section 43)
e. Dissolution by the court (Section 44)
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. Explain the term Over-subscription and
Under-subscription. (2.5+2.5= 5)
Ans. Under- subscription: When a company receives application less than
the shares company has offered for subscription than it is called
under-subscription of shares. For example if a company invites application for
10000 shares and applications are received from public for 8000 shares, the
issue is said to be under-subscribed.
Over-subscription: When
company receives application more than the shares company has offered for
subscription then it is called over-subscription. For example if a company
invites application for 10000 shares and applications are received from public
for 12000 shares then the issue is said to be over-subscribed.
Or
What is preference share? Mention the different types
of preference shares. 5
Ans. 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.
Following are the different types of Preference shares:
A. On the basis of dividend
rights:
a. Cumulative preference share: They have the right to receive arrears of dividend before the dividend
is paid to the equity shareholders.
b. Non-Cumulative preference share: They do not have the right to receive arrears of dividend before the
dividend is paid to the equity shareholders.
B. On the basis of
convertibility:
a. Convertible preference share: They have the right to converted
into equity shares.
b. Non convertible preference share: They do not have the right to converted into equity shares.
C. On the basis of refund of
capital:
a. Redeemable preference shares: Redeemable preference shares are those shares which are redeemable
after the expiry of specific period of time.
b. Irredeemable preference shares: Irredeemable preference shares are those shares which are not redeemed
by the company except in case of winding up of company.
D. On the basis of participation:
a. Participating preference shares: They have the rights to participate in remaining profits after payment
of dividends to the equity shareholders.
b. Non participating preference shares: They do not have the rights to participate in
remaining profits after payment of dividends to the equity shareholders.
19. Following is the Trial Balance of Ram and Shyam as on 31-03-2017. 8
Prepare a Profit & Loss A/c and the Profit &
Loss Appropriation A/c of the firm for the year ended31st March, 2017 and a
Balance Sheet as on that date, after taking into consideration the following
additional information: 8
i. Outstanding Salaries ₹3,000/-
ii. Ram will get a Commission of ₹10,000/- for
the year.
20. Honda Ltd. issued 10,000 equity shares of 100 each
payable as follows:
₹20/- on application
₹30/- on allotment
₹20/- on first call
₹30/- on second and final call
10,000 shares were applied for the allotted. All
money due was received with the exception of both the calls on 300 shares held
by Supriya. These shares were forfeited. Give necessary journal entries. 8Or
Write short notes on:
(i) Re-issue of forfeited shares
(ii) Calls in
arrear
(iii) Calls in advance
(iv) Reserve capital (4x2=
8)
Ans: (i)
Re-issue of forfeited shares: As
per clause 31(1) of the table ‘F’ to the companies Act, 2012, forfeited share
may be sold or otherwise disposed off on such manner as the board thinks fit.
Clause 32(1) of the
table ‘F’ gives absolute power to the board of directors regarding the reissue
of forfeited shares. They have the right to reissue either whole or part of the
shares forfeited. They have the authority to fix the terms and price of reissue
of such shares. Hence, they can re-issue the forfeited shares at par or at a
premium or at a discount.
(ii) Calls
in arrear: 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.
(iii) 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.
(iv) 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.
21. X Ltd.
Issued 5,000, 16% debentures of ₹100/- each at a discount of 5% repayable after
5 years at a premium of 5%. You are required to pass journal entries and show
the “Loss on Issue of Debentures Account” over the period of five years. 8
Or
What is meant by debenture?
Explain the different types of debenture. 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.
Following are the different types of debentures:
A. On the basis of securities:
a. Secured or Mortgaged debenture: - When debentures are secured by the assets of the company they are
called Secured or Mortgaged debenture.
b. Naked or Simple debenture:- When no security is given against debenture they are called Naked or
Simple debenture.
B. On the basis of Redemption:
a. Redeemable debenture:
- When debentures are repayable after a specified period they are called
redeemable debentures.
b. Irredeemable debenture: - When debentures are repayable only when the company goes into
liquidation they are called irredeemable debenture.
C. On the basis of Registration:
a. Registered debenture: - Registered debenture is payable to a person whose name is appears in
the register of debenture holders.
b. Bearer Debenture: -
A bearer debenture is one which is payable to the bearer of the debentures.
D. On the basis of convertibility:
a. Convertible debenture: - Convertible debentures are those debentures which can be converted into
shares.
b. Non-convertible debenture: - Non-convertible debentures are those debentures which cannot be
converted into shares.
22. A and B are partners sharing profits in the ratio of
3:2. Their Balance Sheet as on 31st March, 2017 was as follows: 8
C was admitted as new partner on the following terms
and conditions:
1) C will bring ₹15,000/- for capital and ₹5,000 for
his share of Goodwill for 1/6th share in the future profits.
2) The value of stock to be reduced by ₹2,000/- and
that of machinery be increased by ₹8,000/-
3) The value of furniture to be fixed at ₹9,000/-
Pass
journal entries in the books of the firm and prepare the Balance Sheet of the
new firm.
Or
Give journal entries on dissolution of a Partnership
firm in respect of the following: 1x8=8
a) For transfer of assets.
b) For sale of assets.
c) If any partner takes over any asset.
d) For payment of Realisation Expenses.
f) For realization of unrecorded assets.
g) For transfer of the balance of General Reserve
Account.
h) For payment of Partners’ Loan. 8
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