CBSE Sample Paper 7 For Accounts

Posted on - 30-05-2017

CBSE

Q.1

Distinguish between dissolution of a firm and reconstitution of a firm.

Solution

In case of dissolution of a firm, the business of the firm is closed while in case of reconstitution of a firm, the firm continues.

Q.2

At the time of dissolution of the partnership firm realization expenses amounted to Rs. 2,400 paid by Richa, a partner, who was to bear these expenses. What entry is required in the books of the firm?.

Solution

No entry is required, as the expenses are to be borne by the partner.

Q.3

What is sacrificing ratio?

Solution

Sacrificing ratio means the ratio in which a partner agrees to surrender his share of profit in favour of another partner.

Q.4

Give anyone difference between the dissolution of partnership and dissolution of a partnership firm.

Solution

Dissolution of partnership firm involves the complete breakdown of relations between the partners while dissolution of partnership does not necessarily involve dissolution of firm.

Q.5

Give the meaning of "Issue of Debentures as a Collateral Security".

Solution

Issue of debentures as a collateral security means issue of debentures to lenders as an additional security i.e. in addition to the principal security.

Q.6

What is meant by calls in advance?

Solution

Calls in advance means call not due but paid by the shareholder in advance.

Q.7

PS Ltd. forfeited 500 equity shares of Rs. 100 each for the non-payment of first call of Rs. 30 per share. The final call of Rs. 10 per share was not yet made. The forfeited shares were re-issued for Rs. 65,000 fully paid-up. Pass necessary Journal Entries in the books of the company.

Solution

Working Note

Q.8

Give Journal Entries in each of the following cases if the face value of a debenture is Rs. 100 :.

A debenture issued at Rs. 110 repayable at Rs. 100.
A debenture issued at Rs. 100 repayable at Rs. 105.
A debenture issued at Rs. 105 repayable at Rs. 105.

Solution

(a)

(b)

(c)

Q.9

On the basis of following information, calculate the amount of stationery to be shown inIncome and Expenditure Account for the year ended 31st March, 2007.

Solution

Consumption of Stationery = Opening stock + Amount paid + Creditors (beginning) + Creditors (end) - Closing stock

= Rs. 50,000+ 2,00,000- 20,000+10,000-40,000.

= Rs. 2,00,000.

Q.10

Sita and Priya entered into the partnership firm on 1st April, 2014 dealing in manufacturing garments. They contributed capitals of Rs. 2,00,000 and Rs. 1,00,000 each. Both of them decided to supply fifty percent of the production to the nearby villages keeping their profit margin low. They closed their books on 31st March, 2015 providing interest on capital @ 10% instead of 8%.

Pass the necessary Journal entry to rectify the error and highlight the values indicated above.

Solution

Adjustment Table

Journal

Value : Sensitivity towards lower income group, generosity, helpfulness.

Q.11

A and B were partners in a firm sharing profits and losses in the ratio of 5 : 3. They admitted C as a new partner. A surrendered 1/3rd of his share in favour of C and B surrendered 1/4th of his share in favour of C. C brought Rs. 1,50,000 for his capital and Rs. 58,000 for his share of goodwill. Calculate new profit sharing ratio of A, Band C, sacrificing ratio of A and B and pass necessary journal entries for the above transactions on C' admission.

Solution

A's old share = 5/8

A's sacrifice = 5/8 X 1/3 =5/24

A s new share = 5/8 – 5/24 = 15-5/24 = 10/24

B’s old share = 3/8

B's sacrifice = 3/8 X ¼ =3/32

B’s New share =3/8 – 3/32 =12-3/32 = 9/32

C,s share = 5/24 + 3/32 = 20+9/96 = 29/96

New share of A, B and C

= 10/24 : 9/32 : 29/96 = 40/96 : 27/96 : 29/96

= 40 : 27 : 29

(ii) Sacrificing ratio of A and B

=5/24 : 3/32

= 20 : 9

Second Part

Q.12

Nikhil Ltd. purchased a running business from Sonia Ltd. for a sum of Rs. 22,00,000 by issuing 26;060 full paid equity shares of Rs. 100 each at a premium of 10%. The assets and liabilities consisted of the following:.

Machinery Rs. 7,00,000, .
Trade Receivables Rs. 2,50,000, .
Inventory Rs. 5,00,000, .
Building Rs. 11,50,000 and Trade Payables Rs. 2,50,000. .

Pass necessary Journal entries in the books of Nikhil Ltd. for the above transactions.

Solution

Working notes :

(i)

(ii)

No. of equity shares to be issued = 22,00,000/100+10 = 20,000 shares.

Q.13

Rajat and Ravi are partners in a firm sharing profits and losses in the ratio of 7: 3. Their Balance Sheet as at 31st March 2014 is as follows:.

On 1st April, 2014, they admit Rohan on the following terms:

Goodwill is valued at Rs. 40,000 and Rohan is to bring in the necessary amount in cash aspremium for goodwill and Rs. 60,000 as capital for 1/4 share in profits.
Stock is to be reduced by 40% and furniture is to be reduced to 40%.
Capitals of the partners shall be proportionate to their Profit Sharing Ratio taking Rohan's Capital as base. Adjustments of capitals to be made by cash. Prepare Revaluation Account, Partners' Capital Accounts and Cash Account.

Solution

Rohan's Capital A/c

Rajat's Capital A/c

Ravi's Capital A/c

Cash A/c

Working Notes :

(i) New profit sharing ratio:

Total Profit =1

Rohan's Share = ¼

Remaining Profit = 1- ¼ = ¾

Rajat’s Share = ¾ X 7/10 = 21/40

Ravi’s Share = ¾ X 3/10 = 9/20

New Ratio of Rajat, Ravi and Rohan = 21/40 : 9/40 : ¼ (10/40) = 21 : 9 : 10.

(ii) If nothing is given in the question, the old ratio will be the sacrificing ratio. Hence, sacrificing ratio of Rajat and Ravi would be 7 : 3.

(iii) Adjustment of Capitals

Rohan's Capital for 1/4th share =Rs. 60,000.

Total Capital of the Firm = Rs. 60,000 X 4/1 = Rs. 2,40,000.

Rajat's Capital = Rs. 2,40,000 X 21/40 = Rs = 1,26,000.

Ravi's Capital =Rs. 2,40,000 X 9/40 = 54,000.

(iv) Total Goodwill of the Firm =Rs. 40,000

Goodwill brought in by Rohan =Rs. 40,000 X 1/4 .

= Rs. 10,000.

Q.14

X, Y and Z were partners in a firm sharing profits in the Ratio of 5:3:2. On 28.2.2014 their firm was dissolved. The Balance Sheet of the firm on the dissolution was as follows:.

Assets realised as follow: Debtors Rs. 1,27,000, Stock at 10% less, Furniture was taken over by X for Rs. 40,000. Building was sold for Rs. 15,70,000. 50% of the Machinery was taken over by Y at 50% less than the book value. Bank loan was paid with interest Rs. 4,500. Remaining machinery was sold at 50% profit. Creditors allowed a discount of 10%. Expenses of dissolution Rs. 5,000 were paid by X. Prepare Realisation Account, Partners' Capital Accounts and bank Account.

Solution

Q.15

'Ananya Ltd.' had an authorised capital of Rs. 10,00,00,000 divided into 10,00,000 equity.

sharesofRs. 100 each. The company had already issued 2,00,000 shares. The dividend paid per share for the year ended 31.3.2007was Rs. 30. The management decided to export its products to African countries. To meet the requirements of additional funds, the finance manager put up the following three alternate proposals before the Board of Directors:.

Issue 47,500 equity shares at a premium of Rs. 100 per share. .
Obtain a long-term loan from bank which was available at 12% per annum,
Issue 9% debentures at a discount of 5%.

After evaluating these alternatives the company decided to issue 1,00,000, 9% debentures on 1.4.2008. The face value of each debenture was Rs. 100. These debentures were redeemable in four installments starting from the end of third year, which was as follows:.

Prepare 9% debenture account from 1.4.2008 till all the debentures were redeemed.

Solution

Q.16

Chopra, Shah and Patel were partners sharing profits in the ratio of 3 : 2 : 1. On 31 Mar 2014, their firm was dissolved. The assets were realised and liabilities were paid off. The accountant prepared Realisation Account, Partners' Capital Accounts and Cash Account but forgot to post few amounts in these accounts. .

You are required to complete the below given accounts by posting correct amounts.

Solution

Working Notes :

(i) Balancing figure to be shown in the credit side of Realisation Account will be loss on realisationwhich happens to be Rs. 1,80,000. Loss on realisation will be transferred to Chopra, Shah and Patel in their profitsharing ratio 3 : 2 : 1.

Chopra's Loss =Rs. 1,80,000 X 3/6 = 90,000.

Shah's Loss = Rs. 1,80,000 X 2/6 = 60,000.

Patel's Loss =Rs. 1,80,000 X 1/6 = 30,000.

(ii) Loss on realisation will be shown in the debit side of capital accounts of partners. If we observeCash Account, we find that Patel is bringing Rs. 10,000 cash to settle his capital deficiency. Hence Patel's.

Capital account would be credited by Rs. 10,000 with the Cash Account.

Since Cash Account shows the payment finally made to Chopra and Shah of Rs. 1,20,000 and Rs. 90,000.

respectively, it will be shown in debit side of their capital accounts.

(iii) The missing item on the credit side of Cash Account will be the payment of realisation expenses asshown in Realisation Account. The missing items on the debit side of Cash Account has to be opening balanceof cash and the receipt from the realisation of assets. Realisation from the sale of assets is given in RealisationAccount and the balancing figure will be opening balance of cash.

Q.17

Karan Enterprises Ltd. had an equity capital of Rs. 1,00,00,000 but had no debt component in their capital structure. So in order to take the benefit of trading on equity, being the rate of interest less than the return on investment; the Board of Directors decided to issue Rs. 10,00,000, 8% Debentures of Rs. 100 each at a premium of 5% on 1't April, 2011 redeemable after four years i.e, 31't March, 2015. They decided to transfer the required amount to Debenture Redemption Reserve in two equal instalment in the year ending 31st March 2014 and 2015. They decided to invest the required amount in government securities as per the provisions of Companies Act 2013. Debentures were redeemed on the due date. Record necessary journal entries.

Solution

Q.18

What is meant by cash equivalents?

Solution

Cash equivalents are short-term highly liquid investments that are readily convertible into cash without any risk of changes in value.

Q.19

Give one difference between an operating activity and an investing activity.

Solution

Investing activity is related to purchase and sale of long term assets (or non-current assets) while financing activity is related to activity that result in change in capital and borrowings of the entity. .

Q.20

Following is the Balance Sheet of X Ltd. as on 31st March, 2008 :.

The existing liquid ratio stands at 1:1. A liability of Rs. 4,00,000 under dispute has to be paid immediately as per High Court Order Show the effect of this order on Liquid Ratio and Current Ratio as on 31st March 08.

Solution

Liquid Ratio = Liquid Assets/Current Assets

= Bills Receivables + Debtors + Cash / Creditors + Bills Payable

= 4,00,000 + 20,00,000 + 1,00,000 / 15,00,000 + 10,00,000

= 25,00,000/25,00,000

= 1:1

After Court’s decision,

Current Liability increased by Rs. 4,00,000 and thus .

Liquid Ratio = 25,00,000/29,00,000 = 0.86:1 hence reduced .

Current Ratio before court’s decision was

= Current Assets/ Current Liabilities

= Liquid Assets + Stock / Current Liabilities

= 25,00,000 + 9,00,000/ 25,00,000

OR 1.36 : 1.

After Court’s decision

Current Ratio = 34,00,000/29,00,000

OR 1.17 : 1.

Hence reduced

Q.21

(a) Determine the value of closing stock from the following details. S A/cs- 4,00,000.

Gross Profit Ratio 10%

Stock Velocity = 4 times

Closing stock was Rs. 10,000 in excess of opening stock.

(b) Gross Profit ratio of a company was 25%. Its credit revenue from operations were Rs. 18,00,000 and its cash revenue from operations were 10% of the total revenue from operations. If the indirect expenses of the company were Rs. 50,000 cA/culate its net profit ratio.

Solution

(a) Stock Turnover Ratio

= Cost of revenue from operations / Average Stock

Cost of revenue from operations = SA/c- Gross Profit

= Rs. 4,00,000 - (10/100 x Rs. 4,00,000)= Rs. 3,60,000.

4 = 3,60,000 / x

X = Rs. 90,000.

Average Stock = Opening Stock + Closing Stock / 2

90,000 = x + X+ 10,000 / 2

X = Rs. 85,000= Opening Stock.

X + Rs. 10;000 = Rs.. 95,000 = Closing Stock.

(b) Net Profit Ratio

= Net Profit x 100 / Revenue from Operations

Calculation of Net Profit:

If total Revenue from Operations is 100,

Cash Revenue is 10% and Credit Revenue from operations is 90%.

If credit revenue is Rs. 18,00,000, total revenue is Rs. 20,00,000.

Gross Profit 25% of Rs. 20,00,000 =Rs. 5,00,000.

Net Profit. = Rs. 5,00,000 - Indirect expenses Rs. 50,000 = Rs. 4,50,000.

Net Profit Ratio = 4,50,000 / 20,00,000 X 100 = 22.5 %.

Q.22

The Current Ratio of a company is 2.1 : 1.2. State with reasons which of the following transactions will increase, decrease or not change the ratio:.

Redeemed 9% debentures of Rs. 1,00,000 at a premium of 10%.
Received from debtors Rs. 17,000.
Issued Rs. 2,00,000 equity shares to the vendors of machinery.
Accepted bills of exchange drawn by the creditors Rs. 7,000.

Solution

(i) Redemption of debentures at premium will increase current ratio if debentures are considered as current liability and redeemed in the current year. Redemption of debentures at premium will decrease current ratio if debentures are considered as noncurrent liability because current assets will decrease but current liabilities will remain the same.

(ii) Receipt from debtors will not change the current ratio because there is no change in current liabilities and current assets. Both the aspects of the transaction belong to current assets i.e., cash increases and debtors decreases with the equal amount,.

(iii) Issue of equity shares to the vendors of the machinery will not change the current ratio because there is no change in current assets and current liabilities. Both the aspects of the transaction belong to non-current category i.e., machinery is non-current asset while share capital is a non-current liability.

(iv) Acceptance of bills payable will not change the current ratio because there is no change in current liabilities and current assets. Both the aspects of the transaction belong to the category of current liabilities i.e., bills payable increases and creditors decreases with the equal amount.

Q.23

Prepare a Cash Flow Statement from the following Balance Sheet of Radhika Ltd.

Notes to Accounts:

Additional information:

(a) Depreciation of Rs. 1,60,000 was provided on Tangible Assets during the year.

(b) A Machine costing Rs. 40,000 (accumulated depreciation provided thereon Rs. 24,000) was sold for Rs. 8,000 during the year.

Solution

Working Notes:

2. It has been presumed that the 9% Debentures were issued on 1st April 2014. Thus, interest has been calculated on Rs. 3,20,000.