IPCC WEEKEND TEST

Subjects: Accounts Marks : 20 Date : 24-04-2011 Time : 1 Hr

1. Boom, Doom and Gloom are practicing as solicitors since 1.1.1995 sharing profits and losses in the ratio of 3:2:1, Gloom having a minimum guarantee of Rs.6,000 (including his salary as hereinafter mentioned). They were to draw the following salaries: Boom Rs.1,500 p.m., Doom Rs.1,200 p.m., Gloom Rs.300 p.m. Their accounts were maintained on cash basis, but in 1998 they decided to retrospectively change their system to accounting also for outstanding expenses as well as taking credit for jobs in respect of which payments are not received (whether bills in respect there of were rendered or not) by creating an account styled as Jobs-pending payment. The following are the relevant figures. Year Surplus (before charging Outstanding Values of Jobs pending partners salaries) as per expenses at the end payments at the close earlier system of of the year of the year accounting Rs. Rs. Rs. 1995 50,000 12,000 14,500 1996 61,000 9,000 16,500 1997 40,000 10,500 8,000 Show the Re-cast Income and Expenditure Account and the allocation of net result amongst the partners, giving effect to the changed system of accounting. 2. The following was the balance sheet of A and B, who were sharing Profits & Losses in the ratio of 2:1 on 31.12.2006 Liabilities Rs. Assets Rs. Capital accounts: A 10,00,000 Plant and machinery 12,00,000 B 5,00,000 Building 9,00,000 Reserve Fund 9,00,000 Sundry Debtors 3,00,000 Sundry Creditors 4,00,000 Stock 4,00,000 Bills payable 1,00,000 Cash 1,00,000 29,00,000 29,00,000 (a) The Goodwill of the firm was fixed at Rs.1,05,000. (b) That the value of Stock and Plant and Machinery were to be reduced by 10%. (c) That a provision of 5% was to be created for Doubtful Debts. (d) That the building Account was to be appreciated by 20%. (e) There was an unrecorded Liability of Rs.10,000. (f) Investments worth Rs.20,000 (Not mentioned in the Balance Sheet) were taken into account. (g) That the value of Reserve fund, the values of Assets other than cash are not to be altered. (h) C was to be given one-fourth share in the Profit and to bring capital equal to his share of profit after all adjustments. Prepare Memorandum Revaluation Account, Capital Account of the Partners and the Balance Sheet of the Newly Reconstituted firm.