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# M3C

Class:- 12th

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M3C

## Accounting for Partnership Firms- Fundamentals.

Calculation of interest on Drawings

Q1:

Calculate the interest on Drawing of Mr Gold @ 10% p.a for the year ended 31st Dec 2009, if his drawings during 2008 were Rs 14,400.

Q2:

Calculate the interest on Drawing of Mr Silver @ 10% p.a for the year ended 31st Dec 2009, if he withdrew Rs 1,200 p.m in the beginning of every month.

Q3:

Calculate the interest on Drawing of Mr Copper @ 10% p.a for the year ended 31st Dec 2009, if he withdrew Rs 1,200 p.m at the end of every month.

Q4:

Calculate the interest on Drawing of Mr Mica @ 10% p.a for the year ended 31st Dec 2009, if he withdrew Rs 1,200 p.m in the middle of every month.

Q5:

Calculate the interest on Drawing of Mr Lead @ 10% p.a for the year ended 31st Dec 2009, if he withdrew the following amount as under: Jan. 31 Rs. 3,600, Mar. 31 Rs 2,400. July 1 Rs 4,800, Sep. 30 Rs. 1,800, Nov. 1 Rs 3,000.

Q6:

Calculate the interest on Drawing of Mr Iron @ 10% p.a for the year ended 31 st Dec 2009, if he withdrew Rs 3,600 in the beginning of each quarter.

Q7:

Calculate the interest on Drawing of Mr Brass@ 10% p.a for the year ended 31st Dec 2009, if he withdrew Rs 3,600 at the end of each quarter.

Q8:

Calculate the interest on Drawing of Mr Aluminium @ 10% p.a for the year ended 31st Dec 2009, if he withdrew Rs 3,600 during the middle of each quarter.

Class:- 12th

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M3C

## Mahajan Commerce Coaching Centre

Calculation of interest on Capital. Q9: X and Y started business on 1st April, 2009 with capitals of Rs 3, 00,000 and Rs 1,80,000 respectively. There is no withdrawal or addition of capital during the year. Calculate the interest on capital @ 12% p.a for the year ended 31st December 2009.

Q10: X and Y started business on 1st April, 2008 with capitals of Rs 3, 00,000 and Rs 1,80,000 respectively. On 1st May 2008, X introduced an additional capital of Rs 60,000 and Y withdrew Rs 30,000 from his capital. On 1st October 2008, X withdrew Rs 1,20,000 from his capital and Y introduced Rs 1,50,000. Interest on capital is allowed @ 6% p.a. Calculate the interest on capital for the year ending 31st March, 2009. Division of Profit among partners. Q11: X and Y started a partnership business on 1st January, 2009. They contributed Rs 48,000 and Rs. 36, 000 respectively, as their Capitals. The terms of the partnership agreement are as follows. a) b) c) d) e) 20% of profits to be transferred to General Reserve. Interest on Capital @ 12% p.a and interest on Drawing @ 10% p.a X and Y to get a monthly salary of Rs 1,200 and Rs 1,800 respectively. X is entitled to a commission of Rs. 4,200. Sharing of profits or losses will be in the ratio of their capital contribution. The profit for the year ended 31st December 2009, before making above appropriations was Rs 75,225. the drawings of X and Y were Rs 24,000 and Rs 30,000 respectively. Required: Prepare profit and Loss appropriation account and Partners capital accounts assuming (a) that their Capitals are Fluctuating, (b) that their Capitals are Fixed.

Q12: X and Y are partners in a firm sharing profits and losses in the ratio 3:2. The balances standing to the credit of their Capital Accounts as on 1st Jan 2009 were X Rs 1,00,000 and Y Rs 80,000.

Class:- 12th

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M3C

## Mahajan Commerce Coaching Centre

The terms of the partnership deed provided for the following: a) That the partners will be paid interest on their Capitals @15% per annum. b) Both the partners to get a monthly salary of Rs 2,000 each. The years profits for the year ended 31st December, 2009 before making the above appropriation and charging interest on Drawings were Rs 2,00,000. the drawings of X and Y were Rs 30,000 and Rs 40,000 respectively. The firm decided to charge interest on drawings from the partners to be charged @20% p.a Required: Prepare Profit and Loss appropriation Account and partners Capital accounts assuming that their Capitals are fluctuating. Q13: X and Y started business with Capitals of Rs 1,00,000 and Rs 60,000 on 1st January 2009. Y is entitled to a salary of Rs 800 per month. Interest is allowed on Capitals and is charged on Drawings at 6% per annum. Profits are to be distributed equally after the above noted adjustments. During the year X withdrew Rs 16,000 and Y withdrew Rs 20,000. The profit for the year, before allowing for the terms of partnership Deed, amounted to Rs 60,000. assuming the Capitals to be fixed, prepare the Profit & Loss Appropriation Account and the accounts relating to the partners. Q14: On 1st January 2009 X and Y entered into a partnership contributing Rs 24,000 and Rs 10,000 respectively. According to the deed, the interest on Capital and Drawings is to be charged @ 15% p.a. X and Y shall receive a monthly salary of Rs 2,000 each. X is entitled to 3/5th and Y is entitled to 2/5th of profits. During the year. (a) On 1st July, 2009, X withdrew (on permanent basis) Rs 8,000 from his capital and Y Introduced Rs 4,000 as additional capital. (b) X withdrew Rs 3,000 at the end of each quarter and Y withdrew Rs 6,000 at the end of each half year. (c) The profit for the year before any adjustment is made was Rs 60,000. (d) Required: Prepare the Profit and Loss Appropriation Account and necessary accounts assuming that (i) the capitals are fluctuating and (ii) the capitals are fixed. Q15: A, B and C are partners sharing profits and losses in the proportion of , 3/10 and 1/5 respectively after providing for interest @ 5% p.a, on their respective capitals, viz, A Rs 60,000, B Rs 36,000 and C Rs 24,000 and allowing B and C a salary of Rs 6,000 each p.a. Interest @5% p.a is to be allowed or charged on opening balances in current accounts. During the year 2009 A has drawn Rs
Subject: Accountancy Paper A: & Paper B: Class:- 12th Page 4

M3C

## Mahajan Commerce Coaching Centre

12,000 and B and C in addition to their salaries have drawn Rs 3,000 and Rs 1,200 respectively. The Profit and Loss A/C for the year ended 31st December, 2009 showed a Net Profit of Rs 54,000 before charging (i) Interest on Capital and (ii) Partners Salaries. On 1st January, 2008 the balances in the Current Accounts of the Partners were. A(Cr) Rs 3,000, B(Dr) Rs 1,800 and C(Dr.) Rs 1,200 show the profit and loss Appropriation Account, partners Capital and Current Accounts as at 31st December, 2009. Q16: A and B are partners sharing profits and losses in the ratio of 7:3. Their Capital Accounts as on 1st April 2009 stood as A Rs 30,000, B Rs 24,000. The partners allowed 5% p.a by way of Interest on Capitals. The drawings of the partners during the year ended 31st March 2010 amounted to Rs 4,320 and Rs 3,000 respectively. The profit for the year 2009-10 before allowing Interest on Capital and salary to B @ Rs 300 p.m amounted to Rs 48,000. 10% of this profit is to be kept in a General Reserve Account. Prepare Profit & Loss Appropriation Account, Partners Capital and Current Accounts. Q17: A,B and C are in partnership with capitals of Rs 24,000 and Rs 18,000 and Rs 12,000 respectively. B and C are entitled to annual salaries of Rs 1,200 and Rs 1,800 respectively payable before division of profits. Interest on Capital is allowed @ 5 % p.a, but interest is not charged on drawings. Of the first Rs 7,200 divisible as profit in any year, A is entitled to 50%. B to 30% and C to 20%. Annual profits in excess of Rs 7,200 are divisible equally. The profit for the year ended 31st December, 2009 was Rs 12,060 after debiting partners salaries but before charging Interest on Capital. The partners drawings for the year were. A Rs 4,800; B Rs 4,500 and C Rs 2,400. the balance on the partners current accounts on 1st January, 2009 were A Rs 1,800 credit; B Rs 300 Credit; C Rs 600 debit. Prepare Profit and Loss Appropriation Account and the Partners Current Accounts for the year 2009. Q18: A, B and C are in partnership with respective fixed capital of Rs 40,000, Rs 30,000 and Rs 20,000. B and C are entitled to annual salaries of Rs 2,000 and Rs 1,500 respectively payable before division of profits. Interest on capital is allowed at 5 percent per annum, but interest is not charged on drawings. Of the first Rs 12,000 divisible as profits in any year, A is entitled to 50 percent, B to 30 percent and C to 20 percent. Annual profits in excess of Rs 12,000 are divisible equally. The profits for the year ended 31st December, 2009 was 20,100 after debiting
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Class:- 12th

M3C

## Mahajan Commerce Coaching Centre

partners salaries but before charging interest on capital. The partners drawings for the year were: A Rs 8,000, B Rs 7,500 and C Rs 4,000. The balance on the Partners current account on 1st January, 2009 A Rs 3,000 credit; B Rs 500 credit; C Rs 1,000 Dr. Prepare the closing entries of the profit and loss account and the partners current accounts for the year 2009. Q19: Prepare capital accounts of the partners Suhail and Mushtaq from the following information, assuming that their capital are fluctuating. Suhail Capital on 1-1-2009 Drawings 2009 during 50,000 Rs. 200 at the beginning Of every month Mushtaq 35,000 Rs 100 at the end of every month 6 percent 6 percent 5,000

Interest on capital Interest on drawings Share of profits for 2008 Salary Commission

## 6 percent 6 percent 7,000

--1,000

1800 --

Q20: On 31st December 2009 the capital A/Cs (bearing interest @ 5% p.a. of X, Y and Z sharing in the proportion of 3/9, 4/9, and 2/9 stood at Rs 15,000, 18000 and Rs. 12,000 respectively. The profit for the year amounted to Rs 7,600 before allowing interest on capital A/Cs. It was decided that the capital of the whole firm be Rs 54,000 and that the partners should bring in or withdraw cash to make their capital in profit sharing ratio. Prepare profit and loss A/C and capital accounts of partners.

Class:- 12th

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Q21: X, Y and Z are partners, Their fixed capitals as on 31st Dec 2009 were: X Rs 1,00,000, Y Rs 2,00,000 and Z Rs 3,00,000. Profit for the year 2009 amounting to Rs 1,20,000 were distributed. Give the necessary adjusting entry if interest on Capital was credited @ 10% p.a. though there was no such provision in the partnership deed.

Q22: X, Y and Z are partners, Their fixed capitals as on 31st Dec 2009 were: X Rs 1,00,000, Y Rs 2,00,000 and Z Rs 3,00,000. Profit for the year 2009 amounting to Rs 1,20,000 were distributed. Give the necessary adjusting entry if interest on Capital was not credited @ 10% p.a though there was such provision in the partnership deed. Q23: X, Y and Z are partners, Their fixed capitals as on 31st Dec 2009 were: X Rs 1,00,000, Y Rs 2,00,000 and Z Rs 3,00,000. Profit for the year 2009 amounting to Rs 1,20,000 were distributed. Give the necessary adjusting entry if interest on Capital was credited @ 10% p.a instead of 12% p.a. Q24: A and B are equal partners. Their opening capitals are Rs 24,000 and Rs 48,000 respectively. After the accounts for the year have been prepared, it is discovered that interest @ 5% p.a as provided in the partnership agreement, has not been credited to the capital accounts before distribution of profits. Give the necessary adjusting entry. Q25: A and B are partners, sharing profits and losses in the ratio of 2:1. on 1.1.2009, they admit C with 1/4th share in profits with Guaranteed Amount of Rs 15,000. the profits for the year 2010 amounting to Rs 45,600. Prepare Profit and Loss Appropriation Account. Q26: X, Y and Z are partners sharing profits and losses in the ratio of 6:4:5 respectively, it being provided that in no year should Zs share be less than Rs 6,000. The losses for the year 2007 amounted to Rs 15,000. Pass the necessary journal entries in this regard. Q27: X, Y and Z entered into partnership on 1st Jan. 2008 to share profits and losses in the ratio of 12:8:5. It was provided that in no case Zs share in the profits be less than Rs 15,000 p.a. The profits and losses for the period ended 31st Dec. were 2008 profit Rs 60,000, 2009 profit Rs 90,000, 2010 loss Rs 60,000. Pass the necessary journal entries in the books of the firm.
Subject: Accountancy Paper A: & Paper B: Class:- 12th Page 7

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Q28: X and Y are partners in a firm sharing profits equally. Their capital accounts as on December 31, 2009 showed balances of Rs 42,000 and Rs 36,000 respectively. The drawings of X and Y during the year 2009 were Rs Rs 4,800 and Rs 3,600 respectively. After taking into account the profits of the year 2009 which amounted to Rs 24,000, it was subsequently found that the following items have been left out while preparing the final accounts of the year ended 2009. The partners were entitled on capitals @ 6% p.a The interest on drawings was also to be charged @ 5% p.a X was entitled to salary of Rs 6,000 and Y a commission of Rs 2,400 for the whole year. It was decided to make the necessary adjustments to record the above omissions. (a) Prepare journal Profit and Loss Adjustment Account and Capital Accounts of partner. If adjustment are made through profit and Loss Adjustment Account (b) Give single adjusting entry if adjustments are made though capital accounts. Q29: X, Y and Z are partners sharing profits in the ratio of 5:4:1. Z is given a guarantee that his share in any year will not be less than Rs 10,000. The Profits for the year 2009 amounted to Rs 80,000. Excess amount given to Z will be borne by Y. Pass the journal entries in the books of X, Y and Z. Q30: X, Y and Z are partners sharing profits in the ratio of 2:2:1. However, Z is guaranteed a minimum amount of Rs 10,000 as share of profit every year. Any deficiency arising on that account shall be met by Y. The profits for the two years ending Dec. 2008 and 2009 were Rs 40,000 and Rs 60,000 respectively. Prepare the Profit and Loss Appropriation Account for the two years. Q31: Calculate the value of goodwill as on 1st Jan. 2010, on the basis of three years purchases of the average profits of the last five years profits. The profits and losses for the years were 2003- Rs 60,000, 2004-Loss Rs 80,000, 2005 Rs 1,84,000, 2006 Rs 1,10,000, 2007- Rs 1,40,000, 2008 Rs 1,80,000. Q32: The profits and losses for the last year are 2006- Profit 20,000, 2007-Loss Rs 34,000, 2008-Profit Rs 1,00,000, 2009-Profit Rs 15,00,000. The average capital employed in the business is Rs 4,00,000. The rate of interest expected from capital invested in the class of business is 10%. The remuneration of partners is estimated to be Rs 12,000 p.a. Calculate the value of goodwill on the basis of 2 years purchase of Super Profit based on the average of 3 years.
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i) ii) iii)

Class:- 12th

M3C

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Q33: Gousia and Asiya re-partners sharing profit in the ratio of 5:3. Fayaz is admitted to the partnership for 1/4th share of future profits. Calculate the new profit sharing. Q34: From the following particulars, calculate the new profits sharing ration of partners. i) ii) Javid and Bilal were partners sharing profits in the ratio of 21:9, Eijaz was admitted on 9/21 Share in the profit. Calculate the new profits sharing ratio. Aqib and Asiya are partners in a firm sharing profits and losses in the ratio of 9:6. A new partner Samiya is admitted. Aqib surrenders 3/15th share of his profit in favour of Samiya and Asiya 6/15 of his share in favour of Samiya. Calculate the new profit sharing ratio.

Q35: A and B are partners sharing profits and losses in the proportion of 3:1. They agree to admit C into Partnership who is to get 1/8th share. He acquired his share as to 1/32 from A and 3/32 from B. Calculate the new profit sharing ratio. Q36: A, B, C and D are in partnership sharing profits and losses in the ratio of 36:24:20:20 respectively. E joins the partnership for 20% share. A,B,C and D would in future share. Profit among themselves as after Es admission.
3 4 2 1 , , , . Calculate the new profit sharing ratio 10 10 10 10

Q37: X and Y sharing profits in the ratio of 7:3 admit Z on 3/7 share in the firm which he takes 2/7 From X and 1/7 from Y. Calculate the new profit sharing ratio of partners.

Q38: Shafi and Ashraf are partners in a firm sharing profits in the ratio of 3:2. They admit Gulam as a partner for 1/4th share in profits. Gulam acquires his share from Shafi and Ashraf in the ratio 2:1. Calculate new profit sharing ratio. Q39: Calculate the new ratios of partners in the following cases:

Class:- 12th

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M3C
i)

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ii)

Oroosa and urooba are partners sharing profits and losses in the proportion of 7:5. They agree to admit Sanu their manager into partnership who is to get 1/6th in the profits. He acquires this share as 1/24 from Oroosa dn 1/8 from Urooba. Oroosa and Urooba are partners in a firm sharing profit and losses of 3:2. a new partner Sanju is admitted. Oroosa surrenders 1/5th share of his profit in favour of Sanju and Urooba 2/5th of his share in favour of Sanju.

Q40: X and Y shared profits in the ratio of 7:3. Z was admitted as a partner. X surrendered 1/7th of his share and Y 1/3rd of his share in favour of Z. Calculate the new profit sharing ratio. Q41: A and B are partners in a firm sharing profits and losses in the ratio of 3:2. A new partner C is admitted. A surrenders 1/5th share of his profit in the favour of C and B 1/5th of his share in favour of C. Calculate new profit sharing ration of the parties Q42: A and B shared profits in the ratio of 7:3. C was admitted as a partner. A surrendered 1/7 of his share and B 1/3 of his share in favour of C. Calculate the new ratio. Q43: A and B are partners with capitals of Rs 8,000 and Rs. 6,000 respectively. They admit C as a partner with 1/4th share in the profits of the firm. C brings Rs 8,000 as his share of capital. Give Journal entries of record goodwill.

Class:- 12th

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Q44:A) Calculate the amount of goodwill from the following from the from the following information. Three years purchased of the last four years average profit. Profit/Loss for I Year II Year III year IV year last four years are. Rs 5,000 profit. Rs 8,000 profit. Rs 3,000 loss Rs. 6,000 profit.

B): A partnership firm earned net profits during the last three years as follows: Year new profit Rs 2007 17,000 2008 20,000 2009 23,000 The Capital investment in the firm throughout the above mentioned period has been Rs 80,000. Having regard to the risk involved, 5% is considered to be a fair return on the capital. Calculate the value of goodwill on the basis of 2 years purchase of average super profits earned during the above-mentioned three years. Q45: Calculate the amount of Goodwill in the following cases: Three years purchase of the last five years average profits. The profits for the last five years are: I year II year III year IV year V Year Rs. 4,800 Rs. 7,200 Rs. 10,000 Rs. 3,000 Rs. 5,000

Class:- 12th

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Q46: Calculate goodwill by years purchase of average profits method if profits for 2007, 2008 and 2009 are Rs 16,000, Rs 12,000 and Rs 5,000 respectively and the goodwill is at 2 years purchase. Q47: Calculate the amount of goodwill at three years purchase of the last four years average profits. The profits and losses for the last four years are: Rs I year II year III year IV year 4,000 9,000 3,000 (loss) 6,000

Q48: Shafi and Zeenat on business in partnership and sharing profits and losses in the ratio of 5:3 admit a partner on 1st January,2009 when their balance sheet stood as following. Liabilities Sundry Creditors Shafias capital Zeenats capital Rs. 2,000 Assets Cash Rs 150

14,000

Debtors

7,600

8,400

Stock

15,100

Furniture 24,400

1,550 24,400

They admit Saqib into the partnership giving him 1/8th share in future profits on the following terms: a) Goodwill raised at an average of the last three years profits, which amounted to Rs 2,720, Rs 5,020 and Rs 5,700 and old partners capital accounts are increased accordingly, (b) Saqib brings in as his Capital, cash amounting to 1/7th of the combined capitals of Shafia and Zeenat after additions to the same for goodwill. Show journal entries recording these transactions and draw out the balance
Subject: Accountancy Paper A: & Paper B: Class:- 12th Page 12

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sheet of the new firm, Starting the ratio in which the partners would share profits and losses in future. Q49: The following is the Balance Sheet of Akthar and Mukhtar on 31st December, 2009. They share profits and losses in the proportion of 3/4 and 1/4 Rs. Creditors 70,000 Business premises Fixtures Stock Book debts Rs 50,000

5,000 8,000

6,000

Mukhtar 32,000

40,000

## Cash in hand 1,75,000

5,000 1,75,000

They admit Showkat into partnership on 1st January, 2009 on the following terms. (i) Showkat brings Rs 20,000 as his capital for a fifth share in the future profits. (ii) That a Goodwill Account be raised in the books of the firm at a value of Rs 40,000. (iii) That the value of business premises be appreciated by 20%. (iv) That the stock and fixtures be reduced by 10% each and a 5% reserve for doubtful debts created on Book debts. Prepare Balance Sheet of new firm. Q50: Sartaj and Ashfaq are in partnership sharing profits in the proportion of 3/5 and 2/5 respectively. Their Balance sheet is as follows: Liabilities Sartajs Capital Rs. 2,000 Assets Cash Rs 650

## Subject: Accountancy Paper A: & Paper B:

Class:- 12th

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M3C
Ashfaqs capital Creditors

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1,000 Debtors 1,000

400

600

## 400 1,500 650 3,400

3,400

They decide to admit Tahir to a one-third share upon the terms that he is to pay into the business Rs, 1,000 Goodwill and sufficient capital to give him a 1/3rd share of the total capital of the new firm. It was agreed that the Reserve for Bad debts be reduced to reduce Rs 100, that the stock be revalued at Rs 2,000 and that plant be reduced to Rs 500. Show the Balance Sheet of the new partnership. Q51: A and B carrying on business in partnership sharing profits and losses in the ratio of 3:2 respectively. 31st December 2009 their Balance Sheet stood as following Liabilities As Capital account Bs Capital account Bank loan Sundry creditors Bills payable Rs. 30,200 35,400 20,000 20,800 10,000 1,16,400 C was admitted into partnership on the following conditions. i). C would be entitled to one-third share in profits. ii). C would bring Rs 30,000 as capital and Rs 10,000 as his share of goodwill. iii). The book value of land and buildings would be increased by Rs. 10,000 and provision for bad debts @ 5% of sundry debtors would be created. iv. Bank load would be paid off.
Subject: Accountancy Paper A: & Paper B: Class:- 12th Page 14

Assets Land & Building Furniture Stock Sundry debtors Cash in hand

## Rs 40,000 10,600 38,500 19,000 8,300 1,16,400

M3C
You are required to i) ii)

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Prepare revaluation account, cash book and partners capital accounts. Show initial Balance Sheet of new firm.

Q52: A and B are partners sharing profits in the ratio of 3:1. Their Balance Sheets as on 31-12-09 was as follows. Liabilities Capitals A B Creditors Workmen compensation fund 9,000 3,000 2,000 2,000 Rs. Assets Bank Debtors Stock Investments Goodwill Rs 1,000 6,000 3,000 5,000 1,000

16,000

## 2 shares in future profits. For this purpose following 5

adjustments are agreed upon. C will bring Rs 8,000 for capital and Rs 2,000 for goodwill. Market value of investments is Rs. 4,500. Goodwill is not to appear in the new firm at all. Prepare ledger accounts i.e revaluation account, partners capital accounts to record the above and show the Balance Sheet.

Class:- 12th

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Q53: M and N are partners in a firm sharing profits and losses in the ratio of 5:3. On 31st December 2009, their Balance Sheet was as under. Balance sheet of M and N Liabilities Sundry Creditors Bills payable Capitals M 12,000 N 10,000 22,000 28,000 Rs. 4,000 Assets Machinery Rs 12,000

2,000

## 8,000 7,200 500 300 28,000

On the above date, the partners decide to admit R as a partner on the following terms. (a) The new profit sharing ratio of M,N and R will be 7:5:4 respectively. (b) R Shall bring Rs 8,000 as his capital and Rs 4,000 for his share of goodwill. (c) M and N will draw half of the goodwill in cash. (d) Machinery is to be valued at Rs 15,000; stock at Rs. 10,000 and provisions for bad debts of Rs 1000 is to be created. (e) There is a liability of Rs 2,000 being the outstanding salary payable to employees of the firm. This liability is not included in the creators. Partners decide to show this liability in the books of accounts of the new firm. Prepare revaluation account, partners Capital accounts and the Balance Sheet of M,N and R. Q54: A and B are partners sharing profits in the ratio of 2:1. On January 1,2009 they agreed to admit C as a partner, C agreeing to contribute Rs 50,000 as his capital. A, B and C agreed to share profit and losses in the ratio of 2:3:3 respectively. The Balance Sheet of A and B on December 31,2009 was as under. Liabilities Sundry Creditors Capital accounts:
Subject: Accountancy Paper A: & Paper B:

Rs. 50,000

## Assets Cash at Bank Stock on hand

Class:- 12th

Rs 6,250 50,000
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As Capital 62,500 BS capital 37,500

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Debtors 1,00,000 Plant Premises 1,50,000 31,250 25,000 37,500 1,50,000

They agree to revalue the assets as under. Stock on hand Rs 45,000; Plant Rs 18,000; Premises Rs 50,000; a provision of 5 percent for doubtful debts is to be maintained. C agrees to transfer Rs 15,000 to As capital for goodwill from his capital for goodwill from his capital account. Pass necessary journal entries and prepare revised balance sheet. Q55: Messers A B and C is a firm sharing profits and losses in the ratio of 2:2:1. Their balance sheet as on 31st March 2009 is as below. Liabilities Sundry Creditors Outstanding liabilities General reserve Capital account 12,000 12,000 5,000 29,000 49,850 49,850 Sundry debtors Cash in hand Cash at bank 5,500 140 960 6,500 Stock of goods 11,750 1,500 Rs. 12,850 Assets Land building Furniture 6,500 and Rs 25,000

The partners have agreed to take D as a partner with effect from 1st April 2008 on the following terms i. ii. D shall bring Rs. 500 towards his capital. The value of stock be increased by Rs. 2500.
Subject: Accountancy Paper A: & Paper B: Class:- 12th Page 17

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iii. iv. v. vi. vii. viii. ix.

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Provision for bad and doubtful should be provided at 10% of debtors. The furniture should be depreciated by 10%. The value of land and buildings should be enhanced by 20%. The value of goodwill be fixed at Rs. 15000. General reserve will be transferred to the partners capital account. The new profit sharing ratio shall be A
5 5 3 2 , B ,C and D 15 15 15 15

The new goodwill account shall be written back to the partners accounts in the accordance with the new profit sharing proportion. The outstanding liabilities include Rs. 1000 due to E which has been paid by A. Necessary entries were not made in the books. Prepare (i) The revaluation account (ii) The capital accounts of the partners and (iii) the Balance Sheet of the firm as newly constituted ( journal entries are not required) Q56: The balance sheet of Ajaz and Sajad as on 31st December 2009 is set out below. They share profits and losses in the ratio of 2:1 Liabilities Ajazs capital Sajads capital General reserve Creditors Rs. 40,000 30,000 24,000 16,000 Assets Free hold property Furniture Stock Debtors Cash 1,10,000 Rs 20,000 6,000 12,000 60,000 12,000 1,10,000

They agreed to admit Javid into the firm subject to the following terms and conditions. a) Javid will bring in Rs 21,000 of which Rs 9,000 will be treated as his share of goodwill to be retained in the business. b) He will be entitled to one fourth share of the profits. c) 50% of the general reserve is to remain as a reserve for bad and doubtful debts. d) Depreciation is to be provided on furniture @ 5%. e) Stock to be revalued at Rs 10,500. Give journal entries to give effect to these arrangements and construct the Balance Sheet of the new firm.
Subject: Accountancy Paper A: & Paper B: Class:- 12th Page 18

M3C

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Retirement

Q57: X, Y and Z were partners sharing profits in the ratio of 5:4:1. Y retires. Calculate new ratio of X and Z. Q58: A, B and C were sharing profits as to A, 1/5 to B and 3/10 to C. C retires. Calculate new profit sharing ration of A and B. Q59: Calculate new profit sharing ratio. A,B,C and D were partners sharing profits in the ratio of 5:4:3:2. A and C retires from the firm. Q60: X, Y and Z were partners sharing profits in the ratio of 1/5. 1/3 and 7/15 respectively. Z retries and his share is taken up by X and Y in the ratio of 3:2. Find out the new ratio. Q61: X, Y and Z are partners sharing profits and losses in the ratio of 1 : : : ; Z retries and surrenders
4 th of his share in favour of X and the remaining in 9
1 3 1 2 8 8

favour of Y. Calculate the new profit ratio. Q62: A, B and C are sharing profits in the ratio of 5:3:2. On B retiring A and C decide to share profits in the ratio of 6:4. Calculate gaining ratio. Q63: X, Y and Z are partners sharing profits and losses in the ratio of 2/5, 2/5 and 1/5 respectively. Z retires and X and Y decide to share the future profits and losses in the ratio of 2:1 respectively. Calculate the gaining ratio. Q64: W, X Y and Z are partners sharing profits and losses in the ratio of
1 1 1 1 : : : 3 6 3 6

respectively. Y retires and W,X and Z decide to share the profits and losses equally in future Q64a: X,Y,Z sharing profit in the ratio of 5:4:3. Y retires. Calculate the gaining ratio if. a) X and Z decide to share profits equally. b) X and Z decide to share profits 7:5 c) X and Z decide to share profits 5:7 Q65: X, Y and Z are sharing profit in the ratio of 9:7:4. Y retires. Amount due to Y on retirement on account of goodwill was calculated to be Rs 42,000. Calculate new and gaining ratio if a) X contributes Rs 24,000 and Z Rs. 18,000 to pay out Y.
Subject: Accountancy Paper A: & Paper B: Class:- 12th Page 19

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## Mahajan Commerce Coaching Centre

b) X Contributes Rs 12,000 and Z Rs 30,000 to pay out Y. Q66: A, B and C are partners in a firm sharing profits and losses in the ratio of 3:2:1. C retires from the firm and A and B decide to continue the business of a firm and share profits and losses in the old ratio. Goodwill of the firm is valued at Rs. 12,000. What will be the entries in the books of the firm? i) ii) iii) If goodwill is raised at full value and is allowed to stand in the books of the firm? If goodwill is raised at full value but is written off to the capital accounts of the continuing partners. If goodwill is raised equivalent to the retiring partners share and is allowed to stand in the books of the firm.

Q67: A B and C are partners sharing . 3/8 and 1/8 respectively. B retired, selling his shares of profit to A and C (who continue) for Rs 8,100 and 3,600 being paid by A an Rs 4,500 being paid by C. the profit for the year after Bs retirement is Rs 10,500. Distribute the above profit between A and C( In accordance with the above arrangement) showing how you arrive at the same, and pass the necessary journal entry ( if any) to record the above and sale of Bs share to A and C. Q68: Aijaz and Javid are equal partners in a business. On December 31, 2009, Aijaz retires from the firm, when the partners accounts stand as follows: Ajazs capital A/C Rs 8,000: Ajazs current A/C (Cr.) Rs 900; Javids capital A/C Rs 7,000, Javids current A/C (Cr.) Rs 800. it is agreed that the assets and liabilities appearing in the books should be revalued. Revaluation is made with the following results. The books value of Machinery is reduced by Rs 500; the reserve for Bad debts is found to be excessive by Rs 200; the value of stock is reduced by Rs 350; The sundry creditors are increased by Rs 670 and the patents ( book value Rs 300) are held to be of no value. Show the P &L. Adjustment A/c and the partners accounts as they would appear after the revaluation, but before Ajazs share is paid out to him.

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Q69: A and B are partners in a business sharing profit and loss as A 3/5, B 2/5. Their balance sheet as on 1st January 2009, is given below. Liabilities Capital Account Rs. Assets Plant Machinery Goodwill 35,000 15,000 7,500 Stock Debtors Closing balance: At bank In hand 57,500 6,000 1,000 57,500 and Rs 19,500

## 6,000 10,000 15,000

B retires from the business owing to illness and A takes it over. The following revaluations are made (1)The goodwill of the firm is valued at Rs 15,000 (2) Depreciation: Plant and Machinery by 10%; And Stock by 15%; and (3) A bad debts provision is raised against debtors at 5% and a discount reserve against creditors at 2%. (4) A liability of Rs 500 included in creditors is not likely to arise and should be written back. You are asked to journalise the above transactions in the books of the firm and close the partners account as on 1st January, 2009. Give also the opening Balance Sheet of A.

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Q70: A, B and C are partners in a business sharing profits and losses in the ratio of 3:2:1. Their Balance sheet on 31st December 2009 was as follows. Liabilities Bills payable Sundry creditors Reserve fund Capital A/Cs A 20,000 B 20,000 C 20,000 60,000 75,200 75,200 Rs. 1,600 1,600 12,000 Cash Bank Sundry debtors Stock Machinery Land & building Assets Rs 1,200 2,000 18,000 14,000 12,000 28,000

On 1st January 2010 C retires from the firm. It is agreed to adjust the values of assets as follows. (a) That a provision of 4% on sundry debtors be made for doubtful debts. (b) That the value of stock be depreciated by 5% and machinery be depreciated by 10%. (c) That land and building be revalued at Rs 30,200. (d) That Cs capital account be closed by transferring to his loan account. Prepare a revaluation account, ( Profit and Loss adjustment account), Capital accounts of prepare and The Balance Sheet of A and B, the remaining partners.

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1 1 1 : : . Their 2 3 6

Q71: N, B and S are partners in a business sharing profits in the ratio of balance sheet as on 31st December 2009 was as under Liabilities Capital Accounts N :B :S :Creditor B/P 8,000 6,000 5,200 Rs. Cash Stock Debtors 19,200 Plant and Machinery 4,000 Buildings 800 24,000 Assets

## Rs. 800 5,200 6,000 4,800 7,200

24,000

On 1st January 2010 N retired from the firm and the assets of the firm were revaluation as under Rs Goodwill Stock Debtors Plant and machinery Buildings 1,600 4,800 5,600 4,400 8,800

Creditors agreed to a discount of 2 and % Assuming that the above adjustments are duly carried through, prepare revaluation account. (Profit and loss adjustment account) partners capital accounts and the balance sheet of B.S. Amount due to N on retirement was agreed to be transferred to his loan account.

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Q72: Balance sheet of Brown, Bedser and Bailey who were sharing profits in proportion to their capitals was as follows, on 31st December 2009 Liabilities Creditors Rs. 7,000 Assets Land buildings and Rs 25,000

Capital accounts Capital accounts Brown 20,000 Bedser 15,000 Bailey 10,000 45,000 52,000 Bedser retires on the following conditions. i. ii. iii.

## 8,000 8,000 5,000 5,500 500 52,000

Land and building to be appreciated by 20 percent. Stock to be depreciated by 6 percent. Goodwill of the entire firm to be fixed at Rs 10,800 and Bedsers share of the same be adjusted into the of Brown and Bailey who are going to share in the proportion of five-eights and three-eights. (no Goodwill account to be raised) pass journal entries in the books of the firm to give effect to the above arrangements and prepare the balance sheet of brown and Bailey.

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Q73: A, B and C are partners in a business, sharing profits and losses in the ratio of 3:2:1 respectively. Their balance sheet on 31st March 2009 was as follows. Liabilities Sundry creditors Reserve Capitals: A B C 10,000 10,000 10,000 37,600 Rs. 1,600 6,000 Assets Cash in hand Cash at banks Sundry debtors Stock Machinery Factory buildings Rs 600 1,000 9,000 7,000 6,000 14,000 37,600

On the date, C retires from business. It was agreed to adjust the values of assets as follows: (a) Make a provision of 5% on sundry debtors for doubtful debts. (b) Reduce the value of stock by 5% and depreciate machinery by 10%. (c) Factory building to be revalued at Rs 15,100. Show the revaluation account and the partners capital accounts and prepare the balance sheet of the continuing partn4ers as on 1st April, 2009. Death of Partner Q74: A,B and C are equal partners in a firm whose books are closed on 31st December every year. A died on 31st March, 2009 and according to the agreement, his share of profits up to the date of death is to calculated on the basis of average profits of the last three years. New profits of the last three years were Rs 8,000, Rs 11,000 and Rs 17,000. Calculate As share of profits and pass the necessary journal entry. Q75: A, B and C are partners sharing profits in the ratio of 5:3:2. They have agreed that the deceased Partners share of profit for his life time during the current year shall be based upon the last years profit. The profit earned during the year 2009 was Rs 60,000. Calculate As share of profit if he dies in on 2010 on (a) On January (b) February 28
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Q76: A,B and C are partners sharing in the ratio of 3:2:1. They close their books of accounts on December 31, every year. B dies. Calculate Bs share of profit assuming following cases. a) Decreased partners share of profit is to be calculated on the basis of last years profit, which amounts to Rs 48,000. B dies on 31st March. b) Deceased partners share of profit is to be calculated on the basis of the average of last three years profit, which amount to Rs 30,000, Rs 25,000 and Rs 17,000. Suppose B dies on May 31. Q77: P,R and S are in partnership sharing profits 4/8, 3/8 and 1/8 respectively. It is provided under the partnership deed that on the death of any partner his share of goodwill is to be valued at one-half of the net profits credited to his account during the last four completed years (books of accounts are closed on 31st December) R died on 1st January 2009. The firms profits for the last four years were as follows 2005 profits Rs 1,20,000; 2006 profits Rs 60,000, 2007 losses Rs 20,000, 2008 profits Rs 80,000. i) Determine the amount that should be credited to R in respect of his share of goodwill. ii) Pass a journal entry without raising goodwill account for its adjustment assuming that profit sharing ratio between P and S in future will be 3:2. Show your workings clearly. Q78: T and K are in partnership sharing profits and losses 3:2. They insure their lives jointly for Rs 75,000 at an annual premium of Rs 3,400 to be debited to the business. K dies three months after the date of last balance sheet. According to the partnership deed, the legal personal representatives of K are entitled to the following payments. a) His capital as per the last Balance sheet. b) Interest on above capital at 8 percent annum to date of death. c) His share of profit to date of death calculated on the basis of last years profits. His drawings are to bear interest at an average rate of 2 percent on the amount irrespective of the period.

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The net profits for the last three years, after charging insurance premium, were Rs 20,000, Rs 25,000 and Rs 30,000 respectively. Ks capital as per Balance Sheet was Rs 40,000 and his drawings to date of death were Rs 5,000. Draw Ks account to be rendered to his representatives. Q79: A,B and C are partners sharing profits and loss in the ration 3:2:1 respectively. on 31st December 2009 their balance sheet was as under. Liabilities Rs. Assets Rs Creditors General reserve Capital accounts A B C 10,000 6,000 4,000 42,860 42,860 19,860 3,000 Cash in hand Debtors Stock Investments Buildings 1,210 10,750 12,470 10,430 8,000

B died on 28th Feb. according to partnership agreement his legal representative is entitled to be paid out as follows. 1. The capital to his credit & interest on capital @6% per annum upto the time of death. 2. His appropriate share in general reserve. 3. His share of profit for the period based on the figure of the profit of the previous year. 4. Total goodwill allotted to his share of profit to be calculated by taking twice the amount of average profit of the last 3 years the profits for 3 years were 1,800, 9,000, 9,600 5. Legal representative was paid of selling the investment for Rs 16,020. Prepare Bs capital account and Executors account.

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Dissalution of Firm

Q80: Eijaz and Fayaz are partners sharing profits and losses as to 3 and 2. Their Balance Sheet on 31st March 2009 was as below Liabilities Creditors Reserve for contingencies Bank loan Capital-Eijaz Fayaz Rs. 528 500 1,000 6,000 2,000 Assets Cash Investments Debtors Stock Furniture Rs 363 2,080 2,960 1,875 2,750

10,028

10,028

They dissolved the firm on this date and assets with the exception of cash and investments were sold for Rs 6,900. The investments were taken over by Fayaz at Rs 2,200 and he agreed to pay the bank loan. The realization expenses were Rs 110 and the creditors were paid Rs 503 in full settlement. Give various ledger accounts to show the dissolution of the firm. Also give journal entries. (Ans Loss on realization Rs 650, cash paid to Eijaz Rs 5,910 and Fayaz Rs 740)

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Q81: X, Y and Z are three partners. Their profit sharing ratio was 3:2:1. Their balance sheet on 30th September 2009 was under. Liabilities Creditors Zs loan Xs current A/C Zs Current A/C Capital-X 15,000 Y 5,500 Z 10,000 30,500 Rs. 5,000 3,000 1,000 500 Assets Stock Debtors Goodwill Furniture Cash Ys current A/C Rs 5,000 10,000 15,000 4,000 1,000 5,000

## 40,000 Firm was dissolved on above date.

40,000

b) Goodwill was purchased by Z for Rs 12,000 c) X purchased stock for Rs 6,000 d) Realisation from debtors was 10%less e) Furniture was auctioned for Rs 3,000 f) Dissolution expenses were Rs 500 g) Partners will pay cash, if necessary h) Creditors were paid in full. Prepare realization account and partners capital accounts and Cash account.

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Q82: Ajaz and Sazia were trading as a firm sharing profits in the ratio of 9:7. Firms balance sheet as on December 31,2009 is given below. Liabilities Capital Rs. Bank Property Ajaz Sazia Ajazs current A/C Creditors 3,500 2,750 300 12,000 18,550 Debtors Stock Furniture Sazias current A/C Assets Rs 8,500 2,000 4,700 2,300 50 1,000 18,550

Firm was dissolved. Property realized Rs 1,500. Bad debts amounted to Rs 500. Stock realized Rs 200 more than the book value. Furniture was taken over by Sazia at Rs 25. Creditors allowed Rs 100 discount. Expenses came to Rs 75. Close the books of the firm. Q83: Saqib, Eijaz and Fayaz were partners sharing profits in the ratio 3:2:1 respectively. Their balance sheet on 30th June 2009 stood as follows. Liabilities Sundry creditors Loan Saqibs capital Eijazs capital Fayazs capital Rs. 21,500 Cash Assets Rs 1,000

21,500 6,000

Stock Debtors

25,000 18,000

5,000 3,000

Furniture Machinery

5,000 8,000

57,000

57,000

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The firm was dissolved on 30 June 2009, the fixed assets realized Rs 2,000 whereas stock and debtors realized Rs 33,000 in all. The expenses on dissolution were Rs 600. Prepare necessary ledger accounts assuming that the necessary cash has been brought in b the partners.

Q85: A and B were partners sharing profits and losses as to 7/11th to A and 4/11th to B. They dissolved the partnership on 30th may 2008. As on the date their capitals were; A Rs. 7,000 and B Rs. 4,000. There was also due on loan A/c to A Rs. 4,500 and to B Rs. 750. The other liabilities amounted to Rs. 5,000.The assets proved to have been undervalued in the last balance sheet and actually realized Rs. 24,000. Prepare the necessary accounts showing the final settlement between the partners ignore interest.

Q86: A and B who were in partnership sharing profits and losses in the proportions of 4/7 and 3/7 respectively decided to dissolve partnership as on 31st Dec. 2002. As the date of the dissolution A's Capital was Rs. 1,25,030 and B's Rs. 2,070; the creditors amounted to Rs. 23,150 and cash Rs. 4,520.The remaining assets realized Rs. 1,24,910 and the expenses of dissolution were Rs. 1,860. A and B are both solvent. Prepare the balance sheet as on the date of dissolution and the accounts necessary to close the books of the firm, showing the final adjustment of cash between the partners. [Ans. Loss on realization, Rs. 22,680; A receives Rs. 1,12,070; B brings in Rs. 7,650]

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Q87. P, Q and R dissolved their firm on 1st July 2003, On that date their balance sheet was: Liabilities Creditors Reserve Capitals P 30,000 Q 20,000 R 10,000 60,000 90,000 Rs. 21,000 9,000 Assets Goodwill Machinery Debtors Stock Patents Cash Rs 10,000 30,000 15,000 22,000 10,000 3,000 90,000

P agreed to take over the business and for this purpose the value of the entire business was fixed at Rs. 81,000. P paid in cash the amount due from him. Close the books of the firm by giving journal entries and give the Balance sheet of P. [Ans. P pays Rs. 44,000 and Q receives Rs. 27,000 and R receives Rs. 17,000] [Hint. The price of Rs. 81,000 includes cash also. Cash will be transferred to the Realisation Account]

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ISSUE OF SHARES
Q88: A Ltd. was formed with an authorized capital of 5,00,000 equity shares of Rs. 100 each. It issued 2,00,000 equity shares at par, payable as under. On application On allotment On first call On second and final call Rs. 25 Rs. 35 Rs. 20 Rs. 20

All the shares are subscribed and the amounts duly received. Pass the necessary journal entries. Q89: Sky rockets Ltd. make an issue of 10,000 equity shares of Rs. 100 each, payable Rs. 20 on application Rs. 40 on allotment and Rs. 40 on call. All the shares are subscribed and amounts duly received. Pass journal entries to give effect to these. Q90: A limited company issued 1000. 9% preference shares of Rs. 100 each. The amount was payable Rs. 30 on application . Rs. 50 on allotment and balance on call. All the shares were subscribed and amount duly received . Issue expenses amounted to Rs. 2,000. Give entries in the journal of company. Q91: Valley textiles Ltd. having a nominal capital of Rs. 10,00,000 in shares of Rs. 100 each invited applications for 5,000 shares payable as follows :On application On allotment On first call On second and final call Rs. 20 Rs. 25 Rs. 25 Rs. 30

All the shares were subscribed and allotment made. All the money was received except final call on 100 shares. Expenses of issue came to Rs. 10.000. One fifth of these expenses was written off from profit and loss account. Pass journal entries in the books of company.

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Q92: A Ltd. Was registered with a capital of Rs 1,00,000 divided into 10,000 shares of Rs 10 each. It offered to the public for subscription 6,000 shares on the following terms. Re 1 per share on application, Rs 2 per share on allotment, Rs 3 per share on first call and Rs 4 per share on final call. All the shares were applied for all allotted. All the money were duly received. Give the necessary journal entries and Balance sheet. Q93: B Ltd. Was incorporated with a capital of Rs 5,00,000 divided into 50,000 shares of Rs 10 each, 22,000 shares were offered to the public and of these 20,000 shares were applied for .The application money being Rs. 2.50 per share , allotment Rs 2.50 per share, first call being 2.50 per share and balance on final call. All money were duly received. Give the necessary journal entries and Balance Sheet. Q94: C Ltd. Was floated with a capital consisting of 5,000 shares of Rs 10 each. It offered 3,000 shares on the following terms. Rs 4 per share on application, Rs 3 per share on allotment, Rs 2 per share on first call can Re. 1 per share on final call. Applications were received for 4,000 shares. Applicants for 1,000 shares were sent letters or regret and application money was refunded. All the money due on shares were duly received. Give the necessary journal entries and the Balance Sheet. Q95: D Ltd. Was registered with capital of Rs 1,00,000 divided into shares of Rs 10 each. It issued a prospectus inviting applications for 2,000 shares on the following terms: Rs 2 per share on application. Rs 5 per share ( including Rs 2 premium) on allotment, Rs 3 per share on first call and Rs 2 per share on final call. All the shares were applied for and allotted. All the money were duly received. Give the necessary journal entries and the Balance Sheet. Q96: E Ltd. Was incorporated with a capital of Rs 2,00,000 divided into shares of Rs 10 each. 2,000 shares were offered to the public and of these 1,800 shares were applied for and allotted. Rs 3 per share (including Re. 1 premium) was payable on application, Rs 4 per share (including Re. 1 premium) was payable on allotment, Rs 2 on first call and Rs 3 per share on final call. All moneys were duly received. Give the necessary journal entries and the Balance Sheet.

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Q97: F ltd. Was floated with a capital of Rs 3,00,000 divided into shares of Rs 10 each, offered 4,000 shares on the following terms: Rs 2 per share on application, Rs 5 per share ( Including Rs. 2 premium) on allotment, Rs 3 per share on first call and Rs 2 per share on final call. Applications were received for 6,000 shares. Applicants for 2,000 shares were sent letters of regret an applications money was refunded. All the money due on shares were duly received. Give the necessary journal entries and the Balance Sheet. Q98: I Ltd. Was registered with a capital of Rs 30,00,000 divided into shares of Rs 100 each. It made an issue of 5,000 shares at a discount of 10% payable as follows: An application Rs 40, on allotment Rs 25 and Balance on final call. The issue was fully subscribed for and allotted. All moneys were duly received. Give the necessary journal entries and the Balance Sheet. Q99: J Ltd. Was incorporated with a capital of Rs 50,00,000 divided into shares of Rs 100 each. It invited applications for 10,000 shares at a discount of 4% payable as follows: Rs 20 on application, Rs 30 on allotment and Rs 46 on first and final call. Applications were received for 9,000 shares and all of these were accepted. All money due was received. Give the journal entries and the Balance Sheet. Q100: K Ltd. Was floated with a capital consisting of 2,00,000 Equity shares of Rs 10 each and 20,000, 10% Preference shares of Rs 100 each. It offered 10,000 10% preference shares at a discount of 5% payable as follows: Rs 20 on application Rs 30 on allotment, Rs 25 on first call, Rs 20 on final call. Applications were received for 20,000 shares. Applicants for 15,000 shares were allotted 10,000 shares. Remaining applicants were refused. Money overpaid on application was utilized towards sums due on allotment. All the moneys due on shares were duly received. Give the journal entries and the Balance Sheet. Q101: X Ltd, invited applications for 10,000 shares of Rs 100 each, at a discount of Rs 4 per share payable as, Rs 20 on application, Rs 30 on allotment and Balance on final call. Applications were received for 9,000 shares and all of these were

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accepted and allotted. All money due was received except final call on 400 shares. Give Journal and Balance Sheet. Q102: Y Ltd, with an authorized capital of Rs 1,00,000 in shares of Rs 100 each, issued 500 of such shares, payable Rs 25 per share on application, Rs 25 on allotment, Rs 20 three months later on first call , and the balance as and when required. All money payable on application and allotment were duly received but when the call of Rs 20 per share was made one share holder holding 25 shares failed to pay the amount due and another shareholder holding 50 shares paid them in full. Give the journal and Balance Sheet. Q103: ZC Ltd. Issued 16,000 equity shares of Rs 10 each Rs 5 per share was called, payable Rs 2 on application, Re 1 on allotment Re 1 on first call and Re. 1 on second call. The amount received were as follows: On 12,000 shares On 2,500 shares On 1,000 shares On 500 shares The full amount called Rs 4 per share Rs 3 per share Rs 2 per share.

Prepare journal and the balance sheet Q104: ZD Ltd. Issued 24,000 equity shares of Rs 10 each. Rs 5 per share was called, payable Rs 2 on application, Re 1 on allotment, Re 1 on first call, and Re. 1 on second call. All moneys were duly received with the following exceptions. On 3,750 shares On 1,500 shares On 375 shares Re 1. per share Rs 2 per share Rs 3 per share

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Q108: W Ltd. made an issue of 5,000 equity shares of Rs. 100 each at 10% discount payable as Rs. 40 on application, Rs. 25 on allotment and Balance on final call. All money due was received except the final call on 100 shares. Give journal and Balance Sheet. Q109: A company invited applications for 50.000 shares of Rs. 10 each on the following terms:Rs. On application On allotment On first and final call 3 2 5

Applications were received for 1,10,000 shares. It was decide (I) to refuse allotment to the applications for 10,000 shares (ii) to allot 50 percent to Mr. Eijaz who applied for 20,000 shares (iii) To allot in full to Mr. Javid who applied for 10.000 shares (iv) to allot balance of available Shares equitably among the other applicants and (v) to utilize excess application money in part Payment of allotment and final call. Give journal entries till the stage of allotment assuming that the entire sum due on allotment is received in full.

Q110: Valley industries Ltd. issued 1,50,000 equity shares of Rs. 15 each payable Rs. 3 on application, Rs. 7 on allotment and the balance on two calls, each of equal amounts. Applications were received for 1,25,000 shares which were dully allotted. A shareholder holding 500 shares paid in full on allotment, while another shareholder holding 200 shares failed to pay call moneys. Give journal entries to record the above transactions and show how they would appear in company's balance sheet.

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Q111.Casio Ltd. issued Rs. 10.00,000 shares divided into Rs. 100 shares, payable On application On allotment On final payment Rs. 10 per share Rs. 40 per share Rs. 50 per share

Over-payements on application were to be applied towards sum due on allotment & Over - payements on application exceeding sum due on allotment were to be returned, where no allotment was made, money was to be returned in full. The issue was over subscribed to the extent of 13,000 shares. Applicants for 12,000 shares were allotted only 1,000 shares and applicants for 2,000 shares were sent letters of regret, and application deposit was returned to them. All the money due on allotment and final call was duly received. Make the necessary entries in the company's books to record the above transactions.

Q112: Junaid Ltd. forfeited 40 shares of Rs. 10 each for non-Payment of a final call of Rs. 2 per share and re-issued to Jahanghir as fully paid for Rs. 10 per share. Journalize. Q113: Ishfaq Ltd. forfeited 80 shares of Rs. 10 each for non-payement of a first call of Rs. 3 per share and a final call of Rs. 2 per share and re-issued to Irfan as fully paid for Rs. 9 per share, journalise. Q114: Sahid Ltd. forfeited 120 shares of Rs. 10 each for non-payement of an allotment money, of Rs. 3 per share, first call of Rs. 3 per share and final call of Rs. 2 per share and re-issued to Samie as fully paid for Rs. 8 per share, journalise. Q115: Zubair Ltd. forfeited 200 shares of Rs. 100 each, issued at 10% premium for nonpayment of allotment money of Rs. 50 per share (Including premium), first call of Rs. 40 per share and a second and final call of Rs. 10 per share. Out of these 80 shares were re-issued as fully paid- up for Rs. 95per share, journalise. Q116: Manzoor Ltd. forfeited 10 shares of Rs. 10 each (Rs. 6 called up) issued at a discount of 10% to Mr. Junaid on which he had paid an application money of Rs. 2 per share. Out of these, 8 shares were re-issued to Javid as Rs. 8 called up for Rs. 9 per share . Journalise.

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Q117: On 1st April 2009, X Ltd. Company issued a prospectus offering to the public 40,000 Equity shares of Rs. 20 each Rs. 5 per share payable on application and Rs. 10 on allotment, and the balance to be called up as required. Application had been received for 4500, shares as follows: Raja Khurshid Ajaz John Sajad 8000 shares 9000 shares 4000 shares 10000 shares 14000 Shares

The shares were allotted as follows: Raja 7,000, Khurshid 8,000, Ajaz 3,500, John 8,500 and Sajjad 13,000. The amounts payable on allotment were all received and application money in respect of shares over applied returned. Give the journal entries and prepare the share application A/c. Q118. The Indian Rubber Co. Ltd. Issued Rs. 5,00.000/- new capital divided into Rs. 10 shares at a premium of Rs4 per share, payable thus:On application Re. l per share On allotment Rs. 4 per share and Rs.2 premium On final payment Rs. 5 per shares and Rs. 2 premium over payment on application were applied towards Sums due on allotment. Where no allotment was made, money was to be returned in full. The issue was over Subscribed to the extent of 13000 shares. Application for 12000 shares were allotted only 1000 and allotment and the final call was duly received. Make the necessary entries in the Company's books. The first call was made on 1st November 2009 and the second call on 1st Feb. 2010. Q119: The directors of a company forfeited 200 equity shares of Rs. 10 each on which Rs. 800 had been paid. The shares were re-issued upon payment of Rs. 1,500 as fully paid. Journalize the transactions.

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Q119a. The directors of Saqib Ltd. Resolved on 1st January 2009 that 100 equity shares of Rs. 10 each Rs. 8 paid be forfeited for non-payment of final call of Rs. 2. On 1st February', 60 of these shares were re-issued at Rs. 7 per share fully paid up.

Q120: The J&K. Sugar Works Ltd. issued 1000 shares of Rs.50 each on the following terms: Rs. 12 on application Rs. 15 on allotment Rs. 13 on 1st call and Rs. 10 on final call 900 shares were applied for and allotted. All money was received with the exception of final call on 100 shares held by Raja. These were forfeited. Give journal entries.

Q121: X Ltd. issued 500 shares of Rs. 100 each at Rs.120 payable as follows: Rs. 25 on application Rs. 45 on allotment (including premium) Rs. 20 on 1st call and Rs. 30 on final call 400 shares were applied for and allotted. All money received with the exception of 1st and final calls on 20 shares held by Karim Ali. These shares were forfeited. Draft the journal entries. Q122: A Ltd. Company issues 10,000 shares of the face value of Rs. 10 each, payable Rs. 3 on application, Rs. 3 on allotment, Rs. 2 1st call and Rs. 2 on final call. All the shares are subscribed and duly allotted and the both the calls are made. All cash is duly received except the final call on 400 shares. These shares were forfeited by the directors and re-sold as fully paid for Rs. 1000. Give the journal entries.

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Q123: A limited company invited applications for 20,000 shares of Rs 100 each at a discount of Rs 5 per share(allowed at the time of allotment) The amount was payable as under On application On allotment Balance on call Rs 25 Rs 50 RS 20

The public applied for 18,000 shares and these were allotment. Money due was received with the exception of allotment and call moneys on 300 shares forfeited afterward 200 of these shares were reissued as fully paid for payment of Rs 75 per share. Journalise the transactions in the books of the company. Q124: A company issued 10,000 equity shares of Rs 10 each at a premium of Rs 3 per share payable Rs 5 on application, Rs 5 (Including premium) on allotment and the balance on 1st call. All the shares offered were applied for and allotted. All the money due on allotment was received except on 200 shares. Call was made. All the amount due thereon was received except on 300 shares. Directors forfeited 200 shares on which both allotment and call money was not received. Pass the necessary journal entries and prepare the Balance Sheet. Q125: M Ltd. purchased the business of Saqib Ltd. for Rs. 1,00,000 payable 10% in cash and the balance in fully paid shares of Rs. 100 each . Give the necessary journal entries.

Q126: N Ltd. acquired land costing Rs. 1,00,000 and in payment, allotted 1,000 equity shares of Rs. 100 each as fully paid. Give the necessary journal entries.

Q127: O Ltd. acquired business of Shah Ltd. for Rs. 7,80,000 payable in fully paid shares of Rs, 100 each. Give the necessary journal entries if such shares are to be issued at a premium of 20%.

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Q128: L. Ltd. Purchased land for Rs 60,000 from Ram Bros. It issued equity shares of Rs 10 each fully paid-up in satisfaction of their claim. Give the necessary journal entries.

Q129: M Ltd. Purchased the business of Shyam Ltd. For Rs 1,00,000 payable 10% in cash and the balance in fully paid shares of Rs 100 each. Give the necessary journal entries.

Q130: N Ltd. Acquired land costing Rs 1,00,000 and in payment, allotted 1,000 equity shares of Rs 100 each as fully paid. Give the necessary journal entries.

Q131: O ltd. Acquired business of Ram ltd. For Rs 7,80,000 payable in fully paid shares of Rs 100 each./ Give the necessary journal entries if such shares are to be issued at a premium of 20%.

Issue of Debentures. Q132: A ltd. Issued 1,000, 12% Debentures of Rs 100 each payable 50% on application, 20% on allotment, 15% on first call and balance a month later. The debentures were duly taken up by the public and the money was duly received. Give Journal entries and Balance Sheet.

Q133: B Ltd issued at par Rs 1,00,000, 12% Debentures of Rs 100 each payable 30% on application, 10% all allotment, 30% on first call and balance one month thereafter. The public applied for Rs 1,200 debentures. Applications for 1000 debentures were alloted in full and the remaining applications were rejected. Give journal entries and Balance Sheet. Q134: D Ltd issued Rs 2,00,000, 12% Debentures of Rs 100 each at 20% premium payable 20% on application, 60% ( Including premium) on allotment and the balance one month after. The public applied for 2,800 debentures. Applications for 1800 debentures were accepted in full, applications for 400 debentures were allotted 200 debentures and the remaining applications were rejected. All money was duly received. Give journal entries and Balance Sheet.
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Q135: F Ltd. Issued Rs 2,00,000, 12% Debentures of Rs 100 each at 2 % discount payable 50% on application, 18% on allotment, 15% on first call and the balance a month later. All amounts were duly received. Give journal entries and Balance Sheet. Q136: G ltd. Issued Rs 4,00,000, 12% Debentures of Rs 100 each at 10%, discount payable 30% on application, 30% on allotment and the balance a month later. The public applied for 4,800 debentures, application for 3,600 debentures were accepted in full. Applications for 800 debentures were allotted 400 debentures and the remaining applications were rejected. Give journal entries and Balance Sheet. Q137: Bilal Ltd. Issued at par Rs 1,00,000, 12% Debentures of Rs. 100 each payable 30% on application, 10% on allotment, 30% on first call and balance one month thereafter. The public applied for Rs. 1,200 debentures. Applications for 1,000 debentures were accepted in full. Application for 200 Debentures were allotted 100 debentures and the remaining applications were rejected. Q138: Give journal entries in each of the following alternative cases: (a) A debenture issued at Rs. 100 repayable at Rs. 100 (b) (c) (d) (e) (f) A debenture issued at Rs. 95 repayable at Rs. 100 A debenture issued at Rs. 105 repayable at Rs. 100 A debenture issued at Rs. 100 repayable at Rs. 105 A debenture issued at Rs. 95 repayable at Rs. 105 A debenture issued at Rs. 90 repayable at Rs. 95

The face value of a debenture in each of the above cases is Rs. 100. Q139: Gousia Ltd. took over the fixed assets of Rs. 6.00.000 and current liabilities of Rs. 80,000 of Saqib Ltd. for an agreed purchase consideration of Rs. 5.40.000 to be satisfied by the issue of 15% Debentures of Rs. 100 each. Prepare journal and Balance Sheet of Gousia Ltd. assuming that(a) (b) Such Debentures are issued at Par: Such Debentures are issued at 20% Premium:

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(c)

## Such Debentures are issued at 10% discount.

Q140: Sajid Ltd. Took over the assets of Rs 7,00,000 and liabilities of Rs. 60,000 of Yaseen Ltd. For Purchase consideration of Rs 6,60,000 payable as to Rs 30,000 in cash and the balance by an issue of 7,000 debentures of Rs 100 each. Journalise. Q141: What journal entries will be made in the following cases: (a) Aftaab Ltd. issued Rs. 40,000; 12% Debenture of Rs. 100 each at a discount of 10% redeemable at Par: Manzoor Ltd. issued 40,000;12% Debentures of Rs. 100 each at a premium of 5% redeemable at par Rumeesa Ltd. issued Rs. 40,000; 12% Debentures of Rs. 100 each at Par redeemable at 10% Premium: Sakeena Ltd. issued 40,000; 12% Debentures of Rs. 100 each at Par redeemable at 5% Premium;

(b)

(c)

(d)

Q142: Give journal entries in each of the following alternative cases. a) b) c) d) e) f) A debenture issued at Rs 100 repayable at Rs 100. A debenture issued at Rs 95 repayable at Rs 100. A debenture issued at Rs 105 repayable at Rs 100. A debenture issued at Rs 100 repayable at Rs 105. A debenture issued at Rs 95 repayable at Rs 105. A debenture issued at Rs 90 repayable at Rs 95. The face value of a debenture in each of the above cases is Rs 100.

Q143: A ltd. Bought a building for Rs 9,90,000 from X ltd. And the consideration was paid by issuing 12% debentures of Rs 100 each at par. Journalise. Q144: B Ltd. Purchased a plant from Y ltd. For Rs 5,00,000 payable as to Rs 65,000 in cash and the balance by an issue of 12% debentures of Rs 100 each at par. Journalise. Q145: C ltd. Took over assets of Rs 3,50,000 and liabilities of Rs 30,000 of Z ltd. For purchase consideration of Rs 3,40,000 payable as to Rs 10,000 in cash and the balance by an issue of 12% debentures of Rs 100 each at par. Journalise.

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Q146: E Ltd. Purchased a land for Rs 4,95,000 from W ltd and the consideration was paid by issuing 12% debentures of Rs 100 each at 10% premium. Journalise.

Q147: F ltd, brought a Machinery from X Ltd. For Rs 16,00,000 payable as to Rs 1,60,000 in cash and the balance by an issue of 12% debentures of Rs 100 each at 20% premium. Journalise.

Q148: G ltd. Took over the fixed assets of Rs 3,00,000 and current liabilities of Rs 10,000 of B Ltd. For an agreed purchase consideration of Rs 2,70,000 to be satisfied by the issue of 2,250, 15% debentures of Rs 100 each. Prepare journal and Balance Sheet of A ltd.

Q149: J Ltd purchased a building for Rs 9,00,000 and the consideration was paid by issuing 12% debentures of Rs 100 each at 10% discount. Journalise

Q150: K Ltd. Bought a machinery for Rs 4,00,000 payable as to Rs 1,30,000 in cash and the balance by an issue of 12% debentures of Rs 100 each at 10% discount. Journalise. Q151: A debenture of Rs 100 issued at Rs 100, repayable at Rs 100 journalise. Q152: Q ltd. Issued 90,000, 12% debentures of Rs 100 each at par redeemable at par. Journalise. A debenture of Rs 100 issued at Rs 105, repayable at Rs 100. Journalise.

Q153:

Q154:

R ltd. Issued 45,000, 12% debentures of Rs 100 each at a premium of 10% redeemable at par. Journalise.

Q155:

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Q156:

## Mahajan Commerce Coaching Centre

S ltd. Issued 90,000, 12% debentures of rs 100 each at a discount of 5% redeemable at par. Journalise.

Q157:

## A debenture of Rs 100 issued at Rs 100, repayable at Rs 105. Journalise.

Q158:

T ltd. Issued 45,000, 12% debentures of Rs 100 each at par, redeemable at 10% premium after 10 years. Journalise.

Q159:

## A debenture of Rs 100 issued at Rs 95, repayable at Rs 105. Journalise.

Q160:

U ltd. Issued 90,000, 12% debentures of Rs 100 each at a discount of 5%, redeemable after 10 years at a premium of 10%. Journalise. A debenture of Rs 100 issued at Rs 105, repayable at Rs 110. Journalise. V ltd. Issued 45,000 12% debentures of Rs 110 each at a premium of 5% redeemable at premium of 10%. Journalise. A debenture of Rs 100 issued at 90, repayable at Rs 95 . Journalise. W ltd. Issued 45,000, 12% debentures of Rs 100 each at 10% discount, redeemable at 5% discount, Journalise.

Q161: Q162:

Q163: Q164:

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Paper-A THEORY
Q: Meaning Of Partnership Firm: The law of governing partnership is contained in the Indian partnership Act 1932. Sec-4 act defines partnership as "the relation between persons who have agreed to share the of a business carried on by all or any of them acting for all". The following are essential elements of partnership: 1. There must be an agreement entered into by all the persons concerned. 1 The agreement must be to share the profits of a business. 2. The business must be carried on by all or any of them acting for all. 3. All these elements must be present before a partnership can come into existence. If any of them is not present, there cannot be formed a partnership. Q. Nature of partnership firm: Every sole trader has certain limitations. In a sole trading concern only one man invests capital, undertakes the business risks and controls the whole affairs of the business. But one man's capital, business skills, controlling and risk taking capacities are limited. Therefore, if he needs more capital and help in the management, he has to invite some other person or persons and enter into an agreement with them to form a partnership. Hence, when two or more than two persons enter into an agreement for setting up a business, running it and sharing its profits and individually they are known as partners of the firm and collectively they are known as partnership firm The firm is known by a name determined by its partners. The partnership films in India are the 'Indian Partnership Act, 1932'. Q. What is partnership deed? Partnership is the result of an agreement. The agreement among the partners which Sets out the terms on which they agreed to form a partnership is called partnership agreement. It may be in writing or by words of mouth or be implied from the course of conduct of the parties. It is desirable to have the partnership agreement in writing to avoid future disputes. The documents in writing containing the various terms and conditions as to the partnerships of the partners to each other is called the 'partnership deed'. Q. Difference between fixed capital and fluctuating capital accounts: Basis Change in Balance of Capital A/c's Fixed Capital Accounts It normally remains unchanged, unless some additional capital is introduced or some amount of capital is withdrawn. Each partner has two accounts, namely Capital A/c and a Current A/c.
Class:- 12th

## Fluctuating Capital Accounts It fluctuates quite frequently from year to year.

Number of Accounts

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Recording of transactions

## Mahajan Commerce Coaching Centre

All transactions relating to partners are made directly in the Partner's Capital Accounts.

All transactions relating to partner's drawings, interest on drawings, interest on capital, salary, commission, share of profit or loss etc. are not made in Capital A/c's but are entered in separate Current Accounts. Fixed Capital Accounts always shows credit balance.

## Fluctuating Capital A/c's may have credit or debit balance

1.

2.

3.

Q. Methods of valuation of goodwill 1. Average Profits Method: The average profits of given number of a past years multiplied by an agreed number of years is considered to be the value of goodwill. Thus 'three years' purchase of average profits of the last few years is commonly spoken of as the basis upon which goodwill is to be valued. The average profit of a given number of
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past years is multiplied by an agreed number of years to arrive at the value of goodwill. This method is purely arbitrary and will frequently produce a figure for goodwill out of all proportions to its true value. 2. Super Profit Method: Super profits of a business are the profits which can be expected in the future over and above those necessary to pay a fair return upon the capital invested in the business, having regard to the risk involved in that particular business and a fair remuneration for the services of the partners who work therein. Super profit is the excess of actual profits over normal profits. 3. Capitalization Method: In this method, the whole value of business is calculated by capitalization of the average or actual profits by the following formula:
Actual Profits 100 Normal rate of return

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1. 2.

3. 4. 5.

6. 7.

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Q. Revaluation account? At the time of admission of new partner, the value of new assets will have been appreciated or depreciated. Similarly the amount of various liabilities and reserves will also have been changed. The new partner should not suffer any loss or benefit at the time of admission. For this purpose an account is prepared which is called revaluation account so that the net effect i.e. profit or loss is transferred to old partners' capital account in old ratio. This account is also called as profit and loss adjustment account. Revaluation account is credited with increase in value in assets and decrease in the amount of liability or reserve. Revaluation account is debited with the decrease in the value of assets and increase in the value of liability or reserve. Q. Gaining ratio? It is the ratio in which remaining partners gain out of the retiring partner' share. Remaining partners may gain additional share (out of the retiring partner's share) in their previous ratio or in any other agreed ratio. Gaining ratio is calculated by deducting his old share from his new share. Q. Distinguish between gaining ratio and sacrifice ratio? 1. Sacrificing ratio is calculated at the time of admission of a new partner while gaining ratio is calculated in the event of retirement or death of a partner. 2. Sacrificing ratio is the proportion in which old partners' have sacrificed their profit sharing proportion, whereas gaining ratio is the proportion in which continuing partners have gained the profit sharing ratio. 3. In sacrificing ratio we calculate the sacrifice made by existing partners in favour of incoming partner, whereas in gaining ratio we calculate the gain of the continuing partners out of the proportion of outgoing(retiring or deceased)partner. 4. Sacrificing ratio calculates sacrifice as: Old share - New share Gaining ratio calculates gain as: New ratio - Old ratio. 5. Sacrificing ratio is used to compensate old partners on account of goodwill i.e. old partner's capital accounts are credited whereas gaining ratio is used to charge continuing partners on account of goodwill. I.e. continuing partner's capital account are debited. Q: Joint life policy. Partnership firm may decide to take a joint life insurance policy on the lives of all partners. The firm pays the premium and the amount of policy is payable to the firm in the event of death of any partner or on the maturity of the policy whichever is earlier. The objective of taking such a policy is to minimize the financial hardships to the firm in the event of payment of a large sum to the Legal representatives of a deceased partner. Q. Surrender value. If the policy holder decides to discontinue the policy before its maturity, the insurer pays him the surrender value. A policy, however, acquires a surrender value only after it has run for at least two or three years. Such value is based on the actual premium paid, though it is 2. fraction of the total amount paid by way of premium.
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Q. Dissolution of a firm. Partnership, as a form of business organization, is a voluntary association of persons to came on business. It comes into existence as a result of agreement between partners. Similarly it can be dissolved if and when partners decide, mutually, to discontinue it. Section 39 of the Partnership Act, 1932 provides that "the dissolution of partnership between all the partners of a firm is called dissolution of the firm". It implies complete breakdown of the relation of partnership between all the partners. Q. Difference between dissolution of partnership and dissolution of firm. The Indian partnership Act, recognizes the difference between dissolution of partnership and dissolution of firm. Dissolution of a firm involves the complete breakdown of partnership relation and not any change in the constitution of the firm. In dissolution of partnership, the partners may by agreement provide for the continuance of the firm after its dissolution by death, insolvency or retirement of a partner. In such cases, the firm is re-constituted without any dissolution. Thus dissolution of parlnership does not necessarily involve dissolution of firm, whereas dissolution or firm does involve dissolution of partnership. On dissolution of the firm, the firm's assets are realized and the liabilities are discharged, whereas on dissolution of the partnership, the share of the outgoing partner is ascertained, without in any way winding up the entire business. Q. Realization accountant. Accounting for dissolution is carried through a special account named as realization account. This account is debited with all the assets at book values (except cash and cash at bank); is credited with all the liabilities at book values (except partners' loan, capitals, and reserves etc.) in the first instance. Next it is debited with the amount paid off for settlement of liabilities; expenses of realization and it is credited with the amount realized on disposal of assets. Difference representing profit/loss on realization is transferred to capital accounts of all the partners in their profit sharing ratio. Q. Difference between realization account and revaluation Account. Whenever a partnership firm is dissolved the realization account is prepared, to find out the profit or loss of a partnership firm on the sale of various assets and repayment of various liabilities. This account actually closes the accounts of all assets and liabilities. But a revaluation account or the profit and loss adjustment is prepared whenever there is a change in partnership e.g. admission, retirement or death of a partner. In this case the assets and liabilities are only revalued the revaluation account reveals the profit or losses on their revaluation. Q. Meaning of share Total capital of the company is divided into units of small denomination. Each such unit is called a 'Share'. For example, If total capital of the company is Rs. 10,00,000 divided into 1,00,000 units of 10 each. Each unit of Rs. 10 will be called as share. Thus, a share is proportionate part of the share capital and forms ownership in a company. Shares must be numbered so that they may be identified. The persons who contribute money through shares are known as shareholders who earn profits in the form of dividend on shares.
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Q. Types of shares According to Companies Act, 1956 shares are of two types: (a) Preference Shares (b) Equity Shares. a) Preference Shares: Preference shares are those shares which carry certain priorities. A preference share is given the right of priority in respect of payment of dividend and in respect of return of capital in the case of winding up of the company. These shares are considered best from the point of view of safe investment, permanent income and less risk. Preference shares are always cumulative, unless, otherwise expressly stated in the company's articles. [Section 85, Companies Act 1956] b) Equity Shares: A share which is not a preference share is an equity share. Equity Shares carry no special rights in respect of annual dividend and return of capital in the case of winding up of the company. There will be no fixed rate of dividend on equity shares. If in a particular year, a company earns insufficient profit. The equity shares will receive nothing and if company earns more profits, they get a higher rate of dividend. In other words, equity shareholders receive dividend when there is sufficient profits to the company. As regards to return of capital, equity share capital is returned only when preference share capital is fully returned. Equity shareholders have voting rights and control the affairs of the company. It is compulsion for a company to issue equity shares.

1.

2.

3.

4.

5.

Q. Share capital. Every company must have capital in order to finance its activities. The company raises this capital by issue of shares. That is why the capital of the company is called as 'Share Capital'. The information relating to the share capital of the company is found in the Balance Sheet under following headings: Authorized Capital: It is also called as "Registered" or "Nominal capital". Authorized share of a company is the maximum amount of share capital which a company is authorized to raise throughout its life. This amount is stated in the Memorandum of Association of the company under the capital clause. Issued Capital: It is defined as the nominal amount of that part of the authorized share capital which is proposed to be collected from the public by the company. Thus, it is that part of authorized share capital for which, a company issues an invitation to the public to subscribe for. If a company has an authorized share capital of Rs. 10,00,000, divided into shares of Rs. 10 each and it invites the public to subscribe for 50,000 shares, then its issued capital will be Rs. 5,00,000. Subscribed Capital: It is that part of issued share capital of a company, for which the public has applied. If the public purchases/ applies for all the shares issued, then the issued capital and the subscribed capital will be the same. Called-up Capital: It is that part of subscribed capital which has been called up by the board of Directors from the public. It is the amount called up by the company on its issued shares e.g. a company has made a call for Rs. 6 per share of Rs. 10 each, then, in case stated above, the called up capital of the company will be Rs. 3,00,000 (50,000 x 6) I Paid-up Capital: It is that part of the called up capital which has been received by the company. The other part, which has not been paid by the share-holders of the company,
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is termed as Calls-in -Arrear. Therefore, to calculate paid up capital of the company, the calls-in-arrear amount is deducted from the amount of called up capital. In the above stated example, if a share-holder, holding 500 shares, paid Rs. 4 per share only, then his calls in arrears will be (500 x 2) = Rs. 1,000 and the paid capital will be Rs. 2,99,000 (i.e. Rs. 3,00,000 - Rs. 1,000). 6. Reserve Capital: According to Section 99 of the Companies Act, a company may, by means of a special resolution, decides that certain portion of its uncalled capital shall not be called up during its existence and it would be available as an additional security to its creditors in the event of its liquidation. Such a portion of uncalled capital is termed as 'Reserve Capital'.

Q: What is over subscription? It is the amount received as application money over and above the amount on issued number of shares e.g. if company issues ten thousand shares but application money is received for twelve thousand shares, it is the case of over subscription of two thousand shares. Q. What is under subscription of shares? If the application money is received for number of shares less than the number of shares issued, it is called under subscription of shares. Q. What is calls in arrears? This is the amount called up by the company but remaining unpaid. When a person applies for the shares of company he is liable to pay the entire amount or shares. In case he fails to pay the allotment Money and Call money on shares held by him, the unpaid amount is known as calls arrears. Q. What is rights issue? In this case the company makes further issue of shares, existing equity share holders must be offered to subscribe for the share first.

Q. What is calls in advance? Calls in advance are the amount paid by a certain share holder before the particular call is made due, it is known as calls in advance. Q. Issue of shares: (a) At par (b) At discount (c) At premium. When shares of a company are issued at its own face value, it is called shares issued at par. When shares are issued at less than face value of the shares, it is called shares issued at discount. When shares are issued at more than face value of the shares, it is called shares issued at premium.

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Q. Forfeiture of shares? Forfeiture of shares means cancellation of shares. The share holder who fails to pay the call money. The company after passing resolution can forfeit the shares of such share holders. In other words forfeiture means secure of shares by the company and the share holder remains no more share holder of company. Q. Pro-rata allotment of shares. In case of reputed and prosperous companies. Applications are received for more shares than issued. The company in such situations may allot shares of different applicants on pro-rata basis. Pro-rata allotment means that shares are allotted proportionally as applied by each applicant. Q: what is a debenture and give its various kinds? A debenture is a loan certificate issued by the company to its holders. A debenture is an instrument issued by the company acknowledging its debts to the holder under its seal. Debentures carry interest as per the agreement of the company. Debentures may be classified into different categories, which are as under: Naked debentures: These debentures are not having any security but they are issued without any charge on companies assets. Bearer Debenture: These debentures are issued without registration of the name of such debenture holder. These debentures are transferable by mere delivery. Registered debentures: These debentures are properly registered in the register of the company and such debentures are not transferable by mere delivery. Redeemable debentures: The amount of such debentures are to be repaid after the specified period of time. Irredeemable debentures: These debentures are perpetual and the company has no rights to make the payment of the principal amount. Amount of these debentures during its life time. Mortgage debentures: These debentures are issued having a fixed or floating charge or assets of the company. These debentures are also called secured debentures. Collateral debenture: Debentures may also be issued to banks and financial institutions as an additional security to certain principal security. Leading institutions exercise their rights as debenture holders if the company does not pay loan and principal security falls short.

1. 2. 3. 4. 5.

6. 7.

Q. Issue of debentures. (a) At par (B) At discount (C) At premium. A. At par: debentures are said to be issued at par when the amount collected for it is equal to the nominal value (face value) of the debenture; for example, issue of Rs 1.000 debentures for Rs 1,000. B. At discount: when debentures are issued by company at rice less than its nominal value (face value) it is said to issued at discount. For example, if a debenture of Rs 1,000 is offered to public at Rs 950, it is issue at discount. Here Rs. 50 on each debenture is loss to the company. As a principle of equity, it is desirable to write off this loss. C. At premium: if debentures are issued at price more than its nominal value (face value) such an issue is called issue at a premium. For example, if a debenture of Rs 1,000 is offered at Rs 1,050, it is a case of issue of debentures at premium. The excess of issue price over face value is premium. The premium is a capital gain for company so it is to be
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credited to 'securities premium A/c'. The amount of premium on debentures should not be credited to profited and loss A/c because it is not a profit arising from the normal operations of the company. Since it is a gain, it is shown on the liabilities side of balance sheet under the head 'Reserves and Surplus'.

Q. Issue of debenture for consideration other than cash. Sometimes a company purchases a running business (assets and liabilities) and issues to vendor, debentures as consideration. It is called issue of debentures in consideration, other than cash. Note: When debentures are issued in consideration other than cash they can be issued either at par, at premium or at discount. If they are issued at premium the amount of premium will be credited to 'premium on issue of debentures account' and if issued at a discount, the discount will be debited to 'discount on issue of debentures account'. As per rule purchase consideration (amount to be paid for assets purchased) should be equal to net assets (Assets purchased-liabilities assumed) value. But in practice sometimes it is more than the value of net assets and sometimes it is less than the value of net assets. Extra payment made over and above the value of net assets is treated as goodwill, which can be calculated as follow: Goodwill = Purchase consideration - Net assets Where Net assets = Assets purchased - Liabilities assumed

In case the purchase consideration to be paid by company is less than the value of net excess of net assets, the excess of net over purchase consideration is a capital gain which is transferred to capital reserve account.

Q. Debentures issued as collateral security. The term 'collateral security' implies additional security given for loan. Where a company obtains a loan from a bank or insurance company, it may issue its own debentures to the lender as collateral security against the loan in addition to any other security that may be offered. In such a case, the lender has the absolute right over the debentures until and unless the loan is repaid. On repayment of the loan, however, the lender is legally bound to release the debentures forthwith. But in case the loan is not repaid by the company on the due date or in the event of any other breach of agreement, the lender has the right to retain these debentures and to realize them. The holder of such debentures is entitled to interest only on the amount of loan. but not on the debentures. Such an issue of debentures is known as "Debentures issued as collateral security." Section 121 (4) of the Companies Act expressly refers to this procedure and provides that such debentures should not be deemed to have been redeemed by reason onlv of the account of the company having ceased to be in debit whilst the debentures remained so deposited.

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a)

b)

c)

d)

Q. Redemption of debentures. Redemption of debentures denotes the discharge of the liability of the debentures by a company. Debentures can be redeemed at any time either at par or at a premium or at discount. Terms of redemption of the debentures are generally given in the prospectus inviting applications for the debentures. Section 121 of the Companies Act, 1956 empowers the company to reissue redeemed debentures either by issuing the same debentures or by issuing, other debentures unless debentures are cancelled by the company. Debentures can be redeemed by any of the following methods: By annual installments or by draw of lots: Under this method, a certain portion of the total debentures is redeemed at regular intervals over the life time of the debentures. Thus, at the end of the life time of the debentures, the debentures are fully redeemed. Redemption in lump-sum after the expiry of a fixed period: Under this method the entire amount of the debentures is redeemed in one lump-sum at the expiry of a specified period i.e. at maturity or at the option of the company at a date within such specified period according to the terms of the issue. By purchase of debentures in the open market: A company may reserve with itself the right to purchase its own debentures in the open market. When the debentures are freely available at below par value or debentures are quoted at a discount on stock exchange, the company may use any surplus cash to buy its own debentures and to cancel them. By conversion into shares: A company may issue convertible debentures giving option to the debenture holders to exchange their debentures for equity shares or preference shares in the company. When the debenture holders exercise this option and the company issues the shares, it is referred to as redemption by conversion.

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Ratio Analysis Q1: From the following balance sheet, calculate current ratio & quick ratio: Liabilities Rs Assets Rs. Equity share capital 1,50,000 Land & building 1,00,000 Reserves and surplus 50,000 Plant & machinery 80.000 Debentures 60,000 Goodwill 20,000 Trade creditors 6,000 Cash 5,000 Bills payable 5,000 Investments 15,000 Bank overdraft 5,000 (Gilt edged) Outstanding expenses 1,000 Bills receivable 5,000 Income tax payable 3,000 Sundry debtors 22,000 Proposed dividends 10,000 Less provision 2,000 20,000 Inventories 30,000 Work in progress 15,000 2,90,000 2,90,000 Q2: From the following information, calculate current ratio. Stock Rs. 15,000; debtors (good) Rs. 13,500; cash in hand Rs. 5,000; bank balance Rs. 10,000; bills receivable Rs. 6,000; plant and machinery Rs. 60,000; creditors Rs. 17,500; bills payable Rs. 6,000; accrued interest Rs. 350 ; prepaid expenses Rs. 150 ; debentures Rs. 25,000; provision for taxation Rs. 1,500. From the following, calculate the current ratio and quick ratio Share capital Rs. 100,000; Reserves Rs. 25,00,000 ; Debentures Rs. 100,000 ; Sundry creditors Rs. 37,500; Machinery Rs. 100,000 ; Building Rs. 100,000 ; Furniture Rs. 25,000 ; Sundry debtors Rs. 30,000 ; Cash in hand Rs. 20,000 ; Bills payable Rs. 10,000 ; Stock Rs. 40,000 From the following balance sheet calculate absolute liquid ratio Liabilities Rs Assets Rs. Share capital 5,00,000 Goodwill 50,000 Reserves 1,90,000 Plant & machinery 4,00,000 Bank 1,00,000 Trade investments 2,00,000 overdraft 1,40,000 Marketable securities 1,50,000 Sundry 50,000 Bills receivable 40,000 creditors 10,000 Cash 45,000 Bills payable Bank 30,000 Outstanding Inventories 75,000 expenses 9,90,000 9,90,000
Subject: Accountancy Paper A: & Paper B: Class:- 12th Page 59

Q3:

Q4:

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## Mahajan Commerce Coaching Centre

Q5:

From the following balance sheet of X Ltd., as on December 31, 1991 calculate (a) current ratio (b) acid test ratio and (c) absolute liquid ratio, BALANCE SHEET as on December 31, 2008 Liabilities Rs Assets Rs. Equity share capital 10,00,000 Cash & bank 48,600 General reserve 1,00,000 Deposits & advances 62,000 Profit & loss account 2,17,000 (short-term) Secured debentures 2,50,000 Stock 2,72,800 Trade creditors 4,05,750 Debtors 5,23,000 Bills payable 18,000 Bills receivable 22,600 Provision for taxation 2,64,000 Advance tax 1,00,000 Bank overdraft 52,000 Land & building 8,00,000 Proposed dividend 86,250 Plant & machinery 5,44,000 Trade investments 20,000 23,93,000 23,93,000 A firm has a current ratio of 4 : 1 and quick ratio of 2.5 : 1. Assuming inventories are Rs. 22,500 find out total current assets and total current liabilities.

Q6:

Q7: Current ratio is 2.5; working capital is Rs. 60,000; Calculate the amount of current assets and current liabilities. Q8: X Ltd. has a liquid ratio of 1.5. Its net working capital is Rs. 120,000 and its inventory is Rs. 80,000. Calculate current assets. Q9: X Ltd. has a current ratio of 3 : 1. Its net working capital is Rs. 200,000 and its inventory is Rs. 220,000. Calculate liquid assets.

Q10: X Ltd. has a liquid ratio of 1.5 : 1. Its stock is Rs. 60,000 and its current liabilities are Rs. 120,000. Calculate the current ratio. Q11: Priya Ltd. has a current ratio of 3 : 1. If its stock is Rs. 40,000 and the total current liabilities are Rs. 75,000. Find out its quick ratio. Q12: X Ltd. has a current ratio of 2 : 1 and quick ratio of 1.5:1. Rs. 80,000. Calculate the value of stock.
Subject: Accountancy Paper A: & Paper B: Class:- 12th

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Its current assets are

Q13: X Ltd. has a current ratio of 2.5 : 1 and quick ratio of 1.5 : 1. Rs. 200,000. Calculate the value of stock.

Q14: X Ltd. has a current ratio of 3 : 1 and liquid ratio of 1 : 1. Its working capital is Rs. 200,000 Calculate the value of stock. Q15: A business has current ratio of 3 : 1 and a quick ratio of 1.2 : 1. capital is Rs. 180,000. Calculate the current liabilities and stock. If the working

Q16: Calculate stock turnover ratio from the data given below. Stock at the beginning of the year Rs. 20,000 ; Stock at the end of the year Rs. 10,000 ; Purchases Rs. 50,000 ; Carriage inwards Rs 5,000 ; Sales Rs. 100,000. Q17: Opening stock Rs. 58,000 ; Excess of the closing stock over opening stock Rs. 4,000 ; Sales Rs. 6,40,000 ; Gross profit @ 25% on sales. Calculate stock turnover ratio. Q18: Purchases Rs. 45,000 ; Excess of the opening over closing stock Rs. 5,000 ; Aggregate of the opening stock and closing stock Rs. 25,000 ; Calculate stock turnover ratio. Q19: Opening stock Rs. 29,000 ; Closing stock Rs. 31,000 ; Sales Rs. 3,00,000 ; Gross profit 25% on cost. Calculate stock turnover ratio. Q20: Calculate stock turnover ratio from the following information : Rs Opening stock 58,000 Purchases 4,84,000 Sales 6,40,000 Gross profit ratio 25% on sales Q21: Calculate the stock turnover ratio and stock velocity from the following information. Rs Rs. To Opening stock 37,500 By Sales To Purchases 3,23,500 Cash 1,00,000 To Direct expenses 1,500 Credit 3,07,000 To Gross profit 80,000 4,07,000 Less Returns 7,000 4,00,000 By closing stock 42,500 4,42,500 4,42,500
Subject: Accountancy Paper A: & Paper B: Class:- 12th Page 61

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Q22: Quick ratio 1.5; Current assets Rs. 100,000 ; Current liabilities Rs. 40,000. Calculate the value of stock. Q23: From the following details, calculate the value of opening stock. Closing stock Rs. 68,000 Total sales Rs. 4,80,00 (including cash sales Rs. 1,20,000) Total Purchases Rs. 3,60,000 (including credit purchases Rs 2,93,200) Goods are sold at a profit of 25% on cost. Q24: From the following information, calculate the stock at the end. Rs. Opening stock 62,000 Purchases 4,20,000 Sales 6,00,000 Rate of gross profit on cost
1 33 % 3

Q25: Stock turnover ratio6 times; Gross profit 20% of sales ; Sales Rs. 180,000; Closing stock is Rs. 15,000 in excess of opening stock. Find the value of opening stock and closing stock. Q26: Compute the amount of gross profit and sales if opening stock Rs. 60,000; Closing stock Rs. 100,000; stock turnover rate 8 times and goods sold at a profit on 20% on sales. Q27: Calculate debtors turnover ratio and average collection period in terms of months from the following : Credit sales for the year Rs. 60,000 ; Debtors Rs. 5,000 ; Bills receivable Rs. 5,000. Q28: B Raj and Co. sell goods on cash as well as credit. The following particulars are extracted from their books of accounts for the calender year 2008.

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Q29: Compute the debtors turnover ratio from the following 2007 Year I (Rs.) Gross sales 9,00,000 Debtors in the beginning of the year 83,000 Debtors at the end of the year 1,17,000 Sales returns 1,00,000 Cash sales 2,50,000

## 2008 Year II (Rs.) 7,50,000 1,17,000 83,000 50,000 1,50,000

Q30: From the following information, calculate debtors turnover ratio and average collection period Opening debtors 37,000 Closing debtors 43,000 Sales 6,00,000 Cash sales 80,000 Q31: Calculate the debtors turnover ratio and debt collection period from the following information Rs 1,00,000 25,000 25,000 7,000 Rs. 4,07,000 50,000 20,000

Cash sales Opening sundry debtors Closing bills receivable Sales returns

## Total sales Closing sundry debtors Opening bills receivable

Q32: Opening debtors Rs 10,000. Cash received from debtors Rs 70,000; Closing debtors Rs 15,000; Sales returns Rs 5,000; Calculate debtors turnover ratio and debt collection period. Q33: Calculate the amount of opening debtors and closing debtors from the following figures. Debtors turnover ratio = 4 times Cost of goods sold Rs. 6,40,000 Gross Profit ratio 20% Closing debtors are Rs. 20,000 more than at the beginning, cash sales being 33 of credit sales.
1 % 3

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## Mahajan Commerce Coaching Centre

Q34: A trader purchases goods both on cash as well as on credit terms. The following particulars are obtained from the books. Rs. Total purchases 300,000 Cash purchases 30,000 Purchases returns 51,000 Creditors at the end 105,000 Bills payable at the end 60,000 Reserve for discount on creditors 8,000 Taking a period of 365 days calculate creditors turnover ratio and average payment period. Q35: From the summarized balance sheet given below of a company calculate working capital turnover ratio. 2008 2009 Rs. Rs. Equity 1,24,000 1,22,000 Long term loans 1,10,000 80,000 Current liabilities 74,000 1,38,000 3,08,000 3,40,000 Fixed assets 2,08,000 1,98,000 Current assets 1,00,000 1,42,000 3,08,000 3,40,000 You are informed that sales (net) during 2008 and 2009 amounted to Rs. 6 lakhs and Rs. 5 lakhs respectively and gross profit for the two years was Rs. 80,400 and Rs. 60,800 respectively. Q36: Calculate the gross profit ratio from the following details of a trading firm. Rs Rs. Opening stock 26,000 Closing stock 38,000 Cash sales 32,000 Gross credit sales 1,30,000 Return inwards 2,000 Cash purchases 24,000 Gross credit purchases 83,000 Returns outwards 3,000 Direct expenses 16,000

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## Mahajan Commerce Coaching Centre

Q37: Average stock Rs. 80,000 ; Stock turnover ratio 6 times ; Selling price 25% above cost. Calculate gross profit ratio.

Q38: A Co. has drawn up the following profit and loss account for the year ending 31st March 2009. Rs 26,000 80,000 24,000 16,000 52,000 1,98,000 4,000 22,800 1,200 800 28,000 56,800 Rs. 1,60,000 38,000

To Opening stock To Purchases To Wages To Manufacturing exp. To Gross profit To Selling and distribution expenses To Administration exp. To General expenses To Value of furniture lost by fire To Net profit

## By Gross profit By Compensation for the acquisition of land

1,98,000 52,000

4,800

56,800

Calculate (1) Operating ratio. (2) Ratio of operating net profit to net sales.

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Q39: The following is the trading and profit and loss account of Maheshwari Bros Private Ltd. for the year ended June 30, 2009. Rs Rs. To Stock in hand 76,250 By Sales 5,00,000 To Purchases 3,15,250 By Stock in hand 98,500 To Carriage and freight 2,000 To Wages 5,000 To Gross profit 2,00,000 5,98,500 5,98,500
To Administrative expenses To Finance expenses Interest 1,200 Discount 2,400 Bad debts 3,400 To Selling and distribution expenses To Non-operating expenses loss on sale of securities 350 Provision for legal suit 1,650 To Net profit By Gross profit By Non-operating incomes Interest on securities 1,500 Divident on shares 3,750 Profit on sales of shares 750 2,00,000

1,01,000

7,000 12,000

6,000

2,000 84,000 2,06,000 2,06,000 You are required to calculate (a) Expenses ratio (b) Gross profit ratio (c) Net profit ratio (d) Operating profit ratio (e) Operating ratio and (f) Stock turnover ratio.

Q40: From the following calculate the debt-equity ratio. Rs. Equity shares @ Rs. 10 each 10,00,000 General reserve 45,000 Accumulated profit 30,000 Debentures 75,000 Sundry trade creditors 40,000 Outstanding expenses 10,000

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Q41: If the net income of an enterprise is Rs. 1,62,400 its fixed interest charges on mortgage debentures amount to Rs. 27,000 and income tax paid by it is Rs. 1,62,400 ; Calculate interest coverage ratio. Q42: From the balance sheet given below calculate the proprietory ratio. Rs Assets Liabilities Pref. share capital 1,00,000 Fixed Assets Equity share capital 2,00,000 Current assets reserves & surplus 50,000 Goodwill Debentures 1,00,000 Investment Creditors 50,000 5,00,000

## Rs. 2,00,000 1,00,000 50,000 1,50,000 5,00,000

Q43: From the following figures extracted from the Income Statement and the Balance Sheet of Messrs Anu Sales Pvt. Ltd., calculate the Return on Total Capital employed (ROI) : Rs. Fixed assets 4,50,000 Current assets 1,50,000 Investment in Govt. securities 1,00,000 Sales 5,00,000 Cost of goods sold 3,00,000 Share capital 10% Preference 1,00,000 Equity 2,00,000 Reserves 1,00,000 Debentures 1,00,000 Income from investments 10,000 Interest on debentures at 10% Provision for tax at 50% of net profits. Q 44: Calculate return on equity from the following information. 10% pref. share capital (fully paid) Rs. 1,00,000 16,000 equity shares of Rs. 10 each fully paid Rs. 1,60,000 Reserves and surplus Rs. 6,40,000 Net profit after tax Rs. 2,37,500

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Stock

Q45: From the following information, calculate (i) Gross profit ratio and (ii) turnover ratio. Rs. Sales 2,00,000 Purchases 1,69,000 Opening stock 35,500 Closing stock 44,500 Q46: You are required to compute (i) Debt equity ratio and (ii) Fixed assets turnover ratio from the following information. Rs. Net sales 9,00,000 Total long term debts 3,00,000 Shareholders funds 5,00,000 Fixed assets at written down value 2,00,000 Purchases less return outward 6,00,000 Deposits in bank 1,00,000

Q47: The following is the Balance Sheet of X Ltd. As on 31st December 2009 Rs Assets Rs. Liabilities Equity share capital 2,00,000 Land and buildings 1,50,000 Reserves 90,000 Plant and machinery 80,000 Profit for the year 60,000 Stock 1,40,000 Bank overdraft 30,000 Debtors 80,000 Creditors 1,00,000 Cash 30,000 4,80,000 4,80,000 Calculate quick ratio and return on investment. Q48: From the following information, calculate the debt equity ratio and current ratio. Rs. Share capital 250,000 Bills payable 15,000 Creditors 45,000 Debtors 60,000 12% Debentures 280,000 Bank balance 30,000 Long term loan 110,000 General reserve 25,000
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Q49: From the following Balance Sheet of Y Ltd. for the year ended 31st December 2009 calculate (a) return on capital employed and (b) capital turnover ratio. Rs Assets Rs. Liabilities Equity share capital 75,000 Fixed assets 40,000 Profit for the year 47,000 Stock 90,000 Reserves Trade 25,000 Debtors 86,000 creditors 76,000 Cash 7,000 2,23,000 2,23,000 Sales for the year amounted to Rs. 3,50,000

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Q50: From the following particulars, you are required to calculate i) Current ratio ii) Net profit ratio iii) Gross profit ratio Rs. Net sales 1,40,000 Gross profit 10,000 Net profit 6,000 Bills receivable 2,000 Debtors 8,800 Stock 10,000 Cash 6,000 Creditors 12,000 Bills payable 8,800 Q51: On the basic of the following information, calculate gross profit ratio, working capital turnover ratio and debt equity ratio. Rs Net sales 30,00,000 Cost of goods sold 20,00,000 Current assets 6,00,000 Current liabilities 2,00,000 Paid up share capital 5,00,000 Debentures 2,50,000 Loan 1,25,000 Q52: From the following information, Calculate i) Gross profit ratio ii) Stock turnover ratio iii) Debtors turnover ratio Sales Cost of goods sold Opening stock Closing stock Debtors Bills receivable
Subject: Accountancy Paper A: & Paper B:

## Rs. 1,50,000 1,20,000 27,000 33,000 14,000 6,000

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Q53: The following is the profit and loss account of a company for the year ended 31st December 2009 with the corresponding figures for the previous year. Particulars 2008 2009 Particula 2008 2009 Rs Rs rs Rs Rs. To Opening stock 1,25,000 1,33,000 By Sales 6,00,000 7,48.000 To Purchases 4,80,000 5,84,000 By Closing 1,33,000 1,21,000 To Gross profit 1,28,000 1,52,000 stock 7,33,000 8,69,000 7,33,000 8,69,000 To Administrative By Gross expenses 38,000 38,000 profit 1,28,000 1,52,000 To Selling expenses 22,500 29,290 To Other expenses 37,500 46,710 To Interest 4,000 To Net profit 30,000 34,000 1,28,000 1,52,000 1,28,000 1,52,000 Calculate the following ratios for both the years and to indicate the possible reasons for variation of the ratios of the two years (1) Gross profit ratio (2) Net profit ratio (3) Stock turnover ratio. Q54: Following is the income statement of Strong Ltd. for the year ending 31st December 2009 INCOME STATEMENT for the year ending 31st December 2009 Particulars Rs Particulars Rs To Opening stock 45,750 Bv Sales 3,00,000 To Purchases 1,89,150 By Closing stock 59,100 To Carriage 1,200 To Wages 3,000 To Gross profit 1,20,000 3,59,100 3,59,100 To Administrative exp. 60,600 By Gross profit 120,000 To Finance expenses By Non-operating income Interest 720 Interest 900 Discount 1,440 Dividend 2,250 -Bad debt 2,040 Profit on sale of securities 450 To Selling and 7,200
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distribution expenses To Non-operating expenses To Net profit

## Mahajan Commerce Coaching Centre

1,200 50,400 1,23,600 1,28,000 You are required to calculate (a) Expenses ratio (b) Gross profit ratio (c) Net profit ratio (d) Operating net profit ratio (e) Operating ratio

1,23,600

Q55: From the following income statement of Modi Chemicals Ltd. compute (a) Gross profit ratio (b) Operating net profit ratio and (c) Net profit ratio. Ignore taxation. MODI CHEMICALS LTD. TRADING AND PROFIT AND LOSS ACCOUNT For the year ended 31st Dec, 2009 Rs 55,000 4,65,000 1,43,000 2,60,000 9,23,000 50,000 30,000 20,000 4,000 16,000 14,000 6,000 1,80,000 3,20,000 Rs By Sales (net) Cash 2,43,000 Credit 6,00,500 By Closing stock By Gross profit By Profit on sale of car By Interest on investments

To Stock To Purchases To Factory expenses To Gross profit To Office expenses To Selling expenses To Distribution expenses To Provision for doubtful debts To Depreciation To Interest on debentures To Loss of cash by theft To Net profit

3,20,000

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Q56: Following is the profit and loss account of Electricals Ltd. for the year ending on 31st December, 2009. Rs 1,00,000 By Sales 3,50,000 By Closing stock 9,000 2,01,000 6,60,000 20,000 By Gross profit By Interest on investments 89,000 (outside business) 30,000 By Profit on the sale of 80,000 investments Rs 5,60,000 1,00,000

## To Opening stock To Purchases To Wages To Gross profit

To Administrative exp. To Selling and distribution expenses To Non-operating expenses To Net profit

## 6,60,000 2,01,000 10,000

8,000 2,19,000

2,19,000 You are required to calculate (i) Gross profit ratio (ii) Net profit ratio (iii) Operating ratio (iv) Operating profit ratio (v) Administrative expenses ratio

Q57: A business firm made credit sales of Rs. 2,40,000 during the financial year. If the collection period is 45 days and the year is assumed to be of 360 days, calculate : (i) Debtors turnover ratio and (ii) Average debtors. Q58: From the following particulars, determine the amount of debtors at the end of the year: Rs. Credit sales 2,40,000 Credit collection period 2 months Debtors (beginning) 35,000

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Q59: From the following particulars you are required to determine. (a) Debtors turnover ratio and (b) Average age of debtors Year 2008 Net sales 10,50,000 Debtors Jan. 1 1,20,000 Debtors Dec. 31 1,40,000 Days to be taken for a year 365 Q60: Dryson Ltd. provides the following information. Rs. Cash sales during the year 1,50,000 Credit sales during the year 2,70,000 Return inwards 20,000 Trade debtors in the beginning 55,000 Trade debtors at the end 45,000 Provision for bad and doubtful debts 5,000 Calculate : (i) Debtors turnover ratio (ii) Average collection period. Note. Days to be taken for a year 360.

## Year 2009 13,00,000 1,40,000 1,80,000

Q61: Opening stock Rs. 19,000 ; Closing stock Rs. 21,000 ; Sales Rs. 2,00,000 ; Gross profit ratio on sales 25%. Calculate stock turnover ratio. Q62: From the following details, calculate inventory turnover. Credit sales Rs. 1,20,000 ; Cash sales Rs. 2,60,000 ; Returns inwards Rs. 10,000 ; Opening stock Rs. 22,000 ; Closing stock Rs. 28,000 ; Gross profit ratio 25%. Q63: From the following details, calculate the stock turnover ratio Cost of goods sold 4,50,000 Stock at the beginning of the year 1,25,000 Stock at the close of the year 1,75,000

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Q64: Calculate working capital turnover ratio from the following data : Rs. Cost of goods sold 1,50,000 Current assets 1,00,000 Current liabilities 75,000 Q65: From the following, compute working capital turnover : Rs. Sales 25,20,000 Current assets 15,60,000 Current liabilities 6,00,000 Q66: Find out the working capital turnover ratio. Rs. Cash 10,000 Bills receivables 5,000 Sundry debtors 25,000 Stock 20,000 Sundry creditors 30,000 Cost of sales 1,50,000 Q67: From the following calculate the current ratio BALANCE SHEET OF XYZ COMPANY LTD. as at 31 March, 2009 Liabilities Rs Assets Share capital Reserves 21,000 Fixed assets (Net) To Net profit 1,500 Stock Profit and loss account 2,500 Debtors Bank overdraft 2,000 Cash S. Creditors 6,000 33,000

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Q68: Following is the balance sheet of Crescent Chemical Works Limited as on 31st December, 2008. BALANCE SHEET Liabilities Rs Assets Rs Equity share capital 55,000 Land & building 20,000 6% Preference share capital 15,000 Plant & machinery 22,000 General reserve 25,000 Furniture & fixtures 3,000 Reserve for contingencies 10,000 Stock 50,000 6% Mortage debentures 25,000 Bills receivable 10,000 Income tax payable 4,000 Debtors 20,000 Bills payable 3,000 Trade investments 5,000 Bank overdraft 3,000 Prepaid expenses 2,000 Sundry creditors 8,000 Cash & bank 18,000 Outstanding expenses 2,000 1,50,000 1,50,000 Throw light on the short-term financial position of the company with the help of suitable ratios. Q69: A company's stock turnover is 5 times. Stock at the end of the year is Rs. 4,000 more than the stock at the beginning of the year. Sales during the year (all credit) were Rs. 300,000. Rate of gross profit on sale is 20%. Current liabilities at the end of the year were Rs. 60,000. Quick ratio is 1:1. Calculate the current assets at the end of the year. Show your calculation clearly. Q70: Given Current ratio 2.8 Acid test ratio 1.5 Working capital = Rs. 1,62,000 Find out : (a) Current assets (b) Current liabilities (c) Liquid assets

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Q71: From the following calculate the debt equity ratio Rs. Equity share capital account 2,00,000 General reserves 90,000 Accumulated profits 60,000 Debentures 1,50,000 Sundry creditors 80,000 Expenses payable 20,000 Q72: From the following calculate debt-equity ratio: Rs. Preference share capital 2,00,000 Equity share capital 4,00,000 Capital reserves 1,00,000 Profit & loss account 1,00,000 14% Debentures 2,00,000 Unsecured loans 1,00,000 Creditors 40,000 Bills payable 20,000 Provision for taxation 10,000 Provision for dividends 20,000 Hint. 1. Treat unsecured loan as long-term debt. 2. Apply the formula:
Total long term debt Share holders fund

3. Assume preference capital is not redeemable. Q73: From the following facts and figures, ascertain how many times interest on longterm loans are earned (i) Loan on mortgage (9%) Rs. 10,00,000 (ii) 7 % Debentures (iii) Net profit (after tax) (iv) Income tax rate
1 2

## Rs. 12,00,000 Rs. 9,72,000 40%

Q74: The net profit (after tax) of a firm is Rs. 75,000 and its fixed interest charges on long-term borrowing is 10,000. The rate of income tax is 50%. Calculate interest coverage ratio.
Subject: Accountancy Paper A: & Paper B: Class:- 12th Page 77

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Q75: Calculate the following ratios from the balance sheet given below : (a) Debt equity ratio (b) Proprietory ratio (c) Fixed assets ratio BALANCE SHEET OF X LTD. Liabilities Rs Assets Rs Equity share capital 2,00,000 Fixed assets 5,00,000 Preference share capital 50,000 Stock 1,10,000 Reserves and surplus 50,000 Debtors 60,000 12% Mortgage loan 2,20,000 Prepaid expenses 4,000 10% Debentures 80,000 Cash balance 26,000 Bank overdraft 50,000 Creditors 40,000 Outstanding expenses 10,000 7,00,000 7,00,000

Q76: From the following information, calculate stock turnover ratio, operating ratio and capital turnover ratio Rs. Opening stock 28,000 Closing stock 22,000 Purchases 46,000 Sales 90,000 Sales returns 10,000 Carriage inwards 4,000 Office expenses 4,000 Selling and distribution expenses 2,000 Capital employed 2,00,000

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Q77: Calculate the following ratios, from the details given as under: (i) Current ratio (ii) Acid test ratio (iii) Operating ratio (iv) Gross profit ratio Rs. Liquid assets 40,000 Current liabilities 20,000 Stock 10,000 Sales 50,000 Operating expenses 15,000 Cost of goods sold 20,000

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Q78: Following is the trading and profit and loss account and balance sheet of Expo. Corporation for the year ending 31st December, 2009. TRADING AND PROFIT AND LOSS ACCOUNT for the year ending 31st December, 2009 Liabilities Rs Assets Rs To Opening stock 1,52,500 By Sales 10,01,000 To Purchases 6,30,500 By Stock 1,96,000 To Carriage inward 4,000 To Wages 10,000 To Gross profit c/d 4,00,000 11,97,000 11,97,000 4,00,000 To Administrative exp. 2,02,000 By Gross profit b/d 12,000 To Selling and 24,000 By Non-operating income distribution exp. To Finance exp. 14,000 To Non-operating exp. 4,000 To Net profit 1,68,000 4,12,000 4,12,000 BALANCE SHEET (as on 31st December, 2009) Liabilities Rs Assets Rs Share capital 7,00,000 Fixed assets 6,01,000 Reserves 12,000 Stock 1,96,000 Profit and loss a/c 1,68,000 Debtors 90,000 Overdraft 7,000 Bank 30,000 Creditors 30,000 9,17,000 9,17,000 Calculate the following ratios (i) Gross profit ratio (ii) Operation profit ratio (iii) Current ratio (iv) Liquidity ratio.

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Q79: From the following information, calculate the debt equity ratio and the current ratio Rs. Share capital 1,50,000 Bills payable 13,000 Creditors 57,000 Debentures 2,75,000 Debtors 95,000 Bank balance 45,000 Long term loan 1,00,000 General reserve 20,000 Q80: From the following particulars, you are required to compute (i) Current ratio, (ii) Net profit ratio and (iii) Gross profit ratio Rs. Rs. Stock 50,000 Creditors 60,000 Debtors 40,000 Bills payable 40,000 Bills receivable 10,000 Bank overdraft 4,000 Advances paid 4,000 Sales (Net) 7,00,000 Cash in hand 30,000 Gross profit 50,000 Net profit 30,000 Q81: From the following data, calculate any three ratios: (i) Gross profit ratio (ii) Net profit ratio (Hi) Current ratio (iv) Debt-equity ratio. Net sales Rs. 30,000, cost of sales Rs. 20,000, net profit Rs 3,000, current assets Rs. 6,000, stock Rs 1,000, current liabilities. Rs 2,000, paid up share capital Rs 5,000, debentures Rs 2,500, debentures Rs. 2,500.

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## Mahajan Commerce Coaching Centre

Q82: The following information is given about a company: Rs Sales 1,50,000 Gross profit 30,000 Cost of goods sold 1,20,000 Opening stock 29,000 Closing stock 31,000 Debtors 16,000 Net profit 14,000 Net fixed assets 1,10,000 From the above information, calculate the following ratios i) Fixed assets turnover ratio. ii) Gross profit ratio. iii) Stock turnover ratio. iv) Debtors turnover ratio. v) Net profit ratio. Q83: From the following informations, calculate the stock turnover ratio and the gross profit ratio Rs. Opening stock 18,000 Closing stock 22,000 Purchases 46,000 Wages 14,000 Sales 80,000 Carriage inwards 4,000

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## Mahajan Commerce Coaching Centre

Q84: Following is the trading and profit and loss account and the balance sheet of New Company Limited for the year ending 31st December, 2008; TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st December, 2008 Liabilities Rs Assets Rs To Opening stock 61,000 By Sales 4,00,400 Purchases Carriage 2,52,200 Closing stock 78,400 inward 1,600 Wages 4,000 Gross profit c/d 1,60,000 4,78,800 4,78,800 To Administrative expenses Selling and distribution exp. Finance expenses Other non-operating expenses Net profit 80,800 9,600 By Gross profit b/d Non-operating incomes 1,60,000 4,800

5,600 1,600 67,200 1,64,800 1,64,800 BALANCE SHEET as at 31st December, 2009 Liabilities Rs Assets Rs Share capital (Paid-up) 2,00,000 Land and buildings 2,00,000 Equity share capital 80,000 Plant and machinery 40,400 Preference share capital 4,800 Stock 78,400 General reserves 67,200 Sundry debtors 36,000 Profit & loss a/c Bank 10,000 Bank overdraft 2,800 Cash 2,000 Creditors 12,000 3,66,800 3,66,800 Calculate the following ratio, and indicate the purpose which they serve : (i) Gross profit ratio (ii) Current ratio (Hi) Liquidity ratio.

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## Mahajan Commerce Coaching Centre

Q85: The following are the summarised profit and loss account of Hindustan Products for the year ended 31.12.1996 and the Balance sheet of the company as on that date. PROFIT AND LOSS ACCOUNT Liabilities Rs Assets Rs To Opening stock 99,000 By Sales 8,00,000 To Purchases 5,45,000 By Closing stock 1,99,000 To Direct expenses 15,000 To Gross profit 3,40,000 9,99,000 9,99,000 To Selling and By Gross profit 3,40,000 distribution expenses 2,40,000 3,40,000 To Loss on sale of assets 40,000 To Net profit 60,000 3,40,000 3,40,000 BALANCE SHEET Liabilities Rs Assets Rs Equity share capital 2,90,000 Land 2,30,000 Profit and loss Stock 1,99,000 account 60.000 Debtors 21,000 Creditors 1,15,000 Cash 30,000 Outstanding expenses 15,000 4,80,000 4,80,000 Calculate the following ratios (i) Quick ratio (ii) Stock turnover ratio (iii) Return on shareholders investment

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## Mahajan Commerce Coaching Centre

Q86: Given below is the Trading, Profit and loss account and Balance Sheet of XY Ltd. TRADING, PROFIT AND LOSS ACCOUNT for the year ending 31.3.2009 Liabilities Rs Assets Rs Opening stock 40,000 Sales 3,20,000 Purchases 2,60,000 Closing stock 80,000 Gross profit 1,00,000 4,00,000 4,00,000 Selling expenses 12,000 Office expenses 8,000 Gross profit 1,00,000 Depreciation 6,000 Interest on debentures 14,000 Income tax 20,000 Net profit 40,000 1,00,000 1,00,000 BALANCE SHEET as on 31.3.2008 Liabilities Rs Assets Rs Equity share capital 2,00,000 Cash 20,000 14% Debentures Bills 1,00,000 Debtors 30,000 payable Creditors 10,000 Closing stock 80,000 40,000 Fixed assets 2,20,000 3,50,000 3,50,000 Calculate the following ratios (a) Net profit ratio (c) Operating ratio (e) Stock turnover ratio (b) Return on investment (d) Quick ratio

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## Financial statement of Company.

HORIZONTAL FORM SCHEDULE VI Part I (Summerised) FORM OF BALANCE SHEET. Liabilities Rs Assets 1. SHARE CAPITAL 1. FIXED ASSETS Authorised : (i) Goodwill shares of Rs. each (ii) Land Issued : (iii) Building Subscribed : (iv) Leasehold Called up : (v) Railway siding Less : Calls-in-arrears (vi) Plant & machinery Add : Share Forfeited (vii) Furniture & fittings Account (viii) Patents & trade marks 2. RESERVES AND SURPLUS (ix) Live stock (i) Capital reserve (x) Vehicles etc. (ii) Capital redemption 2. INVESTMENT reseve (i) Government or trust (iii) Securities premium securities account (ii) Shares debentures (iv) Other reserves (iii) Immovable property (v) Surplus (P & L a/c Cr.) (if) Investments in the capital (vi) Sinking fund of 3. SECURED LOANS partnership firm (i) Debentures (ii) Loans from banks 3. CURRENT ASSETS LOANS (iii) Loans from subsidiares AND ADVANCES (iv) Other loans & advances A. Current assets : (v) Interest accrued and due (i) Interest accrued on on Secured Loans investments 4. UNSECURED LOANS (ii) Stores and spares (i) Fixed deposits (iii) Loose tools (ii) Loans from subsidiaries (iv) Stock-in- trade (iii) Short-term loans : (v) Work-in-progress from banks (vi) Sundry debtors from others (vii) a. Cash balance on hand (iv) Other loans & advances b. Bank balance 5. CURRENT LIABILITIES B. Loans and Advances : AND (viii) Advances and loans to PROVISIONS subsidiaries A. Current liabilities : (ix) Bills of exchange (i) Acceptances 4. MISCELLNEOUS (ii) Sundry creditors EXPENDITURE
Subject: Accountancy Paper A: & Paper B: Class:- 12th

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(iii) Subsidiary companies (iv) Advance payments (v) Unclaimed dividend (vi) Other liabilities (if any) (vii) Interest accrued but not due B. Provision : (viii) Provision for taxation (ix) Proposed dividend (x) For contingencies (xi) For provident fund (xii) For insurance, pension etc. (xiii) Other provisions. 6. CONTINGENT LIABILITIES

## Mahajan Commerce Coaching Centre

(i) Preliminary expenses (ii) Commission or Brokerage. underwriting commission (iii) Discount allowed on issue of shares and debentures (iv) Interest paid out of capital (v) Development expenditure unadjusted (vi) Other items : Profit & Loss A/c : (Debit balance left after adjusting from reserves)

Q87: Rearrange the following items appearing on the liabilities side of the Balance sheet according to the requirements of Schedule VI, Part I. i) Fixed Assets ii) Current Assets iii) Loan and Advances iv) Miscellaneous Expenditure. V) Investments. Q88: Rearrange the following items appearing on the liabilities side of the Balance sheet according to the requirements of Schedule VI, Part I. (i) Reserve and Surplus (ii) Secured Loans (iii) Unsecured Loans (iv) Contingent Liabilities (v) Share Capital (vi) Current Liabilities (vii) Provisions Q89: Classify the following items under appropriate headings on the assets side of the balance sheet. i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. xii. xiii. Stock in Trade Furniture Livestock Goodwill Sundry Debtors Preliminary Expenses Stores and spare parts Cash in hand Cash at bank Profit & Loss A/c (debit balance) Work in progress Trade marks Land
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xiv. xv. xvi.

## Vehicles Advances and Loans to Subsidiaries Shares in Reliance Industries

Q90: Classify the following items under appropriate headings on the liabilities side of the balance sheet. (i) Authorised share capital (ii) Unclaimed dividend (iii) Proposed dividend (iv) Interest due on secured loans and debentures (v) Interest due on unsecured loans and fixed deposits (vi) Sundry creditors (vii) Call-in-advance (viii) Securities Premium a/c fix) Provision for taxation (x) Share forfeited account. Q91: Give the heading under which the following items will be shown in a Company's Balance sheet as per schedule VI (Part I) (i) 12% Debentures (ii) Capital Reserve (iii) Discount on issue of Debentures (iv) Stores & Spare parts (v) Fixed Deposits (vi) General Reserve (vii) Interest Accrued on investments (viii) Debenture sinking fund (ix) Calls-in-Advance (x) Prepaid insurance Q92: Give the heading under which the following items will be shown in a company Balance Sheet as per schedule VI (Part I) (i) Calls-in-Arrears (ii) Calls-in-Advance (iii) Plant and Machinery (iv) Public Deposits (v) Unclaimed dividend (vi) Motor Car (vii) Bills Receivable (viii) Long term Investments (ix) Loose Tools (x) Sundry Creditors Q93: Give the heading under which the following will be shown in a company Balance Sheet as per Schedule (VI) Part-I. (i) Work in Progress (ii) Loose Tools (iii) Fixed Deposits (iv) Share Forfeiture A/c (v) Accrued Interest (vi) Capital Reserve (vii) Loss on Issue of debentures (viii) Underwriting Commission. Q94: Under what headings will you show the following items in the Balance Sheet of the company, (i) Sundry Creditors, (ii) Debenture Sinking Fund, (Hi) Bills Receivable, (iv) Discount on Issue of Debentures, (v) Motor Car, (vi) Interest Accrued on investments, (vii) Prepaid Insurance, (viii) Claim against company not acknowledged as debt, (ix) Calls-in-arrears, (x) Calls-in-advance.

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## Mahajan Commerce Coaching Centre

Q95: Give the heading under which the following will be shown in a Company's Balance Sheet as per Schedule (VI) Part I. (i) Goodwill (ii) Patent (Hi) Brokerage and under writing commission (iv) Bills discounted from Bank (u) Provident Fund (vi) Preliminary Expenses (vii) Unclaimed dividend (viii) Stores and Spare Parts. Q96: The following balances appeared in the books of R.K. Ltd. Rs. Goodwill 2,00,000 Plant & Machinery 3,00,000 Loose Tools 20,000 Cash in Hand 20,000 Share Capital : 30,000 shares of Rs. 10 each, Rs. 8 paid up 10% Debentures 2,00,000 Creditors 30,000 Securities Premium 70,000 Prepare Balance Sheet of the company as per Schedule (VI) Part-I of the Company Act. Q97: The following ledger balances were extracted from the books of Varun Ltd. on 31st March, 2008. Land and Building Rs. 2,00,000; 12% Debentures Rs. 2,00,000; Share Capital Rs. 1,00,000, Equity shares Rs. 10 each fully paid up; Plant and Machinery Rs. 8,00,000; Goodwill Rs. 2,00,000; Investments in Shares of Raja Ltd. Rs. 2,00,000; General Reserve Rs. 2,00,000 ; Stock in trade Rs. 1,00,000 ; Bills Receivables Rs. 50,000; Debtors Rs. 1,50,000; Creditors Rs. 1,00,000; Bank Loan (Unsecured) Rs. 1,00,000; Provision for taxation Rs. 50,000; Discount on issue of 12% Debentures Rs. 5,000; Proposed dividend Rs. 55,000. You are required to prepare the Balance Sheet of the company as per Schedule VI Part I of the Companies Act 1956.

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## Mahajan Commerce Coaching Centre

Q98: From the following list of assets and liabilities, prepare the Balance Sheet of Vandna Co. Ltd. as per Schedule VI, Part I of the Companies Act :
Rs 1,00,000 Cash at Bank 40,000 Cash in Hand 28,000 Investments Preliminary Expenses 12,00,000 Goodwill Buildings Plant & Machinery 6,60,000 Less : Depreciation 66,000 7,85,000 Stock 65,000 Debtors 1,74,000 6,00,000 Less Provision for 66,000 Doubtful Debts 85,000 8,700 Furniture Rs 69,800 1,500 95,000 9,000 40,000 6,00,000

Sundry Creditors General Reserves Interest on Debentures Authorised Share Capital 1,20,000 Shares of Rs. 10 each Subscribed Capital 80,000 Shares of Rs. 10 per share 8,00,000 Less : Calls in Arrears 15,000 Profit and Loss A/c 6% debentures Bills Payable Loans and Advances

5,94,000 10,000

1,65,300 14,400

Q99: The following balances appeared in the book of Roop Publications Ltd. Rs. Goodwill 20,000 Plant & Machinery 1,60,000 Building 1,45,000 Cash in hand 10,000 Stock in trade 70,000 10,000 Shares of Rs. 10 each Rs. 8 paid up 80,000 8% Debentures 2,50,000 Preliminary expenses 5,000 Creditors 55,000 Dividend Payable 25,000 Prepare Balance Sheet of Company as per the proforma Q100: Prepare Balance Sheet of Bajaj finance as on 31st March, 2009. Plant and Machinery 1,24,000 Building 30,000 Vehicles 72,000 Share Capital Nominal Value Rs. 100 3,00,000 Paid up Rs. 75 Tax Payable 1,000 Mortgage Loan 50,000 Underwriting commission 2,000 Profit & Loss A/c (Dr.) 32,000
Subject: Accountancy Paper A: & Paper B: Class:- 12th Page 90

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Closing Stock S. Debtors : More than 6 months old Other Debtors

## Mahajan Commerce Coaching Centre

40,000 46,000 5,000

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## Techniques of Financial Statement Analysis

Horizontal Format of Comparative Balance Sheet
Particulars
Previous year Current year Increase/ Decrease % change* ( base 1st Year

A. Fixed Assets B. Investments C. Working Capital (Current assets-Current liabilities) D. Capital Employed (A + B + C) E. Less Long term Debts (Debentures, Bonds etc.) F. Share holders fund (D-E) Represented by : Equity Share Capital Preference Share Capital Net Reserve & Surplus (after Misc. Expenditure) Share holders fund
*Formula for:

## Increase/ Decrease 100 Figure of Provisions

Q101: Prepare the comparative Balance sheet of M/s form (ii) in Vertical form from the following : Particulars 2008 Rs Liabilities : Share Capital 1,50,000 Reserve 20,000 1,70,000 Assets : Fixed Assets 1,00,000 Current Assets 70,000 1,70,000

Mahajan Traders (i) in Horizontal 2009 Rs 1,75,000 25,000 2,00,000 1,50,000 50,000 2,00,000

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## Mahajan Commerce Coaching Centre

Q102: From the following Balance sheet of Bharat Ltd. as 31st December 2008 and 2009, prepare a comparative Balance sheet. Particulars 2008 2009 Particulars 2008 2009 Rs Rs Rs Rs Current Liabilities 2,00,000 4,00,000 Current 5,00,000 9,00,000 Reserves 3,00,000 2,00,000 Assets 12% Loan 5,00,000 8,00,000 Fixed 10,00,000 15,00,000 Share Capital 5,00,000 10,00,000 Assets 15,00,000 24,00,000 15,00,000 24,00,000

Q103: Prepare Comparative Balance Sheet of ABC Ltd. Particulars 2008 2009 Particulars Share Capital 30,000 36,000 Fixed Reserve and 12,000 15,000 Assets Surplus Current Loans 17,000 25,500 Assets Current Liabilities 15,000 12,000 74,000 88,500

## 2009 75,000 13,500

74,000

88,500

Q104: From the following information, prepare a Comparative Balance Sheet of XY Ltd. Particulars 2008 2009 Particulars 2009 2009 Share Capital 30,000 36,000 Fixed 60,000 75,000 Reserve and 12,000 15,000 Assets Surplus Current 14,000 13,500 Loans 17,000 25,500 Assets Current Liabilities 15,000 12,000 74,000 88,500 74,000 88,500

Q105: From the following information, prepare a Comparative Balance Sheet of Y ltd. Particulars 31-3-2008 31-3-2009 Rs Rs Equity Share Capital 25,00,000 25,00,000 Fixed Assets 30,00,000 36,00,000 Reserves and Surplus 5,00,000 6,00,000 Investments 5,00,000 5,00,000 Long term loans 15,00,000 15,00,000 Current Assets 15,00,000 10,50,000 Current Liabilities 5,00,000 5,50,000

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## Mahajan Commerce Coaching Centre

Q106: From the following balance sheets of Essar Gujrat Ltd. prepare comparative statement showing changes in terms of absolute figures and percentage and give comments.
Particulars Share capital Debentures Loans Creditors Bills payable 31-3-2008 10,00,000 6,00,000 4,00,000 1,00,000 50,000 21,50,000 31-3-2009 12,00,000 7,20,000 4,40,000 90,000 40,000 24,90,000 Particulars Building Machinery Equipments Stock Debtors Cash at bank 31-3-2008 31-3-2009 7,50,000 10,00,000 6,00,000 7,50,000 4,00,000 3,00,000 1,00,000 90,000 2,50,000 3,00,000 50,000 50,000 21,50,000 24,90,000

Format of Comparative income statement Comparative income statement For the year ended 31st March
Q: Particulars
Previou s year Current year Absolute Increase Or Decrease Rs % Increase Or Decrease in relation to Prev. year %

Net Sales (i.e. after returns) Less : Cost of Goods Sold Gross Profit (A) Less : Operating Expenses: Office & Administration Expenses Selling & Distribution Expenses Total Operating Expenses (B) Operating Profit (A-B) Add : Non-Operating Profits Total Profits Less : Non-Operating Expenses Net (Profit) before tax Less : Tax Net (Profit) after tax

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## Mahajan Commerce Coaching Centre

Q107: Prepare a Comparative income statement from the following: Particulars 2008 Rs Sales 1,50,000 Cost of Goods Sold (80,000) 70,000 Operating Expenses (10,000) 60,000 Q108: From the statement. Particulars following information prepare a

## 2008 Rs 4,00,000 2,00,000 1,00,000 60,000

Q109: Prepare a Comparative income statement from the following information: Particulars 2008 2009 Rs Rs Sales 4,00,000 5,00,000 Cost of goods sold 2,00,000 3,00,000 Administration, Selling & Distribution Expenses 60,000 1,00,000 Other Incomes 25,000 35,000 Income tax 50,000 60,000 Q110: Prepare a comparative income statement from the following data Particulars 2007 2008 Rs Rs Gross Sales 1,00,000 1,50,000 Less : Returns 10,000 15,000 90,000 1,35,000 Less : Cost of goods sold 30,000 45,000 Gross Profit 60,000 90,000 Other Expenses 20,000 40,000 40,000 50,000

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## Mahajan Commerce Coaching Centre

Q111: Prepare a comparative income statement from the following data. Particulars 2008 2009 Rs Rs Gross Sales 1,50,000 1,80,000 Less : Returns 3,000 6,000 1,47,000 1,74,000 Less : Cost of goods sold 87,000 1,04,000 Gross Profit 60,000 70,000 Operating Expenses 25,000 30,000 Profit before Tax 35,000 40,000 Income Tax 10,000 12,000 Net Profit 25,000 28,000

Q112: Prepare comparative Income Statement of Ram Ltd. with the help of the following information: Particulars March March 31 2008 31 2009 Sales 5,00,000 8,00,000 Cost of Goods Sold 3,00,000 5,00,000 Direct Expenses 40,000 20,000 Indirect Expenses 30,000 40,000 Income Tax 40% 50% Q113: Prepare Comparative statement : Particulars 2008 Sales 2,00,000 Cost of goods sold 60% of Sales Indirect Expenses 50% of gross profit Income Tax 50% of net profit Q114: Prepare Comparative Statement: Particulars 2008 Sales 150% of Cost of goods sold Cost of goods sold 10,00,000 Indirect Expenses 5% of gross profit Income Tax 50% of net profit

2009 3,00,000 70% of Sales 40% of gross profit 50% of net profit

2009 200% of cost of goods sold 8,00,000 of gross profit 50% of net profit

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## Mahajan Commerce Coaching Centre

Q115: Prepare a Comparative Income statement from the following : Particulars Sales Cost of goods sold Indirect Expenses Rate of Income Tax 2008 Rs. 4,00,000 60% of sales 5% of sales 50% of Net Profit before tax 6,00,000 60% of sales 5% of sales 50% of Net profit before tax 2009 Rs

Q:

FORMAT OF COMMON SIZE BALANCE SHEET COMMON SIZE BALANCE SHEET for the year ended 2006 and 2007 Particulars Absolute Percentage of Balance Amount Sheet 2008 2009 2008 % 2009 % Rs Rs Assets Fixed Assets Investments Current Assets Total Assets Liabilities Equity Share Capital Preference Share Capital Reserve and Surplus Secured Loans Unsecured Loans Current Liabilities Provision Capital and Liabilities -

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## Mahajan Commerce Coaching Centre

Q116: Prepare a Common-size Balance Sheet and comment on the financial position of G. Ltd and L. Ltd. The Balance Sheet of G Ltd. and L Ltd. as at 31.3.2007 are given below:
Liabilities Share Capital Reserves and Surplus Current Liabilities G.Ltd. Rs 3,00,000 2,00,000 1,00,000 6,00,000 L.Ltd. Rs. 4,00,000 3,00,000 50,000 7,50,000 Assets Fixed Assets Current Assets G.Ltd. Rs. 4,00,000 2,00,000 L.Ltd. Rs 4,00,000 3,50,000

6,00,000

7,50,000

Q117: Following are the two Balance Sheets of A Ltd and B Ltd on 31-3- 2007: lakhs) Assets A. Ltd. Rs.

(Rs.

in

Cash 27 Sundry debtors 220 Stock 100 Prepaid expenses 11 Other Current assets 10 Fixed assets (net) 635 Total Assets 1003 Liabilities & Capital : Sundry creditors 42 154 Other Current liabilities 78 62 Fixed liabilities 225 318 Capital 658 493 Total Liabilities 1003 1027 From the above data, prepare a common-size statement and make comments.

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## Mahajan Commerce Coaching Centre

Q118: From the under mentioned balance sheets of Yye Ltd., prepare a common-size balance sheet and give your comments. BALANCE SHEET as on 31st March 2008 200 Rs. 9 Rs Capital and liabilities : Equity share capital 90,000 1,50,000 11% Preference share capital 36,000 36,000 Profit and loss account 79,000 1,15,000 12% Mortage loan 1,44,000 1,04,000 Bills payable 54,000 60,000 Taxes payable 36,000 54,000 Total 4,39,000 5,19,000 Assets Plant (net) 72,000 95,000 Inventory 1,80,000 1,92,000 Debtors 1,08,000 1,28,000 Investments 43,000 50,000 Cash 36,000 54,000 Total 4,39,000 5,19,000

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Q:

## Mahajan Commerce Coaching Centre

COMMON SIZE INCOME STATEMENT for the year ended 31st March, 2008 and 2009 Particulars Absolute Amount 2008 2009 Rs Rs A. Gross Sales B. Less Return C. Net Sales (AB) D. Less Cost of Goods Sold E. Gross Profit (CD) F. Less Operating Expenses (i) Office and Administrative Expenses (ii) Selling and Distribution Expenses G. Operating Income (EF) H. Add Non Operating Income I. Less Non Operating Expenses J. Net Income before Tax K. Less Tax L. Net Income after tax -

## Percentage of Net Sales 2008 % 2009 % -

Q119: From the following information, prepare a common-size income statement. 2008 2009 Rs. Rs Sales 40,000 50,000 Cost of goods sold (30,000) (35,000) 10,000 15,000 Administrative Expenses (1,000) (1,000) 9,000 14,000 Selling Expenses (1,500) (2,000) 7,500 12,000 Q120: From the following data, prepare common size income statement. Particulars 2008 Rs. Sales 6,00,000 Cost of goods sold 4,00,000 Office and Administrative Expenses 50,000 Selling and distribution Expenses 20,000 Interest on Loan 10,000 Income Tax 15,000
Subject: Accountancy Paper A: & Paper B: Class:- 12th

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## Mahajan Commerce Coaching Centre

Q121: Following are the Income Statements of a company for the years ending Dec, 31, 2008 and 2009 : Particulars 2007 2008 Rs. In Rs. In 000 000 Sales 500 700 Miscellaneous Income 20 15 520 715 Expenses : 325 510 Cost of sales 20 25 Office expenses 30 45 Selling expenses 25 30 Interest 400 610 Net Profit 120 105 520 715

Q122: From the profit and loss account of Chandra Industries Ltd. for the years ending 31st March, 2005, 2006 and 2007 prepare common size statement. Also give comments. 2007 2008 2009 Rs Rs Rs
Net sales Cost of goods sold Gross margin Operating expenses Net operating income Interest expenses Net income before tax Provision for taxes at 50% Net income after taxes Depreciation included in cost of goods sold and operating expenses 63,70,050 45,40,300 18,29,750 12,03,650 6,26,100 61,500 5,64,600 2,82,300 2,82,300 1,83,600 44,60,300 30,70,150 13,90,150 8,04,050 5,86,100 37,500 5,48,600 2,74,300 2,74,300 28,70,150 20,90,350 7,79,800 4,71,100 3,08,700 4,000 3,04,700 1,52,350 1,52,350

1,16,050 57,850700

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## Mahajan Commerce Coaching Centre

into Trend percentage

Q123: Convert the following comparative income statement statement : ROHIT RUBBER INDUSTRIES Ltd. INCOME STATEMENT for the year ending 31st March 2007 Rs Net sales 7,41,650 Cost of goods sold 3,98,530 Gross profit 3,43,120 Operating expenses 3,07,310 Net profit before taxes 35,810 Income tax 13,070 Net profit after tax 22,740 Note : Take 2007 as base year.

## 2009 Rs 5,92,990 2,80,520 3,12,470 2,80,520 31,950 11,020 20,930

Q124: Compare the profitability of the business by means of trend analysis and comment. INCOME STATEMENT
Administrative expenses Selling expenses Net income 2007 Rs 10,000 24,000 41.000 75,000 2008 Rs 12,000 15,000 63.000 90,000 2009 Rs 15,000 Gross income 19,000 66,000 1,00,000 2007 2008 2009 Rs Rs Rs 75,000 90,000 1,00,000

## 75,000 90,000 1,00,000

Sales during 2007, 2008 and 2009 were Rs. 5,00,000, Rs. 9,00,000 and Rs. 12,00,000. Q125: Prepare a 'Comparative Income Statement' from the following Information : Particulars 2008 2009 Rs. Rs Sales 5,00,000 8,00,000 Cost of goods sold 70% of Sales 70% of Sales Indirect Expenses 5% of Sales 5% of Sales Indirect Expenses 50% of Net Profit 50% of Net Profit Income Tax before tax before tax Q126: From the following data, prepare Statement of Profits in comparative form : Particulars Year I Year II Rs. Rs Sales 6,00,000 7,00,000 Office and Administrative 1,40,000 1,45,000 Expenses Income Tax Rate 50% 50% Gross Profit Ratio 36% 30%
Subject: Accountancy Paper A: & Paper B: Class:- 12th Page 102

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## Mahajan Commerce Coaching Centre

Q127: Prepare Comparative Income statement from the following : Particulars 2008 2009 Rs. Rs Sales 2,00,000 2,50,000 Cost of Goods sold (1,00,000) (1,25,000) 1,00,000 1,25,000 Operating Expenses (10,000) (10.000) 90,000 1,15,000 Q128: From the following information, prepare a Comparative Income Statement : Particulars 2008 2009 Rs. Rs Sales 4,00,000 5,00,000 Cost of Goods Sold 2,00,000 3,00,000 Indirect Expenses 75,000 1,00,000 Provision for Tax 50,000 65,000 Q129: From the following information, prepare a common-size income statement: 2008 2009 Rs. Rs. Sales 40,000 50,000 Cost of goods sold (30,000) (35,000) 10,000 15,000 Administrative expenses (1,000) (1,000) 9,000 14,000 Selling expenses (1,500) (2,000) 7,500 12,000 Q130. Prepare a common-size income statement from the following data: 2008 2009 Rs. Rs. Gross sales 1,50,000 1,80,000 Less returns 3,000 6,000 Net sales 1,47,000 1,74,000 Less cost of goods sold 87,000 1,04,000 Gross profit 60,000 70,000 Other expenses 25,000 30,000 Net profit 35,000 40,000

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## Mahajan Commerce Coaching Centre

CASH FLOW STATEMENT

Q131: Classify the following activities as : 1. Operating activities 2. Investing activities 3. Financing activities. a) Cash Sale b) Patent Purchased c) Income Tax Paid d) Dividend received on investment e) Advertisement expenses paid f) Cash purchases g) Selling & Distribution Expenses h) Rent Paid i) Income Tax refund received j) Sale of Investment-by non-finance company k) Interest paid on debentures l) Preference shares redeemed m) Trading commission received n) Cash received from debtors o) Dividend paid Q132: Calculate cash inflow from debtors from the following informations. Rs Opening Debtors 10,000 Closing Debtors 8,500 Total Sales 1,79,500 Cash Sales 1,00,000 Discount allowed 5,000 Bad debts writen off 1,000 Good returned by debtors 10,000

Q133: Calculate cash inflow from Debtors from the folio-information : Rs Sundry debtors on 1st Jan. 2008 15,000 Sundry debtors on 31st Dec. 2008 25,000 Bills receivable on 1st Jan. 2008 5,000 Bills receivable on 31st Dec. 2008 15,000 Credit Sales 1,02,000

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## Mahajan Commerce Coaching Centre

Q134: Calculate cash outflow to creditor from the following information: Rs Opening balance of creditors 20,000 Total Purchases 1,81,000 Cash purchases 1,00,000 Discount allowed by creditors 12,000 Closing balance of creditors 35,000 Q135: Prepare cash flow statement from operating activities by direct method from the following information : TRADING AND PROFIT & LOSS A/C Particulars Rs Particulars Rs To Opening Stock 1,00,000 By Sales 3,90,000 To Purchases 2,00,000 By Closing Stock 80,000 To Wages 25,000 By Commission 20,000 Add : Outstanding Wages By Profit on Sale of 5,000 30,000 Machinery To Salaries 50,000 Rs. 1,40,000 - Rs. 1,20,000 20,000 To Office expenses 20,000 To Depreciation 10,000 To Net Profit 1,00,000 5,10,000 5,10,000 Q136: Calculate cash flow from operating activities by direst method from the following information. CASH ACCOUNT for the year ending 31st March, 2008 Particulars Rs Particulars Rs To balance b/d 1,00,000 By purchases (Cash) 25,000 To Cash Sales 70,000 By Payment to Suppliers 60,000 To Collection from 50,000 By Office and Selling 25,000 Debtors Expenses To Sale Investment 20,000 By Purchase of Investment 50,000 To Commission received 15,000 By Tax paid 20,000 To Interest and Dividend 5,000 By Balance C/d 80,000 on Investment 2,60,000 2,60,000

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## Mahajan Commerce Coaching Centre

Q137: From the following income statement, prepare a statement showing cash from operating activities by direct method. INCOME STATEMENT For the year ended 31.3.2009 Particulars Rs Particulars Rs
To Opening stock To Purchases Cash Purchase 40,000 Credit Purchase 70,000 1,10,000 less : Return 10,000 To Office & Selling Expenses Discount Allowed To Bad debts. To Provision for tax To Profit 20,000 By Sales Cash Sales Credit Sales 50,000 1,60,000 2,10,000 Less Return 10,000 By Trading Commission By Discount received from suppliers By Closing Stock

## 2,00,000 10,000 5,000 45,000 2,60,000

2,60,000

Q138: Prepare Cash flow statement from operating activities direct method from the following given information: PROFIT AND LOSS ACCOUNT for the year ended 31st March 2009 Particulars Rs Particulars Rs
To Operating Stock To Purchases : Cash Credit To Office Expenses To Bad debts To Discount Allowed To Tax Provision To Net Profit 40,000 60,000 50,000 By Sales Cash 50,000 Credit 1,50,000 1,00,000 25,000 By Closing stock 5,000 By Commissions 1,000 By Discount received 15,000 46,000 2,42,000

## 2,00,000 25,000 15,000 2,000

2,42,000

Additional Information March 31, 2008 Rs. 25,000 15,000 30,000 March 31 2009 Rs. 35,000 10,000 40,000

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Q139: Calculate cash flow from operating activities by indirect method from the following detail : PROFIT AND LOSS ACCOUNT for the year ending on 31st March, 2009 Particulars Rs Particulars Rs
To Salaries To Depreciation To Loss on sale of Plant To Goodwill written off TO Provision for taxation To Net Profit 10,000 By Gross Profit 4,000 By Profit on sale of Land 2,000 By Income tax Refund 5,000 5,000 34,000 60,000 50,000 5,000 5,000

60,000

Q140: Calculate cash from operating activities by indirect method from the following details : Particulars March March 2008 2009 Bills Receivable 15,000 20,000 Debtors 80,000 1,00,000 Creaditors 40,000 50,000 Bills payable 15,000 12,000 Outstanding Expanses 4,000 5,000 Prepaid Expanese 1,500 2,000 Accurued Income 1,000 1,500 Income received in advances 1,000 500 Profit made during the year 2,40,000 Q141: From the following information calculate Cash from Operating Activities.
31 March 2008
st st st st

31 March 2009

31 March 2008

31 March 2009

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Q142: Calculate Cash from Operating Activities from the following details under both the methods TRADING AND PROFIT & LOSS A/C Particulars Rs Particulars Rs
To Opening Stock To Purchases To Wages paid : 40,000 Add Due 10,000 To Salaries paid 16,000 Add outstanding 8,000 To Office Expenses To Depreciation To Goodwill To Net Profit 20,000 By Sales 1,86,000 By Closing stock By Commission 50,000 By Profit on sale of Building (1,24,0001,00,000) 24,000 20,000 11,000 6,400 16,600 3,34,000 2,76,000 32,000 2,000 24,000

3,34,000

Q143: Calculate cash from operating activity by indirect method from the following information : Particulars 31st 31st March March 2008 2009 Profit and Loss Account 30,000 35,000 General Reserve 10,000 15,000 Provision for Depreciation on Plant 30,000 35,000 Outstanding Expenses 5,000 3,000 Goodwill 20,000 10,000 Sundry Debtors 40,000 35,000 An items of Plant Costing Rs. 20,000 having book value of Rs. 14,000 was sold for Rs. 18,000 during 2008-2009. Calculate cash flow from investing activities from the following : Purchases Sold Rs. Rs. Trade Marks 25,000 Building 1,10,000 37,500 Patents 50,000 Investments 45,000 25,000 Interest and dividend received on investments was Rs. 4,000 and Rs. 5,000 respectively. A shop was purchased out of surplus funds for investment purpose and was let out at a rent of Rs. 20,000. Q144:

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Q145: Calculate cash from investing activities. Opening Closing Rs. Rs. Investments 2,00,000 4,00,000 During the year 40% of the investments were sold at 25% profit on cost. Q146: From the following particulars calculate cash flow from financing activities. 1. Issue of equity share capital Rs. 5,00,000 2. Equity share were issued at a premium of 15% 3. 10% Debenture issue Rs. 2,00,000 4. 10% Debenture were issued at as discount of 1%. 5. Interim dividend paid on equity share Rs. 50,000. Q147: From the following information taken from the books of Mahajan Ltd., calculate cash from financial activities. Particulars Opening Closing Rs. Rs. 10% Preference Share Capital 10,00,000 12,00,000 Securities Premium 2,50,000 2,75,000 Debentures 6,00,000 4,50,000 Additional Information : Interest paid on debentures Rs. 50,000.

Q148: From the following information calculate cash flows from investing activities and financing activities : 1-4-2008 31-3-2009 Machinery (at cost) 5,00,000 9,00,000 Accumulated depreciation 3,00,000 4,50,000 Share capital 25,00,000 35,00,000 Loan from bank 12,50,000 7,50,000 During the year machinery costing Rs. 2,00,000 was sold at a profit of Rs. 1,50,000. Depreciation on machinery charged during the year amounted to Rs. 2,50,000. Q149: From the following prepare Cash Flow statement by indirect method. Rs. Opening Cash Balance 10,000 Closing Cash Balance 12,000 Decrease in Debtors 5,000 Increase in Creditors 7,0000 Sale of Fixed Assets 20,000 Redemption of debentures 50,000 Net Profit for the year 20,000

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Q150: Prepare a Cash Flow Statement by indirect method on the basis of the information given in the Balance Sheets of P.S. Ltd.
Liabilities Share Capital 12% Debentures Geneal Reserve Creditors Bills Payable O/S Expenses 2006 2,00,000 1,00,000 50,000 40,000 20,000 25,000 4,35,000 2007 2,50,000 80,000 70,000 60,000 1,00,000 20,000 5,80,000 Assets Goodwill Land & Building Machinery Debtors Stock Cash 2006 2007 10,000 2,000 2,00,000 2,80,000 1,00,000 1,30,000 40,000 60,000 70,000 90,000 15,000 18,000 4,35,000 5,80,000

Q151: Prepare a Cash Flow Statement in indirect method of Bulbul Ltd. on the basis of the information given in the Balance Sheets :
Liabilities Share Capital 12% Debentures General Reserve Creditors Bills Payable O/S Expenses 2006 4,00,000 2,00,000 1,00,000 40,000 80,000 55,000 8,75,000 2007 25,00,000 1,50,000 1,80,000 60,000 75,000 65,000 10,30,000 Assets Goodwill Land & Building Machinery Debtors Stock Cash 2006 2007 70,000 50,000 5,00,000 8,00,000 1,20,000 1,30,000 10,000 20,000 1,40,000 20,000 35,000 10,000 8,75,000 10,30,000

Q152: Abdul Nayeem & Co. provide you with their profit and loss account and balance sheet for the previous two years. The directors are interested in tracking down the activities that generated cash inflows during the year ending 31st March, 2009. Prepare cash flow statement. BALANCE SHEETS as on 31st March, 2009
Liabilities Equity Share capital Preference share capital Debentures Long term borrowings Net profit Reserves and surplus 2008 2,50,000 2009 5,00,000 20,000 40,000 30,000 1,19,000 2,91,000 10,00,000 Assets Fixed Assets (Land) Investments Machinery Cash in hand 2008 4,00,000 2,00,000 1,50,000 41,000 2009 5,00,000 3,00,000 2,00,000

7,91,000

10,00,00

## PROFIT AND LOSS ACCOUNT for the year ending 31.3.09 Rs

To Purchases (Cash) To Salaries and Wages To Income tax To Debenture interest To Dividend (Preference shares) To Dividend (Equity shares) To Net Profit 15,000 By Sales (Cash) 5,000 By Interest Received 1,000 By Dividend Received 6,000 3,000 6,000 19,000 55,000

Rs
30,000 10,000 15,000

55,000

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Q153: From the following Balance Sheet of Rajan Ltd., prepare Cash Flow Statement by indirect method:
Liabilities Equity Share Capital 12% Pref. Share Capital General Reserve P & L A/c Creditors 2008 1,50,000 75,000 20,000 15,000 37,500 2,97,500 2009 Assets 2,00,000 Goodwill 50,000 Building Plant 35,000 Debtors 24,000 Stock 49,500 Cash 3,58,500 2008 2009 36,000 20,000 80,000 60,000 40,000 1,00,000 1,19,000 1,54,500 10,000 15,000 12,500 9,000 2,97,500 3,58,500

Depreciation charged on Plant was Rs. 10,000 and on Building Rs. 60,000. Q154: From the following comparative balance prepare cash flow statement by indirect method :
Share Capital Reserve and Surplus Secured Loan Unsecured Loan Current Liabilities 1-1-08 2,00,000 96,000 60,000 72,000 4,28,000 31-12-09 2,00,000 98,000 40,000 50,000 82,000 4,70,000 Machinery Stock Debtors Cash

sheets

of a company,

1-1-08 31-12-09 3,00,000 3,42,000 50,000 44,000 70,000 76,800 8,000 7,200 4,28,000 4,70,000

During the year, dividend paid was Rs. 52,000 and depreciation charged was Rs18,000. Q155: Balance sheets of M/s Ram and Shyam as on January 1, 2009 and 31 December 2009, were as follows :
Liabilities Creditors Mrs. Ram's Loan Loan from Bank Capital Jan-12009 40,000 25,000 40,000 1,25,000 Dec. 31 2009 44,000 50,000 1,53,000 Asset Cash Debtors Stock Machinery Land Building Jan. 1 2009 10,000 30,000 35,000 80,000 40,000 35,000 2,30,000 Dec. 31 2009 7,000 50,000 25,000 55,000 50,000 60,000 2,47,000

2,30,000

2,47,000

During the year a machine costing Rs. 10,000 (accumulated depreciation Rs. 3,000) was sold for Rs. 5,000. The balance of provision for depreciation against machinery as on 1 January 2004 was Rs. 25,000 and on 31 December 2004 Rs. 40,000. Net profit for the year amounted to Rs. 45,000. Required : Prepare a Cash Flow Statement [AS-3 (Revised)]

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Q156: From the following information, you are required to prepare a cash flow statement of Raj Rani Ltd., for the year ended 31st December, 2009 using the Indirect Method. BALANCE SHEET
Liabilities Share Capital Secured Loan Repayable in 2007) Creditors Tax Payable P & L A/c 2009 Rs 70,000 14,000 1,000 7,000 92,000 2009 Assets Rs 70,000 Plant and 40,000 Machinery Inventory 39,000 Debtors 3,000 Cash 10,000 Prepaid Expenses 1,62,000 2008 Rs 50,000 2009 Rs 91,000

15,000 40,000 5,000 20,000 20,000 7,000 2,000 4,000 92,000 1,62,000

Particulars
To Opening Inventory To Purchase To Gross Profit c/d To General expenses To Depreciation To Taxes To Net profit c/d

PROFIT AND LOSS ACCOUNT for the year ending 31st December 2009 Rs Particulars
15,000 98,000 27,000 1,40,000 11,000 8,000 4,000 4,000 27,000 1,000 10,000 11,000 By Closing Stock By Sales

Rs
40,000 1,00,000 1,40,000 27,000

## 27,000 7,000 4,000 11,000

[Ans. Cash used in operating activities Rs. (3,000) Cash used in investing activities Rs. (49,000) Cash flows from financing activities Rs. 39,000] Q157: The Balance Sheets of Finlay Ltd. as on 31st March 2008 and 31st March 2009 are given below :
Liabilities Equity Shares Profit & Loss A/c Debentures Creditors 31-3-09 12,000 8,000 4,500 2,000 31-3-08 10,000 6,250 7,500 1,500 Assets Cash Debtors Stock Land & Building Plant Prov. for Depreciation 31-3-09 3.000 5,000 6,000 4,000 12,500 (4,000) 26,500 31-3-08 2,500 3,750 7,000 5,000 10,000 (3,000) 25,250

26,500

25,250

Cash dividend of Rs. 1,250 paid during the year. You are required to prepare Cash Flow Statement on indirect basis.

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Q158: The Financial position of ABC Ltd. on the December 31,2008 and December 31, 2009 is given as follows :
Liabilities Current Liabilities Loan from Associate Co. Loan from Bank Capital and Reserves 2008 Rs 72,000 60,000 2,96,000 2009 Rs 82,000 40,000 50,000 2,98,000 Assets Cash Debtors Stocks Machinery Building Provision for Depreciation 2008 Rs 8,000 70,000 50,000 2,14,000 1,40,000 (54,000) 4,28,000 2009 Rs 7,200 76,800 44,000 2,44,000 1,70,000 (72,000) 4,70,000

4,28,000

4,70,000

During the year Rs. 52,000 were paid as dividends. Prepare cash flow statement as per revised AS-3 (by Indirect Method). Q159: The Financial position of ABC Ltd. as on 1st January 2008 December, 2008 was as follows : BALANCE SHEETS
Liabilities Current Liabilities Loans from Associate Co. Loan from Bank Capital and Reserves Provision for Depreciation on Machinery 2008 Rs 72,000 60,000 2,96,000 54,000 4,82,000 Cash Debtors Stock Land Building Machinery 72,000 Cost 5,42,000 2009 Rs 82,000 40,000 50,000 2,98,000 Assets 2008 Rs 8,000 70,000 50,00 40.000 1,00,000 2,14,000 4,82,000

and 31st

## 2009 Rs 7,200 76,800 44,000 60.000 1,10,000 2,44,000 5,42,000

During the year Rs. 52,000 were paid as dividend. You are required to prepare the Cash Flow Statement. Q160: From the following Balance Sheets you are required to prepare a Cash Flow Statement per revised Standard.
Liabilities Shares capital Creditors Profit and Loss A/c 2008 Rs 2.00.000 70,000 10,000 2,80,000 2009 Assets Rs 2.50,000 Cash 45,000 Debtors 23,000 Stock Land 3,18,000 2008 Rs 30,000 1,20,000 80,000 50,000 2,80,000 2009 Rs 47,000 1,15,000 90,000 66,000 3,18,000

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Q161: From the following Profit and Loss Account, you are required to compute cash from operations: Profit and Loss Account for the year ended 31st December 2009 Rs Rs
To Salaries To Rent To Depreciation To Loss on sale of plant To Goodwill written off To Proposed dividend To Provision for taxation To Net Profit 50,000 By Gross profit 10,000 By Profit on sale of land 20,000 By Income-tax refund 10,000 40,000 50,000 50,000 1,00,000 3,30,000 2,50,000 50,000 30,000

3,30,000

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THEORY
ANALYSIS OF VARIOUS ITEMS OF BALANCE SHEET: LIABILITIES SIDE: 1. Share Capital: Under share capital the detailed information such as authorized, issued, subscribed, called up and paid up capital should be shown separately. Out of the called up capital calls in arrear are deducted to get the paid up capital. Shares allotted for consideration other than cash and also bonus shares issued by a company must be separately stated under subscribed capital It is also necessary to specify the source from which bonus shares are Issued e.g. from profits or reserves or from share premium account or from capital redemption reserve account. 2. Reserve and Surplus: Under the head general reserve, capital reserve, capital redemption reserve account, share premium account, sinking fund and uncommitted reserve etc. are shown. After making necessary reserves and provisions the balance of profit is also shown under this head. 3. Secured Loans: The details relating to secured loans are shown as debenture with their condition of redemption, loans obtained from banks, loans from subsidiary companies. All assets pledged as security against loans should also be disclosed in the balance sheet. Loans obtained from directors, managing agents, secretary, treasurer or manager should be shown separately. Interest accrued and due should also be shown along with the amount of loans but interest accrued but not yet due should be shown as current liability. 4. Unsecured Loans: unsecured loans include fixed deposits, loan from subsidiary companies, short-term loans and advances etc. Short-term loans are those loans which repayable within one year from the date of balance sheet, unsecured loans from managing directors, secretary, treasurer and manager should be shown. Any interest due but unpaid on unsecured creditors are also shown along amount of loans. 5. Liabilities and Provisions: Current liabilities are shown separately in part 'A' of this head which includes - acceptances, loans from subsidiary companies, unearned incomes and unpaid dividends etc. Provisions are shown separately under part 'B', it includes provisions, proposed dividend, reserve for contingencies, provident fund, insurance and pension fund and specific reserve etc. 6. Contingent Liabilities. Contingent liabilities arc shown in balance sheet only in the form of note, their amount is not included in the total of balance sheet. ASSETS SIDE Following, items are shown on assets side of balance sheet: 1. Fixed assets: All fixed assets are shown separately with their original cost, addition, deductions or sales, depreciation provided in previous years along with depreciation of current year etc. 2. Investments: All investments should be shown separately along with a note disclosing whether basis of valuation is cost price or market price. The aggregate amount of the company's quoted and unquoted investments should also be given in the balance sheet. 3. Current assets and loans and advances: Current assets are shown in part "A" and loans and advances in part "B". Current assets include accrued interest, stores and spare parts, loose tools, stock, debtors, work in progress, cash and bank balances etc. loans
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and advances include loans to subsidiary companies, bills receivable, prepaid expenses etc. 4. Miscellaneous expenditure: Many expanses such as preliminary expanses, underwriting commission, development expenses, fictitious assets (unwrittenoff part only). 5. Debit balance of profit and loss A/c: If profit and loss account discloses debit balance, it will be shown on asset side of the balance sheet. Q. Financial analysis: The information contained in financial statements is used by various users for decisionmaking process. Users can know better about the financial strengths and weaknesses of the firm if they properly analyze the information contained in the financial statements. Financial analysis is the process of identifying the financial strengths and weaknesses of the entity by properly establishing relationships between the variables (items) of balance sheet and profit and loss account. The purpose of "financial analysis" is to diagnose the information given in the financial statements in such manner so as to judge the liquidity, profitability and financial soundness of the entity. Just as a doctor examines a patient similarly financial analyst examines the financial statements before commenting upon financial health or weakness of an enterprise. The term analysis includes interpretation also. Financial statement analysis is an attempt to determine the significance and meaning of the data contained in the financial statements so that prediction may be made regarding the future earnings, ability to meet its liabilities and profitability of the business. Analysis: Involves re-grouping and re-arranging the data in a useful manner whereas interpretation means explaining the meaning and significance of the data so processed. Meaning: According to John Myer, "Financial statement analysis is (largely) a study of relationship among the various financial factors in a business as disclosed by a single set of statements and a study of the trend of these factors as shown in a series of statements." According to Metcaff R.W. and Titrad P.L. "Analyzing financial statements is a process of evaluating relationship between component parts of financial statements to obtain a better understanding of firm's position and performance." According to Kennedy and Mullar. "The analysis and interpretation of financial statements are an attempt to determine the significance and meaning of financial statements data so that the forecast may be made of the prospects for future earnings, ability to pay interest and debt maturities and profitability and sound dividend policy". Thus analysis of financial statements means such a treatment of the information contained in financial statements as to afford a full diagnosis of the profitability and financial position of the firm concerned. Significance and purpose of financial analysis: Purpose of analysis and interpretation depends upon as to who is interested and what is his object? Still the following may be stated as common or general purposes of analysis: To assess entity's capacity to meet short-term liabilities. To assess entity's financial soundness in the long-run. To assess operational efficiency and profitability.
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To assess relative performance of one unit with other units of the same industry. To review the progress of the unit over a period of time. To forecast the future prospects of the unit. Specific Purposes Of Different Users 1. Management group may be interested: To have an over-all view of the financial position and performance of the unit: To find out if the targets and goals have been achieved. To evaluate the performance of different departments, sections, divisions etc. To know relevant information for taking decision relating to future growth expansion, diversification etc. 2. Investors and shareholders may be interested: To know whether their investment in the unit is safe. To know whether the unit is likely to give adequate return on their investment. 3. Bankers and short-term creditors are interested: To judge the liquidity position, and To judge the solvency position. 4. Debenture holders and institutional creditors (long term) are interested: To evaluate the worth of assets available as security. To study the capital structure and to find out the proportion of equity to debt. To study the cash flow capacity of the unit for ensuring timely repayments of interest and loan. 5. Government is likely to be interested: To find out the performance of the unit. To judge the health of industry. To assess taxpaying capacity. To know how far the unit is discharging its social responsibility, and how far it is contributing towards the achievement of national goals. Limitations of analysis: Financial statements are the output of accounting. Tools and techniques of analysis have been developed by management accounting. Analysis is to be conducted by the analyst. The accounting, management accounting and the analyst, all the three, suffer from limitations or inadequacies. Therefore, it is but natural that financial analysis should also suffer from certain limitations. Financial statements are historic in nature. They provide information relating to past only. Past can never be a perfect guide for future. Past may be helpful in estimating future. But it must be remembered that future has its own uncertainties. Reliability of analysis shall depend upon as to how much reliable the financial statements are? Manipulations in the financial statements, window-dressing, accounting policies relating to depreciation, valuation of assets, providing of reserves etc., affect the figures and their reliability. Static analysis is not much valuable. Analysis can be useful and effective only when comparison is made possible either over a period of time or with different units for the same time. Any figure in isolation is meaningless. For comparison and meaningful analysis data is required for longer periods or for different units. Non-availability-non comparability of figures. Usefulness of analysis lies in comparison of similar and corresponding phenomenon. When accounting policies are changed e.g.
Subject: Accountancy Paper A: & Paper B: Class:- 12th Page 117

a) b) c) d)

a) b) a) b) a) b) c)

a) b) c) d)

1.

2.

3.

4.

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## Mahajan Commerce Coaching Centre

5.

6.

7.

8.

9.

from LIFO to FIFO or non-standardized terminology is used than comparison becomes meaningless. Basic axiom of arithmetic is "like must be added to like". When cows are added to chairs the calculation becomes absurd and nonsense. Analysis can't substitute sound judgement. One should not take the results of analysis as judgement or conclusions. Analysis is only a means which can be used or misused depending upon the user. How the knife shall be used by a surgeon and by a criminal is well known. So analysis is no substitute for skill, observation and experience of the analyst. Perceptions of the users are different. Even if the results are same the interpretation of different users shall not be the same. For example, a high current ratio shall draw favorable comment from short-term creditors but an unfavorable comment for the management. Pitfalls of inter firm comparisons. Comparisons are far more difficult when the performance, efficiency, profitability etc. of different firms are being studied. The adoption of different policies, different classification, and different terminology are obstacles in the utility of inter firm comparison. Price level changes reduce the validity of analysis. The continuous and rapid changes in value of money in the present day economy also reduce the validity of analysis. Acquisition of assets at different levels of the prices make comparison useless as no meaningful conclusions can be drawn from a comparative analysis of such items relating to several accounting periods. Shortcoming of tool of analysis. There are different tool of analysis available to the analyst. Which tool is to be used in a particular situation depends on the skill, training, intelligence and expertise of the analyst. If wrong tool is used it may give misleading result and may lead to wrong conclusions, or inferences which may be harmful to the interest of the business. The above limitations of financial analysis should make the analyst cautious in his approach. He should be careful while commenting. Analysis can be useful if used by competent analyst working with a keen sense of observation, expertise, and neutrality i.e. free from bias. Q. What is ratio analysis? State advantages, limitations of ratio analysis. Ratio's by themselves are not an end but is only of the means of understanding the financial health of business entity. Ratio analysis is not capable of providing precious answer to all the problems faced by any business unit. Ratio analysis is basically a technique of: i. Establishing meaningful relationship to form judgment regarding the financial affairs of the unit, ii. Relationship between significant variables of financial statements, Usefulness of ratio analysis depends upon identifying. a) Objectives of analysis. b) Selection of relevant data. c) Deciding appropriate ratio's to be calculated. d) Comparing the calculating ratios with the norms of standards of forecasts. e) Interpretations of the ratios.

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1. 2.

3.

4.

Advantages: Some of the advantages of the ratio analysis: Simplifies financial statements: Ratios tell the whole story of changes in the financial conditions of a business. Analysis provides data for inter firm comparison. Ratios highlight the factors associated with successful and unsuccessful firms. They also reveal strong firms and weak firms, overvalued firms. Ratio analysis also makes possible comparison of the performance of the different divisions of the firm. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely performance in the future. Ratio analysis helps in planning and forecasting. Over a period of time or industry develops certain norms that may indicate future success or failure. If relationship changes in a firms data over different time periods. The ratios may provide clues or trend sand future problems.

LIMITATIONS: 1. Ratios are calculated on the basis of accounting information. Accounting system has certain in-built limitations like historical cost, going concern value, stable monetary value, etc. so, limitations of accounting data effect the quantity of ratios also. After all ratios can't be more reliable than the reliability of data itself. 2. Changes in price levels often make comparison figures for various years difficult. For instance the ratio of sale to fixed assets in 1995 would be much higher than in 1990 due to raising prices, fixed assets being expressed still on the basis of cost. 3. Ratio analysis is basically historical in nature since the financial statements on the basis of which the ratios are established are historical in nature. 4. Ratio analysis is basically based on the balance sheet prepared on the accounting data. This practice in some cases may lead to window dressing to cover up dab financial position. 5. There are no well accepted standards or rule of thumb for all ratios which might to accepted as norms for comparison. Ratio's: Liquidity ratio: Liquidity ratio is the ratio meant for testing short term financial position of a business. These are designed to test ability of the business to meet its short term obligations promptly. E.g. current ratio quick ratio falls under this category. Solvency ratio: Solvency ratios are also known as leverage ratios. These are meant for testing long term financial soundness of any unit. Primarily, these establish and study relationship between owned funds and loaned funds. E.g. debit equity ratio, capital gaining ratio etc are covered under this group. Efficiency ratios: Efficiency ratios are also known as activity ratios. These are meant to study the efficiency with which the resources of the unit have been used. These are popularly known as turn over ratios. E.g. inventory turnover ratio, debtor's turnover ratio, fixed asset turnover ratio.

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Profitability ratios: These ratios measure the working results of the unit during the accounting period. Profits are compared with sales level and investment level. E.g. gross profit ratio, operating profit ratio, net profit ratio, return on investment, etc. Current ratio: Current ratio is also known as working capital ratio or 2:1 ratio. It is the ratio of total current assets to total current liabilities.
Current Ratio Current Assets Current Liabilites

Current assets are those which are usually converted into cash or consumed within short period (say one year). Current liabilities are required to be paid in short period. Gross Profit ratio: Gross profit ratio is the ratio of gross profit to net sales i.e. sales less sales return. The ratio thus reflects the margin of profit that a concern is able to earn on its trading and manufacturing activity. It is most commonly calculated ratio. It is employed for inter-firm and intra-firm comparisons of trading results. It is calculated as follows:
Gross Profit Net Sales

Net profit ratio: Net profit ratio expresses the relationship between net profit after tax and sales. This ratio is a measure of the overall profitability. Net profit is arrived at after taking into account both non operating items of incomes and expanses. The ratio indicated what portion of the net sales is left for the owners after all expanses have been met. It is calculated as follows:
Net Profit Net Profit after tax 100 Net Sales

Operating ratio: This ratio is determined by comparing the cost of goods sold and other operating expenses with net sales. Operating ratio is calculated as follows:
Cost of goods sold Operating Expenses 100 Net Sales

Operating net profit ratio: Operating net profit ratio is calculated by dividing the operating net profit by sales. This ratio helps in determining the ability of the management in running the business. It is calculated as follows:
Operating Profit 100 Net Sales

Debt equity ratio: Debt equity ratio (also known as debt to net worth ratio). The relationship between harrowed funds and internal owner's funds is measured by debt equity ratio. It is calculated as:
Debt equity ratio Total long term debt Share holders funds

Q. Cash flow statement: Cash flow statement is that statement in which we show changes in the financial position of business due to inflow and out flow of cash. Cash flow statement is required for short range financial planning. Cash flow statement is the summarized form of inflow of cash from different sources and the uses to which the cash has been applied. The importance of cash flow arises because it gives vital information about inflow of cash and out flow of cash of the business. Cash flow statement is useful for the management in accessing the capability of business to meet its short tern commitments towards creditors for goods and expenses.
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1. 2. 3.

4.

Q. Objectives of cash flow statement. It serves as an instrument for cash planning. The periods of 'surplus' or 'deficit' of cash are identified and planning for cash is done according to its availability. Causes for wide difference between the figure of huge profits and paucity of cash or excess of cash despite losses can be analyzed with the help of cash flow statement. The cash budget, already prepared can be compared with the net inflow of cash during the year as revealed by cash now statement and thus causes of any variations between the two can be analyzed and proper corrective action may be taken. The declaration of dividend and formulation of its policy depends largely on the information provided by this statement, because payment of dividend requires availability of adequate cash.

Q:

Meaning of Comparative Financial Statements. Comparative Financial Statements May refer to:-

(a) Financial Statements of an enterprise for two or more successive accounting periods. (b) Financial statements of different enterprises for the same accounting periods, or (c) Financial Statements of an enterprise and an industry to which the enterprise belongs, for the same accounting period, or (d) Financial Statements based on relationship among the components of financial statements for two or more successive accounting periods. (e) Financial Statements of different enterprises for the same accounting periods, or (f) Financial Statements of an enterprise and an industry to which the enterprise belongs, for the same accounting period, or (g) Financial Statements based on relationship among the components of financial statements for two or more successive accounting periods. Horizontal And Vertical Analysis. Horizontal Analysis involves the comparison or establishment of relationship based on: (a) Financial statements of an enterprise for two or more successive accounting periods, or (b) Financial statements of different enterprises for the same accounting period.

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Vertical Analysis involves the analysis of financial data based on relationship among the components of financial statements for two or more successive accounting periods.

Preparation of Comparative Income Statement. Meaning of Comparative Income Statement. Comparative Income statement is the income statement which is prepared in such a form so as to reflect the operating activities of the business for two or more accounting periods. These statements facilitates the horizontal analysis since each accounting variable is analysed horizontally. In such statements, the figures are shown as follows: (i) In absolute monetary value, (ii) Increase or decrease in absolute values, (iii) By way of percentages.

Objectives of Comparative Income Statements: Following are the objectives of Comparative Income Statements: 1. 2. 3. 4. To analyse informations of income and expenses in absolute rupees, i.e., balances on two or more comparative dates. To analyse increase or decrease in rupee amounts as well as in percentage by taking the data of previous year as base. To measure the efforts of a firm. To review the past operational activities and their effect on the profitability of the concern. Contents of a Comparative Income Statement A Comparative Income Statement consists of the following information: 1. First Column for Items of Incomes & Expenses

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Second Column for Previous year's Income Statement Third Column for Current year's Income Statement Fourth Column for Absolute Change Fifth Column (if desired) for Proportionate Change

Preparation of Comparative Balance Sheet Meaning of Comparative Balance Sheet. Comparative Balance Sheet is the Balance Sheet which is prepared in such a form so as to reflect the financing and investing activities of the business for two or more accounting periods. These statements-facilitate the horizontal analysis since each accounting variable is analysed horizontally. In such statements, the figures are shown as follows: (i) In absolute monetary value, (ii) Increase or decrease in absolute values, (iii) By way of percentages.

Objectives of Comparative Balance Sheets Following are the objectives of Comparative Balance Sheet: 1. 2. 3. 4. To analyse informations of assets and liabilities in absolute rupees, i.e. balances on two or more comparative dates. To analyse increase or decrease in rupee amounts as well as in percentage by taking the data of previous years as base. To measure the financial position of a enterprise. To review the past financing and investing activities and their effect on the financial position of the enterprise.

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Contents of a Comparative Balance Sheet. A Comparative Balance Sheet consists of the following information: 1. 2. 3. 4. 5. First Column for Items of Assets & Liabilities Second Column for Previous year's Balance Sheet Third Column for Current year's Balance Sheet Fourth Column for Absolute Change Fifth Column (if desired) for Proportionate Change

Meaning of Common Size Statements. Common Size Financial Statements are those in which figures reported are converted into percentages to some common base. For an interpretation of underlying causes of changes over a period of time, first of all a vertical analysis is required. For this purpose items in the financial statements are presented as percentages or ratios to total of the items and a 'common base for comparison is provided. Each percentage shows the relation of the individual items to its respective total. Common size statements may be used for balance sheet as well as income statement. These statements facilitate the vertical analysis since each accounting variable is analysed vertically. This kind of analysis indicate the static relationship since the relative changes are studied at a specified date. These statements comprise the following items: (a) (b) Absolute amounts of 'individual items of Balance Sheet/Profit and Loss Account for two or more successive periods; and Percentage to some common base. Usually, net sales (i.e. gross sales minus sales returns) is taken as base to Profit and Loss Account items and the total of liabilities is taken as base to the Balance Sheet items. Preparation of Common Size Income Statement. Meaning of Common Size Income Statement. A common size income statement is the Income Statement in which sales figure is assumed to be equal to 100 and all other figures of cost or expenses are
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expressed as percentage of sales. These statements facilitate the vertical analysis since each accounting variable is analysed vertically.

Significance of Common Size Income Statements. Common Size Income Statements for different periods help to reveal the efficiency or otherwise of incurring any cost or expenses. If these are being prepared for two firms, these show the relative efficiency of cost items for the two firms.

Objectives of Common Size Income Statements 1. 2. 3. To analyse changes in individual items of Income Statement. To determine the trend in different items of incomes and expenses.

To judge the relative financial performance on the basis of Common Size Income Statements for different enterprises belonging to the same industry.

Contents of a Common Size income Statement A Common Size Income Statement consists of the following information: 1. 2. 3. 4. First Column for Items of Income Statement Second Column for absolute amounts of different items (i.e., Income/Expenses) of Income Statement for the previous year. Third Column for absolute amounts of different items of Income Statement for the current year. Fourth Column for percentage relation of different items of Income Statement for the previous year, to Net Sales of the previous year which are taken as 100. Fifth Column for percentage relation of different items of Income Statement for the current year to Net Sales for the current year, which are taken as 100.

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Preparation of Common Size Balance Sheet: Meaning of Common Size Balance Sheet A common size balance sheet shows the percentage relation of each asset/liability to total asset/total liabilities including capital, i.e., the total assets or liabilities is taken as 100 and all the figures are expressed as percentage of the total. As these percentages show relationship to balance sheet totals, variations from year, do not necessarily indicate changes in money amounts; infact the balance sheet common size ratios may reflect a change in the individual item, a change in total or a change in both. These statements facilitates the vertical analysis since each accounting variable is analysed vertically.

Significance of Common Size Balance Sheet. A comparison of common size balance sheets for different periods helps to highlight the trends in different items. If it is prepared for different firms in an industry it facilitates to judge the relative soundness and helps in understanding their financial strategy.

Objectives of Common Size Balance Sheets. 1. 2. 3. To analyse the changes in individual items of Balance Sheet. To determine the trend in different items of Assets and Liabilities.

To judge the relative financial position on the basis of Common Size Balance Sheets for different enterprises belonging to the same industry.

Contents of a Common Size Balance Sheet. A Common Size Balance Sheet consists of the following information: 1. 2. 3. First Column for Items of Balance Sheet Second Column for absolute amounts of different items (i.e. Assets/Liabilities) of previous year's Balance Sheet. Third Column for absolute amounts of different items (i.e. Assets/Liabilities) of current year's Balance Sheet.
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Fourth Column for percentage relation of different items of previous year's Balance Sheet to Total Liabilities of previous year which are taken as 100. Fifth Column for percentage relation of different items of current year's Balance Sheet to Total Liabilities of current year, which are taken as 100. Meaning of Funds Flow Statement. The Funds Flow Statement consists of two terms 'Fund' and 'Flow'. Fund may be interpreted as cash or working capital or all financial resources. Flow means change. Therefore, when the term 'Fund' is interpreted as 'working capital', the funds flow statement means statement of changes in working capital. This statement contains the sources of funds, uses of funds and the changes in net working capital indicating the difference between the total sources and total uses. This statement is also known as Statement of Sources and Applications of Funds, or Statement of Sources and Uses of Working Capital. Meaning Of Cash Flow Statement The Cash Flow Statement means the statement of changes in Cash and Cash equivalents. It shows: 1. 2. 3. 4. Net Cash flows from Operating Activities; Net Cash flows from Investing Activities; Net Cash flow from Financing Activities; Net change in Cash and Cash Equivalents.

Q: What is meant by the term 'Cash Flows'? Cash flows are inflows and outflows of cash and cash equivalents. Cash flows exclude movements between items that constitute cash or cash equivalents because these components are part of the cash management of an enterprise rather than part of its operating, investing and financing activities. Cash management includes the investment of excess cash in cash equivalents.

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Q: When does the flow of cash arise? The cash flow arises when the net effect of transaction is either to increase or to decrease the amount of cash or cash equivalents. The transaction which affects either: Q: Additional Questions B and C are partners sharing profit in the ratio of 3 : 2. D is admitted paying a premium of Rs. 2,000 for th Share of the profit, Shares of B and C remaining as before. No goodwill account appears in the books. Give Journal Entries. B and C are partners sharing profit in the ratio 3:2. Goodwill appears in books at Rs. 3,000. D is admitted into partnership on payment of Rs. 2,000 for th Share as goodwill. B and C between themselves sharing future profit and loses equally. Give Journal Entries. B, C and D are partners sharing profit in the ratio of 3 : 2 : 1. The goodwill does not appear in the books but it is worth Rs. 3,000. E is admitted for th share. Give Journal entry. A and B are partners sharing profits in the ratio of 4 : 5. C enters paying a premium of Rs. 1,800 for th Share in the profits, the relative Shares of A and B remaining as before. No goodwill account appears in the books. Give Journal Entries. Q: P and S are partners sharing profits and losses in the ratio 3:2. Their books showed goodwill at Rs. 20,000. R is admitted with 1/5th Share which he acquires equally from P and S. R brings Rs. 20,000 as his capital and Rs. 10,000 as his Share of goodwill. Profits at the end of the year were of the amount of Rs.1,00,000. You are required to give journal entries to carry out the above arrangements. Q: X, Y and Z were partners sharing profits and losses as to X 1/2, Y 1/3, Z 1/6. As from 1st January, 1998 they agreed to admit A into partnership for a one-sixth Share in profits and losses, which he acquires equally from X and Y. A decided to pay Rs. 20,000 for his capital and Rs. 10,000 as premium for goodwill. A paid in his capital money but in respect of premium for goodwill he could bring in only Rs. 5,000. You are required to; (i) Give the journal entries to carry out the above arrangement, and (ii) Work out new profit sharing ratio of the partners.

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'X' and 'Y' were carrying on the business in partnership sharing profits in the ratio of 3 : 1. They admitted 'Z' into partnership who pays Rs. 20,000 as his Share of capital but is unable to bring goodwill in cash. Their new profit sharing ratio is to be 3 : 1 : 1. The goodwill of the firm is valued at Rs. 20,000. Give journal entries in the following cases:(a) If the goodwill is not appearing in the books. (b) if it is appearing in the books at Rs. 16,000. (c)If it is appearing in the books at Rs. 30,000. A and B are equal partners. They admit C in partnership firm, C paying Rs 10,000 as his capital and Rs. 2,000 for Goodwill. The new profit sharing ratio is 2: 2: 1. Pass Journal entries in the firms books i) When Goodwill is received outside the business. ii) When Goodwill is received in the firm and the amount being retained in the business. iii) When goodwill is received in the firm and the amount being immediately withdrawn by the old partners.
Following is the Balance Sheet of A, B and C who Share Profits and Losses in the ratio of 6/14, 5/14 and 3/14. Liabilities Amount Assets Amount Rs Rs. Creditors 18,900 Land and Building 50,400 B/P 6,300 Furniture 7,350 As Capital 39,900 Stock 29,400 Bs Capital 33,600 Debtors 26,460 Bs Capital 16,800 Cash 1,890 1,15,500 1,15,500
They made D as partner for 1/8th Share under following conditions:That D will bring Rs. 14,700 as capital. Furniture be depreciated by Rs. 920. (Hi) Stock be depreciated by 10%. Provision be made for outstanding bills for repairs Rs. 1,320. Value of Land and Building be taken Rs. 65,100. Firm's Value of Goodwill should be taken at Rs. 8,820. Capital Account of old partners should be adjusted according to new partner's capital ratio. Give necessary journal entries and prepare new firm's Balance Sheet.

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