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CBSE Sample Paper 1 For Accounts

Posted on - 06-05-2017

CBSE Accounts

CBSE

Question.1

A company XYZ pays a fixed rate of interest on Debentures issued for cash to the public. At what rate, will the interest be payable on debentures issued as a collateral security?.

Solution

The holder of debenture as a collateral security is not entitled to receive any interest on such debenture from the company. But, in case of company’s failure to meet its obligation of re-payment of loan, the holder of such debenture can exercise his right to claim interest from the company on such debenture held by him.

Question.2

At the dissolution of a partnership firm, there is partner’s Loan existing for Rs. 42,000 which is settled for Rs. 38,000. Write the journal entry?.

Solution

Journal

Question.3

Can P & L Appropriation A/c have a debit balance?

Solution

No, it cannot have a debit balance.

Question.4

Explain ‘’Unlimited Liability of a partner”

Solution

Unlimited Liability of a partner means that a partner is liable to repay the debts of the firm from their personal assets also in case the assets of the firm are insufficient to meet its debts.

Question.5

Give the meaning of called-up capital.

Solution

According to section 2(15) of the Companies Act, 2013, “Called-up Capital” means such part of the capital, which has been called for payment.

Question.6

Why are shares more preferred than debentures while investing in a company?

Solution

The investors prefer to invest in shares of a company to benefit from variable and higher dividend income rather than from fixed return.

Question.7

RAM and TANU are partners in affirm sharing profits in the ratio of 3:2. SURAJ joins the firm. RAM surrenders of his share and TANUof his share in favor of SURAJ. Find the new profit-sharing ratio.

Solution

RAM’s share =3/5

RAM’s sacrifice=3/5 X 1/4=3/20

TANU’s share =2/5

TANU’s sacrifice=2/5 X 1/5=2/25

RAM’s new share = 3/5 -3/20 =12-3/20 =9/20

TANU’s new share = 2/5 -2/25 =10-2/25 =8/25

SURAJ’s share =3/20+2/25=15+8/100=23/100

New profit-sharing ratio of RAM, TANU and SURAJ

=9/20 : 8/25 : 23/100

=45 : 32 :23

Question.8

Why is it necessary to revalue the assets and reassess the liabilities on the reconstitution of firm?

Solution

Assets and liabilities of a firm may also revalued at the time of change in profit sharing ratio of existing partners.

The reason being the realizable value of assets & liabilities can be different from those shown in the balance sheet. Itstherefore necessary because the change in the value of assets and liabilities belongs to the period before change in profit sharing ratio and therefore profit or loss on revaluation must be shared by the partners in their old profit sharing ratio. .

For this purpose, there are two options -

1. If revised value are to be recorded in the books: It has been discussed in the chapter of ‘Admission of a partner’.

2. If revised values are not to be recorded in the books: In this case, the gaining partner must compensate the sacrificing partner with that share of profit on revaluation of assets and liabilities which proportionate to the share gained by him.

Question.9

X, Y and Z are partners in a firm. Total capital employed is Rs.3,60,000 contributed by them in their profit sharing ratio. Y retires from the firm. On the day of retirement the firm had a balance of Rs.60,000 in the General Reserve Account. Y took one of the unrecorded assets of the firm valued at Rs. 36,000 in part payment and, balance amount was paid in cash.

Pass necessary entries on Y's retirement.

Solution

Question.10

What do you mean by “Preference Share Capital”?

Solution

According to section 43 explanation (ii) of the companies act, 2013, “Preference Share Capital” with reference to any company limited by shares, means that part of the company which carries or would carry a preferential right with respect to:

  1. Payment of dividend, either as affixed amount or an amount calculated at affixed rate, which may either be free of or subject to income tax; and
  2. Repayment, in the case of winding up or repayment of capital, of the amount of share capital paid-up or demand to have been paid-up, whether or not, there is a preferential right to the payment of any fixed premium or premium on any fixed scale A/c, specified in the memorandum or articles of a company.

Question.11

Specify the rules relating to the following in the absence of partnership deed:

  1. Sharing of profits and losses.
  2. Interest on partner's capital.
  3. Interest on Partner's drawings.
  4. Interest on Partner's loan
  5. Salary to a partner.

Solution

Following are the main provisions of the Indian Partnership Act, 1932 that are relevant to partnership accounts if there is no partnership deed:

Sharing of profits and losses:

If the partnership deed is silent on sharing of profit or losses among the partners of a firm, then according to the Partnership Act of 1932, profits and losses are to be shared equally by all the partners of the firm.

(ii) Interest on partner's capital: 

If the partnership deed is silent on interest on partner's capital, then according to the Partnership Act of 1932,nointerest on capital should be given to the partners of the firm.

(iii) Interest on partner's drawings: 

If the partnership deed is silent on interest on partner's drawings, then according to the Partnership Act of 1932,nointerest on drawing should be charged from the partners of the firm for the amount of capital withdrawn in form of drawings.

(iv) Interest on partner's loan: 

If the partnership deed is silent on interest on partner's loan, then according to the Partnership Act of 1932, the partners are entitled for 6% p.a. interest on the loan forwarded by them to the firm.

(v) Salary to a partner: 

If the partnership deed is silent on salary to a partner, then according to the Partnership Act of 1932,nosalary should be given to any partner.

Question.12

Mohit Ltd. Took over assets of Rs. 7,20,000 and liabilities of Rs. 80,000 of Ram Ltd. At an agreed value of Rs6,00,000. Mohit Ltd. Paid to Ram Ltd. By issue of 9% debenture of Rs. 100 each at a premium of 20%.Pass necessary Journal Entries to record the above transactions in the books of Mohit ltd.

Solution

Journal

Working note:

Calculation of No. of 9% Debentures.

Amount due to ram Ltd. =Rs. 6,00,000.

Issue Price of 9% Debenture at 20% Premium = Rs 120

No. of Debenture =6,00,000/120=5,000.

Question.13

Rajan andTina entered into Partnership with fixed capital of Rs. 7,00,000 and Rs. 3,00,000 respectively. They were doing good business and were interested in its expansion but could not do the same because of lack of capital. Therefore, to have more capital, they admitted Krishna as a new partner two years later. Krishna brought Rs. 10,00,000 as capital and the new profit sharing ratio decided was 3 : 2: 5. After few years, another new partner Sanjay was admitted with a capital of Rs. 8,00,000 for 1/10th share in the profits, which he acquired equally from Rajan, Tina and Krishna. On 1.1.2015Krishna died and his share was taken over by Rajan and Sanjay equally.

Calculate:

  1. The Sacrificing ratio of Rajan and Tina on Krishna’s admission.
  2. New profit sharing ratio, of Rajan, Tina, Krishna and Sanjay on Sanjay, admission.
  3. New Profit sharing ratio of Rajan, Tina and Sanjay on Krishna’s death.

Solution

(i)

Rajan sacrifice = 1/2-3/10

=5-3/10=2/10

Kushal’s Sacrifice = 1/2-2/10

=5-2/10 = 3/10

Therefore Sacrificing Ratio of Rajan and Tina = 2:3

(ii)

New Profit Sharing Ratio

= Old Ratio Sacrificing/gaining Ratio

Sanjay’s share = 1/10

Sanjay’s Gain from all three existing partners equally =1/10 X 1/3 i.e., 1/30 from each .

Rajan’sNew share

=3/10 – 1/130

= 9-1/30

= 8/30

Kushal’s new share = 2/10 – 1/30

=6-1/30 =5/30

Krishna’s New Share =5/10-1/30

= 15-1/30

=14/30

Sanjay’s new share =1/10 or 3/30

New sharing Profit Ratio OfRajan, Tina, Krishna and Sanjay

=8/30 : 5/30 : 14/30 : 3/30

=8 : 5 : 14 : 3

(iii)

Krishna’s share = 14/30

Rajan’s Gain = 14/30 X 1/2 =14/60 =7/30

Sanjay’s Gain = 14/30 X 1/2 =14/60 =7/30

Rajan’s New ratio =8/30 + 7/30 =15/30

Sanjay’s New Ratio = 3/30 +7/30 = 10/30

New Ratio of Rajan, Tina and Sanjay after Krishna’s Death

= 15/30 : 5/30 : 10/30

=15 : 5 :10

= 3 : 1 : 2

Question.14

Simran and Jahanvi started their partnership firm sharing profits in the ratio of 3:2 on 1't April, 2013. After three years, their friend, Raghavi completed her course in legal studies. So, they decided to request her to join their firm to provide all legal advices to which Raghavi agreed with 1/5 t h share in profits of the firm. Raghavi contributed Rs. 2,00,000for capital and premium for goodwill. Goodwill of the firm was valued at Rs. 3,50,000. Simran and Jahanvi decided to share the remaining profit in the ratio of 4:3. Pass the necessary journal entries if half of the premium for goodwill credited to the partners is withdrawn by them.

Solution

Working Notes:

New Share

Sacrifice =Old share - New share

Simran4/5 x 4/7 = 16/35

3/5 - 16/35 =5/35

Jahanvi

4/5 x 3/7 = 12/35

2/5- 12/35 =2/35

Question.15

Rajesh Limited issued 50,000 10% Debentures of Rs. 100 each at a discount of 4% on 1st April, 2015, Rs.40 on application and the balance on allotment. The Debentures are redeemable after 4 years. Give necessary Journal entries and the Balance Sheet of the Company on the above date. (Ignore interest).

Solution

In the books of Rajesh Ltd.

Journal

Balance sheet (Extract)

On at 1st April, 2015

Notes to Accounts:

Question.16

The Balance Sheet of Ram &Shyam who were sharing profits in the ratio of 3:1 as on 31st March 2012 was as follows :

They decided to admit Mohan on April 1st 2012 for 1/5 share on the following terms.

  1. Mohan shall bring Rs. 60,000 as his share of premium.
  2. The unaccounted accrued income of Rs.1000 be provided for.
  3. The market value of investment was Rs.45,000.
  4. A debtor whose dues of Rs.5,000 was written of as bad debts paid Rs.4000 in full settlement.
  5. Mohan to bring in capital to the extent of 1/5 of total capital of the new firm.

Prepare Revaluation A/c. Partners’ Capital A/c & Balance Sheet of the new firm.

Solution

Revaluation Account

Partner’s Capital Account 

Working Notes :

  • Combined capital of Ram &Shyam = Rs. 1,20,000 + Rs. 60,000 = Rs. 1,80,000.
  • Total Capital of firm = 1,80,000 X 5/4 =Rs. 2,25,000.
  • Mohan’s share = Rs. 2,25,000 X 1/5 = Rs. 45,000.
  • Cash at Bank = Opening Balance + Bad Debts Recovered + Mohan’s Capital + Premium = 20,000 + 4000 + 45000 + 60,000 = Rs. 1,29,000.
  • There is no effect of bad debts recovered on the amount of debtor appearing in balance sheet.

    Question.17

    Sahara Ltd. was formed for the purchase of X Ltd. and was registered with a nominal capital of Rs. 5,00,000 divided into 2000 shares of Rs. 250 each 1000 shares were offered for public subscription at a premium of Rs. 50 payable as.

    On Application Rs. 80.

    On Allotment Rs. 120 (including premium).

    On First all Rs. 60.

    On Second call Rs. 40.

    1000 shares were also issued to vendors as fully paid for the payment of purchase consideration.

    Application were received for 900 shares which were duly allotted. Allotment money was received in full but when first call was made a holder of 200 shares failed to pay first call money and his shares were forfeited. These shares were revised as 210 paid up at rate of 180 per share. The final call was not made. Pass necessary journal entries.

    Solution

    Question.18

    X Ltd. has a Debt-Equity at 3:1. According to the management it should maintained at 1:1. What are the two choice to do so?.

    Solution

    The two choices to maintain Debt equity at 1 : 1 form 3 : 1 are :

    (i) To increase equity

    (ii) To reduce Debt

    (iii) Both i.e. increase in equity and reduce Debt.

    Question.19

    The Quick Ratio of the company is 1.5:1. Explain with reason what will be the change in the ratio on payment of dividend by the company?.

    Solution

    The ratio will decline, because quick asset (Cash) will decline on payment of dividend by the company.

    Question.20

    Current Assets of a company are Rs. 15,00,000. Its current Ratio is 2.5 and liquid Ratio is 0.85. Calculate Current liabilities, Liquid Assets and Inventory.

    Solution

    Current Ratio =Current Assets / Current Liabilities

    2.5 = Rs. 15,00,000 / Current Liabilities.

    Current Liabilities =15,00,000 / 2.5= Rs. 6,00,000.

    Liquid Ratio = Liquid Assets / Current Liabilities

    0.85 = Liquid Assets/ 6,00,000.

    Liquid Assets = Rs. 6,00,000 × 0.85 = Rs. 5,10,000.

    = Rs. 15,00,000 – Rs. 5,10,000.

    = Rs. 9,90,00.

    Solvency Ratios :Solvency ratios convey an enterprise’s ability to meet its long term obligations as and when they becomes due.

    Important solvency ratios are :

    1. Debt Equity Ratio.

    2. Total Assets to Debt Ratio.

    3. Proprietary Ratio.

    4. Interest Coverage Ratio.

    Debt Equity Ratio: It shows relationship between Debts (Long term Liabilities or Non-Current Liabilities) and Equity (Shareholders’ Funds).

    Debt Equity Ratio = Debts or Long Term Liabilities / Equity or Shareholder's Funds

    Debts = Long-term borrowings + Long-term provisions

    Equity/Shareholders’ Funds = Share Capital + Reserves and Surplus – Non-Trading Investments

    OR

    Equity/Shareholders’ Funds = Fixed Assets (Tangible and Intangible) + Non-Current Investment (Excluding Non-Trading investment) + Long Terms Loans and Advances + Current Assets (Excluding Fictitious Assets included in other Current Assets) – Current Liabilities - Long-term borrowings Long - term provision

    1. Significance :

    It assesses the long term soundness of financial position of a business.

    2. Ideal Ratio :

    2: 1 is considered as best but it should not be more than this.

    Question21

    From the following information, calculate the net cash flow from Financing

    Activities

    Additional Information

    1. Interest paid on Debentures Rs. 12,500.
    2. During the year 2010-2011, company issued bonus shares to equity shareholders in the ratio of 2:1 by capitalizing reserve.
    3. The interim dividend of Rs. 75,000 has been paid during the year.
    4. 9% Debentures were redeemed as 5% premium.
    5. 10% preference shares were issued at 2% discount.

    Solution

    Cash Flow from Financing Activities

    Note:

    1. Bonus shares worth Rs. 5,00,000 issued to equity shareholder are not to be shown in the cash flow statement because there is no flow of cash by this activity.
    2. If any other information is not given in the question about final dividend paid amount then the previous year proposed dividend is assumed as dividend payable in current year. Current year proposed dividend amount is assumed as proposed dividend in current year and to be added in operating activities to calculated net profit before tax and extraordinary item.
    3. Previous year proposed dividend- unpaid dividend = final dividend paid during the current year is cash used in financing activities.

    Financing Business Enterprise Transaction Treatment in Cash Flow Statement

    Financing business enterprises are the business enterprises which deal in financelike investment companies, mutual fund house, banks. These enterprises purchasesand sale of securities as their stock, so it is treated as operating activities and interest received, dividend received and interest aid are considered as routine business activities and included in their operating activities.

    Question.22

    From the following information calculate the amount of cash flows Investing Activities :

    Solution

    Calculations of Cash Flows From Investing Activities

    Question.23

    A company’ Inventory Turnover is 5 Times. Inventory at the end is Rs 20,000 more than that at the beginning. Revenue from operations are Rs. 8,00,000. Rate of Gross Profit on Cost 1/4; Current liabilities Rs. 2,40,000. Acid Test Ratio.

    Solution

    Revenue from Operation = Rs. 8,00,000.

    Rate of Gross Profit on Cost of Revenue from Operations =1/4

    Let Cost of Revenue from Operations=100

    Hence, profit =100 X ¼ =25

    Revenue from Operations =100+25 =125

    Rate of Profit to Revenue from Operations = 1-1/5= 4/5 of Revenue from Operations

    Cost of Revenue from Operations =Rs. 8,00,000 X 4/5 = Rs. 6,40,000.

    Inventory Turnover ratio =5 (given)

    Inventory Turnover Ratio =Cost of Revenue From Operations / Average Inventory = 5

    Cost of Revenue From Operations / 5 = Average Inventory

    6,40,000 / 5= Average Inventory

    Average Inventory = 1,28,000

    Let Opening Inventory = x

    Then, Closing Inventory = x + 20,000

    Average Inventory = x + 20,000 + x / 2

    2x + 20,000 / 2 =1,28,000

    x + 10,000 = 1,28,000

    x =Rs. 1,28,000 - Rs. 10,000.

    x= Rs. 1,18,000.

    Closing Inventory = Rs. 1,18,000 + Rs. 20,000= Rs. 1,38,000.

    Acid Test Ratio= Quick Assets / Current Liabilities =0.75.

    Quick Assets = 0.75 X Current Liabilities.

    = 0.75 X 2,40,000 = Rs. 1,80,000.

    Current Assets = Quick Assets + Closing Inventory

    = Rs. 1,80,000 + Rs. 1,38,000 = Rs. 3,18,000.

    Current Ratio = Current Assets/ Current Liabilities

    = 3,18,000/2,40,000

    = 1.325 : 1.

     
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