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CBSE Sample Paper 5 For Accounts

Posted on - 23-05-2017

CBSE Accounts

CBSE

Q.1

Why are assets revalued at the time of admission of a partner?

Solution

Assets are revalued at the time of admission of a partner because any profit or loss on revaluation of assets belong to old partners and not to the new partner.

Q.2

The Accountant of the firm has debited the Profit and Loss Appropriation A/cfor rent paid to a Partner. Is the treatment given by the Accountant correct? Give reason in support of your answer.

Solution

The accounting treatment given by the Accountant for rent paid to a partner is incorrect. It is an expense/charge incurred for use of property and hence should be debited to the Profit and Loss Account.

Q.3

What are calls-in-arrear?

Solution

When a shareholder fails to pay called-up allotment and/or call money, money not so paid is known as calls-in-arrear.

Q.4

What is meant by ‘issue of shares at par’ ?

Solution

When shares are issued for an amount equal to the face value of a share, they are said to be issued at par.

Q.5

State the meaning of "secured debentures".

Solution

Secured debentures refer to the debentures which are secured either on a particular asset of the issuer company (called fixed charge) or on all the assets of the company in general (called floating charge).

Q.6

Give any two points of distinction between a share and a debenture.

Solution

  1. A share is a part of the capital of the company whereas a debenture is a part of loan of the company.
  2. Shares cannot be converted into debentures whereas debenture can be converted into shares.

Q.7

State the exceptions to the creation of Debenture Redemption Reserve as per SEBI Guidelines.

Solution

SEBI guidelines would not apply :

  1. To Infrastructure companies.
  2. A company issuing debentures with a maturity period of not more than 18 months.
  3. For debentures issued by All India Financial Institutions regulated by RBI.
  4. For debentures issued by Banking companies.
  5. For Privately placed debentures

Q.8

A, B and C are partners. They have omitted interest on capital @ 10% p.a. forthree years ended 31st March, 2009. Their fixed capitals on which interest was to be calculated throughout were:.

Give the necessary adjusting journal entry with working notes.

Solution

Working Notes

(A) 10/100 X 1,00,000 = 10,000 X 3 years = 30,000

(B) 10/100 X 80,000 = 8,000 X 3 years = 24,000

(C) 10/100 X 70,000 = 7,000 X 3 years = 21,000

Total = 75,000

(ii) Statement showing Adjustment to be made :

Q.9

Sweera, Rishabh and Sumedha were three partners sharing profits equally. On 1st April, 2015, Sweera retired and Arushi was admitted for 1/4th share in the profits contributing a capital of Rs. 2,00,000. On that date the assets and liabilities of the firm were Rs. 6,60,000 and Rs. 3,00,000 respectively. The firm decided to donate 10% of their profits to the charitable hospitals in order to improve the medical facilities of the country. Pass the necessary journal entry for goodwill and identify the value involved.

Solution

Working Notes:

1.

2.

CA/culation of hidden goodwill

Total Capital of firm as per Arushi's capital = 4 x 2,00,000 = Rs. 8,00,000.

Actual Capital of the firm = Net Assets + Arushi's Capital

= (6,60,000 - 3,00,000) + 2,00,000

= Rs. 5,60,000.

Firm's Goodwill = Total Capital - Actual Capital

= 8,00,000 5,60/000

= Rs. 2,40,OOO.

Sweera's share of Goodwill = 1/3 x 2,40,000

= 80,000

Values highlighted

Social Responsibility.

Care towards the society

Q.10

X, Y and Z were sharing profits and losses in the ratio of 5: 3 : 2. They decided to share future profits and losses in the ratio of 2 : 3 : 5 with effect from 1.4.2014. They decided to record the effect of the following without affecting their book values :.

(i) Profit and Loss Account =Rs. 24,000.

(ii) Advertisement Suspense Account = Rs. 12,000.

Solution

Old ratio of X, Yand 2 = 5 : 3 : 2

New ratio of X, Yand Z 2: 3 : 5

Sacrifice (or Gain) =Old ratio - New ratio

X = 5/10 – 2/10

= 3/10 (sacrifice)

Y = 3/10 – 3/10

= Nil (neither gain or sacrifice)

Z = 2/10 -5/10

= (-3/10) (gain)

Balance in Profit and Loss A/c =Rs. 24,000.

Balance in Advertisement Suspense A/c =Rs. 12,000.

Total Profit to be adjusted = Rs. 12,000.

Amount payable by 2 to X = Rs. 12,000 X 3/10.

= Rs. 3,600.

Q.11

A business has earned average profits of Rs. 1,00,000during the last few years and the normalRate of return in similar business is 10%. Find out the value of goodwill by.

(i) capitalisation of super profit method and

(ii) super profit method if the goodwill is valued at 3 years purchase of super profit.

The assets of the business were Rs. 10,00,000and its external liabilities Rs. 1,80,000.

Solution

Assets of the business = Rs. 10,00,000.

Liabilities of the business = Rs. 1,80,000.

Capital employed =Assets - Liabilities

=Rs. 10,00,000 - Rs. 1,80,000.

= Rs. 8,20,000.

Normal rate of return = 10%

Normal Profit = Capital Employed  X Normal Rate of Return/100

= 82,000 X 10/100

Average Profits = Rs. 1,00,000

Super Profit = Average Profit - Normal Profit

= Rs. 1,00,000 - Rs. 82,000.

= Rs. 18,000.

Goodwill as per capitalisation method

Goodwill = Super Profits X 100/Normal Rate of Return

= 18,000 X 100/10

= Rs. 1,80,000.

Goodwill as per super profit method

Goodwill = Super Profits X Number of Years of Purchase

= 18,000 x 3

=Rs. 54,000.

Q.12

What is meant by debenture? State any two characteristics of debenture.

Solution

Debenture is an acknowledgement of a debt given under the seal of the company and containing a contract for the repayment of the principal sum at a specified date and for the payment of interest (usually half yearly) at a fixed rate per cent until the principal sum is repaid. Following are the characteristics of a debenture:.

(i) Loan - Debenture represents loan to the company. It implies that a debentureholder is a lender or creditor of the company and not the owner.

(ii) Interest - A debentureholder receives interest at a given (fixed) rate of interest regularly. Such interest is a charge to profit.

Q.13

A, Band C were partners sharing profits in the ratio of 6 : 4 : 5. Their capitals were A Rs. 1,00,000/-, B - Rs. 80,000 and C - Rs. 60,000. On 1st April 2014, B retired from the firm and the new profit sharing ratio between A and C was decided as 11 : 4. On B's retirement the goodwill of the firm was valued at Rs. 1,80,000. Showing your calculations clearly pass necessary journal entry for the treatment of goodwill on B's retirement.

Solution

Existing profit sharing ratio of A, Band C = 6 : 4 : 5

New profit sharing ratio of A and C = 11 : 4

Gaining Ratio = New Ratio - Existing Ratio

A's Gain = 11/15-6/15 = 5/15

C's Gain = 4/15-5/15 = -1/15

Since C's gain is  (- )1/15, it implies that C is sacrificing 1/15 portion in favour of A.

C's sacrifice = 1/15

B's sacrifice = 4/15

Sacrificing Ratio of Band C = 4 : 1

Goodwill of the firm Rs. 1,80,000.

Goodwill to be paid by A = Rs. 1,80,000 X 5/15 = Rs. 60,000.

Goodwill to be claimed by B =Rs. 60,000 X 4/5 =Rs. 48,000.

Goodwill to be claimed by C = Rs. 60,000 X 1/5 = Rs. 12,000.

Q.14

Kushal, Kumar and Kavita were partners in a firm sharing profits in the ratio of 3 : 1 : 1. On1st April, 2014 their Balance Sheet was as follows:.

On the above date, Kavita retired and the following was agreed:

  1. Goodwill of the firm was valued at Rs. 40,000. I .
  2. Land was to be appreciated by 30% and building was to be depreciated by Rs. 1,00,000.
  3. Value of furniture was to be reduced by Rs. 20,000.
  4. Bad debts reserve is to be increased to Rs. 15,000.
  5. 10% of the amount payable to Kavita was paid in cash and the balance was transferred to herLoan Account.
  6. Capitals of Kushal and Kumar will be in proportion to their new profit sharing ratio. Thesurplus/deficit, if any in their Capital Account will be adjusted through Current Accounts.

Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of Kushal andKumar after Kavita's retirement. .

Solution

Working Note:

Capital of Kushal before adjustment = Rs. 3,63,000.

Capital of Kumar before adjustment =Rs. 3,01,000.

Total Capital = Rs. 6,64,000.

Kushal's adjusted capital = 3/4 X 6,64,000 = Rs. 4,98,000.

Kumar's adjusted capital = 1/4 X 6,64,000 = Rs. 1,66,000.

Q.15

Krishan ltd. on 30th June, 2013 took over the Assets of Rs. 10,00,000 and liabilities of Rs. 1,00,000 from Mohan Enterprises at an agreed consideration of Rs. 11,00,000. Krishan limited issued 11% Debentures of Rs. 100 each at a premium of 10% in full satisfaction of purchase consideration. The Debentures were redeemable on 31st March, 2015. The Company decided to create a DRR on 31st March, 2014 and also decided to invest in 10% Government Securities to meet the legal requirement. Give the journal entries for the issue and redemption of debentures in the books of Krishan ltd. (Ignore TDS).

Solution

No entry has been made for payment to Creditors as they have accepted Machinery in full settlement of their claim.

Q.16

A, Band C were partners sharing profits in the ratio of 3 : 1 : 1. Their Balance Sheet as on March 31st 2014, the date on which they dissolved their firm, was as follows:.

It was agreed that:

(a)

A to take over Bills Receivables at Rs. 800, debtors amounting to Rs. 20,000 at Rs. 17,200 and the creditors of Rs. 6,000 were to be paid by him at this figure.

(b)

B is to take over all stock for Rs. 7,000 and some sundry assets at Rs. 7,200 (being 10% less thanthe book value).

(c)

C to take over remaining sundry assets at 90% of the book value and assume the responsibilityof discharge of loan together with accrued interest ofRs.300. .

(d)

The expenses of realisation were Rs. 270.

The remaining debtors were sold to a debt collecting agency at 50% of the book value. PrepareRealisation A/c, Partners Capital A/c and Cash A/c.

Solution

Working Notes :

(i) Book value of Sundry Assets - 17,000

Less; Book value of Sundry Assets Taken over by B (7,200 X 100/90) = 8,000

Book value of Sundry Assets taken over by C = 9,000

Agreed value of Sundry Assets taken over by C (90/100 X 9,000) = 8,100

(ii) Book value of Debtors = 24,200

Less: Book value of Debtors taken over by A = 20,000

Book value of Debtors to be realised for cash = 4,200

Cash realised from Debtors = 4,200 X 50/100 = 2,100

Q.17

X Ltd. invited applications for issuing 80,000 equity shares of Rs. 10 each at a premium of.

Rs. 2 per share. The amount was payable as follows:.

  1. On application Rs. 6 (including premium) per share.
  2. On allotment Rs. 3 per share and the balance on first and final call.

Applications for 90,000 shareswere received. Applications for 5,000 shares were rejected and pro-rata allotment was made to the remaining applicants. Over payments received on application was adjusted towards sums due on allotment. All calls were made and were duly received except the allotment and final call on 1,600 shares allotted to Vijay. These shares were forfeited and the forfeited shares were re-issued for Rs. 18,400 fully paid-up.

Pass necessary Journal Entries in the books of the company.

Solution

Working Notes :

(i) Ratio of shares applied and shares allotted

= 85,000 : 80,000

= 17 : 16

It means that Vijay might have applied for

= 1600 X 17/16 = 17,00 shares

Amount received from Vijay on application

=1,700 x 6 =Rs. 10,200.

Excess application money adjusted to allotment

=Rs. 10,200 - Rs. [1,600 x 6] =Rs. 600.

(ii) Total amount due from Vijay on allotment

=Rs. 3 x 1,600 =Rs. 4,800.

Amount payable by Vijay on allotment

= Rs. 4,800 - Rs. 600 = Rs. 4,200.

(iii) Amount due on allotment = 2,40,000

Less: Application money transferred to share allotment = 30,000

Total = 2,10,000

Less: Amount not paid by Vijay = 4,200

Amount received on allotment = 2,05,800

Q.18

What is meant by common-size statement?

Solution

Common-size statement means a statement which expresses all items of a financial statement as a percentage of some common base.

Q.19

Explain how Financial Statements Analysis ignores qualitative elements.

Solution

Financial statements analysis ignores qualitative elements because qualitative elements such as human resources, sales policy, market conditions are not shown in financial statements. .

Q.20

Briefly explain the limitations of analysis of financial statements.

Solution

The following are the limitations of an analysis of financial statements:

(i) Limitations of financial statements –

The financial statement analysis suffers from such limitations as financial statements suffer. This ignores the qualitative elements like quality of management and labour force, public relation etc.

(ii) Different accounting policies –

Different firms may follow different accounting policies. This may create difficulty in comparing the results of two companies.

(iii) Not free from bias –

In many situations, the accountant has to make a choice out of various

available alternatives. He may choose that alternative which may beneficial to the company. In such case, the financial statements are not free from bias.

(iv) Ignores price level changes –

The analysis of financial statements do not disclose the current worth of the business. The financial statements of the company are prepared on cost principle.

Q.21

  1. Under which type of activity will you classify 'Proceeds from sale of patents' while preparing Cash Flow Statement?
  2. Under which type of activity will you classify 'Refund of Income Tax received' while preparing the Cash Flow Statement?

Solution

1. Investing Activity.

2. Operating Activity.

Q.22

Classify the following into operating activity, investing activity and financing activity :

Solution

  1. Operating activity.
  2. Investing activity.
  3. Investing activity.
  4. Financing activity.

Q.23

State the sub-headings and headings under which the following items will be put as per Schedule III of the Companies Act, 2013 :

  1. Discount on Issue of Shares;
  2. Securities Premium; and
  3. Unclaimed dividend.
  4. Trade Payables;
  5. Provision for Tax;
  6. Preliminary Expenses.
  7. Shares Forfeited Account
  8. cheque
  9. Bank Overdraft.
  10. Software
  11. Outstanding Salaries
  12. Bills Payables

Solution

 
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