State any two occasions when reconstitution of a
partnership firm can happen.
in profit sharing ratio.
(ii) Admission of a partner.
the time of reconstitution of a partnership firm, if partners decide to retain
assets and liabilities at their existing values and not at the revalued
amounts, how will they record the adjustment in such a situation?
the time of reconstitution of a partnership firm, if partners decide to retain
assetsand liabilities at their existing values and not at the revalued amounts,
the adjustment is made through a single adjusting entry through Capital
Accounts or Current Accounts by debiting the gaining partner and crediting the
Where would you record "Interest on
Drawings" when capitals are fluctuating?
capitals are fluctuating, we would record "Interest on Drawings" in
Partners' Capital Accounts.
any two deductions that may have to be made from the amount payable to the
legal representative of a deceased partner.
of accumulated loss.
The total assets of a firm were Rs. 5,00,000 and
outsiders Liabilities were Rs. 80,000. Actual profits earned by the firm were
Rs. 60,000. Calculate the total capitalized value of the business if the normal
rate of return is 10%.
Total capitalized value = Rs. 60,000 X 100/10 = Rs. 6,00,000.
Give the meaning of ‘calls-in-Arrears’.
Sometimes, some of the shareholders may fail to pay
the amount due from them on allotment or on call. The amount remaining unpaid
on allotment or on calls call-in-arrear.
Ltd. issued 1,00,000 shares of Rs. 10 each, payable as follows :.
2 on application payable on 1st March, 2006; .
3 on allotment payable on 1st May,2006; .
2 on first call payable on 1st August, 2006 and .
3 on second and final callpayable on 1st December, 2006. .
these shares were subscribed for and amounts dulyreceived. Akriti, who had
8,000 shares, paid the amount of both the calls alongwithallotment.
who had 4,000 shares, paid the amount of second and final call with the first
the amount of interest on calls-in-advance payable to Akriti and Suniti.
Interest on calls-in-advance payable to Akriti.
On IstCall = 8000 X 2 X 6/100 X 3/12 = 240 (for three
On 2nd Call = 8000 X 3 X 6/100 X 7/12 = 840 (for Seventh
= Rs. 1080.
2nd Call = 4000 X 3 X 6/100 X 4/12 = 240 (for Four months)
the necessary journal entries for the issue of debentures in the following
(a)Rs. 40,000, 12%
debentures of Rs.
each issued at a premium of 5% redeemable at par.
12% debentures of Rs. 100 each issued at a
premium of 5% redeemable at Rs. 100.
1-4-2014 Jay and Vijay, entered into partnership for supplying laboratory
equipment to government
situated in remote and backward areas. .
contributed capitals of Rs.
respectively and agreed to share the profits in the ratio of 3 : 2. .
partnership deed providedthat interest on capital shall be allowed at 9% per
the year the firm earneda profit ofRs. 11,700.Showing your calculations
clearly, prepare 'Profit and Loss Appropriation Account' of Jay andVijay for
the year ended 31-3·2015.
In the books of
Profit and Loss
for the year
ended 31st March 2015
on Jay's Capital = Rs. 90,000 X 9/100 = Rs. 8,100.
on Vijay's Capital = Rs. 50,000 X 9/100 = Rs. 4,500.
interest on capital payable to both the partners =Rs. 8,100 + Rs. 4,500 =Rs. 12,600.
the available net profit of Rs. 7,800 is less than the interest on capital payable
to partners, the availableprofit of Rs. 7,800 will be distributed in the ratio
of interest on capitals i.e., 8,100 : 4,500 or 9 : 5.
A partnership firm earned net profits during the
last three years as follows:
capital employed in the firm throughout the above mentioned period has been Rs. 4,00,000. Having
regard to the risk involved, 15% is considered to be a fair return on the
capital. The remuneration of all the partners during this period is estimated
to be Rs.
annum. Calculate the value of goodwill on the basis of (i) two year's purchase
of super profits earned on average basis during the above mentioned three years
and (ii) by capitalization method.
Average Profit = 6,60,000/3 = 2,20,000
Adjusted Average Profit = Average Profit - Fair Remuneration of Partners
Note:Goodwill is to
be estimated on the basis of expected (future) maintainable profit. Hence,
fairremuneration of all the partners has been deducted from average profit.
Employed = Rs.
Normal Rate of Return = 15%.
Normal Profit = Capital Employed X normal Rate of Return/100
= Rs. 4,00,000 X 15/100.
= Rs. 60,000.
Super Profit = Adjusted Average Profit - Normal Profit
(i) Goodwill as per Super Profit Method
= Super Profit x Number of Years of Purchase
(ii) Goodwill as per Capitalisation Method
Goodwill = Super Profit X 100/ Normal Rate of
= 60,000 X 100/15
= Rs. 4,00,000.
Alternate to part (ii)
Total capitalised va1ue = Actual/Average Profit/ Normal rate X 100
= 1,20,000 X 100/15
= Rs. 8,00,000.
Goodwill = Rs. 8,00,000 - Rs. 4,00,000.
R are partners sharing profits and losses in the ratio of 5 : 3 : 2. From 1st
January,2013, they decide to share profits and losses in equal proportions. The
partnership deed provides that inthe event of any change in profit sharing
ratio, the goodwill should be valued at three years' purchase ofthe average of
five years' profits. The profits and losses of the preceding five years
are:Profits: 2011 - Rs.
2012 - Rs.
2013 - Rs.
2014 - Rs.
2015 - Rs.
Give the necessary Journal entry to record the above
ratio of P, Q and R =5 : 3 : 2
ratio of P, Q and R = I : 1 : 1
Sacrifice (or Gain) = Old Ratio - New Ratio
P= 5/10 -1/3
=15-10/30 =5/30 (Sacrifice)
Q = 3/10-1/3
=9-10/30 = (-1/30) (gain)
R = 2/10-1/3
= 6-10/30 =(-4/30) (gain)
Gaining ratio of Q and R =1 : 4
Average profits =
5,00,000/5 = Rs. 1,00,000
Goodwill of the firm
=1,00,000 x 3 =Rs. 3,00,000
Goodwill payable to P =3,00,000
X 5/30 = Rs. 50,000
company took a loan of Rs. 5,00,000 from State Bank of India and issued 10%
debentures of Rs. 8,00,000 of Rs. 100 each as a collateral security. Explain
how will you deal with issue of debentures in the books of company.
There are 2 methods to deal with issue of debentures as
collateral security. They are givenbelow:.
: No entry in the books of accounts.
: No entry in the books of accounts.
Pass the necessary journal entries for the following
transactions on the dissolution of the firm of Sudha and Shiva after the
various assets (other than cash) and outside liabilities have been transferred
to Realisation Account :
- Sudha agreed to pay off her husband's loan Rs.
- A debtor whose debt of Rs. 9,000 was written off in
the books paid Rs. 7,500 in full settlement.
- Shiva took over all investments at Rs. 13,300.
- Sundry creditors Rs. 10,000 were paid at 9% discount.
- Realisation expenses Rs. 3,400 were paid by Sudha
for which she was allowed Rs. 3,000.
- Loss on realization Rs. 9,400 was divided between
Sudha and Shiva in 3: 2 ratio.
died on 30th June, 2014. The partnership deed provided for the following on the
death of apartner:.
of the firm be valued at two years' purchase of average profits for the last
threeyears which were Rs.
share of profit till the date of his death was to be calculated on the basis of
sales. Salesfor the year ended 31st March, 2014 amounted to Rs. 9,00,000 and
that from 1st April to 30th June, 2014Rs. 5,40,000. The profit for the year ended
31st March, 2014 was Rs.
on capital was to be provided @ 8% p,a.
to Shyam's will, the executors should donate his share to 'MaitriChhaya–
anorphanage for girls'.
Shyam's Capital Account to be rendered to his executor. Also identify the value
beinghighlighted in the question.
(i) Average Profit =Rs. 90,000
payable to Shyam = Rs.
X 4/14 = Rs. 51,429.
(ii) Profit for the year ending 31st March, 2014 = Rs. 2,50,000
for the year ending 31st March, 2014 = Rs. 9,00,000.
for 3 months (1st April to 30th June) = Rs. 5,40,000.
for 3 month on the basis of last year's sales
2,50,000/9,00,000 X 5,40,000 = Rs. 1,50,000.
of profit payable to Shyam =Rs. 1,50,000 X 4/14 = Rs. 42,857.
(iii) Interest on capital payable to Shyam= Rs. 65,000 X 8/100 X 3/12 =
question highlights the deceased partner's concern for deprived section of
society i.e., girls living in an orphanage. By donating his wealth to the
orphanage, Shyam has fulfilled his social responsibility. In this way, sympathy
and kindness are the values highlighted by the question.
Ltd. took over the following Assets and Liabilities of Bright Ltd.
Rs. 10,00,000; .
debts Rs. 6,00,000; .
Rs. 3,50,000; .
an agreed consideration of Rs. 20,00,000, which was discharged as follows:.
by a Bank draft
by issue of 9% Debentures of Rs. 100 each @ premium of 25% .
balance by a Bill of Exchange.
the journal entries in the books of Stephen Ltd.
Ltd. is in the garment business. As its Corporate social responsibility it
decided to install 200 cleaningcentres to set up modern sewage systems in the
town. The project was named "Swabhiman Bharat". It purchasedthe
materials required from Aryan Ltd. for Rs. 2,50,000. It made the payment as
50,000 by cheque.
Debentures of Rs. 100 each at par.
12% Preference Shares of Rs. 200 each.
Y and Z were partners sharing profits in the ratio of 2 : 2 : 1. The Balance
Sheet as at 31st.
2014, when they dissolved the firm was as follows:
was agreed that:
to take over furniture at Rs. 8,000 and debtors amounted to Rs. 1,20,000 at Rs.
1,17,200 and thecreditors of Rs. 16,000 were to be paid by him at this figure.
is to take over all stock for Rs. 17,000and some sundry assets at Rs. 72,000
(being 10% less thanthe book value).
to take over remaining sundry assets at 80% of the book value and assume the
responsibilityof discharge of loan together with accrued interest of Rs. 2,300.
expenses ofrealisation were Rs. 2,700. .
remaining debtors were sold to a debt collectingagency at 50% of the
value.Prepare the necessary accounts to close the books of the firm.
Limited' invited applications for issuing 15,000 equity shares of Rs.10 each. The amount was
payable as follows:.
application - Rs.2 per share.
allotment - Rs.3 per share.
first and final call - Rs.5 per share.
Applications for 18,000 shares were received.
were issued proportionately to all applicants.Excess money received with
applications was adjusted towards sums due on allotment. .
whohad applied for 360 shares failed to pay allotment, and first and final call money. .
to whom 150shares were allotted failed to pay the first and final call money. .
of both Ramesh and Naresh wereforfeited. Out of the forfeited shares, 200
shares were re-issued at Rs.9 per share as fully
paid up. There-issued shares included all the shares of Naresh.
necessary journal entries for the above transactions in the books of 'Aakash
(i) No. of shares to be issued = 15,000
of shares applied for = 18,000.
of Shares Allotted and Applied for
15,000 : 18,000 = 5 : 6
allotted to Ramesh
360 X 5/6 = 300
applied by Naresh
150 X 6/5 = 180
(ii) Application money paid by Ramesh
360 x 2 = Rs.
money on 300 shares allotted (300 x 2) Rs. 600.
application money paid by Ramesh adjusted towards share allotment =720 - 600 = Rs. 120.
due from Ramesh on allotment 300 x 3 Rs. 900.
already paid by Ramesh on application = Rs. 120.
not paid by Ramesh on allotment =Rs. 780.
(iii) Amount due on allotment
x 3 =Rs.
money adjusted to allotment =Rs. 6,000.
receivable on allotment =Rs.
money not paid by Ramesh Rs.
received on allotment =Rs.
(iv) Amount forfeited on 300 shares issued to Ramesh = Rs. 720
forfeited on 150 shares issued to Naresh =Rs. 750.
amount forfeited on 450 Shares = Rs. 1,470.
amount forfeited on 200 Shares
on re-issue of shares = Rs.
transferred to Capital Reserve =Rs. 670.
State why Cash Flow Statement is not a substitute
for Income Statement.
Flow Statement is not a substitute for Income Statement because income
statement shows both cash and non-cash items of revenue nature while cash flow
statement shows only cash items of revenue and capital nature.
List any two financing activities that result into
outflow of cash.
(i) Redemption of Debentures (ii) Payment of
the following Income Statement, prepare a Common-size Income Statement of
Ltd. for the year ended 31.3.2012:.
Ltd. is a finance company which recruits its employees through campus
placements wherein they give preference to employ the lower income group
candidates studying under EWS category. Given below is the Comparative
Statement of Profit and Loss of the company for the years ended 31't March 2014
and 31st March, 2015.
net profit ratio for the years ending 31st March 2014 and 31st March, 2015.
Turnover Ratio is 3 Times. Revenue from operations are Rs. 1,80,000,
Opening Inventory is Rs.
more than the Closing Inventory. Calculate Opening and Closing Inventory when
goods are sold at a profit of 20% on cost.
(a) Net Profit Ratio = Net Profit
after Tax / Revenue from operations X 100
the year ended 31St March, 2014 = 4,80,000 X 100 / 10,00,000 = 48%
the year ended 31st March, 2015 = 6,60,000 X 100 / 15,00,000 = 44%
(b) Inventory Turnover Ratio = Cost of
Revenue from Operations / Average Inventory
of Revenue from Operations = Revenue from Operations - Gross Profit
Inventory = Rs. 50,000.
Opening Inventory be x
Closing Inventory =x - 2,000
+ x -2,000 / 2 = Rs.
- 2,000 = 1,00,000
= Rs. 51,000.
Opening Inventory =Rs. 51,000
Closing Inventory =Rs. 49,000.
Current Ratio of a company is 2.5 : 1.5. State with reasons which of the
will increase, decrease or not change the ratio :
a bill receivable of Rs.
from bank. Bank charged discount of Rs. 200.
bill receivable Rs.
discounted with bank was dishonored.
deposited into bank Rs.
to the creditors.
Current Ratio = Current Assets/Current Liabilities
the comparative Income Statement from the following information: