THE INDIAN COMMUNITY SCHOOL, KUWAIT

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THE INDIAN COMMUNITY SCHOOL, KUWAIT SERIES : II MTE / FN/2017-2018 CODE : N 055 TIME ALLOWED : 3 HOURS NAME OF STUDENT : MAX. MARKS : 80 ROLL NO.

1 THE INDIAN COMMUNITY SCHOOL, KUWAIT SERIES : II MTE / FN/ CODE : N 055 TIME ALLOWED : 3 HOURS NAME OF STUDENT : MAX. MARKS : 80 ROLL NO. :.. CLASS/SEC :.. NO. OF PAGES : 8 ACCOUNTANCY ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 1. K, N and A are partners in a firm sharing P/L in the ratio 3:2:1. At the time of admission of a partner, the goodwill of a firm was valued at Rs4, 00,000. The accountant of the firm passed the entry in the books of accounts and therefore showed goodwill at Rs2, 00,000 as an asset in the Balance Sheet was correct in doing so? Why? (1) 2. What are the circumstances where there is a need for revaluation of assets and liabilities? (1) 3. State any two deductions that may have to be made from the amount payable to retiring partner. (1) 4. Pass necessary journal entry:-dissolution expense Rs. 800paid by firm. (1) 5. What are the circumstances where there is a need for revaluation of assets and liabilities? (1) 6. At what rate is interest payable on the amount remaining unpaid to the executor of deceased partner. (1) 7. Differentiate between profit and loss appropriation account and profit and loss suspense account. (1) 8. When is memorandum revaluation account prepared? (1) 9. Pass the necessary journal entries for the following transaction on dissolution of firm of P and Q after various assets (other than cash) and outside liabilities have been transferred to Realisation a/c. a. Bank Loan Rs1,200 was paid. b. Stock worth Rs1,600 was taken over by partner Q. c. Partner P paid a creditor Rs400 d. An asset not appearing in the books of accounts realised Rs1,20 e. Expenses on Realisation Rs200 were paid by partner Q f. Profit on realisation Rs3,600 was distributed between P and Q in 5:4 (3)

2 10. Gahlot and Harrison are partners in a firm sharing profits and losses in the ratio of 3:2. Thomas is admitted into partnership for 1/5 th share in profits. He brings in Rs 30,000 as his share of goodwill premium. The new profit sharing ratio among Ghalot, Harrison and Thomas is 11:9:5. No goodwill account appears in the books. Show how the amount of premium brought in by Thomas will be shared by Ghalot and Harrison and pass journal entries assuming that the amount of goodwill is withdrawn fully by the old partners. (3) 11. D, E, F, P, Z were partners in a firm sharing profits and losses in the ratio 5:4:3:2:1 respectively. Un fortunately, p and z met with a tragic car accident in which both of them died.the goodwill of the firm was valued at Rs. 1,50,000 and D,E AND F decided to share the future profits and losses in the ratio 4:6:5 respectively. Give the Journal entry to record the above. (3) 12. Asin and shreyas are partners in a firm.they admit Ajay as a new partner with 1/5 share in profits of the firm. Ajay brings Rs. 5, 00,000 as his share of capital. The value of total assets of the firm was Rs.15, 00,000 and outside liabilities were valued at Rs.5, 00,000 on that date. Give necessary journal entries to record the goodwill at the time of Ajay's admission. Also show the workings. (3) 13. Ram, Gurdeep and Seemaare partners dealing in manufacturing of electric power saver machine. They share profits and losses in the ratio of 5: 3: 2. They admitted Mathew for 2/10th share. Seema is a single parent of two small kids. On the admission of Mathew, Seema requested to Ram and Gurdeep that she does not want to change her profit share and wants to retain her original (old) share. (a) Find out the new profit sharing ratio of Ram, Gurdeep, Seema and Mathew. (b) What values you can identify in the above problem? (4) 14.. Pass necessary journal entries on retirement of a partner a. Depreciate furniture by 20% (Book value Rs. 1, 00,000) b. Half of investments were to be taken over by P and Q in their profit sharing ratio and remaining sold at Rs. 2,6000 (Book value Rs. 44, 000) c. Bank loan was settled at Rs. 14,000. (Book value Rs.16, 000) d. Stock was found overvalued by 20 % (Book value 50, 000) (4) 15. Give any four points of difference between Dissolution of partnership and Dissolution of a firm. (4)

3 16. A,B, C are sharing profits in the ratio of 2:2:1. B died on 30 June Accounts are closed on 31 March. Sales for the year ended 31 march 2015 amounted to Rs.3, 00,000.Sales of Rs. 1,00,000 amounted between the period from 1 April 2015 to 30 June 2015.The profits for the year ended 31 march 2015 amounted to Rs.30,000. Calculate deceased partners share in the profits of the firm. (4) 17. Record necessary entries in the following cases in case of dissolution of partnership firm : (i) Realisation expenses to be borne by A, a partner for which she was allowed commission of 2% of net cash realized from dissolution. The net cash realized from dissolution was 5,00,000 & actual expenses were 37,000. (ii) Sunil, a creditor to whom 32,000 were due to be paid, took over office equipment at 40,000. Balance was paid by him in cash. (iii) P, a partner, paid creditors 51,000 in full settlement of their claim 60,000. (iv) A debtor, Sam, whose debt of 18,600 was written off in the books, paid 15,000 in full settlement. (4) 18. (A)A & B are partners in a partnership firm which deals in mosquito repellents. They decided to supply their product in different slum areas in order to restrict water bond diseases. a) State three values that are being reflected in this case. b) B being an active partner claims salary of Rs. 20,000 per month. State whether his claim is valid or not. (B) Give reasons for the following: a) When an asset is taken over by a partner, his capital account is debited. b) When a liability is discharged by a partner, his capital account is credited. c) On the admission of a partner, assets and liabilities of the firm are revalued. d) Interest on capital is proportionately allowed to the extent of profits if there are insufficient profit in the firm. (6) 19.Anu Beena and Chander are partners in a firm, sharing profit in the ratio of 3 : 2 : 1. Their Balance Sheet as on March 31, 2006 was as follows: Liabilities Amount Assets Amount Sundry Creditors 3,200 Cash in hand 1,200 General Reserve 12,000 Cash at Bank 2,000

4 Capitals: Debtors 18,000 Anu 20,000 Stocks 14,000 Beena 20,000 Machinery 12,000 Chander 20,000 60,000 Building 28,000 75,200 75,200 On the date of Balance Sheet Chander retires from firm. It is agreed to adjust the value of assets as follows: (a) Provide a reserve of 5% on Sundry Debtors for Doubtful Debts. (b) Building to be revalued at Rs.30,200. (c) Depreciate stock by 5% and Machinery by 10%. Prepare Revaluation account, Partners Capital account.(6) 20. X, Y and Z were partners in a firm sharing profits and losses in the ratio of 5:3:2. On their Balance Sheet was as follows: Liabilities (Rs) Assets (Rs) CapitalAccounts: Building 50,000 X 75,000 Patents 15,000 Y 62,000 Machinery 75,000 Z 38,000 1,75,000 Stock 37,500 Creditors 42,500 Debtors 20,000 Cash at Bank 20,000 2,17,500 2,17,500 Z died on 31 st July It was agreed that: a) Goodwill be valued at 2 ½ year s purchase of the average profits of the last four years, which were as follows: Years Profits (Rs) , , , ,500 b) Machinery be valued at Rs 70,000; Patents at Rs 20,000 and Building Rs 62,500.

5 c) For the purpose of calculating Z s share of profits in the year of his death the profits in should be taken to have been accrued on the same scale as in d) A sum of Rs 17,500 was paid immediately to the executors of Z and the balance was paid in four half yearly instalments together with interest at 12% p.a starting from Give necessary journal entries to record the above transactions and Z executors account.(6) 21. Harsh, Kaushal and Vaman decided to dissolve their firm. The accountant of the firm prepared accounts and left some figures and entries incomplete. You are required to complete the missing figures in the following accounts:(6) Dr. Realisation Account Cr. Particulars (Rs) Particulars (Rs) To Land & Building A/c 23,500 By Accounts Payable 50,400 To Stock A/c 16,000 By Joint Life Policy Reserve A/c 10,000 To Accounts Receivable 20,100 By Harsh s Capital A/c (Stock) 18,000 (Debtors) To Investments A/c 62,600 By Kaushal s Capital A/c (building) 17,500 To Office EquipmentsA/c. By Vaman s Capital A/c (Debtors) 3,700 To Bank A/c (Realisation Expense) 450 By Bank A/c 82,000 To Bank A/c 50,900 To Capital A/c ( profit) Harsh 3/6.. Kaushal 2/6 Vaman 1/6.. 4,350. Dr. Partners Capital Accounts Cr. Particulars Harsh (Rs) Kaushal (Rs) Vaman (Rs) Particulars Harsh (Rs) Kaushal (Rs) Dr. Bank Account Cr. Particulars ( Rs) Particulars ( Rs) Vaman (Rs) To Realisation A/c. By Balance b/d 30,000 20,000 10,000 To Bank A/c 17,175 5,950 8,025 By General.... Reserve By Realisation..... A/c 35,175 23,450 11,725 35,175 23,450 11,725

6 To Balance b/d 500 By Realisation A/c To Realisation A/c ( Assets Realised) 82,000 By Realisation Ac 50,900 By Harsh s Capital A/c By Kausha s Capital A/c. By Vaman s Capital A/c Narang, Suri and Bajaj are partners in a firm sharing profits and losses in proportion of 1/2, 1/6 and 1/3 respectively. The Balance Sheet on 31 st March 2015 was as follows: Balance Sheet Liabilities (Rs) Assets (Rs) Capital Accounts: Freehold Premises 40,000 Narang 30,000 Machinery 30,000 Suri 30,000 Furniture 12,000 Bajaj 28,000 88,000 Stock 22,000 Bills Payable 12,000 Sundry Debtors 22,000 Reserves 12,000 Less: Provisions for Bad Debts 3,000 19,000 Sundry Creditors 18,000 Cash 7,000 Total 1,30,000 1,30,000 Bajaj retires from the business on the above date and the partners agree to the following : a) Freehold premises and stock are to be appreciated by 20% and 15 % respectively. b) Machinery and furniture are to be depreciated by 10% and 7 % respectively. c) Provision for bad debts is to be increased to Rs 1,500 d) Goodwill is valued at Rs 21,000 on Bajaj s retirement. e) The continuing partners have decided to adjust their capitals in their new profit-sharing ratio after retirement of Bajaj. Surplus/deficit, if any, in their accounts will be adjusted through their current accounts. Prepare necessary ledger accounts and draw the Balance Sheet of the reconstituted firm(8) Or Aand B are partners sharing profits in the ratio of A 3/6, B 2/6 and transfer to reserve 1/6. Their Balance sheet on 31st March, 2012 was as follows:

7 LIABILITY AMOUNT ASSET AMOUNT Employee provident goodwill fund Reserve plant Creditors patents 4400 Profit and loss a/c stock Capitals: investment A cash 5000 B Debtors Less: bad debts B retires on 1st April, The terms were: a) Goodwill is to be valued at Rs. 50,000 b) Value of patents is to be increased by Rs. 3,000 but Plant was found over valued by Rs. 15,000. c) Provision for doubtful debts should be 5% on debtors and provision for discount should also be made on debtors and creditors at 3%. d) Out of insurance which was entirely debited to profit & loss Account Rs.870 be carried forward as unexpired insurance. e) Investments were revalued at Rs. 16,000.Half of these investments were taken over by B. f) There is a claim for workmen's compensation to the extent of Rs. 5,000. g) B was paid off in full. Prepare Revaluation Account, Capital Accounts and the Balance sheet of A.(8) 23. Shikhar and Rohit were partners in a firm sharing profits in the ratio of 7 : 3. On 1st April, 2013 they admitted Kavi as a new partner for 1/4 share in profits of the firm. Kavi brought Rs. 4,30,000 as his capital and Rs.25,000 for his share of goodwill premium. The Balance Sheet of Shikhar and Rohit as on 1st April, 2013 was as follows : Balance Sheet of Shikhar and Rohit as on 1st April, LIABILITY AMOUNT ASSET AMOUNT Creditors Cash at Bank Workmen compensation machinery fund General reserve Stock Capital Accounts: Land and building A Debtors B Less: provision 20000

8 it was agreed that: (i) The value of Land and Building will be appreciated by 20%. (ii) The value of Machinery will be depreciated by 10%. (iii) The liabilities of Workmen s Compensation Fund was determined at Rs. 50,000. (iv) Capitals of Shikhar and Rohit will be adjusted on the basis of Kavi s capital and actual cash to be brought in or to be paid off as the case may be. Prepare Revaluation Account, Partners Capital Accounts and the Balance Sheet of the new firm.(8) Or T,N, S were partners in a firm two years ago when S died. Later on, T and N had decided to carry on the partnership among them sharing profits in the ratio of 2:1. However, in wake of deteriorating financial position of the family of S, both T & N agreed upon admitting the minor daughter of S named M into the firm. The mother of M consented to act as the legal guardian of the child until she attained the age of maturity. On 31 st December, 2015 the Balance Sheet of T and N stood as follows: Liabilities (Rs) Assets (Rs) T s Capital 30,000 Freehold Property 10,000 N s Capital 15,000 Furniture 3,000 General Reserve 12,000 Stock 6,000 Creditors 8,000 Debtors 40,000 Cash 6,000 65,000 65,000 T & N share profits and losses in the ratio of 2:1. They agree to admit M into the firm subject to the following terms and conditions: a) M will bring in Rs10, 500 of which Rs4, 500 will be treated as her share of goodwill to be retained in the business. b) M will be entitled to 1/4 th share of profits in the firm. c) A reserve for bad and doubtful debts is to be credited at 3% on the debtors. d) Furniture is to be depreciated by 5%. e) Stock is to be revaluated at Rs5,250 i) Mention the values displayed by T and N in admitting M into the partnership. ii) Mention the provision of the Partnership Act affected by the admission of M and the clauses governing this provision.

9 Prepare Revaluation Account, Partners Capital Accounts and Opening Balance Sheet of the new firm. (8)

ACCOUNTANCY MODEL TEST PAPER-1

ACCOUNTANCY MODEL TEST PAPER-1 Q1- Is it correct that interest on capital is payable whether there is profit or loss in the business? (1) Q2-*-K,L & M were partners sharing profits in the ratio of 3:2:1.