SOLUTIONS. 6. Capital reserve = `6,00,000 `5,93,500 = `6, Journal Date Particulars L.F. Dr. (`) Cr. (`) C s current A/c Dr.

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1 Part A (ACCOUNTING FOR PARTNERSHIP FIRMS AND COMPANIES) 1. Loss on realisation = `1,95, New Profit Sharing Ratio: 20:11:9 3. Interest on drawing = /100 3/12 = `2, i) For issuing fully paid bonus shares to equity shares holders. ii) For writing of expenses or discount allowed on issue of shares or debenture. iii) For providing for payment of premium on redemption of preference shares or debentures. 5. Super Profit = Average Profit Normal Profit = `54,000 `48,000 = `6,000 SOLUTIONS (PRACTICE Sample Paper-5) 6. Capital reserve = `6,00,000 `5,93,500 = `6, Journal Date Particulars L.F. (`) Cr. (`) C s current A/c 360 D s Current A/c To A s Current A/c To B s Current A/c (Adjustment entry for wrong charging of interest on capital and on drawings) 1,630 1, Balance Sheet of PQR Ltd. As at 31 st March, 2016 Particulars Note No. 31 st March, 2016 I. EQUITY AND LIABILITY 1. Shareholders Fund a) Share Capital 2. Current Liabilities a) Other Current Liabilities ,85,000 4,000 Total 17,89,000 II. Assets 1. Current Assets: a) Cash and Cash Equivalents 3 17,89,000 Total 17,89,000 CTF s Sample Papers: Accountancy 12 59

2 Notes to Accounts: 1. Share Capital: i) Authorised capital: 6,00,000 shares of `10 each ii) Issued Capital: 3,00,000 shares of `10 each iii) Subscribed Capital: 3,00,000 shares of `10 each 6 Called up 18,00,000 Less Call in Arrear (7,500 2) (15,000) 2. Other current Liabilities: Call in Advance 3. Cash and Cash Equivalents: Cash at Bank Particulars 31 st March ,00,000 30,00,000 17,85,000 4,000 17,89, Journal Entry Date Particulars L.F. (`) Cr. (`) % Debentures A/c 23,00,000 March 31 Premium on redemption of Debentures A/c 2,30,000 To Debenture holder A/c 25,30,000 (11,500 debentures of `200 each cancelled for conversion) Debenture holder A/c 13,20,000 To Equity share Capital A/c To Securities Premium Reserve A/c 11,00,000 2,20,000 (6,000 debentures converted into equity shares at 20% premium) Debenture holder A/c 12,10,000 To 9% Preference share Capital A/c To Securities Premium Reserve A/c 11,00,000 1,10,000 (5,500 debentures converted into preference shares at premium of 10%) 10. Vesting date: 31st March, 2018 Exercise period: 3 Months Exercise date: 30th June, 2018 Vesting period: 4 years No, Muskan is not eligible to subscribe for the option as she has not completed the terms of contract. 60 CTF s Sample Papers: Accountancy 12

3 11. Profit & Loss Appropriation A/c For the year ended 31 st March, 2016 Cr. To Interest on Capital Shashwat 3,375 Adamya 2,250 Shivam 1,125 To Shivam s Salary To Profit transfer to Partners Capital A/c: Shashwat ( ) 14,700 Adamya 9,675 Shivam ( ) 7,875 6,750 45,000 32,250 By Net Profit 84,000 84,000 84, Journal Date Particulars L.F. (`) Cr. (`) 2016 Reserve A/c 97,000 March 31 To Aastha Capital A/c To Nitya Capital A/c To Ananya Capital A/c (Reserves distributed to partners in their old ratio) 48,500 9,700 38,800 Aastha Capital A/c Nitya Capital A/c Ananya Capital A/c To Profit and Loss A/c (Loss distributed in old ratio) Nitya Capital A/c (5/10 30,000) To Aastha Capital A/c (3/10 30,000) To Ananya Capital A/c (2/10 30,000) (Adjustment entry for goodwill and revaluation of assets and liabilities) 17,500 3,500 14,000 15,000 35,000 9,000 6,000 Working Notes: Calculation of adjustment amount: Decrease in Stock (19,800) Increase in PBDD (1,500) Decrease in furniture (9,000) Decrease in machinery (10,000) Increase in Building 28,000 Goodwill 42,300 Net Adjustment amount 30,000 CTF s Sample Papers: Accountancy 12 61

4 Calculation of Gaining/Sacrificing Ratio: Astha Nitya Ananya Old Ratio 5/10 1/10 4/10 New Ratio 1/5 3/5 1/5 Sacrifice/(Gain) 5/10 1/5 1/10 3/5 4/10 1/5 5 2/10 1 6/10 4 2/10 3/10 (S) 5/10 (G) 2/10 (S) Values: Regional Development and Generation of Employment Opportunities. 13. Journal Date Particulars L.F. (`) Cr. (`) 2016 Amar s Capital A/c 9,000 March 31 Anthony s Capital A/c 18,000 To Akbar s Capital A/c 27,000 (Adjustment entry for goodwill on Akbar s retirement) Revaluation A/c 6,000 To Claim for workmen Compensation A/c To Provision for doubtful debts A/c 5, (Claim created and provision made) Stock A/c Furniture A/c To Revaluation A/c (Revaluation of assets) Revaluation A/c To Amar s Capital A/c To Akbar s Capital A/c To Anthony s Capital A/c (Profit on revaluation is distributed in old ratio) Outstanding Salary A/c To Cash A/c (Unpaid salary paid off) Investment Fluctuation Fund A/c To Amar s Capital A/c To Akbar s Capital A/c To Anthony s Capital A/c (Fund distributed among the partners) Akbar s Capital A/c To Akbar s Loan A/c (Amount due to Akbar transferred to loan account) 5,000 5,000 4,000 3,500 10,000 56,200 10,000 2,000 1, ,500 5,000 3,000 2,000 56, CTF s Sample Papers: Accountancy 12

5 Cash A/c To Amar s Capital A/c (Cash brought in by Amar) Anthony s Capital A/c To Cash A/c (Surplus capital paid back to Anthony) 13,680 13,680 13,680 13,680 Claim for workmen compensation Creditors Akbar s Loan A/c Capital Accounts: Amar 61,680 Anthony 41,120 Balance sheet As at 1 st April, 2016 Liabilities Amount (`) Assets Amount (`) 5,400 9,500 28,800 56,200 1,02,800 Cash Debtors 10,000 Less: Provisions for Doubtful debts (800) Stock Furniture Investment Machinery 9,200 47,000 25,000 95,000 7,500 1,93,200 1,93, Calculation of Gaining/Sacrificing Ratio: Amar Akbar Anthony Old Ratio 5/10 3/10 2/10 New Ratio 3/5 2/5 Sacrifice / (Gain) 5/10 6/10 2/10 4/10 5 6/10 2 4/10 1/10 (G) 3/10 (S) 2/10 (G) Journal Date Particulars L.F. (`) Cr. (`) 2014 Surplus in Statement of Profit & Loss A/c 2,25, th March To Debenture Redemption Reserve A/c (Reserve created for redemption of debentures) 2,25, th April st March Debenture Redemption Investment A/c To (Investment made in for redemption purpose) TDS A/c To Debenture Redemption Investment A/c To Interest Earned (Investment realised and interest earned) 75,000 79, ,000 75,000 5,500 CTF s Sample Papers: Accountancy 12 63

6 31 st March 13% Debentures A/c Premium on Redemption A/c To Debenture holder A/c (Debentures due for redemption) 31 st March Debenture holder A/c To (Debentureholders paid off) 31 st March Interest Earned A/c To Statement of Profit and Loss A/c (Interest on investments transferred) 30 th April Debenture Redemption Investment A/c To (Investment made for redemption purpose) st March TDS A/c To Debenture Redemption Investment A/c To Interest Earned (Investment sold and interest received) 31 st March 13% Debentures A/c Premium on Redemption A/c To Debenture holder A/c (Debentures cancelled at premium for redemption) 31 st March Debenture holder A/c To (Debentureholders paid off) 31 st March Interest Earned A/c To Statement of Profit and Loss A/c (Interest earned on DRI transferred) 31 st March Debenture Redemption Reserve A/c To General Reserve A/c (Balance in DRR transferred) 5,00,000 25,000 5,25,000 5,500 60,000 63, ,00,000 20,000 4,20,000 4,400 2,25,000 5,25,000 5,25,000 5,500 60,000 60,000 4,400 4,20,000 4,20, ,25, Realisation A/c Cr. Liabilities Amount (`) Assets Amount (`) To Sundry Assets: Debtors 20,000 Stock 15,000 Furniture 8,000 Plant 12,200 Investment 20,000 To Kartik s Capital A/c 75,200 15,000 By Sundry Liabilities: Bills Payable 2,000 Creditors 16,000 Bank Loan 20,000 Mrs. Kartik s Loan 15,000 By Ayush s Capital A/c (Investment taken over) 53,000 18, CTF s Sample Papers: Accountancy 12

7 (Mrs. Kartik loan Taken over) To Cash A/c To CashA/c To Partners Capital Account: (profit on realisation) Ayush 2/5 2,600 Kartik 3/5 3,900 35,000 1,800 By Bank: Debtors 19,500 Stock 26,000 Furniture 9,000 Plant 8,000 62,500 6,500 1,33,500 1,33,500 Partners Capital Accounts Cr. Particulars Ayush Kartik Particulars Ayush Kartik 2,000 3,000 50,000 18,000 4,000 36,600 56,900 To Advertisement suspense A/c To Realisation A/c To Cash A/c By Bal B/d By Reserve By Realisation A/c By Realisation A/c (Profit on realisation) 2,600 35,000 6,000 15,000 3,900 56,600 59,900 56,600 59,900 Cr. To Balance B/d To Realisation A/c 67,800 62,500 35,000 By Realisation A/c (Creditors, Bills payable and Bank loan) By Realisation A/c (Expenses on realisation) By Ayush s Capital A/c By Kartik s Capital A/c 1,800 36, ,30,300 1,30,300 Value: Social value as dumping of hazardous material into river pollutes environment and affects society as a whole. 16. Revaluation A/c Cr. To Provision for tax 9,000 By Investment By Loss transferred to partners capital A/c: 3,000 Pankaj 2,400 Rahul 2,400 Manish 1,200 6,000 9,000 9,000 CTF s Sample Papers: Accountancy 12 65

8 Partners Capital Accounts Cr. Particulars Pankaj Rahul Manish Particulars Pankaj Rahul Manish 13,500 40,000 60,000 50,000 2,400 2,400 1,200 7,200 7,200 3,600 _ 15,000 To Drawing To Revaluation A/c To Goodwill To Profit & Loss Suspense A/c To Rahul s Capital A/c To Rahul s Loan A/c To Rahul s Executor s To Cash A/c To Balance c/d 12,000 60,000 5,000 40,100 6,000 11,800 30,000 By Balance b/d By Investment Fluctuation Fund By Contingency Reserve By Pankaj s Capital A/c By Manish s Capital A/c By cash A/c 2,000 3,200 36,400 2,000 3,200 12,000 6,000 1,000 1,600 81,600 83,200 52,600 81,600 83,200 52,600 Rahul s Executor A/c Cr. To Cash A/c 8,020 By Rahul s Capital A/c 40,100 To Rahul s Executor s Loan A/c 32,080 40,100 40,100 Balance Sheet As at 1 st July, 2016 Liabilities Amount (`) Particulars Amount (`) Creditors Bills Payable Profit and Loss Suspense A/c Rahul s Executor Loan A/c Provision for tax Capital A/c s: Pankaj 60,000 Manish 30,000 24,000 10,000 15,000 32,080 9,000 Land and Building Furniture Stock Debtors Cash 61,000 30,000 21,000 22,000 46,080 (25, , ) 90,000 1,80,080 1,80,080 or Revaluation Account Cr. Depreciation on Plants & Machinery Stock Revaluation Profit Raghu 4,720 Munna 7,080 2,500 3,200 Patents Creditor Investment 5,000 3,500 9,000 11,800 17,500 17, CTF s Sample Papers: Accountancy 12

9 Partners Capital Accounts Cr. Particulars Raghu Munna Akram Particulars Raghu Munna Akram To Investment To Raghu s Current A/c To Bal c/d 35, ,40,000 9,000 3,60,000 1,50,000 By Bal b/d By General Reserve By Bank Loan BY Profit and Loss A/c By Bank By Premium for G/w By Revaluation A/c By Munna s Current A/c 2,50,000 3,200 7,000 10,000 4,000 4,720 1,50,000 4,800 15,000 6,000 7,080 1,86,120 1,50,000 2,78,920 3,69,000 1,50,000 2,78,920 3,69,000 1,50,000 Creditors Employees Provident Fund Raghu s Current A/c Capital Accounts: Raghu 2,40,000 Munna 3,60,000 Akram 1,50,000 Balance Sheet As at 1 st April, ,500 1,69,000 10,000 3,920 7,50,000 Bank ( ,50, ,000) Debtors Building Plant and Machinery Stock Patents Investment By Munna s Current A/c 47,000 1,48,000 37,500 1,56,800 50,000 15,000 1,86,120 8,09,420 8,09, Journal Date Particulars L.F. (`) Cr. (`) 1,10,00,000 To Share Application A/c 1,10,00,000 (Application money received on 2,20,000 `50 each) Share Application A/c 1,10,00,000 To Security Premium Reserve A/c To 38,00,000 57,00,000 15,00,000 (Application money transferred) Share Allotment A/c To Security Premium Reserve A/c (Allotment money due on 2,20,000 `70 per share) 1,33,00,000 38,00,000 95,00,000 CTF s Sample Papers: Accountancy 12 67

10 To Share Allotment A/c (Allotment money received, except on 1,000 shares) Share Capital A/c Security Premium Reserve A/c To Share Forfeiture A/c To Share Allotment A/c (1,000 shares forfeited due to non-payment of allotment money) Share First and Final Call A/c (First call due on 1,89,000 per share) To Share First and Final Call A/c (First call money received on 1,87,000 shares) Share Capital A/c To Share Forfeiture A/c To Share First and Final Call (2,000 shares on which first call was not received were forfeited) Share Forfeiture A/c (1,400 shares re-issued at `90, fully paid up) Share forfeiture A/c To Capital Reserve A/c (Balance in share forfeited account transferred) or 1,32,30,000 40,000 50,000 1,13,40,000 1,12,20,000 2,00,000 1,26,000 14,000 30,000 1,32,30,000 20,000 70,000 1,13,40,000 1,12,20,000 80,000 1,20,000 1,40,000 30,000 Journal Date Particulars L.F. (`) Cr. (`) 30,60,000 To Share Application A/c 30,60,000 (Application money received on 1,02,000 shares) Share Application A/c 30,60,000 To Share Allotment A/c To 18,00,000 9,00,000 3,60,000 (Application money transferred and surplus refunded) 68 CTF s Sample Papers: Accountancy 12

11 Share Allotment A/c To Security Premium Reserve A/c (Allotment due) To Share Allotment A/c (Allotment Received) Share Capital A/c Security Premium Reserve A/c To Share Forfeiture A/c To Share Allotment A/c (Shares of Aarav forfeited) Share First Call A/c (First call Due) To Share First Call A/c (First call Received) Share Final Call A/c (Final call Due) To Share Final Call A/c (First call Received) Share Capital A/c To Share Forfeiture A/c To Share First Call To Share Final Call (Abhinav Shares forfeited) Share Forfeiture A/c (Shares reissued) Share Forfeiture A/c To Capital Reserve A/c (Share forfeited Profit transferred to Capital Reserve) 18. Operating Activity. PART B (ANALYSIS OF FINANCIAL STATEMENTS) 19. Investing activities nil and financing activities: 47,00,000 (inflow) 30,00,000 16,75,000 6,00,000 2,00,000 10,00,000 9,20,000 10,00,000 9,20,000 4,00,000 6,40,000 1,60,000 2,30,000 18,00,000 12,00,000 16,75,000 3,75,000 4,25,000 10,00,000 9,20,000 10,00,000 9,20,000 2,40,000 80,000 80,000 8,00,000 2,30,000 CTF s Sample Papers: Accountancy 12 69

12 20. Comparative Statement of Profit and Loss For the year ended 31 st March, 2015 and 2016 Particulars 1. Revenue from Operation 2. Other income 31 st March ,00,000 4,00, st March ,00,000 4,50,000 Absolute Change 10,00,000 50,000 Percentage Change % Total Revenue 24,00,000 34,50,000 10,50, Expense 10,00,000 18,00,000 8,00, Profit before Tax 14,00,000 16,50,000 2,50, Tax paid 7,00,000 8,25,000 1,25, Profit After Tax 7,00,000 8,25,000 1,25, a) Capital commitments are the financial commitments or future liabilities for capital expenditure in respect of which contacts have been made. Examples: i) Arrear of dividend on cumulative preference shares and ii) Estimated amounts of contracts remaining to be executed on capital accounts and not provided for. b) Items Main Heads Sub-Head i. Loan given to employee. Current Assets Short term loan and Advance ii. Capital Advances Non- Current Assets Long term loan and Advance iii. Interest accrued but not due on Loans. Current Liabilities Other Current Liabilities iv. Guarantees given by Company It is a contingent liability and is disclosed in the notes to accounts Cost of Revenue from operations + Operating Expense 22. Operating Ratio = Revenue from operation Cost of Revenue from operation = Revenue from operation gross profit = 22,00,000 8,80,000 = 13,20,000 Operating Ratio = 13,20, ,40, ,00,000 = 80% Debt Equity Ratio = Debt/Equity = 6,00,000/30,00,000 = 0.2:1 70 CTF s Sample Papers: Accountancy 12

13 23. Cash flow statement For the year ended 31 st March, 2016 as per AS-3 Particulars Amount (`) Amount (`) (A) Cash flow from operating Activities Net profit before tax and Extraordinary items Add: Depreciation on Machinery Add: Patents written off Add: Interest on Debentures Less: Profit on sale of Machinery Operating profit before working capital changes Add: Decrease in Current Assets and increase in current Liabilities Decrease in inventories Decrease in Trade Receivable Increase in Trade payables Less: Increase in Current Assets and Decrease in current Liabilities Decrease in outstanding Expenses Cash flow from operating Activities (B) Cash flow from Investing Activities Purchase of Machinery Purchase of Non-current Investment Sale of Machinery Cash used in Investing Activities (C) Cash flow from Financing Activities Equity Dividend paid (20,000 6,000) Interest on Debentures Cash used in Financing Activities Net increase in Cash and Cash Equivalents Add: Opening Cash and Cash Equivalents Closing Cash and Cash Equivalents 60,000 80,000 4,000 10,000 (5,000) 1,49,000 20,000 20,000 95,000 (3,000) (2,28,000) (5,000) 53,000 (14,000) (10,000) 2,81,000 (1,80,000) (24,000) 77,000 18,000 95, Calculation of net profit before Tax and Extraordinary items: Surplus i.e. Balance in the Statement of Profit and Loss (closing) 1,00,000 Less: Surplus i.e. Balance in the Statement of Profit and Loss (Opening) (60,000) Profit for the year 40,000 Add: Dividend on Equity shares 20,000 Net profit before Tax and Extraordinary items. 60,000 Machinery A/c To Balance B/d To Statement of P&L To 3,00,000 5,000 2,28,000 By By Depreciation By Balance c/d 53,000 80,000 4,00,000 5,33,000 5,33,000 CTF s Sample Papers: Accountancy 12 71

MODEL TEST PAPER 12 (Solution)

MODEL TEST PAPER 12 (Solution) SECTION A PART I 1. (i) (a) Share of Existing Goodwill written off. (b) Share of Loss up to the date of retirement. (c) Share of Accumulated Losses up to the date of retirement.