Question Paper Design Accountancy (Code No. 055) Class XII ( )

One Paper Theory: 80 Marks Question Paper Design Accountancy (Code No. 055) Class XII (2015-16) Duration: 3 hrs. SP- 1

SAMPLE PAPER 1 ACCOUNTANCY (055) CLASS-XII Time allowed Three hours Max Marks 80 General Instructions: 1) This question paper contains two parts A and B. 2) Part A is compulsory for all. 3) Part B has two options-financial statement Analysis and Computerised Accounting. 4) Attempt only one option of Part B. 5) All parts of a question should be attempted at one place. PART A: ACCOUNTING FOR PARTNERSHIP FIRMS AND COMPANIES Q1. Any change in the relationship of existing partners which results in an end of the existing agreement and enforces making of a new agreement is called (a) Revaluation of partnership. (b) Reconstitution of partnership. (c) Realization of partnership. (d) None of the above. (1) Q2. Karan, Nakul and Asha were partners in a firm sharing profits and losses in the ratio 3:2:1. At the time of admission of a partner, the goodwill of the firm was valued at `2,00,000. The accountant of the firm passed the entry in the books of accounts and thereafter showed goodwill at `2,00,000 as an asset in the Balance Sheet. Was he correct in doing so? Why? (1) Q3. Anu, Bina and Charan are partners. The firm had given a loan of `20,000 to Bina. They decided to dissolve the firm. In the event of dissolution, the loan will be settled by: (a) Transferring it to debit side of Realization account. (b) Transferring it to credit side of Realization account. (c) Transferring it to debit side of Bina s capital account. (d) Bina paying Anu and Charan privately. (1) Q4. Differentiate between Capital Reserve and Reserve Capital. (1) Q5. Metacaf Ltd. issued 50,000 shares of ` 100 each payable `20 on application (on 1st May 2012); `30 on allotment (on 1st January 2013); `20 on first call (on 1st July 2013) and the balance on final call (on 1st February 2014). Shankar, a shareholder holding 5,000 shares did not pay the first call on the due date. The second call was made and Shankar paid the first call amount along with the second call. All sums due were received. Total amount received on 1st February was: (a) `15,00,000 (b) `16,00,000 (c) `10,00,000 (d) `11,00,000 (1) Q6. Abha and Beena were partners sharing profits and losses in the ratio of 3:2. On April 1st 2013, they decided to admit Chanda for 1/5th share in the profits. They had a reserve of `25,000 which they wantedto show in their new balance sheet. Chanda agreed and the necessary adjustments were made in the books. On October 1st 2013, Abha met with an accident and died. Beena and Chanda decided to admit Abha s daughter Fiza in their partnership, who agreed to bring `2,00,000 as capital. Calculate Abha s share in the reserve on the date of her death. (1) Q7. State any three purposes for which securities premium can be utilized. (3) Q8. Ankur and Bobby were into the business of providing software solutions in India. They were sharing profits and losses in the ratio 3:2. They admitted Rohit for a 1/5 share in the firm. Rohit, an alumni of IIT, Chennai would help them to expand their business to various South African countries where he had been working earlier. Rohit is guaranteed a minimum profit of `2,00,000 for the year. Any deficiency in Rohit s SP- 2

share is to be borne by Ankur and Bobby in the ratio 4:1. Losses for the year were `10,00,000. Pass the necessary journal entries (3) Q9. Newbie Ltd. was registered with an authorized capital of `5,00,000 divided into 50,000 equity shares of Rs10 each. Since the economy was in robust shape, the company decided to offer to the public for subscription 30,000 equity shares of `10 each at a premium of `20 per share. Applications for 28,000 shares were received and allotment was made to all the applicants. All calls were made and duly received except the final call of ` 2 per share on 200 shares. Show the Share Capital in the Balance Sheet of Newbie Ltd.as per Schedule VI of the Companies Act 1956. Also prepare Notes to Accounts for the same. (3) Q10. Drumbeats Ltd. had a prosperous shoe business. They were manufacturing shoes in India and exporting to Italy. Being a socially aware organization, they wanted to pay back to the society. They decided to not only supply free shoes to 50 orphanages in various parts of the country but also give employment to children from those orphanages who were above 18 years of age. In order to meet the fund requirements, they decided to raise 50,000 equity shares of Rs 50 each and 40,000 9% debentures of Rs40 each. Pass the necessary journal entries for issue of shares and debentures. Also identify one value which the company wants to communicate to the society. (3) Q11. Following is the Balance Sheet of Punita, Rashi and Seema who are sharing profits in the ratio 2:1:2 as on 31st March 2013. (4) Punita died on 30th September 2013. She had withdrawn 44,000 from her capital on July 1, 2013. According to the partnership agreement, she was entitled to interest on capital @8% p.a. Her share of profit till the date of death was to be calculated on the basis of the average profits of the last three years. Goodwill was to be calculated on the basis of three times the average profits of the last four years. The profits for the years ended 2009-10, 2010-11 and 2011-12 were `30,000, `70,000 and `80,000 respectively. Prepare Punita s account to be rendered to her executors. (4) Q12: Kanika and Gautam are partners doing a dry cleaning business in Lucknow, sharing profits in the ratio 2:1 with capitals `5,00,000 and `4,00,000 respectively. Kanika withdrew the following amounts during the year to pay the hostel expenses of her son. 1st April 10,000 1st June 9,000 1st Nov. 14,000 1st Dec. 5,000 Gautam withdrew `15,000 on the first day of April, July, October and January to pay rent for the accommodation of his family. He also paid `20,000 per month as rent for the office of partnership which was in a nearby shopping complex. Calculate interest on Drawings @6% p.a. (4) Q13. (a) A firm earned profits of `80,000, `1,00,000, `1,20,000 and `1,80,000 during 2010-11, 2011-12, 2012-13 and 2013-14 respectively. The firm has capital investment of `5,00,000. A fair rate of return on investment is 15% p.a. Calculate goodwill of the firm based on three years purchase of average super profits of last four years. (b) Kabir and Farid are partners sharing profits and losses in the ratio of 7:3. Kabir surrenders 2/10th from SP- 3

his share and Farid surrenders 1/10th from his share in favor of Jyoti, a new partner. Calculate new profit sharing ratio and sacrificing ratio. (6) Q14. (a) Sunrise Company Ltd. has an equity share capital of `10,00,000. The company earns a return on investment of 15% on its capital. The company needed funds for diversification. The finance manager had the following options: (i) Borrow `5,00,000 @15% p.a. from a bank payable in four equal quarterly installments starting from the end of the fifth year (ii) Issue `5,00,000, 9% Debentures of Rs. 100 each redeemable at a premium of 10% after five years. To increase the return to the shareholders, the company opted for option (ii). Pass the necessary journal entries for issue of debentures. (b) Walter Ltd. issued ` 6,00,000 8% Debentures of ` 100 each redeemable after 3 years either by draw of lots or by purchase in the open market. At the end of three years, finding the market price of debentures at `95 per debenture, it purchased all its debentures for immediate cancellation. Pass necessary journal entries for cancellation of debentures assuming the company has sufficient balance in Debenture Redemption Reserve. (6) Q15. Following is the Balance sheet of Karan and Sandeep who share profits and losses equally as on 31st march The firm was dissolved on the above date. 1. Karan agreed to take over 50% of the stock at 10% less on its book value, the remaining stock was sold at a gain of 15%. Furniture and machinery realized for Rs 30,000 and50,000 respectively. 2. There was unrecorded Investments which was sold for Rs 25,000. 3. Debtors realized Rs 31,500 (with interest) and Rs 1200 was recovered for bad debts written off last year. 4. There was an outstanding bill for repairs which had to be paid Rs 2000. Prepare necessary Ledger accounts to close the books of the firm. Q16. A and B are partners in a firm sharing profits and losses in the ratio 3:1. They admit C for a ¼ share on 31st March 2014 when their Balance Sheet was as follows: The following adjustments were agreed upon: (a) C brings in `16,000 as goodwill and proportionate capital. SP- 4

(b) Bad debts amounted to `3,000. (c) Market value of investment is `4,500. (d) Liability on account of workmen s compensation reserve amounted to `2,000. Prepare Revaluation A/c and Partner s Capital A/cs. OR X, Y and Z are partners in a firm sharing profits in proportion of 1/2, 1/6 and 1/3 respectively. The Balance Sheet as on April 1, 2014 was as follows: Z retires from the business and the partners agree that: (a) Machinery is to be depreciated by 10%. (b) Provision for bad debts is to be increased to ` 1,500. (c) Furniture was taken over by Z for ` 14,000. (d) Goodwill is valued at ` 21,000 on Z s retirement. (e) The continuing partners have decided to adjust their capitals in their new profit sharing ratioafter retirement of Z. Surplus or deficit if any, in their capital accounts will be adjusted through their current accounts. Prepare Revaluation A/c and Partners Capital A/c s. (8) Q17. Amrit Ltd. issued 50,000 shares of `10 each at a premium of `2 per share payable as `3 on application, `4 on allotment (including premium), `2 on first call and the remaining on second call. Applications were received for 75,000 shares and a pro-rata allotment was made to all the applicants. All moneys due were received except allotment and first call from Sonu who applied for 1,200 shares. All his shares were forfeited. The forfeited shares were reissued for `9,600. Final call was not made. Pass necessary journal entries. OR Velco Ltd. issued 30,000 shares of ` 10 each at a discount of `1 per share payable as `3 on application, `2 on allotment, `2 on first Call and `2 on second call. Applications were received for 40,000 shares and a pro-rata allotment was made to all the applicants. All money due were received except allotment and first call from Mohit who had applied for 2,000 shares. His shares were forfeited after first call. Subsequently, the second call was duly made and duly received. Thereafter, the forfeited shares were reissued for `9 fully paid. Pass the necessary journal entries (8) PART B: ANALYSIS OF FINANCIAL STATEMENTS Q18. Cash deposit with the bank with a maturity date after two months belongs to which of the following while preparing cash flow statement: (a) Investing activities (b) Financing activities (c) Cash and Cash equivalents (d) Operating activities. (1) Q19. Finserve Ltd is carrying on a Mutual Fund business. It invested ` 30,00,000 in shares and `15,00,000 in debentures of various companies during the year. It received ` 3,00,000 as dividend and interest. Find out cash flows from investing activities. (1) Q20. (a) Name the sub heads under the head Current Liabilities in the Equity and Liabilities part of the SP- 5

Balance Sheet as per Schedule VI of the Companies Act 1956. (b) State any two objectives of Financial Statements Analysis. (4) Q21. (a) From the following details, calculate Opening inventory: Closing inventory `60,000; Total Revenue from operations `5,00,000 (including cash revenue from operations `1,00,000); Total purchases `3,00,000 (including credit purchases `60,000). Goods are sold at a profit of 25% on cost. (b) Current Assets of a company are `17,00,000. Its current ratio is 2.5 and liquid ratio is 0.95. Calculate Current Liabilities and Inventory. (4) Q22. Nimani Ltd. is into the business of back office operations. Honesty and hard work are the two pillars on which the business has been built. It has a good turnover and profits. Encouraged by huge profits, it decided to give the workers bonus equal to two months salary. Following is the Comparative Statement of Profit and Loss of Nimani Ltd. for the years ended 31st March 2013 and 2014. (a) Calculate Net Profit ratio for the years ending 31st March 2013 and 2014. (b) Identify any two values which Nimani Ltd. wants to communicate to the society. (4) 23. Following are the Balance Sheets of Krishna Ltd. as on 31st March 2013 and 2014: Particulars Note No. 2013-14 (Rs) 2012-13(Rs) EQUITY AND LIABILITIES (1) Shareholders Funds (a) Share capital (b) Reserves and Surplus (2) Non Current Liabilities Long term borrowings (3) Current Liabilities Trade Payables Short term Provisions 1 14,00,000 5,00,000 5,00,000 10,00,000 4,00,000 1,40,000 1,00,000 60,000 2 80,000 60,000 Total 25,80,000 16,60,000 ASSETS (1) Non Current Assets (a) Fixed assets (i) Tangible assets (ii) Intangible Assets (2) Current Assets (a) Inventories (b) Trade Receivables (b) Cash and Cash Equivalents 3 4 16,00,000 1,40,000 9,00,000 2,00,000 2,50,000 5,00,000 90,000 2,00,000 3,00,000 60,000 Total 25,80,000 16,60,000 Notes to Accounts: S.No Particulars As on 31.3.2014 (Rs) 1. Reserves and Surplus Surplus (i.e. balance in As on 31.3.2013 (Rs) SP- 6

Statement of Profit and Loss) 5,00,000 4,00,000 2. 3. Short Term provisions Provision for tax Tangible assets Machinery Less Accumulated depreciation 80,000 17,60,000 (1,60,000) 60,000 10,00,000 (1,00,000) 4. Intangible Assets Goodwill 1,40,000 2,00,000 Prepare a Cash Flow Statement after taking into account the following adjustment: (i) Tax paid during the year amounted to ` 70,000. (6) OR Part B: Computerized Accounting Q18: While navigating in the workbook, which of the following commands is used to move to the beginning of the Current row: a. [ ctrl] + [home] b. [page Up] c. [Home] d. [ctrl] + [Back space] (1) Q19: Join line in the context of Access table means: a. Graphical representation of tables between tables b. Lines bonding the data within table c. Line connecting two fields of a table d. Line connecting two records of a table (1) Q20. Enumerate the basic requirements of computerised accounting system for a business organization. (4) Q21. The generation of ledger accounts is not a necessary condition for making trial balance in a computerised accounting system. Explain. (4) Q22. Intentional manipulation of accounting records is much easier in computerised accounting than in manual accounting. How? (4) Q23. Computerisation of accounting data on one hand stores voluminous data in a systematic and organised manner where as on the other hand suffers from threats of vulnerability and manipulations. Discuss the security measures you would like to employ for securing the data from such threats. (6) SP- 7

SAMPLE PAPER 2 Class - XII ACCOUNTANCY Time allowed: 3 hours Maximum Marks: 80 General Instructions: (i) This question paper contains Two parts A& B. (ii) Both the parts are compulsory for all. (iii) (iv) All parts of questions should be attempted at one place. Marks are given at the end of each question. Part - A Partnership, Share Capital and Debentures Q1 Can a partner be exempted from sharing the losses in a firm? If yes, under what circumstances? (i) If all partners agree (ii) If there is no partnership deed (iii) If one partner is new (iv) If one partner is active partner (1) Q2 When an asset is taken over by a partner, why is his capital account debited? (i) To increase his capital account (ii) To reduce his capital balance (iii) To open his current account (iv) To close his current account (1) Q3 Apart from location and profitability, list any two other factors affecting Goodwill of a firm. (1) Q4 Can Securities premium be used as working capital? Give reason in support of your answer. (1) Q5 What is the nature of interest on Debentures? (1) Q7 Q8 Q9 Q10 Q11 Sony Limited purchased assets of Vinod Limited for Rs.8,40,000 and took over the liabilities (creditors) of Rs.80,000 for an agreed purchase consideration of Rs.8,00,000. Sony Limited issued 12% debentures of Rs.100 each at 25% premium for purchase consideration. Pass necessary Journal entries in the books of Sony Limited. (3) A and B were partners in a firm sharing profits in 3:2 ratio. They admitted C and D as new partners. The new profit sharing ratio will be 2:2:1:1. C and D brought Rs.2, 75,000 each for their respective capitals and also necessary amount of premium for goodwill in cash. Goodwill was valued at Rs.2,40,000 for the firm. Calculate sacrificing ratio of A and b and pass necessary Journal entries for the above transactions in the books of the firm. (3) Shubham Limited has 80,000; 8% Debentures of Rs.100 each due for redemption on 31 st March, 2014. Assume that Debenture Redemption Reserve has a balance of Rs.38,00,000 on that date. Record necessary journal entries at the time of Redemption of Debentures. (3) Deepika Limited forfeited 1,000 shares of Rs.10 each, issued at a discount of Rs.1 per share, for the non-payment of the first call of Rs.2 per share. The final call of Rs.3 per share has not yet been made. Subsequently, 400 of these shares were reissued at Rs.5 per share, Rs.7 paid-up, and 600 reissued at Rs.7 per share fully paid. Journalise the transactions to record the forfeiture and reissue of shares. (4) DK, EK and FK were partners in a firm sharing profits in the ratio of 5:7:8. Their fixed capitals were ; DK Rs.10,00,000; EK Rs.14,00,000 and FK Rs.16,00,000. Their Partnership deed provided for the following: (i) Interest on capital @ 10% per annum and Interest on drawings @12% per annum. (ii) Salary of Rs.20,000 per month to FK. (iii) DK Withdrew Rs.80,000 on 31 st January, 2013; EK withdrew Rs.1,00,000 on 31 st March, 2013 and FK withdrew Rs.60,000 on 31 st December, 2013. During the year ended 31 st December, 2013, the firm earned a profit of Rs.7,00,000. Prepare P/L Appropriation Account. Partners have also decided to give more jobs in their business to the economically backward women. Identify the values disclosed by the partners. (4) SP- 8

Q12 A, B and C are partners in a firm sharing profits in the ratio of 3 : 2: 1. Their balance sheet as at 31.12.2004 was as under: Liabilities Amount Assets Amount Creditors 46,000 Cash in hand 18,000 General Reserve 12,000 Debtors 25,000 Capitals : A 40,000 Less: Provision 3,000 22,000 B 40,000 Stock 18,000 C 30,000 1,10,000 Furniture 30,000 Machinery 68,000 Goodwill 12,000 1,68,000 1,68,000 Q13 Q14 Q15 B retires on 1.1.2005 on the following terms: (i) Provision for doubtful debts will be raised by Rs.1,000. (ii) Stock will be depreciated by 10% and Furniture by 5%. (iii) There is an outstanding claim for damages of Rs.1,100 and it is to be provided for in the books. (iv) Creditors will be written back by Rs.6,000. Goodwill of the firm is valued at Rs.24,000, which is not to be shown in the books of the new firm.b is paid in full with the cash brought in by A and C in such a manner that their capitals are in proportion to their profit sharing ratio 3:2. Prepare Revaluation A/c, Partners Capital A/cs and Balance Sheet. (6) X Ltd. has an Authorized capital of Rs.15,00,000 divided into 1,00,000 Equity shares of Rs.10 each and 50,000 9% preference share of Rs.10 each. The company invited applications for all the preference shares but only 90,000 equity shares. All the preference shares were subscribed, called and paid while subscriptions were received for only 85,000 equity shares. During the first year Rs.8 per share were called. Ram holding 1,000 shares and Shyam holding 2,000 shares did not pay first call of Rs.2.Shyam s shares were forfeited after the first call and later on 1,500 of the forfeited shares were reissued at Rs.6 per share Rs.8 called up. Show share capital in the Balance Sheet as per revised Schedule VI as at 31st March 2013. Prepare relevant Notes to Accounts (4) A, B and C are partners in a trading firm. The firm has a fixed total capital of Rs.60,000 held equally by all the partners. Under the partnership deed the partners were entitled to: (i) A and B to a salary of Rs.1,800 and Rs.1,600 per month respectively. (ii) In the event of the death of a partner, Goodwill was to be valued at 2 years purchase of the Average profits of the last 3 years. (iii) Profit upto the date of the death based on the profit of the previous year. (iv) Partners were to be charged interest on drawings at 5% p.a. and allowed interest on capitals at 6% p.a. B died on 1.1.2011. His drawings to the date of death were Rs.2,000 and the interest thereon was Rs.60. The profits for the three years ending 31.3.2008, 2009 and 2010 were Rs.21,200; Rs.3,200 (Dr.) and Rs.9,000 respectively. Prepare A s Capital Account to calculate the amount to be paid to his executors. (6) Following is the Balance Sheet of X and Y, who share profits and losses in the ratio of 4 : 1, as at 31 st March 2012 : Liabilities Amount Assets Amount Sundry Creditors 8,000 Bank 20,000 Bank Overdraft 6,000 Debtors 17,000 X s Brother s Loan 8,000 Less : Provision 2,000 15,000 Y s Loan 3,000 Stock 15,000 Investment Fluctuation fund 5,000 Investments 25,000 Capitals : Buildings 25,000 X 50,000 Goodwill 10,000 Y 40,000 90,000 Profit and Loss A/c 10,000 1,20,000 1,20,000 SP- 9

Q16 Q17 The firm was dissolved on the above date and the following arrangements were decided upon : (i) X agreed to pay off his brother s loan. (ii) Debtors of Rs.5,000 proved bad. (iii) Other assets realized :- Investments 20% less ; and goodwill at 60%. (iv) One of the creditors for Rs.5,000 was paid only Rs.3,000. (v) Buildings were auctioned for Rs.30,000 and the auctioneer s commission amounted to Rs.1,000. Y took a part of stock at Rs.4,000 (being 20% less than the book value) and balance stock was realized 50%.Realisation expenses amounted to Rs.2,000.Prepare Realisatiion Account, Partners Capital Account and Cash Account. (6) X and Y were partners in a firm sharing profits in 3 : 1 ratio. They admitted Z as a new partner for 1/4 th share in the profits. Z was to bring Rs.20,000 as his capital and the capitals of X and y were to be adjusted on the basis of Z s capital in the profit sharing ratio. The balance sheet of X and Y on 31.3.2006 was as follows: Liabilities Amount Assets Amount Sundry Creditors 18,000 Cash 5,000 Bills Payable 10,000 Debtors 17,000 General Reserve 12,000 Stock 12,000 Capitals : X 25,000 Machinery 21,000 Y 10,000 35,000 Building 20,000 75,000 75,000 Other terms of agreement on Z s admission were as follows: (i) Z will bring Rs.6,000 for his share of goodwill. (ii) Building will be valued at Rs.25,000 and Machinery at Rs.19,000. (iii) A Provision at 5% on debtors will be created for bad debts. (iv) Capital accounts of X and y were adjusted by opening current accounts. Prepare Revaluation A/c, Partners Capital A/cs and Balance Sheet of new firm. (8) Shivani Limited issued 30,000 shares of Rs.10 each at maximum discount, payable as follows: Rs.3 per share on Application Rs.2 per share on Allotment Balance on first and final call Applications were received for 50,000 shares. Applications for 10,000 shares were rejected and allotment was made on pro-rata basis to the remaining applicants. Harish who applied for 1,600 shares failed to pay the amount due on allotment and call. Company forfeited his shares. Later on out of the forfeited shares company reissued 800 shares at Rs.10 per share fully paid up. Pass necessary journal entries in the books of Shivani Limited. (8) Part - B Financial Statement Analysis Q18. State with reason whether charging of depreciation on furniture will result into inflow, outflow or no flow of cash. (1) Q19 Interest received by a finance company is classified under which king of activity while preparing Cash Flow Statement. (1) Q20 State how qualitative aspects are ignored in Financial Statement Analysis. (1) Q21 Give major heads and sub heads under which following items will be disclosed in the Balance Sheet as per Revised Schedule VI of the Companies Act, 1956: (3) (i) Tax Reserve (iv) Premium on Redemption of debentures (ii) Interest on calls in advance (v) Loose Tools (iii) Stores and spares (vi) Bank Balance SP- 10

Q21. From the following statement of profit and loss of VK Limited for the years ended 31 s 2010 March and 2009. Particulars 31 March 2010 31 March 2009 Revenue from operations 300% of cost of material 200% of cost of material consumed consumed Cost of material consumed 12,00,000 10,00,000 Other Expenses 20% of cost of material 10% of cost of material consumed Tax 50% 50% Prepare a comparative statement of profit and loss. (4) Q22. Calculate Return on Investment and Debt Equity Ratio from the following information: Net Profit after interest and tax 3, 00,000 10% Debentures 5, 00,000 Tax Rate 40% Capital Employed 40, 00,000 (4) Q23. Following is the Balance Sheets of Greenland Limited as on 31 st March 2012: Particulars Note No. 31 st March 2011-12 (Rs.) 31 st March 2010-11 (Rs.) I. Equity and Liabilities 1. Shareholders Funds (a) Share Capital 12,00,000 8,00,000 (b) Reserves and Surplus (Profit Balance) 3,50,000 4,00,000 2. Non-current Liabilities Long-term Borrowings : Bank Loan 4,40,000 3,50,000 3. Current Liabilities (a) Trade Payables (Creditors) 60,000 50,000 Total 20,50,000 16,00,000 II Assets 1. Non-current Assets (a) Fixed Assets: (i) Tangible Assets : Machinery 12,00,000 9,00,000 2. Current Assets (a) Inventories (Stock) 2,00,000 1,00,000 (b) Trade Receivables (Debtors) 3,10,000 2,30,000 (c) Cash and Cash Equivalents 3,40,000 3,70,000 Total 20,50,000 16,00,000 Adjustments: (i) The Company paid interest Rs.36,000 on its long term borrowings. (ii) Depreciation provided on fixed assets during the year amounted to Rs.1,20,000. (6) SP- 11

SAMPLE PAPER 3 Class - XII ACCOUNTANCY Time allowed: 3 hours Maximum Marks: 80 General Instructions: (i) This question paper contains Two parts A& B. (ii) Both the parts are compulsory for all. Q1 (iii) (iv) All parts of questions should be attempted at one place. Marks are given at the end of each question. Part - A Partnership, Share Capital and Debentures Do all firms of business organisations prepare the P/L Appropriation A/c? (a) Yes all firms prepare P/L App. A/c (b) Only registered firms require P/L App. A/c (c) Only unregistered firms require P/L App. A/c (d) Sole proprietorship firms do not require P/L App. A/c (1) Q2 Where would you record the interest on capital when capital is fixed? (a) Cr. Side of Parners Capital Account (b) Dr. Side of Partners Capital Account (c) Cr. Side of Partners Current Account (d) Dr. Side of Partners Current Account (1) Q3 In the absence of partnership deed, how are mutual relations of partners governed? (1) Q4 In case of re-issue of shares which were originally issued at par or at a premium, what is the maximum permissible discount on re-issue? (1) Q5 State the provision of the Companies Act, 1956 regarding DRR? (1) Q6 On 31 st March, 2005, after the closing of books of accounts, the Capital Accounts of A, B and C stood at Rs.24,000; Rs.20,000 and Rs.12,000 respectively. The profit for the year Rs.36,000 was distributed equally. Subsequently, it was found that interest on capital @ 5% p.a. had been omitted. The profit sharing ratio was 2:2:1. (3) Q7 Shaweta Limited has Rs.8,00,000; 9% Debentures to be redeemed out of profits on 1 st October 2010 at a premium of 5%. The company had a DRR of Rs.4,14,000. Pass the necessary Journal entries at the time of redemption. (3) Q8 Q9 Q10 Rajesh Limited issued 25,000; 10% Debentures of Rs.100 each. Give the Journal entries in each the following cases when: (i) The Debentures were issued at a premium of 20%. (ii) The Debentures were issued at a collateral security to bank against a loan of Rs.20,00,000. (iii) The Debentures were issued to Supplier of Machinery costing Rs.28,00,000 as his full and final payment. (3) D, E and F were partners in a firm sharing profits in the ratio of 5:7:8. Their fixed capitals were ; D Rs.5,00,000; E Rs.7,00,000 and F Rs.8,00,000. Their Partnership deed provided for the following: (i) Interest on capital @ 10%per annum (ii) Interest on drawings @12%per annum. (iii) Salary of Rs.10,000 per month to F. (iv) D Withdrew Rs.40,000 on 31 st January, 2009; E withdrew Rs.50,000 on 31 st March, 2009 and F withdrew Rs.30,000 on 31 st December, 2009. During the year ended 31 st December, 2009, the firm earned a profit of Rs.3,50,000. Prepare P/L Appropriation Account. (4) Sukriti Limited invited applications for 40,000 shares of Rs.50 each isseud at a premium of Rs.10 per share. The amount was payable as follows: On Application and Allotment Rs.20 per share Balance on first and final call (including premium) Application for 70,000 shares were received. Applications for 20,000 shares were rejected and prorata allotment was made to the remaining applicants. First and final call was made and duly received except on 400 shares alloted to Rakesh. Give journal entries. (4) SP- 12

Q11 Vijay, Vivek and Vinay were partners in a firm sharing profits in 2 : 2: 1 ratio. On 31.3.2006 Vivek retired from the firm. On the date of Vivek s retirement the Balance Sheet was as under: Liabilities Amount Assets Amount Creditors 54,000 Bank 55,200 Bills Payable 24,000 Debtors 12,000 Outstanding Rent 4,400 Less: Provision 800 11,200 Provision for Legal Claims 12,000 Stock 18,000 Capitals : Vijay 92,000 Furniture 8,000 Vivek 60,000 Premises 1,94,000 Vinay 40,000 1,92,000 2,86,400 2,86,400 On Vivek s retirement it was agreed that: (i) Premises will be appreciated by 5% and Furniture will be appreciated by Rs.2,000. Stock will be depreciated by 10%. (ii) Provision for bad debts was to be made at 5% on debtors and provision for legal damages to be made for Rs.14,400. (iii) Goodwill of the firm was valued at Rs.48,000. (iv) Rs.50,000 from Vivek s Capital Account will be transferred to his loan account and the balance will be paid by cheque. Prepare Revaluation A/c, Partners Capital A/c and Balance Sheet. (6) Q12. The authorized capital of Vishu Limited is Rs.50,00,000 divided into 25,000 shares of Rs.200 each. Out of these, the company issued 12,000 shares of Rs.200 each at a premium of 10%. The amount per share was payable as follows: Rs.60 on application; Rs.60 on allotment (including premium); Rs.30 on first call and balance on final call. Public applied for 11,000 shares. All the money was duly received. Prepare an extract of Balance Sheet of Vishu Limited as per Revised Schedule VI Part 1 of the Companies Act 1956 and also prepare notes to accounts. (4) Q13 A, B and D are partners in a firm. On 1 st April 2011 the balance in their capital accounts stood at Rs.4,00,000, Rs.3,00,000 and Rs.2,00,000 respectively. They shared profits in the proportion of 5 : 3 : 2 respectively. Partners are entitled to interest on capital @ 10% p.a. and salary to B and D @ Rs.2,000 per month and Rs.3,000 per quarter respectively as per the provisions of the partnership deed.b s Share of profit (excluding interest on capital but including salary) is guaranteed at a minimum of Rs.50,000 p.a. Any deficiency arising on that account shall be met by D. The profits of the firm for the year ended 31 st March 2012 amounted to Rs.2,00,000. Prepare Profit and Loss Appropriation Account for the year ended 31 st March 2012. (6) Q14 X, Y and Z were partners sharing profits in the ratio of 3 : 2: 1. On 31.3.08 their balance sheet stood as under: Liabilities Amount Assets Amount Creditors 72,000 Cash at Bank 70,000 General Reserve 24,000 Investments 50,000 Capitals: X 75,000 Patents 15,000 Y 70,000 Stock 25,000 Z 50,000 1,95,000 Debtors 20,000 Buildings 75,000 Machinery 36,000 2,91,000 2,91,000 SP- 13

Q15 Q16 Z died on 31.5.2008. It was agreed that: (i) Goodwill was valued at 3 years purchase of the average profits of the last five years, which were, 2003 : Rs.40,000; 2004: Rs.40,000; 2005: Rs.30,000; 2006: Rs.40,000 and 2007: Rs.50,000. (ii) Machinery was valued at Rs.70,000, Patents at Rs.20,000 and Buildings at Rs.66,000. (iii) For the purpose of calculating Z s share of profits till the date of death, it was agreed that the same be calculated based on the average profits for the last 2 years. (iv) The executor of the deceased partner is to be paid the entire amount due by means of a cheque. Prepare Z s Capital A/c to be rendered to his executor and also a Journal entry for the settlement of the amount due to the executor. (6) VK Limited issued Rs.10,00,000 new capital divided into Rs.100 at a premium of Rs.20 per share, payable as under: On Application Rs.10 per share On Allotment Rs.40 per share (including premium of Rs.10 per share) On First and Final Call Balance amount Over-payments on application were to be applied towards sums due on allotment and first and final call. Where no allotment was made, money was to be refunded in full. The issue was oversubscribed to the extent of 13,000 shares. Applicants for 12,000 shares were allotted only 2,000 shares and applicants for 3,000 shares were sent letters of regret. Shares were allotted in full to the remaining applicants. All the money due was duly received. Which value has been affected by rejecting the applications of the applicants who had applied for 3,000 shares? Suggest a better alternative for the same. Give Journal Entries to record the above transactions (including cash transactions) in the books of the company. (8) X and Y were partners in a firm sharing profits in 3 : 1 ratio. They admitted Z as a new partner for 1/4 th share in the profits. Z was to bring Rs.20,000 as his capital and the capitals of X and y were to be adjusted on the basis of Z s capital in the profit sharing ratio. The balance sheet of X and Y on 31.3.2006 was as follows: Liabilities Amount Assets Amount Sundry Creditors 18,000 Cash 5,000 Bills Payable 10,000 Debtors 17,000 General Reserve 12,000 Stock 12,000 Capitals : X 25,000 Machinery 21,000 Y 10,000 35,000 Building 20,000 75,000 75,000 Other terms of agreement on Z s admission were as follows: (i) Z will bring Rs.6,000 for his share of goodwill. (ii) Building will be valued at Rs.25,000 and Machinery at Rs.19,000. (iii) (iv) A Provision at 5% on debtors will be created for bad debts. Capital accounts of X and y were adjusted by opening current accounts. Prepare Revaluation A/c, Partners Capital A/cs and Balance Sheet of new firm. (8) Part - B Financial Statement Analysis Q17 X Ltd. has a Debt Equity Ratio at 3 : 1. According to the management it should be maintained at 1 : 1. What are the two choices to do so? (1) Q18 State whether cash deposited in bank will result in inflow/outflow or no flow of cash. (1) Q19 Interest received by a finance company is classified under which kind of activity while preparing a cash flow statement? (1) Q20 List the items which are shown under the heading. Current Assets in the Balance Sheet of a company as per provisions of Schedule VI, of the Companies Act 1956. (3) Q21 Prepare a Comparative Statement of Profit & Loss with the help of following information: (4) SP- 14

M b o o o o i-> o o o o o o o o o o Particulars 2011 2012 Revenue from operations Expenses Other incomes Income Tax 20,00,000 12,00,000 4,00,000 50% 000 000 3,60,000 50% Q22 Find the value of current liabilities and current assets, if current ratio is 2.5: 1, liquid ratio is 1.2 : 1 and the value of inventory of the firm is Rs.78,000. (4) Q23 Following are the Balance Sheets of Krishtec Limited for the year ended 31 st March 2011 and 2012: Particulars 2011-12 2010-11 I. Equity and Liabilities (1) Shareholders Funds : (a) Share Capital 12,00,000 8,00,000 (b) Reserves & Surplus 3,50,000 4,00,000 (Statement of P/L) (2) Non-current Liabilities: Long term borrowings 4,40,000 3,50,000 (3) Current Liabilities: Trade Payables 60,000 50,000 Total 20,50,000 16,00,000 II. Assets (1) Non-current Assets: (a) Fixed Assets: 12,00,000 (i) Tangible Assets (2) Current Assets: (a) Inventories (b) Trade Receivables 3,10,000 2,30,000 (c) Cash and Cash Equivalents 3,40,000 3,70,000 Total 20,50,000 16,00,000 Prepare a Cash Flow Statement after taking into account the following adjustment: (i) The Company paid interest Rs.36,000 on its long term borrowings. (ii) Depreciation charged on tangible fixed assets was Rs.1,20,000. (6) SP- 15

SAMPLE PAPER 4 Class - XII ACCOUNTANCY Time allowed: 3 hours Maximum Marks: 80 General Instructions: (i) This question paper contains Two parts A& B. (ii) Both the parts are compulsory for all. (iii) (iv) All parts of questions should be attempted at one place. Marks are given at the end of each question. Part - A Partnership, Share Capital and Debentures Q1 Is a sleeping partner liable to the acts of other partners? (a) No (b) Yes (c) Sometimes (d) Only when there is loss (1) Q2 Goodwill is (a) Fictitious Asset (b) Current Asset (c) Liquid Asset (d) Intangible Asset (1) Q3 Vasu and Kumar are partners in a firm sharing profits in the ratio of 3:2. Mrs. Vasu has given a loan of Rs.20,000 to the firm and the firm also obtained a loan of Rs.10,000 from Kumar. The firm was dissolved and its assets were realised for Rs.25,000. State the order of payment of Mrs. Vasu s Loan and Kumar s Loan with reason, if there were no creditors of firm. (1) Q4 What is the name given to that part of capital of a company which is called up only on Winding up? (1) Q5 Define Secured Debentures. (1) Q6 X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2. The following was the Balance Sheet of the firm as on 31 st March, 2010 : Liabilities Amount Assets Amount Capitals: Sundry Assets 40,000 X 30,000 Y 10,000 40,000 40,000 The profits Rs.15,000 for the year ended 31.03.2010 were divided between the partners without allowing interest on capital @12% p.a. and salary to X Rs.500 per month. During the year, X withdrew Rs.5,000 and Y Rs.10,000. Prepare the necessary adjustment entry and show your working clearly. (3) Q7 Bhanu Limited obtained a loan of Rs.4,00,000 from HDFC Bank. The company issued 5,000, 9% Debentures of Rs.100 each as a collateral security for the same. Show how these items will be presented in the Balance Sheet of Company. (3) Q8 VS Limited has 10,000, 12% Debentures of Rs.100 each due for redemption on 31 st March, 2011. Assuming that Debentures are to be redeemed out of profit fully and DRR has a balance of Rs.3,60,000 on that date, give entries at the time of redemption of debentures. (3) Q9 X, Y and Z were partners in a firm. Their capitals on 1.4.2012 were : X Rs.2,00,000; Y Rs.2,50,000 and Z Rs.3,00,000. The partnership deed provided for the following: (i) They will share profits in the ratio of 2:3:3. (ii) X will be allowed a salary of Rs. 12,000 per annum. (iii) Interest on capital will be allowed @12% p.a. During the year X withdrew Rs.28,000; Y Rs.30,000 and Z Rs.18,000. For the year ended 31.3.2013 the firm earned a profit of Rs.5,00,000.Prepare Profit & Loss Appropriation A/c and Partners Capital A/cs. (4) SP- 16

Q10 Q11 Sunil Limited purchased furniture for Rs.99,000 from Kumar Limited. The payment to Kumar Limited was made by issued of Equity Shares of Rs.10 each.give necessary entries when: (i) Shares were issued at 10% Premium (ii) Shares were issued at 10% discount (4) The Balance Sheet of Sindhu, Rahul and Kamlesh, who were sharing profits in the ratio of 3:3:4 respectively, as on 31 st March 2012 was as follows: Liabilities Amount Assets Amount General Reserve 10,000 Cash 32,000 Bills Payable 20,000 Stock 88,000 Loan 24,000 Investments 94,000 Capitals: Land and Buildings 1,20,000 Sindhu 1,20,000 Rahul 1,00,000 Sindhu s Loan 20,000 Kamlesh 80,000 3,00,000 3,54,000 3,54,000 Q12 Q13 Sindhu died on 31 st July 2012. The partnership deed provided for the following on the death of a partner: (i) Goodwill of the firm be valued at two year s purchase of average profits for the last three years which were Rs.80,000. (ii) Sindhu s share of profit till the date of his death was to be calculated on the basis of sales. Sales for the year ended 31 st March 2012 amounted to Rs.8,00,000 and that from 1 st April to 31 st July 2012 Rs.3,00,000. The profit for the year ended 31 st March 2012 was Rs.2,00,000. (iii) Interest on capital was to be provided @6% p.a. (iv) According to Sindhu s will, the executors should donate his share to Matri Chaya-an orphanage for girls. Prepare Sindhu s Capital A/c to be rendered to his executor. Also identify the value being highlighted in the question. (6) On 1st April, 2012, Vishwas Ltd. was formed with an authorised capital of Rs.10,00,000 divided into 1,00,000 equity shares of Rs.10 each. The company issued prospectus inviting applications for 90,000 equity shares. The company received applications for 85,000 equity shares. During the first year, Rs.8 per share were called. Ram holding 1,000 shares and Shyam holding 2,000 shares did not pay the first call of Rs 2 per share. Shyam s shares were forfeited after the first call and later on 1,500 of the forfeited shares were re-issued at Rs. 6 per share, Rs.8 called up. Show the following: Share Capital in the Balance Sheet of the company as per revised Schedule VI Part I of the Companies Act, 1956. Also prepare Notes to Accounts for the same. (4) Ram and Mohan are partners in a firm. They admitted Rakhi as a partner without capital for 1/3 rd share in profits of the firm. She is blind by birth but having good management qualities. The new partnership agreement provides for the following: (i) 10% of the trading profit will be donated to Prime Minister s Relief Fund. (ii) 5% of the trading profit will be donated to the National Blind Relief Fund. (iii) Products will be sold at a discount of 15% on Maximum Retail price to the people living below poverty line. (iv) New retail shops will be opened in the Naxal affected areas of the country. (v) New jobs of salespersons will be reserved for the girls belonging to Scheduled Castes and Scheduled Tribes. The trading profit of the firm for the year ended 31.3.2012 was Rs.10,00,000. Identify any four values considered by Ram, Mohan and Rakhi while preparing the new partnership deed and prepare the Profit & Loss Appropriation Account of Ram, Mohan and Rakhi for the year ended 31.3.2012. (6) SP- 17

Q14 Prashant and Rajesh were partners in a firm sharing profits in the ratio of 3 : 2. In spite of repeated reminders by the authorities, they kept dumping hazardous material into a nearby river. The court ordered for the dissolution of their partnership firm on 31 st March 2012. Parshant was deputed to realise the assets and to pay the liabilities. He was paid Rs.1,000 as commission for his services. The financial position of the firm on 31 st March 2012 was as follows: Liabilities Amount Assets Amount Creditors 80,000 Building 1,20,000 Mrs. Prashant s Loan 40,000 Investments 30,600 Rajesh s Loan 24,000 Debtors 34,000 Investment Fluctuation Fund 8,000 Less : Provision 4,000 30,000 Capitals: Bills Receivable 37,400 Prashant 42,000 Cash 6,000 Rajesh 42,000 84,000 Profit and Loss A/c 8,000 Goodwill 4,000 2,36,000 2,36,000 Following was agreed upon: (i) Prashant agreed to pay off his wife s loan. (ii) Debtors realized Rs.24,000. (iii) Rajesh took away all investments at Rs.27,000. (iv) Building realized Rs.1,52,000. (v) Creditors were payable after 2 months. They were paid immediately at 10% discount. (vi) Bills receivable were settled at a loss of Rs.1,400. (vii) Realisation expenses amounted to Rs.2,500. Prepare Realisation A/c, Partners Capital A/c and Cash A/c and identify the value being conveyed. (6) Q15 (a) X Ltd. forfeited 200 shares of Rs.100 each, Rs.70 called up, on which the shareholders had paid application and allotment money of Rs.50 per share. Out of these, 150 shares were re-issued to Naresh as Rs.70 paid up for Rs.80 per share. (b) Y Ltd. forfeited 180 shares of Rs.10 each, Rs.8 called up, issued at a premium of Rs.2 per share to R for non-payment of allotment money of Rs.5 per share (including premium). Out of these, 160 shares were reissued to Sanjay as Rs.8 called up for Rs.10 per share fully paid up. (c) Z Ltd. forfeited 30 shares of Rs.100 each issued at a discount of Rs.10 per share for non-payment of first and final call money of Rs.30 per share. Out of these, 20 shares were re-issued at Rs.30 per share fully paid up. (8) Q16 The Balance Sheet of X, Y and Z who were sharing profits in the ratio of 5 : 3 : 2 as at March 31, 2007 : Liabilities Amount Assets Amount Creditors 50,000 Cash at Bank 40,000 Employees. Provident Sundry Debtors 1,00,000 Fund 10,000 Stock 80,000 Profit & Loss A/c 85,000 Fixed Assets 60,000 Capital A/cs : X 40,000 Y 62,000 Z 33,000 1,35,000 2,80,000 2,80,000 X retired on March 31, 2007 and Y and Z decided to share profits in future in the ratio of 2:3 respectively. The other terms on retirement were as follows : (i) Goodwill of the firm is to be valued at Rs. 80,000. (ii) Fixed Assets are to be depreciated to Rs. 57,500 (iii) Make a provision for doubtful debts at 5% on debtors SP- 18

(iv) A liability for claim, included in creditors for Rs. 10,000, is settled at Rs. 8000. (v) The amount to be paid to X by Y and Z in such a way that their Capitals are proportionate to their profit sharing ratio and leave a balance of Rs. 15,000 in the Bank Account. Prepare Profit and Loss Adjustment Account and Partners. Capital Accounts. (8) Part - B Financial Statement Analysis Q17 State whether Conversion of debentures into Equity Shares by a Financing Company will result into inflow, outflow or no flow of cash? (1) Q18 State how qualitative aspects are ignored in financial statement analysis. (1) Q19 Why is Cash Flow Statement Prepared? (1) Q20 List the items which are shown under the heading. Reserves and Surplus in the Balance Sheet of a company as per provisions of Schedule VI, of the Companies Act 1956. (3) Q21 From the following Statement of Profit and Loss of VK Ltd., for the years ended 31 st March 2011 and 2012, prepare a Comparative Statement of Profit and Loss. (4) Particulars Note No. 2011 2012 Revenue from Operations 6,00,000 7,00,000 Other Income 50,000 80,000 Purchase of Stock-in-Trade 1,80,000 2,00,000 Employees Benefits Expenses 90,000 1,00,000 Other Expenses 80,000 80,000 Tax Rate 30% 40% Q22. Calculate return on investment ratio from the following: Equity Share Capital 16,00,000 Preference Share Capital 4,00,000 General Reserve 7,56,000 10% debentures 16,00,000 Current liabilities 4,00,000 Discount on issue of shares 2,000. Net profit (after interest on debentures but before income tax) 3,20,000 (4) Q23. Calculate cash flow from operating activities with the following information of Vijay Limited: Particulars 2012 2013 Statement of Profit & Loss 50,000 30,000 Bills Receivable 26,000 17,000 Rent payable 1,600 4,000 Prepaid insurance 2,800 2,400 Stock 22,000 39,000 Creditors 20,000 10,000 Vijay Limited had provided for the following items while arriving at the profit for the year : (i) Depreciation on fixed assets Rs.24,000. (ii) Writing off preliminary expenses Rs.6,000. (iii) Loss on sale of furniture Rs.2,000. (iv) Profit on sale of Machinery Rs.4,000. (6) SP- 19

SAMPLE PAPER 5 ACCOUNTANCY Class - XII Time allowed: 3 hours Maximum Marks: 80 General Instructions: (i) This question paper contains Two parts A& B. (ii) Both the parts are compulsory for all. Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 (iii) (iv) All parts of questions should be attempted at one place. Marks are given at the end of each question. Part - A Partnership, Share Capital and Debentures Maximum number of partners in case of a banking business can be (i) 20 (ii) 10 (iii) 7 (iv) 50 Which one is correct in the following options, when there is no partnership deed? (i) No interest on loan will be provided to partner (ii) Interest on drawings will be charged @6% p.a. (iii) Interest on Capital will be 6% p.a. (iv) Profit sharing ratio will be equal What is the nature of Revaluation Account? (i) Personal Account (ii) Real Account (iii) Nominal Account (iv) Statement What do you mean by 'Executor? Why DRR is not necessary in case of infrastructure firms? Krishna,Sandeep and Karim are partners sharing profit in the ratio of 3:2:1.Their fixed capitals are: Krishna Rs 1,20,000,Sandeep Rs 90,000 and Karim Rs 60,000.For the year 2013-14.Interest was credited to them @6% p.a instead of 5% p.a.record adjustment entry. Record necessary journal entries for the issue of debentures in each of the following cases: (i) 27,000,7% debentures of Rs 100 each issued at par redeemable at par. (ii) 25,000 7% debentures of Rs 100 each issued at par redeemable at 4% premium. (iii) 35,000 7% debentures of Rs 100 each issued at a discount of 4% and redeemable at a premium of 5%. Jain Ltd.purchased Building for Rs 10,00,000 from Gupta Ltd.10% of the payable amount was paid by a cheque drawn in favor of Gupta Ltd. The balance was paid by issue of Equity shares of Rs 10 each at a discount of 10%. Pass necessary Journal Entries in the books of Jain Ltd. On 1 st January 2013,Y Ltd has 1000 12% Debentures of Rs 100 each issued at a discount of 5% redeemable at par. The DRR balances on this date is 30,000. They are due for redemption at the end of the year. Pass the necessary Journal entries for redemption of Debentures in lump sum. Q10 L&M were partners in a firm sharing in the ratio of 3:2.Their fixed capitals on 1.4.2010 were L Rs 1,00,000 and M Rs 2,00,000.They agreed to allow interest on capital @ 12% per annum and to charge on drawing @ 15% per annum. The firm earned a profit, before all above adjustments of Rs 30,000 and Rs 5,000 respectively. Showing your calculations, clearly prepare Profit and Loss Appropriation A/c of L&M.The interest on capital will be allowed even if the firm incurs a loss. Q11 (a) A,B and C are sharing profit in the ratio 3:2:1,C dies on 30 June,2011.Accounts are closed on 31 st March every year. Sales for the year ending 31 st March 2011 amounted to Rs 90,00,000.Sales form 1 st April 2013 to 30 June 2013 amounted to Rs 36,00,000.The profit for the year ending 31 st March 2013 amounted to Rs 4,50,000.Calculate the deceased partner s share in the current year s profit. (b) There is no earning members in C s family and hence it is agreed to take C s daughter into partnership with 1/10 th share of profit. You are required to identify the virtues in making such decision. SP- 20