BACHELOR'S DEGREE PROGRAMME
Term-End Examination December, 2011
ELECTIVE COURSE: COMMERCE ECO-14: ACCOUNTANCY-II
Time: 2 hours Maximum Marks: 50
Note: Attempt any four questions including question no. 1 which is compulsory.
1. Attempt any two of the following questions 7, 7
(a)Explain the three systems of maintaining accounts of a dependent branch by the head office.
(b)Distinguish between fixed and fluctuating capitals of partners and list the items that usually appear on the debit and credit sides of a partner's current account.
(c)State the legal provisions relating to issue of shares at a discount and its accounting treatment in the books of a company.
(d)What is profit prior to incorporation and how is it calculated?
2. PQR Ltd. sold a machine to RST Ltd. on 12 April 1, 2007 under a hire-purchase agreement. The payments were to be made in four annual instalments of Rs. 84,600 each at the end of each year which is inclusive of interest at 5% per annum. RST Ltd. paid two instalments on time but defaulted at the time of third instalment and PQR Ltd. repossessed the machinery. Calculate the cash price and prepare necessary accounts in the books of RST Ltd. who charged depreciation at 10% per annum on written down value method?
Ans: Working Notes:
Year
|
Closing Balance
|
Amount of Instalment
|
Total
|
Interest ( 5/105 )
|
Opening Balance
|
4
3
2
1
|
Nil
80,571
1,57,306
2,30,387
|
84,600
84,600
84,600
84,600
|
84,600
1,65,171
2,41,906
3,14,987
|
84,600 x 5/105= 4029
1,65,171x5/105= 7,865
2,41,906x5/105=11,519
3,14,987x5/105=14,994
|
80,571
1,87,306
2,30,387
2,99,988
|
Required Cash Price = 2, 99,988
Ledger Amount in the Books of RST Ltd
PQR Ltd A/c
Date
|
Particulars
|
Amount
|
Date
|
Particulars
|
Amount
|
31.3.08
31.3.08
|
To Bank A/c (1st Instalment)
To Balance c/d
|
84,600
2,30,387
|
1.4.07
31.3.08
|
By Machinery a/c
By Interest a/c
|
2,99,988
14,999
|
3,14,987
|
3,14,987
| ||||
31.3.09
31.3.09
|
To Bank A./c (2nd Instalment)
To Balance c/d
|
84,600
1,57,306
|
1.4.08
31.3.09
|
By balance b/d
By Interest A/c
|
2,30,387
11,519
|
2,41,906
|
2,41,906
| ||||
31.3.10
|
To Machinery A/c
|
1,65,171
|
1.4.09
31.3.10
|
By balance b/d
By Interest A/c
|
1,57,306
7,865
|
1,65,171
|
1,65,171
|
Machinery A/c
Date
|
Particulars
|
Amount
|
Date
|
Particulars
|
Amount
|
1.4.07
|
To PQR Ltd A/c
|
2,99,988
|
31.3.08
31.3.08
|
By Depreciation A/c
By Balance c/d
|
29,999
2,69,989
|
2,99,988
|
2,99,988
| ||||
1.4.08
|
To Balance b/d
|
2,69,989
|
31.3.09
31.3.09
|
By Depreciation A/c
By Balance c/d
|
26,999
2,42,990
|
2,69,989
|
2,69,989
| ||||
1.4.09
|
To Balance b/d
|
2,42,990
|
31.3.10
31.3.10
31.3.10
|
By Depreciation A/c
By PQR Ltd A/c
By P/L A/c (Loss)
|
24,299
1,65,171
53,520
|
2,42,990
|
2,42,990
|
3. Following is the balance sheet of a partnership 12 firm of 'A' and 'B’, who shared profits in the ratio of 3: 2 respectively as on 31 March, 2010:
Liabilities
|
Rs.
|
Assets
|
Rs.
|
Creditors
Bills Payable
Mrs. A’s Loan
Reserve Fund
Capita :
A = 40,000
B = 32,000
|
1,52,000
60,000
40,000
20,000
72,000
|
Cash in hand
Stock
Debtors
Machinery
Furniture
Investments
P & L A/c
|
46,000
24,000
76,000
1,12,000
16,000
40,000
30,000
|
3,44,000
|
3,44,000
|
The firm was dissolved on March 31, 2010; A took over investments at Rs. 32,000 and agreed to pay off Mrs. A's loan. Stock realised. Rs. 20,000; Debtors Rs. 74,000; furniture Rs. 18,000; and machinery Rs. 1, 00,000. The creditors were paid at a discount of 2.5%. B agreed to realize assets and pay off the liabilities on a remuneration of Rs. 4,400. Give journal entries for closure of the books.
Ans:
Journal Entries
In the books of the firm
Particulars
|
L.F.
|
Amount(Dr.)
|
Amount(Cr.)
|
Realisation A/c Dr.
To Stock A/c
To Debtors A/c
To Machinery A/c
To Furniture A/c
To Investments A/c
(Being the sundry assets transferred to realisation account)
|
2,68,000
|
24,000
76,000
1,12,000
16,000
40,000
| |
Creditors A/c Dr.
B/P A/c Dr.
Mrs. A’s Loan A/c Dr.
To Realisation A/c
(Being the sundry liabilities transferred to realisation account)
|
1,52,000
60,000
40,000
|
2,52,000
| |
Reserve Fund A/c Dr.
To A’s Capital A/c
To B’s Capital A/c
(Being the reserve fund distributed between partners in 3:2 ratio)
|
20,000
|
12,000
8,000
| |
A’s Capital A/c Dr.
B’s Capital A/c Dr.
To P/L A/c
(Being the dr. balance of p/l distributed between partners)
|
18,000
12,000
|
30,000
| |
A’s Capital A/c Dr.
To Realisation A/c
(Being the Investments taken over by A)
|
32,000
|
32,000
| |
Realisation A/c Dr.
To A’s Capital A/c
(Being the Mrs. A’s loan taken over by A)
|
40,000
|
40,000
| |
Cash A/c Dr.
To Realisation A/c
(Being the sundry assets realised - 20,000 + 74,,800 + 18,000 + 1,00,000)
|
2,12,000
|
2,12,000
| |
Realisation Account Dr.
To Cash A/c
(Being the sundry liabilities paid off - 1,48,200 + 60,000)
|
2,08,200
|
2,08,200
| |
Realisation A/c Dr.
To B’s Capital A/c
(Being the remuneration paid to B for realisation of assets)
|
4,400
|
4,400
| |
A’s Capital A/c Dr.
B’s Capital A/c Dr.
To Realisation A/c
(Being the loss on realisation distributed amongst partners)
|
14,760
9,840
|
24,600
| |
A’s Capital A/c Dr.
B’s Capital A/c Dr.
To Cash A/c
(Being the final payment made to partners)
|
27,240
22,560
|
49,800
|
4. (a) Define fund flow statement, and state the main sources and application of funds. 8, 4
(b) State the factors that affect the goodwill of a firm.
5.The total capital employed in a company is Rs. 1,70,00,000 out of which Rs. 80,00,000 represents equity capital, Rs. 20,00,000 general reserves, Rs. 50,00,000 long term borrowings in the form of debentures and Rs. 20,00,000 bank overdraft. The current assets of the company are Rs. 85 lakh, make up of stock Rs. 30 lakh, debtors Rs. 35 lakh, advances Rs. 14 lakh and cash Rs. 6 lakh. Compute (a) Current Ratio (b) Quick Ratio and (c) Debt Equity Ratio. 4+4+4
Ans: Ans: (a) Current Ratio = Current Assets/ Current Liabilities
= 85 Lakhs/20 Lakhs
= 4.25: 1
(b) Quick ratio = Quick assets/Current Liabilities
= (85 Lakhs – 30 Lakhs)/ 20 Lakhs
= 55 Lakhs/20 Lakhs
=2.75: 1
(c) Debt Equity ratio = Debt (long term)/Equity
= 50 Lakhs/100 Lakhs
= 0.5: 1
Here, Equity = Capital + reserves = (80 + 20) = 100 Lakhs
6. (a) A Ltd. issued 5,000 14% debentures of 8, 4 Rs.100 each at a discount of 6% on January 1, 2007. The entire amount is payable on application. These debentures are redeemable at a premium of 5% on December 31, 2009. The interest is payable annually on December 31 each year and any loss on their issue is to be written off in three years. Give journal entries for the above in the books of the company for 2007, 2008 and 2009.
Ans:
Journal Entries
In the books of A Ltd
Date
|
Particulars
|
L.F.
|
Amount(Dr.)
|
Amount(Cr.)
|
1-1-07
|
Bank A/c Dr.
Loss on issue of Debenture A/c
To 14% Debentures A/c
To Premium on redemption A/c
(Being the debentures issued at discount of 6% but redeemable at a premium of 5%)
|
4,70,000
55,000
|
5.00,000
25,000
| |
31-12-07
|
Debenture Interest A/c Dr.
To Bank A/c
(Being the debenture interest paid @ 14% p.a. on debentures)
|
70,000
|
70,000
| |
31-12-07
|
P/L A/c Dr.
To Loss on issue of debenture A/c
To Debenture Interest A/c
(Being the debenture interest and loss on issue of debenture transferred to profit and loss account)
|
88,333
|
18,333
70,000
| |
31-12-08
|
Debenture Interest A/c Dr.
To Bank A/c
(Being the debenture interest paid @ 14% p.a. on debentures)
|
70,000
|
70,000
| |
31-12-08
|
P/L A/c Dr.
To Loss on issue of debenture A/c
To Debenture Interest A/c
((Being the debenture interest and loss on issue of debenture transferred to profit and loss account)
|
88,333
|
18,333
70,000
| |
31-12-09
|
Debenture Interest A/c Dr.
To Bank A/c
(Being the debenture interest paid @ 14% p.a. on debentures)
|
70,000
|
70,000
| |
31-12-09
|
14% Debentures A/c Dr.
Premium on redemption A/c Dr.
To Bank A/c
(Being the debentures redeemed at a premium of 5%)
|
5,00,000
25,000
|
5,25,000
| |
31-12-09
|
P/L A/c Dr.
To Loss on issue of Debentures A/c
To Debenture Interest A/c
((Being the debenture interest and loss on issue of debenture transferred to profit and loss account)
|
88,334
|
18,334
70,000
|
(b) Explain the concept of unrealised profit in relation to interdepartmental transfer and its accounting treatment.
7. Draw necessary journal entries relating to issue of shares (a) at par and (b) at premium. 6+6