Term-End Examination: December, 2013
ECO-14: ACCOUNTANCY-II
Note: Attempt any four questions including question no. 1 which is compulsory.
1. Attempt any two of the following questions: 7, 7
(a) What do you mean by departmental accounts? Why are they considered necessary?
(b) What are preference shares? State the rules relating to their redemption.
(c) State the legal provisions for settlement of accounts of a partnership firm after dissolution.
(d) Explain the nature and limitations of financial statements of a company.
2. RST Ltd. sells goods on hire purchase terms at a profit of 25% on hire purchase price (33. 1/3 % of cost) following are the transactions for the year ending March 31, 2012: 12
Rs. | ||
April 1 : | Stock out on hire purchase (at cost) Stock on hand at shop (at cost) Installments due but not yet received Cash received | 3,00,000 50,000 30,000 8,00,000 |
March 31 : | Stock out on hire purchase (at cost) Stock on hand at shop (at cost) Installments due but not yet received | 3,45,000 70,000 50,000 |
Ascertain the profit or loss on hire purchase business by preparing Hire Purchase Trading Account. Also show your working notes for ascertainment of missing figures, if any.
Ans:
H.P. Trading A/c
To Opening balance : H.P. Stock (IP) Instalment due To Goods Sold on H.P. Cost = 6,60,000 Profit = 2,20,000 To Stock reserve A/c (loading) To Profit for the year | 4,00,000 30,000 8,80,000 1,15,000 2,05,000 | By Cash By Goods sold on H.P. A/c (loading) By Stock reserve A/c (loading) By Closing balance : H.P. Stock (IP) Instalment due | 8,00,000 2,20,000 1,00,000 4,60,000 50,000 |
16,30,000 | 16,30,000 |
Stock on Hand A/c
To Balance b/d To Purchase A/c (Balancing figure) | 50,000 6,80,000 | By Goods Sold on H.P. A/c (Cost) By Balance c/d | 6,60,000 70,000 |
7,30,000 | 7,30,000 |
H.P. Stock A/c (At I.P)
To Balance b/d (3,00,000 + 1,00,000) To Goods sold on H.P. A/c (At I.P) | 4,00,000 8,80,000 | By Instalment due A/c By Balance c/d (3,45,000 + 1,15,000) | 8,20,000 4,60,000 |
12,80,000 | 12,80,000 |
Instalment due A/c
To Balance b/d To H.P. Stock A/c (Instalment due during the year) | 30,000 8,20,000 | By Cash A/c By balance c/d | 8,00,000 50,000 |
8,50,000 | 8,50,000 |
3. A, B and C were partners in a firm sharing profits and losses in the ratio of 5: 3: 2 respectively. The balance sheet of the firm as on 31st March, 2012 stood as follows: 12
Liabilities | Amount(Rs.) | Assets | Amount(Rs.) |
Sundry Creditors Bills Payable General Reserve Capitals : A B C | 50,000 75,000 1,00,000 1,50,000 2,00,000 1,25,000 | Cash at Bank Debtors : 85,000 Less Prov. For D.D. 12,500 Stock Machinery Furniture Buildings | 27,500 72,500 50,000 2,00,000 1,00,000 2,50,000 |
7,00,000 | 7,00,000 |
C retires on that date subject to the following adjustments:
(a) Goodwill of the firm to be valued at Rs. 75,000.
(b) Machinery to be depreciated by 10%.
(c) Buildings to be appreciated by 10%.
(d) Stock to be appreciated by 20%.
(e) Provision for doubtful debts is increased by Rs. 7,500.
Prepare Revaluation Account, Partners Capital Accounts and the new balance sheet of the firm after C's retirement.
Ans:
Revaluation Account
To Machinery To Provision for b/d To Profit on revaluation A = 7,500 x 5/10 B = 7,500 x 3/10 C = 7,500 x 2/10 | 20,000 7,500 3,750 2,250 1,500 | By Building By Stock | 25,000 10,000 |
35,000 | 35,000 |
Partner's Capital A/c
Particulars | A | B | C | Particulars | A | B | C |
To C’s Capital A/c To C/s Loan A/c To Balance c/d | 9375 1,94,375 | 5625 2,26,625 | 1,61,500 | By balance b/d By General reserve A/c By Revaluation A/c By A’s Capital A/c By B’s Capital A/.c | 1,50,00 50,000 3,750 | 2,10,000 30,000 2,250 | 1,25,000 20,000 1,500 9,375 5,625 |
2,03,750 | 2,32,250 | 1,61,500 | 2,03,750 | 2,32,250 | 1,61,500 |
Balance Sheet
Liabilities | Amount | Assets | Amount |
Sundry Creditors Bills Payable C’s Loan A/c Capitals A = 1,94,375 B = 2,26,625 | 50,000 75,000 1,61,500 4,21,000 | Cash at Bank Debtors 85,000 Less : Provision For doubtful debt 20,000 Furniture Machinery (2,00,000 – 20,000) Buildings (2,50,000 + 25,000) Stock (5,000 + 20%) | 27,500 65,000 1,00,000 1,80,000 2,75,000 60,000 |
7,07,500 | 7,07,500 |
Working Note: -
(i) A: B: C = 5: 3: 2 (old ratio)
A: B = 5: 3 (new ratio)
Gaining ratio (A: B) = 5: 3
(ii) C’s share of goodwill = 75,000 x 2/10 = 15,000
Contributed by A = 15,000 x 5/8 = 9375
Contributed by B = 15,000 x 3/8 = 5,625
4. G Ltd. offered for public subscription 20,000 equity shares of Rs. 10 each at a premium of 10% payable Rs. 2 on application, Rs. 4 on allotment including premium, Rs. 3 on first call, and Rs. 2 on second and final call. Applications for 26,000 shares were received. The applications for 4,000 shares were rejected, and pro-rata allotment was made to the remaining applicants. Both the calls were made and all the monies were duly received except the final call on 500 shares which were forfeited. These were later reissued at Rs. 8.50 per share as fully paid. Give the necessary journal entries to record these transactions in the books of the company and prepare the balance sheet.
Ans:
Journal entries
In the books of G Ltd.
Particulars | L.F. | Amount | Amount |
Bank A/c Dr. To Equity share application A/c (Being the application money received on 26,000 shares @ Rs.2 each) | 52,000 | 52,000 | |
Equity Share application A/c Dr. To Equity share Capital A/c To Equity share allotment A/c To Bank A/c (Being the application money on 20,000 shares transferred to equity share capital and excess application of 4000 shares were rejected and balance transferred to allotment) | 52,000 | 40,000 4,000 8,000 | |
Equity Share allotment A/c (20,000 x 4) Dr. To Equity share capital A/c To Securities premium A/c (Being the allotment money due on 20,000 shares @ Rs.4 each including premium of Re.1 per share) | 80,000 | 60,000 20,000 | |
Bank A/c (80,000 – 4,000) Dr. To Equity share allotment A/c (Being the allotment money received after adjusting excess application money) | 76,000 | 76,000 | |
Equity share 1st Call A/c (20,000 x 3) Dr. To Equity Share Capital A/c (Being the 1st call money due on 20,000 shares @ Rs.3 each) | 60,000 | 60,000 | |
Bank A/c Dr. To Equity Share 1st Fall A/c (Being the 1st call money received on 20,000 shares @ Rs.3 each) | 60,000 | 60,000 | |
Equity Share 2nd & Final call A/c Dr. To Equity Share Capital A/c (Being the 2nd and final call money due on 20,000 shares @ Rs.2 each) | 40,000 | 40,000 | |
Bank A/c Dr. Calls in arrear A/c Dr. To Equity Share 2nd and final Call A/c (Being the 2nd and final call money received on 19,500 shares @ Rs.2 each) | 39,000 1,000 | 40,000 | |
Equity Share Capital A/c Dr. To Share forfeiture A/c (500 x 8) To Call in arrears A/c. (500 x 2 ) (Being the 500 shares forfeited due to non-payment of 2nd and final call of Rs.2 each) | 5,000 | 4,000 1,000 | |
Bank A/c Dr. Share forfeiture A/c (1.50 x 500) Dr. To Equity Share Capital A/c (Being the 500 forfeited shares reissued @ Rs.8.50 each) | 4,250 750 | 5,000 | |
Equity Share Capital A/c Dr. To Capital reserve A/c (Being the profit on reissue of forfeited shares transferred to capital reserve) | 3,250 | 3,250 |
Balance Sheet of A Ltd.
Particulars | Amount |
Equity & Liabilities : I. Shareholders Fund (a) Equity share Capital 20,000 shares @ Rs. 10 each. (b) Reserve & Surplus Capital reserve Securities Premium Total | 2,00,000 3,250 20,000 2,23,250 |
Assets : I. Current Assets Cash & Cash equivalent | 2,23,250 |
5. (a) What do you mean by debentures issued for consideration other than cash? How is such issue recorded in the books of account of the issuing company? 4, 8
(b) Kabir and Co. of Kanpur has their branch at Moradabad. The following are the transactions relating to the branch for the year ended on 31st march, 2012:
Particulars | Rs. | Rs. |
Opening Stock on 1-4-2011 Goods supplied to branch Goods sent to branch : Rent Expenses Cash Received from the branch during the year Closing Stock on 31-3-12 Closing balance of Paltry Petty Cash on 31-3-12 | 2,000 1,000 | 2,00,000 5,00,000 6,00,000 1,50,000 100 |
Moradabad Branch Account
For the year ended on 31st March, 2012
Particulars | Amount | Particulars | Amount |
To Opening balance Stock To Goods sent to Branch To Bank (Expenses) : Rent 2,000 Petty Cash 1,000 To Branch Profit for the year | 2,00,000 5,00,000 3,000 47,100 | By Cash (Remittance) By Closing Balance : Stock Petty Cash | 6,00,000 1,50,000 100 |
7,50,100 | 7,50,100 |
Goods Sent to Branch A/c
To Purchase A/c (Balancing figure) | 5,00,000 | By Moradabad Branch A/c | 5,00,000 |
5,00,000 | 5,00,000 |
6. (a) State the uses of cash flow statements. 5, 7
(b) From the following particulars, you are required to compute
(i) current ratio, and
(ii) quick ratio, and comment on the liquidity of the firm.
Particulars | Rs. |
Stock Debtors Bills Receivable Advance (recoverable in cash) Gross Profit Cash in hand Creditors Bills Payable Bank Overdraft Sales Net Profit | 5,00,000 4,00,000 1,00,000 40,000 5,00,000 3,00,000 6,00,000 4,00,000 40,000 70,00,000 3,00,000 |
Ans:
Current assets = Stock + Debtors + Bills receivable + Advances
= 5, 00,000 + 4, 00,000 + 1, 00,000 + 40,000
= 10, 40,000
Current Liabilities = Creditors + Bills Payable + Bank overdraft
= 6, 00,000 + 4, 00,000 + 40,000
= 5, 40,000
(i) Current ratio 
(ii) Quick ratio 
Comment: Short term liquidity position of firm is weak because current ratio is 1: 1 as compared to Standard current ratio is 2: 1 and Quick ratio is also less is compared to Standard quick ratio of 1: 1.