AHSEC Class 12: Accountancy Solved Question Papers' 2013 | AHSEC | SOLVED QUESTION PAPERS

1. (a) Fill in the blanks with appropriate word:  1x4 = 4

(i) A Receipts and Payments account is prepared on cash basis of accounting.

(ii) When Partner’s Capital Account is fixed, then Partner’s current Account is prepared.

(iii) Goodwill is the extra earning capacity of a business.

(iv) Unrecorded assets when realised are credited to realisation Account.

(b) Choose the correct alternative:         1x2=2

(i) An Income and Expenditure Account reveals:

(1) Cash Position

(2) Surplus or Deficit

(3) Capital Fund

(4) None of the above

(ii) The portion of capital which can be called up only on the winding up of the company is called:

(c) State whether the following statements are true or false:    1x2=2

(i) Discount on reissue of forfeited shares cannot exceed the amount received on forfeited shares.  True

(ii) Interest on Debenture is payable only when a company earns profits.  False

2. What is sacrificing ratio?         2

Ans:  Sacrificing Ratio: At the time of admission of an incoming partner, existing partners have to surrender some of their share in favour of the new partner. The ratio in which they surrender their profits is known as sacrifice ratio.

3. Give two grounds on which a court may dissolve a firm.          2

Ans. Dissolution by Court: A court may order a partnership firm to be dissolved in the following cases:

4. Name any two items that can be shown under sub head “Reserves and Surplus”.       2

Ans: Reserves and Surplus: Under this head the following items are shown:

5. Give two objectives of cash flow statement.                 2

Ans. Refer Question No. 18 (or), of 2012

6. What is joint life policy?         2

Ans. A Joint Life Policy is an assurance policy taken on the joint lives of the partners. On the death of a partner, the firm becomes liable to pay the executors of deceased partner his capital, interest on capital, his share of profit from the closing of the previous year to the date of death and his share of reserves, goodwill etc. The total amount thus becoming due to the executors is usually significant and immediate payment of such heavy amount out of firm’s resources is likely to affect firm’s finances very adversely.

7. What are the sources of Cash Flow?  3

Ans. (i) Operating Activities; (ii) Investing Activities; and (iii) Financing Activities.

Examples of Operating Activities: (Sources of cash flow)

Examples of Investing Activities: (Sources of cash flow)

Examples of Financing Activities: (Sources of cash flow)

8. Explain average profit method of valuation of goodwill.          3

Ans. Average Profits Method: In this method, normal profits of business of a number of years are taken into account. Such profits are totaled up and their average is arrived at. The average profits are multiplied by the number year’s purchases to arrive at the value of goodwill.

For calculation of goodwill following steps are to be followed

Or

What are the circumstances when a revaluation of assets and liabilities becomes necessary?   3

Ans: When? Revaluation of Assets and Liabilities takes place in each of the following cases:

Why? The actual value of the assets and liabilities may be different from their book value as shown by the balance sheet. So Revaluation account is prepared at the time of reconstitution of partnership to record any increase/decrease in the value of assets and liabilities. The value of some assets may increase with time and some may show a decrease. Similarly some liabilities may also show an increase/decrease in the value. The Revaluation account is credited if there is an increase in the value of assets or decrease in the value of liabilities. On the other hand it is debited if there is any decrease in the value of assets or an increase in the value of liabilities. This account is a nominal account and is sometimes also called Profit and Loss adjustment account. The profit or Loss arising due to revaluation is divided among the old partners in their old ratio.

9. Mention the uses of Securities Premium.       3

Ans: Under Section 52 of the Company Act 2013, the amount of security premium may be used only for the following purposes:

Or

Mention three advantages of issuing debentures.          3

Ans. Advantages of debentures

10. What are contingent liabilities? Mention any two items.      3

Ans: Contingent Liabilities: Those liabilities which may or may not arise because they are dependent on a happening in future. It is not recorded in the books of accounts but is disclosed in the Notes to Accounts for the information of the users. Examples:

Or

What is the importance of Financial Analysis?   3

Ans. Objectives (Purposes) and significance of Financial Statement analysis:

Financial analysis serves the following purposes and that brings out the significance of such analysis:

11. From the following information, calculate Current Ratio:        3

Solution:

Current Ratio = Current Assets/Current Liabilities

Current Assets = Inventory + Debtors + Cash + Bills Receivable + Advance Tax + Accrued Interest

= 55,000 + 40,000 + 37,000 + 20,000 + 4,000 + 4,000

= 1,60,000

Current Liabilities = Creditors + Bills Payable + Bank Overdraft

= 48,000 + 28,000 + 4,000

= 80,000

\ Current Ratio = 1,60,000/80,000

= 2 : 1

12. The Star Cricketer club had a cash balance of Rs.500 and a Bank balance of Rs.1000 on 1.4.2011. From the following details, prepare a Receipts and Payments Account for the year ended 31.03.2012:            5

Solution:

Receipts & Payments Account of the Star Cricketer Club

For the year ended on 31^st March, 2012

13. Pari and Puja are partners sharing profits as 3:2. Their capitals are 80000 and 60000 respectively as on 01.04.2011. Net profit of the business for the year 2011-12 was Rs. 40000 before considering the following:          5

(i) Interest on Capital @ 5% p.a.

(ii) Salary to Puja Rs.6000 p.a.

(iii) Commission to Puja @ 10% of Net Profit after deducting Interest on capital and Salary but before charging such commission. Prepare a profit and Loss Appropriation Account for the year ended on 31.03.2012.

Solution:

Profit & Loss Appropriation A/c

For the year ended on 31.3.2012

14. Rohan and Sohan are partners sharing profits and losses in the ratio of 3:2. Mohan joins the firm as a new partner for 1/4^th share of future profit. Mohan brings Rs.20,000 as capital and required amount of premium. The goodwill of the firm was valued at Rs. 30,000. Give journal entries assuming that partner’s capitals are fixed.                5

Solution:

Journal Entries

In the books of firm

Or

A and B are partners sharing profits and losses A – 75% and B – 25% respectively. Their Balance sheet as on 31.03.2012 is given below:      5

X was admitted as a new partner on the following terms:

(i) That Plant and machinery is to be reduced by 25%.

(ii) Furniture is to be depreciated by 10%.

(iii) Bad debts amounted to Rs.1750 and are to be written off.

(iv) There was an unrecorded typewriter valued at Rs.5000.

(v) Outstanding legal charges estimated at Rs.1250.

Prepare a Revaluation Account.

Solution:

Revaluation A/c

15. What is a Sinking Fund? How is it created?  5

Ans: Sinking fund is a fund into which a company sets aside money over time, in order to retire its preferred stock, bonds or debentures. Such fund is created mainly for some specific purposes which are:

Creation of Sinking fund for redemption of debentures:

For redemption of debentures or other long term liabilities, a fixed amount is kept aside yearly as sinking fund for the specific purpose and the same amount is invested in securities etc.  for a specific period so that the sufficient amount is available at the time of redemption of long term liabilities. The amount to be set aside can be determined with the help of Sinking fund table. The amount kept aside should not be debited to Profit and loss account but to Profit and loss appropriation account because the same is an allocation of profit not expenditure.

16. A Company has issued Rs.100000, 10%Debenture at 5% discount repayable at 5% premium after 4 years. Give journal entries for issue and show the loss on issue of debentures account over 4 years.                             5

Solution:

Journal Entries

In the books of A company

Loss on issue of Debentures A/c

Working Note:

Amount to be written off each year.

= Amount of loss on issue of debentures/ No. of years  = 10,000/5 = 2,500

17. What are the uses and importance of financial statements?                                5

Ans. Uses and Importance of Financial Statements to its various users

Or

What are the limitations of Financial Statement Analysis?          5

Ans. Limitations of financial analysis:  Financial analysis suffers from various limitations which are given below:

18. How would you compute the amount due to a Retiring Partner?       5

Ans. Calculation of amount due to the retiring partner: The amount due to the retiring partner is paid according to the terms of partnership agreement. The retiring partners’ claim consists of:             

(a) The credit balance of Capital Account;

(b) His/her share in the Goodwill of the firm;

(c) His/her share in the Revaluation Profit:

(d) His/her share in General Reserve and Accumulated Profit;

(f) Interest on Capital

But, the following deductions are made from his/her Capital Account on account of:

(a) His/her share in the Revaluation loss;

(b) His/her Drawings and Interest on Drawings up to the date of retirement

(c) His/her share of any accumulated losses

(d) Loan taken from the firm.

The total amount so calculated is the claim of the retiring partner. He/she is interested in receiving the amount at the earliest. Total payment may be made immediately after his/her retirement. However, the resources of the firm may not be adequate to make the payment to the retiring partner in lump sum, then firm makes payment to retiring partner in installments.

19. X, Y and Z are in a partnership sharing profits in the proportion of 5:3:2. On 31.03.2011 their Balance sheet was as under:                  8

X died on 01.10.2011. It was agreed between his executors and the remaining partners that:

(i) Goodwill is valued at 2 years purchase of the average profit of the previous 5 years which were:

2006 – 07:15000, 2007 – 08: 13000, 2008 – 09: 12000, 2009 – 10: 15000, 2010 – 11: 20000.

(ii) Patents are valued at Rs.8000, Machinery at Rs.28000, and Building at Rs.30000.

(iii) Profit for the year 2011 – 12 is taken as having accrued at the same rate as the previous year.

(iv) Interest on Capital is provided at 10% p.a.

(v) A sum of Rs.11500 was to be paid to his executors immediately.

Prepare X’s Capital Account and his Executor’s Account at the time of his death.

Solution:

X’s Capital A/c

X’s Executors A/c

Revaluation A/c

Working Note:

1. Profit of X = 20,000 x 5/10 x 6/12 = 5,000

2. Interest on Capital = 35,000 x 10/100 x 6/12 = 1,750

3. Goodwill = (15,000 + 13,000 + 12,000 + 15,000 + 20,000)/5 x 2

= (75,000/5) x 2

= 30,000

\X’s share of goodwill = 30,000 x 5/10 = 15,000

Y’s Contribution = 30,000 x 3/10 = 9,000

Z’s Contribution = 30,000 x 2/10 = 6,000

20. Karan Ltd. decided to issue 10000 shares of Rs.100 each at a discount of 10%, payable as follows:

On Application – Rs.30

On Allotment – Rs.40 (After deducting discount)

Balance on 1^st and final call.

The company received 9000 applications. All the shares were duly accepted and allotted. All the calls were duly made and all call money received accordingly. Give Journal Entries and prepare a Balance Sheet.

Solution:

Journal Entries

In the books of Karan Ltd.

Or

Ram, Shyam and Mohan were in partnership sharing profits and losses in the ratio of 3:2:1. On 01.01.2010 Shyam retires from the firm. On that date the Balance Sheet of the firm was as follows:                             8

The terms of retirement were:

(i) Goodwill is to be valued at Rs.12000.

(ii) Premises to be appreciated by Rs.5000.

(iii) Furniture to be depreciated by Rs.1000.

(iv) Provision for bad debts to be increased by Rs.400.

(v) Investments were sold at book value and the amount due to Shyam was paid off.

Pass Journal Entries to record the necessary adjustments for retirement of Shyam.

Solution:

Journal Entries

In the books of firm

Working Note:

Goodwill

Gaining Ratio = New Ratio – Old Ratio

= 3/4 – 3/6 : 1/4 – 1/6

= 9 – 6/12 : 3 – 2/12

= 3/12 : 1/12 = 3:1

Shyam’s share of goodwill = 2/6 x 12,000 = 4,000

Ram’s Contribution = 4,000 x 3/4 = 3,000

Mohan’s Contribution = 4,000 x 1/4 = 1,000

21. Shiba and Dhruba are partners in a firm. The trial Balance of the firm as on 31.03.2011 was as follows:            8

Trial Balance

Prepare a Profit and Loss Account and a Profit and Loss Appropriation Account for the year ended 31.03.2011 and also a Balance Sheet as on that date after taking into consideration the following adjustments:

(i) Write off Rs.1000 as bad debts and provide a 5% provision on sundry debtors for doubtful debts.

(ii) Interest on investments accrued Rs.600.

(iii) Interest on Partner’s Capital is allowed @ 5% p.a.

(iv) Create a General Reserve by taking Rs.500 out of profits.

Solution:

Profit & Loss A/c

For the year ended on 31.03.2011

Profit & Loss Appropriation A/c

For the year ended 31.03.2011

Partner’s Capital A/c

Balance Sheet

As on 31.03.2011

22. Fair Deal Ltd. invited applications for the issue of 2000, 10%Debentures of Rs.100 each at a discount of 10% payable Rs.30 on application on 1^st May, 2010, Rs.30 on allotment (after deducting discount) on 1^st June, 2010 and balance on first and final call on 1^st July, 2010. All the debentures were fully subscribed. Debentures money was duly called and paid up.  Give the Journal Entries and show how the debentures and Debenture Discount will be shown in the Balance sheet of the company.            8

Solution:

Journal Entries

In the books of Fair Deal Ltd.

Balance Sheet of Fair Deal Ltd.

Or

Janata Iron Ltd. has forfeited the following shares of Rs.10 each fully called up for non-payment of allotment and call moneys.                              8

(a) 200 shares held by A who has paid Application money of Rs.2 each only.

(b) 300 shares held by B who has paid application and allotment money of Rs.2 and Rs.3 each respectively.

(c) 400 shares held by C who has paid application, allotment and first call money of Rs.2, Rs.3 and Rs.2 each respectively.

All the above forfeited shares have been re-issued at a discount of 10%. Expenses on re-issue amounted to Rs.500. Give the journal entries in the books of Janata Iron Ltd.

Solution:

Journal Entries

In the books of Janata Iron Ltd.