ACCOUNTANCY SOLVED QUESTION PAPER 2022
AHSEC CLASS 12 Solved Question Papers
Full Marks: 100
Pass Marks: 30
Time:
Three Hours
The
figures in the margin indicate full marks for the questions.
1. (a) Fill in the blanks
with appropriate word/words: (any four)
a) Income and Expenditure account is prepared on _______ basis. 1
Ans: Accrual Basis
b) Liability of a partner is _______. 1
Ans: Unlimited
c) Annual Report is issued by a company to its _______. 1
Ans: Shareholders
d) Liquid ratio is the relationship between _______ and current
liabilities. 1
Ans: Liquid assets
e) Equity shareholders are _______ of a company. 1
Ans: Owners
(b) Choose the correct
alternative:
a) When a new partner is admitted – 1
1. Consent of all the partners is required.
2. Consent of majority of the partners is required.
3. Consent of any one partner is required.
Ans: 1. Consent of all the partners is required.
b) Balance of shares forfeited account after re-issue is transferred
to – 1
1) Reserve Fund.
b) Profit and Loss Account.
c) Capital Reserve.
Ans: c) Capital Reserve.
(c) State whether the
following statements are “True” or “False”: (any two)
1. Outstanding subscription is an asset. 1
Ans: True
2. A Preference Shareholders gets interest at a fixed rate. 1
Ans: False, dividend
3. Company’s shares are generally transferable. 1
Ans: True
4. Life membership fee is a capital receipt. 1
Ans: True
2. Mention two features of a not-for-profit
organisation. 2
Ans:
Characteristics
of Not-for-profit organisations: Following are the
main characteristics or the salient features of Not for Profit organisations:
a) The main
objective of not-for-profit organisations is not to make profit but to provide
service to its members and to the society in general.
b) The main
source of income of these organisations is admissions fees, subscriptions,
donations, grant-in-aid, etc.
3. What is Profit and Loss Appropriation
Account? 2
Ans:
Profit or loss appropriation account:
For the purpose of distribution of net profit between or amongst the partners,
an additional account known as profit and loss appropriation accounts is
prepared. This account is nominal in nature. It is prepared after profit and
loss accounts to show the distribution of net profit amongst the partners after
all appropriations.
4. What is the meaning of Cash Flow from
Financing Activities? 2
Ans:
Financing
activities are the activities which results in changes in the size and
composition of the owner’s capital and borrowings of the enterprises from other
sources. The financing activities of a firm include issuing or redemption of
share capital, issue and redemption of debentures, raising and repayment of
long term loans etc. Dividends and Interest paid are also come under financing activities.
5. Mention any two features of a
debenture. 2
Ans:
The characteristics/features of debentures can be summarised as follows:
a) Debentures are debt instruments.
b) Interest is payable on debentures at a fixed rate irrespective
of the profit earned by the business.
6. Mention any two rights of a
partner. 2
Ans:
Rights of a Partner:
a) Every partner has a right to take part in
the conduct and management of the business.
b) Every partner has a right to be consulted
in the matters of the partnership.
********************************************
ALSO READ (AHSEC ASSAM BOARD CLASS 12):
1. AHSEC CLASS 12 ACCOUNTANCY CHAPTERWISE NOTES
2. AHSEC CLASS 12 ACCOUNTANCY IMPORTANT QUESTION (THEORY)
3. AHSEC CLASS 12 ACCOUNTANCY IMPORTANT QUESTION BANK (PRACTICAL)
4. AHSEC CLASS 12 ACCOUNTANCY PAST EXAM PAPERS (FROM 2012 TILL DATE)
5. AHSEC CLASS 12 ACCOUNTANCY SOLVED QUESTION PAPERS (FROM 2012 TILL DATE)
6. AHSEC CLASS 12 ACCOUNTANCY CHAPTERWISE MCQS
********************************************
7. A and B are partners sharing
profits and losses in the ratio 3:2. C is admitted into the partnership. A
surrendered 1/3rd of his share and B surrendered 1/4th of
his share in favour of C. Determine the new profit sharing ratio. 3
Ans:
Or
Write three distinctions between Fixed
Capital Account and Fluctuating Capital Account. 3
Ans:
Difference between fixed capital accounts and fluctuating capital Accounts:
Basic of difference |
Fixed Capital Account |
Fluctuating Capital Accounts |
1.
Opening and Closing balance |
Opening
and Closing balances normally remains same. |
Opening
and Closing balance change due to adjustment in capital account. |
2.
Current account |
Current
accounts of partners are opened in this case. |
Current
accounts of partners are not opened in this case. |
3.
Adjustment relating to capital |
All
adjustment relating to partners’ capital accounts are made in current
account. |
All
such adjustments are made in capital account itself. |
4.
Closing capital |
The
closing balance of capital account always shows a credit balance. |
The
closing balances of partner’s capital account may be debit or credit. |
8. Explain three uses of financial
statement. 3
Ans: Objectives and purposes for which financial statements are prepared:
a) Financial
statements are prepared to provide reliable information about the earning of a
business enterprise and it ability to operate of profit in future.
b) Financial
statements are prepared to show the financial strength and weakness of the
enterprise.
c) Financial
statements are intended to provide the base for tax assessments.
9. Mention any three objectives of
preparing Comparative Statement. 3
Ans:
Objectives of Comparative statements
a) Inter-firm
and intra-firm Comparison: Inter-firm and intra-firm comparison becomes easy
with the help of financial analysis. It helps in assessing own performance as
well as that of others.
b) Understandable:
It simplifies and summarises the accounting figures to make them understandable
to the users. It gives a brief idea about the whole story of changes in the
financial condition of a business.
c) To judge the
financial health of the company: The main objective of the financial analysis
is to determine the financial strength and weakness of the company. It is done
by properly establishing the relationship between the various items of balance
sheet and profit and loss account.
Or
A company’s stock is Rs. 2,00,000.
Total liquid assets are Rs. 8,00,000 and quick ratio is 2:1. Calculate current
ratio.
10. Explain the following terms: 3 [Out of syllabus]
a) Capital Fund.
b) Life Membership Fee.
c) Entrance Fee.
Or
Write three features of Fund
Based Accounting.
Or
Calculate the amount of
stationery consumed to be shown in the Income and Expenditure A/c for the year
ended 31st December, 2020:
|
01-01-2020 |
31-12-2020 |
Creditors for stationery Stock of stationery |
4,000 5,400 |
6,200 5,000 |
During the year 2020 payment
made for stationery was Rs. 40,000.
11. Write three differences between
Realisation Account and Revaluation Account. 3
Ans:
Difference between Revaluation Account and Realisation Account:
Basis |
Revaluation Account |
Realisation Account |
Meaning |
Revaluation
account is prepared in order to work out the profit or loss on revaluation of
assets and liabilities. |
Realisation
account is prepared to work out the profit or loss on realisation of assets
and payment to liabilities. |
Preparation |
Revaluation
account is prepared at the time of admission, retirement or death of a
partner. |
Realisation
account is prepared at the time of dissolution of a partnership firm. |
Closing
of accounts |
After
preparing the revaluation account the firm’s business gets going with the
same set of books. |
After
preparation of Realisation account, all the accounts of the firm are closed. |
Or
Write any three uses of Cash Flow
Statement.
Ans: The Cash Flow
Statement is prepared because of number of merits, which are offered by it.
Such merits are also termed as its objectives. The important objectives are as
follows:
a) To Help the Management in Making Future Financial
Policies: Cash Flow statement is very helpful tool to
the management. The management can base its future financial policies and is in
a position to know about surplus or deficit of cash with the help of cash flow
statement.
b) Helpful in determining the ability to pay
dividends: Cash flow statement indicates the
various sources and uses of cash under different heads which helps the
shareholders to know whether the business can make the payment of dividends on
their investment or not.
c) Efficient Cash Management: It helps in efficient management of cash resources. It will help
the management to make the reliable cash flow projections for the immediate
future and will tell surplus or deficit of cash so that management can make
plan for the investment of surplus cash or to arrange the sources to meet the
deficiency.
12. Prepare Income and
Expenditure Account from the following Receipts and Payments Account and other
details of Surya Club for the year ended 31st December, 2019: 5 [Out of Syllabus]
Receipts and Payments
Account
Receipt |
Rs. |
Payments |
Rs. |
To Balance b/d: Cash-in-hand To Subscriptions 2018
900 2019
19,000 2020
1,000 To Sale of newspaper To Life Membership Fee To Donation To Donation for Building To Interest To Maintenance Grant To Sale of Furniture |
10,000 20,900 100 5,000 6,000 8,000 200 2,000 1,000 |
By Salaries By Honorarium By Travelling Expenses By Telephone Charges By Investment By Construction of
Building By Rent By Postage By Balance c/d: Cash-in-hand |
12,000 3,000 2,000 5,000 10,000 7,000 2,000 1,000 11,200 |
|
53,200 |
|
53,200 |
Other
details:
(1) Outstanding Salaries Rs.
1,000.
(2) Subscription Outstanding Rs.
2,000.
(3) Subscription for 2019
received in 2018 Rs. 200
Or
Write
five distinctions between Receipts and Payments Account and Income and
Expenditure Account.
13. Explain the method of calculating
“Cash flows from Operating Activities” under direct method. 5
Ans:
Or
Calculate cash from operating
activities from the following information:
|
2019
(Rs.) |
2020
(Rs.) |
Profit
and Loss A/c Debtors
Bills
Receivable General
Reserve Salary
Outstanding Wages
Prepaid Goodwill
Cash
and Bank Balance |
60,000 87,000 62,000 2,02,000 30,000 5,000 80,000 40,000 |
65,000 50,000 1,03,000 2,37,000 12,000 7,000 70,000 30,000 |
14. What is Ratio Analysis? Mention any three limitations
of ratio analysis. 2+3=5
Ans: A Ratio is
an arithmetical expression of relationship between two related or
interdependent items. If such ratios are calculated on the basis of accounting
information, then they are called accounting ratios. Simply, accounting ratio
is an expression of relationship between two accounting terms or variables or
two set of accounting heads or group of items stated in financial statement. It
is one of the techniques of financial analysis which is used to evaluate the operating
efficiency and financial position of a business concern.
Limitations of
Ratio Analysis
1. False Result:
Ratios are calculated from the financial statements, so the reliability of
ratio is dependent upon the correctness of the financial statements. If
financial statements are misleading, then the accounting ratios also gives a
false picture.
2. Ignores Price
Level Changes: Change is price level affects the comparability of ratios. A
change in the price level makes the ratio analysis of different accounting
years invalid because accounting records ignores change in value of money.
3. Qualitative
aspect Ignored: Since the financial statements are based on quantitative
aspects only, the quality aspect such as quality of management, quality of
labour force etc., are ignored while calculating accounting ratios. Under such
circumstances, the conclusions derived from ratio analysis would be misleading.
Or
Briefly explain the meaning and significance of any
two of the following ratios: 2½ x 2 = 5
a) Debt-Equity Ratio.
Ans: Debt-Equity Ratio:
Debt equity ratio shows the relationship between long-term debts and
shareholders funds’. It is also known as ‘External-Internal’ equity ratio.
Objective
and Significance: This ratio is a measure of owner’s stock in the business.
Proprietors are always keen to have more funds from borrowings because:
(i)
Their stake in the business is reduced and subsequently their risk too
(ii)
Interest on loans or borrowings is a deductible expenditure while computing
taxable profits. Dividend on shares is not so allowed by Income Tax
Authorities.
b) Gross Profit Ratio.
Ans: c) Gross Profit Ratio: Gross Profit Ratio
shows the relationship between Gross Profit of the concern and its Net Sales.
Gross Profit Ratio can be calculated in the following manner: Gross Profit
Ratio = Gross Profit/Net Sales x 100
Objective
and Significance: Gross Profit Ratio provides guidelines to the concern whether
it is earning sufficient profit to cover administration and marketing expenses
and is able to cover its fixed expenses. This ratio can also be used in
stock-inventory control. Maintenance of steady gross profit ratio is important.
Any fall in this ratio would put the management in difficulty in the
realisation of fixed overheads of the business.
c) Quick Ratio.
Ans: Liquid ratio shows short-term solvency
of a business. It is also called acid-test ratio and quick ratio. It is
calculated in order to know whether or not current liabilities can be paid with
the help of quick assets quickly. Quick assets mean those assets, which are
quickly convertible into cash.
Objective
and Significance: Liquid ratio is calculated to work out the liquidity of a
business. This ratio measures the ability of the business to pay its current
liabilities in a real way. The ideal liquid ratio is supposed to be 1:1. In
case, this ratio is less than 1:1, it shows a very weak short-term financial
position and in case, it is more than 1:1, it shows a better short-term
financial position.
d) Stock Turnover Ratio.
Ans: Stock Turnover Ratio:
Stock turnover ratio is a ratio between cost of goods sold and average stock.
This ratio is also known as stock velocity or inventory turnover ratio.
Stock
Turnover Ratio = Cost of Goods Sold/Average Stock
Objective
and Significance: Stock is a most important component of working capital. This
ratio provides guidelines to the management while framing stock policy. It
measures how fast the stock is moving through the firm and generating sales. It
helps to maintain a proper amount of stock to fulfill the requirements of the
concern. A proper inventory turnover makes the business to earn a reasonable
margin of profit.
Or
|
Rs. |
Cost of Goods
Sold Stock Turnover
Ratio |
3,00,000 6 times |
Find out the
value of Opening Stock, if Opening Stock is Rs. 10,000 less than the Closing
Stock. 5
15.
From the following Income Statement, prepare Common Size Income Statement and
give your comments: 5
Particulars
|
2018
(Rs.) |
2019
(Rs.) |
Particulars
|
2018
(Rs.) |
2019
(Rs.) |
To
Cost of Goods Sold To
Gross Profit c/d |
95,000 25,000 |
1,05,000 40,000 |
By
Net Sales |
1,20,000 |
1,45,000 |
|
1,20,000 |
1,45,000 |
|
1,20,000 |
1,45,000 |
To
Office Expenses To
Distribution Expenses To
Net Profit c/d |
2,000 3,000 20,000 |
8,000 5,000 27,000 |
By
Gross Profit b/d |
25,000 |
40,000 |
|
25,000 |
40,000 |
|
25,000 |
40,000 |
Or
Give the new format of the Balance
Sheet of a company (main headings only) as per the requirements of the revised
Schedule – VI of the Companies Act.
Proforma
of Balance Sheet
Name
of the Company …………………………………….
Balance
Sheet as at…………………………………….
Particulars |
Note No. |
Amount (Current Year) |
Amount (Previous Year) |
I. EQUITY AND LIABILITIES (1) Shareholders’ Funds (a)
Share capital (b)
Reserves and surplus (c)
Money received against share Warrants (2) Share application money pending
allotment (3) Non – current liabilities (a)
Long term borrowings (b)
Deferred tax liabilities (net) (c)
Other long term liabilities (d)
Long term provisions (4) Current liabilities (a)
Short term borrowings (b)
Trade payables (c)
Other current liabilities (d)
Short term provisions |
|
|
|
Total |
|
|
|
II ASSETS (1)
Non-Current Assets (a)
Fixed assets (i)
Tangible assets (ii)
Intangible assets (iii)
Capital work in progress (iv)
Intangible assets under development (b)
Non-current investments (c)
Deferred tax assets (net) (d)
Long term loans and advances (e)
Other non-current assets (2)
Current Assets (a)
Current investments (b)
Inventories (c)
Trade receivables (d)
Cash and cash equivalents (e)
Short term loans and advances (f)
Other current assets |
|
|
|
Total |
|
|
|
Or
Give five points of distinctions
between under subscription and over-subscription.
Basis |
Oversubscription |
Undersubscription |
Meaning |
When the number of shares applied is more
than the number of shares issued by a company, the issue of shares is said to
be oversubscribed. |
When the number of shares applied is less
than the number of shares issued by a company, the issue of shares is said to
be under subscribed. |
Allotment |
Allotment
of shares is made upto the number of shares issued. |
Allotment
of shares is made upto the number of shares applied. |
Minimum
subscription |
No
question of minimum subscription arise in case of oversubscription. |
Minimum
subscription is necessary in case of undersubscription. |
Refund
or adjustment |
Excess
money is refunded or adjusted with allotment or call money. |
Since
excess application money is not receive, therefore question of refund or
adjustment does not arises in case of under subscription. |
Accounting
entries |
Accounting
entries for application money is passed with number of shares applied and
remaining entries are pass with the number of shares issued. |
All
entries are passed on the basis of share application received. |
16.
A, B and C were in partnership sharing profits and losses in the ratio of 3 : 2
: 1. On 1st January, 2020, B retired from the firm. On that date
their Balance Sheet was as follows: 2+3=5
Balance Sheet
Liabilities
|
(Rs.)
|
Assets
|
(Rs.)
|
Creditors
Capitals:
A 30,000 B 20,000 C 20,000 |
27,180 70,000 |
Cash
Debtors
Stock
Buildings
Profit
and Loss A/c |
9,400 16,000 23,380 46,000 2,400 |
|
97,180 |
|
97,180 |
The terms of the retirement were:
(1)
Building is to be appreciated by Rs.
14,000.
(2)
Provision for doubtful debts is to be
made at 5% on the debtors.
(3)
The goodwill of the firm is to be
valued at Rs. 36,000.
(4)
No cash is to be paid to B immediately
and balance of his capital account is to be transferred to his loan account.
Prepare Revaluation Account and Partners’ Capital Account.
Or
Write the uses of securities premium
amount.
Ans: Under Section 52
of the Company Act 2013, the amount of security premium may be used only for
the following purposes:
a)
To write
off the preliminary expenses of the company.
b)
To write
off the expenses, commission or discount allowed on issued of shares or
debentures of the company.
c)
To provide
for the premium payable on redemption of redeemable preference shares or
debentures of the company.
d)
To issue
fully paid bonus shares to the shareholders of the company.
e)
In
purchasing its own shares (buy back).
17.
P, Q and R were in partnership sharing profits and losses in the ratio of 4 : 3
: 3. On 31st March, 2020 their Balance Sheet was as follows: 5
Balance Sheet
Liabilities
|
(Rs.)
|
Assets
|
(Rs.)
|
Creditors
Reserve
Capitals:
P 1,05,000 Q 85,000 R 80,000 |
87,000 33,000 2,70,000 |
Fixed
Assets Stock
and Debtors Cash
|
2,90,000 85,000 15,000 |
|
3,90,000 |
|
3,90,000 |
‘Q’ died on 30.06.2020. Under the partnership agreement the
executors of a deceased partner were entitled to:
(a)
Amount standing to the credit of
deceased partner’s capital account.
(b)
Interest on capital @ 12% p.a.
(c)
His share of goodwill. The goodwill of
the firm on Q’s death was valued at Rs. 2,70,000.
(d)
Share of profit from the closing of
the last financial year to the date of death on the basis of last year’s
profits.
The profit of the firm for the year ended 31.3.2020 was Rs.
2,40,000.
Prepare Q’s capital account on the date of his death.
Or
Distinguish between Profit and Loss
account and Profit and Loss Appropriation account.
Ans:
Difference between Profit and loss
account and Profit and loss appropriation account:
Profit and loss Account |
Profit and loss appropriation
account |
1.
It is prepared after trading account. 2.
This account is prepared by every form of business organisation. 3.
Items debited in profit and loss account are all expenses. 4.
At the time of preparing this account, matching concept is followed. 5.
This account is the basis of calculation of income tax. |
1.
It is prepared after profit and loss account. 2.
This account is prepared by partnership firm only. 3.
Items debited in profit and loss appropriation account are all appropriations. 4.
At the time of preparing this account, no matching concept is followed. 5.
This account is not the basis of calculation of income tax. |
18. What is Realisation Account? Write three cases
where a partnership firm may be dissolved by a court. 2+3=5
Ans: Realisation
account is prepared at the time of dissolution of firm. It is a nominal
account. It is prepared to find out profit or loss on realisation of assets and
payment of liabilities when a firm is dissolved. Any profit or loss on
realisation is transferred to the capital accounts of all the partners in their
profit sharing ratio. It is prepared by:
a) Transferring
all assets except cash or bank account to the debit side of the account.
b) Transferring
all liabilities except partner’s capital, partner’s loan and reserves and
surplus.
c) Amount
realised on sale of assets is credited to the realisation account.
d) Liabilities
paid are debited to the realisation account.
e) Expenses of
dissolution are debited to realisation account.
(v)
Dissolution by Court (Sec. 44): A court may order a partnership firm
to be dissolved in the following cases:
a)
When a partner becomes permanently
incapable of performing his/her duties as a partner.
b)
When partner deliberately and
consistently commits breach of partnership agreement.
c)
When the court considers it just and
equitable to dissolve the firm. The following are the cases for the just and
equitable grounds:
1. Deadlock in the management.
2. Where the partners are in talking terms between them.
3. Loss of substratum.
4. Gambling by a partner on a stock exchange.
Or
Amal and Bimal are
two partners in a firm. They share profits 3:2. Following is their Balance
Sheet as on 31st March, 2021 on which date the firm dissolved:
Balance Sheet
Liabilities
|
(Rs.)
|
Assets
|
(Rs.)
|
Creditors
Reserve Capitals:
Amal 20,000 Bimal 15,000 |
20,000 5,000 35,000 |
Fixed
Assets Stock
Debtors
Cash
Profit
and Loss A/c |
30,000 10,000 15,000 3,000 2,000 |
|
60,000 |
|
60,000 |
Fixed Assets are
realised at Rs. 28,000. Stock at Rs. 8,000 and Debtors at Rs. 13,000. Expenses
on realisation are Rs. 1,500.
Creditors are paid at a discount of 10%. Prepare Realisation A/c, Partners’
Capital A/c and Cash A/c. 2+2+1=5
19.
Pradeep and Pranab are partners in a firm. The Trial Balance of the firm as on
31st March, 2020 was as under:
Trial Balance
Debit |
(Rs.) |
Credit
|
(Rs.) |
Machinery
Goodwill
Patent
Sundry
Debtors Cash
in hand Closing
Stock Investment
Depreciation
on Machinery Rent
Carriage
Outward Taxes
Telephone
charges Commission
Drawings: Pradeep 5,000 Pranab 4,000 Salaries
Bank
Charges |
54,000 10,000 20,000 21,000 1,000 25,000 10,000 6,000 10,000 1,000 500 3,600 800 9,000 8,000 100 |
Capital:
Pradeep 50,000 Pranab 40,000 Sundry
Creditors Interest
on Investment Sundry
Receipts Bills
payable Bank
Overdraft Outstanding
Wages Trading
Account: Gross
Profit Discount
|
90,000 5,000 400 200 2,000 10,000 500 71,000 900 |
|
1,80,000 |
|
1,80,000 |
Prepare Profit and Loss A/c, Profit and Loss Appropriation A/c and
the Balance Sheet of the firm for the year ended 31st March, 2020,
after considering the following information:
(1)
Write off Rs. 1,000 as Bad Debt and
provide a 5% Provision on Sundry Debtors for Doubtful Debts.
(2)
Interest on Investment Accrued Rs.
600.
(3)
Interest on Partners’ Capital is
allowed @ 5% p.a.
(4)
Create a General Reserve by taking Rs.
5,000 out of profit.
20. (a) Write two differences between Authorised
Capital and Issued Capital of a company. 2
Ans: Difference between authorised capital and issued
capital
Authorised capital |
Issued capital |
It is the
maximum permitted capital of the company. |
It is part of
authorised capital which is issued to the public for subscription. |
It is not the
actual capital raised by the company. |
It is the
actual capital raised by the company. |
(b) What is Minimum Subscription? 2
Ans: Minimum Subscription: It means the minimum amount that, in the
opinion of directors, must be raised to meet the needs of business operations
of the company. AS per SEBI guidelines, the minimum subscription of capital
cannot be less than 90% of the issued amount.
(c) What is Reserve Capital? 2
Ans: Reserve Capital: A company may by special
resolution determine that any portion of its share capital which has not been
already called up shall not be capable of being called-up, except in the event
of winding up of the company. Such type of share capital is known as
reserve-capital.
(d) What is Call-in-Arrear? 2
Ans: Calls-in-Arrears: The amount which is not paid by shareholders when money is
demanded by the company, such amount is known as ‘Calls-in-Arrears’. The
maximum rate of interest to be provided on calls in arrears must not exceed 10%
per annum.
Or
Arnab Company
Ltd. issued 10,000 equity shares of Rs. 100 each at a premium of 10% payable as
under: 8
Rs. 30 on
Application
Rs. 60 on
Allotment (including premium)
Rs. 20 on call
Kamalesh holding
400 shares failed to pay the allotment and call money and Monalisha holding 700
shares failed to pay the call money.
Show the Entries
in the Cash book and Journal of the company for the above transactions.
21. Give the
Journal entries for issue and redemption of Debentures in respect of the
following: 8
a) Debentures
issued at a discount and redeemable at premium.
b) Debentures
issued at premium and redeemable at premium.
c) Debentures
issued at par and redeemable at par.
d) Debentures
issued at premium and redeemable at par.
Or
What are the differences between a
shareholder and a debenture holder?
Ans:
Basis of Difference |
Shares |
Debentures |
Ownership |
Shareholders
are the owners of the Company. |
Debenture
holders are the Creditors of the Company. |
Repayment |
Normally,
the amount of share is not returned during the life of the company. |
Debentures
are issued for a definite period. |
Convertibility |
Shares
cannot be converted into debentures. |
Debentures
can be converted into shares. |
Restrictions |
Dividend
is paid to the shareholders as an appropriation of profit. |
Interest
is paid to the debenture holders as a charge against profit. |
Forfeiture |
Shares
can be forfeited for non-payment of allotment and call monies. |
Debentures
cannot be forfeited for non-payment of call monies. |
Or
Explain different methods of redemption of debentures.
Ans:
Meaning of Redemption of Debentures: Redemption of
debenture is the discharge of debenture liability. It can be done either by
repaying the money to debenture holders or converting the debenture into
shares. The conditions of redemption are clearly stated at the time of issue of
debenture in the prospectus. Debentures can be redeemed at par, premium or
discount as per the terms of issue. The period of maturity, redemption amount,
yield on redemption etc. will be mentioned in the prospectus. In case the
non-convertible debentures proposed to be rolled over (repayment extended for
an additional period), a compulsory option should be given to the debenture
holders who wish to withdraw from the debenture programme, as per the guidelines
issued by SEBI.
Methods of Redemption of Debentures
i)
Redemption of debentures in lump-sum at maturity: Under this method the entire
debentures are redeemed at the end of stipulated date stated in the prospectus
for the issue of debentures. The main drawback of this method is that the
company has to arrange a large amount at the time of redemption.
Journal entries for redemption of
debentures under this method
a) When debentures are due for
redemption
Debentures
a/c
Dr
Premium
on redemption of debentures a/c
Dr (If debentures are redeemed at a premium)
To
Debenture holders a/c
b) When payment is made to the
debenture holders
Debenture
holder a/c
Dr
To
Bank
ii)
By Draw of Lots: Under this method the company does not redeem all the
debentures at the same time. Instead a part of debentures redeemed at the end
of each year. The company selects the debentures for redemption by drawing lot
and they are redeemed that year.
Journal entries for redemption of
debentures in installments (these entries are passed every year)
a) When debentures are due for
redemption
Debentures
a/c
Dr
Premium
on redemption of debentures a/c
Dr (If debentures are redeemed at a premium)
To
Debenture holders a/c
b) When payment is made to the
debenture holders
Debenture
holder a/c
Dr
To
Bank
c) When amount equal to the face value
of debenture to be redeemed is transferred to DRR
Profit
and loss appropriation a/c Dr
To
Debenture redemption reserve a/c
iii)
By Purchasing in the Open Market: Debentures can be redeemed by purchasing them
from the open market. If a company finds its debentures are available in the
open market at cheap rate it will purchase those debentures and cancel them.
The profit due to cancellation of such debentures is transferred to capital
reserve.
Journal entries for cancellation of
debentures under this method:
a) When own debentures are purchased
for cancellation:
Own
debentures a/c
Dr
To
Bank a/c
b) When debentures are cancelled
Debentures
a/c
Dr
To Own debentures
a/c
To Profit
on cancellation of own debentures a/c
c) Transfer of profit to capital
reserve
Profit
on cancellation of own debentures a/c Dr.
To
Capital reserve a/c
iv)
By Conversion into New Debentures or Shares: Conversion of debentures into
shares or new debentures is another method of redemption. When debentures are
converted to shares, the company does not pay money to debenture holders.
Instead the company issues share or debenture certificates in place of
debentures.
Journal entries for conversion of
debentures
a) When debentures are due for
redemption
Debentures
a/c
Dr
Premium
on redemption of debentures a/c
Dr (If debentures are redeemed at a premium)
To
Debenture holders a/c
b) When new share or debentures are
issued to the debenture holders
Debenture
holder a/c
Dr.
Discount
on issue of debentures a/c Dr.
To
Share Capital a/c
To
Debentures a/c
To
Securities premium reserve a/c (If shares or debentures are issued at a
premium)
22.
Ram and Mohan are partners sharing profits and losses equally. Their Balance
Sheet on 1st April, 2021 was follows:
Balance Sheet
Liabilities
|
(Rs.)
|
Assets
|
(Rs.)
|
Sundry
Creditors Capitals:
Ram: 40,000 Mohan: 30,000 |
15,000 70,000 |
Cash
Debtors
Stock
Machinery
Building
|
5,000 16,000 12,000 22,000 30,000 |
|
85,000 |
|
85,000 |
They decided to
admit Sanjoy into partnership for 1/3rd share on the following
terms:
a) Machinery and
Buildings were revalued at Rs. 20,000 and Rs. 42,000 respectively.
b) Creditors
were reduced by Rs. 2,000.
c) Provision for
doubtful debts on debtors is to be created at Rs. 1,000.
d) Sanjoy is to
bring in Rs. 40,000 as his capital and Rs. 24,000 as premium for goodwill.
Pass journal
entries for the above information and prepare Balance Sheet of the firm after
the admission of Sanjoy.
Or
Write any three limitations of partnership business. 3
Ans: Limitations
of Partnership:
1.
Less capital as compared to a company: Capital is less due to limited number of
partners.
2.
Unlimited liability of partners: In case of loss, private property of partners
is also liable.
3.
Conflict between partners: There is
always a chance of dispute between or amongst the partners.
Explain five factors affecting the goodwill of a firm.
5
Ans: Factors affecting the value of Goodwill are:
a) Skill in
Management: If the management is capable and efficient, the firm will earn good
profits and that will raise the value of goodwill.
b) Location
Factor: If the business is located at a favourable place, it can increase the
volume of sales which correspondingly increases the value of goodwill.
c) Quality: If
the quality of goods and services are high, then there will be a ready market
for the goods and the value of its goodwill will be high.
d) Favourable
Contracts: Sometimes, a firm enters into long term contracts for sale and
purchase of goods at favourable prices. This will also affect profits and
goodwill of the firm.
e) Risk
Involved: When the risk is less in the business it creates more goodwill but if
the risk is more, it creates less goodwill.
Or
Distinguish between dissolution of Partnership and
dissolution of Partnership firm. 8
Ans: Dissolution of a
partnership means the termination of connections with the firm by some of
the partners of the firm, and remaining partners of the firm continuing the
business of the firm under the same firm’s name under an agreement. Hence,
admission, retirement and a death of a partner are considered dissolution of
partnership. The dissolution of partnership may take place in any of the
following ways:
a)
Change in existing profit sharing ratio
among partners;
b)
Admission of a new partner;
c)
Retirement of a partner;
d)
Death of a partner;
e)
Insolvency of a partner.
Dissolution
of a firm means discontinuation of the firm’s business
and termination of relationship between the partners. According to Sec. 39 of
Indian Partnership Act 1932, “Dissolution of firm means dissolution of
partnership between all the partners in the firm."
Therefore, when a firm is dissolved, assets of the firm are
disposed off, liabilities are paid off and the accounts of all the partners are
also settled.
Difference between dissolution of
partnership and dissolution of firm
Basis of distinction |
Dissolution of partnership |
Dissolution of firm |
Relationship |
Relationship
amongst all the partners does not come to an end. |
Relationship
amongst all the partners comes to an end. |
Continuation
of business |
Business
of the firm may continue. |
Business
of the firm does not continue. |
Inter
relationship |
Dissolution
of partnership may or may not result in dissolution of the firm. |
Dissolution
of the firm necessarily results in dissolution of partnership. |
Books
of accounts |
Books
of accounts are not closed. |
Books
of accounts are closed. |
Nature |
Dissolution
of partnership is voluntary. |
Dissolution
of partnership may sometimes compulsory or sometimes voluntary. |
Account |
Revaluation
account is prepared. |
Realisation
account is prepared. |
***
Post a Comment
Kindly give your valuable feedback to improve this website.