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  • Question 1
    Answer each of the following questions briefly:                                [10 × 2 = 20 Marks]
    (i) Define Prime Cost.
    (ii) Explain FIFO method of stock valuation.
    (iii) What do you mean by the term non-recurring expenses in joint venture?
    (iv) What is the purpose of opening a joint bank account for joint venture?
    (v) State two advantages of self-balancing system.
    (vi) Why is a profit and loss appropriation account necessary in a partnership firm?
    (vii) Why is there a need for revaluation of assets and liabilities of a firm if there is a change in profit-sharing ratio of partners?
    (viii) Explain ‘pro-rata allotment of shares’ by means of a suitable example.
    (ix) State two differences between ‘current assets’ and ‘current liabilities’.
    (x) Mention two uses of ratio analysis.
    VIEW SOLUTION
  • Question 2
    Winston was allotted 100 equity shares of Rs. 100 each by Diplod Ltd. originally issued at a discount of 6% per share. He failed to pay the final call at Rs. 35. These shares were forfeited and out of these, 50 shares were re-issued to Morgan at Rs. 90 each as fully paid up. Journalise the transactions in respect of forfeiture and re-issue of shares only. [10 Marks]
    VIEW SOLUTION
  • Question 3

    Trading and Profit and Loss Account of Myers Ltd. for the year ended 31st March 2007.                                        [14 Marks]

    Particulars
    Amount
    Rs
    Particulars
    Amount
    Rs
    To opening stock
    15,250
    By sales
    1,00,100
    To purchases
    63,050
    By closing stock
    19,600
    To carriage
    400
     
     
    To wages
    1,000
     
     
    To Profit and Loss A/c
    40,000
     
     
     
    1,19,700
     
    1,19,700
     
     
     
     
    To Administrative expenses
    20,200
    By Trading A/c
    40,000
    To salaries
    2,400
    By non operating income
    1,200
    To financial expenses
    1,400
     
     
    To Non-operating expenses
    400
     
     
    To Balance c/d
    16,800
     
     
     
    41,200
     
    41,200
     
     
     
     
     
    Balance Sheet of Myers Ltd.
    As at 31st March, 2007
    Liabilities
    Amount
    Rs
    Assets
    Amount
    Rs
    Share capital
    70,000
    Fixed assets
    60,100
    Reserves
    1,200
    Stock
    19,000
    Profit and Loss A/c
    16,800
    Debtors
    9,000
    Creditors
    3,700
    Bank
    3,600
     
    91,700
     
    91,700
           

    From the above, calculate the follow ratios:
    (i) Gross Profit ratio (%)
    (ii) Net Profit ratio (%)
    (iii) Stock turnover ratio
    (iv) Proprietary ratio
    (v) Current ratio
    (vi) Quick ratio
    (vii) Working capital turnover ratio.

    VIEW SOLUTION
  • Question 4

    The following are the Balance Sheets of Jardine Ltd. as on 31st December 2006 and 2007:-                          [14 Marks]

    Liabilities
    2006
    2007
    Assets
    2006
    2007
    Share capital
    5,10,000
    5,50,000
    Goodwill
    25,000
    20,000
    Loan
    2,50,000
    1,50,000
    Building
    2,10,000
    3,30,000
    General reserve
    1,00,000
    1,00,000
    Machinery
    3,00,000
    4,00,000
    Profit and Loss A/c
    55,000
    95,000
    Stock
    1,25,000
    1,05,000
    Provision for taxation
    20,000
    55,000
    Debtors
    1,50,000
    1,20,000
    Creditors
    25,000
    20,000
    Cash
    1,50,000
    12,000
    Bills payable
    10,000
    15,000
    Preliminary expenses
    15,000
    10,000
    Provision for doubtful debts.
    5,000
    12,000
     
     
     
     
    9,75,000
    9,97,000
     
    9,75,000
    9,97,000
       
     
         

    Additional information:-

    (i) During the year, a part of the machinery costing Rs. 2,500 was sold for Rs. 1,500.

    (ii) Dividend of Rs. 50,000 was paid during the year.

    (iii) Income tax of Rs. 25,000 was paid during the year.

    (iv) Depreciation provided during the year on Building Rs. 5,000 and Machinery Rs. 25,000.

    From the above, you are required to prepare a cash flow statement as per Accounting Standard – 3. VIEW SOLUTION
  • Question 5

    The following are is the trial balance of Martin Ltd. as on 31st March 2007:-                                  [14 Marks]

    Debits
    Amount
    Rs
    Credits
    Amount
    Rs
    Opening stock
    75,000
    Purchase returns
    10,000
    Purchases
    2,45,000
    Sales
    3,40,000
    Wages
    30,000
    Discount
    3,000
    Carriage
    950
    Profit and Loss A/c
    15,000
    Furniture
    17,000
    Share capital
    1,00,000
    Salaries
    7,500
    Creditors
    17,500
    Rent
    4,000
    General reserve
    15,500
    Trade expenses
    7,050
    Bills payable
    7,000
    Dividend paid
    9,000
     
     
    Debtors
    27,500
     
     
    Plant and Machinery
    29,000
     
     
    Cash at Bank
    46,200
     
     
    Patents
    4,800
     
     
    Bills receivable
    5,000
     
     
     
    5,08,000
     
    5,08,000
     
     
     
     

    Additional information:

    (i) Stock as on 31.3.2007 – Rs. 88,000

    (ii) Depreciate plant and machinery at 15% furniture at 10% and patents at 5%

    (iii) The Board recommends payment of a dividend @ 15% p.a.

    From the above information, you are required to prepare the Profit and Loss account for the year ended 31.3.2007 and a Balance Sheet as on that date. VIEW SOLUTION
  • Question 6
    Show by means of journal entries, how would you record the following issues in the books of Charles Ltd. Also show how would they appear in their respective Balance Sheets:-  [14 Marks]

    (i) A debenture issued at Rs. 95 repayable at Rs. 100.

    (ii) A debenture issued at Rs. 95 repayable at Rs. 105.

    [NOTE: Face value of each debenture is Rs. 100] VIEW SOLUTION
  • Question 7

    Robert and Smith were partners sharing profits and losses in the ratio of 3 : 2.                  [14 Marks]
    On the date of dissolution, their capitals were:
    Robert – Rs. 7,650 and Smith – Rs. 4,300
    The Creditors amounted to Rs. 27,500. The balance of cash was Rs. 760. The assets realised Rs. 25,430. The expenses on dissolution were Rs. 1,540. All the partners are solvent. Close the books of the firm showing the realisation, capital and cash accounts.

    VIEW SOLUTION
  • Question 8
    Johnson Ltd. kept bought and sales ledger on self-balancing principles. From the following particulars, prepare the necessary adjustment accounts for the year 2007 in the two ledgers:- [14 Marks]
     
    Sundry Debtors (1.1.2007)
    12,400
    Sundry Creditors (1.1.2007)
    5,000
    Credit purchases
    20,600
    Credit sales
    26,800
    Cash received from debtors
    15,600
    Returns inward
    600
    Acceptances given
    8,000
    Returns outward
    500
    Debtors acceptances dishonoured
    1,000
    Discount allowed
    200
    Bad debts written off
    400
    VIEW SOLUTION
  • Question 9
    S, T and W having agreed to share profits and losses equally, entered into a joint venture to construct a building at a price of Rs. 10,00,000. A joint bank account was thus opened where S paid Rs. 4,00,000, T – Rs. 2,00,000 and W – Rs. 3,00,000. [14 Marks]

    Expenses incurred on behalf of the joint venture were as follows:

    Materials – Rs. 2,00,000; wages Rs. 1,50,000 and expenses Rs. 1,25,000.
    Materials supplied by S from his stock amounted to Rs 1,25,000.

    Finally, the venture was closed by T taking the closing stock at a valuation of Rs. 1,00,000.

    From the above, you are required to prepare the joint venture account, co-ventures’ accounts and the joint bank account. VIEW SOLUTION
  • Question 10

    The following figures were extracted from the records of Alfred Engineering Company Ltd. for the year ended 31.3.2007.           14 Marks

    Opening stock of raw materials
    40,000
    Opening stock of work-in-progress
    12,000
    Opening stock of finished goods
    30,000
    Closing stock of raw materials
    50,000
    Closing stock of work-in-progress
    30,000
    Closing stock of finished goods
    80,000
    Raw materials purchased
    4,00,000
    Direct wages
    2,00,000
    Factory insurance
    90,000
    Carriage inwards
    4,000
    Dock charges
    10,000
    Cost of rectifying raw materials
    20,000
    Hire of special tools for manufacturing
    1,00,000
    Cost of factory supervision
    11,000
    Wages paid to works gatemen
    20,000
    Sale of finished products
    15,00,000

    Selling and distribution overhead – 1% of sales. From the above, you are required to prepare a cost sheet for the year ended 31st March 2007.

    VIEW SOLUTION
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