- Question 1
Answer each of the following questions briefly: [10 × 2 = 20 Marks]
(i) Distinguish between authorized, issued, subscribed, called up and paid up capital by the means of a hypothetical example in the form of a problem.
(ii) What is the complete accounting treatment of interest on loan to the partner during the preparation of a profit and loss appropriation account of a partnership firm assuming that such interest has been paid in cash to the partner by the firm?
(iii) Why are abnormal losses ignored when calculating the profit of the joint venture?
(iv) Give two examples of selling overhead and two examples of distribution overhead in the context of a cost sheet.
(v) What are imputed costs? How will you deal with it during the preparation of a cost sheet?
(vi) What is the basis of accounting that is followed when preparing a cash flow statement?
(vii) State two differences between Debtors’ turnover ratio and Creditors’ turnover ratio.
(viii) What is the self-balancing entry for credit sales and credit purchases?
(ix) When should goodwill be recorded in the books of a firm as per AS – 10? Are there any exceptions? If so, under what circumstances?
(x) Under what heading will ‘Premium on Redemption of Debentures’ be recorded in a Horizontal balance sheet?VIEW SOLUTION
- Question 2
Calculate net cash flows from operating activities: [10 Marks]
Particulars 31.3.09 Rs. 31.3.10 Rs. Profit and Loss Account30,00035,000 General Reserve10,00015,000 Provision for depreciation on plant30,00035,000 Outstanding expenses5,0003,000 Goodwill20,00010,000 Sundry debtors40,00035,000
An item of plant costing Rs. 20,000 having book value of Rs. 14,000 was sold for Rs. 18,000 during 2009 – 2010. VIEW SOLUTION
- Question 3
(a) Current liabilities of a company are Rs. 3,00,000. Its current ratio is 3 : 1 and quick ratio is 1 : 1. Calculate the value of stock in trade. [14 Marks]
(b) Calculate stock turnover ratio from the following information:
Opening stock Rs. 58,000; purchases Rs. 4,84,000; Gross profit rate 25% on sales.
Sales – Rs. 6,40,000.
(c) From the following information, calculate operating Ratio:
Net sales Rs. 5,00,000; cost of goods sold Rs. 3,00,000 and operating expenses
(d) X Ltd. has a current ratio of 4 : 1 and its liquid ratio is 3 : 1. If its inventory is Rs. 36,000, find out the value of total current assets, total quick assets and total current liabilities.
(e) From the following Balance Sheet of Spencer Ltd. as on 31.3.2010, calculate debt – equity ratio.
Equity share capital10,00,000 Building5,00,000 10% Preference share capital4,00,000 Plant8,00,000 Securities premium1,20,000 Machinery4,00,000 General Reserve1,00,000 Furniture2,00,000 12% Debentures4,00,000 Stock1,00,000 Creditors1,00,000 Debtors50,000 Bills Payable1,00,000 Bills Receivable30,000 Outstanding expenses50,000 Bank1,00,000 Provision for tax30,000 Cash1,00,000 Discount on issue of shares20,00023,00,00023,00,000
- Question 4
A, B and C are partners sharing profits and losses in the ratio of 3 : 2 : 1. On 31.3.10, B decides to retire and their capital accounts on that date are A – Rs. 60,000; B – Rs. 45,000 and C – Rs. 50,000. Their current accounts on that date are A – Rs. 5,000 (Cr.); B – Rs. 2,300 (Dr.) and C – Rs. 3,000 (Cr.). [14 Marks]
The partnership deed provided that, in case of retirement, the retiring partner should be entitled to a share of the goodwill of the firm to be calculated on the average of the profits of last three years’ ending on 31.3.2010 which comes to Rs. 12,000. The retiring partner will be entitled to interest also at 6% on the unpaid balance and would be paid by an annual instalments of Rs 10,000. At the time of retiement, B was paid off an amount leaving unpaid balance of Rs 30,000 only. Show B’s loan account until the whole payment due to him is made.
(Modified) VIEW SOLUTION
- Question 5
Jacob ad Company Ltd. issues one thousand, 14% debentures of Rs. 100 each at par on 1.1.01. Under the terms of issue:VIEW SOLUTION
(a) Debenture interest is annually payable on 31st December every year and
(b) of the debentures are annually redeemable by drawings; the first redemption occurring on 31.12.03.
Pass necessary journal entries for the year 2001 and 2002.
- Question 6
Arther and Barry entered into a joint venture on 1.10.2009 for sale of goods paying Rs. 60,000 and Rs. 40,000 respectively in a joint bank account and sharing profits and losses in the ratio of 3 : 5. It was agreed that the joint bank account is to be used for purchases and sales and each venturer is to meet his joint venture expenses out of private funds. Each venturer is to charge a commission @ 5% on sales made by him. The transactions for the period ended 31.3.2010 were as follows: [14 Marks]
Arther purchased goods costing Rs. 40,000 and incurred carriage amounting to Rs. 6,000. He sold 90% of these goods at 30% over this cost price and selling expenses amounted to Rs. 2,500. Barry purchased goods costing Rs. 50,000 and incurred carriage amounting to Rs. 6,500. He sold 80% of these goods at 25% over the cost price and selling expenses amounted to Rs. 3,000.
5thof the remaining goods purchased by Arther was destroyed by fire on 28.2.2010 and the insurance company paid a claim of Rs. 2,000.
Write up Joint Venture account, Joint Bank account and Ventures’ account. VIEW SOLUTION
- Question 7
From the following information prepare a Cost Sheet of Jackson and Company Ltd. showing the total cost for the month of January 2010: [14 Marks]
Opening stock of raw materials60,600 Opening stock of finished goods35,900 Closing stock of raw materials75,000 Closing stock of finished goods30,900 Opening stock of work-in-progress1,25,600 Closing stock of work-in-progress1,42,200 Purchase of raw materials2,85,700 Sale of finished goods13,50,000 Direct wages3,50,000 Factory expenses2,00,000 Office and administration expenses1,05,000 Selling and distribution expenses75,000 Abnormal loss of materials10,000 Cost of idle time in the factory1,000 Cost of rectification of defective work5,000
- Question 8
The following information has been extracted from the books of Mathew and Company Ltd. for the three months ended 31.12.2008: [14 Marks]
01.10.08 Stock 1500 units @ Rs. 2 per unit 12.10.08 Goods received note 2000 units @ Rs. 2.25 per unit 18.10.08 Requisition 1100 units 10.11.08 Requisition 800 units 16.11.08 Requisition 1000 units 18.11.08 Goods received note 2400 units @ Rs. 2.50 per unit 20.12.08 Requisition 900 units
At the physical stock taking on 31.12.08, 2000 units were in stock. You are required to prepare a stores ledger based on LIFO method of pricing. Also prepare a Trading account using this method on the basis of the following sales figures:
18.10.08 1100 units @ Rs. 3.50 per unit 10.11.08 800 units @ Rs. 4 per unit 16.11.08 1000 units @ Rs. 2.75 per unit 20.12.08 900 units @ Rs. 4.50 per unit
- Question 9
Prepare the General Ledger Adjustment Accounts as will appear in the Debtors and Creditors ledgers from the information given below: [14 Marks] Balance on 1.4.2009 (Dr.) Rs. (Cr.) Rs. Debtors Ledger 47,200 240 Creditors Ledger 280 26,300
Transactions for the year ended 31.3.2010
Total Sales1,20,100 Cash Sales8,100 Bills accepted by customers20,100 Bills receivable dishonoured1,500 Total purchase89,500 Credit purchases67,000 Creditors paid in full settlement of Rs. 40,00039,500 Received from debtors in full settlement of Rs. 59,00058,200 Returns inwards2,600 Returns outwards1,800 Bills accepted for creditors5,500 Bills payable matured8,000 Bills receivable discounted5,000 Bills receivable endorsed to creditors4,000 Endorsed Bills dishonoured1,000 Bad debts written off (after deducting bad debts recovered Rs. 300)2,200 Provision for doubtful debts550 Set offs1,100 Mutual indebtedness1,900
Balance on 31.3.2010:
Debtors Ledger (Cr.) Rs. 380.
Creditors Ledger (Dr.) Rs. 420. VIEW SOLUTION
- Question 10
From the list of following assets and liabilities, prepare the Balance Sheet of Burn and Company Limited in vertical form as per Schedule VI, Part I of the Companies Act, 1956: [14 Marks]Amount(Rs) Assets Cash at Bank79,800 Cash In hand1,500 Investment95,000 Preliminary expenses9,000 Loans and advances95,000 Goodwill50,000 Building6,00,000 Plant and machinery6,60,000 Less: depreciation66,0005,94,000 Stock10,000 Debtors1,74,000 Less: provision for doubtful debts8,7001,65,300 Furniture14,400 Liabilities Creditors1,00,000 General Reserve50,000 Interest on debentures accured and due28,000 Authorised share capital: 1,20,000 shares of Rs. 10 each12,00,000 Called up and paid up capital: 80,000 shares of Rs. 10 each8,00,000 Less: calls in arrear15,0007,85,000 Profit and loss account75,000 6% debentures6,00,000 Bills payable76,000