- Question 1
Answer each of the following questions briefly: [10 × 2 = 20 Marks]
(i) Define joint venture.
(ii) State the provisions of the Partnership Act, 1932, in the absence of a Partnership Deed regarding
(a) Interest on Partner’s Drawing
(b) Interest on advances made by a partner to the firm other than capital.
(iii) State the complete accounting treatment of hidden goodwill at the time of admission of a partner.
(iv) Why are assets revalued and liabilities reassessed when there is a change in profit sharing ratio amongst the partners?
(v) State two differences between dissolution of partnership and dissolution of firm.
(vi) Why is a memorandum balance sheet prepared at the time of dissolution of a partnership firm?
(vii) State two similarities between calls in arrear account and calls in advance account.
(viii) What is the accounting treatment when shares are issued to promoters for consideration other than cash?
(ix) Differentiate between Joint Venture account and JV with ..... account.
(x) Mention the name and explain the part of capital of a company which is called up only on its winding up. VIEW SOLUTION
- Question 2
Brian and Derek entered into a joint venture agreement sharing profits and losses equally. Brian purchased 10,000 litres of oil @ Rs 40 per litre and incurred freight and insurance amounting to Rs 10,000. The goods were sent to Derek to be sold in the market. Derek incurred Rs 5,000 on duty and Rs 3,000 on godown rent. During transit, 100 litres were stolen against which Brian received an insurance claim of Rs 3,000. Derek took delivery of the remaining consignment and sold 7,000 litres @ Rs 50 per litre. [10 Marks]
Finally, Derek took over the closing stock for business use.
Assume a normal loss of 10 litres due to leakage and evaporation.
You are required to prepare the Joint Venture Account and Derek’s account in the books of Brian assuming both coventurers maintain all accounts.
Note: All calculations are to be made to the nearest rupee. VIEW SOLUTION
- Question 3
The capital accounts of Adam and Batty stood at Rs 40,000 and Rs 30,000 respectively after the necessary adjustments in respect of the drawings and the net profit for the year ended 31st December 2011. It was subsequently ascertained that interest on capital and on drawings @ 5% per annum were not taken into account in arriving at the divisible profits for the year. [10 Marks]
The drawings of the partners had been: Adam – Rs 1,200 drawn at the end of each quarter and Batty – Rs 1,800 drawn at the end of each half year.
The net profit for the year amounted to Rs 20,000. The partners share profits and losses in the ratio of 3 : 2.
You are required to pass the necessary journal entries to rectify the lapse in accounting and also prepare the adjusted capital accounts of the partner. VIEW SOLUTION
- Question 4
Following is the Balance Sheet of John and Jimmy as on 31st December 2010: [10 Marks]
John’s capital50,000 Goodwill6,000 Jimmy’s capital35,000 Land and building40,000 Reserve6,000 Furniture3,750 Creditors25,000 Stock25,000 Debtors20,000 Investments15,250 Bank4,500 Cash1,5001,16,0001,16,000
The partners shared profits and losses in the ratio of 2:1. From 1st January, 2011. They agreed to share profit and losses equally. For this purpose, the following particulars are provided:
(a) Land and building are to be appreciated by 25%.
(b) Furniture valued at Rs 3,250.
(c) Market value of stock is Rs 22,500.
(d) A provision for bad debts @ 5% is to be created on debtors.
(e) Goodwill is valued at Rs 15,000.
Show the revised Balance Sheet of the firm as on 1st January, 2011 along with appropriate ledger accounts as proper working notes. VIEW SOLUTION
- Question 5
Henry, Jacob and Jackson are partners in a firm. Their Balance Sheet as on 31st December 2011, stood as follows: [10 Marks]
Henry’s capital2,00,000 Plant and machinery2,00,000 Jacob’s capital1,50,000 Furniture and fixtures25,000 Jackson’s capital40,000 Stock1,05,000 General reserve1,00,000 Debtors1,50,000 Creditors1,00,000 Investments1,20,0005,90,000*6,00,000*
The partnership deed provides that the representatives of the deceased partner shall be entitled to:
(a) Deceased partner’s capital as appearing in the last balance sheet.
(b) Interest on capital @ 6% per annum up to date of death.
(c) His share of profit up to date of death on the average of last three years’ divisible profit.
(d) His share of goodwill valued at two years’ purchase of the average divisible profit of last three years.
(e) His share of any undistributed profits and losses as per last drawn balance sheet.
(f) Interest on drawings up to date of death will be charged @ 10% per annum.
(g) Assets and liabilities of the firm on the date of death will be revalued and reassessed respectively by an independent valuer.
Jacob died on 30th June, 2012 and the valuer appointed by Henry and Jackson with the consent of the legal heirs of Jacob recommended as follows:
(i) Plant and Machinery to be depreciated by 5%.
(ii) Furniture and fixtures to be taken at Rs 20,000.
(iii) Stock to be reduced by 10%.
(iv) A provision of is to be raised against debtors for doubtful debts.
(v) The investments are to be valued at Rs 1,50,000.
The divisible profits for the last three years were Rs 6,50,000 Rs 6,40,000 and Rs 6,90,000.
Jacob’s drawings up to the date of death amounted to Rs 1,00,000.
Finally, it was decided to transfer the amount due, to Jacob’s executor’s loan account.
You are required to prepare the revaluation account, partners’ capital accounts and the balance sheet.
Note: All calculations are to be made to the nearest rupee.
*The total of Balance Sheet given in the question does not match. VIEW SOLUTION
- Question 6
Mathew, Clarke and Adolf are partners sharing profits and losses in the proportion to their capitals, which on 31st December 2011 stood at Rs 3,00,000, Rs 2,00,000 and Rs 1,00,000 respectively. The firm’s liabilities on that date amounted to Rs 3,00,000 apart from a contingent liability of Rs 60,000 not so far brought into the books, which also matured for payment. In addition, Adolf had loaned Rs 80,000 to the firm on which he was entitled to receive interest on loan @ 6% per annum for the whole year. [10 Marks]
They dissolved the partnership on 31st December, 2011 and the assets realized Rs 14,40,000.
You are required to close the books of the firm.
Note: All calculations are to be made to the nearest rupee. VIEW SOLUTION
- Question 7
Norton and Company Limited make an issue of 10,000 equity shares of Rs10 each payable as follows: [10 Marks]Rs 2 on application,Applications were received for 12,000 shares and the directors refunded the excess application money. One shareholder who was allotted 20 shares paid first and final call with allotment money and another shareholder did not pay allotment money on his 30 shares but which he paid with first and final call. Directors have decided to charge and allow interest, as the case may be, on calls in arrear and calls in advance respectively according to the provisions of Table-A of the Companies Act 1956. Journalise the above transactions in the books of the company. VIEW SOLUTION
Rs 3 on allotment and
Rs 5 on first and final call (3 months after allotment).
- Question 8
Parker and Company Limited issued 2,000 15% debentures of Rs 100 each at a premium of 10% on 1st January, 2011. [10 Marks]
Under the terms of issue:(a) Entire money is payable on application.Pass the necessary journal entries for the year 2011. VIEW SOLUTION
(b) Debenture interest is payable half yearly on 30th June and 31st December.
(c) Tax to be deducted at source @ 10%.
(d) Debentures are to be redeemed after 5 years from the date of issue.
- Question 9
(a) What is the main object of preparing a Comparative Balance Sheet? [10 Marks]
(b) From the following information, prepare a Comparative Balance Sheet of Relay Ltd.Particulars31st March 2012(Rs)31st March 2013(Rs)
Equity Share Capital25,00,00026,00,000 Fixed Assets30,00,00035,00,000 Reserve & Surplus5,00,0006,00,000 Investments5,00,0005,00,000 Long-Term Loans15,00,00014,00,000 Current Assets15,00,00011,50,000 Current Liabilities5,00,0005,50,000
- Question 10
(a) The following information is available from the books of Arnold and Company Limited : [10 Marks]
Debtors turnover ratio = 4 times
Cost of goods sold = Rs 6,40,000
Gross profit = 20% on sales
Closing debtors were Rs 20,000 more than at the beginning.
Cash sales being of credit sales
From the above calculate the opening debtors and the closing debtors of the company.
(b) The following information is available from the books of Duncan and Company Limited:
The above company has a current ratio of 4.5:1, quick ratio of 3:1 and its inventory is Rs 36,000.
From the above calculate the current assets, current liabilities and quick assets of the company.
(c) Give the formulae for computing:VIEW SOLUTION
(i) Working Capital Turnover Ratio.
(ii) Earnings per Share
- Question 11
(a) Define ‘Operating Activities’. [10 Marks]
(b) From the following Balance Sheets of Pixie Ltd. As on 31st March, 2011 and 31st March 2012, prepare a Cash Flow Statement.
31.03.2012 (Rs) I. Equity and Liabilities1. Shareholders’ FundsEquity Share Capital 3,00,000 6,50,00010% Preference Share Capital 50,000 1,00,0002. Reserves and Surplus 31.03.2011 31.03.2012Balance of Statement of Profit & Loss 1,60,000 1,10,000General Reserve 90,000 60,000Securities Premium Reserve 30,000Preliminary Expenses(adjusted 31.03.2011) (30,000) - 2,50,000 1,70,000 2,50,000 1,70,0003. Non Current LiabilitiesLong Term Borrowings10% Debentures 3,50,000 2,50,000 Total 9,50,000 11,70,000 II. Assets1. Non Current AssetsFixed Assets 4,50,000 7,00,000Non Current Investments 50,000 60,0002. Current AssetsInventories 2,00,000 2,10,000Trade Receivables 1,50,000 90,000Bank 60,000 1,10,000Short term Investments 40,000 - 9,50,000 11,70,000
(i) During the year, a machine costing Rs 80,000 (accumulated depreciation thereon being Rs10,000) was sold for Rs 65,000.
(ii) Debentures were redeemed on 30.09.2011.
(iii) Depreciation charged on Fixed Assets Rs 80,000. VIEW SOLUTION