RECONSTITUTION OF APARTNERSHIP FIRM RETIREMENT /DEATH OF A PARTNER


Q.1    Distinguish between Sacrificing Ratio and Gaining Ratio.
Ans. 1
Basis
Sacrificing Ratio
Gaining Ratio
(i) Meaning
Proportion in which old partners sacrifice their share in favour of new partner.
Proportion in which continuing partner gain the share of outgoing partner on his retirement.
(ii) Occasion
Sacrificing ratio is calculated at the time of admission of new partner.
Gaining ratio is calculated at the time of retirement or death of a partner.
(iii) Formula
Sacrificing ratio = Old ratio – New ratio
Gaining ratio – Old ratio


Q.2    Kamal, Kishore and Kunal are partners in a firm sharing profits equally. Kishore retires from the firm. Kamal and Kunal decide to share the profits in future in the ratio 4:3. Calculate the Gaining Ratio.
Ans. 2 Gaining Ratio = New ratio – Old ratio
            Kamal’s Gain = 4/7 – 1/3 = 5/21
            Kunal’s Gain = 3/7 – 1/3 = 2/21
            Gaining Ratio = 5:2


Q.3   P, Q and R are partners sharing profits in the ratio of 7:2:1. P retires and the new profit sharing ratio between Q and R is 2:1. State the Gaining Ratio.
Ans. 3 Old ratio          =  P      Q     R
                                          7 :  2 :  1
            New ratio        = Q  R
                                        2 : 1
            Gaining Ratio = New ratio – Old ratio
            Q’s gain          = 2/3 – 2/10 = 14/30
            R’s gain           = 1/3 – 1/10 = 7/30
            Gaining Ratio = 14:7 or 2:1


Q.4     A, B and C are partners in a firm sharing profits in the ration of 2:2:1. B retires and his share is acquired by A and C equally. Calculate new profit sharing ratio of A and C.
Ans. 4 A’s gaining share = 2/5 X ½ = 1/5
            A’s new share     = 2/5 + 1/5 = 3/5
            C’s gaining share = 2/5 X ½ = 1/5
            C’s New share     = 1/5 + 1/5 = 2/5
            New ratio of A and C = 3:2


Q.5   X, Y and Z are partners sharing profits in the ratio of 4/9, 1/3 and 2/9. X retires and surrenders 2/3rd of his share in favour of Y and remaining in favour of Z. Calculate new profit sharing ratio and gaining ratio.
Ans. 5
            Y’s gaining share        = 4/9 X 2/3 = 8/27
            Z’s gaining share         = 4/9 – 8/27 = 4/27
            Y’s new share             = Old share + gain
                                                = 1/3 + 8/27 = 17/27
            Z’s new share              = 2/9 + 4/27 = 10/27

            New Ratio                   = 17:10
            Gaining ratio = 8/27 : 4/27 or 2:1


Q.6    X, Y and Z have been sharing profits and losses in the ratio of 3:2:1. Z retires. His share is taken over by X and Y in the ratio of 2:1. Calculate the new profit sharing ratio.
Ans. 6
            Old Ratio                    =          3:2:1
            Z Retire
            X’s Gaining                 = 1/6 X 2/3 = 2/18
            X’s New share            = 3/6 + 2/18 = 11/18
            Y’s Gaining                 = 1/6 X 1/3  = 1/18
            Y’s new share             = 2/6 + 1/18 = 7/18
            New Ratio                  = 11/18, 7/18 Or 11:7                       



Q.7    P, Q and R were partners in a firm sharing profits in 4:5:6 ratio. On 28-02-2008 Q retired and his share of profits was taken over by P and R in 1:2 ratio. Calculate the new profit sharing ratio of P and R.
Ans. 7 Old ratio                     = P Q R
                                                = 4:5:6
            Q retired
            P’s gaining                  = 1/3 X 5/15    = 1/9
            P’s new share              = 4/15 + 1/9    = 17/45
            R’s Gaining share       = 2/3 X 5/15    = 2/9
            R’s new share                         = 6/15 + 2/9    = 28/45
            New Ratio                  = 17:28

Q.8   Mayank, Harshit and Rohit were partners in a firm sharing profits in the ratio of 5:3:2. Harshit retired and goodwill is valued at Rs 60000. Mayank and Rohit decided to share future profits in the ratio 2:3. Pass necessary journal entry for treatment of goodwill.
Ans. 8  Rohit’s capital A/C                             Dr. 24000
            To Mayank’s capital A/C                                            6000
            To harshit’s Capital A/C                                             18000
            (Adjustment Entry for treatment of goodwill in gaining ratio.)
Q.9   Ramesh, Naresh and Suresh were partners in a firm sharing profits in the ratio of 5:3:2. Naresh retired and the new profit sharing ratio between Ramesh and Suresh was 2:3. On Naresh retirement the goodwill of the firm was valued at Rs. 120000. Pass necessary journal entry for the treat.
Ans. 9 Suresh capital A/C                               Dr. 48000
            To Ramesh’s capital A/C                                            12000
            To Naresh capital A/C                                                36000
            (Goodwill adjusted among the gaining partner in gaining ratio.)



Q.10  L, M and O were partners in a firm sharing profits in the ratio of 1:3:2. L retired and the new profit sharing ratio between M and O was 1:2. On L’s retirement the goodwill of the firm was valued Rs. 120000. Pass necessary journal entry for the treatment of goodwill.
Ans. 10 O’s capital A/C                                  Dr. 40000
            To C’s capital A/C                                                     20000
            To M’s capital A/C                                                     20000
            (Adjustment of goodwill in gaining partners in their gaining ratio.)


Q.11  State the journal entry for treatment of deceased partners share of profit for his life period in the year of death.

Ans. 11 Profit and loss suspense A/C             Dr
            To deceased partner’s capital A/C



Q.12  X, Y and Z were partners in a firm sharing profits and losses in the ratio of 3:2:1. The profit of the firm for the year ended 31st March, 2007 was Rs. 3,00000. Y dies on 1st July 2007. Calculate Y’s share of profit up to date of death assuming that profits in the year 2007- 2008 have been accured on the same scale as in the year 2006-07 and pass necessary journal entry.
Ans. 12 Total profit for the year ended 31st March 2007        =          Rs 300000
            Y’s share of profit up to date of death                         =          300000 X 2/6 X 3/12
                                                                                                =          25000
            Profit and Loss suspense A/C             Dr. 25000
            To Y’s capital A/C                                                     25000
            ( Y’s share of profit transferred to Y’s capital A/C)



Q.13 A, B and C were partners in a firm sharing profits in 3:2:1 ratio. The firm closes its books on 31st March every year. B died on 12-06-2007. On B’s death the goodwill of the firm was valued at Rs. 60000. On B’s death his share in the profit of the firm till the time of his death was to be calculated on the basis of previous years which was Rs.150000. Calculate B’s share in the profit of the firm. Pass necessary journal entries for the treatment of goodwill and B’s share of profit at the time of his death.
Ans. 13 Profit and Loss suspense A/C            Dr. 10000
            To B’s capital A/C                                                     10000
            (B’s share of profit transferred to B’s capital A/C)

            A’s capital A/C                                   Dr. 15000
            C’s capital A/C                                   Dr. 5000
            To B’s capital A/C                                                     20000
            (B’s share of goodwill transferred to B’s capital A/C and debited to remaining
            partners capital A/C in their gaining ratio.)

            B’s share of profit       =          Number of days from 1 April to 12th June 2007
                                                =          73 Days
            B’s share of profit       =          150000 X 1/3 X 73/365
                                                =          Rs. 10000


Q.14 A, B and C were partners in a firm sharing profits in the ratio of 2:2:1. C dies on 31st July, 2007. Sales during the previous year upto 31st march, 2007 were Rs. 6,00,000 and profits were Rs. 150000. Sales for the current year upto 31st July were Rs. 250000. Calculate C’s share of profits upto the date of his death and pass necessary journal entry.
Ans. 15 Profit & Loss suspense A/C               Dr. Rs. 12,500
            To C’s capital A/C                                                     Rs. 12,500

RETIREMENT OF PARTNER
6 to 8 marks
Q.1    The balance sheet of X, V, Z who was sharing profits in proportion of capital as follows :- 
         Particulars                                         Amount    Particulars                                          Amount
         Sunday creditors                                   1,000    Cash at bank                                        15,600
         Capitals                                              25,000    Debtors                                    5,000     4,900
             X                                                    20,000    Less provision                                           100
             Y                                                    15,000                                                           
             Z                                                    67,000    Stock                                                   10,000
         P/M                                                   11,500
         Furniture                                             25,000
                                                                   67,000                                                               67,000
         Y retires arid the following adjustment of the assets and liabilities has been made before the ascertainment of the amount payable by the firm to Y
         1.            That the stock be depreciated by 5%
         2.            That the provision for doubtful debts be increased to 5% on debtors.
         3.            That a provision of RS.750 be made in respect of outstanding legal charges.
         4.            That the land and building be appreciated by 20%.
         5.            That the goodwill of the entire firm be fixed at Rs. 16,200 and V share of the same be adjusted  into the account of X and Z (No good will account is to be raised)
         6.            That X and Z decide to share future profits of the firm in equal proportions
         7.            That the entire capital of the new firm at Rs. 48000 between X and Z in· equal proportion. For   the purpose, actual cash is to be brought in or paid off.
         You are required to prepare the revolution account; partner’s capital account and bank account and revised balance sheet after V’s retirement also indicate the gaining rates.
         Solution 1
         Dr.                                              Revaluation A/c                                                             Cr.
         Particulars                                               Rs.    Assets                                                      Rs.
         To stock A/c                                            500    By land and building                                5,000
         To provision for doubtful debts a/c 150
         To outstanding
         Legal charges                                          750
         To profit transferred to
         Capital A/c                                                      
             X                                     1500
             Y                                     1200
             Z                                       900         3,600
                                                                    5,000                                                                 5,000            
        
         Dr.                                              Partner’s Capital Accounts                                            Cr.
         Particulars                  ARs.     B Rs.       C Rs.    Particulars                         A Rs.    B Rs.     C Rs.
         To Y’s Cap A/c           1350          —        1050    By bal b/d                       25,000  25,000         15,000
         To Y’s loan A/c                 -      2600              -    By Rev. A/c                       1500     1250  900
         To bal C/d              251150            -      11850    By X’s Cap A/c                         -     1350       -
                                                                                 (G/W)
                                                                                 By X’s cap A/c                          
                                                                                 (G/W)                                       -     4050       -
                                        26500    26600      15900                                           26500   26600         15900
         To bank A/c               1150            -              -    By bal b/d                        25150           -         11850
         To Bal C/d               24000            -      24000    By Bank                                   -           -         12150
                                        25150            -      24000                                           25150   24000         25150                                                              
         Dr.                                                                   Bank A/c                                                  Cr.
        
         To Bal B/d                                          15,600    By X’s cap A/c                                       1,150
         To Z’s Capital A/c                               12,150    By bal c/d                                            26,600
                                                                   27,750                                                               27,750
BALANCE SHEET OF THE NEW FIRM
         Liabilities                                                  Rs.    Assets                                                      Rs.
         Sundry Creditors                                   7,000    Cash at bank                                        26,600
         Outstanding legal charges                        750    Sundry debtors (5000-250)                      4,750
         Y’s Loan                                             26,600    Stock                                                     9,500
         Capital                                                             Plan & Machinery                                 11,500
             X                                    24000                     Land & Building                                    30,000
             Z                                    24000       48,000
        


                                                  83,250                                                                   83,250
Q.2    The Balance Sheet of A, B and C on 31st December 2007 was as under :
BALANCE SHEET
as at 31.12.2007
         Liabilities                                           Amount    Assets                                                Amount
         A’s Capital                                          400,00    Buildings                                              20,000
         B’s Capital                                          30,000    Motor Car                                            18,000
         C’s Capital                                          20,000    Stock                                                   20,000
         General Reserve                                 17,000    Investments                                      1,20,000
         Sundry Creditors                              1,23,000    Debtors                                                40,000
                                                                                Patents                                                12,000
                                                                2,30,000                                                            2,30,000
         The partners share profits in the ratio of 8 : 4 : 5. C retires from the firm on the same date subject to the following term S and conditions:
         i)             20% of the General Reserve is to remain’ as a reserve for bad and doubtful debts. ;
         ii)             Motor)r Car is to be decreased by 5%.
         iii)            Stock is to be revalued at Rs.17, 500.
         iv)           Goodwill is valued at’ 2 ½ years purchase of the average profits of last 3 years.
                        Profits were; 2001: Rs.11,000;  200l: Rs. 16,000 and 2003: Rs.24,000.
         C.  was paid in July  A and B  borrowed the necessary amount from the Bank on the security of Motor Car and stock to payoff  C.
         Prepare Revaluation Account, Capital Accounts and Balance Sheet of A and B.
Ans.2 SOLUTION


REVALUATION ACCOUNT
         Particulars                                               Rs.    Particulars                                                 Rs.
         To Motor Cars A/C                                  900    By Loss transferred to                       
         To Stock A/C                                        2,500    A’s Capital A/c Rs.                    1,600            
                                                                                B’s Capital A/c Rs.                       800            
                                                                                C’s Capital A/c Rs.                    1,000     3,400
                                                                    3,400                                                                 3,400

PARTNERS CAPITAL ACCOUNT
Particulars                           ARs.     B Rs.       C Rs.    Particulars                         A Rs.    B Rs.     C Rs.
To C’s Capital A/c               8,334     4,166              -    By Balance b/d                40,000  30,000         20,000
To Revaluation A/c (Loss)   1,600        800       1,000    By General Reserve  A/c    6,400    3,200         4,000
To Bank A/c                              -            -     35,500    By A’s Capital A/c                     -           -         8,334
Balance c/d                      36,466   28,234              -    By B’s Capital A/c                     -           -         4,166
                                       46,400   33,200     36,500                                          46,400  33,200         36,500
                                                                                 By Balance b/d                36,466  28,234       -

BALANCE SHEET OF A AND B
         Liabilities                                                  Rs.    Assets                                                      Rs.
         Sundry creditors                               1,23,000    Building                                                20,000
         Bank Loan                                          35,500    Motor Card                                          17,100
         Capital A                           36,466                     Stock                                                   17,500
             B                                   28,234       64,700    Investment                                        1,20,000                                                                                                                             Debtors                      36,600
                                                                                Patents                                                12,000
                                                                2,23,200                                                            2,23,200        

Q.3    A, Band C were partners in a firm sharing profits equally:   Their Balance Sheet on.31.12.2007 stood  as:

BALANCE SHEET  AS AT  31.12.07

         Liabilities                                                  Rs.    Assets                                                      Rs.
         A                       Rs. 30,000                              Goodwill                                               18,000
         B                       Rs. 30,000                              Cash                                                   38,000
         C                       Rs. 25,000                85,000    Debtors                                . 43,000            
         Bills payable                                       20,000    Less: Bad Debt provision           3,000   40,000
         Creditors                                            18,000    Bills Receivable                                    25,000
         Workers Compensation Fund                 8,000    Land and Building                                 60,000
         Employees provide4nt Fund                60,000    Plant and Machinery                             40,000
         General Reserve                                 30,000                                                           
                                                                2,21,000                                                            2,21,000
         It was mutually agreed that C will retire from partnership and for this purpose following terms were agreed upon.
         i)             Goodwill to be valued on 3 years’ purchase of average profit of last 4 years which were 2004 : Rs.50,000 (loss); 2005 : Rs. 21,000; 2006: Rs.52,000; 2007 : Rs.22,000.
         ii)             The Provision for Doubtful Debt was raised to Rs. 4,000.
         iii)            To appreciate Land by 15%.
         iv)           To decrease Plant and Machinery by 10%.
         v)                        Create provision of Rs;600 on Creditors.
         vi)           A sum of Rs.5,000 of Bills Payable was not likely to be claimed.
         vii)           The continuing partners decided to show the firm’s capital at 1,00,000 which would be in their new profit sharing ratio which is 2:3. Adjustments to be made in cash
         Make necessary accounts and prepare the Balance Sheet of the new partners.

Ans.3                                                    REVALUATION ACCOUNT
         Particulars                                               Rs.    Particulars                                                 Rs.
         To Provision for Debts A/c                     1,000    By Land A/c                                           9,000
         To Plant & Machinery A/c                      4,000    By Provision on Creditors A/c                     600
         To Profit transferred to                                      By Bills Payable A/c                                5,000
             A’s Capital A/c             Rs. 3,200                                                                          
             B’s Capital A/c             Rs. 3,200                                                                          
             C’s Capital A/c             Rs. 3,200       9,600                                                           
                                                                   14,600                                                               14,600
PARTNER’S CAPITAL ACCOUNTS
Particulars                           ARs.     B Rs.       C Rs.    Particulars                         A Rs.    B Rs.     C Rs.
To Goodwill A/c                  6,000     6,000       6,000    By Balance b/d                30,000  30,000         25,000
To C’s Capital A/c               2,250     9,000              -    By General Reserve         10,000  10,000         10,000
To C’s Loan A/c                         -            -     46,116    By Worksmen A/c              2,667    2,667         2,666
                                                                                 Compensation Fund
To Balance c/d                 40,000   60,000              -    By Revalu A/c (profit)         3,200    3,200         3,200
                                                                                 By A’s Capital A/c                     -           -         2,250
                                                                                 By B’s Capital A/c                     -           -         9,000
                                                                                 By Cash A/c (Deficiency)    2,383  29,133       -
                                       48,250   75,000     52,116                                          48,250  75,000         52,116
                                                                                 By Balance b/d                40,000  60,000       -




BALANCE SHEET
as at 31.12.07
         Liabilities                                                  Rs.    Assets                                                      Rs.
         Bills Payable                                       15,000    Debtors                           Rs.  43,000            
         Creditors                                            17,400    Less: Provision                   Rs.  4,000   39,000
         Employees Provident Fund                  60,000    Bills Receivables                                   25,000
         C’s Loan                                            46,116    Land & Buildings                                   69,000
         A’s Capital                          40000                     Plant & Machinery                                36,000
         B’S Capital                         60000    1,00,000    Cash                                                   69,516
                                                                2,38,516                                                            2,38,516
                                                                       

Q.4    A, Band C were partners in a firm .sharing profits in the ratio of 5: 3: 2. On 31st  March, 2005 their Balance Sheet was as under:
         Liabilities                                                  Rs.    Assets                                                      Rs.
         Creditors                                              7,000    Buildings                                              20,000
         Reserve                                             10,000    Machinery                                            30,000
         Accounts:                                                         Stock                                                   10,000
             A                                     30,000                  Patents                                                  6,000
             B                                      25,000                 Debtors                                                 8,000
             C                                      15,000   70,000    Cash                                                   13,000
                                                                   87,000                                                               87,000
         A died on 1st October, 2005. It was agreed between his executors and the remaining partners that 
         a.            Goodwill be valued at 2 years’ purchase of the average profits of the previous five years, which were 2001: Rs. 15,000; 2002: Rs. 13,000; 2003: Rs. 12,000; 2004: Rs. 15,000 and 2005: Rs. 20,000.
         b.            Patents be valued at Rs. 8,000; Machinery at Rs. 28,000; Buildings at Rs. 30,000.
         c.            Profit for the year 2005-06 is taken as having accrued at the same rate as the previous year.
         d.            Interest on capital be provided at 10% p.a.
         e.            A sum of Rs. 11,500 was to be paid to his executors immediately.
Ans.4                Prepare A’s Capital Account and his executors’ account at the time of his death.
A’s Capital A/c
         Particulars                       Rs.        Particulars                                                                      Rs.
         Executor’s A/c            61,500        By Balance b/d                                                         30,000
                                                            By Reserves [10,000×  ]                                              5,000
                                                            By B’s Capital A/c  [15,000 ×  ]                                    9,000
                                                            By C’s Capital A/c  [15/000 ×    ]                                  6,000
                                                            By Revaluation A/c [10,00 ×   ]                                    5,000
                                                            By Profit & Loss Suspense A/c                                     5,000
                                                            By Interest on Capital A/c [30/000 ×  ×  ]                      1,500
                                          60,500                                                                                       61,500

A’s EXECUTORS ACCOUNT
         Particulars                                               Rs.    Particulars                                                 Rs.
         Balance c/d                                        61,500    By A’s Capital A/c                                 61,500
                                                                   61,500                                                               61,500
                                                                                By Balance b/d                                     61,500

Q.5    A, B and C were partners in ka firm sharing profits in the ratio of 5:3:2 On 31st March 2005 their Balance Sheet was as under :
         Liabilities                                                  Rs.    Assets                                                      Rs.
         Reserves                                            10,000    Buildings                                              20,000
         Creditors                                              7,000    Machinery                                            30,000
         A’s Capital                          30000                     Stock                                                   10,000
         B’s Capital                          25000                     Patents                                                  6,000
         C’s Capital                          15000       70,000    Cash                                                   21,000                                                                                87,000                                                                    87,000                                                        

         C died on 1st Oct. 2005. It was agreed between his executors and the  remain partners that:
         a.            Goodwill be valued at 2 years’ purchase of the average profits of the pre five years, which were 2001 :Rs. 15,000; 2002 : Rs. 13,000; 2003 : Rs. 12,000; Rs. 15,000 : 2004 and 2005 : Rs. 20,000.

         b.            Patents be valued at Rs. 8,000; Machinery at Rs. 28,000; Buildings at Rs. 30,
         c.            Profit for the year 2005-06 be taken as having accrued at the same rate previous year. 
         d.            Interest on capital be provided at 10% p.a.
         e.            A sum of Rs. 7,750 was paid to his executors immediately.
         Prepare C’s Capital Account and his executors account at the time of his death.
Ans.5
C’S CAPITAL ACCOUNT
         Particulars                                               Rs.    Particulars                                                 Rs.
         To C’s Executor’s A/c                          27,750    By Balance b/d                                     15,000
                                                                                By Reserves                                          2,000
                                                                                By Revaluation A/c                                 2,000
                                                                                By p& L Suspense A/c                            2,000
                                                                                By Interest on Capital                                750
                                                                                By A’s Capital A/c                                  3,750
                                                                                By B’s Capital A/c                                  2,250
                                                                   27,750                                                               27,750

C’S EXECUTOR’S ACCOUNT
         Particulars                                               Rs.    Particulars                                                 Rs.
         To Cash A/c                                         7,750    By C’s Capital A/c                                27,750
         To Executor’s Loan A/c                                    
         or Bal c/d                                            20,000                                                               27,750

Q.6    Anil, Jatin and Ramesh  were sharing profit in the ratio of 2:1:1. Their Balance Sheet as at 31.12.2001  stood as follows:-
BALANCE SHEET
as at  31.12. 2001
         Liabilities                                                  Rs.    Assets                                                      Rs.
         Creditors                                            24,400    Cash                                                 1,00,000
         Bank Loan                                          10,000    Debtors                                   20000            
         Profit and Loss A/c                              18,000    Less : Provision                          1600   18,400
         Bills Payable                                         2,000    Stock                                                   10,000
         Anil’s Capital                                       50,000    Land & Building                                    20,000
         Jatin’s Capital                                     40,000    Investment                                          14,000
         Ramesh’s Capital                                40,000    Goodwill                                               22,000
                                                                1,84,400                                                            1,84,400
         Ramesh died on 31st March 2002. The following adjustments were agreed upon-
         (a)           Building be appreciated by Rs. 2,000
         (b)           Investments be valued at 10% less than the book value.
         (c)           All debtors (except 20% which are considered as doubtful) were good.
         (d)           Stock be increased by 10 %
         (e)           Goodwill be valued at 2 years’ purchase of the average profit of the past five years.
         (f)            Ramesh’s share of profit to the death be calculated on the basis of the profit of the preceding year. profit for the years 1997, 1998, 1999 and 2000 were Rs. 26,000, Rs. 22,000,  Rs. 20,000  and Rs. 24,000 respectively.
Ans.6   Prepare revaluation account, partner’s capital Account, Ramesh ‘s Executors’ Account and Balance sheet immediately after Ramesh’s death assuming  that Rs. 18, 425 be paid immediately to  his executors and balance to b left to the Ramesh’s Executor’s Account
REVALUATION ACCOUNT
         Particulars                                               Rs.    Particulars                                                 Rs.
         To Investment A/c                                1,400    By Building A/c                                       2,000
         To Provision for doubtful debt A/c           2,400    By Stock A/c                                          1,000
                                                                                By Loss transferred to                                    
                                                                                      Anil’s Capital A/c               Rs.400            
                                                                                      Jatin’s Capital A/c             Rs. 200            
                                                                                      Ramesh’s Capital A/c       Rs. 200        800
                                                                    3,800                                                                 3,800
PARTNERS’ CAPITAL ACCOUNTS
Particulars                                       Anil         Jatin     Ramesh     Particulars                                      Anil        Jatin             Ramesh
                                                        Rs.           Rs.             Rs.                                                            Rs.          Rs.    Rs.           
To Goodwill A/c                         11,000        5,500          5,500     By Balance b/d                         50,000     40,000            40,000
To Ramesh Capital A/c               7,333        3,667                  -     By Profit and Loss A/c                9,000       4,500 4,500
To Revaluation A/c (Loss)              400           200             200     By Profit  &Loss Susp A/c                  -              - 1,125
To Ramesh’s  Executor’s A/c              -               -        50,925                                                                                         
To Balance c/d                           40,267      35,133                  -     By Anil’s Capital A/c                           -              - 7,333
                                                                                                      By Jatin’s Capital A/c                          -              - 3,667
                                                   59,000      41,500        56,625                                                      59,000     41,500            56,625
                                                                                                      By Balance b/d                         40,267     35,133        -

         Date         Particulars                                Rs.      Date        Particulars                               Rs.
         2002                                                                   2002                                                          
         Mar. 31     To Cash A/c                        18,425      Mar. 31    By Raeesh’s Capital A/c      50,925
         Dec. 31     To Balance A/c                    32,500                                                                       
                                                                   50,925                                                              50,925
                                                                                   2003
                                                                                   Jan.1       By Balance b/d                   32,500
BATANCE SHEET
         Liabilities                                                  Rs.    Assets                                                      Rs.
         Bank Loan                                         10, 000    Cash                                                   81,575
         Creditors                                            20,400    Debtors                            Rs. 20,000            
         Bills Payable                                         2,000    Less: Provision                    Rs. 4,000   16,000
         Ramesh’s Executor’s Loan                  32,500    Stock                                                   11,000
         Anil’s Capital                                       40,267    Land and Building                                 22,000
         Jatin’s Capital                                     35,133    Investments                                         12,600
                                                                                Profit and Loss Suspense A/c                  1,125
                                    1,44,300                                               1,44,300

Retirement and Death of a Partner
Q.1       What is meant by retirement of a partner?
Ans.     Retirement of a partner is one of the modes of reconstituting the firm in which old partnership comes to an end and a new partner among the continuing (remaining) partners (i.e., partners other than the outgoing partner) comes into existence.
Q.2       ‘How can a partner retire from the firm?
Ans.     A partner may retire from the firm;
             i)    in accordance with the terms of agreement; or
             ii)   with the consent of all other partners; or  
             iii)   where the partnership is at will, by giving a notice in writing to all the partners of his intention to retire.
Q.3       What do you understand by ‘Gaining Ratio*?
Ans.     Gaining Ratio means the ratio by which the share in profit stands increased. It is computed by deducting old ratio from the new ratio.
Q.4       What do you understand by ‘Gaining Partner’?
Ans       Gaining Partner is a partner whose share in profit stands increased as a result of change in partnership.
Q.5       Distinguish between Sacrificing Ratio and Gaining Ratio.
Ans.     Distinction between Sacrificing Ratio and Gaining Ratio

Q.6       Give two circumstances in which gaining ratio is computed. Ans.     Gaining Ratio is computed in the following circumstances: (i) When a partner retires or dies. (ti) When there is a change in profit-sharing ratio.
Q.7       Why is it necessary to revalue assets and reassess liabilities at the time of retirement of a partner ?
Ans.     At the time of retirement or death of a partner, assets are revalued and liabilities are reassessed so that the profit or loss arising on account of such revaluation upto  the  date of retirement or death of a partner may be ascertained and adjusted in all partners’ capital accounts in their old profit-sharing ratio.       
Q.8       Why is it necessary to distribute Reserves Accumulated, Profits and Losses at the time of retirement or death of a partner?
Ans.     Reserves, accumulated profits and losses existing in the books of account as on the date of retirement or death are transferred to the Capital Accounts (or Current Accounts) of all the partners (including outgoing or deceased partner) in their old profit-sharing ratio so that the due share of an outgoing partner in reserves, accumulated profits/losses gets adjusted in his Capital or Current Account.
Q.9       What are the adjustments required on the retirement or death of a partner?
Ans.     At the time of the retirement or death of a partner, adjustments are made for the following:
             (i)   Adjustment in regard to goodwill.
             (ii) Adjustment in regard to revaluation of assets and reassessment of liabilities.
             (iii) Adjustment in regard to undistributed profits.
             (iv) Adjustment in regard to the Joint Life Policy and individual policies.
Q.10     X wants to retire from the firm. The profit on revaluation of assets on the date of retirement is Rs. 10,000. X is of the view that it be distributed among all the partners in their profit-sharing ratio whereas Y and Z are of the view that this profit be divided between Y and Z in new profit-sharing ratio. Who is correct in this case?
Ans.      X is correct because according to the Partnership Act a retiring partner is entitled to share the profit upto the date of his retirement. Since the profit on revaluation arises before a partner retires, he is entitled to the profit.
Q.11     How is goodwill adjusted in the books of a firm -when a partner retires from partnership?
Ans.     When a partner retires (or dies), his share of profit is taken over by the remaining partners. The remaining partners then compensate the retiring or deceased partner in the form of goodwill in their gaining ratio. The following entry is recorded for this purpose:
             Remaining Partners’ Capital A/cs                   ...Dr.                                                [Gaining Ratio]
                   To Retiring/Deceased Partner’s Capital A/c     [With his share of goodwill]
             If goodwill (or Premium) account already appears in the old Balance Sheet, it should be written off by recording the following entry :
                   All Partners’ Capital/Current A/cs   ...Dr.                           [Old Ratio]
                            To Goodwill (or Premium) A/c
Q.12     X, V and Z are partners sharing profits and losses in the ratio of 3 : 2 :1. Z retires and the following Journal entry is passed in respect of Goodwill:
                   Y’s Capital A/c          ...Dr.                     20,000
                   To X’s Capital A/c                                                                 10,000
                   To  Z’s Capital A/c                                                                10,000
             The value of goodwill is Rs. 60,000. What is the new profit-sharing ratio between X and Y?
Ans.     Without calculating the gaining ratio, the amount to be adjusted in respect of goodwill can be calculated directly with the help of following statement:
             STATEMENT SHOWING THE REQUIRED ADJUSTMENT FOR GOODWILL
               Particulars                                                                       X(Rs.)           V(Rs.)        Z(Rs.)
               Right of goodwill before retirement (3:2:1)                          30,000           20,000       10,000
               (Old Ratio) Right of goodwill after retirement                       20,000           40,000              —                                                                                               
               (Balancing Figure) (New Ratio)                                                  
               Net Adjustment                                                            (-) 10,000     (+) 20,000   (-) 10,000
             The new ratio between X and Y is 1 : 2.
Q.13     State the ratio in which profit or loss on revaluation will be shared by the partners when a partner retires. ;
Ans.     Profit or loss on revaluation of assets/liabilities will be shared by the partners (including the retiring partner) hi their old profit-sharing ratio.
Q.14     How is the account of retiring partner settled?
Ans.     The retiring partner account is settled either by making payment in cash or by promising the retiring partner to pay in installments along with interest or by making payment partly in call and partly transferring to his loan account. The -following Journal entry is passed:
                   Retiring Partner’s Capital A/c         ...Dr.
                            To Cash*                             [If paid in cash]
Or
                            To Retiring Partner’s Loan              [If transferred to loan]
Q.15     What is Joint Life Policy?
Ans.     Joint Life Policy is an insurance policy taken on the lives of the partners jointly. Premium of the policy is paid by the firm.
Q.16     What is the objective of taking a Joint Life Policy by a partnership firm?
Ans.     A partnership firm takes a Joint Life Policy with the objective of receiving sufficient amount in cash and thereby enabling itself to pay the amount payable to the retiring partner or to the representatives of the deceased partner, without adversely affecting the financial position and working of the business.
Q.17     When does the Joint Life Policy become due?
Ans.      Joint Life Policy becomes due for payment by the Insurance Company either on the death of any partner or on its maturity, whichever is earlier. The policy may also be surrendered before its maturity.
Q.18     What is Surrender Value?
Ans.     Surrender Value is the value of the insurance policy that the insurance company pays on the surrender of a policy before the date of its maturity.
Q.19     How is the share of profit of a deceased partner calculated from the date of last balance sheet to the date of death?
Ans.     If a partner dies on any date after the date of balance sheet; then his share of profit is calculated from the beginning of the year to the date of death on the basis of average profits or last year’s profit. It is calculated on either of the following two bases:
             (i) On the Basis of Time: In this method, it is assumed that the profits had accrued uniformly in the previous year. On the basis of time, deceased partner’s share in the profits till the date of death is calculated as follows:
             Share of Deceased Partner
             = Average Profits x  x  Proportion of Deceased Partner
             (ii) On the Basis of Sales: Deceased partner’s share in profit till the date of death             shall be:
                   = Sales for the period*  x x Proportion of Deceased Partner
                   *Period = from the beginning of the year to the date of death.
Q.20     How is amount payable to the representative of a deceased partner calculated?
Ans.      In the case of death of a partner, the legal representatives of a deceased partner are entitled to the following:
             (i)   The amount standing to the credit of the deceased partner’s capital account.
             (ii) His share in the goodwill of the firm.
             (iii) His share of profit on the revaluation^ assets and reassessment of liabilities. (iv)   His share of reserves and accumulated profits.
             (v) His share of profits earned from the date of last balance sheet of the date of death.
             (vi) Interest on capital provided in the partnership agreement.
             (vii) His share of the proceeds of Joint Life Policy.
             The following amounts will be debited to his account:
             (i)   His share in the reduction in the value of goodwill, if any.         
             (ii) His share of loss on revaluation of assets and reassessment of liabilities.
             (iii) His drawings.
             (iv) Interest on drawings, if provided in the partnership deed.
             (v) His share of loss from the date of last balance sheet to the date of death.
             The balance in the capital account is transferred to his Executor’s Account.
Q.21     Can an outgoing partner or Legal Representative of Deceased Partner share in the subsequent profits?
Or                  
             What will happen if deceased or retired partner’s dues are not settled immediately?
Ans.      As per the provisions of Section 37 of the Partnership Act, 1932 if full or part amount of outgoing partner still remains to be paid then      
             (i)   He will be entitled to interest or share in profit or nothing as has been mutually agreed among partners.
             (ii) If nothing is agreed among the partners, then outgoing partner or his representatives have the choice to get either of the following till final settlement:
                   (a)     Interest @ 6% per annum on the balance amount.
                   (b)     Share in the profit earned proportionate to their amount outstanding to total capital.
                            Share in Profit =
                   Normally he will opt for the better of (a) or (b).






CHAPTER:5
 DISSOLUTION OF PARTNERSHIP FIRM

Q.1 Distinguish between dissolution of partnership and dissolution of partnership firm on the basis of continuation of business.
Ans. 1 In case of dissolution of partnership, the firm may continue its business operation but in case of dissolution of partnership firm, the business operations are discontinued.


Q.2 Why is Realisation Account prepared on dissolution of partnership firm?
Ans. 2 Realisation account is prepared to ascertain profit or loss on sale of assets and payment of liabilities.



Q.3 State any one point of difference between Realisation Account and Revaluation Account.
Ans. 3 Realisation Account is prepared on dissolution of partnership firm and Revaluation account is prepared on reconstitution of partnership firm.



Q.4 All partners wish to dissolve the firm. Yastin, a partner wants that her loan of Rs. 2,00000 must be paid off before the payment of capitals to the partners. But, Amart, another partner wants that the capital must be paid before the payment of Yastin’s loan. You are required to settle the conflict giving reasons.
Ans. 4 Yustin’s claim is valid as according to section 48 (b) of partnership Act, partners loan are to be paid before any amount is paid to partners on account of their capitals.

Q.5 On a firms dissolution debtors as shown in the Balance sheet were Rs. 17000 out of these Rs. 2000 became bad. One debtor of Rs. 6000 became insolvent and 40% could be recovered from him. Full recovery was made from the balance debtors. Calculate the amount received from debtors and pass necessary journal entry.
Ans. 5 Cash A/C                                 Dr. 11400
            To Realisation A/C                                         11400
            (For debtors realized on dissolution of firm)

Q.6 On dissolution of a firm, Kamal’s capital account shows a debit balance of Rs. 16000. His share of profit on realization is Rs. 11000. He has taken over firms creditors at Rs. 9000. Calculate the final payment due to /from him and pass journal entry.
Ans. 6 Kamal’s capital A/C                Dr. 4000
            To cash A/C                                                    4000
            (for final payment to Kamal)




Q.7 A and B were partners in a firm sharing profits and losses equally. Their firm was dissolved on 15th March, 2004, which resulted in a loss of Rs. 30,000. On that date the capital A/C of A showed a credit balance of Rs. 20,000 and that of B a credit balance of Rs. 30000. The cash account has a balance of Rs. 20000. You are required to pass the necessary journal entries for the (i) Transfer of loss to the capital accounts and (ii) making final payment to the partners.
Ans. 7 (i)    A’s capital A/C                Dr. 15000
                   B’s capital A/C                Dr. 15000
                   To realization A/C                                   30000
                   (For transfer of loss on dissolution)
                   (ii) A’s capital A/C                      Dr. 5000
                   B’s capital A/C                Dr. 15000
                   To cash A/C                                          20000   
                   (For final payment to partners)


Q.8 What journal entries would be passed in the books of A and B who are partners in a firm, sharing profits in the ratio of 5:2, for the following transactions on the dissolution of the firm after various assets (other than cash) and third party liabilities have been transferred to Realisation Account?

(a)   Bank loan Rs. 12,000 is paid.
(b)   Stock worth Rs. 6000 is taken over by B.
(c)   Loss on Realisation Rs. 14,000.
(d)   Realisation expenses amounted to Rs. 2,000, B has to bear these expenses.
(e)    Deferred Revenue Advertising Expenditure appeared at Rs. 28,000.
(f)    A typewriter completely written off in the books of the firm was sold for Rs. 200.

Ans. 8
           

JOURNAL




Dr. (Rs)
Cr. (Rs.)
(a)
Realisation A/C            Dr.
To Bank A/C
12000

12000
(b)
B’s capital A/C                                                        Dr.
To realisation  A/C
6,000

6,000
(c)
A’s capital A/C                                                        Dr.
B’s capital A/C            Dr.
To Realisation A/C
10,000
4,000



14000
(d)
B’s capital A/C            Dr.
To bank A/C
2,000


2,000
(e)
A’s capital A/C                                                        Dr.
B’s capital  A/C                                                       Dr.
To deferred revenue advertising expenditure A/C
20,000
8,000



28,000
(f)
Bank A/C                                                                 Dr.
To realisation A/C
200

200


CBSE SAMPLE PAPER
ACCOUNTANCY
CLASS - XII
Time Allowed : 3 Hours                                                         Maximum Marks : 80
General Instructions:
        1.      This question paper contains three parts A, B and C.
        2.      Part A is compulsory for all.
        3.      Attempt onfy one part of the remaining parts B and C.
        4.      All parts of questions should be attempted at one place.
PART-A
PARTNERSHIP AND COMPANY ACCOUNTS
1.     Not-for-profit organisations have some distinguishing features from that of profit organisations. State any one of them,                                                  [1]
2.     Alka, Barkha and Charu are partners in a firm having no partnership agreement. Alka Barkha and Charu contributed Rs. 2,00,000, Rs. 3,00,000 and Rs. 1,00,000 respectively. Alka and Barkha desire that the profits should be divided in the ratio of capital contribution. Charu does not agree to mis. How will you settle the dispute?                                                                         [1]
3.     Give the formula for 'calculating gaining share' of apartner in a partnership firm.                                   [1]
4.     Pawan and Jayshree are partners. Bindu is admitted for l/4th share. What is the ratio in which Pawan and Jayshree will sacrifice their share in favour of Bindu?                                         [1]
5.     What is meant by Convertible debentures?                                                 [1]
6.     Show the following information in the Balance Sheet of the Cosmos Club as on 31st March, 2007:


        Particulars                                                                              Debit Rs. Credit Rs.
        Tournament Fund                                                -                   1,50,000
        Tournament Fund Investment                         1,50,000                   -               
        Income from Tournament Fund Investment            -                     18,000
        Tournament Expenses                                     12,000                     -
        Additional Information :
        Interest Accrued on Tournament Fund Investment Rs. 6,000.                        [3]
7.     Shubh Limited has the following balances appearing in its Balance Sheet:
                                                                                               Rs.
        Securities Premium                                                 22,00,000
        9% Debentures                                                                              120,00,000
        Underwriting Commission                                        10,00,000
        The company decided to redeem its 9% Debentures at a premium of 10%. You are required to suggest the ways in which the company can utilise the securities premium  amount.                                                                                                          [3]
8.             20,000 Shares of Rs. 10 each were issued for public subscription at a premium of 10% Full amount was'pavaD'e °n application. Applications were received for 30,000 shares and the Board decided to allot the shares on a pro-rata basis.  Pass Journal entries.                                                                 [3]
9.     A, B and C are partners in a firm. They have omitted interest on capital @ 10% pa.a. for three years ended 31st March, 2007. Their fixed capitals on which interest was to be calculated throughout were :
                                        A                             Rs. 1,00,000
                                        B                              Rs. 80,000
                                        C                             Rs. 70,000
        Give the necessary adjusting journal entry with working notes.                     [4]
10.    'X, Y'and Z were sharing profits and losses in the ratio of 5:3:2. They decided to share  future profits and losses in the ratio of 2:3:5 with effect from 1.4.2007. They decided to record the effect of the following, without effecting their book values:-
        i)      Profit and Loss Account                                          Rs. 24,000
        ii)     Advertisement Suspense Account                                          Rs. 12,000
        Pass the necessary adjusting entry.                                                             [4]
11.  Sajal Limited had issued shares of Rs. 100 each at a discount of 5%, payable as follows:
                On application                                                 Rs. 25 per share
                On allotment                                                    Rs. 25 per share
                On first and final call                                       Balance
        One shareholder, Pran holding 50 shares did not pay his first and final call. As a res! his shares were forfeited.
        Of these, 40 shares were reissued to Ram as fully paid up @ Rs. 110 per share, Pass necessary journal entries to record the forfeiture and reissue of shares in: books of Sajal Limited.                                                                                                  [4]
12  (a)    Raghav Limited purchased a running business from Krishna Traders for a sum  of Rs. 15,00,000, payable Rs. 3,00,000 by cheque and for the balance issued  9%     Debentures of Rs. 100 each at par.
                       The assets and liabilities consisted of the following :
                                                                                    Rs.
                       Plant and Machinery                       4,00,000
                       Buildings                                       6,00,000
                       Stock                                             5,00,000
                       Sundry Debtors                              3,00,000
                       Sundry Creditors                            2,00,000
                Record necessary journal entries in the books of Raghav Limited,
        (b)    On January 1,2004, Rhythm Limited issued 1,000 10% debentures of Rs. 500  each at par. Debentures are redeemable after 7 years. However, the company gave an option to debenture holders to get their debentures converted into equity        shares of Rs. 100 each at a premium of Rs. 25 per share      any time after the expiry of one year.
                Shivansh, holder of 200 debentures, informed on Jan. 1, 2006 that he wanted to exercise the option of conversion of debentures into equity shares.
                The company accepted his request and converted debentures into equity shares.
                Pass necessary journal entries to record the issue of debentures on Jan. 1,2004  and conversion of debentures on Jan. 1,2006.                         (3+3 = 6)
13.   From the following Receipts and Payments Account of Sonic Club and from the given additional information; prepare Income and Expenditure Account for the year ending 31st December, 2006 and the Balance Sheet as on that date :
RECEIPTS AND PAYMENTS ACCOUNT
for the year ending 31st December, 2006
         Cr.                                                                                                                                   Dr.
        Receipts                                       Rs.   Payments                                       Rs.
        To Balance b/d                     1,90,000   By Salaries                                      3,30,000
        To Subscriptions                   6,60,000   By Sports Equipment                30,000
        To Interest on Investments                     By Balance c/d                                1,60,400
        @ 8% p.a. for full year            40,000
                                                   8,90,000                                                          8,90,000
        Additional Information :
        (a)      The club had received Rs. 20,000 for subscription in 2005 for 2006.
        (b)      Salaries had been paid only for 11 months
        (c)      Stock of Sports Equipment on 31st December, 2005 was Rs. 3,00,000 and on 31         st December, 2006 Rs. 6,50,000.                                         (6)
14.   Ram, Mohan and Sohan were partners sharing profits and losses in the ratio of 5:3:2. On 31 st March, 2006 their Balance Sheet was as under:
        Liabilities                                     Rs.   Assets                                           Rs.
        Capitals :                        Rs                 Leasehold                                        1,25,000
           Ram                    1,50,000                 Patents                                     30,000
           Mohan                1,25,000                 Machinery                                       1,50,000
           Sohan                    75,000  3,50,000   Stock                                              1,90,000
           Creditors                           1,50,000   Cash at Bank                            40,000
           Workmen's Compensation     30,000
           Reserve
                                                   5,35,000                                                          5,35,000                            
        Sohan died on 1st August, 2006. It was agreed that:
        i)      Goodwill of the firm is to be valued at Rs. 1,75,000.
        ii)     Machinery be valued at Rs. 1,40,000; Patents at Rs. 40,000; Leasehold at Rs. 1,50,000 on this date,
        iii)           For the purpose of calculating Sohan?s share in the profits of 2006-07, the profits  should be taken to have accrued on the same scale as in 2005-06, which were Rs.    75,000.
                Prepare Sohan's Capital Account and Revaluation Account.                 (6)
15.   Srijan Limited issued Rs. 10,00,000 new capital divided into Rs. 100 shares at a premium of Rs. 20 per share, payable as under:
                On Application                        Rs. 10 per share
                On Allotment                           Rs 0 per share (including
                                                               premium of Rs, 10 per share)
                On First and Final Call             Balance
        Over-payments on application, were to be applied towards sums due on allotment and first and final call. Where no allotment was made, money was to be refunded in full. The issue was oversubscribed to the extent of 13,000 shares. Applicants for 12,000 shares were allotted only 2,000 shares and applicants for 3,000 shares were sent letters of regret and application money was returned to them. All the money due was duly received.
        Give Journal Entries to record the above transactions (including cash transactions)^ the books of the company.                                                    [8]
OR
        Sangita Limited invited application for issuing 60,000 shares of Rs. 10 each at par. amount was payable as follows:
                On Application                                            Rs. 2 per share
                On Allotment                                               Rs. 3 per share
                On First and Final Call                                 Rs. 5 per share
        Applications were received for 92,000 shares. Allotment was made on the following basis :
        i)      To applicants for 40,000 shares - Full
        ii)     To applicants for 50,000 shares - 40% (iii) To applicants for 2,000 Shares - Nil  Rs. 1,08,000 was realised on account of allotment (excluding the amount carried first application money) and Rs. 2,50,000 on account of call.
        The directors decided to forfeit shares of those applicants to whom full allotment^ made and on which allotment money was overdue.
        Pass journal entries in the books of Sangita Limited to record the above transactions.                                                                                                                          [5] 
16.   L and M share profits of a business in the ratio of 5:3. They admit N into the firm for a fourth share in the profits to be contributed equally by L&M. On the date of admission the Balance Sheet of L&M is as follows :

BALANCE SHEET
as at......
        Liabilities                                     Rs.   Assets                                           Rs.
        L's Capital                              30,000   Machinery                                26,000   
        M's Capital                             20,000   Furniture                                  18,000
        Reserve Fund                            4,000   Stock                                       10,000
        Bank Loan                               12,000   Debtors                                      8,000
        Creditors                                  2,000   Cash                                          6,000
                                                      68,000                                                   68,000
        Terms of N's admission were as follows :
        i)             N will bring Rs. 25,000 as his capital.
        ii)            Goodwill of the firm is to be valued at 4 years? purchase of the average super  profits of the last three years. Average profits of the last three years are Rs. 20,000;  while the normal profits that can be earned on the capital employed are  Rs. 12,000.
        iii)           Furniture is to be appreciated to Rs. 24,000 and the value of stock into by 20%.    
                Prepare Revaluation-Account, Partners Capital Accounts and the Balance Sheet        of the firm after admission of N .                                                 (8)
OR
        On 31st December, 2006 the Balance Sheet of A. B and C, who were sharing profits and losses in proportion to their capitals, stood as follows :
        Liabilities                              Amount   Assets                                             Amount
        Creditors                                 10,800   Cash at Bank                              8,000
        Capitals :                       Rs.                 Debtors                    Rs 10,000
           A                          45,000                 Less : Provision                  200   9,800
           B                           30,000                 Stock                                         9,000
           C                           15,000    90,000   Machinery                                24,000
                                                                   Land and Buildings                   50,000
                                                   1,00,800                                                          1,00,800

        B retires and the following readjustments of assets and liabilities have been agreed upon before the ascertainment of the amount payable to B :
        i)             That Land and Buildings be appreciated by 12%.
        ii)      That provision for Doubtful Debts be brought upto 5% of debtors.
        iii)           That a provision of Rs. 3,900 be made in respect of an 'outstanding bill for  repairs,
        iv)     That Goodwill of the entire firm be fixed at Rs.. 18,000 and B?s share of the  same be adjusted into the accounts of A&C, who are going to share future profits in the proportion of 3/4th and l/4th respectively,
        v)      That B be paid Rs. 5,000 immediately and the balance to be transferred to his Loan Account.
                Prepare Revaluation Account, Capital Accounts of Partners and the Balance Sheet   of the firm of A and C.                                                       (8)
PART-B
ANALYSIS OF FINANCIAL STATEMENTS
17.   Assuming that the Current Ratio is 2:1, state giving reason whether the ratio will improve, decline or will have no change in case a Bill Receivable is dishonoured.     (1)
18.   State whether cash deposited in bank will result in inflow, outflow or no flow of cash.(1)
19.   Interest received by a finance company is classified under which kind of activity while preparing a cash flow statement ?                                           (1)
20.   Show the major headings into which the liabilities side of a Company's Balance Sheet is organised and presented as per Schedule VI Part 1 of the Companies Act, 1956.(3)
21.   Prepare a Comparative Income Statement with the help of the following information :                                                                                                                          (4)
        Particulars                           2006                                       2007
        Sales                                   Rs. 20,00,000                          Rs. 30,00,000
        Gross Profit                                   40%                                      30%
        Indirect Expenses                 50% of G P.                            40% of G.P.
        Income Tax                                    50%                                      50%
22.            Following is the Balance Sheet of X Ltd. as on 31st March, 2006 :
        Liabilities                              Amount   Assets                                             Amount
        Share Capital                      20,00,000   Fixed Assets (Net)                           29,00,000
        Reserves                              5,00,000   Current Assets                                 25,00,000   
        10% Loans                          10,00,000   Underwriting
                                                                   Commission                                    1,00,000
        Current Liabilities                 8,00,000  
        Profit for the year                12,00,000
                                                  55,00,000                                                         55,00,000
        Find out 'Return on Capital Employed;





23.   From the following balance sheets of ABC Ltd., Find out cash from operating activities only.
        Liabilities                          31.3.2006    31.3.2007       Assets               31.3.2006         31.3.2007                                                                       Rs.                           Rs.                            Rs.                                           Rs.
         Equity Share Capital             30,000         35,000       Goodwill                 10,000      8,000   
         General Reserve                   10,000         15,000       Machinery              41,000    54,000
         Profit & Loss Account                      -           7,000       10% Inv.                  3.000      8.000   
         10% Debentures                   21,000         25,000       Stock                        6,000    24,500
         Sundry Creditors                     8,500         12,500       Cash and Bank      12,000    13,000     
         Provision for Depreciation                                          Discount on
         on Machinery                          9,000         13,000       Debentures                 500              -
                                                                                             Profit & Loss
                                                                                             Account                    6,000              -
                                                       78,500      1,07,500                                     78,500 1,07,500   
        Additional Information :
        *Debentures were issued on 31.3.2007.
        * Investments were made on 31.3.2007.
















ANNUAL PAPER
ACCOUNTANCY
CLASS - XII
Time Allowed : 3 Hours                                                         Maximum Marks : 80
General Instructions :
1.     This question paper contains three parts A, B and C.
2.     Part A is Compulsory for all candidates.
3.     Candidates can attempt only one part of the remaining parts B and C.
4.     All parts of the questions should be attempted at one place.
PART-A
(Not for Profit Organisations, Partnership Firms and Company Accounts)
1.     Distinguish between Income and Expenditure Account and Receipt and Payment Account on the basis-of nature of items recorded therein.               [1]
2.     Ram and Mohan are partners in a firm without any partnership deed. Their capitals are
        Ram Rs.8,00,000 and Mohan Rs.6,00,000. Ram is an active partner and looks after the business.  Ram wants that profit should be shared in proportion of capitals. State with reason whether his claim is valid or not.                         [1]
3.      Defined goodwill.                                                                                     [1]
4.     State any two reasons for the preparation of 'Revaluation Account' on the admission of a partner.                                                                               [1]
5.             Give the meaning of 'minimum subscription'.                                       [1]
6.     Calculate the amount of sports material to be debited to the Income and Expenditure Account of Capital Sports Club for the year ended 31.3.2007 on the basis of the following information
                                                                       1.4.2006               31.3.2007
                                                                               Rs.                         Rs.
        Stock of sports material                                 7,500                     6,400
        Creditors for sports material                          2,000                     2,600
        Amount paid for sports material during the year was Rs. 19,000.

7.             Samta Ltd. forfeited 800 equity shares of Rs. 100 each for the non-payment of first call of Rs. 30 per share. The final call of Rs.20 per share was not yet made. Out of the share 400 were  re-issued at the rate of Rs.105 per share fully paid up.
        Pass necessary journal entries in the books of Samta Ltd. for the above transaction.                                                                                                                                    [3]
8.      Deepak Ltd. purchased furniture Rs.2,20,000 from M/s Furniture Mart. 50% of the amount was paid to Furniture Mart by accepting a bill of exchange and for the balance the company issue 9% debentures of Rs.100 each at a premium of 10% in favour of Furniture Mart. Pass necessary journal entries in the books of Deepak Ltd. for the above transactions.                                                     [3]
9.     Kumar and Raja were partners in a firm sharing profits in the ratio of 7 :3. Their fixed capital were: Kumar Rs.9,00,000 and Raja Rs.4,00,000. The partnership deed provided for the following but the profit for the year was distributed without providing for:
        i)      Interest on capital @ 9% p.a.
        ii)     Kumar's salary Rs.50,000 per year and Raja's salary Rs.3,000 per month.
                The profit for the year ended 31.3.2007 was Rs.2,78,000.
        Pass the adjustment entry.                                                                          [4]
10.   P, Q and R were partners in a firm sharing profits in 2 : 2 :1 ratio. The firm closes its book on  31 March every year. P died three months after the last accounts were prepared. On that date the goodwill of the firm was valued at Rs.90,000. On the death of a partner his share of profit in the  year of death was to be calculated on the basis of the average profits of the last four years The profits of last four years were :
        Year ended 31.3.2007                                                                                            Rs.2,00,000                                                   
        Year ended 31.3.2006                                                                                            Rs. 1,80,000
        Year ended 31,3.2005                                                                                            Rs. 2,10,000
        Year ended 31.3.2004                                                                                            Rs. 1,70,000 (Loss)
        Pass necessary journal entries for the treatment of goodwill and P's share of profit on his death.
        Show clearly the calculation of P's share of profit.                                       (4)
11.   Sagar Ltd. was registered with an authorised capital of Rs. 1,00,000 divided into 1,00,000 equity shares of Rs.100 each. The company offered for public subscription 60,000 equity shares.
        Applications for 56,000 shares were received and allotment was made to all the applicants. All the calls were made and were duly received except the second and final call of Rs.20 per share on 700 shares. Prepare the Balance Sheet of the company showing the different types of share capital.                             (4)
12.   Following is the Receipt and Payment Account of Indian Sports Club for the year ended 31.12.2006.
        Receipts                                Amount   Payments                                         Amount
        To Balance b/d                        10,000   By Salary                                 15,000
        To Subscriptions                     52,000   By Billiards Table                    20,000
        To Entrance Fee                        5,000   By Office Expenses                    6,000
        To Tournament Fund               26,000   By Tournament Expenses          31,000
        To Sale of old newspapers         1,000   By Sports Equipment                40,000
        To Legacy                               37,000   By Balance c/d                         19,000
                                                     1,31,00                                                        1,3 1,000

        Other Information:
        On 31.12.2006 subscription outstanding was Rs.2,000 and on 31.12.2005 subscription outstanding was Rs.3,000. Salary outstanding on 31.12,2006 was Rs.1,500.
        On 1.1.2006 the club had building Rs.75,000, furniture Rs. 18,000,12% investment Rs.30,000 and sports equipment Rs.30,000, Depreciation charged on these items including purchases was 10%.
        Prepare Income and Expenditure Account of the Club for the year ended 31.12.2006 and ascertain the Capital Fund on 31.12.2005.                           (6)
13.   K and Y were partners in a firm sharing profits in 3 :2 ratio. They admitted Z as a new partner for l/3rd share in the profits of the firm. Z acquired his share from K and Y in 2 : 3 ratio. Z brought Rs.80,000 for his capital and Rs.30,000 for his 1/3"1 share as premium. Calculate the new profit sharing ratio of K, Y and Z and pass necessary journal entries for the above transactions in the books of the firm. (6)
14.   Pass necessary journal entries in the books of Varun Ltd. for the following transactions: i) Issued 58,000, 9% debentures of Rs.l,000each at a premium of 10%.
        ii)     Converted 350,9% debentures of Rs. 100 each into equity shares of Rs. 10 each  issued at premium of 25%.
        iii)    Redeemed 450, 9% debentures of Rs.100 each by draw of lots.            (6)
15.  R, S and T were partners in a firm sharing profits in 2 :2 : 1 ratio. On 1.4.2004 their Balance Sheet was as follows :
        Liabilities                              Amount   Assets                                             Amount
        Bank Loan                               12,800   Cash                                        51,300
        Sundry Creditors                     25,000   Bills Receivable                       10,800
        Capitals :                                             Debtors                                    35,600
           R                 80,000                           Stock                                       44,600
           S                  50,000                          Furniture                                    7,000
           T                  40.000          1,70,000   Plant and Machinery                  19,500
        Profit: and Loss A/c                   9,000   Building                                   48,000
                                                   2,16,800                                                          2,16,800
        S retired from the firm on 1.4.2004 and his share was ascertained on the revaluation of assets as follows:
        Stock Rs.40,000; Furniture Rs.6,000; Plant and Machinery Rs. 18,000; Building 40,000, Rs.1,700 were to be provided for doubtful debts. The goodwill of the firm was valued at Rs. 12,000.
        S was to be paid Rs. 18,080 in cash on retirement and the balance in three equal yearly instalments.  Prepare Revaluation Account, Partner's Capital Accounts, S's Loan Account and Balance Sheet on 1.4.2004.
OR
        D and E were partners in a sharing profits in 3 :1 ratio. On 1.4.2007 they admitted F as a new partner for 1/4th share in the firm which he acquired from D. Their Balance Sheet on the date was as follows:
        Liabilities                              Amount   Assets                                             Amount
        Creditors                                 54,000   Land and Building
        Capitals :                                             Machinery
           D                     1,00,000                    Stock
           S                        70.000    1,70,000   Debtors                         40,000
        General Reserve                      32,000   Less provision
                                                                   for bad debts                   3,000 37,000
                                                                   Investments                              50,000                                                                        Cash                                    44,000
                                                   2,56,000                                                          2,56,000
        F will bring R. 40,000 as his capital and the other terms agreed upon were :
        i)      Goodwill of the firm was valued at Rs. 24,000
        ii)     Land and Building were valued at Rs. 70,000       
        iii)    Provision for bad debts was found to be in excess by Rs.800     '
        iv)    A liability for Rs.2,000 included in sundry creditors was not likely to arise.
        v)     Excess or shortfall, if any, to be transferred to current accounts.
        Prepare Revaluation Account, Partner's Capital Accounts and the Balance Sheet of the New firm.
16.   Janata Ltd. invited application for issuing 70,000 equity shares of Rs.10 each at a premium of Rs. 2 per share. The amount was payable as follows:
        On application           Rs.4 per share (including premium)
        On allotment             Rs.3 per share
        On first and final       Balance
        Applications for 1,00,000 shares were received. Applications for 10,000 shares were rejected. Shares were allotted to the remaining applicants on pro-rata basis. Excess money received with applications were adjusted towards sums due on allotment. All calls were made and were duly received except first and final call on 700 shares allotted to Kanwar. His shares were forfeited.
        The forfeited shares were re-issued for Rs.77,000 fully paid up.
        Pass necessary journal entries for the books of the company for the above transactions.                                                                                                                                  (8)
OR
        Shubham Ltd. invited applications for the allotment of 80,000 equity shares of Rs.10 each at a discount of 10%. The amount was payable as follows :
        On application                        Rs.2 per share
        On allotment                                                                             Rs.3 per share
        On first and final call-             Balance
        Applications for 1,10,000 shares were received. Applications for 10,000 shares were rejected. Shares were allotted on pro-rata basis to the remaining applicants. Excess application money received on application was adjusted towards sums due on allotment. All calls were made and were duly received. Manoj who had applied for 2,000 shares failed to pay the allotment and first and final call. His shares were forfeited. The forfeited shares were re-issued for Rs.24,000 fully paid up. Pass necessary journal entries in the books of the company for the above transaction.
PART-B
(Analysis of Financial Statements)
17.   The stock turnover ratio of a company is 3 times. State, giving reason, whether the ratio improves, declines or does not change because of increase in the value of closing stock by Rs.5,000.                                                                                  (1)
18.   State whether the payment of cash to creditors will result in inflow, outflow or no flow of cash.                                                                                                     (1)
19.   Dividend paid by a manufacturing company is classified under which kind of activity while preparing cash flow statement?                                                           (1)
20.   Show the major headings on the liabilities side of the Balance Sheet of a company as per Schedule VI Part I of the Companies Act, 1956.                               (3)
21.   From the following information prepare a comparative Income Statement of Victor Ltd:                                                                                                             (4)
                                                                             2006                              2007
                                                                               Rs.                                Rs.
        Sales                                                      15,00,000                       18,00,000
        Cost of goods sold                                  11,00,000                        14,00,000
        Indirect Expenses                                                                                       
                                                       20% of Gross Profit        125% of Gross Profit
        Income Tax                                                     50%                               50%
22.   From the following information calculate any two of the following ratios                    (4)
        i)      Net Profit Ratio
        ii)     Debt-Equity Ratio
        iii)    Quick Ratio
                                                                                         Rs.
        Paid up Capital                                                 20,00,000
        Capital Reserve                                                                                 2,00,000
        9% Debentures                                                   8,00,000
        Net Sales                                                         14,00,000
        Gross Profit                                                       8,00,000
        Indirect Expenses                                                2,00,000
        Current  Assets                                                  4,00,000
        Current Liabilities                                               3,00,000
        Opening Stock                                                      50,000
        Closing Stock : 2% more than opening stock.
23.   From the following Balance Sheets of Som Ltd. as on 31.3.2006 and 31.3.2007 prepare a Cash Flow Statement :                                                                                            

         Liabilities                                                           Amount      Assets                              Amount
         Equity Share Capital                      2,00,000      5,00,000      Fixed Assets     3,00,000  4,50,000
         Profit and Loss                              1,25,000         25,000      Stock               1,00,000  1,50,000
         10% Debentures                           1,00,000         75,000      Debtors               75,000  1,25,000
         8% Preference Shares Capital           50,000         75,000      Bank                   45,000     65,000
         General Reserve                              45,000      1,15,000     
                                                             5,20,000     7,90,000.                             5,20,000  7,90,000

        During the year machine costing Rs.70,000 was sold for Rs. 15,000. Dividend paid Rs.24,000                                                                                                       (6)












ANSWERS
SET-1
(Not for Profit Organisations, Partnership Firms and Company Accounts)
1.     Income and Expenditure Account records items of revenue nature whereas Receipt and Payments Account records items of both capital and revenue nature.
2.     His claim is not valid because in the absence of a partnership deed, profits and losses should be shared equally.
3.     Goodwill is the value of the reputation of a firm is respect of the profits expected in future over and above the normal profits earned by other similar firms belonging to the same industry.
4.     The two reasons are :
        (i)     To show the assets and liabilities at their current / correct values.
        ii)     To ensure that no partner is at an advantage or disadvantage due to change in the value of assets and liabilities.
5.     Minimum subscription is the minimum amount which in the opinion of the Board of Directors must be raised through the issue of shares so that the company has necessary funds to carry out its objectives as stated in its memorandum of Association.
        Minimum subscription, according to SEB1 guidelines is 90% of the issued capital.
6.     Dr.         STOCK OFSPORTS MATERIAL ACCOUNT                             Cr.
        Particulars                          Amt. (Rs.)  Particulars                                    Amt (Rs.)
        To Balance b/d                          7,500   By Income & Expenditure A/c -                   20,700
                                                                   (stationery consumed)
        To Creditors -                         19,600   By Balance c/d                           6,400
        (purchases)                             27,100
                                                      27,100                                                  27,100
        Dr.          CREDITORS FOR SPORTS MATERIAL ACCOUNT          Cr.
        Particulars                          Amt. (Rs.)  Particulars                                    Amt (Rs.)
        To Cash (paid)                        19,000   By Balance b/d                           2,000
        To Balance c/d                          2,600   By Purchases A/c                     19,600
                                                                   (credit -bal.fig.)
                                                      21,600                                                   21,600
OR
        Calculation of Sports Material consumed during the year
        Cash paid during the year                                                         19,000
        Add Opening Stock of sports Material                                        7,500
        Less Closing stock of sports Material                                         6,400
        Less Creditors in the beginning                                                   2,000
        Add Creditors at the end                                                            2.600
        Amount to be debited to Income & Expenditure A/c                   20,700
JOURNAL OF  SAMTALTD.
7.    
Date            Particulars         L.F.                                                                           Dr. (Rs.)                Cr.(Rs)   
                               Share Capital A/c                                          Dr.                  64,000
                                    To Share Forfeited A/c                                                                  40,000
                                    To Share First Call A/c / Calls in Arrears A/c                                 24,000
                               (Being 800 shares forfeited for noh payment of                                                                
                               first call)
                               Bank A/c                                                        Dr.                  42,000
                                    To Share Capital A/c                                                                     40,000
                                    To Securities Premium A/c                                                              2,000
                               (Being 400 Shares reissued)

                               Share Forfeited A/c                                       Dr.                  20,000
                                    To Capital Reserve A/c                                                                  20,000
                               (Being amount transferred to Capital Reserve)

8.
JOURNAL OF DEEPAK LTD.
                   Date             Particulars                                                                                    L.F.         Dr. (Rs.)       Cr.(Rs)   
                               Furniture A/c                                                  Dr.               2,20,000
                                    To M/s Furniture Mart A/c                                                                          2,20,0001
                               (Being furniture purchased)
                               Ms Furniture Mart A/c                                    Dr.               1,10,000
                                    To Bills Payable A/c                                                                                   1,10,000:,
                               (Being Bill payable Accepted)
                               M/s Furniture Mart A/c                                   Dr.               1,10,000
                                    To 9% Debentures A/c                                                               1,00,000
                                    To Securities Premium                                                                  10,000
                               (Being Debentures issued at 10% premium)

9.           
JOURNAL
                   Date             Particulars                                                                                    L.F.         Dr. (Rs.)       Cr.(Rs)   
                               Kumar's Current A/c                                      Dr.                  11,100
                                    To Raja's Current A/c                                                                    11,100
                               (Being adjustment made which was omitted                                                                                                                                       earlier)
               Working Notes:
               STATEMENT SHOWING ADJUSTMENTS
               Particulars                                                              Kumar (Rs.)                    Raja (Rs.)
               Interest on Capitals                                               81,000  (Cr.)                 36,000 (Cr.)
               Salaries                                                                 50,000  (Cr.)                 36,000 (Cr.)
               Wrong Profits                                                     1,94,600  (Dr.)                 83,400 (Dr.)
               Actual Profits                                                         52,500  (Cr.)                 22,500 (Cr.)
               Adjustments                                                         11,100 (Dr.)                 11,100 (Cr.)

10.         
JOURNAL
                   Date             Particulars                                                                                    L.F.         Dr. (Rs.)       Cr.(Rs)   
                               P & L Suspense A/c                                      Dr.                  10,500              
                                    To P's Capital A/c                                                                          10,500
                               (Being share of profit credited to his A/c)
                               Q's Capital A/c                                               Dr.                  24,000
                               R's Capital A/c                                               Dr.                  12,000
                                    To P's Capital A/c                                                                          36,000
                               (Being adjustment made in respect of P's share                           
                               of goodwill)
               Working Note :
               (a)      P's Share of profit      =          Average profit x 3/12 x 2/5
                        Average Profit             =          2,00,000 + 1,80.000 + 2,10,000 -1,70,000  
                                                                        =  Rs.1,05,000
                                                                                   
                          P's share of profit       =          1,05,000 x 3/12 x 2/5 = Rs.l0,500
                          P's share in goodwill  =  Rs.90,000 x 2/5 = Rs. 36,000

11.
               BALANCE SHEET OF SAGAR LTD.
.              as at ..........
               Liabilities                                                                   Amount (Rs.)       Assets       Amount (Rs.)
               SHARE CAPITAL
               Authorised Capital                                                       1,00,00,000
               1,00,000 equity shares of Rs. 100 each
               Issued Capital
               60,000 equity shares of Rs. 1 00 each                             60,00,000
               Subscribed Capital
               56,000 equity shares of Rs.100 each        56,00,000
               Less calls in arrears                                      14.000        55,86,000

OR
               Liabilities                                                                   Amount (Rs.)       Assets       Amount (Rs.)
               A uthorised Capital                                                                    
               1,00,000 Equity Shares of Rs.100 each                  1,00,00,000
               Issued Share Capital
               60,000 Equity Shares of Rs.100 each                        60,00,000
               Subscribed Share Capital
               56,000 Equity Shares of Rs. 100 each                       56,00,000
               Called up and Paid up Share Capital
               56,000 Equity Shares of Rs. 100 each                       56,00,000
               Less, calls in arrears                                14.000       55,86,000

               Note : If the Issued Capital is taken as Rs.56,00,000, full credit was given.
12.
               INCOME & EXPENDITURE ACCOUNT
               for the year ended 31st December 2006
         Expenditure                                   Amt. (Rs.)    Income                                                    Amt (Rs.)
         To  Salary                         15,000                     By Subscription                                    52,000
         Add: Outstanding Salary       1,500       16,500    Add: Subscription Outstanding
         To Office Expenses                               6,000    at the end                                              2,000
         To Excess of Expenses               
         Over Tournament Fund                         5,000    Less: Subscription
         (31,000-26,000)                                                Outstanding in the
                                                                                beginning                                               3.000
         To Depreciation on Building                    7,500    By Entrance Fees                                   5,000
         To Depreciation on Furniture                  1,800    By Sale of old Newspaper                       1,000
         To Depreciation on Sports Equipment             7,000                                                           
         To Surplus                                          16,800    By Accrued Interest                                3,600
                                                                   60,600                                                               60,600

BALANCE SHEET
as at 31" December 2005
               Liabilities                          Amount (Rs.)       Assets                                    Amount (Rs)
               Capital                                    1,66,000       Cash                                               10,000
                                                                                   Subscription                                             
                                                                                   Outstanding                                      3,000
                                                                                   Building                                          75,000
                                                                                   Furniture                                         18,000
                                                                                   Sports
                                                                                   Equipment                                      30,000
                                                                                   1 2% Investments                          30,000
                                                               1,66,000                                                           1,66,000

               Notes :
               1.   If Billiards Table is included in furniture, then depreciation On furniture would be Rs.3,800      and the surplus would be Rs.l 4,800.
               2.    No marks were deducted if depreciation has been charged on Investments. The surplus         would change accordingly.

13.          Old Ratio                                          =          3:2
               Z's share                                          =          1/3
               Z acquires from K = 1/3 x 2/5 = 2/15
               Z acquires from Y = 1/3 x 3/5 = 3/15
               K's new share = Old share-share to Z = 3/5-2/15 = 7/15
               Y's new share = Old share - share to Z = 2/5 -3/15 = 3/15
               New profit sharing ratio = 7:3:5

JOURNAL
                   Date             Particulars                                                                                    L.F.         Dr. (Rs.)       Cr.(Rs)   
                                       Cash A/c                                                                         Dr.                       1,10;000
                                             To Z's Capital A/c                                                                                                       80,000
                                             To Premium A/c                                                                                                        30,000
                                       (Being Capital and share of goodwill brought in by                                                                                        
                                       the new partner)
                                       Premium A/c                                                                  Dr.                          30,000                  
                                             To K's Capital A/c                                                                                                      12,000
                                             To Y's Capital A/c                                                                                                       18,000
                                       (Being the amount of premium distributed in                                                                                                        
                                       Sacrificing  ratio)


14.          i)                                              JOURNAL OF VARUN LTD.
                   Date             Particulars                                                                                    L.F.         Dr. (Rs.)       Cr.(Rs)   
                                       Bank A/c                                                                         Dr.                  6,38,00,000
                                             To Debenture Application and Allotment A/c                                                                          6,38,00,000
                                       (Being Debenture Application money received)
                                       Debenture Application and Allotment A/c                        Dr.                  6,38,00,000
                                             To 9% Debentures A/c                                                                                                           5,80,00,000
                                             To Securities Premium A/c                                                                                   58,00,000
                                       (Being issue of Debentures at Premium of 10%)

               II)                                                            JOURNAL
                   Date             Particulars                                                                                    L.F.         Dr. (Rs.)       Cr.(Rs)   
                                       9% Debentures A/c                                                         Dr.                          35,000
                                             To Debenture Holders                                                                                               35,000
                                       (Being amount due to Debenture Holders)
                                       Debenture holders A/c                                                    Dr.                          35,000
                                             To Equity Share Capital A/c                                                                                       28,000
                                             To Securities Premium A/c                                                                                          7,000
                                       (Being 2,800 Equity Shares issued at a premium of 25%)

               III)                                                          JOURNAL
                   Date             Particulars                                                                                    L.F.         Dr. (Rs.)       Cr.(Rs)   
                                       9% Debentures A/c                                                         Dr.                          45,000
                                             To Debenture Holders                                                                                               45,000
                                       (Being amount due to Debenture Holders)
                                       Debenture Holders A/c                                                   Dr.                          45,000
                                             To Bank A/c                                                                                                               45,000
                                       (Being amount paid to Debenture Holders)

15.                                                            REVALUATION ACCOUNT
         Expenditure                                   Amt. (Rs.)    Income                                                    Amt (Rs.)
         To Stock                                            4,600    By Loss transferred to                    
         To Furniture                                       1,000    Partners capital A/cs :
         To Plant &. Mach.                              1,500                                              R  6,720
         To Building                                        8,000                                              S  6,720
         To Provision for                                                                                         T  3,360  16,800
         Doubtful Debts                                   1,700
                                                                  16.800                                                              16.800

CAPITAL ACCOUNTS
         Particulars                 R Rs.     S Rs.       T Rs.    Particulars                         R Rs.    S Rs. T Rs
         To
         Revaluation A/c         6,720     6,720       3,360    By Balance b/d                80,000  50,000         40,000
                                                                                 By P&L A/c                       3,600    3,600         1,800
         To S's Capital A/c      3,200            -       1,600    By R's
         To Cash A/c                         18,080                   Capital A/c                               _    3,200       -
         To S's Loan                                                       By T's
         A/c                                  -   33,600              -    Capital A/c                               -    1,600       -
                                                                                 To Bal. c/d                      73,680  36,840       
                                       83,600   58,400     41,800                                          83,600  58,400         41,800













BALANCE SHEET
as at 1.4.2004

         Liabilities                                        Amt (Rs.)    Assets                                                     Amt (Rs.)
         Bank Loan                                          12,800    Cash                                                   33,220
         Sundry Creditors                                 25,000    Bill Receivables                                    10,800
         S'sLoan                                              33,600    Debtors                                  35,600
         Capital                                                             Less Provision                           1,700   33,900
             R                                  73,680                     Stock                                                   40,000
             T                                   36,840                     Furniture                                                6,000
                                                                1,10,520    Plant & Machinery                                18,000
                                                                                Building                                                40,000
                                                                1,81,920                                                            1,81,920

S's LOAN ACCOUNT
         Cr.                                                                                                                                    Dr.
         Date          Particular                Amount (Rs,)      Date              Particular              Amount (Rs.)
                          To Balance c/d                 33,600      2004
                                                                                 Apr. 1            By S's Capital                 33,600
                                                                  33,600                                                                33,600

OR
REVALUATION ACCOUNT
         Cr.                                                                                                                                   Dr,
         Particulars                                      Amt (Rs.)    Particulars                                                Amt (Rs.)
         To Profit TVansferred to                                    By Land and building                             20,000
         Partner's Capital A/c                                          By Provisions for doubtful debts                 800
             D                                  17,100                     By Sundry Creditors                               2,000
                                                         E         5,700    22,800
                                                                   22,800                                                               22,800

PARTNERS' CAPITAL ACCOUNTS
         Particulars                 D Rs.     E Rs.       F Rs.    Particulars                         D Rs.    E Rs.      F Rs.
         To                          67,100   43,700             --    By Balance b/d             1,00,000  70,000      --
         Current A/c             80,000   40,000     40,000    By Revaluation A/c          17,100    5,700      --
                                                                                 By General Reserve         24,000    8,000      --
                                                                                 By Cash A/c                            --          --         40,000
                                                                                 By F's Current A/c             6,000          --       
                                    1,47,000   83,700     46,000                                       1,47,000  83,700         46,000

BALANCE SHEET
as at 1" April 2007
         Liabilities                                        Amt (Rs.)    Assets                                                     Amt (Rs.)
         Creditors                                            52,000    Land & Building                                    70,000
         Capital A/c's                                                     Debtors                                  40,000
             D                                  80,000                     Less Provision                           2.200   37,800
             E                                   40,000                     Machinery                                            60,000
             F                                   40,000    1,60,000    Stock                                                   15,000
         Current A/c's                                                    Investment                                          50,000
             D                                  67,100                     Cash                                                   84,000
             E                                   43,700                     F's Current A/c                                       6,000
                                                                1,10,800        
                                                                3,22,800                                                            3,22,800

            Note: Full credit was given if an examinee has calculated the adjusted capitals as: D Rs. 68,000; E Rs.34,000 and F Rs.34,000 and the total of the Balance Sheet is Rs,3,16,800.

16.                                                       IN THE BOOKS OF JANTA LTD.
            JOURNAL
                   Date             Particulars                                                                                    L.F.         Dr. (Rs.)       Cr.(Rs)   
                                       Bank A/c                                                                         Dr.                       4,00,000
                                             To Share Application A/c                                                                                        4,00,000
                                       (Being application money received on 1,00,000 shares                                                                                      
                                       @ Rs.4 per share including premium)
                                       Share Application A/c                                                     Dr.                       4,00,000
                                             To Share CapitaVA/c                                                                                              1,40,000
                                             To Securities Capital A/c                                                                                         1,40,000
                                             To Share Allotment A/c                                                                                              80,000
                                             To Bank A/c                                                                                                               40,000
                                       (Being application money adjusted to wards share capital                                                                                   
                                       & Share allotment & balance refunded)
                                       Share Allotment A/c                                                        Dr.                       2,10,000
                                             To Share Capital A/c                                                                                               2,10,000
                                       (Being amount due on share allotment)
                                       Bank A/c                                                                         Dr.                       1,30,000
                                             To Share Allotment A/c                                                                                           1,30,000
                                       (Being allotment money-received)                                 
                                       Share First & Final Call A/c                                            Dr.                       3,50,000
                                             To Share Capital A/c                                                                                               3,50,000
                                       (Being amount due on share first & final call                                                                                                        
                                       on 70,000 share @ Rs.5 each)
                                       Bank A/c                                                                         Dr.                       3,46,500
                                             To Share First & Final Call A/c                                                                               3,46,500
                                             (Being first & final call received)
                                                                OR
                                       Bank A/c                                                                         Dr.                       3,46,500
                                       Calls in Arrears A/c                                                         Dr.                            3,500
                                             To Share First & Final Call A/c                                                                               3,50,000
                                       (Being first & final call received)
                                       Share Capital A/c                                                            Dr.                            7,000
                                             To Share Forfeited A/c                                                                                                 3,500
                                             To Share First & Final Call / Calls in Arrears A/c                                                         3,500
                                       (Being 7010 shares forfeited due to non payment of                                                                                            
                                       first & final call)
                                       Bank A/c                                                         Dr.                   77,000
                                    To Share Capital A/c                                                                           7,000
                                    To Securities Premium A/c                                                                70,000
                               (Being forfeited share reissued @ Rs.77,000)
                               Share Forfeited A/c                                                         Dr.                            3,500
                                             To Capital Reserve A/c                                                                                                3,500
                                       (Being Capital Profit on reissued shares transferred to                                                                                  
                                       capital reserve A/c)

OR
                   Date             Particulars                                                                                    L.F.         Dr. (Rs.)       Cr.(Rs)   
                                       Bank A/c                                                                         Dr.                       2,20,000
                                             To Share Application A/c                                                                                        2,20,000
                                       (Being application money received on 1,10,000 share                                                                                  
                                       @ Rs.2 per share)
                                       Share Application A/c                                                     Dr.                       2,20,000
                                             To Share Capital A/c                                                                                               1,60,000
                                             To Share Allotment A/c                                                                                              40,000
                                             To Bank A/c                                                                                                               20,000
                                       (Being application money adjusted to wards share capital                                                                                   
                                       & Share allotment & balance refunded)
                                       Share Allotment A/c                                                        Dr.                       2,40,000
                                       Discount on Issue of Shares A/c                                     Dr.                          80,000
                                             To Share Capital A/c                                                                                               3,20,000
                                       (Being amount due on share allotment)

                                       Bank A/c                                                                         Dr.                       1,96,000                  
                                             To Share Allotment A/c                                                                                           1,96,000
                                       (Being allotment money received)
                                                           OR
                                       Bank A/c                                                                         Dr.                       1,96,000
                                       Calls in Arrears A/c                                                         Dr.                            4,000
                                             To Share Allotment A/c                                                                                           2,00,000
                                       (Being first & final call received)
                                       Share First & Final Call A/c                                            Dr.                       3,20,000
                                             To Share Capital A/c                                                                                               3,20,000
                                       (Being amount due on share first & final call on 80,000                                                                                 
                                       shares @ Rs.4 each)
                                       Bank A/c                                                                         Dr.                       3,13,600
                                             To Share First & Final Call A/c                                                                               3,13,600
                                       (Being first & final call received)
                                                       OR
                                       Bank A/c                                                                         Dr.                       3,31,600
                                       Calls in Arrears A/c                                                         Dr.                            6,400
                                             To Share First & Final Call A/c                                                                               3,20,000
                                       (Being first & final call received)
                                       Share Capital A/c                                                            Dr.                          16,000
                                             To Share Forfeited A/c                                                                                                 4,000
                                             To Share allotment A/c                                                                                                4,000
                                             To Share First & Final Call A/c                                                                                    6,400
                                             To Discount on Issue of Shares A/c                                                                             1,600
                                       (Being 1,600 shares forfeited due to non payment of                                                                                            allotment & first & final call)
                                                     OR
                                       Share Capital A/c                                                            Dr.                          16,000
                                             To Share Forfeited A/c                                                                                                 4,000
                                             To Calls in Arrears A/c                                                                                               10,000
                                             To Discount on Issue of Shares A/c                                                                             1,600
                                       (Being 1,600 shares forfeited due to non payment of                                                                                            allotment & first &. final call)
                                       Bank A/c                                                                         Dr.                          24,000
                                             To Share Capital A/c                                                                                                  16,000
                                             To Securities Premium A/c                                                                                          8,000
                                       (Being forfeited shares reissued @ Rs.24,000)
                                       Share Forfeited A/c                                                         Dr.                            4,000
                                             To Capital Reserve A/c                                                                                                4,000
                                       (Being Capital Profit on reissued shares transferred to                                                                                  
                                       capital reserve A/c)





PART-B
(Analysis of Financial Statements)
17.     Stock turnover ratio will decline because die amount of average stock will increase, cost c goods sold remaining the same.    
18.     Outflow of Cash
19.     Financing Activity
20.   The major headings on the liability side of the balance sheet are:
         i)             Share Capital
         ii)            Reserves & Surplus
         iii)            Secured Loans
         iv)           Unsecured Loans
         v)            Current Liabilities & Provisions
                        a)         Current Liabilities
                        b)         Provisions
21.                               COMPARATIVE INCOME STATEMENT OF VICTOR LTD.
         Particulars                                      2006 Rs.         2007 Rs.    Absolute Change %age Change
         Sales                                            15,00,000        18,00,000                 3,00,000                  20
         Less Cost of                                               
         goods Sold                                   11,00,000        14,00,000                 3,00,000              27,27
         Gross Profit                                   4,00,000            4,00,00                           --                    --
         Less Indirect
         Expenses                                          80,000          1,00,000                   20,000                  25
         Net Profit before
         Tax                                                3,20,000          3,00,000                 (20,000)             (6.25)
         Less : Income Tax                          1,60,000          1,50,000                 (10,000)             (6.25)
         Net Profit After Tax                        1,60,000          1,50,000                 (10,000)             (6.25)


22.     Any Two of the following ratios:
         i) Net Profit Ratio                          =          Net Profit / Net Sales X 100
            Net Profit                                  =          Gross Profit - Indirect expenses
                                                            =          8,00,000-2,00,000
                                                            =          Rs.6,00,000
            Net Profit Ratio                         =          6,00,000 / 40,00,000 x 100 = 42.86%    
         ii) Debt Equity Ratio                      =          Debt / Equity
            Debt                                         =          Debentures = Rs.8,00,000
            Equity                                       =          Equity Share Capital + Capital Reserve
                                                            =          Rs.20,00,000 + Rs.2,00,000
                                                            =          Rs.22,00,000
            Debt Equity Ratio                     =          8,00,000 / 22,00,000 = 4:11
            Note : Full credit was given if net profit is added to equity. Then debt equity Ratio
            = Rs.8,00,000 / Rs.28,00,000 = 2 : 7        .
         iii) Quick Ratio                              =          Liquid Assets / Current Liabilities
            Liquid Assets                             =          Current Assets - Closing Stock
            Liquid Assets                             =          Rs.4,00,000 - Rs.60,000 = Rs.3,40,000
            Current Liabilities                       =          Rs.3,00,000
            Quick Ratio                               =          3,40,000 / 3,00,000= 17: 15 or 1.13 : 1

23.     Calculation of Net Front / Loss before tax :
         Profit for the year                                               (1,00,000)
         Add: Transferred to Reserve                                   70,000
         Add: Dividend                                                        24,000
                                                                                      (6,000)


CASH FLOW STATEMENT
for the year ended 31st March 2007
         Particulars                                                                                                      (Rs.)         (Rs.)
         A Cash Flows from Operating Activities                                                              
         Net Loss as per Profit & Loss A/c                                                                 (6,000)
         Adjustments :                                                                               
         Add: Debenture Interest                                                       10,000
                     Loss on sale of machinery                                        55,000              65,000
         Operating Profit before Working Capital changes                                            59,000
         Adjustments for Working Capital Changes
         Less: Increase in Current Assets
                     Stock                                                                    (50,000)
                     Debtors                                                                 (50,000)         (1,00,000)
         Net Cash used in Operating Activities                                                         (41,000)    (41,000)
         B. Cash Flow from Investing Activities :
         Sale of Fixed Assets                                                                                    15,000
         Purchase of Fixed Assets                                                                        (2,20,000)
         Net Cash used in Investing Activities                                                       (2,05,000) (2,05,000)
         C. Cash Flow from Financing Activities:                                      
         Issue of Equity Share Capital                                                                     3,00,000
         Issue of {Preference Share Capital                                                                25,000
         Redemption of Debentures                                                                        (25,000)
         Dividend Paid                                                                                            (24,000)
         Interest on Debentures paid                                                                       (10,000)
         Net Cash Flaw from Financing Activities                                                    2,66,000   2,66,000
         Net Increase / Decrease in Cash & Cash Equivalents
         Add Opening Cash and Cash Equivalents                                                                      20,000
         Add Opening Cash and Cash Equivalents                                                                      45,000