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Class 12 - Accountancy
Sample Paper 04

Maximum Marks: 40
Time Allowed: 90 minutes

General Instructions:
Read the following instructions very carefully and strictly follow them:

1. This question paper comprises three PARTS – I, II and III. There are 69 questions in the question paper.
2. Part - I -is compulsory for all candidates.
3. Part - II Analysis of Financial Statement
4. There is an internal choice provided in each Sections.
I. Part-I, contains three Sections -A, B and C. Section A has questions from 1 to 18 and Section B has
questions from 19 to 36, you have to attempt any 15 questions each in both the sections.
II. Part I, Section C has questions from 37 to 41. You have to attempt any four questions.
III. Part II, contains two Sections – A and B. Section A has questions from 42 to 48, you have to attempt any
five questions and Section B has questions from 49 to 55, you have to attempt any six questions.
5. All questions carry equal marks. There is no negative marking.
6. Specific Instructions related to each Part and subdivisions (Section) is mentioned clearly before the
questions. Candidates should read them thoroughly and attempt accordingly.

Part - I (Section - A)
1. Capital employed by a partnership firm is Rs10,00,000.Its average profit is Rs 1,20,000. The normal rate
of return in similar type of business is 10%. What is the amount of super profits?
a. Rs 20,000
b. Rs 1,12,000
c. Rs 12,000
d. Rs 1,00,000
2. Which of the following is transferred to the partners capital account?
a. Loan (short term)
b. Creditors
c. Land and Building
d. General Reserve
3. L, M and N are partners in a firm sharing profit and loss in the ratio of 2:3:5. Their fixed capitals were
Rs.15,00,000, Rs. 30,00,000 and Rs. 60,00,000 respectively. For the year 2011 interest on capital was
credited to them @ 12% instead of 10 %. Pass the necessary journal entry.
a. L’s Capital A/c Dr. 15,000 and M’s Capital A/c Cr.15,000
b.

N’s Current A/c ... Dr. 15,000

To M’s Current A/c 12,000

To L’s Current A/c 3,000

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c.

N’s Current A/c ... Dr. 15,000

To L’s Current A/c 12,000

To M’s Current A/c 3,000

d.

L’s Current A/c ... Dr. 15,000

To N’s Current A/c 12,000

To M’s Current A/c 3,000

4. Under the Capitalisation of Super Profit, the formula for calculating the goodwill is
a. Average profit divided by the rate of return
b. Super profit divided by the rate of return
c. Super profit multiplied by the rate of return
d. Average profit multiplied by the rate of return
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5. Aditya and Shiv were partners in a firm with capitals of ₹3,00,000 and ₹2,00,000, respectively. Naina
was admitted as a new partner for 1/4th share in the profits of the firm. Naina brought ₹1,20,000 for
her share of goodwill premium and ₹2,40,000 for her capital. The amount of goodwill premium
credited to Aditya will be:
a. ₹40,000
b. ₹60,000
c. ₹1,20,000
d. ₹2,00,000
6. Which of the following is not transferred to partners capital account?
a. Retained Earnings
b. Employees Provident Fund
c. General Reserve
d. Contingency Reserve
7. If the average profit of a business is Rs.50,000 and normal profits are Rs.60,000, it shows:
a. Positive super profit
b. No Goodwill of business
c. Positive Goodwill
d. Goodwill is more than expected
8. Deferred revenue expenditure given on the Asset side of the Balance sheet will be:
a. Credited to all partners
b. None of these
c. Debited to sacrificing partners
d. Debited to old partners
9. Verma Brothers earn a profit of Rs. 90,000 with a capital of Rs. 4,00,000. The normal rate of return in
the business is 15%. Use Capitalization of super profit method to value the goodwill.
a. Rs.250000

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b. Rs. 2,25,000
c. Rs.2,00,000
d. Rs.150000

10. A, B and C are equal partners in the firm. It is now agreed that they will share the future profits in the
ratio of 3:2:1. sacrificing ratio and gaining ratio of different partners will be:

a. A sacrifice , B no change, C gain

b. A gain , B no change, C sacrifice
c. A gain , B gain , C sacrifice
d. A gain , B no change, C sacrifice
11. X and Y are partners sharing profits in the ratio of 3 : 2. Z is admitted for th share in profits which he
acquires equally from X and Y. The new ratio will be:
a. 3 : 3 : 2
b. 19 : 11 : 10
c. 9 : 6 : 5
d. None of these
12. Ramesh and Suresh are partners sharing profits in the ratio of 2 : 1 respectively. Ramesh Capital is
₹1,02,000 and Suresh Capital is ₹73,000. They admit Mahesh and agree to give him 1/5th share in future
profit. Mahesh brings ₹14,000 as his share of goodwill. He agrees to contribute capital in the new profit
sharing ratio. How much capital will be brought by Mahesh?
a. ₹47,250
b. ₹48,000
c. ₹45,000
d. ₹43,750
13. Calculate goodwill at twice the weighted average profits of last four years’ profits. The profits of the last
four years were:
2008 37000

2009 29000

2010 26000

2011 40000
a. Rs. 55000
b. Rs. 66600
c. Rs. 55500
d. Rs. 66000
14. What treatment should be given to Employee’s Provident Fund appearing in the liabilities side of the
Balance Sheet in case of admission of a partner?
a. Not to be distributed
b. Should be distributed in equal ratio
c. Should be distributed as a part of reserve
d. Both treatment can be done
15. A, B and C are sharing profits and losses in the ratio 5:3:2 with effect from 01/04/2013 they decide to
share profit and losses equally. Calculate B partner’s gain share
a. share

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b. share
c. share
d. share
16. Which of the following statement is false?
a. Company is not affected by the death of any of its member
b. Company is managed by all the members
c. Ownership and management of company is distinct
d. A company is legal entity distinct from its owner
17. A and B sharing profit in the ratio of 4:3. C is admitted and the balance sheet shows a balance of
General Reserve ₹70,000. What amount of General Reserve should be transferred to B’s A/c
a. ₹30,000
b. ₹15,000
c. ₹35,000
d. ₹40,000
18. If an excess of issued price over the nominal value of share price is received it is called ________.
a. premium on issue of share
b. Profit of the company
c. Issued capital
d. Discount on issue of share
Part - I (Section - B)
19. Normal profit is calculated to value goodwill
a. None of these
b. by adding abnormal losses
c. by deducting abnormal gains and adding abnormal losses
d. by deducting abnormal gains (profit)
20. X, Y and Z are partners sharing profits in the ratio of , and . Profit and Loss account shows a
loss of Rs.2,800. Now partners have decided to share future profits in the ratio of 4:2:2. Who is the
gainer and with what amount?
a. X Rs.300
b. Z Rs.300
c. Y Rs.300
d. Z and X Rs.150 each
21. Where shares can be sold by a company?
a. Stock Exchange
b. RBI
c. Media
d. Only Newspapers
22. Assertion (A): A profit and loss adjustment account is required for the rectification of errors or
omissions.
Reason (R): This account is prepared to rectify those errors or omissions which are left while
preparing final accounts and found after distribution of profits among partners.
a. Both A and R are true and R is the correct explanation of A.
b. Both A and R are true but R is not the correct explanation of A.
c. A is true but R is false.
d. A is false but R is true.
23. X Ltd. forfeited 2,000 shares of ₹10 each (which were issued at par) held by Naresh for non-payment of

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allotment money of ₹4 per share. The called-up value per share was ₹9. On forfeiture, the amount
debited to Share Capital Account will be:
a. ₹18,000
b. ₹2,000
c. ₹8,000
d. ₹10,000
24. How would you calculate the new partner’s capital, when it is not given in the question?
a. Old partners capital after all adjustments reciprocal of remaining share new partner’s share
b. Old partners capital after all adjustment reciprocal of sacrificing share new partner’s share
c. All partners capital after all adjustment reciprocal of old partner’s share new partner’s share
d. Old partners capital after all adjustment reciprocal of old partner’s share sacrificing share
25. Which type of shares is not convertible?
a. Equity Shares
b. Redeemable preference shares
c. Both Preference Shares and Equity Shares
d. Preference Shares
26. Assertion (A): A change in profit sharing ratio amounts to dissolution of partnership firm.
Reason (R): Existing agreement comes to an end and a new agreement comes into existence.
a. Both A and R are true and R is the correct explanation of A.
b. Both A and R are true but R is not the correct explanation of A.
c. A is true but R is false.
d. A is false but R is true.
27. Sumo Ltd. was formed with an authorised Share Capital of ₹40,00,000 divided into 4,00,000 shares of Rs
10 each. The Company offers 130000 shares to the public payable ₹3 per share on Application, ₹3 per
share on Allotment and the balance on First and Final Call. Applications were received for 120000
shares. All money payable on the allotment was duly received, except on 200 shares held by Y. First
and Final Call was not made by the Company. Call in arrears will be of:
a. ₹400
b. ₹500
c. ₹600
d. ₹800
28. ________ means capital invested in the firm to carry on business.
a. None of these
b. Trade Investment
c. Service and goods
d. Capital Employed
29. Is there any limit of Securities Premium on the issue of shares. If yes then what is the limit.
a. 25%
b. 10%
c. 20%
d. Unlimited
30. If a company purchases any fixed asset or a running business and makes payment to the vendor in
form of issue of shares in place of cash it is called ________.
a. issue of shares other than cash
b. issue of shares in form of assets
c. issue of shares for cash
d. private placement of shares

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31. Assertion (A): Equity shares are those shares that do not preference shares.
Reason (R): Equity shares are the least issued class of shares and carry the minimum risks and
rewards of the business.
a. Both A and R are true and R is the correct explanation of A.
b. Both A and R are true but R is not the correct explanation of A.
c. A is true but R is false.
d. A is false but R is true.
32. Vanya Ltd. forfeited 20,000 equity shares of ₹ 100 each for non-payment of first and final call of ₹ 40
per share. The maximum amount of discount at which these shares can be re-issued will be:
a. ₹ 12,00,000
b. ₹ 8,00,000
c. ₹ 20,00,000
d. ₹ 20,000
33. Revaluation account is
a. Asset Account
b. Personal Account
c. Real Account
d. Nominal Account
34. Which of the following statements does not relate to Reserve Capital:
a. It is part of subscribed capital.
b. It is part of uncalled capital of a company.
c. It cannot be used during the lifetime of a company.
d. It can be used for writing off capital losses.
35. What adjustments are required when existing partners decide to change their profit sharing ratio:
a. Goodwill
b. Reserves and Accumulated profits
c. Realisation Account
d. Both Goodwill and Reserves and Accumulated profits
36. According to Companies Act company cannot issue its share at ________.
a. Par
b. Discount
c. Both Discount and Par
d. Premium
Part - I (Section - C)

Question No. 37 to 38 are based on the given text. Read the text carefully and answer the
questions:

Batra Ltd. issued 20,000 shares of ₹ 100 each at a premium of ₹ 25 per share, payable as follow
₹ 20 per share on application
₹ 45 per share on the allotment (including premium of ₹ 15 )
₹ 60 per share on first and final call (including premium of ₹ 10)
The issue was over subscribed by 10,000 shares. Applicants of 8,000 shares were allotted only 1,000
shares and applicants of 1,000 shares were sent letters of regret. The excess amount received at the
time of application was to be adjusted only against allotment and overpayments exceeding the amount
due on allotment were to be refunded. All the money at the time of allotment and call was duty
received.

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37. What is an excess amount received along with application money adjusted with allotment?
a. ₹ 59,000
b. ₹ 95,000
c. ₹ 85,000
d. ₹ 58,000
38. What is amount received on allotment?
a. ₹ 9,00,000
b. ₹ 8,15,000
c. ₹ 8,00,000
d. ₹ 9,15,000

Question No. 39 to 41 are based on the given text. Read the text carefully and answer the
questions:

Balwant and Mohit decided to set up a partnership to sell low-sodium, plant-based vegan snacks. Since
both of them had a family, they decided to withdraw a salary of ₹ 12,000 per quarter.
Balwant also withdrew ₹ 1,00,000 on 31st December 2020 to get her wife treated for Covid-19. The
partnership deed provided for 10 % p.a. interest on drawings.
Mohit introduced ₹ 50,000 as additional capital on 31st January 2021 to increase the inventory. The net
distributable profit was ₹ 2,00,000 which was divided between Balwant and Mohit after providing 25
% to general reserve.

39. Total amount of salary credited to the partner's account is

a. ₹ 12,000
b. ₹ 2,88,000
c. ₹ 48,000
d. ₹ 96,000
40. Interest on Balwant's drawings will be ₹ ________.
a. 10,000
b. 2,500
c. 5,000
d. 7,500
41. Interest on Mohit's capital will be
a. ₹ 10,000
b. None of these
c. ₹ 5.000
d. ₹ 20,000
Part - II (Section - A)
42. Assertion (A): Bills receivable are shown as trade receivables in the balance sheet of the company.
Reason (R): Debtors and bills receivable form the part of trade receivables.
a. Both A and R are true and R is the correct explanation of A.
b. Both A and R are true but R is not the correct explanation of A.
c. A is true but R is false.
d. A is false but R is true.
43. Wages paid to workers is shown in the Statement of Profit and Loss under:
a. Cost of Materials Consume
b. Finance cost

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c. Other Expenses
d. Employees Benefit Expenses
44. The analysis of a financial statement by a shareholder is an example of:
a. Internal Analysis
b. Vertical Analysis
c. External Analysis
d. Horizontal Analysis
45. _______ Ratio establishes the relationship between net profit and revenue from operations.
a. Gross Profit Ratio
b. Working Capital Turnover Ratio
c. Net profit ratio
d. Current Ratio
46. If Statement of profit and loss shows a negative balance, it will be shown under ________.
a. Reserves and Surplus
b. Short term borrowings
c. Current Assets
d. Other Current Liabilities
47. What is shown by the Income Statement?
a. Balance of Cash Book
b. Profit or loss of a certain period
c. Accuracy of books of accounts
d. None of these
48. Long term funds employed in the business are also known as________
a. Investments
b. Capital Employed
c. Share Capital
d. Long term borrowings
Part - II (Section - B)
49. Which of these are not the method of financial statement analysis?
a. Capitalisation Method
b. Trend Analysis
c. Ratio Analysis
d. Comparative Analysis
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50. Average Inventory is used to calculate the …….
a. Debt Equity Ratio
b. Inventory Turnover Ratio
c. Interest Coverage Ratio
d. Current Ratio
51. Common-size Statements are also known as:
a. Vertical Analysis
b. Dynamic Analysis
c. External Analysis
d. Horizontal Analysis
52. Assertion (A): If the Current Ratio is 2 : 1. The current maturity of long-term debt i.e., Redemption of
debentures in the current year, will increase the Current Ratio.

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Reason (R): Current assets will decrease and there is no impact on current liabilities.
a. Both A and R are true and R is the correct explanation of A.
b. Both A and R are true but R is not the correct explanation of A.
c. A is true but R is false.
d. A is false but R is true.
53. Assertion (A): When financial statements of several years are compared against a chosen base year, it
is called Dynamic Analysis.
Reason (R): Horizontal analysis is made to review and analyze the financial statements for a number
of years and it is also known as Time Series Analysis.
a. Both A and R are true and R is the correct explanation of A.
b. Both A and R are true but R is not the correct explanation of A.
c. A is true but R is false.
d. A is false but R is true.
54. Return on investment ratio is calculated by
a.

b.

c.

d.
55. With the Permission of Registrar, the accounting period can be extended up to ________ months.
a. 13 Months
b. 18 Months
c. 14 Months
d. 15 Months

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Class 12 - Accountancy
Sample Paper 04

Solution

Part - I (Section - A)
1. (a) Rs 20,000
Explanation: Rs 20,000
2. (d) General Reserve
Explanation: General Reserve given in the balance sheet will be credited to the old partners in their
old profit sharing ratio. While other items i.e. land and building, loan and creditors are shown in the
balance sheet and any change in their value will be shown in the revaluation account. and profit / Loss
of revaluation will be distributed to old partners in the old ratio only.
3. (c)

N’s Current A/c ... Dr. 15,000

To L’s Current A/c 12,000

To M’s Current A/c 3,000

Explanation: Adjustment of amounts will be done as follows:

Amount wrongly taken (2%) L Rs.30,000 M Rs.60,000 N Rs.1,20,000 = Total Rs.2,10,000
Adjust 2,10,000 in 2:3:5 ratio L Rs.42,000 M Rs.63,000 N Rs.1,05,000
L has already taken Rs.30,000 but he should get 42,000, so credit him for Rs.12,000
M has already taken Rs.60,000 but he should get 63,000, so credit him for Rs.3,000
N has already taken Rs.1,20,000 but he should get 1,05,000, so Debit him for Rs.15,000
Entry will be:

L’s Current A/c ... Dr. 15000

To N’s Current A/c 12000

To M’s Current A/c 3000

4. (b) Super profit divided by the rate of return

Explanation: Super profit divided by the rate of return
5. (b) ₹60,000
Explanation: Goodwill will be distributed in Sacrificing ratio, now amount paid to Aditya will
be ₹60,000 (1,20,000 1/2).
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6. (b) Employees Provident Fund
Explanation: Employees provident fund is not a free reserve. Partners cannot distribute employees
provident fund. Partners can distribute only free reserves and accumulated profits at the time of
reconstitution of a partnership firm. Partners will distribute all reserves and retained earnings except
employees provident fund. Employees provident fund is a liability, not a reserve.
7. (b) No Goodwill of business

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Explanation: The formula of super profit is Average Profit - Normal Profit. When normal profit is more
than the average profit, it shows that there is no goodwill of the firm. In such a case do not show a
negative figure of goodwill or super profit. Super profit is the excess of average profit over normal
profit. When the super profit is positive, it shows the goodwill value of the firm. But in question Super
Profit is negative (50000 - 60000 = 10000) hence there is no Goodwill.
8. (d) Debited to old partners
Explanation: At the time of admission of a new partner, all deferred revenue expenditures given in the
old balance sheet will be debited to all the old partner's (existing partners) capital/current accounts (in
case of fixed capital account), in their old profit sharing ratio.
9. (c) Rs.2,00,000
Explanation: Calculation of Goodwill:
1. Average Profit Rs.90,000
2. Normal Profit 4,00,000 15/100 = Rs.60,000
3. Super Profit = 90,000 – 60,000 = Rs.30,000
4. Goodwill = Super Profit 100/NRR = 30,000 100/15 = Rs. 2,00,000
10. (b) A gain , B no change, C sacrifice
Explanation: Gaining ratio = New ratio - old ratio

11. (b) 19 : 11 : 10
Explanation: Calculation of new profit sharing ratio
Old ratio of X & Y = 3:2
New partner Z's Share= which he acquires equally from X and Y= =
X's new share = - =
Y's new share = - =
Z's Share =
19 : 11 : 10
12. (d) ₹43,750
Explanation: Calculation of Mahesh share of capital
Mahesh's Capital = (Ramesh's Capital + Suresh's Capital) Reciprocal of their Combined New Share
Profit Share of Mahesh
Ramesh's Capital + Suresh's Capital = 1,02,000 + 73,000 = ₹1,75,000
Combined Share of Ramesh & Suresh = 1 -
Reciprocal of Combined Share =
Mahesh's Profit Share =
Mahesh's Capital = 1,75,000 = ₹43,750
13. (b) Rs. 66600
Explanation: Calculation of Goodwill by using Weighted method :
Profits Weight Products

37000 1 37,000

29000 2 58,000

26000 3 78,000

40000 4 1,60,000

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Total 10 3,33,000
Step 2 : Calculation of weighted average profit = 3,33,000/10 = 33,300
Step 3 : Goodwill = 33,300 2 = 66,600
14. (a) Not to be distributed
Explanation: Employee provident fund is not a free reserve and It is not an accumulated profit. Hence,
Partners cannot distribute it among themselves. This is outsiders’ liability which has to be paid to the
employees after some time. It will be shown in the new balance sheet of the firm (if not paid) at the
liability side.
15. (c) share
Explanation: Calculation of gaining or sacrificing ratio:
Formula: Old Share - New Share
A = - = = Sacrifice
B = - = = Gain
C = - = = Gain
16. (b) Company is managed by all the members
Explanation: The Statement given as ‘Company is managed by all the members’ is not correct because
it is not mandatory for all the members to run the company. Company is run by their chosen
representatives known as directors.
17. (a) ₹30,000
Explanation: Calculation of amount to be transferred to B's Capital A/c:
Old Ratio of A and B = 4:3
B’s Share of General Reserve = Rs.70,000 = Rs.30,000
18. (a) premium on issue of share
Explanation: When a company issues its shares at a price which is more than its actual face value, it is
known as shares issued at premium i.e. if shares are issued at Rs.120 when its face value is Rs.100 then
Rs.20 is premium.
Part - I (Section - B)
19. (c) by deducting abnormal gains and adding abnormal losses
Explanation: by deducting abnormal gains and adding abnormal losses
20. (b) Z Rs.300
Explanation: Adjustment of loss at the time of change in profit sharing ratio:
Old Ratio = 8:4:2 OR 4:2:1
New Ratio = 4:2:2 OR 2:1:1
Formula = Old share - New share
X’s Sacrifice = - = ;
Y’s Sacrifice = - =
Z’s Gain = - = (gain)
21. (a) Stock Exchange
Explanation: A company can sell its shares only through the stock exchange. The company should be
listed in the stock exchange to sell its shares. Now trade online through both stock exchanges i.e. NSE
and BSE.
22. (a) Both A and R are true and R is the correct explanation of A.
Explanation: Both A and R are true and R is the correct explanation of A.
23. (a) ₹18,000

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Explanation: The company debits a certain amount to the share capital at the time of forfeiture of
shares which is always the called up value. And the called-up value is that amount which any company
demands from its shareholders periodically every year.
The share capital is debited because the called up amount which the company was expecting from was
shareholders has not been deposited and thus they have to reduce the capital balance by debiting share
capital account.
Share capital amount can be calculated as under:
Share Capital Amount = Called up value per share No. of shares Substitute values in the above
equation
Share Capital Amount = ₹9 2000 shares = ₹18,000
The amount debited to share capital is ₹18,000.
24. (a) Old partners capital after all adjustments reciprocal of remaining share new partner’s share
Explanation: Calculation of the new partner’s capital should be done on the basis of the following
procedure:
i. Calculated the combined or adjusted capitals of all the existing partners (after all adjustments)
ii. Find out the reciprocal of remaining share
iii. Now, New partner's capital = combined capitals reciprocal of remaining share new partner’s
share
25. (a) Equity Shares
Explanation: Equity Shares are not convertible. Preference shares can be converted into equity shares
depend upon the terms and conditions but equity shares cannot be converted into any other shares.
26. (d) A is false but R is true.
Explanation: A change in profit sharing ratio amounts to dissolution of partnership only, not
partnership firm.
27. (c) ₹600
Explanation: Call in arrears are the amount which is called but not paid by some shareholders.
Allotment money is not received on 200 shares
Allotment money is Rs. 3
Call in Arrear will be 600 i.e. 200 shares 3 = 600
Note: Amount of first and final call is not called by the company, so it should not be considered as Calls
in Arrears.
28. (d) Capital Employed
Explanation: Capital Employed
29. (d) Unlimited
Explanation: There is no limit of securities premium on issue of shares as specified by the Companies
Act. Share of a company whose face value is Rs.10 can be issued at a price of 300 Rupees (including
premium 290).
30. (a) issue of shares other than cash
Explanation: Company may issue shares to the vendor as consideration for the amount payable on the
purchase of a fixed asset or running business. It is called an issue of shares other than cash. Company
may issue such shares at par, premium or discount.
31. (c) A is true but R is false.
Explanation: Equity shares are the most commonly issued class of shares and carry the maximum
risks and rewards of the business.
32. (a) ₹ 12,00,000
Explanation: The amount standing in the Share forfeiture A/c is ₹ 12,00,000; 20,000 equity shares at ₹
60 (₹ 100 - ₹ 40) which is the maximum permissible discount on re-issue of the forfeited equity shares.

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So, the maximum amount of discount at which these shares can be re-issued will be ₹ 12,00,000.
33. (d) Nominal Account
Explanation: Nature of revaluation is Nominal Account. Any account which is prepared to calculated
the profit or loss is considered as a Nominal Account.
34. (d) It can be used for writing off capital losses.
Explanation: Reserve Capital is used only in the event of winding up of the company thus; it cannot be
used to write off capital losses of the company.
35. (d) Both Goodwill and Reserves and Accumulated profits
Explanation: Due to Change in profit sharing ratio following adjustments are made in the partner’s
capital accounts with respect to undistributed profits and reserves, revaluation of assets and
reassessment of liabilities, etc.
The valuation of goodwill of a firm, its treatment, adjustment regarding undistributed profits and
reserves and revaluation of assets and liabilities due to change in the profit sharing ratio of the
partners.
36. (b) Discount
Explanation: As per the Companies Act, 2013, (new guidelines), a company cannot issue its shares at
discount. The company can issue its shares at par and premium only. Either equity or preference no
share can be issued at discount.
Part - I (Section - C)
37. (c) ₹ 85,000
Explanation: ₹ 85,000
38. (b) ₹ 8,15,000
Explanation: ₹ 8,15,000
39. (d) ₹ 96,000
Explanation: ₹ 96,000
40. (b) 2,500
Explanation: 2,500
41. (b) None of these
Explanation: None of these
Part - II (Section - A)
42. (a) Both A and R are true and R is the correct explanation of A.
Explanation: Both A and R are true and R is the correct explanation of A.
43. (d) Employees Benefit Expenses
Explanation: Wages paid to workers is shown in the Statement of Profit and Loss under Employees
Benefit Expenses.
44. (c) External Analysis
Explanation: The analysis of a financial statement by a shareholder is an external analysis.
45. (c) Net profit ratio
Explanation: Net Profit Ratio is the ratio of after tax profits to net sales. It reveals the remaining profit
after all costs of production , administration, and financing have been deducted from sales, and income
taxes recognized.
46. (a) Reserves and Surplus
Explanation: The negative balance of statement of profit and loss indicates current year loss or
accumulated losses. The negative balance of statement of profit and loss is placed under the heading
reserves and surplus with the amount in the bracket which indicates a negative balance.
47. (b) Profit or loss of a certain period
Explanation: Income Statement shows the profit or loss of an enterprise for a certain period.

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48. (b) Capital Employed

Explanation: Long term funds employed in the business are also known as Capital Employed. i.e.
Share capital + Reserves and Surplus + long term borrowings + Long term provisions
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Part - II (Section - B)
49. (a) Capitalisation Method
Explanation: Capitalisation method is not a method of financial statement analysis.
50. (b) Inventory Turnover Ratio
Explanation: Average inventory is the mean value of an inventory throughout a certain time period.
In inventory turnover ratio is calculated by dividing the cost of goods sold for a period by the average
inventory for that period.
51. (a) Vertical Analysis
Explanation: Common-size Statements are also known as vertical analysis. A common size statement is
a form of analysis and interpretation of the financial statement. It is also known as vertical analysis.
52. (c) A is true but R is false.
Explanation: A is true but R is false.
53. (a) Both A and R are true and R is the correct explanation of A.
Explanation: Both A and R are true and R is the correct explanation of A.
54. (b)
Explanation: ROI measures the amount of return on an investment relative to the investment's cost.
55. (b) 18 Months
Explanation: As per section 210(4), of company Act,2013 a financial year maybe less or more than a
calendar year, but it shall not exceed fifteen months. The financial year may be extended to eighteen
months, where special permission has been granted in this connection by the concerned Registrar of
Companies [Proviso to section 210(4)]. Thus, annual accounts may be prepared for a period up to
eighteen months with the special permission of the Registrar on the application submitted in Form 61
by Company.

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