Solution SURE SHOT ACCOUNTANCY SAMPLE PAPER Class 12 - Accountancy Part Accounsing for Parry Firms and Companies ZA 1. (a) Charge against profit Espa Anything which will reduce the net profit of the firm is called charge. Normally interest on capital is an appropriation; it means It willbe paid out of profits and up to the profits only, But in some cases itis paid as @ charge. it means whether there is profit ‘or loss, it will be paid. Only in such cases interest on capital is treated as a charge. 2. (@) 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. 3B. (© Purchased Goodwill Explanation: Purchased Goodwill oR (0) No. of years purchase is not given Explanation: There are different methods for the calculation of self-generated goodwill. Capitalisation method is one of them, itis mainly used when the number of years purchases not given in the question. Capitalisation method can be used for both super profit and average profit method. Capitalisation method is two types: |. Capitalisation by Average profit method 41, Capitalisation by Super Profit Method 4, (@) Subscribed and fully paid-up capital Explanation: When the entre face value of a share is Called by the company and is also paid by the shareholder, itis known as Subscribed and fully paid-up capital. tis shown by notes to account i the balance sheet. oR (b) Rs.5,000 Explanation: The formula for calculating the amount of capital Feserve = (amount of shares forfeited /no of shares forfeited x no of shares reissued) - amount of discount on the reissue Amount forfeited on 1,000 shares = 1,000 shares x 55 = Rs.55,000 Less: Discount on reissue 1,000 shares x 50 = Rs.50,000 Amount to be transferred to capital reserve = $5,000 50,000 = Rs. 5,000 5. @ 1. Bank A/c «. De ‘To Deb. App, & Allot. A/c Deb. App. BeAllot. A/c. Dr To% Debenture A/c “To Securities premium reserve A/c To Bank Asc Explanation: The following journal entry willbe recorded in the books: i. Bank A/c. Dr (with application money received) ‘To Deb. App. & Alot. A/c Hi, Deb. App. & Allot. A/c... Dr ‘To % Debenture A/c (face value) ‘To Securities premium reserve Alc (premium) ‘To Bank A/c (amount rejected) At the time of allotment excess money should be refunded s0 bank account will be credit with that amount. 6 0 t T T T 1 Jai Mangal Singh 1/1910. 4 2 13, u Realisation Ale Dr. 9,000 To Z's Capital Ale 3,000 Explanation: Partner is getting Rs.9,000 remuneration but expenses paid by him Rs.11,500. He is paying Rs.2,500 from his pocket. In simple words, excess 2,500 will be paid and borne by the partner soit should not be recorded. We record only 9,000 which Is paid by the firm. Entry will be: Realisation Alc Dr. 9,000 HTo Z's Capital Alc 9,000 oR (© Realisation Account Explanation: At the time of dissolution ofthe firm, the assets and liabilities appearing’6n the Balance Sheet are transferred to the Realisation Account, When a firm decides to discontinue its operation, alla3sets need to be disposed off and all liabilities need to be discharged. For this purpose, a Realisation account is opened wher allthe assets, excluding cash at hand and bank Toan toa partner and accumulated losses are shown on the debit side at their Book values and al the external liabilities are shown on the credit side at their book value. Any sale of assets or discharge Of liabilities is also shown in this account. 3 Explanation: According to the Companies Act, a public company'shoutd have a least 3 Directors and a maximum of 15, directors. (b) 10,000 Explanation: Total 10,000 Applications were rejected by the company. Applications received = 30,000 Full allotment made to only 2000 So (30,000 - 2,000) remaining 28,000 Pro-rata allotment made to only 18,000 So applications rejected = (28,000 - 18,000) =10000 oR (2) Secured Debentures Explanation: When a company issue some debentures with th@ charge of some assets they are called secured debentures. Such debentures are shown in the balance sheet under the heading of Long Term Borrowings. A charge on assets of the company is registered with Registrar of companies. (b) Dr. A’s Capital Ale 6,000; Cr. B’s Capital A/e¥ 6,000 Explanation: Dr. A’s Capital A/c 6,000; Cr. B's Capital A/c ¥ 6,000 (@) Cr. A’s Capital Aic € 9,000; Dr. B's Capital Alc ¥ 9,000 Explanation: Cr, A's Capital A/c € 9,000; Dr. B's Capital A/c € 9,000 (b) Personal Account Explanation: Debenture Allotment Account isa personal account. It is a Representative Personal Account. There are three types of account. (i) natural personal A/c (ii) Artificial personal A/c (iti) Representative personal A/c. (943: Explanation: Jayshree’s share = ‘New share = old share - sacrifice share ‘Anand’s share = $ Nitin’s share = 2 - = 3 ‘New profit sharing ratio = 4:3:3 (b) Itis a fictitious asset Explanation: tsa fictitious asset (b) Drawings against capital will reduce the capital Explanation: The main difference between drawings against profit and drawings against capital is: Jai Mangal Singh 2/19i. Drawings against capital will reduce the amount of capital but not the profit because it is withdrawn from capital only. 4i, Drawings against profit will reduce the amount of profit but not the capital. 15, (32 Explanation: Gaining Ratio of B and C will be 3:2. In the absence of any information other than old profit sharing ratio old ratio of remaining partners will be remain gaining ratio. (same as old ratio of remaining partners ) Gain Ratio = New Share - old share Bisgain= 2-2-2 Cpan=2- 3-2 oR (37 Explanation: The new ratio of A and B will be 5:7 16. (8,800 Explanation: Calculation of Nem’s account for goodwill (to be credited his account ‘The total capital of the new firm = Sam's capital x reciprocal of is share = 5 x Rs.60,000 = Rs. 3,00,000 Combined capital = Hem’s + Nem's + Sam’s = Rs.80,000 + Rs. 50,000 + Rs.60,000 = Rs.1,90,000 Goodwill of the firm = Rs.1,10,000 (Rs. 3,00,000 - Rs.1,90,000) Sam’s share = 1,10,000 > 2 = Rs, 22,000 'Nem's account to be credited with = 22,000 x 2 (sacrificing ratio) =.8,600 1” JOURNAL ENTRIES Date [Particulars Le [pr@ [cre seat fount Ae pe] |1,20,000 [To Amits Capital A/c 60,000 [To Amrits Capital Ale 40,000 Fro Akhits Capital A/c 20,000 (Being the Goodwill Account debited with current value of goodwill in old profit sharing ratio of 3:2:1) JAmies Capital Ale Dr. 72,000 [Amrits Capital Ale De.] [48,000 To Goodwill Ale 1,20,000 (Being the Goodwill Account writen off in new profit sharing ratio of continuing partners) 18. Goodwill = Average Profit x Number of years! purchase ‘otal Profs for pest given years ‘Nese of Yas ia aio Average Profit = 1200048, 0 15,000 Goodwill 5,000 x 3 = € 45,000 oR Calculation of Adjusted Profit [average Proce by fm Trs000 [has Unde Viton af ck [on0 [dasea ro [en000 Normal Profit = Capital Employed > Normal Rate of Return Normal Prat = € 70,000 x = = 49,000 Jai Mangal Singh 3/19Super Profit = Average Profit (Adjusted) - Normal Profit = 80,000 - & 49,000 = € 31,000 Goodwill = Super Profit x Number of Years’ Purchase = 31,000 x S=¥ 1,55,000 19. JOURNAL OF DLTD. Date Particulars LE| Dr @® | Cr @® [2017 April 1 [Machinery A/c De] _|2,00,000 fro Ld. a |(Machinery purchased from E Ltd.) ee oe De] [50,000 To Bank Ale Fe (Part payment made in Cash) Apror [Eta De] _|1,50,000 Discount on issue of Debentures Ale De] [10,000 Fro 1296 Debentures Ale a Balance amount of 1,50,000 settled by the issue of €1,60,000 debentures) OR Journal Entries [Date | Particulars LF |Dr. (Rs.) Cr. (Rs.) 1 [Bank Ale.De 3,20,000 Fro Debentures Application & Allotment Ale 360,000 (Being Application money received.) it [Debentures Application & Allotment Ale..Dr 3,80,000 Loss on issue of debentures A/C. 60,000 Fro 9% Debentures Ale 00,000 -To Premium on redemption af Deb. Ale 40,000 (Being debenture issued at didcount redeemable atpremium.) 20. Calelation of Change in Ratio ld Ratio of A, Band =P: 1 New Ratio of A, Band C= 34:5 Sacrifice or Gain: Gain) Tn the books of Firm Journal Date [Particular Le [oe @lo.@ [2017 March 31 [C's Capital Arc (75 of 90,000) pe] [7500 | HTo A's Capital A/c (2, of 90,000) —_ (Adjustment for Profit & Loss Account balance on change in profit sharing ratio) 21. Tm the books of Alankrit Ld. Journal Date Particulars Le[ mee | co@ i) [Machinery Ave br. 10,00,000 Jai Mangal Singh 4/192, To Grand Iron Works Ltd, (Being machinery purchased on from Grand Iron Works Ltd.) 10,00,000 [rots pasate a [ome ton worst |e | frao00 | [io Stare Capi Ae 60R00 = 10) LI [Eom Pio Secures Premium Resewe Ac GOON ~2) CI [.co000 TI [ao.0m (Being shares issued, bill accepted and post Tn the books of Grand Iron Works Ltd. Journal [aka 00000 To sies Av CLI Ta0a00 Being mochne sido Amok) | 1 Invsmnen Ae a Bis Recevabie Ne | _ [soa cheques tond Ae pe] }.co000 Te Aint Toot (Being shares, acceptance and post-dated cheque received as against machinery) Realisation Account Particulars To Sundry Assets Buildings By Creditors By A (investments) Expenses Furniture 6,500 By Cash A/c (Assets Realised) Stock 20,100 Fixed Assets 29,700 Debiors 62,600 Stock and Debtors 30,000 |1,09,700 investments 16,000 °}1,28,700 | By Capital A/es Losses To Cash Avc- lA 1,000 [Creditors = ($0,400. 800) B 1,000 Bills dishonoured 1,500 c 1,000 _ {3,000 181,100 1,81,100 Cash Account Particulars e Particulars z rio Balance b/d 3.700 By Realisation Ale 52,400 To Realisation Ale 7,09,700 By Capital Ale A 25,000 fTo As Loan Ale 10,000 B 28,000 ec 18,000 [71,000 1,23,400 123,400 Jai Mangal Singh 5/1923 Partner's Capital Accounts Piao [AM] >O ] cH | Pais [| aA@ | >@ | ow Tore ae frase |__| [sy tatonewa [vomno 2500 — |1a000 Toned tass [row —_fro0 _|000 [By Resnes [000 _fx000 [000 Foca ae aso fanc00 [18000 _| | 4an0 [2son0 _frs00 | [som feso00 _[raaoo JOURNAL OF NED, Date | Particulars LP. Pe | ce @O}1®@ Equity Share Capital A/c (300 x % 100) Securities Premium Reserve A/c (100 x ® 20) To Calls-in-Arrears A/c (WN 1) -To Forfeited Shares Alc (WN 2) (Being the forfeiture of 300 shares for non-payment of allotment and first and final call money on 100 shares and first and final call money on 200 shares) [Bank A/c (150 x € 80) Forfeited Shares A/c (150 % 20) To Equity Share Capital A/c (Being the reissue of 150 forfeited shares @ % 80 each as fully paid-up) Forfeited Shares Ale To Capital Reserve Alc (WN 3) (Being the gain on reissue transferred t Capital Reserve) BALANCE SHEET (EXTRACT) (BEFORE FORFEITURE OF SHARES) a, a TLEQUITY AND LIABILITIES | Shareholders Funds | (a) Share Capital 1 [985.000 (0) Reserves and Sas 2 | am000 Notes to Accounts Total 11,83,000 1. Share Capital | Authorised Capital Equity Shares of ¥ 100 each Issued Capital 10,000 Equity Shares of ¥ 100 each 10,00,000 [Subscribed Capital Subscribed and fully paid-up 19,700 Equity Shares of & 100 each Jai Mangal Singh 9,70,000 6/19Subscribed but not ul pai-up 00 ity Stare af 10 each Jsn000 [is00 T5000 2.8000 seers and Supls Secures Premium Resewe (720000072000 700 BALANCE SHEET (EXTRACT (AFTER FORFEITURE OF SHARES) 1. EQUITY AND LIABILITIES Shareholders’ Funds () Share Capital 1 9,85,000 (b) Reserves and Surplus 2 [198.000 oa T8800 Notes to Accounts 1, Share Capital | Authorised Capital Equity Shares of € 100 each Issued Capital 10,000 Equity Shares of @ 100 each 10,00,000 [Subscribed Capital Subscribed and fully paid-up 8.700 Buty Shares of #100 each [270000 ha Fare Shares Ave [5000 [25000 Reserves and Sur Secures Preniun Reseve — BALANCE SHEET (EXTRACT) (AFTER FORFEITURE OF SHARES) 1. EQUITY AND LIABILITIES Shares! Funds Stare Copia 7 oom |(b) Reserves and Surplus 2 2,01,000 ea 7195.00 Notes to Accounts 1. Share Capital | Authorised Capital [Equity Shares of € 100 each Jai Mangal Singh RS)Issued Capital 10,000 Equity Shares of € 100 each 10,00,000 [Subscribed Capital [Subscribed and fully paid-up 19,850 Equity Shares of & 100 each 9,85,000 |Add: Forfeited Shares A/c* 9,000 9,94,000 (= 15,000 (Amount Forfeited) - ¥ 3,000 (Reissued Discount) -& 3,000 (Transferred to Capital Reserve)} 2. Reserves and Surplus (2) Capital Reserve 3,000 (Securities Premium Reserve 7,98,000 201,000 ‘Working Now 1. Calculation of Calls-in-Arrears: [_ &_[z-catetation of Amount Forfeited: L: [Asha Allooment money not paid (100 x 50) [5.000 [Asha: Application money paid (100 ~-* 30) [5.000 [Call money not paid (100 x ¥ 40) | #000_ [Neeru Application money paid (200 x ¥ 30) [s:000 Ices Calvanese (058) 00, egtarmmer po gly Sh acne ans) [ome Tis 3. Calculation of the Amount Transferred to Capital Reserve (Gain on Reissue): Capital Reserve = No. of Shares Reissued x (Amoumt forfeited per share) - Discolint allowed on reissue per share) ‘On Asha's Shares [100 x (¥ 30 - € 20)] = @ 1,000 ‘On Neeru’s Shares [50 x (€ 60 - ¥ 20)] = € 2,000 Amount transferred to Capital Reserve = #3,000 oR ‘Applied shares 3,000 Allotment made as: Payable as: Applied Alloted Application F6G+) 2,400 2,000 | Alloument, F20+) ‘600 NIL FirstCall F3Q+) Final Call F3@Q+) 3,000 2,000 14 (10+ 4) per share ‘Cash Book Dr. Cr, Date Particulars Bank (®) | Date Particulars Bank @) ‘Share Application (3,000 shares x 6) | 18,000 ‘Share Application (600 shares x 6) 3,600 Share Allotment (see note-2) 1,568 [Share First Cal (see note-4) 5,700 Share Final Call (see note-5) 5,700 'Share Capital (B0 shares x € 9) 720 Balance c/d 28,088 31,688 31,688 ‘Journal Entries Jai Mangal Singh 8/19Date Particulars LE. |Dr. @|Cr.@) [Share Application A/c Dr. 14,400 To Share Capital A/c 10,000 To Securities Premium A/c 2,000 ‘To Share Allotment A/c 2,400 (Share application money of 2,000 shares transferred to Share Capital and Securities Premium at € 5 and 1 each respectively and % 2,400 adjusted on allotment) [Share Allotment Ale De] [4,000 "To Share Capital Ale 2,000 "To Securities Premium Alc 2,000 (Allotment due on 2,000 shares at € 2 each including ¥ 1 premium) [Share First Call A/c Dr.| — |6,000 ‘To Share Capital A/c 4,000 To Securities Premium A/c 2,000 (First call due on 2,000 shares at € 3 each including & 1 premium) Share Capital A/c (40 shares x % 8) pr] ]320 Securities Premium A/c pr] [72 To Share Forfeiture Alc 240 ‘To Share Allotment A/c 32 [To Share First Call A/c 120 (40 shares of € 10 each & 8 called with premium forfeited for non-payment of amount due) Share Final Call A/c pr. ]5,880 To Share Capital A/c 3,920 To Securities Premium/A/e 1,960 (Final call due on 1,960 shares at &3 each including ® 1 premium) [Share Capital Alc pr] é00 Securities Premium A/E Dr. 120 "To Share Forfeiture Alc 360 To Share First Call A/c 360 (60 shares forfeited for non-payment of amount due) Bank A/c pr] |720 Share Forfeiture A/c pr] |80 To Shares Capital A/c 800 (80 shares of € 10 each re-issued at & 9 per share fully paid-up) Share Forfeiture A/c pr] — ]400 To Capital Reserve 400 Balance of 80 reissued shares in Share Forfeiture Account transferred to Capital Reserve) As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as follows. 9/19 Jai Mangal SinghXYZ Ltd. Balance Sheet Particulars Note No. z 1. Equity and 1 1. Shareholders’ Funds a. Share Capital 1 19,920 b. Reserves and Surplus 2 8,168 2. Non-Current Liabilities 3. Current Liabilities Total 28,088, IL. Assets 1. Non-Current Assets 2. Current Assets a. Cash and Cash Equivalents 3 28,088 Total 28,088 NOTES TO ACCOUNTS Note No. Particulars e 1 [Share Capital Authorised Share Capital shares of € 10 each Issued Share Capital 2,000 shares of € 10 each 20,000 Subscribed, Called-up and Paid-up Share Capital 1,980 shates of @ 10 each 19,800 /Add> Shares Forfeited (20 shares x % 6) 120 19,920 2 Reserves and Surplus Securities Premium 7.768 Capital Reserve 400 8,168 [Cash and Cash Equivalents [Cash at Bank 28,088, Working Notes: 1, X's Shares 400 4g Number of share applied by X = 3408 x 40 = 48 shares Money received on application (48 shares x & 6) Less: Money transferred to Shares Capital (40 shares * € 5) Less: Securities Premium (40 shares x @ 1) = 40 Jai Mangal Singh 10/19Excess money on application from X Utilisation of excess application money received from X Share Capital due on Allotment (40 shares x ¥ 1) = 40 Less: Excess money on Application from X [Excess money after adjustment of Share Capital on Allotment Securities Premium due on Allotment (40 shares x @ 1) Less: Excess money after adjustment of Share Capital on Allotment Calls-in-Arrears of Securities Premium on Allotment 2, Share Allotment Money due on allotment (2,000 shares x 2) [aco Less: Excess money on Application Less: Calls-in-Arrears on X‘s shares (securities premium) [p20 ean 20 Share Forfeiture Credit 22 Money recived nallomen Te 368 3: Shares Namber of shares alloted = 28% « 72 = 60 shares 4. Share First Cll Money de on Share Fs Cal (2000 shares = 83) 600 Tes: Calisin-Arers on X's shares shares 83) 20 Les: Callin-Arers on V's shares (60 shares 3) 700 Money recived on Share First Call 3700 5. Share Final Call Money eon share Final Call (380 shares x €3) 5.000 es: Callin- Amerson Y's sare (60 hares x 3) =180 Money received on Share Final Cal =5700 Capital Reserve Xsshares Money received fom or 1 shares =a es: Scared Pause on Applicaoy =40 Tess Secures Peni adjusted on Alone ea Balance ne Shave Fovehure before eso of shaves Cx 220 = 86 pershare Share forfeiture Debit = 1 per share E55 per share ‘Capital Reserve on re-issue of 20 shares = € 5 x 20 shares Y's Shares Share Forfeiture on 60 Shares of Y Share Forfeiture Credit 6 per share Less: Share Forfeiture Debit }® 1 per share 5 per share Jai Mangal Singh 11/1924, Capital Reserve on re-issue of 60 shares of ¥ = & 5 x 60 shares = & 300 ‘Total Capital Reserve on 80 shares = Capital Reserve on re-issue of 20 shares of X + Capital Reserve on re-issue of 60 shares of Y = 100 + 300 = ¢ 400 Case. x ry z (A) Their existing (ld) share 5/10 v0 2/0 (8) Share acquired by Z from X 210 -2n0 -Their new share (A+ B) 30 10 ano ‘Thus, New Profisharing Ratio of X, Y and Z aa Sacrifice of X = 1/5; Gain of Z = 15 Case 2. x y, Z (A) Their existing (ld) share 5/10 0 20 |(B) Share acquired by Z from X and Y nae no neaes ie, 15 x 22) Yi, -5 % 12) 110+ 1/10) [Their new share (A + B) ai10 ano aii0 ‘Thus, New Profi-sharing RatioofX, and Z= hi hig =2:12 Sacrificing Ratio between X and Y = 1/10 : 1/10 = 1:1; Gain of 2 2/10 Case 3. Sacrificing/(Gaining) Share = Old Share - New Share x ry Z |(A) Their existing (old) share 5/10 3/10 2/10 (8) Theirnew share 173 18 173 % 24-29 Going anegatve result, itis again) ‘Thus, Y gains by 1/30th share, Z’gains by 4/30th share (Sharé& of Y and Z have increased) and X sacrifices by 5/0th share. Gaining Ratio between y and 2= Lik = 1:4 Case 4, (A) Their existing (od) share (@) Share acquired by Z from Share acquired by Zfrom Y = 2 (©) Total share acquired by Z=-b + b= 3 Calculation of New Profit-sharing Ratio and Sacrificing Ratio: x Y Zz (A) Old Share 5/10 3/10 2110 (B) Share Sacrificed/Acquired “110 -1/20 3/20 New Share (A +B) 4/10 oF 8720 5/20 720 ‘Thus, New Profit-sharing Ratio of X, Y and Z= + 7 Gain of Z = &; Sacrificing Ratio between X and In the books of Firm JOURNAL. Date Particulars Jai Mangal Singh2017 Parth’s Capital A/c Raman's Capital A/c Zaisha's Capital Alc "To Profit and Loss A/c 4,000 (Being the balance of Profit and Loss Account distributed in old ratio) (General Reserve A/c To Parth’s Capital A/c ‘To Raman's Capital A/c 36,000 18,000 10,800 To Zaisha's Capital A/c 7,200 (Being the General Reserve distributed in old ratio) /Workmen Compensation Reserve A/c Dr. 12,000 Revaluation A/c Dr. 8,000 To Workmen Compensation Claim A/c 20,000 (Being the liability of Workmen compensation created out of Workmen Compensation Reserve and Revaluation Account)(See Revaluation Account) Revaluation A/c -To Stock Ale 3,200 (Being the decrease in value of stock recorded through Revaluation Account) Investments Ale Creditors Ale To Revaluation A/c 2,900 (Being the increase in Value of inVestments recorded and amount not likely to be claimed by creditors written off)(See working Note) Parth’s Capital A/e 4,150 /Raman's Capital Alc 2,490 Zaisha's Capital Ale 1,660 ‘To Revaluation A/c 8,300 (Being the loss on revaluation of assets and reassessment of liabilities transferred to Partners’ Capital Accounts in their old ratio) (WN 1) /Raman's Capital Ale Zaisha's Capital Alc To Parth's Capital A/c (76,000 x 3/10) (Being the adjustment made for goodwill due to change in profit-sharing ratio by debiting gaining partners and crediting sacrificing partner) (WN 2 and 3) Working Notes: REVALUATION ACCOUNT 22,800 Dr. Cr Particulars Amount(®) Particulars Amount(®) Jai Mangal Singh 13/1925, By Creditors A/c To Workmen Compensation Claim A/c By Investments A/c [ras cman [Rnas capa [eass Cnt ve i, Calculation of Gain/(Sactifice) of Partners due to change in Profit sharing Ratio: Particulars Parth [Raman | Zaisha (i) New Share 20 [0 [210 (i) Old Share sa0 sao 210 (ii) Gainf Sacrifice) ED arto 110 Sacrificing Partner Gaining Partner [caining Partner iii, Adjustment of Goodwill: Parth alone sacrifices whereas Raman and Zaisha gain. Hence, Raman and Zaisha will compénsate Parth for his sacrificed Share of Goodwill & 22,800 (i.e.,& 76,000 x 3/10) in their gaining ratio, ie, 2/10:1/10 oF2 1. Thus, (Compensation payable by Raman to Parth = ¥ 22,800 x 2/3 = 815,200; Compensation payable by Zaisha to Parth = 22,800 1/3 = $7,600. Adjustment Entry: Gaining Partner's Capital A/c... Dr ‘To Sacrificing Partner's Capital A/c IN THE BOOKS OF THE FIRM JOURNAL ENTaUES Date Particulars LAB. pee) ce 7 i Pas Fasc oe] som fscpiave ean Z's Capital Alc Dr. 1,000 cei. om ining dv a nog rn od a nga) rapa ps pala me [an atonal pe [amo 25 copat ne on (Being Z's share of goodwill credited to him and gaining partners debited in gaining ratio) Tan Aco ie & Pais : Panis : Foran Zen yen A790 150 ion Tonatiney A Sen pay Catiow a oo eo movson For bbb Ne a0 [ay Lo on ean 14/19 Jai Mangal SinghX's Capital A/c To 2's Capital Alc To Advertisement expenditure A/c’ To Investment Ale 3,480 2320 By Y's Capital A/c By Investment Fluctuation Reserve A/c 00 Ts Capa we p67 2 ont We a3 [ooo 700 700 Parner Capa Account Pe Ponies LY 2 Porters xl? [2 Fe Gondwi Ae [ooo [a0 | coo fay Banca e000 f.00 To Revahition Ne foo [esr _fiss [ay Xs canta a0 To Bonk ar I 5.067 fo tstomn A | 00 To Bis pte Ne | 500 Te Baca |eraz0) sans [rs2s| 37730] 2576 re |sr0 [pos nance She as on 1st April 2019 after Z's retirement ils poyale sto [Pea 000 cal Dios oo00 x 2's Loan Machinery 24600 Less: prove. for Doubtful Debts 121,283 1,21,283 ‘Working Note: Amount due to 2s = (21,000 + 3,480 + 2,320 + 1,875 + 1,000) - (1,000 + 133 + 875 + 17,600) = 10,067 Amount paid on Retirement immediatly: ¥ 5,067 Amount paid within 1 year: (5000 x 50%) = € 2,500 Amount payable by Bills of Exchange (50% of Balance) = € 2,500 Journal Entries for Goodwill: i. DrX’s Capital A/c-® 3,000; Y's Capital A/e-€ 2,000 and 2's Capital Alc-& 1,000; Cr. Goodwill A/e-& 6,000. fi, Dr, X's Capital A/c- € 3,480 and Y's Capital A/c € 2,320; Cr. 2's Capital A/c € 5,800. 26. JOURNAL OF HAMMER LTD. [Date Particulars Le] pre | ce@ Bank Alc px] [80,000 [To Debentures Application Alc 80,000 (Being the application money received on 4,000; 10% Debentures @ £20 per debenture) Jai Mangal Singh aoeDebentures Application A/c pr.| — }80,000 To 10% Debentures A/c 80,000 | (Being the allotment of 4,000; 10% Debentures of 2100 each) Debentures Alloument A/c Dr.| _}3,20,000 To 10% Debentures A/c 3,20,000| (Being the amount due on 4,000; 10% Debentures on allotment @ ¥80 per debenture) Bank Alc pr] |3,20,000 To Debentures Allotment A/c 3,20,000| (Being the amount received against allotment) BALANCE SHEET OF HAMMER LTD. as ai (Extract) Porcatrs Note No, t 1. EQUITY AND LIABILITIES Now- Current Lines Tonge Borowings 7 oom00 ea | 7.00000 it ASSETS | Coreen Ase | Cash and Cash ules 2 =o0000 7.00000 Notes to Accounts Long-term Borrowings 4,000; 10% Debentures of €100 each 0000 > [eas ana Cash Equatens | [easvarBank | 0000 Part ‘= Analysis of Financial Statements 27. (a) Financing Activity Explanation: Dividend paid by a finance company cotes under Financing activity. As Dividend is a operating activity for a finance company. oR (b) Financial activites Explanation: Payment of dividend is classified as financing activities. tis deducted in financing activites as its paid on the share capital ofthe company. I is an outflow, 28. (a) Horizontal analysis Explanation: Comparative financial statement is an example of Horizontal analysis because it requires comparative financial statements of two or more accounting periods. 29. (a) An investment in Bonds Explanation: An investment inthe bond fs part of investing activites as itis a long term investment and not linked with cash equivalents. It is anon-current asset. oR (@) only Explanation: The transaction that resulted ina flow of cash is the amount received in cash from debtors of ® 19,000. Jai Mangal Singh 16/1930, _(b) To Compile National Income and taxes and policy making. Explanation: Government is interest in financial statement analysis to compile the national income,do tax research and to take decisions related to policies of economic interest a1 [esos shee [Hea faced Sab aie Se (0 Unpaid/Unelaimed |Current Liabilities | Other Current Liabilities Mae Dems Cone ii ier Gren tis sing Sol Rds reser Suh SS aa Sr 32, Current Assets = Total Assets - Non-current Assets ¥ 16,00,000 - [2 6,00,000 (Fixed Assets) + ¥ 1,00,000 (Non-current Investments) + 100,000 (Long-term Loans and ‘Advances)] ® 8,00,000 ‘Quick Assets = Current Assets - Inventories - Prepaid Expenses £8,00,000 - 1,90,000 - € 10,000 = € 6,00,000 (Current Liabilities = Total Debt - Non-current Liabilities © 12,00,000 - [& 4,00,000 (Long-term Borrowings) + 4,00,000 (Long-term Provistons)] 12,00,000 - & 8,00,000 = € 4,00,000, Quick Ratio = SBA — — BON 1.5.21 Tere Laer — %4.00.0% Curren Ratio = coreg ~ Mana = Long term loans and advances (debit) means asset Le.,1gan and advances given to others. 33, Accounting ratios are classified in the following two ways i, Traditional Classification ii, Functional Classification i, Traditional Classification: This classificatio is based on the financial statements, i. Profit and Loss Account and Balance ‘Sheet. On the basis of accounts of financial statements, the Traditional Classification bifurcate accounting ratios as: a Income Statement Ratios: These are those ratios whose all the elements belong only to the Trading and Profit and Loss Account, like Gross Profit Ratio, etc, », Balance Sheet Ratios: These are those ratios whose all the elements belong only to the Balance Sheet, like Current Ratio, Debt Equity Ratio, ete. . Composite Ratios: These are those ratios whose elements belong both to the Trading and Profit and Loss Account as well as to the Balance Sheet, like Debtors Turnover Ratio, etc. Ii, Functional Classification: This classification reflects the functional need and the purpose of calculating the ratio. The basic rationale to compute ratio is to ascertain liquidity, solvency, financial performance, and profitability of a business. Consequently, the Functional Classification classifies various accounting ratios as: 4. Liquidity Ratio: These ratios are calculated to determine short-term solvency. b. Solvency Ratio: These ratios are calculated to determine long-term solvency. . Activity Ratio: These ratios are calculated for measuring the operational efficiency and efficacy ofthe operations. These ratios relate to sales or cost of goods sold. Jai Mangal Singh a7s194. Profitability Ratio: These ratios are calculated to assess the financial performance and the financial viability of the business. oR Cost of Goods Sold = Opening Stock + Purchases + Closing Stock = 40,000 + 3,20,000 ~ 1,20,000 = 2,40,000 Average Stock 0,00041.20,000, Opening Stock + Closing Sock 1,000 240,000, 7 Stock Turnover Ratio =3 Times Effect of various transactions on inventory turnover ratio is as follows:- 4. Sale of goods for € 40,000 (Cost € 32,000)- Increase Reason: This transaction will decrease stock atthe end (closing stock). Decrease in closing stock will result increase the proportion of Cost of Goods Sold and decrease in Average Stock b. Increase in value of Closing Stock by 40,000- Decrease Reason: Increase in Closing Stock results decrease in Cost of Goods Sold and inérease in Average Stock. . Goods purchased for ® 80,000- Decrease Reason: This Transaction increases the amount of Closing Stock. Increase in'Glosing Stock reduces the proportion of Cost of Goods Sold and Increase in Average Stock. 4, Purchase Return € 20,000- Increase Reason: It will result decrease in Cost of Goods Sold and Average Stock with same amount: €. Goods costing ® 10,000 withdrawn for personal use- Increase Reason: Drawing of goods will decrease the amount of Closing Stock and increase in'Gost Of Goods Sold. Goods costing ¥ 20,000 distributed as free sample- Increase Reason: Goods distributed as free sample reduces Closing Stock. Reduction in Cigsing Stock will result increase in Cost of Goods Sold and decrease in Average Stock. ‘Cash Flow Statement Particulars Rs. Rs. 1. Cash Flow from Operating Activities: Net profit before tax 1,90,000 + Depreciation on Machinery 60,000 [Goodwill writen off 60,000 [Operating profit before working capital changes 3,10,000 + Increase in rade payables 40,000 3,50,000 - Increase in Inventories (60,000) |~ Increase In Trade Receivables (2,00,000) |Cash Generated from operations 100,000 - Income Tax Paid 70,000 30,000 TI. Cash Flow From Investing Activities : Purchase of Machinery (7,60,000) (7,60,000) 1. Cash Flow from Financing Activities : Issue of Shares 4,00,000 Loan Taken 3.60,000 760,000 Net increase 30000 + Opening Cash and Cash Eq) 50000 Jai Mangal Singh 18/19[Closing Cash and Cash Equivalents 90000 Jai Mangal Singh 19/19