Accountancy (055)/ Class-XI

Answer Key Practice Paper - 2

1. d) (i), (ii) and (iii)

Explanation (i), (ii) and (iii)
2. a) Debit Note
Explanation: A note sent by the buyer on the return of goods is a Debit Note. Goods
returned to the supplier.

3. c) Assets (1,10,000) = Liabilities (1,00,000) + Capital (10,000)

Explanation: Payment of interest (expenses) will reduce the capital, loan (liabilities) will
be reduced as it is paid and cash (assets) will be reduced because it is
used to pay both loan and interest.
4. a) Only C is correct

Explanation: Wages paid for the construction of the building will be capital
expenditure.
5. a) ₹ 2,71,500
Explanation: purchases = 2,80,000 – 5,000 – 2,000 – 1,500 = 2,71,500

OR

a) Rs.1,04,000
Explanation: adjusted purchases = opening stock + purchases- closing stock

=12,000+1,00,000 – 8,000 =1,04,000

6. a) Rs 2,600
Explanation: 2,400 × 9/12 = Rs 1,800
3,200 × 3/12 = Rs 800
Rent shown in the Profit and Loss Account = 1,800 + 800 = Rs 2,600
OR

a) Rs 5,273
Explanation: Net profit = Gross profit - general expenses
Net profit = 70, 000 - 12,000 = Rs.58,000
Commission to manager = 58,000 × 10/110 = Rs 5,273
7. a) Debited, Debited
Explanation: trading and profit and loss account are nominal in nature so all the expenses
are debited. the direct expenses are debited into the trading account and the
indirect expenses are debited to the profit and loss account.
8. c) A is true but R is false.
Explanation: Capital = Assets - Liabilities
∴ Net Worth (Capital) = (20,000 + 30,000 + 10,000) - 40,000 = ₹20,000

9. a) Business entity principle

Explanation: Business entity principle

10. d) Historical cost principle

Explanati Historical cost principle
on:

11. The general purpose of producing a trial balance is to ensure the entries in a
company's bookkeeping system are mathematically correct.
OR

Capital Reserve (Fill Up Word)

12. c) (i) - (c), (ii) - (d), (iii) - (i), (iv) - (b)

Explanation: (i) - (c), (ii) - (d), (iii) - (i), (iv) - (b)

13. b) Debit Balance

Explanation: While preparing an account if the debit side is greater than the credit side,
the difference is called "Debit Balance". So, if Debit Side > Credit Side, it is a
debit balance.
14. a) Outstanding Exp.
 15. a) Assets = Capital + Liabilities
Explanation: This equation is the base of accounting. This shows that the assets of the
business are always equal to liability and capital.
16. a) entry in the passbook but not in the cash book
17. d) Only A
Explanation: "The book value of the asset becomes zero at any one
point of time" is not a feature of the written-down method
of depreciation. Book value never becomes zero.

18. (a) - (i), (b) - (iii), (c) - (ii), (d) - (iv)

19. b) Provision for liability
Explanation: If we use the provision with a liability account, it will become a
debit account. It means there is a reduction in liability and
under the Prudence Concept, we do not underestimate liability
or do not overstate income. Hence prudence concept does not
allow provision for liability. It is not an example of Provision.

20. b) False
Explanation: False, because cost of goods sold = (opening stock + Net
purchases + Direct expenses - Closing stock)

OR

Journal (Fill Up Word)

21. The company is not a going concern because it has not commenced any
business post-acquisition. The company is only seeking higher compensation
and not quashing the acquisition order of the Government. It has invested
the compensation received in the fixed deposit which remains deposited as
on date also. Thus, the company does not have the intention to conduct the
business. Going concern means business should continue in the future and
there is no intention to close business.
 OR

The answer to this question would be when the goods have been invoiced.
According to the realization concept, revenue is recognized when an
obligation to receive the amount arises. When the goods are invoiced, it is
treated as the transfer of ownership of goods from the seller to the buyer and
hence the revenue is recognized.
22. Calculation of Closing Capital (Capital as on March 31, 2014)
Assets = Liabilities + Capital
1,75,000 = 50,000 + Capital
Capital = ₹1,25,000
Calculation of Profit Earned during the Year
Closing Capital = Opening Capital + Additional Capital + Profit - Drawings
1,25,000 = 1,00,000 + 0 + Profit - 0
Profit = 1,25,000 - 1,00,000 = ₹25,000

23) Purchases Return Book or Returns Outward Book

Details Total Amount

Date Particulars Debit Note No. LF
(Rs) (Rs)

2013

Jul 17 Raja & Sons 140 4,000

(-) Trade Discount 10% 400 3,600

Jul 19 Gujal & Sons 142 10,000

Radhey Shyam 145 1,000

Purchases Return A/c Cr 14,600

Purchases return the book is a book in which the goods returned to suppliers are recorded.
It is also called returns outward book or purchases returns day book.
 24) Books of Ravinder Associates
Trial Balance as on March 31, 2017

Name of Accounts L.F. Dr. (₹) Cr. (₹)

Sundry Debtors 4,10,000

Sundry Creditors 80,000

Rent & Taxes 48,000

Purchases 34,00,000

Sales 56,00,000

Trade Expenses 12,000

Return Outwards 80,000

Return Inwards 1,20,000

Expenses 4,000

Motor Vehicles 6,50,000

Electricity 25,000

Opening Stock (on April 01, 2004) 2,30,000

Premises 12,00,000

Fixture & Fittings 3,10,000

Bad Debts written off 8,000

Loan from Mukul 1,50,000

Interest on Mukul’s Loan 15,000

Drawings 40,000

Cash in Hand 75,000

Rent received from Sub-let of part of Premises 30,000

Capital (Balancing Figure) 6,07,000

Total 65,47,000 65,47,000

Note: Closing Stock of Rs 3,80,000 will not appear in Trial Balance, it will be shown after
the trial balance. Balance remains in the trial balance is recorded as capital according to
the question.
25) ACCOUNTING EQUATION

Assets = Liabilities + Capital

S.
Transaction Cash Furniture Stock
No. + + =
(Rs) (Rs) (Rs) (Rs)
(i) Ajit started a 20,000 = 20,000
business Rs
20,000
20,000 = 20,000
(ii) He purchased – + 2,000 =
furniture for Rs 2,000
2,000
18,000 + 2,000 = 20,000
(iii) He paid Rent of Rs – 200 = – 200
200 (expense)
17,800 + 2,000 = 19,800
(iv) He purchased 3,000 = 3,000
goods on credit Rs
3,000
17,800 + 2,000 + 3,000 = 3,000 + 19,800
(v) He sold goods (cost 5,000 + + – = 3,000
price Rs (2,000) for 2,000 (Profit)
Rs 5,000 on cash
22,800 + 2,000 + 1,000 = 3,000 + 22,800

OR
Calculate closing stock and cost of goods sold.
Cost of Goods Sold = Net Sales (Sales - Sales Return) - Gross Profit
= (₹ 16,000 - 1000) - ₹ 6,000 = ₹ 9,000
Cost of goods sold = ₹ 9000
Calculation of Closing stock:
method 1:
closing stock: opening stock + net purchase + carriage inwards - cost of goods sold
5,000 + 9,100 + 1,000 - 9,000 = 6,100
26) A capital reserve is an account on the balance sheet that can be used for
contingencies or to offset capital losses. The portion of a business’s profits retained by
the company for investment in future growth, and are not redistributed to the
shareholders through regular or special dividends can be termed as revenue reserves.
Difference between Revenue Reserve and Capital Reserve
 Basis Revenue Reserve Capital Reserve

It is created primarily out of capital

It is created out of revenue profits profits that do not arise out of the
that arise out of normal operating normal operating activities of the
Source of
activities of the business and are business and are not available for
Creation
otherwise available for dividend dividend distribution. But revenue
distribution. profits may also be used for this
purpose.

It is created to strengthen the

financial position, to meet It is created for compliance with legal
Purpose
unforeseen contingencies, or for requirements or accounting practices.
some specific purpose.

A specific revenue reserve can be

utilized only for the earmarked
It can be utilized for specific purposes as
purpose while a general reserve can
Usage provided in the law in force e.g., to write
be utilized for any purpose
off capital losses or issue bonus shares.
including the distribution of
dividends.

27) Trading Account for the year ended March 31, 2019
Dr. Cr.

Particulars Amount Particulars Amount

To Opening Stock 82,000 By Sale 6,75,000

To Purchases 4,40,000 Less: Return Inwar 25,000 6,50,000

Less: Return Outwards 37,000 4,03,000 By Closing Stock 1,12,500

To Carriage Inward 6,000

To Fuel and Water 4,750

To Gross Profit (Balancing

2,66,750
Figure)

7,62,500 7,62,500
 28) P/L account Profit and Loss Account for the year ended March 31, 2019
Dr. Cr.

Particulars Amount Particulars Amount

To Depreciation: By Gross Profit 2,66,750

Plant & Machinery 30,000 By Commission 4,000

Motor Vehicle 30,000 60,000 Less: Unearned 1,200 2,800

By Pro. for Doubtful Debts

To Salaries & Wages 24,000 5,305
(Old Provision - New Provision)

Add: Outstanding 4,800 28,800

To Old Bad Debts 4,250

Add: Further Bad Debts 500 4,750

To Trade Expenses 2,500

To Rent, Rates and Taxes 12,000

To Net Profit (Balancing 1,66,805

2,74,855 2,74,855

Working Note:
Calculation of Provision for Doubtful Debts:
Provision for doubtful debts = Sundry Debtors - future Bad debts ×× Rate
Provision for doubtful debts = (₹70,000 - ₹500) ×× 1%
Provision for doubtful debts = ₹695
Adjustments shown in the trial balance will be recorded in the balance sheet only
while adjustments shown after the trial balance will be recorded both in trading and
profit and loss account and balance sheet.
 29) Balance Sheet as on March 31, 2019
Amount Amount
Liabilities Assets
(₹) (₹)

Capital 3,25,000 Fixed Assets

Add: Net Profit 1,66,805 Plant & Machinery 2,00,00

Less: Drawings 15,000 4,76,805 Less: Dep. 30,000 1,70,000

Motor Vehicle 1,50,000

Less: Dep. 30,000 1,20,000

Current Liabilities Current Assets

Creditors 55,000 Closing Stock 1,12,500

Outstanding Salaries and

4,800 Debtors 70,000
Wages

Unearned Commission 1,200 Less: Bad Debts 500

Less: Provision for Bad

695 68,805
Debts

Cash in Hand 16,500

Cash at Bank 50,000

5,37,805 5,37,805

30) Journal Entries

Amount Dr. Amount Cr.

Date Particular L.F.
(Rs) (Rs)

Loss by Fire Account Dr. 4,500

(i) To Purchase Account 4,500

(Being goods destroyed by fire)

Machinery Account Dr. 1,500

(ii) To cash Account 1,500

(Being wages paid for installation Machinery)

 Purchase Account Dr. 7,500

(iii) To Bank Account 7,500

(Being goods purchased by cheque)

M/s Kalu Sons Dr. 6,270

To Sales Account 6,270

(iv)
(Being goods sold costing Rs 6,000 at on invoice
above cost less 5% trade discount)
31) In the Books of Cash Book

Dr. Cr.

Date Particulars Cash Bank Date Particulars Cash Bank

2018 ₹ ₹ 2018 ₹ ₹

June. 1 To Balance b/d 2,300 June. 1 By Balance b/d 12,000

June. 6 To Sales A/c 27,000 June. 5 By purchases A/c 34,000

To Cheques in
June. 9 4,000 June. 12 By Radha A/c 2,500
Hand A/c

June. 20 To Bank A/c 3,400 June. 15 By S. Nair A/c 4,000

June. 31 To Cash A/c 5,000 June. 20 By Cash A/c 3,400

June. 23 By Drawings A/c 75

By Bank charges
June. 27 20
A/c

June. 30 By Bank A/c 5,000

Total Receipts 5,700 36,000 Total Payments 5,000 55,995

June. 30 To Balance c/d 19,995 June. 30 By Balance c/d 700

5,700 55,995 5,700 55,995

July1 To Balance b/d 700 July. 1 By Balance b/d 19,995

Working Notes:

i. Receipt, as well as the endorsement of the Cheque, will not be recorded in Cash
Book. It will be recorded in the Journal since no involvement of cash there.
ii. On 31st January, the balance of the Cash Column comes to ₹ 5,700. As such, after
retaining ₹ 700 at the office i.e., in cash, the remaining amount of ₹ 5,000 will be
deposited into the Bank by cash.
iii. Entries that are not passed in the cash book are recorded in the journal.

JOURNAL PROPER

Date Particulars L.F. Dr. (₹) Cr. (₹)

2018 ₹ ₹

Jan. 7 Cheques in Hand A/c Dr. 4,000

Discount Allowed A/c Dr. 200

To S. Nair A/c
(Cheque received not deposited in the bank on the same 4,200
date)

Jan. 12 Radha A/c Dr. 50

To Discount Received A/c

50
(Discount received from Radha against payment ₹ 2,500)

Jan. 15 S. Nair A/c Dr. 200

To Discount Allowed A/c

(Discount allowed to S. Nair withdrawn on dishonour of 200
his cheque)

Jan 25 Cheques in Hand A/c Dr. 4,500

To Hira A/c
(Cheque received not deposited into the bank on the same 4,500
day)

Jan 27 Sunita A/c Dr. 4,500

To Cheques in Hand A/c

4,500
(Cheque received from Hira endorsed to Sunita)
32) On 31st March 2013, the bank column of the cash book of Mr. Handsome disclosed
an overdraft balance of Rs 20,750. Bank Reconciliation Statement

S. No. Particulars Plus ₹ Minus ₹

Overdraft as per the Cash Book 20,750

(a) Cheque was deposited but not credited in Pass Book 11,500

(b) Cheque issued but not yet presented for payment 3,750

(c) Bill of exchange discounted with the bank 1,000

(d) cash book was undercast by Rs 2,500 2,500

(e) Payment of insurance premium 5,000

(f) Amount directly deposited by the customer 15,250

(g) Insurance claim received 20,000

(h) A cheque for Rs 8,750 issued to Mr. Fair 8,750

Overdraft as per the Pass Book 10,500

13,700 49,500

33) Machinery Account

Dr. Cr.

Amount Amount
Date Particulars Date Particulars
(₹) (₹)

2008 2009

Apr. Mar.
Bank A/c Balance c/d
01 31

M1 50,000 M1 50,000

M2 50,000 M2 50,000 3,00,000

M3 2,00,000 3,00,000 M3 2,00,000 3,00,000

3,00,000

2009 2010

Apr. Balance Mar. Balance c/d

01 b/d 31

M1 50,000 M1 50,000

M2 50,000 M2 50,000

M3 2,00,000 3,00,000 M3 2,00,000 3,00,000

3,00,000 3,00,000

2010 2010

Apr. Balance Oct. Provision for

12,500
01 b/d 01 Depreciation A/c

M1 50,000 Bank A/c (sale of M1) 30,000

Profit and Loss A/c

M2 50,000 7,500
(Loss on Sale of M1)

M3 2,00,000 3,00,000 2011

Mar.
3,00,000 Balance c/d
31

M2 50,000

M3 2,00,000 2,50,000

3,00,000 3,00,000

2011 2011

Apr. Balance Apr. Provision for

15,000
01 b/d 01 Depreciation A/c

M2 50,000 Bank A/c (Sale of M2) 24,000

Profit and Loss A/c

M3 2,00,000 2,50,000 11,000
(Loss on Sale on M2)

2012

Mar.
Balance c/d (M3) 2,00,00
31

2,50,000 2,50,000
 Provision for Depreciation Account

Dr. Cr.

Amount Amount
Date Particulars Date Particulars
(₹) (₹)

2009 2009

Mar. Mar.
Balance c/d 30,000 Depreciation A/c
31 31

M1 5,000

M2 5,000

M3 20,000 30,000

30,000 30,000

2009

60,000 Apr. 01 Balance b/d 30,000

2010

Mar.
Depreciation A/c
31

M1 5,000

M2 5,000

M3 20,000 30,000

60,000 60,000

2010 2010

Oct. 01 Machinery A/c (M1) 12,500 Apr. 01 Balance b/d 60,000

(5,000 + 5,000 +
2,500)

Depreciation A/c
2011 Oct. 01 2,500
(M1)

Mar.
Balance c/d 75,000 2011
31
 Mar.
Depreciation A/c
31

M2 5,000

M3 20,000 25,000

87,500 87,500

2011 2011

Apr. 01 Machinery A/c (M2) 15,000 Apr. 01 Balance b/d 75,000

(5,000 + 5,000 +
5,000)

2012 2012

Mar. Mar. Depreciation A/c

Balance c/d 80,000 20,000
31 31 (M3)

95,000 95,000

Working Notes:
WN1: Calculation of Profit & Loss on Sale of M1

Particulars Amount

Value of Machinery on Apr. 01, 2008 50,000

Less: Depreciation 5,000

Value of Machinery on Apr. 01, 2009 45,000

Less: Depreciation 5,000

Value of Machinery on Apr. 01, 2010 40,000

Less: Depreciation for 6 months 2,500

Value of Machinery on Oct. 01, 2010 37,500

Less: Sale Value 30,000

Loss on Sale 7,500

OR
Books of Manas Ltd.

Dr Machinery Account Cr

Amt Amt
Date Particulars J.F. Date Particulars J.F.
(Rs.) (Rs.)

2010 2011

To Bank A/c By Depreciation A/c (@

Apr 1 3,00,000 M 31 30,000
(Rs.30,000*10) 10%)

M31 By Balance c/d 2,70,000

3,00,000 3,00,000

2011 2011

Apr 1 To Balance b/d 2,70,000 J 30 By Depreciation A/c

(On Rs.30,000 @ 10%

750
for 3 month)

J 30 By Bank A/c 24,000

By Profit and Loss, A/c

J 30 2,250
(W.N.1)

2012

M 31 By Depreciation A/c

(On Rs.30,000*9 @
27,000
10%)

M 31 By Balance c/d 2,16,000

2,70,000 2,70,000

2012 2012

Apr 1 To Balance b/d 2,16,000 D 31 By Depreciation A/c 2,250

Dec To Profit and Loss (On Rs.30,000 @ 10%

750
31 A/c (W.N.2) for 9 months)

D 31 By Bank A/c 22,500

2013
 M 31 By Depreciation A/c

(On Rs.30,000*8 @
24,000
10%)

M 31 By Balance c/d 1,68,000

2,16,750 2,16,750

2013 2014

By Depreciation A/c
Apr 1 To Balance b/d 1,68,000 M 31 25,600
(W.N.3)

Sep
To Bank A/c 32,000 M 31 By Balance c/d 1,74,400
30

2,00,000 2,00,000
Working Note

i. Calculation of Gain or Loss on Sale on 30th June 2010

Particulars Amount

The original cost of the machine sold 30,000

(-) Depreciation Provided up to date of sale

On 31st March 2011 (On Rs.30,000 @ 10% for 1 year) 3,000

On 30th June 2011 (On Rs.30,000 @ 10% for 3 Months) 750 3,750

Book value on the date of sale 26,250

(-) Selling price 24,000

Loss on sale 2,250

ii. Calculation of Gain or Loss on Sale on 31st December 2012

Particulars Amount

The original cost of the machine sold 30,000

(-) Depreciation provided up to date of sale

On 31st March 2011 (On Rs.30,000 @ 10% for 1 year) 3,000

On 31st March 2012 (On Rs.30,000 @ 10% for 1 year) 3,000

 On 31st Dec 2012 (On Rs.30,000 @ 10% for 9 months) 2,250 8,250

Book value on the date of sale 21,750

(-) Selling price 22,500

Profit on sale 750

iii. Depreciation Provided on 31st March 2014

Particulars Amount

Depreciation Provided on 31st March, 014

On Rs. 2,40,000 @ 10% for 1 year 24,000

On Rs.32,000 @ 10% for 6 months 1,600

Total Depreciation for the year 25,600

 The company has adopted a straight-line method of charging depreciation

so it is always calculated on the cost of the asset and the amount of depreciation
remains the same throughout the life of the asset.
 When an asset is used for part of the year or purchased between the year
then depreciation will be computed on a time basis.
 Profit or Loss on sale of the asset will be transferred to P/L A/c.

34) Journal (Rectified Entry)

Date Particulars LF Amt(₹) Amt(₹)

Purchases A/c Dr 1,000

To Suspense Account
(Being the rectification entry made for undercasting of 1,000
purchases book)

Building A/c Dr 20,000

To Wages A/c
(Being the wages for construction of building were
20,000
wrongly debited to wages account, now rectified entry
made)

Ramesh Dr 2,400
To Sales A/c 1,200

To Purchase A/c
(Being the rectification entry for recording sales to 1,200
Ramesh in purchase book is made)

Purchases A/c Dr 4,500

To Suspense A/c
(Being the rectification entry for under casting of 4,500
purchase book is made)

Mahesh Chand Dr 2,000

To Bad Debts Recovered A/c

(Being the rectification entry for the bad debts recovered 2,000
but wrongly credited to Mahesh Chand's personal accoun

Ramesh Dr 360

To Purchase A/c
(Being the credit purchases of ₹1,040 was passed in the 360
books as ₹1,400, now rectified)

Free Sample or Advertising A/c Dr 5,000

To Purchase A/c
(Being the distribution of sample goods recorded in the 5,000
books)

Sales Return A/c Dr 1,500

To Green & Co
1,500
(Being the sales return recorded)
 OR
JOURNAL (rectification entries)

Date Particulars L.F. Dr.(₹) Cr. (₹)

(i) Wages A/c (10,000-1,000) ...Dr. 9,000

To Suspense A/c 9,000

(Being the wages paid ₹10,000 debited in Wages Account

as ₹1,000, now rectified)

(ii) Suspense A/c (5,000+5,000) ...Dr. 10,000

To Mohan a/c 10,000

(Being the Sales Return of ₹5,000 debited to Mohan, who

returned the goods, now rectified)

(iii) Sales A/c ...Dr. 1,200

To Suspense A/c 1,200

(Being the Sales Book overcasted, now rectified)

(iv) Rohan a/c ...Dr. 6,000

Naveen a/c ...Dr. 2,000

To Suspense A/c (6,000+2,000) 8,000

(Being the goods returned to Rohan for ₹6,000 wrongly

credited to Naveen as ₹2,000, now rectified)

(v) Amit a/c (12,000+2,000) ...Dr. 14,000

To Suspense A/c 14,000

(Being the goods sold to Amit for X 12,000 credited to him

as ₹2,000, now rectified)

(vi) Suspense A/c (12,000+6,000) ...Dr 18,000

To Kamal a/c 6,000

To Mohan a/c 12,000

(Being the goods returned by Kamal for ₹6,000 wrongly

debited to Mohan as ₹12,000, now rectified)