M.

22 Management Accounting (Section B)—ISC XII

Model Test Paper 2

Time Allowed: 3 Hrs. Max. Marks: 80

General Instructions: As per Model Test Paper 1

Section A
Part I (12 Marks)
(Answer all questions)
1. Answer each of the following questions briefly:
(i) Why is Revaluation Account prepared? State any two reasons.
(ii) What is meant by a pro rata allotment? When does the need for a pro rata
allotment arise?
(iii) State two differences between Realisation Account and Revaluation Account.
(iv) What is meant by Redemption of Debentures? Enumerate any two methods of
Redemption of Debentures.
(v) Why the Capital Account of a partner, when Capital Accounts are maintained
following Fixed Capital Accounts Method, does not show a ‘Debit balance’ in
spite of regular and consistent losses year after year?
(vi) What is meant by Calls-in-Advance? How is ‘Calls-in-Advance’ shown in the
Balance Sheet? [6 × 2 = 12]

Part II (48 Marks)

(Answer any four questions)
2. (a) The capitals of Raghubir, Balbir and Krantibir as on 31st March, 2019 were ` 60,000;
` 2,20,000 and ` 4,40,000 respectively. Profit of ` 1,20,000 for the year ended
31st March, 2019 was distributed in the ratio of 4 : 1 : 1 after allowing interest
on capital @ 10% p.a. During the year each partner withdrew ` 2,40,000. The
Partnership Deed was silent as to profit-sharing ratio but provided for interest
on capital @ 12%.
Pass the necessary adjusting Journal entry.
(b) Vrindan and Kundan are partners sharing profits and losses in the ratio of 2 : 1.
On 1st April, 2018, they admit Srijan for 1/4th share in profits and guaranteed
profit of ` 50,000. The profit for the year 2018–19 was ` 1,52,000. Pass the Journal
entry in the books of the firm for distribution of profit and prepare Profit and
Loss Appropriation Account. [6 + 6 = 12]
Model Test Papers M.23

3. The Balance Sheet of Madan and Mohan who share profits and losses in the ratio of
3 : 2, as at 31st March, 2019 was as follows:

BALANCE SHEET OF MADAN AND MOHAN

as at 31st March, 2019
Liabilities ` Assets `
Creditors 28,000 Cash at Bank 10,000
Workmen Compensation Reserve 12,000 Debtors 65,000
General Reserve 50,000 Less: Provision for Doubtful Debts 5,000 60,000
Capital A/cs: Stock 30,000
Madan 60,000 Investments 50,000
Mohan 40,000 Patents 10,000
Goodwill 30,000
1,90,000 1,90,000

They admit Gopal on 1st April, 2019 for 1/5th share on the following terms:
(a) Gopal shall bring ` 25,000 by cheque as his share of premium for goodwill.
(b) Unaccounted accrued commission of ` 500 will be accounted.
(c) Market value of investments was ` 45,000.
(d) A debtor whose dues of ` 6,000 were written off as bad debts paid ` 5,800 in
full settlement.
(e) A claim of ` 2,000 for workmen’s compensation to be provided.
( f) Patents are undervalued by ` 5,000.
(g) Out of the amount of insurance which was debited to Profit and Loss Account,
` 5,000 to be carried forward as unexpired insurance.
(h) Gopal to bring in capital equal to 1/5th of the total capital of the new firm.
Prepare Revaluation Account, Capital Accounts of the Partners and the Balance Sheet
of the new firm. [12]
4. Bayson Ltd. invited applications for 54,000 shares of ` 100 each payable as follows:
` 50 per share on application;
` 10 per share on allotment; and
Balance on first and final call.
Applications were received for 80,000 shares.
Full allotment was made to the applicants of 14,000 shares. The remaining applicants
were allotted 40,000 shares on pro rata basis. Excess money received with application
was adjusted towards sums due on allotment and call.
Vibhor, holding 1,200 shares, who belonged to the category of applicants to whom
full allotment was made, paid the call money at the time of allotment. Vidur, who
belonged to the category of applicants to whom shares were allotted on pro rata
basis did not pay any amount after application money on his 400 shares. Vidur’s
shares were forfeited after the first and final call. All the forfeited shares were later
on reissued @ ` 110 per share as fully paid-up.
M.24 Management Accounting (Section B)—ISC XII

Pass the Journal entries in the books of Bayson Ltd. for the above transactions. Also
show relevant items as they would appear in the Balance Sheet of the company. [12]
5. (a) Mars Ltd. issued 5,000, 9% Debentures of ` 100 each at par and also raised a loan of
` 8,00,000 from ICICI Ltd. collaterally secured by issuing ` 10,00,000, 9% Debentures of
` 100 each. How will debentures be shown in the Balance Sheet of the company if the
company has recorded the Debentures issued as collateral in the books? Also Journalise
the Issue of Debentures.
(b) Europa Ltd. issued 2,000, 10% Debentures of ` 100 each credited as fully paid to the
promoters for their services and issued 1,000, 10% Debentures of ` 100 each credited
as fully paid to the underwriters for their underwriting services. Journalise these
transactions.
(c) Show by means of Journal entries how will be the following recorded:
(i) Milton Ltd. issued 1,000, 10% Debentures of ` 100 each at a discount of 10%,
redeemable at the end of 5 years at a premium of 5%.
(ii) Dubblin Ltd. issued 2,000, 9% Debentures of ` 100 each at a premium
` 20 per debenture, redeemable at the end of 5 years at a premium of ` 10 per
debenture. [5 + 3 + 4 = 12]
6. (a) On 1st April, 2018, Moon Ltd. had 1,000; 10% Debentures of ` 100 each. On
1st October, 2018, the company purchased 300 Own Debentures @ ` 93
for immediate cancellation. Interest on debentures is payable half yearly on
30th September and 31st March.
Pass Journal entries on 1st October and 31st March.
(b) Under which major heading and sub-heading will the following items be shown in
the Balance Sheet of a company as per Schedule III of the Companies Act, 2013:
(i) Long-term Borrowings; (ii) Trade Payables;
(iii) Provision for Tax; (iv) Patents;
(v) Accrued Income; (vi) Calls-in-Advance? [6 + 6 = 12]
7. The Balance Sheet of Amal, Bimal and Kamal, who are sharing profits in proportion
of their capitals stood as follows on 31st March, 2019:

BALANCE SHEET OF AMAL, BIMAL AND KAMAL

as at 31st March, 2019
`
Liabilities Assets `
Capital A/cs: Goodwill 21,000
Amal 2,00,000 Land and Building 2,00,000
Bimal 3,00,000 Machinery 3,00,000
Kamal 2,00,000 7,00,000 Closing Stock 1,00,000
General Reserve 70,000 Sundry Debtors 1,10,000
Workmen Compensation Reserve 15,000 Less: Provision for Doubtful Debts 10,000 1,00,000
Sundry Creditors 50,000 Cash at Bank 1,00,000
Advertisement Expenditure 14,000
8,35,000 8,35,000
Model Test Papers M.25

On 1st April, 2019, Amal retired from the firm and the remaining partners decided to carry
on the business. It was agreed to revalue the assets and reassess the liabilities as follows:
(i) Land and Building to be appreciated by 30%.
(ii) Machinery be reduced by 20%.
(iii) There were bad debts of ` 17,000.
(iv) The claim on account of workmen compensation was ` 8,000.
(v) Goodwill of the firm was valued at ` 1,40,000 and Amal’s share of goodwill be adjusted
against the Capital Accounts of the continuing partners Bimal and Kamal who have
decided to share future profits in the ratio of 4 : 3.
(vi) Capital of the new firm will be the same as it was before the retirement of Amal and
will be in the new profit-sharing ratio of the continuing partners.
(vii) Amount due to Amal be settled by paying ` 50,000 in cash and the balance by trans-
ferring to his Loan Account to be paid later.
Prepare Revaluation Account, Capital Accounts of partners and Balance Sheet of the
firm after Amal’s retirement. [12]
8. Following is the Balance Sheet of Ram, Mohan and Sohan as at 31st March, 2019, who
share profits and losses in the ratio of 3 : 1 : 1:
`
Liabilities Assets `
Sundry Creditors 60,000 Cash at Bank 32,000
Loan from Mrs. Mohan 15,000 Debtors 2,42,000
General Reserve 1,00,000 Less: Provision for Doubtful Debts 12,000 2,30,000
Capital A/cs: Stock 78,000
Ram 2,45,000 Investments 1,70,000
Mohan 90,000 Fixed Assets 10,000
Sohan 60,000 3,95,000 Advertisement Suspense A/c 50,000
5,70,000 5,70,000

The firm was dissolved on the above date on the following terms:
(a) Goodwill is to be ignored.
(b) ‘Ram’ is to take all the fixed assets at ` 2,000 less, Debtors amounting to
` 2,00,000 at ` 1,72,000. The creditors of ` 60,000 to be assumed by ‘Ram’ at that value.
(c) ‘Mohan’ is to take entire stock at ` 70,000 and certain investments at ` 72,000
(being book value less 10%).
(d) ‘Sohan’ is to take remaining investments at 90% of the book value less ` 1,000
allowances and to assume responsibility for the discharge of Mrs. Mohan’s loan,
together with accrued interest of ` 300 which has not been recorded in the books
of the firm.
(e) The remaining debtors were sold to a debt collecting agency for 50% of book values.
( f) Ram was to get ` 2,700 as remuneration for completing the dissolution
work and was to bear the realisation expenses. The expenses of realisation
` 1,700 were paid by Ram out of his private funds.
Prepare Realisation Account, Bank Account and Partners’ Capital Accounts. [12]
M.26 Management Accounting (Section B)—ISC XII

Section B
(20 Marks)
(Answer any two questions)

9. (a) From the following information, calculate Cash Flow from Investing Activities:
Particulars 31st March, 31st March,
2019 (`) 2018 (`)

Investment in shares of Star Ltd. 1,50,000 1,50,000

Machinery 4,00,000 3,00,000
Patents 50,000 80,000
Goodwilll 45,000 60,000
10% Investments 2,00,000 1,50,000
Building 25,00,000 25,00,000

Additional Information:
(i) A part of Building was let out for commercial purpose and the rent received
was ` 30,000.
(ii) Dividend received from Star Ltd. @ 10%.
(iii) Patents of ` 10,000 were written off. A part of patents was sold at a loss of ` 5,000.
(iv) During the year, 10% investments were purchased for ` 1,00,000 and some
investments were sold at a profit of ` 10,000. Interest on investments of ` 12,000
for the year was duly received.
(b) From the following extract of Balance Sheet of Orpat Ltd., calculate Cash Flow from
Financing Activities:
Particulars 31st March, 31st March,
2019 (`) 2018 (`)

Equity Share Capital 6,00,000 4,00,000

10% Preference Share Capital 2,00,000 3,00,000
Securities Premium Reserve 15,000 ...
10% Debentures 5,00,000 4,00,000

Additional Information:

(i) Equity Shares were issued at a premium of 10% on 31st March, 2019.
(ii) Preference Shares were redeemed on 31st March, 2019, at a premium of 5%. The
company met premium on redemption from Securities Premium Reserve.
(iii) Additional Debentures were issued on 1st April, 2018.
(iv) The company declared and paid equity dividend @ 9% and also paid preference
dividend for the year 2017–18. [5 + 5 = 10]
Model Test Papers M.27

10. (a) Calculate following ratios from the given information:

(i) Liquid Ratio;
(ii) Proprietary Ratio; and
(iii) Working Capital Turnover Ratio.
`

Revenue from Operations 5,00,000
Total Current Assets 3,00,000
Prepaid Insurance 5,000
Share Capital 4,00,000
Non-Current Assets 6,00,000
Gross Profit 1,50,000
Closing Inventory 25,000
Total Current Liabilities 1,50,000
Reserves and Surplus 50,000
(b) Calculate Trade Receivables Turnover Ratio from the following:
Closing Trade Receivables ` 40,000; Credit Revenue from Operations being 25% of
Cash Revenue from Operations; Excess of Closing Trade Receivables over Opening
Trade Receivables ` 20,000; and Total Revenue from Operations ` 1,50,000.
[6 + 4 = 10]
11. (a) From the following information, prepare a Comparative Balance Sheet of Fable Ltd:
Particulars 31st March, 31st March,
2019 (`) 2018 (`)

Equity Share Capital 25,00,000 25,00,000

Fixed Assets (Tangible) 36,00,000 30,00,000
Reserves and Surplus 6,00,000 5,00,000
Investment (Non-current) 5,00,000 5,00,000
Long-term Loans 15,00,000 15,00,000
Current Assets 10,50,000 15,00,000
Current Liabilities 5,50,000 5,00,000

(b) Sun Ltd. has 8% Debentures of ` 5,00,000. Its profit before interest and tax is
` 2,00,000. Calculate Interest Coverage Ratio.

(c) Give two advantages of Comparative Balance Sheet. [6 + 2 + 2 = 10]
M.28 Management Accounting (Section B)—ISC XII

Answers
1. (i) Revaluation Account is prepared:
(a) To record the effect of Revaluation of Assets and Reassessment of Liabilities so as to
show the Assets and Liabilities at their revised (revalued) values.
(b) To ascertain the Gain (Profit)/Loss arising on account of Revaluation of Assets and
Reassessment of Liabilities.
(ii) Pro rata Allotment means allotment of shares to the applicants in the ratio of number of

shares offered to the number of shares applied.
For example:
Total No. of Shares offered to Public = 4,000
Total No. of Shares applied by Public = 4,800
No. of Shares applied by James = 96
No. of Shares to be allotted to James = 4,000/4,800 × 96 = 80 shares.
The need for a pro rata allotment arises in case of oversubscription of Shares (i.e., when
the number of shares applied for is more than the number of shares offered for subscription
by the company.

(iii) Difference between Realisation Account and Revaluation Account
Basis Realisation Account Revaluation Account

1. Meaning It records the realisation of assets and It records the effect of revaluation of
settlement of liabilities. assets and reassessment of liabilities.
2. When Prepared It is prepared at the time of dissolution of It is prepared at the time of reconstitution
the firm. of the firm.

(iv) Redemption of Debentures means discharging the liability towards debentures by making
repayment to the Debentureholders.
Methods of Redemption of Debentures:
1. By payment in lump sum at the time of their maturity.
2. By payment in instalments by draw of lots.
3. By purchase in the Open Market.

(v) When Fixed Capital Accounts Method is followed, the amount of loss is debited to
Partners’ Current Accounts. Therefore, Partner’s Capital Account is not affected by the
amount of losses and always shows credit balance.

(vi) Calls-in-Advance means the amount received from the shareholders which has not yet
been called by the company.
The amount of Calls-in-Advance is shown under the head ‘Current Liabilities’ and
sub-head ‘Other Current Liabilities’ in the Balance Sheet.

2. (a) JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)
Raghubir’s Capital A/c ...Dr. 44,000
To Balbir’s Capital A/c 20,000
To Krantibir’s Capital A/c 24,000
(Being the short interest on capital provided and profits distributed in the
wrong ratio, now rectified)
Model Test Papers M.29

Working Notes:
1. CALCULATION OF OPENING CAPITAL
Particulars Raghubir (`) Balbir (`) Krantibir (`)
A. Closing Capital 60,000 2,20,000 4,40,000
B. Add: Drawings already debited 2,40,000 2,40,000 2,40,000
3,00,000 4,60,000 6,80,000
C. Less: Profit already credited 80,000 20,000 20,000
D. Opening Capital plus Interest on Capital 2,20,000 4,40,000 6,60,000
E. Less: Interest on Capital (D × 10/110) 20,000 40,000 60,000
F. Opening Capital 2,00,000 4,00,000 6,00,000

2. STATEMENT SHOWING REQUIRED ADJUSTMENT

Particulars Raghubir‘s Capital A/c Balbir‘s Capital A/c Krantibir’s Capital A/c Firm
Dr. (`) Cr. (`) Dr. (`) Cr. (`) Dr. (`) Cr. (`) Dr. (`) Cr. (`)
I. Amount already credited,
now taken back:
Interest on Capital @ 10% 20,000 ... 40,000 ... 60,000 ... ... 1,20,000
Share of Profit (4 : 1 : 1) 80,000 ... 20,000 ... 20,000 ... ... 1,20,000
II. Amount which should
have been credited:
Interest on Capital @ 12% ... 24,000 ... 48,000 ... 72,000 1,44,000 ...
Share of Profit ` 96,000
(i.e., ` 2,40,000 – ` 1,44,000)
in ratio of 1 : 1 : 1 ... 32,000 ... 32,000 ... 32,000 96,000 ...
1,00,000 56,000 60,000 80,000 80,000 1,04,000 2,40,000 2,40,000
III. Net Effect 44,000 (Dr.) 20,000 (Cr.) 24,000 (Cr.) ...

(b)
JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)
2019
March 31 Profit and Loss Appropriation A/c ...Dr. 1,52,000
To Vrindan’s Capital A/c 68,000
To Kundan’s Capital A/c 34,000
To Srijan’s Capital A/c 50,000
(Being the distribution of profit among partners)

Dr. PROFIT AND LOSS APPROPRIATION ACCOUNT for the year ending 31st March, 2019 Cr.
`
Particulars Particulars `

To Vrindan’s Capital A/c (2/4 × ` 1,52,000) 76,000 By Profit and Loss A/c (Net Profit) 1,52,000
Less: Deficiency borne (2/3 × ` 12,000) 8,000 68,000
To Kundan’s Capital A/c (1/4 × ` 1,52,000) 38,000
Less: Deficiency borne (1/3 of ` 12,000) 4,000 34,000
To Srijan’s Capital A/c 38,000
Add: Deficiency recovered from:
Vrindan 8,000
Kundan 4,000 50,000
1,52,000 1,52,000
M.30 Management Accounting (Section B)—ISC XII

Working Notes:
1. Calculation of New Profit-sharing Ratio:
Let the total share be = 1, Srijan’s Share = 1/4, Remaining Share = 1 – 1/4 = 3/4
Vrindan’s New Share = 3/4 × 2/3 = 2/4; Kundan’s New Share = 3/4 × 1/3 = 1/4
Thus, New Profit-Sharing Ratio of Vrindan, Kundan and Srijan = 2/4 : 1/4 : 1/4 or 2 : 1 : 1.
2. Srijan’s actual share of profit = ` 1,52,000 × 1/4 = ` 38,000.
3. Deficiency = Guaranteed Amount of Profit – Actual Share of Profit
= ` 50,000 – ` 38,000 = ` 12,000.
4. Deficiency is to be borne by Vrindan and Kundan in the ratio of 2 : 1 as follows:
Vrindan’s contribution = ` 12,000 × 2/3 = ` 8,000;
Kundan’s contribution = ` 12,000 × 1/3 = ` 4,000.
3.
Dr. REVALUATION ACCOUNT Cr.
`
Particulars Particulars `
To Investment A/c 5,000 By Accrued Income A/c 500
To Gain (Profit) transferred to: By Bad Debts Recovered A/c (WN 1) 5,800
Madan’s Capital A/c 6,780 By Unexpired Insurance A/c 5,000
Mohan’s Capital A/c 4,520 11,300 By Patents A/c 5,000
16,300 16,300

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.

Particulars Madan Mohan Gopal Particulars Madan Mohan Gopal
` ` ` ` ` `
To Goodwill A/c 18,000 12,000 ... By Balance b/d 60,000 40,000 ...
To Balance c/d 99,780 66,520 41,575 By General Reserve A/c 30,000 20,000 ...
By Revaluation A/c 6,780 4,520 ...
By Workmen Comp.
Reserve A/c (WN 2) 6,000 4,000 ...
By Premium for
Goodwill A/c 15,000 10,000 ...
By Bank A/c (WN 3) ... ... 41,575
1,17,780 78,520 41,575 1,17,780 78,520 41,575

BALANCE SHEET OF THE RECONSTITUTED FIRM as at 1st April, 2019

`
Liabilities Assets `
Creditors 28,000 Cash at Bank (WN 4) 82,375
Workmen Compensation Claim 2,000 Debtors 65,000
Capital Accounts: Less: Provision for Doubtful Debts 5,000 60,000
Madan 99,780 Stock 30,000
Mohan 66,520 Investments 45,000
Gopal 41,575 2,07,875 Patents 15,000
Accrued Income 500
Unexpired Insurance 5,000
2,37,875 2,37,875
Model Test Papers M.31

Working Notes:
1. Amount recovered in the form of bad debts written off last year is a gain for the firm. Therefore, Revaluation Account is
credited with the amount.
2. In the given case, there is a claim of ` 2,000 on account of Workmen Compensation. Therefore, Workmen Compensation
Reserve of ` 2,000 is used for providing the liability and balance amount of ` 10,000 (i.e., 12,000 – 2,000) is distributed
among Madan and Mohan in their old profit-sharing ratio.
3. Calculation of Gopal’s Share of Capital: `
Adjusted Capital of Madan 99,780
Adjusted Capital of Mohan 66,520
Combined capital of Madan and Mohan for 4/5 share 1,66,300
Total Capital of the firm should be = ` 1,66,300 × 5/4 = ` 2,07,875
Gopal’s Share of Capital = ` 2,07,875 × 1/5 = ` 41,575.

4. Dr. BANK ACCOUNT Cr.

`
Particulars Particulars `
To Balance b/d 10,000 By Balance c/d
82,375
To Bad Debts Recovered A/c 5,800
To Gopal’s Capital A/c (WN 3) 41,575
To Premium for Goodwill A/c 25,000
82,375 82,375

4. JOURNAL OF BAYSON LTD.

Date Particulars L.F. Dr. (`) Cr. (`)
Bank A/c ...Dr. 40,00,000
To Equity Shares Application A/c 40,00,000
(Being the application money received for 80,000 shares @ ` 50 per share)
Equity Shares Application A/c ...Dr. 40,00,000
To Equity Share Capital A/c (54,000 × ` 50) 27,00,000
To Equity Shares Allotment A/c (40,000 × ` 10) 4,00,000
To Calls-in-Advance A/c ` (40,00,000 – 27,00,000 – 4,00,000) 9,00,000
(Being the application money adjusted)
Equity Shares Allotment A/c ...Dr. 5,40,000
To Equity Share Capital A/c 5,40,000
(Being the allotment money due on 54,000 shares @ ` 10 per share)
Bank A/c (WN 3) ...Dr. 1,88,000
To Equity Shares Allotment A/c 1,40,000
To Calls-in-Advance A/c (1,200 × ` 40) 48,000
(Being the allotment money received and advance of call money
on 1,200 shares)
Equity Shares First and Final Call A/c (54,000 × ` 40) ...Dr. 21,60,000
To Equity Share Capital A/c 21,60,000
(Being the call money due)
Bank A/c ...Dr. 12,05,000
Calls-in-Advance A/c (` 9,00,000 + ` 48,000) ...Dr. 9,48,000
Calls-in-Arrears A/c (WN 4) ...Dr. 7,000
To Equity Shares First and Final Call A/c 21,60,000
(Being the first and final call money received) (WN 4)
M.32 Management Accounting (Section B)—ISC XII

Equity Share Capital A/c (400 × ` 100) ...Dr. 40,000

To Forfeited Shares A/c (660 × ` 50) 33,000
To Calls-in-Arrears A/c 7,000
(Being 400 shares of Vidur forfeited)
Bank A/c (400 × ` 110) ...Dr. 44,000
To Equity Share Capital A/c (400 × ` 100) 40,000
To Securities Premium Reserve A/c (400 × ` 10) 4,000
(Being 400 shares reissued for ` 110 per share as fully paid-up)
Forfeited Shares A/c ...Dr. 33,000
To Capital Reserve A/c 33,000
(Being the gain on reissue transferred to Capital Reserve)
BALANCE SHEET OF BAYSON LTD.
Particulars Note No. `

I. EQUITY AND LIABILITIES

Shareholders’ Funds
(a) Share Capital 1 54,00,000
(b) Reserves and Surplus 2 37,000
Total 54,37,000
II. ASSETS
Current Assets
Cash and Cash Equivalents 3 54,37,000
Total 54,37,000

Notes to Accounts
Particulars `
1. Share Capital
Authorised Capital
... Equity Shares of ` 100 each ...
Issued Capital
54,000 Equity Shares of ` 100 each 54,00,000
Subscribed Capital
Subscribed and Fully paid-up
54,000 Equity Shares of ` 100 each 54,00,000
2. Reserves and Surplus
Capital Reserve 33,000
Securities Premium Reserve 4,000
37,000
3. Cash and Cash Equivalents
Cash at Bank 54,37,000

Working Notes:
1. Adjustment of Excess of Application Money:
Number of Applied Shares Number of Allotted Shares
Total Shares 80,000 54,000
Full Allotment 14,000 14,000
Pro rata Allotment 66,000 40,000
Pro rata Allotment: Excess Application Money = (66,000 – 40,000) × ` 50 = ` 13,00,000;
Adjusted on Allotment = 40,000 × ` 10 = ` 4,00,000;
Adjusted on Call = ` 13,00,000 – ` 4,00,000 = ` 9,00,000.
Model Test Papers M.33

2. Calculation of Allotment money not paid by Vidur:

66,000
(a) Total Number of Shares applied by Vidur = ¥ 400 = 660 shares. `
40,000
(b) Application money received on shares allotted to Vidur (660 × ` 50) 33,000
(c) Less: Application money due on shares allotted to Vidur (400 × ` 50) 20,000
(d) Excess application money to be adjusted on allotment and call 13,000
(e) Allotment money due on shares allotted to Vidur (400 × ` 10) 4,000
Less: Excess application money adjusted on allotment 4,000
Amount not paid by Vidur on Allotment NIL
Still excess application money ` 9,000 (i.e., ` 13,000 – ` 4,000) remains to be adjusted on call.
3. Calculation of allotment money received later: `
Total allotment money due (54,000 × ` 10) 5,40,000
Less: Excess application money adjusted on allotment 4,00,000
1,40,000
Add: Calls-in-Advance (1,200 × ` 40) 48,000
1,88,000
4. Calculation of first and final call money not paid by Vidur: `
Total first and final call money due (400 × ` 40) 16,000
Less: Excess application money to be adjusted on call (WN 2) 9,000
Call money not paid by Vidur 7,000

5. Dr. BANK ACCOUNT Cr.

`
Particulars Particulars `
To Equity Shares Application A/c 40,00,000 By Balance c/d
54,37,000
To Equity Shares Allotment A/c 1,40,000
To Calls-in-Advance A/c 48,000
To Equity Shares First and Final Call A/c 12,05,000
To Equity Share Capital A/c 40,000
To Securities Premium Reserve A/c 4,000
54,37,000 54,37,000

5. (a) Mars Ltd.

JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)
Bank A/c ...Dr. 5,00,000
To Debentures Application and Allotment A/c 5,00,000
(Being the application money received for 5,000 debentures)
Debentures Application and Allotment A/c ...Dr. 5,00,000
To 9% Debentures A/c 5,00,000
(Being the issue of 5,000, 9% Debentures of ` 100 each at par)
Debentures Suspense A/c ...Dr. 10,00,000
To 9% Debentures A/c 10,00,000
(Being the issue of 10,000, 9% Debentures of ` 100 each as
collateral security for a loan from ICICI)
M.34 Management Accounting (Section B)—ISC XII

AN EXTRACT OF BALANCE SHEET OF MARS LTD. as at...

Particulars Note No. `
I. EQUITY AND LIABILITIES
Non-Current Liabilities
Long-term Borrowings 1 13,00,000

Note to Accounts
Particulars ` `
1. Long-term Borrowings
5,000, 9% Debentures of ` 100 each 5,00,000
Loan from ICICI Ltd. 8,00,000
(Secured by the issue of 10,000; 9% Debentures of ` 100 each as collateral security)
10,000; 9% Debentures of ` 100 each (issued as collateral security) 10,00,000
Less: Debentures Suspense Account 10,00,000 Nil
13,00,000

(b) JOURNAL OF EUROPA LTD.

Date Particulars L.F. Dr. (`) Cr. (`)
Incorporation Cost A/c ...Dr. 2,00,000
To Promoters’ A/c 2,00,000
(Being the incorporation cost)
Promoters’ A/c ...Dr. 2,00,000
To 10% Debentures A/c 2,00,000
(Being 2,000; 10% Debentures of ` 100 each issued at par)
Underwriting Commission A/c ...Dr. 1,00,000
To Underwriters’ A/c 1,00,000
(Being the underwriting commission due)
Underwriters’ A/c ...Dr. 1,00,000
To 10% Debentures A/c 1,00,000
(Being 1,000; 10% Debentures of ` 100 each issued at par)

(c) (i) JOURNAL OF MILTON LTD.

Date Particulars L.F. Dr. (`) Cr. (`)
Bank A/c ...Dr. 90,000
To Debentures Application and Allotment A/c 90,000
(Being the debentures application money received)
Debentures Application and Allotment A/c ...Dr. 90,000
Loss on Issue of Debentures A/c* ...Dr. 15,000
To 10% Debentures A/c 1,00,000
To Premium on Redemption of Debentures A/c 5,000
(Being 1,000; 10% Debentures issued at a discount of 10% and
redeemable at a premium of 5%)
Statement of Profit and Loss (Finance Cost) ...Dr. 15,000
To Loss on Issue of Debentures A/c 15,000
(Being the Loss on issue of Debentures written off from Statement
of Profit and Loss)
* Loss on Issue of Debentures = ` 10,000 (Discount on Issue) + ` 5,000 (Premium on Redemption) = ` 15,000.
Model Test Papers M.35

(ii) JOURNAL OF DUBBLIN LTD.

Date Particulars L.F. Dr. (`) Cr. (`)
Bank A/c ...Dr. 2,40,000
To Debentures Application and Allotment A/c 2,40,000
(Being the debentures application money received)
Debentures Application and Allotment A/c ...Dr. 2,40,000
Loss on Issue of Debentures A/c ...Dr. 20,000
To 9% Debentures A/c 2,00,000
To Securities Premium Reserve A/c 40,000
To Premium on Redemption of Debentures A/c 20,000
(Being 2,000; 9% Debentures issued at a premium of ` 20 and
redeemable at a premium of ` 10 per debenture)
Securities Premium Reserve A/c ...Dr. 20,000
To Loss on Issue of Debentures A/c 20,000
(Being the loss on issue of debentures written off)

6. (a) JOURNAL OF MOON LTD.

Date Particulars L.F. Dr. (`) Cr. (`)
2018
Oct. 1 Own Debentures A/c ...Dr. 27,900
To Bank A/c 27,900
(Being the purchase of 300 own debentures @ ` 93)
10% Debentures A/c ...Dr. 30,000
To Own Debentures A/c 27,900
To Gain on Cancellation of Own Debentures A/c 2,100
(Being the cancellation of 300 own debentures)
Gain on Cancellation of Own Debentures A/c ...Dr. 2,100
To Capital Reserve A/c 2,100
(Being the transfer of gain on cancellation of own debentures to
Capital Reserve)
2019
March 31 Interest on Debentures A/c ...Dr. 3,500
To Debentureholders’ A/c 3,500
(Being the interest due on ` 70,000 @ 10% p.a. for 6 months)
March 31 Debentureholders’ A/c ...Dr. 3,500
To Bank A/c 3,500
(Being the payment made to debentureholders)
March 31 Statement of Profit and Loss ...Dr. 8,500
To Interest on Debentures A/c (Note) 8,500
(Being the interest on debentures transferred to Statement of Profit
and Loss)

Note: Interest on Debentures (30th September, 2017) = 1,00,000 × 10/100 × 6/12 = ` 5,000
Interest on Debentures (31st March, 2018) = ` 70,000 × 10/100 × 6/12 = ` 3,500
Total Interest for the year ended 31st March, 2018 = ` 8,500
M.36 Management Accounting (Section B)—ISC XII

(b)

S. No. Items Major Head Sub-head

(i) Long-term Borrowings Non-current Liabilities Long-term Borrowings
(ii) Trade Payables Current Liabilities Trade Payables
(iii) Provision for Tax Current Liabilities Short-term Provisions
(iv) Patents Non-current Assets Fixed Assets—Intangible Assets
(v) Accrued Income Current Assets Other Current Assets
(vi) Calls-in-Advance Current Liabilities Other Current Liabilities

7.
Dr. REVALUATION ACCOUNT Cr.
`
Particulars Particulars `
To Machinery A/c 60,000 By Land and Building A/c 60,000
To Bad Debts A/c (WN 1) 7,000 By Loss transferred to:
Amal’s Capital A/c 2,000
Bimal’s Capital A/c 3,000
Kamal’s Capital A/c 2,000 7,000
67,000 67,000

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.

Particulars Amal Bimal Kamal Particulars Amal Bimal Kamal
` ` ` ` ` `

To Goodwill A/c 6,000 9,000 6,000 By Balance b/d 2,00,000 3,00,000 2,00,000
To Advertisement By General Reserve A/c 20,000 30,000 20,000
Expenditure A/c 4,000 6,000 4,000 By Workmen Compen-
To Revaluation A/c (Loss) 2,000 3,000 2,000 Reserve A/c 2,000 3,000 2,000
To Amal’s Capital A/c (WN 2) ... 20,000 20,000 By Bimal’s Capital A/c (WN 2) 20,000 ... ...
To Bank A/c 50,000 ... ... By Kamal’s Capital A/c (WN 2) 20,000 ... ...
To Amal’s Loan A/c 2,00,000 ... ... By Bank A/c (Bal. Fig.) ... 1,05,000 1,10,000
To Balance c/d (WN 3) ... 4,00,000 3,00,000
2,62,000 4,38,000 3,32,000 2,62,000 4,38,000 3,32,000

BALANCE SHEET
(After Amal’s Retirement)
as at 31st March, 2019
`
Liabilities Assets `
Capital A/cs: Land and Building 2,60,000
Bimal 4,00,000 Machinery 2,40,000
Kamal 3,00,000 7,00,000 Closing Stock 1,00,000
Amal’s Loan A/c 2,00,000 Sundry Debtors 93,000
Workmen Compensation Claim 8,000 Cash at Bank (WN 4) 2,65,000
Sundry Creditors 50,000
9,58,000 9,58,000
Model Test Papers M.37

Working Notes:
1. Accounting Entries for Bad Debts:
Date Particulars L.F. Dr. (`) Cr. (`)
Bad Debts A/c ...Dr. 17,000
To Sundry Debtors A/c 17,000
Provision for Doubtful Debts A/c ...Dr. 10,000
Revaluation A/c ...Dr. 7,000
To Bad Debts A/c 17,000
2
2. (i) Amal’s Share of Goodwill = ` 1,40,000 × = ` 40,000, which is contributed by Bimal and Kamal in their
gaining ratio. It is calculated as follows: 7

4 3 1 3 2 1
Bimal’s Gain = - = ; Kamal’s Gain = - =
7 7 7 7 7 7
1 1
Gaining Ratio of Bimal and Kamal = : or 1 : 1.
7 7
1
(ii) Thus, Bimal and Kamal will contribute for Amal’s share of goodwill = ` 40,000 × = ` 20,000 each.
2
3. Calculation of Proportionate Capital of the remaining partners in the new firm:
Total Capital of the firm before the retirement of Amal = ` 7,00,000, which is contributed by Bimal and Kamal
in their new profit-sharing ratio, i.e, 4 : 3. Thus,
4
Bimal’s Capital in the new firm = ` 7,00,000 × = ` 4,00,000;
7
3
Kamal’s Capital in the new firm = ` 7,00,000 × = ` 3,00,000.
7
4. Dr. BANK ACCOUNT Cr.
`
Particulars Particulars `
To Balance b/d 1,00,000 By Amal’s Capital A/c 50,000
To Bimal’s Capital A/c 1,05,000 By Balance c/d 2,65,000
To Kamal’s Capital A/c 1,10,000
3,15,000 3,15,000

8.
Dr. REALISATION ACCOUNT Cr.
`
Particulars Particulars `
To Debtors 2,42,000 By Sundry Creditors 60,000
To Stock 78,000 By Loan from Mrs. Mohan 15,000
To Investment 1,70,000 By Provision for Doubtful Debts 12,000
To Fixed Assets 10,000 By Ram’s Capital A/c:
To Ram’s Capital A/c (Creditors) 60,000 Fixed Assets 8,000
To Sohan’s Capital A/c (Loan + Interest) 15,300 Debtors 1,72,000 1,80,000
To Ram’s Capital A/c (Remuneration) 2,700 By Mohan’s Capital A/c:
Stock 70,000
Investments 72,000 1,42,000
By Sohan’s Capital A/c (Investments) 80,000
By Bank A/c (Debtors) 21,000
By Loss on Realisation transferred to:
Ram’s Capital A/c 40,800
Mohan’s Capital A/c 13,600
Sohan’s Capital A/c 13,600 68,000
5,78,000 5,78,000
M.38 Management Accounting (Section B)—ISC XII

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.

Particulars Ram Mohan Sohan Particulars Ram Mohan Sohan
` ` ` ` ` `

To Realisation A/c 1,80,000 1,42,000 80,000 By Balance b/d 2,45,000 90,000 60,000
To Realisation A/c (Loss) 40,800 13,600 13,600 By Realisation A/c 60,000 ... 15,300
To Advertisement By Realisation A/c 2,700 ... ...
Suspense A/c 30,000 10,000 10,000 By General Reserve A/c 60,000 20,000 20,000
To Bank A/c 1,16,900 ... ... By Bank A/c ... 55,600 8,300
(Balancing Figure) (Balancing Figure)
3,67,700 1,65,600 1,03,600 3,67,700 1,65,600 1,03,600

Dr. BANK ACCOUNT Cr.

`
Particulars Particulars `
To Balance b/d 32,000 By Ram’s Capital A/c 1,16,900
To Realisation A/c (Debtors) 21,000 (Final Payment)
To Mohan’s Capital A/c (Cash brought in) 55,600
To Sohan’s Capital A/c (Cash brought in) 8,300
1,16,900 1,16,900

Working Notes:
1. Book Value of Investment taken over by Mohan = ` 72,000 × 10/9 = ` 80,000.
2. Remaining investment = ` 1,70,000 – ` 80,000 = ` 90,000.
3. Book Value of Investment taken over by Sohan = 90% of ` 90,000 = ` 81,000.
4. Agreed value of investment taken over by Sohan = ` 81,000 – ` 1,000 = ` 80,000.

Section B

9. (a) CASH FLOW FROM INVESTING ACTIVITIES

`
Particulars

Purchase of Machinery (` 4,00,000 – ` 3,00,000) (1,00,000)

Purchase of 10% Investments (1,00,000)
Rent Received 30,000
Dividend Received from Investment in shares (10% of ` 1,50,000) 15,000
Sale of 10% Investments (WN 1) 60,000
Interest Income on 10% Investments 12,000
Sale of Patents (WN 2) 15,000
Cash Used in Investing Activities (68,000)

Working Notes:
1. Dr. 10% INVESTMENTS ACCOUNT Cr.
`
Particulars Particulars `
To Balance b/d 1,50,000 By Bank A/c (Sale) (Balancing Figure) 60,000
To Bank A/c (Purchase) 1,00,000 By Balance c/d 2,00,000
To Statement of Profit and Loss (Profit on Sale) 10,000
2,60,000 2,60,000
Model Test Papers M.39

2. Dr. PATENTS ACCOUNTS Cr.

`
Particulars Particulars `
To Balance b/d 80,000 By Statement of Profit and Loss (Written off) 10,000
By Bank A/c (Sale) (Balancing Figure) 15,000
By Statement of Profit and Loss (Loss on Sale) 5,000
By Balance c/d 50,000
80,000 80,000

3. Decrease in the book value of Goodwill by ` 15,000 indicates amortisation of Goodwill. It is adjusted while
calculating Cash Flow from Operating Activities and does not effect Cash Flow from Investing Activities.

(b) CASH FLOW FROM FINANCING ACTIVITIES

`
Particulars

Proceeds from issue of Equity Share Capital [ ` 2,00,000 + ` 20,000 (Premium] 2,20,000
Proceeds from Issue of Debentures (` 5,00,000 – ` 4,00,000) 1,00,000
Redemption of 10% Preference Shares [` 1,00,000 + ` 5,000 (Premium)] (1,05,000)
Payment of Preference Dividend (10% × ` 3,00,000) (30,000)
Payment of Equity Dividend (9% × ` 4,00,000) (36,000)
Interest paid on Debentures (10% × ` 5,00,000) (50,000)
Cash Flow from Financing Activities 99,000

Quick Assets ` 2,70,000

10. (a) (i) Liquid Ratio= = = 1.8 : 1.
Current Liabilities ` 1,50,000

Note: Quick Assets = Total Current Assets – Prepaid Insurance – Closing Inventory
= ` 3,00,000 – ` 5,000 – 25,000 = ` 2,70,000.

Shareholders’ Funds/Equity ` 4,50,000

(ii) Proprietary Ratio = = = 0.5 : 1.
Total Assets ` 9,00,000
Notes:
­1. Shareholders’ Funds = Share Capital + Reserves and Surplus
= ` 4,00,000 + ` 50,000 = ` 4,50,000.
2. Total Assets = Total Current Assets + Non-current Assets
= ` 3,00,000 + ` 6,00,000 = ` 9,00,000.

Revenue from Operations ` 5,00,000

(iii) Working Capital Turnover Ratio= = = 3.33 Times.
Working Capital ` 1,50,000

Note: Working Capital = Current Assets – Current Liabilities

= ` 3,00,000 – ` 1,50,000 = ` 1,50,000.

Credit Revenue from Operations

(b) Trade Receivables Turnover Ratio =
Average Trade Receivables

` 30,000
= = 1 Time.
` 30,000
M.40 Management Accounting (Section B)—ISC XII

Working Notes:
1. Calculation of Credit Revenue from Operations:
Let Cash Revenue from Operation = X, credit Revenue from Operation will be 25% of X or X/4.
Total Revenue from Operations = Cash Revenue from Operations + Credit Revenue from Operation
` 1,50,000 = X + X/4
5X = ` 6,00,000
X = ` 6,00,000/5 = ` 1,20,000 (Cash Revenue from Operations)
Credit Revenue from Operations = ` 1,20,000 × 1/4 = ` 30,000.
2. Calculation of Average Trade Receivables:
Opening Trade Receivables = ` 40,000 – ` 20,000 = ` 20,000
Opening Trade Receivables + Closing Trade Receivables
Average Trade Receivables =
2
` 20,000 + ` 40,000
= = ` 30,000.
2
11.
(a) COMPARATIVE BALANCE SHEET OF FABLE LTD. as at 31st March, 2019 and 2018
Particulars Note No. 31st March, 31st March, Absolute Percentage
2019 (`) 2018 (`) Change (`) Change (%)
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
(a) Share Capital 25,00,000 25,00,000 ... ...
(b) Reserves and Surplus 6,00,000 5,00,000 1,00,000 20.00
2. Non-Current Liabilities
(a) Long-term Borrowings 15,00,000 15,00,000 ... ...
3. Current Liabilities 5,50,000 5,00,000 50,000 10.00
Total 51,50,000 50,00,000 1,50,000 3.00
II. ASSETS
1. Non-Current Assets
(a) Fixed Assets 36,00,000 30,00,000 6,00,000 20.00
(b) Non-current Investments 5,00,000 5,00,000 ... ...
2. Current Assets 10,50,000 15,00,000 (4,50,000) (30.00)
Total 51,50,000 50,00,000 1,50,000 3.00

Note: When the amount of current year has decreased, then the absolute change and percentage
change is shown in brackets.
Profit before Interest and Tax
(b) Interest Coverage Ratio =
Interest on Long-term Debt
Profit before Interest and Tax = ` 2,00,000
Interest on Debentures = ` 5,00,000 × 8/100 = ` 40,000
` 2,00,000
Interest Coverage Ratio = = 5 Times.
` 40,000
(c) Advantages of Comparative Balance Sheet:

(i) Comparative Balance Sheet Shows the increase or decrease in various items of Balance
Sheet as compared to single year’s Balance Sheet which shows the balances of assets,
equity and liabilities accounts at a certain date.
(ii) Comparative Balance Sheet acts as a connecting link between Statement of Profit and
Loss and the Balance Sheet as it shows the effect of business operation on its assets,
liabilities and capital.