CBSE XII BOARD TIME TABLE MARCH 2011

Class XII -, MARCH 2011

(Download Class XII Date Sheet)

Exam Timings: 10:30 AM

1 March, Tuesday Time Left: 19 days, 18 hours	PHYSICS PERSIAN OFFCE PROC.& PRAC. LENDING OPERATIONS ELECTRIC MACHINES RADIO ENG.&AUD.SYS M PROD TPT &M COOP POST HARV TECH&PRD OPTICS CLINICAL BIO-CHEM. COMM. HEALTH NURII RADIOGRAPHY-I GENL ESTB & MGMT OF FSU DESG & PAT MAKING DYEING & PRINTING ACCOMODAT.SERVICES TRAVEL TRADE MGMT CONFECTIONERY DTP CAD & MULTIMED CLSFN.&CATALOGUING POULTRY PDTS& TECH H EDN & PUB HELATH C HEALTH NURSING
3 March, Thursday Time Left: 21 days, 18 hours	Business Studies
4 March, Friday Time Left: 22 days, 18 hours	Fashion Studies
5 March, Saturday Time Left: 23 days, 18 hours	HISTORY 027 FINANCIAL ACCNTG CASH MGMT & H-KEEP ELECT APPLIANCES AUTOSHOP REP& PRAC AC & REFRGTN-III ELN.DEV.& CIRCUITS ACTG FOR BUSINESS MIDWIFERY
7 March, Monday Time Left: 25 days, 18 hours	CHEMISTRY OFF. COMMUNICATION SHORTHAND HINDI CONS BEHV & PROTCN MGMT OF BANK OFFCE APPLIED PHYSICS FABRICATN.TECH-III TV & VIDEO SYSTEMS ELECTRICAL ENGG. MILK & MILK PRODS. VEGETABLE CULTURE B THERAPY &H DR-II BIOLOGY-OPTHALMIC LAB. MEDICINE FUND OF NURSING II RADIATION PHYSICS ADVANCE FOOD PREP CLOTHING CONST BASIC DESIGN FOOD PREPARATION INDIA-TOURIST DEST FOOD SCI.& HYGIENE I T SYSTEMS LIB. ADMN & MGMT. PRIN &PRA-LIFE INS POULTRY NUTR & PHY INT TO FINANCL MKT B CONCEPT-H &MED T
8 March, Tuesday Time Left: 26 days, 18 hours	PUNJABI
9 March, Wednesday Time Left: 27 days, 18 hours	BIOTECHNOLOGY ACCOUNTANCY CR WRTNG TR STUDY HERITAGE CRAFTS STORE ACCOUNTING ENGINEERING SCI. DAIRY PLANT INSTRU FOOD& BEV SERVICES
11 March, Friday Time Left: 29 days, 18 hours	ENGLISH ELECTIVE FUNCTIONAL ENGLISH ENGLISH CORE
14 March, Monday Time Left: 32 days, 18 hours	BIOLOGY GRAPHIC DESIGNS SINDHI GUJARATI ASSAMESE PORTUGUESE RUSSIAN SPANISH KASHMIRI SHORTHAND ENGLISH TYPOGRAPHY &CA HIN ELE.COST A/C & AUD SALESMANSHIP MECH. ENGINEERING AUTO ENGINEERING AC & REFRGTN-IV YOGA ANATOMY &PHYS MEAL PLNG & SERVIC TOUR MGMT & MP PLN BUSINESS DATA PROC REFERENCE SERVICE B P O SKILLS
16 March, Wednesday Time Left: 34 days, 18 hours	Economics
18 March, Friday Time Left: 36 days, 18 hours	HINDI ELECTIVE MANIPURI TIBETAN HINDI CORE
22 March, Tuesday Time Left: 40 days, 18 hours	MATHEMATICS SECT PRAC & ACCNTG CIVIL ENGINEERING FABRICATN.TECH-II FLORICULTURE COSMETIC CHEMISTRY OPHTHALMIC TECH. MICROBIOLOGY MAT.&CHILD H.NURII RADIOGRAPHY-II SPL TEXTILE SCIENCE BAKERY SCIENCE COMPUTER& LIFE I A TPT. SYSTEMS &MGMT POULTRY DISE & CNT FIRST AID &MEDCL C HEALTH CENTRE MGMT
25 March, Friday Time Left: 43 days, 18 hours	POLITICAL SCIENCE
26 March, Saturday Time Left: 44 days, 18 hours	PAINTING GRAPHICS SCULPTURE APP-COMMERCIAL ART
28 March, Monday Time Left: 46 days, 18 hours	PHYSICAL EDUCATION MARATHI KANNADA MIZO
30 March, Wednesday Time Left: 48 days, 18 hours	INFORMATICS PRAC. COMPUTER SCIENCE
31 March, Thursday Time Left: 49 days, 18 hours	PHILOSOPHY DANCE-KATHAK DANCE-KUCHIPUDI DANCE-ODISSI DANCE-MANIPURI DANCE-KATHAKALI DANCE-MOHINIYATTAM MULTIMEDIA & WEB T TYPOGRAPHY &CA ENG
1 April, Friday Time Left: 50 days, 18 hours	MUSIC CAR.VOCAL MUSIC CAR.INS.MEL. MUSIC CAR.INS.PER. MUSIC HIND.VOCAL MUSIC HIND.INS.MEL MUSIC HIND.INS.PER ENGG. GRAPHICS TELUGU MALAYALAM ORIYA GERMAN NEPALI LIMBOO LEPCHA BHUTIA
2 April, Saturday Time Left: 51 days, 18 hours	ENTREPRENEURSHIP
5 April, Tuesday Time Left: 54 days, 18 hours	GEOGRAPHY MARKETING
7 April, Thursday Time Left: 56 days, 18 hours	PSYCHOLOGY ARABIC
9 April, Saturday Time Left: 58 days, 18 hours	HOME SCIENCE
11 April, Monday Time Left: 60 days, 18 hours	URDU ELECTIVE SANSKRIT ELECTIVE BENGALI TAMIL FRENCH URDU CORE SANSKRIT CORE
13 April, Wednesday Time Left: 62 days, 18 hours	SOCIOLOGY DANCE-BHARATNATYAM AGRICULTURE

ACCOUNTING RATIOS

Accounting Ratios
for Financial Statement Analysis

Liquidity Analysis Ratios

Current Ratio

 

		Current Assets
	Current Ratio =	————————
		Current Liabilities

 

Quick Ratio

 

		Quick Assets
	Quick Ratio =	———————-
		Current Liabilities

 

Quick Assets = Current Assets – Inventories

 

Net Working Capital Ratio

 

		Net Working Capital
	Net Working Capital Ratio =	————————–
		Total Assets

 

Net Working Capital = Current Assets – Current Liabilities

 

Profitability Analysis Ratios

Return on Assets (ROA)

 

		Net Income
	Return on Assets (ROA) =	———————————-
		Average Total Assets

 

Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2

 

Return on Equity (ROE)

 

		Net Income
	Return on Equity (ROE) =	——————————————–
		Average Stockholders’ Equity

 

Average Stockholders’ Equity  = (Beginning Stockholders’ Equity + Ending Stockholders’ Equity) / 2

 

Return on Common Equity (ROCE)

 

		Net Income
	Return on Common Equity (ROCE) =	——————————————–
		Average Common Stockholders’ Equity

 

Average Common Stockholders’ Equity  = (Beginning Common Stockholders’ Equity + Ending Common Stockholders’ Equity) / 2

 

Profit Margin

 

		Net Income
	Profit Margin =	—————–
		Sales

 

 

Earnings Per Share (EPS)

 

		Net Income
	Earnings Per Share (EPS) =	———————————————
		Number of Common Shares Outstanding

 

 

Activity Analysis Ratios

Assets Turnover Ratio

 

		Sales
	Assets Turnover Ratio =	—————————-
		Average Total Assets

 

Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2

 

Accounts Receivable Turnover Ratio

 

		Sales
	Accounts Receivable Turnover Ratio =	———————————–
		Average Accounts Receivable

 

Average Accounts Receivable  = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2

 

Inventory Turnover Ratio

 

		Cost of Goods Sold
	Inventory Turnover Ratio =	—————————
		Average Inventories

 

Average Inventories = (Beginning Inventories + Ending Inventories) / 2

 

Capital Structure Analysis Ratios

Debt to Equity Ratio

 

		Total Liabilities
	Debt to Equity Ratio =	———————————-
		Total Stockholders’ Equity

 

 

Interest Coverage Ratio

 

		Income Before Interest and Income Tax Expenses
	Interest Coverage Ratio =	——————————————————-
		Interest Expense

 

Income Before Interest and Income Tax Expenses  = Income Before Income Taxes + Interest Expense

 

Capital Market Analysis Ratios

Price Earnings (PE) Ratio

 

		Market Price of Common Stock Per Share
	Price Earnings (PE) Ratio =	——————————————————
		Earnings Per Share

 

 

Market to Book Ratio

 

		Market Price of Common Stock Per Share
	Market to Book Ratio =	——————————————————-
		Book Value of Equity Per Common Share

 

Book Value of Equity Per Common Share  = Book Value of Equity for Common Stock / Number of Common Shares

 

Dividend Yield

 

		Annual Dividends Per Common Share
	Dividend Yield =	————————————————
		Market Price of Common Stock Per Share

 

Book Value of Equity Per Common Share  = Book Value of Equity for Common Stock / Number of Common Shares

 

Dividend Payout Ratio

 

		Cash Dividends
	Dividend Payout Ratio =	——————–
		Net Income

 

 

ROA = Profit Margin X Assets Turnover Ratio

ROA = Profit Margin X Assets Turnover Ratio

 

		Net Income	Net Income	Sales
	ROA =	————————  =	————–  X	————————
		Average Total Assets	Sales	Average Total Assets

 

Profit Margin = Net Income / Sales  Assets Turnover Ratio = Sales / Averages Total Assets

 

Financial statement analysis includes financial ratios. Here are three financial ratios that are based solely on current asset and current liability amounts appearing on a company’s balance sheet:

Financial Ratio		How to Calculate It	What It Tells You
Working Capital	= = =	Current Assets – Current Liabilities $89,000 – $61,000 $28,000	An indicator of whether the company will be able to meet its current obligations (pay its bills, meet its payroll, make a loan payment, etc.) If a company has current assets exactly equal to current liabilities, it has no working capital. The greater the amount of working capital the more likely it will be able to make its payments on time.
Current Ratio	= = =	Current Assets ÷ Current Liabilities $89,000 ÷ $61,000 1.46	This tells you the relationship of current assets to current liabilities. A ratio of 3:1 is better than 2:1. A 1:1 ratio means there is no working capital.
Quick Ratio (Acid Test Ratio)	= = = =	[(Cash + Temp. Investments + Accounts Receivable) ÷ Current Liabilities] : 1 [($2,100 + $100 + $10,000 + $40,500) ÷ $61,000] : 1 [$52,700 ÷ $61,000] : 1 0.86 : 1	This ratio is similar to the current ratio except that Inventory, Supplies, and Prepaid Expenses are excluded. This indicates the relationship between the amount of assets that can quickly be turned into cash versus the amount of current liabilities.

 

Four financial ratios relate balance sheet amounts for Accounts Receivable and Inventory to income statement amounts. To illustrate these financial ratios we will use the following income statement information:

Example Corporation Income Statement For the year ended December 31, 2009   Sales (all on credit) $500,000 Cost of Goods Sold   380,000   Gross Profit   120,000   Operating Expenses     Selling Expenses 35,000   Administrative Expenses    45,000     Total Operating Expenses    80,000   Operating Income 40,000   Interest Expense    12,000   Income before Taxes 28,000   Income Tax Expense     5,000   Net Income after Taxes $ 23,000

 

Financial Ratio		How to Calculate It	What It Tells You
Accounts Receivable Turnover	= = =	Net Credit Sales for the Year ÷ Average Accounts Receivable for the Year $500,000 ÷ $42,000 (a computed average) 11.90	The number of times per year that the accounts receivables turn over. Keep in mind that the result is an average, since credit sales and accounts receivable are likely to fluctuate during the year. It is important to use the average balance of accounts receivable during the year.
Days’ Sales in Accounts Receivable	= = =	365 days in Year ÷ Accounts Receivable Turnover in Year 365 days ÷ 11.90 30.67 days	The average number of days that it took to collect the average amount of accounts receivable during the year. This statistic is only as good as the Accounts Receivable Turnover figure.
Inventory Turnover	= = =	Cost of Goods Sold for the Year ÷ Average Inventory for the Year $380,000 ÷ $30,000 (a computed average) 12.67	The number of times per year that Inventory turns over. Keep in mind that the result is an average, since sales and inventory levels are likely to fluctuate during the year. Since inventory is at cost (not sales value), it is important to use the Cost of Goods Sold. Also be sure to use the average balance of inventory during the year.
Days’ Sales in Inventory	= = =	365 days in Year ÷ Inventory Turnover in Year 365 days ÷ 12.67 28.81	The average number of days that it took to sell the average inventory during the year. This statistic is only as good as the Inventory Turnover figure.

 

The next financial ratio involves the relationship between two amounts from the balance sheet: total liabilities and total stockholders’ equity:

Financial Ratio		How to Calculate It	What It Tells You
Debt to Equity	= = =	(Total liabilities ÷ Total Stockholders’ Equity) : 1 ( $481,000 ÷ $289,000) : 1 1.66 : 1	The proportion of a company’s assets supplied by the company’s creditors versus the amount supplied the owner or stockholders. In this example the creditors have supplied $1.66 for each $1.00 supplied by the stockholders.

CASH FLOW STATEMENT

HIGH ORDER THINKING SKILLS QUESTIONS

 

CASH FLOW STATEMENT

1.         Arvind, an industrialist purchased a machinery worth Rs.5 crores on hire purchase basis.  Categories the (i) payment of installment and (ii) interest into operating/investing or financing activity as per cash flow statement.

Ans.:   (i) The purchase of machinery is categorized as on investing activity and

            (ii) Interest payable on installments is a financing activity.

2.         Give two examples of movements of cash and cash equivalents, which are not recorded in the Cash Flow Statement.

Ans.:   Certain transactions as per Accounting Standards – 3 (revised) though involve movement of cash or cash equivalent are not recorded in cash flow statement as they just involve cash management of cash of an enterprise.

            Examples (any two) of such transactions are –

(a)                Cash deposited into bank out of cash in hand.

(b)               Cash withdrawn from bank from business purposes.

(c)                Sale/purchase of cash equivalents, like marketable securities.

3.         Give one example each of an extra ordinary item under operating, investing and financing activity.

            Examples of extraordinary items under:-

(a)    Operating activity – claim received from insurance company against loss of stock.

(b)   Investing activity – amount of compensation received against acquisition of land belonging to the enterprise.

(c)    Financing activity – payment for buy-back of equity shares of the company.

4.         M/s.Lakshmi Electrical Appliances furnish the following information -

            Calculate net cash flow from financing activities:-

Particulars	31.12.2007	31.12.2008
Equity share capital	2,00,000	4,50,000
10% debentures	1,00,000	-
6% preference shares	-	3,00,000

 

Additional information –

(a)                Interest paid on debentures Rs.5,000/-.

(b)               Dividend paid on equity shares Rs.40,000/-.

(c)                Bonus shares were issued to existing shareholders in the ratio of 4:1 during the year.

Ans.:   CALCULATION OF NET CASH FLOW FROM FINANCING ACTIVITIES

Particulars	Rs.
Cash proceeds from issue of	3,00,000
Pref. Shares + equity shares	2,50,000
Redemption of 10% debentures	(1,00,000)
Interest paid	(5,000)
Dividend paid on equity shares	(40,000)
Net cash flow from financing activity	4,05,000

 

Bonus share is not shown in cash flow statement, as there is no cash flow.

5.         P.Ltd. purchased a business premises for Rs.6,60,000 from Z.Ltd.   Half the payment was made in cash and the remaining half by issue of equity shares of Rs.100 each at a premium of 10% in favour of Z.Ltd.  How will this transaction be shown in the cash flow statement.

            Cash payment of Rs.6,60,000 X ½ = Rs.3,30,000 will be shown under investing activities as an outflow.

            Issue of equity shares is not depicted in cash flow statement as there is no flow of cash.

6.         The Board of Directors of M/s.Elite Industries require your advice regarding categorization of payment of various taxes in a cash flow statement – advice him based on information given below:-

(i)                 Income tax on capital gains which have arisen out of sale of land – Rs.40,00,000.

(ii)               Income tax      – 70,00,000.

(iii)             Dividend tax   – 10,00,000.

(a)                Income tax on capital gains – investing activities.

(b)               Income tax – operating activity

(c)                Dividend tax – financing activity.

7.         From the following information, calculate cash flow from investing and financing activities:-

Particulars	Opening	Closing
Furniture (cost)	2,00,000	2,80,000
Accumulated depreciation on furniture	60,000	90,000
Capital	10,00,000	4,00,000
Loan from bank	2,50,000	1,50,000

 

            During the year, furniture costing Rs.40,000 was sold at a profit of Rs.30,000.  Depreciation charged on furniture amounted to Rs.50,000.

Cash Flow from investing activities -

Particulars	Rs.
Inflow from fresh issue of capital	4,00,000
Outflow from repayment of bank loan	(50,000)
Net cash flow financing activities	3,50,000

 

Cash Flow from investing activities -

Particulars	Rs.
Inflow from sale of furniture	50,000
Outflow from purchased of furniture	(1,20,000)
Net cash flow from investing activities (outflow)	(70,000)

 

Furniture Account

To balance b/d	2,00,000	By Bank	50,000
To profit on sale	30,000	By Accum. Dept.	20,000
To Bank (balancing figure being furniture purchased	1,20,000	By balanace c/d.	2,80,000
	3,50,000		3,50,000

 

Accumulated Depreciation

To Furniture A/c. (Balancing figure being accumulated dep. on furniture sold)	20,000	By balanace b/d.	60,000
To balance c/d.	90,000	By depreciation	50,000
	1,10,000		1,10,000

 

            Sale price =     cost – accumulated dep. + Profit on sale

                                    40,000 – 20,000 + 30,000 = 50,000

8.         A company had the following balance -

Particulars	Rs.
Investment at the beginning of the period	3,40,000
Investment at the end of the period	2,80,000

           

During the year, the company sold 40% of investments at the beginning at a profit of 84,000.  Calculate cash fro, investing activities –

Particulars	Rs.
Inflow from sale of investment Cost of investment Gold (40% of Rs.340000)     =  136000 Add profit on sale         =    84000	2,20,000
Out flow on purchase of investment	(76,000)
Net cash flow from investing activities	1,44,000

 

Investment A/c.

To balance b/d.	3,40,000	By Cash sale of investment	2,20,000
To profit on sale	84,000
To bank a/c. (purchase)	76,000	By balance c/d.	2,80,000
	5,00,000		5,00,000

 

9.         Apoorv Ltd. incurred as loss of Rs.7000 during the year 2008-09.

The following is the position of current assets and current liabilities of the firm:-

Particulars	2008	2009
Pre-paid insurance	5,000	8,000
Commission received in advance	2,000	3,000
Stock	10,000	15,000
B/P	15,000	18,000

 

(a)                Calculate cash flow from operating activities.

(b)               Prepare cash flow statement from following information.

Opening cash balance Rs.15,000, closing cash balance Rs.19,000.  Increase in creditors Rs.13,000, decrease in debtors Rs.17,000.  Fixed assets purchased Rs.30,000.  Redemption of 12% debentures Rs.14,000.  Profit during the year 18,000.

10.       M/s.Sukriti traders suffered loss of their buildings to the tune of Rs.50 lacs due to an earthquake.  However, only Rs.25,00,000 was received as insurance claim.  How will you depict it in a cash flow statement.

FINANCIAL STATEMENTS AND RATIO ANALYSIS

Analysis of finical statement

 

VERY SHORT ANSWER AND SHORT ANSWER QUESTIONS

Q.1      Under What heads will you classify the followings:

1)                  Proposed Dividends

2)                  Interest Accrued and due on secured loans

3)                  Interest Accrued and due on unsecured Loans

4)                  Provision for Taxation

5)                  Arrears of fixed accumulative dividends

6)                  Security  premium Account

7)                  Share Forfeiture account. 

(Answer any four) – 2 Marks

Q.2      Under What headings will you show the following items in the Balance sheet of a company

1)                  Securities Premium account

2)                  Preliminary Expenses

3)                  Bills Receivable

4)                  Goodwill

5)                  Authorised share Capital

(Answer any four) – 2 Marks

Q.3      Prepare a Comparative Income statement with the help of the following information

Particulars	2005	2006
Sales	2000000	3000000
Gross Profit	40%	30%
Indirect Expenses	50%	40%
Income Tax	50%	50%

                                                                                                                        4 Marks

Q.4      Explain three purposes or objectives of Financial Analysis.               2 Marks.

Q.5      Mention three limitations of financial statement Analysis.                2 Marks

Q.6      From the following Balance Sheets U.K Ltd. on 31^st Dec 2006 & 2007.Prepare comparative Balance Sheet.

Balance Sheet

As on 31^st Dec 2006 & 2007

Liabilities	2006	2007	Assets	2006	2007
Current Liabilities	200000	400000	Current Assets	500000	900000
Reserves	300000	200000	Fixed Assets	1000000	1500000
12% Loan	500000	800000
Share Capital	500000	1000000
	1500000	2400000		1500000	2400000

                                        

 Long Answer Questions                              4 Marks

Q.7      (a)        The ratio of current Assets (Rs. 600000) to current Liabilities ( Rs.   400000) is 1.5:1.The Accountant of the firm is interested in maintaining a current Ratio be 2:1 by paying off a part of Liabilities. Calculate the amount of Current Liabilities that should be paid.

            (b)        The Current Assets to Current Liability of a firm is Rs. 800000 to Rs. 300000. The Accountant of the firm wishes that current Ratio be 2:1 by acquiring current assets on credit. Calculate the amount of current Assets.

(3+3) = 6 Marks

Q.8      (a)        A business has current Ratio of 4:1 & a Quick Ratio of 1.2:1 . If working capital is Rs. 180000. Calculate total current Assets and Stock

            (b)        Calculate current Ratio and Quick Ratio from the followings:

            Working capital Rs. 150000, Total Debts Rs.400000, Long term debts Rs. 310000, Stock Rs. 110000, Prepaid Expenses Rs. 10000

Q.9      (a)        Calculate current Ratio and Quick Ratio from the following information:

                        Total Assets                Rs. 350000

                        Fixed Assets               Rs. 175000

                        Investment                  Rs.   70000

                        Fictitious Assets          Rs.     5000

                        Share holders fund      Rs.  200000

                        Long term Debts         Rs. 100000

                        Inventory                    Rs.   45000

(b)               From the following information calculate the stock turnover ratio.

Sales Rs. 200000, G.P 25% on cost, Opening Stock was 1/3^rd of the value of closing stock

Closing stock was 30% of sales

                                                                        (3 + 3)=6 Marks

Q.10    (a)       Determine the amount of gross profit and sales from the followings:

                                    Debtors Turnover Ratio = 4 Times

                                    Loss of goods sold = Rs. 640000

                                    Gross Profit Ratio = 20%

Closing Debtors were Rs. 20000 more than at the beginning.

Cash sales being 33 1/3 % of credit sales.

                                                                                    (3 + 3)=6 Marks

Q.11    (a)        If Current Ratio is 2:1 state giving reason of the following transaction   would

(i)                 Improve  (ii) Reduce or (iii) Not change Current Ratio

(1)               Bills Receivable drawn

(2)               Bills Receivable Dishonoured

(3)               Bills Receivable endorsed to Creditors

(4)               Sales of Goods for cash at par

(5)               Sales of Goods for cash at Profit

(6)               Sales of Assets for Cash

(7)               Bills Payable given to creditors

(Answer any 4 Questions) 2 Marks

(b)        If the Liquid ratio is 1:1, find whether the following transactions would

(ii)               Improve  (ii) Reduce or (iii) Not change Liquid Ratio

1)                  Purchase of goods for cash

2)                  Purchase of goods on credit

3)                  Payment of Tax Provision

4)                  Sales of short term investment at par

5)                  Sales of Investment at profit

(Answer any 4 Questions) 2 Marks

Q.12    (a) Calculate and Closing stock from the following information:-

                        Total sales Rs 600000

                        Gross Profit 25% on Sales

                        Stock Turnover Ratio = 5 times

                        Closing stock is Rs. 12000 more than opening stock

(b)  Gross Profit Ratio of a company was 25%. Its cash sales were Rs. 200000 and its credit Sales was 90% of the total sales. If the indirect expenses of the Company were Rs. 20000. Calculate net Profit ratio.

                                                                                    (3 + 3)=6 Marks

Q.13    With the help of the following information. Prepare Comparative Income Statement of XYZ Ltd.

                                                                        2007                            2008

            Sales                                                    50000                          80000

            Cash of Goods Sold                           60% of Sales               70% of Sales

            Indirect Expenses                               10% of Gross profit   

            Rate of Income Tax                            50% of Net profit before tax

                                                                                                                        4 Marks

Q.14    (a) Calculate Return on Investment from the following

Gross Profit Rs.100000, Office Expenses Rs. 10000, Selling and Distribution expenses Rs. 25000, Interest on Bank Loan Rs. 8000, Income tax Rs. 12000, Fixed Assets Rs. 300000, Current Assets Rs. 150000 & Current Liabilities Rs. 125000

            (b)        Calculate the earning per share from the following data

                        15000 Equity Share of Rs. 10 each                150000

                        10 % Preference Share Capital                       100000

                        Net Profit before Tax                                      55000

Q.15    The Debt-equity ratio of a company is 1:2, state giving reasons which of the following would improve, reduce or no change the ratio:-

1)                  Debenture redeemed for cash

2)                  Issue new equity shares

3)                  Payment of Proposed dividends

4)                  Goods Purchased on Credit

5)                  Goods Purchased on Cash

6)                  Redemption of Debentures against the Purchase of a Fixed Assets                                     

                                                            (Answer any four ) – 2 Marks

CBSE HOTS SOLUTION

Ans 1

1)                  Provisions :- Proposed Dividend

2)                  Secured Loans : – Interest Accrued and due on Secured Loans

3)                  Unsecured Loans:- Interest Accrued and due on unsecured Loans

4)                  Provision : Provision for Taxation

5)                  Contingent Liabilities :- Arrears of Fixed Cumulative dividend

6)                  Reserves & Surplus :- Security Premium Account

7)                  Share Capital Account: – Share forfeiture Account.

Ans 2

1)                  Securities Premium Account :- Under Reserves & Surplus, Liabilities side

2)                  Preliminary Expenses :- Under Miscellaneous Expenditures, Assets side

3)                  Bills Receivables :- Under Loans & Advance on assets side.

4)                  Goodwill :- Under Fixed Assets, Assets side

5)                  Authorised Capital :- Under Share Capital, Liabilities side

Ans 3                          

Comparative Income Statement

For the year ended 31^st Dec, 2006

Particulars	Absolute Change		Change in Percentage
	2005            2006		Rs.                      % Changes
Sales Less: Cost of Goods sold	2000000 1200000	3000000 2100000	1000000 900000	50% 75%
Gross Profit Less : Indirect Exp.	800000 400000	900000 360000	100000 (40000)	12.5% 10%
Profit before tax Less: Tax 50%	400000 200000	540000 270000	140000 70000	35% 35%
Net Profit after tax	200000	270000	70000	35%

 

Ans.4               Following are the purposes of Financial Analysis:

1)      Judging earning capacity of business

2)      Judging managerial efficiency of business

3)      Judging short term long term Solvency

Ans 5   Following are the Limitation of Financial statement Analysis

1)                    Historical Analysis

2)                    Ignore price level changes

3)                    Quantities aspect ignored

Ans.6                           Comparative Balance Sheet

For the year ended 31^st Dec, 2006 & 2007

Particulars	2006	2007	Increase or Decreases	% Increase or Decrease
Fixed Assets Working Capital (C.A-C.L)	1000000 300000	1500000 500000	500000 200000	50% 66.7%
Capital Employed Less 12% Loan	1300000 500000	2000000 800000	700000 300000	53.8% 60%
Shareholders fund	800000	1200000	400000	50%
Represented by share capital Reserves	500000 300000	1000000 200000	500000 (-) 100000	100% -33.3%
	800000	1200000	400000	50%

 

Ans 7   A)

a)      Let Current Liabilities = X

b)       

Current Ratio after making payment of x is 2:1

Current Ratio = Current Assets / Current Liabilities

  2  = 6000000-x

  1       400000 – x

Rs. 800000-2 x= Rs600000 – x

Rs. 800000-600000=2x-x

Rs. 200000=x

Current Liabilities paid off Rs. 200000

            B)        Let amount of Current Assets Purchased on credit is = x

                                    Current Ratio = Current Assets

                                                            Current Liabilities

                                    2                      =          800000+x

                                    1                                  300000 + x

                        Rs. 600000 + 2x = Rs 800000 + x

                        2x-x=800000-600000

                        X= 200000

                        Current Assets be purchased Rs. 200000

Ans. 8     A)     Current Ratio = Current Assets          =          4

                                                   Current Liabilities                1

                                    Let C.L = x

                                    C.A= 4x

                                    Working Capital = C.A- C.L

                                    180000= 4x-x

                                    180000=3x

                                    X= 180000      =          60000

                                                3

Current Assets = 4x = 4 * 60000 = Rs. 240000

                        Quick Ratio = Q.A                 =          1.2

                                                C.L                              1

                                    Since Current Liabilities are = X

                                    Liquid Assets = 1.2x

Liquid Assets = 1.2* 60000= Rs. 72000

                                    Stock = C.A – Q.A

=240000-72000 = Rs. 168000

B)     C.R =     C.A

                                        C.L

                        C.L = Total Debts – Long term debts

                        =          400000-310000= Rs. 90000

                        Working Capital = C.A – C.L

                        Rs. 150000 = C.A – 900000

                        C.A = 150000+ 90000

                        C.A = 240000

                        C.R = 240000             = 2.66:1

                                    90000

                        Q.R = Q.A

                                    C.L

                        Q.A= C.A – (Stock + Prepaid Expenses)

                        =          240000 – ( 110000 + 10000)

                        =          120000

                        Q.R = 120000             = 1.30:1

                                    900000

Ans.9 A)     Total Assets  =  Fixed Assets + Investment + Current    Assets +    Fictitious Assets

                                    350000 = 175000+70000+Current Assets +5000

                                    Current Assets = 350000-250000

                                    Current Assets = 100000

                                    Liquid Assets = Current Assets – Inventory

                                    = 100000 – 45000 = 55000

                                    Total Assets = Total Liabilities

                                    Total Assets = Shareholders Fund + Long Term Debts +Current Liabilities

                                    350000 = 200000+100000+Current Liabilities

                                    Current Liabilities = 350000- 300000

                                    Current Liabilities = 50000

                                    Current Ratio = Current Assets

                                                            Current Liabilities

                                                =          100000            = 2:1

                                                            50000

                        Quick Ratio = Quick Assets                                                               Current Liabilities

                        =          55000            = 1.1:1

                                    50000

B)     Stock Turnover Ratio = Cost of Sale

                                                Average Stock

            Sales = 200000

            G.P = 25% on Cost

            Let Cost of Sale = Rs. 100

            G.P =   25

            Sales    125

            G.P = 200000 * 25              = 40000

                           125  

            Cost of Sales= Sales – G.P

                                    = 200000-40000

                                    = 160000

            Closing Stock = 30 % of Sale

                        = 200000 * 30/100 = 60000

            Opening Stock = 1/3 of Closing Stock

                                    = 1/3 * 60000

                                    = 20000

Average Stock = Opening Stock + Closing Stock

                                                              2

            = 20000 + 60000/ 2

            = 80000/2 = 40000

Stock Turnover Ratio = 160000         = 4 Times

                                                   40000

Ans 10 A)       Inventory Turnover Ratio = Cost of Sales

                                                       Average Stock

                                    6/1 = Cost of Sales

                                                60000

                        Cost of Sales = 60000 * 6 = 360000

            Case 1)

                                    Let Cost of Sale = 100

                                    G.P = 25 % above Cost

                                    Sales = 125

                                    If Cost of Sale 100 Sale = 125

                                    If Cost of Sale 1 Sale = 125/100

                                    If Cost of Sale 360000 = 125/100 * 360000

                                                = 450000

                                    Gross Profit = 450000 – 360000

                                    = 90000

            Case 2)

                                    Let Sales= 100

                                    G.P = -25/75

                                    If Cost of Sale 75 Sales = 100

                                    If Cost of Sale 1 Sale = 100/75

                                    If Cost of Sales 360000 Sales = 100/75 * 360000

                                                =       480000

                        Gross Profit = 480000 – 360000 = 120000

B)     1)         Sales = Cost of Goods Sold – Gross Profit

                        Let Sales = 100

                        G.P = -20

                        Cost of Goods Sold = 80

                        If Cost of Good Sold 80 G.P = 20

                        If Cost of Goods Sold 1 G.P = 20/80

                        If Cost of Goods Sold 640000 G.P = 20/80*640000

                        = 160000

                        Thus Sales = 640000-160000 = 800000

2)                  Let Credit Sale = 100

Cash Sale = 33 1/3 = 100/3

Total Sale = 100 + 100/3 = 400/3

If Sales 400/3 Credit Sales = 100

If Sales 1 Credit Sales = 100* 3/400 = ¾

If Sale 800000 Credit Sales = ¾ * 80000 = 600000

Debtors Turnover Ratio = Net Credit Sales

                                         Average Debtors

4/1=     600000

                                    Average Debtors

                        Average Debtors = 600000*1             =150000

                                                             4

                        150000 = 2x+20000

                                                2

                        2x = 300000-20000

                        X = 280000     = 140000

                                    2

                        Hence Opening Debtors = 140000

                                    Closing Debtors = 140000 + 20000

                                                        = 160000

Ans 11             A)                                            B)

1)      Not Change                       1)         Reduce

2)      Not Change                       2)         Reduce

3)      Improve                             3)         Improve

4)      Not Change                       4)         Not Change

5)      Improve                             5)         Improve

6)      Improve

7)      Not Change

   Ans. 12 A)               Sales = 600000

                                                G.P = 600000*25/100 = 150000

                                                Cost of Goods Sold = Sales – G.P

                                                = 600000-150000 = 450000

                                    Stock Turnover Ratio = Cost of Goods Sold

                                    Average Stock

 5/1 =            450000

            Average Stock

Average Stock = 450000/5 = 90000

Opening Stock = Average Stock – ½ of Rs. 12000

= 90000-6000= 840000

Closing Stock = Average Stock + ½ of Rs 12000

= 90000 + 6000 = 960000

            B)        Net Profit Ratio =        Net Profit                  * 100

                                                                Sales

                                    Let Total Sales = 100

                                    Credit Sales = 90 %

                                    Cash Sales 10 % or 200000

                                    Total Sales = 100/10* 200000

                                    = 20000

                                    G.P = 20000*25/100

                                    = 500000

                                    Net Profit = G.P – Indirect Expenses

                                    = 500000 – 20000 = 480000  

                                    Net Profit Ratio = 480000      *  100

                                                                 2000000

                                    = 24 %

Ans 13                         Comparative Income Statement of XYZ Ltd.

                                    For the year ended 31^st, Dec 1997 & 1998

Particulars	1997	1998	Absolute Change	Percentage Change
A Sales	50000	80000	30000	60%
B Less Cost of Goods Sold	30000	56000	26000	86.67%
C Gross Profit (A-B)	20000	24000	4000	20%
D Less Indirect Expenses	2000	2400	400	20%
E Profit Before Tax (C-D)	18000	21600	3600	20%
F Less Income Tax	9000	10800	1800	20%
	9000	10800	1800	20%

 

Ans. 14 A)

                        Return on Investment = Profit before Interest & Tax               * 100

                                                                 Capital Employed

                        Profit before Interest & Tax = 100000-10000-25000= 65000

                        Capital Employed = 300000+150000-125000= 325000

                        ROI = 65000               * 100

                                    325000

                                    = 20%

            B)        E.P.S =  Net Profit – Preferential Dividend

                                                No. of Equity Shares

                        55000 – 10000

                        15000

                          45000            = 3 per Share

                          15000

Ans 15

1)                  Reduce

2)                  Increase

3)                  Decrease

4)                  Increase

5)                  Not Change

6)                  Increase

7)                  Increase

ISSUE OF SHARES HOTS – SOLUTION

Solutions To Questions

ISSUE OF SHARES

1. Employees stock option plan as introduced by companies (Amendment) Act, 2000 means an option (right and not an obligation). Given to the whole time directors and employees right to purchase shares of a company at a pre-determined price, which usually is lower than the market price.

 

1. Issued capital is that part of Authorised capital which is actually offered to the public for subscription. Issued Capital may or may not be different from Authorised Capital depending upon whether the whole amount is offered to the public or not.

 

1. 3.      Reserve capital

Only at the time of winding up of the Company.

Capital Reserve

To write off capital losses any time during the life of the Company

1. Private placement of shares means raising capital through private sources and contacts. In such a case shares are issued to promoters, their friends and relatives, share holders of group companies, mutual funds, NRI’s, Financial Institutions etc.

 

Options:

a)      Sweat Equity Shares

b)      Employees Stock Option Plan

1. At the rate of 5% p.a.

 

1. 6.      JOURNAL

 

	Rs.	Rs.
Share Capital A/C       Dr To Share Discount   A/C To Share Allotment  A/C To Share Forfeiture   A/C (Being forfeiture of 10 shares, Rs. 6 called up) Bank A/C                  Dr To Share premium A/C To Share Premium A/C (Being reissue of 8 shares @ Rs. 9 each, Rs. 8 called up) Share Forfeiture A/C Dr To Capital Reserve (Being reissue of 8 shares)	60 72 24	10 20 30 64 8 24

 

1. 7.      Journal

 

Sundry Assets A/C                         Dr        To Bhwnesh Ind. Corp. (Being Assets purchased)	41,80,000	41,80,000
a) Bhwnesh Ind. Corp A/C          Dr To Equity Share Capital              A/C (Being issue of 41,800 shares of Rs. 100 each) b) Bhwnesh Ind. Corp. A/C        Dr To Equity Share Capital A/C To share Premium A/C (Being issue of shares of Rs. 100 each at a premium of 10%) c) Bhwnesh Ind. Corp.       A/C      Dr Discount on issue of shares   A/C  Dr To Equity share capital (Being issue of 44,000 shares of Rs. 100 each at a discount of 5%)	41,80,000 41,80,000 41,80,000 2,20,000	41,80,000 38,00,000 3,80,000 44,00,000

 

1. Journal

 

Authorised Capital (1,00,000 shares of Rs. 10 each) Issued Capital (90,000 shares of Rs. 10 each) Subscribed Capital: (85,000 shares of Rs. 10 each) called-up capital: (85,000 shares, Rs. 6 per share) Paid-up capital: Share Capital:5,10,000 Less: Calls-in-arrears 1,000 5,09,000

Rs. 10,00,000 9,00,000 8,50,000 5,10,000

 

1. Journal

 

(i) Assets A/C          Dr To Kailash (Being Assets purchased) (ii) Kailash A/C        Dr To share Capital       A/C To Share Premium   A/C To Cash (Being payment by issue of 15,000 shares of Rs. 10 each at a premium of 10% and balance in cash) (iii)Bank A/C      Dr. To share Application A/C (Being issue of 20,000 shares of Rs. 10 each at per) (iv)Share Application A/C      Dr To Share Capital A/C (Being transfer of applications money to share capital) (v) Incorporation Cost A/C  Dr Discount  A/C  Dr To Equity Share Capital A/C (Being issue of 400 shares of Rs. 10 each at a discount of 5% to promoters.

Rs. 2,00,000 2,00,000 2,00,000 2,00,000 3,800 200

RS. 2,00,000 1,50,000 15,000 35,000 2,00,000 2,00,000 4,000

 

10.  CASH BOOK

Dr	Date	Particulars	Amount	Date	Particulars	Cr Amount Rs.
		To Share Application A/C To Share Allotment A/C To Share First Call A/C To Share Final Call A/C	64,000 31,000 29,000 24,000 1,48,000		By Balance c/d	1,48,000 1,48,000

 

JOURNAL

	Rs	Rs
Building A/C                               Dr To Vendors A/C (Being building purchased) Endor’s A/C                                Dr To share capital          A/C (Being payment made by issue of 8000 shares of Rs. 20 each) Share Application A/C Dr. To Share Capital A/C (Being the transfer of application money to share capital) Share Allotment A/C     Dr To share Capital  A/C (Being Rs. 2 due on allotment in respect of 16,000 shares) Calls-in-Arrears A/c    Dr To share Allotment  A/C (Being arrears on Allotment received) Share First  call A/c    Dr To share capital A/C (Being amount due on First Call-16000 shares @ Rs. 2 each) Calls-in-arrears A/C    Dr To share First Call    A/C (Being arrears on First call amount received) Share Final call A/C    Dr To share capital A/C (Being amount due on Final Call) Calls in Arrears A/C Dr To share Final call A/C (Being arrears on Final call amount received) Share capital A/C   Dr To share Allotment  A/C To share First call A/C To share Final call A/C To share Forfeiture A/C (Being the forfeiture of 1500 shares on which less than Rs. 8 per share has been received.)	1,60,000 1,60,000 64,000 32,000 1000 32,000 3,000 32,000 8,000 15,000	1,60,000 1,60,000 64,000 32,000 1000 32,000 3,000 32,000 8,000 1,000 3,000 3,000 8,000

 

11.

X ltd.

Journal

Bank A/C                                              Dr To share Application A/C (Being Application money received on 3000 share @ Rs. 2 each) Share Application A/C   Dr         To share Capital  A/C         To share Allotment A/C         To Bank A/C (Being the transfer of application money on allotment) Share allotment A/C   Dr        To share Capital A/C        To share Premium A/C (Being Allotment amount due) Bank A/C Calls-in-arrears A/C       To share allotment (Being amount received) Share First Call A/C  Dr       To share Capital A/C (being amount due on First call)       Bank A/C  Dr Calls-in-arrears A/C       To share First call A/C (Being amount received on First call of Rs. 3) Share Final call A/C  Dr        To share capital A/c (Being amount due on Final call) Bank A/C                          Dr Calls-in-arrears A/C           Dr       To share Final Call A/C (Being amount received on final call @ Rs. 2) Working Notes: Applies for 3000 shares Alloted to 2400 applicants         2400:2,000 Pro-vata         6:5 Ramesh:- Allotted 40 share. Therefore, Applied 40/5*6=48 shares. Application money     =48*2=Rs 96 Less: To share capital =40*2=Rs 80 Surplus                                   = 16 Allotment due=40*5=200 Therefore arrears on allotment=Rs 184 Arrars on 1st call 40+60=100*3=Rs. 300 Arrears on inal call 40+60=100*2=Rs 200

6,000 6,000 10,000 9,016 184 6,000 5,700 300 4,000 3,800 200

6000 4,000 800 1,200 6,000 4,000 9,200 6,000 6,000 4,000 4,000

 

12                JOURNAL

a) Share Capital  A/C  Dr          To share application & allotment a/C          To share forfeited A/c (Being 200 shares forfeited) Bank A/c                   Dr Share Forfeited A/C    Dr         To share capital A/C (Being reissue of 50 shares) Share Foreited  A/c   Dr To capital Reserve (Being gain on reissue of 50 shares) b) Share Capital A/C Dr      To share First call A/C      To share Forfeiture A/C (Being forfeiture of 300 shares of Rs. 10 each (Rs. 8 called up) Bank A/C      Dr      To share capital  A/C (being reissue  of 75 shares @ Rs. 8 each) Share forfeiture A/C Dr      To capital Reserve (Being gain on reissue of 75 shares) c)      Share Capital A/C Dr 20,000        To share Final call A/C        To share forfeiture A/C (Being forfeiture of 2000 shares of Rs. 10 each) Bank A/C  Dr Share Foreiture A/C Dr     To share  capital A/C (Being reissue of 1800 shares @ Rs. 6 each) Share Forfeiture A/C   Dr To Capital Reserve (Being gain on reissue) d) Share Capital A/C   Dr To share first cal  A/C To share final call A/C To share forfeiture A/C ( Being 100 shares forfeited for non payment of first call Rs. 30 and final call of Rs. 20) Bank A/C   Dr Share forfeiture A/C  Dr To share capital A/C (Being reissue of 40 shares @ Rs. 90 each) Share forfeiture A/C  Dr To capital Reserve (Being gain on reissue) e) Share Capital A/C    Dr To Discount  A/C To share allotment A/C To share forfeiture A/C (Being forfeiture of 10 shares on which Rs. 2 are paid Rs 6 called-up) Bank A/C              Dr To share capital A/C To share premium A/C (Being 8 shares reissued @ Rs. 9 each) Share forfeiture A/C  Dr To capital Reserve (Being gain on reissue)

1600 400 100 150 2400 600 375 20,000 10800 7,200 6,300 10,000 3600 400 1600 60 72 16

600 1000 500 150 900 600 375 5,000 15,000 18,000 6,300 3,000 2,000 5,000 4,000 1600 10 30 20 64 8 16

 

13.                                                       Shashi Ltd.

Journal

Bank A/C              Dr      To share Application A/C (Being application money received on 1,25,000 shares @ Rs. 4.50 each) Share application A/C    Dr       To share capital     A/C       To share allotment A/C       To Bank A/c (Being transfer of application money on allotment) Share allotment A/c Dr. 7,50,00     To share capital A/C     To share premium A/C (Being allotment amount Rs 750 On 1,00,000 shares due) Bank a/c Calls-in-arrears A/C    To share Allotment A/C (Being amount received on allotment) Share First call A/C   Dr    To share Capital  A/C (Being Rs. 2 on 1,00,000 shares due) Bank A/C  Dr Calls in arrears A/C  Dr   To share First Call A/C (Being amount receive) Share Capital A/C  Dr Share Premium   A/C   To share allotment  A/C   To share first call A/C   To share forfeited A/c (Being 2000 shares forfeited on non payment) Share final call A/C Dr   To share capital A/C (Being final call @ rs. 1 due On 98,000 shares) Bank A/C  Dr Calls-in-arrears A/C Dr   To share final call A/c (Being amount received) Share capital A/C Dr   To share first call A/c   To share final call A/c To share forfeiture A/C (Being forfeiture of 3000 shares) Bank A/c  Dr Share forfeiture A/C  Dr   To share capital A/C (Being reissue of 5,000 shares @ Rs. 8 per share) Share forfeiture A/C  Dr   To capital reserve (Being gain on reissue of share transferred to capital reserve)

5,62,500 5,62,500 7,50,000 6,46,800 13,200 2,00,000 1,90,000 10,000 18,000 10,000 98,000 95,000 3,000 30,000 40,000 10,000 Dr 21,800

5,62,500 4,50,000 90,000 22,500 2,50,000 5,00,000 6,60,000 2,00,000 2,00,000 13,200 4,000 10,800 98,000 6,000 3,000 21,000 50,000 21,800

ISSUE AND REDEMPTION OF DEBENTURES

 

Issue and Redemption of debentures

Q1. Anirudh Ltd. Has 4000, 8% debentures of Rs. 100 each due for redemption on March 31,2005. The company has debenture redemption reserve of Rs. 1,50,000 on that date. Assuming that no interest is due, record the necessary Journal entries at the time of redemption of debentures.

Q2. The company allots 1,000 12% debentures of Rs. 100 each at issue prices of Rs. 96 per debenture redeemable at a premium of Rs. 8 per debenture. The liability of premium is also to be recorded at the time of issue of debentures.

Q3. What is meant by issue of debentures as “Purchase Consideration”.

Q4. Vijaya Ltd. Acquired assets of Rs. 40 lakhs and took over creditors of Rs. 4 lakhs from Sunil Enterprises. Vijaya Ltd. Issued 12% Debentures of Rs. 10% as purchase consideration. Record necessary Journal entries in the books of Vijaya Ltd.

Q 5. Blank Enterprises issued 30,000 12% debentures of Rs. 10 each at par to be redeemed out of profits after 5 years at par. Debentures are callable after 3 years at an exercise price of Rs. 11 per debenture. After 4 years the company invoked the call option and holders of the nominal value of Rs. 50,000 responded to the call option. Record the necessary Journal entries.

Q6. What is meant by issue of debentures as collateral Security?

Q7. On 1.1.2005, Fast computers Ltd. Issued 20,00,000 6% debentures of Rs. 100 each at a discount of 4% redeemable at a premium of 5% after three years. The amount was payable as follows:

On application Rs. 50 per debenture balance on allotment.

Record the necessary Journal entries for issue of debentures.

Q8. What do you mean by “Trust Deed” in context of debenture?

Q9. Promising Company Ltd. Took a loan of Rs.  10,00,00,000 from a bank giving Rs. 12,00,00,000 9% debentures as collateral security. Pass the necessary Journal entries regarding issue of debentures, if any, and show this loan in the Balance Sheet of the Company.

Q10. Pass the necessary Journal entries in the books of A B Ltd. for the following transactions:

(i)                 Issued 5,00,000 12% debentures of Rs. 100 each at a discount of 6% repayable at a premium of 6%.

(ii)               Converted 100, 12% debentures of s. 100 each into 9% preference shares of Rs. 100 each issued at a premium of 25%.

(iii)             Converted 100, 12% debentures of Rs. 100 each issued at a discount of Rs. 10 each.

Q11. Gopalan Ltd. purchased 5,000 of its own 8% debentures of Rs. 1000 each at Rs. 987 per debentures. It also purchased another lot of 600 debentures of the same services at Rs. 986. Record necessary Journal entries in the books of the company.

Q 12. Ganga Ltd. issued 18,00,000 9% debentures of Rs. 500 each. The board of directors decided to purchase 80,000 debentures at a price of Rs. 485 each for investment purpose. After few months, they decided to sell these debentures @ Rs. 510 each in the market.

Record the necessary entries to show the above transactions.

Q13.    A Company redeemed 1000, 15% debentures of Rs. 100 each by converting them to 12% preference shares of Rs. 100 each at 25% premium and 500, 15% debentures of Rs. 100 each by purchasing from market for immediate cancellation at Rs. 95 a debenture. Give Journal entries.

 14. Pass the necessary Journal entries for the following transactions in the book of P Ltd.

(i)                 Issued Rs. 2,00,000 12% debentures as collateral security.

(ii)               Converted 1000 12% debentures of Rs. 100 each into 10% preferences shares of Rs. 100 each. The preference shares were issued at a premium of 25%.

(iii)             Redeemed 1000 12% debentures of Rs. 100 each at a premium of 10% by draw of lots.

(iv)             Paid half yearly interest on Rs. 360,000 12% debentures.

 Q 15. Exe. Ltd. purchased assets of the book value of Rs. 4,00,000 and took over the liabilities of Rs. 50,000 from Mohan Bros. It was agreed that the purchase consideration, settled at Rs. 3,80,000, be paid by issuing debentures of Rs. 100 each.

What Journal entries will be made in the following three cases if debentures are issued.

(a)    at par

(b)   at a discount of 10%

(c)    at a premium of 10%?

It was agreed that any fraction of debentures be paid in cash.

Q16.    X Ltd. purchased assets of Y ltd. as under.

Plant and Machinery               Rs.       8,00,000

Land and Building                  Rs.       72,00,000

The purchase consideration was Rs. 80,00,000. Rs 20,00,000 were paid though cheque and the remaining amount by issue of 6% debentures of Rs. 100 each at a premium of 20%.         

Pass the necessary Journal entries in the books of X ltd.

Q 17.   On 1^st April, 2004 Mode Ltd. issued Rs. 4, 00,000   8% debentures of Rs. 100 each at a discount of 5% and redeemable at 10% premium after 4 years and offered the holders option to convert their holding into equity shares of Rs. 10 each after 31st March, 2006. On 1^st April, 2006, 25%n holders exercised their options. Give the necessary journal entries both at the time of issue and at the time of options. Give the necessary journal entries both at the time of conversion under the alternative cases.

Case: 1                        If equity shares of Rs 10 each are issued at par.

Case: 2                        If equity shares of Rs 10 each are a premium of Rs 2.50 per share.

Case: 3                        If equity shares of Rs 10 each are a discount of 95%.

DEBENTURES HOTS ANSWER

Debentures

Hot question solution

Q1   2005

1.)            March 31        p/e Appropriation A/C            Dr        50000

      To Deb. Red..                   Res     50000

(for D.R.R. created)

   2.)     March 31     8 % Debenture A/C                    Dr        400000

                                      To Debenture holder’s  A/C     400000

                                 (for Amount due to debenture holders)

   3.)     March 31     Debenture holder’s A/C      Dr        400000

                                       To Bank A/C                                     400000

                                    (for Amount paid to Debenture holders)

   4.)     March 31         Deb. Red. Reserve A/C          Dr        200000

                                        To General Reserve A/C     200000

                                 (for balance in D.R.R. tras to G.R.)

Q2 Sol.

            1.)        Bank A/C                    Dr                                96000

                                                To Debenture App. A/C         96000

                                       (for application money received)

            2.)        Debenture App. A/C   Dr                    96000

                      loss on issue of Deb. A/C         Dr                    12000

                                                To 12% Debenture      A/C     100000

                                            To pre. On red. A/C                    8000

                            (for App money tras to Deb. A/C and premium on red. provided)

Q3  Sol.

            Debenture can be issued to vendors against purchase of assets or for purchase of a business. This is called issue of debenture as purchase consideration or for consideration other than cash.

Q4 Sol.

1.)        Sundry Assets A/C     Dr                    4000000

                        To Sundry Liabilities  400000

                        To Sunil Enterprises A/C        3600000

                        (for Assets and liabilities acquired)

            2.)        Sunil Enterprises A/C Dr        3600000

                        Dis. On issue of Deb. A/C   Dr           400000

                        To 12% Debenture     A/C                  40000 

                       (for Debenture issued at 10% discount to Sunil Enterprises)

                        No. of Dib. = 3600000/(100-10)= 40000

Q5  Sol.

      1.)              Bank A/C                    Dr                    300000

                              To 12% Deb. App A/C                 300000

            (for app. Money rece. On deb. Issued at per)

      2.)              12% Debenture App. A/C      Dr.       300000

                              To 12% Debenture   A/C  300000

                        (for Deb. App money tras to debenture A/C)

      3.)              12 % Deb. A/C           Dr        50000

                        loss on Red.of Deb A/C         Dr        5000

                              To Bank A/C                     55000

                        (being redeemed under call option at Rs 11/-)

      4.)              p / e A/C Dr                5000

                            To loss on Red. Of Deb. A/C         5000

                         (Being loss on Redemption of debentures transferred to p/e A/C)

Qno.6

Sol       Issue of debenture as collateral security means, security provided to the lender

            Over and above the principal security. The debenture issued as collateral

            Security does not carry any right as long as the terms of the loan are not

            Contended.

 

Qno.7

Sol 1)  1.1.2005

            Bank A/c Dr                            10, 00, 00000

            To 6% DLB App. A/C            10, 00, 00000

            (Bring app. Money rec.)

2)      6% Debenture App. A/C Dr   10,00,00000

      To 6% Debenture A/C            10, 00, 00000

      (Bring app. Money tars. To 6% Deb. A/C)

3)      6% Debenture Allotment A/C Dr.      9, 20, 00000

      Loss on issued of DLB A/C Dr.         1, 80, 00000

                              To 6% DLB A/C         10, 00, 00000

                              To pre on red A/C       1, 00, 00000

      (Bring allo. Money due)

4)      Bank A/C Dr.                           9, 20, 00000

      To 6% DLB Allo. A/C            9, 20, 00000

      (Bring allo. Money recc.)

Qno.8

Sol       Debenture Trust dead is a document created by the company whereby trusts are appointed to protect the interest of debenture holders before they are offered for public subscription.

Qno.9

Sol      

1)      Bank A/C Dr.                          10,00,00,000

            To Bank loan A/C       10, 00, 00,000

(Bring loan taken from bank)

2)      Debenture suspense A/C Dr   12,00,00,000

                  To 9% DLB A/C         12, 00,00,000

      (Bring deb. Issued as collateral sec.)

      Sec. loan                     B/S                              MIS exp

      9% Deb. A/C              12, 00, 00, 000            DLB. Sus A/C 12,00,0000

      Bank loan                    10, 00, 00, 000            C.A(bank)       10,00,00,000

Q.sol. For issue of debenture

1). Bank A\c Dr       380000

     To 8% Deb.App. A/C  380000

    (being 4000 deb. Of Rs 100 each at a discount of a 5%

2). 8% deb.App.A/C Dr  380000

      loss on issue of Deb.A/C Dr 40000

      Discount on issue of to 8% Debenture A/C 400000

      To pre. On red .A/C 40000

      (being app. Money tras. To deb. A/C and pre. On redemption provided)

      for redemption

3). 8% Deb.A/C Dr.  400000

      to Dis. On issue of Seb A/C   380000

      (being amt due to debentureholders)

CASE I

      No. of shares  =380000\10 =38000

      Debentureholders A/C Dr    380000

      To equity share cap. A/C 380000

      (being 380000 eq. shares are issued at  par)

CASE 2

      No. of sh =380000/12.50 = 30400

      Debentureholders A/C Dr   380000

      To equity Sh. Cap.  30400

      To security Pre. A\C  76000

      (being  30400 eq.  sh. Issued at a premium)

    CASE 3

      No. of sh.  = 38000/9.50  =40000

      Debentureholder  A/C Dr   380000

      Dis. On issued of sh AC/Dr  20000

      To eq. sh.  Cap  A/C  400000

      (being 40000 sh @ 10/- issued at a discount of 5%)

Q14Sol-          Journal entries

(I)          Debenture suspense A/c Dr 200000

            To 12% Debenture A/C   200000

           ( being debenture issued as collateral security)

(II) (a)  12% debenture A/c Dr  100000

             To debentureholders  A/C    100000

             (being amt due to debentureholder)

       (b) Debetureholders A/c  Dr  100000

             To 10% pref. Sh. Cap A/c 80000

             To security premium A/c 20000

             ( being pref. shares issued at 25% premium )

          No. of shares = 100000/125=800shares

(III)(a) P/e App. A/C dr 50000

            To determine Red. Reserve A/C 50000

            (being profit transferred to create debenture redemption Reserve)

        (b) 12% debenture A/c Dr 100000

              Pre. on red A/c Dr        10000

              To debentureholders A/c 110000

             (being the amt. due on redemption )

        (c) Debentureholders A/c Dr 110000

              To bank A/c             110000

               (being the amt. due on red. Paid)

         (d)deb. Red. Reserve A/c dr 50000

               To General reserve A/c  50000

               (being DRR tras. To genral reserve )

 (IV)(a)Int. on debenture A/c Dr  21600

               To Debenture A/c 21600

               (being the   Int. on debenturemade due)

        (b)Debentureholders A/c Dr 21600

             To Bank A/c  21600

               (being the payment of debenture interest )

        (c)P/e A/c Dr     21600

               To Int. on Deb. A/c   21600

 (being Int on Deb. Tras. To P/e A/c)

Q15 Sol-

           1. Sundry Assets A/c Dr    400000

               Goodwill A/c Dr             30000

               To Sundry liabilities A/c   50000

               To Mohan Bros.                380000

            (for business purchased from Mohan Bros.)

         (a) Mohan Bros. Dr   380000

               To Debenture A/c 380000

     (being 3800 deb. Issued at par to Mohan Bros)

(b ) No. of debenture = 380000/90=4222

       Mohan Bros A/c Dr  380000

       Dis. On issue of Deb A/c  Dr   42220

       To Debenture A/c           42220

To Bank  A/c   20

(being 4222 deb. Issued at 10% dis. And balance is paid in cash to Mohan Bros)

(c) No. of debenture = 380000/110=3454

Mohan Bros A/c Dr     380000

To Debenture A/c 345400

To Security Premium A/c 34540

To Bank A/c              60

      (being 3454 debentures of Rs. 100 each issued at 10% premium and balance is paid in cash to Mohan Bros )

Q16 Sol-

      1. Plants and Mac. A/c Dr   800000

          Land and Building A/c Dr  7200000

          To Y Ltd.                   8000000

         (being assers parchased from Y Ltd.)

      2. Y Ltd. A/c Dr    2000000

          To Bank A/c      2000000

         (being amt. paid by cheque)

      3. No. of Deb. =  6000000/120 = 50000

          Y  Ltd A/c Dr   6000000

           To 6% debenture A/c 5000000

           To Security Pre. A/c   1000000

         (being 50000 deb. Of Rs. 100 each issued at a pre. of 20 /- to Y Ltd.)

SHARE CAPITAL

Issue of Shares

1. What is ESOP?

 

1. What is issued capital? How does it differ from Authorized capital?

 

1. Differentiate between Reserve capital and Capital Reserve on the basis of time when it can be used.

 

1. What do you mean by private placement of shares? What are the options for a company?

 

1. At what rate interest on Calls –in-Arrears can be charged by a company according to table A.

 

1. Amex Ltd. Forfeited 10 shares of Re. 10 each (Re. 6 called up) issued at a discount of 10 % to Mr. Y on which he has paid an application money of Re. 3 per share. Out of these, 8 shares were re-issued to Z as Re. 8 called up for Re. 9 per share. Journalize.

 

1. Rohit Ltd. Purchased assets worth Re. 41,80,000 from Bhuvnesh Industrial Corporation and issued equity shares of Re. 100 each, fully paid , in satisfaction of the purchase consideration. Pass necessary Journal entries in the books of Rohit Ltd. Assuming that shares were issued:

a.)  at par;   b.)  at a premium of 10%;

c.)   at a discount of 5%

1. A limited company has been in corporate with an authorized capital of RS 10,00,000 divided into 1,00,000 shares of Rs 10 each. It offended 90,000 shares for subscription by the public and out of these 85,000 shares were subscribed for. The director called for an amount of rs.6 per share and received the entire amount except a call for rs.2 per share on 500 share. Calculate the amount of different categories of share capital.

 

1. Apex co. ltd. is registered with an authorized capital of rs5,00000 divided into shares of Rs10 each . the company purchased various assets of kailash for Rs 200000 & payment is made by the issue of 15000 n shares at a premium of 10% & the balance in cash 20000 shares were issued to the public at per & full amount received on application. The company issued 400 shares at a discount of 5% to its promoters against there services. Record Journal entries for the above transaction .

 

1. Gautam plastics ltd had an authorized capital of Rs 500000 divided into shares of Rs20 of these 8000 shares were issued as fully paid in payment of building purchased .

16000 shares were subscribed for by the public &during the year Rs 10 per share was called up, payable Rs4 on application,Rs2 on allotment , Rs2 on first call &Rs 2 on second call .

the amount received in respect of these shares were as follows –

         On 12000 shares full amount called ,

         On 2500 shares Rs 8 per share

         On 1000 shares Rs 6 per shares

         On 500 shares Rs 4 per shares .

The directors forfeited 1500 shares on which less than Rs 8 per shares has been paid .give journal &cash book entries recording the capital transactions of the company.

1.    X  Ltd issued a prospectus inviting application for 2000 shares of Rs 10 each at a premium of Rs 2 per shares payable as follows;

on application of Rs 2 , on allotment ,RS 5 on first call , Rs 3 on second call & final call of Rs 2

application were received for 3000 shares & pro-rate allotment was made on the application for 2400 shares . Money over paid on application was employed on account of sum due on allotment.

Ramesh to whom 40 shares were allotted failed to pay anything after application & Mohan  ,the holder of 60 shares failed to pay the two calls , show journal entries .  

12 a.)  Eee ltd. forfeited 200 shares of Rs 10          (Re 8 called up) on which the holder had paid application and allotment money of Re. 5 per share. Out of which 50 shares were re-issued to F Ltd. As fully paid for Re. 8 per share. Journalize.

b.)    Aptech Ltd. Forfeited 300 shares of Re. 10 each , on which first call of Re. 3 per share was not received, the second and final call of Rs. 2 per share has not yet been called. Out of these 75 shares were reissued to G as Rs. 8  paid up for each share. Journalize.

c.)    The directors of M Ltd. Resolved that 2000  equity shares of Rs  10 each on which Rs. 7.50 was paid be forfeited for non payment of final call of Rs 2.50 of these 1800 shares were reissued as fully paid for Rs 6 per share. Journalize.

d.)   Y Ltd. Forfeited 100 shares of Rs 100 each issued at 20% premium for non payment of first call of Rs30 per share & second call of Rs 20 per share. Out of these 40 shares were reissued as fully paid up for Rs90 per share. Journalize.

e.)    HI Ltd. Forfeited 10 shares of Rs 10 each (Rs.6 called up) issued at a discount of 10% to Mr. Y on which he had paid an application money of Rs. 2 per share. Out of these, 8 shares were reissued to Z as Rs.8 called up for Rs.9 per share. Journalize.    

(a.    Rs.150; b. Rs375; c. Rs.6300; d. Rs.1600; e. Rs16).

f.)     Sakshi Ltd. Issued a prospectus ,inviting application for 100000 shares of Rs.10 each at a premium of Rs.5 per share , payable as follows:

On application Rs.4.50; on allotment Rs.7.50(including premium); on first call Rs.2 and on final call Re.1.00.

Application were received for 125000 shares and allotment was made pro-rated to the applicants of 120000 shares, remaining application being refused. Money received in excess on the application was adjusted towards the amount due to allotment. 

 D, to whom 2000 shares were allotted, failed to pay allotment money and on his failure to pay the first call, is shares were forfeited.

 M, the holder of 3000 shares, failed to pay the  calls, and so is shares were also forfeited. All these shares were sold to R, credited as fully paid for Rs.8 per share. Pass necessary journal entries to record the above issue of shares by the company.

                                                             (Capital Reserve: Rs.21,800)

RETIREMENT OR DEATH OF A PARTNER – SOLUTION

RETIREMENT AND DEATH OF PARTNER (Solution)

  Ans 1.              (a)        Partner’s capital A/C Dr

                                                To partner’s loan A/C

(This entry is required when the amount due is transferred to retiring partner’s loan A/C)

(b)               Stock A/C ………..Dr

Building A/C……..Dr

            To Revaluation A/C

(This entry is required when the stock and building are appericiated)

	Chandra	Tara	Ravi
Existing Ratio	2/5	1/5	2/5
New Profit Sharing Ratio	-	4/15	11/15
Gaining Ratio	-	4/11 – 1/5 = 1/15	11/15 – 2/5 =  5/15

Ans 2.              (a)       

                                   Gaining Ration = 1:5

                                   Goodwill of 90000 X 2/5  = 18000 X 2

                                   Chander                             = 36000

                                   Tara Capital A/C ………..Dr

                                   Ravi Capital A/c…………Dr

                                                To chander capital A/C           36000

                                    (being the tara and ravi are debited in the gaining ratio)

                   (b)                                                 A                     B                     C                     D

                                   Existing Ratio               3/12                 4/12                 3/12                 2/12

                                   New Ratio                    1/3                   1/3                   -                       1/3

                                   Gaining Ration             11/12               0                      -                       2/12

                                   Gaining Ration between A & D is 1:2

                                   Goodwill of the firm 60000

                                   (Retire’s and C share    =  60000 X 3/12

                                                                        =  15000

                                   Therefore entry will be                         Dr                    Cr

                                   A capital A/C ……….Dr                      5000

                                   D capital A/C………..Dr                     10000

                                                To C Capital A/C                                            15000

Ans 3.                                                              Revaluation

Particulars To Plant To Provision For doubtful debt To Provision For discount on debtors To claim on workmen’s To investment

Amount 15000 600 570 5000 4000 25170

Particulars By Patents By unexpired        Insurance By Provision on creditors By loss on revaluation A capital A/C B capital A/C

Amount 3000 870 300 12600 8400 25170

 

Particulars To capital A/C To loss A/C revaluation To goodwill To investment To balance To B’s loan

A 20000 12600 9000 60000 101600

B 8400 6000 8000 52000 74400

Particulars By balance b/d By reserve fund By profit & loss A/C By A capital A/c

A 80000 7200 14400 101600

B 40000 4800 9600 20000 74400

 

Liabilities	Amount	Assets	amount
Capitals A/c A B’s loan Sundry creditors 10000 Less:                   300 Provision       = 9700 Employee provident fund	60000 52000 9700 18000	Plant Patents Stock Investment Debtors 19000 Less                    570 18430 Unexpired insurance Bank (75000+30000)	7400 8000 18430 870 105000
	139700		139700

 

Journal entries

prepaid insurance A/c previous for doubtful  A/c to revolution A/c (being the increase include of assets) 2.   revolution A/c       to land and building A/C 3.   X capital A/C       Y capital  A/C       Z  capital  A/C            To revolution A/C 4.   X  capital A/C Y capital A/C      To Z capital A/C 5.   Z  capital ‘s A/C            To Z’s loan A/C 6.   bank A/C            Tex capital A/C 7.   Y capital A/C            To bank A/C

5000 1300 12000 2850 1900 950 1000 2000 69300 2100 2100

6300 12000 5700 3000 69300 2100 2100

                                  

                                                           

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                             Partner’s capitals

 

         

Practical   To Z capital A/C   To Z capital A/C   To revolution   To balance A/C To Z’s loan To bank A/C To balance A/C

X   2000 1000 2850 72900 _____ 78750 __ 75000 75000

Y   4000   2000 1900 62100 _____ 70000   __   2100 60000 62100

Z   __   __   950 69300 _____ 70250   69300 69300

 

 

Practical   By balance A/C By X capital A/C By Y capital A/C By X capital A/C By Y capital

X   78750                 _____ 78750

Y   70000                 _____ 70000

Z   61250 4000 200 1000 2000 _____ 70250

 

 

 

 

By balance A/C By balance A/C

72900 2100 _____ 75000

62100 ___ _____ 62100

6900 ____ _____ 69300

 

 

                                                          BALANCE SHEETS

LIABILITIES  Sunday creditors Z’s loan Capital A/C          X  75000          Y  60000

AMT. 15000 69300 135000 ______ 219300

ASSETS Cash at bank Debtors Stock Prepaid insurance Machinery Land and buildings

AMT. 10000 1600 20300 5000 6000 108000 ______ 219300

 

Ans.5.                                                Revaluation  A/C

To machinery To patents To investments

10,000 40,000 14,000 _____ 28,000

By provision By unclaimed utility By  prepaid insurance By loss on revolution A B C

5000 2000 1000 10,000 6,000 4,000 _____ 28,000

 

                                                                 Partner’s capitals A/C

To loss on revolution To goodwill To investment To c’s capital To balance c/d To c’d loan

A 10,000 12000 _____ 19000 164000 ______ 195000

B 6000 7200 _____ 1800 82000 _____ 97000

C 4000 4800 16000 _____ 62000 _____ 86800

By balanced By a capital B capital By cash A/C

A 140000 ____ ____ 55000 ______ 195000

B 90000 ____ ____ 7000 _____ 97000

C 76000 9000 1800 ____ _____ 86800

 

                                                               BALANCE SHEETS

 

LIABILITIES capital a/c          A 164000          B  82000 Sundry creditors           29000    Less 2000 For unclaimed

AMT. 246000 27000 273000

ASSETS Cash Debtors (land and building) Machinery Prepaid insurance premium

AMT. 10000 80000 142000 40000 1000 273000

 

Partner’s Capital A/c

Particulars		Amount		Particulars		Amount
	P	Q	R		P	Q	R
To R Capital	7900	3950	-	By balance b/d	15000	10000	10000
To Drawing	-	-	5000	By Reserve	10000	5000	5000
To Balancce c/d	17100	11050	22936	By Profit & pays suspense A/c	-	-	1036
				By P Capital A/c			7900
				By Q Capital A/c			3950
	25000	15000	22936		25000	15000	22936

 

Balance Sheet

Liabilities	Amount	Assets	Amount
Capital A/c P  17100 Q  11050       28150 Sundry Creditors B’s Loan (Remaining balance) (to be paid to R)	28150 25000 7936 61086	Buildings Debtors B/R Stock Profit & Loss Suspense A/c Cash	26000 15000 6000 12000 1086 1000 61086

 

Ans. 9. Profit to be shared equally because at the time when Ramesh Retire the profit on revaluation is divided in old ratio but not in the new ratio.

Ans. 10.

                                                A                     B                     C

Old Ratio                                5/10                 3/10                 2/10

Acquiring Ratio                      2/10                 –                      1/10

 By A and B

                                                7/10                                         3/10

B Retires

His Share was taken

By A and B in ratio 2:1

                                   A = 3/10 x 2/3 = 2/10               B = 3/10 x 1/3 = 1/10

Therefore New ratio = 7:3

Ans B.

                                    P                      Q                     R

Old Share ratio          5/10                   4/10                 1/10

P retires                      –                       4/10                 1/10

Therefore New Ratio 4:1.

RETIREMENT OR DEATH OF A PARTNER

Reconstitution of partnership

RETIREMENT OR DEATH OF A PARTNER

Very  Short Questions.

Q1.  In   which case the following entries  are  required  :

a)      Partner’s Capital  A/c  Dr.

                              To Partners loan A/c

b)      Stock A/c                 Dr.

Building A/c            Dr.

                              To Revaluation A/c

Q2.  Journalise  the  following :-

(a)                Chander, Tara and Ravi were partners in a firm sharing profits in the ratio of 2:1:2 on 15.02.2007 Cander died and the new profit sharing ratio between Tara & Ravi was 4:11. On Chander’s death the goodwill of the firm was valued at Rs. 90,000. 

Calculate gaining ratio and pan necessary journal entry for the treatment of goodwill on Chander’s death without opening goodwill account.

(b)               A, B, C and D are partners sharing profits in the ratio of 3:4:3:2.  On the retirement of C, the goodwill was valued at Rs. 60,000.  A, B and D decided to share future profits equally.  Pass the necessary journal entry for the treatment of goodwill, without opening Goodwill Account.

Long  Answer Questions.

Q3.  A   and  B are partners sharing profits in the ratio of A 3/6, B 2/6 and transfer to reserve 1/6. 

            Their Balance Sheet on 31^st December 2007 was as follows:

Liabilities	Amount (in Rs.)	Assets	Amount (in Rs.)
Employee’s Provident Fund Reserve Fund Sundry Creditors Profit and Loss A/c Capitals : A              80,000                                      B               40,000	18000 12000 10,000 24,000 120,000	Goodwill Plant Patents Stock Investment Debtors :                  20,000           Less:- Provision           400 Cash	15,000 90,000 4,400 30,000 20,000 19,600 5,000
	184,000		184,000

                  B retires on 1^st Jan 2008.The terms were:-

(i)                 Goodwill is to be valued at 50,000.

(ii)               Value of patents is to be increased by Rs. 3,000 but plant was found over-valued by Rs 15,000.

(iii)             Prevision for doubtful debts should be 5% on Debtors and prevision for discount should also   be made on Debtors & creation at 3%.

(iv)             Out of insurance which was entirely debited to profit and loss Account Rs 870 be carried   forward   as   unexpired   insurance.

(v)               Investments were revalue   at Rs 16,000.  Half  of  these  investments were taken over by B.

(vi)             There is a claim  for  workmen’s  compensation  to  the  extent  of  Rs  5,ooo.

B was paid of in full. A borrowed the necessary money from the bank on the security of plant and stock to pay off  B. Prepare Revaluation A/C .capital A/c of B/S of A.

Q4.      X, Y,   and   Z were in partnership sharing profits in the ratio of 3: 2: 1 they had

            taken a Joint life policy of Rs.50,000 , whose surrender value on 1^st Jan 2007 was

            Rs.18,000 . On this date B/S   is as   follows:-

Liabilities	Amount  (Rs.)	Assets	Amount(Rs.)
Provision for                     Doubtful Debts Sundry creditors Capitals: X    78,750 Y    70,000 Z    61,250	1,300 15000             2,10,000	Cash at bank Debtors Stock Machinery Land and Building	10,000                    16,000                     20,300                     60,000                   1,20,000
	2,26,3000		2,26,300

 

Z retires on the above date and the new profit sharing ratio between X and Y will be 5:4 following terms were agreed:

1)       Land and buildings be reduced by 10%.

   2)   Out of the Insurance premium paid during the year Rs.5,000 be  carried forward as  

           unexpired. 

    3)  There is no need of any provision for doubtful debts.

4)   Goodwill of the firm be valued at Rs.36,000 and adjustment in this respect be made

      without raising a goodwill a/c . The joint life policy was also not to appear in the

      Balance sheet.

 5)  X and Y decided that their Capital will be adjusted in their new profit sharing ratio by bringing in or paying cash to the partners is a/c will be  transfered    to his loan a/c.

a)      Pan  necessary  journal  entries : Prepare the capital  accounts and the new balance sheet.

Q5.      A, B and C are partners sharing profits and losses in the ratio of 5:3:2. There balance

             Sheet as at 31^st   December   2007 was a follows:-

Liabilities	Rs.	Assets	Rs.
Sundry creditors Provision for Doubtful Debts Capitals:-  A  1,40,000 B 90,000 C 76,000	29,000 5,000 3,06,000	Goodwill Debtors Investments Land and building Machinery Patents Cash at bank	24,000  80,000 30,000 1,42,000 50,000 4000 10,000
	3,40,000		3,40,000

 

     Q6.  What are the methods of ascertaining the amount of profit to be given to the executors of deceased  partner , if the death of a partner   occurs on any day during the year .Explain.

  Q7.   On 31^st Dec 2007. The balance sheet of P,Q  and R who were  partners in a firm was as under.                 

Liabilities	Rs.	Assets	Rs.
Sundry creditors Reserve fund Capital:- P 15,000 Q 10,000 R 10,000	25,000 20,000 35,000	Building Investment Debtors Bill Receivable Stock Cash	26,000 15,000 15,000 6,000 12,000 6,000
	80,000		80,000

 

The partnership dead provides that the profit be shared in the ratio of 2:1:1 and that in the event of death of any partner, his executors  will be entitled to be paid out :

a)      The capital to his credit at the date of last Balance sheet.

b)      His proportion of Reserve at the date of last Balance sheet;

c)      Retired on  the above date as per the following condition:-

(i)                 Goodwill of the firm is to be valued at three years Purchase of the average profits of the last five years which were Rs.20,000; Rs.12,000;Rs.30,000;Rs6,000(loss)  and Rs.34,000 respectively.

(ii)               Machinery is to be reduced to Rs.40,000  of patents are valueless.

(iii)             There is no need of any provision for doubtful  debts .

(iv)             An unclaimed liability of Rs.2,000 is to be written off.

(v)               Out of the total insurance premium paid Rs.1,000 be treated as pre paid .

(vi)             Investment are revalued at Rs.16,000 and these are taken by C at this value .

       Entire Sum   payable to C is to be brought in by A and B in such a way so as to   

       Make  their capitals proportionate to their new profit sharing ratio which is 2:1.

            Prepare Revolution Account .Capital A/c and the opening Balance sheet of A and B 

(c) His proportion of profits to the date of death based on the average profits of the last three

         completed years, plus 10% and.

(d)         By way of goodwill, his proportion of the total profits for the three preceding years.

(e)           

(f)          The net profit for the last three years were:- 

2005                  -Rs.16,000 2006                  – Rs16,000 2007                  –Rs15,400

 

R died on 1^st April 2008.He had withdrawn Rs. 5,000 to the date of his death .The investments were sold at par and Rs. Executors were paid off.

                      Prepare  partners  capitals  Accounts, Rs Executors Accounts and Balance sheet of  the surviving partners P and Q.

Testing of Knowledge

Q8. Enumerate the items for which the representatives of decreased partners are entitled to receive.

Q9. Ramesh   wants to retire from the firm .The profits on Revaluation on that date were

        Rs.12,000. Mohan  and  Rahul want to share this in their new profit sharing ratio 3:2.

       Ramesh  wants this to be shared equally. How  are  the Profis to be shared? Give reasons.

Q10.  From the following  particulars.

        Calculate the new profit –sharing ratio of the partners:-

 (a)   A , B and C are partners in a firm sharing profits and losses in the ratio of 5:3:2 B retires

         from  firm and his share was taken up by A and C in the ratio of 2:1.

(b)     P , Q and R were partners sharing profits in the ratio of 5:4:1. P retires from the firm.