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Model Paper-1
Accountancy
CBSE - XII


Time Allotted: 3 hours Maximum marks100

General Instructions:
-
This Paper is divided into two parts A & B.
-Each part carries 50 marks
-All questions are compulsory
-Each question Carries marks indicated against it.

Part-A (50 marks)

Q 1 Distinguish between Sacrificing ratio and Gaining ratio.(2 mks)

Ans.1
Sacrificing Ratio is the ratio in which the old partners have to sacrifice their shares in profit in favour of new partners. Whereas Gaining Ratio is the ratio in which the continuing partners decide to share the outgoing partner's share in the profits. It is the difference between the new share and the old share of the continuing partners.

Q 2 X and Y share profits in the ratio 2:1. Z brings in cash Rs.6000 for goodwill for 1/6 Share in the profits and Rs 10000 as capital. The new firm decides to raise goodwill at its full value. Goodwill already appears in the books at a value of Rs18000.
Record the above entries. (4)


Ans.2 a)
X's capital a/c dr. 12000
Y's capital a/c dr. 6000
To Goodwill a/c 18000
(Being old goodwill written off)

b) Cash a/c dr. 16000
To Z's Capital a/c 16000
(Being goodwill and capital brought in by Z)

c) Z a/c dr. 6000
To X's Capital a/c 4000
To Y's Capital a/c 2000
(Being goodwill distributed among the old partners in old ratio)

d) Goodwill a/c Dr. 36000
To X's capital a/c 20000
To Y's capital a/c 10000
To Z's capital a/c 6000
(Being goodwill raised at its full value in the new ratio 10:5:3)

Q 3 A and B are partners in a firm. X is entitled to a salary of Rs 5000 per month together with a commission of 10% of Net profit before charging any such commission. Y is entitled to a salary of Rs3000 p.a. together with a commission of 10% of net profit after charging all commissions.
Net Profit for the year 1999 before charging any commission was Rs55000.Show the distribution of profit.(6)

Ans. 3
Solution:

Profit and Loss appropriation a/c

Dr.
Particulars


Amount

Particulars
Cr.
Amount

To A's commission
(55000 X 10/100)


5500
By Profit before any
commission

55000

To B's commission
{(55000- 5500)X(10/110)}


4500

   

To Net profit tr
Ansferred to:
A - 22500
B - 22500



45000

   
 

55000

       
  55000

Q 4 What journal entries are made in the books of the firm at the time of Dissolution regarding the following:
(a) realisation expenses incurred by the firm
(b) unrecorded asset taken over by the partner
(c) asset taken over by creditor (3)

Ans. 4. a)
Realization a/c dr.
  To Bank/Cash a/c
(Realization expenses being paid by the firm)

b)
Partner's capital a/c dr.
   To Realization a/c
(being unrecorded asset taken over by the partner)

C)
No entry in this case

Q 5. A and B are partners with profit sharing ratio of 2:1.Their balance sheet on 31.12.99 was as follows:

Liabilities

Creditors
Bills Payables
Reserve fund
Capitals A's 40,000
             B's 30,000

Amount

20,000
15,000
12,000

70,000



1,17,000

Assets
Debtors   40,000
Less prov. 3,600

Stock
Building
Patents and copy right
Machinery

Amount

36,400

20,000
25,000
2,000
33,600


1,17,000

They admitted C into partnership on this date, New profit sharing ratio is agreed as 3:2:1
C brings in proportionate capital after the following adjustments:
i. C brings Rs.10,000 in cash as his share of goodwill.
ii. Provision of doubtful debt is to be reduced by Rs.2,400.
iii. There is an old type writer valued at Rs.2,600, which is not recorded in above balance sheet. Now it is to be recorded.
iv. Patents are value less.
Prepare Revaluation A/c, Capital accounts and opening balance sheet of A,B and C.(12)


Ans. 5

Revaluation Account

Particulars
To Patent
To
Profit tr
Ansferred to
A's Capital A/c 2,000
B's Capital A/c 1,000
Amount
2,000



3,000
Particulars
By provision for doubtful
debt- reduced
By unrecorded assets
Amount
2,400

2,600

  5,000   5,000

Capital Accounts

Particulars A B C Particulars A B C

To A's Cap
To bal c/d

---
60,000

---
35,000

10,000 19,000

By Balan b/d
By reserve
By reval a/c
By cash a/c
By C's cap a/c

40,000 8,000 2,000 --- 10,000

30,000 4,000 1,000 ---
-- --

--
---
--- 29,000 ---

  60,000 35,000 29,000   60,000 35,000 29,000
Balance Sheet
As on 31.3.1999
Liabilities Amount Assets Amount

Creditors
Bills Payables
Capital A's 60,000
B's 35,000
C's 19,000

20,000
15,000
1,24,000

Cash
Sundry Debtors 40,000
Less prov. 1,200
Stock
Building
Machinery
Type writer

29,000

38,800
20,000
25,000
33,600
2,600

 

  1,49,000   1,49,000

Working notes:
i. Capital of C is calculated as below:
Total capital of A and C after adjustment is Rs.95,000 (60,000+35,000), which is for 1-1/6=5/6,
So for the whole firm it shall be equal to 95,000 into 6/5 = 1,14,000
For 1/6 it shall be Rs.19,000 (1,14,000 into 1/6)

OR

M, N and O share profit in the proportion of 2:2:1, agreed upon the dissolution of their partnership on April 1, 1999 on which date their balance sheet was as under:

Liabilities
Capital:
M's Cap 40,000
N's cap 20,000
M's Loan A/c
Creditors
Life Insurance Policy
Investment Fluct. Fund

Amount


60,000
10,000
16,500
14,000
  6,000


1,06,500

Assets
Machinery
Stock in trade
Investments
Joint life policy
Debtors 10,000
Less prov. 500
O's Capital
Cash at bank

Amount
40,000
  8,000
20,000
14,000

  9,500
10,000
  5,000

1,06,500

Additional Information:
i. The joint life policy is surrendered for Rs,10,000.
ii. The investments are taken over by M for Rs.22,500.
iii. N takes over all the stock at Rs.5000 and debtors amounting to Rs.5000 at Rs.3000.
iv. Machinery is sold for Rs.35,000.
v. The remaining debtors realise 50% of the book value.
vi. It is found that an investment not recorded in the books is worth Rs.3,000. This is taken over by one of the creditors at this value.
vii. An unrecorded liability is settled at Rs.2,000.
viii. Outstanding expenses amount to Rs.2500.
Prepare necessary ledger accounts on the completion of dissolution of the firm. (12)


Ans.

Realisation Account

Particulars
To machinery
To stock
To investments
To joint life policy
To debtors
To bank
Creditors 16,500
Less investment taken
over 3,000
To bank unrecorded
liability
To outstanding exp
To profit tr
Ansferred to
Capital accts
M's cap 2,000
N's cap 2,000
O's cap 1,000

Amount
40,000
8,000
20,000
14,000
10,000



13,500

2,000
4,500




5,000  
Particulars

By creditors
By prov. For bad debt
By life policy fund
By investment fluct.fund
By bank:
J.L.P 10,000
Debtors 50%
Of 5000 2,500
Machinery 35,000
By M's capital
(investment)
By N's capital a/c
Stock 5,000
Debtors 3,000

 

  
Amount

16,500
500
14,000
6,000




47,500

22,500


8,000
  1,15,000   1,15,000
Capital Accounts
Particulars M N O Particulars M N O

To bal b/d
To realis a/c
To cash

----
22,500
19,500

42,000

----
8,000
14,000

22,000

10,000



10,000

By bal. B/d
By real profit

40,000
2,000
---

42,000

20,000 2,000
----

22,000

---- 1,000 9,000

10,000

Bank Account

Particulars Amount Particulars Amount
To balance b/d
To realisation assets
Realised
To O's capital a/c

5,000

47,500
9,000

 


61,500

By realisation a/c
(creditors paid)
By realisation unrecorded
liab and outstanding exp.
By M's loan a/c
By M's capital a/c
By N's capital a/c
13,500

4,500

10,000 19,500 14,000

61,500


Q 6 Can shares be issued at discount, if yes what are the provisions regarding it ? (3)

Ans. 6
Under the section 79 of the companies act, a company can issue shares at discount only if the following conditions are fulfilled:
i. A resolution be passed by the company in its general meeting and sanctioned by the company law board.
ii.The rate of discount can not exceed 10%
iii.The shares are of a class which has already been issued.
iv.Not less than one year should have been passed, after receiving the letter of commencement of business.
v. The shares are issued within two months of the date on which the issue is sanctioned by company Law board

Q 7 Pass the entries to record the issue of debentures in the following cases:
i.  5,000 15% debentures of Rs.100 each issued at a discount of 5% and redeemable at premium after 5 years
ii. 10,000 15% debentures of Rs.100 each issued at a premium of 10% and redeemable at par after
6 years. (3)

Ans 7


i. Bank a/c
Loss on issue of debentures a/c
    To debentures   A/c
    To premium on redemption of debenture a/c
Dr
Dr
4,75,000
50,000
    5,00,000
    25,000

(Being 5000 debentures issued at discount redeemable at prem)

ii. Bank a/c Dr 11,00,000
To debentures a/c 10,00,000
To premium on issue of debentures 1,00,000
(being 10,000 debentures issued at a prem )

Q 8 ABC limited issued a prospectus inviting applications for 2000 shares of Rs.10 each at prem of Rs.2 per share payable as follows:

On application
On allotment
On first call
On second and final call
Rs.2
5 (including premium)
3
2

Applications were received for 3000 shares and prorata allotment was made on the applications for 2,400 shares. Money over paid on applications was employed on account of sum due on allotment.

Dinesh , to who applied for 48 shares failed to pay allotment money and on his subsequent failure to pay the first call his shares were forfeited.

Vikas the holder of 60 shares failed to pay the two calls, and his shares were forfeited after the second call.

Of the shares forfeited, 80 shares were sold to Rajesh credited as fully paid for Rs.9 per share, the whole of dinesh shares being included.
Show Journal entries and the balance sheet. (12)

Ans.8

Solution
Bank a/c Dr     6,000
        To Share application A/c 6,000
(being application money received on 3000 shares)

Share Applications a/c
To share capital a/c   
To share allotment a/c
To bank a/c
Dr 6,000

4,000
800
1,200

(being application money tr
Ansferred to share capital)

Share allotment a/c      Dr 10,000
        To share capital a/c    6,000
        To share premium a/c 4,000
(for amount due on allotment)

Bank a/c    dr
To share allotment a/c
(being amount received on allotment)  
9016
    9016

Share first call a/c dr          6,000
         To share capital a/c      6,000
(being first call money due on 2000 shares)

Bank a/c dr             5,700
         To share first call a/c      5,700
(being share first call money received except on 100 shares)

Share capital a/c dr       320
Share prem a/c dr           80
    To share allotment a/c   184
    To share first call          120
    To share forfeited a/c      96
(being 40 shares of dinesh forfeited)

Share final call a/c dr     3920
           To share capital a/c 3920
(being share final call made on 1960 shares)

Bank a/c dr           3800
To share final call            3800
(being share final call money received except on 60 shares)

Share capital a/c dr 600
     To share first call a/c    180
     To share final call a/c    120
     To share forfeited a/c     300
(for forfeiture of vikas's 60 shares)

bank a/c dr          720
share forfeited a/c dr 80
      To share capital a/c    800
(being 80 shares reissued @ 9 per share)

Share forfeited a/c dr 216
      To capital reserve    216
(being share forfeited amount tr
Ansferred to capital reserve)

Balance sheet of ABC limited

Liabilities
Share capital
Share forfeited
Capital reserve
Share premium

Amount
19,800
100
216
3,920
Assets
Current assets: Cash/bank
Amount

24,036
  24,036    


OR

On 1st January,1996 the following balances appear in the books of priya gold limited.

15% debentures
Debenture Red. Reserve fund
Debenture Redemption Fund Investment
Rs.4,00,000
Rs.3,20,000
Rs. 3,20,000

The investment consisted of 4% government securities of the face value of Rs.3,60,000. The annual instalment came to Rs.65,600. On 31st Dec, 1996 the balance at bank was Rs.104,000 (after receipt of interest). Investment were realised at 92.5% and debentures were redeemed. Show the ledger accounts.

Solution: Debenture Redemption Fund

Date
1996
Dec.31

Particulars
To General reserve(tr
Ansfer

Rs.
4,13,000

Date
1996
Jan.1

Dec.31
Dec.31
Dec.31 By

Particulars
By balance b/d


By int. on invst. By profit and loss By deb red. Fund
Rs.
3,20,000


14,400
65,400
13,000
    4,13,000     4,13,000


Debenture Redemption Fund Investment Account

Date Particulars Rs. Date Particulars Rs.

1996
Jan.1

Dec.31

To bal. B/d
(4% govt
security of
Rs.3,60,000)
To deb. Red.
Res. Fund acct.


3,20,000


13,000

1996
Dec.31

By bank a/c
(97.5% of
Rs.3,60,000)


3,33,000

    3,33,000    

3,33,000

15% Debenture Account

Date Particulars Rs. Date Particulars
Rs.
1996
Dec.31
To bank a/c 4,00,000 1996
Jan.1
By bala b/d 4,00,000
    4,00,000     4,00,000

Bank Account

Date Particulars Rs. Date Particulars Rs.
1996

Dec.31 Dec.31


To Balance b/d
To debenture
fund invst.
(sale)


1,04,000
3,33,000
1996

Dec.31

Dec.31


By debenture
amount paid
By balance c/d



4,00,000 37,000
    4,37,000     4,37,000

Q 9. Give the main headings under which the following items will be shown in a company's balance sheet as per the schedule vi part I of companies act, 1956
Bills payable
Share forfeited
Share premium
Live stock
Loose tools (5 marks)

Ans 9


S no. Item Heading with sub heading

1.
2
3.
4.
5.

Bills payable
Share forfeited
Share premium
Live stock
Loose tools

Current liabilities and provisions (C.L)
Share capital
Reserve and surplus
Fixed assets
Current assets, lo
Ans and advances

 

Part B (50 marks)

Q 10 I. What is the significance of financial statement ?
Q 10 II. Explain the limitations of financial statement analysis. (6)

Ans 10.
Significance & importance of financial statement: - It is such a statement, which helps the business unit to know exact financial position i.e. where it stands in monetary terms at a particular fixed point of time.
i. It provides the detailed information about the efficiency of the management.
ii.It helps the owners as well as the outsiders to assess the long term & short term solvency of the concern.
iii.It helps in inter firm comparison.
iv.It helps in preparing budget estimates
v. It helps to assess the earning capacity of the business unit.

Limitations of financial statements
i. It may not help to get a definite conclusion.
ii.It only takes into the account the monetary facts whereas the non-monetary matters may also have the great impact on the financial position of the co. E.g. Strike
iii. Financial statement alone do not help in forecasting the future pl
Ans

Q 11. Explain the limitations of Ratio analysis

Ans. 11
Ratios are fully dependent on the data, which may or may not be correct Changes in the price level of base yr. & current year may be different so the comparison will be different. When the Two firms' result are being compared, it should be remembered that the firms may follow different accounting policies, for instance one firm may charge depreciation on the straight line basis and other on the diminishing value. Such ifferences will not make some of the accounting ratios strictly comparable.

Q 12Explain the significance of the following ratios and also state their method of computation:
i. Current ratio
ii. Debt equity ratio
iii. Overall profitability ratio (6)

Ans.12

1) Current ratio = current assets/current liabilities

Significance:It shows the relationship between the current assets and current liabilities. It is calculated to know that how far the firm is able to pay off its current liabilities with the help of available current assets.

2) Debt equity ratio = debt/ equity
Significance: Here debt me
Ans long term liabilities, and equity stands for share holder funds. It shows the relationship between debt and equity. It me
Ans that what is the composition of owned and borrowed sources of finance.

3) Over all profitability ratio:
Profit before interest, tax and dividend
Capital employed

It is the ratio of return on investment, it shows that how much capital employed is utilised efficiently by the firm. It takes the profit which is before any interest, tax or any dividend.

Q 13 I. Net profit after interest and tax Rs.1,00,000, Current assets Rs.4,00,000. Current liabilities Rs. 2,00,000, Tax rate 50%. Fixed assets Rs. 6,00,000. 10% long term debt Rs. 4,00,000. Calculate return on investment.

II. From the following information, determine the opening and closing stock:
Stock turnover ratio 5 times, total sales Rs.2,00,000, Rate of gross profit on cost is 33-1/3%. Closing stock is more by Rs. 4,000 more than the opening stock.

Ans 13 (I)

Net profit before tax is Rs. 2,00,000
Net profit before interest and tax Rs. 2,00,000+40,000 = 2,40,000
Capital employed = Rs.6,00,000 + (Rs.4,00,000 -- Rs.2,00,000)
=Rs.8,00,000
ROI = 2,40,000 X 100 = 30%
8,00,000

13(II)
Gross profit = 2,00,000 X 1/4 =50,000
Sale less gross profit 2,00,000 less 50,000 = 1,50,000
Average stock = 1,50,000/5 = 30,000
Let opening stock is x, closing stock shall be x + 4,000
So average stock shall be 2x + 4,000/2 = x+ 2,000
X + 2000 = 30,000
X = 28,000
Closing stock shall be 28,000 + 4,000 = 32,000

Q 14. Difference between funds flow statement and cash flow statement ? (3)

Ans 14.
Difference between funds flow statement and cash flow statement is as below:
- Cash flow statement takes into a/c only the cash items whereas the Funds flow statement deals with non cash items also
- Cash flow statements is based on narrow concept i.e. cash = Funds whereas the Funds flow statement is based on broad concept i.e. funds = working capital
- Cash flow statement can be helpful in short term solvency i.e. liquidity whereas the funds flow statement helps in assessing the solvency of firm i.e. Long term liabilities.
- Cash Flow statement takes items on cash basis of accounts besides this in funds flow statement the basis is accrual system of accounting

Q 15 If you want neither inflow nor outflow of funds which of the following tr
Ansactions will you select:
i. Issue of shares in exchange of fixed assets for use in company's factory
ii. Sale of goods on credit
iii. Provision for depreciation
iv. Goodwill written off
v. A long term loan from the bank (3)

Ans.15

Following are the items which result neither into inflow nor into out flow of funds issue of shares in exchange of fixed assets for use in company's factory provision for depreciation goodwill written off.

Q 16. From the following balance sheets of XYZ ltd, make out the schedule of changes in working capital and funds flow statement for the year 1994:

Liability
Share apital
12% per share capital
14% debentures
Reserves Provision for bad debts
Current
liabilities

1993
3,50,000
2,00,000

1,00,000
1,10,000
10,000

70,000

7,90,000

1994
3,50,000
1,00,000

2,00,000
2,70,000
15,000

1,45,000

10,80,000

Assets
Fixed assets(net) Investments
Current assets
Discount on issue
of debentures

1993
5,10,000
30,000
2,40,000 10,000





7,90,000

1994
6,20,000
80,000
3,75,000
5,000





10,80,000

Additional Information:
i. The provision for depreciation stood at Rs.1,50,000 on 31 March, 1993 and at Rs.190,000 on 31 March, 1994
ii. A machinery costing Rs.70,000 (book value being Rs.40,000) was disposed off for Rs.25,000.
iii. Preference share redemption was carried out at a prem of 5% on 1 April,1993.
iv. Dividend at 15% was paid on equity shares for year 1993-94. (12)


Ans.16
Solution: Schedule of Change in Working Capital

Particulars 1993 1994 Increase w.c Decr w.c

Current Assets:
Less
Provision for b.debt Current liability Working capital

Net increase in w.c

2,40,000

10,000
70,000
1,60,000

55,000

3,75,000

15,000
1,45,000 2,15,000

1,35,000

-------
------



5,000
75,000


55,000

 

2,15,000

2,15,000

1,35,000

1,35,000

Calculation of Funds From operation:

Net profit
Add Non operating expenses:
Discount on issue of debentures 
Depreciation
Loss on sale of machinery
Premium on redemption
of preference shares
Dividend on preference shares
Dividend on equity shares
Funds from operation:

 



5,000
70,000
15,000

5,000
12,000
45,000
1,60,000







1,52,000
3,12,000

Funds Flow Statement

Sources Amount Applications Amount

Funds from operation. Issue of shares
Issue of debentures
Sale of machinery

3,12,000
50,000
1,00,000
25,000

Redemption of pref. Shares
Purchase of fixed assets Purchase of investment Payment of dividend
Dividend on pre shares Increase in w.cap

1,05,000
2,20,000
50,000
45,000
12,000
55,000

 

  4,87,000   4,87,000

Q 17 Rama limited is a trading company. It deals in units of a particular product. Purchase price is Rs.25 per unit and sale price is Rs.40 per unit. All purchases are made for cash. 25% of sales are for cash and 75% are on credit basis. Discount of 5% is allowed on cash sales. Credit customers are supposed to pay within one month of sales. From the following particulars, prepare cash budget for January to April 1999
i. cash balance 1st January 1999 Rs.10,000
ii. Sales: Dec. 1998 10,000 units
January 1999 8,000 units
Feb. 9,000 units,
March. 7,000 units
April 8,000 units
May 10,000 units
June 11,000 units
iii. Office expenses are Rs.50,000 per month.
iv. An electric typewriter would be purchased for 15,000 in March
v. Purchases are made in the same month in which goods are sold, hence no stock remains at the end of each month. (6)

Ans.17.

:
Cash Budget for the period Jan. to April 1999

Particulars January February March April

Opening cash balance

Receipts:
Cash sales
Collection from debtors

Payments:
Cash purchases
Office expenses Typewriter

Closing cash balance

10,000


76,000 3,00,000 3,86,000

2,00,000 50,000
------------- 2,50,000
1,36,000

1,36,000


85,500
2,40,000
4,61,500

2,25,000
50,000
----------
2,75,000
1,86,500

1,86,500


66,500
2,70,000
5,23,000

1,75,000
50,000
15,000
2,40,000
2,83,000

2,83,000


76,000
2,10,000
5,69,000

2,00,000
50,000
---------
2,50,000
3,19,000

 

Q 18 From the following information prepare comparative income statement (5)

Items
1990
1991

Sales
Cost of goods sold
Administrative expenses
Selling and distribution exp. Other income
Income tax

40,000
30,000
1,000
1,500
2,000
4,750

50,000
35,000
1,000
2,000
3,000
7,500


Ans 18

Solution:

Particulars 1990 1991 Absolute % change

Sales
Less cost of goods sold Gross profit
Less admn exp
Net operating income Add other incomes
Net profit
Less income tax

40,000
30,000
10,000
2,500
7,500
2,000
9,500
4,750
50,000
35,000
15,000
3,000
12,000
3,000
15,000
7,500
10,000
5,000
5,000
500
4,500
1,000
5,500
2,750
25
16.7
50

60
50
57.9
57.99
Net profit after tax 4,750 7,500 2,750 57.9

OR

Q What do you understand by comparison of financial statements? And the method trend analysis.

Ans 18.
Basically we can say that comparative statements give knowledge about nature of changes affecting the business.
Data when compared with other periods, other firms presents a trend, which if analyzed gives an idea for taking a particular decision e.g. Exp
Ansion decision of a product will depend upon its past demand trend which is result of comparison of past years demand figures.
On account of the above reasons, the Indian companies act, 1956 has provided strictly that every company must show corresponding figures of previous year with current year figures in their annual financial accounts, so that comparative statements may be more useful.

By the word trend we me
Ans any general tendency. Analysis of these general tendencies is called "TREND ANALYSIS".

The main purpose of trend analysis is to know the trend of available financial information or knowledge. With help of this analysis, forecasts for future trends can be made easily.