1. (d) 9 : 6 : 5

 Explanation :

Ram : Shyam

Sacrificing Ratio = 15,000 : 10,000 = 3 : 2

New ratio of Ram =

diagram240

New ratio of Shyam =

Ram : Shyam : Laxman

9 : 6 : 5

2. (a) (A) is correct but (R) is wrong

 Explanation :

Salary provided to a partners is an appropriation of profit and is debited to profit and loss appropriation account.

3. (a) ₹15 per share

 Explanation :

Uncalled capital = ₹(20 – 5) = ₹15 per share

OR

(b) 20,000

 Explanation :

No. of debentures issued =

= 20,000 debentures

4. (b)

L. F. Debit (₹) Credit (₹)
Kunal’s Capital A/c Dr. 12,000
To Vansh’s Capital A/c 8,000
To Divyansh’s Capital A/c 4,000
 Explanation :

Total adjustment amount loss = (80,000)

Investment Function Fund       = 40,000

                                             = (40,000)

S.R. = Old Ratio – New Ratio

OR

(d) Loss of ₹4,000 each partner

 Explanation :

Interest on loan = ₹12,00,000 ×(6/100)×(6/12)

= ₹36,000

Profit after charging interest on loan = ₹(24,000 – 36,000)

= ₹12,000 (loss)

Loss distributed among partners =(₹12,000/3)

= ₹4,000 each partners

5. (b) ₹29,500

 Explanation :

Interest on capital of X:

1st April – 30th April = ₹5,00,000 ×(6/100)×(1/12)

= ₹2,500

1st May – 30th Sep. = ₹6,00,000 ×(6/100)×(5/12)

= ₹15,000

1st Oct. – 31st March = ₹4,00,000 ×(6/100)×(6/12)

= ₹12,000

= ₹(2,500 + 15,000 + 12,000)

= ₹29,500

6. (c) 2,700

 Explanation :

Purchase consideration = 4,08,000 – 48,000 = 3,60,000

Paid by cheque = 3,60,000 × 10% = 36,000

No. of debenture issued =(3,24,000/120)=2,700

OR

(b) 5%

 Explanation :

Total premium use = 50,00,000 – 10,00,000 = ₹40,00,000

Premium on Redemption = 16,00,000 × 100 ×(20/100)=₹32,00,000

Discount on Issue of Debenture = 40,00,000 – 32,00,000

= ₹8,00,000

Rate of Discount =(8,00,000/16,00,000)=5%

7. (c) ₹60,000

 Explanation :

A company must receive minimum subscription of 90% of the shares for subscription before it allots the share i.e., (24,000 × 3 × 90%) = ₹64,800.

Amount less than 64,800 will restrict the company to proceed with the allotment of shares.

8. (a) ₹22,500 and ₹13,500

 Explanation :

B’s Goodwill = 1,08,000 ×(3/9)=₹36,000

Gaining Ratio = 5 : 3

A’s share = 36,000 ×(5/8)=₹22,500

B’s share = 36,000 ×(3/8)=₹13,500

OR

(d) A ₹50,000; B ₹50,000; C ₹50,000

Explanation:

If the deed is silent, then salary is not paid to any partner. Then, the profit will be distributed among all the 3 partners in equal ratio i.e., A ₹50,000; B ₹50,000; C ₹50,000

Read the following hypothetical situation, Answer Question No. 9 and 10

Dharya, Dhanvi and Pawna and partners in a firm trading in Toys. Marshwash were sharing profit in the ratio of 3 : 3 : 2. Their fixed capital on 01-04-2021 were ₹2,00,000; ₹3,00,000 and ₹6,00,000 respectively.

During their COVID pandemic all partners decided to help the poor daily worker personally for this Dharya withdraw ₹20,000 from the firm on 15-09-2021. Dhanvi instead of withdrawing cash from the firm daily amounting to ₹24,000 from the firm and distributed to fixed workers families, on the other hand, Pawna withdraw ₹1,00,000 from her capital on 1/1/2020 and provided a mobile medical van in containment zone.

The partnership deed provide for changing interest on drawings @ 6% p.a. and allowing interest on capital @ 9% p.a. The net profit of the firm for the year ended on 31-01-2022 before providing for any of the above adjustment was ₹1,57,500 partners also decided to divide 10% of net profit to Chief Minister Relief Fund.

Based on the above information you are required to answer the following questions.

9. (d) ₹360

 Explanation :

Interest on drawings = 24,000 ×(6/100)×(3/12)=₹360

10. (c) ₹51,750

 Explanation :

(01-04-2021 to 01-01-2022)

Pawan interest capital’s = 6,00,000 × (9 /100)×(9/12)=40,500

(01-01-2022 to 31-03-2022)

Pawan interest capital’s = 5,00,000 × (9/ 100)  × (3/ 12) = 11,250

Total interest on capital = 42,500 + 11,250 = 51,750

11. (b) (ii), (iii), (i), (iv)

12. (a) ₹7,500

 Explanation :

Amount debited to securities premium reserve account will be = 500 × 15 = ₹7,500

13. (b) ₹350

 Explanation :

Share capital will be debited by = 50 × 7 = ₹350

14. (b) ₹12,000

 Explanation :
Profit of 2nd year = 6,000 × 2 = 12,000
Profit of 3rd year = 12,000 × 1.5 = 18,000

Average profit =(6,000+12,000+18,000/3)= 12,000

Goodwill = 12,000 × 1 = 12,000

15. (b) ₹8,000 and ₹4,000

 Explanation :
Interest on capital A = 2,00,000 × 8% = 16,000

B = 1,00,000 × 8% = 8,000

Total appropriations are more than profit, thus profit will be distributed in the ratio of appropriations

16,000 : 8,000

2 : 1

Ratio of appropriation, 2 : 1

A’s share = 12,000 × (2 /3)=8,000

B’s share = 12,000 ×(1/3)=4,000

OR

(b) ₹6,240

 Explanation :

Interest on Rohit’s drawing = (12,000 × 12) ×(8/100)×(6.5/12)=₹6240

16. (d) ₹45,000

 Explanation :

Value of debtors = 60,000

Bad debts = 10,000

Remaining value = 60,000 – 10,000 = 50,000

Realised value = 50,000 × 90% = 45,000

17.                             Journal Entries

Date Particulars L. F. Debit (₹) Credit (₹)
Land and Building A/c Dr. 1,50,000
To Revaluation A/c 1,50,000
(Being increase in the value of assets recorded)
Revaluation A/c Dr. 65,000
To Debtors A/c Dr. 15,000
To Investment A/c 10,000
To Creditors A/c 40,000
(Being decrease in the value of assets and increase in the amount of liability recorded)
Revaluation A/c Dr. 85,000
To X’s Capital A/c 42,500
To Y’s Capital A/c 34,000
To Z’s Capital A/c 8,500
(Being profit on revaluation i.e., ₹1,50,000 – ₹65,000 transferred to partners capital a/cs in 5 : 4 : 1 ratio)

18. (i) Calculation of Gaining Ratio:

Gaining share = New share – Old share

Gaining ratio = 2 : 3

= ₹6,250

Journal Entries

Date Particulars L.
F.
Debit
(₹)
Credit
(₹)
Y’s Capital A/c (2/5 of ₹6,250) Dr. 2,500
Z’s Capital A/c (3/5 of ₹6,250) 1,50,000
(Being increase in the value of assets recorded) Dr. 3,750
To X’s Capital A/c 6,250
(Being X’s share of profit adjusted to gaining partner’s capital A/cs)

OR

Journal Entries

Date Particulars L.
F.
Debit
(₹)
Credit
(₹)
A’s Current A/c Dr. 6,867
B’s Current A/c Dr. 750
To C’s Current A/c 3,850
To D’s Current A/c 3,767
(Being rectification made for omission of interest on capital and interest on drawings)

Working Note:

Particulars A B C D
Interest on capital allowed (Cr.) (+) 7,200 (+) 10,800 (+) 14,400 (+) 10,800
Interest on drawings debited (Dr.) (–) 2,000 (–) 2,500 (–) 1,500 (–) 1,000
Loss distributed (43,200 – 7,000 = 36,200) in 4 : 3 : 3 : 2 (–) 12,067 (–) 9,050 (–) 9,050 (–) 6,033
Net effect (–) 6,867 (–) 750 (+) 3,850 (+) 3,767

19.                 

Journal

Date Particulars L.
F.
Debit
(₹)
Credit
(₹)
Interest on Debenture A/c Dr. 1,00,000
To Debentureholder’s A/c 1,00,000
(Being interest on debenture due on 10,00,000 @ 10% p.a.)
Debentureholder’s A/c Dr. 1,00,000
To Bank A/c 1,00,000
(Being payment of interest after deducted 10% TDS)
Statement of Profit & Loss A/c Dr. 1,00,000
To Interest on Debentures A/c 1,00,000
(Being interest transferred of profit & loss)

OR

Date Particulars L.
F.
Debit
(₹)
Credit
(₹)
Sundry Assets A/c Dr. 3,20,000
To Sundry Liabilities A/c 30,000
To Yogesh Ltd. A/c 2,70,000
To Capital Reserve A/c (balancing figure) 20,000
(Being purchase of assets and liabilities taken over of Yogesh)
Yegesh Ltd. A/c Dr. 2,70,000
Loss on Issue of Debenture A/c (30,000 + 15,000) Dr. 45,000
To 11% Debenture A/c 3,00,000
To Premium on Redemption of Debenture Issued A/c 15,000
(Being 30,000; 11% debenture ₹100)

20.

Journal

Date Particulars L.
F.
Debit
(₹)
Credit
(₹)
Z’s Capital A/c Dr. 16,000
To X’s Capital A/c 8,000
To Y’s Capital A/c 8,000
(Being adjustment entry made for goodwill reserve and revaluation effect)

X’s sacrifice =(1/15); Z’s gain=(2/15)

diagram248

Calculation of effective profit

General Reserve = 60,000

Goodwill            = 30,000

Revaluation profit = 30,000

Total effective profit = 1,20,000

diagram249

21.

Balance Sheet of Janta Ltd.

Particulars Note
No.
Current
Year
(₹)
Previous
Year
(₹)
EQUITY AND LIABILITIES :
Shareholders' Funds :
Share Capital 1 5,79,600
Total 5,79,600

Notes to Accounts:

Particulars Amount
(₹)
1. Share Capital :
Authorised Capital
2,00,000 Equity Shares of ₹10 each 20,00,000
Issued Capital
1,00,000 Equity Shares of ₹ 10 each 10,00,000
Subscribed Capital:
Subscribed Capital but not Fully Paid
96,400 Shares of ₹ 10 each, ₹6 called up 5,78,400
Add: Share Forfeited A/c 1,200 5,79,600

22.                     Journal Entries

Date Particulars L.
F.
Debit
(₹)
Credit
(₹)
Profit & Loss A/c Dr. 12,000
To Rohan’s Capital A/c 7,200
To Sohan’s Capital A/c 4,800
(Being profit & loss account balance transferred to capital A/cs)
Rohan’s Capital A/c Dr. 4,800
Sohan’s Capital A/c Dr. 3,200
Sohan’s Capital A/c Dr. 3,200
To Advertisement Suspense A/c 8,000
(Being advertisement suspence account balance transferred to capital account)
Rohan’s Loan A/c Dr. 20,000
To Bank A/c 20,000
(Being payment of Rohan;s loan made)
Workmen Compensation Reserve A/c Dr. 15,000
To Rohan’s Capital A/c 9,000
To Sohan’s Capital A/c 6,000
(Being balance of workmen compensation reserve transferred to capital account) 6,000

23.

In the Books of Devam Ltd.

Journal

Date Particulars L.
F.
Debit
(₹)
Credit
(₹)
Bank A/c (45,000 × 3) Dr. 1,35,000
To Equity Share Application A/c 1,35,000
(Being application money received on 45,000 shares)
Equity Share Application A/c Dr. 1,35,000
To Equity Share Capital A/c (30,000 × 2) 60,000
To Securities Premium Reserve A/c (30,000 × 1) 30,000
To Equity Share Allotment A/c 18,000
To Bank A/c 27,000
(Being application money on 30,000 shares transferred to share capital account and securities premium reserve account, on 9,000 share refended and excess amount adjusted to share allotment account)
Equity Share Allotment A/c Dr. 1,20,000
To Equity Share Capital A/c 90,000
To Securities Premium Reserve A/c 30,000
(Being allotment amount due to 30,000 shares @ ₹4 per share including premium)
Bank A/c Dr. 1,00,300
Calls in Arrears A/c Dr. 1,700
To Equity Share Allotment A/c 1,02,000
(Being allotment amount received after adjusting excess money received on application except share to Gaganpreet)
Equity Share Capital A/c Dr. 2,500
Securities Premium Reserve A/c Dr. 500
To Calls in Arrears A/c 1,700
To Share Forfeited A/c 1,300
(Being forfeited of 500 shares of Sudhir)
Equity Share First Call A/c Dr. 1,18,000
To Equity Share Capital A/c 88,500
To Securities Premium Reserve A/c 29,500
(Being first call amount due on 29,500 shares)
Bank A/c Dr. 1,15,000
Calls in Arrears A/c (750 × 4) Dr. 3,000
To Equity Share First Call A/c 1,18,000
(Being first call amount received on 28,750 shares)
Equity Share Capital A/c (750 × 8) Dr. 6,000
Securities Premium Reserve A/c Dr. 750
To Equity Share First Call A/c 3,000
To Share Forfeited A/c 3,750
(Being forfeited of 750 shares of Muskan)
Bank A/c Dr. 4,000
Share Forfeited A/c Dr. 1,000
To Equity Share Capital A/c 5,000
(Being re-issued of 500 forfeited shares of Sudhir)
Share Forfeited A/c Dr. 300
To Capital Reserve A/c 300
(Being profit on 500 re-issued shares transferred to capital reserve)
Equity Share Second & Final Call A/c Dr. 86,250
To Equity Share Capital A/c 57,500
To Securities Premium Reserve A/c 28,750
(Being second and final call money due on 28,750 shares)
Bank A/c Dr. 83,250
Calls in Arrears A/c (1,000 × 3) Dr. 3,000
To Equity Share Second & Final Call A/c 86,250
(Being second and final call amount received on 27,750 shares) 86,250
Equity Share Capital A/c Dr. 10,000
Securities Premium Reserve A/c Dr. 1,000
To Equity Share Second and Final Call A/c 3,000
To Share Forfeited A/c 8,000
(Being forfeited of 1,000 shares of Amit)
Bank A/c Dr. 18,000
To Equity Share Capital A/c 15,000
To Securities Premium Reserve A/c 3,000
(Being re-issued of 1,500 forfeited shares including 1,000 shares of Amit and 500 shares of Muskan)
Share Forfeited A/c Dr. 10,500
To Capital Reserve A/c 10,500
(Being profit on 1,500 re-issued shares transferred to capital shares)

Working Notes:

1.

(a) Amount received on allotment

Amount due on allotment 30,000 share × ₹4 per share 1,20,000

Less: Excess application amount applied for allotment    18,000

Amount actually due on allotment                               1,02,000

(b) Share alloted to Sudhir =(30,000/36,000)×600 = 500 shares

Allotment money due from Sudhir (500 shares × ₹4 per share)   2,000

Less: Excess application money paid (100 × ₹3) (300)

Allotment money due from Sudhir                       1,700

(c) Amount actually due on allotment                 1,02,000

Less: amount unpaid by Sudhir                          (1,700)

Amount received on allotment                            1,00,300

2. 1,500 shares have been re-issued including 1,000 share of Amit and balance 500 shares of Muskan.

diagram250

OR

(i)

Journal Entries

Date Particulars L.
F.
Debit
(₹)
Credit
(₹)
Furniture A/c Dr. 2,50,000
To M/s Furniture Gallary A/c 2,50,000
(Being purchased furniture)
M/s Furniture Gallary A/c Dr. 2,50,000
To Equity Share Capital A/c 2,00,000
To Security Premium Reserve A/c 50,000
(Being (2,50,000/12.5)=20,000)

(ii)

Journal Entries

Date Particulars L.
F.
Debit
(₹)
Credit
(₹)
Plant A/c Dr. 3,50,000
Stock A/c Dr. 4,50,000
Land & Building A/c Dr. 6,00,000
Goodwill A/c (Balancing figure) Dr. 2,00,000
To Sundry Creditor A/c 1,00,000
To Gupta Ltd. A/c 15,00,000
(Being business purchased)
Gupta Ltd. A/c Dr. 15,00,000
To Share Capital A/c 12,00,000
To Bank A/c 3,00,000
(Being payment made to Gupta Ltd. through bank draft and issue of shares)

24. Dr.

Revaluation Account

Cr.

Particulars Amount
(₹)
Particulars Amount
(₹)
To Stock A/c 20,000 By Loss on Revaluation Transferred to:
To Furniture A/c 18,000 Rajat A/c 26,600
Ravi A/c 11,400 38,000
38,000 38,000

Dr.

Partners’ Capital Accounts

Cr.

Particulars Rajat Ravi Rohan Particulars Rajat Ravi Rohan
(₹) (₹) (₹) (₹) (₹) (₹) (₹)
To Rev. Loss 26,600 11,400 By Bank A/c 10,000 80,000
To Cash A/c 20,600 By General Reserve 7,000 3,000
To Balance c/d 1,26,000 54,000 60,000 By Cash 38,600 60,000
By Premium for
Godwill 7,000 3,000
1,52,600 86,000 60,000 1,52,600 86,000 60,000

Working Notes:

Total New Capital = 60,000 ×(4/1) = 2,40,000

Rajat’s New Capital = 2,40,000 ×(21/40) = 1,26,000

Ravi’s New Capital = 2,40,000 ×(9/40)=54,000

Remaining Share = 1 –(1/4)=(3/4)

Rajat’s New Share = (7/10)×(3/4)=(21/40)

Ravi’s New Share =(3/10)×(3/4)=(9/40)

New Profit Sharing Ratioi =(21/40):(9/40):(1/4) = 21:9:10

OR

Dr.

B’s Capital Account

Cr.

Date Particular’s Amount
(₹)
Date Particulars Amount
(₹)
To B’s Executor’s A/c 1,94,100 By Balance b/d 90,000
By Profit & Loss Suspence A/c 10,500
By A’s [Premium for Goodwill] 75,600
By General Reserve A/c 18,000
1,94,100 1,94,100

Dr.

B’s Executor’s Account

Cr.

Date Particular’s Amount
(₹)
Date Particulars Amount
(₹)
To B’s Executor’s A/c 1,94,100 By B’s Capital A/c 1,94,100
1,94,100 1,94,100

Working Notes:

1. Profit =(42, 000 + 39, 000 + 45,000/3) =₹42,000

B’s Share = 42,000 ×(5/12)×(3/5) =₹10,500

2. Goodwill =(42,000+39,000+45000/3)×3=₹1,26,000

B’s Share = 1,26,000 ×(3/5) =₹75,600

3. General Reserve = 30,000 ×(3/5)=₹18,000

25. Dr.

Revaluation Account

Cr.

Particulars Amount
(₹)
Particulars Amount (₹)
To Rev. Profit: By Stock 16,000
Rohit 36,000 By Buildings 1,00,000
Riya 60,000 By Investment 4,000
Naman 24,000 1,20,000
1,20,000 1,20,000

 Dr.

Partners’ Capital Accounts

Cr.

Particulars Rohit Riya Naman Particulars Rohit Riya Naman
To Riya’s Capital A/c 90,000 60,000 By Balance b/d 3,00,000 2,00,000 1,00,000/td>
To Riya’s Loan A/c 4,30,000 By General Reserve 12,000 20,000 8,000
To Balance c/d 2,58,000 72,000 By Rev. Profit 36,000 60,000 24,000
By Rohit (goodwill) 90,000
By Naman (goodwili) 60,000
3,48,000 4,30,000 1,32,000 3,48,000 4,30,000 1,32,000
To Balance c/d 3,00,000 2,00,000 By Balance b/d 2,58,000 72,000
By Rohit’s Current A/c 42,000
By Naman’s
Current A/c 1,28,000
3,00,000 2,00,000 3,00,000 2,00,000

Balance Sheet

Liabilities Amount
(₹)
Assets Amount
(₹)
Sundry Creditors 60,000 Cash (50,000 + 34,000) 84,000
Capital Accounts: Stock 96,000
Rohit 3,00,000 Debtors 40,000
Naman 2,00,000 5,00,000 Buildings 6,00,000
Riya’s Loan A/c 4,30,000 Current Account:
Rohit 42,000
Naman 1,28,000 1,70,000
9,90,000 9,90,000

26. (a)

Journal Entries

Date Particulars L.
F.
Debit
(₹)
Credit
(₹)
2022
1 Jan. Bank A/c Dr. 40,00,000
To Debenture Application & Allotment A/c 40,00,000
1 Jan. Debenture Application & Allotment A/c Dr. 40,00,000
Loss on Issue of Debentures A/c Dr. 2,00,000
To 10% Debentures A/c 40,00,000
To Premium on Redemption of Debenture A/c 2,00,000
31 Mar. Statement of Profit & Loss A/c Dr. 2,00,000
To Loss on Issue of Debentures A/c 2,00,000

(b)

Date Particulars L.
F.
Debit
(₹)
Credit
(₹)
(i) Bank A/c Dr. 20,00,000
To Bank Loan A/c 20,00,000
(Being took a bank loan)
(ii) Debentures Suspense A/c Dr. 25,00,000
To 10% Debentures A/c 25,00,000
(Being debenture issued as a collateral)

In balance sheet loan will be shown as long-term.

Part - B

(Analysis of Financial Statement)

(Option-I)

27. (b) Other-current Liabilities

OR

(a) To decide whether or not the borrower has the ability to repay the interest and principal on borrowed funds.

28. (a) Payment of Bills payable on maturity

29. (b) 25%

Explanation:

diagram251

OR

(c) Issue of shares for cash.

30. (d) Cash flow from operating activities

 Explanation :

The amount of money which company earns from ongoing, regular business operations, such as production and sales of goods or the provision of services to clients, is known as cash flow from operating activities.

  • 31. (i) Non-current Assets – Fixed Assets – Tangible
  • (ii) Current Assets – Inventories
  • (iii) Non-current Assets – Fixed Assets (Intangible)
  • (iv) Non-current Liabilities – Long-term Borrowings
  • (v) Current Liabilities – Short-term Borrowings
  • (vi) Shareholder’s Funds – Reserves and Surplus
  • (vii) Non-current Assets – Fixed Assets (Tangible)
  • (viii) Current Assets – Cash and Cash Equivalents.

32. Yes, accounting ratio are ignore qualitative factors, which may be important in decision making and also Accounting Ratio may not be comparable because different firms follow different accounting policies and procedures. There is no single standard ratio against which accounting ratio can be compared.

33. Inventory Turnover Ratio = (Cost of Revenue from Operation/Average Inventory)

Let cost of revenue from operation be x

(x + 25x/ 100) = 3,00,000

x =(3,00,000/125)×100 = 2,40,000

Closing Inventory = ₹90,000 i.e., 30% of ₹3,00,000 (Revanue from operation)

Opning Inventory = ₹30,000 i.e.,(1/3) of  ₹90,000 (Closing inventory)

Thus, Inventory Turnover Ratio =(₹2,40,000/₹60,000)=4 times

Average Inventory = (30,000+90,000/2)

 = (1, 20, 000/2)=60,000

OR

(a) Gross Profit Ratio =(Gross Profit/Revenue from Operation)×100

=(75 ,000/2 ,00,000)×100  = 37.5%

(b) Net Profit Ratio =(Net Profit After Tax/Revenue from Operation)× 100

Profit After Tax = Gross profit + Other Income – Indirect Expenses/Losses – Tax

Other Income = ₹4,500

Indirect Expenses = Employee Benefit Expenses + Depreciation + Selling Expenses + Distribution Expenses + Finance Costs + Loss on Sale of Tangibale Fixed Assets

= 10,000 + 5,000 + 16,000 + 10,000 + 5,000 + 12,000 = ₹58,000

So, Profit After Tax = 75,000 + 4,500 – 58,000 – 1,500 (Provision for tax) = ₹20,000

Thus, Net Profit Ratio =(₹20,000/₹2,00,000)×100 = 10%

34.

Cash Flow Statement of ABC Ltd.

for the year ended 31st March 2018

Particulars Amount
(₹)
A. Cash Flow from Operating Activities
Profit before tax (Working Note 1) 3,10,000
Depreciation on Plant 20,000
Depreciation on Land and Building 40,000
Goodwill written off 50,000 1,10,000
4,20,000
Less: Rent Received (20,000)
Operating profit before working capital changes 4,00,000
Add: Increase in current liabilities:
Trade Payables 64,000 64,000
4,64,000
Less: Increase in Current Assets:
Inventory 64,000
Trade Receivables 1,00,000 1,64,000
Cash generated from operating activities 3,00,000
Less: Income Tax Paid (70,000)
Cash flow from operating activities 2,30,000
B. Cash Flow from Investing Activities
Sale of Land and Building2 20,000
Purchase of Plant<3> (2,60,000)
Rent Received 20,000
Net cash used in investing activities (2,20,000)
C. Cash Flow from Financing Activities (2,20,000)
Issue of share capital 1,00,000
Payment of proposed dividend (for 2017) (84,000)
Interim dividend paid (40,000)
Net cash from financing activities 24,000
Net increase in cash and cash equivalents (A + B + C) (14,000)
Add: Cash and Cash equivalents in the beginning of the period 50,000
Cash and cash equivalents at the end of the period 36,000

Working Notes:

1. Profit before Tax:

Profit & Loss Balance on 31st March 2018

Less: Profit & Loss Balance on 31st March 2017

Add: Proposed Dividend for 2017

Interim Dividend Paid

Transfer to General Reserve

Provision for taxation4

(₹)

96,000

(60,000)

36,000

84,000

40,000

60,000

90,000

3,10,000

2.

Dr.

Land and Building Account

Cr.

Particulars Amount
(₹)
Particulars Amount
(₹)
To Balance b/d 4,00,000 By Statement of Profit & Loss 40,000
(Current year’s depreciation)
By Bank A/c (Balancing figure being sales) 20,000
By Balance c/d (Given) 2,40,000
4,00,000 4,00,000

3.

Dr.

Plant Account

Cr.

Particulars Amount
(₹)
Particulars Amount
(₹)
To Balance b/d 1,60,000 By Statement of Profit & Loss 20,000
To Bank A/c 2,60,000 (Current year’s depreciation)
(Balance figure, being purchase) By Balance c/d (Give) 4,00,000
4,20,000 4,20,000

4.

Dr.

Provision for Tax Account

Cr.

Particulars Amount
(₹)
Particulars Amount
(₹)
To Bank A/c (Payment made) Given 70,000 By Balance b/d (Given) 80,000
To Balance c/d (Given) 1,00,000 By Statement of Profit & Loss 90,000
(Balancing figure being provision made in 2018)
1,70,000 1,70,000

Note:

Rent received is deducted from profit because it is related to investment in property. It will be shown as inflow of cash under Invseting Activity.

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