# Oswal 36 Sample Question Papers ISC Class 12 Accounts Solutions

## Section-A

(i) (a) ₹6,500

Explanation :

The calculation of interest on drawings is as given below:

₹1,20,000 ×(10/100)×(6.5/12)= ₹6,500

(ii) (a) Discount on issue of debenture A/c

Explanation :

When debenture is issued at discount and redeemed at par, then following entry is passed:

 Debenture Application & Allotment A/c Dr. Discount on issue of Debenture A/c Dr. To Debenture A/c

When redemption is at premium the loss on issue of debenture A/c is debited.

(iii) (d) All of these

Explanation :

Any distributive reserves and profits appear in the books of account; it should be written off by debiting by that reserve and/or profit and crediting by all partner’s capital. Thus, General reserve, Reserve fund and Profit & loss A/c should be debited.

(iv) (a) provide for discount given at the time of re-issue

Explanation :

The balance of share forfeiture account can be only used to provide for discount given at the time of re-issue. The balance left after providing for discount is transferred to capital reserve account.

(v) When partnership deed provides for interest on capital but profit earned by the firm is not enough to do so in that case the interest on capital of partners will be restricted to the amount of profit of the firm and it is distributed amongst the partners in the ratio of their capitals.

(vi) (c) ₹3,60,000

Explanation :

Loss on issue = Discount on issue + Premium on Redemption

= 2,40,000 + 1,20,000 = ₹3,60,000

(vii) (c) Bearer debentures

Explanation :

Debentures which are transferable by mere delivery are called Bearer debentures.

 (viii) Interest on Capital A/c Dr. To Partner’s Current A/c (Being adjustment entry for interest on capital)
Explanation :

Call-in-advance is always treated as current liability because it is reversed when call money is called-up by company.

(x) (a) ₹16,000

Explanation :

Calculation of Shyam’s share in profit will be:

Commission to Ram: ₹42,000 ×(5/100)=₹2,000

Net profit of the firm (after Commission to Ram) = ₹40,000

Shyam’s share in profit will be = ₹40,000 ×(2/5)=₹16,000.

 Dr. Realisation Account Cr. Particulars Amount (₹) Particulars Amount (₹) To Debtors A/c 1,500 By Provision for Doubtful Debt A/c 100 To Stock A/c 8,000 By Creditors A/c 1,850 To Investment A/c 2,000 By Mrs. A’s Loan A/c 500 To Plant A/c 7,500 By Investment Fluctuation Fund A/c 750 To Goodwill A/c 3,500 By Bank A/c (Assets Realised) : To Bank A/c (Expenses) 100 Debtors (75% of 1,000)  750 To Bank A/c (Damages) 800 Stock                5,900 To Bank A/c : Plant                 4,000 10,650 Creditors   1,850 By A’s Capital A/c Mrs. A’s Loan 500 2,350 (Investments taken) 2,500 By B’s Capital A/c (Debtors taken) 400 By Loss transferred to : A’ Capital A/c 4,500 B’ Capital A/c 3,000 C’ Capital A/c 1,500 9,000 25,750 25,750

OR

 Dr. Realisation Account Cr. Particulars Amount (₹) Particulars Amount (₹) To Plant A/c 50,000 By Provision for Doubtful Debts 2,000 To Debtors A/c 40,000 By Creditors 50,000 To Investments A/c 80,000 By Investment Fluctuation Reserve 5,000 To Land A/c 1,00,000 By Cash : 750 To Goodwill A/c 7,000 Debtors    40,000 To Cash A/c : Plant      30,000 Realisation Expenses 500 Land      1,20,000 Creditors         50,000 50,500 Investments 45,000 2,35,000 To Profit transferred to : By Ram’s Capital A/c Ram’s Capital 1,500 (Investment taken over) 13,333 Shyam’s Capital 1,600 By Shyam’s Capital A/c Simran’s Capital 1,400 4,500 (Investment taken over) 14,222 By Simran’s Capital A/c 12,445 (Investment taken over) 3,32,000 3,32,000

Working Note:

Investment to be taken over by partners in the ratio of capitals.

∴ (80, 000) x (1/2)=₹40,000 in 75 : 80 : 70

For Ram : Shyam : Simran

Journal

 Date Particulars L.F. Debit (₹) Credit (₹) 2019 6% Debentures A/c    Dr. 10,00,000 Oct., 1 Premium on Redemption of Debentures A/c    Dr. 40,000 To Debentureholders A/c 10,40,000 (Being amount payable on redemption of debentures including premium of 4%) ” Debentureholders A/c (4,000 × ₹104)         Dr. 4,16,000 To 8% Preference Share Capital A/c (4,16,000 × 100/130) 3,20,000 To Security Premium Reserve A/c (4,16,000 × 30/130) 96,000 (Being debentureholders satisfied by allotment of preference shares of ₹100 each at a premium of ₹30 per share) ” Debentureholders A/c (4,800 × ₹104)          Dr. 4,99,200 Discount on Issue of Debentures A/c (4,99,200 × 4/96) Dr. 20,800 To 7% Debentures A/c (5,200 × 100) 5,20,000 (Being debentureholders satisfied by allotment of debentures of ₹100 each at a discount of 4%) ” Debentureholders A/c (1,200 × 104)   Dr. 1,24,800 To Bank A/c 1,24,800 (Being amount paid to Debentureholders) ” Security Premium Reserve A/c     Dr. 20,800 To Discount on Issue of Debentures A/c 20,800 (Being discount on issue of debentures written off)
 Dr. Debentureholders Account Cr. Particulars Amount(₹) Particulars Amount(₹) To 8% Preference Share Capital A/c 3,20,000 By 6% Debentures A/c 10,00,000 To Security Premium Reserve A/c 96,000 By Premium on Redemption of 40,000 Debentures A/c To 7% Debentures A/c Debentures A/c (5,20,000 – 20,800) 4,99,200 To Bank A/c 1,24,800 10,40,000 10,40,000

In the books of Trans. Ltd.

Journal

 Date Particulars L.F. Debit (₹) Credit (₹) Bank A/c                     Dr. 60,00,000 To 8% Debentures Application A/c 60,00,000 (Being Application money received on 30,000 debentures @₹200 each) 8% Debentures Application A/c Dr. 60,00,000 To 8% Debentures A/c (20,000 × 150) 30,00,000 To Securities Premium Reserve A/c (20,000 × 50) 10,00,000 To 8% Debentures Allotment A/c (10,000 × 200) 20,00,000 (Being Transfer of application money to 8% Debentures A/c and the excess money to allotment A/c) 8% Debentures Allotment A/c Dr. 70,00,000 To 8% Debentures A/c 70,00,000 (Being Allotment due on 20,000 debentures @ ₹350 each) Bank A/c Dr. 50,00,000 To 8% Debentures Allotment A/c 50,00,000 (Being Allotment money received)

OR

In the books of Gold Ltd.

Journal

 Date Particulars L.F. Debit (₹) Credit (₹) Sundry Assets A/c                 Dr. 15,00,000 To Sundry Liabilities A/c 3,00,000 To Silver Ltd. 10,00,000 To Capital Reserve A/c [ Balancing Figure] 2,00,000 (Being purchase of business of Silver Ltd.) Silver Ltd.                      Dr. 10,00,000 Discount on Issue of Debentures A/c Dr. 1,11,110 To Debentures A/c 11,11,100 To Bank A/c 10 (Being debentures of ₹100 each issued at a discount of 10% and balance paid in cash)

Working Note :

No. of Debentures issued =(₹10 00 000/₹100 -10 %)=11,111 Debentures

So, Amount of Debentures = 11,111 × 100 = ₹11,11,100

Less : Discount 10% = [11,11,100 × 10%] = ₹1‚11‚110

Amount Payable in Debentures = ₹9,99,990

Balance amount paid in cash = ₹10 = ₹10,00,000

Calculation of Average profit :

 Year Ended Profit/Loss (₹) 31st March, 2016 60,000 (Profit) 31st March, 2017 1,40,000 (Profit) 31st March, 2018 2,00,000 (Profit) 31st March, 2019 2,80,000 (Profit) 31st March, 2020 (2,10,000) (Loss) (see note) Total profit 4,70,000

Average Profit =(₹4,70,000/5)

= ₹94,000

Goodwill = Average Profit × Number of Year's Purchase

₹94,000 × 4 = ₹3,76,000

Note: Calculation of Adjusted loss for the year ended 31st March, 2020
 ₹ Loss for the year ended 31.3.2020 2,40,000 Less: Cost of cycles wrongly debited to profit and loss A/c (40,000) 2,00,000 Add: Depreciation @ 25% on ₹40,000 (cycle) + 10,000 Loss for the year 2,10,000

 Dr. Realisation Account Cr. Particulars Amount (₹) Particulars Amount (₹) To Sundry Assets A/c : By Creditors A/c 12,000 Debtors     8,000 By Provision for Doubtful Debts A/c 200 Stock       6,000 By Bank A/c : Furniture  2,000 Debtors   7,000 Buildings  22,000 38,000 Stock     5,000 To Bank A/c : 38,000 Furniture 1,000 Creditors 11,000 Building 25,000 38,000 Liability for Damages  3,000 By Loss transferred to Capital A/cs : 38,000 Realisation Expenses - 15,000 A 38,000 1,000 1,120 B 1,120 1,120 C 2,800 560 53,000 53,000
 Dr. Partners’ Capital Account Cr. Particulars A B C Particulars A B C To Realisation A/c 1,120 1,120 560 By Balance b/d 15,000 12,000 6,000 To Bank A/c (Final payment) 15,880 12,880 6,440 By General Reserve A/c 2,000 2,000 1,000 17,000 14,000 7,000 17,000 14,000 7,000
 Dr. Bank Account Cr. Particulars Amount (₹) Particulars Amount (₹) To Balance b/d 12,200 By Realisation A/c 15,000 To Realisation A/c 38,000 By A’s Capital A/c 15,880 By B’s Capital A/c 12,880 By C’s Capital A/c 6,440 50,200 50,200

 (i)   Profit and Loss Appropriation Account Dr. (for the year ended 31 March 2019) Cr. Particulars Amount (₹) Particulars Amount (₹) To Interest on Capital A/c: By Profit and Loss A/c (NP) Anita’s Capital A/c  50,000 Add : (4,00,000 + 12,000 – 9000) 4,03,000 Tony’s Capital A/c  75,000 1,25,000 By Interest on Drawings A/c: To Commission to Anita 16,120 Anita  1,200 (403400 × 4%) 16,120 Anita  1,200 To Salary to Tony 12,000 Tony 1,650 2,850 To Profit transferred to: Anita’s Capital A/c 1,26,365 Tony’s Capital A/c 1,26,365 2,52,730 4,05,850 4,05,850

Working Note :

Calculation of Interest on Drawings :

Anita ⇒ 30 000×(6/100)×(8/12)

⇒ ₹ 1,200

Tony ⇒ 5 000×(6/100)×(11 +10 +9 +8+ 7+ 6+ 5 +4 +3 +2 +1/12)

⇒ 5 000×(6/100)×(5.5)

⇒ ₹  1,650

 (ii) Dr. Partners’ Capital Account Cr. Particulars Anita Tony Particulars Anita Tony To Drawings A/c 30,000 60,000 By Balance b/d 5,00,000 7,50,000 To Interest on Drawings 1,200 1,650 By Interest on Capital 50,000 75,000 To Balance c/d 6,61,285 9,01,715 By Commission 16,120 By Salary 12,000 By Profit & Loss 1,26,365 1,26,365 Appropriation A/c 6,92,485 9,63,365 6,92,485 9,63,365

Working Notes :

Calculation of Interest on Capital:

Anita = 5, 00, 000 10 100×(10/100) → 50,000 (₹ 5,00,000 as Plant and Machinery)

Tony = 7 ,50, 000 × (10/100) →75,000 (₹ 7,50,000 i.e., Furniture of ₹ 50,000 and ₹ 7,00,000 in Cash)

OR

 (i) Profit and Loss Appropriation Account Dr. (for the year ended 31st March,2014) Cr. Particulars Amount (₹) Particulars Amount (₹) To Interest on Capital A/c : By Profit & Loss A/c  70,000 Rohit Capital A/c  ₹7,200 By Ali’s Capital A/c 10,000 80,000 Ali Capital A/c  ₹6,000 By Interest on Drawings A/c : Sneh Capital A/c  ₹6,000 19,200 Rohit Capital A/c  ₹195 To Salary A/c (Ali) 6,000 Ali Capital A/c  ₹195 To Profit transferred to: Sneh Capital A/c  ₹195 585 Rohit’s Capital A/c ₹22,154 Ali’s Capital A/c ₹ 22,154 Sneh’s Capital A/c ₹ 11,077 55,385 80,585 80,585
 (ii) Dr. Partners’ Capital Account Cr. Particulars Rohit Ali Sneh Particulars Rohit Ali Sneh To Profit & Loss By Balance b/d 1,20,000 1,00,000 1,00,000 Appropriation A/c — 10,000 — By Interest on Capital A/c 7,200 6,000 6,000 To Drawings A/c 12,000 12,000 12,000 By Salary A/c — 6,000 — To Interest on By Profit & Loss Drawings A/c 195 195 195 Appropriation A/c 22,154 22,154 11,077 To Balance c/d 1,37,159 1,11,959 1,04,882 1,49,354 1,34,154 1,17,077 1,49,354 1,34,154 1,17,077

Working Note :

Calculation of Interest on Drawings :

Interest on drawings of each of the partner = (1,000 × 12) × 3/100 × 6.5/12 = ₹ 195

Balance Sheet of Watson Co. Ltd.

(as on 31st March, 2019)
 Particulars Note No. Amount (₹) I. EQUITY AND LIABILITIES 1. Shareholders Funds : (a) Share Capital 1 3,00,000 (b) Reserves and Surplus 2 3,74,000 2. Non-Current Liabilities : Long-term Borrowings 3 1,00,000 3. Current Liabilities : (a) Short-term Borrowings 4 2,00,000 (b) Other Current Liabilities 5 10,000 Total 9,84,000 II. ASSETS 1. Non-Current Assets : Property Plant and Equipment and Intangible Assets 6 8,34,000 2. Current Assets : Inventories 1,50,000 Total 9,84,000

Notes to Account :

 Note No. Particulars Amount (₹) 1. Share Capital : Authorised Capital (…… shares @ ₹ ……) …… Issued, Subscribed and Called up Capital : 2,000 Equity Shares @ ₹ 100 2,00,000 1,000, 6% Preference Shares @ ₹ 100 1,00,000 3,00,000 2. Reserves and Surplus : General Reserve 20,000 Statement of Profit and Loss – (Cr.) 3,54,000 3,74,000 3. Long-term Borrowings : 10% Debentures 1,00,000 4. Short-term Borrowings : 1,00,000 Bank Overdraft 2,00,000 5. Other Current Liabilities (Interest accrued and due on 10% debentures) 10,000 6. Property Plant and Equipment and Intangible Assets : Machinery 1,60,000 Land and Buildings 6,74,000 8,34,000

Note : ₹20,000 equity dividend and ₹6,000 preference dividend proposed to be distributed to the equity shareholders & preference shareholders respectively are Contingent Liabilities.

 Dr. Revaluation Account Cr. Date Particulars Amount (₹) Date Particulars Amount (₹) 2016 2016 Apr. 1 To Plant and Machinery A/c 16,000 Apr. 1 By Provision for Doubtful ” By Creditors A/c 2,000 ” By Loss transferred to : Juliet’s Capital A/c  ₹9,000 Rabani’s Capital A/c  ₹3,000 12,000 16,000 16,000
 Dr. Partners’ Capital Account Cr. Date Particulars Juliet Rabani Mike Date Particulars Juliet Rabani Mike 2016 2016 Apr. 1 To Revaluation A/c 9,000 3,000 Apr. 1 By Balance b/d 1,10,000 90,000 ” To P/L A/c 12,000 4,000 By Gen. Res. A/c 22,500 7,500 ” By Premium for Goodwill A/c 11,250 3,750 1,43,750 1,01,250 1,00,000 1,43,750 1,01,250 1,00,000 ” To Current A/c 19,250 ” By Balance b/d 1,22,750 94,250 1,00,000 To Balance c/d 2,25,000 75,000 1,00,000 ” By Bank/ Cash A/c 1,02,250 2,25,000 94,250 1,00,000 2,25,000 94,250 1,00,000

Balance Sheet of Juleit, Rabani and Mike

(as on 1st April, 2016)
 Liabilities Amount (₹) Assets Amount(₹) Sundry Creditors 68,000 Plant and Machinery 1,60,000 Provident Fund 40,000 Inventory 26,000 Rabani Current A/c 19,250 Sundry Debtors ₹57,000 Capitals A/c: Less : Provision for Doubtful Juliet  ₹2,25,000 Debts 1,000 56,000 Rabani  ₹75,000 Cash at Bank 2,85,250 Mike  ₹1,00,000 4,00,000 (68,000 + 1,00,000 + 1,02,250 + 15,000) 5,27,250 5,27,250

Working Notes :

(i) Premium for goodwill = 60,000 ×(1/4)=₹15,000

Premium for goodwill is distributed between Juliet and Rabani in the sacrificing ratio 3 : 1. As the new ratio is not mentioned, hence it is taken that the partners have sacrificed in their old ratio itself.

(ii) Readjustment of Capitals in the New Ratio:

Mike’s Capital for(1/4)th share= ₹1,00,000

⇒ Total Capital = 1,00,000 × 4 = ₹4,00,000

Hence, Juliet’s Capital = 4,00,000 × (9 /16) = ₹2,25,000

Rabani’s Capital = 4,00,000 ×(3/16)=₹75,000

(iii) Calculation of New Profit Sharing Ratio:

Let total profit be 1 Mike’s share =(1/4)

Remaining Profit = 1 –(1/4)=(3/4)

Hence, Juliet’s share = (3 /4)×(3/4)=(9/16)

Rabani’s share =(3/4)×(1/4)=(3/16)

Mike’s share =(1/4)or(4/16)

New ratio = 9 : 3 : 4

OR

 Dr. Revaluation Account Cr. Particulars Amount (₹) Particulars Amount (₹) To Plant and Machinery A/c 8,500 By Land and Building A/c 57,000 To Provision for Bad Debts A/c 1,500 To Outstanding Repairs to Building A/c 3,000 To Xavier’s Capital A/c (5/8th of profit) 27,500 To Youhan’s Capital A/c (3/8th of profit) 16,500 57,000 57,000
 Dr. Partners’ Capital Account Cr. Particulars Xavier Youhan Zeus Particulars Xavier Youhan Zeus To Youhan’s By Balance b/d 2,05,000 1,65,000 Current A/c 28,500 By P/L Appropriation To Balance 3,00,000 1,80,000 1,20,000 A/c 35,000 21,000 c/d By Revaluation A/c 27,500 16,500 By Bank A/c 1,20,000 By Premium for 10,000 6,000 Goodwill A/c (5 : 3) By Xavier’s Current 22,500 A/c 3,00,000 2,08,500 1,20,000 3,00,000 2,08,500 1,20,000

Balance Sheet

(as on 31st March, 2020)
 Liabilities Amount (₹) Assets Amount (₹) Xavier’s Capital A/c 3,00,000 Land and Building 2,47,000 Youhan’s Capital A/c 1,80,000 Plant and Machinery 76,500 Zeus’s Capital A/c 1,20,000 Furniture 54,740 Youhan’s Current A/c 28,500 Stock 72,630 Trade Creditors 27,400 Debtors  30,000 Outstanding Repairs to Building A/c 3,000 Less : Provision for Bad Debts (1,500) 28,500 Cash at Bank 1,57,030 Xavier’s Current A/c 22,500 6,58,900 6,58,900

Working Note:

New Profit sharing Ratio — Zeus’s Share =(1/5)

Remaining share = 1 –(1/5)=(4/5)

Xavier’s Share =(5/8)×(4/5)=(20/40)=(1/2)

Youhan’s Share =(3/8)×(4/5)=(12/40)=(3/10)

(1/2):(3/10):(1/5)=(5 :3 :2/10)=5 : 3 : 2

Required balances of capital A/c

Zeus’s Capital = ₹1,20,000

Zeus’s share of profit = 1/5

Hence total capital of the firm = 1,20,000 × 5 = ₹6,00,000

Xavier’s New Capital = ₹6,00,000 ×(5/10)=₹3,00,000

Youhan’s New Capital = ₹6,00,000 ×(3/10)=₹1,80,000

 Dr. Cash Book Cr. Date Particulars L.F. Amount (₹) Date Particulars L.F. Amount (₹) 2017 To Equity Share 1,25,000 2017 By Equity Share 5,000 May 1 Application A/c May 1 Application A/c July 1 To Equity Share 2,29,000 2018 By Balance c/d 5,98,000 Allotment A/c Mar. 31 Oct. 1 To Equity Share First 2,49,000 and Final call A/c 6,03,000 6,03,000 2018 April, 1 To Balance b/d 5,98,000

Journal

 Date Particulars L.F. Debit (₹) Credit (₹) 2017 May 1 Equity Share Application A/c  Dr. 1,20,000 To Equity Share Capital A/c 1,00,000 To Share Allotment A/c 20,000 (Being application amount transferred) July 1 Equity Share Allotment A/c   Dr. 2,50,000 To Equity Share Capital A/c 1,50,000 To Securities Premium Reserve A/c 1,00,000 (Being allotment amount due on 50,000 shares @ ₹ 5 including premium @ ₹ 2) July 1 Calls in Arrears A/c  Dr. 1,000 To Share Allotment A/c 1,000 (Being allotment money due on 200 shares @ ₹ 5) Oct. 1 Equity Share First & Final Call A/c   Dr. 2,50,000 To Equity Share Capital A/c 2,50,000 (Being first and final call due on 50,000 equity shares @ ₹ 5) Oct. 1 Calls in Arrears A/c   Dr. 1,000 To Equity Share First & Final Call A/c 1,000 (Being final call due on 200 shares @ ₹ 5) 2018 Mar. 31 Shareholders A/c  Dr. 125 To Interest on Calls in Arrears A/c 125 (Being interest due on 200 shares @ 10% p.a. for six months) Mar. 31 Interest on Calls in Arrears   Dr. 125 To Statement of Profit & Loss 125 (Being interest transferred)

Working Notes :

Calculation of Interest on calls in arrears :

(i) Interest on allotment money due:

200 shares @ ₹  5 each = ₹  1,000

from 1st July 2017 to 31st March 2018 @ 10% p.a. (9 months)

1,000 ×(9/12)×(10/100)=₹ 75

(ii) Interest on first and final call due:

200 shares @ ₹  5 each = ₹  1,000

from 1st Oct. 2017 to 31st March 2018

(6 month) @ 10% p.a. = 1,000 ×(6/12)×(10/100)=₹ 50

Total interest on calls in arrears = ₹  75 + ₹  50 = ₹  125

OR

Journal

 Date Particulars L.F. Debit (₹) Credit (₹) Plant & Machinery A/c  Dr. 40,000 To Vendor’s A/c 40,000 (Being plant & machinery purchased) Vendor’s A/c  Dr. 40,000 To Equity Share Capital A/c 40,000 (Being 4,000 equity shares @ ₹ 10 issued as fully paid) Bank A/c  Dr. 18,000 To Equity Share Application A/c 18,000 (Being application amount received on 6,000 equity shares @ ₹ 3) Equity Share Application A/c  Dr. 18,000 To Equity Share Capital A/c 18,000 (Being application amount transferred to equity share capital) Equity Share Allotment A/c  Dr. 6,000 To Equity Share Capital A/c 6,000 (Being allotment amount due on 6,000 equity shares @ ₹ 1) Bank A/c  Dr. 5,600 Calls-in-Arrears A/c (400 × 1)  Dr. 400 To Equity Share Allotment A/c 6,000 (Being allotment amount received on 5,600 shares @ ₹1) Equity Share First Call A/c Dr. 12,000 To Equity Share Capital A/c 12,000 (Being first call due on 6,000 equity shares @ ₹ 2) 12,000 Bank A/c   Dr. 10,000 Calls-in-Arrears A/c (400 × 2 + 600 × 2)   Dr. 2,000 To Equity Share First Call A/c 12,000 (Being first call amount received on 5,000 equity shares @ ₹ 2) Equity Share Capital A/c (400 × 6) Dr. 2,400 To Calls-in-Arrears A/c (400 × 3) 1,200 To Share Forfeiture A/c (400 × 3) 1,200 (Being 400 equity shares forfeited for non-payment of allotment and first call) 1,200 Bank A/c (400 × 4)   Dr. 1,600 Share Forfeiture A/c (400 × 2)   Dr. 800 To Equity Share Capital A/c 2,400 (Being 400 forfeited equity shares re-issued @ ₹ 4 per share ₹ 6 called up) Bank A/c (400 × 4)  Dr. 1,600 Share Forfeiture A/c (400 × 2)  Dr. 800 To Equity Share Capital A/c 2,400 (Being 400 forfeited equity shares re-issued @ ₹ 4 per share ₹ 6 called up) Share Forfeiture A/c  Dr. 400 To Capital Reserve A/c 400 (Being profit on re-issue of 400 equity shares transferred to capital reserve)
 Dr. Calls-in-Arrears Account Cr. Date Particulars Amount (₹) Date Particulars Amount (₹) To Equity Share Allotment By Equity Share A/c 400 Capital A/c 1,200 To Equity Share First By Balance c/d 1,200 Call A/c 2,000 2,400 2,400 To Balance b/d 1,200

Working Note:

Amount transferred to Capital Reserve = 1,200 – 800 = 400

## Section-B

(i) (a) 22.2%

Explanation :

Proprietary Ratio =(Shareholders' Fund/Total Assets)

Shareholders’ Fund = Total Assets* – Long-term Borrowings – Long-term Provision – Current liabilities

= 4,50,000 – 50,000 – 1,00,000 – 2,00,000 = ₹ 1,00,000

Total Assets* = Non-current Assets + Current Assets

= 3,60,000 + 90,000 = ₹ 4,50,000

Proprietary Ratio =(1,00,000/4,50,000)× 100 = 22.2%

(ii) (b) Bank overdraft

Explanation :

Bank overdraft and cash credit will be considered as financing activity as they are short term borrowing, white. Dividend received and interest received are investing activities.

(iii) It indicates the ability of an enterprise to meet it’s obligation of interest on long-term borrowings from it’s net profit. The higher the ratio, the better it is for the enterprise and for the lenders.

(iv) A Cash Flow Statement is prepared from Statement of Profit and Loss and Balance Sheet of two corresponding periods. Hence, it is historical in nature as it is based on values that have already been recorded during the particular period.

(v) The main purpose is to analyse the changes in the items of incomes and expenses of two or more years for better future planning.

Common Size Statement of Profit and Loss

(for the years ended 31st March 2017 and 2016)

 Particulars Note No. Absolutes Amounts Percentage of Revenue from operations 2016-17(₹) 2015-16(₹) 2016-17% 2015-16% I. Revenue from Operations 6,00,000 5,00,000 100 100 II. Expenses : Cost of Material Consumed 3,30,000 3,00,000 55 60 Employee Benefit Exp. 60,000 60,000 10 12 Other Expenses 48,000 25,000 8 5 Total Expenses 4,38,000 3,85,000 73 77 III. Profit before Tax (I – II) 1,62,000 1,15,000 27 23

(i)
Cash Flow from Operating Activities
 Particulars Amount (₹) Net Profit before tax (1) 2,30,000 Add : Non-cash items and Non-operating expenses Interest on Debentures 12,000 Depreciation on Plant & Machinery 24,000 Patents written off 30,000 Less : Non operating Incomes Profit on sale of Patents (5,000) Net Operating Profit before working capital changes 2,91,000 Less : Decrease in Trade Payables (12,000) Cash flow from Operating activities before tax paid 2,79,000 Less : Income tax paid (50,000) Net Cash flow from Operating activities 2,29,000
(ii)
Cash Flow from Investing Activities
 Particulars Amount (₹) Purchase of Machinery (79,000) Sale of Patents 75,000 Purchase of Goodwill (3,000) Net Cash used in Investing Activities (7,000)

Working Notes :

(i) Calculating Net Profit before tax :

 ₹ Net Profit after tax (₹2,40,000 – 1,40,000) = 1,00,000 Add : Provision for tax = 80,000 Add : Proposed dividend for previous year = 40,000 Add : Transfer to General Reserve = 10,000 Net Profit before 2,30,000

(ii)

 Dr. Provision For Taxation Account Cr. Date Particulars Amount (₹) Date Particulars Amount (₹) 2018 2017 Mar. 31 To Bank A/c 50,000 Apr. 1 By Balance b/d 90,000 “ 31 To Balance c/d 1,20,000 2018 By Statement of Profit & Loss Mar. 31 (Balance fig.) 80,000 1,70,000 1,70,000 2018 1,70,000 Apr. 1 By Balance b/d 1,20,000
 Dr. Accumulated Depreciation Account Cr. Date Particulars Amount (₹) Date Particulars Amount (₹) 2018 (Bal. fig.) 2017 Mar. 31 To Plant & Machinery A/c 30,000 Apr. 1 By Balance b/d 40,000 “ 31 To Balance c/d 34,000 2018 Mar. 31 By Depreciation A/c 24,000 64,000 64,000 2018 1,70,000 Apr. 1 By Balance b/d 30,000
 Dr. Plant and Machinery Account Cr. Date Particulars Amount (₹) Date Particulars Amount (₹) 2017 2017 Apr. 1 To Balance b/d 2,45,000 Mar. 31 By Accumulated Depreciation 34,000 A/c 2018 Mar. 31 By Balance c/d 2,90,000 Mar. 31 To Bank A/c (Balance fig.) 79,000 2018 3,24,000 3,24,000 Apr. 1 To Balance b/d 2,90,000

OR

Cash Flows Statement

 Particulars Amount (₹) Amount (₹) (A) Cash Flow from Operating Activities : Net Profit before Tax (10,000 + 50,000) 60,000 Add : Non-cash items and non-operating expenses Depreciation 10,000 Goodwill written off 20,000 Loss on sale of Investment 6,000 Discount on Debentures written off 5,000 Interest on Debentures 16,500 Less : Interest on Investments (₹ 30,000 × 12%) (3,600) Operating profit before working capital changes 1,13,900 Add : Increase in liabilities and decrease in assets. Creditors 35,000 B/P 5,000 40,000 Less : Increase in assets and decrease in liabilities : Inventories 15,000 Debtors 1,10,000 (1,25,000) Net Cash Flow from Operating Activities 28,900 (B) Cash Flow from Investing Activities : Interest on Investments 3,600 Purchase of Machinery (1,00,000) Sale of Investments 30,000 Purchase of Investment (WNI) (86,000) Net Cash used in Investing Activities (1,52,400) (C) Cash Flow from Financing Activities : Proceeds from Issue of Shares 50,000 Proceeds from Issue of Debentures 1,00,000 Interest on Debentures (₹ 1,50,000 × 11%) (16,500) Net Cash Flow from Financing Activities 1,33,500 Net increase in Cash and Cash Equivalents (A + B + C) 10,000 Add : Cash and Cash Equivalents at the beginning 1,20,000 Cash and Cash Equivalents at the end 1,30,000

Working Note:

Investments A/c

 Particulars Amount (₹) Particulars Amount (₹) To Balance b/d 30,000 By Bank A/c 30,000 By loss on sale of investment A/c 6,000 To bank A/c (Purchase) 86,000 By blance c/d 80,000 (Balancing figure) 1,16,000 1,16,000

(i) Earning per share =(Net Profit (after interest, tax and preference dividend)/No. of Equity Shares)

Net Profit after interest and tax = ₹ 2,40,000

Preference share dividend = 1,00,000×(15/100)=₹ 15,000

Net Profit after interest, tax and preference dividend

= 2,40,000 – 15,000 = ₹ 2,25,000

No. of Equity Shares =(5 00 000/10)= 50,000

∴ Earning per share =(2, 25, 000/50 ,000)= ₹ 4.50 per share

(ii) Price Earning Ratio =(Market Value of an Equity share/Earning per share)

=(40/4.5)=8.89 times

(iii) Return on Investments =(Net Profit before Interest, Tax/Capital Employed)×100

Net Profit before Interest, Tax = 2,40,000 + 40,000 + 1,60,000 = ₹ 4,40,000

Interest on Debentures = 10% of 4,00,000 = ₹ 40,000

Capital Employed = Non-current Assets (excluding Non-Trade Investments) + Working Capital

= 10,00,000 + 1,00,000 = ₹ 11,00,000

Return on Investments =(4, 40, 000/11 00 000)×100 = 40%

(iv) Working Capital Turnover Ratio =(Revenue fromOperations/Working Capital)

=(10 00 000/1 00 000)=10 times

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