Oswal 36 Sample Question Papers ISC Class 12 Accounts Solutions

Section-A

Answer 1.

(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

Answer 2.

(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.

Answer 3.

(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.

Answer 4.

(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.

Answer 5.

(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.

Answer 6.

(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)
(ix) Head : current liability
Subhead : other current liabilities
 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.

Answer 2.

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

Answer 3.

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

Answer 4.

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

Answer 5.

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

Answer 6.

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

Answer 7.

(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

ISC 36 Sample Papers
(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

Answer 8.

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.

Answer 9.

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

Answer 10.

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

Answer 11.

(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.

Answer 12.

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

Answer 13.

(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

Answer 14.

(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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