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 (₹)
31^st March, 2016	60,000 (Profit)
31^st March, 2017	1,40,000 (Profit)
31^st March, 2018	2,00,000 (Profit)
31^st March, 2019	2,80,000 (Profit)
31^st 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 31^st 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

(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 31^st 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 31^st 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 1^st 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 31^st 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 31^st 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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