CBSE Class - XII
Accounts Sample Paper Set I

Q 1) Define Partnership. State the main provisions of the Partnership Act relating to partnership accounts in the absence of partnership deed. (Marks 3)
Ans. 1)
Partnership :
The relationship between persons who have agreed to share the profits of a business carried on by all or any one of them acting for all. In the absence of the partnership deed, the following provisions are applicable :
(i) No interest is payable on the capital to the partners.
(ii) No interest is charged on partners drawings.
(iii) 6% p.a. interest is charged on loan advanced by a partner to the firm.
(iv) Profits are to be shared equally by all partners.
(v) No salary is payable to any partner for any extra time devoted by him for the business.

Q2) A and B are partners sharing profits in the ratio of 3 : 2 with capitals of Rs. 50,000 and Rs. 30,000 respectively. Interest on capital is agreed @ 6% p.a. B is to be allowed an annual salary of Rs. 2,500. During 1995, the profits of the year prior to calculation of interest on capital but after charging B’s salary amounted to Rs. 12,500. A provision of 5% of the profits is to be made in respect of manager’s commission.
Prepare an account showing the allocation of profits and partner’s capital account. (Marks 5)
Ans. 2)

Q 3) A and B are partners sharing profits in the ratio of 3 : 2. C is admitted as a partner. The new profit - sharing ratio among A, B and C is 4 : 3 : 2. Find out the sacrificing ratio.
Ans. 3)
A’s sacrifice = A’s old share - A’s new share
= 3/5 - 4/9
= 7/45
B’s sacrifice = B’s old share - B’s new share
= 2/5 - 3/9
= 3/45
Thus, the sacrificing ratio of A and B :
A : B
7 : 3

Q 4) Mention the items that may appear on the debit side of the capital account of a partner when the capitals are fluctuating.
(Marks 2)
Ans. 4)
(i) Drawings
(ii) Interest on Drawings
(iii) Share of loss
(iv) Closing balance of capital (cr.)

Q 5) A, B and C are partners sharing profits and losses in the ratio of 2 : 3 : 5. On 31st March, 1995, their Balance Sheet was as follows:

Liabilities Rs. Assets Rs.
Capitals Cash 18,000
A 36,000 Bills Receivable 24,000
B 44,000 Furniture 28,000
C 52,000 1,32,000 Stock 44,000
Creditors 64,000 Debtors 42,000
Bills Payable 32,000 Investments 32,000
P & L A/c 14,000 Machinery 34,000
Goodwill 20,000
2,42,000 2,42,000

They admit D into partnership on the following terms :
1. Furniture, investments and machinery to be depreciated by 15%.
2. Stock is revalued at Rs. 48,000.
3. Goodwill to be valued at Rs. 26,000.
4. Outstanding rent amounted to Rs. 1,800.
5. Prepaid salaries Rs. 800.
6. D to bring Rs. 32,000 towards capital for 1/6 share and partners to re-adjust their capital accounts on the basis of their profit-sharing ratio.
7. Adjustment of capitals to be made by cash.
Prepare revaluation account, Partners, Capital accounts, Cash account and Balance sheet of the new firm.

Q6) Under what headings will you show the following items in the Balance Sheet of the company:
(i) Goodwill (ii) Unclaimed dividends
(iii) Provision for tax (iv) Share premium account
(v) Loose tools. (Marks 5)
Ans. 6)
Item
Goodwill
Unclaimed Dividend
Prov. for tax
Share premium
Loose tools

Headings
Fixed assets
Current liabilities and Provisions
Current liabilities and Provisions
Reserve and Surplus
Current assets, Loan and Advances.

Q 7) Explain the meaning of “Debentures issued as collateral security” by company. Show its treatment in Balance Sheet. (Marks 3)
Ans. 7)
Debentures issued as collateral security :
When a company raises loans from a financial organisation, some assets are to be pledged as a security in favour of the organisation. If however, the organisation finds the assets insufficient, it may ask for additional security. Thus, the debentures are issued by the company and offered as additional
or collateral security. They are returned when the company repays the loan and interest.

The two ways of dealing with it :
I. No entry is made in the books. Only a note is given in the balance sheet
BALANCE SHEET
Secured Loans
Bank Loan
(Secured by issue of ….Debentures as collateral security)

II. The issue of debentures as collateral security is recorded by an entry
Debenture suspense A/c Dr
To Debentures A/c
The entry is cancelled by means of a reverse entry when the loan is repaid. It is shown in the balance
Sheet as:
Secured Loan…………………………………Misc. Exp.
… Debentures of ..eaach
(Issued as collateral security) Debenture Suspense A/c
Bank Loan
(secured by issue of ….Dbs of
to….each as collateral security)

Q 8 ‘N’ Ltd. issue 10,000 debentures of Rs. 100 each at a discount of 10% with the condition that they will be redeemed at a premium of 5% after the expiry of three years. Pass the necessary journal entries for the issue and redemption of these debentures after the expiry of three years.

Q 9) A Limited Company invites applications for 50,000 equity shares of Rs. 10 each payable as follows :
On application Rs. 3
On allotment Rs. 4
On first call Rs. 2
On final call the balance
Applications were received for 55,000 shares. Allotments were made on the following basis :
(i) To applicants for 35,000 shares - in full.
(ii) To applicants for 20,000 shares - 15,000 shares.
Excess money paid on application was utilised towards allotment money.

A shareholder who was allotted 1,500 shares out of the group applying for 20,000 shares failed to pay allotment money and money due on calls. These shares were forfeited. 1,000 forfeited shares were re-issued as fully paid on receipt of Rs. 8 per share.
Show the journal entries in the books of company. (Marks 12)
Ans. 9)
Working Notes :
50000 x 10 (3, 4, 2, 1)
Applied for Allotted
35000 35000
20000 15000
55000 50000
Shareholder applied for = 20000/15000 x 1500
= 2000 Sh.… Application money paid = 6000Due = 4500 Surplus received = 1500 Due from shareholder on allotment = 6000 
Less : Already received = 1500Unpaid: 4500
Total money due on allotment = 200000
Less : Transferred from share
Application = 15000
Less : Unpaid by shareholder = 4500
Amount recieved on allotment= 180500

Q 10) What is meant by ‘Analysis of Financial Statements’? Give its advantages. (Marks 6)
Ans. 10)
Meaning of analysis of financial statements :
Analysis of financial statements is a study of relationships among the various financial factors in a business. It is an attempt to determine the meaning and significance of financial statement data so that the forecast may be made regarding future earnings, profitability and the likes. Thus it is such treatment to information disclosed in financial statement to afford a full diagnosis of profitability and financial position of the firm.

Advantages :
(i) To know the earning capacity : Financial analysis helps in ascertaining whether sufficient profits are being earned on capital invested in the business or not. Also, it discloses whether the profit is increasing or decreasing.
(ii) To know the solvency : It discloses whether the business is in a position to pay its short-term and long term liabilities in time.
(iii) To know the financial strength : It basically disclosed the total position of the business regarding its goodwill, internal finance system and the likes.
(iv) Comparative study with other firms : The comparative study of the profitability of various firms engaged in the same trade can be done to study the position of the firm in respect of sales, profitability and the likes.
(v) Capability to pay interest and dividend : The analysis helps to assess whether the firm will have sufficient profits to pay the interest in time and whether it has the capacity to pay the dividend in future at a higher ratio.

Q 11) State the significance and method of calculation of any two of the following :
(i) Current ratio (ii) Operating ratio
(iii) Return on investment. (Marks 6)
Ans. 11
Significance and method of calculation :
(i) Current ratio : This ratio is used to assess the firms’ ability meet its short term liabilities on time. The ideal ratio is 2 : 1. Less than this indicates lack of liquidity. Much higher ratio than 2 : 1 may indicate poor investment policies.
Method of calculating :
Current Assets
Current Liabilities
Where, current assets : Those assets that can be converted in cash in a year’s time, for example stock.
Current liabilities : that are repayable in a year, for example creditors.

(ii) Operating ratio : This is a measurement of efficiency and profitability of an enterprise. It indicates the extent of sales absorbed by cost of goods sold and operating expenses.

Method of calculating :
Cost of goods sold + operating expenses x 100
Net sales
Where, cost of goods sold = Opening stock + Purchases + Direct expenses - Closing stock.
Operating expenses = Office and administration exp. + Selling and Distribution exp.
Lower the ratio, the better as it leaves higher margin of profit on sales.

(iii) Return on investment : This is a measure of the overall performance of the business enterprise. It measures how efficiently the capital employed in the business is being used.

Method of calculating :
Profit before Interest, tax and dividend x 100
Capital employed
Where, capital employed = Equity share capital + Preference share capital + Reserves + P/L + Long term loans - Fictitious assets - Non operating assets like investment
Or
Fixed assets + Working capital.

Q 12) From the following details, calculate (i) Opening stock, (ii) Closing stock :
Stock turnover ratio 6 times. Gross profit 20% on sales. Sales Rs. 1,80,000. Closing stock is Rs. 15,000 in excess of opening stock. (Marks 3)
Ans. 12)
Gross profit = 20% on sales.
= 20% (180000)
= 36000
Cost of goods sold = Sales - Gross profit
= 180000 - 36000
= Rs. 144000
Stock turnover ratio = Cost of goods sold
Average Stock
6 = 144000
Avg. stock
… Average stock = 24000
or Cl. Stock + Opg. Stock = 48000
Also, Cl. Stock = Opg Stock + 15000
… 48000 - Opg Stock = Opg stock + 15000
=> 33000 = 2 opg Stock
or Opening Stock = 16500
Closing stock = 31500 (16500 + 15000)

Q13) On the basis of following information, calculate
(i) Gross profit ratio, (ii) Working capital turnover ratio, (iii) Debt equity ratio. (Marks 6)

Net sales 30,00,000
Cost of goods Sold 20,00,000
Current assets 6,00,000
Current Liabilities 2,00,000
Paid-up share Capital 5,00,000
Debentures 2,50,000
Loan 1,25,000

Ans13)
(i) Gross Profit Ratio = Gross Profit x 100
Net Sales
Gross Profit = Net sales - Cost of goods sold
= 3000000 - 2000000
= 1000000
Thus, the ratio = 1000000 x 100
3000000
= 33 1/3%.

(ii) Working Capital Turnover Ratio = Net Sales
Net Working Capital
Working Capital = Current Assets - Current Liabilities
= 600000 - 200000
= 400000
Thus, 3000000
400000
= 7.5 times

(iii) Debt. Equity Ratio = Long term debt.
Shareholders funds
Long term debt. = Debentures + Loan
= 250000 + 125000
= 375000
Thus, 375000
500000
= 3 : 4
Or 0.75 : 1

Q 15) Calculate ‘Cash from Operations’ from the following profit and loss account.

Profit and loss account for the year ending on 31st March, 1995

Particulars Rs.
Salaries 18,000
Rent 10,000
Provision for Bad Debts 2,000
Depreciation 4,000
Loss on Sale of Land 3,000
Goodwill written off 5,000
Proposed dividend 7,000
Provision for Taxation 4,000
Net Profit 25,000
______
78,000
Particulars Rs.
Gross Profit 65,000
Profit on Sale of Plant 7,000
Income Tax Refund 6,000
______
78,000

Ans. 15 Cash from operations

Net Profits 25000
Add: Prov. for Bad Debts 2000
Depreciation 4000
Loss on sale of Land 3000
Goodwill written off 5000
Proposed Dividend 7000
Prov. for taxation 4000 25000
50000
Less: Profit on Sale of Plant 7000
Income Tax refund 6000 13000
Cash from Operation
37000

Q16) What is Cash Budget? Give its advantages.
OR
Prepare a Cash Budget for the month of May and June using following information:

Months Sales Purchases Wages

April 62,000 38,000 8,000
May 64,000 33,000 10,000
June 58,000 39,000 8,500

(i) Cash Balance as on 1st May, 1995 was Rs. 8,000.
(ii) 75% of the sales are realised in the same month and rest in the following month.
(iii) Period of credit from supplier is one month.
(iv) Lag in payment of wages is one month. (Marks 6)
Ans. 16

Q 17) From the following information, prepare a Comparative Income Statement : (Marks 5)

Sales 4,00,000 5,00,000
Cost of Goods Sold 2,00,000 3,00,000
Administrative, Selling and Distribution Expenses 40,000 1,00,000
Other Incomes 20,000 30,000
Income Tax 60,000 70,000

Ans. 17)