Q  Mention any two factors which give rise to goodwill of a firm.  (Marks 2)
Ans  Factors that give rise to goodwill :
(i) Location of the business :
The business which is centrally located in a prominent locality will attract more customers and hence have heavy sale resulting in higher value of goodwill.
(ii) Skill of the management :
If the management of a firm is efficient, the firm will enjoy high productivity and have an effective cost management. Thus will lead to earning huge profits and thus the value of goodwill will be high.

Q  R and S are partners sharing profits in the ratio of 5 : 3. T joins the firm, R gives 1/4 of his share and S gives 1/5 of his share to the new partner. Find the new ratio.  (Marks 3)
Ans R's share = 5/8
S's share = 3/8
R's sacrifice = 1/4 x 5/8 = 5/32
S's sacrifice = 1/5 x 3/8 = 3/40
Thus, R's new share = 5/8 - 5/32 = 15/32
         S's new share = 3/8 - 3/40 = 12/40
T's share = 5/32 + 3/40 = 37/160
Thus, new ratio = R : S : T
= 15/32 : 12/40 : 37/160
= 75 : 48 : 37

Q  Write any three points of difference between equity share and a debenture.  (Marks 3)

Ans  

Q  X Limited issued 12% debentures of Rs. 20,00,000 at 8% discount redeemable at par. Assume that the debentures are redeemed by drawing method in the following manner:

Prepare discount on issue of debentures Account.  (Marks 5)

Ans Discount on issue of debentures = 8/100 x 2000000 = 160000
Statement showing discount on issue of debentures to be written off each year :

Discount on Issue of Debentures A/C

Q  K Limited has been registered with an authorised capital of Rs. 4,00,000 divided into 4000 shares of Rs. 100 each of which, 2000 shares were offered for public subscription at a premium of Rs. 5 per share, payable as under :
                       Rs
on application   10
on allotment     25 (including premium)
on first call       40
on final call       30
Applications were received for 3600 shares, of which applications for 600 shares were rejected; the rest of the applications were allotted 2000 shares on pro-rata basis. Excess application money was transferred to allotment.
All the monies were duly received except from Sundar, holder of 200 shares, who failed to pay allotted and first call money. His shares were later forfeited, and reissued to Shyam at Rs. 60 per share Rs. 70 paid up. Final call has not been made.
Pass necessary cash book and journal entries in the books of K Limited.   (Marks 10)

Ans Working notes :
2000 x 100 at 105 (10, 20 + 5, 40, 30)
 Applied for           Allotted
   600 
  3000   Pro rata    2000
  3600                  2000

Sundar was allotted = 200 shares
Applied for = 200 x 3000/2000 = 300
.^.. Paid application money = 3000
           Due on application = 2000
              Surplus received    1000

Due on allotment on his shares = 5000
                     Already received = 1000
                           Not received = 4000

Total amount payable on allotment = 50000
 Less : Transferred from application =  10000
   (1000 x 10)
             Less : Not paid by sunder =  4000
                                                      18000

K Ltd.
Journal

Books of K Ltd.
Cash Book (Bank column only)

Q  Compute cash from operations from the following details :  (Marks 3)

Ans) 

Q  Explain briefly the meaning and significance of (i) Operating ratio and (ii) Fixed assets turnover ratio.  (Marks 4)

Ans 12 Operating Ratio :
The ratio measures the proportion of cost incurred for making the sale 
Operating ratio = (Cost of goods sold + operating exp) / Net sales x 100
This is a measure of efficiency and profitability of the business enterprise. It indicates the percentage of sales absorbed by the cost of goods sold and operating expenses.
Lower the ratio, the better as it leaves a higher margin of profit on sales.

(ii) Fixed assets turnover ratio :
This ratio measures the relationship between cost of goods sold and the net fixed assets = (Cost of goods sold)/(Net fixed assets)
Net fixed assets = Fixed assets - Depreciation
This ratio indicates how efficient the fixed assets are being utilised. Compared with the previous year, if there is an increase in the ratio, it indicates that there is better utilisation of fixed assets. A fall in the ratio shows vice versa.

Q  From the following information, prepare a cash budget for January, February and March, 1998:

Estimated cash balance on 1 January 1998 Rs. 20,000. In January a new machinery is to be purchased at Rs. 40,000 on credit, to be paid in two equal installments in February and March.  (Marks 6)
Ans 17 Cash budget for the month of Jan - March'1998