CBSE  Class XII
Accounts Sample Paper Set V

Q1) Why is ‘Profit and Loss Appropriation Account’ prepared? (Marks 3)
Ans1)
Profit and Loss Appropriation Account is prepared to show how the net profit have been distributed among the partners. The account is credited with net profit or debited with net loss to begin with and further credited with Interest on drawings and debited with interest on capital salary etc. The final profit/loss is distributed in the agreed profit sharing ratio.

Q2) What are the alternatives available to a company for the allotment of debentures when there is over- subscription of debentures? (Marks 3)
Ans2)
When there is over-subscription of debentures;
(i) The company may not allot any debenture to some applicant i.e. their application money is refunded.
(ii) If the applicants have been allotted less number of debentures than they applied for, the excess application money is adjusted towards allotment and subsequent calls.

Q3) A and B were partners sharing profits in the ratio of 3 : 2. They admitted X and Y as new partners. A surrendered 1/3rd of his share in favour of X and B surrendered 1/4th of his share in favour of Y. Calculate the new profit sharing ratio of A, B, X and Y. (Marks 3)
Ans3)
A’s sacrifice = 1/3 x 3/5 = 3/15
B’s sacrifice = 1/4 x 2/5 = 2/20
A’s new share = 3/5 - 3/15 = 6/15
(Old share - sacrifice)
B’s new share = 2/5 - 2/20 = 6/20
… New Profit sharing ratio :
A : B : X : Y
6/15 : 6/20 : 3/15 : 2/20
= 4 : 3 : 2 : 1
(X’s share is equal to A’s sacrifice)
(Y’s share is equal to B’s sacrifice)

Q4) A and B were partners in firm sharing profits and losses equally. Their firm was dissolved on 15th March 1999, which resulted in a loss of Rs. 30,000.On that date the capital account of A showed a credit balance of Rs. 20,000 and that of B a credit balance of Rs. 30,000. The cash account had a balance of Rs. 20,000. You are required to pass the necessary journal entries for the (i) transfer of loss to the capital accounts of the partners and (ii) making final payment to the partners. (Marks 4)
Ans4)

Q5) M and J are partners in a firm sharing profits in the ratio of 3 : 2. They admitted R as a new partner. The new profit sharing ratio between M, J and R will be 5 : 3 : 2. R brought Rs. 25,000 for his share of goodwill premium. Pass the necessary journal entries for the treatment of goodwill? (Marks 3)
Ans5)
Working Notes :
M : J
Old Ratio = 3 : 2
M : J : R
New Ratio = 5 : 3 : 2
M’s sacrifice = 3/5 - 5/10 = 1/10
J’s sacrifice = 2/5 - 3/10 = 1/10
… Sacrificing Ratio = M : J
1 : 1

Q6) Suvidha Ltd. purchased machinery worth Rs. 1,98,000 from Suppliers Ltd. The payment was made by issue of 12% debentures of Rs. 100 each. Pass necessary journal entries for the purchase of machinery and issue of debentures when :
(i) Debentures are issued at par.
(ii) Debentures are issued at 10% discount.
(iii) Debentures are issued at 10% premium. (Marks 4)
Ans6)
Working Notes :
Machinery’s cost = 198000
(i) When debentures issued at par :
No. of debentures = 198000/100
= 1980
(ii) When debentures issued at 10% discount :
No. of debentures issued = 198000/90
= 2200
(iii) When debentures at 10% premium :
No. of debentures issued = 198000/110
= 1800

Q7) X Limited has an authorised capital of Rs. 10,00,000 divided into Equity Shares of Rs. 10 each. The company invited applications for 50,000 shares. Applications for 40,000 shares were received . All calls were made and were duly received except the final call of Rs. 2 per share on 1000 shares. 500 of the shares on which the final call was not received were forfeited. Show how Share Capital will appear in the Balance Sheet of the company as per Schedule VI Part - I of the Companies Act. 1956? (Marks 5)
Ans7)
Balance Sheet of X Ltd.

Q8) AB Ltd. invited applications for 1,00,000 12%. Preference Shares of Rs. 100 each issued at a discount of 10%. The amount was payable as follows :
On Application Rs. 20
On Allotment Rs. 30
On First and Final Call - balance
Applications for 1,50,000 shares were received. Applications for 30,000 shares were rejected and pro-rata allotment was made to the remaining applicants. All calls were made and were duly received except the first and final call on 1000 shares held by Kumar. His shares were forfeited. Out of the forfeited shares 750 shares were re-issued at Rs. 120 per share fully paid up.
Pass necessary journal entries in the books of AB Ltd.
Ans. 
Working Notes :
100000 x 100 at 90 (20, 30, 40)
Applied for Allotted
30000 Nil
120000 100000
150000 100000

OR

Q The following balances appeared in the books of Madhu Ltd. as on 1st April 1997:

Q9) A, B and C were partners sharing profits in the proportions of 1/2, 1/3 and 1/6 respectively. The Balance Sheet of the firm on 31st March 1998 was as follows:

Liabilities Amt. (Rs.) Assets Amount (Rs.)
Sundry Creditors 12,600 Cash at Bank 4,100
Provident Fund 3,000 Debtors Rs. 30,000
Reserve Fund 9,000 Less Provision Rs. 1,000 29,000
Capitals: Stock 25,000
A 40,000 Investments 10,000
B 36,500 Patents 5,000
C 20,000 Plant and Machinery 48,000
1,21,100 1,21,100

C retired on the above date on the following terms :
(i) Goodwill of the firm was valued at Rs. 27,000, but it was not to remain in the books of the new firm.
(ii) Value of the patents was to be reduced by 20% and that of Plant and Machinery by 10%.
(iii) Provision for doubtful debts was to be raised to 6%.
(iv) C took over the Investments at a value of Rs. 15,800.
(v) Liability on account of Provident Fund was only Rs. 2,500.
Show the necessary journal entries for the treatment of goodwill, prepare revaluation account, Capital accounts of the partners and the Balance Sheet of A and B after C’s retirement. (Marks 14)
Ans 9)

Q 9 Following is the Balance Sheet of Hari, Ram and Shyam as on 31st December 1994.
Liabilities Amount (Rs.) Assets Amount (Rs.)
Sundry creditors 3,000 Tools 1,000
Reserve fund 3,200 Furniture 8,000
Capital Accounts: Stock 6,000
Hari 10,000 Debtors 6,000
Ram 5,000 Cash at Bank 5,000
Shyam 5,000 Cash in Hand 200
26,200 26,200

Ram died on 31st March 1995. Under the partnership agreement the executor of Ram was entitled to :
(a) Amount standing to the credit of his Capital Account.
(b) Interest on capital which amounted to Rs. 62.50.
(c) His share of goodwill Rs. 3,500.
(d) His share of profit from the closing of the last financial year to the date of death which amounted to Rs. 437.50.
Ram’s executor was paid Rs. 1,800 on 1st April 1995 and the balance in four equal yearly instalments starting from 31/3/1996 with interest @ 6% p.a.
Pass the necessary Journal entries and draw up Ram’s Account to be rendered to his executor and Ram’s Executor’s account till it is finally paid.

Q10) When does flow of funds take place? Explain briefly? (Marks 3)
Ans10)
Flow of funds takes place when there is a change in the working capital. The journal entry is passed for the transaction. The accounts of the entry are classified as current assets or current liabilities or non-current assets and non-current liabilities. If all the account of the transaction are of current category, there will be no flow of funds. Similarly no flow of funds will take place if all the accounts are of non-current category. If one account of transaction belongs to current category of the other to non-current category. There will be flow of fund.

Q11) A company earns a gross profit of 20% on cost. Its credit sales are twice its cash sales. If the credit sales are Rs. 4,00,000, calculate the gross profit ratio of the company. (Marks 4)
Ans11)
Credit sales = 400000
Gross profit = 20% on Cost
Credit sales = 2 (cash sales)
…Cash sales = 200000
Total sales = Cash sale + Credit sale
= 200000 + 400000
= 600000
Let cost = 100, Profit = 20
…Sale = 120
Hence, when sale = 120, cost = 100
Sales = 600000, Cost = 100/120 x 600000 = 500000
Gross profit ratio = (Gross profit/Net sales) x 100 = 100000/600000 x 100
= 16.6%
Gross profit = Sales - Cost
= 600000 - 500000
= 100000

31/12/1997 31/12/1998
Machinery at cost Rs 8,00,000 Rs 14,00,000
Provision for Depreciation on Machinery Rs1,00,000 Rs 1,50,000
.
Additional Information :
During the year a piece of machinery costing Rs. 30,000 on which accumulated depreciation was Rs.10,000 was sold for Rs. 25,000 (Marks 5)
Ans. 12)

Machinery A/C
Particulars

Amount

Particulars

Amount
To balance b/d
To P/L (gain on sale)
To Cash A/C
(Purchases)

800000
5000
630000
_______
1435000

By Cash (Sales)
By Prov. for Depreciation
By balance c/d

25000
10000
1400000
_______
1435000

Thus, the sources of fund = Rs. 25000
Application of funds = Rs. 630000

Q13) Briefly explain the meaning and significance of any two of the following ratios :
(i) Return on Investment,
(ii) Debt - Equity Ratio and
(iii) Stock Turnover Ratio. (Marks 5)
Ans13)
(i) Return on Investment :
The overall performance of a business is judged by this ratio which is a measure of relationship between profit earned and capital employed. It ascertains how much income the use of Rs. 100 of capital generates. The ratio is expressed as %.
It is calculated as:
Profit before interest and tax x 100
Capital employed
Where capital employed = Share capital + Reserve + Long term loan - Fictitious assets and non-operating assets.
ROI is a fair measure of the profitability of any concern which also helps in comparing performance efficiency of different industries.

(ii) Debt Equity Ratio :
This ratio indicates the relationship between shareholders funds and long term liabilities. Shareholders funds include equity and preference share capital, reserves less fictitious assets. It is computed as :
Long term debts
Shareholders funds
The ratio is calculated to ascertain the long term financial soundness of business. It indicates the extent to which business depends upon outsiders. It discloses the firms ability to meet its long term obligations. The lower the ratio, the better for the firm.

(iii) Stock Turnover Ratio :
This ratio gives the relationship between cost of goods sold during a given period and the average amount of inventory during that period :
Cost of Goods Sold
Average stock
where, cost of goods sold = Opg stock + Purchase + Direct Exp. - Cl. stock
The ratio indicates whether stock has been efficiently used or not. The purpose is to keep only the required minimum invested in stock. Higher the ratio the better as it indicates that more sales are produced by a rupee of Invest in stock. In directs the management attention to control excess investment in stock and helps reduce storage cost.

Sales Rs. 1,00,000 Rs.2,00,000
Cost of goods sold 60% of Sales 70% of Sales
Indirect expenses 10% of Gross Profit
Rate of Income Tax 50% of Net Profit before Tax
(Marks 5)
Ans14).

Q15) What is meant by analysis of financial statements? Briefly explain horizontal analysis.? (Marks 6)
Ans15)
Analysis of financial statement is a systematic process of evaluating and establishing relationships between different components of financial statements to better understand the performance of the firm. It determines the meaning of the information disclosed in the financial statement of have complete results regarding profitability and financial position of the firm.
Horizontal analysis is a technique of financial analyses to depict the trends of financial characteristics of an enterprise over the years. It involves :
(i) Analysis of financial statement of a firm for a number of years.
(ii) Analysis of financial statement of different enterprises for the same year.

Q16) Calculate any three of the following ratio with the help of he following information:
(i) Operating ratio, (ii) Current ratio, (iii) Capital turnover ratio and (iv) Debt to total funds ratio.
Information: Equity Share Capital Rs. 5,00,000; 12% Debentures Rs. 6,00,000; 9% Preference Share Capital Rs. 3,00,000; General Reserve Rs. 1,00,000; Sales Rs. 10,00,000; Opening stock Rs. 80,000; Purchases Rs. 6,00,000; Wages Rs. 1,00,000; Closing Stock Rs. 1,00,000; Selling and distribution expenses Rs. 20,000; Other current assets Rs. 5,00,000 and Current liabilities Rs.3,00,000 (Marks 6)
Ans16)
(i) Operating Ratio = Operating Cost/Net Sales x 100
Operating cost = cost of Goods Sold* + Selling & Distribution Expenses
Cost of Goods Sold = Opening stock + Purchases + Wages - Closing stock
= 80000 + 600000 + 100000 - 100000
= Rs. 6,80,000
… Operating cost = 680000 + 20000
= 700000
Hence, operating ratio = 700000/10,00,000 x 100 = 70%
(ii) Current Ratio = Current assets/Current liabilities
Current assets = Closing stock + other current assets
= 100000 + 500000
… Current ratio = 600000/300000
= 2 : 1
(iii) Capital turnover ratio = Net sales/Capital employed Capital Employed = Equity share capital + 12% Debentures + Preference Share Capital + General Reserve.
= 500000 + 600000 + 300000 + 100000… Capital Turnover Ratio = 10,00,000/15,00,000= .67 times(iv) Debt. to total funds Ratio = Long term debts/(Long term funds + Shareholders funds) Long term funds + Shareholders funds
= 600000 + 500000 + 300000 + 100000= 1500000… Debt to total funds ratio = 600000/1500000
= 2 : 5

Q17) Prepare a cash budget of Rama Ltd. for the months of January to March 1999 from the following information :
Credit Purchases (Rs.) Credit Sales (Rs.) Wages (Rs.)
November 2,00,000 2,50,000 50,000
December 3,50,000 3,00,000 60,000
January 3,00,000 4,50,000 70,000
February 4,00,000 2,00,000 80,000
March 5,00,000 3,50,000 70,000
Additional Information : (i) Expected cash balance as on 1/1/1999 Rs. 75,000 (ii) Suppliers allowed credit of two months and a credit of two months is allowed to the customers (iii) Lag in payment of wages one month. (Marks 6)