Accounts Class - XII 
Sample paper - 1996- Part - 2
(Solved)

(ACCOUNTING III)

Q) A and B are partners sharing profits in the ration of 4 : 3. C is admitted as a partner. The new profit-sharing ration is 3 : 2 : 1. Find out the sacrificing ratio. (Marks 2)

Q) Define partnership. In the absence of Partnership Deed, what are the rules regarding:
(i) Profit-sharing ratio. (ii) Interest on drawings, (iii) Interest on Capital, (iv) Interest on loan given by a partner. (Marks 3)

Q) Mention the items that may appear on the credit side of the capital account of a partner when the
capitals are fluctuating.

Q) Name the major headings under which the liabilities and the assets sides of a company's Balance Sheet is organised and presented. (Marks 5)

 

PART - B (Analysis of financial statements)

Q) From the following information, calculate Debtors Turnover Ratio and Average Collection Period.
Opening Debtors   Rs.    37,000
Closing Debtors    Rs.    43,000
Sales                   Rs. 6,00,000
Cash Sales           Rs.   80,000

Q) Calculate cash from operations from the following information:
(Marks 5)

Stock Debtors Creditors Expenses Outstanding Bills Payable Accrued Income Profit and Loss A/c

1994 (Rs.)    60,000    25,000    32,000      3,500    35,000      8,000    80,000

1995 (Rs.)    50,000    23,000    28,000      4,500    22,000     9,000    90,000

PART 'A' (ACCOUNTING III)

Q ) 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.

Q) 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. )

Profit and Loss Appropriation A/C for the year ending 1995
Dr.                                                                           Cr.

Dr......................................  Partner's Capital A/C............................. Cr.

Q ) 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. ) 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 ) 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. ) (i) Drawings
(ii) Interest on Drawings
(iii) Share of loss
(iv) Closing balance of capital (cr

Q ) 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:

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.

Ans. ) Working notes, Goodwill entry, Journal

D brings for 1/6 share = 32000
.^.. Total Capital of the reconstituted firm = 32000 x 6 = 192000
This is to be divided in the new ratio as 2 : 3 : 5 : 2

Dr....................................Revaluation Account................................Cr.

Dr....................................Partners Capital A/C................................. Cr.

Dr....................................... Cash Account.......................................Cr.

Balance Sheet of A, B, C, D as on 31st March, 1995

 

Or

Q )  A, B and C are partners sharing profits and losses in the ratio of 3 : 2 : 1. On 31st March, 1995, their Balance Sheet was as follows:

The firm was dissolved on 1st April, 1995.
1. There was a Joint Life Policy of Rs. 60,000. The policy was surrendered for Rs. 15,000.
2. The assets were realised as under : Stock Rs. 47,000; Goodwill Rs. 12,000; Debtors 60% of the book value; Machinery Rs. 90,000.
3. Liabilities were paid in full.
4. The expenses on realisation amounted to Rs. 400.
You are required to prepare the Realisation A/c, Partners' Capital Accounts, and Bank A/c. (Marks 15)
Ans.

 

Dr.....................................Realisation Account..............................Cr.

...Dr...........................Partners' Capital Account                                    Cr.

Dr..............................................Bank Account...........................Cr.

Q) 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. )

Q ) Explain the meaning of "Debentures issued as collateral security" by company. Show its treatment in Balance Sheet. (Marks 3)
Ans. ) 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 )  '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.
Ans. )

JOURNAL

Q ) 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. ) 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 = 6000
                           Due      = 4500
   Surplus received            = 1500
Due from shareholder on allotment  = 6000
Less : Already received                   = 1500
                                  Unpaid:          4500
Total money due on allotment = 200000
Less : Transferred from share
                      Application    =  15000
Less : Unpaid by shareholder =    4500
Amount recieved on allotment= 180500

JOURNAL

PART 'B' (ANALYSIS OF FINANCIAL STATEMENTS)

 

Q ) What is meant by 'Analysis of Financial Statements'? Give its advantages. (Marks 6)
Ans. ) 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 ) 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. 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 ) 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. ) 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)

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

Net sales Cost of goods Sold Current assets Current Liabilities Paid-up share Capital Debentures Loan

Rs. 30,00,000 20,00,000 6,00,000 2,00,000 5,00,000 2,50,000 1,25,000

Ans) (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) From the following Balance Sheet of Avinash Ltd., you are required to prepare.
(i) A statement of changes in working capital and (ii) Funds Flow Statement.

BALANCE SHEET

Additional information :
A piece of machinery costing Rs. 50,000 was sold for Rs. 30,000, accumulated depreciation thereon being Rs. 10,000. (Marks 13)
Ans.

Avinash Ltd.          
Statement of Changes in Working Capital

Working notes :

Dr..................................Fixed Assets A/C..........................................Cr

Accumulated Depreciation A/c

 

Calculation of funds from operations:

Depreciation Loss on Sale of Machine Transfer to General Reserve Funds from operation

65000   10000   25000 100000

Avinash Ltd.
Funds Flow Statement for the year ending 31st December, 1995

 

Q ) Calculate 'Cash from Operations' from the following profit and loss account.

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

Ans. Cash from operations       

Net Profits Add: Prov. for Bad Debts         Depreciation         Loss on sale of Land         Goodwill written off         Proposed Dividend         Prov. for taxation Less: Profit on Sale of Plant          Income Tax refund          Cash from Operation

2000   4000   3000   5000   7000   4000   7000   6000

25000 25000 50000 13000 37000

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

(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.

CASH BUDGET
Cash Budget for the Months of May and June, 1995

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

Sales Cost of Goods Sold Administrative, Selling and Distribution Expenses Other Incomes Income Tax

1994 Rs. 4,00,000 2,00,000 40,000 20,000 60,000

1995 Rs. 5,00,000 3,00,000 1,00,000 30,000 70,000

Ans. )

COMPARATIVE INCOME STATEMENT  

Particulars	1994	1995	Absolute Inc./Dec.	% change
Sales Less: Cost of Goods Sold Gross Profit Less: Operating Expenses - Administrative and Distribution Exp. Net Operating Income Add: Other Income Net Income before Tax Less: Income Tax Net Income after Tax	400000 200000 200000   40000 160000   20000 180000   60000 120000	500000 300000 200000 100000 100000   30000 130000   70000   60000	100000 100000 -- 60000 (60000) 10000 (50000) 10000 (60000)	25 50 -- 150 (37.5) 50 (27.7) 16.67 (50)

* Figures in the bracket indicate negative figures. 

 

 

PART - A (ACCOUNTING III)

Q) A and B are partners sharing profits in the ration of 4 : 3. C is admitted as a partner. The new profit-sharing ration is 3 : 2 : 1. Find out the sacrificing ratio. (Marks 2)
Ans1) A : B : C
          3 : 2 : 1 New Ratio
Old ratio = A : B
                  4 : 3
A's sacrifice = A's old share - A's new share
                  = 4/7 - 3/6 = 3/42
B's sacrifice = 3/7 - 2/6 = 4/42
Thus, the sacrificing ratio = A : B
                                     =  3 : 4

Q) Define partnership. In the absence of Partnership Deed, what are the rules regarding :
(i) Profit-sharing ratio. (ii) Interest on drawings, (iii) Interest on Capital, (iv) Interest on loan given by a partner. (Marks 3)
Ans) Partnership is defined as -
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 information, the following rules will apply,
1. Profit sharing ratio : this will be equal for all the partners.
2. Interest on drawings : No interest is charged on drawings.
3. Interest on capital : No interest is paid on capital.
4. Interest on loan given by partners : Interest @ 6% p.a. will be given to the partners on their loans.

Q) Mention the items that may appear on the credit side of the capital account of a partner when the capitals are fluctuating.
Ans) The following items may appear on the credit of the capital account of a partner when the capital accounts are fluctuating :
(i) Opening balance of capital (Cr.),
(ii) Share of profit,
(iii) Interest on capital,
(iv) Salary (if allowed),
(v) Goodwill,
(vi) Share of general reserve.

Q) Name the major headings under which the liabilities and the assets sides of a company's Balance Sheet is organised and presented. (Marks 5)
Ans)

Major Headings of Liabilities 1. Share Capital 2. Reserve and Surplus 3. Secured Loans 4. Unsecured Loans 5. Current Liabilities and Provisions

Major Headings of Assets 1. Fixed Assets 2. Investments 3. Current Assets, Loans of Advances 4. Miscellaneous Expenses 5. Profit and Loss Account (Debit balance)

PART - B (Analysis of financial statements)

 

Q) From the following information, calculate Debtors Turnover Ratio and Average Collection Period.
Opening Debtors     Rs.    37,000
Closing Debtors       Rs.    43,000
Sales                       Rs. 6,00,000
Cash Sales              Rs.   80,000
Ans) Debtors Turnover Ratio = Net Credit Sales
                                                Average Debtors
Average Debtors = Opening Debtors + Closing Debtors
                                                    2
                         = 37000 + 43000
                                      2
                         = 40000
Net Credit Sales = Sales - Cash Sales
                         = 600000 - 80000
                         = 520000
.^.. Debtors Turnover Ratio = 520000
                                          40000
                                      = 13 times.
Average collection period =   365 days  
                                        Drs Turnover
                                     = 365/13 = 28 days

Q) Calculate Cash from operations from the following information: (Marks 5)

Stock Debtors Creditors Expenses Outstanding Bills Payable Accrued Income Profit and Loss A/c

1994 (Rs.)    60,000    25,000    32,000      3,500    35,000      8,000    80,000

1995 (Rs.)    50,000    23,000    28,000      4,500    22,000     9,000    90,000

Ans) Calculation of profit made during the year :

Profit and loss A/c
for the year ending

Cash from operations :